<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
-----------------------
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MAY 15, 1997
COMMERCIAL NET LEASE REALTY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C> <C>
MARYLAND 0-12989 56-1431377
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION
INCORPORATION NO.)
</TABLE>
400 EAST SOUTH STREET, SUITE 500 32801
ORLANDO, FLORIDA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (407) 422-1574
<PAGE> 2
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not Applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Not Applicable.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not Applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not Applicable.
ITEM 5. OTHER EVENTS.
On May 15, 1997, the Special Committee of the Board of Directors of
Commercial Net Lease Realty, Inc. (the "Company") recommended that the Board of
Directors of the Company approve the Agreement and Plan of Merger by and among
the Company, Net Lease Realty II, Inc., a Maryland corporation and wholly owned
subsidiary of the Company ("NLRII"), CNL Realty Advisors, Inc., a Florida
corporation (the "Advisor"), and the stockholders of the Advisor attached
hereto as Exhibit 10.1 (the "Merger Agreement"). Under the terms of the Merger
Agreement, the Advisor will be merged with and into NLRII (the "Merger") and
NLRII would be the surviving corporation. The Board of Directors (excluding
Robert A. Borne and James M. Seneff who abstained due to their interest in the
transaction as stockholders of the Advisor) unanimously approved the Merger
transaction and the Merger Agreement was executed.
As the purchase price to be paid by the Company in connection with the
Merger, the Company has agreed to issue up to 2,200,000 shares (the "Share
Consideration") of its common stock, $.01 par value (the "Common Shares") to
the stockholders of the Advisor on the terms and conditions set forth in the
Merger Agreement. At the closing, the stockholders will receive Common Shares
pro rata based on their relative equity interests in the Advisor as of the
Closing Date, representing 10% of the Share Consideration. The balance of the
Share Consideration (the "Share Balance") will, subject to the terms of the
Merger Agreement, be issued within 90 days after the end of each Payment Period
(up to a maximum of 20 Payment Periods) beginning the first full Payment Period
following the Closing Date. "Payment Period" shall mean any of the following
three month periods: (i) the period beginning on January 2 and ending on April
1; (ii) the period beginning on April 2 and ending on July 1; (iii) the
period beginning on July 2 and ending on October 1; and (iv) the period
beginning on October 2 and ending on January 1. Within 90 days after the end
of a Payment Period, the number of Common Shares to be issued by the Company to
the stockholders out of the Share Balance will equal the product obtained by
multiplying (i) the Share Balance by (ii) a fraction, the numerator of which is
the total cost (in accordance with GAAP) of Completed New Acquisitions (as
defined below) and Completed Development Projects (as defined below) occurring
during the Payment Period (with the aggregate amounts less $45,000,000 over all
Payment Periods for such purposes not to exceed $405,000,000) and the
denominator of which is $405,000,000; provided, however, that for the purposes
of this calculation, the first $45,000,000 of Completed New Acquisitions and
Completed Development Projects shall not be included in the determination of
the numerator. For example, if during the first Payment Period, the dollar
amount of Completed New Acquisitions and Completed Development Projects equals
$35,000,000, the stockholders would not be issued any Common Shares out of the
Share Balance. If during the second Payment Period, the dollar amount of
Completed New Acquisitions and Completed Development Projects equals
$40,000,000, the stockholders would be entitled to receive 7.4% of the Share
Balance ($30,000,000 [$75,000,000 minus $45,000,000] divided by $405,000,000).
The issuance of Common Shares from the Share Balance for future Payment Periods
would be based solely the percentage determined by dividing (x) the dollar
amount of Completed New Acquisitions and Completed Development Projects that
occurred during such Payment Period by (y) $405,000,000. To the extent any
Common Shares are to be issued at the end of such Payment Period, such shares
will be issued within 90 days of such Payment Period. The term "Completed New
Acquisitions" means property acquisitions closed by the Company (including its
subsidiaries and affiliates) after the Closing Date and the term "Completed
Development Projects" means development projects completed by the Company after
the Closing Date (notwithstanding the date upon which development commenced). A
development project shall be deemed to be completed when a certificate of
occupancy has been issued and the tenant under the project has commenced paying
2
<PAGE> 3
periodic rent under the lease. In the event that the Share Balance has not
been reduced to zero following the twentieth Payment Period, any rights of the
stockholders to the remainder of the Share Balance shall expire and become null
and void and the Share Balance shall be reduced to zero.
The consummation of the Merger is subject to customary closing
conditions and the approval of the stockholders of the Company .
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS.
Not Applicable.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a)-(b) Not Applicable.
(c) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
<S> <C>
10.1 Agreement and Plan of Merger dated as of the 15th day of May 1997, by and among Commercial
Net Lease Realty, Inc., a Maryland corporation, Net Lease Realty II, Inc., a Maryland
corporation, CNL Realty Advisors, Inc., a Florida corporation, and Robert A. Borne, Kevin B.
Habicht, Gary M. Ralston and James M. Seneff, Jr.
</TABLE>
ITEM 8. CHANGE IN FISCAL YEAR.
Not Applicable.
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be filed on its
behalf by the undersigned thereunto duly authorized.
COMMERCIAL NET LEASE REALTY, INC.
Dated: May 15, 1997 By: /s/ Kevin B. Habicht
-----------------------------------------
Kevin B. Habicht, Chief Financial Officer
4
<PAGE> 1
EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
COMMERCIAL NET LEASE REALTY, INC.
AND
NET LEASE REALTY II, INC.
AND
CNL REALTY ADVISORS, INC.
AND
THE STOCKHOLDERS OF CNL REALTY ADVISORS, INC.
MAY 15, 1997
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Terms Defined in this Agreement . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 THE MERGER; EFFECTIVE TIME; CLOSING . . . . . . . . . . . . . . . . 7
2.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 3 ARTICLES OF INCORPORATION, BY-LAWS AND DIRECTORS AND
OFFICERS OF SURVIVING CORPORATION . . . . . . . . . . . . . . . . . . . . 8
3.1 Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . 8
3.2 By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 4 SHARE CONSIDERATION; CONVERSION OR CANCELLATION OF
SHARES IN MERGER; PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . 8
4.1 Share Consideration; Conversion or Cancellation of Advisor
Common Shares in Merger . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Payment of Share Consideration . . . . . . . . . . . . . . . . . . . 9
4.3 Fractional NNN Common Shares . . . . . . . . . . . . . . . . . . . . 10
4.4 Transfer of Advisor Common Shares . . . . . . . . . . . . . . . . . 10
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE INDIVIDUAL
STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Authorization of Transaction . . . . . . . . . . . . . . . . . . . . 11
5.2 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.4 Advisor Common Shares . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF NLRII AND NNN . . . . . . . . . . 12
6.1 Organization of NLRII and NNN . . . . . . . . . . . . . . . . . . . 12
6.2 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.3 Authorization for Common Stock . . . . . . . . . . . . . . . . . . . 12
6.4 Authorization of Transaction . . . . . . . . . . . . . . . . . . . . 12
6.5 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.6 Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.7 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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<TABLE>
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6.8 New York Stock Exchange . . . . . . . . . . . . . . . . . . . . . . 13
6.9 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 7 REPRESENTATIONS AND WARRANTIES CONCERNING THE ADVISOR. . . . . . . . 13
7.1 Organization, Qualification, and Corporate Power . . . . . . . . . 14
7.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3 Authorization of Transaction . . . . . . . . . . . . . . . . . . . 15
7.4 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.5 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.6 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 15
7.8 Events Subsequent to Most Recent Fiscal Year End . . . . . . . . . 16
7.9 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . 17
7.10 Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.12 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.13 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . 20
7.14 Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.15 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.16 Notes and Accounts Receivable . . . . . . . . . . . . . . . . . . . 21
7.17 Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . 22
7.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.19 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.20 Construction and Development Liability . . . . . . . . . . . . . . 23
7.21 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.22 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.23 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.24 Environment, Health, and Safety . . . . . . . . . . . . . . . . . . 25
7.25 Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.26 Relationships with Tenants . . . . . . . . . . . . . . . . . . . . 25
7.27 CALPERS Agreement . . . . . . . . . . . . . . . . . . . . . . . . 26
7.28 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
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<TABLE>
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ARTICLE 8 PRE-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 26
8.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2 Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . 26
8.3 Maintenance of Business; Prohibited Acts . . . . . . . . . . . . . 26
8.4 Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.5 Meeting of Stockholders . . . . . . . . . . . . . . . . . . . . . 28
8.6 Proxy Materials . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.7 Notice of Developments . . . . . . . . . . . . . . . . . . . . . . 29
8.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.9 Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.10 Letter of the Advisor's Accountants . . . . . . . . . . . . . . . 30
8.11 Advisor Stockholder Approval . . . . . . . . . . . . . . . . . . . 30
8.12 Delivery of Certain Financial Information . . . . . . . . . . . . 30
8.13 State Takeover Statutes . . . . . . . . . . . . . . . . . . . . . 30
8.14 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 9 POST-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . 31
9.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.2 Litigation Support . . . . . . . . . . . . . . . . . . . . . . . . 31
9.3 Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.5 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . 32
9.6 NNN Common Shares . . . . . . . . . . . . . . . . . . . . . . . . 32
9.7 Continuity of Interest . . . . . . . . . . . . . . . . . . . . . . 33
9.8 Share Consideration . . . . . . . . . . . . . . . . . . . . . . . 33
9.9 Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.10 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.11 CNL License . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 10 CONDITIONS TO OBLIGATION TO CLOSE . . . . . . . . . . . . . . . . . 35
10.1 Conditions to Each Party's Obligation . . . . . . . . . . . . . . 35
10.2 Conditions to Obligation of NLRII and NNN . . . . . . . . . . . . 36
10.3 Conditions to Obligation of the Stockholders and the
Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 11 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.1 Termination by Mutual Consent . . . . . . . . . . . . . . . . . . 38
</TABLE>
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11.2 Termination by Either NNN or the Advisor . . . . . . . . . . . . 38
11.3 Effect of Termination and Abandonment . . . . . . . . . . . . . . 38
ARTICLE 12 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.1 Indemnity Obligations of the Stockholders . . . . . . . . . . . . 39
12.2 Indemnity Obligations of NNN . . . . . . . . . . . . . . . . . . 39
12.3 Appointment of Representative . . . . . . . . . . . . . . . . . . 39
12.4 Notification of Claims . . . . . . . . . . . . . . . . . . . . . 40
12.5 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.6 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.7 Exclusive Provisions; No Rescission . . . . . . . . . . . . . . . 41
ARTICLE 13 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13.1 Press Releases and Public Announcements . . . . . . . . . . . . . 41
13.2 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . 41
13.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 41
13.4 Succession and Assignment . . . . . . . . . . . . . . . . . . . . 41
13.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 42
13.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
13.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
13.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.9 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . 43
13.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.11 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.12 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.13 Incorporation of Exhibits and Schedules . . . . . . . . . . . . . 44
13.14 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . 44
13.15 Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . 44
13.16 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
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SCHEDULES AND EXHIBITS:
Exhibit A-1 -- Form of Employment Agreement for Kevin B. Habicht
Exhibit A-2 -- Form of Employment Agreement for Gary M. Ralston
Exhibit A-3 -- Form of Employment Agreement for James M. Seneff, Jr.
Exhibit B -- Form of Registration Rights Agreement
Disclosure Schedule -- Exceptions to Representations and Warranties Concerning
the Stockholders and the Advisor
- v -
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered into as
of this 15th day of May 1997, by and among Commercial Net Lease Realty, Inc.,
a Maryland corporation ("NNN"), and Net Lease Realty II, Inc., a Maryland
corporation and wholly-owned subsidiary of NNN ("NLRII"), and CNL Realty
Advisors, Inc., a Florida corporation (the "Advisor"), and Robert A. Bourne,
CNL Group, Inc., a Florida corporation, Kevin B. Habicht and Gary M. Ralston,
the principal stockholders of the Advisor (collectively, the "Stockholders").
CNL, NLRII, the Advisor and the Stockholders are referred to collectively
herein as the "Parties" and individually as a "Party."
RECITALS:
WHEREAS, the Parties hereto desire to consummate a merger (the
"Merger") whereby the Advisor will be merged with and into NLRII and NLRII
will be the surviving corporation in the Merger, upon the terms and subject to
the conditions of this Agreement and in accordance with the Maryland General
Corporation Law (the "Maryland GCL") and the Florida Business Corporation Act
(the "Florida BCA"); WHEREAS, the parties hereto anticipate that the Merger
will further certain of their business objectives (including, without
limitation, allowing NNN to become an entirely self-administered and
self-managed real estate investment trust);
WHEREAS, the Special Committee (the "Special Committee") of the
independent members of the Board of Directors of NNN has received a fairness
opinion (the "Fairness Opinion") from Legg Mason Wood Walker Incorporated as to
the fairness of the Merger, including the consideration to be paid in
connection therewith and the related employment and compensation arrangements
contemplated thereby, to NNN and its stockholders from a financial point of
view;
WHEREAS, the Special Committee has recommended the Merger to the Board
of Directors of NNN and the Board (excluding any of the Stockholders) has
approved the proposal to approve the Merger (the "Merger Proposal") and the
related transactions and has resolved to recommend that the stockholders of NNN
approve the Merger Proposal;
WHEREAS, in connection with a merger that occurred on April 30, 1997,
the Advisor acquired CNL Development Company, Inc., a Florida corporation and
wholly owned subsidiary of CNL Group, Inc. (the "Development Company"), which
was the company that developed certain properties owned by NNN (the
"Development Company Acquisition");
WHEREAS, the Board of Directors of the Advisor and the Stockholders
have unanimously approved the Merger Proposal; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization under Section 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended
<PAGE> 8
(the "Code"), pursuant to which each issued and outstanding share of the
Advisor common stock shall be converted into the right to receive shares of NNN
common stock.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Terms Defined in this Agreement. As used in this Agreement,
the following terms shall have the respective meanings set forth below:
"Advisor" has the meaning set forth in the preface above.
"Advisor Certificate of Merger" has the meaning set forth in Section
2.2 below.
"Advisor Common Shares" means the shares of the common stock, $1.00
par value, and the shares of the Class B common stock, $1.00 par value, of the
Advisor.
"Advisor Common Share Certificates" has the meaning set forth in
Section 4.1(a) below.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504, or any similar group defined under a similar provision of
state, local or foreign law.
"Agreement" has the meaning set forth in the preface above.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms the basis for any specified
consequence.
"Board Changes" shall mean the date that a majority of the Board of
Directors of NNN shall be persons other than persons (i) whose election proxies
shall have been solicited by the Board of Directors or (ii) who are serving as
directors appointed by the Board of Directors to fill vacancies caused by death
or resignation (but not by removal) or to fill newly created directorships.
"Business Combination" has the meaning set forth in Section 4.1(b)
below.
"CALPERS Agreement" has the meaning set forth in Section 7.15(j)
below.
- 2 -
<PAGE> 9
"Change in Control" means (i) the sale or transfer of substantially
all of the assets of NNN, whether in one transaction or a series of
transactions, except a sale to a successor corporation in which the
Stockholders immediately prior to the transaction hold, directly or indirectly,
at least 50% of the Total Voting Power of the successor corporation immediately
after the transaction, (ii) any merger or consolidation between NNN and
another corporation immediately after which the Stockholders hold, directly or
indirectly, less than 50% of the Total Voting Power of the surviving
corporation, (iii) the dissolution or liquidation of NNN, (iv) the acquisition
by any Person or group of Persons of direct or indirect beneficial ownership of
NNN Common Shares representing more than 50% of the common stock of NNN, or (v)
the date the Board Changes.
"Closing" has the meaning set forth in Section 2.3 below.
"Closing Date" has the meaning set forth in Section 2.3 below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Completed Development Projects" has the meaning set forth in Section
4.2(a) below.
"Completed New Acquisitions" has the meaning set forth in Section
4.2(a) below.
"Confidential Information" means any information concerning the
businesses and affairs of the Advisor or NNN, if any, that is not already
generally available to the public.
"Development Company" means CNL Development Company, Inc., a Florida
corporation.
"Development Company Acquisition" has the meaning set forth in the
fifth paragraph of Recitals above.
"Disclosure Schedule" has the meaning set forth in the first paragraph
of Article 7 below.
"Effective Time" has the meaning set forth in Section 2.2 below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) tax-qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c) tax-qualified
defined benefit retirement plan or arrangement which is an Employee Pension
Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare
Benefit Plan or material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act
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of 1976, and the Occupational Safety and Health Act of 1970, each as amended,
together with all other laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof)
concerning pollution or protection of the environment, public health and
safety, or employee health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes into ambient air,
surface water, ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Extremely Hazardous Substance" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fairness Opinion" has the meaning set forth in the third paragraph of
the Recitals above.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statements" has the meaning set forth in Section 7.7 below.
"Florida BCA" has the meaning set forth in the first paragraph of the
Recitals above.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Intellectual Property" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (b) all trademarks, service marks,
trade dress, logos, trade names, and corporate names, together with all
translations, adaptations, derivations, and combinations thereof and including
all goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith, (c) all copyrightable works, all copyrights,
and all applications, registrations, and renewals in connection therewith, (d)
all mask works and all applications, registrations, and renewals in connection
therewith, (e) all trade secrets and confidential business information
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (f) all computer
software (including data and related documentation), (g) all other proprietary
rights, and (h) all copies and tangible embodiments thereof (in whatever form
or medium).
"IRS" means the Internal Revenue Service.
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"Knowledge" means the collective knowledge of all of the Stockholders
after reasonable investigation. For the purposes of this Agreement, the
knowledge of one Stockholder shall be attributed to the other Stockholders.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Maryland GCL" has the meaning set forth in the first paragraph of the
Recitals above.
"Material Adverse Effect" means, as to any Party, a material adverse
effect on the business, properties, operations, condition or future prospects
(financial or otherwise) of such Party.
"Merger" shall mean the merger of the Advisor with and into NLRII in
accordance with the terms of this Agreement.
"Merger Proposal" has the meaning set forth in fourth paragraph of the
Recitals above.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in
Section 7.7 below.
"Most Recent Fiscal Month End" has the meaning set forth in Section
7.7 below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 7.7
below.
"Most Recent Pro Forma Balance Sheet" means the balance sheet
contained within the Most Recent Pro Forma Financial Statements.
"Most Recent Pro Forma Financial Statements" has the meaning set forth
in Section 7.7 below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"NLRII" has the meaning set forth in the preface above.
"NLRII Certificate of Merger" has the meaning set forth in Section 2.2
below.
"NNN" has the meaning set forth in the preface above.
"NNN Common Shares" shall mean the shares of common stock, par value
$0.01, of NNN.
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"NNN Stockholders Meeting" has the meaning set forth in Section 8.5
below.
"NYSE" means the New York Stock Exchange.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"Party" or "Parties has the meaning set forth in the preface above.
"Payment Period" has the meaning set forth in Section 4.2(a) below.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA Section
406 and Code Section 4975.
"Proxy Statement" has the meaning set forth in Section 8.7 below.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Representative" has the meaning set forth in Section 12.3 below.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes
that the taxpayer is contesting in good faith through appropriate proceedings,
(c) purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business
and not incurred in connection with the borrowing of money.
"Share Balance" has the meaning set forth in Section 4.2 below.
"Share Consideration" has the meaning set forth in Section 4.1(a)
below.
"Stockholders" has the meaning set forth in the preface above.
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<PAGE> 13
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Surviving Corporation" has the meaning set forth in Section 2.1
below.
"Takeover Statute" has the meaning set forth in Section 8.13.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 12.4 below.
"Total Voting Power" means the total number of votes which may be cast
in the election of directors of a company by all stockholders entitled to vote
in such an election.
ARTICLE 2
MERGER; EFFECTIVE TIME; CLOSING
2.1 Merger. Subject to the terms and conditions of this
Agreement, the Maryland GCL and the Florida BCA, at the Effective Time, NLRII
and the Advisor shall consummate the Merger in which (i) the Advisor shall be
merged with and into NLRII and the separate corporate existence of the Advisor
shall thereupon cease, (ii) NLRII shall be the successor or surviving
corporation in the Merger and shall continue to be governed by the laws of the
State of Maryland and (iii) the separate corporate existence of NLRII with all
its rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger. The corporation surviving the Merger is sometimes
hereinafter referred to as the "Surviving Corporation." The Merger shall have
the effects set forth in the Maryland GCL and the Florida BCA.
2.2 Effective Time. On the Closing Date, subject to the terms and
conditions of this Agreement, NLRII and the Advisor shall (i) cause to be
executed (A) a Certificate of Merger in the form required by the Maryland GCL
(the "NLRII Certificate of Merger") and (B) a Certificate of Merger in the form
required by the Florida BCA (the "Advisor Certificate of Merger"), and (ii)
cause the NLRII Certificate of Merger to be filed with the Maryland Department
of Assessments and Taxation as provided in the Maryland GCL and the Advisor
Certificate of Merger to be filed with the Florida Secretary of State as
provided in the Florida BCA. The Merger shall become effective at (i) such
time as the NLRII Certificate of Merger has been duly
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<PAGE> 14
filed with the Maryland Department of Assessments and Taxation and the Advisor
Certificate of Merger has been duly filed with the Florida Secretary of State
or (ii) such other time as is agreed upon by the Representative and NNN and
specified in the NLRII Certificate of Merger and the Advisor Certificate of
Merger. Such time is hereinafter referred to as the "Effective Time."
2.3 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Shaw,
Pittman, Potts & Trowbridge, 2300 N Street, N.W., Washington, D.C. 20037,
commencing at 9:00 a.m. local time on such date as within five (5) business
days following the fulfillment or waiver of the conditions set forth in Article
10 (other than conditions which by their nature are intended to be fulfilled at
the Closing) or such other place or time or on such other date as NNN and the
Representative may agree or as may be necessary to permit the fulfillment or
waiver of the conditions set forth in Article 10 (the "Closing Date").
ARTICLE 3
ARTICLES OF INCORPORATION; BY-LAWS; AND
DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
3.1 Articles of Incorporation. The articles of incorporation of
the NLRII, as in effect immediately prior to the Effective Time, shall be the
articles of incorporation of the Surviving Corporation until thereafter amended
as provided therein and under the Florida BCA.
3.2 By-Laws. The by-laws of the NLRII, as in effect immediately
prior to the Effective Time, shall be the by-laws of the Surviving Corporation.
3.3 Directors and Officers. The directors and officers of NLRII
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation from and after the Effective Time until their
successors have been duly elected, appointed or qualified or until their
earlier death, resignation or removal in accordance with the articles of
incorporation and by-laws of the Surviving Corporation.
ARTICLE 4
SHARE CONSIDERATION; PAYMENT OF SHARE CONSIDERATION
4.1 Share Consideration; Conversion or Cancellation of Advisor
Common Shares in Merger.
(a) At the Effective Time, by virtue of the Merger and without any
action by the Parties, all of the outstanding Advisor Common Shares (i) shall
be converted into the right to receive up to 2,200,000 NNN Common Shares (the
"Share Consideration") pursuant to the terms of Section 4.2 below, (ii) shall
cease to be outstanding, and (iii) shall be canceled and retired and shall
cease to exist, and each Stockholder, as the holder of certificates
representing such the Advisor Common Shares (the "Advisor Common Share
Certificates"), shall cease to have any rights with respect thereto, except the
right to receive NNN Common Shares therefor upon the
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<PAGE> 15
surrender of such certificates in accordance with this Section 4.1 and cash in
lieu of fractional NNN Common Shares as set forth in Section 4.3.
(b) Prior to the Effective Time, NNN shall not split or combine
the NNN Common Shares, or pay a stock dividend or other stock distribution in
NNN Common Shares, or in rights or securities exchangeable or convertible into
or exercisable for NNN Common Shares, or otherwise change NNN Common Shares
into, or exchange NNN Common Shares for, any other securities (whether pursuant
to or as part of a merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation of NNN as a result of which NNN
stockholders receive cash, stock or other property in exchange for, or in
connection with, their NNN Common Shares (a "Business Combination") or
otherwise), or make any other dividend or distribution on or of NNN Common
Shares (other than regular quarterly cash dividends paid on NNN Common Shares
or any distribution pursuant to NNN's dividend reinvestment plan), without the
parties hereto having first entered into an amendment to this Agreement
pursuant to which the Share Consideration will be adjusted to reflect such
split, combination, dividend, distribution, Business Combination or change.
(c) At the Effective Time, by virtue of the Merger and without any
action by holders thereof, all of the NNN Common Shares issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding.
4.2 Payment of Share Consideration. At the Closing, upon
surrender to NNN of the Advisor Common Share Certificates by the Stockholders
and the minority stockholders of the Advisor (the "Minority Stockholders") for
cancellation, together with any other required documents, the Stockholders and
the Minority Stockholders shall receive NNN Common Shares, pro rata based on
their relative equity interests in the Advisor as of the Closing Date,
representing 10% of the Share Consideration to be issued in the Merger and the
Advisor Common Share Certificates so surrendered shall forthwith be canceled.
The balance of the Share Consideration (the "Share Balance") will, subject to
this Section 4.2, be issued within 90 days after the end of each Payment Period
(up to a maximum of 20 Payment Periods) beginning the first full Payment Period
following the Closing Date. For the purposes of this Section 4.2, a "Payment
Period" shall mean any of the following three month periods: (i) the period
beginning on January 2 and ending on April 1; (ii) the period beginning on
April 2 and ending on July 1; (iii) the period beginning on July 2 and ending
on October 1; and (iv) the period beginning on October 2 and ending on January
1. Within 90 days after the end of a Payment Period, the number of NNN Common
Shares to be issued by NNN to the Stockholders and the Minority Stockholders
out of the Share Balance will equal the product obtained by multiplying (i) the
Share Balance by (ii) a fraction, the numerator of which is the total cost (in
accordance with GAAP) of Completed New Acquisitions (as defined below) and
Completed Development Projects (as defined below) occurring during the Payment
Period (with the aggregate amounts less $45,000,000 over all Payment Periods
for such purposes not to exceed $405,000,000) and the denominator of which is
$405,000,000; provided, however, that for the purposes of this calculation, the
first $45,000,000 of Completed New Acquisitions and Completed
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<PAGE> 16
Development Projects shall not be included in the determination of the
numerator. For example, if during the first Payment Period, the dollar amount
of Completed New Acquisitions and Completed Development Projects equals
$35,000,000, the Stockholders would not be issued any NNN Common Shares out of
the Share Balance. If during the second Payment Period, the dollar amount of
Completed New Acquisitions and Completed Development Projects equals
$40,000,000, the Stockholders would be entitled to receive 7.4% of the Share
Balance ($30,000,000 [$75,000,000 minus $45,000,000] divided by $405,000,000).
The issuance of NNN Common Shares from the Share Balance for future Payment
Periods would be based solely the percentage determined by dividing (x) the
dollar amount of Completed New Acquisitions and Completed Development Projects
that occurred during such Payment Period by (y) $405,000,000. To the extent
any NNN Common Shares are to be issued at the end of such Payment Period, such
shares will be issued within 90 days of such Payment Period. In the event of
a Change in Control of NNN, the remaining Share Balance shall be immediately
issued and paid to the Stockholders and Minority Stockholders. The
Stockholders and the Minority Stockholders shall also receive cash in lieu of
fractional NNN Common Shares as contemplated by Section 4.3. For the purposes
of this Section 4.2(a), the term "Completed New Acquisitions" means property
acquisitions closed by NNN (including its Subsidiaries and Affiliates) after
the Closing Date and the term "Completed Development Projects" means
development projects completed by NNN after the Closing Date (notwithstanding
the date upon which development commenced). A development project shall be
deemed to be completed when a certificate of occupancy has been issued and the
tenant under the project has commenced paying periodic rent under the lease.
In the event that the Share Balance has not been reduced to zero following the
twentieth Payment Period, any rights of the Stockholders and the Minority
Stockholders to the remainder of the Share Balance shall expire and become null
and void and the Share Balance shall be reduced to zero.
4.3 Fractional NNN Common Shares. No certificates representing
fractional NNN Common Shares shall be issued upon surrender of any Advisor
Common Share Certificates. In lieu of any fractional NNN Common Shares, there
shall be paid to each holder of Advisor Common Shares who otherwise would be
entitled to receive a fractional NNN Common Share an amount of cash (without
interest) determined by multiplying such fraction by the $15.50.
4.4 Transfer of Advisor Common Shares. (a) No transfers of
Advisor Common Shares shall be made on the stock transfer books of the Advisor
after the date of this Agreement, and (b) each Stockholder agrees not to
transfer any Advisor Common Shares after the date of this Agreement and before
the Closing Date; provided, however, the restrictions on transfer of the
Advisor Common Shares contained in this Section 4.4 shall not apply to
transfers by CNL Group, Inc. to certain officers and employees of the Advisor
and its Affiliates so long as the total number of Advisor Common Shares
transferred does not exceed 750.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE INDIVIDUAL STOCKHOLDERS
Each of the Stockholders, severally, but not jointly, represents and
warrants to NLRII and NNN that the statements contained in this Article 5 are
correct and complete as of the date hereof with respect to himself:
5.1 Authorization of Transaction. Each of the Stockholders has
full power and authority to execute and deliver this Agreement and to perform
his obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of each of the Stockholders, enforceable in accordance with
its terms and conditions. None of the Stockholders need give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement, except in connection with federal securities
laws and any applicable "Blue Sky" or state securities laws.
5.2 Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which any Stockholder is subject,
or (B) result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the any Stockholder is a
party or by which he or she is bound or to which any of his assets is subject.
5.3 Investment. Each of the Stockholders (A) understands that the
NNN Common Shares acquired by such Stockholder pursuant to this Agreement have
not been registered under the Securities Act, or under any state securities
laws, and are being exchanged in reliance upon federal and state exemptions for
transactions not involving a public offering, (B) is acquiring the NNN Common
Shares solely for his own account for investment purposes, and not with a view
towards the distribution thereof, (C) is a sophisticated investor with
knowledge and experience in business and financial matters, (D) has received
certain information concerning NNN, including, without limitation, (i) the
most recent annual report on Form 10-K. (ii) the three most recent quarterly
reports on Form 10-Q, (iii) any current reports on Form 8-K since December 31,
1996, in each case as filed by NNN under the Securities Exchange Act, and (iv)
the most recent annual report to stockholders of NNN, and has had the
opportunity to obtain additional information as desired in order to evaluate
the merits and the risks inherent in holding NNN Common Shares, and (E) is able
to bear the economic risk and lack of liquidity inherent in holding NNN Common
Shares which have not been registered under the Securities Act.
5.4 Advisor Common Shares. Except as set forth in Section 7.2 of
the Disclosure Schedule, each of the Stockholders holds of record and owns
beneficially the number of the Advisor Common Shares set forth next to his name
in Section 7.2 of the Disclosure Schedule, free and clear of any restrictions
on transfer (other than any restrictions under the Securities Act and state
securities laws), Taxes, Security Interests, options, warrants, purchase
rights, contracts,
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<PAGE> 18
commitments, equities, claims, and demands. Except for the agreements set forth
on Section 5.4 of the Disclosure Schedule (which, except as otherwise provided
on the Disclosure Schedule, will be terminated prior to the execution of this
Agreement), none of the Stockholders is a party to any option, warrant,
purchase right, or other contract or commitment that could require one or more
Stockholders to sell, transfer, or otherwise dispose of any the Advisor Common
Shares (other than pursuant to this Agreement) or is a party to any voting
trust, proxy, or other agreement or understanding with respect to the voting of
any of the Advisor Common Shares.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF NLRII AND NNN
NLRII and NNN jointly and severally represent and warrant to the
Stockholders and the Advisor that the statements contained in this Article 6
are correct and complete as of the date hereof:
6.1 Organization of NLRII and NNN. Each of NLRII and NNN is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Maryland.
6.2 Capital Stock. The authorized capital stock of NNN consists
of 50,000,000 shares of common stock, $.01 par value (the "NNN Common Shares"),
of which 23,393,672 shares are outstanding as of April 15, 1997. Since March
19, 1997, NNN has not issued any shares of capital stock except pursuant to the
exercise of options outstanding on such date to purchase NNN Common Shares or
pursuant to NNN's dividend reinvestment plan. All outstanding NNN Common
Shares are, and all NNN Common Shares issuable under stock option plans of NNN,
or pursuant to NNN's dividend reinvestment plan, will be when issued in
accordance with the terms thereof, duly authorized, validly issued, fully paid
and nonassessable. Except for the 1,700,000 NNN Common Shares reserved for
issuance pursuant to stock option plans of NNN or NNN's dividend reinvestment
plan, there are outstanding on the date hereof no options, warrants, calls,
rights, commitments or any other agreements of any character to which NNN is a
party or by which it may be bound, requiring it to issue, transfer, sell,
purchase, register, redeem or acquire any shares of capital stock or any
securities or rights convertible into, exchangeable for or evidencing the right
to subscribe for or acquire any shares of its capital stock.
6.3 Authorization for Common Stock. The Share Consideration will,
when issued, be duly authorized, validly issued, fully paid and nonassessable,
and no stockholder of NNN will have any preemptive right or similar rights of
subscription or purchase in respect thereof. The Share Consideration will,
subject to the accuracy of the Stockholders' representations contained in
Section 5.3 hereof, be exempt from registration under the Securities Act and
will be registered or exempt from registration under all applicable state
securities laws. The Share Consideration will, when issued, be approved for
listing on the NYSE, subject to official notice of issuance.
6.4 Authorization of Transaction. Each of NLRII and NNN has full
power and authority (including full corporate power and authority) to execute
and deliver this Agreement and to perform its respective obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of each of
NLRII and NNN, enforceable in accordance with its terms
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<PAGE> 19
and conditions. Neither NLRII nor NNN need give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by
this Agreement, except in connection with federal securities laws and any
applicable "Blue Sky" or state securities laws.
6.5 Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which either NLRII or NNN is
subject or any provision of its articles of incorporation or by-laws or (B)
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which either NLRII or NNN is a party or by
which it is bound or to which any of its assets is subject.
6.6 Brokers' Fees. Except for the fees and expenses paid to Legg
Mason Wood Walker Incorporated with respect to the delivery of the Fairness
Opinion to the Special Committee, neither NLRII nor NNN has any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
6.7 Information. The Proxy Statement will not at the time filed
with the SEC at the time of mailing the Proxy Statement to the stockholders of
NNN, at the time of the NNN Stockholders Meeting or at the Effective Time
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by NNN with respect to
statements made therein based on information supplied by the Stockholders or
the Advisor for inclusion in the Proxy Statement. The Proxy Statement will
comply as to form in all material respects with the provisions of the
Securities Exchange Act and the rules and regulations promulgated thereunder.
6.8 New York Stock Exchange. NNN is in compliance in all material
respects with its NYSE Listing Agreement.
6.9 Disclosure. NNN is in compliance in all material respects
with its obligation under the Securities Exchange Act to publicly disclose
material information in a timely fashion.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES CONCERNING THE ADVISOR
The Stockholders and the Advisor represent and warrant to NLRII and
NNN that the statements contained in this Article 7 are correct and complete as
of the date hereof, except as set forth in the disclosure schedule delivered by
the Stockholders and the Advisor to NLRII and NNN on the date hereof (the
"Disclosure Schedule"). Solely for the purposes of this Article 7 and except
as otherwise indicated, any reference to the "Advisor" shall be deemed to be a
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reference to both the Advisor and the Development Company and any
representation made with respect to the "Advisor" shall include both the
Advisor and the Development Company. References to the Development Company
within a representation and warranty are made solely for clarification purposes
and no implication shall be drawn from the failure to reference the Development
Company in any other representation and warranty that such representation and
warranty is inapplicable to the Development Company. Nothing in the Disclosure
Schedule shall be deemed adequate to disclose an exception to a representation
or warranty made herein, however, unless the Disclosure Schedule identifies the
exception with particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate
to disclose an exception to a representation or warranty made herein (unless
the representation or warranty has to do with the existence of the document or
other item itself). The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this Article
7.
7.1 Organization, Qualification, and Corporate Power. The Advisor
is a corporation duly organized, validly existing, and in good standing under
the laws of Florida. The Advisor is duly authorized to conduct business and is
in good standing under the laws of each jurisdiction where such qualification
is required, except where the failure to so qualify or obtain authorization
would not have a Material Adverse Effect on the Advisor. Except as set forth
in Section 7.1(a) of the Disclosure Schedule, the Advisor has full corporate
power and authority and all licenses, permits, and authorizations necessary to
carry on the businesses in which it is engaged and to own and use the
properties owned and used by it. Section 7.1(b) of the Disclosure Schedule
lists the directors and officers of the Advisor. The Stockholders have
delivered to NLRII and NNN correct and complete copies of the articles of
incorporation and by-laws of the Advisor (as amended to date). The minute
books (containing the records of meetings of the stockholders, the board of
directors, and any committees of the board of directors), the stock certificate
books, and the stock record books of the Advisor are correct and complete. The
Advisor is not in default under or in violation of any provision of its
articles of incorporation or by-laws.
7.2 Capitalization. The entire authorized capital stock of the
Advisor (the "Advisor Common Shares") consists of (i) 10,000 shares of common
stock, $1.00 par value, of which 9,400 shares are issued and outstanding, and
(ii) 5,000 shares of the Class B common stock, $1.00 par value, of which 2,365
shares are issued and outstanding. No Advisor Common Shares are held in
treasury. All of the issued and outstanding the Advisor Common Shares have been
duly authorized, are validly issued, fully paid, and nonassessable, and are
held of record by the respective Stockholders as set forth in Section 7.2 of
the Disclosure Schedule. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require the Advisor to
issue, sell, or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to the Advisor. There are
no voting trusts, proxies, or other agreements or understandings with respect
to the voting of the Advisor Common Shares.
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7.3 Authorization of Transaction. The Advisor has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its respective obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the Advisor,
enforceable in accordance with its terms and conditions. The Advisor is not
required give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement, except in
connection with federal securities laws and any applicable "Blue Sky" or state
securities laws.
7.4 Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Advisor is subject or
any provision of the charter or bylaws of the Advisor or (ii) result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Advisor is a party or by which it is bound or to which
any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets).
7.5 Title to Assets. The Advisor has good title to, or a valid
leasehold interest in, the properties and assets used by it, located on its
premises, or shown on the Most Recent Balance Sheet or the Most Recent Pro
Forma Balance Sheet or acquired after the date thereof, free and clear of all
Security Interests, except for properties and assets disposed of in the
Ordinary Course of Business since the date of the Most Recent Balance Sheet or
the Most Recent Pro Forma Balance Sheet.
7.6 Subsidiaries. The Advisor does not have any Subsidiaries,
operating or otherwise.
7.7 Financial Statements. The Advisor has delivered (collectively,
the "Financial Statements") to NNN its (i) audited balance sheets and
statements of income, changes in stockholders' equity, and cash flow as of and
for the fiscal years ended June 30, 1995, and June 30, 1996 (the "Most Recent
Fiscal Year End"); and (ii) unaudited balance sheets and statements of income,
changes in stockholders' equity, and cash flow (the "Most Recent Financial
Statements") as of and for the nine months ended March 31 31, 1997 (the "Most
Recent Fiscal Month End"). In addition, the Advisor has delivered to NNN
unaudited pro forma balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended June
30, 1995, and June 30, 1996 which give effect to the Development Company
Acquisition (the "Pro Forma Financial Statements") and as of and for the nine
months ended March 31, 1997 (the "Most Recent Pro Forma Financial Statements")
. The Financial Statements and the Pro Forma Financial Statements (including
the notes thereto) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, present fairly the
financial condition of the Advisor as of such dates and the results of
operations of the Advisor for such periods, and are consistent with the books
and records of the Advisor (which books and records are correct and complete in
all material respects)
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7.8 Events Subsequent to Most Recent Fiscal Year End. Since the
Most Recent Fiscal Year End, there has not been any Material Adverse Effect in
the business, financial condition, operations, results of operations, or future
prospects of the Advisor (including the Development Company). Without limiting
the generality of the foregoing, since that date:
(a) the Advisor has not sold, leased, transferred, or assigned any
of its assets, tangible or intangible, other than for a fair consideration in
the Ordinary Course of Business;
(b) the Advisor has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) either involving more than $25,000 or outside the Ordinary Course of
Business;
(c) no party (including the Advisor) has accelerated, terminated,
modified, or canceled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) to which the Advisor is a
party or by which it is bound;
(d) the Advisor has not imposed any Security Interest upon any of
its assets, tangible or intangible;
(e) the Advisor has not made any capital expenditure (or series of
related capital expenditures) either involving more than $25,000 or outside the
Ordinary Course of Business;
(f) the Advisor has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions;
(g) the Advisor has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation;
(h) the Advisor has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of Business;
(i) the Advisor has not canceled, compromised, waived, or released
any right or claim (or series of related rights and claims) outside the
Ordinary Course of Business;
(j) the Advisor has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(k) there has been no change made or authorized in the articles of
incorporation or by-laws of the Advisor;
(l) the Advisor has not issued, sold, or otherwise disposed of any
of its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any of
its capital stock;
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<PAGE> 23
(m) the Advisor has not declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in cash or
in kind) or redeemed, purchased, or otherwise acquired any of its capital
stock;
(n) the Advisor has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
(o) the Advisor has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees outside
the Ordinary Course of Business;
(p) the Advisor has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(q) the Advisor has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(r) the Advisor has not adopted, amended, modified, or terminated
any bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, and employees (or
taken any such action with respect to any other Employee Benefit Plan);
(s) the Advisor has not made any other change in employment terms
for any of its directors, officers, and employees outside the Ordinary Course
of Business or in the terms of its agreements with any independent contractors;
(t) the Advisor has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(u) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary Course of
Business involving the Advisor; and
(v) the Advisor is not under any legal obligation, whether written
or oral, to do any of the foregoing.
7.9 Undisclosed Liabilities. The Advisor (including the
Development Company) does not have any Liability (and there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against it giving rise to any Liability), except
for (i) Liabilities set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) or the Most Recent Pro Forma Balance Sheet
(rather than in any notes thereto) and (ii) Liabilities which have arisen after
the Most Recent Fiscal Month End in the Ordinary Course of Business (none of
which results from, arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law).
7.10 Legal Compliance. The Advisor (including the Development
Company) has complied in all material respects with all applicable laws
(including rules, regulations, codes,
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plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments (and all agencies thereof),
and no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against it alleging any
failure so to comply.
7.11 Tax Matters.
(a) The Advisor has filed all Tax Returns that it was required to
file, including, without limitation, any Tax Returns required to be filed with
any state. All such Tax Returns were correct and complete in all respects. All
Taxes owed by the Advisor (whether or not shown on any Tax Return) have been
paid. The Advisor currently is not the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where the Advisor does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of the Advisor that arose in connection with any
failure (or alleged failure) to pay any Tax.
(b) The Advisor has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
(c) No Stockholder expects any authority to assess any additional
Taxes for any period for which Tax Returns have been filed. There is no
dispute or claim concerning any Tax Liability of the Advisor either (A) claimed
or raised by any authority in writing or (B) as to which any of the
Stockholders has Knowledge. Section 7.11(c) of the Disclosure Schedule lists
all federal, state, local, and foreign income Tax Returns filed with respect to
the Advisor for taxable periods ended on or after December 31, 1991, indicates
those Tax Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. The Stockholders have delivered to NLRII
and NNN correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by the Advisor since December 31, 1991.
(d) The Advisor has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) The Advisor has not filed a consent under Code Section 341(f)
concerning collapsible corporations. The Advisor has not made any payments, is
obligated to make any payments, or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Section 280G. The Advisor has not been a United States
real property holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section 897(c)(1)(A)(ii). The
Advisor has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of Code Section 6662. The Advisor is not a party to any
Tax allocation or sharing agreement. The Advisor (A) has not been a member of
an Affiliated Group filing a consolidated federal income Tax Return (other than
a group the common parent of which was the Advisor) or (B) has any Liability
for the Taxes of any Person (other than the Advisor) under
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<PAGE> 25
Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
7.12 Real Property.
(a) Section 7.12(a) of the Disclosure Schedule lists and describes
briefly all real property owned, leased or subleased to the Advisor. The
Stockholders have delivered to NLRII and NNN correct and complete copies of the
leases and subleases listed in Section 7.12(b) of the Disclosure Schedule (as
amended to date). With respect to each lease and sublease listed in Section
7.12(b) of the Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) no consent is required with respect to any lease or
sublease as a result of this Agreement, and the actions contemplated by this
Agreement will not result in the change of any terms of any lease or sublease
or otherwise affect the ongoing validity of any lease or sublease;
(iii) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(iv) no party to the lease or sublease has repudiated any
provision thereof;
(v) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(vi) with respect to each sublease, the representations
and warranties set forth in subsections (i) through (v) above are true and
correct with respect to the underlying lease;
(vii) the Advisor has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(viii) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses and
permits) required by the Advisor in connection with the operation thereof and
have been operated and maintained by the Advisor in accordance with applicable
laws, rules, and regulations; and
(ix) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation of said
facilities.
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<PAGE> 26
7.13 Intellectual Property.
(a) The Advisor owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property used in the
operation of the businesses of the Advisor as presently conducted. Each item of
Intellectual Property owned or used by the Advisor immediately prior to the
Closing hereunder will be owned or available for use by the Advisor on
identical terms and conditions immediately subsequent to the Closing hereunder.
The Advisor has taken all necessary action to maintain and protect each item of
Intellectual Property that it owns or uses.
(b) The Advisor has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and none of the Stockholders and the directors and
officers (and employees with responsibility for Intellectual Property matters)
of the Advisor has ever received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation, or
violation (including any claim that the Advisor must license or refrain from
using any Intellectual Property rights of any third party). No third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of the Advisor.
(c) The Advisor has no patent or registration which has been
issued to the Advisor with respect to any of its Intellectual Property.
(d) Section 7.13(d) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that the Advisor
uses pursuant to license, sublicense, agreement, or permission. The
Stockholders have delivered to NLRII and NNN correct and complete copies of all
such licenses, sublicenses, agreements, and permissions (as amended to date).
(e) Nothing will interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Intellectual Property rights of third
parties as a result of the continued operation of its business as presently
conducted.
7.14 Tangible Assets. The Advisor owns or leases all buildings,
machinery, equipment, and other tangible assets used in the conduct of its
business as presently conducted and as presently proposed to be conducted. Each
such tangible asset is free from all material defects (patent and latent), has
been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used. The Most Recent
Balance Sheet and the Most Recent Pro Forma Balance Sheet sets forth all of the
assets necessary to conduct the Advisor's business as it is currently being
conducted and as it is contemplated to be conducted in the future.
7.15 Contracts. Section 7.15 of the Disclosure Schedule lists the
following contracts and other agreements to which the Advisor (including the
Development Company) is a party:
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<PAGE> 27
(a) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease payments in
excess of $25,000 per annum;
(b) any agreement concerning a partnership or joint venture;
(c) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation or under which it has imposed a
Security Interest on any of its assets, tangible or intangible;
(d) any agreement concerning confidentiality or noncompetition;
(e) any agreement with any of the Stockholders and their
Affiliates (other than the Advisor);
(f) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
(g) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of $50,000 or providing severance benefits;
(h) any agreement under which it has advanced or loaned any amount
to any of its directors, officers, and employees outside the Ordinary Course of
Business;
(i) the agreement between the Advisor and the California Public
Employees Retirement Systems (the "CALPERS Agreement"); or
(j) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect.
The Stockholders have delivered to NLRII and NNN a correct and complete copy of
each written agreement listed in Section 7.15 of the Disclosure Schedule (as
amended to date) and a written summary setting forth the terms and conditions
of each oral agreement referred to in Section 7.15 of the Disclosure Schedule.
With respect to each such agreement: (A) the agreement is legal, valid,
binding, enforceable, and in full force and effect; (B) the agreement will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (C) no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and (D) no
party has repudiated any provision of the agreement.
7.16 Notes and Accounts Receivable. All notes and accounts
receivable of the Advisor are reflected properly on its books and records, are
valid receivables subject to no setoffs or
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counterclaims, and are current and collectible in accordance with their terms
at their recorded amounts, subject only to the reserve for bad debts set forth
on the face of the Most Recent Balance Sheet (rather than in any notes thereto)
and the Most Recent Pro Forma Balance Sheet (rather than in any notes thereto)
as adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of the Advisor (and, as applicable, the
Development Company).
7.17 Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Advisor.
7.18 Insurance. Section 7.18 of the Disclosure Schedule sets forth
the following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which the Advisor (including the
Development Company) has been a party, a named insured, or otherwise the
beneficiary of coverage at any time within the past five years: (i) the name,
address, and telephone number of the agent; (ii) the name of the insurer, the
name of the policyholder, and the name of each covered insured; (iii) the
policy number and the period of coverage; (iv) the scope (including an
indication of whether the coverage was on a claims made, occurrence, or other
basis) and amount (including a description of how deductibles and ceilings are
calculated and operate) of coverage; and (v) a description of any retroactive
premium adjustments or other loss-sharing arrangements. With respect to each
such insurance policy to the knowledge of the Stockholders and the Advisor: (A)
the policy is legal, valid, binding, enforceable, and in full force and effect;
(B) the policy will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) neither the Advisor (including the
Development Company) nor any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification, or
acceleration, under the policy; and (D) no party to the policy has repudiated
any provision thereof. The Advisor (including the Development Company) has
been covered during the past five years by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged during the
aforementioned period. Section 7.18 of the Disclosure Schedule describes any
self-insurance arrangements affecting the Advisor (including the Development
Company).
7.19 Litigation. Section 7.19 of the Disclosure Schedule sets
forth each instance in which the Advisor (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a party or is
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Section 7.19 of the Disclosure Schedule could
result in any Material Adverse Effect on the Advisor . None of the Stockholders
has any reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against the Advisor.
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<PAGE> 29
7.20 Construction and Development Liability. The Advisor
(including the Development Company) does not have any Liability (and there is
no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against it giving rise to
any Liability) arising out of any injury to individuals or property as a result
of faulty or inadequate construction or development by the Advisor or the
Development Company.
7.21 Employees. To the Knowledge of the Stockholders and the
Advisor, no executive, key employee, or group of employees currently has any
plans to terminate employment with the Advisor (including the Development
Company) or as a result of this Agreement. The Advisor has not committed any
unfair labor practice. None of the Stockholders or the Advisor has any
Knowledge of any organizational effort presently being made or threatened by or
on behalf of any labor union with respect to employees of the Advisor. The
Disclosure Schedule sets forth the names of all employees necessary in order to
conduct the Advisor's business as it is currently being conducted and as it is
contemplated to be conducted in the future, including, without limitation, the
names of Development Company's employees.
7.22 Employee Benefits.
(a) Section 7.22 of the Disclosure Schedule lists each Employee
Benefit Plan that the Advisor (including the Development Company) maintains or
to which the Advisor (including the Development Company) contributes.
(b) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all respects
with the applicable requirements of ERISA, the Code, and other applicable laws.
(c) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, and Summary Plan Descriptions) have
been filed or distributed appropriately with respect to each such Employee
Benefit Plan. The requirements of Part 6 of Subtitle B of Title 1 of ERISA and
of Code Section 4980B have been met with respect to each such Employee Benefit
Plan which is an Employee Welfare Benefit Plan.
(d) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid to each
such Employee Benefit Plan which is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing Date which are not
yet due have been paid to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the Advisor. All premiums or
other payments for all periods ending on or before the Closing Date have been
paid with respect to each such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
(e) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan meets the requirements of a "qualified plan" under Code Section
401(a) and has received, within the last two years, a favorable determination
letter from the Internal Revenue Service.
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<PAGE> 30
(f) The market value of assets under each such Employee Benefit
Plan which is an Employee Pension Benefit Plan (other than any Multiemployer
Plan), subject to Title IV of ERISA, equals or exceeds the present value of all
vested and nonvested Liabilities thereunder determined in accordance with PBGC
methods, factors, and assumptions applicable to an Employee Pension Benefit
Plan terminating on the date for determination.
(g) The Stockholders have delivered to NLRII and NNN correct and
complete copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service, the
most recent Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which implement each such
Employee Benefit Plan.
(h) With respect to each Employee Benefit Plan that the Advisor
maintains or ever has maintained or to which it contributes, ever has
contributed, or ever has been required to contribute:
(i) No such Employee Benefit Plan which is an Employee
Pension Benefit Plan (other than any Multiemployer Plan), subject to Title IV
of ERISA, has been completely or partially terminated or been the subject of a
Reportable Event as to which notices would be required to be filed with the
PBGC. No proceeding by the PBGC to terminate any such Employee Pension Benefit
Plan (other than any Multiemployer Plan) has been instituted or threatened.
(ii) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No Fiduciary has any Liability for
breach of fiduciary duty or any other failure to act or comply in connection
with the administration or investment of the assets of any such Employee
Benefit Plan. No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits) is pending or
threatened. None of the Stockholders has any Knowledge of any Basis for any
such action, suit, proceeding, hearing, or investigation.
(iii) the Advisor (including the Development Company) has
not incurred, and none of the Stockholders and the directors and officers (and
employees with responsibility for employee benefits matters) of the Advisor has
any reason to expect that the Advisor will incur, any Liability to the PBGC
(other than PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the Code with respect to any such
Employee Benefit Plan which is an Employee Pension Benefit Plan.
(i) the Advisor (including the Development Company) does not
contribute to, ever has contributed to, or ever has been required to contribute
to any Multiemployer Plan or has any Liability (including withdrawal Liability)
under any Multiemployer Plan.
(j) the Advisor (including the Development Company) does not
maintain or ever has maintained or contributes, ever has contributed, or ever
has been required to contribute to any Employee Welfare Benefit Plan providing
medical, health, or life insurance or other welfare-type
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<PAGE> 31
benefits for current or future retired or terminated employees, their spouses,
or their dependents (other than in accordance with Code Section 4980B).
7.23 Guaranties. The Advisor is not a guarantor or otherwise is
liable for any Liability or obligation (including indebtedness) of any other
Person.
7.24 Environment, Health, and Safety.
(a) The Advisor (including the Development Company) has complied
with all Environmental, Health, and Safety Laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against it alleging any failure so to comply.
Without limiting the generality of the preceding sentence, the Advisor
(including the Development Company) has obtained and been in compliance with
all of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in, all
Environmental, Health, and Safety Laws.
(b) The Advisor (including the Development Company) does not have
any Liability and has not handled or disposed of any substance, arranged for
the disposal of any substance, exposed any employee or other individual to any
substance or condition, or owned or operated any property or facility in any
manner that could form the Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
the Advisor giving rise to any Liability for damage to any site, location, or
body of water (surface or subsurface), for any illness of or personal injury to
any employee or other individual, or for any reason under any Environmental,
Health, and Safety Law.
(c) All properties and equipment used in the business of the
Advisor (including the Development Company) has been free of asbestos, PCB's,
methylene chloride, trichloroethylene, 1,2-trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
7.25 Proxy Statement. None of the information supplied or to be
supplied in by any of the Stockholders or the Advisor for inclusion in the
Proxy Statement will, at the time of filing the Proxy Statement with the SEC,
at the time of mailing the Proxy Statement to the stockholders of NNN, at the
time of the NNN Stockholders Meeting or at the Effective Date, contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
7.26 Relationships with Tenants. The Stockholders and the Advisor
believe that Advisor's relationships with NNN's existing tenants are sound, and
there is no Basis to believe that any of NNN's primary tenants will materially
and adversely change the manner in which they currently conduct business with
NNN.
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<PAGE> 32
7.27 CALPERS Agreement. The Stockholders and the Advisor have no
Basis to believe that CALPERS Agreement will be terminated or fail to be
renewed on substantially the same terms and conditions as are currently in
effect.
7.28 Disclosure. The representations and warranties contained in
this Article 7 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Article 7 not misleading.
ARTICLE 8
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
8.1 General. Each of the Parties will use his or its reasonable
best efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Article 10 below).
8.2 Notices and Consents. The Advisor shall give any notices to
third parties and shall use its reasonable best efforts to obtain any third
party consents that NNN and NLRII may reasonably request in connection with the
matters referred to in Section 7.3 above. Each of the Parties shall give any
notices to, make any filings with, and use its reasonable best efforts to
obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in Section
5.1, Section 6.4, and Section 7.3 above.
8.3 Maintenance of Business; Prohibited Acts. During the period
from the date of this Agreement to the Effective Time, the Stockholders will
not, and will not cause the Advisor to, take any action that adversely affects
the ability of the Advisor (including the Development Company) (i) to pursue
its business in the ordinary course, (ii) to seek to preserve intact its
current business organizations (iii) to keep available the service of its
current officers and employees and (iv) preserve its relationships with
customers, suppliers and others having business dealings with it; and the
Stockholders will not allow the Advisor (including the Development Company) to,
without NNN's prior written consent:
(a) issue, deliver, sell, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, delivery, sale, disposition or
pledge or other encumbrances of (i) any additional shares of its capital stock
of any class (including the Advisor Common Shares), or any securities or rights
convertible into, exchangeable for or evidencing the right to subscribe for any
shares of its capital stock, or any rights, warrants, options, calls,
commitments or any other agreements of any character to purchase or acquire any
shares of its capital stock or any other securities or rights convertible into,
exchangeable for or evidencing the right to subscribe for any shares of its
capital stock, or (ii) any other securities in respect of, in lieu of or in
substitution for the Advisor Common Shares outstanding on the date hereof;
provided, however, the restrictions on transfer of the Advisor Common Shares
contained in this Section 8.3(a) shall not apply to
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transfers by CNL Group, Inc. to certain officers and employees of the Advisor
and its Affiliates so long as the total number of Advisor Common Shares
transferred does not exceed 750;
(b) redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any of its outstanding securities (including the
Advisor Common Shares);
(c) split, combine, subdivide or reclassify any shares of its
capital stock or otherwise make any payments to the Stockholders in their
capacities as stockholders of the Advisor; provided, however, that nothing
shall prohibit: (i) the payment of any ordinary distribution or dividend in
respect of its capital stock at such times and in such manner and amount as may
be consistent with the Advisor's past practice (which in any event shall
include any and all compensation paid or payable or expenses reimbursed or
reimbursable for the period from April 1, 1997 through the Effective Time, to
the extent not otherwise paid or distributed to the Stockholders), (ii) the
payment of any dividend as shall be required to be paid by the Advisor in order
to permit Puckett & Vogel to issue the letter required by Section 10.2(c), or
(iii) any distribution of property necessary for the representation and
warranty set forth in Section 7.11 to be true and correct.
(d) (i) grant any increases in the compensation of any of its
directors, officers or executives (except as approved by the Special Committee)
or grant any increases in compensation to any of its employees outside the
Ordinary Course of Business (except as approved by the Special Committee), (ii)
pay or agree to pay any pension retirement allowance or other employee benefit
not required or contemplated by any Employee Benefit Plan as in effect on the
date hereof to any such director, officer or employee, whether, past or
present, (iii) enter into any new or amend any existing employment or severance
agreement with any such director, officer or employee, except as approved by
NNN in its sole discretion, (iv) pay or agree to pay any bonus to any director,
officer or employee (whether in the form of cash, capital stock or otherwise)
except as approved by the Special Committee, or (v) except as may be required
to comply with applicable law, amend any existing, or become obligated under
any new Employee Benefit Plan, except in the case of (i) through (v) inclusive,
under and pursuant to the employment agreements referred to in Section 10.1(e);
(e) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
(other than the Merger and the Development Company Acquisition);
(f) except with regard to the acquisition of the Development
Company, make any acquisition, by means of merger, consolidation or otherwise,
of any direct or indirect ownership interest in or assets comprising any
business enterprise or operation;
(g) adopt any amendments to its articles of incorporation or
by-laws;
(h) incur any indebtedness for borrowed money or guarantee such
indebtedness or agree to become contingently liable, by guaranty or otherwise,
for the obligations or indebtedness of any other person or make any loans,
advances or capital contributions to, or investments in,
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any other corporation, any partnership or other legal entity or to any other
persons, except for bank deposits and other investments in marketable
securities and cash equivalents made in the ordinary course of its business;
(i) engage in the conduct of any business the nature of which is
materially different from the business in which the Advisor or the Development
Company is currently engaged;
(j) enter into any agreement providing for acceleration of payment
or performance or other consequence as a result of a change of control of the
Advisor except under the employment agreements referred to in Section 10.1(e);
(k) forgive any indebtedness owed to the Advisor or convert or
contribute by way of capital contribution any such indebtedness owed;
(l) authorize or enter into any agreement providing for management
services to be provided by the Advisor to any third-party or an increase in
management fees paid by any third-party under existing management agreements;
(m) mortgage, pledge, encumber, sell, lease or transfer any
material assets of the Advisor except with the prior written consent of NNN or
as contemplated by this Agreement,
(n) authorize or announce an intention to do any of the foregoing,
or enter into any contract, agreement, commitment or arrangement to do any of
the foregoing; or
(o) perform any act or omit to take any action that would make any
of the representations made above inaccurate or materially misleading as of the
Effective Time.
8.4 Full Access. The Advisor shall permit representatives of NNN
and NLRII to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Advisor to all
premises, properties, personnel, books, records (including Tax records),
contracts, and documents of or pertaining to the Advisor.
8.5 Meeting of Stockholders. NNN will take all action necessary
in accordance with applicable law and NNN's articles of incorporation and
by-laws to arrange for its stockholders to consider and vote upon the Merger
Proposal and the issuance of NNN Common Shares in the Merger at the annual or
special stockholders' meeting (the "NNN Stockholders Meeting") to be held in
connection with the transactions contemplated by this Agreement. Subject to
the fiduciary duties of NNN's Board of Directors under applicable law and as
advised by counsel, the Board of Directors of NNN shall recommend that the NNN
stockholders approve the Merger Proposal. In connection with such
recommendation, NNN shall take all lawful action to solicit, and use all
reasonable efforts to obtain, such approval, including, without limitation, the
inclusion of the recommendation of the NNN Board of Directors and of the
Special Committee in the Proxy Statement that the stockholders of NNN vote in
favor of the Merger Proposal and the adoption of this Agreement.
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8.6 Proxy Materials. After the date hereof, NNN shall promptly
prepare, and the Advisor and the Stockholders shall cooperate in the
preparation of, a proxy statement and a form of proxy to be used in connection
with the vote of NNN's stockholders with respect to the Merger (such proxy
statement, together with any amendments thereof or supplements thereto, in each
case in the form or forms mailed to NNN's stockholders, is herein called the
"Proxy Statement"). NNN shall file the Proxy Statement with the SEC as soon as
practicable, shall use all reasonable efforts to cause the Proxy Statement to
be mailed to stockholders of NNN at the earliest practicable date as permitted
by the SEC and shall take all such action as may be necessary to qualify the
Share Consideration for offering and sale under state securities or blue sky
laws. If at any time prior to the Effective Time any event relating to or
affecting the Advisor, the Stockholders or NNN shall occur as a result of which
it is necessary, in the opinion of counsel for the Advisor and the Stockholders
or of counsel for NNN to supplement or amend the Proxy Statement in order to
make such document not misleading in light of the circumstances existing at the
time approval of the stockholders of NNN is sought, the Advisor, the
Stockholders and NNN, respectively, will notify the others thereof and, in the
case of the Advisor or the Stockholders, they will cooperate with NNN in the
preparation of, and, in the case of NNN, it will prepare and file, an amendment
or supplement with the SEC and, if required by law or NYSE rule, applicable
state securities authorities and the NYSE, such that the Proxy Statement, as so
supplemented or amended, will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances existing at such time, not
misleading, and NNN will, as required by law, disseminate to its stockholders
such amendment or supplement.
8.7 Notice of Developments. Each of the Stockholders and the
Advisor shall give prompt written notice to NNN and NLRII of any material
adverse development causing a breach of any of the representations and
warranties in Article 7 above. Each Party will give prompt written notice to
the others of any material adverse development causing a breach of any of his
own representations and warranties in Article 5 above. No disclosure by any
Party pursuant to this Section 8.7, however, shall be deemed to amend or
supplement the Disclosure Schedule or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
8.8 Tax Matters. Each of the Stockholders, the Advisor and NNN
agrees to report the Merger on all Tax Returns and, if applicable, other
filings as a reorganization under Section 368(a)(2)(D) of the Code to the
extent permitted by law.
8.9 Reorganization. From and after the date hereof and prior to
the Effective Time, except for the transactions contemplated or permitted
herein, none of the Advisor, the Stockholders or NNN shall knowingly take any
action that would be inconsistent with the representations and warranties made
by it herein, including, but not limited to, knowingly taking any action, or
knowingly failing to take any action, that is known to cause disqualification
of the Merger as a reorganization within the meaning of Section 368(a)(2)(D) of
the Code. Furthermore, from and after the date hereof and prior to the
Effective Time, except for the transactions contemplated or permitted herein,
each of NNN, the Stockholders and the Advisor shall use reasonable efforts to
conduct its business and file Tax Returns in a manner that would
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<PAGE> 36
not jeopardize the qualification of NNN after the Effective Time as a real
estate investment trust as defined within Section 856 of the Code.
8.10 Letter of the Advisor's Accountants. The Advisor shall use
reasonable efforts to cause to be delivered to NNN an "agreed-upon procedures"
report of Puckett & Vogel covering the financial statements and other financial
and statistical information of the Advisor set forth in the Proxy Statement and
dated a date within five business days before the date on which the Proxy
Statement shall be mailed to the stockholders of NNN. Such report shall be
addressed to NNN, in form and substance reasonably satisfactory to NNN and
customary in scope and substance for reports delivered by independent public
accountants in connection with proxy statements relating to mergers where the
consideration paid is registered on Form S-4 under the Securities Act.
8.11 Advisor Stockholder Approval. Each of the Stockholders hereby
agrees to vote, at the NNN Stockholders Meeting, the NNN Common Shares owned by
such Stockholder in favor of the Agreement and the transactions contemplated
hereby.
8.12 Delivery of Certain Financial Statements. Promptly after they
are available, and in any event not later than the tenth business day prior to
the Closing Date, the Advisor shall provide to NNN with true and correct copies
of its unaudited consolidated balance sheet as of April 30, 1997 which shall
give effect to the Development Company Acquisition and (ii) true and correct
copies of its unaudited balance sheet as of the last day of each month
occurring after the date hereof (giving effect to the Development Company
Acquisition) and prior to the Closing Date and the related unaudited statements
of income and cash flows for the year to date ending on the last day of each
such month. Delivery of such financial statements shall be deemed to be a
representation by the Advisor and the Stockholders that such balance sheet
(including the related notes, if any) presents fairly, in all material
respects, the financial position of the Advisor (which for the purposes of this
Section 8.12 includes the Advisor) as of the specified date, and the other
related statements (including the related notes, if any) included therein
present fairly, in all material respects, the results of its operations and
cash flows for the respective periods or as of the respective dates set forth
therein, all in conformity with GAAP consistently applied during the periods
involved, except as otherwise stated in the notes thereto, subject to normal
year-end audit adjustments.
8.13 State Takeover Statutes. NNN and its Board of Directors shall
(i) take all action necessary so that no "fair price," "business combination,"
"moratorium," "control share acquisition" or any other anti-takeover statute or
similar statute enacted under state or federal laws of the United States or
similar statute or regulation, including without limitation, the control share
acquisition provisions of Section 3-701 et seq. of the Maryland GCL and the
business combination provisions of Section 3-601 et seq. of the Maryland GCL (a
"Takeover Statute") is or becomes applicable to the Merger, this Agreement or
any of the other transactions contemplated by this Agreement (and so that,
following the Merger, such Takeover Statute shall not apply to James M. Seneff,
Jr., as well as his Affiliates and associates and persons acting in concert
with him), and (ii) if any Takeover Statute becomes applicable to the Merger,
this Agreement or any other transaction contemplated by this Agreement, take
all action necessary so
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that the Merger and the other transactions contemplated by this Agreement and
otherwise to minimize the effect of such Takeover Statute on the Merger and the
other transactions contemplated by this Agreement.
8.14 Exclusivity. None of the Stockholders or the Advisor shall (i)
solicit, initiate, or encourage the submission of any proposal or offer from
any Person relating to the acquisition of any capital stock or other voting
securities or any substantial portion of the assets of the Advisor (including
any acquisition structured as a merger, consolidation, or share exchange) or
(ii) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing. None of the Stockholders shall vote their Advisor Common Shares in
favor of any such acquisition structured as a merger, consolidation, or share
exchange. The Stockholders and the Advisor shall notify NNN immediately if any
Person makes any proposal, offer, inquiry, or contact with respect to any of
the foregoing.
ARTICLE 9
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing:
9.1 General. In the event that at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, all at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to indemnification
therefor under Article 12 below). The Stockholders acknowledge and agree that
from and after the Closing, the Surviving Corporation and NNN will be entitled
to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to the Advisor.
9.2 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Advisor, each of the other Parties will
cooperate with him and his counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Article 12 below).
9.3 Transition. None of the Stockholders will take any action
that is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of the Advisor from
maintaining the same business relationships with the Surviving Corporation
after the Closing as it maintained with the Advisor prior to the Closing.
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9.4 Confidentiality. Each of the Stockholders will treat and hold
as such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to NNN or destroy, at the request and option of NNN, all tangible
embodiments (and all copies) of the Confidential Information which are in his
possession. In the event that any of the Stockholders is requested or required
(by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, the Stockholders will notify
NNN promptly of the request or requirement so that NNN may seek an appropriate
protective order or waive compliance with the provisions of this Section 9.4.
If, in the absence of a protective order or the receipt of a waiver hereunder,
any of the Stockholders is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt,
then the Stockholders may disclose the Confidential Information to such
tribunal; provided, however, that the disclosing Stockholder shall use his best
efforts to obtain, at the request of NNN, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as NNN shall designate. The foregoing
provisions shall not apply to any Confidential Information which is generally
available to the public immediately prior to the time of disclosure.
9.5 Covenant Not to Compete. Unless employed by the Surviving
Corporation or NNN after the Closing, for a period of five years from and after
the Closing Date, none of the Stockholders will engage directly or indirectly
in any business that the Surviving Corporation or NNN conducts as of the
Closing Date. In addition, and not in lieu of the foregoing, James M. Seneff,
Jr., the sole stockholder of CNL Group, Inc., hereby covenants and agrees not
to engage or participate, directly or indirectly, as principal, agent,
executive, employee, employer, consultant, stockholder, partner or in any other
individual capacity whatsoever, in the conduct or management of, or own any
stock or any other equity investment in or debt of, any business that relates
to the ownership, acquisition or development of "retail operations"; provided,
however, for the purposes of this Agreement, "retail operations" shall not
include (A) the ownership, acquisition or development of (i) restaurant
properties or hotel properties that contain retail operations or (ii) retail
stores that contain less than 10,000 square feet and (B) retail stores
currently owned by Affiliates of CNL Group, Inc. If the final judgment of a
court of competent jurisdiction declares that any term or provision of this
Section 9.5 is invalid or unenforceable, the Parties agree that the court
making the determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.
9.6 NNN Common Shares. Each certificate issued to the
Stockholders representing the NNN Common Shares will be imprinted with a legend
substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), IN
RELIANCE UPON THE EXEMPTION FROM
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<PAGE> 39
REGISTRATION CONTAINED IN SECTION 4(2) OF THE 1933 ACT AND REGULATION
D OF THE RULES AND REGULATIONS PROMULGATED UNDER THE 1933 ACT, AND IN
RELIANCE UPON THE REPRESENTATION BY THE HOLDER THAT THEY HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO RESALE OR
FURTHER DISTRIBUTION. SUCH SHARES MAY NOT BE OFFERED FOR SALE, SOLD,
DELIVERED AFTER SALE, HYPOTHECATED, NOR WILL ANY ASSIGNEE OR ENDORSEE
HEREOF BE RECOGNIZED AS AN OWNER HEREOF BY THE ISSUER FOR ANY PURPOSE,
UNLESS A REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION WITH RESPECT TO SUCH SHARES SHALL THEN BE IN EFFECT OR
UNLESS THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION SHALL BE
ESTABLISHED TO THE REASONABLE SATISFACTION OF COUNSEL OF THE ISSUER.
Each Stockholder desiring to transfer any of the NNN Common Shares received in
connection with the Merger, other than in a registered offering or pursuant to
a sale which counsel for NNN confirms is in compliance with Rule 144 of the
Securities Act, must first furnish NNN with (i) a written opinion satisfactory
to NNN in form and substance from counsel reasonably satisfactory to NNN to the
effect that such Stockholder may transfer the NNN Common Shares as desired
without registration under the Securities Act and (ii) a written undertaking
executed by the desired transferee reasonably satisfactory to NNN in form and
substance agreeing to be bound by the restrictions on transfer contained
herein.
9.7 Continuity of Interest. The Stockholders as a group shall not
dispose of any of the NNN Common Shares received in the transaction in a manner
that would cause the transaction to violate the continuity of stockholder
interest requirement set forth in Treas. Reg. Section 1.368-1(b). Any
Stockholder wishing to dispose of any NNN Common Shares received in the
transaction shall provide NNN written notice, not less than 15 days prior to
the intended date of disposition, specifying the number of shares which such
Stockholder proposes to dispose of and an opinion of counsel reasonably
satisfactory to NNN that such transfer or disposition will not violate the
continuity of stockholder interest requirement set forth in Treas. Reg. Section
1.368-1(b).
9.8 Share Consideration. Each Stockholder must retain at least
one-half of the NNN Common Shares received by such Stockholder on the Closing
Date or received by such Stockholder with respect to any Payment Period for a
period of 12 months following the date of receipt of such Share Consideration.
9.9 Listing. NNN shall use its best efforts to effect, at or
before the issuance of any NNN Common Shares issued as Share Consideration
pursuant to Article 4, authorization for listing or quotation of such NNN
Common Shares on the NYSE, subject to official notice of issuance.
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9.10 Tax Matters.
(a) If there is an adjustment to any item reported on a
pre-closing Tax Return that results in an increase in the Taxes payable by
Advisor or the Stockholders, and such adjustment results in a corresponding
adjustment to items reported on a post-closing Tax Return with the result that
the Taxes payable either by NNN, NLRII or any of their Subsidiaries or by any
Consolidated Group of companies of which NNN, NLRII, or any Subsidiary are then
members are reduced, or a refund of Taxes is increased, then any NNN Indemnity
Claim that the Stockholders owe NNN pursuant to Article 11 below shall be
reduced by the amount by which such Taxes are reduced or such refunds are
increased. The amount of reduction of any NNN Indemnity Claim under this
Section 9.10(a) shall be the excess of (i) the Tax liability of NNN, NLRII,
such Subsidiary or, if applicable, NNN's, NLRII's or such Subsidiary's
Consolidated Group for the tax period in question computed without regard to
such adjustment or amendment, over (ii) the actual Tax liability of NNN, NLRII,
or such Subsidiary or, if applicable, NNN's, NLRII's or such Subsidiary's
Consolidated Group for the tax period in question.
(b) Any refund or credit of Taxes (including any statutory
interest thereon) received by NNN, NLRII or any of their Subsidiaries
attributable to periods ending on or prior to or including the Closing Date
that were paid by Advisor pursuant to this Agreement shall reduce any NNN
Indemnity Claim that the Stockholders owe NNN pursuant to Article 11 below by
an amount equal to the amount of such refund or credit.
(c) In the event that NNN, NLRII or any of their Subsidiaries
receives notice, whether orally or in writing, of any pending or threatened
federal, state, local or foreign tax examinations, claims settlements, proposed
adjustments or related matters with respect to Taxes that could affect Advisor
or any of the Stockholders, or if Advisor or any of the Stockholders receives
notice of such matters that could affect NNN, NLRII or any of their
Subsidiaries, the party receiving such notice shall notify in writing the
potentially affected party within ten (10) days thereof. The failure of either
party to give the notice required by this Section shall not impair such party's
rights under this Agreement except to the extent that the other party
demonstrates that it has been damaged thereby.
(d) The Stockholders shall have the responsibility for, and shall
be entitled, at their expense, to contest, control, compromise, settle or
appeal all proceedings with respect to pre-closing Taxes.
9.11 CNL License. CNL Group, Inc. hereby grants an irrevocable
non-exclusive license to NNN and its Affiliates to use the "CNL" name and logo
until such time, if ever, that a Change in Control occurs or James M. Seneff,
Jr., involuntarily, is no longer on the Board of Directors of NNN. At no time
during the term of the license shall NNN be obligated to pay license fees to
CNL Group, Inc. with respect to the license. At such time as a Change in
Control occurs, all rights to the "CNL" name and logo shall revert back to CNL
Group, Inc. and the successor Person and its Affiliates shall have no rights,
without the express written consent of CNL Group, Inc., to utilize the "CNL"
name or logo in its business or any Affiliate's business.
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ARTICLE 10
CONDITIONS TO OBLIGATION TO CLOSE
10.1 Conditions to Each Party's Obligation. The respective
obligations of NNN, NLRII, the Advisor and the Stockholders to consummate the
transactions contemplated by this Agreement are subject to the fulfillment at
or prior to the Closing Date of each of the following conditions, which
conditions may be waived upon the written consent of NNN and the Stockholders:
(a) NNN Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been duly approved, in each case by the
requisite holders of NNN Common Shares in accordance with the applicable
provisions of the NYSE, the Maryland GCL and NNN's articles of incorporation
and by-laws.
(b) Governmental Approvals. The Parties shall have received all
other authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 5.1, Section 6.4, and Section 7.3 above.
(c) No Injunction or Proceedings. There shall not be in effect
any action, suit, or proceeding pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge that would, in the
reasonable judgment of NNN or the Advisor, (A) prevent consummation of any of
the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of NNN to own the capital stock of
the Surviving Corporation, or (D) affect adversely the right of the Surviving
Corporation to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge is in effect).
(d) No Suspension of Trading, Etc. At the Effective Time, there
shall be no suspension of trading in NNN Common Shares on the NYSE, declaration
of a banking moratorium by federal or state authorities or any suspension of
payments by banks in the United States (whether mandatory or not) or of the
extension of credit by lending institutions in the United States, or
commencement of war or other international, armed hostility or national
calamity directly or indirectly involving the United States, which war,
hostility or calamity (or any material acceleration or worsening thereof), in
the sole judgment of NNN, would have a Material Adverse Effect on the Advisor
or, in the sole judgment of the Stockholders, would have a Material Adverse
Effect on NNN.
(e) Employment Agreements. Kevin B. Habicht, Gary M. Ralston and
James M. Seneff, Jr. shall have entered into employment agreements with NNN. in
substantially the forms attach hereto as Exhibits A-1, A-2 and A-3.
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(f) Registration Rights Agreement. The registration rights
agreement, in substantially the form attach hereto as Exhibit B, except for
such changes therein as may be agreed upon by the Stockholders and NNN, shall
have executed and delivered by the parties thereto.
10.2 Conditions to Obligation of NLRII and NNN. The obligations of
NLRII and NNN to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) the Stockholders and the Advisor shall have delivered to NLRII
and NNN a certificate to the effect that:
(i) the representations and warranties set forth in
Article 5 and Article 7 above are true and correct in all material respects at
and as of the Closing Date;
(ii) the Stockholders and the Advisor have performed and
complied with all of their covenants hereunder in all material respects at and
as of the Closing Date;
(iii) the Advisor has procured all of the third party
consents specified in Section 7.3 above; and
(iv) no action, suit, or proceeding is pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge that
would (A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation, (C) affect adversely the right of NNN to
own the capital stock of the Surviving Corporation, or (D) affect adversely the
right of the Surviving Corporation to own its assets and to operate its
businesses (and no such injunction, judgment, order, decree, ruling, or charge
is in effect);
(b) NLRII and NNN shall have received an opinion dated as of the
Closing Date from Rogers & Wells, counsel to the Stockholders and the Advisor,
addressed and in form satisfactory to NLRII and NNN;
(c) NNN shall have received written comfort in form and substance
reasonably satisfactory to it from Puckett & Vogel that the Advisor will not
have any accumulated or current earning and profits with in the meaning of
Section 312 of the Code as of the Effective Time. The Stockholders shall
provide to Puckett & Vogel all information reasonably available to the
Stockholders that is necessary to calculate the accumulated and current
earnings and profits of the Advisor as of the Effective Time, including, but
not limited to, all federal income Tax Returns of the Advisor and any
consolidated group of which the Advisor and the Stockholders are or have been
members, working papers created with respect to such Tax Returns, and
information with respect to any federal income Tax controversy, either pending
or resolved, with respect such returns. Any information shall be treated
strictly confidential by Puckett & Vogel and every employee of, and advisor to,
NNN and Puckett & Vogel.
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<PAGE> 43
(d) Legg Mason Wood Walker Incorporated shall have not withdrawn
its Fairness Opinion issued in connection with the Merger;
(e) NNN and CNL Group, Inc. shall have executed a mutually
acceptable agreement relating to the provision by CNL Group, Inc. of certain
services, including, without limitation, payroll functions, benefit plan
administration, certain management information functions, health insurance
administration and office administration;
(f) NNN shall have received the resignations, effective as of the
Closing, of each director and officer of the Advisor other than those whom NNN
shall have specified in writing prior to the Closing;
(g) the CALPERS Agreement shall be in full, force and effect and
there shall not exist any condition, that, in the reasonable discretion of NNN,
would indicate that the CALPERS Agreement would not be renewed upon
substantially the same terms and condition that are then currently in effect;
and
(h) NNN shall have received satisfactory evidence that all bonus
plans under which officers, directors or employees of the Advisor are
beneficiaries have been terminated as of the Closing Date.
NNN may waive any condition specified in this Section 10.2 if it executes a
writing so stating at or prior to the Closing.
10.3 Conditions to Obligation of the Stockholders and the Advisor.
The obligation of the Stockholders and the Advisor to consummate the
transactions to be performed by them in connection with the Closing is subject
to satisfaction of the following conditions:
(a) NLRII and NNN shall have delivered to Stockholders and the
Advisor a certificate to the effect that:
(i) the representations and warranties set forth in
Article 6 above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) NLRII and NNN shall have performed and complied with
all of its covenants hereunder in all material respects through the Closing;
and
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement
or (B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
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<PAGE> 44
(b) NNN shall have delivered to the Stockholders the Share
Consideration pursuant to Section 4.2.
(c) Since December 31, 1996, there shall not have occurred or been
threatened any material adverse changes in the business, properties, operations
or condition (financial or otherwise) of NNN; and
(d) the Stockholders shall have received an opinion dated as of
the Closing Date from Shaw, Pittman, Potts & Trowbridge, counsel to NLRII and
NNN, addressed and in form satisfactory to the Stockholders.
The Stockholders may waive any condition specified in this Section 10.3 if they
execute a writing so stating at or prior to the Closing.
ARTICLE 11
TERMINATION
11.1 Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval by the Stockholders or the stockholder of
NLRII, respectively, either by the mutual written consent of NNN and the
Representative or by mutual action of the Board of Directors of the Advisor and
the Special Committee.
11.2 Termination by Either NNN or the Advisor. This Agreement may
be terminated and the Merger may be abandoned (a) by action of the Special
Committee in the event of a failure of a condition to the obligations of the
Stockholders or the Advisor set forth in Section 10.3 of this Agreement; or (b)
by majority vote of the Stockholders in the event of a failure of a condition
to the obligations of NNN and NLRII set forth in Section 10.2 of this
Agreement; or (c) if a United States federal or state court of competent
jurisdiction or United States federal or state governmental agency shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
by this Agreement and such other, decree, ruling or other action shall have
become final and non-appealable; and provided, in the case of a termination
pursuant to clause (a) or (b) above, that the terminating party shall not have
breached in any material respect its obligations under this Agreement in any
manner that shall have proximately contributed to the occurrence of the failure
referred to in said clause.
11.3 Effect of Termination and Abandonment. In the event of
termination of this Agreement and abandonment of the Merger pursuant to this
Article 11, no party hereto (or any of its directors or officers) shall have
any liability or further obligation to any other party to this Agreement,
except that nothing herein will relieve any party from liability for any breach
of this Agreement.
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<PAGE> 45
ARTICLE 12
INDEMNIFICATION
12.1 Indemnity Obligations of the Stockholders. Subject to Section
12.5 and Section 12.6, each of the Stockholders hereby severally, in accordance
with his percentage interest in the Share Consideration, agrees to indemnify
and hold NNN and the Surviving Corporation harmless from, and to reimburse NNN
and the Surviving Corporation for, any NNN Indemnity Claims arising under the
terms and conditions of this Agreement. For purposes of this Agreement, the
term "NNN Indemnity Claim" shall mean any loss, damage, deficiency, claim,
liability, obligation, suit, action, fee, cost or expense of any nature
whatsoever resulting from (i) any breach of any representation and warranty of
the Stockholders or the Advisor which is contained in this Agreement or any
Schedule, Exhibit or certificate delivered pursuant thereto; (ii) any breach or
non-fulfillment of, or any failure to perform, any of the covenants, agreements
or undertakings of the Stockholders or the Advisor which are contained in or
made pursuant to this Agreement; and (iii) all interest, penalties and costs
and expenses (including, without limitation, all reasonable fees and
disbursements of counsel) arising out of or related to any indemnification made
under this Section 12.1.
12.2 Indemnity Obligations of NNN. NNN and the Surviving
Corporation hereby jointly and severally agree to indemnify and hold each of
the Stockholders harmless from, and to reimburse each of the Stockholders for,
any Stockholder Indemnity Claims arising under the terms and conditions of this
Agreement. For purposes of this Agreement, the term "Stockholder Indemnity
Claim" shall mean any loss, damage, deficiency, claim, liability, suit, action,
fee, cost or expense of any nature whatsoever incurred by the Stockholders
resulting from (i) any breach of any representation and warranty of NLRII and
NNN which is contained in this Agreement or any Schedule, Exhibit or
certificate delivered pursuant thereto; (ii) any breach or non-fulfillment of,
or failure to perform, any of the covenants, agreements or undertakings of
NLRII or NNN which are contained in or made pursuant to the terms and
conditions of this Agreement; and (iii) all interest, penalties, costs and
expenses (including, without limitation, all reasonable fees and disbursements
of counsel) arising out of or related to any indemnification made under this
Section 12.2.
12.3 Appointment of Representative. Each of the Stockholders
hereby appoints James M. Seneff, Jr. as its exclusive agent to act on its
behalf with respect to any and all Stockholder Indemnity Claims and any and all
NNN Indemnity Claims arising under this Agreement or such other representative
as may be hereafter appointed by a majority in interest of the Stockholders.
Such agent is hereinafter referred to as the "Representative." The
Representative shall take, and the Stockholders agree that the Representative
shall take, any and all actions which the Representative believes are necessary
or appropriate under this Agreement for and on behalf of the Stockholders, as
fully as if such parties were acting on their own behalf, including, without
limitation, asserting Stockholder Indemnity Claims against NNN, defending all
NNN Indemnity Claims, consenting to, compromising or settling all Stockholder
Indemnity Claims and NNN Indemnity Claims, conducting negotiations with NNN and
its representatives regarding such claims, taking any and all other actions
specified in or contemplated by this Agreement and engaging counsel,
accountants or other representatives in connection with the foregoing matters.
NNN shall have the right to rely upon all actions taken or omitted to be taken
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<PAGE> 46
by the Representative pursuant to this Agreement, all of which actions or
omissions shall be legally binding upon the Stockholders. The Representative,
acting pursuant to this Section 12.3, shall not be liable to any other
Stockholder for any act or omission, except in connection with any act or
omission that was the result of the Representative's bad faith or gross
negligence.
12.4 Notification of Claims. Subject to the provisions of Section
12.5, in the event of the occurrence of an event which any party asserts
constitutes a NNN Indemnity Claim or a Stockholder Indemnity Claim, as
applicable, such party shall provide the indemnifying party with prompt notice
of such event and shall otherwise make available to the indemnifying party all
relevant information which is material to the claim and which is in the
possession of the indemnified party. If such event involves the claim of any
third party (a "Third-Party Claim"), the indemnifying party shall have the
right to elect to join in the defense, settlement, adjustment or compromise of
any such Third-Party Claim, and to employ counsel to assist such indemnifying
party in connection with the handling of such claim, at the sole expense of the
indemnifying party, and no such claim shall be settled, adjusted or
compromised, or the defense thereof terminated, without the prior consent of
the indemnifying party unless and until the indemnifying party shall have
failed, after the lapse of a reasonable period of time, but in no event more
than 30 days after written notice to it of the Third-Party Claim, to join in
the defense, settlement, adjustment or compromise of the same. An indemnified
party's failure to give timely notice or to furnish the indemnifying party with
any relevant data and documents in connection with any Third-Party Claim shall
not constitute a defense (in part or in whole) to any claim for indemnification
by such party, except and only to the extent that such failure shall result in
any material prejudice to the indemnifying party. If so desired by any
indemnifying party, such party may elect, at such party's sole expense, to
assume control of the defense, settlement, adjustment or compromise of any
Third-Party Claim, with counsel reasonably acceptable to the indemnified
parties, insofar as such claim relates to the liability of the indemnifying
party, provided that such indemnifying party shall obtain the consent of all
indemnified parties before entering into any settlement, adjustment or
compromise of such claims, or ceasing to defend against such claims, if as a
result thereof, or pursuant thereto, there would be imposed on an indemnified
party any material liability or obligation not covered by the indemnity
obligations of the indemnifying parties under this Agreement (including,
without limitation, any injunctive relief or other remedy). In connection with
any Third-Party Claim, the indemnified party, or the indemnifying party if it
has assumed the defense of such claim pursuant to the preceding sentence, shall
diligently pursue the defense of such Third-Party Claim.
12.5 Survival. All representations and warranties, and, except as
otherwise provided in this Agreement, all covenants and agreements of the
parties contained in or made pursuant to this Agreement, and the rights of the
parties to seek indemnification with respect thereto, shall survive for a
period equal to the later of (i) two years from the Closing Date or (ii) the
date upon which the Share Balance is zero; provided, however, the
representations and warranties contained in Sections 6.3 and 7.11 shall survive
until the expiration of the applicable statute of limitations with respect to
the matters covered thereby. No claim shall be made after the applicable
survival period.
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<PAGE> 47
12.6 Limitations. Notwithstanding the foregoing, any claim by an
indemnified party against any indemnifying party under this Merger Agreement
shall be payable by the indemnifying party only in the event, and to the
extent, that the accumulated amount of the claims in respect of such
indemnifying party's obligations to indemnify under this Agreement shall exceed
the amount of $100,000 in the aggregate. In no event shall the aggregate
liability of the Stockholders under this Agreement with respect to NNN
Indemnity Claims exceed the value of NNN Common Shares actually issued to the
Stockholders valued at a price per share equal to the average closing price of
a NNN Common Share as reported on the NYSE over the 20 trading days immediately
preceding the Closing Date.
12.7 Exclusive Provisions: No Rescission. Except as set forth in
this Agreement, no party hereto is making any representation, warranty,
covenant or agreement with respect to the matters contained herein. Anything
herein to the contrary notwithstanding, no breach of any representation,
warranty, covenant or agreement contained herein or in any certificate or other
document delivered pursuant hereto relating to the Merger shall give rise to
any right on the part of any party hereto, after the consummation of the
Merger, to rescind this Agreement or the transactions contemplated by this
Agreement. Following the consummation of the Merger, the rights of the parties
under the provisions of this Article 12 shall be the sole and exclusive remedy
available to the parties with respect to claims, assertions, events or
proceedings arising out of or relating to the Merger.
ARTICLE 13
MISCELLANEOUS
13.1 Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written
approval of NNN and the Representative; provided, however, that any Party may
make any public disclosure it believes in good faith is required by applicable
law or any listing or trading agreement concerning its publicly-traded
securities (in which case the disclosing Party will use its best efforts to
advise the other Parties prior to making the disclosure).
13.2 No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
13.3 Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
13.4 Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his rights, interests, or obligations hereunder without the prior
written approval of NNN and the Representative; provided, however, that NNN may
(i) assign any or all of its rights and interests hereunder to one or more of
its Affiliates and
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<PAGE> 48
(ii) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases NNN nonetheless shall remain
responsible for the performance of all of its obligations hereunder).
13.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
13.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.7 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to the Advisor or the Stockholders:
c/o James M. Seneff, Jr.
400 East South Street
Suite 500
Orlando, Florida 32801
Telecopy: (407) 423-2894
With copy to:
Rogers & Wells
Two Hundred Park Avenue
New York, New York 10166
Attn: Alan L. Gosule, Esq. and
Jay L. Bernstein, Esq.
Telecopy: (212) 878-8375
If to NNN and NLRII:
Gary M. Ralston
President
Commercial Net Lease Realty, Inc.
400 East South Street
Suite 500
Orlando, Florida 32801
Telecopy: (407) 648-8756
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<PAGE> 49
With copy to:
Shaw, Pittman, Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037
Attn: Thomas H. McCormick, Esq.
Telecopy: (202) 663-8007
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been
duly given unless and until it actually is received by the intended recipient.
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
13.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF MARYLAND WITHOUT
GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF
THE STATE OF MARYLAND OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF MARYLAND.
13.9 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by NNN
and the Representative. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
13.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
13.11 Expenses. Each of the Parties will bear his, her or its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby. The Stockholders
agree that the Advisor has not borne or will bear any of the Stockholders'
costs and expenses (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby.
13.12 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of
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<PAGE> 50
the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
13.13 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
13.14 Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 13.15 below), in addition to any other remedy to which they
may be entitled, at law or in equity.
13.15 Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in the State of Maryland, in
any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of the action or proceeding may be heard and
determined in any such court.
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<PAGE> 51
13.16 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
NNN:
COMMERCIAL NET LEASE REALTY, INC.
By: /s/ GARY M. RALSTON
-------------------------------------
Its: President
------------------------------------
NLRII:
NET LEASE REALTY II, INC.
By: /s/ JAMES M. SENEFF, JR.
-------------------------------------
Its: Chief Executive Officer
------------------------------------
ADVISOR:
CNL REALTY ADVISORS, INC.
By: /s/ JAMES M. SENEFF, JR.
-------------------------------------
Its: Chief Executive Officer
------------------------------------
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<PAGE> 52
STOCKHOLDERS:
/s/ ROBERT A. BOURNE
----------------------------------
Robert A. Bourne
CNL Group, Inc.
By: /s/ JAMES M. SENEFF, JR.
--------------------------------
James M. Seneff, Jr., CEO
/s/ KEVIN B. HABICHT
--------------------------------
Kevin B. Habicht
/s/ GARY M. RALSTON
--------------------------------
Gary M. Ralston
The undersigned executes this Agreement solely with respect to the
covenants of the undersigned contained in Section 9.5, and with respect Article
12, solely as such Article 12 relates to undersigned's capacity as
Representative of the Stockholders.
/s/ JAMES M. SENEFF, JR.
--------------------------------
James M. Seneff, Jr.
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<PAGE> 53
EXHIBIT A-1
KEVIN B. HABICHT FORM OF
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is dated as of ______________, 1997, by and
between COMMERCIAL NET LEASE REALTY, INC., a Maryland corporation (hereinafter
referred to as the "Company"), and Kevin B. Habicht (hereinafter referred to as
the "Executive").
WHEREAS, the Agreement and Plan of Merger, dated as of May 15, 1997,
between CNL REALTY ADVISORS, INC., a Florida corporation ("CNL Advisors"), and
the Company contemplates that the Company enter into an employment agreement
with the Executive;
WHEREAS, the Company wishes to offer employment to the Executive, and
the Executive wishes to accept such offer, on the terms set forth below;
Accordingly, the parties hereto agree as follows:
1. Term. The Company hereby employs the Executive, and the
Executive hereby accepts such employment for an initial term commencing as of
the date hereof and ending on December 31, 2000, unless sooner terminated in
accordance with the provisions of Section 4 or Section 5 (the period during
which the Executive is employed hereunder being hereinafter referred to as the
"Term"). The Term shall be subject to automatic one-year renewals unless
either party hereto notifies the other, in accordance with Section 7.5, of
non-renewal at least 90-days prior to the end of any such Term.
2. Duties. The Executive, in his capacity as Executive Vice
President shall faithfully perform for the Company the duties of said office
including, without limitation, acting as chief financial officer and shall
perform such other duties of an executive, managerial or administrative nature
as shall be specified and designated from time to time by the Board of
Directors of the Company (the "Board"), the Chief Executive Officer or the
President of the Company (including the performance of services for, and
serving on the Board of Directors of, any subsidiary of the Company without any
additional compensation). The Executive shall devote substantially all of the
Executive's business time and effort to the performance of the Executive's
duties hereunder, provided that in no event shall this sentence prohibit the
Executive from performing personal and charitable activities and any other
activities approved by the Board, so long as such activities do not interfere
with the Executive's duties for the Company.
3. Compensation.
3.1 Salary. The Company shall pay the Executive during
the Term a salary at the rate of $150,000 per annum (the "Annual Salary"), in
accordance with the customary payroll practices of the Company applicable to
senior executives generally. Annual Salary will increase annually on January 1
of each year by an amount as may be approved by the Board, with such increase
to be effective on the date salary increases are effective for employees of the
Company
<PAGE> 54
EXHIBIT A-1
generally and, upon such increase, the increased amount shall thereafter be
deemed to be the Annual Salary.
3.2 Bonus. The Executive will be eligible to participate
in the Company's Annual Bonus Program (the "Bonus Plan"), the terms of which
will be established by the Executive Compensation Committee of the Company.
Until such time as the Company adopts a formal bonus program, the Executive
will be entitled to a bonus of up to 50% of Annual Salary.
3.3 Benefits - In General. The Executive shall be
permitted during the Term to participate in any group life, hospitalization or
disability insurance plans, health programs, pension and profit sharing plans
and similar benefits that may be available to other senior executives of the
Company generally, on the same terms as may be applicable to such other
executives, in each case to the extent that the Executive is eligible under the
terms of such plans or programs.
3.4 Vacation. The Executive shall be entitled to
vacation of 20 days per year.
3.5 Automobile. The Company will provide the Executive a
monthly allowance of $500 for the use of an automobile. At the option of the
Company, in lieu of providing such allowance, the Company will provide the
Executive with an automobile of suitable standard to the Executive's position.
3.6 Disability Benefits and Life Insurance. The
Executive shall be entitled to long-term disability coverage providing benefits
(to continue for such period as is provided in the applicable disability plan
or program, as amended from time to time) equal to two-thirds of Annual Salary
in the case of a covered disability and life insurance benefits with a face
amount equal to Annual Salary.
3.7 Expenses. The Company shall pay or reimburse the
Executive for all ordinary and reasonable out-of-pocket expenses actually
incurred (and, in the case of reimbursement, paid) by the Executive during the
Term in the performance of the Executive's services under this Agreement;
provided that the Executive submits such expenses in accordance with the
policies applicable to senior executives of the Company generally.
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<PAGE> 55
EXHIBIT A-1
4. Termination upon Death or Disability. If the Executive dies during
the Term, the obligations of the Company to or with respect to the Executive
shall terminate in their entirety except as otherwise provided under this
Section 4. If the Executive becomes eligible for disability benefits under the
Company's long-term disability plans and arrangements (or, if none apply, would
have been so eligible under the most recent plan or arrangement), the Company
shall have the right, to the extent permitted by law, to terminate the
employment of the Executive upon notice in writing to the Executive; provided
that the Company will have no right to terminate the Executive's employment if,
in the opinion of a qualified physician reasonably acceptable to the Company,
it is reasonably certain that the Executive will be able to resume the
Executive's duties on a regular full-time basis within 90 days of the date the
Executive receives notice of such termination. Upon death or other termination
of employment by virtue of disability, (i) the Executive (or the Executive's
estate or beneficiaries in the case of the death of the Executive) shall have
no right to receive any compensation or benefit hereunder on and after the
effective date of the termination of employment other than Annual Salary and
other benefits (but excluding any bonuses except as provided in the Bonus Plan
or in clause (ii) below) earned and accrued under this Agreement prior to the
date of termination (and reimbursement under this Agreement for expenses
incurred prior to the date of termination); (ii) the Executive (or the
Executive's estate or beneficiaries in the case of the death of the Executive)
shall be entitled to a cash payment equal to the Executive's Annual Salary (as
in effect on the effective date of such termination) payable no later than 30
days after such termination; and (iii) this Agreement shall otherwise terminate
upon such death or other termination of employment and there shall be no
further rights with respect to the Executive hereunder (except as provided in
Section 7.14).
5. Certain Terminations of Employment.
5.1 Termination for Cause; Termination of Employment by the
Executive Without Good Reason.
(a) For purposes of this Agreement, "Cause" shall mean:
(i) the Executive's (A) conviction for (or
pleading nolo contendere to) any felony, or a misdemeanor
involving moral turpitude, or (B) indictment for any
felony or misdemeanor involving moral turpitude, if such
indictment is not discharged or otherwise resolved within
18 months;
(ii) the Executive's commission of an act of
fraud, theft or dishonesty related to the performance of
the Executive's duties hereunder;
(iii) the willful and continuing failure or
habitual neglect by the Executive to perform the
Executive's duties hereunder;
(iv) any material violation by the Executive
of the covenants contained in Section 6; or
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<PAGE> 56
EXHIBIT A-1
(v) the Executive's willful and continuing
material breach of this Agreement.
Notwithstanding the foregoing, if there exists (without regard to this
sentence) an event or condition that constitutes Cause under clause (iii) or
(v) above, the Executive shall have 30 days from the date such notice is given
to cure such event or condition and, if the Executive does so, such event or
condition shall not constitute Cause hereunder.
(b) For purposes of this Agreement, "Good Reason" shall
mean, unless otherwise consented to by the Executive:
(i) the material reduction of the Executive's
authority, duties and responsibilities, or the assignment to
the Executive of duties materially inconsistent with the
Executive's position or positions with the Company and its
subsidiaries;
(ii) a reduction in Annual Salary of the
Executive;
(iii) the failure by the Company to obtain an
agreement in form and substance reasonably satisfactory to the
Executive from any successor to the business of the Company to
assume and agree to perform this Agreement; or
(iv) the Company's material and willful breach of
this Agreement.
Notwithstanding the foregoing, if there exists (without regard to this
sentence) an event or condition that constitutes Good Reason under clause (i),
(ii) or (iv) above, the Company shall have 30 days from the date on which the
Executive gives the notice thereof to cure such event or condition and, if the
Company does so, such event or condition shall not constitute Good Reason
hereunder.
(c) The Company may terminate the Executive's employment
hereunder for Cause. If the Company terminates the Executive for Cause, (i)
the Executive shall have no right to receive any compensation or benefit
hereunder on and after the effective date of the termination of employment
other than Annual Salary and other benefits (but excluding any bonuses except
as provided in the Bonus Plan) earned and accrued under this Agreement prior to
the effective date of the termination of employment (and reimbursement under
this Agreement for expenses incurred prior to the effective date of the
termination of employment); and (ii) this Agreement shall otherwise terminate
upon such termination of employment and the Executive shall have no further
rights hereunder (except as provided in Section 7.14).
(d) The Executive may terminate his employment without
Good Reason. If the Executive terminates the Executive's employment with the
Company without Good Reason: (i) the Executive shall have no right to receive
any compensation or benefit hereunder on and after the effective date of the
termination of employment other than Annual Salary and other benefits
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<PAGE> 57
EXHIBIT A-1
(but excluding any bonuses except as provided in the Bonus Plan) earned and
accrued under this Agreement prior to the effective date of the termination of
employment (and reimbursement under this Agreement for expenses incurred prior
to the effective date of the termination of employment); and (ii) this
Agreement shall otherwise terminate upon such termination of employment and the
Executive shall have no further rights hereunder (except as provided in Section
7.14).
5.2 Termination Without Cause; Termination for Good Reason;
Failure to Renew Employment Agreement. The Company may terminate the
Executive's employment at any time for any reason or no reason and the
Executive may terminate the Executive's employment with the Company for Good
Reason. If the Company or the Executive terminates the Executive's employment
and such termination is not described in Section 4 or Section 5.1, or if the
Company, for any reason, does not renew this Agreement at the expiration of its
Term, (i) the Executive shall have no right to receive any compensation or
benefit hereunder on and after the effective date of the termination of
employment or expiration of the Term other than Annual Salary and other
benefits (but excluding any bonuses except as provided in the Bonus Plan and
clause (ii) below) earned and accrued under this Agreement prior to the
effective date of the termination of employment or expiration of the Term (and
reimbursement under this Agreement for expenses incurred prior to the effective
date of the termination of employment or expiration of the Term); (ii) the
Executive shall receive (A) a cash payment equal to two (2) times the
Executive's Annual Salary (as in effect on the effective date of such
termination or expiration) payable no later than 30 days after such termination
or expiration and (B) for a period of one (1) year after termination of
employment or expiration of the Term such continuing health benefits (including
any medical, vision or dental benefits), under the Company's health plans and
programs applicable to senior executives of the Company generally as the
Executive would have received under this Agreement (and at such costs to the
Executive) as would have applied in the absence of such termination or
expiration (but not taking into account any post-termination increases in
Annual Salary that may otherwise have occurred without regard to such
termination and that may have favorably affected such benefits) it being
expressly understood and agreed that nothing in this clause (ii)(B) shall
restrict the ability of the Company to amend or terminate such plans and
programs from time to time in its sole discretion; provided, however, that the
Company shall in no event be required to provide such coverage after such time
as the Executive becomes entitled to receive health benefits from another
employer or recipient of the Executive's services (and provided, further, that
such entitlement shall be determined without regard to any individual waivers
or other arrangements); (iii) all outstanding unvested options held by the
Executive shall vest and such options shall remain exercisable for one (1) year
following termination or expiration (or, if shorter, the balance of the regular
term of the options); and (iv) this Agreement shall otherwise terminate upon
such termination of employment or expiration of the Term and the Executive
shall have no further rights hereunder (except as provided in Section 7.14).
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<PAGE> 58
EXHIBIT A-1
6. Covenants of the Executive.
6.1 Covenant Against Competition; Other Covenants. The
Executive acknowledges that (i) the principal business of the Company is the
acquisition, ownership and management of a diversified portfolio of
high-quality, single-tenant, freestanding properties leased to retail
businesses (such business, and any and all other businesses that after the date
hereof, and from time to time during the Term, become material and substantial
with respect to the Company's then-overall business, herein being collectively
referred to as the "Business"); (ii) the Company knows of a limited number of
persons who have developed the Company's Business; (iii) the Company's Business
is, in part, national in scope; (iii) the Executive's work for the Company and
its subsidiaries (and the predecessors of either) has given and will continue
to give the Executive access to the confidential affairs and proprietary
information of the Company; (v) the covenants and agreements of the Executive
contained in this Section 6 are essential to the business and goodwill of the
Company; and (vi) the Company would not have entered into this Agreement but
for the covenants and agreements set forth in this Section 6. In light of the
foregoing, during the Term and for a period of one year thereafter (and, as to
Section 6.1(b) and (d), at any time during and after the Executive's employment
with the Company and its subsidiaries (and the predecessors of either)):
(a) The Executive shall not, directly or
indirectly, own, manage, control or participate in the ownership, management,
or control of, or be employed or engaged by or otherwise affiliated or
associated as an employee, employer, consultant, agent, principal, partner,
stockholder, corporate officer, director or in any other individual or
representative capacity, engage or participate in any business that is in
competition in any manner whatsoever with the Business of the Company in any
state in which the Company conducts its Business. In the case of a termination
by the Company without Cause or by the Executive for Good Reason, the preceding
covenant shall expire on the date of termination; provided, however, that,
notwithstanding the foregoing, the Executive may invest in securities of any
entity, solely for investment purposes and without participating in the
business thereof, if (i) such securities are traded on any national securities
exchange or the National Association of Securities Dealers, Inc. Automated
Quotation System, (ii) the Executive is not a controlling person of, or a
member of a group which controls, such entity and (iii) the Executive does not,
directly or indirectly, own one percent or more of any class of securities of
such entity.
(b) The Executive shall keep secret and retain in
strictest confidence, and shall not use for his benefit or the benefit of
others, except in connection with the business and affairs of the Company and
its affiliates, all confidential matters relating to the Company's Business and
the business of any of its affiliates and to the Company and any of its
affiliates, learned by the Executive heretofore or hereafter directly or
indirectly from the Company or any of its subsidiaries (or any predecessor of
either) (the "Confidential Company Information"), including, without
limitation, information with respect to the Business and any aspect thereof,
profit or loss figures, and the Company's or its affiliates, (or any of their
predecessors) properties, and shall not disclose such Confidential Company
information to anyone outside of the Company
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<PAGE> 59
EXHIBIT A-1
except with the Company's express written consent and except for Confidential
Company Information which (i) at the time of receipt or thereafter becomes
publicly known through no wrongful act of the Executive, (ii) is clearly
obtainable in the public domain, (iii) was not acquired by the Executive in
connection with the Executive's employment or affiliation with the Company,
(iv) was not acquired by the Executive from the Company or its representatives
or from a third-party who has an agreement with the Company not to disclose
such information, or (v) is required to be disclosed by rule of law or by order
of a court or governmental body or agency.
(c) The Executive shall not, without the
Company's prior written consent, directly or indirectly, (i) knowingly solicit
or encourage to leave the employment or other service of the Company or any of
its affiliates, any employee thereof or hire (on behalf of the Executive or any
other person or entity) any employee who has left the employment or other
service of the Company or any of its affiliates (or any predecessor of either)
within one year of the termination of such employee's or independent
contractor's employment or other service with the Company and its affiliates,
or (ii) whether for the Executive's own account or for the account of any other
person, firm, corporation or other business organization, intentionally
interfere with the Company's or any of its affiliates, relationship with, or
endeavor to entice away from the Company or any of its affiliates, any person
who during the Executive's employment with the Company and its affiliates (or
the predecessors of either) is or was a customer or client of the Company or
any of its affiliates (or any predecessor of either).
(d) All memoranda, notes, lists, records,
property and any other tangible product and documents (and all copies thereof)
made, produced or compiled by the Executive or made available to the Executive
concerning the Business of the Company and its affiliates shall be the
Company's property and shall be delivered to the Company at any time on
request.
6.2 Rights and Remedies upon Breach. The Executive
acknowledges and agrees that any breach by him of any of the provisions of
Section 6.1 (the "Restrictive Covenants") would result in irreparable injury
and damage for which money damages would not provide an adequate remedy.
Therefore, if the Executive breaches, or threatens to commit a breach of, any
of the Restrictive Covenants, the Company and its affiliates shall have the
right and remedy to have the Restrictive Covenants specifically enforced
(without posting bond and without the need to prove damages) by any court
having equity jurisdiction, including, without limitation, the right to an
entry against the Executive of restraining orders and injunctions (preliminary,
mandatory, temporary and permanent) against violations, threatened or actual,
and whether or not then continuing, of such covenants. This right and remedy
shall be in addition to, and not in lieu of, any other rights and remedies
available to the Company and its affiliates under law or in equity (including,
without limitation, the recovery of damages). The existence of any claim or
cause of action by the Executive, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement of the Restrictive
Covenants.
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<PAGE> 60
EXHIBIT A-1
7. Other Provisions.
7.1 Severability. The Executive acknowledges and agrees
that (i) the Executive has had an opportunity to seek advice of counsel in
connection with this Agreement and (ii) the Restrictive Covenants are
reasonable in geographical and temporal scope and in all other respects. If it
is determined that any of the provisions of this Agreement, including, without
limitation, any of the Restrictive Covenants, or any part thereof, is invalid
or unenforceable, the remainder of the provisions of this Agreement shall not
thereby be affected and shall be given full affect, without regard to the
invalid portions.
7.2 Duration and Scope of Covenants. If any court or
other decision maker of competent jurisdiction determines that any of the
Executive's covenants contained in this Agreement, including, without
limitation, any of the Restrictive Covenants, or any part thereof, are
unenforceable because of the duration or geographical scope of such provision,
then, after such determination has become final and unappealable, the duration
or scope of such provision, as the case may be, shall be reduced so that such
provision becomes enforceable and, in its reduced form, such provision shall
then be enforceable and shall be enforced.
7.3 Enforceability; Jurisdictions. The Company and the
Executive intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of any jurisdiction within the geographical scope of
the Restrictive Covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of
breadth of scope or otherwise it is the intention of the Company and the
Executive that such determination not bar or in any way affect the Company's
right, or the right of any of its affiliates, to the relief provided above in
the courts of any other jurisdiction within the geographical scope of such
Restrictive Covenants, as to breaches of such Restrictive Covenants in such
other respective jurisdictions, such Restrictive Covenants as they relate to
each jurisdiction's being, for this purpose, severable, diverse and independent
covenants, subject, where appropriate, to the doctrine of res judicata. Any
controversy or claim arising out of or relating to this Agreement or the breach
of this Agreement that is not resolved by the Executive and the Company (or its
affiliates, where applicable), other than those arising under Section 6, to the
extent necessary for the Company (or its affiliates, where applicable) to avail
itself of the rights and remedies provided under Section 6.2, shall be
submitted to arbitration in Orlando, Florida in accordance with Florida law and
the procedures of the American Arbitration Association. The determination of
the arbitrators shall be conclusive and binding on the Company (or its
affiliates, where applicable) and the Executive and judgment may be entered on
the arbitrator(s)' award in any court having jurisdiction.
7.4 Attorneys' Fees. In the event of any legal
proceeding (including an arbitration proceeding) relating to this Agreement or
any term or provision thereof, the losing party shall be responsible to pay or
reimburse the prevailing party for all reasonable attorneys' fees incurred by
the prevailing party in connection with such proceeding.
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<PAGE> 61
EXHIBIT A-1
7.5 Notices. Any notice or other communication required
or permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, five days after the date of deposit in the United
States mails as follows:
(i) If to the Company, to:
400 East South Street
Suite 500
Orlando, Florida 32801
Attention: James M. Seneff, Jr.
Facsimile: (407) 648-8756
with a copy in either case to:
Shaw, Pittman, Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037
Attention: Thomas H. McCormick, Esq.
Facsimile: (202) 663-8007
(ii) If to the Executive, to:
Kevin B. Habicht
901 Lake Catherine Drive
Maitland, FL 32751
with a copy in either case to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Jay L. Bernstein, Esq.
Facsimile: (212) 878-8527
Any such person may by notice given in accordance with this Section to the
other parties hereto designate another address or person for receipt by such
person of notices hereunder.
7.6 Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with the Company or its
subsidiaries (or any predecessor of either).
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<PAGE> 62
EXHIBIT A-1
7.7 Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by the parties or, in the case of a waiver,
by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege nor any single or partial exercise of any such right, power or
privilege, preclude any other or further exercise thereof or the exercise of
any other such right, power or privilege.
7.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
7.9 Assignment. This Agreement, and the Executive's rights and
obligations hereunder, may not be assigned by the Executive; any purported
assignment by the Executive in violation hereof shall be null and void. In the
event of any sale, transfer or other disposition of all or substantially all of
the Company's assets or business, whether by merger, consolidation or
otherwise, the Company may assign this Agreement and its rights hereunder.
7.10 Withholding. The Company shall be entitled to withhold from
any payments or deemed payments any amount of withholding required by law. No
other taxes, fees, impositions, duties or other charges or offsets of any kind
shall be deducted or withheld from amounts payable hereunder, unless otherwise
required by law.
7.11 No Duty to Mitigate. The Executive shall not be required to
mitigate damages or the amount of any payment provided for under this Agreement
by seeking other employment or otherwise, nor will any payments hereunder be
subject to offset in the event the Executive does mitigate.
7.12 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors, permitted
assigns, heirs, executors and legal representatives.
7.13 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original but all such counterparts together shall constitute one
and the same instrument. Each counterpart may consist of two copies hereof
each signed by one of the parties hereto.
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<PAGE> 63
EXHIBIT A-1
7.14 Survival. Anything contained in this Agreement to the
contrary notwithstanding, the provisions of Sections 6, 7.3, 7.4 and 7.10 and
the other provisions of this Section 7 (to the extent necessary to effectuate
the survival of Sections 6, 7.3, 7.4 and 7.10) shall survive termination of
this Agreement and any termination of the Executive's employment hereunder.
7.15 Existing Agreements. Executive represents to the Company that
the Executive is not subject or a party to any employment or consulting
agreement, non-competition covenant or other agreement, covenant or
understanding which might prohibit the Executive from executing this Agreement
or limit the Executive's ability to fulfill the Executive's responsibilities
hereunder.
7.16 Headings. The headings in this Agreement are for reference
only and shall not affect the interpretation of this Agreement.
7.17 Parachute Provisions. If any amount payable to or other
benefit receivable by the Executive pursuant to this Agreement is deemed to
constitute a Parachute Payment (as defined below), alone or when added to any
other amount payable or paid to or other benefit receivable or received by the
Executive which is deemed to constitute a Parachute Payment (whether or not
under an existing plan, arrangement or other agreement), and would result in
the imposition on the Executive of an excise tax under Section 4999 of the
Internal Revenue Code of 1986, as amended, then, in addition to any other
benefits to which the Executive is entitled under this Agreement, the Executive
shall be paid by the Company an amount in cash equal to the sum of the excise
taxes payable by the Executive by reason of receiving Parachute Payments plus
the amount necessary to put the Executive in the same after-tax position
(taking into account any and all applicable federal, state and local excise,
income or other taxes at the highest applicable rates on such Parachute
Payments and on any payments under this Section 7.17 ) as if no excise taxes
had been imposed with respect to Parachute Payments. The amount of any payment
under this Section 7.17 shall be computed by a certified public accounting firm
mutually and reasonably acceptable to the Executive and the Company, the
computation expenses of which shall be paid by the Company. "Parachute
Payment" shall mean any payment deemed to constitute a "parachute payment" as
defined in Section 280G of the Internal Revenue Code of 1986, as amended.
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<PAGE> 64
IN WITNESS WHEREOF, the parties hereto have signed their names as of
the day and year first above written.
COMMERCIAL NET LEASE REALTY, INC.
By:
---------------------------------
Its:
-----------------------------
------------------------------------
Kevin B. Habicht
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<PAGE> 65
EXHIBIT A-2
GARY M. RALSTON FORM OF
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is dated as of ______________, 1997, by and
between COMMERCIAL NET LEASE REALTY, INC., a Maryland corporation (hereinafter
referred to as the "Company"), and Gary M. Ralston (hereinafter referred to as
the "Executive").
WHEREAS, the Agreement and Plan of Merger, dated as of May 15, 1997,
between CNL REALTY ADVISORS, INC., a Florida corporation ("CNL Advisors"), and
the Company contemplates that the Company enter into an employment agreement
with the Executive;
WHEREAS, the Company wishes to offer employment to the Executive, and
the Executive wishes to accept such offer, on the terms set forth below;
Accordingly, the parties hereto agree as follows:
1. Term. The Company hereby employs the Executive, and the
Executive hereby accepts such employment for an initial term commencing as of
the date hereof and ending on December 31, 2000, unless sooner terminated in
accordance with the provisions of Section 4 or Section 5 (the period during
which the Executive is employed hereunder being hereinafter referred to as the
"Term"). The Term shall be subject to automatic one-year renewals unless
either party hereto notifies the other, in accordance with Section 7.5, of
non-renewal at least 90-days prior to the end of any such Term.
2. Duties. The Executive, in his capacity as President shall
faithfully perform for the Company the duties of said office including, without
limitation, that of Chief Operating Officer and shall perform such other duties
of an executive, managerial or administrative nature as shall be specified and
designated from time to time by the Board of Directors of the Company (the
"Board") or the Chief Executive Officer of the Company (including the
performance of services for, and serving on the Board of Directors of, any
subsidiary of the Company without any additional compensation). The Executive
shall devote substantially all of the Executive's business time and effort to
the performance of the Executive's duties hereunder, provided that in no event
shall this sentence prohibit the Executive from performing personal and
charitable activities and any other activities approved by the Board, so long
as such activities do not interfere with the Executive's duties for the
Company.
3. Compensation.
3.1 Salary. The Company shall pay the Executive during
the Term a salary at the rate of $225,000 per annum (the "Annual Salary"), in
accordance with the customary payroll practices of the Company applicable to
senior executives generally. Annual Salary will increase annually on January 1
of each year by an amount as may be approved by the Board, with such increase
to be effective on the date salary increases are effective for employees of the
Company
<PAGE> 66
EXHIBIT A-2
generally and, upon such increase, the increased amount shall thereafter be
deemed to be the Annual Salary.
3.2 Bonus. The Executive will be eligible to participate
in the Company's Annual Bonus Program (the "Bonus Plan"), the terms of which
will be established by the Executive Compensation Committee of the Company.
Until such time as the Company adopts a formal bonus program, the Executive
will be entitled to a bonus of up to 50% of Annual Salary.
3.3 Benefits - In General. The Executive shall be
permitted during the Term to participate in any group life, hospitalization or
disability insurance plans, health programs, pension and profit sharing plans
and similar benefits that may be available to other senior executives of the
Company generally, on the same terms as may be applicable to such other
executives, in each case to the extent that the Executive is eligible under the
terms of such plans or programs.
3.4 Vacation. The Executive shall be entitled to
vacation of 20 days per year.
3.5 Automobile. The Company will provide the Executive a
monthly allowance of $500 for the use of an automobile. At the option of the
Company, in lieu of providing such allowance, the Company will provide the
Executive with an automobile of suitable standard to the Executive's position.
3.6 Disability Benefits and Life Insurance. The
Executive shall be entitled to long-term disability coverage providing benefits
(to continue for such period as is provided in the applicable disability plan
or program, as amended from time to time) equal to two-thirds of Annual Salary
in the case of a covered disability and life insurance benefits with a face
amount equal to Annual Salary.
3.7 Expenses. The Company shall pay or reimburse the
Executive for all ordinary and reasonable out-of-pocket expenses actually
incurred (and, in the case of reimbursement, paid) by the Executive during the
Term in the performance of the Executive's services under this Agreement;
provided that the Executive submits such expenses in accordance with the
policies applicable to senior executives of the Company generally.
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<PAGE> 67
4. Termination upon Death or Disability. If the Executive dies during
the Term, the obligations of the Company to or with respect to the Executive
shall terminate in their entirety except as otherwise provided under this
Section 4. If the Executive becomes eligible for disability benefits under the
Company's long-term disability plans and arrangements (or, if none apply, would
have been so eligible under the most recent plan or arrangement), the Company
shall have the right, to the extent permitted by law, to terminate the
employment of the Executive upon notice in writing to the Executive; provided
that the Company will have no right to terminate the Executive's employment if,
in the opinion of a qualified physician reasonably acceptable to the Company,
it is reasonably certain that the Executive will be able to resume the
Executive's duties on a regular full-time basis within 90 days of the date the
Executive receives notice of such termination. Upon death or other termination
of employment by virtue of disability, (i) the Executive (or the Executive's
estate or beneficiaries in the case of the death of the Executive) shall have
no right to receive any compensation or benefit hereunder on and after the
effective date of the termination of employment other than Annual Salary and
other benefits (but excluding any bonuses except as provided in the Bonus Plan
or in clause (ii) below) earned and accrued under this Agreement prior to the
date of termination (and reimbursement under this Agreement for expenses
incurred prior to the date of termination); (ii) the Executive (or the
Executive's estate or beneficiaries in the case of the death of the Executive)
shall be entitled to a cash payment equal to the Executive's Annual Salary (as
in effect on the effective date of such termination) payable no later than 30
days after such termination; and (iii) this Agreement shall otherwise terminate
upon such death or other termination of employment and there shall be no
further rights with respect to the Executive hereunder (except as provided in
Section 7.14).
5. Certain Terminations of Employment.
5.1 Termination for Cause; Termination of Employment by
the Executive Without Good Reason.
(a) For purposes of this Agreement, "Cause" shall
mean:
(i) the Executive's (A) conviction for
(or pleading nolo contendere to) any felony, or a misdemeanor
involving moral turpitude, or (B) indictment for any felony or
misdemeanor involving moral turpitude, if such indictment is
not discharged or otherwise resolved within 18 months;
(ii) the Executive's commission of an act
of fraud, theft or dishonesty related to the performance of
the Executive's duties hereunder;
(iii) the willful and continuing failure or
habitual neglect by the Executive to perform the Executive's
duties hereunder;
(iv) any material violation by the
Executive of the covenants contained in Section 6; or
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<PAGE> 68
EXHIBIT A-2
(v) the Executive's willful and
continuing material breach of this Agreement.
Notwithstanding the foregoing, if there exists (without regard to this
sentence) an event or condition that constitutes Cause under clause (iii) or
(v) above, the Executive shall have 30 days from the date such notice is given
to cure such event or condition and, if the Executive does so, such event or
condition shall not constitute Cause hereunder.
(b) For purposes of this Agreement, "Good Reason" shall
mean, unless otherwise consented to by the Executive:
(i) the material reduction of the
Executive's authority, duties and responsibilities, or the
assignment to the Executive of duties materially inconsistent
with the Executive's position or positions with the Company
and its subsidiaries;
(ii) a reduction in Annual Salary of the
Executive;
(iii) the failure by the Company to obtain
an agreement in form and substance reasonably satisfactory to
the Executive from any successor to the business of the
Company to assume and agree to perform this Agreement; or
(iv) the Company's material and willful
breach of this Agreement.
Notwithstanding the foregoing, if there exists (without regard to this
sentence) an event or condition that constitutes Good Reason under clause (i),
(ii) or (iv) above, the Company shall have 30 days from the date on which the
Executive gives the notice thereof to cure such event or condition and, if the
Company does so, such event or condition shall not constitute Good Reason
hereunder.
(c) The Company may terminate the Executive's employment
hereunder for Cause. If the Company terminates the Executive for Cause, (i)
the Executive shall have no right to receive any compensation or benefit
hereunder on and after the effective date of the termination of employment
other than Annual Salary and other benefits (but excluding any bonuses except
as provided in the Bonus Plan) earned and accrued under this Agreement prior to
the effective date of the termination of employment (and reimbursement under
this Agreement for expenses incurred prior to the effective date of the
termination of employment); and (ii) this Agreement shall otherwise terminate
upon such termination of employment and the Executive shall have no further
rights hereunder (except as provided in Section 7.14).
(d) The Executive may terminate his employment without
Good Reason. If the Executive terminates the Executive's employment with the
Company without Good Reason: (i) the Executive shall have no right to receive
any compensation or benefit hereunder on and after the effective date of the
termination of employment other than Annual Salary and other benefits
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EXHIBIT A-2
(but excluding any bonuses except as provided in the Bonus Plan) earned and
accrued under this Agreement prior to the effective date of the termination of
employment (and reimbursement under this Agreement for expenses incurred prior
to the effective date of the termination of employment); and (ii) this
Agreement shall otherwise terminate upon such termination of employment and the
Executive shall have no further rights hereunder (except as provided in Section
7.14).
5.2 Termination Without Cause; Termination for Good Reason;
Failure to Renew Employment Agreement. The Company may terminate the
Executive's employment at any time for any reason or no reason and the
Executive may terminate the Executive's employment with the Company for Good
Reason. If the Company or the Executive terminates the Executive's employment
and such termination is not described in Section 4 or Section 5.1, or if the
Company, for any reason, does not renew this Agreement at the expiration of its
Term, (i) the Executive shall have no right to receive any compensation or
benefit hereunder on and after the effective date of the termination of
employment or expiration of the Term other than Annual Salary and other
benefits (but excluding any bonuses except as provided in the Bonus Plan and
clause (ii) below) earned and accrued under this Agreement prior to the
effective date of the termination of employment or expiration of the Term (and
reimbursement under this Agreement for expenses incurred prior to the effective
date of the termination of employment or expiration of the Term); (ii) the
Executive shall receive (A) a cash payment equal to two (2) times the
Executive's Annual Salary (as in effect on the effective date of such
termination or expiration) payable no later than 30 days after such termination
or expiration and (B) for a period of one (1) year after termination of
employment or expiration of the Term such continuing health benefits (including
any medical, vision or dental benefits), under the Company's health plans and
programs applicable to senior executives of the Company generally as the
Executive would have received under this Agreement (and at such costs to the
Executive) as would have applied in the absence of such termination or
expiration (but not taking into account any post-termination increases in
Annual Salary that may otherwise have occurred without regard to such
termination and that may have favorably affected such benefits) it being
expressly understood and agreed that nothing in this clause (ii)(B) shall
restrict the ability of the Company to amend or terminate such plans and
programs from time to time in its sole discretion; provided, however, that the
Company shall in no event be required to provide such coverage after such time
as the Executive becomes entitled to receive health benefits from another
employer or recipient of the Executive's services (and provided, further, that
such entitlement shall be determined without regard to any individual waivers
or other arrangements); (iii) all outstanding unvested options held by the
Executive shall vest and such options shall remain exercisable for one (1) year
following termination or expiration (or, if shorter, the balance of the regular
term of the options); and (iv) this Agreement shall otherwise terminate upon
such termination of employment or expiration of the Term and the Executive
shall have no further rights hereunder (except as provided in Section 7.14).
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EXHIBIT A-2
6. Covenants of the Executive.
6.1 Covenant Against Competition; Other Covenants. The
Executive acknowledges that (i) the principal business of the Company is the
acquisition, ownership and management of a diversified portfolio of
high-quality, single-tenant, freestanding properties leased to retail
businesses (such business, and any and all other businesses that after the date
hereof, and from time to time during the Term, become material and substantial
with respect to the Company's then-overall business, herein being collectively
referred to as the "Business"); (ii) the Company knows of a limited number of
persons who have developed the Company's Business; (iii) the Company's Business
is, in part, national in scope; (iii) the Executive's work for the Company and
its subsidiaries (and the predecessors of either) has given and will continue
to give the Executive access to the confidential affairs and proprietary
information of the Company; (v) the covenants and agreements of the Executive
contained in this Section 6 are essential to the business and goodwill of the
Company; and (vi) the Company would not have entered into this Agreement but
for the covenants and agreements set forth in this Section 6. In light of the
foregoing, during the Term and for a period of one year thereafter (and, as to
Section 6.1(b) and (d), at any time during and after the Executive's employment
with the Company and its subsidiaries (and the predecessors of either)):
(a) The Executive shall not, directly or
indirectly, own, manage, control or participate in the ownership, management,
or control of, or be employed or engaged by or otherwise affiliated or
associated as an employee, employer, consultant, agent, principal, partner,
stockholder, corporate officer, director or in any other individual or
representative capacity, engage or participate in any business that is in
competition in any manner whatsoever with the Business of the Company in any
state in which the Company conducts its Business. In the case of a termination
by the Company without Cause or by the Executive for Good Reason, the preceding
covenant shall expire on the date of termination; provided, however, that,
notwithstanding the foregoing, the Executive may invest in securities of any
entity, solely for investment purposes and without participating in the
business thereof, if (i) such securities are traded on any national securities
exchange or the National Association of Securities Dealers, Inc. Automated
Quotation System, (ii) the Executive is not a controlling person of, or a
member of a group which controls, such entity and (iii) the Executive does not,
directly or indirectly, own one percent or more of any class of securities of
such entity.
(b) The Executive shall keep secret and retain in
strictest confidence, and shall not use for his benefit or the benefit of
others, except in connection with the business and affairs of the Company and
its affiliates, all confidential matters relating to the Company's Business and
the business of any of its affiliates and to the Company and any of its
affiliates, learned by the Executive heretofore or hereafter directly or
indirectly from the Company or any of its subsidiaries (or any predecessor of
either) (the "Confidential Company Information"), including, without
limitation, information with respect to the Business and any aspect thereof,
profit or loss figures, and the Company's or its affiliates, (or any of their
predecessors) properties, and shall not disclose such Confidential Company
information to anyone outside of the Company
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EXHIBIT A-2
except with the Company's express written consent and except for Confidential
Company Information which (i) at the time of receipt or thereafter becomes
publicly known through no wrongful act of the Executive, (ii) is clearly
obtainable in the public domain, (iii) was not acquired by the Executive in
connection with the Executive's employment or affiliation with the Company,
(iv) was not acquired by the Executive from the Company or its representatives
or from a third-party who has an agreement with the Company not to disclose
such information, or (v) is required to be disclosed by rule of law or by order
of a court or governmental body or agency.
(c) The Executive shall not, without the Company's prior
written consent, directly or indirectly, (i) knowingly solicit or encourage to
leave the employment or other service of the Company or any of its affiliates,
any employee thereof or hire (on behalf of the Executive or any other person or
entity) any employee who has left the employment or other service of the
Company or any of its affiliates (or any predecessor of either) within one year
of the termination of such employee's or independent contractor's employment or
other service with the Company and its affiliates, or (ii) whether for the
Executive's own account or for the account of any other person, firm,
corporation or other business organization, intentionally interfere with the
Company's or any of its affiliates, relationship with, or endeavor to entice
away from the Company or any of its affiliates, any person who during the
Executive's employment with the Company and its affiliates (or the predecessors
of either) is or was a customer or client of the Company or any of its
affiliates (or any predecessor of either).
(d) All memoranda, notes, lists, records, property and
any other tangible product and documents (and all copies thereof) made,
produced or compiled by the Executive or made available to the Executive
concerning the Business of the Company and its affiliates shall be the
Company's property and shall be delivered to the Company at any time on
request.
6.2 Rights and Remedies upon Breach. The Executive acknowledges
and agrees that any breach by him of any of the provisions of Section 6.1 (the
"Restrictive Covenants") would result in irreparable injury and damage for
which money damages would not provide an adequate remedy. Therefore, if the
Executive breaches, or threatens to commit a breach of, any of the Restrictive
Covenants, the Company and its affiliates shall have the right and remedy to
have the Restrictive Covenants specifically enforced (without posting bond and
without the need to prove damages) by any court having equity jurisdiction,
including, without limitation, the right to an entry against the Executive of
restraining orders and injunctions (preliminary, mandatory, temporary and
permanent) against violations, threatened or actual, and whether or not then
continuing, of such covenants. This right and remedy shall be in addition to,
and not in lieu of, any other rights and remedies available to the Company and
its affiliates under law or in equity (including, without limitation, the
recovery of damages). The existence of any claim or cause of action by the
Executive, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement of the Restrictive Covenants.
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EXHIBIT A-2
7. Other Provisions.
7.1 Severability. The Executive acknowledges and agrees
that (i) the Executive has had an opportunity to seek advice of counsel in
connection with this Agreement and (ii) the Restrictive Covenants are
reasonable in geographical and temporal scope and in all other respects. If it
is determined that any of the provisions of this Agreement, including, without
limitation, any of the Restrictive Covenants, or any part thereof, is invalid
or unenforceable, the remainder of the provisions of this Agreement shall not
thereby be affected and shall be given full affect, without regard to the
invalid portions.
7.2 Duration and Scope of Covenants. If any court or
other decision maker of competent jurisdiction determines that any of the
Executive's covenants contained in this Agreement, including, without
limitation, any of the Restrictive Covenants, or any part thereof, are
unenforceable because of the duration or geographical scope of such provision,
then, after such determination has become final and unappealable, the duration
or scope of such provision, as the case may be, shall be reduced so that such
provision becomes enforceable and, in its reduced form, such provision shall
then be enforceable and shall be enforced.
7.3 Enforceability; Jurisdictions. The Company and the
Executive intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of any jurisdiction within the geographical scope of
the Restrictive Covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of
breadth of scope or otherwise it is the intention of the Company and the
Executive that such determination not bar or in any way affect the Company's
right, or the right of any of its affiliates, to the relief provided above in
the courts of any other jurisdiction within the geographical scope of such
Restrictive Covenants, as to breaches of such Restrictive Covenants in such
other respective jurisdictions, such Restrictive Covenants as they relate to
each jurisdiction's being, for this purpose, severable, diverse and independent
covenants, subject, where appropriate, to the doctrine of res judicata. Any
controversy or claim arising out of or relating to this Agreement or the breach
of this Agreement that is not resolved by the Executive and the Company (or its
affiliates, where applicable), other than those arising under Section 6, to the
extent necessary for the Company (or its affiliates, where applicable) to avail
itself of the rights and remedies provided under Section 6.2, shall be
submitted to arbitration in Orlando, Florida in accordance with Florida law and
the procedures of the American Arbitration Association. The determination of
the arbitrators shall be conclusive and binding on the Company (or its
affiliates, where applicable) and the Executive and judgment may be entered on
the arbitrator(s)' award in any court having jurisdiction.
7.4 Attorneys' Fees. In the event of any legal
proceeding (including an arbitration proceeding) relating to this Agreement or
any term or provision thereof, the losing party shall be responsible to pay or
reimburse the prevailing party for all reasonable attorneys' fees incurred by
the prevailing party in connection with such proceeding.
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EXHIBIT A-2
7.5 Notices. Any notice or other communication required
or permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, five days after the date of deposit in the United
States mails as follows:
(i) If to the Company, to:
400 East South Street
Suite 500
Orlando, Florida 32801
Attention: James M. Seneff, Jr.
Facsimile: (407) 648-8756
with a copy in either case to:
Shaw, Pittman, Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037
Attention: Thomas H. McCormick, Esq.
Facsimile: (202) 663-8007
(ii) If to the Executive, to:
Gary M. Ralston
980 Lincoln Circle
Winter Park, FL 32789
with a copy in either case to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Jay L. Bernstein, Esq.
Facsimile: (212) 878-8527
Any such person may by notice given in accordance with this Section to the
other parties hereto designate another address or person for receipt by such
person of notices hereunder.
7.6 Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with the Company or its
subsidiaries (or any predecessor of either).
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EXHIBIT A-2
7.7 Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by the parties or, in the case of a waiver,
by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege nor any single or partial exercise of any such right, power or
privilege, preclude any other or further exercise thereof or the exercise of
any other such right, power or privilege.
7.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
7.9 Assignment. This Agreement, and the Executive's rights and
obligations hereunder, may not be assigned by the Executive; any purported
assignment by the Executive in violation hereof shall be null and void. In the
event of any sale, transfer or other disposition of all or substantially all of
the Company's assets or business, whether by merger, consolidation or
otherwise, the Company may assign this Agreement and its rights hereunder.
7.10 Withholding. The Company shall be entitled to withhold from
any payments or deemed payments any amount of withholding required by law. No
other taxes, fees, impositions, duties or other charges or offsets of any kind
shall be deducted or withheld from amounts payable hereunder, unless otherwise
required by law.
7.11 No Duty to Mitigate. The Executive shall not be required to
mitigate damages or the amount of any payment provided for under this Agreement
by seeking other employment or otherwise, nor will any payments hereunder be
subject to offset in the event the Executive does mitigate.
7.12 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors, permitted
assigns, heirs, executors and legal representatives.
7.13 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original but all such counterparts together shall constitute one
and the same instrument. Each counterpart may consist of two copies hereof
each signed by one of the parties hereto.
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EXHIBIT A-2
7.14 Survival. Anything contained in this Agreement to the
contrary notwithstanding, the provisions of Sections 6, 7.3, 7.4 and 7.10 and
the other provisions of this Section 7 (to the extent necessary to effectuate
the survival of Sections 6, 7.3, 7.4 and 7.10) shall survive termination of
this Agreement and any termination of the Executive's employment hereunder.
7.15 Existing Agreements. Executive represents to the Company that
the Executive is not subject or a party to any employment or consulting
agreement, non-competition covenant or other agreement, covenant or
understanding which might prohibit the Executive from executing this Agreement
or limit the Executive's ability to fulfill the Executive's responsibilities
hereunder.
7.16 Headings. The headings in this Agreement are for reference
only and shall not affect the interpretation of this Agreement.
7.17 Parachute Provisions. If any amount payable to or other
benefit receivable by the Executive pursuant to this Agreement is deemed to
constitute a Parachute Payment (as defined below), alone or when added to any
other amount payable or paid to or other benefit receivable or received by the
Executive which is deemed to constitute a Parachute Payment (whether or not
under an existing plan, arrangement or other agreement), and would result in
the imposition on the Executive of an excise tax under Section 4999 of the
Internal Revenue Code of 1986, as amended, then, in addition to any other
benefits to which the Executive is entitled under this Agreement, the Executive
shall be paid by the Company an amount in cash equal to the sum of the excise
taxes payable by the Executive by reason of receiving Parachute Payments plus
the amount necessary to put the Executive in the same after-tax position
(taking into account any and all applicable federal, state and local excise,
income or other taxes at the highest applicable rates on such Parachute
Payments and on any payments under this Section 7.17 ) as if no excise taxes
had been imposed with respect to Parachute Payments. The amount of any payment
under this Section 7.17 shall be computed by a certified public accounting firm
mutually and reasonably acceptable to the Executive and the Company, the
computation expenses of which shall be paid by the Company. "Parachute
Payment" shall mean any payment deemed to constitute a "parachute payment" as
defined in Section 280G of the Internal Revenue Code of 1986, as amended.
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EXHIBIT A-2
IN WITNESS WHEREOF, the parties hereto have signed their names as of
the day and year first above written.
COMMERCIAL NET LEASE REALTY, INC.
By:
------------------------------------
Its:
--------------------------------
---------------------------------------
Gary M. Ralston
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EXHIBIT A-3
JAMES M. SENEFF, JR. FORM OF
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is dated as of _________, 1997, by and
between COMMERCIAL NET LEASE REALTY, INC., a Maryland corporation (hereinafter
referred to as the "Company"), and James M. Seneff, Jr. (hereinafter referred
to as the "Executive").
WHEREAS, the Agreement and Plan of Merger, dated as of May 15, 1997,
between CNL REALTY ADVISORS, INC., a Florida corporation ("CNL Advisors"), and
the Company contemplates that the Company enter into an employment agreement
with the Executive;
WHEREAS, the Company wishes to offer employment to the Executive, and
the Executive wishes to accept such offer, on the terms set forth below;
Accordingly, the parties hereto agree as follows:
1. Term. The Company hereby employs the Executive, and the
Executive hereby accepts such employment for an initial term commencing as of
the date hereof and ending on December 31, 2000, unless sooner terminated in
accordance with the provisions of Section 4 or Section 5 (the period during
which the Executive is employed hereunder being hereinafter referred to as the
"Term"). The Term shall be subject to automatic one-year renewals unless
either party hereto notifies the other, in accordance with Section 7.5, of
non-renewal at least 90-days prior to the end of any such Term.
2. Duties. The Executive, in his capacity as Chief Executive
Officer shall faithfully perform for the Company the duties of said office and
shall perform such other duties of an executive, managerial or administrative
nature as shall be specified and designated from time to time by the Board of
Directors of the Company (the "Board") (including the performance of services
for, and serving on the Board of Directors of, any subsidiary of the Company
without any additional compensation). It is expressly understood that the
Executive shall not devote all or substantially all of the Executive's business
time and effort to the performance of the Executive's duties hereunder, but
shall devote such of the Executive's business time and effort as necessary to
the performance of the Executive's duties hereunder, provided that in no event
shall this sentence prohibit the Executive from performing (i) services for CNL
Group, Inc. and other activities related to the business of CNL Group, Inc. and
its affiliates and (ii) personal and charitable activities and any other
activities approved by the Board, so long as such activities do not interfere
with the Executive's duties for the Company.
3. Compensation.
3.1 Salary. The Company shall pay the Executive during
the Term a salary at the rate of $125,000 per annum (the "Annual Salary"), in
accordance with the customary payroll practices of the Company applicable to
senior executives generally. Annual Salary will increase
<PAGE> 78
EXHIBIT A-3
annually on January 1 of each year by an amount as may be approved by the
Board, with such increase to be effective on the date salary increases are
effective for employees of the Company generally and, upon such increase, the
increased amount shall thereafter be deemed to be the Annual Salary.
3.2 Bonus. The Executive will be eligible to participate
in the Company's Annual Bonus Program (the "Bonus Plan"), the terms of which
will be established by the Executive Compensation Committee of the Company.
Until such time as the Company adopts a formal bonus program, the Executive
will be entitled to a bonus of up to 50% of Annual Salary.
3.3 Benefits - In General. The Executive shall be
permitted during the Term to participate in any group life, hospitalization or
disability insurance plans, health programs, pension and profit sharing plans
and similar benefits that may be available to other senior executives of the
Company generally, on the same terms as may be applicable to such other
executives, in each case to the extent that the Executive is eligible under the
terms of such plans or programs.
3.4 Automobile. The Company will provide the Executive a
monthly allowance of $500 for the use of an automobile. At the option of the
Company, in lieu of providing such allowance, the Company will provide the
Executive with an automobile of suitable standard to the Executive's position.
3.5 Disability Benefits and Life Insurance. The
Executive shall be entitled to long-term disability coverage providing benefits
(to continue for such period as is provided in the applicable disability plan
or program, as amended from time to time) equal to two-thirds of Annual Salary
in the case of a covered disability and life insurance benefits with a face
amount equal to Annual Salary.
3.6 Expenses. The Company shall pay or reimburse the
Executive for all ordinary and reasonable out-of-pocket expenses actually
incurred (and, in the case of reimbursement, paid) by the Executive during the
Term in the performance of the Executive's services under this Agreement;
provided that the Executive submits such expenses in accordance with the
policies applicable to senior executives of the Company generally.
4. Termination upon Death or Disability. If the Executive dies
during the Term, the obligations of the Company to or with respect to the
Executive shall terminate in their entirety except as otherwise provided under
this Section 4. If the Executive becomes eligible for disability benefits
under the Company's long-term disability plans and arrangements (or, if none
apply, would have been so eligible under the most recent plan or arrangement),
the Company shall have the right, to the extent permitted by law, to terminate
the employment of the Executive upon notice in writing to the Executive;
provided that the Company will have no right to terminate the Executive's
employment if, in the opinion of a qualified physician reasonably acceptable to
the Company, it is reasonably certain that the Executive will be able to resume
the Executive's duties on a regular full-time basis within 90 days of the date
the Executive receives notice of such termination. Upon death or other
termination of employment by virtue of disability, (i) the
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EXHIBIT A-3
Executive (or the Executive's estate or beneficiaries in the case of the death
of the Executive) shall have no right to receive any compensation or benefit
hereunder on and after the effective date of the termination of employment
other than Annual Salary and other benefits (but excluding any bonuses except
as provided in the Bonus Plan or in clause (ii) below) earned and accrued under
this Agreement prior to the date of termination (and reimbursement under this
Agreement for expenses incurred prior to the date of termination); (ii) the
Executive (or the Executive's estate or beneficiaries in the case of the death
of the Executive) shall be entitled to a cash payment equal to the Executive's
Annual Salary (as in effect on the effective date of such termination) payable
no later than 30 days after such termination; and (iii) this Agreement shall
otherwise terminate upon such death or other termination of employment and
there shall be no further rights with respect to the Executive hereunder
(except as provided in Section 7.14).
5.Certain Terminations of Employment.
5.1 Termination for Cause; Termination of Employment by
the Executive Without Good Reason.
(a) For purposes of this Agreement, "Cause"
shall mean:
(i) the Executive's (A) conviction
for (or pleading nolo contendere to) any felony, or a
misdemeanor involving moral turpitude, or (B) indictment for
any felony or misdemeanor involving moral turpitude, if such
indictment is not discharged or otherwise resolved within 18
months;
(ii) the Executive's commission of an
act of fraud, theft or dishonesty related to the performance
of the Executive's duties hereunder;
(iii) the willful and continuing
failure or habitual neglect by the Executive to perform the
Executive's duties hereunder;
(iv) any material violation by the
Executive of the covenants contained in Section 6; or
(v) the Executive's willful and
continuing material breach of this Agreement.
Notwithstanding the foregoing, if there exists (without regard to this
sentence) an event or condition that constitutes Cause under clause (iii) or
(v) above, the Executive shall have 30 days from the date such notice is given
to cure such event or condition and, if the Executive does so, such event or
condition shall not constitute Cause hereunder.
(b) For purposes of this Agreement, "Good
Reason" shall mean, unless otherwise consented to by the Executive:
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EXHIBIT A-3
(i) the material reduction of the
Executive's authority, duties and responsibilities, or the
assignment to the Executive of duties materially inconsistent
with the Executive's position or positions with the Company
and its subsidiaries;
(ii) a reduction in Annual Salary of
the Executive;
(iii) the failure by the Company to
obtain an agreement in form and substance reasonably
satisfactory to the Executive from any successor to the
business of the Company to assume and agree to perform this
Agreement; or
(iv) the Company's material and
willful breach of this Agreement.
Notwithstanding the foregoing, if there exists (without regard to this
sentence) an event or condition that constitutes Good Reason under clause (i),
(ii) or (iv) above, the Company shall have 30 days from the date on which the
Executive gives the notice thereof to cure such event or condition and, if the
Company does so, such event or condition shall not constitute Good Reason
hereunder.
(c) The Company may terminate the Executive's
employment hereunder for Cause. If the Company terminates the Executive for
Cause, (i) the Executive shall have no right to receive any compensation or
benefit hereunder on and after the effective date of the termination of
employment other than Annual Salary and other benefits (but excluding any
bonuses except as provided in the Bonus Plan) earned and accrued under this
Agreement prior to the effective date of the termination of employment (and
reimbursement under this Agreement for expenses incurred prior to the effective
date of the termination of employment); and (ii) this Agreement shall otherwise
terminate upon such termination of employment and the Executive shall have no
further rights hereunder (except as provided in Section 7.14).
(d) The Executive may terminate his employment
without Good Reason. If the Executive terminates the Executive's employment
with the Company without Good Reason: (i) the Executive shall have no right to
receive any compensation or benefit hereunder on and after the effective date
of the termination of employment other than Annual Salary and other benefits
(but excluding any bonuses except as provided in the Bonus Plan) earned and
accrued under this Agreement prior to the effective date of the termination of
employment (and reimbursement under this Agreement for expenses incurred prior
to the effective date of the termination of employment); and (ii) this
Agreement shall otherwise terminate upon such termination of employment and the
Executive shall have no further rights hereunder (except as provided in Section
7.14).
5.2 Termination Without Cause; Termination for Good
Reason. The Company may terminate the Executive's employment at any time for
any reason or no reason and the Executive may terminate the Executive's
employment with the Company for Good Reason. If the Company or the Executive
terminates the Executive's employment and such termination is
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EXHIBIT A-3
not described in Section 4 or Section 5.1, (i) the Executive shall have no
right to receive any compensation or benefit hereunder on and after the
effective date of the termination of employment other than Annual Salary and
other benefits (but excluding any bonuses except as provided in the Bonus Plan
and clause (ii) below) earned and accrued under this Agreement prior to the
effective date of the termination of employment (and reimbursement under this
Agreement for expenses incurred prior to the effective date of the termination
of employment); (ii) the Executive shall receive (A) a cash payment equal to
one (1) times the Executive's Annual Salary (as in effect on the effective date
of such termination) payable no later than 30 days after such termination and
(B) for a period of one (1) year after termination of employment such
continuing health benefits (including any medical, vision or dental benefits),
under the Company's health plans and programs applicable to senior executives
of the Company generally as the Executive would have received under this
Agreement (and at such costs to the Executive) as would have applied in the
absence of such termination (but not taking into account any post-termination
increases in Annual Salary that may otherwise have occurred without regard to
such termination and that may have favorably affected such benefits) it being
expressly understood and agreed that nothing in this clause (ii)(B) shall
restrict the ability of the Company to amend or terminate such plans and
programs from time to time in its sole discretion; provided, however, that the
Company shall in no event be required to provide such coverage after such time
as the Executive becomes entitled to receive health benefits from another
employer or recipient of the Executive's services (and provided, further, that
such entitlement shall be determined without regard to any individual waivers
or other arrangements); (iii) all outstanding unvested options held by the
Executive shall vest and such options shall remain exercisable for ninety (90)
days following termination (or, if shorter, the balance of the regular term of
the options); and (iv) this Agreement shall otherwise terminate upon such
termination of employment and the Executive shall have no further rights
hereunder (except as provided in Section 7.14).
6. Covenants of the Executive.
6.1 Covenant Against Competition; Other Covenants. The
Executive acknowledges that (i) the principal business of the Company is the
acquisition, ownership and management of a diversified portfolio of
high-quality, single-tenant, freestanding properties leased to retail
businesses (the "Business"; provided, however, for the purposes of this
Section 6, "Business" shall not include (A) the ownership, acquisition,
financing or development by the Executive or his affiliates of (x) restaurant
properties or hotel properties that contain retail stores or (y) retail stores
that contain less than 10,000 square feet and (B) retail stores currently owned
by the Executive or his affiliates); (ii) the Company knows of a limited number
of persons who have developed the Company's Business; (iii) the Company's
Business is, in part, national in scope; (iii) the Executive's work for the
Company and its subsidiaries (and the predecessors of either) has given and
will continue to give the Executive access to the confidential affairs and
proprietary information of the Company; (v) the covenants and agreements of the
Executive contained in this Section 6 are essential to the business and
goodwill of the Company; and (vi) the Company would not have entered into this
Agreement but for the covenants and agreements set forth in this Section 6. In
light of the foregoing, during the Term and for a period of one year
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EXHIBIT A-3
thereafter (and, as to Section 6.1(b) and (d), at any time during and after the
Executive's employment with the Company and its subsidiaries (and the
predecessors of either)):
(a) Except for the Executive's affiliation with
CNL Group, Inc. and its affiliates, or as otherwise provided in Section 2, the
Executive shall not, directly or indirectly, own, manage, control or
participate in the ownership, management, or control of, or be employed or
engaged by or otherwise affiliated or associated as an employee, employer,
consultant, agent, principal, partner, stockholder, corporate officer, director
or in any other individual or representative capacity, engage or participate in
any business that is in competition in any manner whatsoever with the Business
of the Company in any state in which the Company conducts its Business. In the
case of a termination by the Company without Cause or by the Executive for Good
Reason, the preceding covenant shall expire on the date of termination;
provided, however, that, notwithstanding the foregoing, the Executive may
invest in securities of any entity, solely for investment purposes and without
participating in the business thereof, if (i) such securities are traded on any
national securities exchange or the National Association of Securities Dealers,
Inc. Automated Quotation System, (ii) the Executive is not a controlling person
of, or a member of a group which controls, such entity and (iii) the Executive
does not, directly or indirectly, own one percent or more of any class of
securities of such entity.
(b) The Executive shall keep secret and retain
in strictest confidence, and shall not use for his benefit or the benefit of
others, except in connection with the business and affairs of the Company and
its affiliates, all confidential matters relating to the Company's Business and
the business of any of its affiliates and to the Company and any of its
affiliates, learned by the Executive heretofore or hereafter directly or
indirectly from the Company or any of its subsidiaries (or any predecessor of
either) (the "Confidential Company Information"), including, without
limitation, information with respect to the Business and any aspect thereof,
profit or loss figures, and the Company's or its affiliates, (or any of their
predecessors) properties, and shall not disclose such Confidential Company
information to anyone outside of the Company except with the Company's express
written consent and except for Confidential Company Information which (i) at
the time of receipt or thereafter becomes publicly known through no wrongful
act of the Executive, (ii) is clearly obtainable in the public domain, (iii)
was not acquired by the Executive in connection with the Executive's employment
or affiliation with the Company, (iv) was not acquired by the Executive from
the Company or its representatives or from a third-party who has an agreement
with the Company not to disclose such information, or (v) is required to be
disclosed by rule of law or by order of a court or governmental body or agency.
(c) The Executive shall not, without the
Company's prior written consent, directly or indirectly, (i) knowingly solicit
or encourage to leave the employment or other service of the Company or any of
its affiliates, any employee thereof or hire (on behalf of the Executive or any
other person or entity) any employee who has left the employment or other
service of the Company or any of its affiliates (or any predecessor of either)
within one year of the termination of such employee's or independent
contractor's employment or other service with the Company and its affiliates,
or (ii) whether for the Executive's own account or for the account of any other
person, firm, corporation or other business organization, intentionally
interfere with the
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EXHIBIT A-3
Company's or any of its affiliates, relationship with, or endeavor to entice
away from the Company or any of its affiliates, any person who during the
Executive's employment with the Company and its affiliates (or the predecessors
of either) is or was a customer or client of the Company or any of its
affiliates (or any predecessor of either).
(d) All memoranda, notes, lists, records,
property and any other tangible product and documents (and all copies thereof)
made, produced or compiled by the Executive or made available to the Executive
concerning the Business of the Company and its affiliates shall be the
Company's property and shall be delivered to the Company at any time on
request.
6.2 Rights and Remedies upon Breach. The Executive
acknowledges and agrees that any breach by him of any of the provisions of
Section 6.1 (the "Restrictive Covenants") would result in irreparable injury
and damage for which money damages would not provide an adequate remedy.
Therefore, if the Executive breaches, or threatens to commit a breach of, any
of the Restrictive Covenants, the Company and its affiliates shall have the
right and remedy to have the Restrictive Covenants specifically enforced
(without posting bond and without the need to prove damages) by any court
having equity jurisdiction, including, without limitation, the right to an
entry against the Executive of restraining orders and injunctions (preliminary,
mandatory, temporary and permanent) against violations, threatened or actual,
and whether or not then continuing, of such covenants. This right and remedy
shall be in addition to, and not in lieu of, any other rights and remedies
available to the Company and its affiliates under law or in equity (including,
without limitation, the recovery of damages). The existence of any claim or
cause of action by the Executive, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement of the Restrictive
Covenants.
7. Other Provisions.
7.1 Severability. The Executive acknowledges and agrees
that (i) the Executive has had an opportunity to seek advice of counsel in
connection with this Agreement and (ii) the Restrictive Covenants are
reasonable in geographical and temporal scope and in all other respects. If it
is determined that any of the provisions of this Agreement, including, without
limitation, any of the Restrictive Covenants, or any part thereof, is invalid
or unenforceable, the remainder of the provisions of this Agreement shall not
thereby be affected and shall be given full affect, without regard to the
invalid portions.
7.2 Duration and Scope of Covenants. If any court or
other decision maker of competent jurisdiction determines that any of the
Executive's covenants contained in this Agreement, including, without
limitation, any of the Restrictive Covenants, or any part thereof, are
unenforceable because of the duration or geographical scope of such provision,
then, after such determination has become final and unappealable, the duration
or scope of such provision, as the case may be, shall be reduced so that such
provision becomes enforceable and, in its reduced form, such provision shall
then be enforceable and shall be enforced.
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EXHIBIT A-3
7.3 Enforceability; Jurisdictions. The Company and the
Executive intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of any jurisdiction within the geographical scope of
the Restrictive Covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of
breadth of scope or otherwise it is the intention of the Company and the
Executive that such determination not bar or in any way affect the Company's
right, or the right of any of its affiliates, to the relief provided above in
the courts of any other jurisdiction within the geographical scope of such
Restrictive Covenants, as to breaches of such Restrictive Covenants in such
other respective jurisdictions, such Restrictive Covenants as they relate to
each jurisdiction's being, for this purpose, severable, diverse and independent
covenants, subject, where appropriate, to the doctrine of res judicata. Any
controversy or claim arising out of or relating to this Agreement or the breach
of this Agreement that is not resolved by the Executive and the Company (or its
affiliates, where applicable), other than those arising under Section 6, to the
extent necessary for the Company (or its affiliates, where applicable) to avail
itself of the rights and remedies provided under Section 6.2, shall be
submitted to arbitration in Orlando, Florida in accordance with Florida law and
the procedures of the American Arbitration Association. The determination of
the arbitrators shall be conclusive and binding on the Company (or its
affiliates, where applicable) and the Executive and judgment may be entered on
the arbitrator(s)' award in any court having jurisdiction.
7.4 Attorneys' Fees. In the event of any legal
proceeding (including an arbitration proceeding) relating to this Agreement or
any term or provision thereof, the losing party shall be responsible to pay or
reimburse the prevailing party for all reasonable attorneys' fees incurred by
the prevailing party in connection with such proceeding.
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EXHIBIT A-3
7.5 Notices. Any notice or other communication required
or permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, five days after the date of deposit in the United
States mails as follows:
(i) If to the Company, to:
400 East South Street
Suite 500
Orlando, Florida 32801
Attention: Gary M. Ralston
Facsimile: (407) 648-8756
with a copy in either case to:
Shaw, Pittman, Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037
Attention: Thomas H. McCormick, Esq.
Facsimile: (202) 663-8007
(ii) If to the Executive, to:
James M. Seneff, Jr.
1300 Summerland Avenue
Winter Park, FL 32789
with a copy in either case to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Jay L. Bernstein, Esq.
Facsimile: (212) 878-8527
Any such person may by notice given in accordance with this Section to the
other parties hereto designate another address or person for receipt by such
person of notices hereunder.
7.6 Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with the Company or its
subsidiaries (or any predecessor of either).
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<PAGE> 86
EXHIBIT A-3
7.7 Waivers and Amendments. This Agreement may be
amended, superseded, canceled, renewed or extended, and the terms hereof may be
waived, only by a written instrument signed by the parties or, in the case of a
waiver, by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege nor any single or partial exercise of any such right, power or
privilege, preclude any other or further exercise thereof or the exercise of
any other such right, power or privilege.
7.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
7.9 Assignment. This Agreement, and the Executive's
rights and obligations hereunder, may not be assigned by the Executive; any
purported assignment by the Executive in violation hereof shall be null and
void. In the event of any sale, transfer or other disposition of all or
substantially all of the Company's assets or business, whether by merger,
consolidation or otherwise, the Company may assign this Agreement and its
rights hereunder.
7.10 Withholding. The Company shall be entitled to
withhold from any payments or deemed payments any amount of withholding
required by law. No other taxes, fees, impositions, duties or other charges or
offsets of any kind shall be deducted or withheld from amounts payable
hereunder, unless otherwise required by law.
7.11 No Duty to Mitigate. The Executive shall not be
required to mitigate damages or the amount of any payment provided for under
this Agreement by seeking other employment or otherwise, nor will any payments
hereunder be subject to offset in the event the Executive does mitigate.
7.12 Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors,
permitted assigns, heirs, executors and legal representatives.
7.13 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original but all such counterparts together shall
constitute one and the same instrument. Each counterpart may consist of two
copies hereof each signed by one of the parties hereto.
7.14 Survival. Anything contained in this Agreement to
the contrary notwithstanding, the provisions of Sections 6, 7.3, 7.4 and 7.10
and the other provisions of this Section 7 (to the extent necessary to
effectuate the survival of Sections 6, 7.3, 7.4 and 7.10) shall survive
termination of this Agreement and any termination of the Executive's employment
hereunder.
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<PAGE> 87
EXHIBIT A-3
7.15 Existing Agreements. Executive represents to the
Company that the Executive is not subject or a party to any employment or
consulting agreement, non-competition covenant or other agreement, covenant or
understanding which might prohibit the Executive from executing this Agreement
or limit the Executive's ability to fulfill the Executive's responsibilities
hereunder.
7.16 Headings. The headings in this Agreement are for
reference only and shall not affect the interpretation of this Agreement.
7.17 Parachute Provisions. If any amount payable to or
other benefit receivable by the Executive pursuant to this Agreement is deemed
to constitute a Parachute Payment (as defined below), alone or when added to
any other amount payable or paid to or other benefit receivable or received by
the Executive which is deemed to constitute a Parachute Payment (whether or not
under an existing plan, arrangement or other agreement), and would result in
the imposition on the Executive of an excise tax under Section 4999 of the
Internal Revenue Code of 1986, as amended, then, in addition to any other
benefits to which the Executive is entitled under this Agreement, the Executive
shall be paid by the Company an amount in cash equal to the sum of the excise
taxes payable by the Executive by reason of receiving Parachute Payments plus
the amount necessary to put the Executive in the same after-tax position
(taking into account any and all applicable federal, state and local excise,
income or other taxes at the highest applicable rates on such Parachute
Payments and on any payments under this Section 7.17 ) as if no excise taxes
had been imposed with respect to Parachute Payments. The amount of any payment
under this Section 7.17 shall be computed by a certified public accounting firm
mutually and reasonably acceptable to the Executive and the Company, the
computation expenses of which shall be paid by the Company. "Parachute
Payment" shall mean any payment deemed to constitute a "parachute payment" as
defined in Section 280G of the Internal Revenue Code of 1986, as amended.
IN WITNESS WHEREOF, the parties hereto have signed their names as of
the day and year first above written.
COMMERCIAL NET LEASE REALTY, INC.
By:
----------------------------------
Its: President
-------------------------------------
James M. Seneff, Jr.
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<PAGE> 88
EXHIBIT B
FORM OF
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is dated as of
______, 1997, by and among COMMERCIAL NET LEASE REALTY, INC., a Maryland
corporation (the "Company"), and ROBERT A. BORNE, KEVIN B. HABICHT, GARY M.
RALSTON and CNL GROUP, INC., a Florida corporation, (collectively, the
"Shareholders").
RECITALS
WHEREAS, pursuant to an Agreement and Plan of Merger among the
Company, Net Lease Realty II, Inc., a Maryland corporation and wholly-owned
subsidiary of the Company, CNL Realty Advisors, Inc., a Florida corporation
("CNL Advisors"), and the Shareholders of CNL Advisors, dated as of May 15,
1997 (the "Merger"), the Shareholders received up to 2,200,000 shares of the
Company's common stock, $.01 par value (the "Common Stock"), in exchange for
96.9% of the outstanding shares of capital stock of CNL Advisors;
WHEREAS, the Shareholders have been granted certain registration
rights with respect to the shares of Common Stock received in connection with
the Merger; and
WHEREAS, the Company and the Shareholders desire to set forth the
rights and obligations of the parties with respect to such registration rights.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following meanings:
"Common Stock" shall have the meaning set forth in Paragraph one of
the Recitals.
"Demand Registration Request" shall have the meaning set forth in
Section 4.1 hereof.
"Company" shall mean Commercial Net Lease Realty, Inc., a Maryland
corporation.
"Demand Registration Rights" shall mean the rights of the Holders to
have a Registration Statement filed by the Company with respect to the
Registrable Securities held by the Holders in accordance with the provisions of
Section 4 hereof.
"Demanding Holders" shall have the meaning set forth in Section 4.1
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
<PAGE> 89
EXHIBIT B
"Filing Notice" shall have the meaning set forth in Section 3.1
hereof.
"Holders" shall mean the Shareholders or any Permitted Transferee of a
Shareholder, and, with respect to a Permitted Transferee, only if such
Shareholder has granted rights under this Agreement to such Permitted
Transferee; and "Holder" shall mean any one of them.
"Merger" shall have the meaning set forth in Paragraph one of the
Recitals.
"Permitted Transferee" shall have the meaning set forth in Section 2
hereof.
"Piggyback Registration Rights" shall mean the rights of the Holders,
in accordance with the provisions of Section 3 hereof, to have their
Registrable Securities included in any Registration Statement filed by the
Company with respect to the sale of Common Stock or filed by any other
shareholders of the Company.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any of the Registrable Securities covered by
such Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated
by reference in such prospectus.
"Registrable Securities" means the aggregate number of shares of
Common Stock issued by, or to be issued by, the Company to the Shareholders in
connection with the Merger and shall include all shares of Common Stock
received by the Holders pursuant to a stock split, stock dividend or other
recapitalization of the Company. For the purposes of this Agreement, such
shares of Common Stock shall cease to be Registrable Securities on the Rule 144
Eligibility Date or, if earlier, on such date on which (a) a Registration
Statement covering such shares has been declared effective and such shares have
been disposed of pursuant to such effective Registration Statement, or (b) all
of the Registrable Securities are eligible for sale (other than pursuant to
Rule 904 of the Securities Act), in the opinion of counsel to the Company, in a
single or multiple transactions exempt from the registration and prospectus
delivery requirements of the Securities Act, so that all transfer restrictions
with respect to such shares and all restrictive legends with respect to the
certificates evidencing such shares are or may be removed upon the consummation
of such sale.
"Registration Period" shall mean the period commencing on the date the
Merger is effective and ending at the earlier of (i) such time as no Holder
owns any Registrable Securities or (ii) the Rule 144 Eligibility Date.
"Registration Statement" means any registration statement filed by the
Company under the Securities Act that covers any of the Registrable Securities,
including the Prospectus, any amendments and supplements to such registration
statement, including post-effective amendments, and all exhibits thereto and
all material incorporated by reference in such registration statement.
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EXHIBIT B
"Rule 144 Eligibility Date" means the date on which all shares of
Common Stock issued by the Company to the Shareholders in the Merger and the
other shares of Common Stock defined as Registrable Securities herein may be
sold under Rule 144 of the Securities Act by each holder within three months of
such date within the volume limitations of Rule 144(e).
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Holder Information" shall mean information either furnished
in writing by or on behalf of a Selling Holder for use in the Registration
Statement or Prospectus.
"Selling Holders" when used with respect to a Registration Statement,
shall mean those Holders whose Registrable Securities are included in a
Registration Statement pursuant to an exercise by such Holders of their
Piggyback Registration Rights or their Demand Registration Rights.
"Shareholders" shall mean Robert A. Borne, Kevin B. Habicht, Gary M.
Ralston and CNL GROUP, INC., a Florida corporation.
"Underwriter(s)" shall mean any one or more investment banking or
brokerage firms to or through whom the Holders or the Company, as the case may
be, may offer and sell Registrable Securities pursuant to a transaction
requiring the filing of a Registration Statement under the Securities Act,
including one or more of such firms who shall manage such public offering
through such Underwriters and that are referred to herein as "Managing
Underwriter(s)."
2. Permitted Transferees.
Any Shareholder may transfer any of the Registrable Securities
held by such Shareholder, (i) to the spouse, siblings or issue or spouses of
siblings or issue of such Shareholder; (ii) to a trust or custodial account for
the sole benefit of such Shareholder or the spouse, siblings or issue or
spouses of siblings or issue of such Shareholder, (iii) to a partnership,
limited liability company or other entity, the majority and controlling equity
owners of which are a shareholder or the spouse, siblings or issue or spouses
of siblings or issue of such Shareholder or any trust referred to in clause
(ii) above; (iv) to the personal representative of a Shareholder upon the death
of such Shareholder for the purposes of administration of such Shareholder's
estate or upon the incompetency of such Shareholder for the purposes of the
protection and management of such Shareholder's assets, but such personal
representative may not transfer such Registrable Securities other than as
permitted under this Agreement; (v) to a charitable foundation (subject to
receipt by the Shareholder of written approval from the Company, such approval
not to be unreasonably withheld); or (vi) to the Company (a "Permitted
Transferee").
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<PAGE> 91
EXHIBIT B
3. Piggyback Registration Rights.
3.1 If the Company proposes to file a registration
statement under the Securities Act with respect to any proposed public offering
by the Company or by any holders of any class of securities of the Company (i)
prior to the Registration Period, and the Company reasonably expects such
registration statement to be declared effective during the Registration Period,
or (ii) during the Registration Period, the Company shall, not later than 30
days prior to the proposed date of filing of such registration statement with
the SEC under the Securities Act, give written notice (a "Filing Notice") of
the proposed filing to each Holder, which notice shall describe in detail the
proposed registration and distribution (including those jurisdictions where
registration under the securities or blue sky laws is intended). During the
Registration Period, each Holder may elect, by written notice to the Company
(which notice shall specify the aggregate number of Registrable Securities
proposed to be offered and sold by such Holder pursuant to such Registration
Statement, the identity of the proposed seller thereof, and a general
description of the manner in which such person intends to offer and sell such
Registrable Securities) given within 15 days after receipt of the Filing Notice
from the Company, to have any or all of the Registrable Securities owned by
such Holder included in such Registration Statement, and the Company shall
include such Registrable Securities in such Registration Statement. If the
Managing Underwriter(s) or Underwriters (in the case of an underwritten
registration) or the Company (in the case of a nonunderwritten registration
covering a primary offering by the Company) should reasonably object to the
exercise of the Piggyback Registration Rights with respect to such Registration
Statement, then in the discretion of the Company, either:
(i) the Registrable Securities of the
Selling Holders shall nevertheless be included in such
Registration Statement subject to the condition that the
Selling Holders may not offer or sell their Registrable
Securities included therein for a period of up to 90 days
after the initial effective date of such Registration
Statement, whereupon the Company shall be obligated to file
one or more post-effective amendments to such Registration
Statement to permit the lawful offer and sale of such
Registrable Securities for a reasonable period thereafter
beginning at the end of such lock-up period and continuing for
such period, not exceeding 120 days, as may be necessary for
the Selling Holders, Underwriters and selling agents to
dispose of such Registrable Securities; or
(ii) if the Managing Underwriter(s) (in
the case of an underwritten registration) or the Company (in
the case of a nonunderwritten registration covering a primary
offering by the Company) should reasonably determine that the
inclusion of such Registrable Securities, notwithstanding the
provisions of the preceding clause (i), would materially
adversely affect the offering contemplated in such
Registration Statement, and based on such determination
recommends inclusion in such Registration Statement of fewer
or none of the Registrable Securities of the Holders, then (x)
if the Managing Underwriter(s) or the Company, as applicable,
recommends the inclusion of fewer Registrable Securities, the
number of Registrable Securities of the Holders included in
such Registration Statement shall be reduced pro-rata among
such Holders (based upon the number
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<PAGE> 92
EXHIBIT B
of Registrable Securities requested to be included in the
registration), or (y) if the Managing Underwriter(s) or the
Company, as applicable, recommends the inclusion of none of
such Registrable Securities, none of the Registrable
Securities of the Holders shall be included in such
Registration Statement
3.2 Unless otherwise required by law, rule or regulation,
if Registrable Securities owned by Holders who have made the election provided
in Section 3.1 are included in such Registration Statement, the Company shall
bear and pay all fees, costs, and expenses incident to such inclusion,
including, without limitation, registration fees, exchange listing fees and
expenses, legal fees of Company counsel (including blue sky counsel), printing
costs and costs of any special audits or accounting fees. Each Selling Holder
shall pay all underwriting discounts and commissions with respect to its
Registrable Securities included in the Registration Statement, as well as fees
or disbursements of counsel, accountants or other advisors for the Selling
Holder and all internal overhead and other expenses of the Selling Holder.
3.3 The rights of the Holders under this Section 3 are
solely piggyback in nature, and nothing in this Section 3 shall prevent the
Company from reversing a decision to file a Registration Statement or from
withdrawing any such Registration Statement before it has become effective.
3.4 The Holders shall have the right, at any time during
the Registration Period, to exercise their Piggyback Registration Rights
pursuant to the provisions of this Section 3 on any number of occasions that
the Company shall determine to file a registration statement.
3.5 The Piggyback Registration Rights granted pursuant to
this Section 3 shall not apply to (a) a registration relating solely to
employee stock option, purchase or other employee plans, (b) a registration
related solely to a dividend reinvestment plan or (c) a registration on Form
S-4 or Form S-8 or any successor Forms thereto.
3.6 In the event that there is a reduction in the number
of Registrable Securities to be included in a registration statement to which
Holders have exercised Piggyback Registration Rights, the Company shall so
advise all Holders participating that the number of securities of Registrable
Securities that may be included in the registration shall be reduced pro rata
among such Holders (based on the number of Registrable Securities requested to
be included in the registration); provided, however, that the percentage of the
reduction of such Registrable Securities shall be no greater than the
percentage reduction of securities of other selling securityholders who also
have exercised piggyback registration rights pursuant to agreements other than
this Agreement, as such percentage reductions shall be determined in the good
faith judgment of the Company based on the advice of the managing underwriter
of the offering. If Holders have exercised Piggyback Registration Rights with
respect to a registration statement which is being filed as a result of the
exercise of demand registration rights by other securityholders, the
securityholders exercising their demand registration rights shall have the
right, in the event of any reduction of securities covered by such registration
statement, to have all of
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<PAGE> 93
EXHIBIT B
their registrable securities included in such registration statement before
inclusion of any Registrable Securities of Holders exercising their Piggyback
Registration Rights.
4. Demand Registration Rights.
4.1 In addition to, and not in lieu of, the Piggyback
Registration Rights set forth under Section 3, at any time after the effective
date of the Merger and during the Registration Period, any Holder may deliver
to the Company a written request (a "Demand Registration Request") that the
Company register any or all of the Registrable Securities owned by such
Demanding Holders (as hereinafter defined) (provided that the aggregate
offering price of all such Registrable Securities actually included in the
Demand Registration equals $5 million or more) and any other Holders that may
elect to be included pursuant to Section 4.2 hereof under the Securities Act
and the state securities or blue sky laws of any jurisdiction designated by
such Selling Holders (subject to Section 9), subject to the provisions of this
Section 4. The requisite Holders making such demand are sometimes referred to
herein as the "Demanding Holders." The Company shall, as soon as practicable
following the Demand Registration Request, prepare and file a Registration
Statement (on the then appropriate form or, if more than one form is available,
on the appropriate form selected by the Company) with the SEC under the
Securities Act, covering such number of the Registrable Securities as the
Selling Holders request to be included in such Registration Statement and to
take all necessary steps to have such Registrable Securities qualified for sale
under state securities or blue sky laws. The Company shall use its best
efforts to file such Registration Statement no later than 30 days following the
Demand Registration Request. Further, the Company shall use its best efforts
to have such Registration Statement declared effective by the SEC (within the
meaning of the Securities Act) as soon as practicable thereafter and shall take
all necessary action (including, if required, the filing of any supplements or
posteffective amendments to such Registration Statement) to keep such
Registration Statement effective to permit the lawful sale of such Registrable
Securities included thereunder for the period set forth in Section 6 hereof,
subject, however, to the further terms and conditions set forth in Sections
4.3, 4.4, 4.5, 4.6, and 4.7 hereof.
4.2 No later than 10 days after the receipt of the Demand
Registration Request, the Company shall notify all Holders who have not joined
in such request of the proposed filing, and such Holders may, if they desire to
sell any Registrable Securities owned by them, by notice in writing to the
Company given within 15 days after receipt of such notice from the Company,
elect to have all or any portion of their Registrable Securities included in
the Registration Statement.
4.3 The Holders, in the aggregate, may only exercise the
Demand Registration Rights granted pursuant to this Section 4 two times. The
Company shall only be required to file one Registration Statement (as
distinguished from supplements or pre-effective or post-effective amendments
thereto) in response to the exercise by the Demanding Holders of their Demand
Registration Rights pursuant to the provisions of this Section 4.
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EXHIBIT B
4.4 In the event that preparation of a Registration
Statement is commenced by the Company in response to the exercise by the
Demanding Holders of the Demand Registration Right, but such Registration
Statement is not filed with the SEC, either at the request of the Company or at
the request of the Demanding Holders, for any reason, the Demanding Holders
shall not be deemed to have exercised a Demand Registration Right pursuant to
this Section 4, except that, if such Registration Statement is not filed after
the commencement of preparation thereof at the request of the Demanding
Holders, then the Selling Holders whose Registrable Securities were proposed to
be included therein shall be required to bear the fees, expenses and costs
incurred in connection with the preparation thereof.
4.5 In the event that any Registration Statement filed by
the Company with the SEC pursuant to the provisions of this Section 4 is
withdrawn prior to the completion of the sale or other disposition of the
Registrable Securities included thereunder, then the following provisions,
whichever applicable, shall govern:
(i) If such withdrawal is effected at
the request of the Company for any reason other than the
failure of all the Selling Holders to comply with their
obligations hereunder with respect to such registration, then
the filing thereof by the Company shall be excluded in
determining whether the Holders have exercised their Demand
Registration Rights hereunder with respect to the filing of
such Registration Statement.
(ii) If such withdrawal is effected at
the request of the Selling Holders, then the filing thereof by
the Company shall be deemed an exercise of a Demand
Registration Right with respect to the filing of such
Registration Statement.
4.6 The Company shall bear and pay all fees, costs and
expenses incident to such Registration Statement and incident to keeping it
effective and in compliance with all federal and state securities laws, rules,
and regulations for the period set forth in Section 6 hereof (including,
without limitation, registration fees, blue sky qualification fees, exchange
listing fees and expenses, legal fees of Company counsel (including blue sky
counsel), printing costs, costs of any special audits and accounting fees).
Each Selling Holder shall pay fees or disbursements of counsel, accountants or
other advisors for the Selling Holder and any underwriting discounts and
commissions with respect to its Registrable Securities and any internal,
overhead and other expenses of the Selling Holders.
4.7 Whenever a decision or election is required to be
made hereunder by the Demanding Holders or the Selling Holders, such decision
or election shall be made by a vote of holders of a majority of the Registrable
Securities owned by such Demanding Holders or Selling Holders, as the case may
be; provided, however, any decision to withdraw a Demand Notice shall be made
unanimously by the Demanding Holders.
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EXHIBIT B
4.8 In the event that there is a limitation on the number
of securities which may be covered by such Registration Statement, the Selling
Holders shall have the right with respect to any such Registration Statement
filed as a result of their Demand Registration Request to include their
Registrable Securities prior to the inclusion of any other securityholder
exercising piggyback registration rights.
4.9 The Selling Holders shall have the right, with
respect to any Registration Statement to be filed as a result of a Demand
Registration Request, to determine whether such registration shall be
underwritten or not and to select any such underwriter, provided such
underwriter is satisfactory to the Company, which consent will not be
unreasonably withheld.
5. Information to be Furnished. In the event any of the
Registrable Securities are to be included in a Registration Statement under
Section 3 or 4, the Selling Holders and the Company shall furnish the following
information and documents:
5.1 The Selling Holders will furnish to the Company all
information required by the Securities Act to be furnished by sellers of
securities for inclusion in the Registration Statement, together with all such
other information which the Selling Holders have or can reasonably obtain and
which may reasonably be required by the Company in order to have such
Registration Statement become effective and such Registrable Securities
qualified for sale under applicable state securities laws.
5.2 The Company, before filing a Registration Statement,
amendment or supplement thereto, will furnish copies of such documents to legal
counsel selected by the Selling Holders. In addition, the Company will make
available for inspection by any Selling Holder or by any Underwriter, attorney
or other agent of any Selling Holder or Underwriter all information reasonably
requested by such persons. All nonpublicly available information provided to
any Selling Holder, Underwriter or any attorney or agent of any Selling Holder
or Underwriter shall be kept strictly confidential by such Selling Holder,
Underwriter or attorney or agent of such Selling Holder or Underwriter so long
as such information remains nonpublic.
5.3 The Company will promptly notify each Selling Holder
of the occurrence of any event which renders any Prospectus then being
circulated among prospective purchasers misleading because such Prospectus
contains an untrue statement of a material fact or omits to state a material
fact necessary to make the statements made, in light of the circumstances in
which they were made, not misleading, and the Company will amend the Prospectus
so that it does not contain any material misstatements or omissions and deliver
the number of copies of such amendments to each Selling Holder as each Selling
Holder may require.
6. Registration to Be Kept Effective. In connection with any
registration of Registrable Securities pursuant to this Agreement, the Company
shall, at its expense, keep effective and maintain such registration and any
related qualification of Registrable Securities under state securities laws for
such period not exceeding 120 days as may be necessary for the Selling Holders,
Underwriters and selling agents to dispose of such Registrable Securities, from
time to time to amend or supplement the Prospectus used in connection therewith
to the extent
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<PAGE> 96
EXHIBIT B
necessary to comply with applicable laws, and to furnish to such Selling
Holders such number of copies of the Registration Statement, the Prospectus
constituting a part thereof, and any amendment or supplement thereto as such
Selling Holders may reasonably request in order to facilitate the disposition
of the registered Registrable Securities.
7. Conditions to Company's Obligations. The obligations of the
Company to cause the Registrable Securities owned by the Holders to be
registered under the Act are subject to each of the following limitations,
conditions and qualifications:
(a) The Company shall be entitled to postpone for a
reasonable period of time up to three (3) months the filing of any
Registration Statement otherwise required to be prepared and filed by
it pursuant to Section 4 hereof, if the Company determines, in its
reasonable judgment, that such registration and offering would
materially interfere with any financing, acquisition, corporate
reorganization or other material transaction involving the Company,
and the Company promptly gives the Holders written notice including an
explanation of such determination. If the Company shall so postpone
the filing of a Registration Statement, the Selling Holders shall have
the right to withdraw the Demand Registration Request by giving
written notice to the Company within 30 days after receipt of the
notice of postponement (and, in the event of such withdrawal, such
Demand Registration Request shall not be counted for purposes of the
Demand Registration Requests to which the Holders are entitled
pursuant to Section 4 hereof).
(b) The Company shall not be required to file any
Registration Statement pursuant to this Agreement in connection with a
Demand Registration Request made less than 90 days after the effective
date of any Registration Statement filed by the Company (other than
registrations statements filed on Form S-4, Form S-8, or any successor
forms thereto) if (i) the Managing Underwriter(s) associated with such
prior Registration Statement reasonably objects to such Demand
Registration Request or has otherwise precluded the Company from
filing a registration statement within such 90-day period and (ii) the
Selling Holders filing such Demand Registration Request were able to
include in such prior Registration Statement pursuant to their
Piggyback Registration Rights at least one-third of the amount of the
Registrable Securities that they had notified the Company they desired
to have been included in such prior Registration Statement.
(c) The Company may require, as a condition to fulfilling
its obligations to register the Registrable Securities under Sections
3 or 4 hereof, that the Selling Holders execute reasonable and
customary indemnification agreements for the benefit of the
Underwriters of the registration; provided, however, a Selling Holder
shall not be required to indemnify the Underwriters except with
respect to Selling Holder information.
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<PAGE> 97
EXHIBIT B
(d) The Company shall not be required to fulfill any
registration obligations under this Agreement, if the Company provides
the Holders with an opinion of counsel reasonably acceptable to such
Holders stating that the Holders are free to sell in the manner
proposed by them the Registrable Securities that they desired to
register without registering such Registrable Securities or such
Registrable Securities can be sold under Rule 144 of the Securities
Act, or otherwise without registration in the open market in
compliance with the Securities Act, without regard to volume
restrictions.
(e) The Company shall not be obligated to file any
Registration Statement pursuant to this Agreement in connection with a
Demand Registration Request at any time if the Company would be
required to include financial statements audited as of any date other
than the end of its fiscal year, unless the Selling Holder(s) agree to
pay the cost of any such additional audit.
8. Exchange Listing. In the event any Registrable Securities are
included in a Registration Statement under Section 3 or 4 hereof, the Company
will exercise reasonable efforts to cause all such Registrable Securities to be
listed on the New York Stock Exchange or any other exchange(s) on which the
Common Stock is then listed.
9. Registration Under State Securities Laws. The Company shall
use its best efforts to register or qualify any Registrable Securities included
in a Registration Statement pursuant to Section 3 or 4 hereof under state "blue
sky" or similar securities laws in such jurisdictions as the Selling Holders
reasonably request and to take such other action as may be reasonably necessary
to enable the Selling Holders to sell their shares of Registrable Securities in
the jurisdictions where such registration or qualification was made, provided
that the Company will not be required to qualify to do business in any
jurisdiction in which it is not so qualified or to execute a general consent to
service of process in any jurisdiction in which it has not executed such a
consent.
10. Indemnification.
10.1 The Company will indemnify and hold each Selling
Holder, its partners, officers, directors and agents (including sales agents
and Underwriters) and each person, if any, who controls (within the meaning of
the Securities Act or the Exchange Act) the Selling Holder or any of the
foregoing, harmless to the maximum extent permitted by law, from and against
any loss, claim, liability, damage or expense (including attorneys' fees)
resulting from a claim that any Registration Statement, Prospectus or amendment
thereof or supplement thereto, which includes Registrable Securities to be sold
by such Selling Holder, contains a material misstatement or omission, unless
such claim is based upon Selling Holder Information or resulting from the
Selling Holder's failure to deliver a current Prospectus as required under the
Securities Act; and each such Selling Holder will indemnify and hold harmless
the Company, its directors, officers and agents and each person, if any, who
controls (within the meaning of the Securities Act or the Exchange Act) the
Company against any loss, claim, liability, damage or expense (including
attorneys' fees) resulting from any such claim relating to Selling Holder
Information.
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<PAGE> 98
EXHIBIT B
10.2 Promptly after receipt by an indemnified party under
this Section 10 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 10, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party under this Section 10 or otherwise to the extent such
omission did not materially prejudice the indemnifying party. In case any such
action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein, and to the extent that it may elect by written
notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there exists a conflict of interest between the
indemnifying party and any indemnified party or that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to, and inconsistent or in conflict with, those available to
the indemnifying party, the indemnified party or parties shall have the right
to select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party
or parties. Upon receipt of notice from the indemnifying party to such
indemnified party of its election so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party will not
be liable to such indemnified party under this Section 10 for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the preceding sentence, (ii)
the indemnifying party shall not have employed counsel reasonably satisfactory
to the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action, or (iii) the indemnifying
party has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party; and except that, if clause (i) or (iii) is
applicable, such liability shall be only in respect of the counsel referred to
in such clause (i) or (iii). No settlement of an action against any party
under this Section 10 shall bind the other party unless such other party agrees
in writing to the terms of such settlement (which agreement will not be
unreasonably withheld).
10.3 The obligation of the indemnifying party to indemnify
the indemnified party under this Section 10 shall, in each case, be in addition
to any liability which the indemnifying party may otherwise have hereunder or
otherwise at law or in equity.
10.4 If the indemnification provided for in this Section
10 from the indemnifying party is applicable in accordance with its terms but
for any reasons is held to be unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative faults of the indemnifying
party and indemnified party in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
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<PAGE> 99
EXHIBIT B
relevant equitable considerations. The relative faults of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, such
indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 10.1 and 10.2 hereof,
any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 10.4 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person.
11. Rule 144. The Company covenants that it shall file any
reports required to be filed by it under the Exchange Act and the rules and
regulations adopted by the SEC thereunder, and that it shall take such further
action as any Holder of Registrable Securities may reasonably request, all to
the extent required from time to time to enable such holder to sell the
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such rule may be amended from time to time, or (b) any similar rule or
regulation adopted by the SEC. The Company shall, upon the request of any
holder of Registrable Securities, deliver to such Holder a written statement as
to whether it has complied with such requirements.
12. Miscellaneous.
12.1 Amendments and Waivers. Subject to Section 12.2,
this Agreement may be modified or amended only by a writing signed by the
Company and each of the Shareholders. No modification or amendment to this
Agreement shall require the consent of any Permitted Transferee.
12.2 Third Party Beneficiaries. Any Permitted Transferee
shall be a third party beneficiary or intended beneficiary to the agreement
made hereunder by a Shareholder so long as such Shareholder has granted rights
under this Agreement to Permitted Transferee, and any such third party
beneficiary shall have the right to enforce such Agreement directly to the
extent it deems such enforcement necessary or advisable.
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<PAGE> 100
EXHIBIT B
12.3 No Waiver. No failure to exercise and no delay in
exercising, on the Company's or the Holders' part, of any right, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies provided by law.
12.4 Survival of Agreements. All agreements,
representations and warranties contained herein or made in writing by or on
behalf of the Company in connection with the transactions contemplated hereby
shall survive the execution and delivery of this Agreement.
12.5 Limitation of Registration Rights. Nothing contained
in this Agreement shall create any obligation on behalf of the Company to
register under the Securities Act any securities which are not shares of Common
Stock.
12.6 Binding Effect and Benefits. This Agreement shall be
binding upon and shall inure to the benefit of the Company and the Holders and
their respective successors and assigns. Without limiting the generality of
the foregoing, each Holder's registration rights granted hereunder shall be
transferable to and exercised by any Permitted Transferee of Registrable
Securities.
12.7 Entire Agreement. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subjects hereof.
12.8 Separability of Provisions. In case any provision of
this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
12.9 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be by telecopy,
facsimile transmission (confirmed by U.S. mail), telegraph, hand delivery or
mailed by certified or registered mail postage prepaid, returned receipt
requested, to the addresses set forth below or to such other address as any
party may advise the other party in a written notice given in accordance with
this Section.
If to the Company: Commercial Net Lease Realty, Inc.
400 East South Street
Suite 500
Orlando, Florida 32801
Attn.: Gary M. Ralston
If to the Holders: To the respective addresses set
forth in the records of the Company
Any notice or other communication so addressed and so mailed shall be deemed to
have been given when duly delivered or sent.
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EXHIBIT B
12.10 Construction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to the conflict of laws provisions thereof. The descriptive headings of
the several sections and subsections hereof are for convenience only and shall
not control or affect the meaning of construction of any of the provisions
hereof.
12.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed be an original, but all of which
together shall constitute a single original instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
THE COMPANY:
COMMERCIAL NET LEASE REALTY, INC.
By:
----------------------------------
Title:
-------------------------------
THE SHAREHOLDERS:
-------------------------------------
Robert A. Borne
-------------------------------------
Kevin B. Habicht
-------------------------------------
Gary M. Ralston
-------------------------------------
CNL Realty Advisors, Inc.
By:
---------------------------------
James M. Seneff, Jr., President
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