SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CNL American Properties Fund, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, of
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
400 East South Street
Orlando, FL 32801
April 13, 1999
To our Stockholders:
You are cordially invited to attend the annual meeting of stockholders
of CNL American Properties Fund, Inc., (the "Company") on May 27, 1999 at 10:30
a.m. at the CNL Management Center at 450 E. South Street, Suite 101, Orlando,
Florida. The directors and officers of the Company look forward to greeting you
personally. Enclosed for your review are the proxy, the proxy statement, notice
of meeting for the annual meeting of stockholders and annual report.
The Company experienced a year of tremendous growth in 1998. A
favorable market environment combined with our conservative investment
philosophy contributed to the successful results. During 1998, the Company
received over $385 million in capital through its public offerings of shares of
common stock and acquired or invested in 165 properties. The number of
restaurant chains in the Company's portfolio increased from 29 to 39 and the
Company added three new states increasing its presence to 38 states. We believe
the Company is well positioned to participate in the expected continued growth
in the restaurant real estate market. Following the successful completion of its
first follow on offering of common stock in March 1998, the Company commenced an
offering of up to $345,000,000 (34,500,000 shares) of its common stock which was
completed in the first quarter of 1999. The remaining net proceeds of this
offering will be invested in additional triple-net leased properties and
mortgage loans during the first quarter of 1999.
As we have previously reported, in 1998, a special committee comprised
of the Company's independent directors (the "Special Committee") recommended,
and the full Board of Directors unanimously approved, a plan calling for the
Company to pursue a number of strategic alternatives designed to maximize
stockholder value. Under the plan adopted by the Board, the Company (i) will
make certain acquisitions (the "Acquisitions") and (ii) will apply to list its
common stock for trading on the New York Stock Exchange (the "NYSE").
As a result of the Acquisitions, the Company will become a full-service
real estate investment trust (or a "REIT") and one of the largest triple net
lease REITs in the United States. The Acquisitions consist of the following:
o The Company will become internally advised and will acquire
complete acquisition, development and in-house management
functions by acquiring its external advisor, CNL Fund
Advisors, Inc. (the "Advisor").
o To increase its financing capabilities and expand its mortgage
loan portfolio, the Company will acquire CNL Financial Corp.
and CNL Financial Services, Inc., affiliates of the Advisor
that provide mortgage loans and perform securitization
transactions (together, the "CNL Restaurant Financial Services
Group").
o To increase significantly the size of its restaurant property
portfolio, the Company will seek to acquire 18 CNL Income
Funds, limited partnerships affiliated with the Advisor whose
properties are substantially the same type as the Company's.
On February 10, 1999, the Company received two separate fairness
opinions from the investment banking firm of Merrill Lynch, Pierce, Fenner &
Smith, Incorporated that the consideration, payable in shares of the Company's
common stock proposed to be paid for (i) the Advisor and the CNL Restaurant
Financial Services Group and (ii) all of the CNL Income Funds is fair to the
Company from a financial point of view.
The Company will seek to have its common stock begin trading on the
NYSE concurrently with the consummation of the acquisition of the CNL Income
Funds. In accordance with further recommendations of the Special Committee and
in an effort to obtain a greater following by the investment banking analyst
community, concurrently with or shortly following the Company's acquisition of
the CNL Income Funds and NYSE listing, and assuming market conditions permit,
the Company intends to offer common stock to the public pursuant to an
underwritten public offering.
The terms of the Acquisitions are described in greater detail in the
enclosed proxy statement. In order to facilitate consummation of the
Acquisitions and in contemplation of listing the Company's common stock for
trading on the New York Stock Exchange, the Company will be proposing for
stockholder approval an amendment and restatement of its articles of
incorporation. A special meeting will be called for the stockholders to
consider and vote upon the proposal. It is expected that the special meeting
will be held this summer and that, subject to satisfaction of certain
conditions to consummation of the Acquisitions (including, with respect to the
acquisition of the CNL Income Funds, approval of the proposal to amend and
restate the Company's articles of incorporation), that the Acquisitions will be
completed no later than in the fourth quarter of 1999. You will receive further
information regarding the proposal and the special meeting in the near future.
In an effort to prepare for the Company's anticipated future growth as
a result of the Acquisitions and for NYSE listing, the Board of Directors is
asking for your approval of two important proposals contained in this year's
annual proxy in addition to the election of the Board of Directors:
o approval of a one-for-two reverse stock split (the "Reverse Stock
Split") of the Company's common stock; and
o approval of the 1999 Performance Incentive Plan (the "Plan").
The intent of the Reverse Stock Split is to reduce the number of shares
of the Company's common stock outstanding and to increase the future
marketability and liquidity of the Company's common stock in connection with
the Company's anticipated application for listing with the NYSE. The Board
believes that the Reverse Stock Split will allow the Company to list its shares
of common stock at a price per share that is more comparable to other listed
REITs. Additionally, the Board of Directors believes that the $10.00 per share
price that the Company's common stock has been sold in its three public
offerings (the most recent of which was completed in December 1998) may limit
the effective future marketability of the Company's common stock because of the
reluctance of many brokerage firms and institutional investors to recommend
lower-priced stocks to their clients or to hold them in their own portfolios.
The Board believes that the decrease in the number of shares of the Company's
common stock outstanding as a consequence of the proposed Reverse Stock Split
and the resulting anticipated increased price level will enhance its listing
with the NYSE and encourage greater interest in the Company's common stock by
the financial community and the investing public and possibly promote greater
liquidity for the holders of the Company's common stock.
Because there currently is no established trading market for the
Company's common stock, the value at which the Company's common stock may trade
now or following the Reverse Stock Split is uncertain. We also do not know the
value at which the common stock will trade on the NYSE if it is accepted for
listing. Assuming the common stock is valued at $10.00 per share prior to the
Reverse Stock Split, the one-for-two Reverse Stock Split would be expected to
result in the common stock being valued at approximately $20.00 per share.
With the prospect of becoming internally advised, the Board also
believes that equity-based compensation is an important element of overall
compensation for the Company. Such compensation advances the interest of the
Company by encouraging, and providing for, the acquisition of equity interests
in the Company by participants, thereby aligning participants' interests with
stockholders and providing participants with a substantial motivation to
enhance stockholder value. The proposed stock incentive plan will achieve this
result by allowing designated officers, directors and key employees of the
Company to receive various forms of stock awards under the Plan.
As we prepare for the exciting year ahead, the Board of Directors
unanimously recommends that you vote to approve the three proposals included in
this year's annual proxy statement. Your vote counts. Please complete and
return the attached ballot today. Thank you for your attention to this matter.
Sincerely,
/s/ James M. Seneff, Jr. /s/ Robert A. Bourne
- ------------------------------- ------------------------------
James M. Seneff, Jr. Robert A. Bourne
Chairman of the Board and Vice Chairman of the Board
Chief Executive Officer and Treasurer
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
400 East South Street
Orlando, Florida 32801
Notice of Annual Meeting of Stockholders
To Be Held May 27, 1999
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of CNL
AMERICAN PROPERTIES FUND, INC. (the "Company") will be held at 10:30 a.m. local
time, on May 27, 1999, at the CNL Management Center at 450 E. South Street,
Suite 101, Orlando, Florida, for the following purposes:
1. To elect five directors.
2. To approve a one-for-two reverse stock split of the Company's
common stock, par value $0.01 per share, whereby each
outstanding share of common stock will be divided by two.
3. To consider and vote upon the Company's 1999 Performance
Incentive Plan.
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Stockholders of record at the close of business on February 26, 1999,
will be entitled to notice of and to vote at the annual meeting or at any
adjournment thereof.
Stockholders are cordially invited to attend the meeting in person.
WHETHER OR NOT YOU NOW PLAN TO ATTEND THE MEETING, YOU ARE ASKED TO
COMPLETE, DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY CARD FOR WHICH A
POSTAGE PAID RETURN ENVELOPE IS PROVIDED. IT IS IMPORTANT THAT YOUR SHARES BE
VOTED. IF YOU DECIDE TO ATTEND THE MEETING YOU MAY REVOKE YOUR PROXY AND VOTE
YOUR SHARES IN PERSON.
By Order of the Board of Directors,
/s/ Lynn E. Rose
--------------------------
Lynn E. Rose
Secretary
April 13, 1999
Orlando, Florida
<PAGE>
CNL AMERICAN PROPERTIES FUND, INC.
400 East South Street
Orlando, Florida 32801
PROXY STATEMENT
This Proxy Statement is furnished by the Board of Directors (the "Board")
of CNL American Properties Fund, Inc. (the "Company") in connection with the
solicitation by the Company management of proxies to be voted at the annual
meeting of stockholders to be held on May 27, 1999, and at any adjournment
thereof, for the purposes set forth in the accompanying notice of such meeting.
All stockholders of record at the close of business on February 26, 1999, will
be entitled to vote.
Any proxy, if received in time, properly signed and not revoked, will be
voted at such meeting in accordance with the directions of the stockholder. If
no directions are specified, the proxy will be voted FOR each proposal set forth
in this Proxy Statement. Any stockholder giving a proxy has the power to revoke
it at any time before it is exercised. A proxy may be revoked (1) by delivery of
a written statement to the Secretary of the Company stating that the proxy is
revoked, (2) by presentation at the annual meeting of a subsequent proxy
executed by the person executing the prior proxy, or (3) by attendance at the
annual meeting and voting in person.
Votes cast in person or by proxy at the annual meeting will be tabulated
and a determination will be made as to whether or not a quorum is present. The
Company will treat abstentions as shares that are present and entitled to vote
for purposes of determining the presence or absence of a quorum, but as unvoted
for purposes of determining the approval of any matter submitted to the
stockholders. If a broker submits a proxy indicating that it does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote with respect
to such matter.
Solicitation of proxies will be primarily by mail. However, directors and
officers of the Company also may solicit proxies by telephone or telegram or in
person. All of the expenses of preparing, assembling, printing and mailing the
materials used in the solicitation of proxies will be paid by the Company.
Arrangements may be made with brokerage houses and other custodians, nominees
and fiduciaries to forward soliciting materials, at the expense of the Company,
to the beneficial owners of shares held of record by such persons. The Company
also has retained D.F. King & Co. to aid in the solicitation of the proxy at an
estimated fee of $65,000. It is anticipated that this Proxy Statement and the
enclosed proxy first will be mailed to stockholders on or about April 13, 1999.
As of February 26, 1999, the record date, 74,696,927 shares of common stock
of the Company were outstanding. Each share of common stock entitles the holder
thereof to one vote on each of the matters to be voted upon at the annual
meeting. As of the record date, officers and directors of the Company had the
power to vote approximately 0.03% of the outstanding shares of common stock.
<PAGE>
TABLE OF CONTENTS
PROPOSAL I: Election of Directors.................................. 3
Executive Compensation................................. 9
PROPOSAL II: Approval of Reverse Stock Split........................ 9
PROPOSAL III: Approval of 1999 Performance Incentive Plan............ 15
SECURITY OWNERSHIP......................................................... 22
CERTAIN TRANSACTIONS....................................................... 23
INDEPENDENT AUDITORS....................................................... 25
OTHER MATTERS.............................................................. 25
PROPOSALS FOR NEXT ANNUAL MEETING.......................................... 25
ANNUAL REPORT.............................................................. 26
EXHIBIT A - ARTICLES OF AMENDMENT TO THE AMENDED AND
RESTATED ARTICLES OF INCORPORATION OF CNL AMERICAN
PROPERTIES FUND, INC.............................................. 27
EXHIBIT B - CNL AMERICAN PROPERTIES FUND, INC. 1999 PERFORMANCE
INCENTIVE PLAN.................................................... 29
<PAGE>
PROPOSAL I
ELECTION OF DIRECTORS
Nominees
The persons named below have been nominated by the Board for election as
directors to serve until the next annual meeting of stockholders or until their
successors shall have been elected and qualified. Messrs. Bourne and Seneff have
been directors since May 1994. Messrs. Hostetter, Huseman and Kruse have been
directors since March 1995. The table sets forth each nominee's name, age,
principal occupation or employment during at least the last five years and
directorships in other public corporations.
The Company's officers and directors have advised the Company that they
intend to vote their shares of common stock for the election of each of the
nominees. Proxies will be voted FOR the election of the following nominees
unless authority is withheld.
<TABLE>
<CAPTION>
<S> <C>
Name and Age Background
Robert A. Bourne, 51 Robert A. Bourne has served as a Vice Chairman of the Board of Directors
and Treasurer of the Company since February 1999 and has served as a
director of the Company since May 1994. He also served as President of
the Company from May 1994 through February 1999. Mr. Bourne has served
as a director of the Company's advisor, CNL Fund Advisors, Inc. (the
"Advisor") since March 1994 and has served as Treasurer and Vice Chairman
of the Board of Directors since September 1997. Mr. Bourne served as
President of Advisor from March 1994 through September 1997. Mr. Bourne
has served as President and a director of CNL Hospitality Properties,
Inc. since June 1996 and of CNL Hospitality Advisors, Inc. since January
1997. Mr. Bourne has served as President and director of CNL Health Care
Properties, Inc. since December 1997 and CNL Health Care Advisors, Inc.
since July 1997. Mr. Bourne is President and Treasurer of CNL Group,
Inc., President, Treasurer, a director, and a registered principal of CNL
Securities Corp., President, Treasurer, and a director of CNL Investment
Company, and Chief Investment Officer, a director and Treasurer of CNL
Institutional Advisors, Inc., a registered investment advisor. Mr.
Bourne served as President of CNL Institutional Advisor, Inc. from the
date of its inception through July 1997. Mr. Bourne served as President
of Commercial Net Lease Realty, Inc. from July 1992 through February
1996, served as Secretary and Treasurer from February 1996 through
December 1997, and has served as a director since July 1992 and as Vice
Chairman of the Board of Directors since February 1996. In addition, Mr.
Bourne served as President of CNL Realty Advisors, Inc. from May 1992
through February 1996, served as Treasurer from February 1996 through
December 1997, served as a director from May 1992 through December 31,
1997 and served as Vice Chairman from February 1996 through December
1997, at which time such company merged with Commercial Net Lease Realty,
Inc. Mr. Bourne, who joined CNL Securities Corp. in 1979, has
participated as a general partner or joint venturer in over 100 real
estate ventures involved in the financing, acquisition, construction, and
rental of restaurants, office buildings, apartment complexes, hotels, and
other real estate. Included in these real estate ventures are
approximately 64 privately offered real estate limited partnerships with
investment objectives similar to one or more of the Company's investment
objectives, in which Mr. Bourne, directly or through an affiliated
entity, serves or has served as a general partner. Mr. Bourne formerly
was a certified public accountant with Coopers & Lybrand and a partner in
the firm of Bourne & Rose, P.A.
G. Richard Hostetter, Esq., 59 Mr. Hostetter has served as an independent director of the Company since
March 1995. Mr. Hostetter previously served as a director of CNL
Hospitality Properties, Inc. from July 1997 through February 1999.
Mr. Hostetter was associated with the law firm of Miller and Martin from
1966 through 1989, the last ten years of such association as a senior
partner. As a lawyer, he served for more than 20 years as counsel for
various corporate real estate groups, fast-food companies and public
companies, including The Krystal Company, resulting in his extensive
participation in transactions involving the sale, lease, and
sale/leaseback of approximately 250 restaurant units. He is licensed to
practice law in Tennessee and Georgia. From 1989 through 1998, Mr.
Hostetter served as President and General Counsel of Mills, Ragland &
Hostetter, Inc., the corporate general partner of MRH, L.P., a holding
company involved in corporate acquisitions, in which he was also a
general and limited partner. Since January 1, 1999, Mr. Hostetter has
served as President and General Counsel of MRH, Inc., which manages two
of the businesses formerly owned by MRH, L.P.
Richard C. Huseman, 60 Dr. Huseman has served as an independent director of the Company since
March 1995. Mr. Huseman previously served as a director of CNL
Hospitality Properties, Inc. from July 1997 through February 1999. Dr.
Huseman is presently a professor in the College of Business
Administration, and from 1990 through 1995, served as the Dean of the
College of Business Administration of the University of Central Florida.
He has served as a consultant in the area of managerial strategies to a
number of Fortune 500 corporations, including IBM, AT&T, and 3M, as well
as to several branches of the U.S. government, including the U.S.
Department of Health and Human Services, the U.S. Department of Justice,
and the Internal Revenue Service.
J. Joseph Kruse, 66 Mr. Kruse has served as an independent director of the Company since
March 1995. Mr. Kruse previously served as a director of CNL Hospitality
Properties, Inc. from July 1997 through February 1999. From 1993 to the
present, Mr. Kruse has been President and Chief Executive Officer of
Kruse & Co., Inc., a merchant banking company engaged in real estate.
Mr. Kruse also serves as a director of Gateway American Bank of Florida
and Chairman of Topsider Building Systems. Formerly, Mr. Kruse was a
Senior Vice President with Textron, Inc. for twenty years, and then
served as Senior Vice President at G. William Miller & Co., a firm
founded by the former Chairman of the Federal Reserve Board and the
Secretary of the Treasury of the United States. Mr. Kruse was
responsible for evaluations of commercial real estate and retail shopping
mall projects and continues to serve of counsel to the firm.
<PAGE>
James M. Seneff, Jr., 52 James M. Seneff, Jr. has served as Chairman of the Board of Directors of
the Company since December 1994 and as a director and Chief Executive
Officer since May 1994. Mr. Seneff has served as Chairman of the Board,
Chief Executive Officer and a director of the Advisor since March 1994.
Mr. Seneff has served as Chairman of the Board, Chief Executive Officer
and a director of CNL Hospitality Properties, Inc. since June 1996 and of
CNL Hospitality Advisors, Inc. since January 1997. Mr. Seneff has also
served as Chairman of the Board, Chief Executive Officer and a director
of CNL Health Care Properties, Inc. since December 1997 and CNL Health
Care Advisors, Inc. since July 1997. Mr. Seneff is a principal
stockholder of CNL Group, Inc., a diversified real estate company, and
has served as its Chairman of the Board of Directors, a director and
Chief Executive Officer since its formation in 1980. Mr. Seneff has been
Chairman of the Board of Directors, director, and Chief Executive Officer
of CNL Securities Corp. since its formation in 1979. Mr. Seneff also has
held the position of Chairman of the Board of Directors, Chief Executive
Officer, President and director of CNL Management Company, a registered
investment advisor, since its formation in 1976, has served as Chief
Executive Officer, Chairman of the Board and a director of CNL Investment
Company, has served as Chief Executive Officer, a director and Chairman
of the Board of Directors of Commercial Net Lease Realty, Inc., a
publicly-traded REIT, listed on the NYSE, since 1992, served as Chief
Executive Officer, a director and Chairman of the Board of Directors of
CNL Realty Advisors, Inc. from its inception in May 1992 through December
1997, at which time such company merged with Commercial Net Lease Realty,
Inc., and has held the position of Chief Executive Officer, Chairman of
the Board and a director of CNL Institutional Advisors, Inc., a
registered investment advisor, since its inception in December 1990. Mr.
Seneff previously served on the Florida State Commission on Ethics and is
a former member and past Chairman of the State of Florida Investment
Advisory Council, which advises the Florida Board of Administration
investments for various Florida employee retirement funds. The Florida
Board of Administration, Florida's principal investment advisory and
money management agency, oversees the investment of more then $60 billion
of retirement funds. Mr. Seneff has served as a member of the board of
directors of First Union National Bank of Florida since May 1998 and has
served as a member of the Orlando Advisory Board of First Union National
Bank of Florida since March 1994. Since 1971, Mr. Seneff has been active
in the acquisition, development, and management of real estate projects
and, directly or through an affiliated entity, has served as a general
partner or joint venturer in over 100 real estate ventures involved in
the financing, acquisition, construction, and rental of restaurants,
office buildings, apartment complexes, hotels, and other real estate.
Included in these real estate ventures are approximately 65 privately
offered real estate limited partnerships with investment objectives
similar to one or more of the Company's investment objectives, in which
Mr. Seneff, directly or through an affiliated entity, serves or has
served as a general partner.
</TABLE>
<PAGE>
In the event that any nominee(s) should be unable to accept the office of
director, which is not anticipated, it is intended that the persons named in the
proxy will vote FOR the election of such other person in the place of such
nominee(s) for the office of director as the Board of Directors may recommend.
The affirmative vote of a majority of the shares of common stock present in
person or represented by proxy and entitled to vote is required for the election
of directors.
A majority of the Company's directors are required to be independent, as
that term is defined in the Company's Amended and Restated Articles of
Incorporation. Messrs. Hostetter, Kruse and Huseman are independent directors.
Compensation of Directors
During the year ended December 31, 1998, each independent director earned
$6,000 for serving on the Board of Directors. Each independent director also
received $750 per Board meeting and audit committee meeting attended ($375 for
each telephonic meeting in which the director participated), and received $1,000
per special committee meeting and compensation committee meeting ($500 for each
telephonic meeting in which the director participated). The Company has not, and
in the future will not, pay any compensation to the directors of the Company who
also serve as officers and directors of the Advisor.
The Board of Directors met nine times during the year ended December 31,
1998, and the average attendance by directors at Board meetings was
approximately 96 percent. Each current member attended at least 85 percent of
the total meetings of the Board and of any committee on which he served.
Committees of the Board of Directors
The Company has a standing Audit Committee, the members of which are
selected by the Board of Directors each year. The current members of the Audit
Committee, who have served since 1995, are Messrs. Hostetter, Kruse and Huseman.
The Audit Committee makes recommendations to the Board of Directors as to the
independent accountants of the Company and reviews with such accounting firm the
scope of the audit and the results of the audit upon its completion. The Audit
Committee met twice during the year ended December 31, 1998.
During 1998, the Board of Directors established a Special Committee of
the Board of Directors to consider the implementation of strategic alternatives.
The Special Committee consisted of Messrs. Hostetter, Kruse and Huseman, each
being an independent member of the Company's Board of Directors having no
financial interest in the implementation of the strategic alternatives designed
to increase stockholder value which are described below under "Proposal II,
Approval of Reverse Stock Split -- Implementation of Strategic Alternatives."
The Special Committee met 12 times during the year ended December 31, 1998.
During 1998, the Board of Directors also established a Compensation
Committee consisting of Messrs. Hostetter, Kruse and Huseman. The Compensation
Committee advises the Board of Directors on all matters pertaining to future
compensation programs and policies and establishes guidelines for future
employee incentive and benefits programs. The Compensation Committee met four
times during the year ended December 31, 1998.
The Company currently does not have a nominating committee.
<PAGE>
Executive Officers
The executive officers of the Company are as follows:
Name Position
---- --------
James M. Seneff, Jr. Chairman of the Board and Chief Executive Officer
Robert A. Bourne Vice Chairman of the Board and Treasurer
Curtis B. McWilliams President
John T. Walker Chief Operating Officer and Executive Vice President
Jeanne A. Wall Executive Vice President
Steven D. Shackelford Chief Financial Officer
Lynn E. Rose Secretary
Mr. McWilliams, age 43, has served as President of the Company since
February 1999 and previously served as Executive Vice President of the Company
from February 1998 through February 1999. Mr. McWilliams joined CNL Group, Inc.
in April 1997 and currently serves as an Executive Vice President. In addition,
Mr. McWilliams has served as President of the Advisor and as President of the
Restaurant and Financial Services Groups within CNL Group, Inc. since April
1997. From September 1983 through March 1997, Mr. McWilliams was employed by
Merrill Lynch & Co., with the majority of his tenure being spent in the firm's
Investment Banking division.
Mr. Walker, age 40, has served as Executive Vice President of the Company
since January 1996 and Chief Operating Officer of the Company since March 1995,
and previously served as Senior Vice President since December 1994. In addition,
Mr. Walker has served as Executive Vice President of the Advisor since January
1996 and Chief Operating Officer of the Advisor since April 1995, and previously
served as Senior Vice President of the Advisor since November 1994. In addition,
Mr. Walker previously served as Executive Vice President of CNL Hospitality
Properties, Inc. and CNL Hospitality Advisors, Inc. From May 1992 to May 1994,
Mr. Walker, a certified public accountant, was Executive Vice President for
Finance and Administration and Chief Financial Officer of Z Music, Inc., a cable
television network (subsequently acquired by Gaylord Entertainment), where he
was responsible for overall financial and administrative management and
planning. From January 1990 through April 1992, Mr. Walker was Chief Financial
Officer of the First Baptist Church in Orlando, Florida. From April 1984 through
December 1989, he was a partner in the accounting firm of Chastang, Ferrell &
Walker, P.A., where he was the partner in charge of audit and consulting
services, and from 1981 to 1984, Mr. Walker was a Senior Consultant/Audit Senior
at Price Waterhouse.
<PAGE>
Ms. Wall, age 40, has served as Executive Vice President of the Company
since December 1994, as Executive Vice President of the Advisor since November
1994, and previously served as Vice President of the Advisor from March 1994
through November 1994. Ms. Wall has served as Chief Operating Officer of CNL
Investment Company and of CNL Securities Corp. since November 1994 and has
served as Executive Vice President of CNL Investment Company since January 1991.
Ms. Wall joined CNL Securities Corp. in 1984. In 1985, Ms. Wall became Vice
President of CNL Securities Corp. In 1987, she became Senior Vice President and
in July 1997 she became Executive Vice President of CNL Securities Corp. In this
capacity, Ms. Wall serves as national marketing and sales director and oversees
the national marketing plan for the CNL investment programs. In addition, Ms.
Wall oversees product development, partnership administration and investor
services for programs offered through participating brokers and corporate
communications for CNL Group, Inc. and its affiliates. Ms. Wall also has served
as Senior Vice President of CNL Institutional Advisors, Inc., a registered
investment advisor, from 1990 to 1993, as Vice President of CNL Realty Advisors,
Inc. since its inception in 1991 until December 31, 1997, at which time CNL
Realty Advisors, Inc. merged with Commercial Net Lease Realty, Inc., and served
as Vice President of Commercial Net Lease Realty, Inc. from 1992 through
December 31, 1997. In addition, Ms. Wall serves as Executive Vice President of
CNL Hospitality Properties, Inc., CNL Hospitality Advisors, Inc., CNL Health
Care Properties, Inc. and CNL Health Care Advisors, Inc. Ms. Wall currently
serves as a trustee on the Board of the Investment Program Association and on
the Direct Participation Program committee for the National Association of
Securities Dealers.
Mr. Shackelford, age 35, has served as Chief Financial Officer of the
Company since January 1997 and as Chief Financial Officer of the Advisor since
September 1996. From March 1995 to July 1996, Mr. Shackelford was a senior
manager in the national office of Price Waterhouse where he was responsible for
advising foreign clients seeking to raise capital and a public listing in the
United States. From August 1992 to March 1995, he served as a manager in the
Price Waterhouse, Paris, France office serving several multinational clients.
Mr. Shackelford was an audit staff and audit senior from 1986 to 1992 in the
Orlando, Florida office of Price Waterhouse. Mr.
Shackelford is a certified public accountant.
Ms. Rose, age 50, has served as Secretary of the Company since December
1994, served as Treasurer from December 1994 through February 1999, has served
as a director and Secretary of the Advisor since March 1994, and as Treasurer of
the Advisor from the date of its inception through June 30, 1997. Ms. Rose, a
certified public accountant, has served as Secretary of CNL Group, Inc. since
1987, as Chief Financial Officer of CNL Group, Inc. since December 1993, and
served as Controller of CNL Group, Inc. from 1987 until December 1993. In
addition, Ms. Rose has served as Chief Financial Officer and Secretary of CNL
Securities Corp. since July 1994. She has served as Chief Operating Officer,
Vice President and Secretary of CNL Corporate Services, Inc. since November
1994. Ms. Rose also has served as Chief Financial Officer and Secretary of CNL
Institutional Advisors, Inc. since its inception in 1990, as Treasurer of CNL
Realty Advisors, Inc. from 1991 to February 1996, and as Secretary and a
director of CNL Realty Advisors, Inc. since its inception in 1991 until December
31, 1997, at which time CNL Realty Advisors, Inc. merged with Commercial Net
Lease Realty, Inc. In addition, Ms. Rose served as Secretary and Treasurer of
Commercial Net Lease Realty, Inc. from 1992 to February 1996. Ms. Rose also
serves as Secretary and Treasurer of CNL Hospitality Properties, Inc. and CNL
Health Care Properties, Inc. and as Secretary, Treasurer and a director of CNL
Hospitality Advisors, Inc. and CNL Health Care Advisors, Inc. Ms. Rose also
currently serves as Secretary for approximately 50 additional corporations. Ms.
Rose oversees the legal compliance, accounting, tenant compliance, and reporting
for over 250 corporations, partnerships and joint ventures. Prior to joining
CNL, Ms. Rose was a partner with Robert A. Bourne in the accounting firm of
Bourne & Rose, P.A., Certified Public Accountants.
The backgrounds of Messrs. Seneff and Bourne are described at "ELECTION
OF DIRECTORS."
EXECUTIVE COMPENSATION
Annual Compensation
No annual or long-term compensation was paid by the Company to the Chief
Executive Officer for services rendered in all capacities to the Company during
the fiscal years ended December 31, 1996, 1997 and 1998. In addition, no
executive officer of the Company received an annual salary or bonus from the
Company during the fiscal year ended December 31, 1998. The Company's executive
officers also are employees and executive officers of the Advisor and receive
compensation from CNL Group, Inc. in part for services in such capacities. See
"Certain Transactions" for a description of the fees payable and expenses
reimbursed to the Advisor.
PROPOSAL II
APPROVAL OF REVERSE STOCK SPLIT
The Board has unanimously approved, and recommends to the holders of
the Company's common stock that they approve, a one-for-two reverse stock split
of the Company's common stock, par value $.01 per share (the "Reverse Stock
Split"). If approved by the stockholders, the Reverse Stock Split may be
effected, as described below.
As part of the implementation of the strategic alternatives discussed
below under "Implementation of Strategic Alternatives," the Company intends to
apply to list its common stock for trading on the New York Stock Exchange (the
"NYSE"). The intent of the Reverse Stock Split is to reduce the number of shares
of the Company's common stock authorized and outstanding and to increase the
marketability and liquidity of the Company's common stock in connection with the
Company's anticipated application for listing. The Board did not consider, and
the Company does not believe that there are any, potential disadvantages or
risks associated with the Reverse Stock Split. If the Reverse Stock Split is
approved by the holders of the Company's common stock at the Annual Meeting, the
Reverse Stock Split will be effected unless there is a subsequent determination
by the Board that the Reverse Stock Split is not in the best interests of the
Company and its stockholders. Although the Board believes as of the date of this
Proxy Statement that the Reverse Stock Split is advisable, the Reverse Stock
Split may be abandoned by the Board at any time before, during or after the
Annual Meeting and prior to filing the proposed Articles of Amendment to the
Company's Amended and Restated Articles of Incorporation (the "Articles of
Incorporation"), as set forth in Exhibit A to this Proxy Statement. The Board
might determine that the Reverse Stock Split is not in the best interests of the
Company and its stockholders and may decide to abandon the Reverse Stock Split
in the event, for example, that the Company's application for listing on the
NYSE is not approved or if there is a change in market conditions that causes
the Company to decide not to apply to list the common stock for trading on the
NYSE. Based on the Company's discussions with the NYSE regarding listing the
Company's common stock and on its knowledge of the NYSE's current listing
requirements, the Company believes that it has the ability to satisfy such
listing requirements.
The discussion of the Reverse Stock Split set forth below is qualified
in its entirety by reference to Exhibit A, which is incorporated herein by
reference.
Purposes of the Reverse Stock Split
The principal purpose of the Reverse Stock Split is to reduce the
number of shares of the Company's common stock outstanding. The Board believes
that the Reverse Stock Split would allow the Company to list its shares of
common stock on a national exchange at a price per share that is more comparable
to other publicly-traded REITs. The Board bases this determination on its review
of the trading prices of other publicly-traded REITs and on the advice it
received from Merrill Lynch, Pierce, Fenner & Smith, Incorporated ("Merrill
Lynch") and Salomon Smith Barney Holdings, Inc. (together, the "Financial
Advisors"), its financial advisors with respect to the Board's consideration and
implementation of the strategic alternatives. The Financial Advisors orally
advised the Board that the current $10.00 per share price of the Company's
common stock may, upon listing on the NYSE, limit the effective marketability of
the Company's common stock at the time of listing because of the reluctance of
many brokerage firms and institutional investors to recommend lower-priced
stocks to their clients or to hold them in their own portfolios. Certain
policies and practices of the securities industry may tend to discourage
individual brokers within those firms from dealing in lower-priced stocks. In
connection with their oral advice, the Financial Advisors did not provide the
Board with any written materials or empirical data supporting their
recommendation.
The Board of Directors believes, based on its own analysis and the
advice of the Financial Advisors, that a decrease in the number of authorized
and outstanding shares of the Company's common stock, without any material
alteration of the proportionate economic interest in the Company held by
individual shareholders, may increase the trading price of the outstanding
shares when listed on the NYSE, to a price more appropriate for an
exchange-listed security, although no assurance can be given that the market
price of the Company's common stock will rise in proportion to the reduction in
the number of outstanding shares resulting from the Reverse Stock Split.
The Board believes that the decrease in the number of shares of the
Company's common stock outstanding as a consequence of the proposed Reverse
Stock Split and the resulting anticipated increased price level will enhance its
listing with the NYSE and encourage greater interest in the Company's common
stock by the financial community and the investing public and possibly promote
greater liquidity for the holders of the Company's common stock. It is possible,
however, that liquidity could be affected adversely by the reduced number of
shares of common stock outstanding after the Reverse Stock Split. Although any
increase in the market price after listing of the Company's common stock
resulting from the Reverse Stock Split may be proportionately less than the
decrease in the number of shares of common stock outstanding, the proposed
Reverse Stock Split could result in a market price for the shares that would be
high enough to overcome the reluctance, policies and practices of brokerage
houses and investors referred to above.
There can be no assurances, however, that the foregoing effects will
occur or that the market price of the Company's common stock immediately after
implementation of the proposed Reverse Stock Split and listing will be
maintained for any period of time, or that such market price will approximate
two times the market price before the proposed Reverse Stock Split.
Implementation of Strategic Alternatives
General. In 1998, a special committee comprised of the Company's
independent directors (the "Special Committee") recommended, and the full Board
of Directors unanimously approved, a plan calling for the Company to pursue a
number of strategic alternatives designed to maximize stockholder value. Under
the plan adopted by the Board, the Company will make certain acquisitions (the
"Acquisitions") and, as described above, will apply to list its common stock for
trading on the NYSE. As discussed above, the Reverse Stock Split is being
proposed in anticipation of the Company submitting an application to list its
common stock for trading on the NYSE.
As a result of the Acquisitions, the Company will become a full-service
REIT and one of the largest triple net lease REITs in the United States. The
Acquisitions consist of the following:
o The Company will become internally advised and will acquire
complete acquisition, development and in-house management
functions by acquiring the Advisor.
o To increase its financing capabilities and expand its mortgage
loan portfolio, the Company will acquire CNL Financial Corp.
and CNL Financial Services, Inc., affiliates of the Advisor
that provide mortgage loans and perform securitization
transactions (together, the "CNL Restaurant Financial Services
Group).
o To increase significantly the size of its restaurant property
portfolio, the Company will seek to acquire 18 CNL Income
Funds, limited partnerships affiliated with the Advisor whose
properties are substantially the same type as the Company's.
The Company will seek to have its common stock begin trading on the
NYSE concurrently with the consummation of the acquisition of the CNL Income
Funds. The listing of the common stock will substantially enhance liquidity for
the Company's stockholders, whose investments in the Company currently are
unlisted and trade in markets that are informal and sporadic. In accordance with
further recommendations of the Special Committee and in an effort to obtain a
greater following by the investment banking analyst community, concurrently with
or shortly following the Company's acquisition of the CNL Income Funds and NYSE
listing, and assuming market conditions permit, the Company intends to offer
common stock to the public pursuant to an underwritten public offering.
Merger Agreements and Consideration Payable. On March 11, 1999, the
Company entered into agreements with respect to the Acquisitions. Under the
merger agreements, the Advisor and the CNL Restaurant Financial Services Group
will each be merged into a separate newly-formed, wholly-owned subsidiary of the
Company and the CNL Income Funds will be merged into CNL APF Partners, L.P., an
existing, wholly-owned subsidiary of the Company through which the Company will
conduct its business after the Acquisitions have been consummated. The merger
agreements provide that the consideration payable by the Company to the
stockholders of the Advisor and the CNL Restaurant Financial Services Group will
consist of 7,600,000 shares and 4,700,000 shares, respectively, of the Company's
common stock. If all of the CNL Income Funds are acquired, up to an aggregate of
61,000,000 shares of the Company's common stock will be issued to the partners
of the CNL Income Funds (before the payment by the CNL Income Funds of certain
acquisition expenses). If the Reverse Stock Split is approved and effected, the
number of shares payable in the Acquisitions will be adjusted accordingly such
that the Company would issue 3,800,000 shares and 2,350,000 shares of common
stock for the acquisition of the Advisor and the CNL Restaurant Financial
Services Group, respectively, and up to an aggregate of 30,500,000 shares of
common stock for the CNL Income Fund acquisitions.
On February 10, 1999, the Company received two separate fairness
opinions from the investment banking firm of Merrill Lynch, Pierce, Fenner &
Smith, Incorporated that the consideration, payable in shares of the Company's
common stock proposed to be paid for (i) the Advisor and the CNL Restaurant
Financial Services Group and (ii) all of the CNL Income Funds is fair to the
Company from a financial point of view. In determining the consideration to be
paid in the Acquisitions, the Special Committee and the full Board of Directors
assumed the value of a share of the Company's common stock to be $10.00, the
price per share paid by investors in the Company's most recent public offering
that was completed in December 1998.
Special Meeting of the Stockholders. In order to facilitate
consummation of the Acquisitions and in contemplation of listing the Company's
common stock for trading on the NYSE, the Company will be proposing for
stockholder approval an amendment and restatement of its articles of
incorporation. Among other things, the amended and restated articles would
increase the number of shares of common stock that the Company is authorized to
issue in order to have a sufficient number of shares for the Company to
consummate the acquisitions of the CNL Income Funds. A special meeting will be
called for the stockholders to consider and vote upon the proposal. It is
expected that the special meeting will be held this summer. The Company's
stockholders will receive further information regarding the proposal and the
special meeting in the near future.
Conditions to Closing and Consummation of the Acquisitions. The
acquisitions of the Advisor and the CNL Restaurant Financial Services Group are
subject to customary closing conditions. The acquisitions of the CNL Income
Funds are subject to a number of conditions, including (i) approval of the
acquisition by the limited partners of the CNL Income Funds holding units of
limited partnership interest constituting greater than 50% of the outstanding
limited partnership interests of each CNL Income Fund, (ii) approval by the
Company's stockholders of an increase in the number of shares of common stock
necessary to consummate the acquisitions of the CNL Income Funds (which, as
noted above, would be effected by the amended and restated articles that will be
proposed at the upcoming special meeting of stockholders), (iii) consummation of
the acquisition of the CNL Income Funds by not later than December 31, 1999,
(iv) completion of the acquisitions of the Advisor and the CNL Restaurant
Financial Services Group and (v) other customary closing conditions. Further,
while the acquisition of any one CNL Income Fund does not depend on the
acquisition of any other CNL Income Fund, if less than all of the CNL Income
Funds vote to be acquired, the acquisition of the CNL Income Funds will be
subject to the receipt by the Company of a fairness opinion from Merrill Lynch
that the acquisition of the CNL Income Funds that have voted to be acquired is
fair to the Company from a financial point of view.
It is expected that the Acquisitions will be consummated no later than
the fourth quarter of 1999 and that each will be treated as a purchase for
financial accounting purposes. The acquisitions of the Advisor and the CNL
Restaurant Financial Services Group may be completed earlier in 1999 in the
event that the Company's Board of Directors believes that it would be in the
best interests of the Company to consummate those acquisitions at an earlier
date.
Approval of the proposal to effect the Reverse Stock Split is not a
condition to any of the Acquisitions or to NYSE listing. The Company expects to
consummate the Acquisitions and to apply for NYSE listing in order to provide
liquidity and a trading market for its common stock whether or not the Reverse
Stock Split is approved by the stockholders.
Effect of the Reverse Stock Split
If the Reverse Stock Split is approved by the holders of the Company's
common stock at the Annual Meeting, and unless there is a subsequent
determination by the Board of Directors that the Reverse Stock Split is not in
the best interests of the Company and its stockholders, an amendment to Section
7.1 of Article VII of the Articles of Incorporation, in the form set forth in
Exhibit A hereto, would be filed with the Maryland Department of Assessments and
Taxation on any date (the "Reverse Split Date") selected by the Board on or
prior to the Company's next annual meeting of stockholders. The Reverse Stock
Split would become effective on the date of such filing. Without any further
action on the part of the Company or the holders of the Company's common stock,
the shares of the Company's common stock held by stockholders of record as of
the Reverse Split Date would be converted on the Reverse Split Date into the
right to receive an amount of whole shares of Company's common stock equal to
the number of their shares divided by two. The number of authorized shares of
Company's common stock would be reduced from 125,000,000 to 62,500,000.
No fractional shares would be issued, and no such fractional share
interest would entitle the holder thereof either to vote or to any rights of a
stockholder of the Company. In lieu of any such fractional shares, each holder
of such fractional shares would be entitled to a cash payment in an amount equal
to the fraction of a whole share of common stock multiplied by (i) if the stock
is listed on the NYSE, another national exchange or on the NASDAQ Stock Market,
the last closing price of the common stock, or (ii) $20.00 per share if the
stock is not listed on the NYSE, another national exchange or on the NASDAQ
Stock Market.
Approval of the Reverse Stock Split would not affect any continuing
stockholder's percentage ownership interest in the Company or proportional
voting power, except for minor differences resulting from the payment in cash of
fractional shares. The shares of Company's common stock which would be issued
upon approval of the Reverse Stock Split would be fully paid and nonassessable.
The voting rights and other privileges of the continuing holders of Company's
common stock would not be affected substantially by adoption of the Reverse
Stock Split or subsequent implementation thereof.
The par value of the Company's common stock would remain at $0.01 per
share following the Reverse Stock Split, and the number of shares of Company's
common stock outstanding would be reduced. As a consequence, the aggregate par
value of the outstanding Company's common stock would be reduced, while the
aggregate capital in excess of par value attributable to the outstanding
Company's common stock for statutory and accounting purposes would be
correspondingly increased. Under Maryland law, the Board would have the
authority, subject to certain limitations, to transfer some or all of such
capital in excess of par value from capital to surplus, which could be
distributed to stockholders as dividends or used by the Company to repurchase
outstanding stock. The Company has no plans to reduce capital at this time.
As of the Record Date, the number of issued and outstanding shares of
Company's common stock was 74,696,927. As a result of the Reverse Stock Split,
the aggregate number of shares of Company's common stock that would be issued
and outstanding would be approximately 37,348,464, and 25,151,536 shares would
be authorized and unissued (22,926,536 shares, including the reservation of an
additional 2,225,000 shares of Company's common stock for issuance upon exercise
of outstanding stock options under the Company's 1999 Performance Incentive
Plan).
The adoption of the 1999 Performance Incentive Plan is being submitted
to stockholders pursuant to this Proxy Statement. If the 1999 Performance
Incentive Plan is approved and the Reverse Stock Split is similarly approved,
the total number of shares reserved for grants and all options granted under the
plan would be reduced proportionately.
<PAGE>
The following table illustrates the principal effects of the proposed
Reverse Stock Split, as of the Record Date:
<TABLE>
<CAPTION>
<S> <C>
Number of Shares of Common Stock
------------------------------------------------------------
Prior to reverse stock split After reverse stock split
----------------------------- ---------------------------
Authorized 125,000,000 62,500,000
Outstanding (74,696,927 ) (37,348,464 )
Reserved for issuance in connection
with future grants under the 1999
Performance Incentive Plan (4,500,000 ) (2,225,000 )
----------------------------- ---------------------------
Available for future issuance by action
of the Board (after giving effect to the
reservations above) 45,803,073 22,926,536
============================= ===========================
</TABLE>
As described above in "Implementation of Strategic Alternatives," if
the Reverse Stock Split is effected and the Acquisitions are consummated, the
Company will issue 3,800,000 shares and 2,350,000 shares of common stock for the
acquisition of the Advisor and the CNL Restaurant Financial Services Group,
respectively, and up to an aggregate of 30,500,000 shares of common stock for
the CNL Income Fund acquisitions. Concurrently with or shortly following the
Company's acquisition of the CNL Income Funds and NYSE listing, and assuming
market conditions permit, the Company also intends, as discussed above, to offer
common stock to the public pursuant to an underwritten public offering. The
Company has not yet determined how many shares of common stock would be offered
for sale in the public offering or when the offering would commence.
The issuance of shares of the Company's common stock in connection with
the Acquisitions and any future sales (pursuant to the contemplated underwritten
public offering or otherwise) will increase the number of outstanding shares,
which will dilute the ownership interest in the Company represented by each
share and could adversely affect the market price of the shares. Based on the
number of shares of common stock outstanding as of the Record Date and assuming
the Reverse Stock Split is effected, if the Acquisitions are consummated and if
all of the CNL Income Funds are acquired, the Company will have approximately
73,639,713 shares outstanding (net of expenses to be paid by the CNL Income
Funds in the form of a reduction in the number of shares paid to each CNL Income
Fund that is acquired). Of such outstanding shares, approximately 67,489,713
shares will be freely tradable in the open market.
Federal Income Tax Consequences
The Company believes that the federal income tax consequences of the
Reverse Stock Split will be as follows:
i. No income gain or loss will be recognized by stockholders on the
surrender of their existing shares of common stock in exchange for the
issuance of the new number of shares of common stock.
ii. The tax basis of the common stock issued in the Reverse Stock Split will
equal the tax basis of the common stock exchanged therefor.
iii. The holding period of the common stock issued in the Reverse Stock Split
will include the holding period of the original common stock if such
shares were held as capital assets.
iv. The conversion of the old common stock into the common stock issued in
the Reverse Stock Split will produce no taxable income or gain or loss to
the Company.
The foregoing summary represents the Company's opinion only and is
based on the existing provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), and existing administrative interpretations thereof, any
of which may be revised retroactively. The Company's opinion is not binding upon
the Internal Revenue Service or the courts, and there can be no assurance that
the Internal Revenue Service or the courts would accept the positions expressed
above.
The state and local tax consequences of the Reverse Stock Split may
vary significantly as to each stockholder, depending upon the state in which
such stockholder resides. Stockholders are urged to consult their own tax
advisors with respect to the federal, state, and local tax consequences of the
Reverse Stock Split.
No Right of Appraisal
Under the Maryland General Corporation Law, dissenting stockholders are
not entitled to appraisal rights with respect to the Company's proposed
amendment to the Articles of Incorporation to effect the Reverse Stock Split,
and the Company will not provide stockholders with any such right.
Approval of the Reverse Stock Split and the amendment to the Articles
of Incorporation requires the affirmative vote of a majority of the outstanding
Company's common stock outstanding and entitled to vote at the Annual Meeting.
The Board unanimously recommends that the stockholders vote "for" the
Reverse Stock Split.
PROPOSAL III
APPROVAL OF 1999 PERFORMANCE INCENTIVE PLAN
The Board has unanimously approved, and proposes that the stockholders
of the Company approve, the 1999 Performance Incentive Plan (the "Plan"). The
Plan will become effective on February 23, 1999, subject to the approval of the
stockholders of the Company. Following is a summary description of the 1999
Plan, which is qualified in its entirety to the full text of the Plan, attached
hereto as Exhibit B and incorporated herein by reference.
The Board believes that equity-based or equity-related compensation is
an important element of overall compensation for the Company. Such compensation
advances the interest of the Company by encouraging, and providing for, the
acquisition of equity interests in the Company by participants, thereby aligning
participants' interests with stockholders and providing participants with a
substantial motivation to enhance stockholder value.
Description of the Plan
The Plan would authorize the issuance of up to 4,500,000 shares of
Company's common stock upon the exercise of stock options (both incentive and
nonqualified), stock appreciation rights and the award of restricted stock
("Stock Award") provided, that the aggregate number of shares of Common Stock
that may be issued pursuant to Options, SARs and Stock Awards granted under the
Plan shall increase automatically to 9,000,000 shares and 12,000,000 shares
respectively, when the Corporation has issued and outstanding 150,000,000 shares
and 200,000,000 shares, respectively, of common stock. The Plan will become
effective on February 23, 1999 subject to stockholder approval, and terminates
on February 23, 2009. The Plan will be administered by the Compensation
Committee of the Board or by any other committee duly appointed by the Board (as
applicable, the "Committee"), in either case comprised of not fewer than two
non-employee directors, or if no Committee is appointed, by the Board.
Key employees, officers, directors and persons performing consulting or
advisory services for the Company or its affiliates, as defined in the Plan, who
are designated by the Committee, are eligible to receive awards under the Plan.
Awards may be made in the form of stock options, stock awards, stock
appreciation rights ("SARs"), Phantom Stock Awards, Performance Awards and
Leveraged Stock Purchase Awards. Following is a description of the awards
permitted under the Plan.
Under the Plan, fair market value is the last sale price of the
Company's common stock as reported on the over-the-counter market or, if the
Company's common stock is listed on the New York Stock Exchange (or another
national exchange or the NASDAQ Stock Market), the closing price of the
Company's common stock as listed on the New York Stock Exchange (or another
national exchange or the NASDAQ Stock Market) on that date or, if there are no
sales of shares reported on that date, the last sale price or the closing price
as reported on the over-the-counter market or listed on the New York Stock
Exchange (or another national exchange or the NASDAQ Stock Market),
respectively, on the next preceding date on which sales of Company's common
stock were reported or, if the Company's common stock is not listed on the NYSE
(or another national exchange or the NASDAQ Stock Market) or traded on the
over-the-counter market, the price per share determined by the Company's Board
of Directors on the basis of the quarterly valuation of the Company's assets. To
the extent that the aggregate fair market value (determined on the option grant
date) of the shares of Company's common stock with respect to which incentive
stock options are exercisable exceeds $100,000, such options are deemed not to
be incentive stock options.
As of February 23, 1999, ten directors and executive officers were
eligible to receive awards under the Plan. The Company currently has no
employees. Following the Acquisition of the Advisor and the CNL Restaurant
Financial Services Group, the Company will employ approximately 135 individuals,
who currently are employed by the Advisor or CNL Financial Services Group. Under
the Plan, an employee of the Company is eligible to participate in the Plan if
the Committee determines that such employee has contributed significantly or can
be expected to contribute significantly to the profits or growth of the Company
or its affiliates.
Options. Stock options granted under the Plan may be either incentive
stock options or non-qualified stock options. Incentive stock options may be
granted only to employees of the Company or any of its affiliates. Options
granted under the Plan are exercisable only to the extent vested on the date of
exercise, and no options may be exercised more than ten years from the date the
option is granted (five years in the case of an incentive stock option granted
to a person who owns more than 10% of the total combined voting power of all
classes of the Company's stock (a "Ten Percent Shareholder")). The exercise
price per share of each option granted under the Plan may not be less than 100%
(110% in the case of a Ten Percent Shareholder) of the fair market value of the
Company's common stock on the date of grant.
An option may be exercised, in full or in part, provided that the
option is vested. Options may be exercised by written notice delivered to the
Secretary of the Company accompanied by payment of the option exercise price
payable (i) in cash, (ii) with Company's common stock owned by the participant,
(iii) by delivery to the Company of (x) irrevocable instructions to deliver
directly to a broker the stock certificates representing the shares for which
the option is being exercised and (y) irrevocable instructions to such broker to
sell the stock and to promptly deliver to the Company the portion of the
proceeds equal to the option exercise price and any amount necessary to satisfy
the Company's obligation for withholding taxes, or (iv) any combination thereof.
The Company's common stock used to pay the option exercise price or any portion
thereof will be valued at the fair market value of such Company's common stock
on the date of exercise and must have been held for at least six months.
The Committee or the Board, as the case may be, has the authority to
determine the circumstances under which options vest upon termination of the
employment or service of the participant for any reason. Unless otherwise
provided by the Committee, vesting of an option generally ceases on the date
that an option holder terminates employment or service for any reason with the
Company or an affiliate. Options granted under the Plan terminate on the date
three months after the date on which the participant terminates employment, or
the expiration under the terms of the option agreement, whichever period is
shorter except in the case of death, disability or retirement. In the event a
participant terminates employment by reason of death or disability, or the
participant's death occurs after termination of employment or service but before
the option has expired, the option held by such participant may be exercised, to
the extent exercisable, for a period of one year from the date of death or
disability or until the expiration of the stated term of such option, whichever
period is shorter. In the event of termination "for cause," any unexercised
option held by such participant shall be forfeited immediately upon the giving
of notice of such termination of employment or service for cause to the
participant.
Options are not transferable by a participant during the participant's
lifetime and may not be assigned, exchanged, pledged, transferred or otherwise
encumbered or disposed of except by will or by the applicable laws of descent
and distribution. Under the Plan, an option that is not an incentive stock
option may be transferred to immediate family members of the option holder or to
a trust or partnership for such family members; provided, however, that the
option holder receives no consideration for such transfer. In the event of such
transfer, the option and any corresponding SAR that relates to such option must
be transferred to the same person or persons or entity or entities.
Stock Awards. Participants may also be granted stock awards, which are
shares of Company's common stock granted subject to the satisfaction of certain
specified conditions. Stock awards by the Committee will be subject to such
restrictions as the Committee may impose thereon (the "Restrictions"),
including, but not limited to, continuous employment or service with the Company
or any of its affiliates for a specified term or the attainment of specific
corporate, divisional or individual performance standards or goals. If the
Committee, on the date of the stock award, prescribes that a stock award shall
become nonforfeitable and transferable only upon the attainment of certain
performance objectives, the shares subject to such stock award shall become
nonforfeitable and transferable only to the extent that the Committee certified
that such objectives have been achieved. The Committee may endorse a legend on
the certificates representing the stock award in order to prevent a violation of
the requirements of the Securities Act of 1933, as amended, or to implement the
Restrictions with respect to such stock award. The Committee may also require
that the participant deliver to the Company a written statement in which the
participant represents and warrants that the shares in the stock award are being
acquired for the participant's own account and not with a view to the resale or
distribution thereof.
Stock awards are nontransferable except by the laws of descent and
distribution. No right or interest of a participant in a stock award shall be
liable for, or subject to, any lien, obligation or liability of such
participant. Notwithstanding the restriction on transferability, the Committee
may provide that a stock award may be transferred to members of the
participant's immediate family, provided that the participant does not receive
consideration for the transfer. The transferee of a stock award shall be bound
by the same terms and conditions that governed the stock award during the period
that it was held by the participant.
Upon the issuance of a stock award to a participant, the stock
certificate representing the stock award will be issued and transferred to and
in the name of the participant, whereupon the participant will be entitled to
all rights of a stockholder of the Company with respect to such stock award,
including the rights to vote such shares and to receive dividends. The Company
will hold such stock certificate in custody, together with stock powers executed
by the participant in favor of the Company, until the restricted period expires
and the restrictions imposed on the stock award are satisfied.
SARs. Participants may also be granted a SAR that entitles the holder
to receive the difference between the fair market value of the shares on the
date of grant and the date of exercise of the shares of Company's common stock
subject to the award. SARs may be granted in relation to a particular option
awarded under the Plan and exercisable only upon surrender to the Company,
unexercised, of that portion of the option to which the SAR relates. The
Committee has authority to designate each individual to whom SARs are to be
granted and to specify the number of shares covered by such grants. No
participant may be granted corresponding SARs that are related to incentive
stock options which are first exercisable in any calendar year for stock having
an aggregate fair market value that exceeds $100,000 (determined as of the date
the related option is granted). Corresponding SARs may be granted either at the
time of the grant of such option or at any subsequent time prior to the
expiration of such option; provided, however, that corresponding SARs shall not
be offered or granted in connection with a prior option without the consent of
the participant holding such option.
The maximum period in which a SAR may be exercised will be determined
by the Committee, except that no corresponding SAR that is related to an
incentive stock option shall be exercisable after the expiration of ten years
from the date such related option was granted. In the case of a SAR that is
related to an incentive stock option granted to a participant who is or is
deemed to be a Ten Percent Shareholder, such corresponding SAR shall not be
exercisable after the expiration of five years from the date such related option
was granted. The terms of any corresponding SAR that is related to an incentive
stock option may provide that it is exercisable for a period less than such
maximum period.
Subject to the provisions of the Plan and the applicable SAR agreement,
a SAR may be exercised in whole at any time or in part from time to time at such
times and in compliance with such requirements as the Committee shall determine;
provided, however, that a corresponding SAR that is related to an incentive
stock option may be exercised only to the extent that the related option is
exercisable and only when the fair market value exceeds the option exercise
price of the related option. A SAR granted under the Plan may be exercised with
respect to any number of whole shares less than the full number for which the
SAR could be exercised. A partial exercise of a SAR shall not affect the right
to exercise the SAR from time to time in accordance with the Plan and the
related agreement with respect to the remaining shares of Company's common stock
subject to the SAR. The exercise of a corresponding SAR shall result in the
termination of the related option to the extent of the number of shares of
Company's common stock with respect to which the SAR is exercised.
At the Committee's discretion, the amount payable as a result of the
exercise of a SAR may be settled in cash, shares of Company's common stock, or a
combination of cash and Company's common stock.
SARs granted under the Plan are not transferable except by will or by
the laws of descent and distribution. During the lifetime of the participant to
whom the SAR is granted, the SAR may be exercised only by the participant. The
Committee may grant SARs that may be transferred to immediate family members to
the extent and on such terms as may be permitted by Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). In the event
of any such transfer, a corresponding SAR and the related option must be
transferred to the same person or persons or entity or entities. The holder of a
transferred SAR will be bound by the same terms and conditions that governed the
SAR during the period that it was held by the participant.
Phantom Stock Awards. A Phantom Stock Award is a right awarded to a
participant in accordance with the terms of an agreement, which entitles the
holder to receive cash or shares of common stock of the Company. The
Compensation Committee, or the Board, as the case may be, may also grant Phantom
Stock Awards to an eligible participant in the Plan. At the Committee's
discretion, a Phantom Stock Award may be settled by the terms of the applicable
agreement, in cash, common stock or a combination of both. Any payment of common
stock shall be based on the fair market value of the common stock on the payment
date. The Committee may prescribe that a participant's rights shall be
forfeitable or otherwise restricted for a period of time or subject to such
conditions as may be set forth in the agreement governing the grant. The
Committee may prescribe that the Phantom Stock Awards shall become
nonforfeitable based on certain criteria, such as the Company's return on
equity, earnings per share, total earnings, earnings growth, return on capital
or return on assets.
Generally, Phantom Stock Awards may not be transferred except by will
or through the laws of descent and distribution. A grant of a Phantom Stock
Award may provide, however, that such an award may be transferred by a
participant to children, grandchildren, spouse, one or more family-related
trusts, provided that the participant may not receive any consideration for such
a transfer.
Performance Awards. A Performance Award is a right denominated in cash
or in Common Stock awarded to a participant pursuant to an agreement. The Plan
provides that the Committee may provide that a Performance Award become
nonforfeitable based on certain criteria, such as the Company's return on
equity, earnings per share, total earnings, earnings growth, return on capital
or return on assets. Performance Awards may not be transferred except by will or
by the laws of descent or distribution.
A Performance Award shall be exercisable, to the extent that it is
nonforfeitable, at the time set forth in the applicable agreement between the
participant and the Company. A Performance Award may be settled in cash, Common
Stock or in a combination of Cash and Common Stock. Any payment in Common Stock
shall be based on the fair market value of the Common Stock on the payment date.
Leveraged Stock Purchase Awards. A Leveraged Stock Purchase Award is a
right awarded to a participant that, in accordance with the terms of an
agreement, entitles the holder to purchase Common Stock at the fair market value
thereof on the date of purchase by means of a loan to the holder of the Company.
The terms of the loan are to be determined by the Committee. The Committee may
provide, at its discretion, that the right to exercise a Leveraged Stock
Purchase Award will become nonforfeitable, or that the participant's obligation
to pay all or some of the principal or accrued interest on the loan will be
forgiven based on certain criteria, such as the Company's return on equity,
earnings per share, total earnings, earnings growth, return on capital or return
on assets.
<PAGE>
Changes in Capital Structure. Subject to any required stockholder
action, the number of shares of Company's common stock subject to each
outstanding award and the exercise price per each such share of Company's common
stock subject to an option or SAR will be proportionately adjusted for any
increase or decrease in the number of issued shares of Company's common stock
resulting from a subdivision or consolidation of shares of Company's common
stock or other capital readjustment or the payment of a stock dividend (but only
on the Company's common stock) or any other increase or decrease in the number
of shares of common stock effected without receipt of consideration by the
Company.
Thus, if the Reverse Stock Split submitted by the Company's
stockholders pursuant to this Proxy Statement is approved, the initial number of
shares authorized for issuance pursuant to the Plan would be reduced from
4,500,000 shares to 2,250,000 shares, subject to the increases described in
section 5.1 of the Plan. If the Company is the surviving company in a merger or
consolidation and unexercised options remain outstanding under the Plan, after
the effective date of the merger, each holder of an outstanding option or SAR
shall be entitled, upon exercise of that option, to receive, in lieu of
Company's common stock, the number and class or classes of shares of stock or
other securities or property to which the holder would have been entitled if,
immediately prior to the merger, the holder had been the holder of record of a
number of shares of Company's common stock equal to the number of shares of
Company's common stock as to which that option may be exercised.
If the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation (other
than circumstances involving a mere change in the identity, form or place of
organization of the Company), or if the Company is liquidated or dissolved, or
sells or otherwise disposes of substantially all of its assets to another entity
while unexercised options remain outstanding under the Plan, unless provisions
are made in connection with the transaction for the continuance of the Plan
and/or the assumption or substitution of options or SARs with new options or
stock appreciation rights covering the stock of the successor corporation, or
the parent or subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and exercise prices, then all outstanding options, SARs and
Stock Awards shall be vested as of the effective date of such merger,
consolidation, liquidation, dissolution, or sale.
The Board generally may amend the Plan from time to time, except that,
without the approval of the stockholders of the Company, no revision or
amendment may change the aggregate number of shares of Company's common stock
that may be issued under the Plan. The terms and conditions applicable to any
award may thereafter be amended or modified by mutual agreement between the
Company and the participant or such other persons as may then have an interest
therein.
Federal Income Tax Consequences. Incentive stock options are subject to
special federal income tax treatment. No federal income tax is imposed on the
option holder upon the grant of the exercise of an incentive stock option if
certain "holding period" requirements specified in the Code are fulfilled. If
the option holder does not dispose of shares acquired pursuant to the exercise
within a specified holding period and if the option holder meets the
above-mentioned employment requirements, the Company would not be entitled to
any deduction for federal income tax purposes in connection with the grant or
exercise of the option for the disposition of the shares so acquired.
Upon disposition of the common stock received upon exercise of an
incentive stock option after the fulfillment of the holding period requirements
by an option holder who meets the certain employment requirements specified in
the Code, any appreciation of the shares above the exercise price should
constitute capital gain. If an option holder disposes of shares acquired
pursuant to the exercise of an incentive stock option prior to the end of the
holding period or if an option holder does not meet the above-mentioned
employment requirements, the option holder will be treated as having received,
at the time of disposition, ordinary income. In such event, the Company may
claim a deduction at the same time and in the same amount as the option holder
recognizes ordinary income.
As a general rule, no federal income tax is imposed on the option
holder upon the grant of a non-qualified stock option such as those available
under the Incentive Plan, and the Company is not entitled to a tax deduction by
reason of such a grant. Generally, upon the exercise of a non-qualified stock
option, the option holder will be treated as receiving ordinary income in the
year of exercise in an amount equal to the excess of the fair market value of
the shares on the date of exercise over the exercise price paid for such shares.
Upon the exercise of a non-qualified stock option, the Company may claim a
deduction at the same time and in the same amount as ordinary income is
recognized by the option holder. Upon a subsequent disposition of the shares
received upon exercise of a non-qualified stock option, any appreciation after
the date of exercise should qualify as capital gain.
No tax is imposed on an option holder pursuant to a grant of a SAR.
Upon exercise of a SAR, the option holder will recognize ordinary income equal
to the amount of cash received (or, if payment is made in common stock, the fair
market value on the date of exercise of the common stock received), and the
Company will be entitled to a corresponding deduction. SARs issued in tandem
with incentive stock options under the Plan are intended to satisfy the
requirements of applicable federal income tax regulations so as not to
disqualify the related incentive stock options form treatment as incentive stock
options under section 422 of the Code.
A grantee who has been granted any stock award under the Plan
consisting of common stock that is subject to restrictions will not recognize
income for federal income tax purposes at the time of grant, and the Company
will not be entitled to a deduction at that time, if the restrictions
simultaneously prevent the stock's transfer and constitute a substantial risk of
forfeiture for federal income tax purposes. When the restrictions lapse, the
grantee will recognize ordinary income in an amount equal to the excess of the
fair market value of the shares at such time over the amount (if any) paid for
the shares, and the Company will be entitled to a corresponding deduction. If
dividends are paid in cash to the grantee during the period that the
restrictions apply, the dividends will constitute ordinary income to the grantee
for federal income tax purposes at the time they are paid, and the Company will
be entitled to a corresponding deduction.
The comments set forth in the above paragraphs are only a summary of
certain of the federal tax consequence relating to the Plan. No consideration
has been given to the effects of state, local, or other tax laws (including
other federal tax laws) on the Plan or grantees thereunder. As a general matter,
the company will be subject to federal income tax reporting requirements with
respect to all grantees who are employees of the Company.
In view of the complexity of the tax aspects of transactions involving
the grant and exercise of options, SARs and stock awards, and the receipt and
disposition of shares of common stock in connection with these and other awards
under the Plan, and because the impact of taxes will vary depending on
individual circumstances each grantee receiving an award under the Plan should
consult his or her own tax advisor to determine the tax consequences in his or
her particular circumstances.
Federal, state or local law may require the withholding of taxes
applicable to income resulting from an award. A participant shall be required to
make appropriate arrangements with the Company, as the case may be, for
satisfaction of any federal, state or local taxes the Company is required to
withhold. The Committee or Board administering the Plan may, in its discretion
and subject to such rules as it may adopt, permit the participant to pay all or
a portion of the federal, state or local withholding taxes arising in connection
with an award by electing to have the Company withhold shares of Company's
common stock having a fair market value on the date specified in the rules
adopted by the Committee or Board of Directors administering the Plan equal to
the amount to be withheld.
Approval of the Plan requires the affirmative vote of a majority of the
outstanding Company's common stock present and entitled to vote at the Annual
Meeting.
The Board unanimously recommends that the stockholders vote "for" the
adoption of the Plan.
SECURITY OWNERSHIP
The following table sets forth, as of February 26, 1999, the record date,
the number and percentage of outstanding shares beneficially owned by all
persons known by the Company to own beneficially more than five percent of the
Company's common stock, by each director and nominee, and by all officers and
directors as a group, based upon information furnished to the Company by such
stockholders, officers and directors.
<TABLE>
<CAPTION>
<S> <C>
Name and Address Number of Shares Percent
of Beneficial Owner Beneficially Owned of Shares
- ------------------- ------------------ ---------
Robert A. Bourne 0 --
400 East South Street
Orlando, Florida 32801
G. Richard Hostetter, Esq. (IRA) 5,479 (2) (3)
SunTrust Bank of Chattanooga, N.A.
P.O. Box 1638
Mail Code M0321
Chattanooga, TN 37401
Richard C. Huseman 0 --
3300 University Boulevard, Suite 251
Winter Park, Florida 32792
J. Joseph Kruse 0 --
494 Woonasquatucket Avenue, Unit 114
North Providence, RI 02911
James M. Seneff, Jr. 20,000 (1) (3)
400 East South Street
Orlando, Florida 32801
All directors and executive 25,479 (1) (2) (3)
officers as a group (ten persons)
</TABLE>
(1) Represents shares held by CNL Group, Inc., of which Mr. Seneff is Chief
Executive Officer, Chairman of the Board of Directors, director, and a
principal stockholder.
(2) Represents shares held by SunTrust Bank of Chattanooga, on behalf of Mr.
Hostetter, in an individual retirement account.
(3) Less than one percent.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities (collectively, the "Reporting Persons"), to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission (the "SEC"). Reporting Persons are required
by SEC regulation to furnish the Company with copies of all Forms 3, 4 and 5
that they file.
Based solely upon a review of Section 16(a) reports furnished to the
Company for fiscal year 1998, written representations that no other reports were
required and other information known to the Company, the Company believes that
the Reporting Persons have complied with all filing requirements for fiscal year
1998.
CERTAIN TRANSACTIONS
All of the executive officers of the Company are executive officers of the
Advisor, a wholly owned subsidiary of CNL Group, Inc., of which Messrs. Seneff
and Bourne are affiliates. In addition, Messrs. Seneff and Bourne, Ms. Rose and
Ms. Wall are executive officers of CNL Securities Corp., the managing dealer of
the Company's prior offerings of shares of common stock, and a wholly owned
subsidiary of CNL Group, Inc. Messrs. Seneff and Bourne are directors of the
Company, the Advisor and CNL Securities Corp., and Ms. Rose is a director of the
Advisor. Administration of the day-to-day operations of the Company is provided
by the Advisor, pursuant to the terms of an advisory agreement (the "Advisory
Agreement"). The Advisor also serves as the Company's consultant in connection
with policy decisions to be made by the Company's Board of Directors, manages
the Company's properties and renders such other services as the Board of
Directors deems appropriate. The Advisor also bears the expense of providing the
executive personnel and office space to the Company. The Advisor is at all times
subject to the supervision of the Board of Directors of the Company and has only
such functions and authority as the Company may delegate to it as the Company's
agent.
CNL Securities Corp. received selling commissions amounting to 7.5% of the
total amount raised from the sale of shares of common stock for services in
connection with the offering of shares, a substantial portion of which has been
or will be paid as commissions to other broker-dealers. For the year ended
December 31, 1998, the Company had incurred $28,914,297 of such fees, of which
approximately $26,033,446 was paid by CNL Securities Corp. as commissions to
other broker-dealers.
In addition, CNL Securities Corp. received a marketing support and due
diligence expense reimbursement fee equal to 0.5% of the total amount raised
from the sale of shares, a substantial portion of which was reallowed to other
broker-dealers. For the year ended December 31, 1998, the Company had incurred
$1,927,620 of such fees, the majority of which were reallowed to other
broker-dealers and from which all bona fide due diligence expenses were paid.
<PAGE>
CNL Securities Corp. is also entitled to receive, in connection with each
of the Company's offerings of common stock to date, a soliciting dealer
servicing fee payable annually by the Company beginning on December 31 of the
year following the year in which the offering terminates in the amount of 0.20%
of the stockholders' investment in the Company. CNL Securities Corp. in turn may
re-allow all or a portion of such fee to soliciting dealers whose clients
purchased shares in such offering and who held shares on such date. As of
December 31, 1998, the Company had incurred $300,206 of such fees relating to
the initial offering which terminated in February 1997.
During 1998, the Advisor received acquisition fees for services in
identifying the properties and structuring the terms of the acquisition and
leases of the properties and structuring the terms of the mortgage loans equal
to 4.5% of the total amount raised from the sale of shares. For the year ended
December 31, 1998, the Company had incurred $17,317,297 of such fees.
For negotiating secured equipment leases and supervising the secured
equipment lease program, the Advisor will be entitled to receive from the
Company a one-time secured equipment lease servicing fee of two percent of the
purchase price of the equipment that is the subject of a secured equipment
lease. For the year ended December 31, 1998, the Company incurred $54,998 in
such fees.
The Company and the Advisor have entered into an Advisory Agreement
pursuant to which the Advisor will receive a monthly asset management fee of
one-twelfth of 0.60% of the Company's real estate asset value (generally, the
total amount invested in the properties as of the end of the preceding month,
exclusive of acquisition fees and acquisition expenses), plus one-twelfth of
0.60% of the Company's total principal amount of the mortgage loans as of the
end of the preceding month. The management fee, which will not exceed fees which
are competitive for similar services in the same geographic area, may or may not
be taken, in whole or in part as to any year, in the sole discretion of the
Advisor. All or any portion of the management fee not taken as to any fiscal
year shall be deferred without interest and may be taken in such other fiscal
year as the Advisor shall determine. For the year ended December 31, 1998, the
Company had incurred $1,911,128 of such fees, $60,124 of which has been
capitalized as part of the cost of the buildings for properties under
construction.
The term of the Advisory Agreement expires April 19, 1999, subject to
successive one-year renewals upon mutual consent of the parties. The Advisory
Agreement may be terminated for cause by either party thereto, or by the mutual
consent of the parties (by a majority of the independent directors of the
Company or a majority of the Board of the Advisor, as the case may be), upon 60
days written notice.
The Advisor and its affiliates provide accounting and administrative
services to the Company (including accounting and administrative services in
connection with the offering of shares) on a day-to-day basis. For the year
ended December 31, 1998, the Company incurred a total of $4,292,517 for these
services, $3,103,046 of such costs representing stock issuance costs and
$1,189,471 representing general operating and administrative expenses, including
costs related to preparing and distributing reports required by the SEC.
During the year ended December 31, 1998, the Company acquired five
properties for an aggregate purchase price of approximately $8,770,000 from
affiliates of the Company. The affiliates had purchased and temporarily held
title to these properties in order to facilitate the acquisition of the
properties by the Company. Each property was acquired at a cost no greater than
the lesser of the cost of the property to the affiliate (including carrying
costs) or the property's appraised value.
<PAGE>
In connection with the acquisition of six properties during the year ended
December 31, 1998, the Company incurred $229,153 in development/construction
management fees to affiliates of the Advisor that were constructed by such
affiliates. Such fees were included in the purchase price of the properties and
are therefore included in the basis on which the Company charges rent on the
properties.
In connection with the acquisition of properties that are being or have
been renovated, subject to approval by the Company's Board of Directors, the
Company may incur advisory fees payable to affiliates of the Company. Such fees
are included in the purchase price of the properties and are therefore included
in the basis on which the Company charges rent on the properties. During the
year ended December 31, 1998, the Company incurred $67,389 of such fees relating
to three properties.
INDEPENDENT AUDITORS
Upon recommendation of and approval by the Board, including the independent
directors, PricewaterhouseCoopers LLP has been selected to act as independent
certified public accountants for the Company during the current fiscal year.
A representative of PricewaterhouseCoopers LLP will be present at the
annual meeting and will be provided with the opportunity to make a statement if
desired. Such representative will also be available to respond to appropriate
questions.
OTHER MATTERS
The Board does not know of any matters to be presented at the annual
meeting other than those stated above. If any other business should come before
the annual meeting, the person(s) named in the enclosed proxy will vote thereon
as he or they determine to be in the best interests of the Company.
PROPOSALS FOR NEXT ANNUAL MEETING
Any stockholder proposal to be considered for inclusion in the Company's
proxy statement and form of proxy for the annual meeting of stockholders to be
held in 2000 must be received at the Company's office at 400 East South Street,
Orlando, Florida 32801, no later than December 15, 1999.
Under the bylaws of the Company, a stockholder must comply with certain
procedures to nominate directors or to propose other matters to be considered at
an annual meeting of stockholders. These procedures provide that the
stockholders desiring to make nominations for directors or to bring a proper
subject before a meeting must do so by notice timely delivered to the secretary
of the Company. To be timely, the secretary must receive the notice at the
Company's principal executive offices not less than 60 days nor more than 90
days before the anniversary of the preceding year's annual meeting of
stockholders. In the case of the Company's annual meeting of stockholders in
2000, the secretary of the Company must receive notice of any such proposal no
earlier than February 27, 2000 and no later than March 28, 2000 (other than
proposals intended to be included in the proxy statement and form of proxy
which, as noted above, must be received by December 15, 1999. Generally, such
notice must set forth: (i) as to each person whom the stockholder proposes to
nominate for election or re-election as a director, all information relating to
such person that is required to be disclosed in solicitations or proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Exchange Act (including such person's written consent
to being named in the proxy statement as a nominee and to serving as a director
if elected); (ii) as to any other business that the stockholder proposes to
bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and of
the beneficial owner, if any, on whose behalf the proposal is made; (iii) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made, the name and address of such
stockholder, as they appear on the Company's books, and of such beneficial owner
and the class and number of shares of the Company which are owned beneficially
and of record by such stockholder and such beneficial owner. The Chairman of the
annual meeting shall have the power to declare that any proposal not meeting
these and any other applicable requirements imposed by the bylaws shall be
disregarded. A copy of the bylaws may be obtained without charge on written
request addressed to CNL American Properties Fund, Attn. Corporate Secretary,
400 E. South Street, Orlando, Florida 32801.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1998, accompanies this Proxy Statement.
By Order of the Board of Directors,
/s/ Lynn E. Rose
--------------------------------
Lynn E. Rose
Secretary
April 13, 1999
Orlando, Florida
<PAGE>
EXHIBIT A
ARTICLES OF AMENDMENT
TO
THE AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
CNL AMERICAN PROPERTIES FUND, INC.
CNL AMERICAN PROPERTIES FUND, INC., a Maryland corporation having its
principal office at 32 South Street, Baltimore, Maryland 21202 (hereinafter, the
"Company"), does hereby certify to the Department of Assessments and Taxation of
the State of Maryland, that:
FIRST: The name of the Company is CNL American Properties Fund, Inc.
SECOND: Section 7.1 of Article VII of the Amended and Restated Articles
of Incorporation of the Company is hereby deleted in its entirety and amended to
read as follows:
"SECTION 7.1 Authorized Shares. The capital stock of the Company shall
be divided into Equity Shares. The total number of Equity Shares which the
Company is authorized to issue is one hundred forty three million five hundred
thousand (143,500,000) shares, consisting of sixty two million five hundred
thousand (62,500,000) Common Shares (as defined and described in Section
7.2(ii)), three million (3,000,000) Preferred Shares (as defined in Section 7.3
hereof) and seventy eight million (78,000,000) Excess Shares (as defined in
Section 7.7 hereof). All shares shall be fully paid and nonassessable when
issued. Shares may be issued for such consideration as the Directors determine
or, if issued as a result of a share dividend or share split, without any
consideration."
THIRD: The amendment to the Amended and Restated Articles of
Incorporation of the charter of the Company as hereinabove set forth has been
duly advised by the board of directors and approved by the stockholders of the
Company.
FOURTH: Upon the filing with the Department of Assessments and Taxation
of the State of Maryland of these Articles of Amendment to the Amended and
Restated Articles of Incorporation of the Company, whereby Section 7.1 of
Article VII, is amended to read as set forth herein (the "Filing"), each two
shares of Common Shares issued and outstanding and held of record by each
stockholder of the Company immediately prior to the Filing shall, automatically
and without the need for any further action on the part of any stockholder, be
combined into one (1) validly issued, fully paid and nonassessable share of
Common Shares, par value $.01 per share. No scrip or fractional shares will be
issued by reason of this amendment, but in lieu thereof the Company will pay to
any such holder of a fractional share an amount of cash for such fractional
share based on a per share value of $20.00.
FIFTH: (a) The total number of shares of all classes of stock of the
Company heretofore authorized, and the number and par value of the shares of
each class, were as follows:
<PAGE>
The total number of Equity Shares which the Company
was authorized to issue was two hundred six million (206,000,000) shares,
consisting of one hundred twenty five million (125,000,000) Common Shares, three
million (3,000,000) Preferred Shares and seventy-eight million (78,000,000)
Excess Shares. The par value of the Common Shares and Excess Shares was $.01 per
share and the aggregate par value of all of the authorized shares of all classes
of capital stock having a par value was $2,030,000.00. Preferred Shares had not
been assigned a par value.
(b) The total number of shares of all classes of
stock of the Company as increased, and the number and par value of the shares of
each class, are as follows:
The total number of Equity Shares which the Company
is authorized to issue is one hundred forty three million five hundred thousand
(143,500,000) shares, consisting of sixty two million five hundred thousand
(62,500,000) Common Shares, three million (3,000,000) Preferred Shares and
seventy eight million (78,000,000) Excess Shares. The par value of the Common
Shares and Excess Shares remains $.01 per share and the aggregate par value of
all of the authorized shares of all classes of capital stock having a par value
is $1,405,000.00. Preferred Shares have not been assigned a par value.
SIXTH: These Articles of Amendment do not change the information
required by subsection (b)(2)(i) of Section 2-607 of the General Corporation Law
of Maryland.
IN WITNESS WHEREOF, these Articles of Amendment are hereby executed by
Curtis B. McWilliams, the President of the Company, who hereby acknowledges that
the Articles of Amendment are the act of the Company, and who does hereby state
under the penalties of perjury that the matters and facts set forth herein with
respect to authorization and approval of such Articles are true in all material
respects to the best of his knowledge, information and belief.
CNL American Properties Fund, Inc.
By: _____________________________
Name: Curtis B. McWilliams
Title: President
Date: ________________, 1999
ATTEST
By: ____________________
Lynn E. Rose
Secretary
Date: _________, 1999
<PAGE>
Exhibit B
CNL AMERICAN PROPERTIES FUND, INC.
1999 PERFORMANCE Incentive PLAN
ARTICLE I
PURPOSES
The Plan is intended to assist CNL American Properties Fund, Inc. (the
"Company") and its Affiliates in recruiting and retaining individuals with
ability and initiative by enabling such persons to participate in the future
success of the Company and its Affiliates and to associate their interests with
those of the Company and its stockholders. The Plan is intended to permit the
grant of both Options qualifying under Section 422 of the Internal Revenue Code
of 1986, as amended ("Incentive Stock Options") and Options not so qualifying,
and the grant of stock appreciation rights ("SARs"), Stock Awards, Phantom Stock
Awards, Performance Awards and Leveraged Stock Purchase Awards. No Option that
is intended to be an Incentive Stock Option shall be invalid for failure to
qualify as an Incentive Stock Option. The proceeds received by the Company from
the sale of Common Stock pursuant to this Plan shall be used for general
corporate purposes. All capitalized terms used herein are defined below in
Article II.
ARTICLE II
DEFINITIONS
2.1. Affiliate means (i) any entity that directly or indirectly, is
controlled by, or controls or is under common control with the Company, and (ii)
any entity in which the Company has a significant equity interest, in either
case as determined by the Committee.
2.2. Agreement means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the terms
and conditions of a Stock Award, Option, SAR, Phantom Stock Award, Performance
Award or Leveraged Stock Purchase Award granted to such Participant.
2.3. Board means the Board of Directors of the Company.
2.4. Change of Control means:
(a) a "person" or "group" (which terms shall have the meaning
they have when used in Section 13(d) of the Exchange Act) (other than the
Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, any corporation owned directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their
ownership of voting securities of the Company) becomes (other than solely by
reason of a repurchase of voting securities by the Company), the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of forty percent (40%) or more of the combined voting power of the
Company's then total outstanding voting securities;
(b) the Company consolidates with or merges with or into
another corporation or partnership or conveys, transfers or leases, in any
transaction or series of transactions, all or substantially all of its assets to
any corporation or partnership, or any corporation or partnership consolidates
with or merges with or into the Company, in any event pursuant to a transaction
in which the outstanding voting stock of the Company is reclassified or changed
into or exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding voting securities of the Company are
changed into or exchanged for voting securities of the surviving corporation and
(ii) the persons who were the beneficial owners of the Company's voting
securities immediately prior to such transaction beneficially own immediately
after such transaction 50% or more of the total outstanding voting power of the
surviving corporation, or the Company is liquidated or dissolved or adopts a
plan of liquidation or dissolution.
2.5. Code means the Internal Revenue Code of 1986, and any amendments
thereto.
2.6. Committee means either (i) the Board or (ii) a committee of the
Board designated by the Board to administer the Plan and composed of not less
than two directors, each of whom is expected, but not required, to be a
"Non-Employee Director" (within the meaning of Rule 16b-3 of the Securities
Exchange Act of 1934, as amended) and an "outside director" (within the meaning
of Code section 162(m)) to the extent Rule 16b-3 of the Exchange Act and Code
section 162(m), respectively, are at such time applicable to the Company and the
Plan. If at any time such a committee has not been so designated, the Board
shall constitute the Committee.
2.7. Common Stock means the common stock, $0.01 par value, of the
Company.
2.8. Company means CNL American Properties Fund, Inc., a Maryland
corporation.
2.9. Consultant means any person performing consulting or advisory
services for the Company or any Affiliate, with or without compensation, to
whom the Committee chooses to grant a Stock Award, Option, SAR, Phantom Stock
Award, Performance Award or Leveraged Stock Purchase Award in accordance with
the Plan.
2.10. Corresponding SAR means an SAR that is granted in relation to a
particular Option and that can be exercised only upon the surrender to the
Company, unexercised, of that portion of the Option to which the SAR relates.
2.11. Director means a member of the Company's Board of Directors.
2.12. Disability shall have the meaning provided for in Section
22(e)(3) of the Code or any successor statute thereto.
2.13. Exchange Act means the Securities Exchange Act of 1934, as
amended.
2.14. Fair Market Value means, on any given date, the current fair
market value of the shares of Common Stock as determined pursuant to subsection
(a) or (b) below.
(a) While the Company is a Public Company, Fair Market Value
shall be determined as follows: (i) if the Common Stock is traded on the Nasdaq
SmallCap or National Market or listed on a national securities exchange, the
closing price of the Common Stock on the determination date on the exchange on
which the Common Stock is principally traded, or, if there are no sales on such
date, then on the next preceding date on which there were sales of Common Stock,
(ii) if the Common Stock is not traded on the Nasdaq SmallCap or National Market
or listed on a national securities exchange, the closing price last reported by
the National Association of Securities Dealers, Inc. for the over-the-counter
market on the determination date, or, if no sales are reported on such date,
then on the next preceding date on which there where such quotations or (iii) if
the Common Stock is not traded in the over-the-counter market, the price
determined by the Company's Board of Directors on the basis of the quarterly
valuation of the Company's assets.
(b) Notwithstanding subsections (a) and (b) of this Section, in
all cases, Fair Market Value shall not be less than the par value of the Common
Stock.
(c) For purposes of this Section, the term "Public Company"
means the Company, subsequent to the effective date of the Plan, has sold
securities pursuant to an effective registration statement filed pursuant to the
Securities Act and is subject to the reporting and information requirements
under the Exchange Act, and the term "Non-Public Company" means the Company has
not sold securities pursuant to an effective registration statement filed
pursuant to the Securities Act and is not subject to the reporting and
information requirements under the Exchange Act.
2.15. Initial Value means, with respect to an SAR, the Fair Market
Value of one share of Common Stock on the date of grant.
2.16. Incentive Stock Option means an Option qualifying for special tax
treatment under Section 422 of the Code.
2.17. Leveraged Stock Purchase Award means a right awarded to a
Participant under Article XI that, in accordance with the terms of an Agreement,
entitles the holder to purchase shares of Common Stock at the Fair Market Value
thereof on the date of the purchase by means of a loan to the holder by the
Company.
2.18. Nonqualified Stock Option means an option that is not an
Incentive Stock Option.
2.19. Option means a stock option that is either a Nonqualified
Stock Option or Incentive Stock Option that entitles the holder to purchase from
the Company a stated number of shares of Common Stock at the price set forth in
an Agreement.
2.20. Optionee means the employee, Director or Consultant to whom an
Option is granted.
2.21. Parent Corporation means a corporation which is with respect to
the Company a parent corporation as defined in Section 424 of the Code.
2.22. Participant means an employee of the Company or an Affiliate, a
Director or a Consultant who satisfies the requirements of Article IV and is
selected by the Committee to receive a Stock Award, Option, SAR, Phantom Stock
Award, Performance Award, Leveraged Stock Purchase Award or a combination
thereof.
2.23. Performance Award means a right denominated in cash or in shares
of Common Stock awarded to a Participant under Article IX that, in accordance
with the terms of an Agreement, entitles the holder to receive cash or shares of
Common Stock. A Performance Award may be referred to as a Performance Share
Award to the extent that it is denominated in shares of Common Stock.
2.24. Phantom Stock Award means a right awarded to a Participant under
Article X that, in accordance with the terms of an Agreement, entitles the
holder to receive shares of Common Stock, or cash in an amount equal to the Fair
Market Value thereof, as determined by the Committee, without payment of any
amounts by the holder (except to the extent otherwise required by law).
2.25. Plan means this 1999 Performance Incentive Plan.
2.26. SAR means a stock appreciation right that in accordance with the
terms of an Agreement entitles the holder to receive, with respect to each share
of Common Stock encompassed by the exercise of such SAR, the amount determined
by the Committee and specified in an Agreement. In the absence of such a
determination, the holder shall be entitled to receive, with respect to such
share of Common Stock encompassed by the exercise of such SAR, the excess of its
Fair Market Value on the date of exercise over the Initial Value. References to
"SARs" include both Corresponding SARs and SARs granted independently of
Options, unless the context requires otherwise.
2.27 Securities Act means the Securities Act of 1933, as amended.
2.28. Stock Award means Common Stock awarded to a Participant under
Article VIII. A Stock Award may be or include an award of restricted stock.
2.29. Stockholder means the holder of Common Stock issued under the
Plan as a result of exercise of an Option, SAR, Phantom Stock Award, Performance
Award or Leveraged Stock Purchase Award or grant of a Stock Award.
2.30. Subsidiary Corporation means a corporation which is with respect
to the Company a subsidiary corporation as defined in Section 424 of the Code.
2.31. Termination of Employment means unless provided otherwise by the
Committee, an employee has ceased to be employed by the Company or an Affiliate,
a director has ceased to be a member of the Board of Directors of the Company or
an Affiliate, or a Consultant has ceased to have a consulting relationship with
the Company or an Affiliate.
2.32. Ten Percent Shareholder means any individual owning more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, a Parent Corporation or a Subsidiary Corporation. An individual shall
be considered to own any voting stock owned (directly or indirectly) by or for
his brothers, sisters, spouse, ancestors or lineal descendants and shall be
considered to own proportionately any voting stock owned (directly or
indirectly) by or for a company, partnership, estate or trust of which such
individual is a shareholder, partner or beneficiary, all as required by Section
424(d) of the Code.
ARTICLE III
ADMINISTRATION
The Committee shall have authority to grant Stock Awards, Options,
SARs, Phantom Stock Awards, Performance Awards and Leveraged Stock Purchase
Awards upon such terms (not inconsistent with the provisions of this Plan) as
the Committee may consider appropriate. Such terms may include conditions (in
addition to those contained in this Plan) on the exercisability of all or any
part of an Option, SAR or Leveraged Stock Purchase Award or on the
transferability or forfeitability of a Stock Award, Phantom Stock Award or
Performance Award. Notwithstanding any such conditions, the Committee may, in
its discretion, accelerate the time at which any Option, SAR or Leveraged Stock
Purchase Award may be exercised, or the time at which a Stock Award, Phantom
Stock Award or Performance Award may become transferable or nonforfeitable or
the time at which it may be settled. The Committee shall have complete authority
to interpret all provisions of this Plan; to prescribe the form of Agreements;
to adopt, amend, and rescind rules and regulations pertaining to the
administration of the Plan; and to make all other determinations necessary or
advisable for the administration of this Plan. The express grant in the Plan of
any specific power to the Committee shall not be construed as limiting any power
or authority of the Committee; provided that the Committee may not exercise any
right or power reserved to the Board. Any decision made, or action taken, by the
Board or the Committee or in connection with the administration of this Plan
shall be final and conclusive on all persons having an interest in the Plan. No
member of the Board or the Committee shall be liable for any act done in good
faith with respect to this Plan or any Agreement, Stock Award, Option, SAR,
Phantom Stock Award, Performance Award or Leveraged Stock Purchase Award. All
expenses of administering this Plan shall be borne by the Company. If no
Committee is appointed by the Board, the Board shall constitute the Committee.
The Committee, in its discretion, may delegate to one or more officers
of the Company, all or part of the Committee's authority and duties with respect
to grants and awards to individuals who are not subject to the reporting and
other provisions of Section 16 of the Exchange Act. The Committee may revoke or
amend the terms of a delegation at any time but such action shall not invalidate
any prior actions of the Committee's delegates that were consistent with the
terms of the Plan. Furthermore, the mere fact that a Committee member shall fail
to qualify as a "non-employee Director" or "outside director" within the meaning
of Rule 16b-3 under the Exchange Act and Section 162(m) of the Code,
respectively, shall not invalidate any award made by the Committee which award
is otherwise validly made under the Plan.
ARTICLE IV
ELIGIBILITY
Any employee of the Company or an Affiliate (including a company that
becomes an Affiliate after the adoption of this Plan), a Director or a
Consultant to the Company or an Affiliate (including a company that becomes an
Affiliate after the adoption of this Plan) is eligible to participate in this
Plan if the Committee, in its sole discretion, determines that such person has
contributed significantly or can be expected to contribute significantly to the
profits or growth of the Company or an Affiliate. Only employees of the Company,
a Subsidiary Corporation or a Parent Corporation are eligible to receive
Incentive Stock Options.
ARTICLE V
STOCK SUBJECT TO PLAN
5.1. Maximum Shares for Delivery. The maximum number of shares of
Common Stock that may be delivered to Participants under the Plan pursuant to
Stock Awards and exercise of Options, SARs, Phantom Stock Awards, Performance
Awards and Leveraged Stock Purchase Awards shall be four million five hundred
thousand (4,500,000) shares, plus any Common Stock that is represented by awards
granted under the Plan of the Company, which are forfeited, expired or canceled
without the delivery of Common Stock or which result in the forfeiture of Common
Stock back to the Company, provided, that subject to the provisions of Article
IX of the Plan, the aggregate number of shares of Common Stock that may be
issued pursuant to Options, SARs, Phantom Stock Awards, Performance Awards and
Leveraged Stock Purchase Awards granted under the Plan shall increase
automatically to nine million (9,000,000) shares and twelve million (12,000,000)
shares respectively, when the Corporation has issued and outstanding one hundred
and fifty million (150,000,000) shares and two hundred million (200,000,000)
shares, respectively, of Common Stock.
5.2. Shares Subject to Plan. The shares of Common Stock issued may be
shares of authorized but unissued Common Stock or shares of previously issued
Common Stock that have been reacquired by the Company. The maximum aggregate
number of shares that may be issued under this Plan shall be subject to
adjustment as provided in Article XIII.
5.3. Individual Limit. The maximum number of shares of Common Stock
with respect to which Options, SARs, Stock Awards, Phantom Stock Awards,
Performance Awards and Leveraged Stock Purchase Awards may be granted to any one
Participant during any one calendar year shall be seven hundred and fifty
thousand (750,000) shares.
5.4. Incentive Stock Option Limit. The maximum number of shares of
Common Stock that may be issued under Options granted under the Plan that are
intended to be Incentive Stock Options shall be four million five hundred
thousand (4,500,000) shares.
5.5. Reallocation of Shares. If an Option is terminated, in whole or in
part, for any reason other than its exercise or the exercise of a Corresponding
SAR that is settled with Common Stock, the number of shares of Common Stock
allocated to the Option or portion thereof may be reallocated to other Options,
SARs, Stock Awards, Phantom Stock Awards, Performance Awards and Leveraged Stock
Purchase Awards to be granted under this Plan. If an SAR is terminated, in whole
or in part, for any reason other than its exercise or the exercise of a related
Option, the number of shares of Common Stock allocated to the SAR or portion
thereof may be reallocated to other Options, SARs, Stock Awards, Phantom Stock
Awards, Performance Awards and Leveraged Stock Purchase Awards to be granted
under this Plan.
ARTICLE VI
OPTIONS
6.1 Award. In accordance with the provisions of Article IV, the
Committee will designate each individual to whom an Option is to be granted and
will specify the number of shares of Common Stock covered by such awards. The
Option Agreement shall specify whether the Option is an Incentive Stock Option
or Nonqualified Stock Option, the vesting schedule applicable to such Option and
any other terms of such Option. An individual must be an employee of the
Company, a Subsidiary Corporation or a Parent Corporation to be eligible to be
granted an Incentive Stock Option.
6.2 Option Price. The exercise price per share for Common Stock subject
to an Option shall be determined by the Board on the date of grant; provided,
however, that the exercise price per share shall not be less than one hundred
percent 100% of the Fair Market Value of a share of Common Stock on the date the
Option is granted and the exercise price per share of Common Stock for an Option
that is an Incentive Stock Option shall not be less than one hundred percent
(100%) of the Fair Market Value on the date the Option is granted.
Notwithstanding the preceding sentence, the exercise price per share of Common
Stock subject to an Option that is an Incentive Stock Option granted to an
individual who is or is deemed to be a Ten Percent Shareholder on the date such
option is granted, shall not be less than one hundred ten percent (110%) of the
Fair Market Value on the date the Option is granted.
6.3 Maximum Option Period. Unless provided otherwise in this Agreement,
the maximum period in which an Option may be exercised shall be ten years,
except that no Option that is an Incentive Stock Option shall be exercisable
after the expiration of ten years from the date such Option was granted. In the
case of an Incentive Stock Option that is granted to a Participant who is or is
deemed to be a Ten Percent Shareholder on the date of grant, such Option shall
not be exercisable after the expiration of five years from the date of grant.
The terms of any Option that is an Incentive Stock Option may provide that it is
exercisable for a period less than such maximum period.
6.4 Maximum Value of Options which are Incentive Stock Options. To the
extent that the aggregate Fair Market Value of the Common Stock with respect to
which Incentive Stock Options granted to any person are exercisable for the
first time during any calendar year (under all stock option plans of the
Company, a subsidiary Corporation or Parent Corporation) exceeds $100,000, the
Options are not Incentive Stock Options. For purposes of this section, the Fair
Market Value of the Common Stock will be determined as of the time the Incentive
Stock Option with respect to the Common Stock is granted. This paragraph will be
applied by taking Incentive Stock Options into account in the order in which
they are granted.
6.5 Nontransferability. Except as provided in Section 6.6, each Option
granted under this Plan shall be nontransferable except by will or by the laws
of descent and distribution. In the event of any such transfer, the Option and
any Corresponding SAR that relates to such Option must be transferred to the
same person or persons or entity or entities. Except to the extent an Option is
transferred in accordance with Section 6.6, during the lifetime of the
Participant to whom the Option is granted, the Option may be exercised only by
the Participant. No right or interest of a Participant in any Option shall be
liable for, or subject to, any lien, obligation, or liability of such
Participant.
6.6 Transferable Options. Section 6.5 to the contrary notwithstanding,
if the Agreement so provides, an Option that is not an Incentive Stock Option
may be transferred by a Participant to the Participant's children,
grandchildren, spouse, one or more trusts for the benefit of such family members
or a partnership in which such family members are the only partners; provided,
however, that Participant may not receive any consideration for the transfer.
The holder of an Option transferred pursuant to this section shall be bound by
the same terms and conditions that governed the Option during the period that it
was held by the Participant. In the event of any such transfer, the Option and
any Corresponding SAR that relates to such Option must be transferred to the
same person or persons or entity or entities.
6.7 Vesting and Termination of Employment. Except as provided in an
Option Agreement, the following rules shall apply:
(a) Options will vest as provided in the Option Agreement. An
Option will be fully vested upon the occurrence of a Change of Control prior to
the Participant's Termination of Employment. An Option will be exercisable only
to the extent that it is vested on the date of exercise. Vesting of an Option
will cease on the date of the Optionee's Termination of Employment and the
Option will be exercisable only to the extent the Option is vested on the date
of Termination of Employment.
(b) If the Optionee's Termination of Employment is for reason
of death or Disability, the right to exercise the Option (to the extent vested)
will expire on the earlier of (i) one (1) year after the date of the Optionee's
Termination of Employment, or (ii) the expiration date under the terms of the
Agreement. Until the expiration date, the Optionee's heirs, legatees or legal
representative may exercise the Option, except to the extent the Option was
previously transferred pursuant to Section 6.6.
(c) If the Optionee's Termination of Employment is by reason of
the Optionee's retirement from service of the Company and its Affiliates as
determined by the Board, the right to exercise the Option (to the extent that it
is vested) will expire on the earlier of (i) three (3) years after the date of
the Optionee's Termination of Employment, or (ii) the expiration date under the
terms of the Agreement.
(d) If the Optionee's Termination of Employment is for any
reason other than death, Disability or retirement, the right to exercise the
Option (to the extent that it is vested) will expire on the earlier of (i) three
(3) months after the date of the Optionee's Termination of Employment, or (ii)
the expiration date under the terms of the Agreement. However, if the Option
would then expire during the Pooling Period and the Common Stock received upon
the exercise of the Option would be subject to the Pooling Period transfer
restrictions, then the right to exercise the Option will expire ten (10)
calendar days after the end of the Pooling Period. "Pooling Period" means the
period in which property is subject to restrictions on transfer in compliance
with the "Pooling of Interests Accounting" rules set forth in the Securities and
Exchange Commission Accounting Series Releases 130 and 135. If Termination of
Employment is for a reason other than the Optionee's death, disability or
retirement and the Option holder dies after his or her Termination of Employment
but before the right to exercise the Option has expired, the right to exercise
the Option shall expire on the earlier of (i) one (1) year after the date of the
Optionee's Termination of Employment, or (ii) the date the Option expires under
the terms of the Agreement, and, until expiration, the Optionee's heirs,
legatees or legal representative may exercise the Option, except to the extent
the Option was previously transferred pursuant to Section 6.6.
6.8 Forfeiture for Cause. Notwithstanding any provision of the Plan to
the contrary, unless provided otherwise in an Option Agreement, all unexercised
Options granted to an Optionee whose Termination of Employment is for "cause"
shall terminate and be forfeited by the Optionee. A termination of Employment
shall be for cause if it is by reason of (i) conduct related to the Optionee's
service to the Company or an Affiliate for which either criminal or civil
penalties against the Optionee may be sought, (ii) material violation of Company
policies, or (iii) disclosing or misusing any confidential information or
material concerning the Company or Affiliate. An Optionee may be released from
the forfeiture provisions of this section if the Committee (or its duly
appointed agent) determines in its sole discretion that such action is in the
best interests of the Company.
6.9. Exercise. The Option holder must provide written notice to the
Secretary of the Company of the exercise of Options and the number of Options
exercised. Subject to the provisions of this Plan and the applicable Agreement,
an Option may be exercised to the extent vested in whole at any time or in part
from time to time at such times and in compliance with such requirements as the
Committee shall determine. An Option granted under this Plan may be exercised
with respect to any number of whole shares less than the full number for which
the Option could be exercised. An Option may not be exercised with respect to
fractional shares of Common Stock. A partial exercise of an Option shall not
affect the right to exercise the Option from time to time in accordance with
this Plan and the applicable Agreement with respect to the remaining shares
subject to the Option. The exercise of an Option shall result in the termination
of any Corresponding SAR to the extent of the number of shares with respect to
which the Option is exercised.
6.10. Payment. Unless otherwise provided by the Agreement, payment of
the Option price shall be made in cash or a cash equivalent acceptable to the
Committee. Unless otherwise provided by the Agreement, payment of all or part of
the Option price may also be made by surrendering shares of Common Stock to the
Company that have been held for at least six (6) months prior to the date of
exercise. If Common Stock is used to pay all or part of the Option price, the
sum of the cash or cash equivalent and the Fair Market Value (determined as of
the day preceding the date of exercise) of the shares surrendered must not be
less than the Option price of the shares for which the Option is being
exercised. In accordance with such procedures as the Committee may determine,
the Committee may approve payment of the exercise price by a broker-dealer or by
the Option holder with cash advanced by the broker-dealer if the exercise notice
is accompanied by the Option holder's written irrevocable instructions to
deliver the Common Stock acquired upon exercise of the Option to the
broker-dealer.
Wherever in this Plan or any Agreement a Participant is permitted to pay the
exercise price of an Option or SAR or taxes relating to the exercise of an
Option or SAR by delivering Common Stock, the Participant may, subject to
procedures satisfactory to the Committee, satisfy such delivery requirement by
presenting proof of beneficial ownership of such Common Stock, in which case the
Company shall treat the Option or SAR as exercised without further payment and
shall withhold such number of Common Stock from the Common Stock acquired by the
exercise of the Option or SAR.
6.11. Stockholder Rights. No Participant shall have any rights as a
stockholder with respect to shares subject to his or her Option until the date
of exercise of such Option.
6.12. Stock Certificate Legends. The Company may require that
certificates evidencing shares of Common Stock purchased upon the exercise of
Incentive Stock Option issued under the Plan be endorsed with a legend in
substantially the following form:
The shares evidenced by this certificate may not be sold or
transferred prior to ________, 19__, in the absence of a
written statement from the Company to the effect that the
Company is aware of the facts of such sale or transfer.
The blank contained in this legend shall be filled in with the date that is the
later of (i) one year and one day after the date of the exercise of such
Incentive Stock Option or (ii) two years and one day after the grant of such
Incentive Stock Option. Upon delivery to the Company, at its principal executive
office, of a written statement to the effect that such shares have been sold or
transferred prior to such date, the Company does hereby agree to promptly
deliver to the transfer agent for such shares a written statement to the effect
that the Company is aware of the fact of such sale or transfer.
6.13. Disposition of Stock. A Participant shall notify the Company of
any sale or other disposition of Common Stock acquired pursuant to an Incentive
Stock Option if such sale or disposition occurs (i) within two years of the
grant of an Option or (ii) within one year of the issuance of the Common Stock
to the Participant. Such notice shall be in writing and directed to the
Secretary of the Company.
ARTICLE VII
SARS
7.1. Award. In accordance with the provisions of Article IV, the Board
will designate each individual to whom SARs are to be granted and will specify
the number of shares covered by such awards. In addition no Participant may be
granted Corresponding SARs (under all Incentive Stock Option plans of the
Company and its Affiliates) that are related to Incentive Stock Options which
are first exercisable in any calendar year for stock having an aggregate Fair
Market Value (determined as of the date the related Option is granted) that
exceeds $100,000.
7.2. Maximum SAR Period. The maximum period in which an SAR may be
exercised shall be determined by the Board on the date of grant, except that no
Corresponding SAR that is related to an Incentive Stock Option shall be
exercisable after the expiration of ten years from the date such related Option
was granted. In the case of a Corresponding SAR that is related to an Incentive
Stock Option granted to a Participant who is or is deemed to be a Ten Percent
Shareholder, such Corresponding SAR shall not be exercisable after the
expiration of five years from the date such related Option was granted. The
terms of any Corresponding SAR that is related to an Incentive Stock Option may
provide that it is exercisable for a period less than such maximum period.
7.3. Nontransferability. Except as provided in Section 7.4, each SAR
granted under this Plan shall be nontransferable except by will or by the laws
of descent and distribution. In the event of any such transfer, a Corresponding
SAR and the related Option must be transferred to the same person or persons or
entity or entities. During the lifetime of the Participant to whom the SAR is
granted, the SAR may be exercised only by the Participant. No right or interest
of a Participant in any SAR shall be liable for, or subject to, any lien,
obligation, or liability of such Participant.
7.4. Transferable SARs. Section 7.3 to the contrary notwithstanding, if
the Agreement so provides, a SAR may be transferred by a Participant to the
children, grandchildren, spouse, one or more trusts for the benefit of such
family members or a partnership in which such family members are the only
partners; provided, however, that a Participant may not receive any
consideration for the transfer. In the event of any such transfer, a
Corresponding SAR and the related Option must be transferred to the same person
or persons or entity or entities. The holder of an SAR transferred pursuant to
this section shall be bound by the same terms and conditions that governed the
SAR during the period that it was held by the Participant.
7.5. Exercise. Subject to the provisions of this Plan and the
applicable Agreement, an SAR may be exercised in whole at any time or in part
from time to time at such times and in compliance with such requirements as the
Committee shall determine; provided, however, that a Corresponding SAR that is
related to an Incentive Stock Option may be exercised only to the extent that
the related Option is exercisable and only when the Fair Market Value exceeds
the option price of the related Option. An SAR granted under this Plan may be
exercised with respect to any number of whole shares less than the full number
for which the SAR could be exercised. A partial exercise of an SAR shall not
affect the right to exercise the SAR from time to time in accordance with this
Plan and the applicable Agreement with respect to the remaining shares subject
to the SAR. The exercise of a Corresponding SAR shall result in the termination
of the related Option to the extent of the number of shares with respect to
which the SAR is exercised.
7.6. Employee Status. If the terms of any SAR provide that it may be
exercised only during employment or within a specified period of time after
Termination of Employment, the Committee may decide to what extent leaves of
absence for governmental or military service, illness, temporary disability or
other reasons shall not be deemed interruptions of continuous employment.
7.7. Settlement. At the Committee's discretion, the amount payable as a
result of the exercise of an SAR may be settled in cash, Common Stock, or a
combination of cash and Common Stock. No fractional shares will be deliverable
upon the exercise of an SAR but a cash payment will be made in lieu thereof.
7.8. Shareholder Rights. No Participant shall, as a result of receiving
an SAR award, have any rights as a stockholder of the Company or any Affiliate
until the date that the SAR is exercised and then only to the extent that the
SAR is settled by the issuance of Common Stock.
ARTICLE VIII
STOCK AWARDS
8.1. Award. In accordance with the provisions of Article IV, the Board
will designate each individual to whom a Stock Award is to be made and will
specify the number of shares of Common Stock covered by such awards.
8.2. Vesting. The Board, on the date of the award, may prescribe that a
Participant's rights in the Stock Award shall be forfeitable or otherwise
restricted for a period of time or subject to such conditions as may be set
forth in the Agreement.
8.3. Performance Objectives. In accordance with Section 8.2, the Board
may prescribe that Stock Awards will become vested or transferable or both based
on objectives such as, but not limited to, the Company's, an Affiliate's or an
operating unit's return on equity, earnings per share, total earnings, earnings
growth, return on capital, return on assets, or Fair Market Value. If the Board,
on the date of award, prescribes that a Stock Award shall become nonforfeitable
and transferable only upon the attainment of performance objectives, the shares
subject to such Stock Award shall become nonforfeitable and transferable only to
the extent that the Committee certifies that such objectives have been achieved.
8.4. Stock Legends and Related Matters.
(a) The Committee, on behalf of the Company, may endorse such
legend or legends upon the certificates representing the shares of Common Stock,
and may issue such "stop transfer" instructions as it determines to be necessary
or appropriate to (i) prevent a violation of, or to perfect an exemption from,
the registration requirements of the Securities Act, or (ii) implement the
provisions of any agreement between the Company or an Affiliate and the
Participant with respect to such shares.
(b) The Committee may require that a Participant, as a
condition to receipt of a particular award, execute and deliver to the Company a
written statement, in form satisfactory to the Committee, in which the
Participant represents and warrants that the shares are being acquired for such
person's own account, for investment only and not with a view to the resale or
distribution thereof. The Participant shall, at the request of the Committee, be
required to represent and warrant in writing that, to the extent permitted by
the terms of the award, any subsequent resale or distribution of Shares by the
Participant shall be made only pursuant to either (i) a Registration Statement
on an appropriate form under the Securities Act, which Registration Statement
has become effective and is current with regard to the shares being sold, or
(ii) a specific exemption from the registration requirements of the Securities
Act, but in claiming such exemption the Participant shall, prior to any offer of
sale or sale of such shares, obtain a prior favorable written opinion of
counsel, in form and substance satisfactory to counsel for the Company, as to
the application of such exemption thereto.
The Committee may delay any award, issuance or delivery of shares of Common
Stock if it determines that listing, registration or qualification of the shares
or the consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the sale or purchase of
shares under the Plan, until such listing, registration, qualification, consent
or approval shall have been effected or obtained, or otherwise provided for,
free of any conditions not acceptable to the Committee.
8.5. Employee Status. In the event that the terms of any Stock Award
provide that shares may become transferable and nonforfeitable thereunder only
after completion of a specified period of employment, the Committee may decide
in each case to what extent leaves of absence for governmental or military
service, illness, temporary disability, or other reasons shall not be deemed
interruptions of continuous employment.
8.6. Nontransferability. Except as provided in Section 8.7, Stock
Awards granted under this Plan shall be nontransferable except by will or by the
laws of descent and distribution. No right or interest of a Participant in a
Stock Award shall be liable for, or subject to, any lien, obligation, or
liability of such Participant.
8.7. Transferable Stock Awards. Section 8.6 to the contrary
notwithstanding, if the Award so provides, a Stock Award may be transferred by a
Participant to the children, grandchildren, spouse, one or more trusts for the
benefit of such family members or a partnership in which such family members are
the only partners; provided, however, that Participant may not receive any
consideration for the transfer. The holder of a Stock Award transferred pursuant
to this section shall be bound by the same terms and conditions that governed
the Incentive Award during the period that it was held by the Participant.
8.8. Stockholder Rights. Prior to their forfeiture (in accordance with
the applicable Agreement) and while the shares of Common Stock granted pursuant
to the Stock Award may be forfeited or are nontransferable, a Participant will
have all rights of a stockholder with respect to a Stock Award, including the
right to receive dividends and vote the shares; provided, however, that during
such period (i) a Participant may not sell, transfer, pledge, exchange,
hypothecate, or otherwise dispose of shares of Common Stock granted pursuant to
a Stock Award, (ii) the Company shall retain custody of the certificates
evidencing shares of Common Stock granted pursuant to a Stock Award, and (iii)
the Participant will deliver to the Company a stock power, endorsed in blank,
with respect to each Stock Award. The limitations set forth in the preceding
sentence shall not apply after the shares of Common Stock granted under the
Stock Award are transferable and are no longer forfeitable.
ARTICLE IX
PHANTOM STOCK AWARDS
9.1. Award. In accordance with the provisions of Article IV, the Board
shall designate each individual to whom Phantom Stock Awards are to be granted
and shall specify the number of shares included in such awards.
9.2. Vesting. The Board, on the date of the award, may prescribe that a
Participant's rights in the Phantom Stock Award shall be forfeitable or
otherwise restricted for a period of time or subject to such conditions as may
be set forth in the Agreement.
9.3. Performance Objectives. In accordance with Section 9.2, the Board
may prescribe that Phantom Stock Awards will become nonforfeitable based on
objectives such as, but not limited to, the Company's, an Affiliate's or an
operating unit's return on equity, earnings per share, total earnings, earnings
growth, return on capital, return on assets, or Fair Market Value.
9.4. Nontransferability. Except as provided in Section 9.5, Phantom
Stock Awards granted under this Plan shall be nontransferable except by will or
by the laws of descent and distribution. No right or interest of a Participant
in a Phantom Stock Award shall be liable for, or subject to, any lien,
obligation, or liability of such Participant.
9.5. Transferable Phantom Stock Awards. Section 9.4 to the contrary
notwithstanding, if the Award so provides, a Phantom Stock Award may be
transferred by a Participant to his or her children, grandchildren, spouse, one
or more trusts for the benefit of such family members or a partnership in which
such family members are the only partners; provided, however, that Participant
may not receive any consideration for the transfer. The holder of a Phantom
Stock Award transferred pursuant to this section shall be bound by the same
terms and conditions that governed the Incentive Award during the period that it
was held by the Participant.
9.6. Employee Status. In the event that the terms of any Phantom Stock
Award provide that it shall become nonforfeitable only after completion of a
specified period of employment, the Committee may decide in each case to what
extent leaves of absence for governmental or military service, illness,
temporary disability, or other reasons shall not be deemed interruptions of
continuous employment.
9.7. Settlement. A Phantom Stock Award shall be settled, to the extent
that it is nonforfeitable, at the time set forth in the applicable Agreement. At
the Committee's discretion, the Phantom Stock Award may be settled in cash,
Common Stock, or a combination of cash and Common Stock. Any payment to be made
in cash shall be made in a lump sum or in installments as prescribed by the
Committee in its sole discretion. Any payment to be made in Common Stock shall
be based on the Fair Market Value of the Common Stock on the payment date. Cash
dividend equivalents may be paid during or after the vesting period with respect
to a Phantom Stock Award, as determined by the Committee. If a payment of cash
is to be made on a deferred basis, the Committee shall establish whether
interest shall be credited, the rate thereof and any other terms and conditions
applicable thereto.
9.8. Shareholder Rights. No Participant shall, as a result of receiving
a Phantom Stock Award, have any rights as a stockholder of the Company or any
Affiliate until the date that the Phantom Stock Award is exercised and then only
to the extent that the Phantom Stock Award is settled by the issuance of Common
Stock.
ARTICLE X
PERFORMANCE AWARDS
10.1. Award. In accordance with the provisions of Article IV, the Board
shall designate each individual to whom a Performance Award is to be made and
shall specify the amount of such award. The amount may be denominated in cash or
in shares of Common Stock.
10.2. Vesting. The Board, on the date of the award, may prescribe that
a Participant's rights in the Performance Award shall be forfeitable or
otherwise restricted for a period of time or subject to such conditions as may
be set forth in the Agreement.
10.3. Performance Objectives. In accordance with Section 10.2, the
Board may prescribe that Performance Awards will become nonforfeitable based on
objectives such as, but not limited to, the Company's, an Affiliate's or an
operating unit's return on equity, earnings per share, total earnings, earnings
growth, return on capital, return on assets, or Fair Market Value.
10.5. Employee Status. In the event that the terms of any Performance
Award provide that it becomes nonforfeitable only after completion of a
specified period of employment, the Committee may decide in each case to what
extent leaves of absence for governmental or military service, illness,
temporary disability, or other reasons shall not be deemed interruptions of
continuous employment.
10.6. Nontransferability. Performance Awards granted under this Plan
shall be nontransferable except by will or by the laws of descent and
distribution. No right or interest of a Participant in a Performance Award shall
be liable for, or subject to, any lien, obligation, or liability of such
Participant.
10.7. Settlement. A Performance Award shall be settled, to the extent
that it is nonforfeitable, at the time set forth in the applicable Agreement. At
the Committee's discretion or as set forth in the Agreement, the Performance
Award may be settled in cash, Common Stock, or a combination of cash and Common
Stock. Any payment to be made in cash shall be made in a lump sum or in
installments as prescribed by the Committee in its sole discretion. Any payment
to be made in Common Stock shall be based on the Fair Market Value of the Common
Stock on the payment date.
10.8. Shareholder Rights. No Participant shall, as a result of
receiving a Performance Share Award, have any rights as a stockholder of the
Company or any Affiliate until the date that the Performance Share Award is
settled and then only to the extent that the Performance Share Award is settled
by the issuance of Common Stock.
ARTICLE XI
LEVERAGED STOCK PURCHASE AWARDS
11.1. Award. In accordance with the provisions of Article IV, the Board
shall designate each individual to whom Leveraged Stock Purchase Awards are to
be granted and shall specify the number of shares of Common Stock covered by
such awards.
11.2. Vesting. The Board, on the date of the award, may prescribe that
a Participant's right to exercise a Leveraged Stock Purchase Award shall be
forfeitable or otherwise restricted for a period of time or subject to such
conditions as may be set forth in the Agreement.
11.3. Performance Objectives. In accordance with Sections 11.2 and
11.4, the Board may prescribe that a Participant's right to exercise a Leveraged
Stock Purchase Award will become nonforfeitable, or the participant's obligation
to pay some or all of the principal or accrued interest on the loan will be
forgiven, based on objectives such as, but not limited to, the Company's, an
Affiliate's or an operating unit's return on equity, earnings per share, total
earnings, earnings growth, return on capital, return on assets, or Fair Market
Value.
11.4. Purchase Loan. The terms on which a loan is made pursuant to a
Leveraged Stock Purchase Award, including without limitation the term of the
loan, the interest charged on the loan, any security for the loan, any
prepayment rights or obligations, and any provisions for the forgiveness of all
or a portion of the principal or accrued interest on the loan, shall be
determined by the Committee in its complete discretion at the time such loan is
made, subject to any restrictions thereon that may be set forth in the Agreement
and any requirements of applicable law, and provided that the amount of the loan
may not exceed the Fair Market Value of the shares of Common Stock purchased
with the loan. Notwithstanding anything to the contrary in this Section 11, the
Company shall not be required to make any loan pursuant to a Leveraged Stock
Purchase Award if the making of such loan would (i) cause the Company to violate
any covenant or similar provision in any indenture, loan agreement or other
agreement, or (ii) violate any applicable federal, state or local law.
11.5. Nontransferability. Leveraged Stock Purchase Awards granted
under this Plan shall be nontransferable.
11.6. Exercise. Subject to the provisions of this Plan and the
applicable Agreement, a Leveraged Stock Purchase Award may be exercised in whole
or in part to the extent that it is nonforfeitable at the time and in the manner
prescribed by the Committee.
11.7. Employee Status. In the event that the terms of any Leveraged
Stock Purchase Award provide that the Participant's right to exercise it shall
become nonforfeitable only after completion of a specified period of employment,
the Committee may decide in each case to what extent leaves of absence for
governmental or military service, illness, temporary disability, or other
reasons shall not be deemed interruptions of continuous employment.
11.8. Shareholder Rights. No Participant shall, as a result of
receiving a Leveraged Stock Purchase Award, have any rights as a stockholder of
the Company or any Affiliate until the date that the Leveraged Stock Purchase
Award is exercised.
ARTICLE XII
CHANGE IN CAPITAL STRUCTURE
The existence of outstanding Options shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issuance of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of the Common Stock outstanding, without
receiving compensation therefore in money, services or property, then (i) the
number, class, and per share price of shares of Common Stock subject to
outstanding Stock Awards, Options, SARs, Phantom Stock Awards, Performance
Awards and Leveraged Stock Purchase Awards hereunder shall be appropriately
adjusted in such a manner as to entitle a holder to receive, for the same
aggregate cash consideration, the same total number and class of shares as he
would have received had the Optionee exercised his or her Option, SAR, Phantom
Stock Award, Performance Award or Leveraged Stock Purchase Award or received his
or her Stock Award in full immediately prior to the event requiring the
adjustment; and (ii) the number and class of shares then reserved for issuance
under the Plan shall be adjusted by substituting for the total number and class
of shares of Common Stock then reserved that number and class of shares of
Common Stock that would have been received by the owner of an equal number of
outstanding shares of each class of Common Stock as the result of the event
requiring the adjustment.
After a merger of one or more corporations into the Company or after a
consolidation of the Company and one or more corporations in which the Company
shall be the surviving company, each holder of an Option, SAR, Phantom Stock
Award, Performance Award or Leveraged Stock Purchase Award shall, at no
additional cost, be entitled upon exercise of Option, SAR, Phantom Stock Award,
Performance Award or Leveraged Stock Purchase Award to receive (subject to any
required action by stockholders) in lieu of the number and class of shares as to
which such Option, SAR, Phantom Stock Award, Performance Award or Leveraged
Stock Purchase Award shall then be so exercisable, the number and class of
shares of stock or other securities to which such holder would have been
entitled pursuant to the terms of the agreement of merger or consolidation if,
immediately prior to such merger or consolidation, such holder had been the
holder of record of the number and class of shares of Common Stock equal to the
number and class of shares as to which such Option, SAR, Phantom Stock Award,
Performance Award or Leveraged Stock Purchase Award shall be so exercised.
If the Company is merged into or consolidated with another company
under circumstances where the Company is not the surviving company, or if the
Company is liquidated, or sells or otherwise disposes of substantially all of
its assets to another company while unvested Stock Awards, Options, SARs,
Phantom Stock Awards, Performance Awards or Leveraged Stock Purchase Awards
remain outstanding under the Plan, unless provisions are made in connection with
such transaction for the continuance of the Plan and/or the assumption or
substitution of such awards, with appropriate adjustments as to the number and
kind of shares and prices, then all outstanding Stock Awards, Options, SARs,
Phantom Stock Awards, Performance Awards and Leveraged Stock Purchase Awards
shall be vested as of the effective date of any such merger, consolidation,
liquidation, or sale (the "corporate event").
Except as previously expressly provided, neither the issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, for cash or property, or for labor or services either
upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, nor the increase or decrease of the number
of authorized shares of stock, nor the addition or deletion of classes of stock,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number, class or price of shares of Common Stock then subject to outstanding
Options.
Adjustment under the preceding provisions of this section will be made
by the Committee, whose determination as to what adjustments will be made and
the extent thereof will be final, binding, and conclusive. No fractional
interests will be issued under the Plan on account of any such adjustment. No
adjustment will be made in a manner that causes an Incentive Stock Option to
fail to continue to qualify as an Incentive Stock Option under the Code.
The Board may grant Stock Awards, Options, SARs, Phantom Stock Awards,
Performance Awards and Leveraged Stock Purchase Awards in substitution for
performance shares, phantom shares, stock awards, stock options, stock
appreciation rights, or similar awards held by an individual who becomes an
employee of the Company or an Affiliate in connection with a transaction
described in this Article XII. Notwithstanding any provision of the Plan (other
than the limitation of Section 5.1), the terms of such substituted Stock Awards,
Options, SARs, Phantom Stock Awards, Performance Awards and Leveraged Stock
Purchase Awards shall be as the Board, in its discretion, determines is
appropriate.
ARTICLE XIII
COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES
No Option, SAR, Phantom Stock Award, Performance Award or Leveraged
Stock Purchase Award shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made under this Plan except in compliance with all applicable federal and
state laws and regulations (including, without limitation, withholding tax
requirements), any listing agreement to which the Company is a party, and the
rules of all domestic stock exchanges on which the Company's Common Stock may
then be listed. The Company shall have the right to rely on an opinion of its
counsel as to such compliance. Any share certificate issued to evidence Common
Stock when a Stock Award is granted or for which an Option, SAR, Phantom Stock
Award, Performance Award or Leveraged Stock Purchase Award is exercised may bear
such legends and statements as the Committee may deem advisable to assure
compliance with federal and state laws and regulations. No Option, SAR, Phantom
Stock Award or Leveraged Stock Purchase Award shall be exercisable, no Stock
Award or Performance Award shall be granted, no Common Stock shall be issued, no
certificate for shares shall be delivered, and no payment shall be made under
this Plan until the Company has obtained such consent or approval as the
Committee may deem advisable from regulatory bodies having jurisdiction over
such matters.
ARTICLE XIV
GENERAL PROVISIONS
14.1. Tax Withholding. Whenever the Company proposes or is required to
distribute Common Stock under the Plan, the Company may require the recipient to
remit to the Company an amount sufficient to satisfy any federal, state and
local tax withholding requirements prior to the delivery of any certificate for
such shares or, in the discretion of the Committee, the Company may withhold
from the Common Stock to be delivered shares sufficient to satisfy all or a
portion of such tax withholding requirements. Whenever under the Plan payments
are to be made in cash, such payments may be net of an amount sufficient to
satisfy any Federal, state and local tax withholding requirements.
14.2. Employee Status. For purposes of determining the applicability of
Section 422 of the Code (relating to incentive stock options), or in the event
that the terms of any Option, SAR, Phantom Stock Award, Performance Award or
Leveraged Stock Purchase Award provide such award may be exercised only during
employment or within a specified period of time after Termination of Employment
or that a Stock Award or Performance Award shall become transferable and
nonforfeitable only after completion of a specified period of employment, the
Committee may decide to what extent leaves of absence for governmental or
military service, illness, temporary disability, or other reasons shall not be
deemed interruptions of continuous employment.
14.3. Effect on Employment and Service. Neither the adoption of this
Plan, its operation, nor any documents describing or referring to this Plan (or
any part thereof) shall confer upon any individual any right to continue in the
employ or service of the Company or an Affiliate or in any way affect any right
and power of the Company or an Affiliate or in any way affect any right and
power of the Company or an Affiliate to terminate the employment or service of
any individual at any time with or without assigning a reason therefor.
14.4. Holding Period. Notwithstanding anything to the contrary in the
Plan, Common Stock acquired through the exercise of an Option, SAR, Phantom
Stock Award, Performance Award or Leveraged Stock Purchase Award granted, or the
grant of a Stock Award, to a Committee member may not be disposed of by such
member during the six-month period beginning on the date the Option, SAR, Stock
Award, Phantom Stock Award, Performance Award or Leveraged Stock Purchase is
granted to such Committee member.
14.5. Unfunded Plan. The Plan, insofar as it provides for grants, shall
be unfunded, and the Company shall not be required to segregate any assets that
may at any time be represented by grants under this Plan. Any liability of the
Company to any person with respect to any grant under this Plan shall be based
solely upon any contractual obligations that may be created pursuant to this
Plan. No such obligation of the Company shall be deemed to be secured by any
pledge of, or other encumbrance on, any property of the Company.
14.6. Rules of Construction. Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
14.7. Choice of Law. The Plan and all Agreements entered into under the
Plan shall be interpreted under the laws of the State of Maryland, without
regard to its conflict of laws provisions.
ARTICLE XV
AMENDMENT
The Board may amend or terminate this Plan from time to time; provided,
however, that no amendment may become effective until shareholder approval is
obtained if the amendment increases the aggregate number of shares of Common
Stock that may be issued under the Plan. No amendment shall, without a
Participant's consent, adversely affect any rights of such Participant under any
outstanding Stock Award, Option, SAR, Phantom Stock Award, Performance Award or
Leveraged Stock Purchase Award outstanding at the time such amendment is made.
ARTICLE XVI
EFFECTIVE DATE OF PLAN, DURATION OF PLAN
16.1 The Plan became effective as of February 23, 1999 upon
adoption by the Board, subject to approval within one (1) year by the holders of
a majority of the shares of Common Stock.
16.2 Unless previously terminated, the Plan will terminate ten
(10) years after the earlier of (i) the date the Plan is adopted by the Board,
or (ii) the date the Plan is approved by the shareholders, except that Stock
Awards, Options, SARs, Phantom Stock Awards, Performance Awards and Leveraged
Stock Purchase Awards that are granted under the Plan prior to its termination
will continue to be administered under the terms of the Plan until the awards
terminate or are exercised.
Date:____________________ CNL American Properties Fund, Inc.
By:___________________________
Name:_________________________
Title:________________________
<TABLE>
<CAPTION>
<S> <C>
P R O X Y CNL AMERICAN PROPERTIES FUND, INC. PROXY CNL AMERICAN PROPERTIES FUND, INC.
The undersigned hereby appoints James M. Seneff, Jr. and Robert A. Bourne, and Please mark only one box for each item.
each of them, as proxies, with full power of substitution in each, to vote all
shares of common stock of CNL American Properties Fund, Inc. (the "Company")
which the undersigned is entitled to vote, at the Annual Meeting of Stockholders
of the Company to be held on May 27, 1999, at 10:30 a.m., local time, and any DIRECTORS
adjournment thereof, on all matters set forth in the Notice of Annual Meeting ---------
and Proxy Statement, dated April 13, 1999, a copy of which has been received by
the undersigned, as follows:
Please indicate your director and proposal selections by marking the appropriate 1. |_| FOR ALL NOMINEES
box. Detach proxy and return in enclosed envelope.
|_| WITHHOLD FOR ALL NOMINEES
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING ITEMS:
|_| WITHHOLD AUTHORITY TO VOTE FOR ANY
DIRECTORS INDIVIDUAL NOMINEE. WRITE NUMBER(S)
OF NOMINEE(S) BELOW.
1. Election of Five Directors
Nominees: USE NUMBERS ONLY _______________
1 - Robert A. Bourne
2 - G. Richard Hostetter
3 - Richard C. Huseman PROPOSALS
4 - J. Joseph Kruse ---------
5 - James M. Seneff, Jr.
2. |_| FOR |_| AGAINST |_| ABSTAIN
PROPOSALS
3. |_| FOR |_| AGAINST |_| ABSTAIN
2. Proposal for a one-for-two reverse stock split of the Company's common
stock (See Proxy Statement page 9) 4. |_| FOR |_| AGAINST |_| ABSTAIN
3. Proposal for the Company's 1999 Performance Incentive Plan (See Proxy Dated: ________________________, 1999
Statement page 15)
_________________________________
4. Other Matters:
Grant authority upon such other matters as may come before the Meeting _________________________________
as they determine to be in the best interest of the Company. Signature(s) of Stockholder(s)
(ALL PARTIES MUST SIGN)
PLEASE DATE, SIGN AND RETURN YOUR PROXY PROMPTLY IN THE RETURN ENVELOPE
PROVIDED.
IF YOU SIGN, DATE AND MAIL YOUR PROXY WITHOUT INDICATING HOW YOU WANT TO VOTE,
YOUR PROXY WILL BE COUNTED AS A VOTE "FOR" THE MATTERS STATED. IF YOU FAIL TO
RETURN YOUR PROXY, YOUR PROXY WILL NOT BE COUNTED. EACH STOCKHOLDER IS URGED TO
SUBMIT A SIGNED AND DATED PROXY.
IMPORTANT: Please mark this Proxy, date it and sign it exactly as your name(s)
appear(s). Joint owners should each sign personally. Trustees and others signing
in a representative or fiduciary capacity should indicate their full titles in
such capacity.
</TABLE>
