SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
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Check the appropriate box: [_] ConfidentialFor Use of the
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[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Commercial Net Lease Realty, Inc.
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(Name of Registrant as Specified in Its Charter)
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COMMERCIAL NET LEASE REALTY, INC.
450 S. Orange Avenue, Suite 900
Orlando, Florida 32801
Tel: 407-265-7348
April 3, 2001
To Our Stockholders:
You are cordially invited to attend the annual meeting of stockholders of
Commercial Net Lease Realty, Inc. (the "Company") on May 31, 2001 at 9:30
a.m., at CNL Center, 450 South Orange Avenue, 9th Floor, Orlando, Florida
32801. The directors and officers of the Company look forward to greeting you
personally. Enclosed for your review are the Proxy, Proxy Statement and Notice
of Meeting for the Annual Meeting of Stockholders, which describe the business
to be conducted at the meeting. We will also report on matters of current
interest to our stockholders.
Whether you own a few or many shares of stock of Commercial Net Lease
Realty, it is important that your shares be represented. If you cannot
personally attend the meeting, we encourage you to make certain you are
represented at the meeting by signing and dating the accompanying proxy card
and promptly returning it in the enclosed envelope. Returning your proxy card
will not prevent you from voting in person, but will assure that your vote
will be counted if you are unable to attend the meeting.
Sincerely,
/s/ James M. Seneff, Jr. /s/ Kevin B. Habicht
------------------------------- -------------------------------
James M. Seneff, Jr. Kevin B. Habicht
Chairman of the Board and Chief Executive Officer
Executive Vice President, Chief
Financial Officer and
Secretary/Treasurer
COMMERCIAL NET LEASE REALTY, INC.
450 S. Orange Avenue, Suite 900
Orlando, Florida 32801
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 31, 2001
----------------
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of COMMERCIAL
NET LEASE REALTY, INC. will be held at 9:30 a.m. local time, on May 31, 2001,
at CNL Center, 450 South Orange Avenue, 9th Floor, Orlando, Florida 32801, for
the following purposes:
1. To elect eight directors.
2.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 March 26, 2001, will be
entitled to notice of and to vote at the annual meeting or at any adjournment
thereof.
Stockholders are cordially invited to attend the meeting in person. WHETHER
OR NOT YOU NOW PLAN TO ATTEND THE MEETING, YOU ARE ASKED TO COMPLETE, DATE,
SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY CARD FOR WHICH A POSTAGE PAID RETURN
ENVELOPE IS PROVIDED. If you decide to attend the meeting you may revoke your
Proxy and vote your shares in person. It is important that your shares be
voted.
By Order of the Board of Directors,
/s/ Kevin B. Habicht
-------------------------------
Kevin B. Habicht
Secretary
April 3, 2001
Orlando, Florida
COMMERCIAL NET LEASE REALTY, INC.
450 S. Orange Avenue, Suite 900
Orlando, Florida 32801
Tel: 407-265-7348
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PROXY STATEMENT
----------------
This Proxy Statement is furnished by the Board of Directors of Commercial
Net Lease Realty, Inc. (the "Company") in connection with the solicitation by
the Board of Directors of proxies to be voted at the annual meeting of
stockholders to be held on May 31, 2001, 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 March 26, 2001 (the "Record
Date"), will be entitled to vote.
Any proxy, if received in time, properly signed and not revoked, will be
voted at such meeting in accordance with the directions of the stockholder. If
no directions are specified, the proxy will be voted FOR the election of
directors. Any stockholder giving a proxy has the power to revoke it at any
time before it is exercised. A proxy may be revoked (1) by delivery of a
written statement to the Secretary of the Company stating that the proxy is
revoked, (2) by presentation at the annual meeting of a subsequent proxy
executed by the person executing the prior proxy, or (3) by attendance at the
annual meeting and voting in person.
Votes cast in person or by proxy at the annual meeting will be tabulated and
a determination will be made as to whether or not a quorum is present. The
Company will treat abstentions as shares that are present and entitled to vote
for purposes of determining the presence or absence of a quorum, but as
unvoted for purposes of determining the approval of any matter submitted to
the stockholders. If a broker submits a proxy indicating that it does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote with
respect to such matter.
Solicitation of proxies will be primarily by mail. However, directors and
officers of the Company may also solicit proxies by telephone or telegram or
in person. All of the expenses of preparing, assembling, printing and mailing
the materials used in the solicitation of proxies will be paid by the Company.
Arrangements may be made with brokerage houses and other custodians, nominees
and fiduciaries to forward soliciting materials, at the expense of the
Company, to the beneficial owners of shares held of record by such persons. It
is anticipated that this Proxy Statement and the enclosed Proxy will be mailed
to stockholders on or about April 10, 2001.
As of the Record Date 30,502,374 shares of the common stock of the Company
(the "Common Stock") 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, executive officers and directors of the
Company had the power to vote approximately 6.4% of the outstanding shares of
Common Stock.
TABLE OF CONTENTS
Page
----
PROPOSAL I: ELECTION OF DIRECTORS........................................ 3
Nominees............................................................... 3
Compensation of Directors.............................................. 6
Committees of the Board of Directors................................... 7
Executive Officers..................................................... 7
Audit Committee Report................................................. 9
Audit Committee Disclosure............................................. 10
EXECUTIVE COMPENSATION.................................................. 11
Summary Compensation Table............................................. 11
Option Values at December 31, 2000..................................... 12
Employment Agreements.................................................. 12
COMPENSATION COMMITTEE REPORT........................................... 12
PERFORMANCE GRAPH....................................................... 14
SECURITY OWNERSHIP....................................................... 15
Section 16(a) Beneficial Ownership Reporting Compliance................. 16
CERTAIN TRANSACTIONS..................................................... 16
INDEPENDENT AUDITORS..................................................... 17
OTHER MATTERS............................................................ 18
PROPOSALS FOR NEXT ANNUAL MEETING........................................ 18
EXHIBIT A--CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF
COMMERCIAL NET LEASE REALTY, INC........................................ A-1
2
PROPOSAL I
ELECTION OF DIRECTORS
Nominees
The persons named below have been nominated by the Board of Directors of the
Company (the "Board of Directors") for election as directors to serve until
the next annual meeting of stockholders or until their successors shall have
been elected and qualified. Mr. Lanier became a director in 1988 and Mr. Clark
in 1991. Messrs. Bourne and Seneff became directors in 1992. Mr. Hinkle became
a director in 1993. Messrs. Habicht, Jennings and Ralston became directors in
2000. 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 nominees below unless
authority is withheld. Stockholders may withhold authority to vote for any
nominee, in lieu of voting for the entire slate of directors, by lining
through or striking out the name of any nominee listed below the pertinent
instruction on the proxy card.
Name and Age Background
------------ ----------
Robert A. Bourne, 53........... Mr. Bourne has served as Vice Chairman of the
Board since February 1996. Previously, Mr.
Bourne served as Secretary and Treasurer of
the Company from February 1996 through
December 31, 1997. Additionally, he has
served as a director of the Company since
June 1992. Previously, he served as Vice
Chairman of the Board, Secretary and
Treasurer of CNL Realty Advisors, Inc. (the
external advisor of the Company from July
1992 through December 31 1997, the "Advisor")
from February 1996 until December 1997, as
President of the Company from July 1992 until
February 1996 and as President and a director
of the Advisor from 1991 until February 1996.
On January 1, 1998, the Advisor merged into a
wholly owned subsidiary of the Company which
resulted in the Company becoming a self-
administered and self-managed real estate
investment trust. See "Certain Transactions."
Mr. Bourne has also served as Vice Chairman
of CNL American Properties Fund, Inc. since
February 1999 and as a director since May
1994. He also served as President of CNL
American Properties Fund, Inc. from May 1994
to February 1999 and as Treasurer from
February 1999 through August 1999. Mr. Bourne
has also served as President and as a
director of CNL Hospitality Properties, Inc.
and CNL Health Care Properties, Inc. since
June 1996 and December 1997, respectively.
Mr. Bourne also serves as President and
Treasurer of CNL Financial Group, Inc. ("CNL
Group"). In addition, Mr. Bourne is
President, Treasurer, a director and a
registered principal of CNL Securities Corp.,
President, Treasurer and a director of CNL
Investment Company, President of CNL Realty
Corp. and Chief Investment Officer,
Treasurer, director and, until July 1997,
also served as President, of CNL
Institutional Advisors, Inc., a registered
investment advisor. All of the entities
discussed in the preceding sentence are
affiliates of CNL Group, a privately held,
diversified real estate company. Since
joining CNL Group in 1979, Mr. Bourne has
been active in the acquisition, development
and management of real estate projects
throughout the United States. Mr. Bourne
formerly was a Certified Public Accountant
with Coopers & Lybrand.
3
Name and Age Background
------------ ----------
Edward Clark, 81............ Mr. Clark currently is a director of two private
companies and a trustee of a private trust. From
1984 until July 1992, Mr. Clark served as
President of the Company. From 1982 through
January 1998, he was employed by Investors
Management Corporation, a privately held
corporation. While employed by Investors
Management Corporation, Mr. Clark provided
consulting services with respect to tax and
financial matters to Investors Management
Corporation, Golden Corral Corporation, a
subsidiary of Investors Management Corporation,
and various other companies. From 1966 to 1980,
Mr. Clark, a certified public accountant, was a
partner in the public accounting firm of Peat
Marwick Mitchell & Co.
Kevin B. Habicht, 42 ....... Mr. Habicht has been Executive Vice President
and Chief Financial Officer of the Company since
December 1993 and has been Secretary and
Treasurer of the Company since January 1998.
Since May 1999, Mr. Habicht has served as a
director of Commercial Net Lease Realty
Services, Inc. ("Services"), a 95% owned, non-
controlled taxable subsidiary of the Company.
Mr. Habicht previously served as Assistant
Secretary of the Company from December 1993
through December 1997, as Vice President of the
Company from July 1992 through December 1993, as
Assistant Secretary of the Advisor from
December 1993 through December 1997, and as Vice
President of the Advisor from its inception in
1991 through December 1993. From 1990 through
December 1997, Mr. Habicht served as Senior Vice
President of CNL Institutional Advisors, Inc.
and from 1992 through 1997, Mr. Habicht served
as Treasurer of CNL Investment Company, Senior
Vice President of CNL Management Company and
Treasurer of CNL Securities Corp. From 1981 to
1983, Mr. Habicht, a Certified Public Accountant
and a Chartered Financial Analyst, was employed
by Coopers & Lybrand, Certified Public
Accountants. Mr. Habicht is the brother-in-law
of James M. Seneff, Jr., Chief Executive Officer
and Chairman of the Board of the Company.
Clifford R. Hinkle, 52 ..... Since 1991, Mr. Hinkle has been a founder,
director and executive officer of the Flagler
companies and related companies, including
Flagler Capital Corporation (1991-1998), and
Flagler Holdings, Inc., a merchant banking
company, of which Mr. Hinkle has been the
Chairman and Chief Executive Officer since 1996.
He has been a director of Century Capital
Markets, LLC, a private financial consulting
company since 1999. Since 2000, Mr. Hinkle has
been a Vice President and Director of Murphy
Investment Management Company, a registered
investment advisor. From 1996 to 2000, Mr.
Hinkle was a director of Integrated
Orthopaedics, Inc., an American Stock Exchange
company, which owns orthopaedic physician
practices and related facilities and was a
director of Prime Succession, Inc., a private
funeral services company. Additionally, Mr.
Hinkle was a director of MHI Group, Inc., a New
York Stock Exchange company, which owned and
operated funeral homes and cemeteries from
November 1993 until November 1995, and was the
Chief Executive Officer of MHI Group, Inc. from
April 1995 until November 1995 when it was
acquired by a subsidiary of The Loewen Group.
From 1987 to 1991, Mr. Hinkle was the Executive
Director and Chief Investment Officer of the
State Board of Administration of Florida and
managed over $40 billion in various trust funds.
4
Name and Age Background
------------ ----------
Richard B. Jennings, 57 .... Mr. Jennings currently serves as President of
Realty Capital International LLC, a real estate
investment banking firm, which he founded in
1991, and as President of Jennings Securities
LLC, a National Association of Securities
Dealers, Inc. ("NASD") member securities firm,
which he founded in 1995. From 1990 to 1991, Mr.
Jennings served as Senior Vice President of
Landauer Real Estate Counselors, and from 1986
to 1989, Mr. Jennings served as Managing
Director--Real Estate Finance at Drexel Burnham
Lambert Incorporated. From 1969 to 1986, Mr.
Jennings oversaw the REIT investment banking
business at Goldman, Sachs & Co. During his
tenure at Goldman, Sachs & Co., Mr. Jennings
founded and managed the Mortgage Finance Group
from 1979 to 1986. Mr. Jennings also serves as
an outside Director of Alexandria Real Estate
Equities, Inc. and MBOP Liquidating Trust. He is
a licensed NASD Principal and a New York Real
Estate Broker.
Ted B. Lanier, 66 .......... Mr. Lanier was the Chief Executive Officer of
the Triangle Bank and Trust Company, Raleigh,
North Carolina ("Triangle"), from January 1988
until March 1991. Mr. Lanier also was the
Chairman of Triangle from January 1989 until
March 1991 and its President from January 1988
until January 1989. Since his retirement in 1991
as Chairman and Chief Executive Officer of
Triangle, Mr. Lanier has managed his personal
investments and managed investment accounts for
various individuals and trusts.
Gary M. Ralston, 50 ........ Mr. Ralston has served as President and Chief
Operating Officer of the Company since February
1996. Since May 1999, Mr. Ralston has served as
a director of Services. From February 1996 until
December 1997 he served as President of the
Advisor. From December 1993 until February 1996
he served as Executive Vice President and Chief
Operating Officer of the Company. Mr. Ralston
previously served as Vice President of the
Company from July 1992 through December 1993 and
as Vice President of the Advisor from its
inception in 1991 through December 1993. From
1988 to 1992, he also served as a Senior Vice
President of CNL Properties, Inc., a real estate
investment and asset/property management company
affiliated with CNL Group, Inc. From 1983 until
1988, Mr. Ralston was Vice President of ENCO, a
real estate investment and asset/property
management firm located in Lakeland, Florida.
Mr. Ralston holds the Certified Commercial
Investment Member, Society of Industrial and
Office Realtors, Specialist in real estate
securities and Counselor of Real Estate
designations and is also a Florida licensed Real
Estate Broker, Mortgage Broker and Certified
Building Contractor. Mr. Ralston is a member of
the International Council of Shopping Centers, a
full member of the Urban Land Institute, a
member of the Board of Governors of the National
Association of Real Estate Investment Trusts, a
member of the Governing Council of the
Commercial Investment Real Estate Institute and
a member of the Steering Committee of the
Capital Consortium.
5
Name and Age Background
------------ ----------
James M. Seneff, Jr., 54 ... Mr. Seneff has been Chief Executive Officer of
the Company since July 1992 and Chairman of the
Board of the Company since June 1992 Mr. Seneff
has served as Chief Executive Officer, director,
and principal stockholder of CNL Group since its
formation in 1973. From 1991 to December 1997,
Mr. Seneff served as Chief Executive Officer and
Chairman of the Board of the Advisor. Mr. Seneff
has served as Chairman of the Board, Chief
Executive Officer and a director of CNL
Hospitality Properties, Inc. and CNL Health Care
Properties, Inc. since 1996 and 1997,
respectively. He has served as Chairman of the
Board and a director of CNL American Properties
Fund, Inc. since its inception in 1994 and
served as its Chief Executive Officer from 1994
through August 1999. 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 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 serves as Chairman of
the Board of CNL Bank and previously served as a
member of the board of directors of First Union
National Bank of Florida and as a member of the
Orlando Advisory Board of First Union. From 1986
to 1994, Mr. Seneff served on the Florida
Investment Advisory Council (the "Council"),
which oversees the $40 billion Florida state
retirement plan, and was Chairman of the Council
from 1991 to 1992. Since 1971, Mr. Seneff has
been active in the acquisition, development and
management of real estate projects throughout
the United States. Mr. Seneff is the brother-in-
law of Kevin B. Habicht, Chief Financial Officer
of the Company and a member of the board of
directors.
In the event that any nominee(s) should be unable to accept the office of
director, which is not anticipated, it is intended that the persons named in
the Proxy will vote FOR the election of such other person in the place of such
nominee(s) for the office of director as the Board of Directors may recommend.
The affirmative vote of a plurality of the shares of Common Stock present in
person or represented by proxy and entitled to vote is required for the
election of directors. Any director that does not receive an affirmative vote
of a plurality of the shares of Common Stock will not be elected.
A majority of the Company's directors are required to be independent, as
that term is defined in the Company's Bylaws, as amended (the "Bylaws").
Messrs. Bourne, Clark, Hinkle, Jennings and Lanier qualify as independent
directors (the "Independent Directors"). Independent Directors are those
persons who are not affiliated, directly or indirectly, with any person,
corporation, association, company, trust, partnership (general or limited) or
other organization to whom the Board of Directors has delegated management
duties. In addition, an Independent Director cannot perform any services for
the Company other than as a director.
Compensation of Directors
During the year ended December 31, 2000, each director who was a director
for the entire year was paid $12,000 for serving on the Board of Directors.
Each director received $1,000 per Board of Directors meeting attended and $750
per committee meeting attended. However, Messrs. Habicht, Ralston and Seneff,
have waived their director's fees. The Board of Directors believes this
compensation level has been comparable to that provided by many other
companies in the real estate investment trust ("REIT") industry.
6
The Board of Directors met seven times during the year ended December 31,
2000. Each nominated member attended at least 83% of the total meetings of the
Board of Directors and of any committee on which he served.
Committees of the Board of Directors
The Company has a standing Audit Committee, the members of which are
selected by the full Board of Directors each year. The current members of the
Audit Committee are Messrs. Clark and Lanier, who have served since June 1992,
and Mr. Hinkle, who has served since June 1998. 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. Additionally, the Audit
Committee reviews the adequacy of the Company's internal accounting controls.
The Audit Committee met four times during the year ended December 31, 2000.
The Company has a standing Compensation Committee, the members of which are
selected by the full Board of Directors each year. The current members of the
Compensation Committee are Messrs. Bourne, Hinkle and Jennings. The
Compensation Committee is responsible for establishing and administering
executive compensation programs including administration of the 2000
Commercial Net Lease Realty, Inc. Performance Incentive Plan (the "2000 Plan")
as well as approval of changes in directors' fees. The Compensation Committee
met two times during the year ended December 31, 2000.
The Company has a standing Nominating Committee. The current members of the
Nominating Committee are Messrs. Bourne, Clark, Jennings and Lanier. The
Nominating Committee's primary responsibility is to consider potential new
directors for the Company and recommend candidates to the Board. The
Nominating Committee met once during the year ended December 31, 2000.
Executive Officers
The executive officers of the Company are as follows:
Name Position
---- --------
Chief Executive Officer and Chairman of the
James M. Seneff, Jr............ Board
Gary M. Ralston................ President and Chief Operating Officer
Kevin B. Habicht............... Executive Vice President, Chief Financial
Officer,
Secretary and Treasurer
The background of Messrs. Seneff, Ralston and Habicht are described at
"PROPOSAL I--ELECTION OF DIRECTORS--Nominees."
The Company also employs certain other senior officers listed below:
Mez R. Birdie, age 51, has served as Senior Vice President of Asset
Management of the Company since April 1998. From January 1, 1998 to April
1998, Mr. Birdie served as Vice President of Asset Management of the Company.
From December 1993 to December 1997, Mr. Birdie served as Vice President of
Asset Management of the Advisor, from June 1992 to November 1993, Mr. Birdie
served as Director of Retail Management of the Company and from 1987 to 1992,
Mr. Birdie served as Director of Property Management for Charles Wayne
Properties, Inc. Mr. Birdie has been awarded the Certified Commercial
Investment Member, Certified Property Manager and Senior Certified Shopping
Center Manager professional designations, and has a total of 20 years
experience in the field of commercial asset management. Mr. Birdie is a member
of the faculty and has served on the Executive Committee of the Institute of
Real Estate Management.
Courtney S. Hubbard, age 37, has served as Director of Due Diligence and
Research of the Company since January 1, 1998. From February 1995 to December
1997, Ms. Hubbard served as Director of Due Diligence and Research of the
Advisor. Prior to joining the Advisor, Ms. Hubbard was a senior associate at
Clayton, Roper & Marshall, a real estate appraisal and consulting firm (1991
to 1995), and a senior associate with Kampe
7
Appraisals, Inc. (1989 to 1991). She earned a Master of Arts Degree in Real
Estate from the University of Florida. Ms. Hubbard holds the MAI (Member,
Appraisal Institute) and CCIM (Certified Commercial Investment Member)
designations, and serves on the Steering Committee for the University of
Florida Real Estate Alumni Network.
Louis Nimkoff, age 38, Vice President of Asset Management, joined the
Company in April 1998. His responsibilities include handling the Company's
asset management services and managing retailers' surplus properties. Mr.
Nimkoff holds the Certified Property Manager (CPM) and the Certified
Commercial Investor Member (CCIM) professional designations. Prior to joining
the Company, Mr. Nimkoff was the President/Owner of Commercial Real Estate
Group in Orlando starting in 1990. Previously, he was vice president with The
First Republic Corporation of America from 1983--1990. He was named as a
member of the Board of Directors for The First Republic Corporation of America
which owned and managed more than 3 million square feet of commercial space
including more than 1 million square feet of retail space. He also serves on
the executive committee of the Greater Orlando IREM chapter and the board of
directors for the Florida CCIM chapter.
Dawn A. Peterson, age 37, has served as Vice President and Controller of the
Company since 1999. Ms. Peterson served as Director of Accounting and
Financial Reporting of the Company from January 1, 1998 until December 1999
and of the Advisor from July 1994 until December 1997. From 1991 to 1994, Ms.
Peterson was employed by Coopers & Lybrand as a Certified Public Accountant
(CPA). Ms. Peterson earned a Bachelor of Science degree in Business
Administration and a Master of Science Degree in Accountancy from the
University of Central Florida. She is a member of the American Institute of
Certified Public Accountants.
Commercial Net Lease Realty Services, Inc. is a 95% owned, non-controlled
taxable subsidiary of the Company. Services provides development and leasing
services to the Company and third parties and employs the following senior
officers:
John K. Awsumb, age 54, has served as Senior Vice President of Services
since May 1, 1999 and held the same position at the Company from January 1,
1998 until May 1, 1999. From October 1992 to December 1997, Mr. Awsumb served
as Senior Vice President of CNL Development Company, Inc. (the "Development
Company"), which was merged with the Advisor in April 1997. Prior to joining
the Development Company, from 1973 to 1992, Mr. Awsumb was a founding
principal of Vickerey/Oversat/Awsumb Associates, Inc., a national
architecture, planning, and interior design firm in Orlando, Florida and
Chicago, Illinois. Mr. Awsumb served as vice chairman of that company from
1976 to 1992. From 1975 to 1981, Mr. Awsumb served as Chairman of the Downtown
Development Board of the City of Orlando. Mr. Awsumb is a member of the
American Institute of Architects and from 1987 to 1989 served as president and
State director of the mid-Florida chapter. Mr. Awsumb is currently Vice
President of the State Association of the American Institute of Architects.
Jay Bastian, age 50, has served as Senior Vice President of Acquisitions of
Services since May 1, 1999 and previously held the same position at the
Company, serving with the Company and its affiliate CNL Investment Company
from 1989 to 1999. He is responsible for developing new acquisitions for the
Company. Prior to 1989, he was Director of Real Estate for a number of firms
including Rite Aid, Quaker State Minit Lube, Wendy's International, and a
Holiday Inn franchisee for a total corporate real estate career of 26 years.
He is a member of the National Association of Corporate Executives, the
International Council of Shopping Centers, and the Turnaround Management
Association.
Joseph A. Ciardiello, age 53, has served as Senior Vice President of
Corporate Acquisitions of Services since May 1, 1999 and held the same
position at the Company from January 1, 1998 until May 1, 1999. From May 1996
through December 1997, Mr. Ciardiello served as Senior Vice President of
Corporate Acquisitions of the Advisor. From 1992 to 1996, he served as Vice
President of Real Estate and Development at Color Tile Inc. Prior to that he
served as Vice President of Real Estate Price Club East Coast and Vice
President of Development at Marriott Corporation. Mr. Ciardiello also served
as National Director of Real Estate at McDonalds Corporation where he
developed McDonalds' first joint venture real estate projects. Mr. Ciardiello
holds the Certified Commercial Investment Member designation and is a member
of the National Association of Corporate Real Estate Executives (NACORE). Mr.
Ciardiello has over 20 years of retail real estate experience.
8
Alexander M. Dmyterko, age 41, has served as President and Director of
Services since May 1, 1999. Previously, he served as Executive Vice President
and Chief Operating Officer--Build to Suit from January 1, 1998 until May 1,
1999. From March 1997 to December 1997, Mr. Dmyterko served as Build to Suit
Chief Operating Officer of the Development Company. Before joining the
Development Company, Mr. Dmyterko was a founder of, and from 1993 to 1997
served as Executive Vice President/Managing Director of, Trammell Crow BTS.
From 1991 to 1993 Mr. Dmyterko served as Managing Director -- Retail for
Trammell Crow. From 1987 to 1991 Mr. Dmyterko was a Project Manager and
Marketing Representative at Trammell Crow. Mr. Dmyterko is a member of the
ICSC--Florida Program Committee, the Urban Land Institute and the Mortgage
Bankers Association.
Diane L. McCarey, ,age 46, Vice President of Build to Suit, is responsible
for the management of Service's and the Company's build to suit program for
numerous retailers in the state of Florida. She joined Services on May 1,
1999, as Director of Build to Suit, and held the same position at the Company
from March 1995 until that time. Prior to joining the Company, Ms. McCarey was
co-owner of McCarey Builders, a custom home building company from 1987 to 1995
and senior associate for Matonis, MacDermott & Company, specializing in
commercial property and eminent domain appraisals from 1985 to 1991. She has
20 years of real estate experience encompassing a broad range of development,
construction and consulting disciplines. Ms. McCarey graduated from the
University of Florida with a Bachelor of Science degree in Real Estate. She is
a licensed real estate salesman, holds the Certified Commercial Investment
Member (CCIM) professional designation, is a member of the International
Council of Shopping Centers, serves on the Steering Committee for the
University of Florida Real Estate Alumni Network and serves on the board of
directors for CCIM Central District, co-chairing the Education Committee.
Cynthia C. Shelton, age 47, is the Vice President of Business Development
where she is responsible for developer alliances and new business for the BTS
Group. Prior to that she served as Vice President of Acquisitions of Services
since May 1, 1999 and held the same position at the Company from January 1,
1998 until May 1, 1999. From May 1996 to December 1997, Ms. Shelton served as
Director of Acquisitions of the Advisor. Ms. Shelton served from 1995 to 1996
as Vice President of the Ross Realty Group, a real estate brokerage and
property management company that specializes in retail properties, and from
1985 to 1995 as the Real Estate Manager for KinderCare Learning Centers, Inc.,
the largest child care company in the United States. Ms. Shelton has 26 years
of experience in commercial brokerage and site selection and she holds the
Certified Commercial Investment Member (CCIM) designation and is a Florida
licensed Real Estate Broker. Ms. Shelton is the 2002 President of The CCIM
Institute and serves on the board of directors for the Florida Association of
Realtors, the National Association of Realtors and the Florida CCIM Chapter.
Dennis E. Tracy, age 51, has served as Senior Vice President of Services
since May 1, 1999 and held the same position at the Company from January 1,
1998 until May 1, 1999. From November 1990 to December 1997, Mr. Tracy served
as Senior Vice President of the Development Company. Prior to joining the
Development Company, Mr. Tracy founded Tracy Homes, Inc., a luxury custom home
building company and served as its president and owner. Mr. Tracy holds the
Certified Commercial Investment Member professional designation and serves as
a member of the Advisory Board of the Retail Contractors Association.
Thomas L. Yeager, age 59, has served as Vice President of BTS Program
Business of Services since May 1, 1999 and held the same position at the
Company from May 1998 until May 1999. Mr. Yeager is responsible for managing
BTS program business in the Midwest and Southeast regions. Prior to joining
the Company in 1998, he accumulated 28 years of corporate real estate
experience with such firms as Extended Stay of America Inc., Long John
Silver's Inc., Speed Muffler King, Inc., Dunkin' Donuts of America, Inc. and
Shell Oil Corporation. He is currently a member of the International Council
of Shopping Centers.
AUDIT COMMITTEE REPORT
The information contained in this report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission (the "Commission"), nor shall such information be incorporated by
reference into any previous or future filings under the Securities Act of
1933, as amended or the Securities Exchange Act of 1934, as amended, except to
the extent that the Company incorporated it by specific reference.
9
The Audit Committee of the Commercial Net Lease Realty Board of Directors
(the "Committee") is composed of three independent directors and operates
under a written charter adopted by the Board of Directors (Exhibit A). The
members of the Committee are Ted B. Lanier (Chair), Edward Clark and Clifford
R. Hinkle. The Committee held four meetings during 2000.
Management is responsible for the Company's financial statements, internal
controls and financial reporting process. The independent accountants are
responsible for performing an independent audit of the Company's consolidated
financial statements in accordance with auditing standards generally accepted
in the United States of America and to issue a report thereon. The Committee's
responsibility is to monitor and oversee these processes.
In this context, the Committee has met and held discussions with management
and the independent accountants. Management represented to the Committee that
the Company's consolidated financial statements were prepared in accordance
with accounting principles generally accepted in the United States of America,
and the Committee has reviewed and discussed the consolidated financial
statements with management and the independent accountants. The Committee
discussed with the independent accountants matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees).
The Company's independent accountants also provided to the Committee the
written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Committee discussed
with the independent accountants that firm's independence. The Audit Committee
has considered the payments made under the heading "All Other Fees" below to
be compatible with maintaining the independent accountants' independence.
Based on the Committee's discussion with management and the independent
accountants and the Committee's review of the representation of management and
the report of the independent accountants to the Committee, the Committee
recommended that the Board of Directors include the audited consolidated
financial statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 2000 filed with the Securities and Exchange Commission.
Ted B. Lanier, Chairman
Edward Clark
Clifford R. Hinkle
AUDIT COMMITTEE DISCLOSURE
Fees billed to the Company for the year ended December 31, 2000 by the
independent accountants were as follows:
. Audit Fees: $86,800 for services rendered in connection with the annual
audit and the quarterly reviews of the financial statements of the
Company and its affiliates.
. Financial Information Systems Design and Implementation Fees: None
. All Other Fees: $61,400 for tax services of the Company and its
affiliates; $19,750 for consents and comfort letters in connection with
securities registrations and offerings.
10
EXECUTIVE COMPENSATION
Executive Compensation Tables
The following table shows the annual and long-term compensation paid by the
Company to the Chief Executive Officer and the two other executive officers of
the Company for services rendered in all capacities to the Company during the
fiscal years ended December 31, 2000, 1999 and 1998.
Summary Compensation Table
Long Term
Annual Compensation
Compensation Stock Option
----------------- Awards All Other
Name and Principle Position Year Salary Bonus (Shares) Compensation(1)
--------------------------- ---- -------- -------- ------------ ---------------
James M. Seneff, Jr. ...... 2000 $135,000 $ 0 23,000 $ 6,000
Chief Executive Officer & 1999 $130,000 $111,150 0 $ 6,000
Chairman of the Board 1998 $125,000 $ 62,500 46,000 $10,800
Gary M. Ralston............ 2000 $286,000 $ 0 46,000 $10,800
President and Chief 1999 $275,000 $235,125 0 $10,800
Operating Officer 1998 $225,000 $112,500 92,000 $10,800
Kevin B. Habicht........... 2000 $182,000 $ 0 23,000 $10,800
Executive Vice President, 1999 $175,000 $149,625 0 $10,800
Chief Financial 1998 $150,000 $ 75,000 46,000 $10,637
Officer, Secretary and
Treasurer
--------
(1) Represents Company contributions to the Company's 401(k) Plan of $4,800
for Messrs. Ralston and Habicht and a $6,000 auto allowance for Messrs.
Seneff, Ralston and Habicht.
The following table provides certain information regarding stock options
granted to named executive officers for the year ended December 31, 2000. The
Company has not granted any SARs.
Option Grants for the Year Ended December 31, 2000
Percent
of Total
Number Options Exercise Grant
of Granted Price Date
Options to All Per Expiration Present
Name Granted Employees Share Date Value(1)
---- ------- --------- -------- ------------- --------
James M. Seneff, Jr........... 23,000 8.1% $10.625 June 16, 2010 $2,034
Gary M. Ralston............... 46,000 16.3% $10.625 June 16, 2010 $4,069
Kevin B. Habicht.............. 23,000 8.1% $10.625 June 16, 2010 $2,034
--------
(1) The valuation calculations are solely for the purposes of compliance with
the rules and regulations promulgated under the Securities and Exchange
Act of 1934, as amended, and are not intended to forecast possible future
appreciation, if any, of the Company's stock price. The grant date present
value is derived by using the Black-Scholes option pricing model assuming
a dividend yield of 10.54%, volatility of 11.13%, an annualized risk free
rate of 6.23% and an option term of ten years. The actual value of the
options may be significantly different, and the value actually realized,
if any, will depend upon the excess of the market value of the common
stock over the option exercise price at the time of exercise.
11
The following table sets forth certain information with respect to
unexercised stock options held by the named executive officers of the Company
at December 31, 2000. The named executive officers did not exercise any stock
options during the fiscal year ended December 31, 2000.
Option Values At December 31, 2000
Number of Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 2000 December 31, 2000(1)
----------------------- -------------------------
Name Exercisable Exercisable Exercisable Unexercisable
---- ----------- ----------- ----------- -------------
James M. Seneff, Jr........... 318,167 38,333 0 0
Gary M. Ralston............... 210,333 76,667 0 0
Kevin B. Habicht.............. 148,667 38,333 0 0
--------
(1) Based on the closing price of $10.19 on the New York Stock Exchange on
December 31, 2000.
Under the 2000 Plan, directors, officers, and other key employees and key
persons associated with the Company are eligible to receive options under this
plan. Additionally, the Company has adopted a defined contribution savings
plan (the "401(k) Plan") which covers all employees, including executive
officers, who have completed 12 months of service. Participants can contribute
up to 15% of annual compensation on a pre-tax basis. The Company provides a
50% matching contribution up to 3% of annual compensation, with a maximum of
$4,800. All participant contributions are fully vested as soon as they are
made. Company contributions are subject to a vesting schedule and are 100%
vested after six years of service.
Employment Agreements
The Company has entered into employment agreements with each of Messrs.
Seneff, Ralston and Habicht. Each agreement will expire on December 31, 2001,
but is subject to automatic one-year renewals. Each agreement contains a non-
compete provision applicable during the term and provides for a salary, bonus
and options to purchase shares of Common Stock. Each agreement also contains
severance provisions that call for payment to the executive of either twice
the executive's annual salary (in the cases of Messrs. Ralston and Habicht) or
the executive's annual salary (in the case of Mr. Seneff) in the event that
the executive is terminated without cause or the executive resigns for good
reason (including material reduction of responsibilities or reduction in
salary, failure of a successor to the Company to assume the agreement or the
Company's material and willful breach of the agreement), in addition to the
continuation of certain fringe benefits and the immediate vesting of options.
The following section of this Proxy Statement shall not be deemed to be
incorporated into any filing by the Company with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, including any such incorporation by
reference of any other portions of this Proxy Statement.
Compensation Committee Report
The Board of Directors appointed a Compensation Committee comprised of the
undersigned, Messrs. Bourne, Hinkle and Jennings. Members of the Compensation
Committee, all of whom must be independent directors of the Company, are
selected each year by the full Board of Directors. The Compensation Committee
is responsible for establishing and administering executive compensation
programs including administration of the 2000 Commercial Net Lease Realty,
Inc. Performance Incentive Plan (the "2000 Plan") as well as approval of
changes in directors' fees.
The Compensation Committee believes the Company's degree of success is
largely attributable to the talent and dedication of its associates and to the
management and leadership efforts of its executive officers. The goal of the
Compensation Committee is to establish a compensation program that will
attract and retain talented corporate officers, motivate them to perform to
their fullest potential, as well as align their long-term interests
12
with the interests of the Company's stockholders. In evaluating performance,
the Compensation Committee considers quantitative and qualitative improvement
in the Company's Funds From Operations ("FFO"), capital structure, and
individual performance and contribution to corporate goals and objectives.
Historically, the key elements in the Company's executive compensation
program has consisted of salary, annual bonus and stock options. The Committee
has begun a comprehensive evaluation of the Company's executive compensation
plan in order to assure such plan is competitive and to more effectively
utilize the compensation elements of the 2000 Plan and expects to implement
any changes in 2001. In making compensation decisions, the Compensation
Committee considers the compensation practices and financial performance of
other REIT industry participants and from time to time receives assessments
and advice regarding compensation practices from independent compensation
consultants. Additionally, the Compensation Committee makes a subjective
assessment of the general performance of the Company, the officer's
contribution to the Company's performance, the officer's anticipated
performance and contribution to the Company's achievement of its long term
goals and the position, level, and scope of the officer's responsibility.
For 2000, Mr. Seneff received total cash payments of $135,000 in salary. The
Compensation Committee considered this level of payment appropriate in light
of Mr. Seneff's responsibilities and the Company's performance. No bonuses
were paid to Executive Officers in 2000 in light of FFO results below
expectations. Salary increases in 2000 for Executive Officers were based on
FFO per share targets, individual performance, position, tenure, experience,
leadership and competitive data in compensation surveys of comparable
companies.
COMPENSATION COMMITTEE
Clifford R. Hinkle - Chairman
Robert A. Bourne
Richard B. Jennings
13
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's Common Stock, based on the market price of the Common
Stock and assuming reinvestment of dividends ("NNN"), with the National
Association of Real Estate Investment Trusts Equity Index ("NAREIT") and the
S&P 500 Index ("S&P 500") for the five year period commencing January 1, 1996
and ending December 31, 2000. The graph assumes the investment of $100 on
January 1, 1996.
[Performance Graph shown here]
14
SECURITY OWNERSHIP
The following table sets forth, as of March 26, 2001, the number and
percentage of outstanding shares beneficially owned by all persons known by
the Company to own beneficially more than five percent of the Company's Common
Stock, by each director and nominee, by each of the executive officers named
in "Executive Compensation," above, and by all officers and directors as a
group, based upon information furnished to the Company by such stockholders,
officers and directors. Unless otherwise noted below, the persons named in the
table have sole voting and sole investment power with respect to each of the
shares beneficially owned by such person.
Number of Shares Percent
Name and Address of Beneficial Owner Beneficially Owned of Shares
------------------------------------ ------------------ ---------
Robert A. Bourne(1).......................... 594,499(2)(3) 1.90%
450 South Orange Avenue, Suite 900
Orlando, Florida 32801
Edward Clark(1).............................. 19,210(4) (5)
5204 Shamrock Drive
Raleigh, North Carolina 27612
Kevin B. Habicht(6).......................... 188,785(7) (5)
450 South Orange Avenue, Suite 900
Orlando, FL 32801
Clifford R. Hinkle(1)........................ 81,325(8) (5)
111 South Monroe Street, Suite 2000B
Tallahassee, Florida 32301
Richard B. Jennings(1)....................... -- (5)
885 Third Avenue, Suite 2900
New York, NY 10022-4082
Ted B. Lanier(1)............................. 37,775(9) (5)
1818 Windmill Drive Sanford,
North Carolina 27330
Gary M. Ralston (6).......................... 509,937(10) 1.62%
450 South Orange Avenue, Suite 900
Orlando, FL 32801
James M. Seneff, Jr.(6)...................... 1,701,070(2)(11) 5.41%
450 South Orange Avenue, Suite 900
Orlando, FL 32801
Public Employees Retirement System of
Ohio(12).................................... 1,643,000(12) 5.23%
277 East Town Street
Columbus, Ohio 43215
All directors and executive officers as a (2)(3)(4)(7) 9.15%
group (8 persons)........................... (8)(9)(10)(11)
--------
(1) A director of the Company.
(2) Of these shares, 255,696 shares are held by four limited partnerships, of
which Messrs. Bourne and Seneff are general partners. Messrs. Bourne and
Seneff disclaim beneficial ownership of these shares, except to the extent
of their respective percentage interests in each of these entities.
(3) Includes 3,820 shares held by Mr. Bourne as custodian for his minor
children, 3,050 shares held in an irrevocable trust in which Mr. Bourne is
trustee and 200,500 shares subject to currently exercisable options.
(4) Includes 635 shares held by Mr. Clark's spouse and 18,275 shares subject
to currently exercisable options.
(5) Less than 1 percent.
15
(6) An executive officer and director of the Company.
(7) Includes 148,667 shares subject to currently exercisable options.
(8) Includes 18,275 shares subject to currently exercisable options, 3,650
shares held by Mr. Hinkle's spouse, and 50,000 shares held by Flagler
Holdings, Inc., in which Mr. Hinkle has a 27 percent interest and
depository and voting authority
(9) Includes 10,000 shares held by Mr. Lanier's spouse, 18,275 shares subject
to currently exercisable options and 5,000 shares held in a trust in which
Mr. Lanier is the sole Trustee and which Mr. Lanier disclaims any
beneficial ownership of these shares.
(10) Includes 210,333 shares subject to currently exercisable options.
(11) Includes 903,745 shares owned by CNL Financial Group, Inc., which is a
wholly-owned subsidiary of CNL Holdings, Inc., which Mr. Seneff and his
spouse own 100%, and 318,167 shares subject to currently exercisable
options. In addition, 3,050 of these shares are held by a trust, of which
Mr. Seneff serves as trustee. Mr. Seneff disclaims beneficial ownership
of the shares held in trust.
(12) Shares shown are reported on Schedule 13G, dated December 31, 2000, filed
with the Securities and Exchange Commission by Ohio Public Employees
Retirement System, an Employment Benefit Plan and Pension Fund.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (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, to file reports of ownership and changes in ownership on Forms 3,
4 and 5 with the Securities and Exchange Commission (the "SEC") and the New
York Stock Exchange. Officers, directors and greater than ten percent
stockholders are required by SEC regulation to furnish the Company with copies
of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, written representations from certain reporting persons that they
were not required to file Forms 5 for the last fiscal year and other
information known to the Company, the Company believes that all its officers,
directors, and greater than ten percent beneficial owners complied with all
filing requirements applicable to them with respect to transactions during
fiscal 2000.
CERTAIN TRANSACTIONS
On December 18, 1997, the Company's stockholders voted to approve an
agreement and plan of merger with CNL Realty Advisors, Inc. (the "Advisor"),
whereby the stockholders of the Advisor agreed to exchange 100% of the
outstanding shares of common stock of the Advisor for up to 2,200,000 shares
(the "Share Consideration") of the Company's Common Stock (the "Merger"). As a
result, the Company became a fully-integrated, self-administered real estate
investment trust effective January 1, 1998. Ten percent of the Share
Consideration (220,000 shares) was paid January 1, 1998, and the balance (the
"Share Balance") of the Share Consideration is to be paid over time based upon
the Company's completed property acquisitions and completed development
projects in accordance with the merger agreement. The market value of the
common shares issued on January 1, 1998 was $3,933,000. Pursuant to the
agreement and plan of merger, the Company is required to issue the shares
within 90 days after the shares become issuable. At the time of the Merger,
the Advisor was owned 76.8% by CNL Financial Group, Inc. (formerly CNL Group,
Inc.) which is wholly owned by Mr. Seneff and his wife, 8.5% by Mr. Bourne,
8.5% by Mr. Ralston and 3.1% by Mr. Habicht. The Share Consideration, to the
extent paid, is allocated to such persons in accordance with such percentages.
Since the effective date of the Merger, the Company has issued 1,038,622
shares of the Share Balance. The market value of the Share Balance issued was
$12,489,000, all of which was charged to operations.
In November 1999, the Company entered into a lease agreement for its office
space (the "Lease") with an affiliate of Mr. Seneff. The Lease provides for
rent in the amount of $390,000 per year, expiring in October 2014.
16
In May 2000, the Company subleased a portion of its office space to affiliates
of a member of the board of directors. During the year ended December 31,
2000, the Company earned $248,000 in rental income and recognized $143,000 in
accrued rental income related to these subleases.
As of December 31, 2000, the Company held two mortgages due September 2001
totaling $6,755,000 at 8.50% interest with affiliates of Messrs. Seneff and
Bourne.
In connection with the revolving credit facilities between the Company and
Services and the Company and a wholly-owned subsidiary of Services, the
Company received $5,078,000 and $1,530,000 in interest and fees during the
years ended December 31, 2000 and 1999, respectively. In addition, Services
paid the Company $407,000 and $177,000 in expense reimbursements for
accounting services provided by the Company during the years ended December
31, 2000 and 1999, respectively.
During the years ended December 31, 2000, 1999 and 1998, an affiliate of a
member of the Company's board of directors provided certain administrative,
tax and technology services to the Company. In connection therewith, the
Company paid $398,000, $50,000 and $41,000 in fees relating to these services.
In September 2000, a wholly-owned subsidiary of Services entered into a
$6,000,000 loan agreement and a $15,000,000 line of credit agreement with
affiliates in which certain officers of the Company own an equity interest.
The loan and line of credit are collateralized by substantially all of the
assets of the respective affiliate.
The Company has guaranteed bank loans made to certain of the Company's
officers totaling $4,898,000. Each of the loans is full recourse to the
respective officer and is collateralized by the common shares of the Company
that were purchased with the proceeds from the loans.
INDEPENDENT AUDITORS
Upon recommendation of and approval by the Audit Committee, KPMG LLP has
been selected to act as independent certified public accountants for the
Company during the current fiscal year.
A representative of KPMG 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.
17
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
annual meeting other than those stated above. If any other business should
come before the annual meeting, the person(s) named in the enclosed Proxy will
vote thereon as he or they determine to be in the best interests of the
Company.
PROPOSALS FOR NEXT ANNUAL MEETING
Any stockholder proposal to be considered for inclusion in the Company's
proxy statement and form of proxy for the annual meeting of stockholders to be
held in 2002 must be received at the Company's office at 450 South Orange
Avenue, Suite 900, Orlando, Florida 32801, no later than December 20, 2001.
Stockholders desiring to make nominations for directors and/or to bring a
proper subject before a meeting should do so by notice delivered to the
Secretary of the Company. The proxy for the 2002 annual meeting will grant
discretionary authority to vote with regard to nominations and proposals
unless (a) notice is received by December 12, 2001 and (b) the conditions set
forth in Rule 14a-4(c)(2)(i)-(iii) under the Exchange Act are met. The Company
requests that such stockholder notice set forth (a) as to each nominee for
director, all information relating to such nominee that is required to be
disclosed in solicitations of proxies for election of directors under the
proxy rules of the Securities and Exchange Commission; (b) as to any other
business, 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 (c) as to the
stockholder, (i) the name and address of such stockholder, (ii) the class or
series and number of shares of stock of the Company which are owned
beneficially and of record by such stockholder, and (iii) the date(s) upon
which the stockholder acquired ownership of such shares.
By Order of the Board of Directors,
/s/ Kevin B. Habicht
-------------------------------
Kevin B. Habicht
Secretary
April 3, 2001
Orlando, Florida
18
EXHIBIT A
Charter of the Audit Committee
of the Board Of Directors
of Commercial Net Lease Realty, Inc.
The Audit Committee (the "Committee") shall report to and assist the Board
of Directors (the "Board") of Commercial Net Lease Realty, Inc. (the
"Company") by providing oversight of the financial management, independent
auditors and financial reporting procedures of the Company, as well as such
other matters as directed by the Board or this Charter.
A. COMMITTEE MEMBERSHIP
1. The Committee shall be comprised of at least three members of the Board.
2. The composition of the Committee shall meet all the requirements of the
Audit Committee Policy of the New York Stock Exchange, which, among other
things, prohibits any officer or employee of the Company from serving on
the Committee.
3. Each Committee member shall have no other relationship to the Company that
may interfere with the exercise of independence from management and the
Company.
4. Each Committee member shall be financially literate with a fundamental
understanding of financial statements and key business and financial risks
and related controls or shall become financially literate within a
reasonable period of time after appointment to the Committee as such
qualification is interpreted by the Board in its business judgement.
5. At least one member of the Committee shall have accounting or related
financial management expertise as such qualification is interpreted by the
Board in its business judgement.
6. The Board shall annually appoint members to the Committee.
7. The Committee chairperson shall be selected by Committee members.
B. COMMITTEE OPERATING POLICIES
1. Meeting Frequency -- The Committee will meet formally at least three times
each year. Additional meetings may be scheduled as considered necessary by
the Committee or chairperson.
2. Meeting Agenda -- Committee meeting agendas shall be the responsibility of
the Committee chairperson, with input from Committee members, management
and key Committee advisors, and others, as required.
3. Annual Plan -- The Committee shall develop an annual plan for meeting
Committee responsibilities.
4. Shareholder Reporting -- The Committee shall provide to shareholders a
summary report on the scope of its activities, as required by the SEC rules
applicable to proxy statements.
5. External Resources -- The Committee shall be authorized to engage or access
internal and external resources, as the Committee requires, to carry out
its responsibilities.
6. Charter Modifications -- The Committee shall review the adequacy of this
Charter annually and recommend any proposed changes to the Board for
approval.
C. KEY RESPONSIBILITIES
The Company's management is responsible for preparing the Company's
financial statements and the independent auditors are responsible for auditing
those financial statements. The Committee is responsible for overseeing the
conduct of these activities by the Company's management and the independent
auditors. The financial management and the independent auditors of the Company
have more time, knowledge and more
A-1
detailed information on the Company than do Committee members. Consequently,
in carrying out its oversight responsibilities, the Committee is not providing
any expert or special assurance as to the Company's financial statements or
any professional certification as to the independent auditor's work. Nor, is
it the duty for the Committee to conduct investigations or to resolve
disagreements, if any, between management and the independent auditors.
In carrying out its oversight responsibilities, the Committee shall perform
the following functions:
1. Oversight of Independent Auditors--In the course of its oversight of the
independent auditors as provided under this Charter, the Committee will be
guided by the premise that the independent auditor is ultimately
accountable to the Board and the Committee as representatives of the
shareholders.
a. The Committee, subject to any action that may be taken by the full
Board, shall have the ultimate authority and responsibility to select,
evaluate and, where appropriate, replace the independent auditor.
b. The Committee shall:
(i) receive from the independent auditors annually, a formal written
statement delineating the relationships between the auditors and
the Company consistent with Independent Standards Board Standard
Number 1;
(ii) discuss with the independent auditors the scope of any such
disclosed relationships and their impact or potential impact on
the independent auditor's independence and objectivity; and
(iii) recommend that the Board take appropriate action in response to
the independent auditor's report to satisfy itself of the auditor's
independence.
c. The Committee shall review the original proposed scope of the annual
independent audit of the Company's financial statements and the
associated fees, as well as any significant variations in the actual
scope of the independent audit and the associated fees.
d. The Committee shall review the independent auditors' report relating to
reportable conditions in the internal control structure and financial
reporting practices.
2. Oversight of Management's Conduct of the Company's Financial Reporting
Process
a. Audited Financial Statement--The Committee shall review and discuss with
management and the independent auditors the financial statements to be
included in the Company's Annual Report on Form 10-K (or the Annual
Report to Stockholders if distributed prior to the filing of the Form
10-K) and review and consider with the independent auditors the matters
required to be discussed by the applicable Statement of Auditing
Standards ("SAS") including major issues regarding accounting and
auditing principles and practices as well as the adequacy of internal
controls that could significantly affect the Company's financial
statements. Based on these discussions, the Committee will advise the
Board of Directors whether it recommends that the audited financial
statements be included in the Annual Report on Form 10-K (or the Annual
Report to Stockholders).
b. Interim Financial Statements--The Committee, through its Chairman or the
Committee as a whole, will review with management and the independent
auditors, prior to the filing thereof, the Company's interim financial
results to be included in the Company's quarterly reports on Form 10-Q
and the matters required to be discussed by the applicable SAS.
c. Financial Reporting Practices--The Committee shall review:
(i) significant changes in the Company's accounting policies and
practices and significant judgements that may affect the financial
results;
(ii) the nature of any unusual or significant commitments or contingent
liabilities together with the underlying assumptions and estimates
of management; and
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(iii) the effect of changes in accounting standards that may materially
affect the Company's financial reporting practices.
3. Assist the Board in Oversight of the Company's Compliance with Policies and
Procedures Addressing Legal and Ethical Concerns. The Committee shall
review and monitor, as appropriate:
a. Litigation or other legal matters that could have a significant impact
on the Company's financial results.
b. Significant findings of any examination by regulatory authorities or
agencies, in the areas of securities, accounting or tax, such as the
Securities and Exchange Commission or the Internal Revenue Service.
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PROXY
COMMERCIAL NET LEASE REALTY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints James M. Seneff, Jr. and Kevin B. Habicht,
and either of them, attorneys and proxies, with full power of substitution and
revocation, to vote, as designated below, all shares of Common Stock that the
undersigned is entitled to vote, with all powers that the undersigned would
possess if personally present at the annual meeting (including all adjournments
thereof) of stockholders of Commercial Net Lease Realty, Inc. (the "Meeting") to
be held on May 31, 2001, at 9:30 a.m. local time, at CNL Center 450 S. Orange
Avenue, 9th Floor, Orlando, Florida. 32801.
PROPOSAL I. To elect eight Directors to serve until the next annual meeting of
stockholders or until their successors shall have been elected or qualified.
[ ] GRANT AUTHORITY to vote for all nominees listed below (except as marked to
the contrary below).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
Robert A. Bourne, Edward Clark, Kevin B. Habicht, Clifford R. Hinkle, Richard B.
Jennings, Ted B. Lanier, Gary M. Ralston, James M. Seneff, Jr.
INSTRUCTION: To withhold authority to vote for any individual nominee, line
through or strike out any nominee listed above.
The shares represented by this Proxy when properly executed will be voted in the
manner directed herein by the undersigned stockholder. If no direction is given,
the shares represented by this Proxy will be voted FOR the Proposal. In
addition, the proxies may vote in their discretion on such other matters as may
properly come before the Meeting.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE PROXY STATEMENT OF COMMERCIAL
NET LEASE REALTY, INC.
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Signature(s)
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Title/Authority
Dated , 2001
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NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee, custodian, guardian or
corporate officer, please give your full title as such. If a corporation, please
sign in full corporate name by authorized officer. If a partnership, please sign
in partnership name by authorized person. The proxies are authorized in their
discretion, to vote such shares upon any other business that may properly come
before the Meeting and all adjournments and postponements thereof.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.