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EXHIBIT 4.2
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COMMERCIAL NET LEASE REALTY, INC.
Issuer
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to
FIRST UNION NATIONAL BANK
Trustee
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Supplemental Indenture No. 1
Dated as of March , 1998
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$100,000,000
of
% Notes due 2008
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SUPPLEMENTAL INDENTURE NO. 1, dated as of March , 1998 (the
"Supplemental Indenture"), between COMMERCIAL NET LEASE REALTY, INC., a
corporation duly organized and existing under the laws of the State of Maryland
(herein called the "Company"), and First Union National Bank, a national
banking association duly organized and existing under the laws of the United
States of America, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has heretofore delivered to the Trustee an
Indenture, dated as of March , 1998 (the "Indenture"), a form of which has
been filed with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, as an exhibit to the Company's Registration Statement on
Form S-3 (Registration No. 333-24773), providing for the issuance from time to
time of Debt Securities of the Company (the "Securities").
Section 3.1 of the Indenture provides for various matters with
respect to any series of Securities issued under the Indenture to be
established in an indenture supplemental to the Indenture.
Section 9.1(7) of the Indenture provides for the Company and
the Trustee to enter into an indenture supplemental to the Indenture to
establish the form or terms of Securities of any series as provided by Sections
2.1 and 3.1 of the Indenture.
The Board of Directors of the Company has duly adopted
resolutions authorizing the Company to execute and deliver this Supplemental
Indenture.
All the conditions and requirements necessary to make this
Supplemental Indenture, when duly executed and delivered, a valid and binding
agreement in accordance with its terms and for the purposes herein expressed,
have been performed and fulfilled.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
each of the series of Securities provided for herein by the Holders thereof, it
is mutually covenanted and agreed, for the equal and proportionate benefit of
all Holders of the Notes or of either series thereof, as follows:
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ARTICLE ONE
RELATION TO INDENTURE; DEFINITIONS
SECTION 1.1. Relation to Indenture.
This Supplemental Indenture constitutes an integral part of
the Indenture.
SECTION 1.2. Definitions.
For all purposes of this Supplemental Indenture, except as
otherwise expressly provided for or unless the context otherwise requires:
(1) Capitalized terms used but not defined herein shall
have the respective meanings assigned to them in the Indenture; and
(2) All references herein to Articles and Sections,
unless otherwise specified, refer to the corresponding Articles and
Sections of this Supplemental Indenture.
"Acquired Indebtedness" means Indebtedness of a Person (i)
existing at the time such Person becomes a Subsidiary or (ii) assumed in
connection with the acquisition of assets from such Person, in each case, other
than Indebtedness incurred in connection with, or in contemplation of, such
Person becoming a Subsidiary or such acquisition. Acquired Indebtedness shall
be deemed to be incurred on the date of the related acquisition of assets from
any Person or the date the acquired Person becomes a Subsidiary.
"Advisor Transaction" means the merger of CNL Realty Advisors,
Inc. with and into a wholly-owned subsidiary of the Company which was
consummated on January 1, 1998.
"Annual Debt Service Charge" for any period means the
aggregate interest expense for such period in respect of, and the amortization
during such period of any original issue discount of, Indebtedness of the
Company and its Subsidiaries and the amount of dividends which are payable
during such period in respect of any Disqualified Stock.
"Business Day" means any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which banking institutions in the
City of New York or in the City of Charlotte are authorized or required by law,
regulation or executive order to close.
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"Capital Stock" means, with respect to any Person, any capital
stock (including preferred stock), shares, interests, participations or other
ownership interests (however designated) of such Person and any rights (other
than debt securities convertible into or exchangeable for corporate stock),
warrants or options to purchase any thereof.
"Consolidated Income Available for Debt Service" for any
period means Earnings from Operations of the Company and its Subsidiaries plus
amounts which have been deducted, and minus amounts which have been added, for
the following (without duplication): (i) interest on Indebtedness of the
Company and its Subsidiaries, (ii) provision for taxes of the Company and its
Subsidiaries based on income, (iii) amortization of debt discount, (iv)
provisions for gains and losses on properties and property depreciation and
amortization, (v) the effect of any noncash charge resulting from a change in
accounting principles in determining Earnings from Operations for such period
and (vi) amortization of deferred charges.
"Corporate Trust Office" means the office of the Trustee at
which, at any particular time, its corporate trust business shall be
principally administered, which office at the date hereof is located at 000
Xxxxx Xxxxxx, Xxxxx Xxxxx, Xxxxxxxxxxxx, Xxxxxxx 00000, and for purposes of
the Place of Payment provisions of Sections 3.5 and 10.2 of the Indenture, is
located at 0000 Xxxx X.X. Xxxxxx Xxxx., Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock of such Person which by the terms of such Capital Stock (or by
the terms of any security into which it is convertible or for which it is
exchangeable or exercisable), upon the happening of any event or otherwise (i)
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise (other than Capital Stock which is redeemable solely in exchange for
common stock), (ii) is convertible into or exchangeable or exercisable for
Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the
holder thereof, in whole or in part (other than Capital Stock which is
redeemable solely in exchange for Capital Stock which is not Disqualified Stock
or the redemption price of which may, at the option of such Person, be paid in
Capital Stock which is not Disqualified Stock), in each case on or prior to the
Stated Maturity of the Notes.
"Earnings from Operations" for any period means net earnings
excluding (i) gains and losses on sales of investments, (ii) extraordinary
items, (iii) property valuation losses and (iv) costs and expenses associated
with the Advisor Transaction (which will include the fair market value, at the
time of issuance, of the shares of the Company's common stock, $.01 par value,
issuable to the former stockholders of the CNL Realty Advisors, Inc. as a
result of the Advisor Transaction, and reasonable attorneys' and accountants'
fees and miscellaneous other expenses incurred by the Company in connection
therewith), net as reflected in the financial
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statements of the Company and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP.
"Encumbrance" means any mortgage, lien, charge, pledge or
security interest of any kind.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder by the
Commission.
"GAAP" means generally accepted accounting principles as used
in the United States applied on a consistent basis as in effect from time to
time; provided that solely for purposes of any calculation required by the
financial covenants contained herein, "GAAP" shall mean generally accepted
accounting principles as used in the United States on the date hereof, applied
on a consistent basis.
"Indebtedness" of the Company or any Subsidiary means any
indebtedness of the Company or any Subsidiary, whether or not contingent, in
respect of (i) borrowed money or evidenced by bonds, notes, debentures or
similar instruments whether or not such indebtedness is secured by any
Encumbrance existing on property owned by the Company or any Subsidiary, (ii)
indebtedness for borrowed money of a Person other than the Company or a
Subsidiary which is secured by any Encumbrance existing on property owned by
the Company or any Subsidiary, to the extent of the lesser of (x) the amount of
indebtedness so secured and (y) the fair market value (as determined in good
faith by the Board of Directors of the Company) of the property subject to such
Encumbrance, (iii) the reimbursement obligations, contingent or otherwise, in
connection with any letters of credit actually issued or amounts representing
the balance deferred and unpaid of the purchase price of any property or
services, except any such balance that constitutes an accrued expense or trade
payable, or all conditional sale obligations or obligations under any title
retention agreement, (iv) the principal amount of all obligations of the
Company or any Subsidiary with respect to redemption, repayment or other
repurchase of any Disqualified Stock, or (v) any lease of property by the
Company or any Subsidiary as lessee which is reflected on the Company's
consolidated balance sheet as a capitalized lease in accordance with GAAP, and
also includes, to the extent not otherwise included, any obligation by the
Company or any Subsidiary to be liable for, or to pay, as obligor, guarantor or
otherwise (other than for purposes of collection in the ordinary course of
business), Indebtedness of another Person (other than the Company or any
Subsidiary) (it being understood that Indebtedness shall be deemed to be
incurred by the Company or any Subsidiary whenever the Company or such
Subsidiary shall create, assume, guarantee or otherwise become liable in
respect thereof).
"Make-Whole Amount" means, in connection with any optional
redemption or accelerated payment of any 2008 Note, the excess, if any, of (i)
the
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aggregate present value as of the date of such redemption or accelerated
payment of each dollar of principal being redeemed or paid and the amount of
interest (exclusive of interest accrued to the date of redemption or
accelerated payment) that would have been payable in respect of such dollar if
such redemption or accelerated payment had not been made, determined by
discounting, on a semi-annual basis, such principal and interest at the
Reinvestment Rate (determined on the third Business Day preceding the date such
notice of Redemption is given or declaration of acceleration is made) from the
respective dates on which such principal and interest would have been payable
if such redemption or accelerated payment had not been made, over (ii) the
aggregate principal amount of the 2008 Notes being redeemed or paid.
"Notes" has the meaning specified in Section 2.1 hereof.
"Reinvestment Rate" means .25% (twenty-five one hundredths of
one percent) plus the arithmetic mean of the yields under the respective
headings "This Week" and "Last Week" published in the Statistical Release under
the caption "Treasury Constant Maturities" for the maturity (rounded to the
nearest month) corresponding to the remaining life to maturity, as of the
payment date of the principal being redeemed or paid. If no maturity exactly
corresponds to such maturity, yields for the two published maturities most
closely corresponding to such maturity shall be calculated pursuant to the
immediately preceding sentence and the Reinvestment Rate shall be interpolated
or extrapolated from such yields on a straight-line basis, rounding in each of
such relevant periods to the nearest month. For such purposes of calculating
the Reinvestment Rate, the most recent Statistical Release published prior to
the date of determination of the Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination of the
Make-Whole Amount, then such other reasonably comparable index which shall be
designated by the Company.
"Subsidiary" means, with respect to any Person, any
corporation or other entity of which a majority of (i) the voting power of the
voting equity securities or (ii) the outstanding equity interests of which are
owned, directly or indirectly, by such Person. For the purposes of this
definition, "voting equity securities" means equity securities having voting
power for the election of directors, whether at all times or only so long as no
senior class of security has such voting power by reason of any contingency.
"Total Assets" as of any date means the sum of (i) the
Undepreciated Real Estate Assets and (ii) all other assets of the Company and
its Subsidiaries deter-
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mined on a consolidated basis in accordance with GAAP (but excluding accounts
receivable and intangibles).
"Total Unencumbered Assets" as of any date means the sum of
(i) those Undepreciated Real Estate Assets not subject to an Encumbrance for
borrowed money and (ii) all other assets of the Company and its Subsidiaries
not subject to an Encumbrance for borrowed money, all determined on a
consolidated basis in accordance with GAAP (but excluding accounts receivable
and intangibles).
"2008 Notes" has the meaning specified in Section 2.1 hereof.
"Undepreciated Real Estate Assets" as of any date means the
cost (original cost plus capital improvements) of real estate assets of the
Company and its Subsidiaries on such date, before depreciation and
amortization, determined on a consolidated basis in accordance with GAAP.
"Unsecured Indebtedness" means Indebtedness which is not
secured by any Encumbrance upon any of the properties of the Company or any
Subsidiary.
ARTICLE TWO
THE SERIES OF NOTES
SECTION 2.1. Title of the Securities.
There shall be a series of Securities designated the " %
Notes due 2008" (the "2008 Notes" or the "Notes").
SECTION 2.2. Limitation on Aggregate Principal Amount.
The aggregate principal amount of the 2008 Notes shall be
limited to $100,000,000, and, except as provided in this Section and in Section
3.6 of the Indenture, the Company shall not execute and the Trustee shall not
authenticate or deliver 2008 Notes in excess of such aggregate principal
amount.
Nothing contained in this Section 2.2 or elsewhere in this
Supplemental Indenture, or in the Notes, is intended to or shall limit
execution by the Company or authentication or delivery by the Trustee of Notes
under the circumstances contemplated by Sections 3.3, 3.4, 3.5, 3.6, 9.6, 11.7
and 13.5 of the Indenture.
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SECTION 2.3. Interest and Interest Rates; Maturity Date of
Notes.
The 2008 Notes will bear interest at a rate of % per annum,
from March , 1998 or from the immediately preceding Interest Payment Date
to which interest has been paid or duly provided for, payable semi-annually in
arrears on and of each year, commencing
, 1998 (each, an "Interest Payment Date"), to the Person in whose name such
Note is registered at the close of business on or
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date (each, a "Regular Record Date"). Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months. The
interest so payable on any Note which is not punctually paid or duly provided
for on any Interest Payment Date shall forthwith cease to be payable to the
Person in whose name such Note is registered on the relevant Regular Record
Date, and such defaulted interest shall instead be payable to the Person in
whose name such Note is registered on the Special Record Date or other
specified date determined in accordance with the Indenture.
If any Interest Payment Date or Maturity falls on a day that
is not a Business Day, the required payment shall be made on the next Business
Day as if it were made on the date such payment was due and no interest shall
accrue on the amount so payable for the period from and after such Interest
Payment Date or Maturity, as the case may be.
The 2008 Notes will mature on , 2008.
SECTION 2.4. Limitations on Incurrence of Indebtedness.
(a) The Company will not, and will not permit any
Subsidiary to, incur any Indebtedness if, immediately after giving effect to
the incurrence of such additional Indebtedness and the application of the
proceeds thereof, the aggregate principal amount of all outstanding
Indebtedness of the Company and its Subsidiaries on a consolidated basis
determined in accordance with GAAP is greater than 60% of the sum of (without
duplication) (i) the Total Assets of the Company and its Subsidiaries as of the
end of the calendar quarter covered in the Company's Annual Report on Form 10-K
or Quarterly Report on Form 10-Q, as the case may be, most recently filed with
the Commission (or, if such filing is not permitted under the Exchange Act,
with the Trustee) prior to the incurrence of such additional Indebtedness and
(ii) the purchase price of any real estate assets or mortgages receivable
acquired, and the amount of any securities offering proceeds received (to the
extent such proceeds were not used to acquire real estate assets or mortgages
receivable or used to reduce Indebtedness), by the Company or any Subsidiary
since the end of such calendar quarter, including those proceeds obtained in
connection with the incurrence of such additional Indebtedness.
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(b) In addition to the limitation set forth in subsection
(a) of this Section 2.4, the Company will not, and will not permit any
Subsidiary to, incur any Indebtedness if the ratio of Consolidated Income
Available for Debt Service to the Annual Debt Service Charge for the four
consecutive fiscal quarters most recently ended prior to the date on which such
additional Indebtedness is to be incurred shall have been less than 1.5:1, on a
pro forma basis after giving effect thereto and to the application of the
proceeds therefrom, and calculated on the assumption that (i) such Indebtedness
and any other Indebtedness incurred by the Company and its Subsidiaries since
the first day of such four-quarter period and the application of the proceeds
therefrom, including to refinance other Indebtedness, had occurred at the
beginning of such period; (ii) the repayment or retirement of any other
Indebtedness by the Company and its Subsidiaries since the first day of such
four-quarter period had been repaid or retired at the beginning of such period
(except that, in making such computation, the amount of Indebtedness under any
revolving credit facility shall be computed based upon the average daily
balance of such Indebtedness during such period); (iii) in the case of Acquired
Indebtedness or Indebtedness incurred in connection with any acquisition since
the first day of such four-quarter period, the related acquisition had occurred
as of the first day of such period with the appropriate adjustments with
respect to such acquisition being included in such pro forma calculation; and
(iv) in the case of any acquisition or disposition by the Company or its
Subsidiaries of any asset or group of assets since the first day of such
four-quarter period, whether by merger, stock purchase or sale, or asset
purchase or sale, such acquisition or disposition or any related repayment of
Indebtedness had occurred as of the first day of such period with the
appropriate adjustments with respect to such acquisition or disposition being
included in such pro forma calculation.
(c) In addition to the limitations set forth in
subsections (a) and (b) of this Section 2.4, the Company will not, and will not
permit any Subsidiary to, incur any Indebtedness secured by any Encumbrance
upon any of the property of the Company or any Subsidiary if, immediately after
giving effect to the incurrence of such additional Indebtedness and the
application of the proceeds thereof, the aggregate principal amount of all
outstanding Indebtedness of the Company and its Subsidiaries on a consolidated
basis which is secured by any Encumbrance on property of the Company or any
Subsidiary is greater than 40% of the sum of (without duplication) (i) the
Total Assets of the Company and its Subsidiaries as of the end of the calendar
quarter covered in the Company's Annual Report on Form 10-K or Quarterly Report
on Form 10-Q, as the case may be, most recently filed with the Commission (or,
if such filing is not permitted under the Exchange Act, with the Trustee) prior
to the incurrence of such additional Indebtedness and (ii) the purchase price
of any real estate assets or mortgages receivable acquired, and the amount of
any securities offering proceeds received (to the extent that such proceeds
were not used to acquire real estate assets or mortgages receivable or used to
reduce Indebtedness), by the Company or any Subsidiary since the end of such
calendar quarter,
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including those proceeds obtained in connection with the incurrence of such
additional Indebtedness.
(d) The Company and its Subsidiaries may not at any time
own Total Unencumbered Assets equal to less than 150% of the aggregate
outstanding principal amount of the Unsecured Indebtedness of the Company and
its Subsidiaries on a consolidated basis.
(e) For purposes of this Section 2.4, Indebtedness shall
be deemed to be "incurred" by the Company or a Subsidiary whenever the Company
or such Subsidiary shall create, assume, guarantee or otherwise become liable
in respect thereof.
SECTION 2.5. Redemption.
The Notes may be redeemed at any time at the option of the
Company, in whole or in part, at a redemption price equal to the sum of (i) the
principal amount of the Notes being redeemed plus accrued interest thereon to
the Redemption Date and (ii) the Make-Whole Amount, if any, with respect to
such Notes (the "Redemption Price").
SECTION 2.6. Places of Payment.
The Places of Payment where the Notes may be presented or
surrendered for payment, where the Notes may be surrendered for registration of
transfer or exchange and where notices and demands to and upon the Company in
respect of the Notes and the Indenture may be served shall be in the City of
Charlotte, North Carolina, and the office or agency for such purpose shall
initially be located at First Union National Bank, 0000 Xxxx X.X. Xxxxxx Xxxx.,
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000.
SECTION 2.7. Method of Payment.
Payment of the principal of and interest on the Notes will be
made at the office or agency of the Company maintained for that purpose (which
shall initially be an office or agency of the Trustee), in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that, at the
option of the Company, payments of principal and interest on the Notes (other
than payments of principal and interest due at Maturity) may be made (i) by
check mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register or (ii) by wire transfer to an account
maintained by the Person entitled thereto located within the United States,
provided, that such Person owns 2008 Notes in an aggregate principal amount
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of at least $ and such Person makes a written request therefor for the
appropriate Interest Payment Date.
SECTION 2.8. Currency.
Principal and interest on the Notes shall be payable in
Dollars.
SECTION 2.9. Registered Securities; Global Form.
The Notes shall be issuable and transferable in fully
registered form as Registered Securities, without coupons. The Notes shall
each be issued in the form of one or more permanent Global Securities. The
depository for the Notes shall be The Depository Trust Company ("DTC"). The
Notes shall not be issuable in definitive form except as provided in Section
3.5 of the Indenture.
SECTION 2.10. Form of Notes.
The 2008 Notes shall be substantially in the form attached as
Exhibit A hereto.
SECTION 2.11. Registrar and Paying Agent.
The Trustee shall initially serve as Registrar and Paying
Agent for the Notes.
SECTION 2.12. Defeasance.
The provisions of Sections 14.2 and 14.3 of the Indenture,
together with the other provisions of Article XIV of the Indenture, shall be
applicable to the Notes. The provisions of Section 14.3 of the Indenture shall
apply to the covenants set forth in Section 2.4 of this Supplemental Indenture
and to those covenants specified in Section 14.3 of the Indenture.
SECTION 2.13. Acceleration of Maturity; Rescission and
Annulment.
The provisions of the first paragraph of Section 5.2 of the
Indenture as applicable with respect to the Notes shall be deemed to be amended
and restated in their entirety to read as follows:
If an Event of Default with respect to Securities of any
series at the time Outstanding occurs and is continuing, then in every such
case the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series may declare the principal (or, if any
Securities are Original Issue Discount
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Securities or Indexed Securities, such portion of the principal as may be
specified in the terms thereof) of, and the Make-Whole Amount, if any, on, all
the Securities of that series to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by the Holders), and upon
any such declaration such principal or specified portion thereof shall become
immediately due and payable. If an Event of Default with respect to the
Securities of any series set forth in Section 5.1(6) of the Indenture occurs
and is continuing, then in every such case all the Securities of that series
shall become immediately due and payable, without notice to the Company, at the
principal amount thereof (or, if any Securities are Original Issue Discount
Securities or Indexed Securities, such portion of the principal as may be
specified in the terms thereof) plus accrued interest to the date the
Securities of that series are paid plus the Make-Whole Amount, if any, on the
Securities of that series.
SECTION 2.14. Waiver of Certain Covenants.
Notwithstanding the provisions of Section 10.11 of the
Indenture, the Company may omit in any particular instance to comply with any
term, provision or condition set forth in Sections 10.4 to 10.8, inclusive, of
the Indenture, with Section 2.4 of this Supplemental Indenture and with any
other term, provision or condition with respect to the Notes or either series
thereof (except any such term, provision or condition which could not be
amended without the consent of all Holders of the Notes or such series thereof,
as applicable), if before or after the time for such compliance the Holders of
at least a majority in principal amount of all outstanding Notes or such series
thereof, as applicable, by Act of such Holders, either waive such compliance in
such instance or generally waive compliance with such covenant or condition.
Except to the extent so expressly waived, and until such waiver shall become
effective, the obligations of the Company in respect of any such term,
provision or condition shall remain in full force and effect.
ARTICLE THREE
MISCELLANEOUS PROVISIONS
SECTION 3.1. Ratification of Indenture.
Except as expressly modified or amended hereby, the Indenture
continues in full force and effect and is in all respects confirmed and
preserved.
SECTION 3.2. Fiscal Year.
The Company shall notify the Trustee of its fiscal year and
any change thereof.
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SECTION 3.3. Governing Law.
This Supplemental Indenture and each Note shall be governed by
and construed in accordance with the laws of the State of New York. This
Supplemental Indenture is subject to the provisions of the Trust Indenture Act
of 1939, as amended, and shall, to the extent applicable, be governed by such
provisions.
SECTION 3.4. Counterparts.
This Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed by their respective officers
hereunto duly authorized, all as of the day and year first written above.
COMMERCIAL NET LEASE REALTY, INC.
By:
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Name:
Title:
FIRST UNION NATIONAL BANK,
as Trustee
By:
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Name:
Title:
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