As filed with the Securities and Exchange Commission on May 16, 1996 Registration No. 333-________ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-3 REGISTRATION STATEMENT Under The Securities Act of 1933 BRAUVIN NET LEASE V, INC. (Exact name of registrant as specified in its charter) Maryland 150 South Wacker Drive 36-3913066 (State or other Suite 3200 (I.R.S. Employer jurisdiction of Chicago, Illinois 60606 Identification No.) incorporation or (312) 443-0922 organization) (Address, including zip code, and telephone number, including area code of registrant's principal executive offices) James L. Brault Brauvin Realty Advisors V, L.L.C. 150 South Wacker Drive Suite 3200 Chicago, Illinois 60606 (312) 443-0922 (Name, address, including zip code, and telephone number, including area code of agent for service) copy to: Alan B. Patzik, Esq. Saitlin, Patzik, Frank & Samotny Ltd. 150 South Wacker Drive Suite 900 Chicago, Illinois 60606 (312) 551-8300 Approximate date of commencement of proposed sale to the public: On or after May 15, 1996 (first dividend payment date after effective date) If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. X If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective registration amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. CALCULATION OF REGISTRATION FEE Title and class Proposed maximum Proposed maximum of securities Amount to be offering price aggregate offering Amount of to be registered registered per unit price Registration fee Shares of Common Stock, 200,000 $.01 par value per share shares $10.00 $2,000,000 $690 PROSPECTUS BRAUVIN NET LEASE V, INC. DIVIDEND REINVESTMENT PLAN 200,000 SHARES OF COMMON STOCK ($0.01 par value per share) The Board of Directors of Brauvin Net Lease V, Inc. (the "Company") has approved the registration of additional shares of Common Stock (the "Shares") for the existing Brauvin Net Lease V, Inc. Reinvestment Plan (the "Reinvestment Plan"). The Reinvestment Plan provides a method for holders of the Shares ("Stockholders") to conveniently reinvest the dividends payable to them in additional Shares and to invest in additional shares of Common Stock by making optional additional cash contributions as described herein. See "Description of the Reinvestment Plan-Offering Price" for a discussion of the price at which Shares will be issued pursuant to the Reinvestment Plan. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NO PERSON HAS BEEN AUTHORIZED BY THE COMPANY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED, OR INCORPORATED BY REFERENCE, IN THIS PROSPECTUS. INFORMATION OR REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY REFERENCE HEREIN, IF GIVEN OR MADE, MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OR SALE IN SUCH JURISDICTION. NEITHER DELIVERY OF THIS PROSPECTUS, NOR ANY SALE MADE THROUGH ITS USE, SHALL UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE AFFAIRS OF THE COMPANY HAVE BEEN UNCHANGED SINCE THE DATE HEREOF. SEE "DOCUMENTS INCORPORATED BY REFERENCE." The date of this Prospectus is May 16, 1996 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") and in accordance therewith, files reports and other information with the Securities and Exchange Commission (the "Commission"). The Company has filed with the Commission a registration statement (Registration Statement Number 333-________ and herein referred to as the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Shares described in this Prospectus. This Prospectus, which constitutes part of the Registration Statement, does not contain all the information set forth in the Registration Statement and the exhibits relating thereto, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information with respect to the Company and the Shares, reference is made to the Registration Statement and the exhibits filed as a part thereof. Statements made in this Prospectus as to the contents of any agreement orother document are not necessarily complete and, in each instance, reference is made to the copy of such agreement or document filed or incorporated by reference as an exhibit to the Registration Statement. Reports, proxy statements and other information filed by the Company can be inspected and copied (at prescribed rates) at the Public Reference Room maintained by the Commission, 450 Fifth Street, N.W., Washington D.C. 20549, and at its regional offices located at Suite 1400, 500 West Madison Street, Chicago, Illinois 60661 and Suite 1400, 75 Park Place, New York, New York 10007. Copies of such material can be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed rates. DOCUMENTS INCORPORATED BY REFERENCE The documents listed below have been filed with the Commission pursuant to the Exchange Act and are hereby incorporated by reference and made a part of this Prospectus: 1. The Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1995. 2. The Quarterly Report on Form 10-QSB for the fiscal quarter ended March 31, 1996. 3. All other reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of the fiscal year covered by the annual report referred to in 1. above. 4. The description of Common Stock of the Company which is contained in the registration statement of the Company filed under the Exchange Act, including any amendment or reports filed for the purpose of updating such description. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering made hereby shall be deemed to be incorporated by reference into the Prospectus and to be a part hereof from the date of filing of such document. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute part of this Prospectus. The Company hereby undertakes to provide, without charge, to each person to whom a copy of this Prospectus has been delivered, upon the written or oral request of such person, any or all of the documents or information which may have been or may be incorporated by reference herein and not delivered with this Prospectus, other than exhibits to the documents or information that are incorporated herein, unless such exhibits are specifically incorporated by reference into the document or information that is incorporated herein by reference. Requests for such copies should be directed to James L. Brault, Corporate Secretary, Brauvin Net Lease V, Inc., 150 South Wacker Drive, Suite 3200, Chicago, Illinois 60606, telephone (312) 443-0922. TABLE OF CONTENTS PAGE AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . 2 DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . . . 2 BRAUVIN NET LEASE V, INC.. . . . . . . . . . . . . . . . . . . 4 DESCRIPTION OF THE REINVESTMENT PLAN . . . . . . . . . . . . . 4 Offering Price. . . . . . . . . . . . . . . . . . . . . . 4 Administration of the Reinvestment Plan . . . . . . . . . 5 Fees and Charges. . . . . . . . . . . . . . . . . . . . . 5 Reports . . . . . . . . . . . . . . . . . . . . . . . . . 5 Operation of the Reinvestment Plan. . . . . . . . . . . . 5 Taxation of Shares Purchased Through The Reinvestment Plan 6 RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . 7 Company Risks . . . . . . . . . . . . . . . . . . . . . . 7 Investment Risks. . . . . . . . . . . . . . . . . . . . . 9 Risks of Real Estate Ownership. . . . . . . . . . . . . . 10 Tax Risks . . . . . . . . . . . . . . . . . . . . . . . . 12 ERISA Risks . . . . . . . . . . . . . . . . . . . . . . . 13 REDEMPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . 14 TRANSFER OF SHARES . . . . . . . . . . . . . . . . . . . . . . 15 USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . 15 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . 15 Limitation of Liability and Indemnification . . . . . . . 15 LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 17 EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 REINVESTMENT PLAN. . . . . . . . . . . . . . . . . . . . . . .A-1 BRAUVIN NET LEASE V, INC. Brauvin Net Lease V, Inc. (the "Company") is a Maryland corporation which operates as a real estate investment trust ("REIT") under federal tax laws. The Company has acquired six properties that have been leased to credit worthy corporate operators of nationally or regionally established businesses, primarily in the retail and family restaurant sectors. Substantially all of the leases are on a long-term "triple net" basis generally requiring the corporate tenant to pay both base annual rent with mandatory escalation clauses and all operating expenses. On August 8, 1994, the Company sold the minimum (120,000) shares required under its initial public offering (the "Offering") and commenced its real estate activities. As of February 25, 1996, the date of termination of the Offering, the Company had raised $12,865,680 in gross proceeds including $200,000 invested by Brauvin Realty Advisors V, L.L.C. (the "Advisor"), before reduction for selling commissions and other offering costs with an additional $133,861 of shares purchased by stockholders through the Reinvestment Plan. At March 31, 1996, the Company had total assets of approximately $12.0 million. The principal executive offices of the Company are located at 150 South Wacker Drive, Suite 3200, Chicago, Illinois 60606, telephone number (312) 443-0922. DESCRIPTION OF THE REINVESTMENT PLAN The following sets forth a summary of the Reinvestment Plan which is attached as Exhibit A to this Prospectus and is incorporated herein by reference. Such summary is qualified in its entirety by reference to the Reinvestment Plan. The Reinvestment Plan provides Stockholders with a convenient means of automatically re-investing dividends paid on the Company's Common Stock and making optional additional investments. Participation in the Reinvestment Plan will only be available if registration of such shares is effective in the state in which the investor resides at the time of such participation or if an exemption from registration is available. Initially, the Company has retained Brauvin Securities, Inc., an affiliate of the Company and the Advisor, as an agent for the Reinvestment Plan (the "Agent") who will act as agent for those Stockholders who wish to participate in the Reinvestment Plan. The Agent will be paid fees for its services by the Company and will be a broker-dealer registered under the Exchange Act. Participants may contribute cash to the Reinvestment Plan in an amount of not less than $1,000 and not more than $25,000 per quarter ("Additional Cash Contributions"). Additional Cash Contributions shall be made to the Agent no later than 10 days prior to the end of the quarter. Dividends are currently paid on the 15th day of February, May, August and November. If the 15th day of such month does not occur on a business day, the dividends are paid on the immediately following business day. Dividend payment dates may be changed by the Company from time to time. Additional Cash Contributions will not be permitted by residents of Pennsylvania. Offering Price Until February 25, 1999, the third anniversary of the termination of the Offering, the price per Share purchased pursuant to the Reinvestment Plan shall be $10.00, the same price as in the Offering, and thereafter, until the Shares are listed for trading on an exchange or market, at a price determined on the basis of the annual valuation of the Company's assets. The $10.00 per Share price may be either greater than (in which case the purchasing Stockholder will be disadvantaged) or less than (in which case the purchasing Stockholder will be advantaged) the underlying value of the properties or the book value per Share of the Company. Upon the listing of the Shares, whether prior to or subsequent to the third anniversary of the termination of the Offering, the Shares to be acquired for the Reinvestment Plan will be acquired through such market and the price per Share will be the then-prevailing market price on the exchange or market at the date of purchase. The Company is unable to predict the effect which such a proposedlisting would have on the price of the Shares acquired through the Reinvestment Plan. Stockholders should note that there is no assurance that the Shares will be listed on an exchange or included for listing on a formal market. Listing of the shares is subject to the Company satisfying the then applicable listing requirements and the determination of the Company's Board of Directors that such action to be in the best interests of the Company. Administration of the Reinvestment Plan In administering the Reinvestment plan, the Agent will use any dividends paid on the Shares of participants ("Reinvested Dividends") and Additional Cash Contributions to purchase additional Shares for participants in conformity with the terms outlined above. All Reinvested Dividends and Additional Cash Contributions will be paid directly to the Agent which will deposit such amounts in a non-interest bearing bank account pending issuance of Shares. The bank account shall be specifically designated as being for the benefit of participants in the Reinvestment Plan and disbursements shall be permitted from such account only for the purchase of Shares until Shares are issued to the Stockholders. Thereafter, such funds, including funds attributable to fractional shares, will be held in the Company's general business accounts. If a participant's Reinvested Dividends or Additional Cash Contribution is not equally divisible by the price of a full Share, the Participant will be credited with fractional Shares computed to five decimal places. Experience under the Reinvestment Plan may indicate that changes are desirable. The Company's Articles of Incorporation ("Articles") give the Directors broad powers to renew, modify, extend, consolidate or cancel the Company's Reinvestment Plan without the consent of Stockholders. Accordingly, the Company reserves the right to amend any aspect of the Reinvestment Plan effective with respect to any dividend paid subsequent to the notice provided the notice is sent to participants in the Reinvestment Plan at least 10 days before the record date for a dividend. The Company also reserves the right to terminate the Reinvestment Plan or to change the Agent for the Reinvestment Plan, if applicable, for any reason at any time by sending written notice of termination or change to all participants. Fees and Charges At the time Shares are purchased with Reinvested Dividends and Additional Cash Contributions, each participant will pay a service charge of 1.0% of the amount purchased to the Agent. Shares received pursuant to the Reinvestment Plan will entitle participants to the same rights and be treated in the same manner as those issued pursuant to the Offering. Accordingly, consistent with the terms of the Offering, to the extent such Reinvested Dividends and Additional Cash Contributions are used to acquire properties, the Company will pay Acquisition Expenses of 0.75% of Gross Proceeds and Acquisition Fees of 3.50% of Gross Proceeds to the Advisor. Accordingly, in addition to the 1.0% fee paid by participants, fees and other charges in the aggregate of up to 4.75% of the proceeds from the Reinvested Dividends and Additional Cash Contributions will be paid by the Company. No selling commissions or other transaction based compensation will be paid to entities which are not registered under the Exchange Act. For a discussion of the foregoing fees and charges, please see the definitions included in item 15 of Exhibit A attached hereto. Reports Following the purchase of Shares, each participant will be sent a detailed statement and accounting showing the dividends received or cash contributed, the service charge, the number and price of Shares purchased, and total Shares held under the Reinvestment Plan for such participant's account. See "Description of the Reinvestment Plan - Taxation of Shares Purchased Through the Reinvestment Plan." Operation of the Reinvestment Plan Stockholders may become participants at any time by completing or authorizing his or her registered representative at a Placement Agent to complete the appropriate authorization form which will be available from the Company, the Placement Agent or the Agent. Participation in the Reinvestment Plan will become effective with the next dividend payable after receipt of a participant's authorization or Additional Cash Contributions, provided that the election is received by the Company or the Agent no later than 10 days prior to the end of the quarter. A participant will be able to terminate his or her participation in the Reinvestment Plan quarterly by delivering written notice to the Company or the Agent which will become effective with the next dividend payable after receipt of a participant's authorization, provided that the election is received by the Company or the Agent no later than 10 days prior to the end of the quarter. A participant must terminate his or her entire participation in the Reinvestment Plan and will not be allowed to partially terminate. Additional Cash Contributions will not be accepted subsequent to termination of participation. If a participant terminates his or her participation, the Agent will send him or her a check in payment for any fractional Shares in his or her account based on the then market price of the Shares and the record books of the Company will be revised to reflect the ownership of records of his or her whole Shares. There are no fees associated with participants terminating their interest in the Reinvestment Plan. A terminating participant will be forwarded certificates representing Shares beneficially owned by him or her through the Reinvestment Plan immediately following such termination. Stockholders who desire to sell their Shares in addition to terminating their participation in the Reinvestment Plan are required to comply with the provisions set forth under the section entitled "Redemption of Shares." Stockholders who desire to transfer their Shares received upon termination of their participation in the Reinvestment Plan are required to comply with the provisions set forth under the section entitled "Transfer of Shares." A participant in the Reinvestment Plan who terminates his or her interest in the Reinvestment Plan will be allowed to again participate in the Reinvestment Plan by notifying the Agent and completing any required forms. Taxation of Shares Purchased Through The Reinvestment Plan Stockholders that participate in the Reinvestment Plan will be taxed in the same manner as if they received their Company dividends in cash; thus participants may incur a tax liability even though they do not receive a distribution of cash. Specifically, Stockholders will be treated as if they have received the dividend distribution from the Company and then applied such dividend distribution to purchase Shares in the Reinvestment Plan. A Stockholder designating a dividend for reinvestment will be taxed on the amount of such distribution as ordinary income to the extent such distribution is from current or accumulated earnings and profits unless the Company has designated the distribution as a capital gain dividend. In such case, the dividend will be taxed as long term capital gain. A participant will not incur a tax liability, other than as described above, on the receipt of whole shares credited to a participant's Reinvestment Plan account, either upon the participant's request for distribution of certain f those shares or upon withdrawal from or termination of the Reinvestment Plan. A participant who receives a cash payment for a fractional share credited to the participant's account will, however, realize a gain or loss for income tax purposes on the "deemed sale" of the fractional share. A participant will also realize a gain or loss upon the sale or exchange of shares. The amount of gain or loss will be equal to the difference between the amount which the Stockholder receives for each whole or fractional share and the Stockholder's tax basis for the whole or fractional share. Any gain or loss will be a capital gain or loss if the shares sold were held as capital assets. Under the Internal Revenue Code of 1986, as amended (the "Code"), capital gain or loss will be long term if the participant held the shares sold for more than one year, and otherwise, will be short term. A participant's holding period for Shares will begin on the day after the date of purchase. The Agent will report to participants, and to the Internal Revenue Service (the "Service"), if required, the amount of dividend income received by participants on a calendar year basis. If a participant, including a foreign Stockholder, is subject to federal income tax withholding on dividend income, the amount of tax to be withheld will be deducted from the dividend before reinvestment in additional shares for the participant's Reinvestment Plan account will be made. The Agent will also send each participant a statement after the close of each calendar year which will show total dividends paid on shares held of record. A participant should retain the statements for tax reporting purposes. The Reinvestment Plan has not been qualified under Section 401 of the Code or the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The above discussion is merely a summary of the federal income tax consequences of participating in the Reinvestment Plan. Each Stockholder who contemplates becoming a participant in the Reinvestment Plan should consult his or her own tax advisor regarding the tax consequences of participation in the Reinvestment Plan. RISK FACTORS Purchase of Shares offered hereby involves various substantial risk factors. Participants should consider, among others, the following factors: Company Risks "Triple Net" Lease Risks. The Company has acquired six properties and intends to acquire additional properties under long-term "triple net" lease agreements. "Triple net" leases typically require that lessees (tenants) pay all real estate taxes, special assessments sales and use taxes, utilities, insurance and building repairs as well as make lease payments to the lessor. The Company is, therefore, subject to the risk that tenants, as well as lease guarantors, if any, may be unable to make their lease payments. A default by a lessee, the failure of a guarantor to fulfill its obligations or another premature termination of a lease could, depending on the size of the property and the Advisor's ability to successfully find a substitute tenant, have an adverse effect on the financial position of the Company. Should the Company acquire a leasehold interest in a property and the lessee defaults in its obligations pursuant to the lease, the Company may be responsible to pay the rent due to the owner of the underlying land, which payments would reduce income and cash available for dividends. The acquisition of a leasehold interest in a property by the Company presents an additional risk due to the fact that the owner of the land underlying the leasehold interest may have certain rights in the event of an event of default under the lease which may require the Company to cure the default in order to protect its interest. For these reasons, the Company's objective is to acquire properties in fee and in prior programs sponsored by Affiliates of the Advisor, leasehold interests have been avoided. Potential Additional Costs in Connection with Acquiring Single-Use Properties. Certain of the properties may be designed or built primarily for a particular tenant or a specific type of use. If the Company is holding such a property upon the termination of the lease and the tenant fails to renew, or such tenant defaults on its lease obligations, the property may not be readily marketable to a new tenant without substantial capital improvements or remodeling. Such improvements might require expenditure of Company funds otherwise available for distribution or require the sale of such property at a below-market price. Lack of Reserves. Although the Company may establish working capital reserves, the Advisor does not intend to establish such reserves. Thus, if amounts are required to meet any unanticipated cash needs of the Company, the Company would have to obtain financing from either affiliated or unaffiliated sources to service such cash needs. However, there is no assurance that such sums will be available. Borrowings May Increase the Company's Business Risks. Under certain circumstances, the Company may borrow for the purpose of maintaining the operations of the Company. Borrowing may increase the Company's business risks because debt service increases the expenses of operation. Lenders to the Company may require restrictions on future borrowings, distributions and operating policies. The maximum amount of borrowing by the Company in relation to its Net Assets shall, in the absence of a satisfactory showing that a higher level of borrowing is appropriate, not exceed 300%. "Net Assets" shall mean the total assets of the Company (other than intangibles) at cost before deducting depreciation or other non-cash reserves less total liabilities of the Company, calculated at least quarterly on a basis consistently applied. Seller Financing by Company May Delay Liquidation. The Company intends to use its best efforts to sell Company properties for cash. However, to the extent the Company has made borrowings for the purposes outlined above, the Company may sell the properties either subject to or upon the assumption of the then outstanding mortgages, if any, or alternatively may provide financing to purchasers with terms advantageous to the Company. A purchase money obligation secured by a mortgage may be taken as part payment, and there are no limitations or restrictions on the Company taking such purchase money obligations. The terms of payment to the Company will be affected by custom in the area in which the property being sold is located and the then prevailing economic conditions. To the extent the Company receives notes and other property instead of cash from sales, such proceeds (other than any interest payable thereon) will not be included in net sale proceeds until and to the extent the notes or other property are actually paid, sold, refinanced or otherwise disposed of and, therefore, the distribution of the proceeds of a sale to the Stockholders may be delayed until such time. In many cases, the Company will receive payments (cash and other property) in the year of sale in an amount less than the selling price, and subsequent payments will be spread over a number of years. Although it is the Company's intention to sell its properties seven to nine years after acquisition, there is no limitation on the period of liquidation. Risk of Joint Ventures. Some of the Company's investments may be owned by joint ventures between the Company and another real estate program sponsored by an Affiliate of the Advisor. Investments in joint ventures which own properties may involve risks not otherwise present, including, for example, risks that the Company's co-venturer might become bankrupt, that such co-venturer may at any time have economic or business interests or goals which are inconsistent with the interests or goals of the Company or that such co-venturer may be in a position to take action contrary to the Company's instructions, requests, policies or objectives. Among other things, actions by such co-venturer might subject property owned by the joint venture to liabilities in excess of those contemplated by the terms of the joint venture or other adverse consequences. Competition with Others for the Acquisition of Properties. The Company will compete in the acquisition of properties with other entities engaged in real estate investment activities, some of which have greater resources than the Company. In addition, the number of entities and the amount of funds available for investment in properties of a type suitable for investment by the Company may increase, resulting in increased competition for such investments and possible increases in the prices paid therefor. Dependence on the Directors and Advisor. The Directors will have sole control over virtually all aspects of the Company's operations. The success of the Company will depend to a large extent on the quality of the management provided by the Advisor. Indemnification. The Directors and the Advisor are held harmless and indemnified for certain actions taken by them in good faith and without negligence or misconduct pursuant to the Articles or Advisory Agreement, respectively. As a result, the Company and the Stockholders may have more limited rights against the Directors and the Advisor than they would otherwise have under common law and, furthermore, may be obligated to fund the defense of the Directors and the Advisor in certain cases. See "Indemnification." Competition with Affiliate Sponsored Programs - Conflicts of Interest. The Company's acquisition process may be delayed in the event that certain prior public real estate programs with investment objectives substantially identical to the Company have funds available for investment. The Company anticipates that it may enter into forward commitment contracts for the acquisition of properties. Forward commitment contracts bind the Company to acquire properties at a future point in time when prespecified conditions have been met. However, the Company will not enter into any forward commitments for such properties if doing so would violate any restrictions imposed by prior programs. In this respect, such prior programs contain provisions which state that no subsequent program sponsored by an Affiliate of the Advisor may acquire similar properties until such prior program shall have invested at least 75% of gross proceeds available for investment. In addition, should two public real estate programs with the same investment objectives have offering proceeds in excess of 10% of the gross proceeds of either program's offering available for investment in properties, the program which first offered its investment interests for sale will have the opportunity to commit for the purchase of properties prior to the subsequent real estate program making any commitments for properties. All prior programs have satisfied the 75% threshold and the 10% threshold. Accordingly, as of the date of this Prospectus, no prior program sponsored by Affiliates of the Advisor could impact the timing of the Company's investments. Lack of Independent Counsel for Investors. The investors in the Reinvestment Plan have not been separately represented by independent counsel. The attorneys and other experts who have performed services for the Company have also performed the same or similar services for the Advisor and some of its Affiliates. Use of Leverage to Pay Dividends. Although the Company intends to acquire its properties on an all-cash basis, the Company may incur indebtedness if necessary to satisfy the requirement that the Company distribute at least 95% of its REIT Taxable Income or otherwise, as is necessary or advisable to assure that the Company maintains its qualification as a REIT for federal income tax purposes. In such an event, it is possible that the Company will be making distributions in excess of its earnings and profits and accordingly such distributions may constitute a return of capital. The annual report provided to Stockholders will provide information as to whether such distributions were in fact a return of capital. "REIT Taxable Income" shall mean the taxable income as computed for a corporation which is not a REIT, (i) without the deductions allowed by sections 241 through 247, 249 and 250 of the Code (relating generally to the deduction for dividends received); (ii) excluding amounts equal to (a) the net income from foreclosure property, and (b) the net income derived from prohibited transactions; (iii) deducting amounts equal to (x) any net loss derived from prohibited transactions, and (y) the tax imposed by section 857(b)(5) of the Code upon a failure to meet the 95% and/or the 75% gross income tests; and (iv) disregarding the dividends paid, computed without regard to the amount of the net income from foreclosure property which is excluded from REIT Taxable Income. Subscriptions Subject to Refund. During the period from February 15, 1995 through March 2, 1995 (the "Supplement Period") the Company sold approximately $221,100 of shares to a total of eight investors pursuant to a prospectus dated February 25, 1994 which contained audited financial statements dated October 14, 1993 and Prospectus Supplements Nos. 1 and 2 dated December 9, 1994 and February 6, 1995. Federal securities laws require that when a prospectus is used more than nine months after the effective date of the registration statement of which it is a part, information contained therein shall be as of a date no more than sixteen months prior to such use. Investors who purchased shares in the Company during the Supplement Period were not afforded access to the Company's updated audited financial statements (the "Updated Financial Information") as of December 31, 1994 and 1993 and for the year ended December 31, 1994. The Company had no operations during 1993 and acquired its first property in late November, 1994. A possibility exists that any or all of the eight investors could request a return of their investment, in which event such amounts, aggregating $221,100, would be required to be paid from the Company's available cash resources. The Company believes that the possibility that such investors would request their investment returned is remote because the Company has since provided such investors (as well as other Stockholders during the relevant period) with the Updated Financial Information, the Company has conducted its operations in a manner consistent with the terms of the Prospectus and the Company has had no such request from any of the investors. Because of the limited amount, the Company believes that the return of such amounts would not adversely effect the financial condition or liquidity of the Company. Investment Risks Limited Liquidity. There is currently no public trading market for the Shares, and no assurance exists that one will develop. Risk of Recharacterization of Sale and Leaseback Transactions. In addition to the purchase of properties subject to "triple net" leases from unaffiliated sellers, the Company intends to enter into sale and leaseback transactions, pursuant to which the Company will purchase a property from an entity and lease such property to such entity. In the event of the bankruptcy of such a lessee, a transaction structured as a sale and leaseback may be recharacterized as either a financing or as a joint venture which may result in adverse consequences to the Company. To the extent the sale and leaseback is treated as a financing, the Company might not be considered the owner of such property and as such would have the status of a creditor with respect to the property in question. As this is an evolving area of the law, the Company intends to monitor such laws and take commercially reasonable steps to protect itself from any potential adverse impact thereof. Operations of Prior Programs and Property Transfers to Lenders by Prior Leveraged Offerings. The Brauvin organization has sponsored ten public real estate programs and one private program, four of which have investment objectives and acquisition criteria substantially identical to that of the Company and seven of which have property acquisition criteria which is substantially different from those of the Company. The seven Brauvin-sponsored programs with investment objectives similar to those of the Company have acquisition criteria substantially different than the Company and have acquired multi-tenant commercial properties on a leveraged basis. Five of such leveraged programs each transferred one property to the lenders of such properties after negotiations with the lenders did not achieve the results sought by the Affiliates of the Advisor. In addition, one leveraged program transferred title to a property in its portfolio to an unaffiliated third party when the mortgage matured and it was determined the property required substantial capital improvements and the value of the property was below the current loan amount. The Advisor believes such difficulties were due to overbuilding in the areas where properties were acquired subsequent to the acquisition by such leveraged programs and a decline in the oil industry. Affiliates of the Advisor have exclusively since 1987 sponsored programs acquiring for all cash, free-standing properties which were "triple net" leased. Risks of Real Estate Ownership General. All real property investments are subject to some degree of risk. Equity real estate investments may limit the ability of the Company to promptly vary its portfolio in response to changing economic, financial and investment conditions. Such investments will be subject to risks such as adverse changes in general economic conditions or local conditions which reduce the demand for the goods or services of tenants. Such investments also will be subject to other factors affecting real estate values, including: (a) possible federal, state or local regulations and controls affecting rents, prices of goods, fuel and energy consumption and prices, water and environmental restrictions and other factors affecting new construction; (b) increasing labor and material costs; and (c) the attractiveness of the property to tenants in the neighborhood. Uninsured Losses; Unavailability of Insurance. Each tenant shall be responsible for arranging for or acquiring comprehensive insurance for properties acquired by the Company, including casualty, liability, fire and extended coverage customarily obtained for similar properties in amounts which the Advisor determines are sufficient to cover reasonably foreseeable losses. However, there are certain types of losses (generally of a catastrophic nature, such as earthquakes, floods and wars) which are either uninsurable or not economically insurable. Should such a disaster occur to, or cause the destruction of, a property owned by the Company, the Company could lose both its invested capital and anticipated profits from such property. In addition to fixed rent increases and/or increases related to indices such as the Consumer Price Index, leases at selected Company properties entitle the Company to participate in gross receipts of lessees above fixed minimum amounts. Accordingly, the success of the Company will depend in part on the ability of those lessees to compete with similar businesses in the vicinity. Hazardous Waste, Environmental Liens and Other Governmental Regulations. Recent federal and state statutes impose liability on property owners or operators for the clean-up or removal of hazardous substances found on their property. Additionally, such statutes allow the government to place liens for such liabilities against affected properties, which liens will be senior in priority to other liens. In addition, there are various local, state and federal health and safety regulations under which the Company could, under certain circumstances, have responsibility for compliance and liability for fines or damages for noncompliance. For example, certain properties to be acquired may be subject to the Americans with Disabilities Act (the "ADA"), which generally requires that public accommodations, including restaurants and retail stores, be made accessible to disabled persons. Compliance with the ADA could entail substantial expenditures for the removal of barriers to access and noncompliance could result in the imposition of fines by the federal government or damage awards to private litigants. Under the Company's "triple-net" leases, the tenant typically is responsible for compliance with the ADA and other laws and regulations or is required to indemnify the Company when the law or regulation places the burden on the landlord. However, the Company could be liable for violations of such laws and regulations to the extent the tenant is not able to provide indemnification at the time of the violation. State and federal laws in this area are constantly evolving, and the Company intends to monitor such laws and take commercially reasonable steps to protect itself from the impact thereof, including obtaining environmental audits of each property before acquisition. However, there can be no assurance that the Company will be fully protected from the impact of such laws. Potential Additional Costs in Connection with Acquiring Newly-Constructed Properties. The Company intends primarily to acquire existing or newly constructed property currently in operation. Although the Company will only acquire newly-constructed buildings on a turnkey basis, the builder's failure to perform may necessitate legal action by the Company to rescind its purchase of a property, to compel performance or to sue for damages. Any such legal action may result in increased costs to the Company. Mortgage Indebtedness and Unrelated Business Taxable Income ("UBTI"). The policy of the Company will be to acquire properties on an all-cash basis and operate as a non-leveraged program. In certain situations, however, the Company may subsequently incur mortgage indebtedness relating to its properties in order to finance improvements to properties. Plans qualifying for exemption from taxation pursuant to Section 401(a) of the Code and which are exempt from taxation under Code Section 501(a) ("Qualified Plans") may, under certain circumstances, be subject to UBTI. Generally, a Qualified Plan which holds 10% or more, by value, of the Company's Shares, would have a portion of its dividends from the Company treated as UBTI if the Company were considered a "Pension-Held REIT" and the Company had taxable income which was considered to be UBTI. The Company does not intend to operate as a leveraged entity and does not anticipate that it will incur indebtedness unless such indebtedness is necessary to satisfy the requirement that the Company distribute at least 95% of its REIT Taxable Income, or otherwise is necessary or advisable to assure that the Company maintains its qualifications as a REIT for federal income tax purposes, or is necessary to improve a property acquired by the Company. The Company anticipates that such mortgage indebtedness with respect to any single property would not exceed 10% of its fair market value. The Code defines a Pension-Held REIT as any trust, corporation or association which would not have qualified as a REIT but for reliance upon provisions of the Code which treat each of the beneficiaries of the Qualified Plan as an individual for purposes of the "five or fewer" rule and such entity is predominantly held by Qualified Plans. A REIT is considered to be predominantly held by Qualified Plans if at least one Qualified Plan holds more than 25% (by value) of the interest in such REIT or one or more Qualified Plans (each of whom own more than 10% by value of the interest in such REIT) hold an aggregate of more than 50% (by value) of the interest in such REIT. Accordingly, if the Company is a Pension-Held REIT, then any Qualified Plan holding 10% or more of the interests in the Company (by value) will be treated as having its dividends taxed as UBTI to the extent of the ratio of the Company's income which is considered UBTI bears to the Company's total gross income. The Company's taxable income will be treated as UBTI to the extent that it finances the acquisition or improvement of its properties with debt. Since the Company intends to incur little, if any, debt, it is not anticipated that much, if any, of the Company's income will be treated as UBTI. This provision of the Code may adversely affect Qualified Plans who are investors in the Company. However, it cannot be determined at this time whether the Company will be treated as a Pension-Held REIT and no assurance can be given any Qualified Plan that a portion of the dividend distributed to it will not constitute UBTI. Incurring mortgage indebtedness increases the risk of possible loss. If the Company defaults on its secured indebtedness, the lender may foreclose; and the Company could lose its investment in the properties securing such loan. Any such foreclosure would be treated as a sale of the property for a purchase price equal to the outstanding mortgage, and if the outstanding mortgage exceeds the basis of the property to the Company, there could be taxable income upon a foreclosure. It has been and will be the policy of the Company to seek to incur only non-recourse mortgage indebtedness, if available, meaning that the Company will not be liable for any mortgage repayment in an amount in excess of its investment in the property. Suitability of the Company's Investments for Qualified Pension and Profit-Sharing Trusts. When considering participation in the Reinvestment Plan by a Qualified Plan, a fiduciary should consider: (i) whether the investment satisfies the diversification requirements of Section 404(a)(3) of the Employee Retirement Income Security Act of 1974 ("ERISA") or other applicable restrictions imposed by ERISA; and (ii) whether the investment is prudent, as there is anticipated to be only a limited market (prior to the date of anticipated listing on a stock exchange or market) in which it can sell or otherwise dispose of the Shares. The Advisor has not, and will not, evaluate whether an investment in the Company is suitable for any particular plan, but, subject to the disclosure included therein, will accept such entities as Stockholders if an entity otherwise meets the suitability standards. If the Company is considered a Pension-Held REIT, as defined above, an investment in the Company may also produce UBTI which may cause a Qualified Plan holding 10% or more of the Company's Shares to pay a tax on a portion of the income distributed to it by the Company. Prior to the date of anticipated listing on a stock exchange or market, Stockholders subject to ERISA will be provided with an annual statement of value reporting the value of each Share based upon an estimated amount they would receive if Company properties were sold as of the close of the Company's fiscal year and if such proceeds (without reduction for selling expenses), together with the other funds of the Company were distributed in liquidation of the Company. The net asset value of each Share will be deemed to be $10 for the first three annual statements of value following termination of the Offering; thereafter, until the date of listing on a stock exchange or market, the value of the Shares shall be based on an annual valuation of the Shares to be calculated within 120 days after the end of the most recent fiscal year. This annual valuation may be reviewed by the Advisor from time to time. There can be no assurance that, (i) such value could or will actually be realized by the Company or by Stockholders upon liquidation (in part because estimates of value do not necessarily indicate the price at which assets could be sold and because no attempt will be made to estimate the expenses of selling any asset of the Company), (ii) Stockholders could realize such value if they were to sell their Shares, or (iii) such value would comply with the ERISA requirements. Loss on Dissolution and Termination. At the date of dissolution or termination of the Company, the undistributed proceeds realized from the liquidation of assets, if any, will be distributed to Stockholders but only after the satisfaction of claims of creditors. Accordingly, a Stockholder's ability to recover all of his or her investment under such circumstances will depend on the amount of funds so realized and claims to be satisfied therefrom. Tax Risks General. There are various federal income tax risks associated with an investment in the Company. Although the provisions of the Code relevant to an investment in the Company are generally described in the section entitled "Federal Income Tax Considerations" in the Company's Prospectus dated February 25, 1994 which was distributed in connection with the Offering, each potential investor is strongly urged to consult his or her own tax advisor concerning the effects of federal income tax law on an investment in the Company and on his or her individual tax situation. See "Description of the Reinvestment Plan - Taxation of Shares Purchased Through the Reinvestment Plan" for a discussion of the tax effects of participating in the Reinvestment Plan. Investors should recognize that many of the advantages and economic benefits of an investment in the Company depend upon the continued treatment of the Company as a REIT for federal income tax purposes. If the Company were no longer taxed as a REIT, the Company would pay a corporate level tax on its income whether or not distributed which would reduce its cash available for distribution and would reduce the yield from an investment in the Company. The continued treatment of the Company as a REIT is dependent on present law and regulations, which are subject to change, and on the Company's ability to continue to satisfy a variety of criteria. Among the various risks associated with the federal income tax aspects of the Company of which investors should be aware are: Risk of Inability to Qualify as a REIT. The Company was organized and intends to conduct its operations to enable it to qualify as a REIT under the Code. To qualify as a REIT, and thereby avoid the imposition of federal income tax on any income it distributes to Stockholders, the Company must continually satisfy three income tests, two asset tests and one distribution test. If, in any taxable year, the Company should fail to distribute at least 95% of its REIT Taxable Income, it could lose its election to be taxed as a REIT, and distributions to its Stockholders would not be deductible in computing the Company's taxable income for federal income tax purposes. Timing differences may arise between the Company's realization of taxable income and net cash flow (e.g., by reason of the differences between the depreciation deductions allowed by the Code and the amortization of any debt of the Company or the possible disallowance by the Service of deductions claimed by the Company) and thereby cause the Company to have insufficient cash or liquid assets at a particular time to distribute 95% of its REIT Taxable Income. In such event, the Company could declare a consent dividend or a deficiency dividend, borrow funds or liquidate a portion of its investments to pay its expenses, make the required distributions to Stockholders, or satisfy its tax liabilities, including the possible imposition of a 4% excise tax. There can be no assurance that such funds will be available in the amount and at the time required by the Company. If the Company is no longer taxed as a REIT, the payment of federal income tax by the Company would substantially reduce the funds available for distribution to Stockholders or for reinvestment and, to the extent that distributions had been made in anticipation of the Company's qualification as a REIT, the Company might be required to borrow additional funds or to liquidate certain of its investments in order to pay the applicable tax. Moreover, should the Company's election to be taxed as a REIT be terminated or voluntarily revoked, the Company may not be able to elect to be treated as a REIT for the following five-year period. Restrictions on Maximum Share Ownership. In order for the Company to qualify as a REIT, no more than 50% of the outstanding Shares may be owned, directly or indirectly, by five or fewer individuals at any time during the last half of the Company's taxable year. To ensure that the Company will not fail to qualify as a REIT under this test, the Company's Articles grant the Directors the power to demand the sale of Shares or at the Company's option, purchase such Shares. These restrictions may (i) discourage a change of control of the Company; (ii) deter individuals and entities from making tender offers for Shares, which offers may be attractive to Stockholders; or (iii) limit the opportunity for Stockholders to receive a premium for their Shares in the event an investor is making purchases of Shares in order to acquire a block of Shares. Possible Legislative or Other Actions Changing Anticipated Tax Consequences. Investors should recognize that the present federal income tax treatment of an investment in a REIT may be modified by legislative, judicial or administrative action at any time and that any such action may affect investments and commitments previously entered into. The rules dealing with federal income taxation are constantly under review by the Service, resulting in revisions of its regulations and revised interpretations of established concepts. In addition, Congress has granted the Service the right to promulgate legislative and/or interpretive regulations in many areas. ERISA Risks Risk of Investment by Qualified Plans. In deciding whether to purchase Shares, each fiduciary of an employee benefit plan subject to ERISA, in consultation with its advisors, should carefully consider its fiduciary responsibilities under ERISA, the prohibited transaction rules of ERISA and the Code and the effect of the "plan asset" regulations issued by the Department of Labor. REDEMPTION OF SHARES Any Stockholder who acquired Shares in the Reinvestment Plan (such Shares, for so long as owned by the original holder, are called "Eligible Shares") may present such Eligible Shares to the Company for redemption at any time subject to the availability of proceeds in accordance with the procedures outlined herein. Subject to the conditions described below, the Company is required to redeem such Eligible Shares presented for redemption for cash to the extent it has sufficient net proceeds ("Reinvestment Proceeds") from the sale of Shares under the Reinvestment Plan. There is no assurance that there will be investment proceeds available for redemption and, accordingly, a Stockholder's Shares may not be redeemed. The full amount of Reinvestment Proceeds for any quarter will be used to redeem Eligible Shares presented for redemption for the following quarter. If the full amount of Reinvestment Proceeds available for redemption for any given quarter exceeds the amount necessary for such redemptions, the remaining amount may be held for subsequent redemptions or may be invested by the Company in additional properties. If the full amount of Reinvestment Proceeds available for redemption for any given quarter is insufficient to make all the requested redemptions, the Company will redeem the Eligible Shares presented for redemption on a first come basis. A Stockholder who wishes to have his or her Eligible Shares redeemed must mail or deliver a written request executed by the Stockholder, its trustee or authorized agent to the Company. Within 30 days following the Company's receipt of the Stockholder's request, the Company will forward to such Stockholder the documents necessary to effect the redemption, including any signature guarantee the Company may require. The Company will effect such redemption for the calendar quarter provided that the properly completed redemption documents relating to Eligible Shares from the Stockholder are received one calendar month prior to the last date of the current calendar quarter and it has sufficient Reinvestment Proceeds to redeem such Shares. The effective date of any redemption will be the last date during a quarter during which the Company receives the properly completed redemption documents. The Company anticipates that, assuming sufficient Reinvestment Proceeds, the effective date of redemptions will be no later than 30 days after the quarterly determination of the availability of Reinvestment Proceeds. Upon presentment of Eligible Shares to the Company for redemption, the redemption price will be the offering price per Eligible Share ($10.00 per Share) until February 25, 1999, the third anniversary of the termination of the Offering, and thereafter at a price determined on the basis of the annual valuation of the Company assets. The Directors, in their sole discretion, may determine, prior to listing the Shares for trading on an exchange or market, that it is appropriate to pay a higher price than described above. In determining whether a price adjustment is appropriate, the Board of Directors would consider a variety of factors, including whether the Company's net book value is substantially less than a Share valuation based on the Company's present and historic dividend rates and underlying value of the properties. Any such price adjustment will be made with respect to all Shares redeemed during the period the price adjustment is in effect. The Board of Directors will announce any price adjustment and the time period of its effectiveness as part of its regular communications with Stockholders. Any Shares acquired pursuant to a redemption will be retired and no longer available for issuance by the Company. Once the Shares are listed for trading on an exchange or included for quotation on a formal market, whether prior to or subsequent to February 25, 1999, the redemption price will be the market price of the Shares on such exchange or market and no price adjustment will be made. A Stockholder may present less than all his or her Eligible Shares to the Company for redemption, provided, however, that (i) the minimum number of Shares which must be presented for redemption shall be the lesser of all of his or her Eligible Shares or 250 Eligible Shares (100 Eligible Shares for an Individual Retirement Account or Keogh Plan) for redemption, and (ii) if such Stockholder retains any Eligible Shares, he or she must retain at least 250 Eligible Shares (100 Eligible Shares for an Individual Retirement Account or Keogh Plan). The Directors, in their sole discretion, may amend or suspend the provisions for redemption at any time they determine, in their sole discretion, that such is in the best interest of the Company. The Directors may suspend the redemption of Eligible Shares if (i) they determine, in their sole discretion, that such redemption impairs the capital or the operations of the Company; (ii) they determine, in their sole discretion, that an emergency makes such redemption not reasonably practical; (iii) any governmental or regulatory agency with jurisdiction over the Company so demands for the protection of the Stockholders; (iv) they determine, in their sole discretion, that such redemption would be unlawful; or (v) they determine, in their sole discretion, that such redemption, when considered with all other redemptions, sales, assignments, transfers and exchanges of Shares in the Company, could cause direct or indirect ownership of Shares of the Company to become concentrated to an extent which would prevent the Company from qualifying as a REIT under the REIT provisions of the Code. TRANSFER OF SHARES All Shares are fully transferable, subject only to restrictions which would cause loss of REIT status. However, each person acquiring Shares must notify the Company of any such transfer and provide his or her name, address, taxpayer identification number, number of Shares acquired, IRS Form W-9 and the name of the transferor Stockholder prior to any Share transfer being recorded on the books and records of the Company. Additionally, the transferee Stockholder must present the stock certificate representing such Shares or an affidavit of lost certificate. Such documentation must be presented one calendar month prior to the last date of the current quarter. Failure to provide such information could result in a transfer not being recognized by the Company on a timely basis. Transfers of Shares shall be effective and the transferee Stockholder will be recognized as the holder of such Shares as of the first date of the following calendar quarter in which the Company receives the properly executed document. USE OF PROCEEDS The Company has no basis for estimating either the number of Shares that ultimately will be issued by the Company or the aggregate amount that the Company will receive for such issued Shares. The proceeds received by the Company from the issuance of Shares by the Company, if any, will be applied first to satisfy any requirements to redeem Shares and then to acquire additional properties consistent with its investment objectives. See "Redemption of Shares." INDEMNIFICATION Limitation of Liability and Indemnification The liability of the Directors and officers of the Company is limited to the fullest extent permitted by Maryland General Corporation Law; and accordingly the Directors and officers shall not be liable to the Company or its Stockholders except that liability shall not be so limited (a) if it is proved that the person actually received an improper benefit or profit in money, property or services; and (b) to the extent that a judgment or other final adjudication adverse to the person is entered in a proceeding based on a finding in the proceeding that the person's action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding. The Company's Articles and By-laws authorize it to the fullest extent permitted by Maryland statutory or decisional law, as amended or interpreted, and, without limiting the generality of the foregoing, in accordance with Section 2-418 of the Maryland General Corporation Law, to indemnify and pay or reimburse reasonable expenses to, (a) any individual who is a present or former director, officer, employee or agent of the Company or (b) any individual who, while a director of the Company and at the request of the Company, serves or has served another corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee, as the case may be, provided, that (i) the Director, Advisor or other party seeking indemnification has determined, in good faith, that the course of conduct which caused the loss or liability was in the best interest of the Company; (ii) the Director, Advisor or other person seeking indemnification was acting on behalf of or performing services on the part of the Company; (iii) such liability or loss was not the result of negligence or misconduct on the part of the indemnified party, except that in the event the indemnified party is or was an Independent Director, such liability or loss shall not have been the result of gross negligence or wilful misconduct; and (iv) such indemnification or agreement to be held harmless is recoverable only out of the assets of the Company and not from the Stockholders. "Independent Directors" shall mean the Directors who (i) are not affiliated, directly or indirectly, with the Advisor, whether by ownership of, ownership interest in, employment by, any material business or professional relationship with, or service as an officer or director of the Advisor, or its Affiliates, (ii) do not serve as a director for more than two other REITs organized by the Sponsor, and (iii) perform no other services for the Company, except as Directors. For this purpose, an indirect relationship shall include circumstances in which a member of the immediate family of a Director has one of the foregoing relationships with the Advisor or the Company. The Company shall not indemnify a Director, the Advisor or its Affiliates for losses, liabilities or expenses arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee; or (iii) a court of competent jurisdiction approves the settlement and finds that indemnification of the settlement and related costs should be made and the court considering the request has been advised of the position of the Commission and the published opinions of any state securities regulatory authority in which securities of the Company were offered and sold as to indemnification for securities law violations. The Company may advance amounts to persons entitled to indemnification hereunder for legal and other expenses and costs incurred as a result of legal action instituted against or involving such person if: (i) the legal action relates to the performance of duties or services by the indemnified party for or on behalf of the Company; and (ii) the indemnified party receiving such advances undertakes, in writing, to repay the advanced funds to the Company, with interest at the rate determined by the Company, in cases in which such party would not be entitled to indemnification; provided however that the Board of Directors may deny the payment of advances to a Director who is an Affiliate of the Company ("Affiliated Director") if a majority of the Independent Directors shall determine, in the exercise of their reasonable discretion, that the Affiliated Director seeking advances would not be entitled to indemnification. The Company shall have the power to purchase and maintain insurance on behalf of an indemnified party against any liability asserted which was incurred in any such capacity with the Company or arising out of such status; provided, however, that the Company shall not incur the costs of any liability insurance which insures any person against liability for which he, she or it could not be indemnified under the Articles. Neither the amendment nor the adoption of any other provision of the Articles or the By-laws shall apply to or affect in any respect the applicability of indemnification with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption. To the extent that indemnification may apply to liabilities arising under the Securities Act, the Company has been advised that, in the opinion of the Commission, such indemnification is contrary to public policy, and therefore unenforceable. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. LEGAL MATTERS The legality of Shares to be issued in connection with the Reinvestment Plan and certain other legal matters will be passed upon for the Company by Saitlin, Patzik, Frank & Samotny Ltd., 150 South Wacker Drive, Suite 900, Chicago, Illinois 60606. EXPERTS The financial statements and schedule of Brauvin Net Lease V, Inc. appearing in Brauvin Net Lease V, Inc.'s Annual Report (Form 10-K) for the year ended December 31, 1995, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such financial statements and schedule are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. EXHIBIT A REINVESTMENT PLAN Brauvin Net Lease V, Inc. (the "Company"), pursuant to its Amended Articles of Incorporation (the "Articles"), has adopted a Reinvestment Plan, the terms and conditions of which follow. The Company will retain an agent for the Reinvestment Plan (the "Agent") who will act as agent for participants (the "Participants") in the Reinvestment Plan. The initial agent for the Reinvestment Plan shall be an Affiliate of the Company and will be a broker-dealer registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Agent will be paid fees for its services. 1. Commencing on February 25, 1994, the effective date of the Offering of Shares (the "Effective Date of the Plan"), the Agent will receive all dividends paid after the Effective Date of the Plan in respect of Shares of the Company held by each Participant and in respect to any Shares acquired under Plan. The Agent will hold and apply such funds, after deducting applicable service charges and other expenses specified in Paragraph 7 below, as follows. Commencing with the first dividend paid after the Effective Date of the Plan, and continuing until the termination of the Reinvestment Plan, all dividends in respect of the Shares of the Participants will be paid over to the Agent which will purchase additional Shares of the Company for the Participant's accounts ("Reinvested Dividends"). Participants may contribute cash to the Reinvestment Plan in an amount not less than $1,000 and not more than $25,000 per quarter ("Additional Cash Contributions"). Shares will be acquired directly from the Company at a price of $10.00 per Share during the Offering and from February 25, 1996, the termination of the Offering, until the third anniversary thereof. Thereafter, until Shares are listed for trading on an exchange or market, at a price per Share determined on the basis of an annual valuation of the Company's assets. Upon the listing of the Shares on an exchange or market, whether prior or subsequent to the third anniversary of the termination of the Offering, the price will be the then prevailing market price on the exchange or market at the date of purchase by the Agent. 2. Stockholders may become Participants in the Plan at any time by completing, or authorizing their registered representatives at a Placement Agent to complete the appropriate authorization form available from the Company, the Selling Agent, the Placement Agent, if applicable, or the Agent. Participation in the Reinvestment Plan will commence with the next dividend payable after receipt of a Participant's authorization or subscription; provided that the election is made no later than 10 days prior to the end of the quarter. 3. In making purchases for the Participant's accounts, the Agent may commingle the funds of any Participant with those of other Participants. The price at which Shares shall have been acquired for a Participant's account shall be the price at which they were acquired from the Company. Reinvested Dividends and Additional Cash Contributions shall be invested by the Agent promptly following the payment date with respect thereto, and in no event later than 30 days from such receipt (or such longer period as may be permitted). Under certain circumstances, observance of the rules and regulations of the Securities and Exchange Commission may require temporary suspension of such purchases or may require that purchases be spread over a period of more than 30 days, in which event such purchases will be made or resumed as or when permitted by such rules and regulations. The Company or the Agent may rely and act upon an opinion of counsel in this respect, and in such event will not be accountable for such inability to make all purchases prior to the end of such 30-day period. The Agent will hold the Shares of all Participants in one account in the name of its nominee. If a Participant's Reinvested Dividend is not large enough to buy a full Share, the Participant will be credited with fractional Shares, computed to five decimal places. Neither the Company nor the Agent shall have any responsibility or liability as to the value of the Company's Shares or any change in value of the Shares acquired for the Participant's account, provided however that no liability of the Company or the Agent for violation of federal securities laws shall be waived hereby. 4. Pending investment, funds shall be held in non-interest bearing bank account maintained by the Agent. The bank account shall be specifically designated as being for the benefit of Participants and disbursements shall be permitted from such account only for purchases of Shares until Shares are issued to Participants. 5. The Agent will distribute to Participants proxy solicitation material received by it from the Company which is attributable to Shares held in the Plan. The Agent will vote any Shares that it holds for the account of a Participant in accordance with the Participant's written instructions. If a Participant gives a proxy to person(s) representing the Company covering Shares registered in the Participant's name, such proxy will be deemed to be an instruction to the Agent to vote the full Shares in the Participant's account in like manner. If a Participant does not direct the Agent as to how the Shares should be voted and does not give a proxy to person(s) representing the Company covering these Shares, the Agent will not vote said Shares. 6. The Agent will mail to each Participant a statement of account describing the Reinvested Dividends and Additional Cash Contributions received, the service charge, the number and price of Shares purchased and total Shares held under the Plan as soon as practicable after all Reinvested Dividends paid on any payment date with respect thereto have been invested (and also as soon as practicable after the sale of Shares described in Paragraph 10). No certificate representing Shares will be issued for Shares credited to an account until the Account is terminated unless the Participant requests otherwise. Such requests must be made in writing. No certificates will be issued for fractional Shares. 7. The service charge payable by each Participant to the Agent, at the time of investment for the administrative services of the Agent shall be 1% of the amount of the Reinvested Dividends and Additional Cash Contributions. To the extent that Reinvested Dividends and Additional Cash Contributions are used in the acquisition of properties, the Company will pay Acquisition Expenses of .75% of Gross Proceeds and Acquisition Fees of 3.50% of Gross Proceeds to the Advisor. In addition to the 1% fee paid by participants, fees and other charges in the aggregate of up to 4.75% of the proceeds from the Reinvested Dividends and Additional Cash Contributions, will be paid by the Company. 8. No Participant shall have any right to draw checks or drafts against the Participant's account or to give instructions to the Agent except as expressly provided herein. 9. It is understood that reinvestment of dividends does not relieve a Participant of any income tax liability which may be payable on such dividends. 10. A Participant may terminate his or her entire account at any time without penalty by written notice to Brauvin Net Lease V, Inc., 150 South Wacker Drive, Suite 3200, Chicago, Illinois 60606, Attn: Reinvestment Plan, or such other address as may be specified by the Agent in writing. Partial terminations by a Participant will not be allowed. Termination will become effective with the next dividend payable after receipt of a Participant's notice; provided that the notice is received by the Company or the Agent no later than 10 days prior to the end of the quarter. The Company reserves the right to amend any aspect of the Plan effective with respect to any dividend paid subsequent to the notice, provided that the notice is sent to Participants in the Plan at least 10 days before the record date for a dividend, mailed to a Participant, or to all Participants, as the case may be, at the address or addresses shown on their account or such more recent address as a Participant may furnish to the Company or to the Agent in writing. The Company also reserves the right to terminate or change the Agent for the Plan, for any reason at any time, by sending written notice of termination or change to all Participants. Upon termination of the Plan, or upon termination of an individual Participant's involvement in the Plan, the Agent will, as soon as practicable, pay, in cash, the value of any fractional Shares standing to the credit of a Participant's account based upon the market price of Shares, determined as set forth above and the record books of the Company will be revised to reflect the ownership of record of his or her whole shares. Certificates representing such Shares will be forwarded to the terminating Participant. There are no fees associated with termination of an interest in the Plan by a Participant. A Participant who terminates his or her participation in the Plan may request that the Shares be submitted to the Company for redemption. 11. Neither the Company nor the Agent shall be liable for any act done in good faith, or for any good faith omission to act, including, without limitation, any claims or liability (a) arising out of failure to terminate a Participant's account upon such Participant's death prior to receipt of notice in writing of such death, and (b) with respect to the time and the prices at which Shares are purchased or sold for a Participant's account. To the extent that indemnification may apply to liabilities arising under the Securities Act of 1933 or the securities act of a state, the Company and Agent have been advised that, in the opinion of the Securities and Exchange Commission and certain state securities commissioners, such indemnification is contrary to public policy and therefore unenforceable. 12. Each Participant agrees to notify the Company or the Agent promptly in writing of any change of address. Notices to the Participant may be given by letter addressed to the Participant in his or her last address of record the Company, or with the Agent, as the case may be. 13. These terms may be amended or supplemented by an agreement between any agent and the Company at any time, including but not limited to an amendment to the Plan to add a voluntary cash contribution feature or to substitute a new Agent to act as agent for the Participants, by mailing an appropriate notice at least 10 days prior to the effective date thereof to each Participant at his or her last address of record. Such amendment or supplement shall be deemed conclusively accepted by each Participant except those Participants from whom the Company, or the Agent, as the case may be, receives written notice of termination prior to the effective date thereof. 14. This Plan and a Participant's election to participate in the Plan shall be governed by the laws of the State of Illinois. 15. The definitions used in this Reinvestment Plan are set forth below: "Acquisition Expenses" shall mean expenses related to the Company's selection and acquisition of properties, whether or not acquired, including but not limited to legal fees and expenses, travel and communications expenses, cost of appraisals, non-refundable option payments on property not acquired, accounting fees and expenses, title insurance and miscellaneous expenses related to the selection and acquisition of properties. "Acquisition Fees" shall mean the total of all fees and commissions, however designated, paid by any party to any person or entity in connection with the selection or acquisition of any property by the Company. Included in the computation of such fees or commissions shall be any real estate commission, selection fee, development fee, nonrecurring management fee, or any fee of a similar nature, however designated. Excluded shall be development fees and construction fees paid to persons not affiliated with the Advisor in connection with the actual development and construction of a project. "Additional Cash Contributions" shall mean optional investments by participants in the Reinvestment Plan to purchase Shares. "Advisor" shall mean the person(s) or entity responsible for directing or performing the day-to-day business affairs of the Company, including a person or entity to which an Advisor subcontracts substantially all such functions. Initially the Advisor shall be Brauvin Realty Advisors V, L.L.C. or anyone which succeeds it in such capacity. "Affiliate" shall mean (i) any person directly or indirectly controlling, controlled by or under common control with another person, (ii) any person owning or controlling 10% or more of the outstanding voting securities or beneficial interest of such other person, (iii) any officer, director, trustee, general partner of such person, and (iv) if such other person is an officer, director, trustee or partner of another entity, then the entity for which that person acts in any such capacity. "Agent" shall mean the person retained by the Company to undertake the duties provided herein. "Articles" shall mean the Company's Amended Articles of Incorporation. "Company" shall mean Brauvin Net Lease V, Inc. "Effective Date of the Plan" shall mean February 24, 1994, the effective date of the Offering of Shares. "Gross Offering Proceeds" shall mean the total proceeds from the sale of Shares during the initial public offering period (excluding Shares issued pursuant to the Reinvestment Plan during such period) before deductions for organization and offering expenses. For purposes of calculating Gross Offering Proceeds, the purchase price for all Shares, including those for which volume discounts apply, shall be deemed to be $10.00 per Share. "Gross Proceeds" shall mean the total proceeds from the sale of Shares during the initial public offering period (including Shares issued pursuant to the Reinvestment Plan during such period), before deductions for Organization and Offering Expenses. For purposes of calculating Gross Proceeds, the purchase price for all Shares, including those for which volume discounts apply, shall be deemed to be $10.00 per Share. "Offering" shall mean the offering of Shares pursuant to the Prospectus dated February 24, 1994. "Organization and Offering Expenses" shall mean those expenses incurred by and to be paid from the assets of the Company in connection with and in preparing the Company for registration and subsequently offering and distributing it to the public, including, but not limited to, total underwriting and brokerage discounts and commissions (including fees of the underwriters' attorneys), expenses for printing, engraving, mailing, salaries of employees while engaged in sales activity, charges of transfer agents, registrars, trustees, escrow holders, depositaries, experts, expenses of qualification of the sale of the securities under Federal and State laws, including taxes and fees, accountants' and attorneys' fees. "Participant" shall mean a Stockholder electing to participate in the Reinvestment Plan. "Placement Agents" shall mean the dealer members of the National Association of Securities Dealers, Inc. designated by the Selling Agent and the Advisor. "Reinvested Dividends" shall mean those dividends which have been designated to purchase Shares under the Reinvestment Plan. "Selling Agent" shall mean Brauvin Securities, Inc., an Affiliate of the Advisor. "Shares" shall mean the common stock, par value $0.01 per share, of the Company. "Stockholder" shall mean a person holding Shares of the Company. PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. The expenses of issuance and distribution of the securities registered hereby are estimated to be as follow: Expense Amount Securities and Exchange Commission Registration Fee $ 690 Printing and Engraving Expenses . . . . . . . . . . . 1,000* Blue Sky Fees and Expenses (including counsel fees) . 1,800* Legal Fees and Expenses . . . . . . . . . . . . . . . 5,000* Accounting Fees and Expenses. . . . . . . . . . . . . 2,000* Miscellaneous . . . . . . . . . . . . . . . . . . . . 1,010* Total . . . . . . . . . . . . . . . . . . . . . . . $11,500* _______________________ *Estimated Item 15. Indemnification of Directors and Officers. The Company's Articles and By-laws authorize it to the fullest extent permitted by Maryland statutory or decisional law, as amended or interpreted, and, without limiting the generality of the foregoing, in accordance with Section 2-418 of the Maryland General Corporation Law, to indemnify and pay or reimburse reasonable expenses to, (a) any individual who is a present or former director, officer, employee or agent of the Company or (b) any individual who, while a director of the Company and at the request of the Company, serves or has served another corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee, as the case may be, provided, that (i) the Director, Advisor or other party seeking indemnification has determined, in good faith, that the course of conduct which caused the loss or liability was in the best interest of the Company; (ii) the Director, Advisor or other person seeking indemnification was acting on behalf of or performing services on the part of the Company; (iii) such liability or loss was not the result of negligence or misconduct on the part of the indemnified party, except that in the event the indemnified party is or was an Independent Director, such liability or loss shall not have been the result of gross negligence or wilful misconduct; and (iv) such indemnification or agreement to be held harmless is recoverable only out of the assets of the Company and not from the Stockholders. The Company shall not indemnify a Director, the Advisor or its Affiliates for losses, liabilities or expenses arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee; or (iii) a court of competent jurisdiction approves the settlement and finds that indemnification of the settlement and related costs should be made and the court considering the request has been advised of the position of the Commission and the published opinions of any state securities regulatory authority in which securities of the Company were offered and sold as to indemnification for securities law violations. The Company may advance amounts to persons entitled to indemnification hereunder for legal and other expenses and costs incurred as a result of legal action instituted against or involving such person if: (i) the legal action relates to the performance of duties or services by the indemnified party for or on behalf of the Company; and (ii) the indemnified party receiving such advances undertakes, in writing, to repay the advanced funds to the Company, with interest at the rate determined by the Company, in cases in which such party would not be entitled to indemnification; provided however that the Board of Directors may deny the payment of advances to a Director who is an Affiliate of the Company ("Affiliated Director") if a majority of the Independent Directors shall determine, in the exercise of their reasonable discretion, that the Affiliated Director seeking advances would not be entitled to indemnification. The Company shall have the power to purchase and maintain insurance on behalf of an indemnified party against any liability asserted which was incurred in any such capacity with the Company or arising out of such status; provided, however, that the Company shall not incur the costs of any liability insurance which insures any person against liability for which he, she or it could not be indemnified under the Articles. Neither the amendment nor the adoption of any other provision of the Articles or the By-laws shall apply to or affect in any respect the applicability of indemnification with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption. To the extent that indemnification may apply to liabilities arising under the Securities Act of 1933, the Company has been advised that, in the opinion of the Commission, such indemnification is contrary to public policy, and therefore unenforceable. Item 16. Exhibits. INDEX TO EXHIBITS Exhibit No. Description of Document *4 Specimen Stock Certificate 5 Opinion of Saitlin, Patzik, Frank & Samotny Ltd. regarding legality 23(a) Consent of Independent Auditors 23(b) Consent of Saitlin, Patzik, Frank & Samotny Ltd. (included in Exhibit 5) ______________ * Incorporated by reference from the exhibits filed with the Company's registration statement (Registration Number 33-70550) on Form S-11 filed under the Securities Act of 1933, as amended. Item 17. Undertakings. A. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. B. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d)of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. SIGNATURES Pursuant to the requirement of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has fully caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois on the 16th day of May, 1996. BRAUVIN NET LEASE V, INC. By: /s/ Jerome J. Brault Jerome J. Brault, Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date /s/ Jerome J. Brault Chairman, President and Chief May 16, 1996 Jerome J. Brault Executive Officer /s/ James L. Brault Director, Executive Vice President May 16, 1996 James L. Brault and Secretary /s/ Thomas J. Coorsh Chief Financial Officer (Principal May 16, 1996 Thomas J. Coorsh Accounting Officer) /s/ Jeff A. Jacobson Director May 16, 1996 Jeff A. Jacobson /s/ Gregory S. Kobus Director May 16, 1996 Gregory S. Kobus Director Philip S. Moreau /s/ Kenneth S. Nelson Director May 16, 1996 Kenneth S. Nelson /s/ Hugh K. Zwieg Director May 16, 1996 Hugh K. Zwieg INDEX TO EXHIBITS Exhibit No. Description of Document *4 Specimen Stock Certificate 5 Opinion of Saitlin, Patzik, Frank & Samotny Ltd. regarding legality 23(a) Consent of Independent Auditors 23(b) Consent of Saitlin, Patzik, Frank & Samotny Ltd. (included in Exhibit 5) _________________ * Incorporated by reference from the exhibits filed with the Company's registration statement (Registration Number 33-70550) on Form S-11 filed under the Securities Act of 1933, as amended.