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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
July 19 , 2001
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(Date of earliest event reported)
CAPTEC NET LEASE REALTY, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 1045281 38-3368333
(State of Other Jurisdiction (Commission File No.) (I.R.S. Employer
of Incorporation) Identification No.)
24 FRANK LLOYD WRIGHT DRIVE, LOBBY L, FOURTH FLOOR, ANN ARBOR MICHIGAN 48106
(Address of Principal Executive Offices)
(734) 994-5505
(Registrant's Telephone Number)
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ITEM 5.
OTHER EVENTS.
On July 20, 2001 Captec Net Lease Realty, Inc. ("Captec")
was notified that a lawsuit had been filed against the Company in the Court of
Chancery of the State of Delaware in and for New Castle County on July 19,
2001. The following is intended as a summary of this action and is qualified
in its entirety by reference to the complaint filed in this action. The
complaint is attached hereto as Exhibit 99.1, and is incorporated herein by
reference.
a. Bailey, et al. v. Beach, et al., C.A. 19008 NC
(Court of Chancery of the State of Delaware in and
for New Castle County
A complaint was filed by John Bailey and William Steiner, both of whom are
allegedly stockholders of Captec, individually and on behalf of an alleged
class consisting of the public stockholders of Captec, other than the
defendants and any person related to or affiliated with the defendants,
against Captec and each of Captec's directors individually in the Court of
Chancery of the State of Delaware in and for New Castle County. Neither Captec
nor the individual defendants named in the complaint have been served with a
summons for this action as of July 24, 2001. The allegations of the complaint
arise from a July 1, 2001 Agreement and Plan of Merger (the "Merger
Agreement") between Captec and Commercial Net Lease Realty, Inc. ("CNL") which
provides for the merger of Captec with and into CNL with CNL as the surviving
corporation (the "Merger"). The complaint alleges, among other things, that
the Merger is unfair to Captec's stockholders and that the defendants breached
fiduciary duties owed to plaintiffs and the alleged class by entering into the
Merger. The complaint alleges that as part of the Merger, Patrick L. Beach,
Captec's Chairman, President and Chief Executive Officer, will enter into an
asset purchase agreement, by which, Mr. Beach will acquire certain non-real
estate assets of Captec (the "Asset Purchase) at far less than their actual
value. The complaint also alleges that the merger consideration to be paid to
Captec stockholders is unfair and inadequate because the exchange rate of
Captec common stock shares for CNL common and preferred stock shares places no
limit on the movement of CNL stock, thus subjecting Captec's stockholders to
potentially declining per share values. The complaint further alleges that the
alleged class will be irreparably damaged if the Merger is consummated. The
complaint seeks a declaration that the suit is properly maintainable as a
class action and that the defendants breached their fiduciary duties to
plaintiffs and other members of the alleged class. The complaint further seeks
a preliminary and permanent injunction against the defendants and their
counsel, agents, employees and all persons acting under, in concert with, or
for them, from proceeding with or implementing the Merger. In the event that
the Merger is consummated, the complaint seeks an order rescinding the Merger
or, alternatively, awarding rescissory damages. The complaint also seeks for
the defendants to account to the alleged class for all the damages the
plaintiffs and the alleged class have suffered as a result of defendants
actions with interest; awarding plaintiffs and the alleged class the costs and
disbursements of the action as well as reasonable allowances for plaintiffs'
counsel and experts' fees and such other relief as the court deems just and
proper. Captec believes the request for class certification and the claims are
without merit and intends to defend vigorously against the action.
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ITEM 7.
EXHIBITS.
EXHIBIT NO.
99.1 Complaint in Bailey, et al. v. Beach, et al., Del. Ch. C.A. No 19008
NC
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 25, 2001
/s/ W. Ross Martin
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Captec Net Lease Realty, Inc.
W. Ross Martin Executive Vice President and
Chief Financial Officer