UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 1-9496
BODDIE-NOELL PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-1574675
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3710 One First Union Center, Charlotte, NC 28202-6032
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 704/333-1367
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered:
Common Stock, Par Value $.01 per share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant at March 15, 1996 was approximately $36,171,000.
The number of shares of Registrant's Common Stock outstanding on March 15,
1996 was 3,016,740
Index to Exhibits at Page 40 Total number of Pages 115
<PAGE>
BODDIE NOELL PROPERTIES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item No. FINANCIAL INFORMATION Page No.
<S> <C> <C>
PART I
1 Business ........................................................... 3
2 Properties ......................................................... 6
3 Legal Proceedings .................................................. 8
4 Submission of Matters to a Vote of Security Holders ................ 8
X Executive Officers of the Registrant ............................... 8
PART II
5 Market for Registrant's Common Equity and Related Stockholder
Matters ............................................................ 10
6 Selected Financial Data ............................................ 10
7 Management's Discussion and Analysis of Financial Condition
and Results of Operations .......................................... 12
8 Financial Statements and Supplementary Data ........................ 17
9 Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure ........................................... 18
PART III
10 Directors and Executive Officers of the Registrant ................. 19
11 Executive Compensation ............................................. 19
12 Security Ownership of Certain Beneficial Owners and Management...... 19
13 Certain Relationships and Related Transactions ..................... 19
PART IV
14 Exhibits, Financial Statement Schedules, and Reports on Form
8-K ................................................................ 20
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
History and Development of Boddie-Noell Properties, Inc.
Boddie-Noell Properties, Inc., (the "Company") is a self-advised and
self-managed equity real estate investment trust ("REIT"). The Company, formerly
known as Boddie-Noell Restaurant Properties, Inc., was formed in 1987 with an
initial public offering of 2,850,000 shares of common stock. The Company's
shares are listed on the American Stock Exchange. Its executive offices are
located at 3710 One First Union Center, Charlotte, North Carolina 28202-6032
(704-333-1367).
From its inception through 1992 the Company's investment strategy was limited to
the purchase and ownership of 47 restaurant properties leased on a triple net
basis to Boddie-Noell Enterprises, Inc. ("BNE"). During this period the Company
operated as an advised REIT with all management and administrative functions
being performed by BNE Advisory Group, Inc. (an affiliate of BNE) under an
advisory contract. While the Company was able to maintain a relatively stable
dividend throughout this period, it experienced virtually no growth in its
operating results, and its common stock did not perform as well as that of
larger, self-managed, self-advised REITs holding other types of properties and
having more emphasis on long-term growth.
In 1992, the Company began to explore ways to increase shareholder value.
Following an extensive review of its options, the Company concluded that it was
in the best interest of its shareholders to change the focus of the Company to
emphasize apartment properties; reorganize into a self-managed, self-advised
REIT; and to implement a long-term growth strategy of acquiring apartment
properties with a goal of increasing funds from operations ("FFO") and its
annual dividend payment. To this end, the Company, in December 1992, entered a
letter of intent to acquire BT Venture Corporation ("BTVC") and its managed
properties (the "roll-up" transaction). BTVC was a fully integrated apartment
management and development company located in Charlotte, North Carolina, which
owned one apartment property and managed nine other apartment properties for
limited partnerships (collectively the "managed properties"), the general
partner of which was an affiliate of BTVC and an affiliate of certain principals
of BNE. Under the proposed transaction the owners of BTVC and the affiliated
limited partnerships would have received shares of the Company's common stock in
exchange for their respective ownership interests in BTVC and the managed
properties. Management of the Company believed that this transaction would have
resulted in the Company achieving a number of its goals. Following the
transaction over two-thirds of its assets would have been apartments and, using
personnel obtained with the purchase of BTVC, the Company would have become
self-managed and self-advised. Management believed that this transaction would
have placed the Company in a better position to attain long-term growth in its
operating results.
As proposed, the transaction constituted a "roll-up" as defined by the
Securities and Exchange Commission ("SEC") and was subject to a special set of
rules governing the merger of multiple limited partnerships into a single
publicly traded entity (the roll-up rules). These rules govern and specify the
type and extent of disclosure required and mandate certain terms and conditions
for transactions such as that contemplated by the Company. At the time the
Company entered this transaction, there had not been a transaction completed
under the SEC's roll-up rules.
In May 1993, the Company entered into a contract to purchase BTVC and the
managed properties and, in August 1993, filed a registration statement together
with supporting documents with the SEC. With the passage of time, it became
clear that, due to the complexity of the roll-up rules and changes in the market
for apartment properties, the difficulty, time and cost required to complete a
roll-up transaction such as that contemplated by the Company was significantly
more than originally estimated. In early 1994 the Company's Board of Directors
came to the conclusion that, as a result of changes in the apartment sector of
the real estate industry and the burden of compliance with the disclosure
requirements, it was highly unlikely that the proposed roll-up transaction could
be completed in an acceptable period of time and at an acceptable cost. As a
result of this determination, the Company withdrew its registration statement in
March 1994.
<PAGE>
Subsequent to the withdrawal of the Registration Statement, the Company explored
alternatives to the original roll-up transaction that would help the Company
achieve its goals without the cost, time and uncertainty attendant to the
roll-up transaction. As a result, in June 1994, the Company entered a contract
to purchase BTVC in a private transaction for a combination of stock and cash.
Pursuant to a Proxy Statement filed June 15, 1994, the purchase of BTVC was
approved by the Company's shareholders on August 4, 1994. The purchase was
completed on October 1, 1994. As part of the purchase of BTVC, the Company
acquired Latitudes Apartments, a 448-unit apartment community located in
Virginia Beach, Virginia; management rights and responsibility for ten apartment
communities located in North Carolina and Virginia (containing a total of 1,947
apartments) and three shopping centers located in North Carolina and Virginia
(containing a total of 238,550 square feet); and the employees of BTVC,
including all administrative and management staff. Simultaneously with the
acquisition of BTVC, the Company changed its name to Boddie-Noell Properties,
Inc., and moved its corporate headquarters from Rocky Mount, North Carolina, to
Charlotte, North Carolina.
Throughout the time that the Company was involved with the roll-up transaction
and the subsequent purchase of BTVC, the Company was pursuing apartment
acquisitions. In June 1993, the Company acquired Paces Commons Apartments, a
336-unit apartment community located in Matthews, North Carolina (a suburb of
Charlotte). In June 1994, the Company acquired Oakbrook Apartments, a 162-unit
apartment community located in Charlotte, North Carolina. These acquisitions
were identified by and were made with the assistance of BTVC personnel.
Subsequent to the acquisition of BTVC, in December 1994, the Company acquired
Harris Hill Apartments, a 184-unit apartment community located in Charlotte,
North Carolina.
Current Operations
As a result of these acquisitions, the Company now owns 47 restaurant properties
and four apartment communities, containing a total of 1,130 apartments. Through
its unconsolidated subsidiary, BNP Management, Inc., the Company manages an
additional nine apartment communities, containing a total of 1,713 apartments,
and two shopping centers, containing a total of 113,800 square feet. All of the
properties presently owned or managed by the Company are located in the states
of North Carolina and Virginia, with multi-family residential operations in the
North Carolina cities of Raleigh, Durham, Cary, Chapel Hill, and Charlotte, as
well as Virginia Beach, Virginia.
The Company has 80 employees, including administrative, management, accounting,
legal, acquisitions, development, property management, leasing, and maintenance
personnel. The Company operates as a self-advised and self-managed REIT.
With the addition of four apartment properties in June 1993 and June, October,
and December 1994, apartment rental income accounts for a significant portion of
revenues, totaling $8.5 million in 1995 compared to $3.9 million in 1994 and
$1.2 million in 1993. 1995 apartment rental income represents approximately 62
percent of total revenues.
Each apartment community is operated by an on-site manager assisted by staff
trained by the Company in sales, management, accounting, maintenance and other
procedures. On-site managers report directly to property managers who operate
from the Company's corporate offices. This flat organization provides for
efficient staffing levels, reduces overhead expenses and enables the Company to
be responsive to the needs of residents and on-site employees. Employees of the
Company supervise all renovation and repair activities, which are generally
completed by outside contractors.
Restaurant properties are leased on a triple net basis to BNE, a privately held
company, which is the second largest Hardee's franchisee in the United States
with approximately 365 stores. The Company's lease agreement with BNE (the
"master lease"), as amended in December 1995, has a primary term expiring
December 2007, grants BNE three five-year renewal options and provides for rent
equal to 9.875 percent of restaurant sales as defined, subject to a minimum
annual rent of $4,500,000 per year. Under the terms of the master lease, BNE is
responsible for all aspects of the operation, maintenance and upkeep of the
restaurant properties. Restaurant rental income totaled $4.6 million in 1995
compared to $5.0 million in 1994 and $5.2 million in 1993. 1995 restaurant
rental income represents
<PAGE>
approximately 34 percent of total revenues. (See Item 7, Management's Discussion
and Analysis of Financial Condition and Results of Operations for discussion of
restaurant sales trends.)
Business Strategy
Building upon the acquisition of its four apartment communities and BTVC, the
Company intends to continue to acquire high quality apartment properties. The
Company currently has no plans to add to or dispose of its restaurant properties
and will not seek additional third-party management contracts except as part of
a plan to acquire additional properties.
The Company believes that its strategy of combining the restaurant properties
with increasing investment in apartment communities will provide for growth in
FFO and enhance shareholder value. The Company will seek to acquire multi-family
properties located primarily in the states of North Carolina, South Carolina and
Virginia from unaffiliated third parties and as well as some or all of the
affiliated properties it currently manages. The Company will also selectively
consider opportunities for development of new apartment communities. The
Company's management has developed 781 apartment units and believes that its
development experience will enable it to build additional apartment communities
at such time as economic conditions and available capital make development
attractive.
In evaluating potential properties for acquisition, the Company will consider
such factors as (1) the current and anticipated cash flow of the property and
its adequacy to meet operational needs and other obligations and to facilitate
the Company's ability to pay dividends; (2) the geographic area and demographic
profile; (3) the location, construction quality, condition and design of the
property (generally properties will be or have the potential to become Class A
apartment communities); (4) the potential for increasing cash flow by means of
increasing rental rates and reducing operating expenses; (5) the potential for
capital appreciation; (6) the growth, tax and regulatory environment of the
community in which the property is located; (7) occupancy and demand for the
property; and (8) prospects for eventual sale or refinancing. Generally, an
apartment property will be acquired only where the operating history indicates
that the property will contribute immediately to the cash flow of the Company
and there is a strong likelihood of increasing cash flow.
Prior to acquiring its first apartment community, the Company's capital
requirements were minimal as all capital expenses related to the restaurants
were borne by BNE under the terms of the master lease. In order to acquire Paces
Commons, Oakbrook, BTVC, Latitudes and Harris Hill, the Company has incurred
additional debt and issued additional common stock. The additional debt consists
of first mortgages secured by the acquired apartment communities and draws
against the Company's credit lines. In order for the Company to continue to
acquire apartment properties, it is essential that it obtain additional equity
capital. The Company is actively exploring available sources of equity capital.
It is likely that the Company will incur additional long-term debt as part of
any apartment acquisitions. While short-term variable rate debt may be used to
facilitate an acquisition, the preferred permanent financing will be long-term,
fixed rate, and self-amortizing.
The Company is committed to reducing its exposure to variable rate debt. The
Company converted $31.1 million and $29.3 million of variable rate debt to fixed
rates during 1994 and 1995, respectively.
The Company has elected and expects to be taxed as a REIT under Sections 856
through 860 of the Internal Revenue Code of 1986, as amended. As such the
Company generally will not be subject to federal or state income taxes on net
income. REITs are subject to a number of organizational and operational
requirements, including a requirement that they currently distribute 95 percent
of their ordinary taxable income as dividends. The Company intends to pay
dividends quarterly, expects that these dividends will substantially exceed the
95 percent taxable income test, and anticipates that all dividends will be paid
from current funds from operations.
In addition to the 95 percent taxable income test, the Company is subject to a
"non-qualifying" income test which requires that no more than 5 percent of total
revenue come from sources deemed to be "non-qualifying." Failure to comply with
this requirement may result in the loss of the Company's REIT status. Revenue
from third-party property management contracts assumed at the acquisition of
BTVC in 1994 is considered to be non-qualifying income. As a result, the
Company, in 1994, had non-qualifying income of approximately 3 percent of total
revenue. To ensure that
<PAGE>
non-qualifying income does not exceed 5 percent of its total revenue, in May
1995 the Company transferred the third-party management contracts to a newly
formed unconsolidated management subsidiary, BNP Management, Inc., which is
subject to federal and state income taxes. This structure is currently being
used by a number of other REITs.
The Company expects to meet its short-term liquidity requirements generally
through net cash provided by operations and utilization of credit facilities.
The Company believes that its net cash provided by operations will be adequate
and anticipates that it will continue to be adequate to meet both operating
requirements and payment of dividends by the Company in accordance with REIT
requirements in both the short and the long term. The Company anticipates
funding its acquisition activities, if any, primarily by using short-term credit
facilities or secured debt. The Company expects to meet certain of its long-term
liquidity requirements, such as scheduled debt maturities and repayment of
short-term financing of possible property acquisitions, through long-term
secured and unsecured borrowings and the issuance of debt securities or
additional equity securities of the Company. The Company believes that it has
sufficient resources to meet its short- and long-term liquidity requirements.
ITEM 2. PROPERTIES
The Company owns 47 restaurant properties and four apartment communities. All of
the Company's properties are located in the states of North Carolina and
Virginia. The properties are held subject to loans, discussed in Notes to the
Financial Statements included in Item 14 of this Annual Report.
Restaurant Properties
The locations of the Company's 47 restaurant properties are listed in Schedule
III included in Item 14 of this Annual Report. The restaurant properties are
leased on a triple net basis to BNE pursuant to a master lease. The master
lease, as amended in December 1995, provides for a primary term expiring
December 2007, grants BNE three five-year renewal options and provides for rent
equal to 9.875 percent of restaurant sales as defined, subject to a minimum
annual rent of $4,500,000. The average price for the restaurant properties was
approximately $920,000 per property. Under the terms of the master lease, BNE is
responsible for all aspects of the operation, maintenance and upkeep of the
restaurant properties. A copy of the master lease is included as Exhibit 10.1 to
this Annual Report.
The restaurant properties are operated by BNE as Hardee's restaurants pursuant
to franchise agreements. These agreements require that the properties conform to
a standard design specified by Hardee's Food Systems, Inc. ("Hardees"). The
current design consists of a one-story brick, stucco or wood building that
embodies a contemporary style with substantial plate glass window areas. The
buildings average 3,300 square feet and are located on sites ranging from 1 to
1.3 acres. The buildings are suitable for conversion to a number of uses, but
the interiors must be substantially modified prior to utilization in
non-restaurant applications. Hardee's owns a design patent on certain elements
of the building and requires franchisees to make certain exterior modifications
if the location is discontinued as a Hardee's restaurant.
Under the master lease BNE is responsible for all normal maintenance and repair
of the restaurant properties. In addition, BNE is responsible for the cost of
any improvement, expansion, remodeling or replacement required to keep the
properties competitive or in conformity with Hardee's building standards. The
decision to modify a particular restaurant property is based on a number of
factors, including the date of its last modification and the number, age and
design features of competing restaurants located in the market area of the
particular property.
Since the Company's inception in 1987, 16 restaurants have been renovated,
including one that was completely rebuilt. All renovations have been made at
BNE's expense.
Apartment Properties
The Company owns four apartment properties containing a total of 1,130 units. Of
these, three properties containing a total of 682 apartments are located in
Charlotte, North Carolina, and one property with 448 apartments is located in
Virginia Beach, Virginia. Summary information concerning each apartment property
follows:
<PAGE>
Paces Commons Apartments. Located in Charlotte, North Carolina, Paces Commons
was constructed in 1988 on 24.8 acres. The property consists of 18 two and three
story masonry and wood frame buildings containing 336 garden type apartments, a
clubhouse, a family center, two pools, a whirlpool, car wash and two tennis
courts. The community offers eight different one, two and three bedroom floor
plans with an average size of 862 square feet. The property was acquired by the
Company on June 8, 1993, for a contract price of $14,250,000. The property
appraised for $16,763,000 in August 1994. Occupancy statistics are summarized as
follows:
<TABLE>
<CAPTION>
December December
Average Average Revenue Average Average Revenue
Economic per Occupied Physical per Occupied
Occupancy* Unit Occupancy Unit
<S> <C> <C> <C> <C>
Year ended December 31, 1995 94% $655 93% $679
Year ended December 31, 1994 95% $611 95% $646
June 8 thru December 31, 1993 95% $576 94% $589
</TABLE>
*Average Economic Occupancy is defined as gross potential rent less vacancy
divided by gross potential rent.
Oakbrook Apartments. Located in Charlotte, North Carolina, Oakbrook was
constructed in 1985 on a 16.37 acre site. The property consists of 17 two story
wood frame buildings with cedar siding and brick veneer containing 162 garden
and townhouse style apartment units. The property offers eight different one,
two and three bedroom floor plans averaging 1,100 square feet. The property was
acquired by the Company on June 7, 1994, for a contract price of $9,250,000. The
property appraised for $9,832,000 in April 1994. Occupancy statistics are
summarized as follows:
<TABLE>
<CAPTION>
December December
Average Average Revenue Average Average Revenue
Economic per Occupied Physical per Occupied
Occupancy* Unit Occupancy Unit
<S> <C> <C> <C> <C>
Year ended December 31, 1995 98% $750 97% $765
June 7 thru December 31, 1994 98% $711 97% $740
</TABLE>
*Average Economic Occupancy is defined as gross potential rent less vacancy
divided by gross potential rent.
Latitudes Apartments. Located in Virginia Beach, Virginia, Latitudes was
constructed in 1989 on a 24.86 acre site. The property consists of 20 two and
three story wood frame buildings with vinyl siding containing 448 garden style
apartment units. The property offers six different one, two and three bedroom
floor plans averaging 800 square feet. The property was acquired by the Company
on October 1, 1994, as part of the acquisition of BTVC. The property was
purchased by BTVC on December 3, 1992, for a contract price of $19,000,000. The
property appraised for $22,150,000 in January 1994. Occupancy statistics are
summarized as follows:
<TABLE>
<CAPTION>
December December
Average Average Revenue Average Average Revenue
Economic per Occupied Physical per Occupied
Occupancy* Unit Occupancy Unit
<S> <C> <C> <C> <C>
Year ended December 31, 1995 95% $613 93% $614
Year ended December 31, 1994 93% $606 96% $610
Year ended December 31, 1993 90% $593 85% $585
</TABLE>
*Average Economic Occupancy is defined as gross potential rent less vacancy
divided by gross potential rent.
<PAGE>
Harris Hill Apartments. Located in Charlotte, North Carolina, Harris Hill was
constructed in 1988 on a 18.37 acre site. The property consists of 19 two and
three story wood frame buildings with wood siding containing 184 garden style
apartment units. The property offers four different one and two bedroom floor
plans averaging 912 square feet. The property was acquired by the Company on
December 28, 1994, at a contract price of $8,900,000. The property appraised for
$9,500,000 in October 1994. Occupancy statistics are summarized as follows:
<TABLE>
<CAPTION>
December December
Average Average Revenue Average Average Revenue
Economic per Occupied Physical per Occupied
Occupancy* Unit Occupancy Unit
<S> <C> <C> <C> <C>
Year ended December 31, 1995 96% $683 92% $741
December, 1994 95% $641
</TABLE>
*Average Economic Occupancy is defined as gross potential rent less vacancy
divided by gross potential rent.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to a variety of legal proceedings arising in the ordinary
course of its business. In addition, the Company has become a successor
party-in-interest to certain legal proceedings as a result of its acquisition of
BTVC. These matters arose in the ordinary course of BTVC's business either as an
owner of an apartment community or as a property management company. All of
these matters, individually and in aggregate, are not expected to have a
material adverse impact on the Company.
In the event a claim were successful, the Company believes that it is adequately
covered by insurance and indemnification agreements. The Company has insurance
coverage on each of its apartment properties. The Company's restaurant
properties are subject to an indemnification agreement whereby BNE, the lessee,
is responsible for all claims arising from a restaurant property. In addition,
BNE is required to provide insurance on each restaurant property which
identifies the Company as a named insured. Each property which is managed, but
not owned by the Company, is covered by an insurance policy under which the
Company is a named insured. As to claims to which the Company has become a
successor party-in-interest to BTVC, the Company received, as part of the
acquisition of BTVC, an indemnification agreement from B. Mayo Boddie and
Nicholas B. Boddie (the sole shareholders of BTVC) whereby the Company is,
subject to certain limitations, indemnified from loss arising out of a claim
against BTVC.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year 1995.
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is a listing and brief biography of each of the executive
officers of the Company at March 15, 1996.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------ ------------------------------------------------ --------------
Name Age Position Officer Since
- ------------------------------ ------------------------------------------------ --------------
<S> <C> <C> <C>
D. Scott Wilkerson 38 President and Chief Executive Officer October, 1994
Philip S. Payne 44 Executive Vice President, Treasurer and Chief October, 1994
Financial Officer
Douglas E. Anderson 48 Vice President, Secretary 1987
W. Craig Worthy 43 Vice President 1987
Lisa K. McCourt 32 Vice President for Property Management Services October, 1994
Pamela B. Novak 42 Vice President, Controller October, 1994
- ------------------------------ ------------------------------------------------ --------------
</TABLE>
D. Scott Wilkerson - President and Chief Executive Officer. From 1980 to 1986,
Mr. Wilkerson was with Arthur Andersen LLP, Charlotte, North Carolina, serving
as tax manager from 1985 to 1986. His specialization was in the representation
of real estate syndicators, developers and management companies. He joined BT
Venture Corporation ("BTVC") in 1987 and served in various officer level
positions, including vice president of administration and finance and vice
president for acquisitions and development before becoming president in January
1994. He was named Chief Executive Officer of the Company in April 1995. Mr.
Wilkerson received a B.S. degree in accounting from the University of North
Carolina at Charlotte in 1980. He is a licensed C.P.A. and licensed real estate
broker. He has been active in various professional, civic and charitable
activities.
Philip S. Payne - Executive Vice President, Treasurer and Chief Financial
Officer. Mr. Payne joined BTVC in 1990 as vice president of capital market
activities and became executive vice president and chief financial officer in
January 1993. He was named Treasurer of the Company in April 1995. From 1987 to
1990 he was a principal in Payne Knowles Investment Group, a financial planning
firm. From 1983 to 1987 he was a registered representative with Legg Mason Wood
Walker. From 1978 to 1983, Mr. Payne practiced law. He received a B.S. degree
from the College of William and Mary in 1973 and a J.D. degree in 1978 from the
same institution.
Douglas E. Anderson - Vice President and Secretary. Mr. Anderson has served as
Vice President and Secretary of the Company since its inception in 1987. He has
been with BNE since 1977 and is currently a director, executive vice president
and secretary of BNE. Mr. Anderson is also president of BNE Land and Development
Company, the real estate development division of BNE. He serves as a director of
Wachovia Bank of Rocky Mount, North Carolina, the Educational Foundation of the
University of North Carolina and is a former director of Golden Corral Real
Estate Investment Trust. He received a B.S. degree in accounting from the
University of North Carolina at Chapel Hill in 1970.
W. Craig Worthy - Vice President. Mr. Worthy has served as Vice President of the
Company since its inception in 1987 and served as Treasurer of the Company from
its inception until April 1995. He is a licensed certified public accountant and
has been employed by BNE since 1979. Mr. Worthy is currently senior vice
president and chief financial officer of BNE. He serves as a director of First
Union Bank of Rocky Mount, North Carolina. He received a B.A. degree from the
University of Virginia in 1974 and a Master of Accountancy and of Business
Administration from the University of South Carolina in 1977.
Lisa K. McCourt - Vice President, Property Management Services. Ms. McCourt
joined BTVC in 1989 as a community manager and was promoted to regional property
manager and oversaw all apartment and shopping center operations in the
Raleigh-Durham-Chapel Hill area of North Carolina and Virginia Beach, Virginia;
she became vice president of property management in 1993. Prior to joining the
Company, she worked for eight years in property management with fee-managed
properties for Boyd & Hassell Property Management Company.
Pamela B. Novak - Vice President and Controller. A licensed certified public
accountant, Ms. Novak joined BTVC in 1993 as controller. From 1984 to 1993, she
was employed by Ernst & Young, as an audit manager from 1987 through 1993. She
received a B.S. in accounting from the University of North Carolina at Charlotte
in 1984.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has been traded on the American Stock Exchange under
the symbol "BNP". There were approximately 1,610 shareholders of record at March
15, 1996. The table below sets forth for the periods indicated the range of
high, low and closing sale prices of the Common Stock as reported by the
American Stock Exchange. As of March 15, 1996, the closing price of the
Company's Common Stock was $13.50 per share.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Stock Price Dividends
High Low Close Paid Per Share
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
First quarter $13 7/8 $12 1/8 $13 3/8 $ .31
Second quarter 13 5/8 11 1/4 12 7/8 .31
Third quarter 13 5/8 12 1/4 12 7/8 .31
Fourth quarter 13 1/8 12 1/8 12 1/2 .31
$1.24
1994
First quarter 15 3/4 13 5/8 13 7/8 $ .31
Second quarter 14 3/8 13 1/2 14 1/4 .31
Third quarter 14 3/8 13 1/2 14 1/4 .31
Fourth quarter 14 1/2 12 1/2 12 1/2 .31
$1.24
- -----------------------------------------------------------------------------
</TABLE>
The Company has a dividend reinvestment plan which is available to all
shareholders of record. Under this plan, the plan administrator, First Union
National Bank of North Carolina, will reinvest dividends on behalf of plan
participants by buying shares of the Company's stock on the open market. In
addition, shareholders who participate in the plan may elect to supplement their
reinvestment program with cash contributions of any amount from $25 to $3,000
per quarter.
The Company has elected and expects to be taxed as a real estate investment
trust ("REIT") under the Internal Revenue Code. REITs are subject to a number of
organizational and operational requirements, including a requirement that they
currently distribute at least 95 percent of their ordinary taxable income as
dividends. The Company intends to pay dividends quarterly, expects that these
dividends will substantially exceed the 95 percent taxable income test, and
anticipates that all dividends will be paid from current funds from operations.
ITEM 6. SELECTED FINANCIAL DATA
From its inception through 1992 the Company's investment strategy was limited to
the purchase and ownership of 47 restaurant properties leased on a triple net
basis. In June 1993, the Company acquired Paces Commons Apartments, a 336-unit
apartment community. In June 1994, the Company acquired Oakbrook Apartments, a
162-unit apartment community. In October 1994, the Company acquired by merger BT
Venture Corporation ("BTVC"), including a fully integrated apartment management
and development operation and Latitudes Apartments, a 448-unit apartment
community. In December 1994, the Company acquired Harris Hill Apartments, a
184-unit apartment community. (See discussion of History and Development of
Boddie-Noell Properties, Inc. included in Item 1 of this Annual Report.)
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------- -----------------------------------------------------------------------------
For the years ended December 31,
1995 1994 1993 1992 1991
- ----------------------------------- --------------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Operating Data
Revenues $13,725,638 $9,258,246 $6,425,852 $5,373,305 $5,108,207
Net income (1) 1,628,268 2,301,919 2,455,451 3,158,521 2,924,242
Net income per share $.54 $.80 $.86 $1.11 $1.03
Weighted average number of shares
3,005,809 2,885,248 2,850,000 2,850,000 2,850,000
Distributions per share:
Ordinary income $ .60 $ .63 $1.09 $1.11 $1.03
Return of capital .64 .61 .15 .13 .27
Total $1.24 $1.24 $1.24 $1.24 $1.30
Balance Sheet Data (at year end)
Total assets $94,351,776 $95,954,214 $54,642,613 $40,465,345 $40,837,589
Notes payable 67,161,785 66,883,556 26,894,378 12,000,000 12,000,000
Shareholders' equity 26,199,938 27,967,909 27,251,996 28,330,545 28,706,024
Other Data
Funds from operations (2) $4,449,671 $4,291,439 $4,028,885 $3,943,175 $3,717,646
- ----------------------------------- --------------- --------------- --------------- --------------- --------------
</TABLE>
(1) 1995, 1994 and 1993 net income includes a special charge of $321,000,
$377,000 and $600,000, respectively, to write off certain acquisition costs .
(2) The Company considers funds from operations ("FFO") to be an appropriate
measure of the performance of an equity REIT. FFO is generally defined as net
income (loss) plus certain non-cash items, primarily depreciation. Adjustments
for all periods shown consisted only of depreciation, amortization of an
intangible asset related to acquisition of management operations, and write-off
of deferred acquisition and financing costs. All FFO amounts reflect the
definition recommended by the National Association of Real Estate Investment
Trusts, as modified in 1995 to eliminate amortization of deferred financing
costs previously added back to net income when computing FFO. The following
table reflects the effect of this change in definition and reconciles FFO as
previously defined to FFO amounts identified above.
<TABLE>
<CAPTION>
FFO, as FFO, as
previously Effect of currently
defined revision defined
<S> <C> <C> <C>
1995:
First quarter $1,045,523 $ (53,883) $ 991,640
Second quarter 1,193,473 (34,715) 1,158,758
Third quarter 1,106,745 (29,060) 1,077,685
Fourth quarter 1,251,031 (29,443) 1,221,588
4,596,722 (147,101) 4,449,671
1994:
First quarter 902,755 (37,128) 865,627
Second quarter 1,090,308 (38,100) 1,052,208
<PAGE>
Third quarter 1,139,076 (48,794) 1,090,282
Fourth quarter 1,335,916 (52,594) 1,283,322
4,468,055 (176,616) 4,291,439
1993 4,121,286 (92,401) 4,028,885
1992 3,957,023 (13,848) 3,943,175
1991 3,731,494 (13,848) 3,717,646
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Balance Sheets,
Statements of Operations and Statements of Cash Flows included in Item 14 of
this Report.
Results of Operations
Revenues. The Company's revenues come from two primary sources - restaurant
rental income and apartment rental income. Prior to 1993 the Company's primary
source of revenue was restaurant rental income. In June 1993, the Company
acquired Paces Commons Apartments, which generated apartment rental income of
$1.2 million in seven months. Revenues in 1994 were $9.3 million, an increase of
44 percent over 1993, primarily attributable to the impact of acquisitions of
BTVC property management operations and three apartment communities during 1994
(Oakbrook Apartments--June 1994; Latitudes Apartments--October 1994, and Harris
Hill Apartments--December 1994) and full year operations of Paces Commons
Apartments. For the year 1995, revenues increased 48 percent to $13.7 million,
again primarily attributable to the impact of acquisitions of and continued
improvements in operations at the Company's four apartment communities.
Apartment rental income accounts for 62 percent of total revenues in 1995
compared to 42 percent in 1994 and 20 percent in 1993, indicative of the
Company's focus on growth in apartment operations. Increases in revenues
attributable to the Company's apartment operations were offset somewhat by
declines in restaurant rental income in 1994 and 1995 and the creation of a
property management subsidiary in May 1995.
Revenues from Company-owned apartments increased 212 percent and 118 percent in
1994 and 1995, respectively. While this increase is primarily attributable to
acquisitions, apartment operations reflect continued improvement. Occupancy
remained consistently high at an average of approximately 95 percent since the
first apartment acquisition in mid-1993. Average monthly revenue per occupied
unit grew from $613 in January 1995 to $676 in December 1995.
(See discussion of Apartment Properties included in Item 2 of this Report.)
Restaurant rental income payments are comprised of the greater of minimum or
percentage rent based on food sales of 47 restaurants under a single master
lease. Until 1992, restaurant rental income had remained generally consistent
since the inception of the Company in 1987. In 1992, restaurant rental income
increased by 5 percent over 1991, primarily attributable to the introduction by
Boddie-Noell Enterprises, Inc. ("BNE"), the lessee, of fried chicken at the
Company's properties. Restaurant rental income subsequently declined by 3
percent in 1993 and 2 percent in 1994. The 1993 decline reflected the return to
a more normal sales level following the 1992 increase occasioned by introduction
of new products, while the 1994 decline was attributed primarily to closing of
seven restaurants at various times during the year for remodeling.
The Company continued to experience negative comparisons for restaurant rental
income in 1995, with an 8 percent decline from 1994. "Same-store" restaurant
sales for locations open for the full periods in both years declined by 9
percent for the year. The difference in trends for rental income and
"same-store" sales can be attributed to 1994 closings for scheduled remodeling
(all stores were open throughout 1995). Widespread price discounting in the
quick-service restaurant industry and the lack of a strong hamburger product on
the Hardee's menu appear to be the principal reasons for the decline in
restaurant sales volume and related rental income. BNE and Hardee's Food
Systems, the
<PAGE>
restaurant franchisor, are taking aggressive steps to improve restaurant sales.
This includes a new advertising campaign, introduction of several new food
items, and a return to the charbroil cooking method for hamburger products.
While it is too early to judge the impact of these steps, management is
cautiously optimistic that, by the end of 1996, the Company will begin to see
improving restaurant sales.
Effective December 22, 1995, the Company and BNE entered into a modified and
restated master lease which increases the required minimum rent from $3.46
million per year to $4.5 million per year and extends the primary term from May
2002 to December 2007. The percentage rent remains set at 9.875 percent of gross
food sales. The modified master lease effectively limits the impact of any
further decline in restaurant sales to a maximum further decline of
approximately $150,000, or 3 percent, in restaurant rental income.
As part of the acquisition of BTVC in October 1994, the Company received
third-party property management contracts for ten apartment communities and
three shopping centers. In May 1995, the Company established BNP Management,
Inc. (the "Management Company"), a subsidiary in which the Company owns a 95
percent economic interest and a 1 percent voting interest. As of October 1,
1995, the Company has transferred all third-party management contracts to this
subsidiary, and all third-party management activities are now conducted by the
Management Company. On November 1, 1995, one of the managed apartment properties
was sold, and the management contract was terminated. In February 1996, one of
the managed shopping centers was sold, and that management contract was likewise
terminated. As the Company expects to receive significantly all net income of
the subsidiary, management does not expect the formation or operation of the
management subsidiary to have a significant effect on the financial position or
operating results of the Company. Management fees totaled $276,000 in three
months of 1994 and $515,000 in nine months of 1995. Equity in the income of the
Management Company totaled approximately $48,000 in 1995. The Company accounts
for its investment in the Management Company using the equity method of
accounting; therefore, 95 percent of the net income of the Management Company
flows through to the Company's financial statements as a single line item.
Expenses. For the years 1988 through 1992, total expenses remained relatively
constant at approximately $2.2 million per year. In 1993, total expenses
increased to $4.0 million, primarily attributable to acquisition of Paces
Commons. For 1994, total expenses were $7.0 million, an increase of 75 percent
over 1993, due to the inclusion of Paces Commons for the entire period and the
acquisition of BTVC and Oakbrook, Latitudes and Harris Hill apartments. Total
expenses were $12.1 million in 1995, reflecting a full year's operations of all
four apartment communities and administrative functions.
Increases in depreciation and amortization over the three-year period are
directly attributable to the impact of acquisitions of apartment properties in
1993 and 1994 and an intangible asset recorded in conjunction with acquisition
of management operations in October 1994. Restaurant rental property ($43
million) and related depreciation charges (approximately $800,000 per year) were
unchanged throughout the three-year period, while apartment rental property grew
from none at the end of 1992 to over $55 million by the end of 1995, with
related 1995 depreciation of approximately $1.4 million. Amortization of the
intangible related to management operations totaled $56,000 in 1994 and $258,000
in 1995; the balance of amortization expense relates to loan costs.
Operating expenses at the Company's apartment properties were generally in line
with management's expectations. Increases in apartment operations expenses of
206 percent in 1994 and 125 percent in 1995 reflect full year's operations of
Paces Commons (acquired June 1993) and acquisitions of Oakbrook (June 1994),
Latitudes (October 1994), and Harris Hill (December 1994). Operating expenses
relating to restaurant properties are insignificant because of the restaurant
properties' triple net lease arrangement.
Increases in administrative expenses of 153 percent in 1994 and 106 percent in
1995 are due primarily to implementation of directors' and officers' insurance
coverage effective October 1993 and assumption of management activities in
October 1994. These costs declined in the last half of 1995 ($538,000 during the
last six months compared to $748,000 during the first six months), a trend that
management expects will continue in 1996, as expenses related to third-party
property management operations were transferred to the Management Company.
<PAGE>
Throughout 1993 and through third quarter of 1994, the Company paid property
management fees (5 percent of rental revenues collected) to BTVC for management
of its apartment properties and advisory fees (4.65 percent of net cash
available for distribution as defined by the advisory agreement) to BNE Advisory
Group. With the acquisition of BTVC, the Company terminated its advisory
contract and became self-advised and self-managed, thereby eliminating future
property management and advisory fees.
Increases in interest expense are primarily attributable to increases in
outstanding indebtedness incurred in connection with acquisitions of Paces
Commons in 1993 ($14.9 million) and BTVC's management operations, Oakbrook,
Latitudes, and Harris Hill in 1994 ($40.0 million) and the impact of higher
variable interest rates in 1994. During fourth quarter of 1994 and second
quarter of 1995 the Company refinanced all variable rate debt related to
apartment properties to fixed rate loans, and in December 1995, the Company
refinanced its variable rate credit facility to a fixed rate loan. (See further
discussion below included in discussion of Liquidity and Capital Resources.)
During the fourth quarters of 1993, 1994, and 1995, the Company recorded
write-offs of $600,000, $377,000, and $321,000 related to deferred acquisition
costs. Significantly all of these costs arose in 1992 and 1993 in conjunction
with the "roll-up" transaction the Company began in 1993 and ultimately
abandoned in December 1995. All deferred costs related to the "roll-up"
transaction have now been expensed. (See discussion of History and Development
of Boddie-Noell Properties, Inc. included in Item 1 of this Report.)
Summary Results of Operations. Funds from operations ("FFO") is defined by the
National Association of Real Estate Investment Trusts ("NAREIT") as "net income
(computed in accordance with generally accepted accounting principles),
excluding gains (losses) from debt restructuring and sales of property, plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures". In 1995 NAREIT provided additional guidance
for interpretation of this definition which specifies that only depreciation and
amortization of real estate assets should be added back to net income in
calculating FFO. At December 31, 1995, the Company has adopted this
interpretation and restated FFO amounts previously reported.
The Company considers FFO in evaluating property acquisitions and its operating
performance and believes that FFO should be considered along with, but not as an
alternative to, net income and cash flows as a measure of the Company's
operating performance and liquidity. FFO does not represent cash generated from
operating activities in accordance with generally accepted accounting principles
and is not necessarily indicative of cash available to fund cash needs.
A reconciliation of net income, funds from operations, and net cash provided by
operating activities is as follows (all amounts in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Net income $1,628 $2,301 $2,455
Depreciation 2,204 1,415 973
Amortization of management intangible 258 56 -
Write-off deferred loan costs at refinancing 38 142 -
Write-off deferred acquisition costs 321 377 600
Funds from operations 4,450 4,291 4,029
Equity in income of Management Company (48) - -
Amortization of deferred financing costs 147 177 92
Changes in operating assets and liabilities (73) 28 (55)
Net cash provided by operating activities $4,476 $4,496 $4,066
</TABLE>
To a large extent, the addition of apartment properties and improvement in
apartment operations have offset the decline in restaurant rental income,
producing increases in FFO of 7 percent in 1994 and 4 percent in 1995. As
expected, net income declined 6 percent in 1994 and 29 percent in 1995,
reflecting the effect of non-cash charges for depreciation and amortization of
assets related to apartment property acquisitions in 1993 and 1994. Changes in
operating assets and liabilities reflect timing of rent receipts and payments
for trade payables, taxes, and escrow funds, etc.
<PAGE>
Dividends. The Company paid dividends of $1.24 per share in 1993, 1994, and
1995. The Company's dividend payout ratio (the ratio of dividends paid to FFO on
a per share basis) was 88 percent in 1993, 83 percent in 1994, and 84 percent in
1995.
Liquidity and Capital Resources
Capitalization. Prior to acquiring its first apartment community, the Company's
capital requirements were minimal as all capital expenses related to the
restaurants were borne by BNE under the terms of the master lease. In order to
acquire Paces Commons, Oakbrook, BTVC, Latitudes and Harris Hill, the Company
incurred additional debt and issued additional common stock. The additional debt
consists of first mortgages secured by the acquired apartment communities and
draws against the Company's credit lines. As the Company continues to acquire
apartment properties, it is likely that the Company will incur additional
long-term debt and seek additional equity capital.
At December 31, 1995, the Company's total book capitalization was $93.4 million,
comprised of $26.2 million of shareholders' equity and $67.2 million of debt. At
December 31, 1994, the Company's total book capitalization was $94.9 million,
comprised of $28.0 million of shareholders' equity and $66.9 million of debt. At
December 31, 1993, the Company had 2,850,000 shares of common stock outstanding.
On October 1, 1994, an additional 140,990 shares were issued in conjunction with
the acquisition of BTVC. In March, April and July 1995, the Company issued a
total of 25,750 shares of common stock to the former BTVC shareholders in
conjunction with an earn-out provision of that acquisition agreement. Under the
terms of the acquisition agreement, the former BTVC shareholders are due
additional consideration totaling $283,000 as of December 31, 1995. The Company
may, at its election, make this payment in cash or up to 22,645 shares of common
stock. At December 31, 1995, assuming the full contingent purchase price is
earned and paid in common stock, it is anticipated that the Company could issue
approximately 100,000 additional shares of common stock in conjunction with the
acquisition.
Consistent with management's plan to reduce the Company's exposure to variable
rate debt, during fourth quarter of 1994 and second quarter of 1995, the Company
refinanced $37.6 million in variable rate debt related to apartment properties
to fixed rate loans with maturities in 2000 through 2020. On December 27, 1995,
the Company established a credit line with SouthTrust Bank of Alabama in the
amount of $25.5 million at a fixed rate of 8.0 percent for a term of three
years. The Company used an initial draw of $23.25 million to retire its existing
short-term variable rate credit facility. The balance of the credit line will be
available for general corporate purposes. With the implementation of the new
credit facility the Company's only exposure to variable rate loans is two term
notes payable to affiliates totaling $7,056,000 which are capped at an interest
rate of 8.0 percent and due in full May, 1999. As of December 31, 1995, the
Company has no loans which mature in less than three years or which are subject
to material interest rate adjustments in less than two years.
A summary of long-term debt as of December 31, 1995 and 1994 has been included
in the Notes to the Financial Statements included in Item 14 of this Report. At
December 31, 1995, the weighted average interest rate on debt outstanding was
8.1 percent. A 1 percent increase in variable interest rates would impact the
Company by increasing interest expense by approximately $49,000 on an annual
basis; conversely, a 1 percent decrease in variable interest rates would impact
the Company by decreasing interest expense by approximately $71,000 on an annual
basis.
In addition to the credit facility, the Company had an unsecured revolving line
of credit of $2.0 million with BNE. Draws totaling $1.1 million were made and
repaid in full during 1994. In conjunction with modification of the master lease
agreement, this line of credit was terminated in December 1995.
Cash Flow and Liquidity Requirements. For the years 1988 through 1992, cash flow
from operating activities was generally consistent, at approximately $3.8
million in all years except 1991, in which cash flow from operating activities
was approximately $3.4 million. In each of those years the Company utilized its
cash flow principally to fund dividend payments.
During 1993, the Company generated $4.1 million of net cash provided by
operating activities, an increase of 6 percent over 1992. The increase was
primarily attributable to the acquisition of Paces Commons Apartments in June
1993.
<PAGE>
Net cash provided by operating activities increased by 11 percent to $4.5
million in 1994. The increase was attributable to Paces Commons having been
included for the entire period and cash flow from the properties acquired in
1994 (BTVC and Oakbrook, Latitudes and Harris Hill apartments) which more than
offset a $119,000 decrease in restaurant rental income. In 1995 the Company was
able to maintain $4.5 million in net cash provided by operating activities
despite a $398,000 decline in restaurant rental income, again attributable to
favorable performance of apartment properties.
The company applied cash generated by operating activities to pay dividends of
$3.5 million, $3.6 million, and $3.7 million in 1993, 1994, and 1995,
respectively. Dividends paid per share remained stable at $1.24. As discussed
above, during 1994 and 1995 the Company issued 166,740 shares of common stock
under the earn-out provision of the BTVC acquisition agreement. Also in 1995 the
Company applied $150,000 to advances to the Management Company subsidiary formed
mid-year.
During 1993, the Company applied $14.7 million net proceeds of financing
transactions to $16.2 million in apartment acquisition activity. In 1994, the
Company applied $18.6 million net proceeds of financing transactions to $18.7
million of acquisition activity and additions to apartment properties. Payments
for acquisition activities and additions to apartment properties totaled
$682,000 in 1995, with cash payments for debt reduction and financing costs
exceeding net proceeds by $166,000.
Subsequent to December 31, 1995, the Company entered into an agreement to
purchase an additional apartment community. The Company has placed a $150,000
at-risk binder in an escrow account held by a title insurance company.
The Company is currently exploring various financing options.
The Company has elected and expects to be taxed as a REIT under Sections 856
through 860 of the Internal Revenue Code of 1986, as amended. As such the
Company generally will not be subject to federal or state income taxes on net
income. REITs are subject to a number of organizational and operational
requirements, including a requirement that they currently distribute 95 percent
of their ordinary taxable income as dividends. The Company intends to pay
dividends quarterly, expects that these dividends will substantially exceed the
95 percent taxable income test and anticipates that all dividends will be paid
from current FFO.
The Company continues to produce sufficient cash flow to fund its regular
dividend and has positioned itself for future growth. The Company expects to
meet its short-term liquidity requirements generally through net cash provided
by operations and utilization of credit facilities. The Company believes that
its net cash provided by operations will be adequate and anticipates that it
will continue to be adequate to meet both operating requirements and payment of
dividends by the Company in accordance with REIT requirements in both the short-
and the long term. The Company anticipates funding its acquisition activities,
if any, primarily by using short-term credit facilities or secured debt. The
Company expects to meet certain of its long-term liquidity requirements, such as
scheduled debt maturities and repayment of short-term financing of possible
property acquisitions, through long-term secured and unsecured borrowings and
the issuance of debt securities or additional equity securities of the Company.
The Company believes that it has sufficient resources to meet its short- and
long-term liquidity requirements.
Approximately 34 percent of the Company's 1995 revenue was derived from BNE's
payment of rent for the use of the Company's restaurant properties. In addition,
BNE is responsible for all of the cost associated with the maintenance and
operations of these properties. As a result, the financial well being of the
Company is, to a large extent, dependent on BNE's ability to meet its
obligations under the terms of the master lease. The ability of BNE to satisfy
the requirements of the master lease depend on its liquidity and capital
resources. Historically, BNE has been able to meet its liquidity needs through
cash flow generated from operations and through reliance on its credit facility.
BNE's principal line of business is the operation of approximately 365 Hardee's
restaurants, 47 of which are owned by the Company. The continued decline in
restaurant sales (see "Revenues" above) has had a material impact on BNE's
operating cash flow. Management has reviewed BNE's unaudited financial
statements, cash flow analysis, restaurant contribution analysis, sales trend
analysis and projections and believes that with the refinance of its credit
facility (discussed below) BNE will have sufficient liquidity and capital
resources to meet its obligations under the master lease and credit facility as
well as its general corporate operating needs.
<PAGE>
The principal debt facility on which BNE has relied has been a $140 million
credit agreement. This facility matured on December 31, 1995, but has been
temporarily extended pending renewal. BNE has received and executed a commitment
from the bank group issuing the facility specifying the terms and conditions of
a renewal, and BNE is currently assembling the required documentation. Both BNE
and representatives of the bank group have indicated that they expect the
facility to be renewed and that a final closing of the renewal will occur in the
near future.
The table below sets forth certain information with respect to the liquidity and
capital resources of BNE. The information is derived from BNE's unaudited
financial statements for the fiscal year ended December 31, 1995, available as
of March 8, 1996. BNE is an S Corporation for federal and state income tax
purposes; therefore, its cash flow generated from operations does not include a
deduction for corporate income tax payments.
<TABLE>
<S> <C>
Current assets $ 13,350,000
Total assets 296,339,000
Current liabilities 37,732,000
Total debt, including current portion of $8,291,000 140,346,000
Shareholders' equity 92,117,000
Net cash provided by operating activities 13,766,000
</TABLE>
Capitalization of Fixed Assets and Property Improvements. The Company has
established a policy of capitalizing those expenditures relating to acquiring
new assets, materially enhancing the value of an existing asset, or
substantially extending the useful life of an existing asset. In 1994 and 1993,
apartment carpet, vinyl and wallpaper replacements were generally expensed as
incurred ($23,000 in 1994 and none in 1993), except when those replacements were
made in conjunction with a plan of acquisition. In 1995, the Company capitalized
all apartment carpet, vinyl and wallpaper replacements. Management believes that
such capitalization of carpet, vinyl and wallpaper, depreciated over five years,
more appropriately reflects the useful life of these assets and is consistent
with prevailing industry practice.
A summary of capitalized apartment property additions, replacements and
improvements has been included in the Notes to the Financial Statements included
in Item 14 of this Report.
Inflation. Management does not believe that inflation poses a material risk to
the Company. The leases at the Company's apartment properties are short-term in
nature. The majority of the apartment leases are for terms of one year or less,
with none longer than two years. All apartment leases allow, at the time of
renewal, for adjustments in the rent payable thereunder and thus enable the
Company to seek increases in rents to compensate for increases in expenses
brought about by inflation. In addition, the apartment lease agreements give the
Company the right to terminate any lease at the end of its term on 60 days
notice. The restaurant properties are leased on a triple-net basis, which places
the risk of rising operating and maintenance cost on the lessee.
Environmental matters. Phase I environmental studies have been performed on the
Company's apartment properties. Such studies found ground water contamination at
sites near Latitudes and Paces Commons, but none determined to exist on the
properties. The Company believes that the matters raised by such reports will
not have a material adverse effect on the Company's results of operations,
liquidity or capital resources. Environmental transaction screens were obtained
for each of the restaurant properties in 1995. These environmental reports did
not indicate existence of any environmental problems that warranted further
investigation. BNE has indemnified the Company for environmental problems
associated with the restaurant properties under its master lease with the
Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are listed under Item 14(a) and
filed as part of this Annual Report on the pages indicated.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The section under the heading "Election of Directors" of the Proxy Statement for
Annual Meeting of Stockholders to be held May 23, 1996, (the "Proxy Statement")
is incorporated herein by reference for information on Directors of the
Registrant. See Item X in Part I of this Annual Report for information regarding
Executive Officers of the Registrant.
ITEM 11. EXECUTIVE COMPENSATION
The section under the heading "Election of Directors" entitled "Compensation of
Directors" of the Proxy Statement and the section entitled "Executive
Compensation" of the Proxy Statement are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section under the heading "Security Ownership of Certain Beneficial Owners
and Management" of the Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Certain Relationships and Related Transactions" of the
Proxy Statement is incorporated herein by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. and 2. Financial Statements and Schedules
The financial statements and schedules listed below are filed as part of this
Annual Report on the pages indicated.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Financial Statements and Notes:
Report of Independent Accountants 23
Balance Sheets as of December 31, 1995 and 1994 24
Statements of Operations for the Years Ended December 31, 1995, 1994, and 1993 25
Statements of Shareholders' Equity for the Years Ended
December 31, 1995, 1994, and 1993 26
Statements of Cash Flows for the Years Ended December 31, 1995, 1994, and 1993 27
Notes to Financial Statements 28
Schedules:
Schedule III - Real Estate and Accumulated Depreciation 37
</TABLE>
The financial statements and schedule are filed as part of this report. All
other schedules are omitted because they are not applicable or the required
information is included in the financial statements or notes thereto.
(a) 3. Exhibits
The Registrant agrees to furnish a copy of all agreements related to long-term
debt upon request of the Commission.
Exhibit
No.
2* Agreement and Plan of Merger between BT Venture Corporation and
Boddie-Noell Restaurant Properties, Inc. (filed as Exhibit (2)-2 to
Boddie-Noell Properties, Inc. Current Report on Form 8-K dated
October 1, 1994, and incorporated herein by reference)
3.1* Articles of Incorporation (filed as Exhibit 3(a) to Registration
Statement No. 33-13155 on Form S-11 and incorporated herein by
reference)
3.2 By-Laws
10.1 Amended and Restated Master Lease Agreement dated December 21, 1995
between Boddie-Noell Properties, Inc. and Boddie-Noell Enterprises,
Inc.
10.2 Loan Agreement dated December 27, 1995 between Boddie-Noell
Properties, Inc. and SouthTrust Bank of Alabama, N.A.
10.3* Acquisition Agreement by and among Boddie-Noell Restaurant
Properties, Inc., BT Venture Corporation and Related Entities dated
June 7, 1994 (filed as an exhibit in Schedule 14A of Proxy
Statement dated June 15, 1994 and incorporated herein by reference)
10.4* Boddie-Noell Restaurant Properties, Inc. 1994 Stock Option and
Incentive Plan effective August 4, 1994 (filed as an exhibit in
Schedule 14A of Proxy Statement dated June 15, 1994 and
incorporated herein by reference)
10.5* Form and description of Incentive Stock Option Agreements dated
October 17, 1994 between the Company and certain officers (filed as
Exhibit 10.8 to Boddie-Noell Properties, Inc. Annual Report on Form
10-K dated December 31, 1994 and incorporated herein by reference)
<PAGE>
10.6* Form and description of Nonqualified Stock Option Agreements dated
October 17, 1994 between the Company and certain officers (filed as
Exhibit 10.9 to Boddie-Noell Properties, Inc. Annual Report on Form
10-K dated December 31, 1994 and incorporated herein by reference)
10.7* Form and description of Employment Agreements dated October 1, 1994
between the Company and certain officers (filed as Exhibit 10.10 to
Boddie-Noell Properties, Inc. Annual Report on Form 10-K dated
December 31, 1994 and incorporated herein by reference)
11 Computation of Per Share Earnings
21 Subsidiaries of the Registrant
27 Financial Data Schedule (electronic filing)
* Incorporated herein by reference
Exhibits 10.4 through 10.7 are management contracts or compensatory plans.
(b) Reports on Form 8-K.
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BODDIE-NOELL PROPERTIES, INC.
Date: March 25, 1996 /s/ Philip S. Payne
Philip S. Payne
Executive Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature: Title: Date:
/s/ D. Scott Wilkerson President and March 25, 1996
D. Scott Wilkerson Chief Executive Officer
/s/ Philip S. Payne Executive Vice President and March 25, 1996
Philip S. Payne Chief Financial Officer
/s/ Pamela B. Novak Vice President and March 25, 1996
Pamela B. Novak Controller
/s/ B. Mayo Boddie Chairman of the Board March 25, 1996
B. Mayo Boddie
/s/ Nicholas B. Boddie Vice Chairman of the Board and March 25, 1996
Nicholas B. Boddie Director
/s/ William H. Stanley Director March 25, 1996
William H. Stanley
/s/ Richard A. Urquhart, Jr. Director March 25, 1996
Richard A. Urquhart, Jr.
/s/ Donald R. Pesta, Jr. Director March 25, 1996
Donald R. Pesta, Jr.
<PAGE>
Arthur Andersen LLP
Report of Independent Public Accountants
To the Shareholders of
Boddie-Noell Properties, Inc.:
We have audited the accompanying balance sheets of Boddie-Noell Properties, Inc.
(a Delaware corporation) as of December 31, 1995 and 1994, and the related
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
and the schedule referred to above are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Boddie-Noell Properties, Inc.
as of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in Item 14 is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not a required part of the basic financial statements. The schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth in relation to the basic financial
statements taken as a whole.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
January 31, 1996.
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
- ------------------------------------------------------------------------------
Balance Sheets
<TABLE>
<CAPTION>
December 31,
1995 1994
------------------ ------------------
<S> <C> <C>
Assets
Real estate investments at cost:
Restaurant properties $43,205,075 $43,205,075
Apartment properties 55,315,686 54,723,503
------------------ ------------------
98,520,761 97,928,578
Less accumulated depreciation (9,020,948) (6,827,337)
------------------ ------------------
89,499,813 91,101,241
Cash and cash equivalents 700,863 952,363
Accounts receivable under restaurants master lease 236,121 388,293
Apartments rent and other receivables 8,696 105,013
Prepaid expenses and other assets 165,655 226,565
Security deposit funds held in trust 127,894 140,188
Investment in and advances to Management Company 326,767 -
Other assets, net of applicable amortization:
Intangible related to acquisition of management operations 2,560,254 2,318,335
Deferred acquisition costs - 255,999
Deferred financing costs 725,713 466,217
================== ==================
Total assets $94,351,776 $95,954,214
================== ==================
Liabilities and Shareholders' Equity
Mortgage and other notes payable $60,105,485 $59,827,256
Notes payable to affiliates 7,056,300 7,056,300
Accounts payable and accrued expenses 129,908 447,271
Accrued interest on mortgage and other notes payable 269,373 257,575
Accrued interest on notes payable to affiliates 132,231 122,392
Additional consideration due to former BTVC shareholders 283,334 49,648
Escrowed security deposits and deferred revenue 175,207 225,863
------------------ ------------------
Total liabilities 68,151,838 67,986,305
------------------ ------------------
Commitments and contingencies - Note 11 Shareholders' equity:
Common stock, $.01 par value, 10,000,000 shares authorized, 3,016,740 shares
issued and outstanding at December 31, 1995, 2,990,990 shares issued and
outstanding at December 31, 1994 30,167 29,910
Additional paid-in capital 33,785,335 33,452,611
Dividends distributed in excess of net income (7,615,564) (5,514,612)
------------------ ------------------
Total shareholders' equity 26,199,938 27,967,909
------------------ ------------------
Total liabilities and shareholders' equity $94,351,776 $95,954,214
================== ==================
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
Statements of Operations
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
---------------- ---------------- ----------------
<S> <C> <C> <C>
Revenues
Restaurant rental income $ 4,649,250 $ 5,046,837 $5,165,432
Apartment rental income 8,476,268 3,889,277 1,244,803
Management fees 514,872 276,157 -
Equity in income of Management Company 48,063 - -
Interest and other income 37,185 45,975 15,617
---------------- ---------------- ----------------
$ 13,725,638 $ 9,258,246 $ 6,425,852
---------------- ---------------- ----------------
Expenses
Depreciation 2,204,199 1,414,800 973,434
Amortization 405,182 232,856 92,401
Apartment operations 2,480,920 1,101,370 360,447
Administrative 1,285,509 622,605 245,660
Property management and advisory fees - 264,322 256,793
Interest on notes payable to affiliates 540,572 139,973 -
Interest - other 4,821,865 2,661,921 1,441,666
Write-off of deferred loan costs upon refinancing 37,723 141,582 -
Write-off of deferred acquisition costs 321,400 376,898 600,000
---------------- ---------------- ----------------
12,097,370 6,956,327 3,970,401
---------------- ---------------- ----------------
Net income $ 1,628,268 $ 2,301,919 $ 2,455,451
================ ================ ================
Net income per share $ 0.54 $ 0.80 $ 0.86
================ ================ ================
Weighted average number of shares outstanding 3,005,809 2,885,248 2,850,000
================ ================ ================
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
- ------------------------------------------------------------------------------
Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Dividends
Additional distributed
Common Stock paid-in in excess of
Shares Amount capital net income Total
------------- ------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 2,850,000 $ 28,500 $ 31,462,322 $ (3,160,277) $ 28,330,545
Net income 2,455,451 2,455,451
Dividends paid
($1.24 per share) (3,534,000) (3,534,000)
------------- ------------- ---------------- ---------------- --------------
Balance at December 31, 1993 2,850,000 28,500 31,462,322 (4,238,826) 27,251,996
Net income 2,301,919 2,301,919
Common stock issued 140,990 1,410 1,990,289 1,991,699
Dividends paid
($1.24 per share) (3,577,705) (3,577,705)
------------- ------------- ---------------- ---------------- --------------
Balance at December 31, 1994 2,990,990 29,910 33,452,611 (5,514,612) 27,967,909
Net income 1,628,268 1,628,268
Common stock issued 25,750 257 332,724 332,981
Dividends paid
($1.24 per share) (3,729,220) (3,729,220)
============= ============= ================ ================ ==============
Balance at December 31, 1995 3,016,740 $ 30,167 $ 33,785,335 $ (7,615,564) $ 26,199,938
============= ============= ================ ================ ==============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
- ------------------------------------------------------------------------------
Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
---------------- ---------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,628,268 $ 2,301,919 $ 2,455,451
Adjustments to reconcile net income to
net cash provided by operations:
Equity in income of Management Company (48,063) - -
Depreciation and amortization 2,609,381 1,647,656 1,065,835
Write-off of deferred loan costs 37,723 141,582 -
Write-off of deferred acquisition costs 321,400 376,898 600,000
Changes in operating assets and liabilities:
Rent and other receivables 248,489 (78,046) 56,398
Prepaid expenses and other assets (66,088) (5,584) (225,899)
Accounts payable and accrued expenses (204,726) 150,443 84,114
Escrowed security deposits and deferred revenue (50,656) (38,407) 30,325
---------------- ---------------- ----------------
Net cash provided by operating activities 4,475,728 4,496,461 4,066,224
---------------- ---------------- ----------------
Cash flows from investing activities:
Acquisitions of apartment properties - (18,055,659) (14,302,078)
Acquisition of BT Venture Corp., net of cash payment - 164,838 -
Additions to apartment properties (525,516) (161,294) (50,090)
Payment of deferred acquisition costs (156,401) (677,006) (1,804,827)
Advances to Management Company (150,000) - -
---------------- ---------------- ----------------
Net cash used in investing activities (831,917) (18,729,121) (16,156,995)
---------------- ---------------- ----------------
Cash flows from financing activities:
Payment of dividends (3,729,220) (3,577,705) (3,534,000)
Proceeds from notes payable 33,925,000 53,600,000 18,950,000
Principal payments on notes payable (33,646,771) (34,449,203) (4,055,622)
Payment of deferred financing costs (444,320) (509,599) (208,689)
---------------- ---------------- ----------------
Net cash provided by (used in) financing activities (3,895,311) 15,063,493 11,151,689
---------------- ---------------- ----------------
Increase (decrease) in cash and cash equivalents (251,500) 830,833 (939,082)
Cash and cash equivalents at beginning of year 952,363 121,530 1,060,612
---------------- ---------------- ----------------
Cash and cash equivalents at end of year $ 700,863 $ 952,363 $ 121,530
================ ================ ================
Supplemental disclosures of cash flow information:
Cash payments for interest:
To affiliates 530,733 17,581 -
Other 4,810,067 2,539,445 1,402,257
---------------- ---------------- ----------------
Total $ 5,340,800 $ 2,557,026 $ 1,402,257
================ ================ ================
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
- ------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 1995
Note 1. Organization and Summary of Significant Accounting and Reporting
Policies
Organization and History. Boddie-Noell Restaurant Properties, Inc. (the
"Company") was incorporated on April 1, 1987. On October 1, 1994, the Company
changed its name to Boddie-Noell Properties, Inc.
In April 1987, the Company acquired 47 existing Hardee's restaurant properties
located in Virginia and North Carolina, operated by Boddie-Noell Enterprises,
Inc. ("BNE") under franchise agreements with Hardee's Food Systems, Inc.
Simultaneously with their purchase, the properties were leased to BNE under a
master lease agreement.
In June 1993, the Company acquired Paces Commons Apartments, a 336-unit
apartment property in Charlotte, North Carolina. In June 1994, the Company
acquired Oakbrook Apartments, a 162-unit apartment property in Charlotte, North
Carolina. Effective October 1, 1994, the Company acquired by merger BT Venture
Corporation ("BTVC"), an integrated real estate management, development and
acquisition company and owner of the Latitudes Apartments, a 448-unit apartment
property in Virginia Beach, Virginia. As of October 1, 1994, the Company
succeeded to BTVC's third-party management business, terminated its advisory
agreement with BNE Advisory Group, Inc., and began operations as a
self-administered and self-managed real estate investment trust. In December
1994, the Company acquired Harris Hill Apartments, a 184-unit apartment property
in Charlotte, North Carolina.
In May 1995, the Company formed BNP Management, Inc. (the "Management Company").
The Company has a 1 percent voting interest and 95 percent economic interest.
This investment is recorded using the equity method of accounting.
Capital Stock. In June 1995, the Company's shareholders approved amendments to
the Company's bylaws and certificate of incorporation to allow the Board of
Directors to authorize the issuance of up to an additional 90,000,000 shares of
Common Stock and 10,000,000 shares of Preferred Stock, issuable in series the
characteristics of which would be set by the Board of Directors. As of December
31, 1995, no such shares have been authorized or issued.
Real Estate Investments. Restaurant properties, which include only real
property, are carried at cost. Cost of repairs and maintenance and capital
improvements are borne by BNE. Depreciation of the buildings is computed using
the straight-line method over the estimated useful lives (40 years) of the
respective properties.
Apartment properties are carried at cost. Ordinary repairs and maintenance costs
are expensed as incurred while significant improvements, renovations and
replacements are capitalized. Depreciation is computed using the straight-line
method over the estimated useful lives of the related assets, which are 40 years
for buildings, 20 years for land improvements, and 10 years for fixtures and
equipment, and five years for carpet, vinyl, and wallpaper replacements.
Cash and Cash Equivalents. The Company considers all highly liquid investments
with maturities of three months or less when purchased to be cash equivalents.
Deferred Costs. The intangible asset related to the acquisition of management
operations acquired by merger is amortized using the straight-line method over a
period of ten years. Accumulated amortization on this asset totaled $314,000 and
$56,000 at December 31, 1995 and 1994, respectively.
Deferred acquisition costs represent costs incurred in connection with the
proposed acquisition of properties and the associated offering costs. Such costs
are deferred until such time as the acquisition is consummated. Upon completion
of the acquisition, the costs will be capitalized to the underlying assets
and/or charged to shareholders' equity. At such time as an acquisition is deemed
not probable, the costs are charged to expense.
<PAGE>
Financing costs are deferred and amortized using the straight-line method over
the terms of the related notes. Accumulated amortization on these assets totaled
$61,000 and $205,000 at December 31, 1995 and 1994, respectively.
Income Taxes. The Company operates as and elects to be taxed as a Real Estate
Investment Trust ("REIT") under the Internal Revenue Code. Accordingly, the
Company will not be subject to Federal or state income taxes on amounts
distributed to shareholders, provided it distributes at least 95 percent of its
REIT taxable income and meets certain other requirements for qualifying as a
REIT. Accordingly, no provision has been made for federal or state income taxes.
Net Income Per Share. Net income per share for the years ended December 31,
1995, 1994, and 1993 is calculated based on the weighted average number of
shares outstanding during the respective periods.
Fair Values of Financial Instruments. The following methods and assumptions are
used by the Company in estimating its fair value disclosures for financial
instruments.
Cash and cash equivalents: The carrying amount reported on the balance sheet for
cash and cash equivalents approximates fair value.
Notes payable: The fair value of the Company's fixed rate mortgage notes is
estimated using discounted cash flow analysis, based on the Company's current
incremental borrowing rates. The carrying amounts of the Company's borrowings
under its variable rate notes payable approximate fair value.
Reclassifications. Certain amounts in the 1994 and 1993 financial statements
have been reclassified to conform to the 1995 presentation.
Note 2. Real Estate Investments
Real estate investments consist of the following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Restaurants
Land $12,068,737 $12,068,737
Buildings and land improvements 31,136,338 31,136,338
less accumulated depreciation (6,778,604) (6,000,196)
36,426,471 37,204,879
Apartments
Land 6,642,291 6,642,291
Buildings and land improvements 46,517,150 46,205,625
Fixtures, equipment, and other personal property 2,156,245 1,875,587
less accumulated depreciation (2,242,344) (827,141)
53,073,342 53,896,362
$89,499,813 $91,101,241
</TABLE>
The Company has established a policy of capitalizing those expenditures relating
to acquiring new assets, materially enhancing the value of an existing asset, or
substantially extending the useful life of an existing asset. In 1995 the
Company capitalized all apartment carpet, vinyl and wallpaper replacements. In
1994 and 1993 apartment carpet, vinyl, and wallpaper replacements were generally
expensed as incurred ($23,000 in 1994 and none in 1993), except when these
replacements were made in conjunction with a plan of acquisition.
<PAGE>
Capitalized apartment property additions, replacements and improvements are
summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Property acquisitions through purchase $ --- $18,243,374 $14,302,078
Property acquisitions through merger --- 21,950,000 ---
Allocation of additional consideration
for property acquisitions through merger 66,668 16,667 ---
Capitalized carpet, vinyl, and
wallpaper replacements 210,430 91,434 24,274
Other property additions and improvements 315,085 53,193 25,816
$592,183 $40,354,668 $14,352,168
</TABLE>
Note 3. Investment in and Advances to Management Company
In May 1995, the Management Company was formed to provide management services to
non-Company owned properties. The Company contributed approximately $119,000,
primarily in office equipment, to the formation of the Management Company and
transferred the rights to certain third-party property leasing and management
contracts to the Management Company for a 1 percent voting interest and 95
percent economic interest. The remaining interest in the Management Company is
held by certain officers of the Company. Because the Company exercises
significant influence over the financial and operating policies of the
Management Company, it is reflected in the accompanying financial statements
using the equity method. At December 31, 1995, the Management Company provides
leasing and property management services to nine apartment properties and three
shopping centers owned by limited partnerships of which Boddie Investment
Company ("BIC") is the general partner.
During 1995 the Company advanced a total of $150,000 to the Management Company.
These advances accrued interest at 12 percent. 1995 interest on these advances
totaled $9,736 and was outstanding at December 31, 1995.
Summary financial information of the Management Company at December 31, 1995,
and for the eight months then ended is as follows:
<TABLE>
<S> <C>
Current assets $221,758
Property and equipment, net 122,430
Other assets 7,028
Total assets $351,216
Current liabilities $ 21,919
Advances and accrued interest due to
Boddie-Noell Properties, Inc. 159,736
Shareholders' equity 169,561
Total liabilities and shareholders' equity $351,216
Revenues $327,488
Operating expenses (254,659)
Interest (9,736)
Net income before income taxes 63,093
Provision for income taxes 12,500
Net income $ 50,593
</TABLE>
Note 4. Notes Payable
Notes payable consist of the following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Note payable to a bank in the principal sum of up to $25,500,000 due December
1998, interest on the outstanding principal balance payable monthly at an
effective rate of 8.11%, secured by deeds of trust on 47 restaurant properties
and assignment of rents under the Amended and Restated Master Lease Agreement
for those restaurants. The principal balance of the loan may be prepaid, in
whole or part, subject to certain
restrictions and penalties. $23,250,000 $ ---
Fixed rate notes payable comprised of four loans at December 31, 1995 (three
loans at December 31, 1994), payable in monthly installments totaling
approximately $292,000 including principal and interest at rates ranging from
7.86% to 8.55%, with maturities in 2000 (balloon of approximately $12,500,000)
through 2020. The notes are secured by deeds of
trust and assignments of rents of four apartment properties. 36,855,485 31,077,256
Variable rate revolving line of credit, originally at $15,000,000 increased to
$24,000,000, retired December, 1995. Interest was charged and payable monthly,
at the Company's option, at LIBOR plus 1.625%, floating CD rate plus 1.625%, or
prime rate. Lender had the right to require Boddie-Noell
Enterprises, Inc. to purchase 24 restaurants in the event of a default. --- 18,250,000
8.625% note, payable in equal annual installments plus interest payable monthly,
secured by a mortgage on 14 restaurant properties and assignment of the master
lease as it related to such properties. The note was retired
June, 1995. --- 4,000,000
Variable rate note, payable in monthly principal installments based on a 25-year
amortization schedule (approximately $7,000) plus interest at 30-day LIBOR plus
1.85%, secured by a deed of trust and assignment of rents
of an apartment property. The note was retired May, 1995. --- 6,500,000
Variable rate notes payable to affiliates comprised of two loans due May, 1999,
interest at the lower of 30-day LIBOR plus 1.5% (7.3% at December 31, 1995) or
8%, payable quarterly. Liability for these notes was assumed at
the acquisition of BTVC. 7,056,300 7,056,300
$67,161,785 $66,883,556
</TABLE>
As of December 31, 1995, scheduled principal payments are approximately as
follows: 1996 - $476,000; 1997 - $517,000; 1998 - $23,811,000; 1999 -
$7,665,000; 2000 - $12,906,000; thereafter - $21,787,000.
The loan agreement related to the $25,500,000 note payable to a bank includes
covenants and restrictions relating to, among other things, specified levels of
debt service coverage, leverage and net worth.
During 1995 the Company applied $29,425,000 proceeds of fixed rate loans to
retire a fixed rate mortgage note and pay off variable rate notes payable and a
variable rate revolving line of credit totaling approximately $29,250,000. In
<PAGE>
conjunction with these refinancing transactions, unamortized loan costs of
approximately $38,000 were charged to expense.
During 1994 the Company applied $31,100,000 proceeds of three fixed rate loans
to pay off variable rate notes payable totaling approximately $30,300,000. In
conjunction with these refinancing transactions, unamortized loan costs of
approximately $142,000 were charged to expense.
At December 31, 1995, the Company has recorded deferred financing costs of
approximately $266,000 related to the $25,500,000 term loan which was executed
December 29, 1995. Management anticipates that financing costs associated with
this loan will total approximately $410,000, to be amortized over the three-year
term of the loan.
Note 5. Dividends
Dividends of $1.24 per share were paid during 1995, 1994, and 1993. The
allocation of these dividends between non-taxable return of capital and taxable
ordinary dividend income to shareholders was as follows.
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Non-taxable return of capital 51.8% 49.3% 12.5%
Taxable ordinary dividend income 48.2 50.7 87.5
</TABLE>
A regular quarterly dividend of $.31 per share was declared by the Board of
Directors on January 16, 1996, payable on February 15, 1996, to shareholders of
record on February 1, 1996.
Note 6. Rental Operations
Restaurant Properties - Master Lease Agreement. In conjunction with the
$25,500,000 loan agreement with a bank, in December 1995, the Company entered
into an Amended and Restated Master Lease Agreement with BNE which extended the
term of the original lease to an initial term ending in December 2007 and
increased minimum annual rent to $4,500,000. Prior to amendment, the master
lease required the lessee to pay minimum annual rent equal to an annualized rate
of 8.0 percent of the aggregate purchase price of the properties ($3,459,433 in
1995, 1994, and 1993 respectively), and percentage rent of 9.875 percent of the
quarterly aggregate net sales from restaurant operations on the properties less
the aggregate minimum rent payable for such calendar quarter.
As amended, the lease requires the lessee to pay monthly installments of minimum
annual rent equal to $4,500,000, and percentage rent at 9.875 percent of
quarterly aggregate net sales from restaurant operations on the properties less
minimum rent paid for such calendar quarter, subject to an annual calculation of
the greater of minimum or percentage rent. The lessee is responsible for all
taxes, utilities, renovations, insurance and maintenance expenses relating to
the operation of the restaurant properties. The lessee may extend the lease for
up to a maximum of three five-year renewal terms. Under certain conditions as
defined in the agreement, BNE and the Company each have the right to substitute
another restaurant property for a property covered by the lease. The master
lease provides that after December 31, 2007 (the beginning of the first renewal
period), BNE has the right to terminate the lease on up to five restaurant
properties per year by offering to purchase them under specified terms. In
addition, the Company and BNE have entered into a separate agreement which,
after December 31, 1997, allows BNE to purchase under specified terms up to
seven restaurant properties deemed to be uneconomic.
<PAGE>
The components of rental income were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Minimum rent $3,459,433 $3,459,433 $3,459,433
Percentage rent 1,189,817 1,587,404 1,705,999
$4,649,250 $5,046,837 $5,165,432
</TABLE>
Future minimum rentals to be received by the Company under the master lease
agreement are $4,500,000 per year through 2007. These amounts above do not
include percentage rentals which may be received in addition to minimum rent.
Approximately 34 percent of the Company's 1995 revenue was derived from BNE's
payment of rent for the use of the Company's restaurant properties. In addition,
BNE is responsible for all of the cost associated with the maintenance and
operation of these properties. As a result, the financial well being of the
Company is to a large extent dependent on BNE's ability to meet its obligations
under the terms of the master lease. The ability of BNE to satisfy the
requirements of the master lease depend on its liquidity and capital resources.
Historically, BNE has been able to meet its liquidity needs through cash flow
generated from operations and through reliance on its credit facility.
BNE's principal line of business is the operation of approximately 365 Hardee's
restaurants, 47 of which are owned by the Company. The continued decline in
restaurant sales has had a material impact on BNE's operating cash flow.
Management has reviewed BNE's unaudited financial statements, cash flow
analysis, restaurant contribution analysis, sales trend analysis and projections
and believes that with the refinance of its credit facility BNE will have
sufficient liquidity and capital resources to meet its obligations under the
master lease and credit facility as well as its general corporate operating
needs. The principal debt facility on which BNE has relied has been a
$140,000,000 credit agreement. This facility matured on December 31, 1995, but
has been temporarily extended pending renewal. BNE has received and executed a
commitment from the bank group issuing the facility specifying the terms and
conditions of a renewal, and BNE is currently assembling the required
documentation. Both BNE and representatives of the bank group have indicated
that they expect the facility to be renewed and that a final closing of the
renewal will occur in the near future.
Apartment Properties. The Company leases its residential apartments under
operating leases with monthly payments due in advance. The majority of the
apartment leases are for terms of one year or less, with none longer than two
years. Rental and other revenues are recorded as earned.
Note 7. Related Party Transactions
Certain directors and officers of the Company hold similar positions with BNE
and BNE Advisory Group, Inc. (an affiliate of BNE), and held similar positions
with BTVC.
The Company purchased the 47 Hardee's restaurant properties from BNE Realty
Partners, Limited Partnership (an affiliate of BNE) for $43,243,000 in 1987.
The Company had an agreement through September 30, 1994, under which BNE
Advisory Group, Inc. provided all administrative services and was responsible
for the day-to-day operations of the Company. The agreement provided for
compensation to BNE Advisory Group, Inc. at an annual fee equal to 4.65 percent
of the Company's net cash available for distribution (as defined in the
agreement) before the advisory fee. Advisory fee expense totaled $153,000 and
$201,000 in 1994, and 1993, respectively. Effective with the merger of BTVC on
October 1, 1994, the agreement with BNE Advisory Group, Inc. was terminated.
Prior to the Company's acquisition of BTVC, the Company paid BTVC $112,000 and
$56,000 for property management services in 1994 and 1993, respectively.
<PAGE>
BNE had extended to the Company an unsecured revolving line of credit up to
$2,000,000. Draws totaling $1,100,000 were made and repaid in full during 1994.
At December 31, 1994, there was no obligation outstanding. In conjunction with
modification of the master lease agreement (see Note 6), this line of credit was
terminated in December 1995.
Note 8. Acquisitions
On June 8, 1993, the Company acquired Paces Commons Apartments, a residential
apartment community located in Charlotte, North Carolina for a total purchase
cost of $14,302,000. The purchase was financed primarily through bank and
mortgage borrowings. The results of operations of Paces Commons are included in
the financial statements from June 8, 1993.
On June 7, 1994, the Company acquired Oakbrook Apartments, a residential
apartment community located in Charlotte, North Carolina for a total purchase
cost of $9,372,000. The purchase was financed primarily through bank and
mortgage borrowings. The results of operations of Oakbrook are included in the
financial statements from June 7, 1994.
On October 1, 1994, the Company acquired by merger BTVC, including Latitudes
Apartments, for an initial purchase price including $91,000 in cash, $21,251,000
through assumption of liabilities, and 134,610 shares of the Company's common
stock valued at $1,899,000. The acquisition agreement provides for contingent
purchase price payments ("additional consideration") of up to $1,700,000 if
certain future financial targets are attained. The additional consideration is
payable in shares of common stock or cash, at the option of the Company, on a
quarterly basis over a period of up to 14 quarters commencing with the quarter
ended December 31, 1994. The acquisition was accounted for by the purchase
method of accounting, and the total acquisition cost of $26,326,000 (assuming
full earn-out of additional consideration and including approximately $1,385,000
in acquisition costs) approximates the fair value of assets acquired.
Significant assets acquired include the Latitudes Apartments and an intangible
related to management operations, initially recorded at $21,950,000 and
$2,250,000, respectively. Additional consideration payments will be allocated
primarily to the intangible related to management operations and amortized over
ten years. The results of operations of Latitudes and management operations are
included in the financial statements from October 1, 1994.
On December 28, 1994, the Company acquired Harris Hill Apartments, a residential
apartment community located in Charlotte, North Carolina for a total purchase
cost of $8,871,000. The purchase was financed primarily through bank and
mortgage borrowings. The results of operations of Harris Hill are included in
the financial statements from December 28, 1994.
In conjunction with the BTVC acquisition and based on an earlier estimate, the
Company issued 140,990 shares, including 6,380 "excess shares" to the BTVC
shareholders in October, 1994. During the fourth quarter of 1994 and in each
quarter of 1995 the financial target for additional consideration was met.
During 1995 the Company recorded additional consideration of approximately
$567,000, paid in part by issuance of 25,750 shares of common stock. At December
31, 1995, the BTVC shareholders are due additional consideration totaling
$283,334. At December 31, 1994 the BTVC shareholders were due additional
consideration of $49,648 ($141,667 less the value of excess shares previously
issued), subsequently paid in the form of 3,712 shares of common stock during
the first quarter of 1995.
At December 31, 1995, assuming the full contingent purchase price is earned and
paid in common stock, it is anticipated that the Company could issue
approximately 100,000 additional shares of common stock in conjunction with the
acquisition.
The following unaudited pro forma summary presents the results of operations as
if the acquisitions had occurred at the beginning of periods presented and does
not purport to be indicative of what would have occurred had the acquisitions
been made as of those dates or of results which may occur in the future.
<PAGE>
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Total revenues $13,994,000 $13,401,000
Net income $2,160,000 $2,452,000
Net income per common share $0.72 $0.82
</TABLE>
Note 9. Profit Sharing Plan
The employees of the Company are participants in a profit sharing plan pursuant
to Section 401 of the Internal Revenue Code. The Company makes limited matching
contributions based on the level of employee participation as defined.
Note 10. Stock Option and Incentive Plan
In 1994 the Company established an employee Stock Option and Incentive Plan
under which 280,000 shares of the Company's common stock are reserved for
issuance. On October 17, 1994, options to purchase 160,000 shares were granted
to certain eligible employees at $13.75 per share, the fair value of the
Company's stock on the date the options were granted. The options vest and are
exercisable one-fourth per year beginning October 17, 1995, and expire October
17, 2004. At December 31, 1995, options for 40,000 shares have vested and no
options have been exercised. Subsequent to December 31, 1995, the options were
repriced at $12.50, the fair value of the Company's common stock on the date of
repricing.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which establishes financial
accounting and reporting standards for stock-based compensation plans. The
statement defines a fair value based method of accounting for an employee stock
option or similar equity instrument and encourages the adoption of that method
of accounting. However, the statement also allows entities to continue to
account for such plans under Accounting Principles Board Opinion No. 25.
Entities electing to remain with the accounting in Opinion 25 must make pro
forma disclosures of net income and earnings per share as if the fair value
based method of accounting defined in the statement had been applied. The
Company has not decided if it will adopt SFAS No. 123 or continue to account for
stock-based compensation plans under the provisions of Opinion 25. However, the
accounting and disclosure requirements of SFAS No. 123 will have no impact on
recognition of the options which have been granted at December 31, 1995, and
therefore no impact on the Company's financial position or results of operations
as of December 31, 1995.
Note 11. Commitments and Contingencies
Subsequent to December 31, 1995, the Company entered into an agreement to
purchase an additional apartment community. The Company has placed a $150,000
at-risk binder in an escrow account held by a title insurance company.
The Company is currently exploring various financing options.
The Company has agreements with two of its executive officers which provide for
cash compensation and other benefits in the event that a change in control of
the Company occurs.
The Company is a party to a variety of legal proceedings arising in the ordinary
course of its business. Management believes that such matters will not have a
material effect on the financial position of the Company.
<PAGE>
Note 12. Quarterly Financial Data (Unaudited)
Set forth below is selected financial data (unaudited) for the years ended
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Net income
Revenues Net income per share
<S> <C> <C> <C>
1995
First quarter $ 3,353,182 $ 388,106 $0.13
Second quarter 3,528,028 526,125 0.18
Third quarter 3,530,374 467,140 0.16
Fourth quarter (1), (2) 3,314,054 246,897 0.07
$13,725,638 $1,628,268 $0.54
1994
First quarter $1,693,400 $ 584,239 $0.20
Second quarter 2,021,918 761,094 0.27
Third quarter 2,279,216 641,049 0.22
Fourth quarter (1) 3,263,712 315,537 0.11
$9,258,246 $2,301,919 $0.80
</TABLE>
(1) Net income includes a special charge of $321,000 and $377,000 to write off
certain deferred acquisition costs in 1995 and 1994, respectively. (2) Net
income includes an adjustment to capitalize approximately $85,000 of
expenditures for carpet, vinyl and wallpaper previously charged to expense in
the first three quarters of 1995.
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
- ------------------------------------------------------------------------------
Schedule III - Real Estate and Accumulated Depreciation
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Costs Gross Amount at Which
Description Encumb. Initial Costs Capitalized Carried at Close of Period
Buildings & Subsequent Buildings &
Land Improvem'ts to Acquisition Land Improvem'ts Total
<S> <C> <C> <C> <C> <C> <C> <C>
Hardee's Restaurant Properties:
North Carolina:
Bessemer City (1) $152,079 $391,060 $ - $152,079 $391,060 $543,139
Burlington (1) 162,411 417,629 - 162,411 417,629 580,040
Chapel Hill (1) 273,556 703,430 - 273,556 703,430 976,986
Denver (1) 275,484 708,387 - 275,484 708,387 983,871
Eden (1) 253,282 651,296 - 253,282 651,296 904,578
Fayetteville (Ramsey) (1) 260,135 668,919 - 260,135 668,919 929,054
Fayetteville (N.Eastern) (1) 308,271 792,696 - 308,271 792,696 1,100,967
Fayetteville (Bragg) (1) 235,951 606,730 - 235,951 606,730 842,681
Gastonia (E. Franklin) (1) 230,421 592,511 - 230,421 592,511 822,932
Gastonia (N. Chester) (1) 199,133 512,055 - 199,133 512,055 711,188
Hillsborough (1) 290,868 747,948 - 290,868 747,948 1,038,816
Kinston (W. Vernon) (1) 237,135 609,777 - 237,135 609,777 846,912
Kinston (Richlands) (1) 231,678 595,743 - 231,678 595,743 827,421
Mt. Airy (1) 272,205 699,955 - 272,205 699,955 972,160
Newton (1) 223,453 574,594 - 223,453 574,594 798,047
Siler City (1) 268,312 689,945 - 268,312 689,945 958,257
Spring Lake (1) 218,925 562,949 - 218,925 562,949 781,874
Thomasville (E. Main) (1) 253,716 652,411 - 253,716 652,411 906,127
Thomasville (Randolph) (1) 327,727 842,726 - 327,727 842,726 1,170,453
----------------------------------------- -------------------------------------------
4,674,742 12,020,761 - 4,674,742 12,020,761 16,695,503
----------------------------------------- -------------------------------------------
Virginia:
Ashland (1) 296,509 762,452 - 296,509 762,452 1,058,961
Blackstone (1) 275,565 708,596 - 275,565 708,596 984,161
Bluefield (1) 205,700 528,947 - 205,700 528,947 734,647
Chester (1) 300,165 771,852 - 300,165 771,852 1,072,017
Clarksville (1) 211,545 543,972 - 211,545 543,972 755,517
Clintwood (1) 222,673 572,588 - 222,673 572,588 795,261
Dublin (1) 364,065 936,168 - 364,065 936,168 1,300,233
Franklin (1) 287,867 740,230 - 287,867 740,230 1,028,097
Galax (1) 309,578 796,057 - 309,578 796,057 1,105,635
Hopewell (1) 263,939 678,701 - 263,939 678,701 942,640
Lebanon (1) 266,340 684,876 - 266,340 684,876 951,216
Lynchburg (Langhorne) (1) 249,865 642,509 - 249,865 642,509 892,374
Lynchburg (Timberlake) (1) 276,153 710,107 - 276,153 710,107 986,260
Norfolk (1) 325,822 837,829 - 325,822 837,829 1,163,651
Orange (1) 244,883 629,699 - 244,883 629,699 874,582
Petersburg (1) 357,984 920,531 - 357,984 920,531 1,278,515
Richmond (Forest Hill) (1) 196,084 504,216 - 196,084 504,216 700,300
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Accumulated Date of Date Life
Description Depreciation Constr. Acquired (Years)
<S> <C> <C> <C> <C>
Hardee's Restaurant Properties:
North Carolina:
Bessemer City $ 85,137 Nov-77 Apr-87 40
Burlington 90,920 Oct-85 Apr-87 40
Chapel Hill 153,142 Aug-64 Apr-87 40
Denver 154,221 Jul-83 Apr-87 40
Eden 141,792 Jun-73 Apr-87 40
Fayetteville (Ramsey) 145,629 Oct-73 Apr-87 40
Fayetteville (N.Eastern) 172,576 Sep-83 Apr-87 40
Fayetteville (Bragg) 132,090 Jan-85 Apr-87 40
Gastonia (E. Franklin) 128,994 Apr-63 Apr-87 40
Gastonia (N. Chester) 111,478 Jan-78 Apr-87 40
Hillsborough 162,833 Mar-78 Apr-87 40
Kinston (W. Vernon) 132,753 Jul-62 Apr-87 40
Kinston (Richlands) 129,697 Dec-81 Apr-87 40
Mt. Airy 152,385 May-73 Apr-87 40
Newton 125,094 Mar-76 Apr-87 40
Siler City 150,206 May-79 Apr-87 40
Spring Lake 122,558 Mar-76 Apr-87 40
Thomasville (E. Main) 142,035 Feb-66 Apr-87 40
Thomasville (Randolph) 183,467 Apr-74 Apr-87 40
----------
2,617,007
----------
Virginia:
Ashland 165,992 Apr-87 Apr-87 40
Blackstone 154,267 Sep-79 Apr-87 40
Bluefield 115,155 Feb-85 Apr-87 40
Chester 168,038 May-73 Apr-87 40
Clarksville 118,427 Oct-85 Apr-87 40
Clintwood 124,656 Jan-81 Apr-87 40
Dublin 203,810 Jul-83 Apr-87 40
Franklin 161,154 Feb-75 Apr-87 40
Galax 173,307 Jun-74 Apr-87 40
Hopewell 147,758 Jun-78 Apr-87 40
Lebanon 149,103 Jun-83 Apr-87 40
Lynchburg (Langhorne) 139,878 Sep-82 Apr-87 40
Lynchburg (Timberlake) 154,595 Aug-83 Apr-87 40
Norfolk 182,401 Aug-84 Apr-87 40
Orange 137,090 Aug-74 Apr-87 40
Petersburg 200,407 Mar-74 Apr-87 40
Richmond (Forest Hill) 109,772 Nov-74 Apr-87 40
</TABLE>
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
Schedule III - Real Estate and Accumulated Depreciation
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Costs Gross Amount at Which
Description Encumb. Initial Costs Capitalized Carried at Close of Period
Buildings & Subsequent Buildings &
Land Improvem'ts to Acquisition Land Improvem'ts Total
<S> <C> <C> <C> <C> <C> <C> <C>
Richmond (Midlothian) (1) 270,736 696,179 - 270,736 696,179 966,915
Richmond (Myers) (1) 321,946 827,861 - 321,946 827,861 1,149,807
Roanoke (Hollins) (1) 257,863 663,076 - 257,863 663,076 920,939
Roanoke (Abenham) (1) 235,864 606,507 - 235,864 606,507 842,371
Rocky Mount (1) 248,434 638,829 - 248,434 638,829 887,263
Smithfield (1) 223,070 573,608 - 223,070 573,608 796,678
Staunton (1) 260,569 670,035 - 260,569 670,035 930,604
Verona (1) 191,631 492,765 - 191,631 492,765 684,396
Virginia Beach (Lynnhaven) (1) 271,570 698,322 - 231,731 698,322 930,053
Virginia Beach (Holland) (1) 277,943 714,710 - 277,943 714,710 992,653
Wise (1) 219,471 564,355 - 219,471 564,355 783,826
----------------------------------------------------------------------------------------
7,433,834 19,115,577 - 7,393,995 19,115,577 26,509,572
-------------------------------------------------------------------------------------------------------
Total Restaurant Properties 23,250,000 12,108,576 31,136,338 - 12,068,737 31,136,338 43,205,075
-------------------------------------------------------------------------------------------------------
Apartment Properties:
North Carolina:
Paces Commons, Charlotte 10,834,150 1,430,157 12,871,424 334,175 1,430,157 13,205,599 14,635,756
Oakbrook, Charlotte 6,568,683 848,835 8,523,384 90,791 848,835 8,614,175 9,463,010
Harris Hill, Charlotte 6,152,385 1,003,298 7,867,857 180,392 1,003,298 8,048,249 9,051,547
----------------------------------------------------------------------------------------
3,282,290 29,262,665 605,358 3,282,290 29,868,023 33,150,313
----------------------------------------------------------------------------------------
Virginia:
Latitudes, Virginia Beach 13,300,267 3,360,000 18,606,667 158,706 3,360,000 18,805,373 22,165,373
-------------------------------------------------------------------------------------------------------
Total Apartment Properties 36,855,485 6,642,290 47,869,332 804,064 6,642,290 48,673,396 55,315,686
-------------------------------------------------------------------------------------------------------
Total Real Estate $ 60,105,485 $18,750,866 $79,005,670 $804,064 $ 18,711,027 $ 79,809,734 $ 98,520,761
======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Accumulated Date of Date Life
Description Depreciation Constr. Acquired (Years)
<S> <C> <C> <C> <C>
Richmond (Midlothian) 151,563 Jan-74 Apr-87 40
Richmond (Myers) 180,231 Apr-83 Apr-87 40
Roanoke (Hollins) 144,357 Feb-73 Apr-87 40
Roanoke (Abenham) 132,041 Nov-82 Apr-87 40
Rocky Mount 139,077 May-80 Apr-87 40
Smithfield 124,878 Apr-77 Apr-87 40
Staunton 145,872 Sep-83 Apr-87 40
Verona 107,278 Jan-85 Apr-87 40
Virginia Beach (Lynnhaven) 152,030 Jun-80 Apr-87 40
Virginia Beach (Holland) 155,598 Aug-83 Apr-87 40
Wise 122,862 Jun-80 Apr-87 40
-----------
4,161,597
-----------
Total Restaurant Properties 6,778,604
-----------
Apartment Properties:
North Carolina:
Paces Commons, Charlotte 910,400 1988 Jun-93 40
Oakbrook, Charlotte 367,058 1985 Jun-94 40
Harris Hill, Charlotte 249,824 1988 Dec-94 40
-----------
1,527,282
-----------
Virginia:
Latitudes, Virginia Beach 715,062 1989 Oct-94 38
-----------
Total Apartment Properties 2,242,344
-----------
Total Real Estate $9,020,948
===========
</TABLE>
Notes: (1) Indicates the 47 restaurants encumbered by the bank term loan of up
to $25,500,000; $23,250,000 outstanding at 12/31/95
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
- ------------------------------------------------------------------------------
Schedule III - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
-------------- -------------- ---------------
<S> <C> <C> <C>
Real estate investments:
Balance at beginning of year $97,928,578 $57,557,243 $43,205,075
Additions during year
Acquisitions by merger - 21,966,667 -
Other acquisitions - 18,243,374 14,301,581
Improvements, etc. 592,183 161,294 50,587
Deductions during year - - -
============== ============== ===============
Balance at close of year $98,520,761 $97,928,578 $57,557,243
============== ============== ===============
Accumulated depreciation:
Balance at beginning of year $ 6,827,337 $ 5,416,818 $ 4,443,384
Provision for depreciation 2,193,611 1,410,519 973,434
Deductions during year - - -
============== ============== ===============
Balance at close of year $ 9,020,948 $ 6,827,337 $ 5,426,818
============== ============== ===============
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Page
<S> <C> <C>
2* Agreement and Plan of Merger between BT Venture Corporation and
Boddie-Noell Restaurant Properties, Inc. (filed as Exhibit (2)-2
to Boddie-Noell Properties, Inc. Current Report on Form 8-K dated
October 1, 1994, and incorporated herein by reference)
3.1* Articles of Incorporation (filed as Exhibit 3(a) to Registration
Statement No. 33-13155 on Form S-11 and incorporated herein by
reference)
3.2 By-Laws 41
10.1 Amended and Restated Master Lease Agreement dated December 21, 1995
between Boddie-Noell Properties, Inc. and Boddie-Noell Enterprises,
Inc. 55
10.2 Loan Agreement dated December 27, 1995 between Boddie-Noell
Properties, Inc. and SouthTrust Bank of Alabama, N.A. 84
10.3* Acquisition Agreement by and among Boddie-Noell Restaurant
Properties, Inc., BT Venture Corporation and Related Entities
dated June 7, 1994 (filed as an exhibit in Schedule 14A of Proxy
Statement dated June 15, 1994 and incorporated herein by reference)
10.4* Boddie-Noell Restaurant Properties, Inc. 1994 Stock Option and
Incentive Plan effective August 4, 1994 (filed as an exhibit in
Schedule 14A of Proxy Statement dated June 15, 1994 and
incorporated herein by reference)
10.5* Form and description of Incentive Stock Option Agreements dated
October 17, 1994 between the Company and certain officers (filed as
Exhibit 10.8 to Boddie-Noell Properties, Inc. Annual Report on Form
10-K dated December 31, 1994 and incorporated herein by reference)
10.6* Form and description of Nonqualified Stock Option Agreements dated
October 17, 1994 between the Company and certain officers (filed as
Exhibit 10.9 to Boddie-Noell Properties, Inc. Annual Report on Form
10-K dated December 31, 1994 and incorporated herein by reference)
10.7* Form and description of Employment Agreements dated October 1, 1994
between the Company and certain officers (filed as Exhibit 10.10 to
Boddie-Noell Properties, Inc. Annual Report on Form 10-K dated
December 31, 1994 and incorporated herein by reference)
11 Computation of Per Share Earnings 113
21 Subsidiaries of the Registrant 114
27 Financial Data Schedule (electronic filing) 115
</TABLE>
* Incorporated herein by reference
STATE OF DELAWARE
AMENDED AND RESTATED
BYLAWS
OF
BODDIE-NOELL PROPERTIES, INC.
ARTICLE I
OFFICES
Section 1.01 Registered Office. The registered office in Delaware shall be
in the City of Wilmington, County of New Castle, State of Delaware.
Section 1.02 Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require, including, without limitation, the principal office at 3710 One First
Union Center, Charlotte, North Carolina 28202.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01 Location. Meetings of Stockholders for any purpose may be held
at such time and place, within or without the State of Delaware, as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2.02 Annual Meeting. Annual meetings of Stockholders shall be held
on a date and a time as may be determined from time to time by the Board, at
which the Stockholders shall elect by plurality vote a Board of Directors, and
transact such other business as may properly be brought before the meeting in
accordance with Section 2.04 herein.
Section 2.03 Director Nominations. Only persons who are nominated in
accordance with the procedures set forth in this Section 2.03 shall be eligible
for election as Directors. Prior to each annual meeting of Stockholders (or
special meeting of Stockholders held for the election of Directors), the Board
of Directors shall nominate a slate of persons to stand for election to the
Board of Directors at the annual meeting. The notice of the Stockholders of the
meeting shall set forth the names and backgrounds of the persons nominated by
the Board of Directors. Nominations of persons for election to the Board of
Directors of the Corporation may also be made at a meeting of Stockholders or by
any Stockholder of the Corporation entitled to vote for the election of
Directors at the meeting who complies with the notice procedures set forth in
this Section 2.03. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a Stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation not later than (i) with respect to an election to be
held at an annual meeting of Stockholders, ninety days prior to the anniversary
date of the immediately preceding annual meeting, and (ii) with respect to an
election to be held at a special meeting of Stockholders for the election of
Directors, the close of business on the tenth day following the date on which
notice of such meeting is first given to Stockholders. Such Stockholder's notice
shall set forth (a) as to each person whom the Stockholder proposes to nominate
for election or reelection as a Director, (i) the name, age, business address
and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of the
Corporation which are beneficially owned by such person and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including without limitation such person's written consent to being
named in the proxy statement as a nominee and to serving as a Director if
elected); and (b) as to the Stockholder giving the notice, (i) the name and
address, as they appear on the Corporation's books, of such Stockholder and (ii)
the class and number of shares of the Corporation which are beneficially owned
by such Stockholder. At the request of the Board of Directors, any person
nominated by the Board of Directors for election as a Director shall furnish to
the Secretary of the Corporation that information required to be set forth in a
Stockholder's notice of nomination which pertains to the nominee. The Chairman
of the meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
the Bylaws, and if he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded.
Section 2.04 Notice and Business to be Conducted. Written notice of the
annual meeting shall be given to each Stockholder entitled to vote thereat at
least 10 but not more than 60 days before the date of the meeting.
At an annual meeting of the Stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors or (c) otherwise properly brought before the
meeting by a Stockholder. For business to be properly brought before an annual
meeting by a Stockholder, the Stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation. To be timely, a Stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation not later than ninety days prior to the anniversary
date of the immediately preceding annual meeting. A Stockholder's notice to the
Secretary shall set forth as to each matter the Stockholder proposes to bring
before the annual meeting (a) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and address, as they appear on the
Corporation's books, of the Stockholder proposing such business, (c) the class
and number of shares of the Corporation which are beneficially owned by the
Stockholder and (d) any material interest of the Stockholder in such business.
Notwithstanding anything in the Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this Section. The Chairman of the annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Section,
and if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
Section 2.05 Stock Ledger. The officer who has charge of the stock ledger
of the Corporation shall prepare and make, at least ten days before every
election of Directors, a complete list of the Stockholders entitled to vote at
said election, arranged in alphabetical order, showing the address of and the
number of shares registered in the name of each Stockholder. Such list shall be
open to the examination of any Stockholder, during ordinary business hours, for
a period of at least ten days prior to the election, either at a place within
the city, town or village where the election is to be held and which place shall
be specified in the notice of the meeting, or, if not specified, at the place
where said meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and subject to
the inspection of any Stockholder who may be present.
Section 2.06 Special Meetings. At any time in the interval between annual
meetings, special meetings of the Stockholders, unless otherwise provided by law
or by the Certificate of Incorporation, may be called by the Chief Executive
Officer and shall be called by the Chief Executive Officer upon the request in
writing of a majority of the Board of Directors or a majority of the Independent
Directors (as defined in Section 3.01 hereof), or upon the written request of
the holders of shares representing a majority of the shares of capital stock of
the Corporation which would be entitled to vote thereat. Such written request of
the Stockholders shall state the purpose or purposes of such meeting.
Section 2.07 Notice of Special Meeting. Written notice of a special meeting
of Stockholders, stating the time, place and purpose or purposes thereof, shall
be given in accordance with Section 222 of the General Corporation Law of the
State of Delaware to each Stockholder entitled to vote thereat, at least ten
days before the date fixed for the meeting.
Section 2.08 Business at Special Meeting. Business transacted at any
special meeting of Stockholders shall be limited to the purposes stated in the
notice.
Section 2.09 Quorum. The holders of a majority of the total capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
Stockholders for the transaction of business except as otherwise provided by
statute or by the Certificate of Incorporation. If, however, such quorum shall
not be present or represented at any meeting of the Stockholders, the
Stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 2.10 Vote. When a quorum is present at any meeting, the vote of the
holders of a majority of the shares of capital stock entitled to be voted on a
question brought before such meeting whose holders are present in person or
represented by proxy shall decide such question unless the question is one upon
which, by express provision of statute or of the Certificate of Incorporation, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 2.11 Proxies. Each Stockholder shall at every meeting of the
Stockholders be entitled in person or by proxy to the number of votes provided
for in the Corporation's Certificate of Incorporation (or in a resolution of the
Board of Directors fixing the powers, designations, preferences and relative,
participating, optional or other special rights of a particular series of stock
within any class thereof) for each share of the Corporation's capital stock
having voting power held by such Stockholder, but no proxy shall be voted on or
after three years from its date, unless the proxy provides for a longer period,
and, except where a date has been fixed as a record date for determination of
its Stockholders entitled to vote, no share of stock shall be voted at any
election for Directors which has been transferred on the books of the
Corporation within twenty days next preceding such election of Directors. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and if,
and only as long as, it is coupled with an interest sufficient in law to support
an irrevocable power. A Stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary of the Corporation. Voting at meetings of
Stockholders need not be by written ballot and need not be conducted by
inspectors unless the holders of a majority of the outstanding shares of all
classes of stock entitled to vote thereon present in person or by proxy at such
meeting shall so determine.
Section 2.12 Action Without Meeting. Whenever the vote of Stockholders at a
meeting thereof is required or permitted to be taken in connection with any
corporate action by any provisions of the statutes or of the Certificate of
Incorporation, the meeting and vote of Stockholders may be dispensed with if a
consent in writing setting forth the action so taken shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those Stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 3.01 Number, Election and Term. The number of Directors of the
Corporation that shall constitute the whole Board shall be fixed from time to
time by resolution by the Board of Directors but shall not be less than five;
provided, however, that the tenure of office of a Director shall not be affected
by any decrease or increase in the number of Directors so made by the Board. At
all times that the Corporation intends to be qualified as a real estate
investment trust under the Internal Revenue Code of 1986, as amended, or any
successor statute, a majority of the Board of Directors shall be Independent
Directors (as hereinafter defined). For purposes of these Bylaws, "Independent
Director" shall mean a Director of the Corporation who is not an Affiliated
Person (as hereinafter defined) of the Corporation. For purposes of these
Bylaws, an "Affiliated Person" of the Corporation means (a) any person directly
or indirectly owning, controlling, or holding with power to vote, 5 per centum
or more of the outstanding voting securities of the Corporation; (b) any person
5 per centum or more of whose outstanding voting securities are directly or
indirectly owned, controlled, or held with power to vote, by the Corporation;
(c) any person directly or indirectly controlling, controlled by, or under
common control with, the Corporation; or (d) any officer, partner, or employee
of the Corporation. The Directors shall be elected at the annual meeting of the
Stockholders, except as provided in Section 3.03 of this Article III, and the
Directors so elected shall hold office until the next annual meeting or until
their successors are elected and qualify.
Section 3.02 Powers. The business and affairs of the Corporation shall be
managed in accordance with the Certificate of Incorporation and these Bylaws
under the direction of its Board of Directors and where applicable, the
Independent Directors, which may exercise all of the powers of the Corporation,
except such as are by law or by the Corporation's Certificate of Incorporation
or by these Bylaws conferred upon or reserved to the Stockholders.
Section 3.03 Vacancies. Any vacancy occurring in the Board of Directors for
any cause may be filled by a majority of the remaining members of the Board of
Directors, although such majority is less than a quorum; provided, however, that
if the Corporation has sought to qualify as a real estate investment trust and
in accordance with Section 3.01 a majority of the Board of Directors are
required to be Independent Directors, then Independent Directors shall nominate
replacements for vacancies among the Independent Directors. If the Stockholders
of any class or series are entitled separately to elect one or more Directors, a
majority of the remaining Directors elected by that class or series or the sole
remaining Director elected by that class or series may fill any vacancy among
the number of Directors elected by that class or series. A Director elected by
the Board of Directors to fill a vacancy shall be elected to hold office until
the next annual meeting of Stockholders or until his successor is elected and
qualifies.
Section 3.04 Resignations. Any Director or member of a committee may resign
at any time. Such resignation shall be made in writing and shall take effect at
the time specified therein, or if no time is specified, at the time of the
receipt by the Chairman of the Board, the Chief Executive Officer or the
Secretary. The acceptance of a resignation shall not be necessary to make it
effective.
Section 3.05 Committees of the Board of Directors. The Board of Directors
may appoint from among its members one or more committees composed of three or
more Directors. A majority of the members of any committee so appointed shall be
Independent Directors (as defined in Section 3.01). The Board of Directors may
delegate to any committee any of the powers of the Board of Directors except the
power to declare dividends or distributions on stock, recommend to the
Stockholders any action which requires Stockholder approval, amend the Bylaws,
approve any merger or share exchange or issue stock. However, if the Board of
Directors has given general authorization for the issuance of stock, a committee
of the Board, in accordance with a general formula or method specified by the
Board of Directors by resolution or by adoption of a stock option plan, may fix
the terms of stock subject to classification or reclassification and the terms
on which any stock may be issued.
Notice of committee meetings shall be given in the same manner as notice
for special meetings of the Board of Directors.
One-third, but not less than two, of the members of any committee shall be
present in person or by telephonic communication at any meeting of such
committee in order to constitute a quorum for the transaction of business at
such meeting, and the act of a majority of those present shall be the act of
such committee. The Board of Directors may designate a Chairman of any committee
and such Chairman or any two members of any committee may fix the time and place
of its meetings unless the Board shall otherwise provide. In the absence or
disqualification of any member of any such committee, the members thereof
present at any meeting and not disqualified from voting, whether or not they
constitute a quorum, may unanimously appoint another Director to act at the
meeting in the place of such absent or disqualified members; provided, however,
that in the event of the absence or disqualification of an Independent Director,
such appointee shall be an Independent Director.
Each committee shall keep minutes of its proceedings and shall report the
same to the Board of Directors when required, and any action taken by the
committees shall be subject to revision and alteration by the Board of
Directors, provided that no rights of third persons shall be affected by any
such revision or alteration.
Subject to the provisions hereof, the Board of Directors shall have the
power at any time to change the membership of any committee, to fill all
vacancies, to designate alternate members to replace any absent or disqualified
member, or to dissolve any committee.
Section 3.06 Meetings of the Board of Directors. Meetings of the Board of
Directors, regular or special, may be held at any place in or out of the State
of Delaware as the Board may from time to time determine or as shall be
specified in the notice of such meeting.
The first meeting of each newly elected Board of Directors shall be held as
soon as practicable after the annual meeting of the Stockholders at which the
Directors were elected. The meeting may be held at such time and place as shall
be specified in a notice given as hereinafter provided for special meetings of
the Board of Directors, except that no notice shall be necessary if such meeting
is held immediately after the adjournment and at the site of the annual meeting
of the Stockholders.
Regular meetings of the Board of Directors may be held with or without
notice at such time and place as shall from time to time be determined by the
Board of Directors.
Special meetings of the Board of Directors may be called at any time by two
or more Directors or by the Chairman of the Board or the Chief Executive
Officer.
Notice of the place and time of every special meeting of the Board of
Directors shall be delivered to each Director either personally or by telephone,
telegram or telegraph, or by leaving the same at his residence or usual place of
business at least forty-eight hours before the time at which such meeting is to
be held, or by first-class mail, at least three days before the day on which
such meeting is to be held. If mailed, such notice shall be deemed to be given
when deposited in the United States mail addressed to the Director at his
post-office address as it appears on the records of the Corporation, with
postage thereon prepaid. Section 3.07 Quorum and Voting. At all meetings of the
Board, a majority of the entire Board of Directors shall constitute a quorum for
the transaction of business and the action of a majority of the Directors
present at any meeting at which a quorum is present shall be the action of the
Board of Directors unless the concurrence of a greater proportion, or the
concurrence of a majority of the Independent Directors is required for such
action by law, the Corporation's Certificate of Incorporation or these Bylaws.
If a quorum shall not be present at any meeting of Directors, the Directors
present may, by a majority vote, adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Notwithstanding the first paragraph of this Section 3.07, any action
pertaining to a transaction involving the Corporation in which any Director or
officer of the Corporation or any affiliate of any of the foregoing persons has
an interest shall specifically be approved with respect to any isolated
transactions or generally be approved with respect to any series of similar
transactions, by a majority of the members of the Board of Directors, including
a majority of the Independent Directors who are not parties to and have no
financial interest in such transaction and so are not affiliates of such
interested party, even if such Directors constitute less than a quorum.
In approving any contract, joint venture or other transaction or series of
transactions between the Corporation and any Director or officer of the
Corporation or any affiliate of such persons, a majority of the Directors
including a majority of the Independent Directors must determine that:
(a) the contract, joint venture or other transaction as contemplated is
fair and reasonable to the Corporation and its Stockholders and on terms and
conditions no less favorable to the Corporation than those available from
unaffiliated third parties;
(b) if an acquisition of property other than mortgage loans is involved,
the total consideration (determined at the time the acquisition is approved by
the Independent Directors) for the property being acquired is not in excess of
the (i) appraised value of such property as stated in an appraisal by a
qualified independent appraiser with experience in appraising assets of the type
being acquired, or (ii) fair value of such property as stated in an opinion by a
qualified independent consultant, selected, approved or ratified by the
Independent Directors prior to any such acquisition, and if the price is in
excess of the cost of the asset to such seller thereof, the Independent
Directors shall determine that substantial justification for such excess exists
and that such excess is not unreasonable; and
(c) if the transaction involves the making of loans or the borrowing of
money, the transaction is fair, competitive, and commercially reasonable and no
less favorable to the Corporation than loans between unaffiliated lenders and
borrowers under the same circumstances.
Section 3.08 Organization. The Chairman of the Board shall preside at each
meeting of the Board of Directors, or in the absence or inability of the
Chairman of the Board to preside at a meeting, another Director chosen by a
majority of the Directors present shall act as Chairman of the meeting and
preside thereat. The Secretary (or, in his absence or inability to act, any
person appointed by the Chairman of the meeting) shall act as Secretary of the
meeting and keep the minutes thereof.
Section 3.09 Meeting by Conference Telephone. Unless otherwise restricted
by the Certificate of Incorporation, members of the Board of Directors may
participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at a meeting.
Section 3.10 Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting, if a written consent to such action is signed by all
members of the Board or of such committee, as the case may be, and such written
consent is filed with the minutes of proceedings of the Board or committee.
Section 3.11 Compensation of Directors. The Directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as Director. No such payment shall preclude any Director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of committees of the Board may be allowed like compensation
for attending committee meetings.
Section 3.12 Investment Policies and Restrictions. It shall be the duty of
the Board of Directors to ensure that the purchase, sale, retention and disposal
of the Corporation's assets, and the investment policies of the Corporation and
the limitations thereon or amendment thereto are at all times in compliance with
the restrictions applicable to real estate investment trusts pursuant to the
Internal Revenue Code of 1986, as amended.
The Corporation shall not:
(a) invest in mortgage loans unless an appraisal is obtained
concerning the underlying property;
(b) invest more than 10% of the Company's total assets in unimproved
real property or mortgage loans on unimproved real property;
(c) invest in commodity or commodity future contracts other than
interest rate futures used solely for hedging purposes;
(d) issue debt securities unless the historical debt service coverage
of the most recently completed fiscal year, as adjusted for known changes,
is sufficient to service the higher level of debt (without regard to any
applicable balloon principal payments);
(e) invest in real estate contracts for sale, unless such real estate
contracts are recordable in the chain of title; or
(f) act in any way that would disqualify the Company as a real estate
investment trust under the provisions of the Code.
The Corporation does not intend to invest in the securities of other
issuers for the purposes of exercising control (other than with respect to
wholly owned subsidiaries), to engage in the trading of or to underwrite
securities for other issuers, to engage in the purchase and sale (or turnover)
of investments other than as described in the Registration Statement or to offer
securities in exchange for property unless deemed prudent by a majority of the
Directors.
The Independent Directors shall review the investment policies of the
Corporation at least annually to determine that the policies then being followed
by the Corporation are in the best interests of its Stockholders. Each such
determination and the basis therefore shall be set forth in the minutes of the
Board of Directors.
The Directors shall review the borrowings of the Corporation quarterly for
reasonableness in relation to the Corporation's net assets. The Corporation
shall not incur indebtedness if, after giving effect to the incurrence thereof,
aggregate indebtedness, secured and unsecured, would exceed three hundred
percent (300%) of the Corporation's net assets, on a consolidated basis, unless
approved by a majority of the Directors, including a majority of the Independent
Directors, and disclosed to the Stockholders in the next quarterly report of the
Corporation, along with justification for such excess. For this purpose, the
term "Net Assets" means the total assets (less intangibles) of the Corporation
at cost, before deducting depreciation or other non-cash reserves, less total
liabilities, as calculated at the end of each quarter on a basis consistently
applied.
The foregoing prohibitions and restrictions set forth in this Section 3.12
shall not be changed without the approval of the Stockholders of the
Corporation.
ARTICLE IV
NOTICES
Section 4.01 Writing. Notices to Directors and Stockholders when in writing
or by telegram as required by provisions of statutes, or by the Certificate of
Incorporation, or by these Bylaws, shall be delivered personally or mailed to
the Directors or Stockholders at their addresses appearing on the books of the
Corporation.
Section 4.02 Waiver. Whenever any notice is required to be given under
provisions of the statutes or of the Certificate of Incorporation or of these
Bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 5.01 Principal Officers. The principal officers of the Corporation
shall be a Chief Executive Officer, a President, one or more Vice Presidents, a
Treasurer and a Secretary. The Corporation may also have such other principal
officers, including one or more Controllers, as the Board may in its discretion
appoint. One person may hold the offices and perform the duties of any two or
more of said offices, except that no one person shall hold the offices and
perform the duties of President and Secretary.
Section 5.02 Election, Term of Office and Remuneration. The principal
officers of the Corporation shall be elected annually by the Board of Directors
at the annual meeting thereof. Each such officer shall hold office until his
successor is elected and qualified or until his earlier death, resignation or
removal. The remuneration of all officers of the Corporation shall be fixed by
the Board of Directors. Any vacancy in any office shall be filled in such manner
as the Board of Directors shall determine.
Section 5.03 Subordinate Officers. In addition to the principal officers
enumerated in Section 5.01 of this Article V, the Corporation may have one or
more Assistant Treasurers, Assistant Secretaries and Assistant Controllers and
such other subordinate officers, agents and employees as the Board of Directors
may deem necessary, each of whom shall hold office for such period as the Board
of Directors may from time to time determine. The Board of Directors may
delegate to any principal officer the power to appoint and to remove any such
subordinate officer, agents or employees.
Section 5.04 Removal. Except as otherwise permitted with respect to
subordinate officers, any officer may be removed, with or without cause, at any
time, by resolution adopted by the Board of Directors.
Section 5.05 Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors (or to a principal officer if the Board
of Directors has delegated to such principal officer the power to appoint and to
remove such officer). The resignation of any officer shall take effect upon
receipt of notice thereof or at such later time as shall be specified in such
notice; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5.06 Powers and Duties. The officers of the Corporation shall have
such powers and perform such duties incident to each of their respective offices
and such other duties as may from time to time be conferred upon or assigned to
them by the Board of Directors.
ARTICLE VI
CERTIFICATE OF STOCK
Section 6.01 Certificates. Every holder of stock in the Corporation shall
be entitled to have a certificate, signed by, or in the name of the Corporation
by, the Chairman or Vice Chairman of the Board of Directors or the President or
a Vice-President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by him in the Corporation. Any or all of the signatures on the
certificate may be a facsimile. In case any officer or officers who have signed,
or whose facsimile signature or signatures have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates have been delivered by the Corporation, such
certificate or certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures have been
used thereon had not ceased to be such officer or officers of the Corporation.
If the Corporation shall be authorized to issue more than one class of stock, or
more than one series of any call, the designations, preference and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights shall be set forth in full or summarization on the face or the
back of the certificate which the Corporation shall issue to represent such
class of stock; provided, however, that except as otherwise provided in Section
202 of the General Corporation law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each Stockholder
who so requests, the designations, preferences and relative, participating,
option or other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
Section 6.02 Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of the fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost or destroyed.
Section 6.03 Transfer of Stock. No transfers of shares of stock of the
Corporation shall be made if (i) void ab initio pursuant to Article X of the
Corporation's Certificate of Incorporation, or (ii) the Board of Directors,
pursuant to such Article X, shall have refused to offer such shares. The Board
of Directors of the Corporation may:
(a) redeem the outstanding shares of stock of the Corporation or
restrict the transfer of such shares to the extent necessary to prevent the
concentration of ownership of more than 50% of the outstanding shares of
the Corporation in the hands of five or fewer individuals or entities and
to ensure that the Corporation always has at least 100 Stockholders;
(b) refuse to effect a transfer of shares of stock of the Corporation
to any person who as a result would beneficially own shares in excess of
9.8% of the outstanding shares of the Corporation ("Excess Shares"); and
(c) redeem Excess Shares held by any Stockholder of the Corporation.
Permitted transfers of shares of stock of the Corporation shall be made on
the stock records of the Corporation only upon the instruction of the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary or with a transfer agent or transfer
clerk duly authorized by the Board of Directors, and upon surrender of the
certificate or certificates, is issued for such shares properly endorsed or
accompanied by a duly executed stock transfer power and the payment of all taxes
thereon. Upon surrender to the Corporation or the duly authorized transfer agent
of the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, as to any
transfer not prohibited by the Corporation's Certificate of Incorporation, these
Bylaws, or by action of the Board of Directors thereunder, it shall be the duty
of the Corporation to issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
Section 6.04 Setting of Record Date on Transfer Books. The Board of
Directors shall fix in advance a date, not exceeding sixty days preceding the
date of any meeting of Stockholders, or the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any change
or conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining the consent of Stockholders for any purpose, as a
record date for the determination of the Stockholders entitled to notice of, and
to vote at, any such meeting, and any adjournment thereof, or entitled to
receive payment of any such dividend, or to any such allotment of rights, or to
exercise the rights in respect of any such change, conversion or exchange of
capital stock, or to give such consent, and in such case such Stockholders and
only such Stockholders as shall be Stockholders of record on the date so fixed
shall be entitled to such notice of, and to vote at, such meeting and any
adjournment thereof, or to receive payment of such dividend, or to receive such
allotment of rights, or to exercise such rights, or to give such consent, as the
case may be notwithstanding any transfer of any stock on the books of the
Corporation after any such record date fixed as aforesaid.
Section 6.05 Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
Section 7.01 Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 7.02 Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Directors shall think conducive to the interest of
the Corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
Section 7.03 Annual Report. The officers of the Corporation shall prepare
or cause to be prepared annually a full and correct report of the affairs of the
Corporation, including financial statements for the preceding fiscal year, which
shall be prepared in accordance with generally accepted accounting principles,
audited and certified by independent certified public accountants and
distributed to Stockholders within one hundred twenty (120) days after the close
of the Corporation's fiscal year and a reasonable period of time (at least 10
days) prior to the annual meeting of Stockholders. Such report shall also be
submitted at the annual meeting. The annual report shall also include full
disclosure of all material terms, factors and circumstances surrounding any
transactions between the Corporation and any Director, or any affiliates of such
Director. The Independent Directors will comment on the fairness of such
transactions in the annual report.
The Corporation shall also publish in the annual report the ratio of the
cost of raising capital during the year to the capital raised
Section 7.04 Quarterly Report. The officers of the Corporation shall also
prepare or cause to be prepared quarterly for each of the first three quarters
of each fiscal year, a full and correct report of the affairs of the
Corporation, including a balance sheet and financial statement of operations for
the preceding fiscal quarter, which need not be certified by independent
certified public accountants and shall be distributed to Stockholders within
forty-five (45) days after the close of the Corporation's preceding fiscal
quarter.
Section 7.05 Books of Account and Records. The Corporation shall maintain
at its office in the City of Charlotte and State of North Carolina correct and
complete books and records of account of all the business and transactions of
the Corporation, such books and records to include, without limitation, current
names and addresses of all Stockholders as well as Stockholder records. Upon the
request of, and reasonable notice given by, any Stockholder, there shall be made
available for inspection such books and records in accordance with the
provisions of Delaware law during regular business hours of the Corporation.
Section 7.06 Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 7.07 Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
Section 7.09 Seal. The corporate seal shall have inscribed thereon the name
of the Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01 Amendments. These Bylaws may be altered or repealed or new
bylaws may be made by the Stockholders entitled to vote thereon at any annual or
special meeting thereof or by the Board of Directors.
Exhibit 10.1 - Amended and Restated Master Lease
AMENDED AND RESTATED MASTER LEASE AGREEMENT
This AMENDED AND RESTATED MASTER LEASE AGREEMENT (this "Lease") is made and
entered into as of the _21st_ day of December, 1995, by and between BODDIE-NOELL
PROPERTIES, INC., a Delaware corporation, as successor by merger to Boddie-Noell
Restaurant Properties, Inc., having its principal office at 3710 One First Union
Center, Charlotte, North Carolina 28202 ("Lessor"), and BODDIE-NOELL
ENTERPRISES, INC., a North Carolina corporation, having its principal office at
1021 Noell Lane, Rocky Mount, North Carolina 27802 ("Lessee").
RECITALS
This Lease is made and entered into with reference to the following
recitals:
A. Lessor and Lessee entered into that certain Master Lease Agreement dated
May 1, 1987 (the "Original Lease"), covering certain parcels of real property
and improvements located thereon (the "Leased Properties"), as more particularly
identified on Exhibit A attached hereto and incorporated herein by reference,
for the use and operation by Lessee as Hardee's restaurants.
B. Lessor and Lessee now desire to amend and restate the terms of the
Original Lease such that as of the date written above, this Lease shall wholly
supersede and replace the terms of the Original Lease.
C. This Lease provides that additional Leased Properties may be made
subject to the operation and effect of this Lease, upon execution by the Lessor
and the Lessee of a Lease Supplement designating each such additional property
as a Leased Property hereunder.
D. This Lease is intended to be applicable to each of the individual Leased
Properties whether identified on Exhibit A or added by a Lease Supplement, and
to all such properties collectively, as if all of the terms of this Lease were
incorporated into each Lease Supplement.
NOW, THEREFORE, in consideration of the foregoing, and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
1.1 Leased Properties.
(a) Subject to the terms and conditions hereinafter set forth, Lessor
leases to Lessee, and Lessee rents from Lessor, the following commercial real
property (collectively, the "Leased Properties" and individually, a "Leased
Property"):
(i) the various parcels of land described in Exhibit A attached
hereto, together with any additional parcel of real property subsequently
designated as a Leased Property by the parties pursuant to a Lease
Supplement as provided in this Lease (collectively, the "Land");
(ii) all buildings, structures, and other improvements of every kind
situated on the Land at the time each such parcel of Land is made subject
to this Lease, together with any and all appurtenances to the Land and such
improvements, including, but not limited to, sidewalks, utility pipes,
conduits and lines (on-site and off-site), parking areas and roadways
appurtenant to such buildings (collectively, the "Leased Improvements");
(iii) all easements, rights and appurtenances relating to the Land and
Leased Improvements; and
(iv) all fixtures, including all components thereof, located in, on or
used in connection with, the Leased Improvements, which are hereby deemed
by the parties hereto to constitute real estate, together with all
replacements, modifications, alterations and additions thereto
(collectively, the "Fixtures").
1.2 Term. The initial term of this Lease (the "Primary Term") shall be for
a fixed term commencing on the Commencement Date (as hereinafter defined) and
ending on December 31, 2007. The Primary Term for any Leased Property designated
in a Lease Supplement shall begin on the date of such Lease Supplement and
expire at the end of the Primary Term or then current Extension Term, as the
case may be. Lessee shall have the right to extend this Lease to the Leased
Properties as a group, at Lessee's option, for up to a maximum of three (3)
five-year renewal terms from the expiration of the Primary Term, as set forth
more fully in Article XX.
ARTICLE II
2. Definitions. For all purposes of this Lease: (i) the terms defined in
this Article have the meanings assigned to them in this Article and include the
plural as well as the singular; (ii) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with generally accepted
accounting principles applicable as of the date thereof; (iii) all references in
this instrument to designated "Article", "Sections" and other subdivisions are
to the designated Articles, Sections and other subdivisions of this Lease; and
(iv) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Lease as a whole and not to any particular Article, Section
or other subdivision:
Additional Charges: As defined in Section 3.4.
Affiliate: When used with respect to any corporation, the term "Affiliate"
shall mean any person who, directly or indirectly, controls or is controlled by
or is under common control with such corporation. For the purposes of this
definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such person,
through the ownership of voting securities, partnership interests or other
equity interests.
Alteration: As defined in Section 11.
Base Rent: As defined in Section 3.1.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday which is
not a day on which national banks in the City of Charlotte, North Carolina are
authorized, or obligated by law or executive order, to be closed for business.
Commencement Date: May 27, 1987.
Consolidated Financials: For any fiscal year or other accounting periods
for the Lessee and its consolidated subsidiaries, statements of earnings and
retained earnings and of changes in financial position for such period and for
the period from the beginning of the respective fiscal year to the end of such
period and the related balance sheet as at the end of the such period, together
with the notes thereto, all in reasonable detail and setting forth in
comparative form the corresponding figures for the corresponding period in the
preceding fiscal year, and prepared in accordance with generally accepted
accounting principles.
Default: Any condition or event which constitutes or would constitute an
Event of Default either with or without the giving of notice or the passage of
time, or both.
Event of Default: As defined in Article XVII.
Extension Term: Any one or both of the three (3) successive five (5) year
periods of extension of this Lease as to the Leased Properties, as provided in
Article XX.
Fixtures: As defined in Section 1.1(a)(iv).
Gross Sales: The gross aggregate amount received by Lessee or any
sublessee, franchisee or concessionaire from all sales or other income derived
from business conducted on the Leased Properties, less (i) the amount of all
sales tax receipts and similar tax receipts which are required to be accounted
for by Lessee to any governmental body or agency; (ii) any amounts received from
sales of non-food items omitted from the computation of gross sales under
Lessee's franchise agreement with Hardee's Food Systems, Inc. and (iii) the
amount of refunds or credits made by Lessee for items which already have been
included in Gross Sales. Further, no delivery or consumption of food shall be
regarded as a sale or included in Gross Sales if there existed no intention to
charge or collect for such delivery or consumption, as in the case of
promotional meals, charity meals and meals for employees.
Impositions: Collectively, all real estate taxes on the Leased Properties,
all ad valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes levied or incurred with respect to the Leased
Properties, or the use, ownership, and operation thereof, assessments
(including, without limitation, all assessments for public improvements or
benefits, whether or not commenced or completed within the Term), water, sewer
or other rents and charges, excises, levies, fees, and all other governmental
charges of any kind or nature whatsoever, foreseen of unforeseen, ordinary or
extraordinary, in respect of a Leased Property and/or the Rent or Additional
Charges (including all interest and penalties thereon), or this Lease, which at
any time prior to, during or in respect of the Term hereof may be assessed or
imposed on or in respect of or be a lien upon Lessor or any of the Leased
Properties or any part thereof or any rent therefrom or any estate, title or
interest therein. Nothing contained in this Lease, however, shall be construed
to require Lessee to pay (1) any tax imposed on Lessor based on the net income
of Lessor; (2) any transfer, or net revenue, tax of Lessor or any other person;
or (3) any tax imposed with respect to the sale, exchange or other disposition
by Lessor of any Leased Property or the proceeds thereof, except to the extent
that any such tax, assessment, levy or charge set forth in clause (1) or clause
(2) may be levied, assessed or imposed as a total or partial substitute for a
tax, assessment, levy or charge upon the Leased Properties, the Rent, the
Additional Charges or any part of any thereof or interest therein which Lessee
would otherwise have been required to pay hereunder or except to the extent that
any such tax, assessment, levy or charge constitutes a lien upon the Leased
Properties or any part thereof or any Rent therefrom or any estate, title or
interest therein.
Insurance Requirements: All terms of any insurance policy required by this
Lease to be maintained by Lessee and all requirements of the issuer of any such
policy.
Land: The various parcels of land described in Exhibit A hereto, together
with any additional parcel of real property subsequently designated as a Leased
Property by the parties pursuant to a Lease Supplement as provided in this
Lease.
Lease Supplement: An instrument supplementary to this Lease, in the form
attached hereto as Exhibit B but with any modifications or amendments acceptable
to Lessor and Lessee, which is intended to bring additional Leased Properties
within the operation and effect of this Lease.
Leased Properties: As defined in Article I.
Legal Requirements: All federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either any Leased Property or the
construction, use or alteration thereof, whether now or hereafter enacted and in
force, including any which may (i) require repairs, modifications or alterations
in or to any Leased Property, or (ii) in any way limit the use and enjoyment
thereof, and all permits, licenses, authorizations and regulations relating
thereto, and all covenants, agreements, restrictions and encumbrances contained
in any instruments, either of record or known to Lessee (other than those
created by Lessor without the consent of Lessee), affecting any Leased Property.
Lessee's Equipment: As defined in Section 7.2.
Lessor's Mortgagee: Any lender of Lessor, from time to time, taking as a
security interest, for purposes of securing any loan to Lessor by such lender, a
first lien deed of trust or mortgage on the Leased Properties and an assignment
of Lessor's interest in this Lease.
Officer's Certificates: A certificate of Lessee signed by the President or
any Vice President or the Treasurer. Lessee shall be bound by all Officer's
Certificates regardless of the actual authority of the person who executes them.
Original Cost: As to each Leased Property set forth on Exhibit A attached
hereto, Nine Hundred Twenty Thousand Sixty-Two and No/100s Dollars
($920,062.00).
Overdue Rate: On any date, the greater of (i) a rate per annum equal to the
annual rate on such dated announced by Citibank, N.A. as its prime rate of
interest or (ii) 10% per annum.
Payment Date: Any due date for the payment of an installment of Base Rent.
Percentage Rent: As defined in Article III.
Primary Term: As defined in Article I.
Purchase Contract: The Contract for Purchase and Sale of Property among
Boddie-Noell Enterprises, Inc., BNE Realty Partners, Limited Partnership, and
Boddie-Noell Restaurant Properties, Inc. (now known as Boddie-Noell Properties,
Inc. as successor by merger) dated April 21, 1987 pursuant to which Landlord
acquired the Leased Properties, a copy of which is attached hereto as Exhibit C.
Rent: Collectively, the Base Rent and Percentage Rent.
Term: Collectively, the Primary Term and the Extension Term(s) of all of
the Leased Properties. The term of this Lease is intended to continue until this
Lease shall have been terminated (whether through expiration or prior
termination).
Unavoidable Delays: Delays due to strikes, lock-outs, inability to procure
materials, power failure, acts of God, governmental restrictions, enemy action,
civil commotion, fire, unavoidable casualty or other causes beyond the control
of Lessee, provided that lack of funds shall not be deemed a cause beyond the
control of Lessee.
ARTICLE III
3.1 Rent. Lessee will pay to Lessor, at Lessor's address set forth under
Article XXXIII, a net rental during the Term, as follows:
(a) an annual amount equal to Four Million Five Hundred Thousand and
No/100s ($4,500,000.00) ("Base Rent"). Base Rent shall be payable in consecutive
equal installments of Three Hundred Seventy Five Thousand and No/100s Dollars
($375,000.00) by the 15th day of each month during the Term (prorated as to any
partial month in the proportion that the number of days in such month bears to
thirty (30)); and
(b) nine and 875/1000 percent (9.875%) of aggregate Gross Sales during each
calendar quarter (or any portion thereof) generated from the operation of all of
the Leased Properties taken as a group, less the Base Rent payable for such
calendar quarter ("Percentage Rent"). Percentage Rent shall be due and payable
fifteen (15) days after the close of each calendar quarter, based upon an
Officer's Certificate furnished by Lessee to Lessor, setting forth (i) the Gross
Sales for such quarter for each Leased Property; (ii) the amount of Base Rent
for such calendar quarter; and (iii) the computation of the amount of Percentage
Rent. Notwithstanding the above, at the time for payment of Percentage Rent
relating to the last calendar quarter of each calendar year, Lessor and Lessee
shall compute percentage rent for said calendar year on an annual basis using
the formula set forth in the first sentence of this Section 3.1(b) except that
the periods used therein shall be said calendar year (the "Annual Percentage
Rent"). Lessee shall then pay as Percentage Rent for the last calendar quarter
of each calendar year the difference between the Annual Percentage Rent for such
calendar year less the amounts of Percentage Rent paid by Lessee for the
previous three quarters of said calendar year. If the Percentage Rent paid by
Lessee during the previous three calendar quarters of any calendar year exceeds
the Annual Percentage Rent for said calendar year, Lessee shall receive a credit
against the next succeeding payment of Rent due under this Lease in the amount
of such difference. The obligation to pay Percentage Rent shall survive the
expiration or earlier termination of the Term.
3.2 Confirmation of Percentage Rent. Lessee shall (and shall cause any and
all sublessees to) utilize an accounting system which will accurately record all
Gross Sales from a Leased Property, and Lessee shall (and cause any and all
sublessees to) retain for at least eighteen (18) months after the expiration of
each calendar quarter reasonably adequate records conforming to such accounting
system and showing all Gross Sales for such quarter and enabling Lessor to
verify all such Gross Sales through standard audit procedures. Lessor shall have
the right, from time to time by its accountants or representatives, to audit at
Lessee's corporate offices the information set forth in the Officer's
Certificate for each Leased Property and in connection with such audits to
examine Lessee's (or any sublessee's) records with respect thereof (including
but not limited to supporting data and sales tax returns). If any such audit
discloses a deficiency in the payment of Percentage Rent, Lessee shall, within
ten (10) days of notice from Lessor of such deficiency, pay to Lessor the amount
of such deficiency, together with interest at the Overdue Rate from the date
when said payment should have been made to the date of payment. If any such
audit discloses that the Gross Sales for any Leased Property exceed those
reported by Lessee by more than three percent (3%), Lessee shall pay the
reasonable cost of such audit and examination.
3.3 Payment of Base Rent and Percentage Rent. Lessee shall pay or cause all
Base Rent to be paid to Lessor in equal monthly installments as set forth in
Section 3.1(a), to be made on or before the fifteenth (15) day of each calendar
month, and shall make all payments of Percentage Rent within fifteen (15) days
after the end of each calendar quarter. Rent provided for herein shall be paid
absolutely net to Lessor, so that this Lease shall yield to Lessor the full
amount of the total Rent hereunder, without setoff, deduction, or reduction
except as expressly provided in this Lease. If any installment of Base Rent or
Percentage Rent shall not be paid within five (5) Business Days after its due
date, Lessee will pay Lessor on demand a late charge (to the extent permitted by
law) computed at the lesser of the Overdue Rate or at the maximum rate permitted
by law on the amount of such installment, from the due date for such installment
to the date of payment thereof. Rent shall accrue from the Commencement Date for
all properties described on Exhibit A. Rent for other properties added by Lease
Supplement shall accrue from the dates of their respective Lease Supplement.
3.4 Additional Charges. In addition to the Base Rent, Lessee will pay and
discharge as and when due and payable all other amounts, liabilities,
obligations and Impositions which Lessee assumes or agrees to pay under this
Lease; unless expressly provided otherwise in this Lease, in the event of any
failure on the part of Lessee to pay any of such items, Lessee will also
promptly pay and discharge any and every fine, penalty, interest and cost which
may be added for nonpayment or late payment of such items (the items referred to
above in this Section are referred to hereinafter collectively as the
"Additional Charges"), and Lessor shall have all legal, equitable and
contractual rights, powers and remedies provided either in this Lease or by
statute or otherwise in the case of nonpayment of the Additional Charges as in
the case of nonpayment of the Rent. Any late charge imposed by Lessor pursuant
to Section 3.3 shall constitute an Additional Charge hereunder. To the extent
that Lessee pays any Additional Charges to Lessor pursuant to any requirement of
this Lease, Lessee shall be relieved of its obligation to pay such Additional
Charges to the entity to which they would otherwise be due.
ARTICLE IV
4.1 Payment of Impositions. Subject to Article XIII relating to permitted
contests, Lessee will pay or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for nonpayment, such payments to be made
directly to the taxing authorities where feasible, and will promptly, upon
request, furnish to Lessor copies of official receipts or other satisfactory
proof evidencing such payments. If any such Imposition may, at the option of the
taxpayer, lawfully be paid in installments (whether or not interest shall accrue
on the unpaid balance of such Imposition), Lessee may exercise the option to pay
the same in installments, and in such event shall pay such installments during
the Term hereof (subject to Lessee's right of contest pursuant to the provisions
of Article XIII) as the same respectively become due and before any fine,
penalty, premium, further interest or cost may be added thereto. Lessee, at its
expense, shall, to the extent permitted by applicable laws and regulations,
prepare and file all required tax returns and reports in respect of any
Imposition. Lessee shall be entitled to receive any refund due from any taxing
authority in respect of any Imposition previously paid by Lessee, unless an
Event of Default shall have occurred and be continuing. Lessor shall, upon
Lessee's request, provide such data as are maintained by Lessor with respect to
the Leased Properties as Lessee may require to prepare any required tax returns
and reports. In the event governmental authorities classify any property covered
by this Lease as personal property, Lessee shall file all necessary personal
property tax returns in the appropriate jurisdictions, unless by law Lessor is
required to file such returns. Lessor will provide Lessee with cost and
depreciation records necessary for filing returns for any property so classified
as personal property. Where Lessor is required by law to file personal property
tax returns, Lessee will be provided with copies of assessment notices
indicating a value in excess of the reported value in sufficient time for Lessee
to file a protest. Lessee may, upon notice to Lessor, at its option and at its
sole cost and expense, protest, appeal, or institute such other proceedings as
it may deem appropriate to effect a reduction of real estate or personal
property assessments and Lessor, at Lessee's expense as aforesaid, shall fully
cooperate with Lessee in such protest, appeal, or other action. In the event
Lessor makes a payment of any such personal property taxes, any statement sent
by Lessor to Lessee for reimbursement of Lessor's payment thereof shall be
accompanied by copies of a bill therefor and payments thereof which identify the
Fixtures with respect to which such payments are made.
4.2 Notice of Impositions. Lessor shall give prompt notice to Lessee of all
Impositions payable by Lessee hereunder of which Lessor at any time has
knowledge, and shall not pay any Imposition until it has given Lessee reasonable
opportunity to pay same, but Lessor's failure to give any notice shall in no way
diminish Lessee's obligations hereunder to pay such Impositions (exclusive of
interest, fines or penalties occasioned by Lessor's failure to timely give such
notice).
4.3 Adjustment of Impositions. Impositions imposed in respect of the
calendar year during which the Term as to a Leased Property terminates shall be
adjusted and prorated on a daily basis between Lessor and Lessee, whether or not
such Imposition is imposed before or after such termination, and Lessee's
obligation to pay its pro rata share thereof shall survive such termination. In
the event an Imposition is in the nature of a special assessment made against a
Leased Property within the last five (5) years of the Primary Term, or during an
Extension Term, for such Leased Property, Lessee shall pay such assessment
initially, but Lessor shall reimburse Lessee at the end of the Primary Term or
such Extension Term, as the case may be, for the amount of such assessment less
Lessee's share of such assessment, which shall be determined by multiplying the
amount of such assessment by the number of full calendar months remaining in
such Primary term or Extension Term after the assessment divided by sixty (60).
If Lessee thereafter elects to exercise its option for an Extension Term, Lessor
shall not be required to reimburse Lessee for Lessor's portion of such
assessment.
4.4 Utility Charges. Lessee will pay or cause to be paid all charges for
electricity, power, gas, oil, water, telephone, sanitary sewer service, and
other utilities used in or on the Leased Properties during the Term.
ARTICLE V
5. Quiet Enjoyment. So long as Lessee shall pay all Rent as the same
becomes due and shall fully comply with all of the terms of this Lease and fully
perform its obligations hereunder, Lessee shall peaceably and quietly have, hold
and enjoy the Leased Properties for the Term hereof, free of any claim or other
action by Lessor or anyone claiming by, through or under Lessor. No failure by
Lessor to comply with the foregoing covenant shall give Lessee any right to
cancel or terminate this Lease or abate, reduce or make a deduction from or
offset against the Rent or Additional Charges or any other sum payable under
this Lease, or to fail to perform any other obligation of Lessee hereunder.
Notwithstanding the foregoing, Lessee shall have the right, by separate and
independent action, to pursue any claim it may have against Lessor as a result
of a breach by Lessor of the covenant of quiet enjoyment contained in this
Section.
ARTICLE VI
6. No termination, Abatement, Etc. Except as otherwise specifically
provided in this Lease, Lessee, to the fullest extent permitted by law, shall
remain bound by this Lease in accordance with its terms and shall neither take
any action without the consent of Lessor to modify, surrender or terminate the
same, nor seek or be entitled to any abatement, deduction, deferment or
reduction of Rent, or set-off against such Rent, nor shall the respective
obligations of Lessor and Lessee be otherwise affected by reason of (a) any
damage to, or destruction or condemnation of, any Leased Property or any portion
thereof from whatever cause, except as expressly provided in this Lease; (b) any
lawful or unlawful prohibition of, or restriction upon, Lessee's use of any
Leased Property or any portion thereof, the interference with such use by any
person, corporation, partnership or other entity, or by reason of any eviction
by paramount title; (c) any claim which Lessee has or might have against Lessor
or by reason of any default or breach of any warranty by Lessor under this Lease
or any other agreement between Lessor and Lessee, or to which Lessor and Lessee
are parties; (d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceeding affecting
Lessor or any assignee or transferee of Lessor; or (e) any other cause other
than a discharge of Lessee from any such obligations as the result of a judicial
decree. Lessee hereby specifically waives all rights arising from any occurrence
whatsoever (i) to modify, surrender or terminate this Lease or quit or surrender
any Leased Property or any portion thereof; or (ii) that entitle Lessee to any
abatement, reduction, suspension or deferment of the Rent or other sums payable
by Lessee hereunder, except as otherwise specifically provided in this Lease.
The obligations of Lessor and Lessee hereunder shall be separate and independent
covenants and agreements and the Rent, Additional Charges and all other sums
payable by Lessee hereunder shall continue to be payable in all events unless
the obligation to pay the same shall have been terminated pursuant to the
express provisions of this Lease or by termination of this Lease other than by
reason of an Event of Default. Notwithstanding the foregoing, Lessee shall have
the right, by separate and independent action, to pursue any claim it may have
against Lessor.
ARTICLE VII
7.1 Ownership of the Leased Properties. Lessee acknowledges that the Leased
Properties are the property of Lessor and that Lessee has only the right to the
exclusive possession and use of the Leased Properties during the Term upon the
terms and conditions set forth in this Lease.
7.2 Lessee's Equipment. Lessee may, at its expense, install, affix,
assemble or place on any parcels of the Land or in or on any of the Leased
Improvements, and may remove and substitute, any types of machinery, equipment,
furnishing, computers or other personal property owned or leased by Lessee and
used in Lessee's restaurant business, including signs and movable walls or
partitions (collectively, "Lessee's Equipment"). All Lessee's Equipment shall be
and remain the property of Lessee, provided that any of Lessee's Equipment not
removed by Lessee within fifteen (15) days following the expiration or earlier
termination of this Lease or Lessee's right of possession (except that the said
15-day grace period shall not apply in the event that the Lease or Lessee's
right of possession has terminated because of an Event of Default) with respect
to any Leased Property shall be considered abandoned by Lessee and shall,
subject to Section 7.3, thereafter belong to Lessor. All costs and expenses
incurred in removing Lessee's Equipment by Lessee shall be paid by Lessee.
Lessee will, at its expense, repair all damage to any Leased Property caused by
the removal by Lessee of Lessee's Equipment.
7.3 No Interest of Lessor in Lessee's Equipment. Lessor agrees (i) to
acknowledge in writing to such persons, at such times and for such purposes as
Lessee may reasonably request, that Lessee's Equipment is Lessee's personal
property and not fixtures, and that Lessor has no right, title or interest in
such items and (ii) to give thirty (30) days' written notice of Lessor's intent
to exercise its rights under Section 7.2 to any person who has properly filed a
Uniform Commercial Code financing statement with respect to such property so
that such person may exercise its rights in Lessee's Equipment during such
thirty (30) day period. Without limiting the foregoing, in connection with any
purchase, leasing or financing transaction involving or secured by an item of
Lessee's Equipment, Lessor agrees to acknowledge in writing to the seller,
lessor or lender that the interest(s) of such person(s) in such item are and
shall be superior to any interest that Lessor may have or acquire therein by
virtue of Landlord's security interest created by this Lease, or by virtue of
any statutory or common law lien or otherwise.
ARTICLE VIII
8.1 Condition of the Leased Properties. Lessee acknowledges receipt and
delivery of possession of the Leased Properties listed on Exhibit A and that
Lessee has examined the title to and the condition of each of such Leased
Properties prior to the execution and delivery of this Lease or Lease
Supplement, as the case may be, and has found the same to be in good order and
repair and satisfactory for its purposes hereunder. Lessee is renting the Leased
Properties "as is" in their present condition. Lessee waives any claim or action
against Lessor in respect of the condition of each Leased Property. Lessor makes
no warranty or representation, express or implied, with respect to any Leased
Property or any part thereof, either as to its fitness for use, design or
condition for any particular use or purpose or otherwise, or as to quality of
the material or workmanship therein, latent or patent, or as to the existence of
any toxic or hazardous materials on or about any Leased Property, it being
agreed that all such risks are to be borne by Lessee. Lessee acknowledges that
each Leased Property has been inspected by Lessee and is satisfactory to it.
8.2 Use of the Leased Properties. Lessee shall use and cause each Leased
Property to be used for operating a Hardee's restaurant business utilizing
substantially the same menu and operating format as required under Lessee's
license agreements with Hardee's Food Systems, Inc. (the "License Agreements"),
for such other uses as may be incidental thereto, and for such other lawful uses
as may be consented to in writing by Lessor, which consent shall not be
unreasonably withheld. Lessee agrees that it will not permit any unlawful
occupation, activity, business or trade to be conducted on any Leased Property
or any use to be made thereof contrary to any applicable Legal Requirements or
Insurance Requirements. Lessee shall not use or occupy or permit a Leased
Property to be used or occupied, nor do or permit anything to be done in or on a
Leased Property or any part thereof, in a manner that may make it impossible to
obtain fire or other insurance covering such Leased Property meeting the
requirements of this Lease, or that will cause or be likely to cause structural
injury to any of the Leased Improvements, or that will constitute a public or
private nuisance. Lessee shall not be permitted to close the restaurant business
conducted on a Leased Property, except (i) as a result of damage to, or
condemnation of, the Leased Property; (ii) during periods of repair, renovation
or alteration; (iii) as otherwise contemplated by this Lease; or (iv) for any
reason beyond the reasonable control of Lessee, such as governmental action or
changes in zoning or other laws.
8.3 Covenant Not to Compete. Lessee covenants that during the term of this
Lease and any extensions or renewals thereof, Lessee shall not, either directly
or indirectly, for itself, or through, on behalf of, or in conjunction with any
person, persons, partnership or corporation own, maintain, engage in, or have a
controlling interest in, without Lessor's prior written consent, any operating
non-Hardee's restaurant business offering the same or similar products and
services as offered by the Hardee's restaurants operated by Lessee on the Leased
Properties, within a radius of one-and-a-half (1-1/2) miles of any Leased
Property hereunder.
8.4 Covenant Not to Acquire. Lessee covenants and agrees that during the
Primary Term and any Extension Terms of this Lease Lessee and its controlling
shareholders or Affiliates will not acquire, directly or indirectly, ten percent
(10%) or more of the outstanding stock of the Lessor. Lessee covenants and
agrees that it will divest itself of such stock of the Lessor as may be
necessary to satisfy the limitations of this paragraph, in the event of the
acquisition of shares by shareholders or Affiliates beyond the control of
Lessee.
ARTICLE IX
9. Compliance with Legal and Insurance Requirements, Instruments, Etc.
Lessee, at its expense, will (a) comply with all Legal Requirements and
Insurance Requirements in respect of the use, operation, maintenance, repair and
restoration of each Leased Property, whether or not compliance therewith shall
require structural changes in any of the Leased Improvements or interfere with
the use and enjoyment of a Leased Property; and (b) procure, maintain and comply
with all licenses and other authorizations required for the use of each Leased
Property and for the operation and maintenance of the Leased Improvements
including compliance with the provisions of the License Agreements with Hardee's
Food Systems, Inc. with respect to each Leased Property (including Lessee's
obligations to make periodic improvements to the Leased Properties to conform
with design standards imposed under such License Agreements) and taking any
action necessary to avoid a default or termination under such License
Agreements.
ARTICLE X
10.1 Maintenance and Repair.
(a) Lessee, at its expense, will keep each Leased Property and all private
roadways, sidewalks and curbs appurtenant thereto and which are under Lessee's
control in good order and repair (ordinary wear and tear excepted), and shall
make all necessary repairs thereto of every kind and nature whatsoever. To the
extent reasonably achievable, all such repairs will be at least equivalent in
quality to the original work. Lessee shall at its expense maintain each Leased
Property in good order and repair, reasonable wear and tear excepted, and
maintain and improve each Leased Property on a basis consistent with Lessee's
maintenance and improvements of all of the Hardee's restaurants owned or
operated by Lessee and as required by the License Agreements with Hardee's Food
Systems, Inc. Except as permitted by this Lease, Lessee will not take or omit to
take any action the taking or omission of which might materially impair the
value or the usefulness of any Leased Property or any parts thereof.
(b) Lessor shall under no circumstances be required to build any
improvements on any Leased Property, or to make any repairs, replacements,
alterations or renewals of any nature or description to a Leased Property, or to
make any expenditure whatsoever in connection with this Lease, or to maintain
any Leased Property in any way. Lessee hereby waives, to the fullest extent
permitted by law, the right to make repairs at the expense of Lessor pursuant to
any law in effect on the Commencement Date or thereafter enacted.
(c) Unless Lessor shall convey any of the Leased Properties to Lessee
pursuant to the provisions of this Lease, Lessee shall, upon the expiration or
prior termination of the Term as to a Leased Property, vacate and surrender such
Leased Property to Lessor in the condition in which such Leased Property was
originally received from Lessor, except as repaired, rebuilt, restored, altered
or added to as permitted or required by the provisions of this Lease, except for
ordinary wear and tear, and with due consideration being given to the age of the
Leased Improvements at such time.
10.2 Encroachments, Restrictions, Etc. If any of the Leased Improvements
shall, at any time, encroach upon any property, street or right-of-way adjacent
to a Leased Property, or shall violate the agreements or conditions contained in
any restrictive covenant or other agreement affecting a Leased Property, other
than one which is created or consented to by Lessor without Lessee's consent, or
shall impair the rights of others under any easement or right-of-way to which a
Leased Property is subject, other than one which is created or consented to by
Lessor without Lessee's consent, then promptly upon the request of Lessor or at
the request of any person affected by any such encroachment, violation or
impairment, Lessee shall, at its expense, subject to its right to contest the
existence of any encroachment, violation or impairment and in such case, in the
event of an adverse final determination, either (i) obtain valid and effective
waivers or settlements of all claims, liabilities and damages resulting from
each such encroachment, violation or impairment, whether the same shall affect
Lessor or Lessee; or (ii) make such changes in the Leased Improvements and take
such other actions as shall be necessary to remove such encroachment and to end
such violation or impairment, including, if necessary, the alteration of any of
the Leased Improvements. Any such alteration shall be made in conformity with
the requirements of Article XI.
ARTICLE XI
11. Alterations, Substitutions and Replacements. Lessee, at its sole cost
and expense, may at any time and from time to time make alterations to the
Leased Properties or any part thereof and substitutions and replacements for the
same (collectively, "Alterations"), provided that (a) the market value of the
affected Leased Property shall not be reduced or its structural integrity
adversely affected; (b) the work shall be done expeditiously and in a good and
workmanlike manner; (c) the plans and specifications for any single alteration
with an estimated cost in excess of Two Hundred Fifty Thousand Dollars
($250,000) shall be approved in writing by Lessor, such approval not to be
unreasonably withheld; provided, however, that if the Lessee shall not have
received either approval or rejection, or conditions for such approval, of any
such plans and specifications within thirty (30) days after delivery of the same
to Lessor, such plans and specifications shall be conclusively deemed approved
for all purposes hereof; (d) Lessee shall comply with any and all Legal
Requirements and Insurance Requirements applicable to the work; and (e) Lessee
shall promptly pay all costs and expenses and discharge any and all liens
arising in respect of the work.
7 Until the expiration or earlier termination of this Lease as to a
Leased Property, beneficial title to and ownership of any Alterations to such
Leased Property shall remain solely in Lessee and Lessee alone shall be entitled
to deduct all depreciation and amortization on Lessee's income tax returns with
respect to such Alterations. Upon the expiration of earlier termination of this
Lease as to such Property, such Alterations shall revert to, pass to and become
the property of the Lessor.
ARTICLE XII
12. Liens. Subject to Article XIII relating to contests, Lessee shall not
directly or indirectly create or allow to remain, and will promptly discharge at
its expense, any lien, encumbrance, attachment, title retention agreement or
claim upon any Leased Property or any attachment, levy, claim or encumbrance in
respect of the Rent or Additional Charges provided under this Lease, not
including, however, (a) this Lease; (b) utility easements and road rights-of-way
in the customary form (i) provided the same do not adversely affect the intended
use of the Leased Properties (including the Improvements) and do not materially
adversely affect the value of the Leased Properties or (ii) which result solely
from the action or inaction of Lessor; (c) zoning and building laws or
ordinances, provided they do not prohibit the use of the Leased Properties for
commercial restaurant purposes and so long as the Leased Properties are in
compliance with same; (d) such encumbrances as are subsequently consented to in
writing by Lessor or result solely from the action or inaction of Lessor, but
excluding liens in respect of Impositions required to be paid under Section 4.1;
(e) liens for Impositions or for sums resulting from noncompliance with Legal
Requirements so long as (1) the same are not yet payable or are payable without
the addition of any fine or penalty, or (2) such liens are being contested as
permitted by Article XIII; and (f) liens of mechanics, laborers, materialmen,
suppliers or vendors for sums either disputed or not yet due, provided that (1)
the payment of such sums shall not be postponed under any contract for more than
sixty (60) days after the completion of the work, services or delivery of
supplies giving rise to such lien, (2) adequate reserves shall have been made
for the payment thereof, and (3) such liens shall in any event be discharged by
bonding or otherwise within fifteen (15) days after the same have been filed.
ARTICLE XIII
13. Permitted Contests. Lessee, on its own or on Lessor's behalf, but at
Lessee's sole cost and expense, may contest, by appropriate legal proceedings
conducted in good faith and with due diligence, the amount, validity or
application, in whole or in part, of any Imposition or any Legal Requirement or
Insurance Requirement or any lien, attachment, levy, encumbrance, or claim not
otherwise permitted by Article XII, and Lessor agrees not to itself pay any such
item, provided that (a) the commencement and continuation of such proceedings
shall suspend the collection thereof from Lessor and any assignee of Lessor and
from the affected Leased Properties; (b) no part of the affected Leased
Properties nor any Rent therefrom would be in any immediate danger of being
sold, forfeited, attached or lost; (c) in the case of a Legal Requirement,
Lessor would not be in any immediate danger of civil or criminal liability for
failure to comply therewith pending the outcome of such proceedings; (d) such
contest shall not interfere with the use and occupancy of any Leased Property;
and (e) in the event that any such contest shall involve a sum of money or
potential loss in excess of fifty thousand dollars ($50,000), the Lessee shall
deliver to Lessor an Officer's Certificate to the effect set forth in clauses
(a), (b), (c) and (d), and Lessee shall give such reasonable security as may be
demanded by Lessor to ensure ultimate payment of the same and to prevent any
sale or forfeiture of the affected Leased Property. If Lessee contests any
Insurance Requirement; Lessee shall nonetheless maintain the coverage required
by Article XIV during the pendency of any such contest. Lessor, at Lessee's
expense, shall execute and deliver to Lessee such authorizations and other
documents as may reasonably be required in any such contest and, if reasonably
required by Lessee or if Lessor so desires, Lessor shall or may join as a party
therein. Lessee shall indemnify and save Lessor harmless from and against any
liability, cost or expense of any kind that may be imposed upon Lessor in
connection with any such contest and any loss resulting therefrom.
ARTICLE XIV
14.1 Insurance. Lessee agrees to maintain at all times and at its sole cost
and expense insurance covering each Leased Property as follows: (a) fire, with
extended coverage (including windstorm and subsidence), vandalism and malicious
mischief endorsements and insurance against such other risks as Lessee deems
prudent, such insurance to be in each case in an amount not less than the full
insurable value (actual replacement cost to reconstruct in accordance with all
then applicable laws, ordinances, codes and regulations, less the costs of land
excavation, foundations and footings) of each Leased Property; (b) comprehensive
liability insurance as to each Leased Property in amounts equal to the greater
of (i) One Million dollars ($1,000,000) for each occurrence and One Million
dollars ($1,000,000) in the aggregate, and (ii) the limits of liability
generally required under the License Agreements with respect to the Leased
Properties between Lessee and Hardee's Food Systems, Inc.; (c) workers'
compensation insurance as required by statute in respect of any work or other
operations on or about each Leased Property; (d) flood insurance in an amount
equal to the full insurable value (as defined in clause (a) above) of each
Leased Property or the maximum amount available, whichever is less, if any
Leased Property is located in a designated flood hazard area or Lessor's
Mortgagee is required by law or regulation to require or maintain flood
insurance with respect to any Leased Property; (e) upon request and to the
extent available at reasonable cost, earthquake insurance in an amount not less
than the full insurable value (as defined in clause (a) above) of each Leased
Property; (f) commercial comprehensive catastrophic liability insurance with
limits of liability of not less than the greater of (i) Thirty Five Million
dollars ($35,000,000) and (ii) the limits of liability generally required under
the License Agreements with respect to the Leased Properties between Lessee and
Hardee's Food Systems,Inc.; and (g) during the period when any addition,
alteration, construction, installation or demolition is being made or performed
to any part of the Leased Improvements, contingent liability, public liability,
completed value, builder's risk (non-reporting form), workers' compensation and
other insurance as is deemed prudent by Lessee. Deductible provisions for the
insurance required under clause (a) shall not exceed ten thousand dollars per
location per occurrence and one hundred thousand dollars ($100,000) aggregate
per occurrence; under clause (b), one hundred fifty thousand dollars ($150,000)
per occurrence; under clause (d), fifty thousand dollars ($50,000) per
occurrence except that if federal flood insurance is available then such
deductible shall not be greater than the lowest deductible available with
respect to such federal flood insurance; under clause (f), one hundred fifty
thousand dollars ($150,000) per occurrence; and under clause (g), ten thousand
dollars ($10,000) per occurrence. Lessee may effect all coverage required herein
under its blanket insurance policies, if available thereunder, and all such
policies shall be written by companies presently or hereafter insuring
substantially all of the properties of Lessee; provided, however, that in the
case of insurance under clause (d), such insurance must be written on the
federal flood insurance program if available for such Leased Property up to the
maximum amount available under the federal flood insurance program; provided
further, however, that any policy of blanket insurance hereunder shall comply in
all respects with the other provisions of this Article XIV, except that such
policies need not provide for a minimum reserved amount of insurance allocated
to any given Leased Property. Unless otherwise approved by Lessor such insurance
shall be written by an insurance company (i) having a Bests' policyholder's
rating of A or better; (ii) in the Bests' Class XII financial size category; and
(iii) authorized to do insurance business in the states in which the Leased
Properties are located, if so required by law.
14.2 Policy Provisions and Certificates. The insurance maintained by Lessee
under clauses (a), (b), (d), (e), (f) and (g) of Section 14.1 shall name Lessor
and Lessor's Mortgagee, if any, as an additional insured and in the case of (a),
(d), (e) and (g), Lessor and Lessee as their respective interests may appear, as
loss payees, provided, however, that if there is then a Lessor's Mortgagee,
Lessor's Mortgagee shall be named as loss payee pursuant to a standard mortgagee
and lender loss payable clause. The insurance maintained by Lessee under clauses
(a), (d), (e), and (g) of Section 14.1 shall provide that all property losses
insured against shall be adjusted by Lessee (subject to Lessor's approval of
final settlement of estimated losses of ten thousand dollars ($10,000) or more).
All insurance maintained by Lessee shall provide that (a) no cancellation or
reduction thereof shall be effective until at least thirty (30) days after
mailing Lessor, and Lessor's Mortgagee if any, written notice thereof; and (b)
all losses shall be payable notwithstanding any act or negligence of Lessor or
Lessee or their respective agents or employees which might, absent such
agreement, result in a forfeiture of all or part of such insurance payment and
notwithstanding (i) the occupation or use of any Leased Property for purposes
more hazardous than permitted by the terms of such policy, or (ii) any change in
title or ownership of any Leased Property or any part thereof. Lessee will,
within fifteen (15) days after the date hereof, furnish to Lessor and Lessor's
Mortgagee, if any, certificates for the insurance required by Section 14.1(b),
(c) and (f) and evidence of insurance on the Acord 27 form (or equivalent) for
insurance under (a), (d), (e) and (g), and upon request certified copies of all
policies required hereunder, and not less than thirty (30) days evidencing the
replacement or renewal thereof.
14.3 Subrogation. In respect of any real, personal or other property
located in, at or upon each Leased Property, and in respect of each Leased
Property itself, Lessee and Lessor each hereby releases, to the extent permitted
by law, the other from any and all liability or responsibility to the other or
anyone claiming by, through or under either party, by way of subrogation or
otherwise, for any loss or damage caused by fire or any other casualty whether
or not such fire or other casualty shall have been caused by the fault or
negligence of either party or anyone for whom said person may be responsible. If
available, Lessee shall require its fire, extended coverage and other casualty
insurance carriers to include in Lessee's policies a clause or endorsement
whereby the insurer waives any rights of subrogation against Lessor.
14.4 Other Insurance. Lessee shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required by
this Article XIV to be furnished by Lessee unless Lessor and Lessor's Mortgagee,
if any, are included therein as a named insured as their interests may appear,
with loss payable as provided in this Article and such separate insurance does
not have the effect of impairing collection from the insurance required to be
maintained under Section 14.1. Lessee shall immediately notify Lessor whenever
any such separate insurance is taken out and shall deliver the policy or
policies or duplicates thereof, or certificates evidencing the same as provided
in this Article.
ARTICLE XV
15.1 Notice of Taking; Condemnation Awards. In case Lessee receives notice
of a proposed taking, by eminent domain or otherwise, by a public authority, of
a Leased Property, or any interest therein, Lessee shall give notice thereof to
Lessor within ten (10) days of the receipt of notice of such proposed taking. If
Lessor shall be advised by the condemning authority of a proposed taking, Lessor
shall within ten (10) days thereafter give notice thereof to Lessee.
In case of a taking of an entire Leased Property which Lessee reasonably
expects to be permanent or beyond the remainder of the Primary Term or the
Extension Term(s) for which Lessee has committed hereunder to renew this Lease
as to such Leased Property (a "Long-Term Taking"), (i) this Lease shall
terminate with respect to the affected Leased Property on the day prior to the
earlier of the taking of possession by, or the vesting of title in, the public
authority (the "Condemnation Date") and thereafter the Base Rent shall be
proportionately reduced, (ii) Lessor shall be entitled to all awards or payments
by the public authority on account of the taking that are attributable to the
Leased Properties, including the Land, Fixtures and Leased Improvements, and
(iii) Lessee hereby authorizes Lessor in the name of Lessee or otherwise to file
and prosecute any claims for such award or payment.
In case of a taking of an entire Leased Property which Lessee reasonably
expects is for a period of greater than one hundred eighty (180) days, but not a
Long-Term Taking, Lessee may terminate this Lease with respect to such Leased
Property by giving Lessor notice of termination within thirty (30) days
following the Condemnation Date, in which event this Lease shall terminate as to
such Leased Property as of the Payment Date immediately following such
Condemnation Date, and thereafter the Base Rent shall be proportionately
reduced. Any award on account of such taking attributable to the Leased
Properties, including the Land, Fixtures and Leased Improvements shall belong to
Lessor. If Lessee does not so terminate this Lease, this Lease shall continue in
effect with respect to such Leased Property and Lessee shall continue to pay
Rent during the period of taking; provided, that if the performance of any term
hereof (other than the payment of Rent, maintenance of insurance and payment of
Impositions and other Additional Charges) is rendered impossible by such taking,
Lessee shall be excused from such performance.
If a portion of a Leased Property is taken for a period that Lessee
reasonably expects to be permanent or to constitute a Long-Term Taking or for
more than one hundred eighty (180) days and, as a result, in Lessee's reasonable
judgment the potential profitability of the restaurant operated thereon is
substantially adversely affected for the period of the taking by such partial
taking, Lessee may terminate this Lease with respect to such Leased Property by
giving Lessor written notice of termination within twenty (20) days following
the Condemnation Date, in which event this Lease shall terminate as to such
Leased Property as of the Payment Date immediately following such Condemnation
Date and thereafter the Base Rent shall be proportionately reduced. Following
such payment, any condemnation award shall belong to Lessor. If Lessee does not
so terminate this Lease (i) this Lease shall continue in effect with respect to
the portion of the Leased Property not condemned; (ii) the Base Rent shall not
be reduced; (iii) Lessee shall, at its own expense and as soon as practicable
(subject to Unavoidable Delays), perform or cause to be performed such work as
is required to make a complete architectural unit of the remainder of the Leased
Property; and (iv) any condemnation award shall belong to Lessee to the extent
such award does not exceed the cost of such repairs and the proportionate amount
of Base Rent payable with respect to the Leased Property during the repair or
reconstruction period, with the balance of the award, if any, to be paid to
Lessor. For purposes of determining Percentage Rent, if such Leased Property is
closed for repair or reconstruction for more than sixty (60) consecutive days,
then on the sixty-first (61st) day and continuing until the day on which the
Leased Property is reopened, the closed Leased Property shall be deemed to have
Gross Sales during such period equal to the average Gross Sales of the remaining
operating Leased Properties.
Notwithstanding anything to the contrary in this Section 15.1, so long as
no Default shall exist hereunder, Lessee shall be entitled to submit a claim to
a condemning authority for loss of profit, relocation expenses or damage to
Lessee's Equipment resulting from a taking and Lessee may retain any such
separate award applicable thereto. For the purposes of this Lease, all amounts
paid pursuant to any agreement with any condemning authority in settlement of
any condemnation or other eminent domain proceeding affecting a Leased Property
shall be deemed to constitute an award made in such proceeding whether or not
the same shall have actually been commenced.
15.2 Taking Other Than Long-Term Taking. In case of a temporary taking of
all or a portion of a Leased Property for a period not longer than one hundred
eighty (180) days, and which does not constitute a Long-Term Taking, there shall
be no termination, cancellation or modification of this Lease, and Lessee shall
continue to perform and comply with (except as such performance and such
compliance may be rendered impossible by reason of such taking) all of its
obligations under this Lease and shall in no event be relieved of its obligation
to pay punctually all Rent and other charges payable hereunder. For purposes of
determining Percentage Rent, if such Leased Property is closed for repair or
reconstruction for more than sixty (60) consecutive days, then on the
sixty-first (61st) day and continuing until the day on which the Leased Property
is reopened, the closed Leased Property shall be deemed to have Gross Sales
during such period equal to the average Gross Sales of the remaining operating
Leased Properties. Lessor shall pay to Lessee the net awards received by it
(whether by way of damages, rent or otherwise) by reason of such taking.
15.3 Damage or Destruction; Repair or Replacement. In case of any damage or
loss to a Leased Property which is not a Material Loss (as defined below), or
which is a Material Loss but as to which this Lease is not terminated pursuant
to this Section 15.3, Lessee will, at its expense, promptly commence and
complete with due diligence (subject to Unavoidable Delays) the replacement and
repair of the affected Leased Property in order to restore it as nearly as
practicable to the value and condition thereof immediately prior to such damage,
destruction or loss, whether or not the insurance proceeds shall be sufficient
for such purpose. Insurance proceeds available for such purpose shall be placed
in an escrow account at a bank or other financial institution selected by Lessee
and reasonably satisfactory to Lessor. Such funds shall be paid by the escrow
agent to Lessee (or as Lessee may direct), from time to time as the affected
Leased Property is replaced or repaired, in amounts equal to the cost of such
replacement and repair, upon delivery to the escrow agent of an Officer's
Certificate certifying, in each case, the amount to be paid (which may represent
amounts theretofore paid by Lessee in the effectuation of such repairs or
replacements and not reimbursed hereunder or amounts due and payable by Lessee
therefor, or both). Upon completion of construction, Lessee shall deliver to
Lessor (i) if required by law for occupancy, a copy of a permanent,
unconditional certificate of occupancy for the affected Leased Property; and
(ii) an Officer's Certificate certifying to the completion of the repair or
replacement of the affected Leased Property, the payment of the cost thereof in
full, and the amount of such cost, and upon receipt of such certificates by
Lessor, any balance of such insurance proceeds (including any interest earned
thereon) required to be applied to reimburse Lessee for such restoration shall
be paid over to Lessee,and the balance, if any, shall be retained by Lessor.
Notwithstanding the foregoing, if an Event of Default shall have occurred and be
continuing at the time of Lessor's or Lessee's receipt of any such insurance
proceeds, any proceeds received by Lessee shall be paid over to Lessor and all
insurance proceeds shall be held by Lessor and applied in the manner specified
in Article XVII hereof.
During the period of replacement and repair of a damaged Leased Property
under this Section 15.3, Lessee's obligation to punctually pay all Rent and
other charges required under this Lease shall continue notwithstanding that such
Leased Property may be closed for business. For purposes of determining
Percentage Rent, if such Leased Property is closed for replacement or repair for
more than sixty (60) consecutive days, then on the sixty-first (61st) day and
continuing until the day on which the Leased Property is reopened, the damaged
Leased Property shall be deemed to have Gross Sales during such period equal to
the average Gross Sales of the remaining operating Leased Properties.
When loss or damage occurs which, in Lessee's reasonable judgment, renders
an affected Leased Property unfit for occupancy by Lessee to carry on its normal
business activities for a period exceeding one hundred eighty (180) days (a
"Material Loss"), Lessee shall notify Lessor, by an Officer's Certificate,
within ten (10) days following such occurrence and either Lessor or Lessee may
terminate this Lease as to that Leased Property by giving the other party notice
of termination within sixty (60) days following the date of the occurrence of
such Material Loss, in which event this Lease shall terminate as of the Payment
Date specified in such notice of termination and thereafter Base Rent shall be
proportionately reduced. Upon such termination, all insurance proceeds available
as a result of the Material Loss shall be paid and belong to Lessor, and Lessee
shall pay Lessor the amount of any deductible under the applicable insurance
policy providing such proceeds. In any other event, such proceeds shall be
applied in the manner hereinabove set forth in the first paragraph of this
Section 15.3.
15.4 Voluntary Repair or Remodeling. In the event a Leased Property is
closed for business for any reason other than pursuant to Sections 15.1, 15.2 or
15.3, then during the period in which such Leased Property is closed for
business, Lessee's obligation to punctually pay all Rent and other charges
required under this Lease shall continue. For purposes of determining Percentage
Rent, if such Leased Property is closed for more than sixty (60) consecutive
days, then on the sixty-first (61st) day and continuing until the day on which
the Leased Property is reopened, the closed Leased Property shall be deemed to
have Gross Sales during such period equal to the average Gross Sales of the
remaining operating Leased Properties.
ARTICLE XVI
16. Economic Abandonment; Substitution or Purchase of Property.
(a) If, at any time during the Term hereof, in the good faith judgment of
Lessee, a Leased Property becomes uneconomic or unsuitable for Lessee's then use
and occupancy (an "Uneconomic Property"), Lessee shall have the right to
terminate this Lease with regard to such Uneconomic Property, provided that (i)
at the time such discontinuance is sought no Event of Default shall have
occurred and be continuing; and (ii) Lessee must intend to discontinue use of
the Uneconomic Property as a restaurant by Lessee or any Affiliate of Lessee,
for a period of at least one year after the termination of this Lease as to such
Uneconomic Property. Lessee shall signify its election to exercise its right of
termination by giving notice of such election to Lessor. Such notice shall cause
Lessor and Lessee to follow the procedures set forth in this Article XVI, which
procedures must be followed by Lessee as a precondition to the termination of
this Lease as to any Uneconomic Property (provided, however, that after December
31, 2007, Lessee may also elect to follow the procedures set forth in Article
XXIII).
(b) In the event Lessee elects to exercise its right of termination as to
an Uneconomic Property, Lessee shall present to Lessor information regarding at
least three (3) potential substitute properties operated by Lessee as Hardee's
restaurants. Unless Lessor otherwise specifies, such information shall be
substantially similar to the type of information specified in paragraph 5 of the
Purchase Contract. Each substitute site shall have average Gross Sales (as
defined in Article II hereof) for the preceding thirty six (36) month period, of
at least ninety percent (90%) of the average Gross Sales per Leased Property of
all of the Leased Properties for the preceding thirty six (36) month period but
not less than the average Gross Sales of the Uneconomic Property for such
period. Lessor shall have a period of thirty (30) days from the date of
presentation of the third potential substitute property, within which to review
such information and either accept any one of, or reject all of, the potential
substitute properties so presented. If Lessor accepts a proposed substitute
property (a "Substitute Property"), then the parties shall follow substantially
the same procedures set forth in the Purchase Contract to the extent not
inconsistent herewith, except that the consideration to be paid by Lessor shall
consist solely of the conveyance of the Uneconomic Property to Lessee free from
any liens, encumbrances, claims or assessments. Upon execution by Lessor and
Lessee of a Lease Supplement applicable to such Substitute Property, such
Substitute Property shall become a Leased Property and such Leased Property
shall, for the purposes of the Lease, be deemed to have an Original Cost equal
to the Original Cost of the Uneconomic Property, and this Lease shall terminate
as to the Uneconomic Property.
If Lessor rejects all of the substitute properties proffered by Lessee and
Lessor and Lessee are not otherwise able to agree on a Substitute Property, then
Lessee shall nonetheless have the right to terminate this Lease as to the
Uneconomic Property upon notice to Lessor, provided that such notice must be
accompanied by a written offer to purchase the Uneconomic Property at a cash
price equal to the greater of (i) the Original Cost of such Uneconomic Property
or (ii) the Fair Market Value (as defined in Section 16(d) below) of such
Uneconomic Property. Any such notice of intent to purchase shall be given within
thirty (30) days following the expiration of the thirty (30) day review period
set forth above for review of potential substitute properties and shall specify
as the proposed purchase date a date which is between ninety (90) and one
hundred twenty (120) days after such notice. If Lessor does not accept Lessee's
offer to purchase such Uneconomic Property by a date which is thirty (30) days
prior to such proposed purchase date, then this Lease shall terminate as to such
Uneconomic Property as of such proposed purchase date. If Lessor accepts
Lessee's offer to purchase such Uneconomic Property, such sale shall be
consummated on such proposed purchase date and this Lease shall terminate as to
such Uneconomic Property on the date of sale. Upon the termination of the Lease
as to such Uneconomic Property, the Base Rent shall be proportionately reduced.
Notwithstanding anything above to the contrary, the exercise by Lessee of its
rights under this Section 16(b) shall not have a material adverse affect on
Lessor relative to any outstanding loan Lessor may have, including without
limitation, the imposition of prepayment penalties, causing an event of default,
or triggering an acceleration.
(c) From and after the date of substitution, for all purposes of this Lease
Gross Sales for the Substitute Property for any calendar quarter after the
quarter in which the substitution occurs shall be deemed to be the greater of
(A) the actual Gross Sales of such Substitute Property, or (b) the average Gross
Sales per calendar quarter of the Uneconomic Property for the last four full
calendar quarters of its operation. The Term as to such Substitute Property
shall be identical to the Term for the Uneconomic Property, as if no
substitution occurred.
(d) "Fair Market Value" for the purposes of Articles XVI and XXIII shall be
deemed to be the value agreed to by Lessor and Lessee, or,in the absence of such
agreement, the median (i.e., the middle) of those values determined in
accordance with Article XXXIV, provided, however, that if two of the three
appraisers thereunder agree on a value, such value shall govern. Notwithstanding
the foregoing, with respect to a determination of Fair Market Value of an
Uneconomic Property, Fair Market Value shall be computed without regard to any
encumbrance which Lessor or Lessee is, or will be, required to remove pursuant
to any provision of this Lease, but taking into account any other encumbrance
created by, through or under Lessor.
(e) Lessee shall bear all out of pocket costs and expenses associated with,
required by, or incidental to (i) the termination of this Lease as to an
Uneconomic Property resulting from the purchase of the Uneconomic Property by
Lessee under Articles XVI or XXIII, or (ii) the conveyance of the Uneconomic
Property to Lessee and the Substitute Property to Lessor under this Article XVI.
(f) In the event of a substitution of a property for an Uneconomic
Property, or a purchase of an Uneconomic Property by Lessee pursuant to this
Article XVI or Article XXIII, Lessee must discontinue its use of the Uneconomic
Property in its business operations on or before the date of substitution or
purchase and neither Lessee nor any of its Affiliates may use the Uneconomic
Property as a restaurant for a period of one year from the date of substitution
or purchase.
ARTICLE XVII
17. Events of Default.
17.1 If any one or more of the following events (individually, an "Event of
Default") shall occur:
(a) Lessee shall fail to make payment of any Rent, or Additional Charges
payable by Lessee under this Lease when the same becomes due and payable and
such failure shall continue for a period of ten (10) days;
(b) Lessee shall fail to observe or perform the covenants with respect to
insurance set forth in Section 14.1 of this Lease;
(c) Lessee shall fail to observe or perform any other term, covenant or
condition of this Lease and such failure shall continue for a period of thirty
(30) days after notice thereof from Lessor, unless such failure cannot be cured
within such period by the payment of money and Lessee acts with diligence to
correct such failure, in which case Lessee shall be entitled to reasonable time
extensions;
(d) any representation or warranty made by the Lessee herein or made by the
Lessee in a statement, agreement or certificate furnished by the Lessee to or
with any Landlord's Mortgagee or furnished by the Lessee pursuant hereto, is
untrue in any material respect as of the date of the issuance or making thereof;
or
(e) the termination, expiration or relinquishment of the franchise or
license for a Leased Property pursuant to which the Lessee operates a Leased
Property as a Hardee's Restaurant;
(f) the Lessee shall (i) admit in writing its inability to pay its debts
generally as they become due; (ii) file a petition in bankruptcy or a petition
to take advantage of any insolvency act; (iii) make an assignment for the
benefit of its creditors; (iv) consent to the appointment of a receiver of
itself or of the whole or any substantial part of its property; (v) or if a
custodian, trustee or receiver is appointed for the Lessee or for the major part
of the property of the Lessee and is not discharged within 30 days after such
appointment; (vi) file a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any stated thereof;
(g) insolvency proceedings or a petition in bankruptcy shall be filed
against Lessee and not dismissed within sixty (60) days of filing, or a court of
competent jurisdiction shall enter an order or decree appointing, without the
consent of Lessee, a receiver of Lessee or of the whole or substantially all of
its property, and such order or decree shall not be vacated or set aside or
stayed within sixty (60) days from the date of the entry thereof; or
(h) the estate or interest of Lessee in any Leased Property or any part
thereof or in this Lease shall be levied upon or attached in any proceeding and
the same shall not be vacated or discharged within sixty (60) days after such
levy or attachment (unless Lessee shall be contesting such levy or attachment in
good faith in accordance with Article XIII hereof).
Then, and in any such event, Lessor may terminate this Lease as to any one
or all of the Leased Properties by giving Lessee ten (10) days notice of such
termination and upon the expiration of the time fixed in such notice, the Term
shall terminate and all rights of Lessee under this Lease shall cease as to the
designated Leased Properties.
Lessee will, to the fullest extent permitted by law, pay as Additional
Charges all reasonable costs and expenses incurred by or on behalf of Lessor,
including, without limitation, attorneys' fees and expenses, as a result of any
Event of Default hereunder.
17.2 If an Event of Default shall have occurred and be continuing, and this
Lease has been terminated pursuant to Section 17.1, Lessee shall immediately
surrender to Lessor possession of the designated Leased Properties and Lessee
shall quit the same. Lessor may enter upon and repossess such Leased Properties
by reasonable force, summary proceedings, ejectment or otherwise, and may remove
Lessee and all other persons and any and all personal property and Lessee's
Equipment from such Leased Properties. Lessor shall have no liability by reason
by any such entry, repossession or removal.
17.3 If an Event of Default shall have occurred and be continuing, and this
Lease has been terminated pursuant to Section 17.1, Lessor shall use reasonable
efforts to relet those Leased Properties which Lessor has taken possession of,
in the name of Lessee or otherwise, for such term or terms (which may be greater
or less than the period which would otherwise have constituted the balance of
the then current Term) and on such conditions (which may include concessions or
free rent) and for such purposes as Lessor may reasonably determine, and may
collect, receive and retain the rents resulting from such reletting.
17.4 Neither (a) the termination of this Lease as to all or any of the
Leased Properties pursuant to Section 17.1; (b) the repossession of Leased
Properties; (c) the failure of Lessor to relet Leased Properties; (d) the
reletting of all or any portion thereof; nor (e) the failure of Lessor to
collect or receive any rentals due upon any such reletting, shall relieve Lessee
of its liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting. In the event of any such termination as
to one or more of the Leased Properties pursuant to Section 17.1, Lessee shall
forthwith pay to Lessor all Rent and other sums due and payable hereunder to and
including the date of such termination for the designated Leased Properties.
Thereafter, on the days on which the Rent (or the components thereof) would have
been payable under this Lease if the same had not been terminated and until the
end of what would have been the Primary Term(s) or the then current Extension
Term(s) (as the case may be) in the absence of such termination, Lessee shall
pay Lessor, as current liquidated damages (it being agreed that it would be
impossible to accurately determine actual damages):
(i) an amount equal to the Rent and Additional Charges that would have
been payable by Lessee hereunder for the designated Leased Properties if
the Term had not been terminated; provided, however, that for this purpose
Base Rent for a repossessed Leased Property shall be deemed to be Eleven
and 141/1000 percent (11.141%) of the Original Cost of such Leased
Property, less
(ii) the net proceeds, if any, of any reletting of the repossessed
Leased Properties or any portion thereof, after deducting all of Lessor's
expenses in connection therewith, including, without limitation,
repossession costs, brokerage commissions, reasonable attorneys' fees and
expenses and any repair or alteration costs and expenses incurred in
preparation for such reletting;
17.5 At any time after the termination of this Lease as to one or more
Leased Properties pursuant to Section 17.1, whether or not Lessor shall have
collected any current liquidated damages pursuant to Section 17.4, Lessor, at
its option and, as to any Leased Properties, shall be entitled to recover from
Lessee and Lessee will pay to Lessor on demand as and for liquidated and agreed
final damages for Lessee's default (it being agreed that it would be impossible
to accurately determine the actual damages), and in lieu of all current damages
provided in Section 17.4 beyond the date to which the same shall have been paid,
(a) the sum of (i) any past due Rent (and other sums payable thereunder)
together with a late charge thereon (to the extent permitted by law) computed
from the due date thereof to the date of payment of such liquidated damages at
the lesser of the Overdue Rate or the maximum rate permitted by law (in lieu of
the late charge provided by Section 3.4); (ii) the remaining payments of Base
Rent which would otherwise have become due during the remainder of the Primary
Terms(s) or the then current Extension Term(s) for the Leased Properties as to
which this Lease is then being terminated but for such termination (and for the
limited purposes of this Section) the annual Base Rent shall be deemed to be
equal to Eleven and 141/1000 percent (11.141%) of the Original Cost of each
Leased Property as to which this Lease is being terminated, as of the later of
the date to which Base Rent shall have been paid or the date to which Lessee
shall have paid current damages pursuant to Section 17.4, discounted to the date
of payment at the market rate provided in Subsection (b) below; and (iii) an
amount equal to the Additional Charges and other charges (as reasonably
estimated by Lessor) which would be payable hereunder with respect to the
repossessed Leased Properties from such date for what would have been the then
unexpired Primary Term or the then current Extension Term had the same not been
terminated, discounted to the date of payment at the market rate provided in
subsection (b) below; less
(b) the then net fair rental value of the Leased Properties as to which
this Lease is being terminated, as determined by appraisal consistent with the
procedures of Article XXXIV, for the period from the date or payment of such
liquidated damages to the date which would have been the then expiration date of
the Primary Term or the then current Extension Term had this Lease not been
terminated (after deducting all reasonable estimated expense to be incurred in
connection with reletting of any of the repossessed Leased Properties),
discounted to the date of payment at market rate selected by the appraisers
designated pursuant to Article XXXIV.
If any statute or rule of law shall validly limit the amount of such liquidated
current or final damages to less than the amount above agreed upon, Lessor shall
be entitled to the maximum amount allowable under such statute or rule of law.
17.6 If this Lease is terminated pursuant to Section 17.1, Lessee waives,
to the extent permitted by applicable law, (a) any notice of re-entry or of the
institution of legal proceedings to obtain re-entry or possession; (b) any right
of redemption, re-entry or repossession; (c) any right to a trail by jury in the
event of summary proceedings to enforce the remedies set forth in this Article
XVII; (d) the benefit of any laws now or hereafter in force exempting property
from liability for rent or for debt; and (e) any other rights which might
otherwise limit or modify any of Lessor's rights or remedies under this Article
XVII.
17.7 Any payments received by Lessor under any of the provisions of this
Lease during the existence or continuance of any Event of Default (if such
payment is made to Lessor rather than Lessee due to the existence of an Event of
Default) shall be applied to Lessee's obligations in the order which Lessor may
determine.
ARTICLE XVIII
18. Lessor's Right to Cure Lessee's Default. If Lessee shall fail to make
any payment or perform any act required to be made or performed under this
Lease, Lessor, after notice to and demand upon Lessee, and without waiving or
releasing any obligation or Default, may (but shall be under no obligation to)
at any time thereafter make such payment or perform such act for the account and
at the expense of Lessee, and may, to the extent permitted by law, enter upon
any Leased Property for such purpose and take all such action thereon as, in
Lessor's opinion, may be necessary or appropriate therefor. No such entry shall
be deemed an eviction of Lessee. All sums so paid by Lessor and all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses, in each case, to the extent permitted by law) so incurred, together
with a late charge thereon at the Overdue Rate (or at the maximum rate permitted
by law, whichever is the lesser) from the date on which such sums or expenses
are paid or incurred by Lessor, shall be paid by Lessee to Lessor on demand.
ARTICLE XIX
19. Provisions Relating to Lessee's Acquisition of a Leased Property. In
the event Lessee purchases or otherwise acquires a Leased Property from Lessor
pursuant to any of the terms of this Lease, Lessor shall, upon receipt from
Lessee of the applicable purchase price or other consideration, together with
full payment of any unpaid Rent due and payable on or before the date of the
purchase, execute and deliver to Lessee, on the purchase date, an appropriate
special warranty deed conveying title to the affected Leased Property in its
then present condition to Lessee free and clear of any liens and encumbrances
that have been created by, through or under Lessor without consent of Lessee
other than (i) those that Lessee has agreed hereunder to pay or discharge; and
(ii) those mortgage liens, if any, which Lessee has agreed at that time in
writing to accept and to take title subject to (which will result in an
adjustment of the cash portion of the purchase price).
ARTICLE XX
20. Extension Terms. If no Event of Default shall have occurred and be
continuing, the Term of this Lease shall be automatically extended and renewed
for three (3) consecutive five-year optional renewal terms unless the Lessee
shall give notice to Lessor, at least one hundred eighty (180) days prior to the
end of the Primary Term or the then current Extension Term, of Lessee's desire
to terminate the Lease effective at the end of the Primary Term or then current
Extension Term. All of the terms and conditions of this Lease shall continue in
full force and effect during any extension (including Base Rent) except that the
number of Extension Terms permitted hereunder shall be reduced by one upon the
expiration of each successive Extension Term. If Lessee fails to timely notify
Lessor of its desire to terminate the Lease, the Lease shall be extended and
continued as aforesaid unless such timely notice is waived by Lessor in writing
in Lessor's sole discretion.
ARTICLE XXI
21. Holding Over. If Lessee shall for any reason remain in possession of a
Leased Property after the expiration or earlier termination of the Term as to
such Leased Property, such possession shall be as a tenancy at sufferance during
which time Base Rent for such Leased Property shall be Eleven and 141.1000
percent (11.141%) per annum of the Original Cost and Lessee shall continue to
pay all Percentage Rent and Additional Charges, and all other sums, if any,
payable by Lessee pursuant to the provisions of this Lease during the term
thereof with respect to such Leased Property, including Percentage Rent. During
such period of tenancy at sufferance, Lessee shall be obligated to perform and
observe all of the terms, covenants and conditions of this Lease, but shall have
no rights thereunder other than the right, to the extent given by law to tenants
at sufferance, to continue its occupancy and use of such Leased Property.
Nothing contained herein shall constitute the consent, express or implied, of
Lessor to the holding over of Lessee after the expiration or earlier termination
of this Lease and nothing contained herein shall be read or construed as
preventing Lessor from maintaining a suit for possession of any such Leased
Property.
ARTICLE XXII
[INTENTIONALLY LEFT BLANK]
ARTICLE XXIII
23. Special Cash Purchase of Properties by Lessee. In the event Lessee
wishes to terminate this Lease as to up to five (5) Uneconomic Properties per
year after December 31, 2007 but does not wish to utilize the substitution
procedure provided by Section 16(b), Lessee may give Lessor written notice of
such intention. Such notice shall be accompanied by an offer to purchase any of
up to five (5) Uneconomic Properties on a date (the "Termination Date")
specified by Lessee which is between ninety (90) and one hundred twenty (120)
days after such notice, for a cash purchase price equal to the greater of (i)
the Fair Market Value (as defined in Section 16(d) above) of each such
Uneconomic Property or (ii) the net book value of each such Uneconomic Property
as of the Termination Date, computed on the basis of the Original Cost of each
such Uneconomic Property less depreciation of all depreciable components on a
straight line basis using a forty (40) year useful life beginning on the date
such Uneconomic Property became subject to the terms of this Lease. If Lessor
does not accept Lessee's offer by a date which is thirty (30) days prior to the
Termination Date, this Lease shall terminate as to each such Uneconomic Property
on the Termination Date. If Lessor accepts Lessee's offer, such purchase shall
be consummated in accordance with all of the provisions of Article XVI (other
than the substitution provision contained in subparagraph (b) thereof) and this
Lease terminated as to each such Uneconomic Property, on the Termination Date.
Thereafter, Base Rent shall be proportionately reduced.
ARTICLE XXIV
24. Risk of Loss. During the Term of this Lease, the risk of loss of or
decrease in the enjoyment and beneficial use of the Leased Properties in
consequence of the damage or destruction thereof by fire, the elements,
casualties, thefts, riots, wars or otherwise is assumed by lessee, and Lessor
shall in no event be answerable or accountable therefor except in the case of
gross negligence, willful misconduct or breach of this Lease by Lessor resulting
in such damage or destruction. In addition, all risk of loss or decrease in
enjoyment and beneficial use in consequence of foreclosures, attachments, levies
or executions is assumed by Lessee.
ARTICLE XXV
25. Indemnification by Lessee. Lessee will protect, indemnify, save
harmless and defend Lessor from and against all liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses ), to the extent
permitted by law, imposed upon or incurred by or asserted against Lessor by
reason of (a) any accident, injury to or death of persons or loss of or damage
to property occurring on or about a Leased Property or adjoining sidewalks; (b)
any use, misuse, nonuse, condition, maintenance or repair of a Leased Property;
(c) any failure on the part of Lessee to perform or comply with any of the terms
of this Lease; (d) the alleged or actual existence of hazardous or toxic
materials on or about the Leased Properties; (e) the nonperformance of any of
the terms and provisions of any and all existing and future subleases of a
Leased Property to be performed by the sublessor thereunder; and (f) obligations
of Lessor under any and all documents evidencing any loan from a Lessor's
Mortgagee incurred by reason of Lessee's defaults under this Lease, including
without limitation any prepayment penalties. Any amounts which become payable by
Lessee under this Section shall be paid no later than ten (10) days after demand
by Lessor and, if such payment is to be made to Lessor and is not timely paid,
shall bear a late charge (to the extent permitted by law) at the lesser of the
Overdue Rate or the maximum rate permitted by law from the date of such
determination to the date of payment. Lessee, at its expense, shall contest,
resist and defend any such claim, action or proceeding asserted or instituted
against Lessor or may compromise or otherwise dispose of the same as Lessee sees
fit, provided any such contest shall be conducted by counsel who shall be
satisfactory to the Lessor. Nothing herein shall be construed as indemnifying
Lessor against its own grossly negligent acts or willful misconduct. Lessee's
liability under this Section shall survive any termination of this Lease as to
any circumstance, condition, act or omission occurring to and including the date
of termination of this Lease or existing as of the date of Termination, whether
known or unknown to Lessor or Lessee.
ARTICLE XXVI
26.1. Subletting and Assignment by Lessee. Lessee shall not sublet all or
any part of any Leased Property nor assign its interest under this Lease as to
any Leased Property without the prior written consent of Lessor except as
provided in the next sentence. Provided there shall exist no Default or Event of
Default hereunder, Lessee may, without the consent of Lessor, upon written
notice to Lessor, sublet all or any part of any Leased Property or assign its
interest under this Lease as to any Leased Property to any Affiliate of Lessee
(provided the Affiliate agrees in writing to be bound by the provisions of this
Lease) or a business organization into or with which Lessee may merge or with
which it may consolidate (provided the surviving business organization controls
all or substantially all of Lessee's restaurant operations) or to any business
organization which acquired all or substantially all of Lessee's restaurant
operations (provided that the acquiring entity shall expressly assume Lessee's
obligations under this Lease to the extent assigned). In the event of any
assignment or subletting, Lessee shall remain primarily liable under this Lease
as to the Leased Property or Properties so assigned or sublet, and the subtenant
or assignee shall be bound by all of the terms of this Lease applicable to such
Leased Property. No such sublease may have a term with respect to a Leased
Property which extends beyond the Term of this Lease as to such Property.
26.2. Attornment. Lessee shall insert in each sublease permitted under
Section 26.1 provisions to the effect that (a) such sublease is subject and
subordinate to all of the terms and provisions of this Lease and to the rights
of Lessor hereunder; (b) in the event this Lease shall terminate before the
expiration of such sublease, the sublease thereunder will, at Lessor's option,
attorn to Lessor and waive any right the sublessee may have to terminate the
sublease or to surrender possession thereunder, as a result of the termination
of this Lease; and (c) in the event the sublessee receives a written notice from
Lessor stating that Lessee is in Default under this Lease, the sublessee shall
thereafter be obligated to pay all rentals and other sums accruing under said
sublease directly to the party giving such notice, or as such party may direct.
26.3. Sublease Limitation. Anything contained in this Lease to the contrary
notwithstanding, Lessee shall not sublet any Leased Property on any basis such
that the rental to be paid by the sublessee thereunder would be based, in whole
or in part, on either (i) the income or profits derived by the business
activities of the sublessee, or (ii) any other formula such that any portion of
the sublease rental received by Lessor would fail to qualify as "rents from real
property" within the meaning of Section 856(d) of the Internal Revenue Code of
1986, as amended, or any similar or successor provision thereto.
26.4. Assignment by the Lessor. Lessor may assign its rights under this
Lease, in whole or in part in connection with a sale, mortgage or financing of
all or part of the Leased Properties, subject to Lessee's right of first refusal
under Article XXXV hereof.
ARTICLE XXVII
27. Estoppel Certificates and Financial Statements. At any time and from
time to time upon not less than twenty (20) days prior request by Lessor, Lessee
will furnish to Lessor an Officer's Certificate certifying that this Lease is
unmodified and in full force and effect (or that this Lease is in full force and
effect as modified and setting forth the modifications) and the dates to which
the Base Rent, Percentage Rent and all Additional Charges have been paid. Any
such certificate furnished pursuant to this Section may be relied upon by Lessor
and any prospective purchaser of a Leased Property.
Lessee will furnish to Lessor and Lessor's Mortgagee within one hundred and
twenty (120) days after the end of Lessee's fiscal year, Consolidated Financials
for the fiscal year accompanied by an audit opinion of the independent certified
public accountants then employed by Lessee. Lessee shall also furnish Lessor and
Lessor's Mortgagee with reasonable promptness, such other information,
consistent with the disclosure requirements of the federal securities law,
respecting the financial condition of Lessee as Lessor and Lessor's Mortgagee
may reasonably request from time to time, and Lessee consents to the use and
distribution of such other information in the financial reports and other
statements sent to Lessor's shareholders and filed by the Lessor with the
Securities and Exchange Commission.
ARTICLE XXVIII
28. Right to Inspect. Lessee shall permit Lessor and Lessor's Mortgagee and
their authorized representatives, to inspect the Leased Properties during usual
business hours upon reasonable notice, provided that such inspections shall not
unreasonably interfere with Lessee's business operations.
ARTICLE XXIX
29. No Waiver. No failure by Lessor or Lessee to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the extent permitted by law, no waiver
of any breach shall affect or alter this Lease, which shall continue in full
force and effect with respect to any other then existing or subsequent breach.
ARTICLE XXX
30. Acceptance of Surrender. No surrender to Lessor of this Lease or of any
or all of the Leased Properties or of any part of any thereof or of any interest
therein shall be valid or effective unless agreed to and accepted in writing by
Lessor and no act by Lessor or any representative of agent of Lessor, other than
such a written acceptance by Lessor, shall constitute an acceptance of any such
surrender.
ARTICLE XXXI
31. No Merger of Title. There shall be no merger of this Lease or of the
leasehold estate created hereby by reason of the fact that the same person,
firm, corporation or other entity may acquire, own or hold, directly or
indirectly (a) this Lease or the leasehold estate created hereby or any interest
in this Lease or such leasehold estate and (b) the fee estate in any of the
Leased Properties.
ARTICLE XXXII
32. Conveyance by Lessor. If Lessor or any successor owner of any of the
Leased Properties shall convey any of the Leased Properties other than as
security for a debt, Lessor or such successor owner, as the case may be, shall
thereupon be released from all future liabilities and obligations of the Lessor
under this Lease as to the affected Leased Properties and all such future
liabilities and obligations shall thereupon be binding upon the new owner.
ARTICLE XXXIII
33. Notices. All notices, demands, requests, consents, approvals and other
communications hereunder or as may be required by applicable law shall be in
writing and delivered personally or mailed (by registered or certified mail,
return receipt requested and postage prepaid), addressed to the respective
parties, as follows:
(a) if to Lessee:
Boddie-Noell Enterprises, Inc.
1021 Noell Lane
Rocky Mount, North Carolina 27802
Attention: Douglas E. Anderson or
W. Craig Worthy
(b) if to Lessor:
Boddie-Noell Properties, Inc.
3710 One First Union Center
Charlotte, North Carolina 27207
Attention: D. Scott Wilkerson or
Philip S. Payne
or to such other address as either party may hereafter designate, and shall be
effective upon receipt, if delivered personally, or upon the fifth Business Day
after mailing, if mailed. Lessee shall also send a copy of any notice required
to be sent to Lessor under this Lease to any Lessor's Mortgagee which has
notified Lessee of its status as Lessor's Mortgagee and provided Lessee with an
address to which to send such notices.
ARTICLE XXXIV
34.1 Appraisers. In the event that Lessee desires to terminate this Lease
with respect to an Uneconomic Property pursuant to the provisions of Article XVI
or Article XXIII, and the Fair Market Value of the Uneconomic Property is
required by such provisions to be determined by appraisal, Lessee shall include
in the notice of termination of this Lease as to the Uneconomic Property the
name of a person selected to act as appraiser on its behalf. Within ten (10)
days after such notice, Lessor shall by notice to lessee appoint a second person
as appraiser on its behalf. The appraisers thus appointed shall appoint a third
appraiser, and the three appraisers, each of whom must be a member of the
American Institute of Real Estate Appraisers (or any successor organization
thereto), shall proceed to appraise the Uneconomic Property to determine the
fair market value thereof as of the date of such original notice by Lessee;
provided, however, that
(a) if the second appraiser shall not have been appointed as aforesaid, the
first appraiser shall proceed to determine such matter; and
(b) if the two appraisers appointed by the parties shall be unable to
agree, within ten (10) days after the appointment of the second appraiser, upon
the selection of a third appraiser, they shall give notice of such failure to
agree to the parties, and if the parties fail to agree upon the selection of
such third appraiser within ten (10) days thereafter, then within five (5) days
thereafter either of the parties upon notice to the other party may request the
American Institute of Real estate Appraisers (or any successor organization
thereto), or in its absence, court appointment of such appraiser; Lessee and
Lessor hereby agree to use their best efforts to cause the third appraiser to be
appointed within thirty (30) days after the appointment of the second appraiser
if the first two appraisers are unable to agree upon such third appraiser.
34.2 Appraisal. The appraisers shall render their valuation appraisals
within thirty (30) days after the appointment of the third appraiser, or by the
sole appraiser within thirty (30) days after the expiration of the period
described in Section 34.1 for the appointment of a second appraiser, in the
event no second appraiser is so appointed. Such appraisals of fair market value
shall be in writing and shall be final and conclusive on the parties, and
counterpart copies thereof shall be delivered to each of the parties. The
appraisers shall determine fair market value of the Uneconomic Property on the
basis that such Property is free and clear of this Lease. Lessee shall pay the
fees and expenses incurred in connection with each appraisal.
ARTICLE XXXV
35. First Refusal to Purchase. Provided no Event of Default shall have
occurred and be continuing, Lessee shall have a right of first refusal to
purchase any of the Leased Properties during the Term of this Lease upon the
same terms and conditions as proposed in a bona fide written offer to Lessor, or
its successors and assigns, by a third party who does not qualify as an
Affiliate. If Lessor receives a bona fide offer from such a third party and
Lessor desires to accept said offer, Lessor shall promptly notify Lessee of the
proposed purchase price and all other material terms and conditions of such
offer, and Lessee shall have thirty (30) days after such notice from Lessor
within which time to elect to exercise Lessee's right to purchase. If Lessee
elects to exercise its right to purchase, then such transaction shall be
consummated within sixty (60) days after Lessee's notice to Lessor of such
election, in accordance with the terms and conditions of such offer. If Lessee
fails to exercise its right of first refusal within the time set forth above,
then Lessor shall have the right for a period of ninety (90) days to sell such
property to the prospective purchaser on the same terms as the offer. If such
sale is not completed within such ninety (90) day period, Lessee's right of
first refusal shall thereafter apply to such property. Notwithstanding anything
to the contrary herein, (a) such right of first refusal shall not apply to any
conveyance by mortgage or deed of trust executed by Lessor in favor of any
Lessor's Mortgagee, or to any foreclosure or deed in lieu of foreclosure
thereof, (b) any purchase pursuant to such right of first refusal shall be
subject to any such mortgage or deed of trust and shall not affect Lessee's
obligations under this Lease, and (c) all rights of first refusal shall be
deemed extinguished by foreclosure of, or acceptance of a deed in lieu of
foreclosure with respect to, any such mortgage or deed of trust, but all other
provisions of this Lease shall remain in full force and effect.
ARTICLE XXXVI
36. Miscellaneous. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and the liabilities of, the Lessee or
Lessor arising prior to any date of termination of this Lease shall survive such
termination. If any term or provision of this Lease of any application thereof
shall be invalid or unenforceable, the remainder of this Lease and any other
application of such term or provision shall not be affected thereby. In the
event that Lessor or Lessee shall initiate any legal proceeding or suit against
the other relating to this Lease, including any default thereunder, the
unsuccessful party in such proceeding or suit shall reimburse the successful
party for the reasonable fees and expenses of the successful party's attorneys.
Neither this Lease nor any provision hereof may be changed, waived, discharged
or terminated except by an instrument in writing and in recordable form signed
by Lessor and Lessee. Any such change, waiver, discharge or termination, to be
effective against Lessor, must be approved by a majority of the Independent
Directors, as defined in Lessor's certificate of incorporation. All the terms
and provisions of this Lease shall inure to the benefit of the parties hereto
and their respective successors and assigns. The headings in this Lease are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Lease shall be governed by and construed in accordance with
the laws of the State of North Carolina.
ARTICLE XXXVII
37. Memorandum of Lease. This Lease shall not be recorded, but Lessor and
Lessee shall, promptly upon the request of either or Lessor's Mortgagee, enter
into a short form memorandum of this Lease, in form suitable for recording under
the laws of the states in which the Leased Properties are located, in which
reference to this Lease shall be made.
IN WITNESS WHEREOF, the parties have caused this Lease to be executed and
their respective corporate seals to be hereunto affixed and attested by their
respective officers thereunto duly authorized.
LESSOR:
BODDIE-NOELL PROPERTIES, INC.
ATTEST: ____/s/ D. Scott Wilkerson___
By: D. Scott Wilkerson
___/s/ Philip S. Payne___ President
Philip S. Payne
_Asst._Secretary
[Corporate Seal]
LESSEE:
BODDIE-NOELL ENTERPRISES, INC.
ATTEST: ____/s/ Ben Mayo Boddie_______
By:
__/s/ Douglas E. Anderson__ _________President
By:
_____ Secretary
[Corporate Seal]
Exhibit 10.2 - Loan Agreement
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made as of the _27th_ day of
December, 1995, by and between BODDIE-NOELL PROPERTIES, INC., a Delaware
corporation (the "Borrower") and SOUTHTRUST BANK OF ALABAMA, NATIONAL
ASSOCIATION, a national banking association, its successors and assigns (the
"Lender").
R E C I T A L S:
Borrower has requested that the Lender make a loan to the Borrower in the
principal sum of up to $25,500,000. Lender has agreed to make such loan on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, it is hereby agreed as follows:
ARTICLE I.
DEFINITIONS, ACCOUNTING PRINCIPLES, UCC TERMS.
1.1. As used in this Agreement, the following terms shall have the
following meanings unless the context hereof shall otherwise indicate:
"Affiliate" shall mean Boddie-Noell Properties, Inc., any subsidiary of
Boddie-Noell Properties, Inc. or any entity of which Boddie-Noell Properties,
Inc. is a subsidiary (or any of them), collectively a "BNP Entity," or any
entity which a BNP Entity controls or any entity which controls a BNP Entity;
provided, however, "Affiliate" shall in no event include the Lessee under the
Lease Agreement regardless of the degree of ownership or control. For purposes
hereof, the term "controlled" shall mean that the BNP Entity directly or acting
through entities in which they own a substantial equity interest, has the power
to acquire, dispose, operate and manage the assets of said entity even though
the exercise of such powers may be subject to the approval or consent of third
parties.
"Adjusted Leverage" shall mean all Indebtedness (other than subordinated
shareholder indebtedness) divided by total assets, valued at their historical
cost, without depreciation or amortization.
"Applicable Environmental Law" shall mean any applicable federal, state or
local laws, rules or regulations pertaining to health or the environment, or
petroleum products, or radon radiation, or oil or hazardous substances,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA") and the Federal
Emergency Planning and Community Right-To-Know Act of 1986, as amended. The
terms "hazardous substance" and "release" shall have the meanings specified in
CERCLA, and the terms "solid waste," disposal," "dispose," and "disposed" shall
have the meanings specified in RCRA, except that if such acts are amended to
broaden the meanings thereof, the broader meaning shall apply herein
prospectively from and after the date of such amendments; notwithstanding the
foregoing, provided, to the extent that the laws of the States of Virginia and
North Carolina establish a meaning for "hazardous substance" or "release" which
is broader than that specified in CERCLA, as CERCLA may be amended from time to
time, or a meaning for "solid waste," "disposal," and "disposed" which is
broader than specified in RCRA, as RCRA may be amended from time to time, such
broader meanings under said state law shall apply in all matters relating to the
laws of such State.
"Applicable Rate" shall mean eight percent (8%) per annum.
"Assignment" shall mean the Assignment of Rents and Leases of even date
herewith from Borrower to Lender.
"Business Day" shall mean a day, other than Saturday or Sunday and legal
holidays, when the Lender is open for business.
"Closing Date" shall mean the date on which all or any part of the Loan is
disbursed by the Lender to or for the benefit of the Borrower.
"Collateral" shall mean, collectively, the Properties, Improvements,
Equipment and Rents, and all Proceeds, all whether now owned or hereafter
acquired, and including replacements, additions, accessions, substitutions, and
products, and all other property which is or hereafter may become subject to a
Lien in favor of Lender as security for any of the Loan Obligations.
"Commitment Letter" shall mean the commitment letter issued by Lender to
Borrower dated October 19, 1995, as amended by letter from Lender to Borrower
dated December 6, 1995.
"Debt Service Coverage" shall mean a ratio in which the first number is the
sum of Borrower's earnings before interest, taxes, depreciation, amortization
and debt service, less interest on other Indebtedness of Borrower or
Indebtedness included pursuant to Section 5.5 hereof (but in any event excluding
subordinate shareholder indebtedness), calculated based upon the preceding
twelve (12) months, and the second number is $2,361,758, except that if the Loan
is prepaid in part, then the second number shall be equal to twelve (12) months
estimated level monthly principal and interest amortization payments for a Loan
amount equal to (a) $25,500,000 less (b) principal repayments, amortized at 8%
per annum over an assumed term of 300 months less the number of months which
have passed from the date of this Agreement to the date of such calculation.
"Default" shall mean the occurrence or existence of any event which, but
for the giving of notice or expiration of time or both, would constitute an
Event of Default.
"Default Rate" shall mean a per annum rate equal to two percentage points
(2%) in excess of the Applicable Rate then accruing on the outstanding principal
balance of the Loan.
"Equipment" shall mean, to the extent owned by Borrower, all fixtures and
equipment now or hereafter located on, attached to or used or useful in
connection with any Property or Improvements, and shall include but shall not be
limited to, any interest in such fixtures or equipment now or hereafter acquired
as a result of any landlord's liens and any reversionary rights as landlord upon
termination of the Lease Agreement.
"Event of Default" shall mean any "Event of Default" as hereinafter
defined.
"Exhibit" shall mean an Exhibit to this Agreement, unless the context
refers to another document, and each such Exhibit shall be deemed a part of this
Agreement to the same extent as if it were set forth in its entirety wherever
reference is made thereto.
"Facility" shall mean each restaurant facility now or hereafter operating
at a Property.
"GAAP" shall mean, as in effect from time to time, generally accepted
accounting principles consistently applied as promulgated by the American
Institute of Certified Public Accountants.
"Improvements" shall mean the Facilities and all other buildings,
structures and improvements of every nature whatsoever now or hereafter situated
on a Property, including, but not limited to, all gas and electric fixtures,
radiators, heaters, engines and machinery, boilers, ranges, elevators and
motors, plumbing and heating fixtures, air conditioning equipment, carpeting and
other floor coverings, water heaters, awnings and storm sashes, cleaning
apparatus, signs, landscaping, and parking areas, which are or shall be attached
to a Property or said buildings, structures or improvements, to the extent such
attachments are owned by Borrower.
"Indebtedness" shall mean the maximum amount which may be disbursed under
the Loan ($25,500,000) reduced by any prepayments made as of the date of
calculation, plus (as to obligations other than the Loan) any other (i)
obligations of Borrower for borrowed money (including guaranteed obligations),
(ii) obligations of Borrower representing the deferred purchase price of
property other than accounts payable arising in connection with the purchase of
inventory customary in the trade, (iii) obligations, whether or not assumed,
secured by Liens or payable out of the proceeds or production from property now
or hereafter owned or acquired by Borrower, and (iv) the amount of any other
obligation (including obligations under financing leases) which would be shown
as a liability on a balance sheet of Borrower prepared in accordance with GAAP.
"Indemnity Agreement" shall mean that certain Indemnity Agreement of even
date herewith from the Borrower.
"Lease Agreement" shall mean that certain Amended and Restated Master Lease
Agreement dated December 21, 1995 pursuant to which Borrower leases to Lessee
the Properties and Facilities (and any amendments and replacements hereafter
approved in writing by Lender in its sole discretion).
"Lessee" shall mean Boddie-Noell Enterprises, Inc., a North Carolina
corporation (or any replacement lessee pursuant to the Lease Agreement hereafter
approved in writing by Lender in its sole discretion).
"Lien" shall mean any voluntary or involuntary mortgage, security deed,
deed of trust, deed to secure debt, lien, pledge, assignment, security interest,
title retention agreement, financing lease, levy, execution, seizure, judgment,
attachment, garnishment, charge, lien or other encumbrance of any kind,
including those contemplated by or permitted in this Agreement and the other
Loan Documents.
"Loan" shall mean the loan in the principal sum of up to $25,500,000 in
aggregate advances (without regard to repayments) to be made by Lender to the
Borrower pursuant to this Agreement.
"Loan Documents" shall mean, collectively, this Agreement, the Note, the
Assignments, the Mortgages, the SANDA, and the Indemnity Agreement, together
with any and all other documents executed by Borrower or others, evidencing,
securing, or otherwise relating to the Loan.
"Loan Obligations" shall mean the aggregate of all principal and interest
owing from time to time under the Note and all expenses, charges and other
amounts from time to time owing under the Note, this Agreement, or the other
Loan Documents and all covenants, agreements and other obligations from time to
time owing to, or for the benefit of, Lender pursuant to the Loan Documents.
"Loan Term" shall mean the period from the date hereof to the Maturity
Date.
"Maturity Date" shall mean December 27, 1998.
"Mortgages" shall mean those certain Deeds of Trust and Security Agreements
of even date herewith from Borrower in favor of or for the benefit of Lender and
encumbering the Collateral.
"Note" shall mean the Promissory Note of even date herewith in the
principal amount of the Loan payable by Borrower to the order of Lender.
"Person" shall mean any person, firm, corporation, partnership, limited
liability company, trust or other entity.
"Proceeds" shall mean all proceeds (whether cash or non-cash, moveable or
immoveable, tangible or intangible), including proceeds of insurance and
condemnation, from the sale, exchange, transfer, collection, loss, damage,
disposition, substitution or replacement of any of the Collateral.
"Property" shall mean each of the parcels of real estate in Virginia and
North Carolina which are more particularly described in Exhibit A hereto.
"Rents" shall mean all rent and other payments of whatever nature from time
to time payable pursuant to any lease of any Property or Improvements, or any
part thereof, including, but not limited to, the Lease Agreement.
"SANDA" shall mean the Subordination, Attornment and Nondisturbance
Agreement of even date herewith among Borrower, Lender and Lessee.
"Title Company" shall mean Lawyers Title Insurance Corporation.
1.2. Singular terms shall include the plural forms and vice versa, as
applicable, of the terms defined.
1.3. Terms contained in this Agreement shall, unless otherwise defined
herein or unless the context otherwise indicates, have the meanings, if any,
assigned to them by Uniform Commercial Code in effect in the state in which
Collateral for the Loan Obligations is located.
1.4. All accounting terms used in this Agreement shall be construed in
accordance with GAAP, except as otherwise defined.
1.5. All references to other documents or instruments shall be deemed to
refer to such documents or instruments as they may hereafter be extended,
renewed, modified, or amended and all replacements and substitutions therefor.
ARTICLE II
TERMS OF THE LOAN
2.1. The Loan. Borrower has agreed to borrow from Lender, and Lender has
agreed to make the Loan to Borrower, subject to Borrower's compliance with and
observance of the terms, conditions, covenants, and provisions of this Agreement
and the other Loan Documents, and the Borrower has made the covenants,
representations, and warranties herein and therein as a material inducement to
Lender to make the Loan.
2.2. Security for the Loan. The Loan will be evidenced and secured by the
Loan Documents.
2.3. Interest Rate.
(a) The outstanding principal balance of the Loan will bear interest at the
Applicable Rate pursuant to the Note.
(b) All interest on the outstanding principal balance of the Loan shall be
calculated on the basis of a 360-day year by multiplying the outstanding
principal amount by the applicable per annum rate, multiplying the product
thereof by the actual number of days elapsed, and dividing the product so
obtained by 360.
2.4. Repayment of Loan. Each payment of the Loan Obligations shall be paid
directly to the Lender in lawful money of the United States of America at the
following address:
SouthTrust Bank of Alabama,
National Association
P.O. Box 2554 (35290)
420 North 20th Street
Eleventh Floor - Commercial Real Estate Loan Department
Birmingham, Alabama 35203
or such other place as the Lender shall designate in writing to the Borrower.
Each such payment shall be paid in immediately available funds by 2:00 p.m.
Birmingham, Alabama, time on the date such payment is due, except if such date
is not a Business Day such payment shall then be due on the first Business Day
after such date, but interest shall continue to accrue until the date payment is
received. Any payment received after 2:00 p.m. Birmingham, Alabama, time shall
be deemed to have been received on the immediately following Business Day for
all purposes, including, without limitation, the accrual of interest on
principal.
2.5. Prepayment.
(a) The principal balance of the Loan may be prepaid, in whole or in part,
at any time upon thirty (30) days prior written notice to the Lender specifying
the date of such prepayment, and upon payment of a prepayment premium (if any)
set forth in the Note to be prepaid in order to compensate Lender for its forced
reinvestment of Loan proceeds at then-market yields. Notwithstanding the
foregoing, no prepayment premium shall be due if and to the extent that (1) such
prepayment is made from proceeds of condemnation or insurance from a casualty
loss with respect to any Collateral and such prepayment is required by the
provisions of this Agreement, or (2) such prepayment together with all prior
prepayments in the aggregate is not in the excess of the principal sum of
$6,375,000 (excluding prepayments from proceeds of condemnation or casualty).
(b) If an Event of Default occurs and the Loan is declared to be
immediately due and payable, there shall be added to the principal balance then
due an amount equal to the prepayment premium which would then be applicable to
any voluntary prepayment.
(c) All prepayments will be applied to installments coming due hereunder in
their inverse order of maturity. Borrower shall not be entitled to reborrow any
amounts so prepaid.
(d) No prepayment premium shall be due for prepayments made from and after
September 27, 1998.
2.6. Late Charges On Overdue Installments; Default Rate; Collection Costs.
(a) If any scheduled payment of principal or interest, or any other agreed
charge, is not made on or before the fifteenth (15th) day after the same became
due, Borrower agrees to pay to Lender a late charge equal to four percent (4%)
of the amount of the payment or charge which is in default.
(b) Upon the occurrence of any Event of Default, Borrower agrees to pay
interest to Lender at the Default Rate on the aggregate outstanding Loan
Obligations (including accrued interest), which Default Rate will continue, if
the maturity of the outstanding principal indebtedness has been accelerated,
until such outstanding principal indebtedness, with interest, is paid in full or
such acceleration has been rescinded; otherwise such Default Rate shall continue
until such Event of Default is cured or waived in writing by Holder; and
thereafter interest shall again accrue at the Applicable Rate.
(c) Borrower will also pay to Lender, in addition to the amount due, all
reasonable costs of collecting, securing, or attempting to collect or secure the
Note, including, without limitation, court costs and reasonable attorneys' fees,
including, without limitation, reasonable attorneys' fees for preparation of
litigation and in any appellate and bankruptcy proceedings.
2.7. Usury Provisions. In no event shall the amount of interest due or
payable hereunder or pursuant to any of the Loan Documents exceed the maximum
rate of interest allowed by applicable law, and in the event any such payment is
inadvertently paid by Borrower or inadvertently received by Lender, then such
excess sum shall be credited as a payment of principal. It is the express intent
hereof that Borrower not pay and Lender not receive, directly or indirectly,
interest in excess of that which may be legally paid by Borrower under
applicable law.
2.8. Miscellaneous. With respect to the amounts due under the Note,
Borrower waives the following to the fullest extent permitted by law:
(a) All rights of exemption of property from levy or sale under execution
or other process for the collection of debts under the Constitution or laws of
the United States or any state thereof; and
(b) Demand, presentment, protest, notice of dishonor, notice of
non-payment, diligence in collection, and all other requirements necessary to
enforce the Note; and
(c) Any further receipt by Lender or acknowledgment by Lender of any
Collateral now or hereafter deposited with Lender as security for the Loan.
2.9. Fee. Borrower will pay to Lender a fee of $127,500, which fee is due
and deemed earned as of the date of this Agreement.
2.10. Disbursement Procedure. Subject to compliance with all of the
provisions of this Agreement, and subject to the terms of this Agreement, the
Loan shall be disbursed to the Borrower in one or more advances, upon Borrower's
written request and subject to the terms and conditions of this Agreement.
Borrower will request any advance of the Loan in writing, which request must be
received by Lender (a) as to the initial advance, on or before the Closing Date,
and (b) as to any subsequent advance, on or before five (5) Business Days prior
to the date of the requested advance. Lender may make one or more advances to
Borrower upon written or oral disbursement requests not in specific compliance
with the requirements of this Section or other provisions of this Agreement, and
such advances will nevertheless be deemed to be advances to Borrower hereunder,
but will not constitute a waiver by Lender of its right to impose such
provisions, limitations and conditions as a prerequisite to any subsequent
advance to Borrower.
2.11. Direct Advances. Regardless of whether Borrower has submitted a
requisition therefor and whether or not an Event of Default exists, Lender may
from time to time advance amounts which become due for costs of insurance, title
insurance, fees and expenses of Lender's legal counsel and amounts due Lender
for payments of principal, interest and fees and other amounts due to Lender in
connection with the Loan. All such advances shall be deemed advances to Borrower
hereunder and shall be secured by the Loan Documents to the same extent as if
they were made directly to Borrower.
2.12. Representations and Warranties Regarding Submission of Request for
Loan Advance. Each submission by Borrower to Lender of a requisition for an
advance of the Loan shall constitute Borrower's representation and warranty to
Lender that (a) all representations and warranties set forth in this Agreement
and the other Loan Documents are true and correct as of the date of Borrower's
request, (b) all conditions for such advance as contained in this Agreement have
been satisfied as of such date, and (c) no Default or Event of Default exists as
of such date; except in each such case as expressly disclosed by Borrower to
Lender in writing with such request.
2.13. Advances. Lender's obligation to make the Loan or any advance thereof
shall be effective only upon fulfillment of the following conditions:
(a) Receipt and approval by Lender of all items required to be provided to
Lender under the terms of the Commitment Letter.
(b) Payment by Borrower of all fees and expenses then due as required by
this Agreement and the Commitment Letter.
(c) Execution, delivery and, when appropriate, recording or filing, of this
Agreement, the Note, the Mortgages and all other documents required by this
Agreement, all in form and content satisfactory to Lender.
(d) Issuance of the title insurance policy contemplated by the Commitment
Letter in form and content satisfactory to Lender, which policy shall insure the
Mortgages as first-priority liens as to all advances (up to an aggregate of
$25,500,000 in total advances).
In the event Lender, at its option, elects to make one or more advances
prior to receipt and approval of all items required by this Article, such
election shall not obligate Lender to make any subsequent advance.
ARTICLE III.
BORROWER'S REPRESENTATIONS AND WARRANTIES.
To induce Lender to enter into this Agreement, and to make the Loan to the
Borrower, the Borrower represents and warrants to Lender as follows:
3.1. Existence, Power and Qualification. Borrower is a corporation duly
organized and validly existing under the laws of the State of Delaware, has the
power to own its properties and to carry on its business as is now being
conducted, and is duly qualified to do business and is in good standing in every
jurisdiction in which the character of the properties owned by it or in which
the transaction of its business makes its qualification necessary.
3.2. Power and Authority. Borrower has full power and authority to borrow
hereunder and to incur the obligations provided for herein and in each of the
other Loan Documents, all of which have been authorized by all proper and
necessary action of its shareholders.
3.3. Due Execution and Enforcement. Each of the Loan Documents constitutes
a valid and legally binding obligation of the Borrower and does not violate,
conflict with, or constitute any default under any law, government regulation,
decree, judgment, the Borrower's articles incorporation or by-laws or any other
agreement or instrument binding upon the Borrower.
3.4. Pending Matters. No action or investigation is pending or threatened
before or by any state of federal court or administrative agency which might
result in any material adverse change in the financial condition, operations or
prospects of the Borrower. Borrower, to the best of its actual knowledge, is not
in violation of any agreement, the violation of which might reasonably be
expected to have a materially adverse effect on its business or assets, and
Borrower, to the best of its actual knowledge, is not in violation of any order,
judgment, or decree of any state or federal court, or any statute or
governmental regulation to which it is subject.
3.5. Financial Statements Accurate. All financial statements of Borrower
heretofore provided by the Borrower are true, correct and complete in all
material respects as of their respective dates and fairly present the financial
condition of the Borrower, and there are no liabilities, direct or indirect,
fixed or contingent, as of the respective dates of such statements which are not
reflected therein or in the notes thereto. The financial statements of the
Borrower have been prepared in accordance with GAAP. There has been no material
adverse change in the financial condition, operations, or prospects of the
Borrower since the dates of such statements.
3.6. Payment of Taxes. The Borrower has filed all federal, state, and local
tax returns which are required to be filed and has paid, or made adequate
provision for the payment of, all taxes which have or may become due pursuant to
such returns or to assessments received by Borrower.
3.7. Title to Collateral. The Borrower has good and marketable title to all
of the Collateral, subject to no Lien except those Liens specifically permitted
by this Agreement.
3.8. Priority of Mortgages. The Mortgages constitute first liens upon and
security interests in the real and personal property described therein, prior to
all other Liens, including those which may hereafter accrue, excepting only
those Liens specifically permitted by this Agreement or those "Permitted
Encumbrances" specifically set forth in the Mortgages.
3.9. Location of Chief Executive Offices. The location of Borrower's
principal place of business and chief executive office are as set forth on
Exhibit B hereto.
3.10. Disclosure. All information furnished or to be furnished by Borrower
to the Lender in connection with the Loan or any of the Loan Documents, is, or
will be at the time the same is furnished, accurate and correct in all material
respects and complete insofar as completeness may be necessary to provide the
Lender a true and accurate knowledge of the subject matter.
3.11. Trade Names. Borrower has not changed its name or been known by any
other name within the last five (5) years, except for Boddie-Noell Restaurant
Properties and BT Venture Corp.
3.12. ERISA. To the best of Borrower's actual knowledge, the Borrower is in
compliance with all applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
3.13. Proceedings Pending. To the best of Borrower's actual knowledge,
there are no proceedings pending, or, to the best of the Borrower's actual
knowledge, threatened, to acquire any power of condemnation or eminent domain
with respect to any Property or any Improvements, or to enjoin or similarly
prevent or restrict the operation of any Facility in any manner.
3.14. Compliance With Applicable Laws. To the best of Borrower's actual
knowledge, the Improvements and the Properties comply in all material respects
with covenants and restrictions of record and applicable laws, ordinances, rules
and regulations, including, without limitation, the Americans with Disabilities
Act and regulations thereunder, and all laws, ordinances, rules and regulations
relating to zoning, setback requirements and building codes.
3.15. Environmental Matters. To the best of Borrower's actual knowledge,
without independent investigation except for the environmental screenings
prepared by Resolve Environmental which have been furnished to Lender prior to
the date of this Agreement, (a) neither any Improvements, any Property, the
Lessee, nor the Borrower is in violation of or subject to any existing, pending,
or threatened investigation or inquiry by any governmental authority or any
response costs or remedial obligations under any Applicable Environmental Law,
and this representation and warranty would continue to be true and correct
following disclosure to the applicable governmental authorities of all relevant
facts, conditions and circumstances, if any, pertaining to the Improvements, the
Properties, the Lessee, or the Borrower; (b) neither Borrower nor Lessee has
obtained or is required to obtain, any permits, licenses or similar
authorizations to construct, occupy, operate or use any Improvements or
Equipment at any Property by reason of any Applicable Environmental Law; (c) no
petroleum products, oil, or hazardous substances or solid wastes have been
disposed of or otherwise released on or are otherwise located on any Property;
(d) no PCB-containing or PCB-contaminated transformers or other equipment are
located at a Property; and (e) the use of the Properties and Improvements in the
ordinary course of previous operations and as the same is hereafter intended to
be operated will not result in the location on or disposal or other release of
any petroleum products, oil, or hazardous substances or solid wastes on or to
any Property. Borrower has entered into the Indemnity Agreement with Lender, and
Borrower agrees to perform its obligations thereunder.
3.17. Solvency. Borrower represents and warrants that it is solvent within
the meaning of 11 U.S.C. ss. 548 and GAAP, and the borrowing of the Loan will
not render the Borrower insolvent within the meaning of 11 U.S.C. ss. 548 and
GAAP.
3.18. Roads and Utilities. To the best of Borrower's actual knowledge, each
Facility is served by public utilities, including water and sanitary sewage, all
in capacities necessary for the intended use of such Facilities, and dedicated
and publicly maintained roads necessary for the full use of each of the
Facilities for their intended purposes have been completed to the boundary of
each Property; and each Property and the Improvements thereat are in existence
pursuant to final, unconditional certificates of occupancy and there are no
offsite roads, sewage systems, water systems or other improvements which must be
completed for continued occupancy or use of the Improvements.
3.19. Lease Agreement. The Lease Agreement is in full force and effect, is
free from default, offset or defense, has not been modified, altered or amended
(except as described in the definition thereof) and constitutes the complete
agreement of the parties with respect to leasing of the Properties and
Improvements; all Properties and Improvements existing as of the date hereof are
owned by Borrower and are leased to Lessee pursuant to the Lease Agreement, and
there are no other properties subject to the Lease Agreement; all Properties and
Improvements are utilized for operation of Hardee's Restaurants pursuant to
valid and enforceable franchise agreements; the Lease Agreement provides for a
fixed minimum rent of not less than $4,500,000 per annum, payable in monthly
increments; the Lease Agreement provides for percentage rents of 9.875% of
aggregate annual net sales to the extent such percentage of aggregate annual net
sales exceeds the fixed annual minimum rent; no rentals thereunder have been
prepaid further in advance than one (1) month; the Lease Agreement is
noncancellable; all of Borrower's obligations as Landlord under the Lease
Agreement have been fully performed; the Lease Agreement has a term presently
ending December 31, 2007; all fixed minimum rent and other payments to Borrower
pursuant to the Lease Agreement are fully net to Borrower, and Lessee has agreed
in the Lease Agreement to pay all taxes, insurance, and utilities with respect
to the Properties and Improvements; and the Lease Agreement has not been
modified or amended (except as so described in the definition thereof) and
together with the subordination, attornment, and nondisturbance agreement with
Lender is the full and complete agreement of the parties with respect to the
Properties and Improvements.
ARTICLE IV.
AFFIRMATIVE COVENANTS OF THE BORROWER.
Borrower agrees with and covenants unto the Lender that until the Loan
Obligations have been paid in full, the Borrower shall:
4.1. Payment of Loan/Performance of Loan Obligations. Duly and punctually
pay or cause to be paid the principal and interest of the Note in accordance
with its terms and duly and punctually pay and perform or cause to be paid or
performed all Loan Obligations hereunder and under the other Loan Documents.
4.2. Maintenance of Existence. Maintain its existence, and, in each
jurisdiction in which the character of the property owned by it or in which the
transaction of their respective businesses makes qualification necessary,
maintain qualification and good standing.
4.3. Accrual and Payment of Taxes. During each fiscal year, accrue all
current tax liabilities of all kinds (including, without limitation, federal and
state income taxes, franchise taxes, and payroll taxes, all required withholding
of income taxes of employees, all required old age and unemployment
contributions, and all required payments to employee benefit plans), and pay the
same prior to becoming delinquent.
4.4 Insurance. At all times while Borrower is indebted to Lender, maintain
or cause the Lessee to maintain, for the benefit of Borrower, Lender and Lessee
the following insurance:
(a) Liability insurance in an amount equal to at least $1,000,000 per
occurrence, with a $10,000,000 umbrella policy. All such liability insurance
shall be written on an occurrence basis;
(b) "All-risk" broad form coverage on all Improvements and Equipment in an
amount not less than the replacement cost thereof, with endorsements insuring
against such potential causes of loss as shall be required by Lender, including,
but not limited to, loss or damage from (i) subsidence and windstorm, and (ii)
flood, unless evidence satisfactory to Lender is provided that no part of any of
the Facilities is located in an area which is designated as a flood hazard area;
(c) Workers' compensation insurance as required by the laws of the state in
which the Borrower maintains its places of business.
Each of the policies described in 4.4(b) shall name Lender as mortgagee and
loss payee under a standard non-contributory mortgagee and lender loss payable
clause, and shall provide that Lender shall receive not less than thirty (30)
days written notice prior to cancellation. The proceeds of the policies
described in 4.4(b) shall be payable to Lender, and shall be delivered to and
held by Lender, and such proceeds (after deducting Lender's costs and expenses
of obtaining such proceeds) shall be applied by Lender, at Lender's sole option,
either (i) to the full or partial payment or prepayment of the Loan Obligations
(without premium), or (ii) to the repair and/or restoration of the Improvements
and Equipment damaged or taken, or (iii) to the Borrower and/or Lessee, all
without effecting the lien of the Mortgages for the unpaid amount of the Loan
Obligations.
Borrower appoints Lender as Borrower's attorney-in-fact to cause the
issuance of or an endorsement of any policy to bring Borrower into compliance
herewith and, at Lender's sole option, to make any claim for, receive payment
for, and execute and endorse any documents, checks or other instruments in
payment for loss, theft, or damage covered under any such insurance policy;
however, in no event will Lender be liable for failure to collect any amounts
payable under any insurance policy.
4.5. Financial and Other Information. Provide Lender with the following
financial statements and information on a continuing basis:
(a) Within ninety (90) days after the end of each of its fiscal years,
audited financial statements of the Borrower prepared by a nationally recognized
certified public accounting firm or other independent certified public
accounting firm acceptable to the Lender, prepared in accordance with GAAP, and
which shall include all liabilities whether fixed or contingent.
(b) Within forty-five (45) days after the end of each fiscal year quarter,
unaudited financial statements of the Borrower for the quarter then ended,
prepared on a basis consistent with and containing the same information as set
forth in the quarterly financial statements heretofore provided by Borrower to
Lender, and certified by an authorized officer of Borrower to be true and
correct.
The Lender reserves the right to require such other financial information
(including tax returns, detailed cash flow information and contingent liability
information) of Borrower and of any affiliate of the Borrower, all at such times
as Lender shall deem reasonably necessary, and Borrower agrees promptly to
provide such information to Lender. Upon Lender's request, Borrower agrees to
request and provide to Lender such financial and other information regarding
Lessee which Borrower may be entitled to receive under the terms of the Lease
Agreement. All financial statements must be in the form and detail as the Lender
shall from time to time request.
4.6. Books and Records. Permit, and require Lessee to permit, Persons
designated by Lender to inspect the Properties and Improvements and books and
records of the Borrower and the Lessee (to the extent the Lease Agreement
permits inspection by Borrower of Lessee's records) and to discuss the affairs
of the Borrower with the officers of Borrower and employees of Borrower, as
designated by Lender, all at such times as Lender shall reasonably request.
4.7. Payment of Indebtedness. Duly and punctually pay or cause to be paid
all other Indebtedness now owing or hereafter incurred by the Borrower in
accordance with the terms of such Indebtedness, except such Indebtedness owing
to those other than Lender which is being contested in good faith and with
respect to which any execution against properties of the Borrower has been
effectively stayed and for which reserves adequate for payment have been
established.
4.8. Records of Accounts. Maintain all records, including records
pertaining to the Lease Agreement and Rents, at the chief executive office of
Borrower as set forth in this Agreement.
4.9. Notice of Loss. Immediately notify the Lender of any event causing a
loss or depreciation in value of the Borrower's assets in excess of $100,000 and
the amount of such loss or depreciation, except Borrower shall not be required
to notify Lender of depreciation in real and personal property resulting from
ordinary use thereof.
4.10. Tax Service Fee and Escrows. Upon Lender's written request pay Lender
a tax service fee not to exceed $500 per Property for retaining a firm to
monitor and report payment of property taxes with respect to each Property and
the Improvements located thereat, and fund to Lender such escrows for taxes in
the manner and to the extent required in the Mortgages; provided, however, so
long as Borrower timely pays prior to delinquency all property taxes with
respect to the Collateral and provides to Lender within sixty (60) days of the
end of each calendar year a certificate setting forth an itemization of all such
taxes and confirming that such taxes have been paid and provides paid tax
receipts therefor, Lender agrees that it will not require payment of a tax
service fee or establishment of an escrow for taxes.
4.11. Debt Service Coverage Requirements. Achieve and within forty-five
(45) days of the end of each fiscal quarter provide evidence to Lender of the
achievement of a Debt Service Coverage of 2.0 (or greater) to 1.0 as of the end
of each such quarter (based on a twelve-month period ending with such quarter).
4.12. Net Worth. Maintain a minimum net worth at all times during calendar
year 1995 of not less than $25,088,000; during calendar year 1996 of not less
than $22,806,000; during calendar year 1997 of not less than $20,479,000; and
during calendar year 1998 of not less than $18,105,000; and with each submission
of financial statements required in this Agreement provide evidence to Lender of
the net worth of Borrower and the satisfaction of this requirement.
4.13. Lease Agreement. Maintain the Lease Agreement in full force and
effect and timely perform all of Borrower's obligations thereunder and enforce
performance of all obligations of the Lessee thereunder (except that Borrower
will take no action to terminate the Lease Agreement or dispossess Lessee from
any Property or Improvements without Lender's prior written consent); notify
Lender promptly of any default by Lessee or breach of any covenant,
representation or warranty of Lessee under the Lease Agreement and take such
action with respect to such default or breach as Lender may request, provided
such requested action is permitted by the Lease Agreement; not waive any right,
remedy or claim of Borrower as landlord under the Lease Agreement or any breach,
default or obligation of Lessee under the Lease Agreement; not permit the
termination or amendment of the Lease Agreement unless the prior written consent
of Lender is first obtained; and not permit the release of any Property or any
Improvements from the Lease Agreement except as expressly permitted in this
Agreement or the addition of any property to the Lease Agreement. Borrower will
enter into and cause Lessee to enter into a subordination, attornment and
nondisturbance agreement relating to the Lease Agreement and in form
satisfactory to Lender, and will cause Lessee to provide Lender from time to
time an estoppel letter in form satisfactory to Lender.
4.14. Updated Appraisals. For so long as the Loan remains outstanding,
Lender may cause the Properties and Improvements and the Lease Agreement to be
reappraised by an appraiser selected by Lender, and in accordance with Lender's
appraisal guidelines and procedures then in effect, and Borrower agrees to
cooperate in all respects with such appraisals and furnish to the appraisers all
requested information regarding the Properties, the Improvements and the Lease
Agreement, and if a Default or Event of Default exists and Lender requests such
a reappraisal, Borrower agrees to pay all costs incurred by Lender in connection
with the first such reappraisal.
4.15. Comply with Covenants and Laws. Comply and cause each Property and
Improvements to comply with all applicable covenants and restrictions of record
and all laws, ordinances, rules and regulations, including, without limitation,
the Americans with Disabilities Act and regulations thereunder, and laws,
ordinances, rules and regulations relating to zoning, health, building codes,
setback requirements and Applicable Environmental Laws.
4.16. Taxes and Other Charges. Pay all taxes, assessments, charges, claims
for labor, supplies, rent, and other obligations which, if unpaid, might give
rise to a Lien against property of Borrower (including any of the Collateral),
except Liens to the extent permitted by this Agreement, except that Lessee or
Borrower may contest the same to the extent and subject to the conditions set
forth in the Lease Agreement provided Lender receives notice of such contest,
Lessee or Borrower diligently pursues such contest, and the Lender's interest in
the Collateral is not in Lender's opinion materially endangered by such contest
and Lender, at its option, receives and holds any reserves required for payment
to the extent reserves are required by the Lease Agreement.
4.17. Use and Occupancy. Require that each Property and the Improvements
thereon be used primarily as a Hardee's restaurant and maintain the same, or
require Lessee to maintain the same, in good condition and timely make or
require Lessee to make all necessary repairs thereto.
4.18. Use of Proceeds. Use the proceeds of the Loan solely and exclusively
for business purposes of Borrower and not for acquisition of margin stock.
4.19. Reports and Notices. Notify Lender promptly of any material
litigation instituted or threatened against Borrower or Lessee upon Borrower
becoming aware of the same, and any material deficiencies asserted or liens
filed by the Internal Revenue Service against Borrower or Lessee; notify Lender
promptly of any condemnation or similar proceedings with respect to any Property
or Improvements, any proceeding seeking to enjoin the intended use of any of the
Improvements, and of all material changes in governmental requirements
pertaining to any Property or Improvements and any other matters which could
reasonably be expected to adversely affect the Lease Agreement or Borrower's
ability to perform its obligations under this Agreement.
4.20. Certificate. Simultaneously with the furnishing of quarterly and
annual financial statements to Lender and at other times upon Lender's
reasonable written request, furnish Lender with a certificate in the form of
Exhibit C attached hereto, properly completed and signed by an authorized
officer of Borrower.
ARTICLE V.
NEGATIVE COVENANTS OF THE BORROWER.
Until the Loan Obligations have been paid in full, Borrower shall not:
5.1. No Liens; Exceptions. Create, incur, assume or suffer to exist any
Lien upon or with respect to any of the Collateral, whether now owned or
hereafter acquired, other than the following permitted Liens:
(a) Liens at any time existing in favor of the Lender;
(b) Inchoate Liens arising by operation of law for the purchase of labor,
services, materials, equipment or supplies, provided payment shall not be
delinquent and which Lien is fully subordinate to the Mortgages;
(c) Liens for current year's taxes, assessments or governmental charges or
levies provided payment thereof shall not be delinquent;
(d) "Permitted Encumbrances" upon a Property, as defined in the Mortgages;
and
(e) Liens on Lessee's interest only in the Property and Improvements to the
extent permitted in the Lease Agreement.
5.2. Merger, Consolidation, Etc. Except as provided in Section 7.12 hereof,
enter into any merger, consolidation or similar transaction, or sell, assign,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions), all or substantially all of its assets (whether now or hereafter
acquired), without the prior written consent of the Lender, which may be granted
or refused by Lender in Lender's sole discretion.
5.3. Disposition of a Material Portion of Its Assets. Sell, lease, transfer
or otherwise dispose of any material portion of its assets, unless any such
disposition is of property other than the Collateral and is in the ordinary
course of business for a full and fair consideration, which in no event shall
include a transfer for full or partial satisfaction of a preexisting debt.
5.4. Dividends, Distributions and Redemptions. Except as hereinafter
provided or as otherwise consented to by Lender in writing, declare or pay any
distributions to its shareholders or purchase, redeem, retire, or otherwise
acquire for value, any capital stock of Borrower now or hereafter outstanding,
return any capital to its shareholders as such, or make any distribution of
assets to its shareholders; provided Borrower may pay cash dividends or
distributions so long as no Default or Event of Default exists or would occur as
a result of such dividend or distribution.
5.5. Change in Business; Management; Control. Conduct or enter into any
business other than acting as owner and landlord of the Properties and
Improvements pursuant to the Lease Agreement and the acquisition, development
and operation of multi-family properties or the investment in other entities
owning multi-family properties (provided any Indebtedness, including amounts
guaranteed by Borrower, and interest on such Indebtedness, must be included in
the calculations set forth in Sections 4.11, 4.12 and 5.10 hereof in a manner
reasonably satisfactory to Lender after giving consideration to the value of
assets, interests in assets and earnings on assets acquired by virtue of such
acquisition or investment of Borrower), make any other material change in the
nature of its business as it is being conducted as of the date hereof, permit
any change in management with respect to (a) both Nick B. Boddie and B. Mayo
Boddie, or (b) D. Scott Wilkerson, except that the death of D. Scott Wilkerson
or termination of his current managerial position shall not constitute a
violation of this covenant so long as a replacement manager satisfactory to
Lender is employed within ninety (90) days and thereafter remains in such
capacity, or permit any change in control of Borrower.
5.6. Changes in Accounting. Change its methods of accounting, unless such
change is permitted by GAAP, and provided such change does not have the effect
of curing or preventing what would otherwise be an Event of Default or Default
had such change not taken place.
5.7. ERISA Funding and Termination. Permit (a) the funding requirements of
ERISA with respect to any employee plan to be less than the minimum required by
ERISA at any time, or (b) any employee plan to be subject to involuntary
termination proceedings at any time.
5.8. Transactions with Affiliates. Enter into any transaction with any
Person affiliated with the Borrower other than in the ordinary course of its
business and on fair and reasonable terms no less favorable to the Borrower than
those they would obtain in a comparable arms-length transaction with a Person
not an affiliate.
5.9. Place of Business. Change its chief executive office or its principal
place of business without first giving Lender at least thirty (30) days prior
written notice thereof and promptly providing Lender such information and
preparing and filing such additional UCC financing statements as Lender may
request in connection therewith.
5.10. Leverage. Borrower's Adjusted Leverage will at no time exceed 66.67%.
ARTICLE VI.
EVENTS OF DEFAULT AND REMEDIES.
6.1. The occurrence of any one or more of the following shall constitute an
"Event of Default" hereunder:
(a) The failure by Borrower to pay any installment of principal or interest
under the Note, as and when the same comes due, which failure is not cured
within five (5) Business Days following written notice by Lender to Borrower
(except that the requirement of notice and the applicable cure period shall be
deemed eliminated after two such notices of failure have been given in any
single calendar year); or
(b) The failure by Borrower to pay any payment due to Lender under the Loan
Documents other than as provided in (a) above, as and when the same comes due,
which failure is not cured within twenty (20) days following written notice by
Lender to Borrower (except that the requirement of notice and the applicable
cure period shall be deemed eliminated after two such notices of failure have
been given in any single calendar year); or
(c) The failure of Borrower properly and timely to perform or observe any
covenant or condition set forth in this Agreement (other than those specified in
(a) and (b) of this Section) or any other Loan Document, which failure is not
cured within any applicable cure period as set forth herein or, if no cure
period is specified therefor, is not cured within thirty (30) days of Lender's
written notice to Borrower of such Default except that if such Default is
capable of being cured but is not cured within such period and Borrower has
notified Lender on or before the expiration of such initial 30-day period that
it is diligently pursuing a cure, then so long as Borrower is diligently
pursuing a cure, Borrower shall have an additional sixty (60) days within which
to effect a cure; or
(d) The occurrence of any Event of Default (other than those specified in
(a), (b) or (c) of this Section) under any other Loan Documents; or
(e) The filing by the Borrower or Lessee of a voluntary petition in
bankruptcy or the adjudication of either of the aforesaid Persons as a bankrupt
or insolvent, or the filing by either of the aforesaid Persons of any petition
or answer seeking or acquiescing in any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief for itself
under any present or future federal, state or other statute, law or regulation
relating to bankruptcy, insolvency or other relief for debtors, or if either of
the aforesaid Persons should seek or consent to or acquiesce in the appointment
of any trustee, receiver or liquidator for itself or of all or any substantial
part its property or of any or all of the rents, revenues, issues, earnings,
profits or income thereof, or the making of any general assignment for the
benefit of creditors or the admission in writing by either of the aforesaid
Persons of its inability to pay its debts generally as they become due; or
(f) The entry by a court of competent jurisdiction of an order, judgment,
or decree approving a petition filed against the Borrower or Lessee, which such
petition seeks any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future federal,
state or other statute, law or regulation relating to bankruptcy, insolvency, or
other relief for debtors, which order, judgment or decree remains unvacated and
unstayed for an aggregate of sixty (60) days (whether or not consecutive) from
the date of entry thereof, or the appointment of any trustee, receiver or
liquidator of either of the aforesaid Persons or of all or any substantial part
of its properties or of any or all of the rents, revenues, issues, earnings,
profits or income thereof which appointment shall remain unvacated and unstayed
for an aggregate of sixty (60) days (whether or not consecutive); or
(g) Any certificate, statement, representation, warranty or audit
heretofore or hereafter furnished by or on behalf of the Borrower pursuant to or
in connection with this Agreement, the Lease Agreement or otherwise (including,
without limitation, representations and warranties contained herein or in any
Loan Documents) or as an inducement to Lender to extend any credit to or to
enter into this or any other agreement with Borrower in connection with this
Loan or other loans now existing or hereafter created, proves to have been false
in any material respect at the time when the facts therein set forth were stated
or certified, or proves to have omitted any substantial contingent or
unliquidated liability or claim against Borrower, or on the date of execution of
this Agreement there shall have been any materially adverse change in any of the
facts previously disclosed by any such certificate, statement, representation,
warranty or audit, which change shall not have been disclosed to Lender in
writing at or prior to the time of such execution; or
(h) A final judgment shall be rendered by a court of law or equity against
Borrower and the same shall remain undischarged for a period of thirty (30)
days, unless such judgment is either (i) fully covered by collectible insurance
and such insurer has within such period acknowledged such coverage in writing,
or (ii) although not fully covered by insurance, enforcement of such judgment
has been effectively stayed, such judgment is being contested or appealed by
appropriate proceedings and Borrower has established reserves adequate for
payment in the event Borrower is ultimately unsuccessful in such contest or
appeal and evidence thereof is provided to Lender; or
(i) The occurrence of any materially adverse change in the financial
condition or prospects of Borrower or Lessee, or the existence of any other
condition which, in Lender's reasonable determination, constitutes an impairment
of Borrower's ability to perform its obligations under its Loan Documents or the
Lessee's ability to perform its obligations under the Lease Agreement, except
that a material adverse change in the financial condition or prospects of Lessee
shall not be deemed to constitute an Event of Default if within thirty (30) days
following written notice from Lender, Borrower provides Lender with such
additional collateral as Lender may reasonably request to assure Lender that
such material adverse change will not adversely affect the original valuation of
the Lender's Collateral or Borrower's ability to pay and perform the Loan
Obligations as and when due; or
(j) Any default by Lessee under the Lease Agreement which is not cured
within any applicable cure period therein.
Notwithstanding anything in this Section, all requirements of notice shall
be deemed eliminated if Lender is prevented from giving such notice by
bankruptcy or other applicable law. The cure period, if any, shall then run from
the occurrence of the event or condition of Default rather than from the date of
notice.
If a Default occurs solely as a result of a Property or Properties being in
violation of a covenant of this Agreement then Borrower may elect to cure such
Default by satisfying the conditions of Section 7.11 hereof on or before the
last day of the cure period set forth in (c) above, in which event such Default
shall be deemed cured by satisfaction of such conditions and release of such
Property.
6.2. Remedies. Upon the occurrence of any Default or Event of Default,
regardless of any requirement that notice be given or a period of time elapse,
Lender shall be under no obligation to make further advances of the Loan. Upon
the occurrence of any Event of Default, Lender shall have the absolute right to
refuse to disburse any additional Loan funds hereunder and at its option and
election and in its sole discretion to exercise alternatively or cumulatively
any or all of the following remedies:
(a) Cancel Lender's obligations pursuant to this Agreement by written
notice to Borrower. Upon the occurrence of a Default or an Event of Default
described in Sections 6.1(e) or (f) hereof, Lender's obligations pursuant to
this Agreement shall be terminated immediately and automatically.
(b) Take immediate possession of the Borrower's interest in the Collateral
as well as all other property to which title is held by Borrower as is necessary
to comply with the Borrower's obligations under the Lease Agreement; exercise
all rights in and to the Collateral; and do anything in its sole judgment to
fulfill the obligations of Borrower under this Agreement or the Lease Agreement.
Without restricting the generality of the foregoing and for the purposes
aforesaid, Borrower hereby appoints and constitutes Lender its lawful
attorney-in-fact with full power of substitution to preserve and protect the
Collateral and take any action that Borrower itself would be entitled to take
with respect to the Collateral, it being understood and agreed that this power
of attorney shall be a power coupled with an interest and cannot be revoked. All
expenses incurred by Lender under this subsection shall constitute a part of the
Loan Obligations, shall bear interest from the date incurred at the Default Rate
and shall, together with such interest, be deemed secured by the Mortgages and
all Collateral.
(c) Declare the entire unpaid principal of the Loan Obligations to be, and
the same shall thereupon become, immediately due and payable, without
presentment, protest or further demand or notice of any kind, all of which are
hereby expressly waived.
(d) Proceed to protect and enforce its rights by action at law (including,
without limitation, bringing suit to reduce any claim to judgment), suit in
equity and other appropriate proceedings including, without limitation, for
specific performance of any covenant or condition contained in this Agreement.
(e) Exercise any and all rights and remedies afforded by the laws of the
United States, the state in which any Property or other Collateral is located or
any other appropriate jurisdiction as may be available for the collection of
debts and enforcement of covenants and conditions such as those contained in
this Agreement and the Loan Documents.
(f) Exercise the rights and remedies of setoff and/or banker's lien against
the interest of the Borrower in and to every account (including escrows
established pursuant to the Mortgages) and other property of the Borrower which
is in the possession of the Lender or any person who then owns a participating
interest in the Loan, to the extent of the full amount of the Loan Obligations.
(g) Exercise its rights and remedies pursuant to any other Loan Documents.
ARTICLE VII.
MISCELLANEOUS.
7.1. Waiver. No remedy conferred upon, or reserved to, the Lender in this
Agreement or any of the other Loan Documents is intended to be exclusive of any
other remedy or remedies, and each and every remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter
existing in law or in equity. Exercise or omission to exercise any right of the
Lender shall not affect any subsequent right of Lender to exercise the same. No
course of dealing between Borrower and Lender or any delay on the Lender's part
in exercising any rights shall operate as a waiver of any of the Lender's
rights. No waiver of any Default or Event of Default under this Agreement or any
of the other Loan Documents shall extend to or shall affect any subsequent or
other then existing Default or Event of Default or shall impair any rights,
remedies or powers of Lender.
7.2. Costs and Expenses. Borrower will bear all taxes, fees and expenses
(including reasonable fees and expenses of counsel for Lender) in connection
with the Loan, the preparation of this Agreement and the other Loan Documents
(including any amendments hereafter made), and the recording of any of the Loan
Documents. If, at any time, a Default or Event of Default occurs or Lender
becomes a party to any suit or proceeding in order to protect its interests or
priority in any Collateral for any of the Loan Obligations or its rights under
this Agreement or any of the Loan Documents, or if Lender is made a party to any
suit or proceeding by virtue of the Loan, this Agreement or any Collateral for
any Loan Obligations and as a result of any of the foregoing, the Lender employs
counsel to advise or provide other representation with respect to this
Agreement, or to collect the balance of the Loan Obligations, or to take any
action in or with respect to any suit or proceeding relating to this Agreement,
any of the other Loan Documents, any Collateral for any of the Loan Obligations,
the Borrower, or the Lessee, or to protect, collect, or liquidate any of the
Collateral for the Loan Obligations, or attempt to enforce any security interest
or lien granted to the Lender by any of the Loan Documents, then in any such
events, all of the reasonable attorney's fees arising from such services,
including fees on appeal and in any bankruptcy proceedings, and any expenses,
costs and charges relating thereto shall constitute additional obligations of
Borrower to the Lender payable on demand of the Lender. Without limiting the
foregoing, Borrower has undertaken the obligation for payment of, and shall pay,
all recording and filing fees, revenue or documentary stamps or taxes,
intangibles taxes, transfer taxes, recording taxes and other taxes, expenses and
charges payable in connection with this Agreement, any of the Loan Documents,
the Loan Obligations, or the filing of any financing statements or other
instruments required to effectuate the purposes of this Agreement, and should
Borrower fail to do so, Borrower agrees to reimburse Lender for the amounts paid
by Lender, together with penalties or interest, if any, incurred by Lender as a
result of underpayment or nonpayment. This Section shall survive repayment of
the remaining Loan Obligations.
7.3. Performance of Lender. At its option, upon Borrower's failure to do
so, the Lender may make any payment, do any act or give any notice (including
notices of default to Lessee under the Lease Agreement) on the Borrower's behalf
that the Borrower or others are required to do to remain in compliance with this
Agreement, any of the other Loan Documents or the Lease Agreement, and Borrower
agrees to reimburse the Lender, on demand, for any payment made or expense
incurred by Lender pursuant to the foregoing authorization, including, without
limitation, reasonable attorneys' fees, and until so repaid any sums advanced by
Lender shall bear interest at the Default Rate from the date advanced until
repaid, and such expenses together with interest shall be deemed secured by the
Collateral.
7.4. Headings. The headings of the Sections of this Agreement are for
convenience of reference only, are not to be considered a part hereof, and shall
not limit or otherwise affect any of the terms hereof.
7.5. Survival of Covenants. All covenants, agreements, representations and
warranties made herein and in certificates or reports delivered pursuant hereto
shall be deemed to have been material and relied on by Lender, notwithstanding
any investigation made by or on behalf of Lender, and shall survive the
execution and delivery to Lender of the Note and this Agreement.
7.6. Notices, etc. Any notice or other communication required or permitted
to be given by this Agreement or the other Loan Documents or by applicable law
shall be in writing and shall be deemed received (a) on the date delivered, if
sent by hand delivery (to the person or department if one is specified below),
(b) three (3) days following the date deposited in U.S. mail, certified or
registered, with return receipt requested, or (c) one (1) day following the date
deposited with Federal Express or other national overnight carrier, and in each
case addressed as follows:
If to Borrower:
Boddie-Noell Properties, Inc.
3710 One First Union Center
301 South College Street
Charlotte, North Carolina 28202
Attention: Mr. D. Scott Wilkerson, President
with a copy to:
Kennedy Covington Lobdell & Hickman, L.L.P.
100 North Tryon Street, Suite 4200
Charlotte, North Carolina 28202
Attention: E. Allen Prichard
If to Lender:
SouthTrust Bank of Alabama,
National Association
P.O. Box 2554 (35290)
420 N. 20th Street
11th Floor - Commercial Real Estate Loan Department
Birmingham, Alabama 35203
with a copy to:
SouthTrust Bank of North Carolina
6525 Morrison Boulevard
Suite 318
Charlotte, North Carolina 28211
Attention: Mr. John Peirce
Either party may change its address to another single address by notice given as
herein provided, except any change of address notice must be actually received
in order to be effective.
7.7. Benefits. All of the terms and provisions of this Agreement shall bind
and inure to the benefit of the parties hereto and their respective successors
and assigns. No Person other than Borrower or Lender shall be entitled to rely
upon this Agreement or be entitled to the benefits of this Agreement.
7.8. Participation. Borrower acknowledges that Lender may, at its option,
sell participation interests in, or assign all of its interest in, the Loan.
Borrower agrees with each present and future participant or owner of the Loan
that if an Event of Default should occur, each present and future participant or
owner shall have all of the rights and remedies of Lender with respect to any
deposit due from any participant to the Borrower. The execution by a participant
of a participation agreement with Lender, and the execution by the Borrower of
this Agreement, regardless of the order of execution, shall evidence an
agreement between Borrower and said participant in accordance with the terms of
this Section. Borrower consents to the Lender's disclosure and distribution,
subject to obligations of confidentiality in SEC and AMEX rules, of financial
and other information that has been provided by Borrower to Lender pursuant to
this Agreement to participants and prospective participants.
7.9. Supersedes Prior Agreements; Counterparts. This Agreement and the Loan
Documents referred to herein supersede and incorporate all representations,
promises, and statements, oral or written, made by Lender in connection with the
Loan. This Agreement may not be varied, altered, or amended except by a written
instrument executed by an authorized officer of the Lender. This Agreement may
be executed in any number of counterparts, each of which, when executed and
delivered, shall be an original, but such counterparts shall together constitute
one and the same instrument.
7.10. Use of Proceeds for Restoration. Notwithstanding the provisions of
this Agreement or any Mortgage, Lender agrees that Lender shall make the net
proceeds of insurance or condemnation (after payment of Lender's costs and
expenses) available to Borrower or Lessee for Borrower's or Lessee's repair,
restoration and replacement of the Improvements and Equipment damaged or taken
on the following terms and subject to Borrower's or Lessee's satisfaction of the
following conditions:
(a) At the time of such loss or damage and at all times thereafter while
Lender is holding any portion of such proceeds, there shall exist no default
under the Lease Agreement (provided if a default exists as of the date of or
subsequent to Borrower's or Lessee's written election to Lender informing Lender
that Borrower intends to use proceeds to restore the Improvements, Equipment or
Lessee's equipment, Lender shall not apply the net proceeds to Loan Obligations
so long as a cure period exists);
(b) The Improvements, Equipment and Lessee's equipment for which loss or
damage has resulted shall be capable of being restored or replaced to its use
immediately preceding such loss or damage and with a value not less than the
value prior to such loss or damage and restoration or replacement shall be
capable of being completed prior to the current term of the Lease Agreement or
any renewal term for which Lessee has exercised its option;
(c) Within forty-five (45) days from the date of such loss or damage
Borrower or Lessee shall have given Lender a written notice electing to have the
proceeds applied for such purpose;
(d) Within sixty (60) days following the date of notice under the preceding
subparagraph (c) and prior to any proceeds being disbursed to Borrower or
Lessee, Borrower or Lessee shall have provided to Lender all of the following to
the extent requested by Lender:
(1) complete plans and specifications for restoration, repair and
replacement of the Improvements, Equipment and Lessee's equipment damaged
to the condition, utility and value required by (b) above,
(2) if loss or damage exceeds $50,000, fixed-price or guaranteed
maximum cost bonded construction contracts for completion of the repair and
restoration work in accordance with such plans and specifications,
(3) builder's risk insurance for the full cost of construction with
Lender named under a standard mortgagee loss-payable clause,
(4) such additional funds as in Lender's reasonable opinion are
necessary to complete the repair, restoration and replacement, and
(5) copies of all permits and licenses necessary to complete the work
in accordance with the plans and specifications;
(e) Lender may, at Borrower's and Lessee's expense, retain an independent
inspector to review and approve plans and specifications and completed
construction and to approve all requests for disbursement, which approvals shall
be conditions precedent to release of proceeds as work progresses;
(f) No portion of such proceeds shall be made available by Lender for
architectural reviews or for any other purposes which are not directly
attributable to the cost of repairing, restoring or replacing the Improvements,
Equipment and Lessee's equipment for which a loss or damage has occurred unless
the same are covered by such insurance;
(g) Borrower or Lessee shall commence such work within one hundred twenty
(120) days of such loss or damage and shall diligently pursue such work to
completion;
(h) Each disbursement by Lender of such proceeds and deposits shall be
funded subject to conditions and in accordance with disbursement procedures
which a commercial construction lender would typically establish in the exercise
of sound banking practices and shall be made only upon receipt of disbursement
requests on an AIA G702/703 form (or similar form approved by Lender) signed and
certified by the Borrower or Lessee and its architect and general contractor, if
any, with appropriate invoices and lien waivers as required by Lender;
(i) Lender shall have a first lien and security interest in all building
materials and completed repair and restoration work and in all fixtures and
equipment (to the extent owned by Borrower) acquired with such proceeds, and
Borrower and Lessee shall execute and deliver such mortgages, deeds of trust,
security agreements, financing statements and other instruments as Lender shall
request to create, evidence, or perfect such lien and security interest;
provided, however, Lender shall in no event have a lien upon or security
interest in any fixtures, equipment, inventory or personal property of Lessee or
any restoration or replacement thereof, however acquired by Lessee; and
(j) In the event and to the extent such proceeds are not required or used
for the repair, restoration and replacement of the Improvements or Equipment for
which a loss or damage has occurred, or in the event Borrower or Lessee fails to
timely make such election or having made such election fails to timely comply
with the terms and conditions set forth herein, Lender shall be entitled without
notice to or consent from Borrower to apply such proceeds, or the balance
thereof, at Lender's option either (i) to the full or partial payment or
prepayment of the Loan Obligations in the manner aforesaid, or (ii) to the
repair, restoration and/or replacement of all or any part of such Improvements
and Equipment for which a loss or damage has occurred, or Lender may release the
balance of such proceeds to the Borrower, all without affecting the lien of the
Mortgages for the unpaid balance of the Loan Obligations.
7.11. Release of Properties. Certain provisions of the Lease Agreement
provide for the release of "Uneconomic Properties," and Borrower may cure
certain Defaults pursuant to Section 6.1 of this Agreement which affect a
Property or Properties only but not all Properties by obtaining a release of
such Property or Properties, provided Lender is willing to release a Property or
Properties from this Agreement and the Mortgages if and only if all of the
following conditions are satisfied:
(a) Borrower pays to Lender a principal prepayment of $542,553.19 per each
Property to be released, together with any applicable prepayment premium;
(b) Such Property is released and removed from the Lease Agreement with a
reduction in rent not greater than 1/47th of the rent as of the date of this
Agreement;
(c) Not more than seven (7) such Properties are released during the term of
this Agreement; and
(d) No Default or Event of Default exists except a Default which is cured
as a result of such release.
Provided, however, that upon substitution of a property (and corresponding
release of a Property) under the terms of the Lease Agreement, such released
Property shall not be included in the maximum of seven (7) released Properties
and shall not require a principal repayment so long as the Lender approves the
substitute property or properties, the rent under the Lease Agreement does not
decrease, and Borrower satisfies such additional conditions with respect to the
substitute property or properties as Lender may impose, including but not
limited to, the execution, delivery and recording of an amendment to the
applicable Mortgage and the issuance of an endorsement to Lender's policy of
title insurance, insuring the applicable Mortgage, as amended, is an enforceable
first-priority lien with respect to the substitute property or properties.
7.12. UPREIT. In connection with an "UPREIT" transaction in which the
Properties would be transferred to a transferee in exchange for the transferor
(i.e. the Borrower) receiving an interest in the transferee, provided no Default
or Event of Default exists or would result from proposed transfer, Borrower
shall have the right to transfer all (but not less than all) of the Properties,
at any time or from time to time, to an entity which is an "Affiliate" of the
Borrower; provided that not less than ten (10) Business Days prior to the
effective date of any such transfer, Borrower shall provided to Lender:
(a) The name and address of the prospective transferee and evidence that
such transferee is an Affiliate and that such transaction is one described
above;
(b) The partnership agreement, articles of incorporation or other
organizational documents of the prospective transferee and evidence of its
existence and, to the extent applicable, its good standing in each applicable
jurisdiction;
(c) An instrument of assumption, in form satisfactory to the Lender,
whereby the transferee assumes jointly and severally with Borrower the
Borrower's obligations under the Loan Documents in accordance with their terms,
including, but not limited to, all financial covenants; and
(d) Appropriately-completed UCC financing statements or amendments to the
existing financing statements and/or Loan Documents as may be requested by
Lender to continue the perfection of Lender's security interest in the
Collateral without loss of priority; and
(e) Evidence that Borrower's interest under the Lease Agreement is
simultaneously transferred to such transferee and that such transaction is
permitted by the Lease Agreement and does not result in a merger of interests
under the Lease Agreement; and
(f) Evidence that the Borrower, as transferor, and the transferee, on a
consolidated basis, will satisfy all financial and other covenants contained in
this Agreement as of the next reporting date.
Such transfer shall not relieve Borrower from its liability for all Loan
Obligations, including those Loan Obligations thereafter accruing, but Borrower
shall remain jointly and severally obligated therefor.
7.13. Controlling Law. THE VALIDITY, INTERPRETATION, ENFORCEMENT AND EFFECT
OF THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NORTH CAROLINA EXCEPT AS OTHERWISE EXPRESSLY PROVIDED.
7.14. Jurisdiction. THE LENDER'S PRINCIPAL PLACE OF BUSINESS IS LOCATED IN
JEFFERSON COUNTY IN THE STATE OF ALABAMA, AND THE BORROWER AGREES THAT THIS
AGREEMENT SHALL BE HELD BY LENDER AT SUCH PRINCIPAL PLACE OF BUSINESS, AND THE
HOLDING OF THIS AGREEMENT BY LENDER THEREAT SHALL CONSTITUTE SUFFICIENT MINIMUM
CONTACTS OF BORROWER WITH JEFFERSON COUNTY AND THE STATE OF ALABAMA FOR THE
PURPOSE OF CONFERRING JURISDICTION UPON THE FEDERAL AND STATE COURTS PRESIDING
IN SUCH COUNTY AND STATE. BORROWER CONSENTS THAT ANY LEGAL ACTION OR PROCEEDING
ARISING HEREUNDER MAY BE BROUGHT IN THE CIRCUIT COURT OF THE STATE OF ALABAMA,
JEFFERSON COUNTY, ALABAMA OR THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ALABAMA AND ASSENTS AND SUBMITS TO THE PERSONAL JURISDICTION OF ANY
SUCH COURT IN ANY ACTION OR PROCEEDING INVOLVING THIS AGREEMENT. NOTHING HEREIN
SHALL LIMIT THE JURISDICTION OF ANY OTHER COURT.
7.15. Waiver of Jury Trial. TO THE FULLEST EXTENT ENFORCEABLE, BORROWER
HEREBY WAIVES ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY ON ANY CLAIM,
COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN
ANY WAY RELATED TO THIS AGREEMENT, THE LOAN DOCUMENTS OR THE LOAN, OR (B) IN ANY
WAY CONNECTED WITH OR PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS OF
LENDER AND/OR BORROWER WITH RESPECT TO THE LOAN DOCUMENTS OR IN CONNECTION WITH
THIS AGREEMENT OR THE EXERCISE OF EITHER PARTY'S RIGHTS AND REMEDIES UNDER THIS
AGREEMENT OR OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP OF THE PARTIES
HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING
AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. BORROWER AGREES THAT LENDER
MAY FILE A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE
KNOWING, VOLUNTARY, AND BARGAINED AGREEMENT OF BORROWER IRREVOCABLY TO WAIVE ITS
RIGHTS TO TRIAL BY JURY AS AN INDUCEMENT OF LENDER TO MAKE THE LOAN, AND THAT,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY DISPUTE OR CONTROVERSY WHATSOEVER
(WHETHER OR NOT MODIFIED HEREIN) BETWEEN BORROWER AND LENDER SHALL INSTEAD BE
TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
THIS WAIVER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE IN WHICH ANY ACTION, SUIT OR LEGAL PROCEEDING IS THEN PENDING AND THEN
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS THEN IN EFFECT AT THE TIME OF
SUCH ACTION, SUIT OR LEGAL PROCEEDING.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
BORROWER:
BODDIE-NOELL PROPERTIES, INC.,
a Delaware corporation
BY: __/s/ D. Scott Wilkerson__________
Its __President_______________________
LENDER:
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION, a national
banking association
BY: __/s/ John D. Peirce______________
Its __VP______________________________
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
EXHIBIT 11: COMPUTATION OF PER SHARE EARNINGS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Price # SHARES Total Amt.
<S> <C> <C> <C>
Common shares outstanding:
January 1 - March 30 2,990,990
March 31 - April 27 2,994,702
April 28 - July 30 3,005,240
July 31 - December 31 3,016,740
==============
Weighted average 3,005,809
==============
Common stock equivalents:
Options granted October 17, 1994 $ 13.75 160,000
==============
Other potentially dilutive securities: none
==============
Assumed exercise of options @ January 1 13.75 160,000 $2,200,000
Assumed purchase of treasury stock w/proceeds
Average price of stock (per AMEX reports)
January
12.76
February
12.95
March
13.43
April
12.88
May
12.63
June
12.20
July
12.70
August
13.00
September
12.60
October
12.64
November
12.43
December
12.36
===========
Overall average $ 12.72 (173,024) (2,200,000)
-------------- ================
Assumed increase(decrease) in # shares/equity $ (13,024) $ -
================
Weighted average # shares outstanding 3,005,809
Assumed # shares for calculation of
--------------
earnings per common and common equivalent share 2,992,785
==============
Net income, year ended December 31, 1995 $1,628,268
================
Earnings per share, weighted average common shares outstanding $ 0.5417
Earnings per common and common equivalent share 0.5441
================
Dilution percentage -0.44% *
==============
</TABLE>
* Reduction of less than 3% in the aggregate is not considered dilution;
financial statement presentation of fully diluted earnings per share is
not required. Primary earnings per share is presented based on weighted
average number of common shares outstanding.
BODDIE-NOELL PROPERTIES, INC.
- -----------------------------------------------------------------------------
EXHIBIT 21: SUBSIDIARIES OF THE REGISTRANT
YEAR ENDED DECEMBER 31, 1995
Subsidiary name: BNP Management, Inc.
State of incorporation: North Carolina
Business name: BNP Management, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Boddie-Noell
Properties, Inc. financial statements as of and for the year ended December 31,
1995 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 700,863
<SECURITIES> 0
<RECEIVABLES> 244,817
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,239,229
<PP&E> 98,520,761
<DEPRECIATION> (9,020,948)
<TOTAL-ASSETS> 94,351,776
<CURRENT-LIABILITIES> 990,053
<BONDS> 67,161,785
<COMMON> 30,167
0
0
<OTHER-SE> 26,169,771
<TOTAL-LIABILITY-AND-EQUITY> 94,351,776
<SALES> 0
<TOTAL-REVENUES> 13,725,638
<CGS> 0
<TOTAL-COSTS> 5,090,301
<OTHER-EXPENSES> 1,644,632
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,362,437
<INCOME-PRETAX> 1,628,268
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,628,268
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,628,268
<EPS-PRIMARY> .54
<EPS-DILUTED> 0
</TABLE>
