UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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)
Maryland 56-1574675
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
3710 One First Union Center, Charlotte, NC 28202-6032
(Address of principal executive offices) (Zip Code)
704/333-1367
(Registrant's telephone number)
State of incorporation changed from Delaware to Maryland
effective July 31, 1997.
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 ____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of November 10, 1997 (the latest practicable date).
Common Stock, $.01 par value 3,123,741
(Class) (Number of shares)
Index to exhibits at page 16 Total number of pages: 36
1
<PAGE>
TABLE OF CONTENTS
Item No. Page No.
PART I - Financial Information
1 Financial Statements 3
2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II - Other Information
5 Other Information 14
6 Exhibits and Reports on Form 8-K 14
2
<PAGE>
PART I - Financial Information
Item 1. Financial Statements.
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
Balance Sheets
<TABLE>
<CAPTION>
September 30 December 31
1997 1996
------------------- ------------------
(Unaudited)
<S> <C> <C>
Assets
Real estate investments at cost:
Apartment properties $ 67,140,687 $ 66,610,048
Restaurant properties 43,205,075 43,205,075
------------------- ------------------
110,345,762 109,815,123
Less accumulated depreciation (13,383,980) (11,461,365)
------------------- ------------------
96,961,782 98,353,758
Cash and cash equivalents 1,406,892 842,604
Rent and other receivables 34,734 12,695
Prepaid expenses and other assets 595,188 392,302
Investment in and advances to Management Company 243,262 261,598
Notes receivable 1,412,508 -
Intangible related to acquisition of management operations, net 2,841,438 2,744,912
Deferred financing costs, net 709,794 828,113
=================== ==================
Total assets $ 104,205,598 $ 103,435,982
=================== ==================
Liabilities and Shareholders' Equity
Mortgage and other notes payable $ 71,340,252 $ 70,295,957
Notes payable to affiliates 7,056,300 7,056,300
Accounts payable and accrued expenses 1,022,681 476,938
Additional consideration due to former BTVC shareholders 572,136 355,570
Escrowed security deposits and deferred revenue 263,929 348,779
------------------- ------------------
Total liabilities 80,255,298 78,533,544
Shareholders' equity:
Common stock, $.01 par value, 10,000,000 shares authorized, 3,123,741 shares
issued and outstanding at September 30, 1997,
3,074,647 shares issued and outstanding at December 31, 1996 31,237 30,746
Additional paid-in capital 35,163,033 34,522,816
Dividends distributed in excess of net income (11,243,970) (9,651,124)
------------------- ------------------
Total shareholders' equity 23,950,300 24,902,438
=================== ==================
Total liabilities and shareholders' equity $ 104,205,598 $ 103,435,982
=================== ==================
</TABLE>
3
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
1997 1996 1997 1996
----------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Revenues
Apartment rental income $ 2,671,706 $ 2,627,038 $ 7,897,982 $ 7,209,401
Restaurant rental income 1,125,000 1,125,000 3,375,000 3,375,000
Equity in income of Management Company 18,514 35,144 182,747 111,432
Interest and other income 75,081 26,029 153,526 48,875
----------------- ----------------- ---------------- -----------------
3,890,301 3,813,211 11,609,255 10,744,708
Expenses
Depreciation 644,351 627,330 1,922,765 1,786,771
Amortization 145,751 138,507 439,289 394,014
Apartment operations 891,073 829,508 2,536,564 2,189,679
Administrative 190,418 203,497 733,911 701,577
Interest 1,579,826 1,551,351 4,684,256 4,395,137
----------------- ----------------- ---------------- -----------------
3,451,419 3,350,193 10,316,785 9,467,178
================= ================= ================ =================
Net income $ 438,882 $ 463,018 $ 1,292,470 $ 1,277,530
================= ================= ================ =================
Per share data:
Net income $ 0.14 $ 0.15 $ 0.42 $ 0.42
================= ================= ================ =================
Dividends declared $ 0.31 $ 0.31 $ 0.93 $ 0.93
================= ================= ================ =================
Weighted average shares outstanding 3,118,751 3,020,955 3,106,503 3,018,155
================= ================= ================ =================
</TABLE>
4
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
Statement of Shareholders' Equity
(Unaudited)
<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, 1996 3,074,647 $30,746 $34,522,816 $ (9,651,124) $24,902,438
Net income - - - 470,783 470,783
Common stock issued, DRIP 12,036 121 154,844 - 154,965
Common stock issued, earnout 16,300 163 208,273 - 208,436
Dividends paid ($0.31) - - - (958,194) (958,194)
--------------- ---------------- ---------------- --------------- ----------------
Balance at March 31, 1997 3,102,983 31,030 34,885,933 (10,138,535) 24,778,428
Net income - - - 382,805 382,805
Common stock issued, DRIP 10,557 105 131,203 - 131,308
Dividends paid ($0.31) - - - (961,924) (961,924)
--------------- ---------------- ---------------- --------------- ----------------
Balance at June 30, 1997 3,113,540 $31,135 35,017,136 (10,717,654) 24,330,617
Net income - - - 438,882 438,882
Common stock issued, DRIP 10,201 102 145,897 - 145,999
Dividends paid ($0.31) - - - (965,198) (965,198)
=============== ================ ================ =============== ================
Balance at September 30, 1997 3,123,741 $31,237 $35,163,033 $(11,243,970) $23,950,300
=============== ================ ================ =============== ================
</TABLE>
5
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30
1997 1996
---------------- -----------------
<S> <C> <C>
Operating activities:
Net income $ 1,292,470 $ 1,277,530
Adjustments to reconcile net income to
net cash provided by operations:
Equity in income of Management Company (182,747) (111,432)
Depreciation and amortization 2,362,054 2,180,785
Changes in operating assets and liabilities:
Rent and other receivables (22,039) 237,345
Prepaid expenses and other assets (197,941) (130,466)
Accounts payable and accrued expenses 545,744 378,354
Security deposits and deferred revenue (86,396) 97,377
---------------- -----------------
Net cash provided by operating activities 3,711,145 3,929,493
Investing activities:
Acquisition of apartment property - (10,666,580)
Additions to apartment properties (480,788) (426,035)
Investment in Management Company - (165)
Repayment of advances to Management Company 100,000 -
Dividends received from Management Company 97,687 126,977
Investment in notes receivable (1,412,508) -
---------------- -----------------
Net cash used in investing activities (1,695,609) (10,965,803)
Financing activities:
Proceeds of common stock issued through
dividend reinvestment plan 432,269 106,026
Payment of dividends (2,885,316) (2,805,568)
Proceeds from notes payable 1,412,508 10,650,000
Principal payments on notes payable (368,213) (340,978)
Payment of deferred financing costs (42,496) (321,721)
---------------- -----------------
Net cash provided by (used in) financing activities (1,451,248) 7,287,759
---------------- -----------------
Net increase in cash and cash equivalents 564,288 251,449
Cash and cash equivalents at beginning of period 842,604 700,863
---------------- -----------------
Cash and cash equivalents at end of period $ 1,406,892 $ 952,312
================ =================
</TABLE>
6
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
Notes to Financial Statements - September 30, 1997
(Unaudited)
Note 1. Interim financial statements
The accompanying financial statements of Boddie-Noell Properties, Inc. (the
"Company") have not been audited by independent accountants, except for the
balance sheet at December 31, 1996, which was derived from the financial
statements included in the Company's 1996 Annual Report on Form 10-K. We believe
that all adjustments (consisting of normal recurring accruals) necessary for a
fair presentation of the financial position and results of operations for the
periods presented have been included.
We have condensed or omitted certain notes and other information from the
interim financial statements presented in this Quarterly Report on Form 10-Q.
These financial statements should be read in conjunction with our 1996 Annual
Report on Form 10-K.
The results of the first nine months of 1997 are not necessarily indicative of
future financial results.
Note 2. Note receivable and related financing
Effective February 27, 1997, we entered into a participating loan agreement with
The Villages of Chapel Hill Limited Partnership ("The Villages"). Under the
terms of this agreement, we will loan up to $2,625,000 to The Villages to fund a
substantial rehabilitation of the 264-unit apartment property owned by The
Villages. In addition, we have provided a guaranty of $1,500,000 to a bank on
its loan to The Villages. We will receive minimum interest on this loan at the
greater of 12.5% or 30-day LIBOR plus 6.125%, shared income interest, shared
appreciation interest, and certain loan and annual guaranty fees. We plan to
fund advances to The Villages through draws under an existing credit facility
with a bank for borrowings at 30-day LIBOR plus 2.25%, secured by deeds of trust
on three apartment properties. The Villages is a North Carolina limited
partnership which is managed by BNP Management, Inc. The general partner in The
Villages is Boddie Investment Company, whose sole shareholders and directors are
Chairman and Vice Chairman of the Company.
Note 3. Modification of loan agreement
Effective August 1, 1997, we modified our note payable to a bank in the
principal sum of up to $25,500,000 ($23,900,000 outstanding) to extend the
maturity of the note, by one year, to December 1999.
Note 4. Common stock issued
On January 29, 1997, we issued 16,300 shares of common stock pursuant to the
earn-out provision of the acquisition agreement for BT Venture Corporation.
During 1997, we also issued common stock through our Dividend Reinvestment and
Stock Purchase Plan as follows: 12,036 shares on February 14, 1997; 10,577
shares on May 15, 1997; and 10,201 shares on August 15, 1997.
Note 5. Subsequent declaration of dividend
On October 17, 1997, we declared a cash dividend of $0.31 per share, which will
be paid on November 14, 1997, to shareholders of record on October 31, 1997.
7
<PAGE>
Note 6. Statement No. 128, "Earnings per Share"
In February 1997 the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share," which is required to be adopted on December 31, 1997.
At that time, we will be required to change the method we currently use to
compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. We do not expect the impact of Statement 128 on
the calculation of primary and fully diluted earnings per share to be material.
Note 7. Subsequent events
We are currently in the process of converting to an umbrella partnership real
estate investment trust ("UPREIT"). An UPREIT is a real estate investment trust
that controls and holds most of its properties through an umbrella limited
partnership.
On September 22, 1997, we signed an agreement to acquire a portfolio of seven
apartment communities containing 1,356 apartment units located in North
Carolina. Phase I of the acquisition consists of 880 apartment units in four
apartment communities. We expect to complete Phase I of the acquisition in late
November 1997. The remaining three properties are currently under development,
with expected completion dates within the next 12 months. We will acquire these
communities when they are completed and achieve predetermined occupancy and
rental levels.
On November 7, 1997, we filed a Registration Statement on Form S-2 under which
we will issue 2,800,000 shares of our common stock. We have granted the
underwriters an over-allotment option; if they choose to exercise such option in
full, we will issue an additional 420,000 shares. The offering will be made only
by means of a prospectus. We anticipate that the Registration Statement will be
declared effective and that we will complete this offering in December 1997.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
The following discussion contains forward-looking statements within the meaning
of Federal securities law. Such statements can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate," "continue" or other similar words. These statements discuss future
expectations, contain projections of results of operations or of financial
condition or state other "forward-looking" information. Although management
believes that the expectations reflected in such forward-looking statements are
based on reasonable assumptions, there are certain factors such as general
economic conditions, local real estate conditions, or weather conditions that
might cause a difference between actual results and those forward-looking
statements. You should read the following discussion in conjunction with the
financial statements and notes thereto included in this Quarterly Report on Form
10-Q and our audited financial statements and notes thereto included in our 1996
Annual Report on Form 10-K.
Overview
Boddie-Noell Properties, Inc. is a self-managed, self-advised real estate
investment trust ("REIT"). As of September 30, 1997, we owned five apartment
communities containing 1,328 apartments and 47 net-lease restaurant properties.
Through our unconsolidated subsidiary, BNP Management, Inc. (the "Management
Company"), we manage an additional seven apartment communities containing 1,495
apartments and two shopping centers. Our headquarters are in Charlotte, North
Carolina, and all of our operations are in the states of North Carolina and
Virginia.
Results of Operations
Revenues. Revenues increased by 2.0% for the quarter ended September 30, 1997,
and 8.0% for the nine months ended September 30, 1997, compared to the same
prior year periods. The increase in revenues for both the three-month and
nine-month periods is attributable to improved apartment operations and the
effect of the acquisition of Paces Village Apartments in April 1996.
Apartment rental income increased by 1.7% in third quarter of 1997 compared to
the third quarter of 1996. This increase was due to improved apartment
operations. During the first nine months of 1997, apartment rental income
increased by 9.6% compared to 1996. The increase for the first nine months of
1997 was the result of improved operations and the acquisition of Paces Village
in April 1996. For apartment communities held throughout the entire nine months
of both 1997 and 1996, apartment rental income increased by 3.0% through nine
months of 1997 compared to 1996.
Summary amounts related to apartment properties' occupancy and revenue per
occupied unit are as follows:
<TABLE>
<CAPTION>
1997 1996
---------------------------------------------------------------------
Harris Paces Paces
Hill Latitudes Oakbrook Commons Village Overall Overall
<S> <C> <C> <C> <C> <C> <C> <C>
Number of units 184 448 162 336 198 1,328 1,328
Quarter ended September 30
Average physical occupancy 95.1% 93.6% 94.0% 97.5% 93.8% 94.9% 94.8%
Average economic occupancy 96.2% 95.0% 95.8% 98.1% 94.0% 95.9% 95.5%
Average monthly revenue/unit $717 $664 $762 $706 $685 $697 $692
Nine months ended
September 30
Average physical occupancy 94.0% 94.6% 94.2% 97.1% 94.3% 95.0% 93.9%
Average economic occupancy 95.2% 94.8% 95.1% 97.3% 94.3% 95.5% 94.3%
Average monthly revenue/unit $710 $655 $768 $702 $682 $692 $684
</TABLE>
9
<PAGE>
On a same-units basis, average economic occupancy improved by 1.3% through nine
months, and average monthly revenue per unit improved by 1.3% through nine
months of 1997 compared to 1996.
We own apartment communities in Charlotte, North Carolina; Greensboro, North
Carolina; and Virginia Beach, Virginia. Our apartments are priced in the
moderate to moderately high range for apartments available within these markets.
Despite a substantial amount of new construction, especially in Charlotte and
Greensboro, these markets have remained relatively strong. This strength is
primarily attributable to demand for apartments created by continued population
and job growth. The Company experienced a nominal reduction in average economic
occupancy during 1996. We have successfully maintained a slight increase in
average monthly revenue per unit and increased occupancy through the first three
quarters of 1997.
We have utilized three techniques to achieve these results: monitoring and
managing lease expiration dates; encouraging residents to sign longer lease
terms, up to 24 months; and providing incentives for residents who renew their
leases. Approximately one third of our leases in effect are for a duration of 13
months or more. While we expect some continued pressure in our markets through
1997, we do not expect this will have a material adverse effect on the Company's
operations or cash flows.
Restaurant rental income was the minimum rent under the lease agreement with
Boddie-Noell Enterprises, Inc. in the first three quarters of both 1997 and
1996. Under the terms of the lease agreement, restaurant rental income is the
greater of the minimum rent of $4.5 million per year or 9.875% of food sales.
For the third quarter of 1997, sales at the Company's restaurants totaled
$11,564,000, a decrease of 5.0% compared to third quarter of 1996. Through nine
months of 1997, sales at the Company's restaurants totaled $33,364,000, a
decrease of 1.5% compared to the first nine months of 1996. For percentage rent
payments to resume, restaurant sales would have to increase by 1.3 percent over
1996 sales levels.
The Company has a 95% economic interest in the Management Company and received
equity income of $19,000 during the third quarter of 1997 compared to $35,000 in
the third quarter of 1996. Equity in income of the Management Company increased
significantly year-to-date in 1997 compared to 1996, primarily due to the
Management Company's receipt during the first quarter of refinancing fees from
two managed properties and one-time sales commissions from two managed
properties. We do not expect the operation of the Management Company to have a
significant effect on the financial position, operating results, or cash flows
of the Company in future periods.
The increase in interest and other income for the third quarter and through nine
months of 1997 compared to 1996 is primarily attributable to interest and fees
earned on loans made to facilitate the rehabilitation of The Villages. Effective
February 27, 1997, the Company entered into a participating loan agreement with
The Villages, described in detail in our Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1997. Through September 30, 1997, we have
advanced approximately $1,413,000 under the loan agreement, and have recorded
interest income of approximately $68,000. Interest expense on related borrowings
totals approximately $37,000 through September 30, 1997.
Expenses. Expenses in the third quarter and through nine months of 1997 were
generally consistent with our expectations. The increase in depreciation
compared to 1996 amounts reflects the acquisition of Paces Village Apartments
($10.7 million in apartment property assets) in April 1996, along with
improvements at other apartment properties. The increase in amortization expense
is primarily attributable to quarterly additions to the intangible asset related
to the earn-out provision of the 1994 BT Venture Corporation ("BTVC")
acquisition agreement.
Apartment operations expense increased by 7.4% in the third quarter and 15.8%
through nine months of 1997 compared to 1996. These increases reflect the impact
of the Paces Village acquisition in April 1996, increased costs associated with
attracting and retaining residents in a more competitive apartment market, and
preventive maintenance expenditures. Apartment operations expense totaled 33.4%
of related income in third quarter 1997 compared to 31.6% in third quarter of
1996, and 32.1% of related income through nine months of 1997 compared to 30.4%
through nine months of 1996.
10
<PAGE>
Operating expenses relating to restaurant properties are insignificant because
of the restaurant properties' triple net lease arrangement.
The increase in interest expense in the third quarter and through nine months of
1997 compared to 1996 is primarily attributable to the addition of $10,650,000
of debt related to the acquisition of Paces Village in the second quarter of
1996. Weighted average interest rates were 8.1% in the third quarter of 1997 and
8.0% through nine months of both 1997 and 1996.
Funds from operations. Funds from operations (frequently referred to as "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." Consistent with NAREIT
guidelines, we have disregarded all one-time fees received by the Management
Company in the first quarter of 1997 in calculating funds from operations.
We consider funds from operations to be useful in evaluating potential property
acquisitions and measuring the operating performance of an equity REIT because,
together with net income and cash flows, funds from operations provides
investors with an additional basis to evaluate the ability of the REIT to incur
and service debt and to fund acquisitions and other capital expenditures. Funds
from operations does not represent net income or cash flows from operations as
defined by generally accepted accounting principles. You should not consider
funds from operations to be an alternative to net income as an indicator of the
Company's operating performance or as an alternative to cash flows as a measure
of liquidity.
Funds from operations does not measure whether cash flow is sufficient to fund
all of the Company's cash needs, including principal amortization, capital
improvements and distributions to shareholders. Funds from operations does not
represent cash flows from operating, investing or financing activities as
defined by generally accepted accounting principles. Further, funds from
operations as disclosed by other REITs may not be comparable to the Company's
calculation of funds from operations.
A reconciliation of net income to funds from operations is as follows (all
amounts in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
1997 1996 1997 1996
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Net income $ 439 $ 463 $1,292 $1,278
Depreciation 644 627 1,923 1,787
Amortization of management intangible 97 81 278 231
Less non-recurring equity income items
excluded from FFO - - (103) -
--------------- --------------- -------------- ---------------
Funds from operations $1,180 $1,171 $3,391 $3,295
=============== =============== ============== ===============
</TABLE>
Funds from operations increased by 0.7% in third quarter of 1997 compared to
1996. Funds from operations increased by 2.9% through nine months of 1997
compared to 1996, primarily attributable to improved operations at apartment
properties and the inclusion of operations of Paces Village for the full period
in 1997.
11
<PAGE>
Liquidity and Capital Resources
Capital resources. At September 30, 1997, the Company's total book
capitalization was $102,347,000, comprised of $23,950,000 shareholders' equity
and $78,397,000 debt.
During the third quarter of 1997, we issued 10,201 shares of common stock under
our Dividend Reinvestment and Stock Purchase Plan ("DRIP") for cash proceeds
totaling approximately $146,000.
During the third quarter of 1997, we recorded liability for additional
consideration of $141,667 to the former BTVC shareholders pursuant to an
earn-out provision in the BTVC acquisition agreement. No shares were issued
pursuant to this earn-out provision during the third quarter of 1997. Under the
terms of the acquisition agreement, at September 30, 1997, the former BTVC
shareholders were due additional consideration totaling approximately $572,000,
payable at the Company's option in up to 43,438 shares of common stock or in
cash. The earn-out period ended with the quarter ended September 30, 1997. By
agreement, the Company is prohibited from issuing such shares of common stock if
such issuance would cause the Company to become disqualified as a REIT.
We expect to issue these shares in January 1998.
Effective August 1, 1997, we modified the Company's note payable to a bank in
the principal sum of up to $25,500,000 ($23,900,000 outstanding) to extend the
maturity of the note, by one year, to December 1999.
During the third quarter of 1997, we advanced approximately $569,000 to The
Villages under the participating loan agreement, which provides for interest at
the greater of 12.5 percent or 30-day LIBOR plus 6.125 percent plus shared
income interest. These advances were funded by draws under the Company's 1996
credit facility with a bank for borrowings at 30-day LIBOR plus 2.25 percent,
secured by second deeds of trust on three apartment properties.
At September 30, 1997, the weighted average interest rate on outstanding debt
was 8.0%, with long-term debt comprised of $60,032,000 at fixed interest rates
and $18,365,000 at variable rates indexed on 30-day LIBOR rates. A 1% increase
in variable rates would increase annual interest expense by approximately
$167,000, while a 1% decrease in variable rates would decrease annual interest
expense by approximately $185,000.
Cash flows and liquidity. We define funds available for distribution as funds
from operations plus non-cash expense for amortization of loan costs, less
payments for scheduled amortization of debt principal and recurring capital
expenditures.
A reconciliation of funds from operations to funds available for distribution,
along with summary cash flow information, is as follows (all amounts in
thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
1997 1996 1997 1996
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Funds from operations $ 1,180 $ 1,171 $ 3,391 $ 3,295
Amortization of loan costs 49 58 161 163
Scheduled debt principal payments (125) (117) (368) (341)
Recurring capital expenditures (87) (166) (300) (293)
Non-recurring equity income items
excluded from FFO - - 103 -
--------------- --------------- -------------- ---------------
Funds available for distribution $ 1,017 $ 946 $ 2,986 $ 2,825
=============== =============== ============== ===============
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
1997 1996 1997 1996
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Net cash provided by (used in):
Operating activities $ 1,349 $ 1,364 $ 3,711 $ 3,929
Investing activities (736) (140) (1,696) (10,966)
Financing activities (418) (956) (1,451) 7,288
Dividends and distributions paid to shareholders $ 965 $ 935 $ 2,885 $ 2,806
Nonrecurring capital expenditures:
Acquisition improvements and replacements $ 16 $ 19 $ 57 $ 122
Other apartment property improvements 65 6 124 11
</TABLE>
The Company paid dividends of $0.31 per share in each of the first three
quarters of both 1997 and 1996. These dividends were funded from cash provided
by operating activities.
We capitalize expenditures relating to acquiring new assets, materially
enhancing the value of an existing asset, or substantially extending the useful
life of an existing asset. All carpet and vinyl replacements are capitalized.
Additions to apartment properties were funded from cash provided by operating
activities and proceeds of common stock issued through the Company's DRIP.
In February 1997 the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share," which is required to be adopted on December 31, 1997.
At that time, we will be required to change the method currently used to compute
earnings per share and to restate all prior periods. Under the new requirements
for calculating primary earnings per share, the dilutive effect of stock options
will be excluded. The impact of Statement 128 on the calculation of primary and
fully diluted earnings per share is not expected to be material.
Short- and long-term liquidity requirements. We continue to produce sufficient
cash flow to fund our regular dividend. The Company has announced that it will
pay a regular quarterly dividend of $0.31 per share on November 14, 1997, to
shareholders of record on October 31, 1997.
We generally expect to meet short-term liquidity requirements through net cash
provided by operations and utilization of credit facilities. We believe that net
cash provided by operations is, and 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 term and the long term. We anticipate
funding acquisition activities primarily by using short-term credit facilities
as an interim measure, to be replaced by funds from equity offerings or
long-term debt. We expect to meet our 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. We believe we
have sufficient resources to meet our short-term liquidity requirements.
We do not believe that inflation poses a material risk to the Company. The
leases at our apartment properties are short-term in nature, with none exceeding
two years. The restaurant properties are leased on a triple-net basis, which
places the risk of rising operating and maintenance costs on the lessee.
13
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PART II - Other Information
Item 5. Other Information
Recent developments
Conversion to UPREIT. We are currently in the process of converting to an
umbrella partnership real estate investment trust ("UPREIT"). An UPREIT is a
real estate investment trust that controls and holds most of its properties
through an umbrella limited partnership.
Agreement to acquire seven apartment communities. On September 22, 1997, we
signed an agreement to acquire a portfolio of seven apartment communities
containing 1,356 apartment units located in North Carolina. Phase I of the
acquisition consists of 880 apartment units in four apartment communities. We
expect to complete Phase I of the acquisition in late November 1997. The
remaining three properties are currently under development, with expected
completion dates within the next 12 months. We will acquire these communities
when they are completed and achieve predetermined occupancy and rental levels.
Pending Common Stock offering. On November 7, 1997, we filed a Registration
Statement on Form S-2 under which we will issue 2,800,000 shares of our common
stock. We have granted the underwriters an over-allotment option; if they choose
to exercise such option in full, we will issue an additional 420,000 shares. The
offering will be made only by means of a prospectus. We anticipate that the
Registration Statement will be declared effective and that we will complete this
offering in December 1997.
Executive employment contracts. In July 1997, we entered into substantially
identical employment contracts with D. Scott Wilkerson (President and Chief
Executive Officer) and Philip S. Payne (Executive Vice President and Chief
Financial Officer). These four year agreements, subject to automatic annual
renewal for additional one year periods extending the term to a maximum of ten
years, provide for initial base salaries of $139,920, annual discretionary bonus
as determined by the Board of Directors, and participation in an incentive
compensation plan we intend to establish, along with specified death and
disability benefits. The agreements provide for severance payments equal to base
salary for the remaining term of the contract (excluding any unexercised renewal
periods) in the event of termination without cause. Alternatively, in the event
of change in control of the Company, the agreements provide for payments of
three times base salary, discretionary bonus and annual bonus, along with a lump
sum cash payment of the benefit the executive would otherwise have received had
all stock options and other stock based compensation been fully vested, been
exercised and become due and payable.
Also in July 1997, we entered into an employment agreement with Pamela B. Novak,
Vice President, Controller and Chief Accounting Officer of the Company. The two
year agreement is substantially identical to agreements signed by Messrs.
Wilkerson and Payne, except that such agreement provides for a base salary of
$90,000 and severance payments of the greater of the remaining term of the
agreement or one year's total compensation.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits:
Exhibit 2 Certificate of Correction to Articles of Merger dated
July 22, 1997, between Boddie-Noell Properties, Inc. and
Boddie-Noell Properties of Maryland, Inc., dated
August 5, 1997
Exhibit 10 Form and description of Employment Agreements dated
July 15, 1997, between Boddie-Noell Properties, Inc. and
certain officers.
Exhibit 27 Financial data schedule (electronic filing)
b) Reports on Form 8-K: None
14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BODDIE-NOELL PROPERTIES, INC.
(Registrant)
November 13, 1997 /s/ Philip S. Payne
-----------------------
Philip S. Payne
Executive Vice President and
Chief Financial Officer
(Duly authorized officer)
November 13, 1997 /s/ Pamela B. Novak
-----------------------
Pamela B. Novak
Vice President, Controller and
Chief Accounting Officer
15
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Page
<S> <C> <C>
2 Certificate of Correction to Articles of Merger dated July 22, 1997, between
Boddie-Noell Properties, Inc. and Boddie-Noell Properties of Maryland, Inc.,
dated August 5, 1997 17
10 Form and description of Employment Agreements dated July 15, 1997, between
Boddie-Noell Properties, Inc. and certain officers. 21
27 Financial data schedule (electronic filing) -
</TABLE>
16
<PAGE>
EXHIBIT 2
CERTIFICATE OF CORRECTION TO
ARTICLES OF MERGER
I. Boddie-Noell Properties of Maryland, Inc., a Maryland corporation (the
"Surviving Corporation"), and Boddie-Noell Properties, Inc., a Delaware
corporation (the "Merging Corporation"), merged on July 31, 1997 pursuant to
Articles of Merger filed with the State of Maryland Department of Assessments
and Taxation on July 23, 1997.
II. Section V of the Articles of Merger as previously filed stated: The
Articles of Incorporation of the Surviving Corporation shall be amended as part
of the merger as follows: Article II shall be amended to read: "The name of the
corporation (the "Corporation") is Boddie-Noell Properties, Inc."
III. Section V of the Articles of Merger is hereby corrected to read: The
Articles of Incorporation of the Surviving Corporation shall be amended as part
of the merger as follows: (1) Article II shall be amended to read: "The name of
the corporation (the "Corporation") is Boddie-Noell Properties, Inc."; and (2)
Section 5.5 of Article V shall be deleted in its entirety.
17
<PAGE>
IN WITNESS WHEREOF, this Certificate of Correction to Articles of Merger
have been executed by the parties hereto by their duly authorized officers this
5th day of August 1997.
ATTEST: BODDIE-NOELL PROPERTIES, INC.
/s/ Philip S. Payne By: /s/ D. Scott Wilkerson
- --------------------- -----------------------------
Philip S. Payne D. Scott Wilkerson
Assistant Secretary President
[Corporate Seal]
ATTEST: BODDIE-NOELL PROPERTIES OF
MARYLAND, INC.
/s/ Philip S. Payne By: /s/ D. Scott Wilkerson
- --------------------- -----------------------------
Philip S. Payne D. Scott Wilkerson
Secretary President
[Corporate Seal]
18
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PRESIDENT'S CERTIFICATE
I, D. Scott Wilkerson, President of Boddie-Noell Properties, Inc., hereby
acknowledge that the execution of the Certificate of Correction to Articles of
Merger dated as of August ___, 1997, to which this certificate is attached, was
the act of Boddie-Noell Properties, Inc. Under the penalties for perjury, I
hereby certify that the matters and facts set forth therein with respect to
authorization and approval are true in all material respects to the best of my
knowledge, information and belief.
WITNESS my hand on this 5th day of August, 1997.
/s/ D. Scott Wilkerson
-----------------------------
D. Scott Wilkerson, President
19
<PAGE>
PRESIDENT'S CERTIFICATE
I, D. Scott Wilkerson, President of Boddie-Noell Properties of Maryland,
Inc., hereby acknowledge that the execution of the Certificate of Correction to
Articles of Merger dated as of August ___, 1997, to which this certificate is
attached, was the act of Boddie-Noell Properties of Maryland, Inc. Under the
penalties for perjury, I hereby certify that the matters and facts set forth
therein with respect to authorization and approval are true in all material
respects to the best of my knowledge, information and belief.
WITNESS my hand on this 5th day of August, 1997.
/s/ D. Scott Wilkerson
-----------------------------
D. Scott Wilkerson, President
20
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EXHIBIT 10
Form and Description of Employment Agreements dated July 15, 1997
Agreements between the Company and the following individuals are substantially
identical in all material respects except as identified below:
D. Scott Wilkerson* - President and Chief Executive Officer
Base salary $139,920
Rolling term Four years, extended each year for an additional
one year on each anniversary to a maximum term of
10 years
Death benefit Greater of annual base salary in effect at date
of death, or such base salary multiplied by a
ratio equal to the number of years employed
hereunder divided by three
Severance benefit Base salary for remaining period contract would
otherwise have been in force without extension
Termination benefit Three times base salary, discretionary bonus and
annual bonus
Change in control benefit Three times base salary, discretionary bonus and
annual bonus; lump sum cash payment of the benefit
the executive would otherwise have received had
all stock options and other stock based
compensation been fully vested, been exercised
and become due and payable; foregiveness of all
indebtedness to the Company up to $50,000
Philip S. Payne - Executive Vice President and Chief Financial Officer
Base salary $139,920
Rolling term Four years, extended each year for an additional
one year on each anniversary to a maximum term of
10 years
Death benefit Greater of annual base salary in effect at date
of death, or such base salary multiplied by a
ratio equal to the number of years employed
hereunder divided by three
Severance benefit Base salary for remaining period contract would
otherwise have been in force without extension
Termination benefit Three times base salary, discretionary bonus and
annual bonus
Change in control benefit Three times base salary, discretionary bonus and
annual bonus; lump sum cash payment of the benefit
the executive would otherwise have received had
all stock options and other stock based
compensation been fully vested, been exercised
and become due and payable; foregiveness of all
indebtedness to the Company up to $50,000
Pamela B. Novak - Vice President, Controller and Chief Accounting Officer
Base salary $90,000
Rolling term Two years, extended each year for an additional
one year on each anniversary to a maximum term
of 10 years
Death benefit Annual base salary
Severance benefit Annual base salary
Termination benefit Annual base salary, discretionary bonus and
annual bonus
Change in control benefit Annual base salary, discretionary bonus and annual
bonus; lump sum cash payment of the benefit the
executive would otherwise have received had all
stock options and other stock based compensation
been fully vested, been exercised and become due
and payable
*Copy of agreement attached
21
<PAGE>
EXECUTIVE EMPLOYMENT CONTRACT
BETWEEN
Boddie - Noell Properties, Inc.
AND
D. Scott Wilkerson
Dated: July 15, 1997
22
<PAGE>
STATE OF NORTH CAROLINA
EXECUTIVE EMPLOYMENT CONTRACT
COUNTY OF MECKLENBURG
THIS EXECUTIVE EMPLOYMENT CONTRACT (the "Contract") is made and entered
into, as of the date appearing on the signature page hereof, by and between
BODDIE - NOELL PROPERTIES, INC., a Maryland corporation having its
principal office and place of business in Charlotte, Mecklenburg
County, North Carolina (hereinafter referred to as the "Company"), and
D. SCOTT WILKERSON (hereinafter referred to as "Executive").
Statement of Purpose
The Company desires (i) to secure Executive's continued participation
and services in the business of the Company in the manner hereinafter specified
and subject to certain covenants of Executive and (ii) to make provision for
payment of reasonable and proper compensation to Executive for such services and
covenants. Such payments of compensation are acknowledged to contain additional
consideration to Executive above, and in addition to, any current compensation
arrangements for Executive. Executive is willing to be employed by the Company
to perform the duties required by, and incident to, such employment upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the aforesaid Statement of Purpose,
the terms and provisions of this Contract and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto mutually consent, covenant, represent, warrant and agree as
follows:
1. Employment and Duties. The Company hereby employs Executive, and
Executive hereby accepts said employment, in the capacity set forth on Exhibit A
hereto. In such capacity, Executive shall perform such duties as may be assigned
to Executive, from time to time, by the Board of Directors of the Company, or
their designees. The Company shall not demote Executive, in title or otherwise,
or materially decrease Executive's current duties or responsibilities with the
Company without the express written consent of Executive. In addition, Executive
agrees to serve in such other corporate office or offices and on such boards or
committees of the Company as requested from time to time by the Board of
Directors of the Company. In the performance of Executive's duties hereunder,
Executive shall at all times be under the supervision, control and direction of
the Board of Directors of the Company, and Executive shall perform Executive's
duties hereunder in accordance with, and shall at all times strictly adhere to,
all such reasonable rules, regulations and instructions as may be adopted from
time to time by the Board of Directors of the Company.
2. Exclusive Employment.
(a) Full Time Employment. Executive agrees to devote Executive's best
efforts, and corresponding time during customary business hours (and at such
other times as required by the Company, as the Board of Directors of the Company
reasonably may determine from time to time), to the business of the Company.
Executive acknowledges that in performing services hereunder, as occasions
require, Executive will be required to work later than normal business hours and
will be required to travel. Except as otherwise expressly provided herein,
during the continuation of this Contract, Executive will not actively engage in
any business for Executive's own account without the prior written approval of
the Board of Directors of the Company and will not accept any employment
whatever from any other person, firm or corporation.
23
<PAGE>
(b) Accountability. Executive's accountability and liability for
performing the services required of Executive hereunder shall survive the
termination of Executive's employment under this Contract, regardless of the
date, cause or manner of such termination.
(c) Termination of Prior Agreement. Upon execution of this Contract by
the Company and Executive, that certain Employment Agreement dated October 1,
1994 (the "Prior Agreement"), entered into by and between the Company and
Executive is hereby terminated and is of no further force or effect. The terms
and provisions of this Contract shall hereafter govern the employment
relationship between the Company and Executive and shall supersede the terms and
provisions of the Prior Agreement, including any provisions of the Prior
Agreement intended to survive the termination of the Prior Agreement. In no
event, however, shall the termination of the Prior Agreement (i) be construed as
a termination of employment for purposes of repayment of any indebtedness owed
by Executive to the Company or result in an acceleration of the repayment of any
such indebtedness or (ii) affect Executive's participation in other plans or
programs of the Company including without limitation the Company's stock option
plan.
3. Representations of Executive. Executive represents and warrants
to the Company that Executive has the capacity and power to enter into this
Contract and to perform Executive's obligations hereunder. Further, Executive
represents and warrants to the Company (i) that Executive is not restricted by
any agreements or covenants binding on Executive which impose noncompetition,
nonsolicitation or similar restraints on Executive, including without limitation
any agreements or covenants between Executive and any previous employer of
Executive and (ii) that Executive is not subject to any other restraints of any
kind which would impair or encumber Executive's ability to perform the duties
and obligations required of Executive hereunder. In performing Executive's
services hereunder, Executive agrees not to use or divulge any confidential or
proprietary information obtained by Executive from Executive's previous
employers.
4. Term of Employment.
(a) Executive's employment hereunder shall commence as of the date
hereof and shall continue until terminated at the earliest of the following:
(i) Rolling Term. Executive's employment hereunder shall continue for a
period of four (4) years from the date hereof; provided, however, that
such term shall be extended each year for an additional one (1) year on
each anniversary date of this Contract up to a maximum of six (6)
additional years (i.e., extending the term of this Contract to ten
years) unless either party gives notice to the other party of that
party's intention that there be no further extensions of this Contract
within the ninety (90) day period immediately preceding any such
anniversary date. If no such notice is given within such ninety (90)
day period, then the term of this Contract shall be extended for one
(1) additional year. If such notice is provided within such period,
this Contract shall continue in full force and effect for the remainder
of the then current term (three years from the subject anniversary
date) without further extension.
(ii) Death. Executive's employment hereunder shall terminate
automatically upon Executive's death.
(iii) Cause. The Company may terminate Executive's employment hereunder
at any time for Cause (as defined below) upon giving Executive notice
of such termination, said termination to be effective as of (A) the
date of such notice if the Company reasonably determines that such
Cause cannot be cured by Executive or (B) the date thirty (30) days
following the date of such notice if the Company reasonably determines
that such Cause can be cured and such Cause is not cured to the
satisfaction of the Company during such thirty (30) day period.
24
<PAGE>
(iv) Notice. The Company or Executive may terminate Executive's
employment hereunder at any time by giving notice of such termination
to the other party, said termination to be effective on the date thirty
(30) days after the date of such notice or such later date as is
specified in the notice; provided, however, that the Company in its
sole and absolute discretion may elect to accelerate the effective date
of such termination to a date specified by the Company by paying to
Executive the compensation the Company would have paid Executive during
the period from the specified date to the date thirty (30) days after
the date of the termination notice.
(v) Good Reason. Executive may terminate Executive's employment
hereunder at any time for Good Reason (as defined below) upon giving
the Company notice of such termination, said termination to be
effective as of (A) the date of such notice if Executive reasonably
determines that such Good Reason cannot be cured by the Company or (B)
the date thirty (30) days following the date of such notice if
Executive reasonably determines that such Good Reason can be cured and
such Good Reason is not cured to the satisfaction of Executive during
such thirty (30) day period.
(vi) Disability. The Company may terminate Executive's employment
hereunder upon the determination by the Company of the Disability (as
defined below) of Executive, said termination to be effective as of the
date of such determination; provided, however, that if Executive is
then covered by a Company-provided individual or group long-term
disability insurance policy, such effective date shall be no sooner
than the date Executive is determined to be "disabled" under such
policy and commences receiving benefits thereunder.
As used in this Contract, the term "Cause" means an act, action or
series of acts or actions by Executive which constitute or cause or result in:
(A) a deliberate or intentional material misrepresentation by Executive
in Executive's relations with the Company,
(B) the commission of a crime by Executive which constitutes (1) a
felony or (2) a misdemeanor which involves moral turpitude or which has
a material adverse effect on the Company, its business, reputation, or
interests,
(C) a material breach of any contract or agreement between Executive
and the Company (including this Contract) or a material breach by
Executive of a fiduciary duty or responsibility to the Company, which
has not been cured within permitted time periods,
(D) Executive's becoming an alcoholic or addicted to habit-forming
drugs, or
(E) the willful, negligent or wanton misconduct of Executive which
results in material damage to the Company, its business, reputation or
interests.
As used in this Contract, the term "Disability" means Executive's
becoming disabled by reason of physical and mental infirmity or both, thereby
rendering Executive unable to satisfactorily perform Executive's duties under
this Contract, said disability to be determined (i) on the basis of
certification of two (2) physicians duly licensed to practice medicine in the
State of North Carolina or (ii) in good faith by the Board of Directors of the
Company in the event that Executive fails or refuses to submit to the
examination of any such physician upon the request of the Board of Directors of
the Company.
As used in this Contract, the term "Good Reason" means an act, action
or series of acts or actions by the Company which constitute or cause or result
in:
25
<PAGE>
(A) an assignment to Executive of any duties responsibilities or status
materially inconsistent with, or which constitute a material change in,
Executive's current position, duties, responsibilities or status with
the Company,
(B) a material change in Executive's current reporting
responsibilities, title or offices,
(C) removal of Executive from, or failure to re-elect Executive to, any
such positions, except in connection with the termination of this
Contract by the Company for Cause or due to Executive's death or
Disability,
(D) a reduction by the Company of Executive's Base Salary below the
amount specified in Paragraph 1 of Exhibit A, as the same shall be
increased from time to time,
(E) a disproportionately material adverse effect on Executive's
participation in any benefit plan of the Company in which Executive is
participating or disproportionate material reduction of Executive's
benefits thereunder,
(F) a material reduction in any fringe benefit enjoyed by Executive
relative to other comparably situated executives of the Company, or
(G) without Executive's consent, the Company's requiring Executive to
be based at a location which is fifty (50) miles or more further from
Executive's primary residence at the time such requirement is imposed
than such residence is from the Company's office at which Executive is
primarily rendering services at such time.
(b) The provisions of Paragraphs 5, 6, 7, 8, 9, 10 and 11 hereof shall
survive the termination of Executive's employment under this Contract to the
extent provided therein, regardless of the date, cause or manner of such
termination, and such termination shall not impair or otherwise affect
Executive's obligations to strictly observe the provisions of Paragraphs 5, 6,
7, 8, 9, 10 and 11 hereof.
5. Compensation and Benefits. Subject to the terms of this Contract,
and except as otherwise expressly provided herein, until the termination of
Executive's employment hereunder, the Company shall pay compensation and provide
benefits to Executive as set forth in Exhibit A, which is attached hereto and
hereby made a part hereof. The provisions of Exhibit A shall survive the
termination of Executive's employment under this Contract, to the extent
provided therein, regardless of the date cause or manner of such termination.
6. Executive to Return Property and Information. Upon the
termination of Executive's employment under this Contract, regardless of the
date, cause or manner of such termination, Executive (or, in the event of the
death of Executive, Executive's personal representatives, beneficiaries, heirs
and successors) shall turn over and return to the Company all property
whatsoever of the Company in or under Executive's (or their) possession or
control, including without limitation all Confidential Information as that term
is defined in Paragraph 7 below. Executive acknowledges and agrees that any
compensation due Executive at the time of such termination may be withheld in
full by the Company pending receipt of such property. The provisions of this
Paragraph 6 shall survive the termination of Executive's employment under this
Contract, regardless of the date, cause or manner of such termination.
7. Executive Not to Divulge Confidential Information.
(a) Executive expressly covenants and agrees that Executive will not,
during or after Executive's period of employment with the Company,
26
<PAGE>
(i) use any Confidential Information (as defined below), except in the
performance of Executive's services hereunder,
(ii) reveal or disclose any such Confidential Information to any
person, firm, corporation or other entity outside the Company, or
(iii) except in the performance of Executive's services hereunder,
remove or aid in the removal from the premises of the Company any such
Confidential Information or any material which relates thereto.
As used in this Contract, the term "Confidential Information" means any
information which
(i) is, or is designed to be, used in the business of the Company, an
Affiliate (as defined below) or a Customer of the Company (as defined
below),
(ii) is private or confidential and derives independent actual or
potential commercial value from not being generally known or available
to the public, and
(iii) gives the Company, an Affiliate or a Customer of the Company an
opportunity to obtain an advantage over competitors who do not know or
use such information
and shall include, but shall not be limited to, any customer lists, pricing
lists, inventory lists, trade secrets, know-how, customer histories, customer
specifications, employee, agent and contractor data, programs, products, product
designs, call lists, studies, pricing policies, marketing plans, financial
information, sketches, drawings, research, formulae, processes, software,
designs, surveys or plans of the Company, an Affiliate or a Customer of the
Company now or hereafter owned by, or licensed or franchised to, the Company, an
Affiliate or a Customer of the Company.
As used in this Contract, the term "Affiliate" means any business
entity that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with the Company.
As used in this Contract, the term "Customer" means any person or
entity who was or is a customer or client of the Company during the term of
Executive's employment by the Company hereunder or under previous employment by
the Company.
(b) Executive shall at any time and from time to time on demand, advise
and inform the Company of all Confidential Information possessed or known by or
entrusted to Executive so that the Company may know at all times the extent to
which knowledge of Confidential Information is being utilized or is possessed or
known by Executive.
(c) The provisions of this Paragraph 7 shall survive the termination of
Executive's employment under this Contract, regardless of the date, cause or
manner of such termination.
8. Right to Inventions, Designs, Documents, Marks, Names and Trade
Secrets. Executive agrees that Executive will promptly, from time to time, fully
inform, disclose and assign to the Company all inventions, designs, documents,
marks, names, improvements, discoveries and trade secrets which pertain or
relate to the business of the Company, or any business incidental or related
thereto, and which in whole or in part are derived from or are the result of
Executive's work with the Company, that Executive shall conceive, make or come
into possession of during Executive's period of employment with the Company
under this Contract and during a period of one (1) year [twelve (12) full
calendar months] following the effective date of the termination of Executive's
employment under this Contract. The provisions of this Paragraph 8 shall survive
the termination of Executive's employment under this Contract, regardless of the
date, cause or manner of such termination.
27
<PAGE>
9. Covenant Not to Compete.
(a) Executive agrees and covenants that during the term of Executive's
employment hereunder and for a period of one (1) year [twelve (12) full calendar
months] following the effective date of the termination of Executive's
employment hereunder for any one of the following reasons:
(i) termination by the Company for Cause, or
(ii) termination by Executive, other than for Good Reason,
Executive will not, without the advance written consent of the Company, Compete
(as defined below), directly or indirectly, within the Restricted Territory (as
defined below).
(b) As used in this Contract, the term "Compete" means
(i) becoming an officer, employee, director, agent, representative or
consultant of a corporation, or
(ii) becoming an employee, agent, consultant, representative, partner
or member of a business, firm, partnership, limited liability company
or other entity, or
(iii) having, directly or indirectly, a proprietary interest in a
business, firm, partnership, limited liability company or other entity
or
(iv) owning, directly or indirectly, any stock in a corporation that
engages in the operation, management or leasing of any multi-family residential
properties or conducts any business which provides services or materials that
compete with any of the Company's services or materials; provided, however, that
Executive may own not in excess of one percent (1%) of the total outstanding
capital stock in any such competing corporation which is actively traded in the
over-the-counter market or is listed and traded on a national securities
exchange.
(c) As used in this Contract, the term "Restricted Territory" means the
following:
(i) Mecklenburg County, North Carolina;
(ii) any county in the State of North Carolina where the Company is
engaged in business at the time of such termination of Executive's
employment hereunder;
(iii) any county in the Commonwealth of Virginia where the Company is
engaged in business at the time of such termination; and
(iv) any county in any other state in which the Company is engaged in
business at the time of such termination.
Executive agrees that the Restricted Territory is reasonable in scope given
Executive's position with the Company and the real and potential competition
encountered by the Company and reasonably expected to be encountered by the
Company.
28
<PAGE>
10. Injunctive Relief and Damages. Executive hereby acknowledges the
importance and value of the business relationships and competitive position
developed and maintained by the Company and its Affiliates and the need to
protect the same. In the event that Executive violates or breaches any provision
of Paragraphs 7 or 9 hereof, the Company shall be entitled to enjoin such
violation or breach and any further violation or breach as well as to an
equitable accounting of earnings, profits and other benefits arising from such
violation, which rights shall be cumulative and in addition to any other
remedies to which the Company may be entitled at law or in equity. The Company
shall also be entitled to recover from Executive reasonable attorneys' fees
incurred by the Company in enforcing the provisions of Paragraphs 7 or 9. The
provisions of this Paragraph 10 shall survive the termination of Executive's
employment under this Contract, regardless of the date, cause or manner of such
termination.
11. Other Employees of the Company. Executive agrees that during the
term of Executive's employment hereunder and for a period of one (1) year
[twelve (12) full calendar months] following the effective date of the
termination of Executive's employment hereunder, Executive shall not, without
the specific prior written consent of the Company, induce or attempt to induce
any employee of the Company to leave such employment. In the event Executive
violates or breaches any provision of this Paragraph 11 with respect to an
employee, the Company shall be entitled to enjoin such violation or breach and
any further violation or breach and to recover from Executive as liquidated
damages for potential or real loss by the Company of the services of such
employee (i) an amount equal to the gross compensation paid by the Company to
that employee during the eighteen (18) month period immediately preceding the
violation or breach and (ii) reasonable attorneys' fees incurred by the Company
in enforcing the provisions of this Paragraph 11. The provisions of this
Paragraph 11 shall survive the termination of Executive's employment under this
Contract, regardless of the date, cause or manner of such termination.
12. Assignment. Executive may not assign this Contract or any of
Executive's rights, benefits, obligations or duties hereunder to any other
person, firm, corporation or other entity, this Contract being personal in
nature as to Executive. The Company may assign this Contract to an Affiliate or
to any successor of the Company, and any such Affiliate or successor shall be
deemed substituted for all purposes for the Company under this Contract. As used
in this Contract, the term "successor" means any person, firm, corporation or
business entity which at any time, whether by merger, purchase or otherwise,
acquires all or substantially all of the assets or business of the Company.
Notwithstanding such assignment, the Company shall remain, with such Affiliate
or successor, jointly and severally liable for all its obligations hereunder.
Failure of the Company to obtain the agreement of any Affiliate or successor to
be bound by the terms of this Contract prior to the effectiveness of any such
assignment or succession shall be a breach of this Contract and shall
immediately entitle Executive to CIC Benefits (as defined in Exhibit A) from the
Company in the same amount and on the same terms as Executive would be entitled
in the event of a Qualifying Termination (as defined in Exhibit A). Except as
herein provided, this Contract may not otherwise be assigned by the Company.
13. Arbitration of Disputes. Executive and the Company agree that all
disputes that may arise between them relating to the interpretation or
performance of this Contract shall be resolved by binding arbitration through an
arbitrator selected through, and operating under, the rules of the American
Arbitration Association or such other arbitrator mutually acceptable to the
parties. The award of the arbitrator shall be final and binding upon the
parties, and judgment upon the award rendered may be entered in any court having
jurisdiction. Each party shall pay its own legal fees and other expenses
associated with the arbitration, provided that the fee for the arbitrator shall
be shared equally.
14. Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given when (i) personally delivered, (ii) delivered to the following address by
a private delivery service such as Federal Express or (iii) placed in the United
States mail by certified mail, return receipt requested, postage prepaid,
addressed to the parties hereto as follows (provided that notice of change of
address shall be deemed given only when received):
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<PAGE>
As to the Company: Boddie - Noell Properties, Inc.
3710 One First Union Center
301 South College Street
Charlotte, North Carolina 28202-6032
As to Executive: The address set forth on Exhibit A.
The address of both the Company and Executive may be changed from time to time
by either party serving notice upon the other.
15. Non-Waiver. No waiver by either party of any breach by the other
party of any provision hereof shall be deemed to be a waiver of any later or
other breach thereof or as a waiver of any such or other provision of this
Contract.
16. Governing Law. This Contract shall be deemed to have been made
and entered into in the State of North Carolina, and the construction, validity
and enforceability of this Contract shall be governed by the laws of the State
of North Carolina.
17. Binding Effect. This Contract shall be binding upon and inure to
the benefit of the Company and its permitted successors and assigns and
Executive and Executive's personal representatives, beneficiaries, heirs and
successors.
18. Entire Contract. This Contract constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes and
cancels all prior or contemporaneous oral or written agreements and
understandings between them with respect to the subject matter hereof. This
Contract may not be changed or modified orally but only by an instrument in
writing signed by the parties hereto, which instrument states that it is an
amendment to this Contract.
19. Severability. Except as equity may require, should any provision
of this Contract or any part thereof be held invalid or unenforceable, the same
shall not affect or impair any other provision of this Contract or any part
thereof, and the invalidity or unenforceability of any provision of this
Contract shall not have any effect on or impair the obligation of the Company or
Executive.
20. Execution. This Contract may be executed in multiple
counterparts, each of which shall be deemed an original hereof.
IN WITNESS WHEREOF, the Company has caused this Contract to be signed
by its duly authorized officers and its corporate seal to be hereunto affixed,
and Executive has hereunto set Executive's hand and seal, all as of the day and
year noted below.
Date: July 15, 1997 "Company"
Boddie - Noell Properties, Inc.
[CORPORATE SEAL]
ATTEST: By: /s/ Douglas E. Anderson
/s/ Philip S. Payne --------------------------------
- --------------------------------
Secretary
"Executive"
/s/ D. Scott Wilkerson
----------------------------------- [SEAL]
D. Scott Wilkerson
30
<PAGE>
EXHIBIT A
Executive Employment Agreement
Name: D. Scott Wilkerson
Address: XXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Telephone #: XXXXXXXXXXXXXXXXXXXXX
Position: President and Chief Executive Officer
Compensation and Benefits
The compensation to be paid, and the benefits to be provided, by the
Company to Executive pursuant to the terms and provisions of the Executive
Employment Contract to which this Exhibit A is attached are as follows:
1. Base Salary. During the term of Executive's employment hereunder,
the Company shall pay to Executive a base salary at an annual rate of One
Hundred Thirty Nine Thousand Nine Hundred and Twenty Dollars ($139,920) (the
"Base Salary") payable at such intervals as shall be in conformity with the
Company's practices, as such practices shall be established or modified from
time to time. Such Base Salary shall be reviewed by the Board of Directors of
the Company on an annual basis, in good faith, and may be adjusted, from time to
time, in the sole and absolute discretion of the Board of Directors. In no event
shall such Base Salary be less than the above-specified amount during the term
of this Contract.
2. Discretionary Bonus. In addition to Executive's Base Salary as
provided for in Paragraph 1 of this Exhibit A, the Company may pay to Executive
an annual discretionary bonus (a "Discretionary Bonus") with respect to each
annual period ending on December 31. The amount of the Discretionary Bonus, if
any, for a particular annual period shall be determined by the Board of
Directors of the Company in good faith, but in its sole and absolute discretion,
based on such factors as the Board of Directors deems appropriate.
3. Incentive Compensation Plan. The Company will establish, and
Executive shall be entitled to participate in, an incentive compensation plan
for executive officers of the Company. The plan will provide for payment of a
cash bonus to Executive if certain Company performance objectives established
for Executive are achieved during an annual period ending on December 31 (the
"Incentive Bonus"). The amount of the Incentive Bonus will be based on a formula
determined for Executive by the Board of Directors of the Company or its
designee and communicated to Executive at the beginning of the annual
performance period. The formula for the Incentive Bonus will be based primarily
on demonstrated improvements in funds from operations, computed on a per share
basis. Any Incentive Bonus may be subject to adjustment to reflect individual
performance as measured by specific qualitative criteria approved by the Board
of Directors or its designee and communicated to Executive at the beginning of
the annual performance period.
4. Loan Program. The Company shall continue to make available to
Executive a loan program, the proceeds of which shall be used for the purchase
of common stock of the Company, on such terms and conditions as are currently
in place or as are otherwise mutually agreeable to Executive and the Company.
5. Business Expense Reimbursement. During the term of the Contract,
the Company will reimburse Executive for all reasonable out-of-pocket expenses
incurred by Executive in performing services hereunder, provided that such
expenses are incurred in accordance with applicable policies of the Company.
Executive shall present to the Company such reasonable documentation and
accountings of such expenses, as requested by the Company, from time to time.
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<PAGE>
6. General Executive Benefits. The Company shall maintain and
provide coverage and benefits to Executive under life insurance, health
insurance, basic group disability insurance, 401(k), interest-free loan, annual
physical and stock option programs and plans at least as favorable in terms as
those currently in place for Executive on the date hereof . Such health
insurance programs shall include Company paid coverage for dental and health
insurance for the family of Executive. In addition, Executive shall be entitled
to such other benefits, in such form and in such manner and at such times, as
the Board of Directors of the Company, in the exercise of its sole and absolute
discretion, shall from time to time adopt and establish for its executive
employees generally.
7. Death Benefit. In the event that this Contract is terminated by
the death of Executive pursuant to Paragraph 4(a)(ii), the Company shall pay, as
soon as practicable following such death, to the beneficiary designated by
Executive on the records of the Company, or in the absence of such designation
to the estate of Executive, the Death Benefit (defined as follows). The "Death
Benefit" means and refers to the sum of (i) the Base Salary for the month in
which Executive's death occurs to the extent not paid, (ii) any Discretionary
Bonus or Incentive Bonus to which Executive would otherwise have been entitled,
based on Executive's performance through the date of death, assuming that
Executive lived until the end of the annual period with respect to which such
bonuses are computed and was employed by the Company throughout that period and
(iii) an amount equal to the greater of (A) the annual Base Salary of Executive
in effect at the date of death or (B) such Base Salary multiplied by a ratio
equal to the number of full years Executive was employed hereunder divided by
three (3).
8. Disability Benefit. The Company shall provide to Executive such
additional compensation (including amounts necessary to pay all applicable taxes
thereon) as is necessary to pay the premiums on a supplemental disability
insurance policy comparable to the policy currently in place for Executive, and
in lieu of any continuing coverage under such current supplemental policy.
Executive shall apply such compensation to the payment of premiums on such
policy, and the Company shall not be obligated further with respect to
supplemental disability insurance coverage for Executive. Upon termination of
Executive's employment with the Company due to Disability in accordance with
Paragraph 4(a)(vi), Executive shall be entitled to (i) continuation of the life
and health insurance coverage provided under Paragraph 6 of this Exhibit A and
the additional compensation payments referenced above in this Paragraph 8 (to
the extent required to maintain Executive's supplemental disability insurance
coverage), all until the earliest of such Disability ceasing, Executive
attaining age 65, the death of Executive or Executive obtaining comparable
coverage through another employer or otherwise, (ii) continuation of coverage
during any elimination period under the basic group disability insurance
provided under Paragraph 6 of this Exhibit A and (iii) any Discretionary Bonus
or Incentive Bonus to which Executive would otherwise have been entitled based
on Executive's performance through the date of the determination of Disability,
assuming that Executive had not been disabled during the annual period with
respect to which such bonuses are computed and was employed by the Company
throughout that period.
9. Severance and Termination Benefits.
(a) Severance Benefits. In the event that, prior to the seventh
anniversary of this Contract, Executive terminates this Contract for Good Reason
under Paragraph 4(a)(v) or the Company terminates this Contract without Cause
under Paragraph 4(a)(iv) and such termination is not a Qualifying Termination to
which Paragraph 13 of this Exhibit A is applicable, the Company shall continue
to pay and provide to Executive for the remaining period that this Contract
would otherwise have been in force under Paragraph 4(a)(i) without further
extension (i) the Base Salary in effect immediately prior to such termination
and (ii) the general executive benefits described in Paragraph 6 of this Exhibit
A. In addition, Executive shall be entitled to any Discretionary Bonus or
Incentive Bonus to which Executive would otherwise have been entitled based on
Executive's performance through the date of termination, assuming that Executive
had been employed during the annual period with respect to which such bonuses
are computed and was employed by the Company throughout that period.
(b) Termination Benefits. In the event that, on or after the seventh
anniversary of this Contract, Executive terminates this Contract for Good Reason
under Paragraph 4(a)(v) or the Company terminates this Contract without Cause
under Paragraph 4(a)(iv) or in the event that this Contract terminates by
expiration
32
<PAGE>
pursuant to Paragraph 4(a)(i) and no mutually agreeable successor contract
is entered into by the Company and Executive, the Company shall pay and provide
to Executive the following termination benefits:
(i) In the event that a Change of Control (as defined in Paragraph
13(b) of this Exhibit A) has occurred prior to such termination and
such termination is not otherwise a Qualifying Termination to which
Paragraph 13 is applicable, Executive shall be paid and provided the
CIC Benefits as set forth in Paragraph 13 of this Exhibit A as if a
Qualifying Termination had occurred on that termination date. To the
extent such CIC Benefits are in the form of monetary payments, such
payments shall be made, to the extent practicable, in two equal
installments, with the first installment due as soon as practicable
following such termination date and the second installment to be made
(with interest on the unpaid balance at 8%) on the first anniversary of
such termination.
(ii) In the event that a Change of Control has not occurred prior to
such termination, Executive shall be paid (A) the annual Base Salary of
Executive in effect immediately prior to such termination multiplied by
three (3), (B) an amount equal to three (3) times Executive's average
annual Discretionary Bonus and average annual Incentive Bonus earned
over the three (3) fiscal years prior to the effective date of such
termination and (C) a continuation of Executive's general executive
benefits described in Paragraph 6 of this Exhibit A for three (3) full
years after the effective date of such termination in the same manner
as provided in Paragraph 13(a)(iv) of this Exhibit A. To the extent
such benefits are in the form of monetary payments, such payments shall
be made, to the extent practicable, in two equal installments, with the
first installment due as soon as practicable following such termination
date and the second installment to be made (with interest on the unpaid
balance at 8%) on the first anniversary of such termination.
10. Vacation. During the term of Executive's employment under the
Contract, Executive shall be entitled to four (4) weeks vacation for each
calendar year of service hereunder or ratable part thereof. Vacation days not
taken during a particular calendar year may be carried forward. If such vacation
days are not used in any future period hereunder, Executive shall be entitled to
additional compensation at the termination of this Contract for any such unused
vacation days in an amount equal to Executive's per diem Base Salary for each
such day based on the day such vacation day accrued.
11. Withholding. The Company shall withhold or collect from any and
all compensation and benefits paid hereunder all taxes (including without
limitation federal income taxes, Federal Insurance Contributions Act taxes and
other federal, state or local income, payroll and wage taxes) required to be
withheld or collected therefrom.
12. Documentation. Executive shall provide to the Company such
documentation and corroborative material as the Company shall require with
respect to all fringe benefit payments and reimbursements under the Contract.
13. Change in Control.
(a) Employment Terminations in Connection with a Change in Control. In
the event of a Qualifying Termination (as defined below) within six (6) full
calendar months prior to the effective date of a Change in Control (as defined
below), or within two years following the effective date of a Change in Control,
then in lieu of all other benefits provided to Executive under the provisions of
this Contract (other than Executive's rights to receive vested benefits under
the Company's qualified retirement plans), the Company shall pay to Executive
and provide Executive the following benefits and payments (hereinafter
collectively referred to as the "CIC Benefits"):
33
<PAGE>
(i) An amount equal to three (3) times the highest rate of Executive's
Base Salary hereunder in effect at any time up to and including the
effective date of the Qualifying Termination;
(ii) An amount equal to three (3) times Executive's average annual
Discretionary Bonus and average annual Incentive Bonus earned over the
three (3) fiscal years prior to the effective date of the Qualifying
Termination (whether or not deferred);
(iii) An amount equal to Executive's due but unpaid Base Salary through
the effective date of the Qualifying Termination;
(iv) A continuation of Executive's general executive benefits described
in Paragraph 6 of this Exhibit A for three (3) full years after the
effective date of such Qualifying Termination. Such benefits shall be
provided to Executive at no less than the premium cost, and at no less
than the coverage level, as in effect as of the date of the Qualifying
Termination. The continuation of such benefits shall be discontinued
prior to the end of the three (3) year period in the event Executive
has available substantially similar benefits from a subsequent
employer, as determined in good faith by the Company's Board of
Directors.
(v) A lump-sum cash payment of the entire balance of Executive's
compensation, if any, which has been deferred under any nonqualified
deferred compensation plan(s) of the Company together with all interest
or other earnings credited with respect to such deferred compensation
balance.
(vi) A lump-sum cash payment of the benefit which Executive would
otherwise have received had all stock options and other stock based
compensation granted by the Company to Executive been fully vested,
been exercised and become due and payable, all such awards of stock
options and other stock based compensation thereupon being cancelled
and of no further force or effect.
(vii) Forgiveness by the Company of all indebtedness of Executive to
the Company on the date of the Qualifying Termination; provided,
however, that the amount of such forgiven indebtedness shall in no
event exceed Fifty Thousand Dollars ($50,000).
As used in this Contract, the term "Qualifying Termination" means any
termination of Executive's employment other than: (i) by the Company for Cause
[as provided in Paragraph 4(a)(iii)]; (ii) by reason of Executive's death or
Disability [as provided in Paragraphs 4(a)(ii) or (vi)]; or (iii) by Executive
without Good Reason under Paragraph 4(a)(iv).
(b) Definition of "Change in Control". A Change in Control of the
Company shall be deemed to have occurred as of the first day any one or more of
the following conditions shall have been satisfied:
(i) Any individual, corporation (other than the Company), partnership,
trust, association, pool, syndicate, or any other entity or any group
of persons acting in concert becomes the beneficial owner, as that
concept is defined in Rule 13d-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, of
securities of the Company possessing twenty percent (20%) or more of
the voting power for the election of directors of the Company;
(ii) There shall be consummated any consolidation, merger, or other
business combination involving the Company or the securities of the
Company in which holders of voting securities of the Company
immediately prior to such consummation own, as a
34
<PAGE>
group, immediately after such consummation, voting securities of the
Company (or, if the Company does not survive such transaction, voting
securities of the corporation surviving such transaction) having less
than sixty percent (60%) of the total voting power in an election of
directors of the Company (or such other surviving corporation);
(iii) During any period of two (2) consecutive years, individuals who
at the beginning of such period constitute the directors of the Company
cease for any reason to constitute at least a majority thereof unless
the election, or the nomination for election by the Company's
shareholders, of each new director of the Company was approved by a
vote of at least two-thirds (2/3) of the directors of the Company then
still in office who were directors of the Company at the beginning of
any such period; or
(iv) There shall be consummated any sale, lease, exchange, or other
transfer (in one transaction or a series of related transactions) of
all, or substantially all, of the assets of the Company (on a
consolidated basis) to a party which is not controlled by or under
common control with the Company.
(c) Excise Tax Equalization Payment. In the event that Executive
becomes entitled to CIC Benefits (in the aggregate, the "Total Payments"), and
any of the Total Payments will be subject to the tax (the "Excise Tax") imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code")
(or any similar tax that may hereafter be imposed), the Company shall pay to
Executive in cash an additional amount (the "Gross-Up Payment") such that the
net amount retained by Executive after deduction of any Excise Tax upon the
Total Payments and any federal, state and local tax and Excise Tax upon the
Gross-Up Payment provided for by this Paragraph 13(c) (including FICA and FUTA),
shall be equal to the Total Payments. Such payment shall be made by the Company
to Executive as soon as practical following the effective date of the Qualifying
Termination, but in no event later than thirty (30) days after such date.
(d) Tax Computation. For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the amount of such Excise
Tax:
(i) Any other payments or benefits received or to be received by
Executive in connection with a Change in Control of the Company or
Executive's termination of employment [whether pursuant to the terms
of this Contract or any other plan, arrangement, or agreement with the
Company, or with any person (which shall have the meaning set forth in
Section 3(a)(9) of the Securities Exchange Act of 1934, including a
"group" as defined in Section 13(d) therein) whose actions result in a
Change in Control of the Company or any person affiliated with the
Company or such persons] shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) of the
Code shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel to the Company as supported by the Company's
independent auditors and acceptable to Executive, such other payments
or benefits (in whole or in part) do not constitute parachute payments,
or unless such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered within
the meaning of Section 280G(b)(4) of the Code in excess of the base
amount within the meaning of Section 280G(b)(3) of the Code, or are
otherwise not subject to the Excise Tax;
(ii) The amount of the Total Payments which shall be treated as subject
to the Excise Tax shall be equal to the lesser of: (i) the amount of
the Total Payments; or (ii) the amount of excess parachute payments
within the meaning of Section 280G(b)(1) of the Code (after applying
clause (i) above); and
35
<PAGE>
(iii) The value of any noncash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the
Code.
For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of Federal income taxation in the calendar year in which the Gross-Up
Payment is to be made, and state and local income taxes at the highest marginal
rate of taxation in the state and locality of Executive's residence on the
effective date of termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes.
(e) Subsequent Recalculation. In the event the Internal Revenue Service
adjusts the computation of the Company under this Paragraph 13 so that Executive
did not receive the greatest net benefit, the Company shall reimburse Executive
for the full amount necessary to make Executive whole, plus a market rate of
interest, as determined by the Board of Directors of the Company.
(f) Outplacement Assistance. Following a Qualifying Termination,
Executive shall be reimbursed by the Company for the costs of all outplacement
services obtained by Executive; provided, however, that the total reimbursement
shall be limited to an amount equal to fifteen percent (15%) of Executive's Base
Salary as of the effective date of termination.
36
<PAGE>
<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 NINE MONTHS ENDED
SEPTEMBER 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,406,892
<SECURITIES> 0
<RECEIVABLES> 34,734
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,036,814
<PP&E> 110,345,762
<DEPRECIATION> (13,383,980)
<TOTAL-ASSETS> 104,205,598
<CURRENT-LIABILITIES> 1,286,610
<BONDS> 78,396,552
<COMMON> 35,194,270
0
0
<OTHER-SE> (11,243,970)
<TOTAL-LIABILITY-AND-EQUITY> 104,205,598
<SALES> 0
<TOTAL-REVENUES> 11,609,255
<CGS> 0
<TOTAL-COSTS> 4,459,329
<OTHER-EXPENSES> 1,173,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,684,256
<INCOME-PRETAX> 1,292,470
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,292,470
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,292,470
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
