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 June 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 August 8, 1997 (the latest practicable date).
Common Stock, $.01 par value 3,113,540
(Class) (Number of shares)
Index to exhibits at page 15 Total number of pages: 38
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item No. Page No.
<S> <C> <C>
PART I - Financial Information
1 Financial Statements 3
2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II - Other Information
4 Submission of Matters to a Vote of Security Holders 13
5 Other Information 13
6 Exhibits and Reports on Form 8-K 13
</TABLE>
2
<PAGE>
PART I - Financial Information
Item 1. Financial Statements.
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
Balance Sheets
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
------------------- ------------------
(Unaudited)
<S> <C> <C>
Assets
Real estate investments at cost:
Apartment properties $ 66,956,648 $ 66,610,048
Restaurant properties 43,205,075 43,205,075
------------------- ------------------
110,161,723 109,815,123
Less accumulated depreciation (12,739,629) (11,461,365)
------------------- ------------------
97,422,094 98,353,758
Cash and cash equivalents 1,211,595 842,604
Rent and other receivables 17,455 12,695
Prepaid expenses and other assets 544,453 392,302
Investment in and advances to Management Company 224,748 261,598
Notes receivable 843,920 -
Intangible related to acquisition of management operations, net 2,813,514 2,744,912
Deferred financing costs, net 715,973 828,113
=================== ==================
Total assets $103,793,752 $103,435,982
=================== ==================
Liabilities and Shareholders' Equity
Mortgage and other notes payable $ 70,896,540 $ 70,295,957
Notes payable to affiliates 7,056,300 7,056,300
Accounts payable and accrued expenses 776,829 476,938
Additional consideration due to former BTVC shareholders 430,469 355,570
Escrowed security deposits and deferred revenue 302,997 348,779
------------------- ------------------
Total liabilities 79,463,135 78,533,544
Shareholders' equity:
Common stock, $.01 par value, 10,000,000 shares authorized, 3,113,540 shares
issued and outstanding at June 30, 1997,
3,074,647 shares issued and outstanding at December 31, 1996 31,135 30,746
Additional paid-in capital 35,017,136 34,522,816
Dividends distributed in excess of net income (10,717,654) (9,651,124)
------------------- ------------------
Total shareholders' equity 24,330,617 24,902,438
=================== ==================
Total liabilities and shareholders' equity $103,793,752 $103,435,982
=================== ==================
</TABLE>
3
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
1997 1996 1997 1996
----------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Revenues
Apartment rental income $ 2,638,539 $ 2,439,621 $ 5,226,276 $ 4,582,363
Restaurant rental income 1,125,000 1,125,000 2,250,000 2,250,000
Equity in income of Management Company 57,643 48,870 164,233 76,288
Interest and other income 45,157 10,501 78,445 22,846
----------------- ----------------- ---------------- -----------------
3,866,339 3,623,992 7,718,954 6,931,497
Expenses
Depreciation 639,207 603,460 1,278,414 1,159,441
Amortization 148,848 133,218 293,538 255,507
Apartment operations 811,782 694,125 1,645,491 1,360,172
Administrative 316,410 265,854 543,493 498,080
Interest 1,567,287 1,491,997 3,104,430 2,843,785
----------------- ----------------- ---------------- -----------------
3,483,534 3,188,654 6,865,366 6,116,985
================= ================= ================ =================
Net income $ 382,805 $ 435,338 $ 853,588 $ 814,512
================= ================= ================ =================
Per share data:
Net income $0.12 $0.14 $0.28 $0.27
================= ================= ================ =================
Dividends declared 0.31 0.31 0.62 0.62
================= ================= ================ =================
Weighted average shares outstanding 3,108,436 3,016,740 3,098,415 3,016,740
================= ================= ================ =================
</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
=============== ================ ================ =============== ================
</TABLE>
5
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30
1997 1996
---------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 853,588 $ 814,512
Adjustments to reconcile net income to
net cash provided by operations:
Equity in income of Management Company (164,233) (76,288)
Depreciation and amortization 1,571,952 1,414,948
Changes in operating assets and liabilities:
Rent and other receivables (4,760) 235,112
Prepaid expenses and other assets (148,755) (45,988)
Accounts payable and accrued expenses 299,895 206,502
Security deposits and deferred revenue (45,782) 16,849`
---------------- -----------------
Net cash provided by operating activities 2,361,905 2,565,647
Cash flows from investing activities:
Acquisition of apartment property - (10,666,041)
Additions to apartment properties (313,416) (234,975)
Investment in Management Company - (165)
Repayment of advances to Management Company 100,000 -
Dividends received from Management Company 97,687 75,719
Investment in notes receivable (843,920) -
---------------- -----------------
Net cash used in investing activities (959,649) (10,825,462)
Cash flows from financing activities:
Proceeds of common stock issued through
dividend reinvestment plan 286,270 -
Payment of dividends (1,920,118) (1,870,379)
Proceeds from notes payable 843,920 10,650,000
Principal payments on notes payable (243,337) (224,451)
Payment of deferred financing costs - (311,151)
---------------- -----------------
Net cash provided by (used in) financing activities (1,033,265) 8,244,019
---------------- -----------------
Net increase (decrease) in cash and cash equivalents 368,991 (15,796)
Cash and cash equivalents at beginning of period 842,604 700,863
---------------- -----------------
Cash and cash equivalents at end of period $ 1,211,595 $ 685,067
================ =================
</TABLE>
6
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
Notes to Financial Statements - June 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. In the
opinion of the Company's management, 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.
Certain notes and other information have been condensed or omitted from the
interim financial statements presented in this Quarterly Report on Form 10-Q.
These financial statements should be read in conjunction with the Company's 1996
Annual Report on Form 10-K.
The results of the first six months of 1997 are not necessarily indicative of
future financial results.
Note 2. Note receivable and related financing
Effective February 27, 1997, the Company entered into a participating loan
agreement with The Villages of Chapel Hill Limited Partnership ("The Villages").
Under the terms of this agreement, the Company 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, the Company has provided a guaranty of
$1,500,000 to a bank on its loan to The Villages. The Company will receive
minimum interest on this loan at the greater of 12.5 percent or 30-day LIBOR
plus 6.125 percent, shared income interest, shared appreciation interest, and
certain loan and annual guaranty fees. The Company plans 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 percent, 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. Common stock issued
On January 29, 1997, the Company issued 16,300 shares of common stock pursuant
to the earn-out provision of the acquisition agreement for BT Venture
Corporation. On February 14, 1997, and May 15, 1997, the Company issued 12,036
shares and 10,557 shares, respectively, of common stock through its Dividend
Reinvestment and Stock Purchase Plan.
Note 4. Subsequent declaration of dividend
On July 16, 1997, the Company declared a cash dividend of $0.31 per share, which
will be paid on August 15, 1997, to shareholders of record on August 1, 1997.
Note 5. 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, the Company 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.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
Certain matters discussed in this Quarterly Report on Form 10-Q are
forward-looking statements within the meaning of the federal securities laws.
Although the Company believes that the expectations reflected in such
forward-looking statements are based on reasonable assumptions, it can give no
assurance that its expectations will be achieved. Factors that could cause
actual results to differ materially from the Company's current expectations
include general economic conditions, local real estate conditions, and other
risks detailed from time to time in the Company's SEC reports.
Overview
Boddie-Noell Properties, Inc. is a self-managed, self-advised real estate
investment trust ("REIT"). As of June 30, 1997, the Company owned five apartment
properties containing 1,328 apartments and 47 net-lease restaurant properties.
Through its unconsolidated subsidiary, BNP Management, Inc. (the "Management
Company"), the Company manages an additional seven apartment properties
containing 1,495 apartments and two shopping centers. The Company's headquarters
are in Charlotte, North Carolina, and all of the Company's operations are in the
states of North Carolina and Virginia.
The following discussion should be read in conjunction with the financial
statements and notes thereto included in this Quarterly Report on Form 10-Q and
the Company's audited financial statements and notes thereto included in the
Company's 1996 Annual Report on Form 10-K.
Results of Operations
Revenues. Revenues increased by 6.7 percent for the quarter ended June 30, 1997,
and 11.4 percent for the six months ended June 30, 1997, compared to the same
prior year periods. The increase in revenues for both the three-month and
six-month periods is primarily attributable to improved apartment operations and
the effect of the acquisition of Paces Village Apartments in April 1996.
Apartment rental income increased by 8.2 percent in second quarter 1997 and 14.1
percent through six months of 1997 compared to 1996. Paces Village Apartments,
acquired April 29, 1996, contributed $387,000 second quarter revenues and
$764,000 year-to-date revenues in 1997 compared to $266,000 revenues from
acquisition through June 30 in 1996. For apartment properties held throughout
the entire six months of both 1997 and 1996, apartment rental income increased
by 3.6 percent in second quarter 1997 and 3.4 percent through six 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 June 30--
Average physical occupancy 94.8% 96.6% 95.1% 97.3% 95.9% 96.2% 93.7%
Average economic occupancy 96.2% 95.3% 95.5% 97.4% 95.6% 96.1% 93.9%
Average monthly revenue/unit $702 $652 $762 $704 $682 $690 $683
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
1997 1996
---------------------------------------------------------------------
Harris Paces Paces
Hill Latitudes Oakbrook Commons Village Overall Overall
<S> <C> <C> <C> <C> <C> <C> <C>
Six months ended June 30--
Average physical occupancy 93.5% 95.1% 94.3% 96.9% 94.5% 95.1% 93.4%
Average economic occupancy 94.6% 94.1% 94.8% 96.9% 94.5% 95.0% 93.7%
Average monthly revenue/unit $707 $651 $771 $701 $681 $690 $680
</TABLE>
On a same-units basis, average economic occupancy improved by 2.3 percent for
the quarter and 1.5 percent through six months, and average monthly revenue per
unit improved by 1.2 percent for the quarter and 1.9 percent through six months
of 1997 compared to 1996.
The Company owns apartment properties in Charlotte, North Carolina; Greensboro,
North Carolina; and Virginia Beach, Virginia. The Company's 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 its
average economic occupancy during 1996. The Company has successfully maintained
a slight increase in average monthly revenue per unit through the first two
quarters of 1997 compared to fourth quarter of 1996, and increased occupancy
during the first quarter and again in the second quarter of 1997.
The Company has 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. At June 30, 1997, approximately one third of the Company's leases in
effect are for a duration of 13 months or more. While the Company expects some
continued pressure in its markets through 1997, management does 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 two 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 percent of food sales. For
the second quarter of 1997, sales at the Company's restaurants totaled
$11,492,000, a decrease of 3.0 percent compared to second quarter of 1996.
Through six months of 1997, sales at the Company's restaurants totaled
$21,779,000, an increase of 0.4 percent compared to the first six months of
1996. For percentage rent payments to resume, restaurant sales would have to
increase by 1.3 percent over 1996 sales levels.
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 certain one-time refinancing fees from two managed
properties and sales commissions from two managed properties. The increase in
equity income in second quarter of 1997 compared to 1996 is attributable to fees
received by the Management Company for its planning and supervision of a
substantial rehabilitation project at The Villages, one of its managed
properties. Management does 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 second quarter and through six
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 the Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1997. Through June 30, 1997, the
Company has advanced approximately $844,000 under the loan agreement, and has
recorded interest income of approximately $30,000. Interest expense on related
borrowings totals approximately $13,000 through June 30, 1997.
9
<PAGE>
Expenses. Expenses in the second quarter and first half of 1997 were generally
consistent with management's 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 17.0 percent in second quarter and
21.0 percent through six months of 1997 compared to 1996. These increases
reflect the impact of the Paces Village acquisition in April 1996, as well as
increased costs associated with attracting and retaining residents in a more
competitive apartment market. Apartment operations expense totaled 30.8 percent
of related income in second quarter 1997 compared to 28.5 percent in second
quarter of 1996, and 31.5 percent of related income through six months of 1997
compared to 29.7 percent through six months of 1996.
Operating expenses relating to restaurant properties are insignificant because
of the restaurant properties' triple net lease arrangement.
The increase in interest expense in the second quarter and through six 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 percent in the second quarter of
1997 and 8.0 percent through six months of 1997 compared to 8.0 percent during
the same periods in 1996.
Liquidity and Capital Resources
Capital resources. At June 30, 1997, the Company's total book capitalization was
$102,283,000, comprised of $24,331,000 of shareholders' equity and $77,953,000
of debt.
During the second quarter of 1997, the Company issued 10,557 shares of common
stock under its Dividend Reinvestment and Stock Purchase Plan ("DRIP") for cash
proceeds totaling approximately $131,000.
During the second quarter of 1997, the Company 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 second quarter of 1997. Under the
terms of the acquisition agreement, at June 30, 1997, the former BTVC
shareholders were due additional consideration totaling approximately $430,000,
payable at the Company's option in up to 34,021 shares of common stock or in
cash. The earn-out period will end 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.
During the second quarter of 1997, the Company advanced approximately $494,000
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 June 30, 1997, the weighted average interest rate on outstanding debt was 8.1
percent, unchanged from March 31, 1997, with long-term debt comprised of
$60,137,000 at fixed interest rates and $17,816,000 at variable rates indexed on
30-day LIBOR rates. A 1 percent increase in variable rates would increase annual
interest expense by approximately $157,000, while a 1 percent decrease in
variable rates would decrease annual interest expense by approximately $180,000.
10
<PAGE>
Cash flows and liquidity. Funds from operations ("FFO") is defined by the
National Association of Real Estate Investment Trusts ("NAREIT") as "net income
(computed in accordance with generally accepted accounting principles),
excluding gains (losses) from debt restructuring and sales of property, plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures." Consistent with NAREIT guidelines, the Company
has disregarded all one-time fees received by the Management Company in the
first quarter of 1997 in calculating FFO.
Management considers FFO 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, FFO 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. FFO does not represent
net income or cash flows from operations as defined by generally accepted
accounting principles ("GAAP"), and FFO should not be considered as 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. FFO 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. FFO does not represent cash flows from operating, investing or
financing activities as defined by GAAP. Further, FFO as disclosed by other
REITs may not be comparable to the Company's calculation of FFO.
A reconciliation of net income to FFO is as follows (all amounts in thousands):
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
1997 1996 1997 1996
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Net income $ 383 $ 435 $ 854 $ 815
Depreciation 639 603 1,278 1,159
Amortization of management intangible 93 77 181 150
Less non-recurring equity income items
excluded from FFO - - (103) -
--------------- --------------- -------------- ---------------
Funds from operations $ 1,115 $ 1,116 $ 2,210 $ 2,124
=============== =============== ============== ===============
</TABLE>
Funds available for distribution ("FAD") is defined by the Company as FFO plus
non-cash expense for amortization of loan costs, less payments for scheduled
amortization of debt principal and recurring capital expenditures.
A reconciliation of FFO to FAD, along with summary cash flow information, is as
follows (all amounts in thousands):
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
1997 1996 1997 1996
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Funds from operations $1,115 $1,116 $2,210 $2,124
Amortization of loan costs 56 56 112 105
Scheduled debt principal payments (123) (109) (243) (224)
Recurring capital expenditures (126) (77) (214) (126)
Non-recurring equity income items
excluded from FFO - - 103 -
--------------- --------------- -------------- ---------------
Funds available for distribution $ 922 $ 986 $1,969 $1,879
=============== =============== ============== ===============
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
1997 1996 1997 1996
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Net cash provided by (used in):
Operating activities $ 1,166 $ 1,325 $ 2,362 $ 2,566
Investing activities (532) (10,584) (960) (10,825)
Financing activities (460) 9,447 (1,033) 8,244
Dividends and distributions paid to shareholders $962 $935 $ 1,920 $ 1,870
Nonrecurring capital expenditures:
Acquisition improvements and replacements $25 $24 $41 $103
Other apartment property improvements 46 5 59 5
</TABLE>
Funds from operations increased by 4.1 percent through six 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. Funds from operations was flat in second quarter of 1997 compared to
1996, attributed to increased cost of property operations and timing of
administrative expenses.
The Company paid dividends of $0.31 per share in the first and second quarters
of both 1997 and 1996. These dividends were funded from cash provided by
operating activities.
The Company capitalizes those expenditures relating to acquiring new assets,
materially enhancing the value of an existing asset, or substantially extending
the useful life of an existing asset. 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, the Company 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. The Company continues to produce
sufficient cash flow to fund its regular dividend. The Company has announced
that it will pay a regular quarterly dividend of $0.31 per share on August 15,
1997, to shareholders of record on August 1, 1997.
The Company generally expects to meet its short-term liquidity requirements
through net cash provided by operations and utilization of credit facilities.
Management believes 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. The Company anticipates funding its acquisition activities, if any,
primarily by using short-term credit facilities or secured long-term debt. The
Company expects to meet certain of its long-term liquidity requirements, such as
scheduled debt maturities and repayment of short-term financing of possible
property acquisitions, through long-term secured and unsecured borrowings and
the issuance of debt securities or additional equity securities of the Company.
The Company believes that it has sufficient resources to meet its short- and
long-term liquidity requirements.
Management does not believe that inflation poses a material risk to the Company.
The leases at the Company's apartment properties are short-term in nature, 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.
12
<PAGE>
PART II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on June 5, 1997. At that
meeting the following proposals were approved:
<TABLE>
<CAPTION>
Withheld/ Broker
For Against Abstained Non-votes
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Election of five directors:
B. Mayo Boddie 2,430,619 - 15,130 340,324
Nicholas B. Boddie 2,430,619 - 15,130 340,324
Donald R. Pesta, Jr. 2,426,381 - 19,369 340,324
William H. Stanley 2,430,604 - 15,145 340,324
Richard A. Urquhart 2,426,119 - 19,631 340,324
Reincorporation in the State of Maryland 1,731,985 31,614 36,026 986,448
</TABLE>
Item 5. Other Information
Re-election of officers
The Company has announced the re-election of the following officers:
D. Scott Wilkerson President and Chief Executive Officer
Philip S. Payne Executive Vice President, Treasurer, and
Chief Financial Officer
Douglas E. Anderson Vice President, Secretary
Pamela B. Novak Vice President, Controller,
Chief Accounting Officer
Change of the Company's State of Incorporation from Delaware to Maryland
Effective July 31, 1997, pursuant to the proposed Agreement and Plan of Merger
which was included in the Company's proxy statement dated April 30, 1997, and
approved by the Company's shareholders on June 5, 1997, the Company changed its
state of incorporation from Delaware to Maryland.
No action by current holders of the Company's stock certificates is required.
Each share of the Company's common stock prior to the reincorporation has been
converted to one share of the Company's common stock following the
reincorporation.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits:
Exhibit 2 Agreement and Plan of Merger, dated July 22, 1997, between
Boddie-Noell Properties, Inc. and Boddie-Noell Properties
of Maryland, Inc.
Exhibit 3.1 Amended and Restated Articles of Incorporation of Boddie-
Noell Properties, Inc., effective July 31, 1997
Exhibit 3.2 Amended and Restated Bylaws of Boddie-Noell Properties,
Inc., effective July 31, 1997
Exhibit 27 Financial data schedule (electronic filing)
13
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b) Reports on Form 8-K:
None
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)
August 12, 1997 /s/ Philip S. Payne
-----------------------
Philip S. Payne
Executive Vice President and
Chief Financial Officer
(Duly authorized officer)
August 12, 1997 /s/ Pamela B. Novak
-----------------------
Pamela B. Novak
Vice President, Controller and
Chief Accounting Officer
14
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Page
<S> <C> <C>
2 Agreement and Plan of Merger, dated July 22, 1997, between Boddie-Noell
Properties, Inc. and Boddie-Noell Properties of Maryland, Inc. 16
3.1 Amended and Restated Articles of Incorporation of Boddie-Noell Properties, Inc.,
effective July 31, 1997 21
3.2 Amended and Restated Bylaws of Boddie-Noell Properties, Inc., effective July 31,
1997 29
27 Financial data schedule (electronic filing) -
</TABLE>
15
<PAGE>
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of July
22, 1997, is by and between Boddie-Noell Properties, Inc., a Delaware
corporation (the "Company"), and Boddie-Noell Properties of Maryland, Inc., a
Maryland corporation (the "Maryland Company").
RECITALS
WHEREAS, the Board of Directors of the Company and the Board of
Directors of the Maryland Company each have determined that it is in the best
interests of their respective shareholders to effect the merger provided for
herein upon the terms and subject to the conditions set forth therein; and
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto adopt the plan of reorganization encompassed by this agreement
and agree as follows:
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME
1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.3), the Company shall be merged
with and into the Maryland Company and the separate corporate existence of the
Company shall thereupon cease (the "Merger"). To the extent the Merger
constitutes a transaction for federal income tax purposes, the parties intend
that the Merger qualify as a reorganization described in Section 368(a)(1)(F) of
the Internal Revenue Code of 1986, as amended. The Maryland Company shall be the
surviving entity in the Merger (sometimes hereinafter referred to as the
"Surviving Entity") and shall continue to be governed by the laws of the State
of Maryland, and the separate existence of the Maryland Company with all its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger. The Merger shall have the effects specified in the Delaware
General Corporation Law (the "DGCL") and the Maryland General Corporation Law
(the "MGCL").
1.2 Closing. The closing of the Merger (the "Closing") shall take place
(i) at the offices of Smith Helms Mulliss & Moore, L.L.P., 2800 Two Hannover
Square, Raleigh, North Carolina 27601 at 10:00 a.m. local time on the first
business day on which the last to be fulfilled or waived of the conditions set
forth in Section 6.1 hereof shall be fulfilled or (ii) at such other place and
time and/or on such other date as the Company and the Maryland Company may
agree.
1.3 Effective Time. Following the Closing, and provided that this
Agreement has not been terminated or abandoned pursuant to Article VII hereof,
the Company and the Maryland Company will, at such time as they deem advisable,
cause a Certificate of Ownership and Merger (the "Certificate of Ownership and
Merger") to be executed, acknowledged and filed with the Secretary of State of
Delaware as provided in Section 253 of the DGCL and Articles of Merger (the
"Articles of Merger") to be filed with the State Department of Assessments and
Taxation of Maryland (the "SDAT") as provided in Section 3-105 of the MGCL. The
Merger shall become effective at the later of the filing of the Certificate of
Ownership and Merger with the Secretary of State of Delaware and the acceptance
for record of the Articles of Merger by the SDAT (the "Effective Time").
16
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ARTICLE II
ARTICLES OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION
2.1 Articles of Incorporation. Except as set forth in Section 8.8, the
Articles of Incorporation of the Maryland Company in effect at the Effective
Time shall be the Articles of Incorporation of the Surviving Entity, until duly
amended in accordance with the terms thereof and the MGCL.
2.2 The Bylaws. The Bylaws of the Maryland Company in effect at the
Effective Time shall be the Bylaws of the Surviving Entity, until duly amended
in accordance with the terms thereof and the MGCL.
ARTICLE III
DIRECTORS AND OFFICERS
OF THE SURVIVING CORPORATION
3.1 Directors and Officers. The directors and officers of the Company
at the Effective Time shall, from and after the Effective Time, be the directors
and officers, respectively, of the Surviving Entity until their successors have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Entity's Articles of
Incorporation and Bylaws.
ARTICLE IV
EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES
4.1 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any capital stock of
the Company:
(a) Each share of the common stock, par value $0.01 per share
(the "Company Shares") of the Company issued and outstanding immediately prior
to the Effective Time shall be converted into one validly issued, fully paid and
nonassessable share of common stock, par value $0.01 per share (the "Maryland
Company Shares") of the Maryland Company. Each certificate (each, a
"Certificate") representing any such Company Shares shall thereafter represent
the right to receive Maryland Company Shares. All Company Shares shall no longer
be outstanding and shall be canceled and retired and shall cease to exist.
(b) Each Company Share issued and held in the Company's
treasury at the Effective Time, shall by virtue of the Merger and without any
action on the part of the holder thereof, cease to be outstanding, shall be
canceled and retired without payment of any consideration therefor and shall
cease to exist.
(c) At the Effective Time, each Maryland Company Share issued
and outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the Maryland Company or the holder
of such shares, be canceled and retired without payment of any consideration
therefor.
(d) Each option or other right to purchase or otherwise
acquire Company Shares pursuant to stock option or other stock-based plans of
the Company granted and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
of such option or right, be converted into and become a right to purchase or
otherwise acquire the same number of Maryland Company Shares at the same price
per share and upon the same terms and subject to the same conditions as
applicable to such options or other rights immediately prior to the Effective
Time.
17
<PAGE>
4.2 Exchange of Certificates for Company Shares.
(a) Exchange Agent. As of the Effective Time, the Company
shall deposit with an exchange agent (the "Exchange Agent"), for the benefit of
the holders of Company Shares, for exchange in accordance with this Article IV,
certificates representing the Maryland Company Shares (such certificates,
together with the amount of any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund") to be issued pursuant to
Section 4.1 in exchange for outstanding Company Shares.
(b) Exchange Procedures. Promptly after the Effective Time,
the Surviving Entity shall cause the Exchange Agent to mail to each holder of
record of a Certificate or Certificates (i) a letter of transmittal which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as the Surviving
Entity may specify and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing Maryland Company
Shares. Upon surrender of a Certificate for cancellation to the Exchange Agent
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor (x) a certificate
representing that number of Maryland Company Shares and (y) a check representing
unpaid dividends and distributions, if any, which such holder has the right to
receive in respect of shares represented by the Certificate surrendered pursuant
to the provisions of this Article IV, and the Certificate so surrendered shall
forthwith be canceled. No interest will be paid or accrue on unpaid dividends
and distributions, if any, payable to holders of Certificates. In the event of a
transfer of ownership of Company Shares which is not registered in the transfer
records of the Company, a certificate representing the proper number of Maryland
Company Shares may be issued to such a transferee if the Certificate
representing such Company Shares is presented to the Exchange Agent, accompanied
by all documents required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid. If any certificate for
Maryland Company Shares is to be issued in a name other than that in which the
Certificate surrendered in exchange therefore is registered, it shall be a
condition of such exchange that the person requesting this exchange shall pay
any transfer or other taxes required by reason of the issuance of Certificates
for such Maryland Company Shares in a name other than that of the registered
holder of the Certificate surrendered, or shall establish to the satisfaction of
the Surviving Entity that such tax has been paid or is not applicable.
(c) Transfers. After the Effective Time, there shall be no
transfers on the stock transfer books of the Company of the Company Shares which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Entity for transfer,
they shall be canceled and exchanged for the Maryland Company Shares deliverable
in respect thereof pursuant to this Agreement in accordance with the procedures
set forth in this Article IV.
(d) Termination of Exchange Fund. Any portion of the Exchange
Fund (including the proceeds of any investments thereof and any Maryland Company
Shares that remain unclaimed by the shareholders of the Company for six months
after the Effective Time) shall be paid to the Surviving Entity. Any
shareholders of the Company who have not theretofore complied with this Article
IV shall thereafter look only to the Surviving Entity for payment of their
Maryland Company Shares and unpaid dividends on Maryland Company Shares
deliverable in respect of each Company Share such shareholder holds as
determined pursuant to this Agreement, in each case, without any interest
thereon. Notwithstanding the foregoing, none of the Surviving Entity, the
Exchange Agent or any other person shall be liable to any former holder of
Company Shares for any amount properly delivered to a public official pursuant
to applicable abandoned property, escheat or similar laws.
(e) No Liability. In the event any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Entity, the posting by such person of a bond in such
amount as the Surviving Entity may direct as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Certificate, a certificate
representing Maryland
18
<PAGE>
Company Shares and cash in lieu of fractional shares deliverable in respect
thereof pursuant to this Agreement.
ARTICLE V
COVENANTS
5.1 Stock Exchange Listing. The Maryland Company shall use its
best efforts to cause the Maryland Company Shares to be issued in the Merger
to be approved for listing on the American Stock Exchange, Inc. (AMEX),
subject to official notice of issuance, prior to the Closing Date.
5.2 Indemnification; Directors' and Officers' Insurance. From and after
the Effective Time, the Surviving Entity agrees that it will indemnify, and pay
or reimburse reasonable expenses in advance of final disposition of a proceeding
to, (i) any individual who is a present or former director or officer of the
Company or (ii) any individual who, while a director of the Company and at the
request of the Company, serves or has served another corporation, partnership,
joint venture, trust, employee benefit plan or any other enterprise as a
director, officer, partner or trustee of such corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, arising out of or
pertaining to matters existing or occurring at or prior to the Effective Time,
whether asserted or claimed prior to, at or after the Effective Time, to the
fullest extent permitted by law.
ARTICLE VI
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of the Maryland Company and the Company to consummate the
Merger are subject to the fulfillment of each of the following conditions:
(a) Shareholder Approval. This Agreement shall have been
duly approved by the holders of a majority of the Company Shares, in accordance
with applicable law and the Amended Certificate of Incorporation and Bylaws
of the Company.
(b) AMEX Listing. The Maryland Company Shares issuable to the
Company shareholders pursuant to this Agreement shall have been authorized for
listing on AMEX upon official notice of issuance.
ARTICLE VII
TERMINATION
7.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by holders of the Company Shares, by the mutual consent of
the Board of Directors of the Company and the Board of Directors of the Maryland
Company.
7.2 Effect of Termination and Abandonment. In the event of termination
of this Agreement and abandonment of the Merger pursuant to this Article VII, no
party hereto (or any of its directors or officers) shall have any liability or
further obligation to any other party to this Agreement.
ARTICLE VIII
MISCELLANEOUS AND GENERAL
8.1 Modification or Amendment. Subject to the applicable provisions of
the DGCL and the MGCL,
19
<PAGE>
at any time prior to the Effective Time, the parties hereto may modify or amend
this Agreement, by written agreement executed and delivered by duly authorized
officers of the respective parties.
8.2 Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
8.3 Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
8.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the States of Delaware and Maryland.
8.5 No Third-Party Beneficiaries. Except as provided in Section
5.2, this Agreement is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
8.6 Headings. The Article, Section and paragraph headings herein are
for convenience of reference only, do not constitute a part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
8.7 Service of Process. The Maryland Company may be served with process
in the State of Maryland in any proceeding for the enforcement of any obligation
of the Company, as well as for enforcement of any obligations of the Maryland
Company arising from the Merger, and it does hereby irrevocably appoint the
Secretary of State of the State of Maryland as its agent to accept service of
process in any such suit or other proceedings. The address to which a copy of
such process shall be mailed by the Secretary of State to the Maryland Company
is 3710 One First Union Center, Charlotte, North Carolina 28202.
8.8 Amendment of Articles. At the Effective Time, the Articles of
Incorporation of the Maryland Company will be amended in order to (i) change the
name of the Maryland Company to Boddie-Noell Properties, Inc.
and (ii) delete in its entirety Section 5.5 thereof.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto on the date
first hereinabove written.
BODDIE-NOELL PROPERTIES, INC.
ATTEST: /s/ Philip S. Payne By: /s/ D. Scott Wilkerson, President and CEO
---------------------------------------------
BODDIE-NOELL PROPERTIES OF MARYLAND, INC.
ATTEST: /s/ Philip S. Payne By: /s/ D. Scott Wilkerson, President and CEO
---------------------------------------------
20
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
BODDIE-NOELL PROPERTIES, INC.
ARTICLE I
INCORPORATOR
THE UNDERSIGNED, Jeffrey D. Miller, whose mailing address is
2800 Two Hannover Square, Raleigh, North Carolina 27601, being at least eighteen
years of age, acting as incorporator, does hereby form a corporation under the
General Laws of the State of Maryland.
ARTICLE II
NAME
The name of the corporation (the "Corporation") is
Boddie-Noell Properties, Inc.
ARTICLE III
PRINCIPAL OFFICE, REGISTERED OFFICE AND AGENT
The address of the Corporation's principal office is 3710 One
First Union Center, Charlotte, North Carolina 28202. The address of the
Corporation's principal office and registered office in the State of Maryland is
32 South Street, Baltimore, Maryland 21202. The name of its registered agent at
that office is The Corporation Trust, Incorporated.
ARTICLE IV
PURPOSES
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the Maryland
Corporations and Associations Article as now or hereafter in force.
ARTICLE V
CAPITAL STOCK
5.1. Shares and Par Value. The total number of shares of stock of all
classes which the Corporation has authority to issue is 110,000,000 shares of
capital stock (par value $.01 per share), amounting in aggregate par value to
$1,100,000, of which 10,000,000 shares are classified as Preferred Stock (par
value $.01 per share) and 100,000,000 shares are classified as Common Stock (par
value $.01 per share).
5.2. Common Stock. The following is a description of the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption of the Common
Stock of the Corporation (See also Article Sixth hereof):
(a) Except as otherwise provided in these Articles of
Incorporation, each share of Common Stock shall have one vote, and, except as
otherwise provided in respect of any class or series of Preferred Stock
21
<PAGE>
hereafter classified or reclassified, the exclusive voting power for all
purposes shall be vested in the holders of the Common Stock.
(b) Subject to the provisions of law and any preferences of
any class or series of Preferred Stock hereafter classified or reclassified,
dividends, including dividends payable in shares of another class of the
Corporation's stock, may be paid on the Common Stock of the Corporation at such
time and in such amounts as the Board of Directors may deem advisable out of
assets of the Corporation legally available therefor.
(c) In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of the Common
Stock then outstanding shall be entitled, after payment or provision for payment
of the debts and other liabilities of the Corporation and the amount to which
the holders of any class or series of Preferred Stock hereafter classified or
reclassified shall be entitled, to share ratably in the remaining net assets of
the Corporation.
5.3. Preferred Stock. The Board of Directors may classify and
reclassify any unissued shares of Preferred Stock by setting or changing in any
one or more respects, from time to time before issuance of such shares, the
preferences, conversion or other rights, voting powers, restrictions (including
restrictions on transfers of shares), limitations as to dividends,
qualifications or terms or conditions of redemption of such shares of Preferred
Stock. Subject to the foregoing, the power of the Board of Directors to classify
and reclassify any of the shares of Preferred Stock shall include, without
limitation, subject to the provisions of these Articles of Incorporation,
authority to determine, fix, or alter one or more of the following:
(a) The distinctive designation of such class or series and
the number of shares to constitute such class or series; provided that, unless
otherwise prohibited by the terms of such or any other class or series, the
number of shares of any class or series may be decreased by the Board of
Directors in connection with any classification or reclassification of unissued
shares and the number of shares of such class or series may be increased by the
Board of Directors in connection with any such classification or
reclassification, and any shares of any class or series which have been
redeemed, purchased, otherwise acquired or converted into shares of Common Stock
or any other class or series shall become part of the authorized capital stock
and be subject to classification and reclassification as provided in this
sub-paragraph.
(b) Whether or not and, if so, the rates, amounts and times at
which, and the conditions under which, dividends shall be payable on shares of
such class or series, whether any such dividends shall rank senior or junior to
or on a parity with the dividends payable on any other class or series of stock,
and the status of any such dividends as cumulative, cumulative to a limited
extent or non-cumulative and as participating or non-participating.
(c) Whether or not shares of such class or series shall have
voting rights, in addition to any voting rights provided by law and, if so, the
terms of such voting rights.
(d) Whether or not shares of such class or series shall have
conversion or exchange privileges and, if so, the terms and conditions thereof,
including provision for adjustment of the conversion or exchange rate in such
events or at such times as the Board of Directors shall determine.
(e) Whether or not shares of such class or series shall be
subject to redemption and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be redeemable and the
amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates; and whether or not there
shall be any sinking fund or purchase account in respect thereof, and if so, the
terms thereof.
(f) The rights of the holders of shares of such class or
series upon the liquidation, dissolution or winding up of the affairs of, or
upon any distribution of the assets of, the Corporation, which rights
22
<PAGE>
may vary depending upon whether such liquidation, dissolution or winding up is
voluntary or involuntary and, if voluntary, may vary at different dates, and
whether such rights shall rank senior or junior to or on a parity with such
rights of any other class or series of stock.
(g) Whether or not there shall be any limitations applicable,
while shares of such class or series are outstanding, upon the payment of
dividends or making of distributions on, or the acquisition of, or the use of
moneys for purchase or redemption of, any stock of the Corporation, or upon any
other action of the Corporation, including action under this sub-paragraph, and,
if so, the terms and conditions thereof.
(h) Any other preferences, rights, restrictions, including
restrictions on transferability, and qualifications of shares of such class or
series, not inconsistent with law and these Articles of Incorporation.
5.4. Preemptive Rights. No holder of shares of capital stock of the
Corporation shall, as such holder, have any preemptive or other right to
purchase or subscribe for any shares of Common Stock or any class of capital
stock of the Corporation that the Corporation may issue or sell.
ARTICLE VI
REIT PROVISIONS
6.1. Definitions. The following terms shall have the following
meanings:
(a) "Acquire" shall mean the acquisition of Beneficial
Ownership of shares of capital stock of the Corporation by any means including,
without limitation, acquisition pursuant to the exercise of any option, warrant,
pledge or other security interest or similar right to acquire shares, but shall
not include the acquisition of any such rights unless, as a result, the acquiror
would be considered a Beneficial Owner, as defined below.
(b) "Beneficial Ownership" shall mean ownership of capital
stock of the Corporation by a Person who would be treated as an owner of such
shares of capital stock either directly or indirectly under Section 542(a)(2) of
the Code, taking into account, for this purpose, constructive ownership
determined under Section 544 of the Code, as modified by Section 856(h)(1)(B) of
the Code (except where expressly provided otherwise). The terms "Beneficial
Owner," "Beneficially Owns" and "Beneficially Owned" shall have correlative
meanings.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Merger" shall mean the merger of Boddie-Noell Properties,
Inc., a Delaware corporation, into the Corporation.
(e) "Ownership Limit" shall mean 9.8% of the outstanding
capital stock of the Corporation.
(f) "Person" shall mean an individual, corporation,
partnership, estate, trust (including a trust qualified under Section 401(a) or
501(c)(17) of the Code), a portion of a trust permanently set aside for or to be
used exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity and also includes a group as that term
is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended; but does not include an underwriter that participates in a public
offering of the Common Stock for a period of 90 days following the purchase by
such underwriter of the Common Stock.
(g) "REIT" shall mean a Real Estate Investment Trust under
Section 856 of the Code.
(h) "Redemption Price" shall mean the lower of (i) the price
paid by the transferee from whom shares are being redeemed and (ii) the average
of the last reported sales prices on the American Stock
23
<PAGE>
Exchange of the class of capital stock to be redeemed on the ten trading days
immediately preceding the date fixed for redemption by the Board of Directors,
or if such capital stock is not then traded on the American Stock Exchange, the
average of the last reported sales prices of such capital stock on the ten
trading days immediately preceding the relevant date as reported on any exchange
or quotation system over which such capital stock may be traded, or if such
capital stock is not then traded over any exchange or quotation system, then the
price determined in good faith by the Board of Directors of the Corporation as
the fair market value of shares of such capital stock on the relevant date.
(i) "Restriction Termination Date" shall mean the first day
after the date of the Merger on which the Board of Directors and the
shareholders of the Corporation determine pursuant to Section 6.10 of these
Articles of Incorporation that it is no longer in the best interests of the
Corporation to attempt to, or continue to, qualify as a REIT.
(j) "Transfer" shall mean any sale, transfer, gift,
assignment, devise or other disposition of capital stock or the right to vote or
receive dividends on capital stock (including (i) the granting of any option or
entering into any agreement for the sale, transfer or other disposition of
capital stock or the right to vote or receive dividends on capital stock or (ii)
the sale, transfer, assignment or other disposition or grant of any securities
or rights convertible into or exchangeable for capital stock, or the right to
vote or receive dividends on capital stock), whether voluntary or involuntary,
whether of record or beneficially and whether by operation of law or otherwise.
6.2. Restrictions.
(a) Except as provided in Section 6.8, during the period
commencing on the date of the Merger and prior to the Restriction Termination
Date: (i) no Person shall Acquire any shares of capital stock if, as a result of
such acquisition, such Person shall Beneficially Own shares of capital stock in
excess of the Ownership Limit; (ii) no Person shall Acquire any shares of
capital stock if, as a result of such acquisition, the capital stock would be
directly or indirectly owned by less than 100 Persons (determined without
reference to the rules of attribution under Section 544 of the Code); and (iii)
no Person shall Acquire any shares if, as a result of such acquisition, the
Corporation would be "closely held" within the meaning of Section 856(h) of the
Code.
(b) Any Transfer that would result in a violation of the
restrictions in Section 6.2(a) shall be void ab initio as to the Transfer of
such shares of capital stock that would cause the violation of the applicable
restriction in Section 6.2(a), and the intended transferee shall acquire no
rights in such shares of capital stock.
6.3. Remedies for Breach.
(a) If the Board of Directors or a committee thereof shall at
any time determine in good faith that a Transfer has taken place that falls
within the scope of Section 6.2(b) or that a Person intends to Acquire
Beneficial Ownership of any shares of the Corporation that will result in
violation of Section 6.2(a) or Section 6.2(b) (whether or not such violation is
intended), the Board of Directors or a committee thereof shall take such action
as it or they deem advisable to refuse to give effect to or to prevent such
Transfer, including, but not limited to, refusing to give effect to such
Transfer on the books of the Corporation or instituting proceedings to enjoin
such Transfer.
(b) Without limitation to Section 6.2(b) and 6.3(a), any
purported transferee of shares acquired in violation of Section 6.2 shall, if it
shall be deemed to have received any shares, be deemed to have acted as agent on
behalf of the Corporation in acquiring such of the shares as result in a
violation of Section 6.2 and shall be deemed to hold such shares in trust on
behalf and for the benefit of the Corporation. The transferee shall have no
right to receive dividends or other distributions with respect to such shares,
and shall have no right to vote such shares. Such transferee shall have no
claim, cause of action, or any other recourse whatsoever against a transferor of
shares acquired in violation of Section 6.2. The transferee's sole right with
respect to such shares shall be to receive at the Corporation's sole and
absolute discretion, either (i) consideration for such shares upon
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the resale of the shares as directed by the Corporation pursuant to Section
6.3(c) or (ii) the Redemption Price pursuant to Section 6.3(c).
(c) The Board of Directors shall, within six months after
receiving notice of a Transfer that violates Section 6.2(a), either (in its sole
and absolute discretion) (i) direct the transferee of such shares to sell all
shares held in trust for the Corporation pursuant to Section 6.3(b) for cash in
such manner as the Board of Directors directs or (ii) to the extent permissible
under Maryland law, redeem such shares for the Redemption Price within such
six-month period on such date as the Board of Directors may determine. If the
Board of Directors directs the transferee to sell the shares, the transferee
shall receive such proceeds as trustee for the Corporation and pay the
Corporation out of the proceeds of such sale all expenses incurred by the
Corporation in connection with such sale plus any remaining amount of such
proceeds that exceeds the amount paid by the transferee for the shares, and the
transferee shall be entitled to retain only any proceeds in excess of such
amounts required to be paid to the Corporation.
6.4. Notice of Restricted Transfer. Any Person who acquires or attempts
or intends to acquire shares in violation of Section 6.2 shall immediately give
written notice to the Corporation of such event and shall provide to the
Corporation such other information as the Corporation may request in order to
determine the effect, if any, of such Transfer or attempted or intended Transfer
on the Corporation's status as a REIT.
6.5. Owners Required to Provide Information. From the date of the
Merger and prior to the Restriction Termination Date:
(a) every shareholder of record of more than 5% (or such lower
percentage as required by the Code or regulations promulgated thereunder) of the
outstanding capital stock of the Corporation shall, within 30 days after
December 31 of each year, give written notice to the Corporation stating the
name and address of such record shareholder, the number of shares Beneficially
Owned by it, and a description of how such shares are held; provided that a
shareholder of record who holds outstanding capital stock of the Corporation as
nominee for another person, which other person is required to include in gross
income the dividends received on such capital stock (an "Actual Owner"), shall
give written notice to the Corporation stating the name and address of such
Actual Owner and the number of shares of such Actual Owner with respect to which
the shareholder of record is nominee.
(b) every Actual Owner of more than 5% (or such lower
percentage as required by the Code or regulations promulgated thereunder) of the
outstanding capital stock of the Corporation who is not a shareholder of record
of the Corporation, shall within 30 days after December 31 of each year, give
written notice to the Corporation stating the name and address of such Actual
Owner, the number of shares Beneficially Owned, and a description of how such
shares are held.
(c) each Person who is a Beneficial Owner of capital stock and
each Person (including a shareholder of record) who is holding capital stock for
a Beneficial Owner shall provide to the Corporation such information as the
Corporation may request, in good faith, in order to determine the Corporation's
status as a REIT.
6.6. Remedies Not Limited. Subject to Section 6.12 of this Article VI,
nothing contained in this Article VI shall limit the authority of the Board of
Directors to take such other action as it deems necessary or advisable to
protect the Corporation and the interests of its shareholders in preserving the
Corporation's status as a REIT.
6.7. Ambiguity. In the case of an ambiguity in the application of any
of the provisions of this Article VI, including any definition contained in
Section 6.1, the Board of Directors shall have the power to determine the
application of the provisions of this Article VI with respect to any situation
based on the facts known to it.
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6.8. Exception. The Board of Directors may, upon receipt of either a
certified copy of a ruling from the Internal Revenue Service or an opinion of
counsel satisfactory to the Board of Directors, but shall in no case be required
to, exempt a Person (the "Exempted Holder") from the Ownership Limit if the
ruling or opinion concludes that no Person who is an individual as defined in
Section 542(a)(2) of the Code will, as the result of the ownership of shares by
the Exempted Holder, be considered to have Beneficial Ownership of an amount of
capital stock that will violate the Ownership Limit.
6.9. Legend. Each certificate for capital stock of the Corporation
shall bear a legend referring to the restrictions set forth in this Article VI.
6.10. Termination of REIT Status. The Corporation shall take no action
to terminate the Corporation's status as a REIT or to amend the provisions of
this Article VI until such time as (i) the Board of Directors adopts a
resolution recommending that the Corporation terminate its status as a REIT or
amend this Article VI, as the case may be, (ii) the Board of Directors presents
the resolution at an annual or special meeting of the shareholders and (iii)
such resolution is approved by holders of two-thirds of the issued and
outstanding shares of the capital stock entitled to vote thereon voting together
as a single class.
6.11. Severability. If any provision of this Article VI or any
application of any such provision is determined to be invalid by any Federal or
state court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected and other applications of such provision shall
be affected only to the extent necessary to comply with the determination of
such court.
6.12. AMEX Settlement. Nothing in this Article VI shall preclude
settlement of any transaction entered into through the facilities of the
American Stock Exchange.
ARTICLE VII
BOARD OF DIRECTORS
7.1. Function. The business and affairs of the Corporation shall be
managed by, or under the direction of, its Board of Directors. The Board of
Directors shall consist at all times of a majority of Independent Directors,
provided that upon a failure to comply with this requirement because of the
resignation, removal or death of an Independent Director, such requirement shall
not be applicable for a period of 60 days or such longer period as may
reasonably be needed to fill the vacancy with an Independent Director. An
"Independent Director" shall be a director who is not (i) an employee or officer
of the Corporation or a subsidiary or division thereof, (ii) a spouse, parent or
child of, or a relative living in the same household as, a principal executive
officer of the Corporation, or (iii) an individual member of an organization
acting as an advisor, consultant, legal counsel or acting in a similar capacity
that receives compensation on a continuing basis from the Corporation in
addition to director's fees.
7.2. Number. The number of directors that will constitute the entire
Board of Directors shall be fixed by, or in the manner provided in, the Bylaws
but shall in no event be less than three nor more than fifteen. The current
number of directors is five, and the names of the directors who will serve until
the next annual meeting and until their successors are elected and qualify are:
B. Mayo Boddie, Nicholas B. Boddie, Donald R. Pesta, Jr., William H. Stanley
and Richard A. Urquhart, Jr.
7.3. Vacancies. The shareholders may elect a successor to fill a
vacancy on the Board of Directors that results from the removal of a director.
Newly created directorships resulting from any increase in the number of
directors may be filled by a majority of the Board of Directors, or as otherwise
provided in the Bylaws, and any vacancies on the Board of Directors resulting
from any cause other than an increase in the number of directors may be filled
by the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the Board of Directors, or by a sole remaining
director, or as otherwise provided in the Bylaws.
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7.4. Removal. Any director may be removed from office only for cause
and only by the affirmative vote of the holders of two-thirds of the shares of
capital stock of the Corporation outstanding and entitled to vote in the
election of directors voting together as a group. For purposes of this Section
7.4, "cause" shall mean the wilful and continuous failure of a director to
substantially perform such director's duties for the Corporation (other than any
such failure resulting from temporary incapacity due to physical or mental
illness) or the wilful engaging by a director in gross misconduct materially and
demonstrably injurious to the Corporation.
7.5. Powers. The enumeration and definition of particular powers of the
Board of Directors included in the foregoing shall in no way be limited or
restricted by reference to or inference from the terms of any other clause of
this or any other Article of these Articles of Incorporation, or construed as or
deemed by inference or otherwise in any manner to exclude or limit the powers
conferred upon the Board of Directors under the Maryland Corporations and
Associations Article as now or hereafter in force.
ARTICLE VIII
LIABILITY
The liability of the directors and officers of the Corporation
to the Corporation and its shareholders for money damages is hereby limited to
the fullest extent permitted by Section 5-349 of the Courts and Judicial
Proceedings Article of the Annotated Code of Maryland (or its successor) as such
provisions may be amended from time to time. No amendment of these Articles of
Incorporation or repeal of any of its provisions shall limit or eliminate the
benefits provided to directors and officers under this provision with respect to
any act or omission that occurred prior to such amendment or repeal.
ARTICLE IX
INDEMNIFICATION
The Corporation shall indemnify directors, officers, agents
and employees as follows: (a) the Corporation shall indemnify its directors and
officers, whether serving the Corporation, any predecessor of the Corporation,
or at the Corporation's request any other entity, to the full extent required or
permitted by the Maryland Corporations and Associations Article now or hereafter
in force, including the advance of expenses under the procedures and to the full
extent permitted by law and (b) the Corporation shall indemnify other employees
and agents, whether serving the Corporation, any predecessor of the Corporation,
or at the Corporation's request any other entity, to such extent as shall be
authorized by the Board of Directors or the Corporation's Bylaws and be
permitted by law. The foregoing rights of indemnification shall not be exclusive
of any other rights to which those seeking indemnification may be entitled and
shall continue as to a person who has ceased to be a director, officer, agent or
employee and shall inure to the benefit of the heirs, executors and
administrators of such a person. The Board of Directors may take such action as
is necessary to carry out these indemnification provisions and is expressly
empowered to adopt, approve and amend from time to time such Bylaws, resolutions
or contracts implementing such provisions or such further indemnification
arrangements as may be permitted by law. No amendment of these Articles of
Incorporation of the Corporation shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions occurring
prior to such amendment or repeal.
ARTICLE X
VOTING REQUIREMENTS
Notwithstanding any provision of the General Laws of the State
of Maryland requiring action to be taken or authorized by the affirmative vote
of the holders of a designated proportion greater than a majority of
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the shares of capital stock of the Corporation outstanding and entitled to vote
thereupon, such action shall, except as otherwise provided in these Articles of
Incorporation, be valid and effective if taken or authorized by the affirmative
vote of the holders of a majority of the total number of shares of capital stock
of the Corporation outstanding and entitled to vote thereupon voting together as
a single class.
ARTICLE XI
AMENDMENT
The Corporation reserves the right to amend, alter or repeal
any provision contained in these Articles of Incorporation in any manner
permitted by Maryland law, including any amendment changing the terms or
contract rights, as expressly set forth in its Charter, of any of its
outstanding stock by classification, reclassification or otherwise, upon the
vote of the holders of a majority of the shares of capital stock of the
Corporation outstanding and entitled to vote thereon voting together as a single
class; provided that any amendment to Article VI, Section 7.4 of Article VII or
to this Article XI must be adopted by the vote of the holders of two-thirds of
the shares of capital stock of the Corporation outstanding and entitled to vote
thereon voting together as a single class. All rights conferred upon
shareholders herein are subject to this reservation.
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XHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
BODDIE-NOELL PROPERTIES, INC.
ARTICLE I
OFFICES
1.01 Registered Office. The Corporation shall maintain a registered
office in the State of Maryland as required by law.
1.02 Other Offices. The Corporation may also have offices at such other
places both within and without the State of Maryland as the Board of Directors
may from time to time determine or the business of the Corporation may require,
including, without limitation, the principal office at 3710 One First Union
Center, Charlotte, North Carolina 28202.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.01 Location. Meetings of shareholders for any purpose may be held at
such time and place, within or without the State of Maryland, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
2.02 Annual Meeting. Annual meetings of shareholders shall be held on a
date and a time as may be determined from time to time by the Board of
Directors, at which the shareholders shall elect by plurality vote a Board of
Directors, and transact such other business as may properly be brought before
the meeting in accordance with Section 2.04 herein.
2.03 Director Nominations. Only persons who are nominated in accordance
with the procedures set forth in this Section 2.03 shall be eligible for
election as directors. Prior to each annual meeting of shareholders (or special
meeting of shareholders held for the election of directors), the Board of
Directors shall nominate a slate of persons to stand for election to the Board
of Directors at the annual meeting. The notice to the shareholders of the
meeting shall set forth the names and backgrounds of the persons nominated by
the Board of Directors. Nominations of persons for election to the Board of
Directors of the Corporation may also be made at a meeting of shareholders or by
any shareholder of the Corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth in
this Section 2.03. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a shareholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation not later than (i) with respect to an election to be
held at an annual meeting of shareholders, 90 days prior to the anniversary date
of the immediately preceding annual meeting, and (ii) with respect to an
election to be held at a special meeting of shareholders for the election of
directors, the close of business on the tenth day following the date on which
notice of such meeting is first given to shareholders. Such shareholder's notice
shall set forth (a) as to each person whom the shareholder proposes to nominate
for election or reelection as a director, (i) the name, age, business address
and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of the
Corporation which are beneficially owned by such person and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to
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Regulation 14A under the Securities Exchange Act of 1934, as amended (including
without limitation such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (b) as to
the shareholder giving the notice, (i) the name and address, as they appear on
the Corporation's books, of such shareholder and (ii) the class and number of
shares of the Corporation which are beneficially owned by such shareholder. At
the request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the Secretary of the
Corporation that information required to be set forth in a shareholder's notice
of nomination which pertains to the nominee. The Chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with the procedures prescribed by the Bylaws, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
2.04 Notice and Business to be Conducted. Written notice of the annual
meeting shall be given to each shareholder entitled to vote thereat at least 10
but not more than 60 days before the date of the meeting.
At an annual meeting of the shareholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought before
the meeting by a shareholder. For business to be properly brought before an
annual meeting by a shareholder, the shareholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not later than 90 days prior to
the anniversary date of the immediately preceding annual meeting. A
shareholder's notice to the Secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (b) the name and address, as
they appear on the Corporation's books, of the shareholder proposing such
business, (c) the class and number of shares of the Corporation that are
beneficially owned by the shareholder, and (d) any material interest of the
shareholder in such business. Notwithstanding anything in the Bylaws to the
contrary, no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this Section. The Chairman of the
annual meeting shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting in accordance with the
provisions of this Section, and if he should so determine, he shall so declare
to the meeting and any such business not properly brought before the meeting
shall not be transacted.
2.05 Stock Ledger. The officer who has charge of the stock ledger of
the Corporation shall prepare and make, at least 10 days before every election
of directors, a complete list of the shareholders entitled to vote at said
election, arranged in alphabetical order, showing the address of and the number
of shares registered in the name of each shareholder. Such list shall be open to
the examination of any shareholder, during ordinary business hours, for a period
of at least ten days prior to the election, either at a place within the city,
town or village where the election is to be held and which place shall be
specified in the notice of the meeting, or, if not specified, at the place where
said meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and subject to the
inspection of any shareholder who may be present.
2.06 Special Meetings. At any time in the interval between annual
meetings, special meetings of the shareholders, unless otherwise provided by law
or by the Articles of Incorporation, may be called by the Chief Executive
Officer and shall be called by the Chief Executive Officer upon the request in
writing of a majority of the Board of Directors or a majority of the Independent
Directors (as defined in Section 3.01 hereof), or upon the written request of
the holders of shares representing at least 25% of the shares of capital stock
of the Corporation which would be entitled to vote thereat.
2.07 Notice of Special Meeting. A request for a special meeting
pursuant to Section 2.06 hereof shall state the purpose of the meeting and the
matters proposed to be acted on at it. In the event shareholders have
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requested a special meeting, the Secretary shall: (a) inform the shareholders
who make the request of the reasonably estimated cost of preparing and mailing a
notice of the meeting; and (b) on payment of these costs to the corporation,
notify each shareholder entitled to notice of the meeting. Notice of the special
meeting shall be given to each shareholder in the same manner as set forth in
Section 2.04 hereof.
2.08 Business at Special Meeting. Business transacted at any special
meeting of shareholders shall be limited to the purposes stated in the notice.
Unless requested by shareholders entitled to cast a majority of all the votes
entitled to be cast at the meeting, a special meeting need not be called to
consider any matter which is substantially the same as a matter voted on at any
special meeting of the shareholders held during the preceding 12 months.
2.09 Quorum. The holders of a majority of the total capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
statute or by the Articles of Incorporation. If, however, such quorum shall not
be present or represented at any meeting of the shareholders, the shareholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified.
2.10 Vote. When a quorum is present at any meeting, the vote of the
holders of a majority of the shares of capital stock entitled to be voted on a
question brought before such meeting whose holders are present in person or
represented by proxy shall decide such question unless the question is one upon
which, by express provision of statute or of the Articles of Incorporation, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
2.11 Proxies. At all meetings of shareholders, a shareholder may vote
in person or vote by proxy that is executed in writing by the shareholder or
that is executed by his duly authorized attorney-in-fact. Such proxy shall be
filed with the Secretary of the Corporation or other persons authorized to
tabulate votes before or at the time of the meeting. No proxy shall be valid
after 11 months from the date of its execution unless otherwise provided in the
proxy.
ARTICLE III
DIRECTORS
3.01 Number, Election and Term. The number of directors of the
Corporation that shall constitute the whole Board of Directors shall be fixed
from time to time by resolution by the Board of Directors but shall not be less
than five; provided, however, that the tenure of office of a director shall not
be affected by any decrease or increase in the number of directors so made by
the Board of Directors. At all times that the Corporation intends to be
qualified as a real estate investment trust under the Internal Revenue Code of
1986, as amended, or any successor statute, a majority of the Board of Directors
shall be Independent Directors (as hereinafter defined). For purposes of these
Bylaws, "Independent Director" shall mean a director of the Corporation who is
not an Affiliated Person (as hereinafter defined) of the Corporation. For
purposes of these Bylaws, an "Affiliated Person" of the Corporation means (a)
any person directly or indirectly owning, controlling, or holding with power to
vote, 5 per centum or more of the outstanding voting securities of the
Corporation; (b) any person 5 per centum or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held with power to
vote, by the Corporation; (c) any person directly or indirectly controlling,
controlled by, or under common control with, the Corporation; or (d) any
officer, partner, or employee of the Corporation. The directors shall be elected
at the annual meeting of the shareholders, except as provided in Section 3.03 of
this Article III, and the directors so elected shall hold office until the next
annual meeting or until their successors are elected and qualify.
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3.02 Powers. The business and affairs of the Corporation shall be
managed in accordance with the Articles of Incorporation and these Bylaws under
the direction of its Board of Directors and where applicable, the Independent
Directors, which may exercise all of the powers of the Corporation, except such
as are by law or by the Corporation's Articles of Incorporation or by these
Bylaws conferred upon or reserved to the shareholders.
3.03 Vacancies. Any vacancy occurring in the Board of Directors for any
cause may be filled by a majority of the remaining members of the Board of
Directors, although such majority is less than a quorum; provided, however, that
if the Corporation has sought to qualify as a real estate investment trust and
in accordance with Section 3.01 a majority of the Board of Directors are
required to be Independent Directors, then Independent Directors shall nominate
replacements for vacancies among the Independent Directors. If the shareholders
of any class or series are entitled separately to elect one or more directors, a
majority of the remaining directors elected by that class or series or the sole
remaining director elected by that class or series may fill any vacancy among
the number of directors elected by that class or series. A director elected by
the Board of Directors to fill a vacancy shall be elected to hold office until
the next annual meeting of shareholders or until his successor is elected and
qualified.
3.04 Resignations. Any director or member of a committee may resign at
any time. Such resignation shall be made in writing and shall take effect at the
time specified therein, or if no time is specified, at the time of the receipt
by the Chairman of the Board of Directors, the Chief Executive Officer or the
Secretary. The acceptance of a resignation shall not be necessary to make it
effective.
3.05 Committees of the Board of Directors. The Board of Directors may
appoint from among its members one or more committees composed of three or more
directors. A majority of the members of any committee so appointed shall be
Independent Directors (as defined in Section 3.01). The Board of Directors may
delegate to any committee any of the powers of the Board of Directors except the
power to declare dividends or distributions on stock, recommend to the
shareholders any action which requires shareholder approval, amend the Bylaws,
approve any merger or share exchange or issue stock. However, if the Board of
Directors has given general authorization for the issuance of stock, a committee
of the Board of Directors, in accordance with a general formula or method
specified by the Board of Directors by resolution or by adoption of a stock
option plan, may fix the terms of stock subject to classification or
reclassification and the terms on which any stock may be issued.
Notice of committee meetings shall be given in the same manner as
notice for special meetings of the Board of Directors.
One-third, but not less than two, of the members of any committee shall
be present in person or by telephone at any meeting of such committee in order
to constitute a quorum for the transaction of business at such meeting, and the
act of a majority of those present shall be the act of such committee. The Board
of Directors may designate a Chairman of any committee and such Chairman or any
two members of any committee may fix the time and place of its meetings unless
the Board of Directors shall otherwise provide. In the absence or
disqualification of any member of any such committee, the members thereof
present at any meeting and not disqualified from voting, whether or not they
constitute a quorum, may unanimously appoint another director to act at the
meeting in the place of such absent or disqualified members; provided, however,
that in the event of the absence or disqualification of an Independent Director,
such appointee shall be an Independent Director.
Each committee shall keep minutes of its proceedings and shall report
the same to the Board of Directors when required, and any action taken by the
committees shall be subject to revision and alteration by the Board of
Directors, provided that no rights of third persons shall be affected by any
such revision or alteration.
Subject to the provisions hereof, the Board of Directors shall have the
power at any time to change the membership of any committee, to fill all
vacancies, to designate alternate members to replace any absent or disqualified
member, or to dissolve any committee.
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3.06 Meetings of the Board of Directors. Meetings of the Board of
Directors, regular or special, may be held at any place in or out of the State
of Maryland as the Board of Directors may from time to time determine or as
shall be specified in the notice of such meeting.
The first meeting of each newly elected Board of Directors shall be
held as soon as practicable after the annual meeting of the shareholders at
which the directors were elected. The meeting may be held at such time and place
as shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, except that no notice shall be necessary if
such meeting is held immediately after the adjournment and at the site of the
annual meeting of the shareholders.
Regular meetings of the Board of Directors may be held with or without
notice at such time and place as shall from time to time be determined by the
Board of Directors.
Special meetings of the Board of Directors may be called at any time by
two or more directors or by the Chairman of the Board of Directors or the Chief
Executive Officer.
Notice of the place and time of every special meeting of the Board of
Directors shall be delivered to each director either personally or by telephone,
facsimile, telegram or telegraph, or by leaving the same at his residence or
usual place of business at least forty-eight hours before the time at which such
meeting is to be held, or by first-class mail, at least three days before the
day on which such meeting is to be held. If mailed, such notice shall be deemed
to be given when deposited in the United States mail addressed to the director
at his post-office address as it appears on the records of the Corporation, with
postage thereon prepaid.
3.07 Quorum and Voting. At all meetings of the Board of Directors, a
majority of the entire Board of Directors shall constitute a quorum for the
transaction of business and the action of a majority of the directors present at
any meeting at which a quorum is present shall be the action of the Board of
Directors unless the concurrence of a greater proportion, or the concurrence of
a majority of the Independent Directors is required for such action by law, the
Corporation's Articles of Incorporation or these Bylaws. If a quorum shall not
be present at any meeting of directors, the directors present may, by a majority
vote, adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Notwithstanding the first paragraph of this Section 3.07, any action
pertaining to a transaction involving the Corporation in which any director or
officer of the Corporation or any affiliate of any of the foregoing persons has
an interest shall specifically be approved with respect to any isolated
transactions or generally be approved with respect to any series of similar
transactions, by a majority of the members of the Board of Directors, including
a majority of the Independent Directors who are not parties to and have no
financial interest in such transaction and so are not affiliates of such
interested party, even if such directors constitute less than a quorum.
In approving any contract, joint venture or other transaction or series
of transactions between the Corporation and any director or officer of the
Corporation or any affiliate of such persons, a majority of the directors
including a majority of the Independent Directors must determine that:
(a) the contract, joint venture or other transaction as
contemplated is fair and reasonable to the Corporation and its
shareholders and on terms and conditions no less favorable to the
Corporation than those available from unaffiliated third parties;
(b) if an acquisition of property other than mortgage loans is
involved, the total consideration (determined at the time the
acquisition is approved by the Independent Directors) for the property
being acquired is not in excess of the (i) appraised value of such
property as stated in an appraisal by a qualified independent appraiser
with experience in appraising assets of the type being acquired or (ii)
fair value of such property as stated in an opinion by a qualified
independent consultant, selected, approved or ratified by the
Independent Directors prior to any such acquisition, and if the price
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is in excess of the cost of the asset to such seller thereof, the
Independent Directors shall determine that substantial justification
for such excess exists and that such excess is not unreasonable; and
(c) if the transaction involves the making of loans or the
borrowing of money, the transaction is fair, competitive, and
commercially reasonable and no less favorable to the Corporation than
loans between unaffiliated lenders and borrowers under the same
circumstances.
3.08 Organization. The Chairman of the Board of Directors shall preside
at each meeting of the Board of Directors, or in the absence or inability of the
Chairman of the Board of Directors to preside at a meeting, another director
chosen by a majority of the directors present shall act as Chairman of the
meeting and preside thereat. The Secretary (or, in his absence or inability to
act, any person appointed by the Chairman of the meeting) shall act as Secretary
of the meeting and keep the minutes thereof.
3.09 Meeting by Conference Telephone. Unless otherwise restricted by
the Articles of Incorporation, members of the Board of Directors may participate
in a meeting by means of a conference telephone or similar communications
equipment if all persons participating in the meeting can hear each other at the
same time. Participation in a meeting by these means constitutes presence in
person at a meeting.
3.10 Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting, if a written consent to such action is signed by all
members of the Board of Directors or of such committee, as the case may be, and
such written consent is filed with the minutes of proceedings of the Board of
Directors or committee.
3.11 Compensation of Directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of committees of the Board of Directors may be allowed like
compensation for attending committee meetings.
3.12 Investment Policies and Restrictions. It shall be the duty of the
Board of Directors to ensure that the purchase, sale, retention and disposal of
the Corporation's assets, and the investment policies of the Corporation and the
limitations thereon or amendment thereto are at all times in compliance with the
restrictions applicable to real estate investment trusts pursuant to the
Internal Revenue Code of 1986, as amended.
The Corporation shall not:
(a) invest in mortgage loans unless an appraisal is obtained
concerning the underlying property;
(b) invest in commodity or commodity future contracts other
than interest rate futures used solely for hedging purposes;
(c) issue debt securities unless the historical debt service
coverage of the most recently completed fiscal year, as adjusted for
known changes, is sufficient to service the higher level of debt
(without regard to any applicable balloon principal payments);
(d) invest in real estate contracts for sale, unless such real
estate contracts are recordable in the chain of title; or
(e) act in any way that would disqualify the Corporation as a
real estate investment trust under the provisions of the Code.
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The Corporation does not intend to invest in the securities of other
issuers for the purposes of exercising control (other than with respect to
wholly owned subsidiaries), to engage in the trading of or to underwrite
securities for other issuers, to engage in the purchase and sale (or turnover)
of investments other than as described in the Registration Statement or to offer
securities in exchange for property unless deemed prudent by a majority of the
directors.
The Independent Directors shall review the investment policies of the
Corporation at least annually to determine that the policies then being followed
by the Corporation are in the best interests of its shareholders. Each such
determination and the basis therefore shall be set forth in the minutes of the
Board of Directors.
The directors shall review the borrowings of the Corporation quarterly
for reasonableness in relation to the Corporation's net assets. The Corporation
shall not incur indebtedness if, after giving effect to the incurrence thereof,
aggregate indebtedness, secured and unsecured, would exceed three hundred
percent (300%) of the Corporation's net assets, on a consolidated basis, unless
approved by a majority of the directors, including a majority of the Independent
Directors, and disclosed to the shareholders in the next quarterly report of the
Corporation, along with justification for such excess. For this purpose, the
term "Net Assets" means the total assets (less intangibles) of the Corporation
at cost, before deducting depreciation or other non-cash reserves, less total
liabilities, as calculated at the end of each quarter on a basis consistently
applied.
The foregoing prohibitions and restrictions set forth in this Section
3.12 shall not be changed without the approval of the shareholders of the
Corporation.
ARTICLE IV
NOTICES
4.01 Writing. Notices to directors and shareholders when in writing or
by telegram as required by provisions of statutes, or by the Articles of
Incorporation, or by these Bylaws, shall be delivered personally or mailed to
the directors or shareholders at their addresses appearing on the books of the
Corporation.
4.02 Waiver. Whenever any notice is required to be given under
provisions of the statutes or of the Articles of Incorporation or of these
Bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
5.01 Principal Officers. The principal officers of the Corporation
shall be a Chief Executive Officer, a President, one or more Vice Presidents, a
Treasurer and a Secretary. The Corporation may also have such other principal
officers, including one or more Controllers, as the Board of Directors may in
its discretion appoint. One person may hold the offices and perform the duties
of any two or more of said offices, except that no one person shall hold the
offices and perform the duties of President and Secretary.
5.02 Election, Term of Office and Remuneration. The principal officers
of the Corporation shall be elected annually by the Board of Directors at the
annual meeting thereof. Each such officer shall hold office until his successor
is elected and qualified or until his earlier death, resignation or removal. The
remuneration of all officers of the Corporation shall be fixed by the Board of
Directors. Any vacancy in any office shall be filled in such manner as the Board
of Directors shall determine.
5.03 Subordinate Officers. In addition to the principal officers
enumerated in Section 5.01 of this Article V, the Corporation may have one or
more Assistant Treasurers, Assistant Secretaries and Assistant
35
<PAGE>
Controllers and such other subordinate officers, agents and employees as the
Board of Directors may deem necessary, each of whom shall hold office for such
period as the Board of Directors may from time to time determine. The Board of
Directors may delegate to any principal officer the power to appoint and to
remove any such subordinate officer, agents or employees.
5.04 Removal. Except as otherwise permitted with respect to subordinate
officers, any officer may be removed, with or without cause, at any time, by
resolution adopted by the Board of Directors.
5.05 Resignations. Any officer may resign at any time by giving written
notice to the Board of Directors (or to a principal officer if the Board of
Directors has delegated to such principal officer the power to appoint and to
remove such officer). The resignation of any officer shall take effect upon
receipt of notice thereof or at such later time as shall be specified in such
notice; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
5.06 Powers and Duties. The officers of the Corporation shall have such
powers and perform such duties incident to each of their respective offices and
such other duties as may from time to time be conferred upon or assigned to them
by the Board of Directors.
ARTICLE VI
CERTIFICATE OF STOCK
6.01 Certificates. Every holder of stock in the Corporation shall be
entitled to have a certificate, signed by, or in the name of the Corporation by,
the Chairman or Vice Chairman of the Board of Directors or the President or a
Vice President, and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Corporation, certifying the number of shares
owned by him in the Corporation. Any or all of the signatures on the certificate
may be a facsimile. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on, any such certificate or
certificates shall cease to be such officer or officers of the Corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates have been delivered by the Corporation, such certificate or
certificates may nevertheless be adopted by the Corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the Corporation. If the
Corporation shall be authorized to issue more than one class of stock, or more
than one series of any call, the designations, preference and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights shall be set forth in full or summarization on the face or the
back of the certificate which the Corporation shall issue to represent such
class of stock; provided, however, that in lieu of the foregoing requirements,
there may be set forth on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, a statement
that the Corporation will furnish without charge to each shareholder who so
requests, the designations, preferences and relative, participating, option or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
6.02 Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of the fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost or destroyed.
6.03 Transfer of Stock. Subject to restrictions provided in the
Articles of Incorporation, shares of
36
<PAGE>
stock of the Corporation shall be transferable on the books of the Corporation
only by the holder of record thereof, in person or by duly authorized attorney,
upon surrender and cancellation of a certificate or certificates for a like
number of shares, with an assignment or power of transfer endorsed thereon or
delivered therewith, duly executed, and with such proof of the authenticity of
the signature and of authority to transfer, and of payment of transfer taxes, as
the Corporation or its agents may require.
6.04 Setting of Record Date on Transfer Books. The Board of Directors
shall fix in advance a date, not exceeding 60 days preceding the date of any
meeting of shareholders, or the date for the payment of any dividend, or the
date for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining the consent of shareholders for any purpose, as a record date for the
determination of the shareholders entitled to notice of, and to vote at, any
such meeting, and any adjournment thereof, or entitled to receive payment of any
such dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, or to give
such consent, and in such case such shareholders and only such shareholders as
shall be shareholders of record on the date so fixed shall be entitled to such
notice of, and to vote at, such meeting and any adjournment thereof, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights, or to give such consent, as the case may be
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date fixed as aforesaid.
6.05 Registered Shareholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Maryland.
ARTICLE VII
GENERAL PROVISIONS
7.01 Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Articles of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Articles of Incorporation.
7.02 Reserves. Before payment of any dividend, there may be set aside
out of any funds of the Corporation available for dividends such sum or sums as
the directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
7.03 Annual Report. The officers of the Corporation shall prepare or
cause to be prepared annually a full and correct report of the affairs of the
Corporation, including financial statements for the preceding fiscal year, which
shall be prepared in accordance with generally accepted accounting principles,
audited and certified by independent certified public accountants and
distributed to shareholders within one hundred twenty (120) days after the close
of the Corporation's fiscal year and a reasonable period of time (at least 10
days) prior to the annual meeting of shareholders. Such report shall also be
submitted at the annual meeting. The annual report shall also include full
disclosure of all material terms, factors and circumstances surrounding any
transactions between the Corporation and any director, or any affiliates of such
director. The Independent Directors will comment on the fairness of such
transactions in the annual report.
The Corporation shall also publish in the annual report the ratio of
the cost of raising capital during the
37
<PAGE>
year to the capital raised.
7.04 Quarterly Report. The officers of the Corporation shall also
prepare or cause to be prepared quarterly for each of the first three quarters
of each fiscal year, a full and correct report of the affairs of the
Corporation, including a balance sheet and financial statement of operations for
the preceding fiscal quarter, which need not be certified by independent
certified public accountants and shall be distributed to shareholders within
forty-five (45) days after the close of the Corporation's preceding fiscal
quarter.
7.05 Books of Account and Records. The Corporation shall maintain at
its office in the City of Charlotte and State of North Carolina correct and
complete books and records of account of all the business and transactions of
the Corporation, such books and records to include, without limitation, current
names and addresses of all shareholders as well as shareholder records. Upon the
request of, and reasonable notice given by, any shareholder, there shall be made
available for inspection such books and records in accordance with the
provisions of Maryland law during regular business hours of the Corporation.
7.06 Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
7.07 Fiscal Year. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
7.08 Seal. The Board of Directors shall provide a suitable seal,
bearing the name of the Corporation, which shall be in the charge of the
Secretary. The Board of Directors may authorize one or more duplicate seals and
provide for the custody thereof. If the Corporation is required to place its
corporate seal to a document, it is sufficient to meet the requirement of any
law, rule or regulation relating to a corporate seal to place the word "Seal"
adjacent to the signature of the person authorized to sign the document on
behalf of the Corporation.
ARTICLE VIII
AMENDMENTS
8.01 Amendments. These Bylaws may be altered or repealed or new bylaws
may be made by the shareholders entitled to vote thereon at any annual or
special meeting thereof or by the Board of Directors.
38
<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 SIX MONTHS ENDED JUNE
30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,211,595
<SECURITIES> 0
<RECEIVABLES> 17,455
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,773,503
<PP&E> 110,161,723
<DEPRECIATION> (12,739,629)
<TOTAL-ASSETS> 103,793,752
<CURRENT-LIABILITIES> 1,079,826
<BONDS> 77,952,840
<COMMON> 35,048,271
0
0
<OTHER-SE> (10,717,654)
<TOTAL-LIABILITY-AND-EQUITY> 103,793,752
<SALES> 0
<TOTAL-REVENUES> 7,718,954
<CGS> 0
<TOTAL-COSTS> 2,923,905
<OTHER-EXPENSES> 837,031
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,104,430
<INCOME-PRETAX> 853,588
<INCOME-TAX> 0
<INCOME-CONTINUING> 853,588
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 853,588
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28
</TABLE>
