SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997.
Commission File Number 1-13089
U.S. RESTAURANT PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 75-2687420
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5310 Harvest Hill Rd., Suite 270, LB 168, Dallas,
Texas 75230 (Address of principal executive offices,
including zip code)
972-387-1487
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
Common Stock, par value New York Stock Exchange
$0.001 per share
$1.93 Series A Cumulative New York Stock Exchange
Convertible Preferred
Stock
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
The aggregate market value of the Common Stock (based upon the closing
price of the Common Stock on March 13, 1998, on the New York Stock Exchange)
held by non-affiliates of the Registrant was $367,196,692.
As of March 13, 1998, there were 12,998,113 shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information in the Registrant's definitive proxy statement to be filed
with the Securities and Exchange Commission related to the Company's 1998 Annual
Meeting of Stockholders is incorporated by reference in Part III hereof.
- --------------------------------------------------------------------------------
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U.S. RESTAURANT PROPERTIES, INC.
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business............................................. 3
Item 2. Properties........................................... 13
Item 3. Legal Proceedings.................................... 15
Item 4. Submission of Matters to a Vote of Security-Holders.. 15
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................ 16
Item 6. Selected Financial Data.............................. 18
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 19
Item 8. Financial Statements and Supplementary Data.......... 23
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ 23
PART III
Item 10. Directors and Executive Officers of the Registrant... 24
Item 11. Executive Compensation............................... 24
Item 12. Security Ownership of Certain Beneficial Owners and
Management......................................... 24
Item 13. Certain Relationships and Related Transactions....... 24
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K........................................ 25
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PART I
ITEM 1. BUSINESS
GENERAL
U.S. Restaurant Properties, Inc. (the Company), a fully integrated,
self-administered Real Estate Investment Trust (REIT), is one of the largest
publicly-traded entities in the United States dedicated to acquiring, owning,
managing and selectively developing restaurant properties. At December 31, 1997,
the Company's portfolio consisted of 591 properties diversified geographically
in 46 states and operated by approximately 290 restaurant operators. The
properties are leased by the Company on a triple net basis primarily to
operators of fast food and casual dining chain restaurants affiliated with major
brands such as Burger King(R), Arby's(R), Dairy Queen(R), Hardee's(R),
Chili's(R), Pizza Hut(R) and Schlotzsky's(R) and regional franchises such as
Grandy's(R) and Taco Cabana(R). As of December 31, 1997, over 99% of the
Properties were leased pursuant to leases with average remaining lease terms
(excluding extension options) in excess of ten years.
The Company is a Maryland corporation which intends to make an election
to be taxed as a REIT for federal income tax purposes commencing with its
taxable year ended December 31, 1997. Both the common stock, par value $.001 per
share (the Common Stock), and the $1.93 Series A Cumulative Convertible
Preferred Stock, par value $.001 per share (the Preferred Stock), of the Company
are traded on the New York Stock Exchange under the symbols "USV" and "USV pA,"
respectively. The principal executive offices of the Company are located at 5310
Harvest Hill Road, Suite 270, Dallas, Texas 75230. The telephone number is (972)
387-1487.
HISTORY AND STRUCTURE OF THE COMPANY
The Company's predecessor, U.S. Restaurant Properties Master LP (USRP),
formerly Burger King Investors Master L.P., was formed in 1985 by Burger King
Corporation (BKC) and QSV Properties, Inc. (QSV), both of which were at that
time wholly-owned subsidiaries of The Pillsbury Company. QSV acted as the
general partner of USRP. Burger King Corporation was a special general partner
of USRP until its withdrawal on November 30, 1994. USRP effected an initial
public offering in 1986 and the proceeds therefrom were used to buy the
Company's initial portfolio of 128 properties from Burger King Corporation. From
1986 through March 1995, the partnership agreement governing USRP limited the
activities of the Company to managing the original portfolio of properties.
In May 1994, existing management assumed control of the Company and
began implementing a number of new strategies intended to pursue Company growth.
These strategies have involved the Company in, among other things, acquiring new
properties, enhancing investment returns through merchant banking activities and
developing new co-branded service centers on a selective basis. From May 1994
through December 31, 1997, the Company acquired 477 Properties for an aggregate
purchase price of approximately $300 million. Since December 31, 1997, the
Company has acquired an additional 35 restaurant properties for a total
investment of approximately $36 million.
On October 15, 1997, the Company effected the Conversion of USRP into a
self-administered REIT. The Conversion was effected through the merger (the
"Merger") of USRP Acquisition, L.P., a partnership subsidiary of the Company,
with and into USRP. As a result of the Merger, USRP became a subsidiary of the
Company and, at the effective time of the Merger, all holders of units of
beneficial interest (the "Units") of USRP became stockholders of the Company. On
October 16, 1997, the Common Stock, in replacement of the Units, commenced
trading on the NYSE under the symbol "USV." In connection with the Conversion,
QSV withdrew as general partner of each of USRP and U.S. Restaurant Properties
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Operating L.P. (the "OP"), effective as of October 15, 1997, and USRP Managing,
Inc., a wholly-owned subsidiary of the Company, was substituted as the general
partner for USRP and the Operating Partnership. As part of the Conversion, QSV
received 126,582 shares of Common Stock and 1,148,418 units of beneficial
interest in the OP, which are exchangeable at any time for shares of Common
Stock on a one-for-one basis, in exchange for its interests in USRP and the OP
and the termination of its management contract.
STRATEGY
The Company seeks to maximize sustainable growth in Funds From
Operations (FFO) (see Selected Financial Data) per share and cash available for
distribution to stockholders through effective management, operation,
acquisition and selective development of restaurant properties. The Company
believes it can achieve its goal of increasing FFO per share and cash available
for distribution per share by (i) acquiring high quality restaurant properties
at attractive returns, (ii) realizing contractual rental rate escalations or
percentage rent on existing leases, (iii) selectively developing properties
where the Company can secure leases prior to construction and where such
development is expected to result in returns on investment that the Company
believes will exceed returns on comparable acquisitions, and (iv) actively
managing the Company's portfolio, including periodically re-evaluating all
assets for strategic disposition or repositioning. In pursuing its growth
strategy, the Company intends to maintain a conservative capital structure
providing it flexibility to access capital markets when financial and market
conditions warrant, thereby enabling it to take advantage of growth
opportunities as they arise.
ACQUISITION STRATEGY. The Company seeks to identify and acquire high quality
restaurant properties. The Company believes that it has been able to maximize
returns on acquisitions as a result of its expertise in evaluating and
capitalizing on the real estate needs of chain restaurant tenants, its ability
to identify and acquire financially attractive restaurant properties operated by
major national and regional restaurant brands and its expertise in identifying
and evaluating restaurant operators. The Company also seeks to utilize the
extensive personal and business relationships that management has developed over
time within the real estate and chain restaurant industries to identify
prospective acquisition opportunities and to consummate favorable acquisitions
prior to the active marketing of the subject properties.
The Company believes that the ownership of chain restaurant properties
is highly fragmented and that such fragmentation often creates pricing
inefficiencies in the sale of such properties. Chain restaurants are generally
owned by numerous local operators, many of whom own or operate a single
facility. Additionally, the Company believes that numerous chain restaurants are
occupied by owners who desire to focus their investments on and attention to the
operation of their respective restaurants, and not on ownership of real estate.
Critical evaluation of prospective property acquisitions is an
essential component of the Company's acquisition strategy. When evaluating
acquisition opportunities, the Company assesses a full range of matters relating
to the properties, including the quality of the tenant, the condition and
capacity of building infrastructure, the remaining lease term and the strength
of the brand affiliation. Additionally, the Company believes its access to
capital will provide it with a competitive advantage over other potential
property acquirors whose offers may be contingent upon obtaining the requisite
financing. To achieve a predictable return while maintaining a low risk profile,
the Company has developed the following acquisition criteria:
- - INVEST IN MAJOR RESTAURANT BRANDS. The Company intends to continue to
acquire properties operated by competent, financially-stable multi-unit
restaurant operators, which properties are affiliated with major national
brands such as Burger King(R), Arby's(R), Dairy Queen(R), Hardee's(R),
Chili's(R), Pizza Hut(R)and Schlotzsky's(R)and regional brands such as
Grandy's(R)and Taco Cabana(R). The Company believes that successful
restaurants operated
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underthese types of brands will continue to offer stable, consistent income
to the Company with reduced risk of default or non-renewal of the lease and
franchise agreement. The Company's strategy will continue to focus
primarily on the acquisition of existing chain restaurant properties that
have a history of profitable operations with a remaining term on the
current lease of at least five years. The Company believes that acquiring
existing restaurant properties provides a higher risk-adjusted rate of
return to the Company than acquiring newly-constructed restaurants.
- - ACQUIRE PROPERTIES SUBJECT TO LONG-TERM LEASES. The Company has
historically acquired, and intends to continue to acquire, properties
subject to existing long-term leases. The average remaining lease term for
the Properties is over ten years. The Company believes that by having
long-term leases in place it avoids the risks associated with trying to
lease the property, including uncertainty as to lease rate and tenant
continuity.
- - CONSOLIDATE SMALLER PORTFOLIOS. While the Company generally focuses its
acquisition efforts on the acquisition of single properties and smaller
portfolios in the $1 million to $10 million range, the Company also pursues
transactions involving portfolios of restaurant properties (generally
having a portfolio acquisition price in excess of $10 million). These
smaller portfolio transactions have historically resulted in a more
attractive valuation for the Company because the size of such transactions
generally does not attract competition from other large institutional
property owners. Buyers for these smaller portfolios typically are not well
capitalized and may be unable to compete for such transactions. Larger
transactions involving multiple properties generally attract several
institutional bidders, often resulting in a higher purchase price and lower
investment returns to the purchaser. Since January 1, 1996, the Company has
closed 89 transactions involving the acquisition of single properties with
average acquisition prices of less than $1 million and with an average
acquisition capitalization rate of between 11% and 14%. No assurance can be
given, however, that future acquisitions will achieve such capitalization
rates. In certain circumstances, however, the Company has identified,
evaluated and pursued portfolios valued at up to $50 million that present
attractive risk/return ratios.
- - SELECTIVELY DEVELOP CO-BRANDED SERVICE CENTERS. The Company has begun to
develop co-branded service centers, which combine a fast food restaurant
with a branded convenience store and filling station on one prime retail
site. The Company's general approach is to place under contract or option a
prime commercial parcel, obtain lease commitments from restaurant and gas
station/convenience store operators, and then supervise the construction of
the facility. In 1997, the Company opened four co-branded service centers.
In addition, the Company currently has nine co-branded service center
developments under construction which are expected to be completed during
1998. The Company believes that its development program may provide
investment yields in the range of 11% to 15%. No assurance can be given,
however, that future development will achieve such investment yields. The
Company expects to invest approximately $20 million to $24 million, which
is approximately 10% to 12% of its total annual investment activity, in
co-branded service center development over the next 12 months.
- - SELECTIVELY ACQUIRE FILLING STATION PROPERTIES. As an extension of its
co-branded development efforts, the Company seeks to acquire filling
station properties which may, in some instances, have restaurant operations
on the property as well. Management believes that filling station
properties possess many of the favorable characteristics that chain
restaurant properties exhibit. Management will pursue similar strategies
and underwriting standards in acquiring filling stations as those employed
for chain restaurants.
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Management is also exploring acquiring selectively other service retailing
neighbors of restaurants, such as cinemas.
INTERNAL GROWTH. The Company's goal of maximizing sustainable growth in FFO is
expected to be enhanced by its strategy to achieve internal growth from several
sources. A substantial number of the Company's leases contain annual rent
escalations that are either fixed (ranging from 2% to 3%) or indexed based on a
consumer price or other index. The Company will seek to include similar
escalation provisions in its future leases. The Company also seeks to include
percentage rent provisions in its leases. At December 31, 1997, approximately
55% of the Company's leases provided for percentage rent ranging from 2% to 9%
of the gross revenue in excess of a threshold amount generated by the tenant.
OPERATING STRATEGY. Management has endeavored to achieve a consistent return by
employing the strategies described above while at the same time minimizing loss
risk. The significant risk in the chain restaurant property business falls into
two categories: (i) default losses and/or (ii) non-renewal of leases with
accompanying declines in rent. The Company has collected in the last three
years, more than 99% of all rent due and, in the last 12 months, the average
remaining lease term on the Properties has increased from seven years to more
than ten years. These achievements are the result of the following operating
strategies which are designed to enhance the predictability and sustainability
of the Company's cash flow:
- - RENT PAYMENT PROTECTION. The Company protects against loss of rent payment
by employing strict underwriting standards, such as rent coverage ratio
analysis, and including terms and conditions in its leases which discourage
non-payment, such as master leases covering multi-unit operations, cross
default provisions on other properties, non-access to restaurant equipment
and letter of credit and/or personal guaranty requirements.
- - LEASE RENEWAL. The Company believes that the location of a restaurant is a
critical factor in a restaurant's success and that, as a result, its
tenants, in most cases, would experience a loss in the profitability of a
store and incur difficulty and cost in moving the store in the event of
non-renewal of the lease and, as a result, believes renewal of the lease,
on terms equal to or better than the existing terms, is more likely to
occur than the tenant vacating the space. In addition, the Company has
implemented an early lease renewal program pursuant to which the Company
offers remodeling financing to tenants in consideration for renewing and
restructuring existing leases. The Company believes this program will help
mitigate the risk of non-renewals of leases and will enable the Company,
where needed, to restructure the leases to require the tenant to be
responsible for all costs associated with operating the property. The
Company aggressively pursues lease renewals to take advantage of this need
by tenants for stability and continuity. Since August 1995, the Company has
renewed 50 leases.
- - DIVERSIFICATION. The Company believes its income stream is further
protected through the diversification of the Properties by location, brand
affiliation and the large number of operators leasing the Properties. The
591 Properties are diversified geographically in 46 states, with no state,
except Texas (28%), accounting for a concentration of greater than 6% of
the Properties. The Company believes the geographic diversity provides the
Company with protection from downturns in local and regional economies.
Since May 1994, the Company has significantly expanded the number of its
brand affiliations. Of the 477 Properties acquired since May 1994, only 94
are Burger King(R)restaurants and the balance are affiliated with other
national and regional chain restaurants, such as Arby's(R), Hardee's(R),
Pizza Hut(R), Dairy Queen(R), Grandy's(R)and Chili's(R). Additionally, the
Company has no tenant that accounts for greater than 14% of the Company's
gross
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revenues. As a result, the Company is not materially dependent on any one
operator or any small group of operators.
- - ASSET MANAGEMENT. The Company analyzes each restaurant property within its
portfolio to identify opportunities to improve its return. Such
opportunities may include purchasing property adjacent to the current
property, working with existing tenants to improve the sales and
performance of their stores and in some cases providing remodeling
financing toward that end.
FINANCING STRATEGY. The Company utilizes its credit facility provided by
Comerica Bank-Texas for short term financing of the acquisition of additional
restaurant properties. Borrowings under the credit facility at December 31,
1997, bore interest at a rate of London Interbank Offered Rate (LIBOR) plus a
margin of 1.80% per annum. At December 31, 1997, $63 million was outstanding
under the Comerica credit facility. On January 17, 1998, the Company entered
into an agreement with Union Bank of Switzerland (UBS) to provide a new
unsecured credit facility in the amount of $175 million to replace the Comerica
credit facility. The UBS credit facility bears interest at a rate of LIBOR plus
a margin of between 1.05% and 1.35% per annum. The Company may also issue Common
Stock or OP Units as consideration for future acquisitions. The Company believes
that its access to capital should provide it with a competitive advantage in
acquisitions over other bidders that qualify their bids with financing or other
contingencies.
The Company believes that it is best served by a conservative capital
structure with flexibility to access the capital markets when financial and
market conditions warrant. The Company's policy is to maintain a debt to total
market capitalization ratio (i.e., total consolidated debt of the Company as a
percentage of market value of its capital stock plus total consolidated debt;
for purposes of this calculation, the Series A Preferred Stock will be valued at
the greater of its liquidation preference or the market value of the Common
Stock into which it is convertible) of less than 50%. As of December 31, 1997,
the Company's ratio of debt to total market capitalization was approximately
24%.
INDUSTRY
The Company invests in properties on which fast food and casual dining
restaurants operate. These are primarily existing, seasoned operations using the
brand names of well known chain restaurants. The restaurant industry has grown
significantly over the past 20 years as a result of population growth, the
influence of the baby boom generation, the growth of two-income families and the
growth in consumers' disposable income. According to the National Restaurant
Association, the food service industry generated an estimated $308 billion of
revenue representing approximately 4.1% of the Gross Domestic Product during
1996. Total food service industry sales during 1997 are estimated to be
approximately $320 billion. The fast food segment, which offers value pricing
and convenience and represents approximately 90% of the Company's properties, is
the largest segment in the restaurant industry with 1997 sales estimated to
exceed $103 billion or 32% of the industry's revenues. The growth of the fast
food segment has exceeded that of the entire restaurant industry for over 20
years. According to the National Restaurant Association, sales at fast food
restaurants are expected to outpace the overall industry in 1997.
Demographic trends point toward an optimistic outlook for the food
service industry. According to the National Restaurant Association, the aging of
the baby boomers presents an opportunity for the industry, as people aged 45 to
54 generally have the highest incomes and spend the most money on food away from
home. Over the next several years, the 35 to 54 age group will experience an
income increase through wage increases and inheritances. Furthermore, the 15 to
24 age group will begin to expand again, reversing a ten-year decline. The
industry's product serves the dual income family particularly well. This group
craves the convenience due to their job demands and has the financial capacity
to buy meals outside the home.
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Families with two or more incomes represent over 70% of all family units; their
real incomes have improved over the last 20 years while single income families
experienced an erosion in their earnings.
The primary national and regional brands with which the Company is
affiliated are among the strongest in the country. The Company owns properties
operating under the Burger King, Pizza Hut(R), Taco Bell(R), Wendy's(R),
Hardee's(R) and KFC(R) restaurant brands which are six of the top ten domestic
restaurant chains (based on estimated 1996 system wide sales) in the United
States. In addition, the Company leases to operators of restaurant chains
falling in the top 20 domestic restaurant chains such as Arby's(R), Dairy
Queen(R) and Jack in the Box(R).
DIVERSIFICATION
The Company conducts its operations in such a manner as to enhance the
predictability and sustainability of its cash flows. The Company enhances the
predictability of the operating performance of the Properties and its financial
position by diversifying its portfolio by geographic location and number of
tenants. The Company believes that geographic diversification minimizes the
effects on the Company's financial position of downturns in regional and local
economics. The Properties are further diversified by number of tenants. At
December 31, 1997, only one tenant accounts for over 10% of the Company's
properties. Sybra, Inc., the operator of 77 Arby's(R) restaurants located on the
Properties, accounted for 13% of the Company's properties at December 31, 1997.
LEASES WITH RESTAURANT OPERATORS
The Company's strategy is to acquire operating restaurant properties
rather than developing new restaurant properties, although the Company has begun
to acquire newly constructed properties. Typically, the Company acquires a
property that has been operated as a fast food or casual dining restaurant and
that is subject to a lease with a remaining term of five to 20 years and a
co-terminus franchise agreement. The Company believes that this strategy reduces
the Company's financial risk because the restaurant operated on such property
has a proven operating record that mitigates the risk of default or non-renewal
under the lease.
Substantially all of the Company's existing leases are "triple net."
Triple net leases typically require the tenants to be responsible for the
property operating costs, including property taxes, insurance and maintenance. A
majority of the Company's leases provides for a base rent plus a percentage of
the restaurant's sales in excess of a threshold amount. The triple net lease
structure is designed to provide the Company with a consistent stream of income
without the obligation to reinvest in the property. For the twelve months ended
December 31, 1997, base rental revenues and percentage rental revenues
represented 84% and 16%, respectively, of total gross rental revenues.
The Company seeks to renew and restructure leases which will provide
for an increase in the percentage of total rental revenues derived from base
rental revenues and a decrease in the percentage of total rental revenues
derived from percentage rental revenues. In addition, the Company has
implemented an early renewal program pursuant to which the Company offers
remodeling financing to tenants in consideration for renewing and restructuring
leases. To date, the Company has renewed 33 leases under this program, with an
aggregate of $1.3 million paid out by the Company for remodeling. The Company
considers the remodeling financing to be prudent given the increased sales
resulting at the remodeled restaurants and the lower costs incurred because of
the early lease renewals. The early renewal program has resulted in an increase
of the average remaining lease term of the Properties to over ten years, thus
mitigating the risk of non-renewal of leases.
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The Company generally acquires properties from third-party lessors or
from operators in sale/leaseback transactions in which the operator sells the
property to the Company and then enters into a long-term lease (typically 20
years) with the Company for such property. A sale/leaseback transaction is
attractive to the operator because it allows the operator to realize the value
of the real estate while retaining occupancy for the long term. A sale/leaseback
transaction may also provide specific accounting, earnings and market value
benefits to the selling operator. For example, the lease on the property may be
structured by the tenant as an off-balance sheet operating lease, consistent
with Financial Accounting Standards Board rules, which may increase the
operator's earnings, net worth and borrowing capacity. The following table sets
forth certain information regarding lease expirations for the Properties.
LEASE EXPIRATION SCHEDULE (1)
NUMBER PERCENT
OF LEASES OF
YEAR EXPIRING TOTAL
---- ----------- ---------
1998 to 2000 ................. 72 12.2%
2001 to 2003 ................. 107 18.1%
2004 to 2006 ................. 57 9.6%
2007 to 2009 ................. 32 5.4%
2010 to 2012 ................. 26 4.4%
2013 to 2015 ................. 39 6.6%
2016 to 2018 ................. 234 39.6%
2019 to 2021 ................. 17 2.9%
2022 to 2024 ................. 3 0.5%
Unleased ..................... 4 0.7%
---------- ---------
Total ........................ 591 100.0%
========== =========
(1) The lease expiration schedule does not include lease extension options.
RESTAURANT ALTERATIONS
The Company believes that improving, expanding, rebuilding or replacing
its restaurant properties from time to time is important. In addition to normal
maintenance and repair requirements, each operator of a Burger King(R)
restaurant is required under Burger King Corporation's franchise agreement and
lease/sublease, at its own cost and expense, to make such alterations to a
Burger King(R) restaurant as may be reasonably required by Burger King
Corporation from time to time to modify the appearance of the restaurant to
reflect the then current image requirements for Burger King(R) restaurants. Most
of the Properties that are operating as Burger King(R) restaurants are 15 to 20
years old. The Company believes that many of these Properties require
substantial improvements to maximize sales and that their condition is below
Burger King Corporation's current image requirements.
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OWNERSHIP OF REAL ESTATE INTERESTS
Of the 591 Properties included in the Company's portfolio as of
December 31, 1997, the Company (i) owned both the land and the restaurant
building in fee simple on 447 of such Properties (the "Fee Properties"), (ii)
owned the land, with the tenant owning the restaurant building, on 33 of such
Properties and (iii) leased the land, the building or both from a third-party
lessor on 111 of such Properties (the "Leasehold Properties"). Of the 111
Leasehold Properties, 27 are Properties on which the Company leases from a third
party the underlying land, the restaurant building and the other improvements
thereon (the "Primary Leases") and then subleases the property to the restaurant
operator. Under the terms of the remaining 84 Leasehold Properties (the "Ground
Leases"), the Company leases the underlying land from a third party and owns the
restaurant building and the other improvements constructed thereon. Upon
expiration or termination of a Primary Lease or Ground Lease, the owner of the
underlying land generally will become the owner of the building and all
improvements thereon. The remaining terms of the Primary Leases and Ground
Leases range from one to 17 years. With renewal options exercised, the remaining
terms of the Primary Leases and Ground Leases range from one to 30 years, with
the average remaining term being 21 years.
The terms and conditions of each Primary Lease and each Ground Lease
vary substantially. Such leases, however, have certain provisions in common,
including that: (i) the initial term is 20 years or less, (ii) the rentals
payable are stated amounts that may escalate over the terms of the Primary
Leases and Ground Leases (and/or during renewal terms), but normally are not
based upon a percentage of sales of the restaurants thereon, and (iii) the
Company is required to pay all taxes and operating, maintenance and insurance
expenses for the Leasehold Properties. In addition, under substantially all of
the leases the Company may renew the term one or more times at its option
(although the provisions governing any such renewal vary significantly and some
renewal options are at a fixed rental amount while others are at fair rental
value at the time of renewal). Several Primary Leases and Ground Leases also
give the owner the right to require the Company, upon the termination or
expiration thereof, to remove all improvements situated on the property.
Although the Company, as lessee under each Primary Lease and Ground
Lease, generally has the right to freely assign or sublet all of its rights and
interests thereunder, the Company is not permitted to assign or sublet any of
its rights or interests under certain of the Primary Leases and certain of the
Ground Leases without obtaining the lessor's consent or satisfying certain other
conditions. In addition, approximately 20% of the Primary Leases and Ground
Leases require the Company to use such Leasehold Properties only for the purpose
of operating a Burger King(R) restaurant or another specified brand of
restaurant thereon. In any event, no transfer will release the Company from any
of its obligations under any Primary Lease or Ground Lease, including the
obligation to pay rent.
USE AND OTHER RESTRICTIONS ON THE OPERATION AND TRANSFER OF BURGER KING
RESTAURANT PROPERTIES
The Company was originally formed for the purpose of acquiring all
BKC's interests in the original portfolio and leasing or subleasing them to BKC
franchisees under the leases/subleases. Accordingly, the OP Agreement contains
provisions that state, except as expressly permitted by BKC, that the Company
may not use such properties for any purpose other than to operate a Burger King
restaurant during the term of the lease. In furtherance thereof, the OP
Agreement: (i) requires the Company, in certain specified circumstances, to
renew or extend a lease/sublease and enter into a new lease with another
franchisee of BKC, to approve an assignment of a lease/sublease, to permit BKC
to assume a lease/sublease at any time and to renew a Primary Lease, and (ii)
imposes certain restrictions and limitations upon the Company's ability to sell,
lease or otherwise transfer any interest in such properties. The OP Agreement
requires the Company to provide BKC notice of default under a lease/sublease and
an opportunity to cure such default prior to taking any remedial action. The OP
Agreement also requires the Company under certain
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circumstances to provide tenants with assistance with remodeling costs. Such
terms with respect to such properties imposed on the Company by the OP Agreement
may be less favorable than those imposed upon other lessors of Burger King
restaurants. BKC has advised the Company that it intends to waive or not impose
certain of the restrictive provisions contained in the OP Agreement.
RECENT DEVELOPMENTS
RECENT ACQUISITIONS: Since December 31, 1997, the Company has acquired
35 restaurant properties for an aggregate purchase price of approximately $36
million. The acquired properties are leased on a triple net basis to operators
of Burger King(R), Dairy Queen(R), Hardee's(R), Chili's(R), Schlotzsky's(R),
Pizza Hut(R), Grandy's(R), Taco Bell(R), KFC(R) and other brand name
restaurants. The Company acquired these properties with cash which was financed
principally by utilizing the Company's line of credit.
CREDIT FACILITY: On January 17, 1998 the Company entered into a credit
agreement with Union Bank of Switzerland for a revolving credit line of $175
million. At February 28, 1998, approximately $64 million remained available for
borrowings under the UBS credit agreement.
NOTES PAYABLE: In January, 1998, the holders of $40,000,000 in notes
payable agreed in principle to release the collateral securing the notes.
EMPLOYEES AND MANAGEMENT
On February 28, 1998, the Company had 38 employees. The Company
believes that relations with its employees are good.
COMPETITION
The Company believes that it competes with numerous other
publicly-owned entities, some of which dedicate substantially all of their
assets and efforts to acquiring, owning and managing chain restaurant
properties. The Company also competes with numerous private firms and
individuals for the acquisition of restaurant properties. In addition, there are
other publicly owned entities that are dedicated to acquiring, owning and
managing triple net lease properties. The majority of chain restaurant
properties is owned by restaurant operators and real estate investors.
Management believes, based on its industry knowledge and experience, that this
fragmented market provides the Company with substantial acquisition
opportunities. The Company also believes that the inability of most small
restaurant owners to obtain funds with which to compete for acquisitions as
timely and inexpensively as the Company provides the Company with a competitive
advantage when seeking to acquire a restaurant property.
The restaurants operated on the Company's properties are subject to
significant competition (including, for example, competition from other national
and regional "fast food" restaurant chains, other Burger King restaurants
(including mobile restaurants), local restaurants, restaurants owned by Burger
King Corporation or affiliated entities, national and regional restaurant chains
that do not specialize in "fast food" but appeal to many of the same customers
as do "fast food" restaurants, and other competitors such as convenience store
and supermarkets that sell ready-to-eat food). The success of the Company
depends, in part, on the ability of the restaurants operated on the properties
to compete successfully with such businesses. The Company does not anticipate
that it will seek to engage directly in or meet such competition. Instead, the
Company will be dependent upon the experience and ability of the lessees
operating the restaurants located on the properties and, with respect to its
Burger King properties, the Burger King Corporation system generally to compete
with these other restaurants and similar operations.
11
<PAGE>
The Company believes that the ability of its lessees to compete is affected by
their compliance with the image requirements at their restaurants.
REGULATIONS
The Company, through its ownership of interests in and management of
real estate, is subject to various environmental, health, land-use and other
regulation by federal, state and local governments that affects the development
and regulation of restaurant properties. The Company's leases impose the primary
obligation for regulatory compliance on the operators of the restaurant
properties.
ENVIRONMENTAL REGULATION. Under various federal, state and local laws,
ordinances and regulations, an owner or operator of real property may become
liable for the costs of removal or remediation of certain hazardous substances
releases on or within its property. Such liability may be imposed without regard
to whether the owner or operator knew of, or caused the release of the hazardous
substances. In addition to liability for cleanup costs, the presence of
hazardous substances on a property could result in the owner or operator
incurring liability as a result of a claim by an employee or another person for
personal injury or a claim by an adjacent property owner for property damage.
In connection with the Company's acquisition of a new property, a Phase
I environmental assessment is obtained. A Phase I environmental assessment
involves researching historical usages of a property, analyzing databases
containing registered underground storage tanks and other matters, and including
an on-site inspection to determine whether an environmental issue exists with
respect to the property which needs to be addressed. If the results of a Phase I
environmental assessment reveal potential issues, a Phase II assessment, which
may include soil testing, ground water monitoring or borings to locate
underground storage tanks, is ordered for further evaluation and, depending upon
the results of such assessment, the transaction is consummated or the
acquisition is terminated.
The Company is not currently a party to any litigation or
administrative proceeding with respect to any property's compliance with
environmental standards. Furthermore, the Company is not aware of nor does it
anticipate any such action, or the need to expend any of its funds, in the
foreseeable future in connection with its operations or ownership of existing
properties which would have a material adverse affect upon the Company's
financial position, operations or cash flow.
AMERICANS WITH DISABILITIES ACT ("ADA"). Under the ADA, all public
accommodations, including restaurants, are required to meet certain federal
requirements relating to physical access and use by disabled persons. A
determination that the Company or a property of the Company is not in compliance
with the ADA could result in the imposition of fines, injunctive relief, damages
or attorney's fees. The Company's leases contemplate that compliance with the
ADA is the responsibility of the operator. The Company is not currently a party
to any litigation or administrative proceeding with respect to a claim of
violation of the ADA and does not anticipate any such action or proceeding that
would have a material adverse effect upon the Company.
LAND-USE, FIRE AND SAFETY REGULATIONS. In addition, the Company and its
restaurant operators are required to operate the properties in compliance with
various laws, land-use regulations, fire and safety regulations and building
codes as may be applicable or later adopted by the governmental body or agency
having jurisdiction over the location of the property or the matter being
regulated. The Company does not believe that the cost of compliance with such
regulations and laws will have a material adverse effect upon the Company.
HEALTH REGULATIONS. The restaurant industry is regulated by a variety
of state and local departments and agencies, concerned with the health and
safety of restaurant customers. These regulations vary by
12
<PAGE>
restaurant location and type. The Company's leases provide for compliance by the
restaurant operator with all health regulations and inspections and require that
the restaurant operator obtain insurance to cover liability for violation of
such regulations or the interruption of business due to closure caused by
failure to comply with such regulations. The Company is not currently a party to
any litigation or administrative proceeding with respect to the compliance with
health regulations of any property it finances, and does not anticipate any such
action or proceeding that would have a material adverse effect upon the Company.
INSURANCE. The Company requires its lessees to maintain adequate
comprehensive liability, fire, flood and extended loss insurance provided by
reputable companies with commercially reasonable and customary deductibles. The
Company also requires that it be named as an additional insured under such
policies. Certain types and amounts of insurance are required to be carried by
each restaurant operator under the leases with the Company, and the Company
actively monitors tenant compliance with this requirement. The Company intends
to require lessees of subsequently acquired properties to obtain similar
insurance coverage. There are, however, certain types of losses generally of a
catastrophic nature, such as earthquakes and floods, that may be either
uninsurable or not economically insurable, as to which the Company's properties
are at risk depending on whether such events occur with any frequency in such
areas. An uninsured loss could result in a loss to the Company of both its
capital investment and anticipated profits from the affected property. In
addition, because of coverage limits and deductibles, insurance coverage in the
event of a substantial loss may not be sufficient to pay the full current market
value or current replacement cost of the Company's investment. Inflation,
changes in building codes and ordinances, environmental considerations and other
factors also might make using insurance proceeds to replace a facility after it
has been damaged or destroyed infeasible. Under such circumstances, the
insurance proceeds received by the Company might be inadequate to restore its
economic position with respect to such property.
ITEM 2. PROPERTIES
GENERAL
The Company acquires, owns, manages and selectively develops restaurant
properties that it leases on a triple net basis primarily to operators of fast
food and casual dining chain restaurants affiliated with national brands such as
Burger King(R), Arby's(R), Dairy Queen(R), Hardee's(R), Chili's(R), Pizza Hut(R)
and Schlotzsky's(R) and regional brands such as Grandy's(R) and Taco Cabana(R).
During the first year following acquisition by the Company, the Properties have
historically provided the Company with an aggregate first year return on total
investment in excess of 11%. Management believes that the long-term, triple net
structure of its leases results in a more predictable and sustainable income
stream than other forms of real estate investments.
PROPERTIES
As of December 31, 1997, the Company owned 591 Properties, including
209 Burger King(R) Properties (out of approximately 6,400 U.S. locations), 78
Arby's(R) Properties (out of approximately 2,890 U.S. locations), 41 Dairy
Queen(R) Properties (out of approximately 6,000 U.S. locations), 29 Hardee's(R)
Properties (out of approximately 2,300 U.S. locations), 22 Pizza Hut(R)
Properties (out of approximately 9,570 U.S. locations), 24 Schlotzsky's(R)
Properties (out of approximately 560 U.S. locations) and eight Chili's(R)
Properties (out of approximately 110 U.S. locations). The Properties are
diversified geographically in 46 states, with no state, except Texas (28%),
accounting for greater than 6% of the Properties. Of the 591 Properties,
approximately 99% were leased on a triple net basis as of December 31, 1997.
13
<PAGE>
The following table sets forth certain state-by-state information
regarding the Properties owned by the Company as of December 31, 1997.
<TABLE>
<CAPTION>
BURGER DAIRY PIZZA
TOTAL KING QUEEN HARDEE'S HUT SCHLOTZSKY'S CHILI'S ARBY'S OTHER
------- -------- ------- ---------- ------- -------------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alabama ......... 5 3 1 1
Arkansas ........ 9 7 1 1
Arizona ......... 15 13 1 1
California ...... 15 13 2
Colorado ........ 9 4 3 2
Connecticut ..... 3 3
Delaware ........ 1 1
Florida ......... 34 7 1 10 16
Georgia ......... 34 8 23 1 2
Iowa ............ 8 2 6
Idaho ........... 1 1
Illinois ........ 11 1 1 2 7
Indiana ......... 13 4 2 7
Kansas .......... 2 2
Kentucky ........ 4 3 1
Louisiana ....... 8 2 6
Massachusetts ... 5 4 1
Maryland ........ 4 3 1
Maine ........... 4 4
Michigan ........ 30 4 1 24 1
Minnesota ....... 20 2 2 16
Missouri ........ 8 3 1 4
Mississippi ..... 2 2
Montana ......... 1 1
North Carolina .. 21 12 5 4
North Dakota .... 2 2
Nebraska ........ 2 1 1
New Jersey ...... 6 6
New Mexico ...... 7 2 1 1 3
Nevada .......... 1 1
New York ........ 35 18 4 13
Ohio ............ 9 9
Oklahoma ........ 20 3 1 16
Oregon .......... 6 6
Pennsylvania .... 19 13 1 5
South Carolina .. 13 9 2 1 1
South Dakota .... 1 1
Tennessee ....... 15 8 2 2 3
Texas ........... 164 12 41 2 7 2 38 62
Utah ............ 1 1
Virginia ........ 2 1 1
Vermont ......... 1 1
Washington ...... 7 7
Wisconsin ....... 9 6 3
West Virginia ... 3 2 1
Wyoming ......... 1 1
------- -------- ------- -------- --------- -------------- --------- --------- -------
Total ........... 591 209 41 29 22 24 8 78 180
------- -------- ------- -------- --------- -------------- --------- --------- -------
</TABLE>
14
<PAGE>
The Company intends to continue to acquire properties affiliated with
major national brands such as Burger King(R), Arby's(R), Dairy Queen(R),
Hardee's(R), Chili's(R), Pizza Hut(R) and Schlotzsky's(R) and regional brands
such as Grandy's(R) and Taco Cabana(R), operated by competent,
financially-stable multi-unit restaurant operators. The Company believes that
successful restaurants operated under these types of brands will continue to
offer stable, consistent income to the Company with reduced risk of default or
non-renewal of the lease and franchise agreements. The Company believes its
income stream is further protected through the increasing diversification of the
Properties by brand affiliation. Since existing management assumed control of
the Company in May 1994, the Company has significantly expanded the number of
its brand affiliations. Of the 477 Properties acquired since May 1994, only 94
are Burger King(R) restaurants and the balance are affiliated with other
national and regional chain restaurants.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently involved in any material litigation, nor
to its knowledge is any material litigation threatened against the Company or
its Properties, other than routine litigation arising in the ordinary course of
business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to Stockholders in the quarter ended
December 31, 1997.
15
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the New York Stock Exchange
under the symbol "USV". Quarterly distributions are declared for payment early
in the next calendar quarter. The high and low sales prices of the shares and
the distributions paid during each calendar quarter of 1996 and 1997, and
through February 28, 1998 are set forth below (market prices and distributions
per share have been adjusted to reflect the impact of the three-for-two stock
split effected on October 30, 1997):
<TABLE>
<CAPTION>
MARKET PRICE DIVIDENDS AND
HIGH LOW CLOSE DISTRIBUTIONS
------------- --------------- ---------------- ---------------------
<S> <C> <C> <C> <C>
1996
First Quarter $ 15.5833 $ 13.0000 $ 15.5833 $ 0.2933
Second Quarter 16.6667 14.4167 15.3333 0.3133
Third Quarter 17.0833 14.3333 16.5000 0.3200
Fourth Quarter 18.8333 15.0833 18.5000 0.3233
---------------------
$ 1.2499
1997
First Quarter $ 20.5833 $ 17.8333 $ 18.0000 $ 0.3333
Second Quarter 19.7917 17.6667 19.6667 0.3433
Third Quarter 23.4167 19.6667 22.9583 0.3500
Fourth Quarter 25.6667 21.6250 23.9375 0.3575
---------------------
$ 1.3841
1998
First Quarter $ 26.4375 $ 23.8750 $ 26.1250 $ 0.3700
(Through February 28)
</TABLE>
DISTRIBUTIONS AND ALLOCATIONS
Prior to October 15, 1997 the Company operated in the form of a master
limited partnership, and cash distributions and allocations of net income were
made in accordance with the terms of the Partnership Agreement. Distributions
took the form of Cash Flow Distributions and Distributions of Proceeds from
Capital Transactions and were allocated along with operating income as follows.
CASH FLOW DISTRIBUTIONS. Net cash flow from operations of the Company
that was distributed was allocated 98.02 percent to the Unitholders and 1.98
percent to the Managing General Partner until the Unitholders received a simple
(non-cumulative) annual return for such year equal to 12 percent of the
Unrecovered Capital Per Partnership Unit (i.e., $20.00 (the original offering
price in 1986) reduced by any
16
<PAGE>
prior distributions of net proceeds of capital transactions); then any
distributed cash flow for such year was allocated 75.25 percent to the
Unitholders and 24.75 percent to the Managing General Partner until the
Unitholders received a total simple (non-cumulative) annual return for such year
equal to 17.5 percent of the Unrecovered Capital per Partnership Unit; and then
any excess distributed cash flow for such year was allocated 60.4 percent to the
Unitholders and 39.6 percent to the Managing General Partner.
DISTRIBUTIONS OF PROCEEDS FROM CAPITAL TRANSACTIONS. Net proceeds from
financing and sales or other dispositions of the Properties (interim and
liquidating) were allocated 98.02 percent to the Unitholders and 1.98 percent to
the Managing General Partner until the Unitholders received an amount equal to
the Unrecovered Capital Per Partnership Unit (initially $20.00 per Unit) plus a
cumulative, simple return equal to 12 percent of the balance of their
Unrecovered Capital Per Partnership Unit outstanding from time to time (to the
extent not previously received from distributions of prior capital
transactions); then such proceeds were allocated 75.25 percent to the
Unitholders and 24.75 percent to the Managing General Partner until the
Unitholders received a total cumulative, simple return equal to 17.5 percent of
the Unrecovered Capital Per Partnership Unit; and then such proceeds were
allocated 60.4 percent to the Unitholders and 39.6 percent to the Managing
General Partner.
TAX ALLOCATIONS. Operating income and loss of the Company for each year
generally was allocated between the Managing General Partner and the Unitholders
in the same aggregate ratio as cash flow was distributed for that year. Gain and
loss from a capital transaction generally was allocated among the Partners in
the same aggregate ratio as net proceeds of the capital transaction was
distributed except to the extent necessary to reflect capital account
adjustments. In the case of both operating income or loss and gain or loss from
capital transactions, however, the amount of such income, gain or loss allocated
to the Managing General Partner and the Unitholders for the year would not
necessarily equal the total cash distributed to the Managing General Partner and
the Unitholders for such year. Upon the transfer of a Partnership Unit, tax
items allocable thereto generally would be allocated among the transferor and
the transferee based on the period during the year that each owned the
Partnership Unit, with each Unitholder on the last day of the month being
treated as a Unitholder for the entire month.
Subsequent to October 15, 1997 distributions were made in the form of
dividends to common stockholders and distributions to holders of OP units. As a
REIT, the Company is required to distribute 95% of taxable income to
shareholders in the form of dividends.
PAYMENTS TO THE MANAGING GENERAL PARTNER
Prior to October 15, 1997 the Company compensated the Managing General
Partner for its efforts and increased internal expenses with respect to
additional properties. The Company paid the Managing General Partner, with
respect to each additional property purchased: (i) a one-time acquisition fee
equal to one percent of the purchase price for such property and (ii) an annual
fee equal to one percent of the purchase price for such property, adjusted for
increases in the Consumer Price Index. For 1997 and 1996, the one-time
acquisition fee equaled $1,401,000 and $1,043,000 respectively, which was
capitalized, and the increase in the non-accountable annual fee equaled $498,000
and $495,000 respectively. In addition, if the Rate of Return (as defined) on
the Partnership's equity on all additional properties exceeded 12 percent per
annum for any fiscal year, the Managing General Partner was paid an additional
fee equal to 25 percent of the cash flow received with respect to such
additional properties in excess of the cash flow representing a 12 percent Rate
of Return thereon. For 1996, this additional fee equaled $93,000 and there was
no such fee paid in 1997 or in 1995. These fees were discontinued with the
termination of the management contract between QSV and USRP on October 15, 1997.
17
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following information should be read in conjunction with the Company's
consolidated financial statements and notes thereto.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER UNIT/SHARE AND PROPERTY DATA)
1993 1994 1995 1996 1997
------------ ------------ ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME:
Total revenues ............................. $ 8,397 $ 8,887 $ 9,850 $ 18,518 $ 35,584
Expenses:
Rent ..................................... 1,295 1,348 1,405 2,080 2,488
Depreciation and amortization ............ 1,383 1,361 1,541 3,978 9,415
Taxes, general and administrative ........ 1,008 1,144 1,419 2,461 3,590
Interest expense (2) ..................... 109 90 262 2,558 10,011
Provision for write down or
disposition of properties ............ 74 11 - - -
------------ ------------ ------------- -------------- --------------
Total expenses ............................. 3,869 3,954 4,627 11,077 25,504
Minority interest in operating partnership.. - - - - (202)
Gain on sale of property ................... - - - 32 869
REIT Conversion Costs ...................... - - - - (920)
Termination of management contract ......... - - - - (19,220)
------------ ------------ ------------- -------------- --------------
Net income (loss) .......................... $ 4,528 $ 4,933 $ 5,223 $ 7,473 $ (9,393)
============ ============ ============= ============== ==============
Net income (loss) allocable to
Unitholders/Shareholders (1) ........... $ 4,437 $ 4,834 $ 5,119 $ 7,325 $ (10,261)
Weighted average units/shares outstanding (3):
Basic .................................. 6,953 6,953 6,957 8,984 11,693
Diluted ................................ 6,953 6,953 7,015 9,190 11,693
Earnings per unit/share (3):
Basic .................................. $ 0.64 $ 0.70 $ 0.74 $ 0.82 $ (0.88)
Diluted ................................ $ 0.64 $ 0.70 $ 0.73 $ 0.80 $ (0.88)
Dividends/distributions per unit/share (3) $ 0.99 $ 1.07 $ 1.14 $ 1.25 $ 1.38
BALANCE SHEET DATA:
Total assets ............................... $65,322 $62,889 $ 71,483 $ 177,418 $ 359,149
Line of credit and long term debt .......... - - 10,931 69,486 129,196
Capitalized lease obligations .............. 966 775 563 362 170
General partners' capital .................. 1,357 1,308 1,241 1,163 N/A
Limited partners' capital .................. 62,757 60,361 58,071 103,120 N/A
Stockholders' equity and minority interest.. N/A N/A N/A N/A 204,544
Other Data:
Funds From Operations ...................... $ 7,119 $ 7,638 $ 8,314 $ 13,111 $ 20,744
Cash distributions declared per Unit/Share
applicable to respective period (1)..... $ 0.99 $ 1.07 $ 1.14 $ 1.25 $ 1.38
Cash flow from operating activities ........ $ 7,475 $ 6,990 $ 9,288 $ 13,852 $ 19,334
Cash flow from (used in) investing activities $ 1,130 $(12,039) $(100,978) $(174,017)
Cash flow from (used in) financing activities $(8,302) $(7,569) $ 2,077 $ 87,500 $ 155,406
Number of properties ....................... 123 123 139 322 591
</TABLE>
- --------------------------------
(1) Prior to October 15, 1997 the Company operated in the form of a master
limited partnership. Amounts shown for years prior to 1997 reflect net
income allocable to partnership unitholders, net income per partnership
unit, and cash distributions declared per partnership unit.
(2) Interest expense is net of interest income for all periods except for
1997 amounts. Interest income was immaterial for all years prior to 1997.
(3) Weighted average number of units/shares outstanding,
dividends/distributions per unit/share and earnings per unit/share have
been adjusted to reflect the three-for-two split of the Common Stock and
calculation of earnings per unit/share in accordance with SFAS 128.
18
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS.
The Company derives its revenue from the leasing of its Properties to
operators (primarily restaurant) on a "triple net" basis. Triple net leases
typically require the tenants to be responsible for property operating costs,
including property taxes, insurance and maintenance. A majority of the Company's
leases provides for a base rent plus a percentage of the restaurant's sales in
excess of a threshold amount. As a result, a portion of the Company's revenues
is a function of the number of restaurants in operation and their level of
sales. Sales at individual restaurants are influenced by local market
conditions, by the efforts of specific restaurant operators, by marketing, by
new product programs, support by the franchisor and by the general state of the
economy.
On October 15, 1997 the Company changed its form of business from a master
limited partnership to a REIT (Real Estate Investment Trust). U. S. Restaurant
Properties, Inc. became the successor entity to U.S. Restaurant Properties
Master L.P. The results of operations for the year ended December 31, 1997 are
presented as the continuation of the operations of the predecessor entity.
The results of operations of the Company, together with its
predecessors, for the periods discussed below have been affected by the growth
in the total number of Properties owned by the Company, as well as by increases
in rental income across the portfolio, over such time periods. The following
discussion considers the specific impact of such factors on the results of
operations of the Company for the following periods.
COMPARISON OF THE TWELVE MONTHS ENDED DECEMBER 31, 1997 TO THE TWELVE MONTHS
ENDED DECEMBER 31, 1996
The Company owned 322 properties prior to January 1, 1997. The Company
acquired 277 properties and sold 8 properties from January 1, 1997 to December
31, 1997, the operations of which are included in the periods presented from
their respective dates of acquisition..
Revenues in the twelve months ended December 31, 1997 totaled
$35,584,000, an increase of 92% when compared to the twelve months ended
December 31, 1996. The increase was due primarily to increases in the number of
properties owned during this period as compared to the same period in 1996.
Through December 31, 1997, approximately 16% of the Company's rental revenues
resulted from percentage rents (rents determined as a percentage of tenant
sales), down from 33% for the year ended December 31, 1996. Thus, during the
twelve months ended December 31, 1997, the impact of fluctuations in restaurant
sales had a diminishing impact on total rental revenues. Also included in
revenues is interest income relating to secured notes and mortgages receivable
from tenants and related parties. Interest income was $1,091,000 in 1997.
Rent expense for the twelve months ended December 31, 1997 totaled
$2,488,000, an increase of 20% when compared to the twelve months ended December
31, 1996. Depreciation and amortization expenses in the twelve months ended
December 31, 1997 totaled $9,415,000, an increase of 137% when compared to the
twelve months ended December 31, 1996. The increase in rent expense and
depreciation and amortization expenses directly relates to the property
acquisitions.
Taxes, general and administrative expenses for the twelve months ended
December 31, 1997 totaled $3,590,000, an increase of 56% when compared to the
twelve months ended December 31, 1996. The increase was a result of the costs of
the increased infrastructure, including additional employees, required by the
Company to manage and maintain the Company's rate of growth and an increase in
management fees paid to the managing general partner prior to October 15, 1997.
19
<PAGE>
Interest expense for the twelve months ended December 31, 1997 totaled
$10,011,000, an increase of 368%, when compared to the twelve months ended
December 31, 1996. The increase in interest expense directly relates to the
additional debt associated with the acquisitions.
Minority interest in net income of the OP of $202,000 for 1997 related
to OP units held by QSV after October 15, 1997. Gain on sale of properties of
$869,000 in 1997 related primarily to the sale of five restaurant properties for
cash of $3,960,000. REIT conversion costs of $920,000 consisted of direct costs
associated with the conversion of the Company to a REIT on October 15, 1997. In
conjunction with the conversion, the Company recorded a one-time, non-cash
accounting charge of $19.2 million relating to the termination of the management
contract with QSV, the former managing general partner.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED
DECEMBER 31, 1995
The Company owned 139 Properties prior to January 1, 1996. The Company
acquired 184 properties and sold one from January 1, 1996 to December 31, 1996,
the operations of which are included in the periods presented from their
respective dates of acquisition..
Revenues for the twelve months ended December 31, 1996 totaled
$18,518,000, an increase of 88% when compared to the twelve months ended
December 31, 1995. The increase in revenues was primarily due to the acquisition
of restaurant properties in 1996.
Rent expense for the twelve months ended December 31, 1996 totaled
$2,080,000, an increase of 48% when compared to the twelve months ended December
31, 1995. Depreciation and amortization expenses for the twelve months ended
December 31, 1996 totaled $3,978,000, an increase of 158% when compared to the
twelve months ended December 31, 1995. This increase in rent expense and
depreciation and amortization expenses directly correlates to the property
acquisitions in 1996.
Taxes, general and administrative expenses for the twelve months ended
December 31, 1996 totaled $2,299,000, an increase of 62% when compared to the
twelve months ended December 31, 1995. An increase in the management fee of
$585,000 and expenses that directly correspond to the active growth of the
Company were the primary reasons for increased general and administrative
expenses for the year ended December 31, 1996 as compared to December 31, 1995.
Interest expense for the twelve months ended December 31, 1996
increased to $2,720,000 from $262,000 for the twelve months ended December 31,
1995. The increase in interest expense directly correlates to the additional
debt associated with the acquisitions.
LIQUIDITY AND CAPITAL RESOURCES.
The Company's principal source of cash to meet its short term cash
requirements is rental revenues generated by the Company's properties. Cash
generated by the portfolio in excess of operating needs is used to reduce
amounts outstanding under the Company's credit agreements. Currently, the
Company's primary source of funding for acquisitions is its existing revolving
line of credit. The Company anticipates meeting its future long-term capital
needs through the issuance of additional debt or equity, including the issuance
of additional OP units, along with cash generated from internal operations.
During 1997 the Company paid dividends (distributions prior to October 15) of
$1.3841 per share, or an aggregate of $16,970,944 to common stockholders and
minority interests.
On January 17, 1998 the Company entered into a credit agreement with a
syndicate of banks for an unsecured revolving credit line of $175 million. This
line of credit replaced the Company's existing line of
20
<PAGE>
credit. As of February 28, 1998, the Company has approximately $64 million
available under the new unsecured line of credit. The Company may request
advances under this line of credit to finance the acquisition of restaurant
properties, to repair and update restaurant properties and for working capital.
The banks will also issue standby letters of credit for the account of the
Company under this loan facility. This credit agreement expires on January 15,
2001 and provides that borrowings thereunder bear interest at the then current
LIBOR plus a margin spread of either 1.05%, 1.20% or 1.35%, dependent on a
leverage ratio formula. As of February 28, 1998 the margin spread was 1.05%.
On January 31, 1997 the Company issued 8.06% Series A Senior Secured
Guaranteed Notes due January 31, 2000 in the amount of $12,500,000, and 8.30%
Series B Senior Secured Guaranteed Notes due January 31, 2002 in the amount of
$27,500,000. In January, 1998 the note holders agreed to release the collateral
for these notes.
On August 15, 1997 the Company entered into a credit agreement with
Pacific Mutual Life Insurance Company for $30,000,000 of adjustable rate senior
secured notes bearing interest at LIBOR plus a margin spread of 2.30%. Amounts
borrowed under the agreement are due and payable on or before May 20, 1998.
Total outstanding loans under this agreement were $26,200,000 at December 31,
1997.
Management believes that the existing debt facilities, along with the
Company's ability to raise additional equity, including the issuance of OP units
in exchange for properties, will provide the Company with sufficient liquidity
to meet operating and growth requirements.
FUNDS FROM OPERATIONS (FFO)
FFO is computed as net income (loss) available to common stockholders
(computed in accordance with GAAP), excluding the effects of direct financing
leases, minority interest, unusual charges and gains (or losses) from debt
restructuring and sales of property, plus real estate related depreciation and
amortization. The Company believes FFO is helpful to investors as a measure of
the performance of an equity REIT because, along with cash flows from operating,
financing and investing activities, it provides investors with an understanding
of the ability of the Company to incur and service debt and make capital
expenditures. The Company believes that it computes FFO in accordance with the
standards established by the National Association of Real Estate Investment
Trusts ("NAREIT"), which may differ from the methodology for calculating FFO
utilized by other equity REITs, and, accordingly, may not be comparable to such
other REITs. Further, FFO does not represent amounts available for management's
discretionary use because of needed capital replacement or expansion, debt
service obligations, or other commitments and uncertainties. FFO should not be
considered as an alternative to net income (determined in accordance with GAAP)
as an indication of the Company's financial performance or to cash flows from
operating activities (determined in accordance with GAAP) as a measure of the
Company's liquidity, nor is it indicative of funds available to fund the
Company's cash needs, including its ability to make distributions.
21
<PAGE>
The following table sets forth, for the years ended December 31, the
calculation of FFO:
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS) 1995 1996 1997
<S> <C> <C> <C>
Net income (loss) allocable to
Common stock/unit holders $ 5,119 $ 7,325 $ (10,261)
Direct financing lease payments 1,866 2,041 2,286
Capital lease principal payments (212) (201) (169)
Depreciation and amortization 1,541 3,978 9,415
Income allocable to minority interest 202
Gain on sale of property - (32) (869)
REIT Conversion costs - - 920
Termination of management contract 19,220
---------- ---------- ------------
Funds from operations (FFO) $ 8,314 $ 13,111 $ 20,744
========== ========== ============
Total shares/units applicable to FFO 7,015 9,190 12,179
========== ========== ============
</TABLE>
INFLATION
Some of the Company's leases are subject to adjustments for increases
in the Consumer Price Index, which reduces the risk to the Company of the
adverse effects of inflation. Additionally, to the extent inflation increases
sales volume, percentage rents may tend to offset the effects of inflation on
the Company. Because triple net leases also require the restaurant operator to
pay for some or all operating expenses, property taxes, property repair and
maintenance costs and insurance, some or all of the inflationary impact of these
expenses will be borne by the restaurant operator and not by the Company.
Operators of restaurants, in general, possess the ability to adjust
menu prices quickly. However, competitive pressures may limit a restaurant
operator's ability to raise prices in the face of inflation.
SEASONALITY
Fast food restaurant operations historically have been seasonal in
nature, reflecting higher unit sales during the second and third quarters due to
warmer weather and increase leisure travel. This seasonality can be expected to
cause fluctuations in the Company's quarterly revenue to the extent it receives
percentage rent.
NEW ACCOUNTING PRONOUNCEMENTS
In February, 1998, Statement of Financial Accounting Standards No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits,"
("SFAS 132") was issued, effective for fiscal years beginning after December 15,
1997. This Statement does not apply to the Company as of December 31, 1997 since
the Company does not have either a pension or other postretirement benefit
plans.
In June, 1997, Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information," ("SFAS
131") was issued, effective for fiscal years beginning
22
<PAGE>
after December 15, 1997. This Statement requires that public business
enterprises report financial and descriptive information about their reportable
operating segments. The Company will adopt the provisions of SFAS 131 in 1998 as
required, but it does not expect such adoption to have a material impact on its
results of operations, financial position or cash flows.
In June, 1997, Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," (SFAS 130") was issued, effective for fiscal
years beginning after December 15, 1997. This Statement would have no effect on
the Company's current consolidated financial statements.
YEAR 2000 SYSTEMS CONVERSION
The Company has recognized the need to ensure that its data processing
systems and operations will not be adversely affected by the change to the
calendar year 2000. The Company has taken steps to identify potential areas of
risk, and has begun to address these risk factors in its planning, purchasing
and daily operations. The cost of converting all internal systems and operations
is not expected to be material. Estimated costs relating to the failure of third
party service providers and vendors to prepare for the year 2000 is not
available. However, the Company is attempting to identify those risks, and is
requiring third party service providers and vendors to provide evidence of their
systems ability to incorporate the change to the year 2000.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-K.
This Form 10-K contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Act of 1934, which are intended to be covered by the safe harbors
created thereby. These statements include the plans and objectives of management
for future operations, including plans and objectives relating to property
acquisitions. The forward-looking statements included herein are based on
current expectations that involve numerous risks and uncertainties. Assumptions
relating to the foregoing involve judgments with respect to, among other things,
future economic, competitive and market conditions and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond the control of the Company. Although the Company
believes that the assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could be inaccurate and, therefore there can
be no assurance that the forward-looking statements included in this Form 10-K
will prove to be accurate. In light of the significant uncertainties inherent in
the forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by the Company or any
other person that the objectives and plans of the Company will be achieved.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial information and supplementary data begin on page F-1 of
this Annual Report on Form 10-K. Such information is incorporated by reference
into this Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
23
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item will be incorporated by reference
from the Company's definitive Proxy Statement for its 1998 Annual Meeting of
Stockholders to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item will be incorporated by reference
from the Company's definitive Proxy Statement for its 1998 Annual Meeting of
Stockholders to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item will be incorporated by reference
from the Company's definitive Proxy Statement for its 1998 Annual Meeting of
Stockholders to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item will be incorporated by reference
from the Company's definitive Proxy Statement for its 1998 Annual Meeting of
Stockholders to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934.
24
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements.
For a list of the consolidated financial statements of the Registrant
filed as part of this Annual Report on Form 10-K, see page F-1,
herein.
(a)(2) Financial Statement Schedules.
Schedule III Real Estate and Accumulated Depreciation.
All other schedules have been omitted because the required information
of such other schedules is not present, is not present in amounts
sufficient to require submission of the schedule or is included
in the consolidated financial statements.
(b) Reports on Form 8-K.
A report on Form 8-K and 8-K/A dated July 25, 1997 was filed with the
Securities and Exchange Commission on October 15, 1997 and October 27,
1997, respectively, reporting information regarding the acquisition
of 37 properties.
A report on Form 8-K/A dated March 31, 1997 was filed with the
Securities and Exchange Commission on November 24, 1997 reporting
information regarding the acquisition of 122 properties.
A report on Form 8-K dated November 26, 1997 was filed with the
Securities and Exchange Commission on December 9, 1997, reporting
information regarding the acquisition of 26 restaurant properties.
(c) Exhibits.
The Exhibits filed as part of this Annual Report on Form 10-K are
submitted as a separate section.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
U.S. Restaurant Properties, Inc.
By: /s/ Robert J. Stetson
------------------------------
Robert J. Stetson
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of U.S Restaurant
Properties, Inc. and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
/s/ Robert J. Stetson
- ----------------------- Chief Executive Officer, March 20, 1998
Robert J. Stetson President and Director
(Principal Executive Officer)
/s/ Fred H. Margolin Chairman of the Board of March 20, 1998
- ----------------------- Directors, Secretary and
Fred H. Margolin Director
/s/ Michael D. Warren Director of Finance March 20, 1998
- ----------------------- (Principal Accounting Officer)
Michael D. Warren
/s/ Gerald H. Graham Director March 20, 1998
- -----------------------
Gerald H. Graham
/s/ David K.Rolph Director March 20, 1998
- -----------------------
David K. Rolph
/s/ Darrel L. Rolph Director March 20, 1998
- -----------------------
Darrel L. Rolph
/s/ Eugene G. Taper Director March 20, 1998
- -----------------------
Eugene G. Taper
26
<PAGE>
This page intentionally left blank
<PAGE>
INDEX TO FINANCIAL STATEMENTS
U.S. RESTAURANT PROPERTIES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report........................................... F - 2
Consolidated Balance Sheets as of December 31, 1997 and 1996........... F - 3
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995..................................... F - 5
Consolidated Statement of Stockholders' Equity and Partners'
Capital for the years ended December 31, 1997, 1996 and 1995......... F - 6
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995..................................... F - 7
Notes to Consolidated Financial Statements............................. F - 9
The following financial statement supplementary schedule of the Registrant and
its subsidiaries required to be included in Item 14(a)(2) is listed below:
Schedule III - Real Estate and Accumulated Depreciation................ S - 1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
U.S. Restaurant Properties, Inc.
We have audited the accompanying consolidated balance sheets of U.S. Restaurant
Properties, Inc. and its subsidiaries (the Company) (formerly U.S. Restaurant
Properties Master L.P.) as of December 31, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity and partners' capital
and cash flows for each of the three years in the period ended December 31,
1997. Our audits also included the financial statement schedule listed in the
Index at Item 14 (a) (2). These financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on the financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of U.S. Restaurant Properties, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements. In our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Dallas, Texas
March 19, 1998
F-2
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31,
-----------------------------------
1997 1996
-----------------------------------
ASSETS
Property, net
Land $ 109,515 $ 61,340
Building and leasehold improvements 211,200 80,528
Machinery and equipment 4,813 3,244
-----------------------------------
325,528 145,112
Less: Accumulated depreciation (13,438) (5,453)
-----------------------------------
312,090 139,659
Cash and cash equivalents 1,104 381
Rent and other receivables, net
(includes $523 and $188 from
related parties) 4,791 2,653
Prepaid expenses and purchase deposits 1,967 1,311
Notes receivable
(includes $5,406 and $2,738
from related parties) 8,518 4,046
Mortgage loan receivable 5,947 --
Net investment in direct financing leases 13,764 17,105
Intangibles and other assets, net 10,968 12,263
-----------------------------------
TOTAL ASSETS $ 359,149 $ 177,418
===================================
continued on next page
F-3
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31,
-----------------------------------
1997 1996
-----------------------------------
LIABILITIES, STOCKHOLDERS' EQUITY
AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities
(includes $121 and $416 due to
related parties) $ 4,193 $ 2,697
Deferred gain on sale of property 642 590
Lines of credit 89,196 69,486
Notes payable 40,000 --
Capitalized lease obligations 170 362
-----------------------------------
TOTAL LIABILITIES 134,201 73,135
COMMITMENTS AND CONTINGENCIES
(NOTES 8 AND 9)
MINORITY INTEREST IN OPERATING
PARTNERSHIP 19,536 --
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value per
share; 50,000 shares authorized,
Series A - 3,680 shares issued and
outstanding as of December 31, 1997
and no shares issued as of December
31, 1996 (aggregate liquidation
value of $92,000) 4 --
Common stock, $.001 par value per
share; 100,000 shares authorized,
12,698 shares issued and outstanding
as of December 31, 1997 and no shares
issued as of December 31, 1996 13 --
Additional paid in capital 226,140 --
Excess stock, $.001 par value per
share, 15,000 shares authorized, no
shares issued -- --
Distributions in excess of net income (20,745) --
PARTNERS' CAPITAL
General Partners' capital -- 1,163
Limited partners' capital -- 103,120
-----------------------------------
TOTAL STOCKHOLDERS' EQUITY AND
PARTNERS' CAPITAL 205,412 104,283
-----------------------------------
TOTAL LIABILITIES, STOCKHOLDERS'
EQUITY AND PARTNERS' CAPITAL $ 359,149 $ 177,418
===================================
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE OR UNIT DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995
--------------------------------------------
<S> <C> <C> <C>
REVENUES
Rental income $ 32,925 $ 16,346 $ 7,540
Interest income 1,091 194 70
Amortization of unearned income on
direct financing leases 1,568 1,978 2,240
--------------------------------------------
TOTAL REVENUES 35,584 18,518 9,850
EXPENSES
Rent 2,488 2,080 1,405
Depreciation and amortization 9,415 3,978 1,541
Taxes, general and administrative 3,590 2,299 1,419
Interest expense 10,011 2,720 262
--------------------------------------------
TOTAL EXPENSES 25,504 11,077 4,627
--------------------------------------------
INCOME BEFORE GAIN ON SALE OF PROPERTY,
MINORITY INTERESTS AND UNUSUAL ITEMS 10,080 7,441 5,223
Minority interest in operating partnership (202) -- --
Gain on sale of property 869 32 --
REIT conversion costs (920) -- --
Termination of management contract (19,220) -- --
--------------------------------------------
NET INCOME (LOSS) (9,393) 7,473 5,223
Dividends on Preferred Stock/General
Partner interest (868) (148) (104)
--------------------------------------------
Net income (loss) allocable to
Common stockholders/unit holders $ (10,261) $ 7,325 $ 5,119
============================================
Weighted average shares/units outstanding
Basic 11,693 8,984 6,957
Diluted 11,693 9,190 7,015
Net income (loss) per share/unit
Basic $(0.88) $0.82 $0.74
Diluted $(0.88) $0.80 $0.73
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
U.S. RESTAURANT PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL
FOR YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
PREFERRED STOCK COMMON STOCK ADDITIONAL DISTRIBUTIONS
GENERAL LIMITED -------------------------------------- PAID IN EXCESS
UNITS PARTNERS PARTNERS SHARES PAR VALUE SHARES PAR VALUE IN CAPITAL OF NET INCOME TOTAL
-------- ---------- ---------- -------- --------- ------ --------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance January
1, 1995 6,953 $ 1,308 $ 60,361 -- $ -- -- $ -- $ -- $ -- $ 61,669
Special general
partner interest
transfer (13) (3) (16)
Net Income 104 5,119 5,223
Purchase of
partnership units (45) -- (547) (547)
Units issued for
property 81 -- 985 985
Cash distributions (158) (7,844) (8,002)
-------- ---------- ---------- -------- --------- ------ --------- ---------- ------------- ------------
Balance December
31, 1995 6,989 1,241 58,071 -- -- -- -- -- -- 59,312
-------- ---------- ---------- -------- --------- ------ --------- ---------- ------------- ------------
Net income 148 7,325 7,473
Units issued for
property 577 -- 7,912 7,912
Proceeds from
units issued in
public offering 2,700 -- 40,203 40,203
Proceeds from
exercised unit
options 75 -- 775 775
Cash distributions (226) (11,166) (11,392)
-------- ---------- ---------- -------- --------- ------ --------- ---------- ------------- ------------
Balance December
31, 1996 10,341 1,163 103,120 -- -- -- -- -- -- 104,283
-------- ---------- ---------- -------- --------- ------ --------- ---------- ------------- ------------
Net income for
the period
January 1
through October
15, 1997 135 6,678 6,813
Units issued for
property 681 -- 13,796 13,796
Proceeds from
units issued in
private
placements 1,435 -- 25,000 25,000
Proceeds from
exercised unit
options 75 -- 775 775
Cash distributions (240) (11,776) (12,016)
-------- ---------- ---------- -------- --------- ------ --------- ---------- ------------- ------------
Balance before
REIT conversion 12,532 1,058 137,593 -- -- -- -- -- -- 138,651
Conversion to
REIT (12,532) (1,058) (137,593) 12,658 13 138,109 (529)
Sale of preferred
stock 3,680 4 87,618 87,622
Proceeds from
exercised stock
options 40 413 413
Net loss for the
period October
16 through
December 31, 1997 (16,206) (16,206)
Dividends on
common stock (4,539) (4,539)
-------- ---------- ---------- -------- --------- ------ --------- ---------- ------------- ------------
Balance December
31, 1997 -- $ -- $ -- 3,680 $ 4 12,698 $ 13 $ 226,140 $ (20,745) $ 205,412
======== ========== ========== ======== ========= ====== ========= ========== ============= ============
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995
--------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (9,393) $ 7,473 $ 5,223
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Depreciation and amortization 9,415 3,978 1,541
Amortization of deferred financing costs 385 162 --
Minority interest in operating partnership 202 -- --
Gain on sale of property (869) (32) --
Termination of management contract 19,220 -- --
Increase in rent and other receivables, net (2,365) (1,702) (236)
Increase in prepaid expenses (1,043) (88) (192)
Reduction in net investment in direct
financing leases 2,286 2,041 1,866
Increase in accounts payable and accrued
liabilities 1,496 2,020 232
Other, net -- -- 854
--------------------------------------------
28,727 6,379 4,065
--------------------------------------------
Cash provided by operating activities 19,334 13,852 9,288
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 4,107 122 --
Purchase of property (166,123) (95,918) (9,746)
Purchase of machinery and equipment (1,569) (3,032) (232)
Purchase deposits (paid) used 387 884 (1,792)
Increase in notes receivable (4,872) (3,034) (269)
Increase in mortgage loan receivable (5,947) -- --
--------------------------------------------
Cash used in investing activities (174,017) (100,978) (12,039)
</TABLE>
continued on next page
See Notes to Consolidated Financial Statements.
F-7
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995
--------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 133,530 104,805 12,453
Payments on line of credit (113,820) (46,250) (1,522)
Distributions to minority interest (415) -- --
Cash distributions to stockholders/partners (16,555) (11,392) (8,002)
Proceeds from sale of common stock/units 26,188 40,978 --
Proceeds from sale of preferred stock 87,622 -- --
Proceeds from notes payable 40,000 -- --
Financing costs and other intangibles (975) (440) (77)
Payments on capitalized lease obligations (169) (201) (212)
Purchase of partnership units -- -- (547)
Purchase of special general partner interest -- -- (16)
--------------------------------------------
Cash flows provided by financing activities 155,406 87,500 2,077
--------------------------------------------
Increase (decrease) in cash and cash equivalents 723 374 (674)
Cash and cash equivalents at beginning of year 381 7 681
============================================
Cash and cash equivalents at end of year $ 1,104 $ 381 $ 7
============================================
SUPPLEMENTAL DISCLOSURE:
Interest paid during the year $ 9,073 $ 2,431 $ 256
============================================
NON-CASH INVESTING ACTIVITIES:
Units issued for property purchases $ 13,796 $ 7,912 $ 985
============================================
Deferred gain on sale of property $ 52 $ 590 $ --
============================================
Notes received on sale of property $ 1,661 $ 743 $ --
============================================
Property purchased for note receivable $ 2,061 $ -- $ --
============================================
Property purchased for accounts receivable $ 227 $ -- $ --
============================================
Sale of property on capital lease $ 23 $ -- $ --
============================================
Sale of property on direct financing lease $ -- $ 225 $ --
============================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-8
<PAGE>
Notes to Consolidated Financial Statements
1. ORGANIZATION
U.S. Restaurant Properties, Inc. (the "Company") is a Maryland corporation
formed to continue the restaurant property management, acquisition and
development operations, related business objectives and strategies of U.S.
Restaurant Properties Master, L.P. (collectively, with its subsidiaries,
"USRP"). The Company became a self-administered real estate investment trust
("REIT") on October 15, 1997 as defined under the Internal Revenue Code of 1986,
as amended. This conversion was effected through the merger (the "Merger") of
USRP Acquisition, L.P. a partnership subsidiary of U.S. Restaurant Properties,
Inc., with and into U.S. Restaurant Properties Master L.P. As a result of the
Merger, all holders of common units (Units) of beneficial interest in USRP
became stockholders of the Company on a one unit for one share of Common Stock
basis. Accordingly, information contained in the consolidated financial
statements relating to the equity ownership of USRP following October 15, 1997
is presented as ownership of shares of Common Stock of the Company.
The Company is authorized to issue up to 100,000,000 shares of Common Stock, par
value $.001 per share (the "Common Stock"), 50,000,000 shares of Preferred
Stock, par value $.001 per share (the "Preferred Stock") and 15,000,000 shares
of Excess Stock, par value $.001 per share (the "Excess Stock"). Pursuant to the
Company's Articles of Incorporation (the "Articles"), any purported transfer of
shares of Common Stock or Preferred Stock that would result in a person owning
shares of Common Stock or Preferred Stock in excess of certain limits set out in
the Articles will result in the shares subject to such purported transfer being
automatically exchanged for an equal number of shares of Excess Stock. On
October 30, 1997 the REIT effected a three-for-two stock split. All of the
historical units and per unit information has been restated to reflect the
conversion to Common Stock and this stock split.
In connection with the conversion to a REIT, the management contract between QSV
Properties Inc. ("QSV"), the former General Partner of USRP, was terminated. The
contract termination and QSV's partnership interests in USRP were converted to
126,582 shares of Common Stock of the Company and 1,148,418 units of U.S.
Restaurant Properties Operating, L.P. ("OP"). An additional 825,000 shares of
Common Stock of the Company or its equivalent in OP units may be issued to QSV
if certain earnings targets are met by the year 2000 (see note 11). QSV's
principal stockholders are Mr. Robert J. Stetson and Mr. Fred H. Margolin.
The business and operations of the Company are conducted primarily through the
OP. The Company owns 91.71% of and controls the OP. Each OP unit can only be
converted to one share of Common Stock and participates in any cash
distributions made by the OP in an amount equivalent to a share of common stock
of the Company. With each exchange of outstanding OP units for Common Stock, the
Company's percentage ownership interest in the OP, directly or indirectly, will
increase. The units do not have voting rights with respect to the Company and
are not traded on an open market.
The Company has 12,698,113 shares of Common Stock outstanding as of December 31,
1997. USRP had 10,341,004 units outstanding as of December 31, 1996.
F-9
<PAGE>
2. ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements reflect the accounts of the Company after
elimination of all material inter-company transactions and the accounts of the
OP and its 17 wholly-owned subsidiaries.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include short-term, highly liquid investments with
maturities at the date of purchase of three months or less.
RENT RECOGNITION
Rent revenues and expenses under operating leases are recognized on a
straight-line basis.
DEPRECIATION AND AMORTIZATION
Depreciation is computed using the straight-line method over estimated useful
lives of 6 to 20 years for financial reporting purposes. Deferred financing
costs and organizational costs are amortized using the straight-line method over
the life of the loans (1 to 6 years) and five years for organizational costs.
USE OF ESTIMATES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect reported amounts of certain assets, liabilities, revenues and
expenses as of and for the reporting periods. Actual results may differ from
such estimates.
LONG-LIVED ASSETS
Long-lived assets include real estate, direct financing leases, and intangibles
which are evaluated on an individual property basis. The Company's management
routinely reviews its investments for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Based on the Company's policy for reviewing impairment of
long-lived assets, no valuation allowance was recorded as of December 31, 1997
and 1996.
An intangible asset was recorded for the excess of cost over the net investment
in direct financing leases in 1986. This intangible asset is being amortized on
a straight-line basis over 40 years. The Company's management routinely reviews
the carrying amount of intangibles based on projected cash flows. Based on the
Company's policy for evaluating impairment of intangibles, no valuation
allowance was recorded as of December 31, 1997 and 1996.
F-10
<PAGE>
ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Prior to October 15, 1997 no federal or, in most cases, state income taxes are
reflected in the consolidated financial statements because USRP was not a
taxable entity. The partners reported their allocable shares of taxable income
or loss in their individual income tax returns. The Company elected to be taxed
as a REIT for Federal income tax purposes effective October 15, 1997 as provided
under the Internal Revenue Code of 1986, as amended. As a result, the Company
generally will not be subject to Federal income taxation if it distributes 95%
of its REIT taxable income to its stockholders and satisfies certain other
requirements. The Company believes it qualified as a REIT for the taxable period
ended December 31, 1997 and anticipates that its method of operations will
enable it to continue to satisfy the requirements for such qualification.
NET INCOME PER SHARE OF COMMON STOCK
At December 31, 1997, the Company adopted Statement of Financial Accounting
Standards No. 128 that requires the reporting of both basic and diluted earnings
per share. Basic earnings per share is based upon the weighted average number of
common shares outstanding.
Diluted earnings per share reflects the dilutive effect of stock options and
stock on which the price is guaranteed ("Guaranteed Stock") when appropriate.
Such options and Guaranteed Stock did not have a dilutive effect in 1997 (See
Note 6 and 11). Prior periods have been restated to reflect the new standard.
A reconciliation of net income (loss) per share and the weighted average shares
outstanding for calculating basic and diluted net income (loss) per share is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1997 1996 1995
---------------- -------------- -------------
<S> <C> <C> <C>
Net Income $ (9,393) $ 7,473 $ 5,223
Dividends/distributions on preferred
stock/General partner interest (868) (148) (104)
---------------- -------------- -------------
Net Income applicable to share/unitholders $ (10,261) $ 7,325 $ 5,119
================ ============== =============
Net Income per share/unit - Basic $ (0.88) $ 0.82 $ 0.74
================ ============== =============
Net Income per share/unit - Diluted $ (0.88) $ 0.80 $ 0.73
================ ============== =============
Basic
Weighted average shares/units outstanding-Basic 11,693 8,984 6,957
================ ============== =============
Diluted
Weighted average shares outstanding - Basic 11,693 8,984 6,957
Dilutive effect of outstanding options -- 198 54
Dilutive effect of Guaranteed Stock -- 8 4
================ ============== =============
Weighted average shares/units outstanding-Dilutive 11,693 9,190 7,015
================ ============== =============
</TABLE>
F-11
<PAGE>
ACCOUNTING POLICIES (CONTINUED)
EQUITY-BASED COMPENSATION
In 1995, Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," ("SFAS 123") was issued, effective for fiscal years
beginning after December 15, 1995. This Statement establishes a new method of
accounting to use recognized option pricing models to estimate the fair value of
equity based compensation, including options. This Statement also applies to
transactions in which an entity issues its equity instruments to acquire goods
or services from non-employees. Those transactions must be accounted for based
on the fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more reliably measurable.
The Company has elected, as provided by SFAS 123, not to recognize compensation
expense for employee equity based compensation as calculated under SFAS 123, but
will recognize any related expense in accordance with the provisions of APB
Opinion No. 25. Disclosure of amounts required by SFAS 123 are included in Note
6.
MINORITY INTEREST
Minority interest is recorded for the 1,148,418 OP units not owned by the
Company issued in conjunction with the conversion to a REIT and the termination
of the management contract (See Note 1). The units are recorded at carryover
basis for the 1% General Partner interest of QSV in the OP and the fair value of
the units ($19.00 based on the market value of a share of Common Stock) for the
additional units issued for the termination of the management contract (See Note
11).
ENVIRONMENTAL REMEDIATION COSTS
The Company accrues for losses associated with environmental remediation
obligations when such losses are probable and reasonably estimable. Accruals for
estimated losses from environmental remediation obligations generally are
recognized no later than completion of the remediation feasibility study. Such
accruals are adjusted as further information develops or circumstances change.
Recoveries of environmental remediation costs from other parties are recorded as
assets when their receipt is deemed probable. Company management is not aware of
any environmental remediation obligations which would materially affect the
operations, financial position or cash flows of the Company as of December 31,
1997.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current year
presentation.
NEW ACCOUNTING PRONOUNCEMENTS
In February, 1998, Statement of Financial Accounting Standards No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits,"
("SFAS 132") was issued, effective for fiscal years beginning after December 15,
1997. This Statement does not apply to the Company as of December 31, 1997 since
the Company does not have either a pension or other postretirement benefit
plans.
F-12
<PAGE>
ACCOUNTING POLICIES (CONTINUED)
In June, 1997, Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information," ("SFAS 131") was
issued, effective for fiscal years beginning after December 15, 1997. This
Statement requires that public business enterprises report financial and
descriptive information about their reportable operating segments. The Company
will adopt the provisions of SFAS 131 in 1998 as required, but it does not
expect such adoption to have a material impact on its results of operations,
financial position or cash flows.
In June, 1997, Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," (SFAS 130") was issued, effective for fiscal years
beginning after December 15, 1997. This Statement would have no effect on the
Company's current consolidated financial statements.
3. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
The following disclosure of estimated fair value was determined by the Company
using available market information and appropriate valuation methodologies.
However, considerable judgment is necessary to interpret market data and develop
the related estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts that could be realized upon
disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
Cash and cash equivalents, receivables (including deferred rent receivable) and
accounts payable (including deferred rent payable) are carried at amounts that
approximate their fair value based on their short term, highly liquid nature.
The line of credit is carried at an amount that approximates fair value because
it represents short term variable rate debt.
The fair value of notes and mortgage loan receivables totaling $14,465,000 and
$4,046,000 as of December 31, 1997 and 1996, respectively, have a fair value of
$12,973,000 and $3,672,000, respectively, based upon interest rates for notes
with similar terms and remaining maturities.
The fair value of notes payable totaling $40,000,000 as of December 31, 1997,
have a fair value of $41,250,000, based upon interest rates for notes with
similar terms and remaining maturities.
The fair value estimates presented herein are based on information available to
management as of December 31, 1997 and 1996. Although management is not aware of
any factors that would significantly affect the estimated fair value amounts,
such amounts have not been comprehensively revalued for purposes of these
financial statements since that date, and current estimates of fair value may
differ significantly from the amounts presented herein.
F-13
<PAGE>
4. OTHER BALANCE SHEET INFORMATION
DECEMBER 31,
------------------------------------
1997 1996
------------------------------------
(IN THOUSANDS) (IN THOUSANDS)
RENT AND OTHER RECEIVABLES, NET
Accounts receivable and other $ 2,913 $ 2,234
Deferred rent receivable 2,048 536
Less allowance for doubtful accounts (170) (117)
------------------------------------
$ 4,791 $ 2,653
====================================
INTANGIBLES AND OTHER ASSETS, NET
Intangibles $ 26,630 $ 27,003
Less accumulated amortization (15,662) (14,740)
====================================
$ 10,968 $ 12,263
====================================
Total purchase deposits of $521,000 and $908,000 at December 31, 1997 and 1996,
respectively, included $285,000 and $167,000 of non-refundable deposits,
respectively.
During 1997, the Company acquired a $6,000,000 note receivable secured by first
mortgages on 14 properties from a third party. This mortgage note receivable
earns interest at 11% with principal and interest payments of $818,000 due
annually through August 26, 2012.
5. PROPERTY
In March, 1995, USRP's Partnership agreement was amended to expand the purpose
of USRP and allow for the diversification of the restaurant property portfolio
through the acquisition of additional fast-food and casual dining restaurant
properties. Since the amendment in March, 1995, the Company has acquired 477
restaurant properties.
ACQUISITIONS
During 1997, the Company completed the purchase of 277 restaurant properties for
an aggregate purchase price of $182,396,000 including the value of 680,696
shares of Common Stock ($13,796,000) issued as part of the aggregate purchase
price. Twenty-nine restaurant properties were purchased with a combination of
cash and Common Stock and 244 restaurant properties were purchased with only
cash. The 277 restaurant properties include 78 Arby's restaurants, 45 Burger
King restaurants, 18 Kettle restaurants, 17 Bruegger's Bagel restaurants, 18
Schlotzsky's restaurants, 11 Pizza Hut restaurants, 10 Embers restaurants, six
Taco Cabana restaurants, 5 Wendy's and 69 national and regional brand
restaurants and other properties. The 680,696 shares of Common Stock issued in
two of these transactions have guaranteed values (See Note 6).
F-14
<PAGE>
PROPERTY (CONTINUED)
During 1996, the Company completed the purchase of 184 restaurant properties for
an aggregate purchase price of $105,336,000 including the value of 577,254
shares of Common Stock ($7,912,000) issued as part of the aggregate purchase
price. Three restaurant properties were purchased with only stock; 15 restaurant
properties were purchased with a combination of cash and stock; and 166
restaurant properties were purchased with only cash. The 184 restaurant
properties include 45 Burger King restaurants, 40 Dairy Queen restaurants, 30
Grandy's restaurants, 25 Hardee's restaurants, 12 Pizza Hut restaurants, two KFC
restaurants, six Schlotzsky's restaurants, six Chili's restaurants and 18
regional brand restaurants. The 577,254 shares of Common Stock issued in four of
these transactions have guaranteed values (See Note 6).
DISPOSITIONS
During 1997, the Company sold five restaurant properties for cash of $3,960,000,
net of closing costs resulting in a gain of $801,000. In addition, three
restaurant properties were sold for cash of $147,000, net of closing costs and
notes receivable of $1,661,000. One note of $972,000 earns interest at 9.25%
with interest only payments due monthly through June 1, 2000, when it matures
and one note of $689,000 earns interest at 9.75% with interest only payments due
monthly through September 1, 2001, when it matures. Each note receivable
requires all unpaid principal balances to be paid on the dates indicated herein.
During 1996, the Company sold one restaurant property for $815,000. The Company
received cash of $72,000 and a note from the buyer of $743,000. This note earns
interest at 9.25% with interest only payments due monthly through November 1,
1998 when it matures. In accordance with Statement of Financial Accounting
Standards No. 66, "Accounting for Real Estate Sales", the Company recorded
deferred gains on these sales aggregating $642,000 and $590,000 at December 31,
1997 and 1996, respectively.
PROPERTY CHARACTERISTICS
On December 31, 1997 the Company (i) owned both the land and the restaurant
building in fee simple on 447 of such Properties (the "Fee Properties"), (ii)
owned the land, with the tenant owning the restaurant building, on 33 of such
Properties and (iii) leased the land, the building or both from a third-party
lessor on 111 of such Properties (the "Leasehold Properties"). Of the 111
Leasehold Properties, 27 are Properties on which the Company leases from a third
party the underlying land, the restaurant building and the other improvements
thereon (the "Primary Leases") and then subleases the property to the restaurant
operator. Under the terms of the remaining 84 Leasehold Properties (the "Ground
Leases"), the Company leases the underlying land from a third party and owns the
restaurant building and the other improvements constructed thereon. Upon
expiration or termination of a Primary Lease or Ground Lease, the owner of the
underlying land generally will become the owner of the building and all
improvements thereon. The remaining terms of the Primary Leases and Ground
Leases range from one to 17 years. With renewal options exercised, the remaining
terms of the Primary Leases and Ground Leases range from one to 30 years, with
the average remaining term being 21 years.
A total of 100 buildings are leased primarily to franchisees under direct
financing leases. The net investment in the direct financing leases represents
the present value of the future minimum lease receipts for these 100 buildings.
On December 31, 1997 and 1996, there were 587 and 321 Company restaurant sites
respectively, in operation, and there were four and one closed sites,
respectively. The Company continues to seek suitable tenants for the
non-operating remaining sites. No write-downs were recorded in 1997 or 1996.
F-15
<PAGE>
PROPERTY (CONTINUED)
In the normal course of business, the Company may sign purchase agreements to
acquire restaurant properties. Such agreements become binding obligations upon
the completion of a due diligence period ranging usually from 15 - 30 days.
On December 31, 1997, earnest money purchase deposits amounting to $521,000 were
on deposit for the purchase of 21 El Chico restaurant properties, four Wendy's
restaurants, and 11 other properties.
6. STOCK OPTIONS AND GUARANTEED STOCK PRICE
During 1997, 680,696 shares of Common Stock were used to purchase 29 properties
in two separate transactions. Of the 680,696 shares of Common Stock issued,
177,869 shares of Common Stock are guaranteed to have a market value of $16.87
on the second anniversary date of the closing, 502,827 shares of Common Stock
are guaranteed to have a market value of $24.00 two years from the date of the
transaction. These properties were recorded at the guaranteed value of the
Common Stock discounted to reflect the present value on the date the shares of
Common Stock were issued.
During 1996, 577,254 shares of Common Stock were used to purchase 18 properties
in four separate transactions. Of the 577,254 shares of Common Stock issued,
486,862 shares of Common Stock are guaranteed to have a market value of $16 per
share two years from the transaction date, 42,392 shares of Common Stock are
guaranteed to have a market value of $15.33 per share three years from the
transaction date and 48,000 shares of Common Stock are guaranteed to have a
value of $16.67 per share two years from the transaction date. The accounting
described in the paragraph above was used to record these transactions.
Three restaurant properties were acquired on October 10, 1995, with a
combination of cash and 81,250 shares of Common Stock. The stock is guaranteed
to have a value of $16 per share three years from the transaction date. The
share price on the date issued was $12.25. Any difference between the guaranteed
value and the actual value of the shares at the end of the three year period is
to be paid in cash.
The Company does not believe that additional shares of stock will be issued or
cash paid as a result of the guaranteed stock prices discussed above.
The Company has one fixed stock option plan. Under this plan USRP limited
partners on March 17, 1995 granted QSV options to acquire up to 600,000 shares
of Common Stock of the Company, subject to certain adjustments under
anti-dilution provisions. The exercise price of each option is $10.33 which is
the average closing price of the depository receipts for the shares of Common
Stock on the New York Stock Exchange for the five trading days immediately after
the date of grant. The options are non-transferable except by operation of law
and vest and became exercisable in March 1996. The term of the options expire in
March 2005. As of December 31, 1997, QSV has exercised 190,000 stock options at
the option price of $10.33 for a total purchase price of $1,963,000.
In accordance with SFAS 123, the fair value of each option is estimated on the
date of the grant using the binomial option-pricing model with the following
weighted-average assumptions: dividend yield of 7.3 percent for all years;
expected volatility of 17.8 percent, risk free interest rate of 5.7 percent for
the options; and expected lives of 4 years for the plan options.
F-16
<PAGE>
STOCK OPTIONS AND GUARANTEED STOCK PRICE (CONTINUED)
As of March 17, 1995, the 600,000 options which are described above had a fair
value as of the grant date of $724,000 representing a value per option of $1.21.
Under the fixed option plan, if these options were considered as compensation,
net income would have been $7,292,000 and $4,680,000 as of December 31, 1996 and
1995, respectively. No compensation would have been recognized in 1997. Basic
net income per share would have been $0.81 and $0.67 and diluted income per
share would have been $0.80 and $0.66 as of December 31, 1996 and 1995,
respectively.
7. LINES OF CREDIT AND NOTES PAYABLE
LINES OF CREDIT
On December 31, 1997 and 1996, $62,996,000 and $65,396,000, respectively, had
been drawn on the Company's primary line of credit. The Company's line of credit
was increased to $110 million in June 1997 and matures on June 27, 1999. At
December 31, 1997 substantially all properties were included as collateral on
this line of credit. The interest rate on this debt floats at 180 basis points
above LIBOR. The effective interest rate at December 31, 1997, was 7.6125%.
There was an unused line of credit fee of .25% per annum on the average daily
excess of the commitment amount over the aggregate unpaid balance of the
revolving loan which was charged and was payable on a quarterly basis. This line
of credit was refinanced in January 1998. The Company's management believes it
is in compliance with all loan provision requirements as of December 31, 1997.
On December 31, 1997, the balance available on the line of credit equaled
$47,003,000 (considers $1.4 million subject to outstanding letter of credit).
On August 15, 1997, a wholly-owned subsidiary of the Company entered into a
short term borrowing facility (the "Pacific Mutual Facility") of $30 million
which matures on May 20, 1998 and provides that borrowings thereunder bear
interest at LIBOR plus 2.30% per annum. There is an unused fee of 1.0% per annum
on the unused commitment. The Pacific Mutual Facility is secured by the pledge
of 1,351,618 shares of unissued Common Stock of the Company. On December 31,
1997, the outstanding balance was $26,200,000 and the available borrowing
balance was $3,800,000. The collateral is pari passu with the revolving credit
facility.
A revolving credit facility of $20,000,000 was established with a national
mortgage company on April 29, 1996. The interest rate on this credit facility
was LIBOR plus 300 basis points which resulted in an interest rate of 8.5625% at
December 31, 1996. This revolving credit facility was secured by approximately
63 properties. On December 31, 1996, the total amount due equaled $4,090,000.
This revolving credit facility was paid in full in January 1997 and no
additional draws are available.
On January 17, 1998 the Company entered into a credit agreement with Union Bank
of Switzerland for an unsecured revolving credit line of $175 million. At
February 28, 1997, approximately $56 million remained available for borrowings
under the UBS credit agreement.
NOTES PAYABLE
On February 26, 1997, the Company issued $40,000,000 in privately placed debt
which consists of $12,500,000 Series A Senior Secured Guaranteed Notes with a
8.06% interest rate, due January 31,
F-17
<PAGE>
2000; and $27,500,000 Series B Senior Secured Guaranteed Notes with a 8.30%
interest rate, due January 31, 2002. At December 31, 1997, these notes and the
revolving credit facility were collateralized by substantially all the assets of
the Company. In January, 1998, the note holders agreed to release the collateral
for these notes.
PRINCIPAL DEBT MATURITIES
Lines of credit and notes payable principal debt maturities for the next five
years at December 31, 1997 are as follows (in thousands):
1998.............................. $ 26,200
1999.............................. 62,996
2000.............................. 12,500
2001.............................. --
2002.............................. 27,500
---------------
$ 129,196
===============
8. INVESTMENTS AND COMMITMENTS AS LESSOR
The Company leases land and buildings to a variety of national and regional fast
food chain and casual dining restaurants. The building portions on 100 of these
properties, which are leased by BKC franchisees, are accounted for as direct
financing leases while the land portions are operating leases. These leases
generally provide for a term of 20 years from the opening of the related
restaurant, and do not contain renewal options. The Company, however, has agreed
to renew a franchise lease if BKC or any of the other franchise chains renews or
extends the lessee's franchise agreement.
As of December 31, 1997, the remaining lease terms of all leases described in
the above paragraph and Note 5 ranged from 1 to 27 years and include various
renewal options. The leases provide for minimum rents and contingent rents based
on a percentage of each restaurant's sales, and require the franchisee to pay
executory costs.
F-18
<PAGE>
INVESTMENTS AND COMMITMENTS AS LESSOR (CONTINUED)
<TABLE>
<CAPTION>
DIRECT OPERATING
FINANCING LEASES LEASES
---------------------------------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C>
MINIMUM FUTURE LEASE RECEIPTS FOR YEARS ENDING DECEMBER 31:
1998 $ 3,516 $ 37,521
1999 2,834 37,279
2000 1,955 36,691
2001 1,267 35,633
2002 760 34,695
Later 478 361,839
---------------------------------------
$ 10,810 $ 543,658
=======================================
</TABLE>
<TABLE>
<CAPTION>
1997 1996
---------------------------------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C>
NET INVESTMENT IN DIRECT FINANCING LEASES AT DECEMBER 31:
Minimum future lease receipts $ 10,810 $ 15,449
Estimated unguaranteed residual values 6,920 7,437
Unearned amount representing interest (3,966) (5,781)
=======================================
$ 13,764 $ 17,105
=======================================
</TABLE>
Year ended December 31,
------------------------------------------------
1997 1996 1995
------------------------------------------------
(IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS)
RENTAL INCOME:
Minimum rental income $ 27,570 $ 11,022 $ 3,584
Contingent rental income 5,355 5,324 3,956
================================================
$ 32,925 $ 16,346 $ 7,540
================================================
If Burger King properties are not adequately maintained during the term of the
tenant leases of which there are 209, such properties may have to be rebuilt
before the leases can be renewed, either by the Company as it considers
necessary or pursuant to Burger King's successor policy. The successor policy,
which is subject to change from time to time in Burger King's discretion, is
intended to encourage the reconstruction, expansion, or other improvement of
older Burger King restaurants and generally affects properties that are more
than ten years old or are the subject of a franchise agreement that will expire
within five years.
Under the current OP agreement, Burger King can require that a restaurant
property be rebuilt. If the tenant does not elect to undertake the rebuilding,
the Company would be required to make the required improvement itself. However,
as a condition to requiring the Company to rebuild, Burger King would be
required to pay the Company its percentage share ("Burger King's Percentage
Share") of the rebuilding costs. Such percentage share would be equal to (i) the
average franchise royalty fee percentage rate payable to Burger King with
respect to such restaurant, divided by (ii) the aggregate of such average
franchise royalty fee percentage rate and the average percentage rate payable to
the Partnership with respect
F-19
<PAGE>
8. INVESTMENTS AND COMMITMENTS AS LESSOR (CONTINUED)
to such restaurant property. The Company believes that Burger King's Percentage
Share would typically be 29% for a restaurant property.
Management believes it is unlikely that any material amount of rebuilding of
Burger King restaurant properties will be required in the next several years, if
ever.
The Company believes that improving, expanding, rebuilding or replacing its
restaurant properties from time to time is important. In addition to normal
maintenance and repair requirements, each franchisee is required under BKC's
franchise agreement and lease/sublease, at its own cost and expense, to make
such alterations to a Burger King restaurant as may be reasonably required by
BKC from time to time to modify the appearance of the restaurant to reflect the
then current image requirements for Burger King restaurants. Most of the
properties that are operating as Burger King restaurants are 15 to 20 years old.
The Company believes that many of these properties require substantial
improvements to maximize sales and that their condition is below BKC's current
image requirements.
To encourage the early renewal of existing leases/subleases, the Company
recently established an "early renewal program" whereby the Company has offered
to certain tenants the right to renew existing leases/subleases for up to an
additional 20 years in consideration for remodeling financing. The purpose of
this program is to extend the term of existing leases/subleases prior to the end
of the lease term and enhance the value of the underlying property to the
Company. As a result of this program, the Company has extended the lease term on
51 leases/subleases as a result of remodel grants and lease riders. One lease in
1997 and two leases in 1996, respectively were renewed with loans. During 1997
and 1996, the Company paid remodeling costs of $888,000 and $1,118,000,
respectively in conjunction with this Program.
9. COMMITMENTS
The land at 111 restaurant properties and the land and buildings at 13
restaurant properties are leased by the Company from third party lessors. The
building portions of the leases are generally capital leases while the land
portions are operating leases. These leases provide for an original term of 20
years and most are renewable at the Company's option. As of December 31, 1997,
the remaining lease terms (excluding renewal option terms) ranged from 1 to 14
years. If all renewal options are taken into account, the terms ranged from 5 to
35 years. Rents payable may escalate during the original lease and renewal
terms. For eight properties, the leases provide for contingent rent based on
each restaurant's sales.
F-20
<PAGE>
COMMITMENTS (CONTINUED)
CAPITAL OPERATING
LEASES LEASES
---------------------------------
(IN THOUSANDS) (IN THOUSANDS)
MINIMUM FUTURE LEASE OBLIGATIONS FOR YEARS
ENDING DECEMBER 31:
1998 $ 119 $ 2,745
1999 60 2,579
2000 4 2,351
2001 1 1,939
2002 -- 1,628
Later -- 4,114
---------------------------------
Total minimum obligations (a) 184 $ 15,356
==============
Amount representing interest (14)
-----------------
Present value of minimum obligations $ 170
=================
(a) MINIMUM LEASE OBLIGATIONS HAVE NOT
BEEN REDUCED BY MINIMUM SUBLEASE RENTALS.
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1997 1996 1995
-------------------------------------------------
(IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS)
RENTAL EXPENSE
Minimum rental expense $ 2,434 $ 1,992 $ 1,304
Contingent rental expense 54 88 101
------------------------------------------------
$ 2,488 $ 2,080 $ 1,405
================================================
On October 15, 1997, the Company entered into four-year employment agreements
with its two executive officers for which the aggregate compensation of the two
executive officers is $500,000. Under such agreements, the Company is liable for
the compensation benefits for three years of the agreements if an executive
officer were to be terminated without cause, as defined.
10. RELATED PARTY TRANSACTIONS
Prior to October 15, 1997, the Managing General Partner of USRP was responsible
for managing the business and affairs of USRP. USRP paid the Managing General
Partner a non-accountable annual allowance (adjusted annually to reflect
increases in the Consumer Price Index and additions to the property portfolio),
plus reimbursement of out-of-pocket costs incurred to other parties for services
rendered to USRP. The allowance for the period ended October 15, 1997 and the
years ended December 31, 1996, and 1995, was $1,826,000, $1,175,000, and
$585,000, respectively. The Company's accounts payable balance includes $121,000
and $416,000 for this allowance as of December 31, 1997 and 1996, respectively.
The Managing General Partner paid no out-of-pocket costs to other parties on
behalf of USRP during 1997, 1996, and 1995.
F-21
<PAGE>
RELATED PARTY TRANSACTIONS (CONTINUED)
USRP compensated the Managing General Partner for its efforts and increased
internal expenses with respect to additional properties. USRP paid the Managing
General Partner, with respect to each additional property purchased: (i) a
one-time acquisition fee equal to one percent of the purchase price for such
property and (ii) an annual fee equal to one percent of the purchase price for
such property, adjusted for increases in the Consumer Price Index. For 1997,
1996 and 1995, the one-time acquisition fee equaled $1,401,000, $1,043,000 and
$109,000, respectively, which was capitalized, and the increase in the
non-accountable annual fee equaled $498,000, $495,000 and $29,000 respectively.
In addition, if the Rate of Return (as defined) on the Partnership's equity on
all additional properties exceeded 12 percent per annum for any fiscal year, the
Managing General Partner was paid an additional fee equal to 25 percent of the
cash flow received with respect to such additional properties in excess of the
cash flow representing a 12 percent Rate of Return thereon. For 1996, this
additional fee equaled $93,000 and there was no fee paid in 1997 or in 1995.
These fees were discontinued with the termination of the management contract
between QSV and USRP on October 15, 1997.
A note receivable of $261,000 and $267,000 is due from Arkansas Restaurants #10
L.P. (Arkansas) at December 31, 1997 and 1996, respectively. The note receivable
is due on September 1, 1998, and has an interest rate of 9.0% per annum. At
December 31, 1997 and 1996, tenant and other receivables from Arkansas were
$158,000 and $63,000, respectively. In addition, during 1997 and 1996 the
Company paid remodel costs of $53,000 and $443,000, respectively on behalf of
Arkansas for three restaurants operated by Arkansas under the Company's
early-renewal program (See Note 8). The Managing General Partner of Arkansas
Restaurants #10 L.P. is owned by an officer of the Company, but receives no
compensation for this role.
During 1996, the Company agreed to make available to USRP Development Company a
revolving line of credit in the principal amount of $5,000,000, to be used
solely for paying for the acquisition and development of restaurant properties
which will be purchased by the Company upon completion of the development. The
line of credit is secured by certain development properties and bears interest
at an annual rate of 9%. The line of credit is payable in monthly installments
beginning July 1997 and matures in October 2001. At December 31, 1997, the
outstanding balance was $3,920,000 and is included in Notes Receivable. In
March, 1998, the Company assumed the operations of USRP Development Company.
As of December 31, 1997 and 1996, notes receivable of $1,070,000 and $920,000
were due from Southeast Fast Food Partners, L.P. (SFF), respectively. The notes
receivable are due on July 1, 1998 ($207,000) and July 1, 1999 ($863,000) and
have an interest rate of 9.0% per annum. As of December 31, 1997 and 1996, a
note receivable of $136,000 is due from the owners of SFF. This note receivable
is due on July 1, 1999 and has an interest rate of 9.0% per annum. At December
31, 1997 and 1996, tenant and other receivables from SFF were $362,000 and
$125,000, respectively. In addition, during 1996, the Company incurred
remodeling costs of $180,000 on behalf of SFF for restaurants operated by SFF
under the Company's early - renewal program (See Note 8). The Managing General
Partner of Southeast Fast Food Partners, L.P. is owned by an officer of the
Company.
In 1997 and 1996, two sale/leaseback transactions and one sale/leaseback
transaction, respectively were completed by the Company with Carlos O'Kelly's,
Inc. Carlos O'Kelly's, Inc. is owned by a director of the Company.
F-22
<PAGE>
11. STOCKHOLDERS' EQUITY, MINORITY INTEREST AND PARTNERS' CAPITAL
COMMON STOCK
On October 15, 1997, the Company effected the conversion of USRP into a
self-administered and self-managed REIT. As a result of the Merger, USRP became
a subsidiary of the Company and, at the effective time of the Merger, all
holders of units of beneficial interest of USRP became stockholders of the
Company. Accordingly, information contained in these consolidated financial
statements related to the equity ownership of USRP following October 15, 1997 is
presented as ownership of shares of Common Stock of the Company. On October 30,
1997 the Company effected a three-for-two stock split. All of the historical
Units and per unit information has been restated to reflect this stock split and
conversion of the units to Common Stock.
MINORITY INTEREST
In connection with the conversion to a REIT, the management contract between QSV
and USRP was terminated. The contract termination and QSV's partnership
interests in USRP were converted to 126,582 shares of Common Stock of the
Company and 1,148,418 units of the OP. The OP units represent a minority
interest in the OP of the REIT. Each OP unit participates in any income (loss)
of the OP based on the percent ownership in the OP and receives a cash dividend
in an amount equivalent to a share of Common Stock. Each OP unit may be
exchanged by the holder thereof for one share of Common Stock of the Company.
With each exchange of outstanding OP units for Common Stock, the Company's
percentage ownership interest in the OP, directly or indirectly, will increase.
An additional 825,000 shares of Common Stock of the Company or its equivalent in
OP units may be issued to QSV if certain earnings targets are met by the year
2000. As of December 31, 1997 these earnings targets have not been met.
Minority interest in the OP consists of the following at December 31, 1997 (in
thousands):
Termination of management
contract and issuance of OP units $ 19,749
Distributions (415)
Income allocated to minority interest 202
------------
Balance at December 31, 1997 $ 19,536
============
SHELF REGISTRATION
On August 22, 1997, the Company filed a shelf registration statement for
$150,000,000 in shares of Common or Preferred Stock. The amount of securities
available for issuance under this shelf registration statement at December 31,
1997 is $58,000,000.
F-23
<PAGE>
STOCKHOLDERS' EQUITY, MINORITY INTEREST AND PARTNERS' CAPITAL (CONTINUED)
PREFERRED STOCK
On November 12, 1997, the Company sold 3,680,000 shares of Series A Cumulative
Convertible Preferred Stock ("Series A") with a liquidation preference of $25.00
per share under the August 22, 1997 shelf registration statement. Shares of
Series A are convertible, in whole or in part, at the option of the holder at
any time, unless previously redeemed, into shares of Common Stock at a
conversion price of $26.64 per share of Common Stock (equivalent to a conversion
rate of .9384 shares of Common Stock). Distributions on Series A are cumulative
and are equal to the greater of (i) $1.93 per annum or (ii) the cash
distribution paid or payable on the number of shares of Common Stock into which
a share of Series A is convertible. As of December 31, 1997 no Series A shares
have been converted into Common Stock. Holders of Preferred Stock are entitled
to receive dividends in preference to any dividends to Common Stockholders or OP
unit holders.
DISTRIBUTIONS TO COMMON AND PREFERRED STOCKHOLDERS
For the period October 15 through December 31, 1997, the Company paid
distributions of $4,954,000 to its Common Stockholders and minority interests
(or $0.3575 per share of Common Stock), of which 6.07% represented a return of
capital, 16.43% represented a long-term capital gain and 77.50% represented
ordinary taxable dividend income. As of December 31, 1997, no dividends have
been declared to Preferred Stockholders.
DISTRIBUTIONS AND ALLOCATIONS AS UNITHOLDERS
Under the amended USRP partnership agreement, cash flow from operations and net
proceeds from capital transactions of USRP each year were distributed 98.02% to
the unitholders and 1.98% to the general partners until the unitholders received
a 12% simple (noncumulative) annual return for such year on the unrecovered
capital per unit ($20.00, reduced by any prior distributions of net proceeds of
capital transactions); then any cash flow for such year was distributed 75.25%
to the unitholders and 24.75% to the general partners until the unitholders have
received a total simple (noncumulative) annual return for such year of 17.5% on
the unrecovered capital per unit; and then any excess cash flow for such year
was distributed 60.40% to the unitholders and 39.60% to the general partners.
The unitholders received 98.02% of all cash flow distributions for the period
January 1 through October 15, 1997 (date of REIT conversion), 1996 and 1995.
There were no capital transactions in the period January 1 through October 15,
1997 (date of REIT conversion) and 1996 or 1995.
All operating income and loss of USRP for each year generally was allocated
among the partners in the same aggregate ratio as cash flow was distributed for
that year. Gain and loss from a capital transaction was generally allocated
among the partners in the same aggregate ratio as proceeds of the capital
transactions were distributed except to the extent necessary to reflect capital
account adjustments. For the period ended October 15, 1997 and for the years
ended December 31, 1996 and 1995, distributions to USRP unitholders amounted to
$12,016,000, $11,392,000 and $8,002,000, respectively.
F-24
<PAGE>
12. EMPLOYEE BENEFIT PLAN
Effective October 15, 1997, the U.S. Restaurant Properties, Inc. 401(k) plan
(the "Plan") was established as a savings plan for the Company's employees. The
Plan is a voluntary defined contribution plan. Employees are eligible to
participate in the Plan on the earlier of January 1, April 1, July 1 and October
1 immediately following the later of the (i) six months after their first day of
employment with the Company or (ii) the date an employee attains the age of 21,
as defined. Each participant may make contributions to the Plan by means of a
pre-tax salary deferral in an amount up to 15% of the participant's annual
compensation (not to exceed $9,500 per annum for 1997). The Company will match
up to 25% of participating annual employee contributions. The Company's matching
contributions are made in Company stock, which is purchased by the Plan on the
open market, and are subject to specified years-of-service for vesting of the
Company's portion of contributions to the Plan. Employer contributions of
approximately $7,000 have been accrued as of December 31, 1997.
13. PRO FORMA (UNAUDITED)
The following pro forma information was prepared by adjusting the actual
consolidated results of the Company for the years ended December 31, 1997 and
1996 for the effects of:
a. the purchase of 277 restaurant properties on various dates during 1997
for an aggregate purchase price of $182,396,000 including the value of
680,696 shares of Common Stock issued to sellers; the loan of $6,000,000 on
a secured mortgage; and the sale of eight restaurant properties for
$5,822,000; the Preferred Stock dividends required and the reduction of
interest expense as a result of the Preferred Stock offering proceeds used
to reduce the total debt outstanding by $87,622,000; the three-for-two
stock split on October 30, 1997; and other related financing transactions,
including the sale of 1,434,831 shares of Common Stock for $25,000,000;and
b. the purchase of 184 restaurant properties on various dates during 1996
for an aggregate purchase price of $105,336,000 including the value of
577,254 USRP Units issued to sellers and other related financing
transactions including the sale of 2,700,000 USRP Units in June 1996.
These pro forma results are not necessarily indicative of what the actual
results of operations of the Company would have been assuming all of the
restaurant properties were acquired as of January 1, 1996 and they do not
include gains on property dispositions and they do not purport to represent the
results of operations for future periods.
F-25
<PAGE>
14. PRO FORMA (UNAUDITED) (CONTINUED)
YEAR ENDED DECEMBER 31,
--------------------------------------
1997 1996
--------------------------------------
(IN THOUSANDS) (IN THOUSANDS)
TOTAL REVENUES $ 48,198 $ 48,436
======================================
NET INCOME (LOSS) $ (1,896) $ 18,822
Dividends on Preferred
Stock/General Partner interest (7,102) (7,102)
--------------------------------------
Net income (loss) allocable to
Common shareholders/unit holders $ (8,998) $ 11,720
======================================
Weighted average shares/units
outstanding
Basic 12,631 12,514
Diluted 12,631 12,789
Net income (loss) per share/unit
Basic $(0.71) $0.94
Diluted $(0.71) $0.92
15. SUMMARY BY QUARTER (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
--------------------------------------------------------------- TOTAL
FIRST SECOND THIRD FOURTH YEAR
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
Revenues $ 6,265 $ 8,556 $ 9,775 $ 10,988 $ 35,584
Net income 1,952 2,147 2,532 (16,024) (9,393)
Allocable net income 1,913 2,105 2,482 (16,761) (10,261)
Earnings per common share
Basic Net income (loss) per share $ 0.18 $ 0.18 $ 0.20 $ (1.30) $ (0.88)
Diluted Net income (loss) per share $ 0.18 $ 0.18 $ 0.20 $ (1.30) $ (0.88)
1996
Revenues $ 2,971 $ 4,348 $ 5,821 $ 5,378 $ 18,518
Net income 1,323 1,862 2,590 1,698 7,473
Allocable net income 1,296 1,825 2,539 1,665 7,325
Earnings per common share
Basic Net income (loss) per share $ 0.18 $ 0.23 $ 0.25 $ 0.16 $ 0.82
Diluted Net income (loss) per share $ 0.17 $ 0.22 $ 0.24 $ 0.16 $ 0.80
</TABLE>
F-26
<PAGE>
<TABLE>
<CAPTION>
U.S. RESTAURANT PROPERTIES, INC.
SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997
(IN THOUSANDS)
INITIAL COST TO COMPANY AND ACCUMULATED DEPRECIATION
GROSS AMOUNT AT DECEMBER 31, 1997 AT DECEMBER 31, 1997
------------------------------------------------ -----------------------------------
NO. OF
STORE TYPE PROPERTIES LAND BUILDINGS EQUIPMENT TOTAL BUILDINGS EQUIPMENT TOTAL
- ----------------- ----------- ---------- ----------- ---------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ARBY'S 78 $ 9,762 $ 37,370 $ -- $ 47,132 $ 1,256 $ -- $ 1,256
BRUEGGER'S BAGEL 17 2,422 9,478 -- 11,900 364 -- 364
BURGER KING 209 35,742 58,797 242 94,781 4,966 56 5,022
CHILI'S 8 4,204 7,983 -- 12,187 567 -- 567
DAIRY QUEEN 41 2,908 8,628 875 12,411 499 209 708
EMBERS 10 1,029 2,485 598 4,112 43 30 73
GRANDY'S 30 12,758 -- -- 12,758 -- -- --
HARDEE'S 29 3,105 18,238 2,069 23,412 1,579 418 1,997
KETTLE 18 1,860 4,299 -- 6,159 22 -- 22
KFC 3 350 871 -- 1,221 62 -- 62
PIZZA HUT 22 2,638 6,765 -- 9,403 339 -- 339
SCHLOTZSKY'S 24 6,354 11,864 -- 18,218 395 -- 395
TACO BELL 5 560 1,034 -- 1,594 21 -- 21
WENDY'S 5 728 2,280 -- 3,008 54 -- 54
OTHER REGIONAL
BRANDS 92 25,095 41,108 696 66,899 2,443 51 2,494
OTHER ASSETS -- -- -- 333 333 -- 64 64
----------- ---------- ----------- ---------- ------------ ---------- ---------- -----------
591 $109,515 $211,200 $ 4,813 $ 325,528 $12,610 $ 828 $ 13,438
=========== ========== =========== ========== ============ ========== ========== ===========
</TABLE>
S-1
<PAGE>
(1) Substantially all property is restaurant property.
(2) Substantially all property is collateral for the line
of credit and notes payable.
(3) Depreciation is computed over the estimated useful
life of 15 to 20 years for the restaurant buildings
and improvements and 10 years for the restaurant
equipment.
(4) Burger King restaurant properties include the land
values of 100 restaurant properties in which the
building and improvements are accounted for as direct
financing leases.
(5) Transactions in real estate and equipment and
accumulated depreciation during 1997 and 1996 are
summarized below.
Cost Depreciation
------------ ----------------
Balance, December 31, 1995 $ 38,270 $ 2,653
Acquisitions 106,862
Cost of real estate sold (20)
Depreciation expense -- 2,800
------------ ----------------
Balance, December 31, 1996 145,112 5,453
Acquisitions 183,686 --
Cost of real estate sold (3,270) (245)
Depreciation expense -- 8,230
------------ ----------------
Balance, December 31, 1997 $ 325,528 $ 13,438
============ ================
S-2
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
- -------
2.1 First Amendment dated April 18, 1997 to Asset Purchase Agreement
(originally dated December 23, 1996) between Sybra, Inc., Valcor, Inc. and
U.S. Restaurant Properties Master L.P.
2.2 Agreement of Purchase and Sale dated December 4, 1997 between Burger King
Limited Partnership I and U.S. Restaurant Properties Operating L.P.
2.3 Agreement of Purchase and Sale dated December 4, 1997 between Burger King
Limited Partnership III and U.S. Restaurant Properties Operating L.P.
2.4 Purchase and Sale Agreement dated July 31, 1997, among Home Run Associates,
Saratoga Associates, Lathpar Corporation, Delpar Corporation, Schenecpar
Corporation, M & D Development, Westmere Associates and Wolf Road
Enterprises, (known collectively as the "Midon Companies") and U.S.
Restaurant Properties Master L.P.
2.5 Agreement and Plan of Merger dated October 14, 1997 by and among U.S.
Restaurant Properties Master L.P., U.S. Restaurant Properties, Inc., USRP
Acquisition, L.P., USRP Managing, Inc., and QSV Properties, Inc.
10.1 Withdrawal Agreement dated October 15, 1997 by and among U.S. Restaurant
Properties, Inc., U.S. Restaurant Properties Master L.P., U.S. Restaurant
Properties Operating L.P. and QSV Properties, Inc.
10.2 Fourth Amended and Restated Agreement of Limited Partnership of U.S.
Restaurant Properties Operating L.P.
10.3 Revolving Credit Agreement dated January 9, 1998 among U.S. Restaurant
Properties Operating L.P., the institutions from time to time party thereto
as Lenders and as Co-agents and Union Bank of Switzerland
10.4 Employment Agreement dated October 15, 1997 by and between U.S. Restaurant
Properties, Inc. and Robert J. Stetson
10.5 Employment Agreement dated October 15, 1997 by and between U.S. Restaurant
Properties, Inc. and Fred H. Margolin
12.1 Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends
21.1 U.S. Restaurant Properties, Inc. List of Subsidiaries as of December 31,
1997
23.1 Independent Auditors' Consent letter dated March 12, 1998 from Deloitte &
Touche LLP
27.1 Financial Data Schedule
E-1
FIRST AMENDMENT
TO
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
SYBRA, INC., VALCOR, INC.
AND
U.S. RESTAURANT PROPERTIES MASTER L.P.
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT BETWEEN SYBRA, INC.,
VALCOR, INC. AND U.S. RESTAURANT PROPERTIES MASTER dated and effective as of
April 18, 1997 (the "Amendment") is by and between U.S. RESTAURANT PROPERTIES
MASTER L.P., a Delaware limited partnership (the "Buyer"), SYBRA, INC., a
Michigan corporation (the "Seller") and VALCOR, INC., a Delaware corporation and
the sole stockholder of Seller ("Valcor"). The Buyer and the Seller are referred
to individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Seller, Buyer and Valcor entered into an Asset Purchase Agreement
dated as of December 23, 1996 (the "Purchase Agreement"); and
WHEREAS, Seller, Buyer and Valcor desire to amend certain provisions of the
Purchase Agreement as set forth in this Amendment;
COVENANTS
NOW, THEREFORE, in consideration of the foregoing, and in further
consideration of the mutual covenants and considerations herein contained, the
Parties hereby agree as follows:
1. Schedule 1. Schedule 1 attached to the Agreement is hereby deleted and
Schedule 1 attached hereto is substituted for the original Schedule 1 and
incorporated into the Agreement as if attached thereto.
2. Schedule 2. Schedule 2 attached to the Agreement is hereby amended by
inserting after the phrase "Schedule 1.1", the phrase ", the leases related to
Units 630, 785, 899, 984, 1253, 1254, 1313, 1330, 1405, 1434 and the Other
Leases (as defined on Schedule 1.1), if any, on Schedule 1.1". Schedule 2 is
further amended by deleting the reference to "6236 and 731".
3. Schedule 3. Schedule 3 attached to the Agreement is hereby deleted and
Schedule 3 attached hereto is substituted for the original Schedule 3 and
incorporated into the Agreement as if attached thereto. For all purposes related
to the Agreement, the term "Agreed Value" shall mean and refer to such
information as set forth on Schedule 3 attached hereto.
4. Exhibit A. Exhibit A is amended by inserting in Section 1(c) after the
phrase "Schedule 1.1", the phrase ", the leases related to Units 630, 785, 899,
984, 1253, 1254, 1313, 1330, 1405, 1434 and the Other Leases on Schedule 1.1,
provided however, in the event that Buyer assigns the right to acquire such
leases pursuant to Section 10(d), the assignee rather than the Buyer shall
assume the obligations under
<PAGE>
such leases pursuant to documents satisfactory to Buyer and Seller".
Exhibit A is further amended by deleting the reference to Units 6236 and 731.
5. Exhibit C. Exhibit C attached to the Agreement is hereby amended by
inserting under Section 3(c) thereof the following:
"Consents required for assignment and sublease of sandwich leases:
Unit 518 Unit 995
Unit 630 Unit 1172
Unit 785 Unit 5711"
Unit 984
Exhibit C attached to the Agreement is further amended by inserting under
Section 3(f)(ii) thereof the following:
"List of Sandwich Leases by title, parties and date.
1. #630 - 4825 Dixie Highway, Waterford, Michigan.
Lease by and between Mary Alice Heaton and Sybra,
Inc., dated March 1, 1977.
2. #899 - 8068 North Wayne Road, Westland, Michigan.
Lease by and between Westwood Financial
Corporation and Sybra, Inc., as successor by merger to
Sybsidiary, Inc., dated August 13, 1981.
3. #984 - G-4325 West Pierson Road, Flint, Michigan.
Lease by and between Wolverine Properties, Ltd.,
as successor to Empire Management Services, Ltd. and Sybra,
Inc., dated October 1, 1978.
4. #1172 - 32 South 32nd Street, Camp Hill,
Pennsylvania.
Lease Agreement by and between Mid-Island
Properties, Inc. and Sybra, Inc., dated December 7, 1978.
5. #1253 - 2925 East Long Lake Road, Troy, Michigan.
Lease by and between Paul F. Brune Trust, as
successor to Norbob Enterprises, Inc. and Sybra, Inc., as
successor by merger to Sybsidiary, Inc., dated June 26, 1981.
6. #1254 - 36776 Groesbeck Highway, Mt. Clemens,
Michigan.
Lease by and between Harry Shapiro, as successor
to Norbob Enterprises, Inc. and Sybra, Inc., as successor to
Sybsidiary, Inc., dated June 26, 1981.
7. #1313 - 575 Ann Arbor Road, Plymouth, Michigan.
<PAGE>
Lease by and between Lauren Reagor, as successor
to Pacific Realty Fund and Sybra, Inc., as successor by merger
to Sybsidiary, Inc., dated June 30, 1981.
8. #1330 - 1102 North Collins Street, Arlington,
Texas.
Lease by and between Walter Beil, as successor to
Pacific Realty Fund and Sybra, Inc., as successor by merger to
Sybsidiary, Inc., dated June 30, 1981.
9. #1405 - 1933 Northtown East Blvd., Mesquite,
Texas.
Lease by and between Walter Beil, as successor to
Pacific Realty Fund and Sybra, Inc., as successor by merger to
Sybsidiary, Inc., dated June 30, 1981.
10. #1434 - 2131 Texoma Parkway, Sherman, Texas.
Lease by and between Walter Beil, as successor to
Pacific Realty Fund and Sybra, Inc., as successor by merger to
Sybsidiary, Inc., dated June 30, 1981.
11. If necessary consents are obtained, #518 - 2480
Jacksboro Highway, Fort Worth, Texas.
Lease by and between JaGee Properties, Inc. and
Sybra, Inc., dated May 1, 1980.
12. If necessary consents are obtained, #995 - 47540
Van Dyke, Utica, Michigan.
Lease by and between GISA Associates and Sybra,
Inc., dated April 20, 1978.
13. If necessary consents are obtained, #1172 - Camp
Hill Shopping Center, Cumberland County, PA.
Lease by and between Mid-Island Properties,
Inc. and, initially, Cumberland County Industrial Development
Authority, dated December 7, 1978.
14. If necessary consents are obtained, #5711 -
Greeneville Avenue, Dallas, TX.
Lease by and between Texas Commerce Bank
National Association and Sybra, Inc., dated August 14, 1989."
Exhibit C attached to the Agreement is further amended by
deleting under Section 3(f)(ii) thereof "Ground Lease between
Forest & Marsh Lanes Shopping Centers, Ltd./Forest & Marsh
Lanes Development Corporation/Park Forest Properties, Inc. and
Sybra, Inc. dated September 1, 1993."
6. Section 2(d). Section 2(d) of the Agreement is
amended by deleting the phrase "January 31, 1997 except that,
by written notice to Buyer, Seller
<PAGE>
may extend such date for up to fifteen (15) days in order to
obtain Required Consents" and substituting the phrase
"April 30, 1997."
7. Section 2(e). Section 2(e) of the Agreement is
amended by inserting at the end of subsection (B) the phrase
"and each lease for Units 630, 899, 984, 1172, 1253, 1254,
1313, 1330, 1405, 1434 and the Other Leases".
8. Section 7(a). Section 7(a) of the Agreement is
hereby amended by renumbering existing subsection (xiii) as
new subsection (xiv) and by inserting a new subsection (xiii)
as follows:
"(xiii) Simultaneously with the Closing, Seller and Buyer
shall enter into a sublease by Buyer to Seller of Units 630, 785, 899,
984, 1253, 1254, 1313, 1330, 1405, 1434 and the Other Leases, which
sublease shall be in form and substance reasonably satisfactory to
Buyer and Seller."
9. Section 7(b). Section 7(b) of the Agreement is hereby amended by
renumbering existing subsection (ix) as new subsection (x) and by inserting a
new subsection (ix) as follows:
"(ix) Simultaneously with the Closing, Seller and Buyer shall
enter into a sublease by Buyer to Seller of Units 630, 785, 899, 984,
1253, 1254, 1313, 1330, 1405, 1434 and the Other Leases, which sublease
shall be in form and substance reasonably satisfactory to Buyer and
Seller."
10. Section 10(d). Section 10(d) is hereby amended by adding the following
to the end of such sections:
"Notwithstanding the foregoing, Buyer will assign at closing its rights
and obligations (i) to USRP (Sybra), LLC relating to Units 132, 518,
630, 734, 785, 899, 984, 995 and 1405, (ii) to USRP (DeeDee), LLC
relating to Units 1172, 1253, 1254, 1313, 1330, 1434, 5516 and 6285,
and (iii) to U.S. Restaurant Properties Operating L.P. with respect to
all other Acquired Assets, all of the foregoing subject to execution of
such documentation, including without limitation, assumption
agreements, in form and substance reasonably satisfactory to Seller."
11. Except as amended, modified or supplemented by this Amendment, the
parties confirm and ratify the terms and provisions of the Purchase Agreement.
* * * * *
IN WITNESS WHEREOF, this Amendment is entered into by the duly
authorized representatives of the parties hereto as of the date first above
written.
SYBRA, INC., a Michigan corporation
By:
---------------------------------------
Title:
------------------------------------
<PAGE>
VALCOR, INC., a Delaware corporation
By:
---------------------------------------
Title:
------------------------------------
U.S.RESTAURANT PROPERTIES MASTER L.P.,
a Delaware limited partnership
By: U.S. Restaurant Properties, Inc.
By:
---------------------------------------
Title:
------------------------------------
<PAGE>
SCHEDULE 1
ACQUIRED ASSETS
For purposes of this Agreement, "Acquired Assets" means all of the Seller's
right, title and interest in and to the following:
(a) the Real Property owned or leased by the Seller and listed on the
attached Schedule 1.1 incorporated herein by this reference; provided,
however, units 731 and 6236 on Schedule 1.1 shall be deemed omitted and
shall not be part of the Acquired Assets.
(b) all improvements, fixtures, and fittings on the Real Property
listed on Schedule 1.1 which improvements, fixtures, and fittings are
permanently attached to the Real Property and the removal of which
would cause material damage to the Real Property. In no event will
improvements, fixtures, and fittings include (without limitation) any
of the following: seating, booths, awnings, refrigeration equipment not
involving roof penetration, signage or menus.
(c) the leases for the following units: ##630, 785, 899, 984, 1253,
1254, 1313, 1330, 1405, 1434 together with the leases on the following
units for which Seller has obtained all necessary consents to permit
Buyer to assign such leases to Buyer's Affiliate(s) on or before the
Closing Date: ##518, 995, 1172 and 5711 (the "Other Leases"). If any
consent relating to one or more of the Other Leases is not obtained
before the Closing Date, Seller shall use its best efforts to obtain
such consent after the Closing Date, and shall assign such Other
Lease(s) to Buyer's affiliate (for no additional consideration) upon
receipt of such consent. If any consent relating to one or more of the
Other Leases is not obtained within four (4) weeks after the Closing
Date, Seller shall cooperate with Buyer in substituting other leased
properties reasonably acceptable to Buyer for any of the Other Leases
for which consents were not obtained. The obligations contained in this
Schedule 1 shall survive the Closing Date, notwithstanding anything to
the contrary in the Agreement.
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SCHEDULE 3
AGREED VALUE
AGREEMENT
OF
PURCHASE AND SALE
AGREEMENT OF PURCHASE AND SALE ("Agreement") made as of the 4th day of
December, 1997, by and between Burger King Limited Partnership I, a New York
limited partnership ("Seller"), and U.S. Restaurant Properties Operating L.P.
("Buyer").
W I T N E S S E T H :
1. Definitions. For purposes of this Agreement, the
following terms have the meanings indicated in this Section 1.
1.1 "Assignment and Assumption of Lease" means
an Assignment and Assumption of Lease in the form attached hereto as Exhibit A,
with such modifications as may be required to conform to local recording laws.
1.2 "Assignment and Assumption of Sublease"
means an Assignment and Assumption of Sublease in the form attached hereto as
Exhibit B, with such modifications as may be required to conform to local
recording laws.
1.3 "Closing" means the accomplishment (or
waiver by the party in whose favor each such activity runs) of each and every
one of the activities described in Section 6 below.
1.4 "Closing Date" means the date on which the
Closing occurs, as set forth in Section 4 below.
1.5 "Contract Period" means the period
commencing upon the execution by both Buyer and Seller of this Agreement and
ending upon the first to occur of the Closing or the termination of this
Agreement.
1.6 "Deed" means a bargain and sale deed with
covenants against grantor's acts, special warranty deed or the equivalent form
of deed used in the jurisdictions where the Owned Properties are located.
1.7 "Deposit" means the sum of Three Hundred
Twenty Thousand Dollars ($320,000) delivered by Buyer and deposited with
the Escrow Agent, within three (3) business days after Buyer has received
a fully executed duplicate original of this Agreement, to be held in an
interest bearing account subject to the terms of this Agreement. The Deposit
shall include all interest earned thereon.
1.8 "Due Diligence Period" has the meaning
ascribed to such term in Section 2(b) below.
1.9 "Environmental Laws" means any federal,
state or local ordinance, statute, regulation or common law provision relating
to human health and/or the environment.
1.10 "Escrow Agent" means Lawyers Title
Insurance Corporation.
1.11 "Franchisee" means a holder of the right to
occupy a Property pursuant to a Sublease thereof.
1.12 "Improvements" means any and all buildings,
structures, parking lots, walks, and walkways and all fixtures and equipment
(including without limitation all plumbing, electrical, heating, air
conditioning and ventilating lines and systems and boilers) and each and
every other type of physical improvement located at, on or affixed to a
Property to the full extent such items
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constitute or are or can or may be construed as realty under the laws of the
applicable jurisdiction.
1.13 "Lease" means a sublease agreement between
Burger King Corporation, a Florida corporation, as sublessor, and Seller, as
sublessee, with respect to the Leased Properties and all amendments and
modifications thereof.
1.14 "Leased Properties" means, collectively,
those certain tracts or parcels of land in which Seller has a leasehold
interest under the Leases, and which comprise three (3) physical site
locations designated as Stores # 3641, 3588 and 3645 on Schedule 1 hereto,
together with Seller's interests in all Improvements located thereon.
1.15 "Letter of Credit" has the meaning ascribed
to such term in Section 6.1 hereof.
1.16 "Owned Properties" means, collectively,
those certain tracts or parcels of land which individually or together
with contiguous tracts so described, comprise the separate parcels of land
pertaining to the six (6) physical site locations designated as Stores
# 3486, 3504, 3442, 3466, 3626 and 3548 on Schedule 1 hereto, which tracts
or parcels of land are owned in fee by Seller, including without limitation
any land lying in the bed of any street, road or avenue, open or proposed,
in front of, within or adjoining or adjacent to such land and Seller's interest
in all Improvements located thereon.
1.17 "Permitted Exceptions" means such easements,
encumbrances (other than liens), restrictions, rights of way, if any, and
other matters of record provided they do not materially impair marketability
of title or which are not objected to by Buyer in the manner prescribed in
Section 7 hereto.
1.18 "Properties" means, collectively, the Owned
Properties and the Leased Properties which are designated herein and on
Schedule 1 hereto.
1.19 "Purchase Price" means the sum of Six
Million Four Hundred Thousand Dollars ($6,400,000).
1.20 "Sublease" means, as to the Leased
Properties those sub-subleases between Seller, as sub-sublessor, and a
Franchisee, as sub-sublessee, and, as to the
Owned Properties, those leases between Seller, as lessor, and a Franchisee, as
lessee, and all amendments and modifications thereof.
1.21 "Title Insurer" means Lawyers Title
Insurance Corporation.
1.22 "Title Policy" means, as to each Property,
a standard form owner's policy of title insurance, dated the Closing Date,
insuring Buyer as owner of good and marketable fee
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title to the Owned Properties and the holder of a subleasehold interest in the
Leased Properties subject only to the Permitted Exceptions.
1.23 "Title Report" means a certificate of title,
title commitment or title report issued by the Title Insurer to Buyer, which
shall disclose Seller as owner of fee simple interest in the Owned
Properties and the holder of a subleasehold interest in the Leased Properties
and shall disclose, and shall have attached to it, copies of all documents of
record underlying all exceptions to title and all encumbrances on and other
matters of record affecting the Properties.
2. Purchase and Sale. (a) Subject to and in accordance with
all terms and conditions and based upon all representations and warranties set
forth in this Agreement, on the Closing Date, Seller shall convey, transfer,
assign, sell and deliver to Buyer, and Buyer shall acquire, accept and purchase
the Properties.
(b) From the date hereof until 5:00 p.m. Eastern Standard Time
on December 9, 1997 (the "Due Diligence Period") Buyer shall have the right to
satisfy itself, in its sole discretion, as to all matters with respect to the
Properties. If, on or before the expiration of the Due Diligence Period, Buyer
gives notice to Seller and Escrow Agent (the "Cancellation Notice") that it does
not desire to purchase the Properties, the Deposit shall be returned to Buyer,
and neither party shall have any further liability or obligation under this
Agreement. If Buyer does not give the Cancellation Notice to Seller within the
Due Diligence Period, then Buyer shall no longer have the right to terminate
this Agreement pursuant to this Section 2(b).
(c) In the event Buyer terminates that certain Agreement of
Purchase and Sale (the "BKLP III Purchase and Sale Agreement") between Burger
King Limited Partnership III and Buyer pursuant to Section 2(b) thereof, Seller
shall have the right to terminate this Agreement upon delivery of written notice
to Buyer within five (5) days of the date on which Buyer has terminated the BKLP
III Purchase and Sale Agreement. Upon such termination the Deposit shall be
returned to Buyer, and neither party shall have any further liability or
obligation under this Agreement.
3. Purchase Price; Payment Thereof. The Purchase Price is
subject to prorations and adjustments as described in Section 9, further subject
to adjustment in the case of a removal of a Property as provided in Sections 7
and 13. The Purchase Price is payable by Buyer to Seller at the Closing by wire
or other mutually agreeable transfer of immediately available funds.
4. Closing Date. The Closing Date shall be on a date selected
by Buyer upon three (3) days written notice to Seller but not later than the
later of (i) five (5) days following the last day of the Due Diligence Period or
(ii) the first business day following the date that the contingency set forth in
Section 6.3 is removed. The Closing shall take place by mail in escrow at 11:00
a.m. on the Closing Date at the offices of the Title Insurer.
5. Escrow Agent. The Deposit shall be deposited by Escrow
Agent in an interest bearing escrow account and the proceeds held and disbursed
in accordance with the terms of this Agreement. Unless the Deposit is returned
to Buyer pursuant to Section 2(b), upon Closing, Escrow Agent shall deliver the
Deposit to Seller and the Deposit shall be credited against the Purchase Price.
In all other cases, if either party makes a demand upon Escrow Agent for
delivery of the Deposit, Escrow Agent shall give written notice to the other
party of such demand. If a notice of objection to the proposed payment is not
received from the other party within seven (7) business days after the giving of
notice by Escrow Agent, time being of the essence, Escrow Agent is hereby
authorized to deliver the Deposit to the party who made the demand. If Escrow
Agent receives a notice of objection within said period or if for any other
reason Escrow Agent in good faith elects not to deliver the Deposit, then Escrow
Agent shall continue to hold the Deposit and thereafter pay it to the party
entitled when Escrow Agent receives (a) a notice from the objecting party
withdrawing the objection, or (b) a notice signed by both parties directing
disposition of the Deposit or (c) a judgment or order of a court of competent
jurisdiction directing disposition of the Deposit. Buyer and Seller hereby
jointly and severally agree that Escrow Agent shall incur no liability
whatsoever in connection with its good faith performance under this Agreement,
and Buyer and Seller hereby jointly and severally release and waive any claims
they may have against Escrow Agent which may result from its performance in good
faith of its functions under this
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Agreement. Escrow Agent shall be liable only for loss or damage caused directly
by its acts of negligence while performing under this Agreement. Buyer and
Seller further agree to indemnify against, hold harmless, release and waive any
claims they may have against Escrow Agent as a result of a reasonable delay in
any wire transfer made pursuant to this Agreement, and/or any errors in wiring
instructions given to Escrow Agent. The signing of this Agreement by Escrow
Agent is only to evidence Escrow Agent's acceptance of the terms and conditions
of this paragraph.
6. Conditions Precedent.
6.1 The obligation of Seller to sell the
Properties on the Closing Date shall be subject to the satisfaction, of the
following conditions (any of which may be waived by Seller): (a) the
representations and warranties of Buyer set forth in Section 11 were true and
correct in all material respects when made and are true and correct in all
material respects on the Closing Date, (b) Buyer delivers to Seller each of
the items required to be delivered by Buyer and takes all of the actions
required to be taken by Buyer under Section 8 prior to or on the Closing Date,
(c) Buyer shall have performed, observed and complied with all covenants,
agreements and conditions required by this Agreement to be performed,
observed and complied with on its part prior to or as of the Closing Date
and shall not otherwise be in default under this Agreement, (d) the provisions
of Section 6.3 shall have been satisfied, (e) Buyer and Burger King
Corporation shall execute and deliver a Lease Support Agreement (the
"Lease Support Agreement") substantially in the form attached hereto as
Exhibit G and Buyer at its sole cost and expense shall deliver an irrevocable
letter of credit (the "Letter of Credit") to Burger King Corporation on the
Closing Date as required under the Lease Support Agreement; provided,
however, that in the event Burger King Corporation waives such requirement
based upon Buyer's delivery of a letter of credit in connection with the BKLP
III Purchase and Sale Agreement in a form which is acceptable to Burger King
Corporation, then Buyer will not be required to deliver the Letter of Credit;
and (f) no default by Buyer under the BKLP III Purchase and Sale Agreement
shall have occurred and be continuing.
6.2 The obligation of Buyer to purchase the
Properties on the Closing Date shall be subject to the satisfaction of the
following conditions (any of which may be waived by Buyer): (a) the
representations and warranties of Seller set forth in Section 10 were true and
correct in all material respects when made and are true and correct in all
material respects on the Closing Date, (b) Seller delivers to Buyer each of the
items required to be delivered by Seller and takes all of the actions
required to be taken by Seller under Section 8 prior to or on the Closing
Date, and (c) Seller shall have performed, observed and complied with all
covenants, agreements and conditions required by this Agreement to be
performed, observed and complied with on its part prior to or as of the Closing
Date.
6.3 The parties' respective obligations
hereunder are further subject to the right of Seller's limited partners pursuant
to Seller's agreement of limited partnership to vote to disapprove the sale
of the Properties. In connection therewith, Seller has determined to convene a
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meeting of its limited partners for the purpose of considering the disapproval
of the sale of the Properties, has completed the preparation of a preliminary
proxy statement concerning the transactions contemplated herein, has filed such
preliminary proxy statement with the Securities and Exchange Commission ("SEC")
and has mailed such proxy statement to its limited partners. Seller shall
convene a meeting of limited partners on the date and for the purposes specified
in such proxy statement. If a majority of Sellers' limited partners do not vote
to disapprove of the sale of the Properties, the parties will proceed to
Closing, assuming all other conditions are satisfied or waived. If a majority of
Seller's limited partners vote to disapprove of the proposed sale, Seller shall
have the right to terminate this Agreement by written notice to Buyer, the
Deposit shall be returned to Buyer and thereafter neither party shall have any
obligation to the other under this Agreement. If for any reason the meeting of
Seller's limited partners is delayed, postponed or adjourned to a date
subsequent to six months following the mutual execution of this Agreement, then
Buyer, in its sole discretion, may terminate this Agreement by written notice to
the Seller, the Deposit shall be returned to Buyer and thereafter neither party
shall have any obligation to the other under this Agreement.
7. Title Exceptions. Buyer acknowledges that Seller has
delivered a Title Report from the Title Insurer for each of the Properties
together with a survey of each of the Properties to Buyer. Buyer shall have
until the last day of the Due Diligence Period to object to any exception to
title appearing in the Title Report or survey which materially impairs
marketability of title by delivering written notice to the Seller (for each
Property an "Objection" and collectively "Objections"). If Buyer fails to object
as prescribed in this section then the Buyer acknowledges and agrees that such
exception shall be a Permitted Exception and Buyer shall be obligated to proceed
with the Closing and take title to the Properties subject to such exceptions to
title without a reduction of the Purchase Price.
(a) Upon receipt of such Objection, Seller shall have
the right, but not the obligation, to seek to eliminate, cure or
correct such exceptions to title. If such exceptions to title in
Seller's sole and exclusive judgment can be cured or corrected and if
Seller notifies Buyer not later than 5:00 p.m. (New York time) within
ten (10) days after receipt of all Objections to the Property(ies) to
seek to cure or correct same, then (x) Seller shall have the right to
adjourn the Closing for such Property(ies) for such period, not to
exceed ninety (90) days as shall, in Seller's discretion reasonably
exercised, be required in order to cure such exceptions to title and
Buyer shall be obligated to purchase on the Closing Date all Properties
not objected to as provided above and the Purchase Price shall be
reduced by the consideration attributable to the affected Property(ies)
as shown on Schedule 1; (y) Seller shall give Buyer written notice upon
the correction of an Objection for each Property and Buyer shall
purchase such Property, according to the terms hereof, on a mutually
agreeable closing date within ten (10) days of such notice; and (z) if
such exceptions to title can only be satisfied by the payment of money,
Seller shall be entitled to apply a portion of the Purchase Price
payable on such Closing Date for such Property(ies) in order to cure or
correct same. If Seller, having elected to attempt to cure such
exceptions to title, fails so to do within such ninety (90) day period,
Buyer shall have no further obligation to purchase and Seller shall
have no further obligation to sell the Properties subject to such
uncured exceptions to title unless Buyer forthwith elects to purchase
such Properties subject to the unrectified matters with no reduction in
the Purchase Price. If Seller fails to notify Buyer of its election to
seek to cure such exceptions to title, Seller shall be deemed to have
elected NOT to seek to cure same.
(b) If Seller elects not to cure all the Objections
to title on any Property encumbered by same, Buyer may, at its
election, (x) proceed with the Closing and take title to
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all of the Properties subject to such exceptions to title without a reduction
of the Purchase Price, or (y) terminate this Agreement by written notice to
Seller, in which case the Deposit shall be returned to Buyer and thereafter
neither party shall have any obligation to the other under this Agreement,
provided, however, that Buyer shall provide such written notice of termination
to Seller no later than the close of business ten (10) days after receipt of
Seller's notice electing not to cure title exceptions (the "Title Notice Day").
If Buyer fails to provide such notice by 5:00 p.m. (New York time) on the Title
Notice Day, Buyer shall be obligated to purchase all the Properties as provided
herein, subject to the Permitted Exceptions as well as the title exceptions that
Seller elected not to cure.
To be effective, each notice delivered by Buyer to Seller hereunder must be sent
by facsimile transmission to the FAX numbers set forth in Section 17 with an
original hard copy thereof sent in accordance with the requirements of Section
17. Any dispute as to whether or not a notice regarding removal of a Property
from the Agreement has been given in a timely manner shall be resolved by
reference to the date and time stamped on the first page of the facsimile copy
of such notice by the facsimile unit receiving same.
8. Closing Deliveries. At the Closing, the following actions
shall be taken, all of which will be deemed taken simultaneously and no one of
which will be deemed completed until all have been completed:
(a) The Purchase Price shall be paid to Seller in
accordance with Section 3.
(b) The Deeds for each Owned Property shall be
executed and delivered to Buyer.
(c) Buyer and Seller shall execute and deliver an
Assignment and Assumption of Lease for each Leased Property.
(d) Buyer and Seller shall execute and deliver an
Assignment and Assumption of Sublease for each Sublease encumbering the
Properties.
(e) An affidavit of the Seller under FIRPTA shall be
delivered to Buyer.
(f) Seller shall deliver to Buyer the original
counterparts or true copies of the Leases assigned by Seller to Buyer
and assumed by Buyer pursuant to the Assignment and Assumption of
Leases delivered under clause (c) above (or copies thereof certified to
be true and correct by Seller) and the original counterparts or true
copies of the Subleases assigned by Seller to Buyer and assumed by
Buyer pursuant to the Assignment and Assumption of Subleases delivered
under clause (d) above (or copies thereof certified to be true and
correct by Seller).
(g) Seller shall use commercially reasonable efforts
to deliver to Buyer estoppel certificates from the Franchisees, in the
form attached hereto as Exhibit C on or before the last day of the Due
Diligence Period, and if Seller, after using reasonable efforts, is
unable to obtain such estoppel certificates from the Franchisees by the
Closing Date, the balance of the estoppel certificates, if any, may be
delivered by Seller, in the form attached hereto as Exhibit D
("Seller's Franchisee Estoppel Certificate").
(h) Seller shall use commercially reasonable efforts
to deliver to Buyer estoppel certificates from Burger King, in the form
attached hereto as Exhibit E on or before the last day of the Due
Diligence Period, and if Seller after using reasonable efforts, is
unable to obtain such estoppel certificates from Burger King by the
Closing Date, the balance of the estoppel certificates, if any, may be
delivered by Seller, in the form attached as Exhibit F (the "Seller's
Burger King Estoppel Certificate").
(i) Seller shall deliver the originals (if any, and
to the extent in Seller's possession) of all agreements, plans,
drawings, surveys, technical descriptions, warranties and licenses or
permits affecting the Properties.
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(j) Any and all documents, affidavits and agreements
reasonably required by the Title Insurer to enable it to issue the
Title Policies shall be delivered by Buyer and Seller, respectively.
(k) Buyer and Burger King Corporation shall execute
and deliver the Lease Support Agreement and Buyer shall deliver the
Letter of Credit to Burger King Corporation, unless Burger King
Corporation has waived such requirement in accordance with Section 6.1
above.
If additional estoppel certificates are received by Seller from Burger King or
any Franchisee after the last day of the Due Diligence Period and up to sixty
(60) days after the Closing, such estoppel certificates shall be deemed to
replace the Seller's Franchisee Estoppel Certificate or the Seller's Burger King
Estoppel Certificate, as applicable, with respect to the Sublease or Lease for
which an estoppel has been received. Buyer agrees to cooperate and assist
Seller, at no expense to Buyer, in obtaining such estoppel certificates
subsequent to the last day of the Due Diligence Period.
9. Adjustments and Prorations; Closing Expenses.
9.1 Adjustments and Prorations. The basic or
fixed rents and charges payable under the Subleases and rents and charges
actually received by Seller for the month in which the Closing occurs, which
rents and charges may include but are not limited to basic or fixed rents,
shall be apportioned between Buyer and Seller as of 11:59 p.m. of the day next
preceding the Closing Date (it being understood and agreed that Buyer and
Seller shall endeavor to compute all closing adjustments at least five
(5) business days prior to the Closing Date).
The percentage rents shall be pro-rated as of the Closing Date
in the following manner: the total amount of percentage rent payable for the
fiscal year in which the Closing occurs ("Fiscal Year 1997") for each Property
shall be computed for each Property based on an estimate of the sales for the
entire Fiscal Year 1997 which shall be determined by the prior year sales
multiplied by the percentage of increase or decrease in sales for the period
commencing with the beginning of Fiscal Year 1997 through and including the last
day of the month prior to the Closing Date over the comparable period for 1996.
The resulting percentage rental obligation for Fiscal Year 1997 shall then be
apportioned equally to each day during Fiscal Year 1997, with the amount
accruing prior to the Closing Date being referred to as the "Pre-Closing
Portion". Seller shall be credited with 1997 percentage rents in the amount of
the excess, if any, of (i) the Pre-Closing Portion reduced by (ii) percentage
rent payments actually received by Seller for Fiscal Year 1997 prior to the
Closing Date. If clause (ii) above exceeds (i) above, Seller shall be debited
with such excess on the Closing Date.
Seller represents and warrants that the respective Franchisees
of the Properties have the obligation for paying all real estate taxes and
assessments and all charges for utility services.
9.2 Closing Expenses. The premium for the Title
Policies, all costs for the Title Report, all escrow charges, all transfer
charges and taxes, and all fees and other costs for recording the Deeds and
other conveyancing documents shall be paid by Buyer. Seller shall pay fees
for the surveys prepared by International Land Services Inc. and any expenses
incurred in connection with Seller complying with Section 6.3. All other
expenses of Closing shall be paid by Buyer, other than Seller's legal
expenses.
10. Representations and Warranties of Seller. Seller hereby
represents and warrants to Buyer as follows, it being expressly understood and
agreed that all such representations and warranties are to be true and correct
at the date of this Agreement, except as otherwise provided, and as of the
Closing, but such representations and warranties shall not survive the Closing:
(a) Seller has the full right, power and authority to
enter into this Agreement and at the date hereof but not as of the
Closing subject to the right of its limited partners as discussed in
Section 6.3, to cause the sales, transfers and assignments contemplated
herein; and each of the persons signing this Agreement on behalf of
Seller is authorized to do so;
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(b) To the actual knowledge of Seller, (i) the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereunder on the part of the Seller does not
violate any applicable law, ordinance, statute, rule, regulation,
order, decree or judgment to which Seller may be subject, and (ii) no
action by any federal, state or municipal or other governmental
department, commission, board, bureau or instrumentality is necessary
to make this Agreement a valid instrument binding upon Seller in
accordance with its terms; and
(c) To the actual knowledge of Seller, there are no
pending or contemplated condemnation, eminent domain or similar
proceedings with respect to all or any portion of the Properties,
except as provided in Section 13.
(d) Except for the information contained in the
documents listed in Schedule 2 attached hereto, Seller has no actual
knowledge as to the environmental conditions of the Properties.
(e) Seller has no contracts of any kind, such as for
waste disposal, termite protection, cleaning services, management
services or paper supplies which will survive the Closing.
(f) Seller has delivered to Buyer the monthly sales
reports for the months January through October 1997 or true copies
thereof which were delivered to Buyer from Burger King Corporation.
Seller expressly does not represent or warrant the accuracy or
completeness of the information contained in such sales reports.
(g) From and after the date hereof until the Closing
or earlier termination of this Agreement, Seller shall not sell, assign
or create any right, title or interest whatsoever in or to any Property
or create any liens, encumbrance or charge thereon without promptly
discharging same.
(h) From and after the date hereof until the Closing
or earlier termination of this Agreement, Seller shall conduct its
activities as landlord of the Properties reasonably consistent with its
past practices.
If Buyer discovers prior to Closing, that any representation
or warranty made in this Agreement, in Seller's Franchisee Estoppel
Certificate(s), if any, or in Seller's Burger King Estoppel Certificate(s), if
any, is untrue in any material respect, then Buyer shall have the right, as its
sole and exclusive remedy, either to (i) terminate this Agreement by notice
given to Seller prior to the Closing Date, receive a return of the Deposit and
thereafter neither party shall have any obligation to the other under this
Agreement, or (ii) elect to purchase the Properties subject to such untrue
representation or warranty without any reduction in the Purchase Price.
11. Representations and Warranties of Buyer. Buyer hereby
represents and warrants to Seller as follows, such representations and
warranties to be true and correct at the date of this Agreement and as of the
Closing, but such representations and warranties shall not survive the Closing:
(a) Buyer is a limited partnership duly
organized and in good standing under the laws of the State of Delaware;
(b) Buyer has the full right, power and authority to
enter into and fully perform its obligations under this Agreement, and
each of the persons signing this Agreement on behalf of Buyer is
authorized to do so; and
(c) To the actual knowledge of Buyer, (i) the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereunder on the part of Buyer does not
violate any applicable law, ordinance, statute, rule, regulation,
order, decree or judgment to which Buyer may be subject, and (ii) no
action by any federal, state or municipal or other governmental
department, commission, board, bureau or instrumentality is necessary
to make this Agreement a valid instrument binding upon Buyer in
accordance with its terms.
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If Seller discovers prior to Closing, that any representation
or warranty made in this Agreement is untrue in any material respect, then
Seller shall have the right to terminate this Agreement by notice given to Buyer
prior to the Closing Date.
12. Damage or Destruction. In the event that a casualty or
other loss occurs to any Property prior to the Closing Date which (i) renders
such Property inoperable as a restaurant for a period reasonably estimated by
Seller to exceed four (4) months, or (ii) with respect to which there is
insufficient insurance coverage and/or tenant contributions to restore such
Property to its condition prior to such casualty, Buyer may, in its sole
discretion (a) elect to purchase all of the Properties without reduction of the
Purchase Price; or (b) terminate this Agreement by written notice to Seller and
receive a return of the Deposit.
13. Eminent Domain. In the event of any threatened, commenced
or consummated proceedings in eminent domain respecting a Property or
substantially all of a Property, Buyer may, at its option, by notice to Seller
given ten (10) days after Buyer is notified of such actual or possible
proceedings, elect to remove the affected Property from this Agreement and the
Purchase Price shall be reduced by the consideration attributable to the
affected Property as shown on Schedule 1, or if Buyer fails to elect or if such
eminent domain proceedings are for less than substantially all of a Property,
then Buyer shall be obligated to purchase the Property as provided herein and
Seller shall, at the Closing, assign to Buyer its entire right, title and
interest in and to any condemnation award.
14. Environmental Inquiries.
Buyer acknowledges that Seller, at Seller's expense, has
caused Environmental Consulting & Technology, Inc. ("ECT") to conduct
Transaction Screen Assessments consistent with ASTM Standard E 1528-93 (each, a
"Transaction Screen") of the Properties, and that Seller herewith has furnished
to Buyer such information as more particularly described on Schedule 2 hereto.
15. Property "As Is". Seller does not warrant, either
expressly or impliedly, the condition or fitness of the Properties, including
without limitation the environmental fitness and condition of the Properties.
Buyer acknowledges that it has made such inspections and investigations of the
Properties as it has deemed necessary including, without limitation, the
physical and environmental features of the Properties and that Buyer will
acquire the Properties "AS IS, WHERE IS" in their current state, including
without limitation their current physical and environmental condition, subject
to normal wear and tear between the effective date of this Agreement and the
Closing. It is expressly understood and agreed that the willingness of Buyer to
purchase the Properties on an "AS IS, WHERE IS" basis in accordance herewith is
a material inducement to Seller's agreement to sell the Properties to Buyer.
Buyer hereby waives any and all claims which it may now or hereafter have
against Seller arising out of or in connection with Environmental Laws,
including without limitation any such claims under the federal Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section
9601-9659 ("CERCLA"), and any claims under state common law, relating to the
emission, discharge or release of any hazardous substance, as that term is
defined under CERCLA at 42 U.S.C. Section 9601(14), or petroleum product or
other pollutant or contaminant.
16. Brokerage. Each party represents and warrants to the other
that it has neither engaged nor employed any broker or finder in connection with
the transactions contemplated by this Agreement, except that Seller, at Seller's
expense, has retained Jones Lang Wootton USA, Inc. and each party hereby
indemnifies and agrees to hold the other harmless from and against any loss,
cost, damage or expense (including reasonable attorneys' fees) by reason of the
incorrectness of such representation and warranty. This provision shall survive
the Closing.
17. Notices. All notices, demands, requests, consents,
approvals or other communications ("Notices") required or permitted to be given
hereunder or which are given with respect to this Agreement shall be in writing
and shall (except as herein expressly provided to the contrary) be delivered
personally or sent by either registered or certified mail, return receipt
requested, postage prepaid, by Federal Express or another nationally recognized
air courier service, or by telephonic facsimile transmission, addressed as
follows:
9
<PAGE>
TO SELLER:
Burger King Limited Partnership, I
3 World Financial Center, 29th Floor
New York, New York 10285
Attention: Kenneth F. Boyle
FAX: (212) 528-9696
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: C. Tanner Rose, Jr., Esq.
FAX: (212) 455-2502
TO BUYER:
U.S. Restaurant Properties Operating L.P.
5310 Harvest Hill Road
Suite 270
Dallas, Texas 75230
Attention: Fred Margolin
FAX: (972) 490-9119
With a copy to:
Middleberg, Riddle & Gianna
2323 Bryan Street, Suite 1600
Dallas, Texas 75201
Attention: Richard S. Wilensky, Esq.
FAX: (214) 220-0179
or such other address as such party shall have specified most recently by like
Notice. Notices mailed as provided herein shall be deemed given on the third
business day following the date so mailed, on the business day received from a
nationally recognized air courier service or on the business day received by
facsimile transmission.
18. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute but one and the same instrument.
19. Governing Law. This Agreement shall be governed by,
interpreted under, and construed and enforced in accordance with, the laws of
the State of New York.
20. Jurisdiction. The parties hereto irrevocably and
unconditionally submit themselves to the general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and the appellate courts thereof, in any legal
action or proceeding arising under this Agreement or in any way related hereto.
21. Entire Agreement. This Agreement is not to be recorded and
may not be changed, modified or terminated except by written instrument executed
by the parties hereto. This Agreement (including the Exhibits attached hereto)
contain the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior understandings, if any, with respect
thereto. This Agreement may not be modified, changed or supplemented, nor may
any obligations hereunder be waived, except by written instrument signed by the
party to be charged or by its agent duly authorized in writing or as otherwise
expressly permitted herein. The parties do not intend to confer any benefit
hereunder on any person, firm or corporation other than the parties hereto. This
provision shall survive the Closing.
10
<PAGE>
22. Attorneys' Fees. Should either party institute any action
or proceeding to enforce this Agreement or any provision hereof, or for damages
by reason of any alleged default under or breach of this Agreement or of any
provision hereof, or for a declaration of rights hereunder, the prevailing party
in any such action or proceeding shall be entitled to receive from the other
party all costs and expenses, including reasonable attorneys' fees, incurred by
the prevailing party in connection with such action or proceeding at trial and
any appellate levels.
23. Non-Waiver of Rights. No failure or delay of either party
in the exercise of any right given to such party hereunder shall constitute a
waiver thereof unless the time specified herein for exercise of such right has
expired, nor shall any single or partial exercise of any right preclude other or
further exercise thereof or of any other right. The waiver of any breach
hereunder shall not be deemed to be a waiver of any other or any subsequent
breach hereof.
24. Rules of Construction. This Agreement shall be construed
without regard to any presumption or other rule requiring construction against
the party causing this Agreement to be drafted.
25. Titles and Headings. Titles and headings of Sections of
this Agreement are for convenience of reference only and shall not affect the
construction of any provision of this Agreement.
26. Exhibits. Each of the Exhibits and Schedules referred to
herein and attached hereto is an integral part of this Agreement and are
incorporated herein by this reference.
27. Pronouns; Joint and Several Liability. All pronouns and
any variation thereof shall be deemed to refer to the masculine, feminine or
neuter, singular or plural, as the identity of the parties may require. If the
Buyer consists of two or more parties, the liability of such parties shall be
joint and several.
28. Further Assurances. Seller and Buyer each agree to do such
further acts and things and to execute and deliver such additional agreements
and instruments as the other may reasonably require to consummate, evidence or
confirm the sale or any other agreement contained herein in the manner
contemplated hereby.
29. No Assignment. Buyer shall have no right to assign this
Agreement or its rights hereunder, without the express written consent of
Seller. The transfer of a controlling interest in the shares of Buyer shall be
deemed an assignment for purposes of this Agreement; provided, however, that
Buyer shall be permitted to assign its rights to purchase one or more Properties
to a wholly-owned subsidiary of Buyer provided Buyer (i) indemnifies Seller,
Lehman Brothers, Inc. and any of their affiliates, subsidiaries, directors,
officers, shareholders or partners from any and all costs and/or liabilities
incurred in connection with any claims, settlements, fines, investigations,
remediation activities or other charges relating to any environmental conditions
now or hereafter existing on such Property in a form satisfactory to Seller, and
(ii) notifies Seller of the name of the assignee on or before the last day of
the Due Diligence Period.
30. Damages. In the event this Agreement is terminated due to
either party's default in the performance of its obligations hereunder or due to
Buyer's default under the BKLP III Purchase and Sale Agreement, then if Seller
is the defaulting party Buyer shall be entitled to pursue any and all remedies
available at law or in equity, including but not limited to specific performance
or to terminate this Agreement and receive a refund of the Deposit. In the event
Buyer is the defaulting party, then the parties have agreed that the Deposit
shall be retained by Seller as agreed upon liquidated damages it being
acknowledged that Seller's damages from Buyer's default might be impossible to
ascertain and that the Deposit constitutes a fair and reasonable amount for
Seller's damages and is not a penalty. Thereafter neither party shall have any
responsibility or obligation to the other under or pursuant to this Agreement.
Initial:
----------- -------------
Seller Buyer
11
<PAGE>
31. TIME OF ESSENCE. TIME IS OF THE ESSENCE OF EACH AND EVERY
TERM, CONDITION AND PARTICULAR OF THIS AGREEMENT.
12
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as of the day and year first above written.
SELLER: BUYER:
BURGER KING LIMITED PARTNERSHIP I, U.S. RESTAURANT PROPERTIES OPERATING L.P.
a New York limited partnership
By: BK I REALTY INC. By: USRP MANAGING, INC.
By:
------------------------------------
General Partner Name:
Title:
By:
-------------------------------
Name: Kenneth Boyle
Title: President
ESCROW AGENT:
LAWYERS TITLE INSURANCE CORPORATION
By:
------------------------------
Name:
Title:
13
<PAGE>
BURGER KING LIMITED PARTNERSHIP I
SCHEDULE 1
STORE LOCATION SALES PRICE
----- -------- -----------
3486 Decatur, AL $1,100,000
3504 Springdale, AR 600,000
3641 Atlanta, GA 750,000
3588 Springfield, MA 400,000
3442 Statesville, NC 1,000,000
3466 Fairfield, OH 650,000
3645 Klamath Falls, OR 750,000
3548 Greenville, SC 750,000
3626 Greenfield, WI 400,000
-----------
$6,400,000
<PAGE>
SCHEDULE 2(_)
1. Updated Transaction Screen Reports for Burger King Limited Partnership
I Sites prepared by Environmental Consulting & Technology, Inc. dated
October, 1997.
2. Memorandum dated September 27, 1994 prepared by Barry M. Hartman and
Linda L. Raclin of Kirkpatrick & Lockhart regarding Environmental
Testing on the Springdale, Arkansas and Greenfield, Wisconsin
Properties.
3. Transaction Screen Reports for Burger King Limited Partnership I Sites
prepared by Environmental Consulting & Technology, Inc. dated April,
1994.
4. Correspondence with Eder Associates regarding the Burger King
Restaurant located in Greenfield, Wisconsin dated November 27, 1996,
November 14, 1996, October 8, 1996, May 26, 1995, December 19, 1994 and
November 29, 1994.
5. Correspondence with State of Wisconsin/Department of Natural Resources
regarding the Burger King Restaurant located in Greenfield, Wisconsin
dated December 17, 1996 and December 16, 1994.
<PAGE>
A-2
EXHIBIT A
ASSIGNMENT AND ASSUMPTION OF LEASE
FOR AND IN CONSIDERATION of the sum of Ten Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the undersigned, Burger King Limited Partnership I, a New
York limited partnership ("Assignor"), does hereby sell, assign, convey,
transfer, set over and deliver to [ ], a [ ] ("Assignee"), the entire interest
of Assignor, as lessee, in and to the lease of real property more particularly
described in Exhibit A attached hereto and incorporated by reference herein,
between Burger King Corporation, as lessor, and Burger King Limited Partnership
I, as tenant, dated ___________ __, 19__, a Memorandum of which was filed on
___________ __, 19__ and recorded at Book _____, Page _____ in the _________
County Registry of Deeds (the "Lease").
Assignee hereby assumes and agrees to perform all the terms,
covenants and conditions of the Lease required to be performed by the lessee
thereunder from and after the date hereof. Assignee hereby indemnifies and holds
Assignor harmless from and against any and all loss, cost, damage, expense
(including reasonable attorney's fees), liability, claims or causes of action
existing in favor of or asserted by the lessor under the Lease arising out of or
relating to Assignee's failure to perform any of its obligations as lessee under
the Lease on or after the date hereof.
Assignor hereby indemnifies and holds Assignee harmless from
and against any and all loss, cost, damage, expense (including reasonable
attorney's fees), liability, claims or causes of action existing in favor of or
asserted by the lessor under the Lease arising out of or relating to Assignor's
failure to perform any of its obligations as lessee under the Lease prior to the
date hereof.
This Assignment shall be binding upon and shall inure to the
benefit of Assignor and Assignee and their respective successors and assigns.
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed this
Assignment and Assumption of Lease this _________ day of ____ 1997.
ASSIGNOR:
Burger King Limited Partnership I,
a New York limited partnership
By: BK I Realty Inc.,
a New York corporation, general partner
By:
-----------------------------------
Name:
Title:
ASSIGNEE:
[ ]
By: [ ]
By:
------------------------------------
Name:
Title:
<PAGE>
B-2
EXHIBIT B
ASSIGNMENT AND ASSUMPTION OF SUBLEASE
FOR AND IN CONSIDERATION of the sum of Ten Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the undersigned, Burger King Limited Partnership I, a New
York limited partnership ("Assignor"), does hereby sell, assign, convey,
transfer, set over and deliver to U.S. Restaurant Properties Operationg L.P., a
[ ] ("Assignee"), the entire interest of Assignor in and to the sublease of real
property more particularly described in Exhibit A attached hereto and
incorporated by reference herein, between Burger King Limited Partnership I, as
lessor, and lessee, as lessee, dated lease_date, a Memorandum of which was filed
on file_date, and recorded at Book, page, in the county County Registry of Deeds
(the "Sublease").
Assignee hereby assumes and agrees to perform all the terms,
covenants and conditions of the Sublease required to be performed by the lessor
thereunder from and after the date hereof, including, without limitation, the
obligation to repay in accordance with the terms of the Sublease to the lessee
thereunder any and all security deposits and prepaid rental deposits to the
extent, but only to the extent of the amount of cash delivered by Assignor to
Assignee with respect to such security deposits and prepaid rental deposits and
only to the extent that any such amount shall hereafter become refundable to the
lessee under the Sublease.
Assignee hereby indemnifies and holds Assignor harmless from
and against any and all loss, cost, damage, expense (including reasonable
attorney's fees), liability, claims or causes of action existing in favor of or
asserted by the lessee under the Sublease arising out of or relating to
Assignee's failure to perform any of its obligations as lessor under the
Sublease on or after the date hereof. Assignor hereby indemnifies and holds
Assignee harmless from and against any and all loss, cost, damage, expense
(including reasonable attorney's fees), liability, claims or causes of action
existing in favor of or asserted by the lessee under the Sublease arising out of
or relating to Assignor's failure to perform any of its obligations as lessor
under the Sublease prior to the date hereof.
This Assignment shall be binding upon and shall inure to the
benefit of Assignor and Assignee and their respective successors and assigns.
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed this
Assignment and Assumption of Sublease this _____ day of December 1997.
ASSIGNOR:
BURGER KING LIMITED PARTNERSHIP I,
a New York limited partnership
By: BK I Realty Inc.,
a New York corporation, general partner
By:
--------------------------------------
Name: Kenneth Boyle
Title: President
ASSIGNEE:
U.S. RESTAURANT PROPERTIES OPERATING L.P.
By:
-------------------------------------
Name:
Title:
<PAGE>
C-2
EXHIBIT C
[FRANCHISEE ESTOPPEL]
_______________, 1997
[ ]
Re: (a) Sublease or Lease dated ___________, between Burger King Limited
Partnership I ("Landlord") and
______________________________________________________________, as tenant
("Franchisee"), covering the real property commonly known as __________
_________________________ (the "Property"), as amended or modified by the
following: _________________________________________________________________
(the "Lease"). (b) Franchise Agreement dated ___________, between Burger King
Corporation ("Burger King"), as franchisor, and Franchisee with respect to the
operation of a "Burger King" restaurant at the Property, as amended or modified
by the following: _______________
_________________________________________________(the "Franchise Agreement").
Dear Ladies and Gentlemen:
The undersigned has been advised that you or another person or
entity are about to purchase the interest of Burger King Limited Partnership I
in the Property. In connection with such acquisition, the undersigned hereby
represents and certifies to you that:
A. Lease
1. The Lease constitutes the entire agreement between Landlord
and Franchisee pertaining to the Property, and the undersigned has not assigned,
sublet or otherwise transferred its interest in the Lease.
2. The commencement and termination dates of the current term
of the Lease are __________________________________ and
_______________________, respectively. Franchisee has the following options or
rights to renew the term: ____________________
- -------------------------------------------------------------------------------.
3. All rent payable by Franchisee under the Lease has been
paid through __________________, 1997.
4. The Lease is in full force and effect; there are no
outstanding notices of default or breach under the Lease served either by
Landlord or Franchisee, nor, to Franchisee's actual knowledge, has there been
any occurrence or omission which, with the giving of notice or passage of time
or both, would give rise to a default by either party under the Lease.
5. There have been no security or other deposits and there have
been no pre-payments of rent, nor will Franchisee pre-pay rent or other amounts
in connection with the Lease. No concessions, rebates, allowances, or other
concessions for free or reduced rent in the future have been granted, other than
as set forth in the Lease.
<PAGE>
6. Franchisee has not currently (i) made a general assignment
for the benefit of creditors; (ii) filed any voluntary petition in bankruptcy or
suffered the filing of an involuntary petition by its creditors; (iii) suffered
the appointment of a receiver to take possession all or substantially all of its
assets; (iv) suffered the attachment or other judicial seizure of all or
substantially all of its assets; (v) admitted in writing its inability to pay
its debts as they come due; or (iv) made an offer of settlement, extension or
composition of its creditors generally.
B. Franchise Agreement
1. The Franchise Agreement constitutes the entire agreement
between Burger King Corporation and Franchisee pertaining to the operation of a
"Burger King" restaurant at the Property.
2. The term of the Franchise Agreement is 20 years.
3. The Franchise Agreement is in full force and effect; there
are no
outstanding notices of default or breach under the Franchise Agreement served
either by Burger King Corporation or Franchisee, nor, to Franchisee's actual
knowledge, has there been any occurrence or omission which, with the giving of
notice or passage of time or both, would give rise to a default by either party
under the Franchise Agreement.
<PAGE>
Franchisee hereby acknowledges and agrees that you and any such
other purchasing person or entity shall be entitled to rely upon the foregoing
provisions of this letter in consummating the above-referenced transaction.
Very truly yours,
If Franchisee is a corporation, insert ----------------------------------
corporation's name and sign here
By:
-------------------------------
Name:
Title:
If Franchisee is an individual, sign ----------------------------------
here: Name:
<PAGE>
D-1
EXHIBIT D
[BKLP I ESTOPPEL]
_________________, 1997
[ ]
Re: (a) Sublease dated __________ between Burger King Corporation ("Burger
King") and Burger King Limited Partnership I ("BKLP-I"), covering the real
property commonly known as ____________________________________________________
(the "Property"), as amended or modified by the following:
____________________________________________________
_______________________________________ (the "Sublease"); and (b) Lease dated
__________ between BKLP-I, as landlord, and _______________________
________________, as subtenant ("Franchisee"), as amended or modified by the
following: ______________________________________________________ (the
"Operating Lease").
Dear Ladies and Gentlemen:
In connection with your purchase of BKLP-I's interest in the
Property, the undersigned hereby represents and certifies to you and to any
other purchasing person or entity that:
A. Sublease
1. The Sublease constitutes the entire agreement between
Burger King and BKLP-I pertaining to the demising of the Property, and BKLP-I
has not assigned or transferred its interest in the Sublease.
2. The commencement and termination dates of the current term
of the Sublease are ___________________________ and ___________________________,
respectively. BKLP-I has the following options or rights to renew the term:
______________________
- -------------------------------------------------------------------------------.
3. All rent payable by BKLP-I under the Sublease has been paid
through _______________, 1997.
4. The Sublease is in full force and effect; there are no
outstanding notices of default or breach under the Sublease served either by
Burger King or BKLP-I thereunder, nor, to Burger King's actual knowledge, has
there been any occurrence or omission which, with the giving of notice or
passage of time or both, would give rise to a default by either party under the
Sublease.
5. There have been no security or other deposits and there
have been no pre-payments of rent, nor will Franchisee pre-pay rent or other
amounts in connection with the Lease. No concessions, rebates, allowances, or
other concessions for free or reduced rent in the future have been granted,
other than as set forth in the Lease.
B. Operating Lease
1. The Operating Lease constitutes the entire agreement
between BKLP-I and Franchisee pertaining to the Property, and BKLP-I has not
assigned or transferred its interest in the Operating Lease.
<PAGE>
2. The commencement and termination dates of the current term
of the Operating Lease are _________________________ and
__________________________ respectively. Franchisee has the following options or
rights to renew the term: _____________________________________
- -------------------------------------------------------------------------------.
3. All minimum rent and additional rent payable by Franchisee
under the Operating Lease has been paid through _______________, 1997. All
percentage rent payable by Franchisee has been paid through __________________,
199_.
4. The Operating Lease is in full force and effect; there are
no outstanding notices of default or breach under the Operating Lease served
either by BKLP-I or Franchisee, nor, to BKLP-I's actual knowledge, has there
been any occurrence or omission which, with the giving of notice or passage of
time or both, would give rise to a default by either party under the Operating
Lease.
5. There have been no security or other deposits and there
have been no pre-payments of rent, nor will Franchisee pre-pay rent or
other-amounts in connection with the Lease. No concessions, rebates, allowances,
or other concessions for free or reduced rent in the future have been granted,
other than as set forth in the Lease.
<PAGE>
The representations and certifications made hereunder shall
not survive the date upon which you or such other purchasing person or entity
purchase BKLP-I's interest in the Property. BKLP-I hereby acknowledges that you
and any such other purchasing person or entity shall be entitled to rely upon
the foregoing provisions of this letter in consummating the above-referenced
transaction.
Very truly yours,
BURGER KING LIMITED PARTNERSHIP I,
By: BK I Realty Inc., general partner
By:
-----------------------------------
Name:
Title:
<PAGE>
E-1
EXHIBIT E
ESTOPPEL CERTIFICATE
PURCHASE AND SALE
This Certificate is made as of December ___, 1997 by BURGER KING
CORPORATION ("Lessor").
1. The Leases. The term "Leases," as used herein, shall mean those
certain subleases, together with any amendments thereto, concerning the
properties as more particularly described in Exhibit A attached hereto and by
this reference incorporated herein, between Lessor and Burger King Limited
Partnership I (the "Tenant").
2. The Properties. The term "Properties," as used herein, shall mean those
certain real properties as legally described in the Leases.
3. The Sale. The term "Buyer," as used herein, shall mean U.S.
Restaurant Properties Operating, L.P., its successors and assigns. Buyer
proposes to purchase Tenant's interest in the Leases from Tenant.
4. Purpose. In connection with the above-mentioned transactions, Buyer
has requested certain assurances and representations from Lessor, and Tenant has
agreed to provide for an estoppel certificate from Lessor concerning the Leases.
In consideration of the terms and provisions hereinafter contained and
other good and valuable consideration received, the receipt and sufficiency of
which are hereby acknowledged, Lessor certifies and agrees as follows:
(_) Lessor is the sublessor and Tenant is the subtenant under
the Leases.
(_) The terms of the Leases commenced and rent commenced to
accrue under the Leases on the dates described on Exhibit B. Tenant has the
options or rights to renew the terms of the Leases as described in Exhibit B.
(_) The Leases are in full force and effect, and Lessor has no
knowledge of (i) any present defaults of either party under the Leases; nor (ii)
any present condition or state of facts which by notice or the passage of time,
or both, would constitute a default by either party under the Leases.
(_) The sale of the Leased Premises to the Buyer will not
violate any term or conditions of the Leases, and after such sale the Leases
will continue in full force and effect.
<PAGE>
Lessor acknowledges Buyer will rely upon the matters set forth herein
in acquiring the Tenant's interest in the Leases. This Certificate shall inure
to the benefit of, and may be relied upon by, Buyer, its successors and assigns.
LESSOR:
BURGER KING CORPORATION
------------------------------
By:
---------------------------
Its:
--------------------------
Address: 17777 Old Cutler Road,
Miami, Florida 33157
<PAGE>
EXHIBIT A
Leases
(a) Agreement of Sublease dated October 18, 1982 between Burger King
Corporation, as lessor, and Burger King Limited Partnership I, as
lessee, for real property located in Springfield, Massachusetts and
commonly known as Burger King store #3588.
(b) Agreement of Sublease dated December 30, 1982 between Burger King
Corporation, as lessor, and Burger King Limited Partnership I, as
lessee, for real property located in Atlanta, Georgia and commonly
known as Burger King store #3641.
(c) Agreement of Sublease dated January 3, 1983 between Burger King
Corporation, as lessor, and Burger King Limited Partnership I, as
lessee, for real property located in Klamath Falls, Oregon and commonly
known as Burger King store #3645.
<PAGE>
EXHIBIT B
Lease Provisions
1. Springfield Lease:
Commencement Date: December 18, 1982
Options or Rights
to Renew: Lessee has 2 successive 5-year (or approximately
5-year) options to renew, as follows: one term
of 5 years commencing upon the expiration of the
original ten year term; one term of approximately
5 years commencing upon the expiration date of
the first extension term and expiring upon the
expiration of the original term of the overlease
as described in the Springfield Lease; and then
4 terms of 5 years each coincident with the
extension terms of the overlease as described in
the Springfield Lease.
2. Atlanta Lease:
Commencement Date: March 14, 1983
Options or Rights
to Renew:
3. Klamath Falls Lease:
Commencement Date: March 25, 1983
Options or Rights
to Renew: Lessee has 2 successive 5-year (or approximately
5-year) options to renew, as follows: one term
of 5 years commencing upon the expiration of the
original ten year term; one term of approximately
5 years commencing upon the expiration date of
the first extension term and expiring upon the
expiration of the original term of the overlease
as described in the Klamath Falls Lease; and
then 4 terms of 5 years each coincident with the
extension terms of the overlease as described in
the Klamath Falls Lease.
<PAGE>
EXHIBIT F
<PAGE>
ESTOPPEL CERTIFICATE
PURCHASE AND SALE
This Certificate is made as of __________________, by BURGER KING
LIMITED PARTNERSHIP I (the "Tenant").
1. The Leases. The term "Leases," as used herein, shall mean those
certain subleases, together with any amendments thereto, concerning the
properties as more particularly described in Exhibit A attached hereto and by
this reference incorporated herein, between Burger King Corporation ("Lessor")
and Tenant.
2. The Properties. The term "Properties," as used herein, shall
mean those certain real properties as legally described in the Leases.
3. The Sale. The term "Buyer," as used herein, shall mean U.S.
Restaurant Properties Operating, L.P., its successors and assigns. Buyer
proposes to purchase Tenant's interest in the Leases from Tenant.
4. Purpose. In connection with the above-mentioned transactions, Buyer
has requested certain assurances and representations from Tenant and Tenant has
agreed to deliver this estoppel certificate.
In consideration of the terms and provisions hereinafter contained and
other good and valuable consideration received, the receipt and sufficiency of
which are hereby acknowledged, Tenant certifies and agrees as follows:
(a) Lessor is the sublessor and Tenant is the subtenant
under the Leases.
(b) The terms of the Leases commenced and rent commenced to
accrue under the Leases on the dates described on Exhibit B. Tenant has the
options or rights to renew the terms of the Leases as described in Exhibit B.
(c) The Leases are in full force and effect, and Tenant has no
knowledge of (i) any present defaults of either party under the Leases; nor (ii)
any present condition or state of facts which by notice or the passage of time,
or both, would constitute a default by either party under the Leases.
(d) The sale of the Leased Premises to the Buyer will not
violate any term or conditions of the Leases, and after such sale the Leases
will continue in full force and effect.
<PAGE>
The representations and certifications made hereunder shall
not survive the date upon which you or such other purchasing person or entity
purchase Tenant's interest in the Property. Tenant hereby acknowledges that you
and any such other purchasing person or entity shall be entitled to rely upon
the foregoing provisions of this letter in consummating the above-referenced
transaction.
TENANT:
------------------------------
By:
---------------------------
Its:
--------------------------
Address:
----------------------
<PAGE>
EXHIBIT A
Leases
1. Agreement of Sublease dated October 18, 1982 between Burger King
Corporation, as lessor, and Burger King Limited Partnership I, as
lessee, for real property located in Springfield, Massachusetts and
commonly known as Burger King store #3588.
2. Agreement of Sublease dated December 30, 1982 between Burger King
Corporation, as lessor, and Burger King Limited Partnership I, as
lessee, for real property located in Atlanta, Georgia and commonly
known as Burger King store #3641.
3. Agreement of Sublease dated January 3, 1983 between Burger King
Corporation, as lessor, and Burger King Limited Partnership I, as
lessee, for real property located in Klamath Falls, Oregon and commonly
known as Burger King store #3645.
<PAGE>
EXHIBIT B
Lease Provisions
1. Springfield Lease:
Commencement Date: December 18, 1982
Options or Rights
to Renew: Lessee has 2 successive 5-year (or approximately
5-year) options to renew, as follows: one term
of 5 years commencing upon the expiration of the
original ten year term; one term of approximately
5 years commencing upon the expiration date of
the first extension term and expiring upon the
expiration of the original term of the overlease
as described in the Springfield Lease; and then
4 terms of 5 years each coincident with the
extension terms of the overlease as described in
the Springfield Lease.
2. Atlanta Lease:
Commencement Date: March 14, 1983
Options or Rights
to Renew: Lessee has 2 successive 5-year (or approximately
5-year) options to renew, as follows: one term
of 5 years commencing upon the expiration of the
original ten year term; one term of approximately
5 years commencing upon the expiration date of
the first extension term and expiring upon the
expiration of the original term of the overlease
as described in the Atlanta Lease; and then 4
terms of 5 years each coincident with the
extension terms of the overlease as described in
the Atlanta Lease.
3. Klamath Falls Lease:
Commencement Date: March 25, 1983
Options or Rights
to Renew: Lessee has 2 successive 5-year (or approximately
5-year) options to renew, as follows: one term
of 5 years commencing upon the expiration of the
original ten year term; one term of approximately
5 years commencing upon the expiration date of
the first extension term and expiring upon the
expiration of the original term of the overlease
as described in the Klamath Falls Lease; and
then 4 terms of 5 years each coincident with the
extension terms of the overlease as described in
the Klamath Falls Lease.
<PAGE>
EXHIBIT G
[attach Lease Support Agreement]
AGREEMENT
OF
PURCHASE AND SALE
AGREEMENT OF PURCHASE AND SALE ("Agreement") made as of the 4th day of
December, 1997, by and between Burger King Limited Partnership III, a New York
limited partnership ("Seller"), and U.S. Restaurant Properties Operating L.P.
("Buyer").
W I T N E S S E T H :
1. Definitions. For purposes of this Agreement, the following terms have
the meanings indicated in this Section 1.
1.1 "Assignment and Assumption of Lease" means an Assignment and Assumption
of Lease in the form attached hereto as Exhibit A, with such modifications as
may be required to conform to local recording laws.
1.2 "Assignment and Assumption of Sublease" means an Assignment and
Assumption of Sublease in the form attached hereto as Exhibit B, with such
modifications as may be required to conform to local recording laws.
1.3 "Closing" means the accomplishment (or waiver by the party in whose
favor each such activity runs) of each and every one of the activities described
in Section 6 below.
1.4 "Closing Date" means the date on which the Closing occurs, as set forth
in Section 4 below.
1.5 "Contract Period" means the period commencing upon the execution by
both Buyer and Seller of this Agreement and ending upon the first to occur of
the Closing or the termination of this Agreement.
1.6 "Deed" means a bargain and sale deed with covenants against grantor's
acts, special warranty deed or the equivalent form of deed used in the
jurisdictions where the Owned Properties are located.
1.7 "Deposit" means the sum of Eight Hundred Thousand Dollars ($800,000)
delivered -------
by Buyer and deposited with the Escrow Agent within three (3) business days
after Buyer has received a fully executed duplicate original of this Agreement,
to be held in an interest bearing account subject to the terms of this
Agreement. The Deposit shall include all interest earned thereon.
1.8 "Due Diligence Period" has the meaning ascribed to such term in Section
2(b) below.
1.9 "Environmental Laws" means any federal, state or local ordinance,
statute, regulation or common law provision relating to human health and/or the
environment.
1.10 "Escrow Agent" means Lawyers Title Insurance Corporation.
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1.11 "Franchisee" means a holder of the right to occupy a Property pursuant
to a Sublease thereof.
1.12 "Improvements" means any and all buildings, structures, parking lots,
walks, and walkways and all fixtures and equipment (including without limitation
all plumbing, electrical, heating, air conditioning and ventilating lines and
systems and boilers) and each and every other type of physical improvement
located at, on or affixed to a Property to the full extent such items constitute
or are or can or may be construed as realty under the laws of the applicable
jurisdiction.
1.13 "Lease" means a sublease agreement between Burger King Corporation, a
Florida corporation, as sublessor, and Seller, as sublessee, with respect to the
Leased Properties and all amendments and modifications thereof.
]
1.14 "Leased Properties" means, collectively, those certain tracts or
parcels of land in which Seller has a leasehold interest under the Leases, and
which comprise six (6) physical site locations designated as Stores # 4213,
4217, 4268, 4482, 4767 and 4808 on Schedule 1 hereto, together with Seller's
interests in all Improvements located thereon.
1.15 "Letter of Credit" has the meaning ascribed to such term in Section
6.1 hereof. ----------------
1.16 "Memphis Property" means those certain tracts or parcels of land which
comprise the parcels of land pertaining to the physical site location designated
as Store # 4709 located in the City of Memphis, Shelby County, Tennessee owned
in fee by Seller, including without limitation any land lying in the bed of any
street, road or avenue, open or proposed, in front of, within or adjoining or
adjacent to such land and Seller's interest in all Improvements located thereon.
1.17 "Owned Properties" means, collectively, those certain tracts or
parcels of land which individually or together with contiguous tracts so
described, comprise the separate parcels of land pertaining to the sixteen (16)
physical site locations designated as Stores # 4067, 4101, 4116, 4163, 4182,
4320, 4328, 4348, 4445, 4483, 4590, 4601, 4693, 4709, 4714 and 4839 on Schedule
1 hereto, which tracts or parcels of land are owned in fee by Seller, including
without limitation any land lying in the bed of any street, road or avenue, open
or proposed, in front of, within or adjoining or adjacent to such land and
Seller's interest in all Improvements located thereon; provided, however, that
in the event Seller exercises the Removal Option, the term "Owned Properties"
shall be deemed to not include the Memphis Property (Store # 4709).
1.18 "Permitted Exceptions" means such easements, encumbrances (other than
liens), restrictions, rights of way, if any, and other matters of record
provided they do not materially impair marketability of title or which are not
objected to by Buyer in the manner prescribed in Section 7 hereto.
1.19 "Properties" means, collectively, the Owned Properties and the Leased
Properties which are designated herein and on Schedule 1 hereto; provided,
however, that in the event Seller exercises the Removal Option, the term
"Properties" shall be deemed to not include the Memphis Property (Store # 4709).
1.20 "Purchase Price" means the sum of Sixteen Million Dollars
($16,000,000); -------------- provided, however, that in the event Seller
exercises the Removal Option, the term "Purchase Price" shall mean the sum of
Fifteen Million Seven Hundred Thousand Dollars ($15,700,000).
<PAGE>
1.21 "Removal Option" means Seller's right to remove the Memphis Property
from the purchase and sales transaction contemplated by this Agreement, as set
forth in Section 2(c) below.
1.22 "Sublease" means, as to the Leased Properties those sub-subleases
between Seller, as sub-sublessor, and a Franchisee, as sub-sublessee, and, as to
the Owned Properties, those leases between Seller, as lessor, and a Franchisee,
as lessee, and all amendments and modifications thereof.
1.23 "Title Insurer" means Lawyers Title Insurance Corporation.
1.24 "Title Policy" means, as to each Property, a standard form owner's
policy of title insurance, dated the Closing Date, insuring Buyer as owner of
good and marketable fee title to the Owned Properties and the holder of a
subleasehold interest in the Leased Properties subject only to the Permitted
Exceptions.
1.25 "Title Report" means a certificate of title, title commitment or title
report issued by the Title Insurer to Buyer, which shall disclose Seller as
owner of fee simple interest in the Owned Properties and the holder of a
subleasehold interest in the Leased Properties and shall disclose, and shall
have attached to it, copies of all documents of record underlying all exceptions
to title and all encumbrances on and other matters of record affecting the
Properties.
2. Purchase and Sale. (a) Subject to and in accordance with all terms and
conditions and based upon all representations and warranties set forth in this
Agreement, on the Closing Date, Seller shall convey, transfer, assign, sell and
deliver to Buyer, and Buyer shall acquire, accept and purchase the Properties.
(b) From the date hereof until 5:00 p.m. Eastern Standard Time on December
9, 1997 (the "Due Diligence Period") Buyer shall have the right to satisfy
itself, in its sole discretion, as to all matters with respect to the
Properties. If, on or before the expiration of the Due Diligence Period, Buyer
gives notice to Seller and Escrow Agent (the "Cancellation Notice") that it does
not desire to purchase the Properties, the Deposit shall be returned to Buyer,
and neither party shall have any further liability or obligation under this
Agreement. If Buyer does not give the Cancellation Notice to Seller within the
Due Diligence Period, then Buyer shall no longer have the right to terminate
this Agreement pursuant to this Section 2(b).
(c) Seller shall have the right in its sole and absolute discretion to
elect to remove the Memphis Property from the purchase and sales transaction
contemplated by this Agreement by delivering written notice delivered to Buyer
in accordance with Section 17 below at any time on or before 5:00 p.m. on
December 9, 1997.
(d) In the event Buyer terminates that certain Agreement of Purchase and
Sale (the "BKLP I Purchase and Sale Agreement") between Burger King Limited
Partnership I and Buyer pursuant to Section 2(b) thereof, Seller shall have the
right to terminate this Agreement upon delivery of written notice to Buyer
within five (5) days of the date on which Buyer has terminated the BKLP I
Purchase and Sale Agreement. Upon such termination the Deposit shall be returned
to Buyer, and neither party shall have any further liability or obligation under
this Agreement.
<PAGE>
3. Purchase Price; Payment Thereof. The Purchase Price is subject to
prorations and adjustments as described in Section 9, further subject to
adjustment in the case of a removal of a Property as provided in Sections 7 and
13. The Purchase Price is payable by Buyer to Seller at the Closing by wire or
other mutually agreeable transfer of immediately available funds.
4. Closing Date. The Closing Date shall be on a date selected by Buyer upon
three (3) days written notice to Seller but not later than the later of (i) five
(5) days following the last day of the Due Diligence Period or (ii) the first
business day following the date that the contingency set forth in Section 6.3 is
removed. The Closing shall take place by mail in escrow at 11:00 a.m. on the
Closing Date at the offices of the Title Insurer.
5. Escrow Agent. The Deposit shall be deposited by Escrow
Agent in an interest bearing escrow account and the proceeds held and disbursed
in accordance with the terms of this Agreement. Unless the Deposit is returned
to Buyer pursuant to Section 2(b), upon Closing, Escrow Agent shall deliver the
Deposit to Seller and the Deposit shall be credited against the Purchase Price.
In all other cases, if either party makes a demand upon Escrow Agent for
delivery of the Deposit, Escrow Agent shall give written notice to the other
party of such demand. If a notice of objection to the proposed payment is not
received from the other party within seven (7) business days after the giving of
notice by Escrow Agent, time being of the essence, Escrow Agent is hereby
authorized to deliver the Deposit to the party who made the demand. If Escrow
Agent receives a notice of objection within said period or if for any other
reason Escrow Agent in good faith elects not to deliver the Deposit, then Escrow
Agent shall continue to hold the Deposit and thereafter pay it to the party
entitled when Escrow Agent receives (a) a notice from the objecting party
withdrawing the objection, or (b) a notice signed by both parties directing
disposition of the Deposit or (c) a judgment or order of a court of competent
jurisdiction directing disposition of the Deposit. Buyer and Seller hereby
jointly and severally agree that Escrow Agent shall incur no liability
whatsoever in connection with its good faith performance under this Agreement,
and Buyer and Seller hereby jointly and severally release and waive any claims
they may have against Escrow Agent which may result from its performance in good
faith of its functions under this Agreement. Escrow Agent shall be liable only
for loss or damage caused directly by its acts of negligence while performing
under this Agreement. Buyer and Seller further agree to indemnify against, hold
harmless, release and waive any claims they may have against Escrow Agent as a
result of a reasonable delay in any wire transfer made pursuant to this
Agreement, and/or any errors in wiring instructions given to Escrow Agent. The
signing of this Agreement by Escrow Agent is only to evidence Escrow Agent's
acceptance of the terms and conditions of this paragraph.
6. Conditions Precedent.
6.1 The obligation of Seller to sell the Properties on the Closing Date
shall be subject to the satisfaction, of the following conditions (any of which
may be waived by Seller): (a) the representations and warranties of Buyer set
forth in Section 11 were true and correct in all material respects when made and
are true and correct in all material respects on the Closing Date, (b) Buyer
delivers to Seller each of the items required to be delivered by Buyer and takes
all of the actions required to be taken by Buyer under Section 8 prior to or on
the Closing Date, (c) Buyer shall have performed, observed and complied with all
covenants, agreements and conditions required by this Agreement to be performed,
observed and complied with on its part prior to or as of the Closing Date and
shall not otherwise be in default under this Agreement, (d) the provisions of
Section 6.3 shall have been satisfied, (e) Buyer and Burger King Corporation
shall execute and deliver a Lease Support Agreement (the "Lease Support
Agreement") substantially in the form attached hereto as Exhibit G and Buyer at
its sole cost and expense shall deliver an irrevocable letter of credit (the
"Letter of Credit") to Burger King Corporation on the Closing Date as required
under the Lease Support Agreement; and (f) no default by Buyer under the BKLP I
Purchase and Sale Agreement shall have occurred and be continuing.
<PAGE>
6.2 The obligation of Buyer to purchase the Properties on the Closing Date
shall be subject to the satisfaction of the following conditions (any of which
may be waived by Buyer): (a) the representations and warranties of Seller set
forth in Section 10 were true and correct in all material respects when made and
are true and correct in all material respects on the Closing Date, (b) Seller
delivers to Buyer each of the items required to be delivered by Seller and takes
all of the actions required to be taken by Seller under Section 8 prior to or on
the Closing Date, and (c) Seller shall have performed, observed and complied
with all covenants, agreements and conditions required by this Agreement to be
performed, observed and complied with on its part prior to or as of the Closing
Date.
6.3 The parties' respective obligations hereunder are further subject to
the right of Seller's limited partners pursuant to Seller's agreement of limited
partnership to vote to disapprove the sale of the Properties. In connection
therewith, Seller has determined to convene a meeting of its limited partners
for the purpose of considering the disapproval of the sale of the Properties,
has completed the preparation of a preliminary proxy statement concerning the
transactions contemplated herein, has filed such preliminary proxy statement
with the Securities and Exchange Commission ("SEC") and has mailed such proxy
statement to its limited partners. Seller shall convene a meeting of limited
partners on the date and for the purposes specified in such proxy statement. If
a majority of Sellers' limited partners do not vote to disapprove of the sale of
the Properties, the parties will proceed to Closing, assuming all other
conditions are satisfied or waived. If a majority of Seller's limited partners
vote to disapprove of the proposed sale, Seller shall have the right to
terminate this Agreement by written notice to Buyer, the Deposit shall be
returned to Buyer and thereafter neither party shall have any obligation to the
other under this Agreement. If for any reason the meeting of Seller's limited
partners is delayed, postponed or adjourned to a date subsequent to six months
following the mutual execution of this Agreement, then Buyer, in its sole
discretion, may terminate this Agreement by written notice to the Seller, the
Deposit shall be returned to Buyer and thereafter neither party shall have any
obligation to the other under this Agreement.
7. Title Exceptions. Buyer acknowledges that Seller has
delivered a Title Report from the Title Insurer for each of the Properties
together with a survey of each of the Properties to Buyer. Buyer shall have
until the last day of the Due Diligence Period to object to any exception to
title appearing in the Title Report or survey which materially impairs
marketability of title by delivering written notice to the Seller (for each
Property an "Objection" and collectively "Objections"). If Buyer fails to object
as prescribed in this section then the Buyer acknowledges and agrees that such
exception shall be a Permitted Exception and Buyer shall be obligated to proceed
with the Closing and take title to the Properties, subject to such exceptions to
title without a reduction of the Purchase Price.
(a) Upon receipt of such Objection, Seller shall have
the right, but not the obligation, to seek to eliminate, cure or
correct such exceptions to title. If such exceptions to title in
Seller's sole and exclusive judgment can be cured or corrected and if
Seller notifies Buyer not later than 5:00 p.m. (New York time) within
ten (10) days after receipt of all Objections to the Property(ies) to
seek to cure or correct same, then (x) Seller shall have the right to
adjourn the Closing for such Property(ies) for such period, not to
exceed ninety (90) days as shall, in Seller's discretion reasonably
exercised, be required in order to cure such
<PAGE>
exceptions to title and Buyer shall be obligated to purchase on the Closing
Date all Properties not objected to as provided above and the Purchase Price
shall be reduced by the consideration attributable to the affected Property(ies)
as shown on Schedule 1; (y) Seller shall give Buyer written notice upon the
correction of an Objection for each Property and Buyer shall purchase such
Property, according to the terms hereof, on a mutually agreeable closing date
within ten (10) days of such notice; and (z) if such exceptions to title can
only be satisfied by the payment of money, Seller shall be entitled to apply a
portion of the Purchase Price payable on such Closing Date for such
Property(ies) in order to cure or correct same. If Seller, having elected to
attempt to cure such exceptions to title, fails so to do within such ninety (90)
day period, Buyer shall have no further obligation to purchase and Seller shall
have no further obligation to sell the Properties subject to such uncured
exceptions to title unless Buyer forthwith elects to purchase such Properties
subject to the unrectified matters with no reduction in the Purchase Price. If
Seller fails to notify Buyer of its election to seek to cure such exceptions to
title, Seller shall be deemed to have elected NOT to seek to cure same.
(b) If Seller elects not to cure all Objections to
title on any Property encumbered by same, Buyer may, at its election,
(x) proceed with the Closing and take title to all of the Properties
subject to such exceptions to title without a reduction of the Purchase
Price, or (y) terminate this Agreement by written notice to Seller, in
which case the Deposit shall be returned to Buyer and thereafter
neither party shall have any obligation to the other under this
Agreement, provided, however, that Buyer shall provide such written
notice of termination to Seller no later than the close of business ten
(10) days after receipt of Seller's notice electing not to cure title
exceptions (the "Title Notice Day"). If Buyer fails to provide such
notice by 5:00 p.m. (New York time) on the Title Notice Day, Buyer
shall be obligated to purchase all the Properties as provided herein,
subject to the Permitted Exceptions as well as the title exceptions
that Seller elected not to cure.
To be effective, each notice delivered by Buyer to Seller hereunder must be sent
by facsimile transmission to the FAX numbers set forth in Section 17 with an
original hard copy thereof sent in accordance with the requirements of Section
17. Any dispute as to whether or not a notice regarding removal of a Property
from the Agreement has been given in a timely manner shall be resolved by
reference to the date and time stamped on the first page of the facsimile copy
of such notice by the facsimile unit receiving same.
8. Closing Deliveries. At the Closing, the following actions
shall be taken, all of which will be deemed taken simultaneously and no one of
which will be deemed completed until all have been completed:
(a) The Purchase Price shall be paid to Seller in
accordance with Section 3.
(b) The Deeds for each Owned Property shall be
executed and delivered to Buyer.
(c) Buyer and Seller shall execute and deliver an
Assignment and Assumption of Lease for each Leased Property.
(d) Buyer and Seller shall execute and deliver an
Assignment and Assumption of Sublease for each Sublease encumbering the
Properties.
(e) An affidavit of the Seller under FIRPTA shall be
delivered to Buyer.
<PAGE>
(f) Seller shall deliver to Buyer the original
counterparts or true copies of the Leases assigned by Seller to Buyer
and assumed by Buyer pursuant to the Assignment and Assumption of
Leases delivered under clause (c) above (or copies thereof certified to
be true and correct by Seller) and the original counterparts or true
copies of the Subleases assigned by Seller to Buyer and assumed by
Buyer pursuant to the Assignment and Assumption of Subleases delivered
under clause (d) above (or copies thereof certified to be true and
correct by Seller).
(g) Seller shall use commercially reasonable efforts
to deliver to Buyer estoppel certificates from the Franchisees, in the
form attached hereto as Exhibit C on or before the last day of the Due
Diligence Period, and if Seller, after using reasonable efforts, is
unable to obtain such estoppel certificates from the Franchisees by the
Closing Date, the balance of the estoppel certificates, if any, may be
delivered by Seller, in the form attached hereto as Exhibit D
("Seller's Franchisee Estoppel Certificate").
(h) Seller shall use commercially reasonable efforts
to deliver to Buyer estoppel certificates from Burger King, in the form
attached hereto as Exhibit E on or before the last day of the Due
Diligence Period, and if Seller after using reasonable efforts, is
unable to obtain such estoppel certificates from Burger King by the
Closing Date, the balance of the estoppel certificates, if any, may be
delivered by Seller, in the form attached as Exhibit F (the "Seller's
Burger King Estoppel Certificate").
(i) Seller shall deliver the originals (if any, and
to the extent in Seller's possession) of all agreements, plans,
drawings, surveys, technical descriptions, warranties and licenses or
permits affecting the Properties.
(j) Any and all documents, affidavits and agreements
reasonably required by the Title Insurer to enable it to issue the
Title Policies shall be delivered by Buyer and Seller, respectively.
(k) Buyer and Burger King Corporation shall execute
and deliver the Lease Support Agreement and Buyer shall deliver the
Letter of Credit to Burger King Corporation.
If additional estoppel certificates are received by Seller from Burger King or
any Franchisee after the last day of the Due Diligence Period and up to sixty
(60) days after the Closing, such estoppel certificates shall be deemed to
replace the Seller's Franchisee Estoppel Certificate or the Seller's Burger King
Estoppel Certificate, as applicable, with respect to the Sublease or Lease for
which an estoppel has been received. Buyer agrees to cooperate and assist
Seller, at no expense to Buyer, in obtaining such estoppel certificates
subsequent to the last day of the Due Diligence Period.
9. Adjustments and Prorations; Closing Expenses.
9.1 Adjustments and Prorations. The basic or fixed rents and charges
payable under the Subleases and rents and charges actually received by Seller
for the month in which the Closing occurs, which rents and charges may include
but are not limited to basic or fixed rents, shall be apportioned between Buyer
and Seller as of 11:59 p.m. of the day next preceding the Closing Date (it being
understood and agreed that Buyer and Seller shall endeavor to compute all
closing adjustments at least five (5) business days prior to the Closing Date).
<PAGE>
The percentage rents shall be pro-rated as of the Closing Date
in the following manner: the total amount of percentage rent payable for the
fiscal year in which the Closing occurs ("Fiscal Year 1997") for each Property
shall be computed for each Property based on an estimate of the sales for the
entire Fiscal Year 1997 which shall be determined by the prior year sales
multiplied by the percentage of increase or decrease in sales for the period
commencing with the beginning of Fiscal Year 1997 through and including the last
day of the month prior to the Closing Date over the comparable period for 1996.
The resulting percentage rental obligation for Fiscal Year 1997 shall then be
apportioned equally to each day during Fiscal Year 1997, with the amount
accruing prior to the Closing Date being referred to as the "Pre-Closing
Portion". Seller shall be credited with 1997 percentage rents in the amount of
the excess, if any, of (i) the Pre-Closing Portion reduced by (ii) percentage
rent payments actually received by Seller for Fiscal Year 1997 prior to the
Closing Date. If clause (ii) above exceeds (i) above, Seller shall be debited
with such excess on the Closing Date.
Seller represents and warrants that the respective Franchisees
of the Properties have the obligation for paying all real estate taxes and
assessments and all charges for utility services.
9.2 Closing Expenses. The premium for the Title Policies, all costs for the
Title Report, all escrow charges, all transfer charges and taxes, and all fees
and other costs for recording the Deeds and other conveyancing documents shall
be paid by Buyer. Seller shall pay fees for the surveys prepared by
International Land Services Inc. and any expenses incurred in connection with
Seller complying with Section 6.3. All other expenses of Closing shall be paid
by Buyer, other than Seller's legal expenses.
10. Representations and Warranties of Seller. Seller hereby
represents and warrants to Buyer as follows, it being expressly understood and
agreed that all such representations and warranties are to be true and correct
at the date of this Agreement, except as otherwise provided, and as of the
Closing, but such representations and warranties shall not survive the Closing:
(a) Seller has the full right, power and authority to
enter into this Agreement and at the date hereof but not as of the
Closing subject to the right of its limited partners as discussed in
Section 6.3, to cause the sales, transfers and assignments contemplated
herein; and each of the persons signing this Agreement on behalf of
Seller is authorized to do so;
(b) To the actual knowledge of Seller, (i) the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereunder on the part of the Seller does not
violate any applicable law, ordinance, statute, rule, regulation,
order, decree or judgment to which Seller may be subject, and (ii) no
action by any federal, state or municipal or other governmental
department, commission, board, bureau or instrumentality is necessary
to make this Agreement a valid instrument binding upon Seller in
accordance with its terms; and
(c) To the actual knowledge of Seller, there are no
pending or contemplated condemnation, eminent domain or similar
proceedings with respect to all or any portion of the Properties,
except as provided in Section 13.
(d) Except for the information contained in the
documents listed in Schedule 2 attached hereto, Seller has no actual
knowledge as to the environmental conditions of the Properties.
(e) Seller has no contracts of any kind, such as for
waste disposal, termite protection, cleaning services, management
services or paper supplies which will survive the Closing.
<PAGE>
(f) Seller has delivered to Buyer the monthly sales
reports for the months January through October 1997 or true copies
thereof which were delivered to Buyer from Burger King Corporation.
Seller expressly does not represent or warrant the accuracy or
completeness of the information contained in such sales reports.
(g) From and after the date hereof until the Closing
or earlier termination of this Agreement, Seller shall not sell, assign
or create any right, title or interest whatsoever in or to any Property
or create any liens, encumbrance or charge thereon without promptly
discharging same.
(h) From and after the date hereof until the Closing
or earlier termination of this Agreement, Seller shall conduct its
activities as landlord of the Properties reasonably consistent with its
past practices.
If Buyer discovers prior to Closing, that any representation
or warranty made in this Agreement, in Seller's Estoppel Certificate(s), if any,
or in Seller's Burger King Estoppel Certificate(s), if any, is untrue in any
material respect, then Buyer shall have the right, as its sole and exclusive
remedy, either to (i) terminate this Agreement by notice given to Seller prior
to the Closing Date, receive a return of the Deposit and thereafter neither
party shall have any obligation to the other under this Agreement, or (ii) elect
to purchase the Properties subject to such untrue representation or warranty
without any reduction in the Purchase Price.
11. Representations and Warranties of Buyer. Buyer hereby
represents and warrants to Seller as follows, such representations and
warranties to be true and correct at the date of this Agreement and as of the
Closing, but such representations and warranties shall not survive the Closing:
(a) Buyer is a limited partnership duly organized and in good standing
under the laws of the State of Delaware;
(b) Buyer has the full right, power and authority to
enter into and fully perform its obligations under this Agreement, and
each of the persons signing this Agreement on behalf of Buyer is
authorized to do so; and
(c) To the actual knowledge of Buyer, (i) the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereunder on the part of Buyer does not
violate any applicable law, ordinance, statute, rule, regulation,
order, decree or judgment to which Buyer may be subject, and (ii) no
action by any federal, state or municipal or other governmental
department, commission, board, bureau or instrumentality is necessary
to make this Agreement a valid instrument binding upon Buyer in
accordance with its terms.
If Seller discovers prior to Closing, that any representation
or warranty made in this Agreement is untrue in any material respect, then
Seller shall have the right to terminate this Agreement by notice given to Buyer
prior to the Closing Date.
12. Damage or Destruction. In the event that a casualty or
other loss occurs to any Property prior to the Closing Date which (i) renders
such Property inoperable as a restaurant for a period reasonably estimated by
Seller to exceed four (4) months, or (ii) with respect to which there is
insufficient insurance coverage and/or tenant contributions to restore such
Property to its condition prior to such casualty, Buyer may, in its sole
discretion (a) elect to purchase all of the Properties without reduction of the
Purchase Price; or (b) terminate this Agreement by written notice to Seller and
receive a return of the Deposit.
<PAGE>
13. Eminent Domain. In the event of any threatened, commenced
or consummated proceedings in eminent domain respecting a Property or
substantially all of a Property, Buyer may, at its option, by notice to Seller
given ten (10) days after Buyer is notified of such actual or possible
proceedings, elect to remove the affected Property from this Agreement and the
Purchase Price shall be reduced by the consideration attributable to the
affected Property as shown on Schedule 1, or if Buyer fails to elect or if such
eminent domain proceedings are for less than substantially all of a Property,
then Buyer shall be obligated to purchase the Property as provided herein and
Seller shall, at the Closing, assign to Buyer its entire right, title and
interest in and to any condemnation award.
14. Environmental Inquiries.
Buyer acknowledges that Seller, at Seller's expense, has
caused Environmental Consulting & Technology, Inc. ("ECT") to conduct
Transaction Screen Assessments consistent with ASTM Standard E 1528-93 (each, a
"Transaction Screen") of the Properties, and that Seller herewith has furnished
to Buyer such information as more particularly described on Schedule 2 hereto.
15. Property "As Is". Seller does not warrant, either
expressly or impliedly, the condition or fitness of the Properties, including
without limitation the environmental fitness and condition of the Properties.
Buyer acknowledges that it has made such inspections and investigations of the
Properties as it has deemed necessary including, without limitation, the
physical and environmental features of the Properties and that Buyer will
acquire the Properties "AS IS, WHERE IS" in their current state, including
without limitation their current physical and environmental condition, subject
to normal wear and tear between the effective date of this Agreement and the
Closing. It is expressly understood and agreed that the willingness of Buyer to
purchase the Properties on an "AS IS, WHERE IS" basis in accordance herewith is
a material inducement to Seller's agreement to sell the Properties to Buyer.
Buyer hereby waives any and all claims which it may now or hereafter have
against Seller arising out of or in connection with Environmental Laws,
including without limitation any such claims under the federal Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section
9601-9659 ("CERCLA"), and any claims under state common law, relating to the
emission, discharge or release of any hazardous substance, as that term is
defined under CERCLA at 42 U.S.C. Section 9601(14), or petroleum product or
other pollutant or contaminant.
16. Brokerage. Each party represents and warrants to the other
that it has neither engaged nor employed any broker or finder in connection with
the transactions contemplated by this Agreement, except that Seller, at Seller's
expense, has retained Jones Lang Wootton USA, Inc. and each party hereby
indemnifies and agrees to hold the other harmless from and against any loss,
cost, damage or expense (including reasonable attorneys' fees) by reason of the
incorrectness of such representation and warranty. This provision shall survive
the Closing.
17. Notices. All notices, demands, requests, consents,
approvals or other communications ("Notices") required or permitted to be given
hereunder or which are given with respect to this Agreement shall be in writing
and shall (except as herein expressly provided to the contrary) be delivered
personally or sent by either registered or certified mail, return receipt
requested, postage prepaid, by Federal Express or another nationally recognized
air courier service, or by telephonic facsimile transmission, addressed as
follows:
<PAGE>
TO SELLER:
Burger King Limited Partnership, III
3 World Financial Center, 29th Floor
New York, New York 10285
Attention: Kenneth F. Boyle
FAX: (212) 528-9696
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: C. Tanner Rose, Jr., Esq.
FAX: (212) 455-2502
TO BUYER:
U.S. Restaurant Properties Operating L.P.
5310 Harvest Hill Road
Suite 270
Dallas, Texas 75230
Attention: Fred Margolin
FAX: (972) 490-9119
With a copy to:
Middleberg, Riddle & Gianna
2323 Bryan Street, Suite 1600
Dallas, Texas 75201
Attention: Richard S. Wilensky, Esq.
FAX: (214) 220-0179
or such other address as such party shall have specified most recently by like
Notice. Notices mailed as provided herein shall be deemed given on the third
business day following the date so mailed, on the business day received from a
nationally recognized air courier service or on the business day received by
facsimile transmission.
18. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute but one and the same instrument.
19. Governing Law. This Agreement shall be governed by,
interpreted under, and construed and enforced in accordance with, the laws of
the State of New York.
20. Jurisdiction. The parties hereto irrevocably and
unconditionally submit themselves to the general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and the appellate courts thereof, in any legal
action or proceeding arising under this Agreement or in any way related hereto.
<PAGE>
21. Entire Agreement. This Agreement is not to be recorded and
may not be changed, modified or terminated except by written instrument executed
by the parties hereto. This Agreement (including the Exhibits attached hereto)
contain the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior understandings, if any, with respect
thereto. This Agreement may not be modified, changed or supplemented, nor may
any obligations hereunder be waived, except by written instrument signed by the
party to be charged or by its agent duly authorized in writing or as otherwise
expressly permitted herein. The parties do not intend to confer any benefit
hereunder on any person, firm or corporation other than the parties hereto. This
provision shall survive the Closing.
22. Attorneys' Fees. Should either party institute any action
or proceeding to enforce this Agreement or any provision hereof, or for damages
by reason of any alleged default under or breach of this Agreement or of any
provision hereof, or for a declaration of rights hereunder, the prevailing party
in any such action or proceeding shall be entitled to receive from the other
party all costs and expenses, including reasonable attorneys' fees, incurred by
the prevailing party in connection with such action or proceeding at trial and
any appellate levels.
23. Non-Waiver of Rights. No failure or delay of either party
in the exercise of any right given to such party hereunder shall constitute a
waiver thereof unless the time specified herein for exercise of such right has
expired, nor shall any single or partial exercise of any right preclude other or
further exercise thereof or of any other right. The waiver of any breach
hereunder shall not be deemed to be a waiver of any other or any subsequent
breach hereof.
24. Rules of Construction. This Agreement shall be construed
without regard to any presumption or other rule requiring construction against
the party causing this Agreement to be drafted.
25. Titles and Headings. Titles and headings of Sections of
this Agreement are for convenience of reference only and shall not affect the
construction of any provision of this Agreement.
26. Exhibits. Each of the Exhibits and Schedules referred to
herein and attached hereto is an integral part of this Agreement and are
incorporated herein by this reference.
27. Pronouns; Joint and Several Liability. All pronouns and
any variation thereof shall be deemed to refer to the masculine, feminine or
neuter, singular or plural, as the identity of the parties may require. If the
Buyer consists of two or more parties, the liability of such parties shall be
joint and several.
28. Further Assurances. Seller and Buyer each agree to do such
further acts and things and to execute and deliver such additional agreements
and instruments as the other may reasonably require to consummate, evidence or
confirm the sale or any other agreement contained herein in the manner
contemplated hereby.
29. No Assignment. Buyer shall have no right to assign this
Agreement or its rights hereunder, without the express written consent of
Seller. The transfer of a controlling interest in the shares of Buyer shall be
deemed an assignment for purposes of this Agreement; provided, however, that
Buyer shall be permitted to assign its rights to purchase one or more Properties
to a wholly-owned subsidiary of Buyer provided Buyer (i) indemnifies Seller,
Lehman Brothers, Inc. and any of their affiliates, subsidiaries, directors,
officers, shareholders or partners from any and all costs and/or liabilities
incurred in connection with any claims, settlements, fines, investigations,
remediation activities or other charges relating to any environmental conditions
now or hereafter existing on such Property in a form satisfactory to Seller, and
(ii) notifies Seller of the name of the assignee on or before the last day of
the Due Diligence Period.
<PAGE>
30. Damages. In the event this Agreement is terminated due to
either party's default in the performance of its obligations hereunder or due to
Buyer's default under the BKLP I Purchase and Sale Agreement, then if Seller is
the defaulting party Buyer shall be entitled to pursue any and all remedies
available at law or in equity, including but not limited to specific performance
or to terminate this Agreement and receive a refund of the Deposit. In the event
Buyer is the defaulting party, then the parties have agreed that the Deposit
shall be retained by Seller as agreed upon liquidated damages it being
acknowledged that Seller's damages from Buyer's default might be impossible to
ascertain and that the Deposit constitutes a fair and reasonable amount for
Seller's damages and is not a penalty. Thereafter neither party shall have any
responsibility or obligation to the other under or pursuant to this Agreement.
Initial:
--------------- -----------------
Seller Buyer
31. TIME OF ESSENCE. TIME IS OF THE ESSENCE OF EACH AND EVERY
TERM, CONDITION AND PARTICULAR OF THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as of the day and year first above written.
SELLER: BUYER:
BURGER KING LIMITED PARTNERSHIP III, U.S. RESTAURANT PROPERTIES
a New York limited partnership OPERATING L.P.
By: USRP MANAGING, INC.
By: BK III RESTAURANTS INC.
By:
------------------------------
General Partner Name:
Title:
By:
---------------------------
Name: Kenneth Boyle
Title: President
ESCROW AGENT:
LAWYERS TITLE INSURANCE CORPORATION
By:
----------------------------
Name:
Title:
<PAGE>
BURGER KING LIMITED PARTNERSHIP III
SCHEDULE 1
STORE LOCATION SALES PRICE
----- -------- --------------
4217 Montgomery, AL $ 534,500
4163 Covina, CA 828,700
4808 San Bernardino, CA 160,000
4268 Federal Heights, CO 305,200
4101 Largo, FL 867,500
4182 Atlanta, GA 875,000
4693 Columbus, IN 1,370,400
4590 Gary, IN 963,000
4482 Brooklyn Park, MD 190,000
4116 Moundsview, MN 640,000
4348 Edison, NJ 1,125,000
4213 Albuquerque, NM 479,000
4767 Fayetteville, NC 537,100
4601 Wilson, NC 758,300
4714 North Augusta, SC 967,500
4445 Chattanooga, TN 680,000
4320 Gallatin, TN 963,000
4709 Memphis, TN 300,000
4839 Nashville, TN 490,000
4483 Shelbyville, TN 1,114,200
4328 Cleburne, TX 886,000
4067 Sulphur Springs, TX 965,600
---------------
$16,000,000.00
<PAGE>
SCHEDULE 2
1. Updated Transaction Screen Reports for Burger King Limited Partnership
III Sites prepared by Environmental Consulting & Technology, Inc. dated
October 1997.
2. Transaction Screen Reports for Burger King Limited Partnership III
Sites prepared by Environmental Consulting & Technology, Inc. dated
December, 1994.
<PAGE>
EXHIBIT A
ASSIGNMENT AND ASSUMPTION OF LEASE
FOR AND IN CONSIDERATION of the sum of Ten Dollars ($10.00)
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned, Burger King Limited Partnership III, a
New York limited partnership ("Assignor"), does hereby sell, assign, convey,
transfer, set over and deliver to [ ], a [ ] ("Assignee"), the entire interest
of Assignor, as lessee, in and to the lease of real property more particularly
described in Exhibit A attached hereto and incorporated by reference herein,
between Burger King Corporation, as lessor, and Burger King Limited Partnership
III, as tenant, dated lease_date, a Memorandum of which was filed on ___________
__, 19__ and recorded at Book _____, Page _____ in the _________ County Registry
of Deeds (the "Lease").
Assignee hereby assumes and agrees to perform all the terms,
covenants and conditions of the Lease required to be performed by the lessee
thereunder from and after the date hereof. Assignee hereby indemnifies and holds
Assignor harmless from and against any and all loss, cost, damage, expense
(including reasonable attorney's fees), liability, claims or causes of action
existing in favor of or asserted by the lessor under the Lease arising out of or
relating to Assignee's failure to perform any of its obligations as lessee under
the Lease on or after the date hereof.
Assignor hereby indemnifies and holds Assignee harmless from
and against any and all loss, cost, damage, expense (including reasonable
attorney's fees), liability, claims or causes of action existing in favor of or
asserted by the lessor under the Lease arising out of or relating to Assignor's
failure to perform any of its obligations as lessee under the Lease prior to the
date hereof.
This Assignment shall be binding upon and shall inure to the
benefit of Assignor and Assignee and their respective successors and assigns.
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed this
Assignment and Assumption of Lease this _________ day of ____ 1997.
ASSIGNOR:
Burger King Limited Partnership III,
a New York limited partnership
By: BK III Restaurants Inc.,
a New York corporation, general partner
By:
--------------------------------------------
Name:
Title:
ASSIGNEE:
[ ]
By: [ ]
By:
--------------------------------------------
Name:
Title:
<PAGE>
EXHIBIT B
ASSIGNMENT AND ASSUMPTION OF SUBLEASE
FOR AND IN CONSIDERATION of the sum of Ten Dollars ($10.00)
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned, Burger King Limited Partnership III, a
New York limited partnership ("Assignor"), does hereby sell, assign, convey,
transfer, set over and deliver to U.S Restaurant Properties Operating L.P., a [
] ("Assignee"), the entire interest of Assignor in and to the sublease of real
property more particularly described in Exhibit A attached hereto and
incorporated by reference herein, between Burger King Limited Partnership III,
as lessor, and lessee, as lessee, dated lease_date, a Memorandum of which was
filed on file_date, and recorded at book, page, in the county County Registry of
Deeds (the "Sublease").
Assignee hereby assumes and agrees to perform all the terms,
covenants and conditions of the Sublease required to be performed by the lessor
thereunder from and after the date hereof, including, without limitation, the
obligation to repay in accordance with the terms of the Sublease to the lessee
thereunder any and all security deposits and prepaid rental deposits to the
extent, but only to the extent of the amount of cash delivered by Assignor to
Assignee with respect to such security deposits and prepaid rental deposits and
only to the extent that any such amount shall hereafter become refundable to the
lessee under the Sublease.
Assignee hereby indemnifies and holds Assignor harmless from
and against any and all loss, cost, damage, expense (including reasonable
attorney's fees), liability, claims or causes of action existing in favor of or
asserted by the lessee under the Sublease arising out of or relating to
Assignee's failure to perform any of its obligations as lessor under the
Sublease on or after the date hereof. Assignor hereby indemnifies and holds
Assignee harmless from and against any and all loss, cost, damage, expense
(including reasonable attorney's fees), liability, claims or causes of action
existing in favor of or asserted by the lessee under the Sublease arising out of
or relating to Assignor's failure to perform any of its obligations as lessor
under the Sublease prior to the date hereof.
This Assignment shall be binding upon and shall inure to the
benefit of Assignor and Assignee and their respective successors and assigns.
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed this
Assignment and Assumption of Sublease this _________ day of December 1997.
ASSIGNOR:
BURGER KING LIMITED PARTNERSHIP III,
a New York limited partnership
By: BK III Restaurants Inc.,
a New York corporation, general partner
By:
-----------------------------------
Name: Kenneth Boyle
Title: President
ASSIGNEE:
U.S. RESTAURANT PROPERTIES OPERATING L.P.
By:
-----------------------------------
Name:
Title:
<PAGE>
EXHIBIT C
[FRANCHISEE ESTOPPEL]
_______________, 1997
[ ]
Re: (a) Sublease or Lease dated ___________, between Burger King Limited
Partnership III ("Landlord") and
______________________________________________________________, as tenant
("Franchisee"), covering the real property commonly known as __________
_________________________ (the "Property"), as amended or modified by the
following: _________________________________________________________________
(the "Lease"). (b) Franchise Agreement dated ___________, between Burger King
Corporation ("Burger King"), as franchisor, and Franchisee with respect to the
operation of a "Burger King" restaurant at the Property, as amended or modified
by the following: _______________
_________________________________________________(the "Franchise Agreement").
Dear Ladies and Gentlemen:
The undersigned has been advised that you or another person or
entity are about to purchase the interest of Burger King Limited Partnership III
in the Property. In connection with such acquisition, the undersigned hereby
represents and certifies to you that:
A. Lease
<PAGE>
1. The Lease constitutes the entire agreement between Landlord and
Franchisee pertaining to the Property, and the undersigned has not assigned,
amended, sublet or otherwise transferred its interest in the Lease.
2. The commencement and termination dates of the current term of the Lease
are __________________________________ and _______________________,
respectively. Franchisee has the following options or rights to renew the term:
____________________
- ------------------------------------------------------------------------------.
3. All rent payable by Franchisee under the Lease has been paid through
__________________, 1997.
4. The Lease is in full force and effect; there are no outstanding notices
of default or breach under the Lease served either by Landlord or Franchisee,
nor, to Franchisee's actual knowledge, has there been any occurrence or omission
which, with the giving of notice or passage of time or both, would give rise to
a default by either party under the Lease.
5. There have been no security or other deposits made by Franchisee to
Landlord and there have been no pre-payments of rent, nor will Franchisee
pre-pay rent or other amounts in connection with the Lease. No concessions,
rebates, allowances, or other concessions for free or reduced rent in the future
have been granted, other than as set forth in the Lease.
<PAGE>
6. Franchisee has not currently (i) made a general assignment for the
benefit of creditors; (ii) filed any voluntary petition in bankruptcy or
suffered the filing of an involuntary petition by its creditors; (iii) suffered
the appointment of a receiver to take possession all or substantially all of its
assets; (iv) suffered the attachment or other judicial seizure of all or
substantially all of its assets; (v) admitted in writing its inability to pay
its debts as they come due; or (iv) made an offer of settlement, extension or
composition of its creditors generally.
B. Franchise Agreement
1. The Franchise Agreement constitutes the entire agreement
between Burger King Corporation and Franchisee pertaining to the operation of a
"Burger King" restaurant at the Property.
2. The term of the Franchise Agreement is 20 years.
3. The Franchise Agreement is in full force and effect; there
are no
outstanding notices of default or breach under the Franchise Agreement served
either by Burger King Corporation or Franchisee, nor, to Franchisee's actual
knowledge, has there been any occurrence or omission which, with the giving of
notice or passage of time or both, would give rise to a default by either party
under the Franchise Agreement.
<PAGE>
Franchisee hereby acknowledges and agrees that you and any
such other purchasing person or entity shall be entitled to rely upon the
foregoing provisions of this letter in consummating the above-referenced
transaction.
Very truly yours,
If Franchisee is a corporation, insert --------------------------------
corporation's name and sign here
By:
-----------------------------
Name:
Title:
If Franchisee is an individual, sign --------------------------------
here: Name:
<PAGE>
EXHIBIT D
[BKLP III ESTOPPEL]
_________________, 1997
[ ]
Re: (a) Sublease dated __________ between Burger King Corporation ("Burger
King") and Burger King Limited Partnership III ("BKLP-III"), covering the real
property commonly known as ____________________________________________________
(the "Property"), as amended or modified by the following:
____________________________________________________
_______________________________________ (the "Sublease"); and (b) Lease dated
__________ between BKLP-III, as landlord, and _______________________
________________, as subtenant ("Franchisee"), as amended or modified by the
following: ______________________________________________________ (the
"Operating Lease").
Dear Ladies and Gentlemen:
In connection with your purchase of BKLP-III's interest in the
Property, the undersigned hereby represents and certifies to you and to any
other purchasing person or entity that:
A. Sublease
1. The Sublease constitutes the entire agreement between
Burger King and BKLP-III pertaining to the demising of the Property, and
BKLP-III has not amended, assigned or transferred its interest in the Sublease.
2. The commencement and termination dates of the current term
of the Sublease are ___________________________ and ___________________________,
respectively. BKLP-III has the following options or rights to renew the term:
______________________
- ------------------------------------------------------------------------------.
3. All rent payable by BKLP-III under the Sublease has been
paid through _______________, 1997.
4. The Sublease is in full force and effect; there are no
outstanding notices of default or breach under the Sublease served either by
Burger King or BKLP-III thereunder, nor, to Burger King's actual knowledge, has
there been any occurrence or omission which, with the giving of notice or
passage of time or both, would give rise to a default by either party under the
Sublease.
5. There have been no security or other deposits made by
Franchisee to BKLP-III and there have been no pre-payments of rent, nor will
Franchisee pre-pay rent or other amounts in connection with the Lease. No
concessions, rebates, allowances, or other concessions for free or reduced rent
in the future have been granted, other than as set forth in the Lease.
<PAGE>
B. Operating Lease
1. The Operating Lease constitutes the entire agreement
between BKLP-III and Franchisee pertaining to the Property, and BKLP-III has not
assigned or transferred its interest in the Operating Lease.
2. The commencement and termination dates of the current term
of the Operating Lease are _________________________ and
__________________________ respectively. Franchisee has the following options or
rights to renew the term: _____________________________________
- ------------------------------------------------------------------------------.
3. All minimum rent and additional rent payable by Franchisee
under the Operating Lease has been paid through _______________, 1997. All
percentage rent payable by Franchisee has been paid through __________________,
199_.
4. The Operating Lease is in full force and effect; there are
no outstanding notices of default or breach under the Operating Lease served
either by BKLP-III or Franchisee, nor, to BKLP-III's actual knowledge, has there
been any occurrence or omission which, with the giving of notice or passage of
time or both, would give rise to a default by either party under the Operating
Lease.
5. There have been no security or other deposits and there
have been no pre-payments of rent, nor will Franchisee pre-pay rent or
other-amounts in connection with the Lease. No concessions, rebates, allowances,
or other concessions for free or reduced rent in the future have been granted,
other than as set forth in the Lease.
<PAGE>
The representations and certifications made hereunder shall
not survive the date upon which you or such other purchasing person or entity
purchase BKLP-III's interest in the Property. BKLP-III hereby acknowledges that
you and any such other purchasing person or entity shall be entitled to rely
upon the foregoing provisions of this letter in consummating the
above-referenced transaction.
Very truly yours,
BURGER KING LIMITED PARTNERSHIP III,
By: BK III Restaurants Inc., general partner
By:
------------------------------
Name:
Title:
<PAGE>
EXHIBIT E
ESTOPPEL CERTIFICATE
PURCHASE AND SALE
This Certificate is made as of __________________, by BURGER KING
CORPORATION ("Lessor").
1. The Leases. The term "Leases," as used herein, shall mean those certain
subleases, together with any amendments thereto, concerning the properties as
more particularly described in Exhibit A attached hereto and by this reference
incorporated herein, between Lessor and Burger King Limited Partnership III (the
"Tenant").
2. The Properties. The term "Properties," as used herein, shall mean those
certain real properties as legally described in the Leases.
3. The Sale. The term "Buyer," as used herein, shall mean U.S. Restaurant
Properties Operating, L.P., its successors and assigns. Buyer proposes to
purchase Tenant's interest in the Leases from Tenant.
4. Purpose. In connection with the above-mentioned transactions, Buyer has
requested certain assurances and representations from Lessor, and Tenant has
agreed to provide for an estoppel certificate from Lessor concerning the Leases.
In consideration of the terms and provisions hereinafter contained and
other good and valuable consideration received, the receipt and sufficiency of
which are hereby acknowledged, Lessor certifies and agrees as follows:
(_) Lessor is the sublessor and Tenant is the subtenant under the Leases.
(_) The terms of the Leases commenced and rent commenced to accrue under
the Leases on the dates described on Exhibit B. Tenant has the options or rights
to renew the terms of the Leases as described in Exhibit B.
(_) The Leases are in full force and effect, and Lessor has no knowledge of
(i) any present defaults of either party under the Leases; nor (ii) any present
condition or state of facts which by notice or the passage of time, or both,
would constitute a default by either party under the Leases.
(_) The sale of the Leased Premises to the Buyer will not violate any term
or conditions of the Leases, and after such sale the Leases will continue in
full force and effect.
<PAGE>
Lessor acknowledges Buyer will rely upon the matters set forth herein
in acquiring the Tenant's interest in the Leases. This Certificate shall inure
to the benefit of, and may be relied upon by, Buyer, its successors and assigns.
LESSOR:
------------------------------
By:
---------------------------
Its:
--------------------------
Address:
----------------------
<PAGE>
EXHIBIT A
Leases
(a) Agreement of Sublease dated July 10, 1984 between Burger King
Corporation, as lessor, and Burger King Limited Partnership III, as
lessee, for real property located in Albuquerque, New Mexico and
commonly known as Burger King store #4213.
(b) Agreement of Sublease dated July 16, 1984 between Burger King
Corporation, as lessor, and Burger King Limited Partnership III, as
lessee, for real property located in Montgomery, Alabama and commonly
known as Burger King store #4217.
(c) Agreement of Sublease dated August 31, 1984 between Burger King
Corporation, as lessor, and Burger King Limited Partnership III, as
lessee, for real property located in Federal Heights, Colorado and
commonly known as Burger King store #4268.
(d) Agreement of Sublease dated February 20, 1985 between Burger King
Corporation, as lessor, and Burger King Limited Partnership III, as
lessee, for real property located in Brooklyn Park, Maryland, and
commonly known as Burger King store #4482.
(e) Agreement of Sublease dated August 26, 1985 between Burger King
Corporation, as lessor, and Burger King Limited Partnership III, as
lessee, for real property located in Fayetteville, North Carolina and
commonly known as Burger King store #4767.
(f) Agreement of Sublease dated October 1, 1985 between Burger King
Corporation, as lessor, and Burger King Limited Partnership III, as
lessee, for real property located in San Bernardino, California and
commonly known as Burger King store #4808.
<PAGE>
EXHIBIT B
<PAGE>
Lease Provisions
1. Albuquerque Lease:
Commencement Date: October 26, 1984
Options or Rights
to Renew: Lessee has 2 successive 5-year (or approximately
5-year) options to renew, as follows: one term
of 5 years commencing upon the expiration of the
original ten year term; one term of approximately
5 years commencing upon the expiration date of
the first extension term and expiring upon the
expiration of the original term of the Lease as
described in the Lease; and then 4 terms of 5
years each coincident with the extension terms
of the Lease as described in the Lease.
2. Montgomery Lease:
Commencement Date: September 23, 1984
Options or Rights
to Renew: Lessee has 2 successive 5-year (or approximately
5-year) options to renew, as follows: one term
of 5 years commencing upon the expiration of the
original ten year term; one term of approximately
5 years commencing upon the expiration date of
the first extension term and expiring upon the
expiration of the original term of the Lease as
described in the Lease; and then 4 terms of 5
years each coincident with the extension terms
of the Lease as described in the Lease.
3. Federal Heights Lease:
Commencement Date: December 7, 1984
Options or Rights
to Renew: Lessee has 2 successive 5-year (or approximately
5-year) options to renew, as follows: one term
of 5 years commencing upon the expiration of the
original ten year term; one term of approximately
5 years commencing upon the expiration date of
the first extension term and expiring upon the
expiration of the original term of the over Lease
as described in the Lease; and then 3 terms, with
the third extension of term terminates and ending
December 31, 2022; coincident with the extension
terms of the Lease.
4. Brooklyn Park Lease:
Commencement Date:
Options or Rights
to Renew:
<PAGE>
5. Fayetteville Lease:
Commencement Date: November 8, 1985
Options or Rights
to Renew: Lessee has 2 successive 5-year (or approximately
5-year) options to renew, as follows: one term
of 5 years commencing upon the expiration of the
original ten year term; one term of approximately
5 years commencing upon the expiration date of
the first extension term and expiring upon the
expiration of the original term of the Lease as
described in the Lease; and then 4 terms of 5
years each coincident with the extension terms
of the Lease as described in the Lease.
6. San Bernardino Lease:
Commencement Date: December 11, 1985
Options or Rights
to Renew: Lessee has 2 successive 5-year (or approximately
5-year) options to renew, as follows: one term
of 5 years commencing upon the expiration of the
original ten year term; one term of approximately
5 years commencing upon the expiration date of
the first extension term and expiring upon the
expiration of the original term of the Lease as
described in the Lease; and then 4 terms of 5
years each coincident with the extension terms
of the Lease as described in the Lease.
<PAGE>
EXHIBIT F
ESTOPPEL CERTIFICATE
PURCHASE AND SALE
This Certificate is made as of __________________, by BURGER KING
LIMITED PARTNERSHIP III (the "Tenant").
1. The Leases. The term "Leases," as used herein, shall mean those certain
subleases, together with any amendments thereto, concerning the properties as
more particularly described in Exhibit A attached hereto and by this reference
incorporated herein, between Burger King Corporation ("Lessor") and Tenant.
2. The Properties. The term "Properties," as used herein, shall mean those
certain real properties as legally described in the Leases.
3. The Sale. The term "Buyer," as used herein, shall mean U.S. Restaurant
Properties Operating, L.P., its successors and assigns. Buyer proposes to
purchase Tenant's interest in the Leases from Tenant.
4. Purpose. In connection with the above-mentioned transactions, Buyer has
requested certain assurances and representations from Tenant and Tenant has
agreed to deliver this estoppel certificate.
In consideration of the terms and provisions hereinafter contained and
other good and valuable consideration received, the receipt and sufficiency of
which are hereby acknowledged, Tenant certifies and agrees as follows:
(a) Lessor is the sublessor and Tenant is the subtenant under the Leases.
(b) The terms of the Leases commenced and rent commenced to accrue under
the Leases on the dates described on Exhibit B. Tenant has the options or rights
to renew the terms of the Leases as described in Exhibit B.
(c) The Leases are in full force and effect, and Tenant has no knowledge of
(i) any present defaults of either party under the Leases; nor (ii) any present
condition or state of facts which by notice or the passage of time, or both,
would constitute a default by either party under the Leases.
(d) The sale of the Leased Premises to the Buyer will not violate any term
or conditions of the Leases, and after such sale the Leases will continue in
full force and effect.
<PAGE>
The representations and certifications made hereunder shall
not survive the date upon which you or such other purchasing person or entity
purchase Tenant's interest in the Property. Tenant hereby acknowledges that you
and any such other purchasing person or entity shall be entitled to rely upon
the foregoing provisions of this letter in consummating the above-referenced
transaction.
TENANT:
------------------------------
By:
---------------------------
Its:
--------------------------
Address:
----------------------
<PAGE>
EXHIBIT A
Leases
1. Agreement of Sublease dated July 10, 1984 between Burger King
Corporation, as lessor, and Burger King Limited Partnership III, as
lessee, for real property located in Albuquerque, New Mexico and
commonly known as Burger King store #4213.
2. Agreement of Sublease dated July 16, 1984 between Burger King
Corporation, as lessor, and Burger King Limited Partnership III, as
lessee, for real property located in Montgomery, Alabama and commonly
known as Burger King store #4217.
3. Agreement of Sublease dated August 31, 1984 between Burger King
Corporation, as lessor, and Burger King Limited Partnership III, as
lessee, for real property located in Federal Heights, Colorado and
commonly known as Burger King store #4268.
4. Agreement of Sublease dated February 20, 1985 between Burger King
Corporation, as lessor, and Burger King Limited Partnership III, as
lessee, for real property located in Brooklyn Park, Maryland, and
commonly known as Burger King store #4482.
5. Agreement of Sublease dated August 26, 1985 between Burger King
Corporation, as lessor, and Burger King Limited Partnership III, as
lessee, for real property located in Fayetteville, North Carolina and
commonly known as Burger King store #4767.
6. Agreement of Sublease dated October 1, 1985 between Burger King
Corporation, as lessor, and Burger King Limited Partnership III, as
lessee, for real property located in San Bernardino, California and
commonly known as Burger King store #4808.
<PAGE>
EXHIBIT B
Lease Provisions
1. Albuquerque Lease:
Commencement Date: October 26, 1984
Options or Rights
to Renew: Lessee has 2 successive 5-year (or approximately
5-year) options to renew, as follows: one term
of 5 years commencing upon the expiration of the
original ten year term; one term of approximately
5 years commencing upon the expiration date of
the first extension term and expiring upon the
expiration of the original term of the Lease as
described in the Lease; and then 4 terms of 5
years each coincident with the extension terms
of the Lease as described in the Lease.
2. Montgomery Lease:
Commencement Date: September 23, 1984
Options or Rights
to Renew: Lessee has 2 successive 5-year (or approximately
5-year) options to renew, as follows: one term
of 5 years commencing upon the expiration of the
original ten year term; one term of approximately
5 years commencing upon the expiration date of
the first extension term and expiring upon the
expiration of the original term of the Lease as
described in the Lease; and then 4 terms of 5
years each coincident with the extension terms
of the Lease as described in the Lease.
3. Federal Heights Lease:
Commencement Date: December 7, 1984
Options or Rights
to Renew: Lessee has 2 successive 5-year (or approximately
5-year) options to renew, as follows: one term
of 5 years commencing upon the expiration of the
original ten year term; one term of approximately
5 years commencing upon the expiration date of
the first extension term and expiring upon the
expiration of the original term of the over Lease
as described in the Lease; and then 3 terms,
with the third extension of term terminates and
ending December 31, 2022; coincident with the
extension terms of the Lease.
<PAGE>
4. Brooklyn Park Lease:
Commencement Date: June 11, 1985
Options or Rights
to Renew: Lessee has 2 successive 5-year (or approximately
5-year) options to renew, as follows: one term
of 5 years commencing upon the expiration of the
original ten year term; one term of approximately
5 years commencing upon the expiration date of
the first extension term and expiring upon the
expiration of the original term of the over
Lease as described in the Lease; and then 4
terms of 5 years each coincident with the
extension terms of the Lease as described in the
Lease.
5. Fayetteville Lease:
Commencement Date: November 8, 1985
Options or Rights
to Renew: Lessee has 2 successive 5-year (or approximately
5-year) options to renew, as follows: one term
of 5 years commencing upon the expiration of the
original ten year term; one term of approximately
5 years commencing upon the expiration date of
the first extension term and expiring upon the
expiration of the original term of the Lease as
described in the Lease; and then 4 terms of 5
years each coincident with the extension terms
of the Lease as described in the Lease.
6. San Bernardino Lease:
Commencement Date: December 11, 1985
Options or Rights
to Renew: Lessee has 2 successive 5-year (or approximately
5-year) options to renew, as follows: one term
of 5 years commencing upon the expiration of the
original ten year term; one term of approximately
5 years commencing upon the expiration date of
the first extension term and expiring upon the
expiration of the original term of the Lease as
described in the Lease; and then 4 terms of 5
years each coincident with the extension terms
of the Lease as described in the Lease.
<PAGE>
EXHIBIT G
[attach Lease Support Agreement]
PURCHASE AND SALE AGREEMENT
BETWEEN
"THE MIDON COMPANIES"
("Seller")
AND
U. S. RESTAURANT PROPERTIES MASTER L. P.
("Buyer")
<PAGE>
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT ("Agreement") is entered into as of
June ________, 1997, by and between each member of the "MIDON COMPANIES"
IDENTIFIED AS A "Seller" on Schedule 1 hereto (each, a "Seller", and
collectively, the "Sellers"), and U. S. RESTAURANT PROPERTIES MASTER L. P., a
Delaware limited partnership ("Buyer").
W I T N E S S E T H:
In consideration of the mutual covenants set forth herein, Sellers and
Buyer agree as follows:
1. Conveyance of Properties. On the terms and subject to the conditions
set forth in this Agreement, at Closing, as hereinafter defined, each Seller
shall sell, convey and assign to Buyer, and Buyer shall buy and accept from each
Seller, subject to the Permitted Encumbrances, as hereinafter defined, the
seventeen (17) properties (individually, a "Property" and collectively, the
"Properties") set forth opposite such Seller's name on Schedule 1, attached
hereto including, with respect to each Property:
(a) good and indefeasible title in fee simple to the parcel of
land on which a restaurant is located (the "Land"), together with all rights and
interests appurtenant thereto, including the Seller's (i) right, title, and
interest, if any, in and to all adjacent streets, alleys, rights-of-way and any
adjacent strips or gores of real estate; and (ii) seller's right, title and
interest in and to all buildings, structures and other improvements located on
the Land ("Improvements");
(b) all (i) available and existing plans, drawings,
specifications, surveys, and other technical descriptions ("Plans and
Specifications"), (ii) assignable warranties ("Warranties"), and (iii)
assignable licenses or permits including certificates of occupancy ("Licenses");
and
(c) all of Seller's interest as lessor in the lease demising
space in each Property, (including all amendments, if any) ("Lease"), and the
security deposit ("Deposit"), if any, made by tenant ("Tenant") holding under
the Lease.
2. Earnest Money. Within three (3) business days after the date both
Buyer and Seller execute and deliver this Agreement, Buyer shall deliver to
Lawyers Title Insurance Corporation, 600 North Pearl, Suite 700, Dallas, Texas
75201, Attention: John Pettiette ("Title Company") $50.00 ("Non-Refundable
Earnest Money") in consideration for this Agreement and the Inspection Period,
as hereinafter defined. The Title Company shall immediately deliver the
Non-Refundable Earnest Money to Seller and the Non-Refundable Earnest Money
shall be retained by Seller in all events. In addition, at the same time, the
Buyer shall deposit $135,000.00 with Title Company (the "Earnest Money"). The
Earnest Money shall be deposited in escrow or trust accounts that are
interest-bearing, readily available, liquid and federally insured to the full
extent of the Earnest Money deposited therein so that no portion of the Earnest
Money shall ever be at risk. The Earnest Money shall include any interest earned
thereon. Title Company shall deliver the Earnest Money only in accordance with
this Agreement.
<PAGE>
3. Purchase Price.
(a) The purchase price which Sellers shall accept and Buyer
shall pay (the "Purchase Price") for the Properties shall be $13,505,487.00,
which shall be increased by the Percentage Rent Adjustment (as hereafter
defined). The Percentage Rent Adjustment shall be an amount equal to the product
of (i) ten (10) multiplied by (ii) the total percentage rent received by Seller
from the Tenants under the Leases during the twelve (12) month period ending on
the last day of the month preceding the Closing Date as herein defined;
provided, however, if Seller received percentage rent in lieu of base rent
during such period, the percentage rent shall be determined by reducing the
total rent received by Seller under such lease by the base rent due under such
lease.
(b) The Purchase Price shall be paid at Closing by the
delivery by Buyer to Sellers of (i) cash in the amount of $2,600,000.00, and
(ii) Units of limited partnership interest in Buyer (the "Units") equal to the
sum of (x) $10,905,487.00, and (y) the Percentage Rent Adjustment. The Units
delivered at Closing will not be registered under U. S. securities laws, but
will be subject to such registration rights as are set forth on Exhibit I. Buyer
will be subject to such registration obligation with respect to the Units as are
set forth in the Registration Rights Agreement, attached hereto as Exhibit I.
The Purchase Price will be paid to each Seller as set forth on Schedule 2, and
Buyer and Seller agree to treat consistently for tax and accounting purposes the
allocation set forth on Schedule 2. For purposes of determining the credit
against the Purchase Price for Units delivered hereunder, each Unit shall be
valued at the product of (A) 107% multiplied by (B) the average closing price of
the Units on the New York Stock Exchange for the five (5) trading days
immediately preceding Closing, and shall be subject to the Unit Guaranty of the
Purchaser, attached as Exhibit G hereto. The Purchase Price shall be paid in
trust to the Title Company at Closing and distributed immediately by the Title
Company as designated by this Agreement. The Purchase Price shall be credited by
the Earnest Money (and any interest earned thereon) to the extent delivered to
Seller and shall be adjusted at Closing as described in this Agreement.
(c) At Closing, Sellers shall execute an instruction letter
("Transfer Agent Instruction Letter") to American Stock Transfer, the transfer
agent for the Units, irrevocably instructing the transfer agent to withhold from
distributions on Seller's Units on the first payment date for dividends
following the Closing Date an amount equal to the Dividend Adjustment, and to
pay the Dividend Adjustment to Buyer. The Dividend Adjustment shall be an amount
equal to the product of (x) the number of Units (as defined in Section 3(b)
hereof) delivered to Seller at Closing multiplied by (y) the declared dividend
rate on the Units as of the record date for declaration of dividends immediately
preceding the Closing Date ("Record Date"), multiplied by (z) the ratio of (A)
the number of days between the Record Date and the Closing Date, divided by (B)
ninety (90), and reduced by the sum of the following adjustments: (1) the
interest which would accrue on the Dividend Adjustment at an eleven percent
(11.0%) annual rate between the Closing Date and the record date for the
declaration of dividends immediately following the Closing Date ("Post Closing
Record Date") plus (2) the product of (a) the excess, if any, of (i) the
dividend rate per Unit as of the Record Date, less (ii) the dividend rate per
Unit as of the Post Closing Record Date, multiplied by (b) the number of Units
delivered to Seller at the Closing.
<PAGE>
(d) No proration shall be made of real estate property taxes,
utility charges and maintenance expenses, since these expenses are obligations
of the Tenant pursuant to the Leases. Rental payments under the Leases shall be
pro-rated as of 11:59 o'clock p.m. on the Closing Date, as between Seller and
Buyer.
4. Delivery of Documents by Seller. On or before the date which is
fourteen (14) days following the date the Earnest Money is paid by Buyer in
accord with the provisions of Section 2 above of this Agreement, Seller shall
deliver to Buyer the following documents ("Documents"), or with respect to the
Documents listed in Section 4(a) hereof, Buyer shall obtain at its cost and
expense, with respect to each Property:
(a) Commitments for title insurance covering the fee estate in
the Land and the Improvements ("Title Commitments") from the Title Company,
setting forth the status of the title of the Land and the Improvements, showing
all matters of record affecting the Land and the Improvements, together with a
true, complete, and legible copy of all documents referred to in the Title
Commitments;
(b) A current "as built" Survey for each Property drawn under
the minimum standard detail requirements for ALTA/ACSM land title surveys
listing all easements and encroachments affecting each Property, identifying
parking spaces (including handicapped designation) and ingress and egress, and
containing a flood plain certification, the costs for which surveys shall be
equally apportioned between Buyer and Seller;
(c) Current Phase I Environmental Liability Assessment for
each Property (the "Environmental Reports") for which the Seller shall pay the
costs;
(d) All current and historical sales information and balance
sheets and information of Tenant provided to Sellers under the Leases covering
the period August 1, 1994 to the most recent submissions of financial statements
required under the Leases (the "Financial Statements");
(e) Copy of existing insurance binder or certificate of
insurance covering the Property and Improvements;
(f) Tax bills for each Property for the most recent three (3)
tax years; and
(g) Copies of all existing (i) Plans and Specifications, (ii)
Warranties, (iii) Licenses, and (iv) Leases.
<PAGE>
5. Right of Entry, Inspection, Termination.
(a) From the date hereof to the Closing Date, each Seller
shall afford Buyer and its representatives a continuing right to inspect, at
reasonable hours, the Properties, Documents, and all other documents or data
pertaining to the Properties. Buyer shall indemnify and hold each Seller
harmless from and against any loss, claim or liability arising or resulting from
the inspections made by Buyer. At any time prior to 5:00 p.m. on the date that
is thirty (30) days after the last to be delivered of any of the Documents
referenced in Section 4(a) through 4(f) hereof (the "Inspection Period"), Buyer
may terminate this Agreement as to all of the Properties pursuant to Section 14,
in its sole and absolute discretion, and obtain a return of the Earnest Money.
All such inspections shall be upon reasonable prior notice to Sellers and made
so as to minimize any adverse impact on tenant's business at each site. The
costs of any and all inspections made by Buyer shall be the sole and exclusive
cost of the Buyer.
(b) Buyer's failure to terminate this Agreement by delivering
the notice by the time called for in Section 5(a) shall terminate Buyer's right
to terminate this Agreement under that Section.
6. Title. Buyer shall have the right, at any time during the Inspection
Period, to object in writing to any adverse matters reflected by the Surveys or
the Title Commitments. All matters to which Buyer objects, or which are listed
as a "requirement" for the Title Company to issue the title policy are
"Non-Permitted Encumbrances". All matters to which such objection is not made
are "Permitted Encumbrances". Seller, at its sole cost and expense, shall have
the right, but not the obligation, to cure or remove all Non-Permitted
Encumbrances within ten (10) business days following the Seller's receipt of
such written objection from Buyer sent or delivered during the Inspection
Period. If Seller does not cause all of the Non-Permitted Encumbrances to be
removed or cured or if the Title Company is not able to insure over such
objections within the above described ten (10) day period, then this Agreement
shall automatically terminate unless Buyer delivers notice to Seller within two
(2) days after the expiration of the above described ten (10) day period of its
election to purchase the Property subject to the Non-Permitted Encumbrances
without any reduction in the Purchase Price. The existing Leases for each
Property shall not constitute a Non Permitted Encumbrance. Buyer shall not
unreasonably deny Seller's written request made within the said 10-day period
for additional time to cure or remove such Non Permitted Encumbrance.
7. Representations and Warranties.
(a) Seller Representations and Warranties. Each Seller, with
respect to the Property or Properties owned by such Seller, represents and
warrants to, and covenants with Buyer that:
(i) Subject to Section 8, Seller has the full right,
power, and authority to execute, deliver, and perform this Agreement,
and this Agreement, when executed and delivered by Seller and Buyer,
shall constitute the valid and binding agreement of Seller, and shall
be enforceable against Seller in accordance with its terms.
<PAGE>
(ii) Subject to Section 8, all requisite action on
the part of Seller has been taken by Seller in connection with making
and entering into this Agreement and the consummation of the purchase
and sale provided for herein, and no consents or approvals are required
from any party in order to consummate such purchase and sale.
(iii) No attachments, execution proceedings,
assignments for the benefit of creditors, insolvency, bankruptcy,
reorganization or other proceedings are pending or, to the best of
Seller's knowledge, threatened against Seller, which would materially
adversely affect the ability of Seller to consummate the transactions
contemplated by this Agreement.
(iv) Seller has not received any written notice from
appropriate governmental authorities that any Property is in violation
of any applicable laws.
(v) Seller has not received any written notices from
any insurance company, board of fire underwriters or similar
organization regarding any defects in any Property.
(vi) The Improvements and their use shall be in full
compliance with all applicable zoning, building, environmental,
subdivision and other laws, rules, and regulations applicable thereto,
as well as any private restrictive covenants affecting the Properties,
and shall be ready for use and occupancy, and all necessary
certificates of approval and occupancy shall have been issued and
furnished by all authorities having or claiming to have jurisdiction
over the construction, use or occupancy of the Improvements.
(vii) Except for the Permitted Encumbrances and
existing Leases, on the Closing Date, Seller will own each Property
free and clear of all liens, restrictions, charges and encumbrances.
From the date hereof, and until the Closing or earlier proper
termination of this Agreement, Seller shall not sell, assign or create
any right, title or interest whatsoever in or to any Property or create
any liens, encumbrances or charge thereon without discharging the same
at or prior to the Closing Date.
(viii) To the best of Seller's knowledge, the
Financial Statements are and will be true, correct, accurate and
complete and will not omit to state any fact or condition, the omission
of which makes such statements misleading.
(ix) Except as disclosed on Schedule 3, Seller has no
knowledge of any litigation, or possible litigation, or of claims of
any kind, or of any facts or circumstances which may in any way
adversely affect Seller or the Property, including regulations of the
Environmental Protection Agency and any state regulatory body
concerning the disposal of grease, hazardous waste, petroleum, any
underground storage tanks or any other hazardous materials or
regulations of the Americans with Disabilities Act providing for access
to the premises, dining areas and bathroom areas of any Property
("Applicable Laws").
<PAGE>
(x) To the best of Seller's knowledge, all structures
and Improvements upon each Property have been constructed and installed
in full compliance with the Plans and Specifications and with all
applicable laws, statutes, ordinances, codes, covenants, conditions and
restrictions of any kind or nature affecting such Property which were
in effect at the time of such construction.
(xi) Seller has no information or actual knowledge of
any proposed change in any of the Applicable Laws or any judicial or
administrative action or any action by adjacent landowner or any facts
or conditions relating to any Property which would materially and
adversely affect, prevent or limit the use of such Property as a
restaurant.
(xii) Seller has received no written notice of
taking, condemnation, betterment or assessment, actual or proposed,
with respect to any Property, excepting only regularly issued real
property tax assessments for such Property.
(xiii) No portion of any Property lies within any
100-year flood plain, to the best of Seller's knowledge.
(xiv) The Leases are in full force and effect and
Seller has no knowledge of any event which would constitute a default
or any event of default either by Seller or Tenant under any lease.
(b) Buyer Representations and Warranties. Buyer hereby
represents and warrants to, and covenants with each Seller that:
(i) Buyer has the full right, power and authority to
execute, deliver and perform this Agreement, and all transactions
contemplated by this Agreement, and this Agreement, when executed and
delivered by Buyer to Seller, shall constitute the valid and binding
agreement of Buyer to Seller and shall be enforceable against Buyer in
accordance with its terms.
(ii) All requisite action on the part of Buyer has
been taken by Buyer in connection with making and entering into this
Agreement and the consummation of the purchase and sale contemplated by
this Agreement, and no consents or approvals are required from any
other entity or party in order to consummate such purchase and sale.
(iii) Buyer has no knowledge of any litigation, or
possible litigation, or of claims of any kind, or of any facts or
circumstances, which may in any way adversely affect Buyer and Buyer's
guarantees that are intended to be included in the Guarantee Agreement
now set forth as Exhibit G to this Agreement.
<PAGE>
(iv) Buyer has no knowledge of, and no reason to
believe, that the payment by Buyer to Seller of the Units of limited
partnership in Buyer, as described in Section 3 hereof, is, or will be,
unlawful or in violation of any law, rule or regulation of federal or
state securities laws, or of the Securities and Exchange Commission or
of any other government agency or entity having jurisdiction over such
matters or transactions involving such Units of limited partnership.
When used in this Section 7, the term "knowledge", or "the best
knowledge" of Seller or Buyer means the actual knowledge of such party's
executive officers or supervisory employees without a duty of inquiry, and does
not encompass constructive knowledge, as for example, from the Tenants at the
Properties with respect to Seller.
All representations and warranties made in this Agreement
shall be deemed to be made on the date hereof and again on the Closing Date. It
shall be a condition of each parties' obligation to close that all warranties
and representations made by the other party hereto are true on the Closing Date.
If either party discovers prior to Closing, that any representation or warranty
made in this Agreement by the other party is not true, then the party
discovering such untrue representation or warranty shall have the right, as its
sole and exclusive remedies, to either (i) terminate this Agreement in
accordance with Section 14 by delivering notice to the other party prior to the
Closing Date, or (ii) proceed to close the purchase and sale of the Properties
subject to such untrue warranty or representation without any adjustment in the
Purchase Price. If either party (the "Indemnified Party") discovers after
Closing that any representation or warranty made in this Agreement by the other
party is not true, the Indemnified Party shall be entitled to exercise any and
all rights and remedies available at law or in equity as a result of any breach
of any of such representations or warranties, provided as a condition to the
Indemnified Party's right to do so, the Indemnified Party must deliver written
notice of such breach to the other party, within one (1) year after the Closing
Date and the Indemnified Party must exercise such remedies including the filing
of any suit or other action within two (2) years after the Closing Date, based
on a breach thereof of which the Indemnified Party gave the other party such
notice within such one (1) year period after the Closing Date.
8. Conditions Precedent. Seller's obligation to sell the Properties to
Buyer is subject to Seller obtaining the required approval of its partners to
such sale on or before the Closing Date. Seller shall use its best efforts to
cause the satisfaction of all conditions and obligations of Seller set forth in
this Section 8 on or before the Closing Date. If Seller does not obtain such
required approvals, then Seller shall have the right to cancel this Agreement by
furnishing written notice of such cancellation in accordance with Section 10, in
which case the provisions of Section 14(c) of this Agreement shall apply.
<PAGE>
9. Closing. The closing ("Closing") of the sale of the Properties by
Seller to Buyer shall occur on the first business day fifteen (15) days after
the last day of the Inspection Period, or at such earlier date agreed to by
Seller and Buyer in writing (the date such Closing occurs is hereinafter
referred to as the "Closing Date"). Closing shall occur in the offices of Dennis
F. Irwin, 26 Computer Drive West, Albany, New York 12205, or at another place
and or time as mutually agreed upon by Seller and Buyer, commencing at 10:00
o'clock a. m. on the Closing Date. At Closing:
(a) Buyer shall deliver to each Seller (i) the Purchase Price
in accordance with Section 3; (ii) evidence satisfactory to Seller and the Title
Company that the person executing documents on behalf of Buyer has full right,
power and authority to do so; (iii) Assignment and Assumption of Lease Agreement
in the form of Exhibit F; (iv) the General Assignment in the form of Exhibit C;
(v) the Guaranty Agreement in the form of Exhibit G; (vi) the Registration
Rights Agreement in the form of Exhibit I; and (viii) the Investment Letter in
the form of Exhibit H, each and all of which shall be in proper form and be
properly executed.
(b) Each Seller shall deliver or cause to be delivered to
Buyer the following ("Closing Documents"):
(i) Special Warranty Deed in the form of Exhibit B,
conveying to Buyer the Land and Improvements subject to the Permitted
Encumbrances; General Assignment in the form of Exhibit C; IRC Section
1445 Certification in the form of Exhibit E; Assignment and Assumption
of Lease Agreement in the form of Exhibit F; Tenant Estoppel
Certificate in the form of Exhibit J; all fully executed, sworn to, and
acknowledged, as appropriate, by Seller or Tenant;
(ii) An executed Investment Letter substantially in
the form of Exhibit H attached hereto;
(iii) An executed Registration Rights Agreement in
the form of Exhibit I;
(iv) An executed Transfer Agent Instruction Letter;
(v) Evidence satisfactory to Buyer and Title Company
that the person or persons executing the Closing Documents on behalf of
Seller have full right, power and authority to do so; and
(vi) The originals of all Leases, Warranties,
Licenses and Plans and Specifications.
(c) Buyer shall be solely responsible for the costs of
obtaining the Title Commitments, the Owner Policies of Title Insurance for the
Properties, escrow fees of the Title Company and recording costs. Each Seller
shall pay, with respect to such Seller's Property, applicable deed stamp and
transfer taxes and the Environmental Reports. Buyer and Seller shall share
equally the Survey costs.
<PAGE>
(d) Each of Seller and Buyer shall pay its own legal fees
incurred in connection with this Agreement; provided, however, that if a suit is
filed by Buyer or Seller alleging a breach hereof or default hereunder, the
non-prevailing party shall pay all reasonable legal fees of the prevailing party
resulting from such suit.
(e) Seller shall deliver to Buyer possession of the Properties
at the Closing, subject to the Leases and Permitted Encumbrances.
10. Notices. Any notice provided or permitted to be given under this
Agreement must be in writing and may be served by (a) depositing same in the
United States mail, addressed to the party to be notified, postage prepaid and
certified, with return receipt requested, (b) by delivering the same in person
to such party, or (c) by delivering the same by confirmed facsimile followed by
ordinary mailing of same, with proper postage thereon, within 24-hours after
such facsimile transmission. Notice given in accordance herewith shall be
effective upon the earlier of receipt at the address of the addressee or on the
third (3rd) day following deposit of same in the United States mail as provided
for herein, regardless of whether same is actually received. For purposes of
notice, the addresses of the parties shall be as follows:
If to Seller: c/o Jones and Little, CPA
86 West Main Street
East Islip, New York 11730
Attn: Michael P. Jones, Donald Cepiel
If to Buyer: U. S. Restaurant Properties Master L. P.
Attn: Fred H. Margolin
5310 Harvest Hill Road
Suite 270, Lock Box 168
Dallas, Texas 73230
Telephone No. 972-387-1487
Facsimile No. 972-490-9119
Either party may change its address for notice by giving ten (10) days prior
written notice thereof to the other party.
<PAGE>
11. Commissions. The Sellers and Buyer represent and warrant to each
other that no broker or real estate agent brought about this Agreement or the
sales/purchases contemplated by it. Buyer shall defend, indemnify, and hold
harmless Seller from any claim by any party claiming under Buyer for any
brokerage, commission, finder's, or other fees relative to this Agreement or the
sale of the Properties, and any court costs, attorneys' fees, or other costs or
expenses arising therefrom and alleged to be due by authorization of Buyer.
Seller shall defend, indemnify and hold harmless Buyer from any claim by any
party claiming under Seller (other than Broker) for any brokerage, commission,
finder's, or other fees relative to this Agreement or the sale of the
Properties, and any court costs, attorneys' fees, or other costs or expenses
arising therefrom and alleged to be due by authorization of Seller.
12. Assigns. This Agreement shall inure to the benefit of and be
binding on the parties hereto and their respective heirs, legal representatives,
successors and assigns. Buyer may assign to U. S. Restaurant Properties
Operating L. P., a Delaware limited partnership, the right to the conveyance of
the Properties on the Closing Date; provided, however, Buyer shall remain liable
for all obligations hereunder.
13. Destruction, Damage or Taking Before Closing. In the event of
damage to or destruction of all or any portion of any Property by fire or other
casualty, Seller shall promptly notify Buyer. If Seller reasonably estimates
that $50,000.00 or less is required to be expended to repair or restore the
damaged or destroyed Property or portion thereof ("Repair Cost"), this Agreement
shall remain in full force and effect, and Seller shall, at its option, either
(i) repair such damage or destruction, or, if such damage or destruction has not
been repaired prior to Closing, (ii) require Buyer to take title to the
Property, assign to Buyer all available casualty insurance proceeds and
indemnify Buyer (in form and content satisfactory to Buyer) for all costs and
expenses of repair in excess of available insurance proceeds. If Seller
reasonably estimates that the Repair Cost exceeds $50,000.00, Buyer shall have,
as its sole and exclusive remedies, (i) the option to terminate this Agreement
in accordance with Section 14 within ten (10) business days after its receipt of
notice from Seller as set forth above, by notice in writing to Seller given in
accord with Section 10 hereof, or (ii) if Buyer does not elect to terminate,
this Agreement shall remain in full force and effect, Buyer shall take title to
the Property subject to such damage to or destruction, with an assignment by
Seller to Buyer of all available casualty insurance proceeds. In the event of an
eminent domain taking or the issuance of a notice of an eminent domain taking
with respect to all or any portion of the Property, Seller shall promptly notify
Buyer. Buyer shall have, as its sole and exclusive remedies, (i) the option to
terminate this Agreement in accordance with Section 14 within ten (10) business
days after its receipt of such notice from Seller, by notice in writing to
Seller given in accord with Section 10 hereof, or (ii) if Buyer does not elect
to terminate this Agreement, this Agreement shall remain in full force and
effect, Buyer shall be obligated to consummate this transaction for the full
Purchase Price, and Buyer shall be entitled to receive all eminent domain awards
and, to the extent the same may be necessary and appropriate, Seller shall
assign to Buyer at Closing Seller's rights to such awards apportioned between
Buyer and Seller as to any such award applicable before and after the Closing
Date. In no event shall the Purchase Price be reduced, except to the extent of
any deductible amounts payable in connection with insurance proceeds assigned by
Seller to Buyer.
<PAGE>
14. Termination and Remedies.
(a) If Buyer fails to consummate the purchase of the
Properties pursuant to this Agreement for any reason other than termination
hereof pursuant to a right granted to Buyer in Sections 5, 6, 7 or 13, or
terminated by Seller pursuant to Section 8, then Seller, as its sole and
exclusive remedy, shall have the right to terminate this Agreement by notifying
Buyer thereof in accord with Section 10 hereof, in which case the Title Company
shall promptly deliver the Earnest Money to Seller, whereupon neither party
shall have any further rights or obligations hereunder. Seller and Buyer hereby
acknowledge and agree they have included this provision for payment of
liquidated damages because, in the event of a breach by Buyer, the actual
damages incurred by Seller can reasonably be expected to approximate the amount
of liquidated damages called for, and because the actual amount of such damages
would be difficult if not impossible accurately to measure.
(b) If Seller fails to consummate the sale of the Properties
pursuant to this Agreement for any reason other than (i) termination hereof by
Buyer pursuant to Sections 5, 6, 7 or 13, (ii) Buyer's failure to perform its
obligations hereunder or, (iii) Seller's termination of this Agreement pursuant
to Section 8, Buyer shall have the right, as its sole and exclusive remedies, to
either (x) terminate this Agreement by notifying Seller thereof in accord with
Section 10, in which case the Title Company shall deliver the Earnest Money to
Buyer, whereupon neither party hereto shall have any further rights or
obligations hereunder, or (y) enforce specific performance of Seller's
obligation hereunder and/or seek any other remedies available at law or in
equity.
(c) If Buyer properly terminates this Agreement pursuant to a
right granted Buyer in Sections 5, 6, 7 or 13, or if Seller terminates this
Agreement pursuant to Section 8, then the Title Company shall deliver the
Earnest Money to Buyer whereupon neither Buyer or Seller shall have any further
rights or obligations hereunder.
15. Miscellaneous. Each of Buyer and Seller agrees with the other that
it has no present intention to make any public announcement of the purchase and
sale transaction contemplated hereby or of any of the terms thereof, and shall
obtain the written consent of the other party prior to making any public
announcement. Both Seller and Buyer shall cooperate with one another and in a
timely manner execute all documents reasonably required to give effect to the
purchase and sale provided for herein. Seller shall provide without cost or
expense, all documentation reasonably requested by Buyer after Closing in order
to comply with Buyer's disclosure and filing requirements under applicable
securities laws and shall execute all necessary consents in connection
therewith. If any provision of this Agreement is adjudicated by a court having
jurisdiction over a dispute arising herefrom to be invalid or otherwise
unenforceable for any reason, such invalidity or unenforceability shall not
affect the other provisions hereof. This Agreement shall be governed and
construed in accordance with the laws of the State of Texas. This Agreement is
the entire agreement between Seller and Buyer concerning the sale of the
Properties and no modification hereof or subsequent agreement relative to the
subject matter hereof shall be binding on either party unless reduced to writing
and signed by the party to be bound.
<PAGE>
The provisions of Sections 3, 5, 7, 9, 10 and 12 shall survive Closing, but the
right to terminate this Agreement shall not survive Closing. Schedules 1, 2 and
3 and Exhibits A-J attached hereto are incorporated herein by this reference for
all purposes. Time is of the essence in the performance of each and every
provision of this Agreement. In the event that the last day for taking any
action or serving notice under this Agreement falls on a Saturday, Sunday or
legal holiday, the time period shall be extended until the following business
day.
16. Date of Agreement. All references in this Agreement to "the date
hereof" or similar references shall be deemed to refer to the last date, in
point of time, on which all parties hereto have executed and received a fully
executed copy of this Agreement. This Agreement constitutes an offer by Buyer to
purchase the Properties on the terms and conditions and for the Purchase Price
specified herein. Unless sooner terminated or withdrawn by notice in writing to
Seller in accord with Section 10, this offer shall lapse and terminate at the
close of Buyer's business day ten (10) days following execution of this
Agreement by Buyer and delivered in duplicate originals to Seller, unless, prior
to such time, Seller has returned to Buyer one (1) fully executed original of
this Agreement.
IN WITNESS WHEREOF, Buyer and Seller have executed this Agreement as of
the date and time shown by their respective signatures.
BUYER:
U.S. RESTAURANT PROPERTIES MASTER L. P.
By: QSV PROPERTIES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE>
SELLER:
HOME RUN ASSOCIATES
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
SARATOGA ASSOCIATES
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
LATHPAR CORPORATION
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
DELPAR CORPORATION
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
<PAGE>
SCHENECPAR CORPORATION
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
M & D DEVELOPMENT
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
WESTMERE ASSOCIATES
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
WOLF ROAD ENTERPRISES
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
<PAGE>
The undersigned hereby executes this Agreement for the sole purpose of
(i) acknowledging receipt of the Earnest Money and the Non-Refundable Earnest
Money; (ii) to evidence its agreement to hold the Non-Refundable Earnest Money
and the Earnest Money in trust for the parties hereto in accordance with the
terms of this Agreement; (iii) to pay such Non-Refundable Earnest Money and
Earnest Money out in accordance with the terms of this Agreement; (iv) to hold
such Earnest Money in an interest-bearing account; and (v) to otherwise comply
with the escrow conditions of this Agreement.
TITLE COMPANY:
LAWYERS TITLE INSURANCE CORPORATION
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
Date of Execution:
--------------
<PAGE>
Attachments:
Schedule 1 - Selling Partnership and Property Description
Schedule 2 - Allocation of Purchase Price Among Sellers
Schedule 3 - Disclosure Schedule
Schedule 4 - Percentage Rents
Exhibit A - Intentionally Deleted
Exhibit B - Special Warranty Deed
Exhibit C - General Assignment
Exhibit D - Intentionally Deleted
Exhibit E - IRC Section 1445 Certification
Exhibit F - Assignment and Assumption of Lease Agreement
Exhibit G - Guaranty Agreement
Exhibit H - Investment Letter
Exhibit I - Registration Rights Agreement
Exhibit J - Tenant Estoppel Certificate
<PAGE>
SCHEDULE 1
SELLING PARTNERSHIP AND PROPERTY DESCRIPTION
Selling Partnership Location
<PAGE>
SCHEDULE 2
ALLOCATION OF PURCHASE PRICE AMONG SELLERS
Location and Allocated
Selling Partnership Units Cash Purchase Price
<PAGE>
EXHIBIT A
PERSONAL PROPERTY
Intentionally Deleted
<PAGE>
EXHIBIT B
SPECIAL WARRANTY DEED
_____________________________________________________________ ("Grantor")
for and in consideration of the sum of Ten Dollars ($10.00) cash and other good
and valuable considerations to it in hand paid by ("Grantee"), the receipt and
sufficiency of which are hereby acknowledged and confessed, hereby GRANTS,
SELLS, RELEASES and CONVEYS and by these presents does GRANT, SELL, RELEASE and
CONVEY unto Grantee the land described in Exhibit A attached hereto and made a
part hereof for all purposes, together with all improvements thereon
("Property"), subject to the matters described in Exhibit A attached hereto and
made a part hereof for all purposes ("Permitted Encumbrances").
TO HAVE AND TO HOLD the Property, together with all and singular the
rights and appurtenances thereto in anywise belonging unto the said Grantee, its
successors and assigns, forever, subject to the Permitted Encumbrances; and
Grantor does hereby bind itself, to WARRANT all and singular the said Property,
subject to the Permitted Encumbrances, unto the said Grantee, its successors and
assigns, against every person whomsoever lawfully claiming or to claim the same
or any part thereof, by, through, or under Grantor, but not otherwise.
That, in compliance with Section 13 of the Lien Law, the Grantor will
receive the consideration for this conveyance and will hold the right to receive
such consideration as a trust fund to be applied first for the purpose of paying
the cost of the improvement and will apply the same first to the payment of the
cost of the improvement before using any part of the total of the same for any
other purpose.
EXECUTED as of the ______ day of____________________, 1997.
-------------------------------------
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE>
STATE OF }
}
COUNTY OF }
This instrument was acknowledged before me on , 1997, by
____________________________, ____________________________ of , a
______________________________, on behalf of said _______________________.
Notary Public, State of
Attachments:
Exhibit A - Property Description and
Permitted Encumbrances
Grantee's Mailing Address:
- -------------------------
- -------------------------
- -------------------------
- -------------------------
<PAGE>
EXHIBIT C
GENERAL ASSIGNMENT
THIS GENERAL ASSIGNMENT is made and entered into as of the __________
day of ___________________, 1997, by ("Seller"), to
________________________________________________ ("Buyer").
WHEREAS, Seller, by Special Warranty Deed dated of even date herewith,
has conveyed to Buyer the land described in Exhibit A attached hereto ("Land"),
and all improvements ("Improvements") located thereon. (The Land and
Improvements are referred to as the "Property"); and
WHEREAS, Seller and Buyer intend that Seller also convey to Buyer all
of the Conveyed Property (as hereinafter defined).
NOW, THEREFORE, Seller, for and in consideration of Ten Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged and confessed, hereby agrees as follows:
1. Seller has ASSIGNED, and by these present does hereby ASSIGN, to Buyer
all of Seller's interest in and to the following ("Conveyed Property"):
a. All agreements that relate to the ownership, maintenance and operation
of the Property ("Property Agreements") attached hereto as Exhibit A;
b. All plans, drawings, specifications, surveys, and other technical
descriptions;
c. All warranties with respect to the Property and the Conveyed Property as
are capable of assignment.
2. Buyer shall hold Seller harmless from, and indemnify Seller for and
against, any and all claims, loss, damage, liability, cost and expense
(including without limitation attorneys' fees) with respect to the Conveyed
Property occurring from and after the date hereof.
3. This Assignment shall be binding on Seller, its successors and assigns,
and shall inure to the benefit of Buyer, its successors and assigns.
4. To the extent that there are any, Buyer-Assignee hereby assumes the
obligations of the Seller-Assignor that accrue from and after the date hereof as
to such Property Agreement and warranties (exempting tradenames, trademarks and
other items of such nature) to the same extent that such obligation could be
enforced against the Seller-Assignor had this Assignment not been made.
<PAGE>
EXECUTED as of the date first above written.
---------------------------------------------------
, Seller
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
U. S. RESTAURANT PROPERTIES MASTER L. P.
By: QSV PROPERTIES, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
<PAGE>
EXHIBIT D
BILL OF SALE
Intentionally Deleted
<PAGE>
EXHIBIT E
IRC SECTION 1445 CERTIFICATION
SUBJECT PROPERTY: That certain tract of land ("Land"), situated in
State of __________________ described by
metes and bounds in Exhibit A attached hereto.
SELLER: _____________________________________
PURCHASER: U. S. RESTAURANT PROPERTIES MASTER L. P.
To inform Purchaser that the withholding of tax is not required upon the
disposition of a U. S. real property interest by Seller, the undersigned hereby
certifies the following:
1. Seller is not a foreign corporation, foreign partnership,
foreign trust or foreign estate (as those terms are defined in the
Internal Revenue Code and Income Tax Regulations);
2. Seller's U.S. employer identification number is
______________________, and
3. Seller's office address is .
Seller understands that this certification may be disclosed to the
Internal Revenue Service by Purchaser and that any false statement contained
herein could be punished by fine, imprisonment, or both.
Under penalties of perjury, I declare that I have examined this
certification and to the best of my knowledge and belief, it is true, correct
and complete, and I further declare that I have authority to sign this document.
EXECUTED this _______ day of __________________________, 1997.
---------------------------------------------------
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
<PAGE>
EXHIBIT F
ASSIGNMENT AND ASSUMPTION OF LEASE AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION OF LEASES is made and entered into as of the
______ day of ___________________, 1997, by _____________________________
("Assignor"), and U. S. RESTAURANT PROPERTIES MASTER L. P. ("Assignee").
W I T N E S S E T H :
WHEREAS, the Assignor is the lessor under the lease agreement between
___________________ and _____________________________ dated
______________________________ (the "Lease"), which Lease affects the real
property described in Exhibit A attached hereto and made a part hereof for all
purposes and the improvements thereon (the "Property"); and
WHEREAS, Assignor is selling the Property together with its interest
under the Lease to Assignee.
NOW THEREFORE, Assignor, for and in consideration of the sum of Ten and
No/100 Dollars ($10.00) and other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged and confessed, hereby agrees as
follows:
1. Assignor has ASSIGNED, and by these presents does hereby ASSIGN, to
Assignee, its successors and assigns all of its right, title and interest in and
to the Lease, and any funds or other collateral of the tenant deposited with
Assignor as security deposit pursuant to the Lease.
2. Assignee hereby assumes the obligations of Assignor as lessor under
the Lease accruing from and after the date hereof. Assignee shall hold Assignor
harmless from, and indemnify Assignor for and against, any and all claims, loss,
damages, liability, cost and expense (including attorneys fees) with respect to
the Lease arising or accruing from and after the date hereof. Assignor agrees to
hold Assignee harmless from and indemnify Assignee for and against, any and all
claims, loss, damages, liability, cost and expense (including attorney's fees)
with respect to the Lease arising or occurring prior to the date hereof.
3. This Assignment and Assumption of Lease shall be binding upon, and
shall inure to the benefit of, all of the parties hereto and their respective
successors and assigns.
<PAGE>
EXECUTED as of the day and year first above written.
ASSIGNOR:
----------------------------------------------
Witnessed by: Address:
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
ASSIGNEE:
----------------------------------------------
Witnessed by: Address:
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
<PAGE>
EXHIBIT G
GUARANTY AGREEMENT
This Guaranty Agreement ("Guaranty") is made as of the ________ day of
June, 1997, by U. S. RESTAURANT PROPERTIES MASTER L. P., a Delaware limited
partnership ("Guarantor"), with offices at 5310 Harvest Hill, Suite 270, Dallas,
Texas 75230, to THE MIDON COMPANIES, a ____________________ ("Holder"), with
offices at _______________________, pursuant to the Purchase and Sale Agreement
between Guarantor and The Midon Companies, dated as of ___________________,
1997, (the "Purchase Agreement").
1. Definitions. For purposes hereof, the following terms have the meanings
set forth below:
a. Closing Date. The Closing Date as defined in the Purchase Agreement.
b. Guaranteed Price. The product of (i) 113% multiplied by (ii) the average
closing price of the Units on the New York Stock Exchange for the five (5)
trading days immediately preceding the Closing Date.
c. Guaranteed Date. The date twenty-one (21) months following the Closing
Date; provided, however, that Guarantor, in its sole discretion, by written
notice to Holder on or before the Guaranteed Date, may extend the Guaranteed
Date to the date twenty-four (24) months following the Closing Date.
d. Actual Price. The average closing price of the Units on the New York
Stock Exchange for the twenty (20) trading days immediately preceding the
Guaranteed Date.
e. Number of Units. The number of units of limited partnership of Guarantor
issued to Holder on the Closing Date and held on the Guaranteed Date.
f. Unit. Unit shall mean a depositary receipt evidencing ownership of one
share of limited partnership interest of Guarantor.
g. Sale of Units. The sale or other disposition of Units other than any
transfer by operation of law, such as by will or intestate disposition, any
transfer by gift or any transfer for which the consideration is not payable in
cash or cash equivalents.
h. Affiliates. Any person who controls, is controlled by, or is under
common control with Holder, with control being defined as the ownership of ten
percent (10.0%) or more of equity ownership or voting control of any such
person, any partner of Holder, and any immediate family member of a partner of
Holder.
<PAGE>
2. Guaranty. If, as of the Guaranteed Date, the Guaranteed Price exceeds
the Actual Price, Guarantor shall issue an amount of additional Units to Holder
equal to the following: [(Guaranteed Price - Actual Price) x Number of Units] /
Guaranteed Price. Any additional Units issued under this Section 3 shall be
delivered to Holder on or before five (5) days after the Guaranteed Date.
The additional Units issued under this Guaranty will not be registered,
and shall be subject to the transfer restrictions under U. S. and state
securities laws. Guarantor will effect registration of any Units delivered
pursuant to this Guaranty within 180-days after delivery. Guarantor may, at its
election, pay Holder in cash the difference between the Guaranteed Price and the
Actual Price in lieu of delivery of additional Units.
3. Trading and Other Activity Prior to the Guaranteed Date. This
Guaranty will lapse in its entirety, and be of no further force and effect, if
Holder and its Affiliates makes any Sales of Units (whether or not received
under the Purchase Agreement) or otherwise engages in any manipulative
transaction with respect to the trading in the Units, in the period four (4)
months preceding the Guaranteed Date.
4. Stock Splits, Dividends, Conversions. The Guaranteed Price and
Actual Price will be appropriately adjusted for stock dividends, stock splits,
etc. In the event that Guarantor converts to a qualified Real Estate Investment
Trust, any stock received in exchange for the Units will be considered the
equivalent of the Units for purposes of the Guaranty.
5. Termination of Guaranty. This Guaranty will terminate in its
entirety and be of no further force and effect, if during any twelve (12) month
period between the Closing Date and Guaranteed Date, Holder and its Affiliates
make a Sale or Sales of Units which, in the aggregate, constitute more than ten
percent (10.0%) of the total Units owned by Holder and its Affiliates as of the
first day of such twelve (12) month period.
<PAGE>
In Witness Whereof, the parties have executed this Agreement as of the
date and year first above written.
GUARANTOR:
U. S. RESTAURANT PROPERTIES MASTER L.P.
By: QSV PROPERTIES, INC.
By:
-----------------------------------
Name:
----------------------------------
Its:
-----------------------------------
HOLDER:
---------------------------------------
By:
------------------------------------
Name:
----------------------------------
Its:
----------------------------------
<PAGE>
EXHIBIT H
INVESTMENT LETTER
_________________________, 1997
The Midon Companies (or to each Seller)
Gentlemen:
U. S. Restaurant Properties Master L. P., a Delaware limited
partnership ("MLP") with offices at 5310 Harvest Hill, Suite 270, Dallas, Texas
75230, has entered into a purchase and sale agreement with you dated
_________________, 1997, (the "Contract") pursuant to which you will receive, as
partial consideration for such sale, _________ units (the "Units") of limited
partnership interest in MLP.
In connection with your receipt of the Units, you hereby represent and
warrant to MLP the following:
(a) The Units to be acquired pursuant to the Contract are being
acquired for my own account for investment and not with a view to the
distribution thereof or with any intention of distributing or reselling such
Units or any part thereof within the meaning of the Securities Act of 1933, as
amended (the "1933 Act") (it being understood, however, that the disposition of
the undersigned's property shall at all times be within the undersigned's
control). The undersigned understands that MLP will place a "stop transfer"
order on the transfer books of MLP to prevent any transfer of the Units in
violation of law or this Letter Agreement.
(b) The Units have not been registered under the 1933 Act and,
therefore, cannot be sold unless they are registered under the 1933 Act or
unless an exemption from registration is available; a legend to that effect
shall be placed on the certificate or certificates evidencing the Units; there
is no public market for the Units and none is expected to develop; and that it
may be necessary to hold the Units indefinitely and the undersigned must
continue to bear the economic risk of the investment in the Units unless the
Units are subsequently registered under the 1933 Act or an exemption from
registration becomes available.
(c) I am sophisticated in the making of investments and in the purchase
of securities and meet the requirements as to net worth and/or income to be a
"sophisticated investor" as that term is defined in the regulations adopted
pursuant to the 1933 Act.
(d) I have reviewed financial and other information provided to me by
MLP (including the most recent 10 Q's and other regulatory filing of MLP) and
understand and can accept the total loss of my investment. Further, the
undersigned represents and warrants that my accounting and legal representatives
and I have had the opportunity to ask questions of the officers of MLP.
<PAGE>
When accepted by MLP, MLP represents and warrants to the undersigned as
follows:
(a) MLP has been duly constituted as a limited partnership and is
validly existing in good standing under the laws of the State of Delaware, with
limited partnership power and authority to own its properties and conduct its
businesses.
(b) MLP has all requisite partnership power and authority to enter into
this Letter Agreement and to perform its obligations hereunder. The execution,
delivery and performance by MLP of this Letter Agreement and the consummation by
it of the transactions contemplated hereby have been duly authorized by all
necessary limited partnership actions. This Letter Agreement has been duly
executed and delivered by MLP and is a valid and binding agreement of MLP
enforceable against it in accordance with its terms.
This Letter Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors, heirs and permitted assigns,
but neither this Letter Agreement nor any of the rights, interest or obligations
hereunder shall be assigned by either of the parties hereto without the prior
written consent of the other party which shall not be unreasonably withheld.
Nothing in this Agreement, expressed or implied, is intended to confer
on any person other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Letter Agreement.
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Texas without regard to the conflict of laws thereof.
Very truly yours,
Dated: U. S. RESTAURANT PROPERTIES MASTER L. P.
-------------------- By: QSV PROPERTIES, INC.
By:
-------------------------------------------
Its:
------------------------------------------
Accepted and Agreed to:
- --------------------------
By:
-----------------------
Date:
---------------------
<PAGE>
EXHIBIT I
REGISTRATION RIGHTS AGREEMENT
This Agreement (the "Agreement") is made as of the _______ day of
___________________, 1997, by U. S. RESTAURANT PROPERTIES MASTER L. P., a
Delaware limited partner ("USRP") with offices at 5310 Harvest Hill, Suite 270,
Dallas, Texas 75230, and __________________________ ("Holder") with offices at
_________________.
Recitals:
Holder received _____ units of limited partnership interest in USRP
pursuant to the Purchase and Sale Agreement (the "Contract") between Holder and
USRP dated _______________, 1997; and
USRP has agreed to register Holder's units under certain circumstances.
NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby expressed, the parties hereto hereby agree as follows:
1. If, from time to time during the period three (3) years from the
Closing Date defined in the Contract (the "Registration Period"), U. S.
Restaurant Properties Master L. P. ("USRP") determines to effect a registration
under the 1933 Act in connection with the public offering of Units for cash
proceeds payable to USRP or to any Unit holder ("Offering Shares"), then USRP
shall give prompt written notice ("Registration Notice") to the Holder of USRP's
intent to proceed with such registration and offering of the Offering Shares. No
provision of this Section 5(a) shall create, or shall be construed as creating,
any obligation of USRP to (i) proceed with any public offering during the
Registration Period, or (ii) maintain the effectiveness of any registration
statement registering Offering Shares for any period of time.
2. If within five (5) days (the "Final Request Date") after the receipt
of the Registration Notice, Holder shall deliver to USRP a written request to
have some or all of its Units in USRP included in the registration, then USRP
shall cause to be registered under the 1933 Act the number of Units so requested
in accordance with this Agreement (the "Piggyback Shares"). The Holder shall not
be entitled to proceed with a registration and offering of the Piggyback Shares
unless USRP proceeds with the registration and offering of the Offering Shares.
If Holder declines to participate in the offering, USRP shall have no further
registration obligation with respect to Holder.
<PAGE>
3. The underwriter(s), investment banker(s) and/or managers(s) for any
offering pursuant to this Section 5 shall be selected by USRP in its sole
discretion. If the registration involves an underwritten offering, all
participating interest holders must sell their Piggyback Shares to the
underwriters selected by USRP on the same terms and conditions as apply to
Holder and any other selling interest holder with such differences, including
any with respect to indemnification and liability insurance, as may be usual and
customary in combined primary and secondary offerings. If the managing
underwriter of the public offering of Offering Shares proposed to be registered
by USRP or by another interest holder in USRP having been granted registration
rights by USRP advises USRP in writing that marketing factors requires a
limitation of the number of secondary shares to be underwritten, then the number
of Units owned by Holder to be included in such registration statement and the
number of Units in USRP to be included in such registration statement by any
other interest holder in USRP having been granted registration rights by USRP
before or after the date of this Agreement other than Holder (collectively
"Registration Rights Interest Holders") shall be limited, pro rata, based on a
fraction, the numerator of which shall be the number of Units in USRP that
Holder shall have requested to be registered, or in the case of Registration
Rights Interest Holders, the number of Units that such Registration Rights
Interest Holders shall have requested to be registered, and the denominator of
which shall be the total number of Units in USRP requested to be registered by
Holder and Registration Rights Interest Holders. It is the intention of the
parties that the Piggyback or incidental registration rights of Holder shall be
pari passu with any "piggyback" or incidental registration rights of any
Registration Rights Interest Holder.
4. Notwithstanding Section 1 through 3 hereof, USRP shall effect
registration of Holder's Units under the 1933 Act within 180 days after the date
of this Agreement. Holder shall cooperate with USRP in effecting such
registration.
5. Each of USRP, Holder and any Registration Rights Interest Holders
shall pay their own expenses incurred in the registration of the Offering Shares
and Piggyback Shares.
HOLDER:
-----------------------------------------
By:
--------------------------------------
Name:
------------------------------------
Its:
-------------------------------------
U. S. RESTAURANT PROPERTIES MASTER L.P.
By: QSV PROPERTIES, INC.
By:
--------------------------------------
Name:
------------------------------------
Its:
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<PAGE>
EXHIBIT J
ESTOPPEL CERTIFICATE
This Certificate is made as of ___________________________________,
1997, by ("Tenant").
A. The Property; the Leased Premises. The term "Property," as used
herein, shall mean the real property situated in the County of
____________________, State of ____________________, legally described in
Exhibit A attached hereto and by this reference made a part hereof, together
with all buildings, structures, improvements and fixtures now or hereafter
located thereon, and together with all easements and other rights appurtenant
thereto.
B. The Lease; the Landlord. The term "Lease," as used herein, shall
mean the lease, together with any amendments thereto, concerning the Leased
Premises evidenced by the document attached hereto as Exhibit B and by this
reference incorporated herein. The term "Landlord", as used herein, shall mean
______________________________________.
C. The Sale. The term "Buyer," as used herein, shall mean U. S.
Restaurant Property Master L. P., its successors and assigns. Buyer proposes
to purchase the Property from Landlord.
D. Purposes. In connection with the above-mentioned transactions, Buyer
has requested certain assurances and representations from Tenant, and Landlord
has agreed to provide for an estoppel certificate from Tenant concerning the
Lease.
In consideration of the mutual terms and provisions hereinafter
contained and other good and valuable consideration received the receipt and
sufficiency of which are hereby acknowledged, Tenant certifies and agrees as
follows:
(a) Tenant is the tenant and Landlord is the landlord under
the Lease. A true and complete copy of the Lease, together with all riders,
exhibits, modifications and amendments thereto, if any, are attached hereto as
Exhibit B;
(b) The term of the Lease commenced ______________________,
and rent commenced to accrue under the Lease on ______________________;
(c) There are presently no offsets or credits against rents
thereunder and no payments are due from Landlord to Tenant under the Lease;
(d) The Lease is in full force and effect and, except as set
forth in the amendment(s), if any, attached hereto, the Lease has not been
amended, modified or supplemented in any respect;
<PAGE>
(e) All of the improvements contemplated by the Lease have
been entirely completed as required therein, the leased premises and the
improvements thereon have been accepted by Tenant with Tenant in occupancy
thereof, and all sums, if any, payable by Landlord to Tenant in connection with
the construction of such improvements have been paid in full and all conditions
precedent to Tenant's obligations under the Lease have been satisfied;
(f) Tenant has not prepaid (and will not prepay) any rent
which is not yet due and payable under the Lease and no concessions, rebates,
allowances or other considerations for free or reduced rent in the future have
been granted other than as set forth in the Lease as attached hereto;
(g) Tenant has no knowledge of (1) any present defaults of
either party under the Lease; nor (2) any present condition or state of facts
which by notice or the passage of time, or both, would constitute a default by
either party under the Lease;
(h) Tenant has never permitted (and has no knowledge that
Landlord has ever permitted) the generation, treatment, storage or disposal of
any hazardous waste or other hazardous or toxic substance on the Property in
violation of existing laws;
(i) Landlord holds $__________________ as security deposits
or other deposits of Tenant under the Lease;
(j) The party executing this letter on behalf of Tenant is
fully authorized and empowered to do so.
Tenant acknowledges Buyer will rely upon the matters set forth herein
in acquiring the Property. This Certificate shall inure to the benefit of, and
may be relied upon by, Buyer, its successors and assigns.
TENANT:
-----------------------------------------
By:
--------------------------------------
Its:
-------------------------------------
Address:
---------------------------------
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 14, 1997 (the
"Agreement"), by and among U.S. RESTAURANT PROPERTIES MASTER L.P., a Delaware
limited partnership (the "Partnership"); U.S. RESTAURANT PROPERTIES, INC., a
Maryland corporation (the "Company"); USRP ACQUISITION, L.P., a Delaware
partnership and an indirectly wholly-owned subsidiary of the Company (the
"Acquisition Subsidiary"); USRP MANAGING, INC., a Delaware corporation and
wholly-owned subsidiary to the Company and general partner of the Acquisition
Subsidiary (the "General Partner") and QSV PROPERTIES, INC., a Delaware
corporation and the managing general partner of the Partnership ("QSV").
RECITALS
WHEREAS, Boards of Directors of QSV and of the Company have determined
that it is in the best interests of the Partnership and the Company,
respectively, to effect the merger provided for herein (the "Merger") upon the
terms and subject to the conditions set forth herein;
WHEREAS, the Company will have ownership rights in the assets of the
Partnership pursuant to this Agreement, and in accordance therewith, the Company
has caused to be formed and organized the General Partner and the Acquisition
Subsidiary; and
WHEREAS, all partnership and corporate action, as applicable, on the
part of the parties hereto necessary to authorize the execution of this
Agreement has been duly taken.
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties, covenants and agreements contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
1. THE MERGER; EFFECTIVE TIME
1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.2 hereof), in order to effect the
Merger, the Acquisition Subsidiary shall be merged with and into the Partnership
and the separate existence of the Acquisition Subsidiary shall thereupon cease.
The Partnership shall be the surviving entity in the Merger (sometimes
hereinafter referred to as the "Surviving Entity"), the General Partner will be
substituted as managing general partner of the Partnership and, as a result, the
Partnership shall become an indirectly wholly-owned subsidiary of the Company
and shall continue to be governed by the laws of the State of Delaware. The
separate existence of the Partnership with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger. The
Merger shall be pursuant to the provisions of and shall have the effect provided
in the Delaware Revised Uniform Limited Partnership Act (the "Delaware RULPA").
- 1 -
<PAGE>
1.2 Effective Time. Provided that this Agreement has not been
terminated or abandoned pursuant to Section 9 hereof, on the first business day
following the date on which the last to be fulfilled or waived of the conditions
set forth in Section 8 hereof shall be fulfilled or waived, or on such later
date as the Partnership and the Company may agree, a certificate of merger (the
"Certificate of Merger") with respect to the transactions contemplated hereby
shall be executed, acknowledged and filed with the Secretary of State of the
State of Delaware as provided in Section 211 of the Delaware RULPA and the
Merger provided for herein shall become effective at 11:59 p.m. on the date of
such filing or such other time and date as is set forth in the Certificate of
Merger (the "Effective Time").
2. PARTNERSHIP AGREEMENT OF THE SURVIVING ENTITY
The partnership agreement of the Partnership in effect at the Effective
Time shall be the partnership agreement of the Surviving Entity, until duly
amended in accordance with the terms thereof and the Delaware RULPA.
3. EFFECT OF THE MERGER ON PARTNERSHIP INTERESTS
3.1 Effect on Partnership Interests. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any
partnership interest in the Partnership or the Acquiring Subsidiary:
(a) Each unit representing an assignment of limited
partnership interest in the Partnership (the "Units") issued and
outstanding immediately prior to the Effective Time (an aggregate of
8,354,354 Units) shall be exchanged for and converted into one validly
issued, fully paid and nonassessable share of common stock, par value
$.01 per share, of the Company (the "Common Stock") (or an aggregate of
8,354,354 shares). Each certificate representing any such Units (the
"Certificates") outstanding immediately prior to the Effective Date
shall thereafter represent the right to receive a certificate
representing a like number of shares of Common Stock. All Units shall
no longer be outstanding and shall be cancelled and returned and shall
cease to exist;
(b) QSV's 1% Percentage Interest, as defined in the Third
Amended and Restated Agreement of Limited Partnership of the
Partnership dated as of June 27, 1997 (the "Partnership Agreement"),
shall be exchanged for and converted into 84,388 shares of Common Stock
and the right to receive a certificate representing such Common Stock.
(c) At the Effective Time, the options (the "Options") granted
to QSV as of March 24, 1995 that remain unexercised and outstanding as
of the Effective Time shall remain outstanding following the Effective
Time. At the Effective Time, the Options shall, by virtue of the Merger
and without any further action on the part of QSV or the Partnership,
be assumed by the Company and shall be exercisable upon the same terms
and conditions as under the agreement establishing the Options, except
that each such Option shall be exercisable for shares of Common Stock
in like amount to the number of Units for which the Options were
exercisable immediately prior to the Effective Time.
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<PAGE>
3.2 Exchange of Units for Company Shares.
(a) Exchange Agent. As of the Effective Time, the Company
shall deposit with American Stock Transfer & Trust Company (the
"Exchange Agent"), for the benefit of holders of Units ("Unitholders"),
for exchange in accordance with this Section 3, certificates
representing the shares of Common Stock to be issued pursuant to
Section 3.1 in exchange for outstanding Units.
(b) Exchange Procedures. Promptly after the Effective Time,
the Surviving Entity shall cause the Exchange Agent to mail to each
Unitholder of record (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, in such form and including such other provisions as the
Company may specify and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing
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 a certificate representing a number of shares of Common Stock
equal to the number of Units represented by the Certificate, the
Certificate, and the Certificate so surrendered shall forthwith be
cancelled. Declared but unpaid distributions on Units and partnership
interests outstanding as of the applicable record date shall be the
obligation of the Company and the Company hereby agrees to pay such
distributions on the payment date specified in the resolutions of QSV
authorizing such distributions. No interest will be paid or accrued on
unpaid distributions, if any, payable to holders of Certificates. In
the event of a transfer of ownership of Units which is not registered
in the transfer records of the Partnership, a certificate representing
the proper number of shares of Common Stock may be issued to the
transferee if the Certificate representing such Units is presented to
the Exchange Agent, accompanied by all documents required to evidence
and effect such transfer and to evidence that any applicable transfer
taxes have been paid. If any certificate for shares of Common Stock is
to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition
to such exchange that the person requesting such exchange (i) pay any
transfer or other taxes required by reason of the exchange of
certificates of shares of Common Stock in a name other than that of the
registered holder of the Certificate surrendered or (ii) establish to
the satisfaction of the Company that such taxes have been paid or are
not applicable.
(c) Transfers. After the Effective Time, there shall be no
transfers on the transfer books of the Partnership of the Units which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Company for transfer,
they shall be cancelled and exchanged for the number of shares of
Common Stock deliverable in respect thereof pursuant to this Agreement
in accordance with the procedures set forth in this Section 3.
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<PAGE>
(d) 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 Company, the posting by such person of a bond
in such amount as the Company 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 the shares of Common
Stock deliverable in respect thereof pursuant to this Agreement.
4. EFFECT OF MERGER ON PARTNERSHIP INTERESTS IN ACQUIRING SUBSIDIARY
OUTSTANDING PRIOR TO THE EFFECTIVE TIME
At the Effective Time, by virtue of the Merger, all partnership
interests in the Acquiring Subsidiary outstanding immediately prior thereto (all
of which, immediately prior to the Effective time, shall have been owned by the
Company and the General Partner shall continue to be outstanding as interests in
the Partnership.
5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Company, the General Partner
and the Acquisition Subsidiary. The Company, the General Partner and the
Acquisition Subsidiary hereby represent and warrant to the Partnership as
follows:
(a) The Company and the General Partner are corporations and
the Acquisition Subsidiary is a partnership duly formed, validly
existing and in good standing under the applicable laws of its state of
organization.
(b) All action on the part of the Company, the General Partner
and the Acquisition Subsidiary and their respective officers, trustees,
directors, stockholders and partners, as applicable, necessary for the
authorization, execution and delivery of this Agreement, the
performance of all obligations of the Company, the General Partner and
the Acquisition Subsidiary hereunder and, in the case of the Company,
the authorization, issuance and delivery of the shares of Common Stock
has been taken or will be taken prior to the Effective Date, and this
Agreement constitutes the valid and legally binding obligation of each
of the Company, the General Partner and the Acquisition Subsidiary,
enforceable against it in accordance with its terms, except (i) as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditor's rights generally and (ii) as
enforceability may be limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies.
(c) Neither the Company, the General Partner nor the
Acquisition Subsidiary is in violation of or default under any
provisions of its articles or certificate of incorporation, bylaws or
partnership agreement, as applicable, or of any instrument, judgment,
order, writ, decree or contract to which, it is a party or by which it
is bound or, in any material respect, of any provision of any federal
or state statute, rule or regulation applicable to it. The execution,
delivery and performance of this Agreement and the consummation of the
-4-
<PAGE>
transactions contemplated hereby will not result in any such violation
or be in conflict with or constitute, with or without the passage of
time or the giving of notice, either a default under any such
provision, instrument, judgment, order, writ, decree or contract or an
event which results in the creation of any lien, charge or encumbrance
upon any assets of the Company, the General Partner or the Acquisition
Subsidiary.
5.2 Representations and Warranties of the Partnership. The Partnership
hereby represents and warrants to the Company as follows:
(a) The Partnership is a limited partnership duly formed,
validly existing and in good standing under the laws of the State of
Delaware.
(b) All action on the part of the Partnership and its partners
necessary for the authorization, execution and delivery of this
Agreement and the performance of all obligations of the Partnership
hereunder has been taken or, subject to obtaining the approval of
Unitholders holding a majority of the outstanding Units, will be taken
prior to the Effective Date, and this Agreement constitutes the valid
and legally binding obligation of the Partnership, enforceable against
it in accordance with its terms, except (i) as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement
of creditor's rights generally and (ii) as enforceability may be
limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
(c) The Partnership is not in violation of or in default under
any provision of the Partnership Agreement or of any instrument,
judgment, order, writ, decree or contract to which it is a party or by
which it is bound or, in any material respect, of any provision of any
Federal or state statute, rule or regulation applicable to the
Partnership. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not
result in any such violation or be in conflict with or constitute, with
or without the passage of time or the giving of notice, either a
default under any such provision, instrument, judgment, order, writ,
decree or contract or an event which results in the creation of any
lien, charge or encumbrance upon any of the assets of the Partnership.
6. COVENANTS
6.1 Stock Exchange Listing. The Company shall use its best efforts to
obtain an approval to list on the New York Stock Exchange, Inc. ("NYSE") the
Common Stock to be issued in the Merger, subject to official notice of issuance,
prior to the Effective Time.
6.2 Unitholder Approval. The Partnership shall use its best efforts to
obtain the approval of this Agreement by Unitholders holding a majority of the
outstanding Units.
-5-
<PAGE>
6.3 Indemnification. Form and after the Effective Time, the Company
agrees that it will indemnify and hold harmless, and advance expenses to, QSV
and, as applicable, each officer, director, partner or other person controlling
the QSV, and any affiliate of it, against any costs or expenses (including
reasonable attorneys' fees), judgment, fines, losses, claims, damages or
liabilities incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to the transactions contemplated hereby, whether asserted
or claimed prior to, at or after the Effective Time, to the fullest extent
permitted by law. In addition, the Company hereby assumes the Partnership's
indemnity obligations under the Partnership Agreement with respect to
liabilities to the foregoing individuals and entities arising out of actions or
omissions occurring prior to the Effective Time.
7. CONDITIONS
7.1 Conditions to the Partnership's Obligation to Effect the Merger.
The obligation of the Partnership to consummate the Merger is subject to
satisfaction of each of the following conditions:
(a) This Agreement shall have been duly approved by
Unitholders holding a majority of the Units outstanding as of April 30,
1997 (the "Record Date") in accordance with applicable law and the
Partnership Agreement;
(b) No statute, rule or regulation shall have been enacted or
promulgated by any governmental authority, nor shall there be any order
or injunction of a United States or state court of competent
jurisdiction in effect, which prohibits the exchange of Units for
shares of Common Stock or the consummation of the Merger;
(c) The Partnership shall have received an opinion of counsel
to the effect that the Merger will be treated as part of a transaction
described in Section 351 of the Internal Revenue Code of 1986, as
amended (the "Code");
(d) The Partnership shall have received a favorable letter
ruling from the Internal Revenue Service as to treatment of the Merger
as part of a transaction described in Section 351 of the Code;
(e) The shares of Common Stock issuable to the Unitholders
pursuant to this Agreement shall have been approved for listing on the
NYSE upon official notice of issuance; and
(f) Amendments to the Partnership Agreement to permit, among
other things, the withdrawal of QSV as managing general partner of the
Partnership, shall have been duly approved by Unitholders holding a
majority of the Units outstanding as of the Record Date in accordance
with applicable law and the Partnership Agreement, and a certificate of
amendment effecting such amendments shall have been duly filed with the
Secretary of State of the State of Delaware.
7.2 Conditions to the Company's Obligation to Effect the Merger. The
obligation of the Company to consummate the Merger is subject to satisfaction of
the following conditions:
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<PAGE>
(a) No statute, rule or regulation shall have been enacted or
promulgated by any governmental authority, nor shall there be any order
or injunction of a United States or state court of competent
jurisdiction in effect, which prohibits the exchange of the Units for
Common Stock or consummation of the Merger; and
(b) The contribution of the management compensation rights of
QSV under the terms of the Partnership Agreement and the partnership
agreement of the Operating Partnership to the Operating Partnership
shall have been effected.
8. TERMINATION
8.1 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 approval by the Unitholders, by mutual written consent of the Company and
the Partnership.
8.2 Effect of Termination and Abandonment. In the event of termination
of this Agreement and abandonment of the Merger pursuant to this Section 8, no
party hereto (or any of its directors, trustees, officers or partners, or
persons otherwise controlling or affiliated with any of the parties hereto or
any of their directors, officers or partners) shall have any liability or
further obligation to any other party to this Agreement.
9. MISCELLANEOUS AND GENERAL
9.1 Modification or Amendment. Subject to the applicable provisions of
the Maryland General Corporation Law and the Delaware RULPA, at any time prior
to the Effective Time, the parties hereto may modify or amend this Agreement by
mutual written consent.
9.2 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.
9.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
9.4 No Third Party Beneficiaries. Except as provided in Section 6.3,
this Agreement is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
9.5 Captions. The section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
9.6 No Liability. No trustee, beneficiary or stockholder of the Company
shall have any personal liability for any obligations of the Company under this
Agreement.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties hereto as of the date first hereinabove written.
U.S. RESTAURANT PROPERTIES, INC.
By: /s/ Fred H. Margolin
---------------------------------
Fred H. Margolin
Chairman of the Board
USRP MANAGING, INC.
By: /s/ Fred H. Margolin
--------------------------------
Fred H. Margolin
Chairman of the Board
USRP ACQUISITION, L.P.
By: USRP Managing Inc., the General
Partner
By: /s/ Fred H. Margolin
--------------------------------
Fred H. Margolin
Chairman of the Board
U.S. RESTAURANT PROPERTIES
MASTER L.P.
By: QSV Properties, Inc.,
the Managing General Partner
By: /s/ Robert J. Stetson
--------------------------------
Robert J. Stetson
President and Chief Executive
Officer
WITHDRAWAL AGREEMENT
This Withdrawal Agreement (this "Agreement") is dated as of October 15,
1997, by and among U.S. Restaurant Properties, Inc., a Maryland corporation (the
"Company"), U.S. Restaurant Properties Master L.P., a Delaware limited
partnership ("USRP"), U.S. Restaurant Properties Operating L.P., a Delaware
limited partnership (the "Operating Partnership" and, together with USRP, the
"Partnerships"), and QSV Properties, Inc., a Delaware corporation ("QSV").
RECITALS:
WHEREAS, QSV is the managing general partner of USRP and the Operating
Partnership;
WHEREAS, USRP is proposing to convert (the "Conversion") its structure from
being a limited partnership to being a corporation taxable as a real estate
investment trust for federal income tax purposes;
WHEREAS, the Conversion will be effected through one of two alternative
methods: (i) the merger (the "Merger") of a partnership subsidiary of the
Company into USRP with USRP being the surviving entity and pursuant to the
merger agreement (the "Merger Agreement") all outstanding units of beneficial
interest in USRP (the "Units") will be automatically converted into shares of
common stock of the Company (the "Common Stock") and USRP will become a
subsidiary of the Company or (ii) the amendment of the partnership agreement of
USRP (the "Master Partnership Agreement") to permit holders of Units to exchange
their Units for shares of Common Stock from time to time and to require holders
of Units to exchange such Units for shares of Common Stock prior to the transfer
of the Units to unaffiliated third parties (the "Exchange Alternative"), each as
more fully described in the Proxy Statement/Prospectus (as defined below);
WHEREAS, the Company has filed a registration statement with the Securities
and Exchange Commission containing a proxy statement/prospectus (the "Proxy
Statement/Prospectus") for delivery to the holders of the Units in connection
with the solicitation of their approval of the Conversion; and
WHEREAS, in connection with the Conversion, QSV will withdraw as managing
general partner of USRP and the Operating Partnership upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties and agreements contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Withdrawal. QSV hereby agrees to withdraw (the "Withdrawal") as
managing general partner of the Partnerships effective as of the date hereof
(unless such date is extended by the special committee (the "Special Committee")
of the Board of Directors of QSV, in its sole discretion). The effectiveness of
QSV's withdrawal as managing general partner, however,
<PAGE>
is contingent upon receipt of the Acquisition Price (as defined below). The date
on which QSV withdraws as managing general partner of the Partnerships is
hereinafter referred to as the "Withdrawal Date."
Section 2. Effect of Withdrawal.
(a) The Merger Alternative. If the Conversion is effected by the Merger,
pursuant to the terms of the Merger Agreement, QSV's general partner interest in
USRP (the "USRP Interest") will be converted into the right to receive 1% of the
number of shares of Common Stock issued pursuant to the Merger (after giving
effect to such additional 1% interest in USRP). All of QSV's interest in the
Operating Partnership, including, without limitation, (i) its allocable share of
income, profits, loss and distributions of the Operating Partnership and (ii)
its rights under Section 9.3 of the partnership agreement of the Operating
Partnership (the "Operating Partnership Agreement") and Section 9.3 of the
Master Partnership Agreement (collectively, the "General Partner Interest") will
be converted into units representing a limited partnership interest in the
Operating Partnership (the "OP Units"), pursuant to the terms of the Operating
Partnership Agreement in such amount as is provided for in Section 3 hereof.
(b) The Exchange Alternative. If the Conversion is effected through the
Exchange Alternative, QSV's general partner interest in USRP will be converted
into 1% of the outstanding Units (after giving effect to such additional 1% of
Units outstanding), pursuant to the terms of the Master Partnership Agreement
and the General Partner Interest will be assigned to USRP in exchange for Units,
in such amount as is provided for in Section 3 hereof.
(c) Merger of QSV. Regardless of how the Conversion is effected, QSV shall
have the right, exercisable at any time prior to the fifth anniversary hereof,
to merge directly into the Company if, immediately prior to such merger, (i)
QSV's only assets consist of (A) shares of Common Stock, (B) Units or OP Units
that are convertible into or exchangeable for Common Stock, and (C) the
contingent right to receive the Contingent Share Consideration and (ii) QSV has
no liabilities. The stockholders of QSV would receive, in the merger, (i) a
number of shares of Common Stock equal to the sum of the number of shares of
Common Stock owned by QSV immediately prior to the merger and the number of
shares of Common Stock into which the Units or OP Units owned by QSV immediately
prior to the merger are exchangeable or convertible, and (ii) the contingent
right to receive the Contingent Share Consideration. The stockholders of QSV
would jointly and severally indemnify the Company against any losses that it
incurs as a result of liabilities or obligations of QSV for which the Company
becomes responsible. The merger would be conditioned on its being a tax-free
transaction to the Company and the merger having no other adverse consequences
to the Company including, but not limited to, any adverse tax or financial
accounting consequences.
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<PAGE>
Section 3. Acquisition Price.
(a) In consideration for the conversion or assignment of the General
Partner Interest, in either case as provided for above, and the conversion of
the USRP Interest, QSV will be paid the Acquisition Price. The Acquisition Price
consists of two components: (i) the initial share consideration (the "Initial
Share Consideration") and (ii) the contingent share consideration (the
"Contingent Share Consideration"). The Initial Share Consideration is equal to
850,000 shares of Common Stock, and shall consist of shares of Common Stock,
Units and/or OP Units, depending on how the Conversion is effected, as more
fully described above (collectively, the "Initial Shares"). The number of
Initial Shares issuable upon the conversion or assignment of the General Partner
Interest shall consist of 850,000 Units or OP Units minus the number of shares
of Common Stock or Units (on a one-for-one basis) received by QSV in connection
with the conversion of the USRP Interest upon its withdrawal as managing general
partner of USRP. The number of Initial Shares issuable to QSV, including the
number of shares of Common Stock or Units issuable to QSV upon its conversion of
the USRP Interest, shall be subject to adjustment to give effect to certain
dilutive events, as more fully described below. The Initial Shares shall be
issued by the Company, USRP or the Operating Partnership, as applicable, as soon
as practicable following the Withdrawal Date, but in no event later than 30 days
thereafter.
(b) The Contingent Share Consideration is equal to up to a maximum of
550,000 of Units and/or OP Units, depending on how the Conversion is effected
(collectively, the "Contingent Shares" and, together with the Initial Shares,
the "Acquisition Shares"), which number of Contingent Shares shall be adjusted
to give effect to certain dilutive events as more fully described below. The
exact number of Contingent Shares to be issued will be determined by dividing
(i) the amount by which the MGP Net Income (as defined below) for year ending
December 31, 2000 exceeds $3,612,500 by (ii) $4.25, and rounding a resulting
number up to the nearest whole number. "MGP Net Income" means the dollar amount
of fees and distributions which would otherwise have been payable to QSV, as the
managing general partner of the Partnerships for the year ending December 31,
2000 by the Partnerships pursuant to the General Partner Interest and the USRP
Interest had QSV operated the Operating Partnership on a continuous basis from
the Withdrawal Date through December 31, 2000 less $775,000. For example, if the
MGP Net Income for the year 2000 is $5,100,000 ($5,875,000 of revenues less
$775,000) then the Contingent Share Consideration will be equal to 350,000
Contingent Shares. The Contingent Shares, if any, shall be issued by USRP or the
Operating Partnership, as applicable, as soon as practicable following the end
of fiscal year 2000 but in no event later than March 31, 2001.
Section 4. Representations and Warranties of QSV. QSV hereby represents and
warrants to the Company, USRP and the Operating Partnership as of the date
hereof and as of the Withdrawal Date, as follows:
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<PAGE>
(a) Organization and Authority. QSV is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has full corporate power, right and authority to acquire the Acquisition
Shares and to enter into a carry out its obligations under this Agreement.
(b) Authorization. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized and approved by QSV and no further procedure or action of QSV is
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly executed and delivered by QSV and constitutes the
valid and binding agreement of QSV, enforceable against it in accordance with
its terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
application of general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
(c) Title to Converted Interests. QSV owns, and upon the conversion of the
Operating Partnership General Partner Interest and the USRP Interest, the
Company, USRP and/or the Operating Partnership, as applicable, will own, all
right, title and interest (legal and beneficial) in and to, the Operating
Partnership General Partner Interest and the USRP Interest free and clear of all
mortgages, pledges, liens, charges, security interests, restrictions, adverse
claims, demands and encumbrances whatsoever.
(d) Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement by QSV nor the consummation by QSV of the
transactions contemplated hereby (i) conflicts with or results in any breach of
any provision of the certificate of incorporation or bylaws of QSV, (ii)
violates, conflicts with, constitutes a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, or results in the
termination of, or accelerates the performance required by, or results in the
creation of any lien or other encumbrance upon any of the properties or assets
of QSV under the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which QSV is a party or to which QSV or its properties or assets
are subject, or (iii) requires any consent, approval, authorization or permit or
filing with or notification of any court, governmental authority or other
regulatory or administrative agency or commission, or other third party.
(e) Litigation. As of the date of this Agreement, there is no action, suit
or proceeding pending against or, to the best knowledge of QSV, threatened
against or affecting QSV before any court or arbitrator or any governmental
body, agency or official which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay any of the transactions contemplated hereby.
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<PAGE>
(f) Investment Purpose. QSV is acquiring the Acquisition Shares for
investment and not with a view toward, or for sale in connection with, any
distribution thereof, nor with any present intention of distributing or selling
the Acquisition Shares within the meaning of the Securities Act of 1933, as
amended.
Section 5. Representation and Warranties of the Company, USRP and the
Operating Partnership. The Company, USRP and the Operating Partnership represent
and warrant to QSV, as of the date hereof and as of the Withdrawal Date, as
follows:
(a) Organization and Related Matters. The Company is a corporation and each
of USRP and the Operating Partnership is a limited partnership, in each case
duly organized, validly existing and in good standing under the laws of the
applicable jurisdiction of its organization, and each has full corporate or
partnership power, as applicable, right and authority to enter into and carry
out its obligations under this Agreement.
(b) Authorization. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized and approved by each of the Company, USRP and the Operating
Partnership, and no further corporate or partnership proceeding or action on the
part of any of the Company, USRP or the Operating Partnership is necessary to
authorize this Agreement and the transactions contemplated hereby other than the
approval of the Conversion by limited partners of USRP. This Agreement has been
duly executed and delivery by each of the Company, USRP and the Operating
Partnership and constitutes the valid and binding agreement of each of the
Company, USRP and the Operating Partnership, enforceable against each of them in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the application of general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law).
(c) Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement by any of the Company, USRP or the Operating
Partnership nor the consummation by the Company, USRP and the Operating
Partnership of the transactions contemplated hereby (i) conflicts with or
results in any breach of any provision of the articles of incorporation, bylaws,
partnership agreement or similar documents, as applicable, of the Company, USRP
or the Operating Partnership, (ii) violates, conflicts with, constitutes a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or results in the termination of, or accelerates
the performance required by, or results in the creation of any lien or other
encumbrance upon any of the properties, or assets of any of the Company, USRP or
the Operating Partnership under the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Company,
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<PAGE>
USRP or the Operating Partnership is a party or to which any of the
Company, USRP or the Operating Partnership or their respective properties or
assets are subject, or (iii) requires any consent, approval, authorization or
permit of or from, or filing with or notification of, any court, governmental
authority or other regulatory or administrative agency or commission, domestic
or foreign, or other third party other than the approval of the Proxy
Statement/Prospectus by the Securities and Exchange Commission and the
authorization of the issuance of the shares of Common Stock pursuant to
Conversion under applicable state securities and "blue sky" laws.
(d) Litigation. As of the date of this Agreement, there is no action, suit
or proceeding pending against, or to the best knowledge of any of the Company,
USRP or the Operating Partnership, threatened against or affecting any of the
Company, USRP or the Operating Partnership before any court or arbitrator or any
governmental body, agency or official which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
hereby.
Section 6. Adjustments of Number of Acquisition Shares. The number of
Acquisition Shares issuable pursuant to Section 3 hereof, shall, prior to the
date of their issuance, be subject to certain adjustments from time to time upon
the happening of certain events as follows:
In case the Company or USRP shall (a) declare a dividend or make a
distribution on its outstanding shares of Common Stock or Units, as applicable,
in shares of capital stock of the Company or units of USRP, (b) subdivide or
reclassify its outstanding shares of Common Stock or Units, as applicable, into
a greater number of shares or units, or (c) combine or reclassify its
outstanding shares of Common Stock or Units, as applicable, into a smaller
number of shares or Units, the number of Acquisition Shares issuable hereunder,
at the time of the record date for such dividend or distribution or the
effective date of such subdivision, combination or reclassification shall be
proportionately adjusted so that QSV shall be entitled to receive the number of
shares of Common Stock (either directly or indirectly upon the exchange of OP
Units) or Units which it would have owned or been entitled to receive had such
Acquisition Shares been issued immediately prior to such time. Such adjustments
shall be made successively whenever any events specified above shall occur.
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<PAGE>
Section 7. Effect of Reclassification, Consolidation, Sale, Merger, Lease
or Conveyance.
(a) In case of any consolidation with or merger of the Company or USRP, as
applicable, into another entity (or than the Merger or any merger or
consolidation in which the Company or USRP, as applicable, is the continuing
entity) or in the case of any sale, lease or conveyance of assets to another
entity of the properties of the Company or USRP, as applicable, as an entirety
or substantially as an entirety, the successor, leasing or purchasing entity, as
the case may be, shall execute with QSV an amendment to this Agreement providing
that QSV shall have the right thereafter to acquire the kind and amount of
shares of stock, other securities, property or cash, or any combination thereof,
receivable upon such consolidation, merger, sale, lease or conveyance by a
holder of the number of Acquisition Shares to which QSV was then entitled
pursuant to the terms of this Agreement.
(b) In case of any reclassification or change of the shares of Common
Stock, Units or OP Units, as applicable, issuable as part of the Acquisition
Shares, or in case of any consolidation or merger of another entity into the
Company or USRP, as applicable, in which the Company or USRP, as applicable, is
the continuing entity and in which there is a reclassification or change
(including a change in the right to receive cash or other property) of the
shares of Common Stock or Units, as applicable, the Company or USRP shall
execute with QSV an amendment to this Agreement providing that QSV shall have
the right thereafter to acquire the kind and amount of shares of stock, other
securities, property or cash, or any combination thereof, receivable upon such
reclassification, change, consolidation or merger by a holder of the number of
Acquisition Shares which QSV was entitled to receive pursuant to the terms of
this Agreement immediately prior to such reclassification, change, consolidation
or merger.
Section 8. Change in Control of the Company.
(a) If a Change in Control (as hereinafter defined) of the Company or USRP,
as applicable, occurs prior to the earlier of the date on which all of the
Acquisition Shares issuable to QSV pursuant to the terms hereof have been issued
or December 31, 2000, (i) if the Company or USRP is the surviving or resulting
entity in any such Change in Control, then within 30 days following the
consummation of such Change in Control, USRP or the Operating Partnership, as
applicable, shall issue to QSV all 550,000 Contingent Shares, and (ii) if the
Company or USRP, as applicable, is not the surviving or resulting entity in
Change in Control, then within five business days following the announcement of
any such Change in Control, but in no event later than the business day
immediately prior to the consummation of the Change in Control, USRP or the
Operating Partnership, as applicable, shall issue to QSV all 550,000 Contingent
Shares.
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<PAGE>
(b) For purposes of this Agreement, "Change in Control" shall have occurred
if any of the following events occurs:
(i) the Company or USRP, as applicable, is merged, consolidated or
reorganized into or with another entity that is not an affiliate of the Company
or USRP and as a result of such merger, consolidation or reorganization less
than a majority of the combined voting power of the then-outstanding securities
of such entity immediately after such transaction are held in the aggregate by
the holders of shares of Common Stock or Units, as applicable, immediately prior
to such transaction; or
(ii) the Company or USRP, as applicable, sells all or substantially all of
its assets to another entity that is not an affiliate of the Company or USRP,
less than a majority of the combined voting power of then-outstanding voting
securities of which are held, directly or indirectly, in the aggregate by the
holders of the Common Stock or Units, as applicable, immediately prior to such
sale.
Section 9. Restrictions on Transfer.
(a) QSV hereby agrees for a period of two years from the respective date of
issuance not to offer, sell or contract to sell, or otherwise dispose of,
directly or indirectly, any of the Initial Shares or the Contingent Shares
without the prior consent of the Special Committee (or any other committee of
the Board of Directors of the Company or QSV, as applicable, consisting
exclusively of non-employee directors who do not have an ownership interest in
QSV), except for distributions, from time to time, by QSV of Initial Shares
and/or Contingent Shares to its stockholders, provided such stockholders enter
into an agreement with the Company or USRP, as applicable, to be bound by terms
of this Section 9.
(b) QSV understands and acknowledges that the issuance of the Initial
Shares and the Contingent Shares has not and will not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), on the grounds that
the offering and sale of the Initial Shares and the Contingent Shares are exempt
from registration pursuant to Section 4(2) of the Securities Act and Regulation
D thereunder, and that accordingly each of the certificates representing any of
the Initial Shares or the Contingent Shares will bear the following legend:
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED OR REGISTERED
UNDER APPLICABLE STATE BLUE SKY
LAWS. THIS CERTIFICATE MAY NOT BE
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<PAGE>
SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED
EXCEPT PURSUANT TO (1) A REGISTRATION STATEMENT THAT
IS EFFECTIVE UNDER SUCH ACT, (2) RULE 144 UNDER SUCH
ACT (OR ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES)
OR (3) AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE ISSUER THAT SUCH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE.
Section 10. Miscellaneous.
(a) Applicable Law. THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND
DOCUMENTS CONTEMPLATED HEREBY WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS (EXCLUSIVE OF CONFLICTS OF LAW PRINCIPLES)
AND WILL, TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR PERFORMANCE
IN DALLAS COUNTY, TEXAS. COURTS WITHIN THE STATE OF TEXAS WILL HAVE JURISDICTION
OVER ANY AND ALL DISPUTES BETWEEN THE PARTIES HERETO, WHETHER IN LAW OR IN
EQUITY, ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE AGREEMENTS,
INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES CONSENT TO AND AGREE
TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. VENUE IN ANY SUCH DISPUTE, WHETHER
IN FEDERAL OR STATE COURT, WILL BE LAID IN DALLAS COUNTY, TEXAS.
(b) Notices. All notices, demands, requests or other communications that
may be or are required to be given, served or sent by either party to the other
party pursuant to this Agreement will be in writing and will be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, telegram or facsimile transmission
addressed as follows:
(i) If to the Company:
U.S. Restaurant Properties, Inc.
5310 Harvest Hill Road, Suite 270
Dallas, Texas 75230
Facsimile Transmission Number: (972) 490-9119
Attn: Fred H. Margolin
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<PAGE>
(ii) If to USRP:
U.S. Restaurant Properties Master L.P.
5310 Harvest Hill Road, Suite 270
Dallas, Texas 75230
Facsimile Transmission Number: (972) 490-9119
Attn: Robert J. Stetson
(iii) If to the Operating Partnership:
U.S. Restaurant Properties Operating L.P.
5310 Harvest Hill Road, Suite 270
Dallas, Texas 75230
Facsimile Transmission Number: (972) 490-9119
Attn: Robert J. Stetson
(iv) If to QSV:
QSV Properties, Inc.
5310 Harvest Hill Road, Suite 270
Dallas, Texas 75230
Facsimile Transmission Number: (972) 490-9119
Attn: Robert J. Stetson
Any party may designate by written notice a new address to which any
notice, demand, request or communication may thereafter be given, served or
sent. Each notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above will be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a facsimile transmission) the answer back being
deemed conclusive evidence of such delivery or at such time as delivery is
refused by the addressee upon presentation.
(c) Counterparts. This Agreement may be executed in multiple counterparts,
each of which will be deemed to be an original and all of which will be deemed
to be a single agreement. This Agreement will be considered fully executed when
all parties have executed an identical counterpart, notwithstanding that all
signatures may not appear on the same counterpart.
(d) Severability. If any of the provisions of this Agreement are determined
to be invalid or unenforceable, such invalidity or unenforceability will not
invalidate or render unenforceable the remainder of this Agreement, but rather
the entire Agreement will be construed as if not containing the particular
invalid or unenforceable provision or provisions, and the rights and obligations
of the parties will be construed and enforced accordingly. The parties
acknowledge that if any
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<PAGE>
provision of this Agreement is determined to be invalid or unenforceable, it is
their desire and intention that such provision be reformed and construed in such
manner that it will, to the maximum extent practicable, be deemed to be valid
and enforceable.
(e) Third Parties. Except as set forth or referred to in this Agreement,
nothing in this Agreement is intended or will be construed to confer upon or
give to any party other than the parties to this Agreement and their successors
and permitted assigns, if any, any rights or remedies under or by reason of this
Agreement.
(f) Assignment. Neither this Agreement nor any rights or obligations under
this Agreement may be assigned or delegated without the written consent of the
other parties to this Agreement.
(g) Survival. The representations and warranties contained in this
Agreement will survive the consummation of the transactions contemplated by this
Agreement.
(h) Further Assurances. Each party to this Agreement agrees to take such
further action and execute and deliver such other documents as may be reasonably
necessary to effectuate the intent of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement effective
as of the date first above written.
U.S. RESTAURANT PROPERTIES, INC.
By: /s/ Fred H. Margolin
---------------------------
Fred H. Margolin
Chairman of the Board,
Treasurer and Secretary
U.S. RESTAURANT PROPERTIES MASTER L.P.
By: QSV Properties, Inc.,
its managing general partner
By: /s/ Robert J. Stetson
----------------------------
Robert J. Stetson
Chief Executive Officer and
President
U.S. RESTAURANT PROPERTIES OPERATING
L.P.
By: QSV Properties, Inc.,
its managing general partner
By: /s/ Robert J. Stetson
-------------------------
Robert J. Stetson
Chief Executive Officer and
President
QSV PROPERTIES, INC.
By: /s/ Robert J. Stetson
------------------------
Robert J. Stetson
Chief Executive Officer and
President
DA970630151
030598 v15
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FOURTH AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
U.S. RESTAURANT PROPERTIES OPERATING L.P.
(FORMERLY BURGER KING OPERATING
LIMITED PARTNERSHIP)
Dated as of October 15, 1997
<PAGE>
FOURTH AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
U.S. RESTAURANT PROPERTIES OPERATING L.P.
(FORMERLY BURGER KING OPERATING LIMITED PARTNERSHIP)
This Fourth Amended and Restated Agreement of Limited Partnership (this
"Agreement") is entered into as of October 15, 1997, by and among USRP Managing,
Inc. ("Managing"), a Delaware corporation having its principal office at 5310
Harvest Hill Road, Suite 270 , Dallas, Texas 75230 (the "Managing General
Partner") (or any other person or entity who shall in the future execute and
deliver this Agreement as a Substituted General Partner pursuant to the
provisions hereof), as the general partner (the "General Partner"), QSV
Properties, Inc., a Delaware corporation having its principal place of business
at 5310 Harvest Hill Road, Suite 270, Dallas, Texas 75230 ("QSV"), and U.S.
Restaurant Properties Master L.P., a Delaware limited partnership having its
principal place of business at 5310 Harvest Hill Road, Suite 270, Dallas, Texas
75230 (the "MLP") and, together with QSV, the "Limited Partners") (the General
Partner and the Limited Partners sometimes hereinafter are referred to as a
"Partner," individually, and as the "Partners," collectively).
WHEREAS, QSV, MLP and Burger King Corporation, a Florida corporation
("BKC"), as the Special General Partner, heretofore have entered into an
Agreement of Limited Partnership dated as of December 10, 1985;
WHEREAS, QSV, the MLP and BKC amended and restated such Agreement of
Limited Partnership in its entirety as of January 6, 1986 and February 3, 1986,
and further amended such Agreement of Limited Partnership by Amendments No. 1
and 2 thereto through November 30, 1994;
WHEREAS, BKC withdrew as Special General Partner effective as of
November 30, 1994;
WHEREAS, QSV and the MLP amended and restated such Agreement of Limited
Partnership in its entirety as of March 17, 1995 (the "Second Amended and
Restated Agreement");
WHEREAS, QSV and the MLP amended and restated such Second Amended and
Restated Agreement in its entirety as of June 27, 1997 (the "Third Amended and
Restated Agreement");
WHEREAS, QSV withdrew as the Managing General Partner and USRP
Managing, Inc. was substituted as the Managing General Partner effective as of
October 15, 1997; and
WHEREAS, the Partners desire to further amend and restate such Third
Amended and Restated Agreement in its entirety, as hereinafter set forth;
NOW THEREFORE, for and in consideration of the foregoing, and of the
covenants and agreements hereinafter set forth, it is hereby agreed as follows:
<PAGE>
ARTICLE I
CERTAIN DEFINITIONS
Unless the context otherwise specifies or requires, the terms defined
in this Article I shall, for the purposes of this Agreement, have the meanings
herein specified. Unless otherwise specified, all references herein to Articles
or Sections are to Articles or Sections of this Agreement.
Accounting Firm: The independent public accountants who are responsible
for assisting in maintaining the Partnership tax accounting and allocation
records and advising the Managing General Partner with respect thereto, as
selected and approved by the Managing General Partner from time to time, in its
sole and absolute discretion. The Accounting Firm and the Auditing Firm are not
required to be the same.
Additional Limited Partner: Any Person who is admitted to the
Partnership as a Limited Partner pursuant to Sections 5.2 and 12.2 and who is
shown as such on the book and records of the Partnership.
Additional Securities: The meaning ascribed to it in Section 5.2(a)
hereof.
Adjusted Basis: The basis for determining gain or loss for federal
income tax purposes from the sale or other disposition of property, as defined
in Section 1011 of the Code.
Adjusted Capital Account: The Capital Account maintained for each
Partner as of the end of each Fiscal Year (a) increased by any amounts that such
Partner is obligated to restore pursuant to any provision of this Agreement or
is deemed to be obligated to restore pursuant to the penultimate sentences of
Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), (b) increased by
such Partner's allocable share (as determined under Section 752 of the Code) of
any nonrecourse indebtedness of the Partnership to the extent that such
indebtedness could not be repaid out of the Partnership's assets if all of the
Partnership's assets were sold at their respective Gross Asset Values as of the
end of the Fiscal Year and the proceeds from the sales were used to pay the
Partnership's liabilities, and (c) decreased by the items described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6). The foregoing definition of Adjusted Capital Account is
intended to comply with the provisions of Treasury Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
Adjusted Capital Account Deficit: With respect to any Partner, the
deficit balance, if any, in such Partner's Adjusted Capital Account as of the
end of the relevant Fiscal Year.
Affiliate: (a) Any Person (as hereinafter defined) directly or
indirectly owning, controlling, or holding power to vote ten percent (10%) or
more of the outstanding voting securities of the Person in question; (b) any
Person ten percent (10%) or more of whose outstanding voting securities are
directly or indirectly owned, controlled or held with power to vote by the
Person in question; (c) any Person directly or indirectly controlling,
controlled by, or under common control with the Person in question; (d) if the
Person in question is a corporation, any executive officer or director of the
Person in question or of any corporation directly or indirectly controlling the
Person in question; and (e) if the Person in question is a partnership, any
general partner owning or controlling ten percent (10%) or more of either the
capital or profits interests in such partnership.
<PAGE>
As used in this definition of "Affiliate," the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
Aggregate Common Units: A numeric value equal to the total outstanding
Class B Common Units as of the Effective Date. The amount of Aggregate Common
Units shall be appropriately reduced, from time to time, to reflect any
reduction in the amount of Class B Common Units that occurs as a result of (i)
any acquisition of a Class B Common Unit by the Company or its Affiliates or
(ii) any exchange of a Class B Common Unit pursuant to Section 5.5.
Agreement: This Fourth Amended and Restated Agreement of Limited
Partnership, as it may be further amended or supplemented from time to time.
Amended Agreement: The Amended and Restated Agreement of Limited
Partnership of Burger King Operating Limited Partnership, dated as of February
3, 1986, entered into by and among QSV, BKC and the MLP, as amended by Amendment
Nos. 1 and 2 thereto.
Ancillary Property: Personal property (other than personal property
included in the definitions of "Other Restaurant Properties," "Restricted
Restaurant Properties" and "Retail Properties") of whatever kind used in
connection with a Partnership Property, including, without limitation, supplies,
furnishings, equipment, trade dress and franchise, license and other rights.
Appraiser: Real Estate Research Corporation or its successor, or in the
event that Real Estate Research Corporation is not available for any reason to
provide an appraisal with respect to any matter hereunder, Arthur D. Little and
Company or its successor, or in the event that both Real Estate Research
Corporation or its successor and Arthur D. Little and Company or its successor
are not available for any reason to provide an appraisal with respect to any
matter hereunder, Marshall and Stevens, Incorporated or its successor, or in the
event that all of the foregoing companies are not available for any reason to
provide an appraisal with respect to any matters hereunder, such other
independent, nationally recognized real estate valuation firm selected by the
Managing General Partner in its reasonable discretion.
Assignee: A Person to whom one or more Partnership Units have been
transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in Section 11.6.
Auditing Firm: The independent public accountants who are responsible
for auditing the financial statements of the Partnership as set forth in Section
10.4, as selected and approved by the Managing General Partner from time to
time, in its sole and absolute discretion. The Auditing Firm and the Accounting
Firm are not required to be the same.
Available Cash: With respect to any period for which such calculation
is being made,
(i) the sum of:
(a) the Partnership's Profit or Loss (as the case may
be) for such period,
(b) depreciation and all other noncash charges
deducted in determining Profit or Loss for such period,
(c) the amount of any reduction in the reserves of
the Partnership referred to in clause (ii)(f) below
(including, without limitation, reductions resulting because
the Managing General Partner determines such amounts are no
longer necessary),
<PAGE>
(d) the excess of proceeds from the sale, exchange,
disposition, or refinancing of Partnership property for such
period over the gain (or loss, as the case may be)
recognized from such sale, exchange, disposition, or
refinancing during such period(excluding Terminating Capital
Transactions), and
(e) all other cash received by the Partnership for
such period that was not included in determining Profit or
Loss for such period;
(ii) less the sum of:
(a) all principal debt payments made during such
period by the Partnership,
(b) capital expenditures made by the Partnership
during such period,
(c) investments in any entity (including loans made
thereto) to the extent that such investments are not
otherwise described in clause (ii)(a) or (ii)(b),
(d) all other expenditures and payments not deducted
in determining Profit or Loss for such period,
(e) any amount included in determining Profit or Loss
for such period that was not received by the Partnership
during such period,
(f) the amount of any increase in reserves during
such period which the Managing General Partner determines to
be necessary or appropriate in its sole and absolute
discretion, and
(g) the amount of any working capital accounts and
other cash or similar balances which the Managing General
Partner determines to be necessary or appropriate in its sole
and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any
cash received or reductions in reserves, or take into account any disbursements
made or reserves established, after commencement of the dissolution and
liquidation of the Partnership.
Bankruptcy: The meaning ascribed to it in Section 14.2 hereof.
BKC: Burger King Corporation and the successors and assigns of Burger
King Corporation.
BKC Franchise Agreement: A franchise agreement, whether now existing or
hereafter entered into, between a BKC Franchisee and BKC authorizing the BKC
Franchisee to operate a BK Restaurant, as the same may be amended, renewed, or
extended by BKC.
BKC Franchisees: Persons who operate BK Restaurants pursuant to BKC
Franchise Agreements.
<PAGE>
BK Restaurants: Burger King "fast food" restaurants, whether operated
by BKC, an Affiliate of BKC or a BKC Franchisee. "BK Restaurant" means any one
of the BK Restaurants.
Business Day: Monday through Friday of each week, except that a legal
holiday recognized as such by the Government of the United States or the State
of Texas shall not be regarded as a Business Day.
Capital Account: The capital account established and maintained for
each Partner pursuant to Section 5.8.
Capital Contribution: Any property (including cash)contributed to the
Partnership by or on behalf of a Partner.
Carrying Value: (a) With respect to a property contributed to the
Partnership, the fair market value of such property at the time of contribution,
reduced (but not below zero) by all deductions for depreciation, amortization,
cost recovery and expense in lieu of depreciation debited to the Capital
Accounts of Partners and Assignees with respect to such property as of the time
of determination, and (b) with respect to any other property, the Adjusted Basis
of such property as of the time of determination. The Carrying Value of any
property shall be adjusted from time to time in accordance with Section 5.7, and
to reflect changes, additions or other adjustments to the Carrying Value for
dispositions, acquisitions or improvements of Partnership properties, as deemed
to be necessary or appropriate by the Managing General Partner.
Certificate: The Certificate of Limited Partnership, and any and all
amendments thereto, filed on behalf of the Partnership with the Recording Office
as required under the Delaware RULPA.
Class: A class of Partnership Interests distinguished by a specific
alphabetical or other designation.
Class A Common Limited Partner: The MLP or any other Person admitted
pursuant to this Agreement as a Class A Limited Partner either in connection
with the issuance of a newly-created Class A Common Unit or as a substitute with
respect to any transferred Class A Common Unit (or any portion thereof), each
for only so long as such Person remains as a Class A Limited Partner in
accordance with this Agreement and the Act.
Class A Common Unit: A Partnership Interest of a Class A Common Limited
Partner. The number of Class A Common Units owned by each Class A Common Limited
Partner shall be the number set forth opposite its name on Exhibit A.
Class B Common Distribution: With respect to each Partnership Record
Date, the product of (a) the Aggregate Common Units, (b) the Conversion Factor
and (c) the Company Common Dividend which has a record date which is the same as
the Partnership Record Date; provided, however, that with respect to the fiscal
quarter that includes the Effective Date, the numeric amount described in clause
(c) immediately above shall be multiplied by a fraction, the numerator of which
is the number of days from the day after the Effective Date to the end of such
fiscal quarter and the denominator of which is 90.
Class B Common Limited Partner: QSV or any other Person admitted
pursuant to this Agreement as a Class B Common Limited Partner either in
connection with the issuance of a newly-created Class B Common Unit or as a
substitute with respect to any transferred Class B Common Unit, each for only so
long as such Person remains as a Class B Common Limited Partner in accordance
with this Agreement and the Act.
Class B Common Unit: A Partnership Interest of a Class B Common Limited
Partner. The number of Class B Common Units owned by each Class B Common Limited
Partner shall be the number set forth opposite its name on Exhibit A. The number
of Common Units held by any particular Class B Common Limited Partner shall be
appropriately reduced, from time to time, to reflect any (i) acquisition of such
Partner's Class B Common Units by the Company, or any of its Affiliates or (ii)
any exchange of such Class B Common Units pursuant to Section 5.5 hereof;
provided, however, that if the Company or any of its Affiliates acquire a Class
B Common Unit, whether pursuant to Section 5.5 hereof, by purchase, or
otherwise, such Partnership Interest shall, upon and by virtue of such
acquisition and without any further action by the Partnership or any Partner,
automatically convert into a Class A Limited Partner Interest.
Class B Limited Partners: The Class B Common Limited Partners.
Code: The Internal Revenue Code of 1986, as amended to date and
hereafter amended. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
future law.
Commission: The Securities and Exchange Commission.
Common Stock: The common stock, par value $.001 per share, of the
Company.
Company: U.S. Restaurant Properties, Inc., a Maryland corporation.
<PAGE>
Company Common Dividend: Any distribution of cash or property per share
declared payable on Common Stock.
Company Preferred Dividend: Any distribution of cash or property per
share declared payable on a series of Preferred Stock.
Contributed Property: Each Contributing Partner's interest in each
property (or interest therein), or other consideration, in such form as may be
permitted by the Delaware RULPA, but excluding cash and cash equivalents,
contributed directly or indirectly to the Partnership by such Contributing
Partner (or deemed contributed to the Partnership upon termination thereof
pursuant to Section 708 of the Code).
Contributing Partner: Each Partner contributing directly or indirectly
(or deemed to have contributed upon termination of the Partnership pursuant to
Section 708 of the Code) a Contributed Property to the Partnership in exchange
for a Partnership Interest.
Conversion Factor: 1.0, provided that in the event that the Company (a)
declares or pays a dividend on its outstanding shares of Common Stock in shares
of Common Stock or makes a distribution to all holders of its outstanding shares
of Common Stock; (b) subdivides its outstanding shares of Common Stock; or (c)
combines its outstanding shares of Common Stock into a smaller number of shares
of Common Stock, the Conversion Factor shall be adjusted by multiplying the
Conversion Factor by a fraction, the numerator of which shall be the number of
shares of Common Stock issued and outstanding on the record date for such
dividend, distribution, subdivision or combination, assuming for such purpose
that such dividend, distribution, subdivision or combination has occurred as of
such time, and the denominator of which shall be the actual number of shares of
Common Stock (determined without the above assumption) issued and outstanding on
the record date for such dividend, distribution, subdivision or combination. Any
adjustment to the Conversion Factor shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
Delaware RULPA: The Delaware Revised Uniform Limited Partnership Act (Del.
Code Ann. tit. 6 ss. 17-101 et seq.), as amended to date and as it may be
amended from time to time hereafter, and any successor to such Act.
Effective Date: The date as of which the Managing General Partner and the
Limited Partners execute this Agreement.
Exchange Act: Securities Exchange Act of 1934, as amended, and the
regulations of the Commission promulgated thereunder.
Fiscal Year: The Fiscal Year of the Partnership for financial
accounting purposes, and for federal, state, and local income tax purposes,
which shall be the calendar year unless changed by the Managing General Partner
in accordance with Section 10.3.
General Partner Interest: A Partnership Interest held by a General Partner,
in its capacity as general partner of the Partnership. A General Partner
Interest may be expressed as a number of Partnership Units.
General Partners: The Managing General Partner and any Substituted General
Partners. "General Partner" means one of the General Partners.
Gross Asset Value: With respect to any asset, the asset's adjusted basis
for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed (or deemed
to have been contributed) by a Partner to the Partnership shall be the gross
fair market value of such asset, as determined by the contributing Partner and
the General Partner.
(b) The Gross Asset Values of all Partnership assets shall be adjusted
to equal their respective gross fair market values, as determined by the General
Partner and subject to the approval of the Independent Directors, as of the
following times: (i) the acquisition of an additional Partnership Interest by
any new or existing Partner in exchange for more than a de minimis Capital
Contribution; (ii) the distribution by the Partnership to a Partner of more than
a de minimis amount of property as consideration for a Partnership Interest; and
(iii) the liquidation of the Partnership within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Treasury Regulations.
(c) The Gross Asset Value of any Partnership asset distributed to any
Partner shall be adjusted to equal the gross fair market value of such asset on
the date of the distribution as determined by the General Partner and the
Partner receiving such distributed asset.
(d) The Gross Asset Values of Partnership assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 732(d), Code Section 734(b) or Code Section 743(b), but
only to the extent that an adjustment pursuant to clause (c) immediately above
is not required in connection with the transaction.
<PAGE>
Immediate Family: With respect to any natural Person, such natural
Person's spouse and such natural Person's natural or adoptive parents,
descendants (whether natural or adopted), nephews, nieces, brothers, sisters,
sons and daughters-in-law.
Incapacity or Incapacitated: (a) As to any individual Partner, death,
total physical disability or entry by a court of competent jurisdiction
adjudicating him or her incompetent to manage his or her Person or his or her
estate; (b) as to any corporation which is a Partner, the filing of a
certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter; (c) as to any partnership which is a Partner, the
dissolution and commencement of winding up of the partnership; (d) as to any
estate which is a Partner, the distribution by the fiduciary of the estate's
entire interest in the Partnership; (e) as to any trustee of a trust which is a
Partner, the termination of the trust (but not the substitution of a new
trustee); or (f) as to any Partner, the bankruptcy of such Partner. For purposes
of this definition, bankruptcy of a Partner shall be deemed to have occurred
when (i) the Partner commences a voluntary proceeding seeking liquidation,
reorganization or other relief under any bankruptcy, insolvency or other similar
law nor or thereafter in effect, (ii) the Partner is adjudged as bankrupt or
insolvent, or a final and nonappealable order for relief under any bankruptcy,
insolvency or similar law now or thereafter in effect has been entered against
the Partner, (iii) the Partner executes and delivers a general assignment for
the benefit of the Partner's creditors, (iv) the Partner files an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against the Partner in any proceeding of the nature described in
clause (ii) above, (v) the Partner seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator for the Partner or for all or
any substantial part of the Partner's properties, (vi) any proceeding seeking
liquidation, reorganization or other relief of or against such Partner under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed without one hundred twenty (120) days after the commencement
thereof, (vii) the appointment without the Partner's consent or acquiescence of
a trustee, receiver or liquidator has not been vacated or stayed within ninety
(90) days of such appointment, or (viii) an appointment referred to in clause
(g) which has been stayed is not vacated within ninety (90) days after the
expiration of any such stay.
Independent Consultant: Agribusiness Associates, Inc., or in the event
Agribusiness Associates, Inc., is unable or unwilling to advise the Managing
General Partner on a particular matter or informs the Managing General Partner
that it no longer is willing to serve as Independent Consultant, or in the event
Agribusiness Associates, Inc., is terminated as the Independent Consultant in
accordance with Section 8.10(b), any substitute consultant selected by the
Managing General Partner in accordance with Section 8.10(b).
Independent Directors: Directors of the Company who are not officers of
the Company, any Affiliate of an officer or employee of the Company or any
Affiliate of (a) any lessee of any properties of the Company or any Subsidiary
of the Company, (b) any Subsidiaries of the Company, or (c) any partnership that
is an affiliate of the Company.
Limited Partner Interest: A Partnership Interest of a Limited Partner
in the Partnership representing a fractional part of the Partnership Interests
of all Partners and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled, as provided in this Agreement, together
with all obligations of such Persons to comply with the terms and provisions of
this Agreement. A Limited Partner Interest may be expressed as a number of
Partnership Units.
<PAGE>
Limited Partners: QSV, the MLP and any Additional Limited Partners or
Substituted Limited Partners. "Limited Partner" means any one of the Limited
Partners.
Liquidating Trustee: The Managing General Partner, unless the
dissolution of the Partnership is caused by the withdrawal, bankruptcy, removal
or dissolution of the Managing General Partner, in which event the Liquidating
Trustee shall be the Person or Persons selected pursuant to Section 14.5.
Loss: The meaning ascribed to it in Section 6.4(f) hereof.
Majority Vote of the Limited Partners: The written consent of, or an
affirmative vote by, in accordance with the provisions of Section 15.2, Limited
Partners (including the Company) of record who are Limited Partners (and not
Assignees) with respect to more than fifty percent (50%) of the total number of
all outstanding Partnership Units held by all Limited Partners of record, as
Limited Partners (rather than as Assignees).
Managing: USRP Managing, Inc., a Delaware corporation.
Managing General Partner: Managing, or any successor appointed pursuant to
Section 11.2, 13.1 or 14.3, as the case may be.
MLP: U.S. Restaurant Properties Master L.P., a Delaware limited partnership
(formerly Burger King Investors Master L.P.).
Nasdaq: The National Association of Securities Dealers Automated Quotations
System.
National Securities Exchange: An exchange registered with the Commission
under Section 6(a) of the Exchange Act.
Nonrecourse Deductions: The meaning ascribed to it in Treasury Regulations
Section 1.704-2(b)(1).
Nonrecourse Liability: The meaning ascribed to it in Treasury Regulations
Section 1.752-1(a)(2).
Notice of Exchange: The Notice of Exchange substantially in the form of
Exhibit B to this Agreement.
Opinion of Independent Counsel: A written opinion of the law firm of
Winstead Sechrest & Minick P.C. or other counsel designated by or acceptable to
the Managing General Partner, in its sole and absolute discretion.
Original Agreement: The Agreement of Limited Partnership of Burger King
Operating Limited Partnership, dated as of December 10, 1985, entered into by
and among QSV, BKC and the MLP.
<PAGE>
Other Restaurant Properties: Those certain properties for which food
sales account for 10% or more of the gross revenues generated by the
improvements on such properties and (a) properties (regardless of use) acquired
adjacent to such properties or acquired in conjunction with the use or ownership
of such properties, (b) properties that were formerly such type of properties
which are not currently being used for any purpose, and (c) any unimproved land
which is adjacent to such a property or on which such a property is reasonably
expected to be constructed within one (1) year following the date of acquisition
of such land, in any case in which the Partnership, the Company or any Affiliate
or either of them has acquired or acquires an interest, whether consisting of
land to be held in fee simple or as a leasehold and any improvements thereon
(including all real property and certain personal property associated
therewith), together with (i) any other properties acquired pursuant to Section
7.2(v) with respect to such properties, (ii) any properties adjacent to such
properties, (iii) any buildings, improvements or other structures situated on
such properties, and (iv) any further right, title or interest acquired in such
properties. "Other Restaurant Property" means any one of the Other Restaurant
Properties.
Partner: A General Partner or Limited Partner. "Partners" means the General
Partners and the Limited Partners.
Partner Minimum Gain: An amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
Partner Nonrecourse Debt: The meaning ascribed to it in Treasury
Regulations Section 1.704-2(b)(4).
Partner Nonrecourse Debt Minimum Gain: The meaning ascribed to it in
Treasury Regulations Section 1.704(2)(i). A Partner's share of Partner
Nonrecourse Debt Minimum Gain shall be determined in accordance with Treasury
Regulations Section 1.704(2)(i)(5).
Partner Nonrecourse Deductions: The meaning ascribed to it in Treasury
Regulations Section 1.704-2(i)(2).
Partnership: The limited partnership created by this Agreement and any
successor partnership thereto continuing the business of the Partnership which
is a reformation or reconstitution of the partnership governed by this
Agreement.
Partnership Assets: All assets and property, whether tangible or intangible
and whether real, personal or mixed, at any time owned by the Partnership.
Partnership Record Date: The record date established by the General
Partner for the distribution of Available Cash pursuant to Section 6.1 hereof,
which record date shall be the same as the record date established by the
Company for a distribution to its stockholders of some or all of its portion of
such distribution.
Partnership Interest: As to any Partner, all of the interests of that
Partner in the Partnership, including, without limitation, such Partner's (a)
right to a distributive share of the profits and losses of the Partnership, (b)
right to a distributive share of Partnership Assets, and (c) right, if a General
Partner, to participate in the management of the business and affairs of the
Partnership.
Partnership Minimum Gain: The meaning set forth in Treasury Regulations
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in Partnership Minimum Gain, for a Fiscal Year
shall be determined in accordance with the rules of Treasury Regulations Section
1.704-2(d).
<PAGE>
Partnership Properties: The Other Restaurant Properties, the Restricted
Restaurant Properties and the Retail Properties. "Partnership Property" means
any one of the Partnership Properties.
Partnership Units: Fractional shares of the Partnership Interests of all
Partners issued pursuant to Sections 5.1, 5.2 and 5.4 hereof. "Partnership Unit"
means any one of the Partnership Units.
Percentage Interest: As to a Partner, its interest in the Partnership
as determined by dividing the Partnership Units owned by such Partner by the
total number of Partnership Units then outstanding and as specified in Exhibit A
attached hereto, as such Exhibit A may be amended from time to time.
Person: Any individual, corporation, association, partnership, joint
venture, trust, estate, or other entity or organization.
Preferred Distribution: With respect to each Partnership Record Date, the
product of: (a) the number of Preferred Units of any particular series and (b)
the Company Preferred Dividend then payable on the series of Preferred Stock as
to which such Preferred Units relate.
Preferred Partners: Any Person admitted to this Agreement as a Preferred
Partner in connection with the issuance of a newly-created Preferred Partnership
Unit.
Preferred Partnership Unit: Any Partnership Unit issued from time to
time pursuant to Section 5.2 hereof that is designated by the Managing General
Partner at the time of its issuance as a Preferred Partnership Unit. Each
Preferred Partnership Unit shall have such designations, preferences and
relative, participating, optional or other special rights, powers and duties,
including rights, powers and duties senior to Class A Limited Partner Interests
and Class B Common Units, all as shall be determined by the Managing General
Partner subject to the requirements of Section 5.2 hereof.
Preferred Stock: The preferred stock, par value $.001 per share, of the
Company.
Price Index: The Consumer Price Index for Urban Wage Earners and
Clerical Workers, all items, All Urban, Base 1967 = 100, issued by the Bureau of
Labor Statistics of the U.S. Department of Labor; provided, however, that if
such Consumer Price Index shall be discontinued with no successor or comparable
consumer price index, the Managing General Partner, in its sole and absolute
discretion, shall designate a substitute formula.
Profit: The meaning ascribed to it in Section 6.4(f) hereof.
Primary Lease: A lease, whether now existing or hereafter entered into,
pursuant to which the Partnership, as the lessee (either in its own name or as
an assignee of BKC pursuant to the Real Estate Purchase Agreement or otherwise),
holds the right to occupy and use a Partnership Property or any portion thereof.
QSV: QSV Properties Inc., a Delaware corporation.
<PAGE>
Real Estate Purchase Agreement: The amended and restated Purchase and
Sale Agreement entered into concurrently with the execution of the Amended
Agreement by and between the Partnership, as purchaser, and BKC, as seller,
pursuant to which the Partnership purchased from BKC, and BKC sold to the
Partnership, certain of the Partnership Properties.
Recapture Income: Any gain recognized by the Partnership (but computed
without regard to any adjustment required by Section 734 or 743 of the Code)
upon the disposition of any property or asset of the Partnership that does not
constitute capital gain for federal income tax purposes because such gain
represents the recapture of deductions previously taken with respect to such
property or assets (determined without regard to Section 291(a)(1)) of the Code.
Recording Office: The Secretary of State of the State of Delaware.
REIT: A real estate investment trust under Section 856 of the Code.
REIT Partner: (a) A Partner that is, or has made an election to qualify
as, a real estate investment trust under the Code, including, without
limitation, the Company, (b) any "qualified Company subsidiary" (within the
meaning of Section 856(i)(2) of the Code) of any Partner that is, or has made an
election to qualify as, a real estate investment trust under the Code and (c)
any Partner that is a "qualified Company subsidiary" (within the meaning of
Section 856(i)(2) of the Code) of a real estate investment trust.
REIT Stock Amount: A number of shares of Common Stock equal to the
product of the number of Partnership Units offered for exchange by a Partner,
multiplied by the Conversion Factor, provided that in the event the Company
issues to all holders of Common Stock rights, options, warrants or convertible
or exchangeable securities entitling the stockholders to subscribe for or
purchase shares of Common Stock, or any other securities or property
(collectively, the "rights"), then the REIT Stock Amount shall also include such
rights that a holder of that number of shares of Common Stock would be entitled
to receive.
Restricted Restaurant Properties: Those certain restaurant properties,
consisting of the land in which the Partnership holds fee simple title or a
leasehold interest and the improvements thereon (including all real property and
certain personal property associated therewith), (a) held as of the Effective
Date or (b) if (and so long as) a BK Restaurant is located thereon, acquired
after the Effective Date, together with (i) any other properties acquired
pursuant to Section 7.2(v) with respect to such properties after the Effective
Date, (ii) any properties adjacent to such properties that are acquired by the
Partnership after the Effective Date, (iii) any buildings, improvements or other
structures situated on such properties after the Effective Date, and (iv) any
further right, title or interest acquired in such properties after the Effective
Date (including, without limitation, fee title acquired pursuant to Section
8.12). "Restricted Restaurant Property" means any one of the Restricted
Restaurant Properties.
Retail Properties: Those certain properties, other than Other
Restaurant Properties and Restricted Restaurant Properties, for which the sales
of goods or services to the public account for substantially all of the gross
revenues generated by the improvements on such properties and (a) properties
(regardless of use) acquired adjacent to such properties or acquired in
conjunction with the use or ownership of such properties, (b) properties that
were formerly such type of properties which are not currently being used for any
purpose, and (c) any unimproved land which is adjacent to such a property or on
which such a property is reasonably expected to be constructed within one (1)
year following the date of acquisition of such land, in any case in which the
Partnership, the Company or any Affiliate of either of them has acquired or
acquires an interest, whether consisting of land to be held in fee simple or as
a leasehold and any improvements thereon (including all real property and
<PAGE>
certain personal property associated therewith), together with (i) any other
properties acquired pursuant to Section 7.2(v) with respect to such properties,
(ii) any properties adjacent to such properties, (iii) any buildings,
improvements or other structures situated on such properties, and (iv) any
further right, title or interest acquired in such properties. "Retail Property"
means any one of the Retail Properties.
Second Amended and Restated Agreement: The Second Amended and Restated
Agreement of Limited Partnership of U.S. Restaurant Properties Operating L.P.,
dated as of March 17, 1995, by and between QSV Properties, Inc. and U.S.
Restaurant Properties Master L.P.
Section 754 Election: An election under Section 754 of the Code
relating to the adjustment of Adjusted Basis of Partnership Assets, as provided
in Sections 734 and 743 of the Code.
Securities Act: Securities Act of 1933, as amended, and the regulations of
the Commission promulgated thereunder.
Share Price: As of any date of determination: (a) if the shares of
Common Stock are listed or admitted to trading on one or more National
Securities Exchanges, the average of the last reported sale prices per share
regular way or, in case no such reported sale takes place on any such day, the
average of the last reported bid and asked prices per share regular way, in
either case on the principal National Securities Exchange on which the shares of
Common Stock are listed or admitted to trading, for the five (5) trading days
immediately preceding the date of determination; (b) if the shares of Common
Stock are not listed or admitted to trading on a National Securities Exchange
but are quoted by Nasdaq, the average of the last reported sales prices per
share regular way or, in case no reported sale takes place on any such day or
the last reported sales prices are not then quoted, the average of the closing
bid prices per share, for the five (5) trading days immediately preceding such
date of determination, as furnished by the National Quotation Bureau
Incorporated or such other nationally recognized quotation service as may be
selected by the Managing General Partner for such purpose, if such Bureau is not
at the time furnishing quotations; or (c) if the shares of Common Stock are not
listed or admitted to trading on a National Securities Exchange or quoted by
Nasdaq, an amount equal to the fair market value of a share as of such date of
determination, as determined by the Managing General Partner using any
reasonable method of valuation.
Special Allocations: The special allocations of items of income, gain,
deduction and loss pursuant to Section 6.5.
Subsidiary: With respect to any Person, any corporation or other entity
of which a majority of (i) the voting power of the voting equity securities or
(ii) the outstanding equity interests is owned, directly or indirectly, by such
Person.
Subsidiary Partnership: Any partnership of which the majority of the
limited or general partnership interests therein are owned, directly or
indirectly, by the Partnership.
Substituted General Partner: A Person who is admitted to the Partnership as
an additional or successor General Partner in accordance with Section 12.1.
Substituted Limited Partner: A Person who is admitted as a Limited Partner
to the Partnership pursuant to Section 11.5.
<PAGE>
Successor Policy: The "successor policy" of BKC relating to the
extension and/or renewal of BKC Franchise Agreements with BKC Franchisees, which
policy, in connection with such extensions and/or renewals, makes provision for
replacing, reconstructing, expanding and/or otherwise improving BK Restaurants.
All references are to the "Successor Policy" as in effect on the date hereof, as
the same may be modified, amended, supplemented, superseded or replaced by BKC
from time to time in its sole and absolute discretion.
Terminating Capital Transaction: Any sale or other disposition of all
or substantially all of the assets of the Partnership or a related series of
transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Partnership.
Termination Date: December 31, 2035.
Third Amended and Restated Agreement: The Third Amended and Restated
Agreement of Limited Partnership of U.S. Restaurant Properties Operating L.P.,
dated as of June 27, 1997, by and among QSV Properties, Inc., U.S. Restaurant
Properties Master L.P. and U.S. Restaurant Properties, Inc.
TPC: The Pillsbury Company, a Delaware corporation and the owner on the
date of the Amended Agreement of all of the issued and outstanding stock of BKC.
Treasury Regulations: The Income Tax Regulations promulgated under the
Code, as hereafter amended. Any reference herein to a specific section or
sections of specific Treasury Regulations shall be deemed to include a reference
to any corresponding provision of future Treasury Regulations.
Unit: A unit representing an equal undivided interest in an interest in the
MLP.
Unit Price: As of any date of determination: (a) if the Units are
listed or admitted to trading on one or more National Securities Exchanges, the
average of the last reported sale prices per Unit regular way or, in case no
such reported sale takes place on any such day, the average of the last reported
bid and asked prices per Unit regular way, in either case on the principal
National Securities Exchange on which the Units are listed or admitted to
trading, for the five (5) trading days immediately preceding the date of
determination; (b) if the Units are not listed or admitted to trading on a
National Securities Exchange but are quoted by Nasdaq, the average of the last
reported sales prices per Unit regular way or, in case no reported sale takes
place on any such day or the last reported sales prices are not then quoted, the
average of the closing bid prices per Unit, for the five (5) trading days
immediately preceding such date of determination, as furnished by the National
Quotation Bureau Incorporated or such other nationally recognized quotation
service as may be selected by the Managing General Partner for such purpose, if
such Bureau is not at the time furnishing quotations; or (c) if the Units are
not listed or admitted to trading on a National Securities Exchange or quoted by
Nasdaq, an amount equal to the fair market value of a Unit as of such date of
determination, as determined by the Managing General Partner using any
reasonable method of valuation.
Unpaid Common Distribution Account: An account to be maintained by the
Partnership for the Class B Common Limited Partners and to which will be
credited the amount of the Class B Common Distributions not paid on the date the
same is payable in accordance with Section 6.1(a)(ii) hereof.
Unrealized Gain: The excess, if any, of the fair market value of a
Partnership Asset as of the date of determination over the Carrying Value of the
Partnership Asset as of such date of determination.
Unrealized Loss: The excess, if any, of the Adjusted Basis of a
Partnership Asset as of the date of determination over the fair market value of
such Partnership Asset as of the date of determination.
Working Capital Reserve: The reserve for working capital established by the
Managing General Partner pursuant to Section 7.5.
<PAGE>
ARTICLE II
FORMATION; NAME; PLACE OF BUSINESS
II.1. Formation of Partnership; Certificate of Limited Partnership.
The General Partner and the Limited Partners agreed to continue the
limited partnership formed as of December 10, 1985, pursuant to the provisions
of the Delaware RULPA and the terms and conditions of the Original Agreement,
the Amended Agreement, the Second Amended and Restated Agreement and the Third
Amended and Restated Agreement. Promptly after the execution of the Original
Agreement, QSV, in accordance with the Delaware RULPA, filed with the Recording
Office the Certificate of Limited Partnership. Subsequently, QSV, in accordance
with the Delaware RULPA, filed with the Recording Office an amendment to the
Certificate of Limited Partnership regarding the withdrawal of BKC as the
Special General Partner and the change in name of the Partnership. Subsequently,
the Managing General Partner, in accordance with the Delaware RULPA, filed with
the Recording Office an amendment to the Certificate of Limited Partnership
regarding the withdrawal of QSV as the Managing General Partner and the
substitution of Managing as the Managing General Partner. If the laws of any
jurisdiction in which the Partnership transacts business so require, the
Managing General Partner also shall file with the appropriate office in that
jurisdiction a copy of the Certificate of Limited Partnership and any other
documents necessary for the Partnership to qualify to transact business in such
jurisdiction and shall use its best efforts to file with the appropriate office
in that jurisdiction a copy of the Certificate of Limited Partnership and any
other documents necessary to establish and maintain the Limited Partner's
limited liability in such jurisdiction. The Partners further agree and obligate
themselves to execute, acknowledge and cause to be filed for record, in the
place or places and manner prescribed by law, any amendments to the Certificate
of Limited Partnership as may be required, either by the Delaware RULPA, by the
laws of a jurisdiction in which the Partnership transacts business, or by this
Agreement, to reflect changes in the information contained therein or otherwise
to comply with the requirements of law for the continuation, preservation and
operation of the Partnership as a limited partnership under the Delaware RULPA.
II.2. Name of Partnership.
The name under which the Partnership shall conduct its business is U.S.
Restaurant Properties Operating L.P. The business of the Partnership may be
conducted under any other name deemed necessary or desirable by the Managing
General Partner, in its sole and absolute discretion, except that such other
name may not include the surname of any Limited Partner unless such surname is
also the name or surname of the Managing General Partner. The words "Limited
Partnership" shall be included in the name of the Partnership where necessary
for complying with the laws of any jurisdiction that so requires. The Managing
General Partner (and, if necessary, all other General Partners) promptly shall
execute, file and record any assumed or fictitious name certificates required by
the laws of Delaware or any other state in which the Partnership transacts
business, and shall publish such certificates or other statements or
certificates as are required by the laws of Delaware or any other state in which
the Partnership transacts business.
II.3. Place of Business.
The principal place of business of the Partnership on the date hereof
is located at 5310 Harvest Hill Road, Suite 270, Dallas, Texas 75230. The
Managing General Partner may hereafter change the principal place of business of
the Partnership to such other place or places within the United States as the
Managing General Partner may determine from time to time, in its sole and
absolute discretion, provided that the Managing General Partner shall, if
necessary, amend the Certificate of Limited Partnership in accordance with
applicable requirements of the Delaware RULPA. The Managing General Partner may,
in its sole and absolute discretion, establish and maintain such other offices
and additional places of business of the Partnership, either within or without
the State of Delaware, as it deems appropriate.
II.4. Registered Office and Registered Agent.
The street address of the registered office of the Partnership shall be
at 1209 Orange Street, Wilmington, Delaware 19801, and the Partnership's
registered agent at such address shall be The Corporation Trust Company.
<PAGE>
II.5. Power of Attorney.
Each Limited Partner (including any additional or Substituted Limited
Partner) and each Assignee who accepts Partnership Units is deemed to
irrevocably constitute, appoint and empower the Managing General Partner (and
any successor by merger, transfer, election or otherwise), and each of the
Managing General Partner's authorized officers and attorneys-in-fact, with full
power of substitution, as the true and lawful agent and attorney-in-fact of such
Limited Partner or Assignee, with full power and authority in such Limited
Partner's or Assignee's name, place and stead and for such Limited Partner's or
Assignee's use of benefit to make, execute, verify, consent to, swear to,
acknowledge, make oath as to, publish, deliver, file and/or record in the
appropriate public offices (a) all certificates and other instruments,
including, at the option of the Managing General Partner, this Agreement and the
Certificate of Limited Partnership and all amendments and restatements thereof,
that the Managing General Partner deems appropriate or necessary to qualify, or
continue the qualification of, the Partnership as a limited partnership (or a
partnership in which the Limited Partners have limited liability) in the State
of Delaware and all jurisdictions in which the Partnership may or may intend to
conduct business or own property; (b) all other certificates, instruments and
documents as may be required by, or may be appropriate under, the laws of any
state or other jurisdiction in which the Partnership may or may intend to
conduct business or own property; (c) all instruments that the Managing General
Partner deems appropriate or necessary to reflect any amendment, change or
modification of this Agreement in accordance with the terms hereof; (d) all
conveyances and other instruments or documents that the Managing General Partner
deems appropriate or necessary to effectuate or reflect the dissolution,
termination, and liquidation of the Partnership pursuant to the terms of this
Agreement; (e) any and all financing statements, continuation statements,
mortgages or other documents necessary to grant to or perfect for secured
creditors of the Partnership, including the General Partners and Affiliates, a
security interest, mortgage, pledge or lien on all or any of the Partnership
Assets; (f) all instrument or papers required to continue the business of the
Partnership pursuant to Article XIV; (g) all instruments (including this
Agreement and the Certificate of Limited Partnership and amendments and
restatements thereof) relating to the admission of any Partner pursuant to
Article XI; and (h) all other instruments as the attorneys-in-fact or any one of
them may deem necessary or advisable to carry out fully the provisions of this
Agreement in accordance with its terms. The execution and delivery by any of
said attorneys-in-fact of any such agreements, amendments, consents,
certificates or other instruments shall be conclusive evidence that such
execution and delivery was authorized hereby.
Nothing herein contained shall be construed as authorizing any Person
acting as attorney-in-fact pursuant to this Section 2.5 to take action as a
attorney-in-fact for any Limited Partner or Assignee to increase in any way the
liability of such Limited Partner or Assignee beyond the liability expressly set
forth in this Agreement, or to amend this Agreement except in accordance with
Article XV.
The appointment by each Limited Partner and Assignee of the Persons
designated in this Section 2.5 as attorneys-in-fact shall be deemed to be a
power of attorney coupled with an interest in recognition of the fact that each
of the Limited Partners and Assignees under this Agreement will be relying upon
the power of such Persons to act pursuant to this power of attorney for the
orderly administration of the affairs of the Partnership. The foregoing power of
attorney is hereby declared to be irrevocable, and it shall survive, and shall
not be affected by, the subsequent Incapacity or termination of any Limited
Partner or Assignee and it shall extend to such Limited Partner's or Assignee's
heirs, successors and assigns. Each Limited Partner and Assignee hereby agrees
to be bound by any representations made by any Person acting as attorney-in-fact
pursuant to this power of attorney in accordance with this Agreement. Each
Limited Partner and Assignee hereby waives any and all defenses that may be
available to contest, negate or disaffirm the action of any Person taken as
attorney-in-fact under this power of attorney in accordance with this Agreement.
Each Limited Partner and Assignee shall execute and deliver to the Managing
General Partner, within fifteen (15) days after receipt of the Managing General
Partner's request therefor, all such further designations, powers of attorney
and other instruments as the Managing General Partner deems necessary to
effectuate this Agreement and the purposes of the Partnership.
<PAGE>
ARTICLE III
PURPOSES, NATURE OF BUSINESS,
AND POWERS OF PARTNERSHIP
III.1. Purposes and Business.
The purposes of the Partnership shall be (a) to invest in, acquire,
own, hold a leasehold interest in, manage, maintain, operate, lease, sublease,
improve, finance, reconstruct, sell, exchange, franchise and otherwise dispose
of Partnership Properties and Ancillary Property, whether itself, through other
Persons or otherwise; (b) to originate loans secured by liens on real estate;
and (c) to enter into any lawful transaction and engage in any lawful activities
in furtherance of the foregoing purposes; provided, however, that such business
arrangements and interests may be limited to and conducted in such a manner so
as to permit any REIT Partner at all times to be classified as a real estate
investment trust under the Code. In connection with the foregoing, and without
limiting the Company's right in its sole discretion to cease qualifying as a
REIT, the Partners acknowledge that the Company's current status as a REIT
inures to the benefit of all the Partners and not solely to the Company. The
Managing General Partner shall also be empowered to do any and all acts and
things necessary or prudent to ensure the Partnership will not be classified as
a "publicly traded partnership" for purposes of Section 7704 of the Code.
III.2. Powers.
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described herein and
for the protection and benefit of the Partnership, including, without
limitation, the following:
(a) To borrow money and issue evidences of indebtedness, and to secure
the same by mortgages, deeds of trust, security interests, pledges or other
liens on all or any part of the Partnership Assets;
(b) To secure and maintain insurance against liability or other loss
with respect to the activities and assets of the Partnership (including, without
limitation, insurance against liabilities under Section 7.11);
(c) To employ or retain such persons as may be necessary or appropriate
for the conduct of the Partnership's business, including permanent, temporary or
part-time employees and independent attorneys, accountants, consultants and
contractors;
(d) To acquire, own, hold a leasehold interest in, maintain, use,
lease, sublease, manage, operate, sell, exchange, transfer or otherwise deal in
assets and property as may be necessary or convenient for the purposes and
business of the Partnership;
(e) To incur expenses and to enter into, guarantee, perform and carry
out contracts or commitments of any kind, to assume obligations and to execute,
deliver, acknowledge and file documents in furtherance of the purposes and
business of the Partnership;
(f) To pay, collect, compromise, arbitrate, litigate or otherwise
adjust, contest or settle any and all claims or demands of or against the
Partnership;
(g) To invest in interest-bearing accounts and short-term investments,
including, without limitation, obligations of Federal, state and local
governments and their agencies, mutual funds (including money market funds),
commercial paper, time deposits and certificates of deposit of commercial banks,
savings banks or savings and loan associations;
(h) To originate loans secured by liens on real estate; and
(i) To engage in any kind of activity and to enter into and perform
obligations of any kind necessary to or in connection with, or incidental to,
the accomplishment of the purposes and business of the Partnership, so long as
said activities and obligations may be lawfully engaged in or performed by a
limited partnership under the Delaware RULPA.
<PAGE>
ARTICLE IV
TERM OF PARTNERSHIP
IV.1. Term.
The Partnership commenced on the date upon which the Certificate was
duly filed with the Recording Office pursuant to Section 2.1 and shall continue
until the Termination Date unless dissolved and liquidated before the
Termination Date in accordance with the provisions of Article XIV.
<PAGE>
ARTICLE V
CAPITAL
V.1. Capital Contributions of the Partners.
The Partners have made the Capital Contributions as set forth in
Exhibit C attached to this Agreement. Each Partner shall own Partnership Units
in the amount set forth for such Partner in Exhibit A, as the same may be
amended from time to time, and shall have a Percentage Interest in the
Partnership as set forth in Exhibit A, as the same may be amended from time to
time, which Percentage Interest shall be adjusted in Exhibit A from time to time
by the General Partner to the extent necessary to reflect accurately sales,
exchanges or other transfers, redemptions, Capital Contributions, the issuance
of additional Partnership Units, or similar events having an effect on a
Partner's Percentage Interest. Except as provided by law, Section 5.2, the
Partners shall have no obligation or right to make any additional Capital
Contributions or loans to the Partnership. To the extent the Partnership
acquires any property by the merger of any other Person into the Partnership,
Persons who receive Partnership Interests in exchange for their interests in the
Person merging into the Partnership shall become Partners and shall be deemed to
have made Capital Contributions as provided in the applicable merger agreement
and as set forth in Exhibit A, as amended to reflect such Capital Contributions.
The number of Partnership Units held by the General Partner, in its capacity as
general partner (equal to one percent (1%) of all outstanding Partnership Units
from time to time), shall be deemed to be the General Partner Interest.
V.2. Issuances of Additional Partnership Interests.
Except as provided in this Section 5.2 or in Section 5.3 hereof, the
Partners shall have no right or obligation to make any additional Capital
Contributions or loans to the Partnership. The Managing General Partner may
contribute additional capital to the Partnership, from time to time, and receive
additional Partnership Interests in respect thereof, in the manner contemplated
in this Section 5.2.
(a)(i) The Managing General Partner is hereby authorized to cause the
Partnership to issue such additional Partnership Interests in the form of
Partnership Units for any Partnership purpose at any time or from time to time,
to the Partners (including the Managing General Partner and any REIT Partner) or
to other Persons for such consideration and on such terms and conditions as
shall be established by the Managing General Partner in its sole and absolute
discretion, all without the approval of any Limited Partners. Any additional
Partnership Interests issued thereby may be issued in one or more classes, or
one or more series of any of such classes, with such designations, preferences
and relative, participating, optional or other special rights, powers and
duties, including rights, powers and duties senior to the Class A and Class
Limited Partner Interests, all as shall be determined by the Managing General
Partner in its sole and absolute discretion and without the approval of any
Limited Partner, subject to Delaware law, including, without limitation, (A) the
allocations of items of Partnership income, gain, loss, deduction and credit to
each such class or series of Partnership Interests; (B) the right of each such
class or series of Partnership Interests to share in Partnership distributions;
and (C) the rights of each such class or series of Partnership Interests upon
dissolution and liquidation of the Partnership, provided that a list of the
Preferred Partnership Units shall be set forth on Exhibit D hereto and that the
form of any Preferred Partnership Unit certificate issued by the Partnership
shall be attached as a schedule to Exhibit D on or prior to the date of issuance
of such Unit; provided, however, that no additional Partnership Interests shall
be issued to the Managing General Partner or any REIT Partner unless either:
<PAGE>
(1)(x) the additional Partnership Interests are issued in
connection with an issuance of shares of Common Stock of or other interests in
the Company, which shares or interests have designations, preferences and other
rights, all such that the economic interests are substantially similar to the
designations, preferences and other rights of the additional Partnership
Interests issued to the Managing General Partner or any REIT Partner by the
Partnership in accordance with this Section 5.2 and (y) the Managing General
Partner or any REIT Partner shall make a Capital Contribution to the Partnership
in an amount equal to the proceeds raised in connection with the issuance of
such shares of stock of or other interests in the Company,
(2) the additional Partnership Interests are issued pursuant
to Section 11.2 hereof, or
(3) the additional Partnership Interests are issued to all
Partners in proportion to their respective Percentage Interests.
Without limiting the foregoing, the Managing General Partner is expressly
authorized to cause the Partnership to issue Partnership Units for less than
fair market value, so long as the General Partner concludes in good faith that
such issuance is in the best interests of the General Partner and the
Partnership.
(ii) The Company shall not issue any additional shares of Common Stock
or any shares of Preferred Stock (other than shares of Common Stock issued in
connection with an exchange pursuant to Section 5.5 hereof) or rights, options,
warrants or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock (collectively, "Additional
Securities") other than to all holders of shares of Common Stock, unless (A) the
Managing General Partner shall cause the Partnership to issue to the Managing
General Partner and any REIT Partner, as the Company may designate, Partnership
Interests or rights, options, warrants or convertible or exchangeable securities
of the Partnership having designations, preferences and other rights, all such
that the economic interests are substantially similar to those of the Additional
Securities, and (B) the Company contributes the proceeds from the issuance of
such Additional Securities, and from any exercise of rights contained in such
Additional Securities, through the Managing General Partner and any REIT Partner
to the Partnership; provided, however, that the Company is allowed to issue
Additional Securities in connection with an acquisition of a property to be held
directly by the Company, but if and only if, such direct acquisition and
issuance of Additional Securities have been approved and determined to be in the
best interests of the Company and the Partnership by a majority of the
Independent Directors. Without limiting the foregoing, the Company is expressly
authorized to issue Additional Securities for less than fair market value, and
to cause the Partnership to issue to the Managing General Partner corresponding
Partnership Interests, so long as (1) the Managing General Partner concludes in
good faith that such issuance is in the best interests of the Managing General
Partner and the Partnership, including, without limitation, the issuance of
shares of Common Stock and corresponding Partnership Units pursuant to an
employee stock purchase plan providing for employee purchases of shares of
Common Stock at a discount from fair market value or employee stock options that
have an exercise price that is less than the fair market value of the shares of
Common Stock, either at the time of issuance or at the time of exercise, and (2)
the Company contributes all of the proceeds of such issuance, through the
Managing General Partner and any REIT Partner, to the Partnership. For example,
in the event the Company issues shares of Common Stock for a cash purchase price
and contributes all of the proceeds of such issuance, through the Managing
General Partner and any REIT Partner, to the Partnership as required hereunder,
the Managing General Partner and any REIT Partner, as the Company may so
designate, shall be issued a number of additional Partnership Units equal to the
product of (x) the number of such shares of Common Stock issued by the Company,
the proceeds of which were so contributed, multiplied by (y) a fraction, the
numerator of which is 100%, and the denominator of which is the Conversion
Factor in effect on the date of such contribution.
<PAGE>
(b) In connection with any and all issuances of shares of Common Stock,
the Company shall contribute all of the proceeds raised in connection with such
issuance to the Managing General Partner and any REIT Partner as the Company
determines, and in turn, the Managing General Partner and any REIT Partner shall
make Capital Contributions to the Partnership of such proceeds, provided that if
the proceeds actually received and contributed by the Company to the Managing
General Partner and any REIT Partner are less than the gross proceeds of such
issuance as a result of any underwriter's discount or other expenses paid or
incurred in connection with such issuance, then the Managing General Partner and
any REIT Partner shall be deemed to have made Capital Contributions to the
Partnership in the aggregate amount of the gross proceeds of such issuance and
the Partnership shall be deemed simultaneously to have paid such offering
expenses in connection with the required issuance of additional Partnership
Units to the Managing General Partner and any REIT Partner for such Capital
Contributions pursuant to Section 5.2(a) hereof.
(c) In the event the Managing General Partner or the Company acquires
Preferred Units from the Preferred Unitholders (in exchange for cash or shares
of Common Stock), the Partnership shall, as soon as practicable thereafter,
exchange each Preferred Unit held by the Managing General Partner or the Company
for such number of Partnership Units which are not designated as Preferred
Units, as determined by the Conversion Factor then in effect.
V.3. Additional Funding.
If the Managing General Partner determines that it is in the best
interests of the Partnership to provide for additional Partnership funds
("Additional Funds") for any Partnership purpose, the Managing General Partner
may (a) cause the Partnership to obtain such funds from outside borrowings, or
(b) elect to have the Managing General Partner or any REIT Partner provide such
Additional Funds to the Partnership through loans or otherwise.
V.4. Percentage Interests.
If the number of outstanding Partnership Units increases or decreases
during a taxable year, each Partner's Percentage Interest shall be adjusted to a
percentage equal to the number of Partnership Units held by such Partner divided
by the aggregate number of outstanding Partnership Units. If the Partners'
Percentage Interests are adjusted pursuant to this Section 5.4, the Profits and
Losses for the taxable year in which the adjustment occurs shall be allocated
between the part of the year ending on the day when the Partnership's property
is revalued by the Managing General Partner and the part of the year beginning
on the following day either (a) as if the taxable year had ended on the date of
the adjustment or (b) based on the number of days in each part. The Managing
General Partner, in its sole discretion, shall determine which method shall be
used to allocate Profits and Losses for the taxable year in which the adjustment
occurs. The allocation of Profits and Losses for the earlier part of the year
shall be based on the Percentage Interests before adjustment, and the allocation
of Profits and Losses for the later part shall be based on the adjusted
Percentage Interests.
<PAGE>
V.5. Exchange of Units.
(a) Subject to Section 5.5(b), each Class B Limited Partner (other than
the Company) shall have the right (the "Common Exchange Right"), on or after the
first anniversary of the date on which he acquires Class B Units (or such later
or earlier date as shall be determined in the sole and absolute discretion of
the Managing General Partner at the time of the issuance of the Class B Common
Units), to require the Company to acquire all or a portion of the Class B Common
Units held by such Limited Partner in exchange for the REIT Stock Amount and
each Limited Partner (other than the Company) holding Preferred Units shall have
the right to exchange (the "Preferred Exchange Right" and, together with the
Common Exchange Right, the "Exchange Rights"), on or after the first anniversary
of the date on which he acquires the Preferred Units (or such later or earlier
date as shall be determined in the sole and absolute discretion of the Managing
General Partner at the time of issuance of the Preferred Units), to require the
Company to acquire all or a portion of the Preferred Units held by such Limited
Partner to the extent such exchange is permitted by the terms of and subject to
the other provisions of, the certificate evidencing such Preferred Units. The
Exchange Rights shall be exercised pursuant to a Notice of Exchange delivered to
the Company (with a copy to the Partnership) by the Limited Partner who is
exercising an Exchange Right (the "Exchanging Partner"). A Limited Partner may
not exercise an Exchange Right for fewer than one thousand (1,000) Partnership
Units or, if such Limited Partner holds fewer than one thousand (1,000)
Partnership Units, all of the Partnership Units held by such Partner. The
Exchanging Partner shall have no right, with respect to any Partnership Units so
exchanged, to receive any distributions paid with respect to the Partnership
Units on or after the date of the Notice of Exchange. The Assignee of any
Limited Partner may exercise the rights of such Limited Partner pursuant to this
Section 5.5(a), and such Limited Partner shall be deemed to have assigned such
rights to such Assignee and shall be bound by the exercise of such rights by
such Assignee. In connection with any exercise of such rights by an Assignee on
behalf of a Limited Partner, the REIT Stock Amount shall be paid by the Company
directly to such Assignee and not to such Limited Partner.
(b) Notwithstanding the provisions of Section 5.5(a), a Partner shall
not be entitled to exercise the Exchange Rights pursuant to Section 5.5(a) if
the delivery of shares of Common Stock or shares of Preferred Stock to such
Partner by the Company pursuant to Section 5.5(a) would be prohibited under the
Amended and Restated Articles of Incorporation of the Company.
V.6. Minimum Percentage Interest of General Partner.
The provisions of Sections 5.2 and 5.4 shall be applied so that in all
events the Percentage Interest of the General Partners shall be equal to at
least 1.00%. In the event the issuance of additional Partnership Interests
pursuant to Section 5.2 would (but for this Section 5.6) have the effect of
reducing the Percentage Interest of the General Partners to less than 1.00%, the
Company shall transfer Partnership Units to the General Partners (and, as of the
effective date of such issuance, the Company shall be deemed to hold Partnership
Units for the benefit of the General Partners) to the extent necessary to cause
the General Partners' Percentage Interest, after giving effect to such issuance,
to be equal to at least 1.00%. In the event any additional Capital Contributions
are to be made or deemed made to the Partnership by the General Partners and the
Company pursuant to Section 5.2 or 5.4, such additional Capital Contributions or
deemed Capital Contributions shall be allocated between the General Partners and
the Company in the amounts necessary to cause the General Partners' Percentage
Interest, after giving effect to such Capital Contributions, to be equal to at
least 1.00%.
V.7. No Preemptive Rights.
No Person shall have any preemptive, preferential or other similar
right with respect to (a) additional Capital Contributions or loans to the
Partnership; or (b) issuance or sale of any Partnership Units or other
Partnership Interests.
<PAGE>
V.8. Capital Accounts.
A separate capital account (a "Capital Account") shall be established
and maintained for each Partner in accordance with Treasury Regulations Section
1.704-1(b)(2)(iv). If (i) a new or existing Partner acquires an additional
Partnership Interest in exchange for more than a de minimis Capital
Contribution, (ii) the Partnership distributes to a Partner more than a de
minimis amount of Partnership property as consideration for a Partnership
Interest, or (iii) the Partnership is liquidated within the meaning of Treasury
Regulation Section 1.704-1(b)(2)(ii)(g), the Managing General Partner shall
revalue the property of the Partnership to its fair market value (taking into
account Section 7701(g) of the Code) in accordance with Treasury Regulations
Section 1.704-1(b)(2)(iv)(f). When the Partnership's property is revalued by the
Managing General Partner, the Capital Accounts of the Partners shall be adjusted
in accordance with Treasury Regulations Sections 1.704-1(b)(2)(iv)(f) and (g),
which generally require such Capital Accounts to be adjusted to reflect the
manner in which the unrealized gain or loss inherent in such property (that has
not been reflected in the Capital Accounts previously) would be allocated among
the Partners pursuant to Section 6.4 if there were a taxable disposition of such
property for its fair market value (taking into account Section 7701(g) of the
Code) on the date of the revaluation.
V.9. Percentage Interests.
If the number of outstanding Partnership Units increases or decreases
during a taxable year, each Partner's Percentage Interest shall be adjusted to a
percentage equal to the number of Partnership Units held by such Partner divided
by the aggregate number of outstanding Partnership Units. If the Partners'
Percentage Interests are adjusted pursuant to this Section 5.9, the Profits and
Losses for the taxable year in which the adjustment occurs shall be allocated
between the part of the year ending on the day when the Partnership's property
is revalued by the Managing General Partner and the part of the year beginning
on the following day either (i) as if the taxable year had ended on the date of
the adjustment or (ii) based on the number of days in each part. The Managing
General Partner, in its sole discretion, shall determine which method shall be
used to allocate Profits and Losses for the taxable year in which the adjustment
occurs. The allocation of Profits and Losses for the earlier part of the year
shall be based on the Percentage Interests before adjustment, and the allocation
of Profits and Losses for the later part shall be based on the adjusted
Percentage Interests.
V.10. Negative Capital Accounts.
(a) Except to the extent provided in Section 5.10(b), and except to the
extent that the Partners are required to make Capital Contributions under
Section 5.1, no Partner shall be required to pay to the Partnership or any other
Partner any deficit balance which may exist from time to time in such Partner's
or Assignee's Capital Account.
(b) Notwithstanding the foregoing, if any General Partner has a deficit
balance in its Capital Account following the liquidation of its Partnership
Interest, as determined after taking into account all Capital Account
adjustments for the Partnership Fiscal Year during which such liquidation
occurs, it is unconditionally obligated to restore the amount of such deficit or
negative balance to the Partnership by the end of such Fiscal Year (or, if
later, within 90 days after the date of such liquidation), which such amount
shall, upon liquidation of the Partnership, be paid to creditors of the
Partnership or distributed to other Partners in accordance with their positive
Capital Account balances.
<PAGE>
V.11. No Interest on Amounts in Capital Account.
No Partner or Assignee shall be entitled to receive any interest on its
outstanding Capital Account balance.
V.12. Advances to Partnership.
If any Partner or Assignee shall advance funds to the Partnership in
excess of the amounts required hereunder to be contributed by it to the capital
of the Partnership, the making of such advances shall not result in any increase
in the amount of the Capital Account of such Partner or Assignee or entitle such
Partner or Assignee to any increase in its Percentage Interest (as defined in
Article VI). The amounts of any such advances shall be a debt of the Partnership
to such Partner or Assignee and shall be payable or collectible only out of the
Partnership Assets in accordance with the terms and conditions upon which such
advances are made.
V.13. Liability of Limited Partner.
Except as provided in the Delaware RULPA and Section 6.2 and Section
7.11(e), (a) the Limited Partners or Assignees shall not be personally liable
for any debts, liabilities, contracts or obligations of the Partnership; (b) the
Limited Partners shall be liable only to make payments of such Limited Partners'
Capital Contributions pursuant to Section 5.1; and (c) after the Limited
Partners' Capital Contributions shall be fully paid, the Limited Partners shall
not be required to make any further Capital Contributions or to lend any funds
to the Partnership.
V.14. Return of Capital.
Except upon the dissolution of the Partnership or as otherwise
specifically provided in this Agreement, no Partner or Assignee shall have the
right to demand or to receive the return of all or any part of the Capital
Account or Capital Contributions of such Partner or Assignee.
V.15. No Third Party Beneficiary.
No creditor or other third party having dealings with the Partnership
shall have the right to enforce the right or obligation of any Partner to make
Capital Contributions or loans or to pursue any other right or remedy hereunder
or at law or in equity, it being understood and agreed that the provisions of
this Agreement shall be solely for the benefit of, and may be enforced solely
by, the parties hereto and their respective successors and assigns. None of the
rights or obligations of the Partners herein set forth to make Capital
Contributions or loans to the Partnership shall be deemed an asset of the
Partnership for any purpose by any creditor or other third party, nor may such
rights or obligations be sold, transferred or assigned by the Partnership or
pledged or encumbered by the Partnership to secure any debt or other obligation
of the Partnership or of any of the Partners. In addition, it is the intent of
the parties hereto that no distribution to any Limited Partners shall be deemed
a return of money or other property in violation of the Act. However, if any
court of competent jurisdiction holds that, notwithstanding the provisions of
this Agreement, any Limited Partner is obligated to return such money or
property, such obligation shall be the obligation of such Limited Partner and
not of a General Partner. Without limiting the generality of the foregoing, a
deficit Capital Account of a Partner shall not be deemed to be a liability of
such Partner nor an asset or property of the Partnership.
<PAGE>
V.16. Employee Benefit Plans.
(a) If grants of shares of Common Stock are made in connection with any
of the Company's employee benefit plans:
(i) The Company, through the Managing General Partner and any
REIT Partner, shall contribute, as soon as practicable after such grant, to the
Partnership (to be thereafter taken into account for the purpose of calculating
any cash distributable to the Partners), an amount equal to the price, if any,
paid to the Company by the party receiving such shares of Common Stock;
(ii) The Partnership shall issue to the Managing General
Partner and any REIT Partner an aggregate number of additional Partnership Units
equal to the product of (A) the number of such shares of Common Stock issued by
the Company, multiplied by (B) a fraction, the numerator of which is 100%, and
the denominator of which is the Conversion Factor in effect on the date of such
contribution; and
(iii) The Managing General Partner's and any REIT Partners's
Percentage Interest and the Percentage Interests of the other Limited Partners
shall be adjusted as set forth in Section 5.2.
(b) If stock options granted in connection with a Company employee
benefit plan are exercised:
(i) The Company, through the Managing General Partner and any
REIT Partner, shall contribute, as soon as practicable after such exercise, to
the Partnership (to be thereafter taken into account for purposes of calculating
any cash distributable to the Partners), an amount equal to the exercise price,
if any, paid to the Company by the exercising party in connection with the
exercise of the option or warrant;
(ii) The Partnership shall issue to the Managing General
Partner and any REIT Partner an aggregate number of additional Partnership Units
equal to the product of (A) the number of shares of Common Stock issued by the
Company in satisfaction of such exercised option or warrant, multiplied by (B) a
fraction, the numerator of which is 100%, and the denominator of which is the
Conversion Factor in effect on the date of such contribution; and
(iii) The Managing General Partner's and any REIT Partner's
Percentage Interest and the Percentage Interests of the other Limited Partners
shall be adjusted as set forth in Section 5.2.
(c) If the Company grants any director, officer or employee share
appreciation rights, performance share awards or other similar rights
("Incentive Rights"), then simultaneously the Partnership shall grant the
Managing General Partner and any REIT Partner corresponding and economically
equivalent rights. Consequently, upon the cash payment by the Company to its
directors, officers or employees pursuant to such Incentive Rights, the
Partnership shall make an equal cash payment to the Managing General Partner and
any REIT Partner.
<PAGE>
ARTICLE VI
DISTRIBUTIONS; ALLOCATIONS
VI.1. Requirement and Characterization of Distributions.
(a) The Managing General Partner shall cause the Partnership to
distribute quarterly an amount equal to 100% of Available Cash generated by the
Partnership during such quarter to the Partners who are Partners on the
Partnership Record Date with respect to such quarter in the following order of
priority:
(i) First, to the holders of the Preferred Partnership Units
in such amount as is required for the Partnership to pay all
distributions with respect to such Preferred Partnership Units due or
payable in accordance with the instruments designating such Preferred
Partnership Units through the last day of such quarter; such
distributions shall be made to such Partners in such order of priority
and with such preferences as have been established with respect to such
Preferred Partnership Units as of the last day of such calendar
quarter; and then
(ii) Second, to the Class B Common Limited Partners who are,
and to any former Class B Common Limited Partners who were, Partners on
the Partnership Record Date with respect to such fiscal quarter in
accordance with their respective Percentage Interests on such
Partnership Record Date until the Class B Common Limited Partners have
received an amount pursuant to this clause equal to the sum of (A) the
Class B Common Distribution in respect of such fiscal quarter and (B)
the balance in the Unpaid Common Distribution Account; provided,
however, that the allocation between the Class B Common Limited
Partners of amounts relating to the Unpaid Common Distribution Account
shall take into account the effect of any distribution pursuant to
Section 6.1(b) hereof; and
(iii) Thereafter, 1% to the General Partner and 99% to the
Class A Limited Partners in accordance with their respective Percentage
Interests.
(b) Following the receipt of a written notice of an intention to
exchange Class B Common Units pursuant to the terms of Section 5.5 hereof, the
Managing General Partner shall cause the Partnership to distribute, immediately
prior to the consummation of such exchange, to any Limited Partner whose
Partnership Interest is being exchanged an amount of Available Cash at such time
equal to the balance, if any, of the Unpaid Common Distribution Account
corresponding to the Class B Common Units.
(c) The Managing General Partner shall have the power to determine any
alternative minimum tax, adjustments and tax preference items in such manner and
in such amounts as the Managing General Partner may determine in the Managing
General Partner's discretion.
(d) In no event may a Partner receive a distribution of Available Cash
with respect to a Partnership Unit if such Partner is entitled to receive a
distribution out of such Available Cash with respect to a share of Common Stock
for which such Partnership Unit has been redeemed or exchanged. The Managing
General Partner shall take such reasonable efforts, as determined by it in its
sole and absolute discretion and consistent with the Company's qualification as
a REIT, to distribute Available Cash to the Limited Partners so as to preclude
any such distribution or portion thereof from being treated as part of a sale of
property to the Partnership by a Limited Partner under Section 707 of the Code
or the Regulations thereunder; provided that the Company, the Managing General
Partner and the Partnership shall not have liability to a Limited Partner under
any circumstances as a result of any distribution to a Limited Partner being so
treated.
(e) Notwithstanding anything to the contrary contained herein, in no
event shall any Partner receive a distribution of Available Cash with respect to
any Class B Common Unit with respect to any quarter until such time as the
Partnership has distributed to the holders of the Preferred Partnership Units an
amount sufficient to pay all distributions payable with respect to such
Preferred Partnership Units through the last day of such quarter, in accordance
with the instruments designating such Preferred Partnership Units.
<PAGE>
VI.2. Withholding.
(a) All amounts withheld pursuant to the Code or any provisions of any
state or local tax law and Section 6.2(b) with respect to any allocation,
payment or distribution to the General Partner, the Limited Partners or
Assignees shall be treated as amounts distributed to the General Partner,
Limited Partners or Assignees pursuant to Section 6.1 for all purposes under
this Agreement.
(b) Each Limited Partner hereby authorizes the Partnership to withhold
from or pay on behalf of or with respect to such Limited Partner any amount of
federal, state, local, or foreign taxes that the Managing General Partner
determines that the Partnership is required to withhold or pay with respect to
any amount distributable or allocable to such Limited Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the
Code. Any amount paid on behalf of or with respect to a Limited Partner shall
constitute a loan by the Partnership to such Limited Partner, which loan shall
be repaid by such Limited Partner within fifteen (15) days after notice from the
Managing General Partner that such payment must be made unless (i) the
Partnership withholds such payment from a distribution which would otherwise be
made to the Limited Partner, or (ii) the Managing General Partner determines, in
its sole and absolute discretion, that such payment may be satisfied out of the
available funds of the Partnership which would, but for such payment, be
distributed to the Limited Partner. Any amounts withheld pursuant to the
foregoing clauses (i) or (ii) shall be treated as having been distributed to
such Limited Partner. Each Limited Partner hereby unconditionally and
irrevocably grants to the Partnership a security interest in such Limited
Partner's Partnership Interest to secure such Limited Partner's obligation to
pay to the Partnership any amounts required to be paid pursuant to this Section
6.2(b). In the event that a Limited Partner fails to pay any amounts owed to the
Partnership pursuant to this Section 6.2(b) when due, the Managing General
Partner may, in its sole and absolute discretion, elect to make the payment to
the Partnership on behalf of such defaulting Limited Partner, and in such event
shall be deemed to have loaned such amount to such defaulting Limited Partner
and shall succeed to all rights and remedies of the Partnership as against such
defaulting Limited Partner. Without limitation, in such event, the Managing
General Partner shall have the right to receive distributions that would
otherwise be distributable to such defaulting Limited Partner until such time as
such loan, together with all interest thereon, has been paid in full; and any
such distributions so received by the Managing General Partner shall be treated
as having been distributed to the defaulting Limited Partner and immediately
paid by the defaulting Limited Partner to the Managing General Partner in
repayment of such loan. Any amounts payable by a Limited Partner hereunder shall
bear interest at the lesser of (A) the base rate on corporate loans at large
United States money center commercial banks, as published from time to time in
The Wall Street Journal, plus four (4) percentage points or (B) the maximum
lawful rate of interest on such obligation, such interest to accrue from the
date such amount is due (i.e., fifteen (15) days after demand) until such amount
is paid in full. Each Limited Partner shall take such actions as the Partnership
or the Managing General Partner shall request in order to perfect or enforce the
security interest created hereunder.
VI.3. Distributions Upon Liquidation.
(a) Upon liquidation of the Partnership, after payment of, or adequate
provision for, debts and obligations of the Partnership, including any Partner
loans, any remaining assets of the Partnership shall be distributed to all
Partners with positive Capital Accounts in accordance with their respective
positive Capital Account balances. For purposes of the preceding sentence, the
Capital Account of each Partner shall be determined after all adjustments made
in accordance with Sections 6.1 and 6.4 resulting from Partnership operations
and from all sales and dispositions of all or any part of the Partnership's
assets. Any distributions pursuant to this Section 6.3 shall be made by the end
of the Partnership's taxable year in which the liquidation occurs (or, if later,
within 90 days after the date of the liquidation). To the extent deemed
advisable by the General Partner, appropriate arrangements (including the use of
a liquidating trust) may be made to assure that adequate funds are available to
pay any contingent debts or obligations.
(b) If the Managing General Partner has a negative balance in its
Capital Account following a liquidation of the Partnership, as determined after
taking into account all Capital Account adjustments in accordance with Sections
6.1 and 6.4 resulting from Partnership operations and from all sales and
dispositions of all or any part of the Partnership's assets, the Managing
General Partner shall contribute to the Partnership an amount of cash equal to
the negative balance in its Capital Account and such cash shall be paid or
distributed by the Partnership to creditors, if any, and then to the Limited
Partners in accordance with Section 6.3(a). Such contribution by the Managing
General Partner shall be made by the end of the Partnership's taxable year in
which the liquidation occurs (or, if later, within 90 days after the date of the
liquidation).
<PAGE>
VI.4. Allocations of Profit and Losses.
After giving effect to the special allocations set forth in Sections
6.5 and 6.6 hereof, Profits and Losses for a Fiscal Year or other period shall
be allocated for both tax and Capital Account purposes, in the following manner:
(a) Profits shall be allocated in the following order and
priority:
(i) first, to Preferred Partners in proportion to
their respective Percentage Interests until the amount of
Profits allocated to the Preferred Partners pursuant to this
clause (i) for the current Fiscal Year equals the excess of
(A) the cumulative amount of the Preferred Distribution for
each quarter of the current Fiscal Year and all prior Fiscal
Years over (B) the cumulative amount of Profits allocated to
the Preferred Partners pursuant to this clause (i) for all
prior Fiscal Years;
(ii) second, to the General Partner, in proportion to
and to the extent of an amount equal to the excess, if any, of
(A) the cumulative Losses allocated to such General Partner
pursuant to the last sentence of Section 6.7 hereof for all
prior Fiscal Years, over (B) the cumulative Profits allocated
to such General Partner pursuant to this Section 6.4(a)(ii)
for all prior Fiscal Years;
(iii) third, to the Partners (other than the Class B
Limited Partners and the Preferred Partners), in proportion to
and to the extent of an amount equal to the excess, if any, of
(A) the cumulative Losses allocated to such Partners pursuant
to Section 6.4(b)(iv) hereof for all prior Fiscal Years, over
(B) the cumulative Profits allocated to such Partners pursuant
to this Section 6.4(a)(iii) for all prior Fiscal Years;
(iv) fourth, to the Preferred Partners, in proportion
to and to the extent of an amount equal to the excess, if any,
of (A) the cumulative Losses allocated to each such Partner
pursuant to Section 6.4(b)(iii) hereof for all prior Fiscal
Years, over (B) the cumulative Profits allocated to such
Partner pursuant to this Section 6.4(a)(iv) for all prior
Fiscal Years;
(v) fifth, to the Class B Limited Partners, in
proportion to and to the extent of an amount equal to the
excess, if any, of (A) the cumulative Losses allocated to such
Partner pursuant to Section 6.4(b)(ii) hereof for all prior
Fiscal Years, over (B) the cumulative Profits allocated to
such Partner pursuant to this Section 6.4(a)(v) for all prior
Fiscal Years;
(vi) sixth, to the General Partner, the Class A
Common Limited Partner and the Class B Limited Partners in
proportion to and to the extent of (A) the cumulative amount
of the Available Cash distributed to such Partners pursuant to
Sections 6.1(a)(ii) and (iii) for each quarter of the current
Fiscal Year and all prior Fiscal Years over (B) the cumulative
amount of Profits allocated to such Partners pursuant to this
clause (vi) for all prior Fiscal Years; and
(vii) thereafter, to the General Partner, the Class A
Common Limited Partner and the Class B Limited Partners in
accordance with their respective Percentage Interests.
<PAGE>
(b) Losses shall be allocated in the following order and
priority:
(i) first, to the General Partner and the Class A
Common Limited Partners in proportion to and until the amount
of Losses allocated pursuant to this clause (i) for the
current Fiscal Year equals the excess, if any, of (A) the sum
of (1) their respective Capital Account balances on the
Effective Date, (2) the Capital Contributions made by such
Partners subsequent to the Effective Date, and (3) the
cumulative amount of Profits allocated to such Partners
pursuant to Section 6.4(a)(vii) hereof over (B) the sum of (1)
cumulative amount of Losses allocated to such Partners
pursuant to this clause (i) for all prior Fiscal Years and (2)
the cumulative amount of distributions made to them pursuant
to Section 6.1 hereof;
(ii) second, to the Class B Limited Partners, in
proportion to their respective Percentage Interests until the
amount of Losses allocated pursuant to this clause (ii) for
the current Fiscal Year equals the excess, if any, of (A) the
sum of (1) the aggregate amount of the portion of their
Capital Account balances on the Effective Date attributable to
Class B Common Units, (2) the aggregate Capital Contributions
made by such Partners subsequent to the Effective Date in
respect of their Class B Common Units, and (3) the cumulative
amount of Profits allocated to them pursuant to Section
6.4(a)(ii) hereof over (B) the sum of (1) cumulative amount of
Losses allocated to such Partners pursuant to this clause (ii)
for all prior Fiscal Years and (2) the cumulative amount of
distributions made to them pursuant to Section 6.1 hereof;
(iii) third, to the Preferred Partners, in proportion
to their respective Percentage Interests until the amount of
Losses allocated pursuant to this clause (iii) for the current
Fiscal Year equals the excess, if any, of (A) the sum of (1)
the aggregate amount of the portion of their Capital Account
balances on the Effective Date attributable to Class B
Preferred Units, (2) the aggregate Capital Contributions made
by such Partners subsequent to the Effective Date in respect
of their respective Preferred Partnership Units, and (3) the
cumulative amount of Profits allocated to them pursuant to
Section 6.4(a)(i) hereof over (B) the sum of (1) cumulative
amount of Losses allocated to such Partners pursuant to this
clause (iii) for all prior Fiscal Years and (2) the cumulative
amount of distributions made to them pursuant to Section 6.1
hereof; and
(iv) thereafter, 1% to the General Partner and 99% to
the Limited Partners (other than the Class B Limited Partners
and the Preferred Partners) in accordance with their
Percentage Interests.
<PAGE>
VI.5. Special Allocations.
The following special allocations shall be made in the following order:
(a) Notwithstanding any other provision of this Agreement to
the contrary, if in any Fiscal Year there is a net decrease in Partnership
Minimum Gain, then each Partner shall first be allocated items of Partnership
income for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an
amount equal to the portion of such Partners' share of the net decrease in
Partnership Minimum Gain, determined in accordance with the provisions of
Treasury Regulations Section 1.704-2(g). As provided in Treasury Regulations
Section 1.704-2(j), income of the Partnership allocated for any Fiscal Year
under this Section 6.5(a) shall consist first of items of book gain recognized
from the disposition of Partnership property subject to Nonrecourse Liabilities
to the extent of the decrease in Partnership Minimum Gain that is attributable
to such disposition, with any remaining allocated income deemed to be made up of
a pro rata portion of the Partnership's other items of gross income for such
taxable year.
(b) Notwithstanding any other provision of this Agreement to
the contrary, except as specified in Section 6.5(a), if in any Fiscal Year there
is a net decrease in Partner Minimum Gain, then each Partner shall first be
allocated items of Partnership income for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) in an amount equal to the portion of such Partners'
share of the net decrease in such Partner Minimum Gain, determined in accordance
with the provisions of Treasury Regulations Section 1.704-2(i). As provided in
Treasury Regulations Section 1.704-2(j), income of the Partnership allocated for
any Fiscal Year under this Section 6.5(b) shall consist first of items of book
gain recognized from the disposition of Partnership property subject to Partner
Nonrecourse Debt to the extent of the decrease in Partner Minimum Gain that is
attributable to such disposition, with any remaining allocated income deemed to
be made up of a pro rata portion of the Partnership's other items of gross
income for such taxable year.
(c) In the event any Partner unexpectedly receives any
adjustments, allocations, or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) of
the Treasury Regulations, items of Partnership income and gain shall be
specially allocated to such Partner in an amount and manner sufficient to
eliminate, to the extent required by the Treasury Regulations, the Adjusted
Capital Account Deficit, if any, of such Partner as quickly as possible,
provided that an allocation pursuant to this Section 6.5(c) shall be made only
if and to the extent that such Partner would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Article VI have been
tentatively made as if this Section 6.5(c) were not in the Agreement.
<PAGE>
(d) In the event a Limited Partner (who is not also a General
Partner) has a deficit Capital Account at the end of any Fiscal Year that is in
excess of the sum of (i) the amount the Limited Partner is obligated to restore
pursuant to any provision of this Agreement, and (ii) the amount the Limited
Partner is deemed to be obligated to restore pursuant to Section
1.704-1(b)(2)(ii)(c) of the Treasury Regulations, the Limited Partner shall be
specially allocated items of Partnership income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 6.5(d) shall be made only if and to the extent that the Limited Partner
would have a deficit Capital Account in excess of such sum after all other
allocations provided for in this Article VI have been made as if Section 6.5(c)
hereof and this Section 6.5(d) were not in the Agreement.
(e) To the extent an adjustment to the adjusted tax basis of
any Partnership asset is required pursuant to Code Section 732(d), Code Section
734(b) or Code Section 743(b), the Capital Accounts of the Partners shall be
adjusted pursuant to Section 1.704-1(b)(2)(iv)(m) of the Treasury Regulations.
VI.6. Curative Allocations.
The allocations set forth in Sections 6.5 and 6.7 hereof (the
"Regulatory Allocations") are intended to comply with certain requirements of
the Treasury Regulations. It is the intent of the Partners that, to the extent
possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of Partnership
income, gain, loss or deduction pursuant to this Section 6.6. Therefore,
notwithstanding any other provision of this Article VI (other than the
Regulatory Allocations), the General Partner shall make such offsetting special
allocations of Partnership income, gain, loss or deduction in whatever manner it
determines appropriate so that, after such offsetting allocations are made, each
Partner's Capital Account balance is, to the extent possible, equal to the
Capital Account balance such Partner would have had if the Regulatory
Allocations were not part of the Agreement and all Partnership items were
allocated pursuant to Section 6.4.
VI.7. Loss Limitation.
The Losses allocated to a Limited Partner pursuant to Section 6.4(b)
hereof shall not exceed the maximum amount of Losses that can be so allocated
without causing a Limited Partner to have an Adjusted Capital Account Deficit at
the end of any Fiscal Year. All Losses in excess of the limitations set forth in
this Section 6.7 shall be allocated to the General Partner.
<PAGE>
VI.8. Tax Allocations; Code Section 704(c).
In accordance with Code Section 704(c) and the Treasury Regulations
promulgated thereunder, income, gain, loss, and deduction with respect to any
property contributed to the capital of the Partnership shall, solely for tax
purposes, be allocated among the Partners so as to take account of any variation
between the adjusted basis of such property to the Partnership for federal
income tax purposes and its initial Gross Asset Value. In the event the Gross
Asset Value of any Partnership asset is adjusted pursuant to clause (v) of the
definition of Gross Asset Value, subsequent allocations of income, gain, loss,
and deduction with respect to such asset shall take account of any variation
between the adjusted basis of such asset for federal income tax purposes and its
Gross Asset Value in the same manner as under Code Section 704(c) and the
Treasury Regulations promulgated thereunder. Any elections or other decisions
related to allocations pursuant to this Section 6.8 will be made in any manner
that the General Partner determines in its sole discretion (including any manner
that may benefit the General Partner and its Affiliates).
VI.9. Company Distribution Requirements.
The Managing General Partner shall use its reasonable efforts to cause
the Partnership to distribute amounts sufficient to enable the Company to pay
shareholder dividends that will allow the Company to (a) meet its distribution
requirement for qualification as a real estate investment trust as set forth in
Section 857(a)(1) of the Code and (b) avoid any federal income or excise tax
liability imposed by the Code.
VI.10. No Right to Distributions in Kind.
The Managing General Partner may distribute property, other than cash
to the Partners in any manner determined by the General Partner. No Partner
shall be entitled to demand property other than cash in connection with any
distributions by the Partnership.
VI.11. Limitations on Return of Capital Contributions.
Notwithstanding any of the provisions of this Article VI, no Partner
shall have the right to receive and the Managing General Partner shall not have
the right to make, a distribution that includes a return of all or part of a
Partner's Capital Contributions, unless after giving effect to the return of a
Capital Contribution, the sum of all Partnership liabilities, other than the
liabilities to a Partner for the return of his Capital Contribution, does not
exceed the fair market value of the Partnership's assets.
<PAGE>
ARTICLE VII
MANAGEMENT
VII.1. Management and Control of Partnership.
Except as otherwise expressly provided or limited by the provisions of
this Agreement (including, without limitation, the provisions of Article VIII),
the Managing General Partner shall have full, exclusive and complete discretion
to manage and control the business and affairs of the Partnership, to make all
decisions affecting the business and affairs of the Partnership and to take all
such actions as it deems necessary or appropriate to accomplish the purposes of
the Partnership as set forth herein. The Managing General Partner shall use
reasonable efforts to carry out the purposes of the Partnership and shall devote
to the management of the business and affairs of the Partnership such time as
the Managing General Partner, in its reasonable discretion, shall deem to be
reasonably required for the operation thereof. The Limited Partners shall have
no authority, right or power to bind the Partnership, or to manage or control,
or to participate in the management or control of, the business and affairs of
the Partnership in any manner whatsoever.
VII.2. Powers of Managing General Partner.
Subject to the limitation of Section 7.3, which vests certain approval
rights in the Limited Partners, and to the limitations and restrictions set
forth in Article VIII, the Managing General Partner (acting on behalf of the
Partnership) shall have the right, power and authority, in the management of the
business and affairs of the Partnership, to do or cause to be done any and all
acts, at the expense of the Partnership, deemed by the Managing General Partner
to be necessary or appropriate to effectuate the business, purposes and
objectives of the Partnership. The power and authority of the Managing General
Partner pursuant to this Agreement shall be liberally construed to encompass all
acts and activities in which a partnership may engage under the Delaware RULPA.
The power and authority of the Managing General Partner shall include, without
limitation, the power and authority on behalf of the Partnership:
(a) To acquire, own, lease, sublease, manage, hold, deal in, control or
dispose of any interests or rights in personal property or real property,
including interests in any Partnership Property, whether realty or personalty,
including, without limitation, the powers to sell, exchange, lease, sublease,
mortgage, pledge, convey in trust, enter into joint ventures or partnerships
respecting or otherwise hypothecate or dispose of all or any portion of any
Partnership Property or any other Partnership Asset or any interest therein;
provided, however, that the use of any Restricted Restaurant Property and any
sale or other disposition of any Restricted Restaurant Property shall be subject
to the restrictions and limitations set forth in Sections 8.3 and 8.4;
(b) Subject to the restrictions and limitations set forth in Section
8.3 but without limiting the generality of Section 7.2(a), to negotiate, enter
into, renegotiate, extend, renew, terminate, modify, amend, waive, execute,
acknowledge or take any other action on behalf of the Partnership with respect
to any Primary Lease (including, without limitation, to exercise any right of
the Partnership under any Primary Lease to acquire title to a Partnership
Property pursuant to a right of first refusal) or any lease or sublease of a
Partnership Property whether to a BKC Franchisee or otherwise, or any provision
thereof;
(c) Subject to the restrictions and limitations set forth in Sections
8.3 and 8.4, to create, by grant or otherwise, easements, servitudes,
rights-of-way, and other rights in and to any Partnership Property;
<PAGE>
(d) To alter, improve, expand, repair, raze, replace or reconstruct a
Partnership Property; provided, however, that any improvement, expansion,
replacement, or reconstruction of a Partnership Property pursuant to the
Successor Policy (as further described in Section 8.6) shall be subject to the
terms and conditions of Section 8.6;
(e) Subject to the restrictions and limitations set forth in Sections
8.3 and 8.4, to let or lease, or sublet or sublease, any Partnership Property
for any period, and for any purpose;
(f) To apply proceeds of any sale, exchange, mortgage, pledge or other
disposition of any Partnership Property or any other Partnership Asset to
payment of liabilities of the Partnership and to pay, collect, compromise,
arbitrate or otherwise adjust any and all other claims or demands of or against
the Partnership or to hold such proceeds against the payment of contingent
liabilities, known or unknown;
(g) To maintain or cause to be maintained records of all rights and
interests acquired or disposed of by the Partnership, all correspondence
relating to the business of the Partnership, and the original records (or copies
on such media as the Managing General Partner may deem appropriate) of all
statements, bills and other instruments furnished the Partnership in connection
with its business;
(h) To maintain records and accounts of all operations and
expenditures, make all filings and reports required under applicable rules and
regulations of any governmental department, bureau or agency, any securities
exchange and any automated quotation system of a registered securities
association, and furnish the Partners with all necessary United States federal,
state or local income tax reporting information or such information with respect
to any other jurisdiction;
(i) To purchase and maintain (either directly or through participation
under insurance contracts purchased and maintained by any Affiliate), in its
sole and absolute discretion and at the expense of the Partnership, liability,
indemnity and any other insurance (including, without limitation, errors and
omissions insurance and insurance to cover the obligations of the Partnership
under Section 7.10), sufficient to protect the Partnership, the General
Partners, their officers, directors, employers, agents and Affiliates or any
other Person from those liabilities and hazards which may be insured against in
the conduct of the business and in the management of the business and affairs of
the Partnership;
(j) To make, execute, assign, acknowledge and file on behalf of the
Partnership any and all documents or instruments of any kind which the Managing
General Partner may deem necessary or appropriate in carrying out the purposes
and business of the Partnership, including, without limitation, powers of
attorney, agreements of indemnification, sales contracts, deeds, options, loan
obligations, mortgages, deeds of trust, notes, documents or instruments of any
kind or character, and amendments thereto. Any person, firm or corporation
dealing with the Managing General Partner shall not be required to determine or
inquire into the authority or power of the Managing General Partner to bind the
Partnership or to execute, acknowledge or deliver any and all documents in
connection therewith;
(k) To borrow money or to obtain credit in such amounts, on such terms
and conditions and at such rates of interest and upon such other terms and
conditions as the Managing General Partner deems appropriate, from banks, other
lending institutions or any other Person, including the Partners, for any
purpose of the Partnership, including, without limitation, any loan incurred for
the purpose of making one or more distributions to any or all Partners,
including any distributions which are, in whole or in part, a return of Capital
Contributions; and subject to the restrictions and limitations set forth in
Section 8.4, in connection with such loans to mortgage, pledge, assign or
otherwise encumber or alienate any or all of the Partnership Properties or other
Partnership Assets, including any income therefrom, to secure or provide for the
repayment thereof. As between any lender and the Partnership, it shall be
conclusively presumed that the proceeds of such loans are to be and will be used
for the purposes authorized herein and that the Managing General Partner has the
full power and authority to borrow such money and to obtain such credit;
<PAGE>
(l) To originate loans or otherwise provide financing, whether through
guarantees, letters of credit or otherwise, secured by liens on real estate to
borrowers who meet the Partnership's underwriting criteria, which shall be
established by the Managing General Partner;
(m) To assume obligations, enter into contracts, including contracts of
guaranty or suretyship, incur liabilities, lend money and otherwise use the
credit of the Partnership, and, subject to the restrictions and limitations set
forth in Sections 8.3 and 8.4, to secure any of the obligations, contracts or
liabilities of the Partnership by mortgage, pledge or other encumbrance of all
or any part of the property, franchises and income of the Partnership;
(n) To invest funds of the Partnership in interest-bearing accounts and
short-term investments, including, without limitation, obligations of the
federal, state and local governments and their agencies, mutual funds (including
money market funds), time deposits, commercial paper and certificates of deposit
of commercial banks, savings banks or savings and loan associations; provided
that the Managing General Partner shall not invest Partnership funds in such a
manner that the Partnership will be considered to be holding itself out as being
engaged primarily in the business of investing, reinvesting or trading in
securities or otherwise will be deemed to be an investment company under the
Investment Company Act of 1940, as amended;
(o) To make any election on behalf of the Partnership as is or may be
permitted under the Code or under the taxing statute or rule of any state,
local, foreign or other jurisdiction, and to supervise the preparation and
filing of all tax and information returns which the Partnership may be required
to file;
(p) To maintain the buildings, appurtenances and grounds of the
Partnership Properties in accordance with acceptable standards, including within
such maintenance, without limitation thereof, interior and exterior cleaning,
painting and decorating, plumbing, carpentry and such other normal maintenance
and repair work as may be appropriate;
(q) To collect all rents and other charges from lessees of the
Partnership Properties due the Partnership. The Managing General Partner shall
have full power and authority to request, demand, collect, receive and receipt
for all such rents and other charges, to institute legal proceedings in the name
of the Partnership for the collection thereof and for the dispossession of any
Person from a Partnership Property, to settle or compromise all such legal
proceedings and any other disputes with respect to such rents and other charges
and to incur such expenses in connection therewith as the Managing General
Partner shall determine to be necessary or appropriate, which expenses may
include the costs of counsel for any such matter;
(r) To cause to be disbursed (i) the aggregate amount required to be
paid pursuant to any indebtedness of the Partnership, including therein amounts
due under any mortgages or deeds of trust for interest, amortization of
principal and for allocation to reserve or escrow funds; (ii) the amount of rent
payable by the terms of any Primary Lease; (iii) the amount of all real estate
taxes and other impositions levied by appropriate authorities (including,
without limitation, amounts required to be paid by any BKC Franchisee pursuant
to any lease with respect to a Restricted Restaurant Property); and (iv) amounts
otherwise due and payable as expenses of the Partnership incurred in furtherance
of the purposes of this Agreement (including, without limitation, amounts
payable to the General Partners);
<PAGE>
(s) To employ and engage suitable agents, employees, advisers,
consultants and counsel (including any custodian, investment adviser,
accountant, attorney, corporate fiduciary, bank or other reputable financial
institution, or any other agents, employees or Persons who may serve in such
capacity for the Managing General Partner or any Affiliate of the Managing
General Partner) to carry out any activities which the Managing General Partner
is authorized or required to carry out or conduct under this Agreement,
including, without limitation, a Person who may be engaged to undertake some or
all of the general management, property management, financial accounting and
record keeping or other duties of the Managing General Partner, to indemnify
such Persons against liabilities incurred by them in acting in such capacities
on behalf of the Partnership and to rely on the advice given by such Persons, it
being agreed and understood that the Managing General Partner shall not be
responsible for any acts or omissions of any such Persons and shall assume no
obligations in connection therewith other than the obligation to use due care in
the selection thereof;
(t) To enter into an agreement or agreements with real estate brokers
or agents, investment banking firms, appraisers or others providing for the
engagement of such Persons on an exclusive or non-exclusive basis to advise or
represent the Partnership in the valuation, sale, transfer, assignment, lease,
sublease, mortgaging or other encumbering of, or other dealings in, the
Partnership Properties, it being understood that the Managing General Partner
shall not be responsible for any acts or omissions of any such Person and shall
assume no obligations in connection therewith other than the obligation to use
due care in the selection thereof; provided, however, that no commission in
connection with any sale or other disposition of a Partnership Property shall
exceed six percent (6%) of the gross proceeds from such sale or disposition, and
that no commission in connection with any such sale or other disposition shall
be payable to a General Partner or any of its Affiliates;
(u) To consult with the Independent Consultant pursuant to the
provisions of Section 8.10 with respect to any matter related to the business
and affairs of the Partnership;
(v) To take such actions and make such decisions as may be necessary or
appropriate, in the reasonable judgment of the Managing General Partner, to
resolve or avoid any actual or potential conflict of interest between the
Partnership and any General Partners or any Affiliates thereof, including,
without limitation, subject to Section 8.8, to cause the Partnership to accept
from BKC or a third party, in exchange or substitution for one or more
Restricted Restaurant Properties, one or more other properties on which a BK
Restaurant leased to a BKC Franchisee is located; provided, however, that, so
long as Section 1031 of the Code or any similar provision shall remain in
effect, any such substitution or exchange must qualify as an exchange of
property of a like-kind in which no gain or loss is recognized to the
Partnership except to the extent of any cash received in connection therewith;
(w) To hold Partnership Properties or other Partnership Assets in the
name of one or more nominees, with or without disclosure of the fiduciary
relationship;
(x) To pay, extend, renew, modify, adjust, submit to arbitration,
prosecute, defend or compromise, upon such terms as it may determine and upon
such evidence as it may deem sufficient, any obligation, suit, liability, cause
of action or claim, including taxes, either in favor of or against the
Partnership;
<PAGE>
(y) To qualify the Partnership to do business in any state, territory,
dependency or foreign country;
(z) To purchase any Partnership Property subject to a Primary Lease
whether pursuant to a first right of refusal under such Primary Lease or
otherwise;
(aa) To enter into a property management agreement with BKC pursuant to
which BKC agrees on behalf of the Managing General Partner, at no additional
expense to the Partnership, to exercise certain day-to-day management
responsibilities with respect to the Partnership Properties and to perform
related administrative services upon the terms and conditions set forth therein,
to extend, renew, terminate, modify, amend or waive such agreement or any
provision thereof and to take such action pursuant to or in connection with such
agreement as the Managing General Partner shall determine appropriate; provided,
however, that the Managing General Partner shall have no obligation to enter
into any such agreement;
(bb) To distribute money or Partnership Assets to Partners and
Assignees in accordance with Article VI, regardless of the source of such money
or Partnership Assets, including, without limitation, money borrowed by the
Partnership or by the Managing General Partner on behalf of the Partnership;
(cc) To acquire fee simple title or a leasehold interest in any
Partnership Property and Ancillary Property related thereto and to provide for
the purchase price for such property from funds otherwise constituting Cash Flow
or the Net Proceeds of a Capital Transaction, whether at the time of acquisition
or thereafter to pay principal, interest or other amounts payable in respect of
any financing related to such acquisition;
(dd) To lease, sell or otherwise transfer Ancillary Property to any
tenant of a Partnership Property, to provide financing, whether through loans,
guarantees or otherwise, for any tenant of a Partnership Property and to provide
the funds for such transactions from funds otherwise constituting Cash Flow or
the Net Proceeds of a Capital Transaction, whether at the time of such
transaction or thereafter to pay principal, interest or other amounts payable in
respect of any financing undertaken for such purpose;
(ee) To mortgage, lien or otherwise encumber or restrict any Restricted
Restaurant Property and use the proceeds thereof in respect of Other Restaurant
Properties, Retail Properties or for any other Partnership purpose; and to
mortgage, lien or otherwise encumber or restrict any Other Restaurant Property
or Retail Property and use the proceeds thereof in respect of Restricted
Restaurant Properties or for any other Partnership purpose;
(ff) To operate or franchise any Partnership Property, whether directly
or through any Affiliates or other Persons;
(gg) To reinvest or otherwise use funds otherwise constituting Cash
Flow or the Net Proceeds of a Capital Transaction in or for Partnership
Properties, Ancillary Property or other Partnership Assets or for any other
Partnership purpose;
<PAGE>
(hh) To form or acquire an interest in, and to contribute any property
to, any further limited or general partnerships, limited liability companies,
joint ventures or other relationships that it deems desirable (including,
without limitation, the acquisition of interests in, and the contributions of
property to, any subsidiary and other Person in which it has an equity
investment from time to time); provided, however, that, as long as any Partner
has determined to continue to qualify as a real estate investment trust under
the Code, the General Partners may not engage in any such formation, acquisition
or contribution that would cause such Partner to fail to qualify as a real
estate investment trust under the Code or fail to qualify as a "qualified
Company subsidiary" within the meaning of Section 856(i)(2) of the Code;
(ii) To possess and exercise any additional rights and powers of a
general partner under the partnership laws of Delaware (including, without
limitation, the Delaware RULPA) and any other applicable laws, to the extent not
inconsistent with this Agreement; and
(jj) In general, to exercise in full all of the powers of the
Partnership as set forth in Section 3.2 and to do any and all acts and conduct
all proceedings and execute all rights and privileges, contracts and agreements
of any kind whatsoever, although not specifically mentioned in this Agreement,
that the Managing General Partner in its sole and absolute discretion may deem
necessary or appropriate to the conduct of the business and affairs of the
Partnership or to carry out the purposes of the Partnership. The expression of
any power or authority of the Managing General Partner in this Agreement shall
not in any way limit or exclude any other power or authority which is not
specifically or expressly set forth in this Agreement.
VII.3. Restrictions on Authority of Managing General Partner.
(a) Anything in this Agreement to the contrary notwithstanding, the
Managing General Partner shall have no authority to:
(i) pay for any services performed by a General Partner or an
Affiliate of a General Partner, except as otherwise expressly permitted
in this Agreement; or
(ii) take any action on any matter with respect to which the
prior approval of the Limited Partners is specifically required under
this Agreement without having received such prior approval.
(b) Notwithstanding any other provision of this Agreement, the Managing
General Partner shall not, unless approved by a Majority Vote of the Limited
Partners:
(i) except upon dissolution and liquidation of the Partnership
pursuant to Article XIV, cause the Partnership to sell, exchange,
assign, lease, sublease or otherwise dispose of all or substantially
all of the Partnership Assets (including by way of merger,
consolidation or other combination with any other Person) other than in
ordinary course of business of the Partnership; provided, however, that
this provision shall not be interpreted to preclude or limit the
mortgage, pledge, hypothecation or grant of a security interest in all
or substantially all of the Partnership Assets, and shall not apply to
any forced sale of any or all of the Partnership Assets pursuant to the
foreclosure of, or other realization upon, any such encumbrance; or
(ii) cause the Partnership to merge or consolidate with any
other partnership or other entity (other than a Limited Partner).
<PAGE>
VII.4. Title to Partnership Assets.
Title to Partnership Assets, whether real, personal or mixed, or
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner, individually or collectively, shall have any ownership
interest in such Partnership Assets or any portion thereof. Title to any or all
of the Partnership Assets may be held in the name of the Partnership, of the
Managing General Partner or of one or more nominees, as the Managing General
Partner may determine. The Managing General Partner hereby declares and warrants
that any Partnership Assets for which legal title is held in the name of the
Managing General Partner shall be held in trust by the Managing General Partner
for the use and benefit of the Partnership in accordance with the terms or
provisions of this Agreement. All Partnership Assets shall be recorded as the
property of the Partnership on its books and records, irrespective of the name
in which legal title to such Partnership Assets is held.
VII.5. Working Capital Reserve.
The Managing General Partner shall have the right to cause the
Partnership to set up a Working Capital Reserve and to set aside therein such
funds as the Managing General Partner, in its sole and absolute discretion,
shall determine to be reasonable in connection with the operation of the
business of the Partnership. Any funds set aside for such Working Capital
Reserve may be invested by the Managing General Partner with a view to the
appropriate degree of safety of and return on such invested funds, and such
funds shall not be available for current distribution under Section 6.5;
provided, however, that some or all of such funds may subsequently be made
available for distribution pursuant to Section 6.5 should the Managing General
Partner, in its sole and absolute discretion, so elect. The Working Capital
Reserve established and maintained pursuant to this Section 7.5 shall be in
addition to any reserves established and maintained by the Managing General
Partner to implement the Successor Policy pursuant to Section 8.6.
VII.6. Other Business Activities of Partners.
Subject to Section 7.8 hereof and any agreements entered into by the
Managing General Partner or its Affiliates with the Partnership or a Subsidiary
Partnership, any officer, director, employee, agent, trustee, Affiliate or
stockholder of the Managing General Partner shall be entitled to and may have
business interests and engage in business activities in addition to those
relating to the Partnership, including business interests and activities
substantially similar or identical to those of the Partnership. Neither the
Partnership nor any of the Limited Partners shall have any rights by virtue of
this Agreement in any such business ventures, interest or activities. None of
the Limited Partners nor any other Person shall have any rights by virtue of
this Agreement or the partnership relationship established hereby in any such
business ventures, interests or activities, and the Managing General Partner
shall have no obligation pursuant to this Agreement to offer any interest in any
such business ventures, interests and activities to the Partnership or any
Limited Partner, even if such opportunity is of a character which, if presented
to the Partnership or any Limited Partner, could be taken by such Person.
<PAGE>
VII.7. Transactions with Managing General Partner or Affiliates.
In addition to transactions specifically contemplated by the terms and
provisions of this Agreement, including, without limitation, Articles VIII and
IX, the Partnership is expressly permitted to enter into other transactions
(including, without limitation, the acquisition of goods or services) with any
Affiliates of the Managing General Partner, provided that the price and other
terms of such other transactions are fair to the Partnership and that the price
and other terms of such transactions are not less favorable to the Partnership
than those generally prevailing with respect to comparable transactions between
unrelated parties.
VII.8. General Partner Participation.
The Managing General Partner agrees that all business activities of the
Managing General Partner, including activities pertaining to the acquisition,
development or ownership of restaurant properties or other property, shall be
conducted through the Partnership or one or more Subsidiary Partnerships;
provided, however, that the Company is allowed to make a direct acquisition, but
if and only if, such acquisition is made in connection with the issuance of
Additional Securities, which direct acquisition and issuance have been approved
and determined to be in the best interests of the Company and the Partnership by
a majority of the Independent Directors.
VII.9. Net Worth Representation; Independent Judgment.
In addition to their other duties and obligations, the General Partners
further agree as follows:
(a) The General Partners shall use their best efforts to maintain a
combined net worth equal to the total amount, if any, that could reasonably be
expected to be required in order for the Partnership to be treated as a
partnership for federal income tax purposes; and
(b) In acting on behalf of the Partnership, the Managing General
Partner will not act under the direction of or as an agent of or "dummy" for the
Limited Partners.
VII.10. Liability of General Partners to Partnership and the Limited Partners.
The General Partners, their Affiliates and all officers, directors,
employees and agents of the General Partners and their Affiliates shall not be
liable to the Partnership or to the Limited Partners for any losses sustained or
liabilities incurred as a result of any act or omission of the General Partners
or their Affiliates if (a) the General Partner or Affiliate acted (or failed to
act) in good faith and in a manner it believed to be in, or not opposed to, the
interests of the Partnership, and (b) the conduct of the General Partner or
Affiliate did not constitute actual fraud, gross negligence or willful or wanton
misconduct.
<PAGE>
VII.11. Indemnification of General Partners and Affiliates.
(a) The Partnership shall indemnify and hold harmless the General
Partners, their Affiliates and all officers, directors, employees and agents of
the General Partners and their Affiliates (individually, an "Indemnitee") from
and against any and all losses, claims, demands, costs, damages, liabilities,
joint and several, expenses of any nature (including attorneys' fees and
disbursements), judgments, fines, settlements and other amounts arising from any
and all claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, in which the Indemnitee may be involved, or
threatened to be involved, as a party or otherwise, arising out of or incidental
to the Initial Public Offering, the Second Public Offering or the Third Public
Offering or the business of the Partnership or the Limited Partners, including,
without limitation, liabilities under the federal and state securities laws,
regardless of whether the Indemnitee continues to be a General Partner, an
Affiliate or an officer, director, employee or agent of a General Partner or of
an Affiliate at the time any such liability or expense is paid or incurred, if
(i) the Indemnitee acted in good faith and in a manner it believed to be in, or
not opposed to, the interests of the Partnership, and, with respect to any
criminal proceeding, had no reasonable cause to believe its conduct was
unlawful, and (ii) the Indemnitee's conduct did not constitute actual fraud,
gross negligence or willful or wanton misconduct. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere, or its equivalent, shall not, in and of itself, create a
presumption or otherwise constitute evidence that the Indemnitee acted in a
manner contrary to that specified in (i) or (ii) above.
(b) Expenses incurred by an Indemnitee in defending any claim, demand,
action, suit or proceeding subject to this Section 7.11 shall, from time to
time, be advanced by the Partnership prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the Partnership of an
undertaking by or on behalf of the Indemnitee to repay such amount unless it
shall be determined that such Person is entitled to be indemnified as authorized
in this Section 7.11.
(c) The indemnification provided by this Section 7.11 shall be in
addition to any other rights to which those indemnified may be entitled under
any agreement, with the approval of the Limited Partners, as a matter of law or
equity or otherwise, both as to an action in the Indemnitee's capacity as a
General Partner, an Affiliate or as an officer, director, employee or agent of a
General Partner or an Affiliate, and as to an action in another capacity, and
shall continue as to an Indemnitee who has ceased to serve in such capacity and
shall inure to the benefit of the heirs, successors, assigns and administrators
of the Indemnitee.
(d) The Partnership may purchase and maintain insurance (either
directly or through participation under insurance contracts purchased and
maintained by any Affiliate) on behalf of the General Partners and such other
Persons as the Managing General Partner shall determine against any liability
that may be asserted against or expense that may be incurred by such Person in
connection with the Initial Public Offering, the Second Public Offering or the
Third Public Offering and the activities of the Partnership or the Limited
Partners, regardless of whether the Partnership or the Limited Partners would
have the power to indemnify such Person against such liability under the
provisions of this Agreement.
<PAGE>
(e) Except as set forth in the next sentence below, any indemnification
hereunder shall be satisfied solely out of the assets of the Partnership and the
Limited Partners. The limited partners or stockholders of the Limited Partners
shall not be subject to personal liability by reason of these indemnification
provisions; provided, however, that to the extent that a limited partner of the
Limited Partners shall recover from any Indemnitee any amount that is subject to
indemnification hereunder, the limited partner or stockholders of the Limited
Partners shall have personal liability to the Partnership, the Limited Partners
and the Indemnitee under this Section 7.11 for and to the extent of such amount.
(f) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.11 by reason of the fact that the Indemnitee had an
interest in the transaction with respect to which the indemnification applies if
the transaction was otherwise permitted by the terms of this Agreement.
(g) The provisions of this Section 7.11 are for the benefit of the
Indemnitees and shall not be deemed to create any rights for the benefit of any
other Persons.
VII.12. No Management by Limited Partners.
The Limited Partners shall not take part in the day-to-day management,
operation or control of the business and affairs of the Partnership. The Limited
Partners shall not have any right, power or authority to transact any business
in the name of the Partnership or to act for or on behalf of or to bind the
Partnership. The Limited Partners shall have no rights other than those
specifically provided herein or granted by law where consistent with a valid
provision hereof. In the event any laws, rules or regulations applicable to the
Partnership, or to the sale or issuance of securities by a Limited Partner,
require the Limited Partners to have certain rights, options, privileges or
consents not granted by the terms of this Agreement, then the Limited Partner
shall have and enjoy such rights, options, privileges and consents so long as
(but only so long as) the existence thereof does not result in a loss of the
limitation on liability enjoyed by the Limited Partners under the Delaware RULPA
or the applicable laws of any other jurisdiction.
VII.13. Other Matters Concerning General Partners.
(a) The General Partners may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other paper
or document believed by them to be genuine and to have been signed or presented
by the proper party or parties.
(b) The General Partners may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by them and any opinion of any such Person as to matters that
the General Partners reasonably believe to be within its professional or expert
competence (including, without limitation, any opinion of legal counsel to the
effect that the Partnership would "more likely than not" prevail with respect to
any matter) shall be full and complete authorization and protection in respect
of any action taken or suffered or omitted by a General Partner hereunder in
good faith and in accordance with such opinion.
(c) The General Partners shall have the right, in respect of any of
their powers or obligations hereunder, to act through a duly appointed attorney
or attorneys-in-fact. Each such attorney or attorney-in-fact shall, to the
extent provided by the General Partner in the power of attorney, have full power
and authority to do and perform all and every act and duty which is permitted or
required to be done by the General Partner hereunder. Each such appointment
shall be evidenced by a duly executed power of attorney giving and granting to
each such attorney or attorney-in-fact full power and authority to do and
perform all and every act and thing requisite and necessary to be done by the
General Partner in connection with the Partnership.
<PAGE>
(d) Notwithstanding any other provision of this Agreement or the
Delaware RULPA, any action of the General Partners on behalf of the Partnership
or any decision of the General Partners to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or omission is
necessary or advisable in order (i) to protect the ability of any REIT Partner
to continue to qualify as a real estate investment trust under the Code, (ii) to
avoid any REIT Partner incurring any taxes under the Section 857 or 4981 of the
Code or (iii) for any REIT Partner to continue to qualify as a "qualified
Company subsidiary" (within the meaning of Section 856(i)(2)) of the Code), is
expressly authorized under this Agreement and is deemed approved by all of the
Limited Partners.
VII.14. Other Limitations.
The following additional limitations shall apply to the operation and
management of the Partnership:
(a) No General Partner shall receive for its account any kickbacks or
rebates with respect to expenditures made by or on behalf of the Partnership,
nor shall any General Partner enter into any reciprocal arrangement that has the
effect of circumventing this Section 7.15(a) or Section 9.1;
(b) The Partnership shall not grant any General Partner an exclusive
right, as agent, to sell any Partnership Property or other Partnership Asset;
and
(c) No commission or other fee shall be payable to a General Partner,
directly or indirectly, in connection with the distribution or reinvestment of
any Net Proceeds of a Capital Transaction, except as provided in Section 9.3.
VII.15. Miscellaneous.
In the event the Company redeems any shares of Common Stock or
securities convertible into or redeemable or exchangeable for shares of Common
Stock, then the Managing General Partner shall cause the Partnership to purchase
from the Managing General Partner and any REIT Partner a number of Partnership
Units as determined based on the application of the Conversion Factor on the
same terms that the Company redeemed such securities. Moreover, if the Company
makes a cash tender offer or other offer to acquire shares of Common Stock or
securities convertible into or redeemable or exchangeable for shares of Common
Stock, then the Managing General Partner shall cause the Partnership to make a
corresponding offer to the Managing General Partner and any REIT Partner to
acquire an equal number of Partnership Units held by the Managing General
Partner and any REIT Partner. In the event any shares of Common Stock or
securities convertible into or redeemable or exchangeable for shares of Common
Stock are redeemed by the Company pursuant to such offer, the Partnership shall
redeem an equivalent number of the Managing General Partner's and any REIT
Partner's Partnership Units for an equivalent purchase price based on the
application of the Conversion Factor.
<PAGE>
ARTICLE VIII
ACQUISITION, OPERATION, AND DISPOSITION
OF RESTRICTED RESTAURANT PROPERTIES
VIII.1. General.
(a) The Partners hereby expressly agree that, in addition to any other
provisions of this Agreement, the acquisition, ownership, operation and
disposition of the Partnership Properties by the Partnership shall be in
accordance with, and shall be subject to, the provisions, restrictions and
limitations set forth in this Article VIII; provided that, except for Section
8.13, this Article VIII shall not apply to any of the Other Restaurant
Properties or the Retail Properties. The Partners further expressly agree that
any action taken by a General Partner or Affiliate thereof in accordance with,
or pursuant to, the provisions of this Article VIII conclusively shall be deemed
to be fair to and in the best interests of the Partnership, the Limited Partners
and the General Partners, and the fact that an action of a General Partner or an
Affiliate is undertaken in accordance with, or pursuant to, this Article VIII
shall be a complete and absolute defense to any claim or action asserting the
invalidity of such action or any claim or action for damages or other relief
based upon an assertion that such action resulted in a breach by a General
Partner or an Affiliate of this Agreement or any duty, fiduciary or otherwise,
owed by the General Partners and their affiliates to the Partnership or the
Limited Partners.
(b) The Partners expressly acknowledge and agree that the provisions,
restrictions and limitations set forth in this Article VIII are reasonable in
all respects, are pursuant to and consistent with the purposes of the
Partnership, are necessary to induce BKC to enter into the Real Estate Purchase
Agreement and to otherwise deal with Restricted Restaurant Properties, and are
necessary to protect the business and interests of BKC and the Partnership. In
the event that the Partnership shall breach or violate or fail to perform any of
its obligations set forth in this Article VIII, then, at the option of BKC, BKC
shall be entitled to proceed to enforce the obligations of the Partnership
hereunder by any action at law, suit in equity, or other appropriate proceeding,
whether for damages, for special performance of an obligation contained herein
or for an injunction or other equitable remedy against any violation of the
provisions hereof. The Partnership hereby agrees to indemnify and hold harmless
BKC from and against any assessment, payment, damage, expense, loss, cost,
liability or deficiency (including, without limitation, interest, penalties and
reasonable attorneys' fees and disbursements) incurred by BKC in enforcing or
sustaining the provisions hereof or resulting from or in connection with any
such breach, violation, or failure.
VIII.2. Contribution to Partnership; Acquisition of Restricted Restaurant
Properties.
The Managing General Partner has previously caused the Partnership to
acquire certain Restricted Restaurant Properties from BKC in accordance with and
subject to the terms and conditions set forth in the Real Estate Purchase
Agreement, including the exhibits thereto, and caused the Partnership to pay to
BKC the purchase price for such Restricted Restaurant Properties specified in
the Real Estate Purchase Agreement.
<PAGE>
VIII.3. Use and Other Restrictions.
(a) Except as otherwise expressly provided in this Section 8.3, the
Partnership shall not, without the prior written consent of BKC, in its sole and
absolute discretion, use any Restricted Restaurant Property or permit any
Restricted Restaurant Property to be used for any purpose other than the
operation thereon of a BK Restaurant and other uses related thereto.
(b) (i) In furtherance of the provisions of Section 8.3(a), in the
event that BKC renews or extends a BKC Franchise Agreement with respect
to a Restricted Restaurant Property at any time at or prior to the
expiration of such BKC Franchise Agreement, then, regardless of the
duration of such renewal or extension the Partnership promptly shall,
without additional charge, renew or extend the lease of the Restricted
Restaurant Property to such BKC Franchisee for a period coterminous
with the period of such renewal or extension and for and upon
substantially the same rental and other terms and conditions as and
upon which BKC is then renewing or extending leases with BKC
Franchisees for properties owned or leased (as the case may be) by BKC,
or in the event BKC at such time is no longer renewing or extending
leases with BKC Franchisees for properties owned or leased (as the case
may be) by BKC, then upon substantially the same rental and other terms
and conditions as and upon which BKC most recently was renewing or
extending such leases with BKC Franchisees (except that, for purposes
of determining the guaranteed minimum rental thereunder, the lessor's
"investment" in Restricted Restaurant Properties held as of the
Effective Date shall be deemed to be equal to the sum of the investment
of BKC with respect to such Restricted Restaurant Property prior to the
date of its acquisition by the Partnership plus any investment by the
Partnership with respect to such Restricted Restaurant Property after
such date (and in no event shall such "investment" include the purchase
price paid by the Partnership to BKC for such Restricted Restaurant
Property pursuant to the Real Estate Purchase Agreement)); provided
that the rental for such lease may be greater than the rental upon
which BKC is then (or, if applicable, was) so renewing or extending
such leases. Notwithstanding anything to the contrary contained herein,
any extension or renewal of a lease of a Restricted Restaurant Property
pursuant to the Successor Policy shall be in accordance with the
Successor Policy as then in effect and Section 8.6 (including, without
limitation, the provisions of Section 8.6(b) relating to determination
of the annual minimum rental under a lease extended or renewed in
accordance with the Successor Policy). Without limiting the foregoing,
the Managing General Partner, in its sole and absolute discretion, at
the request of BKC or a BKC Franchisee, shall be permitted to consent
to a renewal or extension of a lease of a Restricted Restaurant
Property for a rental less favorable to the Partnership than the rental
upon which BKC is then renewing or extending leases with BKC
Franchisees for properties owned or leased (as the case may be) by BKC
(or, if applicable, the rental upon which BKC most recently was
renewing or extending such leases with BKC Franchisees) if BKC agrees
to treat the excess of the rental at which BKC is then renewing or
extending such leases (or, if applicable, the rental at which BKC most
recently was renewing or extending such leases) over the rental payable
to the Partnership in connection with such renewal or extension as
"rent relief" subject to the provisions of Section 8.5.
<PAGE>
(ii) In the event that (A) either (1) a BKC Franchise
Agreement authorizing the operation of a BK Restaurant on a Restricted
Restaurant Property is terminated automatically, is terminated by BKC
or is terminated by the mutual agreement of the parties thereto prior
to the expiration of the stated term thereof, or (2) a BKC Franchise
Agreement expires according to the terms thereof and is not renewed or
extended by BKC at or prior to the expiration of such BKC Franchise
Agreement, and (B) during the six (6) month period commencing on the
date of such termination or expiration either (1) BKC and a Person that
meets BKC's then existing franchisee financial capability requirements
enter into a BKC Franchise Agreement authorizing such Person to operate
a BK Restaurant on the Restaurant Property, and BKC notifies the
Partnership thereof, or (2) BKC notifies the Partnership that BKC
desires to operate a BK Restaurant on the Restaurant Property, then the
Partnership promptly shall terminate any lease of the Restaurant
Property with the terminated BKC Franchisee (if such lease then has not
terminated or expired) and enter into a new lease of the Restaurant
Property with the new BKC Franchisee or with BKC, as the case may be.
The rental, duration and other terms and conditions of any such new
lease shall be substantially the same as the rental, duration and other
terms and conditions as and upon which BKC is then entering into new
leases with BKC Franchisees for properties owned or leased (as the case
may be) by BKC, or in the event BKC at such time is no longer entering
into new leases with BKC Franchisees for properties owned or leased, as
the case may be, by BKC, then substantially the same rental duration
and other terms and conditions as and upon which BKC most recently was
entering such leases with BKC Franchisees (except that, for purposes of
determining the guaranteed annual minimum rental thereunder, the
lessor's "investment" in Restricted Restaurant Properties held as of
the Effective Date shall be deemed to be equal to the sum of the
investment of BKC with respect to such Restaurant Property prior to the
date of its acquisition by the Partnership plus any investment of the
Partnership with respect to such Restaurant Property after such date
(and in no event shall such "investment" include the purchase price
paid by the Partnership to BKC for such Restricted Restaurant Property
pursuant to the Real Estate Purchase Agreement)). Without limiting the
foregoing, the Managing General Partner, in its sole and absolute
discretion, at the request of BKC or a BKC Franchisee, shall be
permitted to enter into a new lease of a Restricted Restaurant Property
for a rental less favorable to the Partnership than the rental upon
which BKC is then entering into leases with BKC Franchisees for
properties owned or leased (as the case may be) by BKC (or, if
applicable, the rental upon which BKC most recently was entering into
such leases with BKC Franchisees) if BKC agrees to treat the excess of
the rental at which BKC is then entering into such leases (or, if
applicable, the rental at which BKC most recently was entering into
such leases) over the rental payable to the Partnership in connection
with such new lease as "rent relief" subject to the provisions of
Section 8.5. During the period (the "Determination Period") that BKC is
considering whether to enter into a new BKC Franchise Agreement with
respect to the Restricted Restaurant Property or operate itself a BK
Restaurant on the Restricted Restaurant Property (but in no event after
the expiration of the six (6) month period described in clause (B)
above), BKC shall pay to the Partnership an amount equal to the excess
of the guaranteed amount rental payable to the Partnership under the
terminated BKC Franchisee's lease for the Determination Period
(computed without regard to any termination or expiration of such
lease) over the amount of rent, if any, actually collected by the
Partnership thereunder for the Determination Period. The Partnership
shall, at the expense of BKC, take all such actions as BKC reasonably
may request to enforce the provisions of the terminated BKC
Franchisee's lease applicable during the Determination Period. If BKC
does not, prior to the end of the Determination Period, enter into a
new BKC Franchise Agreement with respect to the Restricted Restaurant
Property or elect to operate itself a BK Restaurant on the Restricted
Restaurant Property, then subject to Section 8.9 hereof, the
Partnership shall be free to take such actions with respect to the
terminated BKC Franchisee's lease as the Partnership may deem
appropriate. Notwithstanding anything to the contrary contained herein,
BKC shall have the right at any time, upon written notice to the
Partnership, to terminate the Determination Period with respect to any
Restricted Restaurant Property, in which event all rights and
obligations of BKC in connection with such terminated Determination
Period shall terminate, effective as of the date on which the
Partnership receives such notice and as of the payment by BKC of all
amounts payable hereunder with respect to the Determination Period.
<PAGE>
(iii) In the event that BKC approves the assignment by a BKC
Franchisee of a BKC Franchise Agreement with respect to a Restricted
Restaurant Property to another person or entity that meets BKC's then
existing franchisee financial capability requirements or to BKC, then,
subject to the assumption by such new BKC Franchisee or BKC, as the
case may be, of all of the former BKC Franchisee's obligations and
liabilities thereafter accruing under the former BKC Franchisee's lease
of the Restricted Restaurant Property, the Partnership promptly shall,
without additional charge, approve and permit the assignment of such
lease with respect to such Restricted Restaurant Property to the new
BKC Franchisee or to BKC, as the case may be. Upon such assignment and
assumption, the former BKC Franchisee, at the request of BKC, shall be
released from all obligations and liabilities thereafter accruing under
such lease; provided, however, that a release in connection with an
assignment or assumption shall be required pursuant hereto only if BKC,
as a matter of policy, is then granting such releases in connection
with the assignment or assumption of leases with BKC Franchisees for
properties owned or leased, as the case may be, by BKC. In addition to
the foregoing, in the event that BKC consents to the assignment by a
BKC Franchisee of a Franchise Agreement with respect to a Restricted
Restaurant Property to a corporation in which such BKC Franchisee has a
financial interest, then, upon the request of such BKC Franchisee, the
Partnership shall approve the assignment of the BKC Franchisee's lease
of such Restricted Restaurant Property to such corporation upon the
condition that such BKC Franchisee shall remain fully responsible for
all liabilities and obligations accruing under such lease subsequent to
such assignment.
(iv) The Partnership shall give BKC prompt written notice of
the occurrence of any default by a BKC Franchisee under any lease of a
Restricted Restaurant Property. BKC shall have the right (but not the
obligation), within the longer of thirty (30) days after the receipt by
BKC of such written notice of such default or any applicable grace
period provided to the lessee under such lease, to cure any default by
the lessee under such lease, and the Partnership shall not terminate
such lease unless such default is not cured within such applicable
period. The Partnership also shall give BKC prompt written notice of
the occurrence of any event which results automatically in the
termination of any such lease. BKC shall have the right (but not the
obligation), within thirty (30) days after receipt of such notice, to
assume all obligations and liabilities of the lessee under such lease
accruing from the date of such automatic termination. If BKC exercises
such right, then, as between BKC and the Partnership, such termination
shall be of no force or effect and shall be deemed not to have
occurred.
(v) In furtherance of the provisions of Section 8.3(a), in the
event the Partnership acquires any Restricted Restaurant Property after
the Effective Date, the rental, duration and other terms and conditions
in the lease for the BKC Franchisee for such property shall be
substantially the same as the rental, duration and other terms and
conditions as and upon which BKC is then entering into new leases with
BKC Franchisees for properties owned or leased, as the case may be, by
BKC, or in the event BKC at such time is no longer entering into new
leases with BKC Franchisees for properties owned or leased, as the case
may be, by BKC, then upon substantially the same rental, duration and
other terms and conditions as upon which BKC most recently was entering
into such leases with BKC Franchisees. Notwithstanding the foregoing,
the rental for such leases may be greater than that which BKC is then
setting (or, if appropriate, was setting) for BKC Franchisees.
<PAGE>
(c) Notwithstanding anything to the contrary contained in any lease of
a Restricted Restaurant Property to which a BKC Franchisee is a party, (i) BKC
shall have the right at any time, without obtaining the consent of the
Partnership, to assume the obligations and liabilities of the lessee thereafter
accruing under such lease, and thereupon, at the request of BKC, such lessee
shall be released from all obligations and liabilities thereafter accruing
thereunder; provided, however, that a release in connection with such an
assumption shall be required pursuant to this Section 8.3 only if BKC, as a
matter of policy, is then granting such releases in connection with the
assumption by BKC of leases with BKC Franchisees for properties owned or leased,
as the case may be, by BKC; and (ii) at any time after any such assumption by
BKC, BKC shall have the right, without obtaining the consent of the Partnership,
to assign such lease to a Person that meets BKC's then existing franchisee
financial capability requirements, and upon such assignment and the assumption
by such Person of all obligations and liabilities of BKC thereafter accruing
under such lease, BKC shall be released from all obligations and liabilities
thereafter accruing thereunder.
(d) (i) In the event that BKC notifies the Partnership that BKC has
extended or renewed a BKC Franchise Agreement with respect to a Restricted
Restaurant Property that is subject to a Primary Lease for a term coterminous
with one or more permitted renewal terms available under such Primary Lease, or
(ii) in the event that BKC notifies the Partnership that either (A) BKC has
entered into a new BKC Franchise Agreement with a Person that meets BKC's then
existing financial capabilities requirements authorizing such Person to operate
a BK Restaurant on a Restricted Restaurant Property that is subject to Primary
Lease for a term coterminous with one or more permitted renewal terms available
under such Primary Lease, or (B) BKC has decided to operate a BK Restaurant on a
Restricted Restaurant Property that is subject to a Primary Lease for a term
coterminous with one or more permitted renewal terms available under such
Primary Lease, then in any such event, in addition to any other requirements of
this Section 8.3, the Partnership promptly shall renew the applicable Primary
Lease for a term no shorter than the term of the extended, renewed or new BKC
Franchise Agreement, as the case may be, or in the case of BKC's election to
operate a BK Restaurant at such Restricted Restaurant Property, for a term no
shorter than the term of BKC's lease with the Partnership with respect to such
Restricted Restaurant Property.
(e) Unless otherwise expressly waived by BKC in writing, the
restrictions and other provisions of this Section 8.3 shall remain in effect and
shall be enforceable with respect to each Restricted Restaurant Property by BKC
during the period commencing on the date of the Amended Agreement and ending on
the earliest of (i) a transfer by the Partnership of all of its right, title and
interest in and to all of such Restricted Restaurant Property pursuant to
Section 8.4(f) following the failure of BKC to elect to acquire all of the
Restricted Restaurant Property pursuant to an offer thereof to BKC under Section
8.4(d) or the failure of BKC to close the acquisition thereof on the date
required by Section 8.4(e); (ii) a BKC Franchise Agreement is terminated by BKC
or by the mutual agreement of the parties thereto prior to the expiration of the
stated term thereof and BKC does not, prior to the end of the Determination
Period, enter into a new BKC Franchise Agreement with respect to the Restricted
Restaurant Property or elect to operate itself a BK Restaurant on the Restricted
Restaurant Property; or (iii) a BKC Franchise Agreement with respect to a
Restricted Restaurant Property expires according to the terms thereof and BKC
does not either (A) renew or extend the same at or prior to the expiration
thereof or (B) prior to the end of the Determination Period, enter into a new
BKC Franchise Agreement with respect to the Restricted Restaurant Property or
elect to operate itself a BK Restaurant on the Restricted Restaurant Property;
provided, however, if the duration of such period would render the restrictions
or other provisions of this Section 8.3 invalid or unenforceable under any law
of the jurisdiction in which a Restricted Restaurant Property is located
limiting the period during which such restrictions or other provisions may
endure, then such period shall continue with respect to such Restricted
Restaurant Property only for such term as may be prescribed by the laws of such
jurisdiction. It is the express intent of BKC, the Partnership, and the Partners
that such restrictions and other provisions shall be valid and enforceable to
the fullest extent permitted by the laws of such jurisdiction.
<PAGE>
(f) Notwithstanding anything to the contrary in this Section 8.3 or
elsewhere in this Agreement, nothing contained herein or elsewhere shall affect
the right of BKC, in its sole and absolute discretion, to terminate a BKC
Franchise Agreement, to renew or extend or fail to renew or extend a BKC
Franchise Agreement, to approve or disapprove any assignment of a BKC Franchise
Agreement, to elect to enter into a new BKC Franchise Agreement with respect to
a Restricted Restaurant Property or to operate itself a BK Restaurant on the
Restricted Restaurant Property, to amend or modify a BKC Franchise Agreement or
to take or fail to take any other action in connection with a BKC Franchise
Agreement.
(g) Notwithstanding any other provision of this Agreement, the Partners
hereby expressly agree that the Managing General Partner shall have no duty,
under any circumstances whatsoever, to seek to sell, or to consider any offer to
purchase, any Restricted Restaurant Property so long as such Restricted
Restaurant Property is subject to the restrictions and other provisions of this
Section 8.3, and the fact that a Restricted Restaurant Property is subject to
the restrictions and provisions of this Section 8.3 shall be a complete and
absolute defense to any claim or action for damages or other relief based upon a
claim or action for damages or other relief based upon a failure of the Managing
General Partner to solicit or consider offers to purchase such Restricted
Restaurant Property, irrespective of the terms of any such offer that may be
received by the Managing General Partner.
VIII.4. Restrictions on Transfer of Restricted Restaurant Properties.
(a) For purposes of this Section 8.4, the term "transfer," with respect
to a Restricted Restaurant Property, shall include a sale, lease, sublease,
gift, mortgage, deed of trust, exchange, assignment or other disposition,
including a disposition under judicial order, legal process, execution,
attachment or enforcement or foreclosure of an encumbrance, but shall not
include the following: (i) a mortgage, deed of trust, grant of security interest
or other encumbrance effected in a bona fide transaction with an unrelated and
unaffiliated secured party, or with BKC, the Managing General Partner or any
Affiliate thereof, to secure indebtedness of the Partnership for money borrowed
from such secured party, which mortgage, deed of trust, grant of security
interest or other encumbrance is made pursuant to a written security agreement,
mortgage, deed of trust or other agreement that assures that, before any
foreclosure may be had thereon or other transfer may occur thereunder or in
connection therewith, the secured party shall first notify BKC in writing of its
intent to foreclose or effect another transfer and shall first offer the
Restricted Restaurant Property to BKC at the price and on the other terms and
conditions specified in a written offer from a prospective purchaser (which may
be the secured party) in connection with such foreclosure or other transfer;
(ii) a lease or sublease to BKC or a BKC Franchisee in order to permit the
operation of a BK Restaurant on a Restricted Restaurant Property; (iii) a grant
of easement, right-of-way or other right with respect to a Restricted Restaurant
Property to any public utility or other governmental authority in connection
with the provision of utility or other public service (but such grant shall
comply with the provisions of Section 8.4(b)); or (iv) a transfer to a
governmental authority pursuant to or in connection with a condemnation or other
exercise of the power of eminent domain.
(b) The Partnership shall not, without the prior written consent of
BKC, in BKC's sole and absolute discretion: (i) at any time that a Restricted
Restaurant Property is being leased to BKC or a BKC Franchisee in order to
permit BKC or such BKC Franchisee to operate a BK Restaurant on the Restricted
Restaurant Property or during any applicable Determination Period, lease or
sublease all or any part of a Restricted Restaurant Property to any other
Person, whether or not such other lease would be subject or subordinate to the
lease to BKC or the BKC Franchisee; or (ii) grant or convey any easement,
right-of-way or other right with respect to such Restricted Restaurant Property
if the grant or use thereof would have a material adverse effect upon the
operation of a BK Restaurant on the Restricted Restaurant Property.
(c) Except as provided in Section 8.4(b), the Partnership shall not
transfer (as defined in Section 8.4(a)) any right, title or interest in or to
any Restricted Restaurant Property, or any part thereof, to any person or entity
without first offering it to BKC in accordance with the provisions of this
Section 8.4(c). Subject to the provisions of Section 8.4(b), if the Partnership
receives a bona fide written offer from an independent third party to acquire in
a transfer all or any part of any Restricted Restaurant Property that the
Partnership intends to accept, subject to this Section 8.4(c), then the
Partnership shall offer such Restricted Restaurant Property to BKC at the price
and on the terms and conditions (including timing and manner of payment)
contained in such bona fide written offer. The offer of such Restricted
Restaurant Property to BKC (the "Offer") shall be made in writing and shall be
accompanied by a true and correct copy of the bona fide written offer. The
Partnership promptly shall provide or cause to be provided to BKC such
information relating to the Offer or the third-party offeror as BKC reasonably
may request.
<PAGE>
(d) In order to accept the Offer, BKC shall, within thirty (30) days
after receipt of the Offer (or, if later, within five (5) business days after
receipt of all additional information reasonably requested by BKC pursuant to
Section 8.4(c) (such 30-day period and any extension under this Section 8.4(d)
to be referred to as the "Election Period")), notify the Partnership in writing
of its election to acquire such Restricted Restaurant Property; provided,
however, that BKC shall not be required to acquire such Restricted Restaurant
Property upon the terms and conditions of any third-party offer the
consideration for which is not practicably obtainable by BKC (such as, by way of
example and not of limitation, specific land, stock in a closely held
corporation or stock in a publicly held corporation that cannot be acquired by
BKC without an increase in the trading price thereof or without registration or
filing under any federal or state securities law), but BKC shall have the right
to acquire such Restricted Restaurant Property upon terms and conditions
(including consideration) reasonably equivalent to those contained in such
offer; and provided further, that the failure of BKC to acquire such Restricted
Restaurant Property upon any such reasonably equivalent terms or conditions
shall not permit the Partnership to transfer such Restricted Restaurant Property
pursuit to Section 8.4(f). Failure of BKC to provide such written notice within
the Election Period shall constitute a refusal by BKC to purchase such
Restricted Restaurant Property pursuant to the Offer.
(e) The closing date of any acquisition of such Restricted Restaurant
Property by BKC hereunder shall be on the date fixed in the third-party offer
unless such closing date would occur prior to the expiration of twenty (20)
business days after the last day of the Election Period, in which event the
closing date shall occur on such twentieth (20th) business day or on such other
date to which BKC and the Partnership may agree.
(f) If BKC shall fail to elect to acquire such Restricted Restaurant
Property pursuant to Section 8.4(d), or shall fail to close the acquisition on
the date required by Section 8.4(e), then the Partnership shall be free, for a
period of sixty (60) days after either such failure, to transfer such Restricted
Restaurant Property to the bona fide third-party offeror for a price and on
other terms and conditions contained in such third-party offer. If such
Restricted Restaurant Property is not so transferred by the Partnership within
such sixty (60) day period, all rights of the Partnership to transfer such
Restricted Restaurant Property free of the foregoing restrictions shall
terminate and such Restricted Restaurant Property again shall be subject to the
provisions of this Section 8.4.
(g) Unless otherwise expressly waived by BKC in writing, the provisions
of this Section 8.4 shall remain in effect and the rights granted hereunder
shall be exercisable and enforceable by BKC with respect to each Restricted
Restaurant Property during the period commencing on the date of the Amended
Agreement and ending on the earlier of (i) the date that the Partnership first
ceases to hold any right, title or interest (including an interest as a
creditor) in or to such Restricted Restaurant Property or (ii) the date that the
use restrictions set forth in Section 8.3 terminate or would have terminated but
for an early termination pursuant to the provisions contained in Section 8.3(e);
provided, however, that if the duration of such period would render the
provisions of this Section 8.4 or the rights of BKC hereunder invalid or
unenforceable under the rule against perpetuities as applied in the jurisdiction
in which a Restricted Restaurant Property is located, then such period shall
continue with respect to such Restricted Restaurant Property only until the
expiration of the longest of the following periods which shall be valid under
the rule against perpetuities as applied in such jurisdiction: (i) the period
ending twenty-one (21) years after the death of the survivor of the legitimate
natural or adopted children and grandchildren of U.S. Presidents Kennedy,
Johnson, Nixon, Ford, Carter and Reagan alive on the date of the Amended
Agreement; (ii) twenty-one (21) years after the date of the Amended Agreement;
or (iii) such other term as may be statutorily prescribed in such jurisdiction.
It is the express intent of BKC, the Partnership and the Partners that the
provisions hereof and rights of BKC hereunder shall be exercisable and
enforceable by BKC to the fullest extent permitted by the laws of such
jurisdiction.
<PAGE>
VIII.5. Rent Relief.
(a) The Managing General Partner, in its sole and absolute discretion,
at the request of BKC or a BKC Franchisee, shall be permitted to cause the
Partnership to grant "rent relief" (as defined in Section 8.5(b)) to a BKC
Franchisee with respect to any Restricted Restaurant Property upon the condition
that BKC agree to make a quarterly payment to the Partnership for each fiscal
quarter (with such payment to be due and payable thirty (30) days after the end
of each such fiscal quarter) during which such "rent relief" is in effect,
irrespective of whether or not the Partnership subsequently sells or otherwise
disposes of such Restricted Restaurant Property while such "rent relief" is in
effect in an amount equal to the product of (i) the total dollar amount of the
rent reduction with respect to such Restricted Restaurant Property effective for
such fiscal quarter pursuit to such "rent relief" multiplied by (ii) a fraction,
(A) the numerator of which is the dollar amount of the franchise royalty fee
payable to BKC with respect to such Restricted Restaurant Property for such
fiscal quarter (exclusive of any amount required under the applicable BKC
Franchise Agreement to be expended by BKC for advertising and any other income
to BKC) (the "Franchise Royalty Fee") and (B) the denominator of which is the
sum of the Franchise Royalty Fee and the dollar amount of rent payable with
respect to such Restricted Restaurant Property for such fiscal quarter
(determined without regard to any "rent relief" applicable with respect to such
Restricted Restaurant Property) (the "Rental Amount"). By way of illustration,
if the applicable Franchise Royalty Fee for a Restricted Restaurant Property for
a particular fiscal quarter were $35,000 and the applicable Rental Amount for
such Restricted Restaurant Property for such fiscal quarter were $100,000, and
if the Partnership, at the request of BKC or at the request of a BKC Franchisee
and with the consent of BKC, were to grant "rent relief" with respect to such
Restricted Restaurant Property for such fiscal quarter in the amount of $20,000,
then BKC would be obligated to pay to the Partnership $5,185 (the product of
$35,000/$135,000 multiplied by $20,000) within thirty (30) days after the end of
such fiscal quarter. The obligation of BKC to make payments to the Partnership
in connection with "rent relief" granted hereunder shall continue until the
"rent relief" terminates (or, if sooner, the lease with respect to which the
"rent relief" is granted terminates or expires), notwithstanding any intervening
sale or other disposition by the Partnership of the Restricted Restaurant
Property with respect to which such "rent relief" is granted.
(b) As used here the term "rent relief" shall mean (i) any permanent
reduction in rent payable with respect to a Restricted Restaurant Property, (ii)
any temporary reduction in rent payable with respect to a Restricted Restaurant
Property (A) if such temporary reduction is for a period in excess of either
ninety (90) consecutive days or ninety (90) days, whether or not consecutive, in
any Fiscal Year, or (B) if such temporary reduction is granted while a BK
Restaurant is being replaced, reconstructed, expanded, or otherwise improved
under the Successor Policy to take into account the fact that such BK Restaurant
is not operating or is operating on a limited basis during such period, or (C)
if such temporary reduction is for a period of ninety (90) consecutive days or
less and the Managing General Partner specifically designates such reduction as
"rent relief" subject to this Section 8.5; provided, however, that in no event
shall the term "rent relief" include any reduction in rent payable with respect
to a Restricted Restaurant Property granted in connection with the Successor
Policy if such reduction in rent payable is subject to Section 8.6(b).
Notwithstanding anything to the contrary herein, the Managing General Partner
shall not be considered to have caused the Partnership to grant "rent relief"
hereunder, and no payment from BKC to the Partnership shall be due hereunder, as
the result of or in connection with any failure of a BKC Franchisee, without the
express written consent of the Managing General Partner, to make any payment of
rent due the Partnership with respect to a Restricted Restaurant Property (1) if
such failure does not continue for a period in excess of ninety (90) consecutive
days, or (2) if either the lease with such BKC Franchisee shall have
automatically terminated or the Managing General Partner shall have caused the
Partnership to seek to terminate the Partnership's lease with such BKC
Franchisee with respect to such Restricted Restaurant Property and in either
event, the Managing General Partner shall have caused the Partnership to
initiate and pursue such action (including litigation, if appropriate) against
such defaulting BKC Franchisee as the Managing General Partner, in its sole and
absolute discretion, shall determine to be appropriate under the circumstances
in order to obtain payment of rents (including lost rent) due the Partnership
under its lease with the defaulting BKC Franchisee. In the event that BKC makes
any payment to the Partnership pursuant to this Section 8.5 in connection with
"rent relief" deemed granted hereunder and the Partnership subsequently shall
collect such "rent relief" from the BKC Franchisee, then the Partnership shall
refund to BKC the amount paid by BKC in connection with such "rent relief."
<PAGE>
VIII.6. Successor Policy.
BKC maintains the Successor Policy relating to the extension and/or
renewal of BKC Franchise Agreements with BKC Franchisees. In connection with
such extensions and/or renewals, the Successor Policy, in order to help ensure
that the BK Restaurant system remains competitive, makes provision for the
replacement, reconstruction, expansion and/or other improvement (collectively,
"rebuilding") of existing BK Restaurants owned or leased by BKC and leased or
subleased to BKC Franchisees if such BK Restaurants meet certain criteria
established by BKC. Under the Successor Policy as currently in effect, BKC must
determine whether or not a BK Restaurant should be rebuilt. If BKC determines
that a BK Restaurant should be rebuilt under the Successor Policy and BKC elects
to pay the cost of rebuilding, then the terms of the lease with respect to such
BK Restaurant is extended and the BKC Franchisee's guaranteed "minimum rental"
payable under such lease is adjusted. In the event BKC does not elect to pay the
cost of rebuilding a BK Restaurant designated by BKC to be rebuilt under the
Successor Policy, then, with the consent of BKC, the BKC Franchisee can elect to
pay such cost, in which event the percentage rent payable with respect to such
BK Restaurant is reduced from 8.5 percent (8.5%) to 5.5 percent (5.5%) of annual
gross sales at such BK Restaurant, the term of the lease with respect to such BK
Restaurant is extended and the guaranteed minimum rent payable under such lease
is adjusted. The Managing General Partner shall cause the Partnership to
implement, with respect to the Restricted Restaurant Properties, those aspects
of the Successor Policy related to the rebuilding of BK Restaurants, as such
policy is currently in effect and as such policy may be modified, amended,
supplemented, superseded or replaced by BKC from time to time in its sole and
absolute discretion, in order to cause those Restricted Restaurant Properties
designated by BKC, in its sole and absolute discretion, to be rebuilt under such
Successor Policy to be rebuilt, subject to satisfaction by BKC of the following
conditions:
(a) In the event that the BKC Franchisee for a Restricted Restaurant
Property that is designated by BKC to be rebuilt under the Successor Policy does
not pay the cost of such rebuilding, then the Managing General Partner shall
cause the Partnership to rebuild such Restricted Restaurant Property upon the
condition that BKC pay to the Partnership, at the time such rebuilding is
commenced, an amount equal to the product of (i) the total dollar amount of
funds to be expended by the Partnership for purposes of rebuilding such
Restricted Restaurant Property multiplied by (ii) a fraction, (A) the numerator
of which is the weighted annual average of the percentage rates applicable for
determining the franchise royalty fees payable to BKC with respect to such
Restricted Restaurant Property over the remaining term of the lease under the
BKC Franchise Agreement in effect with respect to such Restricted Restaurant
Property (exclusive of any amounts required under the applicable BKC Franchise
Agreement to be expended by BKC for advertising and other income to BKC) (the
"Average Franchise Royalty Rate") and (B) the denominator of which is the sum of
the Average Franchise Royalty Rate and the weighted annual average of the
percentage rates applicable for determining the percentage rent payable to the
Partnership with respect to such Restricted Restaurant Property on the basis of
sales over the remaining term of the lease with the BKC Franchisee in effect
with respect to such Restricted Restaurant Property (the "Average Percentage
Rent Rate"). By way of illustration, if the applicable Average Percentage Rent
Rate for a particular Restricted Restaurant Property were 8.5 percent (8.5%) and
the applicable Average Franchise Royalty Rate for such Restricted Restaurant
Property were 3.5 percent (3.5%), and if the total cost to rebuild such
Restricted Restaurant Property pursuant to the "Successor Policy" were $500,000,
then BKC would be obligated to pay to the Partnership, at the time the
rebuilding of such Restricted Restaurant Property commenced, $145,833 (the
product of 3.5/12 multiplied by $500,000). The Managing General Partner shall
cause the Partnership to pay the Partnership's share of the cost of rebuilding a
Restricted Restaurant Property to rebuilt under the Successor Policy, in its
sole and absolute discretion, (1) from current operating cash flow of the
Partnership or otherwise to the extent available or (2) with funds borrowed from
a lender (including, subject to Section 7.13, BKC or any Affiliate of BKC) on
such terms and conditions as the Managing General Partner shall, in its sole and
absolute discretion, determine advisable, with the payments of principal and
interest required with respect to any such loan to be paid from operating cash
flow to the extent available; and
<PAGE>
(b) In the event that the BKC Franchisee for a Restricted Restaurant
Property that is designated by BKC to be rebuilt under the Successor Policy pays
the cost of such rebuilding and thus would be entitled to a reduction in rent
payable with respect to such Restricted Restaurant Property, then BKC would make
a quarterly payment to the Partnership for each fiscal quarter during the period
during which such rent reduction is in effect, irrespective of whether or not
the Partnership subsequently sells or otherwise disposes of such Restricted
Restaurant Property while such rent reduction is in effect (with such payment to
be due and payable thirty (30) days after the end of each such fiscal quarter)
in an amount equal to the product of (i) the total dollar amount of the rent
reduction effective with respect to such fiscal quarter pursuant to the
"Successor Policy" multiplied by (ii) a fraction, (A) the numerator of which is
the percentage rate for determining the franchise royalty fee payable to BKC
with respect to such Restricted Restaurant Property for such fiscal quarter
(exclusive of any amount required under the applicable BKC Franchise Agreement
to be expended by BKC for advertising and other income to BKC) (the "Franchise
Royalty Rate"), and (B) the denominator of which is the sum of the Franchise
Royalty Rate and the percentage rate for determining the rent payable to the
Partnership with respect to such Restricted Restaurant Property on the basis of
sales for such fiscal quarter (the "Percentage Rent Rate"). By way of
illustration, if the applicable Percentage Rent Rate for a Restricted Restaurant
Property for a particular fiscal quarter were 8.5 percent (8.5%) and the
applicable Franchise Royalty Rate for such Restricted Restaurant Property for
such fiscal quarter were 3.5 percent (3.5%), and if the BKC Franchisee for such
Restricted Restaurant Property were to be entitled under the Successor Policy to
a reduction in the applicable Percentage Rent Rate to 5.5 percent (5.5%) if such
BKC Franchisee were to rebuild such Restricted Restaurant Property pursuant to
the Successor Policy, then, assuming that such BKC Franchisee's rent payable
following such rent reduction exceeds the minimum base rent payable to the
Partnership with respect to such fiscal quarter, BKC would be obligated to pay
to the Partnership an amount equal to the product of (i) 3.5/12 multiplied by
(ii) the product of (A) 3 percent (3%) multiplied by (B) the gross sales at such
Restricted Restaurant Property for such fiscal quarter. The obligation of BKC to
make payments to the Partnership under this Section 8.6(b) in connection with a
rent reduction granted hereunder shall continue until the lease under which such
rent reduction is granted terminates or expires, notwithstanding any intervening
sale or other disposition by the Partnership of the Restricted Restaurant
Property with respect to which such rent reduction is granted.
In the event the guaranteed minimum rent payable pursuant to any lease
with respect to a Restricted Restaurant Property is adjusted in connection with
the rebuilding of a BK Restaurant pursuant to the Successor Policy, then
notwithstanding any other provision of the Agreement or of the Successor Policy,
the "fair market value of the original property" for purposes of determining the
amount of such adjustment shall be equal to the replacement cost of such
property, as determined by the Appraiser. Notwithstanding anything to the
contrary herein, BKC, in its sole and absolute discretion, may elect not to
designate a particular Restricted Restaurant Property to be rebuilt under the
Successor Policy, in which event the BKC Franchisee for such Restricted
Restaurant Property shall be solely responsible for the cost of rebuilding and
shall not be entitled to any reduction in rent payable with respect to such
Restricted Restaurant Property. BKC in no event shall be entitled to any fee or
other payment from the Partnership in connection with the rebuilding of a
Restricted Restaurant Property under the Successor Policy.
<PAGE>
In addition to the foregoing, BKC, separate and apart from
implementation of the Successor Policy, from time to time may request that the
Partnership acquire property adjacent to a Restricted Restaurant Property for
purposes of permitting expansion of the BK Restaurant or related facilities
(such as parking) located on such Restricted Restaurant Property. The Managing
General Partner shall cause the Partnership to acquire any such adjacent
property upon the request of BKC upon the condition that BKC pay to the
Partnership, at the time such acquisition occurs an amount determined in
accordance with the formula set forth in Section 8.6(a).
VIII.7. Competitive Facilities.
Without in any way limiting the generality of Section 7.6, the Limited
Partner recognizes that BKC, TPC and Affiliates thereof are in the business of
establishing, own, leasing, operating, managing and franchising restaurants,
including, without limitation, BK Restaurants, and that in connection with such
businesses, BKC, TPC and/or Affiliates thereof may from time to time establish,
own, lease, operate, manage and/or franchise new restaurants, including, without
limitation, BK Restaurants. Both such existing restaurants and any such new
restaurants may be competitive with one or more of the Partnership Properties
and may adversely affect the revenues of the Partnership with respect to one or
more of the Partnership Properties. The Limited Partners expressly consent to
all actions of BKC, TPC and any Affiliate of either in connection both with
existing restaurants and with any new restaurants and agrees that neither BKC,
TPC and the Managing General Partner, nor any Affiliate of any of them shall
incur any liability to the Partnership or the Limited Partners as the result of
or in connection with any such action.
VIII.8. Acquisition of Restricted Restaurant Properties by General Partners or
Affiliates.
Notwithstanding any other provision of this Agreement, including,
without limitation, Sections 7.2(v) and 8.4(d), (e) and (f), no Person that is a
General Partner or an Affiliate of a General Partner shall acquire any
Restricted Restaurant Property from the Partnership, whether by purchase,
exchange, or substitution, unless (a) the consideration received by the
Partnership for such Restricted Restaurant Property is at least equal to the
"fair market value" (as hereinafter defined) of such Restricted Restaurant
Property, as determined by the Appraiser and (b) such acquisition would not
result in the Company failing to qualify as a "real estate investment trust"
under Section 856 of the Code; provided, however, that this Section 8.8 shall
have no application to any acquisition of a Restricted Restaurant Property by
BKC pursuant to Section 8.4 if, at the time of such acquisition, neither BKC nor
any Affiliate of BKC is a General Partner. Any acquisition of a Restricted
Restaurant Property, whether by purchase, exchange or substitution, by a Person
who is a General Partner or an Affiliate of a General Partner for consideration
that is at least equal to the "fair market value" (as hereinafter defined) of
such Restricted Restaurant Property, as determined by the Appraiser,
conclusively shall be deemed to be fair and in the best interests of the
Partnership. As used herein, the term "fair market value" shall mean the value
that would be obtained in an arm's-length transaction between an informed and
willing purchaser under no compulsion to buy and an informed and willing seller
under no compulsion to sell, as determined by the Appraiser, using such method
or methods of valuation as the Appraiser determines most accurately reflect the
value of the particular Restricted Restaurant Property in question under the
circumstances, provided that for a period of five (5) years from March 17, 1995,
the Appraiser shall use the "capitalization of income" method (applying such
capitalization rate and other assumptions and adjustments as the Appraiser
determines appropriate under the circumstances) unless the Appraiser determines
that the use of such method would result in an understatement of the value of
the Restricted Restaurant Property with respect to which such appraisal is being
performed. For purposes of this Section 8.8, in the event that any consideration
to be received by the Partnership in exchange or substitution for any Restricted
Restaurant Property is in any form other than money, then the "fair market
value" of such consideration, as determined by the Appraiser (or if such other
consideration is in the form of property other than real estate, by an appraiser
experienced in valuing such other property designated by the Appraiser), shall
be required to be at least equal to the "fair market value" of the Restricted
Restaurant Property or Properties to be transferred.
<PAGE>
VIII.9. Termination of Lease for Restricted Restaurant Property Following
Termination of BKC Franchise Agreement
(a) In the event that (i) either (A) a BKC Franchise Agreement
authorizing the operation of a BK Restaurant is terminated by BKC or by the
mutual agreement of the parties thereto prior to the expiration of the stated
term thereof, or (B) a BKC Franchise Agreement expires according to the terms
thereof and is not renewed by BKC at or prior to the expiration of such BKC
Franchise Agreement, and (ii) BKC does not, prior to the end of the
Determination Period (as defined in Section 8.3), enter into a new BKC Franchise
Agreement with respect to the Restricted Restaurant Property or elect to operate
a BK Restaurant on the Restricted Restaurant Property, as provided for in
Section 8.3(b)(ii), then the Managing General Partner, in its sole and absolute
discretion, shall be permitted to cause the Partnership to terminate any lease
with a BKC Franchisee with respect to such Restricted Restaurant Property if a
default has occurred under such lease and either (1) the Managing General
Partner shall have caused the Partnership to initiate and pursue such action
(including, if appropriate, litigation) against such defaulting lessee as the
Managing General Partner, in its sole and absolute discretion, shall determine
to be reasonable under the circumstances in order to obtain payment of amounts
(including lost rent) due the Partnership under such lease, or (2) the Managing
General Partner or the defaulting lessee shall have located a new lessee for the
Restricted Restaurant Property for a term at least as long as the remaining
unexpired term under the lease to be terminated and for a rent not lower than
the minimum base rent payable under such lease (or if the rent is lower than the
minimum base rent payable under the lease to be terminated, the defaulting
lessee shall have agreed to be contractually obligated to continue to pay to the
Partnership an amount equal to the difference between the rent payable under the
new lease and the minimum base rent payable under the lease to be terminated and
shall have provided adequate security, as determined by the Managing General
Partner to be reasonable under the circumstances, for such obligation).
(b) In addition to any termination in accordance with Section 8.9(a)
and any termination in accordance with Section 8.3(b)(ii), the Managing General
Partner, in its sole and absolute discretion, shall be permitted, without
limitation, to cause the Partnership to terminate a lease with a BKC Franchisee
with respect to a Restricted Restaurant Property if the BKC Franchise Agreement
with respect to such Restricted Restaurant Property is terminated in connection
with or as a result of a condemnation involving all or substantially all of a
Restricted Restaurant Property or a casualty materially adversely affecting the
use of such Restricted Restaurant Property for the purpose of operating a BK
Restaurant for a period in excess of six (6) months.
(c) The provisions of this Section 8.9 shall not limit or affect in any
way the termination of a lease with respect to a Restricted Restaurant Property
with a Person that is not and was not a BKC Franchisee. The provisions of this
Section 8.9 are for the benefit of the Partnership, the Limited Partners, and
the limited partners and stockholders of the Limited Partners and their
assignees, and shall not be deemed to create any rights for the benefit of any
other Persons, including, without limitation, any lessees under leases with the
Partnership.
<PAGE>
VIII.10. Independent Consultant.
(a) The Managing General Partner, in its sole and absolute discretion,
shall be entitled but not required, to consult with the Independent Consultant
with respect to any action or proposed action affecting or relating to the
Partnership or the Limited Partners or their business. In the event that the
Managing General Partner shall elect to consult with the Independent Consultant
with respect to any such action or proposed action, then the Independent
Consultant shall advise the Managing General Partner whether such action or
proposed action is contrary to the interests of the Partnership or the Limited
Partner, as the case may be, taking into account, with respect to the Restricted
Restaurant Properties, that the original purpose of the Partnership and the MLP
was to acquire and hold real estate that is leased to BKC Franchisees for the
purpose of operating BK Restaurants and to derive revenues therefrom. The
Limited Partners expressly agree that any actions taken by the Managing General
Partner in accordance with the advice of the Independent Consultant conclusively
shall be deemed to be fair to and in the best interests of the Partnership, the
Limited Partners and the limited partners and stockholders of the Limited
Partners and their assignees, and the fact that an action of the Managing
General Partner is undertaken in accordance with the advice of the Independent
Consultant shall be a complete and absolute defense to any claim or action
asserting the invalidity of such action or any claim or action for damages or
other relief based upon an assertion that such action resulted in a breach by
the Managing General Partner or any of its Affiliates of this Agreement or any
duty, fiduciary or otherwise, owed by the Managing General Partner or any
Affiliate to the Partnership, the Limited Partners or the limited partners or
stockholders of the Limited Partners or their assignees. The Limited Partners
further acknowledge that the purpose of this Section 8.10 is to provide an
arrangement to facilitate outside consultation by the Managing General Partner
with respect to potential problems arising in connection with the management of
the Partnership and the Limited Partners and expressly agree that, in order to
induce the Managing General Partner to consent to this Section 8.10 and to
undertake such consultation from time to time as it determines appropriate,
neither the failure of the Managing General Partner to consult with the
Independent Consultant on any particular action or proposed action, nor the
failure of the Managing General Partner to act in accordance with the advice of
the Independent Consultant on any action or proposed action with respect to
which the Managing General Partner shall elect to consult with the Independent
Consultant, shall create any inference or presumption or otherwise constitute
evidence with respect to the fairness of such action or proposed action to the
Partnership, the Limited Partners or the limited partners or stockholders of the
Limited Partners or their assignees, as the case may be.
(b) In the event that the Independent Consultant designated in this
Agreement at any time is unable or unwilling to advise the Managing General
Partner on a particular matter or should inform the Managing General Partner
that it no longer is willing to serve as Independent Consultant, then the
Managing General Partner shall designate a substitute Independent Consultant, as
provided for below. The Managing General Partner shall have the right at any
time, in its sole and absolute discretion, to terminate the Independent
Consultant and to designate a substitute Independent Consultant, as provided for
below; provided, however, that the Managing General Partner shall have no
obligation to the Partnership or the Limited Partners, as the case may be, to
terminate the Independent Consultant under any circumstances, and provided
further that any termination of the Independent Consultant pursuant to this
Section 8.10(b) conclusively shall be deemed to be fair to and in the best
interests of the Partnership and the Limited Partners. Any substitute
Independent Consultant designated by the Managing General Partner pursuant to
this Section 8.10(b) shall have experience in advising or consulting about the
"fast food" business and shall be "financially independent" (as hereinafter
defined) of the Managing General Partner. A Person shall be deemed "financially
independent" of the Managing General Partner for purposes of this Section 8.10
if such Person is not, and during the preceding four (4) years has not been, a
BKC Franchisee or Affiliate of the Managing General Partner, of BKC, of TPC or
of a BKC Franchisee; and (ii) such Person has not derived more than fifteen
percent (15%) of such Person's average annual gross revenues over the preceding
four (4) years from the Managing General Partner, BKC, TPC, any BKC Franchisee
and any Affiliate of any of the foregoing.
<PAGE>
(c) The Managing General Partner, in its sole and absolute discretion,
either (i) may cause the Partnership to indemnify and hold harmless the
Independent Consultant upon such terms and conditions as the Managing General
Partner shall determine appropriate or (ii) may indemnify and hold harmless the
Independent Consultant upon such terms and conditions as the Managing General
Partner shall determine appropriate, in which event the Partnership shall
indemnify the Managing General Partner for any amounts required to be paid under
such indemnification; provided, however, that in either case, the terms and
conditions of such indemnification shall be no more favorable to the Independent
Consultant than the terms and conditions pursuant to which the General Partners,
their Affiliates and officers, directors, employees and agents of the General
Partners and their Affiliates are indemnified and held harmless pursuant to
Section 7.11.
VIII.11. Consent to Use of Name and Trademarks.
BKC consents to the Partnership's use of the words "Burger King" in the
name of the Partnership and to the Partnership's use of the registered
trademarks and service marks Burger King(R), Whopper(R), Whopper Junior(R) and
the Burger King bun halves logo in any registration statement filed by any
Partner or any Affiliate thereof, all sales materials and other documents
prepared for use in connection with any public offering by any Limited Partners,
any reports to or written communications with the Limited Partners and any
reports filed by the Partnership with any federal, state or local regulatory
agency terminated upon the withdrawal of BKC as the special general partner.
VIII.12. Acquisition of Fee Title to Properties Subject to Primary Leases.
The Managing General Partner shall have the right, in its sole and
absolute discretion, to cause the Partnership to acquire fee title to any
Restricted Restaurant Property that is subject to a Primary Lease, either
pursuant to a right of first refusal on behalf of the Partnership set forth in
such Primary Lease or otherwise. BKC shall have no obligation to the Partnership
in connection with any such acquisition.
VIII.13. Location of Other Restaurant Properties.
The Partnership shall not acquire any Other Restaurant Properties
within a two-mile radius of any Restricted Restaurant Property held as of March
17, 1995.
<PAGE>
ARTICLE IX
COMPENSATION OF GENERAL PARTNERS;
PAYMENT OF PARTNERSHIP EXPENSES
IX.1. Compensation to General Partners.
Except as expressly provided in Section 9.2 or 9.3, no General Partner
shall receive any compensation from the Partnership for services rendered in its
capacity as a general partner of the Partnership. Notwithstanding anything
herein to the contrary, at such time as QSV ceases to be the Managing General
Partner or the managing general partner of the MLP, whether as a result of the
transfer of QSV's Partnership Interest pursuant to Section 11.2 (or Section 12.2
of the Investors Partnership Agreement) or the withdrawal or removal of QSV
pursuant to Section 13.1 (or Section 14.1 or 14.2 of the Investors Partnership
Agreement) (other than removal for "cause," as defined in the Investors
Partnership Agreement), then QSV shall have the option, in its sole discretion,
to convert its Partnership Interest and its partnership interest in the MLP and
to either assign to the MLP or convert its rights (the "Rights") under the
provisions of Section 9.2 (and Section 9.2 of the Investors Partnership
Agreement) (collectively, the "Conversion") for the Acquisition Price (as
defined below), effective as of the date of such transfer, withdrawal or
removal, and upon such Conversion the successor Managing General Partner shall
cause the Partnership to issue to QSV Partnership Units in the amounts provided
for below.
In exchange for the Conversion of the Rights, as provided for above,
and the conversion of the QSV's Partnership Interest, in the event QSV elects to
effect the Conversion, QSV will receive the "Acquisition Price," consisting of
(a) the Initial Unit Consideration and (b) the Contingent Unit Consideration.
The Initial Unit Consideration consists of 850,000 Partnership Units (which
number or classification shall be adjusted to give effect to any
reclassification or change of the shares of Common Stock or Units, including,
without limitation, a split, or any merger or consolidation of the Company or
the MLP, except the merger of the MLP with the Company or a subsidiary thereof,
or sale of assets to another entity, occurring after March 31, 1997), with the
number of Partnership Units issuable hereunder being reduced (on a one-for-one
basis) by the number of Units or shares of Common Stock otherwise received by
QSV in connection with the Conversion. The portion of the Initial Unit
Consideration consisting of Partnership Units shall be issued by the Partnership
as soon as practicable following the date of the Conversion, but in no event
later than 30 days thereafter.
The Contingent Share Consideration consists of up to a maximum number
of 550,000 Partnership Units (which number or classification shall be adjusted
to give effect to any reclassification or change of the Common Stock or Units,
including, without limitation, a split, or any merger or consolidation of the
Company or the MLP, except the merger of the MLP with the Company or any
subsidiary thereof, or sale of assets to another entity, occurring after March
31, 1997). The type and number of securities issuable as the Contingent Share
Consideration (subject to the next sentence) shall be at the sole discretion of
QSV. The exact number of Partnership Units to be issued (which number shall be
reduced on a one-for-one basis by the number of Units otherwise received by QSV
as part of the Contingent Share Consideration) will be determined by dividing
the (i) amount by which the MGP Net Income (as defined below) for the 2000
Fiscal Year exceeds $3,612,500 by (ii) $4.25, and rounding the resulting number
up to the nearest whole number. "MGP Net Income" means the dollar amount of fees
and distributions which would have been payable to QSV, as Managing General
Partner, by the Partnership for the 2000 Fiscal Year, pursuant to the provisions
of Section 9.2, had QSV operated the Partnership as the "Managing General
Partner" on a continuous basis from the date of the Conversion through December
31, 2000 plus the amounts that would have been payable to QSV pursuant to its
aggregate 1.98% general partnership interests in the Partnership and the MLP,
less $775,000.
<PAGE>
For example, if the MGP Net Income for the 2000 Fiscal Year would have
been $5,100,000 ($5,875,000 revenues less $775,000) then the Contingent Unit
Consideration would be an additional 350,000 Partnership Units.
The Contingent Unit Consideration, if any, shall be issued by the
Partnership as soon as practicable following the end of the 2000 Fiscal Year,
but in no event later than March 31, 2001.
IX.2. Operational Expenses.
In addition to any reimbursement pursuant to the indemnification set
forth in Section 7.11, the Partnership, pursuant to this Section 9.2, shall:
(a) With respect to (i) the Partnership Properties held as of March 17,
1995 and (ii) the Partnership Properties and Ancillary Property related thereto
acquired thereafter with respect to the Partnership Properties referred to in
clause (i) above whether pursuant to Section 8.12 or otherwise, the Partnership
shall cause to be paid to the Managing General Partner with respect to each
Fiscal Year an aggregate amount equal to Four Hundred Thousand Dollars
($400,000) adjusted annually as set forth in Section 9.2(c) hereof, which amount
shall be in lieu of any reimbursement for expenses related to the management of
the business affairs of the Partnership and the Limited Partner (other than
expenses described in Section 9.2(c) hereof) that are incurred by the Managing
General Partner or its Affiliates with respect to such Partnership Properties,
which amount shall be payable in equal quarterly installments within sixty (60)
days after the end of each fiscal quarter.
(b) With respect to any Partnership Property and Ancillary Property
related thereto acquired after March 17, 1995 (other than those referred to in
Section 9.2(a) hereof) and mortgage loans, if any, originated by the Partnership
or the MLP, (i) the Partnership shall pay to the Managing General Partner (A) an
acquisition fee equal to 1% of the purchase price paid by the Partnership or the
Limited Partner for such Partnership Property and Ancillary Property related
thereto, payable on the date of acquisition or origination, as applicable, and
(B) with respect to each Fiscal Year, an amount, adjusted annually as set forth
in Section 9.2(c), accruing while such property is held at the rate of 1% per
annum (applied using the simple interest method on the basis of a 365/366-day
year and the actual number of days elapsed) on the purchase price paid by the
Partnership or any of the Limited Partners for such Partnership Property and
Ancillary Property related thereto, and (ii) if the Rate of Return attributable
to all Partnership Properties and Ancillary Property related thereto acquired
after March 17, 1995 (other than those referred to in Section 9.2(a)) in respect
of any Fiscal Year shall exceed 12% per annum, the Partnership shall pay to the
Managing General Partner an amount equal to 25% of the amount of cash received
by the Partnership representing such excess, which amounts shall be in lieu of
any reimbursement of expenses related to the management of the business affairs
of the Partnership and the Limited Partners (other than expenses described in
Section 9.2(c)) that are incurred by the Managing General Partner or its
Affiliates with respect to such Partnership Properties and (except as provided
in clause (i)(A) of this Section 9.2(b)) shall be payable in quarterly
installments within sixty (60) days after the end of each fiscal quarter (which
may be estimated in the case of the first three fiscal quarters). For purposes
of the calculations provided for in this Section 9.2 in the event of a mortgage
loan origination, the term "Partnership Properties" shall be deemed to include
any originated mortgage loans and the "purchase price" of such mortgage loans
will be the principal balances thereof at the beginning of any Fiscal Year.
(c) The Partnership shall either pay, or reimburse the Managing General
Partner on a monthly basis for the payment of, all amounts payable to any Person
for providing goods or performing services (including, without limitation,
legal, accounting, auditing, recordkeeping, reporting, depositary, transfer
agent, printing, appraisal, servicing and consulting services) for or on behalf
of the Partnership or the Limited Partners; provided, however, that the
Partnership shall not pay, or reimburse the Managing General Partner for, the
payment of any amount to an Affiliate or an officer, director or employee of an
Affiliate for legal, accounting, managerial or consulting services; and provided
further, that the Partnership shall pay, or shall reimburse the Managing General
Partner for, a payment to an Affiliate or an officer, director or employee of an
Affiliate for goods or other services only if the price and the terms upon which
such goods or services are provided to the Partnership or the Limited Partners
are fair to the Partnership or the Limited Partners, as the case may be, and are
not less favorable to the Partnership or the Limited Partners, as the case may
be, than would be incurred if the Partnership or the Limited Partners were to
obtain such goods or services from an unrelated third party or were to engage
employees to provide such goods or services directly.
<PAGE>
For 1987 and for each Fiscal Year thereafter, the amount payable
pursuant to Section 9.2(a) shall be increased by an amount equal to the product
of Four Hundred Thousand Dollars ($400,000) multiplied by the percentage
increase in the Price Index from January 1, 1986, through the last day of the
immediately preceding Fiscal Year. For each year after the year in which a
Partnership Property is acquired, the amount otherwise payable pursuant to
Section 9.2 (b)(i)(B) (the "Section 9.2(b)(i)(B) Amount") shall be increased by
an amount equal to the product of the Section 9.2(b)(i)(B) Amount multiplied by
the percentage increase in the Price Index from the first day of the immediately
preceding Fiscal Year or, in the case of the first year after the year in which
the Partnership Property is acquired, the first day of the month in which the
acquisition occurred through the last day of the Fiscal Year immediately
preceding such year or, if earlier, the last day of the month in which such
Partnership Property was disposed of. The percentage increase in the Price Index
through the last day of a particular period shall be determined by calculating
the increase, if any, in the Price Index for the last time period during such
period (the "Price Index Determination Period") with respect to which the Price
Index is published (currently a monthly period) over the Price Index for the
time period immediately preceding the first day of the Price Index Determination
Period, and expressing the amount of such increase as a percentage of the Price
Index for said time period immediately preceding the first day of the Price
Index Determination Period.
"Rate of Return" in respect of any period shall mean and refer to the
quotient obtained by dividing (1) the aggregate revenues (calculated in
accordance with generally accepted accounting principles and before amortization
of unearned income on direct financing leases) received by the Partnership or
the Limited Partners from the Partnership Properties and Ancillary Property
referred to in Section 9.2(b) for such period, whether through operations, sale
or other disposition, less (without duplication) (i) the aggregate fees payable
pursuant to Section 9.2(b)(i)(B) for such period in respect of such properties,
(ii) the aggregate expenses of the Partnership (other than interest expense,
depreciation, amortization and other non-cash expenses and charges and expenses
described in Sections 9.2(b) and (c)) directly attributable to such property and
interest expense on any debt or distributions with respect to any interests (the
"Preferred Interests") of the Partnership issued to the Company in exchange for
the proceeds from the issuance by the Company of equity securities ranking
senior to the Common Stock with respect to the payment of dividends by the
Company allocated thereto for such period, (iii) the general and administrative
expenses of the Partnership (other than non-cash expenses and charges and
expenses described in Sections 9.2(a) and (b)) for such period allocated to such
properties (based on the ratio of Average Partnership Equity in such properties
to the aggregate Average Partnership Equity in all Partnership Properties), and
(iv) the principal amount of debt and dollar amount of Preferred Interests
allocated to any such properties repaid during such period and, if applicable,
the cash costs and expenses of any kind or nature incurred in respect of the
sale or other disposition thereof, by (2) the Average Partnership Equity in such
properties during such period. "Average Partnership Equity" shall mean and refer
to (A) the average of the sums of the aggregate purchase prices therefor, the
aggregate fees paid pursuant to Section 9.2(b)(i)(A) in respect thereof and all
other cash costs and expenses of any kind or nature incurred in connection with
the acquisitions thereof ("Property Costs") as of the last day of each calendar
month occurring during the period of determination, less (B) the average
outstanding principal amount of debt of the Partnership and the aggregate dollar
value of the Preferred Interests outstanding as of the last day of each calendar
month during such period and allocated to such properties. The Rate of Return
for any outstanding mortgage loans will be evaluated separately with the
mortgage loans constituting a separate pool of "properties" for such
calculation. The general and administrative expenses allocable to such mortgage
loans shall be equal to the total amount of such expenses for any Fiscal Year
multiplied by a fraction, the numerator of which shall be the aggregate
principal amount of all mortgage loans outstanding at the beginning of such
Fiscal Year and the denominator of which shall be the total of all Property
Costs and such aggregate principal amount.
For the purposes of the foregoing, debt of the Partnership and the
Preferred Interests shall be allocated among the Partnership Properties as
follows: (1) non-recourse debt shall be allocated to the property secured
thereby and, if such debt is secured by more than one property, such debt shall
be allocated among the properties secured thereby based on the relative Property
Costs thereof; and (2) recourse debt and the Preferred Interests shall be
allocated to all of the Partnership Properties based on the relative Property
Costs thereof (reduced for this purpose by the amounts of non-recourse debt
allocated thereto in accordance with clause (1) above).
<PAGE>
IX.3. Reimbursement of the General Partners.
In the event that the provisions of Section 9.2 are terminated in
accordance with the terms of Section 9.1, the following compensation provisions
shall apply, to be effective upon the date of such termination.
(a) The General Partners shall not be compensated for their services as
general partner of the Partnership except as provided in elsewhere in this
Agreement (including the provisions of Article VI regarding distributions,
payments and allocations to which it may be entitled in its capacity as the
General Partner).
(b) Subject to Sections 9.2(c) and 16.9, the Partnership shall be
liable for, and shall reimburse the General Partners on a monthly basis, or such
other basis as the General Partners may determine in their sole and absolute
discretion, for all sums expended in connection with the Partnership's business
or for the benefit of the Partnership, including, without limitation, (i)
expenses relating to the ownership of interests in, and management and operation
of, or for the benefit of, the Partnership, (ii) compensation of officers and
employees, including, without limitation, payments under future employee benefit
plans of any General Partner, (iii) director fees and expenses, and (iv) all
costs and expenses of any General Partner being a public company, including
costs of filings with the Commission, reports and other distributions to its
stockholders.
(c) To the extent practicable, Partnership expenses shall be billed
directly to and paid by the Partnership, subject to Section 16.9, reimbursements
to the General Partner of any of their Affiliates by the Partnership pursuant to
this Section 9.3 shall be treated as "guaranteed payments" within the meaning of
Section 707(c) of the Code.
<PAGE>
ARTICLE X
BANK ACCOUNTS; BOOKS AND RECORDS;
FISCAL YEAR; STATEMENTS; TAX MATTERS
X.1. Bank Accounts.
All funds of the Partnership shall be deposited in its name in such
checking and savings accounts, time deposits, certificates of deposit or other
accounts at such banks or other financial institutions as shall be designated by
the Managing General Partner from time to time, and the Managing General Partner
shall arrange for the appropriate conduct of any such account or accounts. The
Managing General Partner shall have fiduciary responsibility for the safekeeping
and use of the funds of the Partnership, whether or not in possession and
control of the Managing General Partner, and the Managing General Partner shall
not employ or permit any other Person to employ such funds except in accordance
with the terms of this Agreement. The Managing General Partner shall not permit
funds of the Partnership to be commingled with funds of the Managing General
Partner, any Affiliate or any other Person; provided, however, that nothing
herein shall preclude any investment of funds of the Partnership in a mutual
fund or similar entity for which a separate account is maintained on behalf of
each participant.
X.2. Books and Records.
(a) The Managing General Partner shall keep, or cause to be kept,
accurate, full, and complete books and accounts with respect to the Partnership,
showing assets, liabilities, income, operations, transactions and the financial
condition of the Partnership. Such books and accounts shall be prepared and
maintained on the accrual basis of accounting in accordance with generally
accepted accounting principles. The Managing General Partner shall maintain and
preserve all Partnership books and records for such period as the Managing
General Partner, in its reasonable discretion, shall determine necessary or
appropriate, subject to any requirements of state or federal law; provided,
however, that all appraisal reports obtained by the Partnership, whether in
connection with the acquisition of the Partnership Properties or otherwise,
shall be retained by the Partnership for at least five (5) years from the date
thereof.
(b) The Limited Partners shall have the right, at reasonable times and
at the Limited Partners' own expense, but only upon twenty (20) days prior
written notice to the Managing General Partner in accordance with Section 16.2,
and only for a valid business purpose related to the conduct of the
Partnership's business, (i) to have true and full information regarding the
status of the business and financial condition of the Partnership; (ii) to
inspect and copy the books of the Partnership and other reasonably available
records and information concerning the operation of the Partnership, including
copies of any appraisal reports described in Section 10.2(a) and copies of the
federal, state and local income tax returns of the Partnership; (iii) to have a
current list of the name and last known business, residence or mailing address
of each Partner; (iv) to have true and full information regarding the amount of
cash and a description and statement of the Carrying Value of any property or
services contributed by any Partner to the Partnership and the date upon which
each Partner became a Partner; and (v) to have a copy of this Agreement, the
Certificate of Limited Partnership and all amendments or certificates of
amendment, as the case may be, thereto, together with copies of any powers of
attorney pursuant to which any such amendment or certificate of amendment has
been executed.
<PAGE>
(c) Anything in this Section 10.2 to the contrary notwithstanding, the
Managing General Partner, in its sole and absolute discretion, may refuse the
Limited Partners access to any information, records, documents or data it
determines to be confidential, including, without limitation, any records
relating to the sales or revenues or projected sales or revenues of one or more
specific BK Restaurants, information related to the financial condition or
circumstances of any BKC Franchisee or BKC's relationship with any BKC
Franchisee and any other information provided to the Partnership by BKC and
specifically designated by BKC, in its reasonable discretion, to be confidential
and/or proprietary.
X.3. Fiscal Year.
The Fiscal Year of the Partnership for financial and federal, state and
local income tax purposes initially shall be the calendar year. The Managing
General Partner shall have authority to change the beginning and ending dates of
the Fiscal Year if the Managing General Partner, in its sole and absolute
discretion, subject to approval by the Internal Revenue Service, shall determine
such change to be necessary or appropriate to the business of the Partnership,
and shall give written notice of any such change to the Limited Partners within
thirty (30) days after the occurrence thereof.
X.4. Financial Statement and Information.
(a) All financial statements shall be accurate and complete in all
material respects, shall present fairly the financial position and operating
results of the Partnership and shall be prepared on the accrual basis as
provided in Section 10.2 for each Fiscal Year of the Partnership during the term
of this Agreement.
(b) No later than forty-five (45) days after the end of each fiscal
quarter of each Fiscal Year (except the last fiscal quarter of each Fiscal
Year), commencing with the fiscal quarter ending June 30, 1986, the Managing
General Partner shall prepare and deliver to the Limited Partners an unaudited
statement of income for the Partnership for such fiscal quarter, an unaudited
statement of changes in cash flows for the period between the end of the most
recent Fiscal Year and the end of such fiscal quarter and an unaudited balance
sheet of the Partnership dated as of the end of such fiscal quarter, in each
case prepared in accordance with generally accepted accounting principles,
together with a statement setting forth any transactions between the Partnership
and any of the General Partners or any Affiliate thereof, the amount of any
fees, commissions, compensation and other remuneration paid or accrued to any of
the General Partners or any Affiliate thereof and a description of any services
rendered to the Partnership therefor, any other information required by Form
10-Q under the Exchange Act and such other information (financial or otherwise)
as the Managing General Partner, in its discretion, shall deem necessary or
appropriate.
(c) No later than ninety (90) days after the end of each Fiscal Year
during the term of this Agreement, the Managing General Partner shall prepare
and deliver to the Limited Partners: (i) a balance sheet, together with
statements of income, Partners' equity and changes in cash flows for the
Partnership during such Fiscal Year, which financial statements shall be audited
by the Auditing Firm (such financial statements to contain a report of the
Auditing Firm which shall include: (A) a statement that an audit of such
financial statements has been made in accordance with generally accepted
auditing standards and that such financial statements are in conformity with
generally accepted accounting principles; (B) a statement of the opinion of the
Auditing Firm with respect to the financial statements and the accounting
principles and practices reflected therein and in regard to the consistency of
the application of such accounting principles; and (C) an identification of any
matters reflected in such financial statements to which the Auditing Firm takes
exception); (ii) a report summarizing any transactions between the Partnership
and any of the General Partners or any Affiliate thereof, the amount of any
fees, commissions, compensation and other remuneration (including, without
limitation, reimbursements of expenses pursuant to Section 9.3) paid or accrued
by the Partnership for such Fiscal Year to the General Partners and any
Affiliates thereof, and the services rendered to the Partnership in connection
therewith; (iii) a report of the activities of the Partnership during the Fiscal
Year; and (iv) a statement (which statement need not be audited) showing any
Cash Flow and any Net Proceeds of a Capital Transaction distributed or to be
distributed to the Partners in respect of such Fiscal Year.
<PAGE>
(d) The Managing General Partner shall provide to the Limited Partners
such other reports and information concerning the business and affairs of the
Partnership (i) as the Managing General Partner, in its sole and absolute
discretion, may deem necessary or appropriate, or (ii) to the extent not
provided for in Section 10.4(b) or (c) as may deem necessary or appropriate by
the Delaware RULPA or by any other law or any regulation of any regulatory body
applicable to the Partnership.
(e) The Managing General Partner shall provide any of the reports or
other information referred to in this Section 10.4 to such federal, state or
local governments, governmental agencies or other regulatory entities as the
Managing General Partner, in its sole and absolute discretion, may deem
necessary or appropriate.
X.5. Accounting Decisions.
All decisions as to accounting matters, except as specifically provided
to the contrary herein, shall be made by the Managing General Partner.
X.6. Where Maintained.
The books, accounts and records of the Partnership at all times shall
be maintained at the Partnership's principal office or, at the option of the
Managing General Partner, at the principal place of business of the Managing
General Partner.
X.7. Preparation of Tax Returns.
The Managing General Partner, at the expense of the Partnership, shall
arrange for the preparation and timely filing of all returns of the Partnership
showing all income, gains, deductions and losses necessary for federal and state
income tax and shall furnish to the Limited Partners within seventy-five (75)
days of the close of the Fiscal Year the tax information reasonably required for
federal and state income tax reporting purposes. The classification, realization
and recognition of income, gains, losses and deductions, and other items of the
Partnership shall be on the accrual method of accounting for federal income tax
purposes.
<PAGE>
X.8. Tax Elections.
Except as otherwise specifically provided herein, the Managing General
Partner shall, in its sole and absolute discretion, determine whether to make
any available election (including, without limitation, the elections provided
for in Sections 48(q)(4), 168 and 754 of the Code) on behalf of the Partnership.
The Managing General Partner shall have the right to seek to revoke any such
election upon the Managing General Partner's determination that such revocation
is in the interests of limited partners and stockholders of the Limited
Partners; provided that the Managing General Partner shall not seek to revoke
any such election unless the Managing General Partner has received an Opinion of
Independent Counsel to the effect that such revocation would not cause (a) the
loss of limited liability of the Limited Partners under this Agreement or of the
limited partners of the MLP under the Investors Partnership Agreement, or (b)
the Partnership or the MLP to be treated as an association taxable as a
corporation for federal income tax purposes.
X.9. Tax Controversies.
Subject to the provisions hereof, the Managing General Partner is
designated as the "tax matters partner" (as defined in the Code) of the
Partnership and is authorized to and required to represent the Partnership (at
the expense of the Partnership) in connection with all examinations of the
affairs of the Partnership by any federal, state or local tax authorities,
including any resulting administrative and judicial proceedings, and to expend
funds of the Partnership for professional services and costs associated
therewith. Each Partner agrees to cooperate with the Managing General Partner
and to do or refrain from doing any or all things reasonably required by the
Managing General Partner in connection with the conduct of all such proceeding.
X.10. Organizational Expenses.
The Partnership shall elect to deduct expenses considered incurred in
organizing the Partnership ratably over a sixty-month period as provided in
Section 709 of the Code.
X.11. Taxation as a Partnership.
No election shall be made by the Partnership, the General Partners or
the Limited Partners to be excluded from the application of any of the
provisions of Subchapter K, Chapter I of Subtitle A of the Code or from an
similar provisions of any state tax law.
X.12. Qualification as a Company.
In the event that the Managing General Partner at any time shall
determine that either the Partnership or the MLP does not qualify, or no longer
will qualify, as a partnership for federal income tax purpose, then the Managing
General Partner shall have the right, but not the obligation, to take any such
action as it, in its sole and absolute discretion, determines to be in the
interests of the MLP in connection therewith or as a result thereof, including,
without limitation to cause the Partnership and the MLP to be reorganized so as
to qualify as a "real estate investment trust" within the meaning of Section 856
of the Code.
<PAGE>
ARTICLE XI
TRANSFER OF INTERESTS
XI.1. Transfer.
(a) The term "transfer," when used in this Article XI with respect to a
Partnership Interest, shall include any sale, assignment, gift, pledge,
hypothecation, mortgage, exchange or other disposition.
(b) No Partnership Interest shall be transferred in whole or in part
except in accordance with the terms and conditions set forth in this Article XI.
Any transfer or purported transfer of any Partnership Interest not made in
accordance with this Article XI shall be null and void.
XI.2. Transfers of Interests of General Partners.
(a) The Managing General Partner shall not transfer all or any portion
of its General Partnership Interest or withdraw as General Partner except as
provided in Section 11.2(b) or in connection with a transaction described in
Section 11.2(c).
(b) Except as otherwise provided in Section 11.2(c) hereof, the Company
shall not engage in any merger, consolidation or other combination with or into
another Person or sale of all or substantially all of its assets, or any
reclassification, or any recapitalization or change of outstanding shares of
Common Stock (other than a change in par value, or from par value to no par
value, or as a result of a subdivision or combination of shares of Common Stock)
(a "Transaction"), unless (i) the Transaction also includes a merger of the
Partnership or sale of substantially all of the assets of the Partnership as a
result of which all Limited Partners will receive for each Partnership Unit an
amount of cash, securities or other property equal to the product of the
Conversion Factor and the greater amount of cash, securities or other property
paid in the Transaction to a holder of one share of Common Stock in
consideration of one share of Common Stock, provided that if, in connection with
the Transaction, a purchase, tender or exchange offer ("Offer") shall have been
made to and accepted by the holders of more than 50% of the outstanding shares
of Common Stock, each holder of Partnership Units shall be given the option to
exchange its Partnership Units for the greater amount of cash, securities or
other property which a Limited Partner would have received had it (A) exercised
its Exchange Right and (B) sold, tendered or exchanged pursuant to the Offer the
shares of Common Stock received upon exercise of the Exchange Right immediately
prior to the expiration of the Offer; and (ii) no more than 75% of the equity
securities of the acquiring Person in such Transaction shall be owned, after
consummation of such Transaction, by the General Partner or Persons who were
Affiliates of the Partnership or the General Partner immediately prior to the
date on which the Transaction is consummated.
<PAGE>
(c) Notwithstanding Section 11.2(b), the Company or the Managing
General Partner may merge with or into a consolidate with another entity if
immediately after such merger or consolidation (i) substantially all of the
assets of the successor or surviving entity (the "Surviving General Partner"),
other than Partnership Units held by the Managing General Partner, are
contributed, directly or indirectly, to the Partnership as a Capital
Contribution in exchange for Partnership Units with a fair market value equal to
the value of the assets so contributed as determined by the Surviving General
Partner in good faith and (ii) the Surviving General Partner expressly agrees to
assume all obligations of the General Partner or the Company, as appropriate,
hereunder. Upon such contribution and assumption, the Surviving General Partner
shall have the right and duty to amend this Agreement as set forth in this
Section 11.2(c). The Surviving General Partner shall in good faith arrive at a
new method for the calculation of the REIT Stock Amount and Conversion Factor
for a Partnership Unit after such merger or consolidation so as to approximate
the existing method for such calculation as closely as reasonably possible. Such
calculation shall take into account, among other things, the kind and amount of
securities, cash and other property that was receivable upon such merger or
consolidation by a holder of shares of Common Stock or options, warrants or
other rights relating thereto, and to which a holder of Partnership Units could
have acquired had such Partnership Units been exchanged immediately prior to
such merger or consolidation. Such amendment to this Agreement shall provide for
adjustment to such method of calculation, which shall be as nearly equivalent as
may be practicable to the adjustments provided for with respect to the
Conversion Factor. The Surviving General Partner also shall in good faith modify
the definition of Common Stock and make such amendments to Section 5.5 hereof so
as to approximate the existing rights and obligations set forth in Section 5.5
as closely as reasonably possible. The above provisions of this Section 11.2(c)
shall similarly apply to successive mergers or consolidations permitted
hereunder.
XI.3. Purchase For Investment.
(a) Each Limited Partner hereby represents and warrants to the Managing
General Partner, to the Company and to the Partnership that the acquisition of
his Partnership Interests is made as a principal for his account for investment
purposes only and not with a view to the resale or distribution of such
Partnership Interest.
(b) Each Limited Partner agrees that he will not sell, assign or
otherwise transfer his Partnership Interest or any fraction thereof, whether
voluntarily or by operation of law or at judicial sale or otherwise, to any
Person who does not make the representations and warranties to the General
Partner set forth in Section 11.3(a) above and similarly agrees not to sell,
assign or transfer such Partnership Interest or fraction thereof to any Person
who does not similarly represent, warrant and agree.
<PAGE>
XI.4. Restrictions on Transfer of Limited Partnership Interests.
(a) The Company or any other REIT Partner may not transfer any Limited
Partner Interest held by it, except (i) to the Partnership in accordance with
Section 7.15 hereof, (ii) to the Company or to any direct or indirect
wholly-owned Subsidiary of the Company, or (iii) in connection with a
Transaction described in Section 11.2(b) hereof.
(b) Subject to the provisions of Sections 11.4(c), (d) and (e), a
Limited Partner (other than the Company or any other REIT Partner) may offer,
sell, assign, hypothecate, pledge or otherwise transfer all or any portion of
his Limited Partner Interest or any of such Limited Partner's economic rights as
a Limited Partner, whether voluntarily or by operation of law or at judicial
sale or otherwise (collectively, a "Transfer") with or without the consent of
the General Partner. Any assignee or transferee of a Limited Partnership
Interest pursuant to this Section 11.4(b) may only become a substitute Limited
Partner pursuant to Section 11.5 hereof. The Managing General Partner may
require as a condition of any Transfer, that the transferor assume all costs
incurred by the Partnership in connection therewith.
(c) No Limited Partner (other than the Company or any other REIT
Partner) may effect a Transfer of its Limited Partner Interest, in whole or in
part, if, in the opinion of legal counsel for the Partnership, such proposed
Transfer would require the registration of the Limited Partnership Interest
under the Securities Act of 1933, as amended, or would otherwise violate any
applicable federal or state securities or blue sky law (including investment
suitability standards).
(d) No transfer by a Limited Partner of its Partnership Units, in whole
or in part, may be made to any Person if (i) in the opinion of legal counsel for
the Partnership, the transfer would result in the Partnership being traded as an
association taxable as a corporation (other than a qualified REIT subsidiary
within the meaning of Section 856(i) of the Code), (ii) in the opinion of legal
counsel for the Partnership, it would adversely affect the ability of the
Company to continue to qualify as a REIT or subject the Company to any
additional taxes under Section 857 or Section 4981 of the Code, or (iii) such
transfer is effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" within the meaning of
Section 7704 of the Code.
(e) No transfer of any Partnership Units may be made to a lender to the
Partnership or any Person who is related (within the meaning of Treasury
Regulations Section 1.752-4(b)) to any lender to the Partnership whose loan
constitutes a nonrecourse liability (within the meaning of Treasury Regulations
Section 1.752-1(a)(2)), without the consent of the Managing General Partner,
which may be withheld in its sole and absolute discretion, provided that as a
condition to such consent the lender will be required to enter into an
arrangement with the Partnership and the Managing General Partner to exchange
any Partnership Units in which a security interest is held simultaneously with
the time at which such lender would be deemed to be a partner in the Partnership
for purposes of allocating liabilities to such lender under Section 752 of the
Code.
(f) Any Transfer in contravention of any of the provisions of this
Article XI shall be void and ineffectual and shall not be binding upon, or
recognized by, the Partnership.
<PAGE>
XI.5. Admission of Substitute Limited Partner.
(a) Subject to the other provisions of this Article XI, an assignee of
the Limited Partner Interest of a Limited Partner (which shall be understood to
include any purchaser, transferee, donee or other recipient of any disposition
of such Limited Partner Interest) shall be deemed admitted as a Limited Partner
of the Partnership only upon the satisfactory completion of the following:
(i) The assignee shall have accepted and agreed to be bound by
the terms and provisions of this Agreement by executing a counterpart or an
amendment thereof; and such other documents or instruments as the Managing
General Partner may require in order to effect the admission of such Person as a
Limited Partner.
(ii) To the extent required, an amended Certificate evidencing
the admission of such Person as a Limited Partner shall have been signed,
acknowledged and filed for record in accordance with the Delaware RULPA.
(iii) The assignee shall have delivered a letter containing
the representation set forth in Section 11.3(a) hereof and the agreement set
forth in Section 11.3(b) hereof.
(iv) If the assignee is a corporation, partnership or trust,
the assignee shall have provided the Managing General Partner with evidence
satisfactory to counsel for the Partnership of the assignee's authority to
become a Limited Partner under the terms and provisions of this Agreement.
(v) The assignee shall have executed a power of attorney
containing the terms and provisions reasonably satisfactory to the Managing
General Partner.
(vi) The assignee shall have paid all reasonable legal fees of
the Partnership and the Managing General Partner and filing and publication
costs in connection with its substitution as a Limited Partner.
(vii) The assignee has obtained the prior written consent of
the Managing General Partner to its admission as a Substitute Limited Partner,
which consent may be given or denied in the exercise of the General Partner's
sole and absolute discretion.
(b) For the purpose of allocating Profits and Losses and distributing
cash received by the Partnership, a Substitute Limited Partner shall be treated
as having become, and appearing in the records of the Partnership as, a Partner
upon the filing of the Certificate described in Section 11.5(a)(ii) hereof or,
if no such filing is required, the later of the date specified in the transfer
documents or the date on which the Managing General Partner has received all
necessary instruments of transfer and substitution.
(c) The Managing General Partner shall cooperate with the Person
seeking to become a Substitute Limited Partner by preparing the documentation
required by this Section and making all official filings and publications. The
Partnership shall take all such action as promptly as practicable after the
satisfaction of the conditions in this Article XI to the admission of such
Person as a Limited Partner of the Partnership.
<PAGE>
XI.6. Assignees.
If the General Partners in their sole and absolute discretion, do not
consent to the admission of any permitted transferee under Section 11.4 as a
Substituted Limited partner, as described in Section 11.5, such transferee shall
be considered an Assignee for purposes of this Agreement. An Assignee shall be
deemed to have had assigned to it, and shall be entitled to receive
distributions from the Partnership and the share of net income, net losses and
any other items of gain, loss, deduction and credit of the Partnership
attributable to the Partnership Units assigned to such transferee, and shall
have the rights granted to the Limited Partners under Section 5.5, but shall not
be deemed to be a holder of Partnership Units for any other purpose under this
Agreement, and shall not be entitled to vote such Partnership Units in any
matter presented to the Limited Partners for a vote (such Partnership Units
being deemed to have been voted on such matter in the same proportion as all
other Partnership Units held by Limited Partners are voted). In the event any
such transferee desires to make a further assignment of any such Partnership
Units, such transferee shall be subject to all the provisions of this Article XI
to the same extent and in the same manner as any Limited Partner desiring to
make an assignment of Partnership Units.
XI.7. General Provisions.
(a) No Limited Partner may withdraw from the Partnership other than as
a result of a permitted transfer of all of such Limited Partner's Partnership
Units in accordance with this Article XI or pursuant to the exchange of all of
its Partnership Units under Section 5.5.
(b) Any Limited Partner who shall transfer all of his Partnership Units
in a transfer permitted pursuant to this Article XI shall cease to be a Limited
Partner upon the admission of all Assignees of such Partnership Units as
Substitute Limited Partners. Similarly, any Limited Partner who shall transfer
all of his Partnership Units pursuant to an exchange of all of his Partnership
Units under Section 5.5 shall cease to be a Limited Partner.
(c) Transfers pursuant to this Article XI may only be made on the first
day of a fiscal quarter of the Partnership, unless the General Partners
otherwise agree.
(d) If any Partnership Interest is transferred or assigned in
compliance with the provisions of this Article XI or exchanged pursuant to
Section 5.5, on any day other than the first day of a Fiscal Year, then net
income, net losses, each item thereof and all other items attributable to such
interest for such Fiscal Year shall be divided and allocated between the
transferor Partner and the transferee Partner by taking into account their
varying interests during the Fiscal Year in accordance with Section 706(d) of
the Code, using the interim closing of the books method (unless the Managing
General Partner, in its sole and absolute discretion, elects to adopt a daily,
weekly or monthly proration method, in which event net income, net losses and
each item thereof for such Fiscal Year shall be prorated based upon the
applicable period selected by the Managing General Partner). Solely for purposes
of making such allocations, each of such items for the calendar month in which
the transfer or assignment occurs shall be allocated to the transferee Partner,
and none of such items for the calendar month in which a redemption occurs shall
be allocated to the Exchanging Partner. All distributions of Cash Flow
attributable to such Partnership Unit with respect to which the payment date (in
accordance with Section 6.5(b)) is before the date of such transfer, assignment
or redemption shall be made to the transferor Partner or the Exchanging Partner,
as the case may be, and, in the case of a transfer or assignment other than a
redemption, all distributions of Cash Flow thereafter attributable to such
Partnership Unit shall be made to the transferee Partner.
<PAGE>
ARTICLE XII
ADMISSION OF PARTNERS
XII.1. Admission of Substitute Successor General Partners.
Except as otherwise provided in Section 11.2(c) hereof, a Person shall
be admitted as a substitute or successor General Partner of the Partnership only
if the following terms and conditions are satisfied:
(a) a Majority Vote of the Limited Partners (other than the MLP or the
Company) shall have been received approving the admission of the substitute or
successor General Partner, which consent may be withheld in the sole discretion
of such Limited Partners;
(b) the Person to be admitted as a substitute or additional General
Partners shall have accepted and agreed to be bound by all the terms and
provisions of this Agreement by executing a counterpart thereof and such other
documents or instruments as may be required or appropriate in order to effect
the admission of such Person as a General Partner, and a Certificate evidencing
the admission of such Person as a General Partner shall have been filed for
recordation;
(c) if the Person to be admitted as a substitute or additional General
Partner is a corporation or a partnership it shall have provided the Partnership
with evidence satisfactory to counsel for the Partnership of such Person's
authority to become a General Partner and to be bound by the terms and
provisions of this Agreement; and
(d) counsel for the Partnership shall have rendered an opinion (relying
on such opinions from other counsel and the state or any other jurisdiction as
may be necessary) that the admission of the person to be admitted as a
substitute or additional General Partner is in conformity with the Act, that
none of the actions taken in connection with the admission of such Person as a
substitute or additional General Partner will cause (i) the Partnership to be
classified other than as a partnership for federal income tax purposes, or (ii)
the loss of any Limited Partner's limited liability.
XII.2. Admission of Additional Limited Partners.
(a) A Person who made or makes a Capital Contribution to the
Partnership in accordance with this Agreement or who exercises an option to
receive Partnership Units shall be admitted to the Partnership as an Additional
Limited Partner only upon furnishing to the Managing General Partner (i)
evidence of acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement, including, without limitation, a power
of authority reasonably satisfactory to the Managing General Partner, and (ii)
such other documents or instruments as may be required in the discretion of the
Managing General Partner in order to effect such Person's admission as an
Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section 12.2, no
Person shall be admitted as an Additional Limited Partner without the consent of
the Managing General Partner, which consent may be given or withheld in the
Managing General Partner's sole and absolute discretion. The admission of any
Person as an Additional Limited Partner shall become effective on the date upon
which the name of such Person is recorded on the books and records of the
Partnership, following the consent of the General Partner to such admission.
(c) If any Additional Limited Partner is admitted to the Partnership on
any day other than the first day of the Partnership's Fiscal Year, then such
Person shall be treated as an Assignee, subject to the provisions of Section
11.6 hereof.
<PAGE>
ARTICLE XIII
WITHDRAWAL OR REMOVAL OF GENERAL PARTNERS
XIII.1. Withdrawal or Removal of General Partners.
(a) A General Partner may not be removed by the Limited Partners with
or without cause.
(b) Upon the occurrence of the Bankruptcy as to, or the dissolution of,
a General Partner, such General Partner shall be deemed to be removed
automatically; provided, however, that if a General Partner is on the date of
such occurrence a partnership, the withdrawal, death, dissolution, Bankruptcy as
to, or removal of, a partner in such partnership shall be deemed not to be a
dissolution of a General Partner if the business of such General Partner is
continued by the remaining partner or partners.
(c) If a General Partner has been removed pursuant to this Section 13.1
and the Partnership is continued pursuant to Section 14.3 hereof, such General
Partner shall promptly transfer and assign its General Partner Interest in the
Partnership to the substitute General Partner approved by a Majority Vote of the
Limited Partners and otherwise admitted to the Partnership in accordance with
Section 12.1 hereof. At the time of assignment, the removed General Partner
shall be entitled to receive from the substitute General Partner the fair market
value of the General Partner Interest of such removed General Partner as reduced
by any damages caused to the Partnership by such General Partner. Such fair
market value shall be determined by an appraiser mutually agreed upon by the
General Partner and a Majority Vote of the Limited Partners (excluding the MLP
and the Company) within 10 days following the removal of the General Partner. In
the event that the parties are unable to agree upon an appraiser, the removed
General Partner and a Majority Vote of the Limited Partners (excluding the MLP
and the Company) each shall select an appraiser. Each such appraiser shall
complete an appraisal of the fair market value of the removed General Partner's
General Partner Interest within 30 days of the General Partner's removal, and
the fair market value of the removed General Partner's General Partner Interest
shall be the average of the two appraisals; provided, however, that if the
higher appraisal exceeds the lower appraisal by more than 20% of the amount of
the lower appraisal, the two appraisers, no later than 40 days after the removal
of the General Partner, shall select a third appraiser who shall complete an
appraisal of the fair market value of the removed General Partner's General
Partner Interest no later than 60 days after the removal of the General Partner.
In such case, the fair market value of the removed General Partner's General
Partner Interest shall be the average of the two appraisals closest in value.
(d) The General Partner Interest of a removed General Partner, during
the time after default until transfer under Section 13.1(c), shall be converted
to that of a special Limited Partner; provided, however, such removed General
Partner shall not have any rights to participate in the management and affairs
of the Partnership, and shall not be entitled to any portion of the income,
expense, profit, gain or loss allocations or cash distributions allocable or
payable, as the case may be, to the Limited Partners. Instead, such removed
General Partner shall receive and be entitled only to retain distributions or
allocations of such items that it would have been entitled to receive in its
capacity as General Partner, until the transfer is effective pursuant to Section
13.1(c).
(e) All Partners shall have given and hereby do give such consents,
shall take such actions and shall execute such documents as shall be legally
necessary and sufficient to effect all the foregoing provisions of this Section.
XIII.2. Amendment of Agreement and Certificate of Limited Partnership.
This Agreement and the Certificate shall be amended to reflect the
withdrawal, removal or succession of a General Partner.
<PAGE>
ARTICLE XIV
DISSOLUTION AND LIQUIDATION
XIV.1. No Dissolution.
The Partnership shall not be dissolved by the admission of additional
Limited Partners or Substituted Limited Partners or by the admission of
additional General Partners or Substituted General Partners in accordance with
the terms of this Agreement.
XIV.2. Events Causing Dissolution.
The Partnership shall be dissolved and its affairs wound up upon the
occurrence of any of the following events:
(a) the expiration of the term of the Partnership, as provided in
Section 4.1;
(b) the withdrawal of the Managing General Partner or the occurrence of
any other event that results in the Managing General Partner ceasing to be the
Managing General Partner (other than by reason of a transfer pursuant to Section
11.2 or a withdrawal occurring upon or after, or a removal effective upon or
after, selection of a successor pursuant to Section 13.1);
(c) the "Bankruptcy" (as hereinafter defined) of the Managing General
Partner;
(d) a written determination by the Managing General Partner that
projected future revenues of the Partnership will be insufficient to enable
payment of projected Partnership costs and expenses or, if sufficient, will be
such that continued operation of the Partnership is not in the best interests of
the Partners;
(e) an election by the Limited Partners to terminate, dissolve or
liquidate the Partnership;
(f) any attempted transfer, sale, assignment, gift, pledge,
hypothecation, mortgage, exchange or other disposition by the Limited Partners
of their Partnership Interests; or
(g) the occurrence of any other event that, under the Delaware RULPA,
would cause the dissolution of the Partnership or that would make it unlawful
for the business of the Partnership to be continued.
For purposes of this Agreement, the term "Bankruptcy" shall mean, and
the Managing General Partner shall be deemed "Bankrupt" upon, (i) the entry of a
decree or order for relief of the Managing General Partner by a court of
competent jurisdiction in any involuntary case involving the Managing General
Partner under any bankruptcy, insolvency or other similar law now or hereafter
in effect; (ii) the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator or other similar agent for the Managing General Partner or
for any substantial part of the Managing General Partner's assets or property;
(iii) the ordering of the winding up or liquidation of the Managing General
Partner's affairs; (iv) the filing with respect to the Managing General Partner
of a petition in any such involuntary bankruptcy case, which petition remains
undismissed for a period of ninety (90) days or which is dismissed or suspended
pursuant to Section 305 of the Federal Bankruptcy Code (or any corresponding
provision of any future United States bankruptcy law); (v) the commencement by
the Managing General Partner of a voluntary case under any bankruptcy,
insolvency or other similar law now or hereafter in effect; (vi) the consent by
the Managing General Partner to the entry of an order for relief in a
involuntary case under any such law or to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator
or other similar agent for the Managing General Partner or for any substantial
part of the Managing General Partner's assets or property; (vii) the making by
the Managing General Partner of any general assignment for the benefit of
creditors; or (viii) the failure by the Managing General Partner generally to
pay its debts as such debts become due.
<PAGE>
XIV.3. Right to Continue Business of Partnership.
Upon an event described in Section 14.2(b), 14.2(c) or 14.2(g) (but not
an event described in Section 14.2(g) that makes it unlawful for the business of
the Partnership to be continued), the Partnership thereafter shall be dissolved
and liquidated unless, within ninety (90) days after the event described in any
of such Sections, an election to reconstitute and continue the business of the
Partnership shall be made by a Majority Vote of the Limited Partners. If such an
election to continue the Partnership is made, then:
(a) a Majority Vote of the Limited Partners shall select a successor
Managing General Partner;
(b) the Partnership shall continue until another event causing
dissolution in accordance with this Article XIV shall occur; and
(c) all necessary steps shall be taken to amend this Agreement and the
Certificate of Limited Partnership to reflect the reconstitution and
continuation of the business of the Partnership.
XIV.4. DissolutionXIV.4. Dissolution.
Except as otherwise provided in Section 14.3, upon the dissolution of
the Partnership, the Certificate of Limited Partnership shall be canceled in
accordance with the provisions of the Delaware RULPA, and the Managing General
Partner promptly shall notify the Partners of such dissolution.
XIV.5. Reasonable Time for Winding Up.
A reasonable time shall be allowed for the orderly winding up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 6.3 in order to minimize any losses otherwise attendant upon
such a winding up.
XIV.6. Termination of Partnership.
Except as otherwise provided in this Agreement, the Partnership shall
terminate when all of the assets of the Partnership shall have been converted
into cash, the net proceeds therefrom, as well as any other liquid assets of the
Partnership, after payment of or due provision for all debts, liabilities and
obligations of the Partnership, shall have been distributed to the Partners as
provided for in Sections 6.3 and 6.7 and the Certificate of Limited Partnership
shall have been canceled in the manner required by the Delaware RULPA.
<PAGE>
ARTICLE XV
AMENDMENTS
XV.1. Amendments to be Adopted Solely by the Managing General Partner.
The Managing General Partner, without the consent or approval at the
time of the Limited Partners, may amend any provision of this Agreement, and
execute, swear to, acknowledge, deliver, file and record all documents required
or desirable in connection therewith, to reflect:
(a) a change in the name of the Partnership or the location of the
principal place of business of the Partnership;
(b) the admission, substitution, termination or withdrawal of Partners
in accordance with this Agreement, including amending Exhibit A hereto.
(c) additions to the obligations of the General Partners or surrender
any right or power granted to the General Partners or any Affiliate of the
General Partners for the benefit of the Limited Partners;
(d) the designations, rights, powers, duties and preferences of the
holders of any additional Partnership Interests issued pursuant to Section
5.2(a) hereof;
(e) a change that is necessary to qualify the Partnership as a limited
partnership or a partnership in which the Limited Partners have limited
liability under the laws of any state or that is necessary or advisable in the
opinion of the Managing General Partner to ensure that the Partnership will not
be treated as an association taxable as a corporation for federal income tax
purposes;
(f) a change that is (i) of an inconsequential nature and does not
adversely affect the Limited Partners in any material respect; (ii) necessary or
desirable to cure any ambiguity, to correct or supplement any provision herein
that would be inconsistent with any other provision herein or to make any other
provision with respect to matters or questions arising under this Agreement that
will not be inconsistent with the provision of this Agreement; (iii) necessary
or desirable to satisfy any requirements, conditions or guidelines contained in
any opinion, directive, order, ruling or regulation of any federal or state
agency or contained in any federal or state statute; (iv) necessary or desirable
to facilitate the trading of the Units, as contemplated in the Investor
Partnership Agreement, or the shares of Common Stock, or comply with any rule,
regulation guideline or requirement of any securities exchange on which the
Units or the shares of Common Stock are or will be listed for trading,
compliance with any of which the Managing General Partner deems to be in the
interests of the Partnership and the Limited Partners; (v) necessary to conform
this Agreement to any amendments made in the Investors Partnership Agreement in
accordance with the terms thereof; or (vi) required or contemplated by this
Agreement;
(g) a change in any provision of this Agreement which requires any
action to be taken by or on behalf of the Managing General Partner or the
pursuant to the requirements of applicable Delaware law if the provisions of
applicable Delaware law are amended, modified or revoked so that the taking of
such action is no longer required;
(h) to reflect such changes as are reasonably necessary for any Partner
to maintain its status as a "qualified Company subsidiary" within the meaning of
Section 856(i)(2) of the Code; or
(i) any other amendments similar to the foregoing.
The authority set forth in this Section 15.1 shall specifically include
the authority to make such amendments to this Agreement and to the Certificate
of Limited Partnership as the Managing General Partner deems necessary or
desirable in the event the Delaware RULPA is amended to eliminate or change any
provision now in effect. Without limiting the foregoing, the Limited Partners
shall, upon the request of the Managing General Partner, execute, swear to or
acknowledge any document determined by the Managing General Partner to be
required or desirable in connection with the foregoing. The Managing General
Partner shall provide notice to the Limited Partners when any action under this
Section 15.1 is taken.
<PAGE>
XV.2. Amendment Procedures.
Except as specifically provided in Sections 15.1 and 15.3, all
amendments to this Agreement shall be made solely in accordance with the
following procedures:
(a) Any amendments of this Agreement must be proposed either:
(i) by the Managing General Partner, by submitting the text of
the proposed amendment to all Limited Partners in writing; or
(ii) by Limited Partners owning (as Limited Partners and not
as Assignees) at least twenty-five percent (25%) of the total
Partnership Units owned by Limited Partners (as Limited Partners and
not as Assignees), by submitting their proposed amendment in writing to
the Managing General Partner. The Managing General Partners shall,
within sixty (60) days after the receipt of any such proposed
amendment, or as soon thereafter as is reasonably practicable, submit
the text of the proposed amendment to all Limited Partners. The
Managing General Partner may include in such submission its
recommendation as to the proposed amendment.
(b) If an amendment is proposed pursuant to this Section 15.2, the
Managing General Partner shall seek the written consent of the Limited Partners
to such amendment or shall call a meeting of the Limited Partners to consider
and vote on the proposed amendment, unless, in the opinion of Independent
Counsel, such proposed amendment would be illegal under Delaware law if adopted,
in which case the Managing General Partner shall not be required to take any
further action with respect thereto. For purposes of obtaining a written vote,
the Managing General Partner may require a response within a reasonable period
of time, but not less than fifteen (15) days, and failure to respond in such
time shall constitute a vote which is consistent with the Managing General
Partner's recommendation with respect to the proposal. A proposed amendment
shall be effective only if approved by the General Partners in writing and by a
Majority Vote of the Limited Partners, unless a greater percentage vote of the
Limited Partners is required by law or any other provision of this Agreement.
The Managing General Partner shall keep all Partners advised of the status of
any proposed amendment and shall notify all Partners upon final adoption or
rejection of any proposed amendment.
(c) The holders of record of Preferred Units shall not be entitled to
vote on any matter on which Limited Partners are entitled to vote, or on any
other matters, provided that the holders of Preferred Units shall have the right
to vote as a separate class of Partnership Units on the following, each of which
shall require the consent of holders of record of Preferred Units representing
more than 50% of Preferred Units:
(i) Any amendment that would adversely affect the rights of
the Preferred Unitholders to receive the distributions payable to them
hereunder;
(ii) Any amendment that would alter the Partnership's
allocations of Profits and Losses to the Preferred Unitholders; or
(iii) Any amendment that would impose on the Preferred
Unitholders any obligation to make additional Capital Contributions to the
Partnership.
<PAGE>
XV.3. Amendment Restrictions.
Notwithstanding Sections 15.1 and 15.2, this Agreement shall not be
amended without the consent of each Partner adversely affected if such amendment
would (a) convert a Limited Partner Interest into a General Partner Interest;
(b) modify the limited liability of a Limited Partner in a manner adverse to
such Limited Partner; (c) alter rights of the Partner to receive distributions
pursuant to Article VI or Article XIV (except as permitted pursuant to Section
5.5 or 15.1(e)); (d) alter or modify the Exchange Right and REIT Stock Amount as
set forth in 5.4, and the related definitions, in a manner adverse to such
Partner; (e) cause the termination of the Partnership prior to the time set
forth in Article IV or Section 14.2; or (f) amend this Section 15.3. Further, no
amendment may alter the restrictions on the General Partner's authority set
forth in Section 7.3(b) without the consent specified in that section.
Notwithstanding any other provision hereof, the General Partner shall not amend
Section 5.2(a), 7.6, 7.7 or 15.4 unless approved by the Majority Vote of the
Limited Partners, excluding Partnership Units held by the Company.
XV.4. Meetings of the Partners.
(a) Meetings of the Partners may be called by the General Partners and
shall be called upon the receipt by the General Partners of a written request by
Limited Partners (other than the Company) holding twenty percent (20%) or more
of the Partnership Units. The request shall state the nature of the business to
be transacted. Notice of any such meeting shall be given to all Partners not
less than ten (10) days nor more than sixty (60) days prior to the date of such
meeting. Partners may vote in person or by proxy at such meeting. Whenever the
vote or consent of the Partners is permitted or required under this Agreement,
such vote or consent may be given at a meeting of the Partners or may be given
in accordance with the procedure prescribed in Section 15.2(b). Except as
otherwise expressly provided int his Agreement, the Majority Vote of the Limited
Partners (including Partnership Units held by the Company) shall control.
(b) Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting forth the
action so taken is signed by a majority of the Percentage Interests of the
Partners (or such other percentage as is expressly required by this Agreement).
Such consent may be in one instrument or in several instruments, and shall have
the same force and effect as a vote of a majority of the Percentage Interests of
the Partners (or such other percentage as is expressly required by this
Agreement). Such consent shall be filed with the General Partner. An action so
taken shall be deemed to have been taken at a meeting held on the effective date
so certified.
(c) Each Limited Partner may authorize any Person or Persons to act for
it by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting or voting or participating
at a meeting. Every proxy must be signed by the Limited Partner or its
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the Limited Partner executing it, such
revocation to be effective upon the Partnership's receipt of written notice of
such revocation from the Limited Partner executing such proxy.
(d) Each meeting of the Partners shall be conducted by the General
Partner or such other Person as the Managing General Partner may appoint
pursuant to such rules for the conduct of the meeting as the Managing General
Partner or such other Person deems appropriate. Without limitation, meetings of
Partners may be conducted in the same manner as meetings of the stockholders of
the Company and may be held at the same time, and as part of, meetings of the
stockholders of Company.
<PAGE>
ARTICLE XVI
MISCELLANEOUS PROVISIONS
XVI.1. Additional Actions and Documents.
Each of the Partners hereby agrees to take or cause to be taken such
further actions, to execute, acknowledge, deliver and file or cause to be
executed, acknowledged, delivered and filed such further documents and
instruments, and to use best efforts to obtain such consents as may be necessary
or as may be reasonably requested in order to fully effectuate the purposes,
terms and conditions of this Agreement, whether before, at or after the closing
of the transactions contemplated by this Agreement.
XVI.2. Notices.
All notices, demands, requests or other communications which may be or
are required to be given, served or sent by a Partner or the Partnership
pursuant to this Agreement shall be in writing, and shall be personally
delivered, mailed by first-class mail, postage prepaid, or transmitted by
facsimile, telegram or telex, addressed as follows:
(a) If to the Managing General Partner:
USRP Managing, Inc.
Attn: Chairman or President
5310 Harvest Hill Road
Suite 270
Dallas, Texas 75230
Facsimile No.: (972) 490-9119
(b) If to QSV:
QSV Properties, Inc.
Attn: Chairman or President
5310 Harvest Hill Road
Suite 270
Dallas, Texas 75230
Facsimile No.: (972) 490-9119
(c) If to the Company:
U.S. Restaurant Properties, Inc.
Attn: Chief Executive Officer
5310 Harvest Hill Road
Suite 270
Dallas, Texas 75270
Facsimile No.: (972) 490-9119
(d) If to the Partnership:
U.S. Restaurant Properties Operating L.P.
Attn: Managing General Partner
5310 Harvest Hill Road
Suite 270
Dallas, Texas 75230
Facsimile No.: (972) 490-9119
<PAGE>
Each Partner and the Partnership may designate by notice in writing a
new address to which any notice, demand, request or communication may thereafter
be so given, served or sent. Each notice, demand, request or communication which
shall be delivered, mailed or transmitted in the manner described above shall be
deemed to have been duly given when delivered in person, sent by first class
mail or transmitted by facsimile, telegram or telex.
XVI.3. Severability.
The invalidity of any one or more provisions hereof or of any other
agreement or instrument given pursuant to or in connection with this Agreement
shall not affect the remaining portions of this Agreement or any such other
agreement or instrument or any part thereof, all of which are inserted
conditionally on their being held valid in law; and in the event that one or
more of the provisions contained herein or therein should be invalid, or should
operate to render this Agreement or any such other agreement or instrument
invalid, this Agreement and such other agreements and instruments shall be
construed as if such invalid provisions had not been inserted.
XVI.4. Survival.
It is the express intention and agreement of the Partners that all
covenants, agreements, statements, representations, warranties and indemnities
made in this Agreement shall survive the execution and delivery of this
Agreement.
XVI.5. Waivers.
Neither the waiver by a Partner of a breach of or a default under any
of the provisions of this Agreement, nor the failure of a Partner, on one or
more occasions, to enforce any of the provisions of this Agreement or to
exercise any right, remedy or privilege hereunder shall thereafter be construed
as a waiver of any subsequent breach or default of a similar nature, or as a
waiver of any such provisions, rights, remedies or privileges hereunder.
XVI.6. Exercise of Rights.
No failure or delay on the part of a Partner or the Partnership in
exercising any right, power or privilege hereunder and no course of dealing
between the Partners or between a Partner and the Partnership shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
expressly provided are cumulative and not exclusive of any other rights or
remedies which a Partner or the Partnership would otherwise have at law or in
equity or otherwise.
XVI.7. Binding Effect.
Subject to any provisions hereof restricting assignment, this Agreement
shall be binding upon and shall inure to the benefit of the Partners (and BKC
and its successors and assigns for purposes of Article VIII and Section 15.3)
and their respective heirs, devisees, executors, administrators, legal
representatives, successors and assigns.
<PAGE>
XVI.8. Limitation on Benefits of this Agreement.
It is the explicit intention of the Partners that, with the exception
of the rights of BKC, its successors and assigns, in connection with Article
VIII and Section 15.3, no person or entity other than the Partners and the
Partnership is or shall be entitled to bring any action to enforce any provision
of this Agreement against any Partner or the Partnership, and that, except as
set forth in Section 8.1(b), the covenants, undertakings and agreements set
forth in this Agreement shall be solely for the benefit of, and shall be
enforceable only by, the Partners (or their respective successors and assigns as
permitted hereunder) and the Partnership.
XVI.9. Limitation to Preserve Company Status.
Notwithstanding anything else in this Agreement, to the extent that the
amount paid, credited, distributed or reimbursed by the Partnership to any REIT
Partner or its officers, directors, employees or agents, whether as a
reimbursement, fee, expense or indemnity (a "REIT Payment"), would constitute
gross income to the REIT Partner for purposes of Section 856(c)(2) or 856(c)(3)
of the Code, then, notwithstanding any other provision of this Agreement, the
amount of such REIT Payments, as selected by the General Partners in their
discretion from among items of potential distribution, reimbursement, fees,
expenses and indemnities, shall be reduced for any Fiscal Year of the
Partnership so that the REIT Payments, as so reduced, for or with respect to
such REIT Partner shall not exceed the lesser of:
(a) an amount equal to the excess, if any, of (i) four and
nine-tenths percent (4.9%) of the REIT Partner's total gross income
(but excluding the amount of any REIT Payments) for the Fiscal Year of
the Partnership that is described in Section 856(c)(2) of the Code (or
any substitute or successor provision thereto) over (ii) the amount of
gross income (within the meaning of Section 856(c)(2) of the Code (or
any substitute or successor provision thereto)) derived by the REIT
Partner from sources other than those described in Section 856(c)(2) of
the Code (or any substitute or successor provision thereto) (but not
including the amount of any REIT Payments); or
(b) an amount equal to the excess, if any, of (i) twenty-four
percent (24%) of the REIT Partner's total gross income (but excluding
the amount of any REIT Payments) for the Fiscal Year of the Partnership
that is described in Section 856(c)(3) of the Code (or any substitute
or successor provision thereto) over (ii) the amount of gross income
(within the meaning of Section 856(c)(3) of the Code (or any substitute
or successor provision thereto)) derived by the REIT Partner from
sources other than those described in Section 856(c)(3) of the Code (or
any substitute or successor provision thereto) (but not including the
amount of any REIT Payments);
provided, however, that REIT Payments in excess of the amounts set forth in
clauses (a) and (b) above may be made if the General Partners, as a condition
precedent, obtain an opinion of tax counsel that the receipt of such excess
amounts shall not adversely affect the REIT Partner's ability to qualify as a
real estate investment trust under the Code. To the extent that REIT Payments
may not be made in a Fiscal Year of the Partnership as a consequence of the
limitations set forth in this Section 16.9, such REIT Payments shall carry over
and shall be treated as arising in the following Fiscal Year of the Partnership.
The purpose of the limitations contained in this Section 16.9 is to prevent any
REIT Partner from failing to qualify as a real estate investment trust under the
Code by reason of such REIT Partner's share of items, including distributions,
reimbursements, fees, expenses or indemnities, receivable directly or indirectly
from the Partnership, and this Section 16.9 shall be interpreted and applied to
effectuate such purpose.
<PAGE>
XVI.10. Force Majeure.
If the Managing General Partner is rendered unable, wholly or in part,
by "force majeure" (as herein defined) to carry out any of its obligations under
this Agreement, other than the obligation hereunder to make money payments, the
obligations of the Managing General Partner, insofar as they are affected by
such force majeure, shall be suspended during, but no longer than, the
continuance of such force majeure. The term "force majeure" as used herein shall
mean an act of God, strike, lockout or other industrial disturbance, act of
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, governmental restraint, unavailability of equipment and any other
cause, whether of the kind specifically enumerated above or otherwise, which is
not reasonably within the control of the Managing General Partner.
XVI.11. Entire Agreement.
This Agreement contains the entire agreement among the Partners with
respect to the transactions contemplated herein, and supersedes all prior oral
or written agreements, commitments or understandings with respect to the matters
provided for herein.
XVI.12. Pronouns.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the person
or entity may require.
XVI.13. Headings.
Article, Section and subsection headings contained in this Agreement
are inserted for convenience of reference only, shall not be deemed to be a part
of this Agreement for any purpose and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
XVI.14. Governing Law.
This Agreement, the rights and obligations of the parties hereto and
any claims or disputes relating thereto, shall be governed by and construed in
accordance with the laws of Delaware (but not including the choice of law rules
thereof).
XVI.15. Execution in Counterparts.
To facilitate execution, this Agreement may be executed in as many
counterparts as may be required; and it shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in making proof of this Agreement to
produce or account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
<PAGE>
ARTICLE XVII
EXECUTION
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement,
or have caused this Agreement to be duly executed on their behalf, as of the day
and year first hereinabove set forth.
MANAGING GENERAL PARTNER:
ATTEST: USRP MANAGING, INC.
By: /s/ Fred H. Margolin By: /s/ Robert J. Stetson
---------------------- -----------------------
Name: Fred H. Margolin Name: Robert J. Stetson
Title: Secretary Title: President and Chief
Executive Officer
LIMITED PARTNERS:
QSV PROPERTIES, INC.
ATTEST:
By: /s/ Fred H. Margolin By: /s/ Robert J. Stetson
---------------------- ------------------------
Name: Fred H. Margolin Name: Robert J. Stetson
Title: Secretary Title: President and Chief
Executive Officer
ATTEST:
U.S. RESTAURANT PROPERTIES
MASTER L.P.
By: USRP MANAGING, INC.,
its Managing General Partner
By: /s/ Fred H. Margolin By: /s/ Robert J. Stetson
---------------------- -----------------------
Name: Fred H. Margolin Name: Robert J. Stetson
Title: Secretary Title: President and Chief
Executive Officer
DB973090149
030598 v12
111:17207-2
<PAGE>
EXHIBIT A
PARTNERSHIP INTERESTS
Name and Address Partnership Percentage
of Partner Units Interest
------------------ ------------- ------------
1. U.S. Restaurant Properties, Inc. 12,531,533 90.69%
Master L.P. Class A Units
5310 Harvest Hill Road
Suite 270
Dallas, Texas 75230
2. QSV Properties, Inc. 1,148,418 8.31%
5310 Harvest Hill Road Class B Units
Suite 270
Dallas, Texas 75230
3. USRP Managing, Inc. General Partner 1%
5310 Harvest Hill Road Interest
Suite 270
Dallas, Texas 75230
A-1
<PAGE>
EXHIBIT B
NOTICE OF EXCHANGE
The undersigned Limited Partner hereby irrevocably (i) exchanges
____________ Partnership Units in U.S. Restaurant Properties Operating L.P. in
accordance with the terms of the Third Amended and Restated Agreement of Limited
Partnership of U.S. Restaurant Properties Operating L.P. and the Exchange Right
referred to therein; (ii) surrenders such Partnership Units and all right, title
and interest therein; and (iii) directs that the REIT Stock Amount deliverable
upon exercise of the Exchange Right be delivered to the address specified below,
and that the shares of Common Stock be registered or placed in the name(s)
specified below. The undersigned hereby represents, warrants and certifies that
the undersigned (a) has marketable and unencumbered title to such Partnership
Units, free and clear of the rights or interests of any other person or entity;
(b) has the full right, power and authority to redeem and surrender such
Partnership Units as provided herein; and (c) has obtained the consent or
approval of all person or entities, if any, having the right to consent or
approve such redemption and surrender.
Dated: _____________________
Name of Limited Partner: ____________________________
Please Print
__________________________________________________
(Signature of Limited Partner)
__________________________________________________
(Street Address)
__________________________________________________
(City) (State) (Zip Code)
Signature Guaranteed by:
_________________________________________________
Issue shares of Common Stock to:
Name:_______________________________
Please insert social security of identifying number:______________________
B-1
<PAGE>
EXHIBIT C
CAPITAL CONTRIBUTIONS
Cash Agreed Value of Total
Partners Contributions Contributed Properties Contribution
- -------- ------------- ---------------------- ------------
C-1
<PAGE>
EXHIBIT D
None
D-1
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I CERTAIN DEFINITIONS.............................................2
ARTICLE II FORMATION; NAME; PLACE OF BUSINESS.............................17
2.1. Formation of Partnership; Certificate of Limited Partnership...17
2.2. Name of Partnership............................................18
2.3. Place of Business..............................................18
2.4. Registered Office and Registered Agent.........................18
2.5. Power of Attorney..............................................18
ARTICLE III PURPOSES, NATURE OF BUSINESS,
AND POWERS OF PARTNERSHIP......................................20
3.1. Purposes and Business..........................................20
3.2. Powers.........................................................20
ARTICLE IV TERM OF PARTNERSHIP............................................21
4.1. Term...........................................................21
ARTICLE V CAPITAL........................................................22
5.1. Capital Contributions of the Partners..........................22
5.2. Issuances of Additional Partnership Interests..................22
5.3. Additional Funding.............................................24
5.4. Percentage Interests...........................................25
5.5. Exchange of Units..............................................25
5.6. Minimum Percentage Interest of General Partner.................26
5.7. No Preemptive Rights...........................................26
5.8. Capital Accounts...............................................26
5.9. Percentage Interests...........................................27
5.10. Negative Capital Accounts......................................27
5.11. No Interest on Amounts in Capital Account......................27
5.12. Advances to Partnership........................................28
5.13. Liability of Limited Partner...................................28
5.14. Return of Capital..............................................28
5.15. No Third Party Beneficiary.....................................28
5.16. Employee Benefit Plans.........................................29
ARTICLE VI DISTRIBUTIONS; ALLOCATIONS.....................................30
6.1. Requirement and Characterization of Distributions..............30
6.2. Withholding....................................................31
6.3. Distributions Upon Liquidation.................................32
6.4. Allocations of Profit and Losses...............................33
6.5. Special Allocations............................................35
6.6. Curative Allocations...........................................36
6.7. Loss Limitation................................................36
6.8. Tax Allocations; Code Section 704(c)...........................37
6.9. Company Distribution Requirements..............................37
6.10. No Right to Distributions in Kind..............................37
6.11. Limitations on Return of Capital Contributions.................37
-i-
<PAGE>
TABLE OF CONTENTS
(Continued)
ARTICLE VII MANAGEMENT.....................................................38
7.1. Management and Control of Partnership..........................38
7.2. Powers of Managing General Partner.............................38
7.3. Restrictions on Authority of Managing General Partner..........44
7.4. Title to Partnership Assets....................................45
7.5. Working Capital Reserve........................................45
7.6. Other Business Activities of Partners..........................45
7.7. Transactions with Managing General Partner or Affiliates.......46
7.8. General Partner Participation..................................46
7.10. Liability of General Partners to Partnership and the Limited
Partners...................................................... 46
7.11. Indemnification of General Partners and Affiliates.............47
7.12. No Management by Limited Partners..............................48
7.13. Other Matters Concerning General Partners......................48
7.14. Other Limitations..............................................49
7.15. Miscellaneous..................................................50
ARTICLE VIII ACQUISITION, OPERATION, AND DISPOSITION
OF RESTRICTED RESTAURANT PROPERTIES............................50
8.1. General........................................................50
8.2. Contribution to Partnership; Acquisition of Restricted
Restaurant Properties..........................................51
8.3. Use and Other Restrictions.....................................51
8.4. Restrictions on Transfer of Restricted Restaurant Properties...56
8.5. Rent Relief....................................................59
8.6. Successor Policy...............................................60
8.7. Competitive Facilities.........................................63
8.8. Acquisition of Restricted Restaurant Properties by General
Partners or Affiliates........................................ 63
8.9. Termination of Lease for Restricted Restaurant Property
Following Termination of BKC Franchise Agreement.............. 64
8.10. Independent Consultant.........................................65
8.11. Consent to Use of Name and Trademarks..........................66
8.12. Acquisition of Fee Title to Properties Subject to Primary
Leases........................................................ 67
8.13. Location of Other Restaurant Properties........................67
ARTICLE IX COMPENSATION OF GENERAL PARTNERS;
PAYMENT OF PARTNERSHIP EXPENSES................................67
9.1. Compensation to General Partners...............................67
9.2. Operational Expenses..........................................68
9.3. Reimbursement of the General Partners.........................71
-ii-
<PAGE>
TABLE OF CONTENTS
(Continued)
ARTICLE X BANK ACCOUNTS; BOOKS AND RECORDS;
FISCAL YEAR; STATEMENTS; TAX MATTERS..........................72
10.1. Bank Accounts.................................................72
10.2. Books and Records.............................................72
10.3. Fiscal Year...................................................73
10.4. Financial Statement and Information...........................73
10.5. Accounting Decisions..........................................74
10.6. Where Maintained..............................................75
10.7. Preparation of Tax Returns....................................75
10.8. Tax Elections.................................................75
10.9. Tax Controversies.............................................75
10.10. Organizational Expenses.......................................76
10.11. Taxation as a Partnership.....................................76
10.12. Qualification as a Company....................................76
ARTICLE XI TRANSFER OF INTERESTS.........................................76
11.1. Transfer......................................................76
11.2. Transfers of Interests of General Partners....................76
11.3. Purchase For Investment.......................................78
11.4. Restrictions on Transfer of Limited Partnership Interests.....78
11.5. Admission of Substitute Limited Partner.......................79
11.6. Assignees.....................................................80
11.7. General Provisions............................................81
ARTICLE XII ADMISSION OF PARTNERS.........................................81
12.1. Admission of Substitute Successor General Partners............81
12.2. Admission of Additional Limited Partners......................82
ARTICLE XIII WITHDRAWAL OR REMOVAL OF GENERAL PARTNERS.....................83
13.1. Withdrawal or Removal of General Partners.....................83
13.2. Amendment of Agreement and Certificate of Limited Partnership.84
ARTICLE XIV DISSOLUTION AND LIQUIDATION...................................84
14.1. No Dissolution................................................84
14.2. Events Causing Dissolution....................................84
14.3. Right to Continue Business of Partnership.....................85
14.4. Dissolution...................................................86
14.5. Reasonable Time for Winding Up................................86
14.6. Termination of Partnership....................................86
ARTICLE XV AMENDMENTS....................................................86
15.1. Amendments to be Adopted Solely by the Managing General
Partner.......................................................86
15.2. Amendment Procedures..........................................88
15.3. Amendment Restrictions........................................89
15.4. Meetings of the Partners......................................89
-iii-
<PAGE>
TABLE OF CONTENTS
(Continued)
ARTICLE XVI MISCELLANEOUS PROVISIONS......................................90
16.1. Additional Actions and Documents..............................90
16.2. Notices.......................................................90
16.3. Severability..................................................92
16.4. Survival......................................................92
16.5. Waivers.......................................................92
16.6. Exercise of Rights............................................92
16.7. Binding Effect................................................92
16.8. Limitation on Benefits of this Agreement......................93
16.9. Limitation to Preserve Company Status.........................93
16.10. Force Majeure.................................................94
16.11. Entire Agreement..............................................94
16.12. Pronouns......................................................94
16.13. Headings......................................................94
16.14. Governing Law.................................................95
16.15. Execution in Counterparts.....................................95
ARTICLE XVII EXECUTION.....................................................96
-iv-
==============================================================
REVOLVING CREDIT AGREEMENT
Dated as of January 9, 1998
among
U.S. RESTAURANT PROPERTIES OPERATING L.P.
THE INSTITUTIONS FROM TIME TO TIME
PARTY HERETO AS LENDERS
THE INSTITUTIONS FROM TIME TO TIME
PARTY HERETO AS CO-AGENTS
and
UNION BANK OF SWITZERLAND, NEW YORK BRANCH
AS AGENT
=================================================================
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS.................................1
1.1. Certain Defined Terms...............................................1
1.2. Computation of Time Periods........................................30
1.3. Accounting Terms...................................................30
1.4. Other Terms........................................................30
ARTICLE II
AMOUNTS AND TERMS OF LOANS.........................30
2.1. Loans..............................................................30
2.2. Intentionally Omitted..............................................35
2.3. Use of Proceeds of Loans...........................................35
2.4. Revolving Credit Termination Date..................................35
2.5. Intentionally Omitted..............................................36
2.6. Maximum Credit Facility............................................36
2.7. Authorized Agents..................................................36
2.8. Letters of Credit..................................................36
2.9. Letter of Credit Usage Absolute....................................39
ARTICLE III
RESERVED..................................41
ARTICLE IV
PAYMENTS AND PREPAYMENTS..........................41
4.1. Prepayments; Reductions in Revolving Credit Commitments............41
4.2. Payments...........................................................43
4.3. Promise to Repay; Evidence of Indebtedness.........................47
ARTICLE V
INTEREST AND FEES..............................49
5.1. Interest on the Loans and other Obligations........................49
5.2. Special Provisions Governing Eurodollar Rate Loans.................52
5.3. Fees...............................................................56
ARTICLE VI
CONDITIONS TO LOANS............................57
6.1. Conditions Precedent to the Initial Loans..........................57
i
6.2. Conditions Precedent to All Subsequent Loans.......................59
ARTICLE VII
REPRESENTATIONS AND WARRANTIES.......................61
7.1. Representations and Warranties of the Borrower.....................61
ARTICLE VIII
REPORTING COVENANTS.............................72
8.1. Borrower Accounting Practices......................................73
8.2. Financial Reports..................................................73
8.3. Events of Default..................................................76
8.4. Lawsuits...........................................................77
8.5. Insurance..........................................................77
8.6. ERISA Notices......................................................78
8.7. Environmental Notices..............................................80
8.8. Labor Matters......................................................81
8.9. Notices of Asset Sales and/or Acquisitions.........................81
8.10. Tenant Notifications...............................................81
8.11. Other Reports......................................................82
8.12. Other Information..................................................82
ARTICLE IX
AFFIRMATIVE COVENANTS...........................82
9.1. Existence, Etc. ...................................................82
9.2. Powers; Conduct of Business........................................83
9.3. Compliance with Laws, Etc. ........................................83
9.4. Payment of Taxes and Claims .......................................83
9.5. Insurance..........................................................84
9.6. Inspection of Property; Books and Records; Discussions.............84
9.7. ERISA Compliance...................................................84
9.8. Maintenance of Property............................................84
9.9. Company Status.....................................................85
9.10. Ownership of Property..............................................85
9.11. Consolidation of Certain Nonrecourse Debt..........................85
9.12. Gas Station Subsidiaries...........................................85
ARTICLE X
NEGATIVE COVENANTS.............................86
10.1. Indebtedness......................................................87
10.2. Sales of Assets...................................................87
10.3. Liens.............................................................87
10.4. Investments.......................................................88
10.5. Conduct of Business...............................................89
10.6. Transactions with Partners and Affiliates.........................89
ii
10.7. Restriction on Fundamental Changes............................... 90
10.8. Margin Regulations; Securities Laws...............................90
10.9. ERISA.............................................................90
10.10. Organizational Documents..........................................91
10.11. Fiscal Year.......................................................91
10.12. Other Financial Covenants.........................................91
10.13. Pro Forma Adjustments.............................................93
ARTICLE XI
EVENTS OF DEFAULT; RIGHTS AND REMEDIES....................93
11.1. Events of Default.................................................93
11.2. Rights and Remedies...............................................98
11.3. Actions in Respect of Letters of Credit..........................100
ARTICLE XII
THE AGENTS.................................102
12.1. Appointment......................................................102
12.2. Nature of Duties.................................................103
12.3. Right to Request Instructions....................................103
12.4. Reliance.........................................................104
12.5. Indemnification..................................................104
12.6. Agents Individually..............................................104
12.7. Successor Agents.................................................105
12.8. Relations Among the Lenders......................................106
ARTICLE XIII
YIELD PROTECTION.............................106
13.1. Taxes............................................................106
13.2. Increased Capital................................................109
13.3. Changes; Legal Restrictions......................................109
ARTICLE XIV
RESERVED..................................111
ARTICLE XV
MISCELLANEOUS..............................111
15.1. Assignments and Participations...................................111
15.2. Expenses.........................................................114
15.3. Indemnity........................................................115
15.4. Change in Accounting Principles..................................116
15.5. Setoff...........................................................117
15.6. Ratable Sharing..................................................117
15.7. Amendments and Waivers...........................................118
15.8. Notices..........................................................121
15.9. Survival of Warranties and Agreements............................121
15.11. Marshalling; Payments Set Aside..................................122
15.12. Severability.....................................................122
15.13. Headings.........................................................122
15.14. Governing Law....................................................122
15.15. Limitation of Liability..........................................122
15.16. Successors and Assigns...........................................123
15.17. Certain Consents and Waivers of the Borrower.....................123
15.18. Counterparts; Effectiveness; Inconsistencies.....................125
15.19. Limitation on Agreements.........................................125
15.20. Confidentiality..................................................125
15.21. Disclaimers......................................................126
15.22. No Bankruptcy Proceedings........................................127
15.23. Entire Agreement.................................................127
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT dated as of
January 9, 1998 (as amended, supplemented or modified
from time to time, the "Agreement") is entered into among
U.S. RESTAURANT PROPERTIES OPERATING L.P., a Delaware
limited partnership ("Borrower"), the institutions from
time to time a party hereto as Lenders, whether by execu-
tion of this Agreement or an Assignment and Acceptance,
the institutions from time to time a party hereto as Co-
Agents, whether by execution of this Agreement or an
Assignment and Acceptance, and UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONSIDEFINITIONS
I.1. Certain Defined Terms.1. Certain Defined
Terms. The following terms used in this Agreement shall
have the following meanings, applicable both to the
singular and the plural forms of the terms defined:
"Additional Lender(s)" as defined in Section
2.1(d) hereof.
"Affiliate", as applied to any Person, means
any other Person that directly or indirectly controls, is
controlled by, or is under common control with, that
Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "con-
trolling", "controlled by" and "under common control
with"), as applied to any Person, means the possession,
directly or indirectly, of the power to vote fifteen
percent (15.0%) or more of the equity Securities having
voting power for the election of directors of such Person
or otherwise to direct or cause the direction of the
management and policies of that Person, whether through
the ownership of voting equity Securities or by contract
or otherwise.
"Agent" means each of UBS and each other Lender
who become an Agent in accordance with the terms of this
Agreement.
"Agreement" is defined in the preamble hereto.
"Annual EBITDA" means, with respect to any
Property, other than a Nonrecourse Debt Property, as of
the first day of each fiscal quarter for the immediately
preceding fiscal quarter, annualized, an amount equal to
(i) total revenues relating to such Property for such
period, less (ii) total operating expenses relating to
such Property for such period (it being understood that
the foregoing calculation shall exclude interest, taxes
(other than real estate taxes), depreciation, amortiza-
tion and other non-cash charges as determined in accor-
dance with GAAP and shall be adjusted for non-recurring
items such as sales of Properties (or portions thereof)
or Minority Interests (other than Nonrecourse Debt Prop-
erties) and shall be further adjusted so as to net out
any non-cash revenue attributable to the straight-lining
of rents in accordance with GAAP). Each of the foregoing
amounts shall be determined by reference to each Bor-
rower's Statement of Operations for the applicable peri-
ods. An example of the foregoing calculation is set
forth on Exhibit G hereto.
"Applicable Lending Office" means, with respect
to a particular Lender, (i) its Eurodollar Lending Office
in respect of provisions relating to Eurodollar Rate
Loans, and (ii) its Domestic Lending Office in respect of
provisions relating to Base Rate Loans.
"Applicable Margin" means, with respect to each
Loan, the respective percentages per annum determined, at
any time,
(i) with respect to any period during which the Borrower
is not rated by any Rating Agency, or, if rated, fails to
maintain an Investment Grade Credit Rating, based on the
range into which the Leverage Ratio then falls, in accor-
dance with the following table. Any change in the Appli-
cable Margin under this clause (i) shall be effective as
of the financial reporting dates set forth in Section 8.2
hereof.
Applicable Applicable
Margin for Margin for
Eurodollar Rate Base Rate
Loans Loans
Leverage Ratio (% per annum) (% per annum)
less than 40% 1.05% 0.00%
40%-less than 50% 1.20% 0.00%
50%-60% 1.35% 0.00%; and
(ii) with respect to any period during which the Borrower
maintains an Investment Grade Credit Rating, based on the
range into which Borrower's Credit Rating then falls, in
accordance with the following tables. Any change in the
Applicable Margin under this clause (ii) shall be effective
immediately as of the date on which any of the Rating Agen-
cies announces a change in the Borrower's Credit Rating or
the date on which the Borrower has no Credit Rating, which-
ever is applicable.
The Applicable Margin, from time to time, depending on
Borrower's Credit Rating shall be as follows:
Range of Applicable Applicable
Borrower's Margin for Margin for
Credit Rating Eurodollar Base Rate
S&P/Moody's Loans Loans
Ratings) (% per annum) (% per annum)
BBB-/Baa3 1.05% 0.00%
BBB/Baa2 0.95% 0.00%
BBB+/Baa1 0.85% 0.00%
A-/A3 0.75% 0.00%
If at any time the Borrower has an Investment Grade Credit
Rating by both Moody's and S&P which Credit Ratings are
split, then: (A) if the difference between such Credit Rat-
ings is one ratings category (e.g. Baa2 by Moody's and BBB-
by S&P), the Applicable Margin shall be the rate per annum
that would be applicable if the lower of the Credit Ratings
were used; and (B) if the difference between such Credit
Ratings is two ratings categories (e.g. Baa1 by Moody's and
BBB- by S&P), the Applicable Margin shall be the rate per
annum that would be applicable if the median of the appli-
cable Credit Ratings were used.
"Assignment and Acceptance" means an Assignment
and Acceptance in substantially the form of Exhibit A at-
tached hereto and made a part hereof (with blanks appropri-
ately completed) delivered to the Agent in connection with
an assignment of a Lender's interest under this Agreement in
accordance with the provisions of Section 15.1.
"Authorized Financial Officer" means a chief
executive officer, chief financial officer, treasurer or
other qualified senior officer acceptable to the Agent.
"Base Eurodollar Rate" means, with respect to any
Eurodollar Interest Period applicable to a Borrowing of
Eurodollar Rate Loans, an interest rate per annum determined
by the Agent to be the rate per annum at which deposits in
Dollars are offered by the principal office of the Reference
Bank in London, England to major banks in the London inter-
bank market at approximately 11:00 a.m. (London time) on the
Eurodollar Interest Rate Determination Date for such Euro-
dollar Interest Period for a period equal to such Eurodollar
Interest Period and in an amount substantially equal to the
amount of the Eurodollar Rate Loan.
"Base Rate" means, for any period, a fluctuating
interest rate per annum as shall be in effect from time to
time, which rate per annum shall at all times be equal to
the higher of:
(i) the rate of interest announced publicly by
UBS in New York, New York from time to time, as UBS's
prime rate; and
(ii) the sum of (A) one-half of one percent
(0.50%) per annum plus (B) the Federal Funds Rate in
effect from time to time during such period.
"Base Rate Loan" means (i) a Loan which bears
interest at a rate determined by reference to the Base Rate
and the Applicable Margin as provided in Section 5.1(a) or
(ii) an overdue amount which was a Base Rate Loan immedi-
ately before it became due.
"Borrower" means U.S. Restaurant Properties Oper-
ating L.P., a Delaware limited partnership.
"Borrower Partnership Agreement" means the Agree-
ment of Limited Partnership of the Borrower as such agree-
ment may be amended, restated, modified or supplemented from
time to time with the consent of the Agent or as permitted
under Section 10.10.
"Borrowing" means a borrowing consisting of Loans
of the same type made, continued or converted on the same
day.
"Business Day" means a day, in the applicable
local time, which is not a Saturday or Sunday or a legal
holiday and on which banks are not required or permitted by
law or other governmental action to close (i) in New York,
New York and (ii) in the case of Eurodollar Rate Loans, in
London, England.
"Capital Expenditures" means, for any period, the
aggregate of all expenditures (whether payable in cash or
other Property or accrued as a liability (but without dupli-
cation)) during such period that, in conformity with GAAP,
are required to be included in or reflected by the Bor-
rower's or any of its Subsidiaries' fixed asset accounts as
reflected in any of their respective balance sheets; pro-
vided, however, (i) Capital Expenditures shall include,
whether or not such a designation would be in conformity
with GAAP, (a) that portion of Capital Leases which is
capitalized on the consolidated balance sheet of the Borrow-
er and its Subsidiaries and (b) expenditures for Equipment
which is purchased simultaneously with the trade-in of
existing Equipment owned by the Borrower or any of their
Subsidiaries, to the extent the gross purchase price of the
purchased Equipment exceeds the book value of the Equipment
being traded in at such time; and (ii) Capital Expenditures
shall exclude, whether or not such a designation would be in
conformity with GAAP, expenditures made in connection with
the restoration of Property, to the extent reimbursed or
financed from insurance or condemnation proceeds. Capital
Expenditures shall not include any such expenditures in-
curred in connection with a Nonrecourse Debt Property.
"Capitalization Value" means the sum of (i) the
quotient of (A) the Combined EBITDA for the fiscal quarter
then ended, annualized, divided by (B) 10%, and (ii) Cash
and Cash Equivalents, and (iii) Construction Asset Cost;
provided, however, that for purposes of calculating Capital-
ization Value, Combined EBITDA attributable to leasing
commissions and/or management fees shall not exceed five
percent (5%) of total Combined EBITDA.
"Capital Lease" means any lease of any property
(whether real, personal or mixed) by a Person as lessee
which, in conformity with GAAP, is accounted for as a capi-
tal lease on the balance sheet of that Person.
"Capital Stock" means, with respect to any Person,
any capital stock of such Person, regardless of class or
designation, and all warrants, options, purchase rights,
conversion or exchange rights, voting rights, calls or
claims of any character with respect thereto.
"Cash and Cash Equivalents" means (i) cash, (ii)
marketable direct obligations issued or unconditionally
guaranteed by the United States government and backed by the
full faith and credit of the United States government;
and (iii) domestic and Eurodollar certificates of deposit
and time deposits, bankers' acceptances and floating rate
certificates of deposit issued by any commercial bank orga-
nized under the laws of the United States, any state there-
of, the District of Columbia, any foreign bank, or its
branches or agencies (fully protected against currency
fluctuations), which, at the time of acquisition, are rated
A-1 (or better) by S&P or P-1 (or better) by Moody's; pro-
vided that the maturities of such Cash and Cash Equivalents
shall not exceed one year.
"CERCLA" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C.
9601 et seq., any amendments thereto, any successor
statutes, and any regulations or guidance promulgated there-
under.
"Claim" means any claim or demand, by any Person,
of whatsoever kind or nature for any alleged Liabilities and
Costs, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute,
Permit, ordinance or regulation, common law or otherwise.
"Closing Date" means January , 1998.
"Co-Agents" means the Lenders appointed by the
Agent to be Co-Agents pursuant to Section 2.1(d) hereof, and
"Co-Agent" means any one of the Co-Agents.
"Combined EBITDA" means the sum of (i) 100% of the
Annual EBITDA from the Consolidated Businesses with respect
to Properties wholly-owned by any of the Consolidated Busi-
nesses (other than Nonrecourse Debt Properties); and (ii)
the portion of the Annual EBITDA of the Minority Holdings,
other than Limited Minority Holdings, allocable to the Con-
solidated Businesses in accordance with GAAP.
"Combined Equity Value" means Capitalization Value
minus Total Adjusted Outstanding Indebtedness.
"Combined Interest Expense" means, for any period,
the sum of (i) interest expense of the Consolidated Busi-
nesses paid during such period and (ii) interest expense of
the Consolidated Businesses accrued for such period (other
than interest expense in connection with Nonrecourse Debt
with respect to a Nonrecourse Debt Property) and (iii) the
portion of the interest expense of Minority Holdings, other
than Limited Minority Holdings, allocable to the Borrower in
accordance with GAAP (it being understood that if the appli-
cable Indebtedness shall be recourse to the Borrower in
connection with the Minority Holding Indebtedness, then 100%
of the interest expense shall be allocable to the Borrower)
and paid during such period and (iv) the portion of the
interest expense of Minority Holdings, other than Limited
Minority Holdings, allocable to the Borrower in accordance
with GAAP and accrued for such period, in each case includ-
ing participating interest expense but excluding extraordi-
nary interest expense, and net of amortization of deferred
costs associated with new financings or refinancings of
existing Indebtedness.
"Commission" means the Securities and Exchange
Commission and any Person succeeding to the functions there-
of.
"Compliance Certificate" is defined in Sec-
tion 8.2(b).
"Consolidated" means consolidated in accordance
with GAAP.
"Consolidated Businesses" means the Borrower and
its respective wholly-owned Subsidiaries.
"Construction Asset Cost" means, with respect to
Property on which construction of improvements has commenced
(such commencement evidenced by foundation excavation) but
has not yet been completed (as such completion shall be
evidenced by such Property being fully leased and opened for
business to the general public), the aggregate sums expended
on the construction of such improvements (including land
acquisition costs).
"Contaminant" means any waste, pollutant, hazard-
ous substance, toxic substance, hazardous waste, special
waste, petroleum or petroleum-derived substance or waste,
radioactive materials, asbestos (in any form or condition),
polychlorinated biphenyls (PCBs), or any constituent of any
such substance or waste, and includes, but is not limited
to, these terms as defined in federal, state or local laws
or regulations.
"Contingent Obligation" as to any Person means,
without duplication, (i) any contingent obligation of such
Person required to be shown on such Person's balance sheet
in accordance with GAAP, and (ii) any obligation required to
be disclosed in the footnotes to such Person's financial
statements in accordance with GAAP, guaranteeing partially
or in whole any non-recourse Indebtedness, lease, dividend
or other obligation, exclusive of contractual indemnities
(such contractual indemnities to include, without limita-
tion, any indemnity or price-adjustment provision relating
to the purchase or sale of securities or other assets) and
guarantees of non-monetary obligations (other than guar-
antees of completion) which have not yet been called on or
quantified, of such Person or of any other Person. The
amount of any Contingent Obligation described in clause (ii)
shall be deemed to be (a) with respect to a guaranty of
interest or interest and principal, or operating income
guaranty, the sum of all payments required to be made there-
under (which in the case of an operating income guaranty
shall be deemed to be equal to the debt service for the note
secured thereby), calculated at the interest rate applicable
to such Indebtedness, through (i) in the case of an interest
or interest and principal guaranty, the stated date of
maturity of the obligation (and commencing on the date
interest could first be payable thereunder), or (ii) in the
case of an operating income guaranty, the date through which
such guaranty will remain in effect, and (b) with respect to
all guarantees not covered by the preceding clause (a) an
amount equal to the stated or determinable amount of the
primary obligation in respect of which such guaranty is made
or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such
Person is required to perform thereunder) as recorded on the
balance sheet and on the footnotes to the most recent finan-
cial statements of the applicable Borrower required to be
delivered pursuant hereto. Notwithstanding anything con-
tained herein to the contrary, guarantees of completion
shall not be deemed to be Contingent Obligations unless and
until a claim for payment has been made thereunder, at which
time any such guaranty of completion shall be deemed to be a
Contingent Obligation in an amount equal to any such claim.
Subject to the preceding sentence, (i) in the case of a
joint and several guaranty given by such Person and another
Person (but only to the extent such guaranty is recourse,
directly or indirectly to the applicable Borrower), the
amount of the guaranty shall be deemed to be 100% thereof
unless and only to the extent that (X) such other Person has
delivered Cash or Cash Equivalents to secure all or any part
of such Person's guaranteed obligations or (Y) such other
Person holds an Investment Grade Credit Rating from both
Moody's and S&P, and (ii) in the case of a guaranty, (wheth-
er or not joint and several) of an obligation otherwise
constituting Debt of such Person, the amount of such guaran-
ty shall be deemed to be only that amount in excess of the
amount of the obligation constituting Indebtedness of such
Person. Notwithstanding anything contained herein to the
contrary, "Contingent Obligations" shall not be deemed to
include guarantees of loan commitments or of construction
loans to the extent the same have not been drawn.
"Contractual Obligation", as applied to any Per-
son, means any provision of any Securities issued by that
Person or any indenture, mortgage, deed of trust, security
agreement, pledge agreement, guaranty, contract, undertak-
ing, agreement or instrument to which that Person is a party
or by which it or any of its properties is bound, or to
which it or any of its properties is subject.
"Credit Rating" means the publicly announced
rating of a Person given by Moody's or S&P.
"Cure Loans" is defined in Section 4.2(b)(v)(C).
"Customary Permitted Liens" means
(i) Liens (other than Environmental Liens
and Liens in favor of the PBGC) with respect to
the payment of taxes, assessments or governmental
charges in all cases which are not yet due or
which are being contested in good faith by appro-
priate proceedings in accordance with Section 9.4
and with respect to which adequate reserves or
other appropriate provisions are being maintained
in accordance with GAAP;
(ii) statutory Liens of landlords against any
Property of the Borrower or any of its Subsidiaries and
Liens against any Property of the Borrower or any of
its Subsidiaries in favor of suppliers, mechanics,
carriers, materialmen, warehousemen or workmen and
other Liens against any Property of the Borrower or any
of its Subsidiaries imposed by law created in the
ordinary course of business for amounts which, if not
resolved in favor of the Borrower or such Subsidiary,
could not result in a Material Adverse Effect;
(iii) Liens (other than any Lien in favor of
the PBGC) incurred or deposits made in the ordi-
nary course of business in connection with
worker's compensation, unemployment insurance or
other types of social security benefits or to
secure the performance of bids, tenders, sales,
contracts (other than for the repayment of bor-
rowed money), surety, appeal and performance
bonds; provided that (A) all such Liens do not in
the aggregate materially detract from the value of
the Borrower's or such Subsidiary's assets or
Property or materially impair the use thereof in
the operation of their respective businesses, and
(B) all Liens of attachment or judgment and Liens
securing bonds to stay judgments or in connection
with appeals do not secure at any time an aggre-
gate amount of recourse Indebtedness exceeding
$2,500,000; and
(iv) Liens against any Property of the Bor-
rower or any Subsidiary of the Borrower arising
with respect to zoning restrictions, easements,
licenses, reservations, covenants, rights-of-way,
utility easements, building restrictions and other
similar charges or encumbrances on the use of Real
Property which do not interfere with the ordinary
conduct of the business of the Borrower or any of
its Subsidiaries to the extent it could not result
in a Material Adverse Effect.
"DOL" means the United States Department of Labor
and any Person succeeding to the functions thereof.
"Dollars" and "$" mean the lawful money of the
United States.
"Domestic Lending Office" means, with respect to
any Lender, such Lender's office, located in the United
States, specified as the "Domestic Lending Office" under its
name on the signature pages hereof or on the Assignment and
Acceptance by which it became a Lender or such other United
States office of such Lender as it may from time to time
specify by written notice to the Borrower and the Agent.
"Eligible Assignee" means an assignee reasonably
acceptable to the Borrower and which is (i) a Lender or any
Affiliate thereof; (ii) a commercial bank having total
assets in excess of $2,500,000,000; (iii) the central bank
of any country which is a member of the Organization for
Economic Cooperation and Development; or (iv) a finance com-
pany or other financial institution reasonably acceptable to
the Agent, which is regularly engaged in making, purchasing
or investing in loans and having total assets in excess of
$300,000,000 or is otherwise reasonably acceptable to the
Agent.
"Environmental, Health or Safety Requirements of
Law" means all Requirements of Law derived from or relating
to any federal, state or local law, ordinance, rule, regu-
lation, Permit, license or other binding determination of
any Governmental Authority relating to, imposing liability
or standards concerning, or otherwise addressing the envi-
ronment, health and/or safety, including, but not limited to
the Clean Air Act, the Clean Water Act, CERCLA, RCRA, any
so-called "Superfund" or "Superlien" law, the Toxic Sub-
stances Control Act and OSHA, and public health codes, each
as from time to time in effect.
"Environmental Lien" means a Lien in favor of any
Governmental Authority for any (i) liabilities under any
Environmental, Health or Safety Requirement of Law, or
(ii) damages arising from, or costs incurred by such Govern-
mental Authority in response to, a Release or threatened
Release of a Contaminant into the environment.
"Environmental Property Transfer Act" means any
applicable Requirement of Law that conditions, restricts,
prohibits or requires any notification or disclosure trig-
gered by the transfer, sale, lease or closure of any Proper-
ty or deed or title for any Property for environmental
reasons, including, but not limited to, any so-called "Envi-
ronmental Cleanup Responsibility Act" or "Responsible Prop-
erty Transfer Act".
"Equipment" means equipment used in connection
with the maintenance of Properties.
"ERISA" means the Employee Retirement Income
Security Act of 1974, 29 U.S.C. 1000 et seq., any amend-
ments thereto, any successor statutes, and any regulations
or guidance promulgated thereunder.
"ERISA Affiliate" means (i) any corporation which
is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Internal Reve-
nue Code) as the Borrower; (ii) a partnership or other trade
or business (whether or not incorporated) which is under
common control (within the meaning of Section 414(c) of the
Internal Revenue Code) with the Borrower; and (iii) a member
of the same affiliated service group (within the meaning of
Section 414(m) of the Internal Revenue Code) as the Borrow-
er, any corporation described in clause (i) above or any
partnership or trade or business described in clause (ii)
above.
"ERISA Termination Event" means (i) a Reportable
Event with respect to any Benefit Plan; (ii) the withdrawal
of the Borrower or any ERISA Affiliate from a Benefit Plan
during a plan year in which the Borrower or such ERISA
Affiliate was a "substantial employer" as defined in Section
4001(a)(2) of ERISA or the cessation of operations which
results in the termination of employment of 20% of Benefit
Plan participants who are employees of the Borrower or any
ERISA Affiliate; (iii) the imposition of an obligation on
the Borrower or any ERISA Affiliate under Section 4041 of
ERISA to provide affected parties written notice of intent
to terminate a Benefit Plan in a distress termination de-
scribed in Section 4041(c) of ERISA; (iv) the institution by
the PBGC of proceedings to terminate a Benefit Plan; (v) any
event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or the ap-
pointment of a trustee to administer, any Benefit Plan; or
(vi) the partial or complete withdrawal of the Borrower or
any ERISA Affiliate from a Multiemployer Plan.
"Eurodollar Affiliate" means, with respect to each
Lender, the Affiliate of such Lender (if any) set forth
below such Lender's name under the heading "Eurodollar
Affiliate" on the signature pages hereof or on the Assign-
ment and Acceptance by which it became a Lender or such
Affiliate of a Lender as it may from time to time specify by
written notice to the Borrower and the Agent.
"Eurodollar Interest Period" is defined in Sec-
tion 5.2(b).
"Eurodollar Interest Rate Determination Date" is
defined in Section 5.2(c).
"Eurodollar Lending Office" means, with respect to
any Lender, such Lender's office (if any) specified as the
"Eurodollar Lending Office" under its name on the signature
pages hereof or on the Assignment and Acceptance by which it
became a Lender or such other office or offices of such
Lender as it may from time to time specify by written notice
to the Borrower and the Agent.
"Eurodollar Rate" means, with respect to any
Eurodollar Interest Period applicable to a Eurodollar Rate
Loan, an interest rate per annum obtained by dividing (i)
the Base Eurodollar Rate applicable to that Eurodollar
Interest Period by (ii) a percentage equal to 100% minus the
Eurodollar Reserve Percentage in effect on the relevant
Eurodollar Interest Rate Determination Date.
"Eurodollar Rate Loan" means (i) a Loan which
bears interest at a rate determined by reference to the
Eurodollar Rate and the Applicable Margin for Eurodollar
Rate Loans, as provided in Section 5.1(a) or (ii) an overdue
amount which was a Eurodollar Loan immediately before it
became due.
"Eurodollar Reserve Percentage" means, for any
day, that percentage which is in effect on such day, as
prescribed by the Federal Reserve Board for determining the
maximum reserve requirement (including, without limitation,
any emergency, supplemental or other marginal reserve re-
quirement) for a member bank of the Federal Reserve System
in New York, New York with deposits exceeding five billion
Dollars in respect of "Eurocurrency Liabilities" (or in
respect of any other category of liabilities which includes
deposits by reference to which the interest rate on Eurodol-
lar Rate Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-
United States office of any bank to United States resi-
dents).
"Event of Default" means any of the occurrences
set forth in Section 11.1 after the expiration of any appli-
cable grace period and the giving of any applicable notice,
in each case as expressly provided in Section 11.1.
"Federal Funds Rate" means, for any period, a
fluctuating interest rate per annum equal for each day
during such period to the weighted average of the rates on
overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business
Day in New York, New York, for the next preceding Business
Day) in New York, New York by the Federal Reserve Bank of
New York, or if such rate is not so published for any day
which is a Business Day in New York, New York, the average
of the quotations for such day on transactions by the Refer-
ence Bank, as determined by the Agent.
"Federal Reserve Board" means the Board of Gover-
nors of the Federal Reserve System or any Governmental
Authority succeeding to its functions.
"Financial Statements" means (i) quarterly and
annual consolidated statements of income and retained earn-
ings, statements of cash flow, and balance sheets, (ii) such
other financial statements as the Borrower shall routinely
and regularly prepare on a quarterly or annual basis, and
(iii) such other financial statements of the Consolidated
Businesses or Minority Holdings as the Agent or the Requi-
site Lenders may from time to time reasonably specify;
provided, however, that the Financial Statements referenced
in clauses (i) and (ii) above shall be prepared in form
reasonably satisfactory to the Agent.
"Fiscal Year" means the fiscal year of the Borrow-
er for accounting and tax purposes, which shall be the 12-
month period ending on December 31 of each calendar year.
"Fixed Charges Expense" means, with respect to any
period, the sum of (i) Combined Interest Expense for such
period, (ii) scheduled payments of principal due with re-
spect to Indebtedness for such period (other than Nonre-
course Debt with respect to Nonrecourse Debt Properties),
(iii) payments of base rent (but not percentage rent, addi-
tional rent or other sums which may be due) under any ground
lease or Capital Lease of the Borrower or any of its Consol-
idated Businesses for such period and (iv) the amount of
dividends actually paid by General Partner with respect to
its preferred stock for such period.
"Fronting Bank" means Union Bank of Switzerland,
New York Branch.
"Funding Date" means, with respect to any Loan,
the date of funding of such Loan.
"GAAP" means generally accepted accounting princi-
ples set forth in the opinions and pronouncements of the
American Institute of Certified Public Accountants' Account-
ing Principles Board and Financial Accounting Standards
Board or in such other statements by such other entity as
may be in general use by significant segments of the ac-
counting profession as in effect on the Closing Date (unless
otherwise specified herein as in effect on another date or
dates).
"Gas Station Subsidiary" means an Affiliate of the
Borrower that shall invest solely in gas stations and re-
lated convenience store, and that shall satisfy the pub-
lished criteria of S&P for a "bankruptcy-remote, single
purpose entity" as well as the other provisions of this
Agreement with respect thereto. In no event shall any one
Gas Station Subsidiary own more than five (5) Properties.
"General Partner" means USRP Managing Inc., a
Delaware corporation.
"Governmental Approval" means all right, title
and interest in any existing or future certificates, licens-
es, permits, variances, authorizations and approvals issued
by any Governmental Authority having jurisdiction with
respect to any Property.
"Governmental Authority" means any nation or
government, any federal, state, local or other political
subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative func-
tions of or pertaining to government.
"Guaranties" means collectively, the Guaranty of
Payment, dated as of the date hereof, by the General Part-
ner, for the benefit of the Agent, and the Guaranty of
Payment, dated as of the date hereof, by the Guarantor, for
the benefit of the Agent.
"Guarantor" means U.S. Restaurant Properties,
Inc., a Maryland corporation, the sole owner of the General
Partner.
"Holder" means any Person entitled to enforce any
of the Obligations, whether or not such Person holds any
evidence of Indebtedness, including, without limitation, the
Agent and each other Lender.
"Improvements" means all buildings, fixtures,
structures, parking areas, landscaping and all other im-
provements whether existing now or hereafter constructed,
together with all machinery and mechanical, electrical, HVAC
and plumbing systems presently located thereon and used in
the operation thereof, excluding (a) any such items owned by
utility service providers, (b) any such items owned by
tenants or other third-parties unaffiliated with the Borrow-
er and (c) any items of personal property.
"Indebtedness", as applied to any Person, means,
at any time, without duplication, (a) all indebtedness,
obligations or other liabilities of such Person (whether
consolidated or representing the proportionate interest in
any other Person) (i) for borrowed money (including con-
struction loans) or evidenced by debt securities, deben-
tures, acceptances, notes or other similar instruments, and
any accrued interest, fees and charges relating thereto,
(ii) under profit payment agreements or in respect of obli-
gations to redeem, repurchase or exchange any Securities of
such Person or to pay dividends in respect of any stock,
(iii) with respect to letters of credit issued for such
Person's account, (iv) to pay the deferred purchase price of
property or services, except accounts payable and accrued
expenses arising in the ordinary course of business, (v) in
respect of Capital Leases, (vi) which are Contingent Obliga-
tions or (vii) under warranties and indemnities; (b) all
indebtedness, obligations or other liabilities of such
Person or others secured by a Lien on any property of such
Person, whether or not such indebtedness, obligations or
liabilities are assumed by such Person, all as of such time;
(c) all indebtedness, obligations or other liabilities of
such Person in respect of interest rate contracts and for-
eign exchange contracts, net of liabilities owed to such
Person by the counterparties thereon; (d) all preferred
stock subject (upon the occurrence of any contingency or
otherwise) to mandatory redemption; and (e) all contingent
Contractual Obligations with respect to any of the forego-
ing. Notwithstanding the foregoing, Indebtedness shall not
include Nonrecourse Debt with respect to Nonrecourse Debt
Properties.
"Indemnified Matters" is defined in Section 15.3.
"Indemnitees" is defined in Section 15.3.
"Initial Funding Date" means the date on or after
January , 1998, on which all of the conditions described in
Section 6.1 have been satisfied (or waived) in a manner
satisfactory to the Agent and the Lenders and on which the
initial Loans under this Agreement are made by the Lenders
to the Borrower.
"Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended to the date hereof and from time to
time hereafter, any successor statute and any regulations or
guidance promulgated thereunder.
"Investment" means, with respect to any Person,
(i) any purchase or other acquisition by that Person of
Securities, or of a beneficial interest in Securities,
issued by any other Person, (ii) any purchase by that Person
of all or substantially all of the assets of a business
conducted by another Person, and (iii) any loan, advance
(other than deposits with financial institutions available
for withdrawal on demand, prepaid expenses, accounts receiv-
able, advances to employees and similar items made or in-
curred in the ordinary course of business) or capital con-
tribution by that Person to any other Person, including all
Indebtedness to such Person arising from a sale of property
by such Person other than in the ordinary course of its
business. The amount of any Investment shall be the origi-
nal cost of such Investment, plus the cost of all additions
thereto less the amount of any return of capital or princi-
pal to the extent such return is in cash with respect to
such Investment without any adjustments for increases or
decreases in value or write-ups, write-downs or write-offs
with respect to such Investment.
"Investment Grade" means (i) with respect to
Moody's a Credit Rating of Baa3 or higher and (ii) with
respect to S&P, a Credit Rating of BBB- or higher.
"IRS" means the Internal Revenue Service and any
Person succeeding to the functions thereof.
"knowledge" with reference to the Borrower or any
Subsidiary of the Borrower, means the actual knowledge of
such Person after reasonable inquiry (which reasonable
inquiry shall include, without limitation, interviewing and
questioning such other Persons as the Borrower or such
Subsidiary of the Borrower, as applicable, deems reasonably
necessary).
"Lease" means a lease, license, concession agree-
ment or other agreement providing for the use or occupancy
of any portion of any Property, including all amendments,
supplements, modifications and assignments thereof and all
side letters or side agreements relating thereto.
"Lender" means each of Agent and each financial
institution a signatory hereto as a Lender as of the Closing
Date and, at any other given time, each financial institu-
tion which is a party hereto as a Co-Agent or Lender, wheth-
er as a signatory hereto or pursuant to an Assignment and
Acceptance, and regardless of the capacity in which such
entity is acting (i.e. whether as Agent, Co-Agent or Lend-
er).
"Letters of Credit" has the meaning provided in
Section 2.1(c).
"Letter of Credit Collateral" has the meaning
provided in Section 11.3.
"Letter of Credit Collateral Account" has the
meaning provided in Section 11.3.
"Letter of Credit Documents" has the meaning pro-
vided in Section 2.7.
"Letter of Credit Usage" means at any time the sum
of (i) the aggregate maximum amount available to be drawn
under the Letter of Credit then outstanding, assuming com-
pliance with all requirements for drawing referred to
therein, and (ii) the aggregate amount of the Borrower's
unpaid obligations under this Agreement in respect of the
Letter of Credit.
"Leverage Ratio" means the ratio, expressed as a
percentage, of the Total Adjusted Outstanding Indebtedness
to the Capitalization Value.
"Liabilities and Costs" means all liabilities,
obligations, responsibilities, losses, damages, personal
injury, death, punitive damages, economic damages, conse-
quential damages, treble damages, intentional, willful or
wanton injury, damage or threat to the environment, natural
resources or public health or welfare, costs and expenses
(including, without limitation, attorney, expert and con-
sulting fees and costs of investigation, feasibility or
Remedial Action studies), fines, penalties and monetary
sanctions, interest, direct or indirect, known or unknown,
absolute or contingent, past, present or future.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, conditional sale agreement,
deposit arrangement, security interest, encumbrance, lien
(statutory or other and including, without limitation, any
Environmental Lien), preference, priority or other security
agreement or preferential arrangement of any kind or nature
whatsoever in respect of any property of a Person, whether
granted voluntarily or imposed by law, and includes the
interest of a lessor under a Capital Lease or under any
financing lease having substantially the same economic
effect as any of the foregoing and the filing of any financ-
ing statement or similar notice (other than a financing
statement filed by a "true" lessor pursuant to 9-408 of
the Uniform Commercial Code), naming the owner of such
property as debtor, under the Uniform Commercial Code or
other comparable law of any jurisdiction.
"Limited Minority Holdings" means Minority Hold-
ings in which (i) the Borrower has a less than fifty percent
(50%) beneficial ownership interest or (ii) the Borrower or
a Consolidated Subsidiary does not control the management of
such Minority Holdings, whether as the general partner or
managing member of such Minority Holding, or otherwise. As
used in this definition only, the term "control" shall mean
the authority to make unilaterally major management deci-
sions, in addition to the management of day-to-day opera-
tions of such entity and shall include instances in which
the Borrower manages the day-to-day leasing, management,
control or development of the Properties of such Minority
Interest pursuant to the terms of a management agreement.
"Limited Partners" means those Persons who from
time to time are limited partners of the Borrower; and
"Limited Partner" means each of the Limited Partners, indi-
vidually.
"Loan" means a loan made by a Lender pursuant to
Section 2.1; provided, that if any such loan or loans (or
portions thereof) are combined or subdivided pursuant to a
Notice of Conversion/Continuation, the term "Loan" shall
refer to the combined principal amount resulting from such
combination or to each of the separate principal amounts
resulting from such subdivision, as the case may be.
"Loan Account" is defined in Section 4.3(b).
"Loan Documents" means this Agreement, the Notes,
the Letters of Credit, the Letter of Credit Documents and
all other instruments, agreements and written Contractual
Obligations between the Borrower and any of the Lenders
pursuant to or in connection with the transactions contem-
plated hereby.
"Margin Stock" means "margin stock" as such term
is defined in Regulation U and Regulation G.
"Material Adverse Effect" means a material adverse
effect upon (i) the financial condition or assets of the
Borrower and its Subsidiaries taken as a whole, (ii) the
ability of the Borrower to perform its obligations under the
Loan Documents, or (iii) the ability of the Lenders or the
Agent to enforce any of the Loan Documents.
"Maximum Revolving Credit Amount" means, at any
particular time, the Revolving Credit Commitments at such
time.
"Minority Holdings" means partnerships, joint
ventures, corporations and other entities held or owned by
the Borrower or Subsidiaries which are not directly or
indirectly wholly-owned by the Borrower.
"Moody's" means Moody's Investor Services, Inc.
"Mortgage Subsidiary" means an Affiliate of the
Borrower that shall invest solely in mortgages on real and
personal properties of unaffiliated third-parties, and that
shall satisfy the published criteria of S&P for a "bankrupt-
cy-remote, single purpose entity".
"Multiemployer Plan" means a "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA which is, or
within the immediately preceding six (6) years was, contrib-
uted to by either the Borrower or any ERISA Affiliate or in
respect of which the Borrower or any ERISA Affiliate has
assumed any liability.
"Non Pro Rata Loan" is defined in Section 4.2
(b)(v).
"Nonrecourse Debt" means Indebtedness as to which
the lender's recourse is limited to either (x) the property
securing such Indebtedness (subject to customary carve-outs
for fraud, misapplication of funds, etc.), or (y) the assets
of any Subsidiary which is the owner of the property secur-
ing such Indebtedness but is not recourse to the Borrower,
the General Partner or the Guarantor (provided that the
Borrower, the General Partner and the Guarantor may pledge,
on a nonrecourse basis, their interests in any such Subsid-
iary).
"Nonrecourse Debt Properties" means Properties
acquired by the Borrower or its Subsidiaries from and after
the date hereof which are subject to Nonrecourse Debt.
"Note" means a promissory note in the form at-
tached hereto as Exhibit B payable to a Lender, evidencing
certain of the Obligations of and executed by the Borrower
as required by Section 4.3(a), as the same may be amended,
supplemented, modified or restated from time to time, to-
gether with the Designated Bank Notes; "Notes" means, col-
lectively, all of such Notes outstanding at any given time.
"Notice of Borrowing" means a notice substantially
in the form of Exhibit C attached hereto and made a part
hereof.
"Notice of Conversion/Continuation" means a notice
substantially in the form of Exhibit D attached hereto and
made a part hereof with respect to a proposed conversion or
continuation of a Loan pursuant to Section 5.1(c).
"Obligations" means all Loans, Letter of Credit
Usage, advances, debts, liabilities, obligations, covenants
and duties owing by the Borrower to the Agent, any other
Lender, any Affiliate of the Agent, any other Lender, or any
Person entitled to indemnification pursuant to Section 15.3
of this Agreement, of any kind or nature, arising under this
Agreement, the Notes or any other Loan Document. The term
includes, without limitation, all interest, charges, expens-
es, fees, reasonable attorneys' fees and disbursements and
any other sum chargeable to the Borrower under this Agree-
ment or any other Loan Document.
"Offering Memorandum" as defined in Section 2.1(d)
hereof.
"Officer's Certificate" means, as to a corpora-
tion, a certificate executed on behalf of such corporation
by the chairman of its board of directors (if an officer of
such corporation) or its chief executive officer, president,
any of its vice-presidents, its chief financial officer, or
its treasurer and, as to a partnership, a certificate exe-
cuted on behalf of such partnership by the chairman of the
board of directors (if an officer of such corporation) or
chief executive officer, president, any vice-president, or
treasurer of the general partner of such partnership.
"Organizational Documents" means, with respect to
any corporation, limited liability company, or partnership
(i) the articles/certificate of incorporation, formation or
limited partnership (or the equivalent organizational docu-
ments) of such corporation or limited liability company or
limited partnership, (ii) the partnership agreement executed
by the partners in the partnership, (iii) the by-laws (or
the equivalent governing documents) of the corporation,
limited liability company or partnership, and (iv) any
document setting forth the designation, amount and/or rela-
tive rights, limitations and preferences of any class or
series of such corporation's Capital Stock or such limited
liability company's or partnership's equity or ownership
interests.
"OSHA" means the Occupational Safety and Health
Act of 1970, 29 U.S.C. 651 et seq., any amendments there-
to, any successor statutes and any regulations or guidance
promulgated thereunder.
"PBGC" means the Pension Benefit Guaranty Corpora-
tion and any Person succeeding to the functions thereof.
"Permits" means any permit, consent, approval,
authorization, license, variance, or permission required
from any Person, including any Governmental Approvals.
"Person" means any natural person, corporation,
limited liability company, limited partnership, general
partnership, joint stock company, joint venture, associa-
tion, company, trust, bank, trust company, land trust,
business trust or other organization, whether or not a legal
entity, and any Governmental Authority.
"Plan" means an employee benefit plan defined in
Section 3(3) of ERISA in respect of which the Borrower or
any ERISA Affiliate is, or within the immediately preceding
six (6) years was, an "employer" as defined in Section 3(5)
of ERISA or the Borrower or any ERISA Affiliate has assumed
any liability.
"Potential Event of Default" means an event which,
with the giving of notice or the lapse of time, or both,
would constitute an Event of Default.
"Prepayment Date" is defined in Section 4.1(d).
"Process Agent" is defined in Section 15.17(a).
"Property" means any Real Property or personal
property, plant, building, facility, structure, underground
storage tank or unit, equipment, general intangible, receiv-
able, or other asset owned, leased or operated by any Con-
solidated Business or any Minority Holding (including any
surface water thereon or adjacent thereto, and soil and
groundwater thereunder).
"Pro Rata Share" means, with respect to any Lend-
er, the percentage obtained by dividing (i) the sum of such
Lender's Revolving Credit Commitment (in each case, as
adjusted from time to time in accordance with the provisions
of this Agreement or any Assignment and Acceptance to which
such Lender is a party) by (ii) the aggregate amount of all
of the Revolving Credit Commitments.
"RCRA" means the Resource Conservation and Recov-
ery Act of 1976, 42 U.S.C. 6901 et seq., any amendments
thereto, any successor statutes, and any regulations or
guidance promulgated thereunder.
"Real Property" means all of the Borrower's pres-
ent and future right, title and interest (including, without
limitation, any leasehold estate) in (i) any plots, pieces
or parcels of land, (ii) any Improvements of every nature
whatsoever (the rights and interests described in clauses
(i) and (ii) above being the "Premises"), (iii) all ease-
ments, rights of way, gores of land or any lands occupied by
streets, ways, alleys, passages, sewer rights, water cours-
es, water rights and powers, and public places adjoining
such land, and any other interests in property constituting
appurtenances to the Premises, or which hereafter shall in
any way belong, relate or be appurtenant thereto, (iv) all
hereditaments, gas, oil, minerals (with the right to ex-
tract, sever and remove such gas, oil and minerals), and
easements, of every nature whatsoever, located in, on or
benefitting the Premises and (v) all other rights and privi-
leges thereunto belonging or appertaining and all exten-
sions, additions, improvements, betterments, renewals,
substitutions and replacements to or of any of the rights
and interests described in clauses (iii) and (iv) above.
"Reference Bank" means UBS.
"Register" is defined in Section 15.1(c).
"Regulation A" means Regulation A of the Federal
Reserve Board as in effect from time to time.
"Regulation G" means Regulation G of the Federal
Reserve Board as in effect from time to time.
"Regulation T" means Regulation T of the Federal
Reserve Board as in effect from time to time.
"Regulation U" means Regulation U of the Federal
Reserve Board as in effect from time to time.
"Regulation X" means Regulation X of the Federal
Reserve Board as in effect from time to time.
"REIT" means a domestic trust or corporation that
qualifies as a real estate investment trust under the provi-
sions of Sections 856, et seq. of the Internal Revenue Code.
"Release" means any release, spill, emission,
leaking, pumping, pouring, dumping, injection, deposit,
disposal, abandonment, or discarding of barrels, containers
or other receptacles, discharge, emptying, escape, dispers-
al, leaching or migration into the indoor or outdoor envi-
ronment or into or out of any Property, including the move-
ment of Contaminants through or in the air, soil, surface
water, groundwater or Property.
"Remedial Action" means actions required to
(i) clean up, remove, treat or in any other way address Con-
taminants in the indoor or outdoor environment; (ii) prevent
the Release or threat of Release or minimize the further
Release of Contaminants; or (iii) investigate and determine
if a remedial response is needed and to design such a re-
sponse and post-remedial investigation, monitoring, opera-
tion and maintenance and care.
"Reportable Event" means any of the events de-
scribed in Section 4043(b) of ERISA and the regulations
promulgated thereunder as in effect from time to time but
not including any such event as to which the thirty (30) day
notice requirement has been waived by applicable PBGC regu-
lations.
"Requirements of Law" means, as to any Person, the
charter and by-laws or other organizational or governing
documents of such Person, and any law, rule or regulation,
or determination of an arbitrator or a court or other Gov-
ernmental Authority, in each case applicable to or binding
upon such Person or any of its property or to which such
Person or any of its property is subject including, without
limitation, the Securities Act, the Securities Exchange Act,
Regulations G, T, U and X, ERISA, the Fair Labor Standards
Act, the Worker Adjustment and Retraining Notification Act,
Americans with Disabilities Act of 1990, and any certificate
of occupancy, zoning ordinance, building, environmental or
land use requirement or Permit and Environmental, Health or
Safety Requirement of Law.
"Requisite Lenders" means Lenders whose Pro Rata
Shares, in the aggregate, are greater than sixty-six and
sixty-six one hundredths percent (66.66%); provided, howev-
er, that, in the event any of the Lenders shall have failed
to fund its Pro Rata Share of any Loan requested by the
Borrower which such Lenders are obligated to fund under the
terms of this Agreement and any such failure has not been
cured as provided in Section 4.2(b)(v)(B), then for so long
as such failure continues, "Requisite Lenders" means Lenders
(excluding all Lenders whose failure to fund their respec-
tive Pro Rata Shares of such Loans have not been so cured)
whose Pro Rata Shares represent more than sixty-six and
sixty-six one hundredths percent (66.66%) of the aggregate
Pro Rata Shares of such Lenders; provided, further, however,
that, in the event that the Revolving Credit Commitments
have been terminated pursuant to the terms of this Agree-
ment, "Requisite Lenders" means Lenders (without regard to
such Lenders' performance of their respective obligations
hereunder) whose aggregate ratable shares (stated as a
percentage) of the aggregate outstanding principal balance
of all Loans are greater than sixty-six and sixty-six one
hundredths percent (66.66%).
"Revolving Credit Availability" means, at any
particular time, the amount by which the Maximum Revolving
Credit Amount at such time exceeds the Revolving Credit
Obligations at such time.
"Revolving Credit Commitment" means, with respect
to any Lender, the obligation of such Lender to make Loans
pursuant to the terms and conditions of this Agreement, and
which shall not exceed the principal amount set forth oppo-
site such Lender's name under the heading "Revolving Credit
Commitment" on the signature pages hereof or the signature
page of the Assignment and Acceptance by which it became a
Lender, as modified from time to time pursuant to the terms
of this Agreement or to give effect to any applicable As-
signment and Acceptance, and "Revolving Credit Commitments"
means the aggregate principal amount of the Revolving Credit
Commitments of all the Lenders, the maximum amount of which
shall be $175,000,000, as reduced from time to time pursuant
to Section 4.1.
"Revolving Credit Obligations" means, at any par-
ticular time, the outstanding principal amount of the Loans
at such time.
"Revolving Credit Period" means the period from
the Initial Funding Date to the Business Day next preceding
the Revolving Credit Termination Date.
"Revolving Credit Termination Date" means the
earlier to occur of (i) January , 2001 (or, if not a Busi-
ness Day, the next preceding Business Day); and (ii) the
date of termination of the Revolving Credit Commitments
pursuant to the terms of this Agreement.
"S&P" means Standard & Poor's Ratings Services, a
Division of The McGraw-Hill Companies, Inc.
"Secured Indebtedness" means any Indebtedness se-
cured by a Lien.
"Securities" means any stock, shares, voting trust
certificates, partnership interests, bonds, debentures,
notes or other evidences of indebtedness, secured or unse-
cured, convertible, subordinated or otherwise, or in general
any instruments commonly known as "securities", including,
without limitation, any "security" as such term is defined
in Section 8-102 of the Uniform Commercial Code, or any
certificates of interest, shares, or participations in
temporary or interim certificates for the purchase or acqui-
sition of, or any right to subscribe to, purchase or acquire
any of the foregoing, but shall not include the Notes or any
other evidence of the Obligations.
"Securities Act" means the Securities Act of 1933,
as amended from time to time, and any successor statute.
"Securities Exchange Act" means the Securities
Exchange Act of 1934, as amended from time to time, and any
successor statute.
"Solvent", when used with respect to any Person,
means that at the time of determination:
(i) the fair saleable value of its assets is
in excess of the total amount of its liabilities
(including, without limitation, Contingent Liabil-
ities); and
(ii) the present fair saleable value of its
assets is greater than its probable liability on
its existing debts as such debts become absolute
and matured; and
(iii) it is then able and expects to be able to pay
its debts (including, without limitation, Contingent
Liabilities and other commitments) as they mature; and
(iv) it has capital sufficient to carry on its
business as conducted and as proposed to be conducted.
"Subsidiary" of a Person means any corporation,
limited liability company, general or limited partnership,
or other entity of which securities or other ownership
interests having ordinary voting power to elect a majority
of the board of directors or other persons performing simi-
lar functions are at the time directly or indirectly owned
or controlled by such Person, one or more of the other
subsidiaries of such Person or any combination thereof.
"Syndication" as defined in Section 2.1(d) hereof.
"Taxes" as defined in Section 13.1(a) hereof.
"Term Note Agreement" means the Note Purchase
Agreement, dated as of January 31, 1997, among U.S. Restau-
rant Properties Operating L.P., Pacific Mutual Life Insur-
ance Company, The Ohio National Life Insurance Company,
Reliastar Life Insurance Company, Northern Life Insurance
Company, Reliastar Bankers Security Life Insurance Company,
Reliastar United Services Life Insurance Company, and Alex-
ander Hamilton Life Insurance Company of America, with
respect to the issuance of $40,000,000 principal amount of
notes.
"Total Adjusted Outstanding Indebtedness" means,
for any period, the sum of (i) the amount of Indebtedness of
the Borrower and the Consolidated Businesses which is not
Nonrecourse Debt, set forth on the then most recent quarter-
ly financial statements of the Borrower, (ii) the outstand-
ing amount of Minority Holding Indebtedness which is not
Nonrecourse Debt as of the time of determination, and (iii)
without duplication, Contingent Obligations, which are
recourse obligations, of the Borrower, including those of
Minority Holdings.
"Total Unsecured Outstanding Indebtedness" means
that portion of Total Adjusted Outstanding Indebtedness that
is Unsecured Indebtedness.
"UBS" means Union Bank of Switzerland, New York
Branch.
"Unencumbered Combined EBITDA" means that portion
of Combined EBITDA which represents revenues earned from
Real Property that is not subject to or encumbered by Se-
cured Indebtedness and is not subject to any agreements
other than this Agreement and the Term Note Agreement, the
effect of which would be to restrict, directly or indirect-
ly, the ability of the owner of such Property from granting
Liens thereon, calculated on the first day of each fiscal
quarter for the immediately preceding fiscal quarter, annu-
alized.
"Uniform Commercial Code" means the Uniform Com-
mercial Code as enacted in the State of New York, as it may
be amended from time to time.
"Unsecured Indebtedness" means Indebtedness which
is not Secured Indebtedness, as well as Indebtedness in
connection with the Term Note Agreement.
"Unsecured Interest Expense" means the portion of
the Combined Interest Expense attributable to Total Unse-
cured Outstanding Indebtedness.
"Unused Commitment" shall mean the amount, calcu-
lated daily, by which the Revolving Credit Commitments
exceed the sum of the outstanding principal amount of the
Loans and the Letter of Credit Usage.
"Unused Commitment Fee" is defined in Section 5.3
(b).
"Unused Commitment Fee Percentage" means the
applicable percentage per annum determined, at any time,
based on the range into which the Leverage Ratio then falls,
in accordance with the following table. Any change in the
Unused Commitment Fee Percentage shall be effective as of
the financial reporting dates set forth in Section 8.2
hereof.
Commitment Fee
Percentage
Leverage Ratio (% per annum)
less than 40% 0.25%
40%-less than 50% 0.25%
50%-60% 0.25%
I.2. Computation of Time Periods. In this Agree-
ment, in the computation of periods of time from a specified
date to a later specified date, the word "from" means "from
and including" and the words "to" and "until" each mean "to
but excluding". Periods of days referred to in this Agree-
ment shall be counted in calendar days unless Business Days
are expressly prescribed. Any period determined hereunder
by reference to a month or months or year or years shall end
on the day in the relevant calendar month in the relevant
year, if applicable, immediately preceding the date numeri-
cally corresponding to the first day of such period, provid-
ed, that if such period commences on the last day of a
calendar month (or on a day for which there is no numerical-
ly corresponding day in the calendar month during which such
period is to end), such period shall, unless otherwise
expressly required by the other provisions of this Agree-
ment, end on the last day of the calendar month.
I.3. Accounting Terms. Subject to Section 15.4,
for purposes of this Agreement, all accounting terms not
otherwise defined herein shall have the meanings assigned to
them in conformity with GAAP.
I.4. Other Terms. All other terms contained in
this Agreement shall, unless the context indicates other-
wise, have the meanings assigned to such terms by the Uni-
form Commercial Code to the extent the same are defined
therein.
ARTICLE II
AMOUNTS AND TERMS OF LOANS
II.1. Loans.
(a) Availability. Subject to the terms and
conditions set forth in this Agreement, each Lender hereby
severally and not jointly agrees to make revolving loans, in
Dollars (each individually, a "Loan" and, collectively, the
"Loans") to the Borrower from time to time during the Re-
volving Credit Period, and participate in the Letters of
Credit issued by the fronting Bank on behalf of the Bor-
rower, in an amount not to exceed such Lender's Pro Rata
Share of the Revolving Credit Availability at such time.
All Loans comprising the same Borrowing under this Agreement
shall be made by the Lenders simultaneously and proportion-
ately to their then respective Pro Rata Shares, it being
understood that no Lender shall be responsible for any
failure by any other Lender to perform its obligation to
make a Loan hereunder nor shall the Revolving Credit Commit-
ment of any Lender be increased or decreased as a result of
any such failure. Subject to the provisions of this Agree-
ment, the Borrower may repay any outstanding Loan on any day
which is a Business Day and any amounts so repaid may be
reborrowed, up to the amount available under this Section
2.1(a) at the time of such Borrowing, until the Business Day
next preceding the Revolving Credit Termination Date. Each
requested Borrowing of Loans funded on any Funding Date
shall be in a principal amount of at least $1,000,000 and in
integral multiples of $1,000,000 in excess of that amount;
provided, however, that if the aggregate Revolving Credit
Commitments outstanding at the time of such requested Bor-
rowing is less than $1,000,000, then the requested Borrowing
shall be for the total amount of such outstanding aggregate
Revolving Credit Commitments.
(b) Notice of Borrowing. When the Borrower de-
sires to borrow under this Section 2.1, it shall deliver to
the Agent a Notice of Borrowing, signed by it (i) no later
than 12:00 noon (New York time) on the Business Day immedi-
ately preceding the proposed Funding Date, in the case of a
Borrowing of Base Rate Loans and (ii) no later than 11:00
a.m. (New York time) at least three (3) Business Days in ad-
vance of the proposed Funding Date, in the case of a Borrow-
ing of Eurodollar Rate Loans; provided, however, that no
Borrowing may be made within less than five (5) Business
Days after any given Borrowing. Such Notice of Borrowing
shall specify (i) the proposed Funding Date (which shall be
a Business Day), (ii) the amount of the proposed Borrowing,
(iii) the Revolving Credit Availability as of the date of
such Notice of Borrowing, (iv) whether the proposed Borrow-
ing will be of Base Rate Loans or Eurodollar Rate Loans, (v)
in the case of Eurodollar Rate Loans, the requested Eurodol-
lar Interest Period, (vi) instructions for the disbursement
of the proceeds of the proposed Borrowing and (vii) the
purposes to which the proceeds of the proposed Borrowing
will be applied. In lieu of delivering such a Notice of
Borrowing (except with respect to a Borrowing of Loans on
the Initial Funding Date), the Borrower may give the Agent
telephonic notice of any proposed Borrowing by the time
required under this Section 2.1(b), if the Borrower confirms
such notice by delivery of the Notice of Borrowing to the
Agent by facsimile transmission promptly, but in no event
later than 3:00 p.m. (New York time) on the same day. Any
Notice of Borrowing (or telephonic notice in lieu thereof)
given pursuant to this Section 2.1(b) shall be irrevocable.
(c) Letter of Credit. Borrower shall
give the Agent and the Fronting Bank written notice in the
event that it desires to have Letters of Credit ("Letter of
Credit") issued hereunder, no later than 10:00 a.m., New
York City time, at least four (4) Domestic Business Days
prior to the date of such issuance. Each such notice shall
specify (i) the amount of such Letter of Credit, (ii) date
of such issuance (which shall be a Domestic Business Day),
(iii) the name and address of the beneficiary, (iv) the
expiration date of the Letter of Credit (which in no event
shall be later than twelve (12) months after the issuance of
such Letter of Credit or the Maturity Date, whichever is
earlier), (v) the purpose and circumstances for which the
Letter of Credit is being issued, and (vi) the terms upon
which the Letter of Credit may be drawn down (which terms
shall not leave any discretion to Fronting Bank). Such
notice may be revoked telephonically by the Borrower to the
Fronting Bank and the Agent any time prior to the date of
issuance of the Letter of Credit by the Fronting Bank, pro-
vided such revocation is confirmed in writing by the Bor-
rower to the Fronting Bank and the Agent within one (1)
Domestic Business Day by facsimile. No later than 10:00
a.m., New York City time, on the date that is four (4)
Domestic Business Days prior to the date of issuance, the
Borrower shall specify a precise description of the docu-
ments and the verbatim text of any certificate to be pre-
sented by the beneficiary of the Letter of Credit, which if
presented by such beneficiary prior to the expiration date
of the Letter of Credit would require the Fronting Bank to
make a payment under the Letter of Credit; provided, that
Fronting Bank may, in its reasonable judgment, require
changes in any such documents and certificates only in
conformity with changes in customary and commercially rea-
sonable practice or law and, provided further, that the
Letter of Credit shall not require payment against a
conforming draft to be made thereunder on the following
Domestic Business Day that such draft is presented if such
presentation is made later than 10:00 A.M. New York City
time. In determining whether to pay on such Letter of Cred-
it, the Fronting Bank shall be responsible only to determine
that the documents and certificates required to be delivered
under the Letter of Credit have been delivered and that they
comply on their face with the requirements of the Letter of
Credit.
(d) Making of Loans. (i) Promptly after receipt
of a Notice of Borrowing under Section 2.1(b) (or telephonic
notice in lieu thereof), the Agent shall notify each Lender
by facsimile transmission, or other similar form of trans-
mission, of the proposed Borrowing (which notice to the
Lenders, in the case of a Borrowing of Eurodollar Rate
Loans, shall be at least three (3) Business Days in advance
of the proposed Funding Date for such Loans). Each Lender
shall deposit an amount equal to its Pro Rata Share of the
Borrowing requested by the Borrower with the Agent at its
office in New York, New York, in immediately available
funds, not later than 12:00 noon (New York time) on the
respective Funding Date therefor. Subject to the fulfill-
ment of the conditions precedent set forth in Section 6.1 or
Section 6.2, as applicable, the Agent shall make the pro-
ceeds of such amounts received by it available to the Bor-
rower at the Agent's office in New York, New York on such
Funding Date (or on the date received if later than such
Funding Date) and shall disburse such proceeds in accordance
with the Borrower's disbursement instructions set forth in
the applicable Notice of Borrowing. The failure of any
Lender to deposit the amount described above with the Agent
on the applicable Funding Date shall not relieve any other
Lender of its obligations hereunder to make its Loan on such
Funding Date. In the event the conditions precedent set
forth in Section 6.1 or 6.2 are not fulfilled as of the
proposed Funding Date for any Borrowing, the Agent shall
promptly return, by wire transfer of immediately available
funds, the amount deposited by each Lender to such Lender.
If the Borrower has requested the issuance of the Letter of
Credit, no later than 12:00 Noon (New York City time) on the
date of such issuance as indicated in the notice delivered
pursuant to Section 2.2(b), the Fronting Bank shall issue
such Letter of Credit in the amount so requested and deliver
the same to the Borrower with a copy thereof to the Agent.
Immediately upon the issuance of the Letter of Credit by the
Fronting Bank, the Fronting Bank shall be deemed to have
sold and transferred to each other Lender, and each such
other Lender shall be deemed, and hereby agrees, to have
irrevocably and unconditionally purchased and received from
the Fronting Bank, without recourse or warranty, an undi-
vided interest and a participation in the Letter of Credit,
any drawing thereunder, and the obligations of the Borrower
hereunder with respect thereto, and any security therefor or
guaranty pertaining thereto, in an amount equal to such
Lender's ratable share thereof (based upon the ratio its
Commitment bears the aggregate of all Commitments). The
Fronting Bank shall have the primary obligation to fund any
and all draws made with respect to such Letter of Credit
notwithstanding any failure of a participating Lender to
fund its ratable share of any such draw. The Agent will in-
struct the Fronting Bank to make such Letter of Credit
available to the Borrower and the Fronting Bank shall make
the Letter of Credit available to the Borrower at the Bor-
rower's aforesaid address or at such address in the United
States as Borrower shall request on the date of the Borrow-
ing.
(ii) Unless the Agent shall have been notified by
any Lender on the Business Day immediately preceding the
applicable Funding Date in respect of any Borrowing that
such Lender does not intend to fund its Loan requested to be
made on such Funding Date, the Agent may assume that such
Lender has funded its Loan and is depositing the proceeds
thereof with the Agent on the Funding Date therefor, and the
Agent in its sole discretion may, but shall not be obligated
to, disburse a corresponding amount to the Borrower on the
applicable Funding Date. If the Loan proceeds corresponding
to that amount are advanced to the Borrower by the Agent but
are not in fact deposited with the Agent by such Lender on
or prior to the applicable Funding Date, such Lender agrees
to pay, and in addition the Borrower agrees to repay, to the
Agent forthwith on demand such corresponding amount, togeth-
er with interest thereon, for each day from the date such
amount is disbursed to or for the benefit of the Borrower
until the date such amount is paid or repaid to the Agent,
at the interest rate applicable to such Borrowing. If such
Lender shall pay to the Agent the corresponding amount, the
amount so paid shall constitute such Lender's Loan, and if
both such Lender and the Borrower shall pay and repay such
corresponding amount, the Agent shall promptly pay to the
Borrower such corresponding amount. This Section 2.1(c)(ii)
does not relieve any Lender of its obligation to make its
Loan on any applicable Funding Date.
(e) Revolving Credit Commitments. UBS shall have
the right, but not the obligation to identify institutions
reasonably acceptable to the Borrower (the "Additional
Lenders") to become Lenders hereunder (the "Syndication")
with Revolving Credit Commitments aggregating an amount not
to exceed $145,000,000; provided that the aggregate of all
Revolving Credit Commitments hereunder shall not exceed
$175,000,000. In connection with such Syndication, UBS
shall have the right to determine (i) the status of any
Additional Lender as Agent, Co-Agent, Lender or otherwise,
(ii) the amounts of Revolving Credit Commitments to be
allocated to such Additional Lenders, and (iii) the fees and
pricing applicable to the Revolving Credit Commitments of
such Additional Lenders. The Borrower agrees to cooperate
with UBS for the purpose of effecting the Syndication, which
cooperation shall include, without limitation, mutual assis-
tance with site visits, attendance at meetings and making
senior management available for all relevant purposes. In
addition, the Borrower agrees to cooperate with UBS in the
preparation of offering materials containing such informa-
tion as UBS deems appropriate for the purposes of effecting
the Syndication (an "Offering Memorandum") and further
agrees to represent, in writing, to each prospective Addi-
tional Lender that the information contained in the Offering
Memorandum is true and correct as of the date of completion
of the Offering Memorandum and as of the date on which such
prospective Additional Lender becomes a Lender hereunder.
Any prospective Additional Lender shall become a Lender
hereunder upon execution of this Agreement, effective as of
the date of such execution.
II.2. Intentionally Omitted.
II.3. Use of Proceeds of Loans. The proceeds of
the Loans to the Borrower hereunder may be used for general
and working capital needs of the Borrower, its Subsidiaries
and Minority Holdings, which purposes shall in any event be
lawful general and working capital purposes of the Borrower.
II.4. Revolving Credit Termination Date. The
Revolving Credit Commitments shall terminate, the Borrower
shall return or cause to be returned all Letters of Credit
to the Fronting Bank, and all outstanding Revolving Credit
Obligations shall be paid in full, on the Revolving Credit
Termination Date. Each Lender's obligation to make Loans
shall terminate on the Business Day next preceding the
Revolving Credit Termination Date.
II.5. Intentionally Omitted.
II.6. Maximum Credit Facility. Notwithstanding
anything in this Agreement to the contrary, in no event
shall the aggregate principal Revolving Credit Obligations
exceed the Revolving Credit Availability.
II.7. Authorized Agents. On the Closing Date and
from time to time thereafter, the Borrower shall deliver to
the Agent an Officer's Certificate setting forth the names
of the employees and agents authorized to request Loans and
to request a conversion/continuation of any Loan and con-
taining a specimen signature of each such employee or agent.
The employees and agents so authorized shall also be
authorized to act for the Borrower in respect of all other
matters relating to the Loan Documents. The Agent, the Co-
Agents (if any) and the Lenders shall be entitled to rely
conclusively on such employee's or agent's authority to
request such Loan or such conversion/continuation until the
Agent receives written notice to the contrary. The Agent
shall have no duty to verify the authenticity of the signa-
ture appearing on any written Notice of Borrowing or Notice
of Conversion/Continuation or any other document, and, with
respect to an oral request for such a Loan or such conver-
sion/continuation, the Agent shall have no duty to verify
the identity of any person representing himself or herself
as one of the employees or agents authorized to make such
request or otherwise to act on behalf of the Borrower. None
of the Agent or the Lenders shall incur any liability to the
Borrower or any other Person in acting upon any telephonic
or facsimile notice referred to above which the Agent or
such Lender believes to have been given by a person duly
authorized to act on behalf of the Borrower and the Borrower
hereby indemnifies and holds harmless the Agent and each
other Lender from any loss or expense the Agent or the Lend-
ers might incur in acting in good faith as provided in this
Section 2.7.
2.8. Letters of Credit. (a) Subject to the
terms contained in this Agreement and the other Loan Docu-
ments, upon the receipt of a notice in accordance with
Section 2.1(c) requesting the issuance of the Letters of
Credit, the Fronting Bank shall issue the Letters of Credit
in such form as is reasonably acceptable to the Borrower in
an amount equal to the amount set forth in the notice deliv-
ered pursuant to Section 2.1(c) hereof.
(b) The Letter of Credit Usage shall be no more
than Thirty Million Dollars ($30,000,000) in the aggregate.
(c) There shall be no more than five (5) Letters
of Credit issued hereunder.
(d) In the event of any request for a drawing
under the Letter of Credit by the beneficiary thereunder,
the Fronting Bank shall endeavor to notify the Borrower and
the Agent (and the Agent shall endeavor to notify each
Lender thereof) on or before the date on which the Fronting
Bank intends to honor such drawing, and, except as provided
in this subsection (d), the Borrower shall reimburse the
Fronting Bank, in immediately available funds, on the same
day on which such drawing is honored in an amount equal to
the amount of such drawing. Notwithstanding anything con-
tained herein to the contrary, however, unless the Borrower
shall have notified the Agent, and the Fronting Bank prior
to 11:00 a.m. (New York time) on the Domestic Business Day
immediately prior to the date of such drawing that the Bor-
rower intends to reimburse the Fronting Bank for the amount
of such drawing with funds other than the proceeds of the
Loans, the Borrower shall be deemed to have timely given a
Notice of Borrowing pursuant to Section 2.1(b) to the Agent,
requesting a Borrowing of Base Rate Loans on the date on
which such drawing is honored and in an amount equal to the
amount of such drawing. Each Lender (other than the Front-
ing Bank) shall, in accordance with Section 2.1(b), make
available its share of such Borrowing to the Agent, the
proceeds of which shall be applied directly by the Agent to
reimburse the Fronting Bank for the amount of such draw. In
the event that any such Lender fails to make available to
the Fronting Bank the amount of such Lender's participation
on the date of a drawing, the Fronting Bank shall be enti-
tled to recover such amount on demand from such Lender
together with interest at the Federal Funds Rate commencing
on the date such drawing is honored.
(e) If, after the date hereof, any change in any
law or regulation or in the interpretation thereof by any
court or administrative or governmental authority charged
with the administration thereof shall either (i) impose,
modify or deem applicable any reserve, special deposit or
similar requirement against letters of credit issued by, or
assets held by, or deposits in or for the account of, or
participations in any letter of credit, upon any Lender (in-
cluding the Fronting Bank) or (ii) impose on any Lender any
other condition regarding this Agreement or such Lender (in-
cluding the Fronting Bank) as it pertains to a Letter of
Credit or any participation therein and the result of any
event referred to in the preceding clause (i) or (ii) shall
be to increase, by an amount deemed by the Fronting Bank or
such Lender to be material, the cost to the Fronting Bank or
any Lender of issuing or maintaining a Letter of Credit or
participating therein then the Borrower shall pay to the
Fronting Bank or such Lender, within 15 days after written
demand by such Lender (with a copy to the Agent), which
demand shall be accompanied by a certificate showing, in
reasonable detail, the calculation of such amount or
amounts, such additional amounts as shall be required to
compensate the Fronting Bank or such Lender for such in-
creased costs or reduction in amounts received or receivable
hereunder.
(f) The Borrower hereby agrees to protect, indem-
nify, pay and save the Fronting Bank harmless from and
against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable
attorneys' fees and disbursements) which the Fronting Bank
may incur or be subject to as a result of (i) the issuance
of any Letter of Credit, other than as a result of the gross
negligence or wilful misconduct of the Fronting Bank or (ii)
the failure of the Fronting Bank to honor a drawing under
any Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de
jure or de facto government or Governmental Authority (col-
lectively, "Governmental Acts"), other than as a result of
the gross negligence or wilful misconduct of the Fronting
Bank. As between the Borrower and the Fronting Bank, the
Borrower assumes all risks of the acts and omissions of, or
misuses of, any Letter of Credit issued by the Fronting
Bank, by the beneficiaries of such Letter of Credit. In fur-
therance and not in limitation of the foregoing, the Front-
ing Bank shall not be responsible (i) for the form, valid-
ity, sufficiency, accuracy, genuineness or legal effect of
any document submitted by any party in connection with the
application for and issuance of the Letters of Credit, even
if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(ii) for the validity or insufficiency of any instrument
transferring or assigning or purporting to transfer or
assign any Letter of Credit or the rights or benefits there-
under or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason; (iii) for
failure of the beneficiary of any Letter of Credit to comply
fully with conditions required in order to draw upon any
Letter of Credit; (iv) for errors, omissions, interruptions
or delays in transmission or delivery of any message, by
mail, cable, telegraph, telex, facsimile transmission, or
otherwise; (v) for errors in interpretation of any technical
terms; (vi) for any loss or delay in the transmission or
otherwise of any documents required in order to make a
drawing under any Letter of Credit or of the proceeds there-
of; (vii) for the misapplication by the beneficiary of a
Letter of Credit of the proceeds of such Letter of Credit;
and (viii) for any consequence arising from causes beyond
the control of the Fronting Bank, including any Government
Acts, in each case other than as a result of the gross
negligence or willful misconduct of the Fronting Bank. None
of the above shall affect, impair or prevent the vesting of
the Fronting Bank's rights and powers hereunder. In fur-
therance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omit-
ted by the Fronting Bank under or in connection with a
Letter of Credit issued by it or the related certificates,
if taken or omitted in good faith, shall not put the Front-
ing Bank under any resulting liability to the Borrower.
(g) If the Fronting Bank or the Agent is required
at any time, pursuant to any bankruptcy, insolvency, liqui-
dation or reorganization law or otherwise, to return to the
Borrower any reimbursement by the Borrower of any drawing
under any Letter of Credit, each Lender shall pay to the
Fronting Bank or the Agent, as the case may be, its share of
such payment, but without interest thereon unless the Front-
ing Bank or the Agent is required to pay interest on such
amounts to the person recovering such payment, in which case
with interest thereon, computed at the same rate, and on the
same basis, as the interest that the Fronting Bank or the
Agent is required to pay.
2.9. Letter of Credit Usage Absolute. The obliga-
tions of the Borrower under this Agreement in respect of a
Letter of Credit shall be unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this
Agreement (as the same may be amended from time to time) and
any Letter of Credit Documents (as hereinafter defined)
under all circumstances, including, without limitation, to
the extent permitted by law, the following circumstances:
(a) any lack of validity or enforceability of any
Letter of Credit or any other agreement or instrument relat-
ing thereto (collectively, the "Letter of Credit Documents")
or any Loan Document;
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the obligations
of the Borrower in respect of a Letter of Credit or any
other amendment or waiver of or any consent by the Borrower
to departure from all or any of the Letter of Credit Docu-
ments or any Loan Document; provided, that the Fronting Bank
shall not consent to any such change or amendment unless
previously consented to in writing by the Borrower;
(c) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or
consent to departure from any guaranty, for all or any of
the obligations of the Borrower in respect of any Letter of
Credit;
(d) the existence of any claim, set-off, defense or
other right that the Borrower may have at any time against
any beneficiary or any transferee of a Letter of Credit (or
any Persons for whom any such beneficiary or any such trans-
feree may be acting), the Agent, the Fronting Bank or any
Lender (other than a defense based on the gross negligence
or wilful misconduct of the Agent, the Fronting Bank or such
Lender) or any other Person, whether in connection with the
Loan Documents, the transactions contemplated hereby or by
the Letters of Credit Documents or any unrelated transac-
tion;
(e) any draft or any other document presented under or
in connection with a Letter of Credit or other Loan Document
proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccu-
rate in any respect; provided, that payment by the Fronting
Bank under a Letter of Credit against presentation of such
draft or document shall not have constituted gross negli-
gence or wilful misconduct of the Fronting Bank;
(f) payment by the Fronting Bank against presentation
of a draft or certificate that does not comply with the
terms of a Letter of Credit; provided, that such payment
shall not have constituted gross negligence or wilful mis-
conduct of the Fronting Bank; and
(g) any other circumstance or happening whatsoever
other than the payment in full of all obligations hereunder
in respect of any Letter of Credit or any agreement or
instrument relating to any Letter of Credit, whether or not
similar to any of the foregoing, that might otherwise con-
stitute a defense available to, or a discharge of, the
Borrower; provided, that such other circumstance or hap-
pening shall not have been the result of gross negligence or
wilful misconduct of the Fronting Bank.
ARTICLE III
RESERVED
ARTICLE IV
PAYMENTS AND PREPAYMENTS
IV.1. Prepayments; Reductions in Revolving Credit
Commitments.
(a) Voluntary Prepayments. The Borrower may, at
any time and from time to time, prepay the Loans, in part or
in their entirety, subject to the following limitations. The
Borrower shall give at least fifteen (15) days' prior writ-
ten notice to the Agent (which the Agent shall promptly
transmit to each Lender) of any prepayment in the entirety
to be made prior to the occurrence of an Event of Default,
which notice of prepayment shall specify the date (which
shall be a Business Day) of prepayment. When notice of
prepayment is delivered as provided herein, the outstanding
principal amount of the Loans on the prepayment date speci-
fied in the notice shall become due and payable on such
prepayment date. Each voluntary partial prepayment of the
Loans shall be in a minimum amount of $1,000,000 and in
integral multiples of $1,000,000 in excess of that amount.
Eurodollar Rate Loans may be prepaid in part or in their en-
tirety only upon payment of the amounts described in Section
5.2(f).
(b) Voluntary Reductions In Revolving Credit
Commitments. The Borrower may, upon at least fifteen (15)
days' prior written notice to the Agent (which the Agent
shall promptly transmit to each Lender), at any time and
from time to time, terminate in whole or permanently reduce
in part the Revolving Credit Commitments; provided that the
Borrower shall have made whatever payment may be required to
reduce the Revolving Credit Obligations to an amount less
than or equal to the Revolving Credit Commitments as reduced
or terminated, which amount shall become due and payable on
the date specified in such notice. Any partial reduction of
the Revolving Credit Commitments shall be in an aggregate
minimum amount of $1,000,000 and integral multiples of
$1,000,000 in excess of that amount, and shall reduce the
Revolving Credit Commitment of each Lender proportionately
in accordance with its Pro Rata Share. Any notice of termi-
nation or reduction given to the Agent under this Sec-
tion 4.1(b) shall specify the date (which shall be a Busi-
ness Day) of such termination or reduction and, with respect
to a partial reduction, the aggregate principal amount
thereof.
(c) Letter Of Credit. The Borrower may, upon at
least one (1) Domestic Business Day's notice to the Agent
(by 11:00 a.m New York time on such Domestic Business Day),
reimburse the Agent for the benefit of the Fronting Bank for
the amount of any drawing under a Letter of Credit in whole
or in part in any amount. The Borrower may at any time
return any undrawn Letter of Credit to the Fronting Bank in
whole, but not in part, and the Fronting Bank shall endeavor
to give the Lead Agent and each of the Lenders notice of
such return.
(d) No Penalty. The prepayments and payments in
respect of reductions and terminations described in clauses
(a) and (b) of this Section 4.1 may be made without premium
or penalty (except as provided in Section 5.2(f)).
(e) Mandatory Prepayment. If at any time from
and after the Closing Date: (i) the Borrower merges or con-
solidates with another Person and the Borrower is not the
surviving entity, or (ii) the Borrower or any Consolidated
Subsidiary or any Minority Holding sells, transfers, assigns
or conveys assets, the book value of which (computed in
accordance with GAAP but without deduction for deprecia-
tion), in the aggregate of all such sales, transfers, as-
signments, foreclosures, or conveyances exceeds 25% of the
then Capitalization Value in any twelve (12) month period,
or (iii) the portion of Capitalization Value attributable to
the aggregate Minority Holdings (other than Limited Minority
Holdings) of the Borrower and its Consolidated Subsidiaries
exceeds 15% of Capitalization Value, or (iv) the Borrower or
an Affiliate ceases to provide property management and
leasing services to 75% of the total number of Real Proper-
ties in which the Borrower has an ownership interest (the
date any such event shall occur being the "Prepayment
Date"), the Revolving Credit Commitment shall be terminated
and the Borrower shall be required to prepay the Loans in
their entirety as if the Prepayment Date were the Revolving
Credit Termination Date. The Borrower shall immediately
make such prepayment together with interest accrued to the
date of the prepayment on the principal amount prepaid. In
connection with the prepayment of any Loan prior to the
maturity thereof, the Borrower shall also pay any applicable
expenses pursuant to Section 5.2(f). Each such prepayment
shall be applied to prepay ratably the Loans of the Lenders.
Amounts prepaid pursuant to this Section 4.1(d) may not be
reborrowed. As used in this Section 4.1(d) only, the phrase
"sells, transfers, assigns or conveys" shall not include (i)
sales or conveyances among Borrower and any Consolidated
Subsidiaries, or (ii) mortgages secured by Real Property.
IV.2. Payments.
(a) Manner and Time of Payment. All payments of
principal of, and interest on, the Loans and other Obliga-
tions (including, without limitation, fees and expenses)
which are payable to the Agent or any other Lender shall be
made without condition or reservation of right, in immedi-
ately available funds, delivered to the Agent not later than
12:00 noon (New York time) on the date and at the place due,
to such account of the Agent as it may designate, for the
account of the Agent or such other Lender, as the case may
be; and funds received by the Agent, including, without
limitation, funds in respect of any Loans to be made on that
date, not later than 12:00 noon (New York time) on any given
Business Day shall be credited against payment to be made
that day and funds received by the Agent after that time
shall be deemed to have been paid on the next succeeding
Business Day. Payments actually received by the Agent for
the account of the Lenders, or any of them, shall be paid to
them by the Agent promptly after receipt thereof.
(b) Apportionment of Payments. (i) Subject to
the provisions of Section 4.2(b)(v), all payments of princi-
pal and interest in respect of outstanding Loans, all pay-
ments of fees and all other payments in respect of any other
Obligations, shall be allocated among such of the Lenders as
are entitled thereto, in proportion to their respective Pro
Rata Shares or otherwise as provided herein. Subject to the
provisions of Section 4.2(b)(ii), all such payments and any
other amounts received by the Agent from or for the benefit
of the Borrower shall be applied in the following order:
(A) to pay principal of and interest on any por-
tion of the Loans which the Agent may have advanced on
behalf of any Lender other than UBS for which the Agent
has not then been reimbursed by such Lender or the
Borrower,
(B) to pay all other Obligations then due and
payable, and
(C) as the Borrower so designates.
Unless otherwise designated by the Borrower, all principal
payments in respect of Loans shall be applied first, to
repay outstanding Base Rate Loans, and then to repay out-
standing Eurodollar Rate Loans, with those Eurodollar Rate
Loans which have earlier expiring Eurodollar Interest Peri-
ods being repaid prior to those which have later expiring
Eurodollar Interest Periods.
(ii) After the occurrence of an Event of Default
and while the same is continuing, the Agent shall apply all
payments in respect of any Obligations in the following
order:
(A) first, to pay principal of and interest
on any portion of the Loans which the Agent may
have advanced on behalf of any Lender other than
UBS for which the Agent has not then been reim-
bursed by such Lender or the Borrower;
(B) second, to pay Obligations in respect of
any fees, expense reimbursements or indemnities
then due to the Agent;
(C) third, to pay Obligations in respect of
any fees, expense reimbursements or indemnities
then due to the Lenders and the Co-Agents;
(D) fourth, to pay interest due in respect
of Loans;
(E) fifth, to the ratable payment or prepay-
ment of principal outstanding on Loans; and
(F) sixth to the ratable payment of all
other Obligations.
The order of priority set forth in this Section 4.2(b)(ii)
and the related provisions of this Agreement are set forth
solely to determine the rights and priorities of the Agent,
the other Lenders and other Holders as among themselves.
The order of priority set forth in clauses (C) through (F)
of this Section 4.2(b)(ii) may at any time and from time to
time be changed by the Requisite Lenders without necessity
of notice to or consent of or approval by the Borrower, any
Holder which is not a Lender, or any other Person. The
order of priority set forth in clauses (A) and (B) of this
Section 4.2(b)(ii) may be changed only with the prior writ-
ten consent of the Agent.
(iii) The Agent, in its sole discretion subject
only to the terms of this Section 4.2(b)(iii), may pay from
the proceeds of Loans made to the Borrower hereunder, wheth-
er made following a request by the Borrower pursuant to
Section 2.1 or a deemed request as provided in this Sec-
tion 4.2(b)(iii), all amounts payable by the Borrower here-
under, including, without limitation, amounts payable with
respect to payments of principal, interest and fees and all
reimbursements for expenses pursuant to Section 15.2. The
Borrower hereby irrevocably authorizes the Lenders to make
Loans, which Loans shall be Base Rate Loans, in each case,
upon notice from the Agent as described in the following
sentence for the purpose of paying principal, interest and
fees due from the Borrower, reimbursing expenses pursuant to
Section 15.2 and paying any and all other amounts due and
payable by the Borrower hereunder or under the Notes, and
agrees that all such Loans so made shall be deemed to have
been requested by it pursuant to Section 2.1 as of the date
of the aforementioned notice. The Agent shall request Loans
on behalf of the Borrower as described in the preceding
sentence by notifying the Lenders by facsimile transmission
or other similar form of transmission (which notice the
Agent shall thereafter promptly transmit to the Borrower),
of the amount and Funding Date of the proposed Borrowing and
that such Borrowing is being requested on the Borrower's
behalf pursuant to this Section 4.2(b)(iii). On the pro-
posed Funding Date, the Lenders shall make the requested
Loans in accordance with the procedures and subject to the
conditions specified in Section 2.1.
(iv Subject to Section 4.2(b)(v), the Agent
shall promptly distribute to each other Lender at its prima-
ry address set forth on the appropriate signature page
hereof or the signature page to the Assignment and Accep-
tance by which it became a Lender, or at such other address
as a Lender or other Holder may request in writing, such
funds as such Person may be entitled to receive, subject to
the provisions of Article XII; provided that the Agent
shall under no circumstances be bound to inquire into or
determine the validity, scope or priority of any interest or
entitlement of any Holder and may suspend all payments or
seek appropriate relief (including, without limitation, in-
structions from the Requisite Lenders or an action in the
nature of interpleader) in the event of any doubt or dispute
as to any apportionment or distribution contemplated hereby.
(v In the event that any Lender fails to fund
its Pro Rata Share of any Loan requested by the Borrower
which such Lender is obligated to fund under the terms of
this Agreement (the funded portion of such Loan being here-
inafter referred to as a "Non Pro Rata Loan"), until the
earlier of such Lender's cure of such failure and the termi-
nation of the Revolving Credit Commitments, the proceeds of
all amounts thereafter repaid to the Agent by the Borrower
and otherwise required to be applied to such Lender's share
of all other Obligations pursuant to the terms of this
Agreement shall be advanced to the Borrower by the Agent on
behalf of such Lender to cure, in full or in part, such
failure by such Lender, but shall nevertheless be deemed to
have been paid to such Lender in satisfaction of such other
Obligations. Notwithstanding anything in this Agreement to
the contrary:
(A0 the foregoing provisions of this Section
4.2(b)(v) shall apply only with respect to the
proceeds of payments of Obligations and shall not
affect the conversion or continuation of Loans
pursuant to Section 5.1(c);
(B0 a Lender shall be deemed to have cured
its failure to fund its Pro Rata Share of any Loan
at such time as an amount equal to such Lender's
original Pro Rata Share of the requested principal
portion of such Loan is fully funded to the Bor-
rower, whether made by such Lender itself or by
operation of the terms of this Section 4.2(b)(v),
and whether or not the Non Pro Rata Loan with
respect thereto has been repaid, converted or
continued;
(C0 amounts advanced to the Borrower to
cure, in full or in part, any such Lender's fail-
ure to fund its Pro Rata Share of any Loan ("Cure
Loans") shall bear interest at the Base Rate in
effect from time to time, and for all other pur-
poses of this Agreement shall be treated as if
they were Base Rate Loans; and
(D0 regardless of whether or not an Event of
Default has occurred or is continuing, and not-
withstanding the instructions of the Borrower as
to its desired application, all repayments of
principal which, in accordance with the other
terms of this Section 4.2, would be applied to the
outstanding Base Rate Loans shall be applied
first, ratably to all Base Rate Loans constituting
Non Pro Rata Loans, second, ratably to Base Rate
Loans other than those constituting Non Pro Rata
Loans or Cure Loans and, third, ratably to Base
Rate Loans constituting Cure Loans.
(c Payments on Non-Business Days. Whenever any
payment to be made by the Borrower hereunder or under the
Notes is stated to be due on a day which is not a Business
Day, the payment shall instead be due on the next succeeding
Business Day (or, as set forth in Section 5.2(b)(iii), the
next preceding Business Day).
IV.3. Promise to Repay; Evidence of Indebted-
ness.3. Promise to Repay; Evidence of Indebtedness.
(a Promise to Repay. The Borrower hereby agrees
to pay when due the principal amount of each Loan which is
made to it, and further agrees to pay all unpaid interest
accrued thereon, in accordance with the terms of this Agree-
ment and the Notes. The Borrower shall execute and deliver
to each Lender on the Closing Date, a promissory note, in
form and substance acceptable to the Agent and such Lender,
evidencing the Loans and thereafter shall execute and deliv-
er such other promissory notes as are necessary to evidence
the Loans owing to the Lenders after giving effect to any
assignment thereof pursuant to Section 15.1, all in form and
substance acceptable to the Agent and the parties to such
assignment (all such promissory notes and all amendments
thereto, replacements thereof and substitutions therefor
being collectively referred to as the "Notes"; and "Note"
means any one of the Notes).
(b Loan Account. Each Lender shall maintain in
accordance with its usual practice an account or accounts (a
"Loan Account") evidencing the Indebtedness of the Borrower
to such Lender resulting from each Loan owing to such Lender
from time to time, including the amount of principal and
interest payable and paid to such Lender from time to time
hereunder and under the Notes.
(c Control Account. The Register maintained by
the Agent pursuant to Section 15.1(c) shall include a con-
trol account, and a subsidiary account for each Lender, in
which accounts (taken together) shall be recorded (i) the
date and amount of each Borrowing made hereunder, the type
of Loan comprising such Borrowing and any Eurodollar Inter-
est Period applicable thereto, (ii) the effective date and
amount of each Assignment and Acceptance delivered to and
accepted by it and the parties thereto, (iii) the amount of
any principal or interest due and payable or to become due
and payable from the Borrower to each Lender hereunder or
under the Notes and (iv) the amount of any sum received by
the Agent from the Borrower hereunder and each Lender's
share thereof.
(d Entries Binding. The entries made in the
Register and each Loan Account shall be conclusive and
binding for all purposes, absent manifest error.
(e No Recourse to Certain Persons. Notwith-
standing anything contained in this Agreement to the con-
trary, it is expressly understood and agreed that nothing
herein or in the Notes shall be construed as creating any
liability on any trustee, officer, shareholder or director
of the Borrower to pay any of the Obligations other than
liability arising from or in connection with (i) fraud or
(ii) the misappropriation or misapplication of proceeds of
the Loans; but nothing contained in this Section 4.3(e)
shall be construed to prevent the exercise of any remedy al-
lowed to the Agent, the Co-Agents or the Lenders by law or
by the terms of this Agreement or the other Loan Documents
which does not relate to or result in such an obligation by
any trustee, officer, shareholder or director of the Borrow-
er to pay money.
ARTICLE V
INTEREST AND FEES
V.1. Interest on the Loans and other Obligations.
(a Rate of Interest. All Loans and the out-
standing principal balance of all other Obligations shall
bear interest on the unpaid principal amount thereof from
the date such Loans are made and such other Obligations are
due and payable until paid in full, except as otherwise
provided in Section 5.1(d), as follows:
(i If a Base Rate Loan or such other Obli-
gation, at a rate per annum equal to the sum of
(A) the Base Rate, as in effect from time to time
as interest accrues, plus (B) the then Applicable
Margin for Base Rate Loans; and
(ii If a Eurodollar Rate Loan, at a rate
per annum equal to the sum of (A) the Eurodollar
Rate determined for the applicable Eurodollar
Interest Period, plus (B) the then Applicable
Margin for Eurodollar Loans.
The applicable basis for determining the rate of interest on
the Loans shall be selected by the Borrower at the time a
Notice of Borrowing or a Notice of Conversion/Continuation
is delivered by the Borrower to the Agent; provided, howev-
er, that the Borrower may not select the Eurodollar Rate as
the applicable basis for determining the rate of interest on
such a Loan if at the time of such selection an Event of
Default or a Potential Event of Default would occur or has
occurred and is continuing and further provided, that from
and after the occurrence of an Event of Default or a Poten-
tial Event of Default, each Eurodollar Rate Loan then out-
standing may, at the Agent's option, convert to a Base Rate
Loan. If on any day any Loan is outstanding with respect to
which notice has not been timely delivered to the Agent in
accordance with the terms of this Agreement specifying the
basis for determining the rate of interest on that day, then
for that day interest on that Loan shall be determined by
reference to the Base Rate.
(b Interest Payments. (i Interest accrued on
each Loan, whether a Base Rate Loan or a Eurodollar Loan
shall be calculated on the last day of each calendar month
and shall be payable in arrears (A) on the first day of each
calendar month, commencing on the first such day following
the making of such Loan, (B) upon the payment or prepayment
thereof in full or in part, and (C) if not theretofore paid
in full, at maturity (whether by acceleration or otherwise)
of such Loan.
(ii Interest accrued on the principal balance of
all other Obligations shall be calculated on the last day of
each calendar month and shall be payable in arrears (A) on
the first day of each calendar month, commencing on the
first such day following the incurrence of such Obligation,
(B) upon repayment thereof in full or in part, and (C) if
not theretofore paid in full, at the time such other Obliga-
tion becomes due and payable (whether by acceleration or
otherwise).
(c Conversion or Continuation. (i The Bor-
rower shall have the option (A) to convert at any time all
or any part of outstanding Base Rate Loans to Eurodollar
Rate Loans; (B) to convert all or any part of outstanding
Eurodollar Rate Loans having Eurodollar Interest Periods
which expire on the same date to Base Rate Loans on such
expiration date; or (C) to continue all or any part of
outstanding Eurodollar Rate Loans having Eurodollar Interest
Periods which expire on the same date as Eurodollar Rate
Loans, and the succeeding Eurodollar Interest Period of such
continued Loans shall commence on such expiration date; pro-
vided, however, no such outstanding Loan may be continued
as, or be converted into, a Eurodollar Rate Loan (i) if the
continuation of, or the conversion into, would violate any
of the provisions of Section 5.2 or (ii) if an Event of
Default or a Potential Event of Default would occur or has
occurred and is continuing. Any conversion into or contin-
uation of Eurodollar Rate Loans under this Section 5.1(c)
shall be in a minimum amount of $1,000,000 and in integral
multiples of $1,000,000 in excess of that amount, except in
the case of a conversion into or a continuation of an entire
Borrowing of Non Pro Rata Loans.
(ii To convert or continue a Loan under Section
5.1(c)(i), the Borrower shall deliver a Notice of Conver-
sion/Continuation to the Agent no later than 11:00 a.m. (New
York time) at least three (3) Business Days in advance of
the proposed conversion/continuation date. A Notice of
Conversion/Continuation shall specify (A) the proposed
conversion/continuation date (which shall be a Business
Day), (B) the principal amount of the Loan to be convert-
ed/continued, (C) whether such Loan shall be converted
and/or continued, and (D) in the case of a conversion to, or
continuation of, a Eurodollar Rate Loan, the requested
Eurodollar Interest Period. In lieu of delivering a Notice
of Conversion/Continuation, the Borrower may give the Agent
telephonic notice of any proposed conversion/continuation by
the time required under this Section 5.1(c)(ii), if the
Borrower confirms such notice by delivery of the Notice of
Conversion/Continuation to the Agent by facsimile transmis-
sion promptly, but in no event later than 3:00 p.m. (New
York time) on the same day. Promptly after receipt of a
Notice of Conversion/Continuation under this Sec-
tion 5.1(c)(ii) (or telephonic notice in lieu thereof), the
Agent shall notify each Lender by facsimile transmission, or
other similar form of transmission, of the proposed conver-
sion/continuation. Any Notice of Conversion/Continuation
for conversion to, or continuation of, a Loan (or telephonic
notice in lieu thereof) given pursuant to this Section
5.1(c)(ii) shall be irrevocable, and the Borrower shall be
bound to convert or continue in accordance therewith. In the
event no Notice of Conversion/Continuation is delivered as
and when specified in this Section 5.1(c)(ii) with respect
to outstanding Eurodollar Rate Loans, upon the expiration of
the Eurodollar Interest Period applicable thereto, such
Loans shall automatically be continued as Eurodollar Rate
Loans with a Eurodollar Interest Period of thirty (30) days.
(d Default Interest. Notwithstanding the rates
of interest specified in Section 5.1(a) or elsewhere in this
Agreement, effective immediately upon the occurrence of an
Event of Default, and for as long thereafter as such Event
of Default shall be continuing, the principal balance of all
Loans and other Obligations shall bear interest at a rate
equal to the sum of (A) the Base Rate, as in effect from
time to time as interest accrues, plus (B) four percent
(4.0%) per annum.
(e Computation of Interest. Interest on all
Obligations shall be computed on the basis of the actual
number of days elapsed in the period during which interest
accrues and a year of 360 days. In computing interest on
any Loan, the date of the making of the Loan or the first
day of a Eurodollar Interest Period, as the case may be,
shall be included and the date of payment or the expiration
date of a Eurodollar Interest Period, as the case may be,
shall be excluded; provided, however, if a Loan is repaid on
the same day on which it is made, one (1) day's interest
shall be paid on such Loan.
(f Eurodollar Rate Information. Upon the rea-
sonable request of the Borrower from time to time, the
Agent shall promptly provide to the Borrower such infor-
mation with respect to the applicable Eurodollar Rate as may
be so requested.
V.2. Special Provisions Governing Eurodollar Rate
Loans.2. Special Provisions Governing Eurodollar Rate
Loans.
(a Amount of Eurodollar Rate Loans. Each Euro-
dollar Rate Loan shall be in a minimum principal amount of
$1,000,000 and in integral multiples of $1,000,000 in excess
of that amount.
(b Determination of Eurodollar Interest Peri-
od. By giving notice as set forth in Section 2.1(b) (with
respect to a Borrowing of Eurodollar Rate Loans), or Section
5.1(c) (with respect to a conversion into or continuation of
Eurodollar Rate Loans), the Borrower shall have the option,
subject to the other provisions of this Section 5.2, to
select an interest period (each, a "Eurodollar Interest
Period") to apply to the Loans described in such notice,
subject to the following provisions:
(i The Borrower may only select, as to a
particular Borrowing of Eurodollar Rate Loans, a
Eurodollar Interest Period of one, two or three
months in duration or, with the prior written con-
sent of the Agent, a shorter or a longer duration;
(ii In the case of immediately successive
Eurodollar Interest Periods applicable to a Bor-
rowing of Eurodollar Rate Loans, each successive
Eurodollar Interest Period shall commence on the
day on which the next preceding Eurodollar Inter-
est Period expires;
(iii If any Eurodollar Interest Period
would otherwise expire on a day which is not a
Business Day, such Eurodollar Interest Period
shall be extended to expire on the next succeeding
Business Day if the next succeeding Business Day
occurs in the same calendar month, and if there
will be no succeeding Business Day in such calen-
dar month, the Eurodollar Interest Period shall
expire on the immediately preceding Business Day;
(iv The Borrower may not select a Eurodol-
lar Interest Period as to any Loan if such Euro-
dollar Interest Period terminates later than the
Revolving Credit Termination Date;
(v The Borrower may not select a Eurodollar
Interest Period with respect to any portion of
principal of a Loan which extends beyond a date on
which the Borrower is required to make a scheduled
payment of such portion of principal; and
(vi There shall be no more than six (6)
Eurodollar Rate Loans outstanding at any one time.
(c Determination of Eurodollar Interest
Rate. As soon as practicable on the second Business Day
prior to the first day of each Eurodollar Interest Period
(the "Eurodollar Interest Rate Determination Date"), the
Agent shall determine (pursuant to the procedures set forth
in the definition of "Eurodollar Rate") the interest rate
which shall apply to the Eurodollar Rate Loans for which an
interest rate is then being determined for the applicable
Eurodollar Interest Period and shall promptly give notice
thereof (in writing or by telephone confirmed in writing) to
the Borrower and to each Lender. The Agent's determination
shall be presumed to be correct, absent manifest error, and
shall be binding upon the Borrower.
(d Interest Rate Unascertainable, Inadequate or
Unfair. In the event that at least one (1) Business Day
before the Eurodollar Interest Rate Determination Date:
(i the Agent is advised by the Reference
Bank that deposits in Dollars (in the applicable
amounts) are not being offered by the Reference
Bank in the London interbank market for such Euro-
dollar Interest Period; or
(ii the Agent determines that adequate and
fair means do not exist for ascertaining the ap-
plicable interest rates by reference to which the
Eurodollar Rate then being determined is to be
fixed; or
(iii the Requisite Lenders advise the Ag-
ent that the Eurodollar Rate for Eurodollar Rate
Loans comprising such Borrowing will not adequate-
ly reflect the cost to such Requisite Lenders of
obtaining funds in Dollars in the London interbank
market in the amount substantially equal to such
Lenders' Eurodollar Rate Loans in Dollars and for
a period equal to such Eurodollar Interest Period;
then the Agent shall forthwith give notice thereof to the
Borrower, whereupon (until the Agent notifies the Borrower
that the circumstances giving rise to such suspension no
longer exist) the right of the Borrower to elect to have
Loans bear interest based upon the Eurodollar Rate shall be
suspended and each outstanding Eurodollar Rate Loan shall be
converted into a Base Rate Loan on the last day of the then
current Eurodollar Interest Period therefor, notwithstanding
any prior election by the Borrower to the contrary.
(e Illegality. (i If at any time any Lender
determines (which determination shall, absent manifest
error, be final and conclusive and binding upon all parties)
that the making or continuation of any Eurodollar Rate Loan
has become unlawful or impermissible by compliance by that
Lender with any law, governmental rule, regulation or order
of any Governmental Authority (whether or not having the
force of law and whether or not failure to comply therewith
would be unlawful or would result in costs or penalties),
then, and in any such event, such Lender may give notice of
that determination, in writing, to the Borrower and the
Agent, and the Agent shall promptly transmit the notice to
each other Lender.
(ii) When notice is given by a Lender under Sec-
tion 5.2(e)(i), (A) the Borrower's right to request from
such Lender and such Lender's obligation, if any, to make
Eurodollar Rate Loans shall be immediately suspended, and
such Lender shall make a Base Rate Loan as part of any
requested Borrowing of Eurodollar Rate Loans and (B) if the
affected Eurodollar Rate Loan or Loans are then outstanding,
the Borrower shall immediately, or if permitted by appli-
cable law, no later than the date permitted thereby, upon at
least one (1) Business Day's prior written notice to the
Agent and the affected Lender, convert each such Loan into a
Base Rate Loan.
(iii) If at any time after a Lender gives notice
under Section 5.2(e)(i) such Lender determines that it may
lawfully make Eurodollar Rate Loans, such Lender shall
promptly give notice of that determination, in writing, to
the Borrower and the Agent, and the Agent shall promptly
transmit the notice to each other Lender. The Borrower's
right to request, and such Lender's obligation, if any, to
make Eurodollar Rate Loans shall thereupon be restored.
(f Compensation. In addition to all amounts
required to be paid by the Borrower pursuant to Section 5.1
and Article XIII, the Borrower shall compensate each Lender,
upon demand, for all losses, expenses and liabilities (in-
cluding, without limitation, any loss or expense incurred by
reason of the liquidation or reemployment of deposits or
other funds acquired by such Lender to fund or maintain such
Lender's Eurodollar Rate Loans to the Borrower but excluding
any loss of Applicable Margin on the relevant Loans) which
that Lender may sustain (i) if for any reason (other than
such Lender's failure to fund) a Borrowing, conversion into
or continuation of Eurodollar Rate Loans does not occur on a
date specified therefor in a Notice of Borrowing or a Notice
of Conversion/Continuation given by the Borrower or in a
telephonic request by it for borrowing or conver-
sion/continuation or a successive Eurodollar Interest Period
does not commence after notice therefor is given pursuant to
Section 5.1(c), including, without limitation, pursuant to
Section 5.2(d), (ii) if for any reason any Eurodollar Rate
Loan is prepaid (including, without limitation, mandatorily
pursuant to Section 4.1(d)) on a date which is not the last
day of the applicable Eurodollar Interest Period, (iii) as a
consequence of a required conversion of a Eurodollar Rate
Loan to a Base Rate Loan as a result of any of the events
indicated in Section 5.2(d), or (iv) as a consequence of any
failure by the Borrower to repay a Eurodollar Rate Loan when
required by the terms of this Agreement. The Lender making
demand for such compensation shall deliver to the Borrower
concurrently with such demand a written statement setting
forth in reasonable detail such losses, expenses and liabil-
ities, and such statement shall be conclusive as to the
amount of compensation due to that Lender, absent manifest
error.
(g Booking of Eurodollar Rate Loans. Any Lender
may make, carry or transfer Eurodollar Rate Loans at, to, or
for the account of, its Eurodollar Lending Office or Euro-
dollar Affiliate or its other offices or Affiliates. No
Lender shall be entitled, however, to receive any greater
amount under Sections 4.2 or 5.2(f) or Article XIII as a
result of the transfer of any such Eurodollar Rate Loan to
any office (other than such Eurodollar Lending Office) or
any Affiliate (other than such Eurodollar Affiliate) than
such Lender would have been entitled to receive immediately
prior thereto, unless (i) the transfer occurred at a time
when circumstances giving rise to the claim for such greater
amount did not exist and (ii) such claim would have arisen
even if such transfer had not occurred.
(h Affiliates Not Obligated. No Eurodollar
Affiliate or other Affiliate of any Lender shall be deemed a
party to this Agreement or shall have any liability or
obligation under this Agreement.
(i Adjusted Eurodollar Rate. Any failure by any
Lender to take into account the Eurodollar Reserve Percent-
age when calculating interest due on Eurodollar Rate Loans
shall not constitute, whether by course of dealing or other-
wise, a waiver by such Lender of its right to collect such
amount for any future period.
V.3. FeesV.3. Fees.
(a Unused Commitment Fee. The Borrower shall
pay to the Agent, for the account of the Lenders based on
their respective Pro Rata Shares, a fee (the "Unused Commit-
ment Fee"), accruing at a per annum rate equal to the then
applicable Unused Commitment Fee Percentage on the Unused
Commitment, such fee being payable monthly, in arrears, com-
mencing on and on the first day of each month
thereafter. Notwithstanding the foregoing, in the event
that any Lender fails to fund its Pro Rata Share of any Loan
requested by the Borrower which such Lender is obligated to
fund under the terms of this Agreement, (A) such Lender
shall not be entitled to any portion of the Unused Commit-
ment Fee with respect to its Revolving Credit Commitment
until such failure has been cured in accordance with Section
4.2(b)(v)(B) and (B) until such time, the Unused Commitment
Fee shall accrue in favor of the Lenders which have funded
their respective Pro Rata Shares of such requested Loan,
shall be allocated among such performing Lenders ratably
based upon their relative Revolving Credit Commitments, and
shall be calculated based upon the average amount by which
the aggregate Revolving Credit Commitments of such perform-
ing Lenders exceeds the sum of the outstanding principal
amount of the Loans owing to such performing Lenders.
(b Letter of Credit Fee Charges. In connection
with each Letter of Credit, the Borrower hereby covenants to
pay to the Agent the following fees, each payable quarterly
in arrears (on the first Business Day of each calendar
quarter following the issuance of each Letter of Credit):
(1) a fee for the account of the Lenders, computed daily on
the Letter of Credit Usage at a rate per annum equal to the
"Lenders' L/C Fee Rate" (as hereinafter defined) and (2) a
fee, for the account of the Fronting Bank, computed daily on
the Letter of Credit Usage at a rate per annum equal to
0.15%. For purposes of this Agreement, the "Lenders' L/C Fee
Rate" shall mean, at any time, a rate per annum equal to the
Applicable Margin for Eurodollar Rate Loans. It is under-
stood and agreed that the last installment of the fees
provided for in this paragraph (b) with respect to any
particular Letter of Credit shall be due and payable on the
first day of the fiscal quarter following the return,
undrawn, or cancellation of such Letter of Credit. In addi-
tion, the Borrower shall pay to the Fronting Bank, solely
for its own account, the standard charges assessed by such
Fronting Bank in connection with the issuance, administra-
tion, amendment and payment or cancellation of Letters of
Credit.
(c Calculation and Payment of Fees. All fees
shall be calculated on the basis of the actual number of
days elapsed during the relevant period in a 360-day year.
All fees shall be payable in addition to, and not in lieu
of, interest, compensation, expense reimbursements, indemni-
fication and other Obligations. Fees shall be payable to
the Agent at its office in New York, New York in immediately
available funds. All fees shall be fully earned and nonre-
fundable when paid. All fees due to any other Lender, in-
cluding, without limitation, those referred to in this Sec-
tion 5.3, shall bear interest, if not paid when due, at the
interest rate specified in Section 5.1(d) and shall consti-
tute Obligations.
ARTICLE VI
CONDITIONS TO LOANS ARTICLE
VI.1. Conditions Precedent to the Initial Loans.
The obligation of each Lender on the Initial Funding Date
to make any Loan requested to be made by it shall be subject
to the satisfaction of all of the following conditions
precedent:
(a Documents. The Agent shall have received on
or before the Initial Funding Date all of the following:
(i this Agreement, the Notes, the Guaran-
ties, and, to the extent not otherwise specifical-
ly referenced in this Section 6.1(a), all other
Loan Documents and agreements, documents and in-
struments described in the List of Closing Docu-
ments attached hereto as Exhibit E and made a part
hereof, each duly executed and in recordable form,
where appropriate, and in form and substance sat-
isfactory to the Agent; without limiting the fore-
going, the Borrower hereby directs its counsel,
Middleberg Riddle & Gianna to prepare and deliver
to the Agents, the Lenders, and Skadden, Arps,
Slate, Meagher & Flom LLP the legal opinions re-
ferred to in such List of Closing Documents; and
(ii such additional documentation as the Agent
may reasonably request.
(b No Legal Impediments. No law, regulation,
order, judgment or decree of any Governmental Authority
shall, and the Agent shall not have received any notice that
litigation is pending or threatened which is likely to (i)
enjoin, prohibit or restrain the making of the Loans on the
Initial Funding Date or (ii) impose or result in the imposi-
tion of a Material Adverse Effect.
(c No Change in Condition. No change in the
business, assets, management, operations, financial condi-
tion or prospects of the Borrower or any of its Properties
shall have occurred since September 30, 1997 (other than the
conversion of the Guarantor to a REIT) which change, in the
judgment of the Agent, will have or is reasonably likely to
have a Material Adverse Effect.
(d Interim Liabilities and Equity. Except as
disclosed to the Agent and the Lenders, since September 30,
1997, the Borrower shall not have (i) entered into any mate-
rial (as determined in good faith by the Agent) commitment
or transaction, including, without limitation, transactions
for borrowings and Capital Expenditures, which are not in
the ordinary course of the Borrower's business, (ii) estab-
lished compensation or employee benefit plans, or (iii)
redeemed or issued any equity Securities.
(e No Loss of Material Agreements and Licenses.
Since September 30, 1997, no agreement or license relating
to the business, operations or employee relations of the
Borrower or any of its Properties shall have been termi-
nated, modified, revoked, breached or declared to be in
default, the termination, modification, revocation, breach
or default under which, in the reasonable judgment of the
Agent, would result in a Material Adverse Effect.
(f No Market Changes. Since September 30, 1997
no material adverse change shall have occurred in the condi-
tions in the capital markets or the market for loan syndica-
tions generally.
(g No Default. No Event of Default or Potential
Event of Default shall have occurred and be continuing or
would result from the making of the Loans.
(h Representations and Warranties. All of the
representations and warranties contained in Section 7.1 and
in any of the other Loan Documents shall be true and correct
in all material respects on and as of the Initial Funding
Date.
(i Fees and Expenses Paid. There shall have
been paid to the Agent, for the accounts of the Agents and
the other Lenders, as applicable, all fees due and payable
on or before the Initial Funding Date and all expenses due
and payable on or before the Initial Funding Date, includ-
ing, without limitation, reasonable attorneys' fees and ex-
penses, and other costs and expenses incurred in connection
with the Loan Documents.
(j Repayment of Indebtedness. The Borrower shall
have delivered to the Agent evidence reasonably acceptable
to the Agent, that the Indebtedness of approximately
$110,000,000 from Comerica Bank to the Borrower, as well as
the Indebtedness of approximately $20,000,000 from PW Real
Estate Investments, Inc. to the Borrower have been repaid in
full and the facilities with respect thereto, cancelled.
VI.2. Conditions Precedent to All Subsequent
Loans. The obligation of each Lender to make any Loan re-
quested to be made by it or to participate in any Letter of
Credit issued by the Fronting Bank and the obligation of the
fronting Bank to issue a Letter of Credit on the occasion of
a Borrowing on any date after the Initial Funding Date is
subject to the following conditions precedent as of each
such date:
(a Representations and Warranties. As of such
date, both before and after giving effect to the Loans to be
made on such date, all of the representations and warranties
of the Borrower contained in Section 7.1 and in any other
Loan Document (other than representations and warranties
which expressly speak as of a different date) shall be true
and correct in all material respects.
(b No Defaults. No Event of Default or Poten-
tial Event of Default shall have occurred and be continuing
or would result from the making of the requested Loan.
(c No Legal Impediments. No law, regulation,
order, judgment or decree of any Governmental Authority
shall, and the Agent shall not have received from such
Lender notice that, in the judgment of such Lender, litiga-
tion is pending or threatened which is likely to, enjoin,
prohibit or restrain, or impose or result in the imposition
of any material adverse condition upon, such Lender's making
of the requested Loan or issuance of the requested letter of
Credit.
(d No Material Adverse Effect. The Borrower
shall not have received written notice from the Requisite
Lenders that an event has occurred since the date of this
Agreement which has had and continues to have, or is reason-
ably likely to have, a Material Adverse Effect.
(e Covenant Compliance Certification. The Bor-
rower shall have delivered to the Agent an Officer's Certif-
icate, in the form of a Quarterly Compliance Certificate, on
a pro forma basis, dated as of the date of the proposed
Loan, indication compliance with the financial covenants of
Articles X and XI.
Each submission by the Borrower to the Agent of a Notice of
Borrowing with respect to a Loan or a Notice of Conver-
sion/Continuation with respect to any Loan and each accep-
tance by the Borrower of the proceeds of each Loan made,
converted or continued hereunder, shall constitute a repre-
sentation and warranty by the Borrower as of the Funding
Date in respect of such Loan and the date of conversion or
continuation, that all the conditions contained in this
Section 6.2 have been satisfied or waived in accordance with
Section 15.7.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
VII.1. Representations and Warranties of the Bor-
rower. In order to induce the Lenders to enter into this
Agreement and to make the Loans and the other financial
accommodations to the Borrower described herein, the Borrow-
er hereby represents and warrants to each Lender that the
following statements are true, correct and complete:
(a Organization; Powers. (i) the Borrower (A)
is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Dela-
ware, (B) is duly qualified to do business and is in good
standing under the laws of each jurisdiction in which fail-
ure to be so qualified and in good standing will have or is
reasonably likely to have a Material Adverse Effect, (C) has
all requisite power and authority to own, operate and encum-
ber its Property and to conduct its business as presently
conducted and as proposed to be conducted in connection with
and following the consummation of the transactions contem-
plated by this Agreement and (D) is a partnership for feder-
al income tax purposes.
(ii General Partner (A) is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Delaware, (B) is duly authorized and
qualified to do business and is in good standing under the
laws of each jurisdiction in which failure to be so quali-
fied and in good standing will have or is reasonably likely
to have a Material Adverse Effect, and (C) has all requisite
corporate power and authority to own, operate and encumber
its Property and to conduct its business as presently con-
ducted.
(iii True, correct and complete copies of the
Organizational Documents identified on Schedule 7.1-A have
been delivered to the Agent, each of which is in full force
and effect, has not been modified or amended except to the
extent set forth therein and, to the best of the Borrower's
knowledge, there are no defaults under such Organizational
Documents and no events which, with the passage of time or
giving of notice or both, would constitute a default under
such Organizational Documents.
(iv Neither Borrower nor any of its Affiliates
are "foreign persons" within the meaning of Section 1445 of
the Internal Revenue Code.
(b Authority. (i) General Partner has the
requisite power and authority to execute, deliver and per-
form this Agreement on behalf of the Borrower and each of
the other Loan Documents which are required to be executed
on behalf of the Borrower as required by this Agreement.
General Partner is the Person who has executed this Agree-
ment and such other Loan Documents on behalf of the Borrower
and is the sole general partner of the Borrower.
(ii The execution, delivery and performance of
each of the Loan Documents which must be executed in connec-
tion with this Agreement by the Borrower and to which the
Borrower is a party and the consummation of the transactions
contemplated thereby are within the Borrower's partnership
powers, have been duly authorized by all necessary partner-
ship action (and, in the case of General Partner acting on
behalf of the Borrower and in its individual capacity in
connection therewith, all necessary corporate action there-
of) and such authorization has not been rescinded. No other
partnership or corporate action or proceedings on the part
of the Borrower or General Partner is necessary to consum-
mate such transactions.
(iii Each of the Loan Documents to which the
Borrower is a party has been duly executed and delivered on
behalf of the Borrower and constitutes the Borrower's legal,
valid and binding obligation, enforceable against the Bor-
rower in accordance with its terms, is in full force and
effect and all the terms, provisions, agreements and condi-
tions set forth therein and required to be performed or
complied with by the Borrower and the Borrower's Subsidiar-
ies on or before the Initial Funding Date have been per-
formed or complied with, and no Potential Event of Default,
Event of Default or breach of any covenant by any of the
Borrower or any Subsidiary of the Borrower exists thereun-
der.
(c Subsidiaries; Ownership of Capital Stock and
Partnership Interests. (i) Schedule 7.1-C (A) contains a
diagram indicating the corporate structure of the Borrower,
and any other Person in which the Borrower holds a direct or
indirect partnership, joint venture or other equity interest
indicating the nature of such interest with respect to each
Person included in such diagram; and (B) accurately sets
forth (1) the correct legal name of such Person, the juris-
diction of its incorporation or organization and the juris-
dictions in which it is qualified to transact business as a
foreign corporation, or otherwise, and (2) the authorized,
issued and outstanding shares or interests of each class of
Securities of the Borrower and the Subsidiaries of the
Borrower and the owners of such shares or interests. None
of such issued and outstanding Securities is subject to any
vesting, redemption, or repurchase agreement, and there are
no warrants or options outstanding with respect to such
Securities, except as noted on Schedule 7.1-C. The out-
standing Capital Stock of General Partner is duly autho-
rized, validly issued, fully paid and nonassessable and the
outstanding Securities of the Borrower and its Subsidiaries
are duly authorized and validly issued. Attached hereto as
part of Schedule 7.1-C is a true, accurate and complete copy
of the Borrower Partnership Agreement as in effect on the
Closing Date and such Partnership Agreement has not been
amended, supplemented, replaced, restated or otherwise
modified in any respect since the Closing Date.
(ii Except where failure may not have a Material
Adverse Effect on the Borrower, each Subsidiary: (A) is a
corporation, limited liability company, limited partnership
or business trust, as indicated on Schedule 7.1-C, duly
organized, validly existing and, if applicable, in good
standing under the laws of the jurisdiction of its organiza-
tion, (B) is duly qualified to do business and, if applica-
ble, is in good standing under the laws of each jurisdiction
in which failure to be so qualified and in good standing
would limit its ability to use the courts of such jurisdic-
tion to enforce Contractual Obligations to which it is a
party, and (C) has all requisite power and authority to own,
operate and encumber its Property and to conduct its busi-
ness as presently conducted and as proposed to be conducted
hereafter.
(d No Conflict. The execution, delivery and
performance of each of the Loan Documents to which the
Borrower is a party do not and will not (i) conflict with
the Organizational Documents of the Borrower or any Subsid-
iary of the Borrower, (ii) constitute a tortious interfer-
ence with any Contractual Obligation of any Person or con-
flict with, result in a breach of or constitute (with or
without notice or lapse of time or both) a default under any
Requirement of Law or Contractual Obligation of the Borrow-
er, any Limited Partner, any Subsidiary of the Borrower, or
any general or limited partner of any Subsidiary of the
Borrower, or require termination of any such Contractual
Obligation which may subject the Agent or any of the other
Lenders to any liability, (iii) result in or require the
creation or imposition of any Lien whatsoever upon any of
the Property or assets of the Borrower, any Limited Partner,
any Subsidiary of the Borrower, or any general partner or
limited partner of any Subsidiary of the Borrower, or
(iv) require any approval of shareholders of General Partner
or any general partner (or equity holder of any general
partner) of any Subsidiary of the Borrower.
(e Governmental Consents. The execution, deliv-
ery and performance of each of the Loan Documents to which
the Borrower is a party do not and will not require any
registration with, consent or approval of, or notice to, or
other action to, with or by any Governmental Authority,
except filings, consents or notices which have been made,
obtained or given.
(f Governmental Regulation. Neither the Borrow-
er nor General Partner is subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, or the Investment
Company Act of 1940, or any other federal or state statute
or regulation which limits its ability to incur indebtedness
or its ability to consummate the transactions contemplated
by this Agreement.
(g Financial Position. Complete and accurate
copies of the following financial statements and materials
have been delivered to the Agent: (i) annual audited finan-
cial statements of the General Partner, the Borrower and
their Subsidiaries for the fiscal year ended December 31,
1996, and (ii) quarterly financial statements for the Gener-
al Partner, the Borrower and their Subsidiaries for the
fiscal quarter ending September 30, 1997. All financial
statements included in such materials were prepared in all
material respects in conformity with GAAP, except as other-
wise noted therein, and fairly present in all material re-
spects the respective consolidated financial positions, and
the consolidated results of operations and cash flows for
each of the periods covered thereby of the General Partner,
the Borrower and their Subsidiaries as at the respective
dates thereof. Neither the General Partner, the Borrower
nor any of their Subsidiaries has any Contingent Obligation,
contingent liability or liability for any taxes, long-term
leases or commitments, not reflected in its audited finan-
cial statements delivered to the Agent on or prior to the
Closing Date or otherwise disclosed to the Agent and the
Lenders in writing, which will have or is reasonably likely
to have a Material Adverse Effect.
(h Indebtedness. Schedule 7.1-H sets forth, as
of September 30, 1997, all Indebtedness for borrowed money
of each of the General Partner, the Borrower and their re-
spective Subsidiaries, and Schedule 7.1-H sets forth with
particularity whether each such item of Indebtedness is
Unsecured Indebtedness or Secured Indebtedness, and, except
as set forth on Schedule 7.1-H, there are no defaults in the
payment of principal or interest on any such Indebtedness
and no payments thereunder have been deferred or extended
beyond their stated maturity and there has been no material
change in the type or amount of such Indebtedness (except
for increases in a credit facility provided by Pacific
Mutual Life Insurance Company in an aggregate amount not to
exceed $30,000,000, and the repayment of certain Indebted-
ness) since September 30, 1997.
(i Litigation; Adverse Effects. Except as set
forth in Schedule 7.1-I, as of the Closing Date, there is no
action, suit, proceeding, Claim, investigation or arbitra-
tion before or by any Governmental Authority or private
arbitrator pending or, to the knowledge of the Borrower,
threatened against the Borrower, or any of their respective
Subsidiaries, or any Property of any of them (i) challenging
the validity or the enforceability of any of the Loan Docu-
ments, (ii) which will or is reasonably likely to result in
any Material Adverse Effect, or (iii) under the Racketeering
Influenced and Corrupt Organizations Act or any similar
federal or state statute where such Person is a defendant in
a criminal indictment that provides for the forfeiture of
assets to any Governmental Authority as a potential criminal
penalty. There is no material loss contingency within the
meaning of GAAP which has not been reflected in the consoli-
dated financial statements of the Borrower. None of the
Borrower or any Subsidiary of the Borrower is (A) in viola-
tion of any applicable Requirements of Law which violation
will have or is reasonably likely to have a Material Adverse
Effect, or (B) subject to or in default with respect to any
final judgment, writ, injunction, restraining order or order
of any nature, decree, rule or regulation of any court or
Governmental Authority which will have or is reasonably
likely to have a Material Adverse Effect.
(j No Material Adverse Effect. Since September
30, 1997, there has occurred no event which has had or is
reasonably likely to have a Material Adverse Effect.
(k Tax Examinations. The IRS has examined (or
is foreclosed from examining by applicable statutes) the
federal income tax returns of any of the Borrower's or its
Subsidiaries' predecessors in interest with respect to the
Properties for all tax periods prior to and including the
taxable year ending December 31, 199_ and the appropriate
state Governmental Authority in each state in which the
Borrower's or its Subsidiaries' predecessors in interest
with respect to the Properties were required to file state
income tax returns has examined (or is foreclosed from
examining by applicable statutes) the state income tax
returns of any of such Persons with respect to the Proper-
ties for all tax periods prior to and including the taxable
year ending December 31, 199_. All deficiencies which have
been asserted against such Persons as a result of any feder-
al, state, local or foreign tax examination for each taxable
year in respect of which an examination has been conducted
have been fully paid or finally settled or are being con-
tested in good faith, and no issue has been raised in any
such examination which, by application of similar princi-
ples, reasonably can be expected to result in assertion of a
material deficiency for any other year not so examined which
has not been reserved for in the financial statements of
such Persons to the extent, if any, required by GAAP. No
such Person has taken any reporting positions for which it
does not have a reasonable basis nor anticipates any further
material tax liability with respect to the years which have
not been closed pursuant to applicable law.
(l Payment of Taxes. All tax returns, reports
and similar statements or filings of each of the Persons de-
scribed in Section 7.1(k), the Borrower and its Subsidiaries
required to be filed have been timely filed, and, except for
Customary Permitted Liens, all taxes, assessments, fees and
other charges of Governmental Authorities thereupon and upon
or relating to their respective Properties, assets, re-
ceipts, sales, use, payroll, employment, income, licenses
and franchises which are shown in such returns or reports to
be due and payable have been paid, except to the extent (i)
such taxes, assessments, fees and other charges of Govern-
mental Authorities are being contested in good faith by an
appropriate proceeding diligently pursued as permitted by
the terms of Section 9.4 and (ii) such taxes, assessments,
fees and other charges of Governmental Authorities pertain
to Property of the Borrower or any of its Subsidiaries and
the non-payment of the amounts thereof would not, individu-
ally or in the aggregate, result in a Material Adverse
Effect. All other taxes (including, without limitation,
real estate taxes), assessments, fees and other governmental
charges upon or relating to the respective Properties of the
Borrower and its Subsidiaries which are due and payable have
been paid, except for Customary Permitted Liens and except
to the extent described in clauses (i) and (ii) hereinabove.
The Borrower has no knowledge of any proposed tax assess-
ment against the Borrower, any of their respective
Subsidiaries, or any of the Properties that will have or is
reasonably likely to have a Material Adverse Effect.
(m Performance. Neither the Borrower nor any of
their Affiliates has received any notice, citation or alle-
gation, nor has actual knowledge, that (i) it is in default
in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Con-
tractual Obligation applicable to it, (ii) any of its Prop-
erties is in violation of any Requirements of Law or
(iii) any condition exists which, with the giving of notice
or the lapse of time or both, would constitute a default
with respect to any such Contractual Obligation, in each
case, except where such default or defaults, if any, will
not have or are not reasonably likely to have a Material Ad-
verse Effect.
(n) Disclosure. The representations and warran-
ties of the Borrower contained in the Loan Documents, and
all certificates and other documents delivered to the Agent
pursuant to the terms thereof, do not contain any untrue
statement of a material fact or omit to state a material
fact necessary in order to make the statements contained
herein or therein, in light of the circumstances under which
they were made, not misleading. The Borrower has not inten-
tionally withheld any fact from the Agent or the other Lend-
ers in regard to any matter which will have or is reasonably
likely to have a Material Adverse Effect. Notwithstanding
the foregoing, the Lenders acknowledge that the Borrower
shall not have liability under this clause (n) with respect
to its projections of future events; provided, however, that
the representations and warranties of the Borrower contained
in the Loan Documents, and all certificates and other docu-
ments delivered to the Agent pursuant to the terms thereof,
unless otherwise required by the express provisions of the
applicable Loan Documents, are not based upon the Borrower's
projections of future events.
(o) Requirements of Law. The Borrower and each
of its Subsidiaries is in compliance with all Requirements
of Law applicable to it and its respective businesses and
Properties, in each case where the failure to so comply
individually or in the aggregate will have or is reasonably
likely to have a Material Adverse Effect.
(p) Environmental Matters.
(i) Except as disclosed on Schedule 7.1-P:
(A) the operations of the Borrower, each
of its Subsidiaries, and their respective Properties comply
with all applicable Environmental, Health or Safety Require-
ments of Law;
(B) the Borrower and each of its Subsid-
iaries have obtained all material environmental, health and
safety Permits necessary for their respective operations,
and all such Permits are in good standing and the holder of
each such Permit is currently in compliance with all terms
and conditions of such Permits;
(C) none of the Borrower or any of its
Subsidiaries or any of their respective present or past
Property or operations is subject to or is the subject of
any investigation, judicial or administrative proceeding,
order, judgment, decree, dispute, negotiations, agreement or
settlement respecting (I) any Environmental, Health or
Safety Requirements of Law, (II) any Remedial Action,
(III) any Claims or Liabilities and Costs arising from the
Release or threatened Release of a Contaminant into the
environment, or (IV) any violation of or liability under any
Environmental, Health or Safety Requirement of Law;
(D) none of Borrower or any of its Sub-
sidiaries has filed any notice under any applicable Require-
ment of Law (I) reporting a Release of a Contaminant; (II)
indicating past or present treatment, storage or disposal of
a hazardous waste, as that term is defined under 40 C.F.R.
Part 261 or any state equivalent; or (III) reporting a
violation of any applicable Environmental, Health or Safety
Requirement of Law;
(E) none of the Borrower's or any of its
Subsidiaries' present or past Property is listed or proposed
for listing on the National Priorities List ("NPL") pursuant
to CERCLA or on the Comprehensive Environmental Response
Compensation Liability Information System List ("CERCLIS")
or any similar state list of sites requiring Remedial Ac-
tion;
(F) neither the Borrower nor any of its
Subsidiaries has sent or directly arranged for the transport
of any waste to any site listed or proposed for listing on
the NPL, CERCLIS or any similar state list;
(G) to the best of Borrower's knowledge,
there is not now, and to Borrower's knowledge there has
never been on or in any Real Property owned by any of the
Consolidated Businesses (I) any treatment, recycling, stor-
age or disposal of any hazardous waste, as that term is
defined under 40 C.F.R. Part 261 or any state equivalent;
(II) any landfill, waste pile, or surface impoundment; (III)
any underground storage tanks the presence or use of which
is or, to Borrower's knowledge, has been in violation of
applicable Environmental, Health or Safety Requirements of
Law, (IV) any asbestos-containing material which such Person
has any reason to believe could subject such Person or its
Property to Liabilities and Costs arising out of or relating
to environmental, health or safety matters that would result
in a Material Adverse Effect; or (V) any polychlorinated
biphenyls (PCB) used in hydraulic oils, electrical trans-
formers or other Equipment which such Person has any reason
to believe could subject such Person or its Property to Lia-
bilities and Costs arising out of or relating to environmen-
tal, health or safety matters that would result in a Materi-
al Adverse Effect;
(H) neither the Borrower nor any of its
Subsidiaries has received any notice or Claim to the effect
that any of such Persons is or may be liable to any Person
as a result of the Release or threatened Release of a Con-
taminant into the environment;
(I) neither the Borrower nor any of its
Subsidiaries has any contingent liability in connection with
any Release or threatened Release of any Contaminants into
the environment that could result in a Material Adverse
Effect;
(J) no Environmental Lien has attached to
any Property of the Borrower or any Subsidiary of the Bor-
rower;
(K) no Property of the Borrower or any
Subsidiary of the Borrower is subject to any Environmental
Property Transfer Act, or to the extent such acts are appli-
cable to any such Property, the Borrower and/or such Subsid-
iary whose Property is subject thereto has fully complied
with the requirements of such acts; and
(L) neither the Borrower nor any of its
Subsidiaries owns or operates, or, to Borrower's knowledge
has ever owned or operated, any underground storage tank,
the presence or use of which is or has been in violation of
applicable Environmental, Health or Safety Requirements of
Law, at any Real Property.
(ii) the Borrower and each of its Subsidiar-
ies are conducting and will continue to conduct their re-
spective businesses and operations and maintain each Real
Property in compliance with Environmental, Health or Safety
Requirements of Law and no such Person has been, and no such
Person has any reason to believe that it or any Property
will be, subject to Liabilities and Costs arising out of or
relating to environmental, health or safety matters that
would result in a Material Adverse Effect.
(q) ERISA. Neither the Borrower nor any ERISA
Affiliate maintains or contributes to any Benefit Plan or
Multiemployer Plan other than those listed on Schedule 7.1-Q
hereto. Each such Plan which is intended to be qualified
under Section 401(a) of the Internal Revenue Code as cur-
rently in effect has been determined by the IRS to be so
qualified, and each trust related to any such Plan has been
determined to be exempt from federal income tax under Sec-
tion 501(a) of the Internal Revenue Code as currently in
effect. Except as disclosed in Schedule 7.1-Q, neither the
Borrower nor any of its Subsidiaries maintains or contrib-
utes to any employee welfare benefit plan within the meaning
of Section 3(1) of ERISA which provides benefits to employ-
ees after termination of employment other than as required
by Section 601 of ERISA. The Borrower and each of its
Subsidiaries is in compliance in all material respects with
the responsibilities, obligations and duties imposed on it
by ERISA, the Internal Revenue Code and regulations promul-
gated thereunder with respect to all Plans. No Benefit Plan
has incurred any accumulated funding deficiency (as defined
in Sections 302(a)(2) of ERISA and 412(a) of the Internal
Revenue Code) whether or not waived. Neither the Borrower
nor any ERISA Affiliate nor any fiduciary of any Plan which
is not a Multiemployer Plan (i) has engaged in a nonexempt
prohibited transaction described in Sections 406 of ERISA or
4975 of the Internal Revenue Code or (ii) has taken or
failed to take any action which would constitute or result
in a Termination Event. Neither the Borrower nor any ERISA
Affiliate is subject to any liability under Sections 4063,
4064, 4069, 4204 or 4212(c) of ERISA. Neither the Borrower
nor any ERISA Affiliate has incurred any liability to the
PBGC which remains outstanding other than the payment of
premiums, and there are no premium payments which have
become due which are unpaid. Schedule B to the most recent
annual report filed with the IRS with respect to each Bene-
fit Plan and furnished to the Agent is complete and accurate
in all material respects. Since the date of each such
Schedule B, there has been no material adverse change in the
funding status or financial condition of the Benefit Plan
relating to such Schedule B. Neither the Borrower nor any
ERISA Affiliate has (i) failed to make a required contribu-
tion or payment to a Multiemployer Plan or (ii) made a
complete or partial withdrawal under Sections 4203 or 4205
of ERISA from a Multiemployer Plan. Neither the Borrower
nor any ERISA Affiliate has failed to make a required in-
stallment or any other required payment under Section 412 of
the Internal Revenue Code on or before the due date for such
installment or other payment. Neither the Borrower nor any
ERISA Affiliate is required to provide security to a Benefit
Plan under Section 401(a)(29) of the Internal Revenue Code
due to a Benefit Plan amendment that results in an increase
in current liability for the plan year. Except as disclosed
on Schedule 7.1-Q, neither the Borrower nor any of its
Subsidiaries has, by reason of the transactions contemplated
hereby, any obligation to make any payment to any employee
pursuant to any Plan or existing contract or arrangement.
(r) Securities Activities. The Borrower is not
engaged in the business of extending credit for the purpose
of purchasing or carrying Margin Stock.
(s) Solvency. After giving effect to the Loans
to be made on the Initial Funding Date or such other date as
Loans requested hereunder are made, and the disbursement of
the proceeds of such Loans pursuant to the Borrower's in-
structions, the Borrower is Solvent.
(t) Insurance. Schedule 7.1-T accurately sets
forth as of the Closing Date all insurance policies main-
tained by the Borrower and its Subsidiaries and programs
currently in effect with respect to the respective Property
and assets and business of the Borrower and its Subsidiar-
ies, specifying for each such policy and program, (i) the
amount thereof, (ii) the risks insured against thereby,
(iii) the name of the insurer and each insured party there-
under, (iv) the policy or other identification number there-
of, and (v) the expiration date thereof. The Borrower has
delivered to the Agent copies of all insurance policies set
forth on Schedule 7.1-T. Such insurance policies and pro-
grams are currently in full force and effect, in compliance
with the requirements of Section 9.5 hereof and, together
with payment by the insured of scheduled deductible pay-
ments, are in amounts sufficient to cover the replacement
value of the respective Property and assets of the Borrower
and/or its Subsidiaries.
(u) REIT Status. Guarantor qualifies as a REIT
under the Internal Revenue Code.
(v) Ownership of Property. Ownership of substan-
tially all Property of the Consolidated Businesses is held
by the Borrower and its Subsidiaries.
ARTICLE VIII
REPORTING COVENANTS
The Borrower covenants and agrees that so long as
any Revolving Credit Commitments are outstanding and there-
after until payment in full of all of the Obligations (other
than indemnities pursuant to Section 15.3 not yet due),
unless the Requisite Lenders shall otherwise give prior
written consent thereto:
VIII.1. Borrower Accounting Practices. The Bor-
rower shall maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and adminis-
tered in accordance with sound business practices to permit
preparation of consolidated and consolidating financial
statements in conformity with GAAP, and each of the finan-
cial statements and reports described below shall be
prepared from such system and records and in form
satisfactory to the Agent.
VIII.2. Financial Reports. The Borrower shall
deliver or cause to be delivered to the Agent and the
Lenders:
(a) Quarterly Reports.
(i) Borrower Quarterly Financial Reports. As soon
as practicable, and in any event within forty-five (45) days
after the end of each fiscal quarter in each Fiscal Year
(other than the last fiscal quarter in each Fiscal Year), a
consolidated balance sheet of the Borrower and the related
consolidated statements of income and cash flow of the
Borrower (to be prepared and delivered quarterly in con-
junction with the other reports delivered hereunder at the
end of each fiscal quarter) for each such fiscal quarter, in
each case in form and substance satisfactory to the Agent
and, in comparative form, the corresponding figures for the
corresponding periods of the previous Fiscal Year, certified
by an Authorized Financial Officer of General Partner as
fairly presenting the consolidated financial position of the
Borrower as of the dates indicated and the results of their
operations and cash flow for the months indicated in accor-
dance with GAAP, subject to normal quarterly adjustments.
(ii) Quarterly Compliance Certificates. Together
with each delivery of any quarterly report pursuant to
paragraph (a)(i) of this Section 8.2, the Borrower shall
deliver Officer's Certificates of the Borrower (the "Quar-
terly Compliance Certificates"), signed by the Borrower's
respective Authorized Financial Officers representing and
certifying (1) that the Authorized Financial Officer signa-
tory thereto has reviewed the terms of the Loan Documents,
and has made, or caused to be made under his/her supervi-
sion, a review in reasonable detail of the transactions and
consolidated financial condition of the Borrower and its
Subsidiaries, during the fiscal quarter covered by such
reports, that such review has not disclosed the existence
during or at the end of such fiscal quarter, and that such
officer does not have knowledge of the existence as of the
date of such Officer's Certificate, of any condition or
event which constitutes an Event of Default or Potential
Event of Default or mandatory prepayment event, or, if any
such condition or event existed or exists, and specifying
the nature and period of existence thereof and what action
the Borrower or any of its Subsidiaries has taken, is taking
and proposes to take with respect thereto; (2) the calcula-
tions (with such specificity as the Agent may reasonably re-
quest) for the period then ended which demonstrate compli-
ance with the covenants and financial ratios set forth in
Articles IX and X and, when applicable, that no Event of
Default described in Section 11.1 exists, (3) a schedule of
the Borrower's outstanding Indebtedness, including the
amount, maturity, interest rate and amortization require-
ments, as well as such other information regarding such
Indebtedness as may be reasonably requested by the Agent,
(4) a schedule of Combined EBITDA, (5) calculations, in the
form of Exhibit G attached hereto, evidencing compliance
with each of the financial covenants set forth in Article X
hereof, (6) a schedule of the estimated taxable income of
the Borrower for such fiscal quarter and (7) a rent roll,
tenant sales report and income statement (if such sales
report and income statement are available to the Borrower)
with respect to any Real Property owned in whole or in part
by any of the Consolidated Businesses.
(b) Annual Reports.
(i) Borrower Financial Statements. As soon as
practicable, and in any event within ninety (90) days after
the end of each Fiscal Year, (i) the Financial Statements of
the Borrower and its Subsidiaries as at the end of such
Fiscal Year, (ii) a report with respect thereto of Deloitte
& Touche L.L.P. or other independent certified public ac-
countants acceptable to the Agent, which report shall be
unqualified and shall state that such financial statements
fairly present the consolidated and consolidating financial
position of each of the Borrowers and its Subsidiaries as at
the dates indicated and the results of their operations and
cash flow for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years (except for
changes with which Deloitte & Touche L.L.P. or any such
other independent certified public accountants, if appli-
cable, shall concur and which shall have been disclosed in
the notes to the financial statements), and (iii) in the
event that the report referred to in clause (ii) above is
qualified, a copy of the management letter or any similar
report delivered to the Borrower or to any officer or em-
ployee thereof by such independent certified public accoun-
tants in connection with such financial statements (which
letter or report shall be subject to the confidentiality
limitations set forth herein and shall set forth such inde-
pendent certified public accountants' knowledge of events
which would give rise hereunder to mandatory prepayment,
Events of Default and Potential Events of Default, if any).
The Agent and each Lender (through the Agent) may, with the
consent of the Borrower (which consent shall not be unrea-
sonably withheld), communicate directly with such accoun-
tants, with any such communication to occur together with a
representative of the Borrower, at the expense of the Agent
(or the Lender requesting such communication), upon reason-
able notice and at reasonable times during normal business
hours.
(ii) Annual Compliance Certificates. Together
with each delivery of any annual report pursuant to clauses
(i) and (ii) of this Section 8.2(b), the Borrower shall
deliver Officer's Certificates of the Borrower (the "Annual
Compliance Certificates" and, collectively with the Quarter-
ly Compliance Certificates, the "Compliance Certificates"),
signed by the Borrower's respective Authorized Financial
Officers, representing and certifying (1) that the officer
signatory thereto has reviewed the terms of the Loan Docu-
ments, and has made, or caused to be made under his/her
supervision, a review in reasonable detail of the transac-
tions and consolidated and consolidating financial condition
of the Borrower and its Subsidiaries, during the accounting
period covered by such reports, that such review has not
disclosed the existence during or at the end of such ac-
counting period, and that such officer does not have knowl-
edge of the existence as at the date of such Officer's
Certificate, of any condition or event which constitutes an
Event of Default or Potential Event of Default or mandatory
prepayment event, or, if any such condition or event existed
or exists, and specifying the nature and period of existence
thereof and what action the Borrower or any of its Subsid-
iaries has taken, is taking and proposes to take with re-
spect thereto; (2) the calculations (with such specificity
as the Agent may reasonably request) for the period then
ended which demonstrate compliance with the covenants and
financial ratios set forth in Articles IX and X and, when
applicable, that no Event of Default described in Section
11.1 exists, (3) a schedule of the Borrower's outstanding
Indebtedness including the amount, maturity, interest rate
and amortization requirements, as well as such other infor-
mation regarding such Indebtedness as may be reasonably
requested by the Agent, (4) a schedule of Combined EBITDA,
(5) calculations, in the form of Exhibit G attached hereto,
evidencing compliance with each of the financial covenants
set forth in Article X hereof, (6) a schedule of the esti-
mated taxable income of the Borrower for such fiscal year,
(7) a schedule of all Capital Expenditures for such fiscal
year together with a budget of planned Capital Expenditures
for the fiscal year immediately following such fiscal year
and (8) a rent roll, tenant sales report and income state-
ment with respect to any Real Property owned in whole or in
part by any of the Consolidated Businesses.
(iii) Tenant Bankruptcy Reports. As soon as
practicable, and in any event within ninety (90) days after
the end of each Fiscal Year, the Borrower shall deliver a
written report, in form reasonably satisfactory to the
Agent, of all bankruptcy proceedings filed by or against any
tenant of any of the Real Properties, the base rent payments
of which tenant account for more than 4% of the Borrower's
share of consolidated minimum rent in the Real Properties in
the aggregate. The Borrower shall deliver to the Agent and
the Lenders, immediately upon the Borrower's learning there-
of, of any bankruptcy proceedings filed by or against, or
the cessation of business or operations of, any tenant of
any of the Real Properties, the base rent payments of which
tenant account for more than 4% of the Borrower's share of
consolidated minimum rent in the Real Properties in the
aggregate.
VIII.3. Events of Default. Promptly upon the
Borrower obtaining knowledge (a) of any condition or event
which constitutes an Event of Default or Potential Event of
Default, or becoming aware that any Lender or the Agent has
given any notice with respect to a claimed Event of Default
or Potential Event of Default under this Agreement; (b) that
any Person has given any notice to the Borrower or any
Subsidiary of the Borrower or taken any other action with
respect to a claimed default or event or condition of the
type referred to in Section 11.1(e); or (c) or of any condi-
tion or event which has or is reasonably likely to have a
Material Adverse Effect, the Borrower shall deliver to the
Agent and the Lenders an Officer's Certificate specifying
(i) the nature and period of existence of any such claimed
default, Event of Default, Potential Event of Default,
condition or event, (ii) the notice given or action taken by
such Person in connection therewith, and (iii) what action
the Borrower has taken, is taking and proposes to take with
respect thereto.
VIII.4. Lawsuits. (i) Promptly upon the
Borrower's obtaining knowledge of the institution of, or
written threat of, any action, suit, proceeding, govern-
mental investigation or arbitration against or affecting the
Borrower or any of its Subsidiaries not previously disclosed
pursuant to Section 7.1(i), which action, suit, proceeding,
governmental investigation or arbitration exposes, or in the
case of multiple actions, suits, proceedings, governmental
investigations or arbitrations arising out of the same
general allegations or circumstances which expose, in the
Borrower's reasonable judgment, the Borrower or any of its
Subsidiaries to liability in an amount aggregating $250,000
or more and is not covered by Borrower's insurance, the
Borrower shall give written notice thereof to the Agent and
the Lenders and provide such other information as may be
reasonably available to enable each Lender and the Agent and
its counsel to evaluate such matters; (ii) as soon as
practicable and in any event within thirty (30) days after
the end of each fiscal quarter of the Borrower, the Borrower
shall provide a written quarterly report to the Agent and
the Lenders covering the institution of, or written threat
of, any action, suit, proceeding, governmental investigation
or arbitration (not previously reported) against or affect-
ing the Borrower or any of its Subsidiaries or any Property
of the Borrower or any of its Subsidiaries not previously
disclosed by the Borrower to the Agent and the Lenders, and
shall provide such other information at such time as may be
reasonably available to enable each Lender and the Agent and
its counsel to evaluate such matters; and (iii) in addition
to the requirements set forth in clauses (i) and (ii) of
this Section 8.4, the Borrower upon request of the Agent or
the Requisite Lenders shall promptly give written notice of
the status of any action, suit, proceeding, governmental
investigation or arbitration covered by a report delivered
pursuant to clause (i) or (ii) above and provide such other
information as may be reasonably available to it to enable
each Lender and the Agent and its counsel to evaluate such
matters.
VIII.5. Insurance. As soon as practicable and in
any event by January 1st of each calendar year, the Borrower
shall deliver to the Agent and the Lenders (i) a report in
form and substance reasonably satisfactory to the Agent and
the Lenders outlining all insurance coverage maintained as
of the date of such report by the Borrower and its Subsid-
iaries and the duration of such coverage and (ii) evidence
that all premiums with respect to such coverage have been
paid when due.
VIII.6. ERISA Notices. The Borrower shall deliv-
er or cause to be delivered to the Agent and the Lenders, at
the Borrower's expense, the following information and notic-
es as soon as reasonably possible, and in any event:
(a) within fifteen (15) Business Days after
the Borrower or any ERISA Affiliate knows or has
reason to know that a Termination Event has oc-
curred, a written statement of the chief financial
officer of the Borrower describing such Termina-
tion Event and the action, if any, which the Bor-
rower or any ERISA Affiliate has taken, is taking
or proposes to take with respect thereto, and when
known, any action taken or threatened by the IRS,
DOL or PBGC with respect thereto;
(b) within fifteen (15) Business Days after
the Borrower knows or has reason to know that a
prohibited transaction (defined in Sections 406 of
ERISA and Section 4975 of the Internal Revenue
Code) has occurred, a statement of the chief fi-
nancial officer of the Borrower describing such
transaction and the action which the Borrower or
any ERISA Affiliate has taken, is taking or pro-
poses to take with respect thereto;
(c) within fifteen (15) Business Days after
the filing of the same with the DOL, IRS or PBGC,
copies of each annual report (form 5500 series),
including Schedule B thereto, filed with respect
to each Benefit Plan;
(d) within fifteen (15) Business Days after
receipt by the Borrower or any ERISA Affiliate of
each actuarial report for any Benefit Plan or
Multiemployer Plan and each annual report for any
Multiemployer Plan, copies of each such report;
(e) within fifteen (15) Business Days after
the filing of the same with the IRS, a copy of
each funding waiver request filed with respect to
any Benefit Plan and all communications received
by the Borrower or any ERISA Affiliate with re-
spect to such request;
(f) within fifteen (15) Business Days after
the occurrence any material increase in the bene-
fits of any existing Benefit Plan or Multiemployer
Plan or the establishment of any new Benefit Plan
or the commencement of contributions to any Bene-
fit Plan or Multiemployer Plan to which the Bor-
rower or any ERISA Affiliate to which the Borrower
or any ERISA Affiliate was not previously contrib-
uting, notification of such increase, establish-
ment or commencement;
(g) within fifteen (15) Business Days after
the Borrower or any ERISA Affiliate receives no-
tice of the PBGC's intention to terminate a Bene-
fit Plan or to have a trustee appointed to admin-
ister a Benefit Plan, copies of each such notice;
(h) within fifteen (15) Business Days after
the Borrower or any of its Subsidiaries receives
notice of any unfavorable determination letter
from the IRS regarding the qualification of a Plan
under Section 401(a) of the Internal Revenue Code,
copies of each such letter;
(i) within fifteen (15) Business Days after
the Borrower or any ERISA Affiliate receives no-
tice from a Multiemployer Plan regarding the impo-
sition of withdrawal liability, copies of each
such notice;
(j) within fifteen (15) Business Days after
the Borrower or any ERISA Affiliate fails to make
a required installment or any other required pay-
ment under Section 412 of the Internal Revenue
Code on or before the due date for such install-
ment or payment, a notification of such failure;
and
(k) within fifteen (15) Business Days after
the Borrower or any ERISA Affiliate knows or has
reason to know (i) a Multiemployer Plan has been
terminated, (ii) the administrator or plan sponsor
of a Multiemployer Plan intends to terminate a
Multiemployer Plan, or (iii) the PBGC has insti-
tuted or will institute proceedings under Section
4042 of ERISA to terminate a Multiemployer Plan,
notification of such termination, intention to
terminate, or institution of proceedings.
For purposes of this Section 8.6, the Borrower and any ERISA
Affiliate shall be deemed to know all facts known by the
"Administrator" of any Plan of which the Borrower or any
ERISA Affiliate is the plan sponsor.
VIII.7. Environmental Notices. The Borrower
shall notify the Agent and the Lenders in writing, promptly
upon any representative of the Borrower or other employee of
the Borrower responsible for the environmental matters at
any Property of the Borrower learning thereof, of any of the
following (together with any material documents and corre-
spondence received or sent in connection therewith):
(a) notice or claim to the effect that the
Borrower or any of its Subsidiaries is or may be
liable to any Person as a result of the Release or
threatened Release of any Contaminant into the
environment, if such liability would result in a
Material Adverse Effect;
(b) notice that the Borrower or any of its
Subsidiaries is subject to investigation by any
Governmental Authority evaluating whether any
Remedial Action is needed to respond to the Re-
lease or threatened Release of any Contaminant
into the environment;
(c) notice that any Property of the Borrower
or any of its Subsidiaries is subject to an Envi-
ronmental Lien if the claim to which such Environ-
mental Lien relates would result in a Material
Adverse Effect;
(d) notice of violation by the Borrower or
any of its Subsidiaries of any Environmental,
Health or Safety Requirement of Law;
(e) any condition which might reasonably re-
sult in a violation by the Borrower or any Sub-
sidiary of the Borrower of any Environmental,
Health or Safety Requirement of Law, which viola-
tion would result in a Material Adverse Effect;
(f) commencement or threat of any judicial
or administrative proceeding alleging a violation
by the Borrower or any of its Subsidiaries of any
Environmental, Health or Safety Requirement of
Law, which would result in a Material Adverse
Effect;
(g) new or proposed changes to any existing
Environmental, Health or Safety Requirement of Law
that could result in a Material Adverse Effect; or
(h) any proposed acquisition of stock, as-
sets, real estate, or leasing of Property, or any
other action by the Borrower or any of its Subsid-
iaries that could subject the Borrower or any of
its Subsidiaries to environmental, health or safe-
ty Liabilities and Costs which could result in a
Material Adverse Effect.
VIII.8. Labor Matters. The Borrower shall notify
the Agent and the Lenders in writing, promptly upon the
Borrower's learning thereof, of any labor dispute to which
the Borrower or any of its Subsidiaries may become a party
(including, without limitation, any strikes, lockouts or
other disputes relating to any Property of such Persons' and
other facilities) which could result in a Material Adverse
Effect.
VIII.9. Notices of Asset Sales and/or Acquisi-
tions. The Borrower shall deliver to the Agent and the
Lenders written notice of each of the following upon the
occurrence thereof: (a) a sale, transfer or other dispo-
sition of assets, in a single transaction or series of
related transactions, for consideration in excess of
$50,000,000, (b) an acquisition of assets, in a single
transaction or series of related transactions, for consider-
ation in excess of $50,000,000, and (c) the grant of a Lien
with respect to assets, in a single transaction or series of
related transactions, in connection with Indebtedness aggre-
gating an amount in excess of $50,000,000.
VIII.10. Tenant Notifications. The Borrower
shall promptly notify the Agent upon obtaining knowledge of
the bankruptcy or cessation of operations of any tenant to
which greater than 4% of the Borrower's share of
consolidated minimum rent is attributable.
VIII.11. Other Reports. The Borrower shall
deliver or cause to be delivered to the Agent and the other
Lenders copies of all financial statements, reports, notices
and other materials, if any, sent or made available
generally by the Borrower to its respective Securities
holders or filed with the Commission, all press releases
made available generally by the Borrower or any of its Sub-
sidiaries to the public concerning material developments in
the business of the Borrower or any such Subsidiary and all
notifications received by the Borrower or its Subsidiaries
pursuant to the Securities Exchange Act and the rules pro-
mulgated thereunder.
VIII.12. Other Information. Promptly upon re-
ceiving a request therefor from the Agent or any Co-Agent,
the Borrower shall prepare and deliver to the Agent and the
other Lenders such other information with respect to either
the Borrower or any of its Subsidiaries, including, without
limitation, information and documentation evidencing the
compliance by the Borrower with the covenants set forth in
Article IX and Article X hereof, as from time to time may be
reasonably requested by the Agent.
ARTICLE IX
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that so long as any
Revolving Credit Commitments are outstanding and thereafter
until payment in full of all of the Obligations (other than
indemnities pursuant to Section 15.3 not yet due), unless
the Requisite Lenders shall otherwise give prior written
consent:
IX.1. Existence, Etc. The Borrower shall, and
shall cause each of its Subsidiaries to, at all times main-
tain its corporate existence or existence as a limited
partnership, limited liability company, corporation, busi-
ness trust or joint venture, as applicable, and preserve and
keep, or cause to be preserved and kept, in full force and
effect its rights and franchises material to its businesses,
except where the loss or termination of such rights and
franchises is not likely to have a Material Adverse Effect.
IX.2. Powers; Conduct of Business. The Borrower
shall remain qualified, and shall cause each of its Subsid-
iaries to qualify and remain qualified, to do business and
maintain its good standing in each jurisdiction in which the
nature of its business and the ownership of its Property
requires it to be so qualified and in good standing.
IX.3. Compliance with Laws, Etc. The Borrower
shall, and shall cause each of its Subsidiaries to, (a)
comply with all Requirements of Law and all restrictive
covenants affecting such Person or the business, Property,
assets or operations of such Person, and (b) obtain and
maintain as needed all Permits necessary for its operations
(including, without limitation, the operation of the Real
Properties) and maintain such Permits in good standing,
except where noncompliance with either clause (a) or (b)
above is not reasonably likely to have a Material Adverse
Effect; provided, however, that the Borrower shall, and
shall cause each of its Subsidiaries to, comply with all
Environmental, Health or Safety Requirements of Law affect-
ing such Person or the business, Property, assets or opera-
tions of such Person.
IX.4. Payment of Taxes and Claims. (a) The Bor-
rower shall pay, and cause each of its Subsidiaries to pay,
(i) all taxes, assessments and other governmental charges
imposed upon it or on any of its Property or assets or in
respect of any of its franchises, licenses, receipts, sales,
use, payroll, employment, business, income or Property
before any penalty or interest accrues thereon, and (ii) all
Claims (including, without limitation, claims for labor,
services, materials and supplies) for sums which have become
due and payable and which by law have or may become a Lien
(other than a Lien permitted by Section 10.3 or a Customary
Permitted Lien for property taxes and assessments not yet
due upon any of the Borrower's or any of the Borrower's
Subsidiaries' Property or assets, prior to the time when any
penalty or fine shall be incurred with respect thereto;
provided, however, that no such taxes, assessments, fees and
governmental charges referred to in clause (i) above or
Claims referred to in clause (ii) above need be paid if
being contested in good faith by appropriate proceedings
diligently instituted and conducted and if such reserve or
other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor.
IX.5. Insurance. The Borrower shall maintain for
itself and its Subsidiaries, or shall cause each of its
Subsidiaries to maintain in full force and effect the insur-
ance policies and programs listed on Schedule 7.1-T or sub-
stantially similar policies and programs or other policies
and programs as are reasonably acceptable to the Agent. All
such policies and programs shall be maintained with insurers
reasonably acceptable to the Agent.
IX.6. Inspection of Property; Books and Records;
Discussions. The Borrower shall permit, and cause each of
its Subsidiaries to permit, any authorized representative(s)
designated by either the Agent, Co-Agent or other Lender to
visit and inspect any of the Real Properties, to examine,
audit, check and make copies of their respective financial
and accounting records, books, journals, orders, receipts
and any correspondence and other data relating to their
respective businesses or the transactions contemplated
hereby (including, without limitation, in connection with
environmental compliance, hazard or liability), and to
discuss their affairs, finances and accounts with their
officers and independent certified public accountants, all
with a representative of the Borrower present, upon reason-
able notice and at such reasonable times during normal
business hours, as often as may be reasonably requested.
Each such visitation and inspection shall be at such visi-
tor's expense. The Borrower shall keep and maintain, and
cause its Subsidiaries to keep and maintain, in all material
respects on its proper books of record and account in which
entries in conformity with GAAP shall be made of all deal-
ings and transactions in relation to their respective busi-
nesses and activities.
IX.7. ERISA Compliance. The Borrower shall, and
shall cause each of its Subsidiaries and ERISA Affiliates
to, establish, maintain and operate all Plans to comply in
all material respects with the provisions of ERISA, the
Internal Revenue Code, all other applicable laws, and the
regulations and interpretations thereunder and the respec-
tive requirements of the governing documents for such Plans.
IX.8. Maintenance of Property. The Borrower
shall, and shall cause each of its Subsidiaries to, maintain
or cause to be maintained in all material respects all of
their respective owned and leased Property in good, safe and
insurable condition and repair and in a businesslike manner,
and not permit, commit or suffer any waste or abandonment of
any such Property and from time to time shall make or cause
to be made all material repairs, renewal and replacements
thereof, including, without limitation, any capital improve-
ments which may be required to maintain the same in a busi-
nesslike manner; provided, however, that such Property may
be altered or renovated in the ordinary course of business
of the Borrower or such applicable Subsidiary. Without any
limitation on the foregoing, the Borrower shall maintain the
Real Property in a manner such that each Real Property can
be used in the manner and substantially for the purposes
such Real Property is used on the Closing Date, including,
without limitation, maintaining all utilities, access
rights, zoning and necessary Permits for such Real Property.
IX.9. Company Status. General Partner shall at
all times (1) remain a publicly traded company listed on the
New York Stock Exchange or other national stock exchange;
(2) maintain its status as a REIT under the Internal Revenue
Code, and (3) retain direct or indirect management and con-
trol of the Borrower.
IX.10. Ownership of Property. The ownership of
substantially all Property of the Consolidated Businesses
shall be held by the Borrower and its Subsidiaries.
IX.11. Consolidation of Certain Nonrecourse Debt.
The Borrower shall, prior to the last day of the six (6)
month period commencing on the Closing Date, effect Borrow-
ings pursuant hereto the proceeds of which the Borrower
covenants and agrees to apply to the repayment of the
$30,000,000 nonrecourse credit facility between Pacific
Mutual Life Insurance Company and USRP (Midon) LLC. The
Borrower shall, prior to the date which is 45 days after the
Closing Date, record or cause to be recorded (and shall
deliver proof thereof to the Agent) satisfactions of mort-
gages with respect to the mortgages securing the approxi-
mately $110,000,000 loan from Comerica Bank to the Borrower,
which loan will be repaid with the proceeds of the Loans as
of the Closing Date.
9.12. Gas Station Subsidiaries. The Borrower
shall not, and shall not permit any Affiliate to, invest in
any gas station Property except through a Gas Station Sub-
sidiary. In addition, the Borrower shall not permit any Gas
Station Subsidiary to purchase any Property which includes a
gas station unless the following conditions shall have been
satisfied:
(a) the Gas Station Subsidiary shall not hold
title to any storage tanks, and the owners thereof shall
comply with all applicable requirements of federal and state
laws and regulations, whether or not such tanks may have
been installed prior to 1988, including with respect to
financial assurances requirements;
(b) the owner of any such tank shall insure (i)
that the tanks and related lines shall be corrosion resis-
tant or protected from corrosion, (ii) that the tanks have
overfill/overspill protection, (iii) that the tanks have
continuous leak protection, (iv) that inventory controls are
in place, and (v) that the tanks comply with all current
federal and state laws;
(c) the owner of any such tank must demonstrate
to the Agent's satisfaction that either (i) it has adequate
assets to satisfy all federal and state requirements with
respect to self-insurance, or (ii) it has purchased an
environmental liability insurance policy with respect to the
applicable tanks in an amount of not less than $1,000,000
per property;
(d) a Phase I environmental report shall have
been obtained, which report shall not indicate that there
shall have been a spill at the Property, or, if a spill
shall have occurred, such report shall include a letter from
the applicable governmental agency indicating that all
required clean-up has been completed or if such clean-up has
not been completed, that a Person with financial capability
reasonably acceptable to the Agent, has acknowledged respon-
sibility and that the applicable governmental agencies have
accepted a clean-up plan; and
(e) the Gas Station Subsidiary shall have entered
into a lease with respect to the applicable Property with an
operator, the environmental provisions of which lease shall
be in substantially the form attached hereto as EXHIBIT H
and made a part hereof.
ARTICLE X
NEGATIVE COVENANTS
Borrower covenants and agrees that it shall comply
with the following covenants so long as any Revolving Credit
Commitments are outstanding and thereafter until payment in
full of all of the Obligations (other than indemnities
pursuant to Section 15.3 not yet due), unless the Requisite
Lenders shall otherwise give prior written consent:
X.1. Indebtedness. Neither the Borrower nor any
of its Subsidiaries shall directly or indirectly create,
incur, assume or otherwise become or remain directly or
indirectly liable with respect to any Indebtedness, except
(a) Indebtedness pursuant to the Term Note Agreement, (b)
the Indebtedness described in Section 9.11, (c) Indebtedness
represented by leases on the Borrower's or any Subsidiary's
Real Property, (d) Indebtedness representing the deferred
purchase price of any Real Property, and (e) Nonrecourse
Debt with respect to Nonrecourse Debt Properties. In addi-
tion, at such time as the Indebtedness with respect to the
Term Note Agreement either shall be repaid in full or the
Liens of the mortgages granted in connection therewith shall
have been released, the Borrower may incur additional Unse-
cured Indebtedness, provided that the incurrence of the same
shall not cause the Borrower to be in violation of any of
the other provisions of this Article X.
X.2. Sales of Assets. Neither the Borrower nor
any of its Subsidiaries shall sell, assign, transfer, lease,
convey or otherwise dispose of any Property, whether now
owned or hereafter acquired, or any income or profits there-
from, or enter into any agreement to do so which would
result in a Material Adverse Effect.
X.3. Liens. Neither the Borrower nor any of its
Subsidiaries shall directly or indirectly create, incur,
assume or permit to exist any Lien on or with respect to any
Property, or (to the extent the same constitutes a pledge or
other encumbrance of equity interests in the Borrower or the
Consolidated Businesses) on or with respect to any Securi-
ties of the Borrower, except:
(a) Liens with respect to Capital Leases of
Equipment entered into in the ordinary course of
business of the Borrower pursuant to which the
aggregate Indebtedness under such Capital Leases
does not exceed $250,000 for any Real Property;
(b) Customary Permitted Liens;
(c) Liens securing Indebtedness permitted pursuant to Section 10.1 hereof;
(d) Liens which are released within 45 days after
the Closing Date as provided in Section 9.11 hereof; and
(e) Pledges allowed pursuant to the definition of
"Nonrecourse Debt".
X.4. Investments. Neither the Borrower nor any
of its Subsidiaries shall directly or indirectly make or own
any Investment except:
(a) Investments in Cash Equivalents;
(b) Subject to the limitations of clause (e)
below, Investments in the Borrower's Subsidiaries and
the Borrower's Affiliates;
(c) Investments in the form of advances to
employees in the ordinary course of business;
provided that the aggregate principal amount of
all such loans at any time outstanding shall not
exceed $250,000;
(d) Investments received in connection with
the bankruptcy or reorganization of suppliers and
lessees and in settlement of delinquent obliga-
tions of, and other disputes with, lessees and
suppliers arising in the ordinary course of busi-
ness;
(e) Investments (i) in any individual Real
Property which do not exceed three percent (3%) of
the Capitalization Value after giving effect to
such Investments of the Borrower or (ii) in a
single Person owning a Property, or a portfolio of
Properties, which do not exceed ten (10%) of the
Capitalization Value after giving effect to such
Investments of the Borrower, it being understood
that no Investment in any individual Person will
be permitted if the Borrower's allocable share of
the Investment of such Person in any individual
Property would exceed the limitation described in
clause (i) hereinabove;
(f) Loans secured by mortgages on real property;
(g) Investments in loans to tenants with respect
to tenant improvements at any Real Property of the
Borrower or any Subsidiary;
(h) Investments in common stock and other securities
traded on a national securities exchange in an aggregate
amount not to exceed $10,000,000, as well as in limited
partner interests in partnerships that are
not publicly traded, in an aggregate amount not to
exceed $10,000,000, unless, in either case, Borrower
has voting control of the applicable Person, in which
event the aggregate amount shall be $35,000,000;
(i) Investments in the securities of the Mortgage
Subsidiary and securitized trust of which a
Subsidiary of the Borrower is the originator; and
(j) Investments in the securities of the Gas
Station Subsidiary.
X.5. Conduct of Business. Neither the Borrower
nor any of its Subsidiaries shall engage in any business,
enterprise or activity other than (a) the businesses of
acquiring, developing, re-developing and managing predom-
inantly restaurant and convenience store Real Properties and
portfolios of like Real Properties, and (b) any business or
activities which are substantially similar, related or
incidental thereto, including making mortgage loans secured
by such Real Properties but only to the extent that the same
is otherwise permitted hereunder.
X.6. Transactions with Partners and Affiliates.
Neither the Borrower nor any of its Subsidiaries shall
directly or indirectly enter into or permit to exist any
transaction (including, without limitation, the purchase,
sale, lease or exchange of any property or the rendering of
any service) with any holder or holders of more than five
percent (5%) of any class of equity Securities of the Bor-
rower, or with any Affiliate of the Borrower which is not
its Subsidiary, on terms that are determined by the Board of
Directors of General Partner to be less favorable to the
Borrower or any of its Subsidiaries, as applicable, than
those that might be obtained in an arm's length transaction
at the time from Persons who are not such a holder or Affil-
iate. Nothing contained in this Section 10.6 shall prohibit
(a) increases in compensation and benefits for officers and
employees of the Borrower or any of its Subsidiaries which
are customary in the industry or consistent with the past
business practice of the Borrower or such Subsidiary; pro-
vided, that no Event of Default or Potential Event of De-
fault has occurred and is continuing; (b) payment of custom-
ary partners' indemnities; or (c) performance of any obliga-
tions arising under the Loan Documents.
X.7. Restriction on Fundamental Changes. Neither
the Borrower nor any of its Subsidiaries shall enter into
any merger or consolidation, or liquidate, wind-up or dis-
solve (or suffer any liquidation or dissolution), or convey,
lease, sell, transfer or otherwise dispose of, in one trans-
action or series of transactions, all or substantially all
of the Borrower's or any such Subsidiary's business or
Property, whether now or hereafter acquired, except in
connection with issuance, transfer, conversion or repurchase
of limited partnership interests in Borrower. Notwithstand-
ing the foregoing, the Borrower shall be permitted to merge
with another Person so long as the Borrower is the surviving
Person following such merger. In addition, any Subsidiary of
the Borrower may merge with another Subsidiary of the
Borrower.
X.8. Margin Regulations; Securities Laws. Nei-
ther the Borrower nor any of its Subsidiaries, shall use all
or any portion of the proceeds of any credit extended under
this Agreement to purchase or carry Margin Stock, except as
provided in Section 10.4 hereof.
X.9. ERISA. The Borrower shall not and shall not
permit any of its Subsidiaries or ERISA Affiliates to:
(a) engage in any prohibited transaction de-
scribed in Sections 406 of ERISA or 4975 of the
Internal Revenue Code for which a statutory or
class exemption is not available or a private
exemption has not been previously obtained from
the DOL;
(b) permit to exist any accumulated funding
deficiency (as defined in Sections 302 of ERISA
and 412 of the Internal Revenue Code), with re-
spect to any Benefit Plan, whether or not waived;
(c) fail to pay timely required contribu-
tions or annual installments due with respect to
any waived funding deficiency to any Benefit Plan;
(d) terminate any Benefit Plan which would
result in any liability of Borrower or any ERISA
Affiliate under Title IV of ERISA;
(e) fail to make any contribution or payment
to any Multiemployer Plan which Borrower or any
ERISA Affiliate may be required to make under any
agreement relating to such Multiemployer Plan, or
any law pertaining thereto;
(f) fail to pay any required installment or
any other payment required under Section 412 of
the Internal Revenue Code on or before the due
date for such installment or other payment; or
(g) amend a Benefit Plan resulting in an in-
crease in current liability for the plan year such
that the Borrower or any ERISA Affiliate is re-
quired to provide security to such Plan under
Section 401(a)(29) of the Internal Revenue Code.
X.10. Organizational Documents. Neither Borrower
nor any of their respective Subsidiaries shall amend, modify
or otherwise change any of the terms or provisions in any of
their respective Organizational Documents as in effect on
the Closing Date, except amendments to effect (a) a change
of name of the Borrower or any such Subsidiary; provided,
that the Borrower shall have provided the Agent with sixty
(60) days' prior written notice of any such name change, or
(b) changes that would not affect such Organizational Docu-
ments in any material manner not otherwise permitted under
this Agreement.
X.11. Fiscal Year. Unless required by applicable
law, neither the Borrower nor any of its Consolidated Sub-
sidiaries shall change its Fiscal Year for accounting or tax
purposes from a period consisting of the 12-month period
ending on December 31 of each calendar year.
X.12. Other Financial Covenants.
(a) Minimum Combined Equity Value. At no time
during the period commencing on the Closing Date and ending
on May 31, 1998, shall the Combined Equity Value be less
than $150,000,000; at no time during the period commencing
on June 1, 1998 and ending on December 31, 1998, shall the
Combined Equity Value be less than $175,000,000; at no time
during the period commencing on January 1, 1999 and ending
on the Revolving Credit Termination Date, shall the Combined
Equity Value be less than $200,000,000.
(b) Maximum Total Adjusted Outstanding Indebted-
ness. Total Adjusted Outstanding Indebtedness shall not
exceed 60% of Capitalization Value.
(c) Maximum Secured Indebtedness. Secured In-
debtedness shall not exceed 15% of Capitalization Value.
(d) Consolidated Interest Coverage Ratio. As of
the last day of each fiscal quarter for the fiscal quarter
then ended, the ratio of (i) Combined EBITDA to (ii) Com-
bined Interest Expense, shall not be less than 2.25 to 1.00.
(e) Consolidated Fixed Charge Coverage Ratio. As
of the last day of each fiscal quarter for the fiscal quar-
ter then ended, the ratio of (i) Combined EBITDA (which, for
purposes of this clause (e) shall be deemed to add back
payments of base rent (but not percentage rent, additional
rent or other sums which may be due) under any ground lease
or Capital Lease of the Borrower or any of its Consolidated
Businesses for such period that has been included in the
calculation of Fixed Charges Expense) to (ii) Fixed Charges
Expense, shall not be less than 1.75 to 1.00.
(f) Minimum Debt Yield. As of the last day of
each fiscal quarter for the fiscal quarter then ended,
annualized, the ratio (expressed as a percentage) of (i)
Combined EBITDA to (ii) Total Adjusted Outstanding Indebted-
ness shall not be less than 16.00%.
(g) Unencumbered Interest Coverage Ratio. As of
the last day of each fiscal quarter for the fiscal quarter
then ended, the ratio of (i) Unencumbered Combined EBITDA to
(ii) Unsecured Interest Expense, shall not be less than 1.75
to 1.00.
(h) Minimum Unsecured Debt Yield. As of the last
day of each fiscal quarter for the fiscal quarter then
ended, annualized, the ratio of (i) Unencumbered Combined
EBITDA for such period to (ii) Total Unsecured Outstanding
Indebtedness during such period shall not be less than
16.00%.
(i) Maximum Construction Asset Cost. Construc-
tion Asset Cost shall at no time exceed 5% of Capitalization
Value.
X.13. Pro Forma AdjustmentsX.13. Pro Forma
Adjustments. (a) In connection with an acquisition of a
Property, or a portfolio of Properties, by any of the Con-
solidated Businesses or any Minority Holding (other than a
Limited Minority Holding) (whether such acquisition is
direct or through the acquisition of a Person which owns
such Property), the financial covenants contained in this
Agreement, as well as the definition of "Leverage Ratio",
shall be calculated on a pro forma basis (with respect to
the pro rata share of the Borrower in the case of an acqui-
sition by a Minority Holding) to be agreed upon as to each
such acquisition by the Agent and the Borrower, which pro
forma calculation shall be effective until the last day of
the fourth fiscal quarter following such acquisition (or
such earlier test period, as applicable), at which time
actual performance shall be utilized for such calculations.
In addition, until such time as any such Property or portfo-
lio of Properties shall have been owned by the Borrower or
any Consolidated Business or Minority Holding (other than a
Limited Minority Holding) for one fiscal quarter, the
Capitalization Value with respect thereto shall be deemed to
be equal to either the acquisition cost thereof if such
Property shall be fully leased, or if such Property shall
not be fully leased, $0. Whether or not any such Property
shall be fully leased, the entire amount of Indebtedness
incurred in connection therewith shall be included in the
definition of "Indebtedness" for purposes of this Article X.
(b) In addition, notwithstanding anything con-
tained herein to the contrary, the financial covenants con-
tained in this Agreement, as well as the definition of
"Leverage Ratio", shall be calculated without reference to,
or inclusion of, any assets or liabilities of any Mortgage
Subsidiary.
ARTICLE XI
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
XI.1. Events of Default. Each of the following
occurrences shall constitute an Event of Default under this
Agreement:
(a) Failure to Make Payments When Due. The
Borrower shall fail (i) to pay, when due, any principal pay-
ment of the Obligations or (ii) to pay, within three (3)
Business Days of the due date thereof without notice, any
interest payment on the Obligations.
(b) Breach of Certain Covenants. The Borrower
shall fail duly and punctually to perform or observe any
agreement, covenant or obligation binding on such Person
under Sections 9.1, 9.3, 9.4, 9.5, 9.6, 9.11 or Article X.
(c) Breach of Representation or Warranty. Any
representation or warranty made by the Borrower to the Agent
or any other Lender herein or by the Borrower or any of its
Subsidiaries in any of the other Loan Documents or in any
statement or certificate at any time given by any such
Person pursuant to any of the Loan Documents shall be false
or misleading in any material respect on the date as of
which made.
(d) Other Defaults. Except as set forth in the
next sentence, the Borrower shall default in the performance
of or compliance with any term contained in this Agreement
(other than as identified in paragraphs (a), (b) or (c) of
this Section 11.1), or any default or event of default shall
occur under any of the other Loan Documents, and such de-
fault or event of default shall continue for twenty (20)
days after receipt of written notice from the Agent thereof.
(e) Acceleration of Other Indebtedness. Any
breach, default or event of default shall occur, or any
other condition shall exist under any instrument, agreement
or indenture pertaining to any recourse Indebtedness (other
than the Obligations) of the Borrower or its Subsidiaries
aggregating $10,000,000 or more, and the effect thereof is
to cause an acceleration, mandatory redemption or other re-
quired repurchase of such Indebtedness, or permit the hold-
er(s) of such Indebtedness to accelerate the maturity of any
such Indebtedness or require a redemption or other repur-
chase of such Indebtedness; or any such Indebtedness shall
be otherwise declared to be due and payable (by acceleration
or otherwise) or required to be prepaid, redeemed or other-
wise repurchased by the Borrower or any of its Subsidiaries
(other than by a regularly scheduled required prepayment)
prior to the stated maturity thereof.
(f) Involuntary Bankruptcy; Appointment of Re-
ceiver, Etc.
(i) An involuntary case shall be commenced
against the Borrower, or any of its Subsidiaries to which
more than $50,000,000 of the Capitalization Value, in the
aggregate, is attributable, and the petition shall not be
dismissed, stayed, bonded or discharged within sixty (60)
days after commencement of the case; or a court having
jurisdiction in the premises shall enter a decree or order
for relief in respect of the Borrower or any of their re-
spective Subsidiaries in an involuntary case, under any
applicable bankruptcy, insolvency or other similar law now
or hereinafter in effect; or any other similar relief shall
be granted under any applicable federal, state, local or
foreign law; or the board of directors of General Partner or
Limited Partners of the Borrower or the board of directors
or partners of any of the Borrower's Subsidiaries (or any
committee thereof) adopts any resolution or otherwise autho-
rizes any action to approve any of the foregoing.
(ii) A decree or order of a court having juris-
diction in the premises for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other offi-
cer having similar powers over the Borrower, or any of its
Subsidiaries to which more than $50,000,000 of the Capital-
ization Value, in the aggregate, is attributable, or over
all or a substantial part of the Property of any of the Bor-
rower or any of such Subsidiaries shall be entered; or an
interim receiver, trustee or other custodian of any of the
Borrower or any of such Subsidiaries or of all or a substan-
tial part of the Property of any of the Borrower or any of
such Subsidiaries shall be appointed or a warrant of attach-
ment, execution or similar process against any substantial
part of the Property of any of the Borrower or any of such
Subsidiaries shall be issued and any such event shall not be
stayed, dismissed, bonded or discharged within sixty (60)
days after entry, appointment or issuance; or the respective
board of directors of any of the Borrower or Limited Part-
ners of the Borrower or the board of directors or partners
of any of Borrower's Subsidiaries (or any committee thereof)
adopts any resolution or otherwise authorizes any action to
approve any of the foregoing.
(g) Voluntary Bankruptcy; Appointment of Receiv-
er, Etc. Any of the Borrower, or any of its Subsidiaries to
which more than $50,000,000 of the Capitalization Value, in
the aggregate, is attributable, shall commence a voluntary
case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or shall consent to
the entry of an order for relief in an involuntary case, or
to the conversion of an involuntary case to a voluntary
case, under any such law, or shall consent to the appoint-
ment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its Property; or
any of the Borrower or any of such Subsidiaries shall make
any assignment for the benefit of creditors or shall be
unable or fail, or admit in writing its inability, to pay
its debts as such debts become due.
(h) Judgments and Unpermitted Liens.
(i) Any money judgment (other than a money
judgment covered by insurance as to which the insurance
company has acknowledged coverage), writ or warrant of
attachment, or similar process against the Borrower or any
of its Subsidiaries or any of its respective assets involv-
ing in any case an amount in excess of $10,000,000 (other
than with respect to Claims arising out of non-recourse
Indebtedness) is entered and shall remain undischarged,
unvacated, unbonded or unstayed for a period of sixty (60)
days or in any event later than five (5) days prior to the
date of any proposed sale thereunder; provided, however, if
any such judgment, writ or warrant of attachment or similar
process is in excess of $20,000,000 (other than with respect
to Claims arising out of non-recourse Indebtedness), the
entry thereof shall immediately constitute an Event of
Default hereunder.
(ii) A federal, state, local or foreign tax
Lien is filed against the Borrower which is not discharged
of record, bonded over or otherwise secured to the satisfac-
tion of the Agent within thirty (30) days after the filing
thereof or the date upon which the Agent receives actual
knowledge of the filing thereof for an amount which, either
separately or when aggregated with the amount of any judg-
ments described in clause (i) above and/or the amount of the
Environmental Lien Claims described in clause (iii) below,
equals or exceeds $10,000,000.
(iii) An Environmental Lien is filed against
any Real Property with respect to Claims in an amount which,
either separately or when aggregated with the amount of any
judgments described in clause (i) above and/or the amount of
the tax Liens described in clause (ii) above, equals or
exceeds $10,000,000.
(i) Dissolution. Any order, judgment or decree
shall be entered against the Borrower decreeing its involun-
tary dissolution or split up; or the Borrower shall other-
wise dissolve or cease to exist except as specifically
permitted by this Agreement.
(j) Loan Documents. At any time, for any reason,
any Loan Document ceases to be in full force and effect or
the Borrower seeks to repudiate its obligations thereunder.
(k) ERISA Termination Event. Any ERISA Termi-
nation Event occurs which the Agent believes could subject
either the Borrower or any ERISA Affiliate to liability in
excess of $100,000.
(l) Waiver Application. The plan administrator
of any Benefit Plan applies under Section 412(d) of the Code
for a waiver of the minimum funding standards of Section
412(a) of the Internal Revenue Code and the Agent believes
that the substantial business hardship upon which the appli-
cation for the waiver is based could subject either the
Borrower or any ERISA Affiliate to liability in excess of
$100,000.
(m) Material Adverse Effect. An event shall
occur which has a Material Adverse Effect.
(n) Certain Defaults Pertaining to the General
Partner. The General Partner shall fail to (i) continue as
a general partner of the Borrower, (ii) comply with all Re-
quirements of Law applicable to it and its businesses and
Properties, in each case where the failure to so comply
individually or in the aggregate will have or is reasonably
likely to have a Material Adverse Effect, or (iii) file all
tax returns and reports required to be filed by it with any
Governmental Authority as and when required to be filed or
to pay any taxes, assessments, fees or other governmental
charges upon it or its Property, assets, receipts, sales,
use, payroll, employment, licenses, income, or franchises
which are shown in such returns, reports or similar state-
ments to be due and payable as and when due and payable,
except for taxes, assessments, fees and other governmental
charges (A) that are being contested by General Partner in
good faith by an appropriate proceeding diligently pursued,
(B) for which adequate reserves have been made on its books
and records, and (C) the amounts the non-payment of which
would not, individually or in the aggregate, result in a
Material Adverse Effect.
(o) Certain Defaults Pertaining to the Guaran-
tor. The Guarantor shall fail to (i) maintain its status as
a REIT for federal income tax purposes, or (ii) remain
listed on the New York Stock Exchange or other national
stock exchange.
(p) Merger or Liquidation of the Borrower.
General Partner or the Borrower shall merge or liquidate
with or into any other Person and, as a result thereof and
after giving effect thereto, (i) the Borrower is not the
surviving Person or (ii) such merger or liquidation would
effect an acquisition of or Investment in any Person not
otherwise permitted under the terms of this Agreement.
(q) Acceleration of Other Indebtedness. Any
breach, default or event of default shall occur, or any
other condition shall exist under the Term Note Agreement or
any agreement or document executed in connection therewith,
and the effect thereof is to cause an acceleration, mandato-
ry redemption or other required repurchase of the Indebted-
ness evidenced thereby, or permit the holder(s) of such In-
debtedness to accelerate the maturity of any such Indebt-
edness or require a redemption or other repurchase of such
Indebtedness; or such Indebtedness shall be otherwise de-
clared to be due and payable (by acceleration, maturity or
otherwise) or required to be prepaid, redeemed or otherwise
repurchased by the borrower thereunder.
An Event of Default shall be deemed "continuing" until cured
or waived in writing in accordance with Section 15.7.
XI.2. Rights and Remedies.
(a) Acceleration and Termination. Upon the
occurrence of any Event of Default described in Sections
11.1(f) or 11.1(g), the Revolving Credit Commitments shall
automatically and immediately terminate and the unpaid
principal amount of, and any and all accrued interest on,
the Obligations and all accrued fees shall automatically
become immediately due and payable, without presentment,
demand, or protest or other requirements of any kind (in-
cluding, without limitation, valuation and appraisement,
diligence, presentment, notice of intent to demand or accel-
erate and of acceleration), all of which are hereby express-
ly waived by the Borrower; and upon the occurrence and
during the continuance of any other Event of Default, the
Agent shall at the request, or may with the consent, of the
Requisite Lenders, by written notice to the Borrower, (i)
declare that the Revolving Credit Commitments are terminat-
ed, whereupon the Revolving Credit Commitments and the
obligation of each Lender to make any Loan hereunder shall
immediately terminate, and/or (ii) declare the unpaid prin-
cipal amount of and any and all accrued and unpaid interest
on the Obligations to be, and the same shall thereupon be,
immediately due and payable, without presentment, demand, or
protest or other requirements of any kind (including, with-
out limitation, valuation and appraisement, diligence, pre-
sentment, notice of intent to demand or accelerate and of
acceleration), all of which are hereby expressly waived by
the Borrower.
(b) Rescission. If at any time after termination
of the Revolving Credit Commitments and/or acceleration of
the maturity of the Loans, the Borrower shall pay all ar-
rears of interest and all payments on account of principal
of the Loans which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates speci-
fied in this Agreement) and all Events of Default and Poten-
tial Events of Default (other than nonpayment of principal
of and accrued interest on the Loans due and payable solely
by virtue of acceleration) shall be remedied or waived
pursuant to Section 15.7, then upon the written consent of
the Requisite Lenders and written notice to the Borrower,
the termination of the Revolving Credit Commitments and/or
the acceleration and their consequences may be rescinded and
annulled; but such action shall not affect any subsequent
Event of Default or Potential Event of Default or impair any
right or remedy consequent thereon. The provisions of the
preceding sentence are intended merely to bind the Lenders
to a decision which may be made at the election of the
Requisite Lenders; they are not intended to benefit the Bor-
rower and do not give the Borrower the right to require the
Lenders to rescind or annul any acceleration hereunder, even
if the conditions set forth herein are met.
(c) Enforcement. The Borrower acknowledges that
in the event the Borrower or any of its Subsidiaries fails
to perform, observe or discharge any of their respective
obligations or liabilities under this Agreement or any other
Loan Document, any remedy of law may prove to be inadequate
relief to the Agent and the other Lenders; therefore, the
Borrower agrees that the Agent and the other Lenders shall
be entitled to temporary and permanent injunctive relief in
any such case without the necessity of proving actual damag-
es.
11.3. Actions in Respect of Letters of Credit.
(a) If, at any time and from time to time, a
Letter of Credit shall have been issued hereunder and an
Event of Default shall have occurred and be continuing,
then, upon the occurrence and during the continuation there-
of, the Agent may, whether in addition to the taking by the
Agent of any of the actions described in this Article or
otherwise, make a demand upon the Borrower to, and forthwith
upon such demand (but in any event within ten (10) days
after such demand) the Borrower shall, pay to the Agent, on
behalf of the Lenders, in same day funds at the Agent's
office designated in such demand, for deposit in a special
cash collateral account (the "Letter of Credit Collateral
Account") to be maintained in the name of the Agent (on
behalf of the Lenders) and under its sole dominion and
control at such place as shall be designated by the Agent,
an amount equal to the amount of the Letter of Credit Usage
under any Letter of Credit. Interest shall accrue on the
Letter of Credit Collateral Account at a rate equal to the
rate on overnight funds.
(b) The Borrower hereby pledges, assigns and grants to
the Agent, as administrative agent for its benefit and the
ratable benefit of the Lenders a lien on and a security
interest in, the following collateral (the "Letter of Credit
Collateral"):
(i) the Letter of Credit Collateral Account,
all cash deposited therein and all certificates and instru-
ments, if any, from time to time representing or evidencing
the Letter of Credit Collateral Account;
(ii) all notes, certificates of deposit and
other instruments from time to time hereafter delivered to
or otherwise possessed by the Agent for or on behalf of the
Borrower in substitution for or in respect of any or all of
the then existing Letter of Credit Collateral;
(iii) all interest, dividends, cash, instru-
ments and other property from time to time received, receiv-
able or otherwise distributed in respect of or in exchange
for any or all of the then existing Letter of Credit Collat-
eral; and
(iv) to the extent not covered by the above
clauses, all proceeds of any or all of the foregoing Letter
of Credit Collateral.
The lien and security interest granted hereby secures the
payment of all obligations of the Borrower now or hereafter
existing hereunder and under any other Loan Document.
(c) The Borrower hereby authorizes the Agent for the
ratable benefit of the Lenders to apply, from time to time
after funds are deposited in the Letter of Credit Collateral
Account, funds then held in the Letter of Credit Collateral
Account to the payment of any amounts, in such order as the
Agent may elect, as shall have become due and payable by the
Borrower to the Lenders in respect of the Letters of Credit.
(d) Neither the Borrower nor any Person claiming or
acting on behalf of or through the Borrower shall have any
right to withdraw any of the funds held in the Letter of
Credit Collateral Account, except as provided in Section
11.3(h) hereof.
(e) The Borrower agrees that it will not (i) sell or
otherwise dispose of any interest in the Letter of Credit
Collateral or (ii) create or permit to exist any lien, secu-
rity interest or other charge or encumbrance upon or with
respect to any of the Letter of Credit Collateral, except
for the security interest created by this Section 11.3.
(f) If any Event of Default shall have occurred and be
continuing:
(i) The Agent may, in its sole discretion, without
notice to the Borrower except as required by law and at any
time from time to time, charge, set off or otherwise apply
all or any part of first, (x) amounts previously drawn on
any Letter of Credit that have not been reimbursed by the
Borrower and (y) any Letter of Credit Usage described in
clause (ii) of the definition thereof that are then due and
payable and second, any other unpaid Obligations then due
and payable against the Letter of Credit Collateral Account
or any part thereof, in such order as the Lead Agent shall
elect. The rights of the Agent under this Section 11.3 are
in addition to any rights and remedies which any Lender may
have.
(ii) The Agent may also exercise, in its sole
discretion, in respect of the Letter of Credit Collateral
Account, in addition to the other rights and remedies pro-
vided herein or otherwise available to it, all the rights
and remedies of a secured party upon default under the Uni-
form Commercial Code in effect in the State of New York at
that time.
(g) The Agent shall be deemed to have exercised rea-
sonable care in the custody and preservation of the Letter
of Credit Collateral if the Letter of Credit Collateral is
accorded treatment substantially equal to that which the
Agent accords its own property, it being understood that,
assuming such treatment, the Agent shall not have any re-
sponsibility or liability with respect thereto.
(h) At such time as all Events of Default have been
cured or waived in writing, all amounts remaining in the
Letter of Credit Collateral Account shall be promptly re-
turned to the Borrower. Absent such cure or written waiver,
any surplus of the funds held in the Letter of Credit Col-
lateral Account and remaining after payment in full of all
of the Obligations of the Borrower hereunder and under any
other Loan Document after the Maturity Date shall be paid to
the Borrower or to whomsoever may be lawfully entitled to
receive such surplus.
ARTICLE XII
THE AGENTS
XII.1. Appointment. (a) Each Lender hereby
designates and appoints UBS as the Agent of such Lender
under this Agreement, and each Lender hereby irrevocably
authorizes Agent to take such actions on its behalf under
the provisions of this Agreement and the Loan Documents and
to exercise such powers as are set forth herein or therein
together with such other powers as are reasonably incidental
thereto. The Agent agrees to act as such on the express
conditions contained in this Article XII.
(b) The provisions of this Article XII are solely
for the benefit of the Agent and the other Lenders, and nei-
ther the Borrower nor any Subsidiary of the Borrower shall
have any rights to rely on or enforce any of the provisions
hereof (other than as expressly set forth in Section 12.7).
In performing its respective functions and duties under
this Agreement, the Agent shall act solely as agent of the
Lenders and do not assume and shall not be deemed to have
assumed any obligation or relationship of agency, trustee or
fiduciary with or for the Borrower or any Subsidiary of the
Borrower. The Agent may perform any of its duties here-
under, or under the Loan Documents, by or through agents or
employees.
XII.2. Nature of Duties. The Agent shall not
have any duties or responsibilities except those expressly
set forth in this Agreement or in the Loan Documents. The
duties of the Agent shall be mechanical and administrative
in nature. The Agent shall not have by reason of this
Agreement a fiduciary relationship in respect of any Holder.
Nothing in this Agreement or any of the Loan Documents,
expressed or implied, is intended to or shall be construed
to impose upon the Agent any obligations in respect of this
Agreement or any of the Loan Documents except as expressly
set forth herein or therein. The Agent hereby agrees that
its duties shall include providing copies of documents re-
ceived by the Agent from the Borrower which are reasonably
requested by any Lender and promptly notifying each Lender
upon its obtaining actual knowledge of the occurrence of any
Event of Default hereunder.
XII.3. Right to Request Instructions. The Agent
may at any time request instructions from the Lenders with
respect to any actions or approvals which by the terms of
any of the Loan Documents the Agent is permitted or required
to take or to grant, and such Agent shall be absolutely
entitled to refrain from taking any action or to withhold
any approval and shall not be under any liability whatsoever
to any Person for refraining from any action or withholding
any approval under any of the Loan Documents until it shall
have received such instructions from those Lenders from whom
Agent is required to obtain such instructions for the perti-
nent matter in accordance with the Loan Documents. Without
limiting the generality of the foregoing, the Agent shall
take any action, or refrain from taking any action, which is
permitted by the terms of the Loan Documents upon receipt of
instructions from those Lenders from whom the Agent required
to obtain such instructions for the pertinent matter in
accordance with the Loan Documents; provided, that no Holder
shall have any right of action whatsoever against the Agent
as a result of the Agent acting or refraining from acting
under the Loan Documents in accordance with the instructions
of the Requisite Lenders or, where required by the express
terms of this Agreement, a greater proportion of the Lend-
ers.
XII.4. Reliance. The Agent shall be entitled to
rely upon any written notices, statements, certificates,
orders or other documents or any telephone message believed
by it in good faith to be genuine and correct and to have
been signed, sent or made by the proper Person, and with
respect to all matters pertaining to this Agreement or any
of the Loan Documents and its duties hereunder or thereun-
der, upon advice of legal counsel (including counsel for the
Borrower), independent public accountants and other experts
selected by it.
XII.5. Indemnification. To the extent that the
Agent is not reimbursed and indemnified by the Borrower, the
Lenders will reimburse and indemnify the Agent for and
against any and all liabilities, obligations, losses, damag-
es, penalties, actions, judgments, suits, and reasonable
costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted
against it in any way relating to or arising out of the Loan
Documents or any action taken or omitted by such Agent under
the Loan Documents, in proportion to each Lender's Pro Rata
Share. The Agent each agrees to refund to the Lenders any
of the foregoing amounts paid to it by the Lenders which
amounts are subsequently recovered by the Agent from the
Borrower or any other Person on behalf of the Borrower. The
obligations of the Lenders under this Section 12.5 shall
survive the payment in full of the Loans and all other Obli-
gations and the termination of this Agreement.
XII.6. Agents Individually. With respect to its
Pro Rata Share of the Revolving Credit Commitments here-
under, and the Loans made by it, if any, the Agent shall
have and may exercise the same rights and powers hereunder
and are subject to the same obligations and liabilities as
and to the extent set forth herein for any other Lender.
The terms "Lenders" or "Requisite Lenders" or any similar
terms shall, unless the context clearly otherwise indicates,
include UBS in its individual capacity as a Lender or as one
of the Requisite Lenders. UBS and each of its Affiliates
may accept deposits from, lend money to, and generally
engage in any kind of banking, trust or other business with
the Borrower or any of its Subsidiaries as if UBS were not
acting as the Agent pursuant hereto.
XII.7. Successor Agents.
(a) Resignation and Removal. Any Agent may
resign from the performance of all its functions and duties
hereunder at any time by giving at least thirty (30) Busi-
ness Days' prior written notice to the Borrower and the
other Lenders, unless applicable law requires a shorter
notice period or that there be no notice period, in which
instance such applicable law shall control. Any Agent may
be removed at the direction of the Requisite Lenders, in the
event such Agent fails to perform its duties hereunder in
any material respect. Such resignation or removal shall
take effect upon the acceptance by a successor Agent of ap-
pointment pursuant to this Section 12.7.
(b) Appointment by Requisite Lenders. Upon any
such resignation or removal becoming effective, (i) if a Co-
Agent shall then be acting with respect to this Agreement,
such Co-Agent shall become the Agent or (ii) if no Co-Agent
shall then be acting with respect to this Agreement, the
Lenders shall have the right to appoint a successor Agent
selected from among the Lenders.
(c) Appointment by Retiring Agent. If a suc-
cessor Agent shall not have been appointed within the thirty
(30) Business Day or shorter period provided in paragraph
(a) of this Section 12.7, the retiring Agent shall then
appoint a successor Agent who shall serve as Agent until
such time, if any, as the Lenders appoint a successor Agent
as provided above.
(d) Rights of the Successor and Retiring Agents.
Upon the acceptance of any appointment as Agent hereunder
by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retir-
ing Agent shall be discharged from its duties and obliga-
tions under this Agreement. After any retiring Agent's
resignation hereunder as Agent, the provisions of this
Article XII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Agent
under this Agreement.
XII.8. Relations Among the LendersXII. Each
Lender agrees that it will not take any legal action, nor
institute any actions or proceedings, against the Borrower
or any other obligor hereunder with respect to any of the
Obligations, without the prior written consent of the
Lenders. Without limiting the generality of the foregoing,
no Lender may accelerate or otherwise enforce its portion of
the Obligations, or unilaterally terminate its Revolving
Credit Commitment except in accordance with Section 11.2(a).
ARTICLE XIII
YIELD PROTECTION
XIII.1. Taxes.
(a) Payment of Taxes. Any and all payments by
the Borrower hereunder or under any Note or other document
evidencing any Obligations shall be made, in accordance with
Section 4.2, free and clear of and without reduction for any
and all present or future taxes, levies, imposts, deduc-
tions, charges, withholdings, and all stamp or documentary
taxes, excise taxes, ad valorem taxes and other taxes im-
posed on the value of the Property, charges or levies which
arise from the execution, delivery or registration, or from
payment or performance under, or otherwise with respect to,
any of the Loan Documents or the Revolving Credit Commit-
ments and all other liabilities with respect thereto exclud-
ing, in the case of each Lender, taxes imposed on or mea-
sured by net income or overall gross receipts and capital
and franchise taxes imposed on it by (i) the United States,
(ii) the Governmental Authority of the jurisdiction in which
such Lender's Applicable Lending Office is located or any
political subdivision thereof or (iii) the Governmental
Authority in which such Person is organized, managed and
controlled or any political subdivision thereof (all such
non-excluded taxes, levies, imposts, deductions, charges and
withholdings being hereinafter referred to as "Taxes"). If
the Borrower shall be required by law to withhold or deduct
any Taxes from or in respect of any sum payable hereunder or
under any such Note or any Letter of Credit or any such
document to any Lender, (x) the sum payable to such Lender
or the Fronting Bank, as the case may be, shall be increased
as may be necessary so that after making all required with-
holding or deductions (including withholding or deductions
applicable to additional sums payable under this Section
13.1) such Lender or the Fronting Bank, as the case may be,
receives an amount equal to the sum it would have received
had no such withholding or deductions been made, (y) the
Borrower shall make such withholding or deductions, and (z)
the Borrower shall pay the full amount withheld or deducted
to the relevant taxation authority or other authority in
accordance with applicable law.
(b) Indemnification. The Borrower will indemnify
each Lender and the Fronting Bank against, and reimburse
each on demand for, the full amount of all Taxes (including,
without limitation, any Taxes imposed by any Governmental
Authority on amounts payable under this Section 13.1 and any
additional income or franchise taxes resulting therefrom)
incurred or paid by such Lender or the Fronting Bank or any
of their respective Affiliates and any liability (including
penalties, interest, and out-of-pocket expenses paid to
third parties) arising therefrom or with respect thereto,
whether or not such Taxes were lawfully payable. A certifi-
cate as to any additional amount payable to any Person under
this Section 13.1 submitted by it to the Borrower shall,
absent manifest error, be final, conclusive and binding upon
all parties hereto. Each Lender and the fronting Bank
agrees, within a reasonable time after receiving a written
request from the Borrower, to provide the Borrower and the
Agent with such certificates as are reasonably required, and
take such other actions as are reasonably necessary to claim
such exemptions as such Lender or the Fronting Bank may be
entitled to claim in respect of all or a portion of any
Taxes which are otherwise required to be paid or deducted or
withheld pursuant to this Section 13.1 in respect of any
payments under this Agreement or under the Notes.
(c) Receipts. Within thirty (30) days after the
date of any payment of Taxes by the Borrower, it will fur-
nish to the Agent, at its address referred to in Section
15.8, the original or a certified copy of a receipt evidenc-
ing payment thereof.
(d) Foreign Bank Certifications. (i) Each
Lender that is not created or organized under the laws of
the United States or a political subdivision thereof shall
deliver to the Borrower and the Agent on the Closing Date or
the date on which such Lender becomes a Lender pursuant to
Section 15.1 hereof a true and accurate certificate executed
in duplicate by a duly authorized officer of such Lender to
the effect that such Lender is eligible to receive payments
hereunder and under the Notes without deduction or withhold-
ing of United States federal income tax (I) under the provi-
sions of an applicable tax treaty concluded by the United
States (in which case the certificate shall be accompanied
by two duly completed copies of IRS Form 1001 (or any suc-
cessor or substitute form or forms)) or (II) under Sec-
tions 1442(c)(1) and 1442(a) of the Internal Revenue Code
(in which case the certificate shall be accompanied by two
duly completed copies of IRS Form 4224 (or any successor or
substitute form or forms)).
(ii) Each Lender further agrees to deliver to the
Borrower and the Agent from time to time, a true and accu-
rate certificate executed in duplicate by a duly authorized
officer of such Lender before or promptly upon the occur-
rence of any event requiring a change in the most recent
certificate previously delivered by it to the Borrower and
the Agent pursuant to this Section 13.1(d). Each certifi-
cate required to be delivered pursuant to this Section
13.1(d)(ii) shall certify as to one of the following:
(A) that such Lender can continue to receive
payments hereunder and under the Notes without
deduction or withholding of United States federal
income tax;
(B) that such Lender cannot continue to
receive payments hereunder and under the Notes
without deduction or withholding of United States
federal income tax as specified therein but does
not require additional payments pursuant to Sec-
tion 13.1(a) because it is entitled to recover the
full amount of any such deduction or withholding
from a source other than the Borrower; or
(C) that such Lender is no longer capable of
receiving payments hereunder and under the Notes
without deduction or withholding of United States
federal income tax as specified therein and that
it is not capable of recovering the full amount of
the same from a source other than the Borrower.
Each Lender agrees to deliver to the Borrower and the Agent
further duly completed copies of the above-mentioned IRS
forms on or before the earlier of (x) the date that any such
form expires or becomes obsolete or otherwise is required to
be resubmitted as a condition to obtaining an exemption from
withholding from United States federal income tax and (y)
fifteen (15) days after the occurrence of any event requir-
ing a change in the most recent form previously delivered by
such Lender to the Borrower and Agent, unless any change in
treaty, law, regulation, or official interpretation thereof
which would render such form inapplicable or which would
prevent the Lender from duly completing and delivering such
form has occurred prior to the date on which any such deliv-
ery would otherwise be required and the Lender promptly
advises the Borrower that it is not capable of receiving
payments hereunder and under the Notes without any deduction
or withholding of United States federal income tax.
XIII.2. Increased Capital. If after the date
hereof any Lender determines that (i) the adoption or imple-
mentation of or any change in or in the interpretation or
administration of any law or regulation or any guideline or
request from any central bank or other Governmental Authori-
ty or quasi-governmental authority exercising jurisdiction,
power or control over any Lender or banks or financial
institutions generally (whether or not having the force of
law), compliance with which affects or would affect the
amount of capital required or expected to be maintained by
such Lender or any corporation controlling such Lender and
(ii) the amount of such capital is increased by or based
upon the making or maintenance by any Lender of its Loans,
any Lender's participation in or obligation to participate
in the Loans or other advances made hereunder or the exis-
tence of any Lender's obligation to make Loans, then, in any
such case, upon written demand by such Lender (with a copy
of such demand to the Agent), the Borrower shall immediately
pay to the Agent for the account of such Lender, from time
to time as specified by such Lender, additional amounts
sufficient to compensate such Lender or such corporation
therefor. Such demand shall be accompanied by a statement
as to the amount of such compensation and include a brief
summary of the basis for such demand. Such statement shall
be conclusive and binding for all purposes, absent manifest
error.
XIII.3. Changes; Legal Restrictions. If after
the date hereof any Lender determines that the adoption or
implementation of or any change in or in the interpretation
or administration of any law or regulation or any guideline
or request from any central bank or other Governmental
Authority or quasi-governmental authority exercising juris-
diction, power or control over any Lender, or over banks or
financial institutions generally (whether or not having the
force of law), compliance with which:
(a) does or will subject a Lender (or its
Applicable Lending Office or Eurodollar Affiliate)
to charges (other than taxes) of any kind which
such Lender reasonably determines to be applicable
to the Revolving Credit Commitments of the Lenders
to make Eurodollar Rate Loans or to participate in
the Letter of Credit issued by the Fronting Bank,
or, with respect to the Fronting Bank, to issue
the Letter of Credit, or change the basis of taxa-
tion of payments to that Lender of principal,
fees, interest, or any other amount payable here-
under with respect to Eurodollar Rate Loans; or
(b) does or will impose, modify, or hold
applicable, in the determination of a Lender, any
reserve (other than reserves taken into account in
calculating the Eurodollar Rate), special deposit,
compulsory loan, FDIC insurance or similar re-
quirement against assets held by, or deposits or
other liabilities in or for the account of, ad-
vances or loans by, commitments made, or other
credit extended by, or any other acquisition of
funds by, a Lender or any Applicable Lending Of-
fice or Eurodollar Affiliate of that Lender;
and the result of any of the foregoing is to increase the
cost to that Lender of making, renewing or maintaining the
Loans or its Revolving Credit Commitment, or to participate
in the Letters of Credit issued by the Fronting Bank, or, in
the case of the Fronting Bank, to issue any Letters of
Credit, or to reduce any amount receivable thereunder; then,
in any such case, upon written demand by such Lender (with a
copy of such demand to the Agent), the Borrower shall imme-
diately pay to the Agent for the account of such Lender,
from time to time as specified by such Lender, such amount
or amounts as may be necessary to compensate such Lender or
its Eurodollar Affiliate for any such additional cost in-
curred or reduced amount received. Such demand shall be
accompanied by a statement as to the amount of such compen-
sation and include a brief summary of the basis for such
demand. Such statement shall be conclusive and binding for
all purposes, absent manifest error.
ARTICLE XIV
RESERVED
ARTICLE XV
MISCELLANEOUS
XV.1. Assignments and Participations.
(a) Assignments. No assignments or
participations of any Lender's rights or obligations under
this Agreement shall be made except in accordance with this
Section 15.1. Each Lender may assign to one or more Eligi-
ble Assignees all or a portion of its rights and obligations
under this Agreement in accordance with the provisions of
this Section 15.1.
(b) Limitations on Assignments. For so long as
no Event of Default has occurred and is continuing, each as-
signment shall be subject to the following conditions:
(i) each assignment shall be of a constant, and not a vary-
ing, ratable percentage of all of the assigning Lender's
rights and obligations under this Agreement and, in the case
of a partial assignment, shall be in a minimum principal
amount of $10,000,000 (except that UBS may make an assign-
ment of less than such principal amount), (ii) each such as-
signment shall be to an Eligible Assignee, (iii) the parties
to each such assignment shall execute and deliver to the
Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, and (iv) provided that no Event
of Default shall have occurred and be outstanding or that
UBS shall not have resigned as Agent hereunder, UBS shall
maintain a minimum Revolving Credit Commitment in an amount
of $30,000,000. Upon the occurrence and continuance of an
Event of Default, none of the foregoing restrictions on
assignments shall apply. Upon such execution, delivery,
acceptance and recording in the Register, from and after the
effective date specified in each Assignment and Acceptance
and agreed to by the Agent, (A) the assignee thereunder
shall, in addition to any rights and obligations hereunder
held by it immediately prior to such effective date, if any,
have the rights and obligations hereunder that have been
assigned to it pursuant to such Assignment and Acceptance
and shall, to the fullest extent permitted by law, have the
same rights and benefits hereunder as if it were an original
Lender hereunder, (B) the assigning Lender shall, to the
extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations
under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of such
assigning Lender's rights and obligations under this Agree-
ment, the assigning Lender shall cease to be a party hereto)
and (C) the Borrower shall execute and deliver to the as-
signee thereunder a Note evidencing its obligations to such
assignee with respect to the Loans.
(c) The Register. The Agent shall maintain at
its address referred to in Section 15.8 a copy of each
Assignment and Acceptance delivered to and accepted by it
and a register (the "Register") for the recordation of the
names and addresses of the Lenders, the Revolving Credit
Commitment of, and the principal amount of the Loans under
the Revolving Credit Commitments owing to, each Lender from
time to time and whether such Lender is an original Lender
or the assignee of another Lender pursuant to an Assignment
and Acceptance. The entries in the Register shall be con-
clusive and binding for all purposes, absent manifest error,
and the Borrower and each of its Subsidiaries, the Agent and
the other Lenders may treat each Person whose name is re-
corded in the Register as a Lender hereunder for all pur-
poses of this Agreement. The Register shall be available
for inspection by the Borrower or any Lender at any reason-
able time and from time to time upon reasonable prior no-
tice.
(d) Fee. Upon its receipt of an Assignment and
Acceptance executed by the assigning Lender and an Eligible
Assignee and a processing and recordation fee of $2,500
(payable by the assignee to the Agent), the Agent shall, if
such Assignment and Acceptance has been completed and is in
compliance with this Agreement and in substantially the form
of Exhibit A hereto, (i) accept such Assignment and Accep-
tance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Borrow-
er and the other Lenders.
(e) Participations. Each Lender may sell
participations to one or more other financial institutions
in or to all or a portion of its rights and obligations
under and in respect of any and all facilities under this
Agreement (including, without limitation, all or a portion
of any or all of its Revolving Credit Commitment hereunder
and the Loans owing to it); provided, however, that (i) such
Lender's obligations under this Agreement (including, with-
out limitation, its Revolving Credit Commitment hereunder)
shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance
of such obligations, (iii) the Borrower, the Agent and the
other Lenders shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and
obligations under this Agreement, (iv) each participation
shall be in a minimum amount of $10,000,000 (except that UBS
may sell participations of less than such principal amount),
and (v) such participant's rights to agree or to restrict
such Lender's ability to agree to the modification, waiver
or release of any of the terms of the Loan Documents, to
consent to any action or failure to act by any party to any
of the Loan Documents or any of their respective Affiliates,
or to exercise or refrain from exercising any powers or
rights which any Lender may have under or in respect of the
Loan Documents, shall be limited to the right to consent to
(A) increase in the Revolving Credit Commitment of the
Lender from whom such participant purchased a participation,
(B) reduction of the principal of, or rate or amount of
interest on the Loans subject to such participation (other
than by the payment or prepayment thereof), (C) postponement
of any date fixed for any payment of principal of, or inter-
est on, the Loan(s) subject to such participation and (D)
release of any guarantor of the Obligations.
(f) Information Regarding the Borrower. Any
Lender may, in connection with any assignment or partici-
pation or proposed assignment or participation pursuant to
this Section 15.1, disclose to the assignee or participant
or proposed assignee or participant, any information relat-
ing to the Borrower or its Subsidiaries furnished to such
Lender by the Agent or by or on behalf of the Borrower;
provided, that, prior to any such disclosure, such assignee
or participant, or proposed assignee or participant, shall
agree, in writing, to preserve in accordance with Section
15.20 the confidentiality of any confidential information
described therein.
(g) Payment to Participants. Anything in this
Agreement to the contrary notwithstanding, in the case of
any participation, all amounts payable by the Borrower under
the Loan Documents shall be calculated and made in the
manner and to the parties required hereby as if no such
participation had been sold.
(h) Lenders' Creation of Security Interests.
Notwithstanding any other provision set forth in this Agree-
ment, any Lender may at any time create a security interest
in all or any portion of its rights under this Agreement
(including, without limitation, Obligations owing to it and
any Note held by it) in favor of any Federal Reserve bank in
accordance with Regulation A of the Federal Reserve Board.
XV.2. Expenses.
(a) Generally. The Borrower agrees upon demand
to pay, or reimburse the Agent and each Co-Agent for all of
their respective reasonable external audit and investigation
expenses and for the fees, expenses and disbursements of
Skadden, Arps, Slate, Meagher & Flom LLP (but not of other
legal counsel) and for all other out-of-pocket costs and
expenses of every type and nature incurred by the Agent or
each Co-Agent in connection with (i) the audit and investi-
gation of the Consolidated Businesses, the Real Properties
and other Properties of the Consolidated Businesses in con-
nection with the preparation, negotiation, and execution of
the Loan Documents; (ii) the preparation, negotiation,
execution, syndication and interpretation of this Agreement
(including, without limitation, the satisfaction or attempt-
ed satisfaction of any of the conditions set forth in Arti-
cle VI), the Loan Documents, and the making of the Loans
hereunder; (iii) the ongoing administration of this Agree-
ment and the Loans, including consultation with attorneys in
connection therewith and with respect to the Agent's rights
and responsibilities under this Agreement and the other Loan
Documents; (iv) the protection, collection or enforcement of
any of the Obligations or the enforcement of any of the Loan
Documents; (v) the commencement, defense or intervention in
any court proceeding relating in any way to the Obligations,
any Real Property, the Borrower, any of its Subsidiaries,
this Agreement or any of the other Loan Documents; (vi) the
response to, and preparation for, any subpoena or request
for document production with which the Agent or any other
Agents or any other Lender is served or deposition or other
proceeding in which any Lender is called to testify, in each
case, relating in any way to the Obligations, a Real Proper-
ty, the Borrower, any of the Consolidated Businesses, this
Agreement or any of the other Loan Documents; and (vii) any
amendments, consents, waivers, assignments, restatements, or
supplements to any of the Loan Documents and the prepara-
tion, negotiation, and execution of the same.
(b) After Default. The Borrower further agrees
to pay or reimburse the Agent, the Co-Agents and each of the
Lenders upon demand for all out-of-pocket costs and expens-
es, including, without limitation, reasonable attorneys'
fees (including allocated costs of internal counsel and
costs of settlement) incurred by such entity after the
occurrence of an Event of Default (i) in enforcing any Loan
Document or Obligation or any security therefor or exer-
cising or enforcing any other right or remedy available by
reason of such Event of Default; (ii) in connection with any
refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a "work-out"
or in any insolvency or bankruptcy proceeding; (iii) in
commencing, defending or intervening in any litigation or in
filing a petition, complaint, answer, motion or other plead-
ings in any legal proceeding relating to the Obligations, a
Real Property, any of the Consolidated Businesses and re-
lated to or arising out of the transactions contemplated
hereby or by any of the other Loan Documents; and (iv) in
taking any other action in or with respect to any suit or
proceeding (bankruptcy or otherwise) described in clauses
(i) through (iii) above.
XV.3. Indemnity. The Borrower further agrees (a)
to defend, protect, indemnify, and hold harmless the Agent,
the Co-Agents and each and all of the other Lenders and each
of their respective officers, directors, employees, attor-
neys and agents (including, without limitation, those re-
tained in connection with the satisfaction or attempted
satisfaction of any of the conditions set forth in Article
VI) (collectively, the "Indemnitees") from and against any
and all liabilities, obligations, losses (other than loss of
profits), damages, penalties, actions, judgments, suits,
claims, costs, reasonable expenses and disbursements of any
kind or nature whatsoever (excluding any taxes and includ-
ing, without limitation, the reasonable fees and disburse-
ments of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding, wheth-
er or not such Indemnitees shall be designated a party
thereto), imposed on, incurred by, or asserted against such
Indemnitees in any manner relating to or arising out of (i)
this Agreement or the other Loan Documents, or any act,
event or transaction related or attendant thereto, the
making of the Loans hereunder, the management of such Loans,
the use or intended use of the proceeds of the Loans here-
under, or any of the other transactions contemplated by the
Loan Documents, or (ii) any Liabilities and Costs relating
to violation of any Environmental, Health or Safety Require-
ments of Law, the past, present or future operations of the
Borrower, any of its Subsidiaries or any of their respective
predecessors in interest, or, the past, present or future
environmental, health or safety condition of any respective
Property of the Borrower or any of its Subsidiaries, the
presence of asbestos-containing materials at any respective
Property of the Borrower or any of its Subsidiaries, or the
Release or threatened Release of any Contaminant into the
environment (collectively, the "Indemnified Matters");
provided, however, the Borrower shall have no obligation to
an Indemnitee hereunder with respect to Indemnified Matters
caused by or resulting from the willful misconduct or gross
negligence of such Indemnitee, as determined by a court of
competent jurisdiction in a non-appealable final judgment;
and (b) not to assert any claim against any of the
Indemnitees, on any theory of liability, for consequential
or punitive damages arising out of, or in any way in connec-
tion with, the Revolving Credit Commitments, the Revolving
Credit Obligations, or the other matters governed by this
Agreement and the other Loan Documents. To the extent that
the undertaking to indemnify, pay and hold harmless set
forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, the Borrower
shall contribute the maximum portion which it is permitted
to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the
Indemnitees.
XV.4. Change in Accounting Principles. If any
change in the accounting principles used in the preparation
of the most recent financial statements referred to in
Sections 8.1 or 8.2 are hereafter required or permitted by
the rules, regulations, pronouncements and opinions of the
Financial Accounting Standards Board or the American Insti-
tute of Certified Public Accountants (or successors thereto
or agencies with similar functions) and are adopted by the
Borrower, as applicable, with the agreement of its inde-
pendent certified public accountants and such changes result
in a change in the method of calculation of any of the cove-
nants, standards or terms found in Article X, the parties
hereto agree to enter into negotiations in order to amend
such provisions so as to equitably reflect such changes with
the desired result that the criteria for evaluating compli-
ance with such covenants, standards and terms by the Bor-
rower shall be the same after such changes as if such chang-
es had not been made; provided, however, that no change in
GAAP that would affect the method of calculation of any of
the covenants, standards or terms shall be given effect in
such calculations until such provisions are amended, in a
manner satisfactory to the Agent and the Borrower, to so
reflect such change in accounting principles.
XV.5. Setoff. In addition to any Liens granted
under the Loan Documents and any rights now or hereafter
granted under applicable law, upon the occurrence and during
the continuance of any Event of Default, each Lender and the
Fronting Bank and any Affiliate of any Lender or the Front-
ing Bank is hereby authorized by the Borrower at any time or
from time to time, without notice to any Person (any such
notice being hereby expressly waived) to set off and to
appropriate and to apply any and all deposits (general or
special, including, but not limited to, indebtedness evi-
denced by certificates of deposit, whether matured or
unmatured (but not including trust accounts)) and any other
Indebtedness at any time held or owing by such Lender or the
Fronting Bank or any of their Affiliates to or for the
credit or the account of the Borrower against and on account
of the Obligations of the Borrower to such Lender or any of
its Affiliates, including, but not limited to, all Loans and
all claims of any nature or description arising out of or in
connection with this Agreement, irrespective of whether or
not (i) such Lender or the Fronting Bank shall have made any
demand hereunder or (ii) the Agent, at the request or with
the consent of the Requisite Lenders, shall have declared
the principal of and interest on the Loans and other amounts
due hereunder to be due and payable as permitted by Article
XI and even though such Obligations may be contingent or
unmatured. Each Lender and the Fronting Bank agrees that it
shall not, without the express consent of the Requisite
Lenders, and that it shall, to the extent it is lawfully
entitled to do so, upon the request of the Requisite Lend-
ers, exercise its setoff rights hereunder against any ac-
counts of the Borrower now or hereafter maintained with such
Lender or the Fronting Bank or any Affiliate.
XV.6. Ratable Sharing. The Lenders agree among
themselves that (i) with respect to all amounts received by
them which are applicable to the payment of the Obligations
equitable adjustment will be made so that, in effect, all
such amounts will be shared among them ratably in accordance
with their Pro Rata Shares, whether received by voluntary
payment, by the exercise of the right of setoff or banker's
lien, by counterclaim or cross-action or by the enforcement
of any or all of the Obligations, (ii) if any of them shall
by voluntary payment or by the exercise of any right of
counterclaim, setoff, banker's lien or otherwise, receive
payment of a proportion of the aggregate amount of the
Obligations held by it, which is greater than the amount
which such Lender is entitled to receive hereunder, the
Lender receiving such excess payment shall purchase, without
recourse or warranty, an undivided interest and partici-
pation (which it shall be deemed to have done simultaneously
upon the receipt of such payment) in such Obligations owed
to the others so that all such recoveries with respect to
such Obligations shall be applied ratably in accordance with
their Pro Rata Shares; provided, however, that if all or
part of such excess payment received by the purchasing party
is thereafter recovered from it, those purchases shall be
rescinded and the purchase prices paid for such
participations shall be returned to such party to the extent
necessary to adjust for such recovery, but without interest
except to the extent the purchasing party is required to pay
interest in connection with such recovery. The Borrower
agrees that any Lender so purchasing a participation from
another Lender pursuant to this Section 15.6 may, to the
fullest extent permitted by law, exercise all its rights of
payment (including, subject to Section 15.5, the right of
setoff) with respect to such participation as fully as if
such Lender were the direct creditor of the Borrower in the
amount of such participation.
XV.7. Amendments and Waivers.
(a) General Provisions. Unless otherwise provid-
ed for or required in this Agreement, no amendment or modi-
fication of any provision of this Agreement or any of the
other Loan Documents shall be effective without the written
agreement of the Requisite Lenders (which the Requisite
Lenders shall have the right to grant or withhold in their
sole discretion) and the Borrower; provided, however, that
the Borrower's agreement shall not be required for any
amendment or modification of Sections 12.1 through 12.8. No
termination or waiver of any provision of this Agreement or
any of the other Loan Documents, or consent to any departure
by the Borrower therefrom, shall be effective without the
written concurrence of the Requisite Lenders, which the
Requisite Lenders shall have the right to grant or withhold
in their sole discretion. All amendments, waivers and
consents not specifically reserved to the Agent, the other
Co-Agents or the other Lenders in Section 15.7(b), 15.7(c),
and in other provisions of this Agreement shall require only
the approval of the Requisite Lenders. Any waiver or consent
shall be effective only in the specific instance and for the
specific purpose for which it was given. No notice to or
demand on the Borrower in any case shall entitle the Borrow-
er to any other or further notice or demand in similar or
other circumstances. Notwithstanding the foregoing, no
amendment, waiver or consent shall, unless in writing and
signed by the Designating Lender on behalf of its Designated
Bank affected thereby, (a) subject such Designated Bank to
any additional obligations, (b) reduce the principal of,
interest on, or other amounts due with respect to, the
Designated Bank Note made payable to such Designated Bank,
or (c) postpone any date fixed for any payment of principal
of, or interest on, or other amounts due with respect to the
Designated Bank Note made payable to the Designated Bank.
(b) Amendments, Consents and Waivers by Affected
Lenders. Any amendment, modification, termination, waiver or
consent with respect to any of the following provisions of
this Agreement shall be effective only by a written agree-
ment, signed by each Lender affected thereby as described
below:
(i) waiver of any of the conditions specified in Sec-
tions 6.1 and 6.2 (except with respect to a condition
based upon another provision of this Agreement, the
waiver of which requires the concurrence of only the
Requisite Lenders),
(ii) increase in the amount of such Lender's Revolving
Credit Commitment,
(iii) reduction of the principal of, rate or amount of
interest on the Loans or any fees or other amounts
payable to such Lender (other than by the payment or
prepayment thereof), and
(iv) postponement or extension of any date (other than
the Revolving Credit Termination Date postponement or
extension of which is governed by Section 15.7(c)(i))
fixed for any payment of principal of, or interest on,
the Loans or any fees or other amounts payable to such
Lender (except with respect to any modifications of the
application provisions relating to prepayments of Loans
and other Obligations which are governed by Section
4.2(b)).
(c) Amendments, Consents and Waivers by All Lend-
ers. Any amendment, modification, termination, waiver or
consent with respect to any of the following provisions of
this Agreement shall be effective only by a written agree-
ment, signed by each Lender:
(i) postponement of the Revolving Credit Termination
Date, or increase in the Maximum Revolving Credit
Amount to any amount in excess of $175,000,000,
(ii) change in the definition of Requisite Lenders or
in the aggregate Pro Rata Share of the Lenders which
shall be required for the Lenders or any of them to
take action hereunder or under the other Loan Docu-
ments,
(iii) amendment of Section 15.6 or this Section 15.7,
(iv) assignment of any right or interest in or under
this Agreement or any of the other Loan Documents by
the Borrower, and
(v) waiver of any Event of Default described in Sec-
tions 11.1(a), (f), (g), (i), (n), and (o).
(d) Agent Authority. The Agent may, but shall
have no obligation to, with the written concurrence of any
Lender, execute amendments, modifications, waivers or con-
sents on behalf of that Lender. Notwithstanding anything to
the contrary contained in this Section 15.7, no amendment,
modification, waiver or consent shall affect the rights or
duties of the Agent under this Agreement and the other Loan
Documents, unless made in writing and signed by the Agent in
addition to the Lenders required above to take such action.
Notwithstanding anything herein to the contrary, in the
event that the Borrower shall have requested, in writing,
that any Lender agree to an amendment, modification, waiver
or consent with respect to any particular provision or
provisions of this Agreement or the other Loan Documents,
and such Lender shall have failed to state, in writing, that
it either agrees or disagrees (in full or in part) with all
such requests (in the case of its statement of agreement,
subject to satisfactory documentation and such other condi-
tions it may specify) within thirty (30) days after such
request, then such Lender hereby irrevocably authorizes the
Agent to agree or disagree, in full or in part, and in the
Agent's sole discretion, to such requests on behalf of such
Lender as such Lenders' attorney-in-fact and to execute and
deliver any writing approved by the Agent which evidences
such agreement as such Lender's duly authorized agent for
such purposes.
XV.8. Notices. Unless otherwise specifically
provided herein, any notice or other communication herein
required or permitted to be given shall be in writing and
may be personally served, sent by facsimile transmission or
by courier service or United States certified mail and shall
be deemed to have been given when delivered in person or by
courier service, upon receipt of a facsimile transmission,
or four (4) Business Days after deposit in the United States
mail with postage prepaid and properly addressed. Notices
to the Agent pursuant to Articles II, IV or XII shall not be
effective until received by the Agent. For the purposes
hereof, the addresses of the parties hereto (until notice of
a change thereof is delivered as provided in this Sec-
tion 15.8) shall be as set forth below each party's name on
the signature pages hereof or the signature page of any
applicable Assignment and Acceptance, or, as to each party,
at such other address as may be designated by such party in
a written notice to all of the other parties to this Agree-
ment.
XV.9. Survival of Warranties and Agreements. All
representations and warranties made herein and all obli-
gations of the Borrower in respect of taxes, indemnification
and expense reimbursement shall survive the execution and
delivery of this Agreement and the other Loan Documents, the
making and repayment of the Loans and the termination of
this Agreement and shall not be limited in any way by the
passage of time or occurrence of any event and shall ex-
pressly cover time periods when the Agent, any of the Co-
Agents or any of the other Lenders may have come into pos-
session or control of any Property of the Borrower or any of
its Subsidiaries.
XV.10. Failure or Indulgence Not Waiver; Remedies
Cumulative. No failure or delay on the part of the Agent,
any other Lender or any other Co-Agent in the exercise of
any power, right or privilege under any of the Loan Docu-
ments shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.
All rights and remedies existing under the Loan Documents
are cumulative to and not exclusive of any rights or reme-
dies otherwise available.
XV.11. Marshalling; Payments Set Aside. None of
the Agent, any other Lender or any other Co-Agent shall be
under any obligation to marshall any assets in favor of the
Borrower or any other party or against or in payment of any
or all of the Obligations. To the extent that the Borrower
makes a payment or payments to the Agent or any other Lender
or any such Person exercises its rights of setoff, and such
payment or payments or the proceeds of such enforcement or
setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or
required to be repaid to a trustee, receiver or any other
party, then to the extent of such recovery, the obligation
or part thereof originally intended to be satisfied, and all
Liens, right and remedies therefor, shall be revived and
continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not oc-
curred.
XV.12. Severability. In case any provision in or
obligation under this Agreement or the other Loan Documents
shall be invalid, illegal or unenforceable in any jurisdic-
tion, the validity, legality and enforceability of the
remaining provisions or obligations, or of such provision or
obligation in any other jurisdiction, shall not in any way
be affected or impaired thereby.
XV.13. Headings. Section headings in this Agree-
ment are included herein for convenience of reference only
and shall not constitute a part of this Agreement or be
given any substantive effect.
XV.14. Governing Law. THIS AGREEMENT SHALL BE
INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES
HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICT OF LAWS
PRINCIPLES.
XV.15. Limitation of Liability. No claim may be
made by any Lender, any Co-Agent, the Agent, or any other
Person against any Lender (acting in any capacity hereunder)
or the Affiliates, directors, officers, employees, attorneys
or agents of any of them for any consequential or punitive
damages in respect of any claim for breach of contract or
any other theory of liability arising out of or related to
the transactions contemplated by this Agreement, or any act,
omission or event occurring in connection therewith; and
each Lender, each Co-Agent and the Agent hereby waives, re-
leases and agrees not to sue upon any such claim for any
such damages, whether or not accrued and whether or not
known or suspected to exist in its favor. In addition, no
claim may be made by any Lender, any Co-Agent, the Agent, or
any other person against any directors, officers or trustees
of the Borrower.
XV.16. Successors and Assigns. This Agreement
and the other Loan Documents shall be binding upon the par-
ties hereto and their respective successors and assigns and
shall inure to the benefit of the parties hereto and the
successors and permitted assigns of the Lenders. The rights
hereunder of the Borrower, or any interest therein, may not
be assigned without the written consent of all Lenders,
except in accordance with the provisions of Article XIV
hereof.
XV.17. Certain Consents and Waivers of the Bor-
rower.
(a) Personal Jurisdiction. (i) EACH OF THE LEND-
ERS AND THE BORROWER IRREVOCABLY AND UNCONDITIONALLY SUB-
MITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT
SITTING IN NEW YORK, NEW YORK, AND ANY COURT HAVING JURIS-
DICTION OVER APPEALS OF MATTERS HEARD IN SUCH COURTS, IN ANY
ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM
IN CONNECTION WITH THIS AGREEMENT, WHETHER ARISING IN CON-
TRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED
BY LAW, IN SUCH FEDERAL COURT. THE BORROWER IRREVOCABLY
DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, 1633 BROAD-
WAY, NEW YORK, NEW YORK 10019, AS ITS AGENT (THE "PROCESS
AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. EACH OF THE
LENDERS AND THE BORROWER AGREES THAT A FINAL JUDGMENT IN ANY
SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW. THE BORROWER WAIVES IN
ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION
OF THE COURT CONSIDERING THE DISPUTE.
(ii) THE BORROWER AGREES THAT THE AGENT SHALL
HAVE THE RIGHT TO PROCEED AGAINST THE BORROWER OR ITS PROP-
ERTY IN A COURT IN ANY LOCATION NECESSARY OR APPROPRIATE TO
ENABLE THE AGENT AND THE OTHER LENDERS TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER ENTERED IN FAVOR OF THE AGENT OR ANY
OTHER LENDER. THE BORROWER AGREES THAT IT WILL NOT ASSERT
ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY
THE AGENT, ANY LENDER OR ANY CO-AGENT TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER IN FAVOR OF THE AGENT, ANY LENDER OR
ANY CO-AGENT. THE BORROWER WAIVES ANY OBJECTION THAT IT MAY
HAVE TO THE LOCATION OF THE COURT IN WHICH THE AGENT, ANY
CO-AGENT OR ANY LENDER MAY COMMENCE A PROCEEDING DESCRIBED
IN THIS SECTION.
(b) Service of Process. THE BORROWER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMEN-
TIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAIL-
ING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE BORROWER'S
NOTICE ADDRESS SPECIFIED BELOW, SUCH SERVICE TO BECOME
EFFECTIVE UPON RECEIPT. THE BORROWER IRREVOCABLY WAIVES ANY
OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRING-
ING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY JURISDICTION SET
FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT OF THE AGENT OR THE OTHER LENDERS TO BRING PRO-
CEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER
JURISDICTION.
(c) WAIVER OF JURY TRIAL. EACH OF THE AGENT AND
THE OTHER LENDERS AND THE BORROWER IRREVOCABLY WAIVES TRIAL
BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT.
XV.18. Counterparts; Effectiveness; Inconsisten-
cies. This Agreement and any amendments, waivers, consents,
or supplements hereto may be executed in counterparts, each
of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall consti-
tute but one and the same instrument. This Agreement shall
become effective against the Borrower and each Lender on the
Closing Date. This Agreement and each of the other Loan
Documents shall be construed to the extent reasonable to be
consistent one with the other, but to the extent that the
terms and conditions of this Agreement are actually incon-
sistent with the terms and conditions of any other Loan
Document, this Agreement shall govern. In the event the
Lenders enter into any co-lender agreement with the Agent
pertaining to the Lenders' respective rights with respect to
voting on any matter referenced in this Agreement or the
other Loan Documents on which the Lenders have a right to
vote under the terms of this Agreement or the other Loan
Documents, such co-lender agreement shall be construed to
the extent reasonable to be consistent with this Agreement
and the other Loan Documents, but to the extent that the
terms and conditions of such co-lender agreement are actual-
ly inconsistent with the terms and conditions of this Agree-
ment and/or the other Loan Documents, such co-lender agree-
ment shall govern. Notwithstanding the foregoing, any
rights reserved to the Agent or the other Co-Agents under
this Agreement and the other Loan Documents shall not be
varied or in any way affected by such co-lender agreement
and the rights and obligation of the Borrower under the Loan
Documents will not be varied.
XV.19. Limitation on Agreements. All agreements
between the Borrower, the Agent, each Co-Agent and each
Lender in the Loan Documents are hereby expressly limited so
that in no event shall any of the Loans or other amounts
payable by the Borrower under any of the Loan Documents be
directly or indirectly secured (within the meaning of Regu-
lation U) by Margin Stock.
XV.20. Confidentiality. Subject to Section
15.1(g), the Lenders shall hold all nonpublic information
obtained pursuant to the requirements of this Agreement, and
identified as such by the Borrower, in accordance with such
Lender's customary procedures for handling confidential
information of this nature and in accordance with safe and
sound banking practices (provided that such Lender may share
such information with its Affiliates in accordance with such
Lender's customary procedures for handling confidential
information of this nature and provided further that such
Affiliate shall hold such information confidential) and in
any event the Lenders may make disclosure reasonably re-
quired by a bona fide offeree, transferee or participant in
connection with the contemplated transfer or participation
or as required or requested by any Governmental Authority or
representative thereof or pursuant to legal process and
shall require any such offeree, transferee or participant to
agree (and require any of its offerees, transferees or
participants to agree) to comply with this Section 15.20.
In no event shall any Lender be obligated or required to
return any materials furnished by the Borrower; provided,
however, each offeree shall be required to agree that if it
does not become a transferee or participant it shall return
all materials furnished to it by the Borrower in connection
with this Agreement. Any and all confidentiality agreements
entered into between any Lender and the Borrower shall
survive the execution of this Agreement.
XV.21. Disclaimers. The Agent, the other Co-A-
gents and the other Lenders shall not be liable to any con-
tractor, subcontractor, supplier, laborer, architect, engi-
neer, tenant or other party for services performed or mate-
rials supplied in connection with any work performed on the
Real Properties. The Agent, the other Co-Agents and the
other Lenders shall not be liable for any debts or claims
accruing in favor of any such parties against the Borrower
or others or against any of the Real Properties. The Bor-
rower is not and shall not be an agent of any of the Agent,
the other Co-Agents or the other Lenders for any purposes
and none of the Lenders, the Co-Agents, nor the Agent shall
be deemed partners or joint venturers with Borrower or any
of its Affiliates. None of the Agent, the other Co-Agents
or the other Lenders shall be deemed to be in privity of
contract with any contractor or provider of services to any
Real Property, nor shall any payment of funds directly to a
contractor or subcontractor or provider of services be
deemed to create any third party beneficiary status or
recognition of same by any of the Agent, the other Co-Agents
or the other Lenders and the Borrower agrees to hold the
Agent, the other Co-Agents and the other Lenders harmless
from any of the damages and expenses resulting from such a
construction of the relationship of the parties or any
assertion thereof.
XV.22. No Bankruptcy Proceedings. Each of the
Borrower, the Co-Agents and the other Lenders hereby agrees
that it will not institute against any Designated Bank or
join any other Person in instituting against any Designated
Bank any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceeding under any federal or state bank-
ruptcy or similar law, until the later to occur of (i) one
year and one day after the payment in full of the latest
maturing commercial paper note issued by such Designated
Bank and (ii) the Revolving Credit Termination Date.
XV.23. Entire Agreementt. This Agreement, taken
together with all of the other Loan Documents, embodies the
entire agreement and understanding among the parties hereto
and supersedes all prior agreements and understandings,
written and oral, relating to the subject matter hereof.
IN WITNESS WHEREOF, this Agreement has been duly
executed as of the date first above written.
BORROWER: U.S. RESTAURANT PROPERTIES OPERATING L.P.,
a Delaware limited partnership
By: USRP Managing, Inc., a Delaware cor-
poration
By: _______________________
Name:
Title:
Notice Address:
5310 Harvest Hill Road
Suite 270, LB 168
Dallas, Texas 75230
Attn:
Telecopy: (972) 490-9119
with a copy to:
Middleberg, Riddle & Gianna
1600 Allianz Financial Centre
2323 Bryan Street
Dallas, Texas 75201
Attn: Richard S. Wilensky, Esq.
Telecopy: (214) 220-3189
AGENT AND LENDER: UNION BANK OF SWITZERLAND, NEW
YORK BRANCH
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
Notice Address, Domestic
Lending Office and
EuroDollar Lending Office:
Union Bank of Switzerland
299 Park Avenue
New York, New York 10171
Attn: Ms. Xiomara Martez
Telecopy: (212) 821-4138
Pro Rata Share: 100%
Revolving Credit Commitment: $175,000,000
LENDERS:
LIST OF EXHIBITS AND SCHEDULES
Exhibit A-- Form of Assignment and Acceptance
Exhibit B-- Form of Note
Exhibit C-- Form of Notice of Borrowing
Exhibit D-- Form of Notice of Conversion/Continuation
Exhibit E-- List of Closing Documents
Exhibit F-- Form of Officer's Certificate
Exhibit G-- Sample Calculations of Financial Covenants
Exhibit H-- Gas Station Lease
Schedule 7.1-A-- Organizational Documents
Schedule 7.1-C-- Corporate Structure; Outstanding Capital
Stock and Partnership Interests; Partner-
ship Agreement
Schedule 7.1-H-- Indebtedness for Borrowed Money; Contin-
gent Obligations
Schedule 7.1-I-- Pending Actions
Schedule 7.1-P-- Environmental Matters
Schedule 7.1-Q-- ERISA Matters
Schedule 7.1-T -- Insurance Policies
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of October 15, 1997,
by and between U.S. Restaurant Properties, Inc., a Maryland corporation (the
"Company"), and Robert J. Stetson (the "Executive").
W I T N E S S E T H:
WHEREAS, Executive will be the Chief Executive Officer and President of the
Company and is expected to make major contributions to the short- and long-term
profitability, growth and financial strength of the Company;
WHEREAS, the Company desires (a) to assure itself of both present and
future continuity of management, (b) to continue certain minimum termination
benefits for Executive, and (c) to provide additional inducement for Executive
to continue to remain in the ongoing employ of the Company; and
WHEREAS, Executive is willing to render services to the Company on the
terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements set forth herein, the Company and Executive agree as follows:
1. Employment. The Company agrees to and does hereby employ the Executive
to perform the duties of Chief Executive Officer and President of the Company,
and Executive accepts such employment, upon the terms and conditions set forth
herein.
2. Term. The term of this Agreement shall be the period commencing as of
the date set forth above and continuing thereafter for a period of four years
(as extended as hereinafter provided, the "Term"); provided, however, that at
the end of such four year period and each anniversary date thereafter, the Term
will automatically be extended for an additional year unless, not later than 60
days prior to the end of such four year period or any such anniversary date, as
the case may be, the Company or Executive shall have given notice that it or
Executive, as the case may be, does not wish to have the Term extended.
3. Duties and Services.
(a) Executive agrees to serve the Company as the Chief Executive Officer
and President and to devote his attention and energies to the business of the
Company. Executive will not be prevented from (i) engaging in any civic or
charitable activity for which Executive receives no compensation or other
pecuniary advantage; (ii) investing his personal assets in businesses which do
not compete with the Company, provided that such investment will not require any
services on the part of Executive in the operation of the affairs of the
businesses in which investments are made which would unreasonably interfere with
his obligations hereunder; (iii) purchasing securities in any corporation whose
securities are publicly traded, provided that such purchases will not result in
Executive owning beneficially at any time five percent (5%) or more of the
equity securities of any corporation engaged in a business competitive with that
of the Company; (iv) serving as a director of any corporation that does not
engage in a Competitive Activity (as defined in Section 15 hereof); or (v)
participating in any other activity approved in advance in writing by the Board.
Executive also agrees to perform from time to time such other executive services
as the Company shall reasonably request, provided that such services shall be
consistent with his position and status as Chief Executive Officer and
President. In attending to the business and affairs of the Company, Executive
agrees to serve the Company faithfully, diligently and to the best of his
ability. Executive shall be entitled to continue to serve as a director and
officer of QSV Properties, Inc. and perform certain ongoing business functions
in connection therewith, provided that such activities do not unreasonably
interfere with his obligations hereunder.
(b) The duties and responsibilities of Executive shall be commensurate with
those of the chief executive officer and president of any publicly-held
corporation similar to the Company.
Page 1 of 11
<PAGE>
4. Compensation.
(a) As consideration for the services to be rendered hereunder by
Executive, the Company agrees to pay Executive, and Executive agrees to accept,
payable in accordance with the Company's standard payroll practices for
executives, but payable in not less than monthly installments, compensation of
Two Hundred Fifty Thousand Dollars ($250,000) per annum or such greater amount
as may be determined from time to time by the Board pursuant to performance
reviews to be conducted on an annual basis or such shorter time period as the
Board shall deem appropriate (the "Salary").
(b) Executive shall be eligible to receive an annual incentive bonus
(whether in cash and/or securities) as provided for in any incentive plan of the
Company, including, without limitation, stock option and/or stock bonus plans,
based on the level of accomplishment of specific performance targets established
by the Board or any committee thereof, or such other bonus plans as may be
adopted by the Board from time to time in the future. In addition, Executive
shall participate in any Company perquisite and supplemental benefit programs
established for the benefit of senior executives of the Company.
(c) Executive shall not receive any additional compensation for his
services as a member of the Board.
(d) Notwithstanding anything in this Section 4 to the contrary, prior to
December 31, 2000, Executive shall not be entitled to receive cash compensation
payable in accordance with this Section 4 (whether Salary and/or bonus) in
excess of $300,000 per annum.
5. Termination for Cause.
(a) Subject to the provisions of Section 20 hereof, in the event that
Executive shall be discharged for "Cause" as provided in Section 5(b) hereof,
all compensation payable to Executive pursuant to Section 4 in respect of
periods after such discharge shall terminate immediately upon such discharge,
and the Company shall have no obligations with respect thereto, nor shall the
Company be obligated to pay Executive severance compensation under Section 7
hereof.
(b) For the purposes of this Agreement, "Cause" shall mean that, prior to
any termination pursuant to Section 5(a) hereof, Executive shall have committed:
(i) an intentional act or acts of fraud, embezzlement or theft constituting
a felony and resulting or intended to result directly or indirectly in gain or
personal enrichment for Executive at the expense of the Company; or
(ii) the continued, repeated, intentional and willful refusal to perform
the duties associated with Executive's position with the Company, which is not
cured within 15 days following written notice to Executive.
For purposes of this Agreement, no act or failure to act on the part of
Executive shall be deemed "intentional" if it was due primarily to an error in
judgment or negligence, but shall be deemed "intentional" only if done or
omitted to be done by Executive not in good faith and without reasonable belief
that his action or omission was in the best interest of the Company.
Executive shall not be deemed to have been terminated for "Cause" hereunder
unless and until there shall have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote of not less than a majority of
the Board then in office at a meeting of the Board called and held for such
purpose, after reasonable notice to Executive and an opportunity for Executive,
together with his counsel (if Executive chooses to have counsel present at such
meeting), to be heard before the Board, finding that, in the good faith opinion
of the Board, Executive had committed an act constituting "Cause" as herein
defined and specifying the particulars thereof in detail. Nothing herein will
limit the right of Executive or his beneficiaries to contest the validity or
propriety of any such determination, including submitting the decision for
review pursuant to Section 20 hereof.
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6. Termination Compensation.
(a) If, during the Term, Executive's employment is terminated (i) for any
reason other than (A) pursuant to Section 5(a) hereof, (B) by reason of death or
(C) by reason of "Disability" or (ii) by Executive due to "Constructive
Discharge," then Executive shall receive termination pay in an amount equal to
two times the highest annualized rate of Executive's Salary prior to the date of
termination, payable in cash within five business days of the date of
termination.
(b) For the purposes of this Agreement, "Constructive Discharge" shall
mean:
(i) a material reduction in Executive's job function, authority, duties or
responsibilities, or a similar change in Executive's reporting relationships;
(ii) a required relocation of Executive of more than 35 miles from
Executive's current job location;
(iii) any breach of any of the terms of this Agreement by the Company which
is not cured within 15 days following written notice thereof by Executive to the
Company; or
(iv) in the event of a "Change in Control" (as hereinafter defined)
Executive has reasonably determined that, as a result of a change in
circumstances following the Change in Control of the Company that significantly
affect his employment, he is unable to exercise the authority, proven duties and
responsibilities contemplated by Section 3 hereof;
provided, however, that the term "Constructive Discharge" shall not include
a specific event described in the preceding clause (i), (ii), (iii), (iv) or (v)
unless Executive actually terminates his employment with the Company within 60
days after the occurrence of such event.
(c) The amount of compensation payable pursuant to this Section 6 is not
subject to any deduction (except for withholding taxes), reduction, offset or
counterclaim, and the Company may not give advance notice of termination in lieu
of the payment provided for in this Section 6.
7. Termination in the Event of Death. This Agreement shall terminate
automatically upon the death of Executive. In such event, the Company shall pay
to Executive's legal representative only the base salary due to the Executive up
to the date of termination as well as incentive bonuses, which have accrued
through the date of termination, and benefits payable pursuant to this
Agreement.
8. Termination in the Event of Disability. If during the Term, Executive
becomes physically or mentally disabled so as to become unable, for a period of
more than six (6) consecutive months, to perform his duties hereunder on
substantially a full time basis ("Disability"), the Company may at its option
terminate Executive's employment hereunder upon not less than thirty (30) days'
written notice. In the event of such termination, Executive shall be entitled to
continue to receive his base salary and benefits, excluding any incentive
bonuses, for a period equal to the lesser of (a) twenty-four (24) months from
the date of termination and (b) the remainder of the Term, and then shall
receive such benefits as are available to senior executives of the Company under
any applicable disability plan.
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9. Change in Control of the Company.
(a) If a Change in Control (as hereinafter defined) of the Company occurs
prior to the scheduled expiration of the Term and within three years after the
Change in Control of the Company (i) Executive is terminated by the Company for
reasons other than (A) death, (B) Disability or (C) Cause or (ii) Executive
terminates his employment as a result of Construction Discharge, the Company,
within 30 days of Executive's termination of employment, will pay to Executive,
in lieu of any severance obligation under Section 6 hereof, an amount equal to
2.99 times Executive's compensation, which, for purposes of this Section 9,
shall mean an amount equal to the highest annualized rate of Executive's Salary
prior to the date of termination, plus Executive's cash bonus for the year
immediately prior to such termination.
(b) For purposes of this Agreement, a "Change in Control" shall have
occurred if at any time during the Term either of the following events occurs:
(i) The Company is merged, consolidated or reorganized into or with another
corporation or other legal person and as a result of such merger, consolidation
or reorganization less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately after such
transaction are held in the aggregate by the holders of Voting Stock (as
hereinafter defined) of the Company immediately prior to such transaction; or
(ii) The Company sells all or substantially all of its assets to any other
corporation or other legal person, less than a majority of the combined voting
power of the then-outstanding voting securities of which are held in the
aggregate by the holders of Voting Stock of the Company immediately prior to
such sale.
10. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined (as hereafter provided) that any payment or
distribution by the Company to or for the benefit of Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise pursuant to or by reason of any other agreement, policy, plan,
program or arrangement (a "Payment"), would be subject to the excise tax imposed
by Section 4999 (or any successor provision thereto) of the Internal Revenue
Code of 1986, as amended (the "Code"), or any interest or penalties with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereafter collectively referred to as the "Excise Tax"), then
Executive shall be entitled to receive an additional payment or payments (a
"Gross-Up Payment") in an amount such that, after payment by Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed upon the Gross-Up Payment, Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) All determinations required to be made under this Section 10, including
whether an Excise Tax is payable by Executive and the amount of such Excise Tax
and whether a Gross-Up Payment is required and the amount of such Gross-Up
Payment, shall be made by a nationally recognized firm of certified public
accountants (the "Accounting Firm") selected by Executive in his sole
discretion. Executive shall direct the Accounting Firm to submit its
determination and detailed supporting calculations to both the Company and
Executive within 15 calendar days after the termination date, if applicable, or
such earlier time or times as may be requested by the Company or Executive. If
the Accounting Firm determines that any Excise Tax is payable by Executive, the
Company shall pay the required Gross-Up Payment to Executive within five
business days after receipt of such determination and calculations. If the
Accounting Firm determines that no Excise Tax is payable by Executive, it shall,
at the same time as it makes such determination, furnish Executive with an
opinion that he has substantial authority not to report any Excise Tax on his
federal income tax return. Any determination by the Accounting Firm as to the
amount of the Gross-Up Payment shall be binding upon the Company and Executive.
As a result of the uncertainty in the application of Section 4999 of the Code
(or any successor provision thereto) at the time of the initial determination by
the Accounting Firm hereunder, it is possible that Gross-Up Payments which will
not have been made by the Company should have been made (an "Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that Executive is required to make a payment of any Excise Tax, Executive shall
direct the Accounting Firm to determine the amount of the Underpayment that has
occurred and to submit its determination and detailed supporting calculations to
both the Company and Executive as promptly as possible. Any such Underpayment
shall be promptly paid by the Company to, or for the benefit of, Executive
within five business days after receipt of such determination and calculations.
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<PAGE>
(c) The Company and Executive shall each provide the Accounting Firm access
to and copies of any books, records and documents in the possession of the
Company or Executive, as the case may be, reasonably requested by the Accounting
Firm, and otherwise cooperate with the Accounting Firm in connection with the
preparation and issuance of the determination contemplated by Section 10(b)
hereof.
(d) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by Section
10(b) hereof shall be borne by the Company. If such fees and expenses are
initially paid by Executive, the Company shall reimburse Executive the full
amount of such fees and expenses within five business days after receipt from
Executive of a statement therefor and reasonable evidence of his payment
thereof.
11. Other Benefits.
(a) Except as expressly provided herein, this Agreement shall not:
(i) be deemed to limit or affect the right of Executive to receive other
forms of additional compensation or to participate in any insurance, retirement,
disability, profit-sharing, stock purchase, stock option, stock appreciation
rights, cash or stock bonus or other plan or arrangement or in any other
benefits now or hereafter provided by the Company or any of the Company's
affiliated companies for its employees; or
(ii) be deemed to be a waiver by Executive of any vested rights which
Executive may have or may hereafter acquire under any employee benefit plan or
arrangement of the Company or any of the Company's affiliated companies.
(b) It is contemplated that, in connection with his employment hereunder,
Executive may be required to incur reasonable business, entertainment and travel
expenses. The Company agrees to reimburse Executive in full for all reasonable
and necessary business, entertainment and other related expenses, including
travel expenses, incurred or expended by him incident to the performance of his
duties hereunder, upon submission by Executive to the Company of such vouchers
or expense statements satisfactorily evidencing such expenses as may be
reasonably requested by the Company.
(c) It is understood and agreed by the Company that during the term of
Executive's employment hereunder, he shall be entitled to annual paid vacations
(taken consecutively or in segments), the length of which shall be consistent
with the effective discharge of Executive's duties and the general customs and
practices of the Company applicable to its executive officers.
12. No Mitigation Obligation. The Company hereby acknowledges that it will
be difficult and may be impossible (a) for Executive to find reasonably
comparable employment following the date of termination, and (b) to measure the
amount of damages which Executive may suffer as a result of termination of
employment hereunder. Accordingly, the payment of the termination compensation
by the Company to Executive in accordance with the terms of this Agreement is
hereby acknowledged by the Company to be reasonable and will be liquidated
damages, and Executive will not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor will any profits, income, earnings or other benefits from any source
whatsoever create any mitigation, offset, reduction or any other obligation on
the part of Executive hereunder or otherwise.
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13. Confidentiality.
(a) Recognizing that the knowledge and information about the business
methods, systems, plans and policies of the Company and of its affiliated
companies which Executive has heretofore and shall hereafter receive, obtain or
establish as an employee of the Company or its affiliated companies are valuable
and unique assets of the Company and its affiliated companies, Executive agrees
that he shall not (otherwise than pursuant to his duties hereunder) disclose,
without the written consent of the Company, any confidential knowledge or
information pertaining to the Company or its affiliated companies, or their
business, personnel or plans, to any person, firm, corporation or other entity,
which would result in any material harm or damage to the Company, its business
or prospects, for any reason or purpose whatsoever, unless required by law or
legal process. In the event Executive is required by law or legal process to
provide documents or disclose information, he shall take all reasonable steps to
maintain confidentiality of documents and information including notifying the
Company and giving it an opportunity to seek a protective order, at its sole
cost and expense.
(b) The provisions of this Section 13 shall survive the expiration or
termination of this Agreement, without regard to the reason therefor, for a
period of two years from the earlier of (i) expiration of the Term or (ii)
termination of Executive's employment with the Company.
14. Non-Competition.
(a) Except as otherwise provided in Section 3 hereof, during the Term and
any period during which Executive receives any severance payments made pursuant
to Section 6, 8, 9(a) or 10(a) hereof and, in the event Executive's employment
is terminated (i) by the Company for Cause or (ii) by the Executive otherwise
than as a result of Constructive Discharge, for a period ending one (1) year
after the date Executive's employment is so terminated (the "Noncompetition
Period"), Executive shall not, directly or indirectly, either for himself or any
other person, own, manage, control, participate in, invest in, permit his name
to be used by, act as consultant or advisor to, render services for (alone or in
association with any individual, entity or other business organization) or
otherwise assist in any manner any individual or entity that engages in or owns,
invests in, manages or controls any venture or enterprise engaged in (each, a
"Competitive Activity") the ownership, management, acquisition or development of
restaurant properties or retail properties similar to those, if any, being
acquired by the Company on the date Executive's employment is so terminated.
Executive will not disseminate or make use of any of the confidential
information of the Company without qualification as to when or how such
information may have been acquired unless such information shall become publicly
available.
Executive will not in any manner induce, attempt to induce or assist others
to induce or attempt to induce any investor, client or tenant of the Company to
terminate its, his or her association with the Company or do anything to
interfere with the relationship between the Company and any of its customers,
clients, tenants or persons or concerns dealing with the Company during the
Noncompetition Period.
Executive will not, without the prior consent of a majority of the
Company's independent directors, solicit, hire away or employ any person who is
an employee of the Company during the Noncompetition Period.
(b) In the event that any restriction contained in this Section 14 shall be
held too broad to allow enforcement of such restriction to its full extent, then
such restriction shall be enforced to the maximum extent permitted by law, and
Executive hereby consents and agrees that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restrictions.
(c) Executive acknowledges and agrees that the Company's remedy at law for
any breach of his obligations under this Section 14 may be inadequate, and
agrees and consents that temporary and/or permanent or injunctive relief may be
entered enjoining him from breaching this Agreement and further agrees that any
proceeding which may be brought to enforce any provision of this Section 14
without being requested to prove actual damages as a result of the premature
breach of this Agreement.
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<PAGE>
15. Legal Fees and Expenses. It is the intent of the Company that Executive
not be required to incur legal fees and the related expenses associated with the
interpretation, enforcement or defense of Executive's rights under this
Agreement by litigation or otherwise because the cost and expense thereof would
substantially detract from the benefits intended to be extended to Executive
hereunder. Accordingly, if it should appear to Executive that the Company has
failed to comply with any of its obligations under this Agreement or in the
event that the Company or any other person takes or threatens to take any action
to declare this Agreement void or unenforceable or in any way reduce the
possibility of collecting the amounts due hereunder, or institutes any
litigation or other action or proceeding designed to deny, or to recover from,
Executive any payments or benefits provided hereunder, the Company irrevocably
authorizes Executive from time to time to retain counsel of Executive's choice,
at the expense of the Company as hereafter provided, to advise and represent
Executive in connection with any such interpretation, enforcement or defense,
including, without limitation, the initiation or defense of any litigation or
other legal action, whether by or against the Company or any director, officer,
stockholder or other person affiliated with the Company, in any jurisdiction.
The Company will pay and be solely financially responsible for any and all
attorneys' and related fees and expenses incurred at the time they are billed by
Executive in connection with any of the foregoing, except only in the event of
litigation where the Company fully and finally prevails on all causes of action.
16. Withholding of Taxes. The Company may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as the Company is
required to withhold pursuant to any law or government regulation or ruling.
17. Successors and Binding Agreement.
(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in form
and substance satisfactory to Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent the Company
would be required to perform if no such succession had taken place. This
Agreement will be binding upon and inure to the benefit of the Company and any
successor to the Company, including, without limitation, any persons acquiring
directly or indirectly all or substantially all of the business or assets of the
Company whether by purchase, merger, consolidation, reorganization or otherwise
(and such successor shall thereafter be deemed the "Company" for the purposes of
this Agreement), but will not otherwise be assignable, transferable or delegable
by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided in
Sections 17(a) and 17(b) hereof and with respect to the Company's obligation to
pay legal fees and expenses under Section 15 hereof. Without limiting the
generality or effect of the foregoing, Executive's right to receive payments
hereunder will not be assignable, transferable or delegable, whether by pledge,
creation of a security interest or otherwise, other than by a transfer by
Executive's will or by the laws of descent and distribution and, in the event of
any attempted assignment or transfer contrary to this Section 17(c), the Company
shall have no liability to pay any amount so attempted to be assigned,
transferred or delegated, except with respect to legal fees and expenses, as and
to the extent provided in Section 15 hereof.
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<PAGE>
18. Notices. For all purposes of this Agreement, all communications,
including, without limitation, notices, consents, requests or approvals,
required or permitted to be given hereunder will be in writing and will be
deemed to have been duly given when hand delivered or dispatched by electronic
facsimile transmission (with receipt thereof orally confirmed), or five business
days after having been mailed by United States registered or certified mail,
return receipt requested, postage prepaid, or three business days after having
been sent by a nationally recognized overnight courier service such as Federal
Express, UPS or Purolator, addressed to the Company (to the attention of the
Secretary of the Company) at the address set forth on the signature pages of
this Agreement and to Executive at the address set forth on the signature pages
of this Agreement, or to such other address as any party may have furnished to
the other in writing and in accordance herewith, except that notices of changes
of address shall be effective only upon receipt.
19. Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Texas, without giving effect to the
principles of conflict of laws of such State.
20. Mutual Agreement to Arbitrate.
(a) The Company and Executive recognize that differences may arise between
them. Through the provisions of this Section 20, both parties expect to gain the
benefits of a speedy, economical, impartial dispute-resolution procedure.
Therefore, the parties agree that this Section 20 shall apply to all disputes or
controversies arising out of Executive's employment (or termination of that
employment) under this Agreement, that the Company may have against Executive,
or that Executive may have against the Company or against (as applicable) its
officers, directors, stockholders, partners, advisers or agents ("Claims").
Claims include, but are not limited to, controversies relating to: compensation
or benefits, breach of any contract, torts, discrimination under state, federal
or local law, and violation of any federal, state or other governmental law,
statute, regulation, or ordinance.
(b) Except as otherwise specifically stated in this Agreement, the sole and
exclusive method to resolve any Claim is arbitration as provided in this Section
20. The parties each waive their right to commence an action in any court to
resolve a Claim. Neither party shall initiate or prosecute any lawsuit in any
way related to any Claim covered by this Section 20.
(c) A Claim must be processed in the manner set forth below, otherwise the
Claim shall be void and deemed waived even if there is a federal or state
statute of limitations which would allow more time to pursue the Claim.
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(i) Any Claim not raised under Section 5 hereof must initially be presented
to the Company's Board of Directors (the "Board") in writing within ten (10)
days after the Executive initially knew or should have known of the facts that
gave rise to the Claim. The Board will answer the claim within ten (10) days
after the Claim was presented. If the Board fails to respond, it will be deemed
a denial of the Executive's Claim.
(ii) If Executive is not satisfied with the Board's decision, or if the
Claim is made under Section 5 hereof, Executive may present the Claim for
resolution by final and binding arbitration pursuant to the terms of this
Section 20. If Executive desires to proceed to arbitration, Executive must give
written notice to the Company of Executive's intention to arbitrate within
thirty (30) days from the date of the Board's final decision.
(iii) If the Company desires to initiate arbitration, it must give written
notice to Executive within thirty (30) days after it initially knew or should
have known of the facts that gave rise to its Claim.
(iv) The written notice of desire to arbitrate shall describe the factual
basis of all Claims asserted, and shall be sent to the other party in accordance
with the terms of Section 18 hereof. If written notice of intention to arbitrate
is not given within the applicable time period, the party who failed to give
notice will be deemed to have waived the right to further contest the matter,
and will be deemed to have accepted the other party's last stated position on
the Claim.
(v) The arbitration shall be conducted in accordance with the then-current
Model Employment Arbitration Procedures of the American Arbitration Association
("AAA") before a single arbitrator (the "Arbitrator"). The arbitration shall
take place in or near the city in which Executive is or was last working with
the Company. All arbitrations shall be governed by the laws of the State of
Texas, the location of the principal executive office of the Company.
(vi) The Arbitrator shall be selected in the following manner. The AAA
shall give each party a list of at least six arbitrators drawn from its panel of
labor and employment arbitrators. Each side may strike all names on the list it
deems unacceptable. If only one common name remains on the list of all parties,
that individual shall be the Arbitrator. If more than one common name remains on
the list of all parties, the parties shall strike names alternately until only
one remains. If no common name remains on the list of all parties, the AAA shall
furnish one additional list, and the above procedure will be utilized. If no
Arbitrator is designated from the second list, the procedure of the AAA rules
will be utilized to select the Arbitrator. In no event will the Arbitrator be
then affiliated in any manner with a competitor of the Company.
A. Any party may be represented by an attorney or other representative
selected by the party.
B. Each party shall have the right to take the deposition of one individual
and any expert witness designed by another party. Each party also shall have the
right to make requests for production of documents to any party. Additional
discovery may be had only where the arbitrator so orders, upon a showing of
substantial need. All issues related to discovery will be resolved by the
Arbitrator.
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(vii) At least fourteen (14) days before the arbitration, the parties must
exchange lists of witnesses, including any expert, and copies of all exhibits
intended to be used at the arbitration.
(viii) The Arbitrator will have no authority to: (A) adopt new Company
policies or procedures, (B) modify this Agreement or existing Company policies,
procedures, wages or benefits, or (C) hear or decide any matter that was not
processed in accordance with this Agreement. The Arbitrator shall have exclusive
authority to resolve any Claim, including, but not limited to, a dispute
relating to the interpretation, applicability, enforceability or formation of
this Agreement, or any contention that all or any part of this Agreement is void
or voidable. The arbitrator will have the authority to award any form of remedy
or damages that would be available in a court.
(ix) The Company shall pay reasonable and necessary fees of the AAA and the
Arbitrator. The parties will pay their own attorneys' fees and expenses
associated with the arbitration.
(x) Either party, in its sole discretion, may, in writing, waive, in whole
or in part, the other's failure to follow any time or other requirement set
forth in this Agreement.
(xi) The arbitration will be conducted in private, and will not be open to
the public or the media. The testimony and other evidence presented, and the
results of the arbitration, unless otherwise agreed to by both parties, are
confidential and may not be made public or reported by any news agency or legal
publisher or service.
(xii) The Arbitrator shall render a written decision and award (the
"Award"), which shall set forth the facts and reasons that support the Award.
The Award shall be final and binding on the Company and Executive.
21. Validity. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, unenforceable
or otherwise illegal, the remainder of this Agreement and the application of
such provision to any other person or circumstances will not be affected, and
the provision so held to be invalid, unenforceable or otherwise illegal will be
reformed to the extent (and only to the extent) necessary to make it
enforceable, valid or legal.
22. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by Executive and the Company. No waiver by either party hereto at
any time of any breach by the other party hereto or compliance with any
condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, expressed or implied with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. Except as otherwise identified, references to Sections are references
to Sections of this Agreement.
23. Survival of Certain Provisions. Notwithstanding anything herein to the
contrary, the obligations of the Company under Sections 6, 8, 9, 10, 11 and 15
hereof, to the extent applicable, shall remain operative and in full force and
effect regardless of the expiration, for any reason, of the Term.
24. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
25. Warranty. Executive warrants and represents that he is not a party to
any agreement, contract or understanding, whether of employment or otherwise,
which would in any way restrict or prohibit him from undertaking or performing
employment in accordance with the terms and conditions of this Agreement.
26. Prior Agreements. This Agreement shall in all respects supersede all
previous agreements providing severance pay benefits, whether written or oral,
between Executive and the Company.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
U.S. RESTAURANT PROPERTIES, INC.
By: /s/ Fred H. Margolin
------------------------
Fred H. Margolin
Chairman of the Board, Treasurer
and Secretary
Address:
5310 Harvest Hill Road
Suite 270
Dallas, Texas 75230
/s/ Robert J. Stetson
------------------------
Robert J. Stetson, Individually
Address:
------------------------
------------------------
------------------------
Page 11 of 11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated
as of October 15, 1997, by and between U.S. Restaurant
Properties, Inc., a Maryland corporation (the "Company"),
and Fred H. Margolin (the "Executive").
W I T N E S S E T H:
WHEREAS, Executive will be the Chairman of the Board, Secretary and
Treasurer of the Company and is expected to make major contributions to the
short- and long-term profitability, growth and financial strength of the
Company;
WHEREAS, the Company desires (a) to assure itself of both present and
future continuity of management, (b) to continue certain minimum termination
benefits for Executive, and (c) to provide additional inducement for Executive
to continue to remain in the ongoing employ of the Company; and
WHEREAS, Executive is willing to render services to the Company on the
terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements set forth herein, the Company and Executive agree as follows:
0.0.0.1. Employment. The Company agrees to and does hereby employ the
Executive to perform the duties of Chairman of the Board, Secretary and
Treasurer of the Company, and Executive accepts such employment, upon the
terms and conditions set forth herein.
0.0.0.2. Term. The term of this Agreement shall be the period
commencing as of the date set forth above and continuing thereafter for a
period of four years (as extended as hereinafter provided, the "Term");
provided, however, that at the end of such four year period and each
anniversary date thereafter, the Term will automatically be extended for an
additional year unless, not later than 60 days prior to the end of such
four year period or any such anniversary date, as the case may be, the
Company or Executive shall have given notice that it or Executive, as the
case may be, does not wish to have the Term extended.
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0.0.0.3. Duties and Services.
0.0.0.3.1. Executive agrees to serve the Company as the
Chairman of the Board, Secretary and Treasurer and to devote his
attention and energies to the business of the Company. Executive will
not be prevented from (i) engaging in any civic or charitable activity
for which Executive receives no compensation or other pecuniary
advantage; (ii) investing his personal assets in businesses which do
not compete with the Company, provided that such investment will not
require any services on the part of Executive in the operation of the
affairs of the businesses in which investments are made which would
unreasonably interfere with his obligations hereunder; (iii) purchasing
securities in any corporation whose securities are publicly traded,
provided that such purchases will not result in Executive owning
beneficially at any time five percent (5%) or more of the equity
securities of any corporation engaged in a business competitive with
that of the Company; (iv) serving as a director of any corporation that
does not engage in a Competitive Activity (as defined in Section 15
hereof); or (v) participating in any other activity approved in advance
in writing by the Board. Executive also agrees to perform from time to
time such other executive services as the Company shall reasonably
request, provided that such services shall be consistent with his
position and status as Chairman of the Board, Secretary and Treasurer.
In attending to the business and affairs of the Company, Executive
agrees to serve the Company faithfully, diligently and to the best of
his ability. Executive shall be entitled to continue to serve as a
director and officer of QSV Properties, Inc. and perform certain
ongoing business functions in connection therewith, provided that such
activities do not unreasonably interfere with his obligations
hereunder.
0.0.0.3.2. The duties and
responsibilities of Executive shall be commensurate with those of the
chairman of the board, secretary and treasurer of any publicly-held
corporation similar to the Company.
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0.0.0.4. Compensation.
0.0.0.4.1. As consideration for the services to be rendered
hereunder by Executive, the Company agrees to pay Executive, and
Executive agrees to accept, payable in accordance with the Company's
standard payroll practices for executives, but payable in not less than
monthly installments, compensation of Two Hundred Fifty Thousand
Dollars ($250,000) per annum or such greater amount as may be
determined from time to time by the Board pursuant to performance
reviews to be conducted on an annual basis or such shorter time period
as the Board shall deem appropriate (the "Salary").
0.0.0.4.2. Executive shall be eligible to receive an annual
incentive bonus (whether in cash and/or securities) as provided for in
any incentive plan of the Company, including, without limitation, stock
option and/or stock bonus plans, based on the level of accomplishment
of specific performance targets established by the Board or any
committee thereof, or such other bonus plans as may be adopted by the
Board from time to time in the future. In addition, Executive shall
participate in any Company perquisite and supplemental benefit programs
established for the benefit of senior executives of the Company.
0.0.0.4.3. Executive shall not
receive any additional compensation for his
services as a member of the Board.
0.0.0.4.4. Notwithstanding anything in this Section 4 to the
contrary, prior to December 31, 2000, Executive shall not be entitled
to receive cash compensation payable in accordance with this Section 4
(whether Salary and/or bonus) in excess of $300,000 per annum.
0.0.0.5. Termination for Cause.
0.0.0.5.1. Subject to the provisions of Section 20 hereof, in
the event that Executive shall be discharged for "Cause" as provided in
Section 5(b) hereof, all compensation payable to Executive pursuant to
Section 4 in respect of periods after such discharge shall terminate
immediately upon such discharge, and the Company shall have no
obligations with respect thereto, nor shall the Company be obligated to
pay Executive severance compensation under Section 7 hereof.
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0.0.0.5.2. For the purposes of this Agreement, "Cause" shall
mean that, prior to any termination pursuant to Section 5(a) hereof,
Executive shall have committed:
0.0.0.5.2.0.1. an intentional act or
acts of fraud, embezzlement or theft
constituting a felony and resulting or
intended to result directly or indirectly
in gain or personal enrichment for
Executive at the expense of the Company; or
0.0.0.5.2.0.2. the continued, repeated, intentional and
willful refusal to perform the duties associated with
Executive's position with the Company, which is not cured
within 15 days following written notice to Executive.
For purposes of this Agreement, no act or failure to act on the part of
Executive shall be deemed "intentional" if it was due primarily to an error in
judgment or negligence, but shall be deemed "intentional" only if done or
omitted to be done by Executive not in good faith and without reasonable belief
that his action or omission was in the best interest of the Company.
Executive shall not be deemed to have been terminated for "Cause"
hereunder unless and until there shall have been delivered to Executive a copy
of a resolution duly adopted by the affirmative vote of not less than a majority
of the Board then in office at a meeting of the Board called and held for such
purpose, after reasonable notice to Executive and an opportunity for Executive,
together with his counsel (if Executive chooses to have counsel present at such
meeting), to be heard before the Board, finding that, in the good faith opinion
of the Board, Executive had committed an act constituting "Cause" as herein
defined and specifying the particulars thereof in detail. Nothing herein will
limit the right of Executive or his beneficiaries to contest the validity or
propriety of any such determination, including submitting the decision for
review pursuant to Section 20 hereof.
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0.0.0.6. Termination Compensation.
0.0.0.6.1. If, during the Term, Executive's employment is
terminated (i) for any reason other than (A) pursuant to Section 5(a)
hereof, (B) by reason of death or (C) by reason of "Disability" or (ii)
by Executive due to "Constructive Discharge," then Executive shall
receive termination pay in an amount equal to two times the highest
annualized rate of Executive's Salary prior to the date of termination,
payable in cash within five business days of the date of termination.
0.0.0.6.2. For the purposes of this
Agreement, "Constructive Discharge" shall mean:
0.0.0.6.2.0.1. a material reduction in
Executive's job function, authority,
duties or responsibilities, or a similar
change in Executive's reporting
relationships;
0.0.0.6.2.0.2. a required relocation of
Executive of more than 35 miles from
Executive's current job location;
0.0.0.6.2.0.3. any breach of any of the
terms of this Agreement by the Company
which is not cured within 15 days
following written notice thereof by
Executive to the Company; or
0.0.0.6.2.0.4. in the event of a "Change
in Control" (as hereinafter defined)
Executive has reasonably determined that,
as a result of a change in circumstances
following the Change in Control of the
Company that significantly affect his
employment, he is unable to exercise the
authority, proven duties and
responsibilities contemplated by Section 3
hereof;
provided, however, that the term "Constructive Discharge" shall not include a
specific event described in the preceding clause (i), (ii), (iii), (iv) or (v)
unless Executive actually terminates his employment with the Company within 60
days after the occurrence of such event.
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0.0.0.6.3. The amount of compensation payable pursuant to this
Section 6 is not subject to any deduction (except for withholding
taxes), reduction, offset or counterclaim, and the Company may not give
advance notice of termination in lieu of the payment provided for in
this Section 6.
0.0.0.7. Termination in the Event of Death. This Agreement shall
terminate automatically upon the death of Executive. In such event, the
Company shall pay to Executive's legal representative only the base salary
due to the Executive up to the date of termination as well as incentive
bonuses, which have accrued through the date of termination, and benefits
payable pursuant to this Agreement.
0.0.0.8. Termination in the Event of Disability. If during the Term,
Executive becomes physically or mentally disabled so as to become unable,
for a period of more than six (6) consecutive months, to perform his duties
hereunder on substantially a full time basis ("Disability"), the Company
may at its option terminate Executive's employment hereunder upon not less
than thirty (30) days' written notice. In the event of such termination,
Executive shall be entitled to continue to receive his base salary and
benefits, excluding any incentive bonuses, for a period equal to the lesser
of (a) twenty-four (24) months from the date of termination and (b) the
remainder of the Term, and then shall receive such benefits as are
available to senior executives of the Company under any applicable
disability plan.
0.0.0.9. Change in Control of the Company.
0.0.0.9.1. If a Change in Control (as hereinafter defined) of
the Company occurs prior to the scheduled expiration of the Term and
within three years after the Change in Control of the Company (i)
Executive is terminated by the Company for reasons other than (A)
death, (B) Disability or (C) Cause or (ii) Executive terminates his
employment as a result of Construction Discharge, the Company, within
30 days of Executive's termination of employment, will pay to
Executive, in lieu of any severance obligation under Section 6 hereof,
an amount equal to 2.99 times Executive's compensation, which, for
purposes of this Section 9, shall mean an amount equal to the highest
annualized rate of Executive's Salary prior to the date of termination,
plus Executive's cash bonus for the year immediately prior to such
termination.
0.0.0.9.2. For purposes of this
Agreement, a "Change in Control" shall have occurred if at any time
during the Term either of the following events occurs:
(i) The Company is merged, consolidated or
reorganized into or with another corporation or other legal
person and as a result of such merger, consolidation or
reorganization less than a majority of the combined voting
power of the then-outstanding securities of such corporation
or person immediately after such transaction are held in the
aggregate by the holders of Voting Stock (as hereinafter
defined) of the Company immediately prior to such transaction;
or
(ii) The Company sells all or substantially all of
its assets to any other corporation or other legal person,
less than a majority of the combined voting power of the
then-outstanding voting securities of which are held in the
aggregate by the holders of Voting Stock of the Company
immediately prior to such sale.
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0.0.0.10. Certain Additional Payments by the
Company.
0.0.0.10.1. Anything in this Agreement to the contrary
notwithstanding, in the event that it shall be determined (as hereafter
provided) that any payment or distribution by the Company to or for the
benefit of Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise
pursuant to or by reason of any other agreement, policy, plan, program
or arrangement (a "Payment"), would be subject to the excise tax
imposed by Section 4999 (or any successor provision thereto) of the
Internal Revenue Code of 1986, as amended (the "Code"), or any interest
or penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereafter collectively
referred to as the "Excise Tax"), then Executive shall be entitled to
receive an additional payment or payments (a "Gross-Up Payment") in an
amount such that, after payment by Executive of all taxes (including
any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed upon the Gross-Up Payment, Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
0.0.0.10.2. All determinations required to be made under this
Section 10, including whether an Excise Tax is payable by Executive and
the amount of such Excise Tax and whether a Gross-Up Payment is
required and the amount of such Gross-Up Payment, shall be made by a
nationally recognized firm of certified public accountants (the
"Accounting Firm") selected by Executive in his sole discretion.
Executive shall direct the Accounting Firm to submit its determination
and detailed supporting calculations to both the Company and Executive
within 15 calendar days after the termination date, if applicable, or
such earlier time or times as may be requested by the Company or
Executive. If the Accounting Firm determines that any Excise Tax is
payable by Executive, the Company shall pay the required Gross-Up
Payment to Executive within five business days after receipt of such
determination and calculations. If the Accounting Firm determines that
no Excise Tax is payable by Executive, it shall, at the same time as it
makes such determination, furnish Executive with an opinion that he has
substantial authority not to report any Excise Tax on his federal
income tax return. Any determination by the Accounting Firm as to the
amount of the Gross-Up Payment shall be binding upon the Company and
Executive. As a result of the uncertainty in the application of Section
4999 of the Code (or any successor provision thereto) at the time of
the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the
Company should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that Executive
is required to make a payment of any Excise Tax, Executive shall direct
the Accounting Firm to determine the amount of the Underpayment that
has occurred and to submit its determination and detailed supporting
calculations to both the Company and Executive as promptly as possible.
Any such Underpayment shall be promptly paid by the Company to, or for
the benefit of, Executive within five business days after receipt of
such determination and calculations.
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0.0.0.10.3. The Company and Executive shall each provide the
Accounting Firm access to and copies of any books, records and
documents in the possession of the Company or Executive, as the case
may be, reasonably requested by the Accounting Firm, and otherwise
cooperate with the Accounting Firm in connection with the preparation
and issuance of the determination contemplated by Section 10(b) hereof.
0.0.0.10.4. The fees and expenses of the Accounting Firm for
its services in connection with the determinations and calculations
contemplated by Section 10(b) hereof shall be borne by the Company. If
such fees and expenses are initially paid by Executive, the Company
shall reimburse Executive the full amount of such fees and expenses
within five business days after receipt from Executive of a statement
therefor and reasonable evidence of his payment thereof.
0.0.0.11. Other Benefits.
0.0.0.11.1. Except as expressly
provided herein, this Agreement shall not:
0.0.0.11.1.0.1. be deemed to limit or affect the right of
Executive to receive other forms of additional compensation or
to participate in any insurance, retirement, disability,
profit-sharing, stock purchase, stock option, stock
appreciation rights, cash or stock bonus or other plan or
arrangement or in any other benefits now or hereafter provided
by the Company or any of the Company's affiliated companies
for its employees; or
0.0.0.11.1.0.2. be deemed to be a waiver by Executive of any
vested rights which Executive may have or may hereafter
acquire under any employee benefit plan or arrangement of the
Company or any of the Company's affiliated companies.
0.0.0.11.2. It is contemplated that, in connection with his
employment hereunder, Executive may be required to incur reasonable
business, entertainment and travel expenses. The Company agrees to
reimburse Executive in full for all reasonable and necessary business,
entertainment and other related expenses, including travel expenses,
incurred or expended by him incident to the performance of his duties
hereunder, upon submission by Executive to the Company of such vouchers
or expense statements satisfactorily evidencing such expenses as may be
reasonably requested by the Company.
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0.0.0.11.3. It is understood and agreed by the Company that
during the term of Executive's employment hereunder, he shall be
entitled to annual paid vacations (taken consecutively or in segments),
the length of which shall be consistent with the effective discharge of
Executive's duties and the general customs and practices of the Company
applicable to its executive officers.
0.0.0.12. No Mitigation Obligation. The Company hereby acknowledges
that it will be difficult and may be impossible (a) for Executive to find
reasonably comparable employment following the date of termination, and (b)
to measure the amount of damages which Executive may suffer as a result of
termination of employment hereunder. Accordingly, the payment of the
termination compensation by the Company to Executive in accordance with the
terms of this Agreement is hereby acknowledged by the Company to be
reasonable and will be liquidated damages, and Executive will not be
required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor will any profits,
income, earnings or other benefits from any source whatsoever create any
mitigation, offset, reduction or any other obligation on the part of
Executive hereunder or otherwise.
0.0.0.13. Confidentiality.
0.0.0.13.1. Recognizing that the knowledge and information
about the business methods, systems, plans and policies of the Company
and of its affiliated companies which Executive has heretofore and
shall hereafter receive, obtain or establish as an employee of the
Company or its affiliated companies are valuable and unique assets of
the Company and its affiliated companies, Executive agrees that he
shall not (otherwise than pursuant to his duties hereunder) disclose,
without the written consent of the Company, any confidential knowledge
or information pertaining to the Company or its affiliated companies,
or their business, personnel or plans, to any person, firm, corporation
or other entity, which would result in any material harm or damage to
the Company, its business or prospects, for any reason or purpose
whatsoever, unless required by law or legal process. In the event
Executive is required by law or legal process to provide documents or
disclose information, he shall take all reasonable steps to maintain
confidentiality of documents and information including notifying the
Company and giving it an opportunity to seek a protective order, at its
sole cost and expense.
0.0.0.13.2. The provisions of this Section 13 shall survive
the expiration or termination of this Agreement, without regard to the
reason therefor, for a period of two years from the earlier of (i)
expiration of the Term or (ii) termination of Executive's employment
with the Company.
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0.0.0.14. Non-Competition.
0.0.0.14.1. Except as otherwise provided in Section 3 hereof,
during the Term and any period during which Executive receives any
severance payments made pursuant to Section 6, 8, 9(a) or 10(a) hereof
and, in the event Executive's employment is terminated (i) by the
Company for Cause or (ii) by the Executive otherwise than as a result
of Constructive Discharge, for a period ending one (1) year after the
date Executive's employment is so terminated (the "Noncompetition
Period"), Executive shall not, directly or indirectly, either for
himself or any other person, own, manage, control, participate in,
invest in, permit his name to be used by, act as consultant or advisor
to, render services for (alone or in association with any individual,
entity or other business organization) or otherwise assist in any
manner any individual or entity that engages in or owns, invests in,
manages or controls any venture or enterprise engaged in (each, a
"Competitive Activity") the ownership, management, acquisition or
development of restaurant properties or retail properties similar to
those, if any, being acquired by the Company on the date Executive's
employment is so terminated.
Executive will not disseminate or make use of any of the
confidential information of the Company without qualification as to
when or how such information may have been acquired unless such
information shall become publicly available.
Executive will not in any manner induce, attempt to induce or
assist others to induce or attempt to induce any investor, client or
tenant of the Company to terminate its, his or her association with the
Company or do anything to interfere with the relationship between the
Company and any of its customers, clients, tenants or persons or
concerns dealing with the Company during the Noncompetition Period.
Executive will not, without the prior consent of a majority of
the Company's independent directors, solicit, hire away or employ any
person who is an employee of the Company during the Noncompetition
Period.
0.0.0.14.2. In the event that any restriction contained in
this Section 14 shall be held too broad to allow enforcement of such
restriction to its full extent, then such restriction shall be enforced
to the maximum extent permitted by law, and Executive hereby consents
and agrees that such scope may be judicially modified accordingly in
any proceeding brought to enforce such restrictions.
0.0.0.14.3. Executive acknowledges and agrees that the
Company's remedy at law for any breach of his obligations under this
Section 14 may be inadequate, and agrees and consents that temporary
and/or permanent or injunctive relief may be entered enjoining him from
breaching this Agreement and further agrees that any proceeding which
may be brought to enforce any provision of this Section 14 without
being requested to prove actual damages as a result of the premature
breach of this Agreement.
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0.0.0.15. Legal Fees and Expenses. It is the intent of the Company that
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's
rights under this Agreement by litigation or otherwise because the cost and
expense thereof would substantially detract from the benefits intended to
be extended to Executive hereunder. Accordingly, if it should appear to
Executive that the Company has failed to comply with any of its obligations
under this Agreement or in the event that the Company or any other person
takes or threatens to take any action to declare this Agreement void or
unenforceable or in any way reduce the possibility of collecting the
amounts due hereunder, or institutes any litigation or other action or
proceeding designed to deny, or to recover from, Executive any payments or
benefits provided hereunder, the Company irrevocably authorizes Executive
from time to time to retain counsel of Executive's choice, at the expense
of the Company as hereafter provided, to advise and represent Executive in
connection with any such interpretation, enforcement or defense, including,
without limitation, the initiation or defense of any litigation or other
legal action, whether by or against the Company or any director, officer,
stockholder or other person affiliated with the Company, in any
jurisdiction. The Company will pay and be solely financially responsible
for any and all attorneys' and related fees and expenses incurred at the
time they are billed by Executive in connection with any of the foregoing,
except only in the event of litigation where the Company fully and finally
prevails on all causes of action.
0.0.0.16. Withholding of Taxes. The Company
may withhold from any amounts payable under this
Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or
government regulation or ruling.
0.0.0.17. Successors and Binding Agreement.
0.0.0.17.1. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation, reorganization
or otherwise) to all or substantially all of the business or assets of
the Company, by agreement in form and substance satisfactory to
Executive, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent the Company would be required to
perform if no such succession had taken place. This Agreement will be
binding upon and inure to the benefit of the Company and any successor
to the Company, including, without limitation, any persons acquiring
directly or indirectly all or substantially all of the business or
assets of the Company whether by purchase, merger, consolidation,
reorganization or otherwise (and such successor shall thereafter be
deemed the "Company" for the purposes of this Agreement), but will not
otherwise be assignable, transferable or delegable by the Company.
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0.0.0.17.2. This Agreement will inure to the
benefit of and be enforceable by Executive's
personal or legal representatives, executors,
administrators, successors, heirs, distributees and
legatees.
0.0.0.17.3. This Agreement is personal in nature and neither
of the parties hereto shall, without the consent of the other, assign,
transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 17(a) and 17(b)
hereof and with respect to the Company's obligation to pay legal fees
and expenses under Section 15 hereof. Without limiting the generality
or effect of the foregoing, Executive's right to receive payments
hereunder will not be assignable, transferable or delegable, whether by
pledge, creation of a security interest or otherwise, other than by a
transfer by Executive's will or by the laws of descent and distribution
and, in the event of any attempted assignment or transfer contrary to
this Section 17(c), the Company shall have no liability to pay any
amount so attempted to be assigned, transferred or delegated, except
with respect to legal fees and expenses, as and to the extent provided
in Section 15 hereof.
0.0.0.18. Notices. For all purposes of this Agreement, all
communications, including, without limitation, notices, consents, requests
or approvals, required or permitted to be given hereunder will be in
writing and will be deemed to have been duly given when hand delivered or
dispatched by electronic facsimile transmission (with receipt thereof
orally confirmed), or five business days after having been mailed by United
States registered or certified mail, return receipt requested, postage
prepaid, or three business days after having been sent by a nationally
recognized overnight courier service such as Federal Express, UPS or
Purolator, addressed to the Company (to the attention of the Secretary of
the Company) at the address set forth on the signature pages of this
Agreement and to Executive at the address set forth on the signature pages
of this Agreement, or to such other address as any party may have furnished
to the other in writing and in accordance herewith, except that notices of
changes of address shall be effective only upon receipt.
0.0.0.19. Governing Law. The validity,
interpretation, construction and performance of this
Agreement will be governed by and construed in
accordance with the substantive laws of the State of
Texas, without giving effect to the principles of
conflict of laws of such State.
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0.0.0.20. Mutual Agreement to Arbitrate.
0.0.0.20.1. The Company and Executive recognize that
differences may arise between them. Through the provisions of this
Section 20, both parties expect to gain the benefits of a speedy,
economical, impartial dispute-resolution procedure. Therefore, the
parties agree that this Section 20 shall apply to all disputes or
controversies arising out of Executive's employment (or termination of
that employment) under this Agreement, that the Company may have
against Executive, or that Executive may have against the Company or
against (as applicable) its officers, directors, stockholders,
partners, advisers or agents ("Claims"). Claims include, but are not
limited to, controversies relating to: compensation or benefits, breach
of any contract, torts, discrimination under state, federal or local
law, and violation of any federal, state or other governmental law,
statute, regulation, or ordinance.
0.0.0.20.2. Except as otherwise specifically stated in this
Agreement, the sole and exclusive method to resolve any Claim is
arbitration as provided in this Section 20. The parties each waive
their right to commence an action in any court to resolve a Claim.
Neither party shall initiate or prosecute any lawsuit in any way
related to any Claim covered by this Section 20.
0.0.0.20.3. A Claim must be processed in the manner set forth
below, otherwise the Claim shall be void and deemed waived even if
there is a federal or state statute of limitations which would allow
more time to pursue the Claim.
0.0.0.20.3.0.1. Any Claim not raised under Section 5 hereof
must initially be presented to the Company's Board of Directors (the
"Board") in writing within ten (10) days after the Executive initially
knew or should have known of the facts that gave rise to the Claim. The
Board will answer the claim within ten (10) days after the Claim was
presented. If the Board fails to respond, it will be deemed a denial of
the Executive's Claim.
0.0.0.20.3.0.2. If Executive is not satisfied with the Board's
decision, or if the Claim is made under Section 5 hereof, Executive may
present the Claim for resolution by final and binding arbitration
pursuant to the terms of this Section 20. If Executive desires to
proceed to arbitration, Executive must give written notice to the
Company of Executive's intention to arbitrate within thirty (30) days
from the date of the Board's final decision.
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0.0.0.20.3.0.3. If the Company desires to
initiate arbitration, it must give written notice to Executive within
thirty (30) days after it initially knew or should have known of the
facts that gave rise to its Claim.
0.0.0.20.3.0.4. The written notice of desire to arbitrate
shall describe the factual basis of all Claims asserted, and shall be
sent to the other party in accordance with the terms of Section 18
hereof. If written notice of intention to arbitrate is not given within
the applicable time period, the party who failed to give notice will be
deemed to have waived the right to further contest the matter, and will
be deemed to have accepted the other party's last stated position on
the Claim.
0.0.0.20.3.0.5. The arbitration shall be conducted in
accordance with the then-current Model Employment Arbitration
Procedures of the American Arbitration Association ("AAA") before a
single arbitrator (the "Arbitrator"). The arbitration shall take place
in or near the city in which Executive is or was last working with the
Company. All arbitrations shall be governed by the laws of the State of
Texas, the location of the principal executive office of the Company.
0.0.0.20.3.0.6. The Arbitrator shall be selected in the
following manner. The AAA shall give each party a list of at least six
arbitrators drawn from its panel of labor and employment arbitrators.
Each side may strike all names on the list it deems unacceptable. If
only one common name remains on the list of all parties, that
individual shall be the Arbitrator. If more than one common name
remains on the list of all parties, the parties shall strike names
alternately until only one remains. If no common name remains on the
list of all parties, the AAA shall furnish one additional list, and the
above procedure will be utilized. If no Arbitrator is designated from
the second list, the procedure of the AAA rules will be utilized to
select the Arbitrator. In no event will the Arbitrator be then
affiliated in any manner with a competitor of the Company.
A. Any party may be
represented by an attorney or other
representative selected by the party.
B. Each party shall have the right to take the
deposition of one individual and any expert witness designed
by another party. Each party also shall have the right to make
requests for production of documents to any party. Additional
discovery may be had only where the arbitrator so orders, upon
a showing of substantial need. All issues related to discovery
will be resolved by the Arbitrator.
Page 14 of 17
<PAGE>
(vii) At least fourteen (14) days before the arbitration, the
parties must exchange lists of witnesses, including any expert, and
copies of all exhibits intended to be used at the arbitration.
(viii) The Arbitrator will have no authority to: (A) adopt new
Company policies or procedures, (B) modify this Agreement or existing
Company policies, procedures, wages or benefits, or (C) hear or decide
any matter that was not processed in accordance with this Agreement.
The Arbitrator shall have exclusive authority to resolve any Claim,
including, but not limited to, a dispute relating to the
interpretation, applicability, enforceability or formation of this
Agreement, or any contention that all or any part of this Agreement is
void or voidable. The arbitrator will have the authority to award any
form of remedy or damages that would be available in a court.
(ix) The Company shall pay reasonable and necessary fees of
the AAA and the Arbitrator. The parties will pay their own attorneys'
fees and expenses associated with the arbitration.
(x) Either party, in its sole discretion, may, in writing,
waive, in whole or in part, the other's failure to follow any time or
other requirement set forth in this Agreement.
(xi) The arbitration will be conducted in private, and will
not be open to the public or the media. The testimony and other
evidence presented, and the results of the arbitration, unless
otherwise agreed to by both parties, are confidential and may not be
made public or reported by any news agency or legal publisher or
service.
(xii) The Arbitrator shall render a written decision and award
(the "Award"), which shall set forth the facts and reasons that support
the Award. The Award shall be final and binding on the Company and
Executive.
Page 15 of 17
<PAGE>
0.0.0.21. Validity. If any provision of this Agreement or the
application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this
Agreement and the application of such provision to any other person or
circumstances will not be affected, and the provision so held to be
invalid, unenforceable or otherwise illegal will be reformed to the extent
(and only to the extent) necessary to make it enforceable, valid or legal.
0.0.0.22. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by Executive and the Company. No
waiver by either party hereto at any time of any breach by the other party
hereto or compliance with any condition or provision of this Agreement to
be performed by such other party will be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
expressed or implied with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this Agreement.
Except as otherwise identified, references to Sections are references to
Sections of this Agreement.
0.0.0.23. Survival of Certain Provisions. Notwithstanding anything
herein to the contrary, the obligations of the Company under Sections 6, 8,
9, 10, 11, 15 and 20 hereof, to the extent applicable, shall remain
operative and in full force and effect regardless of the expiration, for
any reason, of the Term.
0.0.0.24. Counterparts. This Agreement may
be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which
together will constitute one and the same agreement.
0.0.0.25. Warranty. Executive warrants and represents that he is not a
party to any agreement, contract or understanding, whether of employment or
otherwise, which would in any way restrict or prohibit him from undertaking
or performing employment in accordance with the terms and conditions of
this Agreement.
0.0.0.26. Prior Agreements. This Agreement
shall in all respects supersede all previous agreements providing severance
pay benefits, whether written or oral, between Executive and the Company.
Page 16 of 17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
U.S. RESTAURANT PROPERTIES, INC.
By: /s/ Robert J. Stetson
Robert J. Stetson
Chief Executive Officer and President
Address:
5310 Harvest Hill Road
Suite 270
Dallas, Texas 75230
/s/ Fred H. Margolin
Fred H. Margolin, Individually
Address:
Page 17 of 17
U.S. RESTAURANT PROPERTIES, INC.
FLEXIBLE INCENTIVE PLAN
------------------------------------
SECTION 1. PURPOSE OF THIS PLAN
The purposes of the U.S. Restaurant Properties, Inc. Flexible Incentive
Plan are to (i) promote the interests of U.S. Restaurant Properties, Inc. (the
"Company") and its stockholders by enabling the Company and each of its
Subsidiaries (as hereinafter defined) to (A) attract, motivate and retain their
respective employees and non-employee Directors (as hereinafter defined) by
offering such employees and Non-Employee Directors performance-based stock
incentives and other equity interests in the Company and other incentive awards
and (B) compensate Consultants (as hereinafter defined) by offering such
Consultants performance-based stock incentives and other equity interests in the
Company and other incentive awards that recognize the creation of value for the
stockholders of the Company and (ii) promote the Company's long-term growth and
success. To achieve these purposes, eligible Persons may receive Stock Options,
Restricted Stock, Performance Awards and any other Awards (as such terms are
hereinafter defined), or any combination thereof.
SECTION 2. DEFINITIONS
As used in this Plan, the following terms shall have the meanings set
forth below unless the context otherwise requires:
3. "Award" shall mean the grant of a Stock Option, Restricted Stock, a
Performance Award, a Dividend Equivalent or any other grant of incentive
compensation pursuant to this Plan.
4. "Book Value" shall mean the excess of the value of the assets of an
entity over the liabilities of such entity (determined in accordance with United
States generally accepted accounting principles, consistently applied).
5. "Board" shall mean the Board of Directors of the Company, as the same
may be constituted from time to time.
6. "Cause" shall mean termination of a Participant's employment with the
Company or a Subsidiary upon the occurrence of one or more of the following
events:
0.0.0.1. The Participant's failure to substantially perform such
Participant's duties with the Company or any Subsidiary as determined by the
Committee or the Board following receipt by the Participant of written notice of
such failure and the Participant's failure to remedy such failure within thirty
(30) days after receipt of such notice (other than a failure resulting from the
Participant's incapacity during physical or mental illness);
0.0.0.2. The Participant's willful failure or refusal to perform
specific directives of the Board, which directives are consistent with the scope
and nature of the Participant's duties and responsibilities, and which are not
remedied by the Participant within thirty (30) days after being notified in
writing of such Participant's failure by the Board;
0.0.0.3. The Participant's conviction of a felony; or
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<PAGE>
0.0.0.4. A breach of the Participant's fiduciary duty to the Company or
any Subsidiary or willful violation in the course of performing the
Participant's duties for the Company or any Subsidiary of any law, rule or
regulation (other than traffic violations or other minor offenses). No act or
failure to act on the Participant's part shall be considered willful unless done
or omitted to be done in bad faith and without reasonable belief that the action
or omission was in the best interest of the Company;
provided, however, that for each employee of the Company who has entered into an
employment agreement with the Company, "cause" shall have the meaning provided
in such employment agreement.
0.0.0.4.1. "Change in Control" shall mean, after the Effective Date, (i)
a Corporate Transaction is consummated, other than a Corporate Transaction that
would result in substantially all of the holders of voting securities of the
Company outstanding immediately prior thereto owning (directly or indirectly and
in substantially the same proportions relative to each other) not less than
fifty percent (50%) of the combined voting power of the voting securities of the
issuing/surviving/resulting entity outstanding immediately after such Corporate
Transaction or (ii) an agreement for the sale or other disposition of all or
substantially all of the Company's assets (evaluated on a consolidated basis,
without regard to whether the sale or disposition is effected via a sale or
disposition of assets of the Company, the sale or disposition of the securities
of one or more Subsidiaries or the sale or disposition of the assets of one or
more Subsidiaries) is consummated.
0.0.0.4.2. "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time (or any successor to such legislation).
0.0.0.4.3. "Committee" shall mean the Compensation Committee of the
Board as such Compensation Committee may be constituted from time to time;
provided, however, membership on the Committee shall be limited to Non-Employee
Directors; and provided further, the Committee will consist of not less than two
(2) Directors. All members of the Committee will serve at the pleasure of the
Board.
0.0.0.4.4. "Common Stock" shall mean the Common Stock, par value $0.001 per
share, of the Company.
0.0.0.4.5. "Company" shall have the meaning set forth in Section 1 of this Plan.
0.0.0.4.6. "Consultant" shall mean any Person who or which is engaged by
the Company or any Subsidiary to render consulting services.
0.0.0.4.7. "Corporate Transaction" shall mean any recapitalization
(other than a transaction contemplated by Section 13(a) of this Plan) merger,
consolidation or conversion involving the Company or any exchange of securities
involving the Common Stock (other than a transaction contemplated by Section
13(a) of this Plan), provided that a primary issuance of shares of Common Stock
shall not be deemed to be a "Corporate Transaction."
0.0.0.4.8. "Designated Beneficiary" shall mean the beneficiary
designated by a Participant, in a manner authorized by the Committee or the
Board, to exercise the rights of such Participant in the event of such
Participant's death. In the absence of an effective designation by a
Participant, the Designated Beneficiary shall be such Participant's estate.
0.0.0.4.9. "Director" shall mean any member of the Board.
0.0.0.4.10. "Disability" shall mean permanent and total inability to
engage in any substantial gainful activity, even with reasonable accommodation,
by reason of any medically determinable physical or mental impairment which has
lasted or can reasonably be expected to last without material interruption for a
period of not less than twelve (12) months, as determined in the sole discretion
of the Committee or the Board.
Page 2 of 19
<PAGE>
0.0.0.4.11. "Dividend Equivalent" shall mean an award granted pursuant to
Section 8 of this Plan of a right to receive certain payments with respect to
Shares.
0.0.0.4.12. "Effective Date" shall mean December 18, 1997.
0.0.0.4.13. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time (or any successor to such legislation).
0.0.0.4.14. "Fair Market Value" shall mean with respect to the Shares,
as of any date, the value established by the Board. Fair market value shall be
determined without regard to any restriction other than a restriction which, by
its terms, will never lapse.
0.0.0.4.15. "Incentive Stock Option" shall mean any option to purchase
Shares awarded pursuant to this Plan which qualifies as an "Incentive Stock
Option" pursuant to Section 422 of the Code.
0.0.0.4.16. "Non-Employee Director" shall have the meaning set forth in
Rule 16b-3 (or any successor to such rule) promulgated under the Exchange Act)
who are also "outside directors," as required pursuant to Section 162(m) of the
Code and such Treasury regulations as may be promulgated thereunder.
0.0.0.4.17. "Non-Qualified Stock Option" shall mean any option to
purchase Shares awarded pursuant to this Plan that does not qualify as an
Incentive Stock Option (including, without limitation, any option to purchase
Shares originally designated as or intended to qualify as an Incentive Stock
Option) but which does not (for whatever reason) qualify as an Incentive Stock
Option.
0.0.0.4.18. "Non-Share Method" shall have the meaning set forth in Section
6.6(c) of this Plan.
0.0.0.4.19. "Optionee" shall mean any Participant who has been granted and
holds a Stock Option awarded pursuant to this Plan.
0.0.0.4.20. "Participant" shall mean any Person who has been granted and
holds an Award granted pursuant to this Plan.
0.0.0.4.21. "Performance Award" shall mean any Award granted pursuant to
this Plan of Shares, rights based upon, payable in or otherwise related to
Shares (including Restricted Stock) or cash, as the Committee or Board may
determine, at the end of a specified performance period established by the
Committee or Board and may include, without limitation, Performance Shares or
Performance Units.
0.0.0.4.22. "Performance Shares" shall have the meaning set forth in
Section 9.1 of this Plan.
0.0.0.4.23. "Performance Units" shall have the meaning
set forth in Section 9.1 of this Plan.
0.0.0.4.24. "Permitted Modification" shall be deemed to be any
modification of an Award which is made in connection with a Corporate
Transaction and which provides in connection with a Stock Option, that
subsequent to the consummation of the Corporate Transaction (i) the exercise
price of such Stock Option will be proportionately adjusted to reflect the
exchange ratio applicable to the particular Corporate Transaction and/or (ii)
the nature and amount of consideration to be received upon exercise of the Stock
Option will be the same (on a per share basis) as was received by Persons who
were holders of shares of Common Stock immediately prior to the consummation of
the Corporate Transaction.
Page 3 of 19
<PAGE>
0.0.0.4.25. "Person" shall mean an individual, partnership, limited
liability company, corporation, joint stock company, trust, estate, joint
venture, association or unincorporated organization or any other form of
business organization.
0.0.0.4.26. "Plan" shall mean this U.S. Restaurant Properties, Inc.
Flexible Incentive Plan as it may be amended from time to time.
0.0.0.4.27. "Reload Option" shall mean a Stock Option as defined in Section
6.6(b) of this Plan.
0.0.0.4.28. "Reorganization" shall mean any stock split, stock dividend,
reverse stock split, combination of Shares or any other similar increase or
decrease in the number of Shares issued and outstanding.
0.0.0.4.29. "Restricted Stock" shall mean any Shares granted pursuant to
this Plan that are subject to restrictions or substantial risk of forfeiture.
0.0.0.4.30. "Retirement" shall mean termination of employment of an
employee of the Company or any Subsidiary, other than discharge for Cause, after
age 65 or on or before age 65 if pursuant to the terms of any retirement plan
maintained by the Company or any Subsidiary in which such employee participates.
0.0.0.4.31. "Securities Act" shall mean the Securities Act of 1933, as
amended from time to time (or any successor to such legislation).
0.0.0.4.32. "Share Retention Method" shall have the meaning set forth in
Section 6.6(c) of this Plan.
0.0.0.4.33. "Shares" shall mean shares of the Common Stock and any shares
of capital stock or other securities hereafter issued or issuable upon, in
respect of or in substitution or exchange for shares of Common Stock.
0.0.0.4.34. "Stock Option" shall mean any Incentive Stock Option or
Non-Qualified Stock Option.
0.0.0.4.35. "Subsidiary" shall mean a subsidiary corporation of the
Company, as defined in Section 424(f) of the Code.
0.0.0.4.36. "Transactional Consideration" shall have the meaning set forth
in Section 13(b) of this Plan.
SECTION 0.0.0.4.37. ADMINISTRATION OF THIS PLAN
0.0.0.4.38. Committee/Board. This Plan shall be administered and
interpreted by the Committee and/or the Board.
Page 4 of 19
<PAGE>
0.0.0.5. Awards. 0.0.0.5. Subject to the provisions of this Plan and
directions from the Board, the Committee is authorized to:
0.0.0.5.0.1. determine the Persons to whom Awards are to be granted;
0.0.0.5.0.2. determine the types and combinations of Awards to be
granted; the number of Shares to be covered by an Award; the exercise price of
an Award; the time or times when an Award shall be granted and may be exercised;
the terms, performance criteria or other conditions, vesting periods or any
restrictions for an Award; any restrictions on Shares acquired pursuant to the
exercise of an Award; and any other terms and conditions of an Award;
0.0.0.5.0.3. interpret the provisions of this Plan;
0.0.0.5.0.4. prescribe, amend and rescind rules and regulations relating to
this Plan;
0.0.0.5.0.5. determine whether, to what extent and under what circumstances
to provide loans from the Company to Participants to exercise Awards granted
pursuant to this Plan, and the terms and conditions of such loans;
0.0.0.5.0.6. rely upon employees of the Company for such clerical and
recordkeeping duties as may be necessary in connection with the administration
of this Plan;
0.0.0.5.0.7. accelerate or defer (with the consent of the Participant) the
vesting of any rights pursuant to an Award; and
0.0.0.5.0.8. make all other determinations and take all other actions
necessary or advisable for the administration of this Plan.
0.0.0.6. Without limiting the Board's right to amend this Plan pursuant
to Section 13 of the Plan, the Board may take all actions authorized by Section
3.2(a) of this Plan, including, without limitation, granting such Awards
pursuant to this Plan as the Board may deem necessary or appropriate.
0.0.0.7. Procedures. 0.0.0.7. Proceedings by the Board with respect to this
Plan will be conducted in accordance with the articles of incorporation and
bylaws of the Company.
0.0.0.8. A majority of the Committee members shall constitute a quorum
for action by the Committee. All determinations of the Committee shall be made
by not less than a majority of its members.
Page 5 of 19
<PAGE>
0.0.0.9. All questions of interpretation and application of this Plan or
pertaining to any question of fact or Award granted hereunder will be decided by
the Committee or the Board, whose decision will be final, conclusive and binding
upon the Company and each other affected party.
SECTION 0.0.0.9.1. SHARES SUBJECT TO PLAN
0.0.0.9.2. Limitations. The maximum number of Shares that may be issued
with respect to Awards granted pursuant to this Plan at any time shall be an
amount equal to 4.9% of the Company's issued and outstanding shares of Common
Stock at such time; provided, however, that the maximum number of Shares
issuable pursuant to Incentive Stock Options granted under the Plan shall be
575,000. The Shares issued pursuant to this Plan may be authorized but unissued
Shares, or may be issued Shares which have been reacquired by the Company.
0.0.0.9.3. Changes. To the extent that any Award granted pursuant to
this Plan shall be forfeited, shall expire or shall be cancelled, in whole or in
part, then the number of Shares covered by the Award so forfeited, expired or
cancelled may again be awarded pursuant to the provisions of this Plan. In the
event that Shares are delivered to the Company in full or partial payment of the
exercise price for the exercise of a Stock Option, the number of Shares
available for future Awards granted pursuant to this Plan shall be reduced only
by the net number of Shares issued upon the exercise of the Stock Option. Awards
that may be satisfied either by the issuance of Shares or by cash or other
consideration shall, until the form of consideration to be paid is finally
determined, be counted against the maximum number of Shares that may be issued
pursuant to this Plan.
SECTION 0.0.0.9.4. ELIGIBILITY
Eligibility for participation in this Plan shall be confined to those
individuals who are employed by the Company or a Subsidiary and such Consultants
and non-employee Directors as may be designated by the Committee or the Board.
In making any determination as to Persons to whom Awards shall be granted, the
type of Award and/or the number of Shares to be covered by the Award, the
Committee or the Board shall consider the position and responsibilities of the
Person, the importance of the Person to the Company, the duties of the Person,
the past, present and potential contributions of the Person to the growth and
success of the Company and such other factors as the Committee or the Board may
deem relevant in connection with accomplishing the purposes of this Plan.
SECTION 0.0.0.9.5. STOCK OPTIONS
0.0.0.9.6. Grants. The Committee or the Board may grant Stock Options
alone or in addition to other Awards granted pursuant to this Plan to any
eligible Person. Each Person so selected shall be offered a Stock Option to
purchase the number of Shares determined by the Committee or the Board. The
Committee or the Board shall specify whether such Stock Option is an Incentive
Stock Option or a Non-Qualified Stock Option and any other terms or conditions
relating to such Award; provided, however only employees of the Company or a
Subsidiary may be granted Incentive Stock Options. To the extent that any Stock
Option designated as an Incentive Stock Option does not qualify as an Incentive
Stock Option (whether because of its provisions, the failure of the stockholders
of the Company to authorize the issuance of Incentive Stock Options, the time or
manner of its exercise or otherwise), such Stock Option or the portion thereof
which does not qualify shall be deemed to constitute a Non-Qualified Stock
Option. Each Person to be granted a Stock Option shall enter into a written
agreement with the Company, in such form as the Committee or the Board may
prescribe, setting forth the terms and conditions (including, without
limitation, the exercise price and vesting schedule) of the Stock Option. At any
time and from time to time, the Optionee and the Committee or the Board may
agree to modify an option agreement in such respects as they may deem
appropriate, including, without limitation, the conversion of an Incentive Stock
Option into a Non-Qualified Stock Option. The Committee or the Board may require
that an Optionee meet certain conditions before the Stock Option or a portion
thereof may vest or be exercised, as, for example, that the Optionee remain in
the employ of the Company or a Subsidiary for a stated period or periods of
time.
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0.0.0.9.7. Incentive Stock Options Limitations.
0.0.0.10. In no event shall any individual be granted Incentive Stock
Options to the extent that the Shares covered by any Incentive Stock Options
(and any incentive stock options granted pursuant to any other plans of the
Company or its Subsidiaries) that may be exercised for the first time by such
individual in any calendar year have an aggregate Fair Market Value in excess of
$100,000. For this purpose, the Fair Market Value of the Shares shall be
determined as of the date(s) on which the Incentive Stock Options are granted.
It is intended that the limitation on Incentive Stock Options provided in this
Section 6.2(a) be the maximum limitation on Stock Options which may be
considered Incentive Stock Options pursuant to the Code.
0.0.0.11. The option exercise price of an Incentive Stock Option shall
not be less than one hundred percent (100%) of the Fair Market Value of the
Shares subject to such Incentive Stock Option on the date of the grant of such
Incentive Stock Option.
0.0.0.12. Notwithstanding anything herein to the contrary, in no event
shall any employee owning more than ten percent (10%) of the total combined
voting power of the Company or any Subsidiary be granted an Incentive Stock
Option unless the option exercise price of such Incentive Stock Option shall be
at least one hundred ten percent (110%) of the Fair Market Value of the Shares
subject to such Incentive Stock Option on the date of the grant of such
Incentive Stock Option.
0.0.0.13. In no event shall any individual be granted an Incentive Stock
Option after the expiration of ten (10) years from the date this Plan is adopted
or is approved by the stockholders of the Company (if stockholder approval is
required by Section 422 of the Code).
0.0.0.14. To the extent stockholder approval of this Plan is required by
Section 422 of the Code, no individual shall be granted an Incentive Stock
Option unless this Plan is approved by the stockholders of the Company within
twelve (12) months before or after the date this Plan is initially adopted. In
the event this Plan is amended to increase the number of Shares subject to
issuance upon the exercise of Incentive Stock Options or to change the class of
employees eligible to receive Incentive Stock Options, no individual shall be
granted an Incentive Stock Option unless such amendment is approved by the
stockholders of the Company within twelve (12) months before or after such
amendment.
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0.0.0.15. No Incentive Stock Option shall be granted to any employee
owning more than ten percent (10%) of the total combined voting power of the
Company or any Subsidiary unless the term of such Incentive Stock Option is
equal to or less than five (5) years measured from the date on which such
Incentive Stock Option is granted.
0.0.0.15.1. Option Term. The term of a Stock Option shall be for such
period of time from the date of its grant as may be determined by the Committee
or the Board; provided, however, that no Incentive Stock Option shall be
exercisable later than ten (10) years from the date of its grant.
0.0.0.15.2. Time of Exercise. No Stock Option may be exercised unless it
is exercised prior to the expiration of its stated term and, in connection with
options granted to employees of the Company or its Subsidiaries, at the time of
such exercise, the Optionee is, and has been continuously since the date of
grant of such Stock Option, employed by the Company or a Subsidiary, except
that:
0.0.0.16. A Stock Option may, to the extent vested as of the date the
Optionee ceases to be an employee of the Company or a Subsidiary, be exercised
during the three month period immediately following the date the Optionee ceases
(for any reason other than death, Disability or termination for Cause) to be an
employee of the Company or a Subsidiary (or within such other period as may be
specified in the applicable option agreement), provided that, if the Stock
Option has been designated as an Incentive Stock Option and the option agreement
provides for a longer exercise period, the exercise of such Stock Option after
such three-month period shall be treated as the exercise of a Non-Qualified
Stock Option;
0.0.0.17. If the Optionee dies while in the employ of the Company or a
Subsidiary, or within three months after the Optionee ceases (for any reason
other than termination for Cause) to be such an employee (or within such other
period as may be specified in the applicable option agreement), a Stock Option
may, to the extent vested as of the date of the Optionee's death, be exercised
by the Optionee's Designated Beneficiary during the one year period immediately
following the date of the Optionee's death (or within such other period as may
be specified in the applicable option agreement); provided that, if the Stock
Option has been designated as an Incentive Stock Option and the option agreement
provides for a longer exercise period, the exercise of such Stock Option after
such one-year period shall be treated as the exercise of a Non-Qualified Stock
Option;
0.0.0.18. If the Optionee ceases to be an employee of the Company or a
Subsidiary by reason of the Optionee's Disability, a Stock Option, to the extent
vested as of the date the Optionee ceases to be an employee of the Company or a
Subsidiary, may be exercised during the one year period immediately following
the date on which the Disability is determined to exist (or within such other
period as may be specified in the applicable option agreement); provided that,
if the Stock Option has been designated as an Incentive Stock Option and the
option agreement provides for a longer exercise period, the exercise of such
Stock Option after such one-year period shall be treated as the exercise of a
Non-Qualified Stock Option; and
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0.0.0.19. If the Optionee's employment is terminated for Cause, all
Stock Options held by such Optionee shall simultaneously terminate and will no
longer be exercisable.
Nothing contained in this Section 6.4 will be deemed to extend the term of a
Stock Option or to revive any Stock Option which has previously lapsed or been
cancelled, terminated or surrendered. Stock Options granted under this Plan to
Consultants or Non-Employee Directors will contain such terms and conditions
with respect to the death or disability of a Consultant or Non-Employee Director
or termination of a Consultant's or non-employee Director's relationship with
the Company as the Committee or the Board deems necessary or appropriate. Such
terms and conditions will be set forth in the option agreements evidencing the
grant of such Stock Options.
0.0.0.19.1. Vesting of Stock Options.
0.0.0.20. Each Stock Option granted pursuant to this Plan may only be
exercised to the extent that the Optionee is vested in such Stock Option. Each
Stock Option shall vest separately in accordance with the option vesting
schedule determined by the Committee or the Board, which will be incorporated in
the option agreement entered into between the Company and such Optionee. The
option vesting schedule may be accelerated if, in the sole discretion of the
Committee or the Board, the acceleration of the option vesting schedule would be
in the best interests the Company.
0.0.0.21. In the event of the dissolution or liquidation of the Company,
each Stock Option granted pursuant to this Plan shall terminate as of a date to
be fixed by the Committee or Board; provided, however, that not less than thirty
(30) days' prior written notice of the date so fixed shall be given to each
Optionee. During such period all Stock Options which have not previously been
terminated, exercised or surrendered will (subject to the provisions of Sections
6.3 and 6.4 of the Plan) fully vest and become exercisable, notwithstanding the
vesting schedule set forth in the option agreement evidencing the grant of such
Stock Option. Upon the date fixed by the Committee or the Board, any unexercised
Stock Options shall terminate and be of no further effect.
0.0.0.22. Upon the occurrence of a Change in Control, all Stock Options
and any associated Stock Appreciation Rights shall become fully vested and
immediately exercisable.
0.0.0.22.1. Manner of Exercise of Stock Options.
Page 9 of 19
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0.0.0.23. Except as otherwise provided in this Plan, Stock Options may
be exercised as to Shares only in amounts and at intervals of time specified in
the written option agreement between the Company and the Optionee. Each exercise
of a Stock Option, or any part thereof, shall be evidenced by a written notice
delivered by the Optionee to the Company. Except as set forth in Section 6.6(c)
of this Plan, the purchase price of the Shares as to which a Stock Option shall
be exercised shall be paid in full at the time of exercise, and may be paid to
the Company either:
0.0.0.23.0.1. in cash (including check, bank draft or money order);
or
0.0.0.23.0.2. by other consideration deemed acceptable by the
Committee or the Board in its sole discretion.
0.0.0.24. If an Optionee delivers Shares (including Shares of Restricted
Stock) already owned by the Optionee in full or partial payment of the exercise
price for any Stock Option, or if the Optionee elects to have the Company retain
that number of Shares out of the Shares being acquired through the exercise of
the Stock Option having a Fair Market Value equal to the exercise price of the
Stock Option being exercised, the Committee or the Board may, in its sole
discretion, authorize the grant of a new Stock Option (a "Reload Option") for
that number of Shares equal to the number of already owned Shares surrendered
(including Shares of Restricted Stock) or newly acquired Shares being retained
by the Company in payment of the option exercise price of the underlying Stock
Option being exercised. The grant of a Reload Option will become effective upon
the exercise of the underlying Stock Option. The option exercise price of the
Reload Option shall be the Fair Market Value of a Share on the effective date of
the grant of the Reload Option. Each Reload Option shall be exercisable no later
than the time when the underlying stock option being exercised could be last
exercised. The Committee or the Board may also specify additional terms,
conditions and restrictions for the Reload Option and the Shares to be acquired
upon the exercise thereof.
0.0.0.25. Either the (i) purchase price of the Shares as to which a
Stock Option shall be exercised or (ii) amount, as determined by the Committee
or the Board, of any federal, state or local tax required to be withheld by the
Company due to the exercise of a Stock Option may, subject to the authorization
of the Committee or the Board, be satisfied, at the election of the Optionee,
either (A) by payment by the Optionee to the Company of the amount of such
withholding obligation in cash or other consideration acceptable to the
Committee or the Board in its sole discretion (the "Non-Share Method") or (B)
through either the retention by the Company of a number of Shares out of the
Shares being acquired through the exercise of the Stock Option or the delivery
of already owned Shares having a Fair Market Value equal to the amount of the
withholding obligation (the "Share Retention Method"). If an Optionee elects to
use the Share Retention Method in full or partial satisfaction of any tax
liability resulting from the exercise of a Stock Option, the Committee or the
Board may authorize the grant of a Reload Option for that number of Shares as
shall equal the number of Shares used to satisfy the tax liabilities of the
Optionee arising out of the exercise of such Stock Option. Such Reload Option
will be granted at the price and on the terms set forth in Section 6.6(b) of
this Plan. The cash payment or an amount equal to the Fair Market Value of the
Shares so withheld, as the case may be, shall be remitted by the Company to the
appropriate taxing authorities.
Page 10 of 19
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0.0.0.26. An Optionee shall not have any of the rights of a stockholder of
the Company with respect to the Shares subject to a Stock Option except to the
extent that such Stock Option is exercised and one or more certificates
representing such Shares shall have been delivered to the Optionee.
SECTION 0.0.0.26.1. RESTRICTED STOCK
0.0.0.26.2. Grants. The Committee or the Board may grant Awards of
Restricted Stock to any Consultant, Non-Employee Director or employee of the
Company or a Subsidiary for such minimum consideration, if any, as may be
required by applicable law or such greater consideration as may be determined by
the Committee or the Board, in its sole discretion. The terms and conditions of
the Restricted Stock shall be specified by the grant agreement. The Committee or
the Board, in its sole discretion, may specify any particular rights which the
Participant to whom a grant of Restricted Stock is made shall have in the
Restricted Stock during the restriction period and the restrictions applicable
to the particular Award, the vesting schedule (which may be based on service,
performance or other factors) and rights to acceleration of vesting (including,
without limitation, whether non-vested Shares are forfeited or vested upon
termination of employment). Further, the Committee or the Board may grant
performance-based Awards consisting of Restricted Stock by conditioning the
grant, or vesting or such other factors, such as the release, expiration or
lapse of restrictions upon any such Award (including the acceleration of any
such conditions or terms) of such Restricted Stock upon the attainment of
specified performance goals or such other factors as the Committee or the Board
may determine. The Committee or the Board shall also determine when the
restrictions shall lapse or expire and the conditions, if any, pursuant to which
the Restricted Stock will be forfeited or sold back to the Company. Each Award
of Restricted Stock may have different restrictions and conditions. Unless
otherwise set forth in the grant agreement, Restricted Stock may not be sold,
pledged, encumbered or otherwise disposed of by the recipient until the
restrictions specified in the Award expire. Awards of Restricted Stock are
subject to acceleration of vesting, termination of restrictions and termination
in the same manner as Stock Options pursuant to Sections 6.4 and 6.5 of this
Plan.
0.0.0.26.3. Awards and Certificates. Any Restricted Stock issued
hereunder may be evidenced in such manner as the Committee or the Board, in its
sole discretion, shall deem appropriate including, without limitation,
book-entry registration or issuance of a stock certificate or certificates. In
the event any stock certificate is issued in respect of Shares of Restricted
Stock, such certificate shall bear an appropriate legend with respect to the
restrictions applicable to such Award. The Company may retain, at its option,
the physical custody of any stock certificate representing any awards of
Restricted Stock during the restriction period or require that the certificates
evidencing Restricted Stock be placed in escrow or trust, along with a stock
power endorsed in blank, until all restrictions are removed or expire.
Page 11 of 19
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SECTION 0.0.0.26.4. DIVIDEND EQUIVALENTS
0.0.0.26.5. Grant of Dividend Equivalents. The Committee is authorized
to grant Dividend Equivalents to Participants, which will entitle such
Participant to receive, on a current or deferred basis and subject to such
conditions as may be imposed by the Committee, cash payments from the Company in
the same amounts (or such lesser fraction of such amounts as may be specifically
set forth in the Dividend Equivalent agreement evidencing such award) that the
holder of record of such number of Shares would be entitled to receive as cash
dividends on such Shares (unless otherwise limited in such agreement). Dividend
Equivalent agreements will specify the expiration date of such Dividend
Equivalents, the number of Shares to which they relate, and such other
conditions as the Committee may impose.
0.0.0.26.6. Payments. The right to a cash payment in respect of a
Dividend Equivalent will apply to all dividends the record date for which occurs
at any time during the period commencing on the date the Dividend Equivalent is
granted and ending on the date such Dividend Equivalent expires or is
terminated, whichever occurs first.
0.0.0.26.7. Related Dividend Equivalents. If a Dividend Equivalent is
granted in conjunction with the grant of a Stock Option, the applicable Dividend
Equivalent agreement will provide that the grantee is entitled to receive from
the Company cash payments, on a current or deferred basis, in the same amounts
(or such lesser fraction of such amounts as may be specifically set forth in the
Dividend Equivalent agreement) that the holder of record of a number of Shares
equal to the number of Shares covered by such Stock Option would be entitled to
receive as dividends on such Shares unless otherwise limited in the Dividend
Equivalent agreement. Such right to a cash payment will apply to, and such
Dividend Equivalent will remain outstanding in respect of, all cash dividends
the record date for which occurs at any time during the period commencing on the
date the related Stock Option is granted and ending on the date that such Stock
Option is exercised, expires or terminates, whichever occurs first.
SECTION 0.0.0.26.8. PERFORMANCE AWARDS
Page 12 of 19
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0.0.0.26.9. Grants. A Performance Award may consist of either or both,
as the Committee or the Board may determine, of (i) the right to receive Shares
or Restricted Stock, or any combination thereof as the Committee or the Board
may determine ("Performance Shares"), or (ii) the right to receive a fixed
dollar amount payable in Shares, Restricted Stock, cash or any combination
thereof, as the Committee or the Board may determine ("Performance Units"). The
Committee or the Board may grant Performance Awards to any eligible Consultant,
non-employee Director or employee of the Company or a Subsidiary, for such
minimum consideration, if any, as may be required by applicable law or such
greater consideration as may be determined by the Committee or the Board, in its
sole discretion. The terms and conditions of Performance Awards shall be
specified at the time of the grant and may include provisions establishing the
performance period, the performance criteria to be achieved during a performance
period, the criteria used to determine vesting (including the acceleration
thereof), whether Performance Awards are forfeited or vest upon termination of
employment during a performance period and the maximum or minimum settlement
values. Each Performance Award shall have its own terms and conditions, which
shall be determined in the sole discretion of the Committee or the Board. If the
Committee or the Board determines, in its sole discretion, that the established
performance measures or objectives are no longer suitable because of a change in
the Company's business, operations, corporate structure or for other reasons
that the Committee or the Board deems satisfactory, the Committee or the Board
may modify the performance measures or objectives and/or the performance period.
Awards of Performance Shares and/or Performance Units are subject to
acceleration of vesting, termination of restrictions and termination in the same
manner as Stock Options pursuant to Sections 6.4 and 6.5 of this Plan.
0.0.0.26.10. Terms and Conditions. Performance Awards may be valued by
reference to the Fair Market Value of a Share or according to any other formula
or method deemed appropriate by the Committee or the Board, in its sole
discretion, including, but not limited to, achievement of specific financial,
production, sales, cost or earnings performance objectives that the Committee or
the Board believes to be relevant or the Company's performance or the
performance of the Common Stock measured against the performance of the market,
the Company's industry segment or its direct competitors. Performance Awards may
also be conditioned upon the applicable Participant remaining in the employ of
the Company or one of its Subsidiaries for a specified period. Performance
Awards may be paid in cash, Shares (including Restricted Stock) or other
consideration, or any combination thereof. Performance Awards may be payable in
a single payment or in installments and may be payable at a specified date or
dates or upon attaining the performance objective or objectives, all at the sole
discretion of the Committee or the Board. The extent to which any applicable
performance objective has been achieved shall be conclusively determined by the
Committee or the Board in its sole discretion.
Page 13 of 19
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SECTION 0.0.0.26.11. STOCK PURCHASE PLAN
0.0.0.26.12. Grant of Stock Purchase Rights. The term "Stock Purchase
Right" means the right to purchase shares of Common Stock and to pay for all or
a portion of the purchase price for such shares through a loan made by the
Company to a Participant (a "Purchase Loan") as set forth in this Section 10.
0.0.0.26.13. Terms of Purchase Loans.
(a) Each Purchase Loan shall be evidenced by a promissory note. The term
of the Purchase Loan shall be a period not to exceed ten years, as determined by
the Committee, and the proceeds of the Purchase Loan shall be used exclusively
by the Participant for purchase of shares of Common Stock at a purchase price
equal to the Fair Market Value on the date of the Stock Purchase Right.
(b) A Purchase Loan shall bear interest at whatever rate the Committee
shall determine (not less than the then existing prime rate as announced by the
Company's lender under the Company's credit facility but not in excess of the
maximum rate permissible under applicable law), payable in a manner and at such
times as the Committee shall determine. Those terms and provisions as the
Committee shall determine shall be incorporated into the promissory note
evidencing the Purchase Loan.
0.0.0.26.14. Security for Loans.
(a) Purchase Loans granted to Participants shall be secured by a pledge
of the shares of Common Stock acquired pursuant to the Stock Purchase Right.
Such pledge shall be evidenced by a pledge agreement (the "Pledge Agreement")
containing such terms and conditions as the Committee shall determine. The
certificates for the shares of Common Stock purchased by a Participant pursuant
to a Stock Purchase Right shall be issued in the Participant's name, but shall
be held by the Company as security for repayment of the Participant's Purchase
Loan together with a stock power executed in blank by the Participant (the
execution and delivery of which by the Participant shall be a condition to the
issuance of the Stock Purchase Right). The Participant shall be entitled to
exercise all rights applicable to such shares of Common Stock, including, but
not limited to, the right to vote such shares of Common Stock and the right to
receive dividends and other distributions made with respect to such shares of
Common Stock.
(b) The Company shall release and deliver to each Participant
certificates for the shares of Common Stock purchased by the Participant under
the Stock Purchase Right and then held by the Company, provided the Participant
has paid or otherwise satisfied in full the balance of the Purchase Loan and any
accrued but unpaid interest thereon. In the event the balance of the Purchase
Loan is not repaid, forgiven or otherwise satisfied within ninety (90) days
after (i) the date repayment of the Purchase Loan is due (whether in accordance
with its term, by reason of acceleration or otherwise), or (ii) such longer time
as the Committee, in its discretion, shall provide for repayment or
satisfaction, the Company shall retain those shares of Common Stock then held by
the Company in accordance with the Pledge Agreement.
Page 14 of 19
<PAGE>
0.0.0.26.15. Restrictions on Transfer. No Stock Purchase Right or shares
of Common Stock purchased through such Right and pledged to the Company as
collateral security for the Participant's Purchase Loan and accrued but unpaid
interest thereon may be otherwise pledged, sold, assigned or transferred (other
than by will or by the laws of descent and distribution).
SECTION 0.0.0.26.16. OTHER AWARDS
The Committee or the Board may grant to any eligible Consultant,
non-employee Director or employee of the Company or a Subsidiary other forms of
Awards based upon, payable in or otherwise related to, in whole or in part,
Shares, if the Committee or the Board, in its sole discretion, determines that
such other form of Award is consistent with the purposes of this Plan. The terms
and conditions of such other form of Award shall be specified in a written
agreement which sets forth the terms and conditions of such Award, including,
but not limited to, the price, if any, and the vesting schedule, if any, of such
Award. Such Awards may be granted for such minimum consideration, if any, as may
be required by applicable law or for such other greater consideration as may be
determined by the Committee or the Board, in its sole discretion.
SECTION 0.0.0.26.17. COMPLIANCE WITH SECURITIES AND OTHER LAWS
As a condition to the issuance or transfer of any Award or any security
issuable in connection with such Award, the Company may require an opinion of
counsel, satisfactory to the Company, to the effect that (a) such issuance
and/or transfer will not be in violation of the Securities Act or any other
applicable securities laws and (b) such issuance and/or transfer will not be in
violation of the rules and regulations of any securities exchange or automated
quotation system on which the Common Stock is listed or admitted to trading.
Further, the Company may refrain from issuing, delivering or transferring any
Award or any security issuable in connection with such Award until the Committee
or the Board has determined that such issuance, delivery or transfer will not
violate such securities laws or rules and regulations and that the recipient has
tendered to the Company any federal, state or local tax owed as a result of such
issuance, delivery or transfer, when the Company has a legal liability to
satisfy such tax. The Company shall not be liable for damages due to delay in
the issuance, delivery or transfer of any Award or any security issuable in
connection with such Award or any agreement, instrument or certificate
evidencing such Award or security for any reason whatsoever, including, but not
limited to, a delay caused by the listing requirements of any securities
exchange or automated quotation system or any registration requirements under
the Securities Act, the Exchange Act, or under any other state or federal law,
rule or regulation. The Company is under no obligation to take any action or
incur any expense to register or qualify the issuance, delivery or transfer of
any Award or any security issuable in connection with such Award under
applicable securities laws or to perfect any exemption from such registration or
qualification or to list any security on any securities exchange or automated
quotation system. Furthermore, the Company will have no liability to any person
for refusing to issue, deliver or transfer any Award or any security issuable in
connection with such Award if such refusal is based upon the foregoing
provisions of this Section 12. As a condition to any issuance, delivery or
transfer of any Award or any security issuable in connection with such Award,
the Company may place legends on any agreement, instrument or certificate
evidencing such Award or security, issue stop transfer orders with respect
thereto and require such agreements or undertakings as the Company may deem
necessary or advisable to assure compliance with applicable laws or regulations,
including, if the Company or its counsel deems it appropriate, representations
from the recipient of such Award or security to the effect that such recipient
is acquiring such Award or security solely for investment and not with a view to
distribution and that no distribution of the Award or the security will be made
unless registered pursuant to applicable federal and state securities laws, or
in the opinion of counsel to the Company, such registration is unnecessary.
Page 15 of 19
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SECTION 0.0.0.26.18. ADJUSTMENTS UPON THE OCCURRENCE OF A REORGANIZATION OR
CORPORATE TRANSACTION
0.0.0.26.19. Reorganization. In the event of a Reorganization, the
number of Shares subject to this Plan and to each outstanding Award, and the
exercise price of each Award which is based upon Shares, shall (to the extent
deemed appropriate by the Committee or the Board) be proportionately adjusted
(as determined by the Committee or the Board in its sole discretion) to account
for any increase or decrease in the number of issued and outstanding Shares of
the Company resulting from such Reorganization.
0.0.0.26.20. Corporate Transaction with the Company as Survivor. If a
Corporate Transaction is consummated and immediately following the consummation
of such Corporate Transaction the Persons who were holders of shares of Common
Stock immediately prior to the consummation of such Corporate Transaction do not
receive any securities or other property (hereinafter collectively referred to
as "Transactional Consideration") as a result of such Corporate Transaction and
substantially all of such Persons continue to hold the shares of Common Stock
held by them immediately prior to the consummation of such Corporate Transaction
(in substantially the same proportions relative to each other), the Awards will
remain outstanding and will (subject to the provisions of Sections 6.1, 6.5(c),
7.1 and 9.1 of this Plan) continue in full force and effect in accordance with
its terms (without any modification) following the consummation of the Corporate
Transaction.
0.0.0.26.21. Corporate Transaction with Company Being Acquired. If a
Corporate Transaction is consummated and immediately following the consummation
of such Corporate Transaction the Persons who were holders of shares of Common
Stock immediately prior to the consummation of such Corporate Transaction do
receive Transactional Consideration as a result of such Corporate Transaction or
substantially all of such Persons do not continue to hold the shares of Common
Stock held by them immediately prior to the consummation of such Corporate
Transaction (in substantially the same proportions relative to each other), the
terms and conditions of the Awards will be modified as follows:
0.0.0.26.0.1. If the documentation pursuant to which a Corporate
Transaction will be consummated provides for the assumption (by the entity
issuing Transactional Consideration to the Persons who were the holders of
shares of Common Stock immediately prior to the consummation of such Corporate
Transaction) of the Awards granted pursuant to this Plan without any
modification or amendment (other than Permitted Modifications and the
modifications contemplated by Sections 6.1, 6.5(c), 7.1 and 9.1 of this Plan),
such Awards will remain outstanding and will continue in full force and effect
in accordance with its terms following the consummation of such Corporate
Transaction (subject to such Permitted Modifications and the provisions of
Sections 6.1, 6.5(c), 7.1 and 9.1 of the Plan).
0.0.0.26.0.2. If the documentation pursuant to which a Corporate
Transaction will be consummated does not provide for the assumption by the
entity issuing Transactional Consideration to the Persons who were the holders
of shares of Common Stock immediately prior to the consummation of such
Corporate Transaction of the Awards granted pursuant to this Plan without any
modification or amendment (other than Permitted Modifications), all vesting
restrictions (performance based or otherwise) applicable to Awards which will
not be so assumed will accelerate and the holders of such Awards may (subject to
the expiration of the term of such Awards) exercise/receive the benefits of such
Awards without regard to such vesting restrictions during the ten (10) day
period immediately preceding the consummation of such Corporate Transaction. For
purposes of the immediately preceding sentence, all performance based goals will
be deemed to have been satisfied in full. The Company will provide each
Participant holding Awards which will not be so assumed with reasonable notice
of the termination of such vesting restrictions and the impending termination of
such Awards. Upon the consummation of such a Corporate Transaction, all
unexercised Awards which are not to be so assumed will automatically terminate
and cease to be outstanding.
Nothing contained in this Section 13 will be deemed to extend the term of an
Award or to revive any Award which has previously lapsed or been cancelled,
terminated or surrendered.
Page 16 of 19
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SECTION 0.0.0.26.0.2.1. AMENDMENT OR TERMINATION OF THIS PLAN
0.0.0.26.0.2.2. Amendment of This Plan. Notwithstanding anything
contained in this Plan to the contrary, all provisions of this Plan (including,
without limitation, the maximum number of Shares that may be issued with respect
to Awards to be granted pursuant to this Plan) may at any time or from time to
time be modified or amended by the Board; provided, however, that no Award at
any time outstanding pursuant to this Plan may be modified, impaired or
cancelled adversely to the holder of the Award without the consent of such
holder.
0.0.0.26.0.2.3. Termination of This Plan. The Board may suspend or
terminate this Plan at any time, and such suspension or termination may be
retroactive or prospective. Termination of this Plan shall not impair or affect
any Award previously granted hereunder and the rights of the holder of the Award
shall remain in effect until the Award has been exercised in its entirety or has
expired or otherwise has been terminated by the terms of such Award.
SECTION 0.0.0.26.0.2.4. AMENDMENTS AND ADJUSTMENTS TO AWARDS
The Committee or the Board may amend, modify or terminate any
outstanding Award with the Participant's consent at any time prior to payment or
exercise in any manner not inconsistent with the terms of this Plan, including,
without limitation, (a) to change the date or dates as of which and/or the terms
and conditions pursuant to which (i) a Stock Option becomes exercisable or (ii)
a Performance Award is deemed earned, (b) to amend the terms of any outstanding
Award to provide an exercise price per share which is higher or lower than the
then current exercise price per share of such outstanding Award or (c) to cancel
an Award and grant a new Award in substitution therefor under such different
terms and conditions as the Committee or the Board determines in its sole
discretion to be appropriate including, but not limited to, having an exercise
price per share which may be higher or lower than the exercise price per share
of the cancelled Award. The Committee or the Board may also make adjustments in
the terms and conditions of, and the criteria included in agreements evidencing
Awards in recognition of unusual or nonrecurring events (including, without
limitation, the events described in Section 13 of this Plan) affecting the
Company, or the financial statements of the Company or any Subsidiary, or of
changes in applicable laws, regulations or accounting principles, whenever the
Committee or the Board determines that such adjustments are appropriate to
prevent reduction or enlargement of the benefits or potential benefits intended
to be made available pursuant to this Plan. Any provision of this Plan or any
agreement regarding an Award to the contrary notwithstanding, the Committee or
the Board may cause any Award granted to be cancelled in consideration of a cash
payment or alternative Award made to the holder of such cancelled Award equal in
value to the Fair Market Value of such cancelled Award. The determinations of
value pursuant to this Section 15 shall be made by the Committee or the Board in
its sole discretion.
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SECTION 0.0.0.26.0.2.5. GENERAL PROVISIONS
0.0.0.26.0.2.6. No Limit on Other Compensation Arrangements. Nothing
contained in this Plan shall prevent the Company from adopting or continuing in
effect other compensation arrangements, and such arrangements may be either
generally applicable or applicable only in specific cases.
0.0.0.26.0.2.7. No Right to Employment or Continuation of Relationship.
Nothing in this Plan or in any Award, nor the grant of any Award, shall confer
upon or be construed as giving any Participant any right to remain in the employ
of the Company or a Subsidiary or to continue as a Consultant or Non-Employee
Director. Further, the Company or a Subsidiary may at any time dismiss a
Participant from employment or terminate the relationship of any Consultant or
non-employee Director with the Company or any Subsidiary, free from any
liability or any claim pursuant to this Plan, unless otherwise expressly
provided in this Plan or in any agreement evidencing an Award made under this
Plan. No Consultant, Non-Employee Director or employee of the Company or any
Subsidiary shall have any claim to be granted any Award, and there is no
obligation for uniformity of treatment of any Consultant, Non-Employee Director
or employee of the Company or any Subsidiary or of any Participants.
0.0.0.26.0.2.8. GOVERNING LAW. THE VALIDITY, CONSTRUCTION AND EFFECT OF
THIS PLAN AND ANY RULES AND REGULATIONS RELATING TO THIS PLAN SHALL BE
DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
0.0.0.26.0.2.9. Severability. If any provision of this Plan or any Award
is or becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or as to any individual or Award, or would disqualify this Plan or
any Award under any law deemed applicable by the Committee or the Board, such
provision shall be construed or deemed amended to conform to applicable law, or
if it cannot be construed or deemed amended without, in the sole determination
of the Committee or the Board, materially altering the intent of this Plan or
the Award, such provision shall be stricken as to such jurisdiction, individual
or Award and the remainder of this Plan and any such Award shall remain in full
force and effect.
0.0.0.26.0.2.10. No Fractional Shares. No fractional Shares shall be
issued or delivered pursuant to this Plan or any Award, and the Committee or the
Board shall determine, in its sole discretion, whether cash, other securities or
other property shall be paid or transferred in lieu of any fractional Shares or
whether such fractional Shares or any rights thereto shall be cancelled,
terminated or otherwise eliminated.
Page 18 of 19
<PAGE>
0.0.0.26.0.2.11. Headings. Headings are given to the Sections and
Subsections of this Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of this Plan or any provision thereof.
0.0.0.26.0.2.12. Effective Date. The provisions of this Plan that relate to
the grant of Incentive Stock Options shall be effective as of the date of the
approval of this Plan by the stockholders of the Company.
0.0.0.26.0.2.13. Transferability of Awards. Awards shall not be
transferable otherwise than by will or the laws of descent and distribution
without the written consent of the Committee or the Board (which may be granted
or withheld at the sole discretion of the Committee or the Board). Awards may be
exercised, during the lifetime of the holder, only by the holder. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of an Award
contrary to the provisions hereof, or the levy of any execution, attachment or
similar process upon an Award shall be null and void and without effect.
0.0.0.26.0.2.14. Rights of Participants. Except as hereinbefore
expressly provided in this Plan, any Person to whom an Award is granted shall
have no rights by reason of any subdivision or consolidation of stock of any
class or the payment of any stock dividend or any other increase or decrease in
the number of shares of stock of any class or by reason of any dissolution,
liquidation, reorganization, merger or consolidation or spinoff of assets or
stock of another corporation, and any issue by the Company of shares of stock of
any class or securities convertible into shares of stock of any class shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number or exercise price of Shares subject to an Award.
0.0.0.26.0.2.15. No Limitation Upon the Rights of the Company. The grant
of an Award pursuant to this Plan shall not affect in any way the right or power
of the Company to make adjustments, reclassifications, or changes of its capital
or business structure; to merge, convert or consolidate; to dissolve or
liquidate; or sell or transfer all or any part of its business or assets.
0.0.0.26.0.2.16. Date of Grant of an Award. Except as noted in this
Section 16.11, the granting of an Award shall take place only upon the execution
and delivery by the Company and the Participant of a written agreement and
neither any other action taken by the Committee or the Board nor anything
contained in this Plan or in any resolution adopted or to be adopted by the
Committee, the Board or the stockholders of the Company shall constitute the
granting of an Award pursuant to this Plan. Solely, for purposes of determining
the Fair Market Value of the Shares subject to an Award, such Award will be
deemed to have been granted as of the date specified by the Committee or the
Board notwithstanding any delay which may elapse in executing and delivering the
applicable agreement.
Page 19 of 19
EXHIBIT 12.1
<TABLE>
<CAPTION>
U.S. RESTAURANT PROPERTIES, INC.
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(IN THOUSANDS)
Years ended December 31,
------------------------------------------------------------------
1993 1994 1995 1996 1997
------------ ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Net income $ 4,528 $4,933 $ 5,223 $ 7,473 $ (9,393)
Fixed Charges:
Interest Expense 109 90 262 2,558 10,011
Amortization of Debt Issue
Costs 1 162 385
Rent Exp. Portion
Representing Interest 1 5 5
------------ ---------- ------------ ----------- ------------
Total Fixed Charges 109 90 264 2,725 10,401
Earnings $ 4,637 $5,023 $ 5,487 $ 10,198 $ 1,008
============ ========== ============ =========== ============
Fixed Charges and preferred
stock dividends:
Fixed charges $ 109 $ 90 $ 264 $ 2,725 $ 10,401
Preferred stock dividends -- -- -- -- 868
------------ ---------- ------------ ----------- ------------
Combined fixed charges and
preferred stock dividends $ 109 $ 90 $ 264 $ 2,725 $ 11,269
============ ========== ============ =========== ============
Ratio of Earnings to
Fixed Charges 42.54x 55.81x 20.78x 3.74x .10x (1)
Ratio of Earnings to
Combined Fixed Charges and
preferred stock dividends 42.54x 55.81x 20.78x 3.74x .09x (1)
</TABLE>
(1) During 1997, the Company recorded a non-cash, unusual charge of $19,220
related to the termination of the management contract. Excluding the
effects of this unusual charge, the ratio of earnings to fixed charges
and the ratio of earnings to combined fixed charges and preferred stock
would have been 1.94x and 1.80, respectively for 1997.
EXHIBIT 21.1
U.S. RESTAURANT PROPERTIES, INC.
LIST OF SUBSIDIARIES AS OF DECEMBER 31, 1997
Following are the subsidiaries of U.S. Restaurant Properties, Inc. as of
December 31, 1997 together with their ownership interests as of that date.
U.S. Restaurant Properties, Inc:
Subsidiary: Ownership Interest
USRP Managing, Inc. 100.00%
U.S. Restaurant Properties Operating L.P. 90.71%
USRP Managing, Inc.
Subsidiary: Ownership Interest
U.S. Restaurant Properties Operating L.P. 1.00%
U.S. Restaurant Properties Operating L.P.
Subsidiary: Ownership Interest
Restaurant Property Partners, L.P. 100.00%
USRP (West Virginia) Partners, L.P. 100.00%
Restaurant Renovation Partners, L.P. 100.00%
USRP (Carolina), Ltd. 100.00%
USRP (Lincoln), Ltd. 100.00%
USRP (Norman), Ltd. 100.00%
USRP (Consolidating), LLC 100.00%
USRP (Dee Dee), LLC 100.00%
USRP (Sybra), LLC 100.00%
USRP (Ribbit), LLC 100.00%
USRP (Jones), LLC 100.00%
USRP (Central Avenue), LLC 100.00%
USRP (Midon), LLC 100.00%
USRP (Susi), LLC 100.00%
USRP (Minnesota), LLC 100.00%
USRP (Acquisition), LLC 100.00%
USRP (Popeye's), LLC 100.00%
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement
on Form S-3 (Registration No. 333-34263) of U.S. Restaurant Properties, Inc. of
our report dated March 19, 1998, appearing in this Annual Report on Form 10-K of
U.S. Restaurant Properties, Inc. for the year ended December 31, 1997.
DELOITTE & TOUCHE LLP
Dallas, Texas
March 19, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,104
<SECURITIES> 0
<RECEIVABLES> 4,961
<ALLOWANCES> 170
<INVENTORY> 0
<CURRENT-ASSETS> 7,862
<PP&E> 325,528
<DEPRECIATION> 13,438
<TOTAL-ASSETS> 359,149
<CURRENT-LIABILITIES> 4,193
<BONDS> 40,000
0
4
<COMMON> 13
<OTHER-SE> 205,395
<TOTAL-LIABILITY-AND-EQUITY> 359,149
<SALES> 0
<TOTAL-REVENUES> 35,584
<CGS> 0
<TOTAL-COSTS> 2,488
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,011
<INCOME-PRETAX> 10,080
<INCOME-TAX> 0
<INCOME-CONTINUING> 10,080
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,393)
<EPS-PRIMARY> (0.88)
<EPS-DILUTED> (0.88)
</TABLE>
