SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: December 9, 1997
Date of earliest event reported: December 4, 1997
Burger King Limited Partnership III
(Exact name of registrant as specified in its charter)
New York 0-21189 13-3178415
(State of other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
3 World Financial Center, 29th Floor
New York, New York 10285-2900
Attn: Andre Anderson
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 526-3237
Not Applicable
(Former name or former address, if changed since last report.)
Exhibit Index on Page 4
<PAGE>
INFORMATION INCLUDED IN THIS REPORT
Page No.
Item 2. Acquisition or Disposition of Assets . . . . . . . . . . . . . . 2
Item 7. Financial Statements and Exhibits . . . . . . . . . . . . . . . 3
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Unaudited Pro Forma Condensed Financial Data . . . . . . Appendix A
Agreement of Purchase and Sale . . . . . . . . . . . . Exhibit 2.1
Items 1, 3 through 6 and 8 through Not Applicable.
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On December 4, 1997, BK III Restaurants Inc., the general partner (the
"General Partner") of Burger King Limited Partnership III (the "Partnership")
entered into an Agreement of Purchase and Sale (the "Agreement") on behalf of
the Partnership with U.S. Restaurant Properties Operating L.P. (the "Buyer").
The Buyer, its officers and directors are not affiliated with the
Partnership, the General Partner, or its officers and directors. The
Agreement, attached as Exhibit 14 to this report, provides for the sale of
all sixteen of the Partnership's Burger King (Registered Trademark)
restaurants owned in fee simple (the "Owned Properties") and the assignment
of all of the Partnership's rights in all six of the Partnership's Burger
King restaurants subject to ground leases (the "Leased Properties") (the
Owned Properties and the Leased Properties are collectively referred to
herein as the "Properties" and such sale and assignment is collectively
referred to herein as the "Sale") to the Buyer for a purchase price of
$16,000,000, subject to adjustment in certain circumstances, including the
right of the Partnership to remove the restaurant located in Memphis,
Tennessee from the Sale, with a concomitant reduction in the purchase price
of $300,000.
In anticipation of the closing of the Sale, and to satisfy certain conditions
of the Agreement, the Buyer has deposited $800,000 with an escrow agent (the
"Deposit"). The Sale will be completed on or prior to December 16, 1997
provided that certain conditions are satisfied, including that the limited
partners of the Partnership (the "Limited Partners") have not voted to
disapprove the Sale. If a majority of the Limited Partners vote to
disapprove the Sale, the Partnership has the right to terminate the Agreement
and the Deposit will be returned to the Buyer.
The Properties will be sold and assigned on an "as is" basis without any
warranty, either expressly or impliedly, as to the condition or fitness of
the Properties, including the environmental fitness and condition of the
Properties. Detailed property descriptions are included in the Agreement.
The General Partner negotiated a purchase price of $16,000,000 based on its
evaluation of the Property's current return and the potential for future
appreciation. On a pro forma basis, assuming the Properties were sold as of
September 30, 1997, the General Partner estimates that the net proceeds from
the sale of all of the Properties available for distribution to the Limited
Partners would equal or exceed approximately $15,301,707, or $1,020.11 per
Unit, after deducting expenses of the Sale, payment of management fees due to
Burger King Corporation and payment of all debts, liabilities and obligations
of the Partnership, the expenses of dissolution and liquidation and the
establishment of reserves for contingencies that the General Partner
reasonably deemed necessary. In addition, the Limited Partners will receive
an additional amount equal to or exceeding $120,260, or $8.02 per Unit, as
their final liquidating distribution of cash flow from operations after the
payment of all debts, liabilities and obligations of the Partnership and the
expenses of dissolution and liquidation and the establishment of reserves for
contingencies that the General Partner reasonably deemed necessary. See
Unaudited Pro Forma Condensed Financial Data attached as Appendix A.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(b) Pro Forma Financial Information.
The Unaudited Pro Forma Condensed Balance Sheet as of September 30,
1997 and the Unaudited Pro Forma Statement of Changes in Net Assets Available
for Liquidation as of the same date, which are attached as Appendix A, are
presented as if the Partnership's remaining sixteen owned properties and six
leased properties were sold at the Purchase Price of $16,000,000 and the
Partnership liquidated on September 30, 1997. This unaudited pro forma
condensed financial data should be read in conjunction with the unaudited
financial statements filed as part of the Partnership's quarterly report on
Form 10-Q for the quarter ended September 30, 1997 and the annual report on
Form 10-K for the fiscal year ended December 31, 1996. The Pro Forma
financial information is unaudited and not necessarily indicative of the
results which would have occurred had the Sale been consummated on September
30, 1997, nor does it purport to represent the financial position and results
of operations for future periods.
(c) Exhibits.
2.1 Agreement of Purchase and Sale between Burger King Limited
Partnership III and U.S. Restaurant Properties Operating L.P.,
dated as of December 4, 1997.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BURGER KING LIMITED PARTNERSHIP III
By: BK III RESTAURANTS INC., as general
partner of Burger King Limited Partnership
III
By: /s/ Kenneth F. Boyle
--------------------
Name: Kenneth F. Boyle
Title: President
Date: December 9, 1997
<PAGE>
Appendix A
BURGER KING LIMITED PARTNERSHIP III
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
September 30, 1997
<TABLE>
<CAPTION>
Pro Forma
Historical Pro Forma Pro Forma Balance Sheet
Balance Sheet Proposed Sale Liquidation at
at September 30, 1997<F1> Adjustments Adjustments <F4> September 30, 1997
------------------------- ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Assets
Real estate held for sale . $4,876,584 $ (4,876,584)<F2> $ -- $ --
Cash . . . . . . . . . . . 525,765 15,360,000 <F2> (399,176) 15,486,589
Due from affiliates . . . . 14,239 -- (14,239) --
Other assets . . . . . . . 3,153 -- (3,153) --
Rent receivable . . . . . . 61,440 -- (61,440) --
---------- ----------- --------- -----------
Total Assets . . . . . 5,481,181 10,483,416 (478,008) 15,486,589
========== =========== ======== ===========
Liabilities and Partners'
Capital
Liabilities:
Accounts payable and
accrued expenses . . . . 69,890 -- (69,890) --
Distributions payable . 408,118 -- (408,118) --
---------- ----------- -------- -----------
Total Liabilities . . . . 478,008 -- (478,008) --
---------- ----------- -------- -----------
Partners' Capital (Deficit):
General Partner . . . . (29,120) 93,742 <F3> -- 64,622
Limited Partners (15,000
units outstanding) . . . 5,032,293 10,389,674 <F3> -- 15,421,967
---------- ----------- --------- -----------
Total Partners' Capital 5,003,173 10,483,416 -- 15,486,589
---------- ----------- --------- ----------
Total Liabilities and
Partners' Capital . . $5,481,181 $ 10,483,416 $ -- $15,486,589
========== =========== ========= ==========
</TABLE>
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF CHANGES IN NET ASSETS
AVAILABLE FOR LIQUIDATION
September 30, 1997
<TABLE>
<CAPTION>
General Limited Per
Total Partner Partners LP Unit
--------------------- -------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Gross Sales Price . . . . . . . . . $16,000,000 <F2>
Less Estimated Sales Costs . . . . (640,000)<F2>
-----------
Allocation of Net Property
Disposition Proceeds . . . . . . . 15,360,000<F5> $58,293 $15,301,707 $1,020.11
Cash Available at September 30, 1997 525,765<F1>
Liquidation of Balance Sheet
Accounts . . . . . . . . . . . . . (399,176)<F4>
----------
Allocation of Cash Available from
Operations . . . . . . . . . . . 126,589<F6> 6,329 120,260 8.02
---------- ------- ----------- -------
Total Distributions . . . . . . . . $15,486,589 $64,622 $15,421,967 $1,020.13
=========== ======= =========== =========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Financial Data.
<PAGE>
Notes to Unaudited Pro Forma Condensed Financial Data
[FN]
<F1> The pro forma balances were prepared by taking historical balances
reflected in the Partnership's September 30, 1997 Form 10-Q and
adjusting for the Proposed Sale, estimates for selling and liquidation
costs of the Partnership.
<F2> The net sales proceeds from the Proposed Sale are assumed to be
$15,360,000 (the Purchase Price of $16,000,000 less maximum estimated
selling costs of $640,000).
<F3> The adjustments to Partners' capital in the aggregate amount of
$10,483,416 are made to reflect a gain from the Proposed Sale as if it
occurred on September 30, 1997.
<F4> Receipt of rents receivable and other assets and payment of accounts
payable and accrued expenses and other liabilities prior to the
liquidation of the Partnership.
<F5> The Limited Partners' Remaining Invested Capital at September 30, 1997
is $19,492,950, or $1,299.53 per Unit. The Partnership will not reach
Payout, which is defined in the Agreement of Limited Partnership, dated
as of November 22, 1983 (the "Partnership Agreement"), as the point in
time at which each Limited Partner has received from the Partnership
aggregate distributions equal to such Limited Partner's Original
Invested Capital plus a cumulative annual compounded return of 12.5% per
annum on its Remaining Invested Capital, as adjusted from time to time.
Under the Partnership Agreement, if "Net Property Disposition Proceeds,"
as defined in the Partnership Agreement, are insufficient to cause
Payout to occur, the distribution of Net Property Disposition Proceeds
is made 99% to the Limited Partners and 1% to the General Partner until
the amount so distributed is sufficient to reduce the lesser of the
General Partner's or the Limited Partners' aggregate capital accounts to
zero, then to any Partner with a positive capital account balance in an
amount sufficient to reduce such balance to zero and finally 99% to the
Limited Partners and 1% to the General Partner in the amount necessary
to cause Payout to occur.
<F6> After payment of all the debts, liabilities and obligations of the
Partnership and the expenses of dissolution and liquidation and the
setting up of any reserves for contingencies that the General Partner
reasonably deems necessary, liquidating distributions shall be made to
the Limited Partners in the same manner that "Net Cash Flow from
Operations," as defined in the Partnership Agreement, is distributed in
accordance with Section 5.1 of the Partnership Agreement.
<PAGE>
Exhibit 2.1
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.
<PAGE>
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 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
<PAGE>
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).
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.
<PAGE>
(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.
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,
<PAGE>
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.
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.
<PAGE>
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 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
<PAGE>
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.
<PAGE>
(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.
(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
<PAGE>
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:
<PAGE>
(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.
(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
<PAGE>
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.
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
<PAGE>
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.
<PAGE>
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 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 U.S. RESTAURANT PROPERTIES OPERATING
III, a New York limited L.P.
partnership
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>
List of Omitted Schedules and Exhibits
Schedule 1 Sales Price of Each Property
Schedule 2 Material Environmental Reports
Exhibit A Assignment and Assumption of Lease
Exhibit B Assignment and Assumption of Sublease
Exhibit C Franchisee Estoppel
Exhibit D Estoppel of Burger King Limited Partnership III
Exhibit E Estoppel Certificate of Burger King Corporation
Exhibit F Estoppel Certificate of Burger King Limited Partnership III
Exhibit G Lease Support Agreement
Upon request, Burger King Limited Partnership III will furnish the above
schedules and exhibits to the Securities & Exchange Commission.
