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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995.
Commission File Number 1-9079
U.S. RESTAURANT PROPERTIES MASTER L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 41-1541631
(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)
214-387-1487
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Units Representing Limited Partnership New York Stock Exchange
Interests and Evidenced by Depository Receipts
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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
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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
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The aggregate market value of the Units (based upon the closing price of
the Units on February 29, 1996, on the New York Stock Exchange) held by
non-affiliates of the Registrant was $111,176,855.
As of February 29, 1996, there were 4,987,003 Units outstanding.
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U.S. RESTAURANT PROPERTIES MASTER L.P.
TABLE OF CONTENTS
PART I
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Item 1. Business........................................................................ 1
Item 2. Properties...................................................................... 7
Item 3. Legal Proceedings............................................................... 14
Item 4. Submission of Matters to a Vote of Security-Holders............................. 14
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.................................................................... 15
Item 6. Selected Financial Data......................................................... 16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................. 17
Item 8. Financial Statements and Supplementary Data..................................... 19
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................................... 19
PART III
Item 10. Directors and Executive Officers of the Registrant.............................. 19
Item 11. Executive Compensation.......................................................... 20
Item 12. Security Ownership of Certain Beneficial Owners and Management.................. 21
Item 13. Certain Relationships and Related Transactions.................................. 22
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................ 23
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PART I
ITEM 1.BUSINESS
GENERAL
U.S. Restaurant Properties Master L.P. (the "Partnership") owns
properties on which chain restaurants operate. The Partnership, formerly
Burger King Investors Master L.P., was formed in 1986 by Burger King
Corporation ("BKC") and QSV Properties Inc. ("QSV"), at that time a
wholly-owned subsidiary of The Pillsbury Company ("Pillsbury"). In May 1994,
QSV was sold to a management and investor group led by Robert J. Stetson and
Fred H. Margolin (the "Stetson/Margolin Group"), who have no affiliation with
Pillsbury. In 1995, the name of QSV was changed to U.S. Restaurant
Properties, Inc. U.S. Restaurant Properties, Inc. is the Managing General
Partner of the Partnership. BKC was a Special General Partner of the
Partnership until its withdrawal on November 30, 1994.
The Partnership operates through U.S. Restaurant Properties Operating
L.P. (the "Operating Partnership"), formerly Burger King Operating Limited
Partnership, which holds the interests in the Properties. Through its
ownership of all of the limited partnership interest in the Operating
Partnership, the Partnership owns a 99.01 percent partnership interest in the
Operating Partnership. (The Partnership and the Operating Partnership are
generally referred to collectively herein as the "Partnership" or the
"Partnerships," and all references herein to the Partnership when used with
respect to the acquisition, ownership and operation of the Properties refer
to the combined operations of the Partnership and Operating Partnership.)
The Partnerships are Delaware limited partnerships and will continue in
existence until December 31, 2035, unless sooner dissolved or terminated.
The principal executive offices of the Partnership and the Managing General
Partner are located at 5310 Harvest Hill Road, Suite 270, Dallas, Texas
75230, telephone number (214) 387-1487.
The Partnership's agreement of limited partnership was amended by vote
of the limited partners in March 1995 to expand the purpose of the
Partnership. See "- Business Strategy," below.
PROPERTIES
As of February 29, 1996, the Partnership owned or leased 162 properties
located in 37 states (collectively, the "Properties"). Of such Properties,
143 in 37 states were leased to franchisees of BKC (and also to BKC) who
operate BURGER KING (a registered trademark and service mark of BKC)
restaurants ("BK Restaurants"). Such Properties are referred to herein as
the "BK Properties." The remaining 19 Properties in five states were leased
to non-BKC restaurant operators who operate other restaurants on the
Properties. All such other Properties are referred to herein as the "Non-BK
Properties." All restaurants operated on Partnership Properties are
collectively referred to herein as the "Restaurants." Additional information
regarding the Properties is set forth below under "Item 2. Properties."
BUSINESS STRATEGY
Since the Partnership's agreement of limited partnership was amended in
March 1995 to expand the purpose of the Partnership, the principal business
objective of the Partnership has been to expand and diversify the
Partnership's restaurant property portfolio through the acquisition of
additional fast-food and casual dining restaurant properties. The
Partnership intends to achieve growth and diversification while
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maintaining low portfolio investment risk through adherence to proven
acquisition criteria with a conservative capital structure.
Since March 1995, the Partnership has acquired 39 restaurant properties
in 13 states. Of such properties, 22 are Burger King restaurants and the
remainder operate under 12 other tradenames. The Partnership has an
additional 108 restaurant properties located in 20 states under letters of
intent or contracts for acquisition. Such properties represent seven
transactions in various stages of negotiation and due diligence and there can
be no assurance that such transactions will be closed. Such acquisitions
represent an aggregate consideration of $57 million. Of such properties, 28
are BK restaurant properties, 37 are Dairy Queen restaurant properties,
26 are Hardee's restaurant properties, 11 are Pizza Hut restaurant properties
and six restaurants are operated under other tradenames. The Partnership also
intends to make loans to tenants to renovate and improve their restaurants,
purchase additional restaurant properties and related equipment, construct
new Properties and finance the improvement of existing Properties and the
purchase of additional restaurant properties and related property through
borrowings and the issuance of additional units representing limited
partnership interests in the Partnership ("Units").
The Partnership believes that the Partnership can foster improved
operating results at selected Properties, encourage renewal of expiring
leases and reduce the likelihood of having to rebuild the existing Properties
at the Partnership's expense if it assists tenants in repairing and updating
their restaurants. The Partnership also believes that diversification of the
Partnership's restaurant property portfolio would lessen the dependence of
the Partnership's performance on one chain.
INVESTMENT CRITERIA. The Partnership intends to acquire additional
restaurant properties of national and regional fast food or casual dining
restaurant chains, which may include Burger King, that satisfy some or all of
the following criteria:
The contractually fixed rent or the historical total rent on such
restaurant properties has provided cash flow that, after management fees
and any related interest and debt amortization, would improve the
Partnership's cash flow per Unit from the Properties currently in the
Partnership's portfolio.
The respective restaurants' sales would be in the highest 70 percent of
the restaurants in their chain.
The respective restaurants would have historically generated at least
the normal profit for restaurants in their chain and would continue to
generate a profit even if their sales decreased by 20 percent.
The restaurant properties would be located in neighborhoods where the
average per capita income was stable or increasing.
The percentage rent from the restaurant properties would have a
reasonable possibility of increasing.
The respective restaurants' franchisees would possess significant net
worth and preferably operate multiple restaurants.
The restaurant properties would be in good repair.
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No assurance exists, however, that the Partnership will be able to identify
any restaurant property satisfying all or a significant number of the above
criteria, or that if identified, the Partnership will be able to purchase
such restaurant property as contemplated by its expanded business strategy.
When purchasing additional restaurant properties, the Partnership also
intends to emphasize higher base rents and de-emphasize percentage rents.
The Partnership's initial goal is to purchase additional properties
principally by utilizing the borrowing capacity, on a secured recourse or
non-recourse basis, management believes is represented by the Partnership's
existing properties. Purchases might also be made through the issuance of
additional Units. The Partnership believes that seller financing will
generally not be available for the purchase of additional restaurant
properties. The use of borrowings, together with the addition of restaurant
properties not operated as BK Restaurants, represents a new direction in the
Partnership's business strategy.
The Partnership intends to finance the acquisition of additional
properties principally by using borrowing capacity, on a secured recourse or
non-recourse basis, of the Partnership's existing Properties, through the
issuance of additional Units, or the Partnership's $40 million revolving
credit agreement with a group of banks. The proceeds of any borrowing are
expected to be used to acquire additional restaurant properties. The credit
agreement expires June 27, 1998 and provides that borrowings under the
agreement will bear interest at 180 basis points over the London Interbank
Rate (LIBOR). The borrowings are secured by the Partnership's interest in
the real estate and leases owned by the Partnership. At February 29, 1996,
approximately $20 million remained available under the credit agreement. The
Partnership believes that seller financing will not be available for the
purchase of additional restaurant properties.
During 1995, three properties were acquired in part for 54,167 Units.
As a term of the acquisition, the Partnership agreed, in the event the market
price for the Units issued did not equal or exceed $24 per Unit three years
from the date of issuance and such Units were still held on such date by the
seller of the properties, to pay the difference in cash. In connection with
the acquisition of ten properties in 1996, the Partnership agreed, as a term
of those acquisitions, in the event the market price for the Units issued did
not equal or exceed $23 per Unit (as to 28,261 Units) three years from the
date of issuance or $24 per Unit (as to 299,575 Units) two years from the
date of issuance and such Units were still held on such date by the sellers
of the properties, to pay the difference by the issuance of additional Units.
DISTRIBUTIONS AND ALLOCATIONS
CASH FLOW DISTRIBUTIONS. Net cash flow from operations of the
Partnership that is distributed is allocated 98.02 percent to the Unitholders
and 1.98 percent to the Managing General Partner until the Unitholders have
received a simple (non-cumulative) annual return for such year equal to 12
percent of the Unrecovered Capital Per Unit (i.e., $20.00 (the original
offering price in 1986) reduced by any prior distributions of net proceeds of
capital transactions); then any distributed cash flow for such year is
allocated 75.25 percent to the Unitholders and 24.75 percent to the Managing
General Partner until the Unitholders have received a total simple
(non-cumulative) annual return for such year equal to 17.5 percent of the
Unrecovered Capital per Unit; and then any excess distributed cash flow for
such year is allocated 60.4 percent to the Unitholders and 39.6 percent to
the Managing General Partner. Thus, for example, until a further
distribution of net proceeds of a capital transaction occurs (three such
capital distributions have occurred to date, one in 1989 of $0.08 per unit,
and two in 1993 totalling $0.24), the
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Unitholders receive 98.02 percent of any net cash flow distributed for each
year until they have received distributions of $2.39 per Unit for such year;
then the Unitholders receive 75.25 percent of any cash flow distributed for
such year until they have received aggregate distributions of $3.49 per Unit
for such year; and then the Unitholders receive 60.4 percent of any excess
cash flow distributed for such year. The Partnership may retain otherwise
distributable cash flow to the extent the Managing General Partner deems
appropriate.
DISTRIBUTIONS OF PROCEEDS FROM CAPITAL TRANSACTIONS. Net proceeds from
financing and sales or other dispositions of the Properties (interim and
liquidating) are allocated 98.02 percent to the Unitholders and 1.98 percent
to the Managing General Partner until the Unitholders have received an amount
equal to the Unrecovered Capital Per Unit (initially $20.00 per Unit) plus a
cumulative, simple return equal to 12 percent of the balance of their
Unrecovered Capital Per Unit outstanding from time to time (to the extent not
previously received from distributions of prior capital transactions); then
such proceeds are allocated 75.25 percent to the Unitholders and 25.75
percent to the Managing General Partner until the Unitholders have received a
total cumulative, simple return equal to 17.5 percent of the Unrecovered
Capital Per Unit; and then such proceeds are allocated 60.4 percent to the
Unitholders and 39.6 percent to the Managing General Partner. The
Partnership may retain otherwise distributable net proceeds from financing
and sales or other dispositions of the Properties to the extent the Managing
General Partner deems appropriate.
TAX ALLOCATIONS. Operating income and loss of the Partnership for each
year generally is allocated between the Managing General Partner and the
Unitholders in the same aggregate ratio as cash flow is distributed for that
year. Gain and loss from a capital transaction generally is allocated among
the Partners in the same aggregate ratio as net proceeds of the capital
transaction are 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 will not necessarily equal the total cash distributed to the Managing
General Partner and the Unitholders for such year. Upon the transfer of a
Unit, tax items allocable thereto generally will be allocated among the
transferor and the transferee based on the period during the year that each
owned the Unit, with each Unitholder on the last day of the month being
treated as a Unitholder for the entire month. Although the recent amendments
have given the Managing General Partner greater discretion to make a Section
754 election on behalf of the Partnership, no Section 754 election has yet
been made
PAYMENTS TO THE MANAGING GENERAL PARTNER
The Partnership pays the Managing General Partner a non-accountable
annual allowance designed to cover the costs that the Managing General
Partner incurs in connection with the management of the Partnership and the
Properties (other than reimbursements for out-of-pocket expenses paid to
other parties). The annual allowance is adjusted annually to reflect any
cumulative increases in the Consumer Price Index occurring after January 1,
1986, and was $585,445 for the year ended December 31, 1995, and will be
$600,081 for the year ending December 31, 1996. The allowance is paid
quarterly, in arrears.
To compensate the Managing General Partner for its efforts and increased
internal expenses with respect to the addition of properties, the Partnership
will pay 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
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property, adjusted for increases in the Consumer Price Index. For 1995, the
one-time acquisition fee equaled $109,238 which was capitalized and the
increase in the annual fee equaled $29,375. In addition, if the Rate of
Return (as defined) on the Partnership's equity in all additional properties
exceeds 12 percent per annum for any fiscal year, the Managing General
Partner will be 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. However, to the
extent the Managing General Partner receives distributions in excess of those
provided by its 1.98 percent Partnership interest, such distributions will
reduce the fee payable with respect to such excess cash flow from any
additional properties. See "Item 1. Business. - Distributions and
Allocations - Cash Flow Distributions." and "Item 13. Certain Relationships
and Related Transactions."
Except as provided above, such payments are in addition to distributions
made by the Partnership to the Managing General Partner in its capacity as
partner in the Partnership.
EMPLOYEES AND MANAGEMENT
The Partnership has no employees. The Managing General Partner, which
is responsible for the management of the Partnership and the Properties,
employed five individuals during 1995 on either a full-time, part-time or
independent contractor basis. In addition, the Managing General Partner
hired other parties in connection with the operations of the Partnership and
the Properties. The Partnership may pay or reimburse the Managing General
Partner for payments to affiliates for goods or other services if the price
and the terms for providing such goods or services are fair to the
Partnership and not less favorable to the Partnership than would be the case
if such goods or services were obtained from or provided by an unrelated
third party. In addition, the Managing General Partner obtains certain
services, including investor tax reporting services, accounting services,
audit services, depository and transfer agent services, banking services,
legal services, consultant services and printing services from unrelated
third parties.
REVOLVING LINE OF CREDIT AND LOANS TO PARTNERSHIP
The Managing General Partner has agreed to make available to the
Partnership an unsecured, interest-free, revolving line of credit in the
principal amount of $500,000 to provide the Partnership with necessary
working capital to minimize or avoid seasonal fluctuation in the amount of
quarterly cash distributions. The Managing General Partner is not required,
however, to make financing available under this line of credit before the
Partnership obtains other financing, whether for acquisitions, reinvestment,
working capital or otherwise.
No loans from the Managing General Partner were outstanding at any time
during the three years ended December 31, 1995.
CONFLICTS OF INTEREST AND INDEPENDENT CONSULTANT
The Partnership is subject to various conflicts of interest arising out
of its relationship with the Managing General Partner including the ability
to acquire for its own account properties of the type sought to be purchased
by the Partnership as part of its expanded business plan and the fees to be
paid to the Managing General Partner in respect of additional restaurant
properties acquired by the Partnership. As a result of such conflicts,
certain actions or decisions of the Managing General Partner may have an
adverse effect on the interests of the Unitholders although the grant to the
Managing General Partner of
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options to purchase Units in connection with the recent amendments to the
Partnership Agreement was intended to mitigate such conflicts of interest.
The Partnership Agreement permits the Managing General Partner to
consult with an Independent Consultant as to whether any action or proposed
action affecting the Partnership or its business is contrary to the interest
of the Partnership. The Partnership Agreement provides that any action taken
by the Managing General Partner that is in accordance with the Independent
Consultant's advice conclusively will be deemed to be fair to and in the best
interest of the Partnership and not to constitute a breach of any duty to the
Partnership or the Unitholders. The Partnership Agreement also provides that
the Managing General Partner's decision either not to consult with, or not to
act in accordance with the advice of, the Independent Consultant on a
particular matter will not be considered evidence that the Managing General
Partner failed to act in the interests of the Partnership or breached any
duty to the Partnership or the Unitholders. During the year ended December
31, 1995, the Managing General Partner had no reason to consult with the
Independent Consultant.
FIDUCIARY RESPONSIBILITIES OF THE MANAGING GENERAL PARTNER AND INDEMNIFICATION
The Partnership Agreement provides that the Managing General Partner and
its affiliates, officers, directors, agents, and employees will not be liable
to the Partnership or to any of the Unitholders for any actions that do not
constitute actual fraud, gross negligence, or willful or wanton misconduct if
the Managing General Partner or such other person acted (or failed to act) in
good faith and in a manner it believes to be in, or not opposed to, the
interest of the Partnership. Therefore, the Unitholders have a more limited
right against the Managing General Partner than they would have absent the
limitations in the Partnership Agreement. The Partnership also indemnifies
the Managing General Partner and such persons and entities against all
liabilities, costs, and expenses (including legal fees and expenses) incurred
by the Managing General Partner or any such person or entity arising out of
or incidental to the business of the Partnership, including without
limitation, liabilities under the federal and state securities laws if (i)
the Managing General Partner or such person or entity 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, with respect to any criminal
proceedings, had no reasonable cause to believe such conduct was unlawful;
and (ii) the conduct of the Managing General Partner or of such person or
entity did not constitute actual fraud, gross negligence, or willful or
wanton misconduct. A successful indemnification of the Managing General
Partner could deplete the assets of the Partnership unless the Partnership's
indemnification obligation is covered by insurance. The Partnership's
indemnification obligation is currently not covered by insurance. No
determination has been made whether to attempt to secure such insurance,
which may not be available at a reasonable price or at all. Any Unitholder
who recovers from any indemnified party an amount for which the indemnified
party is entitled to indemnification will be personally liable to the
Partnership and the indemnified party (in aggregate) for and to the extent of
such amount.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to persons controlling the Partnership pursuant
to the foregoing provisions, or otherwise, the Partnership has been advised
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy, as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a controlling person of the Partnership in the
successful defense of any action, suit or proceeding) is asserted by such
controlling person, the Partnership will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction
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the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
COMPETITION
The Restaurants operated on the Properties are subject to significant
competition (including, for example, competition from other national and
regional "fast food" restaurant chains, other BK Restaurants (including
mobile restaurants), local restaurants, restaurants owned by BKC 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 Partnership
depends, in part, on the ability of the Restaurants operated on the
Properties to compete successfully with such businesses. The Partnership
does not anticipate that it will seek to engage directly in or meet such
competition. Instead, the Partnership will be dependent upon the experience
and ability of the lessees operating the Restaurants located on the
Properties and, with respect to its BK Properties, the BKC system generally
to compete with these other restaurants and similar operations. The
Partnership believes that the ability of its lessees to compete is effected
by their compliance with the image requirements at their restaurants.
PARTNERSHIP AGREEMENT
All Unitholders are bound by the terms and conditions of the Partnership
Agreement (including, without limitation, provisions thereof relating to
conflicts of interest, limitations on liability, and indemnification of the
Managing General Partner), a copy of which is available upon request (without
charge) at the offices of the Partnership or the Depositary, American Stock
Transfer and Trust Company, 40 Wall Street, New York, NY 10005.
ITEM 2. PROPERTIES
GENERAL
The Partnership acquired 128 properties from BKC on February 27, 1986
for a total purchase price of $94,592,000. From such date through March
1995, five of such properties were sold or leases on such properties were
allowed to expire and were not renewed.
Since the business strategy of the Partnership was changed in March 1995
as a result of the amendments to the partnership agreement, the Partnership
has acquired 39 restaurant properties in 13 states. Of such properties, 22
are Burger King restaurants and the remainder encompass 12 other tradenames.
The Partnership has an additional 108 restaurant properties located in 20
states under letters of intent or contracts for acquisition. Such properties
represent seven transactions in various stages of negotiation and due
diligence and there can be no assurance that such transactions will be
closed. Such acquisitions represent an aggregate consideration of $57
million. Of such properties, 28 are BK restaurant properties, 37 are
Dairy Queen restaurant properties, 26 are Hardee's restaurant properties,
11 are Pizza Hut restaurant properties and six restaurants are operated
under other tradenames. The Partnership also intends to make loans to
tenants to renovate and improve their restaurants, purchase additional
restaurant properties and related equipment, construct new Properties and
finance the improvement of existing Properties and the purchase of additional
restaurant properties and related property through borrowings and the issuance
of additional Units.
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PROPERTIES
The Partnership property portfolio currently consists of 99 Properties
that are owned in fee simple (the "Fee Properties") and 63 Properties that
are leased (the "Leasehold Properties") under leases with third-party lessors
(the "Primary Leases").
The table below lists, as of February 29, 1996, the number of Properties
in each state and how many of such properties are Fee Properties and
Leasehold Properties.
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FEE LEASEHOLD
STATE PROPERTIES PROPERTIES TOTAL
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Arizona 6 4 10
Arkansas 2 3 5
California 8 6 14
Colorado 3 0 3
Connecticut 0 2 2
Delaware 1 0 1
Florida 7 2 9
Georgia 4 1 5
Illinois 1 0 1
Indiana 1 0 1
Iowa 0 2 2
Kansas 1 0 1
Kentucky 1 1 2
Maine 3 1 4
Maryland 0 2 2
Massachusetts 1 1 2
Michigan 3 0 3
Minnesota 0 1 1
Missouri 2 0 2
Montana 0 1 1
Nebraska 1 0 1
Nevada 1 0 1
New Jersey 2 3 5
New Mexico 1 0 1
New York 2 2 4
North Carolina 2 1 3
Ohio 2 5 7
Oklahoma 5 0 5
Oregon 3 2 5
Pennsylvania 1 8 9
South Carolina 6 2 8
Tennessee 1 1 2
Texas 23 1 24
Vermont 0 1 1
Washington 2 6 8
West Virginia 0 2 2
Wisconsin 3 2 5
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99 63 162
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The Properties are leased to a total of 104 different BKC franchisees
and 14 other restaurant operators. Except for BKC, none of the lessees
operates a Restaurant on more than three Properties, and only 18 of the
lessees operate a Restaurant on more than one BK Property. Seven Properties
are leased to BKC. The restaurant on one of the Properties is closed and a
new lessee is being sought. A portion of one Property is subleased, pursuant
to an agreement entered into prior to the acquisition of the Property by the
Partnership, to Pearle, Inc., an affiliate of BKC.
All equipment, furniture, fixtures, and other similar personal property
used on the Properties generally is owned or leased from third parties by the
lessee of the Property.
PRIMARY LEASES. As described above, 63 of the Properties are Leasehold
Properties. Under the terms of 13 Primary Leases, the Partnership leases
both the underlying land and the restaurant building and other improvements
thereon. Under the terms of the remaining 50 Primary Leases, the Partnership
leases the underlying land and owns the restaurant building and other
improvements constructed thereon. In any event, upon expiration or
termination of a Primary Lease, the owner of the underlying land will become
the owner of all improvements thereon.
In addition to variations required to reflect whether the Partnership
owns or leases the improvements on a Leasehold Property, the other terms and
conditions of the Primary Leases vary substantially. However, the Primary
Leases generally have certain provisions in common. For example, the Primary
Leases generally provide that (i) the initial term is 20 years or less, (ii)
the Partnership may renew the term one or more times at its option (although
the provisions governing any such renewal vary significantly in that, for
example, some renewal options are at a fixed rental amount, while others are
at fair rental value at the time of renewal), (iii) the rentals payable are
stated amounts that may escalate over the terms of the Primary Leases (and/or
during renewal terms) but normally (although not always) are not based upon a
percentage of sales of the Restaurants thereon, and (iv) the Partnership is
required to pay all taxes and operating, maintenance, and insurance expenses
for the Leasehold Properties (that is the Primary Leases are "net" leases).
Several Primary Leases also require the Partnership, upon the termination or
expiration thereof, to remove all improvements situated on the Property.
Although the Partnership, as lessee under each Primary Lease, generally
has the right to assign or sublet all of its rights and interests thereunder
without obtaining the landlord's consent, the Partnership is not permitted to
assign or sublet any of its rights or interests under 22 Primary Leases
without obtaining the landlord's consent or satisfying certain other
conditions. In addition, approximately 20 percent of the Primary Leases
require the Partnership to use such Leasehold Properties only for the purpose
of operating a BK Restaurant or another type of restaurant thereon. In any
event, no transfer will release the Partnership from any of its obligations
under the Primary Lease, including the obligation to pay rent. The fact that
all applicable conditions were satisfied in connection with the Partnership's
acquisition of such Leasehold BK Properties will not permit the Partnership
to transfer such Leasehold BK Properties in the future without again
satisfying such conditions.
As of December 31, 1995, the remaining terms of the Primary Leases for
all of the Leasehold BK Properties (excluding renewal option terms) ranged
from approximately 1 to 11 years and the average remaining term (excluding
renewal options terms) was 5 years. With renewal options exercised, the
remaining terms of the Primary Leases ranged from approximately 8 to 33 years
and the average remaining term was 20 years. Only 25 Primary Leases had a
remaining term (including renewal option terms) of less than 25 years.
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LEASES. As described above, 115 of the BK Properties are leased or
subleased to a BKC franchisee under a Lease/Sublease, pursuant to which the
franchisee is required to operate a BK Restaurant thereon in accordance with
the lessee's Franchise Agreement and to make no other use thereof. Upon its
acquisition of the BK Properties, the Partnership assumed the rights and
obligations of BKC under the Leases/Subleases. Five Properties are leased to
Burger King on substantially the same terms and conditions as those contained
in the Lease/Sublease with the prior lessees. A portion of one of the BK
Properties also is leased to a tenant that does not operate a Restaurant, and
this lease was also assumed by the Partnership. Two properties are leased to
lessees operating "fast food" type restaurants not franchised by or
affiliated with BKC.
Although the provisions of BKC's standard form of lease to franchisees
have changed over time, the material provisions of the Lease/Subleases
generally are substantially similar to BKC's current standard form of lease
(except to the extent BKC has granted rent reductions or deferrals or made
other lease modifications in order to alleviate or lessen the impact of
business or other economic problems that a franchisee may have encountered).
The Leases/Subleases generally provide for a term of 20 years from the date
of opening of the Restaurant and do not grant the lessee any renewal options.
The Partnership, however, is required to renew a Leases/Sublease if BKC
renews or extends the lessee's Franchisee Agreement. The Partnership
believes BKC's policy generally is to renew a Franchise Agreement if BKC
determines, in its sole discretion, that economic and other factors justify
renewal or extension and if the franchisee has complied with all obligations
under the Franchise Agreement. As of December 31, 1995, the remaining terms
of all the Leases range from approximately 1 to 15 years, the average
remaining term was 6 years, and 24 Leases/Subleases had a remaining term of
more than 10 years.
The Leases/Subleases generally require the franchisees to pay minimum
rent, percentage rent (based upon sales) in excess of minimum rent, and all
taxes and operating, maintenance, and insurance costs for the Properties
(that is, the Leases/Subleases are "net" leases). Minimum rent is payable
monthly and generally is equal to 13.4 percent or 14.5 percent (depending on
when the Lease/Sublease was executed) of BKC's "investment" in the BK
Property (which investment generally is determined on the basis of BKC's land
acquisition cost (if any), certain construction and other costs (if any), and
capitalized interest, rent and taxes (if any)) plus, in the case of a
Leasehold Property, 113.4 percent or 114.5 percent (depending on when the
Lease/Sublease was executed) of all periodic Primary Lease rent payments
after the construction period. Percentage rent generally is payable
quarterly with an annual adjustment and is equal to the amount (if any) by
which a specified percentage (typically 8.5 percent) of the franchisee's
sales at the Property for each lease year exceeds the minimum rent. The term
"sales" includes all sums charged for goods, merchandise or services sold at
or from the BK Property; the term excludes any federal, state, county or city
sales tax, excise tax or other similar taxes collected by a franchisee from
customers based on sales, as well as cash received as payments in credit
transactions where the extension of credit itself has already been included
in the figure on which any previous percentage rent has been computed. In
the case of Leasehold BK Properties, the Leases/Subleases generally provide
that the minimum rent thereunder (but not percentage rent) will increase to
reflect any increase in rent under the corresponding Primary Lease. If the
franchisee is paying percentage rent at the time of such an increase,
however, an increase in rent under a Primary Lease will not be borne by the
franchisee, and this will result in a decrease in the net revenue derived by
the Partnership from such BK Property.
USE AND OTHER RESTRICTIONS ON THE OPERATION AND TRANSFER OF BK
RESTAURANT PROPERTIES. The Partnership was originally formed for the purpose
of acquiring all of BKC's interests in the existing BK Properties and leasing
or subleasing them to BKC franchisees under the Leases/Subleases. Accordingly,
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the Partnership Agreement provides that, except as expressly permitted
thereby, the Partnership may not use its BK Restaurant Properties for any
purpose other than the operations thereon of a BK Restaurant. In furtherance
thereof, the Partnership Agreement (i) requires the Partnership, 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 Partnership's ability to sell, lease, or otherwise transfer any
interest in its BK Restaurant Properties. The Partnership Agreement also
requires the Partnership to provide BKC notice of default under a
Lease/Sublease and an opportunity to cure such defaults prior to taking any
remedial action. These restrictions could lapse with respect to a particular
Property if the Partnership were to transfer that Property to a third party
following BKC's failure to exercise its right of first refusal (as described
below). The Partnership Agreement, however, specifically provides that the
Managing General Partner is under no obligation to seek to sell any BK
Restaurant Property or to consider any offer to purchase any BK Restaurant
Property so long as BKC maintains a Franchise Agreement in effect with
respect to the BK Property or itself operates a BK Restaurant on the BK
Property.
The Partnership Agreement provides that the Partnership may not sell,
lease or otherwise transfer any of its interest in any BK Restaurant Property
without first offering to sell, lease or otherwise transfer to BKC such
interest at the price and on the terms and conditions contained in a bona
fide third-party offer. BKC generally must elect whether or not to exercise
its right to acquire such interest in the BK Property pursuant to its right
of first refusal within 30 days after its receipt of the offer.
The foregoing restrictions do not apply to any restaurant property
acquired after March 17, 1995 so long as a BK Restaurant is not located
thereon. The Partnership Agreement does not restrict the restaurant
properties that the Partnership may acquire after such date.
RESTAURANT ALTERATIONS AND RECONSTRUCTION. It is important that
existing Properties be improved, expanded, rebuilt, or replaced from time to
time. 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 BK Restaurant as may
be reasonably required by BKC from time to time in order to modify the
appearance of the restaurant to reflect the then current image requirements
for BK Restaurants. Most of the existing BK Properties are 15 to 20 years
old, and the Partnership believes that many of its existing BK Properties
require substantial improvements to maximize sales. Moreover, the conditions
of many of the BK Properties is below BKC's current image requirements.
BKC maintains a "Successor Policy" relating to the renewal and extension
of Franchise Agreements with BKC franchisees. In connection with such
renewals and extensions, the "Successor Policy" includes provisions intended
to encourage the reconstruction, expansion or other improvement of the older
BK Restaurants leased or subleased by BKC to franchisees in order to upgrade
those restaurants to BKC's current standards for physical facilities and to
take advantage of opportunities that may exist to increase sales through
improving an existing restaurant's facilities (for example, by increasing
parking or seating capacity or by adding a "drive-thru" facility).
Substantially all of the Partnership's existing Properties will be
subject to the "Successor Policy" over the next seven years. Under the
current "Successor Policy," (i) a restaurant leased by BKC to a franchisee
where the Franchise Agreement is scheduled to expire within five years or
(ii) a restaurant leased by BKC to a franchisee where the property and
improvements are more than ten years old and the
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Franchise Agreement is at least two years old and has more than five years
remaining on its term, may qualify for financial assistance if BKC, in its
sole discretion, determines that the restaurant should be improved under the
"Successor Policy." If BKC determines that a restaurant should be
reconstructed under the "Successor Policy" and BKC elects to pay the cost of
such reconstruction, then the terms of the Lease/Sublease and the Franchise
Agreement with respect to such restaurant are extended, the minimum rent
payable under the Lease/Sublease is increased, but the applicable percentage
rent rate under the Lease/Sublease generally will remain at (or increase to)
8.5 percent. If, however, BKC elects not to pay the cost of reconstructing a
particular restaurant but the franchisee, with BKC's consent, agrees to pay
the cost thereof, then the terms of the Lease/Sublease and the Franchise
Agreement are extended, the minimum rent under the Lease/Sublease is
increased, and the percentage rent payable under such Lease/Sublease is
permanently reduced (generally from 8.5 percent to 5.5 percent of annual
sales). In addition, the franchisee may be granted a reduction or abatement
of rent for up to 60 days while the reconstruction is underway. The
Partnership believes that some of the requirements of the "Successor Policy,"
if invoked, could have a negative effect on the Partnership's cash flow and
borrowing capacity. The Partnership believes, however, that because of BKC's
regulations to partially subsidize this process, there will be little
incentive for BKC to invoke this policy on properties that are in good repair
and condition.
The Partnership Agreement requires the Managing General Partner to cause
the Partnership to implement those aspects of BKC's "Successor Policy"
related to reconstruction of BK Restaurants as such policy currently is in
effect and as it may be revised from time to time, with respect to any BK
Restaurant Property or Properties that BKC in its discretion, decides should
be reconstructed under the "Successor Policy". The Partnership generally is
required to extend the Lease/Sublease with respect to any Property
reconstructed pursuant to the "Successor Policy," and, in the discretion of
BKC, either to pay for the cost of reconstruction directly or to reduce the
percentage rent rate under such Lease/Sublease if the franchisee pays the
cost of reconstruction. BKC, however, must pay to the Partnership an amount
equal to the portion of the cost of any reconstruction undertaken or any rent
reduction granted, as the case may be, determined by reference to BKC's
relative share (i.e., the franchisee royalty fee, (but excluding amounts
required to be expended for advertising and other income received by BKC)) of
the total rental and royalty income derived by BKC and the Partnership from
the Property. BKC's obligation to make payments to the Partnership in
connection with a rent reduction pursuant to the "Successor Policy" would
continue for the remainder of the term of the Lease/Sublease, even if the
Partnership were to transfer the Property prior to expiration of the
Lease/Sublease. In addition, BKC would subsidize a portion of the 60-day
reduction or abatement in rent while the construction is completed under the
provisions for "rent relief" described below.
BKC, in its sole and absolute discretion, may modify or discontinue at
any time the current version or any subsequent version of the "Successor
Policy," but such a change would not affect the basis on which the
Partnership and BKC will share the cost of any reconstruction undertaken
pursuant to the "Successor Policy."
In addition to the reconstruction of BK Restaurants under the "Successor
Policy" BKC has the right under the Partnership Agreement to require the
Partnership to acquire land adjacent to a BK Restaurant Property if such land
is necessary for the expansion of the BK Restaurant on the Property (for
example, to provide additional parking facilities), even though the expansion
is not undertaken pursuant to the "Successor Policy." However, BKC is
required to pay the Partnership a portion of the cost of any
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<PAGE>
such adjacent land, determined under the formula described above in
connection with the "Successor Policy."
The Partnership believes that it can reduce the likelihood of having to
rebuild the restaurant properties at the Partnership's expense, if it assists
tenants in repairing and updating their restaurants. In many cases, the
tenants have difficulty borrowing to finance improvements to the restaurants
because they do not own them. The recent amendments to the Partnership
Agreement permit the Partnership to make loans to tenants for such purposes.
The Partnership would realize interest income from these loans, with the
possibility of receiving increased percentage rent because of increased sales
at the improved restaurants. As an alternative, the Partnership is also
permitted to make and provide for such improvements through increased rents
on the properties. The Partnership envisions that the typical repairs and
updates that tenants would make would involve constructing playgrounds,
repairing roofs and parking lots, and generally remodeling a restaurant to
conform to Burger King's current image requirements.
The Partnership believes that if the "Successor Policy" is invoked, the
increased base rent and any incremental percentage rent on the improved
restaurant property would be insufficient to compensate the Partnership
adequately for its rebuilding costs. As a consequence, the cash flow of the
Partnership could be adversely effected by implementation of the "Successor
Policy." The Partnership believes that because the "Successor Policy"
includes payments by BKC, it would not be in BKC's economic interest to
invoke the "Successor Policy" with respect to restaurant properties that have
already been renovated and updated. The Partnership believes that it is
unlikely that a tenant would elect to pay for the improvements itself because
any improvements would belong to the Partnership.
RENT RELIEF. In connection with Properties leased or subleased by BKC
to franchisees, BKC, from time to time, in its discretion, has granted "rent
relief" to a limited number of franchisees, in the form of a permanent or
temporary reduction of rent payment otherwise owed, in order to alleviate or
lessen the impact of business or other economic problems that those
franchisees have encountered. The Partnership Agreement provides that the
Managing General Partner, in its discretion, may cause the Partnership to
grant "rent relief" with respect to a BK Property at the request of BKC or
the lessee. Any grant of "rent relief" by the Partnership, however, is
subject to the condition that BKC agrees to pay the Partnership a portion of
such "rent relief," determined by reference to BKC's relative share (i.e. the
franchise royalty fee (but excluding amounts required to be expended for
advertising and other amounts received by BKC)) of the total rental and
royalty income derived by BKC and the Partnership from such Property. BKC's
obligation to make payments to the Partnership would continue for the
duration of the rent reduction, even if the Partnership were to transfer the
BK Property prior to expiration of the Lease/Sublease.
As defined in the Partnership Agreement, "rent relief" is limited to any
reduction in rent for a period in excess of 90 days and reductions for 90
days or less that are specifically designated by the Managing General Partner
as "rent relief" or that are in connection with the improvement of a BK
Restaurant pursuant to BKC's "Successor Policy." No other reduction for a
period of 90 days or less would be considered "rent relief." In addition, a
franchisee's failure to make a payment of rent under a Lease/Sublease would
not be considered "rent relief" if either such Lease/Sublease were to have
terminated automatically or the Managing General Partner were to seek to
terminate such Lease/Sublease and were to cause the Partnership to initiate
and pursue such actions (including, if appropriate, litigation) against the
defaulting franchisee as the Managing General Partner, in its sole
discretion, determined
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<PAGE>
reasonable under the circumstances. The Partnership would not be entitled to
any payment from BKC in these various circumstances that are not considered
"rent relief."
During the year ended December 31, 1995, the Partnership had not
provided "rent relief" for any BK Properties.
PERIODIC CONSIDERATION OF SALE OR FINANCING
The Partnership Agreement provides that the Managing General Partner may
(but is not obligated to) consider at least once every five years, beginning
in the year 2000, whether or not it would be in the interest of the
Partnership to effectuate a sale and/or financing of all or a portion of the
Properties held as of March 17, 1995 in order to return to the Unitholders
all or a substantial portion of their unrecovered capital investments in the
Partnership. If at any such time the Managing General Partner, in its
judgment, determines that such a sale or financing would be in the interest
of the Partnership, it will use reasonable efforts to effectuate such a
transaction, assuming market conditions permit. In the case of a sale of all
or a portion of such Properties on which BK Restaurants are located, BKC
would have the right to exercise its right of first refusal to the extent it
had not lapsed.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Partnership is involved in litigation relating to
claims arising in the ordinary course of business. Currently, the
Partnership is not a party to any material litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to Unitholders in the quarter ended
December 31, 1995.
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<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Partnership's Units are 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 Units and
the distributions declared during each calendar quarter of 1994 and 1995 and
during 1996 through February 29, 1996 are set forth below:
<TABLE>
<CAPTION>
DISTRIBUTIONS
1996 HIGH LOW DECLARED
---- ---- --- --------------
<S> <C> <C> <C>
First Quarter (through February 29) $22 5/8 $19 1/2 $ .44
1995
----
First Quarter 16 1/2 14 1/4 .42
Second Quarter 17 1/8 15 3/4 .42
Third Quarter 18 7/8 16 3/4 .42
Fourth Quarter 20 1/4 18 .43
----
1.69
1994
----
First Quarter 16 3/4 15 7/8 .37
Second Quarter 17 1/4 15 3/8 .39
Third Quarter 17 1/2 16 3/4 .39
Fourth Quarter 17 3/8 13 .41
----
1.56
</TABLE>
As of February 29, 1996, there were 1,903 holders of record in the
Partnership.
In July 1995, the Partnership announced its intention to repurchase up
to 300,000 Units. Through December 31, 1995, the Partnership had purchased
30,000 Units and no further repurchases have been made or are presently
contemplated.
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenues $9,780,289 $8,793,056 $8,331,643 $8,488,597 $8,749,650
Net income 5,222,588 4,932,670 4,527,598 2,485,713 4,032,844
Net income allocable
to unitholders 5,119,180 4,834,017 4,437,051 2,436,001 3,952,192
Net income per unit 1.10 1.04 0.96 0.53 0.85
Cash distributions
declared per unit 1.69 1.56 1.72* 1.56 1.60
</TABLE>
______________
* Includes special capital transaction distributions of $.24.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total assets $71,482,739 $62,889,271 $65,322,433 $69,087,205 $74,170,008
Line of credit 10,930,647 -- -- -- --
Capitalized lease
obligations 562,544 774,602 965,611 1,137,658 1,301,524
Partners' capital 59,312,150 61,669,151 64,114,638 67,716,869 72,609,312
- --general partners 1,240,604 1,308,543 1,357,447 1,429,488 1,527,332
- --limited partners 58,071,546 60,360,608 62,757,191 66,287,381 71,081,980
- --per unit 12.46 13.02 13.54 14.30 15.34
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS.
Total restaurant sales, the primary determinant of Partnership revenues,
are a function of the number of restaurants in operation and their
performance. Sales at individual restaurants are influenced by local market
conditions, by the efforts of specific restaurant operators, and by
marketing, new product and program support by the franchiser, and by the
general state of the economy.
Revenues in 1995 totaled $9,780,289 up 11.2 percent from the $8,793,056
recorded in 1994. Revenues in 1994 were up 5.5 percent from the $8,331,643
recorded in 1993. The partnership owned and leased 122 sites throughout 1994
and 1995. Revenues from these properties were up 6.4 percent in 1995 over
1994. The remaining increase in revenues in 1995 over 1994 is attributable
to 16 properties acquired on various dates during 1995. No additions were
made to the portfolio during 1994 and 1993.
Total sales in the restaurants located on Partnership real estate in
1995 were $135,296,834 up 10.6 percent from the $122,314,903 reported in 1994
which was up 8.4 percent from the $112,880,007 reported for 1993. There were
138, 122 and 121 Partnership restaurant sites in operation on December 31,
1995, 1994 and 1993 respectively.
Expenses excluding the provision for write down of properties for the
year were $4,557,701, up 18.4 percent from 1994 which was up 3.2 percent from
1993. The increase in expenses was primarily due to the increase in the
number of restaurant sites owned by the Partnership and related financing
costs.
There was no write down of assets and intangible values relating to
closed properties during the year. Write downs of $11,061 and $73,739 were
made in 1994 and 1993 respectively.
Net income allocable to Unitholders in 1995 was $5,119,180 or $1.10 per
Partnership Unit, up 5.8 percent or six cents per Unit from $4,837,017 or
$1.04 per Unit achieved in 1994. The 1994 results were up 8.3 percent or
eight cents per Unit from the 1993 results. Excluding provisions for write
down or dispositions of properties, net income allocable to Unitholders was
$1.10 in 1995, $1.05 in 1994 and 97 cents in 1993.
Regular cash distributions to the Limited Partners for 1995 totaled
$1.69 per Unit with 42 cents per Unit paid in the first three quarters and 43
cents in the fourth quarter. Total cash distributions to Unitholders in 1994
and 1993 were $1.56 and $1.72 per Unit, respectively.
FUNDS GENERATED FROM OPERATIONS.
Industry analysts generally consider funds generated from operations to
be an appropriate measure of performance. Funds generated from operations is
calculated as the sum of taxable income plus charges for depreciation and
amortization. Funds generated from operations does not represent cash
generated from operating activities in accordance with generally accepted
accounting principles and is not necessarily indicative of cash available to
fund cash needs and cash distributions. Funds generated from operations
should not be considered as an alternative to net income (determined in
accordance with generally accepted accounting principles) as an indication of
the Partnership's performance or as an
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<PAGE>
alternative to cash flow (determined in accordance with generally accepted
accounting principles) as a measure of liquidity. Funds generated from
operations on a tax basis allocable to Unitholders in 1995 were $1.78 per
Partnership Unit, up 13 cents per Unit from the $1.65 achieved in 1994 which
was up 11 cents per Unit from $1.54 in 1993.
LIQUIDITY AND CAPITAL RESOURCES.
Cash and equivalents on December 31, 1995 totaled $7,127 down $673,519
from December 31, 1994 and down $1,252,976 from December 31, 1993. Year-end
1995 net receivables of $951,095 were up 33 percent and 130 percent from
December 31, 1994 and December 31, 1993, respectively, as a result of
increases in lease revenues and a change in the procedure for paying property
taxes and billing them to the lessees.
Since formation, the Partnership has paid all regular distributions from
its operating cash flow. Funds generated from operations on a tax basis
allocable to Unitholders were seven cents more than the related cash
distributions for 1995 earnings, four cents more than the related cash
distributions for 1994 earnings and 18 cents per Unit more than the related
cash distribution for 1993 earnings. Management of the Partnership believes
that cash generated from operations will be sufficient to meet operating
requirements.
As a result of amendments to the Partnership Agreement approved by the
limited partners in March 1995, the Partnership has undertaken a program of
substantial capital expenditures for the addition of new properties and to
assist existing tenants in the remodeling of their restaurants. To finance
these expenditures, the Partnership has incurred debt and issued additional
Units. In June 1995, the Partnership obtained a revolving bank credit line
in the amount of $10 million (subsequently increased to $20 million and again
in February 1996 to $40 million). Borrowings have been used to acquire
additional restaurant properties and additional borrowings may also be used
to fund additional property acquisitions. The credit agreement expires June
27, 1998 and provides that borrowings under the agreement will bear interest
at 180 basis points over the London Interbank Rate (LIBOR). The borrowings
are secured by the Partnership's interest in the real estate and leases owned
by the Partnership. At February 29, 1996, approximately $20 million remained
available under the credit agreement. Interest expense for 1995 was $193,530.
At February 29, 1996 the Partnership had an additional 108 restaurant
properties located in 20 states under letters of intent or contracts for
acquisition. Such properties represent seven transactions in various stages
of negotiation and due diligence and there can be no assurance that such
transactions will be closed. Such acquisitions will require expenditures of
$57 million. Of such properties, 28 are Burger King restaurant properties,
37 are Dairy Queen restaurant properties, 26 are Hardee's restaurant
properties, 11 are Pizza Hut restaurant properties and six are restaurant
properties operated under other tradenames. The Partnership expects to raise
such consideration (and the consideration for future property acquisitions)
through the use of the remaining availability under the existing credit
agreement, from additional borrowings and from the issuance of additional
Units. The Partnership is currently negotiating an additional credit
facility which would be used to fund these and other potential acquisitions.
There can be no assurance such financing will be available and the failure of
the Partnership to obtain such additional financing would adversely impact
the Partnership's ability to acquire additional properties.
During 1995, three properties were acquired in part for 54,167 Units.
As a term of the acquisition, the Partnership agreed, in the event the market
price for the Units issued did not equal or exceed $24 per Unit three years
from the date of issuance and such Units were still held on such date by
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<PAGE>
the seller of the properties, to pay the difference in cash. In connection
with the acquisition of ten properties in 1996, the Partnership agreed, as a
term of those acquisitions, in the event the market price for the Units
issued did not equal or exceed $23 per Unit (as to 28,261 Units) three years
from the date of issuance or $24 per Unit (as to 299,575 Units) two years
from the date of issuance and such Units were still held on such date by the
sellers of the properties, to pay the difference by the issuance of
additional Units.
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 herein by
reference into this Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Registrant is a limited partnership (of which U.S. Restaurant
Properties, Inc. is the Managing General Partner) and has no directors or
officers. The executive officers of the Managing General Partner are Robert
J. Stetson, President and Chief Executive Officer, and Fred H. Margolin,
Chairman of the Board, Secretary and Treasurer. They have served in such
positions and as directors since the acquisition of the Managing General
Partner on May 27, 1994. Messrs. Stetson and Margolin serve as executive
officers of the Managing General Partner at the pleasure of its board of
directors.
Mr. Stetson is 45 years old. Since 1978, Mr. Stetson has been primarily
engaged in restaurant chain management, including the acquisition and
management of restaurant properties. From 1987 until 1992, Mr. Stetson
served as a senior executive in restaurant and retailing subsidiaries of
Grand Metropolitan PLC, the ultimate parent of Burger King. During this
period, Mr. Stetson served as the Chief Financial Officer and later President
- - Retail Division of Burger King and Chief Financial Officer and later Chief
Executive Officer of Pearle Vision. As Chief Financial Officer of Burger
King, Mr. Stetson was responsible for managing more than 750 restaurants that
Burger King leased to tenants. Prior to 1987, Mr. Stetson served in several
positions with PepsiCo Inc. and its subsidiaries, including Chief Financial
Officer of Pizza Hut. Mr. Stetson is also a director of Bayport Restaurant
Group and Bugaboo Creek Steakhouse Inc., both publicly-traded restaurant
companies. In 1972, Mr. Stetson received a Bachelor of Arts degree from
Harvard College. In 1975, Mr. Stetson received an M.B.A. from Harvard
Business School.
Mr. Margolin is 46 years old. In 1979, Mr. Margolin founded and became
the President of American Eagle Premium Finance Company, one of the largest
independent premium finance companies in Texas. From 1982 through 1988, Mr.
Margolin developed and then leased or sold shopping centers having an
aggregate cost of $50,000,000. In 1977, Mr. Margolin founded Intercon
General Agency, a national insurance agency specializing in the development
and marketing of insurance products for
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<PAGE>
financial institutions. Mr. Margolin served as the Chief Executive Officer
of Intercon General Agency from its inception until its sale to a public
company in 1982. In 1971, Mr. Margolin received a Bachelor of Science degree
from the Wharton School of the University of Pennsylvania. In 1973, Mr.
Margolin received an M.B.A. from Harvard Business School.
In addition to Messrs. Stetson and Margolin, the board of directors of
the Managing General Partner consists of Messrs. Gerald H. Graham, David
Rolph, Darrel Rolph, and Eugene G. Taper. Each director serves a one-year
term. Mr. Graham, age 58, is the Dean of the Barton School of Business at
Wichita State University. David Rolph, age 47, and Darrel Rolph, age 58, own
and operate the Tex-Mex restaurant chain, "Carlos O'Kelleys," which has 25
units, and were formerly one of the largest Pizza Hut franchisees. Mr.
Taper, age 59, a certified public accountant, is a consultant and a retired
partner, since 1993, of Deloitte & Touche LLP, an international public
accounting firm.
SECTION 16(A) REPORTS. Section 16(a) of the Securities and Exchange Act
of 1934, as amended, requires the Managing General Partner, its directors and
executive officers, and persons who beneficially own more than 10 percent of
the Units to file with the SEC initial reports of Unit ownership and reports
of changes in ownership therein. The Managing General Partner, directors and
executive officers of the Managing General Partner, and greater than 10
percent owners of the Units are required by SEC regulation to furnish the
Partnership with copies of all Section 16(a) forms they file.
To the Partnership's knowledge, based solely upon a review of the copies
of such reports furnished to the Partnership and written representations that
no other reports were required during the year ended December 31, 1995, the
Partnership believes that all Section 16(a) filing requirements applicable to
the foregoing Managing General Partner, director, executive officers, and
greater than 10 percent owners were complied with.
The year-end report is not required to be filed if there are no
previously unreported transactions or holding to report. Nevertheless, the
Partnership is required to disclose the names of directors, executive
officers and greater than 10 percent owners who did not file the year-end
report, unless the Partnership has received a written statement that no
filing was required. As of the date of this report, the Partnership has not
received any such statements.
ITEM 11. EXECUTIVE COMPENSATION.
The Managing General Partner, U.S. Restaurant Properties, Inc., is
responsible for managing the business and affairs of the Partnership. The
Partnership pays the Managing General Partner a non-accountable annual
allowance (adjusted annually to reflect increases in the Consumer Price
Index), plus reimbursement of out-of-pocket costs incurred to other parties
for services rendered to the Partnerships. The allowance for the years ended
December 31, 1995, 1994 and 1993 was $585,445, $542,508 and $528,000,
respectively. For 1996, the allowance will be $600,081. For 1995, the
one-time property acquisition fee equaled $109,238 which was capitalized and
the annual allowance includes $29,375 of increased management fees due to
acquisitions. The allowance is paid quarterly, in arrears. The
Partnership's accounts payable balance includes $187,204 and $135,627 for
this allowance as of December 31, 1995 and 1994, respectively. The Managing
General Partner paid no out-of-pocket costs to other parties on behalf of the
Partnership during 1995, 1994 and 1993. See "Item 1. Business -
Distributions and Allocations" and "- Payments to the Managing General
Partner," above, and "Item 13. Certain Relationships and Related
Transactions," below.
-20-
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of the Units and the capital stock of the Managing
General Partner (the "U.S. Restaurant Shares"), respectively, as of February
29, 1996 by: (i) all persons who are beneficial owners of 5 percent or more
of the Units or the U.S. Restaurant Shares, respectively, (ii) all directors
and executive officers of the Managing General Partner, and (iii) all
directors and executive officers of the Managing General Partner as a group.
The Managing General Partner does not itself own any Units but does hold a
partnership interest as a general partner and options to purchase 400,000
Units at $15.50 per Units. The disclosure that no person is the beneficial
owner of 5 percent or more of the Units is based upon the Partnership not
having received any Schedule 13D or 13G to the contrary on or before February
29, 1996. Unless stated otherwise, the persons named below possess sole
voting and investment power with respect to the securities set forth opposite
their names.
<TABLE>
<CAPTION>
US RESTAURANT
UNITS SHARES
----- ------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ------------------------------------ ------ ------- ------ -------
<S> <C> <C> <C> <C>
Gerald H. Graham 1,400 * 0 0
Dean, Barton School of Business
100 Clinton Hall, Wichita State University
Wichita, Kansas 67260
Fred H. Margolin 17,930(1) * 187.5 30
Darrel Rolph 6,000(2) * 125.0 20
David Rolph 3,000 * 125.0 20
Robert J. Stetson 10,600(3) * 187.5 30
Eugene G. Taper 950 * 0 0
6427 Redpine Rd.
Dallas, Texas 75248
------ ----- ---
All directors and executive officers of the
Managing General Partner as a group (6 persons) 39,880 * 625.0 100
</TABLE>
_____________
* Less than one percent.
(1) Does not include 4,375 Units held by Mr. Margolin's wife as trustee for
their minor children.
(2) Does not include 4,000 Units held by Mr. Rolph's wife as trustee for
their minor children.
(3) Does not include 1,000 Units held by Mr. Stetson as trustee for his
minor child.
The address for Messrs. Margolin and Stetson is 5310 Harvest Hill Rd.,
Suite 270, LB 168, Dallas, Texas 75230. The address for Messrs. Darrel Rolph
and David Rolph Sasnack Management, is 1877 N. Rock Rd., Wichita, Kansas 67206.
-21-
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Managing General Partner, U.S. Restaurant Properties, Inc. (formerly
QSV), is responsible for managing the business and affairs of the
Partnership. The Partnership pays the Managing General Partner a
non-accountable annual allowance (adjusted annually to reflect increases in
the Consumer Price Index), plus reimbursement of out-of-pocket costs incurred
to other parties for services rendered to the Partnerships. The allowance
for the years ended December 31, 1995, 1994 and 1993 was $585,448, $542,508
and $528,000, respectively. For 1996, the allowance will be $600,081. For
1995, the one-time property acquisition fee equaled $109,238 which was
capitalized and the annual allowance includes $29,375 of increased management
fees due to acquisitions. The allowance is paid quarterly, in arrears. The
Partnership's accounts payable balance includes $187,204 and $135,627 for
this allowance as of December 31, 1995 and 1994, respectively. The Managing
General Partner paid no out-of-pocket costs to other parties on behalf of the
Partnership during 1995, 1994 and 1993.
The Managing General Partner has agreed to make available to the
Partnership an unsecured, interest-free, revolving line of credit in the
principal amount of $500,000 to provide the Partnership with the necessary
working capital to minimize or avoid seasonal fluctuation in the amount of
quarterly cash distributions. No loans were made by the Managing General
Partner or were outstanding at any time during the years ended December 31,
1995, 1994 and 1993.
On March 17, 1995, the limited partners approved the grant to the
Managing General Partner of options to purchase 400,000 Units. The exercise
price is $15.50 per Unit which was the average closing market price on the
New York Stock Exchange for the five trading days immediately following the
date of grant.
On March 24, 1995, the Managing General Partner assigned its rights to
purchase a property in Amarillo, Texas to the Partnership for no
consideration.
Burger King Corporation withdrew as a Special General Partner in
November 1994. On January 20, 1995, the Partnership paid Burger King
Corporation $16,000 for its interest in the operating and master limited
partnerships.
During 1995, the Partnership loaned $255,000 to Arkansas Restaurants #10
L.P. The balance is due September 1, 1996 and bears interest at nine percent
per annum. The Managing General Partner owns a 90 percent interest in
Arkansas Restaurants #10 L.P.
-22-
<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.
III. Real Estate and Accumulated Depreciation.
(a)(3) For a list of the Exhibits filed as part of this Annual Report on
Form 10-K, see page E-1, herein.
(b) Reports on Form 8-K.
None.
(c) Exhibits.
The Exhibits filed as part of this Annual Report on Form 10-K are
submitted as a separate section.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 29, 1996 U.S. RESTAURANT PROPERTIES MASTER L.P.
By: U.S. RESTAURANT PROPERTIES, INC.,
its Managing General Partner
By: s/Robert J. Stetson
-------------------
Robert J. Stetson
President, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Managing General Partner of the Partnership and in the capacities and on the
dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
s/Robert J. Stetson Director of U.S. Restaurant March 29, 1996
- ------------------- Properties, Inc.
Robert J. Stetson
s/Fred H. Margolin Director of U.S. Restaurant March 29, 1996
- ------------------ Properties, Inc.
Fred H. Margolin
s/Eugene G. Taper Director of U.S. Restaurant March 29, 1996
- ----------------- Properties, Inc.
Eugene G. Taper
s/Gerald H. Graham Director of U.S. Restaurant March 29, 1996
- ------------------ Properties, Inc.
Gerald H. Graham
s/Darrel Rolph Director of U.S. Restaurant March 29, 1996
- -------------- Properties, Inc.
Darrel Rolph
s/David Rolph Director of U.S. Restaurant March 29, 1996
- ------------- Properties, Inc.
David Rolph
-24-
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
WITH INDEPENDENT AUDITORS' REPORT
TABLE OF CONTENTS
<TABLE>
<S> <C>
Independent Auditors' Report...................................... F-2
Consolidated Balance Sheets....................................... F-3
Consolidated Statements of Income................................. F-4
Consolidated Statements of Cash Flows............................. F-5
Consolidated Statements of Partners' Capital...................... F-6
Notes to Consolidated Financial Statements........................ F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
U.S. Restaurant Properties Master L.P.
We have audited the accompanying consolidated balance sheets of U.S.
Restaurant Properties Master L.P. (the Partnership) as of December 31, 1995
and 1994, and the related consolidated statements of income, partners'
capital, and cash flows for each of the three years in the period ended
December 31, 1995. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
financial statement schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these 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 that our audits provide
a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of U.S. Restaurant
Properties Master L.P. as of December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles. Also, 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
February 17, 1996
F-2
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
--------------------------
<S> <C> <C>
ASSETS
Cash and equivalents $ 7,127 $ 680,646
Marketable securities -- 853,791
Receivables, net 951,095 715,202
Purchase deposits (Note 3) 1,791,682 --
Prepaid expenses 315,189 122,962
Notes receivable (Note 10) 268,654 --
Net investment in direct financing leases 19,371,015 21,237,432
Land 27,492,895 23,414,280
Buildings and leasehold improvements, net 6,257,188 1,548,375
Machinery and equipment, net 223,739 --
Intangibles, net 14,804,155 14,316,583
--------------------------
$71,482,739 $62,889,271
--------------------------
--------------------------
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 677,398 $ 445,518
Line of credit 10,930,647 --
Capitalized lease obligations 562,544 774,602
Commitments (Notes 7 and 8)
General Partners' capital 1,240,604 1,308,543
Limited Partners' capital 58,071,546 60,360,608
--------------------------
$71,482,739 $62,889,271
--------------------------
--------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
------------------------------------
<S> <C> <C> <C>
GROSS RENTAL RECEIPTS (NOTE 9) $11,646,706 $10,465,533 $9,848,394
------------------------------------
------------------------------------
REVENUES FROM LEASED PROPERTIES
Rental income $ 7,539,634 $ 6,339,993 $5,665,976
Amortization of unearned income on
direct financing leases 2,240,655 2,453,063 2,665,667
------------------------------------
Total Revenues 9,780,289 8,793,056 8,331,643
EXPENSES
Rent 1,405,380 1,347,748 1,294,669
Depreciation and amortization 1,540,900 1,361,136 1,383,489
Taxes, general and administrative 1,419,279 1,143,956 1,007,914
Interest expense (income), net 192,142 (3,515) 44,234
------------------------------------
4,557,701 3,849,325 3,730,306
Provision for write down or disposition of
properties -- 11,061 73,739
------------------------------------
Total Expenses 4,557,701 3,860,386 3,804,045
------------------------------------
Net income $ 5,222,588 $ 4,932,670 $4,527,598
------------------------------------
------------------------------------
Net income allocable to unitholders $ 5,119,175 $ 4,834,017 $4,437,051
------------------------------------
------------------------------------
Average number of outstanding units 4,637,865 4,635,000 4,635,000
------------------------------------
------------------------------------
Net income per unit $ 1.10 $ 1.04 $ 0.96
------------------------------------
------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
--------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,222,588 $ 4,932,670 $ 4,527,598
--------------------------------------
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 1,540,900 1,361,136 1,383,489
Provision for write down or disposition
of properties - 11,061 73,739
Marketable securities 853,791 (853,791) --
Decrease (increase) in receivables, net (235,893) (301,505) 10,873
Decrease (increase) in prepaid expenses (192,227) (35,673) 1,262
Reduction in net investment in direct
financing leases 1,866,417 1,672,477 1,468,790
Increase in accounts payable 231,880 203,333 9,506
--------------------------------------
4,064,868 2,057,038 2,947,659
--------------------------------------
9,287,456 6,989,708 7,475,257
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of properties - - 1,130,000
Purchase of property (8,083,302) - -
Purchase of intangibles (1,662,729) - -
Purchase of machines and equipment (231,609) - -
Purchase deposits paid (1,791,682) - -
Increase in notes receivable (268,654) - -
--------------------------------------
(12,037,976) - 1,130,000
CASH FLOWS USED IN FINANCING ACTIVITIES:
Increase in loan origination costs (76,843) - -
Reduction in capitalized lease obligations (212,058) (191,008) (172,047)
Increase in line of credit 10,930,647 - -
Cash distributions (8,001,995) (7,378,157) (8,129,829)
Purchase of partnership units (546,750) - -
Purchase of special general partner
interest (16,000) - -
--------------------------------------
2,077,001 (7,569,165) (8,301,876)
--------------------------------------
Increase (decrease) in cash and equivalents (673,519) (579,457) 303,381
Cash and equivalents at beginning of year 680,646 1,260,103 956,722
--------------------------------------
Cash and equivalents at end of year $ 7,127 $ 680,646 $ 1,260,103
--------------------------------------
--------------------------------------
SUPPLEMENTAL DISCLOSURE:
Interest paid during the year $ 256,325 $ 89,912 $ 108,874
--------------------------------------
--------------------------------------
NON-CASH INVESTING ACTIVITIES
Units issued for property $ 985,156 $ - $ -
--------------------------------------
--------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1993 $1,429,488 $66,287,381 $67,716,869
Net income 90,547 4,437,051 4,527,598
Cash distributions (162,588) (7,967,241) (8,129,829)
-------------------------------------
Balance at December 31, 1993 1,357,447 62,757,191 64,114,638
-------------------------------------
Net income 98,653 4,834,017 4,932,670
Cash distributions (147,557) (7,230,600) (7,378,157)
-------------------------------------
Balance at December 31, 1994 1,308,543 60,360,608 61,669,151
-------------------------------------
Special general partner interest
transfer (12,899) (3,101) (16,000)
Net income 103,413 5,119,175 5,222,588
Purchase of partnership units - (546,750) (546,750)
Units issued for property - 985,156 985,156
Cash distributions (158,453) (7,843,542) (8,001,995)
-------------------------------------
Balance at December 31, 1995 $1,240,604 $58,071,546 $59,312,150
-------------------------------------
-------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
U.S. Restaurant Properties Master L.P. (Partnership), formerly Burger King
Investors Master L.P., a Delaware limited partnership, was formed on December
10, 1985. The Partnership, through its 99% limited partnership interest in
U.S. Restaurant Properties Operating Limited Partnership (Operating
Partnership), also a Delaware Limited Partnership, acquired from Burger King
Corporation (BKC) in February 1986 an interest in 128 restaurant properties
(Properties) owned or leased by BKC and leased or subleased on a net lease
basis to BKC franchisees for $94,592,000. (The Partnership is the sole
limited partner of the Operating Partnership, and they are referred to
collectively as the "Partnerships".) U.S. Restaurant Properties, Inc.,
formerly QSV Properties, Inc., (QSV), the managing general partner and BKC,
the special general partner, were both indirect wholly-owned subsidiaries of
Grand Metropolitan PLC prior to May 17, 1994, at which time QSV was sold to
the current owners. On January 20, 1995, the Partnership paid Burger King
Corporation $16,000 for its 0.02% interest in the Operating and Master
Limited Partnership.
The Partnership may issue an unlimited number of units. The units
outstanding as of December 31, 1995 and 1994 totaled 4,659,167 and 4,635,000,
respectively.
2. ACCOUNTING POLICIES
The financial statements have been prepared in accordance with generally
accepted accounting principles; however, this will not be the basis for
reporting taxable income to unitholders (see Note 9 for a reconciliation of
financial reporting income to taxable income). The financial statements
reflect the consolidated accounts of the Partnerships after elimination of
significant inter-partnership transactions.
Cash and equivalents include short-term, highly liquid investments with
original maturities of three months or less.
Marketable securities consist of U.S. treasury securities which have been
treated as trading securities as of December 31, 1994. As a result, they are
stated at market value.
An intangible asset was recorded for the excess of cost over the net
investment in direct financing leases in 1986. This intangible asset
represents the acquired value of future contingent rent receipts (based on a
percentage of each restaurant's sales) and is being amortized on a
straight-line basis over 40 years.
Also included in intangible assets is the amount paid to acquire certain
leases with favorable rents payable to third party lessors. This amount is
being amortized over the remaining lease terms.
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING POLICIES (CONTINUED)
DEPRECIATION
Depreciation is computed using the straight-line method over estimated useful
lives of 10 to 20 years for financial statement purposes. Accelerated and
straight-line methods are used for tax purposes.
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, and
revenues and expenses as of and for the reporting periods. Actual results may
differ from such estimates.
LONG-LIVED ASSETS
In March 1995, Statement of Financial Accounting Standard ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to
be Disposed of" was issued. The Partnerships adopted SFAS No. 121 in 1995.
Long-lived assets include real estate, direct financing leases, and
intangibles which are evaluated on an individual property basis. Based on
the Partnership's policy for reviewing impairment of long-lived assets, there
was no adjustment necessary to the accompanying consolidated financial
statements.
INCOME TAXES
No federal or, in most cases, state income taxes are reflected in the
consolidated financial statements because the Partnerships are not taxable
entities. The partners must report their allocable shares of taxable income
or loss in their individual income tax returns.
FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
The notes receivable and the line of credit are carried at amounts that
approximate their fair value.
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," was issued, effective for calendar
year 1996. This statement 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 Partnership has not completed the
process of evaluating the impact that will result from adopting such
statement and therefore is unable to disclose the impact the adoption will
have on its financial position and results of operations. Additionally, the
effect of adopting the statement will depend on the calculated value of the
units issued and the extent to which units are used in acquiring real estate
properties in the future.
3. OTHER BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
December 31,
------------------------
1995 1994
------------------------
<S> <C> <C>
RECEIVABLES, NET
Receivables $ 1,067,986 $ 832,093
Less allowance for doubtful accounts 116,891 116,891
------------------------
$ 951,095 $ 715,202
------------------------
------------------------
BUILDINGS AND LEASEHOLD IMPROVEMENTS, NET
Buildings and leasehold improvements $ 8,882,138 $ 3,892,294
Less accumulated depreciation 2,624,950 2,343,919
------------------------
$ 6,257,188 $ 1,548,375
------------------------
------------------------
INTANGIBLES, NET
Intangibles $28,178,508 $26,392,197
Less accumulated amortization 13,374,353 12,075,614
------------------------
$14,804,155 $14,316,583
------------------------
------------------------
</TABLE>
Total purchase deposits of $1,791,682 included $1,075,000 of non-refundable
deposits.
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. PROPERTIES
On December 31, 1995, the Partnerships owned the land at 79 Properties and
leased the land at 60 Properties from third party lessors under operating
leases. The Partnerships in turn leased or subleased the land primarily to
BKC franchisees under operating leases.
On December 31, 1995, the Partnerships owned the buildings on 124 Properties
and leased the buildings on 14 Properties from third party lessors under
leases accounted for as capital leases. The Partnerships own one property in
which only the land is owned and leased. The Partnerships leased 28 owned
buildings to franchisees under operating leases. These 28 buildings are
stated at cost, net of accumulated depreciation, on the balance sheet. A
total of 109 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
109 buildings. One property is not currently leased.
On December 31, 1995, there were 138 Partnership restaurant sites in
operation, and there was one closed site. The Partnerships continue to seek a
suitable tenant for the remaining site. The write-down of the closed site was
$11,061 and $73,739 in 1994 and 1993, respectively.
5. GUARANTEED STOCK PRICE
Three properties were acquired on October 10, 1995, with a combination of
cash and 54,167 partnership units. The partnership units are guaranteed to
have a value of $24 per unit three years from the transaction date. The unit
price on the date issued was $18 3/8. Any difference between the guaranteed
value and the actual value of the units at the end of the three year period
is to be paid in cash. These properties were recorded at the guaranteed value
of the units discounted to reflect the present value on the date the units
were issued.
6. LINE OF CREDIT
On December 31, 1995, $10,930,647 had been drawn on the $20 million line of
credit. All properties are included as collateral on this line of credit. The
interest rate floats at 1.8 percentage points above LIBOR. The LIBOR rate at
December 31, 1995, was 5.375%. The line of credit also requires the
Partnerships to maintain a tangible net worth in excess of $40,500,000, a
debt to tangible net worth ratio of not more than 0.5 to 1, and a cash flow
coverage ratio of not less than 2 to 1 based upon a Proforma Five Year Bank
Debt Amortization. The $20 million line of credit matures on June 27, 1998.
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INVESTMENTS AND COMMITMENTS AS LESSOR
The Partnerships lease land and buildings primarily to BKC franchisees. The
building portions of most of the leases are direct financing leases while the
land portions are operating leases. The leases generally provide for a term
of 20 years from the opening of the related restaurant, and do not contain
renewal options. The Partnerships, however, have agreed to renew a franchise
lease if BKC renews or extends the lessee's franchise agreement. As of
December 31, 1995, the remaining lease terms ranged from 1 to 28 years. 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.
<TABLE>
<CAPTION>
DIRECT
FINANCING OPERATING
LEASES LEASES
--------------------------
<S> <C> <C>
MINIMUM FUTURE LEASE RECEIPTS FOR YEARS
ENDING DECEMBER 31:
1996 $ 4,172,825 $ 4,957,086
1997 4,115,977 4,943,011
1998 3,810,947 4,886,906
1999 3,018,938 4,599,365
2000 2,056,720 3,798,127
Later 2,602,150 19,086,897
--------------------------
$19,777,557 $42,271,392
--------------------------
--------------------------
</TABLE>
<TABLE>
<CAPTION>
1995 1994
--------------------------
<S> <C> <C>
NET INVESTMENT IN DIRECT FINANCING LEASES
AT DECEMBER 31:
Minimum future lease receipts $19,777,557 $ 23,950,382
Estimated unguaranteed residual values 7,561,965 7,561,965
Unearned amount representing interest (7,968,507) (10,274,915)
--------------------------
$19,371,015 $ 21,237,432
--------------------------
--------------------------
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------
1995 1994 1993
----------------------------------
<S> <C> <C> <C>
RENTAL INCOME:
Minimum rental income $3,583,609 $3,061,951 $3,029,998
Contingent rental income 3,956,025 3,278,042 2,635,978
----------------------------------
$7,539,634 $6,339,993 $5,665,976
----------------------------------
----------------------------------
</TABLE>
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INVESTMENTS AND COMMITMENTS AS LESSOR (CONTINUED)
If the restaurant properties are not adequately maintained during the term of
the tenant leases, such properties may have to be rebuilt before the leases
can be renewed, either by the Partnership 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 partnership agreement, Burger King can require that a
restaurant property be rebuilt. If the tenant does not elect to undertake the
rebuilding, the Partnership would be required to make the required
improvement itself. However, as a condition to requiring the Partnership to
rebuild, Burger King would be required to pay the Partnership 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 to such restaurant property. The managing general partner
believes that Burger King's Percentage Share would typically be 29% for a
restaurant property.
The managing general partner 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.
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS
The land at 46 Properties and the land and buildings at 14 Properties are
leased by the Partnerships from third party lessors. The building portions of
the leases are generally capital leases while the land portions are operating
leases. Commitment leases provide for an original term of 20 years and most
are renewable at the Partnership's option. As of December 31, 1995, the
remaining lease terms (excluding renewal option terms) ranged from 1 to 11
years. If all renewal options are taken into account, the terms ranged from 8
to 33 years. Rents payable may escalate during the original lease and renewal
terms. For six properties, the leases provide for contingent rent based on
each restaurant's sales.
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------------------------
<S> <C> <C>
MINIMUM FUTURE LEASE OBLIGATIONS FOR YEARS
ENDING DECEMBER 31:
1996 $247,603 $1,357,289
1997 198,819 1,387,445
1998 139,610 1,349,357
1999 60,250 1,173,489
2000 4,328 938,647
Later 1,082 3,290,229
-------------------------
Total minimum obligations (a) 651,692 $9,496,456
------------
------------
Amount representing interest (89,148)
----------
Present value of minimum obligations $562,544
----------
----------
</TABLE>
(A) MINIMUM LEASE OBLIGATIONS HAVE NOT BEEN REDUCED BY MINIMUM SUBLEASE
RENTALS.
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
----------------------------------
<S> <C> <C> <C>
RENTAL EXPENSE
Minimum rental expense $1,303,666 $1,245,986 $1,213,564
Contingent rental expense 101,714 101,762 81,105
----------------------------------
$1,405,380 $1,347,748 $1,294,669
----------------------------------
----------------------------------
</TABLE>
On July 21, 1995, the managing general partner authorized the Partnership to
repurchase up to 300,000 of its units in the open market. During 1995, 30,000
units were repurchased by the Partnership.
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. RECONCILIATION OF FINANCIAL REPORTING INCOME TO TAXABLE INCOME
Financial reporting income differs from taxable income primarily because
generally accepted accounting principles reflect the building portion of
leases from Partnerships to franchisees as a net investment in direct
financing leases. For tax purposes, these leases are treated as operating
leases. In addition, differences exist in depreciation methods and asset
lives.
<TABLE>
<CAPTION>
FINANCIAL
REPORTING RECONCILING TAXABLE
INCOME DIFFERENCES INCOME
--------------------------------------
<S> <C> <C> <C>
REVENUES FROM LEASED PROPERTIES:
Rental income $7,539,634 $ 4,107,072 $11,646,706
Amortization of unearned income
on direct financing leases 2,240,655 (2,240,655) -
--------------------------------------
9,780,289 1,866,417 11,646,706
--------------------------------------
--------------------------------------
EXPENSES:
Rent 1,405,380 280,872 1,686,252
Depreciation and amortization 1,540,900 1,396,966 2,937,866
General and administrative 1,419,279 - 1,419,279
Interest expense (income), net 192,142 (68,814) 123,328
--------------------------------------
4,557,701 1,609,024 6,166,725
--------------------------------------
Net income $5,222,588 $ 257,393 $ 5,479,981
--------------------------------------
--------------------------------------
</TABLE>
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. RELATED PARTY TRANSACTIONS
The managing general partner is responsible for managing the business and
affairs of the Partnerships. The Partnerships pay the managing general
partner a non-accountable annual allowance (adjusted annually to reflect
increases in the Consumer Price Index), plus reimbursement of out-of-pocket
costs incurred to other parties for services rendered to the Partnerships.
The allowance for the years ended December 31, 1995, 1994, and 1993, was
$585,445, $542,508, and $528,000, respectively. The Partnerships' accounts
payable balance includes $187,204 and $135,627 for this allowance as of
December 31, 1995 and 1994, respectively. The managing general partner paid
no out-of-pocket costs to other parties on behalf of the Partnerships during
1995, 1994, and 1993.
To compensate the Managing General Partner for its efforts and increased
internal expenses with respect to additional properties, the Partnership will
pay 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 1995, the one-time acquisition fee equaled
$109,238 which was capitalized, and the increase in the non-accountable
annual fee equaled $29,375. In addition, if the Rate of Return (as defined)
on the Partnership's equity in all additional properties exceeds 12 percent
per annum for any fiscal year, the Managing General Partner will be 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. However, to the extent such distributions
are ultimately received by the Managing General Partner in excess of those
provided by its 1.98 percent Partnership interest, they will reduce the fee
payable with respect to such excess flow from any additional properties.
In 1994, the Partnerships with the consent and financial participation of
BKC, continued rent relief for three properties.
In 1993, the Partnerships sold two non-operating properties at slightly less
than their book values to BKC. At that time, BKC was the special general
partner and had an ownership interest of 0.02% in the Partnerships.
The managing general partner has agreed to make available to the Partnership
an unsecured, interest-free, revolving line of credit in the principal amount
of $500,000 to provide the Partnerships with the necessary working capital to
minimize or avoid seasonal fluctuation in the amount of quarterly cash
distributions. No loans were made or were outstanding at any time during the
years ended December 31, 1995, 1994, and 1993.
A note receivable of $255,000 is due from Arkansas Restaurants #10 L.P. at
December 31, 1995. The note receivable is due on September 1, 1996, and has
an interest rate of 9.0% per annum.
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of December 31, 1995, the managing general partner owned 90% of Arkansas
Restaurants #10 L.P..
On March 17, 1995 the limited partners granted the managing general partner
options to acquire up to 400,000 units, subject to certain adjustments under
anti-dilution provisions. The initial exercise price of each option is
$15.50 which is the average closing price of the depository receipts for the
units 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 become exercisable on the first anniversary of
the date as of which the exercise price is determined, subject to earlier
vesting and exercisability if the managing general partner is removed as
general partner. The term of the options expires on the tenth anniversary of
the date as of which the exercise price is determined.
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. DISTRIBUTIONS AND ALLOCATIONS
Under the amended partnership agreement, cash flow from operations of the
Partnerships each year will be distributed 98.02% to the unitholders and
1.98% to the general partners until the unitholders have 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 will be 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 will be distributed 60.40% to the unitholders and
39.60% to the general partners. The unitholders received 98.02% of all cash
flow distributions for 1995 and 98% for 1994 and 1993.
Under the amended partnership agreement, net proceeds from capital
transactions (for example, disposition of the Properties) will be distributed
98.02% to the unitholders and 1.98% to the general partners until the
unitholders have received an amount equal to the unrecovered capital per unit
plus 12.0% cumulative, simple return on the unrecovered capital per unit
outstanding from time to time (to the extent not previously received from
distribution of cash flow or proceeds of prior capital transactions); then
such proceeds will be distributed 75.25% to the unitholders and 24.75% to the
general partners until the unitholders have received the total cumulative,
simple return of 17.5% on the unrecovered capital per unit; and then such
proceeds will be distributed 60.40% to the unitholders and 39.60% to the
general partners. There were no capital transactions in 1995 or 1994.
During 1993 two non-operating properties were sold at slightly less than
their book values. Both dispositions were capital transactions and resulted
in the special distributions to unitholders of 11 cents and 13 cents per unit
on September 13, and December 13, 1993, respectively.
All operating income and loss of the Partnership for each year generally will
be allocated among the partners in the same aggregate ratio as cash flow is
distributed for that year. Gain and loss from a capital transaction generally
will be allocated among the partners in the same aggregate ratio as proceeds
of the capital transactions are distributed except to the extent necessary to
reflect capital account adjustments.
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. SUMMARY BY QUARTER (UNAUDITED)
<TABLE>
<CAPTION>
PER UNIT
------------------------------------------------------
RELATED* MARKET PRICE
ALLOCABLE CASH ---------------------------
REVENUES NET INCOME NET INCOME DISTRIBUTIONS HIGH LOW CLOSE
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993
First quarter $1,871,146 $ 925,817 $0.20 $0.37 $14 7/8 $13 3/4 $14 1/2
Second quarter 2,116,827 1,146,078 0.24 0.48** 15 14 14 3/8
Third quarter 2,248,966 1,304,560 0.28 0.50** 16 7/8 14 3/8 16
Fourth quarter 2,094,704 1,151,143 0.24 0.37 17 3/8 15 1/2 16 1/8
------------------------------------------------------------------------------
Annual $8,331,643 $4,527,598 $0.96 $1.72**
-----------------------------------------------
-----------------------------------------------
1994
First quarter $1,983,987 $1,099,981 $0.23 $0.39 $16 3/4 $15 7/8 $15 7/8
Second quarter 2,297,313 1,340,560 0.28 0.39 17 1/4 15 3/8 17 1/8
Third quarter 2,329,969 1,392,292 0.29 0.41 17 1/2 16 3/4 16 3/4
Fourth quarter 2,181,787 1,099,837 0.24 0.42 17 3/8 13 14 7/8
-----------------------------------------------
Annual $8,793,056 $4,932,670 $1.04 $1.61
-----------------------------------------------
-----------------------------------------------
1995
First quarter $2,122,620 $1,090,130 $0.23 $0.42 $16 1/2 $14 1/4 $16 1/8
Second quarter 2,494,818 1,406,993 0.30 0.42 17 1/8 15 3/4 17 1/8
Third quarter 2,592,283 1,495,433 0.32 0.43 18 7/8 16 3/4 18 3/8
Fourth quarter 2,570,568 1,230,032 0.25 0.44 20 1/4 18 19 3/4
-----------------------------------------------
Annual $9,780,289 $5,222,588 $1.10 $1.71
-----------------------------------------------
-----------------------------------------------
</TABLE>
* REPRESENTS AMOUNTS DECLARED AND PAID IN THE FOLLOWING QUARTER.
** INCLUDES SPECIAL CASH DISTRIBUTIONS OF $0.11 FOR THE SECOND QUARTER AND
$0.13 FOR THE THIRD QUARTER.
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. PROFORMA (UNAUDITED)
The 1995 acquisitions consisted of 16 properties that were valued at
$10,731,187 based upon the purchase method of accounting. These properties
were acquired on various dates from March 1995 through December 1995. Three
of the properties were acquired with a combination of cash and 54,167
partnership units. The 54,167 partnership units are guaranteed to have a
market value of $24 three years from the transaction date and have certain
registration rights.
The following proforma information was prepared by adjusting the actual
consolidated results of the Partnership for the years ended December 31, 1995
and 1994 for the effects of the 1995 acquisitions as if all such acquisitions
and related financing transactions including the issuance of 54,167 units had
occurred on January 1, 1994. Interest expense for proforma purposes was
calculated assuming a 7.7% interest rate for both years presented, which
approximates the rate the Partnership paid during 1995.
These proforma operating results are not necessarily indicative of what the
actual results of operations of the Partnership would have been assuming all
of the properties were acquired as of January 1, 1994, and they do not purport
to represent the results of operations for future periods.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1994
--------------------------
<S> <C> <C>
REVENUES FROM LEASED PROPERTIES:
Rental income $ 8,819,204 $ 8,049,916
Amortization of unearned income on direct financing
leases 2,240,655 2,453,063
--------------------------
Total revenues 11,059,859 10,502,979
EXPENSES
Rent 1,527,758 1,501,887
Depreciation and amortization 1,831,641 1,771,740
Taxes, general and administrative 1,533,251 1,292,359
Interest expense (income), net 879,172 877,104
Provision for write down or disposition of
properties - 11,061
--------------------------
Total expenses $ 5,771,822 $ 5,454,151
--------------------------
--------------------------
Net income $ 5,288,037 $ 5,048,828
--------------------------
--------------------------
Net income allocable to unitholders $ 5,183,334 $ 4,947,851
--------------------------
--------------------------
Average number of outstanding units 4,679,715 4,689,167
--------------------------
--------------------------
Net income per unit $ 1.11 $ 1.06
--------------------------
--------------------------
</TABLE>
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. SUBSEQUENT EVENTS
In January 1996, 23 properties were purchased in six separate transactions.
The total purchase price was $14 million which consisted of cash and 327,836
Partnership units. Among the properties acquired were 13 Burger Kings, 3
Dairy Queens, and 2 KFCs. Of the 327,836 units issued, 299,575 units have a
guaranteed market price of $24 per unit within two years of the date issued,
any difference being payable through issuance of additional partnership
units. The units must be registered by the Partnership by January 1997,
which will result in related registration costs. The remaining units have a
guaranteed market price of $23 per unit within three years of the date
issued, any difference being payable through issuance of additional
partnership units. There is no registration requirement in respect to the
latter units.
On February 15, 1996, the $20 million line of credit was increased to $40
million.
F-20
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
FORM 10-K
SUPPLEMENTAL SCHEDULE: REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<TABLE>
<S> <C>
Real Estate:
Balance At Beginning of Period $27,306,574
Additions During Period:
Acquisitions Through Foreclosure --
Other Acquisitions 9,068,458
Improvements --
Other --
Deductions During Period:
Cost of Real Estate Sold: --
Other --
-----------
Balance At Close of Period $36,375,032
-----------
-----------
Accumulated Depreciation:
Balance At Beginning of Period 2,343,919
Additions During Period:
Depreciation Expense 281,031
Deductions During Period:
Accum. Depr. of Real Estate Sold --
-----------
Balance At Close of Period $ 2,624,950
-----------
-----------
</TABLE>
<PAGE>
EXHIBIT INDEX
2.1 Amended and Restated Purchase and Sale
Agreement dated as of February 3, 1986.
(Incorporated by reference to Exhibit 10(a) to
Amendment No. 2 to the Registration Statement).
3.1 The original Certificate of Limited Partnership
of U.S. Restaurant Properties Master L.P.
(Incorporated by reference to Exhibit 4.3 to
the Registration Statement). Amendments filed
on July 1, 1994, November 7, 1994 and November
30, 1994. (Incorporated by reference to
Exhibit 3.1 to the Registrant's 10-K Annual
Report for the year ended December 31, 1994.)
3.2 Second Amended and Restated Agreement of
Limited Partnership of U.S. Restaurant
Properties Master L.P. dated as of March 17,
1995. (Incorporated by reference to Exhibit
3.2 to the Registrant's 10-K Annual Report for
the year ended December 31, 1994.)
3.3 Certificate of Limited Partnership of U.S.
Restaurant Properties Operating L.P.
(Incorporated by reference to Exhibit 4.4 to
the Registrant Statement.) Amendments filed on
July 26, 1994 and November 30, 1994.
(Incorporated by reference to Exhibit 3.3 to
the Registrant's 10-K Annual Report for the
year ended December 31, 1994.)
3.4 Second Amended and Restated Agreement of
Limited Partnership of U.S. Restaurant
Properties Operating L.P. dated as of March
17, 1995. (Incorporated by reference to
Exhibit 3.4 to the Registrant's 10-K Annual
Report for the year ended December 31, 1994.)
4.1 Deposit Agreement and Form of Depositary
Receipt and Application for Transfer of
Depositary Units. (Incorporated by reference
to Exhibit 4.5 to Amendment No. 3 to the
Registration Statement.) First Amendment to
Deposit Agreement. (Incorporated by reference
to Exhibit (4)A to Registrant's 8-K Current
Report dated September 30, 1987.)
10.1 Amendment No. 91 - Burger King Corporation
Withdrawal as Special General Partner and Name
Change (Incorporated by reference to Exhibit
10.1 to the Registrant's 10-Q Report for the
period ended September 30, 1994.)
10.2 Consulting Agreement dated April 30, 1987.
(Incorporated by reference to Exhibit 10.2 to
the Registrant's 10-K Annual Report for the
year ended December 31, 1987.)
#10.3 Option Agreement, dated as of March 24,
1995, between U.S. Restaurant Properties
Master L.P. and QSV Properties Inc.
(Incorporated by reference to Exhibit 10.3
to the Registrant's 10-K Annual Report for
the year ended December 31, 1994.)
E-1
<PAGE>
#10.4 Agreement between BKC and Robert J.
Stetson regarding sale of QSV Properties
Inc. (Incorporated by reference to
Exhibit 10.1 to the Registrant's 10-Q
Report for the period ended June 30,
1994.)
10.5 Letter re change of Registrar and Stock
Transfer Agent. (Incorporated by reference to
Exhibit 10.2 to the Registrant's 10-Q Report
for the period ended September 30, 1994.)
*10.6 Amended and Restated Secured Loan
Agreement dated as of February 15, 1996
between Registrant and various banks.
12.1 Subsidiaries of the Registrant. (Incorporated
by reference to Exhibit 22.1 to the
Registrant's 10-K Annual Report for the year
ended December 31, 1994.)
27.1 Financial Data Schedule
__________________
* Filed herewith.
# Management compensatory document.
E-2
<PAGE>
AMENDED AND RESTATED SECURED LOAN AGREEMENT
THIS AMENDED AND RESTATED SECURED LOAN AGREEMENT is dated as of February
15, 1996, by and between U.S. RESTAURANT PROPERTIES OPERATING L.P., a Delaware
limited partnership ("BORROWER") and COMERICA BANK-TEXAS, a state banking
association organized under the laws of the State of Texas (in its individual
capacity, "COMERICA"), COMPASS BANK-DALLAS, a state banking association
organized under the laws of the State of Texas ("COMPASS"), and the additional
commercial, banking or financial institutions which hereafter become parties
hereto (Comerica, Compass and such other additional commercial, banking or
financial institutions which hereafter become parties hereto pursuant to
SECTION 11.11 of this Agreement are sometimes referred to hereinafter
collectively as the "BANKS" and individually as a "BANK") and COMERICA
BANK-TEXAS, as agent for the Banks hereunder (the "AGENT"), to be effective on
the initial Disbursement Date.
WITNESSETH
WHEREAS, Comerica and Borrower entered into that certain Secured Loan
Agreement dated as of June 27, 1995, as amended by that certain First
Amendment to Secured Loan Agreement, dated as of October 6, 1995, and as
further amended by that certain Second Amendment to Loan Agreement, dated as
of December 6, 1995 (as amended, the "ORIGINAL AGREEMENT");
WHEREAS, U.S. Restaurant Properties Master L.P., a Delaware limited
partnership, ("GUARANTOR") executed that certain Guaranty dated as of June 27,
1995, in favor of Comerica, as reaffirmed from time to time thereafter; and
WHEREAS, Borrower executed certain Lease Assignments (as defined below)
as collateral security for all of the indebtedness, liabilities and other
obligations of Borrower and Guarantor arising under the Original Agreement, as
amended, modified, renewed and/or restated from time to time, as well as those
arising under the other "Loan Documents" as such term is defined in such Lease
Assignments.
WHEREAS, Borrower desires to increase the maximum commitment amount
under the Original Agreement to finance the update and repair of Borrower's
existing properties, and to purchase additional restaurant properties, and the
Banks are willing to provide such financing subject to the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, Borrower, the Banks and the Agent agree as follows, this
Agreement being an amendment, modification, renewal and restatement of the
Original Agreement:
1
<PAGE>
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following respective meanings:
"ACQUISITION ADVANCE" shall mean a loan the proceeds of which are used
by Borrower for the purposes described in clause (a) of Section 2.16 of this
Agreement.
"ADVANCE" shall mean a loan advance made by a Bank to Borrower under
Section 2 of this Agreement.
"ADVANCE COMPLIANCE CERTIFICATE" shall mean (a) in regards to each
Acquisition Advance, a certificate in substantially the form of EXHIBIT A-1
attached hereto, (b) in regards to each Working Capital Advance, a certificate
in substantially the form of EXHIBIT A-2 attached hereto, and (c) in regards
to each Letter of Credit Advance, a certificate in substantially the form of
EXHIBIT A-3 attached hereto.
"ADVANCE TYPE" refers to the distinction between Advances which are
Acquisition Advances, Advances which are Letter of Credit Advances, and
Advances which are Working Capital Advances.
"AFFILIATE" shall mean, when used with respect to any person, any other
person which, directly or indirectly, controls or is controlled by or is under
common control with such person. For purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), with respect to any person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the ownership of
voting securities or by contract or otherwise.
"AGENT" shall have the meaning given to it in the preamble of this
Agreement, and shall include all successors and assigns thereof.
"AGENT'S ACCOUNT" shall mean the commercial loan accounting account of
Agent with Comerica Bank-Texas, ABA #111000753, at its office at 1601 Elm
Street, Dallas, Texas 75201, 90010, Favor: Comerica Bank-Texas Commercial Loan
Accounting, Reference: U. S. Restaurant Properties, or such other account of
Agent as Agent notifies the Banks from time to time as the "Agent's Account"
for purposes of this Agreement.
"AGREEMENT" shall mean this Amended and Restated Secured Loan Agreement,
as the same may be renewed, extended, amended and restated from time to time.
"ANNUALIZED CASH FLOW" shall mean, as of any applicable date of
determination, the product of (a) the Cash Flow of Borrower for the calendar
month immediately preceding the month in which such determination date is,
multiplied by (b) twelve (12).
"APPLICABLE RATE" is defined in SECTION 2.2(c) of this Agreement.
2
<PAGE>
"ASSIGNMENT AGREEMENT" shall mean a certain agreement between Comerica,
as assignor, and Comerica and Compass, as assignees, pursuant to which
Comerica has assigned the Original Note to the assignees thereunder.
"BANK" shall have the meaning given to it in the preamble of this
Agreement.
"BANK INTERCREDITOR AGREEMENT" shall mean that certain Intercreditor
Agreement dated as of February 14, 1996, by and among the Agent and the Banks,
pursuant to which the Banks and the Agent have supplemented the terms of
SECTION 10 of this Agreement to govern certain rights and obligations of the
Banks and the Agent with respect to the Indebtedness and the Collateral.
"BANK SUPPLEMENT" is defined in SECTION 11.11 of this Agreement
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code, as
amended, or any successor act or code.
"BKC" shall have the meaning as is given to such term in the Borrower's
Partnership Agreement.
"BORROWER" is defined in the preamble of this Agreement.
"BORROWER'S PARTNERSHIP AGREEMENT" shall mean that certain "Second
Amended and Restated Agreement of Limited Partnership of U.S. Restaurant
Properties Operating L.P. (formerly Burger King Operating Limited
Partnership)" dated as of March 17, 1995, without giving effect to any
amendment thereto.
"BORROWING" shall mean a borrowing consisting of simultaneous Advances
by the Banks.
"BORROWING NOTICE" is defined in SECTION 2.1.3(a) of this Agreement.
"BURGER KING RESTAURANT LOCATION" shall have the meaning as is given to
the term "Restricted Restaurant Property" in the Borrower's Partnership
Agreement.
"BUSINESS DAY" shall mean any day OTHER THAN a Saturday, a Sunday, or a
day on which the Agent is authorized to be closed under the laws of the State
of Texas, and, with respect to each Advance which bears, or is to bear,
interest at the LIBOR Rate, each LIBOR Business Day.
"CASH FLOW" of any person shall mean, for any applicable period of
determination, the Net Income (after deduction for income taxes and other
taxes of such person determined by reference to income or profits of such
person) for such period, PLUS, to the extent deducted in computation of such
Net Income, the amount of depreciation and amortization expense, the amount of
reduction in net investment in direct finance leases, and the amount of
deferred tax liability during such period, all as determined in accordance
with GAAP.
3
<PAGE>
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C. Sections 9601 ET SEQ.), as
amended from time to time, including, without limitation, the Superfund
Amendments and Reauthorization Act ("SARA").
"COLLATERAL" shall mean (i) all property of Borrower now or hereafter in
the possession of the Agent or any Bank or any Affiliate of the Agent or any
Bank (or as to which the Agent or any Bank or any Affiliate of the Agent or
any Bank now or hereafter controls possession by documents or otherwise), (ii)
all amounts in all deposit or other accounts (including without limitation an
account evidenced by a certificate of deposit) of Borrower now or hereafter
with the Agent or any Bank or any Affiliate of the Agent or any Bank, wherever
located and whether now owned or hereafter acquired, together with all
replacements thereof, substitutions therefor, accessions thereto, and all
proceeds and products of any of the foregoing, and (iii) all Real Property and
other additional property (real or personal) of Borrower which is now or
hereafter subject to a security interest, mortgage, lien, claim or other
encumbrance granted by Borrower to, or in favor of, the Agent or any Bank to
secure all or any part of the Indebtedness, including without limitation all
of the leases, real property and other rights, titles and interests covered by
the Lease Assignments.
"COMERICA" is defined in the preamble of this Agreement, and shall
include all successors and assigns thereof.
"COMBINED" OR "COMBINED" shall mean when used with reference to any
financial term in this Agreement, the aggregate for two or more persons of the
amounts signified by such term for all such persons determined on a combined
or consolidated basis in accordance with GAAP. Unless otherwise specified
herein, references to "combined" financial statements or data of Borrower
includes combination and consolidation with its Subsidiaries and with
Guarantor in accordance with GAAP.
"COMMITMENT AMOUNT" of a Bank shall mean (x) in the case of Comerica
prior to the execution and delivery of a Bank Supplement, the dollar amount
set forth opposite Comerica's name on the signature page of this Agreement,
(y) in the case of Compass prior to the execution and delivery of a Bank
Supplement, the dollar amount set forth opposite Compass's name on the
signature page of this Agreement, and (z) in the case of any Bank upon and
after the execution by such Bank of a Bank Supplement, the dollar amount set
forth opposite such Bank's name on the signature page of then most recent Bank
Supplement to which such Bank is a party, as amended from time to time;
PROVIDED, HOWEVER, in no event shall the execution and delivery of a Bank
Supplement reduce the aggregate amount of all the Banks' Commitment Amounts
below the Overall Commitment Amounts.
"CURRENT ASSETS" shall mean, as of any applicable date of determination,
all cash, non-affiliated customer receivables, United States government
securities, claims against the United States government, and inventories.
"CURRENT LIABILITIES" shall mean, as of any applicable date of
determination, (a) all liabilities of a person that should be classified as
current in accordance with GAAP, including without limitation any portion of
the principal of the Advances classified as current, PLUS (b) to
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the extent not otherwise included, all liabilities of Borrower to any of its
Affiliates whether or not classified as current in accordance with GAAP.
"DEBT" shall mean, as of any applicable date of determination, all items
of indebtedness, obligation or liability of a person (other than, with respect
to Borrower, Subordinated Debt), whether matured or unmatured, liquidated or
unliquidated, direct or indirect, absolute or contingent, joint or several,
that should be classified as liabilities in accordance with GAAP.
"DEFAULT" shall mean a condition or event which, with the giving of
notice or the passage of time, or both, would become an Event of Default.
"DEFAULT RATE" shall mean the lesser of (i) the Maximum Rate or (ii) the
rate per annum which shall from day to day be equal to three percent (3%) in
excess of the Applicable Rate.
"DISBURSEMENT DATE" shall mean each date upon which the Agent makes a
disbursement or a Bank makes a loan or otherwise extends credit to or on
behalf of Borrower under SECTION 2.1 and/or SECTION 2.17 of this Agreement or
Comerica issues a Letter of Credit for the benefit of Borrower under SECTION
2.14 of this Agreement.
"ENVIRONMENTAL LAW" shall mean any federal, state or local law, statute,
ordinance, judgment, rule or regulation (a) pertaining to health, industrial
hygiene, or the environmental conditions on, under or about the Real Property,
including, but not limited to, CERCLA, SARA and RCRA; or (b) governing the
use, storage, treatment, handling, manufacture, transportation or disposal of
Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, or any successor act or code.
"EVENT OF DEFAULT" shall mean any of those conditions or events listed
in SECTION 9.1 of this Agreement.
"FINANCIAL STATEMENTS" shall mean all those balance sheets, earnings
statements and other financial data (whether of Borrower or any of its
Subsidiaries or Guarantor or otherwise) which have been furnished to the Agent
and/or any Bank for the purposes of, or in connection with, this Agreement and
the transactions contemplated hereby.
"FINANCING STATEMENTS" shall mean financing statements describing the
Bank as secured party and Borrower as debtor covering the Collateral and
otherwise in such form, for filing in such jurisdictions and with such filing
offices, as the Agent and/or any Bank shall reasonably deem necessary or
advisable.
"FIVE YEAR TREASURY RATE" shall mean, at any date of determination, the
yield which shall be imputed, by linear interpolation, from the current weekly
yield of those United States Treasury Notes having maturities of five years
from such date, as published in then-most recent Federal Reserve Statement
Release H.15(519) or any successor publication thereto.
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"GAAP" shall mean, as of any applicable date of determination, generally
accepted accounting principles consistently applied.
"GENERAL COMPLIANCE CERTIFICATE" shall mean a certificate in
substantially the form of EXHIBIT G attached hereto.
"GENERAL PARTNER" shall mean U.S. Restaurant Properties, Inc., a
Delaware corporation.
"GUARANTOR" is defined in the preamble of this Agreement, and shall
include successors and assigns thereof.
"GUARANTOR'S PARTNERSHIP AGREEMENT" shall mean that certain "Second
Amended and Restated Agreement of Limited Partnership of U.S. Restaurant
Properties Master L.P. (formerly Burger King Investors Master L.P.)" dated as
of March 17, 1995, without giving effect to any amendment thereto.
"GUARANTY" shall mean a guaranty (or separate guaranties) in the form
and content of EXHIBIT "F" to this Agreement pursuant to which the Guarantor
(jointly and severally if more than one) unconditionally guarantees repayment
to the Bank of all the Indebtedness.
"HAZARDOUS SUBSTANCE" shall mean one or more of the following
substances:
(a) those substances included within the definitions of (i)
"hazardous substances", "hazardous materials" or "toxic substances", in
CERCLA, SARA, RCRA, Toxic Substances Control Act, Federal Insecticide,
Fungicide and Rodenticide Act and the Hazardous Materials Transportation
Act (49 U.S.C. Sections 1801 ET SEQ.), or (ii) "solid waste", as defined
under the Texas Solid Waste Disposal Act;
(b) such other substances, materials and wastes which are or
become regulated as hazardous or toxic under applicable local, state or
federal law, or the United States government, or which are or become
classified as hazardous or toxic under federal, state, or local laws or
regulations; and
(c) any material, waste or substance which is: (i) asbestos;
(ii) polychlorinated biphenyls; (iii) designated as a "hazardous
substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C.
Sections 1251 ET SEQ. (33 U.S.C. Section 1321) or listed pursuant to
Section 307 of the Clean Water Act (33 U.S.C. Section 1317); (iv)
explosives; (v) radioactive materials; or (vi) petroleum, petroleum
products or any fraction thereof.
"INDEBTEDNESS" shall mean all loans, advances, indebtedness, obligations
and liabilities of Borrower under the Original Agreement, this Agreement
and/or the other Loan Documents to the Agent and/or any of the Banks
(including without limitation the Advances and the Letter of Credit Exposure),
together with all other indebtedness, obligations and liabilities whatsoever
of Borrower to the Agent and/or any of the Banks, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, due or to become
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due, now existing or hereafter arising, which in any way relate to or arise
from the Original Agreement, this Agreement and/or the other Loan Documents.
"INTEREST PERIOD" is defined in SECTION 2.2 of this Agreement.
"LEASE ASSIGNMENT" shall mean an Assignment of Lease, Rents and Real
Estate in the form and content of EXHIBIT "D" to this Agreement, or such other
form and content as is prescribed by the Banks from time to time and is
consistent with the provisions of SECTION 3 of this Agreement, pursuant to
which Borrower and each Loan Party assigns to the Bank the leases described on
SCHEDULE 1.1 attached to this Agreement and all other Real Property of such
Loan Party now or hereafter owned by such Loan Party.
"LEGAL RATE" shall mean the maximum rate of nonusurious interest
permitted to be paid by Borrower or received by the Agent or any Bank with
respect to the Indebtedness owed to such Lender from time to time under
applicable state or federal law as now or as may be hereafter in effect,
including, as to article 5069-1.04 Vernon's Texas Civil Statutes (and as the
same may be incorporated by reference in other Texas statutes), but otherwise
without limitation, that rate based upon the "INDICATED RATE CEILING".
"LENDER" shall mean the Agent and/or any or all of the Banks, as the
case may be, in its respective capacity as a lender of funds or a provider of
credit accommodations to, or for the account of Borrower under this Agreement
and/or any of the other Loan Documents.
"LETTER OF CREDIT" shall mean each letter of credit, as defined in the
Uniform Commercial Code, issued to, for the account of, or for the benefit of
Borrower by the Agent.
"LETTER OF CREDIT ADVANCE" shall mean a loan, the proceeds of which are
used by Borrower for the purposes described in clause (b) of SECTION 2.16 of
this Agreement.
"LETTER OF CREDIT COMMISSION" shall have the meaning given to such term
in SECTION 2.14(b) of this Agreement.
"LETTER OF CREDIT EXPOSURE" shall mean, at any time, the undrawn portion
of all unexpired Letters of Credit plus all amounts drawn, but unreimbursed,
under Letters of Credit.
"LIBOR BUSINESS DAY" shall mean a day on which commercial banks are open
for domestic or foreign exchange business in London, England.
"LIBOR RATE" shall mean, with respect to any LIBOR Rate Interest Period
for any LIBOR Rate Advance, the interest rate conclusively determined by the
Agent two (2) Business Days prior to the first day of such Interest Period (as
adjusted for any applicable reserve requirement applicable to "eurocurrency
liabilities" pursuant to Regulation D or any other applicable regulation of
the Board of Governors of the Federal Reserve System (or any successor) which
prescribes reserve requirements applicable to "eurocurrency liabilities" as
presently defined in Regulation D, or any eurocurrency funding) at which
deposits in immediately available funds in U.S. dollars are offered to the
Agent by prime banks in the interbank eurodollar market selected by the Agent
for delivery on the first day of such LIBOR
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Rate Interest Period (at such time as the Agent elects) in an amount equal to
the principal amount of the corresponding Advance outstanding on the first
day of such LIBOR Rate Interest Period, for a period equal to such LIBOR Rate
Interest Period.
"LIBOR RATE ADVANCE" is defined in SECTION 2.2 of this Agreement.
"LIBOR RATE INTEREST PERIOD" shall mean an Interest Period pertaining to
an Advance as to which the Applicable Rate during such Interest Period is
based upon the LIBOR Rate.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Revolving
Credit Notes, the Guaranty, the Letters of Credit, the Lease Assignments and
all other agreements, documents and instruments executed by any Loan Party
and, or in favor of, the Agent and/or any Bank in connection with or relating
to this Agreement or the Original Agreement or any of the transactions
contemplated hereunder or thereunder.
"LOAN PARTY" shall mean, individually and collectively, each of
Borrower, Guarantor and each Person which is a guarantor of any of the
Indebtedness or has granted or shall grant a lien on any Real Property as
collateral security for any of the Indebtedness.
"LONG TERM DEBT" shall mean, as of any applicable date of determination,
all Debt of Borrower and/or Guarantor which should be classified as "funded
indebtedness" or "long-term indebtedness" on a combined balance sheet of
Borrower and Guarantor prepared as of such date in accordance with GAAP,
together (without duplication) with the unpaid principal balance of the
Advances outstanding on such date.
"MAJORITY BANKS" shall mean, as of any applicable date of determination,
a Bank or Banks holding not less than sixty-six and two thirds percent (66%)
of the Overall Commitment Amount.
"MAXIMUM RATE" shall mean the maximum nonusurious interest rate, if any,
that at any time, or from time to time, may be contracted for, taken,
received, charged or received under applicable state or federal law.
"NET BOOK VALUE" shall mean, for any item of property or asset of
Borrower, the gross book value of such item of property or asset, minus the
accumulated depreciation attributable to such item of property or asset, as
determined in accordance with GAAP.
"NET INCOME" shall mean the net income (or loss) of a person for any
period determined in accordance with GAAP but excluding in any event:
(a) any gains or losses on the sale or other disposition, not in
the ordinary course of business, of investments, leases or fixed or
capital assets, and any taxes on the excluded gains and any tax
deductions or credits on account on any excluded losses; and
(b) net earnings of any Person in which Borrower and/or
Guarantor has an ownership interest, unless such net earnings shall have
actually been received by Borrower and/or Guarantor in the form of cash
distributions.
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"ORIGINAL NOTE" shall mean that certain Revolving Credit Note dated June
27, 1995, in the stated principal amount of $10,000,000, executed by Borrower
and payable to the order of Comerica, as amended, modified and restated by
that certain Amended and Restated Revolving Credit Note dated December 6,
1995, in the stated principal amount of $20,000,000, executed by Borrower and
payable to the order of Comerica, which note has been assigned by Comerica to
the Agent and the Banks pursuant to the Assignment Agreement.
"OVERALL COMMITMENT AMOUNT" shall mean $40,000,000; PROVIDED, HOWEVER,
that if Borrower reduces the Overall Commitment Amount from time to time under
SECTION 2.1.5 of this Agreement, the Overall Commitment Amount shall be deemed
to be such lesser amount.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any person
succeeding to the present powers and functions of the Pension Benefit Guaranty
Corporation.
"PERMITTED LIENS" shall mean:
(a) liens and encumbrances in favor of the Agent and/or the
Banks which secure the Indebtedness;
(b) liens for taxes, assessments or other governmental charges
incurred in the ordinary course of business and for which no interest,
late charge or penalty is attaching or which are being contested in good
faith by appropriate proceedings and, if requested by the Agent or any
of the Banks, bonded in an amount and manner satisfactory to the Bank;
(c) liens, not delinquent, created by statute in connection with
worker's compensation, unemployment insurance, social security and
similar statutory obligations;
(d) liens of mechanics, materialmen, carriers, warehousemen or
other like statutory or common law liens securing obligations (i)
incurred in good faith in the ordinary course of business that are not
yet due and payable or (ii) which Borrower has provided notice thereof
to the Agent and each of the Banks in accordance with SECTION 6.1.11 of
this Agreement and are being contested in good faith and by appropriate
and lawful proceedings diligently conducted and, if requested by the
Agent or any of the Banks, bonded in a manner satisfactory to the Bank;
(e) encumbrances consisting of existing or future zoning
restrictions, existing recorded rights-of-way, existing recorded
easements, existing recorded private restrictions or existing or future
public restrictions on the use of real property, none of which
materially impairs the use of such property in the operation of the
business for which it is used and none of which is violated in any
material respect by any existing or proposed structure or land use;
(f) liens affecting the fixtures and equipment located on any
Real Property of any Loan Party;
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(g) liens securing purchase money Debt of Borrower incurred by
Borrower on or after the date hereof in an aggregate amount not to
exceed $250,000; provided, however, such liens shall be permitted only
against the specific assets of Borrower purchased with the proceeds of
such purchase money Debt;
(h) liens upon Real Property which secure Qualifying
Non-Recourse Debt in an aggregate amount not to exceed $20,000,000;
(i) existing leases covering all or part of the ground upon
which the Real Property is situated and commercial leases entered into
after the date hereof in the ordinary course of Borrower's business for
the operation of commercial restaurants which leases are assigned to the
Agent and/or the Banks as part of the Collateral; and
(j) existing liens described on SCHEDULE 5.5 attached to this
Agreement.
"PERSON" OR "PERSON" shall mean any individual, corporation,
partnership, joint venture, association, trust, unincorporated association,
joint stock company, government, municipality, political subdivision or
agency, or other entity.
"PRIME RATE" shall mean that annual rate of interest designated by
Comerica as its prime rate, which rate may not be the lowest rate of interest
charged by Comerica to any of its customers, and which rate is changed by
Comerica from time to time, it being understood that Comerica may make
commercial loans and other loans at rates of interest at, above or below its
prime rate.
"PRIME RATE ADVANCE" is defined in SECTION 2.2(c) of this Agreement.
"PRO FORMA FIVE YEAR BANK DEBT AMORTIZATION" shall mean, as of any
applicable date of determination, for purposes of SECTION 6.7 of this
Agreement, a pro forma calculation of the monthly combined principal and
interest payment amounts that would be required to fully amortize the amount
of the aggregate unpaid principal amount of the Advances and the Letter of
Credit Exposure outstanding on the date of such determination, together with a
pro forma amount of interest thereon at the fixed rate per annum equal to the
Five Year Treasury Rate in effect on such date plus two hundred (200) basis
points, in equal combined monthly payments over the five-year period
commencing on such date.
"PRO FORMA TWENTY YEAR BANK DEBT AMORTIZATION" shall mean, as of any
applicable date of determination, for purposes of SECTION 6.7 of this
Agreement, a pro forma calculation of the monthly combined principal and
interest payment amounts that would be required to fully amortize the amount
of the aggregate unpaid principal amount of the Advances and the Letter of
Credit Exposure outstanding on the date of such determination, together with a
pro forma amount of interest thereon at the fixed rate per annum equal to the
Twenty Year Treasury Rate in effect on such date plus two hundred (200) basis
points, in equal combined monthly payments over the twenty-year period
commencing on such date.
"PRO RATA SHARE" means, as to any Bank, (A) in the case of Comerica
prior to the execution and delivery of a Bank Supplement, 50% (i.e., the
percentage obtained by dividing
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the Commitment Amount of Comerica in effect on the date hereof by the Overall
Commitment Amount), (B) in the case of Compass prior to the execution and
delivery of a Bank Supplement, 50% (i.e., the percentage obtained by dividing
the Commitment Amount of Compass in effect on the date hereof by the Overall
Commitment Amount), and (C) in the case of any Bank upon and after the
execution by such Bank of a Bank Supplement, the percentage obtained by
dividing such Bank's Commitment Amount by the Overall Commitment Amount.
"QUALIFYING NON-RECOURSE DEBT" shall mean any Debt of a Loan Party
incurred after the date hereof, in an aggregate amount not to exceed
$20,000,000, for the purpose of refinancing a portion of the Indebtedness, the
terms of which expressly provide that the holder of the agreements,
instruments and documents evidencing such Debt shall look solely to Real
Property which is then collateral for such debt, except that such Debt shall
be permitted to contain such recourse carve out provisions with respect to
reimbursement of costs and expenses to the lender thereunder arising from Loan
Party's failure to perform covenants thereunder (other than the covenants to
pay principal, interest and loan fees on such indebtedness) as are customary
on loans of that type.
"RCRA" shall mean the Resource Conservation and Recovery Act of 1976 (42
U.S.C. Sections 6901, ET SEQ.), as amended from time to time.
"REAL PROPERTY" of a Person shall mean all of the real property and
improvements of such Person, wherever located, now or hereafter owned or
occupied by any such Person or in which any such Person now or hereafter has
any rights, title or interest (including, but not limited to, an interest as
fee owner, ground lessee or other lessee).
"REVOLVING CREDIT NOTE" shall mean the promissory note conforming to
SECTION 2.1.2 of this Agreement and in the form and content of EXHIBIT "C" to
this Agreement.
"SUBORDINATED DEBT" shall mean indebtedness of Borrower which has been
subordinated to the Indebtedness pursuant to a subordination agreement in form
and content satisfactory to the Agent and the Majority Banks.
"SUBSIDIARY" means and includes any Person (a) which, directly or
indirectly, is under the control of Borrower, Guarantor and/or General
Partner, or (b) of which or in which Borrower, Guarantor and/or General
Partner (or any Subsidiary or Subsidiaries of any of them) owns directly or
indirectly 50% or more of (i) the combined voting power of all classes having
general voting power under ordinary circumstances to elect a majority of the
board of directors or equivalent body of such Persons, if it is a corporation,
(ii) the capital interest or profits interest of such Person, if it is a
partnership, joint venture or similar entity, or (iii) the beneficial interest
of such Person if it is a trust, business trust, association or other
unincorporated organization. For purposes of this definition, "control" with
respect to any Person shall mean possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
"TANGIBLE NET WORTH" shall mean, as of any applicable date of
determination, the excess of (a) the net book value of all assets of a person
(other than patents, patent rights,
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trademarks, trade names, franchises, copyrights, licenses, goodwill, and
similar intangible assets) after all appropriate deductions in accordance
with GAAP (including, without limitation, reserves for doubtful receivables,
obsolescence, depreciation and amortization), over (b) all Debt of such
person.
"TERMINATION DATE" shall mean the earlier of (a) June 27, 1998; or (b)
the date on which the Banks' commitments to make Advances are terminated by
Borrower pursuant to SECTION 2.1.5; or (c) the date on which any Bank's
commitment to make Advances is terminated pursuant to SECTION 9.2(a).
"TWENTY YEAR TREASURY RATE" shall mean, at any date of determination,
the yield which shall be imputed, by linear interpolation, from the current
weekly yield of those United States Treasury Notes having maturities of twenty
years from such date, as published in then-most recent Federal Reserve
Statement Release H.15(519) or any successor publication thereto.
"UCC" shall mean the Uniform Commercial Code as adopted and in force in
the State of Texas as from time to time amended or, if the creation,
perfection or enforcement of security interest against a fixture or other
personal property subject to the liens and security interests of the Agent
and/or any Bank is governed by the laws of a state other than Texas, the
Uniform Commercial Code in effect in such state, as the same may be amended
from time to time.
"WORKING CAPITAL" shall mean, as of any applicable date of
determination, Current Assets less Current Liabilities.
"WORKING CAPITAL ADVANCE" shall mean a loan the proceeds of which are
used by Borrower for the purposes described in clause (c) or clause (d) of
SECTION 2.16 of this Agreement.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
in this Agreement shall be construed in accordance with GAAP.
1.3 SINGULAR AND PLURAL. Where the context herein requires, the
singular number shall be deemed to include the plural, the masculine gender
shall include the feminine and neuter genders, and vice versa.
SECTION 2. CREDIT FACILITIES, INTEREST AND FEES
2.1 ADVANCES.
2.1.1 REVOLVING CREDIT COMMITMENT. Subject to the terms and
conditions of this Agreement, each Bank severally, and not jointly, agrees to
make loans (the "ADVANCES") to Borrower on a revolving basis in such amounts
as Borrower shall request pursuant to this SECTION 2.1 from time to time
during the period commencing on the date hereof, and continuing to and
including the Termination Date, on a pro rata basis in accordance with such
Bank's Pro Rata Share; PROVIDED that at no time shall (i) the sum of the
aggregate principal amount of Advances made by any Bank at such time
outstanding PLUS such Bank's Pro Rata Share at such
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time of the Letter of Credit Exposure exceed such Bank's Pro Rata Share of
the Overall Commitment Amount, as the Overall Commitment Amount may be
reduced pursuant to SECTION 2.1.5; and PROVIDED FURTHER, that (i) each
Disbursement Date under this Agreement must be a Business Day, (ii) the
principal amount of each Advance other than a LIBOR Rate Advance must be in
the minimum amount of $1,000 or, if greater, in integral multiples of $1,000,
and (iii) the principal amount of each LIBOR Rate Advance must be in the
minimum principal amount of $400,000 or, if greater, in integral multiples of
$50,000.
2.1.2 REVOLVING CREDIT NOTE. The Advances shall be evidenced by
the Revolving Credit Note, executed by Borrower, dated the date of this
Agreement, payable to Agent as agent for itself, Compass and each of the other
Banks on the Termination Date (unless sooner accelerated pursuant to the terms
of this Agreement or as therein provided), and in the stated principal amount
of the original Overall Commitment Amount.
2.1.3 MAKING THE ADVANCES.
(a) Each Advance shall be made, to the extent that a Bank is so
obligated under SECTION 2.1.1 of this Agreement, on written notice from
Borrower to the Agent and each Bank delivered before 10:00 A.M. (Dallas,
Texas time) on a Business Day which is at least three (3) Business Days
prior to the first day of the Interest Period for such Advance
specifying (i) the amount of such Advance (which amounts of Advances
shall be pro rata among the Banks in accordance with each Bank's Pro
Rata Share), (ii) the Advance Type thereof, (iii) the Interest Period
therefor (which Interest Period shall be the same for each Bank), (iv)
the selected interest rate applicable thereto (which interest rate shall
be the same for each Bank) pursuant to and in accordance with SECTION
2.2, (v) the deposit account (together with wire transfer instructions
of the Borrower) into which Borrower requests that the proceeds of such
Advance be sent in the case of an Advance in the form of a loan, and the
name and address of the beneficiary and other pertinent information in
the case of an Advance by Comerica issuing or guaranteeing a Letter of
Credit (such written notice to be substantially in the form of (A)
EXHIBIT B-1 attached hereto in the case of an Acquisition Advance, (B)
EXHIBIT B-2 attached hereto in the case of a Letter of Credit Advance,
and (C) EXHIBIT B-3 attached hereto in the case of a Working Capital
Advance, and in all cases in all respects in form and substance
satisfactory to Agent, and being hereinafter referred to as the
"BORROWING NOTICE"), and shall be accompanied by an Advance Compliance
Certificate which corresponds to the Advance Type of such Advance. In
the case of a proposed Borrowing comprised of LIBOR Rate Advances, the
Agent shall on the second Business Day before any LIBOR Rate Advance
notify each Bank of the interest rate applicable to such LIBOR Rate
Advance under SECTION 2.2 of this Agreement. Not later than 11:30 A.M.
(Dallas, Texas time) on the day of any Borrowing, each Bank will make
available for its account to the Agent at the Agent's Account, in same
day funds, such Bank's Pro Rata Share of such proposed Borrowing. After
the Agent's receipt of such funds and upon fulfillment of the applicable
conditions set forth in SECTION 4 of this Agreement, the Agent will make
such funds available to Borrower by delivering such funds to Borrower's
deposit account specified in such Borrowing Notice.
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(b) Each Borrowing Notice shall be irrevocable and binding on
Borrower and Borrower shall indemnify the Agent and each Bank against
any loss or expense incurred by it as a result of any failure to fulfill
on or before the date specified for such Advance the applicable
conditions set forth in Section 4 of this Agreement, including, without
limitation, any loss (including loss of anticipated profits) or expense
incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by the Agent or such Bank to fund such Advance when
such Advance, as a result of such failure, is not made on such date.
2.1.4 BANK OBLIGATIONS. The failure of any Bank to make any
Advance required to be made by it shall not relieve any other Bank of its
obligation, if any, under this Agreement to make any Advance required to be
made by it, but no Bank shall be responsible for the failure of any other Bank
to make any Advance required to be made by such other Bank. Furthermore, no
Bank shall be obligated to make any Advance to Borrower if:
(a) any of the conditions precedent set forth in SECTION 4 of
this Agreement shall not have been either satisfied by Borrower or
waived by such Bank in accordance with SECTION 11.4 of this Agreement,
or
(b) such proposed Advance would cause the aggregate sum of the
unpaid principal amount of the Advance outstanding plus the Letter of
Credit Exposure under this Agreement (or such Bank's Pro Rata Share
thereof) to exceed the Overall Commitment Amount (or such Bank's Pro
Rata Share thereof) on such Disbursement Date.
The failure of any Bank to make any Advance required to be made by it shall
not relieve any other Bank of its obligation, if any, under this Agreement to
make any Advance required to be made by it, but no Bank shall be responsible
or liable to Borrower or any Bank for the failure of any other Bank to make
any Advance required to be made by such other Bank.
2.1.5 TERMINATION OR REDUCTION IN OVERALL COMMITMENT AMOUNT BY
BORROWER. Borrower, at any time and from time to time (except as may
hereinafter be provided), upon at least five Business Days' prior written
notice received by the Agent and the Banks, may permanently terminate all but
not less than all of the Banks' commitments to make Advances under this
Agreement or permanently reduce the Overall Commitment Amount by an integral
multiple of $1,000,000. On the effective date of such termination or
reduction, Borrower shall pay to each Bank such Bank's Pro Rata Share, in the
case of a termination, of the aggregate unpaid principal amount of all
Advances, or, in the case of a reduction, the amount, if any, by which the
aggregate unpaid principal amount of all Advances exceeds then reduced Overall
Commitment Amount, together in each case with all interest accrued and unpaid
on the principal amounts so prepaid and, if such termination or reduction
occurs on or before July 31, 1996, the payment in full of the premium
described in SECTION 2.15 of this Agreement. The notice shall specify the
Termination Date of the reduced Overall Commitment Amount and the effective
date of the reduction, as the case may be. Borrower may not revoke any such
notice of termination or reduction without the prior written consent of the
Agent and the Majority Banks.
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2.2 REPAYMENT AND INTEREST.
(a) Borrower shall repay the aggregate unpaid principal amount
of all Advances of each Bank in accordance with the terms of a
promissory note of Borrower, in substantially the form of EXHIBIT C
hereto (the "REVOLVING CREDIT NOTE"), evidencing the indebtedness
resulting from such Advances and delivered to the Agent for the benefit
of the Banks pursuant to SECTION 4.1.1 or SECTION 11.11.
(b) The period between the date of each Advance and the date of
payment in full of such Advance shall be divided into successive
periods, each such period being an "INTEREST PERIOD" for such Advance.
Notwithstanding the duration of the applicable Interest Period, interest
on the unpaid amount of each Advance shall be due and payable in
accordance with SECTION 2.2(c) below and the other applicable provisions
of this Agreement. The initial Interest Period for each Advance shall
begin on the date of such Advance and end on the last day of such period
as selected by Borrower, and thereafter, each subsequent Interest Period
for such Advance shall begin on the last day of the immediately
preceding Interest Period for such Advance and end on the last day of
such period as selected by Borrower in accordance with the terms hereof.
The duration of each such Interest Period for each Prime Rate Advance
shall be one day, and the duration of each such LIBOR Interest Period
for a LIBOR Rate Advance shall be one (1), two (2), three (3), six (6)
or twelve (12) months, or such other period as Borrower may select and
the Agent and the Banks may agree to, in each case as Borrower shall
select; PROVIDED, HOWEVER, that:
(i) the duration of any Interest Period for any Advance
that commences before the repayment date for such Advance and
otherwise ends after such repayment date shall end on such
repayment date;
(ii) if Borrower fails to select any Advance to be a LIBOR
Rate Advance or a Prime Rate Advance, it shall be deemed to be a
Prime Rate Advance;
(iii) if Borrower fails to select the duration of any LIBOR
Rate Interest Period for a LIBOR Rate Advance, the duration of
such LIBOR Rate Interest Period shall be one month;
(iv) any LIBOR Interest Period which would otherwise end on
a day which is not a LIBOR Business Day shall be extended to the
next succeeding LIBOR Business Day (unless such LIBOR Business Day
falls in another calendar month, in which case such LIBOR Interest
Period shall end on the next preceding LIBOR Business Day);
(v) any LIBOR Interest Period which begins on the last
LIBOR Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at
the end of such LIBOR Interest Period) shall, subject to clause
(v) above, end on the last LIBOR Business Day of a calendar month;
and
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(vi) no Borrowing Notice shall specify a LIBOR Rate
Interest Period which shall end after the Termination Date.
(c) Borrower shall pay interest on the unpaid principal amount
of each Advance from the date of such Advance until such principal
amount is due, payable on the first day of each month, commencing on
March 1, 1996 and on the Termination Date, at an interest rate per annum
equal at all times during such Interest Period for such Advance to the
Applicable Rate (as defined below) or the Default Rate (as hereinafter
defined), as the case may be; PROVIDED, HOWEVER, that for any Advance
having an Interest Period less than one month, interest thereon shall be
due and payable on the last day of such Interest Period. The term
"APPLICABLE RATE", as used herein, shall mean an interest rate per annum
equal at all times during the Interest Period then applicable to such
Advance to whichever of the following rates is selected by Borrower:
(i) the Prime Rate in effect on the first day of such
Interest Period (such an Advance being referred to as a "PRIME
RATE ADVANCE"); or
(ii) one and eight-tenths percent (1.80%) PLUS the LIBOR
Rate in effect on the first day of such Interest Period (such an
Advance being referred to in this Agreement as a "LIBOR RATE
ADVANCE");
PROVIDED, HOWEVER, that if either a Bank is unable to acquire the funds
upon which the interest rate described in CLAUSE (ii) immediately above
is based for such Interest Period or the Borrower fails to select an
interest rate in accordance with the terms hereof, then the Applicable
Rate for such Interest Period will the Prime Rate in effect on the first
day of such Interest Period; and PROVIDED, FURTHER, HOWEVER, that in no
event shall the Applicable Rate exceed the Maximum Rate. All past due
principal and, to the extent permitted by applicable law, interest upon
the Advances shall bear interest, from the date such amount becomes due
to the date such amount is paid in full, at the Default Rate and shall
be due and payable upon demand. Each change in the interest rate
applicable to an Advance shall become effective without prior notice to
the undersigned automatically as of the opening of business on the date
of such change in the Prime Rate or the LIBOR Rate, as the case may be;
provided, that, the LIBOR Rate shall not change with respect to a LIBOR
Rate Advance during the corresponding LIBOR Interest Period applicable
thereto.
(d) Borrower shall not be permitted to repay any LIBOR Rate
Advance prior to the expiration of the corresponding LIBOR Interest
Period applicable thereto, unless (i) such repayment is specifically
required by the terms of this Agreement, (ii) the Majority Banks demand
that such repayment be made in accordance with this Agreement, or
(iii) the Majority Banks, in their sole discretion, consent to such
repayment. If for any reason any LIBOR Rate Advance is repaid prior to
the expiration of the corresponding LIBOR Interest Period applicable
thereto, Borrower shall pay to the Agent for the ratable benefit of the
Banks on demand any amounts required to compensate the Agent and/or the
Bank for any losses, costs, or expenses which it may incur as a result
of such repayment. A certificate of the Agent and/or the Banks claiming
compensation
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under this paragraph and setting forth the additional amount or
amounts to be paid to the Agent and/or the Bank hereunder shall be
conclusive in the absence of manifest error.
(e) In regards to any LIBOR Rate Advance, if the Agent
determines that deposits in U.S. dollars (in the applicable amounts) are
not being offered to the Agent in the interbank eurodollar market
selected by the Agent for the LIBOR Interest Period applicable to such
LIBOR Rate Advance, or that the rate at which such dollar deposits are
being offered will not adequately and fairly reflect the cost to the
Agent and/or any Bank of making or maintaining a LIBOR Rate Advance for
the applicable LIBOR Interest Period, the Agent shall forthwith give
notice thereof to the undersigned, whereupon until the Agent notifies
the undersigned that such circumstances no longer exist, (i) the right
of Borrower to select an interest rate based upon the LIBOR Rate shall
be suspended, and (ii) each LIBOR Rate Advance in effect shall thereupon
automatically be converted into a Prime Rate Advance in accordance with
the provisions hereof. If notice has been given by the Agent to
Borrower requiring a LIBOR Rate Advance to be repaid or converted, then
unless and until the Agent notifies Borrower that the circumstances
giving rise to such repayment or conversion no longer apply, the only
interest rate available to Borrower shall be a rate based upon the Prime
Rate. If the Agent notifies Borrower that the circumstances giving rise
to such repayment or conversion on longer apply, Borrower may thereafter
select an interest rate based upon the LIBOR Rate in accordance with the
terms of this Agreement.
(f) If at any time the rate of interest applicable to any
Advance, as computed on the basis of the "contract rate" defined and
specified in the Revolving Credit Note evidencing any Advance, would
exceed the Legal Rate, the interest payable under the Revolving Credit
Note shall be computed upon the basis of the Legal Rate, but any
subsequent reduction in such contract rate shall not reduce the
applicable interest rate thereafter applicable under the Revolving
Credit Note below the Legal Rate until the aggregate amount of interest
accrued and payable under the Revolving Credit Note as to the Advances
equals the total amount of interest which would have accrued if interest
on the Advances had been at all times computed solely on the basis of
such contract rate.
(g) No agreements, conditions, provisions or stipulations
contained in this Agreement or any other instrument, document or
agreement between Borrower and the Agent and/or any Bank or default of
Borrower, or the exercise by the Agent and/or any Bank of its respective
right to accelerate the payment of the maturity of principal and
interest or to exercise any option whatsoever contained in this
Agreement or any other agreement between Borrower and the Agent and/or
any Bank, or the arising of any contingency whatsoever, shall entitle
the Agent and/or any Bank to collect, in any event, interest exceeding
the Legal Rate and in no event shall Borrower be obligated to pay
interest exceeding such Legal Rate and all agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever
operate to bind, obligate or compel Borrower to pay a rate of interest
exceeding the Legal Rate, shall be without binding force or effect, at
law or in equity, to the extent only of the excess of interest over such
Legal Rate. In the event any interest is charged in excess of the Legal
Rate ("EXCESS"), Borrower acknowledges and stipulates that any such
charge shall be the result of an accident and bona fide error, and such
Excess shall be, first, applied to reduce the principal then unpaid
hereunder; second, applied to reduce the
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principal then unpaid hereunder; second, applied to reduce Indebtedness;
and third, returned to Borrower, it being the intention of the parties
hereto not to enter at any time into a usurious or otherwise illegal
relationship. Borrower recognizes that, with fluctuations in the rates
of interest provided for in the Revolving Credit Notes and the Legal
Rate, such an unintentional result could inadvertently occur. By the
execution of this Agreement, Borrower covenants that (a) the credit or
return of any Excess shall constitute the acceptance by Borrower of such
Excess, and (b) Borrower shall not seek or pursue any other remedy,
legal or equitable, against the Agent and/or any Bank, based in whole or
in part upon the charging or receiving of any interest in excess of the
maximum authorized by applicable law. For the purpose of determining
whether or not any Excess has been contracted for, charged or received
by the Agent and/or any Bank, all interest at any time contracted for,
charged or received by the Agent and/or such Bank in connection with
this Agreement shall be amortized, prorated, allocated and spread in
equal parts during the entire term of this Agreement. The provisions of
this SECTION 2.2(g) shall be deemed to be incorporated into every
document or communication relating to the Indebtedness which sets forth
or prescribes any account, right or claim or alleged account, right or
claim of the Agent and/or any Bank with respect to Borrower (or any
other obligor in respect of Indebtedness). All such documents and
communications and all figures set forth therein shall, for the sole
purpose of computing the extent of the Indebtedness and obligations of
Borrower (or other obligor) asserted by the Agent and/or any Bank
thereunder, be automatically recomputed by any Borrower or obligor, and
by any court considering the same, to give effect to the adjustments or
credits required by this SECTION 2.2(g).
2.3 MANDATORY PAYMENTS ON ADVANCES. Borrower shall pay to the Agent
for the ratable benefit of each Bank any amount by which the sum of the
aggregate unpaid principal amount of all Advances plus the Letter of Credit
Exposure from time to time exceeds the Overall Commitment Amount, together
with all interest accrued and unpaid on the amount of such excess. Such
payment shall be immediately due and owing WITHOUT NOTICE OR DEMAND upon the
occurrence of any such excess. Any mandatory prepayment under this SECTION
2.3 shall not reduce the Overall Commitment Amount.
2.4 OPTIONAL PREPAYMENTS ON ADVANCES. Borrower, at any time and from
time to time, may prepay the unpaid principal amount of the Advances in whole
or in part pro rata among the Banks based on each Bank's Pro Rata Share
without premium except as otherwise set forth in SECTION 2.2(d) of this
Agreement; PROVIDED, HOWEVER, that any optional prepayment of the Advances
made under this SECTION 2.4 shall not reduce the Overall Commitment Amount.
2.5 PREPARATION FEES. Upon demand of the Agent and/or any of the
Banks from time to time, Borrower shall pay to such Person the amount of the
reasonable expenses (including, without limitation, reasonable attorneys'
fees, whether of inside or outside counsel, and disbursements) incurred by
such Person from time to time in connection with the preparation of this
Agreement and related instruments and/or the making (or preparation for the
making) of advances hereunder.
2.6 UNUSED LINE FEE. Borrower shall pay to each Bank such Bank's Pro
Rata Share of the unused line fee for the period commencing on the date of
this Agreement to and including
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the Termination Date equal to one-quarter of one percent (0.25%) per annum on
the average daily excess of the Overall Commitment Amount over the aggregate
unpaid principal balance of the Advances plus the Letter of Credit Exposure.
Such unused line fee shall be payable on the first Business Day of each
January, April, July and October, beginning April 1, 1996 and on the
Termination Date, for the periods ending on such date.
2.7 ORIGINATION FEE. Borrower shall pay to Comerica (for its own
account and not for the ratable benefit of the Banks) simultaneously with the
execution of this Agreement an origination fee equal to $10,000 and shall pay
to Compass (for its own account and not for the ratable benefit of the Banks)
simultaneously with the execution of this Agreement an origination fee equal
to $20,000, which origination fees Borrower agrees shall be deemed fully
earned and nonrefundable upon the execution of this Agreement.
2.8 INCREASED COSTS.
(a) If either (i) the introduction of or any change (including,
without limitation, any change by way of imposition or increase of
reserve requirements) in or in the interpretation of any law or
regulation or (ii) the compliance by any Bank with any guideline or
request from any central bank or other governmental authority (whether
or not having the force of law), shall result in any increase in the
cost to any Bank of making, funding or maintaining any LIBOR Rate
Advance, then Borrower shall from time to time, upon demand by such
Bank, pay to such Bank additional amounts sufficient to indemnify such
Bank against such increased cost. A certificate as to the amount of
such increased cost, submitted to Borrower by such Bank, shall, in the
absence of manifest error, be conclusive and binding for all purposes.
(b) If either (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) compliance by any Bank
with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects
or would affect the amount of capital required or expected to be
maintained by any Bank and any Bank determines that the amount of such
capital, is increased by or based upon the existence of such Bank's
commitment to make LIBOR Advances hereunder and other commitments of
this type, then, upon demand by such Bank, Borrower shall immediately
pay to such Bank, from time to time as specified by such Bank,
additional amounts sufficient to compensate such Bank in the light of
such circumstances, to the extent that any Bank reasonably determines
such increase in capital to be allocable to the existence of such Bank's
commitment to lend hereunder. A certificate as to such amounts,
submitted to Borrower by such Bank, shall, in the absence of manifest
error, be conclusive and binding for all purposes.
2.9 LOCK BOX. Borrower shall cause all tenants of the Real Property
of any Loan Party to make payments to Borrower in care of a lock box account
to be established with the Agent prior to the initial Disbursement Date. The
Agent shall have sole access to such account. Borrower shall endorse to the
Agent and forthwith deliver to the Agent all payments which it receives from
its leased properties or arising from any other rights or interests of
Borrower therein, in the form received by Borrower, without commingling with
any funds belonging to Borrower. All payments so received by the Agent shall
be deposited in the account of
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Borrower, Account No. 7611017455, maintained at the Agent on the first
Business Day following the day of receipt by the Agent of such payment;
provided, however, at all times from and after the occurrence of an Event of
Default, all payments so received by the Agent shall be applied in payment of
the Indebtedness, first to the Agent on account of the Agent's costs and
expenses, then to the Lenders in accordance with their respective Pro Rata
Share of interest on the Indebtedness, then to the Lenders in accordance with
their respective Pro Rata Share of principal on the Advances and Letters of
Credit Exposure in such order as they may elect, and then to other
Indebtedness.
2.10 PAYMENTS AND COMPUTATIONS. All sums payable by Borrower to the
Agent and/or any Bank under this Agreement, the Revolving Credit Notes or the
other documents contemplated hereby shall be paid directly to such the Agent
for the benefit of itself, the Bank and Comerica, as the case may be, at the
Agent's address set forth SECTION 11.13 hereof in immediately available United
States funds, without set off, deduction or counterclaim. In its sole
discretion, the Agent and/or any of the Banks may charge any and all deposit
or other accounts (including, without limitation, an account evidenced by a
certificate of deposit) of Borrower with the Agent and/or any of the Banks for
all or a part of any Indebtedness then due; PROVIDED, HOWEVER, that this
authorization shall not affect Borrower's obligation to pay, when due, any
Indebtedness whether or not account balances are sufficient to pay amounts
due. All computations of interest accrued at the Applicable Rate (but not the
Maximum Rate) hereunder and under the Note and commitment fee hereunder shall
be made by each Bank on the basis of a year of 360 days for the actual number
of days (including the first day but excluding the last day) elapsed, and all
computations of interest accrued at the Maximum Rate shall be based upon a
year with 365 or 366 days, as appropriate). Whenever any payment to be made
hereunder or under the Note shall be stated to be due, or whenever the last
day of any Interest Period would otherwise occur, on a Business Day, such
payment may be made, and the last day of such Interest Period shall occur, on
the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest, commitment fee or
other fee, as the case may be
2.11 RECEIPT OF PAYMENTS. Any payment of the Indebtedness made by mail
will be deemed tendered and received only upon actual receipt by the Agent or
a Bank as the case may be, at the address designated for such payment, whether
or not the Agent or such Bank has authorized payment by mail or any other
manner, and shall not be deemed to have been made in a timely manner unless
received on the date due for such payment, time being of the essence.
Borrower expressly assumes all risks of loss or liability resulting from
non-delivery or delay of delivery of any item of payment transmitted by mail
or in any other manner. Acceptance by the Agent or any Bank of any payment in
an amount less than the amount then due shall be deemed an acceptance on
account only, and the failure to pay the entire amount then due shall be and
continue to be an Event of Default, and at any time thereafter and until the
entire amount then due has been paid, such Person shall be entitled to
exercise any and all rights conferred upon it herein upon the occurrence of an
Event of Default. Borrower waives the right to direct the application of any
and all payments at any time or times hereafter received by the Agent or any
Bank from or on behalf of Borrower. Prior to the occurrence of a Default,
payments made by Borrower shall be applied by the Agent and each Bank, as the
case may be, as specified by Borrower. After the occurrence and during the
continuance of a Default, Borrower agrees that the Agent and each of the Banks
shall have the continuing exclusive right to apply and to reapply
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any and all payments received at any time or times hereafter against the
Indebtedness in such manner as each of them may deem advisable,
notwithstanding any entry by any of them upon any of its books and records.
Borrower expressly agrees that to the extent that the Agent or any of the
Banks receives any payment or benefit and such payment or benefit, or any
part thereof, is subsequently invalidated, declared to be fraudulent or
preferential, set aside or is required to be repaid to a trustee, receiver,
or any other party under any bankruptcy act, state or federal law, common law
or equitable cause, then to the extent of such payment or benefit, the
Indebtedness or part thereof intended to be satisfied shall be revived and
continued in full force and effect as if such payment or benefit had not been
made and, further, any such repayment by the Agent or any of the Banks, to
the extent that it did not directly receive a corresponding cash payment,
shall be added to and be additional Indebtedness payable upon demand by it.
2.12 RECORDATION OF AMOUNTS DUE. The date and amount of each Advance
is made by the Agent or each of the Banks, as the case may be, and of each
repayment of principal and interest thereon received by each of them, may be
recorded by each of them in its respective records. The aggregate unpaid
amount so recorded by the Agent or any such Bank shall constitute prima facie
evidence of the amount owing and unpaid on the Indebtedness; PROVIDED,
HOWEVER, that the failure by the Agent or any Bank so to record any such
amount or any error in so recording any such amount shall neither increase nor
limit Borrower's obligations under this Agreement or the Revolving Credit Note
to repay the principal amount of all the Advances and Letter of Credit
Exposure together with all interest accrued or accruing thereon.
2.13 ALL INDEBTEDNESS AT OPTION OF THE BANK BECOMES DUE AND PAYABLE ON
TERMINATION DATE. Notwithstanding anything in this Agreement or in Revolving
Credit Note to the contrary, the Agent and each of the Banks shall have the
sole option, upon the Termination Date, to require payment in full of all
Indebtedness owing to it, including, without limitation, payment in full of
all Advances and, if such the Termination Date occurs on or before June 30,
1996, such Bank's Pro Rata Share of the fee described in SECTION 2.15.
2.14 LETTERS OF CREDIT.
(a) If requested to do so by Borrower, Comerica, in its
individual capacity as a Bank (and not in its capacity as Agent), may,
IN COMERICA'S SOLE DISCRETION, issue or confirm Letters of Credit;
PROVIDED HOWEVER that (i) in no event shall the aggregate amount of
Letter of Credit Exposure at any time outstanding exceed $1,500,000.00
and (ii) Borrower shall be required to satisfy the conditions specified
in SECTION 4.2.2(b) of this Agreement in connection therewith. Each
Letter of Credit shall have an expiration date that occurs on or before
the earliest of (A) the Termination Date, or (B) the date which is three
hundred sixty four (364) days immediately following the date of issuance
or confirmation of such Letter of Credit. Each Letter of Credit shall be
payable in dollars. Borrower will immediately and unconditionally pay
to Agent for the benefit of the Banks the amount of each payment made
under each Letter of Credit. All amounts paid under a Letter of Credit
shall, immediately upon the making of such payment and without the
necessity of further act or evidence, constitute Advances and the Banks
shall be entitled to all of the benefits of this Agreement and the other
Loan Documents with respect thereto.
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(b) In addition, Borrower also shall, in consideration of the
issuance or confirmation of each Letter of Credit and in addition to
other charges payable by Borrower under this Agreement, (i) pay to
Comerica, for Comerica's own account and not for the ratable benefit of
the Banks, at the time of the issuance or confirmation of such Letter of
Credit, the amount of all fees and expenses incurred by Comerica in
connection with the issuance of, or paid by Comerica in connection with
the issuance of, such Letter of Credit, plus (ii) pay to the Agent, for
the ratable benefit of the Banks in connection with each issuance or
confirmation of each Letter of Credit or amendment thereto issued or
confirmed, a fee equal to one percent (1.0%) per annum of the face
amount of each Letter of Credit or Letter of Credit amendment issued or
confirmed (the "LETTER OF CREDIT COMMISSION"). The Letter of Credit
Commission shall be paid to the Agent at the end of each calendar
quarter during which such Letter of Credit is outstanding, and, to the
extent that such amounts remain owing and unpaid, on the Termination
Date. In addition, upon the happening and during the continuance of any
Default or Event of Default, the Letter of Credit Commission shall be
one percent (1.0%) per annum in excess of the Letter of Credit
Commission which would otherwise be payable.
(c) At any time an Event of Default has occurred and is
continuing and at anytime from and after the Termination Date, Borrower
shall deliver to the Agent for the benefit of the Banks with respect to
the Letter of Credit Exposure, within one Business Day following the
Agent's or any of the Bank's request therefor, cash collateral or United
States treasury bills in an amount equal to the aggregate Letter of
Credit Exposure pertaining to all Letters of Credit (plus the projected
amount of all fees associated therewith).
(d) Borrower assumes all risks of the acts or omissions of the
beneficiary with respect to its use of any Letter of Credit. Neither
Comerica, the Agent nor any Bank shall be responsible: for the
validity, or genuineness of certificates or other documents delivered
under or in connection with such Letter of Credit, even if such
certificates or other documents should in fact prove to be invalid,
fraudulent or forged; for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph,
wireless, facsimile or otherwise, whether or not they be in code; for
errors in translation or for errors in interpretation of technical
terms; for any failure or inability by Comerica or anyone else to
perform in accordance with foreign laws, customs or regulations or by
reason of any control or restriction rightfully or wrongfully exercised
by any government or group asserting or exercising governmental or
paramount powers; or for any other consequences arising from causes
beyond Comerica's control; and none of the above shall affect, impair or
prevent the vesting of any of the rights or powers of Comerica
hereunder. In furtherance and not in limitation of the above provisions
of this SUBSECTION (D), Borrower agrees that Comerica may accept
certificates or other documents that appear on their face to be in
order, without responsibility for further investigation, regardless of
any notice or information to the contrary and furthermore, Borrower
agrees that any action, inaction or omission taken or suffered by
Comerica in good faith in connection with any Letter of Credit, or
related drafts, certificates or other documents, shall be binding on
Borrower and shall not result in any liability of Comerica to Borrower.
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(e) Notwithstanding anything in this Agreement to the contrary,
the parties hereto agree that automatically upon the issuance or
confirmation by Comerica of a Letter of Credit, each other Bank shall be
deemed to have purchased a participation equal to such Bank's Pro Rata
Share in such Letter of Credit, and, upon written demand by Comerica
following a draw on such Letter of Credit, with a copy of such demand to
Agent, each other Bank shall purchase from Comerica, directly and not as
a participation, and Comerica shall sell and assign to each such other
Bank, such Bank's Pro Rata Share of the Advance resulting from such
draw, as of the date of such purchase, by such Bank depositing in
Agent's account in Dallas, Texas, or such other place as shall be
designated by Agent, for the benefit of Comerica, in same day funds in
United States dollars, an amount equal to the portion of such Advance
purchased by such Bank. Such payment shall be made by such Bank on the
Business Day on which demand therefor is made by Comerica, provided
notice of such demand is given not later than 2:00 p.m. (Dallas, Texas
time) on such Business Day, or the first Business Day next succeeding
such demand if notice of such demand is given after such time. Borrower
hereby agrees to each participation, sale and assignment pursuant to
this SUBSECTION (E). Upon the purchase by a Bank from Comerica of a
participation and/or Advance described in this SUBSECTION (E), such Bank
shall be entitled on a pro rata basis to the extent of such purchase to
the same rights and benefits under this Agreement relating to such
Letters of Credit and Advances resulting from draws on such Letters of
Credit as to which Comerica is entitled including, without limitation,
the rights to any collateral or security for such Letters of Credit as
provided in this Agreement. At the request of Comerica, each other Bank
agrees to execute such additional agreements, documents and instruments
as Comerica or its counsel may from time to time reasonably require to
further evidence the agreements of such other Banks to the provisions of
this SUBSECTION (E).
2.15 FEE PAYABLE IN THE EVENT OF TERMINATION ON OR BEFORE JUNE 30,
1996. In the event that the Termination Date occurs on or before June 30, 1996
for any reason or the Overall Commitment Amount shall have been reduced or
terminated by Borrower or any Bank for any reason (except, in the case of a
Bank, in violation of the Agreement) on or before June 30, 1996, or any Bank
shall have terminated its commitment under this Agreement to make Advances
(including, but not limited to, a termination by any Bank under SECTION 9.2 of
this Agreement upon the occurrence of an Event of Default), in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of each Bank's
lost profit and damages as a result thereof, Borrower agrees to pay to each of
the Bank's, upon the earlier of the Termination Date or the effective date of
any such termination or reduction of the Overall Commitment Amount, an early
termination fee in the amount of such Bank's Pro Rata Share of (a) $100,000 if
such reduction or termination is on or before April 1, 1996, or (b) $50,000 if
such reduction or termination is after April 1, 1996 and before June 30, 1996;
PROVIDED, HOWEVER, that such fee shall not be payable if the occurrence of the
Termination Date or the termination or reduction of the Commitment Amount
shall have been the direct result of replacement or substitute financing in
the amount of $40,000,000 or more in the aggregate by Comerica (either alone
or in conjunction with one or more of the other Banks under the same financing
facility), or if Comerica (either alone or in conjunction with one or more of
the other Banks under the same financing facility) fails to offer replacement
or substitute financing in the amount of $40,000,000 or more in the aggregate
to Borrower on or before June 30, 1996, it being understood and agreed by the
parties
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that neither Comerica, the Agent nor any of the Banks is under any obligation
to provide such a replacement or substitute financing (either alone or in
conjunction with one or more of the other the Banks), and that any such
replacement or substitute financing shall be at the sole option of each of
them.
2.16 USE OF PROCEEDS. The Advances and the Letters of Credit and the
proceeds of the foregoing shall be used by Borrower solely for the purposes of
(a) acquiring commercial restaurant properties (and any properties adjacent to
the restaurant properties that are essential to the acquisition or operation
of such restaurant properties and, for properties acquired after the date
hereof, have a cost of less than $50,000 for any single restaurant property or
$200,000 for all restaurant properties), (b) the issuance and funding of
standby Letters of Credit and (c) to the extent of $3,000,000 in the aggregate
outstanding at any time (i) advances to Borrower's tenants for the purposes
permitted under SECTION 7.5 of this Agreement and (ii) other working capital
purposes of Borrower. From time to time and upon the Bank's request, Borrower
shall furnish to the Agent evidence satisfactory to the Agent that such
proceeds are being used according to the terms of this SECTION 2.16.
2.17 PRO RATA ADVANCES AND LETTER OF CREDIT EXPOSURE. The Borrower and
the Banks acknowledge and agree that all Advances made and Letter of Credit
Exposure incurred on or after the date hereof, and all increases and decreases
thereof, are to be made and incurred pro rata by the Banks in accordance with
such Bank's Pro Rata Share (or in such other manner as the Banks among
themselves may agree from time to time); and each Bank's actual outstanding
Advance and Letter of Credit Exposure shall be adjusted from time to time by
each Bank purchasing or selling at par from or to the other Banks, as the case
may be, simultaneously with each such increase or decrease, such that each
Bank's position in each shall at all times be pro rata in accordance with such
Bank's Pro Rata Share. Notwithstanding the foregoing provisions of this
SECTION 2.17, in the event that from time to time a Bank does not make an
Advance of all or a portion of an amount under SECTION 2 of this Agreement,
for any reason other than as a result of the existence of an Event of Default
or otherwise (an "UNFUNDED AMOUNT"), each Bank shall have the right (but not
the obligation) for its individual own account, at its option, in the exercise
of its sole discretion, to advance or incur all or a portion of such Unfunded
Amount; and if any Event of Default occurs or exists during any period when an
Unfunded Amount advanced or incurred by a Bank is outstanding, then payments
by the Borrower during such period shall be applied first, to repayment of
such outstanding Unfunded Amount advanced or incurred by such Bank, and next
to the other Advances of each Bank outstanding based upon each Bank's Pro Rata
Share.
2.18 ADMINISTRATIVE FEE. Borrower agrees to pay to the Agent, for the
Agent's own and sole account and not for the account of the Banks, an
administrative fee in an amount determined from time to time by the Agreement
of Borrower and the Agent and set forth in a separate letter agreement between
Borrower and the Agent. Each administrative fee shall be deemed fully earned
and non-refundable on the due date thereof.
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SECTION 3. SECURITY
3.1 GENERAL. To secure full and timely performance of Borrower's
covenants set out in this Agreement and to secure the repayment of the
Revolving Credit Note, all of the Advances and all other Indebtedness,
Borrower, hereby grants and assigns to the Agent and the Banks, and hereby
agrees to grant and assign and cause each Loan Party and each general partner
or Subsidiary of any of them to grant and assign to the Agent and the Banks a
lien upon, and security interest in, the Collateral and all other commercial
restaurant locations and other Real Property of Borrower or Guarantor, or any
general partner or Subsidiary of any of them, now or hereafter owned or leased
by such Person pursuant to the Lease Assignments, the Financing Statements and
such other agreements, documents and instruments as the Agent shall from time
to time require. Borrower hereby ratifies and affirms any and all Lease
Assignments, Financing Statements and other agreements, documents and
instruments executed by Borrower or any other Loan Party on or before the date
of this Agreement, agrees that the same shall continue in full force and
effect, and agrees that the same are the legal, valid and binding obligations
of Borrower or such other Loan Party, as the case may be, enforceable against
Borrower or such other Loan Party, as the case may be, in accordance with
their respective terms, and that all such existing Lease Assignments,
Financing Statements and other agreements, documents and instruments shall
secure the Indebtedness as defined herein, and not just as defined in the
Original Agreement, and that upon request each Loan Party, and any general
partner or Subsidiary of any of them, will execute all documentation
reasonably requested by the Agent and/or the Majority Banks to evidence the
same. The Collateral shall also include such personalty and fixtures of
Borrower and Guarantor, and each general partner or Subsidiary of any of them,
as are at any time now or hereafter located on any Real Property described
above. Borrower shall, and shall cause each Loan Party, and each general
partner or Subsidiary thereof, to execute and deliver such documents as the
Agent and/or the Banks shall require to confirm the existing liens, mortgages
and Lease Assignments and the addition of Compass and the other Banks as
beneficiaries under any recorded Lease Assignment.
3.2 SPECIAL TREATMENT OF QUALIFYING NON-RECOURSE DEBT FINANCINGS. As
long as there has not occurred or then exist a Default or Event of Default,
and no Default or Event of Default would occur or exist as a result thereof,
Borrower and the other Loan Parties shall be permitted to grant mortgages on
Real Property as collateral for Qualifying Non-Recourse Debt in an amount
which does not exceed $20,000,000 in the aggregate at any time outstanding
(but only to the extent of such Qualifying Non-Recourse Debt) for the purpose
of refinancing a portion of the Indebtedness provided that (i) the aggregate
fair market value of all Real Property encumbered by the liens and security
interests which secure such Qualifying Non-Recourse Debt does not exceed two
hundred percent (200%) of the aggregate amount of such Qualifying Non-Recourse
Debt and (ii) all of the proceeds of such Qualifying Non-Recourse Debt are
paid to the Agent for the ratable benefit of the Banks in payment of Advances
and Letter of Credit Exposure then outstanding, and the Agent and the Banks
agree that they will subordinate the lien of the Lease Assignment covering the
same to the lien of such mortgagee on such terms as are reasonable and
customary in non-recourse financings of real property.
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SECTION 4. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE AGENT
AND THE BANKS
4.1 CONDITIONS TO FIRST DISBURSEMENT. The obligations of the Agent
and each of the Banks under this Agreement are subject to the occurrence,
prior to or upon the date hereof, of each of the following conditions:
4.1.1 DOCUMENTS EXECUTED AND FILED. Borrower shall have executed
(or caused to be executed) and delivered to the Agent and, as appropriate,
there shall have been filed or recorded with such filing or recording offices
as the Agent or any of the Banks shall deem appropriate, the following:
(a) the Revolving Credit Notes;
(b) the Financing Statements;
(c) the Lease Assignments;
(d) the Guaranty;
(e) landlord and mortgagee waivers and/or estoppel certificates
with respect to all Real Property where any of the lease agreements,
instruments and other documents evidencing the Collateral (or copies of
such lease agreements, instruments and documents) or any of Borrower's
books and records are located, all in form and substance reasonably
satisfactory to the Majority Bank;
(f) true and correct copies of all leases evidencing any Loan
Party's Real Property consisting of a lessee's leasehold interest (e.g.,
ground leases);
(g) true and correct copies of all leases evidencing any Loan
Party's Real Property consisting of a lessor's leasehold interests
(e.g., commercial restaurant franchisee tenant leases); and
(h) such other documents and instruments as the Agent or any of
the Banks shall reasonably require.
4.1.2 CERTIFIED RESOLUTIONS. Borrower shall have furnished to
the Agent a certified copy of resolutions of the partners of Borrower
authorizing the execution, delivery and performance of this Agreement, the
borrowing hereunder, the Revolving Credit Notes and any other documents
contemplated by this Agreement, which shall have been certified by the General
Partner as of the Disbursement Date first occurring as being complete,
accurate and in effect. General Partner shall have furnished to the Agent a
copy of resolutions of the Board of Directors of General Partner authorizing
the execution, delivery and performance of this Agreement, the borrowing
hereunder, the Revolving Credit Notes and any other documents contemplated by
this Agreement, which shall have been certified by the Secretary or Assistant
Secretary of General Partner as of the Disbursement Date first occurring as
being complete, accurate and in effect. Guarantor shall have furnished to the
Agent a copy of resolutions of the partners of Guarantor
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authorizing the execution, delivery and performance of the Guaranty and any
other documents contemplated by this Agreement to be executed, delivered or
performed by Guarantor, which shall have been certified by the general
partner of Guarantor as of the Disbursement Date first occurring as being
complete, accurate and in effect. The general partner of Guarantor shall
have furnished to the Agent a copy of resolutions of the Board of Directors
of General Partner authorizing the execution, delivery and performance of the
Guaranty and any other documents contemplated by this Agreement to be
executed, delivered or performed by Guarantor, which shall have been
certified by the Secretary of Assistant Secretary of the general partner of
Guarantor as of the Disbursement Date first occurring as being complete,
accurate and in effect.
4.1.3 CERTIFIED ARTICLES/LIMITED PARTNERSHIP CERTIFICATE.
Borrower shall have furnished to the Agent a copy of the Certificate of
Limited Partnership and all other documents required to be filed by Borrower
to create a limited partnership, including all amendments thereto and
restatements thereof, all of which shall have been certified by the Delaware
Secretary of State or other appropriate filing office as of a date within 30
days of the Disbursement Date first occurring. General Partner shall have
furnished to the Agent a copy of the Articles of Incorporation including all
amendments thereto and restatements thereof, and all other charter documents
of General Partner, all of which shall have been certified by the Delaware
Secretary of State as of a date within 30 days of the Disbursement Date first
occurring. Guarantor shall have furnished to the Agent a copy of the
Certificate of Limited Partnership and all other documents required to be
filed by Guarantor to create a limited partnership, including all amendments
thereto and restatements thereof, all of which shall have been certified by
the Delaware Secretary of State or other appropriate filing office as of a
date within 30 days of the Disbursement Date first occurring. The general
partner of Guarantor shall have furnished to the Agent a copy of the Articles
of Incorporation including all amendments thereto and restatements thereof,
and all other charter documents of the general partner of Guarantor, all of
which shall have been certified by the Delaware Secretary of State as of a
date within 30 days of the Disbursement Date first occurring.
4.1.4 CERTIFIED BYLAWS/LIMITED PARTNERSHIP AGREEMENT. Borrower
shall have furnished to the Agent a copy of the limited partnership agreement
of Borrower, including all amendments thereto and restatements thereof, which
shall have been certified to by the General Partner as of the Disbursement
Date first occurring as being complete, accurate and in effect. General
Partner shall have furnished to the Agent a copy of the Bylaws of General
Partner, including all amendments thereto and restatements thereof, which
shall have been certified by the Secretary or Assistant Secretary of General
Partner as of the Disbursement Date first occurring as being complete,
accurate and in effect. Guarantor shall have furnished to the Agent a copy of
the limited partnership agreement of Guarantor, including all amendments
thereto and restatements thereof, which shall have been certified to by the
General Partner as of the Disbursement Date first occurring as being complete,
accurate and in effect. The general partner of Guarantor shall have furnished
to the Agent a copy of the Bylaws of the general partner of Guarantor,
including all amendments thereto, which shall have been certified by the
Secretary or Assistant Secretary of the general partner of Guarantor as of the
Disbursement Date first occurring as being complete, accurate and in effect.
4.1.5 CERTIFICATE OF GOOD STANDING. Borrower, Guarantor, General
Partner and the general partner of Guarantor each shall have furnished to the
Agent a certificate of good
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standing with respect to it, which shall have been certified by the Delaware
Secretary of State, together with evidence of such Person's authority to do
business in the State of Texas, as of a date within 30 days of the initial
Disbursement Date.
4.1.6 CERTIFICATE OF INCUMBENCY. General Partner and the general
partner of Guarantor each shall have furnished to the Agent a certificate of
the Secretary or Assistant Secretary of it, certified as of the Disbursement
Date first occurring, as to the incumbency and signatures of the officers of
it signing this Agreement, the Revolving Credit Notes, the Lease Assignments,
the Guaranty and any documents contemplated or delivered under this Agreement
on behalf of itself, Borrower and/or Guarantor.
4.1.7 OPINION OF COUNSEL. Borrower shall have furnished to the
Agent and each of the Banks the favorable written opinion of legal counsel to
Borrower, General Partner, Guarantor and the general partner of Guarantor,
dated as of the initial Disbursement Date, in form and content as set forth in
EXHIBIT "E" to this Agreement and containing such other or additional opinions
as may be requested by the Agent or any of the Banks.
4.1.8 UCC LIEN SEARCHES. The Agent shall have received UCC
filing and record searches of the names of each Loan Party from all applicable
recording and filing offices, and such searches shall disclose no notice of
any liens or encumbrances filed against any of the Collateral other than the
Financing Statements or Permitted Liens. If such searches disclose any liens
or encumbrances other than the Financing Statements or Permitted Liens,
Borrower shall have furnished the Agent with such releases, modifications, or
assignments thereof as shall be required by the Agent or any of the Banks, in
form and content satisfactory to the Bank.
4.1.9 INSURANCE. Borrower shall have furnished to the Agent, in
form, content and amounts and with companies satisfactory to the Agent and
each of the Banks in accordance with Section 6.2 hereof, copies of the
insurance policies described in Section 6.2 hereof.
4.1.10 FINANCIAL AND OTHER INFORMATION. Borrower shall have
furnished to the Agent and each Bank its current financial statements, agings,
reports and certificates set forth in SECTION 6.1.1 through SECTION 6.1.9.
4.1.11 LEASES. Borrower shall have furnished to the Agent
copies of all leases of Real Property and a legal description of the Real
Property covered thereby, together with all other information reasonably
requested by the Agent or any of the Banks relating to such leases which may
be necessary or desirable by the Agent or any of the Banks for the preparation
or recordation of the Lease Assignments.
4.2 CONDITIONS TO ALL DISBURSEMENTS. The obligations of any of the
Banks to make any Advance on any Disbursement Date, including, but not limited
to, the initial Disbursement Date, are subject to the occurrence, prior to or
on the Disbursement Date related to such Advance, of each of the following
conditions:
4.2.1 GENERAL COMPLIANCE CERTIFICATE. The Agent and each Bank
shall have received on or before the third day preceding such Disbursement
Date a General Compliance Certificate, executed by the chief executive or
chief financial officer of General Partner on
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behalf of Borrower, certified as of such Disbursement Date and confirming
that as of such Disbursement Date:
(a) no Default or Event of Default has occurred and is
continuing, or would result from the making of the proposed Advance; and
(b) the warranties and representations set forth in SECTION 5 of
this Agreement are true and correct on and as of such Disbursement Date.
4.2.2 BORROWING NOTICES AND ADVANCE COMPLIANCE CERTIFICATES. The
Agent and each Bank shall have received each of the following, duly completed
and executed by the chief executive officer or chief financial officer of
General Partner on behalf of Borrower and certified as of such Disbursement
Date:
(a) in the case of an Acquisition Advance, a Borrowing Notice in
the form of EXHIBIT B-1 attached hereto and an Advance Compliance
Certificate in the form of EXHIBIT A-1 attached hereto, together with
(i) Lease Assignments, (ii) a current property summary report of all
Real Property of all Loan Parties and each general partner or Subsidiary
thereof, (iii) mortgagee/lender title commitments which satisfy the
requirements of SECTION 6.13 and SECTION 6.14 of this Agreement, and
with respect to which all costs of policy issuance have been paid by
Borrower (or other Loan Party), (iv) copies of all leases pertaining to
such Real Property, (v) copies of owner title commitments, (vi) pro
forma closing statements, (vii) the "flood hazard area" certificates or
evidence of flood insurance, as the case may be, with respect to such
property or interest described in SECTION 6.13 of this Agreement, (viii)
evidence of casualty, liability and other insurance required under
SECTION 6.2 of this Agreement with respect to such Real Property or
required under any lease on such Real Property, (ix) the cover sheet of
the environmental site assessment pertaining to such Real Property which
identifies such Real Property and sets forth the conclusion and/or
executive summary of such report, and (x) all other agreements,
documents and instruments required by the Agent or any Bank to create,
evidence or perfect the lien and security interest of the Agent for the
benefit of the Banks on the Real Property which is to be acquired with
the proceeds of such Acquisition Advance as Collateral for the
Indebtedness;
(b) in the case of a Letter of Credit Advance, a Borrowing
Notice in the form of EXHIBIT B-2 attached hereto and an Advance
Compliance Certificate in the form of EXHIBIT A-2 attached hereto; and
(c) in the case of a Working Capital Advance, a Borrowing Notice
in the form of EXHIBIT B-3 attached hereto and an Advance Compliance
Certificate in the form of EXHIBIT A-3 attached hereto.
4.2.3 BANK SATISFACTION. Each Bank shall not know or have any
reason to believe that, as of such Disbursement Date:
(a) any Default or Event of Default has occurred and is
continuing;
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(b) any warranty or representation set forth in SECTION 5 of
this Agreement shall not be true and correct; or
(c) any provision of law, any order of any court or other agency
of government on any regulation, rule or interpretation thereof shall
have had any material adverse effect on the validity or enforceability
of this Agreement, the Revolving Credit Note, the Security Agreements,
the Lease Assignment, the Financing Statements, the Pledge Agreement or
the other documents contemplated hereby.
4.2.4 APPROVAL OF LEGAL MATTERS. All actions, proceedings,
instruments and documents required to carry out the transactions contemplated
by this Agreement or incidental thereto and all other related legal matters
shall have been satisfactory to the Agent and each of the Banks and, if
desired by the Bank at its sole option, satisfactory to and approved by legal
counsel for the Agent and each of the Banks (and said counsel shall have been
furnished with such certified copies of actions and proceedings and such other
instruments and documents as they shall have reasonably requested).
SECTION 5. WARRANTIES AND REPRESENTATIONS
From the date of this Agreement until the later of (a) the Termination
Date or (b) when the Indebtedness is paid in full, Borrower has performed all
its obligations hereunder and all commitments and other obligations of the
Agent and of the Banks under the Loan Documents have terminated, Borrower
represents and warrants to the Agent and each of the Banks that:
5.1 CORPORATE EXISTENCE AND POWER. (a) Borrower is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware and is qualified to transact business as a
foreign limited partnership in and is in good standing under the laws of each
jurisdiction in which the failure to so qualify could reasonably be expected
to have a material adverse effect on the business or operations (financial or
otherwise) of Borrower; (b) General Partner is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is qualified to transact business as a foreign business as a foreign
corporation in and is in good standing under the laws of each jurisdiction in
which the failure to so qualify could reasonably be expected to have a
material adverse effect on the business or operations (financial or otherwise)
of General Partner; (c) Guarantor is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is qualified to transact business as a foreign limited partnership in and
is in good standing under the laws of each jurisdiction in which the failure
to so qualify could reasonably be expected to have a material adverse effect
on the business or operations (financial or otherwise) of Guarantor; (d)
Borrower, General Partner and Guarantor each has the power and authority to
own its properties and assets and to carry out its business as now being
conducted and is qualified to do business and in good standing in every
jurisdiction wherein such qualification is necessary; (e) Borrower, and
General Partner on behalf of Borrower, have the power and
authority to execute, deliver and perform this Agreement, to borrow money in
accordance with its terms, to execute, deliver and perform the Revolving
Credit Notes and all other documents contemplated hereby, to grant to the
Agent and the Bank liens and security interests in the Collateral as herein
contemplated and to do any and all other things required of it herein; and
(f) Guarantor, and its general partner on behalf of Guarantor, have the power
and
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authority to execute, deliver and perform the Guaranty and each of the
other documents to which it is a party in accordance with their respective
terms, and to do any and all other things required of it thereunder.
5.2 AUTHORIZATION AND APPROVALS. The execution, delivery and
performance of this Agreement, the borrowings hereunder and the execution,
delivery and performance of the Revolving Credit Notes, the Lease Assignments,
the Financing Statements and other documents contemplated hereby (a) have been
duly authorized by all requisite partnership action of Borrower and corporate
action of General Partner; (b) except for the filing and recording of the
Financing Statements and the Lease Assignments in the appropriate UCC records
and real property records specified on SCHEDULE 5.2 attached hereto, do not
require registration with or consent or approval of, or other action by, any
federal, state or other governmental authority or regulatory body, or, if such
registration, consent or approval is required, the same has been obtained and
disclosed in writing to the Agent and the Banks; (c) will not violate any
provision of law, any order of any court or other agency of government, the
Articles of Incorporation or Bylaws of General Partner, the partnership
certificate or limited partnership agreement of Borrower, or any provision of
any indenture, note, agreement or other instrument to which Borrower and/or
General Partner is a party, or by which it or any of its properties or assets
are bound; (d) will not be in conflict with, result in a breach of or
constitute (with or without notice or passage of time) a default under any
such indenture, note, agreement or other instrument; and (e) will not result
in the creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of Borrower other than in
favor of the Agent for the benefit of itself and the Banks and as contemplated
hereby. The execution, delivery and performance of the Guaranty and the other
documents to which Guarantor is a party (a) have been duly authorized by all
requisite partnership action of Guarantor and corporate action of the general
partner of Guarantor; (b) do not require registration with or consent or
approval of, or other action by, any federal, state or other governmental
authority or regulatory body, or, if such registration, consent or approval is
required, the same has been obtained and disclosed in writing to the Agent and
the Banks; (c) will not violate any provision of law, any order of any court
or other agency of government, the Articles of Incorporation or Bylaws of the
general partner of Guarantor, the partnership certificate or limited
partnership agreement of Guarantor, or any provision of any indenture, note,
agreement or other instrument to which Guarantor and/or the general partner of
Guarantor is a party, or by which it or any of its properties or assets are
bound; (d) will not be in conflict with, result in a breach of or constitute
(with or without notice or passage of time) a default under any such
indenture, note, agreement or other instrument; and (e) will not result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of Guarantor other than in
favor of the Agent and as contemplated thereby.
5.3 VALID AND BINDING AGREEMENT. This Agreement is, and the Revolving
Credit Notes, the Lease Assignment, the Financing Statements and all other
documents contemplated hereby will be, when delivered, valid and binding
obligations of Borrower and enforceable in accordance with their respective
terms. The Guaranty will be, when delivered, the valid and binding
obligations of Guarantor and enforceable in accordance with its terms.
5.4 ACTIONS, SUITS OR PROCEEDINGS. There are no actions, suits or
proceedings, at law or in equity, and no proceedings before any arbitrator or
by or before any governmental
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commission, board, bureau, or other administrative agency, pending, or, to
the best knowledge of Borrower, threatened against or affecting Borrower,
General Partner or Guarantor, or any of their respective properties or rights
which, if adversely determined, could materially impair the right of
Borrower, General Partner or Guarantor to carry on its respective business
substantially as now conducted or could have a material adverse effect upon
the financial condition of Borrower, General Partner or Guarantor. Upon
request of the Agent or any of the Banks, Borrower shall provide, and cause
each Loan Party and each general partner or Subsidiary thereof to provide, a
current list of all pending litigation involving it or its respective
properties.
5.5 NO LIENS, PLEDGES, MORTGAGES OR SECURITY INTERESTS. Except for
Permitted Liens and liens in favor of the Agent for the benefit of itself and
the Banks securing the Indebtedness, none of Borrower's, General Partner's or
Guarantor's respective assets and properties, including, without limitation,
the Collateral, are subject to any mortgage, pledge, lien, security interest
or other encumbrance of any kind or character.
5.6 ACCOUNTING PRINCIPLES. All combined and combining balance sheets,
earnings statements and other financial data furnished to the Agent or any of
the Banks for the purposes of, or in connection with, this Agreement and the
transactions contemplated by this Agreement, have been prepared in accordance
with GAAP, and do or will fairly present the financial condition of Borrower
and Guarantor as of the dates, and the results of its operations for the
periods, for which the same are furnished. Without limiting the generality of
the foregoing, the Financial Statements have been prepared in accordance with
GAAP (except as disclosed therein) and fairly present the financial condition
of Borrower and Guarantor as of the dates, and the results of its operations
for the fiscal periods, for which the same are furnished. Neither Borrower,
General Partner nor Guarantor has any material contingent obligations,
liabilities for taxes, long-term leases or unusual forward or long-term
commitments not disclosed by, or reserved against in, the Financial
Statements.
5.7 FINANCIAL CONDITION. Borrower, General Partner and Guarantor are
each solvent, able to pay its debts as they mature, has capital sufficient to
carry on its business and has assets the fair market value of which exceed its
liabilities, and neither Borrower, nor General Partner nor Guarantor will be
rendered insolvent, undercapitalized or unable to pay maturing debts by the
execution or performance of this Agreement or the other documents contemplated
hereby. There has been no material adverse change in the business, properties
or condition (financial or otherwise) of Borrower, General Partner or
Guarantor since the date of the latest of the Financial Statements.
5.8 CONDITIONS PRECEDENT. As of each Disbursement Date, all
appropriate conditions precedent referred to in Section 4 hereof shall have
been satisfied or waived in writing by the Bank.
5.9 TAXES. Borrower, General Partner and Guarantors have each filed by
the due date therefor all federal, state and local tax returns and other
reports it is required by law to file, has paid or caused to be paid all
taxes, assessments and other governmental charges that are shown to be due and
payable under such returns, and have made adequate provision for the payment
of such taxes, assessments or other governmental charges which have accrued
but are not yet payable. Neither Borrower, nor General Partner nor Guarantor
has any knowledge of any
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deficiency or assessment in connection with any taxes, assessments or other
governmental charges not adequately disclosed in the Financial Statements.
5.10 COMPLIANCE WITH LAWS. Borrower, General Partner and Guarantor have
each complied with all applicable laws, to the extent that failure to comply
would materially interfere with the conduct of the business of Borrower,
General Partner or Guarantor.
5.11 INDEBTEDNESS. Except as disclosed on SCHEDULE 5.11 attached
hereto which may be updated by Borrower from time to time to disclose
Qualifying Non-Recourse Debt expressly permitted under this Agreement, neither
Borrower nor Guarantor has any indebtedness for money borrowed or any direct
or indirect obligations under any leases (whether or not required to be
capitalized under GAAP) or any agreements of guarantee or surety, except for
(i) the endorsement of negotiable instruments by them in the ordinary course
of business for deposit or collection, (ii) unsecured obligations for down
payments and earnest money which are disclosed in advance in writing to the
Agent and the Banks for the purchase of commercial restaurant properties which
do not exceed ten percent (10%) of the proposed purchase price of such
properties, and (iii) unsecured contingent payments for the purchase of
restaurant properties which do not exceed five percent (5%) of the aggregate
purchase price of such properties (as determined on a property-by-property
basis for each property purchased).
5.12 MATERIAL AGREEMENTS. Except as disclosed on SCHEDULE 5.12
attached hereto, which may be updated by Borrower from time to time, neither
Borrower, nor General Partner nor Guarantor has any material leases (under
which it is a lessee), contracts or commitments of any kind (including,
without limitation, employment agreements, collective bargaining agreements,
powers of attorney, distribution contracts, patent or trademark licenses,
contracts for future purchase or delivery of goods or rendering of services,
bonus, pension and retirement plans, or accrued vacation pay, insurance and
welfare agreements). To the best knowledge of Borrower, all parties to the
agreements disclosed on SCHEDULE 5.12 have complied with the provisions of
such leases, contracts or commitments; and to the best knowledge of Borrower,
no party to such agreements is in default thereunder, nor has there occurred
any event which with notice or the passage of time, or both, would constitute
such a default.
5.13 MARGIN STOCK. Borrower is not engaged principally, or as one of
its important activities, in the business of extending credit for the purpose
of purchasing or carrying any "margin stock" within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System, and no part of the
proceeds of any Advance hereunder will be used, directly or indirectly, to
purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock or for any other purpose
which might violate the provisions of Regulation G, S, T, U or X of the said
Board of Governors. Borrower does not own any margin stock.
5.14 PENSION FUNDING. Neither Borrower, General Partner nor Guarantor
has incurred any accumulated funding deficiency within the meaning of ERISA or
incurred any liability to the PBGC in connection with any employee benefit
plan established or maintained by Borrower, General Partner or Guarantor and
no reportable event or prohibited transaction, as defined in ERISA, has
occurred with respect to such plans.
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5.15 MISREPRESENTATION. No warranty or representation by Borrower
contained herein or in any certificate or other document furnished by Borrower
pursuant hereto contains any untrue statement of material fact or omits to
state a material fact necessary to make such warranty or representation not
misleading in light of the circumstances under which it was made. There is no
fact which Borrower has not disclosed to the Agent in writing which materially
and adversely affects nor, so far as Borrower can now foresee, is likely to
prove to affect materially and adversely the business, operations, properties,
prospects, profits or condition (financial or otherwise) of Borrower or
ability of Borrower to perform this Agreement.
5.16 PARTNERSHIP INTERESTS, PARTNERS AND SUBSIDIARIES. The entire
issued and outstanding equity interests and the beneficial and record owners
thereof for each of Borrower and General Partner is set forth in SCHEDULE 5.16
attached hereto. There are no outstanding options, warrants or rights to
purchase, nor any agreement for the subscription, purchase or acquisition of,
any equity interest of Borrower or General Partner. Except as set forth in
SCHEDULE 5.16, which may be updated from time to time by Borrower, neither
Borrower, General Partner nor Guarantor has any Subsidiaries.
5.17 NO CONFLICTING AGREEMENTS. Neither Borrower, nor General Partner
nor Guarantor is in default under any agreement to which it is a party or by
which it or any of its property is bound, the effect of which might have a
material adverse effect on the business or operations (financial or otherwise)
on any of them. No provision of the Certificate of Limited Partnership,
limited partnership agreement, Articles of Incorporation, bylaws or other
organizational documents of Borrower, General Partner or Guarantor, and no
provision of any existing mortgage, indenture, note, contract, agreement,
statute (including, without limitation, any applicable usury or similar law),
rule, regulation, judgment, decree or order binding on Borrower, General
Partner or Guarantor or affecting the property of Borrower, General Partner or
Guarantor conflicts with, or requires any consent under, or would in any way
prevent the execution, delivery or carrying out of the terms of, this
Agreement, the Lease Assignment, the Guaranty or any other documents
contemplated hereby, and the taking of any such action will not constitute a
default under, or result in the creation or imposition of, or obligation to
create any lien upon the property of Borrower, General Partner or Guarantor
pursuant to the terms of any such mortgage, indenture, note, contract or
agreement; except that in regards to sales of and foreclosures on Real
Property of Borrower and Guarantor the provisions of Article VIII of the
Agreements of Limited Partnership of Borrower and Guarantor provide for a
right of first refusal on sales of and foreclosures on Real Property of
Borrower and Guarantor in favor of BKC.
5.18 REAL PROPERTY. SCHEDULE 1.1 sets forth a complete list of all of
the Real Property and interests thereof owned or leased, as the case may be as
indicated thereon, by Borrower as of the date hereof. SCHEDULE 1.1 shall be
updated by Borrower from time to time (but not less frequently than quarterly)
to reflect matters which occur after the date hereof.
5.19 OUTSTANDING PRINCIPAL BALANCE OF INDEBTEDNESS UNDER ORIGINAL
AGREEMENT. As of the date hereof immediately prior to the execution of this
Agreement and the Revolving Credit Note, the unpaid principal balance of the
Indebtedness (including without limitation all Advances and all Letter of
Credit Exposure) under the Original Agreement is $18,323,843.69, as set forth
on SCHEDULE 5.19 attached hereto and made a part hereof, plus accrued but
unpaid interest thereon. Borrower further covenants, warrants and represents
that (i) there exists no Event of Default nor any fact or condition which with
the giving of notice or passage of time or both would create an Event of
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Default, (ii) that there are no defenses, counterclaims or offsets to any of
the Loan Documents, that if any defense, counterclaim or offset exists, known
or unknown, the same is hereby waived and released in full, and (iii) that all
of the warranties and representations contained in the Original Agreement are
true and correct as of the date hereof.
SECTION 6. AFFIRMATIVE COVENANTS
On a continuing basis from the date of this Agreement until the later of
(a) the Termination Date or (b) when the Indebtedness is paid in full,
Borrower has performed all of its other obligations hereunder and all
commitments and other obligations of the Agent and the Banks under the Loan
Documents have terminated, Borrower covenants and agrees that it will, at its
sole expense:
6.1 FINANCIAL AND OTHER INFORMATION.
6.1.1 ANNUAL FINANCIAL REPORTS. Furnish to the Agent and each
Bank, in form and reporting basis satisfactory to the Agent and each Bank, not
later than 90 days after the close of each fiscal year of Borrower, beginning
with the fiscal year ending December 31, 1995, the 10-K Annual Report of
Borrower and the financial statements of Borrower and Guarantor (on a combined
and combining basis) containing the balance sheet as of the close of each such
fiscal year, statements of income and retained earnings and a statement of
cash flows for each such fiscal year, and such other comments and financial
details as are usually included in similar reports. Such reports shall be
prepared in accordance with GAAP by a Big Six accounting firm or such other
independent certified public accountants of recognized standing selected by
Borrower and acceptable to the Agent and each Bank and shall contain
unqualified opinions as to the fairness of the statements therein contained.
The Agent and each Bank acknowledges that it has received such financial
statements for Borrower's fiscal year ended December 31, 1994.
6.1.2 10-Q QUARTERLY REPORTS. Furnish to the Agent and each
Bank, in form and substance satisfactory to the Agent and each Bank, not later
than 45 days after the close of each fiscal quarter of Borrower other than the
fiscal year end of Borrower, beginning with the fiscal quarter ending December
31, 1995, containing the combined balance sheet of Borrower and Guarantor as
of the end of such period, combined statements of income and retained earnings
of Borrower and Guarantor and a combined statement of cash flows of Borrower
and Guarantor for the portion of the fiscal year up to the end of such period,
management's discussion and analysis of the financial condition and results of
operations of Borrower and Guarantor, and such other comments and financial
details as are usually included in such reports. These statements shall be
prepared on the same accounting basis as the statements required in SECTION
6.1 of this Agreement and shall be reviewed by a Big Six accounting firm or
such other independent certified public accountants of recognized standing
selected by Borrower and acceptable to the Agent and each Bank.
6.1.3 MONTHLY FINANCIAL STATEMENTS. Furnish to the Agent and
each Bank not later than 30 days after the close of each calendar month,
beginning with the month ending December 31, 1996, financial statements of
Borrower and Guarantor (on a combined and combining basis) containing a
balance sheet of them as of the end of such period, statements of
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nicome and retained earnings and a statement of cash flows of them for the
portion of the fiscal year up to the end of such period, and such other
comments and financial details as are usually included in similar reports.
These statements shall be prepared on the same accounting basis as the
statements required in SECTION 6.1.1 of this Agreement and shall be in such
detail as the Agent and each Bank may reasonably require, and the accuracy of
the statements shall be certified by the chief executive or financial officer
of Borrower and Guarantor.
6.1.4 QUARTERLY OPERATING REPORTS. Furnish to the Agent and each
Bank quarterly by the thirtieth (30th) day after the close of each fiscal
quarter of Borrower, beginning with the fiscal quarter ending December 31,
1995: (a) operating reports on the properties of each Loan Party as of the
end of the preceding fiscal quarter of Borrower in a form satisfactory to the
Agent and each Bank; (b) property acquisition pipeline reports as of the end
of the preceding fiscal quarter of Borrower in a form satisfactory to the
Agent and each Bank; (c) franchisee loan status reports as of the end of the
preceding fiscal quarter of Borrower in form and substance satisfactory to the
Agent and each Bank; and (d) property summary reports on the properties of
each Loan party as of the end of the preceding fiscal quarter of Borrower in
form and substance satisfactory to the Agents and each Bank.
6.1.5 ANNUAL TRANSACTION AND ACTIVITIES REPORTS. Furnish to the
Agent and each Bank annually by the thirtieth (30th) day after the close of
each fiscal year of Borrower, beginning with the fiscal year ending December
31, 1995, partnership transaction and activities reports of Borrower and
Guarantor as of the end of the preceding fiscal year of Borrower in a form
satisfactory to the Agent and each Bank.
6.1.6 COMPLIANCE CERTIFICATE. Together with each delivery of the
financial statements required by SECTIONS 6.1.1 of this Agreement and the 10-Q
Quarterly Report required by Section 6.1.2 of this Agreement, furnish to the
Agent and each Bank a General Compliance Certificate executed by the chief
executive or chief financial officer of the General Partner and the general
partner of Guarantor, certified as of such date, and confirming that, as of
such date:
(a) no Default or Event of Default has occurred, or if any such
matter exists, stating the nature thereof, the period of existence
thereof, and what action Borrower proposes to take with respect thereto;
(b) the warranties and representations set forth in SECTION 5 of
this Agreement are true and correct on and as of such date, except as
otherwise specified in such certificate; and
(c) Borrower is in compliance with all the terms and conditions
contained in this Agreement;
and attached to which certificate shall be a report in form satisfactory to
the Agent and each Bank, prepared by such chief executive or chief financial
officer of the general partner of Borrower and Guarantor, as the case may be,
setting forth information and calculations that demonstrate compliance (or
noncompliance) with each of the covenants set forth in SECTIONS 6.5, 6.6, and
6.7 of this Agreement.
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6.1.7 ADVERSE EVENTS. Promptly inform the Agent and each Bank of
the occurrence of any Default or Event of Default, or of any other occurrence
which has or could reasonably be expected to have a materially adverse effect
upon Borrower's, General Partner's or Guarantor's business, properties, or
financial condition or upon Borrower's, General Partner's or Guarantor's
ability to comply with its obligations hereunder, including without
limitation, any failure to observe or perform any term, covenant or condition
in any agreement or instrument evidencing, securing or relating to any of its
indebtedness, which is being contested by Borrower.
6.1.8 REPORTS. Promptly furnish to the Agent and each Bank upon
becoming available a copy of all financial statements, reports, notices, proxy
statements and other communications sent by Borrower, or Guarantor to its
respective partnership interest or unit holders, and all regular and periodic
reports filed by Borrower, General Partner or Guarantor with any securities
exchange, the Securities and Exchange Commission, or other governmental
authority.
6.1.9 MANAGEMENT LETTERS. Furnish to the Agent and each Bank,
promptly upon receipt thereof, copies of all management letters and other
reports of substance submitted to Borrower, General Partner or Guarantor by
independent certified public accountants in connection with any annual or
interim audit of the books of Borrower, General Partner or Guarantor.
6.1.10 OTHER INFORMATION AS REQUESTED. Borrower shall promptly
furnish to the Agent and each Bank such other information regarding the
operations, business affairs and financial condition of Borrower, General
Partner or Guarantor as the Agent or any Bank may reasonably request from time
to time, and permit the Agent and each Bank, and its respective employees,
attorneys and agents, to inspect all of the books, records and properties of
any Loan Party and general partner or Subsidiary of any of them and its
Subsidiaries at any reasonable time. References in this SECTION 6 to the
"chief executive or financial officer" shall mean the general partners when
Borrower is a partnership.
6.1.11 LEASES. Borrower shall promptly furnish to the Agent
and each Bank copies of all leases of Real Property and any and all amendments
and modifications of any lease of Real Property entered into on or after the
date hereof between any Loan Party or general partner or Subsidiary thereof
and any Person, under which any Loan Party or general partner or Subsidiary
thereof is a lessor or lessee.
6.2 INSURANCE. Either directly, or indirectly through assignments of
insurance policies provided by lessees of its properties, keep its insurable
properties (including but not limited to the Collateral) adequately insured
and maintain (a) insurance against fire and other risks customarily insured
against under an "all-risk" policy and such additional risks customarily
insured against by companies engaged in the same or a similar business to that
of Borrower or its Subsidiaries, as the case may be, (b) necessary worker's
compensation insurance, (c) public liability insurance, and (d) such other
insurance as may be required by law or as may be reasonably required in
writing by the Agent of any of the Banks, all of which insurance shall be in
such amounts, containing such terms, in such form, for such purposes, prepaid
for such time period, and written by such companies as may be satisfactory to
the Agent; PROVIDED,
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HOWEVER, that unless otherwise agreed by the Agent in writing, the Collateral
shall be insured for its replacement cost and all insurance policies shall be
written by a company (or companies) having an A.M. Best rating of "A-" or
better. Borrower will promptly deliver to the Agent evidence satisfactory to
the Agent that such insurance has been so procured and shall deliver evidence
of each renewal thereof upon the request of the Agent or any Bank. If
Borrower fails to maintain satisfactory insurance as herein provided, the
Agent shall have the option to do so, and Borrower agrees to repay the Agent
upon demand, with interest at the Legal Rate, all amounts so expended by the
Agent. Borrower hereby appoints the Agent or any employee or agent of the
Agent as Borrower's attorney-in-fact, which appointment is coupled with an
interest and irrevocable, and authorizes the Agent or any employee or agent
of the Agent, on behalf of Borrower, (a) to adjust and compromise any loss
under said insurance, (b) at any time after the occurrence during the
existence of an Event of Default, to notify the companies that have issued
said insurance to change the address of delivery of Borrower's mail to an
address designated by the Agent, (c) at any time after the occurrence during
the existence of an Event of Default, to open, to receive, open and dispose
of all mail addressed to Borrower, to demand payment and (d) to endorse any
check or draft payable to Borrower in connection with returned or unearned
premiums on said insurance or the proceeds of said insurance, and any amount
so collected may be applied toward satisfaction of the Indebtedness;
provided, however, that the Agent shall not be required hereunder so to act.
6.3 TAXES. Pay promptly and within the time that they can be paid
without late charge, penalty or interest all taxes, assessments and similar
imposts and charges of every kind and nature lawfully levied, assessed or
imposed upon Borrower or its Subsidiaries, and their property, except to the
extent being contested in good faith. If any contested amount exceeds
$10,000, upon the Agent's request Borrower shall escrow funds, post bond, or
provide other security, in an amount and manner satisfactory to the Agent. If
Borrower shall fail to pay such taxes and assessments within the time they can
be paid without penalty, late charge or interest the Agent shall have the
option to do so, and Borrower agrees to repay the Agent upon demand, with
interest at the Legal Rate, all amounts so expended by the Agent. At the
request of the Agent or any Bank, Borrower shall, at Borrower's expense,
subscribe to a tax monitoring service acceptable to the Agent in order to
monitor the payment of any such taxes and assessments and the filing of any
liens against the property of Borrower or any of its Subsidiaries, Borrower
agreeing to supply the Agent with copies of each report delivered to Borrower
by such tax monitoring service. As an alternative to the preceding sentence,
Borrower agrees that the Agent itself, at Borrower's expense, may subscribe to
such a tax monitoring service as to taxes, assessments and liens applicable to
Borrower's or any of its Subsidiaries' property.
6.4 MAINTAIN LIMITED PARTNERSHIP AND BUSINESS. Do or cause to be done
all things necessary to preserve and keep in full force and effect Borrower's
limited partnership existence, rights and franchises and comply with all
applicable laws; continue to conduct and operate its and each of its
Subsidiaries' business substantially as conducted and operated during the
present and preceding calendar year; at all times maintain, preserve and
protect all franchises and trade names and preserve all the remainder of its
and its Subsidiaries' property and keep the same in good repair, working order
and condition; and from time to time make, or cause to be made, all needed and
proper repairs, renewals, replacements, betterments and improvements thereto
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so that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
6.5 MAINTAIN TANGIBLE NET WORTH. Maintain at all times a Tangible Net
Worth of Borrower and Guarantor on a combined basis of not less than
$40,500,000.
6.6 MAINTAIN DEBT RATIO. Maintain at all times the ratio of Debt to
Tangible Net Worth of Borrower and Guarantor on a combined basis at not more
than 1.00 to 1.0.
6.7 MAINTAIN CASH FLOW COVERAGE RATIO. Maintain at all times the
ratio of (a) Annualized Cash Flow to Pro Forma Five Year Bank Debt
Amortization of Borrower and Guarantor on a combined basis at not less than
1.20 to 1.0 and (b) Annualized Cash Flow to Pro Forma Twenty Year Bank Debt
Amortization of Borrower and Guarantor on a combined basis at not less than
2.75 to 1.0.
6.8 ERISA. (a) At all times meet the minimum funding requirements of
ERISA with respect to Borrower's employee benefit plans subject to ERISA; (b)
promptly after Borrower knows or has reason to know (i) of the occurrence of
any event, which would constitute a reportable event or prohibited transaction
under ERISA, or (ii) that the PBGC or Borrower has instituted or will
institute proceedings to terminate an employee pension plan, deliver to the
Agent a certificate of the chief financial officer of Borrower setting forth
details as to such event or proceedings and the action which Borrower proposes
to take with respect thereto, together with a copy of any notice of such event
which may be required to be filed with the PBGC; and (c) furnish to the Agent
(or cause the plan administrator to furnish the Agent) a copy of the annual
return (including all schedules and attachments) for each plan covered by
ERISA, and filed with the Internal Revenue Service by Borrower not later than
ten days after such report has been so filed.
6.9 USE OF LOAN PROCEEDS. Use the proceeds of the Advances and
Letters of Credit hereunder only for the purposes set forth in SECTION 2.13 of
this Agreement.
6.10 COLLATERAL AUDITS. Permit the Agent or any Bank to conduct audits
of the Collateral and of Borrower's books and records as often as the Agent,
in its credit judgment, deems such audits to be necessary. Upon the Agent's
request, Borrower shall reimburse the Agent for the reasonable costs and
expenses expended by the Agent in connection with such audits.
6.11 LIENS. Promptly notify the Agent and each Bank of any liens in
excess of $10,000 individually or $250,000 in the aggregate of mechanics,
materialmen, carriers, warehousemen or other like statutory or common law
liens.
6.12 COPIES OF LEASES. Deliver to the Agent: (a) within 30 days
following the date hereof, copies of all leases of Real Property, together
with any and all amendments and modifications to such leases, entered into on
or before the date hereof between any Loan Party and any Person, under which
such Loan Party is a lessor; and (b) within 30 days following the entering
into thereof, copies of all leases of Real Property entered
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into after the date hereof, together with any and all amendments and
modifications to any leases of Real Property entered into after the date
hereof, between any Loan Party and any Person, under which such Loan Party is
a lessor.
6.13 EXECUTION, DELIVERY AND RECORDATION OF LEASE ASSIGNMENTS ON REAL
PROPERTY ACQUIRED IN THE FUTURE. Assign, and cause each Loan Party and general
partner or Subsidiary thereof to assign, to the Agent for the benefit of the
Agent and the Banks, as additional collateral for the Indebtedness, all of
such Person's right, title and interest in all Real Property and interests
therein acquired by any Person after the date hereof, and execute and deliver
to the Agent for the benefit of the Agent and the Banks, in form and content
acceptable to the Agent and the Banks and sufficient for filing and recording
with such filing or recording offices as the Agent and the Banks shall deem
appropriate, Lease Assignments covering all of such Real Property, and deliver
to the Agent with respect to all such Real Property (i) a mortgagee/lender
title policy(ies) which satisfies the requirements thereof in SECTION 6.14 of
this Agreement showing that such Person's right, title and interest therein is
not subject to any mortgage, pledge, lien, security interest or other
encumbrance of any kind or character except for Permitted Liens, liens in
favor of the Bank and other liens which may be consented to in writing by the
Agent and the Banks from time to time, and (ii) a certificate that such Real
Property is not located in an identified "flood hazard area" in which flood
insurance has been made available pursuant to the National Flood Insurance
Reform Act of 1994 and the regulations thereunder (or, if such Real Property
is located in such an identified area, evidence of such Loan Party having
obtained flood insurance with respect thereto).
6.14 CLOSINGS OF REAL PROPERTY ACQUISITIONS. Conduct all closings of
all purchases or acquisitions of Real Property by any Loan Party through a
title company satisfactory to the Majority Banks (in the Majority Bank's
reasonable discretion), obtain an owner's title policy or leasehold policy
duly issued to any Loan Party by a title insurer satisfactory to the Majority
Banks (in the Majority Banks' reasonable discretion), and promptly following
such closing deliver to the Agent a true and correct copy of each such owner's
title policy or leasehold policy issued to such Loan Party in connection
therewith. For purposes hereof, Commonwealth Land Title Company, Chicago
Title Company, Ticor, Fidelity National Title Insurance Company shall all be
deemed acceptable. Such Loan Party shall also deliver to the Agent as a part
of each such closing (i) Lease Assignments covering each such Real Property
purchased or acquired, (ii) a mortgagee/lender title insurance commitment in
form and substance satisfactory to the Agent and the Banks covering each such
Real Property purchased or acquired and with respect to which all costs of
policy issuance have been paid by Borrower (or other Loan Party), promptly
followed by a policy naming the Agent and each of the Banks as an insured
thereunder, (iii) copies of all leases pertaining to such Real Property, (iv)
a closing statement pertaining to such Real Property purchase or acquisition,
(v) evidence of casualty, liability and other insurance acquired under SECTION
6.2 of this Agreement with respect to such Real Property or required under any
lease on such Real Property, (vi) the cover sheet of the environmental site
assessment pertaining to such Real Property which identifies such Real
Property and sets forth the conclusion and/or executive summary of such
report, (vii) the flood insurance certificates or evidence of flood insurance,
as the case may be, with respect to such Real Property described in SECTION
6.13 of this Agreement and (viii) all other agreements, documents and
instruments required by the Agent or any Bank to create, evidence or perfect
the lien and security interest of the Agent for the benefit of the Banks on
such Real Property.
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6.15 EVIDENCE OF AUTHORITY TO CONDUCT BUSINESS. Promptly obtain and
deliver, and cause each Loan Party and General Partner or subsidiary thereof
to obtain and deliver, to Agent and each of the Banks evidence of Borrower's
and such other Person's qualification and good standing to do business in each
state where it now or hereafter does business, except in states where the
failure to be qualified or in good standing could not reasonably be expected
to have a materially adverse effect upon the operations, business, property,
assets, financial condition or credit of such Person.
SECTION 7. NEGATIVE COVENANTS
On a continuing basis from the date of this Agreement until the later of
(a) the Termination Date or (b) when the Indebtedness is paid in full,
Borrower has performed all of its other obligations hereunder and all
commitments and other obligations of the Agent and the Banks under the Loan
Documents have terminated, Borrower covenants and agrees that it will not,
that it will not permit any Subsidiary to, and that Guarantor will not:
7.1 DISTRIBUTIONS. Declare or pay during any calendar year any
distribution (whether by reduction of capital or otherwise) with respect to
any of its equity interests in excess of the sum of (A) Net Income, plus (B)
depreciation and amortization, plus (C) reduction in net investment in direct
financing leases, plus (D) provision for writedowns and disposal of Real
Property; PROVIDED, HOWEVER, that in the event that a Default or Event of
Default then exists or would result therefrom, Borrower shall not declare or
pay any distribution (whether by reduction of capital or otherwise) with
respect to any of its equity interests.
7.2 ACQUISITION OF EQUITY INTERESTS. Purchase, redeem, retire or
otherwise acquire any of its general partnership interests or limited
partnership interests (or any units representing the same) of any of its
general partners or limited partners, or make any commitment to do so;
PROVIDED, HOWEVER, that Guarantor shall be permitted to do so as long as no
Default or Event of Default then exists or would result therefrom.
7.3 LIENS AND ENCUMBRANCES. Except as specifically permitted under
SECTION 3.2 of this Agreement, create, incur, assume or suffer to exist any
mortgage, pledge, encumbrance, security interest, lien or charge of any kind
upon any of its property or assets (including, without limitation, any charge
upon property purchased or acquired under a conditional sales or other title
retaining agreement or lease required to be capitalized under GAAP) whether
now owned or hereafter acquired other than Permitted Liens.
7.4 INDEBTEDNESS. Incur, create, assume or permit to exist any
indebtedness or liability on account of deposits or advances or any
indebtedness or liability for borrowed money, or any other indebtedness or
liability evidenced by notes, bonds, debentures or similar obligations, or any
other indebtedness whatsoever, except for (a) the Indebtedness, (b)
Subordinated Debt, (c) existing indebtedness to the extent set forth on
SCHEDULE 5.11 of this Agreement, (d) trade indebtedness incurred and paid in
the ordinary course of business, (e) contingent indebtedness to the extent
permitted by SECTION 7.6 of this Agreement, (f) indebtedness secured by
Permitted Liens, (g) indebtedness of the type and amounts described on
SCHEDULE 7.4, (h) obligations of Borrower or Guarantor to issue limited
partnership interests
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of Guarantor as consideration for Borrower's purchase of real property which
do not involve any obligation to pay money and (i) reimbursement obligations
of Borrower under a Letter of Credit.
7.5 EXTENSION OF CREDIT. Make loans, advances or extensions of credit
to any Person; PROVIDED, HOWEVER, that as long as no Default or Event of
Default then exists or would result therefrom, Borrower shall be permitted to
make (i) advances in a cumulative aggregate amount not to exceed $3,000,000
for the purpose of repair and refurbishment of the restaurant improvements
situated on its Real Properties and (ii) down payments and earnest money
deposits which are disclosed in advance in writing to the Agent and the Banks
for the purchase of commercial restaurant properties and which do not exceed
ten percent (10%) of the proposed purchase price of such properties; provided,
however, that any promissory note or other evidence of such indebtedness and
any collateral or security for the same shall be pledged and assigned to the
Agent for the Benefit of the Banks in such manner as the Agent may require.
7.6 GUARANTEE OBLIGATIONS. Guarantee or otherwise, directly or
indirectly, in any way be or become responsible for obligations of any other
Person, whether by agreement to purchase the indebtedness of any other Person,
agreement for the furnishing of funds to any other Person through the
furnishing of goods, supplies or services, by way of stock purchase, capital
contribution, advance or loan, for the purpose of paying or discharging (or
causing the payment or discharge of) the indebtedness of any other Person, or
otherwise, except for (a) the endorsement of negotiable instruments by
Borrower in the ordinary course of business for deposit or collection and (b)
the guaranty of royalty and advertising cooperative obligations, in an
aggregate amount not to exceed $500,000 at any time, of an Affiliate under a
franchise agreement to which such Affiliate is a party, provided that the
franchise agreement covers the restaurant situated on Real Property leased by
Borrower to such Affiliate.
7.7 SUBORDINATE INDEBTEDNESS. Subordinate any indebtedness due to it
from a Person to indebtedness of other creditors of such Person.
7.8 PROPERTY TRANSFER, MERGER OR LEASE-BACK. (a) Sell, lease,
transfer or otherwise dispose of in any calendar year properties and assets
having an aggregate value of more than $5,000,000 (whether in one transaction
or in a series of transactions) without the prior written consent of the
Majority Banks; provided, however, that all of the proceeds of all sales,
leases, transfers or other dispositions shall in any event be paid to the
Agent for the ratable benefit of the Banks in repayment of the Advances and
Letter of Credit Exposure then outstanding; (b) change its name, consolidate
with or merge into any other corporation, permit another corporation to merge
into it, acquire all or substantially all the properties or assets of any
other Person, enter into any reorganization or recapitalization or reclassify
its capital stock or form or acquire any Subsidiary except a Subsidiary
engaged in substantially the same business as Borrower, provided that such
Subsidiary has guaranteed the Indebtedness and has agreed to abide by such
covenants, which contain substantially the same terms as the warranties and
covenants set forth in SECTIONS 5, 6 and 7 of this Agreement and which are
otherwise in form and substance satisfactory to the Bank; or (c) enter into
any sale-leaseback transaction as a lessee.
7.9 ACQUIRE SECURITIES. Purchase or hold beneficially any stock or
other securities of, or make any investment or acquire any interest whatsoever
in, any other Person, except for (a) certificates of deposit with maturities
of one year or less of United States commercial banks with
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capital, surplus and undivided profits in excess of $100,000,000, (b) the
purchase partnership interests and other securities of Persons substantially
all of the business of which is the rental of restaurant real property,
provided that (i) the aggregate amount of such securities owned by Borrower,
Guarantor and the Subsidiaries may not exceed, at any one time $2,000,000,
and (ii) Borrower shall sell or otherwise dispose of each such security
(including a disposition by the purchase or liquidation into Borrower of all
or substantially all of the assets of such Person), within twelve (12) months
after the date of acquisition, (c) instruments issued by the Agent or any of
the Banks, (d) money market instruments, (e) obligations from United States
commercial banks with capital, surplus and undivided profits in excess of
$100,000,000, as a counterparty to a written repurchase agreement obligating
such counterparty to repurchase such obligations not later than 14 days after
the purchase thereof, (f) mutual funds investing in obligations of the type
described in CLAUSES (E) AND (F) and this SECTION 7.9, and (g) direct
obligations of the United States Government maturing within one year from the
date of acquisition thereof.
7.10 PENSION PLAN. (a) Allow any fact, condition or event to occur or
exist with respect to any employee pension or profit sharing plans established
or maintained by it which might constitute grounds for termination of any such
plan or for the court appointment of a trustee to administer any such plan, or
(b) permit any such plan to be the subject of termination proceedings (whether
voluntary or involuntary) from which termination proceedings there may result
a liability of Borrower to the PBGC which, in the opinion of the Majority
Banks, will have a materially adverse effect upon the operations, business,
property, assets, financial condition or credit of Borrower.
7.11 MISREPRESENTATION. Furnish the Agent or any Bank with any
certificate or other document that contains any untrue statement of a material
fact or omits to state a material fact necessary to make such certificate or
document not misleading in light of the circumstances under which it was
furnished.
7.12 MARGIN STOCK. Apply any of the proceeds of any Advance or Letter
of Credit Exposure to the purchase or carrying of any "margin stock" within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System, or any regulations, interpretations or rulings thereunder.
7.13 PURCHASE OR ACQUIRE CERTAIN PROPERTIES. Purchase or acquire
(a)_any property(ies) or leasehold interest(s) in a single transaction or
series of related transactions having an aggregate cost to Borrower in excess
of $10,000,000 without the prior written consent of the Majority Banks (with
consent or notification of non-consent from the Majority Banks to be
communicated to Borrower within ten (10) Business Days following Borrower's
written request therefor to the Agent and each of the Banks), unless each of
the same at the time of such purchase or acquisition are occupied by a tenant
operating a "Top Twenty Restaurant Chain" (as determined by the then most
recent annual ranking of Nation's Restaurant News) commercial restaurant
thereon; or (b) any leasehold interest(s) in a single transaction or a series
of related transactions in which all rent and obligations of any Loan Party
under the leasehold interest(s) acquired in such transaction(s) are greater
than twenty percent (20%) of the lease rental income of such Loan Party from
the tenant lease(s) of the restaurants located on such leasehold interests.
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7.14 LEASE TERMS AND RENEWALS. Enter into, renew, modify or otherwise
become obligated under any present or future lease (as lessor or lessee)
except on such terms as are made on an arm's length basis, in good faith, and
do not and would not reasonably be expected, individually or in the aggregate,
to have a material adverse effect on the business or operations (financial or
otherwise) of any Loan Party.
7.15 AMENDMENT OF PARTNERSHIP AGREEMENT; REMOVAL OF THE GENERAL
PARTNER. Allow or permit (a) any amendment or modification of Borrower's
Partnership Agreement or Guarantor's Partnership Agreement in any respect or
(b) any removal, addition or substitution of a general partner in Borrower or
Guarantor.
SECTION 8. PROVISIONS REGARDING ENVIRONMENTAL LAWS
8.1 COVENANTS REGARDING ENVIRONMENTAL COMPLIANCE. Borrower hereby
covenants and agrees with the Agent and each of the Banks as follows:
8.1.1 HAZARDOUS SUBSTANCE USE, MANUFACTURE. Borrower shall not
use, generate, manufacture, produce, store, release, discharge, or dispose of
on, under, or about the Real Property or transport to or from the Real
Property any Hazardous Substance, or allow any other person or entity to do so
on the Real Property, except in strict compliance with all applicable laws
(including all applicable Environmental Laws).
8.1.2 COMPLIANCE WITH ENVIRONMENTAL LAWS. Borrower shall keep
and maintain the Real Property in compliance with, and shall not cause the
Real Property to be in violation of, any applicable Environmental Law.
8.1.3 NOTICES. Borrower shall give prompt written notice to the
Agent of:
(a) any proceeding or written inquiry by any governmental
authority with respect to the presence of any Hazardous Substance on the
Real Property or the migration thereof from or to other property;
(b) all written claims made or threatened by any third party
against Borrower or the Real Property relating to any loss or injury
resulting from any Hazardous Substance;
(c) Borrower's discovery of any occurrence or condition on any
real property adjoining or in the vicinity of the Real Property that
would reasonably be expected to cause the Real Property or any part
thereof to be subject to any material restrictions on the ownership,
occupancy, transferability or use of the Real Property under any
applicable Environmental Law, or to be otherwise subject to any material
restrictions on the ownership, occupancy, transferability or use of the
Real Property under any applicable Environmental Law;
(d) any written notice of violation or complaint from a
governmental authority and relating to an applicable Environmental Law;
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(e) any written notices or reports Borrower provides to a
governmental authority relating to instances of non-compliance with an
applicable Environmental Law; and
(f) any written application Borrower provides to a governmental
authority to obtain or amend a permit or approval relating to the
generation, storage, treatment, or disposal of a Hazardous Substance or
air contaminant.
8.1.4 DELIVERY OF PREMISES TO THE BANK. In the event any Lease
Assignment or any mortgage securing the Indebtedness is foreclosed or Borrower
tenders a deed in lieu of foreclosure with respect to any Real Property,
Borrower shall deliver such Real Property to the Agent for the benefit of
itself and each of the Banks free of any and all Hazardous Substances so that
the condition of such Real Property shall not be a violation of any
Environmental Laws.
8.1.5 INDEMNITY. Borrower shall defend, indemnify and hold
harmless the Agent and each of the Banks, its employees, agents, officers,
directors, successors and assigns from and against any and all claims,
demands, penalties, fines, liabilities, settlements, damages, costs or
expenses of whatever kind or nature, including, without limitation, attorney's
and consultant's fees (said attorneys and consultants to be selected by the
Majority Banks), investigation and laboratory fees, environmental studies
required by the Majority Banks (whether prior to foreclosure or otherwise),
court costs and litigation expenses, any of which arise out of or are related
to: (a) the use, generation, manufacture, production, storage, presence,
disposal, release or threatened release of any Hazardous Substance on, from or
affecting the Real Property or the soil, water, vegetation, buildings,
personal property, persons or animals thereon, (b) any personal injury
(including wrongful death) or property damage (real or personal) arising out
of or related to such Hazardous Substance, (c) any lawsuit brought or
threatened, settlement reached, or governmental order relating to such
Hazardous Substances, (d) the cost of removal of all such Hazardous Substances
from all or any portions of the Real Property, (e) taking necessary
precautions to protect against the release of Hazardous Substances on or
affecting the Real Property, (f) complying with all Environmental Laws, (g)
any violation of Environmental Laws or requirements of the Agent which are
based upon or in any way related to such Hazardous Substances, and/or (h) the
costs of any repair, cleanup or remediation of the Real Property and the
preparation and implementation of any closure, remedial or other plans
required to be undertaken by applicable Environmental Laws. Upon the Majority
Banks' request, Borrower shall execute a separate indemnity covering the
foregoing matters.
8.1.6 REMEDIAL WORK. In the event that any investigation, site
monitoring, containment, cleanup, removal, restoration or other remedial work
of any kind or nature (the "REMEDIAL WORK") is required to be undertaken under
any applicable local, state or federal law or regulation, any judicial order,
or by any governmental entity because of, or in connection with, the current
or reasonably threatened future presence or release of a Hazardous Substance
in or into the air, soil, ground water, surface water or soil vapor at, on,
about, under or within the Real Property (or any portion thereof), Borrower
shall promptly after written demand for performance thereof by appropriate
governmental authorities (or such shorter period of time as may be required
under any applicable law, regulation, order or agreement), commence and
thereafter diligently prosecute to completion, all such Remedial Work. All
Remedial Work shall be performed by contractors selected by Borrower and
approved in advance by the Majority
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Banks, and under the supervision of a consulting engineer selected by
Borrower and approved by the Agent (which approval the Agent shall not
unreasonably withhold). All costs and expenses of such Remedial Work shall
be paid by Borrower including, but not limited to, the Agent's reasonable
attorneys' fees and reasonable costs incurred in connection with its
monitoring or review of such Remedial Work. Notwithstanding the foregoing,
Borrower shall not be deemed to have breached this SECTION 8.1.6 if (a)
Borrower's noncompliance hereunder resulted from good faith error or innocent
omission, (b) Borrower after obtaining knowledge of such noncompliance
commences and diligently pursues a cure of such breach, and (c) such
noncompliance is cured within ninety (90) Business Days following Borrower's
receipt of notice of such noncompliance from the Agent, any appropriate
governmental authorities or otherwise and such noncompliance has not resulted
in a material adverse effect on the Collateral or Borrower's business,
financial condition or operation.
8.1.7 CERTAIN RIGHTS OF THE BANK. Upon the Agent's or any Bank's
receipt of notice from any source concerning the existence of any Hazardous
Substance or the noncompliance by Borrower or any Real Property with any
Environmental Law, which matter, if true, could result in an order, suit or
other action against Borrower and/or any Real Property and which could, in the
Majority Banks' commercially reasonable discretion, jeopardize Borrower's
ability to repay the Indebtedness or impair the value of any material portion
of the Collateral, the Majority Banks shall have the right (but not the
obligation) to require a repayment of all or any portion of the Indebtedness
(and a corresponding pro tanto reduction of the Overall Commitment Amount) as
the Majority Banks shall determine, in their sole and absolute discretion,
irrespective of the existence or non-existence of any Default or Event of
Default at such time. The foregoing sentence shall not be deemed to limit any
other rights the Agent may have under this Agreement, any other document, or
at law or in equity. All reasonable costs and expenses incurred by the Agent
in the exercise of any such rights shall become part of the Indebtedness,
shall be secured by the collateral contemplated hereunder, and shall be
payable by Borrower upon demand.
8.2 REPRESENTATIONS AND WARRANTIES RELATING TO ENVIRONMENTAL MATTERS.
Borrower represents and warrants to the Agent and each of the Banks that,
except as disclosed on SCHEDULE 8.2 hereto:
8.2.1 NO EXISTING VIOLATION. Neither the Real Property nor
Borrower is in violation of or subject to any existing, pending or, to the
knowledge of Borrower, threatened investigation by any governmental authority
under any Environmental Law.
8.2.2 NO PERMITS REQUIRED. Borrower has not acquired and is not
required by any applicable Environmental Law to obtain any permits or license
to construct or use any improvements, fixtures or equipment forming a part of
the Real Property except such permits or licenses as have been obtained.
8.2.3 PREVIOUS USES. Borrower or its environmental advisors has
made diligent inquiry into previous uses and ownership of the Real Property,
and based upon such inquiry has no knowledge of any Hazardous Substance
disposed of or released on or to the Real Property.
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8.2.4 USE BY BORROWER. Borrower's prior, present and intended
use of the Real Property will not result in the disposal or release of any
Hazardous Substance on or to the Real Property except in material compliance
with applicable law.
8.2.5 UNDERGROUND STORAGE. No underground storage tanks, whether
or not containing any Hazardous Substances, are located on or under the Real
Property.
8.3 ENVIRONMENTAL RISK ASSESSMENT. Within 30 days after a written
request therefor by the Agent or the Majority Banks, Borrower shall deliver to
the Agent and each of the Banks a report prepared at Borrower's cost and
expense by an environmental consultant acceptable to the Majority Banks,
detailing the results of an environmental investigation concerning the Real
Property or any portion thereof designated in such notice, including results
of any soil and ground water samples that may have been taken in connection
with such investigation.
8.4 SURVIVAL OF OBLIGATIONS. The provisions of this SECTION 8 shall
be in addition to any and all other obligations and liabilities Borrower may
have to the Agent and each of the Banks at common law or pursuant to any other
agreement and, notwithstanding anything in SECTION 11.13 hereof to the
contrary, shall survive (a) the repayment of the Revolving Credit Notes and
all other Indebtedness, (b) the satisfaction of all of Borrower's other
obligations hereunder and under the other loan documents, (c) the discharge of
any mortgage which has been or is hereafter granted to the Agent and any of
the Banks, and (d) the foreclosure or acceptance of a deed in lieu of
foreclosure of any mortgage which has been or is hereafter granted to the
Agent or any of the Banks.
SECTION 9. EVENTS OF DEFAULT - ENFORCEMENT -
APPLICATION OF PROCEEDS
9.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an Event of Default hereunder:
9.1.1 FAILURE TO PAY MONIES DUE. If Borrower shall fail to pay,
within three (3) days of the date when such payment is due, any of the
Indebtedness, including, without limitation, any principal or interest under
the Revolving Credit Note or any taxes, insurance or other amount payable by
Borrower under this Agreement or under any document executed in connection
herewith, or if General Partner and/or Guarantor shall fail to pay, when due,
any indebtedness, obligation or liability whatsoever of such Person to the
Agent and/or any of the Banks.
9.1.2 MISREPRESENTATION. If any warranty or representation of
Borrower in connection with or contained in this Agreement, or if any
financial data or other information now or hereafter furnished to the Agent
and/or any of the Banks by or on behalf of Borrower, shall prove to be false
or misleading in any material respect.
9.1.3 NONCOMPLIANCE WITH THE BANK AGREEMENTS. If Borrower,
General Partner and/or Guarantor shall fail to perform in the time and manner
required any of its obligations or covenants under, or shall fail to comply
with any of the provisions of, this Agreement, the Lease Assignment, the
Guaranty, which does not involve the failure to make a payment when due (be
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it principal, interest, taxes, insurance or otherwise) and which is not cured
by Borrower within 20 days after the earlier of the date of notice to
Borrower by the Agent and/or any of the Banks of such Default or the date the
Agent and/or any of the Banks is notified, or should have been notified
pursuant to Borrower's obligation under SECTION 6.1.7 hereof, of such
Default, provided that with respect to any noncompliance with SECTION 8
hereof which requires Remedial Work, such 20 day period shall be extended to
such time as is required under SECTION 8.1.6 hereof.
9.1.4 OTHER DEFAULTS.
(a) If Borrower, General Partner or Guarantor shall
default in the payment when due of any of its indebtedness (other than
indebtedness owing to the Agent and/or any of the Banks and Qualifying
Non-Recourse Debt covered by SECTION 9.1.4(b) below) or in the observance or
performance of any term, covenant or condition in any agreement or instrument
evidencing, securing or relating to such indebtedness, and such default be
continued for a period sufficient to permit acceleration of the indebtedness,
irrespective of whether any such default shall be forgiven or waived or there
has been acceleration by the holder thereof (provided however, if the
Borrower, General Partner or Guarantor shall give prompt notice of such
default to the Agent and the Banks under SECTION 6.1.7 hereof, together with
evidence of the bona fide contest of the same by appropriate and lawful
proceedings and the Agent and the Banks shall be provided with reasonable
assurances or collateral such that such default will not have a material
adverse effect on the business or operations (financial or otherwise) of the
Borrower, General Partner or Guarantor or the value of any material portion of
the Collateral then, in that event there shall be no Event of Default until
such time as an adverse final judgment has been entered in the matter,
subject, however, to the provisions of SECTION 9.1.5 below); or
(b) if Borrower, General Partner or Guarantor shall
default in the payment when due of any of its Qualifying Non-Recourse Debt or
in the observance or performance of any term, covenant or condition in any
agreement or instrument evidencing, securing or relating to such indebtedness,
and such default be continued for a period sufficient to permit acceleration
of the Qualifying Non-Recourse Debt, irrespective of whether any such default
shall be forgiven or waived or there has been acceleration by the holder
thereof where the occurrence or existence of such default would have a
material adverse effect on the business or operations (financial or otherwise)
of Borrower, General Partner and/or Guarantor (provided however, if the
Borrower, General Partner or Grantor shall give prompt notice of such default
to the Agent and the Banks under SECTION 6.1.7 hereof, together with evidence
of the bona fide contest of the same by appropriate and lawful proceedings and
the Agent and Banks shall be provided with reasonable assurances or collateral
such that such default will not have a material adverse effect on the business
or operations (financial o otherwise) of the Borrower, General Partner or
Guarantor or the value of any material portion of the Collateral then, in that
event there shall be no Event of Default until such time as an adverse final
judgment has been entered in the matter, subject, however, to the provisions
of SECTION 9.1.5 below).
9.1.5 JUDGMENTS. If there shall be rendered against Borrower,
General Partner and/or Guarantor one or more judgments or decrees involving an
aggregate liability of $250,000 or more, which has or have become
nonappealable and shall remain undischarged, unsatisfied by insurance and
unstayed for more than 30 days, whether or not consecutive; or if a writ of
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attachment or garnishment against the property of Borrower, General Partner
and/or Guarantor shall be issued and levied in an action claiming $250,000 or
more and not released or appealed and bonded/secured in an amount and manner
reasonably satisfactory to the Agent and each of the Banks within 30 days
after such issuance and levy.
9.1.6 BUSINESS SUSPENSION, THE BANKRUPTCY, ETC. If Borrower,
General Partner and/or Guarantor shall voluntarily suspend transaction of its
business; or if Borrower, General Partner and/or Guarantor shall not pay its
debts as they mature or shall make a general assignment for the benefit of
creditors; or proceedings in the Bankruptcy, or for reorganization or
liquidation of Borrower, General Partner or Guarantor under the Bankruptcy
Code or under any other state or federal law for the relief of debtors shall
be commenced or shall be commenced against Borrower, General Partner or
Guarantor and shall not be discharged within 30 days of commencement; or a
receiver, trustee or custodian shall be appointed for Borrower, General
Partner or Guarantor or for any substantial portion of its respective
properties or assets.
9.1.7 CHANGE OF MANAGEMENT OR OWNERSHIP. If (a) General Partner
or a controlling portion of its voting stock or a substantial portion of its
assets comes under the practical, beneficial or effective control of one or
more Persons other than the existing shareholders of General Partner set forth
on SCHEDULE 5.16, whether by reason of death, merger, consolidation, sale or
purchase of stock or assets or otherwise, (b) General Partner and/or Guarantor
transfers, assigns or pledges any interest, legal or beneficial, in the
interest of such partner in Borrower to any Person other than the Agent for
the benefit of itself and the Banks, (c) a change in Borrower's senior
management occurs which in the Agent's or any of the Bank's sole judgment
could be expected to adversely affect Borrower's ability to carry on its
business as conducted before such change, (d) General Partner at any time
ceases to be or no longer is the sole general partner of Borrower for any
reason whatsoever, (e) General Partner at any time ceases to be or no longer
is the sole General Partner of Guarantor for any reason whatsoever, or (f)
there exists any general partner in Borrower or Guarantor other than General
Partner.
9.1.8 INADEQUATE FUNDING OR TERMINATION OF EMPLOYEE BENEFIT
PLAN(S) OR OCCURRENCE OF CERTAIN REPORTABLE EVENTS. If (a) Borrower, General
Partner or Guarantor shall fail to meet its minimum funding requirements under
ERISA with respect to any employee benefit plan established or maintained by
it, or if any such plan shall be subject of termination proceedings (whether
voluntary or involuntary) and there shall result from such termination
proceedings a liability of Borrower, General Partner or Guarantor to the PBGC
which in the reasonable opinion of the Agent will have a materially adverse
effect upon the operations, business, property, assets, financial condition or
credit of Borrower, General Partner or Guarantor or (b) there shall occur,
with respect to any pension plan maintained by Borrower, General Partner or
Guarantor any reportable event (within the meaning of Section 4043(b) of
ERISA) which the Agent shall determine constitutes a ground for the
termination of any such plan, and if such event continues for 30 days after
the Agent gives written notice to Borrower, provided that termination of such
plan or appointment of such trustee would, in the opinion of the Agent, have a
materially adverse effect upon the operations, business, property, assets,
financial condition or credit of Borrower, General Partner or Guarantor.
9.2 ACCELERATION OF INDEBTEDNESS; REMEDIES. (a) Upon the occurrence
of an Event of Default, all Indebtedness shall be due and payable in full
immediately at the option of the
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Majority Banks without presentation, demand, protest, notice of dishonor or
other notice of any kind, all of which are hereby expressly waived. Unless
all of the Indebtedness is then immediately fully paid, the Agent, at the
direction of the Majority Banks, and each of the Banks shall have and may
exercise any one or more of the rights and remedies for which provision is
made for a secured party under the UCC, any or all Lease Assignments or other
Loan Document or under any other document contemplated hereby or for which
provision is provided by law or in equity, including, without limitation, the
right to take possession and sell, lease or otherwise dispose of any or all
of the Collateral (subject, in regards to any Burger King Restaurant
Location, to any applicable limitations contained in SECTION 9.2(b) of this
Agreement) and to set off against the Indebtedness any amount owing by the
Agent and/or any Bank to Borrower and/or any property of Borrower in its
possession. Borrower agrees, upon request of the Agent or any Bank, to
assemble the Collateral and make it available to the Agent or any Bank at any
place designated by the Agent or such Bank, as the case may be, which is
reasonably convenient to the Agent or such Bank, as the case may be, and
Borrower. In addition to and not in limitation of the other provisions of
this SECTION 9.2, upon the occurrence of an Event of Default, the Agent and
each of the Banks may, at its option, terminate its commitment under this
Agreement to make Advances.
(b) Except as may otherwise be agreed to or consented to by BKC from
time to time, and only to the extent that such a requirement may exist under
the Borrower's Partnership Agreement, before any foreclosure on any Burger
King Restaurant Location (or other transfer of any Burger King Restaurant
Location occurring in connection with enforcement proceedings by the Agent
and/or any Bank against such Burger King Restaurant Location) may be had under
any Lease Assignment covering the same the Agent or such Bank shall first
notify BKC in writing of its intent to foreclose or effect another transfer
and shall first offer such 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 Agent and/or any such Bank) in connection with such
foreclosure or other transfer. The terms of this SECTION 9.2(b) shall be
deemed to be effective as of the date of the Original Agreement. In
accordance with the Borrower's Partnership Agreement, Borrower warrants and
represents to the Agent and the Banks that the credit facility contemplated
under this Agreement and secured by the Collateral (which includes without
limitation Burger King Restaurant Locations) is a bona fide transaction and
that the Agent and the Banks are unrelated to and unaffiliated with BKC, the
Managing General Partner (as such term is defined in Borrower's Partnership
Agreement) or any Affiliate (as such term is defined in Borrower's Partnership
Agreement) thereof.
9.3 ONE OBLIGATION; APPLICATION OF PROCEEDS. All of the Indebtedness,
including the Advances, shall constitute one loan and obligation, secured by
the Agent's and each Bank's lien or security interest in the Collateral and by
all other security interests, mortgages, liens, claims, and encumbrances now
and from time to time hereafter granted from Borrower to the Agent for the
benefit of itself and the Banks, or to any of the Banks. Upon the occurrence
of an Event of Default, the Agent or any Bank, as the case may be, may in its
sole discretion apply the Collateral to any portion of the Indebtedness. The
proceeds of any sale or other disposition of the Collateral authorized by this
Agreement shall be applied by the Agent or any Bank as the case may be, first
upon all expenses authorized by the UCC or other applicable law or Loan
Document or otherwise in connection with the sale and all reasonable
attorneys' fees and legal expenses incurred by the Agent or such Bank, as the
case may be. The balance of the proceeds
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of such sale or other disposition shall be applied in the payment of the
Indebtedness, first to the costs and expenses of the Agent or such Bank, as
the case may be, then to interest, then to principal, and then to other
Indebtedness. The surplus, if any, shall be paid over to Borrower or to such
other Person or Persons as may be entitled thereto under applicable law.
Borrower shall remain liable for any deficiency, which Borrower shall pay to
the Agent and each Bank immediately upon demand.
9.4 CUMULATIVE REMEDIES. The remedies provided for herein are
cumulative to the remedies for collection of the Indebtedness as provided by
law, in equity or by any mortgage, security agreement or other document
contemplated hereby. Nothing herein contained is intended, nor shall it be
construed, to preclude the Agent or any Bank from pursuing any other remedy
for the recovery of any other sum to which it may be or become entitled for
the breach of this Agreement by Borrower.
9.5 PAYABLE UPON DEMAND. To the extent that any of the Indebtedness
is payable upon demand, nothing contained in this Agreement or any document
contemplated hereby shall be construed to prevent the Agent or any Bank from
making demand, with or without reason, for immediate payment of all or any
part of such Indebtedness at any time or times, whether or not a Default or an
Event of Default has occurred.
SECTION 10. THE AGENT
10.1 AUTHORIZATION AND ACTION. Each Bank hereby appoints and
authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement as are delegated to the Agent by the
terms hereof, together with such powers as are reasonably incidental thereto.
As to any matters not expressly provided for by this Agreement (including,
without limitation, enforcement or collection of the Revolving Credit Notes),
the Agent shall not be required to exercise any discretion or take any action,
but shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Majority Banks pursuant to the terms of the Bank Intercreditor Agreement;
PROVIDED, HOWEVER, that the Agent shall not be required to take any action
which exposes the Agent to personal liability or which is contrary to this
Agreement or applicable law. In addition to and not in limitation of the
foregoing, each Bank hereby specifically appoints and authorizes Agent to act
as agent for and on behalf of such Bank as the Beneficiary under the Lease
Assignments.
10.2 DUTIES AND OBLIGATIONS. The Agent agrees to execute the same
degree of care in handling its duties under this Agreement as it would
normally do with respect to credits of a comparable size, amount and nature
held entirely for its own account. Neither the Agent nor any of its
directors, officers, agents, or employees shall be liable for any action taken
or omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent (i) may treat
the payee of any Bank as the holder of such Bank's Pro Rata Share of the
Indebtedness unless and until the Agent receives written notice of the
assignment thereof signed by such Bank and the Agent receives the written
agreement of the assignee that such assignee is bound hereby as it would have
been if it had been an original Bank party hereto, in each case in form
reasonably satisfactory to the Agent, (ii) may consult with legal counsel
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(including counsel for Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts, and (iii) shall incur no liability under or in respect
of this Agreement by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram, cable, telex or facsimile)
believed by it to be genuine and signed or sent by the proper party or parties
or by acting upon any representation or warranty of Borrower made or deemed to
be made hereunder. Further, the Agent (A) makes no warranty or representation
to any Bank and shall not be responsible or have any liability to any Bank for
the accuracy or completeness of any statements, warranties or representations
(whether written or oral) made by Borrower in or in connection with this
Agreement the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto, the existence, validity, enforceability,
effectiveness or priority of any lien or security interest in the Collateral
granted or proposed to be granted under this Agreement, the Lease Agreement,
or any other document, or the value, adequacy or existence of any Collateral,
(B) shall not have any duty to ascertain or to inquire as to the performance
or observance of any of the terms, covenants or conditions of this Agreement
on the part of Borrower or to inspect the property (including the books and
records) of Borrower.
10.3 AGENT AND AFFILIATES. With respect to its commitment, the
Advances made by it, the Letters of Credit issued by it, and its Pro Rata
Share of the Indebtedness, the Agent shall have the same rights and powers
under this Agreement as the other Banks and may exercise the same as though it
were not the Agent; and the term "BANK" or "BANKS" shall, unless otherwise
expressly indicated, include the Agent in its capacity as Bank. Comerica and
its affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, Borrower,
all as if Comerica were not the Agent hereunder and without any duty to
account therefor to the Banks, but in the event of such engagement, additional
funds advanced by Comerica under such business outside of the contemplation of
the Advances, Letters of Credit and other credit accommodations described in
this Agreement and the Loan Documents shall not be deemed to be part of the
Indebtedness.
10.4 BANK CREDIT DECISION. It is understood and agreed by each Bank
that it has itself been, and will continue to be, solely responsible for
making its own independent appraisal of and investigations into the financial
condition, creditworthiness, condition, affairs, status and nature of
Borrower. Accordingly, each Bank confirms to the Agent that such Bank has not
relied, and will not hereafter rely, on the Agent (i) to check or inquire on
its behalf into the adequacy, accuracy or completeness of any information
provided by Borrower under or in connection with this Agreement or the
transactions herein contemplated (whether or not such information has been or
is hereafter distributed to such Bank by the Agent), or (ii) to assess or keep
under review on its behalf the financial condition, creditworthiness,
condition, affairs, status or nature of Borrower. Each Bank acknowledges that
a copy of this Agreement and a copy of the Exhibits hereto have been made
available to it and to its individual legal counsel for review and such Bank
acknowledges that it is satisfied with the form and substance of this
Agreement and the Exhibits hereto.
10.5 INDEMNIFICATION. The Banks agree to indemnify the Agent (to the
extent not reimbursed by Borrower), ratably according to their respective Pro
Rata Share, from and against
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any and all liabilities, obligations, losses, damages, penalties, actions,
judgment, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against the
Agent in any way relating to or arising out of this Agreement or any action
taken or omitted by the Agent under this Agreement, provided that no Bank
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence or willful
misconduct. Without limiting the generality of the foregoing, each Bank
agrees to reimburse the Agent promptly upon demand for its ratable share of
any reasonable out-of-pocket expenses (including reasonable counsel fees)
incurred by the Agent in connection with the preservation of any rights of
the Agent or the Banks under, or the enforcement of, or legal advice in
respect of rights or responsibilities under, this Agreement, to the extent
that the Agent is not reimbursed for such expenses by Borrower.
10.6 SUCCESSOR AGENT. The Agent may resign at any time by giving 60
days prior written notice thereof to the Banks and Borrower. If no successor
Agent shall have been appointed by the Majority Banks, and shall have accepted
such appointment, within 60 days after the retiring Agent's giving of notice
of resignation, then the retiring Agent may, on behalf of the Banks, appoint
Compass as successor Agent (or if Compass does not accept such appointment,
another successor Agent, which shall be either a Bank or a bank organized
under the laws of the United States or of any state thereof, or any affiliate
of such bank, and having a combined capital and surplus of at least
$50,000,000). 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 retiring Agent shall be discharged from its duties and
obligations under this Agreement arising after the date of such acceptance.
After any retiring Agent's resignation hereunder as Agent, the provision of
this SECTION 10 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement.
10.7 EXCHANGE OF INFORMATION. Each Bank and the Agent shall freely
exchange with the other(s) of them any information relating to the condition,
financial or otherwise, of any Loan Party, and Borrower hereby consents any
and all prior, present or future such exchanges.
10.8 BENEFIT OF THE AGENT AND THE BANKS ONLY. The terms and provisions
of this SECTION 10 are for the sole and exclusive benefit of the Agent and the
Banks, and not for the benefit of the any Loan Party or any other person. The
provisions of this SECTION 10 may be modified and amended by the unanimous
consent of the Agent and the Banks and the consent of Borrower shall not be
required for any such modification or amendment.
SECTION 11. MISCELLANEOUS
11.1 CERTAIN RELEASES OF SPECIFIC REAL PROPERTY COLLATERAL. Upon the
request of Borrower, the Agent and each of the Banks will, so long as there
exists no Default or Event of Default, execute in connection with Borrower's
sales of real property permitted under SECTION 7.8(a) of this Agreement
releases of such property from the lien and encumbrance of the Lease Agreement
covering such property, PROVIDED THAT (a) each such property to be released is
being sold in the ordinary course of business by Borrower to BONA FIDE
unrelated third parties, (b) either (i) such property is being replaced with
substantially equivalent Real Property with
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a substantially equivalent stream of rent payments of similar credit quality
or (ii) the sale of such property is for cash and the proceeds of the sale,
net only of reasonable seller's closing costs, are applied by Borrower as a
payment on the Advances, (c) the property to be released consists of the
entire parcel or parcels of property acquired and is not a mere portion
thereof, and (d)_has submitted to the Agent and each of the Banks properly
prepared release documents in a form satisfactory to the Agent and each of
the Banks, and with respect to any new parcel described in clause (b)(i)
hereof, properly prepared Lease Assignments (or other agreements, documents
and instruments satisfactory to the Agent and each of the Banks in its sole
discretion) for such parcel, the warranty deed and closing statement for such
property or properties, and such other information as the Bank shall
reasonably request.
11.2 INDEPENDENT RIGHTS. No single or partial exercise of any right,
power or privilege hereunder, or any delay in the exercise thereof, shall
preclude other or further exercise of the rights of the parties to this
Agreement.
11.3 COVENANT INDEPENDENCE. Each covenant in this Agreement shall be
deemed to be independent of any other covenant, and an exception or illegality
in one covenant shall not create an exception or illegality in another
covenant.
11.4 WAIVERS AND AMENDMENTS. No forbearance on the part of the Agent
or any of the Banks in enforcing any of its rights under this Agreement, nor
any renewal, extension or rearrangement of any payment or covenant to be made
or performed by Borrower hereunder, shall constitute a waiver of any of the
terms of this Agreement or of any such right. No amendment or waiver of any
provision of this Agreement or any other Loan Document, nor consent to any
departure by Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Majority Banks and then such waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which given; PROVIDED, HOWEVER, that any modification of,
or waiver of compliance with any of the provisions of, this SECTION 11.4 or
the Indebtedness or any terms affecting the maturity of or any other dates for
payment of the amounts of any Indebtedness, the Advances, interest on the
Advances, or the release of any Collateral (except to the extent contemplated
hereunder), the Revolving Credit Notes or the Indebtedness shall require the
written agreement of the Agent and each of the Banks.
11.5 GOVERNING LAW. This Agreement, and each and every term and
provision hereof, shall be governed by and construed in accordance with the
internal law of the State of Texas. If any provisions of this Agreement shall
for any reason be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof, but this
Agreement shall be construed as if such invalid or unenforceable provisions
had never been contained herein.
11.6 SURVIVAL OF WARRANTIES, ETC. All of Borrower's covenants,
agreements, representations and warranties made in connection with this
Agreement and any document contemplated hereby shall survive the borrowing and
the delivery of the Revolving Credit Notes hereunder and shall be deemed to
have been relied upon by the Agent and each of the Banks, notwithstanding any
investigation heretofore or hereafter made by the Agent or any of the Banks.
All statements contained in any certificate or other document delivered to the
Agent or any of
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the Banks at any time by or on behalf of Borrower pursuant hereto or in
connection with the transactions contemplated hereby shall constitute
representations and warranties by Borrower in connection with this Agreement.
11.7 FURTHER ASSURANCES. Borrower agrees, at its cost and expense, to
execute and deliver, and to cause each of its Subsidiaries and Affiliates to
execute and deliver, all further instruments and documents (including without
limitation any security agreement or fee or leasehold mortgage or deed of
trust or assignment of leases or rents or any modifications to any existing
mortgages and Lease Assignments as are necessary to reflect that the
Indebtedness under this Agreement is a modification and extension of the
indebtedness, liabilities and obligations arising under and contemplated by
the Original Agreement in form and substance satisfactory to the Agent or the
Majority Banks), and take all further action, that may be necessary or
appropriate, or that the Agent or any of the Banks may request, in order to
perfect or protect any lien or security interest granted or purported to be
granted under the Lease Assignment or any other Loan Documents or with respect
to any other Collateral and any other remove property (whether real, personal
or mixed) owned or leased by Borrower or any of its Subsidiaries or
Affiliates, now or in the future, that the Agent or the Majority Banks may
specify.
11.8 COSTS AND EXPENSES. Borrower agrees that it will reimburse the
Agent and each of the Banks, upon demand, for all costs and expenses incurred
by any of them in connection with (a) collecting or attempting to collect the
Indebtedness or any part thereof; (b) maintaining or defending the Bank's
security interests or liens (or the priority thereof); (c) the enforcement of
any of their rights or remedies under this Agreement or the other documents
contemplated hereby; (d) the preparation or making of this Agreement, the
other Loan Documents and the other documents contemplated hereby, and of any
amendments, modifications, waivers or consents with respect to this Agreement,
the other Loan Documents or the other documents contemplated hereby; and/or
(e) any other matters or proceedings arising out of or in connection with any
lending arrangement between the Agent and/or any of the banks and Borrower,
which costs and expenses include, without limitation, payments made by the
Agent and/or any of the Banks for taxes, insurance, assessments, or other
costs or expenses which Borrower is required to pay under this Agreement, any
of the other Loan Documents or any of the other documents contemplated hereby;
reasonable expenses related to the examination and appraisal of the
Collateral; reasonable audit expenses; court costs and reasonable attorneys'
fees (whether in-house or outside counsel is used, whether legal assistants
are used, and whether such costs are incurred in formal or informal collection
actions, federal the Bankruptcy proceedings, probate proceedings, on appeal or
otherwise); and all other costs and expenses of the Agent or any of the Banks
incurred in connection with any of the foregoing. All the costs and expenses
of the Agent and each of the Banks shall become part of the Indebtedness and
shall be secured by the Collateral. Without limiting any of the foregoing,
the Agent or any of the Banks may, at any time or times, in its sole
discretion (without any obligation to do so), without waiving or releasing any
obligations, liability or duty of Borrower under this Agreement or the other
Loan Documents, or any Event of Default, (i) make any payment for taxes,
insurance, assessments, or other costs or expenses which Borrower or any Loan
Party is required to pay under this Agreement, any of the other Loan Documents
or any of the other documents contemplated hereby, (ii) pay when due, acquire
or accept an assignment of any Lien or claim asserted by any Person against
any of the Collateral and/or (iii) receive, and require the right to receive,
notice
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and an opportunity to cure any default under any document or instrument
securing any Qualifying Non-Recourse Debt (and Borrower, Guarantor, General
Partner and each other Loan Party shall execute and provide, and shall cause
to be executed and provided, documentation reasonably acceptable to the Agent
and the Banks creating such rights to notice and opportunity to cure). All
sums paid by the Agent or any such Bank in respect thereof and all costs,
fees and expenses, including, without limitation, attorney's fees and court
costs, which are incurred by the Agent or any such Bank on account thereof,
shall be payable upon demand, by Borrower to the Agent for the ratable
benefit of itself and such Banks, as the case may be, together with interest
accruing at the Default Rate from the date of demand until paid and shall be
secured by the Collateral. Neither the Agent nor any Bank shall be liable or
responsible in any way for the safekeeping of any of the Collateral or for
any loss or damage thereto or for any diminution in the value thereof, or for
any act or default of any warehouseman, carrier, forwarding agency, or other
person whomsoever, but the same shall be at Borrower's sole risk.
11.9 PAYMENTS ON SATURDAYS, ETC. Whenever any payment to be made
hereunder shall be stated to be due on a Saturday, Sunday or any other day
which is not a Business Day, such payment may be made on the next succeeding
Business Day, and such extension, if any, shall be included in computing
interest in connection with such payment.
11.10 RIGHT OF SET-OFF. Upon the occurrence and during the continuance
of any Event of Default the Agent and each Bank is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time
owing by the Agent and/or such Bank to or for the credit or the account of
Borrower against any and all of the obligations of Borrower now or hereafter
existing under any Loan Document, irrespective of whether or not the Agent or
such Bank shall have made any demand under such Loan Document and although
such deposits, indebtedness or obligations may be unmatured or contingent.
Agent and such Bank agree promptly to notify Borrower after any such set-off
and application, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of the Agent
and Banks under this SECTION 11.10 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Agent and the Banks may have. In the event of any such set-off the Bank or
the Agent setting-off such amount shall promptly remit the proportionate share
of such sum to the other Banks in accordance with their respective Pro Rata
Share.
11.11 BINDING EFFECT; SUCCESSORS AND ASSIGNS; PARTICIPATIONS. (a) This
Agreement shall be binding upon and inure to the benefit of Borrower, the
Agent and the Banks and their respective successors and assigns, except that
Borrower shall not have the right to assign its rights hereunder or any
interest herein without the prior written consent of the Agent and the
Majority Banks.
(b) Each Bank shall have the right at any time, without the
consent of Borrower or any other person, to assign, negotiate,
hypothecate, or grant participations in this Agreement or in any of its
commitments, Advances, rights and security under this Agreement and any
of the other Loan Documents to either one or more of its affiliates
which is a commercial banking or financial institution or to one or more
of the Banks,
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and in the event of the exercise of such right shall promptly notify
the Agent and the other Banks thereof.
(c) Each Bank shall have the right at any time, with the written
consent of each of the other Banks, to assign, negotiate, or hypothecate
this Agreement or any of its commitments, Advances, rights and security
under this Agreement and any of the other Loan Documents to any other
commercial banking or financial institution, and each Bank so assigning,
negotiating, or hypothecating this Agreement shall promptly notify the
Agent and the other Banks thereof.
(d) Each Bank assigning or transferring any of its commitments,
Advances, rights and security under this Agreement or any of the other
Loan Documents shall, promptly upon request by the Agent, execute and
deliver such documents and instruments reasonably requested by the Agent
(collectively, a "BANK SUPPLEMENT") to evidence such assignment or
transfer and to substitute the assignee or transferee as a Bank on all
of the Loan Documents. Borrower hereby acknowledges and agrees that any
assignment or transfer described in this SECTION 11.11 will give rise to
a direct obligation of Borrower to the buyer, assignee, or transferee,
as the case may be, and such person shall be considered a Bank and rely
on, and possess all rights under, all opinions, certificates or other
instruments delivered under or in connection with this Agreement or any
other Loan Document. Borrower shall accord full recognition to any such
assignment or transfer, and all rights and remedies of such Bank in
connection with the interest so assigned shall be as fully enforceable
by such assignee as they were by the assignor Bank thereof before such
assignment.
(e) The Agent shall receive, in connection with each such
agreement or transfer, a $2,500 processing and recordation fee payable
by the assignee or transferee, as the case may be.
(f) Additionally, each Bank shall have the right to sell or
otherwise grant participations in the Agreement or in any of its
commitments, Advances, Revolving Credit Notes, rights and security under
this Agreement and any of the other Loan Documents to any other
commercial banking or financial institution, PROVIDED THAT: (i) such
transferor Bank shall promptly notify Agent of the sale or grant of such
participation and of the identity of such participant, (ii) such
transferor Bank's obligations under this Agreement (including, without
limitation, its commitments hereunder) shall remain unchanged, (iii)
such transferor Bank shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iv) such
transferor Bank shall remain the holder of its Pro Rata Share of the
Revolving Credit Note for all purposes of this Agreement, (v) Borrower,
the Agent and the other Banks shall continue to deal solely and directly
with such transferor Bank in connection with such transferor Bank's
rights and obligations under this Agreement, and (vi) such participant
under any such participation shall not be in privity of contract with
Borrower, the Agent and the Banks (other than the Bank from whom the
participant obtained such participation) and shall not have any right to
deal directly with Borrower, the Agent or such other Banks in connection
with any approval of any amendment or waiver of any provision of this
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Agreement or any other Loan Document or approval of any consent to any
departure therefrom by any party.
(g) Without limiting the foregoing, Compass agrees that, in
connection with the addition of a third Bank acceptable to Comerica and
Compass under this Agreement, Compass shall reduce its Pro Rata Share to
as low as forty percent (40%) concurrently with a corresponding equal
reduction of Comerica's Pro Rata Share, provided that such concurrent
reductions are accompanied by a contemporaneous ratable adjustment of
Compass and Comerica's respective Pro Rata Share of the Overall
Commitment Amount and the commitment of the third Bank for its
assumption of the balance of the Overall Commitment Amount.
(h) In connection with any proposed assignment, negotiation,
hypothecation or granting of a participation, the Agent and any such
Bank or Banks, as the case may be, may disclose to the proposed assignee
or participant any information that Borrower is required to deliver to
the Agent and/or the Banks pursuant to this Agreement or the other Loan
Documents, and Borrower hereby agrees to cooperate fully with the Agent
and the Banks, as the case may be, in providing any such information to
any proposed assignee or participant.
11.12 MAINTENANCE OF RECORDS. Borrower will keep all of its records
concerning its business operations and accounting at its principal place of
business. Borrower will give the Bank prompt written notice of any change in
its principal place of business, or in the location of its records.
11.13 NOTICES. All notices and communications provided for herein or
in any document contemplated hereby or required by law to be given shall be in
writing (unless expressly provided to the contrary) and, if personally
delivered, effective when delivered at the address below or, in the case of
mailing, effective two days after sending by first class mail, postage
prepaid, addressed as follows, or to such other address as a party shall have
designated to the other in writing in accordance with this section, except
that notices to the Agent and/or the Banks pursuant to the provisions of
SECTION 2 shall not be effective until received by the Agent and/or Banks, as
the case may be:
If to Borrower: U.S. Restaurant Properties Operating L.P.
5310 Harvest Hill Road
Suite 270, L.B. 168
Dallas, Texas 75230
Attn: Robert J. Stetson and Fred H. Margolin
with a copy to: Middleberg Riddle & Gianna, L.L.P.
2323 Bryan Street, Suite 1600
Dallas, Texas 75201
Attn: Richard S. Wilensky, Esq.
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If to the Agent or Comerica:Comerica Bank-Texas
P. O. Box 650282
Dallas, Texas 75262-0282
Attn: Gary L. Emery
with a copy to: Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Attn: James C. Chadwick, Esq.
if to Compass: Compass Bank - Dallas
8080 N. Central Expressway, Suite 370
Dallas, Texas 75206
Attn: John H. Reichenbach
with a copy to: Kuntz & Bonesio, L.L.P.
1717 Main Street, Suite 4050
Dallas, Texas 75201
Attn: Walter N. Kuntz, III, P.C.
and, if to a Bank other than Comerica or Compass, at the address of such Bank
set forth on the most recent Bank Supplement to which such Bank is a party,
or, as to each party, at such other address as shall be designated by such
party in a written notice to the other party.The giving of at least five
days notice before the Agent or any Bank shall take any action described in
any notice shall conclusively be deemed reasonable for all purposes; provided,
that this shall not be deemed to require the Agent or any Bank to give five
days notice or any notice if not specifically required in this Agreement.
11.14 COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures were upon the same
instrument.
11.15 HEADINGS. Article and section headings in this Agreement are
included for the convenience of reference only and shall not constitute a part
of this Agreement for any purpose.
11.16 RELEASE AND DISCHARGE. Upon full payment of the Indebtedness
(including without limitation all Advances and all Letter of Credit Exposure),
performance by Borrower of all its other obligations hereunder and all
commitments and other obligations of the Agent and the Banks under the Loan
Documents having terminated, except as otherwise expressly provided herein,
the parties shall thereupon automatically each be fully, finally and forever
released and discharged from any claim, liability or obligation in connection
with this Agreement and the other documents contemplated hereby.
11.17 INCONSISTENCY WITH OTHER AGREEMENTS. To the extent any term or
provision contained in this Agreement shall be inconsistent with any provision
in any other document or instrument executed in connection herewith, this
Agreement shall control.
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11.18 RELEASE. BORROWER AND GUARANTOR HEREBY VOLUNTARILY AND KNOWINGLY
RELEASE AND FOREVER DISCHARGE THE AGENT AND EACH OF THE BANKS, ITS
PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE
CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND
LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED,
SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS SECOND
AMENDMENT IS EXECUTED, WHICH BORROWER AND GUARANTOR, INDIVIDUALLY OR
COLLECTIVELY, MAY NOW OR HEREAFTER HAVE AGAINST THE AGENT AND EACH OF THE
BANKS, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY,
AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT,
VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY ADVANCES,
ADVANCES, LETTERS OF CREDIT OR OTHER INDEBTEDNESS, INCLUDING, WITHOUT
LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR
RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE
EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE AGREEMENT OR OTHER TRANSACTION
DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AGREEMENT.
11.19 DTPA WAIVER. BORROWER HEREBY WAIVES ALL OF ITS RIGHTS UNDER THE
DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ.,
TEXAS BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF BORROWER'S OWN SELECTION,
BORROWER VOLUNTARILY CONSENTS TO THIS WAIVER. BORROWER EXPRESSLY WARRANTS AND
REPRESENTS TO THE AGENT AND EACH OF THE BANKS THAT BORROWER (A)_IS NOT IN A
SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO THE AGENT AND EACH OF
THE BANKS AND (B)_HAS BEEN REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
11.20 WAIVER OF JURY TRIAL. BORROWER, THE AGENT AND EACH OF THE BANKS
HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY AND
ALL ACTIONS OR PROCEEDINGS AT ANY TIME IN WHICH BORROWER AND THE AGENT OR ANY
OF THE BANKS ARE PARTIES ARISING OUT OF THIS AGREEMENT OR THE OTHER DOCUMENTS
CONTEMPLATED HEREBY. BORROWER HAS REVIEWED THE FOREGOING WAIVERS WITH ITS
LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
11.21 ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE OTHER "LOAN
AGREEMENTS" (AS DEFINED IN SECTION 26.02(a)(2) OF THE TEXAS BUSINESS &
COMMERCE CODE, AS AMENDED) REPRESENT THE FINAL
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AGREEMENT BETWEEN THE PARTIES, AND THIS AGREEMENT AND THE OTHER WRITTEN LOAN
AGREEMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
11.22 AMENDMENT AND RESTATEMENT. This Agreement and the financing
commitments set forth herein constitute an amendment, modification and
restatement, but not an extinguishment or novation, of the Original Agreement
and the financing commitments set forth therein, the interest in the Original
Agreement of Comerica thereunder having assigned to Comerica and Compass
without recourse or warranty of any kind pursuant to the Assignment Agreement.
This Agreement and the other Documents are not intended as, and shall not be
construed as, a release, impairment or novation of the indebtedness,
liabilities and obligations of Borrower or any of the other Loan Parties under
the Original Agreement and the other agreements, documents and instruments
executed in connection therewith or relating thereto or the liens and security
interests granted therein, all of which liens and security interests are
hereby modified and affirmed. With respect to matters relating to the period
of this Agreement prior to the date hereof, all of the provisions of the
Original Agreement are hereby ratified and confirmed, and shall remain in full
force and effect; PROVIDED, HOWEVER, that with respect to the period prior to
the date hereof, all parties hereto waive all prior defaults under the
Original Agreement as to which Borrower has notified Comerica in writing prior
to the date hereof. The Original Agreement, as modified by the provisions of
this Agreement, shall be construed as one agreement.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
61
<PAGE>
IN WITNESS WHEREOF, Borrower and the Banks have caused this Agreement to
be executed in Dallas, Texas by their duly authorized officers as of the day
and year first written above.
BORROWER:
U.S. RESTAURANT PROPERTIES
OPERATING L.P.
By: U.S. Restaurant Properties, Inc.,
its general partner
By: _____________________________
Fred H. Margolin
Secretary
COMERICA:
Commitment Amount $20,000,000 COMERICA BANK -TEXAS
By: _____________________________
Gary L. Emery
Vice President
COMPASS:
Commitment Amount: $20,000,000 COMPASS BANK -DALLAS
By: _____________________________
John H. Reichenbach
Senior Vice President
AGENT:
COMERICA BANK-TEXAS, as Agent
By: _____________________________
Gary L. Emery
Vice President
62
<PAGE>
LIST OF EXHIBITS
EXHIBIT A-1- Form of Advance Compliance Certificate (Acquisition Advance)
EXHIBIT A-2- Form of Advance Compliance Certificate (Letter of Credit
Advance)
EXHIBIT A-3- Form of Advance Compliance Certificate (Working Capital
Advance)
EXHIBIT B-1- Form of Borrowing Notice (Acquisition Advance)
EXHIBIT B-2- Form of Borrowing Notice (Letter of Credit Advance)
EXHIBIT B-3- Form of Borrowing Notice (Working Capital Advance)
EXHIBIT C - Form of Revolving Credit Note
EXHIBIT D - Form of Lease Assignment
EXHIBIT E - Form of Opinion of Counsel
EXHIBIT F - Form of Guaranty
EXHIBIT G - Form of General Compliance Certificate
LIST OF SCHEDULES
SCHEDULE 1.1- List of Real Property
SCHEDULE 5.2- UCC Records and Property Records
SCHEDULE 5.5- Permitted Liens
SCHEDULE 5.11- Existing Indebtedness
SCHEDULE 5.12- Material Agreements
SCHEDULE 5.16- Subsidiaries
SCHEDULE 5.19- Outstanding Principal Balance of Indebtedness Under Original
Agreement
SCHEDULE 7.4- Permitted Indebtedness
SCHEDULE 8.2- Environmental Disclosures
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 7,127
<SECURITIES> 0
<RECEIVABLES> 1,067,986
<ALLOWANCES> 116,891
<INVENTORY> 20,000
<CURRENT-ASSETS> 3,326,620
<PP&E> 9,113,747
<DEPRECIATION> 2,632,820
<TOTAL-ASSETS> 71,482,739
<CURRENT-LIABILITIES> 1,365,373
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 71,482,739
<SALES> 0
<TOTAL-REVENUES> 9,780,289
<CGS> 0
<TOTAL-COSTS> 1,405,380
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 262,403
<INCOME-PRETAX> 5,270,565
<INCOME-TAX> 47,977
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,222,588
<EPS-PRIMARY> 1.126
<EPS-DILUTED> 1.106
</TABLE>
