<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 23, 1996
REGISTRATION NO. 333-02675
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
U.S. RESTAURANT PROPERTIES MASTER L.P.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6512 41-1541631
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
5310 HARVEST HILL ROAD, SUITE 270
DALLAS, TEXAS 75230
(214) 387-1487
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
ROBERT J. STETSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
U.S. RESTAURANT PROPERTIES, INC.
MANAGING GENERAL PARTNER
5310 HARVEST HILL ROAD, SUITE 270
DALLAS, TEXAS 75230
(214) 387-1487
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
Richard S. Wilensky, Esq. Janice V. Sharry, Esq.
Middleberg, Riddle & Gianna Haynes and Boone, L.L.P.
2323 Bryan Street 901 Main Street
Suite 1600 Suite 3100
Dallas, Texas 75201 Dallas, Texas 75202
Phone (214) 220-6300 Phone (214) 651-5000
Fax (214) 220-0179 Fax (214) 651-5940
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CROSS REFERENCE SHEET
SHOWING LOCATIONS IN PROSPECTUS OF REQUIRED INFORMATION
<TABLE>
<CAPTION>
FORM S-3 ITEM AND CAPTION LOCATION IN PROSPECTUS
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<C> <S> <C>
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus............................ Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Outside Front Cover Page; Underwriting
6. Dilution............................................. *
7. Selling Security Holders............................. *
8. Plan of Distribution................................. Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered........... Description of Units
10. Interest of Named Experts and Counsel................ *
11. Material Changes..................................... Business and Properties; Incorporation by Reference
12. Incorporation of Certain Information by Reference.... Incorporation by Reference
13. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... *
</TABLE>
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* Not Applicable
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 23, 1996
PROSPECTUS
U.S. RESTAURANT PROPERTIES MASTER L.P.
----------------------------------------
1,800,000 UNITS OF BENEFICIAL INTEREST
------------------
U.S. Restaurant Properties Master L.P., a Delaware limited partnership (the
"Partnership"), acquires, owns and manages income-producing properties that it
leases on a triple net basis to operators of fast food and casual dining
restaurants, primarily Burger King-Registered Trademark- and other national and
regional brands, including Dairy Queen-Registered Trademark-,
Hardee's-Registered Trademark- and Chili's-Registered Trademark-. The
Partnership is one of the largest publicly-owned entities in the United States
dedicated to acquiring, owning and managing restaurant properties. At May 20,
1996, the Partnership's portfolio consisted of 231 restaurant properties located
in 40 states (the "Current Properties"), approximately 99% of which were leased.
As of the date hereof, the Partnership has an additional 39 restaurant
properties under binding agreements for acquisition (the "Acquisition
Properties").
This Prospectus relates to the sale of 1,800,000 Units of Beneficial
Interest (the "Units") of the Partnership by the Partnership. The Units are
listed on the New York Stock Exchange (the "NYSE") under the symbol "USV." On
May 22, 1996, the last reported sale price of the Units on the NYSE was $24 5/8
per Unit. Since the Partnership's initial public offering in 1986, the
Partnership has made regular quarterly distributions to Unitholders. See "Price
Range of Units and Distribution Policy."
SEE "RISK FACTORS" WHICH BEGINS ON PAGE 9 OF THIS PROSPECTUS FOR CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO PUBLIC DISCOUNT (1) PARTNERSHIP (2)
<S> <C> <C> <C>
Per Unit................................. $ $ $
Total (3)................................ $ $ $
</TABLE>
(1) The Partnership has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting estimated expenses of $ , payable by the
Partnership.
(3) The Partnership has granted the Underwriters a 30-day option to purchase up
to an additional 270,000 Units at the Price to Public less Underwriting
Discount solely to cover over-allotments, if any. If all such 270,000 Units
are purchased, the total Price to Public, Underwriting Discount and
Proceeds to Partnership will be $ , $ and $ ,
respectively. See "Underwriting."
------------------------------
The Units are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by the Underwriters and subject to
approval of certain legal matters by counsel for the Underwriters and to certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the Units offered hereby will be made on or about , 1996.
MORGAN KEEGAN & COMPANY, INC.
EVEREN SECURITIES, INC.
SOUTHWEST SECURITIES, INC.
The date of this Prospectus is , 1996
<PAGE>
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-
THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ALL RESPECTS BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED ALL
INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT
OPTION IS NOT EXERCISED. THE PARTNERSHIP AND THE OPERATING PARTNERSHIP (AS
DEFINED BELOW) 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 PARTNERSHIP
GENERAL
The Partnership acquires, owns and manages income-producing properties that
it leases on a triple net basis to operators of fast food and casual dining
restaurants, primarily Burger King and other national and regional brands,
including Dairy Queen, Hardee's and Chili's. The Partnership acquires properties
either from third party lessors or from operators on a sale/leaseback basis.
Under a triple net lease, the tenant is obligated to pay all costs and expenses,
including all real property taxes and assessments, repairs and maintenance and
insurance. Triple net leases do not require substantial reinvestments by the
property owner and, as a result, more cash from operations may be used for
distributions to Unitholders or for acquisitions.
The Partnership is one of the largest publicly-owned entities in the United
States dedicated to acquiring, owning and managing restaurant properties. At May
20, 1996, the Partnership's portfolio consisted of 231 restaurant properties in
40 states (the "Current Properties"), approximately 99% of which were leased.
From the Partnership's initial public offering in 1986 until March 31, 1995, the
Partnership's portfolio was limited to approximately 125 restaurant properties,
all of which were leased on a triple net basis to operators of Burger King
restaurants. In May 1994, an investor group led by Robert J. Stetson and Fred H.
Margolin acquired the Managing General Partner. In March 1995, certain
amendments to the Partnership Agreement were proposed by the new management and
adopted by the Unitholders which authorized the Partnership to acquire
additional properties, including restaurant properties not affiliated with
Burger King Corporation. Since adoption of the amendments, the Partnership has
acquired 109 properties for an aggregate purchase price of approximately $57
million, including 93 properties acquired since January 1, 1996 and has entered
into binding agreements to acquire 39 additional restaurant properties (the
"Acquisition Properties") for an aggregate purchase price of approximately $27
million. Upon acquisition of the Acquisition Properties, the Partnership's
portfolio will consist of an aggregate of 270 properties in 40 states,
consisting of 170 Burger King restaurants, 40 Dairy Queen restaurants, 27
Hardee's restaurants, 11 Pizza Hut-Registered Trademark- restaurants, five
Schlotzsky's-Registered Trademark- restaurants, two Chili's restaurants and 15
other properties, most of which are regional brands.
The Partnership's management team consists of senior executives with
extensive experience in the acquisition, operation and financing of fast food
and casual dining restaurants. Mr. Stetson, the President -- Chief Executive
Officer of the Managing General Partner is the former President of the Retail
Division and Chief Financial Officer of Burger King Corporation ("BKC"), as well
as the former Chief Financial Officer of Pizza Hut, Inc. As a result, management
has an extensive network of contacts within the franchised fast food and casual
dining restaurant industry. Based on management's assessment of market
conditions and its knowledge and experience, the Partnership believes that
substantial opportunities exist for it to acquire additional restaurant
properties on advantageous terms.
The Partnership is a Delaware limited partnership. U.S. Restaurant
Properties, Inc. (formerly named QSV Properties Inc.), is the Managing General
Partner of the Partnership. The principal executive offices of the Partnership
and the Managing General Partner are located at 5310 Harvest Hill Road, Suite
270, Dallas, Texas 75230. The telephone number is (214) 387-1487, FAX (214)
490-9119.
3
<PAGE>
STRATEGY
Since the adoption of the amendments to the Partnership Agreement in March
1995, the Partnership's principal business objective has been to expand and
diversify the Partnership's portfolio through frequent acquisitions of small to
medium-sized portfolios of fast food and casual dining restaurant properties.
The Partnership intends to achieve growth and diversification while maintaining
low portfolio investment risk through adherence to proven acquisition criteria
with a conservative capital structure. The Partnership intends to continue to
expand its portfolio by acquiring triple net leased properties and structuring
sale/leaseback transactions consistent with the following strategies:
-FOCUS ON RESTAURANT PROPERTIES. The Partnership takes advantage of senior
management's extensive experience in fast food and casual dining restaurant
operations to identify new investment opportunities and acquire restaurant
properties satisfying the Partnership's investment criteria. Management
believes, based on its industry knowledge and experience, that relative to
other real estate sectors, restaurant properties provide numerous
acquisition opportunities at attractive valuations.
-INVEST IN MAJOR RESTAURANT BRANDS. The Partnership intends to continue to
acquire properties operated as major national and regional restaurant
brands, such as Burger King, Dairy Queen, Hardee's and Chili's by
competent, financially-stable operators. Certain of the Partnership's
Current Properties are also operated as Pizza Hut, Schlotzsky's,
KFC-Registered Trademark- and Taco Bell-Registered Trademark- restaurants.
Management believes, based on its industry knowledge and experience, that
successful restaurants operated under these types of brands offer stable,
consistent income to the Partnership with minimal risk of default or
non-renewal of the lease and franchise agreement. As a result of its
concentration on major national and regional brands, in the last three
fiscal years, of all rental revenues due, more than 99.5% has been
collected.
-ACQUIRE EXISTING RESTAURANTS. The Partnership's strategy is to focus
primarily on the acquisition of existing fast food and casual dining chain
restaurant properties that have a history of profitable operations with a
remaining term on the current lease of at least five years. The average
remaining lease term for the Current Properties is nine years. Management
believes, based on its industry knowledge and experience, that acquiring
existing restaurant properties provides a higher risk-adjusted rate of
return to the Partnership than acquiring newly-constructed restaurants.
-CONSOLIDATE SMALLER PORTFOLIOS. Management believes, based on its industry
knowledge and experience, that pursuing multiple transactions involving
smaller portfolios of restaurant properties (generally having an
acquisition price of less than $3 million) results in a more attractive
valuation because the size of such transactions generally does not attract
large institutional property owners. Smaller buyers typically are not well
capitalized and may be unable to compete for such transactions. Larger
transactions involving multiple properties generally attract several
institutional bidders, often resulting in a higher purchase price and lower
investment returns to the purchaser. In certain circumstances, however, the
Partnership has identified, evaluated and pursued portfolios valued at up
to $50 million that present attractive risk/return ratios and recently
closed a transaction of approximately $18 million, including closing costs.
-MAINTAIN CONSERVATIVE CAPITAL STRUCTURE. The Partnership has a policy of
maintaining a ratio of total indebtedness of 50% or less to the greater of
(i) the market value of all issued and outstanding Units plus total
outstanding indebtedness ("Total Market Capitalization") or (ii) the
original cost of all of the Partnership's properties as of the date of such
calculation. The Partnership's ratio of total indebtedness to Total Market
Capitalization was approximately 29% at May 20, 1996. See "Capitalization"
and "Pro Forma Consolidated Financial Statements." The Partnership,
however, may from time to time reevaluate its borrowing policies in light
of then-current economic conditions, relative costs of debt and equity
capital, market values of properties, growth and acquisition opportunities
and other factors.
4
<PAGE>
INDUSTRY
Industry sources estimate that total food service industry sales during 1995
were approximately $277 billion and that there are more than 100,000 free
standing fast food and casual dining chain restaurant locations with a total
current property value of more than $100 billion, with the number of locations
and value growing. Management believes, based on its industry knowledge and
experience, that in addition to the Partnership, there is only one other
publicly-owned entity that dedicates substantially all of its assets and efforts
to acquiring, owning and managing chain restaurant properties. Collectively,
these two publicly-owned entities own less than 5% of the total number of such
restaurant properties, with a majority of such other restaurants owned by
restaurant operators and real estate investors. Management believes that this
fragmented market provides the Partnership with substantial acquisition
opportunities.
Approximately 74% of the Partnership's Current Properties (63% assuming
consummation of the Acquisition Properties) consists of properties leased to
operators of Burger King restaurants. Based on publicly-available information,
Burger King is the second largest fast food restaurant system in the United
States in terms of system wide sales. According to publicly-available
information, there are approximately 6,500 Burger King restaurant units in the
United States. With respect to the Burger King restaurants in the Partnership's
portfolio, for the year-ended December 31, 1995, same-store sales (consisting of
the stores included in the portfolio at January 1, 1994 and at December 31,
1995) increased 7% over the prior year.
RECENT DEVELOPMENTS
RECENT ACQUISITIONS: Since January 1, 1996, the Partnership has acquired 93
restaurant properties for an aggregate purchase price of approximately $46
million. The acquired properties are leased on a triple net basis to operators
of Burger King, Dairy Queen, Taco Bell, KFC and other brand name restaurants.
PENDING ACQUISITIONS: At May 20, 1996, the Partnership had entered into
binding agreements to purchase interests in 39 Acquisition Properties for an
aggregate purchase price of approximately $27 million, including the purchase of
25 Hardee's, nine Pizza Huts and five Schlotzsky's. The Partnership intends to
finance the Acquisition Properties principally by utilizing the Partnership's
mortgage warehouse facility and the net proceeds of this Offering. See "Use of
Proceeds" and "Capitalization."
CREDIT FACILITIES: The Partnership's revolving credit agreement with a
syndicate of banks was recently increased to $40 million. At May 20, 1996, only
approximately $1.0 million remained available for borrowings under the credit
agreement. A portion of the net proceeds of this Offering will be used to reduce
outstanding borrowings under this credit agreement by up to $15 million. The
Partnership also has a $20 million mortgage warehouse facility secured by
certain Current Properties which, at May 20, 1996, had approximately $9.3
million available. See "History and Structure of the Partnership" and
"Capitalization."
REIT CONVERSION: The Partnership and its advisers are analyzing all aspects
of a conversion to a Real Estate Investment Trust (REIT) including feasibility
and tax effects. Assuming that the Partnership and its advisers determine that a
conversion to a REIT is in the best interests of the Partnership and its limited
partners, the Partnership would attempt to complete such a conversion by
December 31, 1997, subject to the approval of the limited partners. Even if the
Partnership does not convert to a REIT, the Partnership intends to become
self-managed and self-advised by December 31, 1997, subject to the approval of
the limited partners. See "Business and Properties -- REIT Conversion."
5
<PAGE>
DISTRIBUTION POLICY
The Partnership currently pays a quarterly distribution of $0.47 per Unit,
which on an annualized basis is equal to an annual distribution of $1.88 per
Unit. The Managing General Partner has declared a distribution of $0.47 per Unit
payable June 13, 1996 to Unitholders of record on June 6, 1996. Purchasers of
Units offered hereby will not be entitled to receive such quarterly
distribution.
RISK FACTORS
An investment in the Units involves various risks. Investors should
carefully consider the matters discussed under "Risk Factors" beginning on page
9.
THE OFFERING
<TABLE>
<S> <C>
Units outstanding before the Offering:....... 4,987,003 Units
Units to be outstanding after the 6,787,003 Units (1)
Offering:...................................
Use of Proceeds:............................. For the acquisition of the Acquisition
Properties; to reduce debt; and for other
general corporate purposes. See "Use of
Proceeds."
NYSE Symbol.................................. USV
</TABLE>
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(1) Does not include options to purchase 400,000 Units held by the Managing
General Partner which are currently exercisable. See "Underwriting."
6
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA
FINANCIAL INFORMATION AND OTHER DATA
(Dollars in Thousands, except per Unit amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
YEARS ENDED DECEMBER 31, (1) ---------------------------------
----------------------------------------------
PRO FORMA(3) HISTORICAL PRO FORMA
HISTORICAL (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------------------------- ------------- -------------------- -----------
1993 1994 1995 1995 1995 1996 1996
--------- --------- --------- ------------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME:
Total revenues................... $ 8,332 $ 8,793 $ 9,780 $ 21,207 $ 2,123 $ 2,955 $ 5,089
Expenses......................... $ 3,804 $ 3,860 $ 4,557 $ 11,845 $ 1,033 $ 1,633 $ 2,826
Net income allocable to
Unitholders..................... $ 4,437 $ 4,834 $ 5,119 $ 9,177 $ 1,069 $ 1,296 $ 2,218
Net income per Unit.............. $ 0.96 $ 1.04 $ 1.10 $ 1.35 $ 0.23 $ 0.26 $ 0.33
Weighted average Units
outstanding..................... 4,635 4,635 4,638 6,808 4,635 4,903 6,787
CASH FLOW DATA:
Cash flows from operating
activities...................... $ 7,475 $ 6,990 $ 9,287 $ 16,533 $ 2,542 $ 2,368 $ 3,896
Cash flows from (used in)
investing activities............ $ 1,130 $ -- $ (12,038) $ (77,483) $ (1,295) $ (10,325) $ (65,525)
Cash flows from (used in)
financing activities............ $ (8,302) $ (7,569) $ 2,077 $ 64,127 $ (1,553) $ 7,968 $ 62,314
OTHER DATA:
Number of properties............. 123 123 139 270 124 163 270
Funds generated from operations
(2)............................. $ 7,281 $ 7,786 $ 8,418 $ 15,684 $ 1,824 $ 2,298 $ 3,826
Regular cash distributions
declared per Unit applicable to
respective year................. $ 1.48* $ 1.61 $ 1.71 $ -- $ 0.42 $ 0.47 $ --
</TABLE>
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* Does not include special capital transaction distributions of $.24 per Unit.
<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, (1) ---------------------------
------------------------------- PRO FORMA AS
HISTORICAL ADJUSTED (3)
HISTORICAL (UNAUDITED) (UNAUDITED)
------------------------------- ----------- --------------
1993 1994 1995 1996 1996
--------- --------- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Net investment in direct financing leases............. $ 22,910 $ 21,237 $ 19,371 $ 18,875 $ 18,875
Land.................................................. 23,414 23,414 27,493 31,203 49,328
Buildings and leasehold improvements, net............. 1,734 1,548 6,257 18,845 52,059
Equipment............................................. -- -- 224 257 3,429
Intangibles, net...................................... 15,503 14,317 14,804 14,524 16,249
Total assets.......................................... 65,322 62,889 71,483 87,351 142,633
Line of credit........................................ -- -- 10,931 21,226 35,922
Capitalized lease obligations......................... 966 775 563 508 508
General partners' capital............................. 1,357 1,309 1,241 1,222 1,222
Limited partners' capital............................. 62,757 60,361 58,072 63,770 103,911
</TABLE>
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(1) The information for the years ended December 31, 1993, 1994 and 1995 was
derived from the Partnership's audited financial statements included
elsewhere in this Prospectus.
(2) 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 flows from operating activities in
accordance with generally accepted accounting principles. 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 alternative to cash
flow (determined in accordance with generally accepted accounting
principles) as a measure of liquidity. The Partnership considers funds
generated from
7
<PAGE>
operations to be the most appropriate measure of its cash flow since it is
the most consistent indicator of cash generated by operations and eliminates
the fluctuations of changes in working capital items. See "Selected
Historical and Pro Forma Financial and Other Data" for a reconciliation of
cash flows from operating activities to funds generated from operations.
(3) The unaudited pro forma consolidated statement of income information for the
year ended December 31, 1995 is presented as if the following had occurred
as of January 1, 1995: (a) the purchase of 16 properties acquired on various
dates from March 1995 through December 1995; (b) the purchase of 93
properties and the sale of one property completed since January 1, 1996; (c)
the acquisition of 39 properties under binding contracts with the assumption
of related tenant and ground leases (all of which are treated as operating
leases based on preliminary assessments); (d) additional borrowings to
purchase the Acquisition Properties; and (e) the issuance and sale by the
Partnership in this Offering of 1,800,000 Units and the application of the
net proceeds therefrom.
The unaudited pro forma consolidated statement of income information for the
quarter ended March 31, 1996 is presented as if the following had occurred
as of January 1, 1996: (a) adjustments to operations for 24 properties
acquired during the quarter ended March 31, 1996 and the purchase of 69
properties and sale of one property since April 1, 1996; (b) the acquisition
of 39 properties under binding contracts with the assumption of related
tenant and ground leases (all of which are treated as operating leases based
on preliminary assessments); (c) additional borrowings to purchase the
Acquisition Properties; and (d) the issuance and sale by the Partnership in
this Offering of 1,800,000 Units and the application of the net proceeds
therefrom.
The unaudited pro forma balance sheet data at March 31, 1996, represents the
Partnership's March 31, 1996 balance sheet adjusted on a pro forma basis to
reflect as of March 31, 1996: (a) the purchase of 69 properties and the sale
of one property since April 1, 1996; (b) the acquisition of 39 properties
under binding contracts with the assumption of related tenant and ground
leases (all of which are treated as operating leases based on preliminary
assessments); (c) additional borrowings to purchase the Acquisition
Properties; and (d) the issuance and sale by the Partnership in this
Offering of 1,800,000 Units and the application of the net proceeds
therefrom.
The unaudited pro forma income statement and balance sheet information is
not necessarily indicative of what the actual financial position of the
Partnership would have been at March 31, 1996 or what the actual results of
operations of the Partnership for the quarter ended March 31, 1996 or the
year ended December 31, 1995 would have been had all of these transactions
occurred and does not purport to represent the future financial position or
results of operations of the Partnership.
8
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS AND INCORPORATED BY
REFERENCE HEREIN, THE FOLLOWING FACTORS SHOULD BE CAREFULLY CONSIDERED BY
PERSONS CONTEMPLATING AN INVESTMENT IN THE UNITS OFFERED HEREBY.
ACQUISITION AND EXPANSION RISKS
FAILURE TO ACQUIRE ACQUISITION PROPERTIES. As of the date of this
Prospectus, the Partnership had 39 properties under binding agreements of
acquisition. In connection with the execution of such agreements, the
Partnership made deposits of approximately $1.0 million which may be
non-refundable in whole or in part if the Partnership elects not to close some
or all of such acquisitions. In addition, if some or all of such acquisitions
are not closed, the Partnership may have proceeds from the Offering without a
designated use and there can be no assurance that the Partnership will be able
to locate additional restaurant properties that meet the Partnership's
acquisition criteria.
RISK OF REFINANCING EXISTING INDEBTEDNESS. Currently, the Partnership's
borrowings do not have long-term maturities and as a result, the Partnership
could be required to refinance such borrowings prior to the maturities of the
lease terms of its properties. Refinancing will depend upon the creditworthiness
of the Partnership and the availability of financing under market conditions at
the time such refinancing is required. Such refinancing of the Partnership's
borrowings could result in higher interest costs and adversely affect results
from operations. The granting of liens on its restaurant properties may preclude
the Partnership from subsequently borrowing against such restaurant properties
and distributing such loan proceeds to the Unitholders. Payment of the interest
on, or amortization of, any such indebtedness could also decrease the cash
distributable to the Unitholders if the financing and other costs of the
expanded business strategy exceed any incremental revenue generated.
RISK OF LEVERAGE. In order to fund the Partnership's expanded business
strategy, the Partnership may borrow funds and grant liens on its restaurant
properties to secure such indebtedness. If the Partnership were unable to repay
or otherwise default in respect of any indebtedness, the Partnership's
properties could become subject to foreclosure, with possible adverse income tax
consequences to the Unitholders, such as allocations of capital gain or
discharge of indebtedness income without any cash distributions from which to
pay the related income tax liability. The Partnership Agreement does not
restrict the amount of such indebtedness, and the extent of the Partnership's
indebtedness from time to time may affect its interest costs, results of
operations, and its ability to respond to future business adversities and
changing economic conditions. The Partnership has implemented a non-binding
policy to maintain a ratio of total indebtedness of 50% or less to the greater
of Total Market Capitalization or the original cost of all of the Partnership's
properties as of the date of such calculation. Because it is anticipated that
the Partnership will not fix all of its interest costs for the long term, future
changes in interest rates may positively or negatively affect the Partnership.
RISK OF MANAGING EXPANDED PORTFOLIO. At March 31, 1995, the Partnership
owned and managed less than 125 restaurant properties. The Partnership's Current
Properties consist of 231 restaurant properties. As a result of the rapid growth
of the Partnership's portfolio and the anticipated additional growth, there can
be no assurance that management will be able to adapt its management,
administrative, accounting and operational systems to respond to the growth
represented by the Acquisition Properties or any future growth. In addition,
there can be no assurance that the Partnership will be able to maintain its
current rate of growth or negotiate and acquire any acceptable restaurant
properties in the future. A larger portfolio of restaurant properties could
entail additional operating expenses that would be payable by the Partnership.
Such acquisitions may also require loans to prospective tenants. Making loans to
existing or prospective tenants involves credit risks and could
9
<PAGE>
subject the Partnership to regulation under various federal and state laws. Any
operation of restaurants, even on an interim basis, would also subject the
Partnership to operating risks (such as uncertainties associated with labor and
food costs), which may be significant. See "Business and Properties."
CONFLICTS OF INTEREST
The Partnership Agreement provides that the Partnership pays one-time and
continuing fees to the Managing General Partner with respect to additional
properties purchased regardless of whether the Partnership receives the
contemplated revenue from such additional properties or whether the Partnership
makes any cash distributions to the Unitholders after such properties are
purchased. This creates an incentive for the Managing General Partner to cause
the Partnership to purchase more properties, pay higher prices, and sell
existing properties or use more leverage to make such purchases. The sale of any
of the restaurant properties acquired from BKC in 1986 (122 at May 20, 1996)
would not reduce the management fee for existing properties, while new fees
would benefit the Managing General Partner incrementally with each purchase. The
Managing General Partner, however, does not presently intend to cause the
Partnership to sell a significant number of its Current Properties. In addition,
the Partnership Agreement provide the Managing General Partner with a fee
providing a percentage participation above a threshold in the cash flow from
newly-purchased properties. Moreover, the Managing General Partner is not
restricted from acquiring for its own account properties of the type to be
purchased by the Partnership. See "Business and Properties -- Payments to the
Managing General Partner."
In addition, the Partnership Agreement does not restrict the ability of the
Managing General Partner or its principals from owning and/or operating
restaurants on Partnership properties or elsewhere. At May 20, 1996, the
Managing General Partner owned 90% of Arkansas Restaurants #10 L.P., the
operator of three Burger King franchises on properties leased from the
Partnership. The Managing General Partner or its principals may acquire future
operating restaurants on Partnership properties, including in connection with
the Acquisition Properties. Financing may also be provided on an arm's length
basis by the Partnership to consummate the acquisition of operating restaurants
by the Managing General Partner, its principals or others.
INVESTMENT CONCENTRATION IN SINGLE INDUSTRY
The Partnership's current strategy is to acquire interests in restaurant
properties, specifically fast food and casual dining restaurant properties. As a
result, a downturn in the fast food or casual dining segment could have a
material adverse effect on the Partnership's total rental revenues and amounts
available for distribution to its Unitholders. See "Business and Properties --
The Properties."
DEPENDENCE ON SUCCESS OF BURGER KING
Of the Partnership's Current Properties, 170 are occupied by operators of
Burger King restaurants. In addition, the Partnership intends to acquire
additional Burger King properties. As a result, the Partnership is subject to
the risks inherent in investments concentrated in a single franchise brand, such
as a reduction in business following adverse publicity related to the brand or
if the Burger King restaurant chain (and its franchisees) were to suffer a
system-wide decrease in sales, the ability of franchisees to pay rents
(including percentage rents) to the Partnership may be adversely affected. See
"Business and Properties -- Strategy" and "Business and Properties -- The
Properties."
POSSIBLE RENT DEFAULTS AND FAILURE TO RENEW LEASES AND FRANCHISE AGREEMENTS
The Partnership's Current Properties are leased to restaurant franchise
operators pursuant to leases with remaining terms varying from one to 28 years
at May 20, 1996 and an average remaining term of nine years. No assurance can be
given that such leases will be renewed at the end of the lease
10
<PAGE>
terms or that the Partnership will be able to renegotiate terms which are
acceptable to the Partnership. The Partnership has attempted to extend the terms
of certain of its existing leases pursuant to an "Early Renewal Program," but in
connection therewith has had to commit to paying for certain improvements on
such properties. See "Business and Properties -- The Properties."
REAL ESTATE INVESTMENT RISKS
GENERAL RISKS. The Partnership's investments in real estate are subject to
varying degrees of risk inherent in the ownership of real property. The
underlying value of the Partnership's real estate and the income therefrom and,
consequently, the ability of the Partnership to make distributions to
Unitholders are dependent upon the operators of the restaurant properties
generating income in excess of operating expenses in order to make rent
payments. Income from the properties may be adversely affected by changes in
national economic conditions, changes in local market conditions due to changes
in general or local economic conditions and neighborhood characteristics,
changes in interest rates and the availability, cost and terms of mortgage
funds, the impact of compliance with present or future environmental laws, the
ongoing need for capital improvements, particularly for older restaurants,
increases in operating expenses, adverse changes in governmental rules and
fiscal policies, civil unrest, acts of God (which may result in uninsured
losses), acts of war, adverse changes in zoning laws, and other factors beyond
the Partnership's control.
ILLIQUIDITY OF REAL ESTATE MAY LIMIT ITS VALUE. Real estate investments are
relatively illiquid. The ability of the Partnership to vary its portfolio in
response to changes in economic and other conditions is limited. No assurance
can be given that the market value of any of the Partnership's properties will
not decrease in the future. If the Partnership must sell an investment, there
can be no assurance that the Partnership will be able to dispose of it in a
desirable time period or that the sales price will recoup or exceed the amount
of the Partnership investment.
POSSIBLE LIABILITY THAT COULD RESULT FROM ENVIRONMENTAL MATTERS. The
Partnership's operating costs may be affected by the obligation to pay for the
cost of complying with existing environmental laws, ordinances and regulations,
as well as the cost of compliance with future legislation. Under current
federal, state and local environmental laws, ordinances and regulations, a
current or previous owner or operator of real property may be liable for the
costs of removal or remediation of hazardous or toxic substances on, under or in
such property. Such laws often impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. In addition, the presence of contamination from hazardous or
toxic substances, or the failure to remediate such contaminated property
properly, may adversely affect the ability of the owner of the property to use
such property as collateral for a loan or to sell such property. Environmental
laws also may impose restrictions on the manner in which a property may be used
or transferred or in which businesses may be operated, and may impose remedial
or compliance costs. The costs of defending against claims of liability or
remediating contaminated property and the cost of complying with environmental
laws could materially adversely affect the Partnership's results of operations
and financial condition.
In connection with the Partnership's acquisition of a property, a Phase I
environmental assessment is obtained. A Phase I environmental assessment
involves researching historical usages of a property, databases containing
registered underground storage tanks and other matters including an on-site
inspection to determine whether an environmental issue exists with respect to
the property which needs to be addressed. If the results of a Phase I
environmental assessment reveal potential issues, a Phase II assessment which
may include soil testing, ground water monitoring or borings to locate
underground storage tanks, is ordered for further evaluation and, depending upon
the results of such assessment, the transaction is consummated or the
acquisition is terminated.
AMERICANS WITH DISABILITIES ACT. The Americans with Disabilities Act (the
"ADA") generally requires that all public accommodations, including restaurants,
comply with certain federal requirements relating to physical access and use by
persons with physical disabilities. A determination that the Partnership or one
of the Partnership's properties is not in compliance with the ADA could result
11
<PAGE>
in the imposition of fines, injunctive relief, damages or attorney's fees. The
Partnership's leases contemplate that compliance with the ADA is the
responsibility of the operator. While the Partnership believes that compliance
with the ADA can be accomplished without undue costs, the costs of compliance
may be substantial and may adversely impact the ability of such lessees to pay
rentals to the Partnership. In addition, a determination that the Partnership is
not in compliance with the ADA could result in the imposition of fines or an
award of damages to private litigants.
UNINSURED AND UNDERINSURED LOSSES COULD RESULT IN LOSS OF VALUE OF
FACILITIES. The Partnership requires its lessees to maintain comprehensive
insurance on each of the properties, including liability, fire and extended
coverage and the Partnership is an additional named insured under such policies.
Management believes such specified coverage is of the type and amount
customarily obtained for or by an owner on real property assets. The Partnership
intends to require lessees of subsequently acquired property, including the
Acquisition Properties, to obtain similar insurance coverage. However, there are
certain types of losses, generally of a catastrophic nature, such as earthquakes
and floods, that may be uninsurable or not economically insurable, as to which
the Partnership's properties (including the Current Properties and the
Acquisition Properties) are at risk depending on whether such events occur with
any frequency in such areas. In addition, because of coverage limits and
deductibles, insurance coverage in the event of a substantial loss may not be
sufficient to pay the full current market value or current replacement cost of
the Partnership's investment. Inflation, changes in building codes and
ordinances, environmental considerations, and other factors also might make it
infeasible to use insurance proceeds to replace a facility after it has been
damaged or destroyed. Under such circumstances, the insurance proceeds received
by the Partnership might not be adequate to restore its economic position with
respect to such property.
DEPENDENCE ON KEY PERSONNEL
The Partnership's continued success is dependent upon the efforts and
abilities of its key executive officers. In particular, the loss of the services
of either Robert J. Stetson or Fred H. Margolin could have a material adverse
effect on the Partnership's operations and its ability to effectuate its growth
strategy. There can be no assurance that the Partnership would be able to
recruit or hire any additional personnel with equivalent experience and
contacts. The Partnership does not own key-man life insurance on the lives of
Mr. Stetson or Mr. Margolin. See "Management."
COMPETITION
ACQUISITIONS. Numerous entities and individuals compete with the
Partnership to acquire triple net leased restaurant properties, including
entities which have substantially greater financial resources than the
Partnership. These entities and individuals may be able to accept more risk than
the Partnership is willing to undertake. Competition generally may reduce the
number of suitable investment opportunities available to the Partnership and may
increase the bargaining power of property owners seeking to sell. There can be
no assurance that the Partnership will find attractive triple net leased
properties or sale/leaseback transactions in the future.
OPERATIONS. The restaurants operated on the properties are subject to
significant competition (including competition from other national and regional
fast food restaurant chains, including Burger King 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, and other competitors such as convenience stores and
supermarkets that sell prepared and ready-to-eat foods. 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 intend to engage directly in the operation of restaurants. However, the
Partnership would operate restaurants located on its properties if required to
do so in order to protect the Partnership's investment. As a result, the
Partnership generally will be dependent upon the experience and ability of the
lessees operating the restaurants located on the properties. See "Business and
Properties -- Strategy" and "Business and Properties -- Industry."
12
<PAGE>
DEVELOPMENT RISKS
The Partnership may pursue certain restaurant property developments. New
project developments are subject to numerous risks including construction delays
or costs that may exceed budgeted or contracted amounts, new project
commencement risks such as receipt of zoning, occupancy and other required
governmental approvals and permits and the incurrence of development costs in
connection with projects that are not pursued to completion. In addition,
development involves the risk that developed properties will not produce desired
revenue levels once leased, the risk of competition for suitable development
sites from competitors which may have greater financial resources than the
Partnership, and the risk that debt or equity financing are not available on
acceptable terms. There can be no assurance that development activities might
not be curtailed or, if consummated will perform in accordance with the
Partnership's expectations and distributions to Unitholders might be adversely
affected.
RISK OF NEWLY-CONSTRUCTED RESTAURANT PROPERTIES
The Partnership may pursue the acquisition of newly-constructed restaurant
properties that do not have operating histories. For example, the Partnership
recently entered into a binding agreement to acquire five newly-constructed
restaurant properties that are leased to operators of Schlotzsky's. The
acquisition of newly-constructed restaurant properties involves numerous risks,
including the risk that newly-constructed restaurant properties will not produce
desired revenue levels (and, therefore, lease rentals) once opened. See
"Business and Properties -- Strategy" and "Business and Properties --
Regulation."
RELIANCE ON MANAGING GENERAL PARTNER
Unitholders will have no right or power to take part in the management of
the Partnership except through the exercise of voting rights on certain
specified matters. The Partnership will rely on the services and expertise of
the Managing General Partner for strategic business direction. See "Business and
Properties -- General," "Business and Properties -- Strategy" and "Management."
POTENTIAL DILUTION FROM UNITS AVAILABLE FOR FUTURE SALE
In March 1995, the Unitholders authorized the grant to the Managing General
Partner of options to purchase 400,000 Units at $15.50 per Unit. Such options
are currently fully exercisable. The sale to the public of additional Units
owned or that may be acquired by the Managing General Partner could adversely
affect the trading price of the Units. Each of the Managing General Partner,
Robert J. Stetson, Fred H. Margolin, Darrell Rolph, David Rolph, Gerald H.
Graham and Eugene G. Taper has executed a lock-up agreement under which each has
agreed not to sell any of its or his Units for a period of 180 days after the
date of the Offering.
POTENTIAL PAYMENTS FOR CERTAIN UNIT PRICE GUARANTEES
During 1995, the Partnership acquired three properties in part for 54,167
Units. As a term of the acquisition, the Partnership agreed that, if the market
price for the Units was less than $24 per Unit on October 10, 1998, and the
Units had not been sold prior to that date for a price at least equal to $24 per
Unit, the Partnership would pay such Unitholder the difference in cash between
$24 and the average closing price for the 20 trading days preceding such date.
In connection with the acquisition of ten properties in 1996, the Partnership
issued 327,836 Units and agreed that, as a term of those acquisitions, if the
market price for the Units was less than $23 per Unit (as to 28,261 Units) on
January 23, 1999 or $24 per Unit (as to 299,575 Units) on January 25, 1998, and
the Units had not been sold prior to that date for a price at least equal to $23
or $24 per Unit, respectively, the Partnership would pay the difference between
$23 or $24, respectively, and the average closing price for the 20 trading days
preceding such date by the issuance of additional Units.
ADVERSE EFFECT OF INCREASES IN INTEREST RATES
One of the factors that may influence the market price of the Units is the
annual yield from distributions made by the Partnership on the Units as compared
to yields on certain financial
13
<PAGE>
instruments. Thus, a general increase in market interests rates could result in
higher yields on certain financial instruments which could adversely affect the
market price for the Units, since alternative investment vehicles may be more
attractive.
TAX RISKS
There are numerous federal and state income tax considerations associated
with acquiring, owning and disposing of Units. See "Federal Income Tax
Considerations" and "State and Other Taxes."
POTENTIAL LOSS OF PARTNERSHIP STATUS. The availability to a Unitholder of
the federal income tax benefits of an investment in the Partnership depends in
large part on the classification of the Partnerships as partnerships for federal
income tax purposes. Based upon certain representations of the Managing General
Partner, Middleberg, Riddle & Gianna, counsel to the Partnership, has rendered
its opinion that under current law and regulations, the Partnerships will be
classified as partnerships for federal income tax purposes. However, the opinion
of counsel is not binding on the IRS. Neither Partnership satisfies requirements
to obtain an advance ruling from the IRS, and, as a result, no advance ruling
from the IRS as to such status has been or will be requested. If the IRS were to
challenge the federal income tax status of the Partnerships or the amount of a
Unitholder's allocable share of the Partnership's taxable income, such challenge
could result in an audit of the Unitholder's entire tax return and in
adjustments to items on that return that are unrelated to the ownership of
Units. In addition, each Unitholder would bear the cost of any expenses incurred
in connection with an examination of his personal tax return.
Middleberg, Riddle & Gianna's opinion is based on the assumption that at
least 90% of the Partnership's gross income for each taxable year will
constitute either (i) real property rents, (ii) gain from the sale or other
disposition of real property, or (iii) other qualifying income within the
meaning of Section 7704(d) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the further assumption that the Managing General Partner will act
independently of and not as an agent for the Unitholders.
If either Partnership was taxable as a corporation or treated as an
association taxable as a corporation in any taxable year, its income, gains,
losses, deductions and credits would be reflected only on its tax return rather
than being passed through to its partners, and its taxable income would be taxed
at corporate rates. In addition, its distributions to each of its partners would
be treated as dividend income (to the extent of its current and accumulated
earnings and profits), and, in the absence of earnings and profits, as a
nontaxable return of capital (to the extent of such partner's tax basis in his
interest therein), or as taxable capital gain (after such partner's tax basis in
his interest therein is reduced to zero). Furthermore, losses realized by such
Partnership would not flow through to the Unitholders. Accordingly, treatment of
either Partnership as a corporation for federal income tax purposes would
probably result in a material reduction in a Unitholder's cash flow and
after-tax return. See "Federal Income Tax Considerations -- Partnership Status."
LIMITED DEDUCTIBILITY OF PARTNERSHIP LOSSES. Losses generated by the
Partnership, if any, will be available to Unitholders that are subject to the
passive activity loss limitations of Section 469 of the Code to offset only
future income generated by the Partnership and cannot be used to offset income
to a Unitholder from other passive activities or investments or any other
source. Losses from the Partnership that are not deductible because of the
passive loss limitations may be deducted when the Unitholder disposes of all of
his Units in a fully taxable transaction with an unrelated party. Net passive
income from the Partnership may be offset only by a Unitholder's investment
interest expense and by unused Partnership losses carried over from prior years.
See "Federal Income Tax Considerations -- Tax Consequences of Unit Ownership --
Limitations on the Deductibility of Losses."
RISK OF CHALLENGE TO PARTNERSHIP ALLOCATIONS. Certain aspects of the
allocations contained in the Partnership Agreement may be challenged
successfully by the IRS. If an allocation contained in the Partnership Agreement
is not given effect for federal income tax purposes, items of income, gain,
loss,
14
<PAGE>
deduction or credit will be reallocated to the Unitholders and the Managing
General Partner in accordance with their respective interests in such items,
based upon all the relevant facts and circumstances. Such reallocation among the
Unitholders and the Managing General Partner of such items of income, gain,
loss, deduction or credit allocated under the Partnership Agreement could result
in additional taxable income to the Unitholders. Such reallocation of
Partnership items also could affect the uniformity of the intrinsic federal tax
characteristics of the Units. See "Federal Income Tax Considerations --
Allocation of Partnership Income, Gain, Loss and Deduction."
POSSIBLE UNSUITABILITY OF UNITS FOR TAX-EXEMPT ENTITIES, REGULATED
INVESTMENT COMPANIES AND FOREIGN INVESTORS. An investment in Units may not be
suitable for tax-exempt entities, regulated investment companies and foreign
investors. See "Federal Income Tax Considerations -- Tax Treatment of Operations
- -- Tax-Exempt Entities, Regulated Investment Companies and Foreign Investors."
RISK OF TAX LIABILITY EXCEEDING CASH DISTRIBUTIONS OR PROCEEDS FROM
DISPOSITIONS OF UNITS. Because the Partnership is not a taxable entity and
incurs no federal income tax liability, a Unitholder will be required to pay
federal income tax and, in certain cases, state and local income taxes on his
allocable share of the Partnership's income, whether or not he receives cash
distributions from the Partnership. There can be no assurance that Unitholders
will receive cash distributions equal to their allocable share of taxable income
from the Partnership. Further, upon the sale or other disposition of Units, a
Unitholder may incur tax liability in excess of the amount of cash received. To
the extent that a Unitholder's tax liability exceeds the amount distributed to
him or the amount he receives on the sale or other disposition of his Units, he
will incur an out-of-pocket expense. See "Federal Income Tax Considerations --
Tax Consequences of Unit Ownership."
ADDITIONAL DILUTION RISKS
The Partnership Agreement permits the Partnership to issue an unlimited
number of additional Units at such prices or for such consideration, including
real property, as may be determined by the Managing General Partner in its
discretion, without the approval of the Unitholders. Depending upon the amount
of consideration that the Partnership receives for any additional Units or the
rents generated by the restaurant properties purchased, such issuance could
dilute the value of the outstanding Units. The Partnership's ability to issue
additional Units for property, moreover, may be restricted by applicable
securities laws.
Under certain circumstances, the Managing General Partner may require the
Partnership to register under applicable securities laws the Managing General
Partner's transfer of Units that it owns or may acquire. The availability to the
public of additional Units because of such a registration could adversely affect
the trading price of the Units. The issuance of additional Units would also
cause the Partnership to incur additional administrative and record-keeping
costs, which may be significant.
15
<PAGE>
HISTORY AND STRUCTURE OF THE PARTNERSHIP
The Partnership, formerly Burger King Investors Master L.P., was formed in
1985 by BKC and QSV Properties Inc. ("QSV"), both of which were at that time
wholly-owned subsidiaries of The Pillsbury Company ("Pillsbury"). QSV acted as
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 effected an initial public offering in 1986 and the proceeds
therefrom were used to buy the Partnership's initial portfolio of 128 properties
from BKC. From 1986 through March 1995, the Partnership's limited partnership
agreement limited the activities of the Partnership to managing the original
portfolio of properties.
In May 1994, an investor group led by Robert J. Stetson and Fred H.
Margolin, acquired QSV and later changed its name to U.S. Restaurant Properties,
Inc. In March 1995, the Unitholders approved certain amendments to the
Partnership's limited partnership agreement that permit the Partnership to incur
debt, to acquire additional properties, including restaurant properties not
affiliated with BKC.
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 partner interests in the Operating Partnership, the
Partnership owns a 99.01% partnership interest in the Operating Partnership. The
Partnerships (defined below) are Delaware limited partnerships and continue in
existence until December 31, 2035, unless sooner dissolved or terminated.
U.S. Restaurant Properties Business Trust #1, a Delaware Business Trust
("Business Trust"), was organized in 1996 to obtain permanent financing for the
Partnership which would be secured by certain of the Partnership's Current
Properties and Acquisition Properties. At May 20, 1996, the Business Trust's
portfolio consisted of 42 properties. See "Capitalization."
16
<PAGE>
The following chart sets forth the organizational structure of the
Partnership and its related entities prior to the consummation of the
acquisition of the Acquisition Properties:
[LOGO]
* In connection with the $20 million mortgage warehouse facility from Morgan
Keegan Mortgage Company, Inc., 29 of the Current Properties were transferred
to the Business Trust and nine of the Acquisition Properties will be
transferred following consummation of their acquisitions. All properties owned
or to be owned by the Business Trust secure or will secure the mortgage
warehouse facility.
17
<PAGE>
CAPITALIZATION
The following table sets forth the historical capitalization of the
Partnership at March 31, 1996, and as adjusted on a pro forma basis to give
effect to (i) the issuance and sale of the 1,800,000 Units offered hereby and
the application of the estimated net proceeds therefrom as described under "Use
of Proceeds" and (ii) the acquisition of the Acquisition Properties. This
information should be read in conjunction with the Consolidated Financial
Statements and Pro Forma Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA AS
ADJUSTED(1)(2)
ACTUAL (UNAUDITED)
--------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Line of credit (3).................................................................. $ 21,226 $ 35,922
Capitalized lease obligations....................................................... 508 508
Partners' capital:
General partner's................................................................. 1,222 1,222
Limited partners'
4,987,003 Units outstanding (2)
6,787,003 Units, as adjusted..................................................... 63,770 103,911
--------- ----------------
Total Capitalization............................................................ $ 86,726 $ 141,563
--------- ----------------
--------- ----------------
</TABLE>
- ------------------------
(1) Gives effect to the sale of 1,800,000 Units in the Offering and the
application of the net proceeds therefrom of $40.1 million (after deducting
estimated expenses of the Offering of $300,000) and to the purchase of the
properties under contract as described in the Pro Forma Consolidated
Financial Statements and Notes thereto appearing elsewhere in this
Prospectus.
(2) Excludes 400,000 Units issuable upon exercise of options held by the
Managing General Partner.
(3) Consists of a revolving credit agreement from a syndicate of banks for up to
$40 million which is secured by certain of the Partnership's real estate
including its leasehold interests. Subsequent to March 31, 1996, a $20
million mortgage warehouse facility has been entered into by the Business
Trust and Morgan Keegan Mortgage Company, Inc., which is secured by certain
of the Partnership's Acquisition Properties and certain additional Current
Properties. At May 20, 1996, the amounts borrowed under the revolving credit
agreement and the mortgage warehouse facility were approximately $39 million
and approximately $10.7 million, respectively. A portion of the net proceeds
of the Offering will be used to reduce the borrowings under the $40 million
revolving credit facility. See "Use of Proceeds."
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<PAGE>
USE OF PROCEEDS
The Partnership estimates that the net proceeds from the Offering will be
approximately $40.1 million (approximately $46.2 million if the Underwriters'
over-allotment option is exercised in full). The Partnership intends to use such
net proceeds as follows:
<TABLE>
<CAPTION>
APPROXIMATE AMOUNT
(IN MILLIONS)
--------------------
<S> <C>
Purchase of additional properties, including certain of the Acquisition Properties........... $ 25.1
Reduce line of credit........................................................................ 15.0(1)
-----
TOTAL...................................................................................... $ 40.1
-----
-----
</TABLE>
- ------------------------
(1) To reduce by up to $15 million the outstanding balance owing under the $40
million line of credit with a syndicate of banks. This line of credit
expires on June 27, 1998 and provides that borrowings thereunder bear
interest at 180 basis points over the London Interbank Offered Rate (LIBOR).
See "Capitalization" and "Management's Discussion and Analysis of Results of
Operations and Financial Condition -- Liquidity and Capital Resources."
PRICE RANGE OF UNITS AND DISTRIBUTION POLICY
The 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 the first quarter of 1996 and to date in the second quarter of
1996 and for each calendar quarter of 1995 and 1994 are set forth below. The
Offering will be completed after the record date established for payment of the
dividend with respect to the quarter ended March 31, 1996 and, therefore, the
purchasers of the Units offered hereby will not be entitled to receive such
dividend.
<TABLE>
<CAPTION>
DISTRIBUTIONS
HIGH LOW DECLARED
-------- ------- -------------
<S> <C> <C> <C>
1994
First Quarter..................................................................... 16 3/4 15 7/8 $ .39
Second Quarter.................................................................... 17 1/4 15 3/8 .39
Third Quarter..................................................................... 17 1/2 16 3/4 .41
Fourth Quarter.................................................................... 17 3/8 13 .42
-----
$ 1.61
-----
-----
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 .43
Fourth Quarter.................................................................... 20 1/4 18 .44
-----
$ 1.71
-----
-----
1996
First Quarter..................................................................... $ 23 3/8 $19 1/2 $ .47
Second Quarter (through May 22)................................................... 24 5/8 22 3/8
</TABLE>
On May 22, 1996, the last reported sales price of the Units was $24 5/8 as
reported in NYSE Composite Transactions. At May 22, 1996, there were 1,874
Unitholders of record in the Partnership.
In July 1995, the Partnership announced its intention to repurchase up to
300,000 Units, because at the time management believed that the repurchase of
the Units represented a good investment value for the Partnership and the
Unitholders. Through March 31, 1996, the Partnership purchased
19
<PAGE>
30,000 Units. No further repurchases have been made or are currently
contemplated, because management currently believes that a better investment
value for the Partnership and the Unitholders is the acquisition of additional
restaurant properties.
The Partnership intends to maximize the cash available for distributions and
enhance Unitholder value by acquiring or developing additional restaurant
properties that its investment criteria and by participating in increased
revenue from restaurant properties through percentage leases. See "Business and
Properties -- Strategy." In connection therewith, the Partnership intends to
make regular quarterly distributions to its Unitholders. Currently, on an
annualized basis, the distribution is $1.88 per Unit. The Managing General
Partner has declared a distribution of $0.47 per Unit for the first quarter of
fiscal 1996, payable on June 13, 1996, to Unitholders of record on June 6, 1996.
Purchasers of Units offered hereby will not be entitled to receive such
quarterly distribution.
Management intends to distribute from 75% to 95% of the estimated cash
available for distribution within the general objective of continued annual
growth in the distributions. The Partnership expects to maintain such
distribution rate for the foreseeable future based upon actual results of
operations, financial condition of the Partnership, capital expenditure
requirements, or other factors management deems relevant. However, such
distribution rate may vary depending on future market conditions, the
Partnership's financial condition and the Managing General Partner's perception
of operating cash needed by the Partnership to fund operations.
The amounts distributed representing a return of capital were $.75 per Unit
in 1991, $1.03 per Unit in 1992, $.52 per Unit in 1993, $.52 per Unit in 1994
and $.59 per Unit in 1995.
20
<PAGE>
SELECTED HISTORICAL AND PRO FORMA
FINANCIAL INFORMATION AND OTHER DATA
(DOLLARS AND UNITS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
PRO FORMA
(UNAUDITED)
(2)
1991 1992 1993 1994 1995 1995
--------- --------- --------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME:
Total revenues.......................... $ 8,750 $ 8,489 $ 8,332 $ 8,793 $ 9,780 $ 21,207
EXPENSES:
Ground rent........................... 1,177 1,187 1,295 1,348 1,405 2,151
Depreciation and amortization......... 1,499 1,473 1,383 1,361 1,541 4,667
Taxes, general and administrative..... 1,062 1,097 1,008 1,144 1,419 2,252
Interest expense (income), net........ 36 60 44 (4) 192 2,775
Provision for write down or
disposition of properties............ 943 2,186 74 11 -- --
--------- --------- --------- --------- ---------- --------------
Total expenses........................ 4,717 6,003 3,804 3,860 4,557 11,845
--------- --------- --------- --------- ---------- --------------
Net income............................ $ 4,033 $ 2,486 $ 4,528 $ 4,933 $ 5,223 $ 9,362
Net income allocable to Unitholders... $ 3,952 $ 2,436 $ 4,437 $ 4,834 $ 5,119 $ 9,177
Weighted average number of Units
outstanding.......................... 4,635 4,635 4,635 4,635 4,638 6,808
Net income per Unit................... $ 0.85 $ 0.53 $ 0.96 $ 1.04 $ 1.10 $ 1.35
Cash distributions declared per Unit
applicable to respective year........ $ 1.58 $ 1.54 $ 1.48* $ 1.61 $ 1.71 --
CASH FLOW DATA:
Cash flows from operating
activities......................... $ 7,725 $ 7,366 $ 7,475 $ 6,990 $ 9,287 $ 16,553
Cash flows from (used in) investing
activities......................... $ -- $ -- $ 1,130 $ -- $ (12,038) $ (77,483)
Cash flows from (used in) financing
activities......................... $ (7,732) $ (7,542) $ (8,302) $ (7,569) $ 2,077 $ 64,127
OTHER DATA:
Number of properties................ 123 123 123 123 139 270
Regular cash distributions declared
per Unit applicable to respective
year............................... $ 1.58 $ 1.54 $ 1.48* $ 1.61 $ 1.71 --
CASH FLOW RECONCILIATION:
Cash flow from operating
activities......................... $ 7,725 $ 7,366 $ 7,475 $ 6,990 $ 9,287 $ 16,553
Net change in marketable securities,
receivables, prepaid expenses and
accounts payable................... (20) (10) (22) 987 (657) (657)
Reduction in capitalized lease
obligations........................ (164) (164) (172) (191) (212) (212)
--------- --------- --------- --------- ---------- --------------
Funds generated from operations
(1)................................ $ 7,541 $ 7,192 $ 7,281 $ 7,786 $ 8,418 $ 15,684
--------- --------- --------- --------- ---------- --------------
--------- --------- --------- --------- ---------- --------------
</TABLE>
- ------------------------------
*Does not include special capital transaction distributions of $.24 per Unit.
21
<PAGE>
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
----------------------------------
PRO FORMA
-----------
1995 1996 1996
--------- ---------- -----------
<S> <C> <C> <C>
STATEMENT OF INCOME:
Total revenues............................................................. $ 2,123 $ 2,955 $ 5,089
EXPENSES:
Ground rent................................................................ 336 412 542
Depreciation and amortization.............................................. 337 534 1,123
Taxes, general and administrative.......................................... 370 370 526
Interest expense (income), net............................................. (10) 317 635
--------- ---------- -----------
Total expenses............................................................. 1,033 1,633 2,826
--------- ---------- -----------
Net income................................................................. $ 1,090 $ 1,322 $ 2,263
--------- ---------- -----------
--------- ---------- -----------
Net income allocable to Unitholders........................................ $ 1,069 $ 1,296 $ 2,218
Weighted average number of Units outstanding............................... 4,635 4,903 6,787
Net income per Unit........................................................ $ 0.23 $ 0.26 $ 0.33
--------- ---------- -----------
--------- ---------- -----------
Cash distributions declared per Unit applicable to respective year......... $ 0.42 $ 0.47 $ --
CASH FLOW DATA:
Cash flows from operating activities....................................... $ 2,542 $ 2,368 $ 3,896
Cash flows from (used in) investing activities............................. $ (1,295) $ (10,325) $ (65,525)
Cash flows from (used in) financing activities............................. $ (1,553) $ 7,968 $ 62,314
OTHER DATA:
Number of properties....................................................... 124 163 270
Regular cash distributions declared per Unit applicable to respective
period.................................................................... $ .42 $ .47 $ --
CASH FLOWS RECONCILIATION:
Cash flows from operating activities....................................... $ 2,542 $ 2,368 $ 3,896
Net change in deferred financing costs, marketable securities, receivables,
prepaid expenses and accounts payable..................................... (667) (15) (15)
Reduction in capitalized lease obligations................................. (51) (55) (55)
Funds generated from operations (1)........................................ $ 1,824 $ 2,298 $ 3,826
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------
(UNAUDITED)
DECEMBER 31, PRO FORMA
----------------------------------------------------- AS ADJUSTED
1991 1992 1993 1994 1995 HISTORICAL (2)
--------- --------- --------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Net investment in direct financing
leases................................ $ 27,383 $ 24,760 $ 22,910 $ 21,237 $ 19,371 $ 18,875 $ 18,875
Land................................... 24,388 23,816 23,414 23,414 27,493 31,203 49,328
Buildings and leasehold improvements,
net................................... 1,797 1,919 1,734 1,548 6,257 18,845 52,059
Equipment.............................. -- -- -- -- 224 257 3,429
Intangibles, net....................... 18,920 17,123 15,503 14,317 14,804 14,524 16,249
Total assets........................... 74,170 69,087 65,322 62,889 71,483 87,351 142,633
Line of credit......................... -- -- -- -- 10,931 21,226 35,922
Capitalized lease obligations.......... 1,302 1,138 966 775 563 508 508
General partners' capital.............. 1,527 1,429 1,357 1,309 1,241 1,222 1,222
Limited partners' capital.............. 71,082 66,287 62,757 60,361 58,072 63,770 103,911
</TABLE>
- ------------------------------
(1) 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 flows from operating activities in
accordance with generally accepted accounting principles. 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 alternative to cash
flow (determined in accordance with generally accepted accounting
principles) as
22
<PAGE>
a measure of liquidity. The Partnership considers funds generated from
operations to be the most appropriate measure of its cash flow since it is
the most consistent indicator of cash generated by operations and
eliminates the fluctuations of changes in working capital items.
(2) The unaudited pro forma consolidated statement of income information for
the year ended December 31, 1995 is presented as if the following had
occurred as of January 1, 1995: (a) the purchase of 16 properties acquired
on various dates from March 1995 through December 1995; (b) the purchase of
93 properties and the sale of one property completed since January 1, 1996;
(c) the acquisition of 39 properties under binding contracts with the
assumption of related tenant and ground leases (all of which are treated as
operating leases based on preliminary assessments); (d) additional
borrowings to purchase the Acquisition Properties; and (e) the issuance and
sale by the Partnership in this Offering of 1,800,000 Units and the
application of the net proceeds therefrom.
The unaudited pro forma statement of income information for the quarter
ended March 31, 1996 is presented as if the following had occurred as of
January 1, 1996: (a) adjustments to operations for 24 properties acquired
during the quarter ended March 31, 1996 and the purchase of 69 properties
and sale of one property since April 1, 1996; (b) the acquisition of 39
properties under contract with the assumption of related tenant and ground
leases (all of which are treated as operating leases based on preliminary
assessments); (c) additional borrowings to purchase the Acquisition
Properties; (d) the issuance and sale by the Partnership in this Offering
of 1,800,000 Units and the application of the net proceeds therefrom.
The unaudited pro forma balance sheet data at March 31, 1996, represents
the Partnership's March 31, 1996 balance sheet adjusted on a pro forma
basis to reflect as of March 31, 1996: (a) the purchase of 69 properties
and the sale of one property since April 1, 1996; (b) the acquisition of 39
properties under binding contracts with the assumption of related tenant
and ground leases (all of which are treated as operating leases based on
preliminary assessments); (c) additional borrowings to purchase the
Acquisition Properties; and (d) the issuance and sale by the Partnership in
this Offering of 1,800,000 Units and the application of the net proceeds
therefrom.
The unaudited pro forma income statement and balance sheet information is
not necessarily indicative of what the actual financial position of the
Partnership would have been at March 31, 1996 or what the actual results of
operations of the Partnership for the quarter ended March 31, 1996 or the
year ended December 31, 1995 would have been had all of these transactions
occurred and it does not purport to represent the future financial position
or results of operations of the Partnership.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
The Partnership derives its revenue from the leasing of the Partnership's
restaurant properties to operators on a "triple net" basis, which is a lease
that imposes on the tenant all obligations for real property taxes and
assessments, repairs and maintenance and insurance. To the extent the landlord
retains any of these responsibilities, the lease becomes less than "triple net."
The Partnership's leases provide for a base rent plus a percentage of the
restaurant's sales in excess of a threshold amount. Total restaurant sales, the
primary determinant of the Partnership's 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, by marketing, by new product programs, support by
the franchisor, and by the general state of the economy.
Some of the leases of the Partnership's properties are treated as direct
financing leases, rather than operating leases, for purposes of generally
accepted accounting principles ("GAAP"); however, the leases do not grant the
lessees thereunder the right to acquire the properties at the expiration of such
leases. As a result, the lease is reflected as an asset on the Partnership's
balance sheet as net investment in direct financing leases, and the underlying
depreciable real property is not considered an asset of the Partnership for GAAP
purposes. Accordingly, the related depreciation is not reflected on the
Partnership's income statement; instead, there is a charge for amortization of
the investment in direct financing leases. For tax accounting purposes, however,
the depreciable real property is treated as being owned by the Partnership (and
not a direct financing lease) and the related charge for depreciation is
reflected on the Partnership's income statement. Primarily due to this
treatment, GAAP revenue and net income differ from gross rental receipts and net
income, as determined for tax purposes. The reconciliation between the GAAP and
tax treatment of these leases is described in Note 9 to the Partnership's
audited Consolidated Financial Statements. Management believes that most if not
all acquisitions made by the Partnership since March 1995, as well as all future
acquisitions and related leases, will qualify as operating leases according to
GAAP and, therefore, were not recorded as a net investment in direct financing
lease.
The following discussion should be read in conjunction with "Selected
Financial Information" and all of the financial statements and notes thereto
included elsewhere in this Prospectus.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 TO THREE MONTHS ENDED MARCH 31,
1995
For the quarter ended March 31, 1996, rental revenues increased 39% over the
same period for the previous year. Comparable store sales growth (the increase
in sales at those restaurants open for the entire reporting period in both the
current period and the same period for the prior year) was 4%. Management
believes the growth reflects improvements in the overall performance of the
Burger King system and efforts by BKC with selected tenants to improve their
restaurant's sales.
General and administrative expenses in 1996 remained constant, as compared
to the same quarter in 1995. An increase in the management fee of $87,647 for
the quarter and expenses that directly correspond to the active growth of the
Partnership in the first quarter of 1996 were offset by non-recurring costs
relating to the proxy in the first quarter of 1995. Depreciation expense
increased 59% which related to the property acquisitions as well as the 22%
increase in ground lease expense. There was an increase in interest expense of
$314,131 due to the financing of acquisitions.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
The number of restaurants owned at December 31, 1995 was 139 compared to 123
at December 31, 1994, a 13% increase. Total sales in restaurants located on
Partnership real estate in 1995 was $135,297,000 compared to $122,315,000
reported in 1994, a 10.6% increase, which was attributable to the increase in
the number of restaurants in the portfolio and to an increase in the average
sales per store.
24
<PAGE>
The Partnership's total revenues in 1995 increased 11.2% to $9,780,000
compared to $8,793,000 recorded in 1994. Rental revenues from properties owned
throughout 1994 and 1995 increased 6.4% in 1995 over 1994. The remaining
increase in revenues in 1995 over 1994 was attributable to the 16 properties
acquired on various dates during the last half of 1995.
Expenses for 1995 increased 18% to $4,557,000 compared to $3,860,000 for
1994 (including a write down of $11,000 in 1994 which was related to one closed
property). This increase in expenses was primarily due to the increase in the
number of restaurant properties owned by the Partnership and related financing
costs.
Ground rent expense increased 4.3% to $1,405,380, compared to $1,347,748 for
1994. The increase in expense was due to the addition of six new ground leases
relating to the 1995 acquisitions and nominal rent escalations on existing
ground leases. Depreciation and amortization increased 13.2% to $1,540,900
compared to $1,361,136 for 1994. This was primarily due to the increase in the
number of restaurant properties owned by the Partnership.
Taxes, general and administrative expenses increased 24% to $1,419,279,
compared to $1,143,956 for 1994. This increase was due to increased professional
fees, consulting fees, and other various general administration expenses that
relate directly to the increased activity of the Partnership.
Interest expense (income), net increased to $192,142 compared to ($3,515)
for 1994. This increase is primarily due to the financing of acquisitions.
There were no write downs of assets and intangible values related to closed
properties during 1995, as compared to write downs for 1994 of $11,000. Write
downs are not a normal part of the Partnership's business. However, store
closings do occur periodically in retail businesses, including the
Partnership's. Management does not believe that there is an established trend in
its business with respect to store closings because virtually all of the
restaurants included within the Current Properties are currently performing on
their leases and are not in default.
Net income allocable to Unitholders in 1995 was $5,119,000 or $1.10 per
Unit, up 5.9% or $0.06 per Unit from $4,834,000 or $1.04 per Unit in 1994. This
was attributable to the increase in total revenues and management's ability to
limit expenses.
COMPARISON OF YEAR ENDED DECEMBER 31, 1994 TO YEAR ENDED DECEMBER 31, 1993
The number of restaurants owned at December 31, 1994 and 1993 was 123. Total
sales in restaurants located on Partnership real estate in 1994 was $122,315,000
compared to $112,880,000 reported in 1993, an 8.4% increase, which was
attributable to an increase in the average sales per store.
The Partnership's total revenues in 1994 increased 5.5% to $8,793,000
compared to $8,332,000 recorded in 1993. The Partnership owned and leased 123
sites throughout 1993 and 1994.
Expenses excluding the provision for write down of properties for 1994
increased 3.2% to $3,849,000 compared to $3,730,000 for 1993. Write downs of
assets and intangible values related to closed properties during 1994 were
$11,000 as compared to write downs for 1993 of $73,739. Write downs are not a
normal part of the Partnership's business. However, store closings do occur
periodically in retail businesses, including the Partnership's. Management does
not believe that there is an established trend in its business with respect to
store closings because virtually all of the restaurants included within the
Current Properties are currently performing on their leases and are not in
default.
Net income allocable to Unitholders in 1994 was $4,834,000 or $1.04 per
Unit, up 8.3% from $4,437,000 or $0.96 per Unit in 1993. This was attributable
to increased total revenues while expenses remained relatively constant.
25
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's principal source of cash to meet its cash requirements,
including distributions to Unitholders, is rental revenues generated by the
Partnership's properties. Cash generated by the portfolio is held in temporary
investment securities pending quarterly distributions to the Unitholders in the
form of quarterly dividends. As discussed below, this cash also may be used to
fund property acquisitions. Currently, the Partnership's primary source of
funding for acquisitions is its existing revolving line of credit. The
Partnership anticipates meeting its future long-term capital needs through the
incurrence of additional debt or the issuance of additional Units, along with
cash generated from internal operations.
The Partnership currently has approximately $39 million outstanding under
its $40 million line of credit with a syndicate of banks. After application of
the net proceeds from the Offering, approximately $16 million will be available
for borrowings under the line of credit. This line of credit is secured by
certain of the Partnership's real estate including its leasehold interests. The
Partnership may request advances under this line of credit to finance the
acquisition of restaurant properties, to repair and update restaurant properties
and for working capital. The banks will also issue standby letters of credit for
the account of the Partnership under this loan facility. This credit agreement
expires on June 27, 1998 and provides that borrowings thereunder bear interest
at 180 basis points over the London Interbank Offered Rate (LIBOR). Interest
expense for 1995 was $199,000. The Partnership also has a $20 million mortgage
warehouse facility from Morgan Keegan Mortgage Company, Inc., which is secured
by certain of the Partnership's Current Properties and will be secured by
certain of the Acquisition Properties, following consummation of the
acquisitions. As of May 20, 1996, approximately $9.3 million remained available
for borrowings. This facility expires on November 30, 1996, and borrowings
thereunder bear interest at the rate of 300 basis points over LIBOR. The
proceeds from this facility were used to finance the acquisition and proposed
acquisition of various restaurant properties owned by the Business Trust. See
"History and Structure of the Partnership." The Partnership intends to repay
borrowings under this facility using any availability under its existing line of
credit after application of the net proceeds of this Offering or additional
borrowings which may be subsequently incurred.
Pursuant to the Partnership Agreement, the Managing General Partner is
required 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. The Managing General Partner may
make other loans to the Partnership. Each loan must bear interest at a rate not
to exceed the Morgan Guaranty Trust Company of New York prime rate plus 1% or
the highest lawful rate (whichever is less), and in no event may any such loan
be made on terms and conditions less favorable to the Partnership that it could
obtain from unaffiliated third parties or banks for the same purpose. To
management's knowledge, no loans have ever been made pursuant to these
arrangements and no loans were made or outstanding at any time during each of
the three years ended December 31, 1995.
The Partnership paid distributions for 1995 of $1.71 per Unit, which
represented 95% of funds generated from operations. The Partnership paid
distributions for the first quarter of 1996 of $.47 per Unit. Management intends
to distribute from 75% to 95% of the estimated cash generated from operations
within the general objective of continued annual growth in the distributions.
The Partnership expects to maintain such distribution rate for the foreseeable
future based upon actual results of operations, the financial condition of the
Partnership, capital or other factors management deems relevant. During 1995,
the Partnership distributed an aggregate of $8,002,000 to its partners.
26
<PAGE>
INFLATION
The Partnership's leases are generally subject to adjustments for increases
in the Consumer Price Index, which reduces the risk to the Partnership of the
adverse effects of inflation. Because triple net
leases also require the restaurant operators to pay for some or all operating
expenses, property taxes, property repair and maintenance costs and insurance,
some or all of the inflationary impact of these expenses will be borne by the
restaurant operators and not by the Partnership.
Operators of restaurants, in general, possess the ability to adjust menu
prices quickly. However, competitive pressures may limit a restaurant operator's
ability to raise prices in the face of inflation.
SEASONALITY
Fast food restaurant operations historically have been seasonal in nature,
reflecting higher unit sales during the second and third quarters due to warmer
weather and increased leisure travel. This seasonality can be expected to cause
fluctuations in the Partnership's quarterly unit revenue to the extent it
receives percentage rent.
27
<PAGE>
BUSINESS AND PROPERTIES
GENERAL
The Partnership acquires, owns and manages income-producing properties that
it leases on a triple net basis to operators of fast food and casual dining
restaurants, primarily Burger King (the second largest restaurant chain in the
United States in terms of system wide sales), and other national and regional
brands including Dairy Queen, Hardee's and Chili's. The Partnership acquires
properties either from third party lessors or from operators on a sale/leaseback
basis. Under a triple net lease, the tenant is obligated to pay all costs and
expenses, including all real property taxes and assessments, repairs and
maintenance and insurance. Triple net leases do not require substantial
reinvestments by the property owner and, as a result, more cash from operations
may be used for distributions to Unitholders or for acquisitions.
The Partnership is one of the largest publicly-owned entities in the United
States dedicated to acquiring, owning and managing restaurant properties. At May
20, 1996, the Partnership's portfolio consisted of 231 restaurant properties in
40 states (the "Current Properties"), approximately 99% of which were leased.
From the Partnership's initial public offering in 1986 until March 31, 1995, the
Partnership's properties were limited to approximately 125 restaurant
properties, all of which were leased on a triple net basis to operators of
Burger King restaurants. In May, 1994, an investor group led by Robert J.
Stetson and Fred H. Margolin acquired the Managing General Partner. In March
1995, certain amendments to the Partnership Agreement were proposed by the new
management and approved by the Unitholders, which authorized the Partnership to
acquire additional restaurant properties not affiliated with BKC. Since adoption
of the amendments, the Partnership has acquired 109 properties for an aggregate
purchase price of approximately $57 million including 93 properties acquired
since January 1, 1996, and has entered into binding agreements to acquire 39
additional properties (the "Acquisition Properties") for an aggregate purchase
price of approximately $27 million. Upon acquisition of the Acquisition
Properties, the Partnership's portfolio will consist of an aggregate of 270
properties in 40 states consisting of 170 Burger King restaurants, 40 Dairy
Queen restaurants, 27 Hardee's restaurants, 11 Pizza Hut restaurants, five
Schlotzsky's restaurants, two Chili's restaurants and 15 other properties, most
of which are regional brands.
The Partnership's management team consists of senior executives with
extensive experience in the acquisition, operation and financing of fast food
and casual dining restaurants. Mr. Stetson, the President - Chief Executive
Officer of the Managing General Partner is the former President of the Retail
Division and Chief Financial Officer of BKC, as well as the former Chief
Financial Officer of Pizza Hut, Inc. As a result, management has an extensive
network of contacts within the franchised fast food and casual dining restaurant
industry. Based on management's assessment of market conditions and its industry
knowledge and experience, the Partnership believes that substantial
opportunities exist for it to acquire additional properties on advantageous
terms.
INDUSTRY
The restaurant industry has grown significantly over the past 20 years as a
result of population growth, the influence of the baby boom generation, the
growth of two-family incomes and the growth in consumers' disposable income. The
total food service industry sales during 1995 have been estimated at
approximately $277 billion. The fast food segment, which offers value pricing
and convenience, is the largest segment in the restaurant industry with
projected 1996 sales of $100 billion. In 1995, industry sources estimate that
fast food restaurants accounted for 71% of total restaurant traffic, 52% of
chain restaurant locations and 47% of consumers' restaurant dollars spent.
The growth of the fast food segments has exceeded that of the entire
restaurant industry for over 20 years. According to industry sources, fast food
restaurant sales have grown at a 6.9% compound annual growth rate with 1995
sales up 7.1% over 1994 levels, and fast food restaurant sales are anticipated
to grow 6.7% in 1996 to over $100 billion. Additionally, industry sources
suggest that in the fast food industry, operators are increasingly moving toward
leasing rather than owning their
28
<PAGE>
restaurants. Currently, approximately two-thirds of fast food restaurant
operators lease their restaurant properties. Leasing enables a restaurant
operator to reallocate funds to the improvement of current restaurants, the
acquisition of additional restaurants or other uses.
Management believes, based on its industry knowledge and experience, that in
addition to the Partnership, there is only one other publicly-owned entity that
dedicates substantially all of its assets and efforts to acquiring, owning and
managing chain restaurant properties. Collectively, these two publicly-owned
entities own less than 5% of the total number of such restaurants. In addition,
there are a number of other publicly-owned entities that are dedicated to
acquiring, owning and managing triple net lease properties, including chain
restaurant properties. A majority of chain restaurant properties are owned by
restaurant operators and real estate investors. Management believes, based on
its industry knowledge and experiences that this fragmented market provides the
Partnership with substantial acquisition opportunities. Management also believes
that the inability of most small restaurant owners to obtain funds with which to
compete for acquisitions as timely and inexpensively as the Partnership provides
the Partnership with a competitive advantage when seeking to acquire a
restaurant property.
In addition to the Partnership's large number of leases to operators of
Burger King restaurants, the Partnership also leases multiple restaurant
properties to operators of Pizza Hut, Taco Bell, Hardee's and Dairy Queen brand
names, substantially all of which, according to industry sources, rank in the
top 15 with respect to restaurant sales in 1995. Based on publicly-available
information, Burger King is the second largest fast food restaurant system in
the world in terms of system wide sales. According to publicly-available
information, there are approximately 6,500 Burger King restaurant units in the
United States. With respect to the Burger King restaurants in the Partnership's
portfolio, for the year-ended December 31, 1995, same-store sales increased 7%
over the prior year.
STRATEGY
Since the adoption of the amendments to the Partnership Agreement in March
1995, the Partnership's principal business objective has been to expand and
diversify the Partnership's portfolio through frequent acquisitions of small to
medium-sized portfolios of fast food and casual dining restaurant properties.
The Partnership intends to achieve growth and diversification while maintaining
low portfolio investment risk through adherence to proven acquisition criteria
with a conservative capital structure. The Partnership has and intends to
continue to expand its portfolio by acquiring triple net leased properties and
structuring sale/leaseback transactions consistent with the following
strategies:
-FOCUS ON RESTAURANT PROPERTIES. The Partnership takes advantage of senior
management's extensive experience in fast food and casual dining restaurant
operations to identify new investment opportunities and acquire restaurant
properties satisfying the Partnership's investment criteria. Management
believes, based on its industry knowledge and experience, that relative to
other real estate sectors, restaurant properties provide numerous
acquisition opportunities at attractive yields.
-INVEST IN MAJOR RESTAURANT BRANDS. The Partnership intends to continue to
acquire properties operated as major national and regional restaurant
brands, such as Burger King, Dairy Queen, Hardee's and Chili's by
competent, financially stable franchisees. Certain of the Partnership's
Current Properties are also operated as Pizza Hut, Schlotzsky's, KFC and
Taco Bell restaurants. Management believes, based on its industry knowledge
and experience, that successful restaurants operated under these brands
offer stable, consistent income to the Partnership with minimal risk of
default or non-renewal of the lease and franchise agreement. As a result of
its concentration on major national and regional brands, in the last three
fiscal years, of all rental revenues due, more than 99.5% has been
collected.
-ACQUIRE EXISTING RESTAURANTS. The Partnership's strategy is to focus
primarily on the acquisition of existing fast food and casual dining chain
restaurants that have a history of profitable
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operations with a remaining term on the current lease of at least five
years. The average remaining lease term for the Current Properties is nine
years. Management believes, based on its industry knowledge and experience,
that acquiring existing restaurants provides a higher risk-adjusted rate of
return to the Partnership than acquiring newly-constructed restaurants.
-CONSOLIDATE SMALLER PORTFOLIOS. Management believes, based on its industry
knowledge and experience, that pursuing multiple transactions involving
smaller portfolios of restaurant properties (generally having an
acquisition price of less than $3 million) result in a more attractive
valuation because the size of such transactions generally does not attract
large institutional property owners and smaller buyers typically are not
well capitalized and may be unable to complete a transaction. Larger
transactions involving multiple properties generally attract several
institutional bidders, often resulting in a higher purchase price and lower
investment returns to the purchaser. In certain circumstances, however, the
Partnership has identified, evaluated and pursued portfolios valued at up
to $50 million that present attractive risk/return ratios and recently
closed a transaction of approximately $18 million.
-MAINTAIN CONSERVATIVE CAPITAL STRUCTURE. The Partnership intends to
maintain a ratio of total indebtedness of 50% or less to the greater of (i)
the market value of all issued and outstanding Units plus total outstanding
indebtedness ("Total Market Capitalization") or (ii) the original cost of
all of the Partnership's properties as of the date of such calculation. The
Partnership's ratio of total indebtedness to Total Market Capitalization
was approximately 29% at May 20, 1996. See "Capitalization." The
Partnership, however, may from time to time reevaluate its borrowing
policies in light of then-current economic conditions, relative costs of
debt and equity capital, market values of properties, growth and
acquisition opportunities and other factors.
INVESTMENT CRITERIA
The Partnership has recently acquired 93 restaurant properties and 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 rent on such restaurant properties has produced cash flow that, after
deducting management fees and interest and debt amortization or Unit
issuance, would improve the Partnership's existing cash flow per Unit.
-The restaurants' annual sales would be in the highest 70% of the
restaurants in that chain.
-The restaurants would have historically generated at least the normal
profit for restaurants in that chain and be projected to continue to
generate a profit even if sales decreased by 10%.
-The restaurant properties would be located where the average per capita
income was stable or increasing.
-The restaurants' franchisees would possess significant net worth and
preferably operate multiple restaurants.
-The restaurant properties would be in good repair and operating condition.
The Managing General Partner receives acquisition proposals from a number of
sources. The Managing General Partner utilizes two independent real estate
professionals who assist the Partnership in examining and analyzing proposed
acquisitions of property. These professionals are compensated principally upon
the Partnership's closing of an acquisition of property. There can be no
assurance that the Managing General Partner will be able to identify restaurant
properties that satisfy all or a significant number of such criteria, or that if
identified, the Partnership will be able to purchase such restaurant properties.
The Partnership believes that the Partnership can generate improved
operating results as a result of the acquisition of additional restaurant
properties and by making loans to tenants for
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renovation and improvement of the Current Properties. The Partnership also
believes that expansion and diversification of the Partnership's restaurant
property portfolio to include more balance among restaurant brands decreases the
Partnership's dependence on one chain.
THE PROPERTIES
At May 20, 1996, the Current Properties consisted of 231 properties, 99% of
which were leased by operators of fast food and casual dining restaurants. In
addition, at such date the Acquisition Properties (totaling 39) were subject to
binding agreements of acquisition. Set forth below are summary descriptions of
the Current Properties and Acquisition Properties.
BURGER KING PROPERTIES. At May 20, 1996, the Partnership owned 170
properties operated as Burger King restaurants. The Burger King restaurant
properties that are part of the Current Properties are operated by more than 80
operators, the largest of which operates five Burger King restaurants.
HARDEE'S PROPERTIES. At May 20, 1996, the Partnership owned two properties
in Georgia and has entered into agreements to acquire 25 additional properties
in Georgia and South Carolina operated as Hardee's restaurants. The Hardee's
restaurant properties that are part of the Current Properties are operated by
two operators, the larger of which operates 23 Hardee's restaurants.
DAIRY QUEEN PROPERTIES. At May 20, 1996, the Partnership owned 40
properties operated as Dairy Queen restaurants, all in Texas. The Dairy Queen
restaurant properties are operated by two operators.
CHILI'S PROPERTIES. At May 20, 1996, the Partnership owned two properties
in Texas which are operated by a single operator.
OTHER PROPERTIES. At May 20, 1996, the Partnership owned 31 additional
properties, most of which were operated under other major national and regional
brand names, including, but not limited to, Pizza Hut, KFC and Taco Bell.
BURGER KING-Registered Trademark- IS A REGISTERED TRADEMARK OF BURGER KING
BRANDS, INC., SCHLOTZSKY'S-Registered Trademark- IS A REGISTERED TRADEMARK OF
SCHLOTZSKY'S, INC., DAIRY QUEEN-Registered Trademark- IS A REGISTERED TRADEMARK
OF AMERICAN DAIRY QUEEN CORPORATION, PIZZA HUT IS A REGISTERED TRADEMARK OF
PIZZA HUT, INC., HARDEE'S-Registered Trademark- IS A REGISTERED TRADEMARK OF
HARDEE'S FOOD SYSTEMS, INC., CHILI'S-Registered Trademark- IS A REGISTERED
TRADEMARK OF BRINKER RESTAURANT CORPORATION, KFC-Registered Trademark- IS A
REGISTERED TRADEMARK OF KFC CORPORATION AND TACO BELL-Registered Trademark- IS A
REGISTERED TRADEMARK OF TACO BELL CORP. THE FOREGOING ENTITIES HAVE NOT ENDORSED
OR APPROVED THE PARTNERSHIP OR THE OFFERING MADE HEREBY.
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The Partnership's Current Properties consist of 231 properties. The table
below sets forth, as of March 31, 1996, the number of properties in each state
and the franchise affiliation of such properties assuming the consummation of
the Acquisition Properties.
<TABLE>
<CAPTION>
TOTAL BURGER DAIRY PIZZA
STATE PROPERTIES KING QUEEN HARDEE'S HUT CHILI'S OTHER
- ------------------------------------------------------------ ---------- ------ ----- -------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Alabama..................................................... 1 1
Arizona..................................................... 15 13 1 1
Arkansas.................................................... 6 6
California.................................................. 18 17 1
Colorado.................................................... 3 3
Connecticut................................................. 3 3
Delaware.................................................... 1 1
Florida..................................................... 9 7 2
Georgia..................................................... 34 8 25 1
Illinois.................................................... 1 1
Indiana..................................................... 3 2 1
Iowa........................................................ 2 2
Kansas...................................................... 2 2
Kentucky.................................................... 3 3
Louisiana................................................... 4 4
Maine....................................................... 4 4
Maryland.................................................... 3 2 1
Massachusetts............................................... 3 3
Michigan.................................................... 4 4
Minnesota................................................... 1 1
Mississippi................................................. 2 2
Missouri.................................................... 3 3
Montana..................................................... 1 1
Nebraska.................................................... 1 1
Nevada...................................................... 1 1
New Jersey.................................................. 6 6
New Mexico.................................................. 1 1
New York.................................................... 4 4
North Carolina.............................................. 7 6 1
Ohio........................................................ 7 7
Oklahoma.................................................... 5 3 1 1
Oregon...................................................... 5 5
Pennsylvania................................................ 9 9
South Carolina.............................................. 10 7 2 1
Tennessee................................................... 5 3 2
Texas....................................................... 68 13 40 1 2 12
Vermont..................................................... 1 1
Washington.................................................. 7 7
West Virginia............................................... 2 2
Wisconsin................................................... 5 5
Total....................................................... 270(1) 170 40 27 11 2 20
% Total................................................... 100% 63% 15% 10% 4% 1% 7%
</TABLE>
- ------------------------
(1) Includes one vacant restaurant property.
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LEASES WITH RESTAURANT OPERATORS
The Partnership's strategy is to acquire operating restaurant properties
rather than developing new properties. Typically, the Partnership acquires a
property that has been operated as a fast food or casual dining restaurant and
which is subject to a lease with a remaining term of five-20 years and a
co-terminous franchise agreement. Management believes, based on its experience,
that this strategy reduces the Partnership's financial risk since the restaurant
operated on such property has a proven operating record which mitigates the risk
of default or non-renewal under the lease. At May 20, 1996, the Current
Properties have remaining lease terms ranging from one to 25 years.
All of the Partnership's existing leases are "triple net," which means that
the tenant is obligated to pay all costs and expenses, including all real
property taxes and assessments, repairs and maintenance and insurance. The
Partnership's leases provide for a base rent plus a percentage of the
restaurant's sales in excess of a threshold amount. The triple net lease
structure is designed to provide the Partnership with a consistent stream of
income without the obligation to reinvest in the property. For the year ended
December 31, 1995, base rental revenues and percentage rental revenues
represented 66% and 34%, respectively, of total gross rental revenues.
Management intends to renew and restructure leases to increase the percentage of
total rental revenues derived from base rental revenues and, consequently,
decrease the percentage of total revenues from percentage rental revenues. In
addition, in order to encourage the early renewal of existing leases, the
Partnership has offered certain lessees remodeling grants of up to $30,000. To
date, the Partnership has renewed leases early under this program. Management
considers the grants to be prudent given the increased sales resulting at the
remodeled restaurants and the lower costs incurred because of the early lease
renewals.
The Partnership generally acquires properties from third party lessors or
from operators in a sale/ leaseback transaction in which the operator sells the
property to the Partnership and enters into a long-term lease (typically 20
years). A sale/leaseback transaction is attractive to the operator because it
allows the operator to realize the value of the real estate while retaining
occupancy for a long term. A sale/leaseback transaction may also provide
specific accounting, earnings and market value benefits to the selling operator.
For example, the lease on the property may be structured by the tenant as an
off-balance sheet operating lease, consistent with Financial Accounting
Standards Board rules, which may increase the operator's earnings, net worth and
borrowing capacity. The following table sets forth certain information regarding
lease expirations for Current Properties and Acquisition Properties.
LEASE EXPIRATION SCHEDULE
<TABLE>
<CAPTION>
NUMBER OF LEASES NET RENTAL
YEAR EXPIRING % OF TOTAL INCOME (1) % OF TOTAL
- ------------------------------------------ ----------------- ----- ----------- -----
<S> <C> <C> <C> <C>
1996...................................... 0 0 $ 0 0
1997...................................... 7 3 321 2
1998...................................... 11 4 823 4
1999...................................... 21 8 1,716 8
2000...................................... 38 14 2,363 12
2001-05................................... 89 33 7,135 35
2006-10................................... 11 4 919 4
2011-15................................... 11 4 1,128 6
2016-25................................... 81 30 5,863 29
--- --- ----------- ---
269(2) 100% $ 20,270 100%
--- --- ----------- ---
--- --- ----------- ---
</TABLE>
- ------------------------
(1) Net Rental Income equals rental receipts less ground rents.
(2) Excludes one vacant restaurant property.
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<PAGE>
OWNERSHIP OF REAL ESTATE INTERESTS
The Partnership's Current Properties and Acquisition Properties consist of
189 properties where the Partnership owns both the land and the restaurant
building in fee simple (the "Fee Properties") and 81 properties where the
Partnership leases the land, the building or both (the "Leasehold Properties")
under leases from third-party lessors.
Of the 81 Leasehold Properties, 13 are Primary Leases, whereby the
Partnership leases from a third party both the underlying land and the
restaurant building and the other improvements thereon and then subleases the
property to the restaurant operator. Under the terms of the remaining 68
Leasehold Properties (the "Ground Leases"), the Partnership leases the
underlying land from a third party and owns the restaurant building and the
other improvements constructed thereon. In any event, upon expiration or
termination of a Primary Lease or Ground Lease, the owner of the underlying land
generally will become the owner of the building and all improvements thereon. At
May 20, 1996, the remaining terms of the Primary Leases and Ground Leases ranged
from one to 25 years. With renewal options exercised, the remaining terms of the
Primary Leases and Ground Leases ranged from approximately five to 35 years and
the average remaining term was 21 years.
The terms and conditions of each Primary Lease and each Ground Lease vary
substantially. However, each Primary Lease and each Ground Lease have certain
provisions in common including that (i) the initial term is 20 years or less,
(ii) the rentals payable are stated amounts that may escalate over the terms of
the Primary Leases and Ground Leases (and/or during renewal terms) but normally
(although not always) are not based upon a percentage of sales of the
restaurants thereon, and (iii) the Partnership is required to pay all taxes and
operating, maintenance, and insurance expenses for the Leasehold Properties. In
addition, under substantially all of the Leases, the 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). Several Primary Leases and Ground Leases also give the owner the right
to 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 and Ground
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 and Ground Leases without obtaining the landlord's consent or
satisfying certain other conditions. In addition, approximately 20% of the
Primary Leases and Ground Leases require the Partnership to use such Leasehold
Properties only for the purpose of operating a Burger King 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 or Ground Lease,
including the obligation to pay rent.
Of the Current Properties, 70 are leased or subleased to a BKC franchisee
under a Lease/ Sublease, pursuant to which the franchisee is required to operate
a Burger King restaurant thereon in accordance with the lessee's Franchise
Agreement and to make no other use thereof. Upon its acquisition of such
properties, the Partnership assumed the rights and obligations of BKC under the
Leases/Subleases. Five properties are leased to BKC on substantially the same
terms and conditions as those contained in the Lease/Sublease with the prior
lessees.
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 or purchase options.
The Partnership, however, is required under the Partnership Agreement to
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<PAGE>
renew a Lease/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. At May 20, 1996, the
remaining terms of all the Leases/Subleases ranged from approximately one to 25
years, and the average remaining term was nine years.
USE AND OTHER RESTRICTIONS ON THE OPERATION AND TRANSFER OF BURGER KING
RESTAURANT PROPERTIES
The Partnership was originally formed for the purpose of acquiring all of
BKC's interests in the original portfolio and leasing or subleasing them to BKC
franchisees under the Leases/Subleases. Accordingly, the Partnership Agreement
contains provisions that state, except as expressly permitted by BKC, that the
Partnership may not use such properties for any purpose other than to operate a
Burger King 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 such properties. The Partnership
Agreement 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. The Partnership Agreement also requires the Partnership under
certain circumstances to provide tenants with assistance with remodeling costs.
Such terms with respect to such properties imposed on the Partnership by the
Partnership Agreement may be less favorable than those imposed upon other
lessors of Burger King restaurants. BKC has advised the Partnership that it
intends to waive or not impose certain of the restrictive provisions contained
in the Partnership Agreement and the Partnership is discussing BKC's position
with BKC to clarify such provisions.
RESTAURANT ALTERATIONS AND RECONSTRUCTION
It is important that the Current 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
Burger King 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 Burger King restaurants. Most of the Current Properties
that are operating as Burger Kings are 15 to 20 years old, and the Partnership
believes that many of these properties require substantial improvements to
maximize sales and the conditions of many of these properties is below BKC's
current image requirements.
Recently, in order to encourage the early renewal of existing
Leases/Subleases, the Partnership has established an "Early Renewal Program"
whereby the Partnership has offered to certain tenants the right to renew
existing Leases/Subleases for up to an additional 20 years in consideration for
remodeling grants for the properties of up to $30,000. As a result of this
Program, to date, the Partnership has extended the lease term for 20
Leases/Subleases. The purpose of this Program is to extend the term of existing
Leases/Subleases prior to the end of the lease term and to enhance the value of
the underlying property to the Partnership.
COMPETITION
The restaurants operated on the properties are subject to significant
competition (including competition from other national and regional fast food
restaurant chains, including Burger King 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, and other competitors such as convenience stores and
supermarkets that sell prepared and ready-to-eat foods. 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
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<PAGE>
upon the experience and ability of the lessees operating the restaurants located
on the properties and the particular franchise system generally to compete with
these other restaurants and similar operations. The Partnership believes that
the ability of its lessees to compete is affected by their compliance with the
image requirements at their restaurants.
Management believes, based on its industry knowledge and experience, that
there is only one other publicly-owned entity that dedicates substantially all
of its assets and efforts to acquiring and managing properties operated as fast
food or casual dining restaurants. However, other publicly-held entities, as
well as numerous private firms and private individuals, compete with the
Partnership for the acquisition of restaurant properties. Such investors may
have greater financial resources than the Partnership.
REGULATION
The Partnership, through its ownership of interests in and management of
real estate, is subject to various environmental, health, land-use and other
regulation by federal, state and local governments that affects the development
and regulation of restaurant properties. The Partnership's leases impose the
primary obligation for regulatory compliance on the operators of the restaurant
properties.
ENVIRONMENTAL REGULATION. Under various federal, state and local laws,
ordinances and regulations, an owner or operator of real property may become
liable for the costs of removal or remediation of certain hazardous substances
released on or within its property. Such liability may be imposed without regard
to whether the owner or operator knew of, or caused the release of the hazardous
substances. In addition to liability for cleanup costs, the presence of
hazardous substances on a property could result in the owner or operator
incurring liability as a result of a claim by an employee or another person for
personal injury or a claim by an adjacent property owner for property damage.
In connection with the Partnership's acquisition of a new property, a Phase
I environmental assessment is obtained. A Phase I environmental assessment
involves researching historical usages of a property, databases containing
registered underground storage tanks and other matters including an on-site
inspection to determine whether an environmental issue exists with respect to
the property which needs to be addressed. If the results of a Phase I
environmental assessment reveal potential issues, a Phase II assessment which
may include soil testing, ground water monitoring or borings to locate
underground storage tanks, is ordered for further evaluation and, depending upon
the results of such assessment, the transaction is consummated or the
acquisition is terminated.
The Partnership is not currently a party to any litigation or administrative
proceeding with respect to any property's compliance with environmental
standards. Furthermore, the Partnership is not aware of nor does it anticipate
any such action, or the need to expend any of its funds, in the foreseeable
future in connection with its operations or ownership of existing properties
which would have a material adverse effect upon the Company.
AMERICANS WITH DISABILITIES ACT ("ADA"). Under the ADA, all public
accommodations, including restaurants, are required to meet certain federal
requirements relating to physical access and use by disabled persons. A
determination that the Partnership or a property of the Partnership is not in
compliance with the ADA could result in the imposition of fines, injunctive
relief, damages or attorney's fees. The Partnership's leases contemplate that
compliance with the ADA is the responsibility of the operator. The Partnership
is not currently a party to any litigation or administrative proceeding with
respect to a claim of violation of the ADA and does not anticipate any such
action or proceeding that would have a material adverse effect upon the Company.
LAND-USE; FIRE AND SAFETY REGULATIONS. In addition, the Partnership and its
restaurant operators are required to operate the properties in compliance with
various laws, land-use regulations, fire and safety regulations and building
codes as may be applicable or later adopted by the governmental
36
<PAGE>
body or agency having jurisdiction over the location or the property or the
matter being regulated. The Partnership does not believe that the cost of
compliance with such regulations and laws will have a material adverse effect
upon the Partnership.
HEALTH REGULATIONS. The restaurant industry is regulated by a variety of
state and local departments and agencies, concerned with the health and safety
of restaurant customers. These regulations vary by restaurant location and type
(i.e., fast food or casual dining). The Partnership's leases provide for
compliance by the restaurant operator with all health regulations and
inspections and require that the restaurant operator obtain insurance to cover
liability for violation of such regulations or the interruption of business due
to closure caused by failure to comply with such regulations. The Partnership is
not currently a party to any litigation or administrative proceeding with
respect to the compliance with health regulations of any property it finances,
and does not anticipate any such action or proceeding that would have a material
adverse effect upon the Partnership.
INSURANCE
The Partnership requires its lessees to maintain adequate comprehensive
liability, fire, flood and extended loss insurance provided by reputable
companies with commercially reasonable and customary deductibles and limits and
the Partnership is an additional named insured under such policies. Certain
types and amounts of insurance are required to be carried by each restaurant
operator under the leases with the Partnership and the Partnership actively
monitors tenant compliance with this requirement. The Partnership intends to
require lessees of subsequently acquired property, including the Acquisition
Properties, to obtain similar insurance coverage. There are, however, certain
types of losses generally of a catastrophic nature, such as earthquakes and
floods, that may be either uninsurable or not economically insurable, as to
which the Partnership's properties (including the Current Properties and the
Acquisition Properties) are at risk depending on whether such events occur with
any frequency in such areas. An uninsured loss could result in a loss to the
Partnership of both its capital investment and anticipated profits from the
affected property. In addition, because of coverage limits and deductibles,
insurance coverage in the event of a substantial loss may not be sufficient to
pay the full current market value or current replacement cost of the
Partnership's investment. Inflation, changes in building codes and ordinances,
environmental considerations, and other factors also might make it infeasible to
use insurance proceeds to replace a facility after it has been damaged or
destroyed. Under such circumstances, the insurance proceeds received by the
Partnership might not be adequate to restore its economic position with respect
to such property.
PAYMENTS TO THE MANAGING GENERAL PARTNER
The Partnership pays the Managing General Partner a non-accountable (no
support is required for payment) 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 third parties). The 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. The allowance is
paid quarterly, in arrears.
In addition, to compensate the Managing General Partner for its efforts and
increased internal expenses resulting from 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 1% of the
purchase price for such property and (ii) an annual fee equal to 1% 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 increased annual fee equaled $29,375. In addition, if the
Rate of Return (as defined in the Partnership Agreement) on the Partnership's
equity in all additional properties exceeds 12% per annum for any fiscal year,
the Managing General Partner will be paid an additional fee equal to 25% of the
cash flow received with respect to such additional properties in excess of the
cash flow representing a 12% rate of return thereon. However, to the extent the
Managing General Partner receives distributions in excess of those provided by
its 1.98% Partnership interest, such distributions will reduce the fee payable
with respect to such excess cash flow from
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<PAGE>
any additional properties. See "Partnership Allocations" below. Except as
provided above, such payments are in addition to distributions made by the
Partnership to the Managing General Partner in its capacity as a partner in the
Partnership. 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.
PARTNERSHIP ALLOCATIONS
Net cash flow from operations of the Partnership that is distributed is
allocated 98.02% to the Unitholders and 1.98% to the Managing General Partner
until the Unitholders have received a simple (non-cumulative) annual return for
such year equal to 12% of the Unrecovered Capital per Unit (as defined in the
Partnership Agreement; such Unrecovered Capital is currently $19.68 per Unit and
will be adjusted to give effect to the issuance of the Units hereunder in order
to make the Unrecovered Capital uniform for all outstanding Units) reduced by
any prior distributions of net proceeds of capital transactions); then any
distributed cash flow for such year is allocated 75.25% to the Unitholders and
24.75% to the Managing General Partner until the Unitholders have received a
total simple (non-cumulative) annual return for such year equal to 17.5% of the
Unrecovered Capital Per Unit; and then any excess distributed cash flow for such
year is allocated 60.4% to the Unitholders and 39.6% to the Managing General
Partner. The Partnership may retain otherwise distributable cash flow to the
extent the Managing General Partner deems appropriate.
Net proceeds from financing and sales or other dispositions of the
Partnership's properties are allocated 98.02% to the Unitholders and 1.98% to
the Managing General Partner until the Unitholders have received an amount equal
to the Unrecovered Capital Per Unit plus a cumulative, simple return equal to
12% 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% to the
Unitholders and 24.75% to the Managing General Partner until the Unitholders
have received a total cumulative, simple return equal to 17.5% of the
Unrecovered Capital per Unit; and then such proceeds are allocated 60.4% to the
Unitholders and 39.6% to the Managing General Partner. The Partnership may
retain otherwise distributable net proceeds from financing and sales or other
dispositions of the Partnership's properties to the extent the Managing General
Partner deems appropriate.
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 Managing General Partner
and the Unitholders 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 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.
REIT CONVERSION
The Partnership, together with its legal and financial advisors, is
currently evaluating the merits of converting to a self-advised, self-managed
REIT. A conversion to a REIT involves numerous complex legal, financial and tax
issues that must be analyzed fully before determining whether converting to a
REIT is in the best interests of the Partnership and the Unitholders. Moreover,
any such conversion must be approved by the limited partners in accordance with
the terms of the Partnership Agreement.
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The Partnership anticipates that the necessary analysis will be completed in
the fourth quarter of 1996. If the Partnership determines that converting to a
REIT is in the best interests of the Partnership and the Unitholders, the
conversion process is anticipated to be commenced prior to December 31, 1996,
and should be completed as soon as possible thereafter, which the Partnership
anticipates being prior to December 31, 1997.
A REIT is not subject to federal income tax provided that certain
restrictions are complied with. These restrictions are extensive and affect the
structure and operations of REITs.
A REIT is structured as a corporation that is governed by a Board of
Directors that is elected by the shareholders. A self-advised, self-managed REIT
is a REIT that is managed by the officers of the REIT and not by a third party.
The Partnership has indicated that even if it does not convert to a REIT that it
may become self-advised and self-managed, subject to the approval of the limited
partners. This would entail the officers of the Managing General Partner
becoming officers of the Partnership and being compensated by the Partnership.
Currently, the Partnership compensates the Managing General Partner for managing
the Partnership and acquiring properties, which in turn compensates its officers
and employees.
EMPLOYEES
The Partnership and the Managing General Partner each currently employ five
individuals on either a full or part-time basis. In addition, the Managing
General Partner retains, at the expense of the Partnership on an independent
contract basis, other parties in connection with the operation of the
Partnership and the Current Properties, including auditing, legal, property
origination and other services.
LEGAL PROCEEDINGS
The Partnership is not presently involved in any material litigation nor, to
its knowledge, is any material litigation threatened against the Partnership or
its properties, other than routine litigation arising in the ordinary course of
business.
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MANAGEMENT
The Partnership 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 are controlling stockholders and serve as executive
officers and directors of the Managing General Partner (subject to election by
its board of directors). The following is a biographical summary of the
experience of the directors and executive officers of the Managing General
Partner.
ROBERT J. STETSON. Mr. Stetson is the President, Chief Executive Officer
and a director of the Managing General Partner. Since 1978, Mr. Stetson has been
primarily engaged in restaurant chain management, including the acquisition and
management of restaurant properties. Prior to 1987, Mr. Stetson served in
several positions with PepsiCo Inc. and its subsidiaries, including Chief
Financial Officer of Pizza Hut. From 1987 until 1992, Mr. Stetson served as a
senior executive in restaurant and retailing subsidiaries of Grand Metropolitan
PLC, the ultimate parent corporation 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. Mr. Stetson is also a director of Bayport Restaurant Group and
Bugaboo Creek Steakhouse Inc., both publicly-traded restaurant companies. Mr.
Stetson received a Bachelor of Arts degree from Harvard College and an M.B.A.
from Harvard Business School. Mr. Stetson is 45 years old.
FRED H. MARGOLIN. Mr. Margolin is the Chairman, Secretary, Treasurer and a
director of the Managing General Partner. In 1977, Mr. Margolin founded Intercon
General Agency, a national insurance agency specializing in the development and
marketing of insurance products for 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 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 approximately $50,000,000. Mr. Margolin received a Bachelor of
Science degree from the Wharton School of the University of Pennsylvania and an
M.B.A. from Harvard Business School. Mr. Margolin is 46 years old.
GERALD H. GRAHAM. Mr. Graham is a director of the Managing General Partner.
Mr. Graham is a professor and the Dean of the Barton School of Business at
Wichita State University. Mr. Graham is 58 years old.
DAVID K. ROLPH. Mr. Rolph is a director of the Managing General Partner.
Mr. Rolph is the President of the Tex-Mex restaurant chain, "Carlos O'Kellys"
and the Vice President of Sasnak Management Corp., a restaurant management
company. Mr. Rolph is 47 years old.
DARREL L. ROLPH. Mr. Rolph is a director of the Managing General Partner.
Mr. Rolph is the Secretary of "Carlos O'Kellys" and the President of the Sasnak
Management Corp., a restaurant management company. Mr. Rolph is 59 years old.
EUGENE G. TAPER. Mr. Taper is a director of the Managing General Partner.
Mr. Taper is a certified public accountant and a business consultant and retired
partner, since 1993, of Deloitte & Touche LLP, an international public
accounting firm. Mr. Taper is 59 years old.
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DESCRIPTION OF UNITS
The following paragraphs generally describe the Units and certain provisions
of the Deposit Agreement and the Depositary Receipt. The following discussion is
qualified in its entirety by reference to the Partnership Agreement, the Deposit
Agreement and the Depositary Receipt, which have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part.
GENERAL
The percentage interest in the Partnership represented by a Unit is equal to
the ratio it bears at the time of such determination to the total number of
Units in the Partnership (including any undeposited Units) outstanding,
multiplied by the aggregate percentage interest in the Partnerships of all
Unitholders. Each Unit evidences entitlement to a portion of the Partnership's
cash flow, proceeds from capital transactions and allocations of net income and
net loss, as determined in accordance with certain provisions of the Partnership
Agreement, including provisions for increased distributions and allocations to
the Managing General Partner (and correspondingly decreased distributions and
allocations to the Unitholders) of cash flow and proceeds of capital
transactions above certain levels. To maintain the uniformity of the Units, the
Managing General Partner is authorized to make certain adjustments to the
capital accounts, unrecovered capital and preferred returns so that all of the
Units will reflect the same amounts on a per Unit basis. Such adjustments to the
unrecovered capital will generally dilute the interests of purchasers of the
Units. In addition, a Unitholder's percentage interest in the Partnership will
be diluted if the Partnership issues Units to a general partner in connection
with the conversion of its interest as a general partner into Units upon its
withdrawal or removal.
Upon the consummation of this Offering (and upon consummation of any
exercise of the over-allotment option), the Managing General Partner will
deposit all of the Units offered and sold pursuant hereto with Morgan Guaranty
Trust Company of New York, as depositary (the "Depositary"). Purchasers of Units
in this Offering will not be required to execute Transfer Applications, but
subsequent transferees of the Depositary Receipts (or their brokers, agents or
nominees on their behalf) will be required to execute a Transfer Application in
the form appearing on the back of the Depositary Receipt. Although purchasers of
Units in this Offering will not be required to execute Transfer Applications,
they will be deemed to have agreed to be bound by the terms and conditions of
the Partnership Agreement, the Deposit Agreement and the Depositary Receipt.
Depositary Receipts may be held in a "street name" account or by any other
nominee holder. In such event, the nominee holder will be required to provide
the Partnership an undertaking to provide transferees with copies of all reports
issued by the Partnership to the Unitholders. The Partnership will not recognize
the transfer of Units held by a nominee holder from one beneficial owner to
another unless the nominee holder submits an executed Transfer Application on
behalf of the transferee. In the absence of written notice to the Partnership or
the Depositary to the effect that a holder of Units is holding such Units in the
capacity of nominee holder and identifying the beneficial owner thereof, the
Partnership will treat the nominee holder of a Depositary Receipt as the
absolute owner thereof for all purposes, and the beneficial owner's rights shall
be limited solely to those that it has against the nominee holder as a result of
or by reason of any understanding or agreement between such beneficial owner and
nominee holder.
TRANSFER OF THE DEPOSITARY RECEIPTS
The Depositary Receipts are transferable upon compliance with the procedure
described below. A transferee of a Depositary Receipt will be an assignee with
respect to the Unit evidenced thereby unless and until the Managing General
Partner, in its sole and absolute discretion, consents to the admission of such
transferee as a Substituted Limited Partner (as defined in the Partnership
Agreement) with respect to such Unit and amends the Partnership Agreement to
reflect such admission. Although the Managing General Partner reserves the
right, in its sole and absolute discretion, to
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refuse to consent to the admission of any transferee of a Depositary Receipt for
any reason or for no reason at all, the Managing General Partner currently
anticipates that it generally will consent to the admission of transferees of
Depositary Receipts who comply with the procedure described below.
A subsequent transferee of a Depositary Receipt (or his or her broker,
dealer or nominee holder on his or her behalf) will be required to deliver an
executed Transfer Application to the Depositary prior to registration of a
transfer by the Depositary. Transfer Applications appear on the back of each
Depositary Receipt and also will be furnished at no charge by the Depositary or
other transfer agent upon receipt of a request therefor. A subsequent transferee
of a Depositary Receipt, whether or not a Transfer Application has been executed
by or on his behalf, will be deemed to have (a) agreed to be bound by the terms
and conditions of the Deposit Agreement and Depositary Receipt, (b) agreed to be
bound by the terms and conditions of the Partnership Agreement, (c) executed any
documents reasonably required by the Partnership in connection with the transfer
and such admission, and (d) granted the power of attorney described below. A
request by any broker, dealer or other nominee holder to register transfer of a
Depositary Receipt, however signed (including by any stamp, mark or symbol
executed or adopted with intent to authenticate the Depositary Receipt), will be
deemed to be execution of a Transfer Application by and on behalf of such
nominee and the beneficial owner of such Depositary Receipt. Until the transfer
of a Depositary Receipt has been registered on the books of the Depositary or
another transfer agent, the Depositary and the Partnership will treat the record
holder thereof as the absolute owner thereof for all purposes.
Transferees who do not execute a Transfer Application (either themselves or
through their broker, agent or nominee on their behalf) will not be treated
either as an Assignee or as a record holder of Units and will not receive cash
distributions, federal income tax allocations or reports furnished to record
holders of Units. Nonetheless, any transferee of a Unit conclusively will be
deemed to have agreed to be bound by the terms of the Partnership Agreement, the
Deposit Agreement and the Depositary Receipt.
Pursuant to the terms of the Partnership Agreement, each purchaser of a Unit
in this Offering and each subsequent transferee of a Depositary Receipt appoints
the Managing General Partner and each of the Managing General Partner's
authorized officers and attorneys-in-fact as such transferee's attorney-in-fact
(a) to enter into the Deposit Agreement and deposit the Units of such transferee
in the deposit account established by the Depositary, and (b) to make, execute,
file and/or record (i) documents with respect to the qualification of the
Partnership as a limited partnership in Delaware and any other appropriate
jurisdictions; (ii) other documents requested by, or appropriate under the laws
of, any appropriate jurisdiction; (iii) instruments with respect to any
amendment of the Partnership Agreement; (iv) conveyances and other instruments
or documents with respect to the dissolution, termination, and liquidation of
the Partnership pursuant to the terms of the Partnership Agreement; (v)
financing statements or other documents necessary to grant or perfect a security
interest, mortgage, pledge or lien on all or any of the assets of the
Partnership; (vi) instruments or papers required to continue the business of the
Partnership pursuant to the Partnership Agreement; (vii) instruments relating to
the admission of any Partner to the Partnership; and (viii) all other
instruments deemed necessary or advisable to carry out the provisions of the
Partnership Agreement. Such power of attorney is irrevocable, will survive the
subsequent death, incompetency, dissolution, disability, incapacity, bankruptcy
or termination of granting transferee, and will extend to such transferee's
heirs, successors and assigns.
WITHDRAWAL OF UNITS
The Deposit Agreement generally provides that a record holder of a Unit on
deposit may withdraw such Unit from the Depositary upon written request and
surrender of the Depositary Receipt evidencing such Unit. A Unit withdrawn from
the Depositary will be evidenced by a certificate issued by the Partnership.
Withdrawn Units may not be transferred except upon death, by operation of law or
by transfer to the Partnership, but record holders of withdrawn Units will
continue to receive their respective share of distributions and allocations
pursuant to the terms of the Partnership Agreement.
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In order to transfer a Unit withdrawn from the Depositary (other than upon
death, by operation of law or to the Partnership), a Unitholder must redeposit
the certificate representing such Unit with the Depositary and request issuance
of a Depositary Receipt, which then may be transferred. Any redeposit of such
Unit with the Depositary will require 60 days' advance written notice and
payment of a redeposit fee (currently $5.00 per 100 Units (or portion thereof))
and will be subject to satisfaction of certain other procedural requirements
under the Deposit Agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary at any time may resign as Depositary and at any time may be
removed by the Partnership. The resignation or removal of the Depositary becomes
effective upon the appointment of a successor Depositary by the Partnership and
written acceptance by the successor Depositary of such appointment. In the event
a successor Depositary is not appointed within 30 days of notification of such
resignation or removal, the Managing General Partner will act as Depositary
until a successor Depositary is appointed. Any corporation into or with which
the Depositary may be merged or consolidated will be the successor Depositary
without the execution or filing of any document or any further act.
AMENDMENT
Subject to the restrictions described below, the Deposit Agreement
(including the form of Depositary Receipt) may be amended by the mutual
agreement of the Managing General Partner, the Partnership and the Depositary.
In the event any such amendment adversely affects any substantial rights of
holders of Units on deposit, such amendment will not be effective without the
affirmative vote or consent of record holders of a majority of the Units on
deposit, as described below. No amendment to the Deposit Agreement may impair
the right of a Unitholder to surrender the Depositary Receipt and withdraw any
or all of the Units evidenced thereby or to redeposit Units pursuant to the
Deposit Agreement and receive a Depositary Receipt evidencing such redeposited
Units.
Any amendment of the Deposit Agreement that imposes any fee, tax or charge
(other than the fees and charges set forth in the Deposit Agreement) upon
Depositary Receipts will not be effective until the expiration of 30 days after
notice of the amendment has been given to the record holders of Depositary
Receipts or, if the amendment is presented for a vote of the record holders of
Units on deposit, until it has been approved by the affirmative vote of the
record holders of a majority of such Units.
For the purpose of considering any amendment of the Deposit Agreement that
adversely affects any substantial right of the record holders of Units on
deposit, the Partnership may call a meeting of the record holders of such Units
according to the procedures set forth in the Deposit Agreement. Such an
amendment of the Deposit Agreement also may be approved if record holders of a
majority of such Units, as of a record date selected by the Depositary, consent
thereto in a writing filed with the Depositary.
TERMINATION
The Partnership may not terminate the Deposit Agreement unless such
termination (a) is in connection with the Partnership entering into a similar
agreement with a new depositary selected by the Managing General Partner, (b) is
as a result of the Partnership's receipt of an opinion of counsel to the effect
that such termination is necessary for the Partnership to avoid being treated as
an association taxable as a corporation for federal income tax purposes or to
avoid being in violation of any applicable federal or state securities laws, or
(c) is in connection with the dissolution of the Partnership. The Depositary
will terminate the Deposit Agreement, when directed to do so by the Partnership
not less than 45 days prior to the date fixed for termination, by mailing notice
of termination to the record holders of all Depositary Receipts then outstanding
at least 30 days before the date fixed for the termination in such notice.
Termination will be effective on the date fixed in the notice, which date must
be at least 30 days after it is mailed.
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DUTIES AND STATUS OF DEPOSITARY
The Managing General Partner may request the Depositary to act as paying
agent with respect to any distributions by the Partnership. In addition to its
out-of-pocket expenses, the Depositary will charge the Partnership fees for
serving as Depositary, for transferring Depositary Receipts, for withdrawal or
redepositing of Units and for any preparation and mailing of distribution
checks. All such fees and expenses will be borne by the Partnership, except that
fees similar to those customarily paid by stockholders for surety bond premiums
to replace lost or stolen certificates, tax or other governmental charges,
special charges for services requested by Unitholders (including redeposit of
withdrawn Units) and other similar fees or charges will be borne by the affected
Unitholders. There will be no charge to Unitholders for any disbursements by the
Depositary of Partnership distributions.
First Chicago Trust Company of New York currently acts as the registrar and
transfer agent for the Depositary Receipts.
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FEDERAL INCOME TAX CONSIDERATIONS
This section was prepared by Middleberg, Riddle & Gianna, counsel to the
Partnership ("Counsel") and addresses all material income tax consequences to
individuals who are citizens or residents of the United States. This section
reflects Counsel's opinion with respect to the matters set forth except for
statements of fact and the representations and estimates of the results of
future operations of the Managing General Partner included in such discussion as
to which no opinion is expressed. Counsel bases its opinions on its
interpretation of the Internal Revenue Code of 1986, as amended (the "Code") and
Treasury Regulations issued thereunder, judicial decisions, the facts set forth
in this Prospectus and certain factual representations made by the Managing
General Partner. Counsel's opinions are subject to both the accuracy of such
facts and the continued applicability of such legislative, administrative and
judicial authorities, all of which authorities are subject to changes and
interpretations that may or may not be retroactively applied.
No ruling has been requested from the IRS with respect to the classification
of the Partnerships as partnerships for federal income tax purposes or any other
matter affecting the Partnerships. Accordingly, the IRS may adopt positions that
differ from Counsel's conclusions expressed herein. It may be necessary to
resort to administrative or court proceedings in an effort to sustain some or
all of Counsel's conclusions, and some or all of these conclusions ultimately
may not be sustained. The costs of any contest with the IRS will be borne
directly or indirectly by some or all of the Unitholders and the Managing
General Partner. Furthermore, no assurance can be given that the tax
consequences of investing in the Partnership will not be significantly modified
by future legislation or administrative changes or court decisions. Any such
modifications may or may not be retroactively applied.
It is impractical to comment on all aspects of federal, state, local and
foreign laws that may affect the tax consequences of the transactions
contemplated by the sale of Units made by this Prospectus and of an investment
in such Units. Moreover, certain types of taxpayers such as tax-exempt entities,
regulated investment companies and insurance companies may be subject to rules
and regulations unique to their status or form of organization in addition to
those rules and regulations described herein. Each prospective Unitholder should
consult his own tax advisor in deciding to acquire Units.
PARTNERSHIP STATUS
A partnership is not a taxable entity and incurs no federal income tax
liability. Each partner is required to take into account in computing his
federal income tax liability his allocable share of income, gains, losses,
deductions and credits of the partnership, regardless of whether cash
distributions are made. Distributions by a partnership to a partner are
generally not taxable unless the distribution is in excess of the partner's tax
basis in his partnership interest.
Counsel is of the opinion that under present law, and subject to the
conditions and qualifications set forth below, for federal income tax purposes,
the Partnerships will be treated as partnerships. Counsel's opinion as to the
partnership status of the Partnerships is based principally upon its
interpretation of the factors set forth in Treasury Regulations under Section
7701 of the Code, its interpretation of Section 7704 of the Code, and upon
certain representations made by the Managing General Partner. However, it should
be noted that neither Partnership satisfies the requirements to obtain an
advance ruling from the IRS with respect to its classification as a partnership
for federal income tax purposes.
The Treasury Regulations under Section 7701 of the Code provide that the
determination of whether a limited partnership will be classified as a
partnership or as an association taxable as a corporation for federal income tax
purposes depends upon the extent to which the partnership has the corporate
characteristics of continuity of life, free transferability of interests,
centralization of management and limited liability. A limited partnership having
no more than two of these four characteristics will ordinarily be classified as
a partnership for federal income tax purposes. Under Proposed Regulations
Section 301.7701-1, the classification determination would be elective for many
business entities including the Partnership. Although the current regulations
will continue to apply until the
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Proposed Regulations are finalized, transitional rules state that the IRS will
not challenge the partnership classification of certain eligible entities which
have a reasonable basis for their claimed classification. In Counsel's opinion,
neither Partnership has the corporate characteristics of continuity of life or
limited liability, and the Operating Partnership does not have the corporate
characteristic of free transferability of interests. Based on this analysis,
Counsel has concluded that neither Partnership will be classified as an
association taxable as a corporation under Section 7701 of the Code.
Section 7704 of the Code provides that publicly-traded partnerships shall,
as a general rule, be taxed as corporations despite the fact that they are not
classified as associations taxable as corporations under Section 7701. Section
7704 of the Code provides an exception to this general rule (the "Real Property
Rent Exception") for a publicly traded partnership if 90% or more of its gross
income for every taxable year consists of "qualifying income". "Qualifying
income" includes real property rental income and gain from the sale or other
disposition of real property and gains from the sale or other disposition of
capital assets held for the production of income that otherwise constitutes
"qualifying income."
Real property rent is defined, under Section 7704 of the Code, as amounts
which would qualify as rent from real property under Section 856(d) of the Code
(the provisions of the Code dealing with Real Estate Investment Trusts).
Although substantially all of the income of the Partnership consists of
qualifying rental income, the Partnership currently engages in activities that
give rise to non-qualifying rental income and may enter into other such
transactions in the future. Rental income of the Partnership may not qualify as
real property rent pursuant to Section 856 of the Code because the Partnership,
directly or indirectly through the constructive ownership rules contained in
Section 318 of the Code, owns more than 10% of the capital or profits interest
in any tenant leasing real property from the Partnership. The Partnership,
through such attribution rules, owns greater than a 10% interest in one tenant
which leases three (3) Burger King restaurant properties from the Partnership.
However, such non-qualifying income is less than 3.5% of total Partnership gross
income. With respect to other transactions in which the Managing General Partner
has or may acquire an ownership interest in any tenant, the Managing General
Partner has represented that it and its affiliates will not acquire, or allow
any Unitholder owning more than 5% of total Units outstanding, to acquire
greater than a 10% ownership interest in such tenant.
Additionally, the Partnership has purchased items of personalty and
equipment and leased such items to tenants in conjunction with real property
leases. To the extent that the rental income attributable to such equipment
exceeds 15% of total rental income for the real property and equipment, such
rental income would not qualify as real property rent. The Partnership generally
separately allocates rental income between equipment and real property, and the
equipment component of such rental income is generally less than 15% of the
total rental income. Assuming that such allocation is valid, no portion of the
rental income attributable to equipment and personal property should constitute
non-qualifying income.
The Partnership estimates that a total of 3.5% of its gross income for
taxable year 1996 will not constitute qualifying income, and estimates that less
than 3.5% of its gross income for each subsequent taxable year will not
constitute qualifying income.
If the Partnership fails to meet the Real Property Rent Exception to the
general rule of Section 7704 of the Code (other than a failure determined by the
IRS to be inadvertent which is cured within a reasonable time after discovery),
the Partnership will be treated as if it had transferred all of its assets
(subject to liabilities) to a newly-formed corporation (on the first day of the
year in which it fails to meet the Real Property Rent Exception) in return for
stock in such corporation, and then distributed such stock to the Unitholders in
liquidation of their interest in the Partnership.
In rendering its opinion that neither Partnership will be treated as a
partnership for federal income tax purposes, Counsel has relied on the following
factual representations by the Managing General Partner as to the Partnerships:
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1. Each Partnership will be operated in accordance with applicable state
partnership statutes, its partnership agreement and the statements
and representations made in this Prospectus.
2. Except as otherwise required by Section 704(c) of the Code, the
general partner of each Partnership will have at least a 0.99%
interest in each material item of income, gain, loss, deduction and credit
of its respective Partnership.
3. For each taxable year, less than 10% of each Partnership's gross
income will be derived from sources other than (i) real property
rental income and gain from the sale or other disposition of real property,
or (ii) other items of "qualifying income" within the meaning of Section
7704(d) of the Code.
4. The Managing General Partner of each Partnership will act
independently of such Partnership's limited partners.
If either Partnership was taxable as a corporation or treated as an
association taxable as a corporation in any taxable year, its income, gains,
losses, deductions and credits would be reflected only on its tax return rather
than being passed through to its partners and its taxable income would be taxed
at corporate rates. In addition, its distributions to each of its partners would
be treated as either dividend income (to the extent of its current or
accumulated earnings and profits), and, in the absence of earnings and profits,
as a nontaxable return of capital (to the extent of such partner's tax basis in
his interest therein) or taxable capital gain (after such partner's tax basis in
his interest therein is reduced to zero). Furthermore, losses realized by such
Partnership would not flow through to the Unitholders. Accordingly, treatment of
either Partnership as a corporation for federal income tax purposes would
probably result in a material reduction in a Unitholder's cash flow and
after-tax return.
The discussion below is based on the assumption that each Partnership will
be classified as a partnership for federal income tax purposes. If that
assumption proves to be erroneous, most, if not all, of the tax consequences
described below would not be applicable to Unitholders.
PARTNER STATUS
Unitholders who have become limited partners of the Partnership pursuant to
the provisions of the Partnership Agreement will be treated as partners of the
Partnership for federal income tax purposes.
The IRS has ruled that assignees of partnership interests who have not been
admitted to a partnership as partners, but who have the capacity to exercise
substantial dominion and control over the assigned partnership interests, will
be treated as partners for federal income tax purposes. On the basis of such
ruling, except as otherwise described herein, (i) assignees who have executed
and delivered transfer applications, and are awaiting admission as limited
partners of the Partnership, and (ii) Unitholders whose Units are held in street
name or by another nominee will be treated as partners for federal income tax
purposes. As such ruling does not extend, on its facts, to assignees of Units
who are entitled to execute and deliver transfer applications and thereby become
entitled to direct the exercise of attendant rights, but who fail to execute and
deliver transfer applications, the tax status of such Unitholders is unclear,
and Counsel expresses no opinion with respect to the status of such assignees.
Such Unitholders should consult their own tax advisors with respect to their
status as partners in the Partnership for federal income tax purposes. A
purchaser or other transferee of Units who does not execute and deliver a
transfer application may not receive certain federal income tax information or
reports furnished to record holders of Units unless the Units are held in a
nominee or street name account and the nominee or broker has executed and
delivered a transfer application with respect to such Units.
A beneficial owner of Units whose Units have been transferred to a short
seller to complete a short sale would appear to lose his status as a partner
with respect to such Units for federal income tax purposes. See "-- Tax
Treatment of Operations -- Treatment of Short Sales."
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TAX CONSEQUENCES OF UNIT OWNERSHIP
FLOW-THROUGH OF TAXABLE INCOME
The Partnership's income, gains, losses, deductions and credits will consist
of its allocable share of the income, gains, losses, deductions and credits of
the Operating Partnership and dividends from its corporate subsidiaries. Because
the Partnership is not a taxable entity and incurs no federal income tax
liability, each Unitholder will be required to take into account his allocable
share of income, gain, loss and deductions of the Operating Partnership (through
the Partnership) without regard to whether corresponding cash distributions are
received by Unitholders. Consequently, a Unitholder may be allocated income from
the Partnership although he has not received a cash distribution in respect of
such income.
TREATMENT OF PARTNERSHIP DISTRIBUTIONS
Under Section 731 of the Code, distributions by the Partnership to a
Unitholder generally will not be taxable to such Unitholder for federal income
tax purposes to the extent of his tax basis in his Units immediately before the
distribution. Cash distributions (and, in certain circumstances, distributions
of marketable securities) in excess of such basis generally will be considered
to be gain from the sale or exchange of the Units, taxable in accordance with
the rules described under "-- Disposition of Units." Any reduction in a
Unitholder's share of the Partnership's liabilities included in his tax basis in
his Units will be treated as a distribution of cash to such Unitholder. See "--
Tax Basis of Units." A decrease in a Unitholder's percentage interest in the
Partnership because of a Partnership offering of additional Units will decrease
such Unitholder's share of nonrecourse liabilities and, thus, will result in a
corresponding deemed distribution of cash.
A non-pro rata distribution of money or property may result in ordinary
income to a Unitholder, regardless of his tax basis in his Units, if such
distribution reduces the Unitholder's share of the Partnership's "unrealized
receivables" (including depreciation recapture) and/or substantially appreciated
"inventory items" (both as defined in Section 751 of the Code) (collectively,
"Section 751 Assets"). To that extent, the Unitholder will be treated as having
received his proportionate share of the Section 751 Assets and having exchanged
such assets with the Partnership in return for the non-pro rata portion of the
actual distribution made to him. This latter deemed exchange will generally
result in the Unitholder's realization of ordinary income under Section 751(b)
of the Code. Such income will equal the excess of (i) the non-pro rata portion
of such distribution over (ii) the Unitholder's tax basis for the share of such
Section 751 Assets deemed relinquished in the exchange.
TAX BASIS OF UNITS
In general, a Unitholder's tax basis for his Units initially will be equal
to the price of such Units to him. A Unitholder's tax basis will generally be
increased by (i) his share of Partnership taxable income and (ii) his share of
Partnership liabilities that are without recourse to any Partner ("nonrecourse
liabilities"), if any. Generally, a Unitholder's tax basis in his interest will
be decreased (but not below zero) by (i) his share of Partnership distributions,
(ii) his share of decreases in nonrecourse liabilities of the Partnership, (iii)
his share of losses of the Partnership and (iv) his share of nondeductible
expenditures of the Partnership that are not chargeable to capital. A
Unitholder's share of nonrecourse liabilities will generally be based on his
share of the Partnership's profits. The Partnership's present debt financing in
the maximum principal amount of $40 million is fully recourse to the Managing
General Partner and would therefore not be includable in the Unitholder's tax
basis for their Units, although the Business Trust has obtained debt financing
which is nonrecourse to the Partnership in the maximum principal amount of $20
million. Accordingly, at the time that a Unitholder makes the adjustment to his
share of Partnership properties pursuant to Section 743(b) of the Code, the
Unitholder will not be permitted to include the recourse debt financing of the
Partnership but may be entitled to include a portion of the Partnership's
nonrecourse financing, in such adjustment. See "-- Tax Treatment of Operations
- -- Section 754 Election."
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LIMITATIONS ON DEDUCTIBILITY OF LOSSES
The passive loss limitations contained in Section 469 of the Code generally
provide that individuals, estates, trusts and certain closely-held corporations
and personal service corporations can deduct losses from passive activities
(generally, activities in which the taxpayer does not materially participate)
only to the extent of the taxpayer's income from such passive activities or
investments. The passive loss limitations are to be applied separately with
respect to publicly-traded partnerships. Consequently, losses generated by the
Partnership, if any, will be available to offset only future income generated by
the Partnership and will not be available to offset income from other passive
activities or investments (including other publicly traded partnerships) or
salary or active business income. Passive losses that are not deductible because
they exceed the Unitholder's income generated by the Partnership may be deducted
in full when the Unitholder disposes of his entire investment in the Partnership
to an unrelated party in a fully taxable transaction.
A Unitholder's share of net income from the Partnership may be offset by any
suspended passive losses from the Partnership, but may not be offset by any
other current or carryover losses from other passive activities, including those
attributable to other publicly traded partnerships. According to an IRS
announcement, Treasury regulations will be issued which characterize net passive
income from a publicly traded partnership as investment income for purposes of
deducting investment interest.
In addition to the foregoing limitations, a Unitholder may not deduct from
taxable income his share of Partnership losses, if any, to the extent that such
losses exceed the lesser of (i) the tax basis of his Units at the end of the
Partnership's taxable year in which the loss occurs and (ii) the amount for
which the Unitholder is considered "at risk" under Section 465 of the Code at
the end of that year. In general, a Unitholder will initially be "at risk" to
the extent of the purchase price of his Units. A Unitholder's "at risk" amount
increases or decreases as his tax basis in his Units increases or decreases,
except that nonrecourse liabilities (or increases or decreases in such
liabilities) of the Partnership generally do not affect his "at risk" amount.
Losses disallowed to a Unitholder as a result of these rules can be carried
forward and will be allowable to the Unitholder to the extent that his tax basis
or "at risk" amount (whichever was the limiting factor) is increased in a
subsequent year. The "at risk" rules apply to an individual Unitholder, a
shareholder of a corporate Unitholder that is an S corporation and a corporate
Unitholder if 50% or more of the value of such stock is owned directly or
indirectly by five or fewer individuals.
ALLOCATION OF PARTNERSHIP INCOME, GAIN, LOSS AND DEDUCTION
The Partnership Agreement requires that a capital account be maintained for
each partner in accordance with the tax accounting principles set forth in
applicable Treasury Regulations under Section 704 of the Code. Distributions
upon liquidation of the Partnership are to be made in accordance with positive
capital account balances.
In general, if the Partnership has a net profit, items of income, gain, loss
and deduction will be allocated among the Managing General Partner and the
Unitholders in accordance with their respective interests in the Partnership.
Notwithstanding the above, as required by Section 704(c) of the Code, certain
items of Partnership income, gain, loss and deduction will be allocated to
account for the difference between the tax basis and fair market value of
certain property held by the Partnership ("Contributed Property"). Transactions
which result in a required Section 704(c) allocation with respect to Contributed
Property may arise if (i) a Unitholder contributes appreciated or depreciated
property, rather than cash, to the Partnership, or (ii) additional Partnership
Units are issued for cash, and at the time of such issuance, the capital account
of the existing partners are restated to account for the difference between the
tax basis and fair market value of Partnership property. The Partnership has
previously participated in several transactions described in clause (i) above.
Upon the issuance of the Units, the capital accounts of the existing partners
will be restated as described in clause (ii) above. Accordingly, with respect to
each such transaction, the Partnership will be required to make Section 704(c)
allocations.
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In addition, certain items of recapture income will be allocated to the
extent possible to the partner allocated the deduction giving rise to the
treatment of such gain as recapture income in order to minimize the recognition
of ordinary income by some Unitholders, but these allocations may not be
respected. If these allocations of recapture income are not respected, the
amount of the income or gain allocated to a Unitholder will not change, but a
change in the character of the income allocated to a Unitholder would result.
Finally, although the Partnership does not expect that its operations will
result in the creation of negative capital accounts, if negative capital
accounts nevertheless result, items of Partnership income and gain will be
allocated in an amount and manner sufficient to eliminate the negative balances
as quickly as possible.
Under Section 704(c) of the Code, the partners in a partnership cannot be
allocated more depreciation, gain or loss than the total amount of any such item
recognized by that partnership in a particular taxable period (the "ceiling
limitation"). To the extent the ceiling limitation is or becomes applicable, the
Partnership Agreement will require that certain items of income and deduction be
allocated in a way designed to effectively "cure" this problem and eliminate the
impact of the ceiling limitation. Such allocations will not have substantial
economic effect because they will not be reflected in the capital accounts of
the Unitholders. Treasury Regulations under Section 704(c) of the Code permit a
partnership to make reasonable curative allocations to reduce or eliminate
disparities between the tax basis and value attributable to Contributed
Properties.
Counsel is of the opinion that, with the exception of the allocation of
recapture income discussed above, allocations under the Partnership Agreement
will be given effect for federal income tax purposes in determining a partner's
distributive share of an item of income, gain, loss or deduction. There are,
however, uncertainties in the Treasury Regulations relating to allocations of
partnership income, and investors should be aware that the allocations of
recapture income in the Partnership Agreement may be successfully challenged by
the IRS.
TAX TREATMENT OF OPERATIONS
INCOME AND DEDUCTIONS IN GENERAL
No federal income tax will be paid by the Partnership. Instead, each
Unitholder will be required to report on his income tax return his allocable
share of income, gains, losses and deductions of the Partnership. Such items
must be included on the Unitholder's federal income tax return without regard to
whether the Partnership makes a distribution of cash to the Unitholder. A
Unitholder is generally entitled to offset his allocable share of the
Partnership's passive income with his allocable share of losses generated by the
Partnership, if any. See "-- Tax Consequences of Unit Ownership -- Limitations
on Deductibility of Losses."
The Partnership has adopted a convention with respect to transferring
Unitholders which generally allocates the Net Income or Net Loss of the
Partnership proportionately to each day of the year, and treats any Unitholder
owning a Unit as of the last day of the month as owning the Unit for the entire
month.
ACCOUNTING METHOD AND TAXABLE YEAR
The Partnership utilizes the calendar year as its taxable year and adopted
the accrual method of accounting for federal income tax purposes.
DEPRECIATION METHOD
The Partnership elected to use the straight-line depreciation method with
respect to its real property assets. Property subsequently acquired or
constructed by the Partnership may be depreciated using accelerated depreciation
methods permitted by Section 168 of the Code.
SECTION 754 ELECTION
Each Partnership will make the election permitted by Section 754 of the Code
effective for Partnership taxable year 1996. Such election will generally permit
a purchaser of Units to adjust his share of the tax basis in the Partnership's
properties pursuant to Section 743(b) of the Code. Such
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elections are irrevocable without the consent of the IRS. The Section 743(b)
adjustment is attributed solely to a purchaser of Units and is not added to the
tax basis of the Partnership's assets associated with all of the Unitholders
described above under the heading "-- Initial Tax Basis of Partnership Assets"
(the "Common Bases"). The amount of the adjustment under Section 743(b) is the
difference between the Unitholder's tax basis in his Units and the Unitholder's
proportionate share of the Common Bases attributable to the Units pursuant to
Section 743. The aggregate amount of the adjustment computed under Section
743(b) is then allocated among the various assets of the Partnership pursuant to
the rules of Section 755. The Section 743(b) adjustment acts in concert with the
Section 704(c) allocations (including the curative allocations, if respected) in
providing the purchaser of Units with the equivalent of a tax basis in his share
of the Partnership's properties equal to the fair market value of such share.
See "-- Allocation of Partnership Income, Gain, Loss and Deduction -- The
Partnership Agreement" and "-- Uniformity of Units."
Proposed Treasury Regulation Section 1.168-2(n) generally requires the
Section 743(b) adjustment attributable to recovery property to be depreciated as
if the total amount of such adjustment were attributable to newly-acquired
recovery property placed in service when the transfer occurs. The legislative
history of Section 197 of the Code indicates that the Section 743(b) adjustment
attributable to an amortizable Section 197 intangible should be similarly
treated. Under Treasury Regulation Section 1.167(c)-1(a)(6), a Section 743(b)
adjustment attributable to property subject to depreciation under Section 167 of
the Code rather than cost recovery deductions under Section 168 is generally
required to be depreciated using either the straight-line method or the 150%
declining balance method. The Partnership utilizes the straight line method on
such property. The depreciation and amortization methods and useful lives
associated with the Section 743(b) adjustment, therefore, may differ from the
methods and useful lives generally used to depreciate the Common Bases in such
properties. The Managing General Partner is authorized to adopt a convention to
preserve the uniformity of Units despite its inconsistency with Proposed
Treasury Regulation Section 1.168-2(n) and Treasury Regulation Section
1.167(c)-1(a)(6). See "-- Uniformity of Units."
Although Counsel is unable to opine as to the validity of such an approach,
the Partnership intends to depreciate the portion of a Section 743(b) adjustment
attributable to unrealized appreciation in the value of Contributed Property (to
the extent of any unamortized disparity between the tax basis and value
attributable to Contributed Property) using a rate of depreciation or
amortization derived from the depreciation or amortization method and useful
life applied to the Common Bases of such property, despite its inconsistency
with Proposed Treasury Regulation Section 1.168-2(n), Treasury Regulation
Section 1.167(c)-1(a)(6) or the legislative history of Section 197 of the Code.
If the Partnership determines that such position cannot reasonably be taken, the
Partnership may adopt a depreciation or amortization convention under which all
purchasers acquiring Units in the same month would receive depreciation or
amortization, whether attributable to Common Bases or Section 743(b) basis,
based upon the same applicable rate as if they had purchased a direct interest
in the Partnership's property. Such an aggregate approach may result in lower
annual depreciation or amortization deductions than would otherwise be allowable
to certain Unitholders. See "-- Uniformity of Units."
The allocation of the Section 743(b) adjustment must be made in accordance
with the principles of Section 1060 of the Code. Based on these principles, the
IRS may seek to reallocate some or all of any Section 743(b) adjustment not so
allocated by the Partnership to goodwill which, as an intangible asset, would be
amortizable over a longer period of time than certain of the Partnership's
tangible assets. Alternatively, it is possible that the IRS might seek to treat
the portion of such Section 743(b) adjustment attributable to the underwriters'
discount as if it were allocable to a non-deductible syndication cost.
A Section 754 election is advantageous when the transferee's tax basis in
such Units is higher than such Units' share of the aggregate tax basis in the
Partnership's assets immediately prior to the transfer. In such case, pursuant
to the election, the transferee will take a new and higher tax basis in his
share of the Partnership's assets for purposes of calculating, among other
items, his depreciation
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deductions and his share of any gain or loss on a sale of the Partnership's
assets. Conversely, a Section 754 election would be disadvantageous if the
transferee's tax basis in such Units is lower than such Units' share of the
aggregate tax basis in the Partnership's assets immediately prior to the
transfer. Thus, the amounts that a Unitholder would be able to obtain on a sale
or other disposition of his Units may be affected favorably or adversely by the
elections under Section 754.
The calculations and adjustments in connection with the Section 754 election
depend, among other things, on the date on which a transfer occurs and the price
at which the transfer occurs. To help reduce the complexity of those
calculations and the resulting administrative cost to the Partnership, the
Managing General Partner will apply the following method in making the necessary
adjustments pursuant to the Section 754 election on transfers subsequent to the
transfers pursuant to this offering: the price paid by a transferee for his
Units will be deemed to be the lowest quoted trading price for the Units during
the calendar month in which the transfer was deemed to occur, without regard to
the actual price paid. The application of such convention yields a less
favorable tax result, as compared to adjustments based on actual price, to a
transferee who paid more than the "convention price" for his Units. The
calculations under Section 754 elections are highly complex, and there is little
legal authority concerning the mechanics of the calculations, particularly in
the context of publicly traded partnerships. It is possible that the IRS will
successfully assert that the adjustments made by the Managing General Partner do
not meet the requirements of the Code or the applicable regulations and require
a different tax basis adjustment to be made.
Should the IRS require a different tax basis adjustment to be made, and
should, in the Managing General Partner's opinion, the expense of compliance
exceed the benefit of the election, the Managing General Partner may seek
permission from the IRS to revoke the Section 754 election previously made for
the Partnership. Such a revocation may increase the ratio of a Unitholder's
distributive share of taxable income to cash distributions and adversely affect
the amount that a Unitholder will receive from the sale of his Units.
ESTIMATES OF RELATIVE FAIR MARKET VALUES AND BASIS OF PROPERTIES
The consequences of the acquisition, ownership and disposition of Units will
depend in part on estimates by the Managing General Partner of the relative fair
market values and determinations of the tax basis of the assets of the
Partnership. The federal income tax consequences of such estimates and
determinations of tax basis may be subject to challenge and will not be binding
on the IRS or the courts. If the estimates of fair market value or
determinations of tax basis were found to be incorrect, the character and amount
of items of income, gain, loss, deduction or credit previously reported by
Unitholders might change, and Unitholders might be required to amend their
previously filed tax returns or to file claims for refund. See "--
Administrative Matters -- Valuation Overstatements."
TREATMENT OF SHORT SALES
A Unitholder whose Units are loaned to a "short seller" to cover a short
sale of Units would appear to be considered as having transferred beneficial
ownership of such Units and would, thus, no longer be a partner with respect to
such Units during the period of such loan. As a result, during such period, any
Partnership income, gains, deductions, losses or credits with respect to such
Units would appear not to be reportable by such Unitholder, any cash
distributions received by the Unitholder with respect to such Units would be
fully taxable and all of such distributions would appear to be treated as
ordinary income. The IRS also may contend that a loan of Units to a "short
seller" constitutes a taxable exchange. If such a contention were successfully
made, the lending Unitholder may be required to recognize gain or loss.
Unitholders desiring to assure their status as partners should modify their
brokerage account agreements, if any, to prohibit their brokers from borrowing
their Units. The IRS has announced that it is actively studying issues relating
to the tax treatment of short sales of partnership interests.
ALTERNATIVE MINIMUM TAX
Each Unitholder will be required to take into account his share of any items
of Partnership income, gain or loss for purposes of the alternative minimum tax.
A portion of the Partnership's
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depreciation deductions may be treated as an item of tax preference for this
purpose. A Unitholder's alternative minimum taxable income derived from the
Partnership may be higher than his share of Partnership net income because the
Partnership may use more accelerated methods of depreciation for purposes of
computing federal taxable income or loss. Prospective Unitholders should consult
with their tax advisors as to the impact of an investment in Units on their
liability for the alternative minimum tax.
TAX-EXEMPT ENTITIES, REGULATED INVESTMENT COMPANIES AND FOREIGN INVESTORS
Employee benefit plans and most other organizations exempt from federal
income tax (including individual retirement accounts ("IRAs") and other
retirement plans) are subject to federal income tax on unrelated business
taxable income ("UBIT"). Substantially all of the income of the Partnership is
rental income from real property which is excluded from the definition of UBIT.
However, to the extent that any rental income is attributable to debt-financed
property, as defined in Section 514 of the Code, such income will not satisfy
the rental income exclusion and will be taxable to a tax-exempt Unitholder as an
item of UBIT. Although the Partnership currently has only a small amount of
debt-financed property (as defined under Section 514 of the Code), the Managing
General Partner expects such proportion of debt-financed properties to increase
as the Partnership continues its acquisition program. Accordingly, a larger
percentage of the Partnership's total income may become UBIT.
Regulated investment companies are required to derive 90% or more of their
gross income from interest, dividends, gains from the sale of stocks or
securities or foreign currency or certain related sources. It is not anticipated
that any significant amount of the Partnership's gross income will be qualifying
income.
Nonresident aliens and foreign corporations, trusts or estates that acquire
Units will be considered to be engaged in business in the United States on
account of ownership of such Units and as a consequence will be required to file
federal tax returns in respect of their distributive shares of Partnership
income, gain, loss, deduction or credit and pay federal income tax at regular
rates (net of credits, including withholding) on such income. Generally, a
partnership is required by Section 1446 of the Code to pay a withholding tax on
the portion of the partnership's income that is effectively connected with the
conduct of a United States trade or business and that is allocable to the
foreign partners, regardless of whether any actual distributions have been made
to such partners. However, under rules applicable to publicly-traded
partnerships, the Partnership will withhold (currently at the rate of 39.6%) on
actual cash distributions made quarterly to foreign Unitholders. Each foreign
Unitholder must obtain a taxpayer identification number from the IRS and submit
that number to the transfer agent of the Partnership on a Form W-8 in order to
obtain credit for the taxes withheld. Subsequent adoption of the Treasury
Regulations or the issuance of other administrative pronouncements may require
the Partnership to change these procedures.
Because a foreign corporation that owns Units will be treated as engaged in
a United States trade or business, such a Unitholder will be subject to United
States branch profits tax at a rate of 30%, in addition to regular federal
income tax, on its allocable share of the Partnership's earnings and profits (as
adjusted for changes in the foreign corporation's "U.S. net equity") that are
effectively connected with the conduct of a United States trade or business.
Such a tax may be reduced or eliminated by an income tax treaty between the
United States and the country with respect to which the foreign corporate
Unitholder is a "qualified resident." In addition, such a Unitholder is subject
to special information reporting requirements under Section 6038C of the Code.
A foreign Unitholder who sells or otherwise disposes of a Unit will be
subject to federal income tax on gain realized on the disposition of such Unit
to the extent that such gain is effectively connected with a United States trade
or business of the foreign Unitholder. The IRS has issued a ruling under which
all or a portion of any gain that is recognized on a sale of a Unit by a foreign
Unitholder will be subject to tax under the rule of the preceding sentence. The
Partnership does not expect that any material portion of any such gain will
avoid United States taxation. If less than all of any such gain is so taxable,
then Section 897 of the Code may increase the portion of any gain that is
recognized by a
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foreign Unitholder that is subject to United States income tax and withholding
of 10% of the amount realized on the disposition of a Unit may apply if that
foreign Unitholder has held more than 5% in value of the Units during the
five-year period ending on the date of the disposition or if the Units are not
regularly traded on an established securities market at the time of the
disposition.
UNIFORMITY OF UNITS
There can arise a lack of uniformity in the intrinsic tax characteristics of
Units sold pursuant to this offering and Units outstanding prior to this
offering. Without such uniformity, compliance with several federal income tax
requirements, both statutory and regulatory, could be substantially diminished.
In addition, such non-uniformity could have a negative impact on the ability of
a Unitholder to dispose of his interest in the Partnership. Such lack of
uniformity can result from the application of Proposed Treasury Regulation
Section 1.168-2(n) and Treasury Regulation Section 1.167(c)-1(a)(6) or the
application of certain "ceiling" limitations on the Partnership's ability to
make allocations to eliminate disparities between the tax basis and value
attributable to Contributed Properties.
Depreciation conventions may be adopted or items of income and deduction may
be specially allocated in a manner that is intended to preserve the uniformity
of intrinsic tax characteristics among all Units, despite the application of
either Proposed Treasury Regulation Section 1.168-2(n) and Treasury Regulation
Section 1.167(c)-l(a)(6) or the "ceiling" limitations to Contributed Properties.
Any such special allocation will be made solely for federal income tax purposes.
In the event the IRS disallows the use of such conventions, some or all of the
adverse consequences described in the preceding paragraph could result. See "--
Allocation of Partnership Income, Gain, Loss and Deduction" and "-- Tax
Treatment of Operations -- Section 754 Election."
DISPOSITION OF UNITS
GAIN OR LOSS IN GENERAL
If a Unit is sold or otherwise disposed of, the determination of gain or
loss from the sale or other disposition will be based on the difference between
the amount realized and the tax basis for such Unit. See "-- Tax Consequences of
Unit Ownership -- Basis of Units". Upon the sale of his Units, a Unitholder's
"amount realized" will be measured by the sum of the cash or other property
received plus the portion of the Partnership's nonrecourse liabilities allocated
to the Units sold. Similarly, upon a gift of his Units, a Unitholder will be
deemed to have realized gain with respect to the portion of the Partnership's
nonrecourse liabilities allocable to such Units. To the extent that the amount
of cash or property received plus the allocable share of the Partnership's
nonrecourse liabilities exceeds the Unitholder's tax basis for the Units
disposed of (in the case of a charitable gift, only a portion of such tax basis
may be offset against the nonrecourse debt), the Unitholder will recognize gain.
The tax liability resulting from such gain could exceed the amount of cash
received upon the disposition of such Units.
The IRS has ruled that a partner must maintain an aggregate tax basis for
his interests in a single partnership (consisting of all interests acquired in
separate transactions). On a sale of a portion of such aggregate interest, such
partner would be required to allocate his aggregate tax basis between the
interest sold and the interest retained by some equitable apportionment method.
If applicable, the aggregation of tax basis of a Unitholder effectively
prohibits a Unitholder from choosing among Units with varying amounts of
inherent gain or loss to control the timing of the recognition of such inherent
gain or loss as would be possible in a stock transaction. Thus, the IRS ruling
may result in an acceleration of gain or deferral of loss on a sale of a portion
of a Unitholder's Units. It is not clear whether such ruling applies to publicly
traded partnerships, such as the Partnership, the interests in which are
evidenced by separate registered certificates, providing a verifiable means of
identifying each separate interest and tracing the purchase price of such
interest. A Unitholder considering the purchase of additional Units or a sale of
Units purchased at differing prices should consult his tax advisor as to the
possible consequences of that IRS ruling.
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To the extent that a portion of the gain upon the sale of a Unit is
attributable to a Unitholder's share of "substantially appreciated inventory
items" and "unrealized receivables" of the Partnership, as those terms are
defined in Section 751 of the Code, such portion will be treated as ordinary
income. Unrealized receivables include (i) to the extent not previously
includable in Partnership income, any rights to pay for services rendered or to
be rendered and (ii) amounts that would be subject to recapture as ordinary
income if the Partnership had sold its assets at their fair market value at the
time of the transfer of a Unit.
Gain from the sale or other disposition of a Unit may constitute investment
income under Section 163(d) of the Code. A Unitholder must report to the
transfer agent of the Partnership (on behalf of the Partnership) any transfer of
Units. See "-- Information Return Filing Requirements."
The treatment of distributions received after a Unitholder has disposed of
his Units is unclear. Such a distribution may be fully taxable as ordinary
income or may reduce a Unitholder's tax basis for the Units disposed of,
resulting in a larger gain or smaller loss from such disposition.
TRANSFEROR/TRANSFEREE ALLOCATIONS
In general, the Partnership's taxable income and losses are determined
annually and are prorated on a monthly basis and subsequently apportioned among
the Unitholders in proportion to the number of Units owned by them as of the
opening of the New York Stock Exchange on the last business day of the month.
However, extraordinary gain or loss realized on a Terminating Capital
Transaction is allocated among the Unitholders of record as of the opening of
the NYSE on the date such Terminating Capital Transaction occurs. As a result of
this monthly allocation, a Unitholder transferring Units in the open market may
be allocated income, gain, loss, deduction and credit accrued after the
transfer.
The use of the monthly conventions discussed above may not be permitted by
existing Treasury Regulations and, accordingly, Counsel is unable to opine on
the validity of the method of allocating income and deductions between the
transferors and transferees of Units. If the IRS treats transfers of Units as
occurring throughout each month and a monthly convention is not allowed by the
regulations (or only applies to transfers of less than all of a partner's
interest), the IRS may contend that taxable income or losses of the Partnership
must be reallocated among the Partners. If any such contention were sustained,
certain Unitholders' respective tax liabilities would be adjusted to the
possible detriment of other Unitholders. The Managing General Partner is
authorized to revise the Partnership's method of allocation between transferors
and transferees (as well as among Partners whose interests otherwise vary during
a taxable period) to comply with any future regulations.
CONSTRUCTIVE TERMINATION OR DISSOLUTION OF PARTNERSHIP
Under Section 708(b)(l)(B) of the Code, a partnership will be considered to
have been terminated if within a twelve-month period there is a sale or exchange
of 50% or more of the interests in partnership capital and profits. A
termination results in a closing of the partnership's taxable year for all
partners, and the partnership's assets are treated as having been distributed to
the partners and reconveyed to the partnership, which is then treated as a new
partnership. A constructive termination of the Partnership will cause a
termination of the Operating Partnership. In the case of a Unitholder reporting
on a fiscal year other than a calendar year, the closing of a tax year of the
Partnership may result in more than twelve months' taxable income or loss of the
Partnership being includable in his taxable income for the year of termination.
In addition, each Unitholder will realize taxable gain to the extent that any
money distributed or deemed distributed to him (including any net reduction in
his share of the Partnership's nonrecourse liabilities) exceeds the tax basis of
his Units.
A termination of either Partnership under Section 708(b)(l)(B) could result
in adverse tax consequences to Unitholders because it could result in a change
in the tax basis for the Partnership's properties and would require that new tax
elections be made by the reconstituted partnerships. In
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addition, such a termination could result in a deferral of Partnership
depreciation deductions. Further, such a termination may either accelerate the
application of (or subject the reconstituted partnerships to the application of)
any change in law effective as of a date after the termination.
The Partnership may not have the ability to determine when a constructive
termination occurs as a result of transfers of Units because the Units will be
freely transferable under "street name" ownership. Thus, the Partnership may be
subject to penalty for failure to file a tax return and may fail to make certain
Partnership elections in a timely manner, including the Section 754 Election.
PARTNERSHIP INCOME TAX INFORMATION RETURNS AND PARTNERSHIP AUDIT PROCEDURES
The Partnership will use all reasonable efforts to furnish Unitholders with
tax information within 75 days after the close of each Partnership taxable year.
Specifically, the Partnership intends to furnish to each Unitholder a Schedule
K-1 which sets forth his allocable share of the Partnership's income, gains,
losses, deductions and credits, if any. In preparing such information, the
Managing General Partner will necessarily use various accounting and reporting
conventions to determine each Unitholder's allocable share of income, gains,
losses, deductions and credits. There is no assurance that any such conventions
will yield a result that conforms to the requirements of the Code, regulations
thereunder or administrative pronouncements of the IRS. The Managing General
Partner cannot assure prospective Unitholders that the IRS will not contend that
such accounting and reporting conventions are impermissible. Contesting any such
allegations could result in substantial expense to the Partnership. In addition,
if the IRS were to prevail, Unitholders may incur substantial liabilities for
taxes and interest.
The federal income tax information returns filed by the Partnership may be
audited by the IRS. The Code contains partnership audit procedures that
significantly simplify the manner in which IRS audit adjustments of partnership
items are resolved. Adjustments (if any) resulting from such an audit may
require each Unitholder to file an amended tax return, and possibly may result
in an audit of the Unitholder's return. Any audit of a Unitholder's return could
result in adjustments of non-partnership as well as partnership items.
Under Sections 6221 through 6233 of the Code, partnerships generally are
treated as separate entities for purposes of federal tax audits, judicial review
of administrative adjustments by the IRS and tax settlement proceedings. The tax
treatment of partnership items of income, gain, loss, deduction and credit is
determined at the partnership level in a unified partnership proceeding rather
than in separate proceedings with the partners. The Code provides for one
partner to be designated as the "Tax Matters Partner" for these purposes. The
Partnership Agreement appoints the Managing General Partner as the Tax Matters
Partner for the Partnership.
The Tax Matters Partner is entitled to make certain elections on behalf of
the Partnership and Unitholders and can extend the statute of limitations for
assessment of tax deficiencies against Unitholders with respect to Partnership
items. In connection with adjustments to partnership tax returns proposed by the
IRS, the Tax Matters Partner may bind any Unitholder with less than a 1% profits
interest in the Partnership to a settlement with the IRS unless the Unitholder
elects, by filing a statement with the IRS, not to give such authority to the
Tax Matters Partner. The Tax Matters Partner may seek judicial review (to which
all the Unitholders are bound) of a final Partnership administrative adjustment
and, if the Tax Matters Partner fails to seek judicial review, such review may
be sought by any Unitholder having at least a 1% profit interest in the
Partnership and by Unitholders having, in the aggregate, at least a 5% profits
interest. Only one judicial proceeding will go forward, however, and each
Unitholder with an interest in the outcome may participate.
The Unitholders will generally be required to treat Partnership items on
their federal income tax returns in a manner consistent with the treatment of
the items on the Partnership information return. In general, that consistency
requirement is waived if the Unitholder files a statement with the IRS
identifying the inconsistency. Failure to satisfy the consistency requirement,
if not waived, will result in an adjustment to conform the treatment of the item
by the Unitholder to the treatment on
56
<PAGE>
the Partnership return. Even if the consistency requirement is waived,
adjustments to the Unitholder's tax liability with respect to Partnership items
may result from an audit of the Partnership's or the Unitholder's tax return.
Intentional or negligent disregard of the consistency requirement may subject a
Unitholder to substantial penalties.
INFORMATION RETURN FILING REQUIREMENTS
A Unitholder who sells or exchanges Units is required by Section 6050K of
the Code to notify the Partnership in writing of such sale or exchange, and the
Partnership is required to notify the IRS of such transaction and to furnish
certain information to the transferor and transferee. However, these reporting
requirements do not apply with respect to a sale by an individual who is a
citizen of the United States and who effects such sale through a broker. In
addition, a transferor and a transferee of a Unit will be required to furnish to
the IRS the amount of the consideration received for such Unit that is allocated
to goodwill or going concern value of the Partnership. Failure to satisfy such
reporting obligations may lead to the imposition of substantial penalties.
NOMINEE REPORTING
Under Section 6031 (c) of the Code, persons who hold an interest in the
Partnership as a nominee for another person must report certain information to
the Partnership. Temporary Treasury Regulations provide that such information
should include (i) the name, address and taxpayer identification number of the
beneficial owners and the nominee; (ii) whether the beneficial owner is (a) a
person that is not a United States person, (b) a foreign government, an
international organization or any wholly owned agency or instrumentality of
either of the foregoing, or (c) a tax-exempt entity; (iii) the amount and
description of Units held, acquired or transferred for the beneficial owners;
and (iv) certain information including the dates of acquisitions and transfers,
means of acquisitions and transfers, and acquisition cost for purchases, as well
as the amount of net proceeds from sales. Brokers and financial institutions are
required to furnish additional information, including whether they are a United
States person and certain information on Units they acquire, hold or transfer
for their own account. A penalty of $50 per failure (up to a maximum of $100,000
per calendar year) is imposed for failure to report such information to the
Partnership. The nominee is required to supply the beneficial owner of the Units
with the information furnished to the Partnership.
STATE AND OTHER TAXES
In addition to federal income taxes, Unitholders may be subject to other
taxes, such as state and local income taxes, unincorporated business taxes, and
estate, inheritance or intangible taxes that may be imposed by the various
jurisdictions in which the Partners reside or in which either Partnership does
business or owns property. Although an analysis of those various taxes cannot be
presented here, each prospective Unitholder should consider the potential impact
of such taxes on his investment in the Partnership. The Operating Partnership
owns property and does business in 40 states. A Unitholder will likely be
required to file state income tax returns in such states (other than states such
as Texas and Florida not having a state income tax or states in which the
Partnership is required or has elected to withhold and pay taxes on behalf of
the Unitholders) and may be subject to penalties for failure to comply with such
requirements. In addition, an obligation to file tax returns or to pay taxes may
arise in other states. Moreover, in certain states, tax losses may not produce a
tax benefit in the year incurred (if, for example, the Partner has no income
from sources within that state) and also may not be available to offset income
in subsequent taxable years.
It is the responsibility of each prospective Unitholder to investigate the
legal and tax consequences, under the laws of pertinent states or localities, of
his investment in the Partnership. Accordingly, each prospective Unitholder
should consult, and must depend upon, his own tax counsel or other advisor with
regard to those matters. Further, it is the responsibility of each Unitholder to
file all state and local, as well as federal, tax returns that may be required
of such Unitholder.
57
<PAGE>
INVESTMENT IN THE PARTNERSHIP BY EMPLOYEE BENEFIT PLANS
An investment in the Partnership by an employee benefit plan is subject to
certain additional considerations because the investments of such plans are
subject to the fiduciary responsibility and prohibited transaction provisions of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
restrictions imposed by Section 4975 of the Code. As used herein, the term
"employee benefit plan" includes, but is not limited to, qualified pension,
profit-sharing and stock bonus plans, Keogh plans, Simplified Employee Pension
Plans, and tax deferred annuities or Individual Retirement Accounts established
or maintained by an employer or employee organization. Among other things,
consideration should be given to (a) whether such investment is prudent under
Section 404(a)(1)(B) of ERISA; (b) whether in making such investment such plan
will satisfy the diversification requirement of Section 404(a)(1)(C) of ERISA;
and (c) (i) the fact that such investment could result in recognition of UBIT by
such plan even if there is no net income, (ii) the effect of an imposition of
income taxes on the potential investment return for an otherwise tax-exempt
investor, and (iii) whether, as a result of the investment, the plan will be
required to file an exempt organization business income tax return with the IRS.
See "Federal Income Tax Considerations -- Tax Treatment of Operations --
Tax-Exempt Entities, Regulated Investment Companies and Foreign Investors". The
person with investment discretion with respect to the assets of an employee
benefit plan (a "fiduciary") should determine whether an investment in the
Partnership is authorized by the appropriate governing instrument and is a
proper investment for such plan.
In addition, a fiduciary of an employee benefit plan should consider whether
such plan will, by investing in the Partnership, be deemed to own an undivided
interest in the assets of the Partnership, with the result that the Managing
General Partner also would be a fiduciary of such plan and the Partnership would
be subject to the regulatory restrictions of ERISA, including its prohibited
transaction rules, as well as the prohibited transaction rules of the Code.
Section 406 of ERISA and Section 4975 of the Code (which also applies to
Individual Retirement Accounts which are not considered part of an employee
benefit plan) prohibit an employee benefit plan from engaging in certain
transactions involving "plan assets" with parties that are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to the plan.
The Department of Labor issued final regulations on November 13, 1986, providing
guidance with respect to whether the assets of an entity in which employee
benefit plans acquire equity interests would be deemed "plan assets" under
certain circumstances. Pursuant to these regulations, an entity's assets would
not be considered to be "plan assets" if, among other things, (i) the equity
interests acquired by employee benefit plans are publicly offered securities,
i.e., the equity interests are widely held by 100 or more investors independent
of the issuer and each other, freely transferable and registered pursuant to
certain provisions of the federal securities laws, (ii) the entity is an
"operating company", i.e., it is primarily engaged in the production or sale of
a product or service other than the investment of capital either directly or
through a majority-owned subsidiary or subsidiaries, or (iii) there is no
significant investment by benefit plan investors, which is defined to mean that
less than 25% of the value of each class of equity interest (disregarding
certain interests held by the Managing General Partner, its affiliates and
certain other persons) is held by employee benefit plans (as defined in Section
3(3) of ERISA), whether or not they are subject to the provisions of Title I of
ERISA, plans described in Section 4975(e)(1) of the Code, and any entities whose
underlying assets include plan assets by reason of a plan's investments in the
entity. The Partnership's assets would not be considered "plan assets" under
these regulations because it is expected that the investment will satisfy the
requirements in (i) above, and also may satisfy requirements (ii) and (iii)
above.
58
<PAGE>
UNDERWRITING
The Underwriters named below, acting through their Representatives, Morgan
Keegan & Company, Inc., EVEREN Securities, Inc. and Southwest Securities, Inc.,
have agreed, subject to the terms and conditions contained in the Underwriting
Agreement, to purchase from the Partnership the number of Units set forth
opposite their respective names below:
<TABLE>
<CAPTION>
NUMBER OF UNITS
UNDERWRITER TO BE PURCHASED
- --------------------------------------------------------------------------------------- ---------------
<S> <C>
Morgan Keegan & Company, Inc...........................................................
EVEREN Securities, Inc.................................................................
Southwest Securities, Inc..............................................................
---------------
Total............................................................................ 1,800,000
---------------
---------------
</TABLE>
The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the Units offered hereby (other than those covered by the
over-allotment option described below) if any such Units are purchased. The
Partnership has been advised by the Representatives that the Underwriters
propose to offer the Units to the public at the offering price set forth on the
cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $. per Unit. The Underwriters may allow, and
such dealers may reallow, a discount not in excess of $. per Unit to other
dealers. The public offering price and the concessions and discount to dealers
may be changed by the Underwriters after the Offering.
The Partnership has granted to the Underwriters an option, expiring on the
close of business on the 30th day subsequent to the date of this Prospectus, to
purchase up to an additional 270,000 Units at the public offering price, less
underwriting discount, as shown on the cover page of this Prospectus. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments incurred in the sale of the Units. To the extent that the
Underwriters exercise such option, each Underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage of
such additional Units as the number of Units set forth next to such
Underwriter's name in the preceding table bears to the total offered initially.
The Partnership has agreed to indemnify the several Underwriters and certain
related persons or to contribute to losses arising out of certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the
"Securities Act"). Insofar as the Underwriters may be indemnified for
liabilities arising under the Securities Act pursuant to the Underwriting
Agreement, 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 Securities Act and is, therefore, unenforceable.
With certain limited exceptions, the Partnership and certain Unitholders
have agreed not to offer, sell, contract to sell, grant any option to purchase
or otherwise dispose (or announce any offer, sale, grant of any option to
purchase or other disposition) of any Units, or any securities convertible into,
or exercisable or exchangeable for, Units for a period of 180 days from the date
of this Prospectus, without the prior written consent of the Representatives.
The Partnership has agreed to pay Morgan Keegan & Company, Inc. a financial
advisory fee equal to $200,000. Such fee is payable upon the closing of the
Offering.
The Underwriters do not intend to sell Units to any account over which they
exercise discretionary authority.
The foregoing does not purport to be a complete statement of the terms and
conditions of the Underwriting Agreement and related documents, a copy of which
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
59
<PAGE>
LEGAL MATTERS
The validity of the Units to be issued by the Partnership in connection with
the Offering will be passed on by Middleberg, Riddle & Gianna, Dallas, Texas.
Certain matters will be passed upon for the Underwriters by Haynes and Boone,
L.L.P., Dallas, Texas.
EXPERTS
The financial statements of the Partnership as of December 31, 1995 and
1994, and for each of the three years in the period ended December 31, 1995
included in this Prospectus and the related financial statement schedule
incorporated by reference therein have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports which are included and
incorporated by reference herein, and have been so included and incorporated in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The financial statements of Burger King Limited Partnership II as of
December 31, 1995 and 1994 and for each of the years in the three-year period
ended December 31, 1995, and the related financial statement schedule as of
December 31, 1995, have been incorporated herein by reference, in reliance upon
the report of KMPG Peat Marwick LLP, independent certified public accountants,
incorporated herein by reference and upon the authority of said firm as experts
in accounting and auditing.
The financial statements of WW Services, Inc. as of September 30, 1995 and
1994, and for each of the two years then ended incorporated by reference herein
have been audited by Tanner and Long, P.C., independent auditors, as stated in
their report incorporated by reference herein and has been so included in
reliance on the report of such firm given upon their authority as experts in
accounting and auditing.
The financial statements of Wiggins Enterprises, Inc. as of September 30,
1995, and for the nine months then ended incorporated by reference herein have
been audited by Thigpen & Lanier, independent auditors, as stated in their
report incorporated by reference herein and has been so included in reliance on
the report of such firm given upon their authority as experts in accounting and
auditing.
The schedule of rental income and direct operating expenses for Selected
Partnership Properties Sold to U.S. Restaurant Properties Master L.P. for the
year ended December 31, 1995 incorporated by reference herein have been audited
by BDO Seidman, LLP, independent auditors, as stated in their report
incorporated by reference herein and has been so included in reliance on the
report of such firm given upon their authority as experts in accounting and
auditing.
The statement of direct revenues and operating expenses applicable to stores
to be acquired by U.S. Restaurant Properties Master L.P. from Matel Enterprises,
Inc. for the year ended December 31, 1995 incorporated by reference herein has
been audited by William C. Love, independent auditor, as stated in his report
incorporated by reference herein and has been so included in reliance on the
report of such firm given upon their authority as experts in accounting and
auditing.
AVAILABLE INFORMATION
The Partnership is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
regulations promulgated thereunder, and in connection therewith files reports
and other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information filed by the
Partnership can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's Regional Offices at 26 Federal Plaza, New York, New York
10278 and 219 South Dearborn, Room 1204, Chicago, Illinois 60604. In addition,
copies of such material can be obtained from the public reference section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at the Commission's
prescribed rates.
60
<PAGE>
The Partnership's Units are listed for trading on the New York Stock Exchange
under the symbol "USV". Reports and other information concerning the Partnership
can be inspected at the offices of such Exchange, 20 Broad Street, New York, New
York 10005.
The Partnership has filed with the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, a Registration Statement on Form S-3 (herein, together
with all amendments thereto, the "Registration Statement") under the Securities
Act of 1933, as amended (the "Act"), with respect to the Units. This Prospectus
does not contain all information set forth in the Registration Statement and in
the exhibits thereto. Statements herein concerning the contents of any contract
or other document are not necessarily complete, and in each instance, reference
is made to such contract or other document filed with the Commission as an
exhibit to the Registration Statement, or otherwise, each such statement being
qualified and amplified in all respects by such reference. Items of information
omitted from the Prospectus but contained in the Registration Statement may be
obtained from the public reference room of the Commission in Washington, D.C.
upon payment of the fee prescribed by the Rules and Regulations of the
Commission or may be examined there without charge.
INCORPORATION BY REFERENCE
The following documents previously filed by the Partnership with the
Commission are incorporated herein by reference:
(a) The Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, as amended by the Form 10-K/A filed May 23,
1996;
(b) The Partnership's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996;
(c) The Partnership's Current Report on Form 8-K dated April 19, 1996, as
amended by the Form 8-K/A filed April 30, 1996; and
(d) All documents subsequently filed by the Partnership pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the Offering. Such documents shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated herein by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document which is incorporated or deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Managing General Partner of the Partnership will provide without charge
to each person, including any beneficial owner, to whom a copy of this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated herein by reference, other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into such documents. Requests should be addressed to President, U.S.
Restaurant Properties, Inc., 5310 Harvest Hill Road, Suite 270, Dallas, Texas
75230. The telephone number is (214) 387-1487, FAX (214) 490-9119.
61
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
U.S. RESTAURANT PROPERTIES MASTER L.P.
PRO FORMA FINANCIAL STATEMENTS
Pro Forma Financial Information.................................................... F-2
Pro Forma Consolidated Balance Sheet as of March 31, 1996 (unaudited) and Notes
thereto........................................................................... F-3
Pro Forma Condensed Consolidated Statement of Income for the quarter ended March
31, 1996 (unaudited) and Notes thereto............................................ F-5
Pro Forma Condensed Consolidated Statement of Income for the year ended December
31, 1995 (unaudited) and Notes thereto............................................ F-6
FINANCIAL STATEMENTS
U.S. RESTAURANT PROPERTIES MASTER L.P.
Independent Auditors' Report....................................................... F-8
Consolidated Balance Sheets at December 31, 1994 and 1995 and March 31, 1996
(Unaudited)....................................................................... F-9
Consolidated Statements of Income for the years ended December 31, 1993, 1994 and
1995 and quarters ended March 31, 1995 and 1996 (Unaudited)....................... F-10
Consolidated Statements of Partners' Capital for the years ended December 31, 1993,
1994 and 1995 and quarter ended March 31, 1996 (Unaudited)........................ F-11
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994
and 1995 and quarters ended March 31, 1995 and 1996 (Unaudited)................... F-12
Notes to Consolidated Financial Statements for the years ended December 31, 1993,
1994 and 1995 and for the quarters ended March 31, 1995 and 1996 (Unaudited)...... F-13
</TABLE>
F-1
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following March 31, 1996 unaudited Pro Forma Consolidated Balance Sheet
of U.S. Restaurant Properties Master L.P. (the "Partnership") consists of the
Partnership's March 31, 1996 balance sheet adjusted on a pro forma basis to
reflect as of March 31, 1996: (a) the purchase of 69 properties and sale of one
property since April 1, 1996; (b) the acquisition of 39 properties under binding
contracts with the assumption of related tenant and ground leases (all of which
are treated as operating leases based on preliminary assessments); (c)
additional borrowings to purchase the properties; and (d) the issuance and sale
by the Partnership in this Offering of 1,800,000 Units and the application of
the net proceeds therefrom. All properties acquired and under contract have been
accounted for using the purchase method of accounting. The unaudited Pro Forma
Consolidated Balance Sheet is not necessarily indicative of what the actual
financial position of the Partnership would have been at March 31, 1996 had all
of these transactions occurred and it does not purport to represent the future
financial position of the Partnership.
The unaudited Pro Forma Condensed Consolidated Statement of Income for the
quarter ended March 31, 1996 is presented as if the following had occurred as of
January 1, 1996: (a) adjustments to operations for 24 properties acquired during
the quarter ended March 31, 1996 and the purchase of 69 properties and sale of
one property since April 1, 1996; (b) the acquisition of 39 properties under
contract with the assumption of related tenant and ground leases (all of which
are treated as operating leases based on preliminary assessments); (c)
additional borrowings to purchase the properties; (d) the issuance and sale by
the Partnership in this Offering of 1,800,000 Units and the application of the
net proceeds therefrom. The unaudited Pro Forma Condensed Consolidated Statement
of Income is not necessarily indicative of what the actual results of operations
of the Partnership would have been assuming the transactions described above had
been completed as of January 1, 1996 nor do they purport to represent the
results of operations for future periods.
The unaudited Pro Forma Condensed Consolidated Statement of Income for the
year ended December 31, 1995 is presented as if the following had occurred as of
January 1, 1995: (a) the purchase of 16 properties acquired on various dates
from March 1995 through December 1995; (b) the purchase of 93 properties and
sale of one property completed since January 1, 1996; (c) the acquisition of 39
properties under contract with the assumption of related tenant and ground
leases (all of which are treated as operating leases based on preliminary
assessments); (c) additional borrowings to purchase the properties under
contract; and (d) the issuance and sale by the Partnership in this Offering of
1,800,000 Units and the application of the net proceeds therefrom. The purchase
and operations of the properties are being included in the pro forma financial
statements because (a) 93 of such properties have already been acquired and (b)
the proceeds of the Offering are being used to acquire the 39 properties under
contract and the Partnership presently intends to consummate such acquisitions.
The unaudited Pro Forma Condensed Consolidated Statement of Income is not
necessarily indicative of what the actual results of operations of the
Partnership would have been assuming the transactions described above had been
completed as of January 1, 1995 nor do they purport to represent the results of
operations for future periods.
These pro forma consolidated financial statements should be read in
conjunction with all of the financial statements and the notes thereto contained
elsewhere in this Prospectus. In management's opinion, all adjustments necessary
to properly reflect the above indicated transactions have been made.
F-2
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 PROPERTIES
ACQUISITIONS(A) UNDER OFFERING
HISTORICAL AND SALE ADJUSTED CONTRACT(B) ADJUSTMENTS(C) PRO FORMA
--------- -------------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Cash.......................... $ 19 $ 82 $ 101 $ $ -- $ 101
Receivables, net.............. 924 924 924
Purchase deposits............. 2,071 (1,136) 935 (643) 292
Prepaid expenses.............. 285 285 285
Notes receivable.............. 348 743 1,091 1,091
Net investment in direct
financing leases............. 18,875 18,875 18,875
Land.......................... 31,203 9,357 40,560 8,768 49,328
Buildings and leasehold
improvements, net............ 18,845 17,437 36,282 15,777 52,059
Machinery and equipment,
net.......................... 257 1,114 1,371 2,058 3,429
Intangibles, net.............. 14,524 1,560 16,084 165 16,249
--------- -------------- ----------- ----------- -------------- -----------
$ 87,351 $ 29,157 $ 116,508 $ 26,125 $ -- $ 142,633
--------- -------------- ----------- ----------- -------------- -----------
--------- -------------- ----------- ----------- -------------- -----------
Liabilities and Partners'
capital
Accounts payable.............. $ 625 $ $ 625 $ $ $ 625
Deferred gain................. 445 445 445
Line of credit................ 21,226 28,712 49,938 26,125 (40,141) 35,922
Capitalized lease
obligations.................. 508 508 508
General Partners' capital..... 1,222 1,222 1,222
Limited Partners' capital..... 63,770 63,770 40,141 103,911
--------- -------------- ----------- ----------- -------------- -----------
$ 87,351 $ 29,157 $ 116,508 $ 26,125 $ -- $ 142,633
--------- -------------- ----------- ----------- -------------- -----------
--------- -------------- ----------- ----------- -------------- -----------
</TABLE>
- ------------------------
(a) Reflects pro forma adjustments for 1996 acquisitions completed since March
31, 1996 which consists of the purchase for cash of 69 Properties and the
sale of one property as follows:
<TABLE>
<CAPTION>
PURCHASE
PRICE/
(CARRYING
NUMBER OF PROPERTIES COST)
----------------------- --------------
<S> <C> <C>
BK II................................................... 29 $ 17,716
Pizza Hut............................................... 2 437
Dairy Queen............................................. 37 11,137
Hardees................................................. 1 558
--- --------------
69 29,848
Sale of Wenatchee store................................. (1) (380)
--- --------------
Total of land, buildings and leasehold improvements,
machinery and equipment and intangibles.............. 68 29,468
Add cost of store sold.................................. 380
Less purchase deposits.................................. 1,136
--------------
Increase in line of credit............................ $ 28,712
--------------
--------------
</TABLE>
F-3
<PAGE>
Respective purchase price for the properties has been allocated between
land, building, machinery and intangibles on a preliminary basis. Final
determination of the proper allocation between these accounts will be made
prior to year end.
The Partnership sold one property for $82 in cash and a note receivable of
$743 which bears interest at 9.25% and interest is due monthly with
principal payable at maturity. The Partnership is accounting for the 1996
sale on the cost recovery method. Accordingly, the Partnership has recorded
a deferred gain of $445.
(b) Reflects the pro forma adjustments for the properties under contract which
are comprised of 39 Properties as follows:
<TABLE>
<CAPTION>
NUMBER OF PROPERTIES PURCHASE PRICE
----------------------- --------------
<S> <C> <C>
Schlotzky's............................................. 5 $ 3,626
Pizza Hut............................................... 9 1,919
Hardee's................................................ 1 643
Wiggins................................................. 24 20,580
--- --------------
39 $ 26,768
</TABLE>
The respective purchase price for the properties has been allocated between
land, building machinery and intangibles on a preliminary basis. Final
determination of the proper allocation between these accounts will be made
prior to year end.
All related tenant and ground leases have been determined to represent
operating leases, based on preliminary assessments. Final determination as
to the proper classification of leases is subject to the completion of the
acquisition transactions.
(c) Reflects the issuance of 1,800,000 Units at $23.75 less underwriters' fees
and offering costs.
F-4
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE QUARTER ENDED MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS EXCEPT FOR PER UNIT DATA)
<TABLE>
<CAPTION>
PROPERTIES
UNDER
CONTRACT
1996 AND
ACQUISITIONS OFFERING
HISTORICAL AND SALE(A) ADJUSTED ADJUSTMENTS PRO FORMA
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total revenues...................................... $ 2,955 $ 1,212 $ 4,167 $ 922(b) $ 5,089
Expenses:
Rent................................................ 412 97 509 33(b) 542
Depreciation and amortization....................... 534 334 868 255(c) 1,123
Taxes, general and administrative................... 370 90 460 66(d) 526
Interest expense (income), net...................... 317 569 886 (251)(e) 635
----------- ----------- ----------- ----------- -----------
Total expenses...................................... 1,633 1,090 2,723 103 2,826
----------- ----------- ----------- ----------- -----------
Net income.......................................... $ 1,322 $ 122 $ 1,444 $ 819 $ 2,263
Net income allocable to unitholders................. $ 1,296 $ 1,415 $ 2,218
Average number of units outstanding................. 4,903 4,987 1,800(f) 6,787
Net income per unit................................. $ 0.26 $ 0.28 $ 0.33
</TABLE>
- ------------------------
(a) Reflects pro forma adjustments to operations for 24 properties acquired
during the quarter ended March 31, 1996 and for the 1996 acquisitions
completed since March 31, 1996, comprising 69 properties acquired on various
dates and the sale of one property also completed since March 31, 1996 as
follows (in thousands):
<TABLE>
<CAPTION>
1996
ACQUISITIONS 1996 SALE NET AMOUNT
----------- --------- -----------
<S> <C> <C> <C>
Rental revenues............................................ $ 1,215 $ (20) $ 1,195
Interest income............................................ 17 17
----------- --- -----------
Total revenues............................................. 1,215 (3) 1,212
Expenses:
Rent....................................................... 97 -- 97
Depreciation and amortization.............................. 334 -- 334
Taxes, general and administrative.......................... 90 -- 90
Interest expense (income), net............................. 569 -- 569
----------- --- -----------
Total expenses............................................. $ 1,090 $ 0 $ 1,090
</TABLE>
(b) Reflects pro forma adjustments for properties under contract comprised of 39
properties.
(c) Reflects the pro forma increase in depreciation expense related to the
purchase of the properties under contract.
(d) Reflects pro forma increase in general and administrative expenses,
attributable to the increase in fees due to the Managing General Partner,
calculated as 1% of the contracted purchase price for the properties under
contract.
(e) Reflects the pro forma adjustment to interest expense as a result of the
Offering and purchase of the properties under contract.
Reduction of pro forma interest expense is based on the use of Offering
proceeds to reduce the total debt outstanding by $14,016 at a pro forma
interest rate of 7.1%.
(f) Reflects the 1,800,000 Units to be issued in the Offering.
F-5
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(IN THOUSANDS EXCEPT FOR PER UNIT DATA)
<TABLE>
<CAPTION>
PROPERTIES
1996 UNDER CONTRACT
1995 ACQUISITIONS AND OFFERING
HISTORICAL ACQUISITIONS(A) AND SALE(C) ADJUSTED ADJUSTMENTS PRO FORMA
----------- -------------- ----------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total Revenues.................. $ 9,780 $ 1,280 $ 6,459 $ 17,519 $ 3,688(e) $ 21,207
Expenses:
Rent.......................... 1,405 123 492 2,020 131(e) 2,151
Depreciation and
amortization................. 1,541 291 1,815 3,647 1,020(f) 4,667
Taxes, general and
administrative............... 1,419 114 454 1,987 265(g) 2,252
Interest expense (income),
net.......................... 192 687 2,976 3,855 (1,080)(h) 2,775
----------- ------- ----------- --------- ------- -----------
Total expenses................ 4,557 1,215 5,737 11,509 336 11,845
----------- ------- ----------- --------- ------- -----------
Net income...................... $ 5,223 $ 65 $ 722 $ 6,010 $ 3,352 $ 9,362
Net income allocable to
unitholders.................... $ 5,119 $ 5,891 $ 9,177
Average number of units
outstanding.................... 4,638 54(b) 328(d) 5,008 1,800(i) 6,808
Net income per unit............. $ 1.10 $ 1.35
</TABLE>
- ------------------------
(a) Reflects pro forma adjustments for the results of operations for the 1995
acquisitions, comprised of 16 properties acquired on various dates from
March 1995 through December 1995. This adjustment represents the operations
of these acquired properties from January 1, 1995 through the date of
purchase.
(b) In connection with the acquisition of three properties, 54,167 Units were
issued.
(c) Reflects pro forma adjustments for the completed 1996 acquisitions,
comprising 93 properties acquired on various dates and the sale of one
property in 1996 as follows (in thousands):
<TABLE>
<CAPTION>
ACQUISITIONS SALE NET AMOUNT
----------- --------- -----------
<S> <C> <C> <C>
Rental revenues............................................ $ 6,468 $ (78) $ 6,390
Interest income from note receivable....................... 69 69
----------- --- -----------
Total revenues............................................. 6,468 (9) 6,459
Expenses:
Rent expense............................................... 492 -- 492
Depreciation and amortization.............................. 1,816 (1) 1,815
Taxes, general and administrative.......................... 454 -- 454
Interest expense........................................... 2,976 -- 2,976
----------- --- -----------
Total expenses............................................. $ 5,738 $ (1) $ 5,737
</TABLE>
(d) In connection with the acquisition of ten properties in 1996, 327,836 Units
were issued.
(e) Reflects pro forma adjustments for properties under contract comprised of 39
properties.
(f) Reflects pro forma increase in depreciation expense related to the purchase
of properties under contract.
F-6
<PAGE>
(g) Reflects pro forma increase in general and administrative expenses,
attributable to the increase in fees due to the Managing General Partner,
calculated as 1% of the contracted purchase price for the properties under
contract.
(h) Reflects the pro forma adjustment to interest expense as a result of the
Offering and purchase of the properties under contract.
Reduction of pro forma interest expense is based on the use of Offering
proceeds to reduce the total debt outstanding by $14,016 at a pro forma
interest rate of 7.7%.
(i) Reflects the 1,800,000 Units to be issued in the Offering.
F-7
<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.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements 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 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.
DELOITTE & TOUCHE LLP
Dallas, Texas
February 17, 1996
F-8
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------ -----------
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cash and equivalents................................ $ 680,646 $ 7,127 $ 18,526
Marketable securities............................... 853,791 -- --
Receivables, net.................................... 715,202 951,095 924,402
Purchase deposits (Note 3).......................... -- 1,791,682 2,070,529
Prepaid expenses.................................... 122,962 315,189 284,552
Notes receivable (Note 10).......................... -- 268,654 348,238
Net investment in direct financing leases........... 21,237,432 19,371,015 18,875,331
Land................................................ 23,414,280 27,492,895 31,203,496
Buildings and leasehold improvements, net........... 1,548,375 6,257,188 18,844,373
Machinery and equipment, net........................ -- 223,739 257,141
Intangibles, net.................................... 14,316,583 14,804,155 14,524,275
----------- ----------- -----------
$62,889,271 $71,482,739 $87,350,863
----------- ----------- -----------
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable.................................... $ 445,518 $ 677,398 $ 624,723
Line of credit...................................... -- 10,930,647 21,226,000
Capitalized lease obligations....................... 774,602 562,544 507,980
Commitments (Notes 7 and 8)
General Partners' capital........................... 1,308,543 1,240,604 1,222,468
Limited Partners' capital........................... 60,360,608 58,071,546 63,769,692
----------- ----------- -----------
$62,889,271 $71,482,739 $87,350,863
----------- ----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-9
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, QUARTER ENDED MARCH 31,
------------------------------------------- ----------------------------
1993 1994 1995 1995 1996
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES FROM LEASED PROPERTIES
Rental income....................... $ 5,665,976 $ 6,339,993 $ 7,539,634 $ 1,539,963 $ 2,433,447
Amortization of unearned income on
direct financing leases............ 2,665,667 2,453,063 2,240,655 582,657 522,022
------------- ------------- ------------- ------------- -------------
Total Revenues...................... 8,331,643 8,793,056 9,780,289 2,122,620 2,955,469
EXPENSES
Rent................................ 1,294,669 1,347,748 1,405,380 336,496 411,521
Depreciation and amortization....... 1,383,489 1,361,136 1,540,900 336,576 534,037
Taxes, general and administrative... 1,007,914 1,143,956 1,419,279 369,668 369,638
Interest expense (income), net...... 44,234 (3,515) 192,142 (10,250) 317,588
------------- ------------- ------------- ------------- -------------
3,730,306 3,849,325 4,557,701 1,032,490 1,632,784
Provision for write down or
disposition of properties.......... 73,739 11,061 -- -- --
------------- ------------- ------------- ------------- -------------
Total Expenses...................... 3,804,045 3,860,386 4,557,701 1,032,490 1,632,784
------------- ------------- ------------- ------------- -------------
Net income............................ $ 4,527,598 $ 4,932,670 $ 5,222,588 $ 1,090,130 $ 1,322,685
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Net income allocable to unitholders... $ 4,437,051 $ 4,834,017 $ 5,119,175 $ 1,068,544 $ 1,296,496
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Average number of outstanding units... 4,635,000 4,635,000 4,637,865 4,635,000 4,903,008
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Net income per unit................... $ 0.96 $ 1.04 $ 1.10 $ 0.23 $ 0.26
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-10
<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
Net income -- Unaudited........................................... 26,191 1,296,494 1,322,685
Units issued for property -- Unaudited............................ -- 6,595,933 6,595,933
Cash distributions -- Unaudited................................... (44,327) (2,194,281) (2,238,608)
------------- -------------- --------------
Balance at March 31, 1996 -- Unaudited............................ $ 1,222,468 $ 63,769,692 $ 64,992,160
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-11
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, QUARTER ENDED MARCH 31
-------------------------------------------- -----------------------------
1993 1994 1995 1995 1996
------------- ------------- -------------- ------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................... $ 4,527,598 $ 4,932,670 $ 5,222,588 $ 1,090,130 $ 1,322,685
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization............ 1,383,489 1,361,136 1,540,900 336,576 535,088
Amortization of deferred financing
costs................................... 10,285
Provision for write down or disposition
of properties........................... 73,739 11,061 -- -- --
Marketable securities.................... -- (853,791) 853,791 853,791 --
Decrease (increase) in receivables, net.. 10,873 (301,505) (235,893) 10,284 26,693
Decrease (increase) in prepaid
expenses................................ 1,262 (35,673) (192,227) 2,851 30,637
Reduction in net investment in direct
financing leases........................ 1,468,790 1,672,477 1,866,417 448,728 495,684
Increase (decrease) in accounts
payable................................. 9,506 203,333 231,880 (200,792) (52,675)
------------- ------------- -------------- ------------- --------------
2,947,659 2,057,038 4,064,868 1,451,438 1,045,712
------------- ------------- -------------- ------------- --------------
7,475,257 6,989,708 9,287,456 2,541,568 2,368,397
CASH FLOWS FROM (USED IN) INVESTING
ACTIVITIES:
Proceeds from sale of properties......... 1,130,000 -- -- (1,228,399) (9,926,741)
Purchase of property..................... -- -- (8,083,302) -- --
Purchase of intangibles.................. -- (1,662,729)
Purchase of machines and equipment....... -- -- (231,609) (6,779) (39,901)
Purchase deposits paid................... -- -- (1,791,682) (60,000) (278,847)
Increase (decrease) in notes receivable.. -- -- (268,654) -- (79,584)
------------- ------------- -------------- ------------- --------------
1,130,000 -- (12,037,976) (1,295,178) (10,325,073)
CASH FLOWS FROM (USED IN) FINANCING
ACTIVITIES:
Increase in loan origination costs....... -- -- (76,843) -- (34,106)
Reduction in capitalized lease
obligations............................. (172,047) (191,008) (212,058) (50,954) (54,564)
Proceeds from line of credit............. -- -- 10,930,647 500,000 11,435,000
Repayment of line of credit.............. (1,139,647)
Cash distributions....................... (8,129,829) (7,378,157) (8,001,995) (1,986,025) (2,238,608)
Purchase of partnership units............ -- -- (546,750) --
Purchase of special general partner
interest................................ -- -- (16,000) (16,000) --
------------- ------------- -------------- ------------- --------------
(8,301,876) (7,569,165) 2,077,001 (1,552,979) 7,968,075
------------- ------------- -------------- ------------- --------------
Increase (decrease) in cash and
equivalents............................. 303,381 (579,457) (673,519) (306,589) 11,399
Cash and equivalents at beginning of
year.................................... 956,722 1,260,103 680,646 680,646 7,127
------------- ------------- -------------- ------------- --------------
Cash and equivalents at end of year...... $ 1,260,103 $ 680,646 $ 7,127 $ 374,057 $ 18,526
------------- ------------- -------------- ------------- --------------
------------- ------------- -------------- ------------- --------------
SUPPLEMENTAL DISCLOSURE:
Interest paid during the year............ $ 108,874 $ 89,912 $ 256,325 $ 19,264 $ 333,395
------------- ------------- -------------- ------------- --------------
------------- ------------- -------------- ------------- --------------
NON-CASH INVESTING ACTIVITIES
Units issued for property................ $ -- $ -- $ 985,156 $ 6,595,933
------------- ------------- -------------- ------------- --------------
------------- ------------- -------------- ------------- --------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-12
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND FOR
THE QUARTERS ENDED MARCH 31, 1995 AND 1996 (UNAUDITED)
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 for $94,592,000 an interest in 128 restaurant properties
(Properties) owned or leased by BKC and leased or subleased on a net lease basis
to BKC franchisees. 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, 1994 and 1995 and March 31, 1996 totaled
4,635,000, 4,659,167 and 4,987,003 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.
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.
F-13
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING POLICIES (CONTINUED)
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.
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, MARCH 31
------------------------ -----------
1994 1995
----------- -----------
1996
-----------
(UNAUDITED)
RECEIVABLES, NET
<S> <C> <C> <C>
Receivables........................... $ 832,093 $ 1,067,986 $ 1,041,293
Less allowance for doubtful
accounts............................. 116,891 116,891 116,891
----------- ----------- -----------
$ 715,202 $ 951,095 $ 924,402
----------- ----------- -----------
----------- ----------- -----------
BUILDINGS AND LEASEHOLD IMPROVEMENTS,
NET
Buildings and leasehold improvements.. $ 3,892,294 $ 8,882,138 $21,694,210
Less accumulated depreciation......... 2,343,919 2,624,950 2,849,837
----------- ----------- -----------
$ 1,548,375 $ 6,257,188 $18,844,373
----------- ----------- -----------
----------- ----------- -----------
INTANGIBLES, NET
Intangibles........................... $26,392,197 $28,178,508 $28,224,300
Less accumulated amortization......... 12,075,614 13,374,353 13,700,025
----------- ----------- -----------
$14,316,583 $14,804,155 $14,524,275
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-14
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. OTHER BALANCE SHEET INFORMATION (CONTINUED)
Total purchase deposits of $1,791,682 at December 31, 1995 included
$1,075,000 of non-refundable deposits.
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.
4. PROPERTY PURCHASES IN 1996
During the first quarter the Partnership completed the purchase of 24
properties. Nine of the properties were purchased for a cash price of
$4,426,264. These properties included three Dairy Queens, two KFCs and a Pizza
Inn. Fifteen of the properties were purchased for a combination of cash and
units. The total purchase price included $5,500,477 in cash and 327,836 units
with a guaranteed value of $7,839,800. Of the 327,836 partnership units issued,
28,261 units are guaranteed to have a market value of $23 three years from the
transaction date and 299,575 partnership units are guaranteed to have a market
value of $24 two years from that transaction date. All 327,836 units have
certain registration rights. The properties included thirteen Burger Kings, one
Sizzler, and one Taco Cabana. The allocation of the cost of the properties
purchased is done on a preliminary basis during the year and will be finalized
at year end.
In the normal course of business, the Partnership may sign purchase
agreements to acquire restaurant properties. Such agreements become binding
obligations upon the completion of a due diligence period ranging usually from
15 - 30 days.
On March 31, 1996, purchase deposits included earnest money amounting to
$1,779,000 for the purchase of 29 Burger Kings, five Schlotskys', 37 Dairy
Queens, 27 Hardees, and nine Pizza Huts.
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
(estimated fair value). As a result, the market price of the units at the date
of issuance was used to record this transaction.
During the quarter ended March 31, 1996, the Partnership issued 327,836 for
the acquisition of properties. Of these units, 28,261 units are guaranteed to
have a market value of $23 three years from the transaction date and 299,575
units are guaranteed to have a market value of $24 two years from
F-15
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. GUARANTEED STOCK PRICE (CONTINUED)
the transaction date. The accounting described in the paragraph above was used
to record these transactions. They were recorded using current market prices at
the date of issuance of approximately $20 per unit.
6. LINE OF CREDIT
On December 31, 1995, $10,930,647 had been drawn on the $20 million line of
credit. The line of credit was increased in February 1996 to $40,000,000 with
substantially all properties included as collateral on this line of credit. The
interest rate is the lower of LIBOR plus 180 basis points or the prime rate
which was 8.25% on March 31, 1996. There is an unused line of credit fee of .25%
per annum on the average daily excess of the commitment amount over the
aggregate unpaid balance of the revolving loan which is charged and is payable
on a quarterly basis. 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 pro
forma five year bank debt amortization. The $40 million line of credit matures
on June 27, 1998.
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
-------------- --------------
-------------- --------------
<CAPTION>
1994 1995
-------------- --------------
<S> <C> <C>
NET INVESTMENT IN DIRECT FINANCING LEASES AT DECEMBER 31:
Minimum future lease receipts.............................. $ 23,950,382 $ 19,777,557
Estimated unguaranteed residual values..................... 7,561,965 7,561,965
Unearned amount representing interest...................... (10,274,915) (7,968,507)
-------------- --------------
$ 21,237,432 $ 19,371,015
-------------- --------------
-------------- --------------
</TABLE>
F-16
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INVESTMENTS AND COMMITMENTS AS LESSOR (CONTINUED)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH
YEAR ENDED DECEMBER 31 31,
---------------------------------- ----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
RENTAL INCOME:
Minimum rental income........ $3,029,998 $3,061,951 $3,583,609 $1,365,785 $2,033,277
Contingent rental income..... 2,635,978 3,278,042 3,956,025 756,835 922,192
---------- ---------- ---------- ---------- ----------
$5,665,976 $6,339,993 $7,539,634 $2,122,620 $2,955,469
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
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.
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
F-17
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS (CONTINUED)
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>
QUARTER ENDED MARCH
YEARS ENDED DECEMBER 31 31,
---------------------------------- --------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
RENTAL EXPENSE
Minimum rental expense.......... $1,213,564 $1,245,986 $1,303,666 $ 315,770 $ 390,907
Contingent rental expense....... 81,105 101,762 101,714 20,726 20,614
---------- ---------- ---------- --------- ---------
$1,294,669 $1,347,748 $1,405,380 $ 336,496 $ 411,521
---------- ---------- ---------- --------- ---------
---------- ---------- ---------- --------- ---------
</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-18
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.
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>
1995
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>
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, 1993, 1994, and 1995, and March 31, 1995 and 1996 was
$528,000, $542,508, $585,445, $139,018 and $198,681, 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 1993, 1994, and 1995.
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 and the quarter ended March 31, 1996, the one-time acquisition
fee equaled $109,238 and $154,251, respectively, which was capitalized, and the
increase in the non-accountable annual fee for 1995 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.
F-19
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. RELATED PARTY TRANSACTIONS (CONTINUED)
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, 1993, 1994, and 1995.
A note receivable of $255,000 and $300,000 is due from Arkansas Restaurants
#10 L.P. at December 31, 1995 and March 31, 1996, respectively. The note
receivable is due on September 1, 1996, and has an interest rate of 9.0% per
annum.
As of December 31, 1995 and March 31, 1996, 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.
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.
F-20
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. DISTRIBUTIONS AND ALLOCATIONS (CONTINUED)
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.
12. SUMMARY BY QUARTER (UNAUDITED)
<TABLE>
<CAPTION>
PER UNIT
---------------------------
ALLOCABLE RELATED CASH
REVENUES NET INCOME NET INCOME DISTRIBUTIONS*
------------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
1993
First quarter........................................ $ 1,871,146 $ 925,817 $ 0.20 $ 0.37
Second quarter....................................... 2,116,827 1,146,078 0.24 0.48**
Third quarter........................................ 2,248,966 1,304,560 0.28 0.50**
Fourth quarter....................................... 2,094,704 1,151,143 0.24 0.37
------------- ------------- ----- -----
Annual............................................... $ 8,331,643 $ 4,527,598 $ 0.96 $ 1.72**
------------- ------------- ----- -----
------------- ------------- ----- -----
1994
First quarter........................................ $ 1,983,987 $ 1,099,981 $ 0.23 $ 0.39
Second quarter....................................... 2,297,313 1,340,560 0.28 0.39
Third quarter........................................ 2,329,969 1,392,292 0.29 0.41
Fourth quarter....................................... 2,181,787 1,099,837 0.24 0.42
------------- ------------- ----- -----
Annual............................................... $ 8,793,056 $ 4,932,670 $ 1.04 $ 1.61
------------- ------------- ----- -----
------------- ------------- ----- -----
1995
First quarter........................................ $ 2,122,620 $ 1,090,130 $ 0.23 $ 0.42
Second quarter....................................... 2,494,818 1,406,993 0.30 0.42
Third quarter........................................ 2,592,283 1,495,433 0.32 0.43
Fourth quarter....................................... 2,570,568 1,230,032 0.25 0.44
------------- ------------- ----- -----
Annual............................................... $ 9,780,289 $ 5,222,588 $ 1.10 $ 1.71
------------- ------------- ----- -----
------------- ------------- ----- -----
1996
First quarter........................................ $ 2,955,469 $ 1,322,685 $ 0.26 $ 0.47
------------- ------------- ----- -----
------------- ------------- ----- -----
</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.
13. PRO FORMA (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.
F-21
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. PRO FORMA (UNAUDITED) (CONTINUED)
The following pro forma information for the years ended December 31, 1994
and 1995 was prepared by adjusting the actual consolidated results of the
Partnership for the years ended December 31, 1994 and 1995 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 pro forma purposes was calculated assuming a 7.7%
interest rate for both years presented, which approximates the interest rate the
Partnership paid during 1995.
The following pro forma information for the quarters ended March 31, 1995
and 1996 was prepared by adjusting the actual consolidated results of the
Partnership for the quarters ended March 31, 1995 and 1996, respectively, for
the effects of the 1995 and 1996 acquisitions as if all acquisitions and related
financing transactions including the issuance of 54,167 and 327,836 units had
occurred on January 1, 1995 and 1996, respectively. Interest expense for pro
forma purposes was calculated assuming a 7.7% and 7.1% interest rate for the
quarter ended March 31, 1995 and 1996, respectively, which approximates the rate
the Partnership paid during such quarters.
These pro forma 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, 1995 and 1996, and they do
not purport to represent the results of operations for future periods.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, QUARTER ENDED MARCH 31,
------------------------------ ----------------------------
1994 1995 1995 1996
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues from leased properties................... $ 10,502,979 $ 11,059,859 $ 3,059,645 $ 3,084,186
Net income....................................... $ 5,048,828 $ 5,288,037 $ 1,243,732 $ 1,343,234
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
Net income allocable to unitholders.............. $ 4,947,851 $ 5,183,334 $ 1,219,106 $ 1,316,638
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
Average number of outstanding units.............. 4,689,167 4,679,715 5,017,003 4,987,003
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
Net income per unit.............................. $ 1.06 $ 1.11 $ 0.24 $ 0.26
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
</TABLE>
14. SUBSEQUENT EVENTS (UNAUDITED)
On April 22, 1996 the board of directors of the Managing General Partner
declared a cash distribution of $.47 per unit. The cash distribution is payable
on June 13, 1996 to Unitholders of record on June 6, 1996.
In April 1996, two Pizza Hut properties and one Hardee's property were
purchased for $420,000 and $546,000, respectively. In May 1996, 37 Dairy Queen
properties were purchased for $11,000,000 and 29 Burger King properties were
purchased for $17,325,000. All of the purchase prices are exclusive of the 1%
paid to the Managing General Partner and other closing costs.
On April 19, 1996, the Partnership filed a registration statement with the
Securities and Exchange Commission to register 1,800,000 partnership units to be
sold in the public market. The Partnership also granted an option to the
underwriters for 270,000 units to cover over-allotments. The registration
statement has not yet become effective.
On April 29, 1996, U.S. Restaurant Properties Business Trust #1, a financing
subsidiary of the Partnership closed on a $20 million credit facility with
Morgan Keegan Mortgage Company, Inc., of which approximately $10,700,000 has
been drawn. The Morgan Keegan credit facility bears interest at a rate of 300
basis points in excess of LIBOR, with interest payable monthly, with a final
maturity date of November 30, 1996. The Morgan Keegan credit facility is
nonrecourse to the Partnership and is secured by approximately $30 million of
real properties owned by the Trust.
F-22
<PAGE>
U.S. RESTAURANTS PROPERTIES MASTER L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
On May 1, 1996, a restaurant property located in Wenatchee, Washington was
sold for $825,000 at a gain. The sales price consisted of $82,500 in cash plus a
$742,500 installment note receivable. Interest on the note receivable is due
monthly at an interest rate of 9.25 percent per annum and the principal is due
at maturity in 30 months.
As of May 20, 1996, the Partnership has entered into binding agreements to
acquire 39 additional restaurant properties for an aggregate purchase price of
approximately $27 million.
F-23
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the approximate amount of the fees and
expenses payable by the Registrant in connection with the issuance and
distribution of the Units:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 16,150
NYSE listing fee................................................. 6,300
NASD filing fee.................................................. 5,183
Printing and mailing expenses.................................... 60,000
Accountant's fees and expenses................................... 80,000
Engraving expenses............................................... 10,000
Blue Sky fees and expenses....................................... 1,425
Legal fees....................................................... 70,000
Transfer Agent's fees............................................ *
Miscellaneous expenses........................................... *
---------
Total........................................................ *
---------
---------
</TABLE>
- ------------------------
* To be supplied by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Partnership Agreement provides that the Managing General Partner and its
affiliates, officers, directors, agents, and employees will not be personally
liable to the Partnership or to any of its 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 they believed to be in, or not opposed to, the
interests 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 a 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 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.
Reference is made to Section 7 of the Underwriting Agreement filed as
Exhibit 1.1 to this Registration Statement.
Subject to any terms, conditions, or restrictions set forth in the
Partnership Agreement, Section 17-108 of the Delaware Revised Limited
Partnership Act empowers a Delaware limited partnership to indemnify by and hold
harmless any partner or other person from and against any and all claims and
demands whatsoever.
II-1
<PAGE>
Section 145 of the Delaware General Corporation Law sets forth the extent to
which a person who is a director or officer of a Delaware corporation or serves
at the request of a Delaware corporation as a director, officer, employee or
agent of any other enterprise may be indemnified against any liabilities they
may incur in their capacity as such. Article VIII of the Managing General
Partner's Bylaws provide for the indemnification of directors and officers of
the Managing General Partner and such directors and officers who serve at the
request of the Managing General Partner as directors, officers, employees, or
agents of any other enterprise against certain liabilities under certain
circumstances.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
**1.1 Form of Underwriting Agreement, including the Agreement Among Underwriters and Selected
Dealer's Agreement.
2.1 Amended and Restated Purchase and Sale Agreement dated as of February 3, 1986, filed as
Exhibit 10(a) to Amendment No. 2 to the Registrant's Registration Statement on Form S-11
(Registration No. 33-2382) and incorporated herein by reference.
**4.1 Second Amended and Restated Partnership Agreement.
**4.2 Certificate of Limited Partnership of the Partnership.
4.3 Deposit Agreement and Form of Depositary Receipt and Application for Transfer of Depositary
Units to Morgan Guaranty Trust Company of New York dated February 3, 1986, filed as
Exhibit 4.5 to Amendment No. 3 to the Registrant's Registration Statement on Form S-11
(Registration No. 33-2382) and incorporated herein by reference.
4.4 First Amendment to Deposit Agreement, dated as of May 5, 1987, filed as Exhibit (4)A to
Registrant's Current Report on Form 8-K dated as of September 30, 1987 and incorporated
herein by reference.
**5.1 Opinion of Middleberg, Riddle & Gianna.
**8.1 Opinion of Middleberg, Riddle & Gianna relating to tax matters.
10.2 Amendment No. 91 to Limited Partnership Agreement effective November 30, 1994, regarding
Burger King Corporation Withdrawal as Special General Partner and Name Change, filed as
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the period ended
September 30, 1994 and incorporated herein by reference.
10.3 Consulting Agreement dated as of April 30, 1987, filed as Exhibit 10.2 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1987 and incorporated herein by
reference.
10.4 Option Agreement dated as of March 24, 1995, between U.S. Restaurant Properties Master L.P.
and QSV Properties Inc., filed as Exhibit 10.3 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1987 and incorporated herein by reference.
10.5 Stock Purchase Agreement dated as of May 27, 1994 between Pillsbury Company and Robert J.
Stetson, et al regarding sale of QSV Properties Inc., filed as Exhibit 10.1 to
Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1984 and
incorporated herein by reference.
10.6 Amended and Restated Secured Loan Agreement dated as of February 15, 1996 between the
Registrant and various banks, filed as Exhibit 10.6 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1995 and incorporated herein by reference.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
**10.7 Demand Promissory Note dated as of August 15, 1995, executed by Arkansas Restaurants #10,
L.P. for the benefit of U.S. Restaurant Properties Operating, L.P.
**10.8 Mortgage Warehouse Facility dated as of April 29, 1996 between U.S. Restaurant Properties
Business Trust I and Morgan Keegan Mortgage Company, Inc.
**23.1 Consent of Deloitte & Touche LLP.
**23.2 Consent of KPMG Peat Marwick LLP.
**23.3 Consent of Tanner and Long, P.C.
**23.4 Consent of Thigpen & Lanier.
**23.5 Consent of BDO Seidman, LLP.
**23.6 Consent of William C. Love, CPA.
**23.7 Consent of Middleberg, Riddle & Gianna (included in Exhibit 5.1).
**24.1 Power of Attorney (set forth on signature page hereof).
</TABLE>
- ------------------------
**Filed herein.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
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 director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction 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.
For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Dallas, State of Texas on May 23, 1996.
U.S. RESTAURANT PROPERTIES MASTER L.P.
By: U.S. Restaurant Properties, Inc.
Managing General Partner
By: /s ROBERT J. STETSON
-----------------------------------
Robert J. Stetson
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
Each individual whose signature appears below hereby constitutes and
appoints Fred H. Margolin and Robert J. Stetson and each of them (with full
power to each of them to act alone), his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and on his
behalf and in his name, place and stead, in any and all capacities, to sign,
execute, and file any and all documents relating to this Registration Statement,
including any and all amendments (including post-effective amendments), exhibits
and supplements thereto, and requests to accelerate the effectiveness of this
Registration Statement, with any regulatory authority, granting unto said
attorneys and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises in order to effectuate the same as fully to all intents and
purposes as he himself might or could do if personally present, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------------------------ ----------------
<C> <S> <C>
Director of U.S. Restaurant Properties, Inc.
s/ ROBERT J. STETSON (Principal Accounting Officer, Principal
------------------------------------ Executive Officer and Principal Financial May 23, 1996
Robert J. Stetson Officer)
s/ FRED H. MARGOLIN
------------------------------------ Director of U.S. Restaurant Properties, Inc. May 23, 1996
Fred H. Margolin
s/ EUGENE G. TAPER
------------------------------------ Director of U.S. Restaurant Properties, Inc. May 23, 1996
Eugene G. Taper
s/ GERALD H. GRAHAM
------------------------------------ Director of U.S. Restaurant Properties, Inc. May 23, 1996
Gerald H. Graham
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------------------------ ----------------
<C> <S> <C>
s/ DARREL ROLPH
------------------------------------ Director of U.S. Restaurant Properties, Inc. May 23, 1996
Darrel Rolph
s/ DAVID ROLPH
------------------------------------ Director of U.S. Restaurant Properties, Inc. May 23, 1996
David Rolph
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
**1.1 Form of Underwriting Agreement (including the Agreement Among Underwriters and Selected
Dealer's Agreement).
2.1 Amended and Restated Purchase and Sale Agreement dated as of February 3, 1986, filed as Exhibit
10(a) to Amendment No. 2 to the Registrant's Registration Statement on Form S-11 (Registration
No. 33-2382) and incorporated herein by reference.
**4.1 Second Amended and Restated Partnership Agreement.
**4.2 Certificate of Limited Partnership of the Partnership.
4.3 Deposit Agreement and Form of Depositary Receipt and Application for Transfer of Depositary
Units to Morgan Keegan Trust Company of New York dated February 3, 1986, filed as Exhibit 4.5
to Amendment No. 3 to the Registrant's Registration Statement on Form S-11 (Registration No.
33-2382) and incorporated herein by reference.
4.4 First Amendment to Deposit Agreement, dated as of May 5, 1987, filed as Exhibit (4)A to
Registrant's Current Report on Form 8-K dated as of September 30, 1987 and incorporated herein
by reference.
**5.1 Opinion of Middleberg, Riddle & Gianna.
**8.1 Opinion of Middleberg, Riddle & Gianna relating to tax matters.
10.2 Amendment No. 91 to Limited Partnership Agreement effective November 30, 1994 regarding Burger
King Corporation Withdrawal as Special General Partner and Name Change, filed as Exhibit 10.1
to the Registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1994 and
incorporated herein by reference.
10.3 Consulting Agreement dated as of April 30, 1987, filed as Exhibit 10.2 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1987 and incorporated herein by reference.
10.4 Option Agreement dated as of March 24, 1995, between U.S. Restaurant Properties Master L.P. and
QSV Properties Inc., filed as Exhibit 10.3 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1987 and incorporated herein by reference.
10.5 Stock Purchase Agreement dated as of May 27, 1994 between Pillsbury Company and Robert J.
Stetson, et al regarding sale of QSV Properties Inc., filed as Exhibit 10.1 to Registrant's
Quarterly Report on Form 10-Q for the period ended June 30, 1984 and incorporated herein by
reference.
10.6 Amended and Restated Secured Loan Agreement dated as of February 15, 1996 between the
Registrant and various banks, filed as Exhibit 10.6 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995 and incorporated herein by reference.
**10.7 Demand Promissory Note dated as of August 15, 1995, executed by Arkansas Restaurants #10, L.P.
for the benefit of U.S. Restaurant Properties Operating, L.P.
**10.8 Mortgage Warehouse Facility dated as of April 29, 1996 between U.S. Restaurant Properties
Business Trust I and Morgan Keegan Mortgage Company, Inc.
**23.1 Consent of Deloitte & Touche LLP.
**23.2 Consent of KPMG Peat Marwick LLP.
**23.3 Consent of Tanner and Long, P.C.
**23.4 Consent of Thigpen & Lanier.
**23.5 Consent of BDO Seidman, LLP.
**23.6 Consent of William C. Love, CPA.
**23.7 Consent of Middleberg, Riddle & Gianna (included in Exhibit 5.1).
**24.1 Power of Attorney (set forth on signature page hereof).
</TABLE>
- ------------------------
**Filed herein.
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
Units
-----
-----------
AGREEMENT AMONG UNDERWRITERS,
INCLUDING
UNDERWRITING AGREEMENT
AND
SELECTED DEALERS AGREEMENT
DATED: JUNE __, 1996
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
(A DELAWARE LIMITED PARTNERSHIP)
UNITS
-----
AGREEMENT AMONG UNDERWRITERS
DATED: JUNE __, 1996
<PAGE>
AGREEMENT AMONG UNDERWRITERS
June __, 1996
MORGAN KEEGAN & COMPANY, INC.
EVEREN SECURITIES, INC.
SOUTHWEST SECURITIES, INC.
c/o Morgan Keegan & Company, Inc.
50 Front Street
Memphis, Tennessee 38103
Ladies and Gentlemen:
1. UNDERWRITING AGREEMENT. The undersigned Underwriters ("Underwriters")
agree among themselves as follows with reference to their proposed purchases
severally from U.S. Restaurant Properties Master L.P. (the "Partnership") of
1,800,000 Units of beneficial interest of the Partnership (the "Firm Units") and
the proposed purchase, severally, of up to an additional 270,000 Units (the
"Option Units") from the Partnership. The Firm Units and the Option Units are
collectively referred to herein as the "Units." Each Underwriter will agree to
purchase (a) the number of Firm Units set forth opposite its name in Schedule A
to the Underwriting Agreement, and (b) that portion of the Option Units as to
which the option is exercised equal to the proportion which such Underwriter's
share of the number of the Firm Units bears to the total number of the Firm
Units.
2. REGISTRATION STATEMENT AND PROSPECTUS. The Units are more
particularly described in a registration statement (Registration No. 333-02675)
filed with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "1933 Act"). Amendments to such
registration statement (or a final prospectus, as contemplated by Rule 430A
under the 1933 Act) have been or are being filed in which, with our consent
hereby confirmed, we have been named as the underwriters of the Units. A copy
of the registration statement as filed and a copy of each amendment as filed
(excluding exhibits) have heretofore been delivered to us. We confirm that we
have examined the registration statement, including amendments thereto, relating
to the Units, as filed with the Commission, that we are willing to accept the
responsibilities of an Underwriter under the 1933 Act in respect of the
registration statement and we are willing to proceed with a public offering of
the Units in the manner described in the registration statement. The
registration statement and the related prospectus may be further amended, but no
such amendment or change shall release or affect our obligations hereunder or
under the Underwriting Agreement. As used herein, the terms "Registration
Statement," "Preliminary Prospectus" and "Prospectus" shall have the same
meanings as set forth in the Underwriting Agreement.
3. AUTHORITY OF THE REPRESENTATIVES. We hereby authorize Morgan
Keegan & Company, Inc., EVEREN Securities, Inc. and Southwest Securities,
Inc., acting on our behalf, as our representatives (the "Representatives")
(a) to complete, execute and deliver the Underwriting Agreement, to determine
the public offering price of the Units and the underwriting discount with
respect thereto and to make such variations, if any, as in your judgment are
appropriate and are not material, provided that the aggregate number of Firm
Units set forth opposite our respective names in Schedule A to the
Underwriting Agreement shall not be increased without our consent, except as
provided herein, (b) to waive performance or satisfaction by the Partnership
of obligations or conditions included in the Underwriting Agreement, if in
your judgment such waiver will not have a material adverse effect upon the
interests of the Underwriters, and (c) to take such actions as in your
discretion may be necessary or advisable to carry out the Underwriting
Agreement, this Agreement and the transactions for the accounts of the
several Underwriters contemplated thereby and hereby. We also authorize you
to determine all matters relating to the public advertisement of the Units.
4. PUBLIC OFFERING. We authorize you, with respect to any Units which we
so agree to purchase, to reserve for sale, and on our behalf to sell, to the
dealers selected by you (including you or any of the other Underwriters, such
dealers so selected being hereinafter called "Selected Dealers") and to others,
all or part of our Units as you may determine. Reservations for sales to
persons other than Selected Dealers shall be as nearly as practicable in
proportion to the respective underwriting obligations of the Underwriters,
unless you agree to a small proportion at the request of
<PAGE>
an Underwriter. Reservations for sales to Selected Dealers need not be in
such proportion. All sales of reserved Units shall be as nearly as practicable
in proportion to the respective reservations as calculated from day to day.
In your discretion, from time to time, you may add to the reserved Units
any Units retained by us remaining unsold, and you may upon our request release
to us any of our Units reserved but not sold. Any Units so released shall not
thereafter be deemed to have been reserved. Upon termination of this Agreement,
or prior thereto at your discretion, you shall deliver to us any of our Units
reserved but not sold and delivered, except that if the aggregate of all
reserved but unsold and undelivered Units is less than 180,000, you are
authorized to sell such Units for the accounts of the several Underwriters at
such price or prices as you may determine. Sales of reserved Units shall be
made to Selected Dealers at the public offering price less a concession
initially not in excess of [$_____] per Unit (the "Selected Dealers'
Concession") and to others at the public offering price. Underwriters and
Selected Dealers may reallow a portion of such concession not in excess of
[$_____] per Unit to any other members of the National Association of Securities
Dealers, Inc. ("NASD"), acting as principal or buyer's agent, provided such
member agrees that the reallowance is to be retained and not reallowed in whole
or in part and also agrees in writing to comply with Section 24 of Article III
of the Rules of Fair Practice of the NASD.
After advice from you that the Units are released for sale to the public,
we will offer to the public in conformity with the terms of the offering set
forth in the Prospectus such Units as you advise us are reserved. We authorize
you after Units are released for sale to the public, in your discretion, to
change the public offering price of the Units and the concession, and to buy
Units for our account from Selected Dealers at the public offering price less
such amount not in excess of the Selected Dealers' Concession as you may
determine.
Sales of Units among Underwriters may be made with your prior consent, or
as you deem advisable for state securities law purposes.
We agree that we will not sell to any accounts over which we exercise
discretionary authority.
5. ADDITIONAL PROVISION REGARDING SALES. Any Units sold by us (otherwise
than through you) which you contract for or purchase in the open market or
otherwise for the account of any Underwriter shall be repurchased by us on
demand at the cost of such purchase plus commission and taxes on redelivery.
Units delivered on such repurchase need not be the identical Units purchased by
you. In lieu of demanding repurchase by us, you may in your discretion (a) sell
for our account the Units so purchased by you, at such price and upon such terms
as you may determine, and debit or credit our account with the loss and expense
or net profit resulting from such sale or (b) charge our account with an amount
not in excess of the Selected Dealers' Concession with respect to such Units.
If we are a member of, or clear through a member of, the Depository Trust
Company ("DTC"), you, in your discretion, may deliver our Units through the
facilities of DTC.
6. PAYMENT AND DELIVERY. At or before the Closing Time (as defined in
the Underwriting Agreement) and at the Date of Delivery (as defined in the
Underwriting Agreement), we will deliver to you at DTC or to the office of
Morgan Keegan & Company, Inc. at 50 Front Street, Memphis, Tennessee 38103, a
certified or bank cashiers' check payable to your order, in clearing house
funds, in the amount equal to the offering price set forth in the Prospectus
less the Selected Dealers' Concession in respect of the number of Firm Units or
Option Units, as the case may be, to be purchased by us pursuant to the
Underwriting Agreement. We authorize you for our account to make payment of the
purchase price for the Firm Units or Option Units, as the case may be, to be
purchased by us against delivery to you of such Units, and the difference
between such price and the amount of our check delivered to you therefor shall
be credited to our account. Unless we notify you at least three (3) full
business days prior to such Closing Time to make other arrangements, you may, in
your discretion, advise the Partnership to prepare our certificates in our name.
If you have not received our funds as requested, you may in your discretion make
such payment on our behalf, in which event we will reimburse you promptly. Any
such payment by you shall not relieve us from any of our obligations hereunder
or under the Underwriting Agreement.
-2-
<PAGE>
We authorize you for our account to accept delivery of our Units from the
Partnership and to hold such of our Units as you have reserved for sale to
Selected Dealers and others and to deliver such Units against such sales. You
will deliver to us our unreserved Units as promptly as practicable.
Notwithstanding the foregoing provision of this Section 6, payment for and
delivery of our Units may be made through the facilities of DTC, if we are a
member, unless we have otherwise notified you prior to a date to be specified by
you, or, if we are not a member, settlement may be made through a correspondent
who is a member pursuant to instructions we may send to you prior to such
specified date.
As promptly as practicable after you receive payment for reserved Units
sold for our account, you will remit to us the purchase price paid by us for
such Units and credit or debit our account with the difference between the sale
price and such purchase price.
7. AUTHORITY TO BORROW. In connection with the transactions contemplated
in the Underwriting Agreement or this Agreement, we authorize you, in your
discretion, to advance your own funds for our account, charging current interest
rates, to arrange loans for our account and in connection therewith to execute
and deliver any notes or other instruments and hold or pledge as security
therefor any of our Units purchased for our account. Any lender may rely upon
your instructions in all matters relating to any such loan.
Any of our Units purchased for our account held by you may from time to
time be delivered to us for carrying purposes, and any such securities will be
redelivered to you upon demand.
8. STABILIZATION AND OTHER MATTERS. We authorize you in your discretion
to make purchases and sales of the Units of the Partnership for our account in
the open market or otherwise, for long or short account, on such terms as you
deem advisable and in arranging sales to over-allot. If you have purchased
Units for stabilizing purposes prior to the execution of this Agreement, such
purchases shall be treated as having been made pursuant to the foregoing
authorization. We also authorize you, either before or after the termination of
the offering provisions of this Agreement, to cover any short position incurred
pursuant to this Section 8 on such terms as you deem advisable. All such
purchases and sales and over-allotments shall be made for the accounts of the
several Underwriters as nearly as practicable in proportion to their respective
underwriting obligations. Our net commitment under this Section 8 (excluding
any commitment incurred under the Underwriting Agreement upon exercise of the
right to purchase Option Units) shall not, at the end of any business day,
exceed 15% of our underwriting obligation as set forth in Schedule A to the
Underwriting Agreement. We will on your demand, take up and pay for at cost any
Units so purchased or sold or overallotted for our account, and, if any other
Underwriter defaults in its corresponding obligation, we will assume our
proportionate share of such obligation without relieving the defaulting
Underwriter from liability. We will be obligated in respect of purchases and
sales made for our account hereunder whether or not any proposed purchase of
Units is consummated. The existence of this provision is no assurance that the
price of the Units will be stabilized or that if stabilizing is commenced, it
may not be discontinued at any time.
We agree to advise you, from time to time upon your request, during the
term of this Agreement, of the number of Units retained by us remaining unsold,
and will, upon your request, sell to you for the accounts of one or more of the
several Underwriters such number of Units as you may designate at such prices,
not less than the net price to Selected Dealers nor more than the public
offering price, as you may determine.
If you effect any stabilizing purchase pursuant to this Section 8, you will
notify us promptly of the date and time when the first stabilizing purchase was
effected and the date and time when stabilizing was terminated. We authorize
you on our behalf to file any reports required to be filed with the Commission
in connection with any transactions made by you for our account pursuant to this
Section 8 and we agree to furnish you with any information needed for such
reports. We agree to transmit to you for filing with the Commission any and all
reports required to be made by us pursuant to paragraph (c) of Rule 17a-2 under
the Securities Exchange Act of 1934, as amended (the "1934 Act"), as a result of
any transactions in connection with the offering of Units.
-3-
<PAGE>
With respect to the Underwriting Agreement, you are also authorized in your
discretion (a) to exercise the option therein as to all or any part of the
Option Units, and to terminate such option in whole or in part prior to its
expiration, (b) to postpone either or both the Closing Time and Date of Delivery
referred to in the Underwriting Agreement, and any other time or date specified
therein, (c) to exercise any right of cancellation or termination, (d) to
arrange for the purchase by other persons (including yourself or any other
Underwriter) of any Units not taken up by any defaulting Underwriter, and (e) to
consent to such other changes in the Underwriting Agreement as in your judgment
do not materially adversely affect the substance of our rights and obligations
thereunder.
We further agree that (a) prior to the termination of this Agreement we
will not, directly or indirectly, bid for or purchase Units for our own account,
except as provided in this Agreement and in the Underwriting Agreement and (b)
prior to the completion (as defined in Rule 10b-6 under the 1934 Act) of our
participation in the distribution, we will otherwise comply with Rule 10b-6
under the 1934 Act.
9. ALLOCATION OF EXPENSES AND SETTLEMENT. We authorize you to charge our
account with (a) all transfer taxes on Units purchased by us pursuant to the
Underwriting Agreement and sold by you for our account, (b) Selected Dealers'
Concessions in connection with the purchase, marketing and sale of the Units for
our account and (c) our proportionate share (based upon our underwriting
obligation) of all other expenses incurred by the Underwriters in connection
with the purchase, carrying, sale, and distribution of the Units. Your
determination of the amount and allocation of such expenses shall be conclusive.
In the event of the default of any Underwriter in carrying out its obligations
hereunder, the expenses chargeable to such Underwriter pursuant to this
Agreement and not paid by it, as well as any additional losses or expenses
arising from such default, may be proportionately charged by you against the
other Underwriters not so defaulting, without, however, relieving such
defaulting Underwriter from its liability therefor.
As soon as practicable after termination of this Agreement, the accounts
hereunder will be settled, but you may reserve from distribution such amount as
you deem necessary to cover possible additional expenses. You may at any time
make partial distributions of credit balances or call for payment of debit
balances. Any of our funds in your hands may be held with your general funds
without accountability for interest. Notwithstanding the termination of this
Agreement or any settlement, we will pay on demand (a) our proportionate share
(based on our underwriting obligation) for all expenses and liabilities which
may be incurred by or for the accounts of the Underwriters, including any
liability based on the claim that the Underwriters constitute an association,
unincorporated business or other separate entity, and of any expenses incurred
by you or any other Underwriter with your approval in contesting any such claim
or liability and (b) any transfer taxes paid after such settlement on account of
any sale or transfer for our account.
10. TERMINATION. This Agreement shall terminate thirty (30) days after
the Units are released by you for sale to the public unless extended by you.
You may extend such provisions for a period or periods not exceeding an
additional thirty (30) days in the aggregate, provided the Selected Dealer
Agreements, if any, are similarly extended. Whether or not said provisions may
be terminated in whole or in part by notice from you, you may, in your
discretion, on notice to us prior to such time, terminate the effectiveness of
this Agreement or any portion of it.
11. DEFAULT OF UNDERWRITERS. Default by one or more Underwriters in
respect of their obligations hereunder or under the Underwriting Agreement shall
not release us from any of our obligations or in any way affect the liability of
any defaulting Underwriter to the other Underwriters for damages resulting from
such default. In case of such default by one or more Underwriters, you are
authorized to increase, pro rata with other non-defaulting Underwriters, the
number of Units which we shall be obligated to purchase pursuant to the
Underwriting Agreement, provided that the aggregate number of all such increases
for our account shall not exceed our pro rata share (together with other non-
defaulting Underwriters) of 180,000 Units; and you are further authorized to
arrange, but shall not be obligated to arrange, for the purchase by other
persons, who may include yourselves or other Underwriters, of all or a portion
of any aggregate number not taken up. If any such arrangements are made, the
respective amount of Units to be purchased by the non-defaulting Underwriters
and by any such other persons shall be taken as a basis for the underwriting
obligations under this Agreement.
12. POSITION OF THE REPRESENTATIVES. Except as in this Agreement
otherwise specifically provided, you shall have full authority to take such
action as you may deem advisable in respect of all matters pertaining to the
-4-
<PAGE>
Underwriting Agreement and this Agreement and in connection with the purchase,
carrying, sale and distribution of the Units (including authority to terminate
the Underwriting Agreement as provided therein). You shall be under no
liability to us for or in respect of the value of the Units or the validity or
the form thereof, the Registration Statement, the Preliminary Prospectus, the
Prospectus, the Underwriting Agreement or other instruments executed by the
Partnership or others; or for or in respect of the issuance, transfer or
delivery of the Units; or for the performance by the Partnership or others of
any agreement on its or their part; nor shall you, as Representatives or
otherwise, be liable under any of the provisions hereof or for any matters
connected herewith, except for your own want of good faith, for obligations
expressly assumed by you in this Agreement and for any liabilities imposed upon
you by the 1933 Act. No obligations on your part shall be implied or inferred
herefrom. Authority with respect to matters to be determined by you, or by you
and the Partnership, pursuant to the Underwriting Agreement, shall survive the
termination of this Agreement.
In taking all actions hereunder, except in the performance of your own
obligations hereunder and under the Underwriting Agreement, you shall act only
as Representatives of each of the Underwriters. The commitments and liabilities
of each of the several Underwriters are several in accordance with their
respective purchase obligations and are not joint or joint and several. Nothing
contained herein shall constitute the Underwriters partners or render any of
them liable to make payments otherwise than as herein provided. If for federal
income tax purposes the Underwriters should be deemed to constitute a
partnership, then each Underwriter elects to be excluded from the application of
Subchapter K, Chapter 1, Subtitle A, of the Internal Revenue Code of 1986, as
amended, and agrees not to take any position inconsistent with such election.
You, as Representatives of the several Underwriters, are authorized, in your
discretion, to execute such evidence of such election as may be required by the
Internal Revenue Service.
13. COMPENSATION TO THE MANAGING UNDERWRITERS. As compensation for the
services of the managing underwriters in connection with the purchase of Units
and the management of the public offering of the Units, we agree to pay you and
authorize you to charge our account with an amount equal to [$_____] for each
Share which we have agreed to purchase pursuant to the Underwriting Agreement.
14. INDEMNIFICATION AND FUTURE CLAIMS. Each Underwriter, including
yourselves, agrees to indemnify, hold harmless and reimburse each other
Underwriter and each person, if any, who controls any other Underwriter within
the meaning of Section 15 of the 1933 Act, and any successor of any other
Underwriter, to the extent that, and upon the terms upon which, each Underwriter
agrees to indemnify, hold harmless and reimburse the Partnership as set forth in
the Underwriting Agreement.
In the event that at any time any person other than an Underwriter asserts
a claim against one or more of the Underwriters or against you as
Representatives of the Underwriters arising out of an alleged untrue statement
or omission in the Registration Statement (or any amendment thereto) or in any
Preliminary Prospectus or the Prospectus (or any amendment or supplement
thereto) or relating to any transaction contemplated by this Agreement, we
authorize you to make such investigation, to retain such counsel for the
Underwriters and to take such action in the defense of such claim as you may
deem necessary or advisable. You may settle such claim with the approval of a
majority in interest of the Underwriters. We will pay our proportionate share
(based upon our underwriting obligation) of all expenses incurred by you
(including the fees and expenses of counsel for the Underwriters in
investigating and defending against such claim, after deducting any contribution
or indemnification obtained pursuant to the Underwriting Agreement, or
otherwise, from persons other than Underwriters), whether such liability is the
result of any such settlement. There shall be credited against any amount paid
or payable by us pursuant to this paragraph any loss, damage, liability or
expense which is incurred by us as a result of any such claim asserted against
us, and if such loss, claim, damage, liability or expense is incurred by us
subsequent to any payment by us pursuant to this paragraph, appropriate
provisions shall be made to effect such credit, by refund or otherwise. Any
Underwriter may retain separate counsel at its own expense. A claim against or
liability incurred by a person who controls an Underwriter shall be deemed to
have been made against or incurred by such Underwriter. In the event of default
by any Underwriter in respect of its obligations under this Section 14, the non-
defaulting Underwriters shall be obligated to pay the full amount thereof in the
proportions that their respective underwriting obligations bear to the
underwriting obligations of all non-defaulting Underwriters, without relieving
such defaulting Underwriter of its liability hereunder. Our agreements
contained in this Section 14 will remain in full force and effect regardless of
any investigation made by or on behalf of such other Underwriter or controlling
person and will survive the delivery of and payment for the Units and the
termination of this Agreement and the similar
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<PAGE>
agreements entered into with the other Underwriters. We will give prompt
notice to you if we receive notice of assertion of any claim against the
Underwriters. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
15. BLUE SKY AND OTHER MATTERS. You will not have any responsibility with
respect to the right of any Underwriter or other person to sell the Units in any
jurisdiction notwithstanding any information you may furnish in that connection.
We authorize you to file a New York Further State Notice, if required, and to
make and carry out on our behalf any agreements which you may deem necessary in
order to procure registration or qualification of any of the Units in any
jurisdiction, and we will at your request make such payments, and furnish to you
such information, as you may deem required by reason of any such agreements.
We authorize you to file on behalf of the several Underwriters with the
National Association of Securities Dealers, Inc. (the "NASD") such documents and
information, if any, which are available or have been furnished to you for
filing pursuant to applicable rules, statements and interpretations of the NASD.
16. TITLE TO UNITS. The Units purchased by the respective Underwriters
and any other securities purchased by you hereunder for their respective
accounts shall remain the property of such Underwriters until sold and no title
to any such Units or other securities shall in any event pass to you, as
Representatives, by virtue of any of the provisions of this Agreement.
17. CAPITAL REQUIREMENTS. We confirm that our net capital and the ratio
of our aggregate indebtedness to our net capital is such that we may, in
accordance with and pursuant to Rule 15c3-1 under the 1934 Act or the rules of
any other exchange to which we are subject, obligate ourselves to purchase, and
purchase, the Units which we agree to purchase under the Underwriting Agreement
and hereunder.
18. LIABILITY FOR FUTURE CLAIMS. Neither any statement by you, as
Representatives of the several Underwriters, of any credit or debit balance in
our account nor any reservation from distribution to cover possible additional
expenses relating to the Units will constitute any representation by you as to
the existence or nonexistence of possible unforeseen expenses or liabilities of
or charge against the several Underwriters. Notwithstanding the distribution of
any net credit balance to us, we will be and remain liable for, and will pay and
demand, (a) our proportionate share (based upon our underwriting obligation) of
all expenses and liabilities which may be incurred by or for the accounts of the
Underwriters, including any liability which may be incurred by the Underwriters
or any of them based on the claim that the Underwriters constitute any
association, unincorporated business, partnership or any separate entity, and
(b) any transfer taxes paid after such settlement on account of any sale or
transfer for our account.
19. ACKNOWLEDGMENT OF REGISTRATION STATEMENT, ETC. We hereby confirm that
we have examined the Registration Statement (including any amendments or
supplements thereto) relating to the Units filed with the Commission, that we
are willing to accept the responsibilities of an underwriter thereunder and that
we are willing to proceed as therein contemplated. We confirm that we have
authorized you to advise the Partnership on our behalf (a) as to the statements
to be included in any Preliminary Prospectus and in the Prospectus relating to
the Units under the heading "Underwriting," insofar as they relate to us, and
(b) that there is no information about us required to be stated in said
Registration Statement or said Preliminary Prospectus or the Prospectus other
than as set forth in the Underwriters' Questionnaire previously delivered by us
to you. We understand that the aforementioned documents are subject to further
change and that we will be supplied with copies of any amendment or amendments
to the Registration Statements and of any amended Prospectus promptly, if and
when received by you, but the making of such changes and amendments will not
release us or affect our obligations hereunder or under the Underwriting
Agreement.
20. NOTICES AND GOVERNING LAW. Any notice from you to us shall be mailed,
telephoned or sent via facsimile to us at our address as set forth in the
Underwriters' Questionnaire. Any notice from us to you shall be deemed to have
been duly given if mailed, telephoned or sent via facsimile to Morgan Keegan &
Company, Inc. at 50 Front Street, Memphis, Tennessee 38103. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York.
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<PAGE>
21. OTHER PROVISIONS. We represent that we are actually engaged in the
investment banking and securities business and are a member in good standing of
the NASD or, if we are not such a member, that we are a foreign bank, dealer or
institution not eligible for membership in said Association and that we will not
offer or sell any Units in the United States of America, its territories or
possessions, or to persons who are citizens thereof or residents therein. In
making sales of the Units, if we are such a member, we agree to comply with all
applicable rules of the NASD, including, without limitation, the NASD's
Interpretation with Respect to Free-Riding and Withholding and Section 24 of
Article III of the NASD's Rules of Fair Practice, or if we are a foreign bank,
dealer or institution, we agree to comply with such Interpretation and Sections
8, 24, 25 (as such Section applies to foreign nonmembers) and 36 of the Article
III as that Section applies to a non-member broker or dealer in a foreign
country. We confirm that we have complied with the requirements of the 1933 Act
concerning delivery of each Preliminary Prospectus and the Prospectus. We are
aware of our statutory responsibilities under the 1933 Act, and you are
authorized on our behalf to so advise the Commission.
22. COUNTERPARTS. This Agreement may be signed in any number of
counterparts which, taken together, shall constitute one and the same agreement.
Very truly yours,
By: ____________________________________________
Attorney-in-fact for each Underwriter named in
Schedule A to the attached Underwriting Agreement
Confirmed as of the date first above written:
MORGAN KEEGAN & COMPANY, INC.
EVEREN SECURITIES, INC.
SOUTHWEST SECURITIES, INC.
As Representatives of the Several Underwriters
By: Morgan Keegan & Company, Inc.
By:
---------------------------
Name:
---------------------------
Title: Managing Director
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<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
(A DELAWARE LIMITED PARTNERSHIP)
_____ UNITS
UNDERWRITING AGREEMENT
DATED: JUNE __, 1996
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
_____ UNITS
UNDERWRITING AGREEMENT
June __, 1996
MORGAN KEEGAN & COMPANY, INC.
EVEREN SECURITIES, INC.
SOUTHWEST SECURITIES, INC.
c/o Morgan Keegan & Company, Inc.
50 Front Street
Memphis, Tennessee 38103
Dear Sirs:
U.S. Restaurant Properties Master L.P., a Delaware limited partnership (the
"Partnership"), proposes to issue and sell to the underwriters named in SCHEDULE
A (collectively, the "Underwriters") an aggregate of 1,800,000 Units of
beneficial interest of the Partnership (the "Firm Units"). The Firm Units are
to be sold to each Underwriter, acting severally and not jointly, in such
amounts as are set forth in SCHEDULE A opposite the name of such Underwriter.
The Partnership also grants to the Underwriters, severally and not jointly,
the option described in Section 2 to purchase, on the same terms as the Firm
Units, up to 270,000 additional Units (the "Option Units") solely to cover
over-allotments. The Firm Units, together with all or any part of the Option
Units, are collectively herein called the "Units." Other capitalized terms used
herein and not otherwise defined herein shall have the respective meanings set
forth in the Registration Statement (as hereinafter defined).
Section 1. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP AND THE
COMPANY. The Partnership and U.S. Restaurant Properties, Inc., a Delaware
corporation (the "Company"), as the sole general partner of the Partnership
hereby jointly and severally represent and warrant to and agree with each of the
Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-02657) with
respect to the Units, including a preliminary form of prospectus, has been
prepared by the Partnership and the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "1933 Act"),
and the applicable rules and regulations (the "1933 Act Regulations") of
the Securities and Exchange Commission (the "Commission"), and has been
filed with the Commission; and such amendments to such registration
statement as may have been required prior to the date hereof have been
filed with the Commission, and such amendments have been similarly
prepared. Copies of such registration statement and amendment or
amendments and of each related preliminary prospectus, and the exhibits,
financial statements and schedules, as finally amended and revised, have
been delivered to you. The Partnership and the Company have prepared in
the same manner, and propose to so file with the Commission, one of the
following: (i) prior to effectiveness of such registration statement, a
further amendment thereto, including the form of final prospectus, or (ii)
a final prospectus in accordance with Rules 430A and 424(b) of the 1933 Act
Regulations. As filed, such amendment and form of final prospectus, or
such final prospectus, shall include all Rule 430A Information (as defined
below) and, except to the extent that you shall agree in writing to a
modification, shall be in all respects in the form furnished to you prior
to the date and time that this Agreement was executed and delivered by the
parties hereto, or, to the extent not completed at such date and time,
shall contain only such specific additional information and other changes
(beyond that contained in the latest preliminary prospectus) as the
Partnership and the Company shall have previously advised you in writing
would be included or made therein.
<PAGE>
The term "Registration Statement" as used in this Agreement shall mean
such registration statement at the time such registration statement becomes
effective and, in the event any post-effective amendment thereto becomes
effective prior to the Closing Time (as hereinafter defined), shall also
mean such registration statement as so amended; provided, however, that
such term shall also include all Rule 430A Information deemed to be
included in such registration statement at the time such registration
statement becomes effective as provided by Rule 430A of the 1933 Act
Regulations. The term "Preliminary Prospectus" shall mean any preliminary
prospectus referred to in the preceding paragraph and any preliminary
prospectus included in the Registration Statement at the time it becomes
effective that omits Rule 430A Information. The term "Prospectus" as used
in this Agreement shall mean the prospectus relating to the Units in the
form in which it is first filed with the Commission pursuant to Rule 424(b)
of the 1933 Act Regulations or, if no filing pursuant to Rule 424(b) of the
1933 Act Regulations is required, shall mean the form of final prospectus
included in the Registration Statement at the time such Registration
Statement becomes effective. The term "Rule 430A Information" means
information with respect to the Units and the offering thereof permitted
pursuant to Rule 430A of the 1933 Act Regulations to be omitted from the
Registration Statement when it becomes effective.
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and no proceedings for that
purpose have been instituted or threatened by the Commission or the state
securities or blue sky authority of any jurisdiction, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the 1933 Act and the 1933 Act Regulations,
and did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the
Partnership by an Underwriter expressly for use in the Registration
Statement.
(c) When the Registration Statement shall become effective, when the
Prospectus is first filed pursuant to Rule 424(b) of the 1933 Act
Regulations, when any amendment to the Registration Statement becomes
effective, and when any supplement to the Prospectus is filed with the
Commission and at the Closing Time and Date of Delivery (as hereinafter
defined), (i) the Registration Statement, the Prospectus and any amendments
thereof and supplements thereto will conform in all material respects with
the applicable requirements of the 1933 Act and the 1933 Act Regulations,
and (ii) neither the Registration Statement, the Prospectus nor any
amendment or supplement thereto will contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Partnership by an
Underwriter expressly for use in the Registration Statement.
(d) At the effective time of the Registration Statement, the
Partnership owned _______________ restaurant properties (the "Current
Properties") as described in the Prospectus. One hundred twenty-five of
the restaurant properties were acquired in connection with the
Partnership's initial public offering in 1986 and _____ restaurant
properties were acquired subsequent to the initial public offering, all as
described in the Prospectus. The Partnership has entered into binding
agreements (the "Acquisition Agreements") as described in the Prospectus to
acquire _____ additional restaurant properties (the "Acquisition
Properties").
(e) The Partnership has been duly organized and is validly existing
as a limited partnership in good standing under the laws of the state of
Delaware with all requisite partnership power and authority to own, lease
and operate its properties and the properties it proposes to own, lease and
operate as described in the Registration Statement and the Prospectus and
to conduct its business as now conducted and as proposed to be conducted as
described in the Registration Statement and the Prospectus. The
Partnership has been duly
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<PAGE>
qualified to do business and is in good standing as a foreign partnership
in each other jurisdiction in which the ownership or leasing of its
properties or the nature or conduct of its business as now conducted
requires such qualification, except where the failure to do so would not
have a material adverse effect on the Partnership, any Current Property
or any Acquisition Property. The Partnership will be duly qualified, at
the time of the closing of the acquisition of the Acquisition Properties,
in each jurisdiction in which the ownership or leasing of its properties
or the nature or conduct of its business as proposed to be conducted as
described in the Registration Statement and the Prospectus requires such
qualification, except where the failure to do so would not have a material
adverse effect on the Partnership or any Acquisition Property. The
Partnership does not own or control, directly or indirectly, any
corporation, partnership, association or other entity except U.S.
Restaurant Properties Operating L.P. (the "Operating Partnership") and U.S.
Restaurant Properties Business Trust #1 (the "Business Trust").
The Company is the sole general partner of the Partnership and holds
an approximate 1.0% interest in the Partnership. At the Closing Time and
Delivery Date, the Company will be the sole general partner of the
Partnership and will be the holder of an approximate 1.0% interest in the
Partnership.
(f) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the state of Delaware.
The Company has all requisite corporate power and authority to own, lease
and operate its properties and conduct its business as now conducted and as
proposed to be conducted as described in the Registration Statement and the
Prospectus. The Company has been duly qualified to do business and is in
good standing as a foreign corporation in each other jurisdiction in which
the ownership or leasing of its properties or the nature or conduct of its
business as now conducted requires such qualification, except where the
failure to do so would not have a material adverse effect on the Company or
the Partnership, respectively. The Company will be duly qualified (at the
time of the closing of the acquisition of the Acquisition Properties) in
each jurisdiction in which the ownership or leasing of its properties or
the nature or conduct of its business as described in the Registration
Statement or Prospectus requires such qualification, except where the
failure to do so would not have a material adverse effect on the Company,
the Partnership, or any operations, properties, prospects or assets of the
Partnership or the Company. Except as disclosed in the Prospectus, the
Company does not own or control, directly or indirectly, any interest in
any entity other than the Partnership.
(g) The Operating Partnership and the Business Trust each have been
duly formed and are validly existing as a corporation or business trust, as
applicable, under the laws of their states of formation. The Operating
Partnership and the Business Trust have all requisite power and authority
to own, lease and operate their respective properties and to conduct their
businesses as now conducted. The Operating Partnership and the Business
Trust each have been duly qualified or registered to do business and are in
good standing as a foreign corporation or business trust, as applicable, in
each jurisdiction in which the ownership or leasing of its properties or
the nature or conduct of its business requires such qualification, except
where the failure to do so would not have a material adverse effect on the
Operating Partnership or the Business Trust.
(h) The Partnership has full partnership right, power and authority
to enter into this Agreement, to issue, sell and deliver the Units as
provided herein and to consummate the transactions contemplated herein.
This Agreement has been duly authorized, executed and delivered by the
Partnership and constitutes a legal, valid and binding obligation of the
Partnership, enforceable in accordance with its terms, except to the extent
that enforceability may be limited by bankruptcy, insolvency,
reorganization or other laws of general applicability relating to or
affecting creditors' rights, or by general equity principles and except to
the extent the indemnification provisions set forth in Section 7 of this
Agreement may be limited by federal or state securities laws or the public
policy underlying such laws.
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<PAGE>
(i) On behalf of the Partnership and itself, the Company has full
corporate right, power and authority to enter into this Agreement and to
consummate the transactions contemplated herein. This Agreement has been
duly authorized, executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by bankruptcy, insolvency, reorganization or other laws of general
applicability relating to or affecting creditors' rights, or by general
equity principles and except to the extent the indemnification provisions
set forth in Section 7 of this Agreement may be limited by federal or state
securities laws or the public policy underlying such laws.
(j) The Second Amended and Restated Agreement of Limited Partnership
of the Partnership (the "Partnership Agreement") has been duly authorized,
executed and delivered by the parties thereto and constitutes a legal,
valid and binding obligation, enforceable in accordance with its terms,
except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization or other laws of general applicability relating
to or affecting creditors' rights or by general equity principles. (This
Agreement and the Partnership Agreement sometimes are hereinafter referred
to as the "Operative Documents.")
(k) Each of the Acquisition Agreements relating to the Acquisition
Properties, when duly authorized, executed and delivered by the parties
thereto, will constitute valid and binding agreements, enforceable in
accordance with their respective terms, except to the extent enforceability
may be limited by bankruptcy, insolvency, reorganization or other laws of
general applicability relating to or affecting creditors' rights or by
general equity principles. Each of the parties to the Acquisition
Agreements has full legal right, power and authority to enter into such
agreements and to consummate the transactions contemplated thereby. The
Acquisition Agreements have been duly authorized, executed and delivered by
the parties thereto and constitute legal, valid and binding obligations,
enforceable in accordance with their respective terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, reorganization or
other laws of general applicability relating to or affecting creditors'
rights or by general equity principles.
(l) Each consent, approval, authorization, order, license,
certificate, permit, registration, designation or filing by or with any
governmental agency or body necessary for the valid authorization,
issuance, sale and delivery of the Units, the execution, delivery and
performance of this Agreement and the consummation by the Partnership and
the Company of the transactions contemplated hereby has been made or
obtained and is in full force and effect.
(m) Neither the issuance, sale and delivery by the Partnership of the
Units, nor the execution, delivery and performance of this Agreement, nor
the consummation of the transactions contemplated hereby by the Partnership
or the Company as applicable, will conflict with or result in a breach or
violation of any of the terms and provisions of, or (with or without the
giving of notice or the passage of time or both) constitute a default under
the certificate of incorporation, bylaws, certificate of limited
partnership or Partnership Agreement, as the case may be, of the
Partnership or the Company, any indenture, mortgage, deed of trust, loan
agreement, note, lease or other agreement or instrument to which the
Partnership or the Company is a party or to which they, any of them, any of
their respective properties or other assets or any Acquisition Property is
subject; or any applicable statute, judgment, decree, order, rule or
regulation of any court or governmental agency or body applicable to any of
the foregoing or any of their respective properties; or result in the
creation or imposition of any lien, charge, claim or encumbrance upon any
property or asset of any of the foregoing.
(n) The Units to be issued and sold to the Underwriters hereunder
have been validly authorized by the Partnership and the Company. When
issued and delivered against payment therefor as provided in this
Agreement, the Units will be duly and validly issued, fully paid and
nonassessable. No preemptive rights exist with respect to any of the
Units. No person or entity has exercised any right to require registration
of any securities in connection with, or otherwise to participate in, the
registration under the 1933 Act of the Units
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<PAGE>
pursuant to the Registration Statement; and, except as set forth in the
Prospectus, no person holds a right to require registration under the
1933 Act of any Units or other securities of the Partnership at any other
time. No person or entity has a right of participation or first refusal
with respect to the sale of the Units by the Partnership. The form of
certificates evidencing the Units complies with all applicable requirements
of Delaware law, the Partnership Agreement and The New York Stock Exchange.
(o) The Partnership's issued and outstanding Units are as disclosed
in the Prospectus. All of the Units have been duly authorized and validly
issued, are fully paid and nonassessable and conform to the description of
the Units contained in the Prospectus. None of the issued Units has been
issued or is owned or held in violation of any preemptive right. Except as
disclosed in the Prospectus, there is no outstanding option, warrant or
other right calling for the issuance of, and no commitment, plan or
arrangement to issue, any Units or any security convertible into or
exchangeable for Units. The Units to be issued at the Closing Time have
been duly and validly authorized by the Partnership. At the Closing Time
and the Delivery Date, such Units will be validly issued, fully paid and
nonassessable.
(p) All offers and sales of the Partnership's Units prior to the date
hereof were at all relevant times duly registered under the 1933 Act or
exempt from the registration requirements of the 1933 Act by reason of
Sections 3(b), 4(2) or 4(6) thereof and were duly registered or the subject
of an available exemption from the registration requirements of the
applicable state securities or blue sky laws.
(q) The Company's authorized, issued and outstanding capital stock is
as disclosed in the Prospectus. All of the issued shares of capital stock
of the Company have been duly authorized, validly issued and are fully paid
and nonassessable. None of the issued capital stock has been issued or is
owned or held in violation of any preemptive right. All of the outstanding
capital stock has been issued, offered and sold in compliance with all
applicable laws (including, without limitation, federal and state
securities laws).
(r) The financial statements of the Partnership in the Registration
Statement and Prospectus present fairly the financial position of the
Partnership as of the dates indicated and the results of operations and
cash flows for the Partnership for the period specified, all in conformity
with generally accepted accounting principles applied on a consistent
basis. The financial statements of the Acquisition Properties and certain
recently acquired Current Properties incorporated by reference in the
Registration Statement from the Form 8-K of the Partnership and Prospectus
present fairly the financial position as of the dates indicated and the
results of operations and cash flows for the periods specified, as required
by the 1933 Act Regulations, all in conformity with generally accepted
accounting principles applied on a consistent basis. The financial
statement schedules included in the Registration Statement and the amounts
in the Prospectus under the captions "Prospectus Summary -- Summary
Historical and Pro Forma Financial Information and Other Data" and
"Selected Historical and Pro Forma Financial Information and Other Data"
fairly present the information shown therein and have been compiled on a
basis consistent with the financial statements included in the Registration
Statement and the Prospectus. No other financial statements or schedules
are required by Form S-3 or otherwise to be included or incorporated in the
Registration Statement, the Prospectus or any Preliminary Prospectus. The
unaudited pro forma financial information (including the related notes)
included in the Prospectus or any Preliminary Prospectus complies as to
form in all material respects to the applicable accounting requirements of
the 1933 Act and the 1933 Act Regulations, and management of the
Partnership believes that the assumptions underlying the pro forma
adjustments are reasonable. Such pro forma adjustments have been properly
applied to the historical amounts in the compilation of the information and
such information fairly presents with respect to the Partnership's
financial position, results of operations and other information purported
to be shown therein at the respective dates and for the respective periods
specified.
(s) Each accountant and accounting firm referenced under "Experts" in
the Registration Statement and Prospectus, who have examined and are
reporting upon the audited financial statements and
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<PAGE>
schedules included in the Registration Statement and the Prospectus, are,
and were during the periods covered by their reports included in the
Registration Statement and the Prospectus, independent public accountants
within the meaning of the 1933 Act and the 1933 Act Regulations.
(t) Neither the Company nor the Partnership has sustained, since
December 31, 1995, and, to the knowledge of the Company or the Partnership,
no entity from which the Partnership proposes to acquire an Acquisition
Property has sustained since December 31, 1995, any material loss or
interference with its business from fire, explosion, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from
any labor dispute or arbitrators' or court or governmental action, order or
decree, in each such case that materially adversely affects the operations
of the Partnership, the Company, the Current Properties or the Acquisition
Properties; and, since the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except as
otherwise stated in the Registration Statement and Prospectus, there has
not been (i) any material change in the capital stock or Partnership Units,
as applicable, long-term debt, obligations under capital leases or short-
term borrowings of the Company or the Partnership, (ii) any material
change, or any development which could reasonably be seen as involving a
prospective material change, in or affecting the business, prospects,
properties, assets, results of operations or condition (financial or other)
of the Company or the Partnership, in each such case that, materially
affects the operations of the Current Properties or the Acquisition
Properties, (iii) any liability or obligation, direct or contingent,
incurred or undertaken by the Company or the Partnership, which is material
to the business or condition (financial or other) of such entity, except
for current liabilities or current obligations incurred in the ordinary
course of business, (iv) any declaration or payment of any dividend or
distribution of any kind on or with respect to the capital stock or
Partnership Units, as applicable, of the Company or the Partnership, or (v)
any transaction that is material to the Company or the Partnership, except
transactions in the ordinary course of business and consistent with past
practices or as otherwise disclosed in the Registration Statement and the
Prospectus.
(u) The Partnership has good and marketable title in fee simple to
all real property and the improvements located thereon owned by them,
including, as applicable, those certain Current Properties identified in
the Registration Statement and the Prospectus as owned by the Partnership,
free and clear of all liens, encumbrances, claims, security interests,
restrictions and defects except such as are described in the Prospectus.
Upon consummation of the transactions involving the Acquisition Properties,
the Partnership will have good and marketable title in fee simple to the
Acquisition Properties and all related real property, free and clear of all
liens, encumbrances, claims, security interests, restrictions and defects.
The Partnership leases certain real property as lessee with respect to
those properties identified as leased property in the Registration
Statement and such properties are subject to valid, binding and enforceable
leases that are not in default. In addition, the Partnership leases real
property as lessor with respect to those properties identified as such in
the Registration Statement and such properties are subject to valid,
binding and enforceable leases that are not in default. No person has an
option or right of first refusal to purchase all or part of any Current
Property, Acquisition Property or any interest therein. Each of the
Current Properties and the Acquisition Properties complies with all
applicable codes, laws and regulations (including, without limitation,
building and zoning codes, laws and regulations and laws relating to access
to the Current Properties and the Acquisition Properties), except if and to
the extent disclosed in the Prospectus and except for such failures to
comply that would not individually or in the aggregate have a material
adverse impact on the condition, financial or otherwise, or on the
earnings, assets, business affairs or business prospects of such property,
the Partnership or the Company. Neither the Company nor the Partnership
has knowledge of any pending or threatened condemnation proceedings, zoning
change, or other proceeding or action that will in any manner affect the
size of, use of, improvements on, construction on or access to the Current
Properties and the Acquisition Properties, except such proceedings or
actions that would not have a material adverse effect on the condition,
financial or otherwise, or on the earnings, assets, business affairs or
business prospects of or with respect to any Current Property or
Acquisition Property, the Partnership or the Company.
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<PAGE>
(v) Neither the Company nor the Partnership is in violation of its
respective charter, bylaws, certificate of limited partnership or
partnership agreement, as the case may be, and no default exists, and no
event has occurred, nor state of facts exists, which, with notice or after
the lapse of time to cure or both, would constitute a default in the due
performance and observance of any obligation, agreement, term, covenant,
consideration or condition contained in any indenture, mortgage, deed of
trust, loan agreement, note, lease or other agreement or instrument to
which any such entity is a party or to which any such entity or any of its
properties is subject. Neither the Company nor the Partnership is in
violation of, or in default with respect to, any statute, rule, regulation,
order, judgment or decree, except such as in the aggregate do not now have
and will not in the future have a material adverse effect on the financial
position, results of operations or business of each such entity,
respectively.
(w) There is not pending or, to the knowledge of the Company or the
Partnership, threatened, any action, suit, proceeding, inquiry or
investigation against the Company, the Partnership or any of their
respective officers and directors or to which the properties (including the
Current Properties), assets or rights of either such entity are subject,
before or brought by any court or governmental agency or body or board of
arbitrators, which could result in any material adverse change in the
business, prospects, properties, assets, results of operations or condition
(financial or otherwise) of any such entity or which could adversely affect
the consummation of the transactions contemplated by this Agreement and the
agreements regarding the purchase of the Acquisition Properties.
(x) The descriptions in the Registration Statement and the Prospectus
of the contracts, leases and other legal documents therein described
present fairly the information required to be shown, and there are no
contracts, leases, or other documents of a character required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement which are not described or filed as
required. There are no statutes or regulations applicable to the
Partnership or the Company or certificates, permits or other authorizations
from governmental regulatory officials or bodies required to be obtained or
maintained by the Partnership or the Company of a character required to be
disclosed in the Registration Statement or the Prospectus which have not
been so disclosed and properly described therein. All agreements between
the Company and the Partnership, respectively, and third parties expressly
referenced in the Prospectus, are legal, valid and binding obligations of
the Company and the Partnership, respectively, enforceable in accordance
with their respective terms, except to the extent enforceability may be
limited by bankruptcy, insolvency, reorganization or other laws of general
applicability relating to or affecting creditors' rights and by general
equitable principles.
(y) Except as disclosed in the Prospectus, the Company or the
Partnership owns, possesses or has obtained all material permits, licenses,
franchises, certificates, consents, orders, approvals and other
authorizations of governmental or regulatory authorities or other entities
as are necessary to own or lease, as the case may be, and to operate its
respective properties and to carry on its business as presently conducted,
or as contemplated in the Prospectus to be conducted, and there are not
pending or, to the knowledge of the Company or the Partnership, threatened,
any proceedings relating to revocation or modification of any such
licenses, permits, franchises, certificates, consents, orders, approvals or
authorizations.
(z) Each of the Company and the Partnership owns or possesses
adequate licenses or other rights to use all patents, trademarks, service
marks, trade names, copyrights, software and design licenses, trade
secrets, manufacturing processes, other intangible property rights and
know-how (collectively "Intangibles") necessary to entitle each of the
Company and the Partnership to conduct its respective business now, and as
proposed to be, conducted or operated as described in the Prospectus and
neither the Company nor the Partnership has received notice of infringement
or of conflict with (and knows of no such infringement of or conflict with)
asserted rights of others with respect to any Intangibles that could
materially and adversely affect
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the business, prospects, properties, assets, results of operation or
condition (financial or otherwise) of the Company or the Partnership.
(aa) To the Company's and the Partnership's knowledge, the
Partnership's system of internal accounting controls is sufficient to meet
the broad objectives of internal accounting control insofar as those
objectives pertain to the prevention or detection of errors or
irregularities in amounts that would be material in relation to the
Partnership's financial statements; and neither the Company, the
Partnership nor any employee or agent thereof, has made any payment of
funds of the Company or the Partnership, as the case may be, or received or
retained any funds and no funds of the Company or the Partnership have been
set aside to be used for any payment, in each case in violation of any law,
rule or regulation.
(bb) The Company and the Partnership have filed on a timely basis all
necessary tax returns required to be filed through the date hereof,
including all federal, state, local and foreign income, sales and franchise
tax returns, and have paid all taxes shown as due thereon; and no tax
deficiency has been asserted against either such entity, nor does either
such entity know of any tax deficiency which is likely to be asserted
against either such entity which if determined adversely to either such
entity, could materially adversely affect the business, prospects,
properties, assets, results of operations or condition (financial or
otherwise) of either such entity, respectively. All tax liabilities are
adequately provided for on the respective books of such entities.
(cc) The Company and the Partnership maintain insurance (issued by
insurers of recognized financial responsibility) of the types and in the
amounts generally deemed adequate for their respective businesses and, to
the Company's and the Partnership's knowledge, consistent with insurance
coverage maintained by similar partnerships or companies (as the case may
be) in similar businesses, including, but not limited to, insurance
covering real and personal property owned or leased by the Company and the
Partnership against theft, damage, destruction, acts of vandalism and all
other risks customarily insured against, all of which insurance is in full
force and effect.
(dd) The Partnership and the Company each have five employees. To the
best of the Partnership's knowledge, no general labor problem exists or is
imminent with the employees of the Partnership or the Company and there is
no pending or anticipated question of union representation or organization
relating to the employees of the Partnership or the Company.
(ee) Each of the Company, the Partnership, and their officers,
directors or affiliates has not taken and will not take, directly or
indirectly, any action designed to, or that might reasonably be expected
to, cause or result in or constitute the stabilization or manipulation of
any security of the Partnership or to facilitate the sale or resale of the
Units.
(ff) The Units are registered pursuant to Section 12(g) of the 1934
Act and listed on The New York Stock Exchange there is not pending or to
the knowledge of the Company or the Partnership, threatened, any proceeding
relating to the termination of the listing of the Units on The New York
Stock Exchange.
(gg) The Partnership has not incurred any liability for a fee,
commission or other compensation on account of the employment of a broker
or finder in connection with the transactions contemplated by this
Agreement other than as contemplated hereby or as described in the
Registration Statement and the Prospectus.
(hh) Except as otherwise disclosed in the Prospectus, neither the
Company, the Partnership nor, to the knowledge of the Company or the
Partnership, any entity ("Selling Entity") from which the Partnership
acquired a Current Property or from which the Partnership proposes to
acquire an Acquisition Property has authorized or conducted or has
knowledge of the generation, transportation, storage, presence, use,
treatment, disposal, release, or other handling of any hazardous substance,
hazardous waste, hazardous material,
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hazardous constituent, toxic substance, pollutant, contaminant, asbestos,
radon, polychlorinated biphenyls ("PCBs"), petroleum product or waste
(including crude oil or any fraction thereof), natural gas, liquefied gas,
synthetic gas or other material defined, regulated, controlled or
potentially subject to any remediation requirement under any environmental
law (collectively, "Hazardous Materials"), on, in, under or affecting any
real property currently leased or owned or by any means controlled by the
Company, the Partnership, or any Selling Entity, including the Current
Properties and the Acquisition Properties (the "Real Property") except as
in material compliance with applicable laws; to the knowledge of the
Company and the Partnership, the Real Property and the Company's, the
Partnership's and the Selling Entities' operations with respect to the Real
Property are in compliance with all federal, state and local laws,
ordinances, rules, regulations and other governmental requirements relating
to pollution, control of chemicals, management of waste, discharges of
materials into the environment, health, safety, natural resources, and the
environment (collectively, "Environmental Laws"), and the Company, the
Partnership and the Selling Entities have, and are in compliance with, all
licenses, permits, registrations and government authorizations necessary to
operate under all applicable Environmental Laws. Except as otherwise
disclosed in the Prospectus, none of the Company, the Partnership, or, to
the best knowledge of the Company or the Partnership, any Selling Entity
has received any written or oral notice from any governmental entity or any
other person and there is no pending or threatened claim, litigation or any
administrative agency proceeding that: alleges a violation of any
Environmental Laws by the Company, the Partnership or any Selling Entity;
alleges that the Company, the Partnership or any Selling Entity is a liable
party or a potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section
9601, ET SEQ., or any state superfund law; has resulted in or could result
in the attachment of an environmental lien on any of the Real Property; or
alleges that the Company, the Partnership or any Selling Entity is liable
for any contamination of the environment, contamination of the Real
Property, damage to natural resources, property damage, or personal injury
based on their activities or the activities of their predecessors or third
parties (whether at the Real Property or elsewhere) involving Hazardous
Materials, whether arising under the Environmental Laws, common law
principles, or other legal standards.
(ii) The Partnership is organized in conformity with the requirements
for qualification as a limited partnership under the Delaware Limited
Partnership Act, and the Partnership is treated as a partnership for
federal income purposes and not as a corporation or an association taxable
as a corporation.
(jj) Neither the Company nor the Partnership is, will become as a
result of the transactions contemplated hereby, or will conduct their
respective businesses in a manner in which any such entity would become,
"an investment company," or a company or partnership "controlled" by an
"investment company," within the meaning of the Investment Company Act of
1940, as amended.
(kk) Neither _________________________, which prepared appraisals of
the Current Properties and the Acquisition Properties, nor any
environmental engineering firm which prepared Phase I environmental
assessment reports with respect to the Current Properties and the
Acquisition Properties, was employed for such purpose on a contingent basis
or has any substantial interest in the Company or the Partnership or, to
the knowledge of the Company or the Partnership any Selling Entity.
Any certificate signed by any officer of the Company on behalf of the
Company or the Partnership and delivered to you or to counsel for the
Underwriters shall be deemed a representation and warranty by such entities to
each Underwriter as to the matters covered thereby.
Section 2. SALE AND DELIVERY OF THE UNITS TO THE UNDERWRITERS; CLOSING.
(a) On the basis of the representations and warranties herein
contained, and subject to the terms and conditions herein set forth, the
Partnership agrees to sell to each Underwriter, and each Underwriter
agrees, severally and not jointly, to purchase from the Partnership the
number of Firm Units set forth opposite the
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name of such Underwriter in SCHEDULE A (the proportion which each
Underwriter's share of the total number of the Firm Units bears to the
total number of Firm Units is hereinafter referred to as such Underwriter's
"underwriting obligation proportion"), at a purchase price of $_____ per
Unit.
(b) In addition, on the basis of the representations and warranties
herein contained, and subject to the terms and conditions herein set forth,
the Partnership hereby grants an option to the Underwriters, severally and
not jointly, to purchase up to an additional 270,000 Option Units at the
same purchase price as shall be applicable to the Firm Units. The option
hereby granted will expire if not exercised within the thirty (30) day
period after the date of the Prospectus by giving written notice to the
Partnership. The option granted hereby may be exercised in whole or in
part (but not more than once), only for the purpose of covering over-
allotments that may be made in connection with the offering and
distribution of the Firm Units. The notice of exercise shall set forth the
number of Option Units as to which the several Underwriters are exercising
the option, and the time and date of payment and delivery thereof. Such
time and date of delivery (the "Date of Delivery") shall be determined by
you but shall not be later than seven full business days after the exercise
of such option, nor in any event prior to the Closing Time. If the option
is exercised as to all or any portion of the Option Units, the Option Units
as to which the option is exercised shall be purchased by the Underwriters,
severally and not jointly, in their respective underwriting obligation
proportions.
(c) Payment of the purchase price for and delivery of certificates in
definitive form representing the Firm Units shall be made at the offices of
Morgan Keegan & Company, Inc., 50 Front Street, Memphis, Tennessee 38103 or
at such other place as shall be agreed upon by the Partnership and you, at
10:00 a.m., either (i) on the third full business day after the effective
date of the Registration Statement, or (ii) at such other time not more
than ten full business days thereafter as you and the Partnership shall
agree (unless, in either case, postponed pursuant to Section 10), (such
date and time of payment and delivery being herein called the "Closing
Time"). In addition, in the event that any or all of the Option Units are
purchased by the Underwriters, payment of the purchase price for and
delivery of certificates in definitive form representing the Option Units
shall be made at the offices of Morgan Keegan & Company, Inc. in the manner
set forth above, or at such other place as the Partnership and you shall
determine, on the Date of Delivery as specified in the notice from you to
the Partnership. Payment for the Firm Units and the Option Units shall be
made to the Partnership by certified or official bank check or checks in
New York Clearing House next day funds payable to the order of the
Partnership, against delivery to you for the respective accounts of the
Underwriters of the Units to be purchased by them.
(d) The certificates representing the Units to be purchased by the
Underwriters shall be in such denominations and registered in such names as
you may request in writing at least three full business days before the
Closing Time or the Date of Delivery, as the case may be. The certificates
representing the Units will be made available at the offices of Morgan
Keegan & Company, Inc. or at such other place as Morgan Keegan & Company,
Inc. may designate for examination and packaging not later than 10:00 a.m.
at least two full business days prior to the Closing Time or the Date of
Delivery as the case may be.
(e) After the Registration Statement becomes effective, you intend to
offer the Units to the public as set forth in the Prospectus, but after the
public offering of such Units you may in your discretion vary the public
offering price.
Section 3. CERTAIN COVENANTS OF THE PARTNERSHIP AND THE PARTNERSHIP. The
Partnership and the Partnership covenant and agree with each Underwriter as
follows:
(a) The Partnership will use its best efforts to cause the
Registration Statement to become effective (if not yet effective at the
date and time that this Agreement is executed and delivered by the parties
hereto). If the Partnership elects to rely upon Rule 430A of the 1933 Act
Regulations or the filing of the
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Prospectus is otherwise required under Rule 424(b) of the 1933 Act
Regulations, and subject to the provisions of Section 3(b) of this
Agreement, the Partnership will comply with the requirements of Rule 430A
and will file the Prospectus, properly completed, pursuant to the
applicable provisions of Rule 424(b) within the time period prescribed.
The Partnership will notify you immediately, and confirm the notice in
writing, (i) when the Registration Statement, or any post-effective
amendment to the Registration Statement, shall have become effective, or
any supplement to the Prospectus or any amended Prospectus shall have been
filed, (ii) of the receipt of any comments from the Commission, (iii) of
any request by the Commission to amend the Registration Statement or amend
or supplement the Prospectus or for additional information, and (iv) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any Preliminary Prospectus or the suspension of the
qualification of the Units for offering or sale in any jurisdiction, or of
the institution or threatening of any proceeding for any such purposes.
The Partnership will use every reasonable effort to prevent the issuance
of any such stop order or of any order preventing or suspending such use
and, if any such order is issued, to obtain the withdrawal thereof at the
earliest possible moment.
(b) The Partnership will not at any time file or make any amendment
to the Registration Statement, or any amendment or supplement (i) to the
Prospectus, if the Partnership has not elected to rely upon Rule 430A, or
(ii) if the Partnership has elected to rely upon Rule 430A, to either the
prospectus included in the Registration Statement at the time it becomes
effective or to the Prospectus filed in accordance with Rule 424(b), in
either case if you shall not have previously been advised and furnished a
copy thereof a reasonable time prior to the proposed filing, or if you or
counsel for the Underwriters shall object to such amendment or supplement.
(c) The Partnership has furnished or will furnish to you, at its
expense, as soon as available, as many signed copies of the Registration
Statement as originally filed and of all amendments thereto, whether filed
before or after the Registration Statement becomes effective, copies of all
exhibits and documents filed therewith and signed copies of all consents
and certificates of experts, as you may reasonably request, and has
furnished or will furnish to each Underwriter, one conformed copy of the
Registration Statement as originally filed and of each amendment thereto
(but without exhibits).
(d) The Partnership will deliver to each Underwriter, at the
Partnership's expense, from time to time, as many copies of each
Preliminary Prospectus as such Underwriter may reasonably request, and the
Partnership hereby consents to the use of such copies for purposes
permitted by the 1933 Act. The Partnership will deliver to each
Underwriter, at the Partnership's expense, as soon as the Registration
Statement shall have become effective and thereafter from time to time as
requested during the period when the Prospectus is required to be delivered
under the 1933 Act, such number of copies of the Prospectus (as
supplemented or amended) as each Underwriter may reasonably request. The
Partnership will comply to the best of its ability with the 1933 Act and
the 1933 Act Regulations so as to permit the completion of the distribution
of the Units as contemplated in this Agreement and in the Prospectus. If
the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the Prospectus in
connection with the offering or sale of the Units and if at such time any
events shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made when such Prospectus is delivered not misleading, or, if for any
reason it shall be necessary during such same period to amend or supplement
the Prospectus in order to comply with the 1933 Act, the Partnership will
notify you and upon your request prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as you may from
time to time reasonably request of an amended Prospectus or a supplement to
the Prospectus which will correct such statement or omission or effect such
compliance, and in case any Underwriter is required to deliver a prospectus
in connection with sales of any of the Units at any time nine months or
more after the time of issue of the Prospectus, upon your request but at
the expense
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of such Underwriter, the Partnership will prepare and deliver to such
Underwriter as many copies as you may request of an amended or
supplemented Prospectus complying with Section 10(a)(3) of the 1933 Act.
(e) The Partnership will use its best efforts to qualify the Units
for offering and sale under the applicable securities laws of such states
and other jurisdictions as you may designate and to maintain such
qualifications in effect for as long as may be necessary to complete the
distribution of the Units; provided, however, that the Partnership shall
not be obligated to file any general consent to service of process or to
qualify as a foreign corporation in any jurisdiction in which it is not so
qualified or to make any undertakings in respect of doing business in any
jurisdiction in which it is not otherwise so subject. The Partnership will
file such statements and reports as may be required by the laws of each
jurisdiction in which the Units have been qualified as above provided.
(f) The Partnership will make generally available to its Unitholders
as soon as practicable, but in any event not later than the end of the
fiscal quarter first occurring after the first anniversary of the
"effective date of the Registration Statement" (as defined in Rule 158(c)
of the 1933 Act Regulations), an earnings statement (in reasonable detail
but which need not be audited) complying with the provisions of Section
11(a) of the 1933 Act and Rule 158 thereunder and covering a period of at
least 12 months beginning after the effective date of the Registration
Statement.
(g) The Partnership and the Partnership will use the net proceeds
received by it from the sale of the Units in the manner specified in the
Prospectus under the caption "Use of Proceeds."
(h) The Partnership will furnish to its Unitholders, as soon as
practicable after the end of each respective period, annual reports
(including financial statements audited by independent public accountants)
and unaudited quarterly reports of operations for each of the first three
quarters of the fiscal year. During a period of five years after the date
hereof, the Partnership will furnish to you: (i) concurrently with
furnishing such reports to its Unitholders, statements of operations of the
Partnership for each of the first three quarters in the form furnished to
the Partnership's Unitholders; (ii) concurrently with furnishing to its
Unitholders, a balance sheet of the Partnership as of the end of such
fiscal year, together with statements of operations, of cash flows and of
Unitholders' equity of the Partnership for such fiscal year, accompanied by
a copy of the certificate or report thereon of independent public
accountants; (iii) as soon as they are available, copies of all reports
(financial or otherwise) mailed to Unitholders; (iv) as soon as they are
available, copies of all reports and financial statements furnished to or
filed with the Commission, any securities exchange or the National
Association of Securities Dealers, Inc. ("NASD"); (v) every material press
release in respect of the Partnership or its affairs which is released by
the Partnership; and (vi) any additional information of a public nature
concerning the Partnership or its business that you may reasonably request.
During such five-year period, the foregoing financial statements shall be
on a consolidated basis to the extent that the accounts of the Partnership
are consolidated with any subsidiaries, and shall be accompanied by similar
financial statements for any significant subsidiary that is not so
consolidated.
(i) For a period of 180 days from the date hereof, the Partnership
will not, without your prior written consent, directly or indirectly, sell,
offer to sell, grant any option for the sale of, or otherwise dispose of,
any shares of Common Stock or securities convertible into Common Stock,
other than to the Underwriters pursuant to this Agreement and other than
Common Stock, Partnership interests or other securities convertible into
Common Stock issued in connection with the acquisition of a restaurant
property.
(j) The Partnership will maintain a transfer agent and, if necessary
under the jurisdiction of organization of the Partnership, a registrar
(which may be the same entity as the transfer agent) for its Units.
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(k) The Partnership will use its best efforts to maintain the listing
of its Units on the New York Stock Exchange.
(l) The Company and the Partnership are familiar with the Investment
Partnership Act of 1940, as amended, and the rules and regulations
thereunder, and have in the past conducted their affairs, and will in the
future conduct their affairs, in such a manner so as to ensure that the
Partnership and the Partnership were not and will not be an "investment
company" or an entity "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(m) The Partnership and its affiliates will not, and will use its
best efforts to cause the Company and its officers, directors and
affiliates not to, (i) in violation of the Exchange Act and the rules and
regulations promulgated thereunder, take, directly or indirectly prior to
termination of the underwriting syndicate contemplated by this Agreement,
any action designed to stabilize or manipulate the price of any security of
the Partnership, or which may cause or result in, or which might in the
future reasonably be expected to cause or result in, the stabilization or
manipulation of the price of any security of the Partnership, to facilitate
the sale or resale of any of the Units, (ii) sell (other than under this
Agreement), bid for, purchase or pay anyone any compensation for soliciting
purchases of the Units or (iii) pay or agree to pay to any person any
compensation for soliciting any order to purchase any other securities of
the Partnership.
(n) If at any time during the 30-day period after the Registration
Statement becomes effective, any rumor, publication or event relating to or
affecting the Partnership shall occur as a result of which in your
reasonable opinion the market price of the Units has been or is likely to
be materially affected (regardless of whether such rumor, publication or
event necessitates a supplement to or amendment of the Prospectus) and
after written notice from you advising the Partnership to the effect set
forth above, the Partnership agrees to forthwith prepare, consult with you
concerning the substance of, and disseminate a press release or other
public statement, reasonably satisfactory to you, responding to or
commenting on such rumor, publication or event.
(o) The Partnership will notify the New York Stock Exchange of the
proposed issuance of the Units.
(p) The Partnership will file timely with the Commission and the NASD
a report on Form 10-C in accordance with the rules and regulations of the
Commission under the 1934 Act.
(q) The Partnership will cause the closing of the acquisition of the
Acquisition Properties to occur on or prior to __________, 1996.
Section 4. PAYMENT OF EXPENSES. The Partnership will pay and bear all
costs, fees and expenses incident to the performance of its obligations under
this Agreement (excluding fees and expenses of counsel for the Underwriters,
except as specifically set forth below), including (a) the preparation, printing
and filing of the Registration Statement (including financial statements and
exhibits), as originally filed and as amended, the Preliminary Prospectuses and
the Prospectus and any amendments or supplements thereto, and the cost of
furnishing copies thereof to the Underwriters, (b) the preparation, printing and
distribution of this Agreement, any Agreement Among Underwriters, any Selected
Dealers Agreement, the certificates representing the Units, the Blue Sky
Memoranda and any instruments relating to any of the foregoing, (c) the issuance
and delivery of the Units to the Underwriters, including any transfer taxes
payable upon the sale of the Units to the Underwriters (other than transfer
taxes on resales by the Underwriters), (d) the fees and disbursements of the
Partnership's counsel and accountants, (e) the qualification of the Units under
the applicable securities laws in accordance with Section 3(e) of this
Agreement, including filing fees and fees and disbursements of counsel for the
Underwriters in connection therewith and in connection with the Blue Sky
Memoranda, (f) all costs, fees and expenses in connection with the notification
to the New York Stock Exchange of the proposed issuance of the Units, (g) filing
fees relating to the review of the offering by the NASD, (h) the transfer
agent's and registrar's fees and all
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miscellaneous expenses referred to in Item 14 of the Registration Statement,
(i) costs related to travel and lodging incurred by the Partnership and its
representatives relating to meetings with and presentations to prospective
purchasers of the Units reasonably determined by the Underwriters to be
necessary or desirable to effect the sale of the Units to the public, and (j)
all other costs and expenses incident to the performance of the Partnership's
obligations hereunder (including costs incurred in closing the purchase of
the Option Units, if any) that are not otherwise specifically provided for in
this section. The Partnership, upon your request, will provide funds in
advance for filing fees in connection with "blue sky" qualifications.
If the sale of the Units provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth in Section 5 hereof
is not satisfied, because of any termination pursuant to Section 9 hereof or
because of any refusal, inability or failure on the part of the Partnership to
perform any agreement herein or comply with any provision hereof other than by
reason of default by any of the Underwriters, the Partnership will reimburse the
Underwriters severally on demand for all reasonable out-of-pocket expenses,
including fees and disbursements of Underwriters' counsel, reasonably incurred
by the Underwriters in reviewing the Registration Statement and the Prospectus,
and in investigating and making preparations for the marketing of the Units.
Section 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the Underwriters to purchase and pay for the Units that they have respectively
agreed to purchase pursuant to this Agreement (including any Option Units as to
which the option granted in Section 2 has been exercised and the Date of
Delivery determined by you is the same as the Closing Time) are subject to the
accuracy of the representations and warranties of the Partnership and the
Company contained herein or in certificates of any officer of the Partnership
and the Company delivered pursuant to the provisions hereof, to the performance
by the Partnership and the Company of their obligations hereunder, and to the
following further conditions:
(a) The Registration Statement shall have become effective not later
than 5:30 p.m. on the date of this Agreement or, with your consent, at a
later time and date not later, however, than 5:30 p.m. on the first
business day following the date hereof, or at such later time or on such
later date as you may agree to in writing; and at the Closing Time no stop
order suspending the effectiveness of the Registration Statement shall have
been issued under the 1933 Act and no proceedings for that purpose shall
have been instituted or shall be pending or, to your knowledge or the
knowledge of the Partnership, shall be contemplated by the Commission, and
any request on the part of the Commission for additional information shall
have been complied with to the satisfaction of counsel for the
Underwriters. If the Partnership has elected to rely upon Rule 430A, a
prospectus containing the Rule 430A Information shall have been filed with
the Commission in accordance with Rule 424(b) (or a post-effective
amendment providing such information shall have been filed and declared
effective in accordance with the requirements of Rule 430A).
(b) At the Closing Time, you shall have received a favorable opinion
of Middleberg, Riddle & Gianna, counsel for the Company and the
Partnership, dated as of the Closing Time, together with signed or
reproduced copies of such opinion for each of the other Underwriters, in
form and substance satisfactory to counsel for the Underwriters, to the
effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with the corporate power and authority to own and lease
its properties and to conduct its business as now conducted and as
proposed to be conducted as described in the Registration Statement
and the Prospectus. The Company is qualified to transact business as
a foreign corporation and is in good standing in the States of
__________, __________, __________, and __________, the only states
where the nature of its business and conduct of its operations require
such qualification. The Company is the sole general partner of the
Partnership.
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(ii) The Partnership is a limited partnership duly formed and
validly existing under the Delaware Limited Partnership Act (the
"Delaware Act") with the requisite power and authority to own and
lease its properties (including the Current Properties and the
Acquisition Properties) and to conduct its business as now conducted
and as proposed to be conducted as described in the Registration
Statement and the Prospectus. The Partnership is qualified to
transact business as a foreign partnership and is in good standing in
the States of __________, __________, __________, and __________, the
only states where the nature of its business and conduct of its
operations require such qualifications. The Partnership is in
compliance with the Partnership Agreement.
(iii) The Company has all requisite corporate power and
authority to execute, deliver and perform this Agreement, to issue,
sell and deliver the Shares as provided herein and to consummate the
transactions contemplated herein. This Agreement has been duly
authorized, executed and delivered by the Company and, assuming due
authorization, execution and delivery by the Underwriters, constitutes
a valid and binding agreement of the Company, enforceable in
accordance with its terms, except to the extent enforceability may be
limited by bankruptcy, insolvency, moratorium, reorganization or other
laws affecting the rights of creditors generally and by principles of
equity whether considered at law or in equity and except to the extent
that enforcement of the indemnification and contribution provisions
set forth in Section 7 of this Agreement may be limited by federal or
state securities laws or the public policy underlying such laws.
(iv) The Partnership has the requisite partnership power and
authority to execute the Agreement, to issue, sell and deliver the
Units as provided herein and to consummate the transactions
contemplated herein. The Agreement has been duly authorized, executed
and delivered by the Partnership and, assuming due authorization,
execution and delivery by the Underwriters, constitutes a valid and
binding agreement of the Partnership enforceable in accordance with
its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or other laws
affecting the rights of creditors generally and by principles of
equity, whether considered at law or in equity and except to the
extent that enforcement of the indemnification and contribution
provisions set forth in Section 7 of the Agreement may be limited by
federal or state securities laws or the public policy underlying such
laws.
(v) The Partnership has the requisite power and authority to
enter into the Acquisition Agreements and to consummate the
transactions contemplated therein. Such agreements have been duly
authorized, executed and delivered by the Partnership and, assuming
due authorization, execution and delivery by the other parties
thereto, constitute valid and binding agreements, enforceable in
accordance with their respective terms, except to the extent
enforceability may be limited by bankruptcy, insolvency,
reorganization or other laws of general applicability relating to or
affecting creditors' rights and by general principles of equity
whether considered at law or in equity.
(vi) No consent, approval, authorization, order, license,
certificate, permit, registration, or filing by or with any
governmental agency or body is necessary for the valid authorization,
issuance, sale and delivery of the Units, the execution, delivery and
performance of the Agreement and the consummation by the Partnership
and the Partnership of the transactions contemplated hereby, the
execution and delivery of the other Operative Documents to which
either the Company or the Partnership is a party, except such as have
been obtained or as may be necessary under state securities laws or
required by the National Association of Securities Dealers, Inc. in
connection with the purchase and distribution of the Units by the
Underwriters, as to which such counsel need express no opinion.
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(vii) Neither the issuance, sale and delivery by the
Partnership of the Units, nor the execution, delivery and performance
of this Agreement and the other Operative Documents to which any of
the Company or the Partnership is a party, nor the consummation of the
transactions contemplated hereby or thereby by either such entity, as
applicable, will violate the Certificate of Incorporation, by-laws,
certificate of limited partnership or partnership agreement, as the
case may be, of any such entity, as applicable; result in a breach of,
or constitute a default under, any contract filed or incorporated by
reference as an exhibit to the Registration Statement; and neither the
issuance, sale and delivery by the Partnership of the Units nor the
execution and delivery of the Agreement or the other Operative
Documents to which any of the Company or the Partnership is a party
will violate any applicable statute, judgment, decree, order, rule or
regulation of any court or governmental agency or body or, to such
counsel's knowledge, result in the creation or imposition of any lien,
charge, claim or encumbrance upon any property or asset of any of the
foregoing.
(viii) The statements set forth in the Prospectus under the
caption "Description of Units," insofar as they purport to constitute
a summary of the terms of the Units and laws relating thereto, fairly
summarize such terms and applicable law, and present the information
called for by the 1933 Act and the rules and regulations thereunder.
The Units conform in all material respects as to legal matters to the
description thereof contained in the Registration Statement and the
Prospectus.
(ix) The Units to be issued and sold to the Underwriters
hereunder have been validly authorized by the Partnership. When
issued and delivered against payment therefor as provided in this
Agreement, such Units will be validly issued, fully paid and
nonassessable. No preemptive rights of Unitholders exist with respect
to any of the Units. No person or entity has elected to require or
participate in the registration under the 1933 Act of the Units
pursuant to the Registration Statement, which has not been validly
waived; and, except as set forth in the Prospectus, no person holds a
right to require or participate in a registration under the 1933 Act
of any Units of the Partnership at any other time. No person or
entity has a right of participation or first refusal with respect to
the sale of the Units by the Partnership. The form of certificates
evidencing the Units complies with all applicable requirements of
Delaware law and the rules and regulations of the New York Stock
Exchange.
(x) The Partnership has authorized Units as set forth in the
Prospectus under the caption "Capitalization" as of the date therein.
All of the issued Units of the Partnership have been duly and validly
authorized and issued by the Partnership and are fully paid and
nonassessable. None of the issued Units have been issued or are owned
or held in violation of any preemptive rights. The Units to be issued
at the Closing Time have been duly and validly authorized by the
Partnership. When issued and delivered against payment therefor as
provided in the Partnership Agreement, such Units will be duly and
validly issued, fully paid and nonassessable. The outstanding Units
have been and will be issued, offered and sold at or prior to the
Closing Time in compliance with all applicable laws (including,
without limitation, federal and state securities laws). All sales of
the Partnership's Units prior to the date hereof were at all relevant
times duly registered under the Act or were exempt from the
registration requirements of the Act by reason of Sections 3(b), 4(2)
or 4(6) thereof. To the knowledge of such counsel, except as
disclosed in the Prospectus, there is no outstanding option, warrant
or other right calling for the issuance of, and no commitment, plan or
arrangement to issue, any Units of the Partnership or any security
convertible into or exchangeable for Units of the Partnership.
(xi) Except as described in the Prospectus, there is not pending
or threatened, any action, suit, proceeding, inquiry or investigation
against the Company or the Partnership or any of their respective
officers and directors or to which the properties, assets or rights of
any such entity are
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subject, which, if determined adversely to any such entity, would
individually or in the aggregate have a material adverse effect on
the financial position, results of operations or business of any
such entity, respectively.
(xii) The descriptions in the Registration Statement and the
Prospectus of the contracts, leases and other legal documents therein
described present fairly the information required to be shown and
there are no contracts, leases or other documents known to such
counsel of a character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement which are not described or filed as required.
There are no statutes or regulations applicable to the Company or the
Partnership or certificates, permits or other authorizations from
governmental regulatory officials or bodies required to be obtained or
maintained by any such entity, known to such counsel, of a character
required to be disclosed in the Registration Statement or the
Prospectus which have not been so disclosed and properly described
therein.
(xiii) The Units are approved and listed for trading on the
New York Stock Exchange.
(xiv) The Partnership is treated as a partnership for federal
income purposes and not as a corporation or an association taxable as
a corporation.
(xv) The Registration Statement has become effective under the
1933 Act and, to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose has been instituted or is
pending or contemplated under the 1933 Act. Other than financial
statements and other financial and operating data and schedules
contained therein, as to which counsel need express no opinion, the
Registration Statement, all Preliminary Prospectuses, the Prospectus
and any amendment or supplement thereto, appear on their face to
conform as to form in all material respects with the requirements of
Form S-3 under the 1933 Act Regulations and the Partnership is
entitled to use the Form S-3 in connection with the Registration
Statement.
(xvi) Such counsel has no reason to believe that the
Registration Statement, or any further amendment thereto made prior to
the Closing Time, on its effective date and as of the Closing Time,
contained or contains any untrue statement of a material fact or
omitted or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, or
that the Prospectus, or any amendment or supplement thereto made prior
to the Closing Time, as of its issue date and as of the Closing Time,
contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they
were made, not misleading (provided that such counsel need express no
belief regarding the financial statements and related schedules and
other financial data contained in the Registration Statement, any
amendment thereto, or the Prospectus, or any amendment or supplement
thereto).
(xvii) Neither the Company nor the Partnership is, or solely
as a result of the consummation of the transactions contemplated
hereby will become, an "investment company," or a company "controlled"
by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
(xviii) The descriptions in the Prospectus of statutes,
regulations, legal or governmental proceedings, and, to the extent
that they constitute a summary of such documents, the Partnership
Agreement and the Acquisition Agreements therein described, are
accurate in all material respects and present fairly a summary of the
information required to be shown under the 1933 Act and the
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<PAGE>
1933 Act Regulations. The information in the Prospectus under the
caption "Federal Income Tax Considerations" to the extent that it
constitutes statements of law or legal conclusions, has been
reviewed by such counsel, is correct and presents fairly the
information required to be disclosed therein under the 1933 Act and
the 1933 Act Regulations.
In rendering the foregoing opinion, such counsel may rely on the
following:
(A) as to matters involving the application of laws other
than the laws of the United States and jurisdictions in which
they are admitted, to the extent such counsel deems proper and to
the extent specified in such opinion, upon an opinion or opinions
(in form and substance reasonably satisfactory to Underwriters'
counsel) of other counsel familiar with the applicable laws, and
(B) as to matters of fact, to the extent they deem proper,
on certificates of responsible officers of the Partnership and
the Partnership, representations, warranties and certificates of
certain shareholders of the Company and partners of the
Partnership and certificates or other written statements of
officers or departments of various jurisdictions, having custody
of documents respecting the existence or good standing of the
Company and the Partnership provided that copies of all such
opinions, statements or certificates shall be delivered to
Underwriters' counsel. The opinion of counsel for the
Partnership shall state that the opinion of any other counsel, or
certificate or written statement, on which such counsel is
relying is in form satisfactory to such counsel and that you and
they are justified in relying thereon.
(c) At the Closing Time, you shall have received a favorable opinion
from Haynes and Boone, L.L.P., counsel for the Underwriters, dated as of
the Closing Time, with respect to the issuance and sale of the Units, the
Registration Statement, the Prospectus and other related matters as the
Underwriters may reasonably require, and the Partnership shall have
furnished to such counsel such documents as they may reasonably request for
the purpose of enabling them to pass on such matters; and, in rendering
such opinion, such counsel shall be entitled to rely on the opinions of
_________________________ as to all matters covered by the laws of the
State of __________.
(d) At the Closing Time, (i) the Registration Statement and the
Prospectus, as they may then be amended or supplemented, shall contain all
statements that are required to be stated therein under the 1933 Act and
the 1933 Act Regulations and in all material respects shall conform to the
requirements of the 1933 Act and the 1933 Act Regulations; the Partnership
shall have complied in all material respects with Rule 430A (if it shall
have elected to rely thereon) and neither the Registration Statement nor
the Prospectus, as they may then be amended or supplemented, shall contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, (ii) there shall not have been, since the respective dates
as of which information is given in the Registration Statement, any
material adverse change in the business, prospects, properties, assets,
results of operations or condition (financial or otherwise) of the
Partnership or the Company, whether or not arising in the ordinary course
of business, (iii) no action, suit or proceeding at law or in equity shall
be pending or, to the best of Partnership's knowledge, threatened against
the Partnership or the Company that would be required to be set forth in
the Prospectus other than as set forth therein and no proceedings shall be
pending or, to the best knowledge of the Partnership, threatened against
the Partnership or the Company before or by any federal, state or other
commission, board or administrative agency wherein an unfavorable decision,
ruling or finding could materially adversely affect the business,
prospects, assets, results of operations or condition (financial or
otherwise) of the Partnership or the Company, other than as set forth in
the Prospectus, (iv) the Partnership and the Company shall have complied
with all agreements and satisfied all conditions on their part to be
performed
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<PAGE>
or satisfied at or prior to the Closing Time, and (v) the
representations and warranties of the Partnership and the Company set
forth in Section 1 shall be accurate as though expressly made at and as
of the Closing Time. At the Closing Time, you shall have received a
certificate executed by the Chairman of the Board and President of the
Company and the general partner of the Partnership, dated as of the
Closing Time, to such effect and with respect to the following
additional matters: (A) the Registration Statement has become effective
under the 1933 Act and no stop order suspending the effectiveness of the
Registration Statement or preventing or suspending the use of the
Prospectus has been issued, and no proceedings for that purpose have
been instituted or are pending or, to the best of their knowledge,
threatened under the 1933 Act; and (B) they have reviewed the
Registration Statement and the Prospectus and, when the Registration
Statement became effective and at all times subsequent thereto up to the
delivery of such certificate, the Registration Statement and the
Prospectus and any amendments or supplements thereto contained all
statements and information required to be included therein or necessary
to make the statements therein not misleading and neither the
Registration Statement nor the Prospectus nor any amendment or
supplement thereto included any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and, since the
effective date of the Registration Statement, there has occurred no
event required to be set forth in an amended or supplemented Prospectus
that has not been so set forth.
(e) At the time that this Agreement is executed by the Partnership,
you shall have received from each accountant or accounting firm referenced
under "Experts" in the Registration Statement and the Prospectus (the
"Accountants"), a letter, dated the date hereof, in form and substance
satisfactory to you, together with signed or reproduced copies of such
letter for each of the other Underwriters, confirming that they are
independent public accountants with respect to the Partnership, within the
meanings of the 1933 Act and 1933 Act Regulations, and stating in effect
that:
(i) in their opinion, the financial statements and any
supplementary financial information and schedules included in the
Registration Statement or incorporated by reference therein, as the
case may be, and covered by their opinions therein comply as to form
in all material respects with the applicable accounting requirements
of the 1933 Act and the 1933 Act Regulations;
(ii) the financial statements of the Partnership and the
Acquisition Properties, to the extent applicable, as of and for the
three-month period ended March 31, 1996 and December 31, 1995,
respectively, were reviewed by them in accordance with the standards
established by the American Institute of Certified Public Accountants
and based upon their review, they are not aware of any material
modifications that should be made to such financial statements for
them to be in conformity with generally accepted accounting principles
and such financial statements comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act
and the 1933 Act Regulations;
(iii) with respect to Deloitte & Touche LLP only, on the
basis of limited procedures (set forth in detail in such letter and
made in accordance with such procedures as may be specified by you)
not constituting an audit in accordance with generally accepted
auditing standards, consisting of (but not limited to) a reading of
the latest available internal unaudited financial statements of the
Partnership, a reading of the minute books of the Partnership,
inquiries of officials of the Partnership responsible for financial
and accounting matters, a reading of the unaudited pro forma financial
statements included in the Registration Statement and the Prospectus
and such other inquiries and procedures as may be specified in such
letter, nothing came to their attention that caused them to believe
that:
(A) any unaudited income statement data and balance sheet
items included in the Prospectus do not agree with corresponding
items in the unaudited financial statements
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<PAGE>
from which such data and items were derived, and any such
unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited financial statements included in the
Prospectus;
(B) any unaudited pro forma financial information included
in the Prospectus does not comply as to form in all material
respects with the applicable accounting requirements of the 1933
Act and the 1933 Act Regulations or the pro forma adjustments
have not been properly applied to historical amounts in the
compilation of that information;
(C) at a specified date not more than five days prior to
the date of delivery of such letter, there was any change in the
capital stock, any increase in debt and any decrease in
Unitholders' equity from that set forth in the Partnership's
balance sheet at March 31, 1996, except as described in such
letter; and
(D) for the period from March 31, 1996 to a specified date
not more than five days prior to the date of delivery of such
letter, there were any decreases in total revenues, or increases
in total expenses, depreciation and amortization or net loss for
the Current Properties, in each case as compared with the
corresponding period of the preceding year, except in each case
for decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(iv) with respect to Deloitte & Touche LLP only, in addition to
the procedures referred to in clause (ii) above and the examination
referred to in their reports included in the Registration Statement,
they have carried out certain specified procedures, not constituting
an audit in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by you which are derived from the general accounting records
of the Partnership, which appear in the Registration Statement or the
exhibits or schedules thereto and are specified by you, and have
compared such amounts, percentages and financial information with the
accounting records of the Partnership and with material derived from
such records and have found them to be in agreement.
(f) At the Closing Time, you shall have received from each of the
Accountants a letter, in form and substance satisfactory to you and dated
as of the Closing Time, to the effect that they reaffirm the statements
made in the letter furnished pursuant to subsection (e) above, except that
the specified date referred to shall be a date not more than five days
prior to the Closing Time.
(g) In the event that either of the letters to be delivered pursuant
to subsections (e) and (f) above sets forth any such changes, decreases or
increases, it shall be a further condition to your obligations that you
shall have reasonably determined, after discussions with officers of the
Company responsible for financial and accounting matters regarding the
Partnership and with Deloitte & Touche, LLP, that such changes, decreases
or increases as are set forth in such letters do not reflect a material
adverse change in the capitalization, long-term debt, or Unitholders'
equity of the Partnership as compared with the amounts shown in the latest
consolidated audited balance sheet of the Partnership, or a material
adverse change in total revenues, or Unitholder's equity for the Current
Properties, as compared with the corresponding period of the prior year.
(h) At the Closing Time, counsel for the Underwriters shall have been
furnished with all such documents, certificates and opinions as they may
request for the purpose of enabling them to pass upon the issuance and sale
of the Units as contemplated in this Agreement and the matters referred to
in Section 5(d) and in order to evidence the accuracy and completeness of
any of the representations, warranties or statements of the Partnership or
the Partnership, the performance of any of the covenants of the Partnership
or the
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Partnership, or the fulfillment of any of the conditions herein
contained; and all proceedings taken by the Partnership at or prior to
the Closing Time in connection with the authorization, issuance and sale
of the Units as contemplated in this Agreement shall be reasonably
satisfactory in form and substance to you and to counsel for the
Underwriters. The Partnership and the Partnership will furnish you with
such number of conformed copies of such opinions, certificates, letters
and documents as you shall reasonably request.
(i) The NASD, upon review of the terms of the public offering of the
Units, shall not have objected to such offering, such terms or the
Underwriters' participation in the same.
(j) Subsequent to the date hereof there shall not have occurred any
of the following: (i) a suspension or material limitation in trading in
securities generally or in the Units on the New York Stock Exchange or
American Stock Exchange or The Nasdaq Stock Market, (ii) a general
moratorium on commercial banking activities in Delaware or New York
declared by either Federal or state authorities, as the case may be, or
(iii) the outbreak or escalation of hostilities involving the United States
or the declaration by the United States of a national emergency or war if
the effect of any such event specified in this clause (iii) in your
reasonable judgment makes it impracticable or inadvisable to proceed with
the public offering or the delivery of the Units on the terms and in the
manner contemplated in the Prospectus.
(k) The Partnership shall have provided to the Underwriters copies of
owner's title insurance policies relating to each of the restaurant
properties currently owned by the Partnership and copies of the proposed
title commitments for each of the Acquisition Properties.
If any of the conditions specified in this Section 5 shall not have been
fulfilled when and as required by this Agreement to be fulfilled, this Agreement
may be terminated by you on notice to the Partnership at any time at or prior to
the Closing Time, and such termination shall be without liability of any party
to any other party, except as provided in Section 4. Notwithstanding any such
termination, the provisions of Section 7 shall remain in effect.
Section 6. CONDITIONS TO PURCHASE OF OPTION UNITS. In the event that the
Underwriters exercise the option granted in Section 2 hereof to purchase all or
any part of the Option Units and the Date of Delivery determined by you pursuant
to Section 2 hereof is later than the Closing Time, the obligations of the
several Underwriters to purchase and pay for the Option Units that they shall
have respectively agreed to purchase pursuant to this Agreement are subject to
the accuracy of the representations and warranties of the Partnership and the
Partnership herein contained, to the performance by the Partnership and the
Partnership of their obligations hereunder and to the following further
conditions:
(a) The Registration Statement shall remain effective at the Date of
Delivery, and, at the Date of Delivery, no stop order suspending the
effectiveness of the Registration Statement shall have been issued under
the 1933 Act and no proceedings for that purpose shall have been instituted
or shall be pending or, to your knowledge or the knowledge of the
Partnership, shall be contemplated by the Commission, and any request on
the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of counsel for the
Underwriters.
(b) At the Date of Delivery, the provisions of Sections 5(d)(i)
through 5(d)(v) shall have been complied with at and as of the Date of
Delivery and, at the Date of Delivery, you shall have received a
certificate executed by the Chairman of the Board and President of the
Company and the general partner of the Partnership, dated as of the Date of
Delivery, to such effect and to the effect set forth in clauses (A) and (B)
of Section 5(d).
(c) At the Date of Delivery, you shall have received an opinion of
Middleberg, Riddle & Gianna, counsel for the Company and the Partnership
together with signed or reproduced copies of such opinion for
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each of the other Underwriters, in form and substance satisfactory to
counsel for the Underwriters, dated as of the Date of Delivery, relating
to the Option Units and otherwise to the same effect as the opinion
required by Section 5(b).
(d) At the Date of Delivery, you shall have received an opinion of
Haynes and Boone, L.L.P., counsel for the Underwriters, dated as of the
Date of Delivery, relating to the Option Units and otherwise to the same
effect as the opinion required by Section 5(c).
(e) At the Date of Delivery, you shall have received a letter from
each of the Accountants, in form and substance satisfactory to you and
dated as of the Date of Delivery, to the effect that they reaffirm the
statements made in the letter furnished pursuant to Section 5(e), except
that the specified date referred to shall be a date not more than five days
prior to the Date of Delivery.
(f) At the Date of Delivery, counsel for the Underwriters shall have
been furnished with all such documents, certificates and opinions as they
may reasonably request for the purpose of enabling them to pass upon the
issuance and sale of the Option Units as contemplated in this Agreement and
the matters referred to in Section 6(a) and in order to evidence the
accuracy and completeness of any of the representations, warranties or
statements of the Partnership and the Partnership, the performance of any
of the covenants of the Partnership and the Partnership, or the fulfillment
of any of the conditions herein contained; and all proceedings taken by the
Partnership at or prior to the Date of Delivery in connection with the
authorization, issuance and sale of the Option Units as contemplated in
this Agreement shall be reasonably satisfactory in form and substance to
you and to counsel for the Underwriters.
Section 7. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and the
Partnership, jointly and severally, will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject under the 1933 Act, the
1934 Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any breach of any
warranty or covenant of the Company or the Partnership herein contained or any
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company or the
Partnership shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus, or any
such amendment or supplement, in reliance upon and in conformity with written
information furnished to the Partnership by any Underwriter expressly for use
therein; provided further, that the indemnity agreement contained in Section
7(a) with respect to any Preliminary Prospectus shall not inure to the benefit
of any Underwriter from whom the person asserting any such losses, claims,
damages or liabilities purchased the Units which are the subject thereof (or to
the benefit of any person controlling such Underwriter), if such Underwriter
failed to send or give a copy of the Prospectus to such person at or prior to
the written confirmation of the sale of such Units to such person in any case
where such delivery is required by the 1933 Act or the 1933 Act Regulations and
if the Prospectus would have cured any untrue statement or alleged untrue
statement or omission or alleged omission giving rise to such loss, claim,
damage or liability. In addition to their other obligations under this Section
7(a), the Company and the Partnership agree that, as an interim measure during
the pendency of any such claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 7(a), they will
reimburse the Underwriters on a monthly basis for all reasonable legal and other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Company's and the Partnership's obligation to reimburse the Underwriters for
such
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expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. Any such interim
reimbursement payments that are not made to an Underwriter within 30 days of
a request for reimbursement shall bear interest at the prime rate (or
reference rate or other commercial lending rate for borrowers of the highest
credit standing) published from time to time by The Wall Street Journal (the
"Prime Rate") from the date of such request. This indemnity agreement shall
be in addition to any liabilities that the Company and the Partnership may
otherwise have. For purposes of this Section 7, the information set forth in
the last paragraph on the front cover page (insofar as such information
relates to the Underwriters) and under "Underwriting" in any Preliminary
Prospectus and in the Prospectus constitutes the only information furnished
by the Underwriters to the Partnership for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement. Neither the
Company nor the Partnership will, without the prior written consent of each
Underwriter, settle or compromise or consent to the entry of any judgment in
any pending or threatened action or claim or related cause of action or
portion of such cause of action in respect of which indemnification may be
sought hereunder (whether or not such Underwriter is a party to such action
or claim), unless such settlement, compromise or consent includes an
unconditional release of such Underwriter from all liability arising out of
such action or claim (or related cause of action or portion thereof).
The indemnity agreement in this Section 7(a) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each person, if any,
who controls any Underwriter within the meaning of the 1933 Act or the 1934 Act
to the same extent as such agreement applies to the Underwriters.
(b) Each Underwriter, severally but not jointly, will indemnify and hold
harmless the Partnership against any losses, claims, damages or liabilities to
which the Partnership may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any breach of any warranty or
covenant by such Underwriter herein contained or any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Partnership by such Underwriter expressly for use therein; and will reimburse
the Partnership for any legal or other expenses reasonably incurred by the
Partnership in connection with investigating or defending any such loss, claim,
damage, liability or action. In addition to its other obligations under this
Section 7(b), the Underwriters agree that, as an interim measure during the
pendency of any such claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged statement
or omission, described in this Section 7(b), they will reimburse the Partnership
on a monthly basis for all reasonable legal and other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of their
obligation to reimburse the Partnership for such expenses and the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. Any such interim reimbursement payments that are not
made to the Partnership within 30 days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request. This indemnity
agreement shall be in addition to any liabilities that the Underwriters may
otherwise have. No Underwriter will, without the prior written consent of the
Partnership, settle or compromise or consent to the entry of judgment in any
pending or threatened action or claim or related cause of action or portion of
such cause of action in respect of which indemnification may be sought hereunder
(whether or not the Partnership is a party to such action or claim), unless such
settlement, compromise or consent includes an unconditional release of the
Partnership from all liability arising out of such action or claim (or related
cause of action or portion thereof).
The indemnity agreement in this Section 7(b) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each officer and
director of the Company and each person, if any, who controls the Partnership
within the meaning of the 1933 Act or the 1934 Act to the same extent as such
agreement applies to the Partnership.
-23-
<PAGE>
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; no indemnification provided for in Section 7(a) or 7(b)
shall be available to any party who shall fail to give notice as provided in
this Section 7(c) if the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was prejudiced by the
failure to give such notice, but the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability that it may
have to any indemnified party otherwise than under Section 7. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation, except
that if the indemnified party has been advised by counsel in writing that there
are one or more defenses available to the indemnified party which are different
from or additional to those available to the indemnifying party, then the
indemnified party shall have the right to employ separate counsel and in that
event the reasonable fees and expenses of such separate counsel for the
indemnified party shall be paid by the indemnifying party; provided, however,
that if the indemnifying party is the Partnership, the Partnership shall only be
obligated to pay the reasonable fees and expenses of a single law firm (and any
reasonably necessary local counsel) employed by all of the indemnified parties
and the persons referred to in Section 7(a) hereof. The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
(d) It is agreed that any controversy arising out of the operation of the
interim reimbursement arrangements set forth in Section 7(a) and 7(b) hereof,
including the amounts of any requested reimbursement payments, the method of
determining such amounts and the basis on which such amounts shall be
apportioned among the indemnifying parties, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the National
Association of Securities Dealers, Inc. Any such arbitration must be commenced
by service of a written demand for arbitration or a written notice of intention
to arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Sections 7(a) and 7(b) hereof
and will not resolve the ultimate propriety or enforceability of the obligation
to indemnify for expenses that is created by the provisions of Sections 7(a)
and 7(b).
(e) In order to provide for just and equitable contribution in
circumstances under which the indemnity provided for in this Section 7 is for
any reason judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the right of appeal) to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Company and the
Partnership, on the one hand and the Underwriters on the other shall contribute
to the aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity incurred by the Partnership and one or more of
the Underwriters, as incurred, in such proportions that (a) the Underwriters are
responsible pro rata for that portion represented by the percentage that the
underwriting discount appearing on the cover page of the Prospectus bears to the
public offering price (before deducting expenses) appearing thereon, and (b) the
Company and the Partnership are responsible for the balance, provided, however,
that no person guilty of fraudulent misrepresentations (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation; provided, further, that
if the allocation provided above is not permitted by applicable law, the Company
and the Partnership, on the one hand and the Underwriters on the other shall
contribute to the aggregate
-24-
<PAGE>
losses in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company and the
Partnership, on the one hand and the Underwriters on the other in connection
with the statements or omissions which resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable
considerations. Relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied
by the Company or the Partnership on the one hand or by the Underwriters on
the other hand and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Partnership and the Underwriters agree that it would not be
just and equitable if contributions pursuant to this Section 7(e) were
determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
Section 7(e). The amount paid or payable by a party as a result of the
losses, claims, damages or liabilities referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such party
in connection with investigating or defending such action or claim.
Notwithstanding the provisions of this Section 7(e), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Units underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. The Underwriters'
obligations in this Section 7(e) to contribute are several in proportion to
their respective underwriting obligations and not joint. For purposes of
this Section 7(e), each person, if any, who controls an Underwriter within
the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as such Underwriter, and each director of the Partnership, each
officer of the Partnership who signed the Registration Statement, and each
person, if any, who controls the Company or the Partnership within the
meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Partnership.
Section 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
The representations, warranties, indemnities, agreements and other statements of
the Company or the Partnership or their respective officers set forth in or made
pursuant to this Agreement will remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Partnership or any
Underwriter or controlling person, with respect to an Underwriter or the Company
or the Partnership, and will survive delivery of and payment for the Units or
termination of this Agreement.
Section 9. EFFECTIVE DATE OF AGREEMENT AND TERMINATION. (a) This
Agreement shall become effective immediately as to Sections 4 and 7 and, as to
all other provisions, (i) if at the time of execution of this Agreement the
Registration Statement has not become effective, at 10:00 a.m., on the first
full business day following the effectiveness of the Registration Statement, or
(ii) if at the time of execution of this Agreement the Registration Statement
has been declared effective, at 10:00 a.m. on the first full business day
following the date of execution of this Agreement; but this Agreement shall
nevertheless become effective at such earlier time after the Registration
Statement becomes effective as you may determine on and by notice to the
Partnership or by release of any of the Units for sale to the public. For the
purposes of this Section 9, the Units shall be deemed to have been so released
upon the release of publication of any newspaper advertisement relating to the
Units or upon the release by you of telegrams (i) advising the Underwriters that
the Units are released for public offering, or (ii) offering the Units for sale
to securities dealers, whichever may occur first. By giving notice before the
time this Agreement becomes effective, you, as Representative of the several
Underwriters, or the Partnership, may prevent this Agreement from becoming
effective, without liability of any party to any other party, except that the
Partnership shall remain obligated to pay costs and expenses to the extent
provided in Section 4 hereof.
(b) You may terminate this Agreement, by notice to the Partnership, at any
time at or prior to the Closing Time (i) in accordance with the last paragraph
of Section 5 of this Agreement, or (ii) if there has been since the respective
dates as of which information is given in the Registration Statement, any
material adverse change, or any development involving a prospective material
adverse change, in or affecting the business, prospects, management, properties,
assets, results of operations or condition (financial or otherwise) of the
Company or the Partnership, whether or not arising in the ordinary course of
business, or (iii) if there has occurred or accelerated any outbreak of
hostilities
-25-
<PAGE>
or other national or international calamity or crisis or change in economic
or political conditions the effect of which on the financial markets of the
United States is such as to make it, in your judgment, impracticable to
market the Units or enforce contracts for the sale of the Units, or (iv) if
trading in any securities of the Partnership has been suspended by the
Commission or by the NASD, or if trading generally on the New York Stock
Exchange or in the over-the-counter market has been suspended, or limitations
on prices for trading (other than limitations on hours or numbers of days of
trading) have been fixed, or maximum ranges for prices for securities have
been required, by such exchange or the NASD or by order of the Commission or
any other governmental authority, or (v) if a banking moratorium has been
declared by federal or New York or Delaware authorities, or (vi) any federal
or state statute, regulation, rule or order of any court or other
governmental authority has been enacted, published, decreed or otherwise
promulgated which in your reasonable opinion materially adversely affects or
will materially adversely affect the business or operations of the Company or
the Partnership, or (vii) any action has been taken by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which
in your reasonable opinion has a material adverse effect on the securities
markets in the United States.
(c) If this Agreement is terminated pursuant to this Section 9, such
termination shall be without liability of any party to any other party, except
to the extent provided in Section 4. Notwithstanding any such termination, the
provisions of Section 7 shall remain in effect.
Section 10. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one or more of
the Underwriters shall fail at the Closing Time to purchase the Units that it or
they are obligated to purchase pursuant to this Agreement (the "Defaulted
Securities"), you shall have the right, within 36 hours thereafter, to make
arrangements for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms set forth in
this Agreement; if, however, you have not completed such arrangements within
such 36-hour period, then:
(a) If the aggregate number of Firm Units which are Defaulted
Securities does not exceed 10% of the aggregate number of Firm Units to be
purchased pursuant to this Agreement, the non-defaulting Underwriters shall
be obligated to purchase the full amount thereof in the proportions that
their respective underwriting obligation proportions bear to the
underwriting obligations of all non-defaulting Underwriters, and
(b) If the aggregate number of Firm Units which are Defaulted
Securities exceeds 10% of the aggregate number of Firm Units to be
purchased pursuant to this Agreement, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section 10 shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default that does not result in a termination of
this Agreement, either you or the Partnership shall have the right to postpone
the Closing Time for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements, and the Partnership agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus that
may thereby be made necessary. As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 10.
Section 11. DEFAULT BY THE PARTNERSHIP. If the Partnership shall fail at
the Closing Time to sell and deliver the aggregate number of Firm Units that it
is obligated to sell, then this Agreement shall terminate without any liability
on the part of any non-defaulting party, except to the extent provided in
Section 4 and except that the provisions of Section 7 shall remain in effect.
-26-
<PAGE>
No action taken pursuant to this Section shall relieve the Partnership from
liability, if any, in respect to such default.
Section 12. NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered, mailed or transmitted by any standard form of telecommunication.
Notices to the Underwriters shall be directed c/o Morgan Keegan & Company, Inc.,
50 Front Street, Memphis, Tennessee 38103, Attention: ___________________, (with
a copy sent in the same manner to Haynes and Boone, L.L.P., 3100 NationsBank
Plaza, 901 Main Street, Dallas, Texas 75202, Attention: Janice V. Sharry); and
notices to the Company and the Partnership shall be directed to them at U.S.
Restaurant Properties Master L.P., 5310 Harvest Hill Road, Suite 270, LB 168,
Dallas, Texas 75230 (with a copy sent in the same manner to Middleberg, Riddle &
Gianna, 1600 Allianz Financial Centre, 2323 Bryan Street, Dallas, Texas 75201,
Attention: Richard Wilensky).
Section 13. PARTIES. This Agreement is made solely for the benefit of and
is binding upon the Underwriters, the Partnership and the Partnership and, to
the extent provided in Section 7, any person controlling the Partnership, the
Partnership, or any of the Underwriters, the officers and directors of the
Partnership, and their respective executors, administrators, successors and
assigns and subject to the provisions of Section 10, no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, as such purchaser,
from any of the several Underwriters of the Units.
All of the obligations of the Underwriters hereunder are several and not
joint.
Section 14. GOVERNING LAW AND TIME. This Agreement shall be governed by
the laws of the State of Texas. Specified time of the day refers to United
States Central Time. Time shall be of the essence of this Agreement.
Section 15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and when a counterpart has been executed by each party, all such
counterparts taken together shall constitute one and the same agreement.
-27-
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among the Partnership, the
Partnership and the several Underwriters in accordance with its terms. It is
understood that your acceptance of this letter on behalf of the Underwriters
is pursuant to the authorities set forth in a form of Agreement among
Underwriters, the form of which shall be submitted to the Partnership for
examination, upon request, but without warranty on your part as to the
authority of the signers thereof.
Very truly yours,
U.S. RESTAURANT PROPERTIES MASTER L.P.
By: U.S. RESTAURANT PROPERTIES, INC.,
Managing General Partner
By:
-----------------------------------------
Name: Robert J. Stetson
Title: President and Chief Executive Officer
U.S. RESTAURANT PROPERTIES, INC.
By:
---------------------------------------------------
Name: Robert J. Stetson
Title: President and Chief Executive Officer
Confirmed and accepted as of
the date first above written:
MORGAN KEEGAN & COMPANY, INC.
EVEREN Securities, Inc.
By: Morgan Keegan & Company, Inc.
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
-28-
<PAGE>
SCHEDULE A
NUMBER OF
FIRM UNITS
UNDERWRITER TO BE PURCHASED
- ----------- ---------------
Morgan Keegan & Company, Inc. ...............................
EVEREN Securities, Inc. .....................................
Southwest Securities, Inc. ..................................
__________________________ .................................. ---------
TOTAL ....................................................... 1,800,000
---------
---------
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
UNITS OF BENEFICIAL INTERESTS
SELECTED DEALER AGREEMENT
May __, 10, 1996
Ladies and Gentlemen:
We have severally agreed to purchase from U.S. Restaurant Properties Master
L.P., a Delaware limited partnership (the "Partnership"), 1,800,000 Units of
beneficial interest, of the Partnership (the "Firm Units"). In addition, the
Partnership proposes to grant us, upon the terms stated in the Underwriting
Agreement, the right to purchase up to 270,000 additional Units (the "Option
Units"), identical to the Firm Units, for the sole purpose of covering over-
allotments in connection with the sale of the Firm Units. The Firm Units and
the Option Units, if purchased, are collectively referred to herein as the
"Units." The Units are described in the enclosed Prospectus, the receipt of
which you hereby acknowledge.
1. OFFERING TO SELECTED DEALERS. We are severally offering part of the
Units for sale to certain dealers (the "Selected Dealers"), as principals,
subject to the terms and conditions stated herein and in the Prospectus, at the
public offering price of $_____ per Unit, less a concession of $_____ (such
concession hereinafter referred to as the "Selected Dealers' Concession").
Sales of the Units to you pursuant to such offering will be evidenced by our
written confirmation and will be on such terms and conditions set forth therein
and in the Prospectus. In purchasing Units, you will rely upon no statement
whatsoever, written or oral, other than statements in the Prospectus.
2. REOFFERING BY SELECTED DEALERS. We are advising you by telegram of
the method and terms of the offering. Acceptances of any reserved Units
received at the office of Morgan Keegan & Company, Inc., 50 Front Street,
Memphis, Tennessee 38103, after the time specified therefor in the telegram and
any order for additional Units will be subject to rejection in whole or in part.
Subscription books may be closed by us at any time in our discretion without
notice and the right is reserved to reject any subscription in whole or in part,
but notification of allotments against and rejections of subscriptions will be
made as promptly as practicable.
We are advising you in such telegram of the release by us of the Units for
public offering and of the public offering price of the Units. Upon receipt of
such advice, the Units thereafter purchased by you hereunder are to be offered
by you to the public at the public offering price, subject to the terms thereof.
You agree that in selling Units purchased hereunder you will comply with the
applicable requirements of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended. Except as herein otherwise
provided, Units shall not be offered or sold by you below the public offering
price before the termination of this Agreement, except that a concession from
such public offering price of not in excess of $_____ of the public offering
price may be allowed to dealers who are members in good standing of the National
Association of Securities Dealers, Inc. (the "NASD") or foreign dealers, not
eligible for membership in the NASD, who agreed, when making sales of Units to
purchasers outside the United States, to comply with the Interpretations with
Respect to Free-Riding and Withholding of the NASD.
It is assumed that Units sold by you will be effectively placed for
investment. If we contract for or purchase in the open market or otherwise for
our account any Units sold to you and not effectively placed for investment, we
may charge you the Selected Dealers' Concession originally allowed you on the
Units so repurchased, and you agree to pay such amount to us on demand. Units
so delivered to us against any such repurchase need not be the identical Units
originally purchased by you.
You will advise us upon request of Units purchased by you remaining unsold,
and we shall have the right to repurchase such unsold Units on demand at the
public offering price less all or part of the Selected Dealers' Concession.
3. PAYMENT AND DELIVERY. Payment for Units purchased by you shall be
made by you on such dates and at such places as we advise you, by certified or
bank cashiers' check payable to the order of Morgan Keegan &
<PAGE>
Company, Inc. in such clearing house funds as we advise, against delivery of
such Units. Delivery instructions must be in our hands at the offices of
Morgan Keegan & Company, Inc., 50 Front Street, Memphis, Tennessee 38103, at
such times as we request. Notwithstanding such provisions, payment for and
delivery of Units purchased by you hereunder will be made through the
facilities of the Depository Trust Company, if you are a member, unless you
have otherwise notified us prior to the date specified in our telegrams to
you, or if you are not a member, settlement may be made through a
correspondent who is a member pursuant to the instructions which you will
send to us prior to such specified date.
The above payment shall be made by you at the public offering price, or
if we so advise you, at a net price equal to the public offering price less
the Selected Dealers' Concession. If payment is made by you at the public
offering price, the Selected Dealers' Concession payable to you hereunder
shall be paid promptly after the termination of this Agreement (or on such
earlier date as we may determine), except that the Selected Dealers'
Concession may be withheld and canceled, at our discretion, as to Units which
we have repurchased as set forth in the third paragraph of Section 2 hereof.
4. POSITION OF SELECTED DEALERS AND UNDERWRITERS. You represent that
you are a member in good standing of the NASD or that you are a foreign bank,
dealer or institution, not eligible for membership in the NASD, who agrees
not to offer or sell any Units in the United States of America, its
territories or possessions or to persons who are citizens thereof or
residents therein. In making sales of Units, if you are such a member, you
agree to comply with all applicable rules of the NASD, including without
limitation, the NASD's Interpretation with Respect to Free-Riding and
Withholding and Section 24 of Article III of the NASD's Rules of Fair
Practice, or, if you are a foreign bank, dealer or institution, you agree to
comply with such Interpretations and Sections 8, 24, 25 (insofar as Section
25 applies to a non-member broker or dealer in a foreign country) and 36 of
such Article III as though you were such a member, and with Section 25 of
Article III as it applies to a non-member broker or dealer in a foreign
country. You also confirm that you have complied with the prospectus
delivery requirements of Rule 15c2-8 under the Securities Exchange Act of
1934, as amended, in accordance with your prior oral undertaking to do so.
You are not authorized to give any information or make any
representations other than as contained in the Prospectus, or to act as agent
for any Underwriter or us. Nothing contained herein shall constitute the
Selected Dealers an association, unincorporated business or other separate
entity or partners with us or with each other, but you shall be liable for
your proportionate share of any tax, liability or expense based on any claims
to the contrary. Nor shall we be under any liability to you, except for
obligations expressly assumed by us in this Agreement, and no obligation on
our part shall be implied or inferred herefrom.
5. BLUE SKY MATTERS. Upon application by us, we will inform you as to
the jurisdictions in which we believe the Units have been qualified for sale
under, or are exempt from the requirements of, the respective laws of such
jurisdictions, but we assume no responsibility or obligation as to your right
to sell Shares in any jurisdiction.
6. NOTICES. All communications from you to us shall be addressed to
Morgan Keegan & Company, Inc., 50 Front Street, Memphis, Tennessee 38103.
Any notice from us to you shall be deemed to have been duly given if mailed
or telegraphed to you at the address to which this letter is mailed.
7. TERMINATION. This Agreement shall terminate thirty (30) days after
the date hereof unless extended by us for a period or periods of not
exceeding an additional thirty (30) days in the aggregate and, whether
extended or not, may be terminated by us at any time. Such termination shall
not affect your obligation to pay for any Units purchased by you or any of
the provisions of Section 4 hereof.
-2-
<PAGE>
Please confirm your agreement hereto by signing the duplicate copy of
this Agreement enclosed herewith and returning it to us at the address set
forth in Section 6 above.
Very truly yours,
MORGAN KEEGAN & COMPANY, INC.
EVEREN SECURITIES, INC.
SOUTHWEST SECURITIES, INC.
By: Morgan Keegan & Company, Inc.
By:
------------------------------
Title: Managing Director
-3-
<PAGE>
MORGAN KEEGAN & COMPANY, INC.
EVEREN Securities, Inc.
c/o Morgan Keegan & Company, Inc.
50 Front Street
Memphis, Tennessee 38103
Ladies and Gentlemen:
We hereby confirm our order for _________ Units of U.S. Restaurant
Properties Master L.P. specified in our order and under the terms and
conditions contained in your written confirmation of our purchase and the
foregoing Agreement.
We hereby confirm our agreement to the terms and conditions stated in
the foregoing Agreement. We acknowledge receipt of the Prospectus relating
to the Units and we further state that in entering this order we have relied
upon the Prospectus and not any other statement whatsoever, whether written
or oral. We confirm that we are a member in good standing of the NASD or
that we are a foreign bank, dealer or institution, not eligible for
membership in the NASD, which agrees not to offer or sell any Units in the
United States of America, its territories or possessions or to persons who
are citizens thereof or residents therein. Further, we agree that in making
sales of Units, if we are such a member, we will comply with all applicable
rules of the NASD, including, without limitation, the NASD's Interpretation
with Respect to Free-Riding and Withholding and Sections 8, 24 and 36 of
Article III as though we were such a member, and with Section 25 of Article
III as it applies to non-member brokers or dealers in a foreign country.
------------------------------------
(Print or Type Name of Firm)
By:
---------------------------------
Dated: , 1996
----------------------
<PAGE>
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 , 1995
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I CERTAIN DEFINITIONS .............................. 1
ARTICLE II FORMATION; NAME; PLACE OF BUSINESS ............... 12
2.01. Formation of Partnership; Certificate of Limited
Partnership ............................................ 12
2.02. Name of Partnership .................................... 13
2.03. Place of Business ...................................... 13
2.04. Registered Office and Registered Agent.................. 13
ARTICLE III PURPOSES, NATURE OF BUSINESS, AND POWERS OF
PARTNERSHIP........................................ 13
3.01. Purposes and Business .................................. 13
3.02. Powers.................................................. 14
ARTICLE IV TERM OF PARTNERSHIP................................ 15
4.01. Term ................................................... 15
ARTICLE V CAPITAL ........................................... 15
5.01. Capital Contributions of Managing General Partner ...... 15
5.02. Capital Contributions of Special General Partner ....... 15
5.03. Capital Contribution of Organizational Limited Partner.. 15
5.04. Capital Contributions of Initial Limited Partners ...... 16
5.05. Additional Issuances of Units and Capital
Contributions .......................................... 16
5.06. No Fractional Units .................................... 17
5.07. Splits and Combinations ................................ 17
5.08. Capital Accounts ....................................... 18
5.09. Negative Capital Accounts .............................. 21
5.10. No Interest on Amounts in Capital Account .............. 21
5.11. Advances to Partnership ................................ 21
<PAGE>
PAGE
----
5.12. Liability of Limited Partners ........................... 21
5.13. Return of Capital ...................................... 21
ARTICLE VI ALLOCATION OF PROFITS AND LOSSES;
DISTRIBUTIONS OF CASH FLOW AND CERTAIN
PROCEEDS .......................................... 22
6.01. Certain Definitions .................................... 22
6.02. Allocations for Capital Account Purposes ............... 25
6.03. Allocations for Tax Purposes ........................... 30
6.04. Allocation of Income and Loss with Respect to Interests
Transferred ............................................ 32
6.05. Distributions of Cash Flow ............................. 33
6.06. Distribution of Proceeds from Interim Capital
Transactions ........................................... 33
6.07. Distribution of Proceeds from Terminating Capital
Transactions; Liquidation Distributions ................ 34
ARTICLE VII MANAGEMENT ........................................ 35
7.01. Management and Control of Partnership .................. 35
7.02. Powers of Managing General Partner ..................... 35
7.03. Restrictions on Authority of Managing General Partner .. 41
7.04. Title to Partnership Assets ............................ 42
7.05. Working Capital Reserve ................................ 43
7.06. Other Business Activities of Partners .................. 43
7.07. Transactions with Managing General Partner or
Affiliates ............................................. 43
7.08. Net Worth Representation; Independent Judgment ......... 44
7.09. Liability of General Partners to Partnership and
Limited Partners ....................................... 44
7.10. Indemnification of General Partners and Affiliates ..... 44
7.11. No Management by Limited Partners and Assignees ........ 45
7.12. Other Matters Concerning General Partners .............. 46
7.13. Revolving Line of Credit; Other Loans to or from a
General Partner ........................................ 46
7.14 Purchase or Sale of Units; Registration Rights of
General Partners ....................................... 47
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7.15. Periodic Consideration of Sale or Refinancing .......... 49
7.16. Other Limitations ...................................... 49
ARTICLE VIII ACQUISITION, OPERATION, AND DISPOSITION OF
RESTRICTED RESTAURANT PROPERTIES .................. 50
8.01. General ................................................ 50
8.02. Contribution to Operating Partnership; Acquisition of
Restaurant Properties .................................. 50
8.03. Use and Other Restrictions ............................. 51
8.04. Restrictions on Transfer of Restaurant Properties ...... 55
8.05. Rent Relief ............................................ 57
8.06. Successor Policy ....................................... 59
8.07. Competitive Facilities ................................. 61
8.08. Acquisition of Restaurant Properties By the
General Partners or Affiliates ......................... 61
8.09. Termination of Lease for Restaurant Property
Following Termination of BKC Franchise Agreement ....... 62
8.10. Independent Consultant ................................. 63
8.11. Consent to Use of Name and Trademarks .................. 64
8.12. Acquisition of Fee Title to Properties Subject
to Primary Leases ...................................... 65
8.13. Location of Other Restaurant Properties ................ 65
ARTICLE IX COMPENSATION OF GENERAL PARTNERS: PAYMENT
OF PARTNERSHIP EXPENSES ........................... 65
9.01. Compensation to General Partners ....................... 65
9.02. Expenses in Connection With Organization of
Partnership and Initial Public Offering ................ 65
9.03. Operational Expenses ................................... 66
ARTICLE X BANK ACCOUNTS; BOOKS AND RECORDS; FISCAL
YEAR; STATEMENTS; TAX MATTERS ..................... 68
10.01. Bank Accounts .......................................... 68
10.02. Books and Records ...................................... 68
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10.03. Fiscal Year ............................................ 69
10.04. Financial Statements and Information ................... 69
10.05. Accounting Decisions ................................... 71
10.06. Where Maintained ....................................... 71
10.07. Preparation of Tax Returns ............................. 71
10.08. Tax Elections .......................................... 71
10.09. Tax Controversies ...................................... 71
10.10. Organizational Expense ................................. 72
10.11. Taxation as a Partnership .............................. 72
10.12. Determination of Adjusted Basis in Connection
with Section 754 Election .............................. 72
10.13. Withholding in Respect of Foreign Partners ............. 72
10.14. Qualification as a REIT ................................ 74
ARTICLE XI ISSUANCE AND DEPOSIT OF CERTIFICATE OF
PARTNERSHIP INTEREST .............................. 74
11.01. Issuance of Certificates of Partnership Interest ....... 74
11.02. Deposit of Certificates of Partnership Interest;
Issuance of Depositary Receipts ........................ 75
11.03. Lost, Stolen, or Destroyed Certificates ................ 75
11.04. Record Holder .......................................... 75
ARTICLE XII TRANSFER OF INTERESTS AND UNITS ........................ 76
12.01. Transfer ............................................... 76
12.02. Transfer of Interests of General Partners .............. 76
12.03. Transfer of Units ...................................... 77
12.04. Transfer of Depositary Receipts ........................ 77
12.05. Restrictions on Transfer ............................... 78
ARTICLE XIII ADMISSION OF PARTNERS ............................. 79
13.01 Admission of Initial Limited Partners .................. 79
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13.02. Admission of Substituted Limited Partners ................ 79
13.03. Admission of a Successor General Partner ................. 80
ARTICLE XIV WITHDRAWAL OR REMOVAL OF GENERAL
PARTNERS; WITHDRAWAL OF LIMITED PARTNERS ............ 81
14.01. Withdrawal of General Partners ........................... 81
14.02. Removal of General Partners .............................. 81
14.03. Limitations on Withdrawal or Removal of a General
Partner and Election of a Successor General Partner ...... 82
14.04. Amendment of Agreement and Certificate of
Limited Partnership ...................................... 82
14.05. Interest of Departing Partner and Successor .............. 82
14.06. Withdrawal of Limited Partners ........................... 84
ARTICLE XV DISSOLUTION AND LIQUIDATION ......................... 84
15.01. No Dissolution ........................................... 84
15.02. Events Causing Dissolution ............................... 84
15.03. Right to Continue Business of Partnership ................ 85
15.04. Dissolution .............................................. 86
15.05. Liquidation .............................................. 86
15.06. Reasonable Time for Winding Up ........................... 87
15.07. Termination of Partnership ............................... 88
ARTICLE XVI AMENDMENTS; MEETINGS; RECORD DATE ................... 88
16.01. Amendment to be Adopted Solely by the
Managing General Partner ................................. 88
16.02. Amendment Procedures ..................................... 89
16.03. Amendment Restrictions ................................... 90
16.04. Meetings ................................................. 90
16.05. Notice of a Meeting ...................................... 91
16.06. Record Date .............................................. 91
16.07. Adjournment .............................................. 91
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16.08. Waiver of Notice; Consent to Meeting; Approval
of Minutes ............................................... 91
16.09. Quorum ................................................... 92
16.10. Conduct of Meeting ....................................... 92
16.11. Voting and Other Rights .................................. 92
16.12. Action Without a Meeting ................................. 93
ARTICLE XVII POWER OF ATTORNEY ................................... 93
ARTICLE XVIII MISCELLANEOUS PROVISIONS ............................ 95
18.01. Additional Actions and Documents ......................... 95
18.02 Notices .................................................. 95
18.03. Severability ............................................. 96
18.04. Survival ................................................. 96
18.05. Waivers .................................................. 96
18.06. Exercise of Rights ....................................... 96
18.07. Binding Effect ........................................... 96
18.08. Limitation on Benefits of this Agreement ................. 96
18.09. Force Majeure ............................................ 97
18.10. Consent of Limited Partners and Assignees ................ 97
18.11. Entire Agreement ......................................... 97
18.12. Pronouns ................................................ 97
18.13. Headings ................................................. 97
18.14. Governing Law ............................................ 97
18.15. Execution in Counterparts ................................ 98
ARTICLE XIX EXECUTION ........................................... 98
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SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF U.S. RESTAURANT PROPERTIES MASTER L.P.
(FORMERLY BURGER KING INVESTORS MASTER L.P.)
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (this
"Agreement") is entered into as of March ___, 1995, by and among QSV Properties
Inc., a Delaware corporation having its principal office at 5310 Harvest Hill
Road, Suite 270, Dallas, Texas 75230 (the "Managing General Partner") (or any
other person or entity who shall in the future execute and deliver this
Agreement as a Substituted General Partner pursuant to the provisions hereof) as
the general partner (the "General Partner"), and all other persons and entities
who are or shall in the future become limited partners of this limited
partnership in accordance with the provisions hereof (the "Limited Partners")
(the Limited Partners are sometimes hereinafter referred to as a "Limited
Partner," individually, and the "Limited Partners," collectively, and the
General Partner and the Limited Partners sometimes hereinafter referred to as a
"Partner," individually, and as the "Partners," collectively).
WHEREAS, the Partners and Burger King Corporation, a Florida corporation
("BKC"), as the Special General Partner, heretofore have entered into an
Agreement of Limited Partnership dated as of December 10,1985;
WHEREAS, the Partners and BKC amended and restated such Agreement of
Limited Partnership in its entirety as of January 6, 1986 and February 3, 1986,
and further amended such Agreement of Limited Partnership by Amendments
Nos. ___ through ___ thereto through ____________________, 1995;
WHEREAS, BKC has withdrawn as Special General Partner effective as of
November 30, 1994;
WHEREAS, the Partners desire to further amend and restate such Agreement of
Limited Partnership in its entirety as hereinafter set forth;
NOW, THEREFORE, for and in consideration of the foregoing, and of the
covenants and agreements hereinafter set forth, it is hereby agreed as follows:
ARTICLE I
CERTAIN DEFINITIONS
Unless the context otherwise specifies or requires, the terms defined in
this Article 1 shall, for the purposes of this Agreement, have the meanings
herein specified. Certain other capitalized terms used in this Agreement are
defined in Articles VI, VIII, and XIV. Unless otherwise specified, all
references herein to Articles or Sections are to Articles or Sections of this
Agreement.
ACCOUNTING FIRM: The independent public accountants who are responsible for
assisting in maintaining Partnership tax accounting and allocation records and
advising the Managing General Partner with respect thereto, as selected and
approved by the Managing General Partner from time to time, in its sole and
absolute discretion. The Accounting Firm and the Auditing Firm are not required
to be the same.
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ADDITIONAL LIMITED PARTNER: A Person who is admitted to the Partnership as
a Limited Partner pursuant to Sections 5.05(a) and 13.01.
ADJUSTED BASIS: The basis for determining gain or loss for federal income
tax purposes from the sale or other disposition of property, as defined in
Section 1011 of the Code.
ADJUSTED CAPITAL ACCOUNT DEFICIT: With respect to a Partner or Assignee,
the deficit balance, if any, in that Partner's or Assignee's Capital Account as
of the end of the relevant taxable year, after giving effect to the following
adjustments:
(a) The Capital Account will be increased by any amount that the
Partner or Assignee is obligated to restore, if any, including any amount
he is deemed to be obligated to restore under the penultimate sentences of
Treasury Regulations Section 1.704-2(g)(1) or 1.704-2(i)(5); and
(b) The Capital Account will be decreased by the items described in
Treasury Regulations Sections 1.704-1(b)(2) (ii)(d)(4), (5) and (6).
This definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d).
ADJUSTED PROPERTY: Any property the Carrying Value of which has been
adjusted pursuant to Section 5.08(d)(i) or Section 5.08(d) (ii), in the case of
a distribution described in Section 5.08(d) (ii) (A).
AFFILIATE: (a) Any Person (as hereinafter defined) directly or
indirectly owning, controlling, or holding power to vote ten percent (10%) or
more of the outstanding voting securities of the Person in question; (b) any
Person ten percent (10%) or more of whose outstanding voting securities are
directly or indirectly owned, controlled, or held with power to vote by the
Person in question; (c) any Person directly or indirectly controlling,
controlled by, or under common control with the Person in question; (d) if the
Person in question is a corporation, any executive officer or director of the
Person in question or of any corporation directly or indirectly controlling the
Person in question; and (e) if the Person in question is a partnership, any
general partner owning or controlling ten percent (10%) or more of either the
capital or profits interests in such partnership. As used in this definition of
"Affiliate," the term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise.
AGGREGATE OFFERING PROCEEDS: The total amount of proceeds received by
the Partnership from the Initial Public Offering (including any proceeds
received pursuant to Section 5.04(b) in connection with the over-allotment
option described therein).
AGREEMENT: This Second Amended and Restated Agreement of Limited
Partnership, as it may be further amended or supplemented from time to time.
AMENDED AGREEMENT: The Amended and Restated Agreement of Limited
Partnership of Burger King Investors Master L.P., dated as of February 3, 1986,
entered into by and among the Managing General Partner, BKC, the Organizational
Limited Partner, and the Limited Partners, as amended through __________, 1995.
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ANCILLARY PROPERTY: Personal property (other than personal property
included in the definition of "Restaurant Properties") of whatever kind used in
connection with a Restaurant Property, including, without limitation, supplies,
furnishings, equipment, trade dress and franchise, license and other rights.
APPRAISER: Real Estate Research Corporation or its successor, or in
the event that Real Estate Research Corporation or its successor is not
available for any reason to provide an appraisal with respect to any matter
hereunder, Arthur D. Little and Company or its successor, or in the event that
both Real Estate Research Corporation or its successor and Arthur D. Little and
Company or its successor are not available for any reason to provide an
appraisal with respect to any matter hereunder, Marshall and Stevens,
Incorporated or its successor, or in the event that all of the foregoing
companies are not available for any reason to provide an appraisal with respect
to any matters hereunder, such other independent, nationally recognized real
estate valuation firm selected by the Managing General Partner in its reasonable
discretion.
ASSIGNEE: A Person to whom one or more Units or Depositary Units have
been transferred, by assignment of a Depositary Receipt or otherwise, in a
manner permitted under this Agreement, but who has not been admitted to the
Partnership as a Substituted Limited Partner with respect to such Units. The
rights of any such Person in the Partnership with respect to Units for which
such Person has not been admitted to the Partnership as a Substituted Limited
Partner shall be (i) limited to the rights and obligations appurtenant to such
Units to share in the allocations and distributions of the Partnership,
including liquidating distributions of the Partnership, and (ii) except as
expressly provided herein, otherwise subject to the limitations under the
Delaware RULPA on the rights of an assignee who has not become a substitute
limited partner. An Assignee shall not be entitled to vote on any matter
requiring the vote of Limited Partners, unless such Assignee has been admitted
as a Substituted Limited Partner.
AUDITING FIRM: The independent public accountants who are responsible
for auditing the financial statements of the Partnership as set forth in Section
10.04, as selected and approved by the Managing General Partner from time to
time, in its sole and absolute discretion. The Auditing Firm and the Accounting
Firm are not required to be the same.
BKC: Burger King Corporation, and the successors and assigns of Burger
King Corporation.
BKC FRANCHISE AGREEMENT: A franchise agreement, whether now existing
or hereafter entered into, between a BKC Franchisee and BKC authorizing the BKC
Franchisee to operate a BK Restaurant, as the same may be amended, renewed, or
extended by BKC.
BKC FRANCHISEES: Persons who operate BK Restaurants pursuant to BKC
Franchise Agreements.
BK RESTAURANTS: Burger King "fast food" restaurants, whether operated
by BKC, an Affiliate of BKC, or a BKC Franchisee. "BK Restaurant" means any one
of the BK Restaurants.
BUSINESS DAY: Monday through Friday of each week, except that a legal
holiday recognized as such by the Government of the United States or the State
of Texas shall not be regarded as a Business Day.
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CAPITAL ACCOUNT: The capital account established and maintained for
each Partner and Assignee pursuant to Section 5.08.
CAPITAL CONTRIBUTION: Any property (including cash) contributed to the
Partnership by or on behalf of a Partner.
CARRYING VALUE: (a) With respect to a property contributed to the
Partnership, the fair market value of such property at the time of contribution,
reduced (but not below zero) by all deductions for depreciation, amortization,
cost recovery, and expense in lieu of depreciation debited to the Capital
Accounts of Partners and Assignees pursuant to Section 5.08(a) with respect to
such property as of the time of determination, and (b) with respect to any other
property, the Adjusted Basis of such property as of the time of determination.
The Carrying Value of any property shall be adjusted from time to time in
accordance with Sections 5.08&) and 5.08(c), and to reflect changes, additions
or other adjustments to the Carrying Value for dispositions, acquisitions or
improvements of Partnership properties, as deemed to be necessary or appropriate
by the Managing General Partner.
CERTIFICATE: A non-negotiable certificate issued by the Partnership,
substantially in the form of Exhibit A to this Agreement, evidencing ownership
of one or more Units.
CERTIFICATE OF LIMITED PARTNERSHIP: The Certificate of Limited
Partnership, and any and all amendments thereto, filed on behalf of the
Partnership with the Recording Office as required under the Delaware RULPA.
CLOSING: The "closing time" as defined in the Underwriters Purchase
Agreement.
CLOSING DATE: The date on which the Closing occurs.
CODE: The Internal Revenue Code of 1986, as amended to date and
hereafter amended. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
future law.
COMMISSION: The Securities and Exchange Commission.
CONTRIBUTED PROPERTY: Each Contributing Partner's interest in each
property (or interest therein), or other consideration, but excluding cash and
cash equivalents, contributed directly or indirectly to the Partnership by such
Contributing Partner (or deemed contributed to the Partnership upon termination
thereof pursuant to Section 708 of the Code). Once the Carrying Value of a
Contributed Property is adjusted pursuant to Section 5.08(d), such Property
shall no longer constitute a Contributed Property for purposes of Section
6.03(b), but shall be deemed an Adjusted Property for such purposes.
CONTRIBUTING PARTNER: Each Partner or Assignee contributing directly
or indirectly (or deemed to have contributed upon termination of the Partnership
pursuant to Section 708 of the Code) a Contributed Property to the Partnership
in exchange for a Partnership Interest.
DATE OF DELIVERY: The "date of delivery," as defined in the
Underwriters Purchase Agreement.
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DELAWARE RULPA: The Delaware Revised Uniform Limited Partnership Act
(Del. Code Ann. tit. 6 Section 17-101 ET SEQ.), as amended to date and as it may
be amended from time to time hereafter, and any successor to such Act.
DEPARTING PARTNER: A General Partner who has withdrawn or been removed
pursuant to Section 14.01 or 14.02, as the case may be, as of the effective date
of the withdrawal or removal of such General Partner.
DEPOSIT ACCOUNT: The account established by the Depositary pursuant to
the Deposit Agreement.
DEPOSIT AGREEMENT: The agreement so designated, to be entered into by
and among the Managing General Partner, for itself and in its capacity both as
Managing General Partner and as attorney-in-fact of the Initial Limited
Partners, and the Depositary, as it may be amended or supplemented from time to
time.
DEPOSITARY: The Partnership's depositary, as selected and approved by
the Managing General Partner from time to time, in its sole and absolute
discretion, or any successor to it as depositary under the Deposit Agreement.
DEPOSITARY RECEIPT: A depositary receipt, issued by the Depositary or
agents appointed by the Depositary in accordance with the Deposit Agreement,
evidencing ownership of one or more Depositary Units.
DEPOSITARY UNIT: A Unit on deposit with the Depositary pursuant to the
Deposit Agreement.
DRIP: A distribution reinvestment plan under which the Partnership
issues Units to electing Limited Partners and Assignees in lieu of making
cash distributions to them, which Units could either be issued directly to
such Limited Partners and Assignees or deposited with the Depositary and be
evidenced by Depositary Receipts issued to them.
EFFECTIVE DATE: The date as of which the Managing General Partner on
its own behalf and the Managing General Partner on behalf of the Limited
Partners execute this Agreement after the approval of this Agreement by a
Majority Vote of the Limited Partners.
EXCHANGE ACT: Securities Exchange Act of 1934, as amended, and the
regulations of the Commission promulgated thereunder.
EXTRAORDINARY INCOME AND EXTRAORDINARY LOSS: For each taxable year or
shorter period, the positive sum, in the case of Extraordinary Income, and the
negative sum, in the case of Extraordinary Loss, of all items of gain or loss
recognized by the Partnership from Capital Transactions (other than items
allocated pursuant to the Special Allocations) occurring in such taxable period
and determined in accordance with Section 5.08(b).
FISCAL YEAR: The fiscal year of the Partnership for financial
accounting purposes, and for federal, state, and local income tax purposes,
which shall be the calendar year unless changed by the Managing General
Partner in accordance with Section 10.03.
5
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FOREIGN PARTNER: Any Partner or Assignee who is a foreign person
(within the meaning of Section 1445 or 1446 of the Code and Treasury Regulations
promulgated thereunder) and/or who is not a citizen or resident of the United
States (within the meaning of Section 1.1441-5 of the Treasury Regulations).
GENERAL PARTNERS: The Managing General Partner and any Substituted
General Partner. "General Partner" means one of the General Partners.
INDEPENDENT CONSULTANT: Agribusiness Associates, Inc., or in the event
Agribusiness Associates, Inc. is unable or unwilling to advise the Managing
General Partner on a particular matter or informs the Managing General Partner
that it no longer is willing to serve as Independent Consultant, or in the event
Agribusiness Associates, Inc., is terminated as the Independent Consultant in
accordance with Section 8.10(b), any substitute consultant selected by the
Managing General Partner in accordance with Section 8.10(b).
INITIAL LIMITED PARTNERS: Each Underwriter purchasing Units in the
Initial Public Offering in accordance with Section 5.04 and the Underwriters
Purchase Agreement.
INITIAL PUBLIC OFFERING: The initial public offering of Units, as more
fully described in the Registration Statement.
INITIAL UNIT PRICE: Twenty Dollars ($20).
Limited Partners: The Organizational Limited Partner, the Initial
Limited Partners, the Additional Limited Partners and the Substituted Limited
Partners, each for so long as they are limited partners hereunder. "Limited
Partner" means one of the Limited Partners. An Assignee who has not been
admitted as a Substituted Limited Partner with respect to some or all of the
Units owned by such Assignee shall not be considered a Limited Partner with
respect to such Units for the purposes of this Agreement.
LIQUIDATING TRUSTEE: The Managing General Partner, unless the
dissolution of the Partnership is caused by the withdrawal, bankruptcy, removal,
or dissolution of the Managing General Partner, in which event the Liquidating
Trustee shall be the Person or Persons selected pursuant to Section 15.05.
MAJORITY VOTE OF THE LIMITED PARTNERS: The written consent of, or an
affirmative vote in accordance with Section 16.04 by, Limited Partners of record
who are Limited Partners (and not Assignees) with respect to more than fifty
percent (50%) of the total number of all outstanding Units held by all Limited
Partners of record, as Limited Partners (rather than as Assignees).
MANAGING GENERAL PARTNER: QSV Properties Inc., or any successor
appointed pursuant to Sections 12.02, 14.01,14.02, or 15.03 hereof, as the case
may be.
NASDAQ: The National Association of Securities Dealers Automated
Quotations System.
NATIONAL SECURITIES EXCHANGE: An exchange registered with the
Commission under Section 6(a) of the Exchange Act.
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NET INCOME AND NET LOSS: For each taxable year or shorter period, the
positive sum, in the case of Net Income, or the negative sum, in the ease of Net
Loss, of all items of income, gain, deduction and loss (other than items
included in computing Extraordinary Income and Extraordinary Loss or allocated
pursuant to the Special Allocations) recognized by the Partnership during such
taxable period and determined in accordance with Section 5.08(b).
NON-FOREIGN CERTIFICATE: The certificate issued by any Partner or
Assignee who is not a Foreign Partner pursuant to Section 10.13 to the
Partnership by such Partner or Assignee. Such Certificate shall (i) provide
that such Partner or Assignee is not a foreign person (within the meaning of
Section 1445 or 1446 of the Code) and be in the form prescribed in the Treasury
Regulations promulgated under Sections 1445 and 1446 of the Code or (ii) provide
that such Partner or Assignee is a citizen or resident of the United States.
NONRECOURSE DEDUCTIONS: The meaning ascribed to it in Treasury
Regulations Section 1.704-2(b)(1).
OPERATING PARTNERSHIP: U.S. Restaurant Properties Operating L.P., a
Delaware limited partnership (formerly Burger King Operating Limited
Partnership) which was formed concurrently herewith for the purpose of
acquiring, holding, operating, and disposing of the Restaurant Properties, and
any successor limited partnership.
OPERATING PARTNERSHIP AGREEMENT: The second amended and restated
limited partnership agreement, dated concurrently herewith, by and among the
Managing General Partner, as general partner, BKC, and the Partnership, as sole
limited partner, pursuant to which the Operating Partnership was organized and
is existing, as it may be further amended or supplemented from time to time.
OPINION OF INDEPENDENT COUNSEL: A written opinion of the law firm of
Gibson, Dunn & Crutcher or other nationally recognized counsel designated by or
acceptable to the Managing General Partner, in its sole and absolute discretion.
ORGANIZATIONAL LIMITED PARTNER: QSV.
ORIGINAL AGREEMENT: The Agreement of Limited Partnership of Burger
King Investors Master L.P., dated as of December 10, 1985, entered into by and
among the General Partner, BKC and the Organizational Limited Partner.
OTHER RESTAURANT PROPERTIES: Those certain restaurant properties,
other than Restricted Restaurant Properties, in which the Partnership acquires
an interest after the Effective Date, whether consisting of land to be held in
fee simple or as a leasehold and any improvements thereon (including all real
property and certain personal property associated therewith), together with (i)
any other properties acquired pursuant to Section 7.02(w) with respect to such
properties, (ii) any properties adjacent to such properties, (iii) any
buildings, improvements, or other structures situated on such properties, and
(iv) any further right, title or interest acquired in such properties. "Other
Restaurant Property" means any one of the Other Restaurant Properties.
PARTNER: A General Partner or a Limited Partner. "Partners" means the
General Partners and all Limited Partners. An Assignee who has not been admitted
as a Substituted Limited Partner with respect to some or all of the Units held
by such Assignee
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shall not be considered a Partner with respect to such Units for purposes of
this Agreement.
PARTNER MINIMUM GAIN: The meaning ascribed to it in Treasury
Regulations Section 1.704-2(i)(2).
PARTNER NONRECOURSE DEBT: The meaning ascribed to it in Treasury
Regulations Section 1.704-2(b)(4).
PARTNER NONRECOURSE DEDUCTIONS: The meaning ascribed to it in Treasury
Regulations Section 1.704-2(i)(2).
PARTNERSHIP: The limited partnership created by this Agreement and any
successor partnership thereto continuing the business of the Partnership which
is a reformation or reconstitution of the partnership governed by this
Agreement.
PARTNERSHIP ASSETS: All assets and property, whether tangible or
intangible and whether real, personal, or mixed, at any time owned by the
Partnership, including, without limitation the Partnership's limited partnership
interest in the Operating Partnership and its proportionate interest in all
assets and properties (including, without limitation, the Restaurant Properties)
owned by the Operating Partnership.
PARTNERSHIP INTEREST: As to any Partner, all of the interests of that
Partner in the Partnership, including, without limitation, such Partner's (i)
right to a distributive share of the profits and losses of the Partnership, (ii)
right to a distributive share of Partnership Assets, and (iii) right, if a
General Partner, to participate in the management of the business and affairs of
the Partnership.
PARTNERSHIP MINIMUM GAIN: The meaning ascribed to it in Treasury
Regulations Section 1.704-2(b)(2).
PERSON: Any individual, corporation, association, partnership, joint
venture, trust, estate, or other entity or organization.
PRICE INDEX: The Consumer Price Index for Urban Wage Earners and
Clerical Workers, all items, All Urban, Base 1967 = 100, issued by the Bureau of
Labor Statistics of the U.S. Department of Labor; provided, however, that if
such Consumer Price Index shall be discontinued with no successor or comparable
successor consumer price index, the Managing General Partner, in its sole and
absolute discretion, shall designate a substitute formula.
PRIMARY LEASE: A lease, whether now existing or hereafter entered
into, pursuant to which the Operating Partnership, as the lessee (either in its
own name or as an assignee of BKC pursuant to the Real Estate Purchase Agreement
or otherwise), holds the right to occupy and use a Restaurant Property or any
portion thereof.
QSV: QSV Properties Inc., a Delaware corporation.
REAL ESTATE PURCHASE AGREEMENT: The amended and restated Purchase and
Sale Agreement entered into concurrently with the execution of the Amended
Agreement by and between the Operating Partnership, as purchaser, and BKC, as
seller, pursuant to
8
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which the Operating Partnership purchased from BKC, and BKC sold to the
Operating Partnership, certain of the Restaurant Properties.
RECAPTURE INCOME: Any gain recognized by the Partnership (but computed
without regard to any adjustment required by Sections 734 or 743 of the Code)
upon the disposition of any property or asset of the Partnership that does not
constitute capital gain for federal income tax purposes because such gain
represents the recapture of deductions previously taken with respect to such
property or assets (determined without regard to Code Section 291(a)(1)).
RECORDING OFFICE: The Secretary of State of the State of Delaware.
RECORD DATE: The date established by the Managing General Partner, in
its discretion, subject to Section 6.05(b) in the case of the Record Date for a
distribution pursuant to Article VI, for determining (i) the identity of Limited
Partners entitled to notice of or to vote at any meeting of Limited Partners or
entitled to exercise rights in respect of any other lawful action of Limited
Partners, or (ii) the identity of Partners and Assignees entitled to receive any
report pursuant to Section 10.04 or distribution pursuant to Article VI.
RECORD HOLDER: As applied to the Limited Partners, the Persons shown
as Limited Partners on the records of the Partnership as of the close of
business on a particular day; as applied to a Depositary Receipt, the Person in
whose name the Depositary Receipt is issued, and in whose name the Depositary
Units evidenced thereby are registered on the books of the Depositary or a
Transfer Agent as of the close of business on a particular day; and as applied
to the holder of a Unit that is not on deposit in the Deposit Account, the
Person shown as the owner of such Unit on the records of the Partnership as of
the close of business on a particular day. For purposes of Section 6.05, a
Unitholder who acquires a Depositary Unit in a transaction on a National
Securities Exchange and who is registered on the books of the Depositary or a
Transfer Agent as the owner thereof shall be considered to be a Record Holder as
of the close of business on the "trade date" pursuant to which such Unitholder
acquired such Depositary Unit, irrespective of the actual date on which such
Unitholder's name is entered on the books of the Depositary or a Transfer Agent,
and a Unitholder who disposes of a Depositary Unit in a transaction on a
National Securities Exchange that subsequently is registered on the books of the
Depositary or a Transfer Agent shall cease to be considered to be a Record
Holder prior to the close of business on the "trade date" pursuant to which such
Unitholder transferred such Depositary Unit, irrespective of the actual date on
which such transfer is recorded on the books of the Depositary or a Transfer
Agent. For purposes of determining the Record Holder of a Unit or Depositary
Unit entitled to a distribution of Cash Flow pursuant to Section 6.05 or Net
Proceeds of a Capital Transaction pursuant to Section 6.06 or 6.07, the
Partnership shall adopt and apply conventions from time to time that conform
with the conventions applied by the National Securities Exchange on which the
Depositary Units are listed for ascertaining the entitlement between a selling
shareholder and a purchasing shareholder to dividends declared by a corporation.
REGISTRATION STATEMENT: The Registration Statement on Form S-11 filed
by the Partnership with the Commission under the Securities Act to register the
offering and sale of the Depositary Units in the Initial Public Offering, as the
same may be amended from time to time.
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RESTAURANT PROPERTIES: Restricted Restaurant Properties and Other
Restaurant Properties. "Restaurant Property" means any one of the Restaurant
Properties.
RESTRICTED RESTAURANT PROPERTIES: Those certain restaurant properties,
consisting of the land in which the Partnership holds fee simple title or a
leasehold interest and the improvements thereon (including all real property
and certain personal property associated therewith), (a) held as of the
Effective Date or (b) if (and so long as) a BK Restaurant is located thereon,
acquired after the Effective Date, together with (i) any other properties
acquired pursuant to Section 7.02(w) with respect to such properties after the
Effective Date, (ii) any properties adjacent to such properties that are
acquired by the Partnership after the Effective Date, (iii) any buildings,
improvements, or other structures situated on such properties after the
Effective Date, and (iv) any further right, title or interest acquired in such
properties after the Effective Date (including, without limitation, fee title
acquired pursuant to Section 8.12). "Restricted Restaurant Property" means any
one of the Restricted Restaurant Properties.
SECTION 754 ELECTION: An election under Section 754 of the Code
relating to the adjustment of Adjusted Basis of Partnership Assets, as provided
in Sections 734 and 743 of the Code.
SECURITIES ACT: Securities Act of 1933, as amended, and the
regulations of the Commission promulgated thereunder.
SPECIAL ALLOCATIONS: The special allocations of items of income,
gain, deduction and loss pursuant to Sections 6.02(d) and (e).
SPECIAL GENERAL PARTNER: Burger King Corporation, in such capacity
prior to the Effective Date.
SUBSTITUTED GENERAL PARTNER: A Person who is admitted to the
Partnership as an additional or successor General Partner in accordance with
Section 13.03.
SUBSTITUTED LIMITED PARTNER: A Person who is admitted to the
Partnership as a Limited Partner pursuant to this Agreement in place of, and
with all the rights of, a Limited Partner pursuant to Section 13.02.
"SUCCESSOR POLICY": The "successor policy" of BKC relating to the
extension and/or renewal of BKC Franchise Agreements with BKC Franchisees, which
policy, in connection with such extensions and/or renewals, makes provision for
replacing, reconstructing, expanding, and/or otherwise improving BK Restaurants.
All references are to the successor policy" as in effect on the date hereof, as
the same may be modified, amended, supplemented, superseded, or replaced by BKC
from time to time in its sole and absolute discretion.
SUPER-MAJORITY VOTE OF THE LIMITED PARTNERS: The written consent of,
or an affirmative vote in accordance with Section 16.04 by, Limited Partners of
record who are Limited Partners (and not Assignees) with respect to more than
eighty percent (80%) of the total number of all outstanding Units held by all
Limited Partners of record, as Limited Partners (rather than as Assignees).
TERMINATION DATE: December 31, 2035.
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TPC: The Pillsbury Company, a Delaware corporation and the owner on
the date of the Amended Agreement of all of the issued and outstanding stock of
BKC.
TRANSFER AGENT: The Depositary or any bank, trust company, or other
Person (including the Managing General Partner or any of its affiliates)
appointed by the Managing General Partner from time to time, in its sole and
absolute discretion, to act as transfer agent for Depositary Receipts.
TRANSFER APPLICATION: An application and agreement for transfer of
Depositary Units in the form set forth on the back of the Depositary Receipt or
in a form substantially to the same effect in a separate instrument by which an
Assignee (or his broker, dealer, or nominee holder acting on his behalf)
requests admission to the Partnership as a Substituted Limited Partner, agrees
to be bound by the terms and conditions of this Agreement and the Deposit
Agreement, and grants a power of attorney to the Managing General Partner
pursuant to Article XVII.
TREASURY REGULATIONS: The Income Tax Regulations promulgated under the
Code, as hereafter amended. Any reference herein to a specific section or
sections of specific Treasury Regulations shall be deemed to include a reference
to any corresponding provision of future Treasury Regulations.
TREATY CERTIFICATE: Any certificate or statement issued pursuant to
Section 10.13 to the Partnership by a Foreign Partner. Such certificate or
statement shall be in the form either (i) prescribed in the United States Income
Tax Convention under which such Foreign Partner is entitled to an exemption from
withholding of United States income tax or to a reduction in the otherwise
applicable United States withholding rate or (ii) prescribed in Treasury
Regulations Section 1.1441-6.
UNDERWRITERS: Those underwriting firms listed in the Underwriters
Purchase Agreement or in an exhibit or schedule thereto that purchased Units
distributed in the Initial Public Offering in accordance with the terms of the
Underwriters Purchase Agreement.
UNDERWRITERS PURCHASE AGREEMENT: That agreement entered into prior to
the Closing Date by and among the Partnership, the Operating Partnership, BKC,
and the Underwriters with respect to the purchase of certain Units by the
Underwriters in connection with the Initial Public Offering.
UNIT: A unit representing an equal undivided interest in a Limited
Partner's Partnership Interest.
UNIT PRICE: Of a Unit or a Depositary Unit, as of any date of
determination: (i) if the Depositary Units are listed or admitted to trading on
one or more National Securities Exchanges, the average of the last reported sale
prices per Depositary Unit regular way or, in case no such reported sale takes
place on any such day, the average of the last reported bid and asked prices per
Depositary Unit regular way, in either case on the principal National
Securities Exchange on which the Depositary Units are listed or admitted to
trading, for the five (5) trading days immediately preceding the date of
determination; (ii) if the Depositary Units are not listed or admitted to
trading on a National Securities Exchange but are quoted by NASDAQ, the average
of the last reported sales prices per Depositary Unit regular way or, in case no
reported sale takes place on any such day or the last reported sales prices are
not then quoted, the average of the closing bid
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prices per Depositary Unit, for the five (5) trading days immediately
preceding such date of determination, as furnished by the National Quotation
Bureau Incorporated or such other nationally recognized quotation service as
may be selected by the Managing General Partner for such purpose, if such
Bureau is not at the time furnishing quotations; or (iii) if the Depositary
Units are not listed or admitted to trading on a National Securities Exchange
or quoted by NASDAQ, an amount equal to the fair market value of a Unit as of
such date of determination, as determined by the Managing General Partner
using any reasonable method of valuation.
UNREALIZED GAIN: The excess, if any, of the fair market value of such
Partnership Asset as of the date of determination over the Carrying Value of the
Partnership Asset as of such date of determination.
UNREALIZED LOSS: The excess, if any, of the Carrying Value of a
Partnership Asset as of the date of determination over the fair market value of
such Partnership Asset as of the date of determination.
WITHHOLDING CERTIFICATE: A certificate that provides for reduction or
elimination of the withholding rates or taxes provided for in Sections 1445 or
1446 of the Code and Treasury Regulations promulgated thereunder.
WORKING CAPITAL RESERVE: The reserve for working capital established
by the Managing General Partner pursuant to Section 7.05.
ARTICLE II
FORMATION; NAME; PLACE OF BUSINESS
2.01. FORMATION OF PARTNERSHIP; CERTIFICATE OF LIMITED PARTNERSHIP
The General Partner, BKC and the Organizational Limited Partner agreed
to continue the limited partnership formed as of December 10, 1985, pursuant to
the provisions of the Delaware RULPA and the terms and conditions of the
Original Agreement and the Amended Agreement. Promptly after the execution of
the Original Agreement, the Managing General Partner, in accordance with the
Delaware RULPA, filed with the Recording Office the Certificate of Limited
Partnership. Subsequently, the Managing General Partner, in accordance with the
Delaware RULPA, filed with the Recording Office amendments to the Certificate of
Limited Partnership regarding the withdrawal of BKC as the Special General
Partner and the change in the name of the Partnership. If the laws of any
jurisdiction in which the Partnership transacts business so require, the
Managing General Partner also shall file with the appropriate office in that
jurisdiction a copy of the Certificate of Limited Partnership and any other
documents necessary for the Partnership to qualify to transact business in such
jurisdiction and shall use its best efforts to file with the appropriate office
in that jurisdiction a copy of the Certificate of Limited Partnership and any
other documents necessary to establish and maintain the Limited Partners'
limited liability in such jurisdiction. The Partners further agree and obligate
themselves to execute, acknowledge, and cause to be filed for record, in the
place or places and manner prescribed by law, any amendments to the Certificate
of Limited Partnership as may be required, either by the Delaware RULPA, by the
laws of a jurisdiction in which the Partnership transacts business, or by this
Agreement, to reflect changes in the information contained therein or otherwise
to comply with the requirements
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of law for the continuation, preservation, and operation of the Partnership
as a limited partnership under the Delaware RULPA.
2.02. NAME OF PARTNERSHIP.
The name under which the Partnership shall conduct its business is
U.S. Restaurant Properties Master L.P. The business of the Partnership may be
conducted under any other name deemed necessary or desirable by the Managing
General Partner, in its sole and absolute discretion, except that such other
name may not include the surname of any Limited Partner unless such surname is
also the name or surname of the Managing General Partner. The words "Limited
Partnership" shall be included in the name of the Partnership where necessary
for complying with the laws of any jurisdiction that so requires. The Managing
General Partner (and, if necessary, any other General Partners) promptly shall
execute, file, and record any assumed or fictitious name certificates required
by the laws of Delaware or any other state in which the Partnership transacts
business, and shall publish such certificates or other statements or
certificates as are required by the laws of Delaware or any other state in which
the Partnership transacts business.
2.03. PLACE OF BUSINESS.
The principal place of business of the Partnership on the date hereof
is located at 5310 Harvest Hill Road, Suite 270, Dallas, Texas 75230. The
Managing General Partner may hereafter change the principal place of business of
the Partnership to such other place or places within the United States as the
Managing General Partner may determine from time to time, in its sole and
absolute discretion, provided that the Managing General Partner shall give
written notice thereof to the Limited Partners within ninety (90) days after the
effective date of any such change and, in connection therewith, shall, if
necessary, amend the Certificate of Limited Partnership in accordance with
applicable requirements of the Delaware RULPA. The Managing General Partner may,
in its sole and absolute discretion, establish and maintain such other offices
and additional places of business of the Partnership, either within or without
the State of Delaware, as it deems appropriate.
2.04. REGISTERED OFFICE AND REGISTERED AGENT.
The street address of the registered office of the Partnership shall
be at 1209 Orange Street, Wilmington, Delaware 19801, and the Partnership's
registered agent at such address shall be the Corporation Trust Company.
ARTICLE III
PURPOSES, NATURE OF BUSINESS, AND POWERS OF
PARTNERSHIP
3.01. PURPOSES AND BUSINESS.
The purposes of the Partnership shall be (a) to invest in, acquire,
own, hold a leasehold interest in, manage, maintain, operate, lease, sublease,
improve, finance, reconstruct, sell, exchange, franchise and otherwise dispose
of Restaurant Properties and Ancillary Property, whether through the Operating
Partnership, other Persons or otherwise; (b) in connection therewith, to
exercise all of the rights and powers conferred
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upon the Partnership as the limited partner in the Operating Partnership
pursuant to the Operating Partnership Agreement; and (c) to enter into any
lawful transaction and engage in any lawful activities in furtherance of the
foregoing purposes. The Partnership shall not engage in any business or
activity except as set forth above without the written consent of the General
Partner and a Majority Vote of the Limited Partners.
3.02. POWERS.
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to, or convenient for the
furtherance and accomplishment of the purposes and business described herein and
for the protection and benefit of the Partnership, including, without
limitation, the following:
(a) To borrow money and issue evidences of indebtedness, and to
secure the same by mortgages, deeds of trust, security interests, pledges,
or other liens on all or any part of the Partnership Assets;
(b) To secure and maintain insurance against liability or other loss
with respect to the activities and assets of the Partnership (including,
without limitation, insurance against liabilities under Section 7.10);
(c) To employ or retain such persons as may be necessary or
appropriate for the conduct of the Partnership's business, including
permanent, temporary, or part-time employees and independent attorneys,
accountants, consultants, and contractors;
(d) To acquire, own, hold a leasehold interest in, maintain, use,
lease, sublease, manage, operate, sell, exchange, transfer, or otherwise
deal in assets and property as may be necessary or convenient for the
purposes and business of the Partnership;
(e) To incur expenses and to enter into, guarantee, perform, and
carry out contracts or commitments of any kind, to assume obligations, and
to execute, deliver, acknowledge, and file documents in furtherance of the
purposes and business of the Partnership;
(f) To pay, collect, compromise, arbitrate, litigate, or otherwise
adjust, contest, or settle any and all claims or demands of or against the
Partnership;
(g) To invest in interest-bearing accounts and short-term
investments, including, without limitation, obligations of Federal, state,
and local governments and their agencies, mutual funds (including money
market funds), commercial paper, time deposits, and certificates of deposit
of commercial banks, savings banks, or savings and loan associations; and
(h) To engage in any kind of activity and to enter into and perform
obligations of any kind necessary to or in connection with, or incidental
to, the accomplishment of the purposes and business of the Partnership, so
long as said activities and obligations may be lawfully engaged in or
performed by a limited partnership under the Delaware RULPA.
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ARTICLE IV
TERM OF PARTNERSHIP
4.01. TERM.
The Partnership commenced on the date upon which the Certificate of
Limited Partnership was duly filed with the Recording Office pursuant to
Section 2.01 and shall continue until the Termination Date unless dissolved
and liquidated before the Termination Date in accordance with the provisions
of Article XV.
ARTICLE V
CAPITAL
5.01. CAPITAL CONTRIBUTIONS OF MANAGING GENERAL PARTNER.
(a) INITIAL CONTRIBUTION. Concurrently with the execution of the
Original Agreement, the Managing General Partner made a Capital Contribution
in the amount of One Thousand Dollars ($1,000) in cash.
(b) ADDITIONAL CONTRIBUTION. Concurrently with the Closing (and, in
the case of the over-allotment option described in Section 5.04(b),
concurrently with the Date of Delivery), the Managing General Partner
contributed to the Partnership an amount equal to the excess of (i) one and
one-hundredth percent (1.01%) of the Aggregate Offering Proceeds (including
any proceeds received pursuant to Section 5.04(b) in connection with the
over-allotment option), over (ii) One Thousand Dollars ($1,000).
5.02. CAPITAL CONTRIBUTIONS OF SPECIAL GENERAL PARTNER.
(a) INITIAL CONTRIBUTION. Concurrently with the execution of the
Original Agreement, BKC, as Special General Partner, made a Capital Contribution
in the amount of One Thousand Dollars ($1,000) in cash.
(b) ADDITIONAL CONTRIBUTION. Concurrently with the Closing (and,
in the case of the over-allotment option described in Section 5.04(b),
concurrently with the Date of Delivery), BKC, as the Special General Partner,
contributed to the Partnership an amount equal to the excess of (i) .01
percent (.01%) of the Aggregate Offering Proceeds (including any proceeds
received pursuant to Section 5.04(b) in connection with the over-allotment
option), over (ii) One Thousand Dollars ($1,000).
(c) WITHDRAWAL. Effective as of November 30, 1994, BKC withdrew as
a General Partner pursuant to Section 14.01(a)(ii). The Partnership paid BKC
not more than $8,000 for BKC's right to receive the fair market value of its
former Partnership Interest in Units as contemplated under Section 14.05.
5.03. CAPITAL CONTRIBUTION OF ORGANIZATIONAL LIMITED PARTNER.
Concurrently with the execution of the Original Agreement, the
Organizational Limited Partner made a Capital Contribution in the amount of
One Hundred Dollars ($100) in cash. Concurrently with the Closing, the
Capital Contribution of the Organizational Limited Partner was returned to
it, without interest, the Organizational
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Limited Partner withdrew from the Partnership, and the Organizational Limited
Partner, as such, has no further rights, claims, or interests as a Partner in
and to the Partnership.
5.04. CAPITAL CONTRIBUTIONS OF INITIAL LIMITED PARTNERS.
(a) INITIAL PUBLIC OFFERING. Pursuant to the Underwriters Purchase
Agreement, the Underwriters purchased Units from the Partnership in
connection with the Initial Public Offering, as more fully described in the
Registration Statement. Concurrently with the Closing, each Underwriter, as
an Initial Limited Partner, contributed to the Partnership, in exchange for
that number of Units designated in the Underwriters Purchase Agreement to be
purchased by each such Underwriter, cash in an amount equal to the product of
the Initial Unit Price multiplied by the number of Units designated in the
Underwriters Purchase Agreement to be purchased by each such Underwriter.
(b) OVER-ALLOTMENT OPTION. On the Date of Delivery, in addition to
Units purchased pursuant to Section 5.04(a), to cover over-allotments as
provided in the Underwriters Purchase Agreement, each Underwriter contributed
to the Partnership, in exchange for that number of Units purchased by such
Underwriter pursuant to the exercise of such option, cash in an amount equal
to the product of the Initial Unit Price multiplied by the number of Units
purchased by each such Underwriter pursuant to the exercise of such option.
For purposes of this Agreement all Units issued pursuant to this Section
5.04(b) shall be deemed issued concurrently with the Closing irrespective of
whether or not the Date of Delivery coincided with the Closing Date.
5.05. ADDITIONAL ISSUANCES OF UNITS AND CAPITAL CONTRIBUTIONS.
(a) In order to raise additional capital or to acquire property or
for or in furtherance of any other Partnership purpose, the Managing General
Partner is authorized to cause the Partnership to issue Units (and Depositary
Units), with such characteristics as may be required under Section 6.03, in
addition to those issued pursuant to Section 5.04, at any time or from time
to time to Partners, holders of Units or Depositary Units, holders of options
to purchase Units or Depositary Units, Assignees or other Persons and, in its
sole and complete discretion, to admit them to the Partnership as Additional
Limited Partners, all without any consent or approval of any Limited Partner.
The Managing General Partner shall have sole and absolute discretion in
determining the Capital Contribution to be made or other consideration to be
received (which may be property) and terms and conditions with respect to any
such future issuance of Units. The Managing General Partner is also
authorized to cause the Partnership to issue options, rights, warrants or
appreciation rights to purchase or relating to any Units or debt obligations
of the Partnership convertible into any Units from time to time on terms and
conditions established in the sole and absolute discretion of the Managing
General Partner without the approval at the time of any Limited Partner;
provided that any such issuance to the Managing General Partner or its
executive officers, directors or employees, shall be approved by a Majority
Vote of the Limited Partners unless issued pursuant to a plan or arrangement
approved by a Majority Vote of the Limited Partners. The Managing General
Partner shall do all things it deems to be appropriate or necessary to comply
with the Delaware RULPA and is authorized and directed to do things it deems
to be necessary or advisable in connection with any such future issuances,
including compliance with any statute, rule, regulation or guideline of any
federal, state or other governmental agency or securities exchange on which
the Units are listed for trading. No Limited Partner or Assignee or any
other Person shall have thy preemptive right with respect to the issuance
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or sale of any Units or any debt obligations or any options, rights, warrants
or appreciation rights relating thereto.
(b) Except as specifically provided for in Sections 5.05(a), 5.07
and 14.05(b) or in Section 13.03(b) of the Operating Partnership Agreement,
no Units except those Units issued by the Partnership pursuant to Section
5.04 shall be offered for sale or issued by the Partnership.
(c) No Partner or Assignee shall be required or allowed to make any
Capital Contribution, except as specifically set forth in Sections 5.01,
5.02, 5.03, 5.04, or 5.05(a), 5.09(b), 6.05(b), 10.13 or in Section 13.03(a)
of the Operating Partnership Agreement. All Capital Contributions provided
for in Section 5.04 shall be paid on the Closing Date or the Date of
Delivery, as the case may be, and shall not be deferred for any reason.
5.06. NO FRACTIONAL UNITS.
No fractional Units shall be issued by the Partnership.
5.07. SPLITS AND COMBINATIONS.
(a) The Managing General Partner may (i) make a distribution in
Units to all Record Holders or may effect a subdivision or combination of
Units, but in each case only on a pro rata basis so that, after such
distribution, subdivision, or combination, each Partner and Assignee shall,
subject to Section 5.07(d), have the same Percentage Interest (as defined in
Article VI) in the Partnership as before such distribution, subdivision, or
combination.
(b) Whenever such a distribution, subdivision, or combination is
declared, the Managing General Partner shall select a Record Date as of which
the distribution, subdivision, or combination shall be effective and shall
send notice of the distribution, subdivision, or combination at least twenty
(20) days prior to such Record Date to each Record Holder as of the date ten
(10) days prior to the date of such notice. The Managing General Partner also
may cause the Accounting Firm or another firm of independent public
accountants selected by it to calculate the number of Units to be held by
each Record Holder after giving effect to such distribution, subdivision, or
combination. The Managing General Partner shall be entitled to rely on any
certificate provided by such firm as conclusive evidence of the correctness
of such a calculation.
(c) Promptly following any such distribution, subdivision, or
combination, the Managing General Partner may cause Certificates or
Depositary Receipts, as the case may be, to be issued to the Record Holders
of Units as of the applicable Record Date representing the new number of
Units or Depositary Units held by such Record Holder, or the Managing General
Partner may adopt such other procedures as it may deem appropriate to reflect
such distribution, subdivision, or combination; provided, however, that in
the event any such distribution, subdivision, or combination results in a
smaller total number of Units outstanding, the Managing General Partner shall
require, as a condition to the delivery to a Record Holder of such new
Certificate or Depositary Receipt, the surrender of any Certificate or
Depositary Receipt representing the Units held by such Record Holder
immediately prior to such Record Date.
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(d) The Partnership shall not be required to issue fractional
Units upon any distribution, subdivision, or combination of Units. In the
event any distribution, subdivision, or combination of Units would result in
the issuance of fractional Units but for the provisions of Section 5.06 and
this Section 5.07(d), each fractional Unit shall be rounded to the nearest
whole Unit.
5.08. CAPITAL ACCOUNTS.
(a) A separate Capital Account shall be established and maintained
for each Partner and Assignee. The Capital Account of each Partner and
Assignee shall be (i) credited with (A) the cash and the initial Carrying
Value of any property (net of liabilities secured by such Contributed
Property that the Partnership is considered to assume or take subject to
under Section 752 of the Code) contributed to the Partnership by such Partner
or Assignee, and (B)all items of Partnership income or gain (including income
or gain exempt from tax) computed in accordance with Section 5.08(b) and
allocated to such Partner or Assignee pursuant to Article VI, and shall be
(ii) debited with (A) all items of Partnership deduction and loss computed in
accordance with Section 5.08(b) and allocated to such Partner or Assignee
pursuant to Article VI, and (B) all cash and the fair market value of any
property (net of liabilities secured by such distributed property that such
Partner or Assignee is considered to assume or take subject to under Code
Section 752) distributed by the Partnership to such Partner or Assignee
pursuant to Article VI. Notwithstanding anything to the contrary contained
herein, the Capital Account of a Partner or Assignee shall be determined in
all events solely in accordance with the rules set forth in Treasury
Regulations Section 1.704-1(b)(2)(iv), as the same may be amended or revised
thereafter. Any references in any Section or subsection of this Agreement to
the Capital Account of a Partner or Assignee shall be deemed to refer to such
Capital Account as the same may be credited or debited from time to time as
set forth above.
(b) For purposes of computing the amount of any item of income,
gain, deduction, or loss to be reflected in Capital Accounts, the
determination, recognition, and classification of each such item shall be the
same as its determination, recognition, and classification for federal income
tax purposes (including any method of depreciation, cost recovery or
amortization used for this purpose), provided that:
(i) Solely for purposes of the application of the provisions
hereof, the Partnership shall be treated as owning directly its
proportionate share of all property owned by the Operating Partnership
(as determined by the Managing General Partner based on the provisions
of the Operating Partnership Agreement).
(ii) In accordance with the requirements of Treasury
Regulations Section 1.704-1(b)(2)(iv)(g), any deductions for
depreciation, cost recovery, or amortization, attributable to a
Partnership Asset contributed to the Partnership shall be determined
as if the Adjusted Basis of such Partnership Asset on the date it was
acquired by the Partnership were equal to the Carrying Value of such
Partnership Asset as of such date. Upon an adjustment pursuant to
Section 5.08(d) to the Carrying Value of any Partnership property
subject to depreciation, cost recovery or amortization, an)' further
deductions for such depreciation, cost recovery or amortization
attributable to such property shall be determined (A) as if the
Adjusted Basis of such property were equal to the Carrying Value of
such
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property immediately following such adjustment and (B) using a
predetermined rate of depreciation, cost recovery or amortization
derived from the same method for useful life as is applied for federal
income tax purposes. As a result, the amount of depreciation, cost
recovery or amortization deductions computed for purposes of this
Section 5.08(b) with respect to any Adjusted Property shall bear the
same relationship to the Carrying Value of such property as the
depreciation, cost recovery or amortization computed for federal
income tax purposes with respect to such property bears to the
Adjusted Basis of such property. Solely for the purposes of this
Section 5.08(b), depreciation, cost recovery or amortization
deductions with respect to property with an Adjusted Basis of zero
shall be at the rate which would apply for tax purposes if (I) in the
case of Contributed Property, such property were placed in service on
the date contributed, and (II) in the case of Adjusted Property, such
property were placed in service on the date of adjustment required
pursuant to Section 5.08(d)(i) or 5.08(d)(ii), provided that if such
Adjusted Property was Contributed Property, which was contributed with
the tax basis of zero and such property is not fully depreciated for
Capital Account purposes at the day of the adjustment, all deductions
for depreciation, cost recovery or amortization of such property shall
be derived from the method and useful life theretofore determined
pursuant to clause (I) above;
(iii) Any income, gain, or loss attributable to the taxable
disposition of any Partnership Asset shall be determined by the
Partnership as if the Adjusted Basis of such Partnership Asset as
of such date of disposition were equal in amount to the
Partnership's Carrying Value with respect to such Partnership
Asset as of such date;
(iv) If the Partnership's Adjusted Basis in any depreciable
property is reduced pursuant to Section 48(q) of the Code, then
the amount of such reduction shall be treated as an expense for
the year in which such reduction occurs and allocated to the
Partners and Assignees in the ratio in which depreciation with
respect to such property is allocable. Any restoration of any
such reduction in Adjusted Basis shall be allocated to the
Partners and Assignees to whom the expense was chargeable;
(v) Immediately prior to the distribution of any Partnership
Asset, any Unrealized Gain or Unrealized Loss attributable to such
Partnership Asset shall, for purposes hereof, be deemed to be gain
or loss recognized by the Partnership and shall be allocated among
the Partners in accordance with Article VI. In determining such
Unrealized Gain or Unrealized Loss, the fair market value of such
Partnership Asset shall be determined pursuant to Section 8.08;
(vi) All fees and other expenses incurred (or treated as
incurred) by the Partnership to promote the sale of (or to sell)
interests in the Partnership that can neither be deducted nor
amortized under Section 709 of the Code shall, for purposes of
Capital Account maintenance, be treated as an item of deduction
and shall be allocated among the Partners and Assignees pursuant
to Article VI; and
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(vii) Except as otherwise provided in Treasury Regulations 1.707-
1(b)(2)(iv)(m), the computation of all items of income, gain, loss,
and deduction shall be made without regard to any Section 754 Election
that may be made by the Partnership, and as to those items described
in Section 705(a)(1)(A) or 705(a)(2)(B) of the Code, without regard
to the fact that such items are not included in gross income or are
neither currently deductible nor capitalized for federal income tax
purposes.
(c) Generally, a transferee (including any Assignee) of a
Partnership Interest will succeed to the Capital Account relating to the
Partnership Interest transferred. However, if the transfer causes a
termination of the Partnership under Section 708(b)(1)(B) of the Code, the
Partnership properties shall be deemed to have been distributed in
liquidation of the Partnership to the Partners and Assignees and deemed
recontributed by such Partners and Assignees in reconstitution of the
Partnership. In such event, the Carrying Values of the Partnership
properties shall be adjusted immediately prior to such deemed distribution
pursuant to Section 5.08(d)(ii). The Capital Accounts of such reconstituted
Partnership shall be maintained in accordance with the principles of this
Section 5.08.
(d) (i) Consistent with the provisions of Treasury Regulation
Section 1.704-1(b)(2)(iv)(f), upon an issuance of additional Partnership
Interests for cash or Contributed Property, the Capital Accounts of all
Partners and Assignees shall, immediately prior to such issuance, be
adjusted (consistent with the provisions hereof) upwards or downwards to
reflect any Unrealized Gain or Unrealized Loss attributable to each
Partnership property (as if such Unrealized Gain or Unrealized Loss had
been recognized upon an actual sale of each such property, immediately
prior to such issuance, and had been allocated to the Partners and
Assignees, at such time, pursuant to Section 6.02). In determining such
Unrealized Gain or Unrealized Loss, the aggregate fair market value of
Partnership properties as of any date of determination shall be determined
in the discretion of the Managing General Partner. The Carrying Values of
all Partnership properties shall be adjusted to reflect their relative fair
market values, as determined hereunder by the Managing General Partner in
its sole and absolute discretion. Once the aggregate fair market value has
been determined, the Managing General Partner shall allocate such aggregate
value among the properties of the Partnership, in a manner it deems
reasonable, to determine a fair market value for individual properties.
(ii) In accordance with Treasury Regulation Section 1.704-
1(b)(2)(iv)(f), immediately prior to the actual or deemed distribution of
any Partnership property, the Capital Accounts of all Partners and
Assignees shall, immediately prior to any such distribution, be adjusted
(consistent with the provisions hereof) upwards or downwards to reflect any
Unrealized Gain or Unrealized Loss attributable to each Partnership
property, as if such Unrealized Gain or Unrealized Loss had been recognized
upon an actual sale of each property, immediately prior to such
distribution, and had been allocated to the Partners and Assignees, at such
time, pursuant to Section 6.02. In determining such Unrealized Gain or
Unrealized Loss, the aggregate fair market value of Partnership properties
as of any date of determination shall be determined in the discretion of
the Managing General Partner. The Managing General Partner shalt allocate
such aggregate market value among the properties of the Partnership, in a
manner it deems reasonable, to determine a fair market value for individual
properties.
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5.09. NEGATIVE CAPITAL ACCOUNTS.
(a) Except to the extent provided in Section 5.09(b), and except to
the extent that the Partners are required to make Capital Contributions under
Sections 5.01, 5.02, 5.03, 5.04, and 5.05(a), no Partner or Assignee shall be
required to pay to the Partnership or any other Partner or Assignee any
deficit or negative balance which may exist from time to time in such
Partner's or Assignee's Capital Account.
(b) Notwithstanding the foregoing, if any General Partner has a
deficit balance in its Capital Account following the liquidation of its
Partnership Interest, as determined after taking into account all Capital
Account adjustments for the Partnership Fiscal Year during which such
liquidation occurs, it is unconditionally obligated to restore the amount of
such deficit or negative balance to the Partnership by the end of such Fiscal
Year (or, if later, within 90 days after the date of such liquidation), which
such amount shall, upon liquidation of the Partnership, be paid to creditors
of the Partnership or distributed to other Partners or Assignees in
accordance with their positive Capital Account balances.
5.10. NO INTEREST ON AMOUNTS IN CAPITAL ACCOUNT.
No Partner or Assignee shall be entitled to receive any interest on
its outstanding Capital Account balance.
5.11. ADVANCES TO PARTNERSHIP.
If any Partner or Assignee shall advance funds to the Partnership
in excess of the amounts required hereunder to be contributed by it to the
capital of the Partnership, the making of such advances shall not result in
any increase in the amount of the Capital Account of such Partner or Assignee
or entitle such Partner or Assignee to any increase in its Percentage
Interest (as defined in Article VI), First-Tier Residual Interest (as defined
in Article VI), or Second-Tier Residual Interest (as defined in Article VI).
The amounts of any such advances shall be a debt of the Partnership to such
Partner or Assignee and shall be payable or collectible only out of the
Partnership Assets in accordance with the terms and conditions upon which
such advances are made.
5.12. LIABILITY OF LIMITED PARTNERS.
Except as provided in the Delaware RULPA, Section 7.10(e), and
Section 10.13: (a) none of the Limited Partners or Assignees shall be
personally liable for any debts, liabilities, contracts, or obligations of
the Partnership; (b) a Limited Partner shall be liable only to make payments
of such Limited Partner's Capital Contribution pursuant to Section 5.04 or
5.05(a); and (c) after such Limited Partner's Capital Contribution shall be
fully paid, no Limited Partner shall be required to make any further Capital
Contributions or to lend any funds to the Partnership.
5.13. RETURN OF CAPITAL.
Except upon the dissolution of the Partnership or as otherwise
specifically provided in this Agreement, no Partner or Assignee shall have
the right to demand or to receive the return of all or any part of the
Capital Account or Capital Contributions of such Partner or Assignee.
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ARTICLE VI
ALLOCATION OF PROFITS AND LOSSES;
DISTRIBUTIONS OF CASH FLOW AND CERTAIN PROCEEDS
6.01. CERTAIN DEFINITIONS.
(a) "Cash Flow" shall mean and refer to the sum of the following:
(i) the taxable income (or loss) of the Partnership for federal
income tax purposes as shown on the books of the Partnership for the
period for which such determination is being made, excluding taxable
income or gain or loss from Capital Transactions (as defined in
Section 6.01(b)); increased by (A) the amount of cost recovery or
depreciation deductions or amortization or similar deductions in lieu
thereof deductible by the Partnership in computing such taxable
income, and any other non-cash accruals deductible in determining
federal taxable income or loss, for such period and (B) any non-
taxable income or receipts of the Partnership for such period
(including, without limitation, any amounts received during such
period that were included in taxable income in a prior period) except
(l) Capital Contributions to the Partnership pursuant to Article V and
(2) the proceeds of any loans to the Partnership; and reduced by (AA)
payments from the sum of the foregoing upon the principal of any loans
to the Partnership, (BB) expenditures from the sum of the foregoing
for the acquisition, improvement or replacement of property
(including, without limitation, expenditures in connection with BKC's
"Successor Policy" pursuant to Section 8.06), the financing of tenants
or other reinvestment or use in the business of the Partnership (all
as determined by the Managing General Partner in its sole and absolute
discretion) not financed through Capital Contributions to the
Partnership, loans to the Partnership, or any reserves previously set
aside by the Partnership for such purposes, and for the payment of
items attributable to the acquisition, improvement, or replacement of
property which are not deductible in determining federal taxable
income when paid, (CC) any amounts included in determining gross
income for such period that were not received by the Partnership
during such period, and (DD) transfers from the sum of the foregoing
to reserves for the acquisition, improvement, or replacement of
property, for the repayment of loans and other indebtedness, for
security deposits or other necessary escrows or deposits, to meet
anticipated expenses, and/or for other reinvestment or use as the
Managing General Partner shall deem to be necessary or advisable in
its sole and absolute discretion (including, without limitation,
expenditures to purchase or otherwise acquire Units or Depositary
Units by purchasing or acquiring the respective Depositary Receipts,
and the creation of or additions to the Working Capital Reserve
established pursuant to Section 7.05 and any reserves established by
the Managing General Partner either to implement BKC's "Successor
Policy" pursuant to Section 8.06, to acquire title to any Restaurant
Property subject to a Primary Lease pursuant to Section 8. 12, or to
set aside cash for the purpose of making future distributions of Cash
Flow to the Partners and Assignees consistent with a policy of
avoiding fluctuations in the amount of quarterly distributions of Cash
Flow to the extent practicable); plus
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(ii) any other funds (including amounts previously set aside as
reserves by the Managing General Partner if and to the extent the
Managing General Partner no longer regards such reserves as reasonably
necessary in the efficient conduct of the business of the Partnership)
deemed available for distribution and designated as Cash Flow by the
Managing General Partner.
The Managing General Partner shall determine, in its sole and absolute
discretion, whether funds are derived from or financed through a particular
source or used for a particular purpose for purposes of determining
Partnership Cash Flow for any period. In determining the Cash Flow for any
quarterly period within a Fiscal Year, the Managing General Partner shall
have the authority to apportion expenses and revenues of the Partnership
among quarterly periods within the Fiscal Year in any reasonable manner
consistent with the principles applied in determination of the Partnership's
Net Income or Net Loss, as the case may be, for such Fiscal Year.
(b) "CAPITAL TRANSACTION" means an "Interim Capital Transaction" or a
"Terminating Capital Transaction," as the case may be. An "Interim Capital
Transaction" shall refer to (i) a transaction pursuant to which the
Partnership borrows funds, (ii) a sale, condemnation, exchange, abandonment,
casualty not followed by reconstruction, or other disposition, whether by
foreclosure or otherwise, of a portion (but less than substantially all) of
the Partnership Assets, or (iii) an insurance recovery or any other
transaction which, in accordance with generally accepted accounting
principles, is considered capital in nature, but which is not a Terminating
Capital Transaction. Notwithstanding the foregoing, no transaction shall be
considered to be an Interim Capital Transaction for purposes of this
Agreement if the "net proceeds" thereof ("net proceeds" shall mean the
proceeds received by the Partnership after the payment of all costs and
expenses of any kind or nature incurred by the Partnership in connection with
such transaction) are not material in amount and, in such instance, any
income, gain or loss, and any proceeds attributable to such transaction shall
be included in computing Net Income or Net Loss, as the case may be, and Cash
Flow. A "Terminating Capital Transaction" shall refer to any sale,
condemnation, exchange, abandonment, or other disposition, whether by
foreclosure or otherwise, of all or substantially all of the then remaining
Partnership Assets and/or any other transaction which will result in a
dissolution and liquidation of the Partnership. Any sale or other disposition
of any Partnership Assets in connection with the dissolution and liquidation
of the Partnership pursuant to Article XV shall be considered a "Terminating
Capital Transaction" for purposes of this Article VI.
(c) "NET PROCEEDS OF A CAPITAL TRANSACTION" means the proceeds received
by the Partnership in connection with a Capital Transaction, after (i) the
payment of all costs and expenses of any kind or nature incurred by the
Partnership in connection with such Capital Transaction, (ii) the utilization
of any such proceeds in connection with the discharge of debts and other
obligations of the Partnership required or intended (as determined by the
Managing General Partner, in its sole and absolute discretion) to be
discharged with the proceeds of such Capital Transaction, (iii) the purchase
or other acquisition of Units or Depositary Units by purchasing or acquiring
the respective Depositary Receipts, the retention of such proceeds or a
portion thereof in connection with creation of or addition to the Working
Capital Reserve established pursuant to Section 7.05 or the acquisition,
improvement or replacement of property, the financing of tenants or
reinvestment or other use in the business of the Partnership (all determined
by the Managing General Partner, in its sole and absolute discretion); (iv)
the retention of such proceeds or a portion thereof in connection with the
creation of or addition to any reserves established by the Managing General
Partner to provide for any amounts required to be
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paid by the Partnership either pursuant to Section 8.06 in connection with
the "Successor Policy," pursuant to Section 8.12 in connection with the
purchase of a title to any Restricted Restaurant Property subject to a
Primary Lease or for other reinvestment or use, all as the Managing General
Partner shall deem necessary or advisable in its sole and absolute
discretion. In the event the proceeds of any Interim Capital Transaction are
to be paid in more than one installment, then each such installment shall be
treated as a separate Interim Capital Transaction for purposes of this
Article VI.
(d) "UNRECOVERED CAPITAL" means, with respect to Units issued in the
Initial Public Offering, the Aggregate Offering Proceeds, reduced, as and
when made, by the previous distributions, if any, made to the Limited
Partners and Assignees pursuant to Section 6.06(a). If the Partnership
issues additional Units, the amount of Unrecovered Capital, if any,
attributable to such new Units shall be the amount necessary to preserve the
uniformity of Units, unless the Managing General Partner shall decide in its
sole and absolute discretion that a different amount of Unrecovered Capital
is more appropriate.
(e) "PERCENTAGE INTEREST" of the Managing General Partner and the
Limited Partners and Assignees are as follows:
Managing General Partner--1.00 percent (1.00%)
Limited Partners and Assignees--99.00 percent (99.00%)
The Percentage Interest of each Limited Partner or Assignee is equal to the
product of (i) 99.00 percent (99.00%) multiplied by (ii) a fraction, the
numerator of which is the number of Depositary Units and undeposited Units
held by such Limited Partner or Assignee as of the date of such determination
and the denominator of which is the total number of Depositary Units and
undeposited Units outstanding as of the date of such determination (the "Unit
Fraction").
(f) "FIRST-TIER RESIDUAL INTERESTS" of the Managing General Partner and
the Limited Partners and Assignees are as follows:
Managing General Partner-24.00 percent (24.00%)
Limited Partners and Assignees-76.00 percent (76.00%)
The First-Tier Residual Interest of each Limited Partner or Assignee is equal
to the product of (i) 76.00 percent (76.00%) multiplied by (ii) the Unit
Fraction.
(g) "SECOND-TIER RESIDUAL INTERESTS" of the Managing General Partner
and the Limited Partners and Assignees are as follows:
Managing General Partner-39.00 percent (39.00%)
Limited Partners and Assignees-61.00 percent (61.00%)
The Second-Tier Residual Interest of each Limited Partner or Assignee is
equal to the product of (i) 61.00 percent (61.00%) multiplied by (ii) the
Unit Fraction.
(h) "PRIMARY PREFERENCE" means, with respect to Units issued in the
Initial Public Offering, an amount equal to the product of (i) twelve percent
(12%) per
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annum (applied using the simple interest method for the period from the
Closing Date through the date for which such determination is being made on
the basis of a 365/366-day year and the actual number of days elapsed)
multiplied by (ii) the total daily average outstanding balance of the
Unrecovered Capital (taking into account the distributions, if any, made to
the Limited Partners and Assignees pursuant to Section 6.06(a) which
distributions shall result in a reduction of the Unrecovered Capital on the
date made). If the Partnership issues additional Units, the amount of Primary
Preference and Unrecovered Primary Preference, if any, attributable to such
new Units shall be the amount necessary to preserve the uniformity of Units,
unless the Managing General Partner shall decide in its sole and absolute
discretion that a different amount of Primary Preference and Unrecovered
Primary Preference is appropriate.
(i) Except as may be determined by the Managing General Partner in the
case of new Units, pursuant to Section 6.01(h), "UNRECOVERED PRIMARY
PREFERENCE" means at any given time an amount equal to the excess of (i) the
Primary Preference over (ii) the sum of all previous distributions made to
the Limited Partners and Assignees by the Partnership pursuant to Sections
6.05 and 6.06(b).
(j) "SECONDARY PREFERENCE" means, with respect to Units issued in the
Initial Public Offering, an amount equal to the product of (i) five and
one-half percent (5 1/2%) per annum (applied using the simple interest method
for the period from the Closing Date through the date for which such
determination is being made on the basis of a 365/366-day year and the actual
number of days elapsed) multiplied by (ii) the total daily average
outstanding balance of the Unrecovered Capital (taking into account the
distributions, if any, made to the Limited Partners and Assignees pursuant to
Section 6.06(a), which distributions shall result in a reduction of the
Unrecovered Capital on the date made). If the Partnership issues additional
Units, the amount of Secondary Preference and Unrecovered Secondary
Preference, if any, attributable to such new Units shall be the amount
necessary to preserve the uniformity of Units, unless the Managing General
Partner shall decide in its sole and absolute discretion that a different
amount of Secondary Preference and Unrecovered Secondary Preference is
appropriate.
(k) Except as may be determined by the Managing General Partner in the
case of new Units, pursuant to Section 6.01(j), "UNRECOVERED SECONDARY
PREFERENCE" Means at any given time an amount equal to (i) the sum of the
Primary Preference and the Secondary Preference, less (ii) the sum of all
previous distributions made to the Limited Partners and Assignees by the
Partnership pursuant to Sections 6.05, 6.06(b), and 6.06(c).
(l) "PROPORTIONATE SHARE" means, as to any Limited Partner or Assignee
with respect to the Unrecovered Capital, the Unrecovered Primary Preference,
or the Unrecovered Secondary Preference, as the case may be, an amount equal
to the product of (i) the Unrecovered Capital, Unrecovered Primary
Preference, or Unrecovered Secondary Preference, as the case may be,
multiplied by (ii) the Unit Fraction.
6.02. ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES
For purposes of maintaining the Capital Accounts and in determining
the rights of the Partners and Assignees among themselves, the following
allocations shall be made:
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(a) Bach item of income, gain, loss and deduction attributable to
operations of the Partnership conducted during any taxable period, determined
in accordance with Section 5.08(b) and taken into account in computing Net
Income or Net Loss, shall be allocated among the Partners and Assignees, pro
rata, in proportion to the distributions of Cash Flow to the Partners and
Assignees with respect to such taxable period in accordance with Section 6.05
(including distributions of Cash Flow made in the first ninety (90) days of a
subsequent taxable period with respect to the last quarter of the taxable
period for which the Net Income is being allocated); provided, however, that
if the Net Income or Net Loss to be allocated pursuant to this Section 6.02
for such taxable period exceeds the Cash Flow distributions made with respect
to such taxable period, such excess Net Income or such Net Loss, as the case
may be, of the Partnership for such taxable period shall be allocated among
the Partners and Assignees, pro rata, in accordance with the manner in which
the same amount of Cash Flow would have been distributed to the Partners and
Assignees with respect to such taxable period in accordance with Section 6.05.
(b) Bach item of income, gain, loss and deduction taken into
account in computing Extraordinary Income or Extraordinary Loss attributable
to Interim Capital Transactions, determined in accordance with Section
5.08(b), shall be allocated in the manner described below. All allocations
under this Section 6.02(b) shall be made after Capital Account balances have
been adjusted by Net Income and Net Loss allocations under Section 6.02(a).
(i) Extraordinary Income of the Partnership resulting from an
Interim Capital Transaction shall be allocated as follows and in the
following order of priority:
(A) FIRST: to the extent that the Extraordinary Income
resulting from an Interim Capital Transaction exceeds the Net Proceeds
of such Interim Capital Transaction, an amount of such Extraordinary
Income in excess of Net Proceeds equal to the aggregate negative
balances in the Capital Accounts of the Partners and Assignees, if
any, shall be allocated to the Partners and Assignees having such
negative balances, such income being allocated to such Partners and
Assignees, pro rata, in proportion to the respective negative balances
in their Capital Accounts;
(B) SECOND: an amount of Extraordinary Income resulting
from such Interim Capital Transaction equal to the Net Proceeds of
such Interim Capital Transaction shall be allocated to the Partners
and Assignees, pro rata, in the same proportion that the Net Proceeds
of such Interim Capital Transaction are distributable to the Partners
and Assignees in accordance with Section 6.06; and
(C) THIRD: any remaining Extraordinary Income from such
Interim Capital Transaction shall be allocated among the Partners and
Assignees, pro rata, in accordance with the manner in which the same
amount of Net Proceeds from such Interim Capital Transaction would
have been distributed to the Partners and Assignees in accordance with
Section 6.06, taking into consideration (for purposes of determining
the level of distributions under Section 6.06 at which any such Net
Proceeds from Interim Capital Transactions would have been
distributed) allocations of Extraordinary Income under this Section
6.02(b)(i)(C) for previous taxable periods, as subsequently reduced by
distributions of Net Proceeds from Interim
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Capital Transactions for any taxable period in excess of Extraordinary
Income for such taxable period.
(ii) Extraordinary Loss of the Partnership resulting from an
Interim Capital Transaction shall be allocated as follows and in the
following order of priority:
(A) Until the Unrecovered Capital and the Unrecovered
Primary Preference are equal to zero, Extraordinary Losses from an
Interim Capital Transaction shall be allocated, first, to the Partners
and Assignees, if any, having positive Capital Account balances, so as
to cause their respective Capital Accounts (after giving effect to
such allocation) to be in the same proportion to each other as are
their respective Percentage Interests, then to Partners and
Assignees, pro rata, in accordance with their respective Percentage
Interests until all such positive balances have been eliminated, and
thereafter, to all Partners and Assignees, pro rata in accordance with
their respective Percentage Interests; or
(B) If the Unrecovered Capital and the Unrecovered
Primary Preference both are equal to zero but the Unrecovered
Secondary Preference is not equal to zero, Extraordinary Losses from
an Interim Capital Transaction shall be allocated, first, to the
Partners and Assignees, if any, having positive Capital Account
balances so as to cause their respective Capital Accounts (after
giving effect to such allocation) to be in the same proportion to each
other as are their respective First-Tier Residual Interests, then to
Partners and Assignees, pro rata, in accordance with their respective
First-Tier Residual Interests until all such positive balances have
been eliminated, and thereafter, to all Partners and Assignees, pro
rata, in accordance with their respective First-Tier Residual
Interests; or
(C) If the Unrecovered Capital, the Unrecovered
Primary Preference, and the Unrecovered Secondary Preference are each
equal to zero, Extraordinary Losses from an Interim Capital
Transaction shall be allocated, first, to the Partners and Assignees,
if any, having positive Capital Account balances so as to cause their
respective Capital Accounts (after giving effect to such allocation)
to be in the same proportion to each other as are their respective
Second-Tier Residual Interests, then to Partners and Assignees, pro
rata, in accordance with their respective Second-Tier Residual
Interests until all such positive balances have been eliminated, and
thereafter, to all Partners and Assignees, pro rata, in accordance
with their respective Second-Tier Residual Interests.
(iii) In the event the proceeds of any Interim Capital
Transaction are to be paid in more than one installment, then Extraordinary
Income or Loss, as the case may be, recognized on the payment of each such
installment shall be treated as Extraordinary Income or Loss, as the case
may be, from a separate Interim Capital Transaction for purposes of this
Section 6.02(b).
(c) Extraordinary Income or Loss of the Partnership resulting from a
Terminating Capital Transaction (and, if necessary, individual items of
income, gain, deduction or loss making up such Extraordinary Income or
Extraordinary Loss) shall be allocated to the Partners and Assignees (after
allocating to the Partners and Assignees the
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appropriate portion of all Net Income or Loss and Extraordinary Income or
Loss of the Partnership for the then current taxable period in accordance
with Sections 6.02(a) and 6.02(b) and after reducing their respective Capital
Accounts for all cash distributed (or distributable during or with respect to
such taxable period under Sections 6.05 and 6.06) in a manner that, to the
maximum extent possible, will adjust their respective Capital Account
balances so that the Net Proceeds of a Terminating Capital Transaction and
any other remaining assets of the Partnership that are available for
distribution will be distributed to the Partners and Assignees under Section
6.07 in the manner and priority indicated in Section 6.06.
(d) SPECIAL ALLOCATIONS. Except as otherwise provided in this
Agreement, the following special allocations will be made in the following
order and priority:
(i) Notwithstanding any other provision of this Section 6.02, if
there is a net decrease in Partner Minimum Gain during any taxable year or
other period for which allocations are made, each Partner or Assignee will
be specially allocated items of Partnership income and gain for that period
(and, if necessary, subsequent periods) in accordance with the requirements
of Treasury Regulations Section 1.704-2(i)(4). This Section 6.02(d)(i) is
intended to comply with the minimum gain charge-back requirements of
Treasury Regulations Section 1.704-2(i)(4).
(ii) Notwithstanding any other provision of this Section 6.02, if
there is a net decrease in Partnership Minimum Gain during any taxable year
or other period for which allocations are made, each Partner or Assignee
will be specially allocated items of Partnership income and gain for that
period (and, if necessary, subsequent periods) in accordance with the
requirements of Treasury Regulations Section 1.704-2(f). This Section
6.02(d)(ii) is intended to comply with the minimum gain charge-back
requirements of Treasury Regulations Section 1.704-2(f).
(iii) A Partner or Assignee who unexpectedly receives any
adjustment, allocation or distribution described in Treasury Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6) will be specially allocated
items of Partnership income and gain in an amount and manner sufficient to
eliminate, to the extent required by the Treasury Regulations, the Adjusted
Capital Account Deficit of the Partner or Assignee as quickly as possible,
provided that any allocation pursuant to this Section 6.02(d) (iii) will be
made if and only to the extent that such Partner or Assignee would have an
Adjusted Capital Account Deficit after all other allocations provided for
in Section 6.02 have been tentatively made as if this Section 6.02(d) (iii)
were not in this Agreement.
(iv) Each Partner or Assignee who has a deficit Capital Account
at the end of any Partnership taxable year that is in excess of the amount
such Partner or Assignee is deemed to be obligated to restore under the
penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5) will be specially allocated items of Partnership income and
gain in the amount of the excess as quickly as possible, provided that any
allocation pursuant to this Section 6.02(d) (iv) will be made if and only
to the extent that such Partner or Assignee would have a deficit Capital
Account in excess of such sum after all other allocations provided for in
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Section 6.02 have been tentatively made as if Section 6.02(d)(iii) and this
Section 6.02(d) (iv) were not in this Agreement.
(v) Nonrecourse Deductions for any taxable year or other period
for which allocations are made will be allocated among the Partners or
Assignees in proportion to their respective Percentage Interests.
(vi) Any Partner Nonrecourse Deductions for any taxable year or
other period for which allocations are made will be allocated to the
Partner or Assignee who bears the economic risk of loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable in accordance with Treasury Regulations Section 1.704-2(i)(1).
(vii) To the extent an adjustment to the adjusted tax basis of any
Partnership asset under Code Sections 734(b) or 743(b) is required to be
taken into account in determining Capital Accounts under Treasury
Regulations Section 1.704-1(b)(2)(iv)(m), the amount of the adjustment to
the Capital Accounts will be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases the
basis), and the gain or loss will be specially allocated to the Partners or
Assignees in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted under Treasury Regulations Section
1.704-1(b)(2)(iv)(m).
(viii) To the extent any item of deduction or loss allocated to a
Partner or Assignee would cause the Partner or Assignee to have an Adjusted
Capital Account Deficit at the end of any taxable period, the item of
deduction or loss will be reallocated to the Managing General Partner.
(ix) In the event that any fees, interest, or other amounts paid
to any General Partner pursuant to this Agreement, or any agreement between
the Partnership and the General Partner providing for the payment of such
amount, and deducted by the Partnership in reliance on Sections 707(a)
and/or 707(c) of the Code, are disallowed as deductions to the Partnership
on its federal income tax return and are treated as Partnership
distributions, then there shall be allocated to the General Partner to
which such fees, interest, or other amounts were paid, prior to the
allocations pursuant to this Section 6.02(d), an amount of gross income,
for the year in which such fees, interest, or other amounts were paid,
equal to the amount of such fees, interest, or other amounts that are
treated as Partnership distributions.
(x) In the event that, upon the exercise of any options granted by
the Partnership, a sale of Partnership assets is deemed to result by virtue
of the value of the interest in the Partnership received upon exercise of
the option exceeding the exercise price of the option, any gain or loss
resulting from such deemed sale, and any compensation or other deductions
of the Partnership in connection with the exercise of such option, shall be
allocated among the Partners and Assignees in accordance with the
provisions of Section 6.02(a) without consideration of any change in the
Percentage Interests of the Partners and Assignees resulting from the
exercise of the option.
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(xi) Notwithstanding any other provision of this Agreement, no
allocation of any item of income, gain, loss or deduction will be made to a
Partner or Assignee if the allocation would not have "economic effect"
under Treasury Regulations Section 1 .704-1(b)(2)(ii) or otherwise would
not be in accordance with the Partner's interest in the Partnership within
the meaning of Treasury Regulations Section 1.704-1(b) (3). The Managing
General Partner will have the authority in its sole and absolute discretion
to reallocate any item in accordance with this Section 6.02(d)(ix).
(e) CURATIVE ALLOCATIONS. The allocations set forth in Section
6.02(d) (the "Regulatory Allocations") are intended to comply with certain
requirements of Treasury Regulations Section 1.704-2. The Regulatory
Allocations may not be consistent with the manner in which the Partners and
Assignees intend to divide Partnership distributions. Accordingly, the
Managing General Partner is authorized to divide other allocations of items
of income, gain, deduction and loss among the Partners and Assignees so as to
prevent the Regulatory Allocations from distorting the manner in which
Partnership distributions would be divided among the Partners but for
application of the Regulatory Allocations. In general, the reallocation will
be accomplished by specially allocating other items of income, gain,
deduction and loss, to the extent they exist, among the Partners and
Assignees so that the net amount of the Regulatory Allocations and the
special allocations to each Partner and Assignee is zero. However, the
Managing General Partner will have discretion to accomplish this result in
any reasonable manner that is consistent with Code Section 704 and the
related Treasury Regulations.
(f) MINIMUM ALLOCATIONS TO MANAGING GENERAL PARTNER.
Notwithstanding anything in this Agreement (other than allocations contained
in Section 6.02(d) required by Sections 704(b) and 704(c) of the Code) to the
contrary, the interest of the Managing General Partner in each material item
of Partnership income, gain, deduction and loss shall equal at least 1% of
each such item at all times during the existence of the Partnership
(determined by excluding any Units owned by the Managing General Partner in
its capacity as a Limited Partner).
6.03. ALLOCATIONS FOR TAX PURPOSES.
(a) Except as otherwise provided in this Section 6.03, for federal
income tax purposes, each item of income, gain, loss and deduction shall be
allocated among the Partners and Assignees in the same manner as its
correlative item of "book" income, gain, loss or deduction has been allocated
pursuant to Section 6.02.
(b) In an attempt to eliminate any disparities between the
Carrying Value and the Adjusted Basis of Contributed Property or Adjusted
Property, items of income, gain, loss, depreciation and cost recovery
deductions shall be allocated for federal income tax purposes among the
Partners and Assignees as follows:
(i) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners and Assignees in
the manner provided under Section 704(c)(1) of the Code that takes into
account the variation between the Carrying Value of such property and its
Adjusted Basis at the time of contribution.
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(ii) In the case of an Adjusted Property, such items attributable
thereto shall (A) first, be allocated among the Partners and Assignees in a
manner consistent with the principles of Section 704(c)(1) of the Code to
take into account the Unrealized Gain or Unrealized Loss attributable to
such property and the allocations thereof pursuant to Section 5.08(d), and
(B) second, in the event such property was originally a Contributed
Property, be allocated among the Partners and Assignees in a manner
consistent with Section 6.03(b)(i).
(iii) Except as otherwise provided in Section 6.03(b)(iv), in
the case of all other properties, items of income, gain, loss and deduction
attributable to such property shall be allocated among the Partners and
Assignees in accordance with Section 6.03(a).
(iv) Any items of income, gain, loss or deduction otherwise
allocable under Sections 6.03(a) or 6.03(b) (iii) shall be subject to
allocation by the Managing General Partner in any reasonable manner
designed to eliminate, to the maximum extent possible, any disparities
between the. Carrying Value and the Adjusted Basis in a Contributed
Property or an Adjusted Property otherwise resulting from the application
of the ceiling limitation (under Section 704(c)(1) of the Code or Section
704(c)(1) principles) to the allocations provided under Sections 6.03(b)(i)
or 6.03(b)(ii).
(c) To the extent of any Recapture Income resulting from the sale
or other taxable disposition of Partnership Assets, the amount of any gain
from such disposition allocated to (or recognized by) a Partner or Assignee
for federal income tax purposes pursuant to the above provisions shall be
deemed to be Recapture Income to the extent such Partner or Assignee (or its
predecessors in interest) has been allocated or has claimed any deduction
directly or indirectly giving rise to the treatment of such gain as Recapture
Income.
(d) All items of income, gain, loss and deduction recognized by
the Partnership for federal income tax purposes and allocated to the Partners
and Assignees in accordance with the provisions hereof and all basis
allocations shall be determined without regard to any election under Section
754 of the Code which may be made by the Partnership.
(e) It is intended that the allocations prescribed in Sections
6.03(b)(i) and (b)(ii) constitute allocations for federal income tax purposes
that are consistent with Section 704 of the Code and comply with any
limitations or restrictions therein. To preserve the uniformity of Units, in
addition to the allocation provided in Section 6.03(b)(iv), the Managing
General Partner shall have sole discretion to adopt such conventions as it
deems appropriate in determining the amount of depreciation and cost recovery
deductions and amend the provisions of this Agreement as appropriate (i) to
reflect the proposal or promulgation of Treasury Regulations under Section
704(c)(1) of the Code, or (ii) otherwise to preserve the uniformity of the
intrinsic tax characteristics of the Units issued or sold from time to time.
The Managing General Partner may adopt such conventions, make such allocations
and make such amendments to this Agreement as provided in this Section 6.03(e)
only if they would not have a material adverse effect on the Limited Partners
and Assignees. The Managing General Partner may use any reasonable depreciation
convention to preserve the uniformity of the intrinsic tax
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characteristics of Units that would not have a material adverse effect on the
Limited Partners and Assignees. If the Managing General Partner determines,
based upon advice of counsel, that no reasonable reporting position exists
that the Units have, as a substantive matter, like intrinsic tax
characteristics, in all material respects, in the hands of a purchaser, then
the Units may be separately identified, to the extent practicable, to reflect
intrinsic differences in tax consequences, regardless of the cause of any
such nonuniformity.
(f) Solely for purposes of the interpretation and application of
this Article VI, the Partnership shall be treated as owning its proportionate
share of all properties owned by the Operating Partnership.
6.04. ALLOCATION OF INCOME AND LOSS WITH RESPECT TO INTERESTS TRANSFERRED.
(a) If any Partnership Interest is transferred during any Fiscal
Year, the Net Income or Net Loss attributable to such interest for such
Fiscal Year shall be divided and allocated proportionately between the
transferor and the transferee based upon the number of days during such
Fiscal Year for which each party was the Record Holder of the Partnership
Interest transferred. For the purpose of accounting simplicity, the
Partnership will treat Partners and Assignees who are Record Holders as of
the close of business on the last day of a calendar month (commencing with
the month in which the Partnership is formed) as having been Partners or
Assignees, as the case may be, for the entire month. Similarly, a Partner or
Assignee who is not a Record Holder as of the close of business on the last
day of a calendar month will not be treated for purposes of this Section 6.04
as a Partner or Assignee, as the case may be, for such calendar month. The
Managing General Partner is authorized to alter this accounting convention to
conform with any regulations issued by the Treasury Department or rulings or
advice of the Internal Revenue Service, as the Managing General Partner shall
deem necessary or appropriate.
(b) Extraordinary Income or Loss of the Partnership realized in
connection with an Interim Capital Transaction shall be allocated only to
those Partners and Assignees who are Record Holders as of the close of
business on the last day of the calendar month in which such Interim Capital
Transaction occurs. Extraordinary Income or Loss of the Partnership realized
in connection with a Terminating Capital Transaction shall be allocated only
to Persons who are the Record Holders of Partnership Interests as of the date
such Terminating Capital Transaction occurs.
(c) Distributions of Partnership assets (including cash) in
respect of a Unit or Depositary Unit shall be made only to the Person who,
according to the books and records of the Partnership, is the Record Holder
of such Unit or Depositary Unit in respect of which such distribution is made
as of the Record Date for such distribution. The Record Dates for all
distributions of Cash Flow shall be selected so that each Unitholder who
receives a distribution of Cash Flow for a fiscal quarter will be allocated
Net Income or Net Loss, as the case may be, for at least one month.
(d) The Managing General Partner shall incur no liability for
making allocations and distributions in accordance with the provisions of
this Section 6.04, whether or not the Managing General Partner has knowledge
or notice of any transfer or purported transfer of ownership of any Unit,
Depositary Unit, or Partnership Interest.
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6.05. DISTRIBUTIONS OF CASH FLOW.
(a) ALLOCATION AND DISTRIBUTION. Cash Flow of the Partnership
shall be determined for each calendar quarter of each Fiscal Year. Cash Flow
as so determined shall be distributed in cash to the Partners and Assignees
as follows and in the following order of priority:
(i) FIRST: to the Partners and Assignees, pro rata, in
accordance with their respective Percentage Interests, until the Limited
Partners and Assignees collectively shall have received in the aggregate
with respect to such Fiscal Year an amount of Cash Flow equal to the
product of (x) twelve percent (12%) multiplied by (y) the outstanding
balance of the Unrecovered Capital as of the first day of such Fiscal Year;
(ii) SECOND: to the Partners and Assignees, pro rata, in
accordance with their respective First-Tier Residual Interests, until the
Limited Partners and Assignees collectively shall have received, in the
aggregate pursuant to Section 6.05(a)(i) and this Section 6.05(a)(ii) with
respect to such Fiscal Year, an amount of Cash Flow equal to the product of
(x) seventeen and one-half percent (17 1/2%) multiplied by (y) the
outstanding balance of the Unrecovered Capital as of the first day of such
Fiscal Year; and
(iii) THIRD: to the Partners and Assignees, pro rata, in
accordance with their respective Second-Tier Residual Interests.
Distributions of Cash Flow within the first ninety (90) days of a subsequent
Fiscal Year designated by the Managing General Partner as made with respect
to the last quarter of the immediately prior Fiscal Year shall be considered
made with respect to such prior Fiscal Year for purposes of this Section
6.05(a).
(b) TIMING OF DISTRIBUTIONS. Cash Flow shall be distributed
quarterly, within seventy-five (75) days after the end of each calendar
quarter of a Fiscal Year, commencing with the calendar quarter ended March
31, 1986, with such distribution to be made to Record Holders of Units and
Depositary Units as of the close of business on the Record Date for such
distribution. The Partners and Assignees agree that, within thirty (30) days
after determination by the Partnership that an overpayment was made to any
Partner or Assignee for any Fiscal Year pursuant to this Section 6.05, such
Partner or Assignee shall repay, allow as a credit against future
distributions, or make such other adjustments as may be appropriate to remedy
such overpayment. Likewise, appropriate adjustments shall be made to remedy
any underpayment.
6.06. DISTRIBUTION OF PROCEEDS FROM INTERIM CAPITAL TRANSACTIONS.
The Net Proceeds of an Interim Capital Transaction shall be
distributed to the Partners and Assignees as follows and in the following
order of priority:
(a) FIRST: to the Partners and Assignees, pro rata, in accordance
with their respective Percentage Interests, until the Limited Partners and
Assignees collectively shall have received in the aggregate pursuant to this
Section 6.06(a) an amount equal to the Unrecovered Capital;
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(b) SECOND: to the Partners and Assignees, pro rata, in accordance
with their respective Percentage Interests, until the Limited Partners and
Assignees collectively shall have received in the aggregate pursuant to this
Section 6.06(a) an amount equal to their then outstanding Unrecovered Primary
Preference;
(c) THIRD: to the Partners and Assignees, pro rata, in accordance with
their respective First-Tier Residual Interests, until the Limited Partners and
Assignees collectively shall have received in the aggregate pursuant to Section
6.06(b) and this Section 6.06(c) an amount equal to their then outstanding
Unrecovered Secondary Preference; and
(d) FOURTH: to the Partners and Assignees, pro rata, in accordance
with their respective Second-Tier Residual Interests.
Distributions pursuant to this Section 6.06 shall be made within seventy-five
(75) days of the receipt of proceeds with respect to an Interim Capital
Transaction, with such distribution to be made to the Record Holders of Units
and Depositary Units as of the close of business on the Record Date for such
distribution.
6.07. DISTRIBUTION OF PROCEEDS FROM TERMINATING CAPITAL TRANSACTIONS;
LIQUIDATION DISTRIBUTIONS.
(a) The Net Proceeds of a Terminating Capital Transaction and any
other remaining assets of the Partnership to be distributed to the Partners
and Assignees in connection with dissolution and liquidation of the
Partnership pursuant to Article XV, after the payment of all debts,
liabilities, and obligations of the Partnership in the manner provided in
Section 15.05 hereof (including, without limitation, all amounts owing to the
General Partners under this Agreement (other than this Article VI) or under
any agreement between the Partnership and the General Partners entered into
by the General Partners other than in their capacity as Partners in the
Partnership), including, without limitation, the payment of expenses of
liquidation of the Partnership, and the establishment of a reasonable reserve
(including an amount estimated by the Managing General Partner to be
sufficient to pay an amount reasonably anticipated to be required to be paid
pursuant to Section 7.10 hereof), shall be distributed to the Partners and
Assignees, pro rata, in proportion to the positive balances, if any, in their
respective Capital Accounts. A distribution pursuant to this Section 6.07
shall be made to the Record Holders of Units and Depositary Units as of the
close of business on the Record Date for such distribution.
(b) Notwithstanding any provision in this Section 6.07 to the
contrary, in the event that the Net Proceeds of the Terminating Capital
Transaction are to be paid to the Partnership in more than one installment,
each such installment (including any interest thereon) shall be allocated
among the Partners and Assignees in accordance with their respective
"Installment Percentages." The "Installment Percentage" of each Partner and
Assignee shall be equal to (i) the aggregate amount of cash that would have
been distributed to that Partner or Assignee under Sections 6.07(a) and (b)
had the Net Proceeds of the Terminating Capital Transaction been paid in one
lump sum, divided by (ii) the total Net Proceeds that would have been
distributed to all of the Partners and Assignees under those Sections.
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ARTICLE VII
MANAGEMENT
7.01. MANAGEMENT AND CONTROL OF PARTNERSHIP.
Except as otherwise expressly provided or limited by the provisions
of this Agreement (including, without limitation, the provisions of Article
VIII), the Managing General Partner shall have full, exclusive, and complete
discretion to manage and control the business and affairs of the Partnership
and the Operating Partnership, to make all decisions affecting the business
and affairs of the Partnership and the Operating Partnership, and to take all
such actions as it deems necessary or appropriate to accomplish the purposes
of the Partnership and the Operating Partnership as set forth herein and in
the Operating Partnership Agreement. The Managing General Partner shall use
reasonable efforts to carry out the purposes of the Partnership and shall
devote to the management of the business and affairs of the Partnership and
the Operating Partnership such time as the Managing General Partner, in its
reasonable discretion, shall deem to be reasonably required for the operation
thereof. No Limited Partner or Assignee shall have any authority, right, or
power to bind the Partnership or the Operating Partnership, or to manage or
control, or to participate in the management or control of, the business and
affairs of the Partnership or the Operating Partnership in any manner
whatsoever.
7.02. POWERS OF MANAGING GENERAL PARTNER.
Subject to the limitation of Section 7.03, which vests certain
voting rights in the Limited Partners, and to the limitations and
restrictions set forth in Article VIII, the Managing General Partner (acting
on behalf of the Partnership and the Operating Partnership) shall have the
right, power, and authority, in the management of the business and affairs of
the Partnership and Operating Partnership, to do or cause to be done any and
all acts, at the expense of the Partnership or Operating Partnership, as the
case may be, deemed by the Managing General Partner to be necessary or
appropriate to effectuate the business, purposes, and objectives of the
Partnership and the Operating Partnership. The power and authority of the
Managing General Partner pursuant to this Agreement and the Operating
Partnership Agreement shall be liberally construed to encompass all acts and
activities in which a partnership may engage under the Delaware RULPA. The
power and authority of the Managing General Partner shall include, without
limitation, the power and authority on behalf of the Partnership and the
Operating Partnership:
(a) To serve as managing general partner of the Operating
Partnership and, as Managing General Partner of the Partnership, to exercise
all rights of the Partnership as limited partner in the Operating Partnership
pursuant to the Operating Partnership Agreement;
(b) Upon consummation of the Closing, to cause the Partnership to
contribute the Aggregate Offering Proceeds and the Capital Contributions of
the General Partners to the Operating Partnership as provided for in the
Operating Partnership Agreement, to cause the Operating Partnership to
acquire certain Restaurant Properties from BKC pursuant to the Real Estate
Purchase Agreement, to cause the Operating Partnership to pay to BKC the
purchase price for such Restaurant Properties specified in the Real Estate
Purchase Agreement, and to take all other actions and make all other
decisions in connection with the acquisition of any Partnership Properties by
the Operating
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Partnership from BKC as the Managing General Partner, in its sole and
absolute discretion, shall deem necessary or appropriate;
(c) To acquire, own, lease, sublease, manage, hold, deal in,
control or dispose of any interests or rights in personal property or real
property, including interests in any Restaurant Property, whether realty or
personalty, including, without limitation, the powers to sell, exchange,
lease, sublease, mortgage, pledge, convey in trust, enter into joint ventures
or partnerships respecting or otherwise hypothecate or dispose of all or any
portion of any Restaurant Property or any other Partnership Asset or any
interest therein, and to contribute all or any Partnership Assets to the
Operating Partnership; provided, however, that the use of any Restricted
Restaurant Property and any sale or other disposition of any Restricted
Restaurant Property shall be subject to the restrictions and limitations set
forth in Sections 8.03 and 8.04;
(d) Subject to the restrictions and limitations set forth in
Section 8.03 but without limiting the generality of Section 7.02(c), to
negotiate, enter into, renegotiate, extend, renew, terminate, modify, amend,
waive, execute, acknowledge, or take any other action on behalf of the
Partnership or the Operating Partnership with respect to any Primary Lease
(including, without limitation, to exercise any right of the Partnership
under any Primary Lease to acquire title to a Restaurant Property pursuant to
a right of first refusal) or any lease or sublease of a Restaurant Property
whether to a BKC Franchisee or otherwise, or any provision thereof;
(e) Subject to the restrictions and limitations set forth in
Sections 8.03 and 8.04 hereof, to create, by grant or otherwise, easements,
servitudes, rights-of-way, and other rights in and to any Restaurant Property;
(f) To alter, improve, expand, repair, raze, replace, or
reconstruct a Restaurant Property; provided, however, that any improvement,
expansion, replacement, or reconstruction of a Restaurant Property pursuant
to the "Successor Policy" of BKC as then in effect (as further described in
Section 8.06) shall be subject to the terms and conditions of Section 8.06;
(g) Subject to the restrictions and limitations set forth in
Sections 8.03 and 8.04, to let or lease, or sublet or sublease, any
Restaurant Property for any period, and for any purpose;
(h) To apply proceeds of any sale, exchange, mortgage, pledge, or
other disposition of any Restaurant Property or any other Partnership Asset
to payment of liabilities of the Partnership or the Operating Partnership and
to pay, collect, compromise, arbitrate, or otherwise adjust any and all other
claims or demands of or against the Partnership or the Operating Partnership
or to hold such proceeds against the payment of contingent liabilities, known
or unknown;
(i) To maintain or cause to be maintained records of all rights
and interests acquired or disposed of by the Partnership or the Operating
Partnership, all correspondence relating to the business of the Partnership
or the Operating Partnership, and the original records (or copies on such
media as the Managing General Partner may deem appropriate) of all
statements, bills, and other instruments furnished the Partnership or the
Operating Partnership in connection with their respective businesses'
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(j) To maintain records and accounts of all operations and
expenditures, make all filings and reports required under applicable rules
and regulations of any governmental department, bureau, or agency, any
securities exchange, and any automated quotation system of a registered
securities association, and furnish the Partners and Assignees with all
necessary United States federal, state, or local income tax reporting
information or such information with respect to any other jurisdiction;
(k) To purchase and maintain (either directly or through
participation under insurance contracts purchased and maintained by any
Affiliate), in its sole and absolute discretion and at the expense of the
Partnership or the Operating Partnership, liability, indemnity, and any other
insurance (including, without limitation, errors and omissions insurance and
insurance to cover the obligations of the Partnership under Section 7.10),
sufficient to protect the Partnership, the Operating Partnership, the General
Partners, their officers, directors, employees, agents, and Affiliates, or
any other Person, from those liabilities and hazards which may be insured
against in the conduct of the business and in the management of the business
and affairs of the Partnership or the Operating Partnership;
(l) To make, execute, assign, acknowledge, and file on behalf of
the Partnership or the Operating Partnership any and all documents or
instruments of any kind which the Managing General Partner may deem necessary
or appropriate in carrying out the purposes and business of the Partnership
or the Operating Partnership, including, without limitation, powers of
attorney, agreements of indemnification, sales contracts, deeds, options,
loan obligations, mortgages, deeds of trust, notes, documents, or instruments
of any kind or character, and amendments thereto. Any person, firm, or
corporation dealing with the Managing General Partner shall not be required
to determine or inquire into the authority or power of the Managing General
Partner to bind the Partnership or the Operating Partnership or to execute,
acknowledge, or deliver any and all documents in connection therewith;
(m) To borrow money or to obtain credit in such amounts, on such
terms and conditions, and at such rates of interest and upon such other terms
and conditions as the Managing General Partner deems appropriate, from banks,
other lending institutions, or any other Person, including the Partners and
Assignees, for any purpose of the Partnership or the Operating Partnership,
including, without limitation, any loan incurred for the purpose of making
one or more distributions to any or all Partners and Assignees, including any
distributions which are, in whole or in part, a return of Capital
Contributions; and subject to the restrictions and limitations set forth in
Section 8.04, in connection with such loans to mortgage, pledge, assign, or
otherwise encumber or alienate any or all of the Restaurant Properties or
other Partnership Assets, including any income therefrom, to secure or
provide for the repayment thereof. As between any lender and the Partnership
or the Operating Partnership, it shall be conclusively presumed that the
proceeds of such loans are to be and will be used for the purposes authorized
herein and that the Managing General Partner has the full power and authority
to borrow such money and to obtain such credit;
(n) To assume obligations, enter into contracts, including
contracts of guaranty or suretyship, incur liabilities, lend money, and
otherwise use the credit of the Partnership or the Operating Partnership,
and, subject to the restrictions and limitations set forth in Sections 8.03
and 8.04, to secure any of the obligations, contracts, or liabilities of the
Partnership or the Operating Partnership, by mortgage, pledge or other
encumbrance of
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all or any part of the property, franchises, and income of the Partnership or
the Operating Partnership;
(o) To invest funds of the Partnership or the Operating
Partnership in interest-bearing accounts and short-term investments
including, without limitation, obligations of the federal, state, and local
governments and their agencies, mutual funds (including money market finds),
time deposits, commercial paper, and certificates of deposit of commercial
banks, savings banks, or savings and loan associations; provided that the
Managing General Partner shall not invest Partnership funds in such a manner
that the Partnership will be considered to be holding itself out as being
engaged primarily in the business of investing, reinvesting, or trading in
securities or will otherwise be deemed to be an investment company under the
Investment Company Act of 1940, as amended;
(p) To make any election on behalf of the Partnership or the
Operating Partnership as is or may be permitted under the Code or under the
taxing statute or rule of any state, local, foreign, or other jurisdiction,
and to supervise the preparation and filing of all tax and information
returns which the Partnership or the Operating Partnership may be required to
file;
(q) To maintain the buildings, appurtenances, and grounds of the
Restaurant Properties in accordance with acceptable standards, including
within such maintenance, without limitation thereof, interior and exterior
cleaning, painting and decorating, plumbing, carpentry, and such other normal
maintenance and repair work as may be appropriate;
(r) To collect all rents and other charges from lessees of the
Restaurant Properties due the Operating Partnership. The Managing General
Partner shall have full power and authority to request, demand, collect,
receive, and receipt for all such rents and other charges, to institute legal
proceedings in the name of the Operating Partnership for the collection
thereof and for the dispossession of any Person from a Restaurant Property,
to settle or compromise all such legal proceedings and any other disputes
with respect to such rents and other charges, and to incur such expenses in
connection therewith as the Managing General Partner shall determine to be
necessary or appropriate, which expenses may include the costs of counsel for
any such matter;
(s) To cause to be disbursed (i) the aggregate amount required to
be paid pursuant to any indebtedness of the Partnership or the Operating
Partnership, including therein amounts due under any mortgages or deeds of
trust for interest, amortization of principal, and for allocation to reserve
or escrow funds; (ii) the amount of rent payable by the terms of any Primary
Lease; (iii) the amount of all real estate taxes and other impositions levied
by appropriate authorities (including, without limitation, amounts required
to be paid by any BKC Franchisee pursuant to any lease with respect to a
Restricted Restaurant Property); and (iv) amounts otherwise due and payable
as expenses of the Partnership or the Operating Partnership incurred in
furtherance of the purposes of this Agreement or the Operating Partnership
Agreement (including, without limitation, amounts payable to the General
Partners);
(t) To employ and engage suitable agents, employees, advisers,
consultants, and counsel (including any custodian, investment adviser,
accountant, attorney, corporate fiduciary, bank, or other reputable financial
institution, or any other agents, employees, or Persons who may serve in such
capacity for the Managing General Partner or any Affiliate of the Managing
General Partner) to carry out any activities which
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the Managing General Partner is authorized or required to carry out or
conduct under this Agreement or the Operating Partnership Agreement,
including, without limitation, a Person who may be engaged to undertake some
or all of the general management, property management, financial accounting
and record keeping, or other duties of the Managing General Partner, to
indemnity such Persons against liabilities incurred by them in acting in such
capacities on behalf of the Partnership or the Operating Partnership, and to
rely on the advice given by such Persons, it being agreed and understood that
the Managing General Partner shall not be responsible for any acts or
omissions of any such Persons and shall assume no obligations in connection
therewith other than the obligation to use due care in the selection thereof;
(u) To enter into an agreement or agreements with real estate
brokers or agents, investment banking firms, appraisers, or others providing
for the engagement of such Persons on an exclusive or non-exclusive basis to
advise or represent the Partnership or the Operating Partnership in the
valuation, sale, transfer, assignment, lease, sublease, mortgaging, or other
encumbering of, or other dealings in, the Restaurant Properties, it being
understood that the Managing General Partner shall not be responsible for any
acts or omissions of any such Person and shall assume no obligations in
connection therewith other than the obligation to use due care in the
selection thereof; provided, however, that no commission in connection with
any sale or other disposition of a Restaurant Property shall exceed six
percent (6%) of the gross proceeds from such sale or disposition, and that no
commission in connection with any such sale or other disposition shall be
payable to a General Partner or any of its Affiliates;
(v) To consult with the Independent Consultant pursuant to the
provisions of Section 8.10 with respect to any matter related to the business
and affairs of the Partnership or the Operating Partnership;
(w) To take such actions and make such decisions as may be
necessary or appropriate, in the reasonable judgment of the Managing General
Partner, to resolve or avoid any actual or potential conflict of interest
between the Partnership or the Operating Partnership and any General Partners
or any Affiliates thereof, including, without limitation, subject to Section
8.08, to cause the Operating Partnership to accept from BKC or a third party,
in exchange or substitution for one or more Restricted Restaurant Properties,
one or more other properties on which a BK Restaurant leased to a BKC
Franchisee is located; provided, however, that, so long as Section 1031 of
the Code or any similar provision shall remain in effect, any such
substitution or exchange must qualify as an exchange of property of a
like-kind in which no gain or loss is recognized to the Partnership except to
the extent of any cash received in connection therewith;
(x) To hold Restaurant Properties or other Partnership Assets in
the name of one or more nominees, with or without disclosure of the fiduciary
relationship;
(y) To pay, extend, renew, modify, adjust, submit to arbitration,
prosecute, defend, or compromise, upon such terms as it may determine and
upon such evidence as it may deem sufficient, any obligation, suit,
liability, cause of action, or claim, including taxes, either in favor of or
against the Partnership or the Operating Partnership;
(z) To register, qualify, list, or report, or cause to be
registered, qualified, listed, or reported, this Agreement or Depositary
Units issued hereunder pursuant to the Securities Act, the Exchange Act, any
other securities laws of the United States, the securities laws of any state
of the United States, the laws of any other
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jurisdiction, with any securities exchange, or pursuant to an automated
quotation system of a registered securities association, as the Managing
General Partner deems appropriate;
(aa) To qualify the Partnership or the Operating Partnership to do
business in any state, territory, dependency, or foreign country;
(bb) To purchase any Restaurant Property subject to a Primary
Lease, whether pursuant to a first right of refusal under such Primary Lease
or otherwise;
(cc) To enter into a property management agreement with BKC
pursuant to which BKC agrees on behalf of the Managing General Partner, at no
additional expense to the Partnership, to exercise certain day-to-day
management responsibilities with respect to the Restaurant Properties and to
perform related administrative services upon the terms and conditions set
forth therein, to extend, renew, terminate, modify, amend, or waive such
agreement or any provision thereof, and to take such action pursuant to or in
connection with such agreement as the Managing General Partner shall
determine appropriate; provided, however, that the Managing General Partner
shall have no obligation to enter into any such agreement;
(dd) To distribute money or Partnership Assets to Partners and
Assignees in accordance with Article VI, regardless of the source of such
money or Partnership Assets, including, without limitation, money borrowed by
the Partnership or by the Managing General Partner on behalf of the
Partnership;
(ee) To acquire fee simple title or a leasehold interest in any
Restaurant Property and Ancillary Property related thereto and to provide for
the purchase price for such property from funds otherwise constituting Cash
Flow or the Net Proceeds of a Capital Transaction, whether at the time of
acquisition or thereafter to pay principal, interest or other amounts payable
in respect of any financing related to such acquisition;
(ff) To lease, sell or otherwise transfer Ancillary Property to any
tenant of Restaurant Property, to provide financing, whether through loans,
guarantees or otherwise, for any tenant of Restaurant Property and to provide
the funds for such transactions from funds otherwise constituting Cash Flow
or the Net Proceeds of a Capital Transaction, whether at the time of such
transaction or thereafter to pay principal, interest or other amounts payable
in respect of any financing undertaken for such purpose;
(gg) To mortgage, lien or otherwise encumber or restrict any
Restricted Restaurant Property and use the proceeds therefor in respect of
Other Restaurant Property or for any other Partnership purpose; and to
mortgage, lien or otherwise encumber or restrict any Other Restaurant
Property and use the proceeds thereof in respect of Restricted Restaurant
Property or for any other Partnership purpose;
(hh) To operate or franchise any Restaurant Property, whether directly
or through any Affiliates or other~Persons;
(ii) To reinvest or otherwise use funds otherwise constituting Cash
Flow or the Net Proceeds of a Capital Transaction in or for Restaurant
Properties, Ancillary Property or other Partnership Assets or for any other
Partnership purpose, including the purchase of Units or Depositary Units by
purchasing the respective Depositary Receipts for subsequent re-issuance
under a DRIP or for any other purpose;
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(jj) To effect any underwriting, placement or other issuance of
Units for such consideration (which may be property) and on such terms and
conditions as it may deem necessary or appropriate, pay the discounts, costs
and expenses associated therewith, apply any proceeds thereof for or in
furtherance of any Partnership purpose and take all other actions and make
all other decisions in connection therewith as it in its sole and absolute
discretion, shall deem necessary or appropriate;
(kk) To possess and exercise any additional rights and powers of a
general partner under the partnership laws of Delaware (including, without
limitation, the Delaware RULPA) and any other applicable laws, to the extent
not inconsistent with this Agreement; and
(ll) In general, to exercise in full all of the powers of the
Partnership as set forth in Section 3.02 and to do any and all acts and
conduct all proceedings and execute all rights and privileges, contracts, and
agreements of any kind whatsoever, although not specifically mentioned in
this Agreement, that the Managing General Partner in its sole and absolute
discretion may deem necessary or appropriate to the conduct of the business
and affairs of the Partnership or the Operating Partnership or to carry out
the purposes of the Partnership or the Operating Partnership. The expression
of any power or authority of the Managing General Partner in this Agreement
shall not in any way limit or exclude any other power or authority which is
not specifically or expressly set forth in this Agreement.
7.03. RESTRICTIONS ON AUTHORITY OF MANAGING GENERAL PARTNER.
(a) Anything in this Agreement to the contrary notwithstanding,
the Managing General Partner shall have no authority to:
(i) pay for any services performed by a General Partner or an
Affiliate of a General Partner, except as otherwise expressly permitted in
this Agreement;
(ii) take any action on any matter with respect to which a
Majority Vote of the Limited Partners or a Super-Majority Vote of the
Limited Partners, as the case may be, is specifically required under this
Agreement without such Vote approving such action having occurred; or
(iii) cause the Partnership to terminate the Deposit Agreement
unless such termination (A) is in connection with the Partnership entering
into a similar agreement with another depositary selected by the Managing
General Partner, in its sole and absolute discretion, (B) results from the
receipt of an Opinion of Independent Counsel to the effect that such
termination is necessary in order for the Partnership to avoid being
treated as an association taxable as a corporation for federal income tax
purposes or to avoid being in violation of any applicable federal or state
securities laws, or (C) is in connection with the dissolution of the
Partnership pursuant to Article XV.
(b) Notwithstanding any other provision of this Agreement, the
Managing General Partner shall not, without the prior Majority Vote of the
Limited Partners (or in the event of an amendment or action described in Section
7.03(b)(iii)(D) below, a Super-Majority Vote of the Limited Partners if such
amendment of, or action pursuant to, a corresponding provision of this Agreement
would have required a prior Super-Majority Vote of the Limited Partners under
such corresponding provision):
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(i) except upon dissolution and liquidation pursuant to
Article XV, cause the Partnership to sell, exchange, assign, lease,
sublease, or otherwise dispose of all or substantially all of the
Partnership Assets other than in ordinary course of business of the
Partnership; provided, however, that this provision shall not be
interpreted to preclude or limit the contribution of the Aggregate Offering
Proceeds to the Operating Partnership in accordance with Section 8.02 and
the terms of the Operating Partnership Agreement, or to preclude or limit
the mortgage, pledge, hypothecation, or grant of a security interest in all
or substantially all of the Partnership Assets, and shall not apply to any
forced sale of any or all of the Partnership Assets pursuant to the
foreclosure of, or other realization upon, any such encumbrance;
(ii) cause the Partnership to merge or consolidate with any
other partnership (other than the Operating Partnership) or other entity;
or
(iii) acting on behalf of the Partnership,
(A) except upon dissolution and liquidation pursuant to the
applicable provisions of the Operating Partnership Agreement, consent
to the sale, exchange, assignment, lease, sublease, or other
disposition by the Operating Partnership of all or substantially all
of the assets of the Operating Partnership other than in the ordinary
course of business of the Operating Partnership; provided, however,
that this provision shall not be interpreted to preclude or limit the
payment to BKC of the purchase price for the Restaurant Properties
specified in the Real Estate Purchase Agreement, or to preclude or
limit the mortgage, pledge, hypothecation, or grant of a security
interest in all or substantially all of the assets of the Operating
Partnership, and shall not apply to any forced sale of any or all of
the assets of the Operating Partnership pursuant to the foreclosure
of, or other realization upon, any such encumbrance;
(B) consent to a merger or consolidation of the Operating
Partnership with any other partnership (other than the Partnership) or
other entity; or
(C) consent to the dissolution of the Operating Partnership
pursuant to Section 14.02(e) of the Operating Partnership Agreement;
or
(D) consent to any amendment of the Operating Partnership
Agreement or any action of the Managing General Partner pursuant to or
in connection with the Operating Partnership Agreement if such
amendment of the corresponding provision of this Agreement or action
pursuant to a corresponding provision of this Agreement would have
required the prior approval of either a Majority Vote of the Limited
Partners or a Super-Majority Vote of the Limited Partners.
7.04. TITLE TO PARTNERSHIP ASSETS.
Title to Partnership Assets, whether real, personal, or mixed or
tangible or intangible, shall be deemed to be owned by the Partnership as an
netity, and no Partner or Assignee, individually or collectively, shall have
any ownership interest in such Partnership Assets or any portion thereof.
Title to any or all of the Partnership Assets may
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be held in the name of the Partnership, of the Managing General Partner, or
of one or more nominees, as the Managing General Partner may determine. The
Managing General Partner hereby declares and warrants that any Partnership
Assets for which legal title is held in the name of the Managing General
Partner shall be held in trust by the Managing General Partner for the use
and benefit of the Partnership in accordance with the terms or provisions of
this agreement. All Partnership Assets shall be recorded as the property of
the Partnership on its books and records, irrespective of the name in which
legal title to such Partnership Assets is held.
7.05. WORKING CAPITAL RESERVE.
The Managing General Partner shall have the right to cause the
Partnership and the Operating Partnership to set up a Working Capital Reserve
and to set aside therein such funds as the Managing General Partner, in its
sole and absolute discretion, shall determine to be reasonable in connection
with the operation of the business of the Partnership and the Operating
Partnership. Any funds set aside for such Working Capital Reserve may be
invested by the Managing General Partner with a view to the appropriate
degree of safety of and return on such invested funds, and such funds shall
not be available for current distribution under Section 6.05; provided,
however, that some or all of such funds may subsequently be made available
for distribution pursuant to Section 6.05 should the Managing General
Partner, in its sole and absolute discretion, so elect. The Working Capital
Reserve established and maintained pursuant to this Section 7.05 shall be in
addition to any reserves established and maintained by the Managing General
Partner to implement Burger King's "Successor Policy" pursuant to Section
8.06.
7.06. OTHER BUSINESS ACTIVITIES OF PARTNERS.
Any Partner or Affiliate (including, without limitation, the
Managing General Partner and any Affiliate thereof) may have other business
interests or may engage in other business ventures of any nature or
description whatsoever, whether presently existing or hereafter created,
including, without limitation, the ownership, leasing, management, operation,
franchising, syndication, and/or development of commercial real estate and/or
restaurants, and may compete, directly or indirectly, with the business of
the Partnership or the Operating Partnership. No Partner or Affiliate thereof
shall incur any liability to the Partnership as the result of such Partner's
or Affiliate's pursuit of such other business interests and ventures and
competitive activity, and neither the Partnership nor any of the other
Partners or any Assignees shall have any right to participate in such other
business interests or ventures or to receive or share in any income or
profits derived therefrom.
7.07. TRANSACTIONS WITH MANAGING GENERAL PARTNER OR AFFILIATES.
In addition to transactions specifically contemplated by the
terms and provisions of this Agreement, including, without limitation,
Articles VIII and IX, the Partnership and the Operating Partnership are
expressly permitted to enter into other transactions (including, without
limitation, the acquisition of goods or services) with the Managing General
Partner, or any Affiliates thereof, provided that the price and other terms
of such other transactions are fair to the Partnership and that the price and
other terms of such transactions are not less favorable to the Partnership or
the Operating Partnership, as the case may be, than those generally
prevailing with respect to comparable transactions between unrelated parties.
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7.08. NET WORTH REPRESENTATION; INDEPENDENT JUDGMENT.
In addition to their other duties and obligations, the General
Partners further agree as follows:
(a) The General Partners shall use their best efforts to maintain a
combined net worth equal to the total amount, if any, that could reasonably
be expected to be required in order for the Partnership and the Operating
Partnership to be treated as partnerships for federal income tax purposes; and
(b) in acting on behalf of the Partnership, the Managing General
Partner will not act under the direction of or as an agent of or "dummy" for the
Limited Partners.
7.09. LIABILITY OF GENERAL PARTNERS TO PARTNERSHIP AND LIMITED PARTNERS.
The General Partners, their Affiliates and all officers, directors,
employees, and agents of the General Partners and their Affiliates shall not
be liable to the Partnership or to the Limited Partners or Assignees for any
losses sustained or liabilities incurred as a result of any act or omission
of the General Partners or their Affiliates if (i) the General Partner or
Affiliate acted (or failed to act) in good faith and in a manner it believed
to be in, or not opposed to, the interests of the Partnership, and (ii) the
conduct of the General Partner or Affiliate did not constitute actual fraud,
gross negligence, or willful or wanton misconduct.
7.10. INDEMNIFICATION OF GENERAL PARTNERS AND AFFILIATES.
(a) the Partnership shall indemnify and hold harmless the General
Partners, their Affiliates, and all officers, directors, employees, and agents
of the General Partners and their Affiliates (individually, an "Indemnitee")
from and against any and all losses, claims, demands, costs, damages,
liabilities, joint and several, expenses of any nature (including attorneys'
fees and disbursements), judgments, fines, settlements, and other amounts
arising from any and all claims, demands, actions, suits, or proceedings, civil,
criminal, administrative or investigative, in which the Indemnitee may be
involved, or threatened to be involved, as a party or otherwise, arising out of
or incidental to the Initial Public Offering or the business of the Partnership
or Operating Partnership, including, without limitation, liabilities under the
federal and state securities laws, regardless of whether the Indemnitee
continues to be a General Partner, an Affiliate, or an officer, director,
employee, or agent of a General Partner or of an Affiliate at the time any such
liability or expense is paid or incurred, if (i) the Indemnitee acted in good
faith and in a manner it believed to be in, or not opposed to, the interests of
the Partnership, and, with respect to any criminal proceeding, had no reasonable
cause to believe its conduct was unlawful, and (ii) the Indemnitee's conduct did
not constitute actual fraud, gross negligence, or willful or wanton misconduct.
The termination of any action, suit, or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere, or its equivalent,
shall not, in and of itself, create a presumption or otherwise constitute
evidence that the Indemnitee acted in a manner contrary to that specified in (i)
or (ii) above.
(b) Expenses incurred by an Indemnitee in defending any claim,
demand, action, suit, or proceeding subject to this Section 7.10 shall, from
time to time, be advanced by the Partnership prior to the final disposition of
such claim, demand, action, suit, or proceeding upon receipt by the Partnership
of an undertaking by or on
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behalf of the Indemnitee to repay such amount unless it shall be determined
that such Person is entitled to be indemnified as authorized in this Section
7.10.
(c) The indemnification provided by this Section 7.10 shall be in
addition to any other rights to which those indemnified may be entitled under
any agreement, vote of the Partners, as a matter of law or equity, or
otherwise, both as to an action in the Indemnitee's capacity as a General
Partner, an Affiliate, or as an officer, director, employee or agent of a
General Partner or an Affiliate, and as to an action in another capacity, and
shall continue as to an Indemnitee who has ceased to serve in such capacity
and shall inure to the benefit of the heirs, successors, assigns, and
administrators of the Indemnitee.
(d) The Partnership may purchase and maintain insurance (either
directly or through participation under insurance contracts purchased and
maintained by any Affiliate) on behalf of the General Partners and such other
Persons as the Managing General Partner shall determine against any liability
that may be asserted against or expense that may be incurred by such Person in
connection with the Initial Public Offering and the activities of the
Partnership or the Operating Partnership, regardless of whether the Partnership
or the Operating Partnership would have the power to indemnify such Person
against such liability under the provisions of this Agreement.
(e) Except as set forth in the next sentence below, any
indemnification hereunder shall be satisfied solely out of the assets of the
Partnership and the Operating Partnership. The Limited Partners or Assignees
shall not be subject to personal liability by reason of these indemnification
provisions; provided, however, that to the extent that any Limited Partner or
Assignee or former Limited Partner or Assignee shall recover from any Indemnitee
any amount that is subject to indemnification hereunder, such Limited Partner or
Assignee or former Limited Partner or Assignee shall have personal liability to
the Partnership and the Indemnitee under this Section 7.10 for and to the extent
of such amount.
(f) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.10 by reason of the fact that the Indemnitee had an
interest in the transaction with respect to which the indemnification applies if
the action was otherwise permitted by the terms of this Agreement.
(g) the provisions of this Section 7.10 are for the benefit of the
Indemnitees and shall not be deemed to create any rights for the benefit of any
other Persons.
7.11. NO MANAGEMENT BY LIMITED PARTNERS AND ASSIGNEES.
No Limited Partner or Assignee (other than the Managing General
Partner or any agent or employee of the Managing General Partner, in its
capacity as such, if such Person shall also be a Limited Partner or Assignee)
shall take part in the day-to-day management, operation or control of the
business and affairs of the Partnership or the Operating Partnership. The
Limited Partners and Assignees shall not have any right, power, or authority to
transact any business in the name of the Partnership or the Operating
Partnership or to act for or on behalf of or to bind the Partnership or the
Operating Partnership. The Limited Partners and Assignees shall have no rights
other than those specifically provided herein or granted by law where consistent
with a valid provision hereof. In the event any laws, rules, or regulations
applicable to the Partnership,
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or to the sale or issuance of the Units in connection with the Initial Public
Offering, require a Limited Partner, or any group or class thereof, to have
certain rights, options, privileges, or consents not granted by the terms of
this Agreement, then such Limited Partners shall have and enjoy such rights,
options, privileges, and consents so long as (but only so long as) the
existence thereof does not result in a loss of the limitation on liability
enjoyed by the Limited Partners under the Delaware RULPA or the applicable
laws of any other jurisdiction.
7.12. OTHER MATTERS CONCERNING GENERAL PARTNERS.
(a) The General Partners may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture, or other
paper or document believed by them to be genuine and to have been signed or
presented by the proper party or parties.
(b) The General Partners may consult with legal counsel, accountants,
consultants, investment bankers, and other consultants and advisers selected by
them and any opinion of such Person as to matters that the General Partners
reasonably believe to be within its professional or expert competence
(including, without limitation, any opinion of legal counsel to the effect that
the Partnership or Operating Partnership would "more likely than not" prevail
with respect to any matter) shall be full and complete authorization and
protection in respect to any action taken or suffered or omitted by a General
Partner hereunder in good faith and in accordance with such opinion.
(c) The General Partners shall have the right, in respect of any of
their powers or obligations hereunder, to act through a duly appointed attorney
or attorneys-in-fact. Each such attorney or attorney-in-fact shall, to the
extent provided by the General Partner in the power of attorney, have full power
and authority to do and perform all and every act and duty which is permitted or
required to be done by the General Partner hereunder. Each such appointment
shall be evidenced by a duly executed power of attorney giving and granting to
each such attorney or attorney-in-fact full power and authority to do and
perform all and every act and thing requisite and necessary to be done by the
General Partner in connection with the Partnership.
7.13. REVOLVING LINE OF CREDIT; OTHER LOANS TO OR FROM A GENERAL PARTNER.
(a) Pursuant to this Section 7.13 and Section 7.13 of the Operating
Partnership Agreement, the Managing General Partner shall make available to the
Partnership and the Operating Partnership, jointly, on an "as needed" basis an
unsecured, interest-free, revolving line of credit in the aggregate principal
amount of Five Hundred thousand Dollars ($500,000). The proceeds of the
revolving line of credit may be used by the Partnership and/or the Operating
Partnership solely for purposes of providing to the Partnership and/or the
Operating Partnership funds determined by the Managing General Partner to be
necessary for purposes of (i) maintaining sufficient working capital, (ii)
maintaining level quarterly distributions of Net Cash Flow, and/or (iii) for the
Fiscal Year ending December 31,1986, making anticipated distributions of Cash
Flow for such Fiscal Year described in the Registration Statement. The
Partnership and the Operating Partnership may borrow, repay, and reborrow under
the revolving line of credit from time to time (subject to the maximum aggregate
principal amount limitation). Nothing herein shall be construed to require the
Managing General Partner to cause the Partnership or the Operating Partnership
to retain cash (or to cause the Partnership or the Operating
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Partnership to borrow under the revolving line of credit in order to retain
cash) in excess of the immediate working capital needs of the Partnership or
the Operating Partnership, as the case may be. In addition, nothing shall be
construed to require the Partnership to use or exhaust the financing
available under the revolving line of credit before obtaining other financing
permitted by this Agreement, whether for acquisitions, reinvestment, working
capital or otherwise. This revolving line of credit shall terminate upon
removal or withdrawal of the Managing General Partner.
(b) In addition to the revolving line of credit described in Section
7.13(a), any of the General Partners or any of their Affiliates may lend to the
Partnership or the Operating Partnership funds needed by the Partnership or the
Operating Partnership, as the case may be, for such periods of time as the
Managing General Partner may determine; provided, however, that (i) interest
payable on such indebtedness shall be calculated at a rate not to exceed the
rate announced by Morgan Guaranty Trust Company from time to time as its "prime
rate" plus one percent (1 %) (as in effect on the first day of each calendar
quarter, as adjusted as of the first day of each succeeding calendar quarter to
reflect such rate in effect on such date) or the highest lawful rate, whichever
is less, and (ii) in no event shall such indebtedness be on terms and conditions
less favorable to the Partnership or the Operating Partnership, as the case may
be, than the Partnership or the Operating Partnership, as the case may be, could
obtain from unaffiliated third parties or banks for the same purpose (without
reference to the General Partners' financial abilities or guarantees). In the
event that Morgan Guaranty Trust Company should during the term of this
Agreement abandon or abolish the practice of announcing an established "prime
rate," the "prime rate" used during the remainder of said term for purposes of
this Agreement shall be the rate from time to time charged by Morgan Guaranty
Trust Company to its preferred commercial customers for unsecured short-term
loans. A certificate signed by an officer of Morgan Guaranty Trust Company shall
be binding and conclusive evidence of the "prime rate" in effect from time to
time.
(c) No loans shall be made by the Partnership or the Operating
Partnership to a General Partner or any of its Affiliates.
7.14. PURCHASE OR SALE OF UNITS; REGISTRATION RIGHTS OF GENERAL PARTNERS.
(a) The Managing General Partner may, on behalf of and for the
account of the Partnership or the Operating Partnership, purchase or otherwise
acquire Units or Depositary Units by purchasing or acquiring the respective
Depositary Receipts and, following any such purchase or acquisition, may sell or
otherwise dispose of such Units and Depositary Units in connection with a DRIP
or otherwise. So long as such Units or Depositary Units shall be held by or on
behalf of the Partnership or the Operating Partnership, such Units or Depositary
Units shall not be considered outstanding for any purpose. In addition to the
foregoing, the General Partners and their Affiliates from time to time also may
purchase or otherwise acquire Units or Depositary Units for their own account
and may, subject to the provisions of Sections 12.03 and 12.04, sell or
otherwise dispose of such Units or Depositary Units.
(b) In the event that (i) a General Partner or an Affiliate holds
Units of the Partnership which it desires to sell, including but not limited to
Units of the Partnership acquired pursuant to the exercise of options issued by
the Partnership to such General Partner or Affiliate, and (ii) Rule 144 of the
Securities Act (or any successor rule or regulation to Rule 144) is not
available to enable such General Partner or Affiliate to dispose of the number
of Units it desires to sell at the time and in the manner that it desires
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to do so, then upon the request of such General Partner or Affiliate, the
Partnership shall file with the Commission as promptly as practicable after
receiving such request, and shall use its best efforts to cause to become
effective, a registration statement under the Securities Act on the
appropriate form registering the offering and sale of the number of Units
specified by the requesting General Partner or Affiliate. In connection with
any such registration pursuant to the preceding sentence, the Partnership
promptly shall prepare and file such documents as may be necessary to
register or qualify the Units subject to such registration and under the
securities laws of such states as the requesting General Partner or Affiliate
shall reasonably request, and shall do any and all other acts and things that
may reasonably be necessary or advisable to enable such General Partner or
Affiliate to consummate a public sale of such Units in such states.
Notwithstanding the foregoing, in no event shall the Partnership be required
to effect a registration relating to the Units pursuant to this Section
7.14(b) for less than 180,000 Units or more frequently than once in any
calendar year. Any registration statement filed pursuant hereto shall be
continued in effect for a period of not less than ninety (90) days following
its effective date.
(c) Except as expressly prohibited under the Blue Sky or securities
laws of any jurisdiction under which a registration or qualification is being
effected the Partnership shall pay all fees and expenses in connection with any
registration or qualification effected pursuant to this Section 7.14 other than
any underwriting discounts, fees, commissions, or similar charges relating to
the securities of a General Partner or Affiliate being qualified or registered
and the fees and expenses of legal counsel for the General Partner or Affiliate
requesting registration hereunder.
(d) In the event of any registration under the Securities Act of any
Units pursuant to this Section 7.14, then, in addition to and not in limitation
of the Partnership's obligation under Section 7.10, the Partnership shall
indemnify and hold harmless the General Partners and their Affiliates and any
underwriter engaged in connection with any registration referred to in this
Section 7.14, and each other person, if any, who controls any such underwriter
within the meaning of the Securities Act, against any losses, claims, demands,
actions, causes of action, assessments, damages, liabilities joint or several),
cost; and expenses (including, without limitation, interest, penalties, and
reasonable attorneys fees and disbursements), resulting to, imposed upon, or
incurred by any indemnified person, directly or indirectly, under the Securities
Act or otherwise (hereinafter referred to in this Section 7.14(d) as a "claim"
and in the plural as "claims"), based upon, arising out of, or resulting from
any untrue statement or alleged untrue statement of material fact contained in
any registration statement under which any Units were registered under the
Securities Act or any state securities or Blue Sky laws, in any preliminary
prospectus (if used prior to the effective date of such registration statement),
or in any summary or final prospectus or in any amendment or supplement thereto
(if used during the period the Partnership is required to keep the registration
statement current), or arising out of, based upon, or resulting from the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements made therein not misleading;
provided, however, that the Partnership shall not be liable to the extent that
any such claim arises out of, is based upon, or results from an untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement, such preliminary, summary, or final prospectus, or such
amendment or supplement in reliance upon and in conformity with written
information with respect to the indemnified Person furnished to the Partnership
by or on behalf of such indemnified Person specifically for use in the
preparation thereof.
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7.15. PERIODIC CONSIDERATION OF SALE OR REFINANCING.
Commencing with the year 2000 and continuing once every five (5) years
thereafter, the Managing General Partner may consider whether or not, in the
reasonable judgment of the Managing General Partner, it would be in the interest
of the Partnership and the Operating Partnership to effectuate a sale or
refinancing of all or a portion of the Restricted Restaurant Properties held as
of the Effective Date, with the proceeds of any such sale or financing to be
distributed to the Partners and Assignees in accordance with Article VI. If the
Managing General Partner, in its reasonable judgment, determines that such a
sale or financing would be in the interest of the Partnership and the Operating
Partnership, then the Managing General Partner intends to use reasonable efforts
to cause the Operating Partnership to effectuate such a sale or financing;
provided, however, that any such sale or other disposition of part or all of
such Restricted Restaurant Properties shall be subject to Sections 7.03 and
8.04. This Section 7.15 does not constitute an obligation of the Managing
General Partner, but merely represents an expression of intent by the Managing
General Partner as of the time of the Amended Agreement as to the manner in
which it expected to manage the Partnership and the Operating Partnership. In no
event shall any sale or financing transaction in connection with this
Section 7.15 involve or require any direct or indirect financial obligation
or other financial support on the part of the Managing General Partner, BKC,
TPC, or any Affiliate of the foregoing.
7.16. OTHER LIMITATIONS.
The following additional limitations shall apply to the operation and
management of the Partnership and the Operating Partnership:
(a) No General Partner shall receive for its account any kickbacks or
rebates with respect to, expenditures made by or on behalf of the Partnership,
nor shall any General Partner enter into any reciprocal arrangement that has the
effect of circumventing this Section 7.16(a) or Section 9.01;
(b) Neither the Operating Partnership nor the Partnership shall grant
any General Partner an exclusive right, as agent, to sell any Restaurant
Property or other Partnership Asset;
(c) No commission or other fee shall be payable to a General Partner,
directly or indirectly, in connection with the distribution or reinvestment of
any Net Proceeds of a Capital Transaction, except as provided in Section 9.03;
and
(d) No General Partner shall, directly or indirectly, pay or award any
commissions or other compensation to any Person for encouraging or inducing any
other Person to purchase Units; provided, however, that nothing herein shall
prohibit the payment of normal sales commissions and fees to (i) any underwriter
in connection with any public offering of Units or any underwriter who
undertakes to sell on behalf of a General Partner or on Affiliate Units held by
such General Partner or Affiliate for its own account, whether or not such sale
is pursuant to the registration rights provided for in Sections 7.14 and
14.05(c), Jr (ii) any finder, broker or consultant (other than the General
Partners or their Affiliates) in connection with the acquisition of Restaurant
Property and Ancillary Property related thereto.
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ARTICLE VIII
ACQUISITION, OPERATION, AND DISPOSITION OF
RESTRICTED RESTAURANT PROPERTIES
8.01. GENERAL.
(a) The Partners and any Assignees hereby expressly agree that, in
addition to any other provisions of this Agreement or the Operating Partnership
Agreement, the acquisition, ownership, operation, and disposition of the
Restaurant Properties by the Operating Partnership shall be in accordance with,
and shall be subject to, the provisions, restrictions, and limitations set forth
in this Article VIII; provided that, except for Section 8.13, this Article VIII
shall not apply to any of the Other Restaurant Properties the Partners and any
Assignees further expressly agree that any action taken by a General Partner or
Affiliate thereof in accordance with, or pursuant to, the provisions of this
Article VIII conclusively shall be deemed to be fair to and in the best
interests of the Partnership, the Operating Partnership, the Partners, and any
Assignees, and the fact that an action of a General Partner or an Affiliate is
undertaken in accordance with, or pursuant to, this Article VIII shall be a
complete and absolute defense to any claim or action asserting the invalidity of
such action or any claim or action for damages or other relief based upon an
assertion that such action resulted in a breach by a General Partner or an
Affiliate of this Agreement or any duty, fiduciary or otherwise, owed by the
General Partners and their Affiliates to the Partnership, the Operating
Partnership, the Limited Partners, or any Assignees.
(b) The Partners and any Assignees expressly acknowledge and agree
bat the provisions, restrictions, and limitations set forth in this Article VIII
are reasonable in all respects, are pursuant to and consistent with the purposes
of the Partnership and the Operating Partnership, are necessary to induce BKC to
enter into the Real Estate Purchase Agreement and to otherwise deal with
Restricted Restaurant Properties, and are necessary to protect the business and
interests of BKC, the Partnership, and the Operating Partnership. In the event
that the Partnership or the Operating Partnership shall breach or violate or
fail to perform any of its obligations set forth in this Article VIII, then, at
the option of BKC, BKC shall be entitled to proceed to enforce the obligations
of the Partnership and the Operating Partnership hereunder by any action at law,
suit in equity, or other appropriate proceeding, whether for damages, for
specific performance of an obligation contained herein, or for an injunction or
other equitable remedy against any violation of the provisions hereof. The
Partnership hereby agrees to indemnify and hold harmless BKC from and against
any assessment, payment, damage, expense, loss, cost, liability, or deficiency
(including, without limitation, interest, penalties, and reasonable attorneys'
fees and disbursements) incurred by BKC in enforcing or sustaining the
provisions hereof or resulting from or in connection with any such breach,
violation, or failure.
8.02. CONTRIBUTION TO OPERATING PARTNERSHIP; ACQUISITION OF RESTAURANT
PROPERTIES.
On the Closing Date or as soon as practicable thereafter, the Managing
General Partner caused the Partnership to contribute the Aggregate Offering
Proceeds and the Capital Contributions of the General Partners to the Operating
Partnership, as provided for in the Operating Partnership Agreement. On the
Closing Date or as Soon as practicable thereafter, the Managing General Partner
caused the Operating Partnership to acquire the
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Restaurant Properties from BKC in accordance with and subject to the terms
and conditions set forth in the Real Estate Purchase Agreement, including the
exhibits thereto, and caused the Operating Partnership to pay to BKC the
purchase price for the Restaurant Properties specified in the Real Estate
Purchase Agreement.
8.03. USE AND OTHER RESTRICTIONS.
(a) Except as otherwise expressly provided in this Section 8.03, the
Operating Partnership shall not, without the prior written consent of BKC, in
its sole and absolute discretion, use any Restricted Restaurant Property or
permit any Restricted Restaurant Property to be used for any purpose other than
the operation thereon of a BK Restaurant and other uses related thereto.
(b)(i) In furtherance of the provisions of Section 8.03(a), in
the event that BKC renews or extends a BKC Franchise Agreement with respect
to a Restricted Restaurant Property at any time at or prior to the expiration
of such BKC Franchise Agreement, then, regardless of the duration of such
renewal or extension, the Operating Partnership promptly shall, without
additional charge, renew or extend the lease of the Restaurant Property to
such BKC Franchisee for a period coterminous with the period of such renewal
or extension and for and upon substantially the same rental and other terms
and conditions as and upon which BKC is then renewing or extending leases
with BKC Franchises for properties owned or leased (as the case may be) by
BKC, or in the event BKC at such time is no longer renewing or extending
leases with BKC Franchisees for properties owned or leased, as the case may
be, by BKC, then upon substantially the same rental and other terms and
conditions and upon which BKC most recently was renewing or extending such
leases with BKC Franchisees (except that, for purposes of determining the
guaranteed minimum rental thereunder, the lessor's "investment" in
Restricted Restaurant Properties held as of the Effective Date shall be
deemed to be equal to sum of the investment of BKC with respect to such
Restaurant Property prior to the Closing Date plus any investment by the
Operating Partnership with respect to such Restaurant Property after the
Closing Date (and in no event shall such "investment" include the purchase
price paid by the Operating Partnership to BKC for such Restaurant Property
pursuant to the Real Estate Purchase Agreement)); provided that the rental
for such lease may be greater than the rental upon which BKC is then (or,
if applicable, was) so renewing or extending such leases. Notwithstanding
anything to the contrary contained herein, any extension or renewal of a
lease of a Restricted Restaurant Property pursuant to the "Successor Policy"
shall be in accordance with the "Successor Policy" as then in effect and
Section 8.06 (including, without limitation, the provisions of Section
8.06(b) relating to determination of the annual minimum rental under a lease
extended or renewed in accordance with the "Successor Policy"). Without
limiting the foregoing, the Managing General Partner, in its sole and
absolute discretion, at the request of BKC or a BKC Franchisee, shall be
permitted to consent to a renewal or extension of a lease of a Restricted
Restaurant Property for a rental less favorable to the Partnership than the
rental upon which BKC is then renewing or extending leases with BKC
Franchisees for properties owned or leased (as the case may be) by BKC (or,
if applicable, the rental upon which BKC most recently was renewing or
extending such leases with BKC Franchisees) if BKC agrees to treat the excess
of the rental at which BKC is then renewing or extending such leases (or, if
applicable, the rental at which BKC most recently was renewing or extending
such leases) over the rental payable to the Partnership in connection with
such renewal or extension as "rent relief" subject to provisions of
Section 8.05.
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(ii) In the event that (A) either (I) a BKC Franchise Agreement
authorizing the operation of a BK Restaurant on a Restricted Restaurant Property
is terminated automatically, is terminated by BKC, or is terminated by the
mutual agreement of the parties thereto prior to the expiration of the stated
term thereof, OR (II) a BKC Franchise Agreement expires according to the terms
thereof and is not renewed or extended by BKC at or prior to the expiration of
such ;BKC Franchise Agreement, AND (B) during the six (6) month period
commencing on the date of such termination or expiration, either (I) BKC and a
Person that meets BKC's then existing franchisee financial capability
requirements enter into a BKC Franchise Agreement authorizing such Person to
operate a BK Restaurant on the Restaurant Property, and BKC notifies the
Operating Partnership thereof, OR (II) BKC notifies the Operating Partnership
that BKC desires to operate a BK Restaurant on the Restaurant Property, then the
Operating Partnership promptly shall terminate any lease of the Restaurant
Property with the terminated BKC Franchisee (if such I-case has not terminated
or expired) and enter into a new lease of the Restaurant Property with the new
BKC Franchisee or with BKC, as the case may be. The rental, duration, and other
terms and conditions of any such new lease shall be substantially the same as
the rental, duration, and other terms and conditions as and upon which BKC is
then entering into new leases with BKC Franchisees for properties owned or
leased (as the case may be) by BKC, or in the event BKC at such time is no
longer entering into new leases with BKC Franchisees for properties owned or
leased, as the case may be, by BKC, then substantially the same rental,
duration, and other terms and conditions as and upon which BKC most recently was
entering such leases with BKC Franchisees (except that, for purposes of
determining the guaranteed annual minimum rental thereunder, the lessor's
"investment" in Restricted Restaurant Properties held as of the Effective Date
shall be deemed to be equal to the sum of the investment of BKC with respect to
such Restaurant Property prior to the Closing Date plus any investment of the
Operating Partnership with respect to such Restaurant Property after the Closing
Date (and in no event shall such "investment" include the purchase price paid by
the Operating Partnership to BKC for such Restaurant Property pursuant to the
Real Estate Purchase Agreement)). Without limiting the foregoing, the Managing
General Partner, in its sole and absolute discretion, at the request of BKC or a
BKC Franchisee, shall be permitted to enter into a new lease of a Restricted
Restaurant Property for a rental less favorable to the Partnership than the
rental upon which BKC is then entering into leases with BKC Franchisees for
properties owned or leased (as the case may be) by BKC (or, if applicable, the
rental upon which BKC most recently was entering into such leases with BKC
Franchisees) if BKC agrees to treat the excess of the rental at which BKC is
then entering into such leases (or, if applicable, the rental at which BKC most
recently was entering into such leases) over the rental payable to the
Partnership in connection with such new lease as "rent relief' subject to the
provisions of Section 8.05. During the period (the "Determination Period") that
BKC is considering whether to enter into a new BKC Franchise Agreement with
respect to the Restaurant Property or operate itself a BK Restaurant on the
Restaurant Property (but in no event after the expiration of the six (6) month
period described in clause (B) above), BKC shall pay to the Operating
Partnership an amount equal to the excess of the guaranteed minimum rental
payable to the Operating Partnership under the terminated BKC Franchisee's lease
for the Determination Period (computed without regard to any termination or
expiration of such lease) over the amount of rent, if any, actually collected by
the Operating Partnership thereunder for the Determination Period. The Operating
Partnership shall, at the expense of BKC, take all such actions as BKC
reasonably may request to enforce the provisions of the terminated BKC
Franchisee's lease applicable during the Determination Period. If BKC does not,
prior to the end of the Determination Period, enter into a new BKC Franchise
Agreement with respect to the Restaurant Property or elect to operate itself a
BK Restaurant on the Restaurant Property, then subject to Section 8.09 hereof,
the Operating
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Partnership shall be free to take such actions with respect to the
terminated BKC Franchisee's lease as the Operating Partnership may deem
appropriate. Notwithstanding anything to the contrary contained herein, BKC
shall have the right at any time upon written notice to the Operating
Partnership, to terminate the Determination Period with respect to any
Restricted Restaurant Property, in which event all rights and obligations of BKC
in connection with such terminated Determination Period shall terminate,
effective as of the date on which the Operating Partnership receives such notice
and as of the payment by BKC of all amounts payable hereunder with respect to
the Determination Period.
(iii) In the event that BKC approves the assignment by a BKC
Franchisee of a BKC Franchise Agreement with respect to a Restricted Restaurant
Property to another person or entity that meets BKC's then existing franchisee
financial capabIlity requirements or to BKC, then, subject to the assumption by
such new BKC Franchisee or BKC, as the case may be, of all of the former BKC
Franchisee's obligations and liabilities thereafter accruing under the former
BKC Franchisee's lease of the Restaurant Property, the Operating Partnership
promptly shall, without additional charge, approve and permit the assignment of
such lease with respect to such Restaurant Property to the new BKC Franchisee or
to BKC, as the case may be. Upon such assignment and assumption, the former BKC
Franchisee, at the request of BKC, shall be released from all obligations and
liabilities thereafter accruing under such lease; provided, however, that a
release in connection with an assignment or assumption shall be required
pursuant hereto only if BKC, as a matter of policy, then is granting such
releases in connection with the assignment or assumption of leases with BKC
Franchises for properties owned or leased, as the case may be by BKC. In
addition to the foregoing, in the event that BKC consents to the assignment by a
BKC Franchisee of a Franchise Agreement with respect to a Restricted Restaurant
Property to a corporation in which such BKC Franchisee has a financial interest,
then, upon the request of such BKC Franchisee, the Operating Partnership shall
approve the assignment of the BKC Franchisee's lease of such Restaurant Property
to such corporation upon the condition that such BKC Franchisee shall remain
fully responsible for all liabilities and obligations accruing under such lease
subsequent to such assignment.
(iv) The Operating Partnership shall give BKC prompt written notice of
the occurrence of any default by a BKC Franchisee under any lease of a
Restricted Restaurant Property. BKC shall have the right (but not the
obligation), within the longer of thirty (30) days after the receipt by BKC of
such written notice of such default or any applicable grace period provided to
the lessee under such lease, to cure any default by the lessee under such lease,
and the Operating Partnership shall not terminate such lease unless such default
is not cured within such applicable period. The Operating Partnership also
shall give BKC prompt written notice of the occurrence of any event which
results automatically in the termination of any such lease. BKC shall have the
right (but not the obligation), within thirty (30) days after receipt of such
notice, to assume all obligations and liabilities of the lessee under such lease
accruing from the date of such automatic termination. If BKC exercises such
right, then, as between BKC and the Operating Partnership, such termination
shall be of no force or effect and shall be deemed not to have occurred.
(v) In furtherance of the provisions of Section 8.03(a), in the event
the Partnership or the Operating Partnership acquires any Restricted Restaurant
Property after the Effective Date, the rental, duration, and other terms and
conditions in the lease for the BKC Franchisee for such property shall be
substantially the same as the rental, duration, and other terms and conditions
as and upon which BKC is then entering into new leases
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with BKC Franchisees for properties owned or leased, as the case may be, by
BKC, or in the event BKC at such time is no longer entering into new leases
with BKC Franchisees for properties owned or leased, as the case may be, by
BKC, then upon substantially the same rental, duration, and other terms and
conditions as upon which BKC most recently was entering into such leases with
BKC Franchisees. Notwithstanding the foregoing, the rental for such leases
may be greater than that which BKC is then setting (or, if appropriate, was
setting) for BKC Franchisees.
(c) Notwithstanding anything to the contrary contained in any lease
of a Restricted Restaurant Property to which a BKC Franchisee is a party, (i)
BKC shall have the right at any time, without obtaining the consent of the
Operating Partnership, to assume the obligations and liabilities of the lessee
thereafter accruing under such lease, and thereupon, at the request of BKC, such
lessee shall be released from all obligations and liabilities thereafter
accruing thereunder; provided, however, that a release in connection with such
an assumption shall be required pursuant hereto only if BKC, as a matter of
policy, then is granting such releases in connection with the assumption by BKC
of leases with BKC Franchisees for properties owned or leased, as the case may
be, by BKC; and (ii) at any time after any such assumption by BKC, BKC shall
have the right, without obtaining the consent of the Operating Partnership, to
assign such lease to a Person that meets BKC's then existing franchisee
financial capability requirements and upon such assignment and the assumption by
such Person of all obligations and liabilities of BKC thereafter accruing under
such lease, BKC shall be released from all obligations and liabilities
thereafter accruing thereunder.
(d)(i) In the event that BKC notifies the Operating Partnership that
BKC has extended or renewed a BKC Franchise Agreement with respect to a
Restricted Restaurant Property that is subject to a Primary Lease for a term
coterminous with one or more permitted renewal terms available under such
Primary Lease, OR (ii) in the event that BKC notifies the Operating Partnership
that EITHER (A) BKC has entered into a new BKC Franchise Agreement with a Person
that meets BKC's then existing financial capabilities requirements authorizing
such Person to operate a BK Restaurant on a Restricted Restaurant Property that
is subject to Primary Lease for a term coterminous with one or more permitted
renewal terms available under such Primary Lease, OR (B) BKC has decided to
operate a BK Restaurant on a Restricted Restaurant Property that is subject to a
Primary Lease for a term coterminous with one or more permitted renewal terms
available under such Primary Lease, then in any such event, in addition to any
other requirements of this Section 8.03, the Operating Partnership promptly
shall renew the applicable Primary Lease for a term no shorter than the term of
the extended, renewed, or new BKC Franchise Agreement, as the case may be, or in
the case of BKC's election to operate a BK Restaurant at such Partnership
Property, for a term no shorter than the term of BKC's lease with the Operating
Partnership with respect to such Restaurant Property.
(e) Unless otherwise expressly waived by BKC in writing, the
restrictions and other provisions of this Section 8.03 shall remain in effect
and shall be enforceable with respect to each Restricted Restaurant Property by
BKC during the period commencing on the date of the Amended Agreement and ending
on -the earliest of (i) a transfer by the Operating Partnership of all of its
right, title, and interest in and to all of such Restaurant Property pursuant to
Section 8.04(f) following the failure of BKC to elect to acquire all of the
Restaurant Property pursuant to an offer thereof to BKC under Section 8.04(d) or
the failure of BKC to close the acquisition thereof on the date required by
Section 8.04(e); (ii) a BKC Franchise Agreement is terminated by BKC or by the
mutual agreement of the parties thereto prior to the expiration of the stated
term thereof and BKC
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does not, prior to the end of the Determination Period, enter into a new BKC
Franchise Agreement with respect to the Restaurant Property or elect to
operate itself a BK Restaurant on the Restaurant Property; or (iii) a BKC
Franchise Agreement with respect to a Restricted Restaurant Property expires
according to the terms thereof and BKC does not either (A) renew or extend
the same at or prior to the expiration thereof or (B) prior to the end of the
Determination Period, enter into a new BKC Franchise Agreement with respect
to the Restaurant Property or elect to operate itself a BK Restaurant on the
Restaurant Property; provided, however, if the duration of such period would
render the restrictions or other provisions of this Section 8.03 invalid or
unenforceable under any law of the jurisdiction in which a Restricted
Restaurant Property is located limiting the period during which such
restrictions or other provisions may endure, then such period shall continue
with respect to such Restaurant Property only for such term as may be
prescribed by the laws of such jurisdiction. It is the express intent of
BKC, the Partnership, and the Operating Partnership that such restrictions
and other provisions shall be valid and enforceable to the fullest extent
permitted by the laws of such jurisdiction.
(f) Notwithstanding anything to the contrary in this Section 8.03 or
elsewhere in this Agreement, nothing contained herein or elsewhere shall affect
the right of BKC, in its sole and absolute discretion, to terminate a BKC
Franchise Agreement, to renew or extend or fail to renew or extend a BKC
Franchise Agreement, to approve or disapprove any assignment of a BKC Franchise
Agreement, to elect to enter into a new BKC Franchise Agreement with respect to
a Restricted Restaurant Property, or to operate itself a BK Restaurant on the
Restaurant Property, to amend or modify a BKC Franchise Agreement, or to take or
fail to take any other action in connection with a BKC Franchise Agreement.
(g) Notwithstanding any other provision of this Agreement, the
Partners and any Assignees hereby expressly agree that the Managing General
Partner shall have no duty, under any circumstances whatsoever, to seek to sell,
or to consider any offer to purchase, any Restricted Restaurant Property so long
as such Restaurant Property is subject to the restrictions and other provisions
of this Section 8.03, and the fact that a Restricted Restaurant Property is
subject to the restrictions and provisions of this Section 8.03 shall be a
complete and absolute defense to any claim or action for damages or other relief
based upon a failure of the Managing General Partner to solicit or consider
offers to purchase such Restaurant Property, irrespective of the terms of any
such offer that may be received by the Managing General Partner.
8.04. RESTRICTIONS ON TRANSFER OF RESTAURANT PROPERTIES.
(a) For purposes of this Section 8.04, the term "transfer," with
respect to a Restricted Restaurant Property, shall include a sale, lease,
sublease, gift, mortgage, deed of trust, exchange, assignment, or other
disposition, including a disposition under judicial order, process, execution,
attachment, or enforcement or foreclosure of an encumbrance, but shall not
include the following: (i) a mortgage, deed of trust, grant of security
interest, or other encumbrance effected in a bona fide transaction with an
unrelated and unaffiliated secured party or with BKC, the Managing General
Partner, or any Affiliate thereof to secure indebtedness of the Operating
Partnership for money borrowed from such party, which mortgage, deed of trust,
grant of security interest, or other encumbrance is made pursuant to a written
security agreement, mortgage, deed of trust or other agreement that assures
that, before any foreclosure may be had thereon or other transfer may occur
thereunder or in connection therewith the secured party shall first notify BKC
in writing of its intent to foreclose or effect another transfer and shall first
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offer the Restaurant Property to BKC at the price and on the other terms and
conditions specified in a written offer from a prospective purchaser (which may
be the secured party) in connection with such foreclosure or other transfer;
(ii) a lease or sublease to BKC or a BKC Franchisee in order to permit the
operation of a BK Restaurant on a Restricted Restaurant Property; (iii) a grant
of an easement, right of way, or other right with respect to a Restricted
Restaurant Property to any public utility or other governmental authority in
connection with the provision of utility or other public services (but such
grant shall comply with the provisions of Section 8.04(b)); or (iv) a transfer
to a governmental authority pursuant to or in connection with a condemnation or
other exercise of the power of eminent domain.
(b) The Operating Partnership shall not, without the prior written
consent of BKC, in BKC's sole and absolute discretion: (i) at any time that a
Restricted Restaurant Property is being leased to BKC or a BKC Franchisee in
order to permit BKC or such BKC Franchisee to operate a BK Restaurant on the
Restaurant Property or during any applicable Determination Period, lease or
sublease all or any part of a Restricted Restaurant Property to any other
Person, whether or not such other lease would be subject or subordinate to the
lease to BKC or the BKC Franchisee; or (ii) grant or convey any easement, right-
of-way, or other right with respect to such Restaurant Property if the grant or
use thereof would have a material adverse effect upon the operation of a BK
Restaurant on the Restaurant Property.
(c) Except as provided in Section 8.04(b), the Operating Partnership
shall not transfer (as defined in Section 8.04(a)) any right, title, or interest
in or to any Restricted Restaurant Property, or any part thereof, to any person
or entity without first offering it to BKC in accordance with the provisions of
this Section 8.04(c). Subject to the provisions of Section 8.04(b), if the
Operating Partnership receives a bona fide written offer from an independent
third party to acquire in a transfer all or any part of any Restricted
Restaurant Property that the Operating Partnership intends to accept, subject to
this Section 8.04(c), then, the Operating Partnership shall offer such
Restaurant Property to BKC at the price and on the terms and conditions
(including timing and manner of payment) contained in such bona fide written
offer. The offer of such Restaurant Property to BKC (the "Offer") shall be made
in writing and shall be accompanied by a true and correct copy of the bona fide
written offer. The Operating Partnership promptly shall provide or cause to be
provided to BKC such information relating to the Offer or the third-party offer
or as BKC reasonably may request.
(d) In order to accept the Offer, BKC shall, within thirty (30) days
after receipt of the Offer (or, if later, within five (5) business days after
receipt of all additional information reasonably requested by BKC pursuant to
Section 8.04(c) (such 30-day period and any extension under this Section 8.04(c)
to be referred to as the "Election Period")), notify the Operating Partnership
in writing of its election to acquire such Restaurant Property; provided,
however, that BKC shall not be required to acquire such Restaurant Property upon
the terms and conditions of any third-party offer the consideration for which is
not practicably obtainable by. BKC (such as, by way of example and not of
limitation, specific land, stock in a closely-held corporation, or stock in a
publicly held corporation that cannot be acquired by BKC without an increase in
the trading price thereof or without registration or filing under any federal or
state securities law), but BKC shall have the right to acquire such Restaurant
Property upon terms and conditions (including consideration) reasonably
equivalent to those contained in such offer; and provided further, that the
failure of BKC to acquire such Restaurant Property upon any such reasonably
equivalent terms or conditions shall not permit the Operating Partnership to
transfer such Restaurant
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Property pursuant to Section 8.04(f). Failure of BKC to provide such written
notice within the Election Period shall constitute a refusal by BKC to
purchase such Restaurant Property pursuant to the Offer.
(e) The closing date of any acquisition of such Restaurant Property
by BKC hereunder shall be on the date Fixed in the third-party offer unless such
closing date would occur prior to the expiration of twenty (20) business days
after the last day of the Election Period, in which event the closing date shall
occur on such twentieth (20th) business day or on such other date to which BKC
and the Operating Partnership may agree.
(f) If BKC shall fail to elect to acquire such Restaurant Property
pursuant to Section 8.04(d), or shall fail to close the acquisition on the date
required by Section 8.04(e), then the Operating Partnership shall be free for a
period of sixty (60) days after either such failure, to transfer such Restaurant
Property to the bona fide third-party offeror for a price and on other terms and
conditions contained in such third-party offer. If such Restaurant Property is
not so transferred by the Operating Partnership within such sixty (60) day
period, all rights of the Operating Partnership to transfer such Restaurant
Property free of the foregoing restrictions shall terminate and such Restaurant
Property again shall be subject to the provisions of this Section 8.04.
(g) Unless otherwise expressly waived by BKC in writing, the
provisions of this Section 8.04 shall remain in effect and the rights granted
hereunder shall be exercisable and enforceable by BKC with respect to each
Restricted Restaurant Property during the period commencing on the date of the
Amended Agreement and ending on the earlier of (i) the date that the Operating
Partnership first ceases to hold any right, title, or interest (including a
interest as a creditor) in or to such Restaurant Property or (ii) the date that
the use restrictions set forth in Section 8.03 terminate or would have
terminated but for a early termination pursuant to the proviso contained in
Section 8.03(e); provided, however, that if the duration of such period would
render the provisions of this Section 8.04 or the rights of BKC hereunder
invalid or unenforceable under the rule against perpetuities as applied in the
jurisdiction in which a Restricted Restaurant Property is located, then such
period shall continue with respect to such Restaurant Property only until the
expiration of the longest of the following periods which shall be valid under
the rule against perpetuities as applied in such jurisdiction: (i) the period
ending twenty-one (21) years after the death of the survivor of the legitimate
natural or adopted children and grandchildren of U.S. Presidents Kennedy,
Johnson, Nixon, Ford, Carter, and Reagan alive on the date of the Amended
Agreement; (ii) twenty-one (21) years after the date of the Amended Agreement;
or (iii) such other term as may be statutorily prescribed in such jurisdiction.
It is the express intent of BKC, the Operating Partnership, and the Partnership
that the provisions hereof and rights of BKC hereunder shall be exercisable and
enforceable by BKC to the fullest extent permitted by the laws of such
jurisdiction.
8.05. RENT RELIEF.
(a) The Managing General Partner, in its sole and absolute
discretion, at the request of BKC or a BKC Franchisee, shall be permitted to
cause the Partnership and the Operating Partnership to grant "rent relief" (as
defined in Section 8.05(b)) to a BKC Franchisee with respect to any Restricted
Restaurant Property upon the condition that BKC agree to make a quarterly
payment to the Operating Partnership for each fiscal quarter (with such payment
to be due and payable thirty (30) days after the end of each such fiscal
quarter) during which such "rent relief" is in effect, irrespective of whether
or not the
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Operating Partnership subsequently sells or otherwise disposes of
such Restaurant Property while such "rent relief" is in effect in an amount
equal to the product of (a) the total dollar amount of the rent reduction with
respect to such Restaurant Property effective for such fiscal quarter pursuant
to such "rent relief' multiplied by (b) a fraction, (i) the numerator of which
is the dollar amount of the franchise royalty fee payable to BKC with respect to
such Restaurant Property for such fiscal quarter (exclusive of any amount
required under the applicable BKC Franchise Agreement to be expended by BKC for
advertising and any other income to BKC) (the "Franchise Royalty Fee") and (ii)
the denominator of which is the sum of the Franchise Royalty Fee and the dollar
amount of rent payable with respect to such Restaurant Property for such fiscal
quarter (determined without regard to any "rent relief' applicable with respect
to such Restaurant Property) (the "Rental Amount"). By way of illustration, if
the applicable Franchise Royalty Fee for a Restaurant Property for a particular
fiscal quarter were $35,000 and the applicable Rental Amount for such Restaurant
Property for such fiscal quarter were $100,000, and if the Operating
Partnership, at the request of BKC or at the request of a BKC Franchisee and
with the consent of BKC, were to grant "rent relief" with respect to such
Restaurant Property for such fiscal quarter in the amount of $20,000, then BKC
would be obligated to pay to the Operating Partnership $5,185 (the product of
$35,000/$135,000 multiplied by $20,000) within thirty (30) days after the end of
such fiscal quarter. The obligation of BKC to make payments to the Operating
Partnership in connection with "rent relief" granted hereunder shall continue
until the "rent relief' terminates (or, if sooner, the lease with respect to
which the "rent relief" is granted terminates or expires), notwithstanding any
intervening sale or other disposition by the Operating Partnership of the
Restaurant Property with respect to which such "rent relief" is granted.
(b) As used herein, the term "rental relief" shall mean (i) any
permanent reduction in rent payable with respect to a Restricted Restaurant
Property, (ii) any temporary reduction in rent payable with respect to a
Restricted Restaurant Property (A) if such temporary reduction is for a period
in excess of either ninety (90) consecutive days or ninety (90) days, whether or
not consecutive, in any Fiscal Year, (B) if such temporary reduction is granted
while a BK Restaurant is being replaced, reconstructed, expanded, or otherwise
improved under the BKC "Successor Policy" to take into account the fact that
such BK Restaurant is not operating or is operating on a limited basis during
such period, or (C) if such temporary reduction is for a period of ninety (90)
consecutive days or less and the Managing General Partner specifically
designates such reduction as "rent relief' subject to this Section 8.05;
provided, however, that in no event shall the term "rent relief" include any
reduction in rent payable with respect to a Restricted Restaurant Property
granted in connection with the BKC "Successor Policy" if such reduction in rent
payable is subject to Section 8.06(b). Notwithstanding anything to the contrary
herein, the Managing General Partner shall not be considered to have caused the
Operating Partnership to grant "rent relief" hereunder, and no payment from BKC
to the Operating Partnership shall be due hereunder, as the result of or in
connection with any failure of a BKC Franchisee, without the express written
consent of the Managing General Partner, to make any payment of rent due the
Operating Partnership with respect to a Restricted Restaurant Property (i) if
such failure does not continue for a period Bin excess of ninety (90)
consecutive days, or (ii) if either the lease with such BKC Franchisee shall
have automatically terminated or the Managing General Partner shall have caused
the Operating Partnership to seek to terminate the Operating Partnership's lease
with such BKC Franchisee with respect to such Restaurant Property and in either
event, the Managing General Partner shall have caused the Operating Partnership
to initiate and pursue such action (including litigation, if appropriate)
against such defaulting BKC Franchisee as the Managing General Partner, in its
sole and absolute discretion, shall determine to be
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appropriate under the circumstances in order to obtain payment of amounts
(including lost rent) due the Operating Partnership under its lease with the
defaulting BKC Franchisee. In the event that BKC makes any payment to the
Operating Partnership pursuant to this Section 8.05 in connection with "rent
relief' deemed granted hereunder and the Operating Partnership subsequently
shall collect such "rent relief" from the BKC Franchisee, then the Operating
Partnership shall refund to BKC the amount paid by BKC in connection with
such "rent relief."
8.06. SUCCESSOR POLICY.
BKC maintains a "Successor Policy" relating to the extension and/or
renewal of BKC Franchise Agreements with BKC Franchisees. In connection with
such extensions and/or renewals, the "Successor Policy," in order to help ensure
that the BK Restaurant system remains competitive, makes provision for the
replacement, reconstruction, expansion, and/or other improvement (collectively
"rebuilding") of existing BK Restaurants owned or leased by BKC and leased or
subleased to BKC Franchisees if such BK Restaurants meet certain criteria
established by BKC. Under the BKC "Successor Policy" as currently in effect, BKC
must determine whether or not a BK Restaurant should be rebuilt. If BKC
determines that a BK Restaurant should be rebuilt under the "Successor Policy"
and BKC elects to pay the cost of rebuilding, then the term of the lease with
respect to such BK Restaurant is extended and the BKC Franchisee's guaranteed
"minimum rental" payable under such lease is adjusted. In the event BKC does not
elect to pay the cost of rebuilding a BK Restaurant designated by BKC to be
rebuilt under the "Successor Policy," then, with the consent of BKC, the BKC
Franchisee can elect to pay such cost, in which event the percentage rent
payable with respect to such BK Restaurant is reduced from 8.5 percent (8.5%) to
5.5 percent (5.5%) of annual gross sales at such BK Restaurant, the term of the
lease with respect to such BK Restaurant is extended and the guaranteed minimum
rent payable under such lease is adjusted. The Managing General Partner shall
cause the Partnership and the Operating Partnership to implement, with respect
to the Restricted Restaurant Properties, those aspects of BKC's "Successor
Policy" related to the rebuilding of BK Restaurants, as such policy is currently
in effect and as such policy may be modified, amended, supplemented, superseded,
or replaced by BKC from time to time in its sole and absolute discretion, in
order to cause those Restaurant Properties designated by BKC, its sole and
absolute discretion, to be rebuilt under such "Successor Policy" to be rebuilt,
subject to satisfaction by BKC of the following conditions:
(a) In the event that the BKC Franchisee for a Restricted Restaurant
Property that is designated by BKC to be rebuilt under the "Successor Policy"
does not pay the cost of such rebuilding, then the Managing General Partner
shall cause the Operating Partnership to rebuild such Restaurant Property upon
the condition that BKC pay to the Partnership, at the time such rebuilding is
commenced, an amount equal to the product of (i) the total dollar amount of
funds to be expended by the Operating Partnership for purposes of rebuilding
such Restaurant Property multiplied by (ii) a fraction, (A) the numerator of
which is the weighted annual average of the percentage rates applicable for
determining the franchise royalty fees payable to BKC with respect to such
Restaurant Property over the remaining term of the lease under the BKC Franchise
Agreement in effect with respect to such Restaurant Property (exclusive of any
amounts required under the applicable BKC Franchise Agreement to be expended by
BKC for advertising and other income to BKC (the "Average Franchise Royalty
Rate") and (B) the denominator of which is the sum of the Average Franchise
Royalty Rate and the weighted annual average of the percentage rates applicable
for determining the percentage rent payable to the Operating
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Partnership with respect to such Restaurant Property on the basis of sales
over the remaining term of the lease with the BKC Franchisee in effect with
respect to such Restaurant Property (the "Average Percentage Rent Rate"). By
way of illustration, if the applicable Average Percentage Rent Rate for a
particular Restaurant Property were 8.5 percent and the applicable Average
Franchise Royalty Rate for such Restaurant Property were 3.5 percent, and if
the total cost to rebuild such Restaurant Property pursuant to the "Successor
Policy" were $500,000, then BKC would be obligated to pay to the Operating
Partnership, at the time the rebuilding of such Restaurant Property
commenced, $145,833 (the product of 3.5/12 multiplied by $500,000). The
Managing General Partner shall cause the Operating Partnership to pay the
Operating Partnership's share of the cost of rebuilding a Restricted
Restaurant Property to be rebuilt under the "Successor Policy," in its sole
and absolute discretion, (i) from current operating cash flow of the
Operating Partnership or otherwise to the extent available or (ii) with funds
borrowed from a lender (including, subject to Section 7.13, BKC or any
Affiliate of BKC), on such terms and conditions as the Managing General
Partner shall, in its sole and absolute discretion, determine advisable, with
the payments of principal and interest required with respect to any such loan
to be paid from operating cash flow or otherwise to the extent available; and
(b) In the event that the BKC Franchisee for a Restricted Restaurant
Property that is designated by BKC to be rebuilt under the "Successor Policy"
pays the cost of such rebuilding and thus would be entitled to a reduction in
rent payable with respect to such Restaurant Property, then BKC would make a
quarterly payment to the Operating Partnership for each fiscal quarter during
the period during which such rent reduction is in effect, irrespective of
whether or not the Operating Partnership subsequently sells or otherwise
disposes of such Restaurant Property while such rent reduction is in effect
(with such payment to be due and payable thirty (30) days after the end of each
such fiscal quarter) in an amount equal to the product of (i) the total dollar
amount of the rent reduction effective with respect to such fiscal quarter
pursuit to the "Successor Policy" multiplied by (ii) a fraction, (A) the
numerator of Which is the percentage rate for determining the franchise royalty
fee payable to BKC with respect to such Restaurant Property for such fiscal
quarter (exclusive of any amount required under the applicable BKC Franchise
Agreement to be expended by BKC for advertising and other income to BKC) (the
"Franchise Royalty Rate"), and (B) the denominator of which is the sum of the
Franchise Royalty Rate and the percentage rate for determining the rent payable
to the Operating Partnership with respect to such Restaurant Property on the
basis of sales for such fiscal quarter (the "Percentage Rent Rate"). By way of
illustration, if the applicable Percentage Rent Rate for a Restaurant Property
for a particular fiscal quarter were 8.5 percent and the applicable Franchise
Royalty Rate for such Restaurant Property for such fiscal quarter were 3.5
percent, and if the BKC Franchisee for such Restaurant Property were to be
entitled under the "Successor Policy" to a reduction in the applicable
Percentage Rent Rate to 5.5 percent if such BKC Franchisee were to rebuild such
Restaurant Property pursuit to the "Successor Policy," then, assuming that such
BKC Franchisee's rent payable following such rent reduction exceeds the minimum
base rent payable to the Operating Partnership with respect to such fiscal
quarter, BKC would be obligated to pay to the Operating Partnership an amount
equal to the product of (i) 3.5/12 multiplied by (ii) the product of (A) 3
percent multiplied by (3) the gross sales at such Restaurant Property for such
fiscal quarter. The obligation of BKC to make payments to the Operating
Partnership under this Section 8.06(b) in connection with a rent reduction
granted hereunder shall continue until the lease under which such rent reduction
is granted, terminates or expires, notwithstanding any intervening sale or other
disposition by the Operating Partnership of the Restaurant Property with respect
to which such rent reduction is granted.
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In the event the guaranteed minimum rent payable pursuant to any lease
with respect to a Restricted Restaurant Property is adjusted in connection with
the rebuilding of a BK Restaurant pursuant to the "Successor Policy," then
notwithstanding any other provision of the Agreement or of the "Successor
Policy," the "fair market of the original property" for purposes of determining
the amount of such adjustment shall be equal to the replacement cost of such
property, as determined by the Appraiser. Notwithstanding anything to the
contrary herein, BKC, in its sole and absolute discretion, may elect not to
designate a particular Restricted Restaurant Property to be rebuilt under the
"Successor Policy," in which event the BKC Franchisee for such Restaurant
Property shall be solely responsible for the cost of any rebuilding and shall
not be entitled to any reduction in rent payable with respect to such Restaurant
Property. BKC in no event shall be entitled to any fee or other payment from the
Partnership in connection with the rebuilding of a Restaurant Property under the
"Successor Policy."
In addition to the foregoing, BKC, separate and apart from
implementation of the "Successor Policy," from time to time may request that the
Operating Partnership acquire property adjacent to a Restaurant Property for
purposes of permitting expansion of the BK Restaurant or related facilities
(such as parking) located on such Restaurant Property. The Managing General
Partner shall cause the Operating Partnership to acquire any such adjacent
property upon the request of BKC, upon the condition that BKC pay to the
Operating Partnership, at the time such acquisition occurs, an amount determined
in accordance with the formula set forth in paragraph 8.06(a) above.
8.07. COMPETITIVE FACILITIES.
Without in any way limiting the generality of Section 7.06, the
Limited Partners and any Assignees recognize that BKC, TPC, and Affiliates
thereof are in the business of establishing, leasing, operating, managing, and
franchising restaurants, including, without limitation, BK Restaurants, and that
in connection with such businesses, BKC, TPC, and/or Affiliates thereof may from
to time establish, own, lease, operate, manage, and/or franchise new
restaurants, including, without limitation, BK Restaurants. Both such existing
restaurants and any such new restaurants may be competitive with one or more of
the Restaurant Properties and may adversely affect the revenues of the
Partnership with respect to one or more of the Restaurant Properties. The
Limited Partners and Assignees expressly consent to all actions of BKC, TPC, and
any Affiliate of either in connection both with existing restaurants and with
any new restaurants and agree that neither BKC, TPC, the Managing General
Partner, nor any Affiliate of them shall incur any liability to the Operating
Partnership, the Partnership, or any Limited Partner or Assignee as the result
of or in connection with any such action.
8.08. ACQUISITION OF RESTAURANT PROPERTIES BY THE GENERAL PARTNERS OR
AFFILIATES.
Notwithstanding any provision of this Agreement, including, without
limitation, Sections 7.02(w) and 8.04(d), (e), and (f), no Person that is a
General Partner or an Affiliate of a General Partner shall acquire any
Restaurant Property from the Operating Partnership, whether by purchase,
exchange, or substitution, unless the consideration received by the Operating
Partnership for such Restaurant Property is at least equal to the "fair market
value" (as hereinafter defined) of such Restaurant Property, as determined by
the Appraiser; provided, however, that this Section 8.08 shall have no
application to any acquisition of a Restaurant Property by BKC pursuant to
Section 8.04 if, at the time of such acquisition, neither BKC nor any Affiliate
of BKC is a General Partner.
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Any acquisition of a Restaurant Property, whether by purchase, exchange, or
substitution, by a Person who is a General Partner or an Affiliate of a
General Partner fair consideration that is at least equal to the "fair value"
(as hereinafter defined) of such Restaurant Property, as determined by the
Appraiser, conclusively shall be deemed to be fair and in the best interests
of the Partnership. As used herein, the term "fair market value" shall mean
the value that would be obtained in an arm's length transaction between an
informed and willing purchaser under no compulsion to buy and an informed and
willing seller under no compulsion to sell, as determined by the Appraiser,
using such method or methods of valuation as the Appraiser determines most
accurately reflect the value of the particular Restaurant Property in
question under the circumstances, provided that for a period of five (5)
years from the Closing Date, the Appraiser shall use the "capitalization of
income" method (applying such capitalization rate and other assumptions and
adjustments as the Appraiser determines appropriate under the circumstances)
unless the Appraiser determines that such method would result in an
understatement of the value of the Restaurant Property with respect to which
such appraisal is being performed. For purposes of this Section 8.08, in the
event that any consideration to be received by the Operating Partnership in
exchange or substitution for any Restaurant Property is in any form other
than money, then the "fair market value" of such consideration, as determined
by the Appraiser (or if such other consideration is in the form of property
other than real estate, by an appraiser experienced in valuing such other
property designated by the Appraiser), shall be required to be at least equal
to the "fair market value" of the Restaurant Property or Properties to be
transferred.
8.09. TERMINATION OF LEASE FOR RESTAURANT PROPERTY FOLLOWING TERMINATION OF
BKC FRANCHISE AGREEMENT.
(a) In the event that (i) either (A) a BKC Franchise Agreement
authorizing the operation of a BK Restaurant is terminated by BKC or by the
mutual agreement of the parties thereto prior to the expiration of the stated
term thereof, or (B) a BKC Franchise Agreement,expires according to the terms
thereof and is not renewed by BKC at or prior to the expiration of such BKC
Franchise Agreement, and (ii) BKC does not, prior to the end of the
Determination Period (as defined in Section 8.03) enter into a new BKC Franchise
Agreement with respect to the Restricted Restaurant Property or elect to operate
a BK Restaurant on the Restricted Restaurant Property, as provided for in
Section 8.03(b)(ii), then the Managing General Partner, in its sole and absolute
discretion, shall be permitted to cause the Operating Partnership to terminate
any lease with a BKC Franchisee with respect to such Restaurant Property if a
default has occurred under such lease and either (i) the Managing General
Partner shall have caused the Operating Partnership to initiate and pursue such
action (including, if appropriate, litigation) against such defaulting lessee as
the Managing General Partner, in its sole and absolute discretion, shall
determine to be reasonable under the circumstances in order to obtain payment of
amounts (including lost rent) due the Operating Partnership under such lease, or
(ii) the Managing General Partner or the defaulting lessee shall have located a
new lessee for the Restaurant Property for a term at least as long as the
remaining unexpired term under the lease to be terminated and for a rent not
lower than the minimum base rent payable under such lease (or if the rent is
lower than the minimum base rent payable under the lease to be terminated, the
defaulting lessee shall have agreed to be contractually obligated to continue to
pay to the Operating Partnership an amount equal to the difference between the
rent payable under the new lease and the minimum base rent payable under the
lease to be terminated and shall have provided adequate security, as determined
by the Managing General Partner to be reasonable under the circumstances, for
such obligation).
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(b) In addition to any termination in accordance with Section 8.09(a)
and any termination in accordance with Section 8.03(b)(ii), the Managing General
Partner, in its sole and absolute discretion, shall be permitted, without
limitation, to cause the Operating Partnership to terminate a lease with a BKC
Franchisee with respect to a Restricted Restaurant Property if the BKC Franchise
Agreement with respect to such Restaurant Property is terminated in connection
with or as a result of a condemnation involving all or substantially all of a
Restricted Restaurant Property or a casualty materially adversely affecting the
use of such Restaurant Property for the purpose of operating a BK Restaurant for
a period in excess of six (6) months.
(c) The provisions of this Section 8.09 shall not limit or affect in
any way the termination of a lease with respect to a Restricted Restaurant
Property with a Person that is not and was not a BKC Franchisee. The provisions
of this Section 8.09 are for the benefit of the Partnership, the Operating
Partnership, the Partners, and any Assignees, and shall not be deemed to create
any rights for the benefit of any other Persons, including, without limitation,
any lessees under leases with the Operating Partnership.
8.10. INDEPENDENT CONSULTANT.
(a) The Managing General Partner, in its sole and absolute
discretion, shall be entitled, but not required, to consult with the Independent
Consultant with respect to any action or proposed action affecting or relating
to the Partnership or the Operating Partnership or their business. In the event
that the Managing General Partner shall elect to consult with the Independent
Consultant with respect to any such action or proposed action, then the
Independent Consultant shall advise the Managing General Partner whether such
action or proposed action is contrary to the interests of the Partnership or the
Operating Partnership, as the case may be, taking into account, with respect to
the Restricted Restaurant Properties, that the original purposes of the
Partnership and the Operating Partnership was to acquire and hold real estate
that was leased to BKC Franchisees for the purpose of operating BK Restaurants
to derive revenues therefrom. The Limited Partners and Assignees expressly agree
that any actions taken by the Managing General Partner in accordance with the
advice of the Independent Consultant conclusively shall be deemed to be fair to
and in the best interests of the Partnership, the Operating Partnership, the
Limited Partners and any Assignees, and the fact that an action of the Managing
General Partner is undertaken in accordance with the advice of the Independent
Consultant shall be a complete and absolute defense to any claim or action
asserting the invalidity of such action or any claim or action for damages or
other relief based on an assertion that such action resulted in a breach by the
Managing General Partner or any of its Affiliates of this Agreement or any duty,
fiduciary or otherwise, owed by the Managing General Partner or any Affiliate to
the Operating Partnership, the Partnership, the Limited Partners, or any
Assignees. The Limited Partners and Assignees further acknowledge that the
purpose of this Section 8.10 is to provide an arrangement to facilitate outside
consultation by the Managing General Partner with respect to potential problems
arising in connection with the management of the Partnership and the Operating
Partnership and expressly agree that, in order to induce the Managing General
Partner to consent to this Section 8.10 and to undertake such consultation from
time to time as it determines appropriate, neither the failure of the Managing
General Partner to consult with the Independent Consultant on any particular
action or proposed action, nor the failure of the Managing General Partner to
act in accordance with the advice of the Independent Consultant on any action or
proposed action with respect to which the Managing General Partner shall elect
to consult with the Independent Consultant, shall create any inference or
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presumption or otherwise constitute evidence with respect to the failure of such
action or proposed action to the Partnership, the Operating Partnership, the
Limited Partners, or Assignees as the case may be.
(b) In the event that the Independent Consultant designated in this
Agreement at any time is unable or unwilling to advise the Managing General
Partner on a particular matter or should inform the Managing General Partner
that it no longer is willing to serve as Independent Consultant, then the
Managing General Partner shall designate a substitute Independent Consultant, as
provided for below. The Managing General Partner shall have the right at any
time, in its sole and absolute discretion, to terminate the Independent
Consultant and to designate a substitute Independent Consultant, as provided for
below; provided, however, that the Managing General Partner shall have no
obligation to the Partnership, the Operating Partnership, the Limited Partners,
or Assignees, as the case may be, to terminate the Independent Consultant under
any circumstances, and provided further that any termination of the Independent
Consultant pursuant to this Section 8. 10(b) conclusively shall be deemed to be
fair to and in the best interests of the Partnership, the Operating Partnership,
the Limited Partners, and any Assignees. Any substitute Independent Consultant
designated by the Managing General Partner pursuant to this Section 8. 10(b)
shall have experience in advising or consulting about the "fast-food" business
and shall be "financially independent" (as hereinafter defined) of the Managing
General Partner. A Person conclusively shall be deemed "financially
independent" of the Managing General Partner for purposes of this Section 8.
10(b) if (i) such Person is not, and during the preceding four (4) years has not
been, a BKC Franchisee or an affiliate of the Managing General Partner, of BKC,
of TPC, or of a BKC Franchisee; and (ii) such Person has not derived more than
fifteen percent (15%) of such Person's average annual gross revenues over the
preceding four (4) years from the Managing General Partner, BKC, TPC, any BKC
Franchisee, and any Affiliate of any of the foregoing.
(c) The Managing General Partner, in its sole and absolute
discretion, either (i) may cause the Partnership to indemnify and hold harmless
the Independent Consultant upon such terms and conditions as the Managing
General Partner shall determine appropriate or (ii) may indemnify and hold
harmless the Independent Consultant upon such terms and conditions as the
Managing General Partner shall determine appropriate, in which event the
Partnership shall indemnify the Managing General Partner for any amounts
required to be paid under such indemnification; provided, however, that in
either case, the terms and conditions of such indemnification shall be no more
favorable to the Independent Consultant than the terms and conditions pursuant
to which the General Partners, their Affiliates, and officers, directors,
employees, and agents of the General Partners and their Affiliates are
indemnified and held harmless pursuant to Section 7.10.
8.11. CONSENT TO USE OF NAME AND TRADEMARKS.
BKC's consent to the Partnership's use of the words "Burger King"
in the name of the Partnership and to the Partnership's use of the registered
trademarks and service marks Burger King-Registered Trademark-,
Whopper-Registered Trademark-, Whopper Junior-Registered Trademark-, and the
Burger King bun halves logo in the Registration Statement, all sales
materials and other documents prepared for use in connection with the Initial
Public Offering, any reports to or written communications with Limited
Partners and Assignees, and any reports filed by the Partnership with any
federal, state, or local regulatory agency terminated upon the withdrawal of
BKC as the Special General Partner.
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8.12. ACQUISITION OF FEE TITLE TO PROPERTIES SUBJECT TO PRIMARY LEASES.
The Managing General Partner shall have the right, in its sole and
absolute discretion, to cause the Operating Partnership to acquire fee title to
any Restricted Restaurant Property that is subject to a Primary Lease, either
pursuant to a right of first refusal on behalf of the Operating Partnership set
forth in such Primary Lease or otherwise. BKC shall have no obligation to the
Operating Partnership or the Partnership in connection with any such
acquisition.
8.13. LOCATION OF OTHER RESTAURANT PROPERTIES.
Neither the Partnership nor the Operating Partnership may acquire any
Other Restaurant Properties within a two-mile radius of any Restricted
Restaurant Property held as of the Effective Date.
ARTICLE IX
COMPENSATION OF GENERAL PARTNERS: PAYMENT OF
PARTNERSHIP EXPENSES
9.01. COMPENSATION TO GENERAL PARTNERS.
Except as permitted under Section 5.05 or expressly provided in
Section 9.03, no General Partner shall receive any compensation from the
Partnership or the Operating Partnership for services rendered in its capacity
as a general partner of the Partnership or the Operating Partnership.
9.02. EXPENSES IN CONNECTION WITH ORGANIZATION OF PARTNERSHIP AND INITIAL
PUBLIC OFFERING.
As set forth in the Real Estate Purchase Agreement, BKC as the Special
General Partner reimbursed the Partnership for all fees, costs, and expenses
actually incurred by the General Partners and their Affiliates in connection
with the organization of the Partnership, the Operating Partnership, and the
Managing Partner; the qualification of the Partnership, the Operating
Partnership and the Managing General Partner to do business in any state in
which the Managing General Partner determined that such qualification was
advisable; the registration of the Depositary Units under applicable federal and
state securities laws in connection with the Initial Public Offering; the
offering, sale, and distribution of the Depositary Units pursuant to the Initial
Public Offering; the listing of the Depositary Receipts evidencing Depositary
Units on a National Securities Exchange; the purchase of the Restaurant
Properties by the Operating Partnership; and planning and preparing for the
operation and management of the Partnership and the Operating Partnership
following the Initial Public Offering, including, without limitation, (i)
printing, mailing, filing, and recording expenses; (ii) charges of agents,
depositaries, appraisers, and the Underwriters; (iii) expenses of registration
and qualification of the Units under applicable federal and state securities
laws; (iv) legal (including tax advice) and accounting fees and disbursements;
(v) remuneration paid to officers or employees of any General Partner or any
Affiliate that is allocable to time spent on such activities; and (vi) other
expenses of a similar nature incurred by; any General Partner or any Affiliate
in connection with such activities.
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9.03. OPERATIONAL EXPENSES.
In addition to any reimbursement pursuant to the indemnification set
forth in Section 7.10, the Partnership shall cause the Operating Partnership,
pursuant to Section 9.03 of the Operating Partnership Agreement, to pay the
following:
(a) With respect to (i) the Restaurant Properties held as of the
Effective Date and (ii) the Restaurant Properties and Ancillary Property related
thereto acquired thereafter with respect to the Restaurant Properties referred
to in clause (i) above whether pursuant to Section 8.12 or otherwise, the
Partnership shall cause to be paid to the Managing General Partner with respect
to each Fiscal Year an aggregate amount equal to Four Hundred thousand Dollars
($400,000) adjusted annually as set forth in the next paragraph below, which
amount shall be in lieu of any reimbursement for expenses related to the
management of the business affairs of the Partnership and the Operating
Partnership (other than expenses described in clause (c) hereof) that are
incurred by the Managing General Partner or its Affiliates with respect to such
Restaurant Properties, which amount shall be payable in equal quarterly
installments within sixty (60) days after the end of each fiscal quarter.
(b) With respect to any Restaurant Property and Ancillary Property
related thereto acquired after the Effective Date (other than those referred to
in clause (a) above), (i) the Partnership shall cause to be paid to the Managing
General Partner (A) an acquisition fee equal to 1% of the purchase price paid by
the Partnership or the Operating Partnership for such Restaurant Property and
Ancillary Property related thereto, payable on the date of acquisition, and (B)
with respect to each Fiscal Year, an amount, adjusted annually as set forth in
the next paragraph below, accruing while such property is held at the rate of 1%
per annum (applied using the simple interest method on the basis of a 365/366-
day year and the actual number of days elapsed) on the purchase price paid by
the Partnership or the Operating Partnership for such Restaurant Property and
Ancillary Property related thereto, and (ii) if the Rate of Return attributable
to all Restaurant Properties and Ancillary Property related thereto acquired
after the Effective Date (other than those referred to in clause (a) above) in
respect of any Fiscal Year shall exceed 12% per annum, the Partnership shall
cause to be paid to the Managing General Partner an amount equal to 25% of the
amount of cash received by the Operating Partnership representing such excess,
which amounts shall be in lieu of any reimbursement of expenses related to the
management of the business affairs of the Partnership and the Operating
Partnership (other than expenses described in clause (c) hereof) that are
incurred by the Managing General Partner or its Affiliates with respect to such
Restaurant Properties and (except as provided in clause (i)(A) of this clause
(b)) shall be payable in quarterly installments within sixty (60) days after the
end of each fiscal quarter (which may be estimated in the case of the first
three fiscal quarters); provided that there shall be credited against the
amounts, if any, payable pursuant to clause (ii) of this clause Q) in respect of
any Fiscal Year amounts payable to the Managing General Partner in respect of
its First-Tier Residual Interest or Second-Tier Residual Interest pursuant to
Sections 6.05 and 6.06 in respect of such Fiscal Year.
(c) The Partnership shall either cause to be paid to the Managing
General Partner on a monthly basis, or cause the Managing General Partner to be
reimbursed for the payment of, all amounts payable to any Person for providing
goods or performing services (including, without limitation, legal, accounting,
auditing, record keeping, reporting, depositary, transfer agent, printing,
appraisal, and consulting services) for or on behalf of the Partnership or the
Operating Partnership; provided, however, that
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the Operating Partnership shall not cause to be paid to the Managing General
Partner, or cause the Managing General Partner to be reimbursed, for the
payment of any amount to an Affiliate or an officer, director, or employee of
an Affiliate for legal, accounting, managerial, or consulting services; and
provided further, that the Operating Partnership shall cause to be paid to,
or shall cause the Managing General Partner to be reimbursed for a payment
to, an Affiliate or an officer, director, or employee of an Affiliate for
goods or other services only if the price and the terms upon which such goods
or services are provided to the Partnership or the Operating Partnership are
fair to the Partnership or the Operating Partnership, as the case may be, and
are not less favorable to the Partnership or the Operating Partnership, as
the case may be, than would be incurred if the Partnership or the Operating
Partnership were to obtain such goods or services from an unrelated third
party or were to engage employees to provide such goods or services directly.
For 1987 and for each Fiscal Year thereafter, the amount payable
pursuant to clause (a) of the immediately preceding paragraph shall be increased
by an amount equal to the product of Four Hundred Thousand Dollars ($400,000)
multiplied by the percentage increase in the Price Index from January 1, 1986,
through the last day of the immediately preceding Fiscal Year. For each year
after the year in which a Restaurant Property is acquired, the amount otherwise
payable pursuant to clause (b)(i)(B) of the immediately preceding paragraph (the
"Clause (b)(i)(B) Amount") shall be increased by an amount equal to the product
of the Clause (b)(i)(B) Amount multiplied by the percentage increase in the
Price Index from the first day of the immediately preceding Fiscal Year or, in
the case of the first year after the year in which the Restaurant Property is
acquired, the first day of the month in which the acquisition occurred through
the last day of the Fiscal Year immediately preceding such year or, if earlier,
the last day of the month in which such property was disposed of. The percentage
increase in the Price Index through the last day of a particular period shall be
determined by calculating the increase, if any, in the Price Index for the last
time period during such period (the "Price Index Determination Period") with
respect to which the Price Index is published (currently a monthly period) over
the Price Index for the time period immediately preceding the first day of the
Price Index Determination Period, and expressing the amount of such increase as
a percentage of the Price Index for said time period immediately preceding the
first day of the Price Index Determination Period.
"RATE OF RETURN" in respect of any period shall mean and refer to the
quotient obtained by dividing (1) the aggregate revenues received by the
Partnership or the Operating Partnership from the Restaurant Properties and
Ancillary Property referred to in clause (b) above for such period, whether
through operations, sale or other disposition, less (without duplication) (i)
the aggregate fees payable pursuant to clause (b)(i)(B) above for such period in
respect of such property, (ii) the aggregate expenses of the Partnership (other
than interest expense, depreciation, amortization and other non-cash expenses
and charges, and expenses described in clauses (b) and (c) above) directly
attributable to such property and interest expense on any debt allocated thereto
for such period, (iii) the general and administrative expenses of the
Partnership (other than non-cash expenses and charges and expenses described in
clauses (a) and (b) above) for such period allocated to such property (based on
the ratio of Average Partnership Equity in such property to the aggregate
Average Partnership Equity in all Partnership property) and (iv) the principal
amount of debt allocated to such property repaid during such period and, if
applicable, the cash costs and expenses of any kind or nature incurred in
respect of the sale or other disposition thereof, by (2) the Average Partnership
Equity in such property during such period. "AVERAGE PARTNERSHIP EQUITY" shall
mean and refer to (A) the average of the sums of the aggregate purchase prices
therefor, the aggregate fees paid pursuant to clause
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(b)(i)(A) above in respect thereof and all other cash costs and expenses of
any kind or nature incurred in connection with the acquisitions thereof
("Property Cost") as of the last day of each calendar month occurring during
the period of determination, less (B) the average outstanding principal
amount of debt of the Partnership outstanding as of the last day of each
calendar month during such period and allocated to such property.
For the purposes of the foregoing, debt of the Partnership shall be
allocated among the Partnership's properties as follows: (1) non-recourse debt
shall be allocated to the property secured thereby and, if such debt is secured
by more than one property, such debt shall be allocated among the properties
secured thereby based on the relative Property Costs thereof; and (2) recourse
debt shall be allocated to all of the property of the Partnership based on the
relative Property Costs thereof (reduced for this purpose by the amounts of non-
recourse debt allocated thereto in accordance with clause (1) above).
ARTICLE X
BANK ACCOUNTS; BOOKS AND RECORDS; FISCAL YEAR;
STATEMENTS; TAX MATTERS
10.01. BANK ACCOUNTS.
All funds of the Partnership shall be deposited in its name in such
checking and savings accounts, time deposits, certificates of deposit, or other
accounts at such banks or other financial institutions as shall be designated by
the Managing General Partner from time to time, and the Managing General Partner
shall arrange for the appropriate conduct of any such account or accounts. The
Managing General Partner shall have fiduciary responsibility for the safekeeping
and use of the funds of the Partnership, whether or not in the possession and
control of the Managing General Partner, and the Managing General Partner shall
not employ or permit any other Person to employ such funds except in accordance
with the terms of this Agreement. The Managing General Partner shall not permit
funds of the Partnership to be commingled with funds of the Managing General
Partner, any Affiliate, or any other Person; provided, however, that nothing
herein shall prohibit the Partnership's investment in the Operating Partnership;
and provided further that nothing herein shall preclude any investment of
Partnership funds in a mutual fund or similar entity for which a separate
account is maintained on behalf of each participant.
10.02. BOOKS AND RECORDS.
(a) The Managing General Partner shall keep, or cause to be kept,
accurate, full, and complete books and accounts with respect to the Partnership,
showing assets, liabilities, income, operations, transactions, and the financial
condition of the Partnership. Such books and accounts shall be prepared and
maintained on the accrual basis of accounting in accordance wi% generally
accepted accounting principles. The Managing General Partner shall maintain and
preserve all Partnership books and records for such period as the Managing
General Partner, in its reasonable discretion, shall determine necessary or
appropriate, subject to any requirements of state or federal law; provided,
however, that all appraisal reports obtained by the Partnership, whether in
connection with the acquisition of the Restaurant Properties or otherwise, shall
be retained by the Partnership for at least five (5) years from the date
thereof.
(b) Each Limited Partner, and each such Limited Partner's duly
authorized representatives, shall have the right, at reasonable times and at
such Limited
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Partner's own expense, but only upon twenty (20) days prior written notice to
the Managing General Partner in accordance with Section 18.02, and only for a
valid business purpose related to the conduct of the Partnership's business,
(i) to have true and fill information regarding the status of the business
and financial condition of the Partnership; (ii) to inspect and copy the
books of the Partnership and other reasonably available records and
information concerning the operation of the Partnership, including copies of
any appraisal reports described in Section 10.02(a) and copies of the
federal, state, and local income tax returns of the Partnership; (iii) to
have a current list of the name and last known business, residence, or
mailing address of each Partner; (iv) to have true and full information
regarding the amount of cash and a description and statement of the Carrying
Value of any property or services contributed by any Partner to the
Partnership and the date upon which each Partner became a Partner; and (v) to
have a copy of this Agreement, the Certificate of Limited Partnership, and
all amendments or certificates of amendment, as the case may be, thereto,
together with copies of any powers of attorney pursuant to which any such
amendment or certificate of amendment has been executed.
(c) Anything in this Section 10.02 to the contrary notwithstanding,
the Managing General Partner, in its sole and absolute discretion, may refuse
any Limited Partner or its representative access to any information, records,
documents, or data it determines to be confidential, including, without
limitation, any records relating to the sales or revenues or projected sales or
revenues of one or more specific BK Restaurants, information related to the
financial condition or circumstances of any BKC Franchisee or BKC's relationship
with any BKC Franchisee, and any other information provided to the Partnership
or the Operating Partnership by BKC and specifically designated by BKC, in its
reasonable discretion, to be confidential and/or proprietary.
10.03. FISCAL YEAR.
The Fiscal Year of the Partnership for financial and federal, state,
and local income tax purposes initially shall be the calendar year. The
Managing General Partner shall have authority to change the beginning and ending
dates of the Fiscal Year if the Managing General Partner, in its sole and
absolute discretion, subject to approval by the Internal Revenue Service, shall
determine such change to be necessary or appropriate to the business of the
Partnership, and shall give written notice of any such change to the Limited
Partners within thirty (30) days after the occurrence thereof.
10.04. FINANCIAL STATEMENTS AND INFORMATION.
(a) All financial statements shall be accurate and complete in all
material respects, shall present fairly the financial position and operating
results of the Partnership, and shall be prepared on the accrual basis as
provided in Section 10.02 for each Fiscal Year of the Partnership during the
term of this Agreement.
(b) No later than forty-five (45) days after the end of each fiscal
quarter of each Fiscal Year (except the last fiscal quarter of each Fiscal
Year), commencing with the fiscal quarter ending June 30,1986, the Managing
General Partner shall prepare and mail, or cause to be prepared and mailed, to
each Record Holder of a Depositary Unit or Unit as of a date specified by the
Managing General Partner (which date shall not be earlier than the last day of
such fiscal quarter), an unaudited statement of income for the Partnership for
such fiscal quarter, an unaudited statement of changes in cash flows for the
period between the end of the most recent Fiscal Year and the end of such fiscal
quarter, and an unaudited balance sheet of the Partnership dated as of the end
of such fiscal quarter,
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in each case prepared in accordance with generally accepted accounting
principles, together with a statement setting forth any transactions between
the Partnership and any of the General Partners or any Affiliate thereof, the
amount of any fees, commissions, compensation and other remuneration paid or
accrued to any of the General Partners or any Affiliate thereof for services
rendered to the Partnership, and a description of such services, any other
information required by Form 10-Q under the Exchange Act, and such other
information (financial or otherwise) as the Managing General Partner, in its
discretion, shall deem necessary or appropriate.
(c) No later than ninety (90) days after the end of each Fiscal Year
during the term of this Agreement, the Managing General Partner shall prepare
and mail, or cause to be prepared and mailed, to each Record Holder of a
Depositary Unit or Unit as of a date specified by the Managing General Partner
(which date shall not be earlier than the last day of such Fiscal Year): (i) a
balance sheet, together with statements of income, Partners' equity, and changes
in cash flows for the Partnership during such Fiscal Year, which financial
statements shall be audited by the Auditing Firm (such financial statements to
contain a report of the Auditing Firm which shall include: (A) a statement that
an audit of such financial statements has been made in accordance with generally
accepted auditing standards and that such financial statements are in conformity
with generally accepted accounting principles; (B) a statement of the opinion of
the Auditing Firm with respect to the financial statements and the accounting
principles and practices reflected therein and in regard to the consistency of
the application of such accounting principles; and (C) an identification of any
matters reflected in such financial statements to which the Auditing Firm takes
exception); (ii) a report summarizing any transactions between the Partnership
and any of the General Partners or any Affiliate thereof, the amount of any
fees, commissions, compensation and other remuneration (including, without
limitation, reimbursements of expenses pursuant to Section 9.03) paid or accrued
by the Partnership for such Fiscal Year to any of the General Partners and any
Affiliates thereof, and the services rendered to the Partnership in connection
therewith; (iii) a report of the activities of the Partnership during the Fiscal
Year; and (iv) a statement (which statement need not be audited) showing any
Cash Flow and any Net Proceeds of a Capital Transaction distributed or to be
distributed to the Partners and any Assignees in respect of such Fiscal Year.
(d) The Managing General Partner shall provide to each Record Holder
of a Depositary Unit as of a date specified by the Managing Partner, no later
than seventy-five (75) days after the close of the period covered thereby, an
earnings statement (in form complying with the provisions of Rule 158 under the
Securities Act) covering a period of twelve (12) months beginning not later than
the first day of the Partnership's fiscal quarter next following the effective
date of the Registration Statement.
(e) The Managing General Partner shall provide to each Record Holder
of a Depositary Unit or Units such other reports and information concerning the
business and affairs of the Partnership (i) as the Managing General Partner, in
its sole and absolute discretion, may deem necessary or appropriate, or (ii) to
the extent not provided for in Sections 10.04(b) or (c), as may be specifically
required by the Delaware RULPA or by any other law or any regulation of any
regulatory body applicable to the Partnership.
(f) The Managing General Partner shall provide any of the reports or
other information referred to in this Section 10.04 to such federal, state, or
local governments, governmental agencies, or other regulatory entities as the
Managing General Partner in its sole and absolute discretion, may deem necessary
or appropriate.
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10.05. ACCOUNTING DECISIONS.
All decisions as to accounting matters, except as specifically
provided to the contrary herein, shall be made by the Managing General Partner.
10.06. WHERE MAINTAINED.
The books, accounts, and records of the Partnership at all times shall
be maintained at the Partnership's principal office or, at the option of the
Managing General Partner, at the principal place of business of the Managing
General Partner.
10.07. PREPARATION OF TAX RETURNS.
The Managing General Partner, at the expense of the Partnership, shall
arrange for the preparation and timely filing of all returns of the Partnership
and the Operating Partnership showing all income, gains, deductions, and losses
necessary for federal and state income tax purposes, and shall furnish to the
Limited Partners and any Assignees within seventy-five (75) days of the close of
the Fiscal Year the tax information reasonably required for federal and state
income tax reporting purposes. The classification, realization, and recognition
of income, gains, losses, and deductions, and other items of the Partnership and
the Operating Partnership shall be on the accrual method of accounting for
federal income tax purposes.
10.08. TAX ELECTIONS.
Except as otherwise specifically provided herein, the Managing General
Partner shall, in its sole and absolute discretion, determine whether to make
any available election (including, without limitation, the elections provided
for in Sections 48(q)(4), 168 and 754 of the Code on behalf of the Partnership
and the Operating Partnership). The Managing General Partner shall have the
right to seek to revoke any such election upon the Managing General Partner's
determination that such revocation is in the interests of the Limited Partners;
provided that the Managing General Partner shall not seek to revoke any such
election unless the Managing General Partner has received an Opinion of
Independent Counsel to the effect that such revocation would not cause (a) the
loss of limited liability of the Partnership under the Operating Partnership
Agreement or of the Limited Partners under this Agreement, or (b) the
Partnership or the Operating Partnership to be treated as an association taxable
as a corporation for federal income tax purposes.
10.09. TAX CONTROVERSIES.
Subject to the provisions hereof the Managing General Partner is
designated as the "tax matters partner" (as defined in the Code) of the
Partnership and the Operating Partnership and is authorized and required to
represent the Partnership and the Operating Partnership (at the expense of the
Partnership or the Operating Partnership, as the case may be) in connection with
all examinations of the affairs of the Partnership or the Operating Partnership,
as the case may be, by any federal, state, or local tax authorities, including
any resulting administrative and judicial proceedings, and to expend funds of
the Partnership or the Operating Partnership, as the case may be, for
professional services and costs associated therewith. Each Partner and any
Assignee agrees to cooperate with the Managing General Partner and to do or
refrain from doing any or all things reasonably required by the Managing General
Partner in connection with the conduct of all such proceedings.
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10.10. ORGANIZATIONAL EXPENSE.
The Partnership shall elect to deduct expenses considered incurred in
organizing the Partnership ratably over a sixty-month period as provided in
Section 709 of the Code.
10.11. TAXATION AS A PARTNERSHIP.
No election shall be made by the Partnership, the Operating
Partnership, the General Partners, or any Limited Partner or Assignee to be
excluded from the application of any of the provisions of Subchapter K, Chapter
I of Subtitle A of the Code or from any similar provisions of any state tax
laws.
10.12. DETERMINATION OF ADJUSTED BASIS IN CONNECTION WITH SECTION 754
ELECTION.
In determining adjustments to any Partner's or Assignee's proportional
share of the Adjusted Basis of Partnership Assets or assets of the Operating
Partnership in connection with the Section 754 Election, if such election shall
be made, the Managing General Partner, for purposes of accounting simplicity,
shall treat each Partner or Assignee who acquires one or more Units or
Depositary Units at any time during a calendar month as having acquired all such
Units or Depositary Units on the First day of such calendar month at a price
equal to the lowest Unit Price of the Units or Depositary Units during such
month, irrespective of the date on or price at which such Units or Depositary
Units actually were acquired by such Partner or Assignee during such month. The
Managing General Partner shall be authorized to alter these accounting
conventions to conform with any regulations issued by the Treasury Department or
rulings ore advice of the Internal Revenue Service, as the Managing General
Partner shall determine necessary or appropriate. To the extent the Managing
General Partner is required to determine the Adjusted Basis of any Partnership
Assets or assets of the Operating Partnership with respect to which the Code
requires that records of such Adjusted Basis be kept and maintained by the
Limited Partners or Assignees, the General Partner may request information
regarding such Adjusted Basis from such Limited Partners or Assignees, in
writing, and such Limited Partners shall furnish such information to the
Managing General Partner within thirty (30) calendar days after such request is
mailed by the Managing General Partner.
10.13. WITHHOLDING IN RESPECT OF FOREIGN PARTNERS.
(a) The Partnership shall comply with any and all withholding
obligations and requirements imposed under applicable federal, state and local
law, including Sections 1441, 1442,1445 and 1446 of the Code and Regulations
promulgated thereunder and Rev. Proc. 89-31,1989-1 C.B. 895, as well as all
other requirements of the Code applicable to foreign persons (within the meaning
of Sections 1445 or 1446 of the Code and Regulations promulgated thereunder),
and the Managing General Partner shall not be liable for the Partnership's
compliance with such obligations and requirements. Each Partner or Assignee who
is not a Foreign Partner shall, within thirty (30) days of such Partner's or
Assignee's receipt of a written request of the Managing General Partner, deliver
to the Managing General Partner a Non-Foreign Certificate. If applicable each
Partner or Assignee who is a Foreign Partner shall, within thirty (30) days of
such Foreign Partner's receipt of a written request of the Managing General
Partner, deliver to the Managing General Partner a Treaty Certificate. If the
Managing General Partner does not
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receive any response to the written request within the indicated period of
time, the Managing General Partner shall have the right to presume that any
such non-responding Partner or Assignee is a Foreign Partner ineligible for
any benefits described in a Treaty Certificate. Each Non-Foreign Certificate
and Treaty Certificate received by the Managing General Partner shall be
maintained by the Managing General Partner as part of the Partnership books
and records in accordance with the Treasury Regulations promulgated under
Sections 1441, 1445 and 1446 of the Code. Any Partner or Assignee who has
previously delivered a Non-Foreign Certificate or Treaty Certificate to the
Managing General Partner shall immediately notify the Managing General
Partner in the event such Partner becomes a Foreign Partner or ineligible for
the benefits described in the Treaty Certificate. Prior to any distribution
or allocation made pursuant to Article VI hereof or any disposition of part
or all of the Partnership properties, the Partnership shall have the right to
require any Partner or Assignee to deliver or redeliver a Non-Foreign
Certificate or Treaty Certificate as a condition to such Partner or Assignee
taking part in such allocation or distribution or as a condition to the
Partnership's disposition of part or all of the Partnership properties. The
Partnership shall also have the authority and power, to the extent qualified,
to request and obtain from the IRS a Withholding Certificate. The Managing
General Partner shall not be required to request a Withholding Certificate
and shall not be liable for either the Managing General Partner's or the
Partnership's failure to request a Withholding Certificate. Each Partner or
Assignee shall, within thirty (30) days of such Partner's or Assignee's
receipt of a written request of the Managing General Partner, deliver to the
Managing General Partner information necessary to obtain a Withholding
Certificate.
(b) For purposes of this Agreement, any withholding tax that is paid
by the Partnership with respect to a Partner or Assignee shall be treated as a
recourse loan by the Partnership to such Partner or Assignee. All loans made
hereunder with respect to a Partner or Assignee shall be payable by the Partner
or Assignee on fifteen (15) days' notice from the Partnership, bear interest at
the highest lawful rate, not to exceed a rate per annum equal to the base rate
announced by Citibank, N.A. from time to time plus two percent (2%) and be
secured by such Partner's or Assignee's interest in the Partnership. So long as
any principal or interest is owing to the Partnership by a Partner or Assignee
in respect of any such loan, any amounts of money which would otherwise be
distributable to such Partner or Assignee pursuant to Article VI shall instead
be retained by the Partnership and applied against the amounts owing by the
Partner or Assignee in respect of all such loans until all amounts of principal
and interest owing in respect of all such loans have been paid or satisfied. A
Partner or Assignee shall have the right to prepay the amounts owing by such
Partner or Assignee in respect of any loan made on such Partner's or Assignee's
behalf at any time without premium or penalty. No funds transferred to the
Partnership pursuant to this Section 10.13(b) shall be treated as a Capital
Contribution to the Partnership. All amounts paid or applied in respect of such
loan shall be applied first against the accrued but unpaid interest thereon and
then to the principal balance thereof.
(c) In the event that a loan is deemed to be made by the Partnership
to a Partner or Assignee pursuant to Section 10.13(b), such Partner or Assignee
shall have full personal liability to pay all amounts of principal and interest
owing to the Partnership in respect of such loan. A Partner or Assignee shall
have fifteen (15) days to cure any default committed by such Partner or Assignee
in respect of any loan deemed to have been made to such Partner or Assignee,
said cure period to commence upon the sending of written notice by the
Partnership to such Partner or Assignee specifying the default that has
occurred. If a Partner or Assignee is indebted to the Partnership with respect
to any loans upon the liquidation of such Partner's or Assignee's Partnership
Interest, such loan shall be
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absolutely due and payable by such Partner or Assignee to the Partnership on
the tenth (10th) day following the liquidation of such Partner's or
Assignee's interest in the Partnership. Each Partner or Assignee hereby
acknowledges that the withholding obligations referred to in this Section
10.13 may require the Managing General Partner, on behalf of the Partnership,
to remit to the applicable taxing authority cash that is in excess of the
amounts that would be distributable to such Partner or Assignee under
Article VI if no withholding tax were due with respect to such Partner or
Assignee.
(d) If the Partnership makes a distribution of money to a Partner or
Assignee pursuant to Article VI and the Partnership determines that it is
required to pay withholding tax (the amount of such tax being referred to herein
as the "Withholding Amount") to a taxing authority in connection therewith, the
Managing General Partner shall have the right to withhold from the amount
otherwise distributable to such Partner or Assignee the Withholding Amount and
to remit the Withholding Amount to the applicable taxing authority. It is hereby
acknowledged and agreed that if the Managing General Partner withholds and
remits to the applicable taxing authority a Withholding Amount with respect to
any Partner or Assignee, the amount so withheld shall be deemed to have been
actually distributed by the Partnership to such Partner or Assignee (and then
paid by such Partner of Assignee to the applicable taxing authority), for all
purposes of this Agreement. The provisions of this Section 10.13(d) are intended
to ensure that regardless of whether Withholding Amounts are remitted to a
taxing authority, all amounts distributable to a Partner or Assignee pursuant to
Article VI shall be treated as actually having been distributed to the Partners
or Assignee according to the distribution priorities of said sections and that
the withholding requirements imposed on the Partnership shall not result in Cash
Flow or Net Proceeds of Capital Transactions being distributed to the Partners
or Assignee in a manner that is inconsistent with the provisions of Article VI.
10.14. QUALIFICATION AS A REIT.
In the event that the Managing General Partner at any time shall
determine that either the Partnership or the Operating Partnership does not
qualify, or no longer will qualify, as a partnership for federal income tax
purposes, then the Managing General Partner shall have the right, but not the
obligation, to take any such action as it, in its sole and absolute discretion,
determines to be in the interests of the Limited Partners and Assignees in
connection therewith or as a result thereof, including, without limitation to
cause the Partnership and the Operating Partnership to be reorganized so as to
qualify as a "real estate investment trust" within the meaning of Section 856 of
the Code.
ARTICLE XI
ISSUANCE AND DEPOSIT OF CERTIFICATE OF PARTNERSHIP
INTEREST
11.01. ISSUANCE OF CERTIFICATES OF PARTNERSHIP INTEREST.
Upon the issuance of the Units in connection with the Initial Public
Offering, the Managing General Partner shall cause the Partnership to issue one
or more Certificates in the names of the Initial Limited Partners owning such
Units. Upon any subsequent issuance of Units, the Managing General Partner
shall cause the Partnership to issue additional Certificates therefor. Each such
Certificate shall be denominated in terms of the number of Units evidenced by
such Certificate. Upon the transfer of a Unit that is not a Depositary Unit in
accordance with Article XII, the Managing General Partner shall
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cause the Partnership to issue replacement Certificates, in accordance with
such procedures as the Managing General Partner, in its sole and absolute
discretion, may establish. No Certificate shall be issued representing a
fraction of a Unit.
11.02. DEPOSIT OF CERTIFICATES OF PARTNERSHIP INTEREST; ISSUANCE OF
DEPOSITARY RECEIPTS.
The Initial Limited Partners shall cause all Certificates issued to
them in connection with the Initial Public Offering to be deposited with the
Depositary to be held under and pursuant to the terms of the Deposit Agreement.
In exchange for the Certificates transferred to the Depositary, and pursuant to
the Deposit Agreement, the Initial Limited Partners shall receive Depositary
Receipts evidencing their ownership of the Units held by the Depositary. The
Managing General Partner shall cause any subsequently issued Units to be subject
to the Deposit Agreement and Depositary Receipts to be issued in exchange
therefor pursuant to the Deposit Agreement, with such changes in such
arrangements with the Depositary as the Managing General Partner deems necessary
or appropriate.
11.03. Lost, Stolen, or Destroyed Certificates.
The Partnership shall issue a new Certificate in place of any
Certificate previously issued if the Record Holder of such Certificate:
(a) makes proof by affidavit, in form and substance satisfactory to
the Managing General Partner, that such previously issued Certificate has been
lost, destroyed, or stolen;
(b) requests the issuance of a new Certificate before the Partnership
has noticed that such previously issued Certificate has been acquired by a
purchaser for value in good faith and without notice of an adverse claim;
(c) if requested by the Managing General Partner, delivers to the
Partnership a bond, in form and substance satisfactory to the Managing General
Partner, with such surety or sureties and with fixed or open penalty, as the
Managing General Partner may direct, to indemnify the Partnership and the
Depositary against any claim that may be made on account of the alleged loss,
destruction, or theft of such previously issued Certificate; and
(d) satisfies any other reasonable requirements imposed by the
Managing General Partner. When a previously issued Certificate has been lost,
destroyed, or stolen, and the Partner falls to notify the Partnership within a
reasonable time after he has notice of such event, and a transfer of Units
represented by the Certificate is registered before such Partnership receives
such notification, the Partner shall be precluded from making any claim against
the Partnership, the Depositary, or any Transfer Agent with respect to such
transfer or for a new Certificate.
11.04. RECORD HOLDER.
The Partnership shall be entitled to treat each Record Holder as the
Limited Partner or Assignee in fact of any Units or Depositary Units, as the
case may be, and, accordingly, shall not be required to recognize any equitable
or other claim or interest in or with respect to such Units or Depositary Units
on the part of any other Person,
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regardless of whether it shall have actual or other notice thereof, except as
otherwise required by law or any applicable rule, regulation, guideline, or
requirement of any stock exchange on which the Units or Depositary Units are
listed for trading.
ARTICLE XII
TRANSFER OF INTERESTS AND UNITS
12.01. TRANSFER.
(a) The term "transfer," when used in this Article XII with respect
to a Partnership Interest, Units, or Depositary Units, shall include any sale,
assignment, gift, pledge, hypothecation, mortgage, exchange, or other
disposition.
(b) No Partnership Interest, Unit, or Depositary Unit shall be
transferred, in whole or in part, except in accordance with the terms and
conditions set forth in this Article XII. Any transfer or purported transfer of
any Partnership Interest, Unit, or Depositary Unit not made in accordance with
this Article XII shall be null and void.
12.02. TRANSFER OF INTERESTS OF GENERAL PARTNERS.
(a) If a General Partner desires to sell or transfer all or any
portion of such General Partner's Partnership Interest as a General Partner to a
Person who is not a General Partner, such transfer shall be permitted if (and
only if):
(i) such transfer and the admission of the transferee as a
general partner of the Partnership is approved by a Majority Vote of
the Limited Partners, unless the transferee is an Affiliate of the
transferring General Partner, in which case no such approval of the
Limited Partners shall be required; and
(ii) the Partnership receives an Opinion of Independent Counsel
that such transfer and admission (A) would not cause the loss of
limited liability of the Partnership under the Operating Partnership
Agreement or the Limited Partners under this Agreement, and (B) would
not cause the Partnership or the Operating Partnership to be treated
as an association taxable as a corporation for federal income tax
purposes.
(b) Neither Section 12.02(a) nor any other provision of this
Agreement shall be construed to prevent (and each Partner, by requesting and
being granted admission to the Partnership, is deemed to consent to):
(i) the transfer by any corporate General Partner of such
corporate General Partner's Partnership Interest as a General Partner
upon its merger or consolidation with another Person or the transfer
by it of all or substantially all of its assets to another Person, and
the assumption of the rights and duties of such a corporate General
Partner by such Person, provided such Person furnishes to the
Partnership an Opinion of Independent Counsel to the effect that such
merger, consolidation, transfer, or assumption (1) would not cause the
loss of limited liability of the Partnership under the Operating
Partnership Agreement or the Limited
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Partners under this Agreement, and (2) would not cause the Partnership
or the Operating Partnership to be treated as an association taxable
as a corporation for federal income tax purposes;
(ii) the transfer by a General Partner of all or any part of
its interest in items of Partnership income, gains, losses, deduction,
credits, distributions, or surplus; or
(iii) a General Partner's mortgaging, pledging, hypothecating,
or granting a security interest in all or any part of its Partnership
Interest as a General Partner as collateral for a loan or loans.
12.03. TRANSFER OF UNITS.
Units that have never been deposited in the Deposit Account or that
have been withdrawn from the Deposit Account and not redeposited in the Deposit
Account are not transferable except upon death or by operation of law or by
transfer to the Managing General Partner for the account of the Partnership or
the Operating Partnership.
12.04. TRANSFER OF DEPOSITARY RECEIPTS.
(a) Except as specifically provided in Section 12.03, the Partnership
shall not recognize any transfer of Units or interests therein except by a
transfer of Depositary Receipts representing Depositary Units. Depositary
Receipts may be transferred only in the manner provided in and subject to the
conditions set forth in the Deposit Agreement.
(b) A transferee who has completed and delivered a Transfer
Application shall be deemed (i) to have applied to be admitted to the
Partnership as a Substituted Limited Partner pursuant to Article XIII with
respect to the Units transferred; (ii) to have agreed to comply with and be
bound by this Agreement, whether or not such transferee is admitted as a
Substituted Limited Partner with respect to the Units transferred, and to
execute any document that the Managing General Partner may reasonably require to
be executed in connection with such transfer or with the admission of such
transferee as a Substituted Limited Partner pursuant to Article XIII with
respect to the Units transferred; and (iii) to have appointed the Managing
General Partner and authorized officers and attorneys-in-fact of the Managing
General Partner as attorney-in-fact for such transferee to execute, swear to,
acknowledge, and file any document, including any amendment of the Certificate
of Limited Partnership, necessary or appropriate in any jurisdiction for, and
relating to, the transferee's admission as a Substituted Limited Partner with
respect to the Units transferred and the transferee becoming a party to this
Agreement, as more fully set forth in Article XVII. Unless and until admitted as
a Substituted Limited Partner pursuant to Article XIII with respect to
Depositary Units transferred pursuant to this Section 12.04, the Record Holder
of a Depositary Unit transferred pursuant to this Section 12.04 shall be an
Assignee in respect of such Depositary Unit, whether or not such Record Holder
is a Limited Partner with respect to other Depositary Units.
(c) Each distribution in respect of a Depositary Unit (or a Unit
withdrawn from the Deposit Account) shall be paid by the Partnership, directly
or through the Depositary or through any other person or agent, only to the
Record Holder of such Depositary Unit (or such Unit withdrawn from the Deposit
Account) as of the Record Date set for such distribution. Such payment shall
constitute full payment and satisfaction of the
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Partnership's liability in respect of such payment, regardless of any claim
of any Person who may have an interest in or with respect to such payment by
reason of any assignment or otherwise.
(d) Notwithstanding anything to the contrary herein, the Partnership
shall not recognize for any purpose any purported transfer by a Limited Partner
or Assignee of all or any part of a Depositary Unit held by such Limited Partner
or Assignee until the Partnership shall have received (A) the written advice by
the Depositary, pursuant to Section 4.05 of the Deposit Agreement, of the
transfer of the Depositary Receipts evidencing such Depositary Units or (B) in
the case of Depositary Units held by the same nominee for the transferor and the
transferee, the receipt of written notification in accordance with Section 18.02
hereof from the nominee holder of the date of the transfer of such Depositary
Units.
(e) Any holder of a Unit or a Depositary Receipt (including a
transferee thereof) conclusively shall be deemed to have agreed to comply with
and be bound by all terms and conditions of this Agreement, with the same effect
as if such holder had executed a Transfer Application, whether or not such
holder in fact has executed such a Transfer Application. A request by any
broker, dealer, bank, trust company, clearing corporation, or nominee holder, to
register transfer of a Depositary Receipt, however signed (including by any
stamp, mark, or symbol executed or adopted with intent to authenticate the
Depositary Receipt), shall be deemed to be execution of a Transfer Application
by and on behalf of the beneficial owner of such Depositary Receipt.
(f) Notwithstanding anything to the contrary herein, no purchaser of
a Depositary Receipt from an Initial Limited Partner in connection with or
pursuant to the Initial Public Offering shall be required to execute a Transfer
Application in order to effect the transfer of such Depositary Receipt or to
become a Substituted Limited Partner with respect to the Units evidenced
thereby. Each such purchaser, by acquiring such Depositary Receipt in connection
with or pursuant to the Initial Public Offering, shall be deemed to have agreed
to comply with and to be bound by all terms and conditions of this Agreement,
the Deposit Agreement, and the Depositary Receipt and to have taken the other
actions specified in the Transfer Application and Section 12.04(b) above as if
such purchaser had executed the Transfer Application. The Managing General
Partner shall admit to the Partnership as Substituted Limited Partners all
purchasers of Depositary Receipts from the Initial Limited Partners in
connection with or pursuant to the Initial Public Offering.
12.05. RESTRICTIONS ON TRANSFER.
Notwithstanding the other provisions of this Article XII, no transfer
of any Unit, Depositary Unit, or the Partnership Interest of any Limited Partner
in the Partnership shall be made if such transfer (a) would violate the then
applicable federal and state securities laws or rules and regulations of the
Commission, state securities commissions, and any other governmental authorities
with jurisdiction over such transfer; (b) would result in the Partnership being
treated as an association taxable as a corporation for federal income tax
purposes; or (c) would affect the Partnership's existence or qualification as a
limited partnership under the Delaware RULPA.
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ARTICLE XIII
ADMISSION OF PARTNERS
13.01. ADMISSION OF INITIAL LIMITED PARTNERS.
(a) On the Closing Date and, if applicable, the Date of Delivery, the
Managing General Partner admitted to the Partnership as Limited Partners the
Initial Limited Partners.
(b) At the consummation of any issuance of additional Units pursuant
to Section 5.05(a), the Persons acquiring such Units may, in the sole and
absolute discretion of the Managing General Partner, be admitted to the
Partnership as Additional Limited Partners upon furnishing to the Managing
General Partner an acceptance of, and an agreement to be bound by, all of the
terms and provisions of this Agreement, in form and substance satisfactory to
the Managing General Partner, and such other documents or instruments as may be
required in order to effect such admission, and such admission shall be
effective when the Managing General Partner determines in its sole and absolute
discretion and such admission is shown on the books and records of the
Partnership.
13.02. ADMISSION OF SUBSTITUTED LIMITED PARTNERS.
(a) Upon a transfer of a Depositary Unit of a Limited Partner or
Assignee in accordance with Article XII, the transferor shall, subject to the
provisions of Section 12.04(d), have the power to give, and by transfer of a
Depositary Receipt, shall be deemed to have given, the transferee of such
Person's Depositary Unit the right to apply to become a Substituted Limited
Partner with respect to the Depositary Unit acquired, subject to the conditions
of and in the manner permitted under this Agreement. Subject to the foregoing,
each transferee of a Depositary Unit (including any Person, such as a broker,
dealer, bank, trust company, clearing corporation, other nominee holder, or an
agent of any of the foregoing, acquiring such Depositary Unit for the account of
another Person) shall be deemed to have applied to become a Substituted Limited
Partner with respect to the Depositary Unit transferred to such Person by
executing and delivering a Transfer Application at the time of such transfer as
provided in Section 12.04(b). A transferee of a Depositary Unit shall be an
Assignee with respect to the Depositary Unit acquired in a transfer (whether or
not such transferee is a Limited Partner or Substituted Limited Partner with
respect to other previously acquired Units or Depositary Units) unless and until
the Managing General Partner, in its sole and absolute discretion, consents to
the admission of such Assignee as a Substituted Limited Partner with respect to
the Depositary Unit acquired in the transfer and amends (or causes to be
amended) this Agreement to reflect such admission, after which time such
transferee shall be a Substituted Limited Partner with respect to such
Depositary Unit.
(b) Under the terms of the Deposit Agreement, the Depositary is
obligated to prepare as of the close of business on the last Business Day of
each month, a list or other appropriate evidence of all transfers of Depositary
Units registered by all Transfer Agents since the last Business Day of the
preceding month (hereinafter called the "transfer record") and, as promptly as
practicable after the last Business Day of each month, to submit the transfer
record to the Managing General Partner. Within thirty (30) days after receipt of
the transfer record by the Managing General Partner, the Managing General
Partner shall determine whether or not to admit as a Substituted Limited Partner
any one or more of the Assignees listed in such transfer record, and shall amend
(or cause
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to be amended) this Agreement in accordance with Section 16.01 and shall
prepare and record (or cause to be prepared and recorded) in such
jurisdictions (if any) as shall be necessary, an amendment to the Certificate
of Limited Partnership pursuant to Section 2.01, or to any other filing made
in such jurisdiction, to reflect the admission as Substituted Limited
Partners those Assignees that the Managing General Partner, in its sole and
absolute discretion, determines shall be admitted as Substituted Limited
Partners.
(c) Anything in this Section 13.02 to the contrary notwithstanding,
no Person shall be admitted as a Substituted Limited Partner with respect to a
Depositary Unit acquired by transfer without the written consent of the Managing
General Partner (whether or not such Record Holder is a Limited Partner with
respect to other Units or Depositary Units), which consent may be withheld or
granted in the sole and absolute discretion of the Managing General Partner.
Each Limited Partner consents to the admission of each Substituted Limited
Partner pursuant to the terms of this Agreement, and no further consent of the
Partners, other than that of the Managing General Partner as aforesaid, shall be
required to effect such admission.
(d) The admission of an Assignee as a Substituted Limited Partner
with respect to a Depositary Unit acquired by transfer shall become effective on
the date that the Managing General Partner gives its written consent to such
admission and amends this Agreement to reflect such admission.
(e) Any Limited Partner who transfers all of his Units and Depositary
Units with respect to which he bad been admitted as a Limited Partner shall
cease to be a Limited Partner of the Partnership upon a transfer of such Units
and Depositary Units in accordance with Article XII and shall have no further
rights as a Partner in or with respect to the Partnership (whether or not the
Assignee of such former Limited Partner is admitted to the Partnership as a
Substituted Limited Partner).
(f) No person shall be entitled to become a Substituted Limited
Partner with respect to any Units or Depositary Units except in accordance with
this Section 13.02.
13.03. ADMISSION OF A SUCCESSOR GENERAL PARTNER.
A successor General Partner selected pursuant to Sections 14.01 or
14.02 or the transferee of all or any portion of the Partnership Interest of a
General Partner pursuant to Section 12.02 shall be admitted to the Partnership
as a General Partner (in the place, in whole or in part, of the transferor or
former General Partner), effective as of the date that an amendment of the
Certificate of Limited Partnership, adding the name of such successor General
Partner and other required information, is recorded pursuant to Section 2.01
(which date, in the event the successor General Partner is in the place in whole
of the transferor or former General Partner, shall be contemporaneous with the
withdrawal of such transferor or former General Partner), and upon receipt by
the transferor or former General Partner of all of the following:
(a) the successor General Partner's acceptance of, and agreement to
be bound by, all of the terms and provisions of this Agreement, in form and
substance satisfactory to the transferor or former General Partner;
(b) evidence of the authority of such successor General Partner to
become a General Partner and to be bound by all of the terms and conditions of
this Agreement;
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(c) the written agreement of the successor General Partner to
continue the business of the Partnership in accordance with the terms and
provisions of this Agreement; and
(d) such other documents or instruments as may be required in order
to effect the admission of the successor General Partner as a General Partner
under this Agreement.
ARTICLE XIV
WITHDRAWAL OR REMOVAL OF GENERAL PARTNERS;
WITHDRAWAL OF LIMITED PARTNERS
14.01. WITHDRAWAL OF GENERAL PARTNERS.
(a) The Managing General Partner shall not withdraw from the
Partnership unless (i) the Managing General Partner shall have transferred all
of its Partnership Interest as a General Partner in accordance with Section
12.02; or (ii) such withdrawal shall have been approved by a Majority Vote of
the Limited Partners.
(b) Upon the occurrence of any one of the foregoing conditions, a
General Partner may withdraw from the Partnership effective on at least thirty
(30) days' advance written notice to the Limited Partners, such withdrawal to
take effect on the date specified in such notice. The withdrawal of a General
Partner pursuant to this Section 14.01 also shall constitute the withdrawal of
such General Partner as a general partner of the Operating Partnership. The
General Partners shall have no liability to the Partnership or the Partners and
Assignees on account of any withdrawal in accordance with the terms of this
Section 14.01. If a General Partner shall give a notice of withdrawal pursuant
to this Section 14.01, then a Majority Vote of the Limited Partners, with the
separate written concurrence of any remaining General Partner, may elect a
successor General Partner. If no successor General Partner shall be elected in
accordance with this Section 14.01 and there shall be no remaining General
Partner, then the Partnership shall be dissolved pursuant to Article XV.
14.02. REMOVAL OF GENERAL PARTNERS.
(a) A General Partner may be removed as general partner (i) for
"cause" (as hereinafter defined), upon an affirmative Majority Vote of the
Limited Partners, or (ii) upon an affirmative Super-Majority Vote of the Limited
Partners. Any such action by the Limited Partners also must provide for the
election of a successor General Partner and shall become effective only upon
admission of the successor General Partner pursuant to Article XIII. The
removal of a General Partner pursuant to this Section 14.02 also shall
constitute the removal of that Person as a general partner of the Operating
Partnership, and the Person elected as successor General Partner in connection
therewith also shall automatically become the successor general partner of the
Operating Partnership. As used herein, "cause" shall mean actual fraud, gross
negligence, or willful or wanton misconduct.
(b) Written notice of the removal of a General Partner pursuant to
this Section 14.02 shall be served upon such General Partner in the manner set
forth in Section 18.02. Such notice shall set forth the day upon which such
removal is to become effective,
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which date shall not be less than thirty (30) days after the service of the
written notice upon the General Partner.
(c) A General Partner removed as a General Partner pursuant to this
Section 14.02 shall not have any right to participate in the management or
affairs of the Partnership upon the effective date of such removal.
14.03. LIMITATIONS ON WITHDRAWAL OR REMOVAL OF A GENERAL PARTNER AND ELECTION
OF A SUCCESSOR GENERAL PARTNER.
Notwithstanding the provisions of Sections 14.01 and 14.02, the rights
of the Limited Partners under Section 14.01 or 14.02 shall not be exercised
until such time as the Partnership shall have received an Opinion of Independent
Counsel that the action in question (i) may be taken without the concurrence of
all Partners, (ii) would not cause the loss of limited liability of the
Partnership under the Operating Partnership Agreement or of the Limited Partners
under this Agreement, and (iii) would not cause the Partnership or the Operating
Partnership to be treated as an association taxable as a corporation for federal
income tax purposes.
14.04. AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP.
This Agreement and the Certificate of the Limited Partnership shall be
amended to reflect the withdrawal, removal, or succession of a General Partner.
14.05. INTEREST OF DEPARTING PARTNER AND SUCCESSOR.
(a) Except as provided in Section 5.02(c), upon the withdrawal or
removal of a Departing Partner, such Departing Partner shall become a Limited
Partner and its Partnership Interest as a General Partner shall be converted
into the number of Units determined by dividing (i) the "fair market value" of
such General Partner's Partnership Interest as a General Partner herein,
determined as set forth in Section 14.05(b) as of the effective date of its
departure, by (ii) the Unit Price determined as of the effective date of its
departure.
(b) For purposes of this Section 14.05, the "fair market value" of
the Departing Partner's Partnership Interest as a General Partner shall be the
amount that would be distributed to the Departing Partner pursuant to Section
6.08 if the Partnership Assets and the assets of the Operating Partnership were
sold for cash in an orderly liquidation of the Partnership Assets and the assets
of the Operating Partnership commencing on the effective date of the Departing
Partner's departure, with such liquidation being effected through arm's-length
sales between informed and willing purchasers under no compulsion to buy and
informed and willing sellers under no compulsion to sell, with the proceeds from
such hypothetical sales to be discounted (at a rate equal to the interest rate
on U.S. Treasury obligations with a term of one (1) year issued on the date
nearest the effective date of the Departing Partner's departure) to the
effective date of the Departing Partner's departure to reflect the time period
reasonably anticipated to be necessary to consummate such sales, as such "fair
market value" is agreed upon by the Departing Partner and the Partnership within
thirty (30) days after the effective date of the Departing Partner's departure
or, in the absence of such an agreement, as determined by the Appraiser. The
Appraiser shall use such method or methods of valuation as the Appraiser
determines most accurately reflect the value of the Restaurant Properties under
the circumstances, provided that for a period of five (5) years from the
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Closing Date, the Appraiser shall use the "capitalization of income" method
(applying such capitalization rate and other assumptions and adjustments as
the Appraiser determines appropriate under the circumstances) unless the
Appraiser determines that use of such method would result in an
understatement of the value of the Restaurant Properties. Any appraisal
pursuant to this Section 14.05(b) shall be completed as soon as practicable
after the Appraiser is notified of the requirement for such appraisal, and in
any event within forty-five (45) days after such notice, and the report of
the Appraiser setting forth the appraised fair market value of Partnership
Assets and assets of the Operating Partnership as of such date shall be final
and binding upon the Departing Partner and the Partnership. The amount that
would be distributed to the Departing Partner pursuant to Section 6.08 if the
Partnership Assets and the assets of the Operating Partnership were so sold
shall be determined by the Accounting Firm within fifteen (15) days after the
report of the Appraiser is received by the Partnership. The closing of the
conversion of the Departing Partner's Partnership Interest into Units
pursuant to Section 14.05(a) shall occur within ten (10) days after the date
on which the Accounting Firm shall have determined the amount distributable
to the Departing Partner pursuant to Section 6.07 for purposes of this
Section 14.05(b).
(c) At any time after the departure of a Departing Partner, upon the
request of such Departing Partner, the Partnership shall file with the
Commission as promptly as practicable after receiving such request, and shall
use its best efforts to cause to become effective, a registration statement
under the Securities Act registering the offering and sale of the Units owned by
the Departing Partner or any Affiliate at the time of such Departing Partner's
departure, including any Units that were received by the Departing Partner
pursuant to Section 14.05(a) and are included in such request, provided that the
Partnership shall be required to file no more than two (2) such registration
statements at the request of any one Departing Partner. In connection with any
registration pursuit to the preceding sentence, the Partnership promptly shall
prepare and file such documents as may be necessary to register or qualify the
Units subject to such registration under the securities laws of such states as
the Departing Partner shall reasonably request and do any and all other acts and
things that may reasonably be necessary or advisable to enable such Departing
Partner to consummate a public sale of such Units in such states. The first
registration effected under this paragraph shall be effected at the expense of
the Partnership, except for underwriting discounts, fees, and commissions, and
fees and expenses of legal counsel for the Departing Partner or its Affiliates,
and any subsequent registrations shall be at the expense of the Departing
Partner. Any registration statement filed pursuant hereto shall be continued in
effect for a period of not less than ninety (90) days following its effective
date. In the event of any registration of any Units pursuant to this Section
14.05(c), the Partnership shall indemnify the Departing Partner and its
Affiliates and any underwriter engaged in connection with such registration and
each other person, if any, who controls any such underwriter within the meaning
of the Securities Act, in the manner and to the extent set forth in Section
7.14(d).
(d) Any successor General Partner other than by reason of the
transfer of a Partnership Interest, shall, at the effective date of its
admission to the Partnership as a General Partner, contribute to the capital
of the Partnership cash in an amount equal to (i) the product of the number
of Units outstanding immediately prior to the effective date of such
successor General Partner's admission (but after giving effect to the
conversion described in Section 14.05(a)), multiplied by the Unit Price
determined as of the effective date of such successor General Partner's
admission, multiplied by (ii) a fraction, the numerator of which shall be the
excess (the "Percentage Interest Excess") of 1% over the Percentage Interest
of any remaining General Partners, and the denominator of which shall
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be 99%. Thereafter, such successor General Partner shall, notwithstanding
any other provision of this Agreement, be entitled to the Percentage Interest
Excess of all Partnership allocations and distributions.
(e) If, at the time of the Departing Partner's departure, the
Partnership is indebted to the Departing Partner under this Agreement or any
other instrument or agreement for funds advanced, properties sold, services
rendered, or costs and expenses incurred by the Departing Partner (including,
without limitation, any amounts advanced pursuant to the revolving line of
credit described in Section 7.13), the Partnership shall, within sixty (60)
days after the effective date of such Departing Partner's departure, pay to
the Departing Partner the full amount of such indebtedness. The successor to
the Departing Partner shall assume all obligations theretofore included by
the Departing Partner, a General Partner of the Partnership, and the
Partnership and such successor shall take all such action as shall be
necessary to terminate any guarantees of the Departing Partner, and any of
its Affiliates, of any obligations of the Partnership. If, for whatever
reason, the creditors of the Partnership shall not consent to such
termination of any such guarantees, the successor to the Departing Partner
and the Partnership shall be required to indemnify the Departing Partner for
any liabilities and expenses incurred by the Departing Partner on account of
such guarantees.
14.06. WITHDRAWAL OF LIMITED PARTNERS.
No Limited Partner shall have any right to withdraw from the
Partnership; provided, however, that upon a transfer of a Limited Partner's
Units in accordance with Article XII, such Limited Partner shall cease to be
a Limited Partner with respect to the Units so transferred. No Limited
Partner shall be entitled to receive any distribution from the Partnership
for any reason or upon any event except as expressly set forth in Articles VI
and XV.
ARTICLE XV
DISSOLUTION AND LIQUIDATION
15.01. NO DISSOLUTION.
The Partnership shall not be dissolved by the admission of
additional Limited Partners or Substituted Limited Partners or by the
admission of additional General Partners or Substituted General Partners in
accordance with the terms of this Agreement.
15.02. EVENTS CAUSING DISSOLUTION.
The Partnership shall be dissolved and its affairs wound up upon
the occurrence of any of the following events:
(a) the expiration of the term of the Partnership, as provided
in Section 4.01;
(b) the withdrawal of the Managing General Partner or the
occurrence of any other event that results in the Managing General
Partner ceasing to be the Managing General Partner (other than by
reason of a transfer pursuant to Section 12.02 or a withdrawal
occurring upon or after,
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or a removal effective upon or after, selection of a successor
pursuant to Section 14.01 or 14.02, as the case may be);
(c) the "Bankruptcy" (as hereinafter defined) of the Managing
General Partner;
(d) a written determination by the Managing General Partner that
projected future revenues of the Partnership will be insufficient to
enable payment of projected Partnership costs and expenses or, if
sufficient, will be such that continued operation of the Partnership
is not in the best interests of the Partners;
(e) an election by a Majority Vote of Limited Partners, with the
approval of the General Partners, to terminate, liquidate, and
dissolve the Partnership; or
(f) the occurrence of any other event that, under the Delaware
RULPA, would cause the dissolution of the Partnership or that would
make it unlawful for the business of the Partnership to be continued.
For purposes of this Agreement, the term "Bankruptcy" shall mean, and
the Managing General Partner shall be deemed "Bankrupt" upon, (i) the entry of a
decree or order for relief of the Managing General Partner by a court of
competent jurisdiction in any involuntary case involving the Managing General
Partner under any bankruptcy, insolvency, or other similar law now or hereafter
in effect; (ii) the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator, or other similar agent for the Managing General Partner
or for any substantial part of the Managing General Partner's assets or
property; (iii) the ordering of the winding up or liquidation of the Managing
General Partner's affairs; (iv) the filing with respect to the Managing General
Partner of a petition in any such involuntary bankruptcy case, which petition
remains undismissed for a period of ninety (90) days or which is dismissed or
suspended pursuant to Section 305 of the Federal Bankruptcy Code (or any
corresponding provision of any future United States bankruptcy law); (v) the
commencement by the Managing General Partner of a voluntary case under any
bankruptcy, insolvency, or other similar law now or hereafter in effect; (vi)
the consent by the Managing General Partner to the entry of an order for relief
in an involuntary case under any such law or to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator, or other similar agent for the Managing General Partner or for any
substantial part of the Managing General Partner's assets or property; (vii) the
making by the Managing General Partner of any general assignment for the benefit
of creditors; or (viii) the failure by the Managing General Partner generally to
pay its debts as such debts become due.
15.03. RIGHT TO CONTINUE BUSINESS OF PARTNERSHIP.
Upon an event described in Sections 15.02(b), 15.02(c), or 15.02(f)
(but not an event described in Section 15.02(f) that makes it unlawful for
the business of the partnership to be continued) the Partnership thereafter
shall be dissolved and liquidated unless, within ninety (90) days after the
event described in any of such Sections, an election to reconstitute and
continue the business of the Partnership shall be made in writing by (i) the
remaining General Partner, if any, in its sole and absolute discretion; or
(ii) in the event there is no remaining General Partner, or in the event that
any remaining General Partner does not so elect to reconstitute and continue
the business of the
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Partnership, then, subject to receipt by the Partnership of an Opinion of
Independent Counsel to the effect described in Section 14.03, by the
unanimous-written agreement of all remaining Partners; provided that by a
Super-Majority Vote of the Limited Partners the Limited Partners may elect to
reconstitute and continue the business of the Partnership upon receipt of an
Opinion from Independent Counsel that unanimous written agreement of the
Limited Partners is not required for the Partnership or Operating Partnership
to be treated as a partnership for federal income tax purposes. If such an
election to continue the Partnership is made, then:
(i) if such election was made by all remaining Partners, a
successor Managing General Partner shall be selected unanimously by
all remaining Partners;
(ii) if such election was made by the remaining General Partner,
such Person shall be the Managing General Partner (and if not
previously the Managing General Partner, shall serve as Managing
General Partner until a successor to the Managing General Partner is
admitted to the Partnership);
(iii) the Partnership shall continue until another event
causing dissolution in accordance with this Article XV shall occur;
(iv) the Partnership Interest of the former General Partner
shall be subject to disposition, at the option of the former General
Partner, in the manner provided in Section 14.05(a) (which option
shall be exercised contemporaneously with the selection of the
successor General Partner); and
(v) all necessary steps shall be taken to amend this Agreement
and the Certificate of Limited Partnership to reflect the
reconstitution and continuation of the business of the Partnership.
15.04. DISSOLUTION.
Except as otherwise provided in Section 15.03, upon the dissolution of
the Partnership, the Certificate of Limited Partnership shall be canceled in
accordance with the provisions of the Delaware RULPA, and the Managing General
Partner (or, if the dissolution is caused by the withdrawal, bankruptcy,
dissolution, or removal of the Managing General Partner, then the Person
designated as Liquidating Trustee in Section 15.05 hereof) promptly shall notify
the Partners and Assignees of such dissolution.
15.05. LIQUIDATION.
Upon dissolution of the Partnership, unless an election to continue
the business of the Partnership is made pursuant to Section 15.03, the Managing
General Partner, or, in the event the dissolution is caused by an event
described in Section 15.02(b) or 15.02(c), a Person or Persons selected by a
Majority Vote of the Limited Partners, shall be the Liquidating Trustee. The
Liquidating Trustee shall proceed without any unnecessary delay to sell or
otherwise liquidate the Partnership Assets and shall apply and distribute the
proceeds of such sale or liquidation in the following order of priority, unless
otherwise required by mandatory provisions of applicable law:
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(a) to pay (or to make provision for the payment of) all
creditors of the Partnership, including current and former Partners,
in the order of priority provided by law other than obligations to
make distributions to current and former Partners;
(b) to pay, on a pro rata basis, all current and former Partners
with respect to obligations to make distributions thereto; and
(c) after the payment (or the provision for payment) of all
debts, liabilities, and obligations of the Partnership, including,
without limitation, the payment of expenses of liquidation of the
Partnership, and the establishment of a reasonable reserve (including
an amount estimated by the Liquidating Trustee to be sufficient to pay
an amount reasonably anticipated to be required to be paid pursuant
Section 7.10 hereof), to the Partners and Assignees in accordance with
Section 6.07.
The Liquidating Trustee, if other than the Managing General Partner,
shall be entitled to receive such compensation for its services as Liquidating
Trustee as may be approved by a Majority Vote of the Limited Partners. The
Liquidating Trustee shall agree not to resign at any time without sixty (60)
days prior written notice and, if other than the Managing General Partner, may
be removed at any time, with or without cause, by written notice of removal
approved by a Majority Vote of the Limited Partners. Upon dissolution, removal,
or resignation of the Liquidating Trustee, a successor and substitute
Liquidating Trustee (who shall have and succeed to all rights, powers and duties
of the original Liquidating Trustee) shall be selected within ninety (90) days
thereafter by a Majority Vote of the Limited Partners. The right to appoint a
successor or substitute Liquidating Trustee in the manner provided herein shall
be recurring and continuing for so long as the functions and services of the
Liquidating Trustee are authorized to continue under the provisions hereof, and
every reference herein to the Liquidating Trustee will be deemed to refer also
to any such successor or substitute Liquidating Trustee appointed in the manner
herein provided. Except as expressly provided in this Article XV, the
Liquidating Trustee appointed in the manner provided herein shall have and may
exercise, without further authorization or consent of any of the parties hereto,
all of the powers conferred upon the Managing General Partner under the terms of
this Agreement (but subject to all of the applicable limitations, contractual
and otherwise, upon the exercise of such powers) to the extent necessary or
desirable in the good faith judgment of the Liquidating Trustee to carry out the
duties and functions of the Liquidating Trustee hereunder (including the
establishment of reserves for liabilities that are contingent or uncertain in
amount) for and during such period of time as shall be reasonably required in
the good faith judgment of the Liquidating Trustee to complete the winding up
and liquidation of the Partnership as provided for herein. In the event that no
Person is selected to be the Liquidating Trustee as herein provided within one
hundred twenty (120) days following the event of dissolution, or in the event
the Limited Partners fail to select a successor or substitute Liquidating
Trustee within the time periods set forth above, any Partner may make
application to a Court of Chancery of the State of Delaware to wind up the
affairs of the Partnership and, if deemed appropriate, to appoint a Liquidating
Trustee.
15.06. REASONABLE TIME FOR WINDING UP.
A reasonable time shall be allowed for the orderly winding up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 15.05 in order to minimize any losses otherwise attendant
upon such a winding up.
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15.07. TERMINATION OF PARTNERSHIP.
Except as otherwise provided in this Agreement, the Partnership shall
terminate when all of the assets of the Partnership shall have been converted
into cash, the net proceeds therefrom, as well as any other liquid assets of the
Partnership, after payment of or due provision for all debts, liabilities and
obligations of the Partnership, shall have been distributed to the Partners as
provided for in Sections 6.07 and 15.05, and the Certificate of Limited
Partnership shall have been canceled in the manner required by the Delaware
RULPA.
ARTICLE XVI
AMENDMENTS; MEETINGS; RECORD DATE
16.01. AMENDMENT TO BE ADOPTED SOLELY BY THE MANAGING GENERAL PARTNER.
The Managing General Partner (pursuant to the Managing General
Partner's powers of attorney from the Limited Partners and Assignees described
in Article XVII), without the consent or approval at the time of any Limited
Partner or Assignee (each Limited Partner and Assignee, by acquiring a Unit or
Depositary Unit and requesting admission to the Partnership, being deemed to
consent to any such amendment), may amend any provision of this Agreement, and
execute, swear to, acknowledge, deliver, file, and record all documents required
or desirable in connection therewith, to reflect:
(a) a change in the name of the Partnership or the location of
the principal place of business of the Partnership;
(b) the admission, substitution, termination, or withdrawal of
Partners in accordance with this Agreement;
(c) a change that is necessary to qualify the Partnership as a
limited partnership or a partnership in which the Limited Partners
have limited liability under the laws of any state or that is
necessary or advisable in the opinion of the Managing General Partner
to ensure that the Partnership will not be treated as an association
taxable as a corporation for federal income tax purposes;
(d) a change that is (i) of an inconsequential nature and does
not adversely affect the Limited Partners or any Assignees in any
material respect; (ii) necessary or desirable to cure any ambiguity,
to correct or supplement any provision herein that would be
inconsistent with any other provision herein, or to make any other
provision with respect to matters or questions arising under this
Agreement that will not be inconsistent with the provision of this
Agreement; (iii) necessary or desirable to satisfy any requirements,
conditions, or guidelines contained in any opinion, directive, order,
ruling, or regulation of any federal or state agency or contained in
any federal or state statute; (iv) necessary or desirable to
facilitate the trading of the Depositary Units or comply with any
rule, regulation, guideline, or requirement of any securities exchange
on which the Depositary Units are or will be listed for trading,
compliance with any of which the Managing General Partner deems to be
in the interests of the
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Partnership, the Limited Partners, and any Assignees; or (v) required
or contemplated by this Agreement;
(e) a change in any provision of this Agreement which requires
any action to be taken by or on behalf of the Managing General Partner
or the Partnership pursuant to the requirements of applicable Delaware
law if the provisions of applicable Delaware law are amended,
modified, or revoked so that the taking of such action is no longer
required; or
(f) any other amendments similar to the foregoing.
The authority set forth in Section 16.01(e) shall specifically include the
authority to make such amendments to this Agreement and to the Certificate of
Limited Partnership as the Managing General Partner deems is necessary or
desirable in the event the Delaware RULPA is amended to eliminate or change any
provision now in effect.
16.02. AMENDMENT PROCEDURES.
Except as specifically provided in Sections 16.01 and 16.03, all
amendments to this Agreement shall be made solely in accordance with the
following procedures:
(a) Any amendments of this Agreement must be proposed either:
(i) by the Managing General Partner, by submitting the text
of the proposed amendment to all Limited Partners in writing; or
(ii) by Limited Partners owning (as Limited Partners and not
as Assignees) at least twenty-five percent (25%) of the total
Units and Depositary Units owned by Limited Partners (as Limited
Partners and not as Assignees), by submitting their proposed
amendment in writing to the Managing General Partner. The
Managing General Partners shall, within sixty (60) days after the
receipt of any such proposed amendment, or as soon thereafter as
is reasonably practicable, submit the text of the proposed
amendment to all Limited Partners. The Managing General Partner
may include in such submission its recommendation as to the
proposed amendment.
(b) If an amendment is proposed pursuant to this Section 16.02,
the Managing General Partner shall seek the written consent of the
Limited Partners to such amendment or shall call a meeting of the
Limited Partners to consider and vote on the proposed amendment,
unless, in the Opinion of Independent Counsel, such proposed amendment
would be illegal under Delaware law if adopted, in which case the
Managing General Partner shall not be required to take any further
action with respect thereto. A proposed amendment shall be effective
only if approved by the General Partners in writing and by a Majority
Vote of the Limited Partners, unless a greater percentage vote of the
Limited Partners is required by law or any other provision of this
Agreement. The Managing General Partner shall keep all Partners
advised of the status of any proposed amendment and shall notify all
Partners upon final adoption or rejection of any proposed amendment.
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16.03. AMENDMENT RESTRICTIONS.
Notwithstanding the provisions of Sections 16.01 and 16.02, (a) no
amendment to this Agreement shall be permitted without a unanimous vote of the
Limited Partners if such amendment, in the Opinion of Independent Counsel, (i)
would cause the loss of limited liability of the Partnership under the Operating
Partnership Agreement or of the Limited Partners under this Agreement, or (ii)
would cause the Partnership or the Operating Partnership to be treated as an
association taxable as a corporation for federal income tax purposes; and (b) no
amendment to any provision of Article VIII shall be permitted without the
written consent of BKC, whether or not BKC is a General Partner at the time of
such amendment.
16.04. MEETINGS.
Meetings of the Limited Partners may be called by the Managing General
Partner or by Limited Partners owning (as Limited Partners and not as Assignees)
at least twenty percent (20%) of the Units and Depositary Units owned by Limited
Partners as Limited Partners (and not as Assignees). Any Partner calling a
meeting shall specify the number of Units and Depositary Units as to which the
Partner is exercising the right to call a meeting and only those specified Units
and Depositary Units shall be counted for the purpose of determining whether the
required twenty percent (20%) standard of the preceding sentence has been met.
Limited Partners desiring to call a meeting shall deliver to the Managing
General Partner one or more calls in writing stating that the Limited Partners
signing such writing wish to call a meeting and indicating the specific purposes
for which the meeting is to be called. Action at the meeting shall be limited to
those specific matters specified in the call of the meeting. Within sixty (60)
days after receipt of such a call from Limited Partners, or within such greater
time as may be reasonably necessary for the Partnership to comply with any
statutes, rules, regulations, listing agreements, or similar requirements
governing the holding of a meeting or the solicitation of proxies for use at
such a meeting, the Managing General Partner shall send a notice of the meeting
to the Limited Partners either directly or indirectly through the Depositary. A
meeting shall be held at a reasonable time and convenient place determined by
the Managing General Partner or the Liquidating Trustee, as the case may be, on
a date not more than sixty (60) days after the mailing of notice of the meeting.
Except as otherwise expressly specified by this Agreement (such as in the case
of matters requiring a Majority Vote of the Limited Partners or a Super-Majority
Vote of the Limited Partners), matters submitted to the Limited Partners for
determination at a meeting at which a quorum is present shall be determined by
the affirmative vote of a majority of the Units and Depositary Units present and
voting at such meeting. Limited Partners may vote either in person or by proxy
at any meeting. No action shall be taken at any meeting unless the Partnership
has received an Opinion of Independent Counsel that such action (i) would not
cause the loss of limited liability of the Partnership under the Operating
Partnership Agreement or of the Limited Partners under this Agreement and (ii)
would not cause the Partnership or the Operating Partnership to be treated as an
association taxable as a corporation for federal income tax purposes. Each
Limited Partner shall have one vote for each Unit or Depositary Unit as to which
he has been admitted to the Partnership as a Limited Partner. A Limited Partner
may cast its vote at any meeting in person or by proxy. No action shall be taken
by the Limited Partners without a meeting duly called and held or without
written consent in accordance with Section 16.12.
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16.05. NOTICE OF A MEETING.
Notice of a meeting called pursuant to Section 16.04 shall be given
either personally in writing or by mail or other means of written communication
addressed to each Limited Partner at the address of the Limited Partner
appearing on the books of the Depositary or the Partnership. An affidavit or
certificate of mailing of any notice or report in accordance with the provisions
of this Article XVI executed by the Managing General Partner, Depositary,
Transfer Agent, registrar of Depositary Units, or mailing organization shall
constitute conclusive (but not exclusive) evidence of the giving of notice. If
any notice addressed to a Limited Partner at the address of such Limited Partner
appearing on the books of the Partnership or Depositary is returned to the
Partnership by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver such notice, the notice and
any subsequent notices or reports shall be deemed to have been duly given
without further mailing if they are available for the Limited Partner at the
principal office of the Partnership for a period of one year from the date of
the giving of the notice to all other Limited Partners.
16.06. RECORD DATE.
For purposes of determining the Limited Partners entitled to notice of
or to vote at a meeting of the Limited Partners or to give consents without a
meeting as provided in Section 16.12, the Managing General Partner or the
Liquidating Trustee, if any, may set a Record Date, which Record Date, shall not
be less than ten (10) days nor more than sixty (60) days prior to the date of
such meeting (unless such requirement conflicts with any rule, regulation,
guideline, or requirement of any securities exchange on which the Depositary
Units are listed for trading, in which case the rule, regulation, guidelines, or
requirement of such securities exchange shall govern).
16.07. ADJOURNMENT.
When a meeting is adjourned to another time or place, notice need not
be given of the adjourned meeting and a new Record Date need not be fixed if the
time and place of such adjourned meeting are announced at the meeting at which
such adjournment is taken, unless such adjournment shall be for more than forty-
five (45) days. At the adjourned meeting, the Partnership may transact any
business that would have been permitted to be transacted at the original
meeting. If the adjournment is for more than forty-five (45) days, or if a new
Record Date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given in accordance with this Article XVI.
16.08. WAIVER OF NOTICE; CONSENT TO MEETING; APPROVAL OF MINUTES.
The transactions of any meeting of Limited Partners, however called
and noticed, and wherever held, are as valid as though they had been approved at
a meeting duly held after regular call and notice, if a quorum is present either
in person or by proxy, and if, either before or after the meeting, each of the
Limited Partners entitled to vote, not present in person or by proxy, signs a
written waiver of notice, or a consent to the holding of the meeting, or an
approval of the minutes thereof. All such waivers, consents, and approvals
shall be filed with the Partnership records or made a part of the minutes of
such meeting. Attendance of a Limited Partner at a meeting shall constitute a
waiver of notice of the meeting; provided, however, that no such waiver shall
occur when the Limited Partner objects, at the beginning of the meeting, to the
transaction of any business at such meeting because the meeting is not lawfully
called or convened; and provided further, that
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attendance at a meeting is not a waiver of any right to object to the
consideration of any matters required to be included in the notice of the
meeting, but not so included, if the objection is expressly made at the
meeting.
16.09. QUORUM.
Limited Partners of record who are Limited Partners (rather than
Assignees) with respect to more than fifty percent (50%) of the total number of
all outstanding Units and Depositary Units held by all Limited Partners (as
Limited Partners rather than Assignees) of record, whether represented in person
or by proxy, shall constitute a quorum at a meeting of Limited Partners. The
Limited Partners present at a duly called or held meeting at which a quorum is
present may continue to transact business until adjournment of such meeting,
notwithstanding the withdrawal of enough Limited Partners to leave less than a
quorum, if any action taken (other than adjournment) is approved by the
requisite number of Limited Partners specified in this Agreement. In the absence
of a quorum, any meeting of Limited Partners may be adjourned from time to time
by the affirmative vote of a majority of the Units and Depositary Units
represented either in person or by proxy at such meeting, but no other business
may be transacted, except as provided in Section 16.04.
16.10. CONDUCT OF MEETING.
The Managing General Partner or the Liquidating Trustee, as the case
may be, shall be solely responsible for convening, conducting, and adjourning
any meeting of Limited Partners, including, without limitation, the
determination of Persons entitled to vote at such meeting, the existence of a
quorum for such meeting, the satisfaction of the requirements of Section 16.04
with respect to such meeting, the conduct of voting at such meeting, the
validity and effect of any proxies represented at such meeting, and the
determination of ;ny controversies, votes, or challenges arising in connection
with or during such meeting or voting. The Managing General Partner, or the
Liquidating Trustee, as the case may be, shall designate a Person to serve as
chairman of any meeting and further shall designate a Person to take the minutes
of any meeting, which Person, in either case, may be, without limitation, a
Partner or any employee or agent of the Managing General Partner. The Managing
General Partner or the Liquidating Trustee, as the case may be, may make all
such other regulations, consistent with applicable law and this Agreement, as it
may deem advisable concerning the conduct of any meeting of the Limited
Partners, including regulations in regard to the appointment of proxies, the
appointment and duties of inspectors of votes, and the submission and
examination of proxies and other evidence of the right to vote.
16.11. VOTING AND OTHER RIGHTS.
(a) Only those Limited Partners who are Record Holders of Depositary
Receipts or Units on the Record Date set pursuant to Section 16.06 shall be
entitled to notice of, or to vote at, a meeting of Limited Partners.
(b) With respect to Depositary Units that are held for a Person's
account by another Person (such as a broker, dealer, bank, trust company, or
clearing corporation, or an agent of any of the foregoing), in whose name the
Depositary Receipts evidencing such Depositary Units are registered, such
broker, dealer, or other agent shall, in exercising any voting rights in respect
of such Depositary Units on any matter, vote such Depositary Units in favor of,
and at the direction of, the Person on whose behalf such
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broker, dealer, or other agent is holding such Depositary Units, and the
Partnership shall be entitled to assume it is so acting without further
inquiry.
16.12. ACTION WITHOUT A MEETING
Any action that may be taken at a meeting of the Limited Partners may
be taken without a meeting if a consent in writing setting forth the action so
taken is signed by Limited Partners owning not less than the minimum number of
Units or Depositary Units that would be necessary to authorize or take such
action at a meeting at which all of the Limited Partners Were present and voted.
Prompt notice of the taking of action without a meeting shall be given to the
Limited Partners who have not consented thereto in writing. The Managing General
Partner may specify that any written ballot submitted to Limited Partners for
the purpose of taking any action without a meeting shall be returned to the
Partnership within the time, not less than twenty (20) days, specified by the
Managing General Partner. If a ballot returned to the Partnership does not vote
all of the Units held by the Limited Partner, as a Limited Partner (rather than
Assignee), the Partnership shall be deemed to have failed to receive a ballot
for the Units that were not voted. If consent to the taking of any action by the
Limited Partners is solicited by any person other than by or on behalf of the
Managing General Partner, the written consents shall have no force and effect
unless and until (i) they are deposited with the Partnership in care of the
Managing General Partner, and (ii) consents sufficient to take the action
proposed are dated as of a date not more than ninety (90) days prior to the date
sufficient consents are deposited with the Partnership.
ARTICLE XVII
POWER OF ATTORNEY
Each Limited Partner (including any additional or Substituted Limited
Partner) and each Assignee who accepts Depositary Units is deemed to irrevocably
constitute, appoint, and empower the Managing General Partner (and any successor
by merger, transfer, election, or otherwise), and each of the Managing General
Partner's authorized officers and attorneys-in-fact, with full power of
substitution, as the true and lawful agent and attorney-in-fact of such Limited
Partner or Assignee, with full power and authority in such Limited Partner's or
Assignee's name, place, and stead and for such Limited Partner's or Assignee's
use of benefit:
(a) to make, execute, verify, consent to, swear to, acknowledge,
make oath as to, publish, deliver, file, and/or record in the
appropriate public offices (i) all certificates and other instruments,
including, at the option of the Managing General Partner, this
Agreement and the Certificate of Limited Partnership and all
amendments and restatements thereof, that the Managing General Partner
deems appropriate or necessary to qualify, or continue the
qualification of, the Partnership as a limited partnership (or a
partnership in which the Limited Partners have limited liability) in
the State of Delaware and all jurisdictions in which the Partnership
may or may intend to conduct business or own property; (ii) all other
certificates, instruments, and documents as may be requested by, or
may be appropriate under the laws of any state or other jurisdiction
in which the Partnership may or may intend to conduct business or own
property; (iii) all instruments that the Managing General Partner
deems appropriate or necessary to reflect any amendment, change, or
modification of this Agreement in accordance
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with the terms hereof; (iv) all conveyances and other instruments or
documents that the Managing General Partner deems appropriate or
necessary to effectuate or reflect the dissolution, termination, and
liquidation of the Partnership pursuant to the terms of this
Agreement; (v) any and all financing statements, continuation
statements, mortgages, or other documents necessary to grant to or
perfect for secured creditors of the Partnership, including the
General Partners and Affiliates, a security interest, mortgage,
pledge or lien on all or any of the Partnership Assets; (vi) all
instrument or papers required to continue the business of the
Partnership pursuant to Article XV; (vii) all instruments (including
this Agreement and the Certificate of Limited Partnership and
amendments and restatements thereof) relating to the admission of
any Partner pursuant to Article XIII; and (viii) all other
instruments as the attorneys-in-fact or any one of them may deem
necessary or advisable to carry out fully the provisions of this
Agreement in accordance with its terms; and
(b) to enter into the Deposit Agreement and deposit all Units of
such Limited Partner in the Deposit Account established by the
Depositary pursuant to the Deposit Agreement. The execution and
delivery by any of said attorneys-in-fact of any such agreements,
amendments, consents, certificates, or other instruments shall be
conclusive evidence that such execution and delivery was authorized
hereby.
Nothing herein contained shall be construed as authorizing any
Person acting as attorney-in-fact pursuant to this Article XVII to take
action as a attorney-in-fact for any Limited Partner or Assignee to increase
in any way the liability of such Limited Partner or Assignee beyond the
liability expressly set forth in this Agreement, or to amend this Agreement
except in accordance with Article XVI.
The appointment by each Limited Partner and Assignee of the Persons
designated in this Article XVII as attorneys-in-fact shall be deemed to be a
power of attorney coupled with an interest in recognition of the fact that each
of the Limited Partners and Assignees under this Agreement will be relying upon
the power of such Persons to act pursuant to this power of attorney for the
orderly administration of the affairs of the Partnership. The foregoing power of
attorney is hereby declared to be irrevocable, and it shall survive, and shall
not be affected by, the subsequent death, incompetency, dissolution, disability,
incapacity, bankruptcy, or termination of any Limited Partner or Assignee and it
shall extend to such Limited Partner's or Assignee's heirs, successors, and
assigns. Each Limited Partner and Assignee hereby agrees to be bound by any
representations made by any Person acting as attorney-in-fact pursuant to this
power of attorney in accordance with this Agreement. Each Limited Partner and
Assignee hereby waives any and all defenses that may be available to contest,
negate, or disaffirm the action of any Person taken as attorney-in-fact under
this power of attorney in accordance with this Agreement. Each Limited Partner
and Assignee shall execute and deliver to the Managing General Partner, within
fifteen (15) days after receipt of the Managing General Partner's request
therefor, all such further designations, powers of attorney, and other
instruments as the Managing General Partner deems necessary to effectuate this
Agreement and the purposes of the Partnership.
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ARTICLE XVIII
MISCELLANEOUS PROVISIONS
18.01. ADDITIONAL ACTIONS AND DOCUMENTS.
Each of the Partners hereby agrees to take or cause to be taken such
further actions, to execute, acknowledge, deliver, and file or cause to be
executed, acknowledged, delivered, and filed such further documents and
instruments, and to use best efforts to obtain such consents, as may be
necessary or as may be reasonably requested in order to fully effectuate the
purposes, terms and conditions of this Agreement, whether before, at, or after
the closing of the transactions contemplated by this Agreement.
18.02 NOTICES.
All notices, demands, requests, or other communications which may be
or are required to be given, served, or sent by a Partner or the Partnership
pursuant to this Agreement shall be in writing and shall be personally
delivered, mailed by first-class mail, postage prepaid, or transmitted by
facsimile, telegram or telex, addressed as follows:
(a) If to the Managing General Partner:
QSV Properties Inc.
Attn: Chairman or President
5310 Harvest Hill Road
Suite 270
Dallas, Texas 75230
(b) If to a Limited Partner or Assignee:
The Last Known Business Residence or Mailing Address of Such
Limited Partner or Assignee Reflected in the Records of the
Partnership or the Depositary.
(c) If to the Partnership:
U.S. Restaurant Properties Master L.P.
Attn: Managing General Partner
5310 Harvest Hill Road
Suite 270
Dallas, Texas 75230
Each Partner and Assignee and the Partnership may designate by notice in writing
a new address to which any notice, demand, request or communication may
thereafter be so given, served or sent. Each notice, demand, request, or
communication which shall be delivered, mailed or transmitted in the manner
described above shalL be deemed to have been duly given when delivered in
person, sent by first class mail, or transmitted by facsimile, telegram, or
telex.
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18.03. SEVERABILITY.
The invalidity of any one or more provisions hereof or of any other
agreement or instrument given pursuant to or in connection with this Agreement
shall not affect the remaining portions of this Agreement or any such other
agreement or instrument or any part thereof, all of which are inserted
conditionally on their being held valid in law; and in the event that one or
more of the provisions contained herein or therein should be invalid, or should
operate to render this Agreement or any such other agreement or instrument
invalid, this Agreement and such other agreements and instruments shall be
construed as if such invalid provisions had not been inserted.
18.04. SURVIVAL.
It is the express intention and agreement of the Partners that all
covenants, agreements, statements, representations, warranties and indemnities
made in this Agreement shall survive the execution and delivery of this
Agreement.
18.05. WAIVERS.
Neither the waiver by a Partner of a breach of or a default under any
of the provisions of this Agreement, nor the failure of a Partner, on one or
more occasions, to enforce any of the provisions of this Agreement or to
exercise any right, remedy, or privilege hereunder shall thereafter be construed
as a waiver of any subsequent breach or default of a similar nature, or as a
waiver of any such provisions, rights, remedies, or privileges hereunder.
18.06. EXERCISE OF RIGHTS.
No failure or delay on the part of a Partner or the Partnership in
exercising any right, power, or privilege hereunder and no course of dealing
between the Partners or between a Partner and the Partnership shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power, or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege. The rights and remedies herein
expressly provided are cumulative and not exclusive of any other rights or
remedies which a Partner or the Partnership would otherwise have at law or in
equity or otherwise.
18.07. BINDING EFFECT.
Subject to any provisions hereof restricting assignment, this
Agreement shall be binding upon and shall inure to the benefit of the Partners
(and BKC and its successors and assigns for purposes of Article VIII and Section
16.03(b)) and their respective heirs, devisees, executors, administrators, legal
representatives, successors, and assigns.
18.08. LIMITATION ON BENEFITS OF THIS AGREEMENT.
It is the explicit intention of the Partners that, with the exception
of the rights of BKC, its successors and assigns, in connection with Article
VIII and Section 16.03(b), no person or entity other than the Partners and the
Partnership is or shall be entitled to bring any action to enforce any provision
of this Agreement against any Partner or the Partnership, and that except as set
forth in Section 8.01(b), the covenants, undertakings, and agreements set forth
in this Agreement shall be solely for the benefit of,
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and shall be enforceable only by, the Partners (or their respective
successors and assigns permitted hereunder) and the Partnership.
18.09. FORCE MAJEURE.
If the Managing General Partner is rendered unable, wholly or in part,
by "force majeure" (as herein defined) to carry out any of its obligations under
this Agreement, other than the obligation hereunder to make money payments, the
obligations of the Managing General Partner, insofar as they are affected by
such force majeure, shall be suspended during, but no longer than, the
continuance of such force majeure. The term "force majeure" as used herein shall
mean an act of God, strike, lockout or other industrial disturbance, act of
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, governmental restraint, unavailability of equipment, and any other
cause, whether of the kind specifically enumerated above or otherwise, which is
not reasonably within the control of the Managing General Partner.
18.10. CONSENT OF LIMITED PARTNERS AND ASSIGNEES.
By acceptance of a Unit or Depositary Unit, each Limited Partner and
each Assignee expressly consents and agrees that whenever in this Agreement it
is specified that an action may be taken upon the affirmative vote of less than
all of the Limited Partners, such action may be so taken upon the concurrence of
less than all of the Limited Partners and each such Limited Partner and Assignee
shall be bound by the results of such action.
18.11. ENTIRE AGREEMENT.
This Agreement contains the entire agreement among the Partners with
respect to the transactions contemplated herein, and supersedes all prior oral
or written agreements, commitments, or understandings with respect to the
matters provided for herein.
18.12. PRONOUNS.
All pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine, neuter, singular, or plural, as the identity of the
person or entity may require.
18.13. HEADINGS.
Article, Section and subsection headings contained in this Agreement
are inserted for convenience of reference only, shall not be deemed to be a part
of this Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
18.14. GOVERNING LAW.
This Agreement, the rights and obligations of the parties hereto, and
any claims or disputes relating thereto, shall be governed by and construed in
accordance with the laws of Delaware (but not including the choice of law rules
thereof).
97
<PAGE>
18.15. EXECUTION IN COUNTERPARTS.
To facilitate execution, this Agreement may be executed in as many
counterparts as may be required; and it shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in making proof of this Agreement to
produce or account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
ARTICLE XIX
EXECUTION
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
or have caused this Agreement to be duly executed on their behalf, as of the day
and year first hereinabove set forth.
MANAGING GENERAL PARTNER:
ATTEST: QSV PROPERTIES INC.
By: ______________________________ By: _______________________________
Title: ______________________ Title: ________________________
LIMITED PARTNERS:
ATTEST: QSV PROPERTIES INC., as Managing
General Partner, Attorney-in-Fact
for the Limited Partners and
Assignees
By: ______________________________ By: _______________________________
Title: ______________________ Title: ________________________
98
<PAGE>
EXHIBIT A
TO AGREEMENT OF
LIMITED PARTNERSHIP
OF U.S. RESTAURANT
PROPERTIES MASTER L.P.
CERTIFICATE
FOR
LIMITED PARTNERSHIP UNITS
OF
U.S. RESTAURANT PROPERTIES MASTER L.P.
No. _________ _________ Units
QSV Properties Inc., as the Managing General Partner of U.S. Restaurant
Properties Master L.P. (the "Partnership"), a Delaware limited partnership,
hereby certifies that __________________________________________ is the
registered owner of ______ units of limited partnership interest in the
Partnership ("Units"). The rights, preferences, and limitations of the Units are
set forth in the Second Amended and Restated Agreement of Limited Partnership
under which the Partnership is existing, and in the Certificate of Limited
Partnership filed for record in the Office of the Secretary of State of the
State of Delaware, copies of which are on file at the Managing General Partner's
principal office at 5310 Harvest Hill Road, Suite 270, Dallas, Texas 75230.
THIS CERTIFICATE IS NON-NEGOTIABLE AND IS NOT TRANSFERABLE EXCEPT UPON DEATH OR
BY OPERATION OF LAW.
QSV PROPERTIES INC.
Managing General Partner of U.S. Restaurant
Properties Master L.P.
Dated: _____________________ By: __________________________
Title: _______________________
BY ACCEPTANCE OF THIS CERTIFICATE FOR LIMITED PARTNERSHIP UNITS, AND AS A
CONDITION TO BEING ENTITLED TO ANY RIGHTS IN OR BENEFITS WITH RESPECT TO THE
UNITS EVIDENCED HEREBY, A HOLDER HEREOF (INCLUDING ANY TRANSFEREE HEREOF) IS
DEEMED TO HAVE AGREED, WHETHER OR NOT SUCH HOLDER IS ADMITTED TO THE PARTNERSHIP
AS A SUBSTITUTED LIMITED PARTNER WITH RESPECT TO THE UNITS EVIDENCED HEREBY, TO
COMPLY WITH AND BE BOUND BY ALL TERMS AND CONDITIONS OF THE AGREEMENT OF LIMITED
PARTNERSHIP UNDER WHICH THE PARTNERSHIP WAS FORMED AND IS EXISTING (INCLUDING,
WITHOUT LIMITATION, PROVISIONS THEREOF RELATING TO CONFLICTS OF INTEREST,
LIMITATIONS ON LIABILITY, AND INDEMNIFICATION OF THE GENERAL PARTNERS THEREOF),
A COPY OF WHICH HAS BEEN AVAILABLE FOR INSPECTION ANT MAY BE OBTAINED UPON
REQUEST TREE OF CHARGE) FROM THE PARTNERSHIP.
<PAGE>
EXHIBIT B
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF THE OPERATING PARTNERSHIP
B-1
<PAGE>
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 , 1995
<PAGE>
TABLE OF CONTENTS
PAGE
----
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I CERTAIN DEFINITIONS. . . . . . . . . . . . . . . 1
ARTICLE II FORMATION; NAME; PLACE OF BUSINESS . . . . . . . 8
2.01. Formation of Partnership; Certificate of
Limited Partnership . . . . . . . . . . . . . 8
2.02. Name of Partnership. . . . . . . . . . . . . . . 8
2.03. Place of Business. . . . . . . . . . . . . . . . 9
2.04. Registered Office and Registered Agent . . . . . 9
ARTICLE III PURPOSES, NATURE OF BUSINESS, AND POWERS OF
PARTNERSHIP. . . . . . . . . . . . . . . . . . . 9
3.01. Purposes and Business. . . . . . . . . . . . . . 9
3.02. Powers . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV TERM OF PARTNERSHIP. . . . . . . . . . . . . . .10
4.01. Term . . . . . . . . . . . . . . . . . . . . . .10
ARTICLE V CAPITAL. . . . . . . . . . . . . . . . . . . . .10
5.01. Capital Contributions of Managing
General Partner . . . . . . . . . . . . . . .10
5.02. Capital Contributions of Special
General Partner . . . . . . . . . . . . . . .11
5.03. Capital Contributions of Limited Partner . . . .11
5.04. Additional Issuances of Partnership Interests
and Capital Contributions . . . . . . . . . .12
5.05. Capital Accounts . . . . . . . . . . . . . . . .12
5.06. Negative Capital Accounts. . . . . . . . . . . .14
5.07. No Interest on Amounts in Capital Account. . . .14
5.08. Advances to Partnership. . . . . . . . . . . . .14
5.09. Liability of Limited Partner . . . . . . . . . .15
5.10. Return of Capital. . . . . . . . . . . . . . . .15
<PAGE>
PAGE
----
ARTICLE VI ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTIONS
OF CASH FLOW AND CERTAIN PROCEEDS. . . . . . . .15
6.01. Certain Definitions. . . . . . . . . . . . . . .15
6.02. Allocations for Capital Account Purposes . . . .17
6.03. Allocations for Tax Purposes . . . . . . . . . .18
6.04. Allocation of Income and Loss With
Respect to Interest Transferred . . . . . . .19
6.05. Distributions of Cash Flow . . . . . . . . . . .20
6.06. Distribution of Proceeds from Interim
Capital Transactions. . . . . . . . . . . . .20
6.07. Distribution of Proceeds from Terminating
Capital Transactions; Liquidation
Distributions . . . . . . . . . . . . . . . .20
6.08. Taxes Withheld . . . . . . . . . . . . . . . . .20
ARTICLE VII MANAGEMENT . . . . . . . . . . . . . . . . . . .21
7.01. Management and Control of Partnership. . . . . .21
7.02. Powers of Managing General Partner . . . . . . .21
7.03. Restrictions on Authority of Managing
General Partner. . . . . . . . . . . . . . . . .26
7.04. Title to Partnership Assets. . . . . . . . . . .27
7.05. Working Capital Reserve. . . . . . . . . . . . .27
7.06. Other Business Activities of Partners. . . . . .27
7.07. Transactions with General Partners or
Affiliates. . . . . . . . . . . . . . . . . .27
7.08. Net Worth Representation; Independent Judgment .28
7.09. Liability of General Partners to Partnership
and Limited Partner . . . . . . . . . . . . .28
7.10. Indemnification of General Partners and
Affiliates. . . . . . . . . . . . . . . . . .28
7.11. No Management by Limited Partner . . . . . . . .29
7.12. Other Matters Concerning General Partners. . . .29
7.13. Revolving Line of Credit; Other Loans to or
from a General Partner. . . . . . . . . . . .30
7.14. Periodic Consideration of Sale or Refinancing. .31
7.15. Other Limitations. . . . . . . . . . . . . . . .31
ARTICLE VIII ACQUISITION, OPERATION, AND DISPOSITION OF
RESTAURANT PROPERTIES . . . . . . . . . . . .32
ii
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PAGE
----
8.01. General. . . . . . . . . . . . . . . . . . . . .32
8.02. Contribution to Partnership; Acquisition of
Restaurant Properties . . . . . . . . . . . .32
8.03. Use and Other Restrictions . . . . . . . . . . .32
8.04. Restrictions on Transfer of Restaurant
Properties. . . . . . . . . . . . . . . . . .36
8.05. Rent Relief. . . . . . . . . . . . . . . . . . .38
8.06. Successor Policy . . . . . . . . . . . . . . . .39
8.07. Competitive Facilities . . . . . . . . . . . . .42
8.08. Acquisition of Restaurant Properties By the
General Partners or Affiliates. . . . . . . .42
8.09. Termination of Lease for Restaurant Property
Following Termination of BKC
Franchise Agreement . . . . . . . . . . . . .42
8.10. Independent Consultant . . . . . . . . . . . . .43
8.11. Consent to Use of Name and Trademarks. . . . . .45
8.12. Acquisition of Fee Title to Properties
Subject to Primary Leases . . . . . . . . . .45
8.13. Location of Other Restaurant Properties. . . . .45
ARTICLE IX COMPENSATION OF GENERAL PARTNERS; PAYMENT OF
PARTNERSHIP EXPENSES . . . . . . . . . . . . . .45
9.01. Compensation to General Partners . . . . . . . .45
9.02. Expenses in Connection With Organization of
Partnership and Initial Public Offering. . .45
9.03. Operational Expenses . . . . . . . . . . . . . .46
ARTICLE X BANK ACCOUNTS; BOOKS AND RECORDS; FISCAL YEAR;
STATEMENTS; TAX MATTERS. . . . . . . . . . . . .48
10.01. Bank Accounts. . . . . . . . . . . . . . . . . .48
10.02. Books and Records. . . . . . . . . . . . . . . .48
10.03. Fiscal Year. . . . . . . . . . . . . . . . . . .49
10.04. Financial Statements and Information . . . . . .49
10.05. Accounting Decisions . . . . . . . . . . . . . .50
10.06. Where Maintained . . . . . . . . . . . . . . . .50
10.07. Preparation of Tax Returns . . . . . . . . . . .50
iii
<PAGE>
PAGE
----
10.08. Tax Elections. . . . . . . . . . . . . . . . . .51
10.09. Tax Controversies. . . . . . . . . . . . . . . .51
10.10. Organizational Expenses. . . . . . . . . . . . .51
10.11. Taxation as a Partnership. . . . . . . . . . . .51
10.12. Qualification as a REIT. . . . . . . . . . . . .51
ARTICLE XI TRANSFER OF INTERESTS . . . . . . . . . . . . .52
11.01. Transfer . . . . . . . . . . . . . . . . . . . .52
11.02. Transfers of Interests of General Partners . . .52
11.03. Transfer of Interest of Limited Partner. . . . .53
ARTICLE XII ADMISSION OF SUBSTITUTE PARTNERS . . . . . . . .53
12.01. Admission of Successor General Partners. . . . .53
ARTICLE XIII WITHDRAWAL OR REMOVAL OF GENERAL PARTNERS. . . .53
13.01. Withdrawal or Removal of General Partners. . . .53
13.02. Amendment of Agreement and Certificate of
Limited Partnership . . . . . . . . . . . . .54
13.03. Interest of Departing Partner and Successor. . .54
ARTICLE XIV DISSOLUTION AND LIQUIDATION. . . . . . . . . . .56
14.01. No Dissolution . . . . . . . . . . . . . . . . .56
14.02. Events Causing Dissolution . . . . . . . . . . .56
14.03. Right to Continue Business of Partnership. . . .57
14.04. Dissolution. . . . . . . . . . . . . . . . . . .57
14.05. Liquidation. . . . . . . . . . . . . . . . . . .57
14.06. Reasonable Time for Winding Up . . . . . . . . .58
14.07. Termination of Partnership . . . . . . . . . . .58
ARTICLE XV AMENDMENTS . . . . . . . . . . . . . . . . . . .59
15.01. Amendments to be Adopted Solely by
the Managing General Partner. . . . . . . . .59
15.02. Amendment Procedures . . . . . . . . . . . . . .60
15.03. Amendment Restrictions . . . . . . . . . . . . .60
iv
<PAGE>
PAGE
----
ARTICLE XVI MISCELLANEOUS PROVISIONS . . . . . . . . . . . .60
16.01. Additional Actions and Documents . . . . . . . .60
16.02. Notices. . . . . . . . . . . . . . . . . . . . .60
16.03. Severability . . . . . . . . . . . . . . . . . .61
16.04. Survival . . . . . . . . . . . . . . . . . . . .61
16.05. Waivers. . . . . . . . . . . . . . . . . . . . .61
16.06. Exercise of Rights . . . . . . . . . . . . . . .61
16.07. Binding Effect . . . . . . . . . . . . . . . . .61
16.08. Limitation on Benefits of this Agreement . . . .62
16.09. Force Majeure. . . . . . . . . . . . . . . . . .62
16.10. Entire Agreement . . . . . . . . . . . . . . . .62
16.11. Pronouns . . . . . . . . . . . . . . . . . . . .62
16.12. Headings . . . . . . . . . . . . . . . . . . . .62
16.13. Governing Law. . . . . . . . . . . . . . . . . .62
16.14. Execution in Counterparts. . . . . . . . . . . .62
ARTICLE XVII EXECUTION. . . . . . . . . . . . . . . . . . . .63
v
<PAGE>
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
U.S. RESTAURANT PROPERTIES OPERATING L.P.
(FORMERLY BURGER KING OPERATING LIMITED PARTNERSHIP)
This Second Amended and Restated Agreement of Limited Partnership (this
"Agreement") is entered into as of March ___, 1995, by and among QSV Properties
Inc., a Delaware corporation having its principal office at 5310 Harvest Hill
Road, Suite 270, Dallas, Texas 75230 (the "Managing General Partner") (or any
other person or entity who shall in the future execute and deliver this
Agreement as a Substituted General Partner pursuant to the provisions hereof),
as the general partner (the "General Partner"), and U.S. Restaurant Properties
Master L.P., a Delaware limited partnership having its principal place of
business at 5310 Harvest Hill Road, Suite 270, Dallas, Texas 75230 (the "Limited
Partner") (the General Partner and the Limited Partner sometimes hereinafter
referred to as a "Partner," individually, and as the "Partners," collectively).
WHEREAS, the Partners and Burger King Corporation, a Florida corporation
("BKC"), as the Special General Partner, heretofore have entered into an
Agreement of Limited Partnership dated as of December 10, 1985;
WHEREAS, the Partners and BKC amended and restated such Agreement of
Limited Partnership in its entirety as of January 6, 1986 and February 3, 1986,
and further amended such Agreement of Limited Partnership by Amendments No. 1
and 2 thereto through November 30, 1994;
WHEREAS, BKC has withdrawn as Special General Partner effective as of
November 30, 1994; and
WHEREAS, the Partners desire to further amend and restate such Agreement of
Limited Partnership in its entirety, as hereinafter set forth;
NOW THEREFORE, for and in consideration of the foregoing, and of the
covenants and agreements hereinafter set forth, it is hereby agreed as follows:
ARTICLE I
CERTAIN DEFINITIONS
Unless the context otherwise specifies or requires, the terms defined in
this Article I shall, for the purposes of this Agreement, have the meanings
herein specified. Certain other capitalized terms used in this Agreement are
defined in Articles VI, VIII, and XIII. Unless otherwise specified, all
references herein to Articles or Sections are to Articles or Sections of this
Agreement.
ACCOUNTING FIRM: The independent public accountants who are responsible for
assisting in maintaining the Partnership tax accounting and allocation records
and advising the Managing General Partner with respect thereto, as selected and
approved by the Managing General Partner from time to time, in its sole and
absolute discretion. The Accounting Firm and the Auditing Firm are not required
to be the same.
ADJUSTED BASIS: The basis for determining gain or loss for federal income
tax purposes from the sale or other disposition of property, as defined in
Section 1011 of the Code.
1
<PAGE>
ADJUSTED PROPERLY: Any property the Carrying Value of which has been
adjusted pursuant to Section 5.05(d)(i) or Section 5.05(d)(ii).
AFFILIATE: (a) Any Person (as hereinafter defined) directly or indirectly
owning, controlling, or holding power to vote ten percent (10%) or more of the
outstanding voting securities of the Person in question; (b) any Person ten
percent (10%) or more of whose outstanding voting securities are directly or
indirectly owned, controlled, or held with power to vote by the Person in
question; (c) any Person directly or indirectly controlling, controlled by, or
under common control with the Person in question; (d) if the Person in question
is a corporation, any executive officer or director of the Person in question or
of any corporation directly or indirectly controlling the Person in question;
and (e) if the Person in question is a partnership, any general partner owning
or controlling ten percent (10%) or more of either the capital or profits
interests in such partnership. As used in this definition of "Affiliate," the
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise.
AGREEMENT: This Second Amended and Restated Agreement of Limited
Partnership, as it may be further amended or supplemented from time to time.
AGGREGATE OFFERING PROCEEDS: The total amount of proceeds received by the
Limited Partner from the Initial Public Offering (including any proceeds
received in connection with the over allotment option described in Section
5.03(b)).
AMENDED AGREEMENT: The Amended and Restated Agreement of Limited
Partnership of Burger King Operating Limited Partnership, dated as of February
3, 1986, entered into by and among the Managing General Partner, BKC and the
Limited Partner, as amended by Amendment Nos. 1 and 2 thereto.
ANCILLARY PROPERLY: Personal property (other than personal property
included in the definition of "Restaurant Properties") of whatever kind used in
connection with a Restaurant Property, including, without limitation, supplies,
furnishings, equipment, trade dress and franchise, license and other rights.
APPRAISER: Real Estate Research Corporation or its successor, or in the
event that Real Estate Research Corporation is not available for any reason to
provide an appraisal with respect to any matter hereunder, Arthur D. Little and
Company or its successor, or in the event that both Real Estate Research
Corporation or its successor and Arthur D. Little and Company or its successor
are not available for any reason to provide an appraisal with respect to any
matter hereunder, Marshall and Stevens, Incorporated or its successor, or in the
event that all of the foregoing companies are not available for any reason to
provide an appraisal with respect to any matters hereunder, such other
independent, nationally recognized real estate valuation firm selected by the
Managing General Partner in its reasonable discretion.
AUDITING FIRM: The independent public accountants who are responsible for
auditing the financial statements of the Partnership as set forth in Section
10:04, as selected and approved by the Managing General Partner from time to
time, in its sole and absolute discretion. The Auditing Firm and the Accounting
Firm are not required to be the same.
BKC: Burger King Corporation and the successors and assigns of Burger King
Corporation.
2
<PAGE>
BKC FRANCHISE AGREEMENT: A franchise agreement, whether now existing or
hereafter entered into, between a BKC Franchisee and BKC authorizing the BKC
Franchisee to operate a BK Restaurant, as the same may be amended, renewed, or
extended by BKC.
BKC FRANCHISEES: Persons who operate BK Restaurants pursuant to BKC
Franchise Agreements.
BK RESTAURANTS: Burger King "fast food" restaurants, whether operated by
BKC, an Affiliate of BKC, or a BKC Franchisee. "BK Restaurant" means any one of
the BK Restaurants.
BUSINESS DAY: Monday through Friday of each week, except that a legal
holiday recognized as such by the Government of the United States or the State
of Texas shall not be regarded as a Business Day.
CAPITAL ACCOUNT: The capital account established and maintained for each
Partner pursuant to Section 5.05.
CAPITAL CONTRIBUTION: Any property (including cash) contributed to the
Partnership by or on behalf of a Partner.
CARRYING VALUE: (a) With respect to a property contributed to the
Partnership, the fair market value of such property at the time of contribution,
reduced (but not below zero) by all deductions for depreciation, amortization,
cost recovery, and expense in lieu of depreciation debited to the Capital
Accounts of Partners pursuant to Section 5.05(a) with respect to such property
as of the time of determination, and (b) with respect to any other property, the
Adjusted Basis of such property as of the time of determination. The Carrying
Value of any property shall be adjusted from time to time in accordance with
Sections 5.05(c) and 5.05(d), and to reflect changes, additions or other
adjustments to the Carrying Value for dispositions, acquisitions or improvements
of Partnership properties, as deemed to be necessary or appropriate by the
Managing General Partner.
CERTIFICATE OF LIMITED PARTNERSHIP: The Certificate of Limited Partnership,
and any and all amendments thereto, filed on behalf of the Partnership with the
Recording Office as required under the Delaware RULPA.
CLOSING: The "closing time" as defined in the Underwriters Purchase
Agreement.
CLOSING DATE: The date on which the Closing occurs.
CODE: The Internal Revenue Code of 1986, as amended to date and hereafter
amended. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
COMMISSION: The Securities and Exchange Commission.
CONTRIBUTED PROPERTY: Each Contributing Partner's interest in each property
(or interest therein), or other consideration, but excluding cash and cash
equivalents, contributed directly or indirectly to the Partnership by such
Contributing Partner (or deemed contributed to the Partnership upon termination
thereof pursuant to Section 708 of the Code). Once the Carrying Value of a
Contributed Property is adjusted pursuant to Section 5.05(d), such Property
shall no longer constitute a Contributed Property for purposes of Section
6.03(b), but shall be deemed an Adjusted Property for such purposes.
3
<PAGE>
CONTRIBUTING PARTNER: Each Partner contributing directly or indirectly (or
deemed to have contributed upon termination of the Partnership pursuant to
Section 708 of the Code) a Contributed Property to the Partnership in exchange
for a Partnership Interest.
DATE OF DELIVERY: The "date of delivery," as defined in the Underwriters
Purchase Agreement.
DELAWARE RULPA: The Delaware Revised Uniform Limited Partnership Act (Del.
Code Ann. tit. 6 Section 17-101 ET SEQ.), as amended to date and as it may be
amended from time to time hereafter, and any successor to such Act.
DEPARTING PARTNER: A General Partner who has withdrawn or been removed
pursuant to Section 13.01 as of the effective date of the withdrawal or removal
of such General Partner.
EFFECTIVE DATE: The date as of which the Managing General Partner and the
Limited Partner execute this Agreement.
EXCHANGE ACT: Securities Exchange Act of 1934, as amended, and the
regulations of the Commission promulgated thereunder.
FISCAL YEAR: The fiscal year of the Partnership for financial accounting
purposes, and for federal, state, and local income tax purposes, which shall be
the calendar year unless changed by the Managing General Partner in accordance
with Section 10.03.
GENERAL PARTNERS: The Managing General Partner and any Substituted General
Partners. "General Partner" means one of the General Partners.
INDEPENDENT CONSULTANT: Agribusiness Associates, Inc., or in the event
Agribusiness Associates, Inc., is unable or unwilling to advise the Managing
General Partner on a particular matter or informs the Managing General Partner
that it no longer is willing to serve as Independent Consultant, or in the event
Agribusiness Associates, Inc., is terminated as the Independent Consultant in
accordance with Section 8.10(b), any substitute consultant selected by the
Managing General Partner in accordance with Section 8.10(b).
INITIAL PUBLIC OFFERING: The initial public offering of Units, as more
fully described in the Registration Statement.
INITIAL UNIT PRICE: Twenty Dollars ($20).
INVESTORS PARTNERSHIP AGREEMENT: The second amended and restated limited
partnership agreement, dated concurrently herewith, pursuant to which the
Limited Partner was organized and is existing, as it may be further amended or
supplemented from time to time.
LIMITED PARTNER: U.S. Restaurant Properties Master L.P., a Delaware limited
partnership (formerly Burger King Investors Master L.P.), which was formed
concurrently with the Partnership.
LIQUIDATING TRUSTEE: The Managing General Partner, unless the
dissolution of the Partnership is caused by the withdrawal, bankruptcy,
removal, or dissolution of the Managing General Partner, in which event the
Liquidating Trustee shall be the Person or Persons selected pursuant to
Section 14.05.
MANAGING GENERAL PARTNER: QSV, or any successor appointed pursuant to
Sections 11.02, 13.01, or 14.03, as the case may be.
4
<PAGE>
NASDAQ: The National Association of Securities Dealers Automated Quotations
System.
NATIONAL SECURITIES EXCHANGE: An exchange registered with the Commission
under Section 6(a) of the Exchange Act.
NONRECOURSE DEDUCTIONS: The meaning ascribed to it in Treasury Regulations
Section 1.704-2(b)(1).
OPINION OF INDEPENDENT COUNSEL: A written opinion of the law firm of
Gibson, Dunn & Crutcher or other nationally recognized counsel designated by or
acceptable to the Managing General Partner, in its sole and absolute discretion.
ORIGINAL AGREEMENT: The Agreement of Limited Partnership of Burger King
Operating Limited Partnership, dated as of December 10, 1985, entered into by
and among the General Partner, BKC and the Limited Partner.
OTHER RESTAURANT PROPERTIES: Those certain restaurant properties, other
than Restricted Restaurant Properties, in which the Partnership acquires an
interest after the Effective Date, whether consisting of land to be held in fee
simple or as a leasehold and any improvements thereon (including all real
property and certain personal property associated therewith), together with (i)
any other properties acquired pursuant to Section 7.02(v) with respect to such
properties, (ii) any properties adjacent to such properties, (iii) any
buildings, improvements, or other structures situated on such properties, and
(iv) any further right, title or interest acquired in such properties. "Other
Restaurant Property" means any one of the Other Restaurant Properties.
PARTNER: A General Partner or the Limited Partner. "Partners" means the
General Partners and the Limited Partner.
PARTNER MINIMUM GAIN: The meaning ascribed to it in Treasury Regulations
Section 1.704-2(i)(2).
PARTNER NONRECOURSE DEBT: The meaning ascribed to it in Treasury
Regulations Section 1.704-2(b) (4).
PARTNER NONRECOURSE DEDUCTIONS: The meaning ascribed to it in Treasury
Regulations Section 1.704-2(i) (2).
PARTNERSHIP: The limited partnership created by this Agreement and any
successor partnership thereto continuing the business of the Partnership which
is a reformation or reconstitution of the partnership governed by this
Agreement.
PARTNERSHIP ASSETS: All assets and property, whether tangible or intangible
and whether real, personal, or mixed, at any time owned by the Partnership.
PARTNERSHIP INTEREST: As to any Partner, all of the interests of that
Partner in the Partnership, including, without limitation, such Partner's (i)
right to a distributive share of the profits and losses of the Partnership, (ii)
right to a distributive share of Partnership Assets, and
(iii) right, if a General Partner, to participate in the management of the
business and affairs of the Partnership.
PARTNERSHIP MINIMUM GAIN: The meaning ascribed to it in Treasury
Regulations Section 1.704-2(b)(2).
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PERSON: Any individual, corporation, association, partnership, joint
venture, trust, estate, or other entity or organization.
PRICE INDEX: The Consumer Price Index for Urban Wage Earners and Clerical
Workers, all items, All Urban, Base 1967 = 100, issued by the Bureau of Labor
Statistics of the U.S. Department of Labor; provided, however, that if such
Consumer Price Index shall be discontinued with no successor or comparable
consumer price index, the Managing General Partner, in its sole and absolute
discretion, shall designate a substitute formula.
PRIMARY LEASE: A lease, whether now existing or hereafter entered into,
pursuant to which the Partnership, as the lessee (either in its own name or as
an assignee of BKC pursuant to the Real Estate Purchase Agreement or otherwise),
holds the right to occupy and use a Restaurant Property or any portion thereof.
QSV: QSV Properties Inc., a Delaware corporation.
REAL ESTATE PURCHASE AGREEMENT: The amended and restated Purchase and Sale
Agreement entered into concurrently with the execution of the Amended Agreement
by and between the Partnership, as purchaser, and BKC, as seller, pursuant to
which the Partnership purchased from BKC, and BKC sold to the Partnership,
certain of the Restaurant Properties.
RECAPTURE INCOME: Any gain recognized by the Partnership (but computed
without regard to any adjustment required by Sections 734 or 743 of the Code)
upon the disposition of any property or asset of the Partnership that does not
constitute capital gain for federal income tax purposes because such gain
represents the recapture of deductions previously taken with respect to such
property or assets (determined without regard to Code Section 291(a)(1)).
RECORDING OFFICE: The Secretary of State of the State of Delaware.
REGISTRATION STATEMENT: The Registration Statement on Form S-11 filed by
the Limited Partner with the Commission under the Securities Act to register the
offering and sale of Units in the Initial Public Offering, as the same may be
amended from time to time.
RESTAURANT PROPERTIES: Restricted Restaurant Properties and Other
Restaurant Properties. "Restaurant Property" means any one of the Restaurant
Properties.
RESTRICTED RESTAURANT PROPERTIES: Those certain restaurant properties,
consisting of the land in which the Partnership holds fee simple title or a
leasehold interest and the improvements thereon (including all real property and
certain personal property associated therewith), (a) held as of the Effective
Date or (b)if (and so long as) a BK Restaurant is located thereon, acquired
after the Effective Date, together with (i) any other properties acquired
pursuant to Section 7.02(v) with respect to such properties after the Effective
Date, (ii) any properties adjacent to such properties that are acquired by the
Partnership after the Effective Date, (iii) any buildings, improvements, or
other structures situated on such properties after the Effective Date, and (iv)
any further right, title or interest acquired in such properties after the
Effective Date (including, without limitation, fee title Acquired pursuant to
Section 8.12). "Restricted Restaurant Property" means any one of the Restricted
Restaurant Properties.
SECTION 754 ELECTION: An election under Section 754 of the Code relating to
the adjustment of Adjusted Basis of Partnership Assets, as provided in Sections
734 and 743 of the Code.
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SECURITIES ACT: Securities Act of 1933, as amended, and the regulations of
the Commission promulgated thereunder.
SPECIAL ALLOCATIONS: The special allocations of items of income, gain,
deduction and loss pursuant to Sections 6.02(c) and (d).
SPECIAL GENERAL PARTNER: BKC, in such capacity prior to the Effective Date.
SUBSTITUTED GENERAL PARTNER: A Person who is admitted to the Partnership as
an additional or successor General Partner in accordance with Section 12.01.
"SUCCESSOR POLICY": The "successor policy" of BKC relating to the extension
and/or renewal of BKC Franchise Agreements with BKC Franchisees, which policy,
in connection with such extensions and/or renewals, makes provision for
replacing, reconstructing, expanding, and/or otherwise improving BK Restaurants.
All references are to the "Successor Policy" as in effect on the date hereof, as
the same may be modified, amended, supplemented, superseded, or replaced by BKC
from time to time in its sole and absolute discretion.
TERMINATION DATE: December 31, 2035.
TPC: The Pillsbury Company, a Delaware corporation and the owner on the
date of the Amended Agreement of all of the issued and outstanding stock of BKC.
TREASURY REGULATIONS: The Income Tax Regulations promulgated under the
Code, as hereafter amended. Any reference herein to a specific section or
sections of specific Treasury Regulations shall be deemed to include a reference
to any corresponding provision of future Treasury Regulations.
UNDERWRITERS: Those underwriting firms listed in the Underwriters Purchase
Agreement or in an exhibit or schedule thereto that purchased Units distributed
in the Initial Public Offering in accordance with the terms of the Underwriters
Purchase Agreement.
UNDERWRITERS PURCHASE AGREEMENT: That agreement entered into prior to the
Closing Date by and among the Partnership, the Limited Partner, BKC, and the
Underwriters with respect to tide purchase of certain Units by the Underwriters
in connection with the Initial Public Offering.
UNIT: A unit representing an equal undivided interest in an interest in the
Limited Partner.
UNIT PRICE: As of any date of determination: (i) if the Units are listed or
admitted to trading on one or more National Securities Exchanges, the average of
the last reported sale prices per Unit regular way or, in case no such reported
sale takes place on any such day, the average of the last reported bid and asked
prices per Unit regular way, in either case on the principal National Securities
Exchange on which the Units are listed or admitted to trading, for the five (5)
trading days immediately preceding the date of determination; (ii) if the Units
are not listed or admitted to trading on a National Securities Exchange but are
quoted by NASDAQ, the average of the last reported sales prices per Unit regular
way or, in case no reported sale takes place on any such day or the last
reported sales prices are not then quoted, the average of the closing bid prices
per Unit, for the five (5) trading days immediately preceding such date of
determination, as furnished by the National Quotation Bureau Incorporated or
such other nationally recognized quotation service as may be selected by the
Managing General Partner for such purpose, if such Bureau is not at the time
furnishing quotations; or (iii) if the Units are not listed or admitted to
trading on a National Securities
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Exchange or quoted by NASDAQ, an amount equal to the fair market value of a
Unit as of such date of determination, as determined by the Managing General
Partner using any reasonable method of valuation.
UNREALIZED GAIN: The excess, if any, of the fair market value of a
Partnership Asset as of the date of determination over the Carrying Value of the
Partnership Asset as of such date of determination.
UNREALIZED LOSS: The excess, if any, of the Adjusted Basis of a Partnership
Asset as of the date of determination over the fair market value of such
Partnership Asset as of the date of determination.
WORKING CAPITAL RESERVE: The reserve for working capital established by the
Managing General Partner pursuant to Section 7.05.
ARTICLE II
FORMATION; NAME; PLACE OF BUSINESS
2.01. FORMATION OF PARTNERSHIP; CERTIFICATE OF LIMITED PARTNERSHIP.
The General Partner, BKC and the Limited Partner agreed to continue
the limited partnership formed as of December 10, 1985, pursuant to the
provisions of the Delaware RULPA and the terms and conditions of the Original
Agreement and the Amended Agreement. Promptly after the execution of the
Original Agreement, the Managing General Partner, in accordance with the
Delaware RULPA, filed with the Recording Office the Certificate of Limited
Partnership. Subsequently, the Managing General Partner, in accordance with the
Delaware RULPA, filed with the Recording Office an amendment to the Certificate
of Limited Partnership regarding the withdrawal of BKC as the Special General
Partner and the change in name of the Partnership. If the laws of any
jurisdiction in which the Partnership transacts business so require, the
Managing General Partner also shall file with the appropriate office in that
jurisdiction a copy of the Certificate of Limited Partnership and any other
documents necessary for the Partnership to qualify to transact business in such
jurisdiction and shall use its best efforts to file with the appropriate office
in that jurisdiction a copy of the Certificate of Limited Partnership and any
other documents necessary to establish and maintain the Limited Partner's
limited liability in such jurisdiction. The Partners further agree and obligate
themselves to execute, acknowledge, and cause to be filed for record, in the
place or places and manner prescribed by law, any amendments to the Certificate
of Limited Partnership as may be required, either by the Delaware RULPA, by the
laws of a jurisdiction in which the Partnership transacts business, or by this
Agreement, to reflect changes in the information contained therein or otherwise
to comply with the requirements of law for the continuation, preservation, and
operation of the Partnership as a limited partnership under the Delaware RULPA.
2.02. NAME OF PARTNERSHIP.
The name under which the Partnership shall conduct its business is
U.S. Restaurant Properties Operating L.P. The business of the Partnership may be
conducted under any other name deemed necessary or desirable by the Managing
General Partner, in its sole and absolute discretion, except that such other
name may not include the surname of any Limited Partner unless such surname is
also the name or surname of the Managing General Partner. The words "Limited
Partnership" shall be included in the name of the Partnership where necessary
for complying with the laws of any jurisdiction that so requires. The Managing
General Partner (and, if necessary, all other General Partners) promptly shall
execute, file, and record
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any assumed or fictitious name certificates required by the laws of Delaware
or any other state in which the Partnership transacts business, and shall
publish such certificates or other statements or certificates as are required
by the laws of Delaware or any other state in which the Partnership transacts
business.
2.03. PLACE OF BUSINESS.
The principal place of business of the Partnership on the date hereof
is located at 5310 Harvest Hill Road, Suite 270, Dallas, Texas 75230. The
Managing General Partner may hereafter change the principal place of business of
the Partnership to such other place or places within the United States as the
Managing General Partner may determine from time to time, in its sole and
absolute discretion, provided that the Managing General Partner shall, if
necessary, amend the Certificate of Limited Partnership in accordance with
applicable requirements of the Delaware RULPA. The Managing General Partner may,
in its sole and absolute discretion, establish and maintain such other offices
and additional places of business of the Partnership, either within or without
the State of Delaware, as it deems appropriate.
2.04. REGISTERED OFFICE AND REGISTERED AGENT.
The street address of the registered office of the Partnership shall
be at 1209 Orange Street, Wilmington, Delaware 19801, and the Partnership's
registered agent at such address shall be The Corporation Trust Company.
ARTICLE III
PURPOSES, NATURE OF BUSINESS,
AND POWERS OF PARTNERSHIP
3.01. PURPOSES AND BUSINESS.
The purposes of the Partnership shall be (a) to invest in, acquire, own,
hold a leasehold interest m, manage, maintain, operate, lease, sublease,
improve, finance, reconstruct, sell, exchange, franchise and otherwise dispose
of Restaurant Properties and Ancillary Property, whether itself, through other
Persons or otherwise; and (b) to enter into any lawful transaction and engage in
any lawful activities in furtherance of the foregoing purposes. The Partnership
shall not engage in any business or activity except as set forth above without
the written consent of the Partners.
3.02. POWERS.
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to, or convenient for the
furtherance and accomplishment of the purposes and business described herein and
for the protection and benefit of the Partnership, including, without
limitation, the following:
(a) To borrow money and issue evidences of indebtedness, and to
secure the same by mortgages, deeds.of trust, security interests, pledges,
or other liens on all or any part of the Partnership Assets;
(b) To secure and maintain insurance against liability or other loss
with respects to the activities and assets of the Partnership (including,
without limitation, insurance against liabilities under Section 7.10);
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(c) To employ or retain such persons as may be necessary or
appropriate for the conduct of the Partnership's business, including
permanent, temporary, or part-time employees and independent attorneys,
accountants, consultants, and contractors;
(d) To acquire, own, hold a leasehold interest in, maintain, use,
lease, sublease, manage, operate, sell, exchange, transfer, or otherwise
deal in assets and property as may be necessary or convenient for the
purposes and business of the Partnership;
(e) To incur expenses and to enter into, guarantee, perform, and
carry out contracts or commitments of any kind, to assume obligations, and
to execute, deliver, acknowledge, and file documents in furtherance of the
purposes and business of the Partnership;
(f) To pay, collect, compromise, arbitrate, litigate, or otherwise
adjust, contest, or settle any and all claims or demands of or against the
Partnership;
(g) To invest in interest-bearing accounts and short-term
investments, including, without limitation, obligations of Federal, state,
and local governments and their agencies, mutual funds (including money
market funds), commercial paper, time deposits, and certificates of deposit
of commercial banks, savings banks, or savings and loan associations; and
(h) To engage in any kind of activity and to enter into and perform
obligations of any kind necessary to or in connection with, or incidental
to, the accomplishment of the purposes and business of the Partnership, so
long as said activities and obligations may be lawfully engaged in or
performed by a limited partnership under the Delaware RULPA.
ARTICLE IV
TERM OF PARTNERSHIP
4.01. TERM.
The Partnership commenced on the date upon which the Certificate of
Limited Partnership was duly filed with the Recording Office pursuant to Section
2.01 and shall continue until the Termination Date unless dissolved and
liquidated before the Termination Date in accordance with the provisions of
Article XIV.
ARTICLE V
CAPITAL
5.01. CAPITAL CONTRIBUTIONS OF MANAGING GENERAL PARTNER.
(a) INITIAL CONTRIBUTION. Concurrently with the execution of the
Original Agreement, the Managing General Partner made a Capital Contribution in
the amount of One Thousand Dollars ($1,000) in cash.
(b) ADDITIONAL CONTRIBUTION. Concurrently with the Closing (and, in
the case of the over-allotment option described in Section 5.03(b), concurrently
with the Date of Delivery), the Managing General Partner contributed to the
Partnership an amount equal to the excess of (i) one percent (1%) of the Capital
Contribution of the Limited Partner pursuant to Section
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5.03(b) (including any proceeds received in connection with the
over-allotment option), over (ii) One Thousand Dollars ($1,000).
5.02. CAPITAL CONTRIBUTIONS OF SPECIAL GENERAL PARTNER.
(a) INITIAL CONTRIBUTION. Concurrently with the execution of the
Original Agreement, BKC, as Special General Partner, made a Capital Contribution
in the amount of One Thousand Dollars ($1,000) in cash.
(b) ADDITIONAL CONTRIBUTION. Concurrently with the Closing (and, in
the case of the over-allotment option described in Section 5.03(b), concurrently
with the Date of Delivery), BKC, as Special General Partner, contributed to the
Partnership an amount equal to the excess of (i) one one-hundredth of one
percent (0.01 %) of the Capital Contribution of the Limited Partner pursuant to
Section 5.03(b) (including any proceeds received in connection with the over-
allotment option), over (ii) One Thousand Dollars ($1,000).
(c) WITHDRAWAL. Effective as of November 30, 1994, BKC withdrew as a
General Partner pursuant to Section 13.01. The Partnership paid BKC not more
than $8,000 for BKC's right to receive the fair market value of its former
Partnership Interest in Units as contemplated under Section 13.03.
5.03. CAPITAL CONTRIBUTIONS OF LIMITED PARTNER.
(a) INITIAL CONTRIBUTION. Concurrently with the execution of the
Original Agreement, the Limited Partner made a Capital Contribution in the
amount of One Hundred Dollars ($100) in cash.
(b) ADDITIONAL CONTRIBUTION. Pursuant to the Underwriters Purchase
Agreement, the Underwriters purchased Units from the Limited Partner in
connection with the Initial Public Offering, as more fully described in the
Registration Statement. Concurrently with the Closing, each Underwriter
contributed to the Limited Partner, in exchange for that number of Units
designated in the Underwriters Purchase Agreement to be purchased by each
such Underwriter, cash in an amount equal to the product of the Initial Unit
Price multiplied by the number of Units designated in the Underwriters
Purchase Agreement to be purchased by each such Underwriter. In addition, on
the Date of Delivery, in the case of the Underwriters exercise of the option
granted to them in the Underwriters Purchase Agreement to acquire certain
additional Units, in addition to the Units to be purchased at the Closing, to
cover over-allotments, each Underwriter who exercised such option contributed
to the Limited Partner, in exchange for that number of Units designated by
the Underwriters Purchase Agreement to be purchased by such Underwriter
pursuant to the exercise of such option, cash in an amount equal to the
product of the Initial Unit Price multiplied by the number of Units purchased
by each such Underwriter pursuant to the exercise of such option. The
Limited Partner also received contributions from its general partners in an
amount equal to one and two one-hundredths of one percent (1.02%) of the
Aggregate Offering Proceeds (including any proceeds received in connection
with the over-allotment option) concurrently with the Closing and the Date of
Delivery, as the case may be. Concurrently with the Closing (and in the case
of the over-allotment option described above, concurrently with the Date of
Delivery), the Limited Partner contributed to the Partnership the excess of
(i) the sum of the amount of the Aggregate Offering Proceeds and the capital
contributions received by the Limited Partner from its general partners, over
(ii) One Hundred Dollars ($100).
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5.04. ADDITIONAL ISSUANCES OF PARTNERSHIP INTERESTS AND CAPITAL
CONTRIBUTIONS.
(a) No Partnership Interests except those Interests issued by the
Partnership pursuant to Sections 5.01, 5.02 and 5.03 shall be offered for
sale or issued by the Partnership.
(b) No Partner shall be required to make any Capital Contribution
except as specifically set forth in Sections 5.01, 5.02, 5.03, or 5.06(b).
5.05. CAPITAL ACCOUNTS.
(a) A separate Capital Account shall be established and maintained
for each Partner. The Capital Account of each Partner shall be (i) credited
with (A) the cash and the initial Carrying Value of any property (net of
liabilities secured by such Contributed Property that the Partnership is
considered to assume or take subject to under Section 752 of the Code)
contributed to the Partnership by such Partner, and (B)all items of
Partnership income or gain (including income or gain exempt from tax)
computed in accordance with Section 5.05(b) and allocated to such Partner
pursuant to Article VI, and shall be (ii) debited with (A) all items of
Partnership deduction and loss computed in accordance with Section 5.05(b)
and allocated to such Partner pursuant to Article VI, and (B)all cash and the
fair market value of any property (net of liabilities secured by such
distributed property that such Partner is considered to assume or take
subject to under Code Section 752) distributed by the Partnership to such
Partner pursuant to Article VI. Notwithstanding anything to the contrary
contained herein, the Capital Account of a Partner shall be determined in all
events solely in accordance with the rules set forth in Treasury Regulations
Section 1.704-1(b)(2)(iv), as the same may be amended or revised from time to
time. Any references in this Agreement to the Capital Account of a Partner
shall be deemed to refer to such Capital Account as the same may be credited
or debited from time to time as set forth above.
(b) For purposes of computing the amount of any item of income,
gain, deduction, or loss to be reflected in Capital Accounts, the
determination, recognition, and classification of each such item shall be the
same as its determination, recognition, and classification for federal income
tax purposes (including any method of depreciation, cost recovery or
amortization used for this purpose), provided that:
(i) In accordance with the requirements of Treasury Regulations
Section 1.704-1(b)(2)(iv)(g), any deductions for depreciation, cost
recovery, or amortization, attributable to a Partnership Asset contributed
to the Partnership shall be determined as if the Adjusted Basis of such
Partnership Asset on the date it was acquired by the Partnership were equal
to the Carrying Value of such Partnership Asset as of such date. Upon an
adjustment pursuant to Section 5.05(d) to the Carrying Value of any
Partnership property subject to depreciation, cost recovery or
amortization, any further deductions for such depreciation, cost recovery
or amortization attributable to such property shall be determined (A) as if
the Adjusted Basis of such property were equal to the Carrying Value of
such property immediately following such adjustment and (B)using a
predetermined rate of depreciation, cost recovery or amortization derived
from the same method for useful life as is applied for federal income tax
purposes. As a result, the amount of depreciation, cost recovery or
amortization deductions computed for purposes of this Section 5.05(b) with
respect to any Adjusted Property shall bear the same relationship to the
Carrying Value of such property as the depreciation, cost recovery or
amortization computed for federal income tax purposes with respect to such
property bears to the Adjusted Basis of such property. Solely for the
purposes of this Section 5.05(b), depreciation, cost recovery or
amortization deductions with respect to property with an Adjusted Basis of
zero shall be at the rate which would apply for tax purposes if (I) in the
case of Contributed Property, such
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property were placed in service on the date contributed, and (II)
in the case of Adjusted Property, such property were placed in
service on the date of adjustment required pursuant to Section
5.05(d)(i) or 5.05(d)(ii), provided that if such Adjusted Property
was Contributed Property, which was contributed with the tax basis
of zero and such property is not fully depreciated for Capital
Account purposes at the day of the adjustment, all deductions for
depreciation, cost recovery or amortization of such property shall
be derived from the method and useful life theretofore determined
pursuant to clause (I) above;
(ii) Any income, gain; or loss attributable to the taxable disposition
of any Partnership Asset shall be determined by the Partnership as if the
Adjusted Basis of such Partnership Asset as of such date of disposition
were equal in amount to the Partnership's Carrying value with respect to
such Partnership Asset as of such date;
(iii) If the Partnership's Adjusted Basis in any depreciable property
is reduced pursuant to Section 48(q) of the Code, then the amount of such
reduction shall be treated as an expense for the year in which such
reduction occurs and allocated to the Partners in the ratio in which
depreciation with respect to such property is allocable. Any restoration of
any such reduction in Adjusted Basis shall be allocated to the Partners to
whom the expense was chargeable;
(iv) Immediately prior to the distribution of any Partnership Asset,
any Unrealized Gain or Unrealized Loss attributable to such Partnership
Asset shall, for purposes hereof, be deemed to be gain or loss recognized
by the Partnership and shall be allocated among the Partners in accordance
with Article VI. In determining such Unrealized Gain or Unrealized Loss,
the fair market value of such Partnership Asset shall be determined
pursuant to Section 8.08;
(v) All fees and other expenses incurred (or treated as incurred) by
the Partnership to promote the sale of (or to sell) interests in the
Partnership that can neither be deducted nor amortized under Section 709 of
the Code shall, for purposes of Capital Account maintenance, be treated as
an item of deduction and shall be allocated among the Partners pursuant to
Article VI; and
(vi) Except as otherwise provided in Treasury Regulations 1.707-
1(b)(2)(iv)(m), the computation of all items of income, gain, loss, and
deduction shall be made without regard to any Section 754 Election that may
be made by the Partnership, and as to those items described in Section
705(a)(l)(A) or 705(a)(2)(B) of the Code, without regard to the fact that
such items are not included in gross income or are neither currently
deductible nor capitalized for federal income tax purposes.
(c) Generally, a transferee of a Partnership Interest will succeed to
the Capital Account relating to the Partnership Interest transferred.
However, if the transfer causes a termination of the Partnership under
Section 708(b)(1)(B) of the Code, the Partnership properties shall be deemed
to have been distributed in liquidation of the Partnership to the Partners
and deemed recontributed by such Partners in reconstitution of the
Partnership. In such event, the Carrying Values of the Partnership properties
shall be adjusted immediately prior to such deemed distribution pursuant to
Section 5.05 (d) (ii). The Capital Accounts of such reconstituted Partnership
shall be maintained in accordance with the principles of this Section 5.05.
(d) (i) Consistent with the provisions of Treasury Regulation Section
1.704-1(b)(2)(iv)(f), upon an issuance of additional Partnership Interests
for cash or Contributed Property, the Capital Accounts of all Partners shall,
immediately prior to such issuance, be
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adjusted (consistent with the provisions hereof) upwards or downwards to
reflect any Unrealized Gain or Unrealized Loss attributable to each
Partnership property (as if such Unrealized Gain or Unrealized Loss had been
recognized upon an actual sale of each such property, immediately prior to
such issuance, and had been allocated to the Partners, at such time, pursuant
to Section 6.02). In determining such Unrealized Gain or Unrealized Loss, the
aggregate fair market value of Partnership properties as of any date of
determination shall be determined in the discretion of the Managing General
Partner. The Carrying Values of all Partnership properties shall be adjusted
to reflect their relative fair market values, as determined hereunder by the
Managing General Partner in its sole and absolute discretion. Once the
aggregate fair market value has been determined, the Managing General Partner
shall allocate such aggregate value among the properties of the Partnership,
in a manner it deems reasonable, to determine a fair market value for
individual properties.
(ii) In accordance with Treasury Regulation Section
1.704-i(b)(2)(iv)(f), immediately prior to the actual or deemed distribution
of any Partnership property, the Capital Accounts of all Partners shall,
immediately prior to any such distribution, be adjusted (consistent with the
provisions hereof) upwards or downwards to reflect any Unrealized Gain or
Unrealized Loss attributable to each Partnership property, as if such
Unrealized Gain or Unrealized Loss had been recognized upon an actual sale of
each property, immediately prior to such distribution, and had been allocated
to the Partners, at such time, pursuant to Section 6.02. In determining such
Unrealized Gain or Unrealized Loss, the aggregate fair market value of
Partnership properties as of any date of determination shall be determined in
the discretion of the Managing General Partner. The Managing General Partner
shall allocate such aggregate market value among the properties of the
Partnership, in a manner it deems reasonable, to determine a fair market
value for individual properties.
5.06. NEGATIVE CAPITAL ACCOUNTS.
(a) Except to the extent provided in Section 5.06(b), and except to the
extent that the Partners are required to make Capital Contributions under
Sections 5.01, 5.02, and 5.03, no Partner shall be required to pay to the
Partnership or any other Partner any deficit balance which may exist from
time to time in such Partner's Capital Account.
(b) Notwithstanding the foregoing, if any General Partner has a deficit
balance in its Capital Account following the liquidation of its Partnership
Interest, as determined after taking into account all Capital Account
adjustments for the Partnership Fiscal Year during which such liquidation
occurs, it is unconditionally obligated to restore the amount of such deficit
or negative balance to the Partnership by the end of such Fiscal Year (or, if
later, within 90 days after the date of such liquidation), which such amount
shall, upon liquidation of the Partnership, be paid to creditors of the
Partnership or distributed to other Partners in accordance with their
positive Capital Account balances.
5.07. NO INTEREST ON AMOUNTS IN CAPITAL ACCOUNT.
No Partner shall be entitled to receive any interest on its outstanding
Capital Account balance.
5.08. ADVANCES TO PARTNERSHIP.
If any Partner shall advance funds to the Partnership in excess of the
amounts required hereunder to be contributed by it to the capital of the
Partnership, the making of such advances shall not result in any increase in
the amount of the Capital Account of such Partner or entitle such Partner to
any increase in its Percentage Interest (as defined in Article VI). The
amounts of any such advances shall be a debt of the Partnership to such
Partner and shall be payable or
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collectible only out of the Partnership Assets in accordance with the terms
and conditions upon which such advances are made.
5.09. LIABILITY OF LIMITED PARTNER.
Except as provided in the Delaware RULPA and Section 7. 10(e): (a) the
Limited Partner shall not be personally liable for any debts, liabilities,
contracts, or obligations of the Partnership; (b) the Limited Partner shall
be liable only to make payments of such Limited Partner's Capital
Contribution pursuant to Section 5.03; and (c) after the Limited Partner's
Capital Contribution shall be fully paid, the Limited Partner shall not be
required to make any further Capital Contributions or to lend any funds to
the Partnership.
5.10. RETURN OF CAPITAL.
Except upon the dissolution of the Partnership or as otherwise
specifically provided in this Agreement, no Partner shall have the right to
demand or to receive the return of all or any part of the Capital Account or
Capital Contributions of such Partner.
ARTICLE VI
ALLOCATION OF PROFITS AND LOSSES;
DISTRIBUTIONS OF CASH FLOW AND CERTAIN PROCEEDS
6.01. CERTAIN DEFINITIONS.
(a) "CASH FLOW" shall mean and refer to the sum of the following:
(i) the taxable income (or loss) of the Partnership for federal
income tax purposes as shown on the books of the Partnership for the period
for which such determination is being made, excluding taxable income or
gain or loss for Capital Transactions (as defined in Section 6.01(b));
increased by (A) the amount of cost recovery or depreciation deductions or
amortization or similar deductions in lieu thereof deductible by the
Partnership in computing such taxable income and any other non-cash
accruals deductible in determining federal taxable income or loss for such
period, and (B) any non-taxable income or receipts of the Partnership for
such period (including, without limitation, any amounts received during
such period that were included in taxable income in a prior period) except
(1) Capital Contributions to the Partnership pursuant to Article V and (2)
the proceeds of any loans to the Partnership, and reduced by (AA) payments
from the sum of the foregoing upon the principal of any loans to the
Partnership, (BB) expenditures from the sum of the foregoing for the
acquisition, improvement, or replacement of property (including, without
limitation, expenditures in connection with BKC's "Successor Policy"
pursuant to Section 8.06,), the financing of tenants or other reinvestment
or use in the business of the Partnership (all as determined by the
Managing General Partner in its sole and absolute discretion) not financed
through Capital Contributions to the Partnership, loans to the Partnership,
or any reserves previously set aside by the Partnership for such purposes,
and for the payment of items attributable to the acquisition, improvement,
or replacement of property which are not deductible in determining federal
taxable income when paid, (CC) any amounts including gross income for such
period that were not received by the Partnership during such period, and
(DD) transfers from the sum of the foregoing to reserves for the
acquisition, improvement, or replacement of property, for the repayment of
loans and other indebtedness, for security deposits or other necessary
escrows or deposits, to meet anticipated expenses, and/or for other
reinvestment or use as the Managing General Partner shall deem to be
necessary or advisable in its sole and
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absolute discretion (including, without limitation, the Working
Capital Reserve established pursuant to Section 7.05 and any
reserves established by the Managing General Partner either to
implement BKC's "Successor Policy" pursuant to Section 8.06, to
acquire title to any Restaurant Property subject to a Primary
Lease pursuant to section 8. 12, or to set aside cash for the
purpose of making future distributions of Cash Flow to the
Partners consistent with a policy of avoiding fluctuations in the
amount of quarterly distributions of Cash Flow to the extent
practicable); plus
(ii) any other funds (including amounts previously set aside as
reserves by the Managing General Partner if and to the extent the Managing
General Partner no longer regards such reserves as reasonably necessary in
the efficient conduct of the business of the Partnership) deemed available
for distribution and designated as Cash Flow by the Managing General
Partner.
The Managing General Partner shall determine, in its sole and absolute
discretion, whether funds are derived from or financed through a particular
source or used for a particular purpose for purposes of determining
Partnership Cash Flow for any period. In determining the Cash Flow for any
quarterly period within a Fiscal Year, the Managing General Partner shall
have the authority to apportion expenses and revenues of the Partnership
among quarterly periods within the Fiscal Year in any reasonable manner
consistent with the principles applied m determination of the Partnership's
taxable income or loss, as the case may be, for such Fiscal Year.
(b) "CAPITAL TRANSACTION" means an "Interim Capital Transaction" or a
"Terminating Capital Transaction," as the case may be. An "Interim Capital
Transaction" shall refer to (i) a transaction pursuant to which the
Partnership borrows funds, (ii) a sale, condemnation, exchange, abandonment,
casualty not followed by reconstruction, or other disposition, whether by
foreclosure or otherwise, of a portion (but less than substantially all) of
the Partnership Assets, or (iii) an insurance recovery or any other
transaction which, in accordance with generally accepted accounting
principles, is considered capital in nature, but which is not a Terminating
Capital Transaction. Notwithstanding the foregoing, no transaction shall be
considered to be an Interim Capital Transaction for purposes of this
Agreement if the "net proceeds" thereof ("net proceeds" shall mean the
proceeds received by the Partnership after the payment of all costs and
expenses of any kind or nature incurred by the Partnership in connection with
such transaction) are not material in amount and, in such instance, any
proceeds attributable to such transaction shall be included in computing Cash
Flow. A "Terminating Capital Transaction" shall refer to any sale,
condemnation, exchange, abandonment, or other disposition, whether by
foreclosure or otherwise, of all or substantially all of the then remaining
Partnership Assets and/or any other transaction which will result in a
dissolution and liquidation of the Partnership. Any sale or other disposition
of any Partnership Assets in connection with the dissolution and liquidation
of the Partnership pursuant to Article XIV shall be considered a "Terminating
Capital Transaction" for purposes of this Article VI.
(c) "NET PROCEEDS OF A CAPITAL TRANSACTION" means the proceeds
received by the Partnership in connection with a Capital Transaction, after
(i) the payment of all costs and expenses of any kind or nature incurred by
the Partnership in connection with such Capital Transaction, (ii) the
utilization of any such proceeds in connection with the discharge of debts
and other obligations of the Partnership required or intended (as determined
by the Managing General Partner, in its sole and absolute discretion) to be
discharged with the proceeds of such Capital Transaction, (iii) the retention
of such proceeds or a portion thereof in connection with creation of or
addition to the Working Capital Reserve established pursuant to Section 7.05
or the acquisition, improvement or replacement of property, the financing of
tenants or reinvestment or other use in the business of the Partnership (all
as determined by the Managing
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General Partner, in its sole and absolute discretion), (iv) the retention of
such proceeds or a portion thereof in connection with the creation of or
addition to any reserves established by the Managing General Partner to
provide for any amounts required to be paid by the Partnership either
pursuant to Section 8.06 in connection with the "Successor Policy," pursuant
to Section 8. 12 in connection with the purchase of title to any Restricted
Restaurant Property subject to a Primary Lease or for other reinvestment or
use, all as the Managing General Partner shall deem necessary or advisable in
its sole and absolute discretion. In the event the proceeds of any Interim
Capital Transactions are to be paid in more than one installment, then each
such installment shall be treated as a separate Interim Capital Transaction
for purposes of this Article VI.
(e) "PERCENTAGE INTERESTS" of the Managing General Partner and the
Limited Partner are as follows:
Managing General Partner - 0.99 percent (0.99%)
Limited Partner - 99.01 percent (99.01%)
6.02. ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES.
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the following allocations shall be
made:
(a) Each item of income, gain, loss and deduction of the Partnership
for any taxable period during the term of this Agreement shall be allocated
among the Partners, pro rata, in accordance with their respective Percentage
Interests.
(b) Notwithstanding the provisions of Section 6.02(a), in the event
that any fees, interest, or other amounts paid to any of the General Partners
pursuant to this Agreement, or any agreement between the Partnership and any
General Partner providing for the payment of such amount, and deducted by the
Partnership in reliance on Sections 701(a) and/or 707(c) of the Code, are
disallowed as deductions to the Partnership on its federal income tax return
and are treated as Partnership distributions, then there shall be allocated
to the General Partner to which such fees, interest, or other amounts were
paid, prior to the allocations pursuant to Section 6.02(a) hereof, an amount
of Partnership income for the year in which such fees, interest, or other
amounts were paid, equal to the amount of such fees, interest, or other
amounts that are treated as Partnership distributions.
(c) SPECIAL ALLOCATIONS. Except as otherwise provided in this
Agreement, the following special allocations will be made in the following
order and priority:
(i) Notwithstanding any other provision of this Section 6.02, if
there is a net decrease in Partner Minimum Gain during any taxable year or
other period for which allocations are made, each Partner will be specially
allocated items of Partnership income and gain for that period (and, if
necessary, subsequent periods) in accordance with the requirements of
Treasury Regulations Section 1.704-2(i)(4). This Section 6.02(c)(i) is
intended to comply with the minimum gain charge-back requirements of
Treasury Regulations Section 1.704-2(i) (4).
(ii) Notwithstanding any other provision of this Section 6.02, if
there is a net decrease in Partnership Minimum Gain during any taxable year
or other period for which allocations are made, each Partner will be
specially allocated items of Partnership income and gain for that period
(and, if necessary, subsequent periods) in accordance with the requirements
of Treasury Regulations Section 1.704-2(f). This
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Section 6.02(c) (ii) is intended to comply with the minimum gain charge-
back requirements of Treasury Regulations Section 1.704-2(f).
(iii) Nonrecourse Deductions for any taxable year or other period for
which allocations are made will be allocated among the Partners in
proportion to their respective Percentage Interests.
(iv) Any Partner Nonrecourse Deductions for any taxable year or other
period for which allocations are made will be allocated to the Partner who
bears the economic risk of loss with respect to the Partner Nonrecourse
Debt to which such Partner Nonrecourse Deductions are attributable in
accordance with Treasury Regulations Section 1.704-2(i)(1).
(v) To the extent an adjustment to the adjusted tax basis of any
Partnership asset under Code Sections 734(b) or 743(b) is required to be
taken into account in determining Capital Accounts under Treasury
Regulations Section 1.704-1(b)(2)(iv)(m), the amount of the adjustment to
the Capital Accounts will be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases the
basis), and the gain or loss will be specially allocated to the Partners
in a manner consistent with the manner in which their Capital Accounts
are required to be adjusted under Treasury Regulations
Section 1.704-1(b)(2)(iv)(m).
(vi) Notwithstanding any other provision of this Agreement, no
allocation of any item of income, gain, loss or deduction will be made to a
Partner if the allocation would not have "economic effect" under Treasury
Regulations Section 1.704-1(b)(2)(ii) or otherwise would not be in
accordance with the Partner's interest in the Partnership within the
meaning of Treasury Regulations Section 1.704-1(b)(3). The General Partner
will have the authority to reallocate any item in accordance with this
Section 6.02(c) (vi).
(d) CURATIVE ALLOCATIONS. The allocations set forth in Section 6.02(c)
(the "Regulatory Allocations") are intended to comply with certain
requirements of Treasury Regulations Section 1.704-2. The Regulatory
Allocations may not be consistent with the manner in which the Partners
intend to divide Partnership distributions. Accordingly, the Managing
General Partner is authorized to divide other allocations of items of income,
gain, deduction and loss among the Partners so as to prevent the Regulatory
Allocations from distorting the manner in which Partnership distributions
would be divided among the Partners but for application of the Regulatory
Allocations. In general, the reallocation will be accomplished by specially
allocating other items of income, gain, deduction and loss, to the extent
they exist, among the Partners so that the net amount of the Regulatory
Allocations and the special allocations to each Partner is zero. However, the
Managing General Partner will have discretion to accomplish this result in
any reasonable manner that is consistent with Code Section 704 and the
related Treasury Regulations.
(e) MINIMUM ALLOCATIONS TO MANAGING GENERAL PARTNER. Notwithstanding
anything in this Agreement (other than allocations contained in Section
6.02(d) required by Sections 704(b) and 704(c) of the Code) to the contrary,
the interest of the Managing General Partner in each material item of
Partnership income ,gain, deduction and loss shall equal at least .99% of
each such item at all times during the existence of the Partnership.
6.03. ALLOCATIONS FOR TAX PURPOSES.
(a) Except as otherwise provided in this Section 6.03, for federal
income tax purposes, each item of income, gain, loss and deduction shall be
allocated among the Partners
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in the same manner as its correlative item of "book" income, gain, loss or
deduction has been allocated pursuant to Section 6.02.
(b) In an attempt to eliminate any disparities between the Carrying
Value and the Adjusted Basis of Contributed Property or Adjusted Property,
items of income, gain, loss, depreciation and cost recovery deductions shall
be allocated for federal income tax purposes among the Partners as follows:
(i) In the case of a Contributed Property, such items attributable
thereto shall be allocated among the Partners in the manner provided under
Section 704(c)(1) of the Code that takes into account the variation between
the Carrying Value of such property and its Adjusted Basis at the time of
contribution.
(ii) In the case of an Adjusted Property, such items attributable
thereto shall (A) first, be allocated among the Partners in a manner
consistent with the principles of Section 704(c)(1) of the Code to take
into account the Unrealized Gain or Unrealized Loss attributable to such
property and the allocations thereof pursuant to Section 5.05(d), and (B)
second, in the event such property was originally a Contributed Property,
be allocated among the Partners in a manner consistent with Section
6.03(b)(i).
(iii) Except as otherwise provided in Section 6.03(b) (iv), in the
case of all other properties, items of income, gain, loss and deduction
attributable to such property shall be allocated among the Partners in
accordance with Section 6.03(a).
(iv) Any items of income, gain, loss or deduction otherwise allocable
under Sections 6.03(a) or 6.03(b)(iii) shall be subject to allocation by
the Managing General Partner in any reasonable manner designed to
eliminate, to the maximum extent possible, any disparities between the
Carrying Value and the Adjusted Basis in a Contributed Property or an
Adjusted Property otherwise resulting from the application of the ceiling
limitation (under Section 704(c)(1) of the Code or Section 704(c)(1)
principles) to the allocations provided under Sections 6.03(b)(i) or
6.03(b)(ii).
(c) To the extent of any Recapture Income resulting from the sale or
other taxable disposition of Partnership Assets, the amount of any gain from
such disposition allocated to (or recognized by) a Partner for federal income
tax purposes pursuant to the above provisions shall be deemed to be Recapture
Income to the extent such Partner (or its predecessors in interest) has been
allocated or has claimed any deduction directly or indirectly giving rise to
the treatment of such gain as Recapture Income.
(d) All items of income, gain, loss and deduction recognized by the
Partnership for federal income tax purposes and allocated to the Partners in
accordance with the provisions hereof and all basis allocations shall be
determined without regard to any election under Section 754 of the Code which
may be made by the Partnership.
6.04. ALLOCATION OF INCOME AND LOSS WITH RESPECT TO INTEREST TRANSFERRED.
If any Partnership Interest is transferred during any taxable period,
the share of Partnership items of income, gain, deduction or loss
attributable to such interest for such taxable period shall be divided and
allocated proportionately between the transferor and the transferee based
upon the number of days during such taxable period for which each party was
the holder of the Partnership Interest transferred.
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6.05. DISTRIBUTIONS OF CASH NOW.
(a) ALLOCATION AND DISTRIBUTION. Cash Flow of the Partnership shall be
determined for each calendar quarter of each Fiscal Year. Cash Flow as so
determined shall be distributed in cash to the Partners, pro rata, in
accordance with their respective Percentage Interests.
(b) TIMING OF DISTRIBUTIONS. Cash Flow shall be distributed quarterly,
within seventy-five (75) days after the end of each calendar quarter of a
Fiscal Year, commencing with the calendar quarter ended March 31, 1986. The
Partners agree that, within thirty (30) days after determination by the
Partnership that an overpayment was made to any Partner for any Fiscal Year
pursuant to this Section 6.05, such Partner shall repay, allow as a credit
against future distributions, or make such other adjustments as may be
appropriate to remedy such overpayment. Likewise, appropriate adjustment
shall be made to remedy any underpayment.
6.06. DISTRIBUTION OF PROCEEDS FROM INTERIM CAPITAL TRANSACTIONS.
The Net Proceeds of an Interim Capital Transaction shall be distributed
to the Partners, pro rata, in accordance with their respective Percentage
Interests. Distributions pursuant to this Section 6.06 shall be made within
seventy-five (75) days of the receipt of proceeds with respect to an Interim
Capital Transaction.
6.07. DISTRIBUTION OF PROCEEDS FROM TERMINATING CAPITAL TRANSACTIONS;
LIQUIDATION DISTRIBUTIONS.
(a) The Net Proceeds of a Terminating Capital Transaction and any other
remaining assets of the Partnership to be distributed to the Partners in
connection with liquidation and dissolution of the Partnership pursuant to
Article XIV, after the payment of all debts, liabilities, and obligations of
the Partnership in the manner provided in Section 14.05 hereof (including,
without limitation, all amounts owing to the General Partners under this
Agreement (other than this Article VI) or under any agreement between the
Partnership and the General Partners entered into by the General Partners
other than in their capacity as Partners in the Partnership), including,
without limitation, the payment of expenses of liquidation of the
Partnership, and the establishment of a reasonable reserve (including an
amount estimated by the Managing General Partner to be sufficient to pay any
amount reasonably anticipated to be required to be paid pursuant to Section
7. 10 hereof), shall be distributed to the Partners, pro rata, in proportion
to the positive balances, if any, in their respective Capital Accounts.
(b) Notwithstanding any provision in this Section 6.07 to the contrary,
in the event that the Net Proceeds of the Terminating Capital Transaction are
to be paid to the Partnership in more than one installment, each such
installment (including any interest thereon) shall be allocated among the
Partners in accordance with their respective "Installment Percentages." The
"Installment Percentage" of each Partner shall be equal to (i) the aggregate
amount of cash that would have been distributed to that Partner under
Sections 6.07(a) and (b) had the Net Proceeds of the Terminating Capital
Transaction been paid in one lump sum, divided by (ii) the total Net Proceeds
that would have been distributed to all of the Partners under those Sections.
6.08. TAXES WITHHELD.
For purposes of this Agreement, any amount of taxes required to be
withheld by the Partnership with respect to any amount distributable by the
Partnership to any Partner shall be deemed to be a distribution or payment to
such Partner and shall reduce the amount otherwise distributable to such
Partner pursuant to this Agreement.
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ARTICLE VII
MANAGEMENT
7.01. MANAGEMENT AND CONTROL OF PARTNERSHIP.
Except as otherwise expressly provided or limited by the provisions of
this Agreement (including, without limitation, the provisions of Article
VIII), the Managing General Partner shall have full, exclusive, and complete
discretion to manage and control the business and affairs of the Partnership,
to make all decisions affecting the business and affairs of the Partnership,
and to take all such actions as it deems necessary or appropriate to
accomplish the purposes of the Partnership as set forth herein. The Managing
General Partner shall use reasonable efforts to carry out the purposes of the
Partnership and shall devote to the management of the business and affairs of
the Partnership such time as the Managing General Partner, in its reasonable
discretion, shall deem to be reasonably required for the operation thereof.
The Limited Partner shall have no authority, right, or power to bind the
Partnership, or to manage or control, or to participate in the management or
control of, the business and affairs of the Partnership.in any manner
whatsoever.
7.02. POWERS OF MANAGING GENERAL PARTNER.
Subject to the limitation of Section 7.03, which vests certain approval
rights in the Limited Partner, and to the limitations and restrictions set
forth in Article VIII, the Managing General Partner (acting on behalf of the
Partnership) shall have the right, power, and authority, in the management of
the business and affairs of the Partnership, to do or cause to be done any
and all acts, at the expense of the Partnership deemed by the Managing
General Partner to be necessary or appropriate to effectuate the business,
purposes, and objectives of the Partnership. The power and authority of the
Managing General Partner pursuant to this Agreement shall be liberally
construed to encompass all acts and activities in which a partnership may
engage under the Delaware RULPA. The power and authority of the Managing
General Partner shall include, without limitation, the power and authority on
behalf of the Partnership:
(a) Upon consummation of the Closing, to cause the Partnership to
acquire certain Restaurant Properties from BKC pursuant to the Real Estate
Purchase Agreement, to cause the Partnership to pay to BKC the purchase
price for such Restaurant Properties specified in the Real Estate Purchase
Agreement, and to take all other actions and make all other decisions in
connection with the acquisition of any Restaurant Properties by the
Partnership from BKC as the Managing General Partner, in its sole and
absolute discretion, shall deem necessary or appropriate;
(b) To acquire, own, lease, sublease, manage, hold, deal in, control,
or dispose of any interests or rights in personal property or real
property, including interests in any Restaurant Property, whether realty or
personalty, including, without limitation, the powers to sell, exchange,
lease, sublease, mortgage, pledge, convey in trust, enter into joint
ventures or partnerships respecting or otherwise hypothecate or dispose of
all or any portion of any Restaurant Property or any other Partnership
Asset or any interest therein; provided, however, that the use of any
Restricted Restaurant Property and any sale or other disposition of any
Restricted Restaurant Property shall be subject to the restrictions and
limitations set forth in Sections 8.03 and 8.04;
(c) Subject to the restrictions and limitations set forth in Section
8.03 but without limiting the generality of Section 7.02(b), to negotiate,
enter into, renegotiate, extend, renew, terminate, modify, amend, waive,
execute, acknowledge, or take any
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other action on behalf of the Partnership with respect to any Primary Lease
(including, without limitation, to exercise any right of the Partnership
under any Primary Lease to acquire title to a Restaurant Property pursuant
to a right of first refusal) or any lease or sublease of a Restaurant
Property whether to a BKC Franchisee or otherwise, or any provision
thereof;
(d) Subject to the restrictions and limitations set forth in Sections
8.03 and 8.04 hereof, to create, by grant or otherwise, easements,
servitudes, rights-of-way, and other rights in and to any Restaurant
Property;
(e) To alter, improve, expand, repair, raze, replace, or reconstruct
a Restaurant Property; provided, however, that any improvement, expansion,
replacement, or reconstruction of a Restaurant Property pursuant to the
"Successor Policy" of BKC as then in effect (as further described in
Section 8.06) shall be subject to the terms and conditions of Section 8.06;
(f) Subject to the restrictions and limitations set forth in Sections
8.03 and 8.04, to let or lease, or sublet or sublease, any Restaurant
Property for any period, and for any purpose;
(g) To apply proceeds of any sale, exchange, mortgage, pledge, or
other disposition of any Restaurant Property or any other Partnership Asset
to payment of liabilities of the Partnership and to pay, collect,
compromise, arbitrate, or otherwise adjust any and all other claims or
demands of or against the Partnership or to hold such proceeds against the
payment of contingent liabilities, known or unknown;
(h) To maintain or cause to be maintained records of all rights and
interests acquired or disposed of by the Partnership, all correspondence
relating to the business of the Partnership, and the original records (or
copies on such media as the Managing General Partner may deem appropriate)
of all statements, bills, and other instruments furnished the Partnership
in connection with its business;
(i) To maintain records and accounts of all operations and
expenditures, make all filings and reports required under applicable rules
and regulations of any governmental department, bureau, or agency, any
securities exchange, and any automated quotation system of a registered
securities association, and furnish the Partners with all necessary United
States federal, state, or local income tax reporting information or such
information with respect to any other jurisdiction;
(j) To purchase and maintain (either directly or through
participation under insurance contracts purchased and maintained by any
Affiliate), in its sole and absolute discretion and at the expense of the
Partnership, liability, indemnity, and any other insurance (including,
without limitation, errors and omissions insurance and insurance to cover
the obligations of the Partnership under Section 7.10), sufficient to
protect the Partnership, the General Partners, their officers, directors,
employers, agents, and Affiliates, or any other Person, from those
liabilities and hazards which may be insured against in the conduct of the
business and in the management of the business and affairs of the
Partnership;
(k) To make, execute, assign, acknowledge, and file on behalf of the
Partnership any and all documents or instruments of any kind which the
Managing General Partner may deem necessary or appropriate in carrying out
the purposes and business of the Partnership, including, without
limitation, powers of attorney, agreements of indemnification, sales
contracts, deeds, options, loan obligations,
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mortgages, deeds of trust, notes, documents, or instruments of any
kind or character, and amendments thereto. Any person, firm, or
corporation dealing with the Managing General Partner shall not be
required to determine or inquire into the authority or power of the
Managing General Partner to bind the Partnership or to execute,
acknowledge, or deliver any and all documents in connection therewith;
(l) To borrow money or to obtain credit in such amounts, on such
terms and conditions, and at such rates of interest and upon such other
terms and conditions as the Managing General Partner deems appropriate,
from banks, other lending institutions, or any other Person, including the
Partners, for any purpose of the Partnership, including, without
limitation, any loan incurred for the purpose of making one or more
distributions to any or all Partners, including any distributions which
are, in whole or in part, a return of Capital Contributions; and subject to
the restrictions and limitations set forth in Section 8.04, in connection
with such loans to mortgage, pledge, assign, or otherwise encumber or
alienate any or all of the Restaurant Properties or other Partnership
Assets, including any income" therefrom, to secure or provide for the
repayment thereof. As between any lender and the Partnership, it shall be
conclusively presumed that the proceeds of such loans are to be and will be
used for the purposes authorized herein and that the Managing General
Partner has the full power and authority to borrow such money and to obtain
such credit;
(m) To assume obligations, enter into contracts, including contracts
of guaranty or suretyship, incur liabilities, lend money, and otherwise use
the credit of the Partnership, and, subject to the restrictions and
limitations set forth in Sections 8.03 and 8.04, to secure any of the
obligations, contracts, or liabilities of the Partnership by mortgage,
pledge or other encumbrance of all or any part of the property, franchises,
and income of the Partnership;
(n) To invest funds of the Partnership in interest-bearing accounts
and short-term investments including, without limitation, obligations of
the federal, state, and local governments and their agencies, mutual funds
(including money market funds), time deposits, commercial paper, and
certificates of deposit of commercial banks, savings banks, or savings and
loan associations; provided that the Managing General Partner shall not
invest Partnership funds in such a manner that the Partnership will be
considered to be holding itself out as being engaged primarily in the
business of investing, reinvesting, or trading in securities or otherwise
will be deemed to be an investment company under the Investment Company Act
of 1940, as amended;
(o) To make any election on behalf of the Partnership as is or may be
permitted under the Code or under the taxing statute or rule of any state,
local, foreign, or other jurisdiction, and to supervise the preparation and
filing of all tax and information returns which the Partnership may be
required to file;
(p) To maintain the buildings, appurtenances, and grounds of the
Restaurant Properties in accordance with acceptable standards, including
within such maintenance, without limitation thereof, interior and exterior
cleaning, painting and decorating, plumbing, carpentry, and such other
normal maintenance and repair work as may be appropriate;
(q) To collect all rents and other charges from lessees of the
Restaurant Properties due the Partnership. The Managing General Partner
shall have full power and authority to request, demand, collect, receive,
and receipt for all such rents and other charges, to institute legal
proceedings in the name of the Partnership for the collection thereof and
for the dispossession of any Person from a Restaurant Property,
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to settle or compromise all such legal proceedings and any other
disputes with respect to such rents and other charges, and to incur such
expenses in connection therewith as the Managing General Partner shall
determine to be necessary or appropriate, which expenses may include the
costs of counsel for any such matter;
(r) To cause to be disbursed (i) the aggregate amount required to be
paid pursuant to any indebtedness of the Partnership, including herein
amounts due under any mortgages or deeds of trust for interest,
amortization of principal, and for allocation to reserve or escrow funds;
(ii) the amount of rent payable by the terms of any Primary Lease; (iii)
the amount of all real estate taxes and other impositions levied by
appropriate authorities (including, without limitation, amounts required to
be paid by any BKC Franchisee pursuant to any lease with respect to a
Restricted Restaurant Property); and (iv) amounts otherwise due and payable
as expenses of the Partnership incurred in furtherance of the purposes of
this Agreement (including, without limitation, amounts payable to the
General Partners);
(s) To employ and engage suitable agents, employees, advisers,
consultants, and counsel (including any custodian, investment adviser,
accountant, attorney, corporate fiduciary, bank, or other reputable
financial institution, or any other agents, employees, or Persons who may
serve in such capacity for the Managing General Partner or any Affiliate of
the Managing General Partner) to carry out any activities which the
Managing General Partner is authorized or required to carry out or conduct
under this Agreement, including, without limitation, a Person who may be
engaged to undertake some or all of the general management, property
management, financial accounting and record keeping, or other duties of the
Managing General Partner, to indemnify such Persons against liabilities
incurred by them in acting in such capacities on behalf of the Partnership,
and to rely on the advice given by such Persons, it being agreed and
understood that the Managing General Partner shall not be responsible for
any acts or omissions of any such Persons and shall assume no obligations
in connection therewith other than the obligation to use due care in the
selection thereof;
(t) To enter into an agreement or agreements with real estate brokers
or agents, investment banking firms, appraisers, or others providing for
the engagement of such Persons on an exclusive or non-exclusive basis to
advise or represent the Partnership in the valuation, sale, transfer,
assignment, lease, sublease, mortgaging, or other encumbering of, or other
dealings in, the Restaurant Properties, it being understood that the
Managing General Partner shall not be responsible for any acts or omissions
of any such Person and shall assume no obligations in connection therewith
other than the obligation to use due care in the selection thereof;
provided, however, that no commission in connection with any sale or other
disposition of a Restaurant Property shall exceed six percent (6%) of the
gross proceeds from such sale or disposition, and that no commission in
connection with any such sale or other disposition shall be payable to a
General Partner or any of its Affiliates;
(u) To consult with the Independent Consultant pursuant to the
provisions of Section 8.10 with respect to any matter related to the
business and affairs of the Partnership;
(v) To take such actions and make such decisions as may be necessary
or appropriate, in the reasonable judgment of the Managing General Partner,
to resolve or avoid any actual or potential conflict of interest between
the Partnership and any General Partners or any Affiliates thereof,
including, without limitation, subject to Section 8.08, to cause the
Partnership to accept from BKC or a third party, in exchange or
substitution for one or more Restricted Restaurant Properties, one or more
other
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properties on which a BK Restaurant leased to a BKC Franchisee is
located; provided, however, that, so long as Section 1031 of the Code or
any similar provision shall remain in effect, any such substitution or
exchange must qualify as an exchange of property of a like-kind in which
no gain or loss is recognized to the Partnership except to the extent of
any cash received in connection therewith;
(w) To hold Restaurant Properties or other Partnership Assets in the
name of one or more nominees, with or without disclosure of the fiduciary
relationship;
(x) To pay, extend, renew, modify, adjust, submit to arbitration,
prosecute, defend, or compromise, upon such terms as it may determine and
upon such evidence as it may deem sufficient, any obligation, suit,
liability, cause of action, or claim, including taxes, either in favor of
or against the Partnership;
(y) To qualify the Partnership to do business in any state,
territory, dependency, or foreign country;
(z) To purchase any Restaurant Property subject to a Primary Lease
whether pursuant to a first right of refusal under such Primary Lease or
otherwise;
(aa) To enter into a property management agreement with BKC pursuant
to which BKC agrees on behalf of the Managing General Partner, at no
additional expense to the Partnership, to exercise certain day-to-day
management responsibilities with respect to the Restaurant Properties and
to perform related administrative services upon the terms and conditions
set forth therein, to extend, renew, terminate, modify, amend, or waive
such agreement or any provision thereof, and to take such action pursuant
to or in connection with such agreement as the Managing General Partner
shall determine appropriate; provided, however, that the Managing General
Partner shall have no obligation to enter into any such agreement;
(bb) To distribute money or Partnership Assets to Partners in
accordance with Article VI, regardless of the source of such money or
Partnership Assets, including, without limitation, money borrowed by the
Partnership or by the Managing General Partner on behalf of the
Partnership;
(cc) To acquire fee simple title or a leasehold interest in any
Restaurant Property and Ancillary Property related thereto and to provide
for the purchase price for such property from funds otherwise constituting
Cash Flow or the Net Proceeds of a Capital Transaction, whether at the
time of acquisition or thereafter to pay principal, interest or other
amounts payable in respect of any financing related to such acquisition;
(dd) To lease, sell or otherwise transfer Ancillary Property to any
tenant of Restaurant Property, to provide financing, whether through loans,
guarantees or otherwise, for any tenant of Restaurant Property and to
provide the funds for such transactions from funds otherwise constituting
Cash Flow or the Net Proceeds of a Capital Transaction, whether at the time
of such transaction or thereafter to pay principal, interest or other
amounts payable in respect of any financing undertaken for such purpose;
(ee) To mortgage, lien or otherwise encumber or restrict any
Restricted Restaurant Property and use the proceeds therefor in respect of
Other Restaurant Property or for any other Partnership purpose; and to
mortgage, lien or otherwise
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encumber or restrict any Other Restaurant Property and use the proceeds
thereof in respect of Restricted Restaurant Property or for any other
Partnership purpose;
(ff) To operate or franchise any Restaurant Property, whether directly
or through any Affiliates or other Persons;
(gg) To reinvest or otherwise use funds otherwise constituting Cash
Flow or the Net Proceeds of a Capital Transaction in or for Restaurant
Properties, Ancillary Property or other Partnership Assets or for any other
Partnership purpose;
(hh) To possess and exercise any additional rights and powers of a
general partner under the partnership laws of Delaware (including, without
limitation, the Delaware RULPA) and any other applicable laws, to the
extent not inconsistent with this Agreement; and
(ii) In general, to exercise in full all of the powers of the
Partnership as set forth in Section 3.02 and to do any and all acts and
conduct all proceedings and execute all rights and privileges, contracts,
and agreements of any kind whatsoever, although not specifically mentioned
in this Agreement, that the Managing General Partner in its sole and
absolute discretion may deem necessary or appropriate to the conduct of the
business and affairs of the Partnership or to carry out the purposes of the
Partnership. The expression of any power or authority of the Managing
General Partner in this Agreement shall not in any way limit or exclude any
other power or authority which is not specifically or expressly set forth
in this Agreement.
7.03. RESTRICTIONS ON AUTHORITY OF MANAGING GENERAL PARTNER.
(a) Anything in this Agreement to the contrary notwithstanding, the
Managing General Partner shall have no authority to:
(i) pay for any services performed by a General Partner or an
Affiliate of a General Partner, except as otherwise expressly permitted in
this Agreement; or
(ii) take any action on any matter with respect to which the prior
approval of the Limited Partner is specifically required under this
Agreement without having received such prior approval.
(b) Notwithstanding any other provision of this Agreement, the Managing
General Partner shall not, without the prior approval of the Limited Partner:
(i) except upon dissolution and liquidation pursuant to Article XIV,
cause the Partnership to sell, exchange, assign, lease, sublease, or
otherwise dispose of all or substantially all of the Partnership Assets
other than in ordinary course of business of the Partnership; provided,
however, that this provision shall not be interpreted to preclude or limit
the mortgage, pledge, hypothecation, or grant of a security interest in all
or substantially all of the Partnership Assets, and shall not apply to any
forced sale of any or all of the Partnership Assets pursuant to the
foreclosure of, or other realization upon, any such encumbrance; or
(ii) cause the Partnership to merge or consolidate with any other
partnership (other than the Limited Partner) or other entity.
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7.04 TITLE TO PARTNERSHIP ASSETS.
Title to Partnership Assets, whether real, personal, or mixed or
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner, individually or collectively, shall have any
ownership interest in such Partnership Assets or any portion thereof. Title
to any or all of the Partnership Assets may be held in the name of the
Partnership, of the Managing General Partner, or of one or more nominees, as
the Managing General Partner may determine. The Managing General Partner
hereby declares and warrants that any Partnership Assets for which legal
title is held in the name of the Managing General Partner shall be held in
trust by the Managing General Partner for the use and benefit of the
Partnership in accordance with the terms or provisions of this Agreement.
All Partnership Assets shall be recorded as the property of the Partnership
on its books and records, irrespective of the name in which legal title to
such Partnership Assets is held.
7.05. WORKING CAPITAL RESERVE.
The Managing General Partner shall have the right to cause the
Partnership to set up a Working Capital Reserve and to set aside therein such
funds as the Managing General Partner, in its sole and absolute discretion,
shall determine to be reasonable in connection with the operation of the
business of the Partnership. Any funds set aside for such Working Capital
Reserve may be invested by the Managing General Partner with a view to the
appropriate degree of safety of and return on such invested funds, and such
funds shall not be available for current distribution under Section 6.05;
provided, however, that some or all of such funds may subsequently be made
available for distribution pursuant to Section 6.05 should the Managing
General Partner, in its sole and absolute discretion, so elect. The Working
Capital Reserve established and maintained pursuant to this Section 7.05
shall be in addition to any reserves established and maintained by the
Managing General Partner to implement Burger King's "Successor Policy"
pursuant to Section 8.06.
7.06. OTHER BUSINESS ACTIVITIES OF PARTNERS.
Any Partner or Affiliate (including, without limitation, the Managing
General Partner, and any Affiliate thereof) may have, other business
interests or may engage in other business ventures of any nature or
description whatsoever, whether presently existing or hereafter created,
including, without limitation, the ownership, leasing, management, operation,
franchising, syndication, and/or development of commercial real estate and/or
restaurants, and may compete, directly or indirectly, with the business of
the Partnership. No Partner or Affiliate thereof shall incur any liability to
the Partnership as the result of such Partner's or Affiliate's pursuit of
such other business interests and ventures and competitive activity, and
neither the Partnership nor any of the other Partners shall have any right to
participate in such other business interests or ventures or to receive or
share in any income or profits derived therefrom.
7.07. TRANSACTIONS WITH MANAGING GENERAL PARTNER OR AFFILIATES.
In addition to transactions specifically contemplated by the terms and
provisions of this Agreement, including, without limitation, Articles VIII
and IX, the Partnership is expressly permitted to enter into other
transactions (including, without limitation, the acquisition of goods or
services) with the Managing General Partner, or any Affiliates thereof,
provided that the price and other terms of such other transactions are fair
to the Partnership and that the price and other terms of such transactions
are not less favorable to the Partnership than those generally prevailing
with respect to comparable transactions between unrelated parties.
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7.08. NET WORTH REPRESENTATION; INDEPENDENT JUDGMENT.
In addition to their other duties and obligations, the General Partners
further agree as follows:
(a) The General Partners shall use their best efforts to maintain a
combined net worth equal to the total amount, if any, that could reasonably
be expected to be required in order for the Partnership to be treated as a
partnership for federal income tax purposes; and
(b) In acting on behalf of the Partnership, the Managing General
Partner will not act under the direction of or as an agent of or "dummy"
for the Limited Partner.
7.09. LIABILITY OF GENERAL PARTNERS TO PARTNERSHIP AND LIMITED PARTNER.
The General Partners, their Affiliates, and all officers, directors,
employees, and agents of the General Partners and their Affiliates shall not
be liable to the Partnership or to the Limited Partner for any losses
sustained or liabilities incurred as a result of any act or omission of the
General Partners or their Affiliates if (i) the General Partner or Affiliate
acted (or failed to act) in good faith and in a manner it believed to be in,
or not opposed to, the interests of the Partnership, and (ii) the conduct of
the General Partner or Affiliate did not constitute actual fraud, gross
negligence, or willful or wanton misconduct.
7.10. INDEMNIFICATION OF GENERAL PARTNERS AND AFFILIATES.
(a) The Partnership shall indemnify and hold harmless the General
Partners, their Affiliates, and all officers, directors, employees, and
agents of the General Partners and their Affiliates (individually, an
"Indemnitee") from and against any and all losses, claims, demands, costs,
damages, liabilities, joint and several, expenses of any nature (including
attorneys' fees and disbursements), judgments, fines, settlements, and other
amounts arising from any and all claims, demands, actions, suits, or
proceedings, civil, criminal, administrative or investigative, in which the
Indemnitee may be involved, or threatened to be involved, as a party or
otherwise, arising out of or incidental to the Initial Public Offering or the
business of the Partnership or the Limited Partner, including, without
limitation, liabilities under the federal and state securities laws,
regardless of whether the Indemnitee continues to be a General Partner, an
Affiliate, or an officer, director, employee, or agent of a General Partner
or of an Affiliate at the time any such liability or expense is paid or
incurred, if (i) the Indemnitee acted in good faith and in a manner it
believed to be in, or not opposed to, the interests of the Partnership, and,
with respect to any criminal proceeding, had no reasonable cause to believe
its conduct was unlawful, and (ii) the Indemnitee's conduct did not
constitute actual fraud, gross negligence, or willful or wanton misconduct.
The termination of any action, suit, or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere, or its equivalent,
shall not, in and of itself, create a presumption or otherwise constitute
evidence that the Indemnitee acted in a manner contrary to that specified in
(i) or (ii) above.
(b) Expenses incurred by an Indemnitee in defending any claim, demand,
action, suit, or proceeding subject to this Section 7.10 shall, from time to
time, be advanced by the Partnership prior to the final disposition of such
claim, demand, action, suit, or proceeding upon receipt by the Partnership of
an undertaking by or on behalf of the Indemnitee to repay such amount unless
it shall be determined that such Person is entitled to be indemnified as
authorized in this Section 7.10.
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(c) The indemnification provided by this Section 7.10 shall be in
addition to any other rights to which those indemnified may be entitled under
any agreement, with the approval of the Limited Partner, as a matter of law
or equity, or otherwise, both as to an action in the Indemnitee's capacity as
a General Partner, an Affiliate, or as an officer, director, employee or
agent of a General Partner or an Affiliate, and as to an action in another
capacity, and shall continue as to an Indemnitee who has ceased to serve in
such capacity and shall inure to the benefit of the heirs, successors,
assigns, and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain insurance (either
directly or through participation under insurance contracts purchased and
maintained by any Affiliate) on behalf of the General Partners and such other
Persons as the Managing General Partner shall determine against any liability
that may be asserted against or expense that may be incurred by such Person
in connection with the Initial Public Offering and the activities of the
Partnership or the Limited Partner, regardless of whether the Partnership or
the Limited Partner would have the power to indemnify such Person against
such liability under the provisions of this Agreement.
(e) Except as set forth in the next sentence below, any indemnification
hereunder shall be satisfied solely out of the assets of the Partnership and
the Limited Partner. The limited partners of the Limited Partner shall not
be subject to personal liability by reason of these indemnification
provisions; provided, however, that to the extent that a limited partner of
the Limited Partner shall recover from any Indemnitee any amount that is
subject to indemnification hereunder, the limited partner of the Limited
Partner shall have personal liability to the Partnership, the Limited
Partner, and the Indemnitee under this Section 7. 10 for and to the extent of
such amount.
(f) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7. 10 by reason of the fact that the Indemnitee had
an interest in the transaction with respect to which the indemnification
applies if the transaction was otherwise permitted by the terms of this
Agreement.
(g) The provisions of this Section 7.10 are for the benefit of the
Indemnitees and shall not be deemed to create any rights for the benefit of
any other Persons.
7.11. NO MANAGEMENT BY LIMITED PARTNER.
The Limited Partner shall not take part in the day-to-day management,
operation, or control of the business and affairs of the Partnership. The
Limited Partner shall not have any right, power, or authority to transact any
business in the name of the Partnership or to act for or on behalf of or to
bind the Partnership. The Limited Partner shall have no rights other than
those specifically provided herein or granted by law where consistent with a
valid provision hereof. In the event any laws, rules, or regulations
applicable to the Partnership, or to the sale or issuance of the Units in
connection with the Initial Public Offering, require the Limited Partner to
have certain rights, options, privileges, or consents not granted by the
terms of this Agreement, then the Limited Partner shall have and enjoy such
rights, options, privileges, and consents so long as (but only so long as)
the existence thereof does not-result in a loss of the limitation on
liability enjoyed by the Limited Partner under the Delaware RULPA or the
applicable laws of any other jurisdiction.
7.12. OTHER MATTERS CONCERNING GENERAL PARTNERS.
(a) The General Partners may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice,
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request, consent, order, bond, debenture, or other paper or document believed
by them to be genuine and to have been signed or presented by the proper
party or parties.
(b) The General Partners may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, and other consultants
and advisers selected by them and any opinion of any such Person as to
matters that the General Partners reasonably believe to be within its
professional or expert competence (including, without limitation, any opinion
of legal counsel to the effect that the Partnership would "more likely than
not" prevail with respect to any matter) shall be full and complete
authorization and protection in respect to any action taken or suffered or
omitted by a General Partner hereunder in good faith and in accordance with
such opinion.
(c) The General Partners shall have the right, in respect of any of
their powers or obligations hereunder, to act through a duly appointed
attorney or attorneys-in-fact. Each such attorney or attorney-in-fact shall,
to the extent provided by the General Partner in the power of attorney, have
full power and authority to do and perform all and every act and duty which
is permitted or required to be done by the General Partner hereunder. Each
such appointment shall be evidenced by a duly executed power of attorney
giving and granting to each such attorney or attorney-in-fact full powers and
authority to do and perform all and every act and thing requisite and
necessary to be done by the General Partner in connection with the
Partnership.
7.13. REVOLVING LINE OF CREDIT; OTHER LOANS TO OR FROM A GENERAL PARTNER.
(a) Pursuant to this Section 7.13(a) and Section 7.13(a) of the
Investors Partnership Agreement, the Managing General Partner shall make
available to the Partnership and the Limited Partner, jointly, on an "as
needed" basis an unsecured, interest-free, revolving line of credit in the
aggregate principal amount of Five Hundred Thousand Dollars ($500,000). The
proceeds of the revolving line of credit may be used by the Partnership
and/or the Limited Partner solely for purposes of providing to the
Partnership and/or the Limited Partner funds determined by the Managing
General Partner to be necessary for purposes of (i) maintaining sufficient
working capital, (ii) maintaining level quarterly distributions of Net Cash
Flow, and/or (iii) for the Fiscal Year ending December 31, 1986, making
anticipated distributions of Cash Flow for such Fiscal Year described in the
Registration Statement. The Partnership and the Limited Partner may borrow,
repay, and reborrow under the revolving line of credit from time to time
(subject to the maximum aggregate principal amount limitation). Nothing
herein shall be construed to require the Managing General Partner to cause
the Partnership or the Limited Partner to retain cash (or to cause the
Partnership or the Limited Partner to borrow under the revolving line of
credit in order to retain cash) in excess of the immediate working capital
needs of the Partnership or the Limited Partner as the case may be. In
addition, nothing shall be construed to require the Partnership to use or
exhaust the financing available under the revolving line of credit, before
obtaining other financing permitted by this Agreement, whether for
acquisitions, reinvestment, working capital or otherwise. The revolving line
of credit shall terminate upon removal or withdrawal of the Managing General
Partner.
(b) In addition to the revolving line of credit described in Section
7.13(a), any of the General Partners or any of their Affiliates may lend to
the Partnership funds needed by the Partnership for such periods of time as
the Managing General Partner may determine; provided, however, that (i)
interest payable on such indebtedness shall be calculated at a rate not to
exceed the rate announced by Morgan Guaranty Trust Company from time to time
as its "prime rate" plus one percent (1%) (as in effect on the first day of
each calendar quarter, as adjusted as of the first day of each succeeding
calendar quarter to reflect such rate in effect on such date) or the highest
lawful rate, whichever is less, and (ii) in no event shall such
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indebtedness be on terms and conditions less favorable to the Partnership
than the Partnership could obtain from unaffiliated third parties or banks
for the same purpose (without reference to the General Partners' financial
abilities or guarantees). In the event that Morgan Guaranty Trust Company
should during the term of this Agreement abandon or abolish the practice of
announcing an established "prime rate," the "prime rate" used during the
remainder of said term for purposes of this Agreement shall be the rate from
time to time charged by Morgan Guaranty Trust Company to its preferred
commercial customers for unsecured short-term loans. A certificate signed by
an officer of Morgan Guaranty Trust Company shall be binding and conclusive
evidence of the "prime rate" in effect from time to time.
(c) No loans shall be made by the Partnership to a General Partner or
any of its Affiliates.
7.14. PERIODIC CONSIDERATION OF SALE OR REFINANCING.
Commencing with the year 2000 and continuing once every five (5) years
thereafter, the Managing General Partner may consider whether or not, in the
reasonable judgment of the Managing General Partner, it would be in the
interest of the Partnership to effectuate a sale or refinancing of all or a
portion of the Restricted Restaurant Properties held as of the Effective
Date, with the proceeds of any such sale or financing to be distributed to
the Partners in accordance with Article VI. If the Managing General Partner,
in its reasonable judgment, determines that such a sale or financing would be
in the interest of the Partnership, then the Managing General Partner intends
to use reasonable efforts to cause the Partnership to effectuate such a sale
or financing; provided, however, that any such sale or other disposition of
part or all of such Restricted Restaurant Properties shall be subject to
Sections 7.03 and 8.04. This Section 7.14 does not constitute an obligation
of the Managing General Partner, but merely represents an expression of
intent by the Managing General Partner as of the time of the Amended
Agreement as to the manner in which it expected to manage the Partnership. In
no event shall any sale or financing transaction in connection with this
Section 7.14 involve or require any direct or indirect financial obligation
or other financial support on the part of the Managing General Partner, BKC,
TPC, or any Affiliate of the foregoing.
7.15. OTHER LIMITATIONS.
The following additional limitations shall apply to the operation and
management of the Partnership:
(a) No General Partner shall receive for its account any kickbacks or
rebates with respect to expenditures made by or on behalf of the
Partnership, nor shall any General Partner enter into any reciprocal
arrangement that has the effect of circumventing this Section 7.15(a) or
Section 9.01;
(b) The Partnership shall not grant any General Partner an exclusive
right, as agent, to sell any Restaurant Property or other Partnership
Asset; and
(c) No commission or other fee shall be payable to a General Partner,
directly or indirectly, in connection with the distribution or reinvestment
of any Net Proceeds of a Capital Transaction, except as provided in Section
9.03.
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ARTICLE VIII
ACQUISITION, OPERATION, AND DISPOSITION
OF RESTRICTED RESTAURANT PROPERTIES
8.01. GENERAL.
(a) The Partners hereby expressly agree that, in addition to any other
provisions of this Agreement, the acquisition, ownership, operation and
disposition of the Restaurant Properties by the Partnership shall be in
accordance with, and shall be subject to, the provisions, restrictions, and
limitations set forth in this Article VIII; provided that, except for Section
8.13, this Article VIII shall not apply to any of the Other Restaurant
Properties. The Partners further expressly agree that any action taken by a
General Partner or Affiliate thereof in accordance with, or pursuant to, the
provisions of this Article VIII conclusively shall be deemed to be fair to and
in the best interests of the Partnership, the Limited Partner, and the General
Partners, and the fact that an action of a General Partner or an Affiliate is
undertaken in accordance with, or pursuant to, this Article VIII shall be a
complete and absolute defense to any claim or action asserting the invalidity of
such action or any claim or action for damages or other relief based upon an
assertion that such action resulted in a breach by a General Partner or an
Affiliate of this Agreement or any duty, fiduciary or otherwise, owed by the
General Partners and their affiliates to the Partnership or the Limited Partner.
(b) The Partners expressly acknowledge and agree that the provisions,
restrictions, and limitations set forth in this Article VIII are reasonable in
all respects, are pursuant to and consistent with the purposes of the
Partnership, are necessary to induce BKC to enter into the Real Estate Purchase
Agreement and to otherwise deal with Restricted Restaurant Properties, and are
necessary to protect the business and interests of BKC and the Partnership. In
the event that the Partnership shall breach or violate or fail to perform any of
its obligations set forth in this Article VIII, then, at the option of BKC, BKC
shall be entitled to proceed to enforce the obligations of the Partnership
hereunder by any action at law, suit in equity, or other appropriate proceeding,
whether for damages, for special performance of an obligation contained herein,
or for an injunction or other equitable remedy against any violation of the
provisions hereof. The Partnership hereby agrees to indemnify and hold harmless
BKC from and against any assessment, payment, damage, expense, loss, cost,
liability, or deficiency (including, without limitation, interest, penalties,
and reasonable attorneys' fees and disbursements) incurred by BKC in enforcing
or sustaining the provisions hereof or resulting from or in connection with any
such breach, violation, or failure.
8.02. CONTRIBUTION TO PARTNERSHIP; ACQUISITION OF RESTAURANT PROPERTIES.
On the Closing Date or as soon as practicable thereafter, the Managing
General Partner caused the Limited Partner to contribute the Aggregate Offering
Proceeds and the capital contributions received by the Limited Partner from its
general partners to the Partnership, as provided for in this Agreement. On the
Closing Date or as soon as practicable thereafter, the Managing General Partner
caused the Partnership to acquire certain Restaurant Properties from BKC in
accordance with and subject to the terms and conditions set forth in the Real
Estate Purchase Agreement, including the exhibits thereto, and caused the
Partnership to pay to BKC the purchase price for such Restaurant Properties
specified in the Real Estate Purchase Agreement.
8.03. USE AND OTHER RESTRICTIONS.
(a) Except as otherwise expressly provided in this Section 8.03, the
Partnership shall not, without the prior written consent of BKC, in its sole and
absolute discretion, use any
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Restricted Restaurant Property or permit any Restricted Restaurant Property
to be used for any purpose other than the operation thereon of a BK
Restaurant and other uses related thereto.
(b) (i) In furtherance of the provisions of Section 8.03(a), in the event
that BKC renews or extends a BKC Franchise Agreement with respect to a
Restricted Restaurant Property at any time at or prior to the expiration of such
BKC Franchise Agreement, then, regardless of the duration of such renewal or
extension the Partnership promptly shall, without additional charge, renew or
extend the lease of the Restaurant Property to such BKC Franchisee for a period
coterminous with the period of such renewal or extension and for and upon
substantially the same rental and other terms and conditions as and upon which
BKC is then renewing or extending leases with BKC Franchisees for properties
owned or leased (as the case may be) by BKC, or in the event BKC at such time is
no longer renewing or extending leases with BKC Franchisees for properties owned
or leased (as the case may be) by BKC, then upon substantially the same rental
and other terms and conditions as and upon which BKC most recently was renewing
or extending such leases with BKC Franchisees (except that, for purposes of
determining the guaranteed minimum rental thereunder, the lessor's "investment"
in Restricted Restaurant Properties held as of the Effective Date shall be
deemed to be equal to the sum of the investment of BKC with respect to such
Restaurant Property prior to the Closing Date plus any investment by the
Partnership with respect to such Restaurant Property prior the Closing Date (and
in no event shall such "investment" include the purchase price paid by the
Partnership to BKC for such Restaurant Property pursuant to the Real Estate
Purchase Agreement)); provided that the rental for such lease may be greater
than the rental upon which BKC is then (or, if applicable, was) so renewing or
extending such leases. Notwithstanding anything to the contrary contained
herein, any extension or renewal of a lease of a Restricted Restaurant Property
pursuant to the "Successor Policy" shall be in accordance with the "Successor
Policy" as then in effect and Section 8.06 (including, without limitation, the
provisions of Section 8.06(b) relating to determination of the annual minimum
rental under a lease extended or renewed in accordance with the "Successor
Policy"). Without limiting the foregoing, the Managing General Partner, in its
sole and absolute discretion, at the request of BKC or a BKC Franchisee, shall
be permitted to consent to a renewal or extension of a lease of a Restricted
Restaurant Property for a rental less favorable to the Partnership than the
rental upon which BKC is then renewing or extending leases with BKC Franchisees
for properties owned or leased (as the case may be) by BKC (or, if applicable,
the rental upon which BKC most recently was renewing or extending such leases
with BKC Franchisees) if BKC agrees to treat the excess of the rental at which
BKC is then renewing or extending such leases (or, if applicable, the rental at
which BKC most recently was renewing or extending such leases) over the rental
payable to the Partnership in connection with such renewal or extension as "rent
relief" subject to the provisions of Section 8.05.
(ii) In the event that (A) either (I) a BKC Franchise Agreement
authorizing the operation of a BK Restaurant on a Restricted Restaurant Property
is terminated automatically, is terminated by BKC, or is terminated by the
mutual agreement of the parties thereto prior to the expiration of the stated
term thereof, OR (II) a BKC Franchise Agreement expires according to the terms
thereof and is not renewed or extended by BKC at or prior to the expiration of
such BKC Franchise Agreement, AND (B) during the six (6) month period commencing
on the date of such termination or expiration either (I) BKC and a Person that
meets BKC's then existing franchisee financial capability requirements enter
into a BKC Franchise Agreement authorizing such Person to operate a BK
Restaurant on the Restaurant Property, and BKC notifies the Partnership thereof,
OR (II) BKC notifies the Partnership that BKC desires to operate a BK Restaurant
on the Restaurant Property, then the Partnership promptly shall terminate any
lease of the Restaurant Property with the terminated BKC Franchisee (if such
lease then has not terminated or expired) and enter into a new lease of the
Restaurant Property with the new BKC Franchisee or with BKC, as the case may be.
The rental, duration, and other terms and conditions of any such new lease shall
be substantially the same as the rental,
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duration, and other terms and conditions as and upon which BKC is then
entering into new leases with BKC Franchisees for properties owned or leased
(as the case may be) by BKC, or in the event BKC at such time is no longer
entering into new leases with BKC Franchisees for properties owned or leased,
as the case may be, by BKC, then substantially the same rental duration and
other terms and conditions as and upon which BKC most recently was entering
such leases with BKC Franchisees (except that, for purposes of determining
the guaranteed annual minimum rental thereunder, the lessor's "investment" in
Restricted RestaUrant Properties held as of the Effective Date shall be
deemed to be equal to the sum of the investment of BKC with respect to such
Restaurant Property prior to the Closing Date plus any investment of the
Partnership with respect to such Restaurant Property after the Closing Date
(and in no event shall such "investment" include the purchase price paid by
the Partnership to BKC for such Restaurant Property pursuant to the Real
Estate Purchase Agreement)). Without limiting the foregoing, the Managing
General Partner, in its sole and absolute discretion, at the request of BKC
or a BKC Franchisee, shall be permitted to enter into a new lease of a
Restricted Restaurant Property for a rental less favorable to the Partnership
than the rental upon which BKC is then entering into leases with BKC
Franchisees for properties owned or leased (as the case may be) by BKC (or,
if applicable, the rental upon which BKC most recently was entering into such
leases with BKC Franchisees) if BKC agrees to treat the excess of the rental
at which BKC is then entering into such leases (or, if applicable, the rental
at which BKC most recently was entering into such leases) over the rental
payable to the Partnership in connection with such new lease as "rent relief"
subject to the provisions of Section 8.05. During the period (the
"Determination Period") that BKC is considering whether to enter into a new
BKC Franchise Agreement with respect to the Restaurant Property or operate
itself a BK Restaurant on the Restaurant Property (but in no event after the
expiration of the six (6) month period described in clause (B) above), BKC
shall pay to the Partnership an amount equal to the excess of the guaranteed
amount rental payable to the Partnership under the terminated BKC
Franchisee's lease for the Determination Period (computed without regard to
any termination or expiration of such lease) over the amount of rent, if any,
actually collected by the Partnership thereunder for the Determination
Period. The Partnership shall, at the expense of BKC, take all such actions
as BKC reasonably may request to enforce the provisions of the terminated BKC
Franchisee's lease applicable during the Determination Period. If BKC does
not, prior to the end of the Determination Period, enter into a new BKC
Franchise Agreement with respect to the Restaurant Property or elect to
operate itself a BK Restaurant on the Restaurant Property, then subject to
Section 8.09 hereof, The Partnership shall be free to take such actions with
respect to the terminated BKC Franchisee's lease as the Partnership may deem
appropriate. Notwithstanding anything to the contrary contained herein, BKC
shall have the right at any time, upon written notice to the Partnership, to
terminate the Determination Period with respect to any Restricted Restaurant
Property, in which event all rights and obligations of BKC in connection with
such terminated Determination Period shall terminate, effective as of the
date on which the Partnership receives such notice and as of the payment by
BKC of all amounts payable hereunder with respect to the Determination Period.
(iii) In the event that BKC approves the assignment by a BKC Franchisee of
a BKC Franchise Agreement with respect to a Restricted Restaurant Property to
another person or entity that meets BKC's then existing franchisee financial
capability requirements or to BKC, then, subject to the assumption by such new
BKC Franchisee or BKC, as the case may be, of all of the former BKC Franchisee's
obligations and liabilities thereafter accruing under the former BKC
Franchisee's lease of the Restaurant Property, the Partnership promptly shall,
without additional charge, approve and permit the assignment of such lease with
respect to such Restaurant Property to the new BKC Franchisee or to BKC, as the
case may be. Upon such assignment and assumption, the former BKC Franchisee, at
the request of BKC, shall be released from all obligations and liabilities
thereafter accruing under such lease; provided, however, That a release in
connection with an assignment or assumption shall be required
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pursuant hereto only if BKC, as a matter of policy, is then granting such
releases in connection with the assignment or assumption of leases with BKC
Franchisees for properties owned or leased, as the case may be, by BKC. In
addition to the foregoing, in the event That BKC consents to the assignment
by a BKC Franchisee of a Franchise Agreement with respect to a Restricted
Restaurant Property to a corporation in which such BKC Franchisee has a
financial interest, then, upon the request of such BKC Franchisee, the
Partnership shall approve the assignment of the BKC Franchisee's lease of
such Restaurant Property to such corporation upon the condition that such BKC
Franchisee shall remain fully responsible for all liabilities and obligations
accruing under such lease subsequent to such assignment.
(iv) The Partnership shall give BKC prompt written notice of the occurrence
of any default by a BKC Franchisee under any lease of a Restricted Restaurant
Property. BKC shall have the right (but not the obligation), within the longer
of thirty (30) days after the receipt by BKC of such written notice of such
default or any applicable grace period provided to the lessee under such lease,
to cure any default by the lessee under such lease, and the Partnership shall
not terminate such lease unless such default is not cured within such applicable
period. The Partnership also shall give BKC prompt written notice of the
occurrence of any event which results automatically in the termination of any
such lease. BKC shall have the right (but not the obligation), within thirty
(30) days after receipt of such notice, to assume all obligations and
liabilities of the lessee under such lease accruing from the date of such
automatic termination. If BKC exercises such right, then, as between BKC and
the Partnership, such termination shall be of no force or effect and shall be
deemed not to have occurred.
(v) In furtherance of the provisions of Section 8.03(a), in the event the
Partnership acquires any Restricted Restaurant Property after the Effective
Date, the rental, duration, and other terms and conditions in the lease for the
BKC Franchisee for such property shall be substantially the same as the rental,
duration, and other terms and conditions as and upon which BKC is then entering
into new leases with BKC Franchisees for properties owned or leased, as the case
may be, by BKC, or in the event BKC at such time is no longer entering into new
leases with BKC Franchisees for properties owned or leased, as the case may be,
by BKC, then upon substantially the same rental, duration, and other terms and
conditions as upon which BKC most recently was entering into such leases with
BKC Franchisees. Notwithstanding the foregoing, the rental for such leases may
be greater than that which BKC is then setting (or, if appropriate, was setting)
for BKC Franchisees.
(c) Notwithstanding anything to the contrary contained in any lease of a
Restricted Restaurant Property to which a BKC Franchisee is a party, (i) BKC
shall have the right at any time, without obtaining the consent of the
Partnership, to assume the obligations and liabilities of the lessee thereafter
accruing under such lease, and thereupon, at the request of BKC, such lessee
shall be released from all obligations and liabilities thereafter accruing
thereunder; provided, however, that a release in connection with such an
assumption shall be required pursuant to this section only if BKC, as a matter
of policy, is then granting such releases in connection with the assumption by
BKC of leases with BKC Franchisees for properties owned or leased, as the case
may be, by BKC; and (ii) at any time after any such assumption by BKC, BKC shall
have the right, without obtaining the consent of the Partnership, to assign such
lease to a Person that meets BKC's then existing franchisee financial capability
requirements, and upon such assignment and the assumption by such Person of all
obligations and liabilities of BKC thereafter accruing under such lease, BKC
shall be released from all obligations and liabilities thereafter accruing
thereunder.
(d) (i) In the event that BKC notifies the Partnership that BKC has
extended or renewed a BKC Franchise Agreement with respect to a Restricted
Restaurant Property that is subject to a Primary Lease for a term coterminous
with one or more permitted renewal terms
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available under such Primary, Lease, OR (ii) in the event that BKC notifies
the Partnership that EITHER (A) BKC has entered into a new BKC Franchise
Agreement with a Person that meets BKC's then existing financial capabilities
requirements authorizing such Person to operate a BK Restaurant on a
Restricted Restaurant Property that is subject to Primary Lease for a term
coterminous with one or more permitted renewal terms available under such
Primary Lease, OR (B) BKC has decided to operate a BK Restaurant on a
Restricted Restaurant Property that is subject to a Primary Lease for a term
coterminous with one or more permitted renewal terms available under such
Primary Lease, then in any such event, in addition to any other requirements
of this Section 8.03, the Partnership promptly shall renew the applicable
Primary Lease for a term no shorter than the term of the extended, renewed,
or new BKC Franchise Agreement, as the case may be, or in the case of BKC's
election to operate a BK Restaurant at such Partnership Property, for a term
no shorter than the term of BKC's lease with the Partnership with respect to
such Restaurant Property.
(e) Unless otherwise expressly waived by BKC in writing, the restrictions
and other provisions of this Section 8.03 shall remain in effect and shall be
enforceable with respect to each Restricted Restaurant Property by BKC during
the period commencing on the date of the Amended Agreement and ending on the
earliest of (i) a transfer by the Partnership of all of its right, title, and
interest in and to all of such Restaurant Property pursuant to Section 8.04(f)
following the failure of BKC to elect to acquire all of the Restaurant Property
pursuant to an offer thereof to BKC under Section 8.04(d) or the failure of BKC
to close the acquisition thereof on the date required by.Section 8.04(e); (ii) a
BKC Franchise Agreement is terminated by BKC or by the mutual agreement of the
parties thereto prior to the expiration of the stated term thereof and BKC does
not, prior to the end of the Determination Period, enter into a new BKC
Franchise Agreement with respect to the Restaurant Property or elect to operate
itself a BK Restaurant on the Restaurant Property; or (iii) a BKC Franchise
Agreement with respect to a Restricted Restaurant Property expires according to
the terms thereof and BKC does not either (A) renew or extend the same at or
prior to the expiration thereof or (B) prior to the end of the Determination
Period, enter into a new BKC Franchise Agreement with respect to the Restaurant
Property or elect to operate itself a BK Restaurant on the Restaurant Property;
provided, however, if the duration of such period would render the restrictions
or other provisions of this Section 8.03 invalid or unenforceable under any law
of the jurisdiction in which a Restricted Restaurant Property is located
limiting the period during which such restrictions or other provisions may
endure, then such period shall continue with respect to such Restaurant Property
only for such term as may be prescribed by the laws of such jurisdiction. It is
the express intent of BKC, the Partnership, and the Partners that such
restrictions and other provisions shall be valid and enforceable to the fullest
extent permitted by the laws of such jurisdiction.
(f) Notwithstanding anything to the contrary in this Section 8.03 or
elsewhere in this Agreement, nothing contained herein or elsewhere shall affect
the right of BKC, in its sole and absolute discretion, to terminate a BKC
Franchise Agreement, to renew or extend or fail to renew or extend a BKC
Franchise Agreement, to approve or disapprove any assignment of a BKC Franchise
Agreement, to elect to enter into a new BKC Franchise Agreement with respect to
a Restricted Restaurant Property, or to operate itself a BK Restaurant on the
Restaurant Property, to amend or modify a BKC Franchise Agreement, or to take or
fail to take any other action in connection with a BKC Franchise Agreement.
(g) Notwithstanding any other provision of this Agreement, the Partners
hereby expressly agree that the Managing General Partner shall have no duty,
under any circumstances whatsoever, to seek to sell, or to consider any offer to
purchase, any Restricted Restaurant Property so long as such Restaurant Property
is subject to the restrictions and other provisions of this Section 8.03, and
the fact that a Restricted Restaurant Property is subject to the restrictions
and provisions of this Section 8.03 shall be a complete and absolute defense to
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any claim or action for damages or other relief based upon a claim or action for
damages or other relief based upon a failure of the Managing General Partner to
solicit or consider offers to purchase such Restaurant Property, irrespective of
the terms of any such offer that may be received by the Managing General
Partner.
8.04. RESTRICTIONS ON TRANSFER OF RESTAURANT PROPERTIES.
(a) For purposes of this Section 8.04, the term "transfer," with respect
to a Restricted Restaurant Property, shall include a sale, lease, sublease,
gift, mortgage, deed of trust, exchange, assignment, or other disposition,
including a disposition under judicial order, legal process, execution,
attachment, or enforcement or foreclosure of an encumbrance, but shall not
include the following: (i) a mortgage, deed of trust, grant of security
interest, or other encumbrance effected in a bona fide transaction with an
unrelated and unaffiliated secured party or with BKC, the Managing General
Partner, or any Affiliate thereof, to Secure indebtedness of the Partnership for
money borrowed from such secured party, which mortgage, deed of trust, grant of
security interest, or other encumbrance is made pursuant to a written security
agreement, mortgage, deed of trust, or other agreement that assures that, before
any foreclosure may be had thereon or other transfer may occur thereunder or in
connection therewith, the secured party shall first notify BKC in writing of its
intent to foreclose or effect another transfer and shall first offer the
Restaurant Property to BKC at the price and on the other terms and conditions
specified in a written offer from a prospective purchaser (which may be the
secured party) in connection with such foreclosure or other transfer; (ii) a
lease or sublease-to BKC or a BKC Franchisee in order to permit the operation of
a BK Restaurant on a Restricted Restaurant Property; (iii) a grant of easement,
right-of-way, or other right with respect to a Restricted Restaurant Property to
any public utility or other governmental authority in connection with the
provision of utility or other public service (but such grant shall comply with
the provisions of Section 8.04(b)); or (iv) a transfer to a governmental
authority pursuant to or in connection with a condemnation or other exercise of
the power of eminent domain.
(b) The Partnership shall not, without the prior written consent of BKC,
in BKC's sole and absolute discretion: (i) at any time that a Restricted
Restaurant Property is being leased to BKC or a BKC Franchisee in order to
permit BKC or such BKC Franchisee to operate a BK Restaurant on the Restaurant
Property or during any applicable Determination Period, lease or sublease all or
any part of a Restricted Restaurant Property to any other Person, whether or not
such other lease would be subject or subordinate to the lease to BKC or the BKC
Franchisee; or (ii) grant or convey any easement, right-of-way, or other right
with respect to such Restaurant Property if the grant or use thereof would have
a material adverse effect upon the operation of a BK Restaurant on the
Restaurant Property.
(c) Except as provided in Section 8.04(b), the Partnership shall not
transfer (as defined in Section 8.04(a)) any right, title, or interest in or to
any Restricted Restaurant Property, or any part thereof, to any person or entity
without first offering it to BKC in accordance with the provisions of this
Section 8.04(c). Subject to the provisions of Section 8.04(b), if the
Partnership receives a bona fide written offer from an independent third party
to acquire in a transfer all, or any part of any Restricted Restaurant Property
that the Partnership intends to accept, subject to this Section 8.04(c), then
the Partnership shall offer such Restaurant Property to BKC at the price and on
the terms and conditions (including timing and manner of payment) contained in
such bona fide written offer. The offer of such Restaurant Property to BKC (the
"Offer") shall be made in writing and shall be accompanied by a true and correct
copy of the bona fide written offer. The Partnership promptly shall provide or
cause to be provided to BKC such information relating to the Offer or the third-
party offeror as BKC reasonably may request.
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(d) In order to accept the Offer, BKC shall, within thirty (30) days after
receipt of The Offer (or, if later, within five (5) business days after receipt
of all additional information reasonably requested by BKC pursuant to Section
8.04(c) (such 30-day period and any extension under this Section 8.04(d) to be
referred to as the "Election Period")), notify the partnership in writing of its
election to acquire such Restaurant Property; provided, however, that BKC shall
not be required to acquire such Restaurant Property upon the terms and
conditions of any third-party offer the consideration for which is not
practicably obtainable by BKC (such as, by way, of example and not of
limitation, specific land, stock in a closely held corporation, or stock in a
publicly held corporation.that cannot be acquired by BKC without an increase in
the trading price thereof or without registration or filing under any federal or
state securities law), but BKC shall have the right to acquire such Restaurant
Property upon terms and conditions (including consideration) reasonably
equivalent to those contained in such offer; and provided further, that the
failure of BKC to acquire such Restaurant Property upon any such reasonably
equivalent terms or conditions shall not permit the Partnership to transfer such
Restaurant Property pursuit to Section 8.04(f). Failure of BKC to provide such
written notice within the Election Period shall constitute a refusal by BKC to
purchase such Restaurant Property pursuant to the Offer.
(e) The closing date of any acquisition of such Restaurant Property by BKC
hereunder shall be on the date fixed in the third-party offer unless such
closing date would occur prior to the expiration of twenty (20) business days
after the last day of the Election period, in which event the closing date shall
occur on such twentieth (20th) business day or on such other date to which BKC
and the Partnership may agree.
(f) If BKC shall fail to elect to acquire such Restaurant Property
pursuant to Section 8.04(d), or shall fail to close the acquisition on the date
required by Section 8.04(e), then the partnership shall be free, for a period of
sixty (60) days after either such failure, to transfer such Restaurant Property
to the bona fide third-party offeror for a price and on other terms and
conditions contained in such third-party offer. If such Restaurant Property is
not so transferred by the partnership within such sixty (60) day period, all
rights of the partnership to transfer such Restaurant Property free of the
foregoing restrictions shall terminate and such Restaurant Property again shall
he subject to the provisions of this Section 8.04.
(g) Unless otherwise expressly waived by BKC in writing, the provisions of
this Section 8.04 shall remain in effect and the rights granted hereunder shall
be exercisable and enforceable by BKC with respect to each Restricted Restaurant
Property during the period commencing on the date of the Amended Agreement and
ending on the earlier of (i) the date that the partnership first ceases to hold
any right, title, or interest (including an interest as a creditor) in or to
such Restaurant property or (ii) the date that the use restrictions set forth in
Section 8.03 terminate or would have terminated but for an early termination
pursuant to the provisions contained in Section 8.03(e); provided, however, That
if the duration of such period would render the provisions of this Section 8.04
or the rights of BKC hereunder invalid or. unenforceable under the rule against
perpetuities as applied in the jurisdiction in which a Restricted Restaurant
Property is located, then such period shall continue with respect to such
Restaurant Property only until the expiration of the longest of the following
periods which shall be valid under the rule against perpetuities as applied in
such jurisdiction: (i) the period ending twenty-one (21) years after the death
of the survivor of the legitimate natural or adopted children and grandchildren
of U.S. presidents Kennedy, Johnson, Nixon, Ford, Carter, and Reagan alive on
the date of the Amended Agreement; (ii) twenty-one (21) years after the date of
the Amended Agreement or (iii) such other term as may be statutorily prescribed
in such jurisdiction. It is the express intent of BKC, the partnership, and the
Partners that the provisions hereof and rights of BKC hereunder shall he
exercisable and enforceable by BKC to the fullest extent permitted by the laws
of such jurisdiction.
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8.05. RENT RELIEF.
(a) The Managing General Partner, in its sole and absolute discretion, at
the request of BKC or a BKC Franchisee, shall be permitted to cause the
Partnership to grant "rent relief" (as defined in Section 8.05(b)) to a BKC
Franchisee with respect to any Restricted Restaurant Property upon the condition
that BKC agree to make a quarterly payment to the Partnership for each fiscal
quarter (with such payment to be due and payable thirty (30) days after the end
of each such fiscal quarter) during which such "rent relief" is in effect,
irrespective of whether or not the Partnership subsequently sells or otherwise
disposes of such Restaurant Property while such "rent relief" is in effect in an
amount equal to the product of (a) the total dollar amount of the rent reduction
with respect to such Restaurant Property effective for such fiscal quarter
pursuit to such "rent relief" multiplied by (b) a fraction, (i) the numerator of
which is the dollar amount of the franchise royalty fee payable to BKC with
respect to such Restaurant Property for such fiscal quarter (exclusive of any
amount required under the applicable BKC Franchise Agreement to be expended by
BKC for advertising and any other income to BKC) (the "Franchise Royalty Fee")
and (ii) the denominator of which is the sum of the Franchise Royalty Fee and
the dollar amount of rent payable with respect to such Restaurant Property for
such fiscal quarter (determined without regard to any "rent relief" applicable
with respect to such Restaurant Property) (the "Rental Amount"). By way of
illustration, if the applicable Franchise Royalty Fee for a Restaurant Property
for a particular fiscal quarter were $35,000 and the applicable Rental Amount
for such Restaurant Property for such fiscal quarter were $100,000, and if the
Partnership, at the request of BKC or at the request of a BKC Franchisee and
with the consent of BKC, were to grant "rent relief" with respect to such
Restaurant Property for such fiscal quarter in the amount of $20,000, then BKC
would be obligated to pay to the Partnership $5,185 (the product of
$35,000/$135,000 multiplied by $20,000) within thirty (30) days after the end of
such fiscal quarter. The obligation of BKC to make payments to the Partnership
in connection with "rent relief" granted hereunder shall continue until the
"rent relief terminates (or, if sooner, the lease with respect to which the
"rent relief" is granted terminates or expires), notwithstanding any intervening
sale or other disposition by the Partnership of the Restaurant Property with
respect to which such "rent relief" is granted.
(b) As used here the term "rent relief" shall mean (i) any permanent
reduction in rent payable with respect to a Restricted Restaurant Property, (ii)
any temporary reduction in rent payable with respect to a Restricted Restaurant
Property (A) if such temporary reduction is for a period in excess of either
ninety (90) consecutive days or ninety (90) days, whether or not consecutive, in
any Fiscal Year, or (B) if such temporary reduction is granted while a BK
Restaurant is being replaced, reconstructed, expanded, or otherwise improved
under the BKC "Successor Policy" to take into account the fact that such BK
Restaurant is not operating or is operating on a limited basis during such
period, or (C) if such temporary reduction is for a period of ninety (90)
consecutive days or less and the Managing General Partner specifically
designates such reduction as "rent relief" subject to this Section 8.05;
provided, however, that in no event shall the term "rent relief" include any
reduction in rent payable with respect to a Restricted Restaurant Property
granted in connection with the BKC "Successor Policy" if such reduction in rent
payable is subject to Section 8.06(b). Notwithstanding anything to the contrary
herein, the Managing General Partner shall not be considered to have caused the
Partnership to grant "rent relief" hereunder, and no payment from BKC to the
Partnership shall be due hereunder, as the result of or in connection with any
failure of a BKC Franchisee without the express written consent of the Managing
General Partner, to make any payment of rent due the Partnership with respect to
a Restricted Restaurant Property (i) if such failure does not continue for a
period in excess of ninety (90) consecutive days, or (ii) if either the lease
with such BKC Franchisee shall have automatically terminated or the Managing
General Partner shall have caused the Partnership to seek to terminate the
Partnership's lease with such BKC Franchisee with respect to such Restaurant
Property and in either event, the Managing General Partner shall have caused the
Partnership to initiate and pursue such action (including
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litigation, if appropriate) against such defaulting BKC Franchisee as the
Managing General Partner, in its sole and absolute discretion, shall
determine to be appropriate under the circumstances in order to obtain
payment of rents (including lost rent) due the Partnership under its lease
with the defaulting BKC Franchisee. In the event that BKC makes any payment
to the Partnership pursuant to this Section 8.05 in connection with "rent
relief" deemed granted hereunder and the Partnership subsequently shall
collect such "rent relief" from the BKC Franchisee, then the Partnership
shall refund to BKC the amount paid by BKC in connection With such "rent
relief."
8.06. SUCCESSOR POLICY.
BKC maintains a "Successor Policy" relating to the extension and/or renewal
of BKC Franchise Agreements with BKC Franchisees. In connection with such
extensions and/or renewals, the "Successor Policy," in order to help ensure that
the BK Restaurant system remains competitive, makes provision for the
replacement, reconstruction, expansion, and/or other improvement (collectively
"rebuilding") of existing BK Restaurants owned or leased by BKC and leased or
subleased to BKC Franchisees if such BK Restaurants meet certain criteria
established by BKC. Under the BKC "Successor Policy" as currently in effect,
BKC must determine whether or not a BK Restaurant should be rebuilt. If BKC
determines that a BK Restaurant should be rebuilt under the "Successor Policy"
and BKC elects to pay the cost of rebuilding, then the terms of the lease with
respect to such BK Restaurant is extended and the BKC Franchisee's guaranteed
"minimum rental" payable under such lease is adjusted. In the event BKC does not
elect to pay the cost of rebuilding a BK Restaurant designated by BKC to be
rebuilt under the "Successor Policy," then, with the consent of BKC, the BKC
Franchisee can elect to pay such cost, in which event the percentage rent
payable with respect to such BK Restaurant is reduced from 8.5 percent (8.5%) to
5.5 percent (5.5%) of annual gross sales at such BK Restaurant, the term of the
lease with respect to such BK Restaurant is extended, and the guaranteed minimum
rent payable under such lease is adjusted. The Managing General Partner shall
cause the Partnership to implement, with respect to the Restricted Restaurant
Properties, those aspects of BKC's "Successor Policy" related to the rebuilding
of BK Restaurants, as such policy is currently in effect and as such policy may
be modified, amended, supplemented, superseded, or replaced by BKC from time to
time in its sole and absolute discretion, in order to cause those Restaurant
Properties designated by BKC, in its sole and absolute discretion, to be rebuilt
under such "Successor Policy" to be rebuilt, subject to satisfaction by BKC of
the following conditions:
(a) In the event that the BKC Franchisee for a Restricted Restaurant
Property that is designated by BKC to be rebuilt under the "Successor Policy"
does not pay the cost of such rebuilding, then the Managing General Partner
shall cause the Partnership to rebuild such Restaurant Property upon the
condition That BKC pay to the Partnership, at the time such rebuilding is
commenced, an amount equal to the product of (i) the total dollar amount of
funds to be expended by the Partnership for purposes of rebuilding such
Restaurant Property multiplied by (ii) a fraction, (A) the numerator of which is
the weighted annual average of the percentage rates applicable for determining
the franchise royalty fees payable to BKC with respect to such Restaurant
Property over the remaining term of the lease under the BKC Franchise Agreement
in effect with respect to such Restaurant Property (exclusive of any amounts
required under the applicable BKC Franchise Agreement to be expended by BKC for
advertising and other income to BKC) (the "Average Franchise Royalty Rate") and
(B) the denominator of which is the sum of the Average Franchise Royalty Rate
and the weighted annual average of the percentage rates applicable for
determining the percentage rent payable to the Partnership with respect to such
Restaurant Property on the basis of sales over the remaining term of the lease
with the BKC Franchisee in effect with respect to such Restaurant Property (the
"Average Percentage Rent Rate"). By way of illustration, if the applicable
Average Percentage Rent Rate for a particular Restaurant Property were 8.5
percent and the
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applicable Average Franchise Royalty Rate for such Restaurant Property were
3.5 percent, and if the total cost to rebuild such Restaurant Property
pursuant to the "Successor Policy" were $500,000, then BKC would be obligated
to pay to the Operating Partnership, at the time the rebuilding of such
Restaurant Property commenced, $145,833 (the product of 3.5/12 multiplied by
$500,000). The Managing General Partner shall cause the Operating
Partnership to pay the Operating Partnership's share of the cost of
rebuilding a Restricted Restaurant Property to be rebuilt under the
"Successor Policy," in its sole and absolute discretion, (i) from current
operating cash flow of the Operating Partnership or otherwise to the extent
available or (ii) with funds borrowed from a lender (including, subject to
Section 7.13, BKC or any Affiliate of BKC), on such terms and conditions as
the Managing General Partner shall, in its sole and absolute discretion,
determine advisable, with the payments of principal and interest required
with respect to any such loan to be paid from operating cash flow or
otherwise to the extent available; and
(b) In the event that the BKC Franchisee for a Restricted Restaurant
Property that is designated by BKC to be rebuilt under the "Successor Policy"
pays the cost of such rebuilding and thus would be entitled to a reduction in
rent payable with respect to such Restaurant Property, then BKC would make a
quarterly payment to the Operating Partnership for each fiscal quarter during
the period during which such rent reduction is in effect, irrespective of
whether or not the Operating Partnership subsequently sells or otherwise
disposes of such Restaurant Property while such rent reduction is in effect
(with such payment to be due and payable thirty (30) days after the end of each
such fiscal quarter) in an amount equal to the product of (i) the total dollar
amount of the rent reduction effective with respect to such fiscal quarter
pursuit to the "Successor Policy" multiplied by (ii) a fraction, (A) the
numerator of Which is the percentage rate for determining the franchise royalty
fee payable to BKC with respect to such Restaurant Property for such fiscal
quarter (exclusive of any amount required under the applicable BKC Franchise
Agreement to be expended by BKC for advertising and other income to BKC) (the
"Franchise Royalty Rate"), and (B) the denominator of which is the sum of the
Franchise Royalty Rate and the percentage rate for determining the rent payable
to the Operating Partnership with respect to such Restaurant Property on the
basis of sales for such fiscal quarter (the "Percentage Rent Rate"). By way of
illustration, if the applicable Percentage Rent Rate for a Restaurant Property
for a particular fiscal quarter were 8.5 percent and the applicable Franchise
Royalty Rate for such Restaurant Property for such fiscal quarter were 3.5
percent, and if the BKC Franchisee for such Restaurant Property were to be
entitled under the "Successor Policy" to a reduction in the applicable
Percentage Rent Rate to 5.5 percent if such BKC Franchisee were to rebuild such
Restaurant Property pursuant to the "Successor Policy," then, assuming that such
BKC Franchisee's rent payable following such rent reduction exceeds the minimum
base rent payable to the Operating Partnership with respect to such fiscal
quarter, BKC would be obligated to pay to the Operating Partnership an amount
equal to the product of (i) 3.5/12 multiplied by (ii) the product of (A) 3
percent multiplied by (3) the gross sales at such Restaurant Property for such
fiscal quarter. The obligation of BKC to make payments to the Operating
Partnership under this Section 8.06(b) in connection with a rent reduction
granted hereunder shall continue until the lease under which such rent reduction
is granted, terminates or expires, notwithstanding any intervening sale or other
disposition by the Operating Partnership of the Restaurant Property with respect
to which such rent reduction is granted.
In the event the guaranteed minimum rent payable pursuant to any lease with
respect to a Restricted Restaurant Property is adjusted in connection with the
rebuilding of a BK Restaurant pursuant to the "Successor Policy," then
notwithstanding any other provision of the Agreement or of the "Successor
Policy," the "fair market value of the original property" for purposes of
determining the amount of such adjustment shall be equal to the replacement cost
of such property, as determined by the Appraiser. Notwithstanding anything to
the contrary herein, BKC, in its sole and absolute discretion, may elect not to
designate a particular Restricted Restaurant Property to be rebuilt under the
"Successor Policy," in which event the BKC Franchisee for such Restaurant
Property shall be solely responsible for the cost of
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rebuilding and shall not be entitled to any reduction in rent payable with
respect to such Restaurant Property. BKC in no event shall be entitled to any
fee or other payment from the Partnership in connection with the rebuilding
of a Restaurant Property under the "Successor Policy.
In addition to the foregoing, BKC, separate and apart from implementation
of the "Successor Policy," from time to time may request that the Partnership
acquire property adjacent to a Restaurant Property for purposes of permitting
expansion of the BK Restaurant or related facilities (such as parking) located
on such Restaurant Property. The Managing General Partner shall cause the
Partnership to acquire any such adjacent property upon the request of BKC upon
the condition that BKC pay to the Partnership, at the time such acquisition
occurs an amount determined in accordance with the formula set forth in
paragraph 8.06(a) above.
8.07. COMPETITIVE FACILITIES.
Without in any way limiting the generality of Section 7.06, the Limited
Partner recognizes that BKC, TPC, and Affiliates thereof are in the business of
establishing, own, leasing, operating, managing, and franchising restaurants,
including, without limitation, BK Restaurants, and that in connection with such
businesses, BKC, TPC, and/or Affiliates thereof may from time to time establish,
own, lease, operate, manage, and/or franchise new restaurants, including,
without limitation, BK Restaurants. Both such existing restaurants and any
such new restaurantS may be competitive with one or more of the Restaurant
Properties and may adversely affect the revenues of the Partnership with respect
to one or more of the Restaurant Properties. The Limited Partner expressly
consents to all actions of BKC, TPC and any Affiliate of either in connection
both with existing restaurants and with any new restaurants and agrees that
neither BKC, TPC and the Managing General Partner, nor any Affiliate of any of
them shall incur any liability to the Partnership or the Limited Partner as the
result of or in connection with any such action.
8.08. ACQUISITION OF RESTAURANT PROPERTIES BY GENERAL PARTNERS OR
AFFILIATES.
Notwithstanding any other provision of this Agreement, including, without
limitation, Sections 7.02(v) and 8.04(d), (e), and (f), no Person that is a
General Partner or an Affiliate of a General Partner shall acquire any
Restaurant Property from the Partnership, whether by purchase, exchange, or
substitution, unless the consideration received by the Partnership for such
Restaurant Property is at least equal to the "fair market value" (as hereinafter
defined) of such Restaurant Property, as determined by the Appraiser; provided,
however, that this Section 8.08 shall have no application to any acquisition of
a Restaurant Property by BKC pursuant to Section 8.04 if, at the time of such
acquisition, neither BKC nor any Affiliate of BKC is a General Partner. Any
acquisition of a Restaurant Property, whether by purchase, exchange, or
substitution, by a Person who is a General Partner or an Affiliate of a General
Partner for consideration that is at least equal to the "fair market value" (as
hereinafter defined) of such Restaurant Property, as determined by the
Appraiser, conclusively shall be deemed to be fair and in the best interests of
the Partnership. As used herein, the term "fair market value" shall mean the
value that would be obtained in an arms length transaction between an informed
and willing purchaser under no compulsion to buy and an informed and willing
seller under no compulsion to sell, as determined by the Appraiser, using such
method or methods of valuation as the Appraiser determines most accurately
reflect the value of the particular Restaurant Property in question under the
circumstances, provided that for a period of five (5) years from the Closing
Date, the Appraiser shall use the "capitalization of income" method (applying
such capitalization rate and other assumptions and adjustments as the Appraiser
determines appropriate under the circumstances) unless the Appraiser determines
that the use of such method would result in an understatement of the value of
the Restaurant
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Property with respect to which such appraisal is being performed. For
purposes of this Section 8.08, in the event that any consideration to be
received by the Partnership in exchange or substitution for any Restaurant
Property is in any form other than money, then the "fair market value" of
such consideration, as determined by the Appraiser, (or if such other
consideration is in the form of property other the real estate, by an
appraiser experienced in valuing such other property designated by the
Appraiser), shall be required to be at least equal to the "fair market value"
of the Restaurant Property or Properties to be transferred.
8.09 TERMINATION OF LEASE FOR RESTAURANT PROPERTY FOLLOWING TERMINATION OF BKC
FRANCHISE AGREEMENT.
(a) In the event that (i) either (A) a BKC Franchise Agreement authorizing
the operation of a BK Restaurant is terminated by BKC or by the mutual agreement
of the parties thereto prior to the expiration of the stated term thereof, or
(B) a BKC Franchise Agreement expires according to the terms thereof and is not
renewed by BKC at or prior to the expiration of such BKC Franchise Agreement,
and (ii) BKC does not, prior to the end of the Determination Period (as defined
in Section 8.03) enter into a new BKC Franchise Agreement with respect to the
Restricted Restaurant Property or elect to operate a BK Restaurant on the
Restricted Restaurant Property, as provided for in Section 8.03(b) (ii), then
the Managing General Partner, in its sole and absolute discretion, shall be
permitted to cause the Partnership to terminate any lease with a BKC Franchisee
with respect to such Restaurant Property if a default has occurred under such
lease and either (i) the Managing General Partner shall have caused the
Partnership to initiate and pursue such action (including, if appropriate,
litigation) against such defaulting lessee as the Managing General Partner, in
its sole and absolute discretion, shall determine to be reasonable under the
circumstances in order to obtain payment of amounts (including lost rent) due
the Partnership under such lease, or (ii) the Managing General Partner or the
defaulting lessee shall have located a new lessee for the Restaurant Property
for a term at least as long as the remaining unexpired term under the lease to
be terminated and for a rent not lower than the minimum base rent payable under
such lease (or if the rent is lower than the minimum base rent payable under the
lease to be terminated, the defaulting lessee shall have agreed to be
contractually obligated to continue to pay to the Partnership an amount equal to
the difference between the rent payable under the new lease and the minimum base
rent payable under the lease to be terminated and shall have provided adequate
security, as determined by the Managing General Partner to be reasonable under
the circumstances, for such obligation).
(b) In addition to any termination in accordance with Section 8.09(a) and
any termination in accordance with Section 8.03(b)(ii), the Managing General
Partner, in its sole and absolute discretion, shall be permitted, without
limitation, to cause the Partnership to terminate a lease with a BKC Franchisee
with respect to a Restricted Restaurant Property if the BKC Franchise Agreement
with respect to such Restaurant Property is terminated in connection with or as
a result of a condemnation involving all or substantially all of a Restricted
Restaurant Property or a casualty materially adversely affecting the use of such
Restaurant Property for the purpose of operating a BK Restaurant for a period in
excess of six (6) months.
(c) The provisions of this Section 8.09 shall not limit or affect in any
way the termination of a lease with respect to a Restricted Restaurant Property
with a Person that is not and was not a BKC Franchisee. The provisions of this
Section 8.09 are for the benefit of the Partnership, the Limited Partner, and
the limited partners of the Limited Partner and their assignees, and shall not
be deemed to create any rights for the benefit of any other Persons, including,
without limitation, any lessees under leases with the Partnership.
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8.10. INDEPENDENT CONSULTANT.
(a) The Managing General Partner, in its sole and absolute discretion,
shall be entitled but not required, to consult with the Independent Consultant
with respect to any action or proposed action affecting or relating to the
Partnership or the Limited Partner or their business. In the event that the
Managing General Partner shall elect to consult with the Independent Consultant
with respect to any such action or proposed action, then the Independent
Consultant shall advise the Managing General Partner whether such action or
proposed action is contrary to the interests of the Partnership or the Limited
Partner, as the case may be, taking into account, with respect to the Restricted
Restaurant Properties, that the original purpose of the Partnership and the
Limited Partner was to acquire and hold real estate that is leased to BKC
Franchisees for the purpose of operating BK Restaurants and to derive revenues
therefrom. The Limited Partner expressly agrees that any actions taken by the
Managing General Partner in accordance with the advice of the Independent
Consultant conclusively shall be deemed to be fair to and in the best interests
of the Partnership, the Limited Partner, and the limited partners of the Limited
Partner and their assignees, and the fact that an action of the Managing General
Partner is undertaken in accordance with the advice of the Independent
Consultant shall be a complete and absolute defense to any claim or action
asserting the invalidity of such action or any claim or action for damages or
other relief based upon an assertion that such action resulted in a breach by
the Managing General Partner or any of its Affiliates of this Agreement or any
duty, fiduciary or otherwise, owed by the Managing General Partner or any
Affiliate to the Partnership, the Limited Partner, or the limited partners of
the Limited Partner or their assignees. The Limited Partner further
acknowledges that the purpose of this Section 8.10 is to provide an arrangement
to facilitate outside consultation by the Managing General Partner with respect
to potential problems arising in connection with the management of the
Partnership and the Limited Partner and expressly agrees that, in order to
induce the Managing General Partner to consent to this Section 8. 10 and to
undertake such consultation from time to time as it determines appropriate,
neither the failure of the Managing General Partner to consult with the
Independent Consultant on any particular action or proposed action, nor the
failure of the Managing General Partner to act in accordance with the advice of
the Independent Consultant on any action or proposed action with respect to
which the Managing General Partner shall elect to consult with the Independent
Consultant, shall create any inference or presumption or otherwise constitute
evidence with respect to the fairness of such action or proposed action to the
Partnership, the Limited Partner, or the limited partners of the Limited Partner
or their assignees, as the case may be.
(b) In the event that the Independent Consultant designated in this
Agreement at any time is unable or unwilling to advise the Managing General
Partner on a particular matter or should inform the Managing General Partner
that it no longer is willing to serve as Independent Consultant, then the
Managing General Partner shall designate a substitute Independent Consultant, as
provided for below. The Managing General Partner shall have the right at any
time, in its sole and absolute discretion, to terminate the Independent
Consultant and to designate a substitute Independent Consultant, as provided for
below; provided, however, that the Managing General Partner shall have no
obligation to the Partnership or the Limited Partner, as the case may be, to
terminate the Independent Consultant under any circumstances, and provided
further that any termination of the Independent Consultant pursuant to this
Section 8.10(b) conclusively shall be deemed to be fair to and in the best
interests of the Partnership and the Limited Partner. Any substitute
Independent Consultant designated by the Managing General Partner pursuant to
this Section 8.10(b) shall have experience in advising or consulting about the
"fast food" business and shall be "financially independent" (as hereinafter
defined) of the Managing General Partner. A Person shall be deemed
"financially, independent" of the Managing General Partner for purposes of this
Section 8.10(b) if (i) such Person is not, and during the preceding four (4)
years has not been,
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a BKC Franchisee or Affiliate of the Managing General Partner, of BKC, of TPC
or of a BKC Franchisee; and (ii) such Person has not derived more than
fifteen percent (15%) of such Person's average annual gross revenues over the
preceding four (4) years from the Managing General Partner, BKC, TPC, any BKC
Franchisee, and any Affiliate of any of the foregoing.
(c) The Managing General Partner, in its sole and absolute discretion,
either (i) may cause the Partnership to indemnify and hold harmless the
Independent Consultant upon such terms and conditions as the Managing General
Partner shall determine appropriate or (ii) may indemnify and hold harmless the
Independent Consultant upon such terms and conditions as the Managing General
Partner shall determine appropriate, in which event the Partnership shall
indemnify the Managing General Partner for any amounts required to be paid under
such indemnification; provided, however, that in either case, the terms and
conditions of such indemnification shall be no more favorable to the Independent
Consultant than the terms and conditions pursuant to which the General Partners,
their Affiliates, and officers, directors, employees, and agents of the General
Partners and their Affiliates are indemnified and held harmless pursuant to
Section 7.10.
8.11. CONSENT TO USE OF NAME AND TRADEMARKS.
BKC's consent to the Partnership's use of the words "Burger King" in the
name of the Partnership and to the Partnership's use of the registered
trademarks and service marks Burger King-Registered Trademark-, Whopper-
Registered Trademark-, Whopper Junior-Registered Trademark-, and the Burger King
bun halves logo in the Registration Statement, all sales materials and other
documents prepared for use in connection with the Initial Public Offering, any
reports to or written communications with the Limited Partner, and any reports
filed by the Partnership with any federal, state, or local regulatory agency
terminated upon the withdrawal of BKC as the Special General Partner.
8.12. ACQUISITION OF FEE TITLE TO PROPERTIES SUBJECT TO PRIMAL LEASES.
The Managing General Partner shall have the right, in its sole and absolute
discretion, to cause the Partnership to acquire fee title to any Restricted
Restaurant Property that is subject to a Primary Lease, either pursuant to a
right of first refusal on behalf of the Partnership set forth in such Primary
Lease or otherwise. BKC shall have no obligation to the Partnership in
connection with any such acquisition.
8.13. LOCATION OF OTHER RESTAURANT PROPERTIES.
The Partnership shall not acquire any Other Restaurant Properties within a
two-mile radius of any Restricted Restaurant Property held as of the Effective
Date.
ARTICLE IX
COMPENSATION OF GENERAL PARTNERS;
PAYMENT OF PARTNERSHIP EXPENSES
9.01. COMPENSATION TO GENERAL PARTNERS.
Except as expressly provided in Section 9.03, no General Partner shall
receive any compensation from the Partnership for services rendered in its
capacity as a general partner of the Partnership or the Limited Partner.
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9.02. EXPENSES M CONNECTION WITH ORGANIZATION OF PARTNERSHIP AND INITIAL
PUBLIC OFFERING.
As set forth in the Real Estate Purchase Agreement, BKC as the Special
General Partner reimbursed the Partnership for all fees, costs, and expenses
actually incurred by the General Partners and their Affiliates in connection
with the organization of the Partnership, the Limited Partner, and the Managing
General Partner; the qualification of the Partnership, the Limited Partner, and
the Managing General Partner to do business in any State in which the Managing
General Partner determined that such qualification was advisable; the
registration of the Units under applicable federal and state securities laws in
connection with the Initial Public Offering; the offering, sale, and
distribution of the Units pursuant to the Initial Public Offering; the listing
of the Units evidenced by depositary receipts on a National Securities Exchange;
the purchase of certain Restaurant Properties by the Partnership; and planning
and preparing for the operation and management of the Partnership and the
Limited Partner following the Initial Public Offering, including, without
limitation, (i) printing, mailing, filing, and recordation expenses; (ii)
charges of agents, depositaries, appraisers, and the Underwriters; (iii)
expenses of registration and qualification of the Units under applicable federal
and state securities laws; (iv) legal (including tax advice) and accounting fees
and disbursements; (v) remuneration paid to officers or employees of any General
Partner or any Affiliate that is allocable to time spent on such activities; and
(vi) other expenses of a similar nature incurred by any General Partner or any
Affiliate in connection with such activities.
9.03. OPERATIONAL EXPENSES.
In addition to any reimbursement pursuant to the indemnification set forth
in Section 7. 10, the Partnership, pursuant to this Section 9.03 and Section
9.03 of the Investors Partnership Agreement, shall:
(a) With respect to (i) the Restaurant Properties held as of the Effective
Date and (ii) the Restaurant Properties and Ancillary Property related thereto
acquired thereafter with respect to the Restaurant Properties referred to in
clause (i) above whether pursuant to Section 8.12 or otherwise, the Partnership
shall cause to be paid to the Managing General Partner with respect to each
Fiscal Year an aggregate amount equal to Four Hundred Thousand Dollars
($400,000) adjusted annually as set forth in the next paragraph below, which
amount shall be in lieu of any reimbursement for expenses related to the
management of the business affairs of the Partnership and the Limited Partner
(other than expenses described in clause (c) hereof) that are incurred by the
Managing General Partner or its Affiliates with respect to such Restaurant
Properties, which amount shall be payable in equal quarterly installments within
sixty (60) days after the end of each fiscal quarter.
(b) With respect to any Restaurant Property and Ancillary Property related
thereto acquired after the Effective Date (other than those referred to in
clause (a) above), (i) the Partnership shall pay to the Managing General Partner
(A) an acquisition fee equal to 1% of the purchase price paid by the Partnership
or the Limited Partner for such Restaurant Property and Ancillary Property
related thereto, payable on the date of acquisition, and (B) with respect to
each Fiscal Year, an amount, adjusted annually as set forth in the next
paragraph below, accruing while such property is held at the rate of 1% per
annum (applied using the simple interest method on the basis of a 365/366-day
year and the actual number of days elapsed) on the purchase price paid by the
Partnership or the Limited Partner for such Restaurant Property and Ancillary
Property related thereto, and (ii) if the Rate of Return attributable to all
Restaurant Properties and Ancillary Property related thereto acquired after the
Effective Date (other than those referred to in clause (a) above) in respect of
any Fiscal Year shall exceed 12% per annum, the Partnership shall pay to the
Managing General Partner an amount equal to 25% of the amount of cash received
by the Partnership representing such excess, which
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amounts shall be in lieu of any reimbursement of expenses related to the
management of the business affairs of the Partnership and the Limited Partner
(other than expenses described in clause (c) hereof) that are incurred by the
Managing General Partner or its Affiliates with respect to such Restaurant
Properties and (except as provided in clause (i)(A) of this clause (b)) shall
be payable in quarterly installments within sixty (60) days after the end of
each fiscal quarter (which may be estimated in the case of the first three
fiscal quarters); provided that there shall be credited against the amounts,
if any, payable pursuant to clause (ii) of this clause (b) in respect of any
Fiscal Year amounts payable to the Managing General Partner in respect of its
First-Tier Residual Interest or Second-Tier Residual Interest pursuant to
Sections 6.05 and 6.06 of the Investors Partnership Agreement in respect of
such Fiscal Year.
(c) The Partnership shall either pay, or reimburse the Managing
General Partner on a monthly basis for the payment of, all amounts payable
to any Person for providing goods or performing services (including,
without limitation, legal, accounting, auditing, record keeping, reporting,
depositary, transfer agent, printing, appraisal, and consulting services)
for or on behalf of the Partnership or the Limited Partner; provided,
however, that the Partnership shall not pay, or reimburse the Managing
General Partner for, the payment of any amount to an Affiliate or an
officer, director, or employee of an Affiliate for legal, accounting,
managerial, or consulting services; and provided further, that the
Partnership shall pay, or shall reimburse the Managing General Partner for,
a payment to an Affiliate or an officer, director, or employee of an
Affiliate for goods or other services only if the price and the terms upon
which such goods or services are provided to the Partnership or the Limited
Partner are fair to the Partnership or the Limited Partner, as the case may
be, and are not less favorable to the Partnership or the Limited Partner,
as the case may be, than would be incurred if the Partnership or the
Limited Partner were to obtain such goods or services from an unrelated
third party or were to engage employees to provide such goods or services
directly.
For 1987 and for each Fiscal Year thereafter, the amount payable
pursuant to clause (a) of the immediately preceding paragraph shall be
increased by an amount equal to the product of Four Hundred Thousand Dollars
($400,000) multiplied by the percentage increase in the Price Index from
January 1, 1986, through the last day of the immediately preceding Fiscal
Year. For each year after the year in which a Restaurant Property is
acquired, the amount otherwise payable pursuant to clause (b)(i)(B) of the
immediately preceding paragraph (the "Clause (b)(i)(B) Amount") shall be
increased by an amount equal to the product of the Clause (b)(i)(B) Amount
multiplied by the percentage increase in the Price Index from the first day
of the immediately preceding Fiscal Year or, in the case of the first year
after the year in which the Restaurant Property is acquired, the first day of
the month in which the acquisition occurred through the last day of the
Fiscal Year immediately preceding such year or, if earlier, the last day of
the month in which such property was disposed of. The percentage increase in
the Price Index through the last day of a particular period shall be determined
by calculating the increase, if any, in the Price Index for the last time
period during such period (the "Price Index Determination Period") with
respect to which the Price Index is published (currently a monthly period)
over the Price Index for the time period immediately preceding the first day
of the Price Index Determination Period, and expressing the amount of such
increase as a percentage of the Price Index for said time period immediately
preceding the first day of the Price Index Determination Period.
"RATE OF RETURN" in respect of any period shall mean and refer to
the quotient obtained by dividing (1) the aggregate revenues received by
the Partnership or the Limited Partner from the Restaurant Properties and
Ancillary Property referred to in clause (b) above for such period, whether
through operations, sale or other disposition, less (without duplication)
(i) the aggregate fees payable pursuant to clause (b)(i)(B) above for such
period in respect of such property, (ii) the aggregate expenses of the
Partnership (other than interest expense,
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depreciation, amortization and other non-cash expenses and charges, and
expenses described in clauses (b) and (c) above) directly attributable to
such property and interest expense on any debt allocated thereto for such
period, (iii) the general and administrative expenses of the Partnership
(other than non-cash expenses and charges and expenses described in clauses
(a) and (b) above) for such period allocated to such property (based on the
ratio of Average Partnership Equity in such property to the aggregate Average
Partnership Equity in all Partnership property) and (iv) the principal amount
of debt allocated to such property repaid during such period and, if
applicable, the cash costs and expenses of any kind or nature incurred in
respect of the sale or other disposition thereof, by (2) the Average
Partnership Equity in such property during such period. Average Partnership
Equity shall mean and refer to (A) the average of the sums of the aggregate
purchase prices therefor, the aggregate fees paid pursuant to clause
(b)(i)(A) above in respect thereof and all other cash costs and expenses of
any kind or nature incurred in connection with the acquisitions thereof
("Property Cost") as of the last day of each calendar month occurring during
the period of determination, less (B) the average outstanding principal amount
of debt of the Partnership outstanding as of the last day of each calendar
month during such period and allocated to such property.
For the purposes of the foregoing, debt of the Partnership shall be
allocated among the Partnership's properties as follows: (1) non-recourse debt
shall be allocated to the property secured thereby and, if such debt is secured
by more than one property, such debt shall be allocated among the properties
secured thereby based on the relative Property Costs thereof; and (2) recourse
debt shall be allocated to all of the property of the Partnership based on the
relative Property Costs thereof (reduced for this purpose by the amounts of non-
recourse debt allocated thereto in accordance with clause (l) above).
ARTICLE X
BANK ACCOUNTS; BOOKS AND RECORDS;
FISCAL YEAR; STATEMENTS; TAX MATTERS
10.01. BANK ACCOUNTS.
All funds of the Partnership shall be deposited in its name in such
checking and savings accounts, time deposits, certificates of deposit, or other
accounts at such banks or other financial institutions as shall be designated by
the Managing General Partner from lime to time, and the Managing General Partner
shall arrange for the appropriate conduct of any such account or accounts. The
Managing General Partner shall have fiduciary responsibility for the safekeeping
and use of the funds of the Partnership, whether or not in possession and
control of the Managing General Partner, and the Managing General Partner shall
not employ or permit any other Person to employ such funds except in accordance
with the terms of this Agreement. The Managing General Partner shall not permit
funds of the Partnership to be commingled with funds of the Managing General
Partner, any Affiliate, or any other Person, provided, however, that nothing
herein shall preclude any investment of funds of the Partnership in a mutual
fund or similar entity for which a separate account is maintained on behalf of
each participant.
10.02. BOOKS AND RECORDS.
(a) The Managing General Partner shall keep, or cause to be kept,
accurate, full, and complete books and accounts with respect to the Partnership,
showing assets, liabilities, income, operations, transactions, and the financial
condition of the Partnership. Such books and accounts shall be prepared and
maintained on the accrual basis of accounting in accordance with generally
accepted accounting principles. The Managing General Partner shall maintain and
preserve all Partnership books and records for such period as the Managing
General
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Partner, in its reasonable discretion, shall determine necessary or
appropriate, subject to any requirements of state or federal law; provided,
however, that all appraisal reports obtained by the Partnership, whether in
connection with the acquisition of the Restaurant Properties or otherwise, shall
be retained by the Partnership for at least five (5) years from the date
thereof.
(b) The Limited Partner shall have the right, at reasonable times and at
the Limited Partner's own expense, but only upon twenty (20) days prior written
notice to the Managing General Partner in accordance with Section 16.02, and
only for a valid business purpose related to the conduct of the Partnership's
business, (i) to have true and full information regarding the status of the
business and financial condition of the Partnership; (ii) to inspect and copy
the books of the Partnership and other reasonably available records and
information concerning the operation of the Partnership, including copies of any
appraisal reports described in Section 10.02(a) and copies of the federal,
state, and local income tax returns of the Partnership; (iii) to have a current
list of the name and last known business, residence, or mailing address of each
Partner; (iv) to have true and full information regarding the amount of cash and
a description and statement of the Carrying Value of any property or services
contributed by any Partner to the Partnership and the date upon which each
Partner became a Partner; and (v) to have a copy of this Agreement, the
Certificate of Limited Partnership, and all amendments or certificate of
amendment, as the case may be, thereto, together with copies of any powers of
attorney pursuant to which any such amendment or certificate of amendment has
been executed.
(c) Anything in this Section 10.02 to the contrary notwithstanding, the
Managing General Partner, in its sole and absolute discretion, may refuse the
Limited Partner access to any information, records, documents, or data it
determines to be confidential, including, without limitation, any records
relating to the sales or revenues or projected sales or revenues of one or more
specific BK Restaurants, information related to the financial condition or
circumstances of any BKC Franchisee or BKC's relationship with any BKC
Franchisee, and any other information provided to the Partnership by BKC and
specifically designated by BKC, in its reasonable discretion, to be confidential
and/or proprietary.
10.03. FISCAL YEAR.
The Fiscal Year of the Partnership for financial and federal, state, and
local income tax purposes initially shall be the calendar year. The Managing
General Partner shall have authority to change the beginning and ending dates of
the Fiscal Year if the Managing General Partner, in its sole and absolute
discretion, subject to approval by the Internal Revenue Service, shall determine
such change to be necessary or appropriate to the business of the Partnership,
and shall give written notice of any such change to the Limited Partner within
thirty (30) days alter the occurrence thereof.
10.04. FINANCIAL STATEMENT AND INFORMATION.
(a) All financial statements shall be accurate and complete in all
material respects, shall present fairly the financial position and operating
results of the Partnership, and shall be prepared on the accrual basis as
provided in Section 10.02 for each Fiscal Year of the Partnership during the
term of this Agreement.
(b) No later than forty-five (45) days after the end of each fiscal
quarter of each Fiscal Year (except the last fiscal quarter of each Fiscal
Year), commencing with the fiscal quarter ending June 30, 1986, the Managing
General Partner shall prepare and deliver to the Limited Partner an unaudited
statement of income for the Partnership for such fiscal quarter, an unaudited
statement of changes in cash flows for the period between the end of the most
recent Fiscal Year and the end of such fiscal quarter, and an unaudited balance
sheet of the
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Partnership dated as of the end of such fiscal quarter, in each case prepared
in accordance with generally accepted accounting principles, together with a
Statement setting forth any transactions between the Partnership and any of
the General Partners or any, the amount of any fees, commissions,
compensation, and other remuneration paid or accrued to any of the General
Partners or any Affiliate thereof, and a description of any services rendered
to the Partnership therefor, any other information required by Form 10-Q
under the Exchange Act, and such other information (financial or otherwise)
as the Managing General Partner, in its discretion, shall deem necessary or
appropriate.
(c) No later than ninety (90) days after the end of each Fiscal Year
during the term of this Agreement, the Managing General Partner shall prepare
and deliver to the Limited Partner: (i) a balance sheet, together with
statements of income, Partners' equity, and changes in cash flows for the
Partnership during such Fiscal Year, which financial statements shall be audited
by the Auditing Firm (such financial statements to contain a report of the
Auditing Firm which shall include: (A) a statement that an audit of such
financial statements has been made in accordance with generally accepted
auditing standards and that such financial statements are in conformity with
generally accepted accounting principles; (B) a statement of the opinion of the
Auditing Firm with respect to the financial statements and the accounting
principles and practices reflected therein and in regard to the consistency of
the application of such accounting principles; and (C) an identification of any
matters reflected in such financial statements to which the Auditing Firm takes
exception); (ii) a report Summarizing any transactions between the Partnership
and any of the General Partners or any Affiliate thereof, the amount of any
fees, commissions, compensation, and other remuneration (including, without
limitation, reimbursements of expenses pursuant to Section 9.03) paid or accrued
by the Partnership for such Fiscal Year to the General Partners and any
Affiliates thereof, and the services rendered to the Partnership in connection
therewith; (iii) a report of the activities of the Partnership during the Fiscal
Year; and (iv) a statement (which statement need not be audited) showing any
Cash Flow and any Net Proceeds of a Capital Transaction distributed or to be
distributed to the Partners in respect of such Fiscal Year.
(d) The Managing General Partner shall provide to each Partner, no later
than seventy-five (75) days after the close of the period covered thereby, an
earnings statement (in form complying with the provisions of Rule 158 under the
Securities Act) covering a period of twelve (12) months beginning not later than
the first day of the Partnership's fiscal quarter next following the effective
date of the Registration Statement.
(e) The Managing General Partner shall provide to the Limited Partner such
other reports and information concerning the business and affairs of the
Partnership (i) as the Managing General Partner, in its sole and absolute
discretion, may deem necessary or appropriate, or (ii) to the extent not
provided for in Sections 10.04(b) or (c) as may deem necessary or appropriate by
the Delaware RULPA or by any other law or any regulation of any regulatory body
applicable to the Partnership.
(f) The Managing General Partner shall provide any of the reports or other
information referred to in this Section 10.04 to such federal, state, or local
governments, government agencies, or other regulatory entities as the Managing
General Partner, in its sole and absolute discretion, may deem necessary or
appropriate.
10.05. ACCOUNTING DECISIONS.
All decisions as to accounting matters, except as specifically provided to
the contrary herein, shall be made by the Managing General Partner.
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10.06. WHERE MAINTAINED.
The books, accounts, and records of the Partnership at all times shall
be maintained at the Partnership's principal office or, at the option of the
Managing General Partner, at the principal place of business of the Managing
General Partner.
10.07. PREPARATION OF TAX RETURNS.
The Managing General Partner, at the expense of the Partnership, shall
arrange for the preparation and timely filing of all returns of the
Partnership showing all income, gains, deductions, and losses necessary for
federal and state income tax and shall furnish to the Limited Partner within
seventy-five (75) days of the close of the Fiscal Year the tax information
reasonably required for federal and state income tax reporting purposes. The
classification, realization, and recognition of income, gains, losses, and
deductions, and other items of the Partnership shall be on the accrual method
of accounting for federal income tax purposes.
10.08. TAX ELECTIONS.
Except as otherwise specifically provided herein, the Managing General
Partner shall, in its sole and absolute discretion, determine whether to make
any available election (including, without limitation, the elections provided
for in Sections 48(q)(4), 168 and 754 of the Code) on behalf of the
Partnership. The Managing General Partner shall have the right to seek to
revoke any such election upon the Managing General Partner's determination
that such revocation is in the interests of limited partners of the Limited
Partner; provided that the Managing General Partner shall not seek to revoke
any such election unless the Managing General Partner has received an Opinion
of Independent Counsel to the effect that such revocation would not cause (a)
the loss of limited liability of the Limited Partner under the Partnership
Agreement or of the limited partners of the Limited Partner under the
Investors Partnership Agreement, or (b) the Partnership or the Limited
Partner to be treated as an association taxable as a corporation for federal
income tax purposes.
10.09. TAX CONTROVERSIES.
Subject to the provisions hereof, the Managing General Partner is
designated as the "tax matters partner" (as defined in the Code) of the
Partnership and is authorized to and required to represent the Partnership
(at the expense of the Partnership) in connection with all examinations of
the affairs of the Partnership by any federal, state, or local tax
authorities, including any resulting administrative and judicial proceedings,
and to expend funds of the Partnership for professional services and costs
associated therewith. Each Partner agrees to cooperate with the Managing
General Partner and to do or refrain from doing any or all things reasonably
required by the Managing General Partner in connection with the conduct of
all such proceeding.
10.10. ORGANIZATIONAL EXPENSES.
The Partnership shall elect to deduct expenses considered incurred in
organizing the Partnership ratably over a sixty-month period as provided in
Section 709 of the Code.
10.11. TAXATION AS A PARTNERSHIP.
No election shall be made by the Partnership, the General Partners, or
the Limited Partner to be excluded from the application of any of the
provisions of Subchapter K, Chapter I of Subtitle A of the Code or from any
similar provisions of any state tax law.
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10.12. QUALIFICATION AS A REIT.
In the event that the Managing General Partner at any time shall
determine that either the Partnership or the Limited Partner does not
qualify, or no longer will qualify, as a partnership for federal income tax
purpose, then the Managing General Partner shall have the right, but not the
obligation, to take any such action as it, in its sole and absolute
discretion, determines to be in the interests of the Limited Partner in
connection therewith or as a result thereof, including, without limitation to
cause the Partnership and the Limited Partner to be reorganized so as to
qualify as a "real estate investment trust" within the meaning of Section 856
of the Code.
ARTICLE XI
TRANSFER OF INTERESTS
11.01. TRANSFER.
(a) The term "transfer," when used in this Article XI with respect to a
Partnership Interest, shall include any sale; assignment, gift, pledge,
hypothecation, mortgage, exchange, or other disposition.
(b) No Partnership. Interest shall be transferred in whole or in part
except in accordance with the terms and conditions set forth in this Article
XI. Any transfer or purported transfer of any Partnership Interest not made
in accordance with this Article XI shall be null and void.
11.02. TRANSFERS OF INTERESTS OF GENERAL PARTNERS.
(a) If a General Partner desires to sell or transfer all or any portion
of such General Partner's Partnership Interest as a General Partner to a
Person who is not a General Partner, such transfer shall be permitted if (and
only if):
(i) such transfer and the admission of the transferee as a general
partner of the Partnership is approved by the Limited Partner, unless the
transferee is an Affiliate of the transferring General Partner, in which
case no such approval of the Limited Partner shall be required; and
(ii) the Partnership receives an Opinion of Independent Counsel that
such transfer and admission (A) would not cause the loss of limited
liability of the Limited Partner under this Agreement or the limited
partners of the Limited Partner under the Investors Partnership Agreement,
and (B) would not cause the Partnership to be treated as an association
taxable as a corporation for federal income tax purposes.
(b) Neither Section 11.02(a) nor any other provision of this Agreement
shall be construed to prevent:
(i) the transfer by any corporate General Partner of such corporate
General Partner's Partnership Interest as a General Partner upon its merger
or consolidation with another Person or the transfer by it of all or
substantially all of its assets to another Person, and the assumption of
the rights and duties of such a corporate General Partner by such Person,
provided such Person furnishes to the Partnership an Opinion of Independent
Counsel to the effect that such merger, consolidation, transfer, or
assumption (l) would not cause the loss of limited liability of the Limited
Partner under this Agreement or the limited partners of the Limited Partner
under the Investors
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Partnership Agreement, and (2) would not cause the Partnership to be
treated as an association taxable as a corporation for federal income tax
purposes;
(ii) the transfer by a General Partner of all or any part of its
interest in items of Partnership income, gains, losses, deduction, credits,
distributions, or surplus; or
(iii) a General Partner's mortgaging, pledging, hypothecating, or
granting a security interest in all or any part of its Partnership Interest
as a General Partner as collateral for a loan or loans.
11.03. TRANSFER OF INTEREST OF LIMITED PARTNER.
The Limited Partner may not transfer all or any part of its Partnership
Interest as the Limited Partner.
ARTICLE XII
ADMISSION OF SUCCESSOR GENERAL PARTNERS
SECTION 12.01 ADMISSION OF SUCCESSOR GENERAL PARTNERS.
A successor General Partner selected pursuant to Sections 13.01 or 13.02
or the transferee of all or any portion of the Partnership Interest of a
General Partner pursuant to Section 11.02 shall be admitted to the
Partnership as a General Partner (in the place, in whole or in part, of the
transferor or former General Partner), effective as of the date that an
amendment of the Certificate of Limited Partnership, adding the name of such
successor General Partner and other required information, is recorded
pursuant to Section 2.01 (which date, in the event the successor General
Partner is in the place in whole of the transferor or former General Partner,
shall be contemporaneous with the withdrawal of such transferor or former
General Partner), and upon receipt by the transferor or former General
Partner of all of the following:
(a) the successor General Partner's acceptance of, and agreement to
be bound by, all of the terms and provisions of this Agreement, in form and
substance satisfactory to the transferor or former General Partner;
(b) evidence of the authority of such successor General Partner to
become a General Partner and to be bound by all of the terms and conditions
of this Agreement;
(c) the written agreement of the successor General Partner to
continue the business of the Partnership in accordance with the terms and
provisions of this Agreement; and
(d) such other documents or instruments as may be required in order
to effect the admission of the successor General Partner as a General
Partner under this agreement.
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ARTICLE XIII
WITHDRAWAL OR REMOVAL OF GENERAL PARTNERS
13.01. WITHDRAWAL OR REMOVAL OF GENERAL PARTNERS.
A General Partner may not withdraw from the Partnership or be removed as
a General Partner unless the General Partner withdraws as, or is removed as,
a general partner of the Limited Partner. A General Partner shall withdraw
from the Partnership or be removed as a General Partner if the General
Partner withdraws as, or is removed as, a general partner of the Limited
Partner. Such withdrawal or removal shall be effective at the same time as
is the General Partner's withdrawal or removal as a general partner of the
Limited Partner. The Limited Partner agrees that the selection of a successor
general partner of the Limited Partner shall constitute selection by the
Limited Partner of such successor as a successor General Partner of the
Partnership. If no such successor General Partner is selected and the
Partnership has no remaining General Partner, then the Partnership shall be
dissolved pursuant to Section 14.02.
13.02. AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP.
This Agreement and the Certificate of the Limited Partnership shall be
amended to reflect the withdrawal, removal, or succession of a General
Partner.
13.03. INTEREST OF DEPARTING PARTNER AND SUCCESSOR.
(a) Except as provided in Section 5.02(c), upon the withdrawal or
removal of a Departing Partner, such Departing Partner shall contribute its
Partnership Interest in the Partnership to the Limited Partner and shall
become a limited partner in the Limited Partner, receiving in connection
therewith, the number of Units determined by dividing (i) the "fair market
value" of such General Partner's Partnership Interest as a General Partner
herein, determined as of the effective date of its departure, by (ii) the
Unit Price determined as of the effective date of its departure.
(b) For purposes of this Section 13.03, the "fair market value" of the
Departing Partner's Partnership Interest as a General Partner shall be the
amount that would be distributed to the Departing Partner pursuant to Section
6.07 if the Partnership Assets were sold for cash in orderly liquidation of
the Partnership Assets commencing on the effective date of the Departing
Partner's departure, with such liquidation being effected through arms-length
sales between informed and willing purchasers under no compulsion to buy and
an informed and willing sellers under no compulsion to sell, with the
proceeds from such hypothetical sales to be discounted (at a rate equal to
the interest rate on U.S. Treasury obligations with a term of one (1) year
issued on the date nearest the effective date of the Departing Partner's
departure) to the effective date of the Departing Partner's departure to
reflect the time period reasonably anticipated to be necessary to consummate
such sales, as such "fair market value" is agreed upon by the Departing
Partner and the Partnership within thirty (30) days after the effective date
of the Departing Partner's departure or, in the absence of.such an agreement,
as determined by the Appraiser. The Appraiser shall use such method or
methods of valuation as the Appraiser determines most accurately reflect the
value of the Restaurant Properties under the circumstances provided that for
a period of five (5) years from the Closing Date, the Appraiser shall use the
"capitalization of income" method (applying such capitalization rate and
other assumptions and adjustments as the Appraiser determines appropriate
under the circumstances) unless the Appraiser determines that use of such
method would result in an understatement of the value of the Restaurant
Property. Any appraisal pursuit to this Section 13.03(b) shall be completed
as soon a practical after the Appraiser is notified of the
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requirement for such appraisal, and in any event within forty-five (45) days
after such notice, and the report of the Appraiser setting forth the
appraised fair market value of Partnership Assets as of such date shall be
final and binding upon the Departing Partner and the Partnership. The amount
that would be distributed to the Departing Partner pursuant to Section 6.07
if the Partnership Assets and the assets of the Investor Partnership were so
sold shall be determined by the Accounting Firm within fifteen (15) days
after the report of the Appraiser is received by the Partnership. The
closing of the conversion of the Departing Partner's Partnership Interest
into Units pursuant to Section 13.03(a) shall occur within ten (10) days
after the date on which the Accounting Firm shall have determined the amount
distributable to the Departing Partner pursuant to Section 6.07 for purposes
of this Section 13.03(b).
(c) At any time after the departure of a Departing Partner, upon the
request of such Departing Partner, the Limited Partner shall file with the
Commission as promptly as practicable after receiving such request, and shall
use its best efforts to cause to become effective, a registration statement
under the Securities Act registering the offering and sale, of the Units
owned by the Departing Partner or any Affiliate at the time of such Departing
Partner's departure, including any Units that were received by the Departing
Partner pursuant to Section 13.03(a) and are included in such request,
provided that the Limited Partner shall be required to file no more than two
(2) such registration statements at the request of any one Departing Partner.
In connection with any registration pursuant to the preceding sentence, the
Limited Partner promptly shall prepare and file such documents as may be
necessary to register or qualify the Units subject to such registration under
the securities laws of such states as the Departing Partner shall reasonably
request and do any and all other acts and things that may reasonably be
necessary or advisable to enable such Departing Partner to consummate a
public sale of such Units in such states. The first registration effected
under this paragraph shall be effected at the expense of the Limited Partner,
except for underwriting discounts, fees and commissions and fees and expenses
of legal counsel for the Departing Partner or its affiliates, and any
subsequent registrations shall be at the expense of the Departing Partner.
Any registration statement filed pursuant hereto shall be continued in effect
for a period of not less ninety (90) days following its effective date. In
the event of any registration of any Units pursuant to this Section 13.03(c),
the Limited Partner shall indemnify the Departing Partner and its Affiliates
and any underwriter engaged in connection with such registration and each
other person, if any, who controls any such underwriter within the meaning of
the Securities Act, in the manner and to the extent set forth in Section 7.
14(d) of the Investors Partnership Agreement.
(d) Any successor General Partner other than by reason of the transfer
of a Partnership Interest shall, at the effective date of its admission to
the Partnership as a General Partner, contribute to the capital of the
Partnership cash in an amount equal to (i) the product of the number of Units
outstanding immediately prior to the effective date of such successor General
Partner's admission (but after giving effect to the conversion described in
Section 13.03(a)), multiplied by the Unit Price determined as of the
effective date of such successor General Partner's admission, multiplied by
(ii) a fraction, the numerator of which shall be the excess (the "Percentage
Interest Excess") of .99% over the Percentage Interest of any remaining
General Partners, and the denominator of which shall be 99.01%. Thereafter,
such successor General Partner shall, notwithstanding any other provision of
this Agreement, be entitled to the Percentage Interest Excess of all
Partnership allocations and distributions.
(e) If, at the time of the Departing Partner's departure, the
Partnership is indebted to the Departing Partner under this Agreement or any
other instrument or agreement for funds advanced, properties sold, services
rendered, or costs and expenses incurred by the Departing Partner (including,
without limitation, any amounts advanced pursuant to the revolving line of
credit described in Section 7.13), the Partnership shall, within sixty (60)
days after the
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effective date of such Departing Partner's departure, pay to the Departing
Partner the full amount of such indebtedness. The successor to the Departing
Partner shall assume all obligations theretofore incurred by the Departing
Partner, as General Partner of the Partnership, and the Partnership and such
successor shall take all such action as shall be necessary to terminate any
guarantees of the Departing Partner, and any of its Affiliates, of any
obligations of the Partnership. If, for whatever reason, the creditors of
the Partnership shall not consent to such termination of any such guarantees,
the successor to the Departing Partner and the Partnership shall be required
to indemnify the Departing Partner for any liabilities and expenses incurred
by the Departing Partner on account of such guarantees.
ARTICLE XIV
DISSOLUTION AND LIQUIDATION
14.01. NO DISSOLUTION.
The Partnership shall not be dissolved by the admission of additional
Limited Partners or Substituted Limited Partners or by the admission of
additional General Partners or Substituted General Partners in accordance
with the terms of this Agreement.
14.02. EVENTS CAUSING DISSOLUTION.
The Partnership shall be dissolved and its affairs wound up upon the
occurrence of any of the following events:
(a) the expiration of the term of the Partnership, as provided in
Section 4.01;
(b) the withdrawal of the Managing General Partner or the occurrence
of any other event that results in the Managing General Partner ceasing to
be the Managing General Partner (other than by reason of a transfer
pursuant to Section 11.02 or a withdrawal occurring upon or after, or a
removal effective upon or after, selection of a successor pursuant to
Section 13.01);
(c) the "Bankruptcy" (as hereinafter defined) of the Managing General
Partner;
(d) a written determination by the Managing General Partner that
projected future revenues of the Partnership will be insufficient to enable
payment of projected Partnership costs and expenses or, if sufficient, will
be such that continued operation of the Partnership is not in the best
interests of the Partners;
(e) an election by the Limited Partner to terminate, dissolve, or
liquidate the Partnership;
(f) any attempted transfer, sale, assignment, gift, pledge,
hypothecation, mortgage, exchange or other disposition by the Limited
Partner of its Partnership Interest; or
(g) The occurrence of any other event that, under the Delaware RULPA,
would cause the dissolution of the Partnership or that would make it
unlawful for the business of the Partnership to be continued.
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For purposes of this Agreement, the term "Bankruptcy" shall mean, and
the Managing General Partner shall be deemed "Bankrupt" upon, (i) the entry
of a decree or order for relief of the Managing General Partner by a court of
competent jurisdiction in any involuntary case involving the Managing General
Partner under any bankruptcy, insolvency, or other similar law now or
hereafter in effect; (ii) the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator, or other similar agent for the
Managing General Partner or for any substantial part of the Managing General
Partner's assets or property; (iii) the ordering of the winding up or
liquidation of the Managing General Partner's affairs; (iv) the filing with
respect to the Managing General Partner of a petition in any such involuntary
bankruptcy case, which petition remains undismissed for a period of ninety
(90) days or which is dismissed or suspended pursuant to Section 305 of the
Federal Bankruptcy Code (or any corresponding provision of any future United
States bankruptcy law); (v) the commencement by the Managing General Partner
of a voluntary case under any bankruptcy, insolvency, or other similar law
now or hereafter in effect, (vi) the consent by the Managing General Partner
to the entry of an order for relief in a involuntary case under any such law
or to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator, or other similar agent for the
Managing General Partner or for any substantial part of the Managing General
Partner's assets or property; (vii) the making by the Managing General
Partner of any general assignment for the benefit of creditors; or (viii) the
failure by the Managing General Partner generally to pay its debts as such
debts become due.
14.03. RIGHT TO CONTINUE BUSINESS OF PARTNERSHIP.
Upon an event described in Sections 14.02(b), 14.02(c), or 14.02(g) (but
not an event described in Section 14.02(g) that makes it unlawful for the
business of the Partnership to be continued), the Partnership thereafter
shall be dissolved and liquidated unless, within ninety (90), days after the
event described in any of such Sections, an election to reconstitute and
continue the business of the Partnership shall be made in writing by the
Limited Partner. If such an election to continue the Partnership is made,
then:
(a) the Limited Partner shall select a successor Managing General
Partner;
(b) the Partnership shall continue until another event causing
dissolution in accordance with this Article XIV shall occur;
(c) the Partnership Interest of the former General Partner shall be
subject to disposition, at the option of the former General Partner, in the
manner provided in Section 13.03(a) (which option shall be exercised
contemporaneously with the selection of the successor General Partner); and
(d) all necessary steps shall be taken to amend this Agreement and
the Certificate of Limited Partnership to reflect the reconstitution and
continuation of the business of the Partnership.
14.04. DISSOLUTION.
Except as otherwise provided in Section 14.03, upon the dissolution of
the Partnership, the Certificate of Limited Partnership shall be canceled in
accordance with the provisions of the Delaware RULPA, and the Managing
General Partner (or, if the dissolution is caused by the withdrawal,
bankruptcy, dissolution, or removal of the Managing General Partner, then the
Person designated as Liquidating Trustee in Section 14.05 hereof) promptly
shall notify the Partners of such dissolution.
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14.05. LIQUIDATION.
Upon dissolution of the Partnership, unless an election to continue the
business of the Partnership is made pursuant to Section 14.03, the Managing
General Partner, or, in the event the dissolution is caused by an event
described in Section 14.02(b) or 14.02(c), a Person or Persons selected by
the Limited Partner, shall be the Liquidating Trustee. The Liquidating
Trustee shall proceed without any unnecessary delay to sell or otherwise
liquidate the Partnership Assets and shall apply and distribute the proceeds
of such sale or liquidation in the following order of priority, unless
otherwise required by mandatory provisions of applicable law:
(a) to pay (or to make provision for the payment of) all creditors of
the Partnership, including current and former Partners, in the order of
priority provided by law other than obligations to make distributions to
current and former Partners;
(b) to pay, on a pro rata basis, all current and former Partners with
respect to obligations to make distributions thereto; and
(c) after the payment (or the provision for payment) of all debts,
liabilities, and obligations of the Partnership, including, without
limitation, the payment of expenses of liquidation of the Partnership, and
the establishment of a reasonable reserve (including an amount estimated by
the Liquidating Trustee to be sufficient to pay an amount reasonably
anticipated to be required to be paid pursuant to Section 7.10 hereof), to
the Partners in accordance with Section 6.07.
The Liquidating Trustee, if other than the Managing General Partner,
shall be entitled to receive such compensation for its services as
Liquidating Trustee as may be approved by the Limited Partner. The
Liquidating Trustee shall agree not to resign at any time without sixty (60)
days prior written notice and, if other than the Managing General Partner,
may be removed at any time, with or without cause, by written notice of
removal approved by the Limited Partner. Upon dissolution, removal, or
resignation of the Liquidating Trustee, a successor and substitute
Liquidating Trustee (who shall have and succeed to all rights, powers and
duties of the original Liquidating Trustee) shall be selected within ninety
(90) days thereafter by the Limited Partner. The right to appoint a successor
or substitute Liquidating Trustee in the manner provided herein shall be
recurring and continuing for so long as the functions and services of the
Liquidating Trustee are authorized to continue under the provisions hereof,
and every reference herein to the Liquidating Trustee will be deemed to refer
also to any such successor or substitute Liquidating Trustee appointed in the
manner herein provided. Except as expressly provided in this Article XIV,
the Liquidating Trustee appointed in the manner provided herein shall have
and may exercise, without further authorization or consent of any of the
parties hereto, all of the powers conferred upon the Managing General Partner
under the terms of this Agreement (but subject to all of the applicable
limitations, contractual and otherwise, upon the exercise of such powers) to
the extent necessary or desirable in the good faith judgment of the
Liquidating Trustee to carry out the duties and functions of the Liquidating
Trustee hereunder (including the establishment of reserves for liabilities
that are contingent or uncertain in amount) for and during such period of
time as shall be reasonably required in the good faith judgment of the
Liquidating Trustee to complete the winding up and liquidation of the
Partnership as provided for herein. In the event that no Person is selected
to be the Liquidating Trustee as herein provided within one hundred twenty
(120) days following the event of dissolution, or in the event the Limited
Partner fails to select a successor or substitute Liquidating Trustee within
the time periods set forth above, any Partner may make application to a Court
of Chancery of the State of Delaware to wind up the affairs of the
Partnership and, if deemed appropriate, to appoint a Liquidating Trustee.
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14.06. REASONABLE TIME FOR WINDING UP.
A reasonable time shall be allowed for the orderly winding up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 14.05 in order to minimize any losses otherwise attendant
upon such a winding up.
14.07. TERMINATION OF PARTNERSHIP.
Except as otherwise provided in this Agreement, the Partnership shall
terminate when all of the assets of the Partnership shall have been converted
into cash, the net proceeds therefrom, as well as any other liquid assets of
the Partnership, after payment of or due provision for all debts, liabilities
and obligations of the Partnership, shall have been distributed to the
Partners as provided for in Sections 6.07 and 14.05, and the Certificate of
Limited Partnership shall have been canceled in the manner required by the
Delaware RULPA.
ARTICLE XV
AMENDMENTS
15.01. AMENDMENTS TO BE ADOPTED SOLELY BY THE MANAGING GENERAL PARTNER.
The Managing General Partner, without the consent or approval at the
time of the Limited Partner, may amend any provision of this Agreement, and
execute, swear to, acknowledge, deliver, file, and record all documents
required or desirable in connection therewith, to reflect:
(a) a change in the name of the Partnership or the location of
the principal place of business of the Partnership;
(b) the admission, substitution, termination, or withdrawal of
Partners in accordance with this Agreement;
(c) a change that is necessary to qualify the Partnership as a
limited partnership or a partnership in which the Limited Partner has
limited liability under the laws of any state or that is necessary or
advisable in the opinion of the Managing General Partner to ensure
that the Partnership will not be treated as an association taxable as
a corporation for federal income tax purposes;
(d) a change that is (i) of an inconsequential nature and does
not adversely affect the Limited Partner in any material respect; (ii)
necessary or desirable to cure any ambiguity, to correct or supplement
any provision herein that would be inconsistent with any other
provision herein, or to make any other provision with respect to
matters or questions arising under this Agreement that will not be
inconsistent with the provision of this Agreement; (iii) necessary or
desirable to satisfy any requirements, conditions, or guidelines
contained in any opinion, directive, order, ruling, or regulation of
any federal or state agency or contained in any federal or state
statute; (iv) necessary or desirable to facilitate the trading of the
Units as contemplated in the Investor Partnership Agreement or comply
with any rule, regulation, guideline, or requirement of any securities
exchange on which the Units are or will be listed for trading,
compliance with any of which the Managing General Partner deems to be
in the interests of the Partnership and the Limited Partner; (v)
necessary to conform this Agreement to any amendments made in the
Investors Partnership Agreement in accordance with the terms thereof;
or (vi) required or contemplated by this Agreement;
59
<PAGE>
(e) a change in any provision of this Agreement which requires
any Action to be taken by or on behalf of the Managing General Partner
or the Partnership pursuant to the requirements of applicable Delaware
law if the provisions of applicable Delaware law are amended, modified,
or revoked so that the taking of such action is no longer required; or
(f) any other amendments similar to the foregoing.
The authority set forth in Section 15.01 shall specifically include the
authority to make such amendments to this Agreement and to the Certificate of
Limited Partnership as the Managing General Partner deems necessary or
desirable in the event the Delaware RULPA is amended to eliminate or change
any provision now in effect. Without limiting the foregoing, the Limited
Partner shall, upon the request of the Managing General Partner, execute,
swear to, or acknowledge any document determined by the Managing General
Partner to be required or desirable in connection with the foregoing.
15.02. AMENDMENT PROCEDURES.
Except as specifically provided in Sections 15.01 and 15.03, all
amendments to this Agreement shall be effective only if approved in writing
by all of the Partners.
15.03. AMENDMENT RESTRICTIONS.
Notwithstanding the provisions of Sections 15.01 and 15.02, no
amendment to any provision of Article VIII shall be permitted without the
written consent of BKC, whether or not BKC is a General Partner at the time
of such amendment.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
16.01. ADDITIONAL ACTIONS AND DOCUMENTS.
Each of the Partners hereby agrees to take or cause to be taken such
further actions, to execute, acknowledge, deliver, and file or cause to be
executed, acknowledged, delivered, and filed such further documents and
instruments, and to use best efforts to obtain such consents as may be
necessary or as may be reasonably requested in order to fully effectuate the
purposes, terms and conditions of this Agreement, whether before, at, or
after the closing of the transactions contemplated by this Agreement.
16.02. NOTICES.
All notices, demands, requests, or other communications which may be
or are required to be given, served, or sent by a Partner or the Partnership
pursuant to this Agreement shall be in writing, and shall be personally
delivered, mailed by first-class mail, postage prepaid, or transmitted by
facsimile, telegram or telex, addressed as follows:
(a) If to the Managing General Partner:
QSV Properties Inc.
Attn: Chairman or President
5310 Harvest Hill Road
Suite 270
Dallas, Texas 75230
60
<PAGE>
(b) If to the Limited Partner:
U.S. Restaurant Properties Master L.P.
Attn: Managing General Partner
5310 Harvest Hill Road
Suite 270
Dallas, Texas 75230
(c) If to the Partnership:
U.S. Restaurant Properties Operating L.P.
Attn: Managing General Partner
5310 Harvest Hill Road
Suite 270
Dallas, Texas 75230
Each Partner and the Partnership may designate by notice in writing a
new address to which any notice, demand, request or communication may
thereafter be so given, served or sent. Each notice, demand, request, or
communication which shall be delivered, mailed or transmitted in the manner
described above shall be deemed to have been duly given when delivered in
person, sent by first class mail, or transmitted by facsimile, telegram, or
telex.
16.03. SEVERABILITY.
The invalidity of any one or more provisions hereof or of any other
agreement or instrument given pursuant to or in connection with this
Agreement shall not affect the remaining portions of this Agreement or any
such other agreement or instrument or any part thereof, all of which are
inserted conditionally on their being held valid in law; and in the event
that one or more of the provisions contained herein or therein should be
invalid, or should operate to render this Agreement or any such other
agreement or instrument invalid, this Agreement and such other agreements and
instruments shall be construed as if such invalid provisions had not been
inserted.
16.04. SURVIVAL.
It is the express intention and agreement of the Partners that all
covenants, agreements, statements, representations, warranties and
indemnities made in this Agreement shall survive the execution and delivery
of this Agreement.
16.05. WAIVERS.
Neither the waiver by a Partner of a breach of or a default under any
of the provisions of this Agreement, nor the failure of a Partner, on one or
more occasions, to enforce any of the provisions of this Agreement or to
exercise any right, remedy, or privilege hereunder shall thereafter be
construed as a waiver of any subsequent breach or default of a similar
nature, or as a waiver of any such provisions, rights, remedies, or
privileges hereunder.
16.06. EXERCISE OF RIGHTS.
No failure or delay on the part of a Partner or the Partnership in
exercising any right, power, or privilege hereunder and no course of dealing
between the Partners or between a Partner and the Partnership shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power, or privilege hereunder preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege. The rights and
remedies herein
61
<PAGE>
expressly provided are cumulative and not exclusive of any other rights or
remedies which a Partner or the Partnership would otherwise have at law or in
equity or otherwise.
16.07. BINDING EFFECT.
Subject to any provisions hereof restricting assignment, this
Agreement shall be binding upon and shall inure to the benefit of the
Partners (and BKC and its successors and assigns for purposes of Article VIII
and Section 15.03) and their respective heirs, devisees, executors,
administrators, legal representatives, successors, and assigns.
16.08. LIMITATION ON BENEFITS OF THIS AGREEMENT.
It is the explicit intention of the Partners that, with the exception
of the rights of BKC, its successors and assigns, in connection with Article
VIII and Section 15.03, no person or entity other than the Partners and the
Partnership is or shall be entitled to bring any action to enforce any
provision of this Agreement against any Partner or the Partnership, and that,
except as set forth in Section 8.01(b), the covenants, undertakings, and
agreements set forth in this Agreement shall be solely for the benefit of,
and shall be enforceable only by, the Partners (or their respective
successors and assigns as permitted hereunder) and the Partnership.
16.09. FORCE MAJEURE.
If the Managing General Partner is rendered unable, wholly or in part,
by "force majeure" (as herein defined) to carry out any of its obligations
under this Agreement, other than the obligation hereunder to make money
payments, the obligations of the Managing General Partner, insofar as they
are affected by such force majeure, shall be suspended during, but no longer
than, the continuance of such force majeure. The term "force majeure" as used
herein shall mean an act of God, strike, lockout or other industrial
disturbance, act of public enemy, war, blockade, public riot, lightning,
fire, storm, flood, explosion, governmental restraint, unavailability of
equipment, and any other cause, whether of the kind specifically enumerated
above or otherwise, which is not reasonably within the control of the
Managing General Partner.
16.10. ENTIRE AGREEMENT.
This Agreement contains the entire agreement among the Partners with
respect to the transactions contemplated herein, and supersedes all prior
oral or written agreements, commitments, or understandings with respect to
the matters provided for herein.
16.11. PRONOUNS.
All pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine, neuter, singular, or plural, as the identity of the
person or entity may require.
16.12. HEADINGS.
Article, Section and subsection headings contained in this Agreement
are inserted for convenience of reference only, shall not be deemed to be a
part of this Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.
62
<PAGE>
16.13. GOVERNING LAW.
This Agreement, the rights and obligations of the parties hereto, and
any claims or disputes relating thereto, shall be governed by and construed
in accordance with the laws of Delaware (but not including the choice of law
rules thereof).
16.14. EXECUTION IN COUNTERPARTS.
To facilitate execution, this Agreement may be executed in as many
counterparts as may be required; and it shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it shall
be sufficient that the signature of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on one or more
of the counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in making proof of this Agreement to
produce or account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
ARTICLE XVII
EXECUTION
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement,
or have caused this Agreement to be duly executed on their behalf, as of the
day and year first hereinabove set forth.
MANAGING GENERAL PARTNER
ATTEST: QSV PROPERTIES INC.
By: By:
----------------------------- ------------------------------------
Title: Title:
----------------------- ------------------------------
LIMITED PARTNER:
U.S. RESTAURANT PROPERTIES MASTER L.P.
By: QSV Properties Inc.,
Managing General Partner
ATTEST:
By: By:
----------------------------- ------------------------------------
Title: Title:
----------------------- ------------------------------
63
<PAGE>
CERTIFICATE OF LIMITED PARTNERSHIP
OF
BURGER KING INVESTORS MASTER L.P.
The undersigned persons, desiring to form a limited partnership
pursuant to the Revised Uniform Limited Partnership Act of the State of
Delaware and constituting all of the general partners of the limited
partnership, hereby certify and swear as follows:
I. NAME: The name of the limited partnership is Burger King
Investors Master L.P.
II. REGISTERED OFFICE AND REGISTERED AGENT: The address of the
registered office of the limited partnership is Corporation Trust Center,
1209 Orange Street, Wilmington, Delaware, 19801, and the name and address of
the registered agent of the limited partnership is The Corporation Trust
Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware,
19801.
III. NAME AND ADDRESS OF EACH GENERAL PARTNER: The name and the
business address of each general partner of the limited partnership are as
follows:
MANAGING GENERAL PARTNER:
QSV Properties Inc.
Pillsbury Center
200 South Sixth Street
Minneapolis, Minnesota 55402-1464
SPECIAL GENERAL PARTNER:
Burger King Corporation
7360 North Kendall Drive
Miami, Florida 33156
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Certificate, or
have caused this Certificate to be duly executed on their behalf, as of the
10th day of December, 1985.
BURGER KING INVESTORS MASTER L.P.
By: QSV Properties Inc., Managing
General Partner
By: /s/ [ILLEGIBLE]
----------------------------
Its: General Manager and
Chairman
By: Burger King Corporation,
Special General Partner
By: /s/ J. Jeffrey Campbell
----------------------------
Its: Chairman and Chief
Executive Officer
-2-
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 07/07/1994
944124824 - 2077842
AMENDMENT TO THE
CERTIFICATE OF LIMITED PARTNERSHIP
OF
BURGER KING INVESTORS MASTER L.P.
This Amendment (this "Amendment") to the Certificate of Limited
Partnership (the "Certificate of Limited Partnership") of Burger King
Investors Master L.P. (the "Partnership") has been executed by the Managing
General Partner thereof as of the date set forth below to change the business
address of the Managing General Partner set forth in the Certificate of
Limited Partnership.
GENERAL PARTNERS
Article III of the Certificate of Limited Partnership is hereby amended
and restated to read as follows:
III. NAME AND ADDRESS OF EACH GENERAL PARTNER. The name and
business address of each general partner of the limited partnership
are as follows:
GENERAL PARTNER BUSINESS ADDRESS
QSV Properties, Inc., 5310 Harvest Hill Road
the Managing General Partner Suite 270, LB 168
Dallas, Texas 75230
Burger King Corporation, 7360 North Kendall Dr.
the Special General Partner Miami, Florida 33156
IN WITNESS WHEREOF, the Managing General Partner has executed this
Amendment as of the 1st day of July, 1994.
QSV PROPERTIES, INC., as the Managing
General Partner of the Partnership
By: /s/ [ILLEGIBLE]
----------------------------
Name:/s/ [ILLEGIBLE]
----------------------------
Title:/s/ [ILLEGIBLE]
----------------------------
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 11/07/1994
944213702 - 2077842
AMENDMENT TO THE
CERTIFICATE OF LIMITED PARTNERSHIP
OF
BURGER KING INVESTORS MASTER L.P.
This Amendment (this "Amendment") to the Certificate of Limited
Partnership (the "Certificate of Limited Partnership") of Burger King
Investors Master L.P. (the "Partnership") has been executed by the Managing
General Partner thereof to change the name of the Partnership.
NAME
Article I of the Certificate of Limited Partnership is hereby amended and
restated to read as follows:
I. NAME. The name of the limited partnership is U.S.
Restaurant Properties Master L.P.
IN WITNESS WHEREOF, the Managing General Partner has executed this
Amendment as of the 28th day of October,1994, to be effective as of 4:00
p.m., Eastern Time, on the 11th day of November, 1994.
QSV PROPERTIES INC., as the
Managing General Partner of the
Partnership
By: /s/ [ILLEGIBLE]
----------------------------
Name:/s/ [ILLEGIBLE]
----------------------------
Title:/s/ [ILLEGIBLE]
----------------------------
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 11/30/1994
9442431657 - 2077842
AMENDMENT TO THE
CERTIFICATE OF LIMITED PARTNERSHIP
OF
U.S. RESTAURANT PROPERTIES MASTER L.P.
This Amendment (this "Amendment") to the Certificate of Limited
Partnership (the "Certificate of Limited Partnership") of U.S. Restaurant
Properties Master L.P. (the "Partnership") has been executed by the Managing
General Partner thereof as of the date set forth below to reflect the
withdrawal of Burger King Corporation as a general partner.
GENERAL PARTNER
Article III of the Certificate of Limited Partnership is hereby amended
and restated to read as follows:
III NAME AND ADDRESS OF THE SOLE GENERAL PARTNER. The name
and business address of the sole general partner of the limited
partnership are as follows:
GENERAL PARTNER BUSINESS ADDRESS
QSV Properties Inc., 5310 Harvest Hill Road, Suite 270
the Managing General Dallas, Texas 75230
Partner
IN WITNESS WHEREOF, the Managing General Partner has executed this
Amendment as of the 30th day of November, 1994.
QSV PROPERTIES INC., as the Managing
General Partner of the Partnership
By: /s/ [ILLEGIBLE]
----------------------------
Name:/s/ [ILLEGIBLE]
----------------------------
Title:/s/ [ILLEGIBLE]
----------------------------
<PAGE>
[Letterhead]
May 23, 1996
U. S. Restaurant Properties Master L. P.
5310 Harvest Hill Road, Suite 270, Lock Box 168
Dallas, Texas 75230
Re: Issuance of 1,800,000 Units of Limited Partnership Interest of
U. S. Restaurant Properties Master L. P., Subject to Underwriters'
Overallotment Option of 270,000 Units
Ladies and Gentlemen:
We have acted as counsel for U. S. Restaurant Properties Master L. P., a
Delaware limited partnership (the "Partnership"), in connection with the
Partnership's Registration Statement on Form S-3 (Registration No. 333-2675)
(the "Registration Statement") and the Prospectus to be delivered in
connection therewith with respect to 1,800,000 units of limited partnership
interest in the Partnership, subject to Underwriters' overallotment option of
270,000 units (collectively, the "Units") to be issued in an underwriting of
the Units pursuant to the Underwriting Agreement between the Partnership and
Morgan Keegan Securities, Inc.
In such capacity, we have reviewed the Partnership's Certificate of
Limited Partnership, the Second Amended and Restated Agreement of Limited
Partnership of the Partnership, and have examined all statutes and records,
instruments and documents which we have deemed necessary to examine for the
purposes of this opinion. Based upon the foregoing, it is our opinion that:
1. The Partnership is a partnership duly organized and validly existing
under the laws of the State of Delaware.
2. The Units to be issued by the Partnership have been duly authorized
and when issued pursuant to such authorization will be validly issued and
nonassessable.
<PAGE>
Morgan Keegan Mortgage Company Inc.
May 7, 1996
Page 2
- -------------------------------------------------------------------------------
We hereby consent to the references made to this firm under the caption
"Legal Opinion" in the Prospectus constituting a part of the Registration
Statement and to the filing of the opinion as Exhibit 5.1 to the Registration
Statement.
Very Truly Yours,
MIDDLEBERG RIDDLE & GIANNA
<PAGE>
[LETTERHEAD]
May 23, 1996
U.S. Restaurant Properties Master L.P.
5310 Harvest Hill Road, Suite 270, Lock Box 168
Dallas, Texas 75230
Re: Issuance of 1,800,000 Units of Limited Partnership Interest of
U.S. Restaurant Properties Master L.P., Subject to Underwriters'
Overallotment Option of 270,000 Units
Ladies and Gentlemen:
We have acted as counsel for U.S. Restaurant Properties Master L.P., a
Delaware limited partnership (the "Partnership"), in connection with the
Partnership's Registration Statement on Form S-3 (Registration No. 333-2675)
(the "Registration Statement") and the Prospectus to be delivered in
connection therewith with respect to 1,800,000 units of limited partnership
interest in the Partnership, subject to Underwriters' overallotment option of
270,000 units (collectively, the "Units") to be issued in an underwriting of
the Units pursuant to the Underwriting Agreement between the Partnership and
Morgan Keegan Securities, Inc.
In such capacity, we have reviewed that portion of the Registration
Statement entitled "Federal Income Tax Considerations," and the content
thereof reflects our opinion regarding the matters of law covered under that
heading.
We hereby consent to the filing of the foregoing opinion as an Exhibit to
the Registration Statement, and to the reference thereto in the Registration
Statement under the caption "Federal Income Tax Considerations," and to the
references to our firm under the caption "Legal Matters."
Very Truly Yours,
MIDDLEBERG RIDDLE & GIANNA
<PAGE>
DEMAND PROMISSORY NOTE
$275,737.00 Dallas, Texas August 15, 1995
FOR VALUE RECEIVED, the undersigned, ARKANSAS RESTAURANTS # 10, L.P.
("Maker"), promises to pay to the order of U.S. RESTAURANT PROPERTIES
OPERATING, L.P., a Delaware limited partnership ("Payee"), at 5310 Harvest
Hill Road, Suite 270, Lock Box 168, Dallas, Texas 75230, or such other place
as Payee or any subsequent holder hereof (in either case, "Noteholder") may
direct, the principal sum of Two Hundred Seventy-Five Thousand Seven Hundred
Thirty-Seven and No/100 Dollars ($275,737.00), or so much as Payee may
advance to Maker pursuant to the Fourth Amendment to Purchase Agreement dated
August 15, 1995 by and among Food Facts, Inc.; Samuel G. Hodges, Claudia
Hodges, William Wesley Hodges, Maker, Payee and Joseph Hickey, together with
interest accrued on the unpaid balance of this Note as it may exist from time
to time at an annual interest rate of nine percent (9.00%). All principal and
accrued interest under this Note are payable upon five (5) days written
notice by Payee.
All amounts payable under this Note are payable in lawful money of the
United States which shall be legal tender for payment of all debts and dues,
public and private, at the time of such payment. All past due principal and
interest shall bear interest at the rate provided hereunder plus three
percent (3.00%).
Maker reserves the right and privilege to make prepayments of principal
and interest at any time, and from time to time, in whole or in part, without
notice, premium, penalty or fee, each such partial prepayment of principal to
be applied to the next installment of principal hereunder, and each such
partial prepayment of interest to be applied to the next installment of
interest hereunder.
Notwithstanding anything to the contrary contained in this Note or
executed in connection herewith, no event which would otherwise constitute a
default in the payment of principal or interest hereunder shall be deemed to
constitute a default unless the same shall have continued uncured for a
period of fifteen (15) days after receipt by Maker of written notice thereof
from Noteholder. In the event any such default continues uncured after
receipt of notice thereof as aforesaid, the unpaid principal balance of this
Note and all accrued interest hereon shall, at the option of Noteholder,
immediately become due and payable without presentment, protest, or demand,
or other notice of any kind. If this Note is not paid at maturity, howsoever
such maturity may be brought about, and the same is collected
<PAGE>
through court through legal action, Maker agrees to pay Noteholder's
reasonable attorneys' fees incurred for such collection.
Except as otherwise expressly provided for herein, Maker waives demand,
presentment, protest, notice of nonpayment, and notice of protest.
Any notice required hereunder shall be deemed to be delivered upon the
earlier to occur of (i) actual receipt by the addressee, or (ii) three (3)
days following deposit in the United States mail, postage prepaid, registered
or certified mail, return receipt requested, addressed to Maker or
Noteholder, as the case may be, as follows:
Maker: Arkansas Restaurants # 10, L.P.
5310 Harvest Hill Road
Suite 270, Lock Box 168
Dallas, Texas 75230
Noteholder: U.S. Restaurant Properties Operating L.P.
5310 Harvest Hill Road
Suite 270, Lock Box 168
Dallas, Texas 75230
Either Maker or Noteholder may change its address for notice purposes by
sending a written notice of change of address to the other party.
If and when included within the term "Noteholder" or "Maker" there is
more than one person or entity, all such persons and entities shall jointly
arrange among themselves for their joint execution and delivery of a notice
to the other specifying some person or entity at some specific address (i)
for the receipt of all notices, demands, payment or other documents on behalf
of all such persons and entities, (ii) to execute any and all documents,
consents and instruments required to be executed by such persons and entities
under the terms hereof, and (iii) to take any and all action required or
permitted to be taken by such persons and entities. All persons and entities
included within the terms "Noteholder" or "Maker" respectively, shall be
bound by notices, demands payments and documents given in accordance with the
provisions of this paragraph to the same extent as if each had received such
notice, demand, payment or document.
The Note shall be governed and construed in accordance with the laws of
the State of Texas.
<PAGE>
IN WITNESS WHEREOF, the undersigned Maker has executed this Note as of the
day and year first above written.
ARKANSAS RESTAURANTS #10, L.P.
By: North American Restaurant Management, Inc.
By: _____________________________
Its: ____________________________
<PAGE>
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
LOAN AGREEMENT
---------------------
U.S. RESTAURANT PROPERTIES BUSINESS TRUST I
and
MORGAN KEEGAN MORTGAGE COMPANY INC.
---------------------
$20,000,000
April 29, 1996
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
LOAN AGREEMENT
Page
----
ARTICLE I - Definitions and References . . . . . . . . . . . . . . . . . . . .1
Section 1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.2. Exhibits and Schedules; Additional Definitions. . . . . . . .8
Section 1.3. Amendment of Defined Instruments. . . . . . . . . . . . . . .8
Section 1.4. References and Titles . . . . . . . . . . . . . . . . . . . .8
Section 1.5. Calculations and Determinations . . . . . . . . . . . . . . .8
ARTICLE II - The Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Section 2.1. Advances. . . . . . . . . . . . . . . . . . . . . . . . . . .9
Section 2.2. Requests for Advances . . . . . . . . . . . . . . . . . . . .9
Section 2.3. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . .9
Section 2.4. Facility Fee. . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.5. Optional Prepayments. . . . . . . . . . . . . . . . . . . . 10
Section 2.6. Payments to Lender. . . . . . . . . . . . . . . . . . . . . 10
Section 2.7. Reimbursable Taxes. . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III - Conditions Precedent to Lending . . . . . . . . . . . . . . . . 11
Section 3.1. Documents to be Delivered . . . . . . . . . . . . . . . . . 11
Section 3.2. Additional Conditions Precedent . . . . . . . . . . . . . . 12
ARTICLE IV - Representations and Warranties . . . . . . . . . . . . . . . . . 14
Section 4.1. Borrower's Representations and Warranties . . . . . . . . . 14
Section 4.2. Representation by Lender. . . . . . . . . . . . . . . . . . 20
ARTICLE V - Covenants of Borrower . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.1. Affirmative Covenants . . . . . . . . . . . . . . . . . . . 20
Section 5.2. Negative Covenants. . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VI - Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.1. The Security. . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.2. Agreement to Deliver Security Documents . . . . . . . . . . 33
Section 6.3. Perfection and Protection of Security Interests and Liens . 34
Section 6.4. Accounts; Offset. . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII - Events of Default and Remedies. . . . . . . . . . . . . . . . . 34
Section 7.1. Events of Default . . . . . . . . . . . . . . . . . . . . . 34
Section 7.2. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.3. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VIII - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.1. Waivers and Amendments; Acknowledgments . . . . . . . . . . 38
Section 8.2. Survival of Agreements; Cumulative Nature . . . . . . . . . 39
i
<PAGE>
Section 8.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.4. Parties in Interest . . . . . . . . . . . . . . . . . . . . 40
Section 8.5. Governing Law; Submission to Process. . . . . . . . . . . . 40
Section 8.6. Limitation on Interest. . . . . . . . . . . . . . . . . . . 40
Section 8.7. Termination; Limited Survival . . . . . . . . . . . . . . . 41
Section 8.8. Severability. . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.9. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 8.10. WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. . . . . . . . 42
SCHEDULES AND EXHIBITS:
Schedule 1 - Disclosure Schedule
Exhibit A - Promissory Note
Exhibit B - Request for Advance
Exhibit C - Certificate Accompanying Financial Statements
Exhibit D - Opinion of Middleberg, Riddle & Gianna, counsel for Borrower
Exhibit E - Subordination Agreement
ii
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT is made as of April 29, 1996, by and between U.S.
RESTAURANT PROPERTIES BUSINESS TRUST I, a Delaware business trust organized
under the Delaware Business Trust Act ("BORROWER"), and MORGAN KEEGAN
MORTGAGE COMPANY INC., a Tennessee corporation ("LENDER"). In consideration
of the mutual covenants and agreements contained herein the parties hereto
agree as follows:
ARTICLE I - DEFINITIONS AND REFERENCES
Section 1.1. DEFINED TERMS. As used in this Agreement, each of the
following terms has the meaning given it in this Section 1.1 or in the
sections and subsections referred to below:
"ADA" means The Americans with Disabilities Act of 1990, 42 U.S.C.
Sections 12101 et seq., and regulations thereunder.
"ADVANCE" has the meaning given it in Section 2.1.
"AFFILIATE" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall
be deemed to be "controlled by" any other Person if such other Person
possesses, directly or indirectly, power
(a) to vote 20% or more of the securities (on a fully diluted basis)
having ordinary voting power for the election of directors or managing
general partners; or
(b) to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.
With respect to Borrower, "AFFILIATE" includes, without limitation, each of
its Owners.
"AGREEMENT" means this Loan Agreement.
"BANK FACILITY DATE" means the first Business Day occurring after the
date of this Agreement on which U.S. Restaurant Properties Master L.P., U.S.
Restaurant Properties Operating L.P. or any affiliate thereof obtains one or
more committed credit facilities from one or more third-party lenders, under
which facility or facilities either of such partnerships or any affiliate
thereof shall have the ability to borrow an aggregate of not less than $60
million, inclusive of any borrowings outstanding on the date such facility or
facilities become available.
"BASE RATE" means (a) three percent (3%) per annum, PLUS (b) the rate
per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%)
reported, on the first Business Day of each month, on Telerate Access Service
Page 3750 (British Bankers Association Settlement Rate) as the London
Interbank Offered Rate for dollar deposits having a term of one month and in
an amount of $1,000,000 (or, if such Page shall cease to be publicly
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available or if the information contained on such Page, in Lender's sole
judgment, shall cease to accurately reflect such London Interbank Offered
Rate, as reported by any publicly available source of similar market data
selected by Lender that, in Lender's sole judgment, accurately reflects such
London Interbank Offered Rate), as adjusted by the Reserve Percentage;
PROVIDED, in the event such London Interbank Offered Rate shall not be
available or Lender shall not be able to determine such London Interbank
Offered Rate, "BASE RATE" shall mean the arithmetic average of the rates of
interest publicly announced by The Chase Manhattan Bank (National
Association), Citibank, N.A. and Morgan Guaranty Trust Company of New York
(or their respective successors) as their respective prime commercial lending
rates (or, as to any such bank that does not announce such a rate, such
bank's 'base' or other rate determined by Lender to be the equivalent rate
announced by such bank), except that, if any such bank shall, for any period,
cease to announce publicly its prime commercial lending (or equivalent) rate,
Lender shall, during such period, determine the "Base Rate" based upon the
prime commercial lending (or equivalent) rates announced publicly by the
other such banks. The Base Rate shall in no event, however, exceed the
Highest Lawful Rate. Notwithstanding the foregoing, the Base Rate applicable
to the month during which the first Advance is made hereunder shall be
determined as of the Business Day of such month on which such Advance is
funded by Lender, rather than as of the first Business Day of such month.
"BORROWER" means U.S. Restaurant Properties Business Trust I, a Delaware
business trust organized under the Delaware Business Trust Act.
"BUSINESS DAY" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in Memphis, Tennessee.
"CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, "CERCLIS" has the meaning given such term
under CERCLA, and "RCRA" means the Resource Conservation and Recovery Act of
1976, as amended.
"COLLATERAL" means all property of any kind which is subject to a Lien in
favor of Lender or which, under the terms of any Security Document, is purported
to be subject to such a Lien.
"DEBT" means, as to any Person, all indebtedness, liabilities and
obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to GAAP.
"DECLARATION OF TRUST" means that certain Declaration of Trust of U.S.
Restaurant Properties Business Trust I, dated January 23, 1996, by and among
U.S. Restaurant Properties Operating L.P., Resident Trustee and Managing
Trustees.
"DEFAULT" means any Event of Default and any default, event or condition
which would, with the giving of any requisite notices and the passage of any
requisite periods of time, constitute an Event of Default.
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"DISCLOSURE REPORT" means either a notice given by Borrower under
Section 5.1(e) or a certificate given by the Managing Trustees of Borrower
under Section 5.1(b)(ii).
"DISCLOSURE SCHEDULE" means Schedule 1 hereto.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment including ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or
wastes.
"EQUITY FUNDING DATE" means the date on which U.S. Restaurant Properties
Master L.P. receives the net proceeds from the currently proposed registered
public offering of its limited partnership units, with respect to which a
registration statement (registration no. 333-2675) has been filed with the
Securities and Exchange Commission.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations
promulgated with respect thereto.
"ERISA PLAN" means any employee pension benefit plan subject to Title IV
of ERISA maintained by Borrower or any of its Affiliates with respect to
which Borrower has a fixed or contingent liability.
"EVENT OF DEFAULT" has the meaning given it in Section 7.1.
"FHAA" means the Fair Housing Amendments Act of 1988, 42 U.S.C. Sections
3601 et seq., and regulations thereunder.
"FISCAL QUARTER" means a three-month period ending on March 31, June 30,
September 30 or December 31 of any year.
"FISCAL YEAR" means a twelve-month period ending on December 31 of any
year.
"FRANCHISEE" means (i) any Person operating any Restaurant Property as a
franchisee of (a) Burger King Corporation, a Florida corporation, or its
successors or assigns or (b) any other national franchisor of fast-food,
casual dining or other restaurant concepts, and (ii) any other Person
operating a Restaurant Property (a "Tenant").
"GAAP" means those generally accepted accounting principles and practices
which are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and which, in the case of Borrower, are applied
for all periods after the date hereof in a manner consistent with the manner in
which such principles and practices were applied to the audited Initial
Financial Statements. If any change in any
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accounting principle or practice is required by the Financial Accounting
Standards Board (or any such successor) in order for such principle or
practice to continue as a generally accepted accounting principle or
practice, all reports and financial statements required hereunder with
respect to Borrower may be prepared in accordance with such change, but all
calculations and determinations to be made hereunder may be made in
accordance with such change only after notice of such change is given to
Lender and Lender agrees to such change insofar as it affects the accounting
of Borrower.
"GROUND LEASE" means any real property lease agreement between any
Lessor and Borrower regarding the lease of any Restaurant Property by such
Lessor to Borrower.
"HAZARDOUS MATERIALS" means any substances regulated under any
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"HIGHEST LAWFUL RATE" means the maximum nonusurious rate of interest
that Lender is permitted under applicable law to contract for, take, charge,
or receive with respect to the Loan.
"INITIAL FINANCIAL STATEMENTS" means the unaudited monthly financial
statements of Borrower dated as of February 29,1996.
"LATE PAYMENT RATE" means, at the time in question, two percent (2%) per
annum plus the Base Rate then in effect. The Late Payment Rate shall in no
event, however, exceed the Highest Lawful Rate.
"LENDER" means Morgan Keegan Mortgage Company Inc., a Tennessee
corporation, and its successors and assigns.
"LESSOR" means any Person who leases any Restaurant Property to Borrower
pursuant to any Ground Lease.
"LIEN" means, with respect to any property or assets, any right or
interest therein of a creditor to secure Debt owed to him or any other
arrangement with such creditor which provides for the payment of such Debt
out of such property or assets or which allows him to have such Debt
satisfied out of such property or assets prior to the general creditors of
any owner thereof, including any lien, mortgage, security interest, pledge,
deposit, production payment, rights of a vendor under any title retention or
conditional sale agreement or lease substantially equivalent thereto, tax
lien, mechanic's or materialman's lien, or any other charge or encumbrance
for security purposes, whether arising by law or agreement or otherwise, but
excluding any right of offset which arises without agreement in the ordinary
course of business. "LIEN" also means any filed financing statement, any
registration of a pledge (such as with an issuer of uncertificated
securities), or any other arrangement or action which would serve to perfect
a Lien described in the preceding sentence, regardless of whether such
financing statement is filed, such registration is made, or such arrangement
or action is undertaken before or after such Lien exists.
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"LOAN" has the meaning given it in Section 2.1.
"LOAN DOCUMENTS" means this Agreement, the Note, the Security Documents,
and all other agreements, certificates, documents, instruments and writings
at any time delivered in connection herewith or therewith (exclusive of term
sheets, commitment letters, correspondence and similar documents used in the
negotiation hereof, except to the extent the same contain information about
Borrower, Trustees, Owners, or any of their Affiliates, properties, business
or prospects).
"MANAGING TRUSTEE" means each of Robert J. Stetson and Fred Margolin.
"MANAGING TRUSTEE" means, collectively, each Managing Trustee.
"NOTE" has the meaning given it in Section 2.1.
"OBLIGATIONS" means the sum of (a) all Debt from time to time owing by
Borrower to Lender under or pursuant to any of the Loan Documents, plus (b)
all other Debt from time to time owing by Borrower to Lender. "OBLIGATION"
means any part of the Obligations.
"OPERATING LEASE" means any real property lease agreement between
Borrower, as lessor, and a Franchisee, as lessee, regarding the lease of any
Restaurant Property by Borrower to such Franchisee.
"OWNER" means each of U.S. Restaurant Properties Operating L.P., a
Delaware limited partnership, and U.S. Restaurant Properties Master L.P., a
Delaware limited partnership, which together own all of the beneficial
ownership interest of Borrower. "OWNERS" means, collectively, each Owner.
"PERMITTED INVESTMENTS" means investments:
(a) in open market commercial paper, maturing within 270 days after
acquisition thereof, which has the highest or second highest credit rating
given by either Rating Agency.
(b) in marketable obligations, maturing within 12 months after
acquisition thereof, issued or unconditionally guaranteed by the United
States of America or an instrumentality or agency thereof and entitled to
the full faith and credit of the United States of America.
(c) in demand deposits, and time deposits (including certificates of
deposit) maturing within 12 months from the date of deposit thereof, with
any domestic office of any national or state bank or trust company which is
organized under the laws of the United States of America or any state
therein, which has capital, surplus and undivided profits of at least
$500,000,000, and whose certificates of deposit have at least the third
highest credit rating given by either Rating Agency.
(d) in money market mutual funds which are rated by either Rating
Agency at the time at which an investment is made in its highest short-term
rating category.
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As used in the foregoing definition (and elsewhere herein), "RATING AGENCY"
means either Standard & Poor's Ratings Group (a division of McGraw Hill,
Inc.) or Moody's Investors Service, Inc., or their respective successors.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or trustee
thereof, estate or executor thereof, unincorporated organization or joint
venture, court or governmental unit or any agency or subdivision thereof, or
any other legally recognizable entity.
"PROHIBITED LIEN" means any Lien not expressly allowed under Section
7.1(p).
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect.
"REQUEST FOR ADVANCE" means a written or telephonic request, or a
written confirmation, made by Borrower which meets the requirements of
Section 2.2.
"RESERVE PERCENTAGE" means the maximum reserve requirement, as
determined by Lender (including without limitation any basic, supplemental,
marginal, emergency or similar reserves), expressed as a percentage and
rounded to the next higher 0.01%, which would then apply to Lender under
Regulation D with respect to "Eurocurrency liabilities" (as such term is
defined in Regulation D), were Lender to have any such "Eurocurrency
liabilities". If such reserve requirement shall change after the date hereof,
the Reserve Percentage shall be automatically increased or decreased, as the
case may be, from time to time as of the effective time of each such change
in such reserve requirement.
"RESTAURANT PROPERTY" means all real and personal property constituting
any restaurant property or facility owned or leased by Borrower.
"RESTRICTED DEBT" of any Person means Debt in any of the following
categories:
(a) Debt for borrowed money,
(b) Debt constituting an obligation to pay the deferred purchase
price of property or services,
(c) Debt evidenced by a bond, debenture, note or similar instrument,
(d) Debt which (i) would under GAAP be shown on such Person's balance
sheet as a liability, and (ii) is payable more than one year from the date
of creation thereof (other than reserves for taxes and reserves for
contingent obligations),
(e) Debt arising under futures contracts, forward contracts, swap,
cap or collar contracts, option contracts, hedging contracts, other
derivative contracts, or similar agreements (excluding only option
contracts giving such Person the right - and not the duty - to buy or sell
goods expected to be bought or sold by such Person in
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the ordinary course of its business, so long as such Person has no
obligation other than the initial payment in full of the purchase
price for the option),
(f) Debt constituting principal under leases capitalized in
accordance with GAAP,
(g) Debt arising under conditional sales or other title retention
agreements,
(h) Debt owing under direct or indirect guaranties of Debt of any
other Person or constituting obligations to purchase or acquire or to
otherwise protect or insure a creditor against loss in respect of Debt of
any other Person (such as obligations under working capital maintenance
agreements, agreements to keep-well, or agreements to purchase Debt,
assets, goods, securities or services), but excluding endorsements in the
ordinary course of business of negotiable instruments in the course of
collection,
(i) Debt (for example, repurchase agreements) consisting of an
obligation to purchase securities or other property, if such Debt arises
out of or in connection with the sale of the same or similar securities or
property,
(j) Debt with respect to letters of credit or applications or
reimbursement agreements therefor OR
(k) Debt with respect to obligations to deliver goods or services in
consideration of advance payments therefor;
provided, however, that the "Restricted Debt" of any Person shall not include
Debt that was incurred by such Person on ordinary trade terms to vendors,
suppliers, or other Persons providing goods and services for use by such
Person in the ordinary course of its business, unless and until such Debt is
outstanding more than ninety (90) days past the original invoice or billing
date therefor.
"SECURITY DOCUMENTS" means all security agreements, deeds of trust,
mortgages, chattel mortgages, pledges, guaranties, financing statements,
continuation statements, extension agreements and other agreements or
instruments now, heretofore, or hereafter delivered by Borrower to Lender in
connection with this Agreement or any transaction contemplated hereby to
secure or guarantee the payment of any part of the Obligations or the
performance of Borrower's other duties and obligations under the Loan
Documents.
"SUBORDINATION AGREEMENT" means those certain Subordination Agreements
among Lender, as senior creditor, Comerica Bank-Texas and Compass
Bank-Dallas, as subordinate creditors, Borrower and U.S. Restaurant
Properties Operating L.P., substantially in the form attached hereto as
Exhibit E.
"SUBSIDIARY" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization
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which is directly or indirectly (through one or more intermediaries)
controlled by or owned fifty percent or more by such Person.
"TERMINATION EVENT" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(b)(5) or (6) of
ERISA or (ii) any other reportable event described in Section 4043(b) of
ERISA other than a reportable event not subject to the provision for 30-day
notice to the Pension Benefit Guaranty Corporation pursuant to a waiver by
such corporation under Section 4043(a) of ERISA, or (b) the withdrawal of
Borrower or any of its Affiliates from an ERISA Plan during a plan year in
which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, or (c) the filing of a notice of intent to terminate any ERISA Plan or
the treatment of any ERISA Plan amendment as a termination under Section 4041
of ERISA, or (d) the institution of proceedings to terminate any ERISA Plan
by the Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or
(e) any other event or condition which might constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any ERISA Plan.
"TRUSTEE" means each of Robert J. Stetson, Fred Margolin and Mark A.
Ferrucci. "TRUSTEES" means, collectively, each Trustee.
Section 1.2. EXHIBITS AND SCHEDULES; ADDITIONAL DEFINITIONS. All
Exhibits and Schedules attached to this Agreement are a part hereof for all
purposes.
Section 1.3. AMENDMENT OF DEFINED INSTRUMENTS. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in
this Agreement which refer to a particular agreement, instrument or document
also refer to and include all renewals, extensions, modifications, amendments
and restatements of such agreement, instrument or document, provided that
nothing contained in this section shall be construed to authorize any such
renewal, extension, modification, amendment or restatement.
Section 1.4. REFERENCES AND TITLES. All references in this Agreement to
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and
do not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof', "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this
section" and "this subsection" and similar phrases refer only to the sections
or subsections hereof in which such phrases occur. The word "or" is not
exclusive, and the word "including" (in its various forms) means "including
without limitation". Pronouns in masculine, feminine and neuter genders
shall be construed to include any other gender, and words in the singular
form shall be construed to include the plural and vice versa, unless the
context otherwise requires.
Section 1.5. CALCULATIONS AND DETERMINATIONS. All calculations of
interest made under the Loan Documents shall be made on the basis of actual days
elapsed (including the
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first day but excluding the last) and a year of 365 or 366 days, as
appropriate. Each determination by Lender of amounts to be paid under
Section 2.7 or any other matters which are to be determined hereunder by
Lender (such as any Base Rate, Business Day, or Reserve Percentage) shall, in
the absence of manifest error, be conclusive and binding. Unless otherwise
expressly provided herein or unless Lender otherwise consents all financial
statements and reports furnished to Lender hereunder shall be prepared and
all financial computations and determinations pursuant hereto shall be made
in accordance with GAAP.
ARTICLE II - THE LOAN
Section 2.1. ADVANCES. Subject to the terms and conditions hereof,
Lender agrees to make advances to Borrower ("ADVANCES") from time to time
prior to the earlier of the Bank Facility Date and November 30,1996, so long
as the aggregate amount of Advances made does not exceed (i) $20,000,000,
prior to the Equity Funding Date, and (ii) $13,000,000, after the Equity
Funding Date, determined in either case as of the date on which the requested
Advance is to be made. Each Advance must be greater than or equal to
$1,000,000 or must equal the unadvanced portion of such $20,000,000 or
$13,000,000, as applicable. The obligation of Borrower to repay to Lender the
aggregate amount of all Advances made by Lender (the "Loan"), together with
interest accruing in connection therewith, shall be evidenced by a single
promissory note (the "Note") made by Borrower payable to the order of Lender
in the form of Exhibit A with appropriate insertions. The amount of principal
owing on the Note at any given time shall be the aggregate amount of all
Advances theretofore made minus all payments of principal theretofore
received by Lender on the Note. Interest on the Note shall accrue and be due
and payable as provided herein and therein. Amounts borrowed and repaid
hereunder may not be reborrowed hereunder.
Section 2.2. REQUESTS FOR ADVANCES. Borrower must give at least three
Business Days' prior written notice, or telephonic notice promptly confirmed
in writing, of any requested Advance. Each such written request or
confirmation must be made in writing in the form and substance of the
"Request for Advance" attached hereto as Exhibit B, duly completed. Each
such telephonic request shall be deemed a representation, warranty;,
acknowledgment and agreement by Borrower as to the matters which are to be
set out in such written confirmation. If all conditions precedent to such
Advance have been met, Lender will on the date requested make such Advance
available to Borrower in immediately available funds at Lender's office in
Memphis, Tennessee.
Section 2.3. USE OF PROCEEDS. Borrower shall use all funds from
Advances to refinance the acquisition of Restaurant Properties acquired by
Borrower prior to the date hereof and to finance the acquisition of
Restaurant Properties to be acquired by Borrower after the date hereof. In no
event shall the funds from any Advance be used directly or indirectly by any
Person for personal, family, household or agricultural purposes or for the
purpose, whether immediate, incidental or ultimate, of purchasing, acquiring
or carrying any; "margin stock" or any "margin securities" (as such terms are
defined respectively in Regulation U and Regulation G promulgated by the
Board of Governors of the Federal Reserve System) or to extend credit to
others directly or indirectly for the purpose of purchasing or carrying any
such margin stock or margin securities. Borrower represents and
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warrants to Lender that Borrower is not engaged principally, or as one of
Borrower's important activities, in the business of extending credit to
others for the purpose of purchasing or carrying such margin stock or margin
securities.
Section 2.4. FACILITY FEE. In consideration of Lender's commitment to
make Advances, Borrower will pay to Lender (i) a commitment fee in the amount
of $100,000, which is due and payable on the date hereof, and (ii) a facility
fee equal to one percent (1%) of the aggregate amount of Advances, such fee
not to exceed $100,000, which shall be due and payable on the earlier of (I)
the Bank Facility Date, (II) November 30,1996, and (III) the date on which
all principal and accrued interest on the Note is paid in full. Borrower and
Lender acknowledge and agree that any amounts payable by Borrower in respect
of the facility fee contemplated by clause (ii) of this Section 2.4 may be
credited against, and therefore reduce on a dollar-for-dollar basis, fees and
expenses owed by Borrower and/or its affiliates to Lender and/or its
affiliates in connection with one or more securitization transactions
involving the sale or placement of commercial mortgage-backed securities.
Section 2.5. OPTIONAL PREPAYMENTS. Borrower may, upon three Business
Days' notice to Lender, from time to time and without premium or penalty
prepay the Note, in whole or in part, so long as each partial prepayment of
principal on the Note is greater than or equal to $1,000,000. Each prepayment
of principal under this section shall be accompanied by all interest then
accrued and unpaid on the principal so prepaid. Any principal or interest
prepaid pursuant to this section shall be in addition to, and not in lieu of,
all payments otherwise required to be paid under the Loan Documents at the
time of such prepayment.
Section 2.6. PAYMENTS TO LENDER. Borrower will make each payment which
it owes under the Loan Documents not later than 11:00 a.m., Memphis,
Tennessee time, on the date such payment becomes due and payable, in lawful
money of the United States of America, without set-off, deduction or
counterclaim, and in immediately available funds by wire transfer to Lender
pursuant to the wiring instructions set forth below Lender's signature
hereto. Any payment received by Lender after such time will be deemed to have
been made on the next following Business Day. Should any such payment become
due and payable on a day other than a Business Day, the maturity of such
payment shall be extended to the next succeeding Business Day, and, in the
case of a payment of principal or past due interest, interest shall accrue
and be payable thereon for the period of such extension as provided in the
Loan Document under which such payment is due. Each payment under a Loan
Document shall be due and payable at the place provided therein and, if no
specific place of payment is provided, shall be due and payable at the place
of payment of the Note. When Lender collects or receives money on account of
the Obligations which is insufficient to pay all Obligations then due and
payable, Lender may apply such money as it elects to the various Obligations
which are then due and payable.
Section 2.7. REIMBURSABLE TAXES. Borrower covenants and agrees that:
(a) Borrower will indemnify Lender against and reimburse Lender for
all present and future income, stamp and other taxes, levies, costs and
charges whatsoever imposed, assessed, levied or collected on or in respect
of this Agreement
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(whether or not legally or correctly imposed, assessed, levied or
collected), excluding, however, any corporate franchise taxes, taxes based
on capital, or taxes imposed on or measured by the overall net income of
Lender or any lending office of Lender (all such non-excluded taxes,
levies, costs and charges, collectively, "REIMBURSABLE TAXES" in this
section). Such indemnification shall be on an after-tax basis, taking into
account any taxes imposed on the amounts paid as indemnity.
(b) All payments on account of the principal of, and interest on, the
Loan and the Note, and all other amounts payable by Borrower to Lender
hereunder, shall be made in full without set-off or counterclaim and shall
be made free and clear of and without deductions or withholdings of any
nature by reason of any Reimbursable Taxes, all of which will be for the
account of Borrower. In the event of Borrower being compelled by law or
other regulations to make any such deduction or withholding from any
payment to Lender, Borrower shall pay on the due date of such payment, by
way of additional interest, such additional amounts as are needed to cause
the amount receivable by Lender after such deduction or withholding to
equal the amount which would have been receivable i~ the absence of such
deduction or withholding. If Borrower should make any deduction or
withholding as aforesaid, Borrower shall within 60 days thereafter forward
to Lender an official receipt or other official document evidencing payment
of such deduction or withholding.
ARTICLE III - CONDITIONS PRECEDENT TO LENDING
Section 3.1. DOCUMENTS TO BE DELIVERED. Lender has no obligation to make
the first Advance unless Lender shall have received all of the following, at
Lender's office in Memphis, Tennessee, duly executed and delivered and in
form, substance and date satisfactory to Lender:
(a) The Note.
(b) An "Omnibus Certificate" of the Managing Trustees of Borrower,
which shall contain their names and signatures and the names and signatures
of any other representatives of Borrower authorized to execute Loan
Documents and which shall certify to the truth, correctness and
completeness of the following exhibits attached thereto: (i) a copy of
resolutions duly adopted by the Managing Trustees of Borrower and in full
force and effect at the time this Agreement is entered in\o, authorizing
the execution of this Agreement and the other Loan Documents delivered or
to be delivered in connection herewith and the consummation of the
transactions contemplated herein and therein, (ii) a copy of the
certificate of trust of Borrower and all amendments thereto, certified by
the Delaware Secretary of State, and (iii) a copy of the Declaration of
Trust of Borrower and all amendments thereto.
(c) A certificate (or certificates) of the due formation, valid
existence and good standing of Borrower in Delaware, issued by the Delaware
Secretary of State.
(d) A "Compliance Certificate" of the Managing Trustees of Borrower,
of even date with such Advance, in which such Managing Trustees certify to
the
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satisfaction of the conditions set out in subsections (a), (b), (c) and (d)
of Section 3.2.
(e) A Certificate of Non-Foreign Status of Borrower.
(f) A favorable opinion of Messrs. Middleberg, Riddle & Gianna,
counsel for Borrower, substantially in the form set forth in Exhibit D,
together with the certificate provided for in such Exhibit.
Section 3.2. ADDITIONAL CONDITIONS PRECEDENT. Lender has no obligation
to make any Advance (including the first) unless the following conditions
precedent have been satisfied:
(a) All representations and warranties made by Borrower in any Loan
Document shall be true on and as of the date of such Advance (except to the
extent that the facts upon which such representations are based have been
changed by the extension of credit hereunder) as if such representations
and warranties had been made as of the date of such Advance.
(b) No Default shall exist at the date of such Advance.
(c) No material adverse change shall have occurred to Borrower's
financial condition or businesses since the date of this Agreement.
(d) Borrower shall have performed and complied with all agreements
and conditions required in the Loan Documents to be performed or complied
with by it on or prior to the date of such Advance.
(e) Borrower shall have furnished Lender with a listing of the
Restaurant Properties to be financed or refinanced by such Advance,
together with a true and correct copy of the closing statement (or proposed
closing statement) prepared in connection with the acquisition of each such
Restaurant Property. The unpaid principal balance of the Loan, after the
making of such requested Advance, shall not exceed fifty percent (50%) of
the lesser of (i) the aggregate acquisition cost of or (ii) the aggregate
value of all Restaurant Properties subject to first priority Liens in favor
of Lender pursuant to the Security Documents.
(f) With respect to each Restaurant Property to be financed or
refinanced by such Advance, Borrower shall have furnished Lender with:
(i) An appropriate version of the Subordination Agreement, if
applicable, duly executed by the subordinate creditors named therein,
Security Documents in form and substance satisfactory to Lender
granting to Lender first priority Liens on each such Restaurant
Property and a certificate of Borrower's good standing and due
qualification to do business issued by appropriate officials of each
state in which such Restaurant Properties are located and in which
such good standing and/or due qualification certifications are
available;
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(ii) policies of mortgage title insurance with respect to each
such Restaurant Property, on the ALTA standard loan policy, revised
coverage, most recent form, and dated no earlier than the date of such
Advance, insuring Lender of a valid first mortgage Lien on each such
Restaurant Property against loss in an amount satisfactory to Lender
in its sole discretion, and containing no exceptions other than (A)
Liens permitted under Section 7.1(p), (B) Liens against leasehold
interests or equipment of a Franchisee, and (C) such restrictive
covenants and exceptions as do not, in the reasonable judgment of
Lender, individually or in the aggregate impair the value or use of
any Restaurant Property or the Collateral as a whole, and containing
such endorsements and affirmative coverages as may be required by
Lender;
(iii) a favorable report of an environmental consulting firm
acceptable to Lender regarding its environmental assessment of each such
Restaurant Property, in scope and results acceptable to Lender;
(iv) true and correct copies of original insurance policies
covering each such Restaurant Property and complying with the requirements
of Section 5.1(i);
(v) a true and correct copy of any Ground Lease covering any
such Restaurant Property, together with an estoppel letter related thereto
duly executed and delivered by the Lessor party to such Ground Lease and
acceptable to Lender; and
(vi) a true and correct copy of the Operating Lease covering each
such Restaurant Property and an estoppel letter related thereto duly
executed and delivered by the Franchisee party to such Operating Lease and
acceptable to Lender.
(g) The making of such Advance shall not be prohibited by any law or
any regulation or order of any court or governmental agency or authority and
shall not subject Lender to any penalty or other onerous condition under or
pursuant to any such law, regulation or order.
(h) Lender shall have received all documents and instruments which
Lender has then requested, in addition to those described in Section 3.1 and
in subsections (e) and (f) of this Section 3.2 (including opinions of legal
counsel for Borrower and Lender; organizational documents and records;
documents evidencing governmental authorizations, consents, approvals,
licenses and exemptions; and certificates of public officials and of Trustees
and representatives of Borrower and other Persons), as to (i) the accuracy
and validity of or compliance with all representations, warranties and
covenants made by Borrower in this Agreement and the other Loan Documents,
(ii) the satisfaction of all conditions contained herein or therein, and
(iii) all other matters pertaining hereto and thereto. All such additional
documents and instruments shall be satisfactory to Lender in form, substance
and date.
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(i) All legal matters relating to the Loan Documents and the
consummation of the transactions contemplated thereby shall be satisfactory
to Thompson & Knight, P.C., counsel to Lender.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
Section 4.1. BORROWER'S REPRESENTATIONS AND WARRANTIES. To confirm
Lender's understanding concerning Borrower and Borrower's business, properties
and obligations and to induce Lender to enter into this Agreement and to make
the Loan, Borrower represents and warrants to Lender that:
(a) NO DEFAULT. Borrower is not in default in the performance of any
of the covenants and agreements contained herein. No event has occurred and
is continuing which constitutes a Default.
(b) ORGANIZATION AND GOOD STANDING. Borrower is duly organized,
validly existing and in good standing under the laws of its state of
organization, having all powers as a Delaware business trust required to
carry on its business and enter into and carry out the transactions
contemplated hereby. Borrower is duly qualified, in good standing, and
authorized to do business in all other jurisdictions within the United
States wherein the character of the properties owned or held by it or the
nature of the business transacted by it makes such qualification necessary.
Borrower does not conduct or transact business or own property outside the
United States. Borrower is not a "foreign person" within the meaning of the
Internal Revenue Code of 1986, as amended, Sections 1445 and 7701 (i.e.
Borrower is not a non-resident alien, foreign corporation, foreign
partnership, foreign trust or foreign estate as defined therein and
regulations promulgated thereunder).
(c) AUTHORIZATION. Borrower has duly taken all action as a Delaware
business trust necessary to authorize the execution and delivery by it of
the Loan Documents and to authorize the consummation of the transactions
contemplated thereby and the performance of its obligations thereunder.
Borrower is duly authorized to borrow funds hereunder and to grant Liens in
the Collateral to Lender. Each Managing Trustee has all necessary power and
authority to execute and deliver the Loan Documents on behalf of Borrower
as a managing trustee of Borrower.
(d) NO CONFLICTS OR CONSENTS. The execution and delivery by each
Trustee, as trustee of Borrower, and Borrower of the Loan Documents, the
performance by Borrower of its obligations under such Loan Documents, and
the consummation of the transactions contemplated by the various Loan
Documents, do not and will not (i) conflict with any provision of (1) any
domestic or foreign law, statute, rule or regulation, (2) the certificate
of trust, Declaration of Trust, trust agreement or any other organizational
document of Borrower, or (3) any agreement, judgment, license, order or
permit applicable to or binding upon Borrower, (ii) result in the
acceleration of any Debt owed by Borrower, or (iii) result in or require
the creation of any Lien upon any assets or properties of Borrower except
as expressly contemplated in the Loan Documents. Except as expressly
contemplated in the Loan Documents no
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consent, approval, authorization or order of, and no notice to or filing
with, any court or governmental authority or third party is required in
connection with the execution, delivery or performance by each Trustee,
as trustee of Borrower, and Borrower of any Loan Document or to consummate
any transactions contemplated by the Loan Documents.
(e) ENFORCEABLE OBLIGATIONS. This Agreement is, and the other Loan
Documents when duly executed and delivered will be, legal, valid and
binding obligations of Borrower, enforceable in accordance with their terms
except as such enforcement may be limited by bankruptcy, insolvency or
similar laws of general application relating to the enforcement of
creditors' rights.
(f) INITIAL FINANCIAL STATEMENTS. The Initial Financial Statements
fairly present Borrower's financial position at the date thereof and the
results of Borrower's operations and Borrower's cash flows for the periods
thereof. Since the date of the Initial Financial Statements no material
adverse change has occurred in Borrower's financial condition or businesses
or in Borrower's financial condition or businesses, except as reflected in
the Disclosure Schedule or a Disclosure Report. All Initial Financial
Statements were prepared in accordance with GAAP.
(g) OTHER OBLIGATIONS AND RESTRICTIONS. Borrower has no outstanding
Debt of any kind (including contingent obligations, tax assessments, and
unusual forward or long-term commitments) which is, in the aggregate,
material to Borrower and not shown in the Initial Financial Statements or
disclosed in the Disclosure Schedule or a Disclosure Report. Except as
shown in the Initial Financial Statements or disclosed in the Disclosure
Schedule or a Disclosure Report, Borrower is not subject to or restricted
by any franchise, contract, deed, charter restriction, or other instrument
or restriction which is materially likely in the foreseeable future to
materially and adversely affect the businesses, properties, prospects,
operations, or financial condition of Borrower.
(h) FULL DISCLOSURE. No certificate, statement or other information
delivered herewith or heretofore by Borrower, Trustees, Owners or any of
their respective Affiliates to Lender in connection with the negotiation of
this Agreement or in connection with any transaction contemplated hereby
contains any untrue statement of a material fact or omits to state any
material fact known to Borrower, Trustees, Owners or any of their
respective Affiliates (other than industry-wide risks normally associated
with the type of business conducted by Borrower) necessary to make the
statements contained herein or therein not misleading as of the date made
or deemed made. There is no fact known to Borrower, Trustees, Owners or
any of their respective Affiliates (other than industry-wide risks normally
associated with the type of business conducted by Borrower) that has not
been disclosed to Lender in writing which could materially and adversely
affect Borrower's properties, business, prospects or condition (financial
or otherwise). Borrower has heretofore delivered to Lender true, correct
and complete copies of the Initial Financial Statements.
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(i) LITIGATION. Except as disclosed in a Disclosure Report: (i) there
are no actions, suits or legal, equitable, arbitrative or administrative
proceedings pending, or to the knowledge of Borrower, Trustees, Owners or
any of their respective Affiliates threatened, against Borrower before any
federal, state, municipal or other court, department, commission, body,
board, bureau, agency, or instrumentality, domestic or foreign, which do or
may materially and adversely affect Borrower, any Collateral, Borrower's
ownership or use of any of its assets or properties, its businesses or then
financial condition or prospects, or the right or ability of Borrower to
enter into the Loan Documents or to consummate the transactions
contemplated thereby or to perform its obligations thereunder, and (ii)
there are no outstanding judgments, injunctions, writs, rulings or orders
by any such governmental entity against Borrower, Trustees, Owners or any
of their respective Affiliates, or Borrower's, Owners' or any of their
respective Affiliates' stockholders, partners, trustees, directors or
officers which have or may have any such effect.
(j) NO AGREEMENTS TO SELL ASSETS. Except as disclosed in the
Disclosure Schedule, none of Borrower, Trustees, Owners or any of their
respective Affiliates has any legal obligation, absolute or contingent, to
any Person to sell any Restaurant Property or any other assets of Borrower
constituting Collateral hereunder (other than sales in the ordinary course
of business), or to effect any merger, consolidation or other
reorganization of Borrower or to enter into any agreement with respect
thereto.
(k) LEASES AND SECURITY DOCUMENTS. Each Ground Lease and each
Operating Lease (i) constitutes the legal, valid and binding obligation of
the parties thereto, and (ii) permits the rights, titles and interests of
Borrower thereunder to be encumbered by the Security Documents. Neither
Borrower, any Lessor, any Franchisee nor any other Person is in default
under, and Buyer is not aware of the existence of any circumstance which
with the passage of time could give rise to a default under, any Ground
Lease or any Operating Lease. There are no amendments, modifications or
supplements to any Ground Lease or any Operating Lease, other than
amendments, modification or supplements copies of which have been furnished
to Lender. Borrower has not received any notices under any Ground Lease or
any Operating Lease with respect to Borrower's compliance or noncompliance
therewith, other than notices copies of which have been furnished to
Lender. No Ground Lease nor any Operating Lease (including any lessee
option to extend such Ground Lease or Operating Lease) will expire prior to
November 30, 1996. Lender has first and prior Liens on Borrower's fee
simple absolute interest to, or leasehold interest in, each Restaurant
Property, and first and prior Liens on all other real and personal property
owned by Borrower, including without limitation all of Borrower's right,
title and interest under each Ground Lease and each Operating Lease. All
tangible Collateral is located at Restaurant Properties subject to Security
Documents. No real property subject to any Security Document is a business
or residential homestead.
(l) LABOR DISPUTES AND ACTS OF GOD. Except as disclosed in a
Disclosure Report, neither the business nor the properties of Borrower has
been affected by any fire, explosion, accident, strike, lockout or other
labor dispute, drought, storm, hail,
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earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance), which do or may materially and
adversely affect Borrower, its ownership or use of any of its assets or
properties, its businesses or then financial condition or prospects.
(m) ERISA LIABILITIES. There are no currently existing ERISA Plans
except as listed in a Disclosure Report. Except as disclosed in a
Disclosure Report, no Termination Event has occurred with respect to any
ERISA Plan and Borrower is in compliance with ERISA in all material
respects. Borrower is not required to contribute to, or has any other
absolute or contingent liability in respect of, any "multi-employer plan"
as defined in Section 4001 of ERISA. Except as set forth in a Disclosure
Report: (i) no "accumulated funding deficiency" (as defined in Section
412(a) of the Internal Revenue Code of 1986, as amended) exists with
respect to any ERISA Plan, whether or not waived by the Secretary of the
Treasury or his delegate, and (ii) the current value of each ERISA Plan's
benefits does not exceed the current value of such ERISA Plan's assets
available for the payment of such benefits by more than $500,000.
(n) ENVIRONMENTAL AND OTHER LAWS. Except as disclosed in the
Disclosure Schedule or a Disclosure Report: (i) Borrower is conducting its
businesses in material compliance with all applicable federal, state or
local laws, including Environmental Laws, and have and are in compliance
with all licenses and permits required under any such laws; (ii) none of
the operations or properties of Borrower is the subject of federal, state
or local investigation evaluating whether any material remedial action is
needed to respond to a release of any Hazardous Materials into the
environment or to the improper storage or disposal (including storage or
disposal at off-site locations) of any Hazardous Materials; (iii) Borrower
has not (and to the best knowledge of Borrower, Trustees, and Owners, no
other Person has) filed any notice under any federal, state or local law
indicating that Borrower is responsible for the improper release into the
environment, or the improper storage or disposal, of any material amount of
any Hazardous Materials or that any Hazardous Materials have been
improperly released, or are improperly stored or disposed of, upon any
property of Borrower; (iv) Borrower has not transported or arranged for the
transportation of any Hazardous Material to any location which is (1)
listed on the National Priorities List under CERCLA, listed for possible
inclusion on such National Priorities List by the Environmental Protection
Agency in its CERCLIS List, or listed on any similar state list or (2) the
subject of federal, state or local enforcement actions or other
investigations which may lead to claims against Borrower for clean-up
costs, remedial work, damages to natural resources or for personal injury
claims (whether under Environmental Laws or otherwise); (v) Borrower
otherwise has no known material contingent liability under any
Environmental Laws or in connection with the release into the environment,
or the storage or disposal, of any Hazardous Materials and (vi) the
Collateral and the intended use thereof by Borrower comply with all
applicable restrictive covenants, zoning ordinances and building codes,
flood disaster laws, applicable health, safety and environmental laws and
regulations, laws relating to the disabled (including but not limited to
the ADA and/or the FHAA and all other applicable laws, statutes,
ordinances, rules, regulations, orders, determinations and
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court decisions. Borrower or Borrower's tenants have obtained all
requisite zoning, utility, building, health and operating permits from the
governmental authority or municipality having jurisdiction over the
Collateral. Without limitation of the foregoing, no asbestos, material
containing asbestos which is or may become friable or material containing
asbestos deemed hazardous by Environmental Laws has been installed in any
Collateral and no Collateral nor Borrower is in violation of or subject to
any existing, pending or, to the best knowledge of Borrower, threatened
investigation or inquiry by any governmental authority or to any remedial
obligations under any Environmental Laws pertaining to health, safety or
the environment, including without limitation CERCLA and RCRA, and this
representation would continue to be true and correct following disclosure
to the applicable governmental authorities of all relevant facts,
conditions and circumstances, if any, pertaining to any Collateral and
Borrower. Borrower has not obtained and is not required to obtain any
permits, licenses or similar authorizations to construct, occupy, operate
or use any buildings, improvements, fixtures and equipment forming a part
of any Collateral by reason of any Environmental Laws. Borrower undertook,
at the time of acquisition of any Collateral, all appropriate inquiry into
the previous ownership and uses of such Collateral consistent with good
commercial or customary practice. Borrower has taken all steps necessary
to determine and has determined that no hazardous substances or solid
wastes have been disposed of or otherwise released on or to any Collateral.
The use which Borrower makes and intends to make of any Collateral will not
result in the disposal or other release of any hazardous substance or solid
waste on or to such Collateral. As used herein, the term "RELEASE" shall
have the meaning specified in CERCLA, and the terms "SOLID WASTE" and
"DISPOSAL" (or "DISPOSED") shall have the meanings specified in RCRA, and
the term "HAZARDOUS SUBSTANCE" shall mean: (i) any "hazardous substance"
as defined in CERCLA and regulations promulgated thereunder; (ii) any
"hazardous waste" as defined in RCRA and regulations promulgated
thereunder; (iii) any petroleum, including crude oil or any fraction
thereof which is not otherwise specifically listed or designated as a
hazardous substance under the definition of hazardous substance in CERCLA
as well as natural gas, natural gas liquids, liquified natural gas, or
synthetic gas usable for fuel (or mixtures of natural gas and such
synthetic gas), and other petroleum products and by-products;
(iv) formaldehyde, urea, polychlorinated biphenyls, radon, and "source",
"special nuclear" and "by-product" material as defined in the Atomic
Energy Act of 1985, 42 U.S.C. Sections 3011 A SEQ.; (v) any material
defined as hazardous or toxic under any statute or regulation of the
State of Texas or any agency thereof; and (vi) any other material or
substance which is toxic, ignitable, reactive or corrosive and which is
regulated by any Environmental Law; provided, (1) all such terms shall be
deemed to include all similar terms used in any Environmental Law or
regulations thereunder (including by way of example, but not limitation,
pollutant, contaminant, toxic substance, discharge and migration), and
(2) to the extent that any Environmental Law or regulations thereunder are
amended so as to broaden the meaning of "hazardous substance," "release,"
"solid waste," or "disposal" (or "disposed"), or any similar terms, or
otherwise establish a meaning for any such terms which is broader than
that specified above, such broader meaning shall apply.
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(o) NAMES AND PLACES OF BUSINESS. Borrower has not, during the
preceding five years, had, been known by, or used any other trust,
corporate, trade, or fictitious name. Except as otherwise indicated in a
Disclosure Report, the chief executive office and principal place of
business of Borrower are (and since its organization have been) located at
the address of Borrower set out in Section 8.3. Except for the office
maintained by Borrower in Wilmington, Delaware, as indicated in a
Disclosure Report, Borrower has no other office or place of business.
(p) BORROWER'S SUBSIDIARIES. Borrower does not presently have any
Subsidiary or own any stock in any other corporation or association.
Borrower is not a member of any general or limited partnership, joint
venture or association of any type whatsoever.
(q) TITLE TO PROPERTIES; LICENSES. Borrower has good and marketable
title in fee simple absolute to, or a valid leasehold interest in, each
Restaurant Property and all of its other real property, and good and
defensible title to all of its other material properties and assets, free
and clear of all Prohibited Liens and of all impediments to the use of such
properties and assets in Borrower's business. All Collateral is free and
clear of all mechanic's or materialmen's Liens. Except as reflected in the
Disclosure Schedule, there is no financing statement covering any
Collateral on file in any public office. Borrower warrants the title to
all Collateral and the Liens created and evidenced by the Security
Documents against the claims of all persons whomsoever lawfully claiming or
to claim the same or any part thereof, subject to Liens permitted under
Section 7.1(p). Borrower possesses all licenses, permits, franchises,
patents, copyrights, trademarks and trade names, and other intellectual
property (or otherwise possesses the right to use such intellectual
property without violation of the rights of any other Person) which are
necessary to carry out its business as presently conducted and as presently
proposed to be conducted hereafter, and Borrower is not in violation in any
material respect of the terms under which it possesses such intellectual
property or the right to use such intellectual property. All Collateral is
served by electric, gas, storm and sanitary sewers, sanitary water supply,
telephone and other utilities required for the use thereof as represented
by Borrower at or within the boundary lines of such Collateral. All
streets, alleys and easements necessary to serve any Collateral for the use
represented by Borrower have been completed and are serviceable and such
streets have been dedicated and accepted by applicable governmental
entities. All Collateral is in good condition and repair with no deferred
maintenance (other than maintenance, the deferral of which has not and will
not materially adversely affect the value or use of any specific item of
Collateral) and is free from damage caused by fire or other casualty.
Borrower is aware of no latent or patent structural or other significant
defect or deficiency in any Collateral. Design and as-built conditions of
any Collateral are such that no drainage or surface or other water will
drain across or rest upon either such Collateral or land of others. No
Collateral is within a flood plain except as indicated on a survey of such
Collateral delivered to Lender. None of the improvements on any Collateral
create an encroachment over, across or upon any of such Collateral
boundary lines, rights of way or easements giving rise to a material
impediment to the use of
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adjoining land, and no buildings or other improvements on adjoining land
create such an encroachment giving rise to a material impediment to the
use of such Collateral.
(r) GOVERNMENT REGULATION. Borrower is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power
Act, the Investment Company Act of 1940 (as any of the preceding acts have
been amended) or any other statute, law, regulation or decree which
regulates the incurring by such Person of Debt, including statutes, laws,
regulations or decrees relating to common contract carriers or the sale of
electricity, gas, steam, water or other public utility services.
Section 4.2. REPRESENTATION BY LENDER. Lender hereby represents that it
will acquire the Note for its own account; however, the disposition of Lender's
property shall at all times be and remain within its control and, in particular
and without limitation, Lender may at any time sell, assign, grant
participations in, delegate or otherwise transfer to any other Person (an
"ASSIGNEE") all or part of the rights and duties of Lender under this Agreement
and the other Loan Documents. To the extent indicated in any document,
instrument or agreement so selling, assigning, granting participations in, or
otherwise transferring to an Assignee such rights and/or duties, (i) the
Assignee shall acquire all of Lender's rights under this Agreement and the other
Loan Documents and (ii) the Assignee shall be deemed to be the "Lender" under
this Agreement and the other Loan Documents with the authority to exercise such
rights in the capacity of Lender.
ARTICLE V - COVENANTS OF BORROWER
Section 5.1. AFFIRMATIVE COVENANTS. To conform with the terms and
conditions under which Lender is willing to have credit outstanding to Borrower,
and to induce Lender to enter into this Agreement and make the Loan, Borrower
warrants, covenants and agrees that until the full and final payment of the
Obligations and the termination of this Agreement, unless Lender has previously
agreed otherwise:
(a) PAYMENT AND PERFORMANCE. Borrower will pay all amounts due under
the Loan Documents in accordance with the terms thereof and will observe,
perform and comply with every covenant, term and condition expressed or
implied in the Loan Documents.
(b) BOOKS FINANCIAL STATEMENTS AND REPORTS. Borrower will at all
times maintain full and accurate books of account and records. Borrower
will maintain a standard system of accounting and will furnish the
following statements and reports to Lender at Borrower's expense:
(i) As soon as available, and in any event within ninety days
after the end of each Fiscal Year, complete financial statements of
Borrower together with all notes thereto, prepared in reasonable
detail in accordance with GAAP, together with an opinion, based on an
audit using generally accepted auditing standards, by Deloitte &
Touche, or other independent certified public accountants selected by
Borrower and acceptable to Lender, stating that such financial
statements have been so prepared. These financial
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statements shall contain a balance sheet as of the end of such Fiscal
Year and statements of earnings, of cash flows, and of changes in
owners' equity for such Fiscal Year, each setting forth in comparative
form the corresponding figures for the preceding Fiscal Year.
(ii) As soon as available, and in any event within forty-five
days after the end of each Fiscal Quarter, Borrower's balance sheet as
of the end of such Fiscal Quarter and statements of Borrower's
earnings and cash flows for the period from the beginning of the then
current Fiscal Year to the end of such Fiscal Quarter, all in
reasonable detail and prepared in accordance with GAAP, subject to
changes resulting from normal year-end adjustments. In addition
Borrower will, together with each such set of financial statements and
each set of financial statements furnished under Section 5.1(b)(i)
above, furnish a certificate in the form of Exhibit C signed by the
Managing Trustees of Borrower stating that such financial statements
are accurate and complete, that such Managing Trustees have reviewed
the Loan Documents, and that no Default exists at the end of such
Fiscal Quarter or at the time of such certificate, or specifying the
nature and period of existence of any such Default.
(iii) Promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent by
Borrower, Owners or any of their respective Affiliates to its
beneficial owners or stockholders, and all registration statements,
periodic reports and other statements and schedules filed by Owners
with any securities exchange, the Securities and Exchange Commission
or any similar governmental authority.
(c) COMMUNICATIONS WITH LESSORS AND FRANCHISEES. Borrower shall provide to
Lender upon request complete copies of any communications from any Lessor or any
Franchisee material to Borrower, any Ground Lease, any Operating Lease, any
Restaurant Property or any other Collateral including, without limitation, any
notices of an event of default or other event or condition which could
materially and adversely affect the business, properties, prospects, operations,
or financial condition of Borrower, promptly following receipt by' Borrower.
Borrower hereby authorizes Lender to discuss with each Lessor and each
Franchisee Borrower's financial condition, operations and any' other matters
relating to Borrower, any Ground Lease, any Operating Lease or any Restaurant
Property upon the occurrence or existence of any Event of Default. Borrower
further (a) consents to the release to Lender by each Lessor and each Franchisee
of any information relating to the foregoing matters, and (b) instructs each
Lessor and each Franchisee to release any information relating to the foregoing
matters upon the request of Lender.
(d) OTHER INFORMATION AND INSPECTIONS. Borrower will furnish to Lender any
information which Lender may from time to time request concerning any covenant,
provision or condition of the Loan Documents or any matter in connection with
Borrower's, Trustees', Owners' or their respective Affiliates' businesses and
operations. To the fullest extent permissible under the Operating Leases,
Borrower
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will permit representatives appointed by Lender (including independent
accountants, agents, attorneys, appraisers and any other Persons) to visit and
inspect any of Borrower's property, including its books of account, other books
and records, and any facilities or other business assets, and to make extra
copies therefrom and photocopies and photographs thereof, and to write down and
record any information such representatives obtain, and Borrower shall permit
Lender or its representatives to investigate and verify the accuracy of the
information furnished to Lender in connection with the Loan Documents and to
discuss all such matters with its Owners, Trustees, employees and
representatives. Lender agrees that, until the occurrence of a Default, it will
take all reasonable steps to keep confidential any proprietary information given
to it by Borrower, provided, however, that this restriction shall not apply to
information which (i) has at the time in question entered the public domain,
(ii) is required to be disclosed by law or by any order, rule or regulation
(whether valid or invalid) of any court or governmental agency, or authority,
(iii) is disclosed to Lender's Affiliates, auditors, attorneys, or agents, or
(iv) is furnished to any purchaser or prospective purchaser of participations or
other interests in the Loan or any Loan Document.
(e) NOTICE OF MATERIAL EVENTS AND CHANGE OF ADDRESS. Borrower will
promptly notify Lender:
(i) of any material adverse change in Borrower's financial condition
or in the aggregate value of the Collateral,
(ii) of the occurrence of any Default,
(iii) of the acceleration of the maturity of any Debt owed by
Borrower or of any default by Borrower under any indenture, mortgage,
agreement, contract or other instrument to which any of them is a party or
by which any of them or any of their properties is bound, if such
acceleration or default might have a material adverse effect upon
Borrower's financial condition or on the value of any material part of the
Collateral,
(iv) of the occurrence of any Termination Event,
(v) of any claim of $50,000 or more, any notice of potential
liability under any Environmental Laws which might exceed such amount, or
any other material adverse claim asserted against Borrower or with respect
to Borrower's properties, and
(vi) of the filing of any suit or proceeding against Borrower in which
an adverse decision could have a material adverse effect upon Borrower's
financial condition, business or operations or on the value of any
Collateral.
Upon the occurrence of any of the foregoing Borrower will take all necessary or
appropriate steps to remedy promptly any such material adverse change, Default,
acceleration, default or Termination Event, to protect against any such adverse
claim,
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to defend any such suit or proceeding, and to resolve all controversies
on account of any of the foregoing. Borrower will also notify Lender and
Lender's counsel in writing at least twenty Business Days prior to the date that
Borrower changes its name or the location of its chief executive office or
principal place of business or the place where it keeps its books and records
concerning any Collateral, furnishing with such notice any necessary financing
statement amendments or requesting Lender and its counsel to prepare the same.
(f) MAINTENANCE AND OPERATION OF COLLATERAL. Subject to the terms and
provisions of the Operating Leases, Borrower shall cause each Franchisee to use
all tangible Collateral in the business of such Franchisee, and all such
tangible Collateral shall remain in such Franchisee's possession or control at
all times at such Franchisee's and Borrower's risk of loss and shall be located
on the real property subject to the Security Documents. Borrower will warrant
and forever defend the title to the Collateral and all Liens created and
evidenced by the Security Documents against the claims of all persons whomsoever
lawfully claiming or to claim the same or any part thereof, subject to Liens
permitted under Section 7.1(p). Subject to the terms and provisions of the
Operating Leases, Borrower will cause each Franchisee to keep the Collateral in
good order, repair, condition and appearance, causing all necessary structural
and non-structural repairs, renewals, replacements, additions and improvements
to be promptly made, and will not allow any of the Collateral to be misused,
abused or wasted or to deteriorate. Notwithstanding the foregoing, Borrower
will not, without the prior written consent of Lender, (i) erect any new
buildings, structures or other improvements on the Collateral; (ii) remove from
the Collateral any fixtures or personal property covered by any Security
Document except such as is replaced by Borrower by an article of equal
suitability and value, owned by Borrower, free and clear of any Lien (except
that created by the Security Documents or subordinated pursuant to the
Subordination Agreement), (iii) make or permit to be made any structural or
material alteration to the Collateral or any other alteration thereto which
impairs the value thereof or (iv) except as may be permitted under the Operating
Leases, make or permit to be made any alteration to the Collateral involving an
estimated expenditure exceeding $10,000 except pursuant to plans and
specifications approved in writing by Lender. Borrower will not use or occupy,
or allow the use or occupancy of, the Collateral in any manner which violates
any applicable law or which constitutes a public or private nuisance or which
makes void, voidable or cancelable, or increases the premium of, any insurance
then in force with respect thereto. Borrower will comply with and use reasonable
efforts to cause all occupants of the Collateral to comply with the ADA and/or
the FHAA and shall provide Lender with copies of all plans for compliance with
the ADA and/or the FHAA and all surveys relating to such compliance now in
Borrower's possession or obtained by Borrower during the term of the Loan.
Borrower will not initiate or permit any zoning reclassification of the
Collateral or seek any variance under existing zoning ordinances applicable to
the Collateral or use or permit the use of the Collateral in such a manner which
would result in such use becoming a nonconforming use under applicable zoning
ordinances or other applicable laws. Borrower will not impose any restrictive
covenants or encumbrances upon the Collateral, execute or file any subdivision
plat affecting the Collateral or consent to
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the annexation of the Collateral to any municipality, without the prior
written consent of Lender. Borrower shall not operate the Collateral, or
permit the Collateral to be operated, as a cooperative or condominium
building or buildings in which the tenants or occupants participate in the
ownership, control or management of the Collateral or any part thereof, as
tenant stockholders or otherwise. Borrower shall not cause or permit any
drilling or exploration for, or extraction, removal or production of,
minerals from the surface or subsurface of the Collateral. Borrower will not
do or suffer to be done any act whereby the value of any part of the
Collateral may be lessened. To the fullest extent permissible under the
Operating Leases, Lender or its authorized representatives, including but not
limited to third party appraisers, environmental engineers, employees of
Lender, architects and engineers, shall have the right to inspect and conduct
testing on the Collateral at any time and Borrower will assist Lender and/or
said representatives in whatever way necessary to make such inspections
and/or testing. If Borrower receives a notice or claim from any federal,
state or other governmental entity pertaining to the Collateral, including
specifically but without limitation a notice that the Collateral is not in
compliance with any applicable law, Borrower will promptly furnish a copy of
such notice or claim to Lender.
(g) MAINTENANCE OF EXISTENCE AND QUALIFICATIONS. Borrower will maintain
and preserve its existence as a Delaware business trust and its rights and
franchises in full force and effect and will qualify to do business as a foreign
business entity in all states or jurisdictions where required by applicable law,
except where the failure so to qualify will not have any material adverse effect
on Borrower.
(h) PAYMENT OF TRADE DEBT, TAXES, ETC. Borrower will (i) timely file all
required tax returns; (ii) timely pay all taxes, assessments, and other
governmental charges or levies imposed upon it or upon its income, profits or
property and cause to be paid prior to delinquency all taxes and assessments
heretofore or hereafter levied or assessed against the Collateral, or any part
thereof, or any trustee under any Security Document, or Lender for or on account
of the Obligations or any interest created by any Security Document and will
furnish Lender with receipts showing payment of such taxes and assessments at
least ten (10) days prior to the applicable default date therefor; (iii) cause
all debts and liabilities of any character, including without limitation all
debts and liabilities for labor, material and equipment and all debts and
charges for utilities servicing the Collateral, incurred in the construction,
maintenance, operation and development of the Collateral to be promptly paid,
and within ninety days after the same becomes due pay all Debt owed by it on
ordinary trade terms to vendors, suppliers and other Persons providing goods and
services used by it in the ordinary course of its business; (iv) pay and
discharge when due all other Debt now or hereafter owed by it; and (v) maintain
appropriate accruals and reserves for all of the foregoing in accordance with
GAAP. Borrower may, however, delay paying or discharging any of the foregoing so
long as it is in good faith contesting the validity, applicability, or amount
thereof by appropriate proceedings and has set aside on its books adequate
reserves therefor, and, with regard to any asserted tax or assessment required
to be paid under clause (ii) of this Section 5.1(h), if Borrower shall (1) prior
to delinquency of the asserted tax or assessment Borrower
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establishes an escrow acceptable to Lender adequate to cover the payment of
such tax or assessment with interest, costs and penalties and a reasonable
additional sum to cover possible costs, interest and penalties (which escrow
shall be returned to Borrower upon payment of all such taxes, assessments,
interest, costs and penalties); (2) Borrower pays to Lender promptly after
demand therefor all costs and expenses incurred by Lender in connection with
such contest; and (3) Borrower promptly causes to be paid any amount adjudged
by a court of competent jurisdiction to be due, with all costs, penalties and
interest thereon, promptly after such judgment becomes final; provided,
however, that in any event each such contest shall be concluded and the tax,
assessment, penalties, interest and costs shall be paid prior to the date any
writ or order is issued under which the Collateral may be sold.
(i) INSURANCE. Borrower shall, or shall cause each Franchisee to, keep the
Collateral insured to the fullest extent specified in each Operating Lease.
Borrower will also provide such other insurance as Lender may from time to time
require, in such companies, upon such terms and provisions, in such amounts, and
with such endorsements, all as are approved by Lender. To the fullest extent
permitted by each Operating Lease, Borrower further agrees that Borrower will
cause each Franchisee to deliver to Borrower, which will in turn deliver to
Lender, true and correct copies of the original policies evidencing such
insurance and any additional insurance which shall be taken out upon any part of
the Collateral and receipts evidencing the payment of all premiums, and will
cause each Franchisee to deliver certificates evidencing renewals of all such
policies of insurance to Borrower, which will in turn deliver such certificates
to Lender, at least fifteen (15) days before any such insurance shall expire. In
the event of foreclosure of any Collateral or other transfer of title to any
Collateral in extinguishment in whole or in part of the Obligations, Borrower
shall cause all right, title and interest of each Franchisee in and to such
policies then in force concerning such Collateral and all proceeds payable
thereunder to, and all right, title and interest of Borrower in and to such
policies then in force concerning such Collateral and all proceeds payable
thereunder shall, thereupon vest in the purchaser at such foreclosure or Lender
or other transferee in the event of such other transfer of title. In the event
any of the Collateral covered by such insurance is destroyed or damaged by fire,
explosion, wind storm, hail or by any other casualty against which insurance
shall have been required hereunder, subject to the terms and provisions of each
Operating Lease, (i) Lender may, but shall not be obligated to, make proof of
loss if not made promptly by a Franchisee or Borrower, (ii) each insurance
company concerned is hereby authorized and directed to make payment for such
loss directly to Lender instead of to Franchisee or Borrower, and (iii) Lender
shall have the right to apply the insurance proceeds first, to reimburse Lender
or any trustee under any Security Document for all costs and expenses, including
reasonable attorney's fees, incurred in connection with the collection of such
proceeds and, second, the remainder of said proceeds shall be applied, at the
discretion of Lender, in payment of the Obligations either in whole or in part,
whether or not then due and payable, in the order determined by Lender in its
sole discretion, or to the repair, restoration or replacement, either partly or
entirely, of the Collateral so destroyed or damaged, provided that, any
insurance proceeds held by Lender to be applied to the repair, restoration or
replacement of the
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Collateral shall be so held without payment or allowance of interest thereon
and shall be paid out from time to time upon compliance by Borrower with such
terms, conditions and requirements as may be imposed by Lender. In any
event, notwithstanding the occurrence of any casualty, the unpaid portion of
the Obligations shall remain in full force and effect (except to the extent
of application of insurance proceeds as provided above) and Borrower shall
not be excused in the payment thereof. If any act or occurrence of any kind
or nature (including any casualty on which insurance was not obtained or
obtainable) shall result in damage to or loss or destruction of the
Collateral, Borrower shall give immediate notice thereof by mail to Lender
and, unless otherwise so instructed by Lender, and subject to the terms and
provisions of each Operating Lease, shall promptly, at Borrower's sole cost
and expense and regardless of whether the insurance proceeds, if any, shall
be sufficient for the purpose, restore, repair, replace and rebuild the
Collateral as nearly as possible to its value, condition and character
immediately prior to such damage, loss or destruction in accordance with
plans and specifications submitted to and approved by Lender and otherwise in
accordance with the provisions of the Security Documents. Borrower shall, or
shall cause each Franchisee to, maintain Comprehensive General Liability
insurance against claims for bodily injury or death and property damage
occurring in or upon or resulting from the Collateral, in standard form and
with a reputable insurance company or companies. Borrower shall, or shall
cause each Franchisee to, maintain with respect to each policy or agreement
evidencing such Comprehensive General Liability insurance such endorsements
as may be required by Lender and, to the fullest extent permitted by each
Operating Lease, shall at all times cause each Franchisee to deliver, and
Borrower shall in turn deliver and maintain with Lender a certificate with
respect to such insurance in form satisfactory to Lender. Not less than
fifteen (15) days prior to the expiration date of each policy of insurance
required pursuant to this Section 5.1(i), Borrower shall, or shall cause each
Franchisee to, deliver to Borrower, and Borrower shall in turn deliver to
Lender, a renewal policy or policies marked "premium paid" or accompanied by
other evidence of payment satisfactory to Lender. In the event of a
foreclosure on any Collateral, subject to the terms of each Operating Lease,
the purchaser of such Collateral shall succeed to all the rights of Borrower
and each Franchisee, including any right to unearned premiums, in and to all
policies of insurance assigned pursuant to the provisions of this Section
5.1(i), and Borrower shall cause each Franchisee to authorize, and Borrower
hereby authorizes Lender to, notify any or all insurance carriers of this
assignment.
(j) PAYMENT OF EXPENSES. Whether or not the transactions contemplated by
this Agreement are consummated, Borrower will promptly (and in any event, within
30 days after any invoice or other statement or notice) pay all reasonable costs
and expenses incurred by or on behalf of Lender (including attorneys' fees) in
connection with (i) the negotiation, preparation, execution and delivery of the
Loan Documents, and any and all consents, waivers or other documents or
instruments relating thereto, (ii) the filing, recording, refiling and re-
recording of any Loan Documents and any other documents or instruments or
further assurances required to be filed or recorded or refiled or re-recorded by
the terms of any Loan Document, (iii) the borrowings hereunder and other action
reasonably required in the course of
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administration hereof, and (iv) the defense or enforcement of the Loan
Documents or the defense of Lender's exercise of its rights thereunder
(including costs and expenses of determining whether and how to carry out
such defense or enforcement). Borrower, upon demand by Lender, shall pay all
deductions by any governmental entity from the value of property for the
purpose of taxation of any Lien thereon under any Security Document, and the
whole or any part of any taxes, assessments, charges or Liens imposed on
Lender so as to affect any Security Document, the Obligations or Lender, or
reimburse Lender therefor; provided, however, that if in the opinion of
counsel for Lender (i) it might be unlawful to require Borrower to make such
payment or (ii) the making of such payment might result in the imposition of
interest beyond the maximum amount permitted by law, then and in such event,
Lender may elect, by notice in writing given to Borrower, to declare all of
the Obligations to be and become due and payable sixty (60) days from the
giving of such notice.
(k) PERFORMANCE ON BORROWER'S BEHALF. If Borrower fails to pay any taxes,
insurance premiums, expenses, attorneys' fees or other amounts it is required to
pay under any Loan Document, Lender may pay the same. Borrower shall immediately
reimburse Lender for any such payments and each amount paid by Lender shall
constitute an Obligation owed hereunder which is due and payable on the date
such amount is paid by Lender.
(l) INTEREST. Borrower hereby promises to pay interest to Lender at the
Late Payment Rate on all Obligations which Borrower has in this Agreement
promised to pay (including Obligations to pay fees or to reimburse or indemnify
Lender) and which are not paid when due. Such interest shall accrue from the
date such Obligations become due until they are paid.
(m) COMPLIANCE WITH AGREEMENTS AND LAW. Borrower will perform all
material obligations it is required to perform under the terms of each
indenture, mortgage, deed of trust, security agreement, lease, franchise,
agreement, contract or other instrument or obligation to which it is a party! or
by which it or any of its properties is bound, including without limitation each
Ground Lease and each Operating Lease. Borrower will conduct its business and
affairs in compliance with all laws, regulations, and orders applicable thereto,
including Environmental Laws.
(n) ENVIRONMENTAL. Borrower will not cause or permit the Collateral or
Borrower to be in violation of, or do anything or permit anything to be done
which will subject the Collateral to any remedial obligations under, any
Environmental Law, assuming disclosure to the applicable governmental
authorities of all relevant facts, conditions and circumstances, if any,
pertaining to the Collateral and Borrower and Borrower will promptly notify
Lender in writing of any existing, pending or, to the best knowledge of
Borrower, threatened investigation or inquiry by any governmental authority in
connection with any Environmental Law. Borrower shall obtain any permits,
licenses or similar authorizations to construct, occupy, operate or use any
buildings, improvements, fixtures and equipment forming a part of the Collateral
by reason of any Environmental Law. Borrower shall take all steps necessary to
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determine that no "hazardous substances" or "solid wastes" are being "disposed"
of or otherwise "released" on or to the Collateral (as such terms are defined in
Section 4.1(n)). Borrower will not cause or permit the disposal or other
release of any hazardous substance or solid waste on or to the Collateral and
covenants and agrees to keep or cause the Collateral to be kept free of any
hazardous substance or solid waste and to remove the same (or if removal is
prohibited by law, to take whatever action is required by law) promptly upon
discovery at its sole expense. Without limitation of Lender's rights to declare
a default hereunder and to exercise all remedies available by reason thereof, in
the event Borrower fails to comply with or perform any of the foregoing
covenants and obligations, Lender may (without any obligation, express or
implied) remove any hazardous substance or solid waste from the Collateral (or
if removal is prohibited by law, take whatever action is required by law) and
the cost of the removal or such other action shall be a demand obligation owing
by Borrower to Lender. Borrower grants to Lender and its agents, employees,
contractors and consultants access to the Collateral and the license (which is
coupled with an interest and irrevocable while the Security Documents are in
effect) to remove the hazardous substance or solid waste (or if removal is
prohibited by law, to take whatever action is required by law). Upon Lender's
reasonable request, at any time and from time to time during the existence of
any Security Document, Borrower will provide at Borrower's sole expense an
inspection or audit of the Collateral from an engineering or consulting firm
approved by Lender indicating the presence or absence of hazardous substances
and solid wastes on the Collateral. If Borrower fails to provide same after ten
(10) days' notice, Lender may order same, and to the fullest extent permissible
under each Operating Lease, Borrower grants to Lender and its agents, employees,
contractors and consultants access to the Collateral and a license (which is
coupled with an interest and irrevocable while any Security Document is in
effect) to perform inspections and tests. The cost of such inspections and tests
shall be a demand obligation owing by Borrower to Lender.
(o) ASBESTOS. Borrower covenants and agrees that it will not install in
the Collateral, nor permit to be installed in the Collateral, asbestos, material
containing asbestos which is or may become friable or material containing
asbestos deemed hazardous by any Environmental Law, and that, if any such
asbestos or material containing asbestos exists in or on the Collateral, whether
installed by Borrower or others, Borrower will remove the same (or if removal is
prohibited by law, will take whatever action is required by law, including
without limitation implementing any required operation and maintenance program)
promptly upon discovery at its sole expense. Without limitation of Lender's
rights to declare a default hereunder and to exercise all remedies available by
reason thereof, in the event Borrower fails to comply with or perform any of the
foregoing covenants and obligations, Lender may (without any obligation, express
or implied) remove such asbestos or material containing asbestos (or if removal
is prohibited by law, take whatever action is required by law including without
limitation implementing any required operation and maintenance program) and the
cost of removal or such other action shall be a demand obligation owing by
Borrower to Lender. Borrower grants to Lender and its agents, employees,
contractors and consultants access to the Collateral and a license (which is
coupled with an interest and irrevocable while any Security
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Document is in effect) to remove such asbestos or materials containing
asbestos (or if removal is prohibited by law, take whatever action is
required by law, including without limitation implementing any required
operation and maintenance program). Upon Lender's reasonable request, at any
time and from time to time during the existence of any Security Document,
Borrower shall provide at Borrower's sole expense an inspection or audit of
the Collateral from an engineering or consulting firm approved by Lender,
indicating the presence or absence of asbestos or material containing
asbestos on the Collateral. If Borrower fails to provide same after ten (10)
days' notice, Lender may order same, and Borrower grants to Lender and its
agents, employees, contractors and consultants access to the Collateral and a
license (which is coupled with an interest and irrevocable while any Security
Document is in effect) to perform inspections and tests. The cost of such
inspections and tests shall be a demand obligation owing by Borrower to
Lender.
(p) INDEMNIFICATION REGARDING ENVIRONMENTAL MATTERS. Borrower agrees to
indemnify and hold Lender and each trustee under any Security Document (for
purposes of this Section 5.1(p), the terms 'Lender" and "trustee" shall include
the directors, officers, partners, employees and agents of Lender and each
trustee, respectively, and any persons or entities owned or controlled by,
owning or controlling, or under common control or affiliated with Lender and
each trustee respectively) harmless from and against, and to reimburse Lender
and each trustee under any Security Document with respect to, any and all
claims, demands, losses, damages (including consequential damages), liabilities,
causes of action, judgments, penalties, costs and expenses (including
attorney's' fees and court costs) of any and every kind or character, known or
unknown, fixed or contingent, imposed on, asserted against or incurred by Lender
and/or any trustee under any Security Document at any time and from time to time
by reason of, in connection with or arising out of (a) the breach of any
representation or warranty of Borrower as set forth herein regarding asbestos,
material containing asbestos or Environmental Laws, (b) the failure of Borrower
to perform any obligation herein required to be performed by Borrower regarding
asbestos, material containing asbestos or Environmental Laws, (c) any violation
on or before the Release Date (as hereinafter defined) of any Environmental Law
in effect on or before the Release Date, (d) the removal of hazardous substances
or solid wastes from the Collateral (or if removal is prohibited by law, the
taking of whatever action is required by law), (e) the removal of asbestos or
material containing asbestos from the Collateral (or if removal is prohibited by
law, the taking of whatever action is required by law including without
limitation the implementation of any required operation and maintenance
program), (f) any act, omission, event or circumstance existing or occurring on
or prior to the Release Date (including without limitation the presence on the
Collateral or release from the Collateral of hazardous substances or solid
wastes disposed of or otherwise released on or prior to the Release Date),
resulting from or in connection with the ownership, construction, occupancy,
operation, use and/or maintenance of the Collateral, regardless of whether the
act, omission, event or circumstance constituted a violation of any
Environmental Law at the time of its existence or occurrence, and (g) any and
all claims or proceedings (whether brought by private party or governmental
agency) for bodily injury, property damage, abatement or remediation,
environmental damage
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or impairment or any other injury or damage resulting from or relating to any
hazardous substance or solid waste located upon or migrating into, from or
through the Collateral (whether or not any or all of the foregoing was caused
by Borrower or its tenant or subtenant, or a prior owner of the Collateral or
its tenant or subtenant, or any third party and whether or not the alleged
liability is attributable to the handling, storage, generation, transportation
or disposal of such substance or waste or the mere presence of such substance
or waste on the Collateral). WITHOUT LIMITATION, THE FOREGOING INDEMNITIES
SHALL APPLY TO EACH INDEMNIFIED PARTY WITH RESPECT TO CLAIMS, DEMANDS,
LOSSES, DAMAGES (INCLUDING CONSEQUENTIAL DAMAGES), LIABILITIES, CAUSES OF
ACTION, JUDGMENTS, PENALTIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS' FEES
AND COURT COSTS) WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ThE
NEGLIGENCE OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PARTY OR ANY STRICT
LIABILITY. However, such indemnities shall not apply to any indemnified party
to the extent the subject of the indemnification is caused by or arises out
of the gross negligence or willful misconduct of such indemnified party. The
"Release Date" as used herein shall mean the earlier of the following two
dates: (i) the date on which the indebtedness and obligations secured hereby
have been paid and performed in full and the Security Documents have been
released, or (ii) the date on which the Liens of the Security Documents are
foreclosed or a conveyance by deed in lieu of such foreclosure is fully
effective; provided, if such payment, performance, release, foreclosure or
conveyance is challenged, in bankruptcy proceedings or otherwise, the Release
Date shall be deemed not to have occurred until such challenge is rejected,
dismissed or withdrawn with prejudice. The foregoing indemnities shall not
terminate upon the Release Date or upon the release, foreclosure or other
termination of any Security Document but will survive the Release Date,
foreclosure or conveyance in lieu of foreclosure, and the repayment of the
Obligations and the discharge and release of the Security Documents and the
other documents evidencing and/or securing the Obligations. Any amount to be
paid under this Section 5.1(p) by Borrower to Lender and/or any trustee under
any Security Document shall be a demand obligation owing by Borrower to
Lender and/or such trustee. Nothing in this Section 5.1(p), this Agreement,
any Security Document or in any other document evidencing, securing or
relating to the Obligations shall limit or impair any rights or remedies of
Lender and/or any trustee under any Security Document against Borrower or any
third party under Environmental Laws, including without limitation any rights
of contribution or indemnification available thereunder.
(q) EVIDENCE OF COMPLIANCE. Borrower will furnish to Lender at Borrower's
expense all evidence which Lender from time to time reasonably requests as to
the accuracy and validity of or compliance with all representations, warranties
and covenants made by Borrower in the Loan Documents, the satisfaction of all
conditions contained therein, and all other matters pertaining thereto.
(r) COMPLIANCE WITH GROUND LEASES AND OPERATING LEASES. Borrower shall
comply, and shall cause each Lessor and each Franchisee to comply, with all
provisions of each Ground Lease and each Operating Lease and, if necessary,
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exercise any option or other extension right necessary to cause the term of each
Ground Lease and each Operating Lease to extend to a date beyond November 30,
1996.
(s) CONDEMNATION. Immediately upon obtaining knowledge of the institution
of any proceedings for the condemnation of the Collateral or any portion
thereof, or any other proceedings arising out of injury or damage to the
Collateral, or any portion thereof, Borrower will notify Lender of the pendency
of such proceedings. Lender may participate in any such proceedings, and
Borrower shall from time to time deliver to Lender all instruments requested by
it to permit such participation. To the fullest extent permissible under each
Operating Lease, Borrower shall, at its expense, diligently prosecute any such
proceedings, and shall consult with Lender, its attorneys and experts, and
cooperate with them in the carrying on or defense of any such proceedings. All
of Borrower's interest in proceeds of condemnation awards or proceeds of sale in
lieu of condemnation with respect to the Collateral and all judgments, decrees
and awards for injury or damage to the Collateral shall be paid to Lender and
shall be applied, first, to reimburse Lender or any trustee under any Security
Document for all costs and expenses, including reasonable attorney's fees,
incurred in connection with collection of such proceeds and, second, the
remainder of said proceeds shall be applied, at the discretion of Lender, to the
payment of the Obligations, either in whole or in part, whether or not then due
and payable, in the order determined by Lender in its sole discretion or paid
out to repair or restore the Collateral so affected by such condemnation, injury
or damage. In any event, notwithstanding such condemnation, the unpaid portion
of the Obligations shall remain in full force and effect (except to the extent
of application of condemnation proceeds as provided above) and Borrower shall
not be excused in the payment thereof. In the event any of the foregoing
proceeds are applied to the repair, restoration or replacement of the
Collateral, Borrower shall promptly commence and complete such repair,
restoration or replacement of the Collateral as nearly as possible to its
value, condition and character immediately prior to such damage or taking in
accordance with plans and specifications submitted to and approved by Lender and
otherwise in accordance with the provisions of the Security Documents. To the
fullest extent permissible under each Operating Lease, Borrower hereby assigns
and transfers all such proceeds, judgments, decrees and awards to Lender and
agrees to execute such further assignments of all such proceeds, judgments,
decrees and awards as Lender may request. Lender is hereby authorized, in the
name of Borrower, to execute and deliver valid acquittances for, and to appeal
from, any such judgment, decree or award. Lender shall not be, in any event or
circumstances, liable or responsible for failure to collect, or exercise
diligence in the collection of, any such proceeds, judgments, decrees or awards.
(t) PROTECTION AND DEFENSE OF LIEN. If the validity or priority of any
Security Document or of any rights, titles or Liens created or evidenced thereby
with respect to the Collateral or any part thereof shall be endangered or
questioned or shall be attacked directly or indirectly or if any legal
proceedings are instituted against Borrower with respect thereto, Borrower will
give prompt written notice thereof to Lender and at Borrower's own cost and
expense will diligently endeavor to cure any
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defect that may be developed or claimed, and will take all necessary and
proper steps for the defense of such legal proceedings, including but not
limited to the employment of counsel, the prosecution or defense of
litigation and the release or discharge of all adverse claims, and each
trustee under any Security Document and Lender, or any of them (whether or
not named as parties to legal proceedings with respect thereto) are hereby
authorized and empowered to take such additional steps as in their judgment
and discretion may be necessary or proper for the defense of any such legal
proceedings or the protection of the validity or priority of any Security'
Document and the rights, titles and Liens created or evidenced thereby,
including but not limited to the employment of counsel, the prosecution or
defense of litigation, the compromise or discharge of any adverse claims made
with respect to the Collateral, the purchase of any tax title and the removal
of prior Liens (including but not limited to the payment of debts as they
mature or the payment in full of matured or non-matured debts, which are
secured by these prior Liens), and all expenses so incurred of every kind and
character shall be a demand obligation owing by Borrower and the party
incurring such expenses shall be subrogated to all rights of the person
receiving such payment.
Section 5.2. NEGATIVE COVENANTS. To conform with the terms and conditions
under which Lender is willing to have credit outstanding to Borrower, and to
induce Lender to enter into this Agreement and make the Loan, Borrower warrants,
covenants and agrees that until the full and final payment of the Obligations
and the termination of this Agreement, unless Lender has previously agreed
otherwise:
(a) RESTRICTED DEBT. Borrower will not in any manner owe or be liable
for Restricted Debt except (i) the Obligations, and (ii) any Ground Lease,
to the extent such Ground Lease may constitute Restricted Debt pursuant to
the definition of such latter term.
(b) LIMITATION ON MERGERS, ISSUANCES OF SECURITIES. Borrower will not
merge or consolidate with or into any other business entity. Borrower will
not issue any securities or any other beneficial ownership interests.
(c) LIMITATION ON BUSINESS. Borrower will not enter into or engage in
any business other than the acquisition and management of Restaurant
Properties. Borrower shall not permit Tenants to at any time operate
Restaurant Properties with an aggregate collateral value in excess of
$5,000,000.
(d) LIMITATION ON CREDIT EXTENSIONS. Except for Permitted
Investments, Borrower will not extend credit, make advances or make loans
other than normal and prudent extensions of credit to customers buying
goods and services in the ordinary course of business, which extensions
shall not be for longer periods than those extended by similar businesses
operated in a normal and prudent manner.
(e) TRANSACTIONS WITH AFFILIATES. Borrower will not engage in any
material transaction with any of its Affiliates on terms which are less
favorable to it than those
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which would have been obtainable at the time in arm's-length dealing with
Persons other than such Affiliates.
(f) CERTAIN CONTRACTS; AMENDMENTS; MULTI-EMPLOYER ERISA PLANS.
Borrower will not enter into any "take-or-pay" contract or other contract
or arrangement for the purchase of goods or services which obligates it to
pay for such goods or service regardless of whether they are delivered or
furnished to it. Borrower will not amend or permit any amendment to any
contract or lease which releases, qualifies, limits, makes contingent or
otherwise detrimentally affects the rights and benefits of Lender under or
acquired pursuant to any Security Documents. Borrower will not incur any
obligation to contribute to any "multi employer plan" as defined in Section
4001 of ERISA.
(g) FISCAL YEAR. Borrower will not change its fiscal year.
(h) CHANGE IN CONTROL. Borrower will not permit (i) Owners to own
less than all of the beneficial ownership interests in Borrower, (ii) any
Person, other than each Managing Trustee, to be a managing trustee of
Borrower, or (iii) any Person, other than each Trustee, to be a trustee of
Borrower.
(i) GROUND LEASES AND OPERATING LEASES. Borrower shall not (i) violate
any of the provisions of any Ground Lease or any Operating Lease or
otherwise cause or permit any default under any Ground Lease or any
Operating Lease; (ii) amend, modify or terminate, or permit termination,
material amendment or material modification of any Ground Lease or any
Operating Lease; (iii) transfer, assign or waive any of its rights under
any Ground Lease or any Operating Lease or (iv) abandon any Restaurant
Property.
ARTICLE VI - SECURITY
Section 6.1. THE SECURITY. The Obligations will be secured by any
Security Documents hereafter delivered by Borrower and accepted by Lender.
Section 6.2. AGREEMENT TO DELIVER SECURITY DOCUMENTS. Borrower will, on
request of Lender, (i) promptly correct any defect, error or omission which may
be discovered in the contents of any Security Document or in any other
instrument now or hereafter executed in connection herewith or in the execution
or acknowledgment thereof; (ii) execute, acknowledge, deliver and record or file
such further instruments (including without limitation further deeds of trust,
security agreements, financing statements, continuation statements and
assignments of rents or leases) and do such further acts as may be necessary,
desirable or proper to carry out more effectively the purposes of the Security
Documents and such other instruments and to subject to the Liens thereof any
property intended by the terms hereof and thereof to be covered hereby and
thereby including specifically, but without limitation, any renewals, additions,
substitutions, replacements, or appurtenances to the Collateral; (iii) execute,
acknowledge, deliver, procure and record or file any document or instrument
(including specifically any financing statement) deemed advisable by Lender to
protect the Liens under the Security Documents against the rights or interests
of third persons; and
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(iv) provide such certificates, documents, reports, information, affidavits
and other instruments and do such further acts as may be necessary, desirable
or proper in the reasonable determination of Lender to enable Lender to
comply with the requirements or requests of any agency having jurisdiction
over Lender or any examiners of such agencies with respect to the
Obligations, Borrower or the Collateral; and Borrower will pay all costs
connected with any of the foregoing.
Section 6.3. PERFECTION AND PROTECTION OF SECURITY INTERESTS AND LIENS.
Borrower will from time to time deliver to Lender any financing statements,
continuation statements, extension agreements and other documents, properly
completed and executed (and acknowledged when required) by Borrower in form and
substance satisfactory to Lender, which Lender requests for the purpose of
perfecting, confirming, or protecting any Liens or other rights in Collateral
securing any Obligations.
Section 6.4. ACCOUNTS; OFFSET. To secure the repayment of the Obligations
Borrower hereby grants to Lender a security interest, a Lien, and a right of
offset, each of which shall be in addition to all other interests, Liens, and
rights of Lender at common law, under the Loan Documents, or otherwise, and each
of which shall be upon and against any and all moneys, securities or other
property (and the proceeds therefrom) of Borrower now or hereafter held or
received by or in transit to Lender from or for the account of Borrower, whether
for safekeeping, custody, pledge, transmission, collection or otherwise, and any
other credits and claims of Borrower at any time existing against Lender. Upon
the occurrence of any Default, Lender is hereby authorized to foreclose upon,
offset, appropriate, and apply, at any time and from time to time, without
notice to Borrower, any and all items hereinabove referred to against the
Obligations then due and payable.
ARTICLE VII - EVENTS OF DEFAULT AND REMEDIES
Section 7.1. EVENTS OF DEFAULT. Each of the following events constitutes an
Event of Default under this Agreement:
(a) Borrower fails to pay any Obligation within three (3) calendar
days after the same becomes due and payable, whether at a date for the
payment of a fixed installment or as a result of acceleration or otherwise;
(b) Any "default" or "event of default" occurs under any Loan
Document which defines either such term, and the same is not remedied
within the applicable period of grace (if any) provided in such Loan
Document;
(c) Borrower fails to duly observe, perform or comply with any
covenant, agreement or provision of Section 5.1(e) or Section 5.2;
(d) Borrower fails (other than as referred to in subsections (a), (b)
or (c) of this Section 7.1) to duly observe, perform or comply, with any
covenant, agreement, condition or provision of any Loan Document, and such
failure remains unremedied for a period of thirty (30) days after notice of
such failure is given by Lender to Borrower;
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(e) Any representation or warranty previously, presently or hereafter
made in writing by or on behalf of Borrower in connection with any Loan
Document shall prove to have been false or incorrect in any material
respect on any date on or as of which made, or any Loan Document at any
time ceases to be valid, binding and enforceable as warranted in Section
4.1(e) for any reason other than its release or subordination by Lender;
(f) Borrower fails to duly observe, perform or comply with any
agreement with any Person or any term or condition of any instrument, if
such agreement or instrument is materially significant to Borrower, and
such failure is not remedied within the applicable period of grace (if any)
provided in such agreement or instrument;
(g) Borrower (i) fails to pay any portion, when such portion is due,
of any of its Debt in excess of $50,000, or (ii) breaches or defaults in
the performance of any agreement or instrument by which any such Debt is
issued, evidenced, governed, or secured, and any such failure, breach or
default continues beyond any applicable period of grace provided therefor;
(h) Either (i) any "accumulated funding deficiency" (as defined in
Section 412(a) of the Internal Revenue Code of 1986, as amended) in excess
of $50,000 exists with respect to any ERISA Plan, whether or not waived by
the Secretary of the Treasury or his delegate, or (ii) any Termination
Event occurs with respect to any ERISA Plan and the then current value of
such ERISA Plan's benefit liabilities exceeds the then current value of
such ERISA Plan's assets available for the payment of such benefit
liabilities by more than $50,000 (or in the case of a Termination Event
involving the withdrawal of a substantial employer, the withdrawing
employer's proportionate share of such excess exceeds such amount);
(i) Borrower:
(i) suffers the entry against it of a judgment, decree or order
for relief by a court of competent jurisdiction in an involuntary
proceeding commenced under any applicable bankruptcy, insolvency or
other similar law of any jurisdiction now or hereafter in effect,
including the federal Bankruptcy Code, as from time to time amended,
or has any such proceeding commenced against it which remains
undismissed for a period of thirty days; or
(ii) commences a voluntary case under any applicable bankruptcy,
insolvency or similar law now or hereafter in effect, including the
federal Bankruptcy Code, as from time to time amended; or applies for
or consents to the entry of an order for relief in an involuntary case
under any such law; or makes a general assignment for the benefit of
creditors; or fails generally to pay (or admits in writing its
inability to pay) its debts as such debts become due; or takes other
action to authorize any of the foregoing; or
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(iii) suffers the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of all or a substantial part of its assets or of any
part of the Collateral in a proceeding brought against or initiated by
it, and such appointment or taking possession is neither made
ineffective nor discharged within thirty days after the making
thereof, or such appointment or taking possession is at any time
consented to, requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for the
payment of money in excess of $50,000 (not covered by insurance
satisfactory to Lender in its discretion), unless the same is
discharged within thirty days after the date of entry thereof or an
appeal or appropriate proceeding for review thereof is taken within
such period and a stay of execution pending such appeal is obtained;
or
(v) suffers a writ or warrant of attachment or any similar
process to be issued by any court against all or any substantial part
of its assets or any part of the Collateral, and such writ or warrant
of attachment or any similar process is not stayed or released within
thirty days after the entry or levy thereof or after any stay is
vacated or set aside;
(j) Any material adverse change occurs in Borrower's financial
condition or businesses or operations;
(k) the Collateral or any part thereof is taken on execution or other
process of law in any action against Borrower;
(l) Borrower fails to have discharged within a period of thirty (30)
days any attachment, sequestration or similar writ levied upon any property
of Borrower;
(m) Borrower abandons all or a portion of the Collateral;
(n) the holder of any Lien on the Collateral (without hereby implying
the consent of Lender to the existence or creation of any such Lien)
declares a default thereunder or institutes foreclosure or other
proceedings for the enforcement of its remedies thereunder;
(o) without the prior written consent of Lender, Borrower sells,
exchanges, leases, assigns, transfers, conveys or otherwise disposes of all
or any part of the Collateral or any interest therein, or legal or
equitable title to the Collateral, or any part thereof or any' interest
therein, is vested in any other party, in any manner whatsoever, by
operation of law or otherwise, whether any of the foregoing is voluntary or
involuntary, it being understood that the consent of Lender required
hereunder may be refused by Lender in its sole and absolute discretion and
for any reason or may be predicated upon any terms, conditions and
covenants deemed advisable or necessary in the sole and absolute discretion
of Lender; or
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(p) without the prior written consent of Lender, Borrower creates,
places or permits to be created or placed, or through any act or failure to
act, acquiesces in the placing of, or allows to remain, any Lien (except
for any Liens (i) for ad valorem taxes on the Collateral which are not
delinquent or (ii) that are subordinated pursuant to the Subordination
Agreement), other than Liens permitted by Lender, regardless of whether the
same are expressly or otherwise subordinate to the Liens granted in the
Security Documents, or acquires any fixtures, equipment or other property
forming a part of the Collateral pursuant to a lease, license or similar
agreement, other than a Ground Lease, it being understood That the consent
of Lender required hereunder may be refused by Lender in its sole and
absolute discretion and for any reason or may be predicated upon any terms,
conditions and covenants deemed advisable or necessary in the sole and
absolute discretion of Lender.
Upon the occurrence of an Event of Default described in subsection (i)(i),
(i)(ii) or (i)(iii) of this Section 7.1 above with respect to Borrower, all of
the Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower. Upon any such acceleration, any obligation
of Lender to make any further Advances shall be permanently terminated. During
the continuance of any other Event of Default, Lender at any time and from time
to time may without notice to Borrower do either or both of the following: (1)
terminate any obligation of Lender to make Advances hereunder, and (2) declare
any or all of the Obligations immediately due and payable, and all such
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any' other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower.
Section 7.2. REMEDIES. If any Default shall occur and be continuing, Lender
may protect and enforce its rights under the Loan Documents by any appropriate
proceedings, including proceedings for specific performance of any covenant or
agreement contained in any Loan Document, and Lender may enforce the payment of
any Obligations due or enforce any other legal or equitable right. All rights,
remedies and powers conferred upon Lender under the Loan Documents shall be
deemed cumulative and not exclusive of any other rights, remedies or powers
available under the Loan Documents or at law or in equity.
Section 7.3. INDEMNITY. Borrower agrees to indemnify Lender, upon demand,
from and against any and all liabilities, obligations, claims, losses, damages,
penalties, fines, actions, judgments, suits, settlements, costs, expenses or
disbursements (including reasonable fees of attorneys, accountants, experts and
advisors) of any kind or nature whatsoever (in this section, collectively,
"LIABILITIES AND COSTS") which to any' extent (in whole or in part) may be
imposed on, incurred by, or asserted against Lender growing out of, resulting
from or in any other way associated with any of the Collateral, the Loan
Documents, or the transactions and events (including the enforcement or defense
thereof) at any time associated therewith or contemplated therein (including any
violation or noncompliance with
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any Environmental Laws by Borrower or any of its Affiliates or any
liabilities or duties of Borrower or any of its Affiliates or of Lender with
respect to Hazardous Materials found in or released into the environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES
AND COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER
ANY CLAIM OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN
PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY LENDER,
provided only that Lender shall be not entitled under this section to receive
indemnification for that portion, if any, of any liabilities and costs which is
proximately caused by its own individual gross negligence or willful misconduct,
as determined in a final judgment. If any Person (including Borrower or any of
its Affiliates) ever alleges such gross negligence or willful misconduct by
Lender, the indemnification provided for in this section shall nonetheless be
paid upon demand, subject to later adjustment or reimbursement, until such time
as a court of competent jurisdiction enters a final judgment as to the extent
and effect of the alleged gross negligence or willful misconduct. As used in
this section the term "LENDER" shall refer not only to the Person designated as
such in Section 1.1 but also to each director, officer, agent, attorney,
employee, representative and Affiliate of such Person.
ARTICLE VIII - MISCELLANEOUS
Section 8.1. WAIVERS AND AMENDMENTS; ACKNOWLEDGMENTS.
(a) WAIVERS AND AMENDMENTS. No failure or delay (whether by course of
conduct or otherwise) by Lender in exercising any right, power or remedy
which Lender may have under any of the Loan Documents shall operate as a
waiver thereof or of any other right, power or remedy, nor shall any single
or partial exercise by Lender of any such right, power or remedy preclude
any other or further exercise thereof or of any other right, power or
remedy. No waiver of any provision of any Loan Document and no consent to
any departure therefrom shall ever be effective unless it is in writing and
signed by Lender, and then such waiver or consent shall be effective only
in the specific instances and for the purposes for which given and to the
extent specified in such writing. No notice to or demand on Borrower shall
in any case of itself entitle Borrower to any other or further notice or
demand in similar or other circumstances. This Agreement and the other Loan
Documents set forth the entire understanding and agreement of the parties
hereto and thereto with respect to the transactions contemplated herein and
therein and supersede all prior discussions and understandings with respect
to the subject matter hereof and thereof, and no modification or amendment
of or supplement to this Agreement or the other Loan Documents shall be
valid or effective unless the same is in writing and signed by the party
against whom it is sought to be enforced.
(b) ACKNOWLEDGEMENTS AND ADMISSIONS. Borrower hereby represents,
warrants, acknowledges and admits that (i) it has been advised by counsel
in the
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negotiation, execution and delivery of the Loan Documents to which it is
a party, (ii) it has made an independent decision to enter into this
Agreement and the other Loan Documents to which it is a party, without
reliance on any representation, warranty, covenant or undertaking by
Lender, whether written, oral or implicit, other than as expressly set out
in this Agreement or in another Loan Document delivered on or after the
date hereof, (iii) there are no representations, warranties, covenants,
undertakings or agreements by Lender as to the Loan Documents except as
expressly set out in this Agreement or in another Loan Document delivered
on or after the date hereof, (iv) Lender owes no fiduciary duty to Borrower
with respect to any Loan Document or the transactions contemplated thereby,
(v) the relationship pursuant to the Loan Documents between Borrower, on
one hand, and Lender, on the other hand, is and shall be solely that of
debtor and creditor, respectively, (vi) no partnership or joint venture
exists with respect to the Loan Documents b&tween Borrower and Lender,
(vii) should an Event of Default or Default occur or exist Lender will
determine in its sole discretion and for its own reasons what remedies and
actions it will or will not exercise or take at that time, (viii) without
limiting any of the foregoing, Borrower is not relying upon any
representation or covenant by Lender, or any representative thereof, and no
such representation or covenant has been made, that Lender will, at the
time of an Event of Default or Default, or at any other time, waive,
negotiate, discuss, or take or refrain from taking any action permitted
under the Loan Documents with respect to any such Event of Default or
Default or any other provision of the Loan Documents, and (ix) Lender has
relied upon the truthfulness of the acknowledgements in this section in
deciding to execute and deliver this Agreement and to make the Loan.
THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT ThE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 8.2. SURVIVAL OF AGREEMENTS; CUMULATIVE NATURE. All of Borrower's
various representations, warranties, covenants and agreements in the Loan
Documents shall survive the execution and delivery of this Agreement and the
other Loan Documents and the performance hereof and thereof, including the
making or granting of the Loan and the delivery of the Note and the other Loan
Documents, and shall further survive until all of the Obligations are paid in
full to Lender and all of Lender's obligations to Borrower are terminated. All
statements and agreements contained in any certificate or other instrument
delivered by Borrower to Lender under any Loan Document shall be deemed
representations and warranties by Borrower or agreements and covenants of
Borrower under this Agreement. The representations, warranties, and covenants
made by Borrower in the Loan Documents, and the rights, powers, and privileges
granted to Lender in the Loan Documents, are cumulative, and, except for
expressly specified waivers and consents, no Loan Document shall be construed in
the context of another to diminish, nullify, or
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otherwise reduce the benefit to Lender of any such representation, warranty,
covenant, right, power or privilege. In particular and without limitation,
no exception set out in this Agreement to any representation, warranty or
covenant herein contained shall apply to any similar representation, warranty
or covenant contained in any other Loan Document, and each such similar
representation, warranty or covenant shall be subject only to those
exceptions which are expressly made applicable to it by the terms of the
various Loan Documents.
Section 8.3. NOTICES. All notices, requests, consents, demands and other
communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document, and shall
be deemed sufficiently given or furnished if delivered by personal delivery, by
telecopy, by delivery service with proof of delivery, or by registered or
certified United States mail, postage prep aid, to Borrower at the address of
Borrower specified on the signature pages hereto and to Lender at its address
specified on the signature pages hereto (unless changed by similar notice in
writing given by the particular Person whose address is to be changed). Any such
notice or communication shall be deemed to have been given (a) in the case of
personal delivery or delivery service, as of the date of first attempted
delivery at the address and in the manner provided herein, (b) in the case of
telecopy, upon receipt, or (c) in the case of registered or certified United
States mail, three days after deposit in the mail; provided, however, that no
Request for Advance shall become effective until actually received by Lender.
Section 8.4. PARTIES IN INTEREST. All grants, covenants and agreements
contained in the Loan Documents shall bind and inure to the benefit of the
parties thereto and their respective successors and assigns; provided, however,
that Borrower may not assign or transfer any of its rights or delegate any of
its duties or obligations under any Loan Document without the prior consent of
Lender.
Section 8.5. GOVERNING LAW; SUBMISSION TO PROCESS. Except to the extent
that the law of another jurisdiction is expressly elected in a Loan Document,
the Loan Documents shall be deemed contracts and instruments made under the laws
of the State of Texas and shall be construed and enforced in accordance with and
governed by the laws of the State of Texas and the laws of the United States of
America, without regard to principles of conflicts of law. Chapter 15 of Texas
Revised Civil Statutes Article 5069 (which regulates certain revolving credit
loan accounts and revolving tri-party accounts) does not apply to this Agreement
or the Note. Borrower hereby irrevocably submits itself to the non-exclusive
jurisdiction of the state and federal courts sitting in the State of Texas and
agrees and consents that service of process may be made upon it in any legal
proceeding relating to the Loan Documents or the Obligations by? any means
allowed under Texas or federal law.
Section 8.6. LIMITATION ON INTEREST. Lender, Borrower and any other parties
to the Loan Documents intend to contract in strict compliance with applicable
usury law from time to time in effect. In furtherance thereof such Persons
stipulate and agree that none of the terms and provisions contained in the Loan
Documents shall ever be construed to create a contract to pay, for the use,
forbearance or detention of money, interest in excess of the maximum amount of
interest permitted to be charged by applicable law from time to time in effect.
Neither Borrower nor any present or future guarantors, endorsers, or other
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Persons hereafter becoming liable for payment of any Obligation shall ever be
liable for unearned interest thereon or shall ever be required to pay interest
thereon in excess of the maximum amount that may be lawfully charged under
applicable law from time to time in effect, and the provisions of this section
shall control over all other provisions of the Loan Documents which may be in
conflict or apparent conflict herewith. Lender expressly disavows any intention
to charge or collect excessive unearned interest or finance charges in the event
the maturity of any Obligation is accelerated. If (a) the maturity of any
Obligation is accelerated for any reason, (b) any Obligation is prep aid and as
a result any amounts held to constitute interest are determined to be in excess
of the legal maximum, or (c) Lender or any other holder of any or all of the
Obligations shall otherwise collect moneys which are determined to constitute
interest which would otherwise increase the interest on any or all of the
Obligations to an amount in excess of that permitted to be charged by applicable
law then in effect, then all sums determined to constitute interest in excess of
such legal limit shall, without penalty, be promptly applied to reduce the then
outstanding principal of the related Obligations or, at Lender's or such
holder's option, promptly returned to Borrower or the other payor thereof upon
such determination. In determining whether or not the interest paid or payable,
under any specific circumstance, exceeds the maximum amount permitted under
applicable law, Lender and Borrower (and any other payors thereof) shall to the
greatest extent permitted under applicable law, (i) characterize any non-
principal payment as an expense, fee or premium rather than as interest, (ii)
exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of the instruments evidencing the Obligations in accordance
with the amounts outstanding from time to time thereunder and the maximum legal
rate of interest from time to time in effect under applicable law in order to
lawfully charge the maximum amount of interest permitted under applicable law.
In the event applicable law provides for an interest ceiling under Texas Revised
Civil Statutes Annotated article 5069-1.04, that ceiling shall be the indicated
rate ceiling and shall be used when appropriate in determining the Highest
Lawful Rate. As used in this section the terms "applicable usury law" and
"applicable law" means the laws of the State of Texas or the laws of the United
States of America, whichever laws allow the greater interest, as such laws now
exist or may be changed or amended or come into effect in the future.
Section 8.7. TERMINATION; LIMITED SURVIVAL. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
notice delivered to Lender to terminate this Agreement. Upon receipt by Lender
of such a notice, if no Obligations are then owing this Agreement and all other
Loan Documents shall thereupon be terminated and the parties thereto released
from all prospective obligations thereunder. Notwithstanding the foregoing or
anything herein to the contrary, any' waivers or admissions made by Borrower in
any Loan Documents, any Obligations under Section 2.7, and any obligations which
any Person may have to indemnify or compensate Lender shall survive any
termination of this Agreement or any other Loan Document. At the request and
expense of Borrower, Lender shall prepare and execute all necessary instruments
to reflect and effect such termination of the Loan Documents.
Section 8.8. SEVERABILITY. If any term or provision of any Loan Document
shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan
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Documents shall nevertheless remain effective and shall be enforced to the
fullest extent permitted by applicable law.
Section 8.9. COUNTERPARTS. This Agreement may be separately executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
SECTION 8.10. WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. EACH OF
BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND
IRREVOCABLY: (a) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH
THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED
THEREWITH, BEFORE OR AFTER MATURITY; (b) WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (c) CERTIFIES THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (d)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.
42
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the date first written
above.
U.S. RESTAURANT PROPERTIES
BUSINESS TRUST I
By: /s/ ROBERT J. STETSON
--------------------------------------
Robert J. Stetson, Managing Trustee
By: /s/ FRED MARGOLIN
--------------------------------------
Fred Margolin, Managing Trustee
Address:
c/o U.S. Restaurant Properties Master L.P.
5310 Harvest Hill Road
Suite 270, LB 168
Dallas, Texas 75230
Attention: Mr. Fred Margolin, Chairman
Telephone: (214) 387-1487
Telecopy: (214) 490-9119
43
<PAGE>
MORGAN KEEGAN MORTGAGE
COMPANY INC.
By: /s/ R. DAVIS HOWE
--------------------------------------
Name: R. Davis Howe
Title: Managing Director
Address:
c/o Morgan Keegan & Company, Inc.
50 North Front Street, 20th Floor
Memphis, Tennessee 38103
Attention: Mr. R. Davis Howe and
Mr. David L. Howard
Telephone: (901) 579-5489
Telecopy: (901) 579-4355
Wire Transfer Instructions:
Name of Bank: First Tennessee Bank Memphis
ABA No.: 084000026
Account Name: Morgan Keegan
Account No.: 0010000117382
Reference: M. Keegan Mortgage-U.S. Restaurant
Attention: Mr. David L. Howard
44
<PAGE>
SCHEDULE 1
DISCLOSURE SCHEDULE
To supplement the following sections of the Agreement of which this
Schedule is a part, Borrower hereby makes the following disclosures:
Section 4.1(f) INITIAL FINANCIAL STATEMENTS:
Section 4.1(g) OTHER OBLIGATIONS AND RESTRICTIONS:
None.
Section 4.1(j) NO AGREEMENTS TO SELL ASSETS:
Burger King Corporation has a right of first refusal to acquire any
restaurant properties owned by any of the Owners which is used as a
Burger King restaurant.
Section 4.1(l) ENVIRONMENTAL AND OTHER LAWS:
None.
Section 4.1(q), TITLE TO PROPERTIES: LICENSES:
UCC-1 Financing Statement (No. 124828) filed June 28,1995 with the
Secretary of State of Texas.
1
<PAGE>
EXHIBIT A
PROMISSORY NOTE
$20,000,000 Memphis, Tennessee April 29,1996
FOR VALUE RECEIVED, the undersigned, U.S. RESTAURANT PROPERTIES BUSINESS
TRUST I, a Delaware business trust organized under the Delaware Business
Trust Act ("Borrower"), hereby promises to pay to the order of MORGAN KEEGAN
MORTGAGE COMPANY INC., a Tennessee corporation ("Lender"), the principal sum
of TWENTY MILLION DOLLARS ($20,000,000) or, if less, the aggregate unpaid
principal amount of the Loan made under this Note by Lender to Borrower
pursuant to the terms of the Loan Agreement (as hereinafter defined),
together with interest on the unpaid principal balance thereof as hereinafter
set forth, both principal and interest payable as herein provided in lawful
money of the United States of America at the offices of Lender, c/o Morgan
Keegan & Company, Inc., 50 North Front Street, 20th Floor, Memphis,
Tennessee, or at such other place within Shelby County, Tennessee, as from
time to time may be designated by the holder of this Note.
This Note (a) is issued and delivered under that certain Loan Agreement
of even date herewith between Borrower and Lender (as from time to time
supplemented, amended or restated, the "LOAN AGREEMENT"), and is the Note as
defined therein, (b) is subject to the terms and provisions of the Loan
Agreement, which contains provisions for payments and prepayments hereunder
and acceleration of the maturity hereof upon the happening of certain stated
events, and (c) is secured by and entitled to the benefits of certain
Security Documents (as identified and defined in the Loan Agreement).
Payments on this Note shall be made and applied as provided herein and in the
Loan Agreement. Reference is hereby made to the Loan Agreement for a
description of certain rights, limitations of rights, obligations and duties
of the parties hereto and for the meanings assigned to terms used and not
defined herein and to the Security Documents for a description of the nature
and extent of the security' thereby provided and the rights of the parties
thereto.
The principal amount of this Note, if any, in excess of $13,000,000 as
of the Equity Funding Date shall be due and payable in full on such Equity
Funding Date. The entire unpaid principal amount of this Note, together with
all interest accrued hereon, shall be due and payable in full on the earlier
of (i) the Bank Facility Date, and (ii) November 30,1996.
The holder of this Note shall have no recourse to U.S. Restaurant
Properties Operating L.P., a Delaware limited partnership, or to U.S.
Restaurant Properties Master L.P., a Delaware limited partnership, such
partnerships being the sole beneficial owners of Borrower, in respect of the
principal amount of this Note or any interest accrued hereon.
The amount of the Loan (exclusive of any past due principal or interest)
from time to time outstanding shall bear interest on each day outstanding at
the Base Rate in effect on such day. All past due principal of and past due
interest on the Loan shall bear interest on each day outstanding at the Late
Payment Rate in effect on such day, and such interest
1
<PAGE>
shall be due and payable as it accrues. Notwithstanding the foregoing
provisions of this paragraph: (a) this Note shall never bear interest in
excess of the Highest Lawful Rate, and (b) if at any time the rate at which
interest is payable on this Note is limited by the Highest Lawful Rate (by
the foregoing clause (a) or by reference to the Highest Lawful Rate in the
definitions of Base Rate and Late Payment Rate), this Note shall bear
interest at the Highest Lawful Rate and shall continue to bear interest at
the Highest Lawful Rate until such time as the total amount of interest
accrued hereon equals (but does not exceed) the total amount of interest
which would have accrued hereon had there been no Highest Lawful Rate
applicable hereto.
Notwithstanding the foregoing paragraph and all other provisions of this
Note, in no event shall the interest payable hereon, whether before or after
maturity, exceed the maximum amount of interest which, under applicable law,
may be charged on this Note, and this Note is expressly made subject to the
provisions of the Loan Agreement which more fully set out the limitations on
how interest accrues hereon. In the event applicable law provides for a
ceiling under Texas Revised Civil Statutes Annotated article 5069-1.04, that
ceiling shall be the indicated rate ceiling and shall be used in this Note
for calculating the Highest Lawful Rate and for all other purposes. The term
"applicable law" as used in this Note shall mean the laws of the State of
Texas or the laws of the United States, whichever laws allow the greater
interest, as such laws now exist or may be changed or amended or come into
effect in the future.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is
proved, established or collected in any court or in any bankruptcy,
receivership, debtor relief, probate or other court proceedings, Borrower and
all endorsers, sureties and guarantors of this Note jointly and severally
agree to pay reasonable attorneys' fees and collection costs to the holder
hereof in addition to the principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration
of the maturity of this Note, diligence in collecting, the bringing of any
suit against any party and any notice of or defense on account of any
extensions, renewals, partial payments or changes in any manner of or in this
Note or in any of its terms, provisions and covenants, or any releases or
substitutions of any security, or any delay, indulgence or other act of any
trustee or any holder hereof, whether before or after maturity.
2
<PAGE>
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW) EXCEPT TO THE EXTENT THE SAME ARE GOVERNED BY APPLICABLE
FEDERAL LAW.
U.S. RESTAURANT PROPERTIES
BUSINESS TRUST I
By:
-------------------------------------
Robert J. Stetson, Managing Trustee
By:
-------------------------------------
Fred Margolin, Managing Trustee
3
<PAGE>
EXHIBIT B
REQUEST FOR ADVANCE
Reference is made to that certain Loan Agreement dated as of April 29,
1996 (as from time to time amended, the "AGREEMENT"), by and between U.S.
Restaurant Properties Business Trust I ("BORROWER") and Morgan Keegan
Mortgage Company Inc. ("Lender"). Terms which are defined in the Agreement
are used herein with the meanings given them in the Agreement. Pursuant to
the terms of the Agreement Borrower hereby requests Lender to make an Advance
to Borrower in the principal amount of $__________ and specifies
_____________, 1996, as the date Borrower desires for Lender to make such
Advance and to deliver to Borrower the proceeds thereof.
To induce Lender to make such Advance, Borrower hereby represents,
warrants, acknowledges, and agrees that:
(a) The managing trustees of Borrower signing this instrument are the
duly elected, qualified and acting managing trustees of Borrower, having
all necessary authority to act for Borrower in making the request herein
contained.
(b) The representations and warranties of Borrower set forth in the
Agreement and the other Loan Documents are true and correct on and as of
the date hereof (except to the extent that the facts on which such
representations and warranties are based have been changed by the extension
of credit under the Agreement), with the same effect as though such
representations and warranties had been made on and as of the date hereof.
(c) There does not exist on the date hereof any condition or event
which constitutes a Default which has not been waived in writing as
provided in Section 8.1(a) of the Agreement; nor will any such Default
exist upon Borrower's receipt and application of the Advance requested
hereby. Borrower will use the Advance hereby requested in compliance with
Section 2.3 of the Agreement.
(d) No material adverse change has occurred to Borrower's financial
condition or businesses since the date of the Agreement.
(e) Except to the extent waived in writing as provided in Section
8.1(a) of the Agreement, Borrower has performed and complied with all
agreements and conditions in the Agreement required to be performed or
complied with by Borrower on or prior to the date hereof, and each of the
conditions precedent to Advances contained in the Agreement remains
satisfied.
(f) The Loan Documents have not been modified, amended or supplemented
by any unwritten representations or promises, by any course of dealing, or
by any other means not provided for in Section 8.1(a) of the Agreement.
The Agreement and the other Loan Documents are hereby ratified, approved,
and confirmed in all respects.
(g) Attached hereto is a listing of the Restaurant Properties to be
financed or refinanced by the Advance requested hereby, together with a
true and correct copy of the closing statement (or proposed closing
statement) prepared in connection with the acquisition of each such
Restaurant Property. The unpaid principal balance of the Loan, after the
making of the Advance requested hereby, does not exceed fifty percent (50%)
of the lesser of (i) the aggregate acquisition cost of or (ii) the
aggregate value of all Restaurant Properties subject to first priority
Liens in favor of Lender pursuant to the Security Documents.
1
<PAGE>
(h) With respect to each Restaurant Property to be financed or
refinanced by the Advance requested hereby, Borrower has furnished to
Lender:
(i) an appropriate version of the Subordination Agreement, if
applicable, duly executed by the subordinate creditors named therein,
Security Documents in form and substance satisfactory to Lender
granting to Lender first priority Liens on each such Restaurant
Property, and a certificate of Borrower's good standing and due
qualification to do business issued by appropriate officials of each
state in which such Restaurant Properties are located and in which
such good standing and/or due qualification certifications are
available;
(ii) policies of mortgage title insurance with respect to each
such Restaurant Property, on the ALTA standard loan policy, revised
coverage, most recent form, and dated no earlier than the date of such
Advance, insuring Lender of a valid first mortgage Lien on each such
Restaurant Property against loss in an amount satisfactory to Lender
in its sole discretion, and containing no exceptions other than Liens
permitted under Section 7.1(p) and Section 3.2(f) (ii) and such
endorsements and affirmative coverages as may be required by Lender;
(iii) a favorable report of an environmental consulting firm
acceptable to Lender regarding its environmental assessment of each
such Restaurant Property, in scope and results acceptable to Lender;
(iv) true and correct copies of original insurance policies
covering each such Restaurant Property and complying with the
requirements of Section 5.1(i);
(v) a true and correct copy of any Ground Lease covering any
such Restaurant Property, together with a landlord Lien waiver and an
estoppel letter related thereto duly executed and delivered by the
Lessor party to such Ground Lease and acceptable to Lender; and
(vi) a true and correct copy of the Operating Lease covering each
such Restaurant Property and an estoppel letter related thereto duly
executed and delivered by the Franchisee party to such Operating Lease
and acceptable to Lender.
The managing trustees of Borrower signing this instrument hereby certify
that, to the best of their knowledge after due inquiry, the above
representations, warranties, acknowledgments, and agreements of Borrower are
true, correct and complete.
IN WITNESS WHEREOF, this instrument is executed as of ______________, 1996.
U.S. RESTAURANT PROPERTIES
BUSINESS TRUST I
By:
--------------------------------------
Robert J. Stetson, Managing Trustee
By:
--------------------------------------
Fred Margolin, Managing Trustee
2
<PAGE>
EXHIBIT C
CERTIFICATE ACCOMPANYING FINANCIAL STATEMENTS
Reference is made to that certain Loan Agreement dated as of April 29,
1996 (as from time to time amended, the "AGREEMENT"), by and between U.S.
Restaurant Properties Business Trust I ("BORROWER") and Morgan Keegan
Mortgage Company Inc. ("LENDER"), which Agreement is in full force and effect
on the date hereof. Terms which are defined in the Agreement are used herein
with the meanings given them in the Agreement.
This Certificate is furnished pursuant to Section 5.I(b)(ii) of the
Agreement. Together herewith Borrower is furnishing to Lender Borrower's
[audited/unaudited] financial statements (the "FINANCIAL STATEMENTS") as at
(the "REPORTING DATE"). Borrower hereby
represents, warrants, and acknowledges to Lender that:
(a) the managing trustees of Borrower signing this instrument are the
duly elected, qualified and acting managing trustees of Borrower;
(b) the Financial Statements are accurate and complete and satisfy the
requirements of the Agreement;
(c) on the Reporting Date Borrower was, and on the date hereof
Borrower is, in full compliance with the disclosure requirements of Section
5.I(e) of the Agreement, and no Default otherwise existed on the Reporting
Date or otherwise exists on the date of this instrument [except for
Default(s) under Section(s) ________ of the Agreement, which
[is/are] more fully described on a schedule attached hereto]; and
(d) [Unless otherwise disclosed on a schedule attached hereto,] The
representations and warranties of Borrower set forth in the Agreement and
the other Loan Documents are true and correct on and as of the date hereof
(except to the extent that the facts on which such representations and
warranties are based have been changed by the extension of credit under the
Agreement), with the same effect as though such representations and
warranties had been made on and as of the date hereof.
The managing trustees of Borrower signing this instrument hereby certify
that they have reviewed the Loan Documents and the Financial Statements and
have otherwise undertaken such inquiry as is in their opinion necessary to
enable them to express an informed opinion with respect to the above
representations, warranties and acknowledgments of Borrower and, to the best
of their knowledge, such representations, warranties, and acknowledgments are
true, correct and complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________, 199__.
U.S. RESTAURANT PROPERTIES
BUSINESS TRUST I
By:
--------------------------------------
Robert J. Stetson, Managing Trustee
By:
--------------------------------------
Fred Margolin, Managing Trustee
<PAGE>
EXHIBIT D
FORM OF OPINION OF
MIDDLEBERG, RIDDLE & GIANNA, COUNSEL FOR BORROWER
Morgan Keegan Mortgage Company Inc.
50 North Front Street, 20th Floor
Memphis, Tennessee 38103
Ladies and Gentlemen:
This opinion is being delivered to you pursuant to Section 3.1(f) of the
Loan Agreement dated as of April 29, 1996 (the "Agreement"), by and between
U.S. Restaurant Properties Business Trust I, a Delaware business trust
("Borrower"), and Morgan Keegan Mortgage Company Inc. ("Lender").
Capitalized terms which are defined in the Agreement and which are used but
not defined herein shall have the meanings given them in the Agreement. Terms
defined in Schedule 1 hereto shall have the same meanings when used in the
body of this opinion.
We have acted as counsel for Borrower and its sole beneficial owners,
U.S. Restaurant Properties Master L.P., a Delaware limited partnership, and
U.S. Restaurant Properties Operating L.P., a Delaware limited partnership
(collectively, the "Partnerships"), in connection with the transactions
provided for in the Agreement. 'As such counsel we have assisted in the
negotiation of the Agreement and the other Loan Documents. We have examined
executed counterparts (or, where indicated, photostatic copies of executed
counterparts) of the documents listed in Schedule 1. (The documents listed in
Section I of Schedule l are hereinafter referred to as the "Principal
Documents".) We have discussed the matters addressed in this opinion with
officers and representatives of Borrower and the Partnerships to the extent
we have deemed appropriate to enable us to render this opinion, and we have
received a certificate authorizing us to deliver this opinion which is
attached hereto as Exhibit A.
In preparing this opinion we have also examined original counterparts or
photostatic or certified copies of all other instruments, agreements,
certificates, records and other documents (whether of Borrower, the
Partnerships, their officers, directors, trustees, general partners,
shareholders and representatives, public officials, or other persons) which
we have considered relevant to the opinions hereinafter expressed. In making
this examination we have assumed, with respect to all documents (other than
the Principal Documents) which we have examined: the genuineness of all
signatures thereon, the authenticity of all documents submitted to us as
originals, the conformity to the originals of all documents submitted to us
as copies, and the authenticity of the originals of such copies. As to
certain questions of fact material to such opinions we have, where such facts
were not otherwise verified or established, relied upon certificates listed
in Section II of Schedule l of the Managing Trustees of Borrower and of
officers of the corporate general partner of the Partnerships.
Based upon the foregoing, and subject to the qualifications and
limitations hereinafter set forth, we are of the opinion that:
1. Borrower is duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each of the Partnerships is duly
organized, validly existing and in good standing under the laws of the State
of Delaware.
1
<PAGE>
2. Borrower has the power and authority to execute and deliver each
Principal Document to which it is a party and to perform its obligations
thereunder. Each Principal Document has been duly authorized, executed and
delivered by Borrower and is enforceable against Borrower in accordance with
its terms.
3. Based solely on the certificates of public officials listed as
items ___ through ____ in Section II of Schedule 1 hereto, Borrower and each
of the Partnerships is in good standing and duly authorized to do business in
each state for which such a certificate has been obtained. To our knowledge,
those states are the only states within the United States in which (a)
Borrower or the Partnerships own or lease any material property or conduct
any material business and (b) the failure to be qualified would have a
material and adverse effect on such business or on Borrower's or either
Partnership's financial condition.
4. The authorized capitalization of Borrower consists of 1,000 common
shares of beneficial interest, without par value, all of which shares are
issued and outstanding. All of such outstanding shares are owned of record
and beneficially by the Partnerships. All of such outstanding shares have
been duly authorized and validly issued and are fully paid and
non-assessable. To our knowledge, Borrower has no obligation or commitment to
issue any other shares of beneficial interest or other equity securities, nor
has it granted any options with respect thereto. Robert J. Stetson and Fred
Margolin are the sole managing trustees of Borrower.
5. The execution, delivery and performance by Borrower of the
Principal Documents, and the consummation of the transactions contemplated by
the Principal Documents, will not and did not:
(a) violate any provision of the Declaration of Trust of Borrower dated
as of January 23, 1996, by and among U.S. Restaurant Properties
Operating L. P., as grantor, Mark AL Ferrucci, as resident trustee, and
Robert J. Stetson and Fred Margolin, as managing trustees, or the
Certificate of Trust of Borrower filed with the Secretary of State of
Delaware, or
(b) to our knowledge, breach or result in a default under or result in
the maturing of any indebtedness pursuant to any indenture, mortgage, deed of
trust, note or loan agreement, material license agreement, or other material
agreement or instrument to which Borrower or either Partnership is a party or
by which any of their respective properties are bound, or
(c) result in a violation of any law, rule or regulation or, to the
best of our knowledge, any judgment, order, decree, determination or award of
any court or governmental authority which is now in effect and applicable to
Borrower, either Partnership or any of their respective properties.
6. Except for any which have been obtained or completed, to our
knowledge no consent, approval, waiver, license, authorization or action by
or filing with any court or governmental authority or any third party is or
was required for the execution and delivery by Borrower of any of the
Principal Documents, or the consummation of the transactions contemplated
thereby.
7. Other than as revealed in the Disclosure Schedule, to our knowledge
there are no actions, suits, proceedings or investigations pending or
threatened in writing against or affecting Borrower or either of the
Partnerships or any of their respective properties in any court, governmental
agency or arbitrator (a) seeking to affect the enforceability or performance
by Borrower of any Principal Document, or (b) which are otherwise required to
be disclosed under Section 4.1 of the Agreement.
2
<PAGE>
8. Borrower is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act
of 1940, as amended.
9. Subject to the filing requirements described in paragraph 10 below,
the Texas Deed of Trust creates to secure the Note a deed of trust lien in
the "Mortgaged Properties" (as defined in the Texas Deed of Trust) located in
the State of Texas and a perfected security interest in the "Collateral" and
proceeds of "Collateral" (as such term is defined in the Texas Deed of Trust)
with respect to which a security interest can be created under the Uniform
Commercial Code of Texas (the "Code") and perfected by the filing of
financing statements in such state pursuant to the Code.
10. A fully executed counterpart of the Texas Deed of Trust is required
to be filed and recorded in the appropriate real estate records of the
offices of the County Clerks of the Texas counties in which properties
described in the Texas Deed of Trust are located, and a fully executed
counterpart of the Texas Financing Statement is required to be filed in the
office of the Secretary of State of Texas. Once the Texas Deed of Trust and
the Texas Financing Statement are so filed and recorded, no further or
subsequent filing or refiling will be necessary in the State of Texas in
order to continue the existence or perfection of the lien and security
interest referred to in paragraph 9 above except that (a) in the event any
indebtedness secured by the Texas Deed of Trust has not been paid before the
expiration of four years from the date provided for therein or in the Note,
as appropriate, for payment of such indebtedness, an extension agreement with
respect to the Texas Deed of Trust, providing for the renewal or extension of
such indebtedness, should be entered into and filed and recorded in the same
records of each office in which the Texas Deed of Trust has been filed prior
to the expiration of such four-year period, (b) a continuation statement with
respect to the Texas Financing Statement must be filed under the Code in the
office where such financing statement was filed within six months prior to
the expiration of five years from the date of such filing (or otherwise
within the time permitted by Section 9.403 of the Code), and subsequent
continuation statements must be filed within six months prior to the end of
each subsequent five-year period, and (c) amendments or supplements to the
Texas Financing Statement or additional financing statements may be required
to be filed in the event of a change in the name, identity, or organizational
structure of Borrower or in the event the Texas Financing Statement otherwise
becomes inaccurate or incomplete.
11. The acceptance of the Texas Deed of Trust and the Texas Financing
Statement by Lender, its possession and retention of its rights thereunder,
and its presentation of such instruments for filing and recording as
described in paragraph 10 hereof will not require Lender to pay or otherwise
subject Lender to any tax, fee or other charge except the customary fee
charged by each filing or recording officer on a per-page or per-instrument
basis. Lender is not required to qualify to do business in the State of Texas
or to otherwise register or make any filing (other than those described in
paragraph 10 hereof) with any state or local official in the State of Texas
as a result of its acceptance of such instruments, its possession and
retention of its rights thereunder, or the filing or recording thereof.
This opinion is limited by, subject to and based on the following:
(a) This opinion is limited in all respects to the Delaware Business
Trust Act, 12 Del. C. Section 3801 ET. SEQ., the laws of the State of Texas
and applicable federal law; however, we are not members of the bar of the
State of Delaware and our knowledge of its Business Trust Act is derived from
a reading of that statute without consideration of any judicial or
administrative interpretations thereof.
3
<PAGE>
(b) In rendering this opinion we have assumed that each of the
Principal Documents in which Lender's execution is provided for has been duly
authorized, executed and delivered by Lender and that Lender is concurrently
herewith advancing funds to Borrower or otherwise "giving value" as
contemplated in Section 9.203 of the Code.
(c) The qualification of any opinion or statement herein by the use of
the words "to our knowledge" or "known to us" means that during the course of
our representation as described in this opinion letter, no information has
come to the attention of the attorneys in this firm involved in the
transactions described which would give such attorneys current actual
knowledge of the existence of the facts so qualified. Except as set forth
herein, we have not undertaken any investigation to determine the existence
of such facts, and no inference as to our knowledge thereof shall be drawn
from the fact of our representation of any party or otherwise.
(d) We have made no examination of and express no opinion with respect
to (i) titles to or rights in or, except as to adequacy of form, descriptions
of the properties described in the Loan Documents, (ii) whether there are of
record any liens, security interests, charges or encumbrances thereon, (iii)
the filing or recording of the Loan Documents or any financing statements or
other instruments relating thereto except as set forth in paragraphs 9 and 10
hereof, or (iv) whether the properties described in the Texas Deed of Trust
are the properties and interests intended to be encumbered thereby.
(e) The enforceability of the Principal Documents is subject to (i)
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and (ii) general principles of equity.
The opinion expressed herein that the Principal Documents are enforceable
against Borrower is also subject to the qualification that certain of the
remedial, waiver and other provisions of the Principal Documents may not be
enforceable; but such unenforceability will not, in our judgment, render the
Principal Documents invalid as a whole, or substantially interFere with the
realization of the principal legal benefits provided by the Principal
Documents, except to the extent of any procedural delay which may result
therefrom.
(f) Insofar as any of the opinions herein expressed concern the
perfection of a security interest in "proceeds" (as such term is defined in
the Code) please be advised that the continuation of the existence and
perfection of such security; interest are limited as provided in Section
9.306 of the Code.
The opinions herein expressed are for the benefit of Lender and may be
relied upon only by Lender and by Thompson & Knight, P.C. in connection with
any opinion delivered by them to Lender.
Respectfully submitted,
4
<PAGE>
SCHEDULE 1
SECTION I. PRINCIPAL DOCUMENTS
1. Loan Agreement dated as of April 29, 1996, by and between U.S. Restaurant
Properties Business Trust I, a Delaware business trust ("Borrower"), and
Morgan Keegan Mortgage Company Inc., a Tennessee corporation ("Lender").
2. Promissory Note dated April 29, 1996, in the principal amount of
$20,000,000 made by Borrower payable to the order of Lender.
3. Deed of Trust and Security Agreement dated as of May ____, 1996, by
Borrower in favor of Lender, to be filed in appropriate counties in the
State of Texas (the "Texas Deed of Trust").
4. Deed of Trust and Security Agreement dated as of May ____, 1996, by
Borrower in favor of Lender, to be filed in appropriate counties in the
States of ___________________ (the "Master Deed of Trust").
5. Assignment of Lease Rights and Profits dated as of May ____, 1996, by
Borrower in favor of Lender.
6. UCC-1 Financing Statement dated May ___, 1996, executed by Borrower, as
debtor, in favor of Lender, as secured party, to be filed with the
Secretary of State of the State of Texas (the "Texas Financing Statement").
7. UCC-1 Financing Statements dated May ___, 1996, executed by Borrower, as
debtor, in favor of Lender, as secured party, to be filed with the
Secretary of State of the following jurisdictions:_________________________
(the "Master UCC-1's")
SECTION II. TRUST AND PARTNERSHIP DOCUMENTS
AND PROCEEDINGS
<PAGE>
EXHIBIT A TO LEGAL OPINION
CERTIFICATE
Reference is made to that certain Loan Agreement dated as of April 29,
1996 (the "Agreement"), by and between U.S. Restaurant Properties Business
Trust I ("Borrower") and Morgan Keegan Mortgage Company Inc. ("Lender").
Section 3.1(f) of the Agreement requires, as a condition precedent to
Lender's advancing funds thereunder, that Lender receive the legal opinion of
Messrs. Middleberg, Riddle and Gianna, counsel for Borrower ("Counsel").
Borrower hereby authorizes Counsel to give such legal opinion and waives any
attorney-client privilege which Borrower may have as to the matters discussed
therein. To enable Counsel to deliver such legal opinion and thereby to
induce Lender to extend the credit provided for in the Agreement, Borrower
hereby represents and acknowledges to Counsel and to Lender that:
(a) Borrower has discussed Section 8.1 of the Agreement with Counsel and
fully understand that Section 8.1 provides that the Agreement and the other
"Loan Documents" (as such term is defined therein) set forth, as written, the
entire understanding and agreement of the parties thereto with respect to the
transactions contemplated in the Agreement;
(b) Section 8.1 of the Agreement is true and correct, and there are no
unwritten representations, promises, Supplemental Agreements or other
statements upon which Borrower is relying in entering into the Agreement and
the other Loan Documents referred to therein;
(c) Borrower has had all discussions with Counsel, and has made
available to Counsel all documents and instruments, which Counsel have
requested to enable them to give such legal opinion; and
(d) Borrower has consulted with Counsel throughout the negotiation of
the Loan Documents in order to understand the legal effect of the Loan
Documents and Borrower's duties and rights thereunder, and Borrower is making
a fully informed decision to enter into the Loan Documents and to undertake
such duties and rights.
IN WITNESS WHEREOF, this Certificate has been executed as of the ____ day
of May, 1996.
U.S. RESTAURANT PROPERTIES
BUSINESS TRUST I
By:
---------------------------------------
Robert J. Stetson, Managing Trustee
By:
---------------------------------------
Fred Margolin, Managing Trustee
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement relating to
1,800,000 limited partner units of U.S. Restaurant Properties Master L.P. on
Amendment No. 1 to Form S-3 of our report dated February 17, 1996 appearing
in the Prospectus, which is a part of such Registration Statement, and our
report dated February 17, 1996 included in the Annual Report on Form 10-K of
U.S. Restaurant Properties Master L.P. for the year ended December 31, 1995
incorporated by reference in the Registration Statement, and to the reference
to us under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Dallas, Texas
May 23, 1996
<PAGE>
Consent of Independent Auditors
The Partners
Burger King Limited Partnership II:
We consent to the incorporation by reference in the registration statement on
Form S-3 of U.S. Restaurant Properties Master L.P. of our report dated
February 2, 1996, except as to Note 5, which is as of March 25, 1996, with
respect to the balance sheets of Burger King Limited Partnership II as of
December 31, 1995 and 1994, and the related statements of operations, changes
in partners' capital (deficit) and cash flows for each of the years in the
three-year period ended December 31, 1995, and the related financial
statement schedule, which report appears in the Form 8-K of U.S. Restaurant
Properties Master L.P dated April 19, 1996 and to the reference to our firm
under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Boston, Massachusetts
May 22, 1996
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of U.S. Restaurant Properties Master L.P.'s 1st Amendment to
Form S-3 to be filed the week of May 20, 1996, related to WW Services, Inc.
We consent to the reference to us under the heading "Experts" on such
Prospectus.
Tanner and Long, P.C.
Baxley, Georgia
May 21, 1996
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of U.S. Restaurant Properties Master L.P.'s 1st Amendment to Form
S-3 to be filed the week of May 20, 1996, related to Wiggins Enterprises,
Inc. We consent to the reference to us under the heading "Experts" on such
Prospectus.
Thigpen & Lanier
Statesboro, Georgia
May 21, 1996
<PAGE>
[BDO SEIDMAN LETTERHEAD]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
U.S. Restaurant Properties Master L.P.
Dallas, Texas
We hereby consent to the incorporation by reference in the Registration
Statement No. 333-02675 of U.S. Restaurant Properties Master L.P. on
Amendment #1 to Form S-3 of our report dated April 19, 1996 relating to the
schedule of rental income and direct operating expenses for Selected
Partnership Properties Sold to U.S. Restaurant Properties Master L.P. for the
year ended December 31, 1995, which report appears in the Form 8-K/A of
U.S. Restaurant Properties Master L.P., dated April 30, 1996.
/s/ BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
Philadelphia, Pennsylvania
May 21, 1996
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Form 8-K of U.S. Restaurant Properties Master,
L.P. of our report dated April 25, 1996, related to Motel Enterprises, Inc.
and the Applicable Stores to be acquired by U.S. Restaurant Properties
Master, L.P., and to the incorporation by reference of our report in the
Registration Statement of U.S. Restaurant Properties Master, L.P. on the
Amended Form S-3 dated May 21, 1996.
William C. Love, CPA
Austin, TX
May 21, 1996
