-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PR489xj65BWvirRMd/Njpiz4a5t0nrklW+H0Vy27GAkyzZgk36u1YSyD0t8mIHk8 ld2Kt+MQy9uPL32TEjk/mQ== 0000950134-01-002316.txt : 20010320 0000950134-01-002316.hdr.sgml : 20010320 ACCESSION NUMBER: 0000950134-01-002316 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20010319 GROUP MEMBERS: ADVISORS GENPAR INC GROUP MEMBERS: HUDSON ADVISORS ASSOCIATES LP GROUP MEMBERS: HUDSON ADVISORS LLC GROUP MEMBERS: JOHN P GRAYKEN GROUP MEMBERS: LONE STAR MANAGEMENT CO III LTD GROUP MEMBERS: LONE STAR PARTNERS III LP GROUP MEMBERS: LSF III INTERNATIONAL LP GROUP MEMBERS: LSF3 CAPITAL INVESTMENTS I LLC GROUP MEMBERS: LSF3 CAPITAL INVESTMENTS II LLC GROUP MEMBERS: LSF3 GENPAR I LLC GROUP MEMBERS: LSF3 REOC I LP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: U S RESTAURANT PROPERTIES INC CENTRAL INDEX KEY: 0001032462 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 752687420 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-51969 FILM NUMBER: 1572046 BUSINESS ADDRESS: STREET 1: 5310 HARVEST HILL ROAD STREET 2: SUITE 270 LB168 CITY: DALLAS STATE: TX ZIP: 75230 BUSINESS PHONE: 9723871487 MAIL ADDRESS: STREET 1: 5310 HARVEST HILL ROAD STREET 2: SUITE 270 CITY: DALLAS STATE: TX ZIP: 75230 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LSF3 CAPITAL INVESTMENTS I LLC CENTRAL INDEX KEY: 0001136989 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 600 N. PEARL, SUITE 1550 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2147548400 SC 13D 1 d85065sc13d.txt SCHEDULE 13D 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- SCHEDULE 13D (RULE 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) U.S. RESTAURANT PROPERTIES, INC. --------------------------------------------------------- (Name of Issuer) COMMON STOCK, PAR VALUE $0.001 PER SHARE --------------------------------------------------------- (Title of Class of Securities) 90 2 97110 --------------------------------------------------------- (CUSIP NUMBER) J.D. DELL HUDSON ADVISORS, LLC 600 NORTH PEARL STREET, SUITE 1500 DALLAS, TEXAS 75201 (214) 754-8400 --------------------------------------------------------- (Name, address and telephone number of person authorized to receive notices and communications) MARCH 9, 2001 --------------------------------------------------------- (Date of event which requires filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), (f) or (g), check the following box. [ ] (Continued on following pages) 2 CUSIP No. 90 2 97110 13D Page 2 of 34 Pages --------------------- ------- ------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) LSF3 CAPITAL INVESTMENTS I, LLC --------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[ ] --------------------------------------------------------------------- 3 SEC USE ONLY --------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC, OO --------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] --------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE --------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER 2,312,753 OWNED BY EACH ------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH ------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,312,753 ------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,312,753 --------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11* EXCLUDES CERTAIN SHARES [ ] --------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 12.2% --------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO --------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 3 CUSIP No. 90 2 97110 13D Page 3 of 34 Pages --------------------- ------- ------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) LSF3 REOC I, L.P. --------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[ ] --------------------------------------------------------------------- 3 SEC USE ONLY --------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC, OO --------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] --------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE --------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER 2,312,753 OWNED BY EACH ------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH ------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,312,753 ------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,312,753 --------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES* [ ] --------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 12.2% --------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN --------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 4 CUSIP No. 90 2 97110 13D Page 4 of 34 Pages --------------------- ------- ------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) LSF3 GENPAR I, LLC --------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[ ] --------------------------------------------------------------------- 3 SEC USE ONLY --------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC, OO --------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] --------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE --------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER 2,312,753 OWNED BY EACH ------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH ------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,312,753 ------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,312,753 --------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES* [ ] --------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 12.2% --------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO --------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 5 CUSIP No. 90 2 97110 13D Page 5 of 34 Pages --------------------- ------- ------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) Lone Star Fund III (U.S.), L.P. --------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[ ] --------------------------------------------------------------------- 3 SEC USE ONLY --------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC, OO --------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] --------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE --------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER 2,312,753 OWNED BY EACH ------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH ------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,312,753 ------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,312,753 --------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES* [ ] --------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 12.2% --------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN --------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 6 CUSIP No. 90 2 97110 13D Page 6 of 34 Pages --------------------- ------- ------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) LONE STAR PARTNERS III, L.P. --------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[ ] --------------------------------------------------------------------- 3 SEC USE ONLY --------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC, OO --------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] --------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION BERMUDA --------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER 3,729,765 OWNED BY EACH ------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH ------------------------------------------- 10 SHARED DISPOSITIVE POWER 3,729,765 ------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,729,765 --------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES* [ ] --------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 19.7% --------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN --------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 7 CUSIP No. 90 2 97110 13D Page 7 of 34 Pages --------------------- ------- ------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) LSF3 CAPITAL INVESTMENTS II, LLC --------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[ ] --------------------------------------------------------------------- 3 SEC USE ONLY --------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC, OO --------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] --------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE --------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER 1,417,012 OWNED BY EACH ------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH ------------------------------------------- 10 SHARED DISPOSITIVE POWER 1,417,012 ------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,417,012 --------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES* [ ] --------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 7.5% --------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO --------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 8 CUSIP No. 90 2 97110 13D Page 8 of 34 Pages --------------------- ------- ------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) LONE STAR MANAGEMENT CO. III, LTD. --------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[ ] --------------------------------------------------------------------- 3 SEC USE ONLY --------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC, OO --------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] --------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION BERMUDA --------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER 3,729,765 OWNED BY EACH ------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH ------------------------------------------- 10 SHARED DISPOSITIVE POWER 3,729,765 ------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,729,765 --------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES* [ ] --------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 19.7% --------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO --------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 9 CUSIP No. 90 2 97110 13D Page 9 of 34 Pages --------------------- ------- ------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) HUDSON ADVISORS, L.L.C. --------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[ ] --------------------------------------------------------------------- 3 SEC USE ONLY --------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC, OO --------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] --------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION TEXAS --------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER 3,729,765 OWNED BY EACH ------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH ------------------------------------------- 10 SHARED DISPOSITIVE POWER ------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,729,765 --------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES* [ ] --------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 19.7% --------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO --------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 10 CUSIP No. 90 2 97110 13D Page 10 of 34 Pages --------------------- ------- ------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) HUDSON ADVISORS ASSOCIATES, L.P. --------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[ ] --------------------------------------------------------------------- 3 SEC USE ONLY --------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC, OO --------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] --------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION TEXAS --------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER 3,729,765 OWNED BY EACH ------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH ------------------------------------------- 10 SHARED DISPOSITIVE POWER ------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,729,765 --------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES* [ ] --------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 19.7% --------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN --------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 11 CUSIP No. 90 2 97110 13D Page 11 of 34 Pages --------------------- ------- ------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) ADVISORS GENPAR, INC. --------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[ ] --------------------------------------------------------------------- 3 SEC USE ONLY --------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC, OO --------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] --------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION TEXAS --------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER 3,729,765 OWNED BY EACH ------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH ------------------------------------------- 10 SHARED DISPOSITIVE POWER ------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,729,765 --------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES* [ ] --------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 19.7% --------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO --------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 12 CUSIP No. 90 2 97110 13D Page 12 of 34 Pages --------------------- ------- ------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) JOHN P. GRAYKEN --------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[ ] --------------------------------------------------------------------- 3 SEC USE ONLY --------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC, OO --------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] --------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION IRELAND --------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER 3,729,765 OWNED BY EACH ------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH ------------------------------------------- 10 SHARED DISPOSITIVE POWER 3,729,765 ------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,729,765 --------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES* [ ] --------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 19.7% --------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN --------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 13 CUSIP No. 90 2 97110 13D Page 13 of 34 Pages --------------------- ------- ------- ITEM 1. SECURITY AND ISSUER This statement relates to the common stock, $0.001 par value per share (the "Common Stock"), of U.S. Restaurant Properties, Inc., a Maryland corporation ("USRP"). The address of the principal executive offices of USRP is 12240 Inwood Road, Suite 300, Dallas, Texas 75244. ITEM 2. IDENTITY AND BACKGROUND (a)-(c). This statement is filed on behalf of LSF3 Capital Investments I, LLC, a Delaware limited liability company ("Investments I") and LSF3 Capital Investments II, LLC, a Delaware limited liability company ("Investments II"). The sole member of Investments I is LSF3 REOC I, L.P., a Delaware limited partnership ("REOC"). The general partner of REOC is LSF3 GenPar I, LLC, a Delaware limited liability company ("GenPar"). The sole member of GenPar is Lone Star Fund III (U.S.), L.P. a Delaware limited partnership ("Fund III"). The general partner of Fund III is Lone Star Partners III, L.P., a Bermuda limited partnership ("Partners III"). The general partner of Partners III is Lone Star Management Co. III, Ltd., a Bermuda exempted limited liability company ("Management III"). John P. Grayken ("Grayken"), a citizen of Ireland, is the sole stockholder, a director and President of Management III. Grayken is also sole shareholder and director of Advisors GenPar, Inc., a Texas corporation ("Advisors GenPar") as discussed below. The managing member of Investments II is Partners III. Hudson Advisors, L.L.C., a Texas limited liability company ("Hudson"), is an asset manager and, pursuant to a proxy granted by Investments I and Investments II, has certain voting rights with respect to the shares of Common Stock owned by Investments I and Investments II, pursuant to an agreement among Investments I, Investments II and Hudson (the "Asset Management Agreement"). The Reporting Persons (as defined below) intend to file the form of the Asset Management Agreement with an amendment to this statement when such agreement becomes available. The managing member of Hudson is Hudson Advisors Association, L.P., a Texas limited partnership ("Advisors"). The general partner of Advisors is Advisors GenPar. The address of the principal offices and business address of Investments I, Investments II, REOC, GenPar and Fund III is 600 North Pearl Street, Suite 1550, Dallas, Texas 75201. The address of the principal offices and business address of Hudson, Advisors and Advisors GenPar is 600 North Pearl Street, Suite 1500, Dallas, Texas 75201. The address of the principal offices and business address of Partners III and Management III is Clarendon House, Two Church Street, Hamilton, HM 11, Bermuda The business address of Grayken, is 50 Welbeck Street, London, United Kingdom, W1M7HE. Investments I, Investments II, REOC, GenPar, Fund III, Partners III, Management III, Hudson, Advisors and Advisors GenPar (collectively, the "Lone Star Entities" and with Grayken, the "Reporting Persons") are all part of a series of private investment entities investing in a broad range of primarily real estate related investments. Investors in these entities are 14 CUSIP No. 90 2 97110 13D Page 14 of 34 Pages --------------------- ------- ------- primarily pension funds and other institutional investors. Grayken's principal occupation is serving in the aforementioned offices of Management III. (d). None of the Reporting Persons has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors). (e). None of the Reporting Persons has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Other Information Attached as Schedule I hereto is a list of the directors and executive officers of Management III, GenPar and Advisors GenPar which contains the following information with respect to each person: (i) name; (ii) principal business address; and (iii) present principal occupation or employment. None of the persons identified on Schedule I hereto has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). None of the persons identified on Schedule I hereto has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Each person identified on Schedule I hereto is a United States citizen, other than Grayken, who is a citizen of Ireland, and John C.R. Collis and Dawn C. Griffiths, both of whom are citizens of Bermuda. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION (a) On March 9, 2001 Investments I paid USRP $3,100,403 and Investments II paid USRP $1,899,601 for 291,118 and 178,366 shares of Common Stock, respectively, pursuant to the terms of that certain Amended and Restated Stock Purchase Agreement dated as of February 27, 2001, (the "REIT Stock Purchase Agreement") attached hereto as Exhibit 10.1 and incorporated herein by reference, by and between USRP and Lone Star U.S. Acquisitions, LLC, a Delaware limited liability company ("LS Acquisitions"), which subsequently assigned its rights and obligations thereunder to Investments I and Investments II pursuant to an Assignment and Assumption Agreement dated as of March 9, 2001, a copy of which is attached hereto as 15 CUSIP No. 90 2 97110 13D Page 15 of 34 Pages --------------------- ------- ------- Exhibit 10.2 and incorporated herein by reference. The purchase price for these shares was paid from working capital of Investments I and Investments II that was provided by capital contributions of the members of Investments I and Investments II. Under the terms of the REIT Stock Purchase Agreement, Investments I and Investments II have agreed to purchase from USRP an additional 873,353 and 535,098 shares of Common Stock, respectively, also at a price of $10.65 per share on or before September 5, 2001. The purchase price for these shares is also expected to be paid out of working capital. (b) On March 9, 2001 Investments I paid the Selling Stockholders an aggregate of $13,033,023 and Investments II paid the Selling Stockholders $7,985,269 for 1,148,284 and 703,548 shares of Common Stock, respectively, pursuant to the terms of that certain Amended and Restated Stock Purchase Agreement, dated as of February 27, 2001, (the "Stockholders Stock Purchase Agreement", together with the REIT Stock Purchase Agreement, the "Stock Purchase Agreements") attached hereto as Exhibit 10.3 and incorporated herein by reference, by and among Fred H. Margolin, Darrel L. Rolph, David K. Rolph and certain of their affiliates (the "Selling Stockholders") and LS Acquisitions, which subsequently assigned its rights and obligations thereunder to Investments I and Investments II pursuant to an Assignment and Assumption Agreement dated as of March 9, 2001, a copy of which is attached hereto as Exhibit 10.4 and incorporated herein by reference. The purchase price for these shares was paid primarily from working capital of Investments I and Investments II that was provided by capital contributions of the members of Investments I and Investments II. A total of $401,899 and $246,242 of the purchase price for the shares of Common Stock purchased under the Stockholders Stock Purchase Agreement will be paid to the Selling Stockholders pursuant to promissory notes delivered by Investments I and Investments II, respectively. The notes are unsecured obligations of Investments I and Investments II, do not bear interest and are due and payable on September 9, 2002. Each of these promissory notes has been guaranteed by Lone Star Fund III (U.S.), L.P. ITEM 4. PURPOSE OF TRANSACTION The reporting persons have acquired shares and propose to acquire the additional shares of Common Stock referred to herein for investment purposes. The Reporting Persons intend to review the investment in USRP on a continuous basis and, depending on the price of, and other market conditions relating to, the Common Stock, subsequent developments affecting USRP, USRP's business and prospects, other investment and business opportunities available to the Reporting Persons, general stock market and economic conditions, tax considerations and other factors deemed relevant by the Reporting Persons, the Reporting Persons may decide to increase or decrease their respective investments in USRP. Pursuant to the Stock Purchase Agreements, four members of USRP's board of directors, Fred H. Margolin, Darrel L. Rolph, David K. Rolph and Gerald H. Graham, resigned effective March 9, 2001. In addition, Mr. Margolin resigned as the Chairman and Chief Executive Officer of USRP and from any other positions he held with USRP or any of its subsidiaries. Four individuals designated by Investments I and Investments II, David W. West, Robert Gidel, Len W. Allen, Jr. and Gregory I. Strong, were appointed to fill the vacancies created by these resignations. In addition, Mr. West was appointed to serve as interim Chief Executive Officer of 16 CUSIP No. 90 2 97110 13D Page 16 of 34 Pages --------------------- ------- ------- USRP while the USRP board of directors identifies a permanent replacement for Mr. Margolin. In connection with their resignations, Messrs. Margolin, Rolph and Rolph entered into Noncompetition and Release Agreements with USRP pursuant to which each of them agreed not to (a) submit or cause the submission of any proposals or nominations of candidates for election as directors of USRP or (b) solicit proxies from any USRP stockholders, in each case prior to December 31, 2003. Other than described above, none of the Reporting Persons has any present plan or intention which would result in or relate to any of the transactions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF ISSUER (a)-(b). Upon consummation of all of the transactions contemplated by the Stock Purchase Agreements, the Reporting Persons will have the following rights: Investments I will directly and beneficially own and have the power to vote and dispose of 2,312,753 shares of Common Stock as described above, which is equal to approximately 12.2% of the shares of Common Stock outstanding on March 9, 2001 pursuant to information provided by USRP as of that date. Investments I granted Hudson certain rights to vote such shares pursuant to the Asset Management Agreement. Through its ownership interests in Investments I, REOC will beneficially own and have the power to vote and dispose of 2,312,753 shares of Common Stock as described above, which is equal to approximately 12.2% of the shares of Common Stock outstanding on March 9, 2001 pursuant to information provided by USRP as of that date. Hudson has certain rights to vote such shares pursuant to the Asset Management Agreement. Through its general partner interest in REOC, GenPar will beneficially own and have the power to vote and dispose of 2,312,753 shares of Common Stock as described above, which is equal to approximately 12.2% of the shares of Common Stock outstanding on March 9, 2001 pursuant to information provided by USRP as of that date. Hudson has certain rights to vote such shares pursuant to the Asset Management Agreement. Through its ownership interests in GenPar, Fund III will beneficially own and have the power to vote and dispose of 2,312,753 shares of Common Stock as described above, which is equal to approximately 12.2% of the shares of Common Stock outstanding on March 9, 2001 pursuant to information provided by USRP as of that date. Hudson has certain rights to vote such shares pursuant to the Asset Management Agreement. Through its general partner interest in Fund III and its managing membership in Investments II, Partners III will beneficially own and have the power to vote and dispose of 3,729,765 shares of Common Stock as described above, which is equal to approximately 19.7% of the shares of Common Stock outstanding on March 9, 2001 pursuant to information provided by USRP as of that date. Hudson has certain rights to vote such shares pursuant to the Asset Management Agreement. 17 CUSIP No. 90 2 97110 13D Page 17 of 34 Pages --------------------- ------- ------- Through its general partnership interest in Partners III, Management III will beneficially own and have the power to vote and dispose of 3,729,765 shares of Common Stock as described above, which is equal to approximately 19.7% of the shares of Common Stock outstanding on March 9, 2001 pursuant to information provided by USRP as of that date. Hudson has certain rights to vote such shares pursuant to the Asset Management Agreement. Through his ownership interests in Management III and Advisors GenPar, Grayken will beneficially own and have the power to vote and to dispose of 3,729,765 shares of Common Stock as described above, which is equal to approximately 19.7% of the shares of Common Stock outstanding on March 9, 2001 pursuant to information provided by USRP as of that date. Hudson has certain rights to vote such shares pursuant to the Asset Management Agreement. Upon consummation of the transactions contemplated by the Stock Purchase Agreement, Investments II will directly and beneficially own and have the power to dispose of 1,417,012 shares of Common Stock as described above, which is equal to approximately 7.5% of the shares of Common Stock outstanding on March 9, 2001 pursuant to information provided by USRP as of that date. Investments II granted Hudson certain rights to vote such shares pursuant to the Asset Management Agreement. Pursuant to the Asset Management Agreement, Hudson will have certain powers to vote, but not dispose of, and may be deemed to beneficially own 3,729,765 shares of Common Stock as described above, which is equal to approximately 19.7% of the shares of Common Stock outstanding on March 9, 2001 pursuant to information provided by USRP as of that date. Through its managing member interest in Hudson, Advisors will have certain powers to vote, but not dispose of, and may be deemed to beneficially own 3,729,765 shares of Common Stock as described above, which is equal to approximately 19.7% of the shares of Common Stock outstanding on March 9, 2001 pursuant to information provided by USRP as of that date. Through its general partner interest in Advisors, Advisors GenPar will have certain powers to vote, but not dispose of, and may be deemed to beneficially own 3,729,765 shares of Common Stock as described above, which is equal to approximately 19.7% of the shares of Common Stock outstanding on March 9, 2001 pursuant to information provided by USRP as of that date. (c). Except as described herein, none of the Reporting Persons has effected any transaction in any shares of Common Stock during the past sixty (60) days. (d). Not applicable. (e). Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER Certain rights relating to the Common Stock are set forth in the Stock Purchase Agreements set forth as Exhibits 10.1 and 10.3 to this statement and as further described in Item 3 herein. 18 CUSIP No. 90 2 97110 13D Page 18 of 34 Pages --------------------- ------- ------- USRP, Investments I and Investments II entered into a Registration Rights Agreement as of March 9, 2001 (the "Registration Rights Agreement") filed as Exhibit 10.5 hereto and incorporated herein by reference. The Registration Rights Agreement covers the shares of Common Stock purchased under the Stock Purchase Agreements. Subject to certain restrictions, the holders of a majority of such shares will have the right to make up to three requests for underwritten registration of such securities for resale under the Securities Act of 1933, as amended (the "Securities Act"). Also, such holders will have certain rights to request piggyback registrations of such securities in the event that USRP proposes to file a registration statement on its own behalf for on behalf of another person during the term of the Registration Rights Agreement. Also, beginning June 9, 2001, a majority of such holders may request that USRP effect a "shelf registration" covering all or a portion of the Common Stock covered by the Stock Purchase Agreements. Such holders will have certain rights to require one underwritten offering off the shelf registration (a "take down") and to require additional take downs equal to the number of unused Demand Registrations. Subject to certain restrictions, pursuant to the Excepted Holder Agreement among USRP, Investments I and Investments II dated as of March 9, 2001 (the "Excepted Holder Agreement"), USRP granted Investments I and Investments II the right to acquire additional Common Stock up to an aggregate of forty percent (40%) of the outstanding Common Stock. The Excepted Holder Agreement is filed as Exhibit 10.6 hereto and incorporated herein by reference. Investments I and Investments II have granted certain rights, including sole voting rights with respect to certain matters, in the Common Stock held by them to Hudson, pursuant to the Asset Management Agreement. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit 10.1 Amended and Restated Stock Purchase Agreement among U.S. Restaurant Properties, Inc., Lone Star U.S. Acquisitions, LLC and Lone Star Fund III (U.S.), L.P., dated as of February 27, 2001 (filed herewith) Exhibit 10.2 Assignment and Assumption Agreement among Lone Star Fund III (U.S.), L.P., LSF3 Capital Investments I, LLC and LSF3 Capital Investments II, LLC dated as of March 9, 2001 (relating to the REIT Stock Purchase Agreement)(filed herewith) Exhibit 10.3 Amended and Restated Stock Purchase Agreement among certain U.S. Restaurant Properties, Inc. shareholders and Lone Star U.S. Acquisitions, LLC, dated as of February 27, 2001 (filed herewith) Exhibit 10.4 Assignment and Assumption Agreement among Lone Star Fund III (U.S.), L.P., LSF3 Capital Investments I, LLC and LSF3 Capital Investments II, LLC dated as of March 19 CUSIP No. 90 2 97110 13D Page 19 of 34 Pages --------------------- ------- ------- 9, 2001 (related to the Stockholder Stock Purchase Agreement) (filed herewith) Exhibit 10.5 Registration Rights Agreement among U.S. Restaurant Properties, Inc., LSF3 Capital Investments I, LLC and LSF3 Capital Investments II, LLC dated as of March 9, 2001 (filed herewith) EXHIBIT 10.6 Excepted Holder Agreement among U.S. Restaurant Properties, Inc., LSF3 Capital Investments I, LLC and LSF3 Capital Investments II, LLC dated as of March 9, 2001 (filed herewith) Exhibit 99.1 Agreement Among Filing Parties dated as of March 19, 2001 (filed herewith) 20 CUSIP No. 90 2 97110 13D Page 20 of 34 Pages --------------------- ------- ------- SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. LSF3 Capital Investments I, LLC, a Delaware limited liability company By: LSF3 REOC I, L.P., its Sole Member and a Delaware limited partnership By: LSF3 GenPar I, LLC, its General Partner and a Delaware limited liability company By: /s/ BENJAMIN D. VELVIN III ------------------------------------------------- Benjamin D. Velvin III Vice President Date: March 19, 2001 ---------------------------------------------- 21 CUSIP No. 90 2 97110 13D Page 21 of 34 Pages --------------------- ------- ------- LSF3 REOC I, L.P., a Delaware limited partnership By: LSF3 GenPar I, LLC, its General Partner and a Delaware limited liability company By: /s/ BENJAMIN D. VELVIN III ------------------------------------------------- Benjamin D. Velvin III Vice President Date: March 19, 2001 ---------------------------------------------- 22 CUSIP No. 90 2 97110 13D Page 22 of 34 Pages --------------------- ------- ------- LSF3 GenPar I, LLC, a Delaware limited liability company By: /s/ BENJAMIN D. VELVIN III ------------------------------------------------- Benjamin D. Velvin III Vice President Date: March 19, 2001 ----------------------------------------- 23 CUSIP No. 90 2 97110 13D Page 23 of 34 Pages --------------------- ------- ------- Lone Star Fund III (U.S.), L.P., a Delaware limited partnership By: Lone Star Partners III, L.P., its General Partner and a Bermuda limited partnership By: Lone Star Management Co. III, Ltd., its General Partner and a Bermuda exempted limited liability company By: /s/ BENJAMIN D. VELVIN III -------------------------------------------- Benjamin D. Velvin III Vice President 24 CUSIP No. 90 2 97110 13D Page 24 of 34 Pages --------------------- ------- ------- Lone Star Partners III, L.P., a Bermuda limited partnership By: Lone Star Management Co. III, Ltd., its general partner and a Bermuda exempted limited liability company By: /s/ J.D. DELL --------------------------------------------- J.D. Dell Vice President Witnessed on 16 day of March, 2001 in London, England By: /s/ Eve Shenol --------------------------------------------- 25 CUSIP No. 90 2 97110 13D Page 25 of 34 Pages --------------------- ------- ------- Lone Star Management Co. III, Ltd., a Bermuda exempted liability company By: /s/ J.D. DELL --------------------------------------------- J.D. Dell Vice President Witnessed on 16 day of March, 2001 in London, England By: /s/ EVE SHENOL --------------------------------------------- 26 CUSIP No. 90 2 97110 13D Page 26 of 34 Pages --------------------- ------- ------- LSF3 Capital Investments II, LLC, a Delaware limited liability company By: Lone Star Partners III, L.P., its General Partner and a Bermuda limited partnership By: Lone Star Management Co. III, Ltd., its General Partner and a Bermuda exempted limited liability company By: /s/ J.D. DELL --------------------------------------------- J.D. Dell Vice President 27 CUSIP No. 90 2 97110 13D Page 27 of 34 Pages --------------------- ------- ------- /s/ JOHN P. GRAYKEN Date: March 19 , 2001 ------------------------------------ ----------------------- JOHN P. GRAYKEN 28 CUSIP No. 90 2 97110 13D Page 28 of 34 Pages --------------------- ------- ------- Hudson Advisors, L.L.C., a Texas limited liability company By: /s/ ROBERT J. CORCORAN ---------------------------------- Robert J. Corcoran President 29 CUSIP No. 90 2 97110 13D Page 29 of 34 Pages --------------------- ------- ------- Hudson Advisors Associates, L.P., a Texas limited partnership By: Advisors GenPar, Inc., its General Partner and a Texas corporation By: /s/ ROBERT J. CORCORAN ----------------------------------- Robert J. Corcoran President 30 CUSIP No. 90 2 97110 13D Page 30 of 34 Pages --------------------- ------- ------- Advisors GenPar, Inc., a Texas corporation By: /s/ ROBERT J. CORCORAN -------------------------------------- Robert J. Corcoran President 31 CUSIP No. 90 2 97110 13D Page 31 of 34 Pages --------------------- ------- ------- SCHEDULE I Instruction C. Information for Officers and Directors of Management III, GenPar and Advisors GenPar. OFFICERS AND DIRECTORS OF MANAGEMENT III Name: John P. Grayken Present Principal Occupation or President and Director Employment: Business Address: 50 Welbeck Street London, United Kingdom W1M 7HE Name: J.D. Dell Present Principal Occupation or Vice President and Director Employment: Business Address: Lone Star Management Co. III, Ltd. 600 North Pearl Street, Suite 1550 Dallas, Texas 75201 Name: John C.R. Collis Present Principal Occupation or Director Employment: Business Address: Clarendon House, Two Church Street Hamilton, HM11 Bermuda Name: Dawn C. Griffiths Present Principal Occupation or Alternate Director Employment Business Address: Clarendon House, Two Church Street Hamilton, HM11 Bermuda Name: Ginger M. Quillen Present Principal Occupation or Vice President Employment: Business Address: Lone Star Management Co. III, Ltd. 600 North Pearl Street, Suite 1550 Dallas, Texas 75201 Name: Steven R. Shearer Present Principal Occupation or Vice President Employment: Business Address: Lone Star Management Co. III, Ltd. 600 North Pearl Street, Suite 1550 Dallas, Texas 75201 Name: Ellis Short IV Present Principal Occupation or Vice President Employment: Business Address: Toranomon 45 Mori Building 5th Floor 1-5, Toranomon 5-Chome MINATO - KU, Toyko Japan 105-0001 32 CUSIP No. 90 2 97110 13D Page 32 of 34 Pages --------------------- ------- ------- Name: Benjamin D. Velvin III Present Principal Occupation or Vice President and Assistant Secretary Employment: Business Address: Lone Star Management Co. III, Ltd. 600 North Pearl Street, Suite 1550 Dallas, Texas 75201 OFFICERS AND DIRECTORS OF GENPAR Name: J.D. Dell Present Principal Occupation or President Employment: Business Address: Lone Star Management Co. III, Ltd. 600 North Pearl Street, Suite 1550 Dallas, Texas 75201 Name: Benjamin D. Velvin III Present Principal Occupation or Vice President Employment: Business Address: Lone Star Management Co. III, Ltd. 600 North Pearl Street, Suite 1550 Dallas, Texas 75201 Name: Louis Paletta Present Principal Occupation or Vice President Employment: Business Address: Lone Star Management Co. III, Ltd. 600 North Pearl Street, Suite 1550 Dallas, Texas 75201 OFFICERS AND DIRECTORS OF ADVISORS Name: John P. Grayken 33 CUSIP No. 90 2 97110 13D Page 33 of 34 Pages --------------------- ------- ------- Present Principal Occupation or Director Employment: Present Principal Occupation or 50 Welbeck Street Employment: London, United Kingdom W1M 7HE Name: Robert J. Corcoran Present Principal Occupation or President Employment: Present Principal Occupation or Hudson Advisors, LLC Employment: 600 North Pearl Street, Suite 1500 Dallas, Texas 75201 Name: J.D. Dell Present Principal Occupation or Vice President Employment Business Address: Lone Star Management Co. III, Ltd. 600 North Pearl Street, Suite 1550 Dallas, Texas 75201 Name: Benjamin D. Velvin III Present Principal Occupation or Vice President Employment: Business Address: Lone Star Management Co. III, Ltd. 600 North Pearl Street, Suite 1550 Dallas, Texas 75201 34 CUSIP No. 90 2 97110 13D Page 34 of 34 Pages --------------------- ------- ------- EXHIBIT INDEX Exhibit 10.1 Amended and Restated Stock Purchase Agreement among U.S. Restaurant Properties, Inc., Lone Star U.S. Acquisitions, LLC and Lone Star Fund III (U.S.), L.P., dated as of February 27, 2001 (filed herewith) Exhibit 10.2 Assignment and Assumption Agreement among Lone Star Fund III (U.S.), L.P., LSF3 Capital Investments I, LLC and LSF3 Capital Investments II, LLC dated as of March 9, 2001 (relating to the REIT Stock Purchase Agreement)(filed herewith) Exhibit 10.3 Amended and Restated Stock Purchase Agreement among certain U.S. Restaurant Properties, Inc. shareholders and Lone Star U.S. Acquisitions, LLC, dated as of February 27, 2001 (filed herewith) Exhibit 10.4 Assignment and Assumption Agreement among Lone Star Fund III (U.S.), L.P., LSF3 Capital Investments I, LLC and LSF3 Capital Investments II, LLC dated as of March 9, 2001 (related to the Stockholder Stock Purchase Agreement) (filed herewith) Exhibit 10.5 Registration Rights Agreement among U.S. Restaurant Properties, Inc., LSF3 Capital Investments I, LLC and LSF3 Capital Investments II, LLC dated as of March 9, 2001 (filed herewith) Exhibit 10.6 Excepted Holder Agreement among U.S. Restaurant Properties, Inc., LSF3 Capital Investments I, LLC and LSF3 Capital Investments II, LLC dated as of March 9, 2001 (filed herewith) Exhibit 99.1 Agreement Among Filing Parties dated as of March 19, 2001 (filed herewith)
EX-10.1 2 d85065ex10-1.txt AMENDED/RESTATED STOCK PURCHASE AGREEMENT 1 EXHIBIT 10.1 AMENDED AND RESTATED STOCK PURCHASE AGREEMENT BETWEEN U.S. RESTAURANT PROPERTIES, INC. LONE STAR U.S. ACQUISITIONS, LLC AND LONE STAR FUND III (U.S.), L.P. DATED AS OF FEBRUARY 27, 2001 2 TABLE OF CONTENTS
Page ---- ARTICLE 1 PURCHASE AND SALE OF SHARES....................................................... 2 1.1 Purchase and Sale................................................................ 2 1.2 Purchase Price................................................................... 2 1.3 Payment at First Closing or Subsequent Closing................................... 2 1.4 Earnest Money.................................................................... 2 1.5 Inspection Period................................................................ 3 ARTICLE 2 REPRESENTATIONS AND WARRANTIES.................................................... 3 2.1 Representations and Warranties Regarding the REIT................................ 3 (a) Organization, Standing and Power........................................... 3 (b) Capital Structure.......................................................... 4 (c) Authority; No Violations; Consents and Approvals........................... 6 (d) SEC Documents.............................................................. 8 (e) Information Supplied....................................................... 8 (f) Absence of Certain Changes or Events....................................... 9 (g) No Undisclosed Material Liabilities........................................ 9 (h) No Default................................................................. 9 (i) Compliance with Applicable Laws............................................ 10 (j) REIT Litigation............................................................ 10 (k) Taxes...................................................................... 10 (l) Pension and Benefit Plans; ERISA........................................... 12 (m) Labor and Employment Matters............................................... 15 (n) Intangible Property........................................................ 16 (o) Environmental Matters...................................................... 16 (p) Properties................................................................. 18 (q) Insurance.................................................................. 20 (r) Beneficial Ownership of REIT Common Stock.................................. 20 (s) Brokers.................................................................... 20 (t) Investment Company Act of 1940............................................. 20 (u) Contracts.................................................................. 20 (v) Information Systems........................................................ 22 (w) Projections................................................................ 22 2.2 Representations and Warranties of Buyer.......................................... 22 (a) Organization, Standing and Power........................................... 22 (b) Authority; No Violations, Consents and Approvals........................... 23 (c) Information Supplied....................................................... 24 (d) Litigation................................................................. 24 (e) Acquisition of Shares...................................................... 24 (f) No Registration............................................................ 24 (g) Status as Accredited Investor.............................................. 25 (h) Brokers.................................................................... 25
i 3 ARTICLE 3 COVENANTS OF THE REIT............................................................. 25 3.1 Covenants Relating to the Business of the REIT................................... 25 3.2 No Solicitation by the REIT...................................................... 28 3.3 Access and Information........................................................... 30 3.4 Assistance....................................................................... 31 3.5 Notification of Certain Matters.................................................. 31 3.6 Third Party Consents............................................................. 31 3.7 Appointment of Directors........................................................ 32 3.8 Noncompetition and Release Agreements............................................ 32 3.9 Affiliate Agreement.............................................................. 32 3.10 Additional Arrangements.......................................................... 32 3.11 Insurance........................................................................ 32 3.12 Execution and Delivery of Registration Rights Agreement.......................... 32 3.13 Execution and Delivery of Excepted Holder Agreement.............................. 32 ARTICLE 4 MUTUAL COVENANTS.................................................................. 33 4.1 Additional Agreements............................................................ 33 4.2 Preparation of Proxy Statement................................................... 33 4.3 Stockholders Meeting............................................................. 33 4.4 Advise of Changes; SEC Filings................................................... 34 ARTICLE 5 CONDITIONS PRECEDENT.............................................................. 34 5.1 Conditions to Each Party's Obligation............................................ 34 (a) Consents and Approvals..................................................... 34 (b) No Injunctions or Restraints............................................... 34 (c) No Action.................................................................. 34 5.2 Conditions to Obligations of Buyer at the First Closing.......................... 34 (a) Representations and Warranties............................................. 34 (b) Performance of Obligations................................................. 34 (c) Consents Under Agreements.................................................. 35 (d) Legal Opinion.............................................................. 35 (e) Excepted Holder Limit and Excepted Holder Agreement........................ 35 (f) Registration Rights Agreement.............................................. 35 (g) Resignations From Positions and Appointment of Directors................... 35 (h) Closing Deliveries......................................................... 35 (i) Affiliate Agreements....................................................... 35 (j) Severance.................................................................. 35 (k) Releases................................................................... 36 (l) Concurrent Transactions.................................................... 36 (m) Other Agreements........................................................... 36 (n) No Litigation.............................................................. 36 (o) Stock Exchange Listing..................................................... 36 (p) Material Adverse Effect.................................................... 36 (q) REIT Stockholder Approval.................................................. 36 (r) Noncompetition and Release Agreement....................................... 36 5.3 Conditions to Obligations of the REIT at the First Closing....................... 37
ii 4 (a) Representations and Warranties............................................. 37 (b) Performance of Obligations of Buyer........................................ 37 (c) Closing Deliveries......................................................... 37 (d) Concurrent Transactions.................................................... 37 5.4 Conditions to Obligations of Buyer at each Subsequent Closing.................... 37 (a) Representations and Warranties............................................. 37 (b) Performance of Obligations................................................. 37 (c) Closing Deliveries......................................................... 37 (d) First Closing.............................................................. 38 (e) No Litigation.............................................................. 38 5.5 Conditions to Obligations of the REIT at Each Subsequent Closing................. 38 (a) Representations and Warranties............................................. 38 (b) Performance of Obligations of Buyer........................................ 38 (c) Closing Deliveries......................................................... 38 ARTICLE 6 CLOSING........................................................................... 38 6.1 Closing.......................................................................... 38 6.2 Actions to Occur at the First Closing............................................ 39 6.3 Actions to Occur at Each Subsequent Closing...................................... 39 ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER................................................. 40 7.1 Termination Prior to First Closing............................................... 40 7.2 Termination Subsequent to First Closing.......................................... 42 7.3 Effect of Termination Prior to First Closing..................................... 42 ARTICLE 8 INDEMNIFICATION................................................................... 44 8.1 Indemnification of Buyer......................................................... 44 8.2 Indemnification of the REIT...................................................... 44 8.3 Defense of Third-Party Claims.................................................... 45 8.4 Direct Claims.................................................................... 46 8.5 Limitations...................................................................... 46 (a) Minimum Loss............................................................... 46 (b) Determination of Breach.................................................... 46 (c) Limitation as to Time...................................................... 47 (d) Other Indemnified Costs.................................................... 47 (e) Limitation as to Amount.................................................... 47 8.6 Tax Related Adjustments.......................................................... 47 ARTICLE 9 GENERAL PROVISIONS................................................................ 47 9.1 Survival of Representations, Warranties, and Covenants........................... 47 9.2 No Waiver Relating to Claims for Fraud........................................... 48 9.3 Amendment and Modification....................................................... 48 9.4 Waiver of Compliance............................................................. 48 9.5 Specific Performance............................................................. 48 9.6 Severability..................................................................... 48 9.7 Expenses and Obligations......................................................... 49 9.8 Parties in Interest.............................................................. 49
iii 5 9.9 Notices.......................................................................... 49 9.10 Counterparts..................................................................... 50 9.11 Entire Agreement................................................................. 51 9.12 Governing Law; Choice of Forum................................................... 51 9.13 Public Announcements............................................................. 51 9.14 Assignment....................................................................... 51 9.15 Guarantee of Buyer's Obligation to Purchase Shares at any Subsequent Closing..... 51
EXHIBITS: Exhibit A -- Form of Deposit Escrow Agreement Exhibit B-1 -- Form of Noncompetition and Release Agreement Exhibit B-2 -- Form of Noncompetition and Release Agreement (Darrel Rolph) Exhibit B-3 -- Form of Noncompetition and Release Agreement (David Rolph) Exhibit C -- Form of Excepted Holder Agreement Exhibit D -- Form of Legal Opinion of REIT's Counsel Exhibit E -- Form of Registration Rights Agreement Exhibit F -- Liquidated Damages Release Exhibit G -- Commitment Letter DISCLOSURE SCHEDULES: Schedule 2.1(a) -- REIT Subsidiaries Schedule 2.1(a)(iii) -- Non-Subsidiary Investments Schedule 2.1(b) -- Capital Structure Schedule 2.1(c)(ii) -- Conflicts, Violations or Defaults Schedule 2.1(c)(iii) -- Consents of Governmental Entities Schedule 2.1(f) -- Certain Changes or Events Schedule 2.1(g) -- Undisclosed Material Liability Schedule 2.1(h) -- Defaults and Violations Schedule 2.1(i) -- Officers with Knowledge Schedule 2.1(j) -- REIT Litigation Schedule 2.1(k) -- Taxes Schedule 2.1(l) -- ERISA Matters Schedule 2.1(m) -- Labor and Employment Matters Schedule 2.1(o) -- Environmental Matters Schedule 2.1(p) -- Properties Schedule 2.1(q) -- Insurance Schedule 2.1(s) -- Brokers Schedule 2.1(u) -- Certain Contracts Schedule 2.1(v) -- Information Systems Schedule 3.1 -- Conduct of Business Schedule 3.10 -- Affiliate Agreements Schedule 3.11 -- Internal Litigation iv 6 INDEX OF DEFINED TERMS
Definitions Defined on Page # - ----------- ----------------- Affiliate................................................................................... 8 Affiliate Agreements........................................................................ 32 Agreement................................................................................... 1 Business Day................................................................................ 39 Buyer....................................................................................... 1 Buyer Indemnified Costs..................................................................... 44 Buyer Indemnified Parties................................................................... 44 Buyer Indemnified Representation Costs...................................................... 44 Buyer Litigation............................................................................ 24 Buyer Order................................................................................. 24 CERCLA...................................................................................... 18 Closing Date................................................................................ 38 Closing Dates............................................................................... 38 Closings.................................................................................... 38 Company..................................................................................... 1 Company Common Stock........................................................................ 1 Confidentiality Agreement................................................................... 28 Contingent Securities....................................................................... 1 Cure Period................................................................................. 40 Delivery Date............................................................................... 3 Deposit Escrow Agreement.................................................................... 2 Earnest Money............................................................................... 3 Encumbrances................................................................................ 5 Environmental Laws.......................................................................... 16 EPA......................................................................................... 18 ERISA....................................................................................... 12 Escrow Agent................................................................................ 2 Excepted Holder Agreement................................................................... 32 Excepted Holder Limit....................................................................... 35 Exchange Act................................................................................ 7 Final Closing Date.......................................................................... 40 First Closing............................................................................... 2 First Closing Shares........................................................................ 2 GAAP........................................................................................ 8 Governmental Entity......................................................................... 7 Guaranteed Funding Facility................................................................. 41 Guarantor................................................................................... 1 Hazardous Materials......................................................................... 17 HSR Act..................................................................................... 8 Indemnified Costs........................................................................... 46 Indemnified Party........................................................................... 45 Indemnifying Party.......................................................................... 45 Information Systems......................................................................... 22
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Definitions Defined on Page # - ----------- ----------------- Initial Execution Date...................................................................... 1 Inspection Period........................................................................... 3 Inspection Termination Time................................................................. 3 Investment Company Act...................................................................... 20 Knowledge................................................................................... 10 Liquidated Damages Release.................................................................. 43 Material Adverse Effect..................................................................... 4 Material Contracts.......................................................................... 21 Merger...................................................................................... 1 Merger Agreement............................................................................ 1 Minimum Loss................................................................................ 46 Net Cash Flow............................................................................... 4 Net Operating Income........................................................................ 4 Noncompetition and Release Agreements....................................................... 28 OP Units.................................................................................... 1 Operating Partnership....................................................................... 1 Original Agreement.......................................................................... 1 Person...................................................................................... 8 Projections................................................................................. 22 Property Restrictions....................................................................... 19 Proxy Statement............................................................................. 7 Purchase Price.............................................................................. 2 Registration Rights Agreement............................................................... 35 Reit........................................................................................ 11 REIT........................................................................................ 1 REIT Acquisition Agreement.................................................................. 29 REIT Board.................................................................................. 28 REIT Charter................................................................................ 7 REIT Common Stock........................................................................... 1 REIT Disclosure Schedule.................................................................... 4 REIT Employee Benefit Plans................................................................. 13 REIT ERISA Affiliate........................................................................ 12 REIT Incentive Plan......................................................................... 5 REIT Indemnified Costs...................................................................... 44 REIT Indemnified Parties.................................................................... 45 REIT Indemnified Representation Costs....................................................... 45 REIT Intangible Property.................................................................... 16 REIT Litigation............................................................................. 10 REIT Notice................................................................................. 29 REIT Order.................................................................................. 10 REIT Pension Plans.......................................................................... 12 REIT Permits................................................................................ 10 REIT Preferred Stock........................................................................ 4 REIT Properties............................................................................. 18 REIT Response Period........................................................................ 30 REIT SEC Documents.......................................................................... 8
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Definitions Defined on Page # - ----------- ----------------- REIT Superior Proposal...................................................................... 30 REIT Takeover Proposal...................................................................... 29 Release..................................................................................... 17 Released Claims............................................................................. 43 Released Parties............................................................................ 43 Remedial Action............................................................................. 17 SEC......................................................................................... 7 Securities Act.............................................................................. 7 Selling Stockholders........................................................................ 32 Series A Preferred Stock.................................................................... 4 Shares...................................................................................... 2 Stockholders................................................................................ 1 Stockholders Meeting........................................................................ 33 Stockholders Stock Purchase Agreement....................................................... 1 Subsequent Closing.......................................................................... 2 Subsequent Closing Date..................................................................... 38 Subsequent Closing Shares................................................................... 2 Subsidiary.................................................................................. 4 Tax Protection Agreement.................................................................... 12 Taxes....................................................................................... 11 Termination Fee............................................................................. 49 third-party action.......................................................................... 45 Transaction Documents....................................................................... 6 Voting Debt................................................................................. 5 Year 2000 Data.............................................................................. 22
vii 9 AMENDED AND RESTATED STOCK PURCHASE AGREEMENT This AMENDED AND RESTATED STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as of February 27, 2001, by and among U.S. Restaurant Properties, Inc., a Maryland corporation (the "REIT"), Lone Star U.S. Acquisitions, LLC, a Delaware limited liability company (including its permitted successors and assigns, "Buyer"), and Lone Star Fund III (U.S.), L.P., a Delaware limited partnership, as guarantor solely for the purpose of Section 9.15 of this Agreement ("Guarantor"). WHEREAS, pursuant to a Stock Purchase Agreement, dated as of January 17, 2001 (the "Initial Execution Date") by and between the REIT and Buyer (the "Original Agreement"), Buyer agreed to purchase from the REIT, and REIT agreed to issue and sell to Buyer, 1,887,935 shares of common stock, par value $0.001 per share (the "REIT Common Stock"), of the REIT in consideration of the Purchase Price (as defined in the Original Agreement), upon the terms and subject to the conditions set forth in the Original Agreement; WHEREAS, pursuant to the terms of the Withdrawal Agreement dated October 15, 1997 by and among QSV Restaurant Properties, Inc., a Delaware corporation (the "Company"), the REIT, U.S. Restaurant Properties Master L.P., a Delaware limited partnership, and U.S. Restaurant Properties Operating L.P., a Delaware limited partnership (the "Operating Partnership"), and the Agreement and Plan of Merger (the "Merger Agreement") dated as of December 29, 2000 by and among the REIT, the Company and each of the stockholders of the Company (collectively, the "Stockholders") pursuant to which the Company has merged (the "Merger") with the REIT; WHEREAS, pursuant to the Merger and the Merger Agreement the shares of common stock, par value $0.001 per share, of the Company ("Company Common Stock") held by the Stockholders were converted into REIT Common Stock (or cash, as determined in the sole discretion of the REIT), and the (a) units of limited partnership interest in Operating Partnership, which are exchangeable into shares of REIT Common Stock (the "OP Units"), (b) unvested units of partnership interest in Operating Partnership, which units are exchangeable into shares of REIT Common Stock after vesting (the "Contingent Securities"), and (c) other securities convertible into or exchangeable for shares of REIT Common Stock or other rights to acquire REIT Common Stock or such convertible or exchangeable securities (collectively with the OP Units and the Contingent Securities, "REIT Common Stock Equivalent") held by the Company, were terminated and cancelled in exchange for the issuance of REIT Common Stock or cash on the terms and conditions set forth in the Merger Agreement, an executed copy of which has been delivered to Buyer; WHEREAS, concurrently with the execution of the Original Agreement, certain of the Stockholders and Buyer entered into a stock purchase agreement on January 17, 2001 (the "Stockholders Stock Purchase Agreement") pursuant to which Buyer agreed to purchase from such Stockholders, and such Stockholders agreed to sell to Buyer, concurrently with the closing of the transactions contemplated by the Original Agreement, all shares of REIT Common Stock received in the Merger by such Stockholders, upon the terms and subject to the conditions set forth therein; and 10 WHEREAS, the REIT and Buyer now desire to amend and restate the Original Agreement to add Guarantor as a party, and to make such other amendments as are set forth herein. NOW, THEREFORE, in consideration of the respective representations, warranties, agreements and conditions are hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE 1 PURCHASE AND SALE OF SHARES 1.1 Purchase and Sale. Upon the terms and subject to the conditions set forth in this Agreement, the REIT shall issue and sell to Buyer, and Buyer shall purchase from the REIT, at the times indicated below, a number of shares of REIT Common Stock equal to the sum of the following: (a) at the first closing (the "First Closing") 469,484 shares of REIT Common Stock (the "First Closing Shares"); and (b) at subsequent closings, each of which shall occur within 15 business days after the date on which the REIT provides written notice to Buyer in accordance with Section 9.9 hereof (each, a "Subsequent Closing") requiring such Subsequent Closing to occur, up to 1,408,451 shares of REIT Common Stock (all such shares, the "Subsequent Closing Shares" and, together with the First Closing Shares, the "Shares"); provided, however, that, subject to the satisfaction of the conditions set forth in Sections 5.4 and 5.5 hereof, Buyer shall be required to purchase all of the Subsequent Closing Shares on or before the 180th day following the date on which the First Closing occurs and provided, further, that the aggregate number of Subsequent Closing Shares shall not exceed 1,408,451. 1.2 Purchase Price. The purchase price payable by Buyer to the REIT in consideration for the sale of the Shares shall be an amount equal to $10.65 per Share, or a total of $20,000,007.75 (the "Purchase Price"). 1.3 Payment at First Closing or Subsequent Closing. Payment of the Purchase Price for the Shares to be purchased hereunder shall be made by or on behalf of Buyer by wire transfer of immediately available funds to an account designated by the REIT (the number for which account shall have been furnished to Buyer at least two Business Days prior to the First Closing Date (as hereinafter defined) or any Subsequent Closing Date (as hereinafter defined), as applicable). 1.4 Earnest Money. (a) Concurrently with the execution of the Original Agreement, Buyer, the REIT and an escrow agent (the "Escrow Agent") have executed and delivered a Deposit Escrow Agreement (the "Deposit Escrow Agreement") in the form attached hereto as Exhibit A. 2 11 (b) Notwithstanding anything to the contrary in the Transaction Documents (as hereinafter defined), on February 28, 2001, Buyer shall deposit $1,000,000 in cash (the "Earnest Money") with the Escrow Agent to be held in accordance with the terms hereof and the Deposit Escrow Agreement. (c) Subject to the satisfaction of the conditions set forth in Article 5 hereof, at the First Closing Buyer and the REIT shall instruct the Escrow Agent to release and return the Earnest Money (together with any earnings thereon) by wire transfer of immediately available funds to an account designated by Buyer. (d) If this Agreement is terminated after the Inspection Termination Time, Buyer and the REIT shall instruct the Escrow Agent to release the Earnest Money (together with any earnings thereon) to Buyer or to the REIT, all as provided in Section 7.3. 1.5 Inspection Period. On or before 5:00 p.m., Central time, on the fifth Business Day (as hereinafter defined) following the date of the Original Agreement, the REIT delivered the REIT Disclosure Schedule (as defined below) to Buyer (the later of (a) such date of delivery and (b) the delivery by the Stockholders of the Stockholders Disclosure Schedule (as defined in the Stockholders Stock Purchase Agreement), the "Delivery Date"). If for any reason Buyer, in its sole discretion, determines that it does not desire to purchase the Shares, then Buyer may terminate this Agreement in accordance with Section 7.1(c)(i) by delivering to the REIT a notice of termination at any time during the period (the "Inspection Period") beginning on the Delivery Date and terminating at 5:00 p.m. Dallas, Texas time, on February 27, 2001 (the "Inspection Termination Time"). If Buyer does not so terminate this Agreement before the Inspection Termination Time, Buyer shall have waived its right to terminate this Agreement under this Section 1.5 and Section 7.1(c)(i). ARTICLE 2 REPRESENTATIONS AND WARRANTIES 2.1 Representations and Warranties Regarding the REIT. The REIT represents and warrants to Buyer as follows (such representations and warranties being deemed to be made on a continuous basis until the First Closing): (a) Organization, Standing and Power. (i) The REIT is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland, and each of its Subsidiaries (as defined below) is a corporation, limited liability company or partnership duly organized, validly existing and, where applicable, in good standing under the laws of its state of incorporation or organization, and each of the REIT and each of its Subsidiaries has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified and in good standing to do business in each jurisdiction in which the business it is conducting, or the operation, ownership or leasing of its properties, makes such qualification necessary, other than in such jurisdictions where the failure so to qualify would not have a Material Adverse Effect (as defined below) on the REIT. On or before the Delivery Date, the REIT shall 3 12 deliver to Buyer complete and correct copies of the REIT's charter and bylaws and the charter, bylaws or other organizational documents of each of the REIT's Subsidiaries. All Subsidiaries of the REIT and their respective jurisdictions of incorporation or organization are identified on Schedule 2.1(a) of the disclosure schedule delivered by the REIT to Buyer on the Delivery Date, and made a part hereof by reference (the "REIT Disclosure Schedule"). Each owner and the respective amount of such owner's equity interest in each such Subsidiary is set forth on Schedule 2.1(a) of the REIT Disclosure Schedule. Schedule 2.1(a) of the REIT Disclosure Schedule sets forth a list of each jurisdiction in which the REIT or a Subsidiary of the REIT is qualified or licensed to do business and each assumed name under which any of them conducts business in any jurisdiction. (ii) As used in this Agreement, "Material Adverse Effect" means, when used in connection with the REIT, any change, event or effect, whether or not foreseeable or known as of the Initial Execution Date, that, individually or in the aggregate with any such other changes, events or effects, is, or could reasonably be expected to be (whether or not such change, event or effect has, at the time in question, manifested itself in the REIT's historical financial statements), materially adverse to the historical or near-term or long-term projected (A) business, (B) assets, (C) liabilities, (D) financial condition or (E) results of operations (including, but not limited to, Net Operating Income (as defined below) and Net Cash Flow (as defined below)), in each case, of the REIT and its Subsidiaries taken as a whole. As used in this Agreement, "Net Operating Income" means rental and other property income minus property management and operating expenses and general and administrative expenses, and "Net Cash Flow" means Net Operating Income minus debt service payments of principal and interest, capital expenditures and other non-operating expenses. (iii) As used in this Agreement, the word "Subsidiary" means, with respect to any party, any corporation or other organization, whether incorporated or unincorporated, of which: (A) such party or any other Subsidiary of such party is a general partner; (B) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is, directly or indirectly, owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and any one or more of its Subsidiaries; (C) such party and/or any other Subsidiary of such party beneficially owns, directly or indirectly, at least 25% of the equity interests; or (D) such party and/or any other Subsidiary of such party has a direct or indirect investment of $10 million or more in equity or indebtedness in such corporation or other organization except as set forth on Schedule 2.1(a)(iii) of the REIT Disclosure Schedule. (b) Capital Structure. (i) As of the Initial Execution Date, the authorized capital stock of the REIT consisted of (A) 100,000,000 shares of REIT Common Stock, (B) 50,000,000 shares of preferred stock, par value $0.001 per share ("REIT Preferred Stock"), of which 3,680,000 shares have been designated as Series A Cumulative Convertible Preferred Stock, par value $0.001 per share ("Series A Preferred Stock"), and (C) 15,000,000 4 13 shares of excess stock, par value $0.001 per share. As of the Initial Execution Date, (1) 17,416,672 shares of REIT Common Stock were issued and outstanding; (2) 3,679,938 shares of REIT Preferred Stock were issued and outstanding; (3) 756,720 (4.3% of the outstanding shares of REIT Common Stock) shares of REIT Common Stock were reserved for issuance pursuant to the REIT's Flexible Incentive Plan (the "REIT Incentive Plan"), of which no shares of REIT Common Stock were issued under restricted stock grants; (4) 634,577 shares of REIT Common Stock were subject to issuance upon the exercise of options or awards granted to officers, directors or employees of the REIT and its Subsidiaries under the REIT Incentive Plan; (5) 134,344 shares of REIT Common Stock were subject to issuance, and were also reserved for issuance, upon the exchange of OP Units (as defined above); and (6) no Voting Debt (as defined below) was issued and outstanding in the REIT or any Subsidiary of the REIT. A wholly owned subsidiary of the REIT is the sole general partner of the Operating Partnership and holds a 1.0% general partnership interest in the Operating Partnership. As of the Initial Execution Date, (x) 134,344 OP Units, constituting an interest of 0.7654% in the Operating Partnership, were validly issued and outstanding, fully paid and nonassessable and not subject to preemptive rights, and (y) no other REIT Common Stock Equivalents to acquire shares of REIT Common Stock were issued and outstanding, and (z) 4,312 OP Units or shares were required to be issued to the Amy and Pamela Friedman Trust pursuant to a guaranty agreement and an undeterminable amount were due the Gant family and affiliates on July 29, 2002 pursuant to a guaranty agreement. Subject to the limitations contained in the partnership agreement for the Operating Partnership and the REIT charter, each OP Unit is immediately exchangeable for one share of REIT Common Stock upon the election of the holder of OP Units. Schedule 2.1(b) of the REIT Disclosure Schedule sets forth the name and number and class of OP Units and the percentage interest of each partner in the Operating Partnership. The term "Voting Debt" means bonds, debentures, notes or other indebtedness having the right to vote (or convertible into securities having the right to vote) on any matters on which holders of equity interests in the REIT or any Subsidiary of the REIT or Buyer, as applicable, may vote. (ii) All outstanding shares of REIT Common Stock and REIT Preferred Stock are validly issued, fully paid and nonassessable and are not subject to preemptive rights. Except as set forth on Schedule 2.1(a) of the REIT Disclosure Schedule, all outstanding equity interests of the Subsidiaries of the REIT owned by the REIT, or a direct or indirect wholly owned Subsidiary of the REIT, are free and clear of all liens, pledges, charges, claims, mortgages, deeds of trust, security interests, restrictions, rights of first refusal, defects in title, or other burdens, options or encumbrances of any kind ("Encumbrances"). Set forth on Schedule 2.1(b) of the REIT Disclosure Schedule is a true and complete list of the following: (A) each outstanding qualified or non-qualified option to purchase REIT Common Stock granted under the REIT Incentive Plan or otherwise, the name of each holder of each such option and the exercise price and the number of shares subject to each such option; (B) each grant of REIT Common Stock to employees which is subject to any risk of forfeiture, the name of each holder of such restricted stock and the number of shares of such restricted stock held by each holder; (C) any obligations of the REIT to issue REIT Common Stock except pursuant to this Agreement, and any obligations of the Operating Partnership to issue OP 5 14 Units, in each case as a result of the transactions contemplated hereby and the total thereof; and (D) each loan made by the REIT with respect to the purchase of REIT Common Stock and the recipient, amount and principal terms thereof. Except as set forth in this Section 2.1(a) or on Schedule 2.1(a) of the REIT Disclosure Schedule, there are issued and outstanding or reserved for issuance: (x) no shares of stock, Voting Debt or other voting securities of the REIT; (y) no securities of the REIT or any Subsidiary of the REIT or securities or assets of any other entity convertible into or exchangeable for shares of stock, Voting Debt or other voting securities of the REIT or any Subsidiary of the REIT; and (z) no options, warrants, calls, rights (including preemptive rights), commitments or agreements to which the REIT or any Subsidiary of the REIT is a party or by which it is bound in any case obligating the REIT or any Subsidiary of the REIT to issue, deliver, sell, purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased, redeemed or acquired, additional shares of stock or any Voting Debt or other voting securities of the REIT or of any Subsidiary of the REIT, or obligating the REIT or any Subsidiary of the REIT to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There were not as of the Initial Execution Date, and there will not be on the Closing Date, any stockholder agreements, voting trusts or other agreements or understandings to which the REIT or any Subsidiary of the REIT is a party or by which it is bound relating to the voting of any shares of the stock of the REIT or partnership interests in the Operating Partnership that will limit in any way, if required, the solicitation of proxies or consents from, or the casting of votes by, the stockholders of the REIT or the partners of the Operating Partnership with respect to the transactions contemplated by this Agreement and all other documents to be executed by the REIT (or any applicable Subsidiary) and Buyer in connection with the consummation of the transactions contemplated in this Agreement (collectively, the "Transaction Documents"). Except as set forth on Schedule 2.1(b) of the REIT Disclosure Schedule, there are no restrictions on the REIT's ability to vote the equity interests of any of its Subsidiaries. Except as set forth on Schedule 2.1(b) of the REIT Disclosure Schedule, all dividends or distributions on securities of the REIT that have been declared or authorized prior to the Initial Execution Date have been paid in full. Except as set forth on Schedule 2.1(b) of the REIT Disclosure Schedule, there is no restriction on the ability of the REIT's Subsidiaries to distribute cash to their respective parent companies. (c) Authority; No Violations; Consents and Approvals. (i) Each of the REIT and its Subsidiaries has all requisite power and authority to enter into the Transaction Documents to which it is a party, if any, and to consummate the transactions contemplated hereby and thereby. The execution and delivery of the Transaction Documents to which the REIT or any of its Subsidiaries is a party, if any, and the consummation of the transactions contemplated hereby or thereby have been duly authorized by all necessary action on the part of the REIT and/or such Subsidiary. The Transaction Documents to which the REIT or any applicable Subsidiary is a party have been duly executed and delivered by the REIT or such Subsidiary and, assuming the Transaction Documents to which Buyer is a party constitute the valid and binding obligations of Buyer, constitute valid and binding obligations of the REIT or such Subsidiary, enforceable in accordance with their terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general principles of equity 6 15 (regardless of whether such enforceability is considered in a proceeding in equity or at law). (ii) Except as set forth on Schedule 2.1(c)(ii) of the REIT Disclosure Schedule, the execution and delivery of the Transaction Documents by the REIT and any of its Subsidiaries, if applicable, do not, and the consummation of the transactions contemplated hereby or thereby, and compliance with the provisions hereof or thereof, will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any material obligation or to the loss of a material benefit under, or give rise to a right of purchase under, result in the creation of any Encumbrance upon any of the properties or assets of the REIT or any of its Subsidiaries under or require the consent or approval of any third party under, any provision of (A) the charter of the REIT, as that term is defined in the Maryland General Corporation Law, as amended from time to time (the "REIT Charter"), or REIT bylaws or any provision of the comparable charter or organizational documents of any of the REIT's Subsidiaries, (B) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to the REIT or any of its Subsidiaries or their respective properties or assets or any guarantee by the REIT or any of its Subsidiaries of any of the foregoing, (C) any joint venture or other ownership arrangement or (D) assuming the consents, approvals, authorizations or permits and filings or notifications referred to in Section 2.1(c)(iii) are duly and timely obtained or made, any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the REIT or any of its Subsidiaries or any of their respective properties or assets, other than, in the case of clauses (B), (C) and (D), any such conflicts, violations, defaults, rights, Encumbrances or detriments that, individually or in the aggregate, (1) have not had, and could not reasonably be expected to have, a Material Adverse Effect on the REIT, or (2) would not, or could not reasonably be expected to, materially impair the ability of the REIT or any of its Subsidiaries to perform its obligations hereunder or thereunder or prevent the consummation of any of the transactions contemplated hereby or thereby. (iii) Except as set forth on Schedule 2.1(c)(iii) of the REIT Disclosure Schedule, no consent, approval, order or authorization of, or registration, declaration or filing with, or permit from any court, governmental, regulatory or administrative agency or commission or other governmental authority or instrumentality, domestic or foreign (a "Governmental Entity"), is required by or with respect to the REIT or any of its Subsidiaries in connection with the execution and delivery of the Transaction Documents to which the REIT or any of its Subsidiaries is a party, if any, by the REIT or such Subsidiary, or the consummation by the REIT and its Subsidiaries of the transactions contemplated hereby or thereby, except for: (A) the filing with the Securities and Exchange Commission (the "SEC") of such reports under Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and such other compliance with the Exchange Act or Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations thereunder, as may be required in connection with the Transaction Documents and the transactions contemplated hereby or thereby, including (if required) the filing with SEC of a proxy statement (the "Proxy Statement") in preliminary and definitive form relating to the meeting (if required) of the stockholders of the REIT to be held in connection with the issuance and sale of the Shares; (B) any 7 16 filings required under state securities laws; (C) such filings and approvals as may be required by any applicable state takeover laws, or environmental laws; (D) such filings and approvals as may be required by any foreign premerger notification, securities, corporate or other law, rule or regulation; (E) the filing, if applicable, of a pre-merger notification and report by the REIT under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the expiration or termination of the applicable waiting period thereunder; and (F) approval of the listing application for the Shares to be issued hereunder by the New York Stock Exchange. (d) SEC Documents. The REIT has made available to Buyer a true and complete copy of each report, schedule, registration statement and definitive proxy statement filed by the REIT with the SEC since January 1, 1997 and prior to or on the date hereof (the "REIT SEC Documents"), which are all the documents (other than preliminary material) that the REIT was required to file with the SEC between January 1, 1997 and the date hereof. As of their respective dates, the REIT SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such REIT SEC Documents, and none of the REIT SEC Documents contained any untrue statement of a material fact or omitted 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. The REIT has no outstanding and unresolved comments from the SEC with respect to any of the REIT SEC Documents. The financial statements of the REIT included in the REIT SEC Documents complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with generally accepted accounting principles ("GAAP") applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of the unaudited statements, as permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly presented in accordance with applicable requirements of GAAP (subject, in the case of the unaudited statements, to normal, recurring adjustments, none of which are material) the consolidated financial position of the REIT and its consolidated Subsidiaries as of their respective dates and the consolidated statements of income and the consolidated cash flows of the REIT and its consolidated Subsidiaries for the periods presented therein. Except as disclosed in the REIT SEC Documents, there are no agreements, arrangements or understandings between the REIT and any party who is at the date hereof or was at any time prior to the date hereof but after January 1, 1997 an Affiliate (as hereinafter defined) of the REIT that are required to be disclosed in the REIT SEC Documents. The books of account and other financial records of the REIT are true, complete and correct in all material respects and are accurately reflected in all material respects in the financial statements included in the REIT SEC Documents. As used in this Agreement, "Affiliate" means, with respect to any Person, any other Person controlling, controlled by or under common control with such Person. For purposes of this definition and this Agreement, the term "control" (and correlative terms) means the power, whether by contract, equity ownership or otherwise, to direct the policies or management of a Person. As used in this Agreement, "Person" means an individual, corporation, partnership, limited liability company, association, trust, unincorporated organization, or other entity. (e) Information Supplied. If a meeting of the stockholders of the REIT and the filing with the SEC of a Proxy Statement shall be required in connection with the purchase of the Shares contemplated hereby, none of the information supplied or to be supplied by the REIT for inclusion or incorporation by reference in the Proxy Statement will, at the date mailed to 8 17 stockholders of the REIT, at the time of the meeting of such stockholders to be held in connection with any required approval of the purchase of the Shares contemplated hereby or at the Closing, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. If at any time prior to the First Closing any event with respect to the Company, the REIT or any of their respective Subsidiaries or the Stockholders, or with respect to other information supplied by the REIT for inclusion in the Proxy Statement, shall occur which is required to be described in an amendment of, or a supplement to, the Proxy Statement, such event shall be so described, and the REIT shall cause such amendment or supplement to be promptly filed (if required to be filed) with the SEC and disseminated to the stockholders of the REIT. The Proxy Statement, insofar as it relates to the REIT, the REIT's Subsidiaries or other information supplied by the REIT for inclusion or incorporation by reference therein, will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder and other applicable law. (f) Absence of Certain Changes or Events. Except as set forth on Schedule 2.1(f) of the REIT Disclosure Schedule or as disclosed in or reflected in the REIT SEC Documents, and except as contemplated by this Agreement, since the date of the most recent audited financial statements included in the REIT SEC Documents, (i) nothing has occurred that would have been prohibited by Section 3.1 if the terms of such subsections had been in effect as of and after such date of such financial statements; and (ii) there has not been: (A) except for regularly scheduled monthly and quarterly dividend and distribution payments in amounts consistent with past practices, any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any of the REIT's stock or the OP Units; (B) any amendment of any term of any outstanding equity security of the REIT or any Subsidiary of the REIT; (C) any repurchase, redemption or other acquisition by the REIT or any Subsidiary of the REIT of any outstanding shares of capital stock or other equity securities of, or other ownership interests in, the REIT or any Subsidiary of the REIT; (D) any material change in any method of accounting or accounting practice or any tax method, practice or election by the REIT or any Subsidiary of the REIT; (E) any amendment of any employment, consulting, severance, retention or any other agreement between the REIT or any of its Subsidiaries and any officer or director of the REIT or any of its Subsidiaries; or (F) any change, event or effect that has had, or could reasonably be expected to have, a Material Adverse Effect on the REIT. (g) No Undisclosed Material Liabilities. Except as set forth on Schedule 2.1(g) of the REIT Disclosure Schedule or as disclosed in the REIT SEC Documents, there are no liabilities of the REIT or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute or determined, other than: (i) liabilities adequately provided for on the balance sheet of the REIT dated as of September 30, 2000 (including the notes thereto) contained in the REIT's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000; (ii) liabilities incurred in the ordinary course of business subsequent to September 30, 2000 which have not had, individually or in the aggregate, and could not reasonably be expected to have a Material Adverse Effect on the REIT; and (iii) liabilities under this Agreement. (h) No Default. Except as set forth on Schedule 2.1(h) of the REIT Disclosure Schedule, neither the REIT nor any of its Subsidiaries is in default or violation (and no event has occurred which, with notice or the lapse of time or both, would constitute a default or violation) 9 18 of any term, condition or provision of (i) the REIT Charter or bylaws of the REIT or the comparable charter or organizational documents of any of the REIT's Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license to which the REIT or any of its Subsidiaries is now a party or by which the REIT or any of its Subsidiaries or any of their respective properties or assets is bound or (iii) any order, writ, injunction, decree, statute, rule or regulation applicable to the REIT or any of its Subsidiaries, except in the case of (ii) and (iii) for defaults or violations which in the aggregate have not had and could not reasonably be expected to have a Material Adverse Effect on the REIT. (i) Compliance with Applicable Laws. The REIT and its Subsidiaries hold all permits, licenses, variances, exemptions, orders, franchises and approvals of all Governmental Entities necessary for the lawful conduct of their respective businesses (the "REIT Permits"), except where the failure so to hold has not had, and could not reasonably be expected to have, a Material Adverse Effect on the REIT. The REIT and its Subsidiaries are in compliance with the terms of the REIT Permits, except where the failure so to comply has not had, and could not reasonably be expected to have, a Material Adverse Effect on the REIT. Except as disclosed in the REIT SEC Documents, the businesses of the REIT and its Subsidiaries are not being conducted in violation of any law, ordinance or regulation of any Governmental Entity, except for possible violations which have not had, and could not reasonably be expected to have, a Material Adverse Effect on the REIT. No investigation or review by any Governmental Entity with respect to the REIT or any of its Subsidiaries is pending or, to the Knowledge (as hereinafter defined) of the REIT, is threatened, other than those the outcome of which has not had, and could not reasonably be expected to have, a Material Adverse Effect on the REIT. As used in this Agreement, "Knowledge" means, with respect to a specified party hereto, the actual knowledge of such party (including, but not limited to, (i) the actual knowledge of any Subsidiaries of such party and (ii) with respect to the REIT and its Subsidiaries, the actual knowledge of the officers, directors and employees set forth on Schedule 2.1(i) of the REIT Disclosure Schedule and (iii) with respect to Buyer, the individuals listed on Schedule 2.2(d) of the Buyer Disclosure Schedule. (j) REIT Litigation. As of the Initial Execution Date, except as disclosed in the REIT SEC Documents or on Schedule 2.1(j) of the REIT Disclosure Schedule, there was no suit, action or proceeding pending, or, to the Knowledge of the REIT, threatened against the REIT or any Subsidiary of the REIT ("REIT Litigation"), and the REIT had no Knowledge of any facts that are likely to give rise to any REIT Litigation, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against the REIT or any Subsidiary of the REIT ("REIT Order"). Schedule 2.1(j) of the REIT Disclosure Schedule contains an accurate and complete list of all REIT Litigation pending or, to the Knowledge of the REIT, threatened against the REIT or any of its Subsidiaries. (k) Taxes. Except as set forth on Schedule 2.1(k) of the REIT Disclosure Schedule: (i) Each of the REIT and its Subsidiaries (A) has filed all Tax returns and reports required to be filed by it (after giving effect to any filing extension properly granted by a Governmental Entity having authority to do so), and all such returns and reports are accurate and complete in all material respects, and (B) has paid (or the REIT 10 19 has paid on its behalf) all Taxes (as defined below) shown on such returns and reports as required to be paid by it. The most recent financial statements contained in the REIT SEC Documents reflect an adequate reserve for all material Taxes payable by the REIT and its Subsidiaries for all taxable periods and portions thereof through the date of such financial statements. The REIT and each Subsidiary of the REIT has established (and until the First Closing Date shall continue to establish and maintain) on its books and records reserves that are adequate for the payment of all Taxes not yet due and payable, all as required by GAAP. Since September 30, 2000, the REIT has incurred no liability for Taxes under Sections 857(b), 860(c) or 4981 of the Code, including without limitation any Tax arising from a prohibited transaction described in Section 857(b)(6) of the Code, and neither the REIT nor any of its Subsidiaries has incurred any material liability for Taxes other than in the ordinary course of business. No material deficiencies for any Taxes have been proposed, asserted or assessed against the REIT or any of its Subsidiaries, including claims by any taxing authority in a jurisdiction where the REIT or any Subsidiary of the REIT do not file Tax returns but in which any of them is or may be subject to taxation, and no requests for waivers of the time to assess any such Taxes are pending. As used in this Agreement, "Taxes" includes all federal, state, local and foreign income, property, sales, use, franchise, employment, payroll, excise, environmental and other taxes, tariffs or governmental charges of any nature whatsoever, together with penalties, interest or additions to Tax with respect thereto. (ii) The REIT (A) for all taxable years commencing with the year ended December 31, 1997 through December 31, 1999, has been subject to taxation as a real estate investment trust within the meaning of Section 856 of the Code (a "Reit") and has satisfied all requirements to qualify as a domestically controlled (as defined in Section 897(h)(4)(B) of the Code) Reit for such years, (B) was as of the Initial Execution Date and will be as of the First Closing Date (taking into account the Shares to be issued hereunder and the shares issued pursuant to the Merger Agreement) domestically organized and operated in conformity with the requirements for qualification and taxation as a domestically controlled Reit and (C) no challenge to the REIT's status as a domestically controlled Reit is pending or, to the REIT's Knowledge, threatened. Each Subsidiary of the REIT which is a partnership, joint venture or limited liability company has been since its formation and continues to be treated for federal income tax purposes as a partnership and not as a corporation. (iii) All Taxes which the REIT or the REIT's Subsidiaries are required by law to withhold or collect, including Taxes required to have been withheld in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party and sales, gross receipts and use taxes, have been duly withheld or collected and, to the extent required, have been paid over to the proper Governmental Entities or are held in separate bank accounts for such purpose. There are no liens for Taxes upon the assets of the REIT or the REIT's Subsidiaries except for statutory liens for Taxes not yet due. (iv) The Tax returns of the REIT and the REIT's Subsidiaries are not being and have not been examined or audited by any taxing authority for any past year or periods. 11 20 (v) Neither the REIT nor the REIT's Subsidiaries (A) have filed a consent under Section 341(f) of the Code concerning collapsible corporations, or (B) are a party to any Tax allocation or sharing agreement. (vi) The REIT does not have any liability for the Taxes of any Person other than the REIT and the REIT's Subsidiaries and the REIT's Subsidiaries do not have any liability for the Taxes of any Person other than the REIT and the REIT's Subsidiaries (A) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), (B) as a transferee or successor, (C) by contract, or (D) otherwise. (vii) Neither the REIT nor the REIT's Subsidiaries have made any payments, are obligated to make any payments, or are parties to an agreement that could obligate them to make any payments that will not be deductible under Section 280G of the Code. (viii) Neither the REIT nor any of its Subsidiaries has entered into or is subject, directly or indirectly, to any "Tax Protection Agreements," except as disclosed in Schedule 2.1(k) of the REIT Disclosure Schedule, true and correct copies of which have been made available to Buyer. As used herein, a "Tax Protection Agreement" is an agreement, oral or written, (A) that has as one of its purposes to permit a Person or entity to take the position that such Person or entity could defer federal taxable income that otherwise might have been recognized upon a transfer of property to any Subsidiary of the REIT that is treated as a partnership for federal income tax purposes, and (B) that (i) prohibits or restricts in any manner the disposition of any assets of the REIT or any of its Subsidiaries (including, without limitation, requiring the REIT or any of its Subsidiaries to indemnify any Person for any tax liabilities resulting from any such disposition), (ii) requires that the REIT or any of its Subsidiaries maintain, or put in place, or replace, indebtedness, whether or not secured by one or more of the REIT Properties (as hereinafter defined), or (iii) requires that the REIT or any of its Subsidiaries offer to any Person or entity at any time the opportunity to guarantee or otherwise assume, directly or indirectly, the risk of loss for federal income tax purposes for indebtedness or other liabilities of the REIT or any of its Subsidiaries. (l) Pension and Benefit Plans; ERISA. Except as set forth on Schedule 2.1(l) of the REIT Disclosure Schedule or in the REIT SEC Documents: (i) All "employee pension benefit plans," as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), maintained by the REIT or any of its Subsidiaries or any trade or business (whether or not incorporated) which is under common control, or which is treated as a single employer, with the REIT under Section 414(b), (c), (m) or (o) of the Code ("REIT ERISA Affiliate") or to which the REIT or any of its Subsidiaries or any REIT ERISA Affiliate contributed or is obligated to contribute thereunder within six years prior to the Effective Time (the "REIT Pension Plans") intended to qualify under Section 401 of the Code so qualify and have been determined by the IRS to be qualified under Section 401 of the Code and, to the Knowledge of the REIT nothing has occurred with respect to the operation of the REIT Pension Plans that could reasonably be expected to cause the loss 12 21 of such qualification or the imposition of any material liability, penalty or tax under ERISA or the Code. (ii) No REIT Pension Plan is subject to Title IV of ERISA. (iii) There is no material violation of ERISA with respect to (A) the filing of applicable reports, documents, and notices with the Secretary of Labor and the Secretary of the Treasury regarding all "employee benefit plans," as defined in Section 3(3) of ERISA, the REIT Pension Plans and all other material employee compensation and benefit arrangements or payroll practices, including, without limitation, severance pay, sick leave, vacation pay, salary continuation for disability, consulting or other compensation agreements, retirement, deferred compensation, bonus (including, without limitation, any retention bonus plan), long-term incentive, stock option, stock purchase, hospitalization, medical insurance, life insurance and scholarship programs maintained by the REIT or any of its Subsidiaries or with respect to which the REIT or any of its Subsidiaries has any liability (all such plans, other than the REIT Pension Plans, being hereinafter referred to as the "REIT Employee Benefit Plans") or (B) the furnishing of such documents to the participants or beneficiaries of the REIT Employee Benefit Plans or REIT Pension Plans. (iv) Each REIT Employee Benefit Plan and REIT Pension Plan, related trust (or other funding or financing arrangement) and all amendments thereto are listed on Schedule 2.1(l) of the REIT Disclosure Schedule, true and complete copies of which have been made available to Buyer, as have the most recent summary plan descriptions, administrative service agreements, Form 5500s and, with respect to any REIT Pension Plan intended to be qualified pursuant to Section 401 of the Code, a current determination letter. (v) The REIT Employee Benefit Plans and REIT Pension Plans have been maintained, in all material respects, in accordance with their terms and with all provisions of ERISA (including rules and regulations thereunder) and other applicable Federal and state law, there is no material liability for breaches of fiduciary duty in connection with the REIT Employee Benefit Plans and REIT Pension Plans, and neither the REIT nor any of its Subsidiaries or any "party in interest" or "disqualified person" with respect to the REIT Employee Benefit Plans and the REIT Pension Plans has engaged in a material "prohibited transaction" within the meaning of Section 4975 of the Code or Section 406 of ERISA. (vi) There are no material actions, suits or claims pending (other than routine claims for benefits) or, to the Knowledge of the REIT, threatened against, or with respect to, the REIT Employee Benefit Plans or the REIT Pension Plans or their assets. (vii) Except as described on Schedule 2.1(l) of the REIT Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (A) result in any payment (including any retention bonuses or noncompetition payments) becoming due to any employee or group of employees of the REIT or any of its Subsidiaries; (B) increase any benefits otherwise payable under any REIT Employee Benefit Plan or REIT Pension Plan; or (C) result in 13 22 the acceleration of the time of payment or vesting of any such benefits. Except as described on Schedule 2.1(l) of the REIT Disclosure Schedule, there are no severance agreements, noncompetition agreements or employment agreements between the REIT or any of its Subsidiaries and any employee of the REIT or such Subsidiary. True and complete copies of all severance agreements and employment agreements described on Schedule 2.1(l) of the REIT Disclosure Schedule have been provided to Buyer. (viii) Neither the REIT nor any of its Subsidiaries has any consulting agreement or arrangement with any Person involving compensation in excess of $200,000 except as are terminable upon one month's notice or less. (ix) Neither the REIT nor any of its Subsidiaries nor any REIT ERISA Affiliate contributes to, or has an obligation to contribute to, and has not within six years prior to the Effective Time contributed to, or had an obligation to contribute to, a multiemployer plan within the meaning of Section 3(37) of ERISA. (x) No stock or other security issued by the REIT or any of its Subsidiaries forms or has formed a material part of the assets of any REIT Employee Benefit Plan or REIT Pension Plan. (xi) The REIT and its ERISA Affiliates have materially complied with the requirements of Section 4980B of the Code and Parts 6 and 7 of Subtitle B of Title I of ERISA regarding health care coverage under the REIT Employee Benefit Plans. (xii) No amount has been paid by the REIT or any of its ERISA Affiliates, and no amount is expected to be paid by the REIT or any of its ERISA Affiliates, which would be subject to the provisions of 162(m) of the Code such that all or a part of such payments would not be deductible by the payor. (xiii) As to any REIT Pension Plan intended to be qualified pursuant to Section 401(a) of the Code there has been no termination or partial termination of the plan within the meaning of Section 411(d)(3) of the Code. (xiv) No act, omission or transaction has occurred which would result in the imposition on the REIT or any Subsidiary of the REIT of breach of fiduciary duty liability damages pursuant to Section 409 of ERISA, a civil penalty pursuant to Section 502 of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code. (xv) To the Knowledge of the REIT, there is no matter pending with respect to any REIT Pension Plan or REIT Employee Benefit Plan before the Internal Revenue Service, the Department of Labor or the Pension Benefit Guaranty Corporation. (xvi) Each REIT Employee Benefit Plan may be unilaterally amended or terminated in its entirety by the REIT without liability except as to benefits accrued thereunder prior to amendment or termination. (xvii) No Employee Benefit Plan provides retiree medical or retiree life insurance benefits to any Person and the REIT is not contractually or otherwise obligated (whether or not in writing) to provide any Person with life insurance or medical benefits 14 23 upon retirement or termination of employment, other than as referenced by the provisions of Section 601 through 608 of ERISA and Section 4980B of the Code. (xviii) In connection with the consummation of the transaction contemplated by this Agreement, no payments have or will be made which, in the aggregate, would result in the imposition of the sanctions imposed under Sections 280G and 4999 of the Code. (m) Labor and Employment Matters. Except as set forth on Schedule 2.1(m) of the REIT Disclosure Schedule or in the REIT SEC Documents: (i) Neither the REIT nor any of its Subsidiaries is a party to any collective bargaining agreement or other current labor agreement with any labor union or organization, and there is no current union representation question involving employees of the REIT or any of its Subsidiaries, nor does the REIT have any Knowledge of any activity or proceeding of any labor organization (or representative thereof) or employee group (or representative thereof) to organize any such employees. (ii) There is no unfair labor practice charge or grievance arising out of a collective bargaining agreement or other grievance procedure pending, or, to the Knowledge of the REIT, threatened against the REIT or any of its Subsidiaries. (iii) There is no complaint, lawsuit or proceeding in any forum by or on behalf of any present or former employee, any applicant for employment or any classes of the foregoing alleging breach of any express or implied contract of employment, any law or regulation governing employment or the termination thereof or other discriminatory, wrongful or tortious conduct in connection with the employment relationship pending, or, to the Knowledge of the REIT, threatened against the REIT or any of its Subsidiaries. (iv) There is no strike, slowdown, work stoppage or lockout pending, or, to the Knowledge of the REIT, threatened, against or involving the REIT or any of its Subsidiaries. (v) Employees of the REIT and its Subsidiaries are lawfully authorized to work in the United States according to federal immigration laws, except for such lack of authorization that does not have, and could not reasonably be expected to have, a Material Adverse Effect on the REIT. (vi) The REIT and each of its Subsidiaries are in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment, wages, hours of work and occupational safety and health, except for non-compliance that does not have, and could not reasonably be expected to have, a Material Adverse Effect on the REIT. (vii) There is no proceeding, claim, suit, action or governmental investigation pending or, to the Knowledge of the REIT, threatened, with respect to which any current or former director, officer, employee or agent of the REIT or any of its Subsidiaries is or may be entitled to claim indemnification from the REIT or any of its 15 24 Subsidiaries pursuant to the REIT Charter or REIT bylaws, any provision of the comparable charter or organizational documents of any of the REIT's Subsidiaries, any indemnification agreement to which the REIT or any Subsidiary of the REIT is a party or applicable law. (n) Intangible Property. The REIT and its Subsidiaries own, possess or have adequate rights to use all material trademarks, trade names, patents, service marks, brand marks, brand names, computer programs, databases, industrial designs and copyrights necessary for the operation of the businesses of each of the REIT and its Subsidiaries (collectively, the "REIT Intangible Property"), except where the failure to possess or have adequate rights to use such properties has not had, and could not reasonably be expected to have, a Material Adverse Effect on the REIT. All of the REIT Intangible Property is owned or licensed by the REIT or its Subsidiaries free and clear of any and all Encumbrances, except those that have not had, and could not reasonably be expected to have, a Material Adverse Effect on the REIT, and neither the REIT nor any such Subsidiary has forfeited or otherwise relinquished any REIT Intangible Property which forfeiture has resulted, or could reasonably be expected to result, in a Material Adverse Effect on the REIT. To the Knowledge of the REIT, the use of the REIT Intangible Property by the REIT or its Subsidiaries does not, in any material respect, conflict with, infringe upon, violate or interfere with or constitute an appropriation of any right, title, interest or goodwill, including, without limitation, any intellectual property right, trademark, trade name, patent, service mark, brand mark, brand name, computer program, database, industrial design, copyright or any pending application therefor, of any other Person, and there have been no claims made, and neither the REIT nor any of its Subsidiaries has received any notice of any claim, and the REIT has no Knowledge, that any of the REIT Intangible Property is invalid or conflicts with the asserted rights of any other Person or has not been used or enforced or has failed to have been used or enforced in a manner that would result in the abandonment, cancellation or unenforceability of any of the REIT Intangible Property, except for any such conflict, infringement, violation, interference, claim, invalidity, abandonment, cancellation or unenforceability that has not had and could not reasonably be expected to have a Material Adverse Effect on the REIT. (o) Environmental Matters. For purposes of this Agreement: "Environmental Laws" means all federal, state and local laws (including common laws), rules, regulations, ordinances, orders and decrees of any Governmental Entity or other legal requirements, whether now in existence or hereafter enacted and in effect at the time of the First Closing which apply to the applicable party hereto, relating to pollution or the protection of human health or the environment or natural resources of any jurisdiction in which the applicable party hereto owns or operates assets or conducts business or owned or operated assets or conducted business (whether or not through a predecessor entity) (including, without limitation, ambient air, surface water, groundwater, land surface, subsurface strata, natural resources or wildlife), including, without limitation, laws and regulations relating to Releases or threatened Releases of Hazardous Materials or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of solid waste or Hazardous Materials, and any similar laws, rules, regulations, ordinances, orders and decrees of any foreign jurisdiction in which the applicable party hereto owns or operates assets or conducts business; 16 25 "Hazardous Materials" means (i) any petroleum or petroleum products, radioactive materials (including naturally occurring radioactive materials), asbestos in any form that is or could become friable, urea formaldehyde foam insulation, polychlorinated biphenyls or transformers or other equipment that contain dielectric fluid containing polychlorinated biphenyls, (ii) any chemicals, materials or substances which are now defined as or included in the definition of "solid wastes," "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous substances," "restricted hazardous wastes," "toxic substances" or "toxic pollutants," or words of similar import, under any Environmental Law and (iii) any other chemical, material, substance or waste, exposure to which is now prohibited, limited or regulated under any Environmental Law in a jurisdiction in which the REIT or any of its Subsidiaries operates); "Release" means any spill, effluent, emission, leaking, pumping, pouring, emptying, escaping, dumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, or into or out of any property owned, operated or leased by the applicable party or its Subsidiaries; and "Remedial Action" means all actions, including, without limitation, any capital expenditures, required by a Governmental Entity or required under any Environmental Law, or voluntarily undertaken to (i) clean up, remove, treat, or in any other way ameliorate or address any Hazardous Materials or other substance in the indoor or outdoor environment; (ii) prevent the Release or threat of Release, or minimize the further Release of any Hazardous Material so it does not endanger or threaten to endanger the public or employee health or welfare of the indoor or outdoor environment; (iii) perform pre-remedial studies and investigations or post-remedial monitoring and care pertaining or relating to a Release; or (iv) bring the applicable party into compliance with any Environmental Law. Except as disclosed on Schedule 2.1(o) of the REIT Disclosure Schedule: (i) The operations of the REIT and its Subsidiaries have been conducted, are and, as of the First Closing Date, will be, in compliance with all Environmental Laws, in all material respects; (ii) The REIT and its Subsidiaries have obtained and, until the First Closing Date, will maintain all material permits, licenses and registrations, or applications relating thereto, and have made and, until the First Closing Date, will make all material filings, reports and notices required under applicable Environmental Laws for the continued operations of their respective businesses; (iii) The REIT and its Subsidiaries are not subject to any outstanding material written orders issued by any Governmental Entity respecting (A) Environmental Laws, (B) Remedial Action, (C) any Release or threatened Release of a Hazardous Material or (D) an assumption of responsibility for environmental liabilities of another Person; 17 26 (iv) The REIT and its Subsidiaries are not subject to any outstanding material contracts with any other Person respecting (A) Environmental Laws, (B) Remedial Action, (C) any Release or threatened Release of a Hazardous Material or (D) an assumption of responsibility for environmental liabilities of another Person, with respect to which the obligations of the REIT or any of its Subsidiaries has, or could reasonably be expected to have, a Material Adverse Effect on the REIT; (v) The REIT and its Subsidiaries have not received any written communication alleging, with respect to any such party, the violation of or liability under any Environmental Law; (vi) Neither the REIT nor any of its Subsidiaries has any material contingent liability in connection with the Release of any Hazardous Material into the indoor or outdoor environment (whether on-site or off-site) or employee or third party exposure to Hazardous Materials; (vii) The operations of the REIT and its Subsidiaries involving the generation, transportation, treatment, storage or disposal of hazardous or solid waste, as defined and regulated under 40 C.F.R. Parts 260-270 (in effect as of the Prior Execution Date) or any applicable state equivalent, are in material compliance with applicable Environmental Laws; (viii) Other than properties on which convenience stores and/or gasoline stations are operated (which properties are designated with an asterisk on Schedule 2.1(p) of the REIT Disclosure Schedule), there is not on or in any property of the REIT or its Subsidiaries or any property for which the REIT or its Subsidiaries are potentially liable any of the following: (A) to the Knowledge of the REIT, after due inquiry including completion of phase I environmental surveys, any underground storage tanks or surface impoundments or (B) any on-site disposal of Hazardous Material; and (ix) No REIT Property (as hereinafter defined) is included or, to the Knowledge of the REIT, proposed for inclusion on the National Priorities List issued pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), by the United States Environmental Protection Agency (the "EPA") or on the Comprehensive Environmental Response, Compensation, and Liability Information System database maintained by the EPA, and the REIT has no Knowledge that any REIT Property has otherwise been identified in a published writing by the EPA as a potential CERCLA removal, remedial or response site or, to the Knowledge of the REIT, proposed for inclusion on any similar list of potentially contaminated sites pursuant to any other Environmental Law. (p) Properties. (i) The REIT or one of the REIT's Subsidiaries owns fee simple title (or where indicated, leasehold estate) to each of the real properties identified in Schedule 2.1(p) to the REIT Disclosure Schedule (the "REIT Properties"), which are all of the real estate properties owned or leased by them, in each case (except as provided below) free and clear of Encumbrances. The REIT Properties are not subject to any 18 27 rights of way, written agreements, laws, ordinances and regulations affecting building or land use, occupancy, or development (collectively, "Property Restrictions"), except for (A) Property Restrictions imposed or promulgated by law or any governmental body or authority with respect to real property, including zoning regulations, provided that they do not materially adversely affect the currently intended use of any REIT Property, (B) Encumbrances and Property Restrictions disclosed on existing title reports or existing surveys (in either case copies of which title reports or surveys have been made available to Buyer), and (C) mechanics', carriers', workmen's, repairmen's and materialmen's liens and other Encumbrances, Property Restrictions and other limitations of any kind, if any, which, individually or in the aggregate, do not materially detract from the value of or materially interfere with the present use of any of the REIT Properties subject thereto or affected thereby, and do not, or could not reasonably be expected to, otherwise have a Material Adverse Effect on the REIT. Except as set forth on Schedule 2.1(p) and for approximately 125 properties contributed to Burger King Master L.P. (a predecessor to the REIT) at the time of its formation (which properties are designated by a double asterisk on Schedule 2.1(p) to the REIT Disclosure Schedule), valid policies of title insurance or commitments to issue title insurance policies have been obtained, insuring the REIT's or its applicable Subsidiary's fee simple title or leasehold estate to the REIT Properties in amounts at least equal to the value of such REIT Properties at the time of the issuance of such policy, subject only to the matters disclosed above and on the REIT Disclosure Schedule, and such policies are in full force and effect and no material claim has been made against any such policy. Except as set forth on Schedule 2.1(p) to the REIT Disclosure Schedule, to the REIT's Knowledge, an on-the-ground survey of each of the REIT Properties made prior to the First Closing Date and prepared in accordance with ALTA/ACSM (or Texas equivalent) standards would not disclose any Encumbrance, Property Restriction or other matter affecting title which is not currently shown on an existing survey of such REIT Property and which could materially adversely affect the value or operation of such REIT Property or the ability to obtain mortgage financing on such REIT Property. (ii) Each REIT Property (A) complies with the Property Restrictions, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect, (B) each improvement on each REIT Property lies outside of any flood plain or, if any such improvement lies within a flood plain, adequate insurance therefor is in full force and effect, and (C) each REIT Property has access to and from a dedicated public right-of-way either directly or through an insured easement, copies of which have been made available to Buyer. (iii) All properties currently under development or construction by the REIT or the REIT's Subsidiaries and all properties currently proposed for acquisition, development or commencement of construction prior to the First Closing Date by the REIT and the REIT's Subsidiaries are listed as such on Schedule 2.1(p) to the REIT Disclosure Schedule. All material executory agreements (which shall include, without limitation, all executory agreements involving aggregate payments for goods or services in excess of $100,000) entered into by the REIT or any of its Subsidiaries relating to the development or construction of restaurant, gasoline, convenience store or other real estate properties (other than agreements for architectural, engineering, planning, accounting, legal or other professional services or agreements for material or labor) are listed on 19 28 Schedule 2.1(p) to the REIT Disclosure Schedule. Copies of such agreements, all of which have previously been delivered or made available to Buyer, are listed on the REIT Disclosure Schedule and are true and correct. (q) Insurance. Schedule 2.1(q) of the REIT Disclosure Schedule sets forth an insurance schedule of the REIT's and each of its Subsidiaries' directors' and officers' liability insurance. The REIT and each of its Subsidiaries maintains insurance with financially responsible insurers in such amounts and covering such risks as are in accordance with normal industry practice for companies engaged in businesses similar to those of the REIT and each of its Subsidiaries (taking into account the cost and availability of such insurance). Except as set forth on Schedule 2.1(q) of the REIT Disclosure Schedule, neither the REIT nor any of its Subsidiaries has received any notice of cancellation or termination with respect to any existing material insurance policy of the REIT or any of its Subsidiaries. (r) Beneficial Ownership of REIT Common Stock. Neither the REIT nor its Subsidiaries "beneficially own" (as defined in Rule 13d-3 under the Exchange Act) any of the outstanding REIT Common Stock or any of the REIT's outstanding debt securities. (s) Brokers. Except as set forth on Schedule 2.1(s) of the REIT Disclosure Schedule, no agent, broker, investment banker or other person is or will be entitled to any broker's, finder's or other similar fee or commission in connection with the transactions contemplated by the Transaction Documents based upon arrangements made by or on behalf of the REIT. (t) Investment Company Act of 1940. Neither the REIT nor any of its Subsidiaries is, or at the Effective Time will be, required to be registered as an investment company under the Investment Company Act of 1940, as amended (the "Investment Company Act"). (u) Contracts. (i) Except as disclosed in the REIT SEC Documents or on Schedule 2.1(u) to the REIT Disclosure Schedule, there is no contract or agreement that purports to limit in any material respect the names or the geographic location in which the REIT or any REIT Subsidiary may conduct its business. (ii) Schedule 2.1(u) of the REIT Disclosure Schedule sets forth each interest rate cap, interest rate collar, interest rate swap, currency hedging transaction, and any other agreement relating to a similar transaction to which the REIT or any REIT Subsidiary is a party or an obligor with respect thereto. (iii) Except as set forth on Schedule 2.1(u) of the REIT Disclosure Schedule, neither the REIT nor any of the REIT's Subsidiaries is party to any agreement which would restrict any of them from prepaying any of their indebtedness without penalty or premium at any time or which requires any of them to maintain any amount of indebtedness with respect to any of the REIT Properties. (iv) Neither the REIT nor any of the REIT's Subsidiaries is a party to any agreement relating to the management of any of the REIT Properties which is not 20 29 terminable by the REIT or such Subsidiary without penalty on less than 30 days notice except the agreements described on Schedule 2.1(u) of the REIT Disclosure Schedule. (v) Schedule 2.1(u) of the REIT Disclosure Schedule lists all agreements entered into by the REIT or any of the REIT's Subsidiaries providing for the sale of, or option to sell, any REIT Properties or the purchase of, or option to purchase, any real estate which are currently in effect, other than agreements containing rights of first refusal exercisable by the Burger King Corporation to match third party offers to purchase any of the REIT Properties. (vi) Except as set forth on Schedule 2.1(u) of the REIT Disclosure Schedule, neither the REIT nor any of its Subsidiaries has any continuing contractual liability (A) for indemnification or otherwise under any agreement relating to the sale of real estate previously owned (other than non-material indemnification obligations relating to brokerage commissions, ordinary and customary title warranties, post-closing adjustments and customary contractual indemnification for pre-closing events upon sales of properties by the REIT or any of its Subsidiaries), (B) to pay any additional purchase price for any of the REIT Properties, or (C) to make any prorations or adjustments to prorations involving an amount in excess of $50,000 (other than real estate taxes) that may previously have been made with respect to any property currently or formerly owned by the REIT. (vii) Except as set forth on Schedule 2.1(u) of the REIT Disclosure Schedule, there are no material outstanding contractual obligations of the REIT or any of its REIT Subsidiaries to provide any funds to, or make any investment (in the form of an advance, loan, extension of credit, capital contribution or otherwise) in, or which provide for the direct or indirect guarantee by the REIT or any of its Subsidiaries (including by means of a take-or-pay or keepwell agreement) of the indebtedness, liabilities, obligations or financial condition of, any of the REIT's Subsidiaries or any other Person. (viii) Except as set forth on Schedule 2.1(u) of the REIT Disclosure Schedule, there are no indemnification agreements entered into by and between the REIT and any director or officer of the REIT or any of its Subsidiaries. (ix) Except as set forth on Schedule 2.1(u) of the REIT Disclosure Schedule, there are no contracts, agreements, commitments or arrangements that (A) create a material partnership, joint venture or similar arrangement, (B) require payments to be made in excess of $100,000 per year for goods and services or with respect to any licenses granted to or by the REIT or any of its Subsidiaries, (C) grant any Encumbrance upon any material asset of the REIT or any of its Subsidiaries or (D) were not made in the ordinary course of business and are material to the REIT and its Subsidiaries, taken as a whole, in each of the cases set forth in clauses (A), (B), (C) and (D) which are not subject to termination within 30 days after the date of the execution and delivery thereof without penalty or payment by the REIT (all such contracts, arrangements or agreements listed on Schedule 2.1(u) of the REIT Disclosure Schedule pursuant to clauses (i) through (ix), the "Material Contracts"). 21 30 (v) Information Systems. Schedule 2.1(v) of the REIT Disclosure Schedule identifies information systems of the REIT and its Subsidiaries that are material to the operations of the REIT and its Subsidiaries (the "Information Systems") and identifies for each such Information System (i) whether such Information System has been able to accurately process date and time data from, into and beyond the year 2000 ("Year 2000 Data"), and (ii) if such Information System has not been able to accurately process Year 2000 Data, the plan and target date for replacing, updating or upgrading such Information System in order to be able to accurately process such data. No client, customer, supplier or vendor, and no electric, telecommunications or other utility with whom the REIT's or any Subsidiary's Information Systems interact, has notified the REIT or such Subsidiary that the Information Systems, when used in combination with any information system of such Person, has been or is unable to accurately process such Year 2000 Data. (w) Projections. All financial projections concerning the REIT, its Subsidiaries, the Company and the transactions contemplated by this Agreement and the other Transaction Documents (the "Projections") that have been prepared by or on behalf of the REIT or any of its authorized representatives and that have been or will be made available to Buyer or any of its authorized representatives in connection with the transactions contemplated hereby and thereby have been, and at the time made available will be, reasonably prepared on a basis reflecting (i) the REIT's best estimates, (ii) assumptions and (iii) judgments as to the future financial performance of the REIT and its Subsidiaries. 2.2 Representations and Warranties of Buyer. Buyer represents and warrants to the REIT as follows (such representations and warranties being deemed to be made on a continuous basis until the final Subsequent Closing): (a) Organization, Standing and Power. Buyer is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware. Buyer has no Subsidiaries. As of the Initial Execution Date, Buyer has heretofore delivered to the REIT complete and correct copies of its certificate of formation. 22 31 (b) Authority; No Violations, Consents and Approvals. (i) Buyer has all requisite power and authority to enter into the Transaction Documents to which it is a party and to consummate the transactions contemplated hereby or thereby. The execution and delivery of the Transaction Documents to which Buyer is a party and the consummation of the transactions contemplated hereby or thereby have been duly authorized by all necessary action on the part of Buyer. The Transaction Documents to which Buyer is a party have been duly executed and delivered by Buyer, and assuming the Transaction Documents, if any, to which the REIT or any of its Subsidiaries or any Stockholder is a party constitute the valid and binding obligation of the REIT or its Subsidiary or such Stockholder, as the case may be, constitute a valid and binding obligation of Buyer enforceable in accordance with its terms, subject as to enforceability, to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (ii) The execution and delivery of the Transaction Documents to which Buyer is a party do not, and the consummation of the transactions contemplated hereby or thereby, and compliance with the provisions hereof or thereof, will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any material obligation or to the loss of a material benefit under, or give rise to a right of purchase under, result in the creation of any Encumbrance upon any of the properties or assets of Buyer under, require the consent or approval of any third party or otherwise result in a material detriment to Buyer under, any provision of (A) Buyer's limited liability company agreement, (B) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to Buyer or its respective properties or assets or any guarantee by Buyer of the foregoing, (C) any joint venture or other ownership arrangement or (D) assuming the consents, approvals, authorizations or permits and filings or notifications referred to in Section 2.2(b)(iii) are duly and timely obtained or made, any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Buyer or any of its respective properties or assets, other than, in the case of clauses (B), (C) and (D), any such conflicts, violations, defaults, rights, Encumbrances or detriments that, individually or in the aggregate, would not, or could not reasonably be expected to, materially impair the ability of Buyer to perform its obligations hereunder or thereunder or prevent the consummation of any of the transactions contemplated hereby or thereby. (iii) No consent, approval, order or authorization of, or registration, declaration or filing with, or permit from any Governmental Entity is required by or with respect to Buyer in connection with the execution and delivery by Buyer of the Transaction Documents to which it is a party or the consummation by Buyer of the transactions contemplated hereby or thereby, except for: (A) the filing with the SEC of such reports under Section 13(a) of the Exchange Act and such other compliance with the Securities Act and the Exchange Act and the rules and regulations thereunder as may be required in connection with this Agreement and the transactions contemplated hereby; (B) any filings required under state securities laws; (C) such filings and approvals as may 23 32 be required by any applicable state takeover laws or environmental laws; and (D) filings under the HSR Act, if applicable. (c) Information Supplied. If a meeting of the stockholders of the REIT and the filing with the SEC of a Proxy Statement shall be required in connection with the purchase of the Shares contemplated hereby, none of the information, if any, supplied or to be supplied by Buyer for inclusion or incorporation by reference in the Proxy Statement will, at the date mailed to stockholders of the REIT, at the time of the meeting of such stockholders to be held in connection with any required approval of the purchase of the Shares contemplated hereby contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. If at any time prior to the final Subsequent Closing any event with respect to Buyer or with respect to other information supplied by Buyer for inclusion in the Proxy Statement, shall occur which is required to be described in an amendment of, or a supplement to, the Proxy Statement, such event shall be so described, and such amendment or supplement shall be promptly filed (if required to be filed) with the SEC. The Proxy Statement, insofar as it relates to Buyer or other information supplied by Buyer for inclusion or incorporation by reference therein, will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. (d) Litigation. As of the Initial Execution Date, there was no suit, action or proceeding pending, or, to the Knowledge of Buyer, threatened against Buyer that could reasonably be expected to affect the ability of Buyer to consummate the transactions contemplated hereby ("Buyer Litigation"), and Buyer had no Knowledge of any facts that are likely to give rise to any Buyer Litigation, nor was there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Buyer that could reasonably be expected to affect the ability of Buyer to consummate the transactions contemplated hereby ("Buyer Order"). Schedule 2.2(d) sets forth the individuals whose Knowledge shall be deemed to be the Knowledge of the Buyer. (e) Acquisition of Shares. Buyer is acquiring the Shares for its own account or for one or more separate accounts maintained by it or for the account of one or more institutional investors on whose behalf Buyer has authority to make this representation for investment and without the view to the distribution thereof within the meaning of the Securities Act or with any present intention of distributing or selling any of the Shares except in compliance with the Securities Act and except to one or more such institutional investors, provided that the disposition by Buyer or such institutional investors of their property shall at all time be within their control. (f) No Registration. Buyer understands that the Shares (A) have not been registered under the Securities Act or any state securities laws or the securities laws of any other domestic or foreign jurisdiction, (B) will be issued in reliance upon an exemption from the registration and prospectus delivery requirements of the Securities Act pursuant to Section 4(2) thereof and/or Regulation D promulgated thereunder and (C) will be issued in reliance upon exemptions from the registration and prospectus delivery requirements of state securities laws which relate to private offerings. 24 33 (g) Status as Accredited Investor. Buyer is an "Accredited Investor" within the meaning of Rule 501 of Regulation D, as promulgated by the United States Securities and Exchange Commission pursuant to the Securities Act. (h) Brokers. Except for the fee to be paid to Christopher Weil & Company, Inc. as provided in the Stockholders Stock Purchase Agreement, no agent, broker, investment banker or other Person is or will be entitled to any broker's, finder's or other similar fee or commission in connection with the transactions contemplated by the Transaction Documents based upon arrangements made by or on behalf of Buyer. ARTICLE 3 COVENANTS OF THE REIT 3.1 Covenants Relating to the Business of the REIT. Except as contemplated by or otherwise permitted under this Agreement or to the extent that Buyer shall otherwise consent in writing, from the Initial Execution Date until the First Closing, the REIT covenants and agrees with Buyer that, as to itself and its Subsidiaries, neither it nor its Subsidiaries shall: (a) fail to conduct its business in any manner except in the ordinary course consistent with past practice; (b) except as set forth on Schedule 3.1(b) of the REIT Disclosure Schedule, amend, terminate, or fail to use all commercially reasonable efforts to renew any agreement or contract (provided that the REIT shall not be required to renew any agreement or contract on terms that are less favorable to the REIT), or default in any material respect (or take or omit to take any action that, with or without the giving of notice or passage of time, would constitute a material default) under any agreement or contract or enter into any agreement or contract under which any party thereto becomes obligated to provide goods or services having a value of, or to make payments aggregating, $50,000 or more per year, other than contracts and agreements relating to the amendment, modification or other restructuring or termination of leases, the resolution of issues arising under existing leases (including, without limitation, the payment or collection of rent and the providing of services) and entering into new leases relating to properties owned by the REIT as of the Initial Execution Date and the Noncompetition and Release Agreements (as defined below) which, individually or in the aggregate, are not material to the operation or financial results of the REIT and its subsidiaries taken as a whole; provided however, that any action or omission described in this Section 3.1(b) shall not constitute a breach of this Agreement if such action or omission is described on Schedule 3.1 attached hereto which supplements and amends the REIT Disclosure Schedule. (c) other than mergers of wholly-owned Subsidiaries of the REIT with or into the REIT or other Subsidiaries, merge or consolidate with or into any other legal entity, dissolve, or liquidate; (d) (i) hire or promote any individual to serve as an officer of the REIT or hire any employee or consultant if the aggregate annual compensation of such employee or consultant exceeds $75,000; (ii) grant any increases in the compensation of, or pay any bonuses (other than regularly scheduled bonuses as set forth on Schedule 3.1(d) of the REIT Disclosure Schedule, 25 34 attached hereto) or noncompetition payments to, any of its directors, trustees, officers or employees; (iii) pay or agree to pay to any director, officer or employee, whether past or present, any pension, retirement or other employee benefit not required or contemplated by any of the existing REIT Employee Benefit Plans or REIT Pension Plans, as applicable; (iv) enter into any new, or amend any existing, employment or severance or termination agreement with any director, officer or employee either individually or as part of a class of similarly situated Persons, other than the Noncompetition and Release Agreements; or (v) establish, adopt or enter into any new, or amend any existing, (A) "employee benefit plan," as such term is defined in section 3(3) of ERISA (including, but not limited to, employee benefit plans, such as foreign plans, which are not subject to the provisions of ERISA), (B) personnel policy, stock option plan, stock purchase plan, stock appreciation rights, phantom stock plan, collective bargaining agreement, bonus plan or arrangement, incentive award plan or arrangement, vacation policy, severance pay plan, policy or agreement, deferred compensation agreement or arrangement, executive compensation or supplemental income arrangement, consulting agreement, employment agreement or other employee benefit plan, agreement, arrangement, program, practice or understanding or (C) collective bargaining agreement; (e) acquire (including, without limitation, by merger, consolidation, or the acquisition of any equity interest or assets) any assets other than the acquisitions set forth on Schedule 3.1(e) of the REIT Disclosure Schedule; (f) sell (whether by merger, consolidation or the sale of an equity interest or assets, except for transactions permitted under Section 3.1(c)) or otherwise dispose of any real property assets of the REIT or its Subsidiaries except as set forth on Schedule 3.1(f) of the REIT Disclosure Schedule; (g) except as set forth on Schedule 2.1(u) of the REIT Disclosure Schedule, mortgage, pledge, or subject to any material Encumbrance, any assets having a fair market value, individually or in the aggregate, in excess of $1,000,000; (h) fail to pay or otherwise satisfy (except if being contested in good faith) any material accounts payable, liabilities, or obligations when due and payable other than on a basis, and within the time, consistent with past practice; (i) (i) authorize, declare, pay or set aside for payment any dividends on or make other distributions in respect of any of its equity interests, capital stock or partnership interests, except for (A) the authorization, declaration and payment of regular monthly cash dividends on REIT Common Stock not to exceed $0.11 per share, with usual record and payment dates, (B) the payment of regular cash dividends on the REIT Preferred Stock in accordance with its terms, with usual record and payment dates, (C) the payment of any distributions to the partners of any limited partnerships that are Subsidiaries of the REIT made in accordance with the requirements of the existing organizational documents of such Subsidiary limited partnerships and (D) the payment of regular quarterly cash dividends to stockholders of any corporations that are preferred stock Subsidiaries of the REIT, with usual record and payment dates (ii) split, combine, divide, distribute, or reclassify any shares of its equity interests, capital stock or partnership interests, or (iii) directly or indirectly, redeem, purchase, or otherwise acquire any equity interests, shares of its capital stock or other securities; 26 35 (j) issue, sell, pledge, dispose of, encumber, or deliver (whether through the issuance or granting of any options, warrants, commitments, subscriptions, rights to purchase or otherwise) any equity interests or stock of any class or any securities convertible into or exercisable or exchangeable for shares of stock of any class (other than the issuance of certificates in replacement of lost certificates) or any Voting Debt or other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, Voting Debt, other voting securities or convertible securities, other than the issuance of (i) REIT Common Stock upon the exercise of stock options that were outstanding on the Initial Execution Date and (ii) REIT Common stock upon the conversion of OP Units that were outstanding on the Initial Execution Date; (k) change or amend its charter documents or bylaws; (l) except as set forth on Schedule 3.1(l) of the REIT Disclosure Schedule, (i) incur any indebtedness for borrowed money (except (A) to finance any transactions or other expenditures permitted by this Agreement (including those referred to in Section 3.1(e)) and regular borrowings under credit facilities made in the ordinary course of the REIT's cash management practices, (B) refinancings of existing debt and (C) immaterial borrowings that, in each such case, permit prepayment of such debt without penalty) or guarantee any such indebtedness or issue or sell any debt securities or warrants or rights to acquire any debt securities of the REIT or any of its Subsidiaries or guarantee any debt securities of others, (ii) except in the ordinary course of business, create any material mortgages, liens, security interests or similar other encumbrances on the property of the REIT or any of its Subsidiaries in connection with any indebtedness thereof; (iii) assume, guarantee, endorse, or otherwise become liable or responsible (whether directly, contingently, or otherwise) for the obligations of any other Person (other than endorsements of checks in the ordinary course); or (iv) make any loans, advances, or capital contributions to, or investments in, any Person; (m) (i) make or rescind any material express or deemed election relating to Taxes (except as required by law or necessary to preserve the REIT's status as a REIT or the status of any of the REIT's Subsidiaries as a partnership for federal income tax purposes or as a qualified REIT subsidiary under Section 856(i) of the Code or as a taxable REIT subsidiary under Section 856(l) of the Code) unless it is reasonably expected that such action will not materially and adversely affect the REIT, including elections for any and all joint ventures, partnerships, limited liability companies or other investments where the REIT has the capacity to make such binding election, (ii) settle or compromise any material claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes, except where such settlement or compromise will not materially and adversely affect the REIT and except any settlement or compromise relating to contests or protests relating to property tax valuations undertaken by the REIT in the ordinary course of business, or (iii) change in any material respect any of its methods of reporting income or deductions for federal income tax purposes from those employed in the preparation of its federal income Tax Returns that have been filed for prior taxable years, except as may be required by applicable law or except for changes that are reasonably expected not to materially and adversely affect the REIT; (n) except as set forth on Schedule 3.1(g) or 3.1(l) of the REIT Disclosure Schedule, engage in any transactions with any of its Affiliates other than (i) transactions approved by Buyer in writing or expressly contemplated hereby and (ii) those certain 27 36 Noncompetition and Release Agreements between the REIT and each of Fred H. Margolin, Darrel L. Rolph and David K. Rolph in the forms attached hereto as Exhibit B (the "Noncompetition and Release Agreements"); (o) terminate the services of its current officers and employees or terminate or damage its relationships with customers, suppliers and others having business dealings with it such that its goodwill and ongoing business shall be impaired in any material respect at the Effective Time; (p) authorize, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation or dissolution of the REIT or any of its Subsidiaries, provided that dispositions in accordance with Section 3.1(f) hereof shall not be deemed a partial liquidation; (q) make any changes in its accounting methods which would be required to be disclosed under the rules and regulations of the SEC, except as required by law, rule, regulation or GAAP; (r) materially amend or terminate, or waive compliance with the terms of or breaches under, any Material Contract nor enter into a new contract, agreement or arrangement that, if entered into prior to the Initial Execution Date, would have been required to be listed on Schedule 2.1(u) of the REIT Disclosure Schedule but was not listed on such schedule; (s) take any action to increase the size of its board of directors, remove any director or, except as expressly contemplated hereby, fill any vacancies created by the death, resignation or removal of any director; or (t) agree to or make any commitment, orally or in writing, to take any actions prohibited by this Agreement. 3.2 No Solicitation by the REIT. (a) The REIT shall not, nor shall it authorize or permit any of its Subsidiaries to, nor shall it authorize or permit any of its or its Subsidiaries' directors, officers, employees, agents or representatives (including, without limitation, any investment banker, financial advisor, attorney, accountant or other representative retained by it or any of its Subsidiaries) to, directly or indirectly, (i) solicit, initiate, encourage or knowingly facilitate any inquiries, any expression of interest or the making of any proposal which constitutes any REIT Takeover Proposal (as defined below) or (ii) participate in any discussions or negotiations regarding any REIT Takeover Proposal; provided, however, that if the Board of Directors of the REIT (the "REIT Board") (A) determines in good faith (after receiving advice from a financial advisor) that such REIT Takeover Proposal is or is reasonably likely to result in a REIT Superior Proposal (as defined in Section 3.2(b)) and (B) determines in good faith, after receiving advice of outside counsel, that such action is necessary for the REIT Board to comply with its statutory duties to stockholders under the Maryland General Corporation Law, and, prior to furnishing any non-public information to such Person, the REIT receives from such Person an executed confidentiality agreement with provisions no less favorable to the REIT than the letter agreement dated August 21, 2000 between the REIT and Buyer (the "Confidentiality Agreement"), the 28 37 REIT may, in response to a REIT Takeover Proposal not solicited in violation of this Section 3.2(a) and subject to providing prior written notice of its decision to take such action to Buyer (the "REIT Notice") in compliance with Section 3.2(c), following delivery of the REIT Notice (x) furnish information with respect to the REIT and its Subsidiaries to any Person making such a REIT Takeover Proposal and (y) participate in discussions or negotiations regarding such a REIT Takeover Proposal; provided, further, that discussions between the REIT and the REIT's lenders and potential lenders regarding the REIT's credit facilities shall not be prohibited by the provisions of this Section 3.2(a). For purposes of this Agreement, "REIT Takeover Proposal" means any inquiry, proposal or offer from any Person relating to any (i) acquisition or purchase or financing of substantial assets of the REIT or any of its Subsidiaries, taken as a whole, (ii) direct or indirect acquisition or purchase or financing of 10% or more of any class of equity securities of the REIT or any of its Subsidiaries whose business constitutes 10% or more of the net revenues, net earnings or assets of the REIT and its Subsidiaries, taken as a whole, (iii) tender offer or exchange offer that if consummated would result in any Person beneficially owning 10% or more of any class of equity securities of the REIT, (iv) merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving the REIT or any of its Subsidiaries whose business constitutes 10% or more of the net revenues, net earnings or assets of the REIT and its Subsidiaries, taken as a whole, or (v) adoption by the REIT of a plan of liquidation or the effectuation by the REIT of a recapitalization or other similar type of transaction other than the transactions contemplated by this Agreement. Immediately after the execution and delivery of this Agreement, the REIT and its Subsidiaries will, and will instruct their directors, officers, employees, agents or representatives (including, without limitation, any investment banker, financial advisor, attorney, accountant or other representative retained by it or any of its Subsidiaries) to, cease and terminate any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any possible REIT Takeover Proposal. The REIT agrees that it will take the necessary steps to promptly inform its directors, officers, employees, agents or representatives (including, without limitation, any investment banker, financial advisor, attorney, accountant or other representative retained by it) involved in the transactions contemplated hereby of the obligations undertaken in this Section 3.2. The REIT shall not release any third party from, or waive any provision of, any confidentiality or standstill agreement to which the REIT is a party. (b) Except as expressly permitted by this Section 3.2, neither the REIT Board nor any committee thereof shall (i) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Buyer, the approval or recommendation by the REIT Board or such committee of this Agreement or the issuance and sale of the Shares hereunder, (ii) approve or recommend, or propose publicly to approve or recommend, any REIT Takeover Proposal or (iii) cause the REIT to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (each, a "REIT Acquisition Agreement") related to any REIT Takeover Proposal. Notwithstanding the foregoing, in the event that the REIT Board determines in good faith, after receiving advice from the REIT's outside counsel that (i) the withdrawal, modification or change of its recommendation is necessary for the REIT Board to comply with its statutory duties to the stockholders under the Maryland General Corporation Law, and (ii) the REIT Takeover Proposal is a REIT Superior Proposal (as defined below), the REIT Board may (subject to this and the following sentences) (x) withdraw or adversely modify its approval or recommendation of this Agreement or the issuance and sale of the Shares 29 38 hereunder or the matters to be considered at the REIT Stockholders Meeting, if any, (y) approve or recommend such REIT Superior Proposal and/or (z) simultaneously with the payment of the Termination Fee (as hereinafter defined) required pursuant to Section 9.7(b), terminate this Agreement and enter into a REIT Acquisition Agreement with respect to such REIT Superior Proposal, but only after the fifth business day following Buyer's receipt of written notice advising Buyer that the REIT Board is prepared to terminate this Agreement and only if, during such five-day period (the "Response Period"), the REIT and its advisors shall have negotiated in good faith with Buyer to make such adjustments in the terms and conditions of this Agreement as would enable Buyer to proceed with the transactions contemplated hereby on such adjusted terms. For purposes of this Agreement, a "REIT Superior Proposal" means any bona fide written proposal, which was not solicited, initiated, facilitated or encouraged in breach of Section 3.2(a), made by a third party to acquire, directly or indirectly, including pursuant to a tender offer, exchange offer, merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction, more than 80% of the combined voting power of the shares of REIT Common Stock then outstanding or all or substantially all the assets of the REIT and its Subsidiaries and which the REIT Board determines in its good faith judgment (after receiving advice from a financial advisor of nationally recognized reputation) to be more financially favorable to the REIT's stockholders than transactions contemplated by this Agreement and the other Transaction Documents and for which financing, to the extent required, is then committed or reasonably likely (in the REIT Board's good faith judgment) to be available. Any material amendment or modification to the terms of a REIT Superior Proposal shall be deemed a new REIT Superior Proposal and commence a new Response Period. (c) In addition to the obligations of the REIT set forth in paragraphs (a) and (b) of this Section 3.2, the REIT shall promptly and in any event within one business day advise Buyer orally and in writing of (i) the receipt of any REIT Takeover Proposal or request for information relating to the REIT or any of its Subsidiaries, or for access to the properties, books or records of the REIT or any of its Subsidiaries, by any Person that has advised the REIT that it is considering making, or has made, a REIT Takeover Proposal, (ii) the material terms and conditions of such REIT Takeover Proposal or request, (iii) the identity of the Person making any such REIT Takeover Proposal or request and (iv) any determination by the REIT Board that a REIT Takeover Proposal is a REIT Superior Proposal. During the Response Period, the REIT shall keep Buyer reasonably informed of the status and details thereof and, if in writing, promptly deliver or cause to be delivered to Buyer a copy of such proposal or request. (d) Nothing contained in this Section 3.2 shall prohibit the REIT from taking and disclosing to its stockholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure to the REIT's stockholders which, in the good faith judgment of the REIT Board, after receiving advice of outside counsel, is necessary under applicable law, provided that the REIT does not withdraw or modify, or propose to withdraw or modify, its position with respect to the issuance and sale of Shares or this Agreement and the transactions contemplated hereby or approve or recommend, or propose to approve or recommend, a REIT Takeover Proposal unless the REIT and the REIT Board have complied with all the provisions of this Section 3.2. 30 39 3.3 Access and Information. (a) Until the First Closing, the REIT shall afford to Buyer and its representatives (including accountants and counsel) full access during normal business hours, upon reasonable notice and in such manner as will not unreasonably interfere with the conduct of the business of the REIT, to all properties, books, records, Phase I and Phase II environmental reports and Tax Returns of the REIT and all other information with respect to its business, together with the opportunity to make copies of such books, records, Phase I and Phase II environmental reports and other documents and to discuss the business of the REIT with such officers, directors, accountants and counsel for the REIT as Buyer deems reasonably necessary or appropriate for the purposes of familiarizing itself with the REIT, the Operating Partnership and the other Subsidiaries of the REIT. In furtherance of the foregoing, the REIT shall authorize and instruct its accountants to meet with Buyer and its representatives, including Buyer's independent public accountants, to discuss the business and accounts of the REIT, the Operating Partnership and the other Subsidiaries of the REIT and to make available (with the opportunity to make copies) to Buyer and its representatives, including its independent public accountants, all the work papers of its accountants related to their audit of the financial statements and Tax Returns of the REIT and its Subsidiaries. (b) Within 30 days after the end of each calendar month, the REIT shall deliver to Buyer for the REIT, the Operating Partnership and the other Subsidiaries of the REIT monthly operating statements (in a form consistent with the monthly operating statements previously supplied to the REIT) prepared in the ordinary course of business for internal purposes. (c) From and after the Initial Execution Date, the REIT shall advise Buyer of the status of its discussions and negotiations with respect to the renegotiation, extension or replacement of its existing senior credit facility and shall afford Buyer and its representatives the opportunity to participate in and advise it with respect to such discussions and negotiations. 3.4 Assistance. If Buyer requests, the REIT shall cooperate in all reasonable respects in connection with any financing efforts of Buyer or its Affiliates and any other filings that may be made by Buyer or its Affiliates with the SEC, all at the sole expense of Buyer. 3.5 Notification of Certain Matters. The REIT shall give prompt written notice to Buyer of (a) the occurrence, or failure to occur, of any event of which it has Knowledge that has caused or that would be likely to cause any representation or warranty of the REIT contained in this Agreement or the other Transaction Documents to be untrue or inaccurate in any material respect at any time from the Initial Execution Date to the First Closing Date or (b) the failure of the REIT or any officer, director, employee or agent of the REIT, the Operating Partnership and the other Subsidiaries of the REIT to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it hereunder No such notification shall affect the representations or warranties of the parties or the conditions to their respective obligations hereunder. 3.6 Third Party Consents. After the Initial Execution Date and prior to the First Closing, the REIT shall use all commercially reasonable efforts, including making any required payments, to obtain the written consent, waiver or approval (i) with respect to any of the items 31 40 required by the items set forth on Schedule 2.1(c)(ii) of the REIT Disclosure Schedule and (ii) any other party to any contract or agreement that is required to permit the consummation of the transactions contemplated hereby. 3.7 Appointment of Directors. Immediately prior to the First Closing, the REIT shall have (i) appointed four individuals designated by Buyer to fill the vacancies created by the resignations contemplated by the Stockholders Stock Purchase Agreement and (ii) appointed at least one such individual designated by Buyer to each committee of the Board of Directors of the REIT. Buyer shall have received a copy of the resolutions of the REIT's Board of Directors reflecting these actions. 3.8 Noncompetition and Release Agreements. Subject to the terms and conditions hereof, the REIT shall enter into a Noncompetition and Release Agreement with each of Fred H. Margolin, Darrel L. Rolph and David K. Rolph (the "Selling Stockholders"). The Noncompetition and Release Agreements shall be executed in substantially the following forms: with respect to Fred H. Margolin, as provided in Exhibit B-1; with respect to Darrel L. Rolph, as provided in Exhibit B-2; and with respect to David K. Rolph, as provided in Exhibit B-3. 3.9 Affiliate Agreement. The REIT shall take all actions necessary to terminate at or prior to the First Closing all agreements, arrangements or rights of the REIT, the Operating Partnership or any other Subsidiaries of the REIT, or any of their respective Affiliates, with the Company, any Selling Stockholder or Gerald H. Graham (the "Affiliate Agreements") other than any rights of such Persons to indemnity in their capacities as officers or directors of the REIT, any of the REIT's Subsidiaries or any predecessors of the REIT or its Subsidiaries, which Affiliate Agreements are set forth on Schedule 3.9 to the REIT Disclosure Schedule. 3.10 Additional Arrangements. Subject to the terms and conditions herein provided, the REIT shall take, or cause to be taken, all actions and shall do, or cause to be done, all things necessary, appropriate or desirable under any applicable laws and regulations or under applicable governing agreements to consummate and make effective the transactions contemplated by this Agreement, including using all reasonable efforts to obtain all necessary waivers, consents and approvals and effecting all necessary registrations and filings. The REIT shall take, or cause to be taken, all action or shall do, or cause to be done, all things necessary, appropriate or desirable to cause the covenants and conditions applicable to the transactions contemplated hereby to be performed or satisfied as soon as practicable. In addition, if any Governmental Entity shall have issued any order, decree, ruling or injunction, or taken any other action that would have the effect of restraining, enjoining or otherwise prohibiting or preventing the consummation of the transactions contemplated hereby, the REIT shall use its reasonable best efforts to have such order, decree, ruling or injunction or other action declared ineffective as soon as practicable. 3.11 Insurance. The REIT shall, and shall cause its Subsidiaries to, use all commercially reasonable efforts to maintain with financially responsible insurance companies insurance in such amounts and against such risks and losses as are customary for companies engaged in their respective business. 3.12 Execution and Delivery of Registration Rights Agreement. The REIT shall execute and deliver to Buyer the Registration Rights Agreement (as defined below). 32 41 3.13 Execution and Delivery of Excepted Holder Agreement. The REIT shall execute and deliver to Buyer an excepted holder agreement (the "Excepted Holder Agreement"), in the form attached hereto as Exhibit C (as modified, if necessary, to reflect assignment by Buyer to more than one Affiliate pursuant to Section 9.14; provided that such modification shall not increase the aggregate ownership limit of Buyer thereunder). ARTICLE 4 MUTUAL COVENANTS 4.1 Additional Agreements. Subject to the terms and conditions of this Agreement, both the REIT and Buyer will use their commercially reasonable efforts to do, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper, or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. If at any time after each Closing Date, any further action is necessary to comply with this Agreement, the parties to this Agreement or their duly authorized representatives shall take all such action. Without limiting the generality of the foregoing, if, after each Closing Date, Buyer seeks indemnification or recovery from one or more other parties to a contract or agreement or otherwise seeks to enforce such contract or agreement and, in order to obtain such indemnification, recovery or enforcement, it is necessary for the REIT or any of its Subsidiaries or Affiliates to participate in any enforcement proceeding or otherwise provide assistance to Buyer, then, at the request, upon reasonable prior notice, during normal business hours and without unreasonable interruption of such Person's business activities, and at the sole expense of Buyer, the REIT shall take, or shall cause such Subsidiary or Affiliate to take, such action as Buyer may reasonably request in connection with Buyer's efforts to obtain such indemnification, recovery or enforcement. 4.2 Preparation of Proxy Statement. If the approval of the REIT's stockholders is required in connection with the issuance and sale of the Shares hereunder, then the REIT shall promptly prepare and file with the SEC the Proxy Statement in form and substance reasonably satisfactory to the REIT and Buyer. Each of the REIT and Buyer shall use its commercially reasonable efforts to have the Proxy Statement approved for mailing to the stockholders of the REIT as promptly as practicable after such filing. The REIT shall agree to date the Proxy Statement as of the approximate date of mailing to its stockholders and shall use its commercially reasonable efforts to cause the Proxy Statement to be mailed to its stockholders at the earliest practicable date. 4.3 Stockholders Meeting. If required by the Maryland General Corporation Law or rules of the NYSE, the REIT shall call a meeting of its stockholders (the "Stockholders Meeting") to be held as promptly as practicable after the date hereof, but no sooner than 20 business days following the date that the Proxy Statement is mailed to stockholders of the REIT, for the purpose of voting upon this Agreement and the issuance and sale of the Shares hereunder. Subject to the provisions of Section 3.2(b), the REIT Board shall recommend to the REIT's stockholders entitled to vote thereon the approval of this Agreement, the issuance and sale of the Shares hereunder and not rescind such recommendation, and the REIT shall use all commercially reasonable efforts to obtain approval of this Agreement and the issuance and sale of the Shares hereunder by its stockholders entitled to vote thereon. The REIT shall use all commercially 33 42 reasonable efforts to hold such meeting as soon as practicable, but no sooner than 20 business days following the date that the Proxy Statement is mailed to stockholders of the REIT. 4.4 Advise of Changes; SEC Filings. The REIT shall confer with Buyer on a regular basis, report on REIT operational matters and promptly advise Buyer orally and in writing of any change or event which has, or could reasonably be expected to have, a Material Adverse Effect on the REIT. The REIT or Buyer, as the case may be, shall promptly provide each other (or their respective counsel) copies of all filings made by such party or its Subsidiaries with the SEC or any other state or federal Governmental Entity in connection with the Transaction Documents and the transactions contemplated hereby or thereby. ARTICLE 5 CONDITIONS PRECEDENT 5.1 Conditions to Each Party's Obligation. The respective obligations of Buyer and the REIT to effect the transactions contemplated hereby are subject to the satisfaction of the following conditions on or prior to each Closing Date: (a) Consents and Approvals. All authorizations, consents, orders, or approvals of, or declarations or filings with, or expirations of waiting periods imposed by, any Governmental Entity necessary for the consummation of the transactions contemplated by this Agreement shall have been filed, occurred, or been obtained. (b) No Injunctions or Restraints. No temporary restraining order, preliminary or permanent injunction, or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the transactions contemplated hereby shall be in effect. (c) No Action. No action shall have been taken nor any statute, rule, or regulation shall have been enacted by any Governmental Entity that makes the consummation of the transactions contemplated hereby illegal. 5.2 Conditions to Obligations of Buyer at the First Closing. The obligation of Buyer to effect the transactions contemplated hereby at the First Closing is subject to the satisfaction of the following conditions unless waived, in whole or in part, by Buyer: (a) Representations and Warranties. The representations and warranties of the REIT set forth in this Agreement shall be true and correct in all material respects (provided that any representation or warranty of the REIT contained herein that is qualified by a materiality standard or a Material Adverse Effect qualification shall not be further qualified hereby) as of the Initial Execution Date and as of the First Closing Date, as though made on or as of the First Closing Date, and Buyer shall have received a certificate to the foregoing effect signed by the chief executive officer and the chief financial officer of the REIT. (b) Performance of Obligations. The REIT shall have performed in all material respects (provided that any covenant or agreement that is qualified by a materiality standard or Material Adverse Effect qualification shall not be further qualified hereby) all 34 43 obligations required to be performed by it under this Agreement prior to the First Closing Date, and Buyer shall have received a certificate to such effect signed by the chief executive officer and the chief financial officer of the REIT. (c) Consents Under Agreements. Buyer shall have been furnished with any such written consent, approval or waiver contemplated by Section 3.6 hereof. (d) Legal Opinion. Buyer shall have received from Locke Liddell & Sapp LLP, counsel to the REIT, an opinion dated the First Closing Date, in substantially the form attached as Exhibit D hereto, which opinion, if requested by Buyer, shall expressly provide that they may be relied upon by Buyer's lenders, underwriters, or other sources of financing with respect to the transactions contemplated hereby and which opinion shall be based on such representations by the REIT as shall be requested by Locke Liddell & Sapp LLP. (e) Excepted Holder Limit and Excepted Holder Agreement. The Board of Directors of the REIT shall have granted Buyer a limit on the percentage ownership of the REIT by Buyer (the "Excepted Holder Limit") of no less than 40% and otherwise on terms reasonably acceptable to Buyer and shall have waived any applicable State law restrictions on such ownership by Buyer, including exemption from the "control share" provisions (Title 3, Subtitle 7 of the Corporations and Associations Article of the Annotated Code of Maryland (or any successor statute)) and "business combination" provisions (Section 3) of the Maryland General Corporation Law, as amended from time to time, and Buyer shall have received a copy of the resolutions of the REIT's Board of Directors reflecting these actions. Further, the REIT shall have entered into the Excepted Holder Agreement. (f) Registration Rights Agreement. The REIT shall have entered into a registration rights agreement with Buyer, in substantially the form attached as Exhibit E hereto (the "Registration Rights Agreement"), granting Buyer customary registration rights with respect to any and all shares of REIT Common Stock acquired by Buyer, including (but not limited to) the right to at least three demand registrations and unlimited piggyback registration rights, on terms reasonably acceptable to Buyer. (g) Resignations From Positions and Appointment of Directors. Each of the Selling Stockholders and Gerald H. Graham shall have resigned from all positions each holds as an officer or director of the REIT, the Operating Partnership and any of their respective Affiliates, the Board of Directors of the REIT shall have appointed four individuals designated by Buyer to fill the vacancies created by the resignations of the Selling Stockholders and Gerald H. Graham, the Board of Directors shall have appointed at least one such individual designated by Buyer to each committee of the Board of Directors, and Buyer shall have received a copy of the resolutions of the REIT's Board of Directors reflecting these actions. (h) Closing Deliveries. All documents, instruments, certificates or other items required to be delivered by the REIT pursuant to Section 6.2(b) shall have been delivered. 35 44 (i) Affiliate Agreements. All Affiliate Agreements shall have been terminated, and Buyer shall have received evidence satisfactory to it of such terminations. (j) Severance. To the extent that any of the officers or directors of the REIT receives, in connection with his resignation from his positions with the REIT or any of its Subsidiaries or other Affiliates, a severance payment in excess of the amount to which such Person is entitled under any written employment or severance agreement between the REIT or any of its Subsidiaries or other Affiliates and such Person, such severance payment shall be acceptable to Buyer in its sole discretion. (k) Releases. To the extent that any of the officers or directors of the REIT receives, in connection with his resignation from his positions with the REIT or any of its Subsidiaries or other Affiliates, any severance payment, such Person shall have executed and delivered a general release of claims against the REIT and its Subsidiaries and Affiliates in a form reasonably satisfactory to Buyer. (l) Concurrent Transactions. The transactions contemplated by the Stockholders Stock Purchase Agreement shall be consummated concurrently with the First Closing pursuant to its terms. (m) Other Agreements. All other agreements or arrangements between any of the directors who are resigning as directors of the REIT or any of its Subsidiaries or other Affiliates and the Company, the REIT and/or the Operating Partnership or any of their respective Subsidiaries or other Affiliates shall have been terminated, cancelled or modified on terms reasonably acceptable to Buyer, and Buyer shall have received evidence satisfactory to it of such terminations, cancellations or modifications. (n) No Litigation. No litigation or administrative proceeding or investigation (whether formal or informal) shall be pending or, to Buyer's Knowledge, threatened which challenges the transactions contemplated hereby. (o) Stock Exchange Listing. The Shares shall have been authorized for listing on the New York Stock Exchange, subject to official notice of listing. (p) Material Adverse Effect. There shall not have occurred (i) any event, circumstance, condition, fact, effect, or other matter which has had or could reasonably be expected to have a REIT Material Adverse Effect or material adverse effect on the ability of any of the REIT and its Subsidiaries, the Company, or the Stockholders to perform on a timely basis any material obligation under this Agreement or any of the other Transaction Documents to which such Person is a party or to consummate the transactions contemplated hereby or thereby; or (ii) any material disruption of, or material adverse change in, financial, banking, or capital market conditions. (q) REIT Stockholder Approval. The issuance and sale of the Shares hereunder and all other actions contemplated hereby that require the approval of holders of the REIT Common Stock shall have been approved and adopted by the affirmative vote of the holders of a majority of the outstanding shares of REIT Common Stock present and entitled to vote thereon. 36 45 (r) Noncompetition and Release Agreement. The REIT and Fred H. Margolin shall have entered into a Noncompetition and Release Agreement in the form attached hereto as Exhibit B1. 5.3 Conditions to Obligations of the REIT at the First Closing. The obligation of the REIT to effect the transactions contemplated hereby at the First Closing is subject to the satisfaction of the following conditions unless waived, in whole or in part, by the REIT. (a) Representations and Warranties. The representations and warranties of Buyer set forth in this Agreement shall be true and correct in all material respects (provided that any representation or warranty of Buyer contained herein that is qualified by a materiality standard shall not be further qualified hereby) as of the Initial Execution Date and as of the First Closing Date, as though made on or as of the First Closing Date, and the REIT shall have received a certificate to the foregoing effect signed on behalf of Buyer by the chief executive officer and another officer of Buyer. (b) Performance of Obligations of Buyer. Buyer shall have performed in all material respects (provided that any covenant or agreement that is qualified by a materiality standard shall not be further qualified hereby) the obligations required to be performed by it under this Agreement prior to the First Closing Date, and the REIT shall have received a certificate to such effect signed on behalf of Buyer by the chief executive officer and another officer of Buyer. (c) Closing Deliveries. All documents, instruments, certificates or other items required to be delivered by Buyer pursuant to Section 6.2(a) shall have been delivered. (d) Concurrent Transactions. The transactions contemplated by the Stockholders Stock Purchase Agreement shall be consummated concurrently with the First Closing pursuant to its terms. 5.4 Conditions to Obligations of Buyer at each Subsequent Closing. The obligation of Buyer to effect the transactions contemplated hereby at each Subsequent Closing is subject to the satisfaction of the following conditions unless waived, in whole or in part, by Buyer: (a) Representations and Warranties. The representations and warranties of the REIT set forth in this Agreement (other than the representation and warranty set forth in Section 2.1(b)(i)(1) hereof) shall have been true and correct in all material respects (provided that any representation or warranty of the REIT contained herein that is qualified by a materiality standard or a Material Adverse Effect qualification shall not be further qualified hereby) as of the Initial Execution Date and as of the First Closing Date, as though made on or as of the First Closing Date, and Buyer shall have received a certificate to the foregoing effect signed by the chief executive officer and the chief financial officer of the REIT. (b) Performance of Obligations. The REIT shall have performed in all material respects (provided that any covenant or agreement that is qualified by a materiality standard or Material Adverse Effect qualification shall not be further qualified hereby) all obligations required to be performed by it under this Agreement prior to the First Closing Date, 37 46 and Buyer shall have received a certificate to such effect signed by the chief executive officer and the chief financial officer of the REIT. (c) Closing Deliveries. All documents, instruments, certificates or other items required to be delivered by the REIT pursuant to Section 6.3(b) shall have been delivered. (d) First Closing. The First Closing shall have occurred. (e) No Litigation. No litigation or administrative proceeding or investigation (whether formal or informal) shall be pending or, to Buyer's Knowledge, threatened which challenges the transactions contemplated hereby. 5.5 Conditions to Obligations of the REIT at Each Subsequent Closing. The obligation of the REIT to effect the transactions contemplated hereby at each Subsequent Closing is subject to the satisfaction of the following conditions unless waived, in whole or in part, by the REIT. (a) Representations and Warranties. The representations and warranties of Buyer set forth in this Agreement shall be true and correct in all material respects (provided that any representation or warranty of Buyer contained herein that is qualified by a materiality standard shall not be further qualified hereby) as of the Initial Execution Date and as of each Subsequent Closing Date, as though made on or as of such Subsequent Closing Date, and the REIT shall have received a certificate to the foregoing effect signed on behalf of Buyer by the chief executive officer and another officer of Buyer. (b) Performance of Obligations of Buyer. Buyer shall have performed in all material respects (provided that any covenant or agreement that is qualified by a materiality standard shall not be further qualified hereby) the obligations required to be performed by it under this Agreement prior to such Subsequent Closing Date, and the REIT shall have received a certificate to such effect signed on behalf of Buyer by the chief executive officer and another officer of Buyer. (c) Closing Deliveries. All documents, instruments, certificates or other items required to be delivered by Buyer pursuant to Section 6.3(a) shall have been delivered. ARTICLE 6 CLOSING 6.1 Closing. (a) The purchase and sale of the Shares shall take place at two or more closings (the "Closings"). The First Closing shall take place, subject to the earlier satisfaction or waiver of each of the conditions set forth in Article 5 (other than the conditions set forth in Sections 5.2(h), 5.2(m) and 5.3(c)) concurrently with the closing of the transactions contemplated by the Stockholders Stock Purchase Agreement, at 9:30 a.m., Central time, on March 9, 2001 (the "First Closing Date"), at the offices of Vinson & Elkins L.L.P., 3700 Trammell Crow Center, 2001 Ross Avenue, Dallas, Texas 75201, unless another date or place is agreed to in writing by the parties. Each Subsequent Closing shall occur within 15 business days of the date (each, a "Subsequent Closing Date" and, together with the First Closing Date, the "Closing Dates" and each, a "Closing Date") on which the REIT provides written notice to Buyer 38 47 in accordance with Section 9.9 hereof requiring a Subsequent Closing to occur at the offices of Vinson & Elkins L.L.P., 3700 Trammell Crow Center, 2001 Ross Avenue, Dallas, Texas 75201, unless another date or place is agreed to in writing by the parties. Notwithstanding anything to the contrary in this Agreement, the obligation of Buyer hereunder to consummate any Subsequent Closing within 15 business days of the date on which the REIT provides written notice to Buyer shall not be amended, terminated or waived without the consent of a majority of the members of the REIT's Board of Directors other than those members appointed to the REIT's Board of Directors pursuant to Section 3.7(i) hereof. (b) As used in this Agreement, "Business Day" means any day other than (i) a Saturday or Sunday or (ii) a day on which commercial banks in New York, New York or Dallas, Texas are authorized or required to be closed. 6.2 Actions to Occur at the First Closing. (a) At the First Closing, Buyer shall deliver to the REIT the following: (i) Purchase Price. An amount equal to the Purchase Price for the First Closing Shares, by wire transfer of immediately available funds to an account designated by the REIT; and (ii) Certificates. The certificates referred to in Sections 5.3(a) and 5.3(b). (b) At the First Closing, the REIT shall deliver to Buyer the following: (i) Share Certificates. Certificates representing the First Closing Shares; (ii) Certificates. The certificates described in Sections 5.2(a) and 5.2(b); (iii) Legal Opinion. The opinion of counsel referred to in Section 5.2(d); (iv) Consents; Acknowledgments. The original of each Consent, if any, pursuant to Section 5.2(c); (v) Noncompetition and Release Agreements. Fully executed copies of the Noncompetition and Release Agreements; and (vi) Registration Rights Agreement. A counterpart of the Registration Rights Agreement executed by the REIT; 6.3 Actions to Occur at Each Subsequent Closing. (a) At each Subsequent Closing, Buyer shall deliver to the REIT the following: 39 48 (i) Purchase Price. An amount equal to the Purchase Price for the Subsequent Closing Shares to be purchased at such Subsequent Closing, by wire transfer of immediately available funds to an account designated by the REIT; and (ii) Certificates. The certificates referred to in Sections 5.5(a) and 5.5(b). (b) At each Subsequent Closing, the REIT shall deliver to Buyer the following: (i) Share Certificates. Certificates representing the Subsequent Closing Shares to be purchased at such Subsequent Closing; and (ii) Certificates. The certificates described in Sections 5.4(a) and 5.4(b). ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER 7.1 Termination Prior to First Closing. This Agreement may be terminated at any time prior to the First Closing: (a) by mutual consent of Buyer and the REIT; (b) by either Buyer or the REIT: (i) in the event of a breach by the other party of any representation, warranty, covenant or agreement contained in this Agreement, which cannot be or has not been cured within 10 days (the "Cure Period") following receipt by the breaching party of written notice of such breach; provided, however, that there shall be no right to cure any breach of Section 3.2, Section 3.12 or Section 6.2 and provided, further, that the REIT shall not terminate this Agreement pursuant to this Section 7.1(b)(i) at or prior to the Inspection Termination Time; (ii) if a court of competent jurisdiction or other Governmental Entity shall have issued an order, decree, or ruling or taken any other action (which order, decree, or ruling Buyer and the REIT shall use their best efforts to lift), in each case permanently restraining, enjoining, or otherwise prohibiting the transactions contemplated by this Agreement or the other Transaction Documents, and such order, decree, ruling, or other action shall have become final and nonappealable; or (iii) if the First Closing shall not have occurred by 5:00 p.m., Central time on the 150th day following the Delivery Date (the "Final Closing Date"); provided, however, that the right to terminate this Agreement under this clause (iii) shall not be available to any party whose breach of this Agreement has been the cause of, or resulted in, the failure of the First Closing to occur on or before such date; (c) by Buyer: 40 49 (i) pursuant to the provisions of Section 1.5 upon delivery of the notice of termination to the REIT; (ii) if the REIT shall have entered into or agreed to enter into any material amendment of or replacement for the REIT's Bank of America, N.A. credit facility or entered into or agreed to enter into any other material financing transaction other than with the written consent of Buyer, other than any credit facility entered into in accordance with the terms of the commitment letter regarding the proposed $175 million Guaranteed Funding Facility attached hereto as Exhibit G ("Guaranteed Funding Facility"); (iii) upon the occurrence of an event described in Section 5.2(p); (iv) if the Stockholders Stock Purchase Agreement or any other definitive document relating thereto is terminated in accordance with its terms (other than as a result of a breach of this Agreement by Buyer); (v) if (A) the REIT proposes to enter into a written agreement for a REIT Superior Proposal, (B) the REIT Board (or any committee thereof) withdraws or modifies its approval or recommendation of this Agreement, the issuance and sale of the Shares, or the transactions contemplated hereby in a manner adverse to Buyer, (C) the REIT Board (or any committee thereof) approves or recommends to stockholders of the REIT any REIT Takeover Proposal, (D) the REIT Board (or any committee thereof) fails to recommend that the stockholders of the REIT vote against any REIT Takeover Proposal within ten business days after public announcement thereof, or (E) the REIT Board (or any committee thereof) shall have resolved to do any of the foregoing; or (vi) if stockholder approval is required with respect to this Agreement and the issuance and sale of the Shares to Buyer hereunder, and, when presented to the holders of REIT Common Stock for their consideration, such actions shall fail to receive the requisite vote for approval and adoption by the REIT's stockholders. (d) by the REIT, if: (i) the REIT Board shall have exercised its termination rights set forth in Section 3.2(b); provided that, in order for the termination of this Agreement pursuant to this paragraph (d)(i) to be deemed effective, the REIT shall have complied with all provisions of Section 3.2, including (A) the notice provisions therein and (B) the obligation to simultaneously pay Buyer the Termination Fee required pursuant to Section 3.2(b) and enter into a REIT Acquisition Agreement relating to a REIT Superior Proposal; or (ii) if Buyer fails to deposit $1,000,000 with the Escrow Agent prior to 5:00 p.m., Central Time, on February 28, 2001; provided that this Agreement has not otherwise been terminated prior to such time. The right of any party hereto to terminate this Agreement pursuant to this Section 7.1 shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any party hereto, any Person controlling any such party, or any of their respective 41 50 officers, directors, employees, accountants, consultants, legal counsel, agents, or other representatives whether prior to or after the execution of this Agreement. Notwithstanding anything in the foregoing to the contrary, a party that is in material breach of this Agreement shall not be entitled to terminate this Agreement except, in the case of a default by the REIT, with the consent of Buyer, or in the case of a default by Buyer, with the consent of the REIT. 7.2 Termination Subsequent to First Closing. This Agreement may be terminated subsequent to the First Closing: (a) by mutual consent of Buyer and the REIT; provided, however, that the REIT may not so consent without the approval of a majority of the members of the REIT's Board of Directors other than those members appointed to the REIT's Board of Directors pursuant to Section 3.7(i) hereof; (b) by the REIT, in the event of a breach by Buyer of any representation, warranty, covenant or agreement contained in this Agreement, which cannot be or has not been cured within the Cure Period following receipt by the Buyer of written notice of such breach; provided, however, that there shall be no right to cure any breach of Section 6.3, and provided, further, that the REIT may not so terminate without the approval of a majority of the members of the REIT's Board of Directors other than those members appointed to the REIT's Board of Directors pursuant to Section 3.7(i) hereof; (c) by Buyer, in the event that any representation or warranty contained in this Agreement was not true and correct as of the First Closing Date, which cannot be or has not been cured within the Cure Period following receipt by the REIT of written notice of such breach; and (d) by Buyer, in the event of a breach by the REIT of any covenant or agreement contained in this Agreement, which cannot be or has not been cured with the Cure Period following receipt by the REIT of written notice of such breach; provided, however, that there shall be no right to cure any breach of Section 3.2, Section 3.12 or Section 6.3 hereof. 7.3 Effect of Termination Prior to First Closing. (a) In the event of a termination of this Agreement pursuant to Section 7.1 hereof by either the REIT or Buyer, this Agreement shall terminate and have no further effect, without any liability or obligation on the part of either the REIT or Buyer, other than the provisions of Article 9 and this Article 7, which shall survive termination of this Agreement; provided, however, that nothing herein shall relieve any party from any liability for any breach by such party of any of its representations, warranties, covenants or agreements set forth in this Agreement. If, after the Inspection Termination Time and prior to the First Closing, Buyer should breach this Agreement in a manner which gives rise to a termination right pursuant to Section 7.1(b)(i) or 7.1(d)(ii) on the part of the REIT (which breach shall include a purported or wrongful termination of this Agreement by Buyer made in breach of this Agreement), then the REIT's sole and exclusive right and remedy shall be to terminate this Agreement pursuant to Section 7.1(b)(i) or 7.1(d)(ii) and to receive payment of the liquidated damages described below as provided in this Section 7.3. If this Agreement is terminated by the REIT pursuant to Section 7.1(b)(i) or 7.1(d)(ii), the parties agree and acknowledge that the REIT will suffer damages that are not practicable to ascertain. Accordingly, in such event and if, within ten Business Days after 42 51 termination of this Agreement by the REIT pursuant to Section 7.1(b)(i) or 7.1(d)(ii), the REIT delivers to Buyer a written demand for liquidated damages, subject to Buyer's receipt of a counterpart of a release of claims executed and delivered by the REIT, in the form attached hereto as Exhibit F (the "Liquidated Damages Release"), the REIT shall be entitled to an aggregate amount in cash equal to $1,000,000 (together with any earnings thereon), as liquidated damages payable by Buyer in accordance with the provisions of the Deposit Escrow Agreement within ten Business Days after receipt of the written demand by the REIT. As security for payment thereof, Buyer has concurrently with the execution of the Original Agreement entered into the Deposit Escrow Agreement with the REIT and the Escrow Agent as provided in Section 1.4 and Buyer will, prior to 5:00 p.m., Central Time, on February 28 2001, deposit $1,000,000 with the Escrow Agent. The parties agree that the foregoing liquidated damages are reasonable considering all the circumstances existing as of the Initial Execution Date and constitute the parties' good faith estimate of the actual damages reasonably expected to result from the termination of this Agreement by the REIT. The REIT agrees that, to the fullest extent permitted by law, the REIT's right to terminate this Agreement and to receive payment of the liquidated damages described above as provided in this Section 7.3 shall be the REIT's sole and exclusive right and remedy if the First Closing does not occur with respect to any damages whatsoever that the REIT may suffer or allege to suffer as a result of any claim or cause of action asserted by the REIT relating to or arising from breaches of the representations, warranties or covenants of Buyer contained in this Agreement and to be made or performed at or prior to the First Closing. If this Agreement is terminated either by Buyer or the REIT pursuant to any provision of Section 7.1 other than a termination (A) by the REIT pursuant to Section 7.1(b)(i) or 7.1(d)(ii), or (B) by Buyer pursuant to Section 7.1(c)(i), then Buyer and the REIT shall instruct the Escrow Agent in writing to release the Earnest Money (including any accrued interest thereon), if any, to Buyer. If the REIT delivers to the Escrow Agent a fully executed counterpart of the Liquidated Damages Release in accordance with the Deposit Escrow Agreement, Buyer shall be deemed to have received a counterpart of the Liquidated Damages Release for purposes of this Section 7.3(a). (b) As a condition of payment, and upon receipt of an aggregate amount in cash equal to $1,000,000 (together with any earnings thereon) in respect of a termination pursuant to Section7.1(b)(i) or 7.1(d)(ii), as liquidated damages under this Section 7.3, the REIT hereby irrevocably and unconditionally releases, acquits, and forever discharges Buyer and its successors, assigns, officers, directors, employees, agents, stockholders, subsidiaries, parent companies and other Affiliates (corporate or otherwise) (the "Released Parties") of and from any and all Released Claims. "Released Claims" as used herein shall mean any and all charges, complaints, claims, causes of action, promises, agreements, rights to payment, rights to any equitable remedy, rights to any equitable subordination, demands, debts, liabilities, express or implied contracts, obligations of payment or performance, rights of offset or recoupment, accounts, damages, costs, losses or expenses (including attorneys' and other professional fees and expenses) held by the REIT, whether known or unknown, matured or unmatured, suspected or unsuspected, liquidated or unliquidated, absolute or contingent, direct or derivative, arising out of the negotiation, execution, performance, or breach of this Agreement. The Liquidated Damages Release to be delivered pursuant to Section 7.3(a) shall be in addition to the provisions of this Section 7.3(b). 43 52 ARTICLE 8 INDEMNIFICATION 8.1 Indemnification of Buyer. (a) From and after the First Closing and subject to the provisions of this Article 8 and Section 9.2 below, the REIT agrees to indemnify and hold harmless the Buyer Indemnified Parties (as hereinafter defined) from and against any and all Buyer Indemnified Costs; provided, however, that the liability of the REIT for any Buyer Indemnified Representation Costs shall not exceed an amount equal to the Purchase Price. (b) As used in this Agreement, (i) "Buyer Indemnified Costs" means (i) all Buyer Indemnified Representation Costs and (ii) all damages, losses, claims, liabilities, demands, charges, suits, penalties, costs, and expenses (including court costs and reasonable legal fees and expenses incurred in investigating and preparing for any litigation or proceeding) that any of the Buyer Indemnified Parties incurs and that arise out of any breach by the REIT of any of the covenants or agreements (other than breaches of covenants to be performed by the REIT after the First Closing) of the REIT under this Agreement or any other Transaction Document executed in connection herewith. (ii) "Buyer Indemnified Parties" means Buyer and each officer, director, partner, member, manager, agent, employee, stockholder and other Affiliate of Buyer. (iii) "Buyer Indemnified Representation Costs" means any and all damages, losses, claims, liabilities, demands, charges, suits, penalties, costs, and expenses (including court costs and reasonable legal fees and expenses incurred in investigating and preparing for any litigation or proceeding) that any of the Buyer Indemnified Parties incurs in connection with, relating to or arising out of the transactions contemplated hereby and that arise out of any breach or default by the REIT of any of the representations or warranties of the REIT under this Agreement or any agreement or document executed in connection herewith. 8.2 Indemnification of the REIT. From and after the First Closing and subject to the provisions of this Article 8 and Section 9.2 below, Buyer agrees to indemnify and hold harmless the REIT Indemnified Parties from and against any and all REIT Indemnified Costs. (a) As used in this Agreement, (i) "REIT Indemnified Costs" means (i) all REIT Indemnified Representation Costs, (ii) any and all damages, losses, claims, liabilities, demands, charges, suits, penalties, costs, and expenses (including court costs and reasonable legal fees and expenses incurred in investigating and preparing for any litigation or proceeding) that the REIT incurs and that arise out of any breach by Buyer of any of the covenants or agreements under this Agreement or any other Transaction Documents and (iii) any and all damages, losses, claims, liabilities, demands, charges, suits, penalties, 44 53 costs, and expenses (including court costs and reasonable legal fees and expenses incurred in investigating and preparing for any litigation or proceeding) that the REIT incurs and that arise out of any breach by Buyer of a covenant or agreement to be performed by Buyer after the First Closing. (ii) "REIT Indemnified Parties" means the REIT and each officer and director of the REIT. (iii) "REIT Indemnified Representation Costs" means any and all damages, losses, claims, liabilities, demands, charges, suits, penalties, costs, and expenses (including court costs and reasonable legal fees and expenses incurred in investigating and preparing for any litigation or proceeding) that the REIT incurs and that arise out of any breach or default by Buyer of any of its representations or warranties under this Agreement or any agreement or document executed in connection herewith. 8.3 Defense of Third-Party Claims. The Buyer Indemnified Parties or the REIT Indemnified Parties, as the case may be (each, an "Indemnified Party"), shall give prompt written notice to any Person who is obligated to provide indemnification hereunder (an "Indemnifying Party") of the commencement or assertion of any action, proceeding, demand, or claim by a third party (collectively, a "third-party action") in respect of which such Indemnified Party shall seek indemnification hereunder. Any failure so to notify an Indemnifying Party shall not relieve such Indemnifying Party from any liability that it, he, or she may have to such Indemnified Party under this Article 8 unless the failure to give such notice materially and adversely prejudices such Indemnifying Party. The Indemnifying Party shall have the right to assume control of the defense of, settle, or otherwise dispose of such third-party action on such terms as it deems appropriate; provided, however, that: (a) The Indemnified Party shall be entitled, at its own expense, to participate in the defense of such third-party action (provided, however, that the Indemnifying Parties shall pay the legal fees of the Indemnified Party if (i) the employment of separate counsel shall have been authorized in writing by all Indemnifying Parties in connection with the defense of such third-party action, (ii) the Indemnifying Parties shall not have employed counsel reasonably satisfactory to the Indemnified Party to have charge of such third-party action, (iii) the Indemnified Party shall have been advised in writing by counsel that there may be defenses available to such Indemnified Party that are different from or additional to those available to the Indemnifying Party, or (iv) the Indemnified Party's counsel shall have advised the Indemnified Party in writing, with a copy delivered to the Indemnifying Party, that there is a material conflict of interest that could violate applicable standards of professional conduct to have common counsel); (b) The Indemnifying Party shall obtain the prior written approval of the Indemnified Party before entering into or making any settlement, compromise, admission, or acknowledgment of the validity of such third-party action or any liability in respect thereof if, pursuant to or as a result of such settlement, compromise, admission, or acknowledgment, injunctive or other equitable relief would be imposed against the Indemnified Party or if, in the opinion of the Indemnified Party, such settlement, compromise, admission, or acknowledgment could have a material adverse effect on its business; 45 54 (c) No Indemnifying Party shall consent to the entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by each claimant or plaintiff to each Indemnified Party of a release from all liability in respect of such third-party action; and (d) The Indemnifying Party shall not be entitled to control (but shall be entitled to participate at its own expense in the defense of), and the Indemnified Party shall be entitled to have sole control over, the defense or settlement, compromise, admission, or acknowledgment of any third-party action (i) as to which the Indemnifying Party fails to assume the defense within a reasonable length of time; or (ii) to the extent the third-party action seeks an order, injunction, or other equitable relief against the Indemnified Party which, if successful, would materially adversely affect the business, operations, assets, or financial condition of the Indemnified Party; provided, however, that the Indemnified Party shall make no settlement, compromise, admission, or acknowledgment that would give rise to liability on the part of any Indemnifying Party without the prior written consent of such Indemnifying Party. The parties hereto shall extend reasonable cooperation in connection with the defense of any third-party action pursuant to this Article 8 and, in connection therewith, shall furnish such records, information, and testimony and attend such conferences, discovery proceedings, hearings, trials, and appeals as may be reasonably requested. 8.4 Direct Claims. In any case in which an Indemnified Party seeks indemnification hereunder which is not subject to Section 8.3 because no third-party action is involved, the Indemnified Party shall notify the Indemnifying Party in writing of any Buyer Indemnified Costs or REIT Indemnified Costs, as the case may be ("Indemnified Costs"), which Indemnified Party claims are subject to indemnification under the terms hereof. Subject to the limitations set forth in Sections 8.5(c) and 9.2, the failure of the Indemnified Party to exercise promptness in such notification shall not amount to a waiver of such claim unless the resulting delay materially prejudices the position of the Indemnifying Party with respect to such claim. 8.5 Limitations. Subject to Section 9.2 hereof, the following provisions of this Section 8.5 shall be applicable after the time of the First Closing: (a) Minimum Loss. No Indemnifying Party shall be required to indemnify an Indemnified Party for Buyer Indemnified Representation Costs or REIT Indemnified Representation Costs, as the case may be ("Indemnified Representation Costs"), unless and until the aggregate amount of such Indemnified Representation Costs for which the Indemnified Party is otherwise entitled to indemnification pursuant to this Article 8 exceeds $400,000 (the "Minimum Loss"). After the Minimum Loss is exceeded, the Indemnified Party shall be entitled to be paid the entire amount of its Indemnified Representation Costs, including the full amount of the Minimum Loss, subject to the limitations on recovery and recourse set forth in this Section 8.5. (b) Determination of Breach. For purposes of determining (i) whether an Indemnifying Party shall be required to indemnify an Indemnified Party under this Article 8 or (ii) the aggregate amount of Minimum Loss suffered by an Indemnified Party, each representation and warranty contained in this Agreement for which indemnification can be or is sought hereunder shall be read (including for purposes of determining whether a breach of such 46 55 representation or warranty has occurred) without regard to materiality (including Material Adverse Effect) qualifications that may be contained therein. (c) Limitation as to Time. No Indemnifying Party shall be liable for any Indemnified Representation Costs pursuant to this Article 8 unless a written claim for indemnification in accordance with Section 8.3 or 8.4 is given by the Indemnified Party to the Indemnifying Party with respect thereto on or before the first anniversary of the First Closing Date, except that this time limitation shall not apply to any (i) claims for fraud pursuant to Section 9.2; (ii) claims for breaches of the representations and warranties contained in Section 2.1(b) (relating to capital structure of the REIT and its Subsidiaries), Section 2.1(c) (relating to authority of the REIT and its Subsidiaries), Section 2.1(k) (relating to taxes) and Section 2.1(o) (relating to environmental matters), which representations and warranties shall survive until the expiration of the applicable statute of limitations. (d) Other Indemnified Costs. The provisions of this Section 8.5 shall only be applied to Indemnified Representation Costs and shall not be applicable to any other Indemnified Costs. (e) Limitation as to Amount. The Indemnifying Party's aggregate indemnity obligations to the Indemnified Parties under this Agreement shall be limited to an amount equal to the Purchase Price. 8.6 Tax Related Adjustments. The REIT and Buyer agree that any payment of Indemnified Costs made hereunder will be treated by the parties on their Tax Returns as an adjustment to the Purchase Price. If, notwithstanding such treatment by the parties, any payment of Indemnified Costs is determined to be taxable income rather than adjustment to Purchase Price by any taxing authority, then the Indemnifying Party shall indemnify the Indemnified Party for any Taxes payable by the Indemnified Party or any subsidiary by reason of the receipt of such payment (including any payments under this Section 8.6), determined at an assumed marginal tax rate equal to the highest marginal tax rate then in effect for corporate taxpayers in the relevant jurisdiction. ARTICLE 9 GENERAL PROVISIONS 9.1 Survival of Representations, Warranties, and Covenants. Regardless of any investigation at any time made by or on behalf of any party hereto or of any information any party may have in respect thereof, each of the representations and warranties made in this Agreement or any other Transaction Document shall survive the First Closing as provided below. The representations and warranties set forth in this Agreement (other than representations and warranties contained in Section 2.1(b) (relating to capital structure of the REIT and its Subsidiaries), Section 2.1(c) (relating to authority of the REIT and its Subsidiaries), Section 2.1(k) (relating to taxes) and Section 2.1(o) (relating to environmental matters), which representations and warranties shall survive until the expiration of the applicable statute of limitations) or any other Transaction Document shall terminate on the first anniversary of the First Closing Date. Following the date of termination of a representation or warranty, no claim can be brought with respect to a breach of such representation or warranty, but no such 47 56 termination shall affect any claim for a breach of a representation or warranty that was asserted in writing pursuant to Section 8.3 or Section 8.4 hereof before the date of termination. To the extent that such are performable after the First Closing or any Subsequent Closing, as applicable, each of the covenants and agreements contained in each of the Transaction Documents shall survive such Closing indefinitely; provided, however, effective as of the First Closing or any Subsequent Closing, the REIT shall be deemed to have waived any and all rights and remedies as to any breach by Buyer of any covenant and agreement of Buyer contained in each Transaction Document occurring prior to such Closing other than the obligation to acquire all Subsequent Closing Shares. 9.2 No Waiver Relating to Claims for Fraud. The liability of any party under Article 8 shall be in addition to, and not exclusive of, any other liability that such party may have at law or equity based on such party's fraudulent acts or omissions. None of the provisions set forth in this Agreement, including but not limited to the provisions set forth in Section 8.5, shall be deemed a waiver by any party to this Agreement of any right or remedy which such party may have at law or equity based on any other party's fraudulent acts or omissions, nor shall any such provisions limit, or be deemed to limit, (a) the amounts of recovery sought or awarded in any such claim for fraud, (b) the time period during which a claim for fraud may be brought, or (c) the recourse which any such party may seek against another party with respect to a claim for fraud; provided, that with respect to such rights and remedies at law or equity, the parties further acknowledge and agree that none of the provisions of this Section 9.2, nor any reference to this Section 9.2 throughout this Agreement, shall be deemed a waiver of any defenses which may be available in respect of actions or claims for fraud, including but not limited to, defenses of statutes of limitations or limitations of damages. 9.3 Amendment and Modification. This Agreement may not be amended except by an instrument in writing signed by the parties hereto or by Buyer and the REIT. 9.4 Waiver of Compliance. Any failure of Buyer on the one hand, or the REIT, on the other hand, to comply with any obligation, covenant, agreement, or condition contained herein may be waived only if set forth in an instrument in writing signed by the party or parties to be bound by such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement, or condition shall not operate as a waiver of, or estoppel with respect to, any other failure. 9.5 Specific Performance. The parties recognize that in the event the REIT should refuse to perform under the provisions of this Agreement, monetary damages alone will not be adequate. Buyer shall therefore be entitled, in addition to any other remedies which may be available, including money damages, to obtain specific performance of the terms of this Agreement. In the event of any action to enforce this Agreement specifically, the REIT hereby waives the defense that there is an adequate remedy at law. In no event shall the REIT be entitled to seek specific performance with respect to any of Buyer's obligations arising under this Agreement. 9.6 Severability. If any term or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal, or incapable of being enforced under any rule of applicable law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of 48 57 the transactions contemplated herein are not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated herein are consummated as originally contemplated to the fullest extent possible. 9.7 Expenses and Obligations. (a) Except as otherwise expressly provided in this Agreement or as provided by law, if the First Closing does not occur, all costs and expenses incurred by the parties hereto in connection with the consummation of the transactions contemplated hereby shall be borne solely and entirely by the party which has incurred such expenses. If the First Closing does occur, then, except as so provided, all costs and expenses incurred by the REIT, on the one hand, and Buyer, on the other, in connection with such consummation shall be borne solely and entirely by the REIT and Buyer, respectively. Notwithstanding the foregoing, upon the First Closing, Buyer shall pay $131,250, the Selling Stockholders shall pay $71,250 in the aggregate and the REIT shall pay $60,000 ($262,500 in total) to Christopher Weil & Company, Inc. as a result of the consummation of the transactions contemplated hereby. (b) In the event that (i) this Agreement is terminated by the REIT prior to the First Closing pursuant to Section 7.1(d)(i) or (ii) this Agreement is terminated by Buyer pursuant to Section 7.1(c)(ii), Section 7.1(c)(v), or Section 7.1(c)(vi), then promptly after such termination (and in any event within one Business Day, except that any payment of the Termination Fee pursuant to subparagraph (i) above shall be paid simultaneously with, and be a necessary condition to, such termination), the REIT shall pay Buyer a fee of $10,000,000 million (the "Termination Fee") by wire transfer of same day funds; provided, however, that the amount of the Termination Fee payable to Buyer upon a termination by Buyer pursuant to Section 7.1(c)(ii) or 7.1(c)(vi) shall be $3,500,000 rather than $10,000,000. The fee and other amounts payable pursuant to this Section 9.7 shall be paid by the REIT without reservation of rights or protests and the REIT, upon making such payment, shall be deemed to have released and waived any and all rights that it may have to recover such amounts. 9.8 Parties in Interest. This Agreement shall be binding upon and, except as provided below, inure solely to the benefit of each party hereto and their successors, assigns and transferees, and nothing in this Agreement, except as set forth below, express or implied, is intended to confer upon any other Person (other than the Indemnified Parties as provided in Article 8 and any Released Parties under Section 7.3) any rights or remedies of any nature whatsoever under or by reason of this Agreement. 9.9 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied, or mailed by registered or certified mail (return receipt requested), or sent by Federal Express or other recognized overnight courier, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): 49 58 (a) If to Buyer, to: Lone Star Fund III (U.S.), L.P. 600 North Pearl Street Suite 1500, LB 164 Dallas, Texas 75201 Attention: J.D. Dell Facsimile: (214) 754-8401 with copies (which shall not constitute notice) to: Vinson & Elkins L.L.P. 3700 Trammell Crow Center 2001 Ross Avenue Dallas, Texas 75201 Attention: Michael D. Wortley Facsimile: (214) 999-7732 (b) If to the REIT, to: U.S. Restaurant Properties, Inc. 12240 Inwood Road Suite 200 Dallas, Texas 75244 Attention: Fred H. Margolin Facsimile: (972) 233-6453 with copies (which shall not constitute notice) to: Locke Liddell & Sapp LLP 2200 Ross Avenue Suite 2200 Dallas, Texas 75201 Attention: Kenneth L. Betts Facsimile: (214) 740-8800 Any of the above addresses may be changed at any time by notice given as provided above; provided, however, that any such notice of change of address shall be effective only upon receipt. All notices, requests or instructions given in accordance herewith shall be deemed received on the date of delivery, if hand delivered, on the date of receipt, if telecopied, three Business Days after the date of mailing, if mailed by registered or certified mail, return receipt requested, and one Business Day after the date of sending, if sent by Federal Express or other recognized overnight courier. 9.10 Counterparts. This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by 50 59 each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. 9.11 Entire Agreement. This Agreement (which term shall be deemed to include the exhibits and schedules hereto and the other certificates, documents and instruments delivered hereunder) constitutes the entire agreement of the parties hereto and supersedes all prior agreements, letters of intent and understandings, both written and oral, among the parties with respect to the subject matter hereof. There are no representations or warranties, agreements, or covenants other than those expressly set forth in this Agreement. The provision contained in Section 1.4(b) hereof shall supercede any provision to the contrary in the Transaction Documents. 9.12 Governing Law; Choice of Forum. This Agreement shall be construed in accordance with and governed by the internal law of the State of Maryland (without reference to its rules as to conflicts of law). 9.13 Public Announcements. The REIT, on the one hand, and Buyer, on the other, shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or the transactions contemplated hereby, except for statements required by law or by any listing agreements with any national securities exchange or the National Association of Securities Dealers, Inc., or made in disclosures filed pursuant to the Securities Act or the Exchange Act. 9.14 Assignment. Neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by any of the parties hereto, whether by operation of law or otherwise; provided, however, that upon notice to the REIT and without releasing Buyer from any of its obligations or liabilities hereunder, (a) Buyer may assign or delegate any or all of its rights or obligations under this Agreement to any one or more Affiliates of Buyer or any Person with or into which Buyer or any parent company of Buyer merges or consolidates, and (b) nothing in this Agreement shall limit Buyer's ability to make a collateral assignment of its rights under this Agreement to any institutional lender that provides funds to Buyer without the consent of the REIT. The REIT shall execute an acknowledgment of such collateral assignments in such forms as Buyer's lenders may from time to time reasonably request; provided, however, that unless written notice is given to the REIT that any such collateral assignment has been foreclosed upon, the REIT shall be entitled to deal exclusively with Buyer as to any matters arising under this Agreement or any of the other agreements delivered pursuant hereto. In the event of such an assignment, the provisions of this Agreement shall inure to the benefit of and be binding on Buyer's assigns. Any attempted assignment in violation of this Section 9.14 shall be null and void. 9.15 Guarantee of Buyer's Obligation to Purchase Shares at any Subsequent Closing. Guarantor guarantees the full and prompt performance by Buyer of Buyer's obligation to deliver the Purchase Price for the Subsequent Closing Shares pursuant to Section 6.3(a)(i) hereunder. This guarantee shall be a continuing guarantee of Buyer's obligation to deliver the Purchase Price for the Subsequent Closing Shares pursuant to Section 6.3(a)(i) and the liability of the Buyer hereunder shall in no way be effected, modified or diminished. 51 60 9.16 No Affiliate Liability. Each of the following is herein referred to as a "Buyer Affiliate": (a) any direct or indirect holder of any equity interests or securities in Buyer (whether limited or general partners, members, stockholders or otherwise), (b) any Affiliate of Buyer, or (c) any director, officer, employee, representative or agent of (i) Buyer, (ii) any Affiliate of Buyer or (iii) any such holder of equity interests or securities referred to in clause (a) above. No Buyer Affiliate shall have any liability or obligation of any nature whatsoever in connection with or under this Agreement or the other Transaction Documents or the transactions contemplated hereby or thereby (other than as an assignee of this Agreement) and the REIT hereby waives and releases all claims of any such liability and obligation, it being understood that no such Person or entity (other than Buyer or an assignee of this Agreement) shall be liable for or in respect of this Agreement or the other Transaction Documents and the transactions contemplated hereby or thereby. 9.17 Headings. The headings of this Agreement are for convenience of reference only and are not part of the substance of this Agreement. [Signature page follows] 52 61 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed, all as of the date first written above. U.S. RESTAURANT PROPERTIES, INC. By: /s/ FRED H. MARGOLIN ----------------------------------- Name: Fred H. Margolin --------------------------------- Title: CEO ------------------------------- LONE STAR U.S. ACQUISITIONS, LLC By: /s/ DAVID M. WEST ----------------------------------- Name: David M. West --------------------------------- Title: President ------------------------------- LONE STAR FUND III (U.S.), L.P. By: /s/ J.D. DELL ----------------------------------- Name: J.D. Dell --------------------------------- Title: Vice President ------------------------------- S-1 62 Exhibit A Form of Deposit Escrow Agreement 63 Exhibit B-1 Form of Noncompetition and Release Agreement (Margolin) 64 Exhibit B-2 Form of Noncompetition and Release Agreement (Darrel Rolph) 65 Exhibit B-3 Form of Noncompetition and Release Agreement (David Rolph) 66 Exhibit C Form of Excepted Holder Agreement 67 Exhibit D Form of Legal Opinion of REIT's Counsel 68 Exhibit E Form of Registration Rights Agreement 69 Exhibit F Liquidated Damages Release 70 Exhibit G Commitment Letter EX-10.2 3 d85065ex10-2.txt ASSIGNMENT & ASSUMPTION AGREEMENT 1 EXHIBIT 10.2 ASSIGNMENT AND ASSUMPTION AGREEMENT This ASSIGNMENT AND ASSUMPTION AGREEMENT ("Assignment") is entered into among Lone Star U.S. Acquisitions, LLC, a Delaware limited liability company ("Assignor"), LSF3 Capital Investments I, LLC, a Delaware limited liability company, and LSF3 Capital Investments II, LLC, a Delaware limited liability company ("Assignees," and each, an "Assignee"), effective as of March 9, 2001. WHEREAS, Assignor is a party to that certain Amended and Restated Stock Purchase Agreement among U.S. Restaurant Properties, Inc., a Maryland corporation, Assignor, and Lone Star Fund III (U.S.), L.P., a Delaware limited partnership, dated as of February 27, 2001 (the "Agreement"); and WHEREAS, effective as of March 9, 2001 (the "Effective Time"), Assignor desires to assign, and each Assignee desires to acquire, Assignor's rights, titles and interests as Buyer under the Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, Assignor hereby transfers, assigns and conveys to Assignees, and each of them, all of Assignor's rights, titles and interests as Buyer in, under and to the Agreement. 1. Assignment and Assumption. (a) As of the Effective Time, Assignor hereby sells, transfers and assigns to Assignees, and each of them, all of Assignor's rights, titles and interests as Buyer in, under and to the Agreement, free and clear of any and all claims, pledges, liens, security interests or other encumbrances (collectively, "Encumbrances"). (b) As of the Effective Time, each Assignee hereby acquires and accepts from Assignor all of Assignor's rights, titles and interests in, under and to the Agreement and assumes all obligations related to the Agreement. 2. Warranties and Covenants. (a) Assignor. As a material inducement for and in consideration of Assignees' obligations under this Assignment, Assignor represents and warrants to each Assignee that (i) Assignor has all requisite power and authority to transfer and assign the Agreement to such Assignee and to perform its obligations under this Assignment, (ii) neither this Assignment nor any transaction contemplated hereby violates any law or agreement by which Assignor is bound, and (iii) Assignor owns, and (upon consummation of the transactions contemplated by this Assignment) Assignees will acquire, all right, title and interest in and to the Agreement, free and clear of all Encumbrances. (b) Assignees. As a material inducement for and in consideration of Assignor's transfer of the Agreement, each Assignee represents and warrants to Assignor that (i)Assignee has all requisite power and authority to perform its obligations under this Assignment, 2 and (ii) neither this Assignment nor any transaction contemplated hereby violates any law or agreement by which any Assignee is bound. 3. Miscellaneous. (a) Entire Agreement. This Assignment sets forth the entire agreement and understanding, and supersedes any prior agreements and understandings, written or oral, of the parties with respect to the subject matter hereof. (b) Amendments. This Assignment may not be amended except by written agreement signed by each party against whom such amendment is sought to be enforced. (c) Assignment. Neither this Assignment nor any right or obligation hereunder may be assigned in whole or in part by any party without the written consent of all parties hereto. This Assignment shall benefit and bind the parties hereto and their respective successors and permitted assigns. (d) Choice of Law. This Assignment shall be governed by, and construed and enforced in accordance with, the laws of the State of Texas (without regard to any such laws pertaining to conflicts of laws) applicable to contracts executed and performed in such state. (e) Counterparts. This Assignment may be executed in one or more counterparts, all of which shall constitute one and the same instrument. (f) Interpretation. Whenever in this Assignment the singular number is used, the same shall include the plural where appropriate (and vice versa), and words of any gender shall include each other gender where appropriate. As used in this Assignment, "or" shall mean "and/or," and "including" or "include" shall mean "including without limitation." [REMAINDER OF PAGE IS INTENTIONALLY BLANK] 2 3 IN WITNESS WHEREOF, this Assignment has been executed and delivered on March 9, 2001. Assignor: LONE STAR U.S. ACQUISITIONS, LLC By: /s/ J.D. Dell --------------------------------- Name: J.D. Dell ------------------------------- Title: Sr. Vice President ------------------------------ Assignees: LSF3 CAPITAL INVESTMENTS I, LLC By: /s/ J.D. Dell --------------------------------- Name: J.D. Dell ------------------------------- Title: President ------------------------------ LSF3 CAPITAL INVESTMENTS II, LLC. By: /s/ J.D. Dell --------------------------------- Name: J.D. Dell ------------------------------- Title: President ------------------------------ 3 EX-10.3 4 d85065ex10-3.txt AMENDED/RESTATED STOCK PURCHASE AGREEMENT 1 EXHIBIT 10.3 AMENDED AND RESTATED STOCK PURCHASE AGREEMENT AMONG THE PERSONS LISTED ON THE SIGNATURE PAGES HERETO AND LONE STAR U.S. ACQUISITIONS, LLC DATED AS OF FEBRUARY 27, 2001 2 TABLE OF CONTENTS Page ARTICLE 1 PURCHASE AND SALE OF SHARES.........................................1 1.1 Purchase and Sale..................................................1 1.2 Purchase Price.....................................................2 1.3 Payment............................................................2 1.4 Earnest Money......................................................2 1.5 Inspection Period..................................................2 1.6 Dividends..........................................................3 ARTICLE 2 REPRESENTATIONS AND WARRANTIES......................................3 2.1 Representations and Warranties Regarding Stockholders..............3 (a) Ownership of REIT Equity Securities..........................3 (b) Authority; No Violations; Consents and Approvals.............3 (c) Agreements with the REIT or REIT Subsidiaries................4 (d) Brokers......................................................5 2.2 Representations and Warranties of Buyer............................5 (a) Organization, Standing and Power.............................5 (b) Authority; No Violations, Consents and Approvals.............5 (c) Litigation...................................................6 (d) Acquisition of Securities....................................6 (e) No Registration..............................................6 (f) Status as Accredited Investor................................7 (g) Brokers......................................................7 ARTICLE 3 COVENANTS OF PARTIES................................................7 3.1 Covenants of the Stockholders......................................7 (a) Other Transactions...........................................7 (b) Assistance...................................................8 (c) Notification of Certain Matters..............................8 (d) Third-Party Consents.........................................8 (e) Resignations as Directors and Officers.......................8 (f) Additional Arrangements......................................8 (g) No Amendment of Settlement Agreement.........................9 3.2 Covenants of the Buyer.............................................9 (a) Assistance...................................................9 (b) Notification of Certain Matters..............................9 (c) No Amendment of REIT Stock Purchase Agreement...............10 ARTICLE 4 MUTUAL COVENANTS...................................................10 4.1 Additional Agreements.............................................10 ARTICLE 5 CONDITIONS PRECEDENT...............................................10 5.1 Conditions to Each Party's Obligation.............................10 (a) Consents and Approvals......................................10 (b) No Injunctions or Restraints................................10 i 3 (c) No Action...................................................11 (d) Settlement of Litigation....................................11 5.2 Conditions to Obligations of Buyer................................11 (a) Representations and Warranties..............................11 (b) Performance of Obligations..................................11 (c) Consents Under Agreements...................................11 (d) Closing Deliveries..........................................11 (e) Stock Exchange Listing......................................11 (f) Material Adverse Effect.....................................12 (g) REIT Stock Purchase Agreement...............................12 (h) Resignations as Directors and Officers......................12 5.3 Conditions to Obligations of Stockholders.........................12 (a) Representations and Warranties..............................12 (b) Performance of Obligations of Buyer.........................12 (c) Closing Deliveries..........................................12 (d) Releases....................................................12 (e) Registration Rights.........................................12 ARTICLE 6 CLOSING............................................................13 6.1 Closing...........................................................13 6.2 Actions to Occur at Closing.......................................13 ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER..................................14 7.1 Termination.......................................................14 7.2 Effect of Termination.............................................15 ARTICLE 8 INDEMNIFICATION....................................................16 8.1 Indemnification of Buyer..........................................16 8.2 Indemnification of Stockholders...................................17 8.3 Defense of Third Party Claims.....................................17 8.4 Direct Claims.....................................................18 8.5 Limitations.......................................................18 (a) Limitation as to Time.......................................18 (b) No Contribution.............................................18 8.6 Tax Related Adjustments...........................................18 ARTICLE 9 GENERAL PROVISIONS.................................................19 9.1 Survival of Representations, Warranties, and Covenants............19 9.2 No Waiver Relating to Claims for Fraud............................19 9.3 Amendment and Modification........................................19 9.4 Waiver of Compliance..............................................19 9.5 Specific Performance..............................................20 9.6 Severability......................................................20 9.7 Expenses and Obligations..........................................20 9.8 Parties in Interest...............................................20 9.9 Notices...........................................................21 9.10 Counterparts......................................................22 ii 4 9.11 Entire Agreement..................................................22 9.12 Governing Law.....................................................22 9.13 Arbitration.......................................................23 9.14 Public Announcements..............................................23 9.15 Assignment........................................................23 9.16 No Affiliate Liability............................................23 9.17 Construction of "Stockholders."...................................24 9.18 Headings..........................................................24 9.19 Appointment of Stockholders' Representatives......................24 (a) Margolin Stockholders' Representative.......................24 (b) Rolph Stockholders' Representative..........................25 9.20 Deletion of Certain Rolph Stockholders............................27
EXHIBITS: Exhibit A - Form of Deposit Escrow Agreement Exhibit B-1 - Form of Noncompetition and Release Agreement (Fred H. Margolin) Exhibit B-2 - Form of Noncompetition and Release Agreement (Darrel L. Rolph) Exhibit B-3 - Form of Noncompetition and Release Agreement (David K. Rolph) Exhibit C-1 - Joint Notice and Stipulation of Dismissal With Prejudice Exhibit C-2 - Joint Stipulation of Dismissal With Prejudice Exhibit D - Form of Promissory Note
DISCLOSURE SCHEDULES: Schedule 2.1(a)(i) - Owned Securities Schedule 2.1(a)(ii) - Securities to be Sold to Buyer Schedule 2.1(c) - Agreements with the REIT Schedule 5.1(d) - Internal Litigation
INDEX OF DEFINED TERMS Definitions Defined on Page # Accredited Investor............................................................7 Affiliate......................................................................4 Agreement......................................................................1 Alternative Proposal...........................................................7 Business Day...................................................................2 Buyer..........................................................................1 Buyer Affiliate...............................................................23 Buyer Indemnified Costs.......................................................16 Buyer Indemnified Parties.....................................................17 Buyer Litigation...............................................................6 Closing.......................................................................13 Closing Date..................................................................13 control........................................................................4 iii 5 Cure Period...................................................................14 Deferred Payment Amount........................................................2 Delivery Date..................................................................2 Deposit Escrow Agreement.......................................................2 Earnest Money..................................................................2 Encumbrances...................................................................1 Escrow Agent...................................................................2 Exchange Act...................................................................4 Final Closing Date............................................................14 Former Margolin Stockholder...................................................24 Former Rolph Stockholder......................................................26 Governmental Entity............................................................4 HSR Act........................................................................4 Indemnified Costs.............................................................18 Indemnified Party.............................................................17 Indemnifying Party............................................................17 Initial Payment Amount.........................................................2 Inspection Termination Time....................................................3 Internal Litigation...........................................................11 Knowledge......................................................................6 Liquidated Damages Release....................................................15 Majority-in-Interest..........................................................25 Management Stockholders........................................................1 Margolin Stockholders.........................................................24 Margolin Stockholders' Representative.........................................24 Nominee Shares................................................................13 Options........................................................................1 Person.........................................................................4 Promissory Note...............................................................13 Registration Rights Agreement.................................................12 REIT...........................................................................1 REIT Common Stock..............................................................1 REIT Stock Purchase Agreement.................................................12 Releases.......................................................................8 Rolph Stockholders............................................................25 Rolph Stockholders' Representative............................................25 SEC............................................................................4 Second Payment Date............................................................2 Securities.....................................................................1 Securities Act.................................................................4 Settlement Agreement...........................................................9 Share Purchase Price...........................................................2 Shares.........................................................................1 Stockholder Indemnified Costs.................................................17 Stockholders...................................................................1 Subsidiary.....................................................................4 iv 6 Successor Margolin Stockholder................................................24 Successor Rolph Stockholder...................................................26 Transaction Documents..........................................................3 v 7 AMENDED AND RESTATED STOCK PURCHASE AGREEMENT This AMENDED AND RESTATED STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as of February 27, 2001, by and among Fred H. Margolin, Darrel L. Rolph and David K. Rolph (collectively, the "Management Stockholders") and the other individuals and entities listed on the signature pages hereto (collectively with the Management Stockholders, the "Stockholders"), and Lone Star U.S. Acquisitions, LLC, a Delaware limited liability company (including its permitted successors and assigns, "Buyer"). WHEREAS, on January 17, 2001 Buyer, the Stockholders and certain other entities entered into a Stock Purchase Agreement (the "Original Agreement"); WHEREAS, the Stockholders own as of the date hereof (a) shares of common stock, par value $0.001 per share ("REIT Common Stock"), of U.S. Restaurant Properties, Inc., a Maryland corporation (the "REIT"), and (b) options to purchase shares of REIT Common Stock (each such option to purchase a share, an "Option" and, collectively, the "Options" and, collectively with the Shares (as hereinafter defined), the "Securities"), in each case in the amounts set forth on Schedule 2.1(a)(i); WHEREAS, Buyer desires to purchase from the Stockholders, and the Stockholders desire to sell to Buyer, certain shares of REIT Common Stock in consideration of the Share Purchase Price (as hereinafter defined), upon the terms and subject to the conditions set forth herein; and WHEREAS, Buyer and the Stockholders now desire to amend and restate the Original Agreement to delete certain entities as Stockholders and to make such other amendments as are set forth herein. NOW, THEREFORE, in consideration of the respective representations, warranties, agreements, and conditions hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE 1 PURCHASE AND SALE OF SHARES 1.1 Purchase and Sale. Upon the terms and subject to the conditions of this Agreement, at the Closing (as hereinafter defined), each Stockholder shall sell to Buyer, and Buyer shall purchase from such Stockholder, the shares of REIT Common Stock (the "Shares") described on Schedule 2.1(a)(ii), free and clear of all liens, pledges, charges, encumbrances, claims, security interests, restrictions, rights of first refusal, defects in title, or options of any kind ("Encumbrances"), other than restrictions imposed by applicable Federal and state securities laws and as set forth on Schedule 2.1(a)(ii). 8 1.2 Purchase Price. The purchase price payable by Buyer to the Stockholders in consideration for the sale of the Shares shall be an amount equal to $11.35 per Share (the "Share Purchase Price") to be paid in two installments as provided in Section 1.3 hereof. 1.3 Payment. Subject to the satisfaction of the other terms and conditions of this Agreement, Buyer shall pay or cause to be paid to each Stockholder cash, by wire transfer of immediately available funds to an account designated by such Stockholder, as follows: (a) At the Closing, an amount equal to $11.00 (the "Initial Payment Amount") multiplied by the number of Shares being sold by such Stockholder. (b) By 5:00 p.m., Central time, on September 9, 2002 (the "Second Payment Date") an amount equal to $0.35 (the "Deferred Payment Amount") multiplied by the number of Shares being sold by such Stockholder. 1.4 Earnest Money. (a) Concurrently with the execution of the Original Agreement, Buyer, the Stockholders and an escrow agent (the "Escrow Agent") executed and delivered a Deposit Escrow Agreement (the "Deposit Escrow Agreement") in the form attached hereto as Exhibit A. (b) If this Agreement has not been terminated on or before the Inspection Termination Time (as hereinafter defined), then at or before 5:00 p.m., Central time, on February 28, 2001, Buyer shall deposit $1,000,000 in cash (the "Earnest Money") with the Escrow Agent to be held in accordance with the terms hereof and the Deposit Escrow Agreement. (c) Subject to the satisfaction of the conditions set forth in Article 5 hereof, at the Closing Buyer and the Stockholders shall instruct the Escrow Agent to release and return the Earnest Money (together with any earnings thereon) by wire transfer of immediately available funds to an account designated by Buyer. (d) If this Agreement is terminated after the Inspection Termination Time, Buyer and the Stockholders shall instruct the Escrow Agent to release the Earnest Money (together with any earnings thereon) to Buyer or to the Stockholders, all as provided in Section 7.2. (e) As used in this Agreement, "Business Day" means any day other than (i) a Saturday or Sunday or (ii) a day on which commercial banks in New York, New York or Dallas, Texas are authorized or required to be closed. 1.5 Inspection Period. On or before 5:00 p.m., Central time, on the fifth Business Day (as hereinafter defined) after the date of the Original Agreement, the Stockholders delivered the disclosure schedules of the Stockholders set forth herein to Buyer (the later of (a) such date of delivery and (b) the delivery by the REIT of the REIT Disclosure Schedule (as defined in the REIT Stock Purchase Agreement, as hereinafter defined) shall be hereinafter referred to as the "Delivery Date"). If for any reason Buyer, in its sole discretion, determines that it does not desire to purchase the Securities, then Buyer may terminate this Agreement in accordance with Section 7.1(c)(i) by delivering to the Margolin Stockholders' Representative (as hereinafter 2 9 defined), David K. Rolph and the Rolph Stockholders' Representative (as hereinafter defined) a notice of termination at any time during the period (the "Inspection Period") beginning on the Delivery Date and terminating at 5:00 p.m., Dallas, Texas time, on February 27, 2001 (the "Inspection Termination Time"). If Buyer does not so terminate this Agreement before the Inspection Termination Time, Buyer shall have waived its right to terminate this Agreement under this Section 1.5 and Section 7.1(c)(i). 1.6 Dividends. As between Buyer and the Stockholders, any dividends paid in respect of the Shares after the Closing Date shall be prorated between Buyer and the Stockholders such that each Stockholder shall be entitled to the portion of such dividends attributable to his pro rata portion of the Shares for the period prior to the Closing Date, and Buyer shall be entitled to the dividends attributable to the Shares for the period beginning on and after the Closing Date. Buyer shall pay to each Stockholder the amount of any dividends owed to such Stockholder and received by Buyer within 10 days after Buyer receives payment thereof. ARTICLE 2 REPRESENTATIONS AND WARRANTIES 2.1 Representations and Warranties Regarding Stockholders. Each Stockholder, severally as to himself and not jointly, represents and warrants to Buyer as follows (such representations and warranties being deemed to be made on a continuous basis until the Closing): (a) Ownership of REIT Equity Securities. (i) As of the date of this Agreement, such Stockholder is the holder of record and owns beneficially the equity securities of the REIT disclosed on Schedule 2.1(a)(i). (ii) At the Closing, Buyer will receive good and valid title to the Shares to be sold to Buyer by such Stockholder (as designated on Schedule 2.1(a)(ii)), free and clear of all Encumbrances. (b) Authority; No Violations; Consents and Approvals. (i) Such Stockholder has full legal capacity to enter into the Transaction Documents to which he is a party and to consummate the transactions contemplated hereby and thereby. The "Transaction Documents" are defined as this Agreement, the Releases (as hereinafter defined) and the Deposit Escrow Agreement. The Transaction Documents to which such Stockholder is a party have been (or, in the case of the applicable Release, will be) duly executed and delivered by such Stockholder (or, if applicable, the Margolin Stockholders' Representative and the Rolph Stockholders' Representative) and, assuming the Transaction Documents to which other Persons are parties constitute the valid and binding obligations of such other Persons, constitute (or, in the case of the applicable Release, will constitute) valid and binding obligations of such Stockholder, enforceable in accordance with their terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general principles of 3 10 equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). As used in this Agreement, "Person" means an individual, corporation, partnership, limited liability company, association, trust, estate, unincorporated organization, or other entity. (ii) No consent, approval, order or authorization of, or registration, declaration or filing with, or permit from, any court, governmental, regulatory or administrative agency or commission or other governmental authority or instrumentality, domestic or foreign (a "Governmental Entity"), is required by or with respect to such Stockholder in connection with the execution and delivery of the Transaction Documents by such Stockholder or the consummation by such Stockholder of the transactions contemplated hereby or thereby, except for: (A) the filing with the Securities and Exchange Commission ("SEC") of such reports under Sections 13(a) and 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and such other compliance with the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act and the rules and regulations thereunder, as may be required in connection with the Transaction Documents and the transactions contemplated hereby or thereby; (B) the submission by the REIT of a supplemental listing application regarding certain of the Shares with the New York Stock Exchange; (C) any filings required under state securities laws; (D) such filings and approvals as may be required by any applicable state laws; (E) such filings and approvals as may be required by any foreign premerger notification, securities, corporate or other law, rule or regulation; and (F) the filing, if applicable, of a pre-merger notification and report by the REIT under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the expiration or termination of the applicable waiting period thereunder. (c) Agreements with the REIT or REIT Subsidiaries. Schedule 2.1(c) sets forth all agreements or arrangements (i) to which such Stockholder is a party relating to (A) the equity interest of such Stockholder in the REIT or any of its Subsidiaries or Affiliates, (B) any rights or obligations of such Stockholder as an officer, director or stockholder of the REIT or any of its Affiliates or Subsidiaries, (C) any right of such Stockholder to compensation or other remuneration by the REIT, or any of its Subsidiaries or Affiliates and (D) any other agreement between such Stockholder and the REIT or any Subsidiary of the REIT or (ii) to the Knowledge of such Stockholder, to which Gerald H. Graham or an Affiliate of Gerald H. Graham is a party and to which any of the REIT, an Affiliate of the REIT, or a Subsidiary of the REIT is a party. As used in this Agreement, "Affiliate" means, with respect to any Person, any other Person controlling, controlled by or under common control with such Person. For purposes of this definition and this Agreement, the term "control" (and correlative terms) means the power, whether by contract, equity ownership or otherwise, to direct the policies or management of a Person. As used in this Agreement, the word "Subsidiary" means, with respect to any party, any corporation or other organization, whether incorporated or unincorporated, of which: (A) such party or any other Subsidiary of such party is a general partner; (B) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is, directly or indirectly, owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and any one or more of its Subsidiaries; (C) such party and/or any other Subsidiary of such party beneficially owns, directly or indirectly, at least a 4 11 majority of the equity interests; or (D) such party and/or any other Subsidiary of such party has a direct or indirect investment of $10 million or more in equity or indebtedness in such corporation or other organization. (d) Brokers. Except for the fee to be paid to Christopher Weil & Company, Inc., as provided in Section 9.7, no agent, broker, investment banker or other Person is or will be entitled to any broker's, finder's or other similar fee or commission in connection with the transactions contemplated by the Transaction Documents based upon arrangements made by or on behalf of such Stockholder. 2.2 Representations and Warranties of Buyer. Buyer represents and warrants to the Stockholders as follows (such representations and warranties being deemed to be made on a continuous basis until the Closing): (a) Organization, Standing and Power. Buyer is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware. Buyer has no Subsidiaries. (b) Authority; No Violations, Consents and Approvals. (i) Buyer has all requisite power and authority to enter into the Transaction Documents to which it is a party and to consummate the transactions contemplated hereby or thereby. The execution and delivery of the Transaction Documents to which Buyer is a party and the consummation of the transactions contemplated hereby or thereby have been duly authorized by all necessary action on the part of Buyer. The Transaction Documents to which Buyer is a party have been duly executed and delivered by Buyer, and assuming the Transaction Documents to which any other Person is a party constitute the valid and binding obligation of such Person, constitute a valid and binding obligation of Buyer enforceable in accordance with its terms, subject as to enforceability, to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (ii) The execution and delivery of the Transaction Documents to which Buyer is a party do not, and the consummation of the transactions contemplated hereby or thereby, and compliance with the provisions hereof or thereof, will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any material obligation or to the loss of a material benefit under, or give rise to a right of purchase under, result in the creation of any Encumbrance upon any of the properties or assets of Buyer under, require the consent or approval of any third party or otherwise result in a material detriment to Buyer under, any provision of (A) Buyer's limited liability company agreement, (B) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to Buyer or its respective properties or assets or any guarantee by Buyer of the foregoing, or (C) assuming the consents, approvals, authorizations or permits and filings or notifications 5 12 referred to in Section 2.2(b)(iii) are duly and timely obtained or made, any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Buyer or any of its respective properties or assets, other than, in the case of clauses (B) and (C), any such conflicts, violations, defaults, rights, Encumbrances or detriments that, individually or in the aggregate, would not, or could not reasonably be expected to, materially impair the ability of Buyer to perform its obligations hereunder or thereunder or prevent the consummation of any of the transactions contemplated hereby or thereby. (iii) No consent, approval, order or authorization of, or registration, declaration or filing with, or permit from any Governmental Entity is required by or with respect to Buyer in connection with the execution and delivery by Buyer of the Transaction Documents to which it is a party or the consummation by Buyer of the transactions contemplated hereby or thereby, except for: (A) the filing with the SEC of such reports under Section 13(a) of the Exchange Act and such other compliance with the Securities Act and the Exchange Act and the rules and regulations thereunder as may be required in connection with this Agreement and the transactions contemplated hereby; (B) any filings required under state securities laws; (C) such filings and approvals as may be required by any applicable state takeover laws or environmental laws; and (D) filings under the HSR Act, if applicable. (c) Litigation. As of the date of this Agreement, there is no suit, action or proceeding pending, or, to the Knowledge (as hereafter defined) of Buyer, threatened against Buyer that could reasonably be expected to affect the ability of Buyer to consummate the transactions contemplated hereby ("Buyer Litigation"), and Buyer has no Knowledge of any facts that are likely to give rise to any Buyer Litigation, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Buyer that could reasonably be expected to affect the ability of Buyer to consummate the transactions contemplated hereby. As used in this Agreement, "Knowledge" means, with respect to a specified party hereto, the actual knowledge of such party. (d) Acquisition of Securities. Buyer is acquiring the Securities for its own account or for one or more separate accounts maintained by it or for the account of one or more institutional investors on whose behalf Buyer has authority to make this representation for investment and without the view to the distribution thereof within the meaning of the Securities Act or with any present intention of distributing or selling any of the Securities except in compliance with the Securities Act and except to one or more such institutional investors, provided that the disposition by Buyer or such institutional investors of their property shall at all time be within their control. (e) No Registration. Buyer understands that the Securities (A) have not been registered under the Securities Act or any state securities laws or the securities laws of any other domestic or foreign jurisdiction and (B) will be transferred to Buyer in reliance upon an exemption from the registration and prospectus delivery requirements of the Securities Act and state securities laws. 6 13 (f) Status as Accredited Investor. Buyer is an "Accredited Investor" within the meaning of Rule 501 of Regulation D, as promulgated by the United States Securities and Exchange Commission pursuant to the Securities Act. (g) Brokers. Except for the fee to be paid to Christopher Weil & Company, Inc. as provided in Section 9.7, no agent, broker, investment banker or other Person is or will be entitled to any broker's, finder's or other similar fee or commission in connection with the transactions contemplated by the Transaction Documents based upon arrangements made by or on behalf of Buyer or any Affiliate of Buyer. ARTICLE 3 COVENANTS OF PARTIES 3.1 Covenants of the Stockholders. Each of the Stockholders (or, in the case of Sections 3.1(e), (f) and (g), the Management Stockholders), severally as to himself or itself and not jointly, covenants to Buyer as follows: (a) Other Transactions. None of the Stockholders shall (in their capacities as stockholders of the REIT), nor shall they permit their respective Affiliates to, directly or indirectly, through any officer, director, stockholder, partner, member, manager, employee, agent, financial advisor, banker or other representative, or otherwise, solicit, initiate, or encourage the submission of any inquiry, proposal or offer from any Person relating to, or any other efforts or attempts that constitute or may reasonably be expected to lead to, any acquisition, purchase or financing of all or any material portion of the assets of the REIT or any of its Subsidiaries or Affiliates or any equity interest in the REIT or any of its Subsidiaries or Affiliates or any tender or exchange offer, merger, consolidation, share exchange, business combination, or other similar transaction with the REIT or any of its Subsidiaries or Affiliates or participate (in their capacity as stockholders of the REIT) in any negotiations regarding, or furnish to any other Person any information with respect to, or otherwise cooperate in any way with, or assist or participate in, facilitate, or encourage, any effort or attempt by any other Person to do or seek any of the foregoing (any such inquiry, proposal or offer, an "Alternative Proposal"). The Stockholders shall immediately communicate to Buyer the material terms of any such Alternative Proposal (and the identity of the party making such Alternative Proposal) which they may receive and, if such Alternative Proposal is in writing, the Stockholders shall promptly deliver a copy of such Alternative Proposal to Buyer. Each Stockholder immediately shall cease and cause to be terminated all existing discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. Each Stockholder hereby revokes any and all previous proxies with respect to such Stockholder's Shares and irrevocably agrees to attend, in Person or by proxy, and to vote or cause to be voted (or if the stockholders of the REIT act by written consent, to consent in writing, with respect to) all voting securities of the REIT that such Stockholder owns or has the right to vote or consent with respect to (a) the issuance of the shares of REIT Common Stock to be issued pursuant to the REIT Stock Purchase Agreement (as hereinafter defined) and (b) against any Alternative Proposal or other proposal or matter that may interfere with or be inconsistent with the transactions contemplated by this Agreement or that is reasonably likely to result in a breach in any material respect of any covenant, representation or warranty of any other obligation of the Stockholders or the REIT under any of 7 14 the Transaction Documents. Buyer understands, acknowledges and agrees that the Stockholders are officers, directors or both of the REIT and as such have fiduciary obligations to the REIT and its stockholders and, nothing to the contrary contained herein withstanding, no action taken or which any Stockholder fails to take in his capacity as an officer or director of the REIT shall be a breach of this Section 3.1(a) or any other provision of this Agreement, including (without limitation) any action in such capacity that results in Buyer's right to terminate the REIT Stock Purchase Agreement pursuant to Section 7.1(c)(ii), Section 7.1(c)(v) or Section 7.1(c)(vi) of such agreement or the REIT's right to terminate the REIT Stock Purchase Agreement pursuant to Section 7.1(d) of such agreement. (b) Assistance. If Buyer requests, the Stockholders shall use reasonable efforts to cooperate in all reasonable respects in connection with any financing efforts of Buyer or its Affiliates and in making any filings that may be made by Buyer or its Affiliates with the SEC, all at the sole expense of Buyer. (c) Notification of Certain Matters. Each Stockholder shall give prompt written notice to Buyer of (a) the occurrence, or failure to occur, of any event of which he has Knowledge that has caused or that would be likely to cause any representation or warranty of any Stockholder contained in this Agreement or the other Transaction Documents to be untrue or inaccurate in any material respect at any time from the date hereof to the Closing Date or (b) the failure of any Stockholder or, to the extent of his Knowledge, the failure of any officer, director, employee or agent of the REIT and the Subsidiaries of the REIT, to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it hereunder or thereunder. No such notification shall affect the representations or warranties of the parties or the conditions to their respective obligations hereunder. (d) Third-Party Consents. After the date hereof and prior to the Closing, each Stockholder shall use all commercially reasonable efforts, including making any required payments, to obtain the written consent from any party to any contract or agreement to which such Stockholder is a party that is required to permit the consummation of the transactions contemplated hereby or that is required to prevent a breach of such contract or agreement or the creation of the right to terminate such contract or agreement. (e) Resignations as Directors and Officers. At the Closing, each Management Stockholder shall resign as a director of the REIT and its Subsidiaries and from each position such Management Stockholder may hold as an officer of the REIT or any of its Subsidiaries. In addition, the Management Stockholders shall have entered into Noncompetition and Release Agreements in favor of the REIT in the forms attached hereto as Exhibit B-1, with respect to Fred H. Margolin, Exhibit B-2, with respect to Darrel L. Rolph, and Exhibit B-3, with respect to David K. Rolph (collectively, the "Releases"), and each Management Stockholder shall deliver an executed copy of his respective Release to Buyer. (f) Additional Arrangements. Subject to the terms and conditions herein provided, each of the Management Stockholders (in their capacities as stockholders of the REIT) shall take, or cause to be taken, all action that stockholders in their capacity as such can take or cause to be taken, and shall do, or cause to be done, all things that stockholders in their capacity as such can do or cause to be done, necessary, appropriate or desirable under any applicable laws 8 15 and regulations or under applicable governing agreements to consummate and make effective the transactions contemplated by this Agreement, including using all reasonable efforts to obtain all necessary waivers, consents and approvals and effecting all necessary registrations and filings; provided, however, that, except as provided in Section 3.1(d), nothing contained herein shall be construed to require any Management Stockholder to expend any money, incur any obligation or duty or to waive any right, privilege or preference, except as expressly provided in the Transaction Documents, without compensation that is acceptable to such Management Stockholder. Each of the Management Stockholders (in their capacities as stockholders of the REIT) shall take, or cause to be taken, all action that stockholders in their capacity as such can take or cause to be taken, or shall do, or cause to be done, all things that stockholders in their capacity as such can do or cause to be done, necessary, appropriate or desirable to cause the covenants and conditions applicable to the transactions contemplated hereby to be performed or satisfied as soon as practicable; provided, however, that, except as provided in Section 3.1(d), nothing contained herein shall be construed to require any Management Stockholder to expend any money, incur any obligation or duty or to waive any right, privilege or preference, except as expressly provided in the Transaction Documents, without compensation that is acceptable to such Management Stockholder. In addition, if any Governmental Entity shall have issued any order, decree, ruling or injunction, or taken any other action that would have the effect of restraining, enjoining or otherwise prohibiting or preventing the consummation of the transactions contemplated hereby, each of the Management Stockholders, solely in his capacity as a stockholder, shall use his reasonable best efforts to have such order, decree, ruling or injunction or other action declared ineffective as soon as practicable; provided, however, that nothing contained herein shall be construed to require any Management Stockholder to expend any money, incur any obligation or duty or to waive any right, privilege or preference, except as expressly provided in the Transaction Documents, without compensation that is acceptable to such Management Stockholder. (g) No Amendment of Settlement Agreement. Each Management Stockholder agrees that he shall not amend, waive, terminate or breach any provision of that certain settlement agreement (the "Settlement Agreement") dated December 29, 2000 and entered into by and among the parties to the Internal Litigation (as hereinafter defined), a true and correct copy of which has been delivered to Buyer, unless such amendment, waiver or breach would not adversely affect Buyer, Buyer's rights hereunder or the ability of Buyer, the REIT or the Stockholders to perform on a timely basis any material obligation under this Agreement or any of the other Transaction Documents to which such Person is a party or to consummate the transactions contemplated hereby or thereby. 3.2 Covenants of the Buyer. Buyer covenants to each Stockholder as follows: (a) Assistance. If the REIT requests, Buyer shall use reasonable efforts to cooperate in all reasonable respects in connection with any filings that may be made by the REIT or its Affiliates with the SEC in connection with this Agreement or the REIT Stock Purchase Agreement, all at the sole expense of the REIT. (b) Notification of Certain Matters. Buyer shall give prompt written notice to each Stockholder of (i) the occurrence, or failure to occur, of any event of which Buyer has Knowledge that has caused or that would be likely to cause any representation or warranty of 9 16 Buyer contained in this Agreement, the REIT Stock Purchase Agreement or the other Transaction Documents to be untrue or inaccurate in any material respect at any time from the date hereof through the Closing Date or (ii) the failure of Buyer or, to the extent of its Knowledge, the failure of the REIT, or the Subsidiaries of the REIT, to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it hereunder or thereunder. No such notification shall affect the representations or warranties of the parties or the conditions to their respective obligations hereunder. (c) No Amendment of REIT Stock Purchase Agreement. Buyer agrees it shall not amend, waive, terminate (except in accordance with its terms but other than a termination pursuant to Section 7.1(a) thereof) or breach any provision of the REIT Stock Purchase Agreement unless such amendment, waiver, termination or breach would not adversely affect the ability of Buyer or the REIT to perform on a timely basis any material obligation under this Agreement, the REIT Stock Purchase Agreement or any of the other Transaction Documents to which Buyer is a party or to consummate the transactions contemplated hereby or thereby. ARTICLE 4 MUTUAL COVENANTS 4.1 Additional Agreements. Subject to the terms and conditions of this Agreement, each of the Stockholders and Buyer will use its commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper, or advisable under applicable laws and regulations, to consummate and make effective the transactions contemplated by this Agreement. If, at any time after the Closing Date, any further action is necessary to comply with this Agreement, the parties to this Agreement or their duly authorized representatives shall take all such action as is commercially reasonable. ARTICLE 5 CONDITIONS PRECEDENT 5.1 Conditions to Each Party's Obligation. The respective obligations of Buyer and each Stockholder to effect the transactions contemplated hereby are subject to the satisfaction on or prior to the Closing Date of the following conditions: (a) Consents and Approvals. All authorizations, consents, orders, or approvals of, or declarations or filings with, or expirations of waiting periods imposed by, any Governmental Entity necessary for the consummation of the transactions contemplated by this Agreement shall have been filed, occurred, or been obtained. (b) No Injunctions or Restraints. No temporary restraining order, preliminary or permanent injunction, or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the transactions contemplated hereby shall be in effect. 10 17 (c) No Action. No action shall have been taken nor any statute, rule, or regulation shall have been enacted by any Governmental Entity that makes the consummation of the transactions contemplated hereby illegal. (d) Settlement of Litigation. With respect to all litigation, arbitration, and other proceedings described on Schedule 5.1(d) (the "Internal Litigation"), a Joint Notice of Stipulation and Dismissal with Prejudice in the form attached hereto as Exhibit C-1 and a Joint Stipulation of Dismissal with Prejudice in the form attached hereto as Exhibit C-2 shall have been fully executed and filed with the appropriate courts, and Buyer shall have received evidence reasonably satisfactory to it of such execution and filing, and no amendment, waiver, termination or breach of the Settlement Agreement shall have occurred that would materially adversely affect Buyer, Buyer's rights hereunder or the ability of Buyer, the REIT or the Stockholders to perform on a timely basis any material obligation under this Agreement or any of the other Transaction Documents to which such Person is a party or to consummate the transactions contemplated hereby or thereby. 5.2 Conditions to Obligations of Buyer. The obligation of Buyer to effect the transactions contemplated hereby is subject to the satisfaction of the following conditions unless waived, in whole or in part, by Buyer: (a) Representations and Warranties. The representations and warranties of each Stockholder set forth in this Agreement shall be true and correct in all material respects (provided that any representation or warranty of a Stockholder contained herein that is qualified by a materiality standard or a material adverse effect qualification shall not be further qualified hereby), and Buyer shall have received a certificate to the foregoing effect signed by each of the Stockholders (but only as to themselves). (b) Performance of Obligations. The Stockholders shall have performed in all material respects (provided that any covenant or agreement that is qualified by a materiality standard or material adverse effect qualification shall not be further qualified hereby) all obligations required to be performed by them under this Agreement prior to the Closing Date, and Buyer shall have received a certificate to such effect signed by each of the Stockholders (but only as to themselves). (c) Consents Under Agreements. Buyer shall have been furnished with evidence reasonably satisfactory to it of the consent or approval of each Person that is a party to any contract or agreement (including evidence of the payment or any required payment) and whose consent or approval shall be required in order to permit the consummation of the transactions contemplated hereby or to prevent a breach of such contract or agreement or the creation of a right to terminate such contract or agreement, and such consent or approval shall be in form and substance reasonably satisfactory to Buyer. (d) Closing Deliveries. All documents, instruments, certificates or other items required to be delivered by the Stockholders pursuant to Section 6.2(b) shall have been delivered. (e) Stock Exchange Listing. The Shares shall have been authorized for listing on the New York Stock Exchange, subject to official notice of issuance. 11 18 (f) Material Adverse Effect. There shall not have occurred (i) any event, circumstance, condition, fact, effect or other matter which has had or could reasonably be expected to have a material adverse effect on the ability of the Stockholders to perform on a timely basis any material obligation under this Agreement or any of the other Transaction Documents to which such Person is a party or to consummate the transactions contemplated hereby or thereby, or (ii) any material disruption of, or material adverse change in, financial, banking or capital market conditions. (g) REIT Stock Purchase Agreement. The transactions contemplated to occur at the First Closing (as defined in the REIT Stock Purchase Agreement) by that certain Amended and Restated Stock Purchase Agreement of even date herewith by and between Buyer and the REIT (the "REIT Stock Purchase Agreement") shall have been completed, in accordance with the terms of the REIT Stock Purchase Agreement, concurrently with the Closing. (h) Resignations as Directors and Officers. Each Management Stockholder shall have resigned as a director of the REIT and its Subsidiaries and from each position such Management Stockholder may hold as an officer of the REIT or any of its Subsidiaries, and Buyer shall have received an executed copy of each resignation required by Section 3.1(e). 5.3 Conditions to Obligations of Stockholders. The obligation of the Stockholders to effect the transactions contemplated hereby is subject to the satisfaction of the following conditions unless waived, in whole or in part, by the Stockholders. (a) Representations and Warranties. The representations and warranties of Buyer set forth in this Agreement shall be true and correct in all material respects (provided that any representation or warranty of Buyer contained herein that is qualified by a materiality standard shall not be further qualified hereby), and the Stockholders shall have received a certificate to the foregoing effect signed on behalf of Buyer by an officer of Buyer. (b) Performance of Obligations of Buyer. Buyer shall have performed in all material respects (provided that any covenant or agreement that is qualified by a materiality standard shall not be further qualified hereby) the obligations required to be performed by it under this Agreement prior to the Closing Date, and the Stockholders shall have received a certificate to such effect signed on behalf of Buyer by an officer of Buyer. (c) Closing Deliveries. All documents, instruments, certificates or other items required to be delivered by Buyer pursuant to Section 6.2(a) shall have been delivered. (d) Releases. Counterparts of the Releases shall have been executed by the REIT and delivered to the Management Stockholders. (e) Registration Rights. REIT and Stockholders shall have entered into an agreement providing for a resale shelf registration statement with respect to any REIT Common Stock issuable upon exercise of the Options, to be effective for a period of up to five years and on terms customary for agreements of such type, including mutual indemnification provisions as are customary in similar situations (the "Registration Rights Agreement"). The Registration Rights Agreement shall provide that the REIT shall bear all reasonable costs and expenses associated with such registration (except for underwriters' discounts and commissions, if any), 12 19 including without limitation the reasonable fees and expenses of one counsel representing the Stockholders. ARTICLE 6 CLOSING 6.1 Closing. The closing of the purchase and sale of the Shares (the "Closing") shall take place, subject to the earlier satisfaction or waiver of each of the conditions set forth in Article 5 (other than the conditions set forth in Sections 5.2(d), 5.2(g) and 5.3(c)) concurrently with the closing of the transactions contemplated by the REIT Stock Purchase Agreement, at 9:30 a.m., Central time, on March 9, 2001, at the offices of Vinson & Elkins L.L.P., 3700 Trammell Crow Center, 2001 Ross Avenue, Dallas, Texas 75201, unless another date or place is agreed to in writing by the parties (the "Closing Date"). 6.2 Actions to Occur at Closing. (a) At the Closing, Buyer shall deliver to the Stockholders the following: (i) Purchase Price. To each Stockholder, an amount equal to the Initial Payment Amount multiplied by the number of Shares being sold by such Stockholder by wire transfer of immediately available funds to an account designated by such Stockholder; and (ii) Certificates. The certificates referred to in Sections 5.3(a) and 5.3(b). (iii) Promissory Notes. Three Promissory Notes, in the form attached hereto at Exhibit D (each a "Promissory Note"), which have an aggregate principal amount equal to the Deferred Payment Amount multiplied by the number of Shares being sold by the Stockholders. (b) At the Closing, the Stockholders shall deliver to Buyer the following: (i) Share Certificates. Certificates representing the Shares identified on Schedule 2.1(a)(ii), duly endorsed in blank or accompanied by stock powers duly endorsed in blank, and otherwise in proper form for transfer; provided, however, that the Stockholders shall use his or its reasonable best efforts to cause the certificates for any Shares held in a custodial account, foundation or trust (the "Nominee Shares") to be delivered on or within 60 days after the Closing Date and, if the certificates representing Nominee Shares are not delivered within 60 days following the Closing Date, this Agreement shall be terminated with respect to such Nominee Shares, and thereafter the Buyer shall have no obligation to purchase such Nominee Shares, and such Stockholder owning such shares shall have no obligation to sell such Nominee Shares. Nothing to the contrary contained herein withstanding, Buyer shall have no obligation to deliver 13 20 payment of the Initial Installment Amount for Nominee Shares until such time as the certificates representing such shares are tendered to Buyer; (ii) Certificates. The certificates described in Sections 5.2(a) and 5.2(b); (iii) Consents. The original of each consent, if any, contemplated by Section 5.2(c); (iv) Releases. Provided that the condition in Section 5.3(d) has been satisfied, counterparts of the applicable Release executed by each Management Stockholder; and (v) Resignations. The resignations referred to in Section 3.1(e). ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER 7.1 Termination. This Agreement may be terminated prior to the Closing: (a) by mutual consent of Buyer and the Stockholders; (b) by either Buyer or the Stockholders: (i) in the event of a breach by the other party of any representation, warranty, covenant, agreement, or obligation contained in this Agreement which cannot be or has not been cured within ten days (the "Cure Period") following receipt by the breaching party of written notice of such breach; provided, however, that there shall be no right to cure any breach of Section 1.4, Section 3.1(a) or Section 6.2; provided, further, that no Stockholder shall be deemed to be in default of its obligations under Section 6.2(b) as a result of any failure to obtain a consent referred to in Section 6.2(b)(iii) (subject to compliance with the provisions of Section 3.1(d)); and provided, further, that the Stockholders may not terminate this Agreement pursuant to this Section 7.1(b)(i) at or prior to the Inspection Termination Time; (ii) if a court of competent jurisdiction or other Governmental Entity shall have issued an order, decree, or ruling or taken any other action (which order, decree, or ruling Buyer and the Stockholders shall use their best efforts to lift), in each case permanently restraining, enjoining, or otherwise prohibiting the transactions contemplated by this Agreement or the other Transaction Documents, and such order, decree, ruling, or other action shall have become final and nonappealable; or (iii) if the Closing shall not have occurred by 5:00 p.m., Central time, on the 150th day after the Delivery Date (the "Final Closing Date"); provided, however, that the right to terminate this Agreement under this clause (iii) shall not be available to any party whose breach of this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date; 14 21 (c) by Buyer: (i) pursuant to the provisions of Section 1.5 upon delivery of the notice of termination to the Margolin Stockholders' Representative, David K. Rolph and the Rolph Stockholders' Representative; (ii) if the Settlement Agreement has been amended, waived, terminated or breached in a manner that would materially adversely affect Buyer, Buyer's rights hereunder or the ability of Buyer, the REIT or the Stockholders to perform on a timely basis any material obligation under this Agreement or any of the other Transaction Documents to which such Person is a party or to consummate the transactions contemplated hereby or thereby; (iii) if the REIT Stock Purchase Agreement is terminated in accordance with its terms (other than as a result of a breach of the REIT Stock Purchase Agreement by Buyer and other than pursuant to Section 7.1(a) thereof); or (iv) upon the occurrence of an event described in Section 5.2(f); or (d) by the Stockholders, if Buyer fails to deposit $1,000,000 with the Escrow Agent at or before 5:00 p.m., Central time, on February 28, 2001; provided that this Agreement has not otherwise been terminated prior to such time. The right of any party hereto to terminate this Agreement pursuant to this Section 7.1 shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any party hereto, any Person controlling any such party or any of their respective officers, directors, employees, accountants, consultants, legal counsel, agents, or other representatives whether prior to or after the execution of this Agreement. Notwithstanding anything in the foregoing to the contrary, a party that is in material breach of this Agreement shall not be entitled to terminate this Agreement except, in the case of a default by any Stockholder, with the consent of Buyer, or in the case of a default by Buyer, with the consent of each Stockholder. 7.2 Effect of Termination. In the event of a termination of this Agreement by either the Stockholders or Buyer as provided above, there shall be no liability on the part of any of the Stockholders or Buyer, except for liability arising out of a breach of this Agreement as limited by the provisions of this Section 7.2, except as otherwise set forth in Section 9.2. Article 9 and this Article 7 shall survive termination of this Agreement. If, after the Inspection Termination Time and prior to the Closing, Buyer should breach this Agreement in a manner which gives rise to a termination right pursuant to Section 7.1(b)(i) or 7.1(d) on the part of the Stockholders (which breach shall include a purported or wrongful termination of this Agreement by Buyer made in breach of this Agreement), then the Stockholders' sole and exclusive right and remedy shall be to terminate this Agreement pursuant to Section 7.1(b)(i) or 7.1(d) and to receive payment of the liquidated damages described below as provided in this Section 7.2. If this Agreement is terminated by the Stockholders pursuant to Section 7.1(b)(i) or 7.1(d), the parties agree and acknowledge that the Stockholders will suffer damages that are not practicable to ascertain. Accordingly, in such event and if, within ten Business Days after termination of this Agreement 15 22 by the Stockholders pursuant to Section 7.1(b)(i) or 7.1(d), the Stockholders deliver to Buyer a written demand for liquidated damages and an executed copy of the applicable release as provided in the Deposit Escrow Agreement (the "Liquidated Damages Release"), the Stockholders shall be entitled to an aggregate amount in cash equal to $1,000,000 (together with any Interest, as defined in the Deposit Escrow Agreement), as liquidated damages payable by Buyer in accordance with the provisions of the Deposit Escrow Agreement within ten Business Days after receipt of the written demand by the Stockholders. Such amount shall be paid to the Stockholders pro rata based on the value of the Securities (based on the Share Purchase Price) proposed to be sold to Buyer pursuant to the terms of this Agreement by each Stockholder. As security for payment thereof, Buyer has concurrently with the execution hereof entered into the Deposit Escrow Agreement with the Stockholders and the Escrow Agent as provided in Section 1.4, and Buyer will prior to the Inspection Termination Time deposit $1,000,000 with the Escrow Agent if this Agreement is not terminated prior to such deposit. The parties agree that the foregoing liquidated damages are reasonable considering all the circumstances existing as of the date hereof and constitute the parties' good faith estimate of the actual damages reasonably expected to be suffered by the Stockholders as a result of the termination of this Agreement. The Stockholders agree that, to the fullest extent permitted by law, the Stockholders' right to terminate this Agreement and to receive payment of the liquidated damages described above as provided in this Section 7.2 shall be the Stockholders' sole and exclusive right and remedy if the Closing does not occur with respect to any damages whatsoever that the Stockholders may suffer or allege to suffer as a result of any claim or cause of action asserted by the Stockholders relating to or arising from breaches of the representations, warranties or covenants of Buyer contained in this Agreement and to be made or performed at or prior to the Closing. If this Agreement is terminated either by Buyer or the Stockholders pursuant to any provision of Section 7.1 other than a termination (A) by the Stockholders pursuant to Section 7.1(b)(i) or 7.1(d), or (B) by Buyer pursuant to Section 7.1(c)(i), then Buyer and the Stockholders shall instruct the Escrow Agent in writing to release the Earnest Money (including any accrued interest thereon), if any, to Buyer. If the Stockholders deliver to the Escrow Agent a fully executed counterpart of the Liquidated Damages Release in accordance with the Deposit Escrow Agreement, Buyer shall be deemed to have received a counterpart of the Liquidated Damages Release for purposes of this Section 7.2. ARTICLE 8 INDEMNIFICATION 8.1 Indemnification of Buyer. (a) From and after the Closing and subject to the provisions of this Article 8 and Section 9.2 below, each Stockholder, severally and not jointly, agrees to indemnify and hold harmless the Buyer Indemnified Parties (as hereinafter defined) from and against any and all Buyer Indemnified Costs (as hereinafter defined); provided, however that the liability of any Stockholder individually for any Buyer Indemnified Costs shall not exceed an amount equal to the Share Purchase Price multiplied by the number of Shares purchased from such Stockholder by Buyer. (b) As used in this Agreement, 16 23 (i) "Buyer Indemnified Costs" means all damages, losses, claims, liabilities, demands, charges, suits, penalties, costs, and expenses (including court costs and reasonable legal fees and expenses incurred in investigating and preparing for any litigation or proceeding) that any of the Buyer Indemnified Parties incurs and that arise out of any breach by the indemnifying Stockholder of any of the covenants or agreements of such Stockholder contained in this Agreement or the Deposit Escrow Agreement or the breach by the indemnifying Stockholder of any representation or warranty of such indemnifying Stockholder contained in Section 2.1 of this Agreement. (ii) "Buyer Indemnified Parties" means Buyer and each officer, director, partner, member, manager, agent, employee, stockholder and other Affiliate of Buyer. 8.2 Indemnification of Stockholders. From and after the Closing and subject to the provisions of this Article 8 and Section 9.2 below, Buyer agrees to indemnify and hold harmless each of the Stockholders from and against any and all Stockholder Indemnified Costs. As used in this Agreement, "Stockholder Indemnified Costs" means any and all damages, losses, claims, liabilities, demands, charges, suits, penalties, costs, and expenses (including court costs and reasonable legal fees and expenses incurred in investigating and preparing for any litigation or proceeding) that any of the Stockholders incurs and that arise out of any breach by Buyer of any of the covenants or agreements contained in this Agreement or the Deposit Escrow Agreement or the breach of any representation or warranty of the Buyer contained in Section 2.2 of this Agreement. 8.3 Defense of Third Party Claims. (a) If any third party shall notice the Buyer Indemnified Parties or the Stockholders, as the case may be (the "Indemnified Party"), with respect to any matter which may give rise to a claim for indemnification against any other party (the "Indemnifying Party") under this Article 8, then the Indemnified Party shall notify each Indemnifying Party thereof promptly; provided, however, that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any liability or obligation hereunder unless (and then solely to the extent) the Indemnifying Party thereby is damaged. In the event any Indemnifying Party notifies the Indemnified Party within 15 days after the Indemnified Party has given notice of the matter that the Indemnifying Party is assuming the defense thereof, (i) the Indemnifying Party will defend the Indemnified Party against the matter with counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the Indemnified Party may retain separate co-counsel at its sole cost and expense (except that the Indemnifying Party will be responsible for the fees and expenses of the separate co-counsel to the extent the Indemnified Party concludes reasonably that the counsel the Indemnifying Party has selected has a conflict of interest), (iii) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement from all liability with respect to the matter without the written consent of the Indemnifying Party (not to be withheld unreasonably) and (iv) the Indemnifying Party will not consent to the entry of any judgment with respect to the matter, or enter into any settlement from all liability with respect thereto, without the written consent of the Indemnified Party (not to be withheld unreasonably). An Indemnifying Party who fails to give the Indemnified Party notice within such 15-day period that the Indemnifying Party is assuming the defense of the matter shall have waived its right to assume the defense thereof. 17 24 (b) Notwithstanding the provisions of Section 8.3(a), the Indemnifying Party shall not be entitled to control (but shall be entitled to participate at its own expense in the defense of), and the Indemnified Party shall be entitled to have sole control over, the defense or settlement, compromise, admission, or acknowledgement of any third-party action to the extent that the third-party action seeks an order, injunction, or other equitable relief against the Indemnified Party which, if successful, would materially adversely affect the business, operations, assets, or financial condition of the Indemnified Party. The parties hereto shall extend reasonable cooperation in connection with the defense of any third-party action pursuant to this Article 8 and, in connection therewith, shall furnish such records, information and testimony and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested. 8.4 Direct Claims. In any case in which an Indemnified Party seeks indemnification hereunder which is not subject to Section 8.3 because no third-party action is involved, the Indemnified Party shall notify the Indemnifying Party in writing of any Buyer Indemnified Costs or Stockholder Indemnified Costs, as the case may be ("Indemnified Costs"), which such Indemnified Party claims are subject to indemnification under the terms hereof. Subject to the limitations set forth in Section 9.2, the failure of the Indemnified Party to exercise promptness in such notification shall not amount to a waiver of such claim unless (and then solely to the extent) the resulting delay materially prejudices the position of the Indemnifying Party with respect to such claim. 8.5 Limitations. The following provisions of this Section 8.5 shall be applicable after the time of the Closing: (a) Limitation as to Time. No Indemnifying Party shall be liable for any Indemnified Costs pursuant to this Article 8 unless a written claim for indemnification in accordance with Section 8.3 or 8.4 is given by the Indemnified Party to the Indemnifying Party with respect thereto on or before the first anniversary of the Closing Date, except that this time limitation shall not apply to any (i) claims for fraud pursuant to Section 9.2 or (ii) claims for breaches of the representations and warranties contained in Section 2.1(a) (relating to ownership of the Securities) and Section 2.1(b) (relating to capacity of the Stockholders), which representations and warranties shall survive until the expiration of the applicable statute of limitations. (b) No Contribution. Effective as of the Closing, the Stockholders waive and release any and all rights that they may have under this Agreement or any other Transaction Document to assert claims of contribution against the REIT or any of its Subsidiaries in respect of liability of Stockholders for breaches of any representation, warranty or covenant of the Stockholders in any of the Transaction Documents. 8.6 Tax Related Adjustments. The Stockholders and Buyer agree that any payment of Indemnified Costs made hereunder will be treated by the parties on their Tax Returns as an adjustment to the total purchase price paid for the Shares pursuant to Section 1.2. If, notwithstanding such treatment by the parties, any payment of Indemnified Costs is determined to be taxable income rather than adjustment to such total purchase price by any taxing authority, 18 25 then the Indemnifying Party shall indemnify the Indemnified Party for any Taxes payable by the Indemnified Party or any subsidiary by reason of the receipt of such payment (including any payments under this Section 8.6), determined at an assumed marginal tax rate equal to the highest marginal tax rate then in effect for corporate taxpayers in the relevant jurisdiction. ARTICLE 9 GENERAL PROVISIONS 9.1 Survival of Representations, Warranties, and Covenants. Regardless of any investigation at any time made by or on behalf of any party hereto or of any information any party may have in respect thereof, each of the representations and warranties made in this Agreement or any other Transaction Document shall survive the Closing as provided below. The representations and warranties set forth in this Agreement (other than representations and warranties contained in Section 2.1(a) (relating to ownership of the Shares) and Section 2.1(b) (relating to authority of the Stockholders), which representations and warranties shall survive until the expiration of the applicable statute of limitations) or any other Transaction Document shall terminate on the first anniversary of the Closing Date. Following the date of termination of a representation or warranty, no claim can be brought with respect to a breach of such representation or warranty, but no such termination shall affect any claim for a breach of a representation or warranty that was asserted in writing pursuant to Section 8.3 or Section 8.4 hereof before the date of termination. To the extent that such are performable after the Closing, each of the covenants and agreements contained in each of the Transaction Documents shall survive the Closing indefinitely; provided, however, effective as of the Closing, the Stockholders, on the one hand, and Buyer, on the other hand, shall be deemed to have waived any and all rights and remedies as to any breach by the other party of any covenant and agreement of such party contained in each Transaction Document to be performed by such party at or prior to the Closing. 9.2 No Waiver Relating to Claims for Fraud. The liability of any party under Article 8 shall be in addition to, and not exclusive of, any other liability that such party may have at law or equity based on such party's fraudulent acts or omissions. None of the provisions set forth in this Agreement, including but not limited to the provisions set forth in Section 8.5, shall be deemed a waiver by any party to this Agreement of any right or remedy which such party may have at law or equity based on any other party's fraudulent acts or omissions, nor shall any such provisions limit, or be deemed to limit, (a) the time period during which a claim for fraud may be brought, or (b) the recourse which any such party may seek against another party with respect to a claim for fraud; provided, that with respect to such rights and remedies at law or equity, the parties further acknowledge and agree that none of the provisions of this Section 9.2, nor any reference to this Section 9.2 throughout this Agreement, shall be deemed a waiver of any defenses which may be available in respect of actions or claims for fraud, including but not limited to, defenses of statutes of limitations or limitations of damages. 9.3 Amendment and Modification. This Agreement may not be amended except by an instrument in writing signed by the parties hereto or by Buyer and the Stockholders (or, in the case of the Margolin Stockholders and the Rolph Stockholders, by the Margolin Stockholders' Representative and/or the Rolph Stockholders' Representative, as applicable). 19 26 9.4 Waiver of Compliance. Any failure of Buyer on the one hand, or a Stockholder, on the other hand, to comply with any obligation, covenant, agreement, or condition contained herein may be waived only if set forth in an instrument in writing signed by the party or parties to be bound by such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement, or condition shall not operate as a waiver of, or estoppel with respect to, any other failure. 9.5 Specific Performance. The parties recognize that in the event a Stockholder should refuse to perform under the provisions of this Agreement, monetary damages alone will not be adequate. Buyer shall therefore be entitled, in addition to any other remedies which may be available, including money damages, to obtain specific performance of the terms of this Agreement. Provided that Buyer timely complies with its obligations under Section 1.4, in the event of any action to enforce this Agreement specifically, the Stockholders hereby waive the defense that there is an adequate remedy at law. Provided that Buyer timely complies with its obligations under Section 1.4, in no event shall the Stockholders be entitled to seek specific performance with respect to any of Buyer's obligations arising under this Agreement. 9.6 Severability. If any term or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal, or incapable of being enforced under any rule of applicable law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated herein are not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated herein are consummated as originally contemplated to the fullest extent possible. 9.7 Expenses and Obligations. Except as otherwise expressly provided in this Agreement or as provided by law, if the Closing does not occur, all costs and expenses incurred by the parties hereto in connection with the consummation of the transactions contemplated hereby shall be borne solely and entirely by the party which has incurred such expenses; provided, however, that this Section 9.7 shall not relieve any party from any liability resulting from such party's breach of this Agreement. If the Closing does occur, then, except as so provided, all costs and expenses incurred by the Stockholders, on the one hand, and Buyer, on the other, in connection with such consummation shall be borne solely and entirely by the Stockholders and Buyer, respectively. Notwithstanding the foregoing, upon the Closing, Buyer shall pay $131,250, Fred H. Margolin shall pay $30,535.72, Darrel L. Rolph shall pay $20,357.14, David K. Rolph shall pay $20,357.14, and the REIT shall pay $60,000 (or an aggregate of $262,500) to Christopher Weil & Company, Inc. as a result of the consummation of the transactions contemplated hereby. 9.8 Parties in Interest. This Agreement shall be binding upon and, except as provided below, inure solely to the benefit of each party hereto and their successors, assigns and transferees, and nothing in this Agreement, except as set forth below, express or implied, is intended to confer upon any other Person (other than the Indemnified Parties as provided in Article 8) any rights or remedies of any nature whatsoever under or by reason of this Agreement. 20 27 9.9 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied, or mailed by registered or certified mail (return receipt requested), or sent by Federal Express or other recognized overnight courier, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) If to Buyer, to: Lone Star Fund III (U.S.), L.P. 600 North Pearl Street Suite 1500, LB 164 Dallas, Texas 75201 Attention: J.D. Dell Facsimile: (214) 754-8401 with copies to: Vinson & Elkins L.L.P. 3700 Trammell Crow Center 2001 Ross Avenue Dallas, Texas 75201 Attention: Michael D. Wortley Facsimile: (214) 999-7732 (b) If to the Stockholders, to: Fred H. Margolin Ann E. & Fred H. Margolin, Jt. Tn. Ann E. Margolin, Custodian for Jane M. Margolin UTXUTMA Ann E. Margolin, Custodian for Richard Margolin UTXUTMA Ann E. Margolin Trustee of Fred H. Margolin Legacy Trust Fred H. Margolin Trustee of Ann E. Margolin Legacy Trust The Ann E. and Fred H. Margolin Foundation c/o Margolin Stockholders' Representative 10515 Lennox Lane Dallas, Texas 75229 Facsimile: (972) 233-6453 Darrel L. Rolph Darrel L. Rolph, Trustee of the Darrel L. Rolph Living Trust U/A/D 4/21/97 1877 North Rock Road Wichita, Kansas 67206 Facsimile: (316) 681-1693 David K. Rolph 21 28 c/o SASNAK Management Corporation 1877 North Rock Road Wichita, Kansas 67206 Facsimile: (316) 681-1693 with copies to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1700 Pacific Ave., Suite 4100 Dallas, Texas 75201 Attention: Terry M. Schpok Facsimile: (214) 969-4343 and Thompson & Knight L.L.P. 1700 Pacific Ave., Suite 3300 Dallas, Texas 75201 Attention: Fred W. Fulton Facsimile: (214) 969-1751 Any of the above addresses may be changed at any time by notice given as provided above; provided, however, that any such notice of change of address shall be effective only upon receipt. All notices, requests or instructions given in accordance herewith shall be deemed received on the date of delivery, if hand delivered, on the date of receipt, if telecopied, three Business Days after the date of mailing, if mailed by registered or certified mail, return receipt requested, and one Business Day after the date of sending, if sent by Federal Express or other recognized overnight courier. 9.10 Counterparts. This Agreement may be executed and delivered (including by facsimile transmission) in counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. 9.11 Entire Agreement. This Agreement (which term shall be deemed to include the exhibits and schedules hereto and the other certificates, documents and instruments delivered hereunder), along with the other agreements referenced herein, constitutes the entire agreement of the parties hereto and supersedes all prior agreements, letters of intent and understandings, both written and oral, among the parties with respect to the subject matter hereof. There are no representations or warranties, agreements, or covenants other than those expressly set forth in this Agreement. 9.12 Governing Law. This Agreement shall be construed in accordance with and governed by the internal law of the State of Delaware (without reference to its rules as to conflicts of law). 22 29 9.13 Arbitration. Any controversy or claim arising out of or relating to this Agreement, the other Transaction Documents, and the transactions contemplated herein or therein, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitration shall be conducted under the Emergency Interim Relief Procedures of the AAA Commercial Arbitration Rules. The arbitration tribunal shall be composed of a single arbitrator, to be appointed pursuant to AAA rules and Emergency Interim Relief Procedures. The Optional Rules for Large, Complex Commercial Disputes shall not apply. Pursuant to Rule E-8, the arbitration hearing shall be conducted in Dallas, Texas, within 30 days after confirmation of the arbitrator's appointment. The arbitrator shall not have the authority to award punitive damages. 9.14 Public Announcements. The Stockholders, on the one hand, and Buyer, on the other, shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or the transactions contemplated hereby, except for statements required by law or by any listing agreements with any national securities exchange or the National Association of Securities Dealers, Inc., or made in disclosures filed pursuant to the Securities Act or the Exchange Act. 9.15 Assignment. Neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by any of the parties hereto, whether by operation of law or otherwise; provided, however, that upon notice to the Stockholders and without releasing Buyer from any of its obligations or liabilities hereunder, (a) Buyer may assign or delegate any or all of its rights or obligations under this Agreement to any one or more Affiliates of Buyer or any Person with or into which Buyer or any parent company of Buyer merges or consolidates and (b) nothing in this Agreement shall limit Buyer's ability to make a collateral assignment of its rights under this Agreement to any institutional lender that provides funds to Buyer without the consent of the Stockholders. The Stockholders shall execute an acknowledgment of such collateral assignments in such forms as Buyer's lenders may from time to time reasonably request; provided, however, that unless written notice is given to the Stockholders that any such collateral assignment has been foreclosed upon, the Stockholders shall be entitled to deal exclusively with Buyer as to any matters arising under this Agreement or any of the other agreements delivered pursuant hereto. In the event of such an assignment, the provisions of this Agreement shall inure to the benefit of and be binding on Buyer's assigns. Any attempted assignment in violation of this Section 9.15 shall be null and void. 9.16 No Affiliate Liability. Each of the following is herein referred to as a "Buyer Affiliate": (a) any direct or indirect holder of any equity interests or securities in Buyer (whether limited or general partners, members, stockholders or otherwise), (b) any Affiliate of Buyer, or (c) any director, officer, employee, representative or agent of (i) Buyer, (ii) any Affiliate of Buyer or (iii) any such holder of equity interests or securities referred to in clause (a) above. No Buyer Affiliate shall have any liability or obligation of any nature whatsoever in connection with or under this Agreement or the other Transaction Documents or the transactions contemplated hereby or thereby (other than Buyer or an assignee of this Agreement), and the Stockholders hereby waive and release all claims of any such liability and obligation, it being understood that no such Person or entity (other than Buyer or an assignee of this Agreement) shall be liable for or 23 30 in respect of this Agreement or the other Transaction Documents and the transactions contemplated hereby or thereby. 9.17 Construction of "Stockholders." Except as otherwise expressly provided herein, all references to "Stockholders" herein shall mean all Stockholders and any action to be taken by the Stockholders must be taken by all of the Stockholders. 9.18 Headings. The headings of this Agreement are for convenience of reference only and are not part of the substance of this Agreement. 9.19 Appointment of Stockholders' Representatives. (a) Margolin Stockholders' Representative. (i) By the execution and delivery of this Agreement, each of Fred H. Margolin, Ann E. & Fred H. Margolin, Jt. Tn., the Jane M. Margolin UTXUTMA, the Richard Margolin UTXUTMA, the Fred H. Margolin Legacy Trust, the Anne E. Margolin Legacy Trust, the Ann E. and Fred H. Margolin Foundation and Ann E. Margolin (collectively, the "Margolin Stockholders") hereby irrevocably constitute and appoint Fred H. Margolin as the true and lawful agent and attorney-in-fact (the "Margolin Stockholders' Representative") of such Margolin Stockholder with full authority and power of substitution to act in the name, place and stead of such Margolin Stockholder with respect to the consummation of the transactions contemplated hereunder and under any other Transaction Documents. (ii) Buyer, the other Buyer Indemnified Parties, and any other person, may conclusively and absolutely rely, without inquiry, upon any action of the Margolin Stockholders' Representative as the action of each Margolin Stockholder in all matters referred to herein, and each Margolin Stockholder confirms all that the Margolin Stockholders' Representative shall do or cause to be done by virtue of his or her or its appointment as the Margolin Stockholders' Representative. (iii) Each Margolin Stockholder covenants and agrees that it will not voluntarily revoke the power of attorney conferred in this Section 9.19(a). If any Margolin Stockholder dies or becomes incapacitated, disabled or incompetent (such deceased, incapacitated, disabled or incompetent Margolin Stockholder being a "Former Margolin Stockholder") and, as a result, the power of attorney conferred by this Section 9.19(a) is revoked by operation of law, it shall not be a breach by such Former Margolin Stockholder under this Agreement if the heirs, beneficiaries, estate, administrator, executor, guardian, conservator or other legal representative of such Former Margolin Stockholder (each a "Successor Margolin Stockholder") confirms the appointment of the Margolin Stockholders' Representative as agent and attorney-in-fact for such Successor Margolin Stockholder. Notwithstanding the foregoing sentence, if the power of attorney conferred by this Section 9.19(a) is revoked by operation of law and thereafter not reconfirmed by the Successor Margolin Stockholder prior to the Closing, such revocation shall not be deemed a breach by the Successor Margolin Stockholder of any of the provisions of this Agreement provided that the Securities held by such Successor 24 31 Margolin Stockholder are delivered for transfer to Buyer at the Closing duly endorsed for transfer or accompanied by stock powers duly endorsed for transfer and further provided that such Successor Margolin Stockholder executes and delivers such other certificates, documents or instruments (including, without limitation, any amendments hereto, and the Deposit Escrow Agreement) that would have been delivered on its behalf by the Margolin Stockholders' Representative had such Successor Margolin Stockholder reconfirmed the agency and power of attorney conferred by this Section 9.19(a). The Margolin Stockholders' Representative may resign as the Margolin Stockholders' Representative for any reason and at any time by written notice to Buyer and each Margolin Stockholder. If at any time Fred H. Margolin (or any successor Margolin Stockholders' Representative) resigns from his, her or its position as the Margolin Stockholders' Representative, the Majority-in-Interest (as hereinafter defined) of the Margolin Stockholders shall designate a successor as soon as practicable and shall notify Buyer in writing of such designation. Upon written notice delivered to Buyer, the Margolin Stockholders may change the identity of the Margolin Stockholders' Representative by written consent signed by the Majority-in-Interest of the Margolin Stockholders (including as a result of the resignation by the Margolin Stockholders' Representative). "Majority-in-Interest" means, with respect to a group of Stockholders, Stockholders whose shares represent more than 50% of the REIT Common Stock (based on shares of the REIT Common Stock actually issued and outstanding at the time of determination and, with respect to any time following the Closing, as of the Closing Date) collectively owned by such group. (iv) Each of the Margolin Stockholders hereby consents and agrees to all actions or inactions taken or omitted to be taken in good faith by the Margolin Stockholders' Representative under this Agreement, the Deposit Escrow Agreement or any other Transaction Document and hereby agrees to indemnify and hold harmless the Margolin Stockholders' Representative from and against all damages, losses, liabilities, charges, penalties, costs and expenses (including court costs and legal fees and expenses) incurred in any claim, action, dispute or proceeding between any such person or persons and the Margolin Stockholders (or any of them) or between any such person or persons and any third party or otherwise incurred or suffered as a result of or arising out of such actions or inactions. (b) Rolph Stockholders' Representative. (i) By the execution and delivery of this Agreement, each of Darrel L. Rolph and the Darrel L. Rolph Living Trust U/A/D 4/21/97 (collectively, the "Rolph Stockholders") hereby irrevocably constitute and appoint Darrel L. Rolph as the true and lawful agent and attorney-in-fact (the "Rolph Stockholders' Representative") of such Rolph Stockholder with full authority and power of substitution to act in the name, place and stead of such Rolph Stockholder with respect to the consummation of the transactions contemplated hereunder and under any other Transaction Documents. (ii) Buyer, the other Buyer Indemnified Parties, and any other person, may conclusively and absolutely rely, without inquiry, upon any action of the Rolph Stockholders' Representative as the action of each Rolph Stockholder in all matters 25 32 referred to herein, and each Rolph Stockholder confirms all that the Rolph Stockholders' Representative shall do or cause to be done by virtue of his or her or its appointment as the Rolph Stockholders' Representative. (iii) Each Rolph Stockholder covenants and agrees that it will not voluntarily revoke the power of attorney conferred in this Section 9.19(b). If any Rolph Stockholder dies or becomes incapacitated, disabled or incompetent (such deceased, incapacitated, disabled or incompetent Rolph Stockholder being a "Former Rolph Stockholder") and, as a result, the power of attorney conferred by this Section 9.19(b) is revoked by operation of law, it shall not be a breach by such Former Rolph Stockholder under this Agreement if the heirs, beneficiaries, estate, administrator, executor, guardian, conservator or other legal representative of such Former Rolph Stockholder (each a "Successor Rolph Stockholder") confirms the appointment of the Rolph Stockholders' Representative as agent and attorney-in-fact for such Successor Rolph Stockholder. Notwithstanding the foregoing sentence, if the power of attorney conferred by this Section 9.19(b) is revoked by operation of law and thereafter not confirmed by the Successor Rolph Stockholder prior to the Closing, such revocation shall not be deemed a breach by the Successor Rolph Stockholder of any of the provisions of this Agreement provided that the Securities held by such Successor Rolph Stockholder are delivered for transfer to Buyer at the Closing duly endorsed for transfer or accompanied by stock powers duly endorsed for transfer and further provided that such Successor Rolph Stockholder executes and delivers such other certificates, documents or instruments (including, without limitation, any amendments hereto, and the Deposit Escrow Agreement) that would have been delivered on its behalf by the Rolph Stockholders' Representative had such Successor Rolph Stockholder confirmed the agency and power of attorney conferred by this Section 9.19(b). The Rolph Stockholders' Representative may resign as the Rolph Stockholders' Representative for any reason and at any time by written notice to Buyer and each Rolph Stockholder. If at any time Darrel L. Rolph (or any successor Rolph Stockholders' Representative) resigns from his, her or its position as the Rolph Stockholders' Representative, the Majority-in-Interest of the Rolph Stockholders shall designate a successor as soon as practicable and shall notify Buyer in writing of such designation. Upon written notice delivered to Buyer, the Rolph Stockholders may change the identity of the Rolph Stockholders' Representative by written consent signed by the Majority-in-Interest of the Rolph Stockholders (including as a result of the resignation by the Rolph Stockholders' Representative). (iv) Each of the Rolph Stockholders hereby consents and agrees to all actions or inactions taken or omitted to be taken in good faith by the Rolph Stockholders' Representative under this Agreement, the Deposit Escrow Agreement or any other Transaction Document and hereby agrees to indemnify and hold harmless the Rolph Stockholders' Representative from and against all damages, losses, liabilities, charges, penalties, costs and expenses (including court costs and legal fees and expenses) incurred in any claim, action, dispute or proceeding between any such person or persons and the Rolph Stockholders (or any of them) or between any such person or persons and any third party or otherwise incurred or suffered as a result of or arising out of such actions or inactions. 26 33 9.20 Deletion of Certain Rolph Stockholders.. Darrel L. Rolph, as the Rolph Stockholders' Representative pursuant to the terms and conditions of the Original Agreement, hereby acknowledges and consents to the deletion of the Diane C. Rolph Living Trust, U/A/D 4/21/97, Dawn Sarah Rolph Trust DTD 12/21/77, the Daniel Cody Rolph Trust DTD 12/21/77 and the Darlene R. Knorr Charitable Trust U/A/D 12/23/97 from the Original Agreement. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK] 27 34 IN WITNESS WHEREOF, the Stockholders (directly or through the Margolin Stockholders' Representative or the Rolph Stockholders' Representative, as the case may be, pursuant to the terms and provisions of the Original Agreement) and Buyer have caused this Agreement to be signed, all as of the date first written above. BUYER: LONE STAR U.S. ACQUISITIONS, LLC By: /s/ DAVID M. WEST ------------------------------------------------ Name: David M. West ---------------------------------------------- Title: President --------------------------------------------- STOCKHOLDERS: /s/ FRED H. MARGOLIN --------------------------------------------------- Fred H. Margolin, individually and as the Margolin Stockholders' Representative on behalf of: Ann E. & Fred H. Margolin, Jt. Tn. Ann E. Margolin, Custodian for Jane M. Margolin UTXUTMA Ann E. Margolin, Custodian for Richard Margolin UTXUTMA Ann E. Margolin, Trustee of Fred H. Margolin Legacy Trust Fred H. Margolin, Trustee of Ann E. Margolin Legacy Trust The Ann E. and Fred H. Margolin Foundation S-1 35 /s/ DARREL L. ROLPH --------------------------------------------------- Darrel L. Rolph, individually and as the Rolph Stockholders' Representative on behalf of: Darrel L. Rolph, Trustee of the Darrel L. Rolph Living Trust U/A/D 4/21/97 /s/ DAVID K. ROLPH --------------------------------------------------- David K. Rolph S-2 36 Accepted and Agreed as of the date first above written: The undersigned has executed this Agreement for the purpose of consenting to this Agreement and agreeing to be bound by the terms hereof with respect to her present or future community property interest (if any) in all Shares of which her spouse is or will become the record or beneficial owner. Nothing in this Agreement is intended to, and this Agreement shall not, confer any community property interest in any Shares or any other asset to the spouse of any signatory hereto. /s/ ANN MARGOLIN - ------------------------------------ Ann Margolin S-3 37 EXHIBIT A FORM OF DEPOSIT ESCROW AGREEMENT A-1 38 EXHIBIT B-1 FORM OF NONCOMPETITION AND RELEASE AGREEMENT (FRED H. MARGOLIN) B-1-1 39 EXHIBIT B-2 FORM OF NONCOMPETITION AND RELEASE AGREEMENT (DARREL L. ROLPH) B-2-1 40 EXHIBIT B-3 FORM OF NONCOMPETITION AND RELEASE AGREEMENT (DAVID K. ROLPH) B-3-1 41 EXHIBIT C-1 JOINT NOTICE AND STIPULATION OF DISMISSAL WITH PREJUDICE C-1-1 42 EXHIBIT C-2 JOINT STIPULATION OF DISMISSAL WITH PREJUDICE C-2-1 43 EXHIBIT D FORM OF PROMISSORY NOTE D-1-1 44
SCHEDULE 2.1(a)(i) SECURITIES OWNED BY STOCKHOLDERS A Ownership of Margolin and his Affiliates: Common Shares of USRP Stock: Fred H. Margolin 766,500 Ann E. Fred H. Margolin, Jt. Tn. 27,932 Ann E. Margolin IRA 2,190 Ann E. Margolin, Custodian for Jane M. Margolin UTXUTMA 2,823 Ann E. Margolin, Custodian for Richard Margolin 4,110 Ann E. Margolin Trustee of Fred H. Margolin Legacy Trust 1,833.5 Fred H. Margolin IRA 4,324 Fred H. Margolin Trustee of Ann E. Margolin Legacy Trust 1,833.5 The Ann E. and Fred H. Margolin Foundation 8,800 Preferred Shares of USRP Stock: Ann E. Margolin IRA 1,200 Ann E. Margolin, Custodian for Richard Margolin UTXUTMA 5,000 Fred H. Margolin IRA 4,000 The Ann E. and Fred H. Margolin Foundation 5,000 Options to Purchase Common Shares of USRP Stock: Fred Margolin 24,000 B. Ownership of Darrel L. Rolph and his Affiliates: Common Shares of USRP Stock: Darrel L. Rolph, Trustee of the Darrel L. Rolph Living Trust U/A/D 4/21/97 526,999 Diane C. Rolph & Darrel L. Rolph, Trustees of the Diane C. Rolph Living Trust, U/A/D 4/21/97 51,000 Diane C. Rolph, Trustee of the Dawn Sarah Rolph Trust DTD 12/21/77 4,000 Diane C. Rolph, Trustee of the Daniel Cody Rolph Trust DTD 12/21/77 3,000 Darrel L. Rolph, Trustee of the Darlene R. Knorr Charitable Trust U/A/D 12/23/97 8,000 Options to Purchase Common Shares of USRP Stock: Darrel L. Rolph, Trustee of the Darrel L. Rolph Living Trust U/A/D 4/21/97 16,000 C. Ownership of David K. Rolph Common Shares of USRP Stock: 515,499 Options to Purchase Common Shares of USRP Stock: 16,000
45
SCHEDULE 2.1(a)(ii) SHARES TO BE SOLD BY STOCKHOLDERS A Margolin and Margolin Stockholders: Common Shares of USRP Stock: Fred H. Margolin 766,500 Ann E. Fred H. Margolin, Jt. Tn. 27,932 Ann E. Margolin, Custodian for Jane M. Margolin UTXUTMA 2,823 Ann E. Margolin, Custodian for Richard Margolin 4,110 Ann E. Margolin Trustee of Fred H. Margolin Legacy Trust 1,833.5 Fred H. Margolin Trustee of Ann E. Margolin Legacy Trust 1,833.5 The Ann E. and Fred H. Margolin Foundation 8,800 Certain shares of USRP common stock owned by Mr. Margolin are pledged to Intrust Bank, N.A. in Wichita, Kansas as security for a loan. The loan will be paid off at Closing. B. Darrel L. Rolph and the Rolph Stockholders: Common Shares of USRP Stock: Darrel L. Rolph, Trustee of the Darrel L. Rolph Living Trust U/A/D 4/21/97 526,999 C. David K. Rolph Common Shares of USRP Stock: 515,499
46 SCHEDULE 2.1(c) a. Indemnification rights under (i) charter and bylaws of USRP and QSV and (ii) Indemnification Agreements between USRP and each of the Stockholders dated June 1, 1999. b. Noncompetition and Release Agreements between USRP and each of Margolin, D.L. Rolph and D.K. Rolph to be entered into at the Closing. c. Settlement Agreement relating to the Internal Litigation. d. Ownership of Securities as set forth on Schedule 2.1(a)(i). e. Gerald H. Graham has indemnification rights under (i) charter and bylaws of USRP and (ii) an Indemnification Agreement with URRP dated June 1, 1999. EX-10.4 5 d85065ex10-4.txt ASSIGNMENT & ASSUMPTION AGREEMENT 1 EXHIBIT 10.4 ASSIGNMENT AND ASSUMPTION AGREEMENT This ASSIGNMENT AND ASSUMPTION AGREEMENT ("Assignment") is entered into among Lone Star U.S. Acquisitions, LLC, a Delaware limited liability company ("Assignor"), LSF3 Capital Investments I, LLC, a Delaware limited liability company, and LSF3 Capital Investments II, LLC, a Delaware limited liability company ("Assignees," and each, an "Assignee"), effective as of March 9, 2001. WHEREAS, Assignor is a party to that certain Amended and Restated Stock Purchase Agreement (the "Agreement") among the Stockholders (as defined in the Agreement), Assignor, and Lone Star Fund III (U.S.), L.P., a Delaware limited partnership, dated as of February 27, 2001; and WHEREAS, effective as of March 9, 2001 (the "Effective Time"), Assignor desires to assign, and each Assignee desires to acquire, Assignor's rights, titles and interests as Buyer under the Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, Assignor hereby transfers, assigns and conveys to Assignees, and each of them, all of Assignor's rights, titles and interests as Buyer in, under and to the Agreement. 1. Assignment and Assumption. (a) As of the Effective Time, Assignor hereby sells, transfers and assigns to Assignees, and each of them, all of Assignor's rights, titles and interests as Buyer in, under and to the Agreement, free and clear of any and all claims, pledges, liens, security interests or other encumbrances (collectively, "Encumbrances"). (b) As of the Effective Time, each Assignee hereby acquires and accepts from Assignor all of Assignor's rights, titles and interests in, under and to the Agreement and assumes all obligations related to the Agreement. 2. Warranties and Covenants. (a) Assignor. As a material inducement for and in consideration of Assignees' obligations under this Assignment, Assignor represents and warrants to each Assignee that (i)Assignor has all requisite power and authority to transfer and assign the Agreement to such Assignee and to perform its obligations under this Assignment, (ii) neither this Assignment nor any transaction contemplated hereby violates any law or agreement by which Assignor is bound, and (iii) Assignor owns, and (upon consummation of the transactions contemplated by this Assignment) Assignees will acquire, all right, title and interest in and to the Agreement, free and clear of all Encumbrances. (b) Assignees. As a material inducement for and in consideration of Assignor's transfer of the Agreement, each Assignee represents and warrants to Assignor that (i) Assignee has all requisite power and authority to perform its obligations under this Assignment, 2 and (ii) neither this Assignment nor any transaction contemplated hereby violates any law or agreement by which any Assignee is bound. 3. Miscellaneous. (a) Entire Agreement. This Assignment sets forth the entire agreement and understanding, and supersedes any prior agreements and understandings, written or oral, of the parties with respect to the subject matter hereof. (b) Amendments. This Assignment may not be amended except by written agreement signed by each party against whom such amendment is sought to be enforced. (c) Assignment. Neither this Assignment nor any right or obligation hereunder may be assigned in whole or in part by any party without the written consent of all parties hereto. This Assignment shall benefit and bind the parties hereto and their respective successors and permitted assigns. (d) Choice of Law. This Assignment shall be governed by, and construed and enforced in accordance with, the laws of the State of Texas (without regard to any such laws pertaining to conflicts of laws) applicable to contracts executed and performed in such state. (e) Counterparts. This Assignment may be executed in one or more counterparts, all of which shall constitute one and the same instrument. (f) Interpretation. Whenever in this Assignment the singular number is used, the same shall include the plural where appropriate (and vice versa), and words of any gender shall include each other gender where appropriate. As used in this Assignment, "or" shall mean "and/or," and "including" or "include" shall mean "including without limitation." [REMAINDER OF PAGE IS INTENTIONALLY BLANK] 2 3 IN WITNESS WHEREOF, this Assignment has been executed and delivered on March 9, 2001. Assignor: LONE STAR U.S. ACQUISITIONS, LLC By: /s/ J.D. Dell --------------------------------- Name: J.D. Dell ------------------------------- Title: Sr. Vice President ------------------------------ Assignees: LSF3 CAPITAL INVESTMENTS I, LLC By: /s/ J.D. Dell --------------------------------- Name: J.D. Dell ------------------------------- Title: President ------------------------------ LSF3 CAPITAL INVESTMENTS II, LLC. By: /s/ J.D. Dell --------------------------------- Name: J.D. Dell ------------------------------- Title: President ------------------------------ 3 EX-10.5 6 d85065ex10-5.txt REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 10.5 ================================================================================ REGISTRATION RIGHTS AGREEMENT BETWEEN U.S. RESTAURANT PROPERTIES, INC. AND LSF3 CAPITAL INVESTMENTS I, LLC LSF3 CAPITAL INVESTMENTS II, LLC DATED MARCH 9, 2001 ================================================================================ 2 TABLE OF CONTENTS
ARTICLE I DEFINITIONS....................................................... 1 1.1 Definitions........................................................ 1 1.2 Internal References................................................ 3 ARTICLE II REGISTRATION RIGHTS.............................................. 3 2.1 Demand Registration................................................ 3 2.2 Piggyback Registration............................................. 5 2.3 Shelf Registration................................................. 7 ARTICLE III REGISTRATION PROCEDURES......................................... 8 3.1 Filings; Information............................................... 8 3.2 Registration Expenses.............................................. 12 ARTICLE IV INDEMNIFICATION AND CONTRIBUTION................................. 13 4.1 Indemnification by the Company..................................... 13 4.2 Indemnification by Selling Holders................................. 13 4.3 Conduct of Indemnification Proceedings............................. 14 4.4 Contribution....................................................... 14 ARTICLE V MISCELLANEOUS..................................................... 15 5.1 Participation in Underwritten Registrations........................ 15 5.2 Rule 144........................................................... 16 5.3 Holdback Agreements................................................ 16 5.4 Termination........................................................ 17 5.5 Amendments, Waivers, Etc........................................... 17 5.6 Counterparts....................................................... 17 5.7 Entire Agreement................................................... 17 5.8 Governing Law...................................................... 17 5.9 Assignment of Registration Rights.................................. 17 5.10 Binding Effect..................................................... 18
3 This REGISTRATION RIGHTS AGREEMENT (the "Agreement"), is made as of March 9, 2001, by and between U.S. Restaurant Properties, Inc., a Maryland corporation ("REIT"), LSF3 Capital Investments I, LLC, a Delaware limited liability company, and LSF3 Capital Investments II, LLC, a Delaware limited liability company ("Buyer"). WHEREAS, the REIT and Lone Star U.S. Acquisitions, LLC ("Lone Star"), a Delaware limited liability company, entered into that certain Stock Purchase Agreement dated as of January 17, 2001, as amended and restated as of February 27, 2001 (as so amended and restated, the "REIT Stock Purchase Agreement"); WHEREAS, Lone Star and certain stockholders of the Company have entered into a certain Stock Purchase Agreement dated January 17, 2001 (as amended and restated as of February 27, 2001, the "Stockholder Stock Purchase Agreement" and, together with the REIT Stock Purchase Agreement, the "Stock Purchase Agreements"); WHEREAS, Lone Star assigned its rights and obligations under the Stock Purchase Agreement and Buyer assumed such rights and obligations pursuant to that certain Assignment and Assumption Agreement dated March 9, 2000 by and among Lone Star and Buyer; WHEREAS, it is a condition precedent to the closing of the transactions contemplated in the REIT Stock Purchase Agreement that the parties hereto execute and deliver this Agreement; NOW THEREFORE, in consideration of the premises, mutual promises and covenants contained in this Agreement and intending to be legally bound, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS 1.1 DEFINITIONS. Unless otherwise indicated to the contrary, capitalized terms defined in the Stock Purchase Agreements are given the same meaning herein as therein defined. In addition, the following terms, as used herein, have the following meanings: "Affiliate" or "Affiliates," as appropriate, has the same meaning as set forth in Rule 144 (as hereinafter defined). "Commission" means the Securities and Exchange Commission. "Common Stock" means the common stock of the Company, par value $0.001 per share. "Company" means the REIT and any subsequent issuer of Registrable Securities. 1 4 "Demand Registration" means a registration under the Securities Act requested in accordance with Section 2.1. "Exchange Act" means the Securities Exchange Act of 1934, and the rules and regulations promulgated by the Commission thereunder. "fair market value" as of any date means the average closing price of the Registrable Securities, as reported by The Wall Street Journal for the preceding five consecutive trading days on The New York Stock Exchange (or such other exchange or quotation system on which such securities are then listed or traded). "Holders" or "Holder," as appropriate, means the Initial Holder and any direct or indirect transferee of any Registrable Securities held by any of such Persons. "Initial Amount," on any particular date and with respect to the Holders means the number of shares of Common Stock held by the Holder on the date hereof. "Initial Holder" means Buyer. "Person" or "persons" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or other entity or government or other agency or political subdivision thereof. "Piggyback Registration" has the meaning set forth in Section 2.2. "Registrable Securities" means (a) the shares of Common Stock purchased pursuant to the Stock Purchase Agreements, plus any additional shares of Common Stock issued in respect thereof in connection with any stock split, stock dividend or similar event with respect to the Common Stock, (b) any additional shares of Common Stock acquired by the Holders and (c) any securities of the Company or any successor entity, including without limitation any parent entity of such successor, into which Registrable Securities may hereafter be converted or changed. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of under such registration statement, (ii) such securities shall have been transferred pursuant to Rule 144 (as hereinafter defined), (iii) such securities shall have been otherwise transferred or disposed of, and new certificates therefor not bearing a legend restricting further transfer shall have been delivered by the Company, and subsequent transfer or disposition of them shall not require their registration or qualification under the Securities Act or any similar state law then in force, or (iv) such securities shall have ceased to be outstanding. "Registration Expenses" has the meaning set forth in Section 3.2. "Requesting Holders" means the Holders requesting a Demand Registration, and shall include parties deemed "Requesting Holders" pursuant to Section 2.1(a)(iii). "Rule 144" means Rule 144 (or any successor rule of similar effect) promulgated under the Securities Act. 2 5 "Securities Act" means the Securities Act of 1933, and the rules and regulations promulgated by the Commission thereunder. "Selling Holder" means any Holder who is selling Registrable Securities pursuant to a public offering registered hereunder. "Shelf Registration" has the meaning set forth in Section 2.3(a). "Underwriter" means a securities dealer who purchases any Registrable Securities as principal and not as part of such dealer's market-making activities. 1.2 INTERNAL REFERENCES. Unless the context indicates otherwise, references to Articles, Sections and paragraphs shall refer to the corresponding articles, sections and paragraphs in this Agreement, and references to the parties shall mean the parties to the Stock Purchase Agreements. ARTICLE II REGISTRATION RIGHTS 2.1 DEMAND REGISTRATION. (a) REQUEST FOR REGISTRATION. (i) Holders of a majority of the Registrable Securities held by all of the Holders may make up to three written requests for a Demand Registration of all or any part of the Registrable Securities held by the Holders; provided, that (A) each such Demand Registration by the Holders must be in respect of Registrable Securities with a fair market value of at least $5,000,000, on the date such request is made or all of the Registrable Securities held by the requesting Holders if the aggregate fair market value of all of such Registrable Securities is less than $5,000,000 and (B) the Holders shall not be entitled to a Demand Registration if, during the 120 days preceding such request, the Holders had requested a Demand Registration, unless the Company preempted such Demand Registration in accordance with Section 2.1(e) or the Company postponed the filing thereof in accordance with Section 3.1(a) and the requesting Holders withdrew the request for such Demand Registration. (ii) Any request for a Demand Registration will specify the aggregate number of shares of Registrable Securities proposed to be sold by the Requesting Holders and will also specify the intended method of disposition thereof. A registration will not count as a Demand Registration until it has become effective. Should a Demand Registration not become effective due to the failure of a Holder to perform its obligations under this Agreement or the inability of the Requesting Holders to reach agreement with the Underwriters for the proposed sale on price or other customary terms for such transaction, or in the event the Requesting Holders withdraw or do not pursue the request for the Demand Registration (in each of the foregoing cases, provided that at such time the Company is in compliance in all material respects with its obligations under this 3 6 Agreement), then, subject to Section 2.1(b), such Demand Registration shall be deemed to have been effected; provided that (i) if the Demand Registration does not become effective because a material adverse change has occurred, or is reasonably likely to occur, in the condition (financial or otherwise), business, assets or results of operations of the Company and its subsidiaries taken as a whole subsequent to the date of the written request made by the Requesting Holders, (ii) if the Company withdraws the Demand Registration for any reason or preempts the request for the Demand Registration or (iii) if, after the Demand Registration has become effective, an offering of Registrable Securities pursuant to a registration is interfered with by any stop order, injunction, or other order or requirement of the Commission or other governmental agency or court or (iv) if the Demand Registration is withdrawn at the request of the Requesting Holders pursuant to Section 2.1(f) or Section 3.1(a), then the Demand Registration shall not be deemed to have been effected and will not count as a Demand Registration. (iii) Upon receipt of any request for a Demand Registration by holders of a majority of the Registrable Securities held by all of the Holders, the Company shall promptly (but in any event within ten days) give written notice of such proposed Demand Registration to all other Holders and all such Holders shall have the right, exercisable by written notice to the Company within twenty days of their receipt of the Company's notice, to elect to include in such Demand Registration such portion of their Registrable Securities as they may request. All such Holders requesting to have their Registrable Securities included in a Demand Registration in accordance with the preceding sentence shall be deemed to be "Requesting Holders" for purposes of this Section 2.1. (b) In the event that the Requesting Holders withdraw or do not pursue a request for a Demand Registration and, pursuant to Section 2.1(a) hereof, such Demand Registration is deemed to have been effected, the Holders may reacquire such Demand Registration (such that the withdrawal or failure to pursue a request will not count as a Demand Registration hereunder) if the Requesting Holders reimburse the Company for any and all Registration Expenses incurred by the Company in connection with such request for a Demand Registration that was withdrawn or not pursued. (c) If the Requesting Holders so elect, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of a "firm commitment" underwritten offering. A majority in interest of the Requesting Holders shall have the right to select the managing Underwriters and any additional investment bankers and managers to be used in connection with any offering under this Section 2.1, subject to the Company's approval, which approval shall not be unreasonably withheld. (d) The Requesting Holders will inform the Company of the time and manner of any disposition of Registrable Securities; provided, however, that the Holders' only right to a shelf registration statement shall be pursuant to Section 2.3. (e) The Company will have the right to preempt any Demand Registration with a primary registration by delivering written notice (within seven business days after the Company has received a request for such Demand Registration) of such intention to the Requesting Holders indicating that the Company has identified a specific business need and use for the 4 7 proceeds of the sale of such securities and had contemplated such sale of securities prior to receiving the Requesting Holders' notice, and the Company shall use commercially reasonable efforts to effect a primary registration within 30 days of such notice. In the ensuing primary registration, the Holders will have such piggyback registration rights as are set forth in Section 2.2 hereof. Upon the Company's preemption of a requested Demand Registration, such requested registration will not count as the Holders' Demand Registration. If the Company thereafter decides to abandon its intention to pursue such sale of securities, it shall give notice thereof to any preempted Holders within two business days following the Company's decision. The Company may exercise the right to preempt a Demand Registration only once in any 360-day period; provided that during any 360-day period the Company shall use its reasonable best efforts to permit a period of at least 180 consecutive days during which the Selling Holders may effect a Demand Registration. (f) Securities to be sold for the account of any Person (including the Company) other than a Requesting Holder shall not be included in a Demand Registration if the managing Underwriter or Underwriters shall advise the Company and the Requesting Holders in writing that the inclusion of such securities will materially and adversely affect the price of the offering (a "Material Adverse Effect"). Furthermore, in the event the managing Underwriter or Underwriters shall advise the Company or the Requesting Holders that even after exclusion of all securities of other Persons (including the Company) pursuant to the immediately preceding sentence, the amount of Registrable Securities proposed to be included in such Demand Registration by Requesting Holders is sufficiently large to cause a Material Adverse Effect, the Registrable Securities of the Requesting Holders to be included in such Demand Registration shall equal the number of shares which the Company and the Requesting Holders are so advised can be sold in such offering without a Material Adverse Effect and such shares shall be allocated pro rata among the Requesting Holders on the basis of the number of Registrable Securities requested to be included in such registration by each such Requesting Holder; provided, however, that if any Registrable Securities requested to be registered pursuant to a Demand Registration under Section 2.1 are excluded from registration hereunder, then the Holder(s) having shares excluded ("Excluded Holders") shall have the right to withdraw all, or any part, of their shares from such registration and if withdrawn in full such Demand Registration shall not be deemed to have been effected on the withdrawing Holder's or Holders' behalf and will not count as a Demand Registration for such withdrawing Holder(s). 2.2 PIGGYBACK REGISTRATION. (a) If the Company proposes to file a registration statement under the Securities Act with respect to an offering of Common Stock for its own account or for the account of another Person (other than a registration statement on Form S-4 or S-8 (or any substitute form or rule, respectively, that may be adopted by the Commission)), the Company shall give written notice of such proposed filing to the Holders at the address set forth in the share register of the Company as soon as reasonably practicable (but in no event less than 15 days before the anticipated filing date), undertaking to provide each Holder the opportunity to register on the same terms and conditions such number of shares of Registrable Securities as such Holder may request (a "Piggyback Registration"). Each Holder will have seven business days after receipt of any such notice to notify the Company as to whether it wishes to participate in a Piggyback Registration (which notice shall not be deemed to be a request for a Demand Registration); 5 8 provided that should a Holder fail to provide timely notice to the Company, such Holder will forfeit any rights to participate in the Piggyback Registration with respect to such proposed offering other than as described in Section 2.1(a)(iii). If the Company or the Person for whose account such offering is being made shall determine in its sole discretion not to register or to delay the proposed offering, the Company may, at its election, provide written notice of such determination to the Holders and (i) in the case of a determination not to effect the proposed offering, shall thereupon be relieved of the obligation to register such Registrable Securities in connection therewith, and (ii) in the case of a determination to delay a proposed offering, shall thereupon be permitted to delay registering such Registrable Securities for the same period as the delay in respect of the proposed offering. As between the Company or any other Person for whose account any such offering is being made, on one hand, and the Selling Holders, on the other hand, the Company or such other Person, as the case may be, shall be entitled to select the Underwriters in connection with any Piggyback Registration. (b) If the Registrable Securities requested to be included in the Piggyback Registration by any Holder differ from the type of securities proposed to be registered by the Company and the managing Underwriter advises the Company that due to such differences the inclusion of such Registrable Securities would cause a Material Adverse Effect, then (i) the number of such Holders' Registrable Securities to be included in the Piggyback Registration shall be reduced to an amount which, in the opinion of the managing Underwriter, would eliminate such Material Adverse Effect or (ii) if no such reduction would, in the opinion of the managing Underwriter, eliminate such Material Adverse Effect, then the Company shall have the right to exclude all such Registrable Securities from such Piggyback Registration, provided that no other securities of such type are included and offered for the account of any other Person in such Piggyback Registration. Any partial reduction in number of Registrable Securities of any Holder to be included in the Piggyback Registration pursuant to clause (i) of the immediately preceding sentence shall be effected pro rata based on the ratio which such Holder's requested shares bears to the total number of shares requested to be included in such Piggyback Registration by all Persons other than the Company who have the contractual right to request that their shares be included in such registration statement and who have requested that their shares be included. If the Registrable Securities requested to be included in the registration statement are of the same type as the securities being registered by the Company (whether such registration is initiated by the Company or another security holder) and the managing Underwriter advises the Company that the inclusion of such Registrable Securities would cause a Material Adverse Effect, the Company will be obligated to include in such registration statement, as to each Holder and any other Person or Persons having a contractual right to request their shares be included in such registration only a portion of the shares such Holder and such other Person or Persons have requested be registered equal to the ratio which each such Holder's and such other Person's requested shares bears to the total number of shares requested to be included in such registration statement by all Holders and such other Person or Persons (other than the Person or Persons initiating such registration request) having a contractual right to request that their shares be included in such registration statement and who have requested their shares be included. If the Company initiated the registration, then the Company may include all of its securities in such registration statement before any such Holder's requested shares are included. If another security holder initiated the registration, then such initiating security holder may include all of its securities in such registration statement before any such Holder's requested shares are included and the Company may not include any of its securities in such registration statement unless all 6 9 Registrable Securities requested to be included in the registration statement by all Holders are included in such registration statement. If as a result of the provisions of this Section 2.2(b) any Holder shall not be entitled to include all Registrable Securities in a registration that such Holder has requested to be so included, such Holder may withdraw such Holder's request to include Registrable Securities in such registration statement prior to its effectiveness. 2.3 SHELF REGISTRATION. (a) Holders of a majority of the Registrable Securities held by all of the Holders ("Majority Holders") may, at any time beginning 90 days after the Closing Date, make a written request that the Company effect a shelf registration of all or any portion of the Registrable Securities held by the Holders (the "Shelf Registration") pursuant to Rule 415. Upon receipt of a request for the Shelf Registration, the Company shall promptly (but in any event within ten business days) give written notice of the proposed Shelf Registration to all other Holders, and all such Holders (including their future direct and indirect transferees to the extent permitted by the Commission) shall have the right to include Registrable Securities in the Shelf Registration. The Company shall use commercially reasonable efforts to file as promptly as practicable (but in no event more than 45 days after the time such obligation to file arises) with the Commission, and thereafter shall use its reasonable best efforts to cause to be declared effective within 180 days after the filing thereof, a shelf registration statement on an appropriate form under the Securities Act covering all Registrable Securities with respect to which the Company has received written requests from Holders for inclusion therein within 30 days after delivery to the Holders of the Company's notice. Each such Holder's request shall specify the number of Registrable Securities to be registered and the intended method of disposition. (b) The Company shall use its best efforts to keep the Shelf Registration continuously effective for a period terminating the earlier of (i) the fifth anniversary of the date on which the Commission declares the Shelf Registration effective and (ii) the date on which all the Registrable Securities covered by the Shelf Registration have been sold pursuant to such Shelf Registration. (c) The Company further agrees to supplement or make amendments to the Shelf Registration, if required by the rules, regulations or instructions applicable to the registration form utilized by the Company or by the Securities Act or requested by the holders of a majority of the Registrable Securities covered by such registration or any underwriter of the Registrable Securities. 7 10 (d) The Holders' rights to require a Shelf Registration shall include the right to require one underwritten offering off the Shelf Registration statement (a "take-down") plus an additional number of take-downs equal to the number of unused Demand Registrations then remaining (as provided in Section 2.2(a)(i)); provided that any such takedown shall be in respect of Registrable Securities having a fair market value of at least $5,000,000 on the date such request is made. Any Holder having Registrable Securities representing at least a majority of the Registrable Securities included in an effective registration statement pursuant to a Shelf Registration may request an underwritten take-down, and the Company shall be obligated to give notice and opportunity to participate in the take-down to the other Holders having Registrable Securities included in the Shelf Registration, in accordance with the same procedures, limitations and allocations applicable to a Demand Registration (with such changes in those procedures, limitations and allocations as are necessary to reflect that it is a take-down). No Holder may request a take-down for a number of such Holder's Registrable Securities that exceeds the number of that Holder's Registrable Securities already included in the effective Shelf Registration. No other securities of the Company may be included in an effective registration statement pursuant to a Shelf Registration other than the Registrable Securities. ARTICLE III REGISTRATION PROCEDURES 3.1 FILINGS; INFORMATION. In connection with the registration of Registrable Securities pursuant to Section 2.1, Section 2.2 and Section 2.3 hereof, the Company will use its reasonable best efforts to effect the registration of such Registrable Securities as promptly as is reasonably practicable, and in connection with any such request: (a) The Company will expeditiously prepare and file with the Commission a registration statement on any form for which the Company then qualifies and which counsel for the Company shall deem appropriate and available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof, and use its reasonable best efforts to cause such filed registration statement to become and remain effective (i) with respect to any Demand Registration or Piggyback Registration, for such period, not to exceed 60 days, as may be reasonably necessary to effect the sale of such securities, (ii) with respect to a Shelf Registration, until the earlier of the sale of all Registrable Securities thereunder and the fifth anniversary of the date on which the Commission declares the Shelf Registration effective; provided that if the Company shall furnish to the Selling Holder a certificate signed by the Company's Chairman, President or any Executive Vice-President or Vice-President stating that the Company's Board of Directors has determined in good faith that it would be detrimental or otherwise disadvantageous to the Company or its stockholders for such a registration statement to be filed as expeditiously as possible because the sale of Registrable Securities covered by such Registration Statement or the disclosure of information in any related prospectus or prospectus supplement would materially interfere with any acquisition, financing or other material event or transaction which is then intended or the public disclosure of which at the time would be materially prejudicial to the Company, the Company may postpone the filing or effectiveness of a registration statement for a period of not more than 120 days; provided that 8 11 during any 360-day period the Company shall use its reasonable best efforts to permit a period of at least 180 consecutive days during which the Company will make a registration statement available under this Agreement; and provided further that if (i) the effective date of any registration statement filed pursuant to a Demand Registration would otherwise be at least 45 calendar days, but fewer than 90 calendar days, after the end of the Company's fiscal year, and (ii) the Securities Act requires the Company to include audited financials as of the end of such fiscal year, the Company may delay the effectiveness of such registration statement for such period as is reasonably necessary to include therein its audited financial statements for such fiscal year. If the Company exercises its right to postpone the filing or effectiveness of a registration statement, the applicable Requesting Holders shall be entitled to withdraw their request for such Demand Registration and it shall not count as a Demand Registration. (b) Anything in this Agreement to the contrary notwithstanding, it is understood and agreed that the Company shall not be required to keep any shelf registration effective or useable for offers and sales of the Registrable Securities, file a post effective amendment to a shelf registration statement or prospectus supplement or to supplement or amend any registration statement, if the Company is then involved in discussions concerning, or otherwise engaged in, any material financing or investment, acquisition or divestiture transaction or other material business purpose if the Company determines in good faith that the making of such a filing, supplement or amendment at such time would interfere with such transaction or purpose; provided that under no circumstances may such postponement exceed 90 days from the date on which the Company notifies the Holders of such postponement, as provided hereafter. The Company shall promptly give the Holders of Registrable Securities written notice of such postponement containing a general statement of the reasons for such postponement and an approximation of the anticipated delay. Upon receipt by a Holder of Registrable Securities of notice of an event of the kind described in this Section 3.1(b), such Holder shall forthwith discontinue such Holder's disposition of Registrable Securities until such Holder's receipt of notice from the Company that such disposition may continue and of any supplemented or amended prospectus indicated in such notice. The Company shall use its reasonable best efforts to permit sales of Registrable Securities on such shelf registration statement for at least 180 days during any 360-day period. In the event the Company shall give notice of an event of the kind described in this Section 3.1(b), the Company shall extend the period during which the applicable registration statement shall be maintained effective as provided in Section 3.1(a) hereof by the number of days during the period from and including the date of the giving of such notice to the date when the Company shall give notice to the Selling Holders that such dispositions of such Registrable Securities may continue and shall have made available to the Selling Holders any such supplemented or amended prospectus. (c) The Company will, if requested, prior to filing such registration statement or any amendment or supplement thereto, furnish to the Selling Holders, and each applicable managing Underwriter, if any, copies thereof, and thereafter furnish to the Selling Holders and each such Underwriter, if any, such number of copies of such registration statement, amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein) and the prospectus included in such registration statement (including each preliminary prospectus) as the Selling Holders or each such Underwriter may reasonably request in order to facilitate the sale of the Registrable Securities by the Selling Holders. 9 12 (d) After the filing of the registration statement, the Company will promptly notify the Selling Holders of any stop order issued or, to the Company's knowledge, threatened to be issued by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. (e) In addition to the requirements imposed on the Company elsewhere herein, the Company will use its commercially reasonable efforts to qualify the Registrable Securities for offer and sale under such other securities or blue sky laws of such jurisdictions in the United States as the Selling Holders reasonably request; keep each such registration or qualification (or exemption therefrom) effective during the period in which such registration statement is required to be kept effective; and do any and all other acts and things which may be reasonably necessary or advisable to enable each Selling Holder to consummate the disposition of the Registrable Securities owned by such Selling Holder in such jurisdictions; provided that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3.1(e), (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction. (f) The Company will as promptly as is practicable notify the Selling Holders, at any time when a prospectus relating to the sale of the Registrable Securities is required by law to be delivered in connection with sales by an Underwriter or dealer, of the occurrence of any event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and promptly make available to the Selling Holders and to the Underwriters any such supplement or amendment. Upon receipt of any notice of the occurrence of any event of the kind described in the preceding sentence, Selling Holders will forthwith discontinue the offer and sale of Registrable Securities pursuant to the registration statement covering such Registrable Securities until receipt by the Selling Holders and the Underwriters of the copies of such supplemented or amended prospectus and, if so directed by the Company, the Selling Holders will deliver to the Company all copies, other than permanent file copies then in the possession of Selling Holders, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. In the event the Company shall give such notice, the Company shall extend the period during which such registration statement shall be maintained effective as provided in Section 3.1(a) hereof by the number of days during the period from and including the date of the giving of such notice to the date when the Company shall make available to the Selling Holders such supplemented or amended prospectus. Furthermore, in the event the Company shall give such notice, the Company shall, as promptly as is practical, prepare a supplement or post-effective amendment to the registration statement or a supplement to the related prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, such prospectus will not 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, in light of the circumstances under which they were made, not misleading. 10 13 (g) The Company will enter into customary agreements (including an underwriting agreement in customary form) and take such other actions (including, without limitation, participation in road shows and investor conference calls) as are required in order to expedite or facilitate the sale of such Registrable Securities. (h) At the request of any Underwriter in connection with an underwritten offering the Company will furnish (i) an opinion of counsel, addressed to the Underwriters, covering such customary matters as the managing Underwriter may reasonably request and (ii) a comfort letter or comfort letters from the Company's independent public accountants covering such customary matters as the managing Underwriter may reasonably request. (i) If requested by the managing Underwriter or any Selling Holder, the Company shall promptly incorporate in a prospectus supplement or post effective amendment such information as the managing Underwriter or any Selling Holder reasonably requests to be included therein, including without limitation, with respect to the Registrable Securities being sold by such Selling Holder, the purchase price being paid therefor by the Underwriters and with respect to any other terms of the underwritten offering of the Registrable Securities to be sold in such offering, and promptly make all required filings of such prospectus supplement or post effective amendment. (j) The Company shall promptly make available for inspection by any Selling Holder or Underwriter participating in any disposition pursuant to any registration statement, and any attorney, accountant or other agent or representative retained by any such Selling Holder or Underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records"), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information requested by any such Inspector in connection with such registration statement; provided, however, that unless the disclosure of such Records is necessary to avoid or correct a misstatement or omission in the registration statement or the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, the Company shall not be required to provide any information under this subparagraph (j) if (A) the Company believes, after consultation with counsel for the Company, that to do so would cause the Company to forfeit an attorney-client privilege that was applicable to such information or (B) if either (1) the Company has requested and been granted from the Commission confidential treatment of such information contained in any filing with the Commission or documents provided supplementally or otherwise or (2) the Company reasonably determines in good faith that such Records are confidential and so notifies the Inspectors in writing unless prior to furnishing any such information with respect to (A) or (B) such Holder of Registrable Securities requesting such information agrees to enter into a confidentiality agreement in customary form and subject to customary exceptions; provided further, however, that each Holder of Registrable Securities agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at its expense, to undertake appropriate action and to prevent disclosure of the Records deemed confidential. (k) The Company shall cause the Registrable Securities included in any registration statement to be (A) listed on each securities exchange, if any, on which similar 11 14 securities issued by the Company are then listed, or (B) authorized to be quoted and/or listed (to the extent applicable) on the Nasdaq National Market if the Registrable Securities so qualify. (l) The Company shall provide a CUSIP number for the Registrable Securities included in any registration statement not later than the effective date of such registration statement. (m) The Company shall cooperate with each Selling Holder and each Underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (n) The Company shall participate in any financial roadshow organized for purposes of publicizing the sale or other disposition of the Registrable Securities. Such participation shall include, but not be limited to, dispatch by the Company of personnel to assist in each presentation made during the roadshow, and provision of Company data needed for purposes of the roadshow. (o) The Company shall during the period when the prospectus is required to be delivered under the Securities Act, promptly file all documents required to be filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act. (p) The Company will make generally available to its security holders, as soon as reasonably practicable, an earnings statement covering a period of twelve months, beginning within three months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder. The Company may require Selling Holders promptly to furnish in writing to the Company such information regarding such Selling Holders, the plan of distribution of the Registrable Securities and other information as the Company may from time to time reasonably request or as may be legally required in connection with such registration. 3.2 REGISTRATION EXPENSES. In connection with any Registration effected hereunder, the Company shall pay all expenses incurred in connection with such registration (the "Registration Expenses"), including without limitation: (i) registration and filing fees with the Commission and the National Association of Securities Dealers, Inc., (ii) all fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) printing expenses, messenger and delivery expenses, (iv) fees and expenses incurred in connection with the listing or quotation of the Registrable Securities, (v) fees and expenses of counsel to the Company and the reasonable fees and expenses of independent certified public accountants for the Company (including fees and expenses associated with the special audits or the delivery of comfort letters together with the fees and expenses of one counsel for the Selling Holders), (vi) the reasonable fees and expenses of any additional experts retained by the Company in connection with such registration, (vii) all roadshow costs and expenses not paid by the Underwriters, and (viii) the fees and expenses of 12 15 other persons retained by the Company will be borne by the Company, whether or not any registration statement becomes effective; provided that in no event shall Registration Expenses include any underwriting discounts or commissions or transfer taxes or the fees and expenses of more than one counsel for the Selling Holders. ARTICLE IV INDEMNIFICATION AND CONTRIBUTION 4.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless each Selling Holder and its Affiliates and their respective officers, directors, partners, stockholders, members, employees, agents and representatives and each Person (if any) which controls a Selling Holder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages, liabilities, costs and expenses (including reasonable attorneys' fees) caused by, arising out of, resulting from or related to any untrue statement or alleged untrue statement of a material fact contained or incorporated by reference in any registration statement or prospectus relating to the Registrable Securities (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by or based upon any information furnished in writing to the Company by or on behalf of such Selling Holder expressly for use therein or by the Selling Holder's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Company has furnished the Selling Holder with copies of the same; provided, however, that the Company shall have no obligation to indemnify under this sentence to the extent any such losses, claims, damages or liabilities have been finally and non-appealably determined by a court to have resulted from such Selling Holder's willful misconduct or gross negligence. The Company also agrees to indemnify any Underwriters of the Registrable Securities, their officers and directors and each person who controls such Underwriters on substantially the same basis as that of the indemnification of the Selling Holders provided in this Section 4.1, except insofar as such losses, claims, damages or liabilities are caused by or based upon any information furnished in writing to the Company by or on behalf of such Underwriter expressly for use therein or by the Underwriter's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Company has furnished the Underwriter with copies of the same; provided, however, that the Company shall have no obligation to indemnify under this sentence to the extent any such losses, claims, damages or liabilities have been finally and non-appealably determined by a court to have resulted from any such Underwriter's willful misconduct or gross negligence. 4.2 INDEMNIFICATION BY SELLING HOLDERS. Each Selling Holder agrees to indemnify and hold harmless the Company, its officers and directors, and each Person, if any, which controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the 13 16 foregoing indemnity from the Company to each Selling Holder, but only with reference to information furnished in writing by or on behalf of such Selling Holder expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus. Each Selling Holder also agrees to indemnify and hold harmless any Underwriters of the Registrable Securities, their officers and directors and each person who controls such Underwriters on substantially the same basis as that of the indemnification of the Company provided in this Section 4.2, but only with reference to information furnished in writing by or on behalf of such Selling Holder expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus. Each such Selling Holder's liability under this Section 4.2 shall be limited to an amount equal to the net proceeds (after deducting the underwriting discount and expenses) received by such Selling Holder from the sale of such Registrable Securities by such Selling Holder. The obligation of each Selling Holder shall be several and not joint. 4.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to Section 4.1 or Section 4.2, such Person (the "Indemnified Party") shall promptly notify the Person against whom such indemnity may be sought (the "Indemnifying Party") in writing and the Indemnifying Party, upon the request of the Indemnified Party, shall retain counsel reasonably satisfactory to such Indemnified Party to represent such Indemnified Party and any others the Indemnifying Party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the Indemnified Party and the Indemnifying Party and, in the written opinion of counsel for the Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the Indemnifying Party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by the Indemnified Parties. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent (not to be unreasonably withheld), or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. 4.4 CONTRIBUTION. If the indemnification provided for in this Article IV is unavailable to an Indemnified Party in respect of any losses, claims, damages or liabilities in respect of which indemnity is to 14 17 be provided hereunder, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall to the fullest extent permitted by law contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of such party in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company, a Selling Holder and the Underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and each Selling Holder agrees that it would not be just and equitable if contribution pursuant to this Section 4.4 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 that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Article IV, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the securities 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, and each Selling Holder shall not be required to contribute any amount in excess of the amount by which the net proceeds of the offering (before deducting expenses) received by such Selling Holder exceeds the amount of any damages which such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. ARTICLE V MISCELLANEOUS 5.1 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may participate in any underwritten registered offering contemplated hereunder unless such Person (a) agrees to sell its securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements, (b) completes and executes all questionnaires, powers of attorney, custody arrangements, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and this Agreement and (c) furnishes in writing to the Company such information regarding such Person, the plan of distribution of the Registrable Securities and other information as the Company may from time to time request or as may be legally required in connection with such registration; provided, however, that no such 15 18 Person shall be required to make any representations or warranties in connection with any such registration other than representations and warranties as to (i) such Person's ownership of his or its Registrable Securities to be sold or transferred free and clear of all liens, claims and encumbrances, (ii) such Person's power and authority to effect such transfer and (iii) such matters pertaining to compliance with securities laws as may be reasonably requested; provided further, however, that the obligation of such Person to indemnify pursuant to any such underwriting agreements shall be several, not joint and several, among such Persons selling Registrable Securities, and the liability of each such Person will be in proportion to, and provided further that such liability will be limited to, the net amount received by such Person from the sale of such Person's Registrable Securities pursuant to such registration. 5.2 RULE 144. The Company covenants that it will file any reports required to be filed by it under the Securities Act and the Exchange Act and that it will take such further action as the Holders may reasonably request to the extent required from time to time to enable the Holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such reporting requirements. 5.3 HOLDBACK AGREEMENTS. (a) The Holders. Each Holder, for so long as he or it individually owns Registrable Securities representing ten percent or more of the voting power of the outstanding voting securities of the Company, agrees, in the event of an underwritten offering by the Company (whether for the account of the Company or otherwise) not to offer, sell, contract to sell or otherwise dispose of any Registrable Securities, or any securities convertible into or exchangeable or exercisable for such securities, including any sale pursuant to Rule 144 under the Securities Act (except as part of such underwritten offering), during the 14 days prior to, and during the 90-day period (or such lesser period as the lead or managing underwriters may require) beginning on, the effective date of the registration statement for such underwritten offering (or, in the case of an offering pursuant to an effective shelf registration statement pursuant to Rule 415, the pricing date for such underwritten offering), provided that in connection with such underwritten offering each officer and director of the Company and holder of ten percent or more of the Common Stock is subject to restrictions substantially equivalent to those imposed on the Holders. (b) Restrictions on Public Sale by the Company. The Company agrees (i) without the written consent of the managing Underwriters in an underwritten offering of Registrable Securities covered by a registration statement filed pursuant to this Agreement, not to effect any public or private sale or distribution of its equity securities, including a sale pursuant to Regulation D under the Securities Act, during the period beginning 14 days prior to, and ending 90 days after, the closing date of each underwritten offering made pursuant to such Registration Statement (except (w) on Form S-8 or any successor form to such Form, (x) upon the exercise of any warrants, options or other securities exercisable or convertible into Common Stock 16 19 outstanding on the date hereof or (y) the grant or exercise of options to employees of the Company pursuant to any duly adopted employee stock option plan); provided, however, that such period shall be extended by the number of days from and including the date of the giving of any notice pursuant to Section 3.1(f) hereof to and including the date when each seller of Registrable Securities covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by Section 3.1(f) hereof, and (ii) to cause each holder of its equity securities purchased from the Company at any time on or after the date of this Agreement (other than equity securities purchased in a registered public offering) to agree not to effect any public sale or distribution of any such equity securities during such periods, including a sale pursuant to Rule 144. 5.4 TERMINATION. The registration rights granted under this Agreement will terminate on December 31, 2015, or such earlier time as there shall no longer be any Registrable Securities. 5.5 AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended, waived or otherwise modified or terminated except by an instrument in writing signed by the Company and the Holders of at least a majority of the Registrable Securities then held by all the Holders, if the amendment is to be effective against the Holders. 5.6 COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement. Each party need not sign the same counterpart. 5.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. 5.8 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Maryland regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. 5.9 ASSIGNMENT OF REGISTRATION RIGHTS. Each Holder of the Registrable Securities may assign all or any part of its rights under this Agreement to any person to whom such Holder sells, transfers, assigns or pledges such Registrable Securities. In the event that the Holder shall assign its rights pursuant to this Agreement in connection with the transfer of less than all its Registrable Securities, the Holder shall also retain its rights with respect to its remaining Registrable Securities. 17 20 5.10 BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Company and any successor organization which shall succeed to substantially all of the business and property of the Company, whether by merger, consolidation, acquisition of all or substantially all of the assets of the Company or otherwise, including by operation of law ("Successor"). The Company hereby covenants and agrees that it shall cause any Successor to adopt and assume this Agreement. If a parent entity of the Company or its Successor becomes the issuer of the Registrable Securities, then the Company or such Successor shall cause such parent entity to adopt and assume this Agreement to the same extent as if the parent entity were the Company or such Successor. 18 21 IN WITNESS WHEREOF, the Company and each Holder has caused this Agreement to be signed on its behalf by its officer thereunto duly authorized as of the date first written above. U.S. RESTAURANT PROPERTIES, INC. By: /s/ BARBARA A. ERHART --------------------------------- Name: Barbara A. Erhart Title: Chief Financial Officer LSF3 CAPITAL INVESTMENTS, I, LLC By: /s/ J.D. DELL --------------------------------- Name: J.D. Dell Title: President LSF3 CAPITAL INVESTMENTS, II, LLC By: /s/ J.D. DELL --------------------------------- Name: J.D. Dell Title: President S-1 EX-10.6 7 d85065ex10-6.txt EXCEPTED HOLDER AGREEMENT 1 EXHIBIT 10.6 EXCEPTED HOLDER AGREEMENT This Excepted Holder Agreement (this "AGREEMENT") is made and entered into as of March 9, 2001, by and between U.S. Restaurant Properties, Inc., a Maryland corporation (the "COMPANY"), LSF3 Capital Investments I, LLC, a Delaware limited liability company ("BUYER 1"), and LSF3 Capital Investments II, LLC, a Delaware limited liability company ("BUYER 2") (Buyer 1 and Buyer 2 are sometimes referred to collectively herein as "BUYER"). R E C I T A L S A. Buyer proposes to purchase from the Company and from stockholders of the Company (with such collective purchases referred to herein as the "ACQUISITIONS") approximately 3,729,765 shares of common stock, par value $.001 per share, of the Company ("COMMON STOCK"). B. To help the Company maintain its status as a REIT, the Company's Restated Articles of Incorporation (the "ARTICLES"), impose certain limitations on the ownership of the Company's stock. Capitalized terms used in this Agreement that are not otherwise defined shall have the meanings given to them in the Articles. The Articles contain a general restriction prohibiting any Person from owning more than a specified percentage (initially set at 9.8%) of the Common Stock of the Company and any series of Preferred Stock of the Company. C. Pursuant to Section 7.10 of the Articles, the Company's Board of Directors is permitted to increase the Common Stock Ownership Limit with respect to a stockholder (as to such stockholder, an "EXCEPTED HOLDER LIMIT") and allow ownership in excess of the Common Stock Ownership Limit if certain conditions described in Section 7.11 of the Articles are satisfied. D. This Agreement is intended to recognize that the Board of Directors of the Company has agreed to increase the Common Stock Ownership Limit of Buyer if certain conditions are satisfied and Buyer intends to satisfy such conditions by execution of this Agreement. A G R E E M E N T 1. REPRESENTATIONS AND COVENANTS OF BUYER 1 AND BUYER 2 Beginning on the date hereof, and during any period that an Excepted Holder Limit established pursuant to this Agreement (as subsequently adjusted) remains in effect, Buyer 1 and Buyer 2 represent and agree, severally and not jointly, as follows: 1.1 As required by Section 7.11(A) of the Articles as a prerequisite to increasing the Common Stock Ownership Limit of a stockholder, assuming no individual, as such term is defined in Code Section 542(a)(2), is currently in violation of its 9.8% Common Stock Ownership Limit, the Acquisitions will not cause the Company to be "closely held" within the meaning of Section 856(h) of the Code (assuming ownership of shares of Equity Stock by all C-1 2 Persons equal to the greatest of (i) the actual ownership, (ii) the Beneficial Ownership of Equity Stock by each Person or (iii) the applicable Ownership Limit with respect to such Person). 1.2 Applying the constructive stock ownership rules of Code Section 856(h), Common Stock purchased by Buyer pursuant to the Acquisitions will not be considered to be owned by any individual, as such term is defined in Code Section 542(a)(2), who would be treated as owning Common Stock in excess of his Common Stock Ownership Limit of 9.8% of the outstanding shares of Common Stock of the Company. If at any time after the date of this Agreement, under the constructive ownership rules of Code Section 856(h) and taking the Common Stock owned by Buyer into account, an individual, as such term is defined in Section 542(a)(2) of the Code, would be treated as owning Common Stock in excess of such individual's Common Stock Ownership Limit in violation of Section 7.2, the Excess Stock and other provisions of Section 7.2 of the Articles shall be applied first to the Common Stock actually owned by such individual, second to the Common Stock treated as owned by such individual (other than as a result of Common Stock actually owned by Buyer) and third to the Common Stock treated as owned by such individual as a result of Common Stock actually owned by Buyer. 1.3 Buyer will not own, actually, Beneficially, or Constructively shares of the Company's Equity Stock that would violate the Excepted Holder Limit established for Buyer pursuant to this Agreement and the resolutions of the Board of Directors. 1.4 As modified by Section 1.2 above, Buyer agrees that any violation or attempted violation of Article 1 of this Agreement or the provisions of the Board of Directors' resolution implementing this Agreement (or other action contrary to the ownership restrictions imposed under the Articles) will automatically subject the shares that otherwise would result in the violation to the treatment described in Section 7.2 of the Articles. 2. ESTABLISHMENT OF AN EXCEPTED HOLDER LIMIT FOR BUYER Based on the representations and agreements contained in this Agreement, the Company, effective as of the execution of this Agreement, is increasing the Common Stock Ownership Limit of Buyer by adopting a resolution of its Board of Directors in the form attached to this Agreement as Exhibit "A." 3. RELATED PARTY RENTS 3.1 Buyer 1 and Buyer 2 hereby represent, severally and not jointly, that, to the best knowledge of such Buyer based upon the due diligence described below, such Buyer and each Indirect Equity Owner does not own (directly or constructively through the application of Code Section 318, as modified by Code Section 856(d)(5)) an interest in any tenant of the Company (or any entity owned or controlled by the Company) listed on Schedule 1 attached hereto that would cause the Company to own (directly or constructively through the application of Code Section 318, as modified by Code Section 856(d)(5)) more than a 9.9% interest (within the meaning of Section 856(d)(2)(B) of the Code) in such tenant, without regard to the other interests in such tenant which the Company may own (directly or constructively through the application C-2 3 of Code Section 318, as modified by Code Section 856(d)(5)). The due diligence referred to above consisted of a review by Buyer 1 and Buyer 2, respectively, of the most recently received copies of all financial reports received from (i) each partnership or limited liability company in which Buyer 1 and Buyer 2, as the case may be, directly or indirectly holds an equity interest; and (ii) each corporation or trust in which Buyer 1 and Buyer 2, as the case may be, directly or indirectly or indirectly owns a 10% or greater equity interest (which financial reports describe all entities in which such partnerships, limited liability companies, corporations and trust own an equity interest as of the date of such reports) and comparing the information contained in such financial reports to Schedule 1. For purposes of this Agreement, an "Indirect Equity Owner" means any Person (i) that is deemed to Beneficially Own or Constructively Own an interest in shares of the Company that are held by Buyer, and (ii) whose direct or indirect ownership of any interest in any tenant of the Company would be attributed to the Company through the application of Section 318 of the Code, as modified by Code Section 856(d)(5). In addition, Buyer 1 and Buyer 2 have received representations from each Indirect Equity Owner of such Buyer that the Indirect Equity Owner does not own more than a 9.9% (within the meaning of Section 856(d)(2)(B) of the Code) in a tenant described on Schedule 1. These representations are made only with respect to the date hereof assuming the Acquisitions have already taken place and do not constitute continuing representations or covenants with respect to the matters described in this Section 3.1. 3.2 Buyer and the Company agree that Buyer will provide the following information to the Company and the Company will provide the following information to Buyer on an annual basis: (a) No later than December 31, of each calendar year, the Company will update the information contained in Schedule 1 (the "TENANT LIST") and provide such information to Buyer and to any Indirect Equity Owner; (b) No later than 30 days after receipt of the Tenant List, Buyer 1 and Buyer 2 and any Indirect Equity Owner will inform the Company of its direct equity ownership of any tenant in which it owns a 10% or greater equity interest (as described in Code Section 856(d)(2)(B)) and whose name appears on the Tenant List; (c) No later than March 31, of each calendar year after 2000 (but only for so long as Buyer owns or Constructively Owns at least 10% of the Equity Stock of the Company), Buyer shall deliver to the Company, subject to such confidentiality restrictions as Buyer may reasonably require, copies of the most recently received information regarding investments from (i) each partnership or limited liability company in which Buyer or any Indirect Equity Owner directly or indirectly holds an equity interest; and (ii) each corporation or trust in which Buyer or any Indirect Equity Owner directly or indirectly owns a 10% or greater equity interest (each such partnership, limited liability company, corporation or trust referred to as a "BUYER ENTITY"). In the alternative, Buyer may satisfy the requirements of this Section 3.2(c) by certifying to the Company, not later than March 31 of each calendar year after 2000 (but only for so long as Buyer owns or Constructively Owns at least 10% of the Equity Stock of the Company), that Buyer personnel have reviewed the information regarding investments of C-3 4 each Buyer Entity described in the preceding sentence together with the Tenant List most recently provided by the Company, and that such review has not revealed (except as specifically noted) any circumstances in which Buyer, any Indirect Equity Owner or any Buyer Entity would own (directly or constructively through the application of Section 318 (as modified by Code Section 856(d)(5)) more than a 9.9% interest (as described in Code Section 856(d)(2)(B)) in any such tenant. 3.3 No later than 30 days after receipt of the Tenant List, Buyer shall provide the Tenant List to each Buyer Entity and any Indirect Equity Owner. Buyer agrees and Buyer will cause each Buyer Entity and Indirect Equity Owner to agree that they will not acquire an equity interest in any of the tenants listed on the Tenant List without the consent of the Company. 4. MISCELLANEOUS 4.1 All questions concerning the construction, validity and interpretation of this Agreement shall be governed by and construed in accordance with the domestic laws of the State of Maryland, without giving effect to any choice of law or conflict of law provision (whether of the State of Maryland or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Maryland. 4.2 This Agreement may be signed by the parties in separate counterparts, each of which when so signed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. C-4 5 Each of the parties has caused this Agreement to be signed by its duly authorized officers as of the date forth in the introductory paragraph of this Agreement. The "Company" U.S. Restaurant Properties, Inc., a Maryland corporation By: /s/ Fred H. Margolin ------------------------------- Name: Fred H. Margolin ----------------------------- Title: CEO ---------------------------- "Buyer" LSF3 Capital Investments I, LLC, a Delaware limited liability company By: /s/ J.D. Dell ------------------------------- Name: J.D. Dell ----------------------------- Title: President ---------------------------- LSF3 Capital Investments II, LLC, a Delaware limited liability company By: /s/ J.D. Dell ------------------------------- Name: J.D. Dell ----------------------------- Title: President ---------------------------- C-5 6 EXHIBIT A EXCEPTED HOLDER LIMITED RESOLUTION In accordance with Article 7 of the Corporation's Restated Articles of Incorporation (the "Articles"), the Board of Directors (capitalized terms used in this resolution that are not otherwise defined herein shall have the meanings given to those terms in the Articles) hereby determines that, effective upon the purchase by LSF3 Capital Investments I, LLC, a Delaware limited liability company and LSF3 Capital Investments II, LLC, a Delaware limited liability company (collectively, "Buyer") of Common Stock of the Corporation pursuant to that certain Amended and Restated Stock Purchase Agreement (the "Agreement") among Lone Star U.S. Acquisitions, LLC, Lone Star Fund II (U.S.), L.P. and the Corporation dated as of February 27, 2001 (the "REIT Ownership Date"): (1) Pursuant to Section 7.10 of the Articles, the aggregate Common Stock Ownership Limit relating to Buyer is increased to 40% of the outstanding shares of Common Stock of the Corporation; provided, however, pursuant to Section 7.11(A) and Section 7.11(B) of the Articles, such increase is contingent upon the execution by Buyer of an Excepted Holder Agreement in the form attached hereto as Exhibit A, the accuracy of Buyer's representations and warranties contained in such Excepted Holder Agreement and the completion of the transactions contemplated by the Agreement; and (2) If at any time after the REIT Ownership Date, under the constructive ownership rules of Code Section 856(h) and taking the Common Stock owned by Buyer into account, an individual, as such term is defined in Section 542(a)(2) of the Code, would be treated as owning Common Stock in excess of such individual's Common Stock Ownership Limit in violation of Section 7.2, the Excess Stock and other provisions of Section 7.2 of the Articles shall be applied first to the Common Stock actually owned by such individual, second to the Common Stock constructively owned by such individual (other than as a result of Common Stock actually owned by Buyer) and third to the Common Stock constructively owned by such individual as a result of Common Stock actually owned by Buyer. C-6 EX-99.1 8 d85065ex99-1.txt AGREEMENT AMONG FILING PARTIES 1 EXHIBIT 99.1 AGREEMENT AMONG FILING PARTIES THIS AGREEMENT is made and entered into on March 19, 2001, by and among LSF3 Capital Investments I, a Delaware limited liability company; LSF3 Capital Investments II, a Delaware limited liability company; LSF3 REOC I, L.P., a Delaware limited partnership; LSF3 GenPar I, LLC, a Delaware limited liability company; Lone Star Fund III L.P., a Delaware limited partnership; Lone Star Partners III, L.P., a Bermuda limited partnership; Lone Star Management Co. III, Ltd., a Bermuda exempted limited liability company; John P. Grayken; Hudson Advisors, L.L.C., a Texas limited liability company; Hudson Advisors Associates, L.P., a Texas limited partnership and Advisors GenPar, Inc., a Texas corporation (collectively referred to herein as the "FILING PARTIES"). WHEREAS, Rule 13d-1(k)(1)(iii) under the Securities Exchange Act of 1934, as amended (the "Act"), requires that, when a Schedule 13D is filed on behalf of more than one person, an agreement be executed and filed as an exhibit to the Schedule 13D reflecting that the Schedule 13D is being filed on behalf of all such persons: NOW, THEREFORE, in consideration of the premises and the mutual promises stated herein, the Filing Parties hereby agree as follows: 1. Each Filing Party agrees that a single Schedule 13D (and any amendments thereto) shall be filed jointly on behalf of all the Filing Parties with respect to the paired shares of common stock, $.001 par value per share, of U.S. Restaurant Properties, Inc., a Delaware corporation. 2. Each Filing Party acknowledges and agrees that, pursuant to Rule 13d-1(k)(1) under the Act, each Filing Party individually is (i) eligible to use the Schedule 13D and (ii) responsible for the timely filing of such Schedule 13D and any amendments thereto and for the completeness and accuracy of the information concerning such Filing Party contained in such Schedule 13D. None of the Filing Parties, however, shall be responsible for the completeness or accuracy of information concerning any other Filing Party contained in such Schedule 13D, or any amendments thereto, unless such Filing Party knows or has reason to believe that such information is incomplete or inaccurate. 3. This agreement shall not be assignable by any Filing Party. Any assignment in violation of the foregoing shall be null and void. 4. This agreement shall terminate upon the written notice of termination given by any Filing Party to the other Filing Parties. 5. This agreement may be executed in several counterparts, each of which shall be deemed to be an original copy hereof. 2 IN WITNESS WHEREOF, each of the undersigned has hereby executed this Agreement Among Filing Parties as of the date or dates indicated below. LSF3 Capital Investments I, LLC, a Delaware limited liability company By: LSF3 REOC I, L.P., its Sole Member and a Delaware limited partnership By: LSF3 GenPar I, LLC, its General Partner and a Delaware limited liability company By: /s/ Benjamin D. Velvin III ------------------------------------- Benjamin D. Velvin III Vice President Date: March 19, 2001 ----------------------------------- 3 LSF3 REOC I, L.P., a Delaware limited partnership By: LSF3 GenPar I, LLC, its General Partner and a Delaware limited liability company By: /s/ Benjamin D. Velvin III ------------------------------------- Benjamin D. Velvin III Vice President Date: March 19, 2001 ----------------------------------- 4 LSF3 GenPar I, LLC, a Delaware limited liability company By: /s/ Benjamin D. Velvin III ------------------------------------- Benjamin D. Velvin III Vice President Date: March 19, 2001 ----------------------------------- 5 Lone Star Fund III L.P., a Delaware limited partnership By: Lone Star Partners III, L.P., its General Partner and a Bermuda limited partnership By: Lone Star Management Co. III, Ltd., its General Partner and a Bermuda exempted limited liability company By: /s/ John P. Grayken ------------------------------------- John P. Grayken President Date: March 19, 2001 ----------------------------------- 6 Lone Star Partners III, L.P., a Bermuda limited partnership By: Lone Star Management Co. III, Ltd., its general partner and a Bermuda exempted limited liability company By: /s/ John P. Grayken ------------------------------------- John P. Grayken President Date: March 19, 2001 ----------------------------------- 7 Lone Star Management Co. III, Ltd., a Bermuda exempted liability company By: /s/ John P. Grayken ------------------------------------- John P. Grayken President Date: March 19, 2001 ----------------------------------- 8 LSF3 Capital Investments II, LLC, a Delaware limited liability company By: Lone Star Partners III, L.P., its General Partner and a Bermuda limited partnership By: Lone Star Management Co. III, Ltd., its General Partner and a Bermuda exempted limited liability company By: /s/ John P. Grayken ------------------------------------- John P. Grayken President Date: March 19, 2001 ----------------------------------- 9 Date: March 19 , 2001 /s/ John P. Grayken ------------------------ ------------------------------------ John P. Grayken 10 Hudson Advisors, L.L.C., a Texas limited liability company By: /s/ Robert J. Corcoran ------------------------------------- Robert J. Corcoran President Date: March 19, 2001 ----------------------------------- 11 Hudson Advisors Associates, L.P., a Texas limited partnership By: Advisors GenPar, Inc., its General Partner and a Texas corporation By: /s/ Robert J. Corcoran ------------------------------------- Robert J. Corcoran President Date: March 19, 2001 ------------------------------------ 12 Advisors GenPar, Inc., a Texas corporation By: /s/ Robert J. Corcoran ------------------------------------- Robert J. Corcoran President Date: March 19, 2001 ----------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----