1
EXHIBIT 10.3
================================================================================
U.S. RESTAURANT PROPERTIES OPERATING L.P.
and
USRP FUNDING 2001-A, L.P.
----------------------------
CONTRIBUTION AGREEMENT
Dated as of January 9, 2001
----------------------------
$175,000,000
USRP Funding 2001-A, L.P.
Triple Net Lease Mortgage Notes
================================================================================
1
2
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT, dated as of January 9, 2001 (this
"Agreement"), is made between U.S. Restaurant Properties Operating L.P.
("USRP"), a Delaware limited partnership, and USRP Funding 2001-A, L.P. (the
"Issuer"), a Delaware limited partnership.
PRELIMINARY STATEMENT
Reference is made to an Indenture, dated as of January 9, 2001
(the "Indenture"), among the Issuer and Wells Fargo Bank Minnesota, N.A., as
indenture trustee (the "Indenture Trustee"), related to the issuance by the
Issuer of its $175,000,000 Triple Net Lease Mortgage Notes (the "Notes"). Terms
used without definition herein shall have the respective meanings assigned to
them in the Indenture, and to the extent not defined therein, such terms shall
have the respective meanings assigned to them in the Property Management
Agreement, dated as of January 9, 2000 (the Property Management Agreement"),
among the Issuer, the Indenture Trustee and USRP, as property manager (the
"Property Manager").
USRP is the sole limited partner of, and owns 99.99% of the
beneficial interest in, the Issuer.
USRP and affiliates of USRP described in Schedule 1 (the
"Record Owners") are the record owners of the fee title to, or ground leasehold
(or ground subleasehold) interests in, the commercial real properties described
on Schedule 1 (the "Franchise Units"). On or before the date hereof, (i) such
Record Owners will transfer all of their right, title and interest in and to the
Franchise Units to USRP (which transfer will not be required to be reflected in
the public records of the applicable jurisdictions), and USRP will make a
contribution to the capital of the Issuer, by transferring all of its right,
title and interest in and to the Franchise Units to the Issuer effective as of
the date hereof, together with all of its right, title and interest in and to
the Leases with respect to the Franchise Units, including, without limitation,
all Rents and other amounts due under such Leases on or after the date hereof
and all rights under the Leases against the Tenants with respect to the
Franchise Units, including, without limitation, rights to Insurance Proceeds,
Liquidation Proceeds and Condemnation Proceeds arising on or after the date
hereof, and all Tenant security deposits (whether in the form of cash or other
security) and escrow funds related to the Leases with respect to the Franchise
Units.
The Issuer will grant a security interest in each of the
Franchise Units to the Indenture Trustee pursuant to the Security Instruments to
secure repayment of the Notes. The Issuer intends to sell the Notes to Banc of
America Mortgage Capital Corporation ("Banc of America") pursuant to a Purchase
Agreement, dated as of January 9, 2001 (the "Purchase Agreement"), among the
Issuer and Banc of America.
1. CAPITAL CONTRIBUTION. USRP hereby agrees to transfer,
assign, set over and otherwise convey all of its right, title and interest in
and to the Franchise Units and the Leases with respect to the Franchise Units to
the Issuer on the Effective Date (as defined in Section 4 below), including,
without limitation, all Rents and other amounts due under such Leases with
respect
2
3
to the Franchise Units on or after the date hereof, and all rights under the
Leases with respect to the Franchise Units against the Tenants, including,
without limitation, rights to Insurance Proceeds, Liquidation Proceeds and
Condemnation Proceeds arising on or after the date hereof and all Tenant
security deposits (whether in the form of cash or other security) and escrow
funds related to the Leases, pursuant to a General Warranty Deed and Assignment
of Leases and Rents for each Franchise Unit and Lease. Each such General
Warranty Deed and Assignment of Leases and Rents may be made directly by the
applicable Record Owner to the Issuer on behalf of USRP. The parties agree that
such transfer shall be treated as a contribution to the capital of the Issuer by
USRP.
(b) USRP hereby agrees to deliver to and deposit with the
Indenture Trustee, or cause to be so delivered and deposited, the Lease
File for each of the Leases within the time periods and in accordance
with the Indenture.
(c) The Issuer shall own and be entitled to receive with
respect to each Franchise Unit (i) all Rent due under each such Lease
on or after the Closing Date, (ii) all other payments on such Franchise
Unit or Lease attributable to the Franchise Unit, other than the
portion of any such payment allocable to a period prior to the Closing
Date (which has been retained by USRP hereunder) and all rights under
the Leases against the Tenants or otherwise with respect to the
Franchise Units, including, without limitation, rights to Insurance
Proceeds, Liquidation Proceeds and Condemnation Proceeds arising on or
after the Closing Date and (iii) all Tenant security deposits (whether
in the form of cash or other security) and escrow funds related to the
Leases with respect to the Franchise Units.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS.
2.1 USRP hereby represents and warrants to the Issuer and the
Indenture Trustee, as third party beneficiary hereunder, with respect to itself
and the Record Owners, as of the date hereof, as of the Closing Date and as of
the date of any substitution, exchange or other transfer of a Franchise Unit to
the Issuer hereunder, that:
(i) Each of USRP and each Record Owner is duly organized,
validly existing and in good standing under the laws of the state of
its organization;
(ii) The execution, delivery and performance of this Agreement
by USRP and the General Warranty Deeds and Assignments of Leases and
Rents by the Record Owners (i) are within the power and authority of
USRP and the Record Owners; (ii) have been authorized by all requisite
organizational action; (iii) have received all necessary approvals and
consents, organizational, governmental or otherwise; (iv) will not
violate, conflict with, result in a breach of or constitute (with
notice or lapse of time, or both) a material default under any
provision of law, any order or judgment of any court or governmental
authority, any of the organizational documents of USRP or the Record
Owners, or any indenture, agreement or other instrument to which USRP
or any of the Record Owners are a party or by which USRP or any of the
Record Owners or any of their assets or the Properties are or may be
bound or affected; (v) will not result in the creation or imposition of
any lien, charge or encumbrance whatsoever upon any of their assets or
the Properties; and (vi) will not require any authorization or license
from, or any filing with, any governmental or other body (except for
the recordation of the General Warranty Deeds);
3
4
(iii) This Agreement, assuming due authorization, execution
and delivery by the other parties hereto, constitutes a valid, legal
and binding obligation of USRP, enforceable against USRP in accordance
with its terms, subject to (A) applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the enforcement of
creditors' rights generally and (B) general principles of equity,
regardless of whether such enforcement is considered in a proceeding in
equity or at law; and
(iv) No litigation is pending or, to USRP's knowledge,
threatened against USRP or any of the Record Owners that, if determined
adversely to USRP or any of the Record Owners, would prohibit USRP from
entering into and performing its obligations under this Agreement or
such Record Owners making the transfers contemplated by this Agreement,
or that may adversely affect the ability of USRP to perform its
obligations under this Agreement or the Record Owners from making the
transfers contemplated by this Agreement.
2.2 USRP hereby represents and warrants to the Issuer and the
Indenture Trustee, as third party beneficiary hereunder, as to each Lease and
Franchise Unit and the Tenant thereunder, as of the time immediately prior to
each transfer of such Franchise Unit and Lease to the Issuer, unless otherwise
specified below, that:
(a) Except with respect to the Leases described on Schedule
2.2(a) (the "Master Leases"), USRP owns such Lease free and clear of
any and all liens and other encumbrances and, with respect to each
Master Lease, USRP owns such Master Lease as it relates to any of the
Franchise Units free and clear of any and all liens and other
encumbrances.
(b) Each of the applicable Record Owner and USRP has full
right, power and authority to sell, assign and transfer such Lease.
(c) The information set forth in Schedule 1 was true and
correct in all material respects as of the Closing Date.
(d) Except as set forth on Schedule 2.2(d), such Lease was not
delinquent (giving effect to any applicable grace period) in the
payment of Rent as of the Closing Date, and has not been during the
twelve-month period prior thereto, 30 days or more delinquent in the
payment of Rent required thereunder without giving effect to any
applicable grace period.
(e) Immediately prior to the transfer of such Franchise Unit
to USRP, the related Record Owner has, and immediately prior to the
transfer of such Franchise Unit to the Issuer, USRP has fee simple
title to, or a ground leasehold or ground subleasehold interest in, the
Franchise Units, free and clear of all encumbrances and liens except
for the following ("Permitted Exceptions"): (i) liens for real estate
taxes and special assessments not yet due and payable or due but not
yet delinquent, (ii) covenants, conditions and restrictions,
rights-of-way, easements and other matters of public record, such
exceptions being of a type or nature which are acceptable to mortgage
lending institutions generally, (iii) liens encumbering the fee owner's
interest with respect to ground lease transactions, (iv) tenant
4
5
purchase options described on Schedule 2.2(e) ("Tenant Purchase
Options") and (v) other matters to which like properties are commonly
subject, which matters referred to in clauses (ii), (iii), (iv) and (v)
do not, individually or in the aggregate, materially interfere with the
value of the Franchise Unit, or materially interfere or restrict the
current use or operation of the Franchise Unit as a restaurant or
convenience store, as applicable.
(f) Lessor estoppels containing customary protection
provisions have been obtained from the owner of the fee simple interest
in each Franchise Unit in which the Issuer has only a ground leasehold
interest and from the owner of the fee simple interest and the owner of
the ground lessee's interest in each Franchise Unit in which the Issuer
has only a ground subleasehold interest.
(g) Except as set forth on Schedule 2.2(g), there is no
default, breach, violation or event of acceleration existing under such
Lease or other agreement, document or instrument executed in connection
with such Lease and there is no existing event which, with the passage
of time or with notice and the expiration of any grace period, would
constitute a default, breach, violation or event of acceleration under
such Lease or other agreement, document or instrument executed in
connection with such Lease, and neither the Record Owner nor USRP has,
within the 180 day period immediately preceding the Closing Date,
waived any default, breach, violation or event of acceleration existing
under such Lease or other agreement, document or instrument executed in
connection with such Lease.
(h) Neither such Lease nor any other agreement, document or
instrument executed in connection with such Lease has been waived,
modified, altered, satisfied, canceled or subordinated in any material
respect, and such Lease has not been terminated or canceled, nor has
any instrument been executed that would effect any such waiver,
modification, alteration, satisfaction, termination, cancellation,
subordination or release, except in each case by a written instrument
which is part of the related Lease File.
(i) Such Franchise Unit is covered by an American Land Title
Association (or an equivalent form thereof as adopted in the applicable
jurisdiction) mortgagee's title insurance policy (the "Title Policy")
in an amount at least equal to the Allocated Loan Amount with respect
to such Franchise Unit. The Title Policy insures, as of the date of
such policy (or any date-down endorsement to such policy), that the
Indenture Trustee has a valid security interest in such Franchise Unit
prior to any other security interest subject only to the Permitted
Exceptions (to the extent stated therein); such title insurance policy
is in full force and effect and inures to the benefit of the Indenture
Trustee as a mortgagee of record; all premiums thereon have been paid;
and no material claims have been made thereunder.
(j) The Tenant is in possession and paying Rent pursuant to
such Lease; the Lease is not a Defaulted Lease or a Delinquent Lease.
(k) To the best of USRP's knowledge, the Tenant has all
material licenses, permits, material agreements, including without
limitation franchise agreements, necessary for the operation and
continuance of the Tenant's business on the Franchise Unit; and, to the
5
6
best of USRP's knowledge, the Tenant is not in default of its
obligations under any such applicable license, permit or agreement.
(l) The Tenant is not the subject of any bankruptcy or
insolvency proceeding.
(m) There are no pending actions, suits or proceedings by or
before any court or governmental authority against or affecting, such
Lease, such Franchise Unit or, to USRP's knowledge, the Tenant, that if
determined would materially and adversely affect the value of the Lease
or Franchise Unit, or the ability of the Tenant to pay Rent or any
other amounts due under the Lease.
(n) Except as set forth on Schedule 2.2(n), as of the Closing
Date, all of the material improvements built or to be built on the
Franchise Unit lay within the boundaries and building restriction lines
of such property (unless affirmatively covered in the Title Policy);
the improvements located on or forming part of the Franchise Unit
comply in all material respects with applicable zoning laws and
ordinances, except for legal nonconforming uses; the applicable zoning
laws and ordinances permit the use of the Franchise Unit as a
restaurant or convenience store, as applicable.
(o) There are no delinquent or unpaid taxes or assessments, or
other outstanding charges affecting any Franchise Unit which are or may
become a lien of priority equal to or higher than the lien of the
Mortgages in favor of the Indenture Trustee, other than such amounts
which do not materially and adversely affect the value of the Lease or
Franchise Unit. For purposes of this representation and warranty, real
property taxes and assessments shall not be considered unpaid until the
date on which interest and/or penalties would be payable thereon.
(p) The assignment of Rents contained in the related
Assignment of Leases and Rents constitutes the legal, valid, binding
and enforceable assignment of the related Record Owner's and USRP's
rights in the Lease to the Issuer.
(q) As of the Closing Date, the assignment of Rents contained
in the related Mortgage constitutes the legal, valid, binding and
enforceable assignment of the Issuer's rights in the Lease to the
Indenture Trustee.
(r) There is no valid dispute, claim, offset, defense or
counterclaim to the related Record Owner's or USRP's rights in the
Lease.
(s) There is no proceeding pending or threatened for the total
or, except as set forth on Schedule 2.2(s), partial condemnation of the
Franchise Unit, and the Franchise Unit is free and clear of any damage
that would materially and adversely affect the value of such Franchise
Unit as security for the related Lease.
(t) The Lease or other agreement, document or instrument
executed in connection with such Lease or securing such Lease is the
legal, valid and binding obligation of the
6
7
Tenant (subject to certain creditors' rights exceptions and other
exceptions of general application).
(u) Except as set forth on Schedule 2.2(u) with respect to
Leases whose Tenants are permitted to self-insure (that is, to maintain
no insurance) for casualty losses, such Lease requires the Tenant to
maintain in respect of the Franchise Unit insurance against loss by
hazards and comprehensive general liability insurance in amounts
generally required by USRP and its Affiliates, all of such insurance
required under the Lease for such Franchise Unit is in full force and
effect and names the Record Owner and its respective successors or
assigns as an additional insured; all premiums on any insurance
policies required to be paid as of the date hereof have been paid; all
insurance policies require prior notice to the lessor under the Lease
of termination or cancellation, and as of the date hereof, no such
notices have been received; in the event that the Tenant fails to
maintain the insurance required thereunder, the Lease (or other
applicable document) authorizes the lessor under the Lease to maintain
such insurance at the Tenant's cost and expense and to seek
reimbursement therefor from such Tenant.
(v) Such Franchise Unit either (i) is insured under the
Environmental Policy or (ii) was subject to a Phase I environmental
site assessment (each, a "Phase I Assessment") or a Phase II
environmental site assessment (each, a "Phase II Assessment") performed
by a reputable environmental consultant no earlier than one year prior
to the Closing Date with respect to each Franchise Unit operated as a
convenience and gasoline store or two years and six months prior to the
Closing Date with respect to each Franchise Unit operated as a
restaurant (or if such Phase I Assessment or Phase II Assessment was
performed in excess of such time period, a "Vista" database search was
performed within such time period) and (A) any such Phase I Assessment
concluded that no further investigation was necessary or (B) if any
such Phase I Assessment recommended further investigation, a Phase II
Assessment was performed, and such Phase II Assessment concluded that
no remediation or further action was required with respect to such
Franchise Unit; USRP has no knowledge of any material and adverse
environmental condition or circumstance or violation of applicable
environmental laws affecting such Franchise Unit that was: (i) not
disclosed in the related Phase I Assessment or Phase II Assessment or
(ii) that was disclosed, but (A) remains uncured or unremediated, (B)
for which monitoring efforts are ongoing or (C) is not insured under
the Environmental Policy; except as set forth in the related Phase I
Assessment or Phase II Assessment and to the best of USRP's knowledge,
no Hazardous Substances are or have been (including the period prior to
USRP's acquisition of such Franchise Unit) discharged, generated,
treated, disposed of or stored on, incorporated in, or removed or
transported from each Franchise Unit other than in compliance with all
Environmental Laws; to the best of USRP's knowledge other than as set
forth in the related Phase I or Phase II Assessment or as set forth on
Schedule 2.2(v), no notice of violation of such laws has been issued by
any governmental agency or authority; and neither the related Record
Owner nor USRP has taken any action which would cause the related
Franchise Unit not to be in compliance with all federal, state and
local laws pertaining to environmental hazards. For purposes of this
Agreement, "Hazardous Substances" means petroleum and petroleum
products and compounds containing them, including gasoline, diesel fuel
and oil; explosives; flammable materials; radioactive materials;
polychlorinated biphenyls ("PCBs") and
7
8
compounds containing them; lead and lead-based paint; asbestos or
asbestos-containing materials in any form that is or could become
friable; underground or above-ground storage tanks, whether empty or
containing any substance; any substance the presence of which on the
Franchise Unit is regulated by or prohibited by any federal, state or
local authority; any substance that requires special handling; and any
other material, substance or waste now or in the future defined as a
"hazardous substance," "hazardous material," " hazardous waste," "toxic
substance," "toxic pollutant," "contaminant," "pollutant" or other
words of similar import within the meaning of any Environmental Law.
For purposes of this Agreement, "Environmental Law" means any present
and future federal, state and local laws, statutes, ordinances, rules,
regulations, standards, policies, consent decrees, consent or
settlement agreements and other governmental directives or
requirements, as well as common law, that apply to the Franchise Unit
and relate to Hazardous Substances, including, without limitation,
CERCLA and RCRA.
(w) As of the Closing Date, such Franchise Unit is free and
clear of any mechanics' and materialmen's liens or liens in the nature
thereof (unless affirmatively covered under the Title Policy) which
would materially and adversely affect the value, use or operation of
such Franchise Unit.
(x) The Lease, together with applicable state law, contains
customary and enforceable provisions such as to render the rights and
remedies of the lessors thereof adequate for the practical realization
against the related Franchise Unit of the principal benefits of the
security intended to be provided thereby.
(y) With respect to each Lease:
(1) the Franchise Unit is not subject to any lease other
than a ground lease and/or the Lease and, subleases to related
entities or franchisees; no person has any possessory interest
in, or right to occupy, the Franchise Unit except under and
pursuant to the Lease or such sublease; the Tenant (or
sub-tenant) is in occupancy of the Franchise Unit; and, in the
case of any sublease, the Tenant remains primarily liable on
the Lease;
(2) the obligations of the Tenant, including, but not
limited to, the obligation to pay fixed and additional Rent,
are not affected by reason of: any damage to or destruction of
any portion of the Franchise Unit; any taking of the Franchise
Unit or any part thereof by condemnation or otherwise; except
with respect to certain abatement and termination rights in
connection with casualty and condemnation occurrences which
may be provided for under such Lease;
(3) neither the Record Owner nor USRP, as lessor under the
Lease, has any monetary obligations under the Lease which have
not been satisfied;
(4) the Tenant has not been released, in whole or in part,
from its obligations under the terms of the Lease;
8
9
(5) except as set forth on Schedule 2.2(y)(5), every
obligation associated with managing, owning, developing and
operating the Franchise Unit, including, but not limited to,
the costs associated with utilities, taxes, insurance, ground
rent, capital and structural improvements, maintenance and
repairs is an obligation of the Tenant, other than certain
state franchise taxes that are prohibited under state law from
being passed through to a Tenant;
(6) except as set forth on Schedule 2.2(y)(6), and other
than obligations related to the initial construction of the
Improvements which have been satisfied, and the obligation to
rebuild the Improvements after a casualty (which obligation is
limited by available insurance proceeds), the lessor does not
have any nonmonetary obligations under the Lease and has made
no representation or warranty under the Lease, the breach of
which would result in the abatement of Rent, a right of setoff
or termination of the Lease;
(7) there is no right of rescission, set-off, abatement
(except in the case of casualty or condemnation), diminution,
defense or counterclaim to the Lease, nor will the operation
of any of the terms of the Lease, or the exercise of any
rights thereunder, render the Lease unenforceable, in whole or
in part, or subject to any right of recission, set-off,
abatement, diminution, defense or counterclaim, and no such
right has been asserted;
(8) except as set forth in Schedule 2.2(y)(8), the Tenant
may not terminate the Lease for any reason prior to the
Termination Date of the Lease, except (i) in the case of
ground lease properties, if the ground lease terminates, (ii)
in the event of a casualty or condemnation, in some cases,
(iii) the exercise of the Tenant Purchase Option, or (iv) the
exercise of the Tenant's right of first refusal; and the
Tenant's right to terminate is subject to the payment of all
insurance proceeds or condemnation awards to the lessor;
(9) except as set forth in Schedule 2.2(y)(9), except for
assignments to (a) affiliates of the Tenant, (b) permitted
franchisees, (c) assignees meeting the lessor's then current
concept and credit standards and (d) certain other assignees
where the Tenant remains liable under the Lease, the Tenant
may not assign or sublease the Franchise Unit without the
consent of the lessor, and in the event the Tenant assigns or
sublets the Franchise Unit, the Tenant remains primarily
obligated under the Lease;
(10) the Tenant has agreed to indemnify the lessor from
any claims of any nature relating to the Lease and the related
Franchise Unit, including, without limitation, arising as a
result of violations of Environmental Laws resulting from the
Tenant's operation of the property;
(11) any obligation or liability imposed on the lessor by
any easement or reciprocal easement agreement is also an
obligation of the Tenant under the Lease;
9
10
(12) the Tenant is required to make rental payments as
directed by the lessor and its successors and assigns; and
(13) in the event the Indenture Trustee acquires title to
a Franchise Unit by foreclosure or otherwise, except in
certain cases where the Tenant may exercise a right of first
refusal, the Lease is freely assignable by the lessor and its
successors and assigns to any person without the consent of
the Tenant, and in the event the lessor's interest is so
assigned, the Tenant will be obligated to recognize the
assignee as lessor under such Lease, whether under the Lease
or by operation of law.
(z) In connection with Leases with a guaranty:
(1) such guaranty, on its face, is unconditional,
irrevocable and absolute, and is a guaranty of payment and not
merely of collection and contains no conditions to such
payment, other than a notice and right to cure; the guaranty
provides that it is the guaranty of both the performance and
payment of the financial obligations of the Tenant under the
Lease and does not provide for offset, counterclaim or
defense; and
(2) such guaranty is binding on the successors and assigns
of the guarantor and inures to the benefit of the lessor's
successors and assigns.
(aa) The Record Owner has inspected or caused to be inspected
such Franchise Unit within 6 months of origination of the Lease.
(bb) No fraudulent acts were committed by the Record Owner,
USRP or any of their Affiliates during the origination process of such
Lease and the origination, servicing and collection of such Lease is in
all respects legal, proper and prudent in accordance with customary
industry standards.
(cc) To the extent required under applicable law, each of the
Record Owner and USRP was authorized to transact and do business in the
jurisdiction in which such Franchise Unit is located at all times that
the Record Owner or USRP was the lessor, except where such failure to
qualify would not result in a Material Adverse Effect.
(dd) Such Franchise Unit (i) is located on or adjacent to a
dedicated road, or has access to an irrevocable easement permitting
ingress and egress, (ii) is served by public utilities, water and sewer
(or septic facilities) and (iii) has parking as required under
applicable law or is a legal non-conforming use.
(ee) Each Lease File contains a survey with respect to such
Franchise Unit, which survey (i) was prepared by a duly licensed
surveyor or registered engineer in the state in which said property is
located and is signed and sealed by same, (ii) was deemed sufficient to
replace the standard title survey exception with an exception referring
specifically to such survey in the Title Policy, and (iii) is certified
to USRP or the Record Owner.
10
11
(ff) The information delivered by on or behalf of USRP to Banc
of America or the Indenture Trustee is true and accurate in all
material respects and does not omit any material fact necessary to make
such information not misleading.
(gg) Except as set forth on Schedule 2.2(gg), and based on an
estoppel letter obtained from the Tenant, with respect to each
Franchise Unit operated by a franchisee, the term of the related
franchise agreement is for a period equal to or longer than the initial
Lease term and, the franchisee is in good standing under the terms of
such franchise agreement.
(hh) No adverse selection was employed in selecting the
Leases.
(ii) With respect to each Franchise Unit in which USRP has a
ground leasehold or ground subleasehold interest:
(1) the ground lease or a memorandum thereof has been duly
recorded, the ground lease (or a recorded estoppel letter)
permits the interest of the lessee thereunder to be encumbered
by the related Mortgage, and there has not been a material
change in the terms of the ground lease since its recordation,
with the exception of written instruments which are part of
the Lease File;
(2) except as indicated in the related title insurance
policy or opinion of title, the ground lessee's interest in
the ground lease is not subject to any liens or encumbrances
superior to, or of equal priority with, the related Mortgage,
other than the related ground lessor's fee interest and those
subject to non-disturbance rights;
(3) as of the Closing Date, the ground lease is in full
force and effect and no default has occurred under the ground
lease and there is no existing condition which, but for the
passage of time or the giving of notice, would result in a
default under the terms of the ground lease;
(4) the ground lease or an estoppel letter executed by the
ground lessor requires the lessor thereunder to give notice of
any default by the lessee to the Indenture Trustee; or the
ground lease or an estoppel letter received by the Indenture
Trustee from the lessor provides that notice of termination
given under the ground lease is not effective against the
Indenture Trustee unless a copy of the notice has been
delivered to the Indenture Trustee in the manner described in
such ground lease;
(5) the Indenture Trustee is permitted a reasonable
opportunity (including, where necessary, sufficient time to
gain possession of the interest of the lessee under the ground
lease) to cure any default under the ground lease, which is
curable after the receipt of notice of any default before the
lessor thereunder may terminate the ground lease;
(6) the ground lease has a term which is at least as long
as the term of the related Lease;
11
12
(7) the ground lease or an estoppel letter executed by the
ground lessor requires the ground lessor to enter into a
substitute ground lease containing identical terms with the
Indenture Trustee upon termination of the ground lease by the
lessee for any reason, including, without limitation,
rejection of the ground lease in a bankruptcy proceeding of
the lessee;
(8) under the terms of the ground lease, any related
casualty insurance proceeds will be available for the repair
or restoration of all or part of the related Franchise Unit;
and
(9) either (i) the ground lease does not impose
restrictions on subletting or (ii) the ground lessor has
consented to the existing lease with respect to the related
Franchise Unit.
3. DEFECT, BREACH, CURE, SUBSTITUTION AND REPURCHASE.
Effective upon the issuance of the Notes under the Indenture, USRP hereby agrees
as follows:
(a) Within 90 days of being notified that, with respect to any
Franchise Unit, Lease or Tenant, (x) any document constituting part of
a Lease File has not been properly executed, is missing, contains
information that does not conform in any respect with the corresponding
information set forth in Schedule 1 hereto or does not appear to be
regular on its face (each, a "Document Defect"), or (y) a breach of any
representation or warranty relating to any Franchise Unit, Lease or
Tenant set forth in this Agreement (a "Breach") has occurred, and that
such Document Defect or Breach materially and adversely affects the
value of, or interests of the Issuer in, such Franchise Unit or Lease
(a "Defective Franchise Unit or Lease"), USRP shall (i) promptly cure
such Document Defect or Breach in all material respects, (ii)
repurchase such Defective Franchise Unit at the related Allocated Loan
Amount by wire transfer of funds to the Payment Account or (iii) with
the prior written consent of the Directing Noteholder which shall not
be unreasonably withheld, substitute one or more Qualified Substitute
Franchise Units for such Defective Franchise Unit, provided, that if
(A) such Document Defect or Breach is capable of being cured but not
within such 90-day period, (B) USRP has commenced during such 90_day
period and is diligently proceeding with the cure of such Document
Defect or Breach, and (C) USRP has delivered to the Issuer and the
Indenture Trustee a certification executed on its behalf by one of its
officers (1) setting forth the reason such Document Defect or Breach is
not capable of being cured within such 90-day period and what actions
USRP is pursuing in connection with the cure thereof, and (2) stating
that USRP anticipates that such Document Defect or Breach will be cured
within an additional period not to exceed 90 days, then USRP shall have
an additional 90 days to complete such cure commencing on the 91st day
from receipt by USRP of the notice referred to above. It is understood
and agreed that the obligations of USRP set forth in this Section 3(a)
to cure a Document Defect or Breach or to repurchase or substitute one
or more Qualified Substitute Franchise Units for the related Defective
Franchise Unit constitute the sole remedies available to any Person
respecting such Document Defect or Breach.
12
13
"Qualified Substitute Franchise Unit" means a commercial real
property with respect to which USRP or an affiliate of USRP owns the fee title
to, or ground leasehold (or ground sub-leasehold) interests in, and which is
approved by the Directing Noteholder in its reasonable discretion. With respect
to any Defective Franchise Unit for which USRP substitutes one or more Qualified
Substitute Franchise Units, USRP shall effect such substitution by deeding each
Qualified Substitute Franchise Unit (or assigning the ground leasehold interest
therein) to the Issuer and delivering to and depositing with the Indenture
Trustee (i) the deed (or assignment of ground lease) and any other transfer
documents transferring such Qualified Substitute Franchise Unit (or ground
leasehold interest) to the Issuer and (ii) the Lease Files for such Qualified
Substitute Franchise Units in accordance with Section 1 (b) above, together with
an "as-built" ALTA survey for such Qualified Substitute Franchise Unit and
opinions of counsel, all of which shall meet or exceed the customary commercial
real estate legal and business standards applied to the Lease File for such
Defective Franchise Unit as determined by the Directing Noteholder, and by
furnishing to the Issuer and the Indenture Trustee an Opinion of Counsel to the
effect that such substitution will not result in an imposition of entity level
tax on the Issuer. No substitution of a Qualified Substitute Franchise Unit
shall be made in any calendar month after the related Determination Date. The
Rent due with respect to a Qualified Substitute Franchise Unit prior to the
Determination Date in the month of substitution shall be retained by USRP, and
the Issuer shall be entitled to the Rent due in respect of the related Defective
Franchise Unit prior to such Determination Date. Thereafter, USRP shall be
entitled to retain all amounts received in respect of such Defective Franchise
Unit and the Issuer shall be entitled to all amounts received in respect of the
Qualified Substitute Franchise Units. USRP shall be deemed to have made, as of
the date of substitution, the representations and warranties set forth in
Section 2.2 above with respect to the Qualified Substitute Franchise Units.
For any month in which one or more Qualified Substitute
Franchise Units are substituted for a Defective Franchise Unit, USRP will
determine the amount, if any, by which the aggregate Allocated Loan Amounts (as
determined by the Directing Noteholder in its reasonable discretion) of all such
Qualified Substitute Franchise Units as of the date of substitution is less than
the Allocated Loan Amount of such Defective Franchise Unit. USRP shall remit to
the Indenture Trustee for deposit in the Payment Account the amount of such
shortfall on the day of substitution, without any reimbursement therefor, and
such remittance shall be accompanied by any other expenses as have been made or
incurred with respect to such Defective Franchise Unit and have not been
reimbursed. Promptly upon making such deposit, USRP shall give written notice of
such deposit to the Property Manager, the Indenture Trustee and the Issuer,
which notice shall be accompanied by an Officer's Certificate as to the
calculation of such shortfall and expenses.
(b) In connection with any repurchase of, or substitution for,
a Defective Franchise Unit by USRP, the Issuer shall execute and
deliver to USRP, without recourse, such instruments of transfer or
assignment in the forms presented by USRP as shall be necessary to vest
in USRP, on a servicing-released basis (that is, such Defective
Franchise Unit shall not be subject to any third-party management
agreement after such repurchase or substitution), the legal and
beneficial ownership of such Defective Franchise Unit (including any
property acquired in respect thereof free and clear of the liens of the
Indenture and the related Mortgage.
13
14
(c) In connection with any repurchase of, or substitution for,
a Defective Franchise Unit by USRP, USRP shall provide a revised
Schedule 1 hereto and a revised Schedule A to the Indenture Trustee and
the Directing Noteholder.
4. CLOSING; CLOSING DOCUMENTS. The closing of the transfer and
contribution of the Franchise Units and Leases contemplated by this Agreement
shall take place on such day on or prior to the Closing Date (the "Effective
Date") and at such place as may be agreed by USRP and the Issuer. USRP shall
furnish such information, certificates, letters, opinions of counsel and other
documents with respect to the transfer and contribution of the right, title and
interest in and to the Franchise Units and Leases contemplated by this Agreement
and the issuance of the Notes as the Issuer requests in order to perform any of
the obligations or satisfy any of the conditions on its part to be performed or
satisfied pursuant to the Purchase Agreement and the Indenture at or prior to
the Closing Date.
5. COSTS. USRP shall pay all expenses that are incidental to
the performance of the obligations of USRP under this Agreement and all expenses
of the Issuer that are incidental to the issuance of the Notes.
6. NOTICES. All notices, requests and other communications
hereunder to any party hereto shall be in writing and, unless otherwise provided
herein, shall be deemed to have been duly given if delivered by courier or
mailed by first class mail, postage prepaid, or if transmitted by telecopier and
confirmed in a writing delivered or mailed as aforesaid, to such party, in the
case of U.S. Restaurant Properties Operating L.P. at 12440 Inwood Road, Suite
300, Dallas Texas 75244 Attention: Asset Management Department, telecopier (972)
490-9119 telephone (972) 387-1487; in the case of USRP Funding 2001-A, L.P. at
12240 Inwood Road, Suite 300, Dallas, Texas 75244, Attention.: Asset Management
Department, telecopier (972) 490-9119, telephone (972) 387-1487; and in the case
of the Indenture Trustee as third party beneficiary, at 11000 Broken Land
Parkway, Columbia, Maryland 21044-3562, Attention: Corporate Trust Services
(CMBS) - USRP 2000-1, telecopier (410) 884-2360 , telephone (410) 884-2000, or
to such other address and telecopier number as may be designated by any such
party in a written notice to each of other parties hereto.
7. SURVIVAL; ASSIGNMENT. The representations, warranties and
agreements made by USRP in this Agreement shall survive the transfer and
contribution contemplated hereby. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns. The Issuer may assign its rights and obligations hereunder to the
Indenture Trustee for the benefit of the Noteholders under the Indenture.
8. INDENTURE TRUSTEE AS THIRD PARTY BENEFICIARY. The Indenture
Trustee for the benefit of the Noteholders shall be a third party beneficiary
under this Agreement with the right to enforce the terms and conditions hereof
as if it were a party. For the avoidance of doubt, the Indenture Trustee may
enforce this Agreement without regard to whether an Event of Default or other
default has occurred and is continuing under the Indenture. No person other than
the parties hereto and the Indenture Trustee as third party beneficiary shall
have any rights hereunder.
9. MISCELLANEOUS. Neither this Agreement nor any term hereof
may be changed, waived, discharged or terminated except by a writing signed by
the party against whom enforcement
14
15
of such change, waiver, discharge or termination is sought. The provisions of
this Agreement shall be severable. This Agreement may be executed in any number
of counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall together constitute but one and the same
instrument.
10. GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the substantive laws of the State of New York.
11. COOPERATION. USRP agrees to cooperate with and assist the
Issuer and the Directing Noteholder in all reasonable respects concerning the
issuance and sale of securities secured by the Properties for the purpose of
refinancing the Notes, including, without limitation, executing all agreements
and certificates and making such representations, warranties, covenants and
indemnities as may reasonably be requested by the Issuer and/or the Directing
Noteholder or required by any rating agency or note insurer, including without
limitations, restating as of the date of any such securitization the
representations and warranties with respect to itself, the Record Owners, the
Properties, the Leases as of the date of any such securitization and the Tenants
as are set forth herein.
15
16
IN WITNESS WHEREOF, USRP and the Issuer have caused this
Agreement to be duly executed by their respective officers as of the day and
year first above written.
U.S. RESTAURANT PROPERTIES L.P., a
Delaware limited partnership
By: USRP Managing, Inc., a Delaware
corporation, its general partner
By: /s/ FRED MARGOLIN
----------------------------------
Name: Fred Margolin
Title: President
USRP FUNDING 2001-A, L.P., a Delaware
limited partnership
By: USRP (SFGP), LLC, a Delaware
limited liability company, its
general partner
By: /s/ FRED MARGOLIN
----------------------------------
Name: Fred Margolin
Title: Manager