Exhibit 10.7

 

PLEDGE AGREEMENT

[U.S. RESTAURANT PROPERTIES OPERATING, L.P. PLEDGE AGREEMENT]

 

THIS PLEDGE AGREEMENT, dated as of November 4, 2003 (this “Pledge Agreement”) is
made by (a) U.S. RESTAURANT PROPERTIES OPERATING, L.P., a Delaware limited
partnership, as pledgor (in such capacity, the “Pledgor”), and (b) BANK OF
AMERICA, N.A., in its capacity as Agent (in such capacity, the “Collateral
Agent”) for the Secured Parties (as defined in Section 1 hereof).

 

RECITALS

 

WHEREAS, pursuant to the terms of that certain Credit Agreement dated as of
November 4, 2003 by and among U.S.  RESTAURANT PROPERTIES OPERATING L.P., a
Delaware limited partnership (“USRP Operating” or the “Principal Borrower”),
USRP FUNDING 2002-A, L.P., a Texas limited partnership (the “General SPE), USRP
(S&C), LLC, a Texas limited liability company (“S&C”), USRP (JV1), LLC, a Texas
limited liability company (“JV1”), USRP/HCI PARTNERSHIP 1, L.P., a Texas limited
partnership (“HCI”), USRP HOLDING CORP., a Texas corporation (“USRP Holding”;
collectively, with USRP Operating, the General SPE, S&C, JV1 and HCI, the
“Borrower”), USRP MANAGING, INC., a Delaware corporation and the general partner
of USRP Operating, as a Guarantor (the “General Partner”), U.S. RESTAURANT
PROPERTIES, INC., a Maryland corporation, as a Guarantor (“USRP REIT”), the
Subsidiary Guarantors (as defined therein, collectively, with the General
Partner and the USRP REIT, the “Guarantors”), the Lenders (as defined therein;
provided, that such parties shall be referred to herein as the “Revolving
Lenders”), BANK OF AMERICA, N.A., as Agent for the Revolving Lenders (in such
capacity, the “Revolver Agent”) and BANC OF AMERICA SECURITIES LLC, as Sole Lead
Arranger and Sole Book Manager (as the same may have be further amended,
restated, supplemented or otherwise modified prior to the date hereof, the
“Revolving Credit Agreement”), the Revolving Lenders have agreed to make loans
upon the terms and subject to the conditions set forth therein;

 

WHEREAS, pursuant to the terms of that certain Term Loan Agreement dated as of
November 4, 2003 by and among the Borrower, the Guarantors, the Lenders (as
defined therein; provided, that such parties shall be referred to herein as the
“Term Loan Lenders”), BANK OF AMERICA, N.A., as Agent for the Term Loan Lenders
(in such capacity, the “Term Loan Agent”) and BANC OF AMERICA SECURITIES LLC, as
Sole Lead Arranger and Sole Book Manager (as the same may have be further
amended, restated, supplemented or otherwise modified prior to the date hereof,
the “Term Loan Agreement”), the Term Loan Lenders have agreed to make loans upon
the terms and subject to the conditions set forth therein;

 

WHEREAS, the Collateral Agent, Revolver Agent, Revolving Lenders, Term Loan
Agent, Term Loan Lenders, the Borrower and the Guarantors (collectively, the
Borrower and Guarantors shall be referred to herein as the “Credit Parties”)
have entered into that certain Intercreditor Agreement dated as of November 4,
2003 (the “Intercreditor Agreement”) pursuant to which the Revolver Agent,
Revolving Lenders, Term Loan Agent and Term Loan Lenders have agreed to share,
pursuant to the terms and conditions set forth therein, the collateral and
payments made or delivered in connection with the credit facilities referenced
in the Revolving Credit Agreement and Term Loan Agreement and the Collateral
Agent has been appointed as the agent for such parties in administering such
sharing provisions and to hold all collateral delivered in connection with such
credit facilities for the benefit of the Secured Parties;

 

WHEREAS, it is a condition precedent to the effectiveness of the Revolving
Credit Agreement and the Term Loan Agreement and the documents executed in
connection with each of them that the Pledgor shall have executed and delivered
this Pledge Agreement to the Collateral Agent for the ratable benefit of the
Secured Parties in accordance with the Intercreditor Agreement; and

 

NOW, THEREFORE, in consideration of these premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:

 

1.                                       Definitions. Capitalized terms used
herein but not otherwise defined shall have the meanings given to such terms in
the Revolving Credit Agreement (or, to the extent the Revolving Credit Agreement
has been

 

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terminated or is of no further force and effect, the Term Loan Agreement). The
following terms which are defined in the Uniform Commercial Code as in effect in
the State of North Carolina as of the date hereof are used herein as so
defined:  Accession, Financial Asset, Proceeds and Security.  In addition, the
following terms have the following meanings:

 

“Secured Obligations” means, without duplication, (i) all of the obligations of
the Credit Parties to any Secured Party, whenever arising, under the Revolving
Credit Agreement, the Term Loan Agreement or any of the Subject Documents
(including, but not limited to, any interest accruing after the occurrence of a
Bankruptcy Event with respect to any Credit Party, regardless of whether such
interest is an allowed claim under the Bankruptcy Code), whether now existing or
hereafter arising, due or to become due, direct or indirect, absolute or
contingent, howsoever evidenced, created, held or acquired, whether primary,
secondary, direct, contingent, or joint and several, as such obligations may be
amended, modified, increased, extended, renewed or replaced from time to time,
(ii) all of the obligations of the Credit Parties to any Secured Party under any
Hedging Agreement, and (iii) all costs and expenses incurred in connection with
enforcement and collection of the foregoing obligations, including reasonable
attorneys’ fees and the allocated cost of internal counsel.

 

“Secured Parties” means a collective reference to the Collateral Agent, Revolver
Agent, Revolving Lenders, Term Loan Agent, Term Loan Lenders and the Sole Lead
Arranger and the Sole Book Manager under the Revolving Credit Agreement and Term
Loan Agreement.

 

“Subject Documents” shall mean a collective reference to the Revolving Credit
Agreement, the Term Loan Agreement, the Intercreditor Agreement and all other
documents, instruments or agreements from time to time constituting “Credit
Documents” as such term is used in both the Revolving Credit Agreement and the
Term Loan Agreement (to the extent such documents have not been terminated and
remain in full force and effect).

 

“UCC” means the Uniform Commercial Code, as in effect in the State of North
Carolina.

 

2.                                       Pledge and Grant of Security Interest.
To secure the prompt payment and performance in full when due, whether by lapse
of time, acceleration, mandatory prepayment or otherwise, of the Secured
Obligations, Pledgor hereby grants, pledges and assigns to the Collateral Agent,
for the benefit of the Secured Parties, a continuing security interest in, and a
right to set off against, any and all right, title and interest of Pledgor in
and to the following, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the “Pledged Collateral”):

 

(a)                                  Pledged Capital Stock.  (i) 100% of the
issued and outstanding Capital Stock owned by Pledgor in the entities set forth
on Schedule 2(a) attached hereto and (ii) 65% of the issued and outstanding
classes of Capital Stock entitled to vote (within the meaning of Treas. Reg.
Section 1.956 2(c)(2)) (“Voting Equity”) and 100% of the issued and outstanding
classes of Capital Stock not entitled to vote (within the meaning of Treas. Reg.
Section 1.956 2(c)(2)) (“Non Voting Equity”) owned by the Pledgor of each
foreign Subsidiary of the Pledgor set forth on Schedule 2(b), in each case
together with the certificates (or other agreements or instruments), if any,
representing such Capital Stock and all options and other rights, contractual or
otherwise, with respect thereto (collectively, together with the Capital Stock
described in Sections 2(b) and 2(c) below, the “Pledged Capital Stock”),
including, but not limited to, the following:

 

(A)                              all shares, securities, partnership interests,
membership interests or other equity interests representing a dividend on any of
the Pledged Capital Stock, or representing a distribution or return of capital
upon or in respect of the Pledged Capital Stock, or resulting from a stock
split, revision, reclassification or other exchange therefor, and any
subscriptions, warrants, rights or options issued to the holder of, or otherwise
in respect of, the Pledged Capital Stock; provided, however, that such Pledgor
shall not be required to deliver more than 65% of the Voting Equity of any
Person that is a foreign Subsidiary of the Pledgor; and

 

(B)                                without affecting the obligations of the
Pledgor under any provision prohibiting such action hereunder or under any
Subject Document, in the event of any consolidation or merger

 

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involving the issuer of any Pledged Capital Stock and in which such issuer is
not the surviving entity, the Capital Stock (in the applicable percentage
specified in Section 2(a) above) of the successor entity formed by or resulting
from such consolidation or merger.

 

(b)                                 Additional Shares.  (i) 100% of the issued
and outstanding Capital Stock of any Person which is hereafter listed on
Schedule 2(a), as amended from time to time and (ii) 65% of the Voting Equity
and 100% of the Non Voting Equity owned by the Pledgor of any Person which is
hereafter listed on Schedule 2(b), as amended from time to time, in each case
together with the certificates (or other agreements or instruments), if any,
representing such Capital Stock.

 

(c)                                  Proceeds. All Accessions and all Proceeds
of any and all of the foregoing, including, without limitation, all cash and
non-cash proceeds and products of the foregoing, however and whenever acquired
and in whatever form.

 

Without limiting the generality of the foregoing, it is hereby specifically
understood and agreed that Pledgor may from time to time hereafter deliver
additional shares of Capital Stock to the Collateral Agent as collateral
security for the Secured Obligations.  Upon delivery to the Collateral Agent,
such additional Capital Stock shall be deemed to be part of the Pledged
Collateral and shall be subject to the terms of this Pledge Agreement whether or
not Schedule 2(a) is amended to refer to such additional Capital Stock.

 

3.                                       Security for Secured Obligations. The
security interest created hereby in the Pledged Collateral constitutes
continuing collateral security for the Secured Obligations.

 

4.                                       Delivery of the Pledged Collateral;
Perfection of Security Interest.

 

(a)                                  Delivery of Certificates.  Pledgor shall
deliver to the Collateral Agent (i) simultaneously with or prior to the
execution and delivery of this Pledge Agreement, all certificates representing
the Pledged Capital Stock of Pledgor and (ii) promptly upon the receipt thereof
by or on behalf of Pledgor, all other certificates and instruments constituting
Pledged Collateral of Pledgor.  Prior to delivery to the Collateral Agent, all
such certificates and instruments constituting Pledged Collateral of Pledgor
shall be held in trust by Pledgor for the benefit of the Collateral Agent
pursuant hereto.  All such certificates shall be delivered in suitable form for
transfer by delivery or shall be accompanied by duly executed instruments of
transfer or assignment in blank, substantially in the form provided in Exhibit
4(a) attached hereto with appropriate reference made therein to capital stock,
partnership interests or membership interests, as appropriate.

 

(b)                                 Additional Securities.  If Pledgor shall
receive by virtue of its being, becoming or having been the owner of any Pledged
Collateral, any (i) certificate, including without limitation, any certificate
representing a dividend or distribution in connection with any increase or
reduction of capital, reclassification, merger, consolidation, sale of assets,
combination of shares or membership or equity interests, stock splits, spin-off
or split-off, promissory notes or other instrument; (ii) option or right,
whether as an addition to, substitution for, or an exchange for, any Pledged
Collateral or otherwise; (iii) dividends payable in securities; or
(iv) distributions of securities or other equity interests in connection with a
partial or total liquidation, dissolution or reduction of capital, capital
surplus or paid-in surplus, then, subject to the percentage limitations set
forth in Section 2(a) above, Pledgor shall receive such certificate, instrument,
option, right or distribution in trust for the benefit of the Secured Parties,
shall segregate it from Pledgor’s other property and shall deliver it forthwith
to the Collateral Agent in the exact form received together with any necessary
endorsement and/or appropriate stock power duly executed in blank, substantially
in the form provided in Exhibit 4(a), to be held by the Collateral Agent as
Pledged Collateral and as further collateral security for the Secured
Obligations.

 

(c)                                  Financing Statements.  Pledgor shall
execute and deliver to the Collateral Agent such UCC or other applicable
financing statements as may be reasonably requested by the Collateral Agent in
order to perfect and protect the security interest created hereby in the Pledged
Collateral of Pledgor.

 

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(d)                                 Control.  If necessary to perfect the
Secured Parties’ security interest in any Pledged Collateral consisting of
uncertificated Pledged Capital Stock, upon request of the Collateral Agent, (i)
the Pledgor shall, and shall cause each issuer of such uncertificated Pledged
Capital Stock (each an “Issuer”) to, execute a control agreement in form and
substance reasonably acceptable to the Collateral Agent.  Pledgor hereby
authorizes and instructs each Issuer that is a party to this Pledge Agreement to
comply with any instruction received by it from the Collateral Agent in writing
that (y) states that an Event of Default has occurred and is continuing and (z)
is otherwise in accordance with the terms of this Pledge Agreement, without any
other or further instructions from Pledgor, and Pledgor agrees to indemnify such
Issuer for any loss, damage or liability incurred by such Issuer in acting upon
such instructions of the Collateral Agent.

 

5.                                       Representations and Warranties. 
Pledgor hereby represents and warrants to the Collateral Agent, for the benefit
of the Secured Parties, that:

 

(a)                                  Authorization of Pledged Capital Stock. 
The Pledged Capital Stock is duly authorized and validly issued, is fully paid
and, with respect any Pledged Capital Stock consisting of stock of a
corporation, nonassessable and is not subject to the preemptive rights of any
Person.  All other shares of Capital Stock constituting Pledged Collateral will
be duly authorized and validly issued, fully paid and, with respect any Pledged
Capital Stock consisting of stock of a corporation, nonassessable and not
subject to the preemptive rights of any Person.

 

(b)                                 Title.  Pledgor has good and indefeasible
title to the Pledged Collateral of Pledgor and will at all times be the legal
and beneficial owner of such Pledged Collateral free and clear of any Lien,
other than Permitted Liens.  There exists no “adverse claim” within the meaning
of Section 8-102 of the UCC with respect to the Pledged Capital Stock of
Pledgor.

 

(c)                                  Exercising of Rights.  The exercise by the
Collateral Agent of its rights and remedies hereunder will not violate any law
or governmental regulation or any material contractual restriction binding on or
affecting Pledgor or any of its property.

 

(d)                                 Pledgor’s Authority.  No authorization,
approval or action by, and no notice or filing with any Governmental Authority
or with the issuer of any Pledged Capital Stock is required either (i) for the
pledge made by Pledgor or for the granting of the security interest by Pledgor
pursuant to this Pledge Agreement or (ii) for the exercise by the Collateral
Agent or the Secured Parties of their rights and remedies hereunder (except as
may be required by laws affecting the offering and sale of securities).

 

(e)                                  Security Interest/Priority.  This Pledge
Agreement creates a valid security interest in favor of the Collateral Agent,
for the benefit of the Secured Parties, in the Pledged Collateral.  The taking
possession by the Collateral Agent of the certificates, if any, representing the
Pledged Capital Stock and all other certificates and instruments constituting
Pledged Collateral will perfect and establish the first priority of the
Collateral Agent’ security interest in the Pledged Capital Stock and such
certificates and instruments and, upon the filing of UCC financing statements or
registration of the Collateral Agent’ security interest on the books and records
of the Issuers of any uncertificated Pledged Capital Stock, the Collateral Agent
shall have a first priority perfected security interest in all other Pledged
Collateral represented by such Pledged Capital Stock.  Except as set forth in
this Section 5(e), no action is necessary to perfect or otherwise protect such
security interest.

 

(f)                                    Partnership and Membership Interests. 
Except as previously disclosed to the Collateral Agent, none of the Pledged
Shares consisting of partnership or limited liability company interests (i) is
dealt in or traded on a securities exchange or in a securities market, (ii) by
its terms expressly provides that it is a security governed by Article 8 of the
UCC, (iii) is an investment company security, (iv) is held in a securities
account or (v) constitutes a Security or a Financial Asset.

 

(g)                                 No Other Capital Stock.  Pledgor owns no
Capital Stock in entity(ies) listed on Schedule 2(a) and Schedule 2(b) other
than as set forth on such schedules.

 

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(h)                                 Partnership and Limited Liability Company
Interests.  Except as previously disclosed to the Collateral Agent, none of the
Pledged Capital Stock consisting of partnership or limited liability company
interests (i) is dealt in or traded on a securities exchange or in a securities
market, (ii) by its terms expressly provides that it is a security governed by
Article 8 of the UCC, (iii) is an investment company security, (iv) is held in a
securities account or (v) constitutes a “security” or a “financial asset” as
such terms are defined in Article 8 of the UCC.

 

6.                                       Covenants.  Pledgor hereby covenants,
that until such time as the Secured Obligations are fully satisfied, Pledgor
shall:

 

(a)                                  Books and Records.  Mark its books and
records (and shall cause the issuer of the Pledged Capital Stock of Pledgor to
mark its books and records) to reflect the security interest granted to the
Collateral Agent, for the benefit of the Secured Parties, pursuant to this
Pledge Agreement.

 

(b)                                 Defense of Title.  Warrant and defend title
to and ownership of the Pledged Collateral of Pledgor at its own expense against
the claims and demands of all other parties claiming an interest therein, keep
the Pledged Collateral free from all Liens, except for Permitted Liens, and not
sell, exchange, transfer, assign, lease or otherwise dispose of Pledged
Collateral of Pledgor or any interest therein, except as expressly permitted
under the Subject Documents.

 

(c)                                  Further Assurances.  Promptly execute and
deliver at its expense all further instruments and documents and take all
further action that may be necessary and desirable or that the Collateral Agent
may reasonably request in order to (i) perfect and protect the security interest
created hereby in the Pledged Collateral of Pledgor (including, without
limitation, the execution and filing of UCC financing statements and any and all
action necessary to satisfy the Collateral Agent that the Collateral Agent has
obtained a first priority perfected security interest in all Pledged Capital
Stock); (ii) enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder in respect of the Pledged Collateral of Pledgor; and (iii)
otherwise effect the purposes of this Pledge Agreement, including, without
limitation and if requested by the Collateral Agent upon the occurrence or
during the continuance of an Event of Default, delivering to the Collateral
Agent irrevocable proxies in respect of the Pledged Collateral of Pledgor.  To
that end, Pledgor agrees that the Collateral Agent may file one or more
financing statements disclosing the Collateral Agent’s security interest in any
or all of the Pledged Collateral of Pledgor without Pledgor’s signature thereon,
and further Pledgor also hereby irrevocably makes, constitutes and appoints the
Collateral Agent, its nominee or any other person whom the Collateral Agent may
designate, as Pledgor’s attorney-in-fact with full power and for the limited
purpose to sign in the name of Pledgor any such financing statements (including
renewal statements), amendments and supplements, notices or any similar
documents that in the Collateral Agent’s reasonable discretion would be
necessary, appropriate or convenient in order to perfect and maintain perfection
of the security interests granted hereunder, such power, being coupled with an
interest, being and remaining irrevocable so long as the Secured Obligations
remain unpaid and until the commitments relating thereto shall have been
terminated.  Pledgor hereby agrees that a carbon, photographic or other
reproduction of this Pledge Agreement or any such financing statement is
sufficient for filing as a financing statement by the Collateral Agent without
notice thereof to Pledgor wherever the Collateral Agent may in its sole
discretion desire to file the same.  In the event for any reason the law of any
jurisdiction other than [the State of Texas] becomes or is applicable to the
Pledged Collateral of Pledgor or any part thereof, or to any of the Secured
Obligations, Pledgor agrees to execute and deliver all such instruments and to
do all such other things as the Collateral Agent reasonably deems necessary to
preserve, protect and enforce the security interests of the Collateral Agent
under the law of such other jurisdiction (and, if Pledgor shall fail to do so
promptly upon the request of the Collateral Agent, then the Collateral Agent may
execute any and all such requested documents on behalf of Pledgor pursuant to
the power of attorney granted hereinabove).  If any Pledged Collateral is in the
possession or control of Pledgor’s agents and the Collateral Agent so requests,
Pledgor agrees to notify such agents in writing of the Collateral Agent’s
security interest therein and, upon the Collateral Agent’s request, instruct
them to hold all such Pledged Collateral for its account and subject to the
Collateral Agent’s instructions.  Pledgor agrees to mark its books and records
to reflect the security interest of the Collateral Agent in the Pledged
Collateral.

 

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(d)                                 Amendments.  Not make or consent to any
amendment or other modification or waiver with respect to any of the Pledged
Collateral of Pledgor or enter into any agreement or allow to exist any
restriction with respect to any of the Pledged Collateral of Pledgor other than
pursuant hereto or as may be permitted under the Subject Documents.

 

(e)                                  Compliance with Securities Laws.  File all
reports and other information now or hereafter required to be filed by Pledgor
with the United States Securities and Exchange Commission and any other state,
federal or foreign agency in connection with the ownership of the Pledged
Collateral of Pledgor.

 

(f)                                    Issuance, Acquisition or Encumbrance of
Capital Stock.  Not issue or acquire any Capital Stock or execute any warrants,
pledges or similar instruments pledging or in any manner encumbering its
currently outstanding Capital Stock except to the extent required by the Subject
Documents.

 

7.                                       Performance of Obligations and Advances
by Collateral Agent. On failure of Pledgor to perform any of the covenants and
agreements contained herein, the Collateral Agent may, at its sole option and in
its reasonable discretion, perform or cause to be performed the same and in so
doing may expend such sums as the Collateral Agent may reasonably deem advisable
in the performance thereof, including, without limitation, the payment of any
insurance premiums, the payment of any taxes, a payment to obtain a release of a
Lien or potential Lien, expenditures made in defending against any adverse claim
and all other expenditures which the Collateral Agent may make for the
protection of the security hereof or which may be compelled to make by operation
of law.  All such sums and amounts so expended shall be repayable by the Pledgor
on a joint and several basis promptly upon timely notice thereof and demand
therefor, shall constitute additional Secured Obligations and shall bear
interest from the date said amounts are expended at the default rate specified
in Section 3.1 of the Revolving Credit Agreement for loans outstanding
thereunder and bearing interest based on the Base Rate or, if such document is
of no further force and effect or has been terminate, as specified in
Section 3.1 of the Term Loan Agreement for loans outstanding thereunder.  No
such performance of any covenant or agreement by the Collateral Agent on behalf
of Pledgor, and no such advance or expenditure therefor, shall relieve the
Pledgor of any default under the terms of this Pledge Agreement or any of the
Subject Documents or any other documents relating to the Secured Obligations. 
The Collateral Agent may make any payment hereby authorized in accordance with
any bill, statement or estimate procured from the appropriate public office or
holder of the claim to be discharged without inquiry into the accuracy of such
bill, statement or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien, title or claim except to the extent such payment is being
contested in good faith by Pledgor in appropriate proceedings and against which
adequate reserves are being maintained in accordance with GAAP.

 

8.                                       Events of Default. The occurrence of an
event which under the Revolving Credit Agreement or Term Loan Agreement would
constitute an Event of Default shall be an event of default hereunder (an “Event
of Default”).

 

9.                                       Remedies.

 

(a)                                  General Remedies. Upon the occurrence of an
Event of Default and during the continuation thereof, the Collateral Agent and
the Secured Parties shall have, in addition to the rights and remedies provided
herein, in the Subject Documents or in any other documents relating to the
Secured Obligations, or by law (including, without limitation, levy of
attachment or garnishment), the rights and remedies of a secured party under the
UCC of the jurisdiction applicable to the affected Pledged Collateral.

 

(b)                                 Sale of Pledged Collateral.  Upon the
occurrence of an Event of Default and during the continuation thereof, without
limiting the generality of this Section and without notice, the Collateral Agent
may, sell or otherwise dispose of or realize upon the Pledged Collateral, or any
part thereof, in one or more parcels, at public or private sale, at any exchange
or broker’s board or elsewhere, at such price or prices and on such other terms
as the Collateral Agent may deem commercially reasonable, for cash, credit or
for future delivery or otherwise in accordance with applicable law.  To the
extent permitted by law, any Secured Party may in such event bid for the
purchase of such securities.  Pledgor agrees that, to the extent notice of sale
shall be required by law and has not been waived by Pledgor, any requirement of
reasonable notice shall be met if notice, specifying the place of any public
sale or the time after which any private sale is to be made, is personally
served on or mailed postage prepaid to Pledgor in accordance with the notice
provisions of Section 11.1 of the Revolving Credit Agreement (or, to the extent
the same has been

 

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terminated or is otherwise ineffective as of such date, Section 11.1 of the Term
Loan Agreement) at least 10 days before the time of such sale.  The Collateral
Agent shall not be obligated to make any sale of Pledged Collateral of Pledgor
regardless of notice of sale having been given.  The Collateral Agent may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.

 

(c)                                  Private Sale.  Upon the occurrence of an
Event of Default and during the continuation thereof, the Pledgor recognizes
that the Collateral Agent may deem it impracticable to effect a public sale of
all or any part of the Pledged Collateral and that the Collateral Agent may,
therefore, determine to make one or more private sales of any such Pledged
Collateral to a restricted group of purchasers who will be obligated to agree,
among other things, to acquire such Pledged Collateral for their own account,
for investment and not with a view to the distribution or resale thereof. 
Pledgor acknowledges that any such private sale may be at prices and on terms
less favorable to the seller than the prices and other terms which might have
been obtained at a public sale and, notwithstanding the foregoing, agrees that
such private sale shall be deemed to have been made in a commercially reasonable
manner and that the Collateral Agent shall have no obligation to delay sale of
any such Pledged Collateral for the period of time necessary to permit the
issuer of such Pledged Collateral to register such Pledged Collateral for public
sale under the Securities Act of 1933.  Pledgor further acknowledges and agrees
that any offer to sell such Pledged Collateral which has been (i) publicly
advertised on a bona fide basis in a newspaper or other publication of general
circulation in the financial community of Charlotte, North Carolina (to the
extent that such offer may be advertised without prior registration under the
Securities Act of 1933), or (ii) made privately in the manner described above
shall be deemed to involve a “public sale” under the UCC, notwithstanding that
such sale may not constitute a “public offering” under the Securities Act of
1933, and the Collateral Agent may, in such event, bid for the purchase of such
Pledged Collateral.

 

(d)                                 Retention of Pledged Collateral. To the
extent permitted under applicable law, in addition to the rights and remedies
hereunder, upon the occurrence of an Event of Default, the Collateral Agent may,
after providing the notices required by Sections 9-620 and 9-621 of the UCC or
otherwise complying with the requirements of applicable law of the relevant
jurisdiction, accept or retain all or any portion of the Pledged Collateral in
satisfaction of the Secured Obligations.  Unless and until the Collateral Agent
shall have provided such notices, however, the Collateral Agent shall not be
deemed to have accepted or retained any Pledged Collateral in satisfaction of
any Secured Obligations for any reason.

 

(e)                                  Deficiency.  In the event that the proceeds
of any sale, collection or realization are insufficient to pay all amounts to
which the Collateral Agent or the Secured Parties are legally entitled, the
Pledgor shall be jointly and severally liable for the deficiency, together with
interest thereon at the default rate specified in Section 3.1 of the Revolving
Credit Agreement for loans outstanding thereunder and bearing interest based on
the Base Rate (or, if such document is of no further force and effect or has
been terminate, as specified in Section 3.1 of the Term Loan Agreement for loans
outstanding thereunder) and together with the costs of collection and the
reasonable fees of any attorneys employed by the Collateral Agent to collect
such deficiency.  Any surplus remaining after the full payment and satisfaction
of the Secured Obligations shall be returned to the Pledgor or to whomsoever a
court of competent jurisdiction shall determine to be entitled thereto.

 

(f)                                    Partial Exercise of Remedies/Failure to
Exercise Remedies.  Pledgor hereby acknowledges and agrees that (i) the
Collateral Agent shall not, in any case, be obligated to exercise any remedies
contemplated hereunder, (ii) the Collateral Agent may, in their sole discretion,
exercise any remedy contemplated hereunder with respect to all or any portion of
the Pledged Collateral, and (iii) any failure by the Collateral Agent upon an
Event of Default hereunder to exercise its remedies with respect to any portion
or the whole of the Pledged Collateral shall not constitute a waiver of its
right to exercise such remedies at any point in the future during such Event of
Default or any later Event of Default.

 

10.                                 Rights of the Collateral Agent.

 

(a)                                  Power of Attorney.  In addition to other
powers of attorney contained herein, Pledgor hereby designates and appoints the
Collateral Agent, on behalf of the Secured Parties, and each of their

 

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designees or agents as attorney-in-fact of Pledgor, irrevocably and with power
of substitution, with authority to take any or all of the following actions upon
the occurrence and during the continuance of an Event of Default:

 

(i)                                     to demand, collect, settle, compromise,
adjust and give discharges and releases concerning the Pledged Collateral of
Pledgor, all as the Collateral Agent may reasonably determine;

 

(ii)                                  to commence and prosecute any actions at
any court for the purposes of collecting any of the Pledged Collateral of
Pledgor and enforcing any other right in respect thereof;

 

(iii)                               to defend, settle, adjust or compromise any
action, suit or proceeding brought and, in connection therewith, give such
discharge or release as the Collateral Agent may deem reasonably appropriate;

 

(iv)                              to pay or discharge taxes, liens, security
interests, or other encumbrances levied or placed on or threatened against the
Pledged Collateral of Pledgor;

 

(v)                                 to direct any parties liable for any payment
under any of the Pledged Collateral to make payment of any and all monies due
and to become due thereunder directly to the Collateral Agent or as the
Collateral Agent shall direct;

 

(vi)                              to receive payment of and receipt for any and
all monies, claims, and other amounts due and to become due at any time in
respect of or arising out of any Pledged Collateral of Pledgor;

 

(vii)                           to sign and endorse any drafts, assignments,
proxies, stock powers, verifications, notices and other documents relating to
the Pledged Collateral of Pledgor;

 

(viii)                        to execute and deliver all assignments,
conveyances, statements, financing statements, renewal financing statements,
pledge agreements, affidavits, notices and other agreements, instruments and
documents that the Collateral Agent may determine necessary in order to perfect
and maintain the security interests and liens granted in this Pledge Agreement
and in order to fully consummate all of the transactions contemplated herein;

 

(ix)                                to exchange any of the Pledged Collateral of
Pledgor or other property upon any merger, consolidation, reorganization,
recapitalization or other readjustment of the issuer thereof and, in connection
therewith, deposit any of the Pledged Collateral of Pledgor with any committee,
depository, transfer agent, registrar or other designated agency upon such terms
as the Collateral Agent may determine;

 

(x)                                   to vote for a shareholder or member
resolution, or to sign an instrument in writing, sanctioning the transfer of any
or all of the Pledged Capital Stock of Pledgor into the name of the Collateral
Agent or one or more of the Secured Parties or into the name of any transferee
to whom the Pledged Capital Stock of Pledgor or any part thereof may be sold
pursuant to Section 9 hereof; and

 

(xi)                                to do and perform all such other acts and
things as the Collateral Agent may reasonably deem to be necessary, proper or
convenient in connection with the Pledged Collateral of Pledgor.

 

This power of attorney is a power coupled with an interest and shall be
irrevocable for so long as any of the Credit Party Obligations are not fully
satisfied.  The Collateral Agent shall be under no duty to exercise or withhold
the exercise of any of the rights, powers, privileges and options expressly or
implicitly granted to the Collateral Agent in this Pledge Agreement and shall
not be liable for any failure to do so or any delay in

 

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doing so.  The Collateral Agent shall not be liable for any act or omission or
for any error of judgment or any mistake of fact or law in their individual
capacities or their capacity as attorney-in-fact except acts or omissions
resulting from its gross negligence or willful misconduct.  This power of
attorney is conferred on the Collateral Agent solely to protect, preserve and
realize upon its security interest in the Pledged Collateral.

 

(b)                                 Assignment by the Collateral Agent.  The
Collateral Agent may from time to time assign the Secured Obligations and any
portion thereof and/or the Pledged Collateral and any portion thereof to a
successor Collateral Agent under the Credit Agreement and the assignee shall be
entitled to all of the rights and remedies of the Collateral Agent under this
Pledge Agreement in relation thereto.

 

(c)                                  The Collateral Agent’s Duty of Care.  Other
than the exercise of reasonable care to ensure the safe custody of the Pledged
Collateral while being held by the Collateral Agent hereunder, the Collateral
Agent shall have no duty or liability to preserve rights pertaining thereto, it
being understood and agreed that the Pledgor shall be responsible for
preservation of all rights in the Pledged Collateral of Pledgor, and the
Collateral Agent shall be relieved of all responsibility for such Pledged
Collateral upon surrendering it or tendering the surrender of it to Pledgor. 
The Collateral Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Pledged Collateral in its possession if such
Pledged Collateral is accorded treatment substantially equal to that which the
Collateral Agent accord their own property, which shall be no less than the
treatment employed by a reasonable and prudent agent in the industry, it being
understood that the Collateral Agent shall not have responsibility for (i)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to any Pledged Collateral, whether
or not the Collateral Agent have or are deemed to have knowledge of such
matters; or (ii) taking any necessary steps to preserve rights against any
parties with respect to any Pledged Collateral.

 

(d)                                 Voting Rights in Respect of the Pledged
Collateral.

 

(i)                                     So long as no Event of Default shall
have occurred and be continuing, to the extent permitted by law, Pledgor may
exercise any and all voting and other consensual rights pertaining to the
Pledged Collateral of Pledgor or any part thereof for any purpose not
inconsistent with the terms of this Pledge Agreement or the Credit Agreement
(including, without limitation, Section 6(g) hereof); and

 

(ii)                                  Upon the occurrence and during the
continuance of an Event of Default, all rights of Pledgor to exercise the voting
and other consensual rights which it would otherwise be entitled to exercise
pursuant to paragraph (i) of this Section shall cease and all such rights shall
thereupon become vested in the Collateral Agent which shall then have the sole
right to exercise such voting and other consensual rights.

 

(f)                                    Dividend and Distribution Rights in
Respect of the Pledged Collateral.

 

(i)                                     So long as no Event of Default shall
have occurred and be continuing and subject to Section 4(b) hereof, Pledgor may
receive and retain any and all dividends (other than stock dividends and other
dividends constituting Pledged Collateral which are addressed hereinabove),
distributions or interest paid in respect of the Pledged Collateral to the
extent they are allowed under the Subject Documents.

 

(ii)                                  Upon the occurrence and during the
continuance of an Event of Default:

 

(A)                              all rights of Pledgor to receive the dividends,
distributions and interest payments which it would otherwise be authorized to
receive and retain pursuant to subsection (i) of this Section shall cease and
all such rights shall thereupon be vested in the Collateral Agent which shall
then have the sole right to receive and hold as Pledged Collateral such
dividends, distributions and interest payments; and

 

9

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(B)                                all dividends, distributions and interest
payments which are received by Pledgor contrary to the provisions of
subsection (A) of this Section shall be received in trust for the benefit of the
Secured Parties, shall be segregated from other property or funds of Pledgor,
and shall be forthwith paid over to the Collateral Agent as Pledged Collateral
in the exact form received, to be held by the Collateral Agent as Pledged
Collateral and as further collateral security for the Secured Obligations.

 

(g)                                 Release of Pledged Collateral.  The
Collateral Agent may release any of the Pledged Collateral from this Pledge
Agreement or may substitute any of the Pledged Collateral for other Pledged
Collateral without altering, varying or diminishing in any way the force,
effect, lien, pledge or security interest of this Pledge Agreement as to any
Pledged Collateral not expressly released or substituted, and this Pledge
Agreement shall continue as a first priority lien on all Pledged Collateral not
expressly released or substituted.

 

11.                                 Rights of Required Lenders and Actions of
Collateral Agent.

 

(a)                                  Rights of Required Lenders to Act for
Collateral Agent.  All rights of the Collateral Agent hereunder, if not
exercised by the Collateral Agent, may be exercised by the Required Secured
Parties, as such term is defined in the Intercreditor Agreement.

 

(b)                                 Actions of Collateral Agent. 
Notwithstanding anything to the contrary contained herein, all actions of the
Collateral Agent hereunder (including the exercise of the remedies set forth in
Section 9 hereof) shall be taken in accordance with the Intercreditor Agreement.

 

12.                                 Application of Proceeds.  Upon the
occurrence and during the continuance of an Event of Default, any payments in
respect of the Secured Obligations and any proceeds of any Pledged Collateral,
when received by the Collateral Agent or any of the Secured Parties in cash or
its equivalent, will be applied in accordance with the terms of the
Intercreditor Agreement.  Pledgor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Collateral Agent shall have the continuing and exclusive right to apply and
reapply any and all such payments and proceeds in the Collateral Agent’ sole
discretion, notwithstanding any entry to the contrary upon any of its books and
records.

 

13.                                 Costs and Expenses. At all times hereafter,
whether or not upon the occurrence of an Event of Default, the Pledgors agree to
promptly pay upon demand any and all reasonable costs and expenses (including,
without limitation, reasonably attorneys’ fees) of the Collateral Agent and the
Secured Parties (a) as required under the Subject Documents and (b) as necessary
to protect the Pledged Collateral or to exercise any rights or remedies under
this Pledge Agreement or with respect to any Pledged Collateral.  All of the
foregoing costs and expenses shall constitute Secured Obligations hereunder.

 

14.                                 Continuing Agreement.

 

(a)                                  This Pledge Agreement shall be a continuing
agreement in every respect and shall remain in full force and effect until such
time as all of the Secured Obligations are fully satisfied.  At such time as
such obligations are fully satisfied, this Pledge Agreement shall be
automatically terminated and the Collateral Agent and the Secured Parties shall,
upon the request and at the expense of the Pledgor, (i) return all certificates
representing the Pledged Capital Stock, all other certificates and instruments
constituting Pledged Collateral and all instruments of transfer or assignment
which have been delivered to the Collateral Agent pursuant to this Pledge
Agreement and (ii) forthwith release all of its liens and security interests
hereunder and shall execute and deliver all UCC termination statements and/or
other documents reasonably requested by the Pledgor evidencing such
termination.  Notwithstanding the foregoing, all releases and indemnities
provided hereunder shall survive termination of this Pledge Agreement.

 

(b)                                 This Pledge Agreement shall continue to be
effective or be automatically reinstated, as the case may be, if at any time
payment, in whole or in part, of any of the Secured Obligations is rescinded or
must otherwise be restored or returned by the Collateral Agent or any Secured
Party as a preference, fraudulent conveyance or otherwise under any bankruptcy,
insolvency or similar law, all as though such

 

10

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payment had not been made; provided that in the event payment of all or any part
of the Secured Obligations is rescinded or must be restored or returned, all
reasonable costs and expenses (including without limitation any reasonable legal
fees and disbursements) incurred by the Collateral Agent or any Secured Party in
defending and enforcing such reinstatement shall be deemed to be included as a
part of the Secured Obligations.

 

15.                                 Amendments; Waivers; Modifications.  This
Pledge Agreement and the provisions hereof may not be amended, waived, modified,
changed, discharged or terminated unless such amendment, waiver, modification,
change, discharge or termination is evidenced in writing and signed by the
Collateral Agent and the Pledgor.

 

16.                                 Successors in Interest.  This Pledge
Agreement shall create a continuing security interest in the Collateral and
shall be binding upon Pledgor, its successors and assigns and shall inure,
together with the rights and remedies of the Collateral Agent and the Secured
Parties hereunder, to the benefit of the Collateral Agent and the Secured
Parties and their successors and permitted assigns; provided, however, that the
Pledgor may not assign its rights or delegate its duties hereunder without the
prior written consent of each of the Required Secured Parties (as defined in the
Intercreditor Agreement) and the Collateral Agent.  To the fullest extent
permitted by law, Pledgor hereby releases the Collateral Agent and each Secured
Party, and its successors and assigns, from any liability for any act or
omission relating to this Pledge Agreement or the Collateral, except, as
applicable, for any liability arising from the gross negligence or willful
misconduct of the Collateral Agent, or such Secured Party, or its officers,
employees or agents.

 

17.                                 Notices.  All notices required or permitted
to be given under this Pledge Agreement shall be in conformance with the
provisions of the Intercreditor Agreement.

 

18.                                 Counterparts.  This Pledge Agreement may be
executed in any number of counterparts, each of which where so executed and
delivered shall be an original, but all of which shall constitute one and the
same instrument.  It shall not be necessary in making proof of this Pledge
Agreement to produce or account for more than one such counterpart.

 

19.                                 Headings.  The headings of the sections and
subsections hereof are provided for convenience only and shall not in any way
affect the meaning, construction or interpretation of any provision of this
Pledge Agreement.

 

20.                                 GOVERNING LAW.

 

THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO CONFLICT OF
LAW PROVISIONS THEREOF EXCEPT TO THE EXTENT THAT PERFECTION AND REMEDIES ARE
NECESSARILY GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.

 

21.                                 Waiver of Jury Trial.

 

EACH OF THE PLEDGOR AND THE COLLATERAL AGENT HEREBY IRREVOCABLY WAIVES TO THE
FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED THEREBY AND TO THE FULLEST EXTENT PERMITTED BY LAW
WAIVES ANY RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE CONSEQUENTIAL OR SPECIAL
DAMAGES IN CONNECTION WITH ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS PLEDGE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.

 

22.                                 Consent to Jurisdiction.

 

(a)                                  Any legal action or proceeding with respect
to this Pledge Agreement may be brought in the courts of the State of North
Carolina in Mecklenburg County, or of the United States for the Western District
of North Carolina, and, by execution and delivery of this Pledge Agreement, the
Pledgor hereby irrevocably accepts for himself and in respect of its property,
generally and unconditionally, the nonexclusive jurisdiction of such courts. 
The Pledgor further

 

11

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irrevocably consents to the service of process in any manner permitted by law. 
Nothing herein shall affect the right of any Secured Party to commence legal
proceedings or to otherwise proceed against the Pledgor in any other
jurisdiction.

 

(b)                                 The Pledgor hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Pledge
Agreement in the courts referred to in Section 22(a).  Each of the parties
hereto hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.

 

23.                                 Severability.  If any provision of this
Pledge Agreement is determined to be illegal, invalid or unenforceable, such
provision shall be fully severable and the remaining provisions shall remain in
full force and effect and shall be construed without giving effect to the
illegal, invalid or unenforceable provisions.

 

24.                                 Entirety.  This Pledge Agreement, the
Subject Documents and any other documents relating to the Secured Obligations
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Subject Documents or the
transactions contemplated herein and therein.

 

25.                                 Survival.  All representations and
warranties of the Pledgor hereunder shall survive the execution and delivery of
this Pledge Agreement and the other Subject Documents and the making of the
loans under the Subject Documents.

 

26.                                 Other Security.  To the extent that any of
the Secured Obligations are now or hereafter secured by property other than the
Pledged Collateral (including, without limitation, real and other personal
property owned by Pledgor), or by a guarantee, endorsement or property of any
other Person, then the Collateral Agent and the Secured Parties shall have the
right to proceed against such other property, guarantee or endorsement upon the
occurrence of any Event of Default, and the Collateral Agent and the Secured
Parties have the right, in their sole discretion, to determine which rights,
security, liens, security interests or remedies the Collateral Agent and the
Secured Parties shall at any time pursue, relinquish, subordinate, modify or
take with respect thereto, without in any way modifying or affecting any of them
or any of the Collateral Agent’ and the Secured Parties’ rights or the Secured
Obligations under this Pledge Agreement, the Subject Documents or any other
documents relating to the Secured Obligations.

 

[remainder of page intentionally left blank]

 

12

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Each of the parties hereto has caused a counterpart of this Pledge Agreement to
be duly executed and delivered as of the date first above written.

 

 

 

PLEDGOR:

 

 

 

 

 

U.S.  RESTAURANT  PROPERTIES OPERATING L.P.

 

 

 

 

 

By:  USRP MANAGING, INC.

 

 

By:

/s/ Stacy M. Riffe

 

 

Name:

Stacy M. Riffe

 

Title:

Chief Financial Officer

 

Accepted and agreed as of the date first above written.

 

 

 

 

 

COLLATERAL AGENT:

 

 

 

 

 

 

 

 

BANK OF AMERICA, N.A.,
as Collateral Agent for the Secured Parties

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

13

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Schedule 2(a)

 

to

 

Pledge Agreement

 

dated as of November 4, 2003 in favor of

 

the Collateral Agent

 

PLEDGED CAPITAL STOCK

 

1.                                       USRP FUNDING 2002-A, L.P., a Delaware
limited partnership.

 

2.                                       USRP (JV1), LLC, a Delaware limited
liability company.

 

14

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Schedule 2(b)

 

to

 

Pledge Agreement

 

dated as of November 4, 2003 in favor of

 

the Collateral Agent

 

PLEDGED CAPITAL STOCK

 

[None.]

 

15

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Exhibit 4(a)

 

to

 

Pledge Agreement

 

dated as of November 4, 2003 in favor of

 

the Collateral Agent

 

Irrevocable Stock Power

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to

 

 

the following shares of [Capital Stock] of                                , a
                            :

 

No. of Shares

 

Certificate No.

 

 

 

 

 

 

 

 

and irrevocably appoints                                            its agent
and attorney-in-fact to transfer all or any part of such capital stock and to
take all necessary and appropriate action to effect any such transfer.  The
agent and attorney-in-fact may substitute and appoint one or more persons to act
for him.

 

 

 

,

 

a                              corporation

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

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