**Exhibit 10.7**

 

**PLEDGEAGREEMENT**

**[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 OFAMERICA, N.A.**, in its capacity as Agent (in such capacity, the “CollateralAgent”) for the Secured Parties (as defined in Section 1 hereof).

 

RECITALS

 

**WHEREAS,** pursuantto the terms of that certain Credit Agreement dated as of November 4, 2003by and among **U.S.  RESTAURANT PROPERTIESOPERATING L.P.**, a Delaware limited partnership (“USRP Operating”or the “Principal Borrower”), **USRP FUNDING 2002-A, L.P.**, a Texas limitedpartnership (the “General SPE), **USRP (S&C), LLC**, a Texas limitedliability company (“S&C”), **USRP (JV1), LLC**, a Texas limited liabilitycompany (“JV1”), **USRP/HCI PARTNERSHIP 1, L.P.**, a Texaslimited partnership (“HCI”), **USRP HOLDING CORP.**, a Texas corporation (“USRPHolding”; collectively, with USRP Operating, the General SPE, S&C, JV1and HCI, the “Borrower”), **USRP MANAGING, INC.**, a Delaware corporationand the general partner of USRP Operating, as a Guarantor (the “GeneralPartner”), **U.S. RESTAURANT PROPERTIES, INC.**, a Maryland corporation, as aGuarantor (“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 referredto herein as the “Revolving Lenders”), **BANK OF AMERICA, N.A.**, asAgent for the Revolving Lenders (in such capacity, the “Revolver Agent”)and **BANCOF AMERICA SECURITIES LLC**, as Sole Lead Arranger and SoleBook Manager (as the same may have be further amended, restated,supplemented or otherwise modified prior to the date hereof, the “RevolvingCredit Agreement”), the Revolving Lenders have agreed to make loans uponthe terms and subject to the conditions set forth therein;

 

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

 

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

 

**WHEREAS**, it is acondition precedent to the effectiveness of the Revolving Credit Agreement andthe Term Loan Agreement and the documents executed in connection with each ofthem that the Pledgor shall have executed and delivered this Pledge Agreementto the Collateral Agent for the ratable benefit of the Secured Parties inaccordance with the Intercreditor Agreement; and

 

**NOW, THEREFORE**, inconsideration of these premises and other good and valuable consideration, thereceipt and sufficiency of which is hereby acknowledged, the parties heretoagree as follows:

 

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

 

----

 

terminated or is of nofurther force and effect, the Term Loan Agreement). The following terms whichare defined in the Uniform Commercial Code as in effect in the State of NorthCarolina as of the date hereof are used herein as so defined:  Accession, Financial Asset, Proceeds andSecurity.  In addition, the followingterms have the following meanings:

 

“Secured Obligations” means, withoutduplication, (i) all of the obligations of the Credit Parties to any Secured Party,whenever arising, under the Revolving Credit Agreement, the Term Loan Agreementor any of the Subject Documents (including, but not limited to, any interestaccruing after the occurrence of a Bankruptcy Event with respect to any CreditParty, regardless of whether such interest is an allowed claim under theBankruptcy Code), whether now existing or hereafter arising, due or to becomedue, direct or indirect, absolute or contingent, howsoever evidenced, created,held or acquired, whether primary, secondary, direct, contingent, or joint andseveral, as such obligations may be amended, modified, increased, extended,renewed or replaced from time to time, (ii) all of the obligations of theCredit Parties to any Secured Party under any Hedging Agreement, and (iii) allcosts and expenses incurred in connection with enforcement and collection ofthe foregoing obligations, including reasonable attorneys’ fees and theallocated cost of internal counsel.

 

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

 

“Subject Documents” shall mean a collectivereference to the Revolving Credit Agreement, the Term Loan Agreement, theIntercreditor Agreement and all other documents, instruments or agreements fromtime to time constituting “Credit Documents” as such term is used in both theRevolving Credit Agreement and the Term Loan Agreement (to the extent suchdocuments 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.                                       Pledgeand Grant of Security Interest. To secure the prompt payment andperformance in full when due, whether by lapse of time, acceleration, mandatoryprepayment 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 allright, title and interest of Pledgor in and to the following, whether now ownedor existing or owned, acquired, or arising hereafter (collectively, the “PledgedCollateral”):

 

(a)                                  PledgedCapital Stock.  (i) 100% of theissued and outstanding Capital Stock owned by Pledgor in the entities set forthon Schedule 2(a) attached hereto and (ii) 65% of the issued andoutstanding classes of Capital Stock entitled to vote (within the meaning ofTreas. Reg. Section 1.956 2(c)(2)) (“Voting Equity”) and 100% ofthe issued and outstanding classes of Capital Stock not entitled to vote(within the meaning of Treas. Reg. Section 1.956 2(c)(2)) (“Non VotingEquity”) owned by the Pledgor of each foreign Subsidiary of the Pledgor setforth on Schedule 2(b), in each case together with the certificates(or other agreements or instruments), if any, representing such Capital Stockand all options and other rights, contractual or otherwise, with respectthereto (collectively, together with the Capital Stock described in Sections2(b) and 2(c) below, the “Pledged Capital Stock”), including, but notlimited to, the following:

 

(A)                              allshares, securities, partnership interests, membership interests or other equityinterests representing a dividend on any of the Pledged Capital Stock, orrepresenting a distribution or return of capital upon or in respect of thePledged 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, thePledged Capital Stock; provided, however, that such Pledgor shall not berequired to deliver more than 65% of the Voting Equity of any Person that is aforeign Subsidiary of the Pledgor; and

 

(B)                                withoutaffecting the obligations of the Pledgor under any provision prohibiting suchaction hereunder or under any Subject Document, in the event of anyconsolidation or merger

 

1

----

 

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

 

(b)                                 AdditionalShares.  (i) 100% of the issued andoutstanding 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 theNon Voting Equity owned by the Pledgor of any Person which is hereafter listedon Schedule 2(b), as amended from time to time, in each casetogether 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 theforegoing, however and whenever acquired and in whatever form.

 

Withoutlimiting the generality of the foregoing, it is hereby specifically understoodand agreed that Pledgor may from time to time hereafter deliver additionalshares of Capital Stock to the Collateral Agent as collateral security for theSecured Obligations.  Upon delivery tothe Collateral Agent, such additional Capital Stock shall be deemed to be partof the Pledged Collateral and shall be subject to the terms of this PledgeAgreement whether or not Schedule 2(a) is amended to refer to suchadditional Capital Stock.

 

3.                                       Securityfor Secured Obligations. The security interest created hereby in thePledged Collateral constitutes continuing collateral security for the SecuredObligations.

 

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

 

(a)                                  Deliveryof Certificates.  Pledgor shalldeliver to the Collateral Agent (i) simultaneously with or prior to theexecution and delivery of this Pledge Agreement, all certificates representingthe Pledged Capital Stock of Pledgor and (ii) promptly upon the receipt thereofby or on behalf of Pledgor, all other certificates and instruments constitutingPledged Collateral of Pledgor.  Prior todelivery to the Collateral Agent, all such certificates and instrumentsconstituting Pledged Collateral of Pledgor shall be held in trust by Pledgorfor the benefit of the Collateral Agent pursuant hereto.  All such certificates shall be delivered insuitable form for transfer by delivery or shall be accompanied by duly executedinstruments of transfer or assignment in blank, substantially in the formprovided in Exhibit 4(a) attached hereto with appropriate reference madetherein to capital stock, partnership interests or membership interests, asappropriate.

 

(b)                                 AdditionalSecurities.  If Pledgor shallreceive by virtue of its being, becoming or having been the owner of anyPledged Collateral, any (i) certificate, including without limitation, anycertificate representing a dividend or distribution in connection with anyincrease or reduction of capital, reclassification, merger, consolidation, saleof assets, combination of shares or membership or equity interests, stocksplits, spin-off or split-off, promissory notes or other instrument; (ii)option or right, whether as an addition to, substitution for, or an exchangefor, any Pledged Collateral or otherwise; (iii) dividends payable insecurities; or (iv) distributions of securities or other equity interestsin connection with a partial or total liquidation, dissolution or reduction ofcapital, capital surplus or paid-in surplus, then, subject to the percentagelimitations set forth in Section 2(a) above, Pledgor shall receive suchcertificate, instrument, option, right or distribution in trust for the benefitof the Secured Parties, shall segregate it from Pledgor’s other property andshall deliver it forthwith to the Collateral Agent in the exact form receivedtogether with any necessary endorsement and/or appropriate stock power dulyexecuted in blank, substantially in the form provided in Exhibit 4(a),to be held by the Collateral Agent as Pledged Collateral and as furthercollateral security for the Secured Obligations.

 

(c)                                  FinancingStatements.  Pledgor shall executeand deliver to the Collateral Agent such UCC or other applicable financingstatements as may be reasonably requested by the Collateral Agent in order toperfect and protect the security interest created hereby in the PledgedCollateral of Pledgor.

 

3

----

 

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

 

5.                                       Representationsand Warranties.  Pledgor herebyrepresents and warrants to the Collateral Agent, for the benefit of the SecuredParties, that:

 

(a)                                  Authorizationof Pledged Capital Stock.  ThePledged 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 Stockconstituting Pledged Collateral will be duly authorized and validly issued,fully paid and, with respect any Pledged Capital Stock consisting of stock of acorporation, nonassessable and not subject to the preemptive rights of anyPerson.

 

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

 

(c)                                  Exercisingof Rights.  The exercise by theCollateral Agent of its rights and remedies hereunder will not violate any lawor governmental regulation or any material contractual restriction binding onor affecting Pledgor or any of its property.

 

(d)                                 Pledgor’sAuthority.  No authorization,approval or action by, and no notice or filing with any Governmental Authorityor with the issuer of any Pledged Capital Stock is required either (i) for thepledge made by Pledgor or for the granting of the security interest by Pledgorpursuant to this Pledge Agreement or (ii) for the exercise by the CollateralAgent or the Secured Parties of their rights and remedies hereunder (except asmay be required by laws affecting the offering and sale of securities).

 

(e)                                  SecurityInterest/Priority.  This PledgeAgreement 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 CollateralAgent of the certificates, if any, representing the Pledged Capital Stock andall other certificates and instruments constituting Pledged Collateral willperfect and establish the first priority of the Collateral Agent’ securityinterest in the Pledged Capital Stock and such certificates and instrumentsand, upon the filing of UCC financing statements or registration of theCollateral Agent’ security interest on the books and records of the Issuers ofany uncertificated Pledged Capital Stock, the Collateral Agent shall have afirst priority perfected security interest in all other Pledged Collateralrepresented by such Pledged Capital Stock. Except as set forth in this Section 5(e), no action is necessary toperfect or otherwise protect such security interest.

 

(f)                                    Partnershipand Membership Interests.  Except aspreviously disclosed to the Collateral Agent, none of the Pledged Shares consistingof partnership or limited liability company interests (i) is dealt in or tradedon a securities exchange or in a securities market, (ii) by its terms expresslyprovides that it is a security governed by Article 8 of the UCC, (iii) isan investment company security, (iv) is held in a securities account or (v)constitutes a Security or a Financial Asset.

 

(g)                                 NoOther Capital Stock.  Pledgor ownsno Capital Stock in entity(ies) listed on Schedule 2(a) and Schedule 2(b)other than as set forth on such schedules.

 

4

----

 

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

 

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

 

(a)                                  Booksand Records.  Mark its books andrecords (and shall cause the issuer of the Pledged Capital Stock of Pledgor tomark its books and records) to reflect the security interest granted to theCollateral Agent, for the benefit of the Secured Parties, pursuant to thisPledge Agreement.

 

(b)                                 Defenseof Title.  Warrant and defend titleto and ownership of the Pledged Collateral of Pledgor at its own expenseagainst the claims and demands of all other parties claiming an interesttherein, keep the Pledged Collateral free from all Liens, except for PermittedLiens, and not sell, exchange, transfer, assign, lease or otherwise dispose ofPledged Collateral of Pledgor or any interest therein, except as expresslypermitted under the Subject Documents.

 

(c)                                  FurtherAssurances.  Promptly execute anddeliver at its expense all further instruments and documents and take allfurther action that may be necessary and desirable or that the Collateral Agentmay reasonably request in order to (i) perfect and protect the security interestcreated hereby in the Pledged Collateral of Pledgor (including, withoutlimitation, the execution and filing of UCC financing statements and any andall action necessary to satisfy the Collateral Agent that the Collateral Agenthas obtained a first priority perfected security interest in all PledgedCapital Stock); (ii) enable the Collateral Agent to exercise and enforce itsrights 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 occurrenceor during the continuance of an Event of Default, delivering to the CollateralAgent irrevocable proxies in respect of the Pledged Collateral of Pledgor.  To that end, Pledgor agrees that theCollateral Agent may file one or more financing statements disclosing theCollateral Agent’s security interest in any or all of the Pledged Collateral ofPledgor without Pledgor’s signature thereon, and further Pledgor also herebyirrevocably makes, constitutes and appoints the Collateral Agent, its nomineeor any other person whom the Collateral Agent may designate, as Pledgor’sattorney-in-fact with full power and for the limited purpose to sign in thename of Pledgor any such financing statements (including renewal statements),amendments and supplements, notices or any similar documents that in theCollateral Agent’s reasonable discretion would be necessary, appropriate orconvenient in order to perfect and maintain perfection of the securityinterests granted hereunder, such power, being coupled with an interest, beingand remaining irrevocable so long as the Secured Obligations remain unpaid anduntil the commitments relating thereto shall have been terminated.  Pledgor hereby agrees that a carbon,photographic or other reproduction of this Pledge Agreement or any suchfinancing statement is sufficient for filing as a financing statement by theCollateral Agent without notice thereof to Pledgor wherever the CollateralAgent may in its sole discretion desire to file the same.  In the event for any reason the law of anyjurisdiction other than **[the State of Texas]**becomes or isapplicable to the Pledged Collateral of Pledgor or any part thereof, or to anyof the Secured Obligations, Pledgor agrees to execute and deliver all suchinstruments and to do all such other things as the Collateral Agent reasonablydeems necessary to preserve, protect and enforce the security interests of theCollateral Agent under the law of such other jurisdiction (and, if Pledgorshall fail to do so promptly upon the request of the Collateral Agent, then theCollateral Agent may execute any and all such requested documents on behalf ofPledgor pursuant to the power of attorney granted hereinabove).  If any Pledged Collateral is in thepossession or control of Pledgor’s agents and the Collateral Agent so requests,Pledgor agrees to notify such agents in writing of the Collateral Agent’ssecurity interest therein and, upon the Collateral Agent’s request, instructthem to hold all such Pledged Collateral for its account and subject to theCollateral Agent’s instructions. Pledgor agrees to mark its books and records to reflect the securityinterest of the Collateral Agent in the Pledged Collateral.

 

5

----

 

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

 

(e)                                  Compliancewith Securities Laws.  File allreports and other information now or hereafter required to be filed by Pledgorwith the United States Securities and Exchange Commission and any other state,federal or foreign agency in connection with the ownership of the PledgedCollateral 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 itscurrently outstanding Capital Stock except to the extent required by theSubject Documents.

 

7.                                       Performanceof Obligations and Advances by Collateral Agent. On failure of Pledgor toperform any of the covenants and agreements contained herein, the CollateralAgent may, at its sole option and in its reasonable discretion, perform orcause to be performed the same and in so doing may expend such sums as theCollateral Agent may reasonably deem advisable in the performance thereof,including, without limitation, the payment of any insurance premiums, thepayment 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 otherexpenditures which the Collateral Agent may make for the protection of thesecurity hereof or which may be compelled to make by operation of law.  All such sums and amounts so expended shallbe repayable by the Pledgor on a joint and several basis promptly upon timelynotice thereof and demand therefor, shall constitute additional SecuredObligations and shall bear interest from the date said amounts are expended atthe default rate specified in Section 3.1 of the Revolving CreditAgreement for loans outstanding thereunder and bearing interest based on theBase Rate or, if such document is of no further force and effect or has beenterminate, as specified in Section 3.1 of the Term Loan Agreementfor loans outstanding thereunder.  Nosuch performance of any covenant or agreement by the Collateral Agent on behalfof Pledgor, and no such advance or expenditure therefor, shall relieve thePledgor of any default under the terms of this Pledge Agreement or any of theSubject Documents or any other documents relating to the SecuredObligations.  The Collateral Agent maymake any payment hereby authorized in accordance with any bill, statement orestimate procured from the appropriate public office or holder of the claim tobe discharged without inquiry into the accuracy of such bill, statement orestimate or into the validity of any tax assessment, sale, forfeiture, taxlien, title or claim except to the extent such payment is being contested ingood faith by Pledgor in appropriate proceedings and against which adequatereserves are being maintained in accordance with GAAP.

 

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

 

9.                                       Remedies.

 

(a)                                  GeneralRemedies. Upon the occurrence of an Event of Default and during thecontinuation thereof, the Collateral Agent and the Secured Parties shall have,in addition to the rights and remedies provided herein, in the SubjectDocuments or in any other documents relating to the Secured Obligations, or bylaw (including, without limitation, levy of attachment or garnishment), therights and remedies of a secured party under the UCC of the jurisdictionapplicable to the affected Pledged Collateral.

 

(b)                                 Saleof Pledged Collateral.  Upon theoccurrence of an Event of Default and during the continuation thereof, withoutlimiting the generality of this Section and without notice, the CollateralAgent 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 anyexchange or broker’s board or elsewhere, at such price or prices and on suchother terms as the Collateral Agent may deem commercially reasonable, for cash,credit or for future delivery or otherwise in accordance with applicablelaw.  To the extent permitted by law, anySecured Party may in such event bid for the purchase of such securities.  Pledgor agrees that, to the extent notice ofsale shall be required by law and has not been waived by Pledgor, anyrequirement of reasonable notice shall be met if notice, specifying the placeof any public sale or the time after which any private sale is to be made, ispersonally served on or mailed postage prepaid to Pledgor in accordance withthe notice provisions of Section 11.1 of the Revolving CreditAgreement (or, to the extent the same has been

 

6

----

 

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

 

(c)                                  PrivateSale.  Upon the occurrence of anEvent of Default and during the continuation thereof, the Pledgor recognizesthat the Collateral Agent may deem it impracticable to effect a public sale ofall 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 PledgedCollateral 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 privatesale may be at prices and on terms less favorable to the seller than the pricesand other terms which might have been obtained at a public sale and,notwithstanding the foregoing, agrees that such private sale shall be deemed tohave been made in a commercially reasonable manner and that the CollateralAgent shall have no obligation to delay sale of any such Pledged Collateral forthe period of time necessary to permit the issuer of such Pledged Collateral toregister such Pledged Collateral for public sale under the Securities Act of1933.  Pledgor further acknowledges andagrees 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 ofgeneral circulation in the financial community of Charlotte, North Carolina (tothe extent that such offer may be advertised without prior registration underthe Securities Act of 1933), or (ii) made privately in the manner describedabove shall be deemed to involve a “public sale” under the UCC, notwithstandingthat such sale may not constitute a “public offering” under the Securities Actof 1933, and the Collateral Agent may, in such event, bid for the purchase ofsuch Pledged Collateral.

 

(d)                                 Retentionof Pledged Collateral. To the extent permitted under applicable law, inaddition to the rights and remedies hereunder, upon the occurrence of an Eventof Default, the Collateral Agent may, after providing the notices required bySections 9-620 and 9-621 of the UCC or otherwise complying with therequirements of applicable law of the relevant jurisdiction, accept or retainall or any portion of the Pledged Collateral in satisfaction of the SecuredObligations.  Unless and until theCollateral Agent shall have provided such notices, however, the CollateralAgent shall not be deemed to have accepted or retained any Pledged Collateralin 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 theCollateral Agent or the Secured Parties are legally entitled, the Pledgor shallbe jointly and severally liable for the deficiency, together with interestthereon at the default rate specified in Section 3.1 of theRevolving Credit Agreement for loans outstanding thereunder and bearinginterest based on the Base Rate (or, if such document is of no further forceand effect or has been terminate, as specified in Section 3.1 ofthe Term Loan Agreement for loans outstanding thereunder) and together with thecosts of collection and the reasonable fees of any attorneys employed by theCollateral Agent to collect such deficiency. Any surplus remaining after the full payment and satisfaction of theSecured Obligations shall be returned to the Pledgor or to whomsoever a courtof competent jurisdiction shall determine to be entitled thereto.

 

(f)                                    PartialExercise 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 anyremedies contemplated hereunder, (ii) the Collateral Agent may, in their solediscretion, exercise any remedy contemplated hereunder with respect to all orany portion of the Pledged Collateral, and (iii) any failure by the CollateralAgent upon an Event of Default hereunder to exercise its remedies with respectto any portion or the whole of the Pledged Collateral shall not constitute awaiver of its right to exercise such remedies at any point in the future duringsuch Event of Default or any later Event of Default.

 

10.                                 Rightsof the Collateral Agent.

 

(a)                                  Powerof Attorney.  In addition to otherpowers of attorney contained herein, Pledgor hereby designates and appoints theCollateral Agent, on behalf of the Secured Parties, and each of their

 

7

----

 

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

 

(i)                                     todemand, collect, settle, compromise, adjust and give discharges and releasesconcerning the Pledged Collateral of Pledgor, all as the Collateral Agent mayreasonably determine;

 

(ii)                                  tocommence and prosecute any actions at any court for the purposes of collectingany of the Pledged Collateral of Pledgor and enforcing any other right inrespect thereof;

 

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

 

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

 

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

 

(vi)                              toreceive payment of and receipt for any and all monies, claims, and otheramounts due and to become due at any time in respect of or arising out of anyPledged Collateral of Pledgor;

 

(vii)                           to sign and endorse anydrafts, assignments, proxies, stock powers, verifications, notices and otherdocuments relating to the Pledged Collateral of Pledgor;

 

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

 

(ix)                                toexchange any of the Pledged Collateral of Pledgor or other property upon anymerger, consolidation, reorganization, recapitalization or other readjustmentof the issuer thereof and, in connection therewith, deposit any of the PledgedCollateral of Pledgor with any committee, depository, transfer agent, registraror other designated agency upon such terms as the Collateral Agent maydetermine;

 

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

 

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

 

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

 

8

----

 

doingso.  The Collateral Agent shall not beliable for any act or omission or for any error of judgment or any mistake offact or law in their individual capacities or their capacity asattorney-in-fact except acts or omissions resulting from its gross negligenceor willful misconduct.  This power ofattorney is conferred on the Collateral Agent solely to protect, preserve andrealize upon its security interest in the Pledged Collateral.

 

(b)                                 Assignmentby the Collateral Agent.  TheCollateral Agent may from time to time assign the Secured Obligations and anyportion thereof and/or the Pledged Collateral and any portion thereof to asuccessor Collateral Agent under the Credit Agreement and the assignee shall beentitled to all of the rights and remedies of the Collateral Agent under thisPledge Agreement in relation thereto.

 

(c)                                  TheCollateral Agent’s Duty of Care. Other than the exercise of reasonable care to ensure the safe custody ofthe Pledged Collateral while being held by the Collateral Agent hereunder, theCollateral Agent shall have no duty or liability to preserve rights pertainingthereto, it being understood and agreed that the Pledgor shall be responsiblefor preservation of all rights in the Pledged Collateral of Pledgor, and theCollateral Agent shall be relieved of all responsibility for such PledgedCollateral upon surrendering it or tendering the surrender of it to Pledgor.  The Collateral Agent shall be deemed to haveexercised reasonable care in the custody and preservation of the PledgedCollateral in its possession if such Pledged Collateral is accorded treatmentsubstantially equal to that which the Collateral Agent accord their ownproperty, which shall be no less than the treatment employed by a reasonableand prudent agent in the industry, it being understood that the CollateralAgent shall not have responsibility for (i) ascertaining or taking action withrespect to calls, conversions, exchanges, maturities, tenders or other mattersrelating to any Pledged Collateral, whether or not the Collateral Agent have orare deemed to have knowledge of such matters; or (ii) taking any necessarysteps to preserve rights against any parties with respect to any PledgedCollateral.

 

(d)                                 VotingRights in Respect of the Pledged Collateral.

 

(i)                                     Solong as no Event of Default shall have occurred and be continuing, to theextent permitted by law, Pledgor may exercise any and all voting and otherconsensual rights pertaining to the Pledged Collateral of Pledgor or any partthereof for any purpose not inconsistent with the terms of this PledgeAgreement or the Credit Agreement (including, without limitation,Section 6(g) hereof); and

 

(ii)                                  Uponthe occurrence and during the continuance of an Event of Default, all rights ofPledgor to exercise the voting and other consensual rights which it wouldotherwise be entitled to exercise pursuant to paragraph (i) of thisSection shall cease and all such rights shall thereupon become vested inthe Collateral Agent which shall then have the sole right to exercise suchvoting and other consensual rights.

 

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

 

(i)                                     Solong as no Event of Default shall have occurred and be continuing and subjectto Section 4(b) hereof, Pledgor may receive and retain any and alldividends (other than stock dividends and other dividends constituting PledgedCollateral which are addressed hereinabove), distributions or interest paid inrespect of the Pledged Collateral to the extent they are allowed under theSubject Documents.

 

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

 

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

 

9

----

 

(B)                                alldividends, distributions and interest payments which are received by Pledgorcontrary to the provisions of subsection (A) of this Section shall bereceived in trust for the benefit of the Secured Parties, shall be segregatedfrom other property or funds of Pledgor, and shall be forthwith paid over tothe Collateral Agent as Pledged Collateral in the exact form received, to beheld by the Collateral Agent as Pledged Collateral and as further collateralsecurity for the Secured Obligations.

 

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

 

11.                                 Rightsof Required Lenders and Actions of Collateral Agent.

 

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

 

(b)                                 Actionsof Collateral Agent. Notwithstanding anything to the contrary contained herein, all actionsof the Collateral Agent hereunder (including the exercise of the remedies setforth in Section 9 hereof) shall be taken in accordance with theIntercreditor Agreement.

 

12.                                 Applicationof Proceeds.  Upon the occurrenceand during the continuance of an Event of Default, any payments in respect ofthe Secured Obligations and any proceeds of any Pledged Collateral, whenreceived by the Collateral Agent or any of the Secured Parties in cash or itsequivalent, will be applied in accordance with the terms of the IntercreditorAgreement.  Pledgor irrevocably waivesthe right to direct the application of such payments and proceeds andacknowledges and agrees that the Collateral Agent shall have the continuing andexclusive right to apply and reapply any and all such payments and proceeds inthe Collateral Agent’ sole discretion, notwithstanding any entry to thecontrary upon any of its books and records.

 

13.                                 Costsand Expenses. At all times hereafter, whether or not upon the occurrence ofan Event of Default, the Pledgors agree to promptly pay upon demand any and allreasonable costs and expenses (including, without limitation, reasonablyattorneys’ fees) of the Collateral Agent and the Secured Parties (a) asrequired under the Subject Documents and (b) as necessary to protect thePledged Collateral or to exercise any rights or remedies under this PledgeAgreement or with respect to any Pledged Collateral.  All of the foregoing costs and expenses shall constitute SecuredObligations hereunder.

 

14.                                 ContinuingAgreement.

 

(a)                                  ThisPledge Agreement shall be a continuing agreement in every respect and shallremain in full force and effect until such time as all of the SecuredObligations are fully satisfied.  Atsuch time as such obligations are fully satisfied, this Pledge Agreement shallbe automatically terminated and the Collateral Agent and the Secured Partiesshall, upon the request and at the expense of the Pledgor, (i) return all certificatesrepresenting the Pledged Capital Stock, all other certificates and instrumentsconstituting Pledged Collateral and all instruments of transfer or assignmentwhich have been delivered to the Collateral Agent pursuant to this PledgeAgreement and (ii) forthwith release all of its liens and security interestshereunder and shall execute and deliver all UCC termination statements and/orother documents reasonably requested by the Pledgor evidencing suchtermination.  Notwithstanding theforegoing, all releases and indemnities provided hereunder shall survivetermination of this Pledge Agreement.

 

(b)                                 ThisPledge 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 theSecured Obligations is rescinded or must otherwise be restored or returned bythe Collateral Agent or any Secured Party as a preference, fraudulentconveyance or otherwise under any bankruptcy, insolvency or similar law, all asthough such

 

10

----

 

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

 

15.                                 Amendments;Waivers; Modifications.  This PledgeAgreement 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 theCollateral Agent and the Pledgor.

 

16.                                 Successorsin Interest.  This Pledge Agreementshall create a continuing security interest in the Collateral and shall bebinding upon Pledgor, its successors and assigns and shall inure, together withthe rights and remedies of the Collateral Agent and the Secured Partieshereunder, to the benefit of the Collateral Agent and the Secured Parties andtheir successors and permitted assigns; provided, however, thatthe Pledgor may not assign its rights or delegate its duties hereunder withoutthe prior written consent of each of the Required Secured Parties (as definedin 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 itssuccessors and assigns, from any liability for any act or omission relating tothis Pledge Agreement or the Collateral, except, as applicable, for anyliability arising from the gross negligence or willful misconduct of theCollateral Agent, or such Secured Party, or its officers, employees or agents.

 

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

 

18.                                 Counterparts.  This Pledge Agreement may be executed in anynumber of counterparts, each of which where so executed and delivered shall bean original, but all of which shall constitute one and the sameinstrument.  It shall not be necessary inmaking proof of this Pledge Agreement to produce or account for more than onesuch counterpart.

 

19.                                 Headings.  The headings of the sections and subsectionshereof are provided for convenience only and shall not in any way affect themeaning, construction or interpretation of any provision of this PledgeAgreement.

 

# **20.**                                 Governing Law.

# ** **

THISPLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THEINTERNAL LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO CONFLICT OF LAWPROVISIONS THEREOF EXCEPT TO THE EXTENT THAT PERFECTION AND REMEDIES ARENECESSARILY GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.

 

21.                                 Waiverof Jury Trial.

 

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

 

22.                                 Consentto Jurisdiction.

 

(a)                                  Anylegal action or proceeding with respect to this Pledge Agreement may be broughtin the courts of the State of North Carolina in Mecklenburg County, or of theUnited States for the Western District of North Carolina, and, by execution anddelivery of this Pledge Agreement, the Pledgor hereby irrevocably accepts forhimself and in respect of its property, generally and unconditionally, thenonexclusive jurisdiction of such courts. The Pledgor further

 

11

----

 

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

 

(b)                                 ThePledgor hereby irrevocably and unconditionally waives, to the fullest extent itmay legally and effectively do so, any objection which it may now or hereafterhave to the laying of venue of any suit, action or proceeding arising out of orrelating to this Pledge Agreement in the courts referred to in Section 22(a).  Each of the parties hereto hereby furtherirrevocably waives and agrees not to plead or claim in any such court that anysuch action or proceeding brought in any such court has been brought in aninconvenient forum.

 

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

 

24.                                 Entirety.  This Pledge Agreement, the Subject Documentsand any other documents relating to the Secured Obligations represent theentire agreement of the parties hereto and thereto, and supersede all prioragreements and understandings, oral or written, if any, including anycommitment letters or correspondence relating to the Subject Documents or thetransactions contemplated herein and therein.

 

25.                                 Survival.  All representations and warranties of thePledgor hereunder shall survive the execution and delivery of this PledgeAgreement and the other Subject Documents and the making of the loans under theSubject Documents.

 

26.                                 OtherSecurity.  To the extent that any ofthe Secured Obligations are now or hereafter secured by property other than thePledged Collateral (including, without limitation, real and other personalproperty owned by Pledgor), or by a guarantee, endorsement or property of anyother Person, then the Collateral Agent and the Secured Parties shall have theright to proceed against such other property, guarantee or endorsement upon theoccurrence of any Event of Default, and the Collateral Agent and the SecuredParties have the right, in their sole discretion, to determine which rights,security, liens, security interests or remedies the Collateral Agent and theSecured Parties shall at any time pursue, relinquish, subordinate, modify ortake with respect thereto, without in any way modifying or affecting any ofthem or any of the Collateral Agent’ and the Secured Parties’ rights or the SecuredObligations under this Pledge Agreement, the Subject Documents or any otherdocuments relating to the Secured Obligations.

 

[remainder of page intentionally left blank]

 

12

----

 

Eachof the parties hereto has caused a counterpart of this Pledge Agreement to beduly 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

----

 

Schedule 2(a)

 

to

 

Pledge Agreement

 

dated as of November 4, 2003 in favor of

 

the Collateral Agent

 

PLEDGED CAPITAL STOCK

 

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

 

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

 

14

----

 

Schedule 2(b)

 

to

 

Pledge Agreement

 

dated as of November 4, 2003 in favor of

 

the Collateral Agent

 

PLEDGED CAPITAL STOCK 

 

[None.]

 

15

----

 

Exhibit 4(a)

 

to

 

Pledge Agreement

 

dated as of November 4, 2003 in favor of

 

the Collateral Agent

 

Irrevocable Stock Power

 

FORVALUE 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 capitalstock and to take all necessary and appropriate action to effect any suchtransfer.  The agent andattorney-in-fact may substitute and appoint one or more persons to act for him.

 
|   |                                                                                                                                                                                     | ,      |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | a                                corporation |   |
|   |                                                                                                                                                                                     |   |
|   | By:                                                                                                                                                                                      |   |   |
|   | Name:                                                                                                                                                                                    |   |   |
|   | Title:                                                                                                                                                                                   |   |   |
|        |                                                                                                                                                                                          |        |  |  |  |

 

16

----