**Exhibit 4.02**

 

**SECURITIESPURCHASE AGREEMENT**

 

This Securities Purchase Agreement (this “Agreement”)is dated as of June 12, 2003, among U.S. Restaurant Properties, Inc., aMaryland corporation (the “Company”), and the purchasers identified onthe signature pages hereto (each, including its successors and assigns, a “Purchaser”and collectively the “Purchasers”).

 

WHEREAS, subject to the terms and conditionsset forth in this Agreement and pursuant to Section 4(2) of the Securities Actof 1933, as amended (the “Securities Act”), and Rule 506 promulgatedthereunder, the Company desires to issue and sell to each Purchaser, and eachPurchaser, severally and not jointly with the other Purchasers, desires topurchase from the Company securities of the Company as more fully described inthis Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of themutual covenants contained in this Agreement, and for other good and valuableconsideration the receipt and adequacy of which are hereby acknowledged, theCompany and each Purchaser agrees as follows:

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# **ARTICLE I**

**DEFINITIONS**

 

## 1.1                                 Definitions.  In addition to the terms defined elsewherein this Agreement: (a) capitalized terms that are not otherwise defined hereinhave the meanings given to such terms in the Articles Supplementary (as definedherein), and (b) the following terms have the meanings indicated in thisSection 1.1:

 

“Actual Minimum” means, as of any date, the maximum aggregatenumber of shares of Common Stock then issued or potentially issuable in thefuture pursuant to the Transaction Documents, including any Underlying Sharesissuable upon exercise or conversion in full of all Warrants and shares ofPreferred Stock, ignoring any conversion or exercise limits set forth therein,and assuming that any previously unconverted shares of Preferred Stock are helduntil the third anniversary of the Closing Date and all dividends are paid inshares of Common Stock until such third anniversary, subject to the limitationon the number of shares of Common Stock issuable hereunder set forth in Section5(a)(iii) of the Articles Supplementary.

 

“Affiliate” means any Person that, directly or indirectlythrough one or more intermediaries, controls or is controlled by or is undercommon control with a Person, as such terms are used in and construed underRule 144 under the Securities Act.  Withrespect to a Purchaser, any investment fund or managed account that is managedon a discretionary basis by the same investment manager as such Purchaser willbe deemed to be an Affiliate of such Purchaser.

 

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“Articles Supplementary” means the Articles Supplementary to be filed prior to the Closing by the Company with the State Department of Assessment and Taxation of Maryland, in the form of Exhibit A attached hereto.

 

## “CapitalShares” means the Common Stock and any shares of any other class of commonstock whether now or hereafter authorized, having the right to participate inthe distribution of earnings and assets of the Company.

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## “CapitalShares Equivalents” means any securities, rights, or obligations that areconvertible into or exchangeable for or give any right to subscribe for orpurchase, directly or indirectly, any Capital Shares of the Company or anywarrants, options or other rights to subscribe for or purchase, directly orindirectly, Capital Shares or any such convertible or exchangeable securities.

 

“Closing” means the Closing of the purchase and sale of theSecurities pursuant to Section 2.1.

 

“Closing Date” means the date of the Closing.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value$0.001 per share, and any securities into which such common stock shallhereinafter been reclassified into.

 

“Company Counsel” means Locke Liddell & Sapp LLP, outsidecounsel to the Company, with offices at 2200 Ross Avenue, Suite 2200, Dallas,Texas 75201-6776.

 

“Disclosure Schedules” shall have the meaning ascribed to suchterm in Section 3.1.

 

“Effective Date” means the date that the Registration Statementinitially filed with the Commission pursuant to the Registration RightsAgreement is first declared effective by the Commission.

 

“Exchange Act” means the Securities Exchange Act of 1934, asamended.

 

“FW” means Feldman Weinstein LLP with offices at Suite 2620, 420Lexington Avenue, New York, New York 10170-0002

 

“GAAP” shall have the meaning ascribed to such term in Section3.1(h).

 

“Liens” shall have the meaning ascribed to such term in Section3.1(a).

 

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“Losses” means any and all losses, claims, damages, liabilities,settlement costs and expenses, including without limitation costs ofpreparation and reasonable attorneys’ fees.

 

“Material Adverse Effect” shall have the meaning assigned tosuch term in Section 3.1(b).

 

“Person” means an individual or corporation, partnership, trust,incorporated or unincorporated association, joint venture, limited liabilitycompany, joint stock company, government (or an agency or subdivision thereof)or other entity of any kind.

 

“Preferred Stock” means the 16,000 shares of the Company’s 8% Series B Convertible Preferred Stock issued hereunder having the rights, preferences and privileges set forth in the Articles Supplementary.

 

“Principal Market” initially means the New York Stock Exchangeand shall also include the NASDAQ Small-Cap Market, the American Stock Exchangeor the NASDAQ National Market, whichever is at the time the principal tradingexchange or market for the Common Stock, based upon share volume.

 

“Proceeding” means an action, claim, suit, investigation orproceeding (including, without limitation, an investigation or partialproceeding, such as a deposition), whether commenced or threatened.

 

“Purchaser Percentage” means, with respect to a Purchaser, thepercentage equal to the product of (x) a fraction, the numerator of which shallbe the Subscription Amount paid by such Purchaser on the Closing Date and thedenominator of which shall be the aggregate Subscription Amount paid by allPurchasers on the Closing Date times (y) 100.

 

“Registration Rights Agreement” means the Registration RightsAgreement, dated the date hereof, among the Company and each Purchaser, in theform of Exhibit B.

 

“Required Approvals” shall have the meaning ascribed to suchterm in Section 3.1(e).

 

“Required Minimum” means, as of any date, the maximum aggregatenumber of shares of Common Stock then issued or potentially issuable in thefuture pursuant to the Transaction Documents, including any Underlying Sharesissuable upon exercise or conversion in full of all Warrants and PreferredStock, ignoring any conversion or exercise limits set forth therein, andassuming that (i) any previously unconverted shares of Preferred Stock are helduntil the third anniversary of the Closing Date and all dividends thereon arepaid in shares of Common Stock until such third anniversary, and (ii) the VWAPat all times on and after the date of determination equals 80% of the actualVWAP on the Trading Day immediately prior to the date of determination and thecompany has sold its securities for such VWAP on such date, subject to thelimitation on the number of shares of Common Stock issuable hereunder set forthin Section 5(a)(iii) of the Articles Supplementary.

 

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“Rule 144” means Rule 144 promulgated by the Commission pursuantto the Securities Act, as such Rule may be amended from time to time, or anysimilar rule or regulation hereafter adopted by the Commission havingsubstantially the same effect as such Rule.

 

“SEC Reports” shall have the meaning ascribed to such term inSection 3.1(h).

 

“Securities” means the Preferred Stock, the Warrants and theUnderlying Shares.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Stated Value” means $1,000 per share of Preferred Stock.

 

“Stockholder Approval” means such approval as may be required bythe applicable rules and regulations of the Principal Market (or any successorentity) from the shareholders of the Company with respect to the transactionscontemplated by the Transaction Documents, including the issuance of all of theUnderlying Shares and shares of Common Stock issuable upon exercise of theWarrants in excess of 20% of the Company’s issued and outstanding Common Stockon the Closing Date.

 

“Subscription Amount” shall mean, as to each Purchaser, the amount tobe paid for the Preferred Stock purchased hereunder as specified below suchPurchaser’s name on the signature page of this Agreement, in United StatesDollars.

 

“Subsidiary” means any subsidiary of the Company that isrequired to be listed in Schedule 3.1(a).

 

“Trading Day” means any day during which the Principal Marketshall be open for business.

 

“Transaction Documents” means this Agreement, the ArticlesSupplementary, the Warrants, the Registration Rights Agreement and any otherdocuments or agreements executed in connection with the transactionscontemplated hereunder.

 

“Underlying Shares” means the shares of Common Stock issuableupon conversion of the Preferred Stock, upon exercise of the Warrants andissued and issuable in lieu of the cash payment of dividends on the PreferredStock.

 

“Underlying Shares Registration Statement” or “RegistrationStatement” means a registration statement meeting the requirements setforth in the Registration Rights Agreement and covering the resale of theUnderlying Shares by each Purchaser as provided for in the Registration RightsAgreement.

 

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Principal Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Principal Market on which the Common Stock is then

 

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listed or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if the Common Stock is not then listed or quoted on the Principal Market and if prices for the Common Stock are then quoted on the OTC Bulletin Board, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by the National Quotation Bureau Incorporated (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers and reasonably acceptable to the Company.

 

“Warrants” means collectively the Stock Purchase Warrants, inthe form of Exhibit C delivered to each Purchaser at the Closing inaccordance with Section 2.2.

# ** **

# **ARTICLE II**

**PURCHASE AND SALE**

 

## 2.1                                 Investment.

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#### (a)  Upon the terms and subject to the conditionsset forth herein, concurrent with the execution and delivery of this Agreementby the parties hereto or such other time as shall be agreed to by the partieshereto, each Purchaser shall purchase, severally and not jointly, and theCompany shall sell to such Purchaser, a number of shares of Preferred Stockequal to such Purchaser’s Subscription Amount divided by the Stated Value foran aggregate number of shares of Preferred Stock sold hereunder equal to 16,000for an aggregate Subscription Amount equal to $16,000,000.

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### (b) Uponsatisfaction of the conditions set forth in Section 2.2, the Closing shalloccur at the offices of FW, or such other location as the parties shallmutually agree.

 

2.2                                 Conditionsto Closing.  The Closing is subjectto the satisfaction or waiver by the party to be benefited thereby of thefollowing conditions:

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### (a)                                  TheCompany shall have delivered or caused to be delivered to each Purchaser thefollowing:

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#### (i)                                     thisAgreement duly executed by the Company;

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#### (ii)                                  acertificate evidencing a number of shares of Preferred Stock equal to suchPurchaser’s Subscription Amount divided by the Stated Value, registered in thename of such Purchaser;

 

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#### (iii)                               aWarrant, registered in the name of such Purchaser, pursuant to which suchPurchaser shall have the right to acquire up to a number of shares of CommonStock equal to 20% of such Purchaser’s Subscription Amount divided by $15.50,subject to adjustment for reverse and forward stock splits, stock dividends,stock combinations and other similar transactions of the Common Stock thatoccur after the date of this Agreement. The Warrant shall have a term of exercise of seven years beginning ontheir date of issuance and an exercise price equal to $16.50, as adjustedtherein and subject to adjustment for reverse and forward stock splits, stockdividends, stock combinations and other similar transactions of the CommonStock that occur after the date of this Agreement;

 

#### (iv)                              alegal opinion of Company Counsel, in the form of Exhibit D attachedhereto, addressed to each Purchaser;

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#### (v)                                 theRegistration Rights Agreement duly executed by the Company; and

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#### (vi)                              executedagreements, in the form attached hereto as Exhibit E, by Robert J.Stetson and Lone Star Fund III (U.S.), L.P.

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### (b)                                 Atthe Closing, each Purchaser shall have delivered or caused to be delivered tothe Company the following:

 

#### (i)                                     thisAgreement duly executed by such Purchaser;

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#### (ii)                                  suchPurchaser’s Subscription Amount, by wire transfer to the account of theCompany; and

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#### (iii)                               theRegistration Rights Agreement duly executed by such Purchaser.

 

### (c)                                  Allrepresentations and warranties of the other party contained herein shall remaintrue and correct as of the applicable Closing Date.

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### (d)                                 Thereshall have been no Material Adverse Effect (as defined in Section 3.1(b)) withrespect to the Company since the date hereof.

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### (e)                                  Fromthe date hereof to the Closing Date, trading in the Common Stock shall not havebeen suspended by the Commission (except for any suspension of trading of limitedduration agreed to by the Company, which suspension shall be terminated priorto the Closing), and, at any time prior to the Closing Date, trading insecurities generally as reported by Bloomberg Financial Markets shall not havebeen suspended or limited, or minimum prices shall not have been established onsecurities whose trades are reported by such service, or on the PrincipalMarket, nor shall a banking moratorium have been declared either by the UnitedStates or New York State authorities, nor shall there have occurred anymaterial outbreak or escalation of hostilities or other national orinternational calamity of such magnitude in its effect on, or any materialadverse change

 

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### in, anyfinancial market which, in each case, in the reasonable judgment of thePurchasers, makes it impracticable or inadvisable to purchase the shares ofPreferred Stock at the Closing.

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# **ARTICLE III**

**REPRESENTATIONSAND WARRANTIES**

 

## 3.1                                 Representationsand Warranties of the Company. Except as set forth under the corresponding section of the disclosureschedules delivered to the Purchasers concurrently herewith (the “DisclosureSchedules”), the Company hereby makes the following representations andwarranties to each Purchaser:

 

### (a)                                  Subsidiaries.  The Company has no direct or indirectsubsidiaries.  The Company owns,directly or indirectly, all of the capital stock or other equity interests ofeach Subsidiary free and clear of any lien, charge, security interest,encumbrance, right of first refusal or other restriction (collectively, “Liens”),and all the issued and outstanding shares of capital stock of each Subsidiaryare validly issued and are fully paid, non-assessable and free of preemptiveand similar rights. If the Company has no subsidiaries, then references in theTransaction Documents to the Subsidiaries will be disregarded.

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### (b)                                 Organizationand Qualification.  Each of theCompany and the Subsidiaries is an entity duly incorporated or otherwiseorganized, validly existing, as applicable, and in good standing under the lawsof the jurisdiction of its incorporation or organization (as applicable), withthe requisite power and authority to own and use its properties and assets andto carry on its business as currently conducted.  Neither the Company nor any Subsidiary is in violation of any ofthe provisions of its respective certificate or articles of incorporation,bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to dobusiness and is in good standing as a foreign corporation or other entity ineach jurisdiction in which the nature of the business conducted or propertyowned by it makes such qualification necessary, except where the failure to beso qualified or in good standing, as the case may be, could not reasonably beexpected to, individually or in the aggregate: (i) adversely affect thelegality, validity or enforceability of any Transaction Document, (ii) have orresult in or be reasonably likely to have or result in a material adverseeffect on the results of operations, assets, business or condition (financialor otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii)adversely impair the Company’s ability to perform fully on a timely basis itsobligations under any of the Transaction Documents (any of (i), (ii) or (iii),a “Material Adverse Effect”).

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### (c)                                  Authorization;Enforcement.  The Company has therequisite corporate power and authority to enter into and to consummate the transactionscontemplated by each of the Transaction Documents and otherwise to carry outits obligations hereunder or thereunder. The execution and delivery of each of the Transaction Documents by theCompany and the consummation by it of the transactions contemplated hereby orthereby have been duly authorized by all necessary action on the part of theCompany and no

 

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### further consent or action is required by the Company, other than theRequired Approvals.  Each of theTransaction Documents has been (or upon delivery will be) duly executed by theCompany and, when delivered in accordance with the terms hereof, willconstitute the valid and binding obligation of the Company enforceable againstthe Company in accordance with its terms, subject to applicable bankruptcy,insolvency, fraudulent conveyance, reorganization, moratorium and similar lawsaffecting creditors’ rights and remedies generally and general principles ofequity.

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### (d)                                 NoConflicts.  The execution, deliveryand performance of the Transaction Documents by the Company and theconsummation by the Company of the transactions contemplated thereby do not andwill not: (i) conflict with or violate any provision of the Company’s or anySubsidiary’s certificate or articles of incorporation, bylaws or otherorganizational or charter documents, or (ii) subject to obtaining the RequiredApprovals (as defined below), conflict with, or constitute a default (or anevent that with notice or lapse of time or both would become a default) under,or give to others any rights of termination, amendment, acceleration orcancellation (with or without notice, lapse of time or both) of, any agreement,credit facility, debt or other instrument (evidencing a Company or Subsidiarydebt or otherwise) or other understanding to which the Company or anySubsidiary is a party or by which any property or asset of the Company or anySubsidiary is bound or affected, or (iii) result in a violation of any law,rule, regulation, order, judgment, injunction, decree or other restriction ofany court or governmental authority as currently in effect to which the Companyor a Subsidiary is subject (including federal and state securities laws andregulations), or by which any property or asset of the Company or a Subsidiaryis bound or affected; except in the case of each of clauses (ii) and (iii),such as could not reasonably be expected to, individually or in the aggregate,have or result in a Material Adverse Effect.

 

### (e)                                  Filings,Consents and Approvals.  Neither theCompany nor any Subsidiary is required to obtain any consent, waiver,authorization or order of, give any notice to, or make any filing orregistration with, any court or other federal, state, local or othergovernmental authority or other Person in connection with the execution,delivery and performance by the Company of the Transaction Documents, otherthan (i) the filings required under Section 4.9, (ii) the filing withthe Commission of the Underlying Shares Registration Statement, (iii) theapplication(s) to each applicable Principal Market for the listing of theUnderlying Shares for trading thereon in the time and manner required thereby,(iv) the filing with the Commission of a Form D pursuant to CommissionRegulation D, and (v) applicable Blue Sky filings (collectively, the “RequiredApprovals”).

 

### (f)                                    Issuanceof the Securities.  The Securitiesare duly authorized and, when issued and paid for in accordance with theapplicable Transaction Documents, will be duly and validly issued, fully paidand nonassessable, free and clear of all Liens, other than any Liens created orpermitted to exist by the Purchasers. The Company has reserved from its duly authorized capital stock a numberof shares of Common Stock for issuance of the Underlying Shares at least equalto the Required Minimum on the date hereof.

 

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### (g)                                 Capitalization.  The number of shares and type of allauthorized, issued and outstanding capital stock of the Company is set forth inthe Disclosure Schedules.  No securitiesof the Company are entitled to preemptive or similar rights, and no Person hasany right of first refusal, preemptive right, right of participation, or anysimilar right to participate in the transactions contemplated by theTransaction Documents.  Except as aresult of the purchase and sale of the Securities, there are no outstandingoptions other than as set forth in the SEC Reports, warrants, script rights tosubscribe to, calls or commitments of any character whatsoever relating to, orsecurities, rights or obligations convertible into or exchangeable for, orgiving any Person any right to subscribe for or acquire, any shares of CommonStock, or contracts, commitments, understandings or arrangements by which theCompany or any Subsidiary is or may become bound to issue additional shares ofCommon Stock, or securities or rights convertible or exchangeable into sharesof Common Stock.  The issuance and saleof the Securities will not obligate the Company to issue shares of Common Stockor other securities to any Person (other than the Purchasers) and will notresult in a right of any holder of Company securities to adjust the exercise,conversion, exchange or reset price under such securities.

 

### (h)                                 SECReports; Financial Statements.  TheCompany has filed all reports required to be filed by it under the SecuritiesAct and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,for the two years preceding the date hereof (or such shorter period as theCompany was required by law to file such material) (the foregoing materialsbeing collectively referred to herein as the “SEC Reports”) on a timelybasis or has received a valid extension of such time of filing and has filedany such SEC Reports prior to the expiration of any such extension.  The Company has made available to eachPurchaser a copy of all SEC Reports filed within the 10 days preceding the datehereof.  As of their respective dates,the SEC Reports complied in all material respects with the requirements of theSecurities Act and the Exchange Act and the rules and regulations of theCommission promulgated thereunder, and none of the SEC Reports, when filed,contained any untrue statement of a material fact or omitted to state a materialfact required to be stated therein or necessary in order to make the statementstherein, in light of the circumstances under which they were made, notmisleading.  The financial statements ofthe Company included in the SEC Reports comply in all material respects withapplicable accounting requirements and the rules and regulations of theCommission with respect thereto as in effect at the time of filing.  Such financial statements have been preparedin accordance with GAAP, except as may be otherwise specified in such financialstatements or the notes thereto, and fairly present in all material respectsthe financial position of the Company and its consolidated subsidiaries as ofand for the dates thereof and the results of operations and cash flows for theperiods then ended, subject, in the case of unaudited statements, to normal,immaterial, year-end audit adjustments.

 

### (i)                                     MaterialChanges.  Since the date of thelatest audited financial statements included within the SEC Reports, except asspecifically disclosed in the SEC Reports: (i) there has been no event,occurrence or development that has had or that could reasonably be expected toresult in a Material Adverse Effect, (ii) the Company has not incurred anyliabilities (contingent or otherwise) other than (A) trade payables and accruedexpenses

 

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### incurred in the ordinary course of business consistent with pastpractice and (B) liabilities not required to be reflected in the Company’sfinancial statements pursuant to GAAP or required to be disclosed in filingsmade with the Commission, (iii) the Company has not altered its method ofaccounting or the identity of its auditors, (iv) other than in the ordinarycourse of business, the Company has not declared or made any dividend ordistribution of cash or other property to its stockholders or purchased,redeemed or made any agreements to purchase or redeem any shares of its capitalstock, and (v) the Company has not issued any equity securities to any officer,director or Affiliate, except pursuant to existing Company stock option orsimilar plans.

 

### (j)                                     Litigation.  There is no action, suit, inquiry, notice ofviolation, proceeding or investigation pending or, to the knowledge of theCompany, threatened against or affecting the Company, any Subsidiary or any oftheir respective properties before or by any court, arbitrator, governmental oradministrative agency or regulatory authority (federal, state, county, local orforeign) (collectively, an “Action”) which: (i) adversely affects orchallenges the legality, validity or enforceability of any of the TransactionDocuments or the Securities or (ii) could, if there were an unfavorabledecision, individually or in the aggregate, have or reasonably be expected toresult in a Material Adverse Effect. Neither the Company nor any Subsidiary,nor any director or officer thereof, is or has been the subject of any Actioninvolving a claim of violation of or liability under federal or statesecurities laws or a claim of breach of fiduciary duty. The Company does nothave pending before the Commission any request for confidential treatment ofinformation.  There has not been, and tothe knowledge of the Company, there is not pending or contemplated, anyinvestigation by the Commission involving the Company or any current or formerdirector or officer of the Company.  TheCommission has not issued any stop order or other order suspending theeffectiveness of any registration statement filed by the Company or anySubsidiary under the Exchange Act or the Securities Act.

 

### (k)                                  Compliance.  Except as set forth in the SEC Reports,neither the Company nor any Subsidiary: (i) is in default under or in violationof (and no event has occurred that has not been waived that, with notice orlapse of time or both, would result in a default by the Company or anySubsidiary under), nor has the Company or any Subsidiary received notice of aclaim that it is in default under or that it is in violation of, any indenture,loan or credit agreement or any other agreement or instrument to which it is aparty or by which it or any of its properties is bound (whether or not suchdefault or violation has been waived), (ii) is in violation of any order of anycourt, arbitrator or governmental body, or (iii) is or has been in violation ofany statute, rule or regulation of any governmental authority, except in eachcase as could not, individually or in the aggregate, have or result in aMaterial Adverse Effect.

 

### (l)                                     LaborRelations.  No material labor disputeexists or, to the knowledge of the Company, is imminent with respect to any ofthe employees of the Company.

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### (m)                               RegulatoryPermits.  The Company and theSubsidiaries possess all certificates, authorizations and permits issued by theappropriate federal, state, local or

 

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### foreign regulatory authorities necessary to conduct their respectivebusinesses as described in the SEC Reports, except where the failure to possesssuch permits could not, individually or in the aggregate, have or reasonably beexpected to result in a Material Adverse Effect (“Material Permits”),and neither the Company nor any Subsidiary has received any notice ofproceedings relating to the revocation or modification of any Material Permit.

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### (n)                                 Titleto Assets.  The Company and theSubsidiaries have good and marketable title in fee simple to all real propertyowned by them that is material to the business of the Company and theSubsidiaries and good and marketable title in all personal property owned bythem that is material to the business of the Company and the Subsidiaries, ineach case free and clear of all Liens, except for Liens as do not materiallyaffect the value of such property and do not materially interfere with the usemade and proposed to be made of such property by the Company and theSubsidiaries.  Except in each case ascould not, individually or in the aggregate, have or result in a MaterialAdverse Effect, any real property and facilities held under lease by theCompany and the Subsidiaries are held by them under valid, subsisting andenforceable leases of which the Company and the Subsidiaries are in materialcompliance.

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### (o)                                 Patentsand Trademarks.  To the knowledge ofthe Company, the Company and the Subsidiaries have, or have rights to use, allpatents, patent applications, trademarks, trademark applications, servicemarks, trade names, copyrights, licenses and other similar rights that arenecessary or material for use in connection with their respective businesses asdescribed in the SEC Reports and which the failure to so have could have aMaterial Adverse Effect (collectively, the “Intellectual Property Rights”).  Neither the Company nor any Subsidiary hasreceived a written notice that the Intellectual Property Rights used by theCompany or any Subsidiary violates or infringes upon the rights of any Person.To the knowledge of the Company, all such Intellectual Property Rights areenforceable and there is no existing infringement by another Person of any ofthe Intellectual Property Rights.

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### (p)                                 Insurance.  The Company and the Subsidiaries are insuredby insurers of recognized financial responsibility against such losses andrisks and in such amounts as are prudent and customary in the businesses inwhich the Company and the Subsidiaries are engaged. A list of the Company’sinsurance contracts and policies are set forth on the DisclosureSchedules.  To the best of Company’sknowledge, such insurance contracts and policies are accurate andcomplete.  Neither the Company nor anySubsidiary has any knowledge that it will not be able to renew its existinginsurance coverage as and when such coverage expires or to obtain similarcoverage from similar insurers as may be necessary to continue its businesswithout a significant increase in cost.

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### (q)                                 TransactionsWith Affiliates and Employees. Except as set forth in the SEC Reports, none of the executive officersor directors of the Company and, to the knowledge of the Company, none of theemployees of the Company is presently a party to any transaction with theCompany or any Subsidiary (other than for services as employees, officers anddirectors), including any contract, agreement or other

 

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### arrangement providing for the furnishing of services to or by,providing for rental of real or personal property to or from, or otherwiserequiring payments to or from any officer, director or such employee or, to theknowledge of the Company, any entity in which any officer, director, or anysuch employee has a substantial interest or is an officer, director, trustee orpartner.

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### (r)                                    InternalAccounting Controls.  Except as setforth in the SEC Reports, the Company and the Subsidiaries maintain a system ofinternal accounting controls sufficient to provide reasonable assurance that(i) transactions are executed in accordance with management’s general orspecific authorizations, (ii) transactions are recorded as necessary to permitpreparation of financial statements in conformity with generally acceptedaccounting principles and to maintain asset accountability, (iii) access toassets is permitted only in accordance with management’s general or specificauthorization, and (iv) the recorded accountability for assets is compared withthe existing assets at reasonable intervals and appropriate action is takenwith respect to any differences.  Thereare no disagreements of any kind presently existing, or reasonably anticipatedby the Company to arise, between the accountants and lawyers formerly orpresently employed by the Company and the Company is current with respect toany fees owed to its accountants and lawyers. Except as set forth in the SECReports, the Company has established disclosure controls and procedures (asdefined in Exchange Act Rules 13a-14 and 15d-14) for the Company and designedsuch disclosures controls and procedures to ensure that material informationrelating to the Company, including its subsidiaries, is made known to thecertifying officers by others within those entities, particularly during theperiod in which the Company’s Form 10-K or 10-Q, as the case may be, is beingprepared.  The Company’s certifyingofficers have evaluated the effectiveness of the Company’s controls andprocedures as of a date within 90 days prior to the filing date of the Form10-K for the fiscal year ended December 31, 2002 (such date, the “EvaluationDate”).  The Company presented inthe Form 10-K for the fiscal year ended December 31, 2002 the conclusions ofthe certifying officers about the effectiveness of the disclosure controls andprocedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have beenno significant changes in the Company’s internal controls (as such term isdefined in Item 307(b) of Regulation S-K under the Exchange Act) or, theCompany’s knowledge, in other factors that could significantly affect theCompany’s internal controls.

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### (s)                                  Solvency/Indebtedness.  Based on the financial condition of theCompany as of the Closing Date: (i) the fair market value of the Company’sassets exceeds the amount that will be required to be paid on or in respect ofthe Company’s existing debts and other liabilities (including known contingentliabilities) as they mature; (ii) the Company’s assets do not constituteunreasonably small capital to carry on its business for the current fiscal yearas now conducted and as proposed to be conducted including its capital needstaking into account the particular capital requirements of the business conductedby the Company, and projected capital requirements and capital availabilitythereof; and (iii) the current cash flow of the Company, together with theproceeds the Company would receive, were it to liquidate all of its assets,after taking into account all anticipated uses of the cash, would be sufficientto pay all amounts on or in respect of its

 

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### debt when such amounts are required to be paid.  The Company does not intend to incur debtsbeyond its ability to pay such debts as they mature (taking into account thetiming and amounts of cash to be payable on or in respect of its debt). TheCompany has no knowledge of any facts or circumstances which lead it to believethat it will file for reorganization or liquidation under the bankruptcy orreorganization laws of any jurisdiction within one year from the ClosingDate.  The SEC Reports set forth as ofthe date thereof all outstanding secured and unsecured Indebtedness of theCompany or any Subsidiary, or for which the Company or any Subsidiary hascommitments.  For the purposes of thisAgreement, “Indebtedness” shall mean (a) any liabilities for borrowedmoney or amounts owed in excess of $50,000 (other than trade accounts payableincurred in the ordinary course of business), (b) all guaranties, endorsementsand other contingent obligations in respect of Indebtedness of others, whetheror not the same are or should be reflected in the Company’s balance sheet (orthe notes thereto), except guaranties by endorsement of negotiable instrumentsfor deposit or collection or similar transactions in the ordinary course ofbusiness; and (c) the present value of any lease payments in excess of $50,000due under leases required to be capitalized in accordance with GAAP.  Neither the Company nor any Subsidiary is indefault with respect to any Indebtedness.

###  

### (t)                                    CertainFees.  No brokerage or finder’s feesor commissions are or will be payable by the Company to any broker, financialadvisor or consultant, finder, placement agent, investment banker, bank orother Person with respect to the transactions contemplated by this Agreement,and the Company has not taken any action that would cause any Purchaser to beliable for any such fees or commissions. The Company agrees that each Purchaser shall have no obligation withrespect to any fees or with respect to any claims made by or on behalf of anyPerson for fees of the type contemplated by this Section with the transactionscontemplated by this Agreement.

###  

### (u)                                 PrivatePlacement.  Assuming the accuracy ofthe representations and warranties of each Purchaser set forth in Sections 3.2,the offer, issuance and sale of the Preferred Stock and Warrants to eachPurchaser as contemplated hereby are exempt from the registration requirementsof the Securities Act.  The issuance andsale of the Securities hereunder does not contravene the rules and regulationsof the Principal Market and no shareholder approval is required for the Companyto fulfill its obligations under the Transaction Documents.

###  

### (v)                                 Listingand Maintenance Requirements.  TheCompany has not, in the 12 months preceding the date hereof, received noticefrom any Principal Market on which the Common Stock is or has been listed orquoted to the effect that the Company is not in compliance with the listing ormaintenance requirements of such Principal Market. The Company is, and has noreason to believe that it will not in the foreseeable future continue to be, incompliance with all such listing and maintenance requirements.

###  

### (w)                               RegistrationRights.  The Company has not grantedor agreed to grant to any Person any rights (including “piggy-back”registration rights) to have any securities of the Company registered with theCommission or any other governmental authority that have not been satisfied.

 

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### (x)                                   Applicationof Takeover Protections.  TheCompany and its Board of Directors have taken all necessary action, if any, inorder to render inapplicable any control share acquisition, businesscombination, poison pill (including any distribution under a rights agreement)or other similar anti-takeover provision under the Company’s Certificate ofIncorporation (or similar charter documents) or the laws of its state ofincorporation that is or could become applicable to each Purchaser as a resultof each Purchaser and the Company fulfilling their obligations or exercisingtheir rights under the Transaction Documents, including without limitation as aresult of the Company’s issuance of the Securities and each Purchaser’sownership of the Securities.

###  

### (z)                                   Disclosure.  The Company confirms that neither it nor anyother Person acting on its behalf has provided any of the Purchasers or theiragents or counsel with any information that constitutes or might constitutematerial, nonpublic information.  TheCompany understands and confirms that each Purchaser will rely on the foregoingrepresentations in effecting transactions in securities of the Company.  All disclosure provided to each Purchaserregarding the Company, its business and the transactions contemplated hereby,including the Schedules to this Agreement, furnished by or on behalf of theCompany with respect to the representations and warranties made herein are trueand correct with respect to such representations and warranties and do notcontain any untrue statement of a material fact or omit to state any materialfact necessary in order to make the statements made therein, in light of thecircumstances under which they were made, not misleading. The Companyacknowledges and agrees that no Purchaser makes or has made any representationsor warranties with respect to the transactions contemplated hereby other thanthose specifically set forth in Section 3.2.

 

(aa)                            Form S-3 Eligibility.  The Company is eligible to register theresale of the Underlying Shares for resale by the Purchaser under Form S-3promulgated under the Securities Act.

 

(bb)                          Seniority.  As of the date of this Agreement, no otherequity of the Company is senior to the Preferred Stock in right of payment,whether with respect to interest or upon liquidation or dissolution, orotherwise.

 

(cc)                            Tax Status.  The Company and each of its Subsidiaries hasmade or filed all material federal, state and foreign income and all othermaterial tax returns, reports and declarations required by any jurisdiction towhich it is subject (unless and only to the extent that the Company and each ofits Subsidiaries has set aside on its books provisions reasonably adequate forthe payment of all unpaid and unreported taxes) and has paid all taxes andother governmental assessments and charges that are material in amount, shownor determined to be due on such returns, reports and declarations, except thosebeing contested in good faith and has set aside on its books provisionsreasonably adequate for the payment of all taxes for periods subsequent to theperiods to which such returns, reports or declarations apply.  There are no unpaid taxes in any materialamount claimed to be due by the taxing authority of any jurisdiction, and theofficers of the Company know of no basis for any such claim.  The Company has not executed a waiver withrespect to the statute of limitations relating to the assessment or collectionof any

 

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foreign, federal, statue or local tax. None of the Company’s tax returns is presently being audited by anytaxing authority.

 

(dd)                          Acknowledgment RegardingPurchasers’ Purchase of Securities. The Company acknowledges and agrees that the Purchasers are actingsolely in the capacity of arm’s length purchasers with respect to thisAgreement and the transactions contemplated hereby.  The Company further acknowledges that no Purchaser is acting as afinancial advisor or fiduciary of the Company (or in any similar capacity) withrespect to this Agreement and the transactions contemplated hereby and anystatement made by any Purchaser or any of their respective representatives oragents in connection with this Agreement and the transactions contemplatedhereby is not advice or a recommendation and is merely incidental to thePurchasers’ purchase of the Securities. The Company further represents to each Purchaser that the Company’sdecision to enter into this Agreement has been based solely on the independentevaluation of the Company and its representatives.

 

(ee)                            No General Solicitationor Advertising in Regard to this Transaction.  Neither the Company nor, to the knowledge of the Company, any ofits directors or officers (i) has conducted or will conduct any generalsolicitation (as that term is used in Rule 502(c) of Regulation D) or generaladvertising with respect to the sale of the Preferred Stock or the Warrants, or(ii) made any offers or sales of any security or solicited any offers to buyany security under any circumstances that would require registration of thePreferred Stock, the Underlying Shares or the Warrants under the Securities Actor made any “directed selling efforts” as defined in Rule 902 of Regulation S.

 

(ff)                                Acknowledgment ofDilution.  The Company acknowledgesthat the issuance of the Securities will result in dilution of the outstandingshares of Common Stock, which dilution may be substantial under certain marketconditions.  The Company furtheracknowledges that its obligations under the Transaction Documents, includingwithout limitation its obligation to issue the Underlying Shares pursuant tothe Transaction Documents, are unconditional and absolute and not subject toany right of set off, counterclaim, delay or reduction, regardless of theeffect of any such dilution and regardless of the dilutive effect that suchissuance may have on the ownership of the other stockholders of the Company.

 

## 3.2                                 Representationsand Warranties of each Purchaser. Each Purchaser hereby, for itself and for no other Purchaser, representsand warrants to the Company as follows:

###  

### (a)                                  Organization;Authority.  Such Purchaser is anentity duly organized, validly existing and in good standing under the laws ofthe jurisdiction of its organization with the requisite corporate orpartnership power and authority to enter into and to consummate thetransactions contemplated by the Transaction Documents and otherwise to carryout its obligations thereunder. The purchase by such Purchaser of theSecurities hereunder has been duly authorized by all necessary action on thepart of such Purchaser.  Each of thisAgreement, and the Registration Rights Agreement has been duly executed

 

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### by such Purchaser, and when delivered by such Purchaser in accordancewith the terms hereof, will constitute the valid and legally binding obligationof such Purchaser, enforceable against it in accordance with its terms.

###  

### (b)                                 InvestmentIntent.  Such Purchaser is acquiringthe Securities as principal for its own account for investment purposes onlyand not with a view to or for distributing or reselling such Securities or anypart thereof, without prejudice, however, to such Purchaser’s right, subject tothe provisions of this Agreement, at all times to sell or otherwise dispose ofall or any part of such Securities pursuant to an effective registrationstatement under the Securities Act or under an exemption from such registrationand in compliance with applicable federal and state securities laws.  Nothing contained herein shall be deemed arepresentation or warranty by such Purchaser to hold Securities for any periodof time.  Such Purchaser is acquiringthe Securities hereunder in the ordinary course of its business.  Such Purchaser does not have any agreementor understanding, directly or indirectly, with any Person to distribute any ofthe Securities.

###  

### (c)                                  PurchaserStatus.  At the time such Purchaserwas offered the Securities, it was, and at the date hereof it is, and on eachdate on which it exercises any Warrants or converts any Preferred Stock, itwill be an “accredited investor” as defined in Rule 501(a) under the SecuritiesAct. Such Purchaser has not been formed solely for the purpose of acquiring theSecurities.  Such Purchaser is not abroker-dealer requiring registration under Section 15 of the Exchange Act.

###  

### (d)                                 Experienceof such Purchaser.  Such Purchaser,either alone or together with its representatives, has such knowledge,sophistication and experience in business and financial matters so as to becapable of evaluating the merits and risks of the prospective investment in theSecurities, and has so evaluated the merits and risks of such investment.  Such Purchaser is able to bear the economic riskof an investment in the Securities and, at the present time, is able to afforda complete loss of such investment.

###  

### (e)                                  GeneralSolicitation.  Such Purchaser is notpurchasing the Securities as a result of any advertisement, article, notice orother communication regarding the Securities published in any newspaper,magazine or similar media or broadcast over television or radio or presented atany seminar or any other general solicitation or general advertisement.

 

# **ARTICLE IV**

**OTHER AGREEMENTS OFTHE PARTIES**

 

## 4.1                                 TransferRestrictions.

###  

### (a)                                  TheSecurities may only be disposed of in compliance with state and federalsecurities laws.  In connection with anytransfer of Securities other than pursuant to an effective registrationstatement, to the Company or to an Affiliate of a Purchaser, the Company mayrequire the transferor thereof to provide to the Company an opinion of counselselected by the transferor, the form and substance of which opinion shall be

 

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### reasonably satisfactory to the Company, to the effect that suchtransfer does not require registration of such transferred Securities under theSecurities Act.  As a condition oftransfer, any such transferee shall agree in writing to be bound by the termsof this Agreement and shall have the rights of a Purchaser under this Agreementand the Registration Rights Agreement.

###  

### (b)                                 EachPurchaser agrees to the imprinting, so long as is required by this Section4.1(b), of the following legend on any certificate evidencing Securities:

 

[NEITHER] THESE SECURITIES[NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [EXERCISABLE][CONVERTIBLE]] HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSIONOR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROMREGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIESACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO ANEFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO ANAVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATIONREQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATESECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TOSUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THECOMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESESECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OROTHER LOAN SECURED BY SUCH SECURITIES.

 

THE SECURITIES REPRESENTEDBY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON OWNERSHIP AND TRANSFER FORTHE PURPOSE OF THE COMPANY’S MAINTENANCE OF ITS STATUS AS A REAL ESTATEINVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMEMDED (THE“CODE”).  EXCEPT AS OTHERWISE PROVIDED PURSUANT TO THE CHARTER OF THECORPORATION, NO PERSON MAY (1) BENEFICIALLY OWN SHARES OF STOCK IN EXCESS OF9.8% (OR SUCH OTHER PERCENTAGE AS MAY BE PROVIDED IN THE CHARTER OF THECORPORATION) OF THE AGRREGATE VALUE OF ALL OUTSTANDING STOCK OR (2)BENEFICIALLY OWN STOCK THAT WOULD RESULT IN THE COMPANY BEING “CLOSELY HELD”UNDER SECTION 856(h) OF THE CODE.  ANY PERSON WHO ATTEMPTS TO BENEFECIALLYOWN SHARES OF STOCK IN EXCESS OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFYTHE COMPANY.  IF THE RESTRICTIONS ON OWNERSHIP OR TRANSFER ARE VIOLATED,THE SHARES OF STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY CONVERTED INTOSHARES OF EXCESS STOCK WHICH WILL BE HELD IN TRUST BY THE COMPANY.  THECOMPANY HAS THE OPTION TO REDEEM SHARES OF EXCESS STOCK UNDER CERTAIN

 

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CIRCUMSTANCES.  ALLTERMS IN THIS LEGEND NOT OTHERWISE DEFINED HEREIN HAVE THE MEANINGS ASCRIBEDTHERETO IN THE COMPANY’S CHARTER, AS THE SAME MAY BE FURTHER AMENDED FROM TIMETO TIME,  A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON OWNERSHIP ANDTRANSFER, WILL BE SENT WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS.

 

The Company acknowledges andagrees that a Purchaser may from time to time pledge pursuant to a bona fidemargin agreement or grant a security interest in some or all of the Securitiesand, if required under the terms of such arrangement, such Purchaser maytransfer pledged or secured Securities to the pledgees or secured partiessubject to the limitations set forth in this Section 4.1.  Such a pledge or transfer would not besubject to approval of the Company and no legal opinion of the pledgee, securedparty or pledgor shall be required in connection therewith.  Further, no notice shall be required of suchpledge.  At the appropriate Purchaser’sexpense, the Company will execute and deliver such reasonable documentation asa pledgee or secured party of Securities may reasonably request in connectionwith a pledge or transfer of the Securities, including the preparation and filingof any required prospectus supplement under Rule 424(b)(3) of the SecuritiesAct or other applicable provision of the Securities Act to appropriately amendthe list of Selling Stockholders thereunder.

###  

### (c)                                  Certificatesevidencing Underlying Shares shall not contain any legend (including the legendset forth in Section 4.1(b)): (i) while a registration statement (including theUnderlying Shares Registration Statement) covering the resale of suchUnderlying Shares is effective under the Securities Act, or (ii) following anysale of such Underlying Shares pursuant to Rule 144, or (iii) if suchSecurities are eligible for sale under Rule 144(k), or (iv) if such legend isnot required under applicable requirements of the Securities Act (includingjudicial interpretations and pronouncements issued by the Staff of theCommission).  If all or any shares ofPreferred Stock or any portion of a Warrant is converted or exercised (asapplicable) at a time when there is an effective registration statement tocover the resale of the Underlying Shares, or if such Underlying Shares may besold under Rule 144(k) or if such legend is not otherwise required underapplicable requirements of the Securities Act (including judicialinterpretations thereof) then such Underlying Shares shall be issued free ofall legends.  The Company agrees thatfollowing the Effective Date or at such time as such legend is no longerrequired under this Section 4.1(c), it will, no later than three Trading Daysfollowing the delivery by a Purchaser to the Company or the Company’s transferagent of a certificate representing Securities issued with a restrictivelegend, deliver or cause to be delivered to such Purchaser a certificaterepresenting such Underlying Shares that is free from all restrictive and otherlegends.  The Company may not make anynotation on its records or give instructions to any transfer agent of theCompany that enlarge the restrictions on transfer set forth in this Section.

 

(d)                                 Inaddition to such Purchaser’s other available remedies, the Company shall pay toa Purchaser, in cash, as liquidated damages and not as a penalty, for each$1,000 of Underlying Shares (based on the VWAP on the date such Securities are

 

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submitted to theCompany’s transfer agent) delivered for removal of the restrictive legend andsubject to this Section 4.1(c), $10 per Trading Day (increasing to $20 perTrading Day 3 Trading Days after such damages have begun to accrue) for eachTrading Day after such third Trading Day until such certificate is deliveredwithout a legend.

##  

## 4.3                                 Furnishingof Information.  As long as anyPurchaser owns Securities, the Company covenants to timely file (or obtainextensions in respect thereof and file within the applicable grace period) allreports required to be filed by the Company after the date hereof pursuant tothe Exchange Act.  Upon the request ofany Purchaser, the Company shall deliver to such Purchaser a written certificationof a duly authorized officer as to whether it has complied with the precedingsentence. As long as any Purchaser owns Securities, if the Company is notrequired to file reports pursuant to such laws, it will prepare and furnish toeach Purchaser and make publicly available in accordance with Rule 144(c) suchinformation as is required for each Purchaser to sell the Securities under Rule144.  The Company further covenants thatit will take such further action as any holder of Securities may reasonably request,all to the extent required from time to time to enable such Person to sell suchSecurities without registration under the Securities Act within the limitationof the exemptions provided by Rule 144.

##  

## 4.4                                 Integration.  The Company shall not, and shall use itscommercially reasonable efforts to ensure that no Affiliate of the Companyshall, sell, offer for sale or solicit offers to buy or otherwise negotiate inrespect of any security (as defined in Section 2 of the Securities Act) thatwould be integrated with the offer or sale of the Securities in a manner thatwould require the registration under the Securities Act of the sale of theSecurities to each Purchaser, or that would be integrated with the offer orsale of the Securities for purposes of the rules and regulations of anyPrincipal Market.

##  

## 4.5                                 Reservationand Listing of Securities.

###  

### (a)                                  TheCompany shall maintain a reserve from its duly authorized shares of CommonStock for issuance pursuant to the Transaction Documents in such amount as maybe required to fulfill its obligations in full under the Transaction Documents.

###  

### (b)                                 If,on any date, the number of authorized but unissued (and otherwise unreserved)shares of Common Stock is less than 130% of (i) the Actual Minimum on suchdate, minus (ii) the number of shares of Common Stock previously issuedpursuant to the Transaction Documents, then the Board of Directors of theCompany shall use commercially reasonable efforts to amend the Company’scertificate or articles of incorporation to increase the number of authorizedbut unissued shares of Common Stock to at least the Required Minimum at suchtime (minus the number of shares of Common Stock previously issued pursuant tothe Transaction Documents), as soon as possible and in any event not later thanthe 75th day after such date; provided that the Company will not be required atany time to authorize a number of shares of Common Stock greater than themaximum remaining number of shares of Common Stock that could possibly beissued after such time pursuant to the Transaction Documents.

 

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### (c)                                  TheCompany shall: (i) in the time and manner required by the Principal Market,prepare and file with such Principal Market an additional shares listingapplication covering a number of shares of Common Stock at least equal to theRequired Minimum on the date of such application, (ii) take all steps necessaryto cause such shares of Common Stock to be approved for listing on thePrincipal Market as soon as possible thereafter, (iii) provide to each Purchaserevidence of such listing, and (iv) use reasonable efforts to maintain thelisting of such Common Stock on such Principal Market or another PrincipalMarket.

###  

### (d)                                 If,on any date, the number of shares of Common Stock previously listed on aPrincipal Market is less than 130% of the Actual Minimum on such date, then theCompany shall take the necessary actions to list on such Principal Market, assoon as reasonably possible, a number of shares of Common Stock at least equalto the Required Minimum on such date; provided that the Company will not berequired at any time to list a number of shares of Common Stock greater thanthe maximum number of shares of Common Stock that could possibly be issuedpursuant to the Transaction Documents. In addition, the Company shall, at itsnext regularly scheduled annual or special meeting of shareholders, but in noevent later than September 30, 2003, include a proposal for StockholderApproval, with the recommendation of the Company’s Board of Directors that suchproposal be approved, and the Company shall solicit proxies from itsshareholders in connection therewith in the same manner as all other managementproposals in such proxy statement and all management-appointed proxyholdersshall vote their proxies in favor of such proposal.

##  

## 4.6                                 Conversionand Exercise Procedures.  The formof Election to Purchase included in the Warrants and the forms of ConversionNotice included in the Articles Supplementary set forth the totality of theprocedures required in order to exercise the Warrants or convert the PreferredStock.  No additional legal opinion orother information or instructions shall be necessary to enable each Purchaserto exercise their Warrants or convert their Preferred Stock.  The Company shall honor exercises of theWarrants and conversions of the Preferred Stock and shall deliver UnderlyingShares in accordance with the terms, conditions and time periods set forth inthe Transaction Documents.

 

4.7                                 Future Financings.  From the date hereof until 90 days after theEffective Date, other than as contemplated by this Agreement, neither theCompany nor any Subsidiary (with respect to Capital Shares Equivalents) shallissue or sell any Capital Shares or Capital Shares Equivalents (other thanunits of limited partnership issued by U.S. Restaurant Properties OperatingL.P. in the ordinary course of acquiring properties) entitling any Person toacquire shares of Common Stock. Notwithstanding anything herein to the contrary, the 30 day period setforth in this Section 4.7 shall be extended for the number of Trading Daysduring such period in which (i) trading in the Common Stock is suspended by anyPrincipal Market, or (ii) following the Effective Date, the RegistrationStatement is not effective or the prospectus included in the RegistrationStatement may not be used by each Purchaser for the resale of the UnderlyingShares.  Notwithstanding anything to thecontrary herein, this Section 4.7 shall not apply to the following (a) thegranting or issuance of shares of Common Stock or options to employees,

 

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officersand directors of the Company pursuant to any stock option plan or employeeincentive plan or agreement duly adopted or approved by a majority of thenon-employee members of the Board of Directors of the Company or a majority ofthe members of a committee of non-employee directors established for suchpurpose, (b) the exercise of any Preferred Stock or any other security issuedby the Company in connection with the offer and sale of this Company’ssecurities pursuant to this Agreement, or (c) the exercise of or conversion ofany convertible securities, options or warrants issued and outstanding on thedate hereof, provided that such securities have not been amended since the datehereof.  In addition, unless StockholderApproval has been obtained and deemed effective in accordance with Section4.5(d), the Company shall not make any issuance whatsoever of Capital Shares orCapital Shares Equivalents which would cause any adjustment of the Set Price(other than pursuant to Section 5(c)(ii) of the Articles Supplementarys) to theextent the holders of Preferred Stock would not be permitted, pursuant toSection 5(a)(iii) of the Articles Supplementarys, to convert their respectiveoutstanding Preferred Stock in full.

##  

## 4.8                                 AdditionalInvestment.  From the date hereofuntil 12 months after the Closing Date, each Purchaser may, in its soledetermination, elect to purchase, in the ratio of such Purchaser’s SubscriptionAmount to the aggregate Subscription Amounts of all Purchasers, additionalshares of Preferred Stock and warrants to acquire shares of Common Stock for anaggregate purchase price of $4,000,000. Any additional investment will be on terms identical those set forth inthe Transaction Documents, *mutatis**mutandis*, except that, (a)Section 4.7 will not apply and (b) the set price per share of the Common Stockfor such additional investment shall equal 110% of the average of the VWAPs forthe Common Stock during the 5 Trading Days immediately before such election ismade in writing to the Company and the exercise price of the warrants for suchadditional investment shall equal 115% of the average of the VWAPs during the 5Trading Days immediately before such election is made in writing to theCompany.  In order to effectuate apurchase and sale of the additional shares of preferred stock and warrants, theCompany and the Purchasers shall enter into the following agreements: (x) a securitiespurchase agreement identical to this Agreement, *mutatis mutandis* and shallinclude updated disclosure schedules and (y) a registration rights agreementidentical to the Registration Rights Agreement, *mutatis mutandis* and shallinclude updated disclosure schedules.

##  

## 4.9                                 SecuritiesLaws Disclosure; Publicity.  TheCompany shall, within one Trading Day after the Closing Date, issue a pressrelease or file a Current Report on Form 8-K reasonably acceptable to eachPurchaser disclosing all material terms of the transactions contemplated hereby.  The Company and each Purchaser shall consultwith each other in issuing any press releases with respect to the transactionscontemplated hereby.  Notwithstandingthe foregoing, other than in any registration statement filed pursuant to theRegistration Rights Agreement and filings related thereto, the Company shallnot publicly disclose the name of any Purchaser or the terms hereof, or includethe name of any Purchaser or the terms hereof in any filing with the Commissionor any regulatory agency or Principal Market, without the prior written consentof such Purchaser, except to the extent such disclosure is required by law orPrincipal Market regulations, in which case the Company shall provide eachPurchaser with prior notice of such disclosure.

 

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## 4.10                           Non-PublicInformation.  The Company covenantsand agrees that neither it nor any other Person acting on its behalf willprovide any Purchaser or its agents or counsel with any information that theCompany believes constitutes material non-public information, unless priorthereto such Purchaser shall have executed a written agreement regarding theconfidentiality and use of such information. The Company understands and confirms that each Purchaser shall berelying on the foregoing representations in effecting transactions insecurities of the Company.

##  

## 4.11                           Useof Proceeds.  The Company shall usethe net proceeds from the sale of the Securities hereunder for working capitalpurposes or for the satisfaction of any portion of the Company’s debt asidentified on Schedule 4.11 hereto, and not to redeem any Company equityor equity-equivalent securities or to settle any outstanding litigation.

##  

## 4.12           Reimbursement. If any Purchaserbecomes involved in any capacity in any Proceeding by or against any Person whois a stockholder of the Company, solely as a result of such Purchaser’sacquisition of the Securities under this Agreement and without causation by anyother activity, obligation, condition or liability pertaining to such Purchaserand not to the transactions contemplated by this Agreement, the Company willreimburse such Purchaser, to the extent such reimbursement is not provided forin Section 4.13, for its reasonable legal and other expenses (including thecost of any investigation preparation and travel in connection therewith)incurred in connection therewith, as such expenses are incurred. Thereimbursement obligations of the Company under this paragraph shall be inaddition to any liability which the Company may otherwise have, shall extendupon the same terms and conditions to any Affiliates of each Purchaser who areactually named in such action, proceeding or investigation, and partners,directors, agents, employees and controlling persons (if any), as the case maybe, of each Purchaser and any such Affiliate, and shall be binding upon andinure to the benefit of any successors, assigns, heirs and personalrepresentatives of the Company, each Purchaser and any such Affiliate and anysuch Person. The Company also agrees that neither each Purchaser nor any suchAffiliates, partners, directors, agents, employees or controlling persons shallhave any liability to the Company or any Person asserting claims on behalf ofor in right of the Company solely as a result of acquiring the Securities underthis Agreement.

##  

## 4.13                           Indemnificationof Purchasers.  Subject to theprovisions of this Section 4.13, the Company will indemnify and hold eachPurchaser and their directors, officers, shareholders, partners, employees andagents (each, a “Purchaser Party”) harmless from any and all losses,liabilities, obligations, claims, contingencies, damages, costs and expenses,including all judgments, amounts paid in settlements, court costs andreasonable attorneys’ fees and costs of investigation that any such PurchaserParty may suffer or incur as a result of or relating to any breach of any ofthe representations, warranties, covenants or agreements made by the Company inthis Agreement or in the other Transaction Documents.  If any action shall be brought against any Purchaser Party inrespect of which indemnity may be sought pursuant to this Agreement, suchPurchaser Party shall promptly notify the Company in writing, and the Companyshall have the right to assume the defense thereof with counsel of its ownchoosing.  Any Purchaser Party shallhave the right to employ separate counsel in any such action and participate inthe defense thereof, but the fees and expenses of such counsel shall be at theexpense of such Purchaser Party except to the extent that (i) the employmentthereof has been specifically authorized by the Company in writing, (ii) theCompany has failed after a reasonable period of time to assume

 

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## such defense and to employ counsel or (iii)in such action there is, in the reasonable opinion of such separate counsel, amaterial conflict on any material issue between the position of the Company andthe position of such Purchaser Party. The Company will not be liable to any Purchaser Party under thisAgreement (i) for any settlement by an Purchaser Party effected without theCompany’s prior written consent; or (ii) to the extent that any loss, claim,damage or liability is attributable to any Purchaser Party’s breach of any ofthe representations, warranties, covenants or agreements made by each Purchaserin this Agreement or in the other Transaction Documents.

##  

## 4.14                           Shareholders Rights Plan.  In the event that a shareholders rights planis adopted by the Company, no claim will be made or enforced by the Company orany other Person that any Purchaser is an “Acquiring Person” under the plan orin any way could be deemed to trigger the provisions of such plan by virtue ofreceiving Securities under the Transaction Documents.

 

# **ARTICLE V**

**MISCELLANEOUS**

 

## 5.1                                 Termination.  This Agreement may be terminated by theCompany or any Purchaser, by written notice to the other parties, if theClosing has not been consummated by the tenth Trading Day following the date ofthis Agreement; provided that no such termination will affect the right of anyparty to sue for any breach by the other party (or parties).

##  

## 5.2                                 Feesand Expenses.  The Company agrees topay $35,000 to Omicron Master Trust as reimbursement for the Omicron Master Trust’slegal and other fees and expenses incurred in connection with the investigationand negotiation of the transaction and the preparation and negotiation of theTransaction Documents, of which $15,000 has been received by FW, counsel toOmicron Master Trust.  Accordingly, inlieu of the foregoing payments, on the Closing Date, the aggregate amount thatOmicron Master Trust are to pay for the Securities at the Closing will bereduced by $20,000.  Each party shallpay the fees and expenses of its advisers, counsel, accountants and otherexperts, if any, and all other expenses incurred by such party incident to thenegotiation, preparation, execution, delivery and performance of thisAgreement.  The Company shall pay alltransfer agent fees, stamp taxes and other taxes and duties levied inconnection with the issuance of any Securities.

##  

## 5.3                                 EntireAgreement.  The TransactionDocuments, together with the exhibits and schedules thereto, contain the entireunderstanding of the parties with respect to the subject matter hereof andsupersede all prior agreements and understandings, oral or written, withrespect to such matters, which the parties acknowledge have been merged intosuch documents, exhibits and schedules.

##  

## 5.4                                 Notices.  Any and all notices or other communicationsor deliveries required or permitted to be provided hereunder shall be inwriting and shall be deemed given and effective on the earliest of (a) the dateof transmission, if such notice or communication is delivered via facsimile atthe facsimile number specified on the signature pages hereto prior to 5:30 p.m.(New York City time) on a Trading Day, (b) the next Trading Day after the dateof transmission, if

 

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## such notice or communication is delivered viafacsimile at the facsimile number specified in this Section on a day that isnot a Trading Day or later than 5:30 p.m. (New York City time) on any TradingDay, or (c) the Trading Day following the date of mailing, if sent by U.S.nationally recognized overnight courier service.  The addresses for such notices and communications are those setforth on the signature pages hereof, or such other address as may be designatedin writing hereafter, in the same manner, by such Person.

##  

## 5.5                                 Amendments;Waivers.  No provision of thisAgreement may be waived or amended except in a written instrument signed, inthe case of an amendment, by the Company and each Purchaser or, in the case ofa waiver, by the party against whom enforcement of any such waiver is sought.  No waiver of any default with respect to anyprovision, condition or requirement of this Agreement shall be deemed to be acontinuing waiver in the future or a waiver of any subsequent default or awaiver of any other provision, condition or requirement hereof, nor shall anydelay or omission of either party to exercise any right hereunder in any mannerimpair the exercise of any such right.

##  

## 5.6                                 Construction.  The headings herein are for convenienceonly, do not constitute a part of this Agreement and shall not be deemed tolimit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the languagechosen by the parties to express their mutual intent, and no rules of strictconstruction will be applied against any party.

##  

## 5.7                                 Successorsand Assigns.  This Agreement shallbe binding upon and inure to the benefit of the parties and their successorsand permitted assigns.  The Company maynot assign this Agreement or any rights or obligations hereunder without theprior written consent of each Purchaser. Any Purchaser may assign its rightsunder this Agreement and the Registration Rights Agreement to any Person towhom such Purchaser assigns or transfers any Securities.

##  

## 5.8                                 NoThird-Party Beneficiaries.  This Agreementis intended for the benefit of the parties hereto and their respectivesuccessors and permitted assigns and is not for the benefit of, nor may anyprovision hereof be enforced by, any other Person, except as otherwise setforth in Section 4.13.

##  

## 5.9                                 GoverningLaw; Venue; Waiver of Jury Trial. All questions concerning the construction, validity, enforcement andinterpretation of this Agreement shall be governed by and construed andenforced in accordance with the internal laws of the State of New York, withoutregard to the principles of conflicts of law thereof.  Each party hereby irrevocably submits to the exclusivejurisdiction of the state and federal courts sitting in the City of New York,borough of Manhattan, for the adjudication of any dispute hereunder or inconnection herewith or with any transaction contemplated hereby or discussedherein (including with respect to the enforcement of any of the TransactionDocuments), and hereby irrevocably waives, and agrees not to assert in anysuit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding isimproper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of processand consents to process being served in any such suit, action or proceeding bymailing a copy thereof via registered or certified mail or overnight delivery(with evidence of delivery) to such party at the address in effect for noticesto it under this Agreement and agrees that such

 

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## service shall constitute good and sufficientservice of process and notice thereof. Nothing contained herein shall be deemedto limit in any way any right to serve process in any manner permitted bylaw.  The parties hereby waive allrights to a trial by jury.  If eitherparty shall commence an action or proceeding to enforce any provisions of thisAgreement, then the prevailing party in such action or proceeding shall be reimbursedby the other party for its attorneys fees and other costs and expenses incurredwith the investigation, preparation and prosecution of such action orproceeding.

##  

## 5.10                           Survival.  The representations, warranties, agreementsand covenants contained herein shall survive the Closing and the delivery,exercise and/or conversion of the Securities, as applicable.

##  

## 5.11                           Execution.  This Agreement may be executed in two ormore counterparts, all of which when taken together shall be considered one andthe same agreement and shall become effective when counterparts have beensigned by each party and delivered to the other party, it being understood thatboth parties need not sign the same counterpart.  In the event that any signature is delivered by facsimiletransmission, such signature shall create a valid and binding obligation of theparty executing (or on whose behalf such signature is executed) with the sameforce and effect as if such facsimile signature page were an original thereof.

##  

## 5.12                           Severability.  If any provision of this Agreement is heldto be invalid or unenforceable in any respect, the validity and enforceabilityof the remaining terms and provisions of this Agreement shall not in any way beaffected or impaired thereby and the parties will attempt to agree upon a validand enforceable provision that is a reasonable substitute therefor, and upon soagreeing, shall incorporate such substitute provision in this Agreement.

##  

## 5.13                           Rescissionand Withdrawal Right. Notwithstanding anything to the contrary contained in (and withoutlimiting any similar provisions of) the Transaction Documents, whenever anyPurchaser exercises a right, election, demand or option under a TransactionDocument and the Company does not timely perform its related obligations withinthe periods therein provided, then such Purchaser may rescind or withdraw, inits sole discretion from time to time upon written notice to the Company, anyrelevant notice, demand or election in whole or in part without prejudice toits future actions and rights; provided, however, in the case ofa rescission of a conversion of the Preferred Stock or exercise of the Warrant,the Purchaser shall be required to return any shares of Common Stock subject tosuch conversion or exercise notice.

##  

## 5.14                           Replacementof Securities.  If any certificateor instrument evidencing any Securities is mutilated, lost, stolen ordestroyed, the Company shall issue or cause to be issued in exchange andsubstitution for and upon cancellation thereof, or in lieu of and substitutiontherefor, a new certificate or instrument, but only upon receipt of evidencereasonably satisfactory to the Company of such loss, theft or destruction andcustomary and reasonable indemnity, if requested.  The applicants for a new certificate or instrument under suchcircumstances shall also pay any reasonable third-party costs associated withthe issuance of such replacement Securities.

 

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## 5.15                           Remedies.  In addition to being entitled to exerciseall rights provided herein or granted by law, including recovery of damages,each of each Purchaser and the Company will be entitled to specific performanceunder the Transaction Documents.  Theparties agree that monetary damages may not be adequate compensation for anyloss incurred by reason of any breach of obligations described in the foregoingsentence and hereby agrees to waive in any action for specific performance ofany such obligation the defense that a remedy at law would be adequate.

##  

## 5.16                           PaymentSet Aside. To the extent that the Company makes a payment or payments toany Purchaser pursuant to any Transaction Document or a Purchaser enforces orexercises its rights thereunder, and such payment or payments or the proceedsof such enforcement or exercise or any part thereof are subsequentlyinvalidated, declared to be fraudulent or preferential, set aside, recoveredfrom, disgorged by or are required to be refunded, repaid or otherwise restoredto the Company, a trustee, receiver or any other person under any law(including, without limitation, any bankruptcy law, state or federal law,common law or equitable cause of action), then to the extent of any suchrestoration the obligation or part thereof originally intended to be satisfiedshall be revived and continued in full force and effect as if such payment hadnot been made or such enforcement or setoff had not occurred.

##  

## 5.18                           Independent Nature ofPurchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document areseveral and not joint with the obligations of any other Purchaser, and noPurchaser shall be responsible in any way for the performance of theobligations of any other Purchaser under any Transaction Document.  Nothing contained herein or in any TransactionDocument, and no action taken by any Purchaser pursuant thereto, shall bedeemed to constitute each Purchaser as a partnership, an association, a jointventure or any other kind of entity, or create a presumption that eachPurchaser is in any way acting in concert or as a group with respect to suchobligations or the transactions contemplated by the Transaction Document.  Each Purchaser shall be entitled toindependently protect and enforce its rights, including without limitation therights arising out of this Agreement or out of the other Transaction Documents,and it shall not be necessary for any other Purchaser to be joined as anadditional party in any proceeding for such purpose. Each Purchaser wasintroduced to the Company by Ladenburg Thalmann & Co., Inc., which hasacted solely as agent for the Company and not for any Purchaser.  Each Purchaser has been represented by itsown separate legal counsel in their review and negotiation of the TransactionDocuments.  For reasons ofadministrative convenience only, Purchasers and their respective counsel havechosen to communicate with the Company through FW.  FW does not represent all of the Purchasers but only OmicronMaster Trust.  The Company has electedto provide all Purchasers with the same terms and Transaction Documents for theconvenience of the Company and not because it was required or requested to doso by the Purchasers.

##  

## 5.19                           Liquidated Damages.  The Company’s obligations to pay anyliquidated damages or other amounts owing under the Transaction Documents is acontinuing obligation of the Company and shall not terminate until all unpaidliquidated damages and other amounts have been paid notwithstanding the factthat the instrument or security pursuant to which such liquidated damages orother amounts are due and payable shall have been canceled.

 

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[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto havecaused this Securities Purchase Agreement to be duly executed by theirrespective authorized signatories as of the date first indicated above.

 

 
|               | **U.S. RESTAURANT PROPERTIES, INC.** |
|--------------------|--------------------------------------|
|               |                                 |
|               |                                 |
|               | By:                                  |   |   |
|               | Name:                                |
|               | Title:                               |
|               |                                 |
|               | Address for  Notice:                 |
|               | 12240 Inwood  Road, Suite 300        |
|               | Dallas,  Texas 75244                 |
|               | Attn: Chief  Financial Officer       |
|               | Tel:  (972) 387-1487            |
|               | Fax:  (972) 490-9119            |
|               |                                 |
| With a copy to:    | Kenneth  L. Betts                    |
|               | Locke  Liddell & Sapp LLP        |
|               | 2200  Ross Avenue, Suite 2200        |
|               | Dallas,  Texas 75201                 |
|               | Tel:  (214) 740-8743            |
|               | Fax:                                 |
|               |                                 |
| Wire Instructions: | attached as  Annex A                 |

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

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[PURCHASER’S SIGNATURE PAGE]

 

IN WITNESS WHEREOF, the undersigned havecaused this Securities Purchase Agreement to be duly executed by theirrespective authorized signatories as of the date first indicated above.

 
| **OMICRON MASTER TRUST**                             | Address for  Notice:                |
|------------------------------------------------------|-------------------------------------|
| By:  Omicron Capital L.P., as subadvisor        | c/o Omicron  Capital L.P.           |
| By:  Omicron Capital Inc., its  general partner | 810 Seventh Avenue, 39th   Fl. |
|                                                 | New York, NY 10019                  |
|                                                 | Attn:  Brian Daly              |
| By:                                                  |                                |   |   |
| Name:                                                |                                |
| Title:                                               |                                |
|                                                 |                                |
| Subscription  Amount:  $                        |                                |
|                                                 |                                |
| With a copy  to:                                     |                                |
| Feldman  Weinstein LLP                               |                                |
| 420  Lexington Avenue                                |                                |
| New York,  New York 10170-0002                       |                                |
| Tel:  (212) 931-8704                            |                                |
| Fax:  (212) 410-4741                            |                                |
| Attn: Robert  F. Charron                             |                                |
|                                                      |                                     |  |  |

 

[ADDITIONAL PURCHASER SIGNATURES FOLLOW]

 

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[PURCHASER’S SIGNATURE PAGE]

** **
| **RIVERVIEW GROUP, LLC**      | Address for  Notice:           |
|-------------------------------|--------------------------------|
|                          | C/o  Millennium Partners, L.P. |
|                          | 666 5th  Avenue                |
| By:                           |                           |   | 8th  Floor |
| Name:                         | New York,  New York 10103      |
| Title:                        | Fax:  (212) 841-6302      |
|                          | Attn:  Fund Manager       |
| Subscription  Amount:  $ |                           |
|                               |                                |  |  |

 

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**ANNEX A**

 

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**EXHIBIT4.02**

 

**EXHIBITE**

 

The Purchasers of U.S.Restaurant Properties, Inc. 8% Series B Convertible Preferred Stock andWarrants

 

Gentlemen:

 

This letterwill confirm my agreement to vote all shares of U.S. Restaurant Properties,Inc. (“USV”) voting stock over which I have voting control in favor ofany resolution presented to the shareholders of USV to approve the issuance, inthe aggregate, more than 19.999% of the number of shares of common stock of USVoutstanding on the date of closing of the pursuant to that certain SecuritiesPurchase Agreement, dated June 12, 2003, among USV and the investors signatorythereto (the “Purchase Agreement”) and the other agreements entered intoin connection therewith or as otherwise may be required by the applicable rulesand regulations of the New York Stock Exchange (or any successor entity).  This agreement is given in consideration of,and as a condition to your agreement to purchase shares of such Preferred Stockand warrants, and is not revocable by me.

 

 
|   |   |   |
|--------|--------|--------|
|   |   | Name:  |   |   |

 

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