**Exhibit10.5**

 

**SECURITIES PURCHASE AGREEMENT**

 

This Securities PurchaseAgreement (this “Agreement”) is dated as of November 4, 2003, amongU.S. Restaurant Properties, Inc., a Maryland corporation (the “Parent”),USRP (JV1), LLC, a Texas limited liability company and wholly-owned subsidiaryof the Parent (the “Company”), and Harbilan Corporation, a Floridacorporation (collectively, including its successors and assigns, the “Purchaser”).

 

WHEREAS, subject to theterms and conditions set forth in this Agreement, the Parent desires to issueand sell to the Purchaser, and the Purchaser desires to purchase from theParent securities of the Parent, and the Company desires to purchase theSubscription Securities, each as more fully described in this Agreement.

 

NOW, THEREFORE, INCONSIDERATION of the mutual covenants contained in this Agreement, and forother good and valuable consideration the receipt and adequacy of which arehereby acknowledged, the Parent, the Company and the Purchaser agree asfollows:

 

**ARTICLE IDEFINITIONS**

 

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:

 

“ActualMinimum” means, as of any date, the maximum aggregate number of UnderlyingShares then issued or potentially issuable in the future upon conversion of allshares of Preferred Stock.

 

“Affiliate”means any Person that, directly or indirectly through one or moreintermediaries, controls or is controlled by or is under common control with aPerson, as such terms are used in and construed under Rule 144 under theSecurities Act.  With respect to aPurchaser, any investment fund or managed account that is managed on adiscretionary basis by the same investment manager as such Purchaser will bedeemed to be an Affiliate of such Purchaser.

 

“Agent”shall have the meaning ascribed to such term in Section 2.2(f).

 

“ArticlesSupplementary” means the Articles Supplementary relating to the PreferredStock, in the form of Exhibit A attached hereto.

 

“CashConsideration” means $51,842,853.

 

“Closing”means the Closing of the purchase and sale of the Securities pursuant toSection 2.1.

 

“ClosingDate” means the date of the Closing.

 

“Commission”means the Securities and Exchange Commission.

 

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“CommitmentLetter” shall have the meaning ascribed to such term inSection 2.2(f).

 

“CommonStock” means the common stock of the Parent, par value $0.001 per share,and any securities into which such common stock shall hereinafter beenreclassified into.

 

“CompanyCounsel” means Locke Liddell & Saap LLP, outside counsel to the Parentand the Company, with offices at 2200 Ross Avenue, Suite 2200, Dallas, Texas75201-6776.

 

“CreditAgreement” shall have the meaning ascribed to such term inSection 2.2(f).

 

“DisclosureSchedules” shall have the meaning ascribed to such term inSection 3.1.

 

“ExchangeAct” means the Securities Exchange Act of 1934, as amended.

 

“GAAP”shall have the meaning ascribed to such term in Section 3.1(h).

 

“Lenders”shall have the meaning ascribed to such term in Section 2.2(f).

 

“Liens”shall have the meaning ascribed to such term in Section 3.1(a).

 

“Losses”means any and all losses, claims, damages, liabilities, settlement costs andexpenses, including without limitation costs of preparation and reasonableattorneys’ fees.

 

“MaterialAdverse Effect” shall have the meaning assigned to such term inSection 3.1(b).

 

“MVA”means Moore & Van Allen, PLLC with offices at Suite 4700, 100 North TryonStreet, Charlotte, North Carolina 28202.

 

“Person”means an individual or corporation, partnership, trust, incorporated orunincorporated association, joint venture, limited liability company, jointstock company, government (or an agency or subdivision thereof) or other entityof any kind.

 

“PreferredStock” means the Parent’s $1.93 Series A Cumulative ConvertiblePreferred Stock sold hereunder having the rights, preferences and privilegesset forth in the Articles Supplementary.

 

“PreferredStock Consideration” means $8**,**592,438.

 

“PrincipalMarket” initially means the New York Stock Exchange and shall also includethe NASDAQ Small-Cap Market, the American Stock Exchange or the NASDAQ NationalMarket, whichever is at the time the principal trading exchange or market forthe Common Stock and the Preferred Stock, based upon share volume.

 

“Proceeding”means an action, claim, suit, investigation or proceeding (including, withoutlimitation, an investigation or partial proceeding, such as a deposition),whether commenced or threatened.

 

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“ProspectusSupplement” means a supplemental prospectus to be filed by the Parent withthe Commission pursuant to Rule 424 of the Securities Act, specificallyrelating to the issuance of the Preferred Stock to the Purchaser.

 

“RegistrationStatement” means the shelf registration statement filed by the Parent onForm S-3 (Registration No. 333-66371) and subsequent amendments thereto.

 

“RequiredApprovals” shall have the meaning ascribed to such term inSection 3.1(e).

 

“Rule 144”means Rule 144 promulgated by the Commission pursuant to the SecuritiesAct, as such Rule may be amended from time to time, or any similar rule orregulation hereafter adopted by the Commission having substantially the sameeffect as such Rule.

 

“SECReports” shall have the meaning ascribed to such term inSection 3.1(i).

 

“Securities”means the Preferred Stock and the Underlying Shares.

 

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

 

“StockholderApproval” means such approval as may be required by the applicable rulesand regulations of the Principal Market (or any successor entity) from theshareholders of the Parent with respect to the transactions contemplated by theTransaction Documents, including the issuance of all of the Underlying Sharesin excess of 20% of the Parent’s issued and outstanding Common Stock on theClosing Date.

 

“SubscriptionSecurities” shall mean all of the Purchaser’s entire right, title andinterest in its limited partnership interests in USRP/HCI Partnership 1, L.P.,which represents the amount to be exchanged by the Purchaser for theconsideration from the Company described in Section 2.1(a)(ii).

 

“SubscriptionFee” shall have the meaning ascribed to such term in Section 2.2(f).

 

“Subsidiary”means any subsidiary of the Parent that is required to be listed in Schedule 3.1(a).

 

“TradingDay” means any day during which the Principal Market shall be open forbusiness.

 

“TransactionDocuments” means this Agreement, the Articles Supplementary, theCredit Agreement (as defined herein) and any other documents or agreementsexecuted in connection with the transactions contemplated hereunder.

 

“UnderlyingShares” means the shares of Common Stock issuable upon conversion of thePreferred Stock.

 

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**ARTICLE IIEXCHANGE, PURCHASE AND SALE**

 

2.1           Purchase; Sale; Exchange and Investment.  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,

 

(a)           (i) the Purchaser shall tender to theParent the Preferred Stock Consideration by wire transfer of immediatelyavailable funds to an account designated by the Parent; and (ii) the Parentshall issue 404,350 shares of Preferred Stock to the Purchaser; and

 

(b)           (i) the Purchaser shall tender to theCompany the Subscription Securities; and (ii) the Company shall pay the CashConsideration to the Purchaser by wire transfer of immediately available fundsto an account designated in writing by the Purchaser.

 

2.2           Proration of Priority Distribution.  In addition to tendering the SubscriptionSecurities provided in Section 2.1(a)(i), the Company shall also pay tothe Purchaser the Priority Distribution (as defined in the USRP/HCI Partnership1, L.P. partnership agreement) for the relevant period, prorated for the numberof days between October 20, 2003 and the Closing Date, which the Companyand the Purchaser hereby agree shall be equal to $213,642.  The Company shall not be entitled to theBuyout Price (as defined in the USRP/HCI Partnership 1, L.P. partnershipagreement).

 

2.3           Conditions to Closing.  The Closing is subject to the satisfactionor waiver by the party to be benefited thereby of the following conditions:

 

(a)           The Parent and the Company shall havedelivered or caused to be delivered to the Purchaser the following:

 

(i)            this Agreement duly executed by theParent and the Company;

 

(ii)           evidence of the transfer of 404,350shares of Preferred Stock to the Purchaser’s account at the Depository TrustCompany;****and

 

(iii)          a legal opinion of Company Counsel, inthe form of Exhibit B attached hereto, addressed to the Purchaser;

 

(iv)          the Prospectus Supplement, a copy ofwhich shall have been filed by the Parent with the Commission on or prior tothe Closing Date;

 

(v)           a certificate dated the Closing Date,executed by an officer of the Parent satisfactory to the Purchaser, to theeffect that the conditions set forth in subsections (c) and (d) of thisSection 3.3 have been satisfied; and

 

(vi)          a certificate dated the Closing Date,executed by the Secretary of each entity, to the effect that (A) theCertificate of Incorporation and By-laws of each entity shall have not beenamended since the date upon which certified copies of each had been deliveredto Purchaser and remain in full force and effect and (B) the officer executingthis Agreement on behalf of each entity is duly elected and hold the office setforth therein, with copies of resolutions approved by the Board of Directors ofeach entity attached as an exhibit thereto.

 

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(b)           At the Closing, the Purchaser shallhave delivered or caused to be delivered to the Parent and the Company thefollowing:

 

(i)            this Agreement duly executed by thePurchaser;

 

(ii)           the Preferred Stock Consideration;and

 

(iii)          the Purchaser’s SubscriptionSecurities, evidenced by delivery to the Company of a certificate orcertificates evidencing the Purchaser’s interest in units of USRP/HCIPartnership 1, L.P.

 

(c)           All representations and warranties ofthe other party contained herein shall remain true and correct as of theapplicable Closing Date.

 

(d)           There shall have been no MaterialAdverse Effect (as defined in Section 3.1(b)) with respect to the Parentand the Company from June 30, 2003 through the date hereof.

 

(e)           From the date hereof to the ClosingDate, trading in the Common Stock or the Preferred Stock shall not have beensuspended by the Commission (except for any suspension of trading of limitedduration agreed to by the Parent, which suspension shall be terminated prior tothe Closing), and, at any time prior to the Closing Date, trading in securitiesgenerally as reported by Bloomberg Financial Markets shall not have beensuspended 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 in, any financial market which, in each case, in the reasonablejudgment of the Purchaser, makes it impracticable or inadvisable to purchase theshares of Preferred Stock at the Closing.

 

(f)            The Parent shall have entered into acredit agreement (“Credit Agreement”) with Bank of America, N.A., asagent (the “Agent”), and other lenders parties thereto (collectively,the “Lenders”) in accordance with the terms of that certain commitmentletter dated October 2, 2003 (the “Commitment Letter”) between theCompany and the Lenders and that certain summary of terms and conditionsattached to the Commitment Letter.  Onthe Closing Date, the Credit Agreement shall be in full force and effect.  The Credit Agreement shall provide for anaggregate of not less than $50,000,000 of revolving credit commitments (ofwhich not less than $20,000,000 shall remain undrawn both before and aftergiving effect to the transactions contemplated to occur on the ClosingDate).  On the Closing Date, the Parentshall have issued a term loan note to the Agent in an amount of not less than$35,000,000 under the Credit Agreement and shall have paid via wire transfer ofimmediately available funds to the Agent the sum of $500,000 (the “SubscriptionFee”) in consideration for advisory services associated with transactionscontemplated under the Credit Agreement and this Agreement.  All of the terms and conditions of theCredit Agreement and other documents related thereto shall be satisfactory tothe Purchaser.

 

(g)           On or before the Closing Date, theParent shall have prepared and filed with the Principal Market an additionalshares listing application covering (A) at least

 

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404,350 shares ofPreferred Stock and (B) a number of shares of the Common Stock at least equalto the Actual Minimum on the date of such application.

 

**ARTICLE IIIREPRESENTATIONS AND WARRANTIES**

 

3.1           Representations and Warranties ofthe Parent and Company.  Except asset forth under the corresponding section of the disclosure schedulesdelivered to the Purchaser concurrently herewith (the “Disclosure Schedules”),the Parent and the Company hereby make the following representations andwarranties to the Purchaser:

 

(a)           Subsidiaries.  The Parent and the Company have no direct orindirect subsidiaries.  The Parent andthe Company own, directly or indirectly, all of the capital stock or otherequity interests of each of their respective Subsidiaries free and clear of anylien, charge, security interest, encumbrance, right of first refusal or otherrestriction (collectively, “Liens”), and all the issued and outstandingshares of capital stock of each Subsidiary are validly issued and are fullypaid, non-assessable and free of preemptive and similar rights.  If the Parent and the Company have nosubsidiaries, then references in the Transaction Documents to the Subsidiarieswill be disregarded.

 

(b)           Organization and Qualification.  Each of the Parent, the Company and theirrespective Subsidiaries is an entity duly incorporated or otherwise organized,validly existing, as applicable, and in good standing under the laws of thejurisdiction of its incorporation or organization (as applicable), with therequisite power and authority to own and use its properties and assets and tocarry on its business as currently conducted. Neither the Parent, the Company nor any of their respective Subsidiariesis in violation of any of the provisions of its respective certificate orarticles of incorporation, bylaws or other organizational or charterdocuments.  Each of the Parent, theCompany and their respective Subsidiaries is duly qualified to do business andis in good standing as a foreign corporation or other entity in eachjurisdiction in which the nature of the business conducted or property owned byit makes such qualification necessary, except where the failure to be soqualified 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, condition or prospects(financial or otherwise) of the Parent, the Company and their respectiveSubsidiaries, taken as a whole, or (iii) adversely impair the Parent’s or theCompany’s ability to perform fully on a timely basis its obligations under anyof the Transaction Documents (any of (i), (ii) or (iii), a “Material AdverseEffect”).

 

(c)           Authorization: Enforcement.  The Parent and the Company each has therequisite corporate power and authority to enter into and to consummate thetransactions contemplated by each of the Transaction Documents and otherwise tocarry out its obligations hereunder or thereunder.  The execution and delivery of each of the Transaction Documentsby the Parent and the Company and the consummation by them of the transactionscontemplated hereby or thereby have been duly authorized by all necessaryaction on the part of the Parent and the Company and no further consent oraction is required by the Parent or the Company, other than the Required Approvals.  Each of the Transaction Documents has been(or upon delivery will be) duly executed by the Parent and the Company and,when delivered in accordance with the terms hereof, will constitute the validand binding obligation of each of the Parent and the Company enforceableagainst each of them in accordance with its terms, subject to applicablebankruptcy,

 

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insolvency, fraudulentconveyance, reorganization, moratorium and similar laws affecting creditors’rights and remedies generally and general principles of equity.

 

(d)           No Conflicts.  The execution, delivery and performance ofthe Transaction Documents by the Parent and the Company and the consummation bythe Parent and the Company of the transactions contemplated thereby do not andwill not: (i) conflict with or violate any provision of the Parent’s, Company’sor any of their respective Subsidiaries’ certificate or articles ofincorporation, bylaws or other organizational or charter documents, or (ii) subjectto obtaining the Required Approvals (as defined below), conflict with, orconstitute a default (or an event that with notice or lapse of time or bothwould become a default) under, or give to others any rights of termination,amendment, acceleration or cancellation (with or without notice, lapse of timeor both) of, any agreement, credit facility, debt or other instrument(evidencing a Parent, Company or Subsidiary debt or otherwise) or otherunderstanding to which the Parent, Company or any of their respectiveSubsidiaries is a party or by which any property or asset of the Parent,Company or any of their respective Subsidiaries is bound or affected, or (iii)result in a violation of any law, rule, regulation, order, judgment,injunction, decree or other restriction of any court or governmental authorityas currently in effect to which the Parent, Company or their respectiveSubsidiaries is subject (including federal and state securities laws andregulations), or by which any property or asset of the Parent, Company or theirrespective Subsidiaries is bound or affected; except in the case of each ofclauses (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 the Parent, Company nor any of their respective Subsidiaries isrequired to obtain any consent, waiver, authorization or order of, give anynotice to, or make any filing or registration with, any court or other federal,state, local or other governmental authority or other Person in connection withthe execution, delivery and performance by the Parent and the Company of theTransaction Documents, other than (i)  the Parent’s filing with theCommission of the Prospectus Supplement**,** (ii) the application(s) to eachapplicable Principal Market for the listing of the additional shares ofPreferred Stock for trading thereon in the time and manner required thereby,and (iii) applicable Blue Sky filings (collectively, the “Required Approvals”).

 

(f)            Issuance ofthe Securities.  The Securities are duly authorized and, whenissued and paid for in accordance with the applicable Transaction Documents,will be duly and validly issued, fully paid and nonassessable, free and clear ofall Liens, other than any Liens created or permitted to exist by thePurchaser.  The Parent has reserved fromits duly authorized capital stock a number of shares of Common Stock forissuance of the Underlying Shares at least equal to the Actual Minimum on thedate hereof.

 

(g)           Capitalization.  The number of shares and type of allauthorized, issued and outstanding capital stock of the Parent is set forth inthe Disclosure Schedules.  No securitiesof the Parent 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, or givingany Person any right to subscribe for or acquire, any shares of Common Stock,or contracts, commitments, understandings or arrangements by which the Parentor any Subsidiary is or may become bound

 

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to issue additionalshares of Common Stock, or securities or rights convertible or exchangeableinto shares of Common Stock.  Theissuance and sale of the Securities will not obligate the Parent to issueshares of Common Stock or other securities to any Person (other than thePurchaser) and will not result in a right of any holder of the Parentsecurities to adjust the exercise, conversion, exchange or reset price undersuch securities.

 

(h)           Registration Statement.

 

(i)                                     TheRegistration Statement has been declared effective by the Commission under theSecurities Act; no stop order suspending the effectiveness of the RegistrationStatement has been issued and no proceeding for that purpose has beeninstituted or, to the knowledge of the Parent, threatened by the Commission;and the Registration Statement and Prospectus Supplement (as amended orsupplemented if the Parent shall have furnished any amendments or supplementsthereto) comply, or will comply, as the case may be, in all material respectswith the Securities Act, and the rules and regulations of the Commissionthereunder, and do not and will not, as of the applicable effective date as tothe Registration Statement and any amendment thereto and as of the date of theProspectus Supplement and any amendment or supplement thereto, contain anyuntrue statement of a material fact or omit to state any material fact requiredto be stated therein or necessary to make the statements therein, in the lightof the circumstances under which they were made, not misleading, and theProspectus Supplement, as amended or supplemented at the Closing Date, ifapplicable, will not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements therein, in the light ofthe circumstances under which they were made, not misleading.

 

(ii)                                  Thedocuments incorporated by reference in the Registration Statement, when theywere filed with the Commission, conformed in all material respects to therequirements of the Exchange Act, and none of such documents contained anuntrue statement of a material fact or omitted to state a material factnecessary to make the statements therein, in the light of the circumstancesunder which they were made, not misleading.

 

(iii)                               The financial statements, and the related notes thereto, included orincorporated by reference in the Registration Statement present fairly theconsolidated financial position of the Parent and its consolidated subsidiariesas of the dates indicated and the results of their operations and the changesin their consolidated cash flows for the periods specified; said financialstatements have been prepared in conformity with generally accepted accountingprinciples applied on a consistent basis except as set forth in the notes thereto,and the supporting schedules included or incorporated by reference in theRegistration Statement present fairly the information required to be statedtherein.

 

(iv)                              Sincethe respective dates as of which information is given in the RegistrationStatement or the Prospectus Supplement, there has not been

 

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any material adverse change, or any development involving a prospectivematerial adverse change, in or affecting the general affairs, business, prospects,financial position, stockholders’ equity or results of operations of the Parentand its subsidiaries, taken as a whole, otherwise than as set forth orcontemplated in the Registration Statement or the Prospectus Supplement; andexcept as set forth or contemplated in the Registration Statement or ProspectusSupplement neither the Parent nor any of its subsidiaries has entered into anytransaction or agreement (whether or not in the ordinary course of business)material to the Parent and its subsidiaries taken as a whole.

 

(i)            SEC Reports: Financial Statements.  Except as set forth in the DisclosureSchedules, the Parent has filed all reports required to be filed by it underthe Securities Act and the Exchange Act, including pursuant toSection 13(a) or 15(d) thereof, for the two years preceding the datehereof (or such shorter period as the Parent was required by law to file suchmaterial) (the foregoing materials being collectively referred to herein as the“SEC Reports”) on a timely basis or has received a valid extension ofsuch time of filing and has filed any such SEC Reports prior to the expirationof any such extension.  The Parent hasmade available to the Purchaser a copy of all SEC Reports filed within the 10days preceding the date hereof.  As oftheir respective dates, the SEC Reports complied in all material respects withthe requirements of the Securities Act and the Exchange Act and the rules andregulations of the Commission promulgated thereunder, and none of the SECReports, when filed, contained any untrue statement of a material fact oromitted to state a material fact required to be stated therein or necessary inorder to make the statements therein, in light of the circumstances under whichthey were made, not misleading.  Thefinancial statements of the Parent included in the SEC Reports comply in allmaterial respects with applicable accounting requirements and the rules andregulations of the Commission with respect thereto as in effect at the time offiling.  Such financial statements havebeen prepared in accordance with GAAP, except as may be otherwise specified insuch financial statements or the notes thereto, and fairly present in allmaterial respects the financial position of the Parent and its consolidatedsubsidiaries as of and for the dates thereof and the results of operations andcash flows for the periods then ended, subject, in the case of unauditedstatements, to normal, immaterial, year-end audit adjustments.

 

(j)            Material Changes.  Except as set forth in the Disclosure Schedules,since the date of the latest audited financial statements included within theSEC Reports, except as specifically disclosed in the SEC Reports or theProspectus Supplement: (i) there has been no event, occurrence or developmentthat has had or that could reasonably be expected to result in a MaterialAdverse Effect, (ii) the Parent has not incurred any liabilities (contingent orotherwise) other than (A) trade payables and accrued expenses incurred in theordinary course of business consistent with past practice and (B) liabilitiesnot required to be reflected in the Parent’s financial statements pursuant toGAAP or required to be disclosed in filings made with the Commission, (iii) theParent has not altered its method of accounting or the identity of itsauditors, (iv) other than in the ordinary course of business, the Parent hasnot declared or made any dividend or distribution of cash or other property toits stockholders or purchased, redeemed or made any agreements to purchase orredeem any shares of its capital stock, and (v) the Parent has not issued anyequity securities to any officer, director or Affiliate, except pursuant toexisting Parent stock option or similar plans.

 

(k)           Litigation.  There is no action, suit, inquiry, notice ofviolation, proceeding or investigation pending or, to the knowledge of theParent, threatened against or affecting the

 

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Parent, any Subsidiary orany of their respective properties before or by any court, arbitrator,governmental or administrative agency or regulatory authority (federal, state,county, local or foreign) (collectively, an “Action”) which: (i)adversely affects or challenges the legality, validity or enforceability of anyof the Transaction Documents or the Securities or (ii) could, if there were anunfavorable decision, individually or in the aggregate, have or reasonably beexpected to result in a Material Adverse Effect.  Neither the Parent nor any Subsidiary, nor any director orofficer thereof, is or has been the subject of any Action involving a claim ofviolation of or liability under federal or state securities laws or a claim ofbreach of fiduciary duty.  The Parentdoes not have pending before the Commission any request for confidential treatmentof information.  There has not been, andto the knowledge of the Parent, there is not pending or contemplated, anyinvestigation by the Commission involving the Parent or any current or formerdirector or officer of the Parent.  TheCommission has not issued any stop order or other order suspending theeffectiveness of any registration statement filed by the Parent or anySubsidiary under the Exchange Act or the Securities Act.

 

(l)            Compliance.  Except as set forth in the SEC Reports,neither the Parent 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 Parent or anySubsidiary under), nor has the Parent 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.

 

(m)          Labor Relations.  No material labor dispute exists or, to theknowledge of the Parent, is imminent with respect to any of the employees ofthe Parent.

 

(n)           Regulatory Permits.  The Parent and the Subsidiaries possess allcertificates, authorizations and permits issued by the appropriate federal,state, local or foreign regulatory authorities necessary to conduct theirrespective businesses as described in the SEC Reports, except where the failureto possess such permits could not, individually or in the aggregate, have orreasonably be expected to result in a Material Adverse Effect (“MaterialPermits”), and neither the Parent nor any Subsidiary has received anynotice of proceedings relating to the revocation or modification of anyMaterial Permit.

 

(o)           Title to Assets.  Except as set forth in the DisclosureSchedules, the Parent and the Subsidiaries have good and marketable title infee simple to all real property owned by them that is material to the businessof the Parent and the Subsidiaries and good and marketable title in allpersonal property owned by them that is material to the business of the Parentand the Subsidiaries, in each case free and clear of all Liens, except forLiens as do not materially affect the value of such property and do notmaterially interfere with the use made and proposed to be made of such propertyby the Parent and the Subsidiaries. Except in each case as could not, individually or in the aggregate, haveor result in a Material Adverse Effect, any real property and facilities heldunder lease by the Parent and the Subsidiaries are held by them under valid,subsisting and enforceable leases of which the Parent and the Subsidiaries arein material compliance.

 

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(p)           Patents and Trademarks.  To the knowledge of the Parent, the Parentand the Subsidiaries have, or have rights to use, all patents, patentapplications, trademarks, trademark applications, service marks, trade names,copyrights, licenses and other similar rights that are necessary or materialfor use in connection with their respective businesses as described in the SECReports and which the failure to so have could have a Material Adverse Effect(collectively, the “Intellectual Property Rights”).  Neither the Parent nor any Subsidiary hasreceived a written notice that the Intellectual Property Rights used by theParent or any Subsidiary violates or infringes upon the rights of anyPerson.  To the knowledge of the Parent,all such Intellectual Property Rights are enforceable and there is no existinginfringement by another Person of any of the Intellectual Property Rights.

 

(q)           Insurance.  The Parent 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 Parent and the Subsidiaries are engaged.  A list of the Parent’s insurance contracts and policies are setforth on the Disclosure Schedules.  Tothe best of Parent’s knowledge, such insurance contracts and policies areaccurate and complete.  Neither theParent nor any Subsidiary has any knowledge that it will not be able to renewits existing insurance coverage as and when such coverage expires or to obtainsimilar coverage from similar insurers as may be necessary to continue itsbusiness without a significant increase in cost.

 

(r)            Transactions With Affiliates andEmployees.  Except as set forth inthe SEC Reports, none of the executive officers or directors of the Parent and,to the knowledge of the Parent, none of the employees of the Parent ispresently a party to any transaction with the Parent or any Subsidiary (otherthan for services as employees, officers and directors), including anycontract, agreement or other arrangement providing for the furnishing ofservices to or by, providing for rental of real or personal property to orfrom, or otherwise requiring payments to or from any officer, director or suchemployee or, to the knowledge of the Parent, any entity in which any officer,director, or any such employee has a substantial interest or is an officer,director, trustee or partner.

 

(s)           Internal Accounting Controls.  Except as set forth in the SEC Reports, theParent and the Subsidiaries maintain a system of internal accounting controlssufficient to provide reasonable assurance that (i) transactions are executedin accordance with management’s general or specific authorizations, (ii)transactions are recorded as necessary to permit preparation of financialstatements in conformity with GAAP and to maintain asset accountability, (iii)access to assets is permitted only in accordance with management’s general orspecific authorization, and (iv) the recorded accountability for assets iscompared with the existing assets at reasonable intervals and appropriateaction is taken with respect to any differences.  There are no disagreements of any kind presently existing, orreasonably anticipated by the Parent to arise, between the accountants andlawyers formerly or presently employed by the Parent and the Parent is currentwith respect to any fees owed to its accountants and lawyers.  Except as set forth in the SEC Reports, theParent has established disclosure controls and procedures (as defined inExchange Act Rules 13a-14 and 15d-14) for the Parent and designed suchdisclosures controls and procedures to ensure that material informationrelating to the Parent, including its subsidiaries, is made known to thecertifying officers by others within those entities, particularly during theperiod in which the Parent’s Form 10-K or 10-Q, as the case may be, isbeing prepared.  The Parent’s certifyingofficers have evaluated the effectiveness of the Parent’s controls andprocedures as of a date within 90 days prior to the filing date of theForm 10-K for the fiscal year ended December 31, 2002 (such date, the“Evaluation Date”).  The Parentpresented in the Form 10-K for the fiscal year ended December 31,2002 the conclusions of the

 

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certifying officers about the effectiveness of thedisclosure controls and procedures based on their evaluations as of theEvaluation Date.  Since the EvaluationDate, there have been no significant changes in the Parent’s internal controls(as such term is defined in Item 307(b) of Regulation S-K under theExchange Act) or, the Parent’s knowledge, in other factors that couldsignificantly affect the Parent’s internal controls.

 

(t)            Solvency/Indebtedness.  Based on the financial condition of theParent as of the Closing Date: (i) the fair market value of the Parent’s assetsexceeds the amount that will be required to be paid on or in respect of theParent’s existing debts and other liabilities (including known contingentliabilities) as they mature; (ii) the Parent’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 businessconducted by the Parent, and projected capital requirements and capitalavailability thereof, and (iii) the current cash flow of the Parent, together withthe proceeds the Parent 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 debt when such amounts are requiredto be paid.  The Parent does not intendto incur debts beyond its ability to pay such debts as they mature (taking intoaccount the timing and amounts of cash to be payable on or in respect of itsdebt).  The Parent has no knowledge ofany facts or circumstances which lead it to believe that it will file forreorganization or liquidation under the bankruptcy or reorganization laws ofany jurisdiction within one year from the Closing Date.  The SEC Reports set forth as of the date thereofall outstanding secured and unsecured Indebtedness of the Parent or anySubsidiary, or for which the Parent or any Subsidiary has commitments.  For the purposes of this Agreement, “Indebtedness”shall mean (a) any liabilities for borrowed money or amounts owed in excess of$50,000 (other than trade accounts payable incurred in the ordinary course ofbusiness), (b) all guaranties, endorsements and other contingent obligations inrespect of Indebtedness of others, whether or not the same are or should bereflected in the Parent’s balance sheet (or the notes thereto), exceptguaranties by endorsement of negotiable instruments for deposit or collectionor similar transactions in the ordinary course of business; and (c) the presentvalue of any lease payments in excess of $50,000 due under leases required tobe capitalized in accordance with GAAP. Neither the Parent nor any Subsidiary is in default with respect to anyIndebtedness.

 

(u)           Certain Fees.  No brokerage or finder’s fees or commissionsare or will be payable by the Parent to any broker, financial advisor orconsultant, finder, placement agent, investment banker, bank or other Personwith respect to the transactions contemplated by this Agreement, and the Parenthas not taken any action that would cause any Purchaser to be liable for any suchfees or commissions.  The Parent agreesthat the Purchaser shall have no obligation with respect to any fees or withrespect to any claims made by or on behalf of any Person for fees of the typecontemplated by this Section with the transactions contemplated by thisAgreement.

 

(v)           Principal Market; Approvals.  The issuance and sale of the Preferred Stockhereunder does not contravene the rules and regulations of the Principal Marketand no Stockholder Approval is required (i) in connection with the issuance andsale of the Preferred Stock contemplated by this Agreement, and (ii) for theParent to fulfill its obligations under the Transaction Documents.

 

(w)          Listing and MaintenanceRequirements.  Except as set forthin the Disclosure Schedules, the Parent has not, in the 12 months preceding thedate hereof, received notice from any Principal Market on which the CommonStock or Preferred Stock is or has been listed or

 

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quoted to the effect that the Parent is not incompliance with the listing or maintenance requirements of such PrincipalMarket.  The Parent 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.

 

(x)            Registration Rights.  Except as set forth in the DisclosureSchedules, the Parent has not granted or agreed to grant to any Person anyrights (including “piggy-back” registration rights) to have any securities ofthe Parent registered with the Commission or any other governmental authoritythat have not been satisfied.

 

(y)           Application of TakeoverProtections.  The Parent and itsBoard of Directors have taken all necessary action, if any, in order to renderinapplicable any control share acquisition, business combination, poison pill(including any distribution under a rights agreement) or other similaranti-takeover provision under the Parent’s Restated Articles of Incorporation(or similar charter documents) or the laws of its state of incorporation thatis or could become applicable to the Purchaser as a result of the Purchaser andthe Parent fulfilling their obligations or exercising their rights under theTransaction Documents, including without limitation as a result of the Parent’sissuance of the Securities and the Purchaser’s ownership of the Securities.

 

(z)            Disclosure.  The Parent confirms that neither it nor anyother Person acting on its behalf has provided the Purchaser or its agents orcounsel with any information that constitutes or might constitute material,nonpublic information.  The Parentunderstands and confirms that the Purchaser will rely on the foregoingrepresentations in effecting transactions in securities of the Parent.  All disclosure provided to the Purchaserregarding the Parent, its business and the transactions contemplated hereby,including the Schedules to this Agreement, furnished by or on behalf ofthe Parent with respect to the representations and warranties made herein aretrue and 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 Parent acknowledges and agrees that thePurchaser does not make or has not made any representations or warranties withrespect to the transactions contemplated hereby other than those specificallyset forth in Section 3.2.

 

(aa)         Form S-3 Eligibility.  The eligibility requirements for use of FormS-3, including both the registrant and the transaction requirements of GeneralInstructions I. A. and I. B. of Form S-3 promulgated under the Securities Act,are satisfied for purposes of registering the Preferred Stock for sale to thePurchaser.

 

(bb)         Seniority.  As of the date of this Agreement, no otherequity of the Parent 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 Parent 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 Parent 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

 

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the periods to which such returns, reports ordeclarations apply.  There are no unpaidtaxes in any material amount claimed to be due by the taxing authority of anyjurisdiction, and the officers of the Parent know of no basis for any suchclaim.  The Parent has not executed awaiver with respect to the statute of limitations relating to the assessment orcollection of any foreign, federal, statue or local tax.  None of the Parent’s tax returns ispresently being audited by any taxing authority.

 

(dd)         Acknowledgment Regarding Purchaser’sPurchase of Securities.  The Parentacknowledges and agrees that the Purchaser is acting solely in the capacity ofan arm’s length purchaser with respect to this Agreement and the transactionscontemplated hereby.  The Parent furtheracknowledges that the Purchaser is not acting as a financial advisor orfiduciary of the Parent (or in any similar capacity) with respect to thisAgreement and the transactions contemplated hereby and any statement made bythe Purchaser or any of its respective representatives or agents in connectionwith this Agreement and the transactions contemplated hereby is not advice or arecommendation and is merely incidental to the Purchaser’s purchase of the PreferredStock.  The Parent further represents tothe Purchaser that the Parent’s decision to enter into this Agreement has beenbased solely on the independent evaluation of the Parent and itsrepresentatives.

 

(ee)         Acknowledgment of Dilution.  The Parent acknowledges that the issuance ofthe Securities will result in dilution of the outstanding shares of CommonStock, which dilution may be substantial under certain market conditions.  The Parent further acknowledges that itsobligations under the Transaction Documents, including without limitation itsobligation to issue the Underlying Shares pursuant to the TransactionDocuments, are unconditional and absolute and not subject to any right of setoff, counterclaim, delay or reduction, regardless of the effect of any suchdilution and regardless of the dilutive effect that such issuance may have onthe ownership of the other stockholders of the Parent.

 

(ff)           Representations and Warranties inOther Agreements.  Therepresentations and warranties made by the Parent and its subsidiaries in theCredit Agreement and in any other agreements, instruments or certificatesdelivered pursuant hereto or thereto, are true and correct in all materialrespects (except where any such representation and warranty is stated as beingtrue only as of a specific date, in which case such representation and warrantywas true and correct in all material respects on such date).

 

3.2           Representations and Warranties ofthe Purchaser.  The Purchaser herebyrepresents and warrants to the Parent and the Company as follows:

 

(a)           Organization: Authority.  The Purchaser is an entity duly organized,validly existing and in good standing under the laws of the jurisdiction of itsorganization with the requisite corporate or partnership power and authority toenter into and to consummate the transactions contemplated by the TransactionDocuments and otherwise to carry out its obligations thereunder.  The purchase by the Purchaser of theSecurities hereunder has been duly authorized by all necessary action on thepart of the Purchaser.  Each of thisAgreement and the Registration Agreement has been duly executed by suchPurchaser, and when delivered by the Purchaser in accordance with the termshereof, will constitute the valid and legally binding obligation of thePurchaser, enforceable against it in accordance with its terms.

 

(b)           Ownership of the Limited PartnerInterest; Encumbrances.  As of thedate hereof, the Purchaser is the holder of record and beneficial owner ofone-hundred percent (100%) of the

 

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Subscription Securities.  At the Closing, the Company will receive good and valid title tothe Subscription Securities, free and clear of any liens, charges, pledges,encumbrances, claims, security interests, restrictions, rights of firstrefusal, defects in title or options of any kind.

 

**ARTICLE IVOTHER AGREEMENTS OF THE PARTIES**

 

4.1           Transfer Restrictions.

 

(a)           The Purchaser agrees to theimprinting of the following legend on any certificate evidencing theSecurities:

 

THE SECURITIESREPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON OWNERSHIP ANDTRANSFER FOR THE PURPOSE OF THE COMPANY’S MAINTENANCE OF ITS STATUS AS A REALESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED(THE “CODE”). EXCEPT AS OTHERWISE PROVIDED PURSUANT TO THE CHARTER OF THECORPORATION, NO PERSON MAY (1) BENEFICIALLY OWN SHARES OF STOCK IN EXCESSOF 9.8% (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, THESHARES OF STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY CONVERTED INTO SHARESOF EXCESS STOCK WHICH WILL BE HELD IN TRUST BY THE COMPANY. THE COMPANY HAS THEOPTION TO REDEEM SHARES OF EXCESS STOCK UNDER CERTAIN CIRCUMSTANCES. ALL TERMSIN THIS LEGEND NOT OTHERWISE DEFINED HEREIN HAVE THE MEANINGS ASCRIBED THERETOIN THE COMPANY’S CHARTER, AS THE SAME MAY BE FURTHER AMENDED FROM TIME TOTIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON OWNERSHIP AND TRANSFER,WILL BE SENT WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS.

 

(b)           Certificates evidencing UnderlyingShares shall not contain any legend (other than the legend described inSection 4.1(a)): (i) while a registration statement (including theRegistration Statement and Underlying Shares Registration Statement) coveringthe resale of the Preferred Stock or the Underlying Shares, as the case may be,is effective under the Securities Act, or (ii) following any sale of theSecurities pursuant to Rule 144, or (iii) if such Securities areeligible for sale under Rule 144(k), or (iv) if such legend is notrequired under applicable requirements of the Securities Act (includingjudicial interpretations and pronouncements issued by the Staff of theCommission).  If all or any shares ofPreferred Stock are converted at a time when there is an effective registrationstatement to cover the resale of the Underlying Shares, or if such UnderlyingShares may be sold under Rule 144(k) or if such legend is not otherwiserequired under applicable requirements of the Securities Act (includingjudicial interpretations thereof) then such Underlying Shares shall be issuedfree of all legends.  The Parent agreesthat following 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 TradingDays following the delivery by a Purchaser to

 

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the Parent or theParent’s transfer agent of a certificate representing Securities issued with arestrictive legend, deliver or cause to be delivered to the Purchaser acertificate representing such Securities that is free from all restrictive andother legends.  The Parent may not makeany notation on its records or give instructions to any transfer agent of theParent that enlarge the restrictions on transfer set forth in this Section.

 

4.2           Furnishing of Information.  As long as the Purchaser owns Securities,the Parent covenants to timely file (or obtain extensions in respect thereofand file within the applicable grace period) all reports required to be filedby the Parent after the date hereof pursuant to the Exchange Act.  Upon the request of any Purchaser, theParent shall deliver to such Purchaser a written certification of a dulyauthorized officer as to whether it has complied with the precedingsentence.  As long as any Purchaser ownsSecurities, if the Parent is not required to file reports pursuant to suchlaws, it will prepare and furnish to the Purchaser and make publicly availablein accordance with Rule 144(c) such information as is required for thePurchaser to sell the Securities under Rule 144.  The Parent further covenants that it will take such furtheraction as any holder of Securities may reasonably request, all to the extentrequired from time to time to enable such Person to sell such Securitieswithout registration under the Securities Act within the limitation of theexemptions provided by Rule 144.

 

4.3           Integration.  The Parent shall not, and shall use itscommercially reasonable efforts to ensure that no Affiliate of the Parentshall, 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)that would be integrated with the offer or sale of the Securities in a mannerthat would require the registration under the Securities Act of the sale of theSecurities to the Purchaser, or that would be integrated with the offer or saleof the Securities for purposes of the rules and regulations of any PrincipalMarket.

 

4.4           Reservation and Listing ofSecurities.

 

(a)           The Parent shall maintain a reservefrom its duly authorized shares of Common Stock for issuance pursuant to theTransaction Documents in such amount as may be required to fulfill itsobligations in full under the Transaction Documents.

 

(b)           If, on any date, the number ofauthorized but unissued (and otherwise unreserved) shares of Common Stock isless than the Actual Minimum on such date, minus (ii) the number of shares ofCommon Stock previously issued pursuant to the Transaction Documents, then theBoard of Directors of the Parent shall use commercially reasonable efforts toamend the Parent’s certificate or articles of incorporation to increase thenumber of authorized but unissued shares of Common Stock to at least the ActualMinimum at such time (minus the number of shares of Common Stock previouslyissued pursuant to the Transaction Documents), as soon as possible and in anyevent not later than the 75th day after such date; provided that the Parentwill not be required at any time to authorize a number of shares of CommonStock greater than the maximum remaining number of shares of Common Stock thatcould possibly be issued after such time pursuant to the Transaction Documents.

 

(c)           The Parent shall: (i) take all stepsnecessary to cause such shares of Preferred Stock and Common Stock to beapproved for listing on the Principal Market as soon as possible after theClosing Date, (ii) provide to the Purchaser evidence of such listing, and (iii)use reasonable efforts to maintain the listing of such Preferred Stock andCommon Stock on such Principal Market or another Principal Market.

 

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4.5           Securities Laws Disclosure:Publicity.  The Parent shall, withinone Trading Day after the Closing Date, issue a press release or file a CurrentReport on Form 8-K reasonably acceptable to the Purchaser disclosing allmaterial terms of the transactions contemplated hereby.  The Parent and the Purchaser shall consultwith each other in issuing any press releases with respect to the transactionscontemplated hereby.  Notwithstandingthe foregoing, other than in the Registration Statement and filings relatedthereto, the Parent shall not publicly disclose the name of the Purchaser orthe terms hereof, or include the name of the Purchaser or the terms hereof inany filing with the Commission or any regulatory agency or Principal Market,without the prior written consent of such Purchaser, except to the extent suchdisclosure is required by law or Principal Market regulations, in which casethe Parent shall provide the Purchaser with prior notice of such disclosure.

 

4.6           Non-Public Information.  The Parent covenants and agrees that neitherit nor any other Person acting on its behalf will provide the Purchaser or itsagents or counsel with any information that the Parent believes constitutesmaterial non-public information, unless prior thereto the Purchaser shall haveexecuted a written agreement regarding the confidentiality and use of suchinformation.  The Parent understands andconfirms that the Purchaser shall be relying on the foregoing representationsin effecting transactions in securities of the Parent.

 

4.7           Reimbursement.  If the Purchaser becomes involved in anycapacity in any Proceeding by or against any Person who is a stockholder of theParent, solely as a result of such Purchaser’s acquisition of the PreferredStock under this Agreement and without causation by any other activity,obligation, condition or liability pertaining to the Purchaser and not to thetransactions contemplated by this Agreement, the Parent will reimburse thePurchaser, to the extent such reimbursement is not provided for inSection 4.8, 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.  The reimbursement obligations of the Parentunder this paragraph shall be in addition to any liability which the Parent mayotherwise have, shall extend upon the same terms and conditions to anyAffiliates of the Purchaser who are actually named in such action, proceedingor investigation, and partners, directors, agents, employees and controllingpersons (if any), as the case may be, of the Purchaser and any such Affiliate,and shall be binding upon and inure to the benefit of any successors, assigns,heirs and personal representatives of the Parent, the Purchaser and any suchAffiliate and any such Person.  TheParent also agrees that neither the Purchaser nor any such Affiliates,partners, directors, agents, employees or controlling persons shall have anyliability to the Parent or any Person asserting claims on behalf of or in rightof the Parent solely as a result of acquiring the Preferred Stock under thisAgreement.

 

4.8           Indemnification of Purchaser.  Subject to the provisions of thisSection 4.8, the Parent and the Company will indemnify and hold thePurchaser and its 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 Parent andthe Company in this Agreement or in the other Transaction Documents.  If any action shall be brought against anyPurchaser Party in respect of which indemnity may be sought pursuant to thisAgreement, such Purchaser Party shall promptly notify the Parent in writing,and the Parent and/or the Company shall have the right to assume the defensethereof with counsel of its own choosing. Any Purchaser Party shall have the right to employ separate counsel inany such action and participate in the defense thereof, but the fees andexpenses of such counsel shall be at the expense of such Purchaser Party exceptto the extent that (i) the employment thereof has been specifically authorizedby the Parent in writing, (ii) the Parent or the Company has

 

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failed after a reasonable period of time to assume such defense and toemploy counsel or (iii) in such action there is, in the reasonable opinion ofsuch separate counsel, a material conflict on any material issue between theposition of the Parent or the Company and the position of such PurchaserParty.  The Parent and the Company willnot be liable to any Purchaser Party under this Agreement (i) for anysettlement by an Purchaser Party effected without the Parent’s prior writtenconsent; or (ii) to the extent that any loss, claim, damage or liability isattributable to any Purchaser Party’s breach of any of the representations,warranties, covenants or agreements made by the Purchaser in this Agreement orin the other Transaction Documents.

 

4.9           Indemnification of Parent andCompany.  Subject to the provisionsof this Section 4.9, the Purchaser will indemnify and hold the Parent andthe Company and each of their respective directors, officers, shareholders,partners, employees and agents (each, a “Parent-Company Party”) harmlessfrom any and all losses, liabilities, obligations, claims, contingencies,damages, costs and expenses, including all judgments, amounts paid insettlements, court costs and reasonable attorneys’ fees and costs ofinvestigation that any such Parent-Company Party may suffer or incur as aresult of or relating to any breach of any of the representations, warranties,covenants or agreements made by the Purchaser in this Agreement or in the otherTransaction Documents, other than the Credit Agreement.  If any action shall be brought against anyParent-Company Party in respect of which indemnity may be sought pursuant tothis Agreement, such Parent-Company Party shall promptly notify the Purchaserin writing, and the Purchaser shall have the right to assume the defensethereof with counsel of its own choosing. Any Parent-Company Party shall have the right to employ separate counselin any such action and participate in the defense thereof, but the fees andexpenses of such counsel shall be at the expense of such Parent-Company Partyexcept to the extent that (i) the employment thereof has been specificallyauthorized by the Purchaser in writing, (ii) the Purchaser has failed after areasonable period of time to assume 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 Purchaserand the position of such Parent-Company Party. The Purchaser will not be liable to any Parent-Company Party under thisAgreement (i) for any settlement by an Parent-Company Party effected withoutthe Purchaser’s prior written consent; or (ii) to the extent that any loss,claim, damage or liability is attributable to any Parent-Company Party’s breachof any of the representations, warranties, covenants or agreements made by theParent or the Company in this Agreement or in the other Transaction Documents.

 

4.10         Shareholders Rights Plan.  In the event that a shareholders rights planis adopted by the Parent, no claim will be made or enforced by the Parent 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 VMISCELLANEOUS**

 

5.1           Reserved.

 

5.2           Fees and Expenses.  The Parent agrees to reimburse the Purchaserfor all of its out of pocket costs and expenses (including reasonable fees andexpenses of its counsel) incurred in connection with the transactionscontemplated by this Agreement on or prior to the Closing.  The Parent shall pay the fees and expensesof its advisers, counsel, accountants and other experts, if any, and all otherexpenses incurred by such party incident to the negotiation, preparation,execution, delivery and performance of this Agreement.  The Parent shall pay all transfer agentfees, stamp taxes and other taxes and duties levied in connection with theissuance of any Securities.

 

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5.3           Entire Agreement.  The Transaction Documents, together with theexhibits and schedules thereto, contain the entire understanding of the partieswith respect to the subject matter hereof and supersede all prior agreementsand understandings, oral or written, with respect to such matters, which theparties acknowledge have been merged into such documents, exhibits andschedules.

 

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 to5:30 p.m.  (New York City time) ona Trading Day, (b) the next Trading Day after the date of transmission, if suchnotice or communication is delivered via facsimile at the facsimile numberspecified in this Section on a day that is not a Trading Day or later than5:30 p.m.  (New York City time) onany Trading Day, or (c) the Trading Day following the date of mailing, if sent byU.S.  nationally recognized overnightcourier service.  The addresses for suchnotices and communications are those set forth on the signature pages hereof,or such other address as may be designated in writing hereafter, in the samemanner, by such Person.

 

5.5           Amendments: Waivers.  No provision of this Agreement may be waivedor amended except in a written instrument signed, in the case of an amendment,by the Parent, Company and the Purchaser or, in the case of a waiver, by theparty 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           Successors and Assigns.  This Agreement shall be binding upon andinure to the benefit of the parties and their successors and permittedassigns.  The Parent and the Company maynot assign this Agreement or any rights or obligations hereunder without theprior written consent of the Purchaser. The Purchaser may assign its rights under this Agreement to any Personto whom such Purchaser assigns or transfers any Securities.

 

5.8           No Third-Party Beneficiaries.  This Agreement is intended for the benefitof the parties hereto and their respective successors and permitted assigns andis not for the benefit of, nor may any provision hereof be enforced by, anyother Person, except as otherwise set forth in Section 4.8.

 

5.9           Governing Law: Venue: Waiver ofJury Trial.  All questionsconcerning the construction, validity, enforcement and interpretation of thisAgreement shall be governed by and construed and enforced in accordance withthe internal laws of the State of New York, without regard to the principles ofconflicts of law thereof.  Each partyhereby irrevocably submits to the exclusive jurisdiction of the state andfederal courts sitting in the City of New York, borough of Manhattan, for theadjudication of any dispute hereunder or in connection herewith or with anytransaction contemplated hereby or discussed herein (including with respect tothe enforcement of any of the Transaction Documents), and hereby irrevocablywaives, and agrees not to assert in any suit, action or proceeding, any claimthat it is not personally subject to the jurisdiction of any such court, thatsuch suit, action or proceeding is improper or inconvenient venue for suchproceeding.  Each party herebyirrevocably

 

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waives personal service of process and consents to process being servedin any such suit, action or proceeding by mailing a copy thereof via registeredor certified mail or overnight delivery (with evidence of delivery) to suchparty at the address in effect for notices to it under this Agreement andagrees that such service shall constitute good and sufficient service ofprocess and notice thereof.  Nothingcontained herein shall be deemed to limit in any way any right to serve processin any manner permitted by law.  Theparties hereby waive all rights to a trial by jury.  If either party shall commence an action or proceeding to enforceany provisions of this Agreement, then the prevailing party in such action orproceeding shall be reimbursed by the other party for its attorneys fees andother costs and expenses incurred with the investigation, preparation andprosecution of such action or proceeding.

 

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 facsimile transmission,such signature shall create a valid and binding obligation of the partyexecuting (or on whose behalf such signature is executed) with the same forceand 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         Rescission and Withdrawal Right.  Notwithstanding anything to the contrarycontained in (and without limiting any similar provisions of) the TransactionDocuments, whenever the Purchaser exercises a right, election, demand or optionunder a Transaction Document and the Parent and/or the Company does not timelyperform their related obligations within the periods therein provided, then thePurchaser may rescind or withdraw, in its sole discretion from time to timeupon written notice to the Parent, any relevant notice, demand or election inwhole or in part without prejudice to its future actions and rights; provided,however, in the case of a rescission of a conversion of the PreferredStock, the Purchaser shall be required to return any shares of Common Stocksubject to such conversion or exercise notice.

 

5.14         Replacement of Securities.  If any certificate or instrument evidencingany Securities is mutilated, lost, stolen or destroyed, the Parent shall issueor cause to be issued in exchange and substitution for and upon cancellationthereof, or in lieu of and substitution therefor, a new certificate orinstrument, but only upon receipt of evidence reasonably satisfactory to theParent of such loss, theft or destruction and customary and reasonableindemnity, if requested.  The applicantsfor a new certificate or instrument under such circumstances shall also pay anyreasonable third-party costs associated with the issuance of such replacementSecurities.

 

5.15         Remedies.  In addition to being entitled to exerciseall rights provided herein or granted by law, including recovery of damages,the Purchaser, the Parent and the Company will be entitled to specificperformance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensationfor any loss incurred by reason of any breach of obligations described in

 

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the foregoing sentence and hereby agrees to waive in any action forspecific performance of any such obligation the defense that a remedy at lawwould be adequate.

 

5.16         Payment Set Aside.  To the extent that the Parent or the Companymakes a payment or payments to the Purchaser pursuant to any TransactionDocument or the Purchaser enforces or exercises its rights thereunder, and suchpayment or payments or the proceeds of such enforcement or exercise or any partthereof are subsequently invalidated, declared to be fraudulent orpreferential, set aside, recovered from, disgorged by or are required to berefunded, repaid or otherwise restored to the Parent or the Company, as thecase may be, a trustee, receiver or any other person under any law (including,without limitation, any bankruptcy law, state or federal law, common law orequitable cause of action), then to the extent of any such restoration theobligation or part thereof originally intended to be satisfied shall be revivedand continued in full force and effect as if such payment had not been made orsuch enforcement or setoff had not occurred.

 

5.17         Liquidated Damages.  The Parent’s and the Company’s obligationsto pay any liquidated damages or other amounts owing under the TransactionDocuments is a continuing obligation of the Parent and the Company and shallnot terminate until all unpaid liquidated damages and other amounts have beenpaid notwithstanding the fact that the instrument or security pursuant to whichsuch liquidated damages or other amounts are due and payable shall have beencanceled.

 

5.18         Tax Information.  Notwithstanding any provisions herein to thecontrary or in any other agreement to which a party hereto is bound, theparties hereto and their respective Affiliates (and the respective partners,directors, officers, employees, agents, advisors and other representatives ofeach of the foregoing and their Affiliates) may disclose to any and allPersons, without limitation of any kind the “tax treatment” or “tax structure”(as those terms are defined in Treasury Regulation   1.6011-4(c)(8) and (9), respectively) of the transactionscontemplated hereby and (b) all materials of any kind (including opinions orother tax analyses) relating to such tax treatment  or tax structure or facts that are provided to any of the Personsreferred to above, except that “tax treatment” or “tax structure” shall notinclude the identity of an existing or future party or its Affiliates.

 

**[**SIGNATURE PAGEFOLLOWS**]**

 

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IN WITNESS WHEREOF, theparties hereto have caused this Securities Purchase Agreement to be dulyexecuted by their respective authorized signatories as of the date firstindicated above.

 

 
|   | **U.S. RESTAURANT PROPERTIES, INC.** |
|--------|--------------------------------------|
|   |
|   |
|   | By:                                  | /s/ Stacy M.  Riffe |   |
|   | Name:                                | Stacy M. Riffe |
|   | Title:                               | Chief Financial  Officer |
|        |                                      |  |  |  |  |

 

Address for Notice:

12240 Inwood Road, Suite300

Dallas, Texas 75244

Attn:       Chief Financial Officer

Tel:         (972) 387-1487

Fax:         (972) 490-9119

 

With a copy to:

Kenneth L. Betts

Locke Liddell & SappLLP

2200 Ross Avenue, Suite2200

Dallas, Texas 75201

Tel:         (214) 740-8743

Fax:         (214) 740-8800

 

22

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IN WITNESS WHEREOF, theparties hereto have caused this Securities Purchase Agreement to be dulyexecuted by their respective authorized signatories as of the date firstindicated above.

 

 
|   | **USRP (JV1), LLC** |
|--------|---------------------|
|   |
|   |
|   | By:                 | /s/ Stacy M.  Riffe |   |
|   | Name:               | Stacy M. Riffe |
|   | Title:              | Chief Financial  Officer |
|        |                     |  |  |  |  |

 

Address for Notice:

c/o U.S. RestaurantProperties, Inc.

12240 Inwood Road, Suite300

Dallas, Texas 75244

Attn:       Chief Financial Officer

Tel:         (972) 387-1487

Fax:         (972) 490-9119

 

With a copy to:

Kenneth L. Betts

Locke Liddell & SappLLP

2200 Ross Avenue, Suite2200

Dallas, Texas 75201

Tel:         (214) 740-8743

Fax:         (214) 740-8800

 

23

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IN WITNESS WHEREOF, theundersigned have caused this Securities Purchase Agreement to be duly executedby their respective authorized signatories as of the date first indicatedabove.

 
|   | **HARBILAN CORPORATION** |
|--------|--------------------------|
|   |
|   |
|   | By:                      |   |   |
|   | Name:                    |
|   | Title:                   |

 

Address for Notice:

Harbilan Corporation

c/o Banc of AmericaSecurities, LLC

100 N. Tryon St.

NC1-007-11-07

Charlotte, NC  28255

Attention: Robert W.Long, Jr., Managing Director

Tel:         (704) 386-8467

Fax:         (704) 386-3215

 

 

With a copy to:

John S. Chinuntdet

Moore & Van Allen,PLLC

100 North Tryon Street

Suite 4700

Charlotte, NC  28202

Tel:         (704) 331-3502

Fax:         (704) 378-1950

 

 

 

**[**PURCHASER’SSIGNATURE PAGE**]**

 

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Exhibit A

 

ArticlesSupplementary

 

25

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Exhibit B

 

Form of LegalOpinion

 

26

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