EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the "Agreement"),  dated as of October 15, 1997,
by and between U.S.  Restaurant  Properties,  Inc., a Maryland  corporation (the
"Company"), and Robert J. Stetson (the "Executive").

                              W I T N E S S E T H:
     WHEREAS, Executive will be the Chief Executive Officer and President of the
Company and is expected to make major  contributions to the short- and long-term
profitability, growth and financial strength of the Company;

     WHEREAS,  the  Company  desires  (a) to assure  itself of both  present and
future  continuity of management,  (b) to continue  certain minimum  termination
benefits for Executive,  and (c) to provide additional  inducement for Executive
to continue to remain in the ongoing employ of the Company; and

     WHEREAS,  Executive  is willing to render  services  to the  Company on the
terms and subject to the conditions set forth in this Agreement.

     NOW,  THEREFORE,  in  consideration  of  the  foregoing  premises  and  the
agreements set forth herein, the Company and Executive agree as follows:

     1.  Employment.  The Company agrees to and does hereby employ the Executive
to perform the duties of Chief  Executive  Officer and President of the Company,
and Executive  accepts such employment,  upon the terms and conditions set forth
herein.

     2. Term.  The term of this Agreement  shall be the period  commencing as of
the date set forth above and  continuing  thereafter  for a period of four years
(as extended as hereinafter provided,  the "Term");  provided,  however, that at
the end of such four year period and each anniversary date thereafter,  the Term
will  automatically be extended for an additional year unless, not later than 60
days prior to the end of such four year period or any such anniversary  date, as
the case may be, the  Company or  Executive  shall have given  notice that it or
Executive, as the case may be, does not wish to have the Term extended.

     3. Duties and Services.

     (a) Executive  agrees to serve the Company as the Chief  Executive  Officer
and  President  and to devote his  attention and energies to the business of the
Company.  Executive  will not be  prevented  from (i)  engaging  in any civic or
charitable  activity  for which  Executive  receives  no  compensation  or other
pecuniary  advantage;  (ii) investing his personal assets in businesses which do
not compete with the Company, provided that such investment will not require any
services  on the  part of  Executive  in the  operation  of the  affairs  of the
businesses in which investments are made which would unreasonably interfere with
his obligations hereunder;  (iii) purchasing securities in any corporation whose
securities are publicly traded,  provided that such purchases will not result in
Executive  owning  beneficially  at any time  five  percent  (5%) or more of the
equity securities of any corporation engaged in a business competitive with that
of the  Company;  (iv)  serving as a director of any  corporation  that does not
engage in a  Competitive  Activity  (as  defined in Section 15  hereof);  or (v)
participating in any other activity approved in advance in writing by the Board.
Executive also agrees to perform from time to time such other executive services
as the Company shall  reasonably  request,  provided that such services shall be
consistent  with  his  position  and  status  as  Chief  Executive  Officer  and
President.  In attending  to the business and affairs of the Company,  Executive
agrees  to  serve  the  Company  faithfully,  diligently  and to the best of his
ability.  Executive  shall be entitled  to  continue to serve as a director  and
officer of QSV Properties,  Inc. and perform certain ongoing business  functions
in  connection  therewith,  provided that such  activities  do not  unreasonably
interfere with his obligations hereunder.

     (b) The duties and responsibilities of Executive shall be commensurate with
those  of the  chief  executive  officer  and  president  of  any  publicly-held
corporation similar to the Company.
                            


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     4. Compensation.

     (a)  As  consideration  for  the  services  to  be  rendered  hereunder  by
Executive,  the Company agrees to pay Executive, and Executive agrees to accept,
payable  in  accordance  with  the  Company's  standard  payroll  practices  for
executives,  but payable in not less than monthly installments,  compensation of
Two Hundred Fifty Thousand  Dollars  ($250,000) per annum or such greater amount
as may be  determined  from time to time by the Board  pursuant  to  performance
reviews to be  conducted  on an annual  basis or such shorter time period as the
Board shall deem appropriate (the "Salary").

     (b)  Executive  shall be  eligible  to  receive an annual  incentive  bonus
(whether in cash and/or securities) as provided for in any incentive plan of the
Company, including,  without limitation,  stock option and/or stock bonus plans,
based on the level of accomplishment of specific performance targets established
by the Board or any  committee  thereof,  or such  other  bonus  plans as may be
adopted by the Board from time to time in the  future.  In  addition,  Executive
shall  participate in any Company  perquisite and supplemental  benefit programs
established for the benefit of senior executives of the Company.

     (c)  Executive  shall  not  receive  any  additional  compensation  for his
services as a member of the Board.

     (d)  Notwithstanding  anything in this Section 4 to the contrary,  prior to
December 31, 2000,  Executive shall not be entitled to receive cash compensation
payable in  accordance  with this  Section 4 (whether  Salary  and/or  bonus) in
excess of $300,000 per annum.

     5. Termination for Cause.

     (a)  Subject to the  provisions  of  Section  20 hereof,  in the event that
Executive  shall be  discharged  for "Cause" as provided in Section 5(b) hereof,
all  compensation  payable  to  Executive  pursuant  to  Section 4 in respect of
periods after such discharge  shall terminate  immediately  upon such discharge,
and the Company shall have no obligations  with respect  thereto,  nor shall the
Company be obligated to pay  Executive  severance  compensation  under Section 7
hereof.

     (b) For the purposes of this Agreement,  "Cause" shall mean that,  prior to
any termination pursuant to Section 5(a) hereof, Executive shall have committed:

     (i) an intentional act or acts of fraud, embezzlement or theft constituting
a felony and  resulting or intended to result  directly or indirectly in gain or
personal enrichment for Executive at the expense of the Company; or

     (ii) the continued,  repeated,  intentional  and willful refusal to perform
the duties associated with Executive's  position with the Company,  which is not
cured within 15 days following written notice to Executive.

     For  purposes  of this  Agreement,  no act or failure to act on the part of
Executive shall be deemed  "intentional"  if it was due primarily to an error in
judgment  or  negligence,  but  shall be  deemed  "intentional"  only if done or
omitted to be done by Executive not in good faith and without  reasonable belief
that his action or omission was in the best interest of the Company.

     Executive shall not be deemed to have been terminated for "Cause" hereunder
unless  and until  there  shall have been  delivered  to  Executive  a copy of a
resolution duly adopted by the  affirmative  vote of not less than a majority of
the Board  then in office at a  meeting  of the Board  called  and held for such
purpose,  after reasonable notice to Executive and an opportunity for Executive,
together with his counsel (if Executive  chooses to have counsel present at such
meeting),  to be heard before the Board, finding that, in the good faith opinion
of the Board,  Executive  had  committed an act  constituting  "Cause" as herein
defined and specifying the  particulars  thereof in detail.  Nothing herein will
limit the right of  Executive  or his  beneficiaries  to contest the validity or
propriety  of any such  determination,  including  submitting  the  decision for
review pursuant to Section 20 hereof.



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     6. Termination Compensation.

     (a) If, during the Term,  Executive's  employment is terminated (i) for any
reason other than (A) pursuant to Section 5(a) hereof, (B) by reason of death or
(C) by  reason  of  "Disability"  or  (ii)  by  Executive  due to  "Constructive
Discharge,"  then Executive shall receive  termination pay in an amount equal to
two times the highest annualized rate of Executive's Salary prior to the date of
termination,  payable  in  cash  within  five  business  days  of  the  date  of
termination.

     (b) For the  purposes of this  Agreement,  "Constructive  Discharge"  shall
mean:

     (i) a material reduction in Executive's job function,  authority, duties or
responsibilities, or a similar change in Executive's reporting relationships;

     (ii) a  required  relocation  of  Executive  of  more  than 35  miles  from
Executive's current job location;

     (iii) any breach of any of the terms of this Agreement by the Company which
is not cured within 15 days following written notice thereof by Executive to the
Company; or

     (iv) in the  event  of a  "Change  in  Control"  (as  hereinafter  defined)
Executive  has  reasonably   determined  that,  as  a  result  of  a  change  in
circumstances  following the Change in Control of the Company that significantly
affect his employment, he is unable to exercise the authority, proven duties and
responsibilities contemplated by Section 3 hereof;

     provided, however, that the term "Constructive Discharge" shall not include
a specific event described in the preceding clause (i), (ii), (iii), (iv) or (v)
unless Executive  actually  terminates his employment with the Company within 60
days after the occurrence of such event.

     (c) The amount of  compensation  payable  pursuant to this Section 6 is not
subject to any deduction (except for withholding  taxes),  reduction,  offset or
counterclaim, and the Company may not give advance notice of termination in lieu
of the payment provided for in this Section 6.

     7.  Termination  in the  Event of Death.  This  Agreement  shall  terminate
automatically upon the death of Executive.  In such event, the Company shall pay
to Executive's legal representative only the base salary due to the Executive up
to the date of  termination  as well as  incentive  bonuses,  which have accrued
through  the  date  of  termination,  and  benefits  payable  pursuant  to  this
Agreement.

     8.  Termination in the Event of Disability.  If during the Term,  Executive
becomes  physically or mentally disabled so as to become unable, for a period of
more than six (6)  consecutive  months,  to  perform  his  duties  hereunder  on
substantially  a full time basis  ("Disability"),  the Company may at its option
terminate Executive's  employment hereunder upon not less than thirty (30) days'
written notice. In the event of such termination, Executive shall be entitled to
continue  to receive  his base  salary and  benefits,  excluding  any  incentive
bonuses,  for a period equal to the lesser of (a)  twenty-four  (24) months from
the date of  termination  and (b) the  remainder  of the  Term,  and then  shall
receive such benefits as are available to senior executives of the Company under
any applicable disability plan.



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     9. Change in Control of the Company.

     (a) If a Change in Control (as  hereinafter  defined) of the Company occurs
prior to the  scheduled  expiration of the Term and within three years after the
Change in Control of the Company (i)  Executive is terminated by the Company for
reasons  other than (A) death,  (B)  Disability  or (C) Cause or (ii)  Executive
terminates his employment as a result of  Construction  Discharge,  the Company,
within 30 days of Executive's termination of employment,  will pay to Executive,
in lieu of any severance  obligation under Section 6 hereof,  an amount equal to
2.99 times  Executive's  compensation,  which,  for  purposes of this Section 9,
shall mean an amount equal to the highest  annualized rate of Executive's Salary
prior to the date of  termination,  plus  Executive's  cash  bonus  for the year
immediately prior to such termination.

     (b) For  purposes  of this  Agreement,  a "Change  in  Control"  shall have
occurred if at any time during the Term either of the following events occurs:

     (i) The Company is merged, consolidated or reorganized into or with another
corporation or other legal person and as a result of such merger,  consolidation
or  reorganization  less than a majority  of the  combined  voting  power of the
then-outstanding securities of such corporation or person immediately after such
transaction  are held in the  aggregate  by the  holders  of  Voting  Stock  (as
hereinafter defined) of the Company immediately prior to such transaction; or

     (ii) The Company sells all or substantially  all of its assets to any other
corporation or other legal person,  less than a majority of the combined  voting
power  of the  then-outstanding  voting  securities  of  which  are  held in the
aggregate  by the holders of Voting  Stock of the Company  immediately  prior to
such sale.

     10. Certain Additional Payments by the Company.

     (a)  Anything in this  Agreement to the  contrary  notwithstanding,  in the
event that it shall be determined  (as hereafter  provided)  that any payment or
distribution by the Company to or for the benefit of Executive,  whether paid or
payable or distributed or distributable  pursuant to the terms of this Agreement
or  otherwise  pursuant to or by reason of any other  agreement,  policy,  plan,
program or arrangement (a "Payment"), would be subject to the excise tax imposed
by Section 4999 (or any  successor  provision  thereto) of the Internal  Revenue
Code of 1986, as amended (the "Code"), or any interest or penalties with respect
to such  excise  tax (such  excise  tax,  together  with any such  interest  and
penalties,  are hereafter  collectively  referred to as the "Excise Tax"),  then
Executive  shall be  entitled  to receive an  additional  payment or payments (a
"Gross-Up  Payment") in an amount such that,  after  payment by Executive of all
taxes (including any interest or penalties  imposed with respect to such taxes),
including any Excise Tax imposed upon the Gross-Up Payment, Executive retains an
amount  of the  Gross-Up  Payment  equal  to the  Excise  Tax  imposed  upon the
Payments.

     (b) All determinations required to be made under this Section 10, including
whether an Excise Tax is payable by Executive  and the amount of such Excise Tax
and  whether a Gross-Up  Payment  is  required  and the amount of such  Gross-Up
Payment,  shall be made by a  nationally  recognized  firm of  certified  public
accountants  (the   "Accounting   Firm")  selected  by  Executive  in  his  sole
discretion.   Executive   shall  direct  the  Accounting   Firm  to  submit  its
determination  and  detailed  supporting  calculations  to both the  Company and
Executive within 15 calendar days after the termination date, if applicable,  or
such earlier time or times as may be requested by the Company or  Executive.  If
the Accounting Firm determines that any Excise Tax is payable by Executive,  the
Company  shall pay the  required  Gross-Up  Payment  to  Executive  within  five
business  days after  receipt of such  determination  and  calculations.  If the
Accounting Firm determines that no Excise Tax is payable by Executive, it shall,
at the same  time as it makes  such  determination,  furnish  Executive  with an
opinion that he has  substantial  authority  not to report any Excise Tax on his
federal income tax return.  Any  determination  by the Accounting Firm as to the
amount of the Gross-Up  Payment shall be binding upon the Company and Executive.
As a result of the  uncertainty  in the  application of Section 4999 of the Code
(or any successor provision thereto) at the time of the initial determination by
the Accounting Firm hereunder,  it is possible that Gross-Up Payments which will
not have been made by the  Company  should  have been made (an  "Underpayment"),
consistent with the  calculations  required to be made  hereunder.  In the event
that Executive is required to make a payment of any Excise Tax,  Executive shall
direct the Accounting Firm to determine the amount of the Underpayment  that has
occurred and to submit its determination and detailed supporting calculations to
both the Company and  Executive as promptly as possible.  Any such  Underpayment
shall be promptly  paid by the  Company  to, or for the  benefit  of,  Executive
within five business days after receipt of such determination and calculations.



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     (c) The Company and Executive shall each provide the Accounting Firm access
to and copies of any books,  records  and  documents  in the  possession  of the
Company or Executive, as the case may be, reasonably requested by the Accounting
Firm, and otherwise  cooperate with the Accounting  Firm in connection  with the
preparation  and issuance of the  determination  contemplated  by Section  10(b)
hereof.

     (d) The fees and  expenses  of the  Accounting  Firm  for its  services  in
connection  with the  determinations  and  calculations  contemplated by Section
10(b)  hereof  shall be borne by the  Company.  If such  fees and  expenses  are
initially  paid by  Executive,  the Company shall  reimburse  Executive the full
amount of such fees and expenses  within five  business  days after receipt from
Executive  of a  statement  therefor  and  reasonable  evidence  of his  payment
thereof.

     11. Other Benefits.

     (a) Except as expressly provided herein, this Agreement shall not:

     (i) be deemed to limit or affect the right of  Executive  to receive  other
forms of additional compensation or to participate in any insurance, retirement,
disability,  profit-sharing,  stock purchase,  stock option,  stock appreciation
rights,  cash or stock  bonus  or  other  plan or  arrangement  or in any  other
benefits  now or  hereafter  provided  by the  Company  or any of the  Company's
affiliated companies for its employees; or

     (ii) be deemed to be a waiver  by  Executive  of any  vested  rights  which
Executive may have or may hereafter  acquire under any employee  benefit plan or
arrangement of the Company or any of the Company's affiliated companies.

     (b) It is contemplated  that, in connection with his employment  hereunder,
Executive may be required to incur reasonable business, entertainment and travel
expenses.  The Company agrees to reimburse  Executive in full for all reasonable
and necessary  business,  entertainment  and other related  expenses,  including
travel expenses,  incurred or expended by him incident to the performance of his
duties  hereunder,  upon submission by Executive to the Company of such vouchers
or  expense  statements  satisfactorily  evidencing  such  expenses  as  may  be
reasonably requested by the Company.

     (c) It is  understood  and agreed by the  Company  that  during the term of
Executive's employment hereunder,  he shall be entitled to annual paid vacations
(taken  consecutively  or in segments),  the length of which shall be consistent
with the effective  discharge of Executive's  duties and the general customs and
practices of the Company applicable to its executive officers.

     12. No Mitigation Obligation.  The Company hereby acknowledges that it will
be  difficult  and may be  impossible  (a)  for  Executive  to  find  reasonably
comparable employment following the date of termination,  and (b) to measure the
amount of  damages  which  Executive  may suffer as a result of  termination  of
employment hereunder.  Accordingly,  the payment of the termination compensation
by the Company to Executive in  accordance  with the terms of this  Agreement is
hereby  acknowledged  by the  Company to be  reasonable  and will be  liquidated
damages,  and  Executive  will not be  required  to  mitigate  the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor  will any  profits,  income,  earnings  or other  benefits  from any  source
whatsoever create any mitigation,  offset,  reduction or any other obligation on
the part of Executive hereunder or otherwise.



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     13. Confidentiality.

     (a)  Recognizing  that the  knowledge  and  information  about the business
methods,  systems,  plans and  policies  of the  Company  and of its  affiliated
companies which Executive has heretofore and shall hereafter receive,  obtain or
establish as an employee of the Company or its affiliated companies are valuable
and unique assets of the Company and its affiliated companies,  Executive agrees
that he shall not (otherwise  than pursuant to his duties  hereunder)  disclose,
without  the written  consent of the  Company,  any  confidential  knowledge  or
information  pertaining  to the Company or its  affiliated  companies,  or their
business,  personnel or plans, to any person, firm, corporation or other entity,
which would result in any material  harm or damage to the Company,  its business
or prospects,  for any reason or purpose  whatsoever,  unless required by law or
legal  process.  In the event  Executive is required by law or legal  process to
provide documents or disclose information, he shall take all reasonable steps to
maintain  confidentiality of documents and information  including  notifying the
Company and giving it an  opportunity  to seek a protective  order,  at its sole
cost and expense.

     (b) The  provisions  of this  Section 13 shall  survive the  expiration  or
termination  of this  Agreement,  without regard to the reason  therefor,  for a
period of two  years  from the  earlier  of (i)  expiration  of the Term or (ii)
termination of Executive's employment with the Company.

     14. Non-Competition.

     (a) Except as otherwise  provided in Section 3 hereof,  during the Term and
any period during which Executive  receives any severance payments made pursuant
to Section 6, 8, 9(a) or 10(a) hereof and, in the event  Executive's  employment
is terminated  (i) by the Company for Cause or (ii) by the  Executive  otherwise
than as a result of  Constructive  Discharge,  for a period  ending one (1) year
after the date  Executive's  employment  is so terminated  (the  "Noncompetition
Period"), Executive shall not, directly or indirectly, either for himself or any
other person, own, manage,  control,  participate in, invest in, permit his name
to be used by, act as consultant or advisor to, render services for (alone or in
association  with any  individual,  entity or other  business  organization)  or
otherwise assist in any manner any individual or entity that engages in or owns,
invests in,  manages or controls any venture or enterprise  engaged in (each,  a
"Competitive Activity") the ownership, management, acquisition or development of
restaurant  properties  or retail  properties  similar to those,  if any,  being
acquired by the Company on the date Executive's employment is so terminated.

     Executive  will  not  disseminate  or make  use of any of the  confidential
information  of the  Company  without  qualification  as to  when  or  how  such
information may have been acquired unless such information shall become publicly
available.

     Executive will not in any manner induce, attempt to induce or assist others
to induce or attempt to induce any investor,  client or tenant of the Company to
terminate  its,  his or her  association  with the  Company  or do  anything  to
interfere  with the  relationship  between the Company and any of its customers,
clients,  tenants or persons or concerns  dealing  with the  Company  during the
Noncompetition Period.

     Executive  will  not,  without  the  prior  consent  of a  majority  of the
Company's independent directors,  solicit, hire away or employ any person who is
an employee of the Company during the Noncompetition Period.

     (b) In the event that any restriction contained in this Section 14 shall be
held too broad to allow enforcement of such restriction to its full extent, then
such  restriction  shall be enforced to the maximum extent permitted by law, and
Executive hereby consents and agrees that such scope may be judicially  modified
accordingly in any proceeding brought to enforce such restrictions.

     (c) Executive  acknowledges and agrees that the Company's remedy at law for
any breach of his  obligations  under this  Section  14 may be  inadequate,  and
agrees and consents that temporary and/or permanent or injunctive  relief may be
entered  enjoining him from breaching this Agreement and further agrees that any
proceeding  which may be brought to enforce  any  provision  of this  Section 14
without  being  requested to prove actual  damages as a result of the  premature
breach of this Agreement.



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     15. Legal Fees and Expenses. It is the intent of the Company that Executive
not be required to incur legal fees and the related expenses associated with the
interpretation,   enforcement  or  defense  of  Executive's  rights  under  this
Agreement by litigation or otherwise  because the cost and expense thereof would
substantially  detract  from the  benefits  intended to be extended to Executive
hereunder.  Accordingly,  if it should appear to Executive  that the Company has
failed to comply  with any of its  obligations  under this  Agreement  or in the
event that the Company or any other person takes or threatens to take any action
to  declare  this  Agreement  void or  unenforceable  or in any way  reduce  the
possibility  of  collecting  the  amounts  due  hereunder,   or  institutes  any
litigation or other action or  proceeding  designed to deny, or to recover from,
Executive any payments or benefits provided  hereunder,  the Company irrevocably
authorizes  Executive from time to time to retain counsel of Executive's choice,
at the expense of the Company as  hereafter  provided,  to advise and  represent
Executive in connection  with any such  interpretation,  enforcement or defense,
including,  without  limitation,  the initiation or defense of any litigation or
other legal action, whether by or against the Company or any director,  officer,
stockholder or other person  affiliated with the Company,  in any  jurisdiction.
The  Company  will pay and be  solely  financially  responsible  for any and all
attorneys' and related fees and expenses incurred at the time they are billed by
Executive in connection  with any of the foregoing,  except only in the event of
litigation where the Company fully and finally prevails on all causes of action.

     16. Withholding of Taxes. The Company may withhold from any amounts payable
under this Agreement all federal,  state,  city or other taxes as the Company is
required to withhold pursuant to any law or government regulation or ruling.

     17. Successors and Binding Agreement.

     (a) The Company will require any successor (whether direct or indirect,  by
purchase,  merger,  consolidation,   reorganization  or  otherwise)  to  all  or
substantially all of the business or assets of the Company, by agreement in form
and  substance  satisfactory  to  Executive,  expressly  to assume  and agree to
perform  this  Agreement  in the same  manner and to the same extent the Company
would be  required  to  perform  if no such  succession  had taken  place.  This
Agreement  will be binding  upon and inure to the benefit of the Company and any
successor to the Company,  including,  without limitation, any persons acquiring
directly or indirectly all or substantially all of the business or assets of the
Company whether by purchase, merger, consolidation,  reorganization or otherwise
(and such successor shall thereafter be deemed the "Company" for the purposes of
this Agreement), but will not otherwise be assignable, transferable or delegable
by the Company.

     (b) This  Agreement  will  inure to the  benefit of and be  enforceable  by
Executive's  personal  or  legal  representatives,   executors,  administrators,
successors, heirs, distributees and legatees.

     (c) This  Agreement is personal in nature and neither of the parties hereto
shall,  without the  consent of the other,  assign,  transfer  or delegate  this
Agreement or any rights or obligations hereunder except as expressly provided in
Sections 17(a) and 17(b) hereof and with respect to the Company's  obligation to
pay legal  fees and  expenses  under  Section 15 hereof.  Without  limiting  the
generality or effect of the  foregoing,  Executive's  right to receive  payments
hereunder will not be assignable,  transferable or delegable, whether by pledge,
creation  of a security  interest  or  otherwise,  other  than by a transfer  by
Executive's will or by the laws of descent and distribution and, in the event of
any attempted assignment or transfer contrary to this Section 17(c), the Company
shall  have  no  liability  to pay  any  amount  so  attempted  to be  assigned,
transferred or delegated, except with respect to legal fees and expenses, as and
to the extent provided in Section 15 hereof.



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     18.  Notices.  For all  purposes  of this  Agreement,  all  communications,
including,  without  limitation,   notices,  consents,  requests  or  approvals,
required  or  permitted  to be given  hereunder  will be in writing  and will be
deemed to have been duly given when hand  delivered or  dispatched by electronic
facsimile transmission (with receipt thereof orally confirmed), or five business
days after having been mailed by United  States  registered  or certified  mail,
return receipt requested,  postage prepaid,  or three business days after having
been sent by a nationally  recognized  overnight courier service such as Federal
Express,  UPS or  Purolator,  addressed to the Company (to the  attention of the
Secretary  of the  Company) at the address set forth on the  signature  pages of
this Agreement and to Executive at the address set forth on the signature  pages
of this  Agreement,  or to such other address as any party may have furnished to
the other in writing and in accordance herewith,  except that notices of changes
of address shall be effective only upon receipt.

     19.   Governing  Law.  The  validity,   interpretation,   construction  and
performance  of this  Agreement  will be governed by and construed in accordance
with the  substantive  laws of the State of Texas,  without giving effect to the
principles of conflict of laws of such State.

     20. Mutual Agreement to Arbitrate.

     (a) The Company and Executive  recognize that differences may arise between
them. Through the provisions of this Section 20, both parties expect to gain the
benefits  of  a  speedy,  economical,  impartial  dispute-resolution  procedure.
Therefore, the parties agree that this Section 20 shall apply to all disputes or
controversies  arising out of  Executive's  employment  (or  termination of that
employment) under this Agreement,  that the Company may have against  Executive,
or that  Executive may have against the Company or against (as  applicable)  its
officers,  directors,  stockholders,  partners,  advisers or agents  ("Claims").
Claims include, but are not limited to, controversies  relating to: compensation
or benefits, breach of any contract, torts,  discrimination under state, federal
or local law, and  violation of any federal,  state or other  governmental  law,
statute, regulation, or ordinance.

     (b) Except as otherwise specifically stated in this Agreement, the sole and
exclusive method to resolve any Claim is arbitration as provided in this Section
20. The  parties  each waive  their  right to commence an action in any court to
resolve a Claim.  Neither  party shall  initiate or prosecute any lawsuit in any
way related to any Claim covered by this Section 20.

     (c) A Claim must be processed in the manner set forth below,  otherwise the
Claim  shall be void and  deemed  waived  even if  there is a  federal  or state
statute of limitations which would allow more time to pursue the Claim.



                                  Page 8 of 11
<PAGE>



     (i) Any Claim not raised under Section 5 hereof must initially be presented
to the Company's  Board of Directors  (the  "Board") in writing  within ten (10)
days after the Executive  initially  knew or should have known of the facts that
gave rise to the  Claim.  The Board will  answer the claim  within ten (10) days
after the Claim was presented.  If the Board fails to respond, it will be deemed
a denial of the Executive's Claim.

     (ii) If Executive is not  satisfied  with the Board's  decision,  or if the
Claim is made  under  Section  5 hereof,  Executive  may  present  the Claim for
resolution  by final  and  binding  arbitration  pursuant  to the  terms of this
Section 20. If Executive desires to proceed to arbitration,  Executive must give
written  notice to the Company of  Executive's  intention  to  arbitrate  within
thirty (30) days from the date of the Board's final decision.

     (iii) If the Company desires to initiate arbitration,  it must give written
notice to Executive  within  thirty (30) days after it initially  knew or should
have known of the facts that gave rise to its Claim.

     (iv) The written  notice of desire to arbitrate  shall describe the factual
basis of all Claims asserted, and shall be sent to the other party in accordance
with the terms of Section 18 hereof. If written notice of intention to arbitrate
is not given within the  applicable  time  period,  the party who failed to give
notice  will be deemed to have  waived the right to further  contest the matter,
and will be deemed to have  accepted the other  party's last stated  position on
the Claim.

     (v) The arbitration  shall be conducted in accordance with the then-current
Model Employment Arbitration Procedures of the American Arbitration  Association
("AAA") before a single  arbitrator (the  "Arbitrator").  The arbitration  shall
take place in or near the city in which  Executive  is or was last  working with
the  Company.  All  arbitrations  shall be  governed by the laws of the State of
Texas, the location of the principal executive office of the Company.

     (vi) The  Arbitrator  shall be selected in the  following  manner.  The AAA
shall give each party a list of at least six arbitrators drawn from its panel of
labor and employment arbitrators.  Each side may strike all names on the list it
deems unacceptable.  If only one common name remains on the list of all parties,
that individual shall be the Arbitrator. If more than one common name remains on
the list of all parties,  the parties shall strike names  alternately until only
one remains. If no common name remains on the list of all parties, the AAA shall
furnish one  additional  list, and the above  procedure will be utilized.  If no
Arbitrator  is designated  from the second list,  the procedure of the AAA rules
will be utilized to select the  Arbitrator.  In no event will the  Arbitrator be
then affiliated in any manner with a competitor of the Company.

     A. Any party may be  represented  by an  attorney  or other  representative
selected by the party.

     B. Each party shall have the right to take the deposition of one individual
and any expert witness designed by another party. Each party also shall have the
right to make  requests for  production  of  documents to any party.  Additional
discovery  may be had only where the  arbitrator  so  orders,  upon a showing of
substantial  need.  All issues  related to  discovery  will be  resolved  by the
Arbitrator.



                                  Page 9 of 11
<PAGE>



     (vii) At least fourteen (14) days before the arbitration,  the parties must
exchange  lists of witnesses,  including any expert,  and copies of all exhibits
intended to be used at the arbitration.

     (viii) The  Arbitrator  will have no  authority  to: (A) adopt new  Company
policies or procedures,  (B) modify this Agreement or existing Company policies,
procedures,  wages or  benefits,  or (C) hear or decide any matter  that was not
processed in accordance with this Agreement. The Arbitrator shall have exclusive
authority  to  resolve  any  Claim,  including,  but not  limited  to, a dispute
relating to the  interpretation,  applicability,  enforceability or formation of
this Agreement, or any contention that all or any part of this Agreement is void
or voidable.  The arbitrator will have the authority to award any form of remedy
or damages that would be available in a court.

     (ix) The Company shall pay reasonable and necessary fees of the AAA and the
Arbitrator.  The  parties  will pay  their  own  attorneys'  fees  and  expenses
associated with the arbitration.

     (x) Either party, in its sole discretion,  may, in writing, waive, in whole
or in part,  the  other's  failure to follow any time or other  requirement  set
forth in this Agreement.

     (xi) The arbitration will be conducted in private,  and will not be open to
the public or the media.  The testimony and other  evidence  presented,  and the
results of the  arbitration,  unless  otherwise  agreed to by both parties,  are
confidential  and may not be made public or reported by any news agency or legal
publisher or service.

     (xii) The  Arbitrator  shall  render a  written  decision  and  award  (the
"Award"),  which shall set forth the facts and reasons  that  support the Award.
The Award shall be final and binding on the Company and Executive.

     21. Validity.  If any provision of this Agreement or the application of any
provision hereof to any person or  circumstances is held invalid,  unenforceable
or otherwise  illegal,  the remainder of this  Agreement and the  application of
such provision to any other person or  circumstances  will not be affected,  and
the provision so held to be invalid,  unenforceable or otherwise illegal will be
reformed  to  the  extent  (and  only  to  the  extent)  necessary  to  make  it
enforceable, valid or legal.

     22. Miscellaneous.  No provision of this Agreement may be modified,  waived
or  discharged  unless such  waiver,  modification  or discharge is agreed to in
writing signed by Executive and the Company. No waiver by either party hereto at
any  time of any  breach  by the  other  party  hereto  or  compliance  with any
condition  or  provision  of this  Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations,  oral
or  otherwise,  expressed or implied with respect to the subject  matter  hereof
have been  made by  either  party  which  are not set  forth  expressly  in this
Agreement. Except as otherwise identified, references to Sections are references
to Sections of this Agreement.

     23. Survival of Certain Provisions.  Notwithstanding anything herein to the
contrary,  the  obligations of the Company under Sections 6, 8, 9, 10, 11 and 15
hereof, to the extent  applicable,  shall remain operative and in full force and
effect regardless of the expiration, for any reason, of the Term.

     24.   Counterparts.   This  Agreement  may  be  executed  in  one  or  more
counterparts,  each of which shall be deemed to be an original  but all of which
together will constitute one and the same agreement.

     25. Warranty.  Executive  warrants and represents that he is not a party to
any agreement,  contract or  understanding,  whether of employment or otherwise,
which would in any way restrict or prohibit him from  undertaking  or performing
employment in accordance with the terms and conditions of this Agreement.

     26. Prior  Agreements.  This Agreement shall in all respects  supersede all
previous agreements  providing severance pay benefits,  whether written or oral,
between Executive and the Company.



                                 Page 10 of 11
<PAGE>



         IN WITNESS WHEREOF, the parties hereto have executed this Agreement.


                                          U.S. RESTAURANT PROPERTIES, INC.


                                          By:     /s/ Fred H. Margolin
                                              ------------------------
                                              Fred H. Margolin
                                              Chairman of the Board, Treasurer
                                              and Secretary

                                              Address:
                                              5310 Harvest Hill Road
                                              Suite 270
                                              Dallas, Texas 75230



                                                 /s/ Robert J. Stetson
                                              ------------------------
                                              Robert J. Stetson, Individually

                                              Address:
                                              ------------------------
                                              ------------------------
                                              ------------------------    



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