AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

by and among

Trustreet Properties, Inc.,

CNL APF Partners, LP

and

General Electric Capital Corporation

Dated as of October 30, 2006

INDEX

 

 

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Exhibit A Form of Voting Agreement

Exhibit B Form of Amended Company Articles of Incorporation

Exhibit C Merger Sub Articles Supplementary

Exhibit D Form of Tax Opinion and Representation Letter

 

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TABLE OF DEFINED TERMS

 

 

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of October 30, 2006, is by and among General Electric Capital Corporation, a Delaware corporation (“ Parent ”), Trustreet Properties, Inc., a Maryland corporation (the “ Company ”), and CNL APF Partners, LP, a Delaware limited partnership (“ CNL Partnership ” and, together with the Company, the “ Company Parties ”).

WHEREAS, the parties wish to effect a business combination through a merger of either (i) a to-be-formed Maryland corporation that will be a wholly-owned subsidiary of Parent (“ Merger Sub ”) with and into the Company or (ii) the Company with and into Merger Sub (in either case, the “ Company Merger ”) on the terms and subject to the conditions set forth in this Agreement and in accordance with the Maryland General Corporation Law, as amended (the “ MGCL ”);

WHEREAS, the parties also wish to effect a merger of a to-be-formed Delaware limited liability company that will be a wholly-owned subsidiary of Parent (“ Partnership Merger Sub ” and, collectively with Parent and Merger Sub, the “ Buyer Parties ”) with and into CNL Partnership (the “ Partnership Merger ” and, together with the Company Merger, the “ Mergers ”), on the terms and subject to the conditions set forth in this Agreement and in accordance with Section 17-211 of the Delaware Revised Uniform Limited Partnership Act, as amended (the “ DRULPA ”) and Section 18-209 of the Delaware Limited Liability Company Act, as amended (the “ DLLCA ”);

WHEREAS, the Board of Directors of the Company (the “ Company Board ”) has (i) approved this Agreement, the Company Merger and the other transactions contemplated by this Agreement and declared that this Agreement, the Company Merger and the other transactions contemplated by this Agreement are advisable and in the best interests of the Company and its stockholders on the terms and subject to the conditions set forth herein, (ii) directed that this Agreement, the Company Merger and the other transactions contemplated hereby be submitted for consideration at a meeting of the Company’s stockholders and (iii) recommended the approval of this Agreement, the Company Merger and the other transactions contemplated hereby by the Company’s stockholders;

WHEREAS, CNL APF GP Corp., a Delaware corporation and an indirect wholly-owned Subsidiary of the Company (“ CNL General Partner ”), as the sole general partner of CNL Partnership, has approved this Agreement and the Partnership Merger and deemed it advisable and in the best interests of CNL Partnership and the limited partners of CNL Partnership to enter into this Agreement and to consummate the Partnership Merger on the terms and conditions set forth herein;

WHEREAS, as a condition to the willingness of, and an inducement to Parent to enter into this Agreement, contemporaneously with the execution and delivery of this Agreement, certain holders of Company Common Stock (as defined herein) are entering into Voting Agreements, dated as of the date hereof, in the form of Exhibit A hereto (the “ Voting Agreements ”); and

WHEREAS, the parties hereto desire to make certain representations, warranties, covenants and agreements in connection with the Mergers, and also to prescribe various conditions to such transactions.

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, Parent and the Company Parties agree as follows:

ARTICLE I

THE MERGERS

1.1 Effective Times of the Mergers . (a) Subject to the terms and conditions of this Agreement, at the Closing, CNL Partnership shall file with the Secretary of State of the State of Delaware a certificate of merger in respect of the Partnership Merger (the “ Certificate of Merger ”) in such form as is required by, and executed in accordance with, the relevant provisions of the DRULPA and shall make all other filings or recordings required under the DRULPA. The Partnership Merger shall become effective at (i) such time as the Certificate of Merger has been duly filed with the Secretary of State of the State of Delaware or (ii) such later time as is agreed upon by Parent and the Company and specified in the Certificate of Merger. Such time is hereinafter referred to as the “ Partnership Merger Effective Time .”

(a) Subject to the terms and conditions of this Agreement, at the Closing and immediately after the Partnership Merger Effective Time, the Company and Merger Sub shall duly execute and shall file with the Department of Assessments and Taxation of the State of Maryland (the “ SDAT ”), articles of merger in respect of the Company Merger (the “ Articles of Merger ”), in such form as is required by, and executed in accordance with, the relevant provisions of the MGCL, as applicable, and shall make all other filings or recordings required under the MGCL. The Company Merger shall become effective at (i) such time as the Articles of Merger have been accepted for record by the SDAT or (ii) such later time as is agreed upon by Parent and the Company and specified in the Articles of Merger. Such time is hereinafter referred to as the “ Company Merger Effective Time .”

1.2 Closing . Unless this Agreement shall have been terminated in accordance with Article VIII hereof, the closing of the Mergers (the “ Closing ”) shall take place on a date and at a time to be specified by Parent and the Company (the “ Closing Date ”), which shall be no later than the second business day after satisfaction or waiver of the conditions set forth in Article VII (other than delivery of items to be delivered at the Closing and other than satisfaction of those conditions that by their nature are to be satisfied at the Closing, but subject to the delivery of such items and the satisfaction or waiver of such conditions at the Closing), at the offices of Pillsbury Winthrop Shaw Pittman LLP, 2300 N Street, N.W., Washington, DC 20037, unless another date, place or time is agreed to in writing by Parent and the Company.

1.3 Effects of the Mergers . (a) Unless Parent elects to cause the Company Merger to occur in accordance with the alternative structure set forth in Section 1.3(b), subject to the terms and conditions of this Agreement and in accordance with the MGCL, at the Company Merger Effective Time: (i) the separate existence of Merger Sub shall cease and Merger Sub

 

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shall be merged with and into the Company (Merger Sub and the Company are sometimes referred to below as the “ Constituent Corporations ” and, in such case, the Company following the Company Merger is sometimes referred to below as the “ Surviving Corporation ”); (ii) the Amended Company Articles of Incorporation (as defined in Section 1.9) shall be the articles of incorporation of the Surviving Corporation effective as of the Company Merger Effective Time; and (iii) the bylaws of Merger Sub as in effect immediately prior to the Company Merger Effective Time shall be the bylaws of the Surviving Corporation. The Company Merger shall have the effects set forth in the MGCL, including, without limitation, Section 3-114 thereof.

(b) Parent, in its sole and absolute discretion, may elect to cause the Company Merger to have the effects set forth in this Section 1.3(b) in lieu of the effects set forth in Section 1.3(a) above. Subject to the terms and conditions of this Agreement and in accordance with the MGCL, at the Company Merger Effective Time: (i) the separate existence of the Company shall cease and the Company shall be merged with and into Merger Sub (in such case, Merger Sub following the Company Merger is sometimes referred to below as the “ Surviving Corporation ”); (ii) the articles of incorporation of Merger Sub shall be the articles of incorporation of the Surviving Corporation effective as of the Company Merger Effective Time; and (iii) the bylaws of Merger Sub as in effect immediately prior to the Company Merger Effective Time shall be the bylaws of the Surviving Corporation. The Company Merger shall have the effects set forth in the MGCL, including, without limitation, Section 3-114 thereof. If the Company Merger occurs as described in this Section 1.3(b), any Tax liability of the Company resulting from the Company Merger shall be the responsibility of Parent and the Surviving Corporation.

(c) Subject to the terms and conditions of this Agreement and in accordance with Section 17-211 of the DRULPA and Section 18-209 of the DLLCA, at the Partnership Merger Effective Time: (i) Partnership Merger Sub shall be merged with and into CNL Partnership and the separate existence of Partnership Merger Sub shall cease (Partnership Merger Sub and CNL Partnership are sometimes referred to below as the “ Constituent Partnerships ” and CNL Partnership following the Partnership Merger is sometimes referred to below as the “ Surviving Partnership ”); (ii) the certificate of limited partnership of CNL Partnership as in effect immediately prior to the Partnership Merger Effective Time shall be the certificate of limited partnership of the Surviving Partnership effective as of the Partnership Merger Effective Time; and (iii) the CNL Partnership Agreement as in effect immediately prior to the Partnership Merger Effective Time shall be the partnership agreement of the Surviving Partnership. The Partnership Merger shall have the effects set forth in the DRULPA, including Section 17-211 thereof and the DLLCA, including Section 18-209 thereof.

1.4 Directors and Officers . The directors and officers of Merger Sub immediately prior to the Company Merger Effective Time shall be the initial directors and officers of the Surviving Corporation, each to hold office in accordance with the articles of incorporation and bylaws of the Surviving Corporation.

1.5 Partnership Matters .

The general partner of the Surviving Partnership immediately after the Partnership Merger Effective Time shall be CNL General Partner.

 

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1.6 Other Transactions .

Parent shall have the option, in its sole discretion and without requiring the further consent of any of the Company Parties or the board of directors, stockholders, members or partners of any Company Party, upon reasonable notice to the Company, to have the Company use its commercially reasonable efforts to, immediately prior to the Closing, (a) convert or cause the conversion of one or more Subsidiaries that are organized as corporations into limited liability companies and one or more Subsidiaries that are organized as limited partnerships into limited liability companies, (b) sell or cause to be sold all of the stock, partnership interests or limited liability company interests owned, directly or indirectly, by the Company in one or more Subsidiaries at a price designated by Parent, (c) sell or cause to be sold any of the assets of the Company or one or more Subsidiaries at a price designated by Parent, and (d) cause one or more Subsidiaries of the Company to declare a dividend or distribution payable to the Company in an amount and on a date specified by Parent; provided , however , that (i) neither the Company nor any Subsidiary shall be required to take any action in contravention of any organizational document or other Material Contract relating to any applicable Subsidiary for which consent has not been obtained, (ii) any such actions or transactions shall be contingent upon the receipt by the Company of a written notice from Parent confirming that all of the conditions set forth in Sections 7.1 and 7.2 have been satisfied (or, with respect to Section 7.2, waived by Parent) and that the Buyer Parties are prepared to proceed immediately with the Closing (it being understood that in any event the transactions described in clauses (a), (b), (c) and (d) will be deemed to have occurred prior to the Closing), (iii) such actions (or the inability to complete such actions) shall not affect or modify in any respect the obligations of Parent under this Agreement, including payment of the Merger Consideration, and (iv) neither the Company nor any Subsidiary shall be required to take any such action that could adversely affect the classification of the Company as a “real estate investment trust” (a “ REIT ”) within the meaning of Section 856 of the Code. If requested by Parent in connection with any asset sale contemplated above, the Company shall and shall cause its Subsidiaries to, with respect to such asset sale, (i) request of ground lessors, tenants, suppliers, and service providers with respect to the properties that are the subject of the asset sale, process, and use good faith to obtain such estoppel letters, subordination, non-disturbance and attornment agreements, consents and other certificates, agreements or documents customary or reasonably required for acquisition of, or financing transactions secured by, real property, (ii) grant reasonable access to Company Properties to Parent, its Representatives and potential purchasers of such Company Properties designated by Parent and their Representatives; (iii) execute and deliver to Parent or its designee, at the Closing, such conveyance documents and agreements and other certificates and affidavits as reasonably requested by Parent, and (iv) terminate, effective as of the Closing, such service agreements as reasonably requested by Parent. Parent shall upon request by the Company advance to the Company all reasonable out-of-pocket costs to be incurred by the Company or, promptly upon request by the Company, reimburse the Company for all reasonable out-of-pocket costs incurred by the Company in connection with any actions taken by the Company in accordance with this Section 1.6. Parent shall indemnify and hold harmless the Company and its Subsidiaries from and against any and all liabilities, Taxes, losses, damages, claims, costs, expenses, interest, awards, judgments and penalties suffered or incurred by them in connection with or as a result of taking such actions. Without limiting the foregoing, none of the representations, warranties or covenants of the Company Parties shall be deemed to apply to, or deemed breached or violated by, any of the transactions contemplated by this Section 1.6 or required by Parent pursuant to this Section 1.6.

 

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As used in this Agreement, a “ Representative ” of a Person means any officer, trustee, director, employee, Affiliate, agent, investment banker, financial advisor, financing source, attorney, accountant, broker, finder, consultant or other agent or representative of such Person. As used in this Agreement, an “ Affiliate ” or “ affiliate ” of a specified Person means a Person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.

1.7 Formation of Newco; Contribution .

Parent shall have the option, in its sole discretion and without requiring the further consent of any of the Company Parties or the board of directors, stockholders, members or partners of any Company Party, upon reasonable notice to the Company, to cause the Company to (a) immediately prior to the Partnership Merger, contribute all or substantially all of its assets and liabilities (including all Equity Interests of the Company’s direct Subsidiaries) to a newly formed direct wholly-owned Subsidiary of the Company (“ Newco ”) and (b) take all actions necessary to cause Newco to expressly assume all obligations of the Company under the Company’s 7   ¹ / 2 % Senior Notes due 2015 (the “ Senior Notes ”) and under the indenture governing the Senior Notes in accordance with the terms thereof; provided , however , that (i) any such actions or transactions shall be contingent upon the receipt by the Company of a written notice from Parent confirming that all of the conditions set forth in Sections 7.1 and 7.2 have been satisfied (or, with respect to Section 7.2, waived by Parent) and that the Buyer Parties are prepared to proceed immediately with the Closing (it being understood that in any event the transactions described in clauses (a) and (b) will be deemed to have occurred prior to the Partnership Merger) and (ii) neither the Company nor any Subsidiary shall be required to take any such action that could adversely affect the classification of the Company as a REIT. The organizational documents and jurisdiction of incorporation of Newco shall in each case be satisfactory to Parent. Parent shall upon request by the Company advance to the Company all reasonable out-of-pocket costs to be incurred by the Company or, promptly upon request by the Company, reimburse the Company for all reasonable out-of-pocket costs incurred by the Company in connection with any actions taken by the Company in accordance with this Section 1.7. Parent shall indemnify and hold harmless the Company and its Subsidiaries from and against any and all liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments and penalties suffered or incurred by them in connection with or as a result of taking such actions. Without limiting the foregoing, none of the representations, warranties or covenants of the Company Parties shall be deemed to apply to, or deemed breached or violated by, any of the transactions contemplated by this Section 1.7 or required by Parent pursuant to this Section 1.7.

1.8 Dissolution and Liquidation of the Surviving Corporation .

As promptly as practicable following the Company Merger Effective Time, the Surviving Corporation shall deliver written notice of its election to liquidate and terminate its existence to the holders of the Company Series C Preferred Stock or Merger Sub Preferred Shares, as applicable, stating the date and place of payment of the amount distributable to such holders of such shares in accordance with the terms of the articles of incorporation of the Surviving Corporation relating to such shares, which notice will be delivered prior to the payment date stated in the notice (the “ Liquidation Payment Date ”) in accordance with the terms of the articles

 

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of incorporation of the Surviving Corporation relating to such shares. On the Liquidation Payment Date, the holders of such shares will receive distributions from the Surviving Corporation equal to the amounts payable to them upon a liquidation of the Surviving Corporation in accordance with the terms of the articles of incorporation of the Surviving Corporation relating to such shares.

1.9 Company Articles of Incorporation .

Unless Parent elects to cause the Company Merger to occur in accordance with the alternative structure set forth in Section 1.3(b), at the Company Merger Effective Time, the Company Articles of Incorporation, as amended and restated in the form of Exhibit B hereto pursuant to the Company Merger and the Articles of Merger, shall be the articles of incorporation of the Surviving Corporation (as so amended and restated, the “ Amended Company Articles of Incorporation ”).

ARTICLE II

CONVERSION OF SECURITIES

2.1 Conversion of Capital Stock . At the Company Merger Effective Time, by virtue of the Company Merger and without any action on the part of the holder of any shares of the capital stock of the Company:

(a) Each share of common stock of Merger Sub issued and outstanding immediately prior to the Company Merger Effective Time shall be automatically converted into one share of common stock of the Surviving Corporation.

(b) All shares of the Company’s common stock, $.001 par value per share (“ Company Common Stock ”), the Company’s Series A Cumulative Convertible Preferred Stock (the “ Company Series A Preferred Stock ”) and the Company’s 7.5% Series C Redeemable Convertible Preferred Stock (the “ Company Series C Preferred Stock ” and with the Company Series A Preferred Stock, collectively, the “ Company Preferred Stock ” and, collectively with the Company Common Stock, the “ Company Capital Stock ”), that are owned by the Company or by any Subsidiary (as defined in Section 3.1) of the Company shall be cancelled and shall cease to exist and no consideration shall be delivered in exchange therefor.

(c) Each share of Company Common Stock issued and outstanding immediately prior to the Company Merger Effective Time (other than shares to be cancelled in accordance with Section 2.1(b)) shall be automatically converted into, and cancelled in exchange for, the right to receive, without interest, cash in the amount of $17.05 (the “ Company Common Share Merger Consideration ”).

(d) Each share of Company Series A Preferred Stock issued and outstanding immediately prior to the Company Merger Effective Time (other than shares to be cancelled in accordance with Section 2.1(b)) shall be automatically converted into, and cancelled in exchange for, the right to receive, without interest, (i) cash in the amount of $25.00 plus (ii) any accrued and unpaid dividends through and including the Closing Date payable with respect to such shares of Company Series A Preferred Stock pursuant to the terms of the Company Articles of

 

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Incorporation (the “ Company Series A Preferred Share Merger Consideration ” and, collectively with the Company Common Share Merger Consideration and the Option Merger Consideration (as defined in Section 6.7(a)), the “ Company Merger Consideration ”).

(e) Each share of Company Series C Preferred Stock issued and outstanding immediately prior to the Company Merger Effective Time (other than shares to be cancelled in accordance with Section 2.2(b)) shall remain outstanding as one share of Series C Preferred Stock of the Surviving Corporation.

2.2 Alternative Structure; Conversion of Capital Stock . Notwithstanding Section 2.1, if Parent elects that the Company Merger will have the effects set forth in Section 1.3(b), at the Company Merger Effective Time, by virtue of the Company Merger and without any action on the part of the holder of any shares of the capital stock of the Company:

(a) Each share of common stock of Merger Sub issued and outstanding immediately prior to the Company Merger Effective Time shall remain outstanding as one share of common stock of the Surviving Corporation.

(b) All shares of Company Common Stock, Company Series A Preferred Stock and Company Series C Preferred Stock that are owned by the Company or by any Subsidiary of the Company shall be cancelled and shall cease to exist and no consideration shall be delivered in exchange therefor.

(c) Each share of Company Common Stock issued and outstanding immediately prior to the Company Merger Effective Time (other than shares to be cancelled in accordance with Section 2.2(b)) shall be automatically converted into, and cancelled in exchange for, the right to receive, without interest, cash in the amount of the Company Common Share Merger Consideration.

(d) Each share of Company Series A Preferred Stock issued and outstanding immediately prior to the Company Merger Effective Time (other than shares to be cancelled in accordance with Section 2.2(b)) shall be automatically converted into, and cancelled in exchange for, the right to receive, without interest, the Company Series A Preferred Share Merger Consideration.

(e) Each share of Company Series C Preferred Stock issued and outstanding immediately prior to the Company Merger Effective Time (other than shares to be cancelled in accordance with Section 2.2(b)) shall be automatically converted into, and cancelled in exchange for, the right to receive one share of 7.5% Series C Redeemable Convertible Preferred Stock (the “ Merger Sub Preferred Shares ”) of the Surviving Corporation (the “ Company Series C Preferred Share Merger Consideration ”). Immediately prior to the Company Merger Effective Time, the terms of the Merger Sub Preferred Shares shall be as set forth in the articles supplementary of Merger Sub, substantially in the form set forth in Exhibit C hereto.

2.3 Effect on Partnership and Limited Liability Company Interests . At the Partnership Merger Effective Time, by virtue of the Partnership Merger and without any action

 

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on the part of the holder of any partnership interest of CNL Partnership or Partnership Merger Sub:

(a) Each unit of partnership interest in CNL Partnership (“ CNL LP Units ”) issued and outstanding immediately prior to the Partnership Merger Effective Time held by the Company or any of its Subsidiaries shall remain issued and outstanding as a unit of partnership interest in the Surviving Partnership.

(b) Each CNL LP Unit issued and outstanding immediately prior to the Partnership Merger Effective Time (other than any CNL LP Units held by the Company or any of its Subsidiaries), subject to the terms and conditions set forth herein, shall be converted into, and cancelled in exchange for, the right to receive cash in an amount equal to the Company Common Share Merger Consideration per CNL LP Unit, without interest (the “ Partnership Merger Consideration ” and, together with the Company Merger Consideration and, if applicable pursuant to Section 2.2(e), the Company Series C Preferred Share Merger Consideration, the “ Merger Consideration ”).

(c) Each unit of limited liability company interest in Partnership Merger Sub shall be automatically converted into, and cancelled in exchange for, one Class A unit of limited partnership interest in CNL Partnership.

2.4 Exchange of Certificates; Paying Agent .

(a) Paying Agent . Prior to the Closing, Parent shall designate and appoint a bank or trust company reasonably acceptable to the Company as agent for the benefit of the holders of shares of Company Capital Stock, CNL LP Units, and Company Stock Options (the “ Paying Agent ”) for the purpose of exchanging certificates representing shares of Company Capital Stock for the Company Merger Consideration (other than the Option Merger Consideration) and, if applicable, the Company Series C Preferred Share Merger Consideration, and certificates representing CNL LP Units for the Partnership Merger Consideration, and paying the Option Merger Consideration in accordance with Section 6.7.

(b) Parent to Provide Merger Consideration . Prior to the Company Merger Effective Time, Parent will make available to the Paying Agent, as needed, cash and, if applicable, Merger Sub Preferred Shares, in respect of the Merger Consideration to be paid in respect of shares of Company Capital Stock, CNL LP Units and Company Stock Options in accordance with the terms of Sections 2.1 or 2.2 (as applicable), 2.3 and 6.7 (the “ Exchange Fund ”).

(c) Exchange Procedures . Promptly after the Company Merger Effective Time, the Surviving Corporation shall cause the Paying Agent to mail to each holder of record of a certificate or certificates (the “ Certificates ”) that represented as of the Company Merger Effective Time or Partnership Merger Effective Time, as applicable, outstanding shares of Company Capital Stock or CNL LP Units to be exchanged pursuant to Section 2.1 or 2.2 (as applicable) or Section 2.3, a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in such form and have such other provisions as the

 

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Surviving Corporation may reasonably specify) and instructions for use in effecting the surrender of the Certificates in exchange for the applicable Merger Consideration payable in respect of the Company Common Stock, Company Series A Preferred Stock, Company Series C Preferred Stock (if any) or CNL LP Units. Upon surrender of a Certificate to the Paying Agent, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor cash which such holder has the right to receive pursuant to Sections 2.1 or 2.2 (as applicable) and 2.3 after giving effect to any withholding rights described in Section 2.4(h) below, and the Certificate so surrendered shall forthwith be canceled. Until so surrendered, each such Certificate shall, after the Partnership Merger Effective Time or the Company Merger Effective Time, as applicable, represent for all purposes only the right to receive the applicable portion of the Merger Consideration to which the holder thereof is entitled.

(d) Transfers of Ownership . If any portion of the Merger Consideration payable to holders of Company Capital Stock or CNL LP Units is to be paid to a Person other than the registered holder of the shares of Company Capital Stock or CNL LP Units represented by the Certificate or Certificates surrendered in exchange therefor, it shall be a condition to such payment that the Certificate or Certificates so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the Person requesting such payment shall pay to the Paying Agent any transfer or other taxes required as a result of such payment to a Person other than the registered holder of such shares of Company Capital Stock or CNL LP Units or establish to the satisfaction of the Paying Agent that such tax has been paid or is not payable. For purposes of this Agreement, “ Person ” means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization, including, without limitation, a government or political subdivision or any agency or instrumentality thereof.

(e) No Transfers after Effective Time . After the Company Merger Effective Time and the Partnership Merger Effective Time, as applicable, there shall be no further registration of transfers of shares of Company Capital Stock or CNL LP Units. If, after the Company Merger Effective Time and the Partnership Merger Effective Time, as applicable, any Certificates representing shares of Company Capital Stock or CNL LP Units are presented to the Surviving Corporation, they shall be canceled and exchanged for the consideration provided for, and in accordance with the procedures set forth, in this Section 2.4.

(f) No Further Ownership Rights . At the Company Merger Effective Time or the Partnership Merger Effective Time, as applicable, holders of Company Capital Stock or CNL LP Units shall cease to be, and shall have no rights as, stockholders of the Company or limited partners in CNL Partnership other than the right to receive the applicable Merger Consideration provided under Article II hereof (except that, in the event the Company Merger has the effects set forth in Section 1.3(a) and the Company Series C Preferred Stock remains outstanding in accordance with Section 2.1(e), holders of Company Series C Preferred Stock shall continue to have rights as holders thereof, subject to the effects of the dissolution and liquidation of the Surviving Corporation in accordance with Section 1.8). The Merger Consideration paid upon the surrender for exchange of Certificates in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such shares of Company Capital

 

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Stock or CNL LP Units, as applicable. The Option Merger Consideration paid with respect to Company Stock Options in accordance with Section 6.7 and this Section 2.4 shall be deemed to have been paid in full satisfaction of all rights and privileges pertaining to the canceled Company Stock Options, and on and after the Company Merger Effective Time the holder of a Company Stock Option shall have no further rights with respect to any Company Stock Option, other than the right to receive the Option Merger Consideration as provided in Section 6.7.

(g) No Liability . To the extent permitted by law, none of the Buyer Parties, the Company Parties, the Surviving Corporation, the Surviving Partnership or the Paying Agent, or any Affiliate thereof or any employee, officer, director, shareholder, partner, or agent of any of the foregoing, shall be liable to any holder of shares of Company Capital Stock, CNL LP Units or Company Stock Options for any amount paid to a public official pursuant to applicable abandoned property, escheat or similar laws. Any amounts remaining unclaimed by holders of shares of Company Capital Stock, CNL LP Units or Company Stock Options immediately prior to such time as such amounts would otherwise escheat to or become the property of any Governmental Entity shall, to the extent permitted by law, become the property of the Surviving Corporation free and clear of any claim or interest of any Person previously entitled thereto. Any portion of the Merger Consideration made available to the Paying Agent pursuant to Section 2.4(b) that remains unclaimed by the holders of shares of Company Capital Stock, CNL LP Units or Company Stock Options 12 months after the Company Merger Effective Time shall be returned to the Surviving Corporation, upon demand, and any such holder who has not exchanged his shares of Company Capital Stock, CNL LP Units or Company Stock Options for the Merger Consideration in accordance with this Section 2.4 prior to that time shall thereafter look only to the Surviving Corporation for his claim for the applicable Merger Consideration.

(h) Withholding Rights . The Surviving Corporation, Parent or the Paying Agent, as applicable, shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Capital Stock, CNL LP Units or Company Stock Options such amounts as it is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the “ Code ”), or any other applicable provision of law. To the extent that amounts are so withheld by the Surviving Corporation, Parent or the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Capital Stock, CNL LP Units or Company Stock Options in respect of which such deduction and withholding was made by the Surviving Corporation, Parent or the Paying Agent, as applicable.

(i) Lost Certificates . If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such Person of a bond in such reasonable amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent will issue or pay in exchange for such lost, stolen or destroyed Certificate the applicable Merger Consideration payable in respect thereof pursuant to this Agreement.

(j) Investment of Exchange Fund . The Paying Agent shall invest the cash deposited in the Exchange Fund, as directed by Parent, on a daily basis. Any net profit resulting

 

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from, or interest or income produced by, such investments shall be placed in the Exchange Fund and shall be paid to the Surviving Corporation. To the extent that there are losses with respect to such investments, or the Exchange Fund diminishes for other reasons below the level required to make prompt payments of the Merger Consideration as contemplated hereby, Parent shall promptly replace or restore the portion of the Exchange Fund lost through investments or other events so as to ensure that the Exchange Fund is, at all times, maintained at a level sufficient to make all such payments in full.

2.5 Dissenters’ Rights . No dissenters’ or appraisal rights shall be available with respect to the Mergers or the other transactions contemplated hereby.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY PARTIES

The Company Parties hereby jointly and severally represent and warrant to Parent that the statements contained in this Article III are true and correct, except as set forth herein or in the disclosure schedule delivered by the Company Parties to Parent on or before the date of this Agreement (the “ Company Disclosure Schedule ”). The Company Disclosure Schedule is arranged in sections corresponding to the numbered and lettered sections contained in this Article III and the disclosure in any section shall qualify other sections in this Article III, so long as the relevance of such disclosure to such other section is reasonably apparent from the nature of such disclosure.

As used herein, “ Company Material Adverse Effect ” shall mean any fact, event, development, change, effect or circumstance that, individually or in the aggregate with all other facts, events, developments, changes, effects or circumstances, (a) is materially adverse to the assets, financial condition, business, operations or results of operations of the Company and its Subsidiaries (as defined below) taken as a whole or (b) would reasonably be expected to prevent or materially delay the consummation of either of the Mergers or the other transactions contemplated hereby or prevent or materially impair or delay the ability of the Company Parties to perform their respective obligations hereunder, including the consummation of either of the Mergers; provided, that Company Material Adverse Effect shall not include any adverse fact, event, development, change, effect or circumstance arising out of or resulting from (A) the announcement or performance of this Agreement or the transactions contemplated by this Agreement, (B) any adverse change that results from general legal, tax, regulatory, political or business changes in the industries in which the Company operate (unless such adverse fact, event, development, change, effect or circumstance affects the Company and its Subsidiaries in a disproportionate manner as compared to other Persons in the industries in which the Company and its Subsidiaries conduct their business), (C) changes in the United States or global economy that do not disproportionately affect the Company and its Subsidiaries as compared to other Persons in the industries in which the Company and its Subsidiaries conduct their business or (D) any failure of the Company to meet the financial projections of any analyst. The parties agree that the mere fact of a decrease in the market price of the Company Common Stock shall not, in and of itself, constitute a Company Material Adverse Effect, but any fact, event, development, change, effect or circumstance underlying such decrease shall be considered in determining whether there has occurred a Company Material Adverse Effect.

 

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3.1 Organization, Standing and Power; Subsidiaries .

(a) The Company and each of its Subsidiaries (as defined below) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, has all requisite power and authority to own, lease and operate its properties and assets and to carry on its business as now being conducted. The Company and each of its Subsidiaries is duly qualified or licensed to do business and is in good standing as a foreign entity in each jurisdiction in which the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified, licensed or in good standing would not reasonably be expected to result in a Company Material Adverse Effect.

(b) Neither the Company nor any of its Subsidiaries owns any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for, directly or indirectly, any equity or similar interest in, any Person. Set forth in Section 3.1(b) of the Company Disclosure Schedule is a true, accurate and complete list of each Subsidiary of the Company, together with the jurisdiction of its formation and the percentage of equity of such Subsidiary owned by the Company and each of the Company’s Subsidiaries.

As used in this Agreement, the word “ Subsidiary ” means, with respect to a party, any corporation, partnership, limited partnership, joint venture, limited liability company or other business association or entity, whether incorporated or unincorporated, of which (i) such party or any other Subsidiary of such party is a general partner (excluding partnerships, the general partnership interests of which are held by such party and/or one or more of its Subsidiaries do not have 50% or more of the voting interest in such partnership), (ii) such party and/or one or more of its Subsidiaries holds voting power to elect 50% or more of the board of directors or other governing body performing similar functions, or (iii) such party and/or one or more of its Subsidiaries, directly or indirectly, owns or controls 50% or more of the equity, membership, partnership or similar interests.

(c) The Company has made available to Parent complete and accurate copies of: (i) the Restated Articles of Incorporation of the Company dated November 11, 1997, as amended by the Articles of Amendment to the Articles of Restatement of the Company dated February 24, 2005 and the Articles of Amendment to the Articles of Restatement of the Company dated February 24, 2005; the Articles Supplementary Classifying and Designating a Series of Preferred Stock as Series A Cumulative Convertible Preferred Stock, dated November 11, 1997, as amended by the Amendment to Articles Supplementary Classifying and Designating a Series of Preferred Stock as Series A Cumulative Convertible Preferred Stock, dated February 16, 2005; the Articles Supplementary Classifying and Designating a Series of Preferred Stock as 8% Series B Convertible Preferred Stock, dated June 18, 2003; the Articles Supplementary Classifying and Designating a Series of Preferred Stock as 8% Series B-1 Convertible Preferred Stock, dated October 30, 2003; and the Articles Supplementary Establishing and Fixing the Rights and Preferences of 7.5% Series C Redeemable Convertible Preferred Stock, dated February 16, 2005 (each of the foregoing, collectively, the “ Company Articles of Incorporation ”), (ii) the Second Amended and Restated Bylaws of the Company adopted as of February 25, 2005 (the “ Company Bylaws ”); (iii) the charter, bylaws or other organizational documents of each Subsidiary of the Company as in effect since the inception of such

 

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Subsidiary, together with each amendment made to date (the “ Subsidiary Organizational Documents ”); and (iv) the agreements governing each joint venture of the Company (together with the Company Articles of Incorporation, Company Bylaws and the Subsidiary Organizational Documents, the “ Charter Documents ”). The Charter Documents are in full force and effect and no dissolution or revocation or forfeiture proceedings regarding the Company or any Subsidiary of the Company has been commenced. Neither the Company nor any Subsidiary of the Company is in violation of any of the provisions of the Charter Documents in any material respect.

3.2 Capitalization .

(a) The authorized capital stock of the Company consists of 300,000,000 shares of Company Common Stock, 400,000,000 shares of Excess Stock, $.001 par value per share (the “ Excess Stock ”), and 100,000,000 shares of Company Preferred Stock, $.001 par value per share, of which 8,000,000 shares are designated as Company Series A Preferred Stock; 20,000 shares are designated as 8% Series B Convertible Preferred Stock (the “ Company Series B Preferred Stock ”); 5,000 shares are designated as 8% Series B-1 Convertible Preferred Stock (the “ Company Series B-1 Preferred Stock ”); and 7,500,000 shares are designated as Company Series C Preferred Stock. As of the close of business on October 27, 2006, (i) 67,526,109 shares of Company Common Stock were issued and outstanding, (ii) no shares of Company Common Stock were owned by the Company or by any Subsidiaries of the Company, (iii) 0 shares of Excess Stock were issued and outstanding, (iv) 7,834,197 shares of Company Series A Preferred Stock were issued and outstanding, (v) no shares of Company Series B Preferred Stock or Company Series B-1 Stock were issued and outstanding, and (vi) 7,244,028 shares of Company Series C Preferred Stock were issued and outstanding.

(b) As of the date of this Agreement, no shares of Company Common Stock were reserved for future issuance pursuant to the U.S. Restaurant Properties, Inc. Fixed Stock Option Plan (the “ Fixed Option Plan ”) and no options granted pursuant to the Fixed Option Plan (the “ Fixed Option Plan Options ”) to purchase any shares of Company Common Stock were outstanding. As of the date of this Agreement, 30,910 shares of Company Common Stock were reserved for future issuance pursuant to the U.S. Restaurant Properties, Inc. Flexible Incentive Plan (the “ Flexible Option Plan ,” and together with the Fixed Option Plan, the “ Company Stock Plans ”) and 11,500 options granted pursuant to the Flexible Option Plan (the “ Flexible Option Plan Options ,” and together with the Fixed Option Plan Options, the “ Company Stock Options ”) to purchase 11,500 shares of Company Common Stock were outstanding. As of the date of this Agreement, 379,848 warrants (the “ Warrants ”) to purchase 379,848 shares of Company Common Stock were outstanding. As of the date of this Agreement, 7,351,610 shares of Company Common Stock were issuable upon conversion of Company Series A Preferred Stock and 9,287,206 shares of Company Common Stock were issuable upon conversion of Company Series C Preferred Stock. Section 3.2(b)(i) of the Company Disclosure Schedule sets forth a true, complete and correct list of the Company Stock Options and the Warrants, including the names of the Persons to whom such Company Stock Options and the Warrants have been granted or issued, the number of shares of Company Common Stock subject to each Company Stock Option and Warrant, the per share exercise price or purchase price for each Company Stock Option and Warrant, and whether the Company Stock Option is qualified. Except as set forth in this Section 3.2, (i) there are no equity securities of any class of the Company or any of

 

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its Subsidiaries (other than equity securities of any such Subsidiary that are directly or indirectly owned by the Company), or any security convertible or exchangeable into or exercisable for such equity securities, issued, reserved for issuance or outstanding and (ii) there are no options, warrants, equity securities, calls, rights, commitments or agreements of any character to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound obligating the Company or any of its Subsidiaries to issue, transfer, deliver or sell, or cause to be issued, transferred, delivered or sold, additional equity securities of the Company or any of its Subsidiaries or any security or rights convertible into or exchangeable or exercisable for any such equity securities. Neither the Company nor any of its Subsidiaries has outstanding any stock appreciation rights, phantom stock, performance based rights or similar rights or obligations. Except for the Voting Agreements, the Company is not a party to any agreement or understanding with respect to the voting (including voting trusts and proxies) or sale or transfer (including agreements imposing transfer restrictions) of any equity securities of the Company or any of its Subsidiaries. “ Knowledge ” means the actual knowledge after due inquiry of any individual identified on Section 3.2(b)(ii) of the Company Disclosure Schedule.

(c) All outstanding shares of Company Common Stock, Company Series A Preferred Stock and Company Series C Preferred Stock are, and all shares of Company Common Stock, subject to issuance as specified in Section 3.2(b) above, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be, duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the MGCL, the Company Articles of Incorporation or Company Bylaws or any agreement to which the Company is a party or is otherwise bound. There are no obligations, contingent or otherwise, of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of Company Common Stock, Company Preferred Stock or capital stock of the Company or any of its Subsidiaries or to provide funds to, or make any material investment (in the form of a loan, capital contribution or otherwise) in, the Company or any Subsidiary of the Company or any other entity, other than guarantees of bank obligations of Subsidiaries of the Company entered into in the ordinary course of business. The Company has paid in full all dividends accrued and payable on or prior to the date hereof with respect to outstanding shares of Company Capital Stock.

(d) All of the outstanding shares of capital stock, membership interests, partnership or limited partnership interests or other equity interests (the “ Equity Interests ”) of each of the Subsidiaries of the Company are owned of record and beneficially, directly or indirectly, by the Company or another Subsidiary of the Company, are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights and all such Equity Interests are owned by the Company or another Subsidiary of the Company free and clear of all security interests, liens, claims, pledges, agreements, limitations in the Company’s voting rights or right to sell, charges or other encumbrances of any nature (“ Liens ”).

(e) CNL General Partner, as of the date hereof, is the sole general partner of CNL Partnership and directly owns all of the units of general partner interest in CNL Partnership.

 

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(f) Section 3.2(f) of the Company Disclosure Schedule sets forth a list of all holders of units of partnership interest in CNL Partnership, including the name of the Person holding each such unit, and the number, class and type thereof (e.g., preferred, common, general or limited). Except as set forth in the Fourth Amended and Restated Agreement of Limited Partnership of U.S. Restaurant Properties Operating, L.P., as amended by Amendment No. 1 dated December 30, 1999 and further amended by Amendment No. 2 dated December [ ], 2003 (the “ CNL Partnership Agreement ”), there are no options, warrants, calls, subscriptions, convertible or exchangeable securities or other rights, agreements or commitments that obligate the CNL Partnership, the Company or any of its Subsidiaries to issue, repurchase, redeem, transfer or sell any partnership interests of CNL Partnership. The partnership interests of CNL Partnership owned indirectly by the Company through its wholly-owned Subsidiaries are owned free and clear of any Liens and subject only to the restrictions on transfer set forth in the CNL Partnership Agreement and those imposed by applicable securities laws.

(g) As of the date of this Agreement, there is no outstanding indebtedness for borrowed money of the Company or its Subsidiaries individually in excess of $500,000 in principal amount.

(h) The Company does not have a “poison pill” or similar stockholders’ rights plan or agreement.

3.3 Authority; No Conflict; Required Filings and Consents .

(a) The Company and CNL Partnership, respectively, have all requisite corporate or limited partnership power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement, including the Mergers. The Company Board has (i) approved this Agreement, the Mergers and the other transactions contemplated by this Agreement and declared that the Mergers and the other transactions contemplated by this Agreement are in the best interests of the Company and its stockholders on the terms and subject to the conditions set forth herein, (ii) directed that this Agreement, the Mergers and the other transactions contemplated hereby be submitted for consideration at a special meeting of the holders of the Company Common Stock (the “ Company Meeting ”) and (iii) recommended the approval of this Agreement, the Mergers and the other transactions contemplated hereby to the holders of the Company Common Stock. The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement by the Company and CNL Partnership, including the Mergers, have been duly authorized by all necessary corporate action on the part of the Company and partnership action on the part of CNL Partnership, subject only to affirmative approval of the Company Merger by holders of a majority of the outstanding shares of Company Common Stock outstanding at the close of business on the record date for the Company Meeting (the “ Company Stockholder Approval ”). This Agreement has been duly executed and delivered by the Company and CNL Partnership and constitutes the valid and binding obligation of each of the Company and CNL Partnership, enforceable in accordance with its terms.

(b) The execution and delivery of this Agreement by the Company and CNL Partnership does not, and the consummation of the transactions contemplated by this Agreement will not, (i) conflict with, or result in any violation or breach of, (1) any provision of the

 

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Company Articles of Incorporation or the Company Bylaws, (2) the CNL Partnership Agreement or the certificate of limited partnership of CNL Partnership or (3) the Charter Documents of any of the Company’s other Subsidiaries, (ii) conflict with, or result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, or require a consent or waiver under, any of the terms, conditions or provisions of, any note, bond, mortgage, indenture, lease, license, contract or other agreement, instrument or obligation to which the Company or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound, (iii) subject to compliance with the requirements specified in clauses (i), (ii), (iii), (iv) and (v) of Section 3.3(c), conflict with or violate any permit, concession, franchise, license, judgment, injunction, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries or any of its or their properties or assets; or (iv) require the Company under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract or other agreement, instrument or obligation to which it is a party or by which it or its assets are bound, to obtain the consent or approval of, or provide notice to, any other party to any such agreement, contract, arrangement or understanding, except in the case of clauses (ii), (iii) and (iv) of this Section 3.3(b) for any such conflicts, violations, breaches, defaults, terminations, cancellations, accelerations, losses, failure to obtain consent or approval or failure to notify which would not reasonably be expected to result in a Company Material Adverse Effect.

(c) No consent, approval, license, permit, order or authorization of, or registration, declaration, notice or filing with, any court, arbitrational tribunal, administrative agency or commission or other federal, state or local, domestic, foreign or multinational governmental or regulatory authority or agency (a “ Governmental Entity ”) is required by or with respect to the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated by this Agreement, except for (i) pre-merger notification under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), (ii) the filing of the Articles of Merger with the SDAT, the filing of the Partnership Certificate of Merger with the Secretary of State of the State of Delaware, and appropriate corresponding documents with the Secretaries of State of other states in which the Company is qualified as a foreign corporation to transact business, (iii) the filing of reports with the Securities and Exchange Commission (the “ SEC ”) in accordance with the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), (iv) the filing of a proxy statement (the “ Proxy Statement ”) with the NYSE and the SEC in accordance with the Securities Act of 1933, as amended (the “ Securities Act ”), (v) the compliance with any state securities laws, and (vi) any consent, approval, license, permit, order, authorization, registration, declaration, notice or filing, which, if not obtained or made, would not reasonably be expected to result in a Company Material Adverse Effect.

(d) Other than (i) the Company Stockholder Approval at the Company Meeting (as defined below) and (ii) the approval of the Partnership Merger by the CNL General Partner and holders of a majority of the limited partner interests in CNL Partnership which have already been irrevocably obtained, no other vote or approval of the holders of any class or series of Equity Interests of the Company or any of its Subsidiaries is necessary to approve this Agreement, the Company Merger, the Partnership Merger and the transactions contemplated by this Agreement. There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable or exercisable for, securities having the right to vote) on any matters on which stockholders of the Company may vote.

 

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3.4 SEC Filings; Financial Statements; Information Provided .

(a) The Company has filed or furnished all forms, reports and other documents required to be filed or furnished by the Company with the SEC and state securities regulators, including all prospectuses and other materials used by it or on its behalf in connection with the offer and sale of securities issued by the Company since January 1, 2003. Such forms, reports and other documents (including those forms, reports and other documents that the Company may file with or furnish to the SEC after the date hereof until the Closing, including the Proxy Statement) are referred to herein as the “ Company SEC Reports ”. The Company SEC Reports (i) were or will be filed or furnished on a timely basis and (ii) were or will be prepared in compliance in all material respects with the applicable requirements of the Securities Act, the Exchange Act and applicable state securities laws, as the case may be, and the rules and regulations promulgated thereunder applicable to such Company SEC Reports. None of the Company SEC Reports when filed or furnished, or, if amended, as of the date of such amendment, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. No investigation by the SEC with respect to the Company or any its Subsidiaries is pending or, to the Knowledge of the Company, threatened. No Subsidiary of the Company is required, or has been required since January 1, 2003, to file or furnish any forms, reports or other documents with the SEC.

(b) Each of the consolidated financial statements (including, in each case, any related notes and schedules) contained or to be contained in or incorporated by reference into the Company SEC Reports (i) complied or will comply in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, (ii) were or will be prepared in accordance with generally accepted accounting principles (“ GAAP ”) applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by the SEC on Form 10-Q under the Exchange Act or for normal year-end adjustments) and (iii) fairly presented or will fairly present the consolidated financial position, result of operations and cash flows of the Company as of the dates thereof and the results of its operations and cash flows of the Company and its consolidated Subsidiaries for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments.

(c) The Company has made available to Parent copies of all correspondence received by the Company from, or sent by the Company to, the SEC since January 1, 2003. There are no outstanding or unresolved comments from the SEC with respect to any of the Company SEC Reports.

(d) The Company maintains disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15 under the Exchange Act; such controls and procedures are designed to ensure that all material information concerning the Company and the Subsidiaries is made known on a timely basis to the individuals responsible for the preparation of the Company’s SEC filings and other public disclosure documents.

 

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(e) The Company and each of its Subsidiaries maintain accurate books and records reflecting its assets and liabilities and maintain a system of internal accounting controls that are designed to ensure that (i) transactions are executed in accordance with management’s authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s authorization, (iv) the recorded accountability for assets is compared with the existing assets at regular intervals and appropriate action is taken with respect to any differences, and (v) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis. The Company has previously made available to Parent complete and correct copies of all written descriptions of, and all policies, manuals and other documents promulgating, such internal accounting controls.

(f) Neither the Company nor any of its Subsidiaries nor any of their respective trustees, directors, officers, employees, auditors or accountants has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices. No attorney representing the Company or any of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, trustees, employees or agents to the Company Board or any committee thereof or to any trustee or officer of the Company.

3.5 No Undisclosed Liabilities .

Except (i) as set forth on the Company’s consolidated balance sheet at June 30, 2006 as included in the Company’s Form 10-Q for the fiscal quarter ended June 30, 2006, (ii) for normal or recurring liabilities incurred since June 30, 2006 in the ordinary course of business consistent with past practice, and (iii) fees and expenses incident to the consummation of the transactions contemplated hereby, the Company and its Subsidiaries do not have any liabilities, either accrued, contingent or otherwise, that are required to be reflected in the consolidated balance sheet of the Company or in the notes thereto in accordance with GAAP and that have had or would reasonably be expected to result in a Company Material Adverse Effect.

3.6 Absence of Certain Changes or Events .

(a) Except as disclosed in the Company SEC Reports filed prior to the date of this Agreement, since June 30, 2006, (i) there has not been a fact, event, development, change, effect or circumstance that has resulted or would reasonably be expected to result in a Company Material Adverse Effect and (ii) the Company and its Subsidiaries have conducted their business in the ordinary course consistent with past practice.

 

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(b) During the period from January 1, 2006 to the date hereof, (i) there has not been any change by the Company in its accounting methods, principles or practices, any revaluation by the Company of any of its assets, including, writing down the value of inventory or writing off notes or accounts receivable and (ii) there has not been any action or event, and neither the Company nor any of its Subsidiaries has agreed in writing or otherwise to take any action, that would have required the consent of Parent pursuant to Section 5.1 had such action or event occurred or been taken after the date hereof and prior to the Company Merger Effective Time.

3.7 Properties .

(a) The Company or a Subsidiary of the Company owns good and marketable fee simple title (or leasehold estate) to each of its real properties used in the ordinary course of its business (such real property, together with all buildings, structures and other improvements and fixtures located on or under such real property and all easements, rights of way and other appurtenances to such real property, collectively, the “ Company Properties ” and each, a “ Company Property ”). Section 3.7(a) of the Company Disclosure Schedule sets forth each Company Property owned or leased by the Company and its Subsidiaries, and, for each Company Property that is leased to a tenant, the following information: (i) the address of the Company Property and the name of the Company Subsidiary that owns such Company Property, (ii) the name of the tenant, (iii) the “concept”, and (iv) whether the Company Property currently is or, to the Company’s Knowledge, has ever been operated as a gas station. Except (i) as set forth in the Title Insurance Policies, (ii) for the Company Leases, (iii) for any easements granted in the ordinary course of business since the date of the Title Insurance Policies, none of which has had or would reasonably be expected to result in a Company Material Adverse Effect, and (iv) mortgage encumbrances related to securitizations or secured transactions, no other Person has any real property ownership interest in any of the Company Properties (other than those Company Properties owned in joint venture arrangements). The Company Properties are not subject to any rights of way, written agreements, covenants, laws, ordinances and regulations (including zoning regulations or building codes affecting building use or occupancy, or reservations of an interest in title (collectively, “ Property Restrictions ”) or liens (including liens for Taxes), mortgages or deeds of trust, claims against title, charges which are liens, security interests or other encumbrances on title (collectively, the “ Encumbrances ”), except for (A) Property Restrictions imposed or promulgated by law or any Governmental Entity with respect to real property, including zoning regulations which would not reasonably be expected to result in a Company Material Adverse Effect, (B) Property Restrictions and Encumbrances disclosed on the Title Insurance Policies or existing surveys and easements granted in the ordinary course of business since the date of the Title Insurance Policies, none of which would adversely effect the tenant’s obligation to pay rent under the applicable Company Lease (as defined below), (C) mechanics’, carriers’, workmen’s and repairmen’s liens and other Encumbrances and Property Restrictions, if any, which would not reasonably be expected to result in a Company Material Adverse Effect, and (D) liens for Taxes not yet due and payable (items (i) – (iv) of the preceding sentence and the foregoing items (A) – (D), the “ Permitted Encumbrances ”). There is no default under any of the Permitted Encumbrances which would reasonably be expected to result in a Company Material Adverse Effect.

 

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(b) Valid policies of title insurance (“ Title Insurance Policies ”) have been issued or irrevocably committed to be issued insuring the Company’s or the applicable Company Subsidiary’s fee simple title (or leasehold estate) in each of the Company Properties owned by it in amounts at least equal to the purchase price thereof paid by Company or its Subsidiary in the case of Company Properties owned by the Company or any of its Subsidiaries, subject only to matters and exceptions disclosed in such policies, none of which would adversely effect the tenant’s obligation to pay rent under the applicable Company Lease. Such policies are, at the date hereof, in full force and effect and no written claim has been made against any of the Title Insurance Policies.

(c) There has been no physical damage to any Company Properties which would be reasonably expected to result in a Company Material Adverse Effect after giving effect to any applicable insurance.

(d) Neither Company nor any of the Subsidiaries of the Company nor, to the Company’s Knowledge, any tenant under a Company Lease, has received any notice with respect to any Company Property, and neither the Company nor any of the Subsidiaries has any Knowledge, to the effect that any condemnation or rezoning proceedings are pending or threatened which would reasonably be expected to result in a Company Material Adverse Effect. All work to be performed, payments to be made and actions to be taken by the Company or any of its Subsidiaries prior to the date hereof pursuant to any agreement entered into with a Governmental Entity in connection with a site approval, zoning reclassification or other similar action (e.g., local improvement district, road improvement district, environmental mitigation) material to Company and any of its Subsidiaries taken as a whole have been performed, paid or taken, as the case may be, and to the Company’s Knowledge, no planned or proposed work, payments or actions that may be required after the date hereof pursuant to such agreements are material to Company and any of its Subsidiaries taken as a whole.

(e) Neither the Company nor any Subsidiary has engaged any property manager that is not the Company or a Subsidiary of the Company for any Company Property.

3.8 Leases .

(a) Each lease to which any Company Property is subject (each, a “ Company Lease ” and together, the “ Company Leases ”) is a valid and subsisting lease with respect to the Company Property to which it relates and none of the Company or the applicable Subsidiary is in material breach or default under any Company Lease and to the Company’s Knowledge, no event of default by any other party to a Company Lease has occurred that has had or would reasonably be expected to result in a Company Material Adverse Effect. Each of the Company Leases is valid, binding and in full force and effect against the Company or the applicable Company Subsidiary, and, to the Knowledge of the Company, against the other party thereto.

(b) With regard to any Company Properties where the Company or any Subsidiary of the Company (the “ Lessee ”) holds a leasehold estate (a “ Leasehold Interest ”): (i) the Leasehold Interest is a valid and subsisting lease and, to the Company’s Knowledge, the Lessee is not in default under any terms thereunder; and (ii) to the extent required under the Leasehold Interest, the Company will use commercially reasonable efforts to obtain consent from the lessor under the Leasehold Interest to the transaction contemplated hereby. Schedule 3.8(b) sets forth a list of each Leasehold Interest.

 

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3.9 Underground Storage Tanks . Section 3.9 of the Company Disclosure Schedule sets forth a true and complete list of each parcel of real property owned by the Company and any real property over which the Company exercises day-to-day control on which an underground storage tank that contains, formerly contained, or is intended for the storage of, petroleum products is or, to the Company’s Knowledge, prior to the acquisition of such real property by the Company, was located.

3.10 Data Tape . The Company has furnished or made available to Parent (i) a data tape which provides certain information with respect to all leases of the Company and its Subsidiaries, including any rights of first refusal and purchase options (the “ Data Tape ”), and (ii) a loan receivables roll which provides certain information with respect to all loan agreements, letters of credit, indentures, notes, bonds, debentures, mortgages or any other documents, agreements or instruments evidencing a capitalized leased obligation or other indebtedness, or any guarantee thereof, for the benefit of, or payable to the Company or any of its Subsidiaries (the “ Receivables Roll ”). Except as would not reasonably be expected to result in a Company Material Adverse Effect, the Data Tape and Receivables Roll were prepared in good faith by the Company in accordance with the books and records of the Company and its Subsidiaries and in a manner not to have intentionally contained incorrect information.

3.11 Taxes .

(a) Each of the Company, the Tax Subsidiaries and any Company Group has timely filed all Tax Returns required to be filed by it (after giving effect to any filed extension properly granted by a Tax Authority having authority to do so) and has timely paid or will timely pay all Taxes (whether or not shown on such Tax Returns) as required to be paid by it, and such returns are true, correct and complete in all material respects. Accurate and complete copies of all federal, state and local income or franchise Tax Returns that have been filed by the Company and each Tax Subsidiary for all taxable years beginning on or after January 1, 2003, any extensions filed with any Tax Authority that are currently in effect and all written communications with a Taxing Authority relating thereto, have been delivered or made available to Parent. Neither the Company nor any other Person on behalf of the Company or any Tax Subsidiary has requested any extension of time within which to file any material Tax Return, which material Tax Return has not yet been filed.

(b) All Taxes payable by or on behalf of the Company or any of its Tax Subsidiaries (whether or not shown in a Tax Return) have been fully and timely paid or adequately provided for in accordance with GAAP, and the most recent audited financial statements contained in the Company SEC Reports reflect an adequate reserve for all Taxes payable by the Company and its Tax Subsidiaries for all taxable periods and portions thereof through the date of such financial statements and Taxes payable by the Company and Tax Subsidiaries on the Closing Date will not exceed such reserve as adjusted through the Closing Date in accordance with the past customs and practice of the Company and its Tax Subsidiaries in filing their Tax Returns. There are no liens for Taxes, other than Permitted Encumbrances, upon any of the assets of the Company or any Tax Subsidiary.

 

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(c) The Company (i) for all taxable years commencing with the Company’s taxable year ended December 31, 1997, through the most recent December 31, has been subject to taxation as a REIT within the meaning of Section 856 of the Code and has satisfied all requirements to qualify as a REIT for such years and (ii) has operated since and including the most recent January 1 through the date hereof in a manner that will permit it to qualify as a REIT for the taxable year that includes the date hereof, and (iii) intends to continue to operate, in such a manner as to qualify as and be subject to taxation as a REIT for the taxable year that includes the Company Merger Effective Time; provided, however, that the Company’s qualification as a REIT for the year that includes the Company Merger Effective Time will depend, in part, upon its organization and method of operation post-Closing. No challenge to the Company’s status as a REIT is pending or threatened in writing.

(d) Since January 1, 2003, (i) the Company and its Tax Subsidiaries have not incurred any liability for Taxes under sections 857(b), 857(f), 860(c) or 4981 of the Code which have not been previously paid and (ii) neither the Company nor any Tax Subsidiary has incurred any material liability for Taxes that have not been previously paid other than in the ordinary course of business. Neither the Company nor any Tax Subsidiary (other than a “taxable REIT Tax Subsidiary” or any Tax Subsidiary of a “taxable REIT Tax Subsidiary”) has engaged at any time in any “prohibited transactions” within the meaning of Section 857(b)(6) of the Code. Neither the Company nor any Tax Subsidiary has engaged in any transaction that would give rise to “redetermined rents, redetermined deductions and excess interest” described in section 857(b)(7) of the Code. No event has occurred, and no condition or circumstances exists, which presents a risk that any Tax described in the preceding sentences will be imposed on the Company or any Tax Subsidiary.

(e) The Company and its Tax Subsidiaries (i) have complied with all applicable Laws, rules and regulations relating to the payment and withholding of Taxes (including, without limitation, withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446 and 3402 of the Code or similar provisions under any foreign Laws); and (ii) have duly and timely withheld and have paid over to the appropriate taxing authorities all amounts required to be withheld and paid over on or prior to the due date thereof under all applicable Laws.

(f) Neither the Company nor any of its Tax Subsidiaries has executed or filed with any Taxing Authority any agreement, waiver or other document or arrangement extending or having the effect of extending the period for assessment or collection of Taxes (including, but not limited to, any applicable statute of limitation) that will have continuing effect after the Closing, and no request for any such waiver or extension is currently pending. No power of attorney with respect to any Tax matter is currently in force and no request for any such waiver or extension is currently pending.

(g) No material deficiencies for any Taxes have been proposed, asserted or assessed against the Company or any Tax Subsidiary. There are no material pending actions or proceedings by any Taxing Authority for audit, examination, assessment, liability or collection of any Tax. Neither the Company nor any Tax Subsidiary has received any written notice from any taxing authority that it intends to conduct such an audit, examination or other proceeding in respect of the liability or collection of any Tax or make any assessment for Taxes. Neither the Company nor any Tax Subsidiary is a party to any litigation or pending litigation or administrative proceeding relating to Taxes (other than litigation dealing with appeals of property tax valuations or litigation set forth in the SEC Reports).

 

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(h) Neither the Company, nor any Tax Subsidiary has received notice of any claim by a Taxing Authority in a jurisdiction where the Company or such Tax Subsidiary does not file Tax Returns that the Company or such Tax Subsidiary is or may be subject to taxation by the jurisdiction.

(i) Neither the Company, nor any Tax Subsidiary is obligated to make after the Closing any payment that would not be deductible pursuant to Section 162(m) of the Code.

(j) Each Tax Subsidiary that is a partnership, joint venture, or limited liability company (i) has been since its formation and continues to be treated for federal income tax purposes as a partnership or disregarded entity, as the case may be, and not as a corporation or an association taxable as a corporation and (ii) has not since the later of the date of its formation or the acquisition by the Company of a direct or indirect interest therein, owned any assets that have caused or would cause the Company to violate the requirements of Section 856(c)(4) of the Code. Each Tax Subsidiary that is a corporation has been, since the later of the date of its formation or the date on which such Tax Subsidiary became a Tax Subsidiary, a “qualified REIT Tax Subsidiary” pursuant to Section 856(i) of the Code or a “taxable REIT Tax Subsidiary” pursuant to Section 856(l) of the Code.

(k) Neither the Company nor any of its Tax Subsidiaries holds, directly or indirectly, any assets the disposition of which would be subject to rules similar to Section 1374 of the Code, including as a result of (A) an election under IRS Notice 88-19 or Treasury Regulations Section 1.337(d)-5 or Section 1.337(d)-6 or (B) the application of Treasury Regulations Section 1.337(d)-7.

(l) Neither the Company nor any Tax Subsidiary (i) is a party to any Tax sharing or similar agreement or arrangement, other than any agreement or arrangement between the Company and any of its Tax Subsidiaries, pursuant to which it will have any obligation to make any payments after the Closing, (ii) is or has ever been a member of an affiliated group (other than a group the common parent of which is the Company or a directly or indirectly wholly-owned Tax Subsidiary) filing a consolidated federal income tax return or (iii) has any liability for the Taxes of any Person other than the Company and its Tax Subsidiaries (x) under Treasury Regulation §1.1502-6 (or similar provision of state, local or foreign law), (y) as transferee or successor or (z) by contract.

(m) Neither the Company nor any of its Tax Subsidiaries has requested a private letter ruling from the IRS or comparable rulings from other taxing authorities or has entered into any “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law).

(n) Neither the Company nor any of its Tax Subsidiaries has engaged in any transaction that has given rise to or would be reasonably expected to give rise to a disclosure obligation as a “listed transaction” under Section 6011 of the Code and the regulations

 

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promulgated thereunder. The Company and all of its Tax Subsidiaries have complied with all obligations applicable to the Company or the relevant Tax Subsidiary under Sections 6111 and 6112 of the Code.

(o) To the Knowledge of the Company, as of the date hereof, the Company is a “domestically-controlled REIT” within the meaning of Section 897(h)(4)(B) of the Code.

(p) There are no Tax Protection Agreements currently in force and no Person has raised in writing, or to the Knowledge of the Company threatened to raise, a material claim against the Company or any Tax Subsidiary for any breach of any Tax Protection Agreement.

(q) As used in this Agreement:

(i) “ Tax ” or “ Taxes ” shall include all federal, state, local and foreign income, property, sales, use, occupancy, transfer, recording, withholding, franchise, employment, and excise and other taxes, tariffs or governmental charges of any nature whatsoever, together with assessments, interest or additions to tax with respect thereto.

(ii) “ Tax Return ” or “ Tax Returns ” shall include all original and amended returns and reports (including elections, claims, declarations, disclosures, schedules, computations and information returns) required to be supplied to a Tax Authority in any jurisdiction.

(iii) “ Tax Authority ” means the Internal Revenue Service (the “ IRS ”) and any other domestic or foreign bureau, department, entity, agency or other Governmental Entity responsible for the administration of any Tax.

(iv) “ Tax Subsidiary ” means (i) any Subsidiary, (ii) any entity in which the Company owns, directly or indirectly, an equity interest (as determined for U.S. federal income tax purposes) of at least 10%, determined by either voting power or value, whichever is greater, or (iii) any entity of which the Company or any other subsidiary of the Company is a general partner or managing member.

(v) “Tax Protection Agreement ” means any written or oral agreement to which the Company or any Tax Subsidiary is a party pursuant to which: (a) any liability to a partner or member in any Tax Subsidiary relating to Taxes may arise, whether or not as a result of the consummation of the transactions contemplated by this Agreement; or (b) in connection with the deferral of income Taxes of a partner or member of any Tax Sub