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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) SEPTEMBER 30, 1998
AMRESCO CAPITAL TRUST
(Exact name of registrant as specified in its charter)
TEXAS 1-14029 75-2744858
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
700 NORTH PEARL STREET
SUITE 2400, LB 342
DALLAS, TEXAS 75201
(Address of principal executive offices)
(Registrant's telephone number, including area code) (214) 953-7700
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On September 30, 1998, AMREIT I, Inc. (the "Company"), a wholly-owned
subsidiary of AMRESCO Capital Trust (the "Registrant"), acquired certain loans
from AMRESCO Commercial Finance, Inc. ("ACFI") pursuant to two separate
agreements.
ACFI is a wholly-owned subsidiary of AMRESCO, INC. ("AMRESCO," and,
together with its affiliated entities, the "AMRESCO Group"). AMRESCO is also an
affiliate of AMREIT Managers, L.P. (the "Manager"), the manager of the
Registrant. Pursuant to a management agreement, the Manager is responsible for
the day-to-day operations of the Registrant. Additionally, three of the seven
members of the Board of Trust Managers of the Registrant and all of the
Registrant's officers are employed by the AMRESCO Group. The AMRESCO Group
currently owns approximately 15% of the Registrant.
PACKAGE 1
The first Sale and Assignment Agreement between the Company and ACFI
provided for the purchase by the Company from ACFI of three loans, represented
by nine notes and primarily secured by first liens, for a cash purchase price of
approximately $11,313,916. The Company paid the purchase price from cash on
hand.
The first of these loans provides for a $13,000,808 commitment, with an
outstanding principal balance of approximately $7,673,611 as of September 30,
1998. Additionally, the Company acquired accrued interest totaling $114,790. The
proceeds of the loan are being used for the construction and lease-up of a
115,000 (approximate) square foot office building in Richardson, Texas. The loan
earns interest at an accrual rate of 14% per annum. Payments of interest only
are due and payable monthly at a pay rate of 10% per annum. The Company is
entitled to receive and apply 50% of any excess cash flow from the rental of the
property to the interest accrual. The Company is also entitled to a 50% residual
profits interest. The initial maturity date is October 30, 1999.
The second of these loans provides for a $3,157,900 commitment, with an
outstanding principal balance of approximately $1,554,552 as of September 30,
1998. Additionally, the Company acquired accrued interest totaling $13,678. The
proceeds of the loan are being used to finance the development of a 400-acre
residential community in San Antonio, Texas. The loan earns interest at 22% per
annum. Payments of interest only are due and payable monthly. The initial
maturity date is May 1, 2001.
The third loan provides for a $8,400,000 revolving credit commitment,
with an outstanding principal balance of approximately $1,949,116 as of
September 30, 1998. Additionally, the Company acquired accrued interest totaling
$8,169. The proceeds of the loan are being used to finance the development of
various residential subdivisions in San Antonio, Texas. The loan earns interest
at an accrual rate of 14% per annum. Payments of interest only are due and
payable monthly at a pay rate of 10% per annum. Payments of interest at the
accrual rate are due and payable quarterly. The various notes underlying the
loan mature on various dates through August 1, 2000.
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PACKAGE 2
Pursuant to a separate Sale and Assignment Agreement with ACFI, the
Company acquired five loans, represented by seven notes, for a cash purchase
price of approximately $22,978,251, including accrued interest. The Company paid
the purchase price from cash on hand and certain borrowings under the Company's
Master Repurchase Agreement with Prudential Securities Credit Corporation.
Immediately following the purchase of the five loans described below,
pursuant to an Economics Equivalents and Funding Agreement dated as of September
30, 1998, the Company sold to ACFI for a cash purchase price of approximately
$5,020,292 the right to collect from the Company an amount equal to the economic
equivalent of all amounts collected from the five loans in excess of $17,957,959
plus a return on this amount, or so much of it as is outstanding from time to
time, equal to 12% per annum. As additional consideration, ACFI agreed to
reimburse the Company for any additional advances required to be made under the
loan documents. ACFI was also granted the right to service these five loans,
subject to obtaining the Company's consent to certain amendments or
modifications of the loan under certain circumstances.
Loan one is a $3,664,000 first lien facility, the proceeds of which
were used by the borrower to finance the acquisition and renovation of a
240-unit apartment complex in Galveston, Texas. Additionally, the Company
acquired accrued interest totaling $236,686. The loan earns interest at an
accrual rate of 15% per annum. Payments of interest only are due and payable
monthly at a variable rate equal to the prime rate plus 1.5% per annum. The loan
agreement provides that 25% of any excess cash flow from the rental of such
property shall be applied to the interest accrual. Furthermore, the loan
agreement provides for a 40% residual profits interest. The initial maturity
date is July 15, 1999.
Loan two is a $2,650,000 mezzanine facility of which approximately
$2,587,000 had been funded as of September 30, 1998. Additionally, the Company
acquired accrued interest totaling $246,802. The borrower used the proceeds to
finance the construction of a 278-unit apartment complex in Fort Worth, Texas.
The loan earns interest at an accrual rate of 16% per annum. Payments of
interest only are due monthly at a pay rate of 10.5% per annum. The loan
agreement provides that 75% of any excess cash flow from the rental of such
property shall be applied to the interest accrual. Additionally, the loan
agreement provides for a 33% profits participation through January 8, 1999 and
a 38% profits participation thereafter. The initial maturity date is January 8,
1999.
Loan three consists of two loans (one a first lien facility and one a
second lien facility) aggregating $6,325,000, of which approximately $6,247,000
had been funded as of September 30, 1998. Additionally, the Company acquired
accrued interest totaling $86,327. The borrower used the proceeds to finance
the acquisition, completion and leasing of a 56,000 (approximate) square foot
office building in Austin, Texas. The loan earns interest at an accrual rate of
16% per annum. Payments of interest only are due monthly at a pay rate of 10%
per annum. The loan agreements provide that 65% of any excess cash flow from
the rental of such property shall be applied to the interest accrual. Certain
additional amounts are to be paid by the borrower in the event of a sale or
refinancing of the property. The initial maturity date is April 18, 1999.
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Loan four is a $3,015,000 first lien facility, of which approximately
$2,364,000 had been funded as of September 30, 1998. Additionally, the Company
acquired accrued interest totaling $53,180. The borrower used the proceeds to
finance the acquisition and expansion of an existing medical office building in
Dallas, Texas. The loan earns interest at an accrual rate of 13% per annum.
Payments of interest only are due monthly at a pay rate of 10% per annum. The
loan agreement provides that 50% of any excess cash flow from the rental of such
property shall be applied to the interest accrual. Furthermore, the loan
agreement provides for a 50% residual profits participation. The initial
maturity date is June 30, 1999.
Loan five is a $8,765,000 first lien facility, of which approximately
$7,441,000 had been funded as of September 30, 1998. Additionally, the Company
acquired accrued interest totaling $51,775. The loan proceeds are being used as
one-year bridge financing for a 147,000 (approximate) square foot
office/industrial building in Norwood, Massachusetts. The loan earns interest at
an accrual rate of 12.5% per annum. Payments of interest only are due monthly at
a pay rate of 10% per annum. The loan agreement provides that 100% of any excess
cash flow from the rental of such property shall be applied to the interest
accrual. The initial maturity date is July 22, 1999.
ITEM 5. OTHER EVENTS.
On July 1, 1998, the Company originated a $10,068,000 mezzanine loan
for the acquisition of four office buildings in Dallas, Texas; the initial
funding totaled approximately $6,283,000. The loan earns interest at an accrual
rate of 15% per annum. Payments of interest only are due monthly at a pay rate
of 10% per annum. Additionally, the borrower paid a 2% commitment fee to the
Company. The initial maturity date is July 1, 2001.
On July 2, 1998, the Company originated a $7,000,000 first lien loan
for the acquisition of an office building in Washington, D.C.; the initial
funding totaled approximately $5,247,000. The loan earns interest at an accrual
rate of 10.5% per annum. Payments of interest only are due monthly at a pay rate
of 10.5% per annum. Additionally, the borrower paid a 2% commitment fee to the
Company. The initial maturity date is June 30, 2000.
On July 10, 1998, the Company originated a $3,350,000 first lien loan;
the initial funding totaled approximately $1,887,000. The loan is to be used by
the borrower to finance the acquisition and renovation of a multi-family complex
in Pasadena, Texas. The loan earns interest at an accrual rate of 14% per annum.
Payments of interest only are due and payable monthly at a pay rate of 10% per
annum. Additionally, the borrower paid a 1% commitment fee to the Company. The
initial maturity date is July 31, 2000.
On September 1, 1998, the Company originated an $18,419,000 first lien
loan; the initial funding totaled approximately $17,413,000. The loan is to be
used by the borrower to finance the acquisition and refurbishment of nine
buildings containing 754,000 (approximate) square feet of net rentable space,
for manufacturing, mixed-use office and ground floor retail use in Los Angeles,
California. The loan earns interest at an accrual rate of 12% per annum.
Payments of interest only are due and payable monthly at a pay rate of 10% per
annum. The Company is entitled to receive and apply 100% of any excess cash flow
from the rental of such space to the interest accrual.
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Additionally, the borrower paid a 1% commitment fee to the Company. The initial
maturity date is February 28, 2001.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibits. The following exhibits are filed as part of this report on
Form 8-K:
2.1 Sale and Assignment Agreement by and between AMRESCO Commercial
Finance, Inc. and AMREIT I, Inc. dated effective as of September
30, 1998 relating to three loans.
2.2 Sale and Assignment Agreement by and between AMRESCO Commercial
Finance, Inc. and AMREIT I, Inc. dated effective as of September
30, 1998 relating to five loans.
2.3 Economics Equivalents and Funding Agreement by and between AMRESCO
Commercial Finance, Inc. and AMREIT I, Inc. dated effective as of
September 30, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMRESCO CAPITAL TRUST
Date: October 15, 1998 By: /S/ MICHAEL L. MCCOY
------------------------------------
Name: Michael L. McCoy
Title: Senior Vice President, General Counsel
and Secretary
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INDEX TO EXHIBITS
Exhibit
No. Exhibit
- ------- -------
2.1 Sale and Assignment Agreement by and between AMRESCO
Commercial Finance, Inc. and AMREIT I, Inc. dated effective as
of September 30, 1998 relating to three loans.
2.2 Sale and Assignment Agreement by and between AMRESCO
Commercial Finance, Inc. and AMREIT I, Inc. dated effective as
of September 30, 1998 relating to five loans.
2.3 Economics Equivalents and Funding Agreement by and between
AMRESCO Commercial Finance, Inc. and AMREIT I, Inc. dated
effective as of September 30, 1998.
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Exhibit 2.1
SALE AND ASSIGNMENT AGREEMENT
This Sale and Assignment Agreement (this "Agreement") is executed by
and between AMRESCO Commercial Finance, Inc., a Nevada corporation ("Assignor"),
and AMREIT I, Inc., a Delaware corporation (collectively, "Assignee"), and is
effective as of September 30, 1998 (the "Effective Date").
RECITALS:
A. Assignor is the owner of certain loans ("Loans") and payee or
holder of the promissory note(s) (the "Notes") identified on
the attached Exhibit A and evidencing the Loans, and the
related mortgages and deeds of trust (collectively, the
"Mortgages") covering certain real property and the
improvements situated thereon (collectively, the "Mortgaged
Properties"), security agreements, guaranties, claims, and/or
judgments and all other related documents, instruments,
collateral, files, claims and other assets (collectively with
the Notes and Mortgages, the "Loan Documents"), evidencing,
securing, or otherwise related to the indebtedness of the
party therein listed (as maker, guarantor or otherwise,
hereinafter referred to as the "Borrower"). The term "Primary
Loan Documents," as used herein, refers to the Notes, the
Mortgages, and all loan agreements, guaranties and security
instruments included in the Loan Documents.
B. Assignor and Assignee have agreed that Assignor will
irrevocably sell, transfer and assign to Assignee all of
Assignor's interest in, to and under the Loans including,
without limitation, all of Assignor's interest in the Loan
Documents and all of Assignor's claims and its defenses under
law related thereto, and all "Benefits Accruing to Assignee"
as described in Section 15 below (collectively, the "Assigned
Rights"), all subject to the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. SALE AND ASSIGNMENT; PURCHASE PRICE. Subject to the terms and
conditions of this Agreement:
(a) Assignor hereby sells, transfers, assigns, grants and conveys
unto Assignee, its successors and assigns, at the Closing (as
defined below) the Assigned Rights, on an:
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"AS IS", "WHERE IS" BASIS, "WITH ALL FAULTS" AND WITHOUT
REPRESENTATIONS, EXPRESS OR IMPLIED, OF ANY TYPE, KIND,
CHARACTER OR NATURE, AND WITHOUT RECOURSE OR WARRANTIES,
EXPRESS OR IMPLIED, SAVE AND EXCEPT THE EXPRESS
REPRESENTATIONS OR WARRANTIES SET FORTH IN THIS AGREEMENT AND
IN DOCUMENTS TO BE DELIVERED PURSUANT TO THIS AGREEMENT.
(b) In full payment for the Assigned Rights, Assignee shall pay to
Assignor via wire transfer in accordance with the instructions
on Exhibit C or by certified or cashier's check drawn upon a
recognized financial institution acceptable to Assignor the
aggregate "Purchase Price" (herein so called) of
$11,313,915.60. The Purchase Price for each of the Loans shall
be set forth on Exhibit A-1.
(c) The parties agree to reconcile and adjust the Purchase Price
if necessary within 15 business days following the closing to
reflect any discrepancies in accrued interest or outstanding
principal as of September 29, 1998. Following such
reconciliation, if the Purchase Price is increased, Assignee
shall remit an amount equal to such increase (but in no event
in excess of $10,000) to Assignor within 2 business days of a
request therefor. If the reconciliation reflects a decrease in
the Purchase Price, Assignor shall remit the amount of such
decrease to Assignee within 2 business days of a request
therefor.
2. CLOSING. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place on or before
September 30, 1998, at the offices of Assignor, 700 North
Pearl, Suite 2400, Dallas, Texas 75201, or at such other time,
day or place as the parties hereto may agree upon. The actual
date of the Closing shall be referred to as the "Closing
Date".
3. ASSIGNOR'S CONDITIONS TO CLOSING. The obligation of Assignor
to sell and assign the Assigned Rights to Assignee at the
Closing is subject to the fulfillment to Assignor's
satisfaction of the following conditions prior to or at the
Closing:
(a) The representations and warranties of Assignee set forth in
Section 6 hereof shall be true and correct in all material
respects on and as of the Closing Date.
(b) Assignee shall have paid to Assignor the Purchase Price.
(c) Assignee shall provide to Assignor at or prior to Closing
documentation reasonably requested by Assignor to evidence
Assignee's authority to execute this Agreement and to
consummate the transactions contemplated hereby.
(d) To the extent applicable prior to the Closing, Assignee shall
have complied with its covenants as set forth in Sections 8(a)
and (c) of this Agreement.
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If Assignee fails to satisfy the conditions to Closing set forth in
this Section 3, Assignor may at its option terminate this Agreement by
written notice to Assignee of its intention to terminate this
Agreement, identifying therein the condition(s) which have not been
satisfied.
4. ASSIGNEE'S CONDITIONS TO CLOSING. The obligation of Assignee
to purchase the Assigned Rights from Assignor at the Closing
is subject to the fulfillment to Assignee's satisfaction of
the following conditions prior to or at the Closing:
(a) Assignee's Investment Committee has approved the purchase of
the Assigned Rights.
(b) The representations and warranties of Assignor set forth in
Section 5 hereof shall be true and correct in all material
respects on and as of the Closing Date.
(c) Assignor shall have prepared and delivered to Assignee at the
Closing:
(i) Duly executed and acknowledged assignments, as
appropriate, in the forms annexed hereto as Exhibit
B;
(ii) A notice to each Borrower at Borrower's last known
address of the transaction contemplated by this
Agreement, duly executed by Assignor in the form
annexed hereto as Exhibit E, to be delivered by
Assignee by certified mail at the related Borrower's
last known address not more than fifteen (15) days
after the Closing Date;
(iii) (A) The original executed Notes with original
allonges attached thereto containing endorsements by
Assignor to Assignee as follows: "Pay to the order of
AMREIT I, Inc., without recourse, representation or
warranty except as provided in that certain Sale and
Assignment Agreement dated September 30, 1998
executed by and between AMRESCO Commercial Finance,
Inc. and AMREIT I, Inc.";
(B) Originals of all other Loan Documents and other
instruments or documents contained in Assignor's
files relating to the Loan Documents, together with
such other tangible collateral as may be in
Assignor's possession or control securing the Notes;
(C) Originals of title insurance policies ("Title
Policies") in Assignor's possession relating to the
Loans and insuring the priority of the liens created
by the Mortgages against the applicable Mortgaged
Properties;
(iv) All escrow accounts and collateral accounts
associated with the Notes, together with assignments
of such accounts, agreements governing such accounts
and copies of ledgers or bank statements for such
accounts;
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(v) All documents reasonably deemed necessary by Assignee
to evidence a transfer of the security interests
included in the Assigned Rights, including, without
limitation, the appropriate assignments to be filed
in the respective real property records, as well as
the necessary forms of UCC-3 assignments, and
endorsements or assignments of Title Policies and all
other insurance policies, to the extent they are
assignable.
(d) Assignor shall provide to Assignee at or prior to Closing
corporate resolutions, certificates of incumbency, and other
documentation reasonably requested by Assignee to evidence
Assignor's authority to execute this Agreement and to
consummate the transactions contemplated hereby.
(e) To the extent applicable prior to the Closing, Assignor shall
have complied with its covenants as set forth in Section 7 of
this Agreement.
If Assignor fails to satisfy the conditions to Closing set forth in
this Section 4, then Assignee may at its option terminate this
Agreement by written notice to Assignor of its intention to terminate
this Agreement, identifying therein the condition(s) which have not
been satisfied.
5. REPRESENTATIONS AND WARRANTIES OF ASSIGNOR.
(a) Assignor hereby represents and warrants to Assignee that:
(i) (A) Assignor is a duly organized and validly existing
corporation under the laws of the State of Nevada,
continues to hold a valid certificate to do business
as such and has full power and authority to conduct
its business as such, (B) Assignor is in all material
respects in compliance with all laws, rules,
regulations, directives and published interpretations
issued or administered by, all conditions imposed in
writing by and all agreements entered into with, any
bank regulatory agency, authority or body having
jurisdiction over Assignor or any of its respective
assets, operations or businesses, and (C) Assignor is
duly authorized as a foreign corporation, to do
business and is in good standing in all jurisdictions
in which such authorization or qualification is
required and in which the failure to be so authorized
or to qualify, as the case may be, could, in the
aggregate, have any material adverse effect upon the
business, condition or properties of Assignor taken
as a whole.
(ii) Assignor has the full power and authority to hold the
Assigned Rights, to sell the Assigned Rights, and to
enter into and consummate all transactions
contemplated by this Agreement with respect to the
Assigned Rights. Assignor has duly authorized the
execution, delivery and performance of this
Agreement, has duly executed and delivered this
Agreement, and this Agreement, assuming due
authorization, execution and delivery by Assignee,
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constitutes a legal, valid and binding obligation of
Assignor, enforceable against it in accordance with
its terms.
(iii) The consummation of the transactions contemplated by
this Agreement is in the ordinary course of
Assignor's business and will not result in a breach
of any of the terms, conditions or provisions of
Assignor's charter or bylaws or any legal restriction
or any agreement or instrument to which Assignor is
now a party or by which it is bound, or constitute a
default or result in an acceleration under any of the
foregoing, or result in the violation of any law,
rule, regulation, order, judgment or decree to which
Assignor or its property is subject.
(iv) Assignor is not in material default under any
agreement, contract, instrument or indenture to which
it is a party or by which it is bound, nor has any
event occurred that with notice or lapse of time or
both would constitute a material default under any
such agreement, contract, instrument or indenture
which could have a material adverse effect on this
Agreement or the transactions proposed hereunder.
(v) There is no action, suit, proceeding or investigation
pending or, to Assignor's knowledge, threatened,
against Assignor that either individually or in the
aggregate, if determined adversely to Assignor, would
result in any material liability to Assignor, impair
the ability of Assignor to perform its obligations
hereunder in accordance with the terms hereof, or
have a material adverse effect on the business,
operations or financial condition of Assignor.
(vi) No consent, approval, authorization or order of any
court or governmental authority, participant or other
third party is required for the execution and
delivery of this Agreement by Assignor or for the
performance by Assignor of its obligations hereunder,
other than such consent, approval, authorization or
order as has been or will be obtained prior to the
Closing.
(b) With respect to each Loan, Assignor hereby represents and
warrants to Assignee that:
(i) Assignor is the sole owner and holder of the Notes.
(ii) The Loans are not currently subject to any prior
assignment or pledge which will not be released prior
to closing.
(iii) Assignor has made or will, prior to the Closing, make
available to Assignee for Assignee's review originals
or true copies of all Loan Documents, Collateral
Reports (as defined in Section 10) and substantive
correspondence in Assignor's possession which
directly concern the Assigned Rights (including,
without limitation, the Loan Documents). If there
have been changes to the terms of the Loans not
reflected in the materials furnished to
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Assignee, or if significant correspondence has been
received in connection with the Loans since the time
the materials were furnished to Assignee, information
regarding the same has been or will, prior to
Closing, be provided to Assignee by Assignor.
(iv) Each of the Primary Loan Documents is valid and
enforceable except as such enforcement may be limited
by bankruptcy, insolvency, reorganization or other
laws affecting the enforcement of creditors' rights
generally and by general equity principles
(regardless of whether such enforcement is considered
in a proceeding in equity or at law), and each
Mortgage, if any, grants to Assignor a lien interest
in the Mortgaged Property described therein with the
priority identified on Exhibit A-2, subject only to
the interest of the first lien holder in the case of
second lien mortgages and standard printed exceptions
to Title Policies, mineral reservations where surface
rights have been waived, and utility easements or
such other non-monetary encumbrances described as
exceptions in each of the assigned Title Policies and
such exceptions, individually or collectively, will
not impair the use of the property for its intended
purpose (collectively, the "Permitted Exceptions").
Further, to the extent there is a Mortgage, each
Mortgage has created a valid lien on the respective
Mortgaged Property which, in the event of a material
default thereunder or under the related Note, may be
foreclosed upon in accordance with applicable state
law (subject to the rights of the first lienholder in
the case of second mortgages). Assignor has not taken
any action that creates any valid defense in
accordance with applicable state law by the obligor
thereunder to the holder's realization on the
collateral or the indebtedness.
(v) Assignor has not received notice of pending or
threatened litigation (including bankruptcies and tax
suits) which may materially affect the validity or
enforceability of the Loan Documents or the valuation
of the Mortgaged Properties.
(vi) The Notes are legal, valid and binding obligations of
the maker or obligor thereof, enforceable against
such maker or obligor in accordance with their terms
except as such enforcement may be limited by
bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights
generally and by general equity principles
(regardless of whether such enforcement is considered
in a proceeding in equity or at law) and Assignor has
not taken any enforcement action under any security
agreements or the other related Loan Documents that
creates any valid defense in accordance with
applicable state law by the maker thereunder to the
holder's realization on such security.
(vii) The legal principal balances for each Note as set
forth on Exhibit A-2 attached hereto are true and
correct as of September 30, 1998 (the "Cut-Off
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Date") and the legal principal balances as set forth
on the Certificate of Principal Balances (as
described in Section 7(d) hereof) will be true and
correct as of the last business day before Closing.
There are no monetary defaults under the Notes, and
to the best of Assignor's knowledge, there are no
material non-monetary defaults currently existing
under any of the Loan Documents.
(viii) Ad valorem and other property taxes for the Mortgaged
Properties are current, and there are no material
delinquencies. For purposes of this Section
5(b)(viii), the term "material" shall refer to
delinquencies in excess of $50,000 or 5% of the
principal balance of the related Loan, whichever is
less.
(ix) To the best of Assignor's knowledge and belief, there
are no material Loan Documents which are not in its
possession.
(x) Assignor has made or caused to be made available for
review by Assignee (and will continue to update such
information as it is received and shall provide to
Assignee such updated information that is received by
Assignor prior to the Closing Date of this Agreement)
(collectively, "Environmental Material") all written
materials in its possession regarding (i) compliance
by each Mortgaged Property and/or the applicable
Borrower with all Environmental Requirements (as
defined in Section 9 below), (ii) the presence of any
Hazardous Materials (as defined in Section 9 below)
located on or affecting any of the Mortgaged
Properties, and (iii) the failure to remediate, or
failure to have taken such steps as may have been
required as of the Effective Date by any governmental
authority with jurisdiction over the Borrower or
Mortgaged Property. Assignor has no actual knowledge
of any breach of any Environmental Requirements or
the existence of any Hazardous Materials on or
affecting the Mortgaged Properties not described in
the Environmental Material. Any breach of this
Section 5(b)(x) shall be referred to herein as an
"Environmental Defect."
(xi) Assignor has not foreclosed upon or otherwise
realized upon or received any property securing the
Notes and will not take any such actions prior to the
Closing without Assignee's prior written consent.
6. REPRESENTATIONS AND WARRANTIES OF ASSIGNEE. Assignee hereby
represents and warrants to Assignor that:
(a) Assignee has all requisite power and authority to execute and
deliver, and to perform all of its obligations under, this
Agreement and all instruments and other documents executed and
delivered by Assignee in connection herewith.
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(b) The execution, delivery and performance of this Agreement has
been duly authorized by all necessary action on the part of
Assignee and does not require any consent or approval of any
party that has not been obtained.
(c) Assignee has agreed to the Purchase Price on the basis of its
own independent investigation and credit evaluation of the
Assigned Rights. Assignee has not relied upon any
representations, warranties or statements of any kind made by
or on behalf of Assignor except for those representations,
warranties and statements set forth in this Agreement.
Assignee acknowledges that, except for the representations and
warranties of Assignor set forth in, or to be made in
instruments delivered pursuant to this Agreement, Assignor
negates and disclaims all representations, warranties and
statements of every kind or type (express or implied).
Assignee further acknowledges that the amount ultimately
received by Assignee in respect of the Assigned Rights may be
less than the Purchase Price, and, except as otherwise
provided herein, Assignee shall have no recourse to Assignor
for any such deficiency.
Nothing in this Section 6 shall constitute a waiver or modification of
Assignor's representations and warranties as set forth in this
Agreement, nor shall Assignee's remedies for breach of such
representations and warranties as set forth in Section 13 of this
Agreement be hereby waived or modified.
7. COVENANTS OF ASSIGNOR.
(a) Assignor shall use its reasonable efforts to satisfy each of
the conditions to closing set forth in Section 3 hereof.
(b) Assignor shall notify Assignee promptly if any of the
representations set forth in Section 5 hereof shall become
inaccurate prior to the Closing Date or if any of such
representations is discovered to be inaccurate prior to the
Closing Date.
(c) Assignor and Assignor's counsel shall cooperate with Assignee
and Assignee's counsel in the defense of any claims or
counterclaims made against Assignee, or any of Assignee's
subsidiaries, affiliates, employees, officers, directors,
shareholders, agents, representatives, attorneys, accountants
or consultants, in any litigation, arbitration proceeding or
other forum involving or relating to the Assigned Rights.
Other than with respect to Assignor's obligations to indemnify
Assignee from certain claims as specified in Section 12
hereof, Assignor's obligations under this Section 7(c) shall
not be construed to require Assignor to expend any significant
funds or incur any material costs for which it is not
reimbursed in connection with such cooperation, and Assignee
shall reimburse Assignor for the reasonable costs of
Assignor's employees involved in supplying Assignee or
Assignee's counsel with copies of documents and other
information as may be reasonably required by Assignee or
Assignee's counsel in preparing for depositions or trial. For
purposes of this Section 7(c) and Section 8(d) below,
"significant funds or...material costs"
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<PAGE> 9
shall mean costs, fees or expenses in excess of $1,000 per
lawsuit, arbitrated matter or other legal proceeding. This
provision is in addition to, and not in lieu of, the
indemnification of Assignee by Assignor contained in Section
12 hereof.
(d) As soon as practical but in no event later than the Closing
Date, Assignor shall provide to Assignee a description of all
Notes listed on Exhibit A hereto in the form attached as
Exhibit A-2, giving the name of the Borrower(s), the date of
the Note, the original principal balance of the Note, and the
outstanding principal balance of the Note as of the Cut-off
Date. At Closing, Assignor shall provide Assignee with a
Certificate of Principal Balances in the form of Exhibit D
attached hereto; Schedule I to that Certificate of Principal
Balances shall include the information set forth in the list
described in the first sentence of this Section 7(d), plus the
principal balances on the Notes as of the last business day
before Closing.
(e) If there are letters of credit held as collateral for the
Notes or other obligations under the Loan Documents which are
not assignable, Assignor will cooperate fully with Assignee to
make presentment of or demand on such letters of credit or
other collateral. Such cooperation shall include, without
limitation, execution of notices, affidavits, or other notices
required for presentation of the letter of credit, actual
presentation of the letter of credit for funding, immediate
transfer of funds or endorsement and delivery of a check to
Assignee, and filing and vigorous prosecution of litigation
(at Assignee's expense) to obtain the proceeds of the
collateral letter of credit.
(f) Until the Closing Date, Assignor will continue to service the
Loans or cause the Loans to be serviced in a prudent fashion,
including, without limitation, maintaining or causing to be
maintained customary amounts and types of casualty insurance
with respect to the Mortgaged Properties. Assignor shall not
modify or extend the terms of the Loans, fund previously
unfunded commitments or release any collateral securing or
obligors upon such Notes, unless legally obligated to do so.
There have been no restructurings of the Notes or the Loans
they evidence since the date the Loans were originated by
Assignor except as disclosed in the files or otherwise in
writing to Assignee.
8. COVENANTS OF ASSIGNEE.
(a) Assignee shall use its reasonable efforts to satisfy each of
the conditions to closing set forth in Section 4 hereof.
(b) Within fifteen (15) days after Closing, Assignee shall deposit
in the U.S. Mail, return receipt requested, all notices to
Borrower delivered to Assignee pursuant to Section 4(c)(ii)
hereof.
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<PAGE> 10
(c) Assignee shall notify Assignor promptly if any of the
representations set forth in Section 6 hereof shall become
inaccurate prior to the Closing Date or if any such
representation is discovered to be inaccurate prior to the
Closing Date.
(d) Assignee and Assignee's counsel shall cooperate with Assignor
and Assignor's counsel in the defense of any claims or
counterclaims made against Assignor, or any of Assignor's
subsidiaries, affiliates, employees, officers, directors,
shareholders, agencies, representatives, attorneys,
accountants or consultants, in any litigation, arbitration
proceeding or other forum involving or relating to the
Assigned Rights. Other than with respect to Assignee's
obligations to indemnify Assignor from certain claims as
specified in Section 11 hereof, Assignee's obligations under
this Section 8(d) shall not be construed to require Assignee
to expend any significant funds or incur any material costs
(as defined in Section 7(c) hereof) for which it is not
reimbursed in connection with such cooperation and Assignor
shall reimburse to Assignee the reasonable costs of Assignee's
employees involved in supplying Assignor or Assignor's counsel
with copies of documents and other information as may be
reasonably required by Assignor or Assignor's counsel in
preparing for depositions or trial. This provision is in
addition to, and not in lieu of, the indemnification of
Assignor by Assignee contained in Section 11 hereof.
(e) Assignee hereby agrees to be expressly bound by the terms of
each Loan and the Loan Documents executed in connection
therewith and hereby assumes and covenants to perform all
obligations by Assignor thereunder. The agreement contained in
this subsection (e) shall be in full force and effect at the
time that Closing has occurred.
9. ENVIRONMENTAL ISSUES. For purposes of this Agreement, the term
"Hazardous Materials" shall mean any substance which is or
contains: (i) any "hazardous substance" as now or hereafter
defined in Section 101(14) of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended
(42 U.S.C. Section 9601 et seq.) ("CERCLA") or any regulations
promulgated under CERCLA; (ii) any "hazardous waste" as now or
hereafter defined in the Resource Conservation and Recovery
Act (42 U.S.C. Section 6901 et seq.) ("RCRA") or regulations
promulgated under RCRA; (iii) any substance regulated by the
Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.);
(iv) gasoline, diesel fuel, or other petroleum hydrocarbons;
(v) asbestos and asbestos containing materials, in any form,
whether friable or non-friable; (vi) polychlorinated
biphenyls; (vii) radon gas; and (viii) any additional
substances or materials which are now or hereafter classified
or considered to be hazardous or toxic under Environmental
Requirements (as hereinafter defined) or the common law, or
any other applicable laws relating to the Mortgaged
Properties. Hazardous Materials shall include, without
limitation, any substance, the presence of which on the
Mortgaged Properties, (A) requires reporting, investigation or
remediation under Environmental Requirements; (B) causes or
threatens to cause a nuisance on the Mortgaged Properties or
adjacent property or poses or threatens to pose a hazard to
the health or safety of persons on the Mortgaged Properties or
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<PAGE> 11
adjacent property; or (C) which, if it emanated or migrated
from the Mortgaged Properties, could constitute a trespass.
For purposes of this Agreement, the term "Environmental
Requirements" shall mean all laws, ordinances, statutes,
codes, rules, regulations, agreements, judgments, orders, and
decrees, now or hereafter enacted, promulgated, or amended, of
the United States, the states, the counties, the cities, or
any other political subdivisions in which the Mortgaged
Properties are located, and any other political subdivision,
agency or instrumentality exercising jurisdiction over the
owner of the Mortgaged Properties, the Mortgaged Properties,
or the use of the Mortgaged Properties, relating to pollution,
the protection or regulation of human health, natural
resources, or the environment, or the emission, discharge,
release or threatened release of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or
waste or Hazardous Materials into the environment (including,
without limitation, ambient air, surface water, groundwater,
land or soil).
10. COLLATERAL REPORTS. To the extent they are available, Assignor
has provided Assignee with the Title Policies, all title
reports, file reviews, environmental site assessments,
inspection reports, surveys, engineering reports, committee
recommendations, internal analyses and/or appraisals in
Assignor's possession or control relating to the Mortgaged
Properties (collectively, the "Collateral Report(s)"). The
Collateral Reports may have been prepared by Assignor, its
predecessors in interest, or third party contractors. ASSIGNEE
UNDERSTANDS AND ACKNOWLEDGES THAT ANY COLLATERAL REPORT WHICH
MAY BE PROVIDED BY ASSIGNOR OR ITS EMPLOYEES, AGENTS,
CONTRACTORS AND REPRESENTATIVES IS BEING PROVIDED WITHOUT
REPRESENTATION OR WARRANTY AS TO THE COMPLETENESS OR ACCURACY
OF THE FACTS, PRESUMPTIONS AND CONCLUSIONS CONTAINED THEREIN,
AND ASSIGNEE SHALL NOT RELY ON SAME TO ASSIGNEE'S DETRIMENT IN
CLOSING THE TRANSACTION CONTEMPLATED HEREBY. ASSIGNEE HAS BEEN
EXPRESSLY ADVISED BY ASSIGNOR TO CONDUCT AN INDEPENDENT
INVESTIGATION IN RESPECT TO THE IDENTIFICATION OF THE
MORTGAGED PROPERTY, ANY OTHER COLLATERAL FOR THE LOAN, ITS
VALUE OR CONDITION, AND ITS LIEN PRIORITY OR PERFECTION.
Nothing in this Section 10 shall diminish or affect the
representations and warranties set forth in Section 5 hereof.
11. ASSIGNEE'S INDEMNITIES. Assignee agrees to indemnify and hold
harmless Assignor, its subsidiaries, affiliates, officers,
directors, shareholders, employees, agents, representatives
and attorneys, from and against any and all loss, liability,
claim, damage and expense whatsoever (including attorneys'
fees) directly or indirectly arising out of, based upon,
resulting from or otherwise relating to (a) any act or
omission of Assignee or any of its representatives after the
Closing Date, which constitutes negligence or wilful
misconduct, in connection with the Loan
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<PAGE> 12
Documents, the Assigned Rights or otherwise, (b) the material
inaccuracy of any of Assignee's representations or warranties
contained in Section 6, (c) the material breach of any of
Assignee's covenants herein, (d) any commissions, finder's
fees or similar fees due or claimed by any broker, agent or
salesperson claimed directly against Assignor as a result of
an agreement entered into by Assignee and relating to the
Loans, or (e) actions taken by Assignor which are specifically
requested by Assignee under Section 7(e) hereof.
12. ASSIGNOR'S INDEMNITIES. Assignor agrees to indemnify and hold
harmless Assignee, its subsidiaries, affiliates, officers,
directors, shareholders, employees, agents, representatives
and attorneys, from and against any and all loss, liability,
claim, damage and expense whatsoever (including attorneys'
fees) directly or indirectly arising out of, based upon,
resulting from or otherwise relating to (a) any act or
omission of Assignor or any of its representatives, which
constitutes negligence or willful misconduct, in connection
with the Loan Documents, the Assigned Rights or otherwise,
including, but not limited to, any action taken by it in
connection with any Loan Document which gives rise to a valid
third party claim for usury or for damages (and not solely a
defense to payment of the note which was not caused by any
action on the part of Assignor), (b) the failure to make any
advance of principal on or before the Closing Date that was
required to be made on a Loan on or before the Closing Date,
(c) the material inaccuracy of any of Assignor's
representations or warranties contained in Section 5, (d) the
material breach of any of Assignor's covenants herein, and (e)
any commissions, finder's fees or similar fees due or claimed
by any broker, agent or salesperson claimed directly against
Assignee as a result of an agreement entered into by Assignor.
13. CONDITIONAL PRICE ADJUSTMENT OR REPURCHASE BY THE ASSIGNOR
AFTER TRANSFER DATE.
(a) Assignee's Conditional Right to Require Assignor to
Repurchase. Upon discovery by Assignee of a material breach of
any of Assignor's representations and warranties, as set forth
in Section 5 hereof, Assignee shall give prompt written notice
to Assignor. Such notice shall include documentary evidence
establishing the existence of a breach of a representation or
warranty by Assignor. Upon such discovery and sending of
notice of such material breach of a representation or
warranty, Assignor shall have the right to cure such breach in
all material respects within thirty (30) days of Assignor's
receipt of the notice (or within one hundred and eighty (180)
days of such notification if a breach of Section 5(b)(x) and
Assignor commences such cure within thirty (30) days of such
notification and diligently pursues such cure thereafter) and,
if such breach cannot be cured within thirty (30) days of
Assignee's notification to Assignor (or within the above
described 180-day cure period, if applicable), then Assignee
may, at its option, by written notice to Assignor, require
Assignor to repurchase such Note and the related Loan
Documents from Assignee, on a whole asset, servicing-released
basis as provided herein. Such notice from Assignee must be
delivered not later than thirty (30) days from the expiration
of the
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<PAGE> 13
30-day cure period (or 180-day cure period, if applicable) or
receipt of written notice from Assignor to Assignee that
Assignor is unable to cure the breach of representation or
warranty, whichever is earlier. If the breach is an error in
the Purchase Price of a Loan of less than 2%, it may be cured
by Assignor paying Assignee the excess Purchase Price together
with its interest thereon at 12% per annum.
(b) Repurchase Price. The repurchase price of any Note(s) shall be
determined as follows: the Purchase Price allocated to the
particular Note(s) (as reflected on Exhibit A-1), plus any
interest accrued since the Closing Date at a per annum rate of
12%, less (a) any interest paid on the Note to Assignee from
and after the Closing Date through the date the Note is
repurchased, and (b) any principal payments received by
Assignee from and after the Closing Date through the date of
repurchase. The repurchase price shall be paid to Assignee
within three (3) days after Assignee's receipt of the
documents and instruments required to be delivered pursuant to
Section 13(d) or, at Assignee's option, the repurchase may be
closed through an escrow.
(c) Duration of Assignor's Obligation to Repurchase. Assignor's
obligation to repurchase any Loan pursuant to Section 13(a)
shall terminate automatically, with respect to that particular
Loan, unless Assignee notifies Assignor in writing that a
condition allowing Assignee to require Assignor to repurchase
such Loan has occurred, which notice must be delivered prior
to the first of the following to occur:
(1) The economic terms are substantively
modified by a written agreement between
Assignee and Borrower.
(2) Assignee obtains full payment on the Note
from Borrower or any guarantor or surety
therefor, or otherwise accepts a partial
payment thereof in full satisfaction of the
debt evidenced thereby.
(3) The Borrower or other significant obligor
liable for payment of the Note is released
by Assignee.
(4) In the case of a Loan being repurchased
because of an Environmental Defect, Assignee
has taken steps to control the Mortgaged
Property or the property owner so that the
"secured lender" exception for environmental
liability has been effectively waived.
(d) Transfer of Loan/Delivery of Loan Files. Assignee shall,
within three (3) business days after delivering written notice
to Assignor confirming that Assignee is exercising its option
to require repurchase of a Loan or Loans by Assignor
hereunder, deliver to Assignor all originals and copies of the
Note(s) and any other Loan Documents, Collateral Report(s) and
related files and any other transfer documents or other
documents that were delivered to Assignee pursuant to this
Agreement regarding such Loan(s), together with any addenda,
exhibits and schedules thereto.
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<PAGE> 14
With respect to each such Loan, Assignee shall endorse,
transfer, convey or assign to Assignor the Note and the Loan
Documents in the same manner as such Note and the associated
Loan Documents were transferred and assigned from Assignor to
Assignee by documentation in the same form as that delivered
from Assignor to Assignee (provided that Assignee shall not be
required to make any representation other than that the events
set forth in Sections 13(c)(1) - (4) have not occurred and
representations corresponding to those of Assignor in Section
5(b)(i), (ii) and (iv)). Simultaneously with Assignee's
delivery of such documents to Assignor, Assignor shall pay to
Assignee the Repurchase Price in the form of a wire transfer,
a cashier's check or certified check drawn upon an institution
acceptable to Assignee in its sole and absolute discretion.
After repurchase hereunder, Assignee shall immediately
endorse, assign over and deliver to Assignor any and all
payments received from or on behalf of any obligor on the
repurchased Loan. All amounts paid over to Assignor hereunder
shall be without payment of interest thereon. Upon repurchase
of any Loan, Assignee agrees to immediately terminate, at its
sole cost, the applications of any servicing agreement with
respect to the Loan repurchased. If either party fails to
comply with the terms of this Section 13, the other party
shall have the right to enforce the provisions hereof by
appropriate legal means and, in connection therewith, the
defaulting party shall be responsible for payment of all of
the prevailing party's costs and expenses (including, without
limitation, attorneys' fees and costs) incurred by the
prevailing party in such enforcement.
14. LIMITATION OR DAMAGES. Assignor and Assignee each hereby agree
that any claim they may have hereunder for damages shall be
limited to actual damages and each hereby waives the right to
claim or receive consequential, punitive, special or
incidental damages in connection with any claim arising out of
or related to this Agreement.
15. FURTHER COVENANTS.
(a) (i) For purposes of this Agreement, the following terms
shall have the following meanings:
(A) "BENEFITS ACCRUING TO ASSIGNOR" shall mean
with respect to the Loans, all principal and
interest payments received before the close
of business on the day before the Closing
Date.
(B) "BENEFITS ACCRUING TO ASSIGNEE" shall mean
with respect to the Loans, all principal and
interest payments received on or after the
Closing Date.
(ii) If Assignor shall receive any rents or payments of
interest and/or principal on the Notes or other
consideration distributed or paid by Borrower or its
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<PAGE> 15
affiliates which represent "Benefits Accruing to
Assignee", and provided the Closing occurs in
accordance with the terms and conditions contemplated
herein, Assignor shall accept such payments or other
consideration as Assignee's agent and hold the same
on behalf of and for the benefit of Assignee, and
shall remit (within five (5) Business Days) the same
following the Closing to Assignee with the
endorsement (without recourse, representation or
warranty) of Assignor when necessary or appropriate.
(b) The terms of the transactions contemplated in this Agreement,
including, without limitation, the Purchase Price and all
other financial terms, shall remain confidential and shall not
be disclosed by either party hereto without the written
consent of the other except as otherwise required by law or
regulation.
(c) Assignor shall pay all fees and expenses (including, without
limitation, legal, accounting or investment banking fees and
expenses) incurred by it in connection with this Agreement and
the transactions contemplated hereby. Assignee shall pay all
fees and expenses (including, without limitation, legal,
accounting or investment banking fees and expenses) incurred
by it in connection with this Agreement and the transactions
contemplated hereby. All recording fees and documentary taxes
necessitated by the assignment of the Assigned Rights to
Assignee shall be borne and paid by Assignor.
16. OCCURRENCE OF CERTAIN EVENTS PRIOR TO CLOSING. Until Closing,
all risk of loss for the Loans shall be borne by Assignor and
any insurance, condemnation or other proceeds paid or payable
for such losses shall be either delivered or assigned to
Assignor at Closing, as appropriate.
17. LITIGATION IN NAME OF ASSIGNOR. Assignee shall not, without
the express prior written consent of Assignor (which consent
may be withheld in Assignor's discretion), institute any legal
action in the name of Assignor or continue to prosecute in the
name of Assignor any pending legal action. Assignee shall not
mislead or conceal from any person the identity of the owner
of the Assigned Rights purchased hereunder.
18. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants of the parties
contained herein shall survive the consummation of the
transactions contemplated in this Agreement, subject to any
time period limitations specified herein.
19. FURTHER ASSURANCES. Assignor and Assignee shall each execute
and deliver to the other all further documents or instruments
reasonably requested by either of them in order to effect the
intent of this Agreement and to obtain the full benefit of
this Agreement. Any request by either party under this Section
19 shall be accompanied by the document proposed for signature
by the party requesting it, in form and substance satisfactory
to the party of whom the request is made and its
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<PAGE> 16
attorneys. The party making the request shall bear and
discharge any fees or expenses incident to the preparation,
filing or recording of documents requested pursuant to this
Section 19.
20. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with federal law. To the extent not
controlled by federal law, this Agreement shall be governed by
and construed and enforced in accordance with the laws of the
State of Texas without reference to conflicts of law
principles.
21. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. The parties
make no representations or warranties to each other, except as
contained in this Agreement or in the accompanying exhibits or
the certificates or other closing documents delivered
according to this Agreement. All prior agreements and
understandings between the parties hereto with respect to the
transactions contemplated hereby, whether verbal or in
writing, are superseded by, and are deemed to have been merged
into, this Agreement unless otherwise expressly provided
herein. This Agreement shall be binding on, and inure to the
benefit of, the parties hereto and their successors and
assigns, but no other party shall have or claim any third
party beneficiary rights under this Agreement. Neither party
hereto has engaged any broker or finder or incurred or become
obligated to pay any broker's commission or finder's fee in
connection with the transactions contemplated by this
Agreement.
22. MODIFICATIONS. This Agreement may not be changed, waived,
discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought.
23. SEVERABILITY. If any provision of this Agreement shall be
determined to be invalid, illegal or unenforceable, the
balance of this Agreement shall remain in full force and
effect and if any provision is inapplicable to any person of
circumstance, it shall nevertheless remain applicable to all
other persons and circumstances.
24. ASSIGNMENT. This Agreement may be assigned by Assignee to any
affiliate or subsidiary thereof. Assignee shall immediately
give Assignor written notice of such assignment. The term
"affiliate" as used herein shall include, without limitation,
any partnership (general or limited) in which Assignee or
Assignee's general partner has an interest.
25. NOTICES. All notices between the parties shall be in writing
and shall be served either personally, by certified mail,
facsimile (followed by overnight courier) or overnight courier
services. If served personally or by facsimile, notice shall
be
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<PAGE> 17
deemed given or made at the time of such service. If served by
certified mail, notice shall be deemed given and made five (5)
business days after the deposit thereof in the United States
mail, postage prepaid, addressed to the party to whom said
notice is to be given or made. If served by an overnight
courier service promising delivery not later than 10:00 a.m.
on the first business day after receipt by such service,
notice shall be deemed given and made one business day after
the deposit thereof with such courier service, addressed to
the party to whom such notice is to be given or made, if such
deposit is timely and appropriate in accordance with the
requirements of such courier service.
All notices to Assignor shall be given to it at:
AMRESCO Commercial Finance, Inc.
700 North Pearl Street
Suite 2400, LB 342
Dallas, Texas 75201
Attention: Rhonda Lindsey
Fax No.: (214) 953-7817
With copies to:
AMRESCO, INC.
700 North Pearl Street
Suite 2400, LB #342
Dallas, TX 75201
Attention: Karen H. Cornell, Esq.
Fax No.: (214) 953-7757
All notices to Assignee shall be given to it at:
AMREIT I, Inc.
700 North Pearl Street
Suite 2400, LB #342
Dallas, TX 75201
Attention: Michael L. McCoy, Esq.
Fax No.: (214) 758-1373
26. REFERENCES IN THIS AGREEMENT. Whenever the context of this
Agreement requires, references to the singular number shall
include the plural, and the plural shall include the singular,
where appropriate; words denoting gender shall be construed to
include the masculine, feminine and neuter where appropriate;
and specific enumeration shall not exclude the general, but
shall be considered as cumulative. For purposes of this
Agreement, the term "Business Days" shall mean
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<PAGE> 18
any day other than a Saturday, Sunday or national holiday
recognized by federally chartered banks.
27. JURISDICTION AND VENUE; WAIVER OF JURY TRIAL; MEDIATION.
Assignee and Assignor hereby consent to the jurisdiction of
any state or federal court located within Dallas County,
Texas, waive personal service of any and all process upon
them, consent to service of process by registered mail
directed to the defendant party at the address stated in
Section 25 above, and acknowledges that service so made shall
be deemed to be completed upon actual receipt thereof. In
addition, Assignee and Assignor consent and agree that venue
of any action instituted under this Agreement shall be proper
in Dallas County, Texas, and hereby waive any objection to
venue. This Agreement is and shall be performed in Dallas
County, Texas. Both Assignor and Assignee waive any rights
they may have to a jury trial for disputes arising hereunder,
and both parties agree to submit any disputes hereunder to
non-binding mediation prior to the institution of a lawsuit.
28. COUNTERPARTS. This Agreement and any amendment hereto may be
executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument.
29. ACCESS TO FILES AND RECORDS. From and after the Closing Date,
Assignee shall permit Assignor or Assignor's designee access
to the Loan Documents during normal business hours (with
reasonable prior written notice) delivered with respect to
this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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<PAGE> 19
IN WITNESS WHEREOF, the undersigned have duly executed this Sale and
Assignment Agreement effective as of the date first above written.
AMRESCO COMMERCIAL FINANCE, INC.
Date: September 30, 1998 By: /s/ RHONDA LINDSEY
------------------------------------
Printed Name: Rhonda Lindsey
Title: Vice President
AMREIT I, INC.
Date: September 30, 1998 By: /s/ JONATHAN S. PETTEE
------------------------------------
Printed Name: Jonathan S. Pettee
Title: Executive Vice President
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<PAGE> 20
LIST OF EXHIBITS
----------------
Exhibit A -- Notes
Exhibit A-1 -- Purchase Price
Exhibit A-2 -- Loan Descriptions
Exhibit B -- Assignment
Exhibit C -- Wire Instructions
Exhibit D -- Certificate of Principal Balances
Exhibit E -- Notice to Borrower
[The Registrant hereby undertakes to supply to the Commission, upon request by
the Commission, any of the omitted exhibits.]
<PAGE> 1
Exhibit 2.2
SALE AND ASSIGNMENT AGREEMENT
This Sale and Assignment Agreement (this "Agreement") is executed by
and between AMRESCO Commercial Finance, Inc., a Nevada corporation ("Assignor"),
and AMREIT I, Inc., a Delaware corporation (collectively, "Assignee"), and is
effective as of September 30, 1998 (the "Effective Date").
RECITALS:
A. Assignor is the owner of certain loans ("Loans") and payee or
holder of the promissory note(s) (the "Notes") identified on
the attached Exhibit A and evidencing the Loans, and the
related mortgages and deeds of trust (collectively, the
"Mortgages") covering certain real property and the
improvements situated thereon (collectively, the "Mortgaged
Properties"), security agreements, guaranties, claims, and/or
judgments and all other related documents, instruments,
collateral, files, claims and other assets (collectively with
the Notes and Mortgages, the "Loan Documents"), evidencing,
securing, or otherwise related to the indebtedness of the
party therein listed (as maker, guarantor or otherwise,
hereinafter referred to as the "Borrower"). The term "Primary
Loan Documents," as used herein, refers to the Notes, the
Mortgages, and all loan agreements, guaranties and security
instruments included in the Loan Documents.
B. Assignor and Assignee have agreed that Assignor will
irrevocably sell, transfer and assign to Assignee all of
Assignor's interest in, to and under the Loans including,
without limitation, all of Assignor's interest in the Loan
Documents and all of Assignor's claims and its defenses under
law related thereto, and all "Benefits Accruing to Assignee"
as described in Section 15 below (collectively, the "Assigned
Rights"), all subject to the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. SALE AND ASSIGNMENT; PURCHASE PRICE. Subject to the terms and
conditions of this Agreement:
(a) Assignor hereby sells, transfers, assigns, grants and conveys
unto Assignee, its successors and assigns, at the Closing (as
defined below) the Assigned Rights, on an:
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"AS IS", "WHERE IS" BASIS, "WITH ALL FAULTS" AND WITHOUT
REPRESENTATIONS, EXPRESS OR IMPLIED, OF ANY TYPE, KIND,
CHARACTER OR NATURE, AND WITHOUT RECOURSE OR WARRANTIES,
EXPRESS OR IMPLIED, SAVE AND EXCEPT THE EXPRESS
REPRESENTATIONS OR WARRANTIES SET FORTH IN THIS AGREEMENT AND
IN DOCUMENTS TO BE DELIVERED PURSUANT TO THIS AGREEMENT.
(b) In full payment for the Assigned Rights, Assignee shall pay to
Assignor via wire transfer in accordance with the instructions
on Exhibit C or by certified or cashier's check drawn upon a
recognized financial institution acceptable to Assignor the
aggregate "Purchase Price" (herein so called) of
$22,978,251.67. The Purchase Price for each of the Loans shall
be set forth on Exhibit A-1.
(c) The parties agree to reconcile and adjust the Purchase Price
if necessary within 15 business days following the closing to
reflect any discrepancies in accrued interest or outstanding
principal as of September 29, 1998. Following such
reconciliation, if the Purchase Price is increased, Assignee
shall remit an amount equal to such increase (but in no event
in excess of $10,000) to Assignor within 2 business days of a
request therefor. If the reconciliation reflects a decrease in
the Purchase Price, Assignor shall remit the amount of such
decrease to Assignee within 2 business days of a request
therefor.
2. CLOSING. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place on or before
September 30, 1998, at the offices of Assignor, 700 North
Pearl, Suite 2400, Dallas, Texas 75201, or at such other time,
day or place as the parties hereto may agree upon. The actual
date of the Closing shall be referred to as the "Closing
Date".
3. ASSIGNOR'S CONDITIONS TO CLOSING. The obligation of Assignor
to sell and assign the Assigned Rights to Assignee at the
Closing is subject to the fulfillment to Assignor's
satisfaction of the following conditions prior to or at the
Closing:
(a) The representations and warranties of Assignee set forth in
Section 6 hereof shall be true and correct in all material
respects on and as of the Closing Date.
(b) Assignee shall have paid to Assignor the Purchase Price.
(c) Assignee shall provide to Assignor at or prior to Closing
documentation reasonably requested by Assignor to evidence
Assignee's authority to execute this Agreement and to
consummate the transactions contemplated hereby.
(d) To the extent applicable prior to the Closing, Assignee shall
have complied with its covenants as set forth in Sections 8(a)
and (c) of this Agreement.
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If Assignee fails to satisfy the conditions to Closing set forth in
this Section 3, Assignor may at its option terminate this Agreement by
written notice to Assignee of its intention to terminate this
Agreement, identifying therein the condition(s) which have not been
satisfied.
4. ASSIGNEE'S CONDITIONS TO CLOSING. The obligation of Assignee
to purchase the Assigned Rights from Assignor at the Closing
is subject to the fulfillment to Assignee's satisfaction of
the following conditions prior to or at the Closing:
(a) Assignee's Investment Committee has approved the purchase of
the Assigned Rights.
(b) The representations and warranties of Assignor set forth in
Section 5 hereof shall be true and correct in all material
respects on and as of the Closing Date.
(c) Assignor shall have prepared and delivered to Assignee at the
Closing:
(i) Duly executed and acknowledged assignments, as
appropriate, in the forms annexed hereto as Exhibit
B;
(ii) A notice to each Borrower at Borrower's last known
address of the transaction contemplated by this
Agreement, duly executed by Assignor in the form
annexed hereto as Exhibit E, to be delivered by
Assignee by certified mail at the related Borrower's
last known address not more than fifteen (15) days
after the Closing Date;
(iii) (A) The original executed Notes with original
allonges attached thereto containing endorsements by
Assignor to Assignee as follows: "Pay to the order of
AMREIT I, Inc., without recourse, representation or
warranty except as provided in that certain Sale and
Assignment Agreement dated September 30, 1998
executed by and between AMRESCO Commercial Finance,
Inc. and AMREIT I, Inc.";
(B) Originals of all other Loan Documents and other
instruments or documents contained in Assignor's
files relating to the Loan Documents, together with
such other tangible collateral as may be in
Assignor's possession or control securing the Notes;
(C) Originals of title insurance policies ("Title
Policies") in Assignor's possession relating to the
Loans and insuring the priority of the liens created
by the Mortgages against the applicable Mortgaged
Properties;
(iv) All escrow accounts and collateral accounts
associated with the Notes, together with assignments
of such accounts, agreements governing such accounts
and copies of ledgers or bank statements for such
accounts;
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(v) All documents reasonably deemed necessary by Assignee
to evidence a transfer of the security interests
included in the Assigned Rights, including, without
limitation, the appropriate assignments to be filed
in the respective real property records, as well as
the necessary forms of UCC-3 assignments, and
endorsements or assignments of Title Policies and all
other insurance policies, to the extent they are
assignable.
(d) Assignor shall provide to Assignee at or prior to Closing
corporate resolutions, certificates of incumbency, and other
documentation reasonably requested by Assignee to evidence
Assignor's authority to execute this Agreement and to
consummate the transactions contemplated hereby.
(e) To the extent applicable prior to the Closing, Assignor shall
have complied with its covenants as set forth in Section 7 of
this Agreement.
If Assignor fails to satisfy the conditions to Closing set forth in
this Section 4, then Assignee may at its option terminate this
Agreement by written notice to Assignor of its intention to terminate
this Agreement, identifying therein the condition(s) which have not
been satisfied.
5. REPRESENTATIONS AND WARRANTIES OF ASSIGNOR.
(a) Assignor hereby represents and warrants to Assignee that:
(i) (A) Assignor is a duly organized and validly existing
corporation under the laws of the State of Nevada,
continues to hold a valid certificate to do business
as such and has full power and authority to conduct
its business as such, (B) Assignor is in all material
respects in compliance with all laws, rules,
regulations, directives and published interpretations
issued or administered by, all conditions imposed in
writing by and all agreements entered into with, any
bank regulatory agency, authority or body having
jurisdiction over Assignor or any of its respective
assets, operations or businesses, and (C) Assignor is
duly authorized as a foreign corporation, to do
business and is in good standing in all jurisdictions
in which such authorization or qualification is
required and in which the failure to be so authorized
or to qualify, as the case may be, could, in the
aggregate, have any material adverse effect upon the
business, condition or properties of Assignor taken
as a whole.
(ii) Assignor has the full power and authority to hold the
Assigned Rights, to sell the Assigned Rights, and to
enter into and consummate all transactions
contemplated by this Agreement with respect to the
Assigned Rights. Assignor has duly authorized the
execution, delivery and performance of this
Agreement, has duly executed and delivered this
Agreement, and this Agreement, assuming due
authorization, execution and delivery by Assignee,
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<PAGE> 5
constitutes a legal, valid and binding obligation of
Assignor, enforceable against it in accordance with
its terms.
(iii) The consummation of the transactions contemplated by
this Agreement is in the ordinary course of
Assignor's business and will not result in a breach
of any of the terms, conditions or provisions of
Assignor's charter or bylaws or any legal restriction
or any agreement or instrument to which Assignor is
now a party or by which it is bound, or constitute a
default or result in an acceleration under any of the
foregoing, or result in the violation of any law,
rule, regulation, order, judgment or decree to which
Assignor or its property is subject.
(iv) Assignor is not in material default under any
agreement, contract, instrument or indenture to which
it is a party or by which it is bound, nor has any
event occurred that with notice or lapse of time or
both would constitute a material default under any
such agreement, contract, instrument or indenture
which could have a material adverse effect on this
Agreement or the transactions proposed hereunder.
(v) There is no action, suit, proceeding or investigation
pending or, to Assignor's knowledge, threatened,
against Assignor that either individually or in the
aggregate, if determined adversely to Assignor, would
result in any material liability to Assignor, impair
the ability of Assignor to perform its obligations
hereunder in accordance with the terms hereof, or
have a material adverse effect on the business,
operations or financial condition of Assignor.
(vi) No consent, approval, authorization or order of any
court or governmental authority, participant or other
third party is required for the execution and
delivery of this Agreement by Assignor or for the
performance by Assignor of its obligations hereunder,
other than such consent, approval, authorization or
order as has been or will be obtained prior to the
Closing.
(b) With respect to each Loan, Assignor hereby represents and warrants
to Assignee that:
(i) Assignor is the sole owner and holder of the Notes.
(ii) The Loans are not currently subject to any prior
assignment or pledge which will not be released prior
to closing.
(iii) Assignor has made or will, prior to the Closing, make
available to Assignee for Assignee's review originals
or true copies of all Loan Documents, Collateral
Reports (as defined in Section 10) and substantive
correspondence in Assignor's possession which
directly concern the Assigned Rights (including,
without limitation, the Loan Documents). If there
have been changes to the terms of the Loans not
reflected in the materials furnished to
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Assignee, or if significant correspondence has been
received in connection with the Loans since the time
the materials were furnished to Assignee, information
regarding the same has been or will, prior to
Closing, be provided to Assignee by Assignor.
(iv) Each of the Primary Loan Documents is valid and
enforceable except as such enforcement may be limited
by bankruptcy, insolvency, reorganization or other
laws affecting the enforcement of creditors' rights
generally and by general equity principles
(regardless of whether such enforcement is considered
in a proceeding in equity or at law), and each
Mortgage, if any, grants to Assignor a lien interest
in the Mortgaged Property described therein with the
priority identified on Exhibit A-2, subject only to
the interest of the first lien holder in the case of
second lien mortgages and standard printed exceptions
to Title Policies, mineral reservations where surface
rights have been waived, and utility easements or
such other non-monetary encumbrances described as
exceptions in each of the assigned Title Policies and
such exceptions, individually or collectively, will
not impair the use of the property for its intended
purpose (collectively, the "Permitted Exceptions").
Further, to the extent there is a Mortgage, each
Mortgage has created a valid lien on the respective
Mortgaged Property which, in the event of a material
default thereunder or under the related Note, may be
foreclosed upon in accordance with applicable state
law (subject to the rights of the first lienholder in
the case of second mortgages). Assignor has not taken
any action that creates any valid defense in
accordance with applicable state law by the obligor
thereunder to the holder's realization on the
collateral or the indebtedness.
(v) Assignor has not received notice of pending or
threatened litigation (including bankruptcies and tax
suits) which may materially affect the validity or
enforceability of the Loan Documents or the valuation
of the Mortgaged Properties.
(vi) The Notes are legal, valid and binding obligations of
the maker or obligor thereof, enforceable against
such maker or obligor in accordance with their terms
except as such enforcement may be limited by
bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights
generally and by general equity principles
(regardless of whether such enforcement is considered
in a proceeding in equity or at law) and Assignor has
not taken any enforcement action under any security
agreements or the other related Loan Documents that
creates any valid defense in accordance with
applicable state law by the maker thereunder to the
holder's realization on such security.
(vii) The legal principal balances for each Note as set
forth on Exhibit A-2 attached hereto are true and
correct as of September 30, 1998 (the "Cut-Off
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<PAGE> 7
Date") and the legal principal balances as set forth
on the Certificate of Principal Balances (as
described in Section 7(d) hereof) will be true and
correct as of the last business day before Closing.
There are no monetary defaults under the Notes, and
to the best of Assignor's knowledge, there are no
material non-monetary defaults currently existing
under any of the Loan Documents.
(viii) Ad valorem and other property taxes for the Mortgaged
Properties are current, and there are no material
delinquencies. For purposes of this Section
5(b)(viii), the term "material" shall refer to
delinquencies in excess of $50,000 or 5% of the
principal balance of the related Loan, whichever is
less.
(ix) To the best of Assignor's knowledge and belief, there
are no material Loan Documents which are not in its
possession.
(x) Assignor has made or caused to be made available for
review by Assignee (and will continue to update such
information as it is received and shall provide to
Assignee such updated information that is received by
Assignor prior to the Closing Date of this Agreement)
(collectively, "Environmental Material") all written
materials in its possession regarding (i) compliance
by each Mortgaged Property and/or the applicable
Borrower with all Environmental Requirements (as
defined in Section 9 below), (ii) the presence of any
Hazardous Materials (as defined in Section 9 below)
located on or affecting any of the Mortgaged
Properties, and (iii) the failure to remediate, or
failure to have taken such steps as may have been
required as of the Effective Date by any governmental
authority with jurisdiction over the Borrower or
Mortgaged Property. Assignor has no actual knowledge
of any breach of any Environmental Requirements or
the existence of any Hazardous Materials on or
affecting the Mortgaged Properties not described in
the Environmental Material. Any breach of this
Section 5(b)(x) shall be referred to herein as an
"Environmental Defect."
(xi) Assignor has not foreclosed upon or otherwise
realized upon or received any property securing the
Notes and will not take any such actions prior to the
Closing without Assignee's prior written consent.
6. REPRESENTATIONS AND WARRANTIES OF ASSIGNEE. Assignee hereby
represents and warrants to Assignor that:
(a) Assignee has all requisite power and authority to execute and
deliver, and to perform all of its obligations under, this
Agreement and all instruments and other documents executed and
delivered by Assignee in connection herewith.
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(b) The execution, delivery and performance of this Agreement has
been duly authorized by all necessary action on the part of
Assignee and does not require any consent or approval of any
party that has not been obtained.
(c) Assignee has agreed to the Purchase Price on the basis of its
own independent investigation and credit evaluation of the
Assigned Rights. Assignee has not relied upon any
representations, warranties or statements of any kind made by
or on behalf of Assignor except for those representations,
warranties and statements set forth in this Agreement.
Assignee acknowledges that, except for the representations and
warranties of Assignor set forth in, or to be made in
instruments delivered pursuant to this Agreement, Assignor
negates and disclaims all representations, warranties and
statements of every kind or type (express or implied).
Assignee further acknowledges that the amount ultimately
received by Assignee in respect of the Assigned Rights may be
less than the Purchase Price, and, except as otherwise
provided herein, Assignee shall have no recourse to Assignor
for any such deficiency.
Nothing in this Section 6 shall constitute a waiver or modification of
Assignor's representations and warranties as set forth in this
Agreement, nor shall Assignee's remedies for breach of such
representations and warranties as set forth in Section 13 of this
Agreement be hereby waived or modified.
7. COVENANTS OF ASSIGNOR.
(a) Assignor shall use its reasonable efforts to satisfy each of
the conditions to closing set forth in Section 3 hereof.
(b) Assignor shall notify Assignee promptly if any of the
representations set forth in Section 5 hereof shall become
inaccurate prior to the Closing Date or if any of such
representations is discovered to be inaccurate prior to the
Closing Date.
(c) Assignor and Assignor's counsel shall cooperate with Assignee
and Assignee's counsel in the defense of any claims or
counterclaims made against Assignee, or any of Assignee's
subsidiaries, affiliates, employees, officers, directors,
shareholders, agents, representatives, attorneys, accountants
or consultants, in any litigation, arbitration proceeding or
other forum involving or relating to the Assigned Rights.
Other than with respect to Assignor's obligations to indemnify
Assignee from certain claims as specified in Section 12
hereof, Assignor's obligations under this Section 7(c) shall
not be construed to require Assignor to expend any significant
funds or incur any material costs for which it is not
reimbursed in connection with such cooperation, and Assignee
shall reimburse Assignor for the reasonable costs of
Assignor's employees involved in supplying Assignee or
Assignee's counsel with copies of documents and other
information as may be reasonably required by Assignee or
Assignee's counsel in preparing for depositions or trial. For
purposes of this Section 7(c) and Section 8(d) below,
"significant funds or...material costs"
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shall mean costs, fees or expenses in excess of $1,000 per
lawsuit, arbitrated matter or other legal proceeding. This
provision is in addition to, and not in lieu of, the
indemnification of Assignee by Assignor contained in Section
12 hereof.
(d) As soon as practical but in no event later than the Closing
Date, Assignor shall provide to Assignee a description of all
Notes listed on Exhibit A hereto in the form attached as
Exhibit A-2, giving the name of the Borrower(s), the date of
the Note, the original principal balance of the Note, and the
outstanding principal balance of the Note as of the Cut-off
Date. At Closing, Assignor shall provide Assignee with a
Certificate of Principal Balances in the form of Exhibit D
attached hereto; Schedule I to that Certificate of Principal
Balances shall include the information set forth in the list
described in the first sentence of this Section 7(d), plus the
principal balances on the Notes as of the last business day
before Closing.
(e) If there are letters of credit held as collateral for the
Notes or other obligations under the Loan Documents which are
not assignable, Assignor will cooperate fully with Assignee to
make presentment of or demand on such letters of credit or
other collateral. Such cooperation shall include, without
limitation, execution of notices, affidavits, or other notices
required for presentation of the letter of credit, actual
presentation of the letter of credit for funding, immediate
transfer of funds or endorsement and delivery of a check to
Assignee, and filing and vigorous prosecution of litigation
(at Assignee's expense) to obtain the proceeds of the
collateral letter of credit.
(f) Until the Closing Date, Assignor will continue to service the
Loans or cause the Loans to be serviced in a prudent fashion,
including, without limitation, maintaining or causing to be
maintained customary amounts and types of casualty insurance
with respect to the Mortgaged Properties. Assignor shall not
modify or extend the terms of the Loans, fund previously
unfunded commitments or release any collateral securing or
obligors upon such Notes, unless legally obligated to do so.
There have been no restructurings of the Notes or the Loans
they evidence since the date the Loans were originated by
Assignor except as disclosed in the files or otherwise in
writing to Assignee.
8. COVENANTS OF ASSIGNEE.
(a) Assignee shall use its reasonable efforts to satisfy each of
the conditions to closing set forth in Section 4 hereof.
(b) Within fifteen (15) days after Closing, Assignee shall deposit
in the U.S. Mail, return receipt requested, all notices to
Borrower delivered to Assignee pursuant to Section 4(c)(ii)
hereof.
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(c) Assignee shall notify Assignor promptly if any of the
representations set forth in Section 6 hereof shall become
inaccurate prior to the Closing Date or if any such
representation is discovered to be inaccurate prior to the
Closing Date.
(d) Assignee and Assignee's counsel shall cooperate with Assignor
and Assignor's counsel in the defense of any claims or
counterclaims made against Assignor, or any of Assignor's
subsidiaries, affiliates, employees, officers, directors,
shareholders, agencies, representatives, attorneys,
accountants or consultants, in any litigation, arbitration
proceeding or other forum involving or relating to the
Assigned Rights. Other than with respect to Assignee's
obligations to indemnify Assignor from certain claims as
specified in Section 11 hereof, Assignee's obligations under
this Section 8(d) shall not be construed to require Assignee
to expend any significant funds or incur any material costs
(as defined in Section 7(c) hereof) for which it is not
reimbursed in connection with such cooperation and Assignor
shall reimburse to Assignee the reasonable costs of Assignee's
employees involved in supplying Assignor or Assignor's counsel
with copies of documents and other information as may be
reasonably required by Assignor or Assignor's counsel in
preparing for depositions or trial. This provision is in
addition to, and not in lieu of, the indemnification of
Assignor by Assignee contained in Section 11 hereof.
(e) Assignee hereby agrees to be expressly bound by the terms of
each Loan and the Loan Documents executed in connection
therewith and hereby assumes and covenants to perform all
obligations by Assignor thereunder. The agreement contained in
this subsection (e) shall be in full force and effect at the
time that Closing has occurred.
9. ENVIRONMENTAL ISSUES. For purposes of this Agreement, the term
"Hazardous Materials" shall mean any substance which is or
contains: (i) any "hazardous substance" as now or hereafter
defined inss.101(14) of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended
(42 U.S.C.ss.9601 et seq.) ("CERCLA") or any regulations
promulgated under CERCLA; (ii) any "hazardous waste" as now or
hereafter defined in the Resource Conservation and Recovery
Act (42 U.S.C.ss.6901 et seq.) ("RCRA") or regulations
promulgated under RCRA; (iii) any substance regulated by the
Toxic Substances Control Act (15 U.S.C.ss.2601 et seq.); (iv)
gasoline, diesel fuel, or other petroleum hydrocarbons; (v)
asbestos and asbestos containing materials, in any form,
whether friable or non- friable; (vi) polychlorinated
biphenyls; (vii) radon gas; and (viii) any additional
substances or materials which are now or hereafter classified
or considered to be hazardous or toxic under Environmental
Requirements (as hereinafter defined) or the common law, or
any other applicable laws relating to the Mortgaged
Properties. Hazardous Materials shall include, without
limitation, any substance, the presence of which on the
Mortgaged Properties, (A) requires reporting, investigation or
remediation under Environmental Requirements; (B) causes or
threatens to cause a nuisance on the Mortgaged Properties or
adjacent property or poses or threatens to pose a hazard to
the health or safety of persons on the Mortgaged Properties or
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adjacent property; or (C) which, if it emanated or migrated
from the Mortgaged Properties, could constitute a trespass.
For purposes of this Agreement, the term "Environmental
Requirements" shall mean all laws, ordinances, statutes,
codes, rules, regulations, agreements, judgments, orders, and
decrees, now or hereafter enacted, promulgated, or amended, of
the United States, the states, the counties, the cities, or
any other political subdivisions in which the Mortgaged
Properties are located, and any other political subdivision,
agency or instrumentality exercising jurisdiction over the
owner of the Mortgaged Properties, the Mortgaged Properties,
or the use of the Mortgaged Properties, relating to pollution,
the protection or regulation of human health, natural
resources, or the environment, or the emission, discharge,
release or threatened release of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or
waste or Hazardous Materials into the environment (including,
without limitation, ambient air, surface water, groundwater,
land or soil).
10. COLLATERAL REPORTS. To the extent they are available, Assignor
has provided Assignee with the Title Policies, all title
reports, file reviews, environmental site assessments,
inspection reports, surveys, engineering reports, committee
recommendations, internal analyses and/or appraisals in
Assignor's possession or control relating to the Mortgaged
Properties (collectively, the "Collateral Report(s)"). The
Collateral Reports may have been prepared by Assignor, its
predecessors in interest, or third party contractors. ASSIGNEE
UNDERSTANDS AND ACKNOWLEDGES THAT ANY COLLATERAL REPORT WHICH
MAY BE PROVIDED BY ASSIGNOR OR ITS EMPLOYEES, AGENTS,
CONTRACTORS AND REPRESENTATIVES IS BEING PROVIDED WITHOUT
REPRESENTATION OR WARRANTY AS TO THE COMPLETENESS OR ACCURACY
OF THE FACTS, PRESUMPTIONS AND CONCLUSIONS CONTAINED THEREIN,
AND ASSIGNEE SHALL NOT RELY ON SAME TO ASSIGNEE'S DETRIMENT IN
CLOSING THE TRANSACTION CONTEMPLATED HEREBY. ASSIGNEE HAS BEEN
EXPRESSLY ADVISED BY ASSIGNOR TO CONDUCT AN INDEPENDENT
INVESTIGATION IN RESPECT TO THE IDENTIFICATION OF THE
MORTGAGED PROPERTY, ANY OTHER COLLATERAL FOR THE LOAN, ITS
VALUE OR CONDITION, AND ITS LIEN PRIORITY OR PERFECTION.
Nothing in this Section 10 shall diminish or affect the
representations and warranties set forth in Section 5 hereof.
11. ASSIGNEE'S INDEMNITIES. Assignee agrees to indemnify and hold
harmless Assignor, its subsidiaries, affiliates, officers,
directors, shareholders, employees, agents, representatives
and attorneys, from and against any and all loss, liability,
claim, damage and expense whatsoever (including attorneys'
fees) directly or indirectly arising out of, based upon,
resulting from or otherwise relating to (a) any act or
omission of Assignee or any of its representatives after the
Closing Date, which constitutes negligence or wilful
misconduct, in connection with the Loan
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Documents, the Assigned Rights or otherwise, (b) the material
inaccuracy of any of Assignee's representations or warranties
contained in Section 6, (c) the material breach of any of
Assignee's covenants herein, (d) any commissions, finder's
fees or similar fees due or claimed by any broker, agent or
salesperson claimed directly against Assignor as a result of
an agreement entered into by Assignee and relating to the
Loans, or (e) actions taken by Assignor which are specifically
requested by Assignee under Section 7(e) hereof.
12. ASSIGNOR'S INDEMNITIES. Assignor agrees to indemnify and hold
harmless Assignee, its subsidiaries, affiliates, officers,
directors, shareholders, employees, agents, representatives
and attorneys, from and against any and all loss, liability,
claim, damage and expense whatsoever (including attorneys'
fees) directly or indirectly arising out of, based upon,
resulting from or otherwise relating to (a) any act or
omission of Assignor or any of its representatives, which
constitutes negligence or willful misconduct, in connection
with the Loan Documents, the Assigned Rights or otherwise,
including, but not limited to, any action taken by it in
connection with any Loan Document which gives rise to a valid
third party claim for usury or for damages (and not solely a
defense to payment of the note which was not caused by any
action on the part of Assignor), (b) the failure to make any
advance of principal on or before the Closing Date that was
required to be made on a Loan on or before the Closing Date,
(c) the material inaccuracy of any of Assignor's
representations or warranties contained in Section 5, (d) the
material breach of any of Assignor's covenants herein, and (e)
any commissions, finder's fees or similar fees due or claimed
by any broker, agent or salesperson claimed directly against
Assignee as a result of an agreement entered into by Assignor.
13. CONDITIONAL PRICE ADJUSTMENT OR REPURCHASE BY THE ASSIGNOR
AFTER TRANSFER DATE.
(a) Assignee's Conditional Right to Require Assignor to
Repurchase. Upon discovery by Assignee of a material breach of
any of Assignor's representations and warranties, as set forth
in Section 5 hereof, Assignee shall give prompt written notice
to Assignor. Such notice shall include documentary evidence
establishing the existence of a breach of a representation or
warranty by Assignor. Upon such discovery and sending of
notice of such material breach of a representation or
warranty, Assignor shall have the right to cure such breach in
all material respects within thirty (30) days of Assignor's
receipt of the notice (or within one hundred and eighty (180)
days of such notification if a breach of Section 5(b)(x) and
Assignor commences such cure within thirty (30) days of such
notification and diligently pursues such cure thereafter) and,
if such breach cannot be cured within thirty (30) days of
Assignee's notification to Assignor (or within the above
described 180-day cure period, if applicable), then Assignee
may, at its option, by written notice to Assignor, require
Assignor to repurchase such Note and the related Loan
Documents from Assignee, on a whole asset, servicing-released
basis as provided herein. Such notice from Assignee must be
delivered not later than thirty (30) days from the expiration
of the
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<PAGE> 13
30-day cure period (or 180-day cure period, if applicable) or
receipt of written notice from Assignor to Assignee that
Assignor is unable to cure the breach of representation or
warranty, whichever is earlier. If the breach is an error in
the Purchase Price of a Loan of less than 2%, it may be cured
by Assignor paying Assignee the excess Purchase Price together
with its interest thereon at 12% per annum.
(b) Repurchase Price. The repurchase price of any Note(s) shall be
determined as follows: the Purchase Price allocated to the
particular Note(s) (as reflected on Exhibit A-1), plus any
interest accrued since the Closing Date at a per annum rate of
12%, less (a) any interest paid on the Note to Assignee from
and after the Closing Date through the date the Note is
repurchased, and (b) any principal payments received by
Assignee from and after the Closing Date through the date of
repurchase. The repurchase price shall be paid to Assignee
within three (3) days after Assignee's receipt of the
documents and instruments required to be delivered pursuant to
Section 13(d) or, at Assignee's option, the repurchase may be
closed through an escrow.
(c) Duration of Assignor's Obligation to Repurchase. Assignor's
obligation to repurchase any Loan pursuant to Section 13(a)
shall terminate automatically, with respect to that particular
Loan, unless Assignee notifies Assignor in writing that a
condition allowing Assignee to require Assignor to repurchase
such Loan has occurred, which notice must be delivered prior
to the first of the following to occur:
(1) The economic terms are substantively
modified by a written agreement between
Assignee and Borrower.
(2) Assignee obtains full payment on the Note
from Borrower or any guarantor or surety
therefor, or otherwise accepts a partial
payment thereof in full satisfaction of the
debt evidenced thereby.
(3) The Borrower or other significant obligor
liable for payment of the Note is released
by Assignee.
(4) In the case of a Loan being repurchased
because of an Environmental Defect, Assignee
has taken steps to control the Mortgaged
Property or the property owner so that the
"secured lender" exception for environmental
liability has been effectively waived.
(d) Transfer of Loan/Delivery of Loan Files. Assignee shall,
within three (3) business days after delivering written notice
to Assignor confirming that Assignee is exercising its option
to require repurchase of a Loan or Loans by Assignor
hereunder, deliver to Assignor all originals and copies of the
Note(s) and any other Loan Documents, Collateral Report(s) and
related files and any other transfer documents or other
documents that were delivered to Assignee pursuant to this
Agreement regarding such Loan(s), together with any addenda,
exhibits and schedules thereto.
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<PAGE> 14
With respect to each such Loan, Assignee shall endorse,
transfer, convey or assign to Assignor the Note and the Loan
Documents in the same manner as such Note and the associated
Loan Documents were transferred and assigned from Assignor to
Assignee by documentation in the same form as that delivered
from Assignor to Assignee (provided that Assignee shall not be
required to make any representation other than that the events
set forth in Sections 13(c)(1) - (4) have not occurred and
representations corresponding to those of Assignor in Section
5(b)(i), (ii) and (iv)). Simultaneously with Assignee's
delivery of such documents to Assignor, Assignor shall pay to
Assignee the Repurchase Price in the form of a wire transfer,
a cashier's check or certified check drawn upon an institution
acceptable to Assignee in its sole and absolute discretion.
After repurchase hereunder, Assignee shall immediately
endorse, assign over and deliver to Assignor any and all
payments received from or on behalf of any obligor on the
repurchased Loan. All amounts paid over to Assignor hereunder
shall be without payment of interest thereon. Upon repurchase
of any Loan, Assignee agrees to immediately terminate, at its
sole cost, the applications of any servicing agreement with
respect to the Loan repurchased. If either party fails to
comply with the terms of this Section 13, the other party
shall have the right to enforce the provisions hereof by
appropriate legal means and, in connection therewith, the
defaulting party shall be responsible for payment of all of
the prevailing party's costs and expenses (including, without
limitation, attorneys' fees and costs) incurred by the
prevailing party in such enforcement.
14. LIMITATION OR DAMAGES. Assignor and Assignee each hereby agree
that any claim they may have hereunder for damages shall be
limited to actual damages and each hereby waives the right to
claim or receive consequential, punitive, special or
incidental damages in connection with any claim arising out of
or related to this Agreement.
15. FURTHER COVENANTS.
(a) (i) For purposes of this Agreement, the following terms
shall have the following meanings:
(A) "BENEFITS ACCRUING TO ASSIGNOR" shall mean
with respect to the Loans, all principal and
interest payments received before the close
of business on the day before the Closing
Date.
(B) "BENEFITS ACCRUING TO ASSIGNEE" shall mean
with respect to the Loans, all principal and
interest payments received on or after the
Closing Date.
(ii) If Assignor shall receive any rents or payments of
interest and/or principal on the Notes or other
consideration distributed or paid by Borrower or its
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<PAGE> 15
affiliates which represent "Benefits Accruing to
Assignee", and provided the Closing occurs in
accordance with the terms and conditions contemplated
herein, Assignor shall accept such payments or other
consideration as Assignee's agent and hold the same
on behalf of and for the benefit of Assignee, and
shall remit (within five (5) Business Days) the same
following the Closing to Assignee with the
endorsement (without recourse, representation or
warranty) of Assignor when necessary or appropriate.
(b) The terms of the transactions contemplated in this Agreement,
including, without limitation, the Purchase Price and all
other financial terms, shall remain confidential and shall not
be disclosed by either party hereto without the written
consent of the other except as otherwise required by law or
regulation.
(c) Assignor shall pay all fees and expenses (including, without
limitation, legal, accounting or investment banking fees and
expenses) incurred by it in connection with this Agreement and
the transactions contemplated hereby. Assignee shall pay all
fees and expenses (including, without limitation, legal,
accounting or investment banking fees and expenses) incurred
by it in connection with this Agreement and the transactions
contemplated hereby. All recording fees and documentary taxes
necessitated by the assignment of the Assigned Rights to
Assignee shall be borne and paid by Assignor.
16. OCCURRENCE OF CERTAIN EVENTS PRIOR TO CLOSING. Until Closing,
all risk of loss for the Loans shall be borne by Assignor and
any insurance, condemnation or other proceeds paid or payable
for such losses shall be either delivered or assigned to
Assignor at Closing, as appropriate.
17. LITIGATION IN NAME OF ASSIGNOR. Assignee shall not, without
the express prior written consent of Assignor (which consent
may be withheld in Assignor's discretion), institute any legal
action in the name of Assignor or continue to prosecute in the
name of Assignor any pending legal action. Assignee shall not
mislead or conceal from any person the identity of the owner
of the Assigned Rights purchased hereunder.
18. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants of the parties
contained herein shall survive the consummation of the
transactions contemplated in this Agreement, subject to any
time period limitations specified herein.
19. FURTHER ASSURANCES. Assignor and Assignee shall each execute
and deliver to the other all further documents or instruments
reasonably requested by either of them in order to effect the
intent of this Agreement and to obtain the full benefit of
this Agreement. Any request by either party under this Section
19 shall be accompanied by the document proposed for signature
by the party requesting it, in form and substance satisfactory
to the party of whom the request is made and its
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<PAGE> 16
attorneys. The party making the request shall bear and
discharge any fees or expenses incident to the preparation,
filing or recording of documents requested pursuant to this
Section 19.
20. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with federal law. To the extent not
controlled by federal law, this Agreement shall be governed by
and construed and enforced in accordance with the laws of the
State of Texas without reference to conflicts of law
principles.
21. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. The parties
make no representations or warranties to each other, except as
contained in this Agreement or in the accompanying exhibits or
the certificates or other closing documents delivered
according to this Agreement. All prior agreements and
understandings between the parties hereto with respect to the
transactions contemplated hereby, whether verbal or in
writing, are superseded by, and are deemed to have been merged
into, this Agreement unless otherwise expressly provided
herein. This Agreement shall be binding on, and inure to the
benefit of, the parties hereto and their successors and
assigns, but no other party shall have or claim any third
party beneficiary rights under this Agreement. Neither party
hereto has engaged any broker or finder or incurred or become
obligated to pay any broker's commission or finder's fee in
connection with the transactions contemplated by this
Agreement.
22. MODIFICATIONS. This Agreement may not be changed, waived,
discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought.
23. SEVERABILITY. If any provision of this Agreement shall be
determined to be invalid, illegal or unenforceable, the
balance of this Agreement shall remain in full force and
effect and if any provision is inapplicable to any person of
circumstance, it shall nevertheless remain applicable to all
other persons and circumstances.
24. ASSIGNMENT. This Agreement may be assigned by Assignee to any
affiliate or subsidiary thereof. Assignee shall immediately
give Assignor written notice of such assignment. The term
"affiliate" as used herein shall include, without limitation,
any partnership (general or limited) in which Assignee or
Assignee's general partner has an interest.
25. NOTICES. All notices between the parties shall be in writing
and shall be served either personally, by certified mail,
facsimile (followed by overnight courier) or
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<PAGE> 17
overnight courier services. If served personally or by
facsimile, notice shall be deemed given or made at the time of
such service. If served by certified mail, notice shall be
deemed given and made five (5) business days after the deposit
thereof in the United States mail, postage prepaid, addressed
to the party to whom said notice is to be given or made. If
served by an overnight courier service promising delivery not
later than 10:00 a.m. on the first business day after receipt
by such service, notice shall be deemed given and made one
business day after the deposit thereof with such courier
service, addressed to the party to whom such notice is to be
given or made, if such deposit is timely and appropriate in
accordance with the requirements of such courier service.
All notices to Assignor shall be given to it at:
AMRESCO Commercial Finance, Inc.
700 North Pearl Street
Suite 2400, LB 342
Dallas, Texas 75201
Attention: Rhonda Lindsey
Fax No.: (214) 953-7817
With copies to:
AMRESCO, INC.
700 North Pearl Street
Suite 2400, LB #342
Dallas, TX 75201
Attention: Karen H. Cornell, Esq.
Fax No.: (214) 953-7757
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<PAGE> 18
All notices to Assignee shall be given to it at:
AMREIT I, Inc.
700 North Pearl Street
Suite 2400, LB #342
Dallas, TX 75201
Attention: Michael L. McCoy, Esq.
Fax No.: (214) 758-1373
26. REFERENCES IN THIS AGREEMENT. Whenever the context of this
Agreement requires, references to the singular number shall
include the plural, and the plural shall include the singular,
where appropriate; words denoting gender shall be construed to
include the masculine, feminine and neuter where appropriate;
and specific enumeration shall not exclude the general, but
shall be considered as cumulative. For purposes of this
Agreement, the term "Business Days" shall mean any day other
than a Saturday, Sunday or national holiday recognized by
federally chartered banks.
27. JURISDICTION AND VENUE; WAIVER OF JURY TRIAL; MEDIATION.
Assignee and Assignor hereby consent to the jurisdiction of
any state or federal court located within Dallas County,
Texas, waive personal service of any and all process upon
them, consent to service of process by registered mail
directed to the defendant party at the address stated in
Section 25 above, and acknowledges that service so made shall
be deemed to be completed upon actual receipt thereof. In
addition, Assignee and Assignor consent and agree that venue
of any action instituted under this Agreement shall be proper
in Dallas County, Texas, and hereby waive any objection to
venue. This Agreement is and shall be performed in Dallas
County, Texas. Both Assignor and Assignee waive any rights
they may have to a jury trial for disputes arising hereunder,
and both parties agree to submit any disputes hereunder to
non-binding mediation prior to the institution of a lawsuit.
28. COUNTERPARTS. This Agreement and any amendment hereto may be
executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument.
29. ACCESS TO FILES AND RECORDS. From and after the Closing Date,
Assignee shall permit Assignor or Assignor's designee access
to the Loan Documents during normal business hours (with
reasonable prior written notice) delivered with respect to
this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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<PAGE> 19
IN WITNESS WHEREOF, the undersigned have duly executed this Sale and
Assignment Agreement effective as of the date first above written.
AMRESCO COMMERCIAL FINANCE, INC.
Date: September 30, 1998 By: /s/ RHONDA LINDSEY
-----------------------------------
Printed Name: Rhonda Lindsey
Title: Vice President
AMREIT I, INC.
Date: September 30, 1998 By: /s/ JONATHAN S. PETTEE
-----------------------------------
Printed Name: Jonathan S. Pettee
Title: Executive Vice President
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<PAGE> 20
LIST OF EXHIBITS
----------------
Exhibit A -- Notes
Exhibit A-1 -- Purchase Price
Exhibit A-2 -- Loan Descriptions
Exhibit B -- Assignment
Exhibit C -- Wire Instructions
Exhibit D -- Certificate of Principal Balances
Exhibit E -- Notice to Borrower
[The Registrant hereby undertakes to supply to the Commission, upon request by
the Commission, any of the omitted exhibits.]
<PAGE> 1
Exhibit 2.3
ECONOMICS EQUIVALENTS AND FUNDING AGREEMENT
This Economics Equivalents and Funding Agreement (this "Agreement") is
executed by and between AMRESCO Commercial Finance, Inc., a Nevada corporation
("ACFI"), and AMREIT I, Inc., a Delaware corporation (collectively, "AMREIT"),
and is effective as of September 30, 1998 (the "Effective Date").
RECITALS:
A. ACFI has sold the commercial mortgage loans (the "Loans") described in
Exhibit A to AMREIT pursuant to a Sale and Assignment Agreement (the
"Sales Agreement") dated and effective as of September 30, 1998.
B. ACFI desires to purchase, and AMREIT desires to sell, the right to
payment from AMREIT of an amount equal to certain potential proceeds
from the Loans.
NOW, THEREFORE, in consideration of the promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. SALE OF ECONOMIC EQUIVALENT INTEREST. In consideration of the
rights being sold to ACFI hereunder and subject to the terms
and conditions hereof, ACFI shall pay to AMREIT via wire
transfer in accordance with the instructions on Exhibit B or
by certified or cashier's check drawn upon a reputable
financial institution reasonably acceptable to AMREIT, the
purchase price equal to $5,020,292.18.
2. APPLICATION OF PAYMENTS. Subject to ACFI's compliance with the
terms hereof, including, without limitation, ACFI's obligation
to reimburse AMREIT for certain amounts advanced by AMREIT in
connection with the Loans (as specified in Section 3 hereof),
AMREIT agrees and promises to pay to ACFI an amount or amounts
equal to the Excess Proceeds (hereinafter defined) from the
Loans as provided above. Such Excess Proceeds, if any, shall
be due and payable by AMREIT within two (2) business days of
the receipt of said proceeds. ACFI and AMREIT agree that an
amount (the "Excess Proceeds") shall be due and payable to
ACFI after one hundred percent (100%) of all of the cash flow
received with respect to the Loans on a pool-wide basis has
been applied by the servicer of the Loans in the following
order of priority (the amounts being received by AMREIT under
the Loans being hereinafter called the "AMREIT Return"):
ECONOMICS EQUIVALENTS AND FUNDING AGREEMENT Page 1
<PAGE> 2
(a) AMREIT has received, from and after the Effective
Date, an amount that is equivalent to a twelve
percent (12%) return per annum (calculated on the
basis of a 360 day year consisting of twelve 30-day
months) on an amount equal to $17,957,959.49 (which
amount does not include any additional principal
amounts which are reimbursed by ACFI pursuant to
Section 3 hereof) plus any out-of-pocket expenses
incurred by AMREIT in connection with the collection
or enforcement of the Loans, or such lesser amount as
may be outstanding after any payments are applied
against such amount pursuant to Section 2(b) below.
For purposes of calculating the AMREIT Return, AMREIT
shall receive a 12% return per annum on any amounts
it has advanced (which are subject to reimbursement
by ACFI under Section 3 hereof) until such amounts
are reimbursed by ACFI.
(b) AMREIT has received, when and as delivered, the
amount of $17,957,959.49 plus any out-of-pocket
expenses incurred by AMREIT in connection with the
collection or enforcement of the Loans.
3. REIMBURSEMENT OBLIGATIONS OF ACFI. The parties hereto
acknowledge that there remain certain unfunded commitments
under the Loans, including, without limitation, the obligation
to fund certain interest payments by the borrowers thereunder
and other unfunded committed amounts. In that regard,
notwithstanding the transfer of the Loans to AMREIT, ACFI
agrees to immediately reimburse AMREIT for all such amounts as
such amounts are advanced from and after the Effective Date
until the termination of such funding commitments under the
applicable loan documents. In addition, ACFI shall be
obligated to reimburse AMREIT for any protective advances as
may be required or deemed appropriate in connection with the
Loans in order to preserve the lien position or collateral
held by AMREIT in the Loans. ACFI's failure to reimburse
AMREIT for either of the foregoing advances shall constitute
an event of default under this Agreement. ACFI shall have the
right to cure such default within five (5) days following
written notice of such breach from AMREIT. If such default is
not cured within such time frame, AMREIT's obligation to pay
any Excess Proceeds to ACFI will terminate and be of no
further force or effect.
4. SERVICING OF LOAN. Notwithstanding the transfer of the Loans
to AMREIT, AMREIT consents to AMREIT Managers, L.P. entering
into a subservicing agreement with ACFI and/or AMRESCO
Management, Inc. to service the Loans. In performing its
servicing obligations, ACFI shall not pursue any remedies or
enforcement actions under the loan documents or enter into any
amendments, modifications or waivers to the loan documents
(except for the waiver of any lockout provisions or prepayment
penalties) which would require committee approval under ACFI's
customary servicing procedures related thereto or which would
have the
ECONOMICS EQUIVALENTS AND FUNDING AGREEMENT Page 2
<PAGE> 3
effect of doing any of the following, without first obtaining
the prior written consent of AMREIT, which consent shall not
be unreasonably withheld:
(a) Increases the amount of any Loan;
(b) Decreases the amount or frequency of any payments
under the Loans or delays the scheduled payment dates
for any amounts thereunder;
(c) Releases, substitutes or subordinates any collateral
or guaranty for any Loan;
(d) Consents to any leases requiring lender approval
(except leases which materially conform to the
economics as presented in the committee approval
package for a Loan, as may have been modified);
(e) Consents to the sale of any collateral securing the
Loans which would result in proceeds insufficient to
retire the indebtedness evidenced by the loan
documents;
(f) Modifies or waives any of the enforcement provisions
in the loan documents; or
(g) Modifies or waives compliance with any default or
event of default under the loan documents.
In the event ACFI provides notice of a default to a borrower
under a Loan, it shall simultaneously furnish a copy of such
default notice to AMREIT. In the event ACFI is in breach of
any of its obligations under this Agreement, including its
obligation to fund any advances under the Loans, and such
default remains uncured for five (5) days following written
notice thereof to ACFI, ACFI shall no longer have the right to
service any of the Loans. Notwithstanding the foregoing, if
there should exist an event of default by the borrower under
any particular Loan being assigned to AMREIT hereunder, AMREIT
shall have the right to terminate ACFI's subservicing
agreement relating to the defaulted Loan. The transfer of the
servicing of such Loan, however, will not effect ACFI's right
to continue to service the remaining Loans under this
Agreement provided ACFI is not in default of its obligations
hereunder. ACFI shall have the right to unilaterally terminate
its servicing obligations hereunder at any time in its sole
discretion with respect to any Loan or all of the Loans.
5. CLOSING. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place on or before
September 30, 1998, at the offices of ACFI, 700 North Pearl,
Suite 2400, Dallas, Texas 75201, or at such other time, day or
place as the parties hereto may agree upon. The actual date of
the Closing shall be referred to as the "Closing Date".
ECONOMICS EQUIVALENTS AND FUNDING AGREEMENT Page 3
<PAGE> 4
6. REPURCHASE OPTION.
(a) Upon the occurrence of an event of default under any
of the Loans, and the failure of the applicable
borrower to cure such default within the applicable
grace or cure period thereunder, ACFI may elect, at
its option, to repurchase all but not less than all
of AMREIT's interests in such Loan. The price at
which ACFI may repurchase such Loan (the "Repurchase
Price") shall be equal to (a) AMREIT's net purchase
price allocated to such Loan as reflected on Exhibit
A less (b) any principal payments previously received
by servicer with respect to such Loan ACFI may elect
to exercise its option to repurchase by delivering
written notice of such election to AMREIT and
specifying a closing date within five (5) days of the
date ACFI has knowledge (whether from AMREIT or as a
result of ACFI's servicing of the Loan) that a Loan
is in default and the borrower has failed to cure
such default within the applicable grace or cure
period under the loan documents. ACFI shall have the
right to extend the closing date for such repurchase
for up to 30 days, provided ACFI delivers within such
five (5) day period a nonrefundable deposit equal to
5% of the Repurchase Price for such Loan. If ACFI
fails to repurchase such Loan within the time frames
set forth above, the right to service such Loan shall
immediately be transferred to AMREIT. If ACFI does
repurchase such Loan, AMREIT will assign its
interests to ACFI on the specified closing date, by
delivering to ACFI all originals and copies of the
promissory note and all other loan documents,
Collateral Reports (as defined in the Sales
Agreement) and related files and any other transfer
documents or other documents that were delivered to
AMREIT pursuant to the Sales Agreement regarding such
Loan, together with any addenda, exhibits and
schedules thereto. With respect to each such Loan,
AMREIT shall endorse, transfer, convey or assign to
ACFI the promissory note and the loan documents in
the same manner as such promissory note and
associated loan documents were transferred and
assigned from ACFI to AMREIT by documentation in
substantially the same form as that delivered from
ACFI to AMREIT (provided that AMREIT shall not be
required to make any representation other than those
set forth in Section 5(b)(i), (ii) and (iv) of the
Sales Agreement and other than that the events set
forth in Section 13(c)1-4 of the Sales Agreement have
not occurred). Simultaneously, with the delivery of
such documents to ACFI, ACFI shall pay to AMREIT the
Repurchase Price in the form of a wire transfer or
certified or cashier's check drawn upon an
institution acceptable to AMREIT. After repurchase
hereunder, AMREIT shall immediately endorse,
sign-over and deliver to ACFI any and all payments
from or on behalf of any obligor on the repurchased
Loans. The Repurchase Price shall be applied to the
AMREIT
ECONOMICS EQUIVALENTS AND FUNDING AGREEMENT Page 4
<PAGE> 5
Return and Excess Proceeds, if applicable, in
accordance with Section 2 above.
(b) In the event of the occurrence of an "Insolvency
Event" (as herein defined) ACFI may repurchase any or
all of the Loans. The Loans will be purchased at the
Repurchase Price and the terms of such repurchase
shall otherwise be consistent with the requirements
set forth in paragraph 6(a) above and in Section
13(d) of the Sales Agreement. If ACFI should fail to
repurchase some or all of the Loans within five (5)
days following the occurrence of an Insolvency Event,
with respect to the Loans it has not repurchased ACFI
shall no longer have any right to share in the
payment under such Loans or to exercise its servicing
rights hereunder.
(c) For purposes hereof, the term "Insolvency Event"
shall mean and refer to the following:
i. AMREIT shall apply for or consent to the
appointment of a receiver, trustee,
custodian or liquidator of all or
substantially all of its assets, file a
voluntary petition in bankruptcy, admit in
writing that it is unable to pay its debts
as they become due or generally not pay such
debts as they become due, make a general
assignment for the benefit of creditors,
file a petition or answer seeking
reorganization or rearrangement with
creditors, file an answer admitting the
material allegations of or consent to or
default in answering a petition filed
against it in any bankruptcy, reorganization
or insolvency proceedings.
ii. AMREIT's default on any material
indebtedness of AMREIT and the continuance
of such default beyond any applicable grace
or cure periods. Upon its receipt of a
formal notice of such default, AMREIT will,
as soon as practicable, deliver a copy of
the notice to ACFI.
iii. An involuntary proceeding shall be commenced
against AMREIT seeking bankruptcy or
reorganization of AMREIT or the appointment
of a receiver, custodian, trustee,
liquidator or other similar official of
AMREIT or all or substantially all of
AMREIT's assets and such proceeding shall
not have been dismissed within 60 days of
the filing thereof.
(d) Upon the occurrence of an "Insolvency Event"
described in (c) (i) and (iii), with respect to ACFI,
ACFI shall forfeit its servicing rights hereunder to
AMREIT.
ECONOMICS EQUIVALENTS AND FUNDING AGREEMENT Page 5
<PAGE> 6
7. GRANT OF RIGHT OF FIRST REFUSAL. AMREIT hereby grants to ACFI
the right of first refusal to purchase one or more of the
Loans in the event AMREIT enters into an agreement for the
sale of the Loans to a third party. AMREIT agrees to notify
ACFI at least five (5) days in advance of a proposed sale of
one or more of the Loans, in which case ACFI shall have five
(5) days to respond to AMREIT as to whether it intends to
purchase the Loan or Loans on the same terms and conditions as
those contained in the proposed agreement. If ACFI elects to
exercise such option, the purchase of the Loan or Loans shall
be at the price and pursuant to the terms and conditions set
forth in the proposed sales agreement with the third party
purchaser; provided, however, that the entire purchase price
shall be considered proceeds from the Loans to be applied to
the AMREIT Return and to Excess Proceeds, if applicable, in
accordance with Section 2 above. In the event ACFI declines to
exercise its right of first refusal relating to the purchase
of the Loan or Loans in question, the entire purchase price
from the sale shall be applied to the AMREIT Return and Excess
Proceeds, if applicable, in accordance with Section 2 above.
8. FURTHER ASSURANCES. ACFI and AMREIT shall each execute and
deliver to the other all further documents or instruments
reasonably requested by either of them in order to effect the
intent of this Agreement and to obtain the full benefit of
this Agreement. Any request by either party under this Section
8 shall be accompanied by the document proposed for signature
by the party requesting it, in form and substance satisfactory
to the party of whom the request is made and its attorneys.
The party making the request shall bear and discharge any fees
or expenses incident to the preparation, filing or recording
of documents requested pursuant to this Section 8.
9. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with federal law. To the extent not
controlled by federal law, this Agreement shall be governed by
and construed and enforced in accordance with the laws of the
State of Texas without reference to conflicts of law
principles.
10. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. The parties
make no representations or warranties to each other, except as
contained in this Agreement or in the accompanying exhibits or
the certificates or other closing documents delivered
according to this Agreement. All prior agreements and
understandings between the parties hereto with respect to the
transactions contemplated hereby, whether verbal or in
writing, are superseded by, and are deemed to have been merged
into, this Agreement unless otherwise expressly provided
herein. This Agreement shall be binding on, and inure to the
benefit of, the
ECONOMICS EQUIVALENTS AND FUNDING AGREEMENT Page 6
<PAGE> 7
parties hereto and their successors and assigns, but no other
party shall have or claim any third party beneficiary rights
under this Agreement. Neither party hereto has engaged any
broker or finder or incurred or become obligated to pay any
broker's commission or finder's fee in connection with the
transactions contemplated by this Agreement.
11. MODIFICATIONS. This Agreement may not be changed, waived,
discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought.
12. SEVERABILITY. If any provision of this Agreement shall be
determined to be invalid, illegal or unenforceable, the
balance of this Agreement shall remain in full force and
effect and if any provision is inapplicable to any person of
circumstance, it shall nevertheless remain applicable to all
other persons and circumstances.
13. ASSIGNMENT. This Agreement may be assigned by either party to
its affiliate or subsidiary. The party assigning its interest
shall immediately give the other party written notice of such
assignment. The term "affiliate" as used herein shall include,
without limitation, any partnership (general or limited) in
which a party or its general partner, if any, has an interest.
14. NOTICES. All notices between the parties shall be in writing
and shall be served either personally, by certified mail,
facsimile (followed by overnight courier) or overnight courier
services. If served personally or by facsimile, notice shall
be deemed given or made at the time of such service. If served
by certified mail, notice shall be deemed given and made five
(5) business days after the deposit thereof in the United
States mail, postage prepaid, addressed to the party to whom
said notice is to be given or made. If served by an overnight
courier service promising delivery not later than 10:00 a.m.
on the first business day after receipt by such service,
notice shall be deemed given and made one business day after
the deposit thereof with such courier service, addressed to
the party to whom such notice is to be given or made, if such
deposit is timely and appropriate in accordance with the
requirements of such courier service.
All notices to ACFI shall be given to it at:
AMRESCO Commercial Finance, Inc.
700 North Pearl Street
Suite 2400, LB 342
Dallas, Texas 75201
Attention: Rhonda Lindsey
Fax No.: (214) 953-8317
ECONOMICS EQUIVALENTS AND FUNDING AGREEMENT Page 7
<PAGE> 8
With copies to:
AMRESCO, INC.
700 North Pearl Street
Suite 2400, LB #342
Dallas, TX 75201
Attention: Karen H. Cornell, Esq.
Fax No.: (214) 953-7757
All notices to AMREIT shall be given to it at:
AMREIT I, Inc.
700 North Pearl Street
Suite 2400, LB #342
Dallas, TX 75201
Attention: Ms. Rebecca Kuban
Fax No.: (214) 758-1373
15. REFERENCES IN THIS AGREEMENT. Whenever the context of this
Agreement requires, references to the singular number shall
include the plural, and the plural shall include the singular,
where appropriate; words denoting gender shall be construed to
include the masculine, feminine and neuter where appropriate;
and specific enumeration shall not exclude the general, but
shall be considered as cumulative. For purposes of this
Agreement, the term "Business Days" shall mean any day other
than a Saturday, Sunday or national holiday recognized by
federally chartered banks.
16. JURISDICTION AND VENUE; WAIVER OF JURY TRIAL; MEDIATION.
AMREIT and ACFI hereby consent to the jurisdiction of any
state or federal court located within Dallas County, Texas,
waive personal service of any and all process upon them,
consent to service of process by registered mail directed to
the defendant party at the address stated in Section 14 above,
and acknowledges that service so made shall be deemed to be
completed upon actual receipt thereof. In addition, AMREIT and
ACFI consent and agree that venue of any action instituted
under this Agreement shall be proper in Dallas County, Texas,
and hereby waive any objection to venue. This Agreement is and
shall be performed in Dallas County, Texas. Both ACFI and
AMREIT waive any rights they may have to a jury trial for
disputes arising hereunder, and both parties agree to submit
any disputes hereunder to non-binding mediation prior to the
institution of a lawsuit.
17. COUNTERPARTS. This Agreement and any amendment hereto may be
executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument.
ECONOMICS EQUIVALENTS AND FUNDING AGREEMENT Page 8
<PAGE> 9
18. ACFI'S RIGHTS IN LOANS. The parties agree that the rights
being conferred upon ACFI under this Agreement are solely
contractual rights which ACFI has bargained for and may
enforce solely against AMREIT. Notwithstanding anything to the
contrary in this Agreement, none of such rights are intended
to nor shall confer upon ACFI any rights or interests in the
Loans and any other asset or right sold and transferred under
the Sales Agreement. ACFI acknowledges that AMREIT, as the
holder of the Loans, may take any actions or refrain from
taking any actions under the Loans or the loan documents as
AMREIT may elect in its discretion without any obligation or
duty to ACFI at any time the Loans are outstanding. Such
actions include amendments, modifications, debt forgiveness,
settlements, releases of collateral or obligors and any other
restructuring of any of the Loans. Furthermore, except with
respect to the specific contractual repurchase rights being
conferred upon ACFI, AMREIT is the owner and holder of the
promissory notes and the loan documents and shall be free at
any time to pledge all or any portion of its interest in such
Loans to any lender providing financing to AMREIT free and
clear of any claims to such Loans by ACFI.
19. RELATIONSHIP LOANS. In the event ACFI elects to purchase a
Loan that has gone into default, it must purchase all Loans
associated with or related to such defaulted Loan, which
related Loans are identified on Exhibit A.
20. MODIFICATION OF SALES AGREEMENT. The reference to "Purchase
Price" set forth in Section 13(b) of the Sales Agreement is
hereby modified with respect to each Loan to be a reference to
AMREIT's net purchase price for such Loan as set forth in
Exhibit A attached hereto.
IN WITNESS WHEREOF, the undersigned have duly executed this Sale and
Assignment Agreement effective as of the date first above written.
(The remainder of this page is intentionally blank.)
ECONOMICS EQUIVALENTS AND FUNDING AGREEMENT Page 9
<PAGE> 10
AMRESCO COMMERCIAL FINANCE, INC.
Date: September 30, 1998 By: /s/ RHONDA LINDSEY
------------------------------------
Printed Name: Rhonda Lindsey
Title: Vice President
AMREIT I, INC.
Date: September 30, 1998 By: /s/ JONATHAN S. PETTEE
------------------------------------
Printed Name: Jonathan S. Pettee
Title: Executive Vice President
ECONOMICS EQUIVALENTS AND FUNDING AGREEMENT Page 10
<PAGE> 11
LIST OF EXHIBITS
----------------
Exhibit A -- Schedule of Loans and AMREIT Net Purchase Prices
Exhibit B -- Wire Instructions
[The Registrant hereby undertakes to supply to the Commission, upon request by
the Commission, any of the omitted exhibits.]
