-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QlnsxgBbHUBLLNuIeB1rvUSxpmlQec9C5+CGexmz89R2Rer8yupdYm3E4ocly8GE uA4WNUYPejdC0ALtB/HS6g== 0000950134-98-008122.txt : 19981016 0000950134-98-008122.hdr.sgml : 19981016 ACCESSION NUMBER: 0000950134-98-008122 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980930 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981015 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMRESCO CAPITAL TRUST CENTRAL INDEX KEY: 0001054337 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 752744858 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-14029 FILM NUMBER: 98726220 BUSINESS ADDRESS: STREET 1: 700 NORTH PEARL STREET STREET 2: SUITE 2400 LB 342 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149537700 MAIL ADDRESS: STREET 1: 700 NORTH PEARL STREET STREET 2: SUITE 2400 LB 342 CITY: DALLAS STATE: TX ZIP: 75201 8-K 1 FORM 8-K 1 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 2 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. -2- 3 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. -3- 4 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. -4- 5 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 -5- 6 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. EX-2.1 2 SALE & ASSIGNMENT AGREEMENT RE: TO THREE LOANS 1 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: Page 1 2 "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. Page 2 3 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; Page 3 4 (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, Page 4 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 Page 5 6 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 Page 6 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. Page 7 8 (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" Page 8 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. Page 9 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 Page 10 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 Page 11 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 Page 12 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. Page 13 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 Page 14 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 Page 15 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 Page 16 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 Page 17 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.] Page 18 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 Page 19 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.] EX-2.2 3 SALE & ASSIGNMENT AGREEMENT RELATING TO FIVE LOANS 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: Page 1 2 "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. Page 2 3 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; Page 3 4 (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, Page 4 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 Page 5 6 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 Page 6 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. Page 7 8 (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" Page 8 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. Page 9 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 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 Page 10 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 Page 11 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 Page 12 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. Page 13 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 Page 14 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 Page 15 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 Page 16 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 Page 17 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.] Page 18 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 Page 19 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.] EX-2.3 4 ECONOMICS EQUIVALENTS & FUNDING AGREEMENT 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 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 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 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 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 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 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 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 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 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 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.] -----END PRIVACY-ENHANCED MESSAGE-----