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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
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(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
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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".
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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
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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.
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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
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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
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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.
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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.)
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AMRESCO COMMERCIAL FINANCE, INC.
Date: September 30, 1998 By: /s/ RHONDA LINDSEY
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Printed Name: Rhonda Lindsey
Title: Vice President
AMREIT I, INC.
Date: September 30, 1998 By: /s/ JONATHAN S. PETTEE
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Printed Name: Jonathan S. Pettee
Title: Executive Vice President
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LIST OF EXHIBITS
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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.]