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EXHIBIT 10.1
AMENDED AND RESTATED INTERIM WAREHOUSE AND SECURITY AGREEMENT
BY AND AMONG
PRUDENTIAL SECURITIES CREDIT CORP.
AS THE LENDER
AND
AMRESCO CAPITAL TRUST
AND
AMREIT I, INC.
AND
AMREIT II, INC.
AND
ACT EQUITIES, INC.
AND
ACT HOLDINGS, INC.
AS, INDIVIDUALLY AND COLLECTIVELY, THE BORROWER
DATED AS OF MAY 4, 1999
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TABLE OF CONTENTS
SECTION PAGE
Section I. The Loan............................................................................. 1
Section II. Loan Files and Custodian............................................................. 9
Section III. Representations, Warranties and Covenants............................................ 10
Section IV. Mandatory Partial Prepayment of Loan................................................. 18
Section V. Release of Loan Files Following Payment of Loan...................................... 20
Section VI. Servicing............................................................................ 21
Section VII. No Oral Modifications; Successors and Assigns; Assignment of Collateral.............. 21
Section VIII. Reports.............................................................................. 21
Section IX. Events of Default.................................................................... 24
Section X. Remedies Upon Default................................................................ 26
Section XI. Pre-Existing Conditions.............................................................. 27
Section XII. Indemnification...................................................................... 27
Section XIII. Periodic Due Diligence Review........................................................ 28
Section XIV. Power of Attorney.................................................................... 29
Section XV. Choice of Law; Agreement Constitutes Security Agreement.............................. 29
Section XVI. Lender May Act Through Affiliates.................................................... 29
Section XVII. Notices.............................................................................. 29
Section XVIII. Severability......................................................................... 31
Section XIX. Counterparts......................................................................... 31
Section XX. Additional Borrowers................................................................. 31
Section XXI. No Exclusivity....................................................................... 31
Section XXII. Joint and Several Liability.......................................................... 32
Section XXIII. Consent to Jurisdiction and Service of Process....................................... 32
Section XXIV. Waiver of Jury Trial................................................................. 32
Appendix I Certain Definitions
Appendix II Representations And Warranties Regarding All Pledged Eligible Assets
Schedule A Approved Assets
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Schedule B Disclosure Of Proceedings Pending Against The Borrower, Events Causing Material Adverse
Changes And Changes To The Management Agreement
Exhibit A Form Of Secured Note
Exhibit B Form Of Legal Opinion
Exhibit C Form Of Underwriting Transmittal
Exhibit D Form Of Funding Notice
Exhibit E Form Of Commercial Loan/Asset Schedule
Exhibit F Form Of Warrant Agreement
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AMENDED AND RESTATED INTERIM WAREHOUSE AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED INTERIM WAREHOUSE AND SECURITY AGREEMENT
dated as of May 4, 1999 (as amended or otherwise modified in writing by the
parties hereto from time to time, this "Agreement") is by and among PRUDENTIAL
SECURITIES CREDIT CORP., a Delaware corporation, having an office at 1220 N.
Market Street, Wilmington, Delaware 19801 (the "Lender") and AMRESCO CAPITAL
TRUST, a Texas real estate investment trust ("ACT"), AMREIT I, INC., a Delaware
corporation ("AMREIT I") AMREIT II, INC., a Nevada corporation ("AMREIT II"),
ACT EQUITIES, INC., a Georgia corporation ("EQUITIES"), and ACT HOLDINGS, INC.,
a Georgia corporation ("HOLDINGS"),each having its principal office at 700 North
Pearl Street, Suite 2400, Dallas, Texas 75201 (individually and collectively,
the "Borrower").
WHEREAS, the Lender and the Borrower entered that certain Interim
Warehouse and Security Agreement dated as of July 1, 1998, by and between the
Lender and the Borrower (the "Original Agreement") and now wish to amend and
restate the Original Agreement herein in full; and
WHEREAS, the Lender intends to lend and the Borrower intends to borrow
up to $300,000,000 to provide interim warehouse financing of Eligible Assets (as
defined herein).
Capitalized terms used in this Agreement and not otherwise specifically
defined herein are defined in Appendix I hereto.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the parties hereto hereby agree as follows:
Section I. The Loan.
Subject to the terms of this Agreement:
1. Maximum Loan Amount. Subject to the terms and conditions
set forth in this Agreement, the Lender agrees to lend to the Borrower up to a
maximum of $300,000,000 (the "Maximum Loan Amount") under this Agreement (such
borrowing, the "Loan") to be made in one or more advances (each, an "Advance"),
subject to the following limitations:
(a) the "Mezzanine Loan/Equity Investment Sub-Limit" --
the aggregate outstanding Advances made in connection with one or more Mezzanine
Loans/Equity Investments shall not exceed $40,000,000 at any time (excluding
Land Development Loans and Mezzanine Construction Loans included in Section
I(1)(C) below);
(b) the "Construction Loan Sub-Limit" -- the aggregate
outstanding Advances made in connection with one or more Construction Loans
shall not exceed $115,000,000 at any time; and
(c) the "Less Than 70% Pre-Leased Sub-Limit" -- of the
$115,000,000 Construction Loan Sub-Limit, no more than $50,000,000 in aggregate
outstanding Advances at
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any time may be for (i) construction projects that are less than 70% leased,
measured on a project by project basis, at the time of the Initial Advance for
each such construction project (a "Less Than 70% Pre-Leased Project") and (ii)
outstanding Advances (after adjustment pursuant to Sections I(3)(e) and (f)) for
Land Development Loans and Mezzanine Construction Loans. If at any time a
particular construction project subject to the Less Than 70% Pre-Leased
Sub-Limit becomes greater than or equal to 70% leased (a "Greater Than or Equal
to 70% Pre-Leased Project"), then (i) the Borrower may request in writing that
the Lender no longer consider the aggregate outstanding Advances made with
respect to such construction project as part of the $50,000,000 Less Than 70%
Pre-Leased Sub-Limit and only consider such Advances as part of the $115,000,000
Construction Loan Sub-Limit and (ii) the Lender shall have the right, in its
sole discretion, to approve or disapprove the Borrower's request. In determining
whether a construction project is a Less Than 70% Pre-Leased Project or a
Greater Than or Equal to 70% Pre-Leased Project, a lease must meet the following
criteria: the tenant must be a bona fide, credit-worthy party unaffiliated with
the project developer; the lease must be a bona fide lease on fair market value
terms and conditions, bearing the duly authorized signatures of landlord and
tenant; the lease must have a minimum initial term of not less than five years;
and the lease shall not be subject to any termination rights or conditions
subsequent, other than customary conditions relating to timely completion of the
project and tenant improvement work and other customary termination rights such
as those for landlord's default. The Lender, in its sole discretion, may (but
shall not be required to) consider exceptions to such lease requirements based
on other specific property types. Once the construction project is complete and
the tenants take possession of leased space in the project pursuant to a fully
executed lease which satisfies the criteria for leases set forth above in this
Section I(1)(c), the Borrower may also request the Lender to recharacterize the
aggregate outstanding Advances relating to such Construction Loan as no longer
part of the Construction Loan Sub-Limit. The Lender, in its sole discretion, may
(but shall not be required to) consider such request.
2. Eligible Assets. The Borrower agrees that the Loan shall be used to
warehouse certain commercial mortgage loans and commercial real estate assets,
including, but not limited to, Mortgage Loans, Construction Loans, Mezzanine
Loans/Equity Investments, Bridge Loans, Rehabilitation Loans, Acquisition Loans
and Participating Loans (all of the foregoing described loans and other assets,
collectively, "Eligible Assets"). To qualify as an Eligible Asset, the Borrower
shall not commit to finance more than 100% of the Budgeted Costs or 100% of the
Stabilized Value of such Eligible Asset. A schedule of all currently approved
assets (the "Approved Assets") and their respective asset classifications,
sub-limit categories and maximum Advance levels, as approved by Lender, is set
forth on Schedule A attached hereto and made a part hereof. In accordance with
the procedures provided herein and subject to the terms and conditions of this
Agreement, the Borrower is entitled to request Advances on Approved Assets up to
the maximum Advance amount set forth in Schedule A for such Approved Asset, and,
in the event of such request, Lender is obligated to fund up to such maximum
Advance amounts in accordance with the terms hereof, including, without
limitation, the Borrower's performance of all conditions precedent to the
Lender's Obligation to make specific Advances. Land Development Loans and
Mezzanine Construction Loans shall not be deemed Eligible Assets except those
described on Schedule A. Any outstanding Advances for either Land Development
Loans or Mezzanine Construction Loans made pursuant to the Original Agreement
may remain outstanding pursuant to this Agreement and, subject to the terms and
conditions of this Agreement, the Lender will advance up to the maximum Advance
amount related thereto as
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set forth on Schedule A so long as the conditions set forth in Sections I(3)(e)
and (f) are satisfied and no events of default exist with respect thereto. All
Eligible Assets must: (x) be originated in accordance with prudent underwriting
standards and the Borrower's approved due diligence standards, closing
procedures manual (the form and content of which have been provided in advance
to the Lender and approved in advance by the Lender in writing, both as more
particularly set forth in Section I(3)(a)(vi) below) (collectively, the
"Borrower's Guidelines") and related documents or otherwise have been approved
by the Lender in writing and (y) have an Approved Exit Strategy prior to the
Initial Advance for such Eligible Asset. The Eligible Assets to be pledged to
the Lender under this Agreement shall be identified by the Borrower to the
Lender in writing from time to time, and at any time upon the Lender's request.
Any Eligible Asset for which an Advance is made under this Agreement is
hereinafter referred to as a "Pledged Eligible Asset."
3. Advances.
(a) Subject to the terms and conditions of this Agreement,
each Advance shall be made, pursuant to the terms of this Agreement on a date
prior to the Maturity Date referred to below (each such date, a "Funding Date");
provided that:
(i) not later than (A) five Business Days prior to the
proposed Funding Date for an Initial Advance, the Borrower shall
deliver to the Lender a written underwriting transmittal in the form
of Exhibit C hereto previously approved by the Lender and used by the
Borrower for the Approved Assets (an "Underwriting Transmittal") for
each Eligible Asset proposed to be pledged in connection with such
Initial Advance, and (B) two Business Days prior to the proposed
Funding Date for an Initial Advance, the Borrower shall deliver to the
Lender (i) a written notice (a "Funding Notice") in the form of
Exhibit D hereto and (ii) a schedule, via facsimile, in the form of
Exhibit E hereto, detailing certain specified characteristics of the
Eligible Assets proposed to be pledged in connection with such Initial
Advance (each such schedule, a "Commercial Loan/Asset Schedule");
(ii) the representations, warranties and covenants of
the Borrower set forth in this Agreement shall be true and correct on
and as of each such Funding Date as if made on and as of such date;
(iii) no Event of Default shall have occurred and be
continuing or would exist after the making of the Advance on such
Funding Date;
(iv) the Lender shall have received in connection with
each Initial Advance, by no later than 12:00 noon (New York City time)
on the related Funding Date, a certificate from the Custodian referred
to below to the effect that it has reviewed the loan files relating to
the Eligible Assets being pledged in connection with the Advance being
made on such Funding Date and has found no material deficiencies in
such loan files (the "Custodian's Certification"); provided, however,
if the Funding Date is the same date as the closing of the underlying
loan, then the Lender shall have received by no later than one
Business Day prior to the Funding Date a certificate from the escrow
officer of a title company approved by the Lender (the "Escrow
Officer"), engaged by the
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Borrower and the underlying mortgagor/borrower in connection with such
Pledged Eligible Asset which verifies that the Escrow Officer has
received the loan files relating to such Eligible Asset to be pledged
in connection with the Advance and that the Escrow Officer will
forward such loan files directly to the Custodian no later than the
first Business Day following the Funding Date;
(v) for Eligible Assets, the Borrower shall have
delivered or caused to be delivered to the Custodian or the Escrow
Officer all required documents with respect to the Eligible Assets
being pledged to the Lender under this Agreement on such Funding Date;
(vi) prior to the first Advance after the execution of
this Agreement and under this Agreement relating to a Pledged Eligible
Asset: (A) the Lender has received a complete and up-to-date copy of
the Borrower's Guidelines and all other relevant handbooks and
manuals, as the Lender may reasonably request; (B) the Lender has
approved the Borrower's Guidelines and related documents; and (C)
prior to each Advance, the Lender shall have approved in writing all
changes or modifications thereto, if any, that, in the reasonable
judgment of the Lender, may result in a material relaxation of the
standards or requirements contained in the Borrower's Guidelines
and/or related documentation;
(vii) prior to the first Advance under this Agreement
relating to a Pledged Eligible Asset, the Lender shall have received a
current Secretary's Certificate of each Borrower certifying as to the
incumbency of the officers of the Borrower, with copies of (A) any
amendments to ACT's Declaration of Trust since July 1, 1998, as to
AMREIT I and AMREIT II any amendments to each such Borrower's
respective Articles of Incorporation and certificate of incorporation
since July 1, 1998, and, as to EQUITIES and HOLDINGS, copies of each
such Borrower's respective Articles of Incorporation and certificate
of incorporation; (B) any amendments to ACT's, AMREIT I's and AMREIT
II's by-laws since July 1, 1998 and copies of EQUITIES' and HOLDINGS'
by-laws; and (C) a good standing certificate for each of the Borrowers
(other than ACT) dated as of a recent date;
(viii) with respect to each Eligible Asset, the Lender
shall have given its prior approval to allow an Advance with respect
to such Eligible Asset, subject to all of the terms and conditions of
this Agreement having been fully and unconditionally satisfied;
(ix) with respect to any Advance relating to Pledged
Eligible Assets after the Initial Advance, the Lender shall have
received (A) an additional Funding Notice at least two Business Days
prior to the date requested for funding such Advance, and (B) the
Borrower's representation that no change has occurred with respect to
any material fact contained in the Underwriting Transmittal relating
to the Pledged Eligible Asset;
(x) to the extent described in Section IV(C) of this
Agreement, no notice described in Section IV(C) shall have been
received by the Lender;
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(xi) prior to each Initial Advance with respect to each
Pledged Eligible Asset, if in the Lender's reasonable discretion, the
Lender requires the Borrower to enter into an Interest Rate Protection
Agreement as provided herein, the Lender shall have received
fully-executed copies of such Interest Rate Protection Agreements
relating to such Pledged Eligible Asset (which Interest Rate
Protection Agreement must be transferable as set forth more
particularly in Section IV(E) below), each certified by an officer of
Borrower as a true, correct and complete copy of the original;
(xii) (A) contemporaneously with the execution of this
Agreement, with respect to each Pledged Eligible Asset (i)
that was originated by a Person other than the Borrower, (ii)
that was purchased by the Borrower prior to the execution of
this Agreement, and (iii) for which the Lender has made one or
more Advances prior to the execution of this Agreement, the
Borrower shall provide evidence sufficient to satisfy the
Lender that such Pledged Eligible Asset was acquired in a true
and legal sale, including, without limitation, an opinion, in
form and substance and from legal counsel to the Borrower
(which may be employed by the Borrower) acceptable to the
Lender in its sole discretion, that such Pledged Eligible
Asset was acquired in a true and legal sale;
(B) prior to each Initial Advance after the
execution of this Agreement and under this Agreement with
respect to each Pledged Eligible Asset (i) that was originated
by a Person other than the Borrower and (ii) that was
purchased by the Borrower prior to the execution of this
Agreement, the Lender may, in its sole discretion, require the
Borrower to provide evidence sufficient to satisfy the Lender
that such Pledged Eligible Asset was acquired in a true and
legal sale, including, without limitation, an opinion, in form
and substance and from legal counsel to the Borrower (which
may be employed by the Borrower) acceptable to the Lender in
its sole discretion, that such Pledged Eligible Asset was
acquired in a true and legal sale; and
(C) prior to each Initial Advance with respect to
each Pledged Eligible Asset (i) that was originated by a
Person other than the Borrower and (ii) that was purchased by
the Borrower after the execution of this Agreement, the Lender
may, in its sole discretion, require the Borrower to provide
evidence sufficient to satisfy the Lender that such Pledged
Eligible Asset was acquired in a true and legal sale,
including, without limitation, an opinion, in form and
substance and from outside legal counsel to the Borrower
acceptable to the Lender in its sole discretion, that such
Eligible Asset was acquired in a true and legal sale;
(xiii) prior to each Advance with respect to each
Pledged Eligible Asset, there shall be no default, breach, violation
or event of acceleration existing under any Pledged Eligible Asset or
the related documents to any Pledged Eligible Asset and no event known
to the Borrower after due inquiry which, with the passage of time or
with notice and the expiration of any grace period or cure period,
would constitute a default, breach, violation or event of
acceleration;
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(xiv) prior to making each Advance and after giving
effect to such Advance, the Borrower shall be in compliance with the
sub-limits set forth in Sections I(1)(a), (b) and (c);
(xv) prior to the first Advance after the execution of
this Agreement and under this Agreement relating to a Pledged Eligible
Asset, one or more legal opinion(s) from legal counsel (which may be
in house counsel) to the Borrower in the form of Exhibit B attached
hereto, an executed copy of the Secured Note in the form of Exhibit A
attached hereto and an executed copy of the Warrant Agreement in the
form of Exhibit F attached hereto;
(xvi) prior to the Initial Advance as to each Pledged
Eligible Asset, the Initial Advance and all future Advances for such
Pledged Eligible Asset, as approved by the Lender, will not cause the
Borrower to exceed the sublimits set forth in Section I(1) of this
Agreement;
(xvii) prior to the Initial Advance as to each Pledged
Eligible Asset, if more than 30 days shall have passed since the
Borrower submitted the Underwriting Transmittal, the Lender shall have
received a certificate of an officer of the Borrower certifying that
no Material Adverse Change has occurred between the submission of the
Underwriting Transmittal and the Funding Date; and
(xviii) for any equity interest comprising all or any
portion of any Pledged Eligible Asset, including, without limitation,
Mezzanine Loan/Equity Investments, the Borrower shall grant the Lender
a security interest in the Borrower's equity interest comprising such
Pledged Eligible Asset and shall take all necessary and advisable
steps to perfect such interest, including, without limitation, if
certificated, delivery of any certificates evidencing the Borrower's
equity interest, or, if uncertificated, the recording with the
appropriate state authorities, a Form UCC-1 financing statement, and
shall provide the Lender with copies of any such other documents
related to such equity investment and the entity in which the Owner is
investing.
(b) The Lender shall evaluate all Eligible Assets on an
individual basis. The Lender agrees to approve or disapprove any Eligible Asset
within five Business Days of receipt by the Lender of the Underwriting
Transmittal and the information and documents required in this Section I(3);
provided, however, that the Lender shall have no obligation to make the first
Advance after the execution of this Agreement and under this Agreement in
connection with any Funding Notice until the Lender, Custodian or Escrow
Officer, as applicable, shall also have received the documents required in
Sections I(3)(a)(i), (iv), (v), (vi) and (vii). In the event the Lender does not
approve in writing such Eligible Asset within five Business Days, the Lender
shall be deemed to have elected not to finance such Eligible Asset.
(c) The Lender shall not be obligated to make an Advance as to
any particular Pledged Eligible Asset more frequently than once in any calendar
month.
(d) The "Maximum Advance Amount" for each Eligible Asset approved
after the date of this Agreement shall be the lesser of:
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(i) 76% of the amount Borrower has executed a written
commitment to lend to the underlying mortgagor/borrower or to invest
as equity for such Pledged Eligible Asset;
(ii) 85% of the LTV for such Pledged Eligible Asset; or
(iii) 95% of the LTC for such Pledged Eligible Asset.
(e) The "Maximum Advance Amount" with respect to each Mezzanine
Construction Loan and each Land Development Loan outstanding as of the date of
this Agreement shall be 76% and 50%, respectively, of the amount Borrower has
executed a written commitment to lend to the underlying mortgagor/borrower with
respect to such Mezzanine Construction Loan or Land Development Loan. In
connection with this modification in the Maximum Advance Amount, with respect to
each Mezzanine Construction Loan and each Land Development Loan, the Borrower
shall repay the Lender on or before the date of this Agreement the amount by
which the aggregate outstanding Advances, together with any interest accrued and
unpaid thereon, exceeds the Maximum Advance Amount that would have been made
under this Agreement (i.e., 76% and 50% of the Budgeted Costs for each Mezzanine
Construction Loan and Land Development Loan, respectively).
(f) Following the adjustment of the aggregate outstanding
Advances for Land Development Loans and Mezzanine Construction Loans pursuant to
the preceding Section I(3)(e), the aggregate amount of Advances for Mezzanine
Construction Loans, together with the aggregate amount of Advances made for Less
Than 70% Pre-Leased Projects shall at all times be less than $50,000,000. If at
any time the aggregate amount of such Advances is greater than $50,000,000, the
Borrower shall promptly repay the Lender the amount by which the aggregate
amount of such Advances exceeds $50,000,000.
(g) The Lender shall not be obligated to make any Advance with
respect to any Eligible Asset prior to the Borrower and/or the underlying
mortgagor/borrower having funded 90% of the Haircut for such Pledged Eligible
Asset. Once the Borrower has funded 90% of the Haircut for such Pledged Eligible
Asset, then Lender shall loan the Borrower 90% of the Maximum Advance Amount for
such Pledged Eligible Asset. The Lender shall then fund, on a pro rata basis,
the remaining 10% of the approved Maximum Advance Amount as the Borrower funds
its remaining 10% of the Haircut.
4. Interest; Facilities Fee.
(a) The Loan shall accrue interest daily on its outstanding
principal amount, with interest calculated for the actual number of days elapsed
based on a 360-day year. The interest rate (the "Interest Rate") on the Loan
shall be (except as otherwise provided in Section X(D) hereof) the Applicable
Interest Rate Spread plus LIBOR as determined by the Lender as of 11:00 a.m. New
York time on the Eurodollar Business Day immediately preceding each of (i) the
related Funding Date and (ii) the first day of each succeeding calendar month.
The Lender shall send the Borrower at the beginning of each month a written
statement indicating the amount of interest accrued during the immediately
preceding month. Interest which accrues during each calendar month shall be
payable on the third Business Day following
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the date the Lender sends such written notice to the Borrower, with any
outstanding interest due and payable in its entirety on the Maturity Date, or if
earlier, the date of termination of this Agreement. "LIBOR" means (i) the rate
(expressed as a percentage per annum) for a one-month deposit in U.S. dollars
that appears on Telerate Page 3750 as of 11:00 a.m., New York City time on the
applicable Eurodollar Business Day for such period or (ii) if such rate does not
appear on Telerate Page 3750 as of 11:00 a.m. New York City time, on the
applicable Eurodollar Business Day, the rate (expressed as a percentage per
annum) for a one-month deposit in U.S. dollars as reported by Morgan Guaranty
Trust Company of New York or its successor (or such other prime bank in the
London Interbank market as the Lender shall designate). "Eurodollar Business
Day" means a Business Day in New York on which commercial banks are open for
international business (including dealings in deposits in U.S. dollars) in
London.
(b) The Applicable Interest Rate Spread for the outstanding
principal amount of this Loan up to the Borrower's Tangible Net Worth (as set
forth in the statement provided pursuant to Section VIII(B)(12)) shall be 125
basis points. For any outstanding principal amount equal to or in excess of the
Borrower's Tangible Net Worth, the Applicable Interest Rate Spread shall be 300
basis points. The parties hereto agree that the aforementioned increase in the
Applicable Interest Rate reflects the increased risk associated with lending to
the Borrower and is not intended as a penalty against the Borrower.
(c) Borrower shall compensate the Lender for all losses, expenses
and liabilities sustained by the Lender in connection with the liquidation or
re-employment of such funds and losses relating to hedging arrangements
established by the Lender with respect to the Pledged Eligible Assets which the
Lender may sustain: (i) if for any reason an Advance for Pledged Eligible Assets
approved by the Lender is not made on a date specified therefor in a Funding
Notice and the Borrower has met all conditions to borrowing, (ii) if any
prepayment or other principal payment occurs on a date other than the first day
of a month or on such other date as may be required hereunder, (iii) if any
prepayment of the Loans is not made on any date specified in a notice of
prepayment given by the Borrower, or (iv) as a consequence of any other default
by the Borrower in the repayment of the Loan when required by the terms of this
Agreement.
5. Maturity and Prepayment.
(a) The Loan evidenced hereby shall mature on the Maturity Date,
and all amounts outstanding under this Agreement, including, without limitation,
all Advances made with respect to any Pledged Eligible Asset and any accrued and
unpaid interest thereon, shall be due and payable on the Maturity Date, and in
the event of non-payment in full on the Maturity Date, the Lender may exercise
all rights and remedies available to it as the holder of a first perfected
security interest under the Uniform Commercial Code of the State of New York
(the "New York UCC").
(b) The Loan is prepayable without premium or penalty, in whole
or in part, at any time prior to the date that is one year after the date of
this Agreement (the "One-Year Anniversary"); provided, however, that in
connection with any prepayment of the Loan in part (other than any prepayment
pursuant to Section IV(A) or (B) or any prepayment resulting from a payment in
full of the Pledged Eligible Asset by the underlying mortgagor/borrower or
pursuant
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to the equity investment documentation on existing equity investments, in which
case such Pledged Eligible Asset (if prepaid in full) shall be released by the
Lender upon payment in full of the related Advance), Pledged Eligible Assets may
not be removed from this Loan if the Lender determines in its sole discretion
that a Collateral Deficiency Situation would then exist unless the Borrower
fully and unconditionally cures such Collateral Deficiency Situation in
accordance with the provisions of Section IV(C). Any prepayment by the Borrower
in whole or in part during the period between the One-Year Anniversary and the
Maturity Date (other than any prepayment pursuant to Section IV(A), (B) or (C)
or any prepayment resulting from a payment in full of the Pledged Eligible Asset
by the underlying mortgagor/borrower or pursuant to the equity investment
documentation on existing equity investments) requires the Borrower to pay 120%
of the aggregate outstanding Advances made by the Lender to the Borrower with
respect to the Pledged Eligible Asset being removed from this Loan. If the
Borrower intends to prepay the Loan in whole or in substantial part from a
source other than the proceeds of a Securitization, payment in full by the
underlying mortgagor/borrower, or as a result of an Exit Strategy, the Borrower
shall provide two Business Days' written notice to the Lender. The Borrower
shall hold any principal repayments received from any underlying
mortgagor/borrower in trust for the Lender and shall pay directly to the Lender
in an amount that equals the amount of the Advances made by Lender for the
Subject Pledged Eligible Asset from the principal repayment; provided, however,
at the Borrower's written election and with the written approval of the Lender
in its sole discretion, any principal repayments received by the Borrower may be
applied against any unfunded Advance Amount applicable to a Pledged Eligible
Asset which the Lender is otherwise obligated to advance to the Borrower in
accordance with this Agreement. Any written notice by the Borrower with respect
to such scheduled amortization payments shall be irrevocable and shall specify
which Pledged Eligible Asset such prepayment is being applied towards. Any
amounts prepaid or repaid under this Agreement prior to the One-Year Anniversary
may be re-borrowed, subject to the terms and conditions of this Agreement. Any
amounts prepaid or repaid under this Agreement any time during the period
between the One-Year Anniversary of this Agreement and the Maturity Date may not
be re-borrowed.
(c) If any payment under this Agreement shall be due on a day
that is not a Business Day, such payment shall be made on the succeeding
Business Day, and such extension of time shall be included in the computation of
payment of interest under this Agreement or under the Secured Note.
6. Break-Up Fee. Pursuant to the terms and conditions of the
Securitization Agreement, under certain circumstances PSI may be entitled to a
break-up fee with respect to the disposition of Pledged Eligible Assets from
securitizations involving such assets, equal to 25 basis points multiplied by
the dollar amount of aggregate outstanding Advances as to such Pledged Eligible
Assets.
7. Secured Note. The Loan shall be evidenced by the secured promissory
note of the Borrower in the form attached hereto as Exhibit A (the "Secured
Note").
Section II. Loan Files and Custodian. The Borrower shall deliver to
Bank One, Texas, N.A., as custodian on behalf of the Lender, or such other
custodian that may be mutually agreeable to the Lender and the Borrower from
time to time (the "Custodian"), with respect to each Pledged Eligible Asset, the
documents and instruments listed in Section 2 of that
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certain Amended and Restated Custodial Agreement, dated as of May 4, 1999 (as
amended, supplemented and modified from time to time, the "Custodial
Agreement"), among the Lender, the Borrower and Custodian. The Pledged Eligible
Assets, the documents and instruments evidencing and relating to the Pledged
Eligible Assets (collectively, the "Commercial Loan/Asset Files"), the
certificates evidencing the Borrower's equity interest in any Mezzanine
Loan/Equity Investment or, if uncertificated, the document granting the Lender a
security interest in such equity investment (if the Lender requires such a
document outside of this Agreement) and any documents recorded with the
appropriate state agencies necessary and advisable to perfect such security
interest, the collateral securing such Pledged Eligible Assets, together with
any proceeds thereof and any rights the Borrower may have under any Interest
Rate Protection Agreements, are hereinafter referred to as the "Collateral". The
Borrower hereby pledges all of its right, title and interest in and to the
Collateral to the Lender to secure the repayment of principal of and interest on
the Loan and all other amounts owing by the Borrower to the Lender under this
Agreement or under any other agreement or arrangement now existing or
hereinafter entered into among such parties, including, without limitation, the
Custodial Agreement, the Warrant Agreement and the Securitization Agreement
(collectively, the "Secured Obligations").
Section III. Representations, Warranties and Covenants.
A. The Borrower represents and warrants to the Lender that, except
as otherwise disclosed and approved by the Lender:
1. Each Borrower has been duly organized and is validly existing
as (i) with respect to ACT, a real estate investment trust duly organized under
the laws of the State of Texas, (ii) with respect to AMREIT I, a corporation
duly organized and in good standing under the laws of the State of Delaware,
(iii) with respect to AMREIT II, a corporation duly organized and in good
standing under the laws of the State of Nevada, (iv) with respect to EQUITIES, a
corporation duly organized and in good standing under the laws of the State of
Georgia and (v) with respect to HOLDINGS, a corporation duly organized and in
good standing under the laws of the State of Georgia.
2. Each Borrower is duly licensed or is otherwise qualified in
each state in which it transacts business to the extent required under
applicable law, except where the failure to take such action would not (either
individually or in the aggregate) have a Material Adverse Effect and is not a
default of such state's applicable laws, rules and regulations. Each Borrower
has the requisite power and authority and legal right to own and grant a lien on
all of its right, title and interest in and to the Collateral, and to execute
and deliver, engage in the transactions contemplated by, and perform and observe
the terms and conditions of, this Agreement, the Custodial Agreement, the
Warrant Agreement, the Securitization Agreement and the Secured Note.
3. At all times after the Custodian has received a Pledged
Eligible Asset from the Borrower and until payment in full of the Loan, the
Borrower will not knowingly or intentionally commit any act in violation of
applicable laws, or regulations promulgated with respect thereto.
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4. Each Borrower is solvent and no condition exists under any
mortgage, borrowing agreement or other instrument or agreement pertaining to
indebtedness for borrowed money to which any Borrower is a party which (either
individually or in the aggregate) has caused, or would be reasonably likely to
cause, a Material Adverse Effect, and the execution, delivery and performance by
the Borrower under this Agreement, the Secured Note, the Warrant Agreement, the
Securitization Agreement and the Custodial Agreement and the consummation of the
transactions contemplated hereby and thereby do not and will not conflict with
any term or provision of the declaration of trust or certificate of
incorporation, as applicable, or by-laws of the Borrower or any law, rule,
regulation, order, judgment, writ, injunction or decree applicable to the
respective Borrower of any court, regulatory body, administrative agency or
governmental body having jurisdiction over such Borrower and will not result in
any violation of any such mortgage, instrument or agreement.
5. All financial statements or certificates of any Borrower, any
Affiliate of any Borrower or any of its officers furnished to the Lender are
true, correct and complete in all material respects and do not omit to disclose
any material liabilities or other facts relevant to the Borrowers' or such
Affiliates' condition. All such financial statements (other than any financial
statements prepared to show the Borrower's taxable income) have been prepared in
accordance with GAAP; provided, however, that interim financial statements shall
not be required to and may not include footnotes.
6. No consent, approval, authorization or order of, registration
or filing with, or notice to any governmental authority or court is required
under applicable law in connection with the execution, delivery and performance
by any Borrower of this Agreement, the Secured Note, the Warrant Agreement, the
Securitization Agreement or the Custodial Agreement and the consummation of the
transactions contemplated thereby.
7. There is no action, proceeding or investigation pending with
respect to which any Borrower has received service of process or, to the best of
any Borrower's knowledge, threatened against it before any court, administrative
agency or other tribunal (A) asserting the invalidity of this Agreement, the
Secured Note, the Warrant Agreement, the Securitization Agreement or the
Custodial Agreement, (B) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement, the Secured Note, the Warrant
Agreement, the Securitization Agreement or the Custodial Agreement, or (C) which
if determined against any Borrower would materially and adversely affect the
validity or collectability of the Pledged Eligible Assets or the performance by
the Borrower of its obligations under, or the validity or enforceability of,
this Agreement, the Secured Note, the Warrant Agreement, the Securitization
Agreement or the Custodial Agreement.
8. Except as has been disclosed to the Lender in Schedule B
attached hereto and approved by the Lender prior to the first Advance after the
execution of this Agreement, and after the Initial Advance, as disclosed to the
Lender from time to time (and subject to the Lender's rights hereunder to
declare a Collateral Deficiency Situation), there is no action, proceeding or
investigation pending with respect to which any Borrower has received service of
process, or to the best of the Borrower's knowledge, threatened against it
before any court, administrative agency or other tribunal challenging the
enforceability of any material
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mortgage loan document relating to a Pledged Eligible Asset or raising a defense
to the exercise of any remedies under such mortgage loan documents.
9. Except as has been disclosed to the Lender in Schedule B
attached hereto and approved by the Lender, no event has occurred which has
caused a Material Adverse Effect since the date set forth in the financial
statements supplied to the Lender.
10. This Agreement, the Secured Note, the Warrant Agreement, the
Securitization Agreement and the Custodial Agreement have been duly authorized,
executed and delivered by each Borrower that is a party to such agreement, all
requisite trust or corporate action, as applicable, having been taken, and each
is valid, binding and enforceable against the respective Borrower in accordance
with its terms except as such enforcement may be affected by bankruptcy,
insolvency, moratorium, reorganization, fraudulent conveyance, redemption or
other similar laws affecting the enforcement of creditor's rights generally, or
by general principles of equity.
11. Except as has been disclosed to Lender in Schedule B attached
hereto, the Management Agreement has not been amended, superseded, or otherwise
modified.
12. No Event of Default under the Original Agreement, this
Agreement, the Secured Note, the Securitization Agreement or the Custodial
Agreement has occurred or is continuing to occur.
13. As of the date of this Agreement and immediately after giving
effect to each Advance, the Borrower is and will be able to pay its debts as
they mature and does not and will not have insufficient capital to engage in the
business in which it is engaged and proposes to engage. The Borrower does not
intend to incur, or believe that it has incurred, debts beyond its ability to
pay such debts as they mature. The Borrower is not contemplating the
commencement of insolvency, bankruptcy, liquidation or consolidation proceedings
or the appointment of a receiver, liquidator, conservator, trustee or similar
official in respect of the Borrower or any of its assets. The Borrower is not
transferring any Pledged Eligible Assets with any intent to hinder, delay or
defraud any of its creditors.
14. Solely as a result of the transactions contemplated in this
Agreement, the Lender is not required to be licensed, registered or approved or
to obtain permits or otherwise qualify (i) to do business in any state in which
it currently is not so required or (ii) under any state consumer lending, fair
debt collection or other applicable state statute or regulation; or prior to the
Borrower subsequently entering such a transaction, the Borrower shall obtain the
necessary license, registration, approval or permit.
15. Each Eligible Asset originated by an originator other than
the Borrower has been conveyed to the Borrower pursuant to a true and legal sale
and, prior to any Initial Advance with respect to such Eligible Asset, the
Borrower has delivered to the Lender the opinion of legal counsel required by
the Lender, if any, pursuant to Section I(3)(a)(xii)(A), (B) or (C).
16. The information, reports, financial statements, exhibits and
schedules furnished in writing by or on behalf of the Borrower to the Lender in
connection with
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the negotiation, preparation or delivery of this Agreement, the Warrant
Agreement, the Custodial Agreement, the Secured Note, and the Securitization
Agreement or included herein or therein or delivered pursuant hereto or thereto
(or to the extent prepared or furnished by an underlying mortgagor/borrower or
parties other than the Borrower or its Affiliates, to the best of Borrower's
knowledge), do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements herein or therein not
misleading. All written information furnished by or on behalf of the Borrower to
the Lender in connection with this Agreement, the Warrant Agreement, the
Custodial Agreement, the Secured Note, and the Securitization Agreement and the
transactions contemplated hereby and thereby will be true, correct and accurate
in every material respect, or (in the case of projections) based on reasonable
estimates, on the date as of which such information is stated or certified.
There is no fact known to the Borrower that, after due inquiry, could reasonably
be expected to have a Material Adverse Effect that has not been disclosed in
this Agreement, the Warrant Agreement, the Custodial Agreement, the Secured Note
or the Securitization Agreement or in a report, financial statement, exhibit,
schedule, disclosure letter or other writing furnished to the Lender for use in
connection with the transactions contemplated hereby or thereby.
17. Each Plan to which the Borrower makes direct contributions
and each other Plan and each Multiemployer Plan is in compliance in all material
respects with, and has been administered in all material respects in compliance
with, the applicable provisions of ERISA, the Code and any other Federal or
state law.
18. The Borrower has conducted a comprehensive review and
assessment of its computer applications and has made an appropriate inquiry of
the Borrower's material vendors and contractors with respect to the year 2000
problem (i.e., the inability of certain computer applications to recognize
correctly and perform date-sensitive functions involving certain dates prior to
and after December 31, 1999). Based on the foregoing review, assessment and
inquiry, the Borrower reasonably believes that the year 2000 problem will not
result in any Material Adverse Effect. Without diminishing or extinguishing this
representation in any respect as between the parties hereto, it is understood
and agreed that this year 2000 readiness disclosure is made pursuant to the
terms and conditions of the Year 2000 Information and Readiness Act.
19. The Borrower has REIT status and maintains its common stock
listed on the NASDAQ. The Borrower has timely elected or will timely elect to be
taxed as a REIT for its taxable year ended December 31, 1998. The Borrower does
not know of any currently existing event or condition which would cause or is
reasonably likely to cause the Borrower to fail to qualify as a REIT.
B. With respect to every Pledged Eligible Asset, the Borrower
represents and warrants to the Lender that:
1. Such Pledged Eligible Asset and all accompanying collateral
documents obtained and required to be obtained in connection with the Pledged
Eligible Assets are complete and authentic and all signatures thereon are
genuine.
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2. Such Pledged Eligible Asset arose from a bona fide loan or
contract, as applicable, complying in all material respects with all applicable
State and Federal laws and regulations, and is not subject to any valid defense,
set-off or counterclaim.
3. Except as set forth in Section III(B)(9) below, no default has
occurred in any provisions of such Pledged Eligible Asset.
4. With respect to such Pledged Eligible Asset, all amounts
represented to be payable on the related Promissory Note or other contract are,
in fact, payable pursuant to the provisions of such Promissory Note or other
contract.
5. To the best of the Borrower's knowledge, any property subject
to any security interest given in connection with such Pledged Eligible Asset is
not subject to any other encumbrances other than as disclosed to and approved in
writing by the Lender in writing in its sole discretion or as described in the
Underwriting Transmittal or as otherwise would not adversely impact the quality
and condition of title to such property being good and marketable and/or the
value of the property.
6. The Borrower holds good and indefeasible title to, and is the
sole owner of, such Pledged Eligible Asset and as of the related Funding Date,
such Pledged Eligible Asset is not subject to any liens, charges, mortgages,
encumbrances or rights of any Person other than the Lender except (a) such liens
that are to be released simultaneously with the pledge to the Lender under this
Agreement, (b) as identified in an Underwriting Transmittal for an Approved
Asset or (c) as has otherwise been approved by the Lender in writing in its sole
discretion.
7. Each Pledged Eligible Asset conforms to the description
thereof as set forth on the related Commercial Loan/Asset Schedule delivered to
the Custodian and the Lender.
8. All applicable disclosures required by the Real Estate
Settlement Procedures Act, by Regulation X promulgated thereunder and by
Regulation Z of the Board of Governors of the Federal Reserve System promulgated
pursuant to the statute commonly known as the Truth-in-Lending Act and the
Notice of the Right of Rescission required by said statute and regulation have
been properly made and given.
9. Except as otherwise disclosed in the Underwriting Transmittal,
as of the first Funding Date under this Agreement or any subsequent Funding
Date, such Pledged Eligible Asset is not thirty-one or more days delinquent as
of the last payment due date for such Pledged Eligible Asset and since inception
such Pledged Eligible Asset has not been thirty-one or more days delinquent on
more than one occasion.
10. The Pledged Eligible Assets do not have characteristics which
are materially worse than those of other similar Eligible Assets financed by the
Borrower during the twelve-month period preceding the first Funding Date under
this Agreement.
11. To the extent applicable, the representations and warranties
set forth in Appendix II are true, correct and complete in all material respects
as to the Pledged
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Eligible Assets as of the date of closing of each such Pledged Eligible Asset,
except as disclosed in the related Underwriting Transmittal prepared and
delivered by the Borrower.
12. Each Pledged Eligible Asset was originated pursuant to
prudent underwriting standards, the Borrower's Guidelines and other relevant
handbooks (including any amendments and modifications thereto as approved in
writing by the Lender pursuant to Section I(3)(a)(vi)) heretofore provided to,
and approved by, the Lender, except for such material exceptions which have been
disclosed to, and where required hereunder pre-approved by, the Lender in the
Underwriting Transmittal.
C. The Borrower covenants with the Lender that, during the term of this
Loan:
1. Financial Covenants.
(a) Tangible Net Worth. ACT, on a consolidated basis, shall
at all times maintain Tangible Net Worth and a schedule showing Tangible Net
Worth (and shall deliver prior to the first Advance under this Agreement, a
schedule showing the Borrower's Tangible Net Worth) in an amount not less than
the sum of (i) $100,000,000, plus (ii) 75% of the net cash proceeds of any
equity subsequently raised by the Borrower in any public or private offering, as
of the last day of any calendar quarter.
(b) Coverage Ratio. ACT, on a consolidated basis, shall
not permit the Coverage Ratio at the end of any calendar quarter to be less than
1.4 to 1.
(c) Leverage Ratio. The Total Indebtedness of the Borrower
shall not exceed, at the end of any calendar quarter, 400% of shareholders'
equity, as determined in accordance with GAAP.
(d) Liquidity. At all times, the Borrower shall either
hold in cash or cash equivalents as a capital reserve or leave unborrowed under
this Loan or under another outstanding lending facility with the Lender or an
Affiliate of the Lender in an amount not less than $3,000,000, which is 1% of
the Maximum Loan Amount.
2. REIT Status. ACT has continuously conducted its business so as
to qualify as a real estate investment trust ("REIT") as defined in Section 856
of the Code for all taxable years commencing with taxable year ending December
31,1998, and has elected to be taxed as a REIT for its taxable year ending
December 31, 1998, and such election has not been terminated, nor does ACT
contemplate revoking its REIT status. The Borrower does not know of any
currently existing event or condition which would cause or is reasonably likely
to cause the Company to fail to qualify as a REIT. If the Borrower does,
however, at any point decide to forego qualification as a REIT under the Code,
the Borrower must provide the Lender with written notice of such decision at its
earliest opportunity and the Lender shall have no further obligation to fund
additional Advances; provided, however, that all Advances outstanding shall not
be accelerated solely for failure of this covenant.
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3. Underwriter. Subject to the provisions of Section I(6), PSI
shall have the right to be engaged in the Manager Role within eighteen months
following the date of this Agreement as provided in the Securitization Agreement
and as set forth in Section III(C)(8).
4. Licenses. With respect to each state in which the Borrower is
not licensed or otherwise qualified to do business, upon (i) meeting the
requirements which make it subject to such licensing or qualification in any
such state or (ii) the advice of counsel that the Borrower become licensed or
qualified, the Borrower shall either (x) become licensed or otherwise become
qualified to do business in each such state or (y) cease doing business in such
state relating to Pledged Eligible Assets subject to this Agreement except in
either instance described in (x) or (y) the failure to take such action would
not (either individually or in the aggregate) have a Material Adverse Effect.
5. Delivery of Documents. If requested by the Lender, the
Borrower shall deliver to the Lender copies of each of the documents to be
delivered to the Custodian under the Custodial Agreement and the Lender shall be
entitled to rely on each of the representations and warranties in favor of the
Custodian contained therein as if such representation and warranty were made
directly to the Lender for its benefit.
6. Standard Loan Documents. The Borrower shall use, or cause to
be used, standard loan documents for each Pledged Eligible Asset, in form and
substance satisfactory to the Lender, modified, as necessary in the reasonable
opinion of the Borrower and consistent with institutional lending documentation
for similar transactions, reflect modifications thereto as customarily agreed to
by institutional lenders, provided that such loan documents contain customary
provisions in institutional loan documents for similar transactions protective
of the Lender's interests under such loan documents and which are adequate for
the realization against the collateral securing the Mortgage Loan, subject to
any limitations imposed by (a) bankruptcy, reorganization, fraudulent
conveyance, moratorium, redemption or other similar laws affecting the
enforcement of creditor's rights generally and (b) general equity principles
(regardless of whether such enforcement is considered in a proceeding in equity
or in law).
7. Warrant Agreement. Simultaneously with the execution of this
Agreement, Borrower shall execute and deliver to PSI the Warrant Agreement,
which shall be in a form acceptable to PSI and Lender in their sole discretion.
In addition, the Borrower shall perform its obligations under the Warrant
Agreement in a complete and timely manner during the term of the Warrant
Agreement. AMREIT I, AMREIT II, EQUITIES and HOLDINGS are not parties to the
Warrant Agreement, however, each of AMREIT I, AMREIT II, EQUITIES and HOLDINGS
has been provided a copy of the Warrant Agreement and each of AMREIT I, AMREIT
II, EQUITIES and HOLDINGS agrees that a default by ACT under the Warrant
Agreement shall constitute an Event of Default under this Agreement. Further,
each of AMREIT I, AMREIT II, EQUITIES and HOLDINGS waives any defenses that it
may have in connection with such Event of Default.
8. Financing Transactions. If, at any time within the 18 months
following the date of this Agreement, the Borrower or any of its Affiliates
proposes or enters into a letter of intent or agreement: (i) to dispose of, sell
or otherwise transfer any interest in any of their respective assets or
businesses and the Borrower elects to engage a Financial Advisor
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(defined below), unless otherwise approved in writing by the Lender in its sole
discretion; (ii) to acquire or purchase any interest or investment in any
assets, business or other entity and the Borrower elects to engage a Financial
Advisor (defined below); (iii) to issue or offer publicly or privately any
securities (other than pursuant to that certain Exchange Agreement dated as of
February 2, 1999 between Borrower and OLY/ACT, L.P., OLY/GP ACT L.P. and
EQUITIES, without modification, except as reasonably approved by the Lender and
the Borrower hereby acknowledges that it shall be reasonable for the Lender to
disapprove any modification which frustrates the intent and purpose of this
Section III(c)(8), relating to the potential exchange of partnership assets for
the Borrower's common shares in the event that the Borrower or any Affiliate
does not engage a financial advisor in connection with such transaction); or
(iv) to securitize the Pledged Eligible Assets as provided in the Securitization
Agreement (each of such transactions referred to in clauses (i), (ii), (iii) or
(iv) hereof being hereafter referred to as a "Financing Transaction"), the
Lender and/or its Affiliates (as the Lender may designate) shall have the
exclusive right (but not the obligation) to act as the financial advisor,
placement agent, underwriter, lender consultant or otherwise (collectively, the
"Financial Advisor"), as the case may be, with respect to such Financing
Transaction. The Borrower or any of its Affiliates must present the terms of any
proposed Financing Transaction to the Lender or its Affiliates in order for the
Lender or its Affiliates to consider whether to exercise its exclusive right to
be the Financial Advisor. The terms of any such proposed Financing Transaction
shall include provisions for the compensation of the Financial Advisor in an
amount and on terms no less favorable than the prevailing rate and terms
required by a majority of nationally recognized commercial/investment banks for
transactions of similar size and nature. In the event that the Lender or its
Affiliates decline in writing to exercise such right, the Borrower may proceed
to conduct such Financing Transaction with a third party on the same amount,
terms and conditions as presented to the Lender so long as (i) if the Financing
Transaction is the merger of the Borrower with or into another entity, then the
Borrower and the applicable suitor or target have entered into a definitive
agreement (to consummate such merger) within 180 days of Lender's decision to
decline to exercise its right, and (ii) if the Financing Transaction is any
other type of transaction, the Financing Transaction closes within 180 days of
Lender's decision to decline to exercise its right. In the event that any of the
Lender or its Affiliates elects to act as a Financial Advisor with respect to a
particular Financing Transaction, then each of the Borrower and/or its
Affiliates and the Lender and/or its Affiliates, as applicable, shall enter into
customary agreements which will include, among other things, the terms of any
such financing, provisions for the payment of the compensation described above
for the Lender and/or its Affiliates in their capacity as Financial Advisor,
provisions for the indemnification of the Lender and its Affiliates in its
capacity as Financial Advisor, and customary representations, warranties,
covenants and conditions (including, without limitation, due diligence, market
conditions and approval by the applicable committees of the Lender and/or its
Affiliates).
9. Assets Determined to be Defective. Upon discovery by the
Borrower that a Pledged Eligible Asset no longer meets the eligibility criteria
listed herein applicable to any such Pledged Eligible Asset, the Borrower shall
promptly give written notice of such discovery to the Lender.
10. Limitation on Liens on Collateral. The Borrower will defend
the Collateral against, and will take such other action as is necessary to
remove, any lien, security interest or claim on or to the Collateral, other than
the security interests created under this
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Agreement, and the Borrower will defend the right, title and interest of the
Lender in and to any of the Collateral against the claims and demands of all
persons whomsoever.
11. Year 2000 Readiness. The Borrower will take those actions
reasonably necessary to ensure that the Borrower's internal mission critical
systems are able to operate and effectively process data which includes dates on
and after January 1, 2000. Without diminishing or extinguishing this covenant in
any respect as between the parties hereto, it is understood and agreed that this
year 2000 readiness covenant is made pursuant to the terms and conditions of the
Year 2000 Information and Readiness Act.
12. Update to the Borrower's Representations and Warranties. The
Borrower will, at the request of the Lender in connection with the subsequent
disposition or securitization, if any, of the Pledged Eligible Assets or any
portion thereof, update the representations and warranties contained in Section
III mutatis mutandis and make such additional representations and warranties or
modifications to such representations and warranties as reasonably requested by
the Lender or any rating agency with respect to each such Pledged Eligible
Asset. Such updating may be effected by delivery to the Lender of an officer's
certificate of the Borrower providing that each of the representations and
warranties of the Borrower contained in Section III is true, correct and
complete in all material respects as of the date of such subsequent disposition
or securitization, except to the extent that such representation and warranty
specifically relates to an earlier date, in which case such representation or
warranty was true and correct in all material respects as of such earlier date,
and setting forth any such additional or modified representations and warranties
as set forth above.
13. Negative Covenants.
(a) Prohibition on Fundamental Changes. Neither the
Borrower nor the Manager shall enter into any transaction of merger or
consolidation or amalgamation or liquidate, wind up or dissolve itself (or
suffer any liquidation, winding up or dissolution) or sell all or substantially
all of its assets, without the prior written consent of the Lender.
(b) Compliance with Laws. At all times after the Custodian
has received a Pledged Eligible Asset from the Borrower and until payment in
full of the Loan, the Borrower shall not commit any act in violation of
applicable laws, or regulations promulgated with respect thereto.
(c) Limitation on Sale or Other Disposition of Collateral.
Neither the Borrower nor the Manager shall lease (other than in the ordinary
course of business), transfer, assign, sell or otherwise dispose of any
Collateral without the prior written consent of the Lender, unless the proceeds
of such sale or disposition are applied to repay Advances so that, after giving
effect to such transaction, a Collateral Deficiency Situation does not exist
with respect to any Pledged Eligible Asset.
Section IV. Mandatory Partial Prepayment of Loan.
A. Upon discovery by the Borrower or the Lender of any breach of any
of the representations, warranties or covenants set forth in this Agreement, the
party discovering such
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breach shall promptly give notice of such discovery to the other. If there has
been a material breach with respect to any Pledged Eligible Asset of one or more
of the representations, warranties or covenants set forth in Section III(B)
preceding (notwithstanding any qualification therein as to the Borrower's
knowledge), the Borrower shall repay the Loan in an amount equal to the
aggregate outstanding Advances made for such Pledged Eligible Asset.
B. If any Pledged Eligible Asset, as indicated on any Supplemental
Commercial Loan/Asset Schedule delivered pursuant to Section VIII(A) hereof or
otherwise, becomes thirty-one or more days delinquent, the Borrower shall prepay
the Loan in part with respect to such Pledged Eligible Asset, or, with the
Lender's written consent, deliver a qualifying substitute Eligible Asset in its
place. Any such Pledged Eligible Asset which becomes thirty-one or more days
delinquent shall be subject to an immediate re-determination of its Stabilized
Value by the Lender. At the written request of the Borrower to the Lender, upon
delivery of a qualifying substitute Eligible Asset or payment in full of all
Advances related to such delinquent Pledged Eligible Asset, and so long as no
Event of Default has occurred and is continuing, the Lender agrees to cause to
be released from the lien hereof the Pledged Eligible Asset and the documents
described as Mortgage Documents in the Custodial Agreement.
C. If, on any date other than a Funding Date, the Lender determines
that a Collateral Deficiency Situation exists, the Lender shall so notify the
Borrower, and the Borrower, within three Business Days, shall either (i) pay to
the Lender the Restoration Amount or (ii) deliver to the Custodian on behalf of
the Lender assets or collateral (including, but not limited to, a letter of
credit or a pledged certificate of deposit) or additional Eligible Assets, such
that the difference between the Maximum Advance Amount and the aggregate
Outstanding Advances as to such additional Eligible Asset, together with the
other assets or collateral have an aggregate Stabilized Value at least equal to
the Restoration Amount, as determined by the Lender in its sole discretion.
D. Additional Advances for Excess Collateral.
In the event that the Borrower has a good faith belief that the
Eligible Asset Value of a Pledged Eligible Asset has increased as a result of an
increase in its DSCR or other means supportable by the Borrower and agreed to by
the Lender in writing in its sole discretion, so long as no default or Event of
Default has occurred and is continuing:
1. The Borrower may prepare a Request for Additional Advance in a
form satisfactory to the Lender ("Request for Additional Advance"), specifying
(i) the Pledged Eligible Asset(s) and Advance Amount for which an Advance is
sought and the requested Funding Date, (ii) the Borrower's determination of the
new Eligible Asset Value and DSCR with respect to such Pledged Eligible Asset,
and (iii) an Underwriting Transmittal supporting the increase in Eligible Asset
Value and DSCR.
2. The Borrower may transmit the Request for Additional Advance
by facsimile transmission to the Lender. Upon review of the Request for
Additional Advance and confirmation that, after giving effect to the requested
Additional Advance, the Lender determines that a Collateral Deficiency
Situation, any default or any Event of Default will not exist the Lender may, in
its sole discretion, decide to approve the Additional Advance and
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countersign the Request for Additional Advance and may advance funds in the
amount set forth in such Request for Additional Advance. In the event that the
Lender's assessment of the Stabilized Value of the Pledged Eligible assets would
alter the information set forth in any Request for Additional Advance, the
Lender shall promptly notify the Borrower in writing of such assessment.
3. The Lender shall not be obligated to countersign a Request for
Additional Advance.
E. Hedging. The Borrower and the Lender shall negotiate in good
faith on a hedging strategy in respect of the Pledged Eligible Assets; provided,
however, that in the event the Borrower and the Lender shall disagree on a
hedging strategy, the Borrower shall implement the hedging strategy as
reasonably determined by the Lender. The Lender shall not require any hedging
strategy that would materially affect the Borrower's ability to maintain its
status as a REIT. At the time of the Lender's approval of a Pledged Eligible
Asset, the Lender will inform the Borrower if it anticipates requiring such a
strategy with respect to such asset; provided, however, that such notice shall
not preclude the Lender from requiring a hedging strategy for such Pledged
Eligible Asset at a later time. The Lender will advise PSI to recommend and
provide quotes for Interest Rate Protection Agreements in connection with
Pledged Eligible Assets and Eligible Assets in process. Prior to entering into
any Interest Rate Protection Agreement, the Borrower shall consult with the
Lender and obtain the Lender's written approval, not to be unreasonably
withheld, conditioned or delayed, of the proposed terms of any such Interest
Rate Protection Agreement. The benefits and liabilities under any Interest Rate
Protection Agreement shall be transferable to any subsequent transferee of the
Pledged Eligible Asset, at the option of such transferee. Any Interest Rate
Protection Agreements shall be priced "at market" and subject to a "check away"
mechanism. In determining whether a Collateral Deficiency Situation exists, the
Lender will offset any increase in fair market value of any Interest Rate
Protection Agreements in which the Lender has been granted a first-lien security
interest against any decrease in Market Value relating to the Pledged Eligible
Assets, and the Lender shall offset any increase in Market Value of the Pledged
Eligible Assets against any Hedge Loss related to Interest Rate Protection
Agreements in which the Lender has been granted a first-lien security interest.
The Borrower agrees to bear all risk for the Market Value of the Pledged
Eligible Assets and the combined position of such Pledged Eligible Assets and
hedges pursuant to all Interest Rate Protection Agreements. Any Hedge Loss
associated with any Pledged Eligible Asset that is not recoverable in a
disposition of such Pledged Eligible Asset shall be deemed to be an Advance as
to such Pledged Eligible Asset and a Secured Obligation under this Agreement.
Section V. Release of Loan Files Following Payment of Loan. The Lender
agrees to cause to be released from the lien hereof the Pledged Eligible Assets
and the documents described as Mortgage Documents in the Custodial Agreement at
the request of the Borrower upon payment in full of the Loan, or, if a partial
payment of the Loan shall have occurred, the Pledged Eligible Assets and the
related documents held by the Custodian relating to the Advances being repaid
associated with such Pledged Eligible Assets; provided, that, with respect to
payments in full of any Pledged Eligible Asset, the Borrower agrees to (i)
provide the Lender with a copy of a report from the Borrower, as servicer, or a
subservicer of the Borrower, or a certification indicating that such Pledged
Eligible Asset has been paid in full and (ii) pay to the
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Lender in full all outstanding Advances with respect to such Pledged Eligible
Asset (subject to the Borrower's rights under Section I(5)(b)). The Lender
agrees to release such lien within one Business Day after receipt of the
documents referred to in (i) and (ii) in the immediately preceding sentence.
Section VI. Servicing. The Borrower shall service or cause the Pledged
Eligible Assets to be serviced (i) in accordance with the provisions of the
Management Agreement executed in connection with the servicing of the Eligible
Assets and (ii) with the degree of skill and care consistent with that which the
Borrower customarily exercises with respect to similar Eligible Assets owned,
managed or serviced by it and all applicable industry standards. The Borrower
shall (i) comply with all applicable Federal and State laws and regulations,
(ii) maintain all State and Federal licenses, except where the failure to take
such action would not (either individually or in the aggregate) have a Material
Adverse Effect, necessary for it to perform its servicing responsibilities under
this Agreement and (iii) not impair the rights of the Lender in any Pledged
Eligible Assets or any payment under this Agreement.
Section VII. No Oral Modifications; Successors and Assigns; Assignment
of Collateral. No provisions of this Agreement shall be waived or modified
except by a writing duly signed by the authorized agents of the Lender and the
Borrower. This Agreement shall be binding upon the successors and assigns of the
parties hereto. The Borrower acknowledges and agrees that the Lender may
re-pledge, enter into repurchase transactions and otherwise re-hypothecate
(including the granting of participation interests therein, provided that any
such participation and re-hypothecation does not materially increase any
obligation of the Borrower under this Agreement and provided further that the
Lender shall provide written notice to the Borrower of any such participation)
the Collateral for the Loan; provided, however, that no such act shall in any
way affect the Borrower's rights to the Collateral.
Section VIII. Reports.
A. The Borrower shall provide the Lender with a report (a
"Supplemental Commercial Loan/Asset Schedule") (i) on the date any additional or
substitute Eligible Assets are delivered pursuant to Section IV(B) or Section
IV(C) hereof and at least (a) two Business Days before each Funding Date for any
Eligible Asset and (b) the fifteenth day of the month, and (ii) within two
Business Days following any request by the Lender or any Affiliate thereof for
such a schedule. Such Supplemental Commercial Loan/Asset Schedule will contain
information concerning (a) the Pledged Eligible Assets then held pursuant to
this Agreement, (b) any Eligible Assets proposed to be delivered pursuant to
this Agreement on the next Funding Date or in connection with the cure of a
Collateral Deficiency Situation pursuant to Section IV(B) or Section IV(C)
hereof, and (c) the portfolio performance data with respect to all Pledged
Eligible Assets, including, without limitation, any outstanding delinquencies,
prepayments in whole or in part and any repurchases by the Borrower, and shall
be in a format as may be agreed upon by the Borrower and the Lender from time to
time. The Borrower shall also provide to the Lender every two weeks a pipeline
report, indicating the status of pending transactions, including transactions
for which a term sheet or other proposal has been submitted, the status of all
transactions in which commitments have been granted, the expected
closing/funding date, and a designation of the loans included on such list that
the Borrower anticipates will become Pledged Eligible Assets, in a form
satisfactory to the Lender. Each such report referenced in this
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paragraph shall be transmitted by the Borrower to the Lender via facsimile,
except for each monthly report which shall be transmitted by the Borrower to the
Lender either via modem or on a computer disk or tape. The Borrower at its
option shall either deliver to the Lender and/or permit the Lender or its
agents, consultants, accountants or attorneys to inspect any property, books,
valuations, records, audits or other information as the Lender may reasonably
require during business hours with reasonable advance notice.
B. The Borrower shall furnish to the Lender:
1. immediately, copies of any material and adverse notices
(including, without limitation, notices of defaults, breaches, potential
defaults or potential breaches) given to or received from the Borrower's or any
of its Affiliate's other lenders;
2. immediately, a notice of the occurrence of any "Event of
Default" under this Agreement or of any situation which the Borrower, with the
passage of time, reasonably expects to develop into an "Event of Default" under
this Agreement;
3. immediately upon, but in no event later than three Business
Days after, service of process on the Borrower, or any agent thereof for service
of process, notice in respect of any legal or arbitrable proceedings affecting
the Borrower (a) that questions or challenges the validity or enforceability of
this Agreement, the Secured Note, the Warrant Agreement, the Securitization
Agreement and the Custodial Agreement or any document, agreement or instrument
pertaining to the Collateral, or (b) in which the amount in controversy exceeds
$3,000,000;
4. immediately upon the Borrower having actual knowledge, notice
of the occurrence of any default related to any Collateral, any Material Adverse
Effect and any event or change in circumstances which could reasonably be
expected to have a Material Adverse Effect;
5. immediately upon the Borrower having actual knowledge, notice
that the Mortgaged Property in respect of any Pledged Eligible Asset has been
materially damaged by waste, fire, earthquake or earth movement, windstorm,
flood, tornado or other casualty, or otherwise damaged so as to materially and
adversely affect the Stabilized Value of the underlying real property or the
Market Value of such Pledged Eligible Asset;
6. immediately upon notice of entry of a judgment or decree
against the Borrower in an amount in excess of $3,000,000;
7. within 120 days of the end of each calendar year, consolidated
audited financial statements of ACT, together with a calculation showing
compliance with each financial covenant set forth in Section III(C)(1);
8. within 120 days of AMREIT I's, AMREIT II's, EQUITIES' and
HOLDINGS' fiscal year end, unaudited financial statements of such Borrower
certified by such Borrower's Chief Financial Officer or Controller, or the Chief
Financial Officer, Treasurer or Controller of AMREIT Managers, L.P. (the
"Manager") as true, correct and complete in all
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material respects, and fairly representing the information set forth therein,
together with a calculation showing compliance with each financial covenant set
forth in Section III(C)(1);
9. within 60 days after the end of each calendar quarter
consolidated unaudited financial statements of ACT, and unaudited financial
statements for AMREIT I, AMREIT II, EQUITIES and HOLDINGS, respectively, for
each of such Borrower's first three quarters of each fiscal year together with a
calculation showing compliance with each financial covenant set forth in Section
III(C)(1);
10. within five Business Days of their release, quarterly and
annual consolidated and consolidating financial statements of ACT;
11. within five Business Days of their filing with the SEC,
copies of all 10-Ks, registration statements, other "corporate finance" SEC
filings (other than 8-Ks) and any other filings reasonably requested by the
Borrower and its Affiliates; provided, that, ACT will provide the Lender with a
copy of ACT's annual 10-K filed with the SEC no later than 120 days after the
end of the year; and
12. within fifteen days after the end of each calendar quarter, a
schedule showing the Borrower's Tangible Net Worth as of the end of such
calendar quarter, certified as true, correct and complete by the Chief
Accounting Officer of the Borrower.
All required financial statements, information and reports shall be
prepared in accordance with GAAP, or, if applicable to SEC filings, SEC
accounting regulations; provided, however, that interim financial statements do
not need to include footnotes.
C. In conjunction with the delivery of each notice delivered by the
Borrower pursuant to Section VIII(B)(1) through (6), the Borrower shall deliver
to the Lender an officer's certificate setting forth details of the occurrence
referred to therein and certifying as to what action the Borrower has taken or
proposes to take with respect thereto, and in conjunction with the delivery of
the financial statements to be delivered by the Borrower pursuant to Sections
VIII(B)(8), (9) and (10) the Borrower shall deliver to the Lender an officer's
certificate of the Borrower certifying that, as of the date of delivery of such
financial statements, the Borrower is in compliance with all the terms of this
Agreement including, without limitation, each of the covenants set forth in
Section III(C), together with calculations showing compliance with such
covenants.
D. The Lender covenants and agrees to use commercially reasonable
efforts to preserve the confidentiality of any financial data concerning the
Borrower, any Affiliate of the Borrower, or any of the Borrower's businesses or
operations or any information with respect to which the Borrower or any
Affiliate has (a) an obligation of confidentiality to a third party (to the
extent such obligation has been disclosed to the Lender) or (b) informed the
Lender of the confidential nature of the specific information, except to the
extent the Lender is required to disclose such information pursuant to any
applicable law, rule, regulation or order of any governmental authority and if
the Lender is requested or is required by applicable law (by interrogatories,
requests for information or documents, subpoena, civil investigative demand or
similar process) to disclose any such information, to the extent reasonably
practicable the Lender
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shall provide the Borrower with prompt notice of such request or requirement so
that the Borrower may consider seeking a protective order or an injunction;
provided that (i) any information contained in any annual report, or any Form
10-K, Form 10-Q or Form 8-K reports (if any) which have been delivered to the
SEC, or any annual or quarterly reports to the stockholders of the Borrower
subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended, proxy material delivered to the stockholders of any Borrower or any
report delivered to the SEC, or any other information that is in the public
domain or has become publicly known, shall not in any event be deemed
confidential, and (ii) the Lender may make any information received by it
available (A) to a proposed transferee of or proposed participant in any
interest in the Secured Note, provided that such proposed transferee or proposed
participant agrees in writing to be bound by the provisions of this Section
VIII(D), (B) to any accountants or other professionals engaged by the Lender,
provided that each such accountant or professional agrees to be bound by the
provisions of this Section VIII(D), or (C) in connection with the enforcement of
this Agreement or any litigation in connection therewith. Further, the Lender
agrees that, prior to the Maturity Date, it will not intentionally use the
information provided by the Borrower and not otherwise generally known or
obtainable through sources other than the Borrower to take any action to
personally, by telephone or mail, solicit any underlying borrower for any
purpose which is in conflict with the services and products which the Borrower
is providing or can provide with the Borrower's current products and services to
such underlying borrower, including to refinance loans made by the Borrower to
such underlying borrower, without the prior written consent of the Borrower.
Section IX. Events of Default. Each of the following shall constitute
an "Event of Default" under this Agreement:
A. Failure of the Borrower to (i) make any payment of interest or
principal which has become due, whether by acceleration or otherwise, under the
terms of the Secured Note, this Agreement, any other warehouse and security
agreement or any other document evidencing or securing indebtedness of the
Borrower to the Lender or to any Affiliate of the Lender or any other lender,
unless in each instance the indebtedness was specifically non-recourse by its
terms and the Borrower and the lender under such indebtedness are not in
litigation as a result of such loan default, (ii) pay or deliver any Restoration
Amount within the time period specified in Section IV(C), (iii) pay the Lender
the amount of interest accrued in the immediately preceding month within the
time period specified in Section I(4) or (iv) make a payment of any other amount
payable under the terms of this Agreement or the Secured Note when due.
B. A final judgment or judgments for the payment of money in
excess of $5,000,000 in the aggregate shall be rendered against the Borrower or
any of its Qualified or Non-Qualified REIT Subsidiaries by one or more courts,
administrative tribunals or other bodies having jurisdiction and the same shall
not be discharged (or provision shall not be made for such discharge), bonded or
paid, or a stay of execution thereof shall not be procured, within 60 days from
the date of entry thereof, and the Borrower or any such Qualified REIT
Subsidiary and Non-Qualified REIT Subsidiary shall not, within such period of 60
days, or such longer period during which execution of the same shall have been
stayed or bonded, appeal therefrom and cause the execution thereof to be stayed
during such appeal.
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C. Assignment or attempted assignment by the Borrower of this
Agreement or any rights under this Agreement, without first obtaining the
specific written consent of the Lender, or the granting by the Borrower of any
security interest, lien or other encumbrance on any Pledged Eligible Assets to
any person other than the Lender.
D. The filing by the Borrower of a petition for liquidation,
reorganization, arrangement or adjudication as a bankrupt or similar relief
under the bankruptcy, insolvency or similar laws of the United States or any
state or territory thereof or of any foreign jurisdiction; the failure of the
Borrower to secure dismissal of any such petition filed against it within 60
days of such filing; the making of any general assignment by the Borrower for
the benefit of creditors; the appointment of a receiver or trustee for the
Borrower, or for any part of the Borrower's property; the institution by the
Borrower of any other type of insolvency proceeding (under the Bankruptcy Code
or otherwise) or of any formal or informal proceeding, for the dissolution or
liquidation of, settlement of claims against, or winding up of the affairs of,
the Borrower; the institution of any such proceeding against the Borrower if the
Borrower shall fail to secure dismissal thereof within 60 days thereafter; the
consent by the Borrower to any type of insolvency proceeding against the
Borrower (under the Bankruptcy Code or otherwise); the occurrence of any event
or existence of any condition which could be the ground, basis or cause for any
proceeding or petition described in this Section IX.
E. The occurrence of any material adverse change in the financial
condition of the Borrower, without Borrower being subject to the requirement of
or entitled to the benefit of any notice, cure or grace period. For purposes of
this Section IX(E), a material adverse change in the financial condition of the
Borrower shall include, but is not limited to, a breach of any financial
covenant set forth in Section III(C)(1).
F. The existence of any condition which, in the Lender's sole
determination reasonably exercised, constitutes an impairment of the Borrower's
ability to perform its obligations under this Agreement or the Secured Note and
which condition is not remedied within ten days after written notice to the
Borrower thereof or, if the conditions cannot be fully remedied within such ten
days, substantial progress has not been made within such ten days toward remedy
of the condition.
G. Failure by the Borrower to service the Pledged Eligible Assets
in substantial compliance with the servicing requirements set forth in Section
VI hereof and such failure continues unremedied for a period of thirty days
after notice thereof from the Lender.
H. Except as set forth in Sections IX(E) and (F) above, a
material breach by the Borrower of any representation, warranty or covenant set
forth in this Agreement or in any Funding Notice, in the form of Exhibit D
attached hereto, delivered by the Borrower to the Lender, and such breach
relating to any other covenant in this Agreement remains unremedied for a period
of thirty days after notice thereof from the Lender or, if such breach is not
reasonably susceptible to cure with such thirty-day period, such longer period
as may be reasonably required (but in no event in excess of 120 days in the
aggregate) to cure such breach as long as the Borrower has commenced such cure
within the thirty-day period and diligently prosecutes same to the satisfaction
of the Lender, or a use by the Borrower of the proceeds of the Loan for a
purpose other than as set forth in Section I(2) hereof.
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I. Except with respect to non-recourse obligations of the
Borrower as provided in Section IX(A), any "Event of Default" under any
agreement between the Borrower and the Lender or any Affiliate of the Lender,
after the expiration of any applicable grace or cure periods set forth in such
agreement, including, without limitation, defaults under the Securitization
Agreement, the Warrant Agreement or the Custodial Agreement.
J. Any Person or any two or more Persons acting in concert
shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended), directly or indirectly, of Securities of the Borrower (or
other Securities convertible into such Securities) representing 51% or more of
the combined voting power of all Securities of the Borrower, as applicable,
entitled to vote in the election of directors, other than Securities having such
power only by reason of the happening of a contingency, if the foregoing occurs
without Lender's prior written consent.
Section X. Remedies Upon Default.
A. Upon the happening of one or more Events of Default, the
Lender may (x) refuse to make any Advances under this Agreement and (y)
immediately declare the principal of the Secured Note then outstanding to be
immediately due and payable, together with all interest thereon and fees and
expenses accruing under this Agreement; provided, however, that upon the
occurrence of the Event of Default referred to in Section IX(D), such amounts
shall immediately and automatically become due and payable without any further
action by any person or entity. Upon such declaration or such automatic
acceleration, the balance then outstanding on the Secured Note shall become
immediately due and payable without presentation, demand or further notice of
any kind to the Borrower.
B. Upon the happening of one or more Events of Default, the
Lender shall have the right to obtain physical possession, and to commence an
action to obtain physical possession, of all files of the Borrower relating to
the Collateral and all documents relating to the Collateral which are then or
may thereafter come in to the possession of the Borrower or any third party
acting for the Borrower. The Lender shall be entitled to specific performance of
all agreements of the Borrower contained in this Agreement. The Borrower and the
Lender hereby acknowledge that the Lender's right to obtain physical possession
of the Collateral is deemed for all purposes to be equivalent to the rights of
"seizure of property or maintenance or continuation of perfection of an interest
in property" as specified under Bankruptcy Code Sections 362(b) and 546(b)(2).
C. Upon the happening of one or more Events of Default, the
Lender shall have the right to direct all servicers and/or subservicers then
servicing any Pledged Eligible Assets to remit all collections on the Pledged
Eligible Assets to the Lender, and if any such payments are received by the
Borrower, the Borrower shall hold such payments in trust for the Lender and not
commingle the amounts received with other funds of the Borrower and shall
promptly pay them over to the Lender. In addition, the Lender shall have the
right to dispose of the Collateral as provided in this Agreement, or as provided
in the other documents executed in connection with this Agreement, or in any
commercially reasonable manner, or as provided by law. Such disposition may be
on either a servicing-released or a servicing-retained basis. The Lender shall
be entitled to place the Pledged Eligible Assets which it recovers after any
default in
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a pool for issuance of asset-backed securities at the then-prevailing price for
such securities and to sell such securities for such prevailing price in the
open market as a commercially reasonable disposition of Collateral, subject to
the applicable requirements of the New York UCC. The Lender shall also be
entitled to sell any or all of such Eligible Assets individually for the
prevailing price as a commercially reasonable disposition of Collateral subject
to the applicable requirements of the New York UCC. The specification in this
Section X(C) of manners of disposition of collateral as being commercially
reasonable shall not preclude the use of other commercially reasonable methods
(as contemplated by the New York UCC) at the option of the Lender.
D. Following the occurrence and during the continuance of an
Event of Default, interest shall accrue on the Loan at a default interest rate
of LIBOR plus 5.00%.
Section XI. Pre-Existing Conditions. The Borrower (and each of its
successors and assigns) does hereby forever release, discharge and acquit the
Lender and PSI, and their respective parents, subsidiaries and Affiliates, and
their respective officers, directors, shareholders, agents and employees, and
their respective successors, heirs and assigns, and each of them, of and from
any and all claims, demands, obligations, liabilities, indebtedness, breaches of
contract, breaches of duty or any relationship, acts, omissions, misfeasance,
malfeasance, cause or causes of action, debts, sums of money, accounts,
compensation, contracts, controversies, promises, damages, costs, losses and
expenses, of every type, kind, nature, description or character, and
irrespective of how, why, or any reason of facts, whether heretofore or now
existing or arising or which could, might or may be claimed to now exist or
arise, of whatever kind or name, whether known or unknown, suspected or
unsuspected, liquidated or unliquidated, each as though fully set forth at
length and which in any way arise out of, or are connected with or relate to the
Original Agreement or otherwise prior to the date of this Agreement.
Section XII. Indemnification.
A. The Borrower agrees to hold the Lender, PSI and their
respective Affiliates (the "Indemnified Parties") harmless from and indemnifies
the Indemnified Parties against all liabilities, losses, damages, judgments,
costs and expenses of any kind which may be imposed on, incurred by, or asserted
against any of the Indemnified Parties relating to or arising out of this
Agreement, the Secured Note, the Custodial Agreement, the Warrant Agreement, the
Securitization Agreement or any transaction contemplated hereby or thereby
resulting from anything other than the Indemnified Parties' gross negligence or
willful misconduct.
B. The Borrower shall reimburse each of the Indemnified
Parties for any of the respective Indemnified Party's reasonable out-of-pocket
costs and expenses incurred in connection with the negotiation, execution and
enforcement of this Agreement, the Secured Note, the Warrant Agreement, the
Custodial Agreement, the Securitization Agreement and the transactions
contemplated hereby and thereby including, without limitation, due diligence
review costs, reasonable attorney's fees and, subject to Section XIII below, any
other costs and expenses incurred by the Lender in determining the acceptability
to the Lender of any Eligible Assets.
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C. The Borrower shall indemnify and hold each of the
Indemnified Parties harmless from and against all liabilities, losses, damages,
judgments, costs and expenses of any kind which may be imposed on, or asserted
against the Indemnified Parties and relating to arising out of any Hedge Loss,
except for losses caused by the Indemnified Parties' gross negligence or willful
misconduct. The Borrower's obligations under this Section XII(C) shall be
secured by the Collateral.
D. The Borrower's agreements in this Section XII shall survive
the payment in full of the Secured Note and the expiration or termination of
this Agreement. The Borrower hereby acknowledges that, notwithstanding the fact
that the Secured Note is secured by the Collateral, the obligations of the
Borrower under the Secured Note are recourse obligations of the Borrower.
Section XIII. Periodic Due Diligence Review. The Lender has the right
to perform continuing due diligence reviews with respect to the Pledged Eligible
Assets and for purposes of verifying compliance with the representations,
warranties and covenants made under this Agreement, or otherwise, and each of
the Borrowers agree that upon reasonable (but no less than one Business Day's)
prior notice to the Borrower, the Lender or its authorized representatives will
be permitted during normal business hours to examine, inspect, and make copies
and extracts of, the Commercial Loan/Asset Files and any and all documents,
records, agreements, instrument or information relating to such Pledged Eligible
Asset in the possession or under the control of any Borrower and/or the
Custodian. The Lender shall use reasonable efforts to perform each such due
diligence review within three Business Days. The Borrower shall also make
available to the Lender a knowledgeable financial or accounting officer for the
purpose of answering questions respecting the Commercial Loan/Asset Files and
the Pledged Eligible Assets. Without limiting the generality of the foregoing,
the Borrower acknowledges that the Lender may make Advances to the Borrower
based solely upon the information provided by the Borrower to the Lender in the
Underwriting Transmittal and/or the Commercial Loan/Asset Schedule and the
representations, warranties and covenants contained in this Agreement, and that
the Lender, at its option, has the right at any time to conduct a partial or
complete due diligence review on some or all of the Pledged Eligible Assets
securing such Loan, including, without limitation, conducting a property site
inspection and otherwise re-generating the information used to originate such
Mortgage Loan. The Borrower agrees to cooperate with the Lender in connection
with such underwriting, including, but not limited to, providing the Lender with
access to any and all documents, records, agreements, instruments or information
relating to such Pledged Eligible Assets in the possession, or under the
control, of the Borrower. Subject to any applicable Due Diligence Cap, the
Borrower further agrees that the Borrower shall reimburse the Lender for any and
all out-of-pocket costs and expenses incurred by the Lender in connection with
the Lender's activities pursuant to this Section XIII ("Due Diligence Costs");
and (ii) in the event that a Default or an Event of Default shall have occurred,
the Borrower shall reimburse the Lender for all Due Diligence Costs and no such
Due Diligence Cap shall apply. For Pledged Eligible Assets over $15,000,000, all
Construction Loans and all loans with a Debt Service Coverage Ratio below 1.0 to
1.0, the due diligence cap shall be the actual cost, not to exceed $1,500 per
real property asset securing such Pledged Eligible Asset. For all other Pledged
Eligible Assets, the annual due diligence cap shall be the actual cost, not to
exceed $5,000 in the aggregate. The limitations on due diligence set forth in
this paragraph is referred to as the "Due
28
32
Diligence Cap." Moreover, the Borrower shall provide any additional information
in connection with each Pledged Eligible Asset that the Lender reasonably
requests.
Section XIV. Power of Attorney. The Borrower hereby authorizes the
Lender, at the Borrower's expense, to file such financing statement or
statements relating to the Collateral without the Borrower's signature thereon
as the Lender at its option may deem appropriate, and appoints the Lender as the
Borrower's agent and attorney-in-fact to execute any such financing statement or
statements in the Borrower's name and to perform all other acts which the Lender
deems appropriate to perfect and continue the security interest granted hereby
and to protect, preserve and realize upon the Collateral, including, but not
limited to, the right to endorse notes, complete blanks in documents, transfer
servicing, and sign assignments on behalf of the Borrower as its agent and
attorney-in-fact. This power of attorney is coupled with an interest and is
irrevocable without the Lender's consent and, to the maximum extent permitted by
law, the Borrower waives the benefit of any laws requiring the Lender to act as
the Borrower's fiduciary in connection with the exercise of such power of
attorney. Notwithstanding the foregoing, the power of attorney hereby granted
may be exercised only during the occurrence and continuance of an Event of
Default hereunder.
Section XV. Choice of Law; Agreement Constitutes Security Agreement.
This Agreement shall be governed by the laws of the State of New York (without
regard to choice of law principles thereof), and shall constitute a security
agreement within the meaning of the New York UCC. THE PARTIES HERETO AGREE THAT
ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE OR ARISING OUT OF THIS AGREEMENT OR
THE SECURED NOTE SHALL BE COMMENCED IN THE SUPREME COURT OF THE STATE OF NEW
YORK, OR IN THE DISTRICT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF
NEW YORK.
Section XVI. Lender May Act Through Affiliates. The Lender may, from
time to time, designate one or more Affiliates for the purpose of performing any
action hereunder.
Section XVII. Notices. All demands, notices and communications relating
to this Agreement shall be in writing and shall be deemed to have been duly
given if mailed, by registered or certified mail, return receipt requested, or
by overnight courier, or, if by other means, when received by the other party or
parties at the address shown below, or such other address as may hereafter be
furnished to the other party or parties by like notice. Any such demand, notice
or communication hereunder shall be deemed to have been received on the date
delivered to or received at the premises of the addressee (as evidenced, in the
case of registered or certified mail, by the date noted on the return receipt).
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If to the Borrower:
Amresco Capital Trust
700 North Pearl Street
Suite 2400
Dallas, Texas 75201
Attention: Michael L. McCoy, General Counsel
Phone Number: 214-953-7733
Fax Number: 214-953-7757
If to the Lender and/or Prudential Securities Incorporated:
Prudential Securities Incorporated
Investment Banking
One New York Plaza, 18th Floor
New York, New York 10292
Attention: Lainie Kaye
Phone Number: 212-778-5760
Fax Number: 212-778-5099
With copies to:
Prudential Securities Incorporated
One Seaport Plaza, 30th Floor
New York, New York 10292-2018
Attention: Frederick Robustelli, Esq.
Phone Number: 212 214-6813
Fax Number: 212-214-7938
and
Prudential Securities Incorporated
One Seaport Plaza, 27th Floor
New York, New York 10292
Attention: Elizabeth Castagna
Phone Number: 212-214-7775
Fax Number: 212-214-7572
and
Prudential Securities Incorporated
One New York Plaza, 15th Floor
New York, New York 10292-2015
Attention: Jeff Theodorou
Phone Number: 212-778-7444
Fax Number: 212-778-3293
30
34
and
Prudential Securities Incorporated
One New York Plaza, 14th Floor
New York, New York 10292
Attention: Robert Becker
Phone Number: 212-778-3025
Fax Number: 212-778-6509
and
Prudential Securities Incorporated
One Seaport Plaza
199 Water Street, 27th Floor
New York, New York 10292
Attention: Michael Pierro
Phone Number: 212-214-7336
Fax Number: 212-214-7678
and
O'Melveny & Myers LLP
275 Battery Street, 26th Floor
San Francisco, California 94111
Attention: Peter T. Healy, Esq.
Phone Number: 415-984-8700
Fax Number: 415-984-8701
Section XVIII. Severability. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization, without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
Section XIX. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, and all such
counterparts shall together constitute one and the same instrument.
Section XX. Additional Borrowers. The Lender acknowledges that from
time to time ACT may need to form additional Qualified REIT Subsidiaries and/or
Non-Qualified REIT Subsidiaries. Upon delivery of a written notice of formation
of subsidiaries and an explanation of the purpose for such subsidiaries, the
Lender agrees to allow such subsidiaries to be added as a Borrower for purposes
of financing Eligible Assets.
Section XXI. No Exclusivity. The Lender acknowledges that this
Agreement may not be the exclusive source to the Borrower for interim financing
for Eligible Assets and that the Borrower may have other interim warehouse
facilities. The Lender's rights with respect to any Securitization extends only
to Pledged Eligible Assets financed pursuant to this Agreement.
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35
Section XXII. Joint and Several Liability. Any liability of a Borrower
under this Agreement or any certificate or other agreement delivered in
connection herewith shall be the joint and several liability of ACT, AMREIT I,
and AMREIT II and any other Subsidiary that is or becomes a Borrower.
Section XXIII. Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE BORROWER ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS
THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND
DELIVERING THIS AGREEMENT, THE BORROWER, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION
AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY
SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO THE BORROWER AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SECTION XVII;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER BORROWER IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT THE LENDER RETAINS THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST BORROWER
IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SECTION XXIII RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION
5-1402 OR OTHERWISE.
Section XXIV. Waiver of Jury Trial.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver
is intended to be
32
36
all-encompassing of any and all disputes that may be filed in any court and that
relate to the subject matter of this transaction, including contract claims,
tort claims, breach of duty claims and all other common law and statutory
claims. Each party hereto acknowledges that this waiver is a material inducement
to enter into a business relationship, that each has already relied on this
waiver in entering into this Agreement, and that each will continue to rely on
this waiver in their related future dealings. Each party hereto further warrants
and represents that it has reviewed this waiver with its legal counsel and that
it knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER
SPECIFICALLY REFERRING TO THIS SECTION XXIV AND EXECUTED BY EACH OF THE PARTIES
HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE
HEREUNDER. In the event of litigation, this Agreement may be filed as a written
consent to a trial by the court.
[Signature Page S-1 Attached]
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37
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
AMRESCO CAPITAL TRUST
By:
--------------------------------------
Name: Jon S. Pettee
Title: President
By:
--------------------------------------
Name: Rebecca A. Kuban
Title: Executive Vice President
AMREIT I, INC.
By:
--------------------------------------
Name: Jon S. Pettee
Title: President
By:
--------------------------------------
Name: Rebecca A. Kuban
Title: Executive Vice President
AMREIT II, INC.
By:
--------------------------------------
Name: Jon S. Pettee
Title: President
By:
--------------------------------------
Name: Rebecca A. Kuban
Title: Executive Vice President
S-1
38
ACT EQUITIES, INC.
By:
--------------------------------------
Name: Jon S. Pettee
Title: President
By:
--------------------------------------
Name: Rebecca A. Kuban
Title: Executive Vice President
ACT HOLDINGS, INC.
By:
--------------------------------------
Name: Jon S. Pettee
Title: President
By:
--------------------------------------
Name: Rebecca A. Kuban
Title: Executive Vice President
PRUDENTIAL SECURITIES CREDIT CORP.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
S-2
39
Appendix I
CERTAIN DEFINITIONS
Certain Definitions. The following capitalized terms are either
defined below or in the corresponding sections specified below:
"ACT" means AMRESCO Capital Trust.
"Acquisition Loan" means a Mortgage Loan used to finance the
acquisition of an existing real property.
"Advance" - Section I(1).
"Advanced Amount" means the amount of each Advance with
respect to a Pledged Eligible Asset.
"Affiliate" means, when used with reference to a specified
person, (i) any person that directly or indirectly controls or is controlled by
or is under common control with the specified person, (ii) any person that is
an officer of, partner in or trustee of, or serves in a similar capacity with
respect to, the specified person or of which the specified person is an
officer, partner or trustee, or with respect to which the specified person
serves in a similar capacity, and (iii) any person that, directly or
indirectly, is the beneficial owner of 5% or more of any class of equity
securities of the specified person or which the specified person is directly or
indirectly the owner of 5% or more of any class of equity securities; provided,
however, that ACT will not be treated as an Affiliate of the Manager and its
Affiliates and provided further that with respect to the Borrower, Affiliate
shall not include any Non-Qualified REIT Subsidiary, joint venture,
partnership, limited liability company, UPREIT, DOWNREIT or structure unless
such entity becomes the Borrower hereunder.
"Agreement" - Introductory Clause.
"AMREIT I" means the wholly-owned Qualified REIT Subsidiary
of ACT.
"AMREIT II" means the Non-Qualified REIT Subsidiary of ACT.
"AMREIT Managers, L.P." means the Manager of ACT.
"Applicable Interest Rate Spread" - Section I(4)(b).
"Approved Assets" - Section I(2).
"Approved Exit Strategy" means the Borrower's plan for each
Eligible Asset on an asset specific basis or on the Borrower entity level
basis, as approved by the Lender in Lender's sole discretion and in writing
prior to an Initial Advance, to payoff or refinance the aggregate Advances
outstanding as to such Eligible Asset. The Approved Exit Strategy may be the
exit strategy for the Eligible Asset described in the Underwriting Transmittal.
The Approved
Appendix I-1
40
Exit Strategy will generally be the exit strategy for the underlying
mortgagor/borrower, similar to those for currently approved Pledged Eligible
Assets, which are typically the sale or refinance of the underlying project
within the term of the related loan, but may also include (a) the possibility
prior to the Maturity Date of a sale, merger, consolidation or other corporate
level capital transaction of Borrower, a portfolio refinancing by Borrower or
some other corporate level debt transaction by Borrower, or (b) the net worth
and financial ability of Borrower prior to the Maturity Date is sufficient to
provide the exit strategy for the particular asset.
"Borrower" means individually and collectively, ACT, AMREIT
I, AMREIT II, EQUITIES and HOLDINGS.
"Borrower's Guidelines" - Section I(2).
"Break-Up Fee" - Section I(6).
"Bridge Loan" means a Mortgage Loan used for temporary
financing.
"Budgeted Costs" - means the total construction or other
project or asset budget (including interest carry and budgeted soft costs, but
excluding any developer profit to the underlying mortgagor/borrower or any
Affiliate of the underlying mortgagor/borrower or the fair market value of any
land in excess of the purchase price thereof) of the construction project or
other real estate asset, as applicable, described in the applicable
Underwriting Transmittal. The Borrower may request that the fair market value
of the land in excess of the purchase price thereof be included in the Budgeted
Costs; provided, however, the Lender, in its sole discretion may (but shall not
be required to) consider such request.
"Business Day" means any day other than (i) a Saturday or
Sunday, or (ii) a day on which banking institutions in the State of New York or
State of Texas or State of Georgia are authorized or obligated by law or
executive order to be closed.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" - Section II.
"Collateral Deficiency Situation" shall be deemed to be
existing as of any day on which (a) the outstanding principal amount of all of
the Advances as of such day exceeds, by more than $250,000, (b) the sum of
either 76%, for each Pledged Eligible Asset except Land Development Loans, or
50%, for Land Development Loans, times the lesser of the Stabilized Value of
each such Pledged Eligible Asset (i) on the date of the Initial Advance and
(ii) on the date of the calculation to determine if a Collateral Deficiency
Situation exists.
"Commercial Loan/Asset Files" - Section II.
"Commercial Loan/Asset Schedule" - Section I(3)(a)(i).
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Borrower within the
meaning of Section 4001 of
Appendix I-2
41
ERISA or is part of a group which includes the Borrower and which is treated as
a single employer under Section 414 of the Code.
"Construction Loan" means a Mortgage Loan the proceeds of
which are to be used to finance the costs of the initial construction or
substantial rehabilitation of real property. If less than 25% of the total
square footage of the then existing building improvements is subject to a lease
which satisfies the conditions for leases set forth in the definition of
Rehabilitation Loans at the time the Borrower requests an Initial Advance as to
such Mortgage Loan, such Mortgage Loan shall be deemed a Construction Loan for
all purposes under this Agreement. If the underlying mortgagor/borrower leases
more than 25% of the total square footage of the then existing building
improvements pursuant to a lease which satisfies the conditions for leases set
forth in the definition of Rehabilitation Loans subsequent to Borrower's
request for an Initial Advance as to such Mortgage Loan, the Borrower may
request the Lender to recharacterize such Mortgage Loan as a Rehabilitation
Loan. The Borrower may also request the Lender to recharacterize a Construction
Loan as a different asset classification. The Lender, in its sole discretion,
may (but shall not be required to) consider such requests.
"Construction Loan Sub-Limit" - Section I(1)(b).
"Coverage Ratio" means, with respect to the Borrower, on a
consolidated basis, a ratio of the Borrower's GAAP basis earnings before
interest, taxes, depreciation and amortization, to scheduled interest on Total
Indebtedness.
"Custodial Agreement" - Section II.
"Custodian" - Section II.
"Custodian's Certification" - Section I(3)(a)(iv).
"Debt Service Coverage Ratio" or "DSCR" means, with respect
to any Mortgage Loan, the number (as approved (as to form, substance and
mathematical accuracy) by the Lender in writing) reflected on the Commercial
Loan/Asset Schedule as being the ratio of (i) any interest reserve funded or to
be funded by the Borrower (up to a maximum of one year) in connection with a
Mortgage Loan, plus net operating income of the Mortgaged Property securing the
Mortgage Loan, as determined by the Borrower in accordance with its
underwriting guidelines, to (ii) debt service at the current pay rate on the
Mortgage Loan; provided, however, that at the expiration of the period provided
for in the Borrower's Underwriting Transmittal for the Mortgaged Property to
achieve a stabilized occupancy, the DSCR, to the extent necessary to calculate
the Eligible Asset Value or for any other purpose hereunder, will be based upon
the actual net income of the Mortgaged Property.
"Due Diligence Cap" - Section XIII.
"Due Diligence Costs" - Section XIII.
Appendix I-3
42
"Eligible Asset Value" means, with respect to any Eligible
Asset, the product of LTV for such Eligible Asset multiplied by the value of
collateral related to such Eligible Asset as determined by the Borrower, and
approved by Lender.
"Eligible Assets" - Section I(2).
"EQUITIES" means ACT Equities, Inc.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Escrow Officer" - Section I(3)(a)(iv).
"Eurodollar Business Day" - Section I(4)(a).
"Event of Default" - Section IX.
"Financial Advisor" - Section III(C)(8).
"Financing Transaction" - Section III(C)(8).
"First Securitization" means each initial securitization, if
any, involving the public or private placement of securities relating to all or
any portion of the Pledged Eligible Assets.
"Funding Date" - Section I(3)(a).
"Funding Notice" - Section I(3)(a)(i).
"GAAP" means, generally accepted accounting principles
consistently applied as in effect at the time of the application of the
provisions of this Agreement.
"Greater Than 70% Pre-Leased Project" - Section I(1)(c).
"Haircut" shall mean, with respect to a particular Pledged
Eligible Asset, an amount equal to the difference between (i) the amount which
the Borrower has executed a written commitment to lend to the underlying
mortgagor/borrower of or to invest as equity in such Pledged Eligible Asset and
(ii) the applicable Maximum Advance Amount for such Pledged Eligible Asset.
"Hedge Loss" shall mean, with respect to any Interest Rate
Protection Agreement entered into by the Borrower with the Lender or any
Affiliate thereof (in either case, the "Hedging Counterparty"), the amount, if
any, owed thereunder by the Borrower to the Hedging Counterparty as of any date
of determination, in the aggregate, including, without limitation, the amount
of other losses relating to any such hedging instrument and the carrying costs
for such hedging position, minus the sum of (a) all Hedge Losses previously
paid by the Borrower to the Hedging Counterparty in connection with such
Interest Rate Protection Agreement, if any, and
Appendix I-4
43
(b) any amount the Borrower has received from the Hedging Counterparty with
respect to such Interest Rate Protection Agreements.
"HOLDINGS" means ACT Holdings, Inc.
"Indemnified Parties" - Section XII(A).
"Initial Advance" means either the only Advance relating to a
Pledged Eligible Asset or the first Advance relating to a Pledged Eligible
Asset, such as a Construction Loan or Rehabilitation Loan, for which more than
one Advance may be made.
"Interest in Real Property" mean, among other things, an
interest in Mortgage Loans or land and improvements thereon, such as buildings
or other inherently permanent structures (including items that are structural
components of such buildings or structures), a leasehold of real property, and
an option to acquire real property (or a leasehold of real property). An
"interest in real property" also generally includes an interest in Mortgage
Loans secured by controlling equity interests in entities treated as
partnerships for federal income tax purposes that own real property, to the
extent that the principal balance of the mortgage does not exceed the fair
market value of the real property that is allocable to the equity interest.
"Interest Rate" - Section I(4)(a).
"Interest Rate Protection Agreement" shall mean, with respect
to any or all of the Mortgage Loans, any short sale of US Treasury Security, or
futures or forward contract, or mortgage related security, or Eurodollar
futures contract, or options related contract, or interest rate swap, cap or
collar agreement or similar arrangements providing for protection against
fluctuations in interest rates or the exchange of nominal interest obligations,
either generally or under specific contingencies, entered into by the Borrower
and the Lender, PSI, an Affiliate of the Lender or PSI, or a third party
reasonably acceptable to the Lender, which shall be transferable with the
Mortgage Loan, at the transferee's option.
"Investment Grade" means securities rated AAA through BBB -
(or equivalent rating) by any of Standard & Poor's Rating Services, a division
of the McGraw-Hill Companies, Duff & Phelps Credit Rating Co. or Fitch IBCA,
Inc.
"Land Development Loan" shall mean loans wherein more than
30% of the proceeds of which are used for (i) surveying, grading, cutting and
filling the land, (ii) the demolition of developments on the land, (iii) the
reconfiguration, importation and/or deportation of soil or other earthen
materials, (iv) land use planning, (v) procuring regulatory approvals, permits,
zoning, subdivision approvals, mapping and land use changes, (vi) the
construction of streets, (vii) the acquisition of unfinished land with the
intention of conducting any of the foregoing activities or merely holding the
land for resale, or (vii) anything in the nature of the foregoing.
"Lender" means Prudential Securities Credit Corp.
"Less Than 70% Pre-Leased Project" - Section I(1)(c).
Appendix I-5
44
"Less Than 70% Pre-Leased Sub-Limit" - Section I(1)(c).
"Liquidity Reserve" - Section III(C)(1)(d).
"LIBOR" - Section I(4)(a).
"Loan" - Section I(1).
"LTC" means the percentage determined by dividing the maximum
committed loan or investment amount by the Budgeted Costs. For purposes of
calculating the LTC, the Borrower shall include the amount of all liens or
encumbrances on the underlying asset which are senior to the Borrower's loan to
the underlying mortgagor/borrower and the maximum amount which Borrower has
committed to loan with respect to such Pledged Eligible Asset.
"LTV" means the number (as approved (as to form, substance
and mathematical accuracy) by the Lender in writing) specified in the
Commercial Loan/Asset Schedule as the percentage determined by dividing the
maximum committed loan or investment amount by the Stabilized Value of the
collateral related to such loan or investment. For purposes of calculating the
LTV, the Borrower shall include the amount of all liens or encumbrances on the
underlying asset which are senior to the Borrower's loan to the underlying
mortgagor/borrower and the maximum amount which Borrower has committed to loan
with respect to such Pledged Eligible Asset.
"Management Agreement" means the Management Agreement dated
as of May 12, 1998 by and between ACT and the Manager, as it may be amended.
"Manager" means AMREIT Managers, L.P.
"Manager Role" means the sole placement agent or the sole
underwriter, as the case may be for each First Securitization, if any, to be
sponsored by the Borrower (or by an Affiliate thereof) and collateralized by
some or all of the Pledged Eligible Assets.
"Market Value" means, as of any date in respect of an
Eligible Asset or Pledged Eligible Asset, the price at which such Eligible
Asset or Pledged Eligible Asset (together with any Interest Rate Protection
associated with such asset) could be sold in an orderly manner, as determined
in good faith by the Lender in its sole and reasonable discretion.
"Maturity Date" means the earlier to occur of (a) the date
eighteen months after execution of this Agreement and (b) 60 days following the
termination of the Securitization Agreement by the Borrower.
"Material Adverse Effect" shall mean a material adverse
change regarding (a) the Mortgaged Property, business, operations, financial
condition or prospects of the Borrower, (b) the ability of the Borrower to
perform its obligations under any of the Loan Documents to which it is a party,
(c) the validity or enforceability of any of the Loan Documents, (d) the rights
and remedies of the Lender under any of the Loan Documents, (e) the timely
payment of the principal of or interest on the Loans or other amounts payable
in connection therewith or (f) the Collateral.
Appendix I-6
45
"Maximum Advance Amount" - Section I(3)(d) or (e), as
applicable.
"Maximum Loan Amount" - Section I(1).
"Mezzanine Construction Loan" means a Mezzanine Loan/Equity
Investment (as defined below) the proceeds of which are to be used to finance
the costs of the initial construction of real property.
"Mezzanine Loan/Equity Investment" means either (a) a
commercial real estate loan the repayment of which is subordinated to a senior
Mortgage Loan and which is secured either by a second lien mortgage or a pledge
of the ownership interests of the borrower or (b) a joint venture interest in
or equity investment in an entity which directly or indirectly owns a real
estate asset or a direct equity investment in a real estate asset.
"Mezzanine Loan/Equity Investment Sub-Limit" - Section
I(1)(a).
"Mortgage Loan" means a commercial loan secured by real
property and a Mezzanine Loan(s).
"Mortgaged Property" means the real property and improvements
securing a Mortgage Loan.
"Multiemployer Plan" means a Plan which is a multiemployer
plan as defined in Section 4001(a)(3) of ERISA.
"Non-Qualified REIT Subsidiary" means any corporation in
which ACT owns 10% or less of the voting shares in such corporation.
"New York UCC" - Section I(5)(a).
"One Year Anniversary" - Section I(5)(b).
"Original Agreement" - Recitals.
"Participating Loan" means a Mortgage Loan that entitles the
lender to the receipt of interest at a stated rate, plus a percentage of the
pledged real estate's revenues or cash flow, or a specified percentage or fixed
amount of the net proceeds from any sale of the property, which Participating
Loan may be a Mezzanine Loan/Equity Investment, Construction Loan,
Rehabilitation Loan, Bridge Loan or other Mortgage Loan.
"Person" means any individual, corporation, company,
voluntary association, partnership, joint venture, limited liability company,
trust, unincorporated association, government (or any agency, instrumentality
or political subdivision thereof) or any other entity of whatever nature.
Appendix I-7
46
"Plan" means at a particular time, any employee benefit plan
which is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Pledged Eligible Assets" means, as of any date of
determination, any Eligible Assets then held by the Custodian on behalf of the
Lender to secure the Loan.
"PSI" means Prudential Securities Incorporated, an Affiliate
of the Lender.
"Qualified REIT Subsidiary" means any corporation if 100% of
the stock of such is held by ACT at all times during such corporation's
existence or otherwise satisfies Section 856(i)(2) of the Code.
"Rehabilitation Loan" means a Mortgage Loan, the proceeds of
which are used to finance the acquisition and renovation or rehabilitation of
existing real property; provided, however, that at the time the Borrower
requests an Initial Advance as to such Mortgage Loan, 25% or more of the total
square footage of the then existing building improvements shall be subject to a
lease that: (i) is currently in full force and effect with no material
defaults; (ii) is with a tenant paying rent on a current basis without
deferral, credit or qualification, except for a reasonable reduction for
inconvenience during rehabilitation; and (iii) does not expire until after a
date that is six months following the anticipated date of completion of such
renovation or rehabilitation (other than tenant improvement work) set forth in
the applicable construction plans delivered by the Borrower to the Lender. If
less than 25% of the total square footage of the then existing building
improvements is subject to such a lease at the time the Borrower requests an
Initial Advance as to such Mortgage Loan, such Mortgage Loan shall be deemed a
Construction Loan for all purposes under this Agreement. If the underlying
mortgagor/borrower leases more than 25% of the total square footage of the then
existing building improvements subsequent to the Borrower's request for an
Initial Advance as to such Mortgage Loan, the Borrower may request the Lender
to recharacterize such Mortgage Loan as a Rehabilitation Loan. The Borrower may
also request the Lender to recharacterize a Rehabilitation Loan as a different
asset classification. The Lender, in its sole discretion, may (but shall not be
required to) consider such requests.
"REIT" means a real estate investment trust, as defined under
Section 856 of the Code.
"Request for Additional Advance" - Section IV(D)(1).
"Restoration Amount" means, as of any date of determination,
the amount, if any, by which (i) the outstanding principal amount of the Loan
as of such date (including accrued interest thereon) exceeds (ii) the sum of
the applicable Advance Rate for each Pledged Eligible Asset times the lesser of
(1) the Stabilized Value of each Pledged Eligible Asset), and (2) the
outstanding principal balance of each such Pledged Eligible Asset.
"SEC" means the U.S. Securities and Exchange Commission.
Appendix I-8
47
"Secured Note" - Section I(7).
"Secured Obligations" - Section II.
"Securitization" means the First Securitization and any
subsequent securitization involving the public or private placement of
securities relating to all or any portion of the Pledged Eligible Assets.
"Securitization Agreement" means the Amended and Restated
Securitization Agreement, dated as of May 4, 1999, by and between the Borrower
and PSI and regarding the securitization of some of the Pledged Eligible
Assets.
"Stabilized Value" means, as of any date in respect of an
Eligible Asset or Pledged Eligible Asset, the stabilized value of the
collateral property underlying such Eligible Asset or Pledged Eligible Asset,
as determined in good faith by the Borrower and approved by the Lender in its
sole discretion. The Stabilized Value of a Pledged Eligible Asset shall be
described in the Underwriting Transmittal of such Pledged Eligible Asset.
"Supplemental Commercial Loan/Asset Schedule" - Section
VIII(A).
"Tangible Net Worth" means, for any calendar quarter, total
shareholder's equity reflected in ACT's financial statements on a consolidated
basis prepared in accordance with GAAP less goodwill, patents, trademarks,
copyrights, franchises and any other items which would be treated as
intangibles under GAAP. A schedule of Tangible Net Worth shall be prepared by
the Borrower within 30 days after the end of each calendar quarter and such
schedule shall be delivered to the Lender. The Lender shall have 10 days to
disapprove of such schedule by citing any specific defects in a written notice
to the Borrower. The Borrower shall then have 10 days to cure all such defects.
If the Borrower cures such defects in the Lender's reasonable discretion, such
schedule shall be deemed approved by the Lender. As of December 31, 1998,
Tangible Net Worth was $130,266,000.00.
"Total Indebtedness" means, for any period, the aggregate
indebtedness of the Borrower during such period computed in accordance with
GAAP less (i) the amount of any non-specific balance sheet reserves maintained
in accordance with GAAP, (ii) obligations under any Interest Rate Protection
Agreement, (iii) loan or investment commitments or loan take-out agreements
issued by the Borrower in the ordinary course of its business, (iv) obligations
to indemnify parties involved in Securitization or the underwriting and
placement (whether publicly or privately) of ACT's shares of beneficial
interest or other indemnities made in the ordinary course of business, (v)
endorsements for collection or deposit in the ordinary course of the Borrower's
business, and (vi) obligations for which the Borrower is not the obligor but
which are required to be included on the Borrower's financial statements by
GAAP.
"Underwriting Transmittal" - Section I(3)(a)(i).
"Warrant Agreement" means the Warrant Agreement attached
hereto as Exhibit F and executed as of the date of this Agreement by and
between the ACT and PSI.
Appendix I-9
48
Appendix II
REPRESENTATIONS AND WARRANTIES REGARDING ALL PLEDGED ELIGIBLE ASSETS
1. As to each Pledged Eligible Asset, the Borrower hereby represents
and warrants to the Lender that as of the related Closing Date; provided,
however, that any such representation and warranty may be modified as set forth
in, or an exception thereto may be contained in, the executed Underwriting
Transmittal in effect for such Pledged Eligible Asset:
(a) Commercial Loan/Asset Schedule. The information set forth
in the related Commercial Loan/Asset Schedule is true, complete and correct in
all material respects.
(b) Origination. Such Pledged Eligible Asset complied, on the
date such asset was originated ("Closing Date"), in all material respects with
all terms, conditions and requirements of prudent underwriting standards, the
Borrower's approved due diligence standards and closing procedures as approved
by the Lender (the "Borrower's Guidelines") then in effect, except as disclosed
by the Borrower in writing in the list of exceptions included in the
Underwriting Transmittal and approved by the Lender.
(c) Disbursement of Proceeds. The closing of such Pledged
Eligible Asset was in compliance, in all material respects, with the Borrower's
Guidelines then in effect, except as disclosed in writing by the Borrower to
the Lender in the list of exceptions included in the related Commercial
Loan/Asset File or the Underwriting Transmittal and thereby approved by the
Lender, and the proceeds, or the applicable portion thereof, of such Pledged
Eligible Asset have been disbursed in accordance with the related loan
documents ("Pledged Asset Documents"). Except as disclosed in writing by the
Borrower to the Lender in the list of exceptions included in the related
Underwriting Transmittal, any and all requirements imposed by the Borrower as
to the status of any on-site or off-site improvements related to the related
real property ("Property") and the disbursement of any escrow funds therefor
have been complied with as of the date of the Underwriting Transmittal. All
costs, fees and expenses incurred in connection with the origination and
closing of such Pledged Eligible Asset, including, without limitation,
recording costs and fees, have been paid to the appropriate Person or
arrangements have been made for their payment to the appropriate Person on a
timely basis by the related mortgagor or borrower, and the related mortgagor is
not entitled to any refund of any amounts paid or due under the related
promissory note or contract or the related mortgage, if any, except for a
refund of a cost, fee or expense related to the origination or closing of such
Pledged Eligible Asset which borrower is obligated to pay, and has made
arrangements to pay, in full on a timely basis.
(d) Documents Valid. Each representation and warranty of the
Borrower set forth in Section III(B) of this Agreement or this Appendix to this
Agreement, to the extent related to the enforceability of any instrument,
agreement or other document or as to offsets, defenses, counterclaims or rights
of rescission related to such enforceability is qualified to the extent that
(i) enforcement may be limited (A) by bankruptcy, insolvency, reorganization
fraudulent conveyance, redemption, moratorium or other similar laws affecting
the enforcement
Appendix II-1
49
of creditors' rights generally, (B) by general principles of equity (regardless
of whether such enforcement is considered in a proceeding in equity or at law),
and (C) by any applicable anti-deficiency law or statute, and (ii) such
instrument, agreement or other document contains certain provisions which may
be unenforceable in accordance with their terms, in whole or in part, but the
unenforceability of such provisions will not (A) cause the related note or
contract or mortgage, if any, to be void, (B) invalidate the related borrower's
obligation to pay interest on, and repay the principal of, the related Pledged
Eligible Asset in accordance with the payment terms of the related note or
contract, the related mortgage, if any, and other written agreements delivered
to the Borrower in connection therewith, (C) invalidate the obligation of any
related guarantor to pay guaranteed obligations with respect to interest on,
and the principal of, the related Pledged Eligible Asset in accordance with the
payment terms of such guarantor's written guaranty, (D) impair the mortgagee's
right to accelerate and demand payment of the interest on, and principal of,
the related Pledged Eligible Asset upon the occurrence of a legally enforceable
default, or (E) impair the mortgagee's right to realize against the related
Property, if any, by judicial or, if applicable, nonjudicial foreclosure except
as provided in any subordination agreement and subject to applicable law.
(e) Pledge of Security Interest; Note or Contract
Endorsement. The related pledge of the Lender's security interest in the
related collateral documents ("Security Documents") is in recordable or
otherwise appropriate form and constitutes the Borrower's legal, valid and
binding assignment to the Lender of any related mortgage, assignment of leases
and rents and/or other collateral. The Borrower's endorsement and delivery of
the related note or contract in accordance with the terms of this Agreement
constitutes the Borrower's legal, valid and binding assignment to the Lender of
such note or contract, and together with the related assignment of Security
Documents legally and validly conveys all right, title and interest of the
Borrower in such Pledged Eligible Asset to the Lender.
(f) No Modification, Release or Satisfaction. Neither the
Security Documents nor the related note or contract has been impaired, waived,
modified, altered, satisfied, canceled or subordinated or rescinded by the
Borrower, and the related Property has not been released from the lien of such
Security Documents or the lien of the senior lender and the related mortgagor
has not been released by the Borrower from its obligations under such Security
Documents, in whole or in any part, in each such event in a manner which
materially interferes with the benefits of the security intended to be provided
by such Security Documents except as provided in the loan documents or as set
forth on the respective Underwriting Transmittal. No instrument has been
executed by the Borrower that would effect any such waiver, modification,
alteration, satisfaction, cancellation, subordination, rescission or release,
with the exception of the written instruments (i) which are a part of the
related Commercial Loan/Asset File, (ii) which have been recorded if necessary
to protect the interests of the Lender, and (iii) the substance of which is
included in the list of exceptions in such Underwriting Transmittal.
(g) Escrow Deposits. All escrow deposits and other escrow
payments required under the related Pledged Asset Documents to be paid to the
Borrower prior to the Funding Date have been paid to, and are in the possession
of, or under the control of, or have been applied in accordance with their
intended purposes by, the Borrower or its agent.
Appendix II-2
50
(h) No Buydowns or Third Party Advances. The Borrower has
not, directly or indirectly, advanced funds, induced or solicited any payment
from a Person other than the related obligor or, to the best of the Borrower's
knowledge, received any payment from a Person other than such obligor, for the
payment of any amount required under the related note or contract or Security
Documents, except for (a) interest accruing from the date of such note or
contract or date of disbursement of the Pledged Eligible Asset proceeds,
whichever is later, to the date which precedes by thirty days the first due
date under the related promissory note or contract, (b) interest paid pursuant
to any interest reserve specified in the Underwriting Transmittal or (c)
payments from any tax, insurance or other reserves specified in the
Underwriting Transmittal. The Pledged Asset Documents contain no provisions
pursuant to which monthly payments are (x) paid or partially paid with funds
deposited in any separate account established by borrower, the related
mortgagor or anyone on behalf of such mortgagor, or (y) paid by any source
other than such mortgagor (except provisions pertaining to a related
guarantor's obligations under the terms of such guarantor's written guaranty)
and contain no similar provision which may constitute a "buydown" provision
unless disclosed in the Underwriting Transmittal.
(i) No Condemnation or Damages. To the best of the Borrower's
knowledge, there are no proceedings pending or threatened for the total or
partial condemnation of the related Property as of the applicable closing date,
except for any proceedings as to partial condemnation which are disclosed in
writing in the list of exceptions included in such Underwriting Transmittal. To
the best of the Borrower's knowledge, each Pledged Eligible Asset is being used
for the purpose(s) set forth in the Underwriting Transmittal and is in good
repair and free of any damage, waste or defective condition that would
materially or adversely affect the value of the property as security for a
Pledged Eligible Asset or for the use the property was intended at the time of
the origination of the Pledged Eligible Asset.
(j) Title Survey; Improvements. The related Commercial
Loan/Asset File includes an ALTA/ACSM Land Title Survey with respect to the
related Property or, if an ALTA/ACSM Land Title Survey is not available or as
otherwise approved in writing by the Lender, an as-built survey with respect to
such Property which satisfied the requirements of the title insurance company
for its deletion of the standard general exceptions for encroachments, boundary
and other survey matters and for easements not shown by the public records from
the related title insurance policy as required by the Borrower's Guidelines. In
either such event, such survey has been certified by the surveyor to the
Borrower if a mortgagee, or the owner of the Property if the Borrower is not
the mortgagee and the title insurance company in accordance with the applicable
requirements of the Borrower's Guidelines and satisfies the other applicable
requirements set forth in the Borrower's Guidelines, except as disclosed in
writing in the list of exceptions included in such Underwriting Transmittal. In
reliance on the survey and the Title Policy (defined below), except for
encroachments and similar matters which do not materially and adversely affect
such Property as security for such Pledged Eligible Asset or which are
disclosed in writing in the list of exceptions included in such Underwriting
Transmittal, (i) none of the improvements which were included for the purpose
of determining the value of such Property at the time of the origination of
such Pledged Eligible Asset lie outside the boundaries and building restriction
lines of such Property, (ii) no improvements on adjoining properties materially
encroach upon such Property, and (iii) to the best of the Borrower's knowledge
(based upon a representation or opinion obtained from the related mortgagor),
no improvements
Appendix II-3
51
located on or forming a part of such Property are in violation of any
applicable zoning and building laws or ordinances.
(k) Compliance with Laws. To the best of the Borrower's
knowledge (based upon a representation or opinion obtained from the related
mortgagor), (i) the related Property complies, in all material respects, with
all laws and regulations pertaining to the use and occupancy thereof, other
than applicable zoning and building laws and regulations (addressed in Section
1(j) above) and Environmental Laws (as defined and addressed in Sections 1(t)
and (u) below) and all applicable insurance requirements, and (ii) the related
mortgagor has obtained or will obtain all inspections, licenses, permits,
authorizations and certificates necessary for such compliance, including but
not limited to, certificates of occupancy and fire underwriter certificates.
The Borrower has not received notification from any governmental authority that
such Property is in material non-compliance with such laws or regulations, is
being used, operated or occupied unlawfully or has failed to have or obtain
such inspections, licenses or certificates, as the case may be.
(l) Title Insurance. The related Property (excluding any
related personal property) is covered by an ALTA lender's or owner's title
insurance policy or, if an ALTA lender's or owner's title insurance policy is
unavailable, another state-approved form of lenders title insurance policy
issued by a qualified insurer, in an amount not less than the stated original
principal amount of such Pledged Eligible Asset (a "Title Policy") and, if the
Pledged Eligible Asset is a loan, insuring that the related mortgage is a valid
lien on such Property with a priority corresponding to the priority stated in
its Underwriting Transmittal, subject to the Permitted Exceptions described in
Subsection 2(a) below. The Borrower has not taken, or omitted to take, any
action, and, to the best of the Borrower's knowledge, no other Person has
taken, or omitted to take, any action, that would materially impair the
coverage benefits of any such title insurance policy. Such title policy does
not include the general exception for intervening liens which appeared in the
commitment for such title insurance.
(m) Hazard Insurance. The related Property is insured by a
fire and extended perils insurance policy, issued by a commercial insurer,
providing coverage against loss or damage sustained by reason of fire,
lightning, windstorm, hail, explosion, riot, riot attending a strike, civil
commotion, aircraft, vehicles and smoke and, to the extent required by the
Borrower consistent with the Borrower's Guidelines then in effect against
earthquake and other risks insured against for which persons operating like
properties in the locality of such Property obtain insurance, in an amount not
less than the lesser of (i) the full replacement cost of all improvements to
such Property, and (ii) the outstanding principal balance of such Pledged
Eligible Asset, but in any event in an amount sufficient to avoid the operation
of any co-insurance provisions contained in such insurance policy. The related
mortgage contains provisions requiring the related mortgagor to maintain
business interruption and/or rental continuation coverage sufficient to protect
against loss for such period as shall be consistent with the requirements of
the Borrower's Guidelines under a policy issued by a qualified insurer. If any
improvement on such Property is located in an area identified by the Federal
Emergency Management Agency as having special flood hazards under the National
Flood Insurance Act of 1968, as amended, such Property is insured by a flood
insurance policy, issued by a qualified insurer, meeting the current
requirements of the Federal Insurance Administration in an amount
Appendix II-4
52
not less than the lesser of (A) the stated principal amount of the related
promissory note or contract, and (B) the maximum amount of insurance available
under the Flood Disaster Protection Act of 1973, as amended. In the event the
Borrower is the mortgagee, each such insurance policy includes a lender's loss
payable endorsement in favor of the Borrower and requires the insurer to
endeavor to provide at least thirty days' prior written notice to the Borrower
of termination or cancellation, and no such notice has been received by the
Borrower. To the best of the Borrower's knowledge, such insurance policies are
in full force and effect. To the best of the Borrower's knowledge, all premiums
due and payable on such insurance policies prior to the Funding Date have been
paid and nothing has occurred that would materially impair the benefits of
coverage thereunder. In connection with the placement of any such insurance, no
commission, fee or other compensation has been or will be received by the
Borrower or, to the best of the Borrower's knowledge, any officer, director or
employee of the Borrower. The related mortgage, if any, obligates the related
mortgagor to maintain all such insurance and, at such mortgagor's failure to do
so, authorizes the mortgagee to maintain such insurance at such mortgagor's
cost and expense and to seek reimbursement therefore from such mortgagor.
(n) Proceeds of Mortgage Loan. To the best of the Borrower's
knowledge, the proceeds of such Pledged Eligible Asset have not been and shall
not be applied to satisfy, in whole or in part, any debt owing by the related
mortgagor/borrower to an Affiliate of the Borrower with respect to the
origination of such Pledged Eligible Asset whereby such Affiliate has taken or
will take (i) a discounted pay-off of such debt in connection with such
application, or (ii) a subordinated lien on any property securing such debt or
an equity interest in the related mortgagor in connection with such application
unless, in any such case, such fact is disclosed in the list of exceptions
included in the related Commercial Loan/Asset File.
(o) Customary Provisions. The related promissory note or
contract or the related mortgage contains customary and enforceable provisions
such as to render the rights and remedies of the holder thereof adequate for
the practical realization against the related Property of the benefits of the
security.
(p) Pledged Eligible Asset Terms. The interest rate on such
promissory note constituting a Mortgage Loan Document or contract is as set
forth in the Commercial Loan/Asset Schedule; provided, however, that if such
promissory note or contract relates to an adjustable rate note, the mechanism
by which the interest rate is adjusted shall be set forth in the Commercial
Loan/Asset Schedule. Except as specified in the Underwriting Transmittal
relating to an accrual rate of interest in excess of a required pay rate of
interest, the related Mortgage Loan Documents do not provide for any negative
amortization. The related mortgage, if any, provides for the appointment of a
receiver for rents, or the mortgagee's entry into possession of the related
Property to collect rents, in connection with an event of default or
acceleration.
(q) Inspection. Consistent with the provisions of the
Borrower's Guidelines, the Borrower has inspected or has caused the related
Property to be inspected in connection with the origination of such Pledged
Eligible Asset no earlier than six months prior to the initial Funding Date.
Appendix II-5
53
(r) No Notice of Bankruptcy. The Borrower has no knowledge
nor has it received any notice that the related Mortgagor is a debtor in any
state or federal bankruptcy or insolvency proceeding.
(s) Access Routes. Based upon the information provided the
Borrower in the Pledged Asset Documents, at the Closing Date of such Pledged
Eligible Asset, (i) the underlying borrower had sufficient rights with respect
to amenities, ingress and egress and similar matters to support the intended
use described in the Underwriting Transmittal, and (ii) to the best of the
Borrower's knowledge, such Property was receiving or has access to adequate
services from public or private water, sewer and other utilities.
(t) Environmental Assessment. In connection with the
origination of such Pledged Eligible Asset, a Phase I environmental assessment
and report and, if recommended by the Phase I environmental assessment and
report, a Phase II environmental assessment and report with respect to the
related Property were obtained from an independent environmental engineer or
consultant; and such report(s) did not indicate the existence of conditions or
circumstances respecting such Property that would (i) constitute or result in a
material violation of any applicable Environmental Law, (ii) impose any
material constraint on the operation of such Property or require material
change in the use thereof, or (iii) require clean-up, remedial action or other
response with respect to Hazardous Materials on or affecting such Property
under any applicable Environmental Law, with the exception of conditions or
circumstances (A) which such report(s) indicated could be cleaned up,
remediated or brought into compliance with applicable Environmental Law by the
taking of certain actions, and (B) either (1) for which a hold-back or other
escrow of funds, if any, not less than the costs of taking such clean-up,
remediation or compliance actions as estimated in such report(s) has been
created to be held by the Borrower or an escrow agent until such clean-up,
remediation or compliance actions have been taken, (2) for which an
environmental insurance policy in an amount satisfactory to the Borrower has
been obtained by the related mortgagor or an indemnity for such costs has been
obtained from a potentially culpable party, or (3) such clean-up, remediation
or compliance actions in compliance with applicable Environmental Law have been
completed prior to the related Funding Date, or (4) for which other
arrangements disclosed to the Lender have been made. For purposes of this
Agreement, the term "Hazardous Materials" shall include, without limitation,
gasoline, petroleum products, explosives, radioactive materials,
polychlorinated biphenyls or related or similar materials, asbestos or any
material containing asbestos, and any other substance or material as may be
defined as a hazardous or toxic substance under any applicable Environmental
Law; and the term "Environmental Law" shall mean any environmental law
ordinance, rule, regulation or order of a federal, state or local governmental
authority including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. 9601 et
seq), the Hazardous Material Transportation Act, as amended (49 U.S.C. 1801 et
seq,), the Resource Conservation and Recovery Act, as amended (42 U.S.C. 6901
et seq,), the Federal Water Pollution Control Act, as amended (33 U.S.C. 12S1
et seq.,), the Clean Air Act (42 U.S.C. 7401 et seq.), as amended, and the
regulations promulgated pursuant thereto.
(u) Notice of Environmental Problem. Except for the notices,
if any, described in the list of exceptions included in the related
Underwriting Transmittal and furnished
Appendix II-6
54
to the environmental engineer or consultant in connection with its
assessment(s) described in Section 1(t) above (and addressed by such engineer
or consultant in such assessments), the Borrower has not received actual notice
from: (i) any federal, state or other governmental authority of (A) any failure
of the related Property to comply with any applicable Environmental Laws, or
(B) any known or threatened release of Hazardous Materials on or from such
Property in violation of Environmental Laws; or (ii) the related mortgagor that
(A) such mortgagor has received any such notice from any such governmental
authority, (B) such Property fails to comply with Environmental Laws, or (C)
there is any known or threatened release of Hazardous Materials on or from such
Property in violation of Environmental Laws.
(v) No Untrue Information. No statement, report or other
document furnished by or on behalf of the Borrower or any affiliate thereof in
writing (including writings in electronic form) pursuant to this Agreement
relating to such Pledged Eligible Asset contains any untrue statement by the
Borrower or any Affiliate thereof of any material fact or an omission by the
Borrower or any Affiliate thereof of a material fact necessary to make the
statements contained therein not misleading. Based upon its review of its files
and such inquiry as is customary by a prudent commercial mortgage lender, the
Borrower does not know or have reason to know that any such statement, report
or other document furnished by or on behalf of the Borrower or any Affiliate
thereof in writing (including writings in electronic form) pursuant to this
Agreement relating to such Pledged Eligible Asset incorporating any statement,
report or other document furnished to the Borrower by any underlying borrower
or any other Person contains any untrue statement by any other Person of any
material fact or an omission of a material fact necessary to make the
statements contained therein not misleading.
2. As to each Pledged Eligible Asset which constitutes a Mortgage Loan
or other Pledged Eligible Asset, if applicable, and is secured by an interest
in real property, the Borrower hereby represents and warrants to the Lender
that as of the related Funding Date; provided however, that any such
representation and warranty maybe modified as set forth in, or an exception
thereto may be contained in, the executed Underwriting Transmittal in effect
for such Pledged Eligible Asset:
(a) Lien Position. The related mortgage is a valid,
subsisting and enforceable lien on the related Property (including all
buildings and improvements on such Property and all installations and
mechanical, electrical, plumbing, heating and air conditioning systems located
in or annexed to such buildings, and all additions, alterations and
replacements made at any time prior to the related Funding Date with respect to
the foregoing, but excluding any related personal property), which Property is
free and clear of all encumbrances and liens having priority over the lien of
such Mortgage, except for (i) any liens of a prior lender described in the
Title Policy and Underwriting Transmittal, (ii) liens for real estate taxes and
special assessments not yet due and payable, (iii) covenants, conditions and
restrictions, rights of way, easements and other matters of public record as of
the date of recording of such mortgage which do not materially and adversely
(1) affect the value of such Property, and (2) interfere with the related
mortgagor's use of such Property for the intended purposes therefor, (iv)
leases and subleases pertaining to such Property which the Borrower, in
accordance with the Borrower's Guidelines, did not require to be subordinated
to the lien of such mortgage, and (iv) other matters to which like properties
are commonly subject which do not, individually or in the aggregate, materially
Appendix II-7
55
interfere with the benefits of the security intended to be provided by such
Mortgage ("Permitted Exceptions"). Any security agreement, chattel mortgage or
equivalent document related to and delivered in connection with the related
Pledged Eligible Asset establishes and creates a valid, subsisting and
enforceable lien on and a security interest in the property described therein,
and the Borrower has full right to sell and assign the same to the Lender.
(b) No Taxes or Assessments. All taxes and governmental
assessments which became due and owing prior to the Funding Date in respect of
the related Property (excluding any related personal property) and which, if
left unpaid, would be or might become, a lien on such Property having priority
over the related mortgage, have been paid or an escrow of funds in an amount
sufficient to cover such taxes and assessments has been established.
(c) No Mechanics Liens. In reliance on the related Title
Policy and to the best of the Borrower's knowledge, the related Property
(excluding any related personal property) is free and clear of any mechanics'
and materialmen's liens or liens in the nature thereof, and no rights are
outstanding that, under law, could give rise to any such liens, any of which
liens are or may be prior to, or equal with, the lien of the related mortgage,
except those which are insured against by the Title Policy.
(d) UCC Financing Statements. One or more Uniform Commercial
Code financing statements covering all furniture, fixtures, equipment and other
personal property in which Mortgagor has an interest (i) which are collateral
under the related Security Documents executed and delivered in connection with
such Pledged Eligible Asset, and (ii) in which a security interest can be
perfected by the filing of Uniform Commercial Code financial statement(s) under
applicable law have been filed or recorded (or have been sent for filing or
recording) in all Uniform Commercial Code filing offices necessary to the
perfection of a security interest in such furniture, fixtures, equipment and
other personal property under applicable law.
(e) Property Leased to Tenants. As to each Pledged Eligible
Asset other than a multifamily property secured by a Property which is subject
to one or more leases that are relied on for purposes of determining the DSCR
of such loan, the Borrower has obtained estoppel certificates from tenants (or,
at a minimum, tenants occupying 90% of the net leased area relied on in
determining the DSCR, but specifically including any such tenant who leases 25%
or more of the net leasable area of the Property), and other information with
respect to the leases ("Leases") relating to such Property in which the
underlying borrower is the landlord or lessor thereunder (including copies
thereof) and the tenants with such Leases as required by the Borrower's
Guidelines, and based upon such investigation by the Borrower:
(i) To the best of the Borrower's knowledge, the
related mortgagor/borrower is complying, in all material respects,
with each lease pertaining to the Property except as disclosed in
writing in the list of exceptions included in the related Underlying
Transmittal.
(ii) Except as disclosed in writing in the list of
exceptions included in the related Underwriting Transmittal, no Lease
with respect to 10% or more of the net
Appendix II-8
56
leasable area of such Property requires the landlord to rebuild or
repair any damages or destruction to the leased premises or to
compensate the tenant for any condemnation affecting the leased
premises.
(iii) Except as disclosed in writing in the list of
exceptions included in the related Underwriting Transmittal, to the
best of the Borrower's knowledge, (A) no Lease with respect to 10% or
more of the net leasable area of such Property contains an option to
purchase or any right of a tenant to terminate the Lease or vacate the
leased premises prior to expiration of the lease term, (B) each Lease
is in full force and effect, (C) each tenant is current in the payment
of rent due under each Lease of 10% or more of the net leasable area
of such Property and has not paid the remaining rents more than one
month in advance, and (D) such Commercial Loan/Asset File contains
true and complete copies of each Lease, as amended.
(f) Mortgage Loans Secured by Ground Lease. With respect to
each Pledged Eligible Asset that is secured in whole or in part by the interest
of a related mortgagor as a lessee under a ground lease of the related Property
(a "Ground Lease"), either (i) the ground lessor's related fee interest in such
Property (the "Fee Interest") is subject to or subordinate to the lien of the
related mortgage as set forth in the Commercial Loan/Asset Schedule, or (ii):
(A) such Ground Lease is in full force and
effect and such Ground Lease or a memorandum thereof has been duly
recorded; such Ground Lease does not prohibit the interest of the
related lessee thereunder from being encumbered by the related
mortgage; and there have been no material changes in the terms of any
such Ground Lease except as set forth in written instruments which are
part of the related Commercial Loan/Asset File;
(B) except as may be indicated in the related
Title Policy referred to in Section 1(l) above, such Ground Lease is
not subject to any liens or encumbrances superior to, or of equal
priority with, the related mortgage, other than the related Fee
Interest;
(C) the related lessee's interest in such
Ground Lease may be transferred to the Lender and its successors and
assigns through foreclosure of the related Mortgage or conveyance in
lieu of foreclosure and, thereafter, may be transferred to another
Person by the Lender and its successors and assigns upon notice to,
but without the consent of, the related lessor (or, if any such
consent is required, either (1) it has been obtained prior to the
Funding Date, or (2) it will not to be unreasonably withheld);
(D) the related lessor is required to give
notice of any default under such Ground Lease by the related lessee to
the Borrower either under the terms of such Ground Lease (the related
lessor having received notice of the related mortgage) or under the
terms of a separate written agreement binding upon the related lessor;
(E) except as disclosed in writing in the
list of exceptions included in the related Underwriting Transmittal,
before the related lessor may terminate
Appendix II-9
57
such Ground Lease because of a default thereunder by the related
lessee, the Borrower is entitled, under the terms of such Ground Lease
or a separate written agreement binding upon the related lessor, to
receive notice of such default and to cure or, alternatively, to
commence proceedings to foreclose the related mortgage plus a
reasonable opportunity to cure such default after foreclosure or a
conveyance in lieu of foreclosure if the Borrower pursues foreclosure
in good faith and with due diligence;
(F) except as expressly approved by the
Lender in writing, the currently effective term of such Ground Lease
(excluding any extension or renewal which is not binding on the lessor
thereunder) extends not less than ten years beyond the maturity date
of the related Pledged Eligible Asset;
(G) except as expressly approved by the
Lender in writing, under the terms of such Ground Lease and the
related Mortgage, taken together, any related property insurance
proceeds other than in respect of a total or substantially total loss
or taking, would be applied either (1) to the repair or restoration of
the damaged portion of the related Property, with the mortgagee or a
trustee or escrow agent appointed by it having the right to hold and
disburse such proceeds as the repair or restoration progresses (except
where such mortgage provides that the related mortgagor or its agent
may hold and disburse such proceeds), or (2) to the payment of the
outstanding principal balance of such Pledged Eligible Asset together
with any accrued interest thereon;
(H) such Ground Lease does not impose any
restrictions on subletting which the Borrower considered to be
commercially unreasonable at the time of origination of such Pledged
Eligible Asset; and
(I) the Borrower has not received any notice
and otherwise has no knowledge that (1) the lessor under such Ground
Lease is asserting a default by the lessee or an event of default
thereunder, or (2) any event has occurred which, with the passage of
time, the giving of notice, or both (other than rental or other
payments being due, but not yet delinquent), would result in a default
or an event of default under the terms of such Ground Lease.
(g) Deed of Trust. With respect to each related mortgage that
is a deed of trust or trust deed, a trustee, duly qualified under applicable
law to serve as such, has either been properly designated and currently so
serves or may be substituted in accordance with applicable law. Except in
connection with a trustee's sale after default by the related mortgagor or in
connection with the release of the related Property following the payment of
such Pledged Eligible Asset in full, no fees or expenses are payable by the
Lender to such trustee.
(h) Type of Property. The related Property consists of an
estate in fee simple or leasehold estate in real property and improvements
thereon as set forth in the Commercial Loan/Asset Schedule.
(i) Mortgage Acceleration Provisions. The related mortgage
contains a provision for the acceleration of the payment of the unpaid
principal balance of such Pledged
Appendix II-10
58
Eligible Asset in the event that the related Property is sold or transferred
without the prior written consent of the mortgagee thereunder, except as
provided in any subordination agreement contained in the Commercial Loan/Asset
File.
(j) No Additional Collateral. The related promissory note or
contract is not, and has not been, secured by any collateral except the lien of
the related mortgage and the Security interest of any related Security
Documents assigned pursuant to the related assignment to the Lender. Except for
any cross-collateralizations described in the Underwriting Transmittal, such
mortgage was not given as collateral or security for the performance of
obligations of any Person other than the related mortgagor.
(k) Assignment of Leases and Rents. Any related assignment of
leases and rents incorporated within the related mortgage or set forth in a
separate document creates a valid assignment of, or security interest in, the
right to receive all payments due under the related Leases, if any, with a
priority corresponding to the priority stated in the Underwriting Transmittal
and subject to the effect of bankruptcy, insolvency, reorganization,
receivership, moratorium or other laws relating to or affecting the rights of
creditors generally and general principles of equity (regardless of whether
considered in a proceeding in equity or at law); and no Person other than the
related mortgagor owns any interest in the right to receive any payments due
under such Leases that is superior to or of equal priority with the mortgagee's
interest therein.
(l) Default, Breach and Acceleration. There is no monetary
default, breach, violation or event of acceleration existing under the related
Pledged Eligible Asset or the related documents to such Pledged Eligible Asset
and no event (other than a failure to make payments due but not yet delinquent)
which, with the passage of time or with notice and the expiration of any grace
or cure period, would constitute a monetary default, breach, violation or event
of acceleration. In addition, to the best of the Borrower's knowledge there is
no non-monetary default, breach, violation or event of acceleration.
Appendix II-11
59
Schedule A
APPROVED ASSETS
Schedule A-1
60
Schedule B
DISCLOSURE OF PROCEEDINGS PENDING AGAINST
THE BORROWER, EVENTS CAUSING MATERIAL ADVERSE
CHANGES AND CHANGES TO THE MANAGEMENT AGREEMENT
None
Schedule B-1
61
Exhibit A
FORM OF SECURED NOTE
Dated as of May 4, 1999
FOR VALUE RECEIVED, the undersigned, AMRESCO CAPITAL TRUST, a
real estate investment trust organized under the laws of the State of Texas,
AMREIT I, INC., a Delaware corporation, AMREIT II, INC., a Delaware
corporation, ACT EQUITIES, INC., a Georgia corporation and ACT HOLDINGS, INC.,
a Georgia corporation, each having an address at 700 North Pearl Street, Suite
2400, Dallas, Texas 75201 (individually and collectively, the "Borrower"),
jointly and severally, promise to pay to the order of PRUDENTIAL SECURITIES
CREDIT CORP., a Delaware corporation, whose address is One New York Plaza, New
York, New York 10292 (the "Lender"), on or before each Maturity Date the amount
then outstanding (including accrued interest at the rate(s) set forth in the
Agreement) under that certain Amended and Restated Interim Warehouse and
Security Agreement, dated as of May 4, 1999, between the Borrower and the
Lender (as amended from time to time, the "Agreement"). Initially, the maximum
principal amount which may be outstanding is $300,000,000 (subject to certain
limitations as set forth therein). Capitalized terms used herein and not
defined herein shall have their respective meanings as set forth in the
Agreement.
The holder of this Note is authorized to record the date and
amount of each Advance and the date and amount of each repayment of principal
thereof on the schedule to be maintained by the Lender (which schedule may be
obtained upon the Borrower's request), and any such recordation shall
constitute prima facie evidence of the accuracy of the amount so recorded;
provided that the failure of the holder hereof to make such recordation (or any
error in such recordation) shall not affect the obligations of the Borrower
hereunder or under the Agreement.
MAXIMUM RATE OF INTEREST: It is intended that the rate of
interest herein shall never exceed the maximum rate, if any, which may be
legally charged on the Loan evidenced by this Note ("Maximum Rate"), and if the
provisions for interest contained in this Note would result in a rate higher
than the Maximum Rate, interest shall nevertheless be limited to the Maximum
Rate and any amounts which may be paid toward interest in excess of the Maximum
Rate shall be applied to the reduction of principal, or, at the option of the
Lender, returned to the Borrower.
DUE DATE: The Loan evidenced hereby not paid before each
Maturity Date shall be due and payable on each Maturity Date.
PLACE OF PAYMENT: All payments hereon shall be made, and all
notices to the Lender required or authorized hereby shall be given, at the
office of the Lender at the address designated in the heading of this Note, or
to such other place as the Lender may from time to time direct by written
notice to the Borrower.
Exhibit A-1
62
PAYMENT AND EXPENSES OF COLLECTION: All amounts payable
hereunder are payable by wire transfer in immediately available funds to the
account number specified by the Lender, in lawful money of the United States.
Payments remitted by the Borrower via wire transfer initiated after 1:00 p.m.
New York City time shall be deemed to be received on the next Business Day. The
Borrower agrees to pay all costs of collection when incurred, including,
without limiting the generality of the foregoing, reasonable attorneys' fees
through appellate proceedings, and to perform and comply with each of the
covenants, conditions, provisions and agreements contained in every instrument
now evidencing or securing said indebtedness.
SECURITY: This Note is issued pursuant to the Agreement and
is secured by a pledge of the Collateral described therein. Notwithstanding the
pledge of the Collateral, the Borrower hereby acknowledges, admits and agrees
that the Borrower's obligations under this Note are recourse obligations of the
Borrower to which the Borrower pledges its full faith and credit.
DEFAULTS: Upon the happening of an Event of Default (as
defined in the Agreement), the Lender shall have all rights and remedies set
forth in the Agreement.
The failure to exercise any of the rights and remedies set
forth in the Agreement shall not constitute a waiver of the right to exercise
the same or any other option at any subsequent time in respect of the same
event or any other event. The acceptance by the Lender of any payment hereunder
which is less than payment in full of all amounts due and payable at the time
of such payment shall not constitute a waiver of the right to exercise any of
the foregoing rights and remedies at that time or at any subsequent time or
nullify any prior exercise of any such rights and remedies without the express
consent of the Lender, except as and to the extent otherwise provided by law.
WAIVERS: The Borrower waives diligence, presentment, protest
and demand and also notice of protest, demand, dishonor and nonpayments of this
Note, and expressly agrees that this Note, or any payment hereunder, may be
extended from time to time, and consents to the acceptance of further
collateral, the release of any collateral for this Note, the release of any
party primarily or secondarily liable hereon, and that it will not be necessary
for the Lender, in order to enforce payment of this Note, to first institute or
exhaust the Lender's remedies against the Borrower or any other party liable
hereon or against any collateral for this Note. None of the foregoing shall
affect the liability of the Borrower. No extension of time for the payment of
this Note, or an installment hereof, made by agreement by the Lender with any
person now or hereafter liable for the payment of this Note, shall affect the
liability under this Note of the Borrower, even if the Borrower is not a party
to such agreement; provided, however, the Lender and the Borrower, by written
agreement between them, may affect the liability of the Borrower.
TERMINOLOGY: If more than one party joins in the execution of
this Note, the covenants and agreements herein contained shall be the joint and
several obligation of each and all of them and of their respective heirs,
executors, administrators, successors and assigns, and relative words herein
shall be read as if written in the plural when appropriate. Any reference
herein to the Lender shall be deemed to include and apply to every subsequent
holder of this
Exhibit A-2
63
Note. Words of masculine or neuter import shall be read as if written in the
neuter or masculine or feminine when appropriate.
AGREEMENT: Reference is made to the Agreement for provisions
as to Advances, rates of interest, mandatory principal repayments, collateral
and acceleration. If there is any conflict between the terms of this Note and
the terms of the Agreement, the terms of the Agreement shall control.
APPLICABLE LAW: THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED
UNDER THE LAWS OF THE STATE OF NEW YORK, THE LAWS OF WHICH THE BORROWER HEREBY
EXPRESSLY ELECTS TO APPLY TO THIS NOTE. THE BORROWER AGREES THAT ANY ACTION OR
PROCEEDING BROUGHT TO ENFORCE OR ARISING OUT OF THIS NOTE MAY BE COMMENCED IN
THE SUPREME COURT OF THE STATE OF NEW YORK, OR IN THE DISTRICT COURT OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK.
WAIVER OF JURY TRIAL: EACH OF THE PARTIES TO THIS AGREEMENT
HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF
THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING
ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including contract claims, tort claims, breach of
duty claims and all other common law and statutory claims. Each party hereto
acknowledges that this waiver is a material inducement to enter into a business
relationship, that each has already relied on this waiver in entering into this
Agreement, and that each will continue to rely on this waiver in their related
future dealings. Each party hereto further warrants and represents that it has
reviewed this waiver with its legal counsel and that it knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY
REFERRING TO THIS SECTION AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the
event of litigation, this Agreement may be filed as a written consent to a
trial by the court.
[Signature Page S-1 Attached]
Exhibit A-3
64
AMRESCO CAPITAL TRUST
By:
----------------------------------------
Name: Jon S. Pettee
Title: President
By:
----------------------------------------
Name: Rebecca A. Kuban
Title: Executive Vice President
AMREIT I, INC.
By:
----------------------------------------
Name: Jon S. Pettee
Title: President
By:
----------------------------------------
Name: Rebecca A. Kuban
Title: Executive Vice President
AMREIT II, INC.
By:
----------------------------------------
Name: Jon S. Pettee
Title: President
By:
----------------------------------------
Name: Rebecca A. Kuban
Title: Executive Vice President
S-1
65
ACT EQUITIES, INC.
By:
----------------------------------------
Name: Jon S. Pettee
Title: President
By:
----------------------------------------
Name: Rebecca A. Kuban
Title: Executive Vice President
ACT HOLDINGS, INC.
By:
----------------------------------------
Name: Jon S. Pettee
Title: President
By:
----------------------------------------
Name: Rebecca A. Kuban
Title: Executive Vice President
S-2
66
Exhibit B
FORM OF LEGAL OPINION
__________ __, 1999
Lender
- ----------------
- ----------------
- ----------------
Re: Amended and Restated Interim Funding Arrangement for
Eligible Assets
Gentlemen:
I am the counsel to AMRESCO Capital Trust, a Texas real estate
investment trust ("ACT"), AMREIT I, Inc., a Nevada corporation, AMREIT II, a
Delaware corporation, ACT Equities, Inc., a Georgia corporation, and ACT
Holdings, Inc., a Georgia corporation (individually and collectively, the
"Borrower"). I have represented the Borrower in connection with the execution
and delivery of the following documents:
(i) Amended and Restated Interim Warehouse and Security
Agreement, dated as of __________, 1999 (the "Agreement"), by and between the
Borrower and Prudential Securities Credit Corp. (the "Lender");
(ii) Secured Note executed as of ___________________, 1999 by
the Borrower in favor of the Lender (the "Note"); ----
(iii) Amended and Restated Custodial Agreement, dated as of
___________________, 1999 (the "Custodial Agreement"), among the Lender, the
Borrower and ____________ (the "Custodian");
(iv) Amended and Restated Securitization Agreement, dated as
of ______, 1999 by and between the Borrower and Prudential Securities
Incorporated (the "Securitization Agreement");
(v) Warrant Agreement, dated as of ______, 1999 by and
between ACT and Prudential Securities Incorporated (the "Warrant Agreement");
and
(vi) The Letter Agreement Amending Section III(C)(8) of the
Warehouse Agreement, dated as of ______, 1999 addressed to the Borrower and
sent by the Lender (the "Letter Agreement").
Capitalized terms used herein, but not defined herein, shall have the
meanings assigned to them in the Interim Warehouse and Security Agreement.
Exhibit B-1
67
I have examined executed copies of the Agreement, the Note, the
Custodial Agreement, the Securitization Agreement, the Warrant Agreement and
the Letter Agreement. I have also examined originals or photostatic or
certified copies of all such corporate records of the Borrower and such
certificates of public officials, certificates of corporate officers, and other
documents, and such questions of law, as I have deemed appropriate and
necessary as a basis for the opinions hereinafter expressed. In making my
examination and rendering the opinions herein expressed, I have made the
following assumptions: (i) each party to each of the Agreement (other than the
Borrower), the Custodial Agreement (other than the Borrower), the
Securitization Agreement (other than the Borrower), the Warrant Agreement
(other than the Borrower) and the Letter Agreement (other than the Borrower)
has the power to enter into and perform all of its obligations thereunder, (ii)
the due authorization, execution and delivery of each of the Agreement, the
Custodial Agreement, the Securitization Agreement, the Warrant Agreement and
the Letter Agreement by all parties thereto (other than the Borrower), and
(iii) the validity and binding effect on all parties thereto (other than the
Borrower) of each of the Agreement, the Custodial Agreement, the Securitization
Agreement, the Warrant Agreement and the Letter Agreement.
The opinions expressed below with respect to enforceability are
subject to the following additional qualifications:
(a) The effect of insolvency, reorganization, moratorium,
conservatorship, receivership, or other similar laws relating to or affecting
the rights of creditors generally in the event of insolvency, reorganization,
moratorium or receivership.
(b) The application of general principles of equity,
including, but not limited to, the right of specific performance (regardless of
whether enforceability is considered in a proceeding in equity or at law).
(c) The unenforceability of provisions to the effect that
failure to exercise or delay in exercising rights or remedies will not operate
as a waiver of any such rights or remedies, or to the effect that provisions
therein may only be waived in writing to the extent that an oral agreement has
been entered into modifying such provisions.
I am licensed to practice law in the State of Texas. For purposes of
this opinion, I have assumed the laws of the State of Texas are substantially
similar to the laws of the State of New York. Subject to such assumption, each
opinion hereinafter set forth is an opinion concerning only the law of the
State of Texas and New York, the corporate laws of Texas, Nevada, Delaware and
Georgia and applicable federal law. All opinions expressed herein are based on
laws, regulations and policy guidelines currently enforced and may be affected
by future changes in law. Furthermore, no opinion is expressed herein regarding
the applicable federal securities, state Blue Sky, legal investment or real
estate syndication laws.
Based upon the foregoing, and subject to the last paragraph hereof, I
am of the opinion that:
Exhibit B-2
68
1. The Agreement, the Note, the Custodial Agreement, the
Warrant Agreement and the Securitization Agreement each constitute the valid,
legal and binding agreement of the Borrower, and each is enforceable against
the Borrower in accordance with its terms.
2. No consent, approval, authorization or order of,
registration or filing with, or notice to, any governmental authority or court
is required under federal laws or the laws of the States of Texas or New York
for the execution, delivery and performance of the Agreement, the Note, the
Custodial Agreement, the Warrant Agreement or the Securitization Agreement, as
applicable, by the Borrower, except such of which as have been obtained.
3. The execution, delivery and performance by the Borrower of
the Agreement, the Note, the Custodial Agreement, the Warrant Agreement and the
Securitization Agreement, does not conflict with or result in a breach of, or
constitute a default under any law, rule or regulation of the federal
government or of the States of Texas or New York.
4. The execution, delivery and performance of the Agreement,
the Note, the Custodial Agreement, the Warrant Agreement and the Securitization
Agreement by the Borrower will not result in a default under any mortgage,
borrowing agreement, or other instrument or agreement pertaining to
indebtedness for borrowed money to which the Borrower is a party.
5. Upon the execution of the Agreement, a valid security
interest in the Eligible Assets and the proceeds thereof is granted to the
Lender, which security interest would be a valid, first-priority, perfected
security interest with respect to such Eligible Assets and the proceeds thereof
upon the delivery of the Commercial Loan/Asset Files to the Custodian or the
recording of a Form UCC-1 financing statement with the appropriate state
authorities.
6. Attached as Exhibit A and incorporated by reference herein
is a listing of states in which the Borrower is licensed as a mortgage lender
or maintains a comparable license. Attached as Exhibit B and incorporated by
reference herein is a listing of states in which each Borrower has qualified to
do business. Each Borrower is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification.
This Opinion is furnished by me as counsel to the Borrower and is
solely for the benefit of the addressees hereof; except that this Opinion may
be relied upon by any holder in due course of the Note.
Yours truly,
Exhibit B-3
69
Exhibit C
FORM OF UNDERWRITING TRANSMITTAL
Exhibit C-1
70
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
Executive Summary
- -----------------
OVERVIEW
- -----------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -----------------
LOAN SUMMARY
- -----------------
- -------------------------------------------------------------------------------
Loan Purpose Borrower Name
Property Type Referral Source
SF/Units Investment Officer
Location Manager
ACT Loan Amount Expected Closing Date
Lien Position Commitment Expiration
Date
LTC
Prior 3rd Party Lien
Amount
- -------------------------------------------------------------------------------
- -----------------
RECOMMENDED
STRUCTURE
- -----------------
- -------------------------------------------------------------------------------
Commitment Amount Commitment %
Fees
Expected Initial Funding Pay Rate % Fixed/Floating
Loan Term Accrual Rate % Fixed/Floating
(Months)
Amortization Term Cash Flow Participation Yes No %
(Months)
Number of Extension Options Residual Participation Yes No %
Number of Months Projected ACT IRR
Extension Fees Earlier Payoff % mos.
Lockout Period Primary Term % mos.
Prepayment Penalty Extended Term % mos.
Primary Term Leveraged @ % @ rate =
---- ------
- -------------------------------------------------------------------------------
Exhibit C-2
71
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
Participation Discussion & Waterfall Description:
- -------------------------------------------------------------------------------
- -----------------
EXIT STRATEGY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Exhibit C-3
72
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
Capital Structure
- -----------------
SOURCES USES
- -------------------------------------------------------------------------------
Borrower PSF/OR PSF/OR
Equity: UNIT UNIT
Cash $ % Purchase Price $ %
Deferred Fees $ % Land $ %
Other $ % Construction Cost $ %
Other Debt $ % Interest Reserve $ %
ACT Debt $ % Tenant Improvements $ %
$ % Leasing Commissions $ %
Deferred Maintenance $ %
Closing Costs $ %
Contingencies $ %
Other
======================= =============================
TOTAL Total
- -------------------------------------------------------------------------------
- -----------------
SOURCE OF
DEVELOPER EQUITY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Exhibit C-4
73
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
- -----------------
INTEREST RESERVE
- -------------------------------------------------------------------------------
Lease up Assumptions
Calculation (note offsetting income)
- -------------------------------------------------------------------------------
ADEQUACY DISCUSSION:
- -------------------------------------------------------------------------------
- -----------------
TI RESERVE
- -------------------------------------------------------------------------------
Calculation:
- -------------------------------------------------------------------------------
Adequacy Discussion:
- -------------------------------------------------------------------------------
- ------------------------------------------
LEASE COMMISSIONS (DESCRIBE FEE STRUCTURE)
- -------------------------------------------------------------------------------
Average Rent PSF $
Average Lease Term years
Average Commission %
- -------------------------------------------------------------------------------
Adequacy Discussion:
- -------------------------------------------------------------------------------
Exhibit C-5
74
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
- -----------------
FEE BREAKDOWN
- -------------------------------------------------------------------------------
ACT:
Broker:
Developer:
Overhead:
Profit:
Management:
Leasing Commissions:
- -------------------------------------------------------------------------------
Exhibit C-6
75
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
Capital Structure (continued)
- ----------------------------------------------
JUSTIFICATION OF POSITION IN CAPITAL STRUCTURE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -----------------
PRIOR LIEN DETAIL
- -------------------------------------------------------------------------------
Amount: $ Holder:
Rate: Address:
Term:
Maturity Date:
Amortization:
Other:
Inter-Creditor Rights:
- -------------------------------------------------------------------------------
- -----------------------------
Other Sources & Uses Comments
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Exhibit C-7
76
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
Borrower & Guarantors
- ----------------------------
BORROWER/SPONSOR INFORMATION
- -------------------------------------------------------------------------------
Borrower Name:
Borrower Entity Type:
Sponsor/Principal of Borrower:
Borrower Address:
Special Purpose Entity [ ] Yes [ ] No
Related Loans (Borrower, $ Amount)
Is SPE Bankruptcy Remote [ ] Yes [ ] No
- -------------------------------------------------------------------------------
BORROWER/PRINCIPAL/SPONSOR CREDIT HISTORY AND REAL ESTATE EXPERIENCE/SUMMARY
OF 3RD PARTY INQUIRIES
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Exhibit C-8
77
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
- ----------------
GUARANTORS
- ----------------
- ----------------
Guarantor 1
- -------------------------------------------------------------------------------
Name Comments:
F/S Date
Total Assets
Liquid Assets
Net Worth
- -------------------------------------------------------------------------------
Guarantor 2
- -------------------------------------------------------------------------------
Name Comments:
F/S Date
Total Assets
Liquid Assets
Net Worth
- -------------------------------------------------------------------------------
Guarantor 3
- -------------------------------------------------------------------------------
Name Comments:
F/S Date
Total Assets
Liquid Assets
Net Worth
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Are all principals signing guaranties? [ ] Yes [ ] No
- -------------------------------------------------------------------------------
List any exceptions:
- -------------------------------------------------------------------------------
Standard Carve-Out for
Bankruptcy
Standard Carve-Out for
Fraud/Misrepresentation
Standard Carve-Out for
Misapplication of Funds
Standard Carve-Out for
Obstruction of Remedies
Standard Carve-Out for
Unpermitted Transactions
Standard Environmental
Guaranty
Standard Indemnification
Standard Completion
- -------------------------------------------------------------------------------
Exhibit C-9
78
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
Project Team
- ------------------------
CONTRACTOR INFORMATION
- -------------------------------------------------------------------------------
Name: FS Date:
Bonded: [ ] Yes [ ] No Total Assets:
Liquid Assets:
Net Worth:
- -------------------------------------------------------------------------------
Contractor Experience Discussion:
- -------------------------------------------------------------------------------
- --------------------
PROPERTY MANAGEMENT
- -------------------------------------------------------------------------------
Firm Firm Contact
- -------------------------------------------------------------------------------
Does Owner manage property? [ ] Yes Contractual Mgmt Fee Percent
[ ] No
- -------------------------------------------------------------------------------
Underwritten Mgmt Fee Percent
- -------------------------------------------------------------------------------
Comments:
- -------------------------------------------------------------------------------
- ---------------
Leasing Agent
- -------------------------------------------------------------------------------
Company Name Leasing Agent Contact
- -------------------------------------------------------------------------------
Leasing Managed by Property [ ] Yes [ ] No Leasing Agent Fee %
Owner
- -------------------------------------------------------------------------------
Leasing Managed by Property [ ] Yes [ ] No New Leases
Manager
- -------------------------------------------------------------------------------
Renewals
- -------------------------------------------------------------------------------
Comments:
- -------------------------------------------------------------------------------
Exhibit C-10
79
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
Property Economics Summary(1)
- ------------------- -------------------
AT INITIAL FUNDING: AT STABILIZATION:
- -------------------------------------------------------------------------------
Expected Closing Date Expected Date
NOI NOI
TI/LC Reserves TI/LC Reserves
CFADS CFADS
DSCR (w/o Int. Res.) DSCR
DSCR (with Int. Res.)
Init. Funding/Acq. Price
Total Cost Estimated Value
Cost PSF Value PSF
LTC Stabilized LTV
Occupancy Occupancy
Pre-leasing
- -------------------------------------------------------------------------------
Comments:
- -------------------------------------------------------------------------------
- ------------------------
(1) See Tabs entitled "Economics:" "Act Model" and "ARGUS" for Details.
Exhibit C-11
80
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
Market Summary
- ----------------------------
CURRENT MARKET INFORMATION
- -------------------------------------------------------------------------------
Information as of Date Market Occupancy
Underwritten Market Rents Occupancy Trends
Rent Trends Economic Trends
- -------------------------------------------------------------------------------
GENERAL MARKET COMMENTS:
- -------------------------------------------------------------------------------
SUB-MARKET COMMENTS:
- -------------------------------------------------------------------------------
- -------------------
RENT COMPARABLES
- -------------------------------------------------------------------------------
NAME/ADDRESS SIZE (SF, YEAR BUILT OCCUPANCY RENTAL TI'S
UNITS) (%) RATE
- -------------------------------------------------------------------------------
1.
2.
3.
Subject Property
- -------------------------------------------------------------------------------
Comments:
- -------------------------------------------------------------------------------
- -------------------------
SALES COMPARABLES - LAND
- -------------------------------------------------------------------------------
NAME/ADDRESS SALES
SIZE (SF, SALES SALES SALES PRICE/BUIDABLE
UNITS) DATE PRICE PRICE SF
PSF
- -------------------------------------------------------------------------------
1.
2.
3.
Subject Property
- -------------------------------------------------------------------------------
Comments:
- -------------------------------------------------------------------------------
Exhibit C-12
81
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
Sales Comparables - Buildings
- -------------------------------------------------------------------------------
NAME/ADDRESS SALES CAP
SIZE (SF, YEAR OCCUPANCY RENTAL PRICE RATE
UNITS) BUILT (%) RATE SF, UNIT (%)
- -------------------------------------------------------------------------------
1.
2.
3.
Subject Property
- -------------------------------------------------------------------------------
Comments:
- -------------------------------------------------------------------------------
Exhibit C-13
82
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
PROPERTY/COLLATERAL DESCRIPTION
MULTI-FAMILY
- --------------
PROPERTY
- -------------------------------------------------------------------------------
Name:
Street Address:
City:
State:
Zip:
- -------------------------------------------------------------------------------
- --------------------------
AREA/LOCATION DESCRIPTION
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ----------------------
PROPERTY DESCRIPTION
- -------------------------------------------------------------------------------
Year Built: Attached Garage
Year Rehabilitated: Unattached Garage
Rentable Area: Covered Parking
Roof Type: Uncovered Parking
Land Area (acres): Total Spaces
Units per acre: No. of Spaces per Unit
Current Occupancy:
- -------------------------------------------------------------------------------
- ------------
UNIT MIX
- -----------------------------------------------------------------------------------------------------------------------------------
Unit Type Number Average Size (Sq. ft.) Current Rental Rate
- --------- ------ --------------------- -------------------
Base PSF
- ------------------- ----------------- --------------------------------- ------------------------------- ---------------------------
1BR/1B
- ------------------- ----------------- --------------------------------- ------------------------------- ---------------------------
2BR/1B
- ------------------- ----------------- --------------------------------- ------------------------------- ---------------------------
2BR/2B
- ------------------- ----------------- --------------------------------- ------------------------------- ---------------------------
Other
- ------------------- ----------------- --------------------------------- ------------------------------- ---------------------------
TOTAL OR AVG.
- ------------------- ----------------- --------------------------------- ------------------------------- ---------------------------
- -----------------
UNIT AMENITIES
- --------------------------- ------------------------------ ------------------------- ----------------------- ----------------------
[ ] Washer-Dryer [ ] Self-Cleaning Oven [ ] Dry Bar [ ] Ceiling Fans [ ] Garden Tubs
[ ] W/D Connections [ ] Icemakers [ ] Built-In Bookcases [ ] Crown Molding [ ] Double Vanities
[ ] Trash Compactor [ ] Frost-free Refrigerator [ ] Security System [ ] Mini Blinds [ ] Balconies/Patios
[ ] Disposal [ ] Built-Ins [ ] Vaulted Ceilings [ ] Vertical Blinds [ ] Free Cable T.V.
- --------------------------- ------------------------------ ------------------------- ----------------------- ----------------------
Exhibit C-14
83
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
- --------------------------- ------------------------------ ------------------------- ----------------------- ----------------------
[ ] Microwave Oven [ ] Fireplaces [ ] 9' Ceilings [ ] Walk-In Closets [ ] Storage
[ ] Dishwasher [ ] Wet Bar [ ] Other:
- --------------------------- ------------------------------ ------------------------- ----------------------- ----------------------
COMMENTS:
- -----------------------------------------------------------------------------------------------------------------------------------
- -------------------
PROJECT AMENITIES
- --------------------------- ------------------------------ ------------------------- ----------------------- ----------------------
[ ] Clubhouse [ ] Computer Center [ ] Secured Access [ ] Volleyball Courts
[ ] Pool [ ] Movie Theater [ ] On-site Security [ ] Basketball Courts
[ ] Hot Tub/Jacuzzi [ ] Laundry Facilities [ ] Day Care Center [ ] BBQ/Picnic Areas
[ ] Tennis Court [ ] Exercise Room [ ] Water Features [ ] Playground
[ ] Door-to-Door Trash Pickup [ ] Other:
- --------------------------- ------------------------------ ------------------------- ----------------------- ----------------------
COMMENTS:
- -----------------------------------------------------------------------------------------------------------------------------------
Exhibit C-15
84
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
PROPERTY/COLLATERAL DESCRIPTION
INDUSTRIAL
- -----------------
PROPERTY
- -------------------------------------------------------------------------------
Name:
Street Address:
City:
State:
Zip:
- -------------------------------------------------------------------------------
- --------------------------
AREA/LOCATION DESCRIPTION
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ------------------------
PROPERTY DESCRIPTION
- -------------------------------------------------------------------------------
Year Built: Number of Parking Spaces
Year Rehabilitated: Per 1,000 Sq. Ft.
Current Occupancy % WH Bay Depths FT
If new construction, percent
Preleased: SF WH Clear Height FT
Rentable Area SF Truck Court Depth FT
Office SF Land Area (acres)
%
Air Conditioned SF Site Coverage Percentage
%
Warehouse SF
%
Sprinklered [ ] Yes [ ] No
Rail Service [ ] Yes [ ] No
- -------------------------------------------------------------------------------
- -----------------
MAJOR TENANTS
- --------------------------------- ------------ ------------------ -------------------------- ----------------- -----------------
Tenant Name Size (SF) Percent of Total Current Rental Rate Expense Basis Expiration Date
-------------- -----------
Per Month Per SF
- --------------------------------- ----------- ------------------- ------------- ------------ ----------------- -----------------
% Net
% Base Year
% Gross
% Or
Total or Average % Modified
- --------------------------------------------------------------------------------------------------------------------------------
Comments:
- -------------------------------------------------------------------------------
Exhibit C-16
85
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
- -------------------------
Lease Rollover Exposure
- --------------------------- ------------------------ -------------------------- -------------------------- ------------------------
Year Area (Sq. Ft.) Percent (%) Cumulative Percent (%) No. of Tenants
- --------------------------- ------------------------ -------------------------- -------------------------- ------------------------
1
2
3
4
5
Total
- --------------------------- ------------------------ -------------------------- -------------------------- ------------------------
Exhibit C-17
86
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
PROPERTY/COLLATERAL DESCRIPTION
OFFICE
- -----------
PROPERTY
- -------------------------------------------------------------------------------
Name:
Street Address:
City:
State:
Zip:
- -------------------------------------------------------------------------------
- ---------------------------
AREA/LOCATION DESCRIPTION
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -----------------------
PROPERTY DESCRIPTION
- -------------------------------------------------------------------------------
Year Built: Parking Spaces
Year Rehabilitated: Number of Per 1,000 Sq.
Structured Ft.
Current Occupancy % Number of Open Per 1,000 Sq.
Spaces Ft.
===================================
If new construction, percent
Preleased: % Total Per 1,000 Sq.
Rentable Area SF Ft.
# of Floors
Floor Plate Size SF
Retail Component SF
%
Land Area (acres)
Site Coverage Percentage %
- -------------------------------------------------------------------------------
- ---------------------
BUILDING AMENITIES
- -------------------------------------------------------------------------------
[ ] Card Access [ ] On-Site Security [ ] On-Site Restaurant
[ ] Conference Facilities [ ] On-Site Management [ ] On-Site Copy Center
[ ] Concierge [ ] Other [ ] Other
- -------------------------------------------------------------------------------
- -------------------
MAJOR TENANTS
- ------------------------------------ ------------ ------------------ -------------------------- ----------------- -----------------
Tenant Name Size (SF) Percent of Total Current Rental Rate Expense Basis Expiration Date
-------------- -----------
Per Month PSF
- ------------------------------------ ----------- ------------------- ------------- ------------ ----------------- -----------------
% Net
% Base Year
% Gross
% Or
Total or Average % Modified
- -----------------------------------------------------------------------------------------------------------------------------------
Exhibit C-18
87
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Comments:
- -------------------------------------------------------------------------------
- ------------------------
Lease Rollover Exposure
- --------------------------- ------------------------ -------------------------- -------------------------- ------------------------
Year Area (Sq. Ft.) Percent (%) Cumulative Percent (%) No. of Tenants
- --------------------------- ------------------------ -------------------------- -------------------------- ------------------------
1
2
3
4
5
Total
- --------------------------- ------------------------ -------------------------- -------------------------- ------------------------
Exhibit C-19
88
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
PROPERTY/COLLATERAL DESCRIPTION
RETAIL
- ------------
PROPERTY
- -------------------------------------------------------------------------------
Name:
Street Address:
City:
State:
Zip:
- -------------------------------------------------------------------------------
- ----------------------------
AREA/LOCATION DESCRIPTION
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ----------------------
PROPERTY DESCRIPTION
- ----------------------------------------------------- ------------------------- ----------------------------------- ---------------
Year Built: Number of Parking Spaces
Year Rehabilitated: Per 1,000 Sq. Ft.
Bay Depths
Current Occupancy % Primary Anchors(s) FT
If new construction, percent Preleased: % Secondary Anchor(s) FT
Rentable Area SF In-Line FT
Primary Anchor(s): SF % Land Area (acres):
Secondary Anchor(s): SF % Site Coverage Percentage %
In-Line SF %
Pad Sites SF %
Floors
1st Floor SF %
2nd Floor SF %
- ----------------------------------------------------- ------------------------- ----------------------------------- ---------------
- ----------------
MAJOR TENANTS
- ------------------------------------ ------------ ------------------ -------------------------- ----------------- -----------------
Tenant Name Size (SF) Percent of Total Current Rental Rate Expense Basis Expiration Date
-------------- -----------
Per Month Per SF
- ------------------------------------ ----------- ------------------- ------------- ------------ ----------------- -----------------
% Net
% Base Year
% Gross
% Or
Total or Average % Modified
- -----------------------------------------------------------------------------------------------------------------------------------
Exhibit C-20
89
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Comments:
- -------------------------------------------------------------------------------
- ------------------------
LEASE ROLLOVER EXPOSURE
- -------------------------------- ------------------------ -------------------------- -------------------------- -------------------
Year Area (Sq. Ft.) Percent (%) Cumulative Percent (%) No. of Tenants
- -------------------------------- ------------------------- ------------------------- -------------------------- -------------------
1
2
3
4
5
Total
- -------------------------------- ------------------------- ------------------------- -------------------------- -------------------
Exhibit C-21
90
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
Third Party Reports
- -------------------------
APPRAISAL INFORMATION
- --------------------- ----------------- ----------------- -------------- ------------------------------- ------------- ---------
Appraised Value As Is $ $ PSF Income Approach $ $ PSF
As Completed $ $ PSF Stabilized Occupancy %
Effective Date As Is DCF $ $ PSF
As Completed Yield Rate %
Appraisal Date Terminal Cap Rate %
In Conformance with USPAP? [ ] Yes [ ] No Direct Capitalization $ $ PSF
In Conformance with FIRREA? [ ] Yes [ ] No Cap Rate %
Appraisal Firm Sales Comparison Approach $ $ PSF
Appraiser(s) Multiplier
Cost Approach $ $ PSF
Land Value $ $ PSF
- --------------------- ----------------- ----------------- -------------- ------------------------------- ------------- ---------
- -------------------------------------------------------------------------------
COMMENTS:
(Reconcile Appraised Value to Underwritten Value and comment on reasonableness)
- -------------------------------------------------------------------------------
- -----------------------------
ENVIRONMENTAL INFORMATION
- ------------------------------------------------ ------------------------------
Phase I Date Environmental Firm Name
Report issued to ACT Cost To Cure per Report
Were Substantial Environmental Iss. Noted Type of O&M Plan in Place
- ------------------------------------------------ ------------------------------
WERE ENVIRONMENTAL ISSUES NOTED CONCERNING THE FOLLOWING:
- ------------------------------------------------ ------------------------------
Underground Storage Tanks Above Ground Storage Tanks
PCBs/Transformers Lead-Based Paint
Radon Lead in Drinking Water
Asbestos/ACM Wastes Site on Property
Adjacent Sites On-Site Operations
Storage of Hazardous Materials History Review
Regulatory Review Was Phase II Performed?
- ------------------------------------------------ ------------------------------
COMMENTS:
- -------------------------------------------------------------------------------
Exhibit C-22
91
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
- ------------------------
ENGINEERING INFORMATION
- -------------------------------------------------------------------------------
Engineering Report Date Engineering Firm Name
- -------------------------------------------------------------------------------
DEFERRED MAINTENANCE INFORMATION
- -------------------------------------------------------------------------------
Immediate Deferred Maintenance $
Estimate
- -------------------------------------------------------------------------------
COMMENTS:
- -------------------------------------------------------------------------------
Exhibit C-23
92
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
Recommendation
- -------------
STRENGTHS
- -------------------------------------------------------------------------------
LOAN AND PROPERTY STRENGTHS COMMENTS:
o
o
o
o
- -------------------------------------------------------------------------------
- -------------
WEAKNESSES
- -------------------------------------------------------------------------------
LOAN AND PROPERTY WEAKNESSES COMMENTS:
o
o
o
o
- -------------------------------------------------------------------------------
- -----------------------------
RISK MITIGANTS INFORMATION
- -------------------------------------------------------------------------------
o
o
o
o
- -------------------------------------------------------------------------------
Recommended by:
-----------------------------------
Manager:
-----------------------------------
Investment Committee:
-----------------------------------
-----------------------------------
-----------------------------------
Date:
-----------------------------------
Exhibit C-24
93
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
Exhibit C-25
94
[AMRESCO CAPITAL TRUST LOGO]
EQUITY APPLICATION
- -------------------------------------------------------------------------------
Deal Name: Date:
- -------------------------------------------------------------------------------
Executive Summary
- ------------
OVERVIEW
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- --------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
Investment Purpose Partnership Name
Property Type Referral Source
SF/Units Investment Officer
Location Manager
ACT Investment Expected Closing Date
% of Equity Commitment Expiration Date
% of Cost
Prior 3rd Party Lien
Amount
- -------------------------------------------------------------------------------
- -------------------------
RECOMMENDED STRUCTURE
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Amount
Expected Initial Funding
Investment Fees %
ACT % of Cashflow: Property Returns Year 1 Avg IRR
---------------- ------ --- ---
% Until Return Of % Unleveraged % % %
% Until Return Of % Leveraged % % %
% Until Return Of %
% Until Return Of %
INVESTOR YIELDS
ACT Yield % % %
Levered (LA too)
Partner Yield % % %
- -----------------------------------------------------------------------------------------------------------------------------------
Exhibit C-26
95
- -------------------------------------------------------------------------------
Participation Discussion & Waterfall Description:
- -------------------------------------------------------------------------------
- ------------------
EXIT STRATEGY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Exhibit C-27
96
Capital Structure
- ---------------------- -------------------------
SOURCES USES
- -------------------------------------------------- --------------------------------------------------------------------
Partner Equity: PSF/OR UNIT PSF/OR UNIT
Cash $ % Purchase Price $ %
Deferred Fees $ % Land $ %
Other $ % Construction Cost $ %
ACT Equity $ % Interest Reserve $ %
3rd Party Debt $ % Tenant Improvements $ %
$ % Leasing Commissions $ %
Deferred Maintenance $ %
Closing Costs $ %
Contingencies $ %
Other
============================== =============================================
TOTAL Total
- -------------------------------------------------- --------------------------------------------------------------------
PARTNERSHIP STRUCTURE
- ---------------------------- ---- ----------- -------- ------
Name Ownership % $ Amount Source
---- ----------- -------- ------
General Partner
%
Limited Partner
%
Limited Partner
%
Limited Partner
%
100.0%
- ---------------------------- ---- ----------- -------- ------
Exhibit C-28
97
- -------------------------------------------------------------------------------
Comments:
- -------------------------------------------------------------------------------
- ----------------------
INTEREST RESERVE
- -------------------------------------------------------------------------------
Lease up Assumptions
Calculation (note offsetting income)
Adequacy Discussion
- -------------------------------------------------------------------------------
- -----------------------
TI RESERVE
- -------------------------------------------------------------------------------
Calculation:
Adequacy Discussion:
- -------------------------------------------------------------------------------
- ------------------------------------------
LEASE COMMISSIONS (DESCRIBE FEE STRUCTURE)
- -------------------------------------------------------------------------------
Average Rent PSF: $
Average Lease Term:
Commission %: %
- -------------------------------------------------------------------------------
Comments:
- -------------------------------------------------------------------------------
Exhibit C-29
98
Capital Structure (continued)
- ------------------------------------
FEE BREAKDOWN
- -------------------------------------------------------------------------------
ACT:
Broker:
Partner:
Overhead:
Profit:
Management:
Leasing Commissions:
- -------------------------------------------------------------------------------
- ------------------------------------------------
JUSTIFICATION OF POSITION IN CAPITAL STRUCTURE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------
PRIOR LIEN DETAIL
- -------------------------------------------------------------------------------
Amount: $ Holder:
Rate: Address:
Term:
Maturity Date:
Amortization:
Other:
Inter-Creditor Rights:
- -------------------------------------------------------------------------------
- ---------------------------------
Other Sources & Uses Comments
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Exhibit C-30
99
Sponsors
- ------------------------
SPONSOR INFORMATION
- -------------------------------------------------------------------------------
Partnership Name:
Partnership Entity Type:
Sponsor/Principal:
Address:
Special Purpose Entity [ ] Yes [ ] No
Related Loans (Principal, $ Amount)
Is SPE Bankruptcy Remote [ ] Yes [ ] No
- -------------------------------------------------------------------------------
PRINCIPAL/SPONSOR CREDIT HISTORY AND REAL ESTATE EXPERIENCE/SUMMARY OF 3RD
PARTY INQUIRIES
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Exhibit C-31
100
- ----------------------------
THIRD PARTY LOAN GUARANTORS
- ----------------------------
Guarantor 1
- -------------------------------------------------------------------------------
Name Comments:
F/S Date
Total Assets
Liquid Assets
Net Worth
- -------------------------------------------------------------------------------
Guarantor 2
- -------------------------------------------------------------------------------
Name Comments:
F/S Date
Total Assets
Liquid Assets
Net Worth
- -------------------------------------------------------------------------------
Guarantor 3
- -------------------------------------------------------------------------------
Name Comments:
F/S Date
Total Assets
Liquid Assets
Net Worth
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Are all listed above signing guaranties? [ ] Yes [ ] No
- -------------------------------------------------------------------------------
Is ACT signing guaranties? [ ] Yes [ ] No
- -------------------------------------------------------------------------------
DETAILS OF GUARANTY BEING PROVIDED BY ACT OR RELATED ACT ENTITY:
- -------------------------------------------------------------------------------
Exhibit C-32
101
Project Team
- -------------------------
CONTRACTOR INFORMATION
- -------------------------------------------------------------------------------
Name: FS Date:
Bonded: [ ] Yes [ ] No Total Assets:
Liquid Assets:
Net Worth:
- -------------------------------------------------------------------------------
Contractor Experience Discussion:
- -------------------------------------------------------------------------------
- -------------------------------------------
PROPERTY MANAGEMENT
- -------------------------------------------
- -------------------------------------------------------------------------------
Firm Firm Contact
- -------------------------------------------------------------------------------
Does Owner [ ] Yes [ ] No Contractual Mgmt Fee Percent
manage property?
- -------------------------------------------------------------------------------
Underwritten Mgmt Fee Percent
- -------------------------------------------------------------------------------
Comments:
- -------------------------------------------------------------------------------
- ------------------
Leasing Agent
- -------------------------------------------------------------------------------
Company Name Leasing Agent Contact
- -------------------------------------------------------------------------------
Leasing Managed by [ ] Yes [ ] No Leasing Agent Fee %
Property Owner
- -------------------------------------------------------------------------------
Leasing Managed by [ ] Yes [ ] No New Leases
Property Manager
- -------------------------------------------------------------------------------
Renewals
- -------------------------------------------------------------------------------
Comments:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Exhibit C-33
102
Property Economics Summary(2)
- ---------------------------------- ------------------------------------
AT FUNDING: AT STABILIZATION:
- ---------------------------------- ------------------------------------
Expected Closing Date Expected Date
NOI $ NOI $
TI/LC Reserves $ TI/LC Reserves $
CFADS $ CFADS $
DSCR to 3rd Party Loan DSCR to 3rd Party Loan
Cashflow to ACT $ Cashflow to ACT $
C-on-C Yield to ACT % Yield to ACT %
Cashflow to Partner $ Cashflow to Partner $
Yield to Partner % Yield to Partner %
Total Cost $ Estimated Value $
Cost PSF $ Value PSF $
LTC % LTV %
Occupancy % Occupancy %
Preleased % %
- ---------------------------------- ------------------------------------
Comments:
- -------------------------------------------------------------------------------
- ----------------------------
(2) See Tabs Entitled "Economics," "Act Model" and "ARGUS" for Details
Exhibit C-34
103
Market Summary
- --------------------------------------
CURRENT MARKET INFORMATION
- -------------------------------------------------------------------------------
Information as of Date Market Occupancy
Underwritten Market Occupancy Trends
Rents
Rent Trends Economic Trends
- -------------------------------------------------------------------------------
GENERAL MARKET COMMENTS:
- -------------------------------------------------------------------------------
SUB-MARKET COMMENTS:
- -------------------------------------------------------------------------------
- ------------------
RENT COMPARABLES
- ------------------------------- ------------------- --------------------- ------------------- ---------------- ----------------
NAME/ADDRESS SIZE (SF, UNITS) YEAR BUILT OCCUPANCY (%) RENTAL RATE TI'S
- ------------------------------- ------------------- --------------------- ------------------- ---------------- ----------------
1.
2.
3.
Subject Property
- -------------------------------------------------------------------------------------------------------------------------------
Comments:
- -------------------------------------------------------------------------------------------------------------------------------
- ----------------------------
SALES COMPARABLES - LAND
- ---------------------------------------- ------------------ -------------- ------------------- ------------- ---------------------
NAME/ADDRESS SALES PRICE SALES
SIZE (SF, UNITS) SALES DATE SALES PRICE PSF PRICE/BUIDABLE SF
- ---------------------------------------- ------------------ -------------- ------------------- ------------- ---------------------
1.
2.
3.
Subject Property
- -----------------------------------------------------------------------------------------------------------------------------------
Comments:
- ---------------------------------------------------------------------------------------------------------------------------------
Exhibit C-35
104
- ---------------------------------
Sales Comparables - Buildings
- ------------------------------------- ---------------- -------------- --------------- ------------- ------------------ ------------
NAME/ADDRESS SIZE (SF, SALES PRICE/ SF, CAP RATE
UNITS) YEAR BUILT OCCUPANCY (%) RENTAL RATE UNIT (%)
- ------------------------------------- ---------------- -------------- --------------- ------------- ------------------ ------------
1.
2.
3.
Subject Property
- ------------------------------------- ---------------- -------------- --------------- ------------- -------------------------------
Comments:
- -----------------------------------------------------------------------------------------------------------------------------------
Exhibit C-36
105
Property/Collateral Description
Multi-Family
- -----------
PROPERTY
- -------------------------------------------------------------------------------
Name:
Street Address:
City:
State:
Zip:
- -------------------------------------------------------------------------------
- -----------------------------
AREA/LOCATION DESCRIPTION
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ------------------------
PROPERTY DESCRIPTION
- -------------------------------------------------------------------------------
Year Built: Attached Garage
Year Rehabilitated: Unattached Garage
Rentable Area: Covered Parking
Roof Type: Uncovered Parking
Land Area (acres): Total Spaces
Units per acre: No. of Spaces per Unit
Current Occupancy:
- -------------------------------------------------------------------------------
- -----------------
UNIT MIX
- ------------------- ----------------- --------------------------------- -----------------------------------------------------------
Unit Type Number Average Size (Sq. ft.) Current Rental Rate
- --------- ------ ---------------------- -------------------
Base PSF
---- ---
- ------------------- ----------------- ------------------ -------------- ------------------------------- ---------------------------
1BR/1B
- ------------------- ----------------- ------------------ -------------- ------------------------------- ---------------------------
2BR/1B
- ------------------- ----------------- ------------------ -------------- ------------------------------- ---------------------------
2BR/2B
- ------------------- ----------------- --------------------------------- ------------------------------- ---------------------------
Other
- ------------------- ----------------- --------------------------------- ------------------------------- ---------------------------
TOTAL OR AVG.
- ------------------- ----------------- --------------------------------- ------------------------------- ---------------------------
- ------------------
UNIT AMENITIES
- --------------------------- ------------------------------ ------------------------- ----------------------- -----------------------
[ ] Washer-Dryer [ ] Self-Cleaning Oven [ ] Dry Bar [ ] Ceiling Fans [ ] Garden Tubs
[ ] W/D Connections [ ] Icemakers [ ] Built-In Bookcases [ ] Crown Molding [ ] Double Vanities
[ ] Trash Compactor [ ] Frost-free Refrigerator [ ] Security System [ ] Mini Blinds [ ] Balconies/Patios
[ ] Disposal [ ] Built-Ins [ ] Vaulted Ceilings [ ] Vertical Blinds [ ] Free Cable T.V.
[ ] Microwave Oven [ ] Fireplaces [ ] 9' Ceilings [ ] Walk-In Closets [ ] Storage
[ ] Dishwasher [ ] Wet Bar [ ] Other:
- ------------------------------------------------------------------------------------------------------------------------------------
COMMENTS:
- --------------------------- --------------------------------------------------------------------------------------------------------
Exhibit C-37
106
- ----------------------
PROJECT AMENITIES
- ------------------------------------------------------------------------------------------------------------
[ ] Clubhouse [ ] Computer Center [ ] Secured Access [ ] Volleyball Courts
[ ] Pool [ ] Movie Theater [ ] On-site Security [ ] Basketball Courts
[ ] Hot Tub/Jacuzzi [ ] Laundry Facilities [ ] Day Care Center [ ] BBQ/Picnic Areas
[ ] Tennis Court [ ] Exercise Room [ ] Water Features [ ] Playground
[ ] Door-to-Door Trash Pickup [ ] Other:
- ------------------------------------------------------------------------------------------------------------
COMMENTS:
- ------------------------------------------------------------------------------------------------------------
Exhibit C-38
107
PROPERTY/COLLATERAL DESCRIPTION
INDUSTRIAL
- ----------------
PROPERTY
- -------------------------------------------------------------------------------
Name:
Street Address:
City:
State:
Zip:
- -------------------------------------------------------------------------------
- -------------------------------
AREA/LOCATION DESCRIPTION
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ----------------------------------------------
PROPERTY DESCRIPTION
- -----------------------------------------------------------------------------------------------------------------------------------
Year Built: Number of Parking Spaces
Year Rehabilitated: Per 1,000 Sq. Ft.
Current Occupancy % WH Bay Depths FT
If new construction, percent Preleased: SF WH Clear Height FT
Rentable Area SF Truck Court Depth FT
Office SF Land Area (acres)
%
Air Conditioned SF Site Coverage Percentage
%
Warehouse SF
%
Sprinklered [ ] Yes [ ] No
Rail Service [ ] Yes [ ] No
- -----------------------------------------------------------------------------------------------------------------------------------
- ---------------
MAJOR TENANTS
- ------------------------------------ ------------ ------------------ -------------------------- ----------------- -----------------
Tenant Name Size (SF) Percent of Total Current Rental Rate Expense Basis Expiration Date
-------------- -----------
Per Month Per SF
- ------------------------------------ ----------- ------------------- ------------- ------------ ----------------- -----------------
% Net
% Base Year
% Gross
% Or
Total or Average % Modified
- -----------------------------------------------------------------------------------------------------------------------------------
Comments:
- -----------------------------------------------------------------------------------------------------------------------------------
Exhibit C-39
108
- -------------------------
Lease Rollover Exposure
- ------------------------------ ------------------------ -------------------------- -------------------------- ---------------------
Year Area (Sq. Ft.) Percent (%) Cumulative Percent (%) No. of Tenants
- ------------------------------ ------------------------- ------------------------- -------------------------- ---------------------
1
2
3
4
5
Total
- ------------------------------ ------------------------- ------------------------- -------------------------- ---------------------
Exhibit C-40
109
PROPERTY/COLLATERAL DESCRIPTION
OFFICE
- -------------
PROPERTY
- -------------------------------------------------------------------------------
Name:
Street Address:
City:
State:
Zip:
- -------------------------------------------------------------------------------
- ---------------------------
AREA/LOCATION DESCRIPTION
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ------------------------
PROPERTY DESCRIPTION
- --------------------------------------------- ----------------------- ------------------------------------- -----------------------
Year Built: Parking Spaces
Year Rehabilitated: Number of Structured Per 1,000 Sq. Ft.
Current Occupancy % Number of Open Spaces Per 1, 000 Sq. Ft.
===================================== =======================
If new construction, percent Preleased: % Total Per 1,000 Sq. Ft.
Rentable Area SF
# of Floors
Floor Plate Size SF
Retail Component SF
%
Land Area (acres)
Site Coverage Percentage %
- --------------------------------------------- ----------------------- ------------------------------------- -----------------------
- --------------------
BUILDING AMENITIES
- -------------------------- -------------------------- -------------------------
[ ] Card Access [ ] On-Site Security [ ] On-Site Restaurant
[ ] Conference Facilities [ ] On-Site Management [ ] On-Site Copy Center
[ ] Concierge [ ] Other [ ] Other
- -------------------------- -------------------------- -------------------------
- ------------------
MAJOR TENANTS
- ------------------------------------ ------------ ------------------ -------------------------- ----------------- -----------------
Tenant Name Size (SF) Percent of Total Current Rental Rate Expense Basis Expiration Date
-------------- -----------
Per Month PSF
- ------------------------------------ ----------- ------------------- ------------- ------------ ----------------- -----------------
% Net
% Base Year
% Gross
% Or
Total or Average % Modified
- -----------------------------------------------------------------------------------------------------------------------------------
Comments:
- -----------------------------------------------------------------------------------------------------------------------------------
Exhibit C-41
110
- --------------------------
Lease Rollover Exposure
- -------------------------------- ---------------------- ------------------------- -------------------------- ----------------------
Year Area (Sq. Ft.) Percent (%) Cumulative Percent (%) No. of Tenants
- -------------------------------- ---------------------- ------------------------- -------------------------- ----------------------
1
2
3
4
5
Total
- -------------------------------- ---------------------- ------------------------- -------------------------- ----------------------
Exhibit C-42
111
PROPERTY/COLLATERAL DESCRIPTION
RETAIL
- --------
PROPERTY
- -------------------------------------------------------------------------------
Name:
Street Address:
City:
State:
Zip:
- -------------------------------------------------------------------------------
- ---------------------------
AREA/LOCATION DESCRIPTION
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ---------------------
PROPERTY DESCRIPTION
- ----------------------------------------------------- ------------------------ ----------------------------------- ---------------
Year Built: Number of Parking Spaces
Year Rehabilitated: Per 1,000 Sq. Ft.
Bay Depths
Current Occupancy % Primary Anchors(s) FT
If new construction, percent Preleased: % Secondary Anchor(s) FT
Rentable Area SF In-Line FT
Primary Anchor(s): SF Land Area (acres):
%
Secondary Anchor(s): SF Site Coverage Percentage %
%
In-Line SF
%
Pad Sites SF
%
Floors
1st Floor SF
%
2nd Floor SF
%
- ----------------------------------------------------- ------------------------ ----------------------------------- ---------------
- -----------------
MAJOR TENANTS
- ------------------------------------ ------------ ------------------ -------------------------- ----------------- -----------------
Tenant Name Size (SF) Percent of Total Current Rental Rate Expense Basis Expiration Date
-------------- -----------
Per Month Per SF
- ------------------------------------ ----------- ------------------- ------------- ------------ ----------------- -----------------
% Net
% Base Year
% Gross
% Or
Total or Average % Modified
- -----------------------------------------------------------------------------------------------------------------------------------
Comments:
- -----------------------------------------------------------------------------------------------------------------------------------
Exhibit C-43
112
- ------------------------
LEASE ROLLOVER EXPOSURE
- -------------------------------- ------------------------ -------------------------- -------------------------- -------------------
Year Area (Sq. Ft.) Percent (%) Cumulative Percent (%) No. of Tenants
- -------------------------------- ------------------------- ------------------------- -------------------------- -------------------
1
2
3
4
5
Total
- -------------------------------- ------------------------- ------------------------- -------------------------- -------------------
Exhibit C-44
113
Third Party Reports
- ------------------------
APPRAISAL INFORMATION
- --------------------- ----------------- ----------------- --------- ------------------------------- ------------- -----------------
Appraised Value As Is $ $ PSF Income Approach $ $ PSF
As Completed $ $ PSF Stabilized Occupancy %
Effective Date As Is DCF $ $ PSF
As Completed Yield Rate %
Appraisal Date Terminal Cap Rate %
In Conformance with USPAP? [ ] Yes [ ] No Direct Capitalization $ $ PSF
In Conformance with FIRREA? [ ] Yes [ ] No Cap Rate %
Appraisal Firm Sales Comparison Approach $ $ PSF
Appraiser(s) Multiplier
Cost Approach $ $ PSF
Land Value $ $ PSF
- --------------------- ----------------- ----------------- --------- ------------------------------- ------------- -----------------
COMMENTS:
(Reconcile Appraised Value to Underwritten Value and comment on reasonableness)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------
ENVIRONMENTAL INFORMATION
- ------------------------------------------------------------------------ ----------------------------------------------------------
Phase I Date Environmental Firm Name
Report issued to ACT Cost To Cure per Report
Were Substantial Environmental Iss. Noted Type of O&M Plan in Place
- ------------------------------------------------------------------------ ----------------------------------------------------------
WERE ENVIRONMENTAL ISSUES NOTED CONCERNING THE FOLLOWING:
- ------------------------------------------------------------------------ ----------------------------------------------------------
Underground Storage Tanks Above Ground Storage Tanks
PCBs/Transformers Lead-Based Paint
Radon Lead in Drinking Water
Asbestos/ACM Wastes Site on Property
Adjacent Sites On-Site Operations
Storage of Hazardous Materials History Review
Regulatory Review Was Phase II Performed?
- ------------------------------------------------------------------------ ----------------------------------------------------------
COMMENTS:
- -----------------------------------------------------------------------------------------------------------------------------------
Exhibit C-45
114
- ---------------------------
ENGINEERING INFORMATION
- -------------------------------------------------------------------------------
Engineering Report Date Engineering Firm Name
- -------------------------------------------------------------------------------
DEFERRED MAINTENANCE INFORMATION
- -------------------------------------------------------------------------------
Immediate Deferred Maintenance $
Estimate
- -------------------------------------------------------------------------------
COMMENTS:
- -------------------------------------------------------------------------------
Exhibit C-46
115
Partnership Agreement Information
- ---------------------
Buy/Sell Provisions
- -------------------------------------------------------------------------------
Lockout Period:
- -------------------------------------------------------------------------------
Comments:
- -------------------------------------------------------------------------------
- ---------------------
Control Provisions
- -------------------------------------------------------------------------------
Leases:
Budgets:
- -------------------------------------------------------------------------------
Comments:
- -------------------------------------------------------------------------------
- ---------------------
Removal Provisions
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ---------------------
Radius Restrictions
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ---------------------
Funding Requirements
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Exhibit C-47
116
- ---------------------
Other Comments
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Exhibit C-48
117
Recommendation
- ---------------------------
STRENGTHS
- -------------------------------------------------------------------------------
INVESTMENT AND PROPERTY STRENGTHS COMMENTS:
o
o
o
o
- -------------------------------------------------------------------------------
- ---------------------------
WEAKNESSES
- -------------------------------------------------------------------------------
INVESTMENT AND PROPERTY WEAKNESSES COMMENTS:
o
o
o
o
- -------------------------------------------------------------------------------
- ---------------------------
RISK MITIGANTS INFORMATION
- -------------------------------------------------------------------------------
o
o
o
o
- -------------------------------------------------------------------------------
Recommended by:
------------------------------------
Manager:
------------------------------------
Investment Committee:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
Date:
------------------------------------
Exhibit C-49
118
REIT TAX DUE DILIGENCE - EQUITY
(Office Buildings, Retail & Multi-family)
Date:_______________________
Name of Property:_______________________________________________________________
[If all of the leases of the property do not have the same basic provisions,
fill out a separate form for each version.]
1. How are rents determined?
_________________ Fixed Amount
_________________ Based upon the net income or net profits of the tenant
_________________ Based upon a fixed percentage of the gross sales or
gross receipts of the tenant Based upon an "overage
provision" whereby all or a portion of the rent is based
on the tenant's net / gross (circle one) income or
profits in excess of a base amount
_________________ Other (please explain)
2. Does the lease provide that in the case of a sublease that the landlord is
entitled to all or a percentage of the excess rent received? Yes ___ No ___
3. Has there been any sublet of all or part of the premises? Yes ___ No ___
4. Are any of the following services provided to tenants? (please circle those
that apply)
o reserved parking
o valet parking
o cable TV
o security system
o laundry facilities
o maid/janitorial services
o provision for health clubs, gyms or workout facilities (includes
discounts for tenants)
5. List any of the services circled above which are not typical and customary
for properties of a similar character and quality in the same geographic
area.
6. List any other services provided which are not typical or customary for
properties which are of a similar character and quality in the same
geographic area.
7. Is any portion of the rent for any lease of the property attributable to
personal property (i.e., furniture, appliances, washer, dryers, etc.)?
___ Yes ___ No ___ N/A
If yes, is the percentage of the total rent attributable to the personal
property less than 15 percent of the total rent?
___ Yes ___ No ___ N/A
8. Are any services rendered to any tenant by third-party suppliers or
independent contractors hired by the ompany (or its affiliates)? If so,
please describe the nature of such services, the name of the third-party
supplier or independent contractor, and the fee arrangement.
___ Yes ___ No ___ N/A
Explain:
9. Does the company (or any of its affiliates) engage in any
revenue-generating activities not mentioned previously in this
questionnaire other than the rental of real property (and associated
activities)?
___ Yes ___ No ___ N/A
Explain:
Exhibit C-50
119
Signature _________________________________
REIT TAX DUE DILIGENCE - LOANS
Date:_________________________
Name of Property:_______________________________________________________________
1. Is an interest in a partnership or LLC securing the loan? (Note: shares of
a corporation, not including LLC's generally should not be taken as
collateral since a REIT cannot own more than 10% of the voting stock of any
one corporation.)
___ Yes
___ No (shares of a corporation are collateral) - SKIP TO QUESTION 3.
___ No (the real and personal property is the only collateral) - SKIP TO
QUESTION 3.
2. The partnership or LLC interest securing the loan represents what
percentage of capital and profits of the entity? (if 100% so state.)
Capital_______% Profits_______%
3. What is the gross value of the land and improvements at the time of
commitment (not any stabilized value)? (If this is a construction loan,
then the value is the value of the land plus the improvement costs to be
capitalized as part of the realty.)
Land Value $______________________________.
Improvement Costs $_______________________________.
4. What is the value of the personal property securing the loan? $___________.
5. What is the loan principal amount? $_________________.
IF A SHARED APPRECIATION ANSWER QUESTION 6, OTHERWISE SKIP TO #7.
[If the answer to any of these questions in #6 is Yes, then the gain may be
subject to a 100% tax]
6. Is the debtor considered a "dealer" in property (i.e., the property is held
as inventory and the gain on the sale is ordinary income instead of capital
gain)? Yes _____. No _____.
a. Does the debtor intend to engage a broker to sell the property prior
to or during construction or prior to lease up, or does the debtor
otherwise intend to engage in any "for sale" marketing activities?
Yes _____. No _____.
b. Has the debtor contacted any potential buyers for the property?
Yes _____. No _____.
c. Does the debtor intend to hold the property for more than twelve
months after completion? Yes _____. No _____.
7. Does a note secure the note? Yes _____. No _____(SKIP TO THE END)
a. Is the note serving as collateral secured by real estate? Yes _____.
No _____.
[If you answered Yes to the questions in #7, see questions 1 through 6 above to
evaluate such note as collateral.]
Signature ______________________________
Exhibit C-51
120
Exhibit D
FORM OF FUNDING NOTICE
_________ __, 199_
Prudential Securities Credit Corp.
One New York Plaza
New York, NY 10292
Re: Amended and Restated Interim Warehouse and Security Agreement
dated as of ___________________, 1999 (the "Agreement")
Gentlemen:
Reference is made to the Agreement for defined terms used
herein. Pursuant to Section I(3)(a)(i) of the Agreement, this letter
constitutes notice that the undersigned desires to obtain an Advance in the
principal amount of $____________, with respect to the Eligible Assets shown on
the attached Commercial Loan/Asset Schedule. Attached as Schedule I hereto is
the calculation of the Advanced Amount in accordance with the Agreement
including a breakdown of each calculation required to determine such Advanced
Amount.
The Borrower further represents, warrants and certifies that:
(1) the undersigned has no notice or knowledge of any Event of Default; (2) the
representations, warranties and covenants in the Agreement relating to the
Eligible Assets shown on the attached Commercial Loan/Asset Schedule are true
and correct as of the date hereof and shall be true and correct on the date of
the Advance requested herein, before and after giving effect thereto; and (3)
each of the conditions precedent to an Advance listed in Section I(2) of the
Agreement has been satisfied as of the date hereof.
[Insert Appropriate Borrower Name]
AMRESCO CAPITAL TRUST
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
AMREIT I, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Exhibit D-1
121
AMREIT II, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
ACT EQUITIES, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
ACT HOLDINGS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Exhibit D-2
122
Exhibit E
FORM OF COMMERCIAL LOAN/ASSET SCHEDULE
Exhibit E-1
123
Exhibit F
FORM OF WARRANT AGREEMENT
Warrant Agreement dated as of May 4, 1999 between AMRESCO Capital Trust and
Prudential Securities Incorporated (filed as Exhibit 10.2 to the Registrant's
Current Report on Form 10-Q for the quarterly period ended March 31, 1999 filed
with the Securities and Exchange Commission on May 13, 1999, which exhibit is
incorporated herein by reference).
Exhibit F-1