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<SEC-DOCUMENT>0000950134-07-020502.txt : 20070926
<SEC-HEADER>0000950134-07-020502.hdr.sgml : 20070926
<ACCEPTANCE-DATETIME>20070926165501
ACCESSION NUMBER:		0000950134-07-020502
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20070918
ITEM INFORMATION:		Other Events
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20070926
DATE AS OF CHANGE:		20070926

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AMERICAN REALTY INVESTORS INC
		CENTRAL INDEX KEY:			0001102238
		STANDARD INDUSTRIAL CLASSIFICATION:	REAL ESTATE OPERATORS (NO DEVELOPERS) & LESSORS [6510]
		IRS NUMBER:				752847135
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-15663
		FILM NUMBER:		071137024

	BUSINESS ADDRESS:	
		STREET 1:		1800 VALLEY VIEW LANE
		STREET 2:		SUITE 300
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
		BUSINESS PHONE:		4695224200

	MAIL ADDRESS:	
		STREET 1:		1800 VALLEY VIEW LANE
		STREET 2:		SUITE 300
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>d50175e8vk.htm
<DESCRIPTION>FORM 8-K
<TEXT>
<HTML>
<HEAD>
<TITLE>e8vk</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED
STATES<br>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 8-K</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B>CURRENT REPORT<BR>
Pursuant to Section&nbsp;13 or 15(d) of the
Securities Exchange Act</B>
</DIV>

<DIV align="CENTER" style="font-size: 10pt; margin-top: 12pt"><B>Date of Report (Date of earliest event reported): </B><B>September&nbsp;18, 2007</B>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B><FONT style="border-bottom: 1px solid #000000">AMERICAN REALTY INVESTORS, INC.</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact Name of Registrant as Specified in its Charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Nevada</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>001-15663</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>75-2847135</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(State or other
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Commission
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(I.R.S. Employer</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">jurisdiction of incorporation)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">File No.)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Identification No.)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>1800 Valley View Lane, Suite&nbsp;300</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Dallas, Texas</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>75234</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(Address of principal executive offices)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Zip Code)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="CENTER" style="font-size: 10pt; margin-top: 12pt">Registrant&#146;s telephone number, including area code <B>469-522-4200</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the Registrant under any of the following provisions:
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">&nbsp;<FONT face="Wingdings">&nbsp;&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>Written communications pursuant to Rule&nbsp;425 under the Securities Act (17 CFR 230.425)</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">&nbsp;<FONT face="Wingdings">&nbsp;&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>Soliciting material pursuant to Rule&nbsp;14a-12 under the Exchange Act (17 CFR 240.14a-12)</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">&nbsp;<FONT face="Wingdings">&nbsp;&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>Pre-commencement communications pursuant to Rule&nbsp;14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">&nbsp;<FONT face="Wingdings">&nbsp;&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>Pre-commencement communications pursuant to Rule&nbsp;13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))</TD>
</TR>
</TABLE>
</DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>





<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Section&nbsp;8 &#151; Other Events</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Item&nbsp;8.01. Other Events</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Three separate but recently consolidated legal proceedings have existed involving matters
between Sunset Management LLC (&#147;Sunset&#148;) and the Registrant and/or Basic Capital Management, Inc.
(&#147;BCM&#148;) over pledges as collateral for certain loans of a number of shares of Common Stock of
Transcontinental Realty Investors, Inc. (&#147;TCI&#148;). The three cases which have continued for some
time were all pending in the United States District Court, Eastern District of Texas, Sherman
Division under Master Case No.&nbsp;4:06-CV-00018 (collectively the &#147;Sunset Litigation&#148;). On September
18, 2007, the various parties to the Sunset Litigation entered into a Forbearance and Settlement
Agreement which resolved the Sunset Litigation. The parties to the Forbearance and Settlement
Agreement include Sunset, the Registrant, BCM, three of the Registrants subsidiaries (American
Realty Trust, Inc., EQK Holdings, Inc. and ART Williamsburg, Inc.), Syntek West, Inc., Triad Realty
Services, Ltd. and Regis Realty, Inc. Under the terms of the Forbearance and Settlement Agreement,
the Registrant and others have the opportunity to satisfy, by two different alternatives for
$38,500,000, or in another alternative $40,000,000 plus interest, in payments spread through
October&nbsp;19, 2009, a judgment of $62,000,000 which Sunset will forbear from enforcing if the terms
of the payout arrangements are met. Approximately $8,200,000 is currently held in an escrow
account which will be applied by October&nbsp;1, 2007 against the payments to be made. To secure the
obligation, the Registrant&#146;s subsidiaries will continue a pledge in favor of Sunset of not less
than 44% of all of the issued and outstanding Stock of TCI, others will continue an assignment of
the rights of various parties under eight separate agreements and Sunset will continue to hold
certain proxies over the TCI Common Stock pledged to it. The Forbearance and Settlement Agreement
contains an allocation of the funds to be paid to the repayment of principal ($15,000,000) and the
balance to interest and fees in various categories. The registrant&#146;s portion of the principal
amount is $5,000,000. The Forbearance and Settlement Agreement brings to an end litigation among
the parties which existed for almost the last five years, fixes as a certainty the amount of the
indebtedness to Sunset and provides a payout method of such indebtedness.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Section&nbsp;9 &#151; Financial Statements and Exhibits</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Item&nbsp;9.01. Financial Statements and Exhibits</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Exhibits
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following exhibit is furnished with this Report:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Exhibit Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Description of Exhibit</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Forbearance and Settlement Agreement dated September
18, 2007 among Sunset Management, LLC, EQK Holdings,
Inc., American Realty Trust, Inc., Basic Capital
Management, Inc., American Realty Investors, Inc., ART
Williamsburg, Inc., Syntek West, Inc., Triad Realty
Services, LP and Regis Realty, Inc.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Furnished herewith.</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt"><!-- Folio --> -1- <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly-caused this report to be signed on its behalf by the undersigned hereunto duly-authorized.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dated: September 24, 2007&nbsp;</TD>
    <TD colspan="3" align="left">AMERICAN REALTY INVESTORS, INC.<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Steven A. Abney
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Steven A. Abney, Executive Vice&nbsp;</TD>

</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">President and Chief Financial Officer</TD>

</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio --> -2- <!-- /Folio -->
</DIV>




</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>2
<FILENAME>d50175exv10w3.htm
<DESCRIPTION>FORBEARANCE AND SETTLEMENT AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w3</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;10.3</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>IN THE UNITED STATES DISTRICT COURT<BR>
FOR THE EASTERN DISTRICT OF TEXAS<BR>
SHERMAN DIVISION</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>SUNSET
MANAGEMENT, LLC,</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#167;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>CIVIL ACTION NO. 4:06-CV-18</B></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Judge Schneider/Judge Bush</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Plaintiff/Counter-Defendant,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">VS.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#167;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>AMERICAN
REALTY INVESTORS, INC, et al.,</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#167;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Defendants/Counter-Plaintiffs.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#167;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>FORBEARANCE AND SETTLEMENT AGREEMENT</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Parties have agreed to the full and complete settlement of all disputes on
the basis of the Satisfaction outlined below or, at Borrowers&#146;(as identified in the
signature block below) option, the Alternative Satisfaction, also outlined below.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&nbsp; <B>I.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>GENERAL CONDITIONS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;The parties will cause a final judgment (the &#147;Judgment&#148;) to be entered in the
U.S. District Court for the Eastern District of Texas against all of the Borrowers in
the amount of $62,000,000, which will bear interest at the highest post-judgment rate
allowed by law. Pursuant to the agreement set forth below, Sunset Management, LLC
(&#147;Sunset&#148; or &#147;Lender&#148;) will forbear from enforcing said judgment on the terms set forth below (the &#147;Forbearance
Agreement&#148;). If: (a)&nbsp;all of the terms and conditions of the &#147;Satisfaction&#148; or &#147;Alternative
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">FORBEARANCE AND SETTLEMENT AGREEMENT &#151; Page 1
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Satisfaction&#148; are met; (b)&nbsp;no default in the payment of any sums due has occurred; and (c)&nbsp;no
other default has occurred that has not been cured within the applicable curative period
following notice of such default to Borrowers as provided for herein, then Sunset will file a
Satisfaction of Judgment within five (5)&nbsp;business days following the earlier of the following
dates: (i)&nbsp;the date that all of the terms of the Satisfaction or Alternative Satisfaction have
been fully performed by Borrowers; or (ii)&nbsp;the date that Lender is paid in full pursuant to
this Forbearance Agreement. In the event any of the terms of the Satisfaction or the
Alternative Satisfaction, as applicable, are not performed by Borrowers on or prior to the
date and time performance is required, then Sunset&#146;s obligation to forbear will immediately
cease and Sunset shall be entitled to undertake execution for all sums due on the
aforementioned $62.0&nbsp;million judgment plus post-judgment interest thereon and to pursue all
remedies allowed by law, including, without limitation, a private sale of the stock of
Transcontinental Realty Investors, Inc. pledged under the three Stock Pledge Agreements
(&#147;Stock Pledge Agreements&#148;) dated on or about September&nbsp;17, 2001, described as the ART Stock
Pledge Agreement, BCM Stock Pledge Agreement and EQK Stock Pledge Agreement, as such terms are
defined in that certain Loan Agreement dated September&nbsp;17, 2001 (&#147;Loan Agreement&#148;) among
certain of the Borrowers and Lender pursuant to the terms of such Stock Pledge Agreements.
Sunset will give written notice of the termination of its forbearance obligations under this
agreement by fax and Federal Express to Jay LaJone at 1750 Valley View Lane, Suite&nbsp;120,
Dallas, Texas 75234, Fax # 204/853-5768. In determining default, time is of the essence, and
any default, not just a material default, will terminate Sunset&#146;s duty to forbear.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;Until such time as all of the obligations of the Borrowers to Sunset have been fully
paid and performed, the aforementioned $62.0&nbsp;million judgment and post-judgment interest
</DIV>

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</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">thereon will be secured by; (a)&nbsp;a pledge (the &#147;TCI Stock Pledge&#148;) of not less than 44% of all of
the issued and outstanding capital stock of Transcontinental Realty Investors, Inc. (&#147;TCI&#148;) from
time to time; and (b)&nbsp;an assignment of all of the rights of Prime Income Asset Management, LLC,
Triad Realty Investors, L.P., Regis Realty I, LLC, and Syntek West, Inc. (&#147;Replacement Managers&#148;)
under the eight agreements referred to in Exhibit&nbsp;A attached hereto (&#147;Replacement Agreements&#148;) and
proceeds thereof. All of the provisions of the Loan Agreement, Stock Pledge Agreements, and the
Security Agreement dated September&nbsp;17, 2001 as such terms are defined in the Loan Agreement
(&#147;Security Agreement&#148;) shall continue in full force and effect with respect to the obligations of
the Borrowers to pay the S62.0&nbsp;million judgment and post-judgment interest thereon. In addition,
within twenty-one (21)&nbsp;days following the request of Sunset from time to time, the Borrowers will
execute and deliver all additional agreements and modifications of the existing agreements that
evidence and secure the obligations of each of the respective Borrowers to Sunset, including,
without limitation, the Loan Agreement, the Stock Pledge Agreements, and the Security Agreement,
reasonably requested and submitted to the Borrowers for execution by Sunset in order to evidence
and confirm the applicability of all of the provisions of the applicable Loan Agreement, Security
Agreement and Stock Pledge Agreements to the obligation of the Borrowers to pay the $62.0&nbsp;million
judgment and post-judgment interest thereon and in order to cause such judgment and post-judgment
interest to be secured by, among other things, a collateral assignment of all of the rights of the
Replacement Managers. Without limiting the generality of the preceding, the Borrowers will cause a
minimum of 44% of the stock of TCI to be pledged as collateral for payment of the Judgment and
post-judgment interest thereon, and upon request of Sunset, the Borrowers will execute and deliver
irrevocable proxies that give Sunset the same right to vote all of the pledged shares of TCI that
Sunset currently has under the Irrevocable Proxies dated June 7
</DIV>


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</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2002. Sunset acknowledges that the Advisory, Management and Brokerage Agreements
described on Exhibit&nbsp;A to Security Agreement dated as of September&nbsp;4, 2001 have been
replaced with the Replacement Agreements and agrees that the replacement of the
agreements that were collaterally assigned to Sunset under the General Security Agreement
by the Replacement Agreements will not be a default that entitles Sunset to terminate its
forbearance obligations under this Agreement so long as the Borrowers perform all of
their obligations under this Paragraph.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;The U.S. District Court for the Eastern District of Texas, Sherman Division
shall retain jurisdiction until the Judgment is satisfied and any dispute regarding
this Forbearance Agreement or the Judgment shall be determined by a bench trial in
that Court. Borrowers and Replacement Managers expressly waive any right to a jury
trial. The Replacement Managers expressly consent to the jurisdiction of the
United States District Court for the Eastern District of Texas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;The sums to be paid to Lender shall be allocated as set forth by Lender in
Exhibit&nbsp;B, attached hereto.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&nbsp;<B>II.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>SATISFACTION</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;The Judgment may be satisfied by the payment of S40.0&nbsp;million (the &#147;Reduced Balance&#148;),
plus simple interest at the rate of 10% per annum until September&nbsp;17, 2008, and at the rate
of 12% simple interest per annum thereafter, until satisfied, under the terms set forth
below:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;Borrowers shall pay Sunset the sum of $ 1.8&nbsp;million by a wire transfer of
immediately available federal funds to the account identified in Exhibit&nbsp;C attached
hereto by September&nbsp;28, 2007. In addition, Borrowers shall pay or cause to be paid to
Sunset at least S8.2&nbsp;million or the
</DIV>

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</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">entire amount currently being held by Charles Brewer, Trustee for ART Williamsburg, Inc., whichever
is greater, on or before October&nbsp;1, 2007.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;Borrowers shall pay $5.0&nbsp;million to Sunset on or before October&nbsp;18, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;Thereafter,
Borrowers shall make seven (7)&nbsp;quarterly payments to Sunset as follows: (a)&nbsp;S3.0&nbsp;million on or
before January&nbsp;18, 2008; (b)&nbsp;another $3.0&nbsp;million on or before April&nbsp;18, 2008; (c)&nbsp;another S3.0
million on or before July&nbsp;18, 2008; (d)&nbsp;another S3.0&nbsp;million on or before October&nbsp;18, 2008; (e)
another S3.0&nbsp;million on or before January&nbsp;19, 2009; (f)&nbsp;another S3.0&nbsp;million on or before April&nbsp;18,
2009; (g)&nbsp;and another $3.0&nbsp;million on or before July&nbsp;19, 2009. Each such payment shall be applied
first to all accrued interest on the outstanding Reduced Balance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;Borrowers shall make a final payment on or before October&nbsp;19, 2009 in the amount necessary
to pay Sunset an amount equal to the excess of the Reduced Balance and all accrued and unpaid
interest thereon over the aggregate sum of the principal payments previously made to Sunset under
this Agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><b>III</b>.
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><FONT style="border-bottom: 1px solid #000000"><b>ALTERNATIVE
SATISFACTION</b></FONT>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;In lieu of the Satisfaction provided in Paragraphs 5 through 9 above, Borrowers may satisfy the
aforementioned $62.0&nbsp;million Judgment with a payment of $38.5&nbsp;million (rather than $40.0
million) (the &#147;Alternative Reduced Balance&#148;) if:
(a)&nbsp;the Borrowers pay Sunset and Sunset has
received in immediately available federal funds all of the payments referred to in Paragraphs 6
and 7 above as and when due; plus (b)&nbsp;an amount equal to the excess of the sum of $17.5&nbsp;million
over the amount of all of the payments referred to in Paragraphs 6 and 7 above; provided however,
as long as the payment referred to in subparagraph (b)&nbsp;received within five (5)&nbsp;days of October&nbsp;18,
2007, the
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">remaining provisions of this Section shall apply; (c)&nbsp;the Borrowers pay Sunset, and Sunset has
received, in immediately available federal funds on or before the due dates the aggregate sum of
$21.0&nbsp;million together with all accrued, and unpaid interest on the outstanding Alternative Reduced
Balance, payable in the same quarterly installments and at the same times as the quarterly
installments set forth in Paragraph&nbsp;8 above; and (d)&nbsp;Borrowers shall make a final payment on
or before October&nbsp;19, 2009 in the amount necessary to pay Sunset an amount equal to the excess of the
Alternative Reduced Balance and all accrued and unpaid interest thereon over the aggregate sum of
the principal payments previously made to Sunset under this Agreement .
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;The Borrowers shall not be entitled to any notice of default in the event of a failure to
pay
any sums due to Sunset as and when due. In the event any such failure has not been fully cured
by a
payment of immediately available federal funds to Sunset within five (5)&nbsp;calendar days of the
due
date, such failure shall terminate all of Sunset&#146;s forbearance obligations under this
Agreement In the
event the Borrowers default in the performance of any of their obligations other than the
obligation to
pay sums due to Sunset as and when due, then Sunset will have the right to terminate its
forbearance
obligations under this Agreement as a result of such default, only if Sunset gives the
Borrowers a
written notice of such default and the Borrowers fail to cure such default following such
notice: (i)
within the applicable curative period provided for defaults of that kind under the Loan
Agreement; or (ii)&nbsp;five (5)&nbsp;days, whichever is greater.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;In the event that Borrowers fail to satisfy all of the requirements of the Satisfaction or
Alternative Satisfaction, all payments made by the Borrowers to Sunset under this Agreement
shall in
any event be credited against accrued and unpaid interest on the aforesaid $62.0&nbsp;million
Judgment and
then to the unpaid principal balance of the Judgment. Any unpaid interest due and payable to
Sunset
shall be compounded monthly. Borrowers shall pay all reasonable attorneys fees, cost
and
</DIV>
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</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">expenses arising out of any dispute arising and/or regarding this Forbearance Agreement or the
Judgment
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13. Borrowers release any claim against Lender related to the loan (&#147;Loan&#148;) that is the
subject of this litigation. Lender hereby releases any claim it may have against Bennett, Weston &#038;
LaJone P.C. and Jay LaJone related to the Loan or any opinion given in connection therewith.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.&nbsp;Delay or failure to exercise any option or right shall not constitute a waiver of
the right to
exercise same at any time thereafter or in the event of any
continuing or subsequent default.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.&nbsp;The acceptance of any payment hereunder which is less than payment of all amounts then
due and payable shall not constitute a waiver of any of the rights or options of the holder
hereof or to
the exercise of those rights and options at the time of such acceptance or at any subsequent
time.
Principal, interest and other sums shall be payable by Borrower in lawful money of the United
States
of America in immediately available funds free and clear of, and without deduction for, any
present or
future taxes, withholdings or costs or reserves. No payment shall be deemed to have been
received by
Lender unless it consists of cash or other immediately available
funds, All payments shall be
wired. Any payment received after noon on a day shall not be deemed to have been received until the
next business day.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.&nbsp;In the event that suit is brought hereon, or any attorney is employed or expenses are
incurred by Lender in connection with the Loan whether or not any suit, proceeding or any
judicial or
non-judicial foreclosure proceeding is commenced, Borrower promises to pay all such expenses
and
reasonable attorneys&#146; fees, including, without limitation, any attorneys&#146; fees incurred in
any
bankruptcy proceeding.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FORBEARANCE AND SETTLEMENT AGREEMENT  &#151;  Page 7
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.&nbsp;No waiver by Lender of any right or remedy shall be effective unless in writing and
signed by Lender, and no such waiver, on any occasion, shall be construed as a waiver on any
other
occasion. Borrower waives any right of offset now or hereafter existing against the holder
hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.&nbsp;THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS (AS DEFINED IN
THE LOAN AGREEMENT) REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#091;THIS PORTION OF DOCUMENT DELIBERATELY LEFT BLANK&#093;
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Dated: Tyler, Texas<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September&nbsp;18,
2007
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">PARTIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Lender:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sunset Management, LLC
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ John K. Baldwin</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">John K. Baldwin</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Borrowers:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">EQK Holdings, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">American Realty Trust, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Basic Capital Management, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">American Realty Investors, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ART Williamsburg, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Syntek West, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Triad Realty Services, Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Regis Realty, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">EQK Holdings, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">American Realty Trust, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Basic Capital Management, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">American Realty Investors, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ART Williamsburg, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Regis Realty, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ A. Cal Rossi</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A. Cal Rossi</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Authorized Agent</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Regis Realty I, LLC</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Triad Realty Investors, L.P.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Syntek West, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Triad Realty Services, Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Gene E. Phillips</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Gene E. Phillips</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Authorized Agent</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Regis Realty I</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Prime Asset Management, Inc</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ A. Cal Rossi</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A. Cal Rossi</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Authorized Agent</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">FORBEARANCE
AND SETTLEMENT AGREEMENT &#151; Page 9
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><b>EXHIBIT A</b></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><b>ADVISORY,
CONSULTING, MANAGEMENT</b></U><BR>
<U><b>and BROKERAGE AGREEMENTS</b></U>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><b>TCI</b></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;Advisory Agreement between Transcontinental Realty Investors, Inc. (&#147;TCI&#148;) and
Prime Income Asset management, LLC<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(&#147;Prime&#148;) dated
October&nbsp;1, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;Consulting and Management Agreement (Residential) dated July&nbsp;1, 2007 with TCI
and Triad Realty Investors, L.P. (&#147;Triad&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;Consulting
and Management Agreement (&#147;Commercial&#148;) dated July 1, 2007 between
TCI and Triad.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;Brokerage Agreement dated June&nbsp;28, 2002 between TCI and Regis Realty I, LLC
(&#147;Regis&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><b>IORI</b></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;Advisory Agreement between Income Opportunity Realty Investors, Inc. (&#147;IORI&#148;) and
Syntek West, Inc. (&#147;Syntek&#148;) dated July&nbsp;1, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;Consulting and Management Agreement between IORI and Triad
(Residential) dated July&nbsp;1, 2002.</div>




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;Consultant
and Management Agreement between IORI and Triad (Commercial) dated
July&nbsp;1, 2003.</div>




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;Brokerage
Agreement between IORI and Regis dated June&nbsp;28, 2002.</Div>

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><b>EXHIBIT
B</b></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><b>ALLOCATION</b></U>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="bottom">$15,000,000.00</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Principal</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="bottom">&nbsp;&nbsp;&nbsp;&nbsp;1,500,000.00</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Late Charge</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="bottom">&nbsp;&nbsp;10,000,000.00</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exit Fee</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="bottom">&nbsp;&nbsp;&nbsp;&nbsp;3,000,000.00</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Legal Fees and Expenses</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="bottom">&nbsp;&nbsp;11,500,000.00</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest</DIV></TD>
</TR>
<TR style="font-size: 1px">
    <TD align="left" valign="bottom" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="bottom"><b>$40,000,000.00</b></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><b>TOTAL</b></DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><b>EXHIBIT
C</b></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><b>WIRING INSTRUCTIONS</b></U>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank Name:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ABA #:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Account #:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>



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