<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Amresco Capital Trust
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE> 2
SUBJECT TO COMPLETION, DATED MARCH 30, 2000
AMRESCO CAPITAL TRUST
700 NORTH PEARL STREET
SUITE 1900, LB 342
DALLAS, TEXAS 75201-7424
YOUR VOTE ON OUR PROPOSED LIQUIDATION AND DISSOLUTION IS VERY IMPORTANT.
Dear Shareholders:
AMRESCO Capital Trust's board of trust managers has approved a plan of
liquidation and dissolution. To complete the liquidation and dissolution, we
must obtain the approval of our shareholders. We believe that the liquidation
and dissolution will benefit our shareholders and the board recommends that you
vote for the proposals as described in the attached document. Also enclosed is
our Annual Report to Shareholders for the year ended December 31, 1999.
Our annual meeting will be held on June __, 2000, at 10:00 a.m., local
time, on the 17th Floor of the North Tower of the Plaza of the Americas, 700
North Pearl Street, Dallas, Texas. At the annual meeting, you will be voting on
the approval of the liquidation and dissolution, the election of two trust
managers and the appointment of Deloitte & Touche LLP as our independent public
accountants for the 2000 fiscal year.
YOUR VOTE IS IMPORTANT. PLEASE VOTE AS SOON AS POSSIBLE TO MAKE SURE
THAT YOUR SHARES ARE REPRESENTED AT THE MEETING. TO VOTE YOUR SHARES, PLEASE
COMPLETE AND RETURN THE ENCLOSED PROXY CARD. YOU MAY ALSO CAST YOUR VOTE IN
PERSON AT THE MEETING.
Sincerely,
Robert L. Adair III
Chairman of the Board of Trust Managers and
Chief Executive Officer
This proxy statement is dated May __, 2000 and is first being mailed to
shareholders on or about May __, 2000.
<PAGE> 3
AMRESCO CAPITAL TRUST
700 NORTH PEARL STREET
SUITE 1900, LB 342
DALLAS, TEXAS 75201-7424
-----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE __, 2000
-----------------
The 2000 annual meeting of shareholders of AMRESCO Capital Trust will
be held on the 17th floor of the North Tower of the Plaza of the Americas, 700
North Pearl Street, Dallas, Texas, on June __, 2000, at 10:00 a.m., local time,
for the following purposes:
1. To approve the complete liquidation and dissolution of AMRESCO
Capital Trust under the terms and conditions of the plan of
liquidation and dissolution. We have included a copy of the
plan of liquidation and dissolution as Annex A to the attached
document.
2. To elect two trust managers.
3. To ratify the appointment of Deloitte & Touche LLP as our
independent public accountants for 2000.
4. To adjourn the meeting, if necessary to permit further
solicitations of proxies if there are not sufficient votes at
the time of the meeting to approve or disapprove proposals 1,
2 or 3.
5. To transact such other business as may properly come before
the meeting or any adjournment or postponement of the meeting.
Only shareholders of record at the close of business on May ___, 2000
will be entitled to vote at the meeting. To vote your shares, please complete
and return the enclosed proxy card. You also may cast your vote in person at the
meeting. Please vote promptly whether or not you expect to attend the meeting.
By Order of the Board of Trust Managers,
Michael L. McCoy
Secretary
Dallas, Texas
May __, 2000
PLEASE VOTE YOUR SHARES PROMPTLY. YOU CAN FIND INSTRUCTIONS FOR VOTING
ON THE ENCLOSED PROXY CARD.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING..................................................................1
RISK FACTORS RELATING TO THE LIQUIDATION AND THE DISSOLUTION....................................................4
If we do not realize the estimated net proceeds from loan pay-offs
and asset sales, liquidating distributions to shareholders may be reduced or delayed...................4
Our trust managers, officers and affiliates may have interests in the liquidation and dissolution
that are different from or in addition to the interests of other shareholders..........................6
The liquidity and the market price of our shares could decrease.................................................6
Our public entity value may be jeopardized......................................................................6
No dissenters' rights for shareholders..........................................................................6
No further shareholder approval will be required................................................................6
The liquidation and dissolution may not result in greater returns to shareholders
than our continuing as a going concern.................................................................6
The board of trust managers may amend the plan or abandon the liquidation and dissolution
even if shareholders approve the liquidation and dissolution...........................................7
Shareholders could be liable to the extent of the distributions they receive if contingent
reserves are insufficient to satisfy our liabilities...................................................7
APPROVAL OF THE LIQUIDATION AND DISSOLUTION.....................................................................8
Overview of the company.........................................................................................8
Background of the liquidation and dissolution...................................................................8
Reasons for the liquidation and dissolution and recommendation of the board of trust managers...................11
Interests of some of our trust managers, executive officers and affiliates in the liquidation and dissolution...13
Summary of the plan of liquidation and dissolution..............................................................14
Expected distributions..........................................................................................16
Material federal income tax consequences of the liquidation and dissolution.....................................17
Government approvals............................................................................................22
No dissenters' rights...........................................................................................22
Vote required...................................................................................................22
ELECTION OF TRUST MANAGERS......................................................................................22
The board of trust managers.....................................................................................22
Information concerning trust managers...........................................................................23
Required vote...................................................................................................25
Meetings of the board and committees............................................................................25
Committees of the board of trust managers.......................................................................25
Compensation of trust managers..................................................................................26
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.....................................................26
AUDIT COMMITTEE REPORT..........................................................................................26
EXECUTIVE OFFICERS..............................................................................................27
RELATIONSHIPS...................................................................................................29
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.........................................................29
EXECUTIVE COMPENSATION..........................................................................................29
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.........................................................31
</TABLE>
i
<PAGE> 5
<TABLE>
<S> <C>
SHAREHOLDER RETURN COMPARISON...................................................................................32
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..................................................33
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................................................................35
The manager.....................................................................................................35
Right of first refusal/correspondent agreement..................................................................36
Transactions with affiliates of AMRESCO, INC....................................................................36
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS.....................................................................37
SHAREHOLDER PROPOSALS...........................................................................................37
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS...............................................................37
WHERE YOU CAN FIND MORE INFORMATION.............................................................................38
ANNEX A - PLAN OF LIQUIDATION AND DISSOLUTION.................................................................A-1
</TABLE>
ii
<PAGE> 6
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
Q: WHAT MAY I VOTE ON?
A: At the meeting, you will be voting on four proposals. Item numbers
refer to the numbers on the proxy card.
Item 1: Approval of our complete liquidation and dissolution under the
terms and conditions set forth in the plan of liquidation and
dissolution.
Item 2: Election of two trust managers.
Item 3: Ratification of the appointment of Deloitte & Touche LLP as
our independent public accountants for 2000.
Item 4: To adjourn the meeting, if necessary to permit further
solicitation of proxies if there are not sufficient votes at
the time of the meeting to approve or disapprove Items 1, 2 or
3.
Q: HOW DOES THE BOARD RECOMMEND THAT I VOTE?
A: The board of trust managers recommends that you vote in favor of the
liquidation and dissolution, the election of trust managers, the
appointment of Deloitte & Touche LLP as our independent public
accountants for 2000 and the adjournment of the meeting.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSALS?
A: For the liquidation and dissolution to occur, holders of at least
two-thirds of our outstanding common shares entitled to vote at the
meeting must approve the liquidation and dissolution. For the other
proposals to be approved, holders of at least a majority of our common
shares present in person or represented by a proxy at the meeting must
approve the particular proposal.
Q: WHO IS ENTITLED TO VOTE?
A: All shareholders of record on the close of business on May __, 2000 are
entitled to vote at the meeting. On May __, 2000, we had 10,015,111
common shares outstanding. Each share is entitled to one vote. As of
May __, 2000, our affiliates, trust managers and executive officers
owned and had the right to vote a total of 1,640,311 shares or
approximately 16.4% of the outstanding shares entitled to vote at the
meeting. AMRESCO, INC. and its affiliates, which own a total of
approximately 15% of our outstanding common shares, have indicated
their intention to vote in favor of each of the proposals.
Q: WHAT DISTRIBUTIONS SHOULD I EXPECT TO RECEIVE IN THE LIQUIDATION AND
DISSOLUTION?
A: Although we cannot be sure of the amounts or the timing, we currently
expect that you will receive cash distributions in the total amount of
approximately $12.60 to $13.10 per share. This would result in total
distributions since our inception of about $14.90 to $15.40 per share,
including dividends paid to date. We anticipate making the first
distribution during the second half of 2000 after we repay any amounts
due on our outstanding credit facilities. We plan to then collect
payments on any remaining mortgage loans and sell any remaining assets
as opportunities arise that are in the best interests of our
shareholders, and anticipate distributing the net proceeds to holders
of our common shares at that time through additional cash
distributions.
Q: WHEN DO YOU EXPECT TO COMPLETE THE LIQUIDATION AND DISSOLUTION?
A: Immediately after the meeting, if shareholders approve the liquidation
and dissolution, we intend to proceed with the collection of our
outstanding mortgage loans and the sale of our other assets as
expeditiously as possible. For the most part, we anticipate that this
will take place over the next 18 to 24 months through scheduled loan
pay-offs in accordance with the terms of the loan documents. We also
anticipate selling our equity interests in real estate and commercial
mortgage-backed securities.
<PAGE> 7
Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE LIQUIDATION AND
DISSOLUTION TO SHAREHOLDERS?
A: In general, if the liquidation and dissolution proposal is approved and
we are liquidated, shareholders will realize, for federal income tax
purposes, gain or loss equal to the difference between the cash
distributed to them from the liquidating distributions and their
adjusted tax basis in their shares. Tax consequences to shareholders
may differ depending on their circumstances. Shareholders are
encouraged to consult with their own tax advisors.
Q: DO I HAVE DISSENTERS' RIGHTS?
A: No. Under applicable law, dissenters' rights are not available in
connection with the liquidation and dissolution.
Q: HOW DO I VOTE?
A: The board of trust managers is soliciting proxies from shareholders to
be used at the meeting. To cast your vote, please complete, date, sign
and mail the proxy card in the enclosed postage pre-paid envelope or
fax it to (214) 758-1373. By voting, you will authorize the individuals
named on the proxy card, referred to as proxies, to vote your shares
according to your instructions. You may specify on the proxy whether
your shares should be voted for all, some or none of the nominees for
trust manager. You may also specify whether you approve, disapprove or
abstain from voting on the other proposals.
If you leave Item 1, Item 3 or Item 4 blank, the proxies will vote FOR
approval of that proposal. If you abstain from voting on Item 1, Item 3
or Item 4, your vote will not be counted in the tabulation of votes
cast on that proposal. If you do not indicate how you wish to vote for
one or more of the nominees for trust manager in Item 2, the proxies
will vote FOR election of all of the nominees for trust manager. If you
"withhold" your vote for any of the nominees, your vote will not be
counted in the tabulation of votes cast on that nominee.
The proxy card also confers discretionary authority on the persons
named on the proxy card to vote the shares represented by the proxy
card on any other matter that is properly presented for action at the
meeting. This discretionary authority will not be used to vote for
adjournment of the meeting to permit further solicitation of proxies if
the shareholder votes against any proposal.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY PROXY CARD?
A: Yes. Just send a written revocation or a later dated, signed proxy card
to our secretary before the meeting or simply attend the meeting in
person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions to
your broker on how to vote. You should follow the directions provided
by your broker regarding how to instruct your broker to vote your
shares.
Q: HOW WILL VOTES BE COUNTED?
A: The meeting will be held if a quorum is represented in person or by
proxy at the meeting. A quorum is a majority of our outstanding common
shares entitled to vote. If you have returned a signed proxy card or
attend the meeting in person, your shares will be counted for the
purpose of determining whether there is a quorum, even if you do not
vote. Failures to vote, referred to as abstentions, are not counted as
votes cast on a proposal and have no effect on the result of the vote
on that proposal. A withheld vote is the same as an abstention.
Broker non-votes occur when proxies submitted by a broker, bank or
other nominee holding shares in "street" name do not indicate a vote
for some or all of the proposals because they do not have discretionary
voting authority and have not received instructions as to how to vote
on those proposals. We will treat broker non-votes as shares that are
present and entitled to vote for quorum purposes. However, broker
non-votes will not be counted as votes cast on a proposal and will have
no effect on the result of the vote on that proposal.
2
<PAGE> 8
Q: WHO WILL PAY THE COSTS OF SOLICITING THE PROXIES?
A: We will pay all of the costs of soliciting proxies on the accompanying
form. Some of our trust managers, officers and other employees may
solicit proxies personally or by telephone, mail or facsimile. They
will not be specially compensated for these activities. We will also
make arrangements with brokerage houses and other custodians, nominees
and fiduciaries to send proxy material to beneficial owners. We will,
upon request, reimburse these institutions for their reasonable
expenses. We have retained Corporate Investor Communications, Inc. to
aid in the solicitation of proxies. Their fee is not expected to exceed
$10,000 plus reimbursement of reasonable out-of-pocket expenses.
Q: HOW WILL VOTING ON OTHER BUSINESS BE CONDUCTED?
A: We do not know of any matter to be presented or acted upon at the
meeting, other than the proposals described in this proxy statement. If
any other matter is presented at the meeting on which a vote may be
properly taken, the shares represented by proxies will be voted in
accordance with the judgment of the persons named as proxies on the
accompanying proxy card.
Q: WHOM SHOULD I CALL IF I HAVE QUESTIONS?
A: You should call Jonathan S. Pettee at (214) 953-7942 or (800) 966-7887.
3
<PAGE> 9
RISK FACTORS RELATING TO THE LIQUIDATION AND THE DISSOLUTION
In addition to the other information included elsewhere in this
document, you should carefully consider the following factors in determining
whether to vote in favor of our liquidation and dissolution.
IF WE DO NOT REALIZE THE ESTIMATED NET PROCEEDS FROM LOAN PAY-OFFS AND ASSET
SALES, LIQUIDATING DISTRIBUTIONS TO SHAREHOLDERS MAY BE REDUCED OR DELAYED
We cannot assure you that our planned loan pay-offs or asset sales will
occur when and for the proceeds we estimated. These estimates are subject to
various and significant uncertainties, many of which are beyond our control.
This may result in the actual results being materially lower than our
expectations. Examples of these uncertainties include the following:
BORROWERS UNDER OUR MORTGAGE LOANS MAY NOT PAY-OFF THE LOANS IN
ACCORDANCE WITH THEIR TERMS
If borrowers fail to pay-off their loans in the amounts and at the
times specified in their respective loan documents, we will not realize the full
amounts of the estimated proceeds of the liquidation. This could also increase
our expenses. In any of these cases, the dissolution could be delayed and
distributions to shareholders could be less than or paid later than estimated.
WE MAY DECIDE TO SELL OUR LOANS TO THIRD PARTIES
We may decide it is in the best interests of shareholders to sell one
or more loans to third parties, rather than wait to receive payments in
accordance with the terms of the applicable loan documents. This may increase
our expenses, which could decrease the payment of distributions to shareholders.
Also, the consummation of these sales may be subject to numerous conditions,
including obtaining third party consents. This may delay the dissolution, which
could delay the payment of distributions.
WE MAY NOT CONSUMMATE THE EXPECTED ASSET SALES OR THEY COULD BE DELAYED
We expect that the sales of our mortgage loans, commercial
mortgage-backed securities or equity securities will be subject to numerous
conditions. These may include the receipt of consents to the transactions from
third parties. Accordingly, we cannot assure you that, even if shareholders vote
to approve the liquidation and dissolution, any asset sales will be consummated.
If we cannot sell our assets on the terms and at the times we have targeted, the
dissolution could be delayed and distributions to shareholders could be less
than or paid later than estimated.
THE ACTUAL COSTS AND EXPENSES OF THE LIQUIDATION AND DISSOLUTION COULD
RISE
Our estimate of net distributable cash resulting from the asset sales
and loan pay-offs and the subsequent dissolution is based on estimates of the
costs and expenses of the liquidation and dissolution. We could incur additional
expenses, including additional interest expense on our credit facilities, if the
consummation of any of the asset sales, the receipt of any of the loan pay-offs
or the dissolution are delayed. If our actual costs and expenses exceed the
estimated amounts, distributions to shareholders as a result of the liquidation
and dissolution could be less than estimated or delayed.
WE COULD SELL ASSETS ON AN INSTALLMENT BASIS, WHICH COULD INCREASE OUR
COSTS
If we sell some or all of our assets on an installment basis and the
purchaser subsequently defaults in its payment on the related promissory note or
installment contract, our exercise of remedies, which may include foreclosure on
any property securing the promissory note, will likely result in our incurring
additional costs and expenses. This could in turn result in delays in effecting
the dissolution and reductions or delays in the payment of distributions to
shareholders.
4
<PAGE> 10
EARLY LOAN PAY-OFFS OR ASSET SALES MAY DECREASE SHAREHOLDER
DISTRIBUTIONS
If loan pay-offs and asset sales occur earlier than we anticipate, our
earnings from these investments will be less than our estimates. This could
reduce distributions to shareholders.
INTEREST RATE INCREASES MAY ADVERSELY AFFECT NET PROCEEDS
An increase in interest rates would decrease the market value of our
commercial mortgage-backed securities. An increase in interest rates would also
impact our borrowers' ability to achieve third party financing or property sales
to pay off their loans. Except for an existing interest rate cap agreement
designed to protect against rate increases that would increase our financing
costs, we have not entered into hedging transactions to protect against the
effect of interest rate increases. Accordingly, an increase in interest rates
could result in distributions to shareholders being less than estimated.
INCREASES IN INTEREST RATE SPREADS MAY ADVERSELY AFFECT NET PROCEEDS
The fair values of our investments in non-investment grade commercial
mortgage-backed securities are dependent upon, and are sensitive to changes in,
comparable-term U.S. treasury rates and spreads over U.S. treasury rates in
effect from time to time. Spreads are influenced by a number of factors. These
include investor expectations with respect to future economic conditions,
interest rates and real estate market factors. All of these are beyond our
control and can impact the ability of borrowers to perform under the terms of
the mortgage loans underlying commercial mortgage-backed securities. As a
result, even in an environment characterized by relatively constant U.S.
treasury rates and low commercial mortgage default rates, the value of our
commercial mortgage-backed securities can be adversely impacted by increasing
spreads. Accordingly, increased spreads could result in distributions to
shareholders being less than estimated.
DECREASES IN REAL ESTATE VALUES MAY ADVERSELY AFFECT NET PROCEEDS
The underlying value of our real estate investments may be adversely
affected by a number of factors that are beyond our control, including the
following:
o adverse changes in economic conditions;
o changes in interest rates and in the availability, cost and
terms of mortgage funds;
o the ability of lessees to make lease payments;
o competition;
o changes in real estate tax rates and other operating expenses;
and
o adverse changes in governmental rules and fiscal policies.
Any adverse change in the underlying value of our real estate
investments would make it more difficult for our borrowers to sell or refinance
their properties. This, in turn, could adversely impact the market value of our
assets or delay the pay-off of our loans. Accordingly, any decrease in the
underlying value of our real estate investments could decrease or delay the
payment of distributions to shareholders.
WE COULD LOSE PERSONNEL AS A RESULT OF THE LIQUIDATION
If shareholders approve the liquidation and dissolution, personnel who
provide services to us may consider other employment because of our limited
future prospects. This may make implementation of the plan of liquidation and
dissolution more difficult. This may delay or increase the costs associated with
the liquidation and dissolution, which may result in distributions to
shareholders being less than estimated or delayed.
5
<PAGE> 11
UNKNOWN OR CONTINGENT LIABILITIES COULD ARISE
If liabilities that were unknown or contingent at the time we mailed
this document later arise that we must satisfy or reserve for as part of the
liquidation and dissolution, actual distributions to shareholders as a result of
the liquidation and dissolution could be less than estimated or delayed.
WE COULD EXPERIENCE UNANTICIPATED MORTGAGE LOAN DEFAULTS
If any of the borrowers under our mortgage loans default in the payment
of their debt, we will suffer delays in the collection of the indebtedness and
incur additional costs and expenses in the exercise of our remedies. Any of
these events could delay the dissolution or result in distributions to
shareholders being less than or paid later than estimated.
OUR TRUST MANAGERS, OFFICERS AND AFFILIATES MAY HAVE INTERESTS IN THE
LIQUIDATION AND DISSOLUTION THAT ARE DIFFERENT FROM OR IN ADDITION TO THE
INTERESTS OF OTHER SHAREHOLDERS
In considering the recommendation of the board of trust managers with
respect to the liquidation and dissolution and deciding whether or not to
approve the proposal, you should be aware that some of our trust managers,
officers and affiliates have interests in the liquidation and dissolution that
are different from or in addition to those of other shareholders. In particular,
two of our executive officers will receive retention payments of varying
amounts. These are described below under "Approval of the Liquidation and
Dissolution - Interests of some of our trust managers, executive officers and
affiliates in the liquidation and dissolution."
THE LIQUIDITY AND THE MARKET PRICE OF OUR SHARES COULD DECREASE
As we sell our assets and our loans are paid off and we distribute
liquidating distributions to shareholders, our market capitalization and "float"
may diminish. Market interest in our shares and in the investment community may
also diminish. This could reduce the market demand and liquidity for our shares,
which may adversely affect the market price of our shares. In addition, our
shares may become ineligible for listing on the Nasdaq Stock Market before the
dissolution is finalized. This will further decrease the market demand and
liquidity for and price of our shares.
OUR PUBLIC ENTITY VALUE MAY BE JEOPARDIZED
Once shareholders approve the liquidation and dissolution, we will be
committed to winding-up our operations. This jeopardizes any value that a
potential acquirer might place on the ability to acquire a publicly-held entity
with an indefinite life. It may also preclude other possible courses of action
not yet identified by the board.
NO DISSENTERS' RIGHTS FOR SHAREHOLDERS
Texas law does not provide a procedure for shareholders who dissent
from approval of the liquidation and termination to demand an appraisal for
their shares and payment of their fair cash value. As a result, shareholders who
object to the liquidation and dissolution do not have a right to demand a
different payment for their shares.
NO FURTHER SHAREHOLDER APPROVAL WILL BE REQUIRED
If shareholders approve the liquidation and dissolution, we will be
authorized to dispose of our assets without further approval of our
shareholders. This will be the case even if we dispose of all or substantially
all of our assets.
THE LIQUIDATION AND DISSOLUTION MAY NOT RESULT IN GREATER RETURNS TO
SHAREHOLDERS THAN OUR CONTINUING AS A GOING CONCERN
If the liquidation and dissolution proposal is not approved at the
meeting, the board of trust managers intends to continue managing us and our
assets substantially as they are currently being managed. The board may continue
to entertain and consider indications of interest from third parties to engage
in a business combination with us. We cannot
6
<PAGE> 12
assure you that the liquidation and dissolution will result in greater returns
to shareholders than our continuing as a going concern or through a business
combination with a third party.
THE BOARD OF TRUST MANAGERS MAY AMEND THE PLAN OR ABANDON THE
LIQUIDATION AND DISSOLUTION EVEN IF SHAREHOLDERS APPROVE THE LIQUIDATION AND
DISSOLUTION
Even if shareholders vote to approve the liquidation and dissolution
proposal at the meeting, the board of trust managers may amend the plan of
liquidation and dissolution without further shareholder approval, except as
required by Texas law. In addition, prior to the filing of articles of
dissolution, the board may abandon the liquidation and dissolution without
further shareholder action.
SHAREHOLDERS COULD BE LIABLE TO THE EXTENT OF THE DISTRIBUTIONS THEY RECEIVE IF
CONTINGENT RESERVES ARE INSUFFICIENT TO SATISFY OUR LIABILITIES
If we have, or a liquidating trust to which our assets are transferred
has, inadequate reserves for the payment of our expenses and liabilities, each
shareholder could be held personally liable for the payment to creditors of such
shareholder's pro rata portion of the additional amounts owed, up to the amount
of the liquidating distributions such shareholder has previously received.
If a court holds at any time that we have failed to make an adequate
provision for expenses and liabilities, or if the amount we are ultimately
required to pay in respect of such expenses or liabilities exceeds the amount
available from the reserve for contingencies and the assets of the liquidating
trust, our creditors could seek an order enjoining us from making distributions
under the plan of liquidation and dissolution on the grounds that the amounts to
be distributed are needed to provide for the payment of our expenses and
liabilities. This could delay or substantially diminish the distributions to be
made to shareholders and/or holders of beneficial interests of the liquidating
trust under the plan of liquidation and dissolution.
7
<PAGE> 13
APPROVAL OF THE LIQUIDATION AND DISSOLUTION
(ITEM 1 ON PROXY CARD)
OVERVIEW OF THE COMPANY
We were organized in January 1998 as a real estate investment trust, or
REIT, under the laws of the State of Texas. We were formed to take advantage of
lending and investment opportunities in real estate related assets, including
various types of commercial mortgage loans, commercial mortgage-backed
securities, commercial real estate, equity investments in joint ventures and/or
partnerships and other real estate related assets. Our day-to-day operations
commenced on May 12, 1998, concurrent with the closing of our initial public
offering, and are managed by AMREIT Managers, L.P., an affiliate of AMRESCO,
INC.
Our common shares are traded on the Nasdaq Stock Market under the
symbol "AMCT." The closing sale price of our common shares on the Nasdaq Stock
Market on March 29, 2000, the last trading day prior to the announcement of the
signing of the plan of liquidation and dissolution, was $__ per share. The
closing sale price of our common shares on the Nasdaq Stock Market on May __,
2000, the last trading day prior to the date of this document, was $__ per
share.
Our principal executive offices are located at 700 North Pearl Street,
Suite 1900, Dallas, Texas 75201. The telephone number at those offices is (214)
953-7700 or (800) 966-7887.
BACKGROUND OF THE LIQUIDATION AND DISSOLUTION
Since our formation, we have maintained our business plan of
originating and acquiring high-yield first mortgage loans, mezzanine loans,
equity investments in real estate and subordinated commercial mortgage-backed
securities. We have aimed to maximize total return to our shareholders by
producing cash flow for distribution to shareholders through our investments.
Beginning in mid 1998, market prices for publicly traded real estate investment
trusts began a significant decline and, during the third and fourth quarters of
1998, the commercial mortgage-backed securitization market deteriorated. Because
of these developments, we, like many other REITs, became limited in our ability
to obtain financing and to achieve our business strategy.
It had also became apparent that the market was pricing our equity at
severely discounted values relative to our book value. Accordingly, in late
1998, our board of trust managers began discussions of ways to strengthen our
balance sheet, gain access to additional sources of capital and provide
liquidity to use for future investments and operations.
On February 25, 1999, Prudential Securities Incorporated made a
presentation to the board regarding potential strategic alternatives, including
remaining an independent entity, converting from a REIT to a C corporation or
entering into a business combination. The purpose of the presentation was to
assist the board in identifying the best alternative, or combination of
alternatives, for us and our shareholders. During the course of this
presentation and the discussion of the alternatives, the board also expressed an
interest in evaluating the acquisition of other companies as an additional
strategic alternative. At the conclusion of the presentation, the board
authorized the engagement of Prudential Securities as our financial advisor for
the purposes of further reviewing and evaluating the strategic alternatives that
might be available to us, contacting third parties that might be interested in
potential transactions with us and advising us in connection with any proposals
or inquiries that we might receive from third parties.
During the following several weeks, Prudential Securities identified
and contacted various third parties in connection with a potential transaction.
Prudential Securities and management also began preparing public and non-public
information for distribution to interested parties after they entered into
confidentiality agreements with us. On April 6, 1999, we signed an engagement
letter with Prudential Securities relating to the provision of financial
advisory services and the rendering of a fairness opinion in connection with a
potential transaction.
In late April and May, we entered into confidentiality agreements
covering six third parties, under which each agreed to keep discussions with us
and materials provided by us confidential. Prudential Securities then
distributed to
8
<PAGE> 14
these parties a letter on our behalf soliciting written, preliminary non-binding
proposals for a business combination with us.
During the first week of May, Prudential Securities received four
indications of interest in response to its letters, one of which was on behalf
of Impac Commercial Holdings, Inc. Impac's indication of interest was for a
stock-for-stock merger and contemplated a separate purchase of our current
management agreement and all of the common shares owned by AMRESCO, INC. and its
affiliates for cash.
On June 11, 1999, the board met telephonically with Prudential
Securities to review the terms and the relative merits of the proposals. The
board decided against converting from a REIT to a C corporation due to the fact
that our income would be taxed, we had no assurance that our access to capital
would be greater and investors had not reacted positively to other mortgage
REITs converting to C corporations. The board also rejected the possibility of
remaining a stand-alone entity because it believed that we required an infusion
of capital and faced increasing exposure to credit risk from our relatively
small balance sheet.
On June 22, 1999, the board again met telephonically with Prudential
Securities to review the terms and relative merits of the proposals. Based upon
the information gathered by Prudential Securities and management and an
assessment of the business and prospects that would be available under each
alternative, the board determined that the Impac proposal was superior and
authorized negotiations with representatives of Impac and FIC Management, Inc.,
its external manager, and a merger with Impac.
By August 4, 1999, both Impac and AMRESCO, advised by their legal and
financial advisors, had negotiated a merger agreement under which Impac would be
merged into us. The terms of this agreement included an exchange ratio of .66094
of our common shares for each share of Impac common stock. On August 5, 1999,
both companies executed the merger agreement and issued press releases
announcing the merger. The merger agreement provided that it would be terminated
if the merger was not consummated prior to December 31, 1999. Also, FIC
Management Inc., AMRESCO, INC., AMREIT Managers, L.P., AMREIT Holdings, Inc. and
MLM Holdings, Inc. executed a purchase agreement. Under this agreement, FIC
Management agreed that it or one of its designees would purchase from AMRESCO,
INC. and its affiliates specified assets, including our existing management
agreement, 1,500,111 of our common shares and options to purchase 1,000,011
shares.
Several events subsequently occurred that made the merger less
attractive. First, the market price of our common shares did not increase when
and after the time that we announced the merger. Also, Impac received a merger
proposal from Apex Mortgage Capital, Inc. under which Impac stockholders would
receive Apex Mortgage common stock in the merger. On October 28, 1999, Impac
announced that its board had unanimously determined that it was unable to
conclude that Apex Mortgage's proposal was a superior proposal, as "superior
proposal" was defined in the AMRESCO/Impac merger agreement, and that Impac was
therefore contractually bound to proceed with the merger with us. Shortly after
this time, two class action lawsuits were filed against Impac and some of its
directors and officers alleging that the defendants had breached duties to
Impac's stockholders by failing to give due deliberation to, and failing to
accept, Apex Mortgage's proposal.
During the fourth quarter of 1999, the market prices of our and Impac's
common shares did not rise and the commercial mortgage-backed securities market
continued to deteriorate.
Our board met on December 16, 1999 with its legal and financial
advisors to discuss the fact that the merger agreement with Impac could be
terminated after December 31, 1999. It also discussed current market conditions
and the events that had recently arisen relating to the merger with Impac,
including the increased uncertainties created by the litigation commenced
against Impac. The board believed that, as a result of these factors, the merger
was now less attractive than originally anticipated and that it was in our
shareholders' best interests to terminate the merger agreement in accordance
with its terms on December 31. The board also reviewed an analysis prepared by
management of the cash flows that management projected could be achieved from an
orderly liquidation of our loan portfolio from pay-offs and sales of our
commercial mortgage-backed securities and partnership interests. The board
directed management and our financial advisors to continue to analyze strategic
alternatives to maximize shareholder value, including continuing to operate as a
going concern, merging or combining with other entities, winding down our
operations through the normal pay-off of assets and selling our shares or
assets.
9
<PAGE> 15
On January 4, 2000, we announced that we had mutually agreed with Impac
to terminate the merger agreement. The parties to the purchase agreement also
agreed to terminate that agreement effective January 4, 2000.
During the following several weeks, Prudential Securities and
management continued to analyze our strategic alternatives, including
shareholder value that may be realized in a liquidation. Also during this
period, Prudential Securities identified 40 third parties that it believed might
have an interest in engaging in a transaction with us. Prudential Securities
began to contact these parties to determine their level of interest in a
potential transaction with us. Prudential Securities received preliminary
indications of interest in a possible transaction from 16 of the parties
contacted. Three of these indications of interest were to acquire us for
consideration consisting entirely of securities of the bidder. Thirteen of these
indications of interest were predominantly cash proposals to acquire us at
prices ranging from $10 to $10.50 per share. The remaining indication of
interest was from a private entity referred to as "company A" to acquire us for
$12 per share, $10 of which would be in cash and $2 of which would be in equity
in the merged entity.
On January 24, 2000, the board met telephonically with Prudential
Securities to review our strategic alternatives. The board believed that the
aggregate market value of our shares did not reflect the full value of our
portfolio. The board also believed that if we continued our existing business
and made new investments, we would continue to encounter the same difficulties
that we currently faced, including our inability to obtain new financing or
raise new equity, and that the dichotomy between our share price and the net
value of our assets would be perpetuated. The board further believed that the
real estate market had reached a point in its cycle that made our investment
strategy more risky given our relatively small asset base. In addition, the
board believed that shareholders would be better served by receiving cash
proceeds rather than shares in a merger or other combination with another
company, which would in effect be a risky investment alternative with no
guarantee of success. Representatives of Prudential Securities informed the
board that they believed that they had discussed, or were discussing, a
transaction involving us on a confidential basis with all of the entities that
would reasonably be likely to engage in a transaction with us. Representatives
of Prudential Securities then reviewed with the board its analysis of the 16
preliminary indications of interest received to date. In light of the board's
belief that a transaction maximizing cash distributions to shareholders was in
our shareholders' best interests, the board focused on the indication of
interest from company A. Prudential Securities informed the board that company A
had requested that we enter into an "exclusivity" agreement under which we would
be prevented from initiating or encouraging proposals from third parties. The
board considered the proposal in comparison to a liquidation. The principal
factors considered by the board included the proposed price per share, the
valuation of the equity, the relatively short time frame in which shares would
be acquired, and the related transaction costs, as opposed to the possibility of
a lengthier pay-off or disposition of assets in a liquidation and the additional
administrative costs under a liquidation plan. The board authorized management
and Prudential Securities to commence the negotiation of an exclusivity
agreement.
On February 3, 2000, we entered into an exclusivity agreement with
company A under which we agreed that until February 21, 2000 we would not
initiate or encourage proposals from third parties. We also agreed that during
this period we would not accept any offer to buy us unless the offer, if
consummated, would result in a transaction more favorable to our shareholders
than the transaction with company A. If we determined to accept such a superior
proposal, we agreed to reimburse company A for the expenses it incurred in
connection with the negotiation of a definitive agreement and its due diligence
investigation up to $300,000. This agreement expired by its terms on February
21, 2000 without the parties entering into a definitive agreement or making any
payments to the other party.
By letter dated February 23, 2000, company A reduced the cash component
of its offer to $8 per share. Company A's offer also included $2 in common
shares of the merged entity and up to $2 per share in the form of a liquidating
security of the merged entity. Payments on the liquidating security would be
made depending on the performance of some of our mortgage loans as specified in
company A's offer.
On February 24, 2000, the board met with its financial and legal
advisors to consider company A's revised proposal. The board again considered
the proposal in comparison to a liquidation. Management and Prudential
Securities reviewed with the board analyses of the values that might be realized
by shareholders in both a transaction with company A and a liquidation. These
analyses indicated that the value for our assets through the sale of some assets
over a period of time and the winding down of our operations through the pay-off
of our other assets should be higher than the value that company A placed on our
assets in the amended proposal. These analyses included estimates by management
as to potential sales prices and pay-off amounts based on capitalization rates
that were considered
10
<PAGE> 16
reasonable by management based on their experience in the industry for owned
real estate assets, and estimates of proceeds from pay-offs of loans and sales
of our commercial mortgage-backed securities and partnership investments.
Representatives of Prudential Securities also informed the board that they
believed that it was unlikely that we would be successful in generating any cash
equivalent offers in excess of $11 per share. Based on these factors, the board
determined that a liquidation was more likely to provide shareholders with
greater return on their investment than they would receive in company A's
proposal and authorized management to commence the preparation of a plan of
liquidation and dissolution. The board also authorized Prudential Securities to
continue to discuss a possible transaction to maximize shareholder return with
third parties who may remain interested in such a transaction. Also at this
meeting, the board of trust managers approved the marketing and sale of our
non-core assets, including our commercial mortgage-backed securities and our
equity investments in real estate.
Over the next several weeks, management and our legal advisors prepared
a plan of liquidation and dissolution. In addition, management provided to the
board and Prudential Securities a further analysis of potential proceeds from a
liquidation, which indicated liquidation proceeds to shareholders of between
$12.60 and $13.10 per share.
On March 29, 2000, the board met with its financial and legal advisors.
Prudential Securities reported that no new indications of interest had been
received and that none of the existing bidders had increased their original
offers. The board reviewed the terms of the plan of liquidation and dissolution
and discussed various aspects of the trust managers' fiduciary duties in the
context of a liquidation. Following further discussion, the board unanimously
approved the complete liquidation and dissolution under the terms and conditions
set forth in the plan of liquidation.
REASONS FOR THE LIQUIDATION AND DISSOLUTION AND RECOMMENDATION OF THE BOARD OF
TRUST MANAGERS
THE BOARD OF TRUST MANAGERS HAS UNANIMOUSLY DETERMINED THAT THE
LIQUIDATION AND DISSOLUTION IS IN OUR AND OUR SHAREHOLDERS' BEST INTERESTS, HAS
APPROVED AND ADOPTED THE PLAN OF LIQUIDATION AND DISSOLUTION AND UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE LIQUIDATION AND
DISSOLUTION.
Our board and management have from time to time reviewed our strategic
position and our short-term and long-term prospects. In particular, adverse
developments in the markets for commercial mortgage-backed securities, REIT
stocks in general and our shares in particular have made it more difficult for
us to enhance shareholder value by growing our business as an independent
entity. The board also believes that we will continue to experience difficulties
in obtaining new debt or equity financing at a reasonable cost. Therefore, our
board and senior management believe that the liquidation and dissolution is the
best alternative available to maximize shareholder value.
In deciding whether to approve the plan of liquidation and dissolution,
the board considered a number of factors, including the following:
1. The board does not believe that our original business strategy
is a viable option for a number of reasons, including the
following:
o The board believes that the continued weakness in the
equity markets for REITs forecloses any reasonable
possibility of raising additional equity without
significantly reducing returns to current
shareholders and diluting shareholder value.
o We would require additional credit if we were to
pursue our original business strategy. In the current
market environment, obtaining additional credit
facilities appears to be more difficult and expensive
than we contemplated at the time we developed our
business strategy. An increase in our borrowing costs
would adversely affect our ability to maintain
attractive spreads between our cost of capital and
our return on investments.
o The board believes that the market opportunities that
led to our formation in January 1998 have diminished
to a point that continuing our original business plan
would carry substantially increased risks with
substantially diminished prospective returns. Market
demand for our assets has failed to return to the
levels seen prior to the unexpected and
11
<PAGE> 17
severe widening of mortgage-related credit spreads in
the third quarter of 1998. Even if market conditions
improve, we would continue to face the risk that a
repeat occurrence of widening spreads could cause
losses and further erode shareholder value.
o The board does not believe that we have been able to
attract substantial interest from the investment
community. The board bases this belief principally on
the fact that the average daily trading volume for
our shares during 1999 and the first two months of
2000 was 30,110 shares.
o The board also believes that the modest public float
for our shares limits the attractiveness of our
shares to investors, particularly institutional
investors that prefer to invest in large increments
in a float that presents greater liquidity.
o As a result of our being a small capitalization,
externally managed mortgage REIT with credit
sensitive investments, the board does not believe
that our shares are likely to trade at a significant
premium to the book value of our assets. The board
also does not believe that the aggregate market value
of our shares of approximately $95 million at March
29, 2000 reflects the full value of our portfolio.
The disparity between our market value and the net
value of our portfolio has persisted despite our
paying a growing dividend stream and our other
attempts to improve shareholder value. The board
believes that we would continue to face the same
difficulties we currently face if we were to continue
our current business strategy, and that the dichotomy
between our share price and the value of our net
assets would continue.
2. The board also does not believe that retaining our current
assets and operating under a modified business strategy is an
acceptable alternative. The board believes that a
publicly-traded REIT is no longer an efficient and attractive
vehicle with which to pursue the opportunities in the
commercial mortgage and commercial mortgage-backed securities
markets. The additional equity and debt capital necessary to
pursue this strategy is not available to publicly-traded
REITs, the shares of which continue to trade at discounts to
their net asset values. For the reasons discussed above,
without additional equity capital, the board believes that it
would be difficult and expensive for us to support a revised
strategy.
3. The board believes that a merger in which our shareholders
receive shares in another company is not an attractive option.
This would require you to accept the acquirer's investment
strategy. This would also subject you to risks associated with
the valuation of an acquirer's shares. Based on the results of
the solicitation process conducted by Prudential Securities on
our behalf and our experience in evaluating and negotiating
potential merger transactions, the board believes that any
potential merger transaction, whether you were to receive
shares in another company and/or cash, would not provide you
with a meaningful premium over our net asset value and
therefore offers few advantages over the liquidation and
dissolution.
4. We anticipate that you will receive total distributions of
between $12.60 to $13.10 per share as a result of the
liquidation. The board believes that this exceeds the value of
the consideration to be offered to you in any of the proposals
we have received from third parties.
5. The board has retained the right to abandon the liquidation
and has the flexibility to entertain business combination
offers. The board intends to do so if it believes that such a
transaction would maximize shareholder value.
In addition to these factors, the board also considered the potential
adverse impact of other factors on the proposed liquidation and dissolution.
These included the following:
1. There could be no assurance that we would be successful in
disposing of our assets for values equal to or exceeding those
currently estimated or that these dispositions would occur as
early as we expected.
12
<PAGE> 18
2. It is possible that the liquidation may not yield
distributions as great as or greater than the recent market
prices of our shares and distributions may not be effected for
a significant amount of time.
3. As opposed to a business combination with a relatively short
time frame during which a third party would acquire us, the
liquidation process would involve a longer pay-off process and
would require us to incur potentially larger administrative
costs.
4. The receipt of liquidating distributions will be a taxable
event for shareholders.
5. It is likely that the liquidity and price of our shares will
decrease as we pay distributions to shareholders.
The foregoing discussion of the information and factors discussed by
the board is not meant to be exhaustive, but is believed to include all material
factors considered by the board. The board did not quantify or attach any
particular weight to the various factors that it considered in approving the
plan of liquidation and dissolution. Rather, the board viewed its position and
recommendation as being based on the totality of the information presented to
and considered by it. In addition, individual members of the board may have
given different weights to different factors. However, in the view of the board,
the potentially negative factors considered by it did not outweigh the benefits
and advantages of the liquidation and dissolution.
If shareholders do not approve the liquidation and dissolution or the
dissolution is not consummated for any reason, we will either return to
executing our strategy of taking advantage of mid- to high-yield investment
opportunities in real estate related assets or such other business strategy as
the board then determines to be in the best interests of our shareholders. To
the extent opportunities are available, we may consider potential business
combinations with public or private entities or other alternative strategies
that our board and management believe are in our and our shareholders' best
interests.
INTERESTS OF SOME OF OUR TRUST MANAGERS, EXECUTIVE OFFICERS AND AFFILIATES IN
THE LIQUIDATION AND DISSOLUTION
In considering the recommendation of the board of trust managers with
respect to the liquidation and dissolution, you should be aware that some trust
managers, executive officers and affiliates have interests in the liquidation
and dissolution that are different from or in addition to your interests as
shareholders. Our board was aware of these interests and considered them, along
with other matters, in approving the plan of liquidation and dissolution.
AMENDMENT OF THE MANAGEMENT AGREEMENT
Subject to the direction and oversight of the board of trust managers,
our day-to-day operations and investment activities are currently managed by
AMREIT Managers, L.P., an affiliate of AMRESCO, INC., under the terms of a
management agreement. On March 29, 2000, the board of trust managers approved
modifications to AMREIT Managers' compensation in response to our changed
business strategy. The new fee structure eliminates both incentive fee
compensation and termination fees. In addition to receiving a base management
fee, AMREIT Managers will be reimbursed for any of its quarterly operating
deficits beginning on April 1, 2000. See "Certain Relationships and Related
Transactions -- The manager."
The following table summarizes the positions held by persons who also
held officer and/or director positions in AMRESCO Capital Trust and AMRESCO,
INC.
<TABLE>
<CAPTION>
NAME POSITION IN AMRESCO CAPITAL TRUST POSITION IN AMRESCO, INC.
- ---- --------------------------------- -------------------------
<S> <C> <C>
Robert L. Adair III Chairman of the Board of Trust Managers and Director, President and Chief Operating
Chief Executive Officer Officer until March 31, 2000
Robert H. Lutz, Jr. Trust Manager Chairman of the Board until March 31, 2000
and current Chief Executive Officer
</TABLE>
13
<PAGE> 19
BENEFITS TO EXECUTIVE OFFICERS
Two of our executive officers have entered into retention arrangements
with AMRESCO, INC. These arrangements are summarized below.
If the employment of either David M. Striph, our Executive Vice
President and Chief Investment Officer, and Thomas R. Lewis II, our Senior Vice
President, Chief Financial and Accounting Officer and Controller is terminated
without cause prior to January 1, 2001, the terminated officer will receive a
lump sum payment equal to his base salary plus, if he is terminated without
cause or the termination is related to a change of control, the product of the
following:
o two times the sum of (a) his base salary plus (b) the
incentive compensation he was paid relating to the services he
provided to us during 1999; multiplied by
o a fraction, the numerator of which is 731 minus the number of
days between January 1, 2000 and the date of termination and
the denominator of which is 731.
If either Mr. Striph's or Mr. Lewis's employment is terminated after
December 31, 2000 and prior to January 1, 2002, the terminated officer will
receive a lump sum payment equal to two times his base salary plus, if he is
terminated without cause or the termination is related to a change of control,
the sum of his base salary and the incentive compensation he was paid relating
to the services he provides to us during 2000.
In addition, beginning as of January 1, 2000, Mr. Striph will be
entitled to receive incentive compensation using a formula that is based upon
the performance of all of our loans and real estate investments excluding
commercial mortgage-backed securities.
SUMMARY OF THE PLAN OF LIQUIDATION AND DISSOLUTION
We believe that this summary describes the material terms of the plan
of liquidation and dissolution. However, we recommend that you read carefully
the complete plan for the precise legal terms of the plan and other information
that may be important to you. The plan of liquidation and dissolution is
included in this document as Annex A.
The plan of liquidation and dissolution provides for our complete
liquidation and dissolution in accordance with the requirements of the Texas
Real Estate Investment Trust Act and the Internal Revenue Code. Because the plan
contemplates the disposition of all of our assets and the distribution of the
net proceeds to shareholders, and because the terms of such dispositions have
not yet been determined, we do not believe that pro forma financial information
concerning the plan would be meaningful.
OPERATIONS
If the liquidation and dissolution proposal is approved at the meeting,
we will cease conducting normal business operations, except as may be required
to wind-up our business and affairs, and proceed with the liquidation and
dissolution. We will continue our existence, but solely for the purpose of
managing our investments, providing for the satisfaction of our obligations,
adjusting and winding-up our business and affairs and distributing our remaining
assets. One or more liquidating distributions from our assets will be
conditioned upon setting aside a sufficient amount of money to meet any residual
obligation or liability that we have not otherwise met. We will not obtain any
further approvals of shareholders. We will satisfy, or provide for the
satisfaction of, all of our legally enforceable claims, liabilities or
obligations in an orderly manner.
AMENDMENT AND TERMINATION OF THE PLAN
If the board determines that it is in our and our shareholders' best
interests, the board may amend or modify the plan without further shareholder
approval, except as required by applicable law. Also, if prior to the filing of
the articles of dissolution, whether before or after shareholder approval, the
board determines that liquidation and dissolution are not in our and our
shareholders' best interests, the board may abandon and revoke the dissolution
without further shareholder action. If the board so abandons the dissolution, we
may, without further shareholder
14
<PAGE> 20
approval, sell some of our remaining assets if the board determines that this
action is in our and our shareholders' best interests. However, we may not
consummate the sale of all or substantially all of our assets without
shareholder approval as required by the Texas Real Estate Investment Trust Act
and our declaration of trust.
TRUST MANAGERS AND OFFICERS
We anticipate that our current trust managers and officers will
continue to serve in these capacities after approval of the liquidation and
dissolution proposal. Trust managers remaining in office will continue to
receive fees in accordance with our compensation policies.
We will also reserve sufficient assets and/or obtain and maintain
insurance as may be necessary to provide for the continued indemnification of
our trust managers, officers and agents to the full extent provided in our
declaration of trust and bylaws, any existing indemnification agreements and
applicable law. We expect that such insurance will include coverage for periods
after the termination of any liquidating trust, and would include coverage for
trustees, employees and agents of such liquidating trust.
TERMINATION OF OUR MANAGEMENT AGREEMENT
Upon filing of the articles of dissolution, our management agreement
with AMREIT Managers, L.P. will be terminated. See "Certain Relationships and
Related Transactions-- The manager."
TERMINATION OF REIT STATUS
Under the plan, the trust managers are authorized, in their discretion,
to choose to maintain our existence as a real estate investment trust for the
purposes of winding up our affairs. Although we expect that we will continue to
be able to meet the REIT requirements, there can be no assurance that we will be
able to do so. See "Material federal income tax consequences of the dissolution
and liquidation."
CONTINGENCY RESERVE
Under Texas law, we are required, in connection with the dissolution,
to apply our assets, as far as such property will go, to the just and equitable
payment of all of our liabilities and obligations. If the liquidation and
dissolution proposal is approved at the meeting, the board of trust managers has
determined to establish a reserve for contingencies of approximately $2,000,000.
The board believes that this reserve, together with cash flow from operations
and other cash on hand, should enable us to operate until dissolution and to
satisfy our liabilities, expenses, and obligations not otherwise paid, provided
for or discharged as they become due and payable.
The amount of the contingency reserve is based upon our estimates
derived from consultations with our manager and outside advisors and a review of
our estimated expenses and actual and contingent liabilities and obligations.
There can be no assurance that the contingency reserve will be sufficient to
cover such expenses, liabilities and obligations. Subsequent to the
establishment of the contingency reserve, we may from time to time distribute to
shareholders such portions of the contingency reserve that the board deems to be
no longer required. After the expenses, liabilities and obligations for which
the contingency reserve has been established are believed by the board to have
been satisfied in full, we will distribute to our shareholders any remaining
funds in the contingency reserve.
LIQUIDATING TRUST
If all of our assets are not sold or distributed prior to the second
anniversary of the approval of the liquidation and dissolution by shareholders,
or if unpaid claims, liabilities and other obligations remain outstanding, we
may transfer any assets not sold or distributed, including any contingency
reserve or other cash on hand, to a liquidating trust. If we establish a
liquidating trust, we would distribute to the then holders of our common shares
beneficial interests in the liquidating trust in proportion to the number of
common shares owned by such holders. The sole purpose of the liquidating trust
will be to liquidate any remaining assets on terms satisfactory to the
liquidating trustees and, after paying any of our remaining liabilities,
distribute the proceeds of the sale of assets formerly owned by us to the
holders of the interests in the liquidating trust. The liquidating trust will be
obligated to pay any of our expenses
15
<PAGE> 21
and liabilities that remain unsatisfied. Approval of the liquidation and
dissolution will constitute the approval by shareholders of the establishment of
a liquidating trust, its appointment of one or more individuals, who may or may
not be former trust managers, or corporate persons to act as trustee or trustees
and the terms of any liquidating trust agreement adopted by the board. We do not
anticipate that interests in the liquidating trust will be freely transferable.
Therefore, the recipients of interests in the liquidating trust will not realize
any value from these interests unless and until the liquidating trust
distributes cash or other assets to them, which will be solely in the discretion
of the trustees.
Any plan to transfer assets to a liquidating trust is only a
contingency plan to provide for the possibility that all of our assets are not
liquidated during a two-year period. Therefore, the board has not determined the
detailed terms or structure for a liquidating trust. The characteristics of any
liquidating trust will be determined by the board at a future date depending on
factors such as the number and value of assets to be held by the liquidating
trust and the number of holders of interests in the liquidating trust.
DISSOLUTION
After all of our assets have been liquidated, all our known and
contingent debts, liabilities and obligations have been paid and discharged, or
adequate provision has been made for such amounts, and all net proceeds have
been distributed to or for the benefit of shareholders, we will file articles of
dissolution with the County Clerk of Dallas County, Texas. Upon the filing of
articles of dissolution, we will cease to exist as a legal entity and will be
dissolved and terminated. Our share record books will be closed as of the close
of business on the date the Dallas County Clerk accepts the filing of our
articles of dissolution. After this time, we will not record any assignment or
transfer of our common shares, except for those occurring by will, intestate
succession or operation of law.
TRANSFERABILITY OF SHARES; NASDAQ LISTING
Prior to the filing of the articles of dissolution, our common shares
will continue to be transferable, and shareholders will continue to have the
rights that applicable law and our declaration of trust confer on shareholders.
We anticipate that the market price of our common shares may decline as we make
liquidating distributions to shareholders. We currently intend to maintain the
listing of our common shares on the Nasdaq Stock Market until the shares are no
longer eligible for listing.
EXPECTED DISTRIBUTIONS
Under the terms of the plan of liquidation and dissolution and Texas
law, after the sale or other liquidation of our assets, and after applying such
property as far as it will go to the just and equitable payment of our
obligations and liabilities, we will distribute to shareholders our remaining
property and assets in cancellation of all of our outstanding capital shares.
All distributions will be paid pro rata in accordance with shareholders'
respective rights and interests to shareholders of record at the close of
business on the record dates to be determined by the board.
Immediately after the meeting, if shareholders approve the liquidation
and dissolution, we intend to proceed with the collection of our outstanding
mortgage loans and the sale of our other assets as expeditiously as possible.
For the most part, we anticipate that this will take place over the next 18 to
24 months through scheduled loan pay-offs in accordance with the loan documents.
We also anticipate selling our equity interests in real estate and commercial
mortgage-backed securities. Although we cannot be sure of the amounts, we
currently expect that you will receive cash distributions in the total amount of
about 12.60 to $13.10 per share. This would result in total distributions since
our inception of approximately $14.90 to $15.40 per share, including dividends
paid to date. We also cannot be certain of the timing of distributions, but we
anticipate making our first liquidating distribution during the second half of
2000 after we repay any amounts due on our outstanding credit facilities. We
plan to then collect payments on any remaining mortgage loans and sell any
remaining assets as opportunities arise in the best interests of shareholders,
and anticipate distributing the net proceeds to our shareholders through
additional cash distributions.
The amount and timing of the distributions represent our current
estimates. It is not possible to determine with certainty the aggregate net
proceeds that may ultimately be available for distribution to shareholders. The
actual amount and timing of, and record dates for, shareholder distributions
will be determined by the board of trust managers in its sole discretion and
will depend upon the timing and receipt of loan pay-offs and proceeds of the
sale
16
<PAGE> 22
of our remaining assets and the amounts deemed necessary by the board to pay or
provide for all of our liabilities and obligations.
We have established targeted amounts for the loan pay-offs and the
sales prices of our other assets. However, there can be no assurance that any or
all of the loans will be paid off for these amounts or at all or that any or all
of our other assets will be sold at the targeted sales prices or at all. The
amount of the proceeds we receive from the liquidation is dependent upon a
number of conditions, many of which are beyond our control, including market
conditions and actions by third parties. Therefore, loans may be paid off and
other assets may be sold at amounts that may not necessarily be equal to or
greater than their book value.
To estimate the amounts that may be available for distribution from the
liquidation proceeds, management estimated costs of the liquidation and
dissolution. Management also estimated general and administrative costs during
the liquidation process. Payment of the distributions is in each case subject to
the payment or provision for payment of our obligations, expenses to the extent
not assumed by any purchasers of our assets and any tax liabilities. We do not
plan to satisfy all of our liabilities and obligations prior to making
distributions to shareholders. Instead, we will reserve assets deemed to be
adequate to satisfy such liabilities and obligations. See "Contingency reserve"
and "Liquidating trust." We believe that we will have sufficient cash to pay all
of our current and accrued obligations as a result of cash flow from operations,
loan repayments and asset sales. However, if contingent or unknown liabilities
exist, distributions to shareholders may be reduced or delayed. Also, claims,
liabilities and expenses will continue to accrue following approval of the
liquidation and dissolution, and we anticipate that expenses for professional
fees and other expenses of liquidation will be significant. These expenses will
reduce the amount of cash available for ultimate distribution to shareholders.
The final distribution will be in complete redemption and cancellation
of our outstanding shares. Upon such final distribution, you may be required to
surrender your share certificates. If we cannot make distributions to a
shareholder because mail is not deliverable to the last known address of that
shareholder on the shareholder list we maintain, we will hold the funds subject
to unclaimed funds or escheat statutes of the state of such shareholder's last
known address. If such state does not have an escheat law, the law of Texas will
govern. If a shareholder does not claim such funds within the statutory period,
such funds may escheat to the state.
If we make distributions to shareholders without payment of or adequate
provision for our obligations, each shareholder could be personally liable for
up to the amount of the total liquidating distributions such shareholder
received.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE LIQUIDATION AND DISSOLUTION
The following discussion is a summary of the material federal income
tax consequences to the shareholders relevant to the plan of liquidation and
dissolution. This discussion does not deal with all of the tax consequences of
the liquidation and dissolution that may be relevant to every shareholder and is
not intended as a substitute for careful tax planning. YOU SHOULD THEREFORE
CONSULT WITH YOUR OWN TAX ADVISORS AS TO THE TAX CONSEQUENCES ASSOCIATED WITH
IMPLEMENTATION OF THE LIQUIDATION AND DISSOLUTION UNDER APPLICABLE FEDERAL,
STATE, LOCAL AND FOREIGN TAX LAWS.
The discussion of tax consequences that follows is based on current
provisions of the Internal Revenue Code and its legislative history, existing,
temporary and currently proposed treasury regulations, existing administrative
rulings and practices of the Internal Revenue Service and judicial decisions in
effect on the date of this document. All of these are subject to change at any
time, and any such change may be applied retroactively. Thus, no assurance can
be given that legislative, judicial or administrative changes will not affect
the accuracy of this discussion, possibly on a retroactive basis. In addition,
we have not requested and do not plan to request any rulings from the Internal
Revenue Service with respect to the tax consequences of the plan of liquidation
and dissolution. Accordingly, no assurance can be given that the statements set
forth in this discussion, which do not bind the Internal Revenue Service or the
courts, will not be challenged by the Internal Revenue Service or sustained by
the courts if so challenged.
17
<PAGE> 23
TAX CONSEQUENCES TO AMRESCO CAPITAL TRUST
For federal income tax purposes, we are taxed as a REIT under sections
856 through 860 of the Internal Revenue Code. As such, we generally are entitled
to a deduction for all dividends we pay to our shareholders for a taxable year.
As a result, as a practical matter we are not subject to federal income taxation
with respect to our distributed income. If the liquidation and dissolution is
adopted by the shareholders, we currently contemplate that we will continue to
qualify as a REIT prior to the final distribution of assets. However, in order
for us to continue to qualify as a REIT, we must satisfy a number of asset,
income and distribution tests, and there can be no assurances that we will be
able to satisfy these tests throughout the period during which we would
liquidate our assets.
Asset test. To qualify as a REIT for federal income tax purposes, at
least 75% of the value of our assets at the close of each quarter of our taxable
year must be represented by real estate assets, cash, cash items, including
receivables arising in the ordinary course of our operations, and government
securities. We may not have more than 25% of our total assets represented by
non-government securities, except securities that constitute "real estate
assets" for this purpose. In connection with investments in non-government
securities, we may not do the following:
o under current law, invest more than 5% of the value of our
total assets in non-government securities of any one issuer
and we may not hold more than 10% of the voting securities of
any one issuer;
o for the tax years beginning after December 31, 2000, invest
more than 20% of the value of our total assets in one or more
corporations, other than a real estate investment trust,
pursuant to which we and such corporation(s) have jointly
elected that such corporation(s) will be treated as a taxable
REIT subsidiary;
o for the tax years beginning after December 31, 2000, invest
more than 5% of the value of our total assets in
non-government securities of any one issuer, unless the issuer
is a taxable REIT subsidiary;
o for the tax years beginning after December 31, 2000, hold more
than 10% of the outstanding voting securities, or 10% of the
total value of outstanding securities of any one issuer unless
we hold all of the securities of such issuer, unless the
issuer is a taxable REIT subsidiary.
Income tests. We must also meet two tests relating to the source of our
income. First, at least 75% of our gross income for each year must be derived
from rents from real property, interest on obligations secured by mortgages on
real property, and other sources directly related to real estate activities.
Second, at least 95% of our gross income must be derived from the sources
described in the preceding sentence and from dividends, interest and gains from
sales or dispositions of stock or securities.
Distributions. The REIT provisions of the Internal Revenue Code also
require that we distribute 95% of our REIT taxable income, determined without
regard to the dividends paid deduction, which is discussed below, and excluding
any net capital gain, to our shareholders each taxable year. This percentage
drops to 90% in tax years beginning after December 31, 2000.
Liquidation period. We anticipate that we would remain qualified under
the foregoing tests throughout the period of the liquidation of our assets.
However, given the changes in the nature of our assets and in our sources of
income that could result from dispositions of assets in the liquidation process
and the need to retain assets to meet liabilities, there can be no assurance
that we will continue to meet the qualification tests. If we cease to qualify as
a REIT for any taxable year, we would not be entitled to deduct dividends paid
to our shareholders from our taxable income. In this case, we would be liable
for federal income taxes with respect to our gains from sales of assets and our
income from operations for that year and for subsequent taxable years. These
federal income taxes would reduce the amounts otherwise distributable to our
shareholders.
To be entitled to a deduction for the amount distributed to our
shareholders for a tax year, referred to as a "dividends paid deduction," a
REIT's distributions must qualify as "dividends." Distributions in liquidation
of a corporation, however, are generally treated as being in full payment of a
shareholder's interest in the corporation, rather than as dividends.
Nevertheless, in the context of the liquidation of a REIT, section 562(b) of the
Internal Revenue Code provides a special rule that classifies liquidating
distributions as dividends solely for purposes of the dividends paid deduction
if specified conditions are met. In particular, section 562(b) provides that, if
a REIT is liquidated within
18
<PAGE> 24
the 24-month period following the adoption of a plan of liquidation,
distributions pursuant to such plan will, to the extent of the distributing
corporation's earnings and profits, computed without regard to capital losses,
for the year of the distribution, be treated as dividends for purposes of
computing the corporation's dividends paid deduction.
Approval of the liquidation and dissolution proposal by shareholders
would constitute the adoption of a plan of liquidation for purposes of section
562(b) of the Internal Revenue Code. We anticipate that we will completely
liquidate within 24 months of the approval of the liquidation and dissolution
proposal so as to take advantage of section 562(b), but no assurance can be
provided that this timetable will in fact be met. For instance, we may not be
able to sell our assets at acceptable prices during this period. As the end of
the 24-month period approaches, we intend to evaluate the then existing
situation and consider whether distribution of our remaining assets and
liabilities to a liquidating trust would be appropriate, or whether existing
circumstances indicate that the shareholders would be better served by a course
of action that might forego the benefits of section 562(b).
Although section 562(b) may treat liquidating distributions as
dividends, it only does so "to the extent of the earnings and profits (computed
without regard to capital losses) of the corporation for the taxable year of the
distribution." Section 562(e) of the Internal Revenue Code provides that, for
purposes of determining a REIT's dividends paid deduction, a REIT's earnings and
profits for a taxable year are to be increased by the total amount of gain
recognized on the sale or exchange of real property during that year. Thus, we
should have sufficient earnings and profits to allow distribution of such gain
on sale to qualify as a dividend. We intend to use our best efforts to
distribute sufficient amounts to shareholders each year during the liquidation
period so that we would remain qualified as a REIT under the rules described
above. In this case, we would not have any REIT taxable income as a result of
the proposed liquidation.
Prohibited transactions. REITs also are subject to a 100% excise tax on
any gain from "prohibited transactions." The term "prohibited transaction" means
the sale or other disposition of property that would properly be included in
inventory or is held primarily for sale to customers in the ordinary course of
the REIT's trade or business. The determination of whether property would
properly be included in inventory or is held primarily for sale to customers in
the ordinary course of the REIT's trade or business is inherently factual in
nature and thus cannot be predicted with certainty. Whether property is held as
inventory or held primarily for sale to customers in the ordinary course of a
trade or business depends on the facts and circumstances.
The Internal Revenue Code provides a "safe harbor" provision under
which, if all of its conditions are met, property sales would be protected from
being considered prohibited transactions. One of these conditions is that the
seller must have held the asset for at least four years. Since we have not held
any of our assets for at least four years, we do not expect to be able to
satisfy the safe harbor provisions with respect to the sales of our assets in
the liquidation. However, we believe that, based on the facts and circumstances,
we do not hold any of our assets as inventory or for sale to customers. We
therefore believe that a sale of any such asset pursuant to the plan of
liquidation and dissolution will not be considered a sale in the ordinary course
of our business. Accordingly, asset sales pursuant to the plan should not be
subject to the 100% "prohibited transactions" tax.
CONSEQUENCES TO SHAREHOLDERS
We believe that the distributions of proceeds of sales of properties,
if any, to shareholders pursuant to the plan would be treated as distributions
in a complete liquidation. In this case, distributions would not be treated as
dividends received by a shareholder, but rather as if the shareholder had sold
its shares. Also in this case, a shareholder would recognize gain or loss with
respect to each share held by the shareholder, measured by the difference
between:
o the total amount of cash and fair market value of other
property, if any, received by the shareholder with respect to
such share pursuant to the plan; and
o the shareholder's basis in that share.
The consequences to shareholders if we transfer assets to a liquidating
trust is discussed below under "Liquidating trust."
19
<PAGE> 25
If a shareholder holds blocks of shares acquired at different times or
at different costs, each liquidating distribution would be allocated ratably
among the various blocks of shares, and gain or loss would be computed
separately with respect to each block of shares.
Gain or loss recognized by a shareholder would be capital gain or loss
if the shares are held by the shareholder as capital assets. Capital gain or
loss would be long-term if the shares were held for more than 12 months.
Corporate shareholders may deduct capital losses in the year recognized only to
the extent of capital gains recognized during such year. Unused capital losses
of a corporation may be carried back three years and forward for five years, but
may not be carried to any year in which they would create or increase a net
operating loss. Individual shareholders may deduct capital losses to the extent
of their capital gains, plus $3,000. Any unused capital loss may be carried
forward indefinitely by individual taxpayers until the individual recognizes
sufficient capital gains to absorb them or recognizes such losses at the rate of
up to $3,000 per year. Capital losses may not be carried back by an individual.
If approved, the liquidation and dissolution could result in more than
one liquidating distribution to the shareholders. Each liquidating distribution
would be first applied against the adjusted tax basis of each of a shareholder's
shares and gain would be recognized with respect to a share only after an amount
equal to the adjusted tax basis of such share has been fully recovered. Any
losses with respect to a share could be recognized by a shareholder only after
we have made our final distribution, if any, or after the last substantial
liquidating distribution was determinable with reasonable certainty. As a
consequence of the foregoing, shareholders that would realize losses under the
plan would likely be prevented from recognizing such losses until the receipt of
the final distribution.
LIQUIDATING TRUST
If we are not able to dispose of all of our assets within 24 months
after shareholder approval of the liquidation and dissolution, or if it is
otherwise advantageous or appropriate to do so, the board may establish a
liquidating trust to which we could distribute in kind our unsold assets. In any
event, even if we dispose of all of our assets within such 24-month period, it
might be necessary to establish a liquidating trust to retain cash reserves
beyond such 24-month period to meet our contingent liabilities. Under the
Internal Revenue Code, a trust will be treated as a liquidating trust if it is
organized for the primary purpose of liquidating and distributing the assets
transferred to it, and if its activities are all reasonably necessary to and
consistent with the accomplishment of that purpose. However, if the liquidation
is prolonged or if the liquidation purpose becomes so obscured by business
activities that the declared purpose of the liquidation can be said to be lost
or abandoned, it will no longer be considered a liquidating trust. Although
neither the Internal Revenue Code nor the regulations thereunder provide any
specific guidance as to the length of time a liquidating trust may last, the
Internal Revenue Service's guidelines for issuing rulings with respect to
liquidating trust status call for a term not to exceed three years, which period
may be extended to cover the collection of installment obligations.
An entity classified as a liquidating trust may receive assets,
including cash, from the liquidating entity without incurring any tax. It will
be treated as a grantor trust, and accordingly will also not be subject to tax
on any income or gain recognized by it. Instead, each beneficiary will be
treated as the owner of its pro rata portion of each asset, including cash,
received by and held by the liquidating trust. Accordingly, if the proposal for
liquidation and dissolution is approved and if we ultimately employ a
liquidating trust, each shareholder would be treated as having received a
liquidating distribution equal to its share of the amount of cash and the fair
market value of any asset distributed to the liquidating trust and generally
would recognize gain to the extent such value was greater than its basis in its
shares, notwithstanding that it may not contemporaneously receive a distribution
of cash or any other assets with which to satisfy the resulting tax liability.
In addition, each shareholder would be required to take into account in
computing its own taxable income its pro rata share of each item of income, gain
and loss of the liquidating trust. Since shareholders would be treated as owning
their respective shares of the liquidating trust's assets, they would be treated
as directly engaging in the operations of the trust. As such, shareholders that
are tax-exempt entities may realize "unrelated business taxable income" with
respect to the trust's activities and foreign investors may be considered to
receive income that is "effectively connected" with a U.S. trade or business. A
full discussion of the consequences to tax-exempt and foreign shareholders of
using a liquidating trust is beyond the scope of this document and any such
shareholder should consult its own tax advisors.
An individual shareholder who itemizes deductions would be entitled to
deduct its pro rata share of fees and expenses of the liquidating trust only to
the extent that such amount, together with the shareholder's other miscellaneous
deductions, exceeded 2% of its adjusted gross income. A shareholder would also
recognize taxable gain
20
<PAGE> 26
or loss when all or part of its pro rata portion of an asset is disposed of for
an amount greater or less than its pro rata portion of the fair market value of
such asset at the time it was transferred to the liquidating trust. Any such
gain or loss would be capital gain or loss so long as the shareholder held its
interest in the assets as a capital asset.
If a liquidating trust fails to qualify as such, its treatment will
depend upon, among other things, the reasons for its failure to so qualify. It
most likely would be taxable as a corporation. In such case, the liquidating
trust itself would be subject to tax, and shareholders could also be subject to
tax upon the receipt of certain distributions from the liquidating trust. If the
board determines to make use of a liquidating trust, it is anticipated that
every effort will be made to ensure that the trust will be classified as a
grantor trust for federal income tax purposes.
TAXATION OF NON-UNITED STATES SHAREHOLDERS
Because liquidating distributions pursuant to the plan would be treated
as paid in exchange for a shareholder's shares and not as dividends, no
withholding on liquidating distributions would generally be required because of
the Foreign Investment in Real Property Tax Act, commonly known as "FIRPTA."
However, if our shares were to constitute United States real property
interests in the hands of a non-U.S. shareholder, we would be required under
section 1445(e)(3) of the Internal Revenue Code to withhold 10% of the gross
amount of each liquidating distribution to such shareholder, even if the
shareholder recognizes a loss on the distribution. In addition, the non-U.S.
shareholder would be subject to regular U.S. income tax with respect to any gain
or loss realized on the deemed sale of such shares resulting from the receipt of
liquidating distributions, subject to any applicable alternative minimum tax, a
special alternative minimum tax in the case of nonresident alien individuals,
and the possible application of the 30% "branch profits" tax in the case of
entities treated as foreign corporations for U.S. federal income tax purposes.
If our shares are regularly traded on an established securities market
at any time during the calendar year, the shares will not constitute United
States real property interests with respect to any shareholder in such calendar
year unless such shareholder has owned, actually or constructively under
attribution rules, more than 5% of our outstanding shares at all times during
the shorter of the period during which the shareholder has held its shares or
the five-year period ending on the date that the liquidating distributions are
received. Shares that are owned by a non-U.S. shareholder whose actual or
constructive ownership of our outstanding shares has exceeded the 5% threshold
described above, or shares owned by any non-U.S. shareholder if the shares are
not regularly traded on an established securities market at any time during the
calendar year, will be treated as United States real property interests unless,
at all times during a prescribed testing period, either we have not been a
"United States real property holding corporation" or we have been a
"domestically controlled REIT." We will constitute a "United States real
property holding corporation" with respect to a particular non-U.S. shareholder
if, at any time during the five-year period preceding the distribution or
shorter period that the shareholder has held its shares, the fair market value
of our "United States real property interests" equals or exceeds 50% of the fair
market value of such United States real property interests, its interests in
real property located outside the United States, plus any other of its assets
that are used or held for use in a trade or business. For this purpose, the term
"United States real property interests" include any interest other than an
interest solely as a creditor in real estate located within the United States or
the Virgin Islands and in certain entities that own U.S. real estate. We will
constitute a "domestically controlled REIT" only if, at all times during the
five-year period preceding the distribution in question or shorter period that
we have been in existence, we remain qualified as a REIT and less than 50% of
the value of our shares is beneficially owned, directly or indirectly, by
non-U.S. persons (taking into account as beneficial owners for this purpose
those persons who are required to include dividends from us in taxable income
for U.S. federal income tax purposes). Although we believe that we are a
"domestically controlled REIT," no assurance can be given that we will remain a
"domestically controlled REIT" because our shares are publicly traded.
Although we will not be required to withhold against liquidating
distributions to any non-U.S. shareholder unless our shares constitute United
States real property interests with respect to such shareholder, a non-U.S.
shareholder who is not subject to withholding nevertheless will be subject to
U.S. federal income tax with respect to liquidating distributions under the
following circumstances. First, if a non-U.S. shareholder's investment in our
shares is effectively connected with the non-U.S. shareholder's U.S. trade or
business, the non-U.S. shareholder will be subject to the same treatment as U.S.
shareholders with respect to liquidating distributions, and if the non-U.S.
shareholder is a corporation, it may also be subject to the branch profits tax.
Second, if the non-U.S. shareholder is a nonresident alien individual who is
present in the United States for 183 days or more during the taxable year in
which the liquidating
21
<PAGE> 27
distributions are received and certain other conditions apply, the nonresident
alien individual will be subject to a 30% tax on the individual's capital gains.
Finally, if we recognize gain from the disposition of a United States real
property interest and remain qualified as a REIT, all of our non-U.S.
shareholders could be subject to U.S. federal income tax on liquidating
distributions under section 897(h)(1) of the Internal Revenue Code, which
provides that any distribution by a REIT to a non-U.S. shareholder, to the
extent attributable to gain from sales or exchanges by the REIT of United States
real property interests, is treated as gain recognized by such non-U.S.
shareholder from the sale or exchange of a United States real property interest.
Non-U.S. shareholders should consult their own tax advisors regarding
the U.S. federal income tax consequences of receiving liquidating distributions,
including the consequences that would apply if we were to contribute our assets
to a liquidating trust.
STATE AND LOCAL INCOME TAX
Shareholders may also be subject to state or local taxes with respect
to distributions they receive pursuant to the plan and should consult their tax
advisors regarding these taxes.
GOVERNMENT APPROVALS
Other than compliance with the provisions of the Texas Real Estate
Investment Trust Act to effect the dissolution and withdrawals from the states
in which we or our subsidiaries are registered to do business, we are not
required to obtain any federal or state approvals or comply with any federal or
state regulatory requirements in connection with the liquidation and
dissolution.
NO DISSENTERS' RIGHTS
Texas law does not provide dissenters' or appraisal rights with respect
to the liquidation and dissolution.
VOTE REQUIRED
The affirmative vote of the holders of at least two-thirds of our
outstanding common shares is required to approve the liquidation and
dissolution. AMRESCO, INC. and its affiliates, which own a total of
approximately 15% of our outstanding common shares, have indicated their
intention to vote in favor of the liquidation and dissolution.
THE BOARD RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE LIQUIDATION AND
DISSOLUTION.
ELECTION OF TRUST MANAGERS
(ITEM 2 ON PROXY CARD)
THE BOARD OF TRUST MANAGERS
There are currently six members of the board of trust managers, one of
which is affiliated with AMREIT Managers, L.P., our manager, one of which was so
affiliated until April 1, 2000, and four of whom are independent trust managers.
The board is divided into three classes. Each class consists of two trust
managers, at least one of whom is an independent trust manager. An independent
trust manger is defined in our bylaws as a person who is not one of our or our
affiliates' officers or employees, or an affiliate of any of our advisors or
managers. In addition, except for acting as a trust manager or as a director of
any entity controlled by us, an independent trust manager cannot have performed
more than a "de minimus" amount of service for us or had a material business
relationship with AMREIT Managers or any other of our advisors or managers.
The term of office of one class of trust managers expires each year at
the annual meeting of shareholders. The initial term of office of the Class II
trust managers will expire at this meeting and the initial term of the Class III
trust managers will expire at our 2001 annual meeting of shareholders. The term
of office of the Class I trust managers expires at the 2002 annual meeting of
shareholders. Each trust manager of the class elected at each annual meeting of
shareholders will hold office for a term of three years. However, if the
liquidation and dissolution proposal is approved, the term of each trust manager
will expire on the date that we file articles of dissolution.
22
<PAGE> 28
INFORMATION CONCERNING TRUST MANAGERS
At the meeting, you will be asked to elect two Class II trust managers,
each to serve as a member of the board for a three-year term ending at the
annual meeting of shareholders in 2003, or until his successor is duly elected
or qualified, or until we file articles of dissolution. The board has selected
each of the two current Class II trust managers as a nominee for election at the
meeting. Unless you withhold authority to vote for one or more nominees, the
persons named as proxies intend to vote for election of the two nominees.
Each nominee has consented to serve as a trust manager. The board has
no reason to believe that either of the nominees will be unable to act as trust
manager. However, if a nominee is unable to stand for re-election, the board may
either reduce the size of the board or designate a substitute. If a substitute
nominee is named, the proxies will vote for the election of the substitute.
The following table sets forth certain information, as of April 1,
2000, concerning each nominee for election as a Class II trust manager and each
of our other trust managers. All positions and offices with AMRESCO Capital
Trust held by each trust manager and executive officer, as well as the principal
positions held by each such person with AMRESCO, INC. and with AMREIT Managers,
are indicated.
<TABLE>
<CAPTION>
TRUST YEAR
MANAGER TERM BOARD
NAME (AGE) RECENT BUSINESS EXPERIENCE SINCE EXPIRES COMMITTEES
- ---------- -------------------------- ----- ------- ----------
CLASS I TRUST MANAGERS
<S> <C> <C> <C> <C>
Robert L. Adair III (56) Mr. Adair has served as our Chief Executive Officer 1998 2002 (a)(b)
since November 1998 and has served as our Chairman of
the Board since our inception in 1998. From 1994
until March 31, 2000, Mr. Adair also served as a
director, President and Chief Operating Officer of
AMRESCO, INC. Mr. Adair served AMRESCO, INC. and its
predecessors in various capacities since 1987. Mr.
Adair is also a director of Stratus Properties, Inc.
John C. Deterding (67) Mr. Deterding served as Senior Vice President and 1998 2002 (a)(b)(d)
General Manager of the Commercial Real Estate
Division of General Electric Capital Corporation from
1975 to June 1993. From November 1989 to June 1993,
Mr. Deterding also served as Chairman of the General
Electric Real Estate Investment Company, a
privately-held REIT. From 1986 to 1993, Mr. Deterding
served as a director of GECC Financial Corporation.
Since retiring from General Electric Capital
Corporation in June 1993, Mr. Deterding has worked as
a private real estate consultant. He served as a
director of Patriot American Hospitality Inc./Wyndham
International, a publicly-held REIT (or its
predecessors), from September 1995 to June 1999, and
serves as a trustee of Fortress Investment Fund.
</TABLE>
23
<PAGE> 29
<TABLE>
<CAPTION>
CLASS II TRUST MANAGERS
<S> <C> <C> <C> <C>
Bruce W. Duncan (48) Mr. Duncan was the Chairman, President and Chief 1998 2000 (a)(b)(c)
Executive Officer of Cadillac Fairview Corporation
Limited from 1995 until March 17, 1999. Prior to
joining Cadillac Fairview, Mr. Duncan worked for JMB
Realty Corporation from 1978 to 1992, where he served
as Executive Vice President and a member of the Board
of Directors. From 1992 to 1994, he was President and
Co-Chief Executive Officer of JMB Institutional
Realty Corporation. From 1994 to 1995, he was with
Blakely Capital, Inc. Mr. Duncan is a member of the
Board of Trustees of Starwood Hotels and Resorts
Worldwide, Inc. and is a member of the Board of
Trustees of Kenyon College. He is also a member of
the Board of Directors of the Canadian Institute of
Public Real Estate Companies.
Robert H. Lutz, Jr. (50) From May 1994, Mr. Lutz has served as Chief Executive 1998 2000 (a)
Officer of AMRESCO, INC. From May 1994 until March
31, 2000, Mr. Lutz also served as Chairman of the
Board of AMRESCO, INC. Mr. Lutz also is a director of
Felcor Lodging Trust, a publicly-traded REIT.
CLASS III TRUST MANAGERS
Christopher B. Leinberger Mr. Leinberger has been Managing Director and 1998 2001 (a)(c)(d)
(49) co-owner of Robert Charles Lesser & Co. since 1982.
Mr. Leinberger is also a partner in Arcadia Land
Company. Mr. Leinberger is Chair of the Board of
The College of Santa Fe.
James C. Leslie (44) Mr. Leslie has served as President and Chief 1998 2001 (b)(c)(d)
Operating Officer of The Staubach Company since 1996,
and as a director of The Staubach Company since 1988.
Mr. Leslie was President of Staubach Financial
Services from January 1992 until February 1996. Mr.
Leslie is also President and a board member of
Wolverine Holding Company, and serves on the boards
of Stratus Properties, Inc. and the North Texas
Chapter of the Arthritis Foundation.
</TABLE>
- -------------------------------------
(a) Member of the Executive Committee
(b) Member of the Investment Committee
(c) Member of the Audit Committee
(d) Member of the Compensation Committee
24
<PAGE> 30
REQUIRED VOTE
Each nominee must be reelected by the affirmative vote of the holders
of at least a majority of the shares present in person or represented by proxy
at the meeting.
THE BOARD RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES.
MEETINGS OF THE BOARD AND COMMITTEES
Our business is managed under the direction of the board of trust
managers. The board meets on a regularly scheduled basis to review significant
developments affecting us and to act upon matters requiring board approval. It
holds special meetings when an important matter requires board action between
scheduled meetings. The board held ten meetings during 1999. All trust managers
attended at least 75% of the meetings of the board and committees on which they
served during 1999.
COMMITTEES OF THE BOARD OF TRUST MANAGERS
The board has an executive committee, an audit committee, a
compensation committee and an investment committee. Members of these committees
generally are elected annually at the regular meeting of the board immediately
following the annual meeting of shareholders.
The executive committee consists of Messrs. Adair (Chairman),
Deterding, Duncan, Leinberger and Lutz. Subject to various limitations specified
by our declaration of trust or bylaws and the Texas Real Estate Investment Trust
Act, the executive committee is authorized to exercise the powers of the board
when the board is not in session. The executive committee did not hold any
meetings during 1999.
The audit committee consists of Messrs. Leinberger, Leslie (Chairman)
and Duncan. The functions of the audit committee include the following:
o reviewing the independence and performance of the independent
public accountants;
o recommending to the board the appointment or termination of
the independent public accountants;
o consulting with the independent public accountants concerning
their audits of our financial statements;
o reviewing the presentation of our financial statements,
reviewing and considering the observations of the independent
public accountants concerning internal control and accounting
matters during their annual audit;
o reviewing the range of services provided by the independent
public accountants; and
o approving the types of professional services rendered by the
independent public accountants and considering the possible
effects of such services on the independence of the public
accountants.
The audit committee is required by our bylaws to have at least two
members and each member must be an independent trust manager. All of the current
members of the audit committee are independent trust managers. The audit
committee held two meetings during 1999.
The compensation committee consists of Messrs. Deterding, Leinberger
(Chairman) and Leslie. The functions of the compensation committee include
making recommendations to the board regarding compensation for our executive
officers and administering our 1998 Share Option and Award Plan. The
compensation committee must be comprised of two or more members, each of whom
must be an independent trust manager. All of the current members of the
compensation committee are independent trust managers. The compensation
committee held one meeting during 1999.
25
<PAGE> 31
The investment committee consists of Messrs. Adair, Deterding
(Chairman), Duncan and Leslie. The functions of the investment committee are to
review, approve and authorize all investments that we make, which, in accordance
with our guidelines, require approval of the board, and to review, modify and
approve modifications to our investment guidelines. In addition, the investment
committee is required to review and approve any acquisition of investments from,
or coinvestments with, AMRESCO, INC. or any of its affiliates that is not
otherwise submitted to the full board for consideration. The investment
committee did not hold any meetings during 1999.
We do not have a nominating or other standing committee. The entire
board performs the functions customarily attributable to a nominating committee.
COMPENSATION OF TRUST MANAGERS
In lieu of the cash payment of fees to independent trust managers for
attendance at the regularly scheduled board meetings, in May 1999, we granted to
each independent trust manager 2,250 restricted shares. In addition, in 1999, we
paid each independent trust manager a fee of $1,000 for each special meeting of
the board he attended.
During the period from February 1999 to February 2000, we granted
dividend equivalent rights to the trust managers. During this period, each trust
manager received quarterly cash payments equal to our per share dividend,
excluding that portion of a declared dividend that represented a return of
capital to shareholders, multiplied by the number of common shares such trust
manager was eligible to purchase under options that were vested at the time the
dividend payment was declared. A total of $60,950 has been paid to trust
managers under this program. As of February 24, 2000, the board terminated this
program. The board does not expect that any dividend equivalent payments will be
made on vested options after the dividend equivalent payment made on January 27,
2000 with respect to our 1999 fourth quarter dividend.
Following this meeting, we expect to pay each independent trust manager
an annual fee of $20,000, payable quarterly in advance, plus $1,000 for each
special meeting of the board he attends. After March 31, 2000, we expect to pay
Mr. Adair an annual fee of $60,000, payable quarterly in advance, for his
services as our Chairman of the Board of Trust Managers and Chief Executive
Officer.
We do not separately compensate trust managers who are affiliated with
us or AMREIT Managers, other than through our 1998 Share Option and Award Plan
and, from February 1999 to February 2000, through dividend equivalent payments
relating to vested options. We reimburse all trust managers for their costs and
expenses in attending board and committee meetings.
Immediately after the closing of our initial public offering, we
granted each independent trust manager options to purchase 20,000 common shares
at $15.00 per share, which was the initial public offering price. We granted
each of Messrs. Adair and Lutz, who were affiliated with us, options to purchase
45,000 common shares at $15.00 per share. These options vest 25% on each of the
four anniversaries following the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No trust manager who served on the compensation committee during 1999
was:
o one of our or our affiliates' officers or employees during
1999;
o one of our or our affiliates' former officers; or
o a party to any material transaction described below under
"Certain Relationships and Related Transactions."
None of our or our affiliates' officers served as a member of the
compensation committee or similar committee or board of directors of any entity
whose members served on our compensation committee.
26
<PAGE> 32
AUDIT COMMITTEE REPORT
The board of trust managers intends to adopt a written charter for the
audit committee prior to June 14, 2000.
The members of the audit committee are independent, as independence is
defined in Rule 4200(a) of the National Association of Securities Dealers'
listing standards.
The audit committee has reviewed and discussed the audited financial
statements with management. The audit committee has discussed with the
independent auditors the matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standards, AU Section 380). The audit
committee has received the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1,
and has discussed with the independent auditors the independent auditors'
independence. Based upon the reviews and discussions, the audit committee
recommended to the board of trust managers that the audited financial statements
be included in our Annual Report on Form 10-K for the fiscal year ended December
31, 1999 for filing with the SEC.
This section of the proxy statement is not deemed "filed" with the SEC
and is not incorporated by reference into our Annual Report on Form 10-K.
This audit committee report is given by the following members of the
audit committee:
Christopher B. Leinberger
James C. Leslie
Bruce W. Duncan
EXECUTIVE OFFICERS
Our executive officers serve at the discretion of the board and are
elected annually by the board at a meeting held following each annual meeting of
shareholders, or as soon thereafter as necessary and convenient in order to fill
vacancies or newly created offices. Each officer holds office until his
successor is duly elected and qualified or until death, resignation or removal,
if earlier. The following table lists the names and ages of our executive
officers and the position held by and recent business experience of each
individual.
<TABLE>
<CAPTION>
NAME AGE POSITION RECENT BUSINESS EXPERIENCE
- ---- --- -------- --------------------------
<S> <C> <C> <C>
Robert L. Adair III 56 Chairman of the Board See "Election of Trust Managers -- Information
of Trust Managers and concerning trust managers" above.
Chief Executive
Officer (November 1998
to present)
Jonathan S. Pettee 41 President and Chief Prior to November 1998, Mr. Pettee served as our and
Operating Officer of AMREIT Managers' Executive Vice President and Chief
AMRESCO Capital Trust Operating Officer. From 1996 to March 1998, Mr.
and AMREIT Managers, Pettee was responsible for mortgage product
L.P. (November 1998 to development, capital raising and management of a
present) non-investment grade portfolio of commercial
mortgage-backed securities for our affiliates.
Effective April 1, 2000, Mr. Pettee also became the
Executive Vice President and Chief Financial Officer
of AMRESCO, INC. Mr. Pettee has over fourteen years
of experience in corporate finance, fixed income and
real estate. From 1995 to 1996, Mr. Pettee was
Managing Director for BBC Investment Advisors, a
joint venture between Back Bay Advisors and Copley
Real Estate Advisors. At BBC, Mr. Pettee managed an
investment grade portfolio of commercial
mortgage-backed
</TABLE>
27
<PAGE> 33
<TABLE>
<CAPTION>
NAME AGE POSITION RECENT BUSINESS EXPERIENCE
- ---- --- -------- --------------------------
<S> <C> <C> <C>
securities. Mr. Pettee has held previous positions as
Managing Director at Copley Real Estate Advisors
(1992 to 1994), where he was responsible for managing
the external financing activities for Copley's
institutional funds, and as Senior Associate at
Morgan Stanley Realty (1986 to 1992), where he
executed sale, financing and investment banking
transactions for the firm's clients. Mr. Pettee has a
B.S. degree in Mechanical Engineering from Cornell
University and an M.B.A. degree from the Harvard
Business School.
David M. Striph 41 Executive Vice Mr. Striph is responsible for the day-to-day
President and Chief management of our investments, other than commercial
Investment Officer of mortgage-backed securities, and will be primarily
AMRESCO Capital Trust responsible for the liquidation of our mortgage loan
(February 2000 to assets and our equity investments in real estate. Mr.
present) Striph has served as one of our executive officers
since November 1998. His primary responsibilities
have included nationwide business development and
management of the staff responsible for the
origination, underwriting and portfolio management of
high-yield commercial real estate mortgages and
equity investments. Mr. Striph was the Western
Division Manager for AMRESCO, INC.'s Real Estate
Structured Finance Group from December 1996 until
August 1998. Mr. Striph has been employed by AMRESCO,
INC. since 1994 serving in various positions within
the Asset Management/Loan Workout division. Mr.
Striph has over 15 years of real estate
lending/banking experience including owning a
commercial mortgage brokerage company for five years.
Michael L. McCoy 44 Senior Vice President, From February 1996 to March 31, 2000, Mr. McCoy also
General Counsel and served as Assistant General Counsel of AMRESCO, INC.
Secretary of AMRESCO Mr. McCoy was employed by AMRESCO, INC. in 1989.
Capital Trust (January
1998 to present)
Thomas R. Lewis II 37 Senior Vice President, From our inception until February 2000, Mr. Lewis
Chief Financial and served as our and AMREIT Managers' Vice President and
Accounting Officer and Controller. Mr. Lewis has been employed by AMRESCO,
Controller of AMRESCO INC. since November 1995. From 1993 to 1995, Mr.
Capital Trust and Lewis was Vice President-Finance for Acacia Realty
AMREIT Managers, L.P. Advisors, Inc.
(February 2000 to
present)
</TABLE>
28
<PAGE> 34
RELATIONSHIPS
There are no family relationships among any of our trust managers or
executive officers. Except as specified in the biographical information in this
document, none of our trust managers hold directorships in any company with a
class of securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934 or pursuant to Section 15(d) of the Securities Exchange Act or any
company registered as an investment company under the Investment Company Act of
1940. There are no arrangements or understandings between any trust manager or
executive officer and any other person pursuant to which that trust manager or
executive officer was selected.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires our officers and
trust managers, and persons who beneficially own more than 10% of our common
shares, to file initial reports of ownership and reports of changes in ownership
with the SEC. Officers, trust managers and greater than 10% beneficial owners
are required by SEC regulations to furnish us with copies of all Section 16(a)
forms they file.
Based solely on a review of the copies of such reports furnished to us
and representations from the officers and trust managers, we believe that all
Section 16(a) filing requirements with respect to fiscal 1999 applicable to our
officers, trust managers and greater than 10% beneficial owners were satisfied
by such persons.
EXECUTIVE COMPENSATION
We do not pay a salary or bonus to our executive officers, nor do we
provide any other compensation or incentive programs to our executive officers,
other than grants from time to time of share options under our option plan and
related dividend equivalent payments.
During the period from February 1999 to February 2000, we granted
dividend equivalent rights to persons employed by us or by AMREIT Managers or
otherwise involved in our business, excluding those options held by AMREIT
Managers. During this period, each such person received quarterly cash payments
equal to our per share dividend, excluding that portion of a declared dividend
that represented a return of capital to shareholders, multiplied by the number
of common shares such person was eligible to purchase under options that were
vested at the time the dividend payment was declared. As of February 24, 2000,
the board terminated this program. The board does not expect that any dividend
equivalent payments will be made on vested options after the dividend equivalent
payment made on January 27, 2000 with respect to our 1999 fourth quarter
dividend.
AMREIT Managers, at its expense, provides all personnel necessary to
conduct our regular business. AMREIT Managers receives various fees and cost
reimbursements for advisory and other services it provides to us under the terms
of the management agreement. Excluding compensation associated with share option
awards and related dividend equivalent payments, AMREIT Managers pays all
salaries, bonuses and other compensation to our executive officers. For a
description of the management agreement, see "Certain Relationships and Related
Transactions -- The manager" below.
Since the only forms of compensation we have provided to our executive
officers are awards of share options and related dividend equivalent rights, the
named executive officers in the following tables were determined based upon the
number of share options granted. We have not granted any share appreciation
rights.
29
<PAGE> 35
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------- -------------------------------------------------
Number of Long-Term
Other Restricted Securities Incentive
Name Annual Stock Underlying Plan All Other
and Salary Bonus Compensation Awards Options/SARs Payouts Compensation
Principal Position Year ($) ($) ($) ($) Granted ($) ($)(1)
------------------ ---- ------ ----- ------------ ---------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert L. Adair III, Chairman of the 1999 -- -- -- -- -- -- 11,925
Board of Trust Managers and Chief 1998 -- -- -- -- 45,000 -- --
Executive Officer
Jonathan S. Pettee, President and 1999 -- -- -- -- -- -- 7,950
Chief Operating Officer 1998 -- -- -- -- 30,000 -- --
Michael L. McCoy, Senior Vice President, 1999 -- -- -- -- -- -- 3,975
General Counsel and Secretary 1998 -- -- -- -- 15,000 -- --
David M. Striph, Executive Vice President 1999 -- -- -- -- -- -- 1,860
and Chief Investment Officer 1998 -- -- -- -- 10,000 -- --
Thomas R. Lewis II, Senior Vice 1999 -- -- -- -- -- -- 1,590
President, Chief Financial and 1998 -- -- -- -- 6,000 -- --
Accounting Officer and Controller
</TABLE>
(1) All other compensation is comprised solely of non-preferential dividend
equivalents earned by the executive officers. Dividend equivalents were
paid to the executive officers on August 16, 1999, November 15, 1999 and
January 27, 2000. The payments made on these dates totaled the amounts
shown above.
SHARE OPTION/SAR GRANTS IN FISCAL 1999
During fiscal 1999, we did not grant any share options or share
appreciation rights to our executive officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
None of the named executive officers has exercised any options.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
December 31, 1999 at December 31, 1999 ($)
------------------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert L. Adair III 11,250 33,750 -- --
Jonathan S. Pettee 7,500 22,500 -- --
Michael L. McCoy 3,750 11,250 -- --
David M. Striph 2,500 7,500 620 1,860
Thomas R. Lewis II 1,500 4,500 -- --
</TABLE>
30
<PAGE> 36
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During 1999, the compensation committee generally determined the
compensation of our executive officers. When appropriate, the compensation
committee seeks advice and considers recommendations from executive compensation
consultants.
AMREIT Managers pays our executive officers' salaries and bonuses.
Accordingly, the compensation committee's responsibilities have been limited to
those involving share-based compensation matters.
The 1998 Share Option and Award Plan was designed to provide a means of
competitive, long-term performance-based compensation, which closely aligns our
shareholders' interests with those of our executive officers. Share option
awards are intended to attract, retain and reward experienced, highly motivated
executive officers who are capable of effective leadership. The number of share
options granted to each executive officer is based upon corporate performance
and the level of responsibility, contribution and performance of the particular
officer.
During 1999, we did not grant any share options to any executive
officer.
Options granted under the share option plan generally have an exercise
price equal to the market price of our common shares on the date that the option
is granted. Option grants typically vest 25% on each of the four anniversaries
following the date of grant.
During the period from February 1999 to February 2000, we granted
dividend equivalent rights to persons employed by us or by AMREIT Managers or
otherwise involved in our business, excluding those options held by AMREIT
Managers. During this period, each such person received quarterly cash payments
equal to our per share dividend, excluding the portion of a declared dividend
that represented a return of capital to shareholders, multiplied by the number
of common shares such person was eligible to purchase under options that were
vested at the time the dividend payment was declared. As of February 24, 2000,
the board terminated this program. The board does not expect that any dividend
equivalent payments will be made on vested options after the dividend equivalent
payment made on January 27, 2000 with respect to our 1999 fourth quarter
dividend.
This section of the proxy statement is not deemed "filed" with the SEC
and is not incorporated by reference into our Annual Report on Form 10-K.
Compensation Committee
John C. Deterding
Christopher B. Leinberger
James C. Leslie
31
<PAGE> 37
SHAREHOLDER RETURN COMPARISON
Our common shares commenced trading on the Nasdaq Stock Market on May 7, 1998.
Set forth below is a line graph comparing, for the period from May 7, 1998
through December 31, 1999, total shareholder return on our common shares with
that of the Nasdaq Composite Index and a "mortgage" REIT index provided by the
National Association of Real Estate Investment Trusts. At December 31, 1999 and
1998, the mortgage REIT index was comprised of 26 and 24 mortgage REITs,
respectively. We were one of the companies included in the mortgage REIT index
in both 1999 and 1998. Upon request, we will provide to any shareholder the
names of the companies comprising the mortgage REIT index.
The graph assumes that the common shares were acquired at the initial
public offering price of $15.00 per share and that the value of the investment
in each of the common shares and the indices was $100 at the beginning of the
period. The graph further assumes the reinvestment of dividends. The share price
performance reflected in the graph below is not necessarily indicative of future
performance.
AMRESCO CAPITAL TRUST
Total Return Performance
[GRAPH]
<TABLE>
<CAPTION>
May December December
1998 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
AMRESCO Capital Trust $ 100.00 $ 68.31 $ 72.25
Nasdaq Composite Index $ 100.00 $ 120.35 $ 218.07
NAREIT Mortgage REIT Index $ 100.00 $ 69.99 $ 46.74
</TABLE>
32
<PAGE> 38
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
On March 15, 2000, there were 10,015,111 of our common shares
outstanding. The following table sets forth, as of March 15, 2000, the ownership
of our common shares for the following:
o each person known by us to be the beneficial owner of more
than 5% of our common shares;
o each trust manager;
o each named executive officer; and
o all trust managers and executive officers as a group.
Unless otherwise indicated in the footnotes, all such common shares are
owned directly and the indicated person has sole voting and investment power
with respect to the shares.
Unless otherwise noted, the mailing address for each person identified
below is c/o AMRESCO Capital Trust, 700 North Pearl Street, Suite 1900, Dallas,
Texas 75201.
<TABLE>
<CAPTION>
Percentage of
Amount and Nature of Common Shares
Name of Beneficial Owner (1) Beneficial Ownership Beneficially Owned
---------------------------- -------------------- ------------------
<S> <C> <C>
AMRESCO, INC ..................................... 2,000,117(2) 19.0%
FMR Corp. ........................................ 1,273,394(3) 12.7%
Farallon Capital Management, L.L.C ............... 542,100(4) 5.4%
John C. Deterding ................................ 13,750(5) *
Bruce W. Duncan .................................. 27,450(5) *
Christopher B. Leinberger ........................ 19,000(5) *
James C. Leslie .................................. 18,750(5) *
Robert H. Lutz, Jr ............................... 32,500(6) *
Robert L. Adair III .............................. 102,500(7) 1.0%
Jonathan S. Pettee ............................... 22,000(8) *
Michael L. McCoy ................................. 10,500(9) *
David M. Striph .................................. 4,250(10) *
Thomas R. Lewis II ............................... 4,000(10) *
All Trust Managers and executive officers as
a group (10 persons) ......................... 254,700(11) 2.5%
</TABLE>
* Less than 1%.
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days upon the exercise of options.
Each beneficial owner's percentage ownership was determined by assuming
that options that are held by such person, but not those held by any
other person, that are exercisable within 60 days have been exercised.
(2) Includes options that are exercisable by AMREIT Managers, L.P. within
60 days to purchase 250,003 common shares. AMREIT Holdings, Inc., a
wholly-owned subsidiary of AMRESCO, INC., owns 1,500,011 shares.
AMRESCO, INC. owns 100 shares. The partnership interests of AMREIT
Managers are owned by AMREIT Holdings and a wholly-owned subsidiary of
AMREIT Holdings. The address of AMRESCO, INC. and AMREIT Managers is
700 North Pearl Street, Suite 1900, Dallas, Texas 75201. AMREIT
Holdings' address is 330 E. Warm Springs Road, Las Vegas, Nevada 89119.
(3) The information set forth above is based solely on the Schedule 13G
filed by FMR Corp. with the SEC on February 14, 2000. FMR Corp.
reported that, through its subsidiaries, it had sole dispositive power
with
33
<PAGE> 39
respect to all such shares and sole voting power with respect to
348,494 of such shares. FMR Corp. is the parent holding company of an
investment management company registered under Section 203 of the
Investment Advisers Act of 1940 that provides investment advisory and
management services to its clients. FMR Corp. disclaims investment
power or voting power over any of the securities referenced above.
However, it may be deemed to "beneficially own" such securities by
virtue of Rule 13d-3 under the Securities Exchange Act of 1934. FMR
Corp.'s address is 82 Devonshire Street, Boston, Massachusetts 02109.
(4) The information set forth above is based solely on the Schedule 13D
filed with the SEC on January 14, 2000 by Farallon Capital Partners,
L.P., Farallon Capital Institutional Partners, L.P., Farallon Capital
Institutional Partners II, L.P., Farallon Capital Institutional
Partners III, L.P., Tinicum Partners, L.P., Farallon Capital
Management, L.L.C., Farallon Partners, L.L.C., Enrique H. Boilini,
David I. Cohen, Joseph F. Downes, William F. Duhamel, Jason M. Fish,
Andrew B. Fremder, Richard B. Freid, William F. Mellin, Stephen L.
Millham, Meridee A. Moore, Thomas F. Steyer, Mark C. Wehrly and Fleur
E. Fairman. In such Schedule 13D, Farallon Capital Institutional
Partners, L.P. reported that it had shared voting and shared
dispositive power over 110,900 shares, Farallon Capital Institutional
Partners II, L.P., reported that it had shared voting power and shared
dispositive power over 20,600 shares, Farallon Capital Institutional
Partners III, L. P. reported that it had shared voting power and shared
dispositive power over 31,600 shares, Tinicum Partners, L.P. reported
that it had shared voting power and shared dispositive power over 6,800
shares, Farallon Capital Management, L.L.C. reported that it had shared
voting power and shared dispositive power over 234,100 shares, Farallon
Partners, L.L.C. reported that it had shared voting power and shared
dispositive power over 308,000 shares, Enrique H. Boilini, David I.
Cohen, Joseph F. Downes, William F. Duhamel, Jason M. Fish, Andrew B.
Fremder, Richard B. Freid, William F. Mellin, Stephen L. Millham,
Meridee A. Moore, Thomas F. Steyer and Mark C. Wehrly each reported
that he or she had shared voting power and shared dispositive power
over 542,100 shares, and Fleur E. Fairman reported that he had shared
voting power and shared dispositive power over 308,000 shares. The
address of all such persons is One Maritime Plaza, Suite 1325, San
Francisco, California 94111, except the address of Enrique H. Boilini
is c/o Farallon Capital Management, L.L.C., 75 Holly Hill Lane,
Greenwich, Connecticut 06830.
(5) Includes options that are exercisable within 60 days to purchase 5,000
common shares.
(6) Includes options that are exercisable within 60 days to purchase 11,250
common shares. Excludes 5,000 shares that are owned by Mr. Lutz's
spouse as to which Mr. Lutz disclaims ownership.
(7) Includes options that are exercisable within 60 days to purchase 11,250
common shares.
(8) Includes options that are exercisable within 60 days to purchase 7,500
common shares.
(9) Includes options that are exercisable within 60 days to purchase 3,750
common shares.
(10) Includes options that are exercisable within 60 days to purchase 1,500
common shares.
(11) Includes options that are exercisable within 60 days to purchase 56,750
common shares.
34
<PAGE> 40
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE MANAGER
Under the terms of a management agreement dated as of May 12, 1998 and
subject to the direction and oversight of our board of trust managers, our
day-to-day operations are managed by AMREIT Managers, L.P., an affiliate of
AMRESCO, INC. For its services, AMREIT Managers has been entitled to receive the
following:
o a base management fee equal to 1% per year of our average
invested non-investment grade assets and 0.5% per year of our
average invested investment grade assets, payable quarterly in
arrears;
o incentive compensation in an amount equal to 25% of the dollar
amount by which our funds from operations (as defined by the
National Association of Real Estate Investment Trusts) plus
gains and minus losses from debt restructurings and sales of
property, as adjusted, exceeds the 10-year U.S. treasury rate
plus 3.5%, payable quarterly in arrears; and
o reimbursement for the manager's costs of providing specified
due diligence and professional services to us
The following table summarizes the amounts charged to us by AMREIT
Managers since May 12, 1998:
<TABLE>
<CAPTION>
Period from May 12, 1998
Year ended through
December 31, 1999 December 31, 1998
----------------- ------------------------
<S> <C> <C>
Base management fees $2,066,000 $ 835,000
Incentive compensation -- --
Reimbursable expenses 192,000 140,000
---------- ----------
Total $2,258,000 $ 975,000
========== ==========
</TABLE>
AMREIT Managers has options to purchase 1,000,011 common shares, 70% of
which are exercisable at $15.00 per share and the remaining 30% of which are
exercisable at $18.75 per share. The options vest ratably over a four-year
period commencing on the first anniversary of the date of grant.
The initial term of the management agreement expires on May 12, 2000.
During its initial two-year term, neither party may terminate the management
agreement, except that we may terminate the agreement if AMREIT Managers
breaches its obligations thereunder or upon the occurrence of other specified
events constituting "cause." The management agreement may be renewed at the end
of the initial term (and each successive term) for a period of one year, upon
review and approval by a majority of our independent trust managers. If the
independent trust managers do not vote to terminate or renew the management
agreement at least 90 days prior to the end of the then current period, the
management agreement will automatically renew for a one-year period. The manager
has the right, at any time after the initial term, to terminate the management
agreement upon 180 days prior written notice to us. We have the right, at any
time after the initial term, to terminate the management agreement upon 90 days
prior written notice to the manager. Prior to the amendment described below, if
we terminated the management agreement without cause, we were obligated to pay
the manager a termination fee equal to the sum of the base management fee plus
any incentive compensation earned by the manager during the four calendar
quarters immediately preceding the termination.
On March 29, 2000, the board of trust managers approved modifications
to AMREIT Managers' compensation in response to our changed business strategy.
The new fee structure eliminates both incentive fee compensation and termination
fees if the management agreement is terminated. In addition to its base
management fee, AMREIT Managers will receive reimbursement for any of its
quarterly operating deficits beginning on April 1, 2000. These reimbursements
will be equal to any excess of AMREIT Managers' operating costs, which
principally include personnel and general and administrative expenses, over the
sum of its base management fees and any other fees that AMREIT Managers receives
from sources other than us. Currently, AMRESCO, INC., through AMREIT Managers,
employs seven people who are fully dedicated to us. Additionally, three of our
executive officers allocate their time, as necessary, to us. After March 31,
2000, two of these three officers will no longer be employed by AMRESCO, Inc.,
although they will continue to serve in their present capacities as our
officers. As part of the modification, AMREIT
35
<PAGE> 41
Managers is no longer entitled to receive incentive compensation. Also as part
of the modifications, AMREIT Managers is no longer entitled to receive a
termination fee if we terminate the management agreement without cause,
including a termination resulting from our liquidation and dissolution. During
the period from January 1, 2000 through March 31, 2000, AMREIT Managers was
entitled to receive the fees and reimbursements provided for under the original
terms of the management agreement.
RIGHT OF FIRST REFUSAL/CORRESPONDENT AGREEMENT
We and AMRESCO, INC. have entered into a right of first refusal
agreement under which AMRESCO, INC. agreed, subject to limited exceptions, not
to and not to permit any of its affiliates to invest in the following:
o the first $100 million of mortgage loans that meet our
investment criteria and objectives that are identified by or
to AMRESCO, INC. or any of its affiliates during any calendar
quarter;
o all mortgage-backed securities, other than mortgage-backed
securities issued in securitizations sponsored in whole or in
part by AMRESCO, INC. or any of its affiliates.
Additionally, we have entered into a correspondent agreement with
Holliday Fenoglio Fowler, L.P., which was an affiliate of AMRESCO, INC. until
March 17, 2000, at which time its assets and several of AMRESCO, INC.'s other
business platforms were purchased by Lend Lease (US) Services, Inc. At the
closing, Lend Lease established a new limited partnership and transferred all of
Holliday Fenoglio Fowler's assets into the new partnership. The correspondent
agreement was assigned to the new partnership in this transaction. Under the
correspondent agreement, Holliday Fenoglio Fowler endeavors to present to us
investment opportunities that meet our investment criteria and objectives. We
are not obligated to pay any fees or commissions, or reimbursement of expenses,
to Holliday Fenoglio Fowler in connection with any investment opportunity
presented to us under this agreement. This agreement is non-exclusive. Either we
or Holliday Fenoglio Fowler may enter into similar agreements with other
parties, including those that are competitors of the other.
TRANSACTIONS WITH AFFILIATES OF AMRESCO, INC
AMREIT Holdings, Inc., a wholly-owned subsidiary of AMRESCO, INC.,
currently owns 1,500,011 of our common shares, or approximately 15% of the
outstanding shares. AMREIT Holdings, Inc. acquired 1,000,011 shares at $15.00
per share in a private placement and acquired the remaining 500,000 shares
through our initial public offering. AMRESCO, INC. owns 100 common shares. It
acquired these shares on February 2, 1998 in connection with our initial
capitalization.
At the commencement of our operations on May 12, 1998, we acquired two
loans from AMRESCO Funding Corporation, a wholly-owned subsidiary of AMRESCO,
INC. These loans had been originated by AMRESCO Funding on February 20, 1998 and
March 30, 1998. The purchase price was $5.4 million and equated to the
following:
o the outstanding principal balance of the loans as of the date
of purchase, plus
o accrued and unpaid interest to the date of purchase, less
o the unamortized portion of the related loan commitment fees.
On September 30, 1998, we acquired eight loans from AMRESCO Commercial
Finance, Inc., a wholly-owned subsidiary of AMRESCO, INC., for an aggregate cash
purchase price of $34.3 million. The eight loans were acquired at a price that
equated to the outstanding principal balance of the loans as of the date of
purchase, plus accrued and unpaid interest to the date of purchase. Immediately
following the purchase, we sold to AMRESCO Commercial Finance a contractual
right to collect from us an amount equal to the economic equivalent of all
amounts collected from five of the loans in excess of the following:
o $17.9 million; and
36
<PAGE> 42
o a return on this amount, or so much of it as was outstanding
from time to time, equal to 12% per year.
The aggregate cash sales price for these contractual rights was $5
million.
On January 14, 1999, and in accordance with the terms of its contract
with us, AMRESCO Commercial Finance purchased one of the loans that it had
previously sold to us that was more than 30 days past due. The proceeds,
totaling $4.6 million, were applied as a reduction of the amount upon which we
earned a 12% return, as described above. The sales price equated to our net
investment in the loan at the sale date under the terms of the originally
negotiated agreement. On November 1, 1999, in accordance with the terms of its
contract with us, AMRESCO Commercial Finance acquired the then remaining loans
pursuant to the terms of the originally negotiated agreement. In connection with
this most recent sale, amounts due to AMRESCO Commercial Finance totaling $5.8
million were fully extinguished. Additionally, AMRESCO Commercial Finance's
contingent reimbursement obligations were satisfied.
Holliday Fenoglio Fowler, through the correspondent agreement described
above, presents to AMRESCO on a non-exclusive basis investment opportunities
meeting specified criteria. Mark D. Gibson, who was a member of our board
through February 24, 2000 is also an executive managing director of Holliday
Fenoglio Fowler. Mr. Gibson also served on the executive committee of AMRESCO,
INC. until March 2000. During 1999, Holliday Fenoglio Fowler represented two of
our borrowers and four of our subsidiary partnerships in the closing of
transactions with us. In each case, the borrower or the subsidiary partnership
in the specific transaction paid a fee to Holliday Fenoglio Fowler for its
services in accordance with the terms of a separate agreement with Holliday
Fenoglio Fowler. Other than as described above, we had no obligation, agreement
or understanding with Holliday Fenoglio Fowler to pay it any fee or other
compensation in connection with any transaction involving us. However, in the
borrower transactions, some or all of the fees may have been paid out of the
loan proceeds advanced to the borrower by us. In the subsidiary partnership
transactions, some or all of the fees may have been paid out of the proceeds
from the capital contributions made to the partnerships by us. In connection
with transactions we closed, Holliday Fenoglio Fowler received a total of
$531,823 in fees in 1999. Mr. Gibson did not receive any compensation in
connection with these closings.
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM 3 ON PROXY CARD)
The board has selected Deloitte & Touche LLP as our independent public
accountants for 2000.
Representatives of Deloitte & Touche LLP will be present at the meeting
and will have the opportunity to make a statement if they desire to do so. These
representatives will also be available to respond to appropriate questions.
The affirmative vote of the holders of a majority of our common shares
represented in person or by proxy at the meeting is required to approve this
proposal.
THE BOARD RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE APPOINTMENT OF
DELOITTE &TOUCHE LLP.
SHAREHOLDER PROPOSALS
If the proposal for our liquidation and dissolution is approved at the
meeting, we do not intend to hold another annual shareholder meeting. If we hold
an annual meeting in 2001, and if a shareholder desires to present any proposal
for consideration at that meeting, the shareholder must, in addition to meeting
other applicable requirements, mail such proposal to us so that it is received
at our executive offices not later than December 10, 2000.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We make "forward-looking" statements in this document and in the
documents incorporated by reference into this document within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These statements are usually identified by the use of
words such as "believes," "will," "anticipates," "estimates," "expects,"
"projects," "plans," "intends," "should" or similar expressions. These
forward-looking statements reflect our current views about our plans, strategies
and prospects, which are based on the information currently available to us and
on assumptions that we have made.
37
<PAGE> 43
Although we believe that our plans, intentions and expectations as
reflected in or suggested by those forward-looking statements are reasonable, we
can give no assurance that we will achieve the plans, intentions or
expectations. We have discussed elsewhere in this document some important risks,
uncertainties and contingencies that could cause our actual results to be
materially different from the forward-looking statements we make in this
document and in the documents we incorporate by reference into this document.
Except for our ongoing obligations to disclose material information as
required by federal securities laws, we undertake no obligation to release
publicly any revisions to any forward-looking statements to reflect events or
circumstances occurring after the date of this document or to reflect the
occurrence of unanticipated events.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the reporting requirements of the Securities Exchange
Act of 1934 and file reports, proxy statements and other information with the
Securities and Exchange Commission. You may read and copy any material we file
with the Securities and Exchange Commission at its public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the public reference rooms. Our public filings are also available to the public
from commercial document retrieval services and at the web site maintained by
the SEC at http://www.sec.gov. You may also inspect all reports, proxy
statements and other information we filed with the Nasdaq Stock Market at the
offices of the National Association of Securities Dealers, Inc., 1735 K Street,
N.W., Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" into this document.
This means that we can disclose important information to you by referring you to
another document filed separately with the SEC. The information incorporated by
reference is deemed to be part of this document, except for any information
superseded by information in this document. This document incorporates by
reference the documents set forth below that we have previously filed with the
SEC. These documents contain important information about us and our finances.
<TABLE>
<CAPTION>
SEC FILING (FILE NO. 1-14029) PERIOD
----------------------------- ------
<S> <C>
Annual Report on Form 10-K. Year ended December 31, 1999
Current Report on Form 8-K. Filed on March 30, 2000
</TABLE>
We are also incorporating by reference additional documents that we may
file with the SEC between the date of this document and the date of the meeting
of shareholders.
We are sending you along with this proxy statement our 1999 Annual
Report to Shareholders, which report comprises our Annual Report on Form 10-K
for the year ended December 31, 1999. You can obtain any of the incorporated
documents by contacting us. We will send you the documents incorporated by
reference without charge, excluding exhibits to the information that is
incorporated by reference, unless we have specifically incorporated by reference
the exhibit in this document.
Shareholders may obtain documents incorporated by reference in this
document by requesting them in writing or by telephone from the following:
Michael L. McCoy
AMRESCO Capital Trust
700 North Pearl Street, Suite 1900
LB 342
Dallas, Texas 75201
Telephone: (214) 953-7700
(800) 966-7887
Facsimile: (214) 758-1373
38
<PAGE> 44
If you would like to request documents from us, including any
documents we may subsequently file with the SEC before the meeting,
please do so by __________, 2000 so that you will receive them before
the meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS DOCUMENT TO VOTE ON THE PROPOSALS. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED
IN THIS DOCUMENT. THIS DOCUMENT IS DATED MAY __, 2000. YOU SHOULD NOT ASSUME
THAT THE INFORMATION CONTAINED IN THIS DOCUMENT IS ACCURATE AS OF ANY OTHER
DATE, AND THE MAILING OF THIS DOCUMENT TO SHAREHOLDERS SHALL NOT CREATE ANY
IMPLICATION TO THE CONTRARY.
By Order of the Board of Trust Managers,
Michael L. McCoy
Secretary
39
<PAGE> 45
ANNEX A
AMRESCO CAPITAL TRUST
PLAN OF LIQUIDATION AND DISSOLUTION
This Plan of Liquidation and Dissolution (hereinafter called the
"Plan") is for the purpose of effecting the complete liquidation and dissolution
of AMRESCO Capital Trust, a Texas real estate investment trust (the "Company"),
pursuant to the following steps:
1. The Plan shall become effective upon the approval of the
liquidation and dissolution of the Company pursuant to this
Plan (the "Dissolution") by the shareholders of the Company,
or as soon thereafter as practicable (the date that this Plan
becomes effective, the "Effective Date". Upon the Effective
Date, the Company will cease conducting normal business
operations pursuant to this Plan except insofar as may be
necessary for the winding up of the business and affairs of
the Company, and proceed to a complete liquidation and
dissolution of the Company in accordance with the requirements
of the Texas Real Estate Investment Trust Act and the Internal
Revenue Code of 1986, as amended.
2. The officers of the Company are hereby authorized to sell and
otherwise to liquidate any and all of the assets and
properties of the Company and to pay, discharge or make
adequate provision for the payment of all of the known debts,
liabilities and obligations of the Company.
3. Liquidating distributions may be made to shareholders in
accordance with the Declaration of Trust in amounts and as
determined by the Board of Trust Managers, provided that the
Board of Trust Managers believes at that time that any
contingency reserve and the remaining assets of the Company
are adequate to provide for the Company's remaining
liabilities (actual and contingent) and expenses. The Board of
Trust Managers is authorized to determine the amount of any
contingency reserve and may, in their sole discretion,
increase or decrease the amount of the contingency reserve as
the Board of Trust Managers determines to be adequate to
provide for the just and equitable payment of liabilities and
obligations of the Company. The officers of the Company shall
place such funds in an account of the Company as the Board of
Trust Managers has determined should be maintained as a
contingency reserve.
4. After the sale of such of the assets and properties of the
Company as the officers shall deem in the best interest of the
Company, and after applying such property as far as it will go
to the just and equitable payment of obligations and
liabilities of the Company, the remaining property and assets
of the Company shall be distributed to the shareholders of the
Company in cancellation of all of the outstanding capital
shares of the Company and in accordance with such
shareholders' respective rights and interests.
5. The Board of Trust Managers of the Company is hereby
authorized, in its discretion, to choose to maintain existence
of the Company as a real estate investment trust for the
purposes of winding up the affairs contemplated herein.
Alternatively, the Board of Trust Managers of the Company is
hereby authorized, in its discretion, to elect to terminate
the Company's status as a real estate investment trust. The
Board of Trust Managers is authorized to establish a
Liquidating Trust (as defined below) for the benefit of the
shareholders of the Company to distribute the remaining
proceeds.
6. The officers of the Company are hereby authorized and directed
to file such documents as are necessary to effect the
Dissolution of the Company under the Texas Real Estate
Investment Trust Act.
7. The officers of the Company are hereby authorized to complete
and file any and all necessary or appropriate forms with the
Internal Revenue Service. As soon as practicable after the
A-1
<PAGE> 46
Dissolution, the officers shall execute and file the final
federal and state income tax returns of the Company, if any,
and all other returns, documents and information required to
be filed by reason of the Dissolution.
8. The members of the Board of Trust Managers shall continue to
receive compensation for as long as they remain members of the
Board until the final distribution of assets of the Company.
9. Implementation of the Plan shall be under the direction of the
members of the Board of Trust Managers or the trustees of the
Liquidating Trust, who shall have full authority to carry out
the provisions of the Plan or such other actions as they deem
appropriate without further shareholder action. The Board
shall have the authority to amend or modify the Plan without
the further approval of the shareholders of the Company,
except as required by the Texas Real Estate Investment Trust
Act.
10. Prior to the filing of articles of dissolution, the Board of
Trust Managers shall have full authority to abandon and revoke
the Dissolution as the Board deems appropriate without further
shareholder action.
11. The actions provided for in this Plan shall be commenced as
soon as practicable after the Effective Date, and such
proceeds shall be distributed and the Dissolution shall be
completed as soon as practicable after the Effective Date.
12. The officers and Trust Managers of the Company or the trustees
of the Liquidating Trust are authorized to perform, and shall
perform, such acts and take such steps as may be necessary or
convenient to carry out this Plan, including, but not limited
to, the execution and delivery, on behalf of the Company and
in its name, of any and all documents and instruments as may
be required to collect and distribute the property and assets
of the Company in accordance with the provisions of this Plan,
and all such other and further instruments as may be necessary
to vest title to the assets of the Company in its shareholders
in accordance with this Plan, and wind up its affairs in
dissolution in accordance with this Plan.
13. After adoption of the Dissolution by the shareholders, the
shareholders shall have no right to approve or disapprove the
terms of the sale of the Company's assets.
14. At any time, the Board of Trust Managers may, if the Board of
Trust Managers deems such action to be in the best interests
of the Company and the shareholders, cause the common shares
of beneficial interest of the Company to be delisted from any
securities exchange on which they are traded or to no longer
be traded or completely prohibit the trading or other transfer
of such common shares if and to the extent permitted by law.
15. If, in the judgment of the Board of Trust Managers, it appears
that the Company will be unable to satisfy its legally
enforceable obligations within 24 months after the Effective
Date, or if, at any time, the Company will no longer qualify
as a real estate investment trust, the Board of Trust Managers
may cause the Company to create a liquidating trust (the
"Liquidating Trust") and to distribute beneficial interests in
the Liquidating Trust to the shareholders as part of the
liquidation process. The Liquidating Trust shall be
constituted pursuant to a liquidating trust agreement in such
form as the Board may approve, it being intended that the
transfer and assignment to the Liquidating Trust pursuant
hereto and the distribution to shareholders of the beneficial
interests therein shall constitute a part of the final
liquidating distribution by the Company to the shareholders of
their interests in the remaining amount of cash and other
property held by or for the account of the Company. From and
after the date of the Company's transfer of cash and property
to the Liquidating Trust, the Company shall have no interest
of any character in and to any such cash and property and all
of such cash and property shall thereafter be held by the
Liquidating Trust solely for the benefit of and ultimate
distribution to the shareholders, subject to any unsatisfied
debts, liabilities and expenses.
A-2
<PAGE> 47
16. The Company shall reserve sufficient assets and/or obtain or
maintain such insurance as shall be necessary to provide the
continued indemnification of the Board of Trust Managers,
officers and agents of the Company, and other parties whom the
Company has agreed to indemnify, to the full extent provided
by the declaration of trust and the bylaws of the Company, any
existing indemnification agreement and applicable law. At the
discretion of the Board of Trust Managers, such insurance may
include coverage for periods after the Dissolution, including
periods after the termination of any Liquidating Trust, and
may include coverage for trustees, employees and agents of
such Liquidating Trust.
IN WITNESS WHEREOF, this Plan is executed to be effective as of the
29th day of March, 2000.
AMRESCO Capital Trust,
a Texas real estate investment trust
By: /s/ Jonathan S. Pettee
----------------------
Name: Jonathan S. Pettee
Title: President and Chief Operating Officer
A-3
<PAGE> 48
AMRESCO CAPITAL TRUST
700 NORTH PEARL STREET,
SUITE 1900, LB 342
DALLAS, TEXAS 75201
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUST MANAGERS
The undersigned hereby appoints each of Robert L. Adair III and Jonathan S.
Pettee, or either of them, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
below, all the common shares of beneficial interest of AMRESCO Capital Trust
held of record by the undersigned on _______, 2000 at the annual meeting of
shareholders to be held on June __, 2000 or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
THE BOARD OF TRUST MANAGERS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
PROPOSALS 1, 3 AND 4 AND FOR BOTH NOMINEES LISTED IN PROPOSAL 2. PLEASE REVIEW
CAREFULLY THE PROXY STATEMENT DELIVERED WITH THIS PROXY.
(Continued and to be dated and signed on the reverse side.)
<PAGE> 49
[X] Please mark your votes as in this example.
<TABLE>
<S> <C> <C> <C>
1. Approval of our complete liquidation and FOR AGAINST ABSTAIN
dissolution under the terms and conditions of the [ ] [ ] [ ]
plan of liquidation.
2. Election of Trust Managers Instruction: To withhold FOR WITHHOLD AUTHORITY ABSTAIN
authority for any individual nominee, write that [ ] FOR BOTH NOMINEES [ ]
nominee's name on the lines below. [ ]
---------------------------
----------------------------
3. Ratification of the appointment of Deloitte & FOR AGAINST ABSTAIN
Touche LLP as our independent public accountants [ ] [ ] [ ]
for 2000.
4. Adjournment of the meeting, if necessary to permit FOR AGAINST ABSTAIN
further solicitation of proxies if there are not [ ] [ ] [ ]
sufficient votes at the time of the meeting to
approve or disapprove proposals 1, 2 or 3.
In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
This Proxy, when properly executed, will be voted in the
manner directed herein by the undersigned shareholder. If no
direction is made, this Proxy will be voted FOR Proposals 1,
3 and 4 and FOR both nominees listed in Proposal 2.
Please sign exactly as name appears. When shares are held by
joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full
corporate name by the President or other authorized officer.
If a partnership, please sign in partnership name by an
authorized person.
DATED: , 2000
--------------------
-----------------------------------------
Signature
-----------------------------------------
Signature, if held jointly
</TABLE>
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE OR BY FACSIMILE TO (214) 758-1373.
