AMRESCO INC, S-3, 1995-12-22

AMRESCO INC
S-3, 1995-12-22
ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 22, 1995

REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------

AMRESCO, INC.
(Exact name of registrant as specified in its charter)

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<S> <C>
DELAWARE 59-1781257
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>

1845 WOODALL RODGERS FREEWAY
SUITE 1700
DALLAS, TEXAS 75201
(214) 953-7700
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------------

L. KEITH BLACKWELL
GENERAL COUNSEL AND SECRETARY
1845 WOODALL RODGERS FREEWAY
DALLAS, TEXAS 75201
(214) 953-7700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------

COPIES TO:

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<S> <C>
MICHAEL M. BOONE PATRICK DELANEY
HAYNES AND BOONE, L.L.P. LINDQUIST & VENNUM, P.L.L.P.
3100 NATIONSBANK PLAZA 4200 IDS CENTER
901 MAIN STREET MINNEAPOLIS, MINNESOTA 55402
DALLAS, TEXAS 75202-3789 (612) 371-3211
(214) 651-5000
</TABLE>

--------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING
OF SECURITIES TO BE REGISTERED REGISTERED (1) SECURITY (2) PRICE (2)
<S> <C> <C> <C>
Senior Subordinated Notes due 2003........ $57,500,000 100% $57,500,000

TITLE OF EACH CLASS AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Senior Subordinated Notes due 2003........ $11,500
</TABLE>

(1) Includes $7,500,000 principal amount issuable upon exercise of the
Underwriters' over-allotment option.

(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(a) of Regulation C under the Securities Act of 1933.
--------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 22, 1995
PROSPECTUS
DATED , 1996
$50,000,000

[LOGO]

% SENIOR SUBORDINATED NOTES DUE 2003

------------------------

The % Senior Subordinated Notes due 2003 (the "Notes") offered hereby are
senior subordinated obligations of AMRESCO, INC. (the "Company"). Interest on
the Notes is payable on the fifteenth day of each month, commencing ,
1996 and will accrue at the rate of % per annum until maturity or earlier
redemption. The Notes mature on , 2003. The Notes are not redeemable
prior to , 2001. However, the Notes are redeemable thereafter at the
option of the Company at par plus accrued interest upon not less than 30 nor
more than 60 days' notice to the holders thereof. The Notes will be issued only
in fully registered form and in denominations of $1,000 and integral multiples
thereof. The Notes will be unsecured general obligations of the Company and will
be subordinated to all existing and future "Senior Indebtedness", as defined, of
the Company. As of December 15, 1995, Senior Indebtedness of the Company totaled
approximately $85.2 million. The Notes will also be structurally subordinated in
right of payment to all liabilities of the Company's subsidiaries, which at
November 30, 1995, totaled approximately $171.4 million (excluding $53.1 million
representing intercompany notes of subsidiaries payable to the Company in
respect of obligations that are included in Senior Indebtedness of the Company).
The shares of capital stock, the Company's 8% Convertible Debentures due 2005,
and any other indebtedness that the Company may issue which is subordinated to
the Notes by its terms will be junior to the Notes. The Company will redeem, at
par plus accrued interest to the date of redemption, Notes tendered by the
personal representative or surviving joint tenant or tenant by the entirety of a
deceased holder, after presentation of necessary documents, up to an annual
maximum of $30,000 per holder and subject to a maximum aggregate of $300,000
during any twelve month period. The Company has made application to list the
Notes on the New York Stock Exchange. See "Description of the Notes."

SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES OFFERED HEREBY.

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Note.................................. % % %
Total (3)................................. $ $ $
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting offering expenses payable by the Company estimated at
$ .

(3) The Company has granted to the Underwriters an option, exercisable within 30
days of the date of this Prospectus, to purchase up to an additional
$7,500,000 aggregate principal amount of Notes, at the Price to Public less
Underwriting Discount, solely for the purpose of covering over-allotments,
if any. If the Underwriters exercise such option in full, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."

------------------------

The Notes are offered by the Underwriters named herein, subject to prior sale
and when, as and if delivered to and accepted by the Underwriters. It is
expected that delivery of certificates for the Notes will be made at the offices
of Piper Jaffray Inc. in Minneapolis, Minnesota on or about , 1996.

PIPER JAFFRAY INC.
<PAGE>
AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In accordance with the
Exchange Act, the Company files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). The reports,
proxy statements and other information can be inspected and copied at the public
reference facilities that the Commission maintains at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
located at 7 World Trade Center, 13th Floor, New York, New York 10048, and
Northwestern Atrium Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661. Copies of these materials can be obtained at prescribed rates
from the Public Reference Section of the Commission at the principal offices of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The Common Stock
is listed on the Nasdaq National Market and reports, proxy statements and other
information concerning the Company may be inspected at the offices of the Nasdaq
National Market, 1735 K Street, N.W., Washington, D.C. 20006.

The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Notes. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement, certain items of which are
contained in schedules and exhibits to the Registration Statement as permitted
by the rules and regulations of the Commission. Statements made in the
Prospectus concerning the contents of any documents referred to herein are not
necessarily complete. With respect to each such document filed with the
Commission as an exhibit to the Registration Statement, reference is made to the
exhibit for a more complete description, and each such statement shall be deemed
qualified in its entirety by such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference in
this Prospectus the Company's: (i) Annual Report on Form 10-K for the year ended
December 31, 1994, (ii) Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995, (iii) Quarterly Report on Form 10-Q for the quarter ended June
30, 1995, (iv) Quarterly Report on Form 10-Q for the quarter ended September 30,
1995, as amended by its Form 10-Q/A No. 1 dated October 25, 1995, (v) Current
Report on Form 8-K dated November 22, 1995 and (vi) Current Report on Form 8-K
dated December 7, 1995.

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Offering shall be deemed to be incorporated by reference
herein. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed superseded or modified for
purposes of this Prospectus to the extent that a statement contained herein (or
in any other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.

The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of any such person, a copy of any or all of the documents incorporated
by reference (other than exhibits to such documents which are not specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to the Company, 1845 Woodall Rodgers Freeway, Suite 1700,
Dallas, Texas 75201, Attention: L. Keith Blackwell, General Counsel and
Secretary. Telephone requests may be directed to L. Keith Blackwell, General
Counsel and Secretary of the Company at (214) 953-7700.

2
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[Map of the United States showing the locations of the Company's Asset
Acquisition and Resolution offices, Mortgage Banking offices, Real Estate
Pension Advisory office and Corporate Headquarters, and a listing of
International Offices in Toronto and London.]

The Company intends to furnish holders of the Notes with (i) annual reports
containing audited financial statements and (ii) for so long as the Company
provides quarterly reports to its shareholders, quarterly reports for each of
the first three quarters of each fiscal year, which will contain unaudited
summary financial information.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

3
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CERTAIN DEFINITIONS

The following are certain defined terms used in this Prospectus:

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<S> <C>
"ACACIA" means Acacia Realty Advisors, Inc.

"ACACIA ACQUISITION" means the acquisition by the Company of the real estate
pension advisory business of Acacia Realty Advisors, Inc.

"ACC" means AMRESCO Capital Corporation, a subsidiary of the Company.

"ARMC" means, collectively, AMRESCO Residential Mortgage Corporation and AMRESCO
Residential Credit Corporation, subsidiaries of the Company.

"ASSET PORTFOLIO" means a pool or portfolio of performing, non-performing or
underperforming commercial, industrial, agricultural and/or real estate
loans.

"BEI" means BEI Holdings, Ltd.

"BEI MERGER" means the merger of Holdings with and into a subsidiary of BEI on
December 31, 1993.

"CKSRS" means CKSRS Housing Group, Ltd., a Florida limited partnership.

"COMPANY" means, unless otherwise stated in this Prospectus or unless the
context otherwise requires, the Company and each of its subsidiaries.

"CONDUIT PURCHASERS" means investment bankers and other financial intermediaries
who purchase or otherwise accumulate pools or portfolios of loans having
common features (E.G., real estate mortgages, etc.), with the intent of
securitizing such loan assets and selling them to a trust that secures its
funds by selling ownership interests in the trust to public or private
investors.

"CONVERTIBLE SUBORDINATED DEBENTURES" means the Company's 8% Convertible
Subordinated Debentures due 2005.

"CONVERTIBLE SUBORDINATED DEBENTURE INDENTURE" means that certain Indenture
dated November 27, 1995, governing the Convertible Subordinated Debentures.

"CREDIT AGREEMENTS" means the Revolving Loan Agreement and the Warehouse
Agreements.

"EQS" means, collectively, EQ Services, Inc. and Equitable Real Estate
Investment Management, Inc.

"EQS ACQUISITION" means the acquisition by the Company of the third-party
securitized, commercial mortgage loan Master Servicer and Special Servicer
business of EQS.

"FACE VALUE" means, with respect to any loan or Asset Portfolio, the aggregate
unpaid principal balance of a loan or loans.

"FANNIE MAE" means the Federal National Mortgage Association.

"FDIC" means the Federal Deposit Insurance Corporation.

"FREDDIE MAC" means the Federal Home Loan Mortgage Corporation.

"HOLDINGS" means AMRESCO Holdings, Inc.

"HOLLIDAY FENOGLIO" means Holliday Fenoglio, Inc., a subsidiary of the Company.

"MASTER SERVICER" means an entity which provides administrative services to
securitized pools of mortgage-backed securities.

"NATIONSBANK CONTRACT" means the asset management contract, as amended,
originally dated July 1, 1992, among the Company, NationsBank Corporation
and certain of its bank subsidiaries.
</TABLE>

4
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<TABLE>
<S> <C>
"NATIONSBANK OF TEXAS" means NationsBank of Texas, N.A.

"PRIMARY SERVICER" means an entity which provides various administrative
services for loans such as collecting monthly mortgage payments, maintaining
escrow accounts for the payment of ad valorem taxes and insurance premiums
on behalf of borrowers, remitting payments of principal and interest
promptly to investors in mortgages or the Master Servicer of a pool and
reporting to those investors or the Master Servicer on financial
transactions related to such mortgages.

"OFFERING" means the offering of Notes made hereby.

"REVOLVING LOAN AGREEMENT" means the Revolving Loan Agreement dated as of
September 29, 1995, among the Company, NationsBank of Texas, as Agent, and
the Banks which are parties thereto from time to time.

"RTC" means the Resolution Trust Corporation.

"SECURITIZATION" and "SECURITIZED" mean a transaction in which loans originated
or purchased by an entity are sold to special purpose entities organized for
the purpose of issuing asset-backed securities.

"SPECIAL SERVICER" means an entity which provides asset management and
resolution services for non-performing or under-performing loans within a
pool of performing loans and/or mortgages.

"WAREHOUSE" means a type of lending arrangement whereby loans funded and held
for sale are financed by financial institutions or institutional lenders on
a short-term basis.

"WAREHOUSE AGREEMENTS" means, collectively, (i) the $25.0 million credit
facility dated as of April 28, 1995, among ACC, the Company and NationsBank
of Texas, (ii) the credit facility dated as of August 15, 1995, between ACC
and Residential Funding Corporation and (iii) the $150.0 million credit
facility dated as of November 3, 1995, between ARMC and Prudential
Securities Realty Funding Corporation.
</TABLE>

5
<PAGE>
SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION CONTAINED IN
THIS PROSPECTUS DOES NOT GIVE EFFECT TO THE EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION IN RESPECT OF THE NOTES.

THE COMPANY

GENERAL. The Company is a leading specialty financial services company
engaged primarily in Asset Portfolio acquisition and resolution and mortgage
banking. The Asset Portfolio acquisition and resolution business involves
acquiring at a substantial discount to Face Value and managing and resolving
Asset Portfolios to maximize cash recoveries. The Company manages and resolves
Asset Portfolios acquired by the Company alone, acquired by the Company with
co-investors and owned by third-parties. The Company's mortgage banking business
involves the origination, placement and servicing of commercial real estate
mortgages. In addition, the Company has formed a residential mortgage banking
business through which the Company will purchase and securitize portfolios of
residential mortgages of borrowers who do not qualify for conventional loans and
whose borrowing needs are not being met by traditional financial institutions.
The Company also is entering the real estate pension advisory business through
the purchase of substantially all of the advisory contracts of Acacia.

HISTORY. The Company is the product of the December 1993 merger of two
Asset Portfolio management and resolution service companies: BEI and Holdings.
Holdings was the former Asset Portfolio management and resolution unit of
NationsBank of Texas, which was created in 1988 in connection with NationsBank
Corporation's acquisition from the FDIC of certain assets and liabilities of the
collapsed First RepublicBank. BEI, a publicly-held company that was in the real
estate and asset management services businesses, began providing asset
management and resolution services to the RTC in 1990. BEI also participated in
certain non-real estate service businesses, which were not retained after the
BEI Merger. The BEI Merger created one of the largest Asset Portfolio management
and resolution service companies in the United States. Since 1987, the Company
and its predecessors have managed approximately $30.0 billion (Face Value) of
Asset Portfolios.

DEVELOPMENT OF BUSINESS STRATEGY. The Company's original business of
managing and resolving Asset Portfolios for third parties developed as a result
of the takeover of failed thrifts and banks by the federal government's deposit
insurance agencies in the late 1980s. Due to the substantial volume of
under-performing and non-performing loans and foreclosed assets (much of it
commercial real estate loans and properties) and a lack of sufficient internal
staffing, the RTC and FDIC turned to private contractors to assist in the
management and resolution of Asset Portfolios.

In early 1994, the Company made the strategic decision to diversify its
business lines and to reduce the Company's dependence on asset management and
resolution contracts with governmental agencies and certain other entities. As a
result, the Company shifted its strategic focus in order to take advantage of
business opportunities in the specialty finance markets that capitalize on the
Company's competitive strengths and reputation within its core business.

ASSET ACQUISITION AND RESOLUTION BUSINESS. The Company manages and resolves
Asset Portfolios acquired at a substantial discount to Face Value by the Company
alone and by the Company with co-investors. The Company also resolves Asset
Portfolios owned by third parties. Asset Portfolios generally include secured
loans of varying qualities and collateral types. The resolution of an Asset
Portfolio typically involves either (i) negotiating with debtors a discounted
payoff, which may be accomplished through a refinancing by the obligor with a
lender other than the Company or (ii) foreclosure and sale of the collateral.
Since the Company's objective is to resolve an Asset Portfolio as quickly as
practicable, the Company's policy is to not extend credit to debtors by
advancing cash or by renewing and extending their obligations. As of September
30, 1995, the Company's management and resolution service contracts with
third-parties (including Asset Portfolios owned by the Company with
co-investors) covered Asset Portfolios having an aggregate

6
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Face Value of $2.7 billion of which $411.3 million was represented by
securitized commercial mortgage pools with respect to which the Company is the
named Special Servicer. At September 30, 1995, the Company's total investment in
Asset Portfolios was $175.8 million compared to $70.9 million at December 31,
1994 and $48.8 million at September 30, 1994. For the nine month period ended
September 30, 1995 and the fiscal year ended December 31, 1994, $54.3 million
(78%) and $139.1 million (88%) respectively of the Company's gross revenues were
attributable to its Asset Portfolio acquisition and resolution business.

MORTGAGE BANKING BUSINESS. The Company performs a wide range of commercial
mortgage banking services, including originating, underwriting, placing, selling
and servicing of commercial real estate loans through its Holliday Fenoglio and
ACC mortgage banking units. Holliday Fenoglio was one of the largest mortgage
bankers in the United States in 1994 (based on origination volume) and primarily
serves commercial real estate developers and owners by originating commercial
real estate loans. Holliday Fenoglio primarily targets developers and owners of
higher-quality commercial and multi-family real estate properties. Holliday
Fenoglio originates prospective borrowers through its own commission-based
mortgage bankers in its offices located in Atlanta, Boca Raton, Buffalo, Dallas,
Houston, New York City and Orlando. The loans originated by Holliday Fenoglio
generally are funded by institutional lenders, primarily insurance companies,
with Holliday Fenoglio retaining the Primary Servicer rights on approximately
20% of such loans. The Company believes that Holliday Fenoglio's relationship
and credibility with the institutional lender network provide the Company a
competitive advantage in the commercial mortgage banking industry.

ACC, which originated approximately $260.7 million of commercial real estate
mortgages during the nine months ended September 30, 1995, is a mortgage banker
that originates and underwrites commercial real estate loans that are funded
primarily by Conduit Purchasers rather than by institutional lenders such as
insurance companies. ACC, therefore, makes certain representations and
warranties concerning the loans it originates. These representations cover such
matters as title to the property, lien priority, environmental reviews and
certain other matters. ACC primarily targets originators of commercial mortgage
loans for commercial real estate properties that are suitable for sale to
Conduit Purchasers accumulating loans for securitization programs. ACC markets
its services directly through ACC's offices located in Dallas, Miami and
Washington, D.C., as well as through a network of approximately 20 independent
mortgage brokers located throughout the United States. ACC recently established
a relationship with the 22 office commercial real estate finance unit of a major
insurance company whereby the insurance company has agreed to refer prospective
borrowers to the Company in instances where the prospective borrower does not
meet the insurer's requirements (typically borrowers for medium-quality
commercial properties). Since ACC commenced its underwriting activities and
through September 30, 1995, Holliday Fenoglio has originated approximately 31%
of the loans underwritten by ACC, with Holliday Fenoglio and ACC each receiving
fees for their respective services.

As of September 30, 1995, the Company was the servicer for approximately
$3.1 billion of commercial mortgages of which $117.0 million was as a Master
Servicer and $3.0 billion was as a Primary Servicer. On October 27, 1995, the
Company acquired additional servicing business in the EQS Acquisition. See
"Recent Developments -- Acquisition of EQS." The Company has formed a
residential mortgage banking business through which the Company will purchase
and securitize portfolios of non-conforming residential mortgages. For the
nine-month period ended September 30, 1995, $14.1 million (20.2%) of the
Company's gross revenues were attributable to the Company's mortgage banking
business.

BUSINESS STRATEGY. The Company seeks to continue to increase its market
share in its existing business lines and to enter related businesses through
both internal growth and acquisitions. See "Recent Developments." Key elements
of this strategy include:

- increasing the amount that the Company invests for its own account in
Asset Portfolios by capitalizing on its expertise in managing and
resolving Asset Portfolios for third parties;

- continuing to provide high quality management and resolution services to
co-investors and other third-party owners of Asset Portfolios;

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<PAGE>
- expanding its presence in the traditional mortgage banking market through
greater market penetration and by participating in the expanding market
for securitization of commercial and residential real estate mortgages;
and

- developing its new real estate pension advisory business to complement the
Company's existing business lines.

The Company is a Delaware corporation. The Company's principal executive
offices and mailing address are 1845 Woodall Rodgers Freeway, Suite 1700,
Dallas, Texas 75201 and its telephone number is (214) 953-7700.

THE OFFERING

<TABLE>
<S> <C>
Notes offered..................... $50,000,000 principal amount of % Senior
Subordinated Notes due 2003. See "Description of the
Notes -- General."
Denomination...................... $1,000 and integral multiples thereof.
Maturity.......................... 15, 2003.
Interest payment dates............ Monthly, commencing 15, 1996, and on the
fifteenth day of each month thereafter. The first
interest payment will represent interest from the date
of issuance of the Notes through 14, 1996.
Redemption at option of the
Company.......................... The Notes may not be redeemed prior to , 2001.
Thereafter, the Notes may be redeemed in whole or in
part at any time at the option of the Company, upon not
less than 30 nor more than 60 days' written notice, at
par plus accrued interest to the date of redemption. See
"Description of the Notes -- Redemption at Option of the
Company."
Repayment option upon death....... Upon the death of any holder of Notes, the Company will
redeem, at par plus accrued interest, such holder's
Notes upon request up to $30,000 in principal amount per
holder per year subject to an aggregate limit for all
holders of $300,000 in principal amount in any twelve
month period and certain conditions being met, including
the condition that the Company would not be in default
on any Senior Indebtedness as a result of such
redemption. See "Description of the Notes -- Repayment
Option Upon Death."
Subordination..................... The Notes are subordinated to the prior payment of all
existing and future Senior Indebtedness. See
"Description of the Notes -- Subordination." The Notes
will also be structurally subordinated to all
liabilities of and the rights of holders of preferred
stock, if any, of the Company's subsidiaries. The Notes
are not secured by any collateral. Upon consummation of
the Offering, only the capital stock and the Convertible
Subordinated Debentures of the Company will be junior to
the Notes. At December 15, 1995, Senior Indebtedness of
the Company totaled approximately $85.2 million. At
November 30, 1995, liabilities of the Company's
subsidiaries totaled approximately $171.4 million
(excluding approximately $53.1 million representing
intercompany notes of subsidiaries payable to the
Company in respect of obligations that are included in
Senior Indebtedness of the Company). Following the
Offering, the Company will have the ability to incur a
</TABLE>

8
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<TABLE>
<S> <C>
significant amount of additional indebtedness, including
indebtedness which may have rights that are senior to or
equivalent to those of the Notes in respect of payments
and distributions on liquidation. See "Description of
the Notes -- Restrictions on Additional Indebtedness."
Limited rights of acceleration or
repurchase....................... Payment of principal on the Notes may be accelerated
upon the occurrence of Events of Default (as defined)
only upon the action of the Trustee or the holders of at
least 25% in aggregate principal amount of outstanding
Notes, and such acceleration may be rescinded by the
holders of a majority of the aggregate principal amount
of the outstanding Notes if all Events of Default are
remedied and all payments due are made before a judgment
or decree for payment of money due is obtained. See
"Description of the Notes -- Events of Default."
Covenants......................... The indenture under which the Notes will be issued (the
"Indenture") will contain certain covenants that, among
other things, will limit (i) the Company's ability to
incur Indebtedness for Money Borrowed (as defined), (ii)
the payment of dividends or distributions to holders of
the Company's equity securities and (iii)
consolidations, mergers and transfers of all or
substantially all of the Company's assets. All of these
covenants, however, are subject to a number of important
qualifications. See "Description of the Notes --
Covenants."
Listing........................... The Company has made application to list the Notes on
the New York Stock Exchange.
Trustee........................... Bank One, Columbus, N.A.
</TABLE>

USE OF PROCEEDS

The net proceeds from the sale of the Notes offered hereby by the Company
will be used to reduce the Company's outstanding borrowings under the Revolving
Loan Agreement. After application of the net proceeds, approximately $
million will be available for borrowing under the Revolving Loan Agreement to be
used for general corporate purposes, which may include funding investments in
Asset Portfolios, acquiring new businesses or making strategic investments in
companies that complement the Company's business lines and strategies. See "Use
of Proceeds."

RISK FACTORS

Prior to making an investment decision, prospective purchasers of the Notes
should consider all of the information set forth in this Prospectus and should
evaluate the considerations set forth in "Risk Factors."

9
<PAGE>
SUMMARY FINANCIAL AND OTHER DATA

The summary data presented below under the captions "Summary Income
Statement" and "Summary Balance Sheet Data" for and as of the end of each of the
fiscal years in the three-year period ended December 31, 1994, are derived from
the Consolidated Financial Statements of the Company and its predecessors
audited by Deloitte & Touche LLP and included herein. In the opinion of
management of the Company, the data presented for the nine months ended
September 30, 1994 and 1995, which are derived from the Company's unaudited
consolidated financial statements, reflect all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of the financial
position and results of operations for such periods. Results for the nine months
ended September 30, 1995, are not necessarily indicative of results for the
entire fiscal year. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Consolidated Financial Statements and
the Notes to Consolidated Financial Statements.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1992(1) 1993 1994(2) 1994(2) 1995
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
SUMMARY INCOME STATEMENT:
Revenues:
Asset management and resolution fees................ $166,857 $168,313 $120,640 $101,221 $27,278
Asset Portfolio income.............................. -- 2,642 13,089 8,433 23,662
Mortgage banking fees............................... -- -- 6,176 1,967 14,077
Other revenues...................................... 1,273 1,207 17,279 16,184 4,585
--------- --------- --------- --------- ---------
Total revenues.................................... 168,130 172,162 157,184 127,805 69,602
Operating expenses.................................... 134,085 127,731 119,730 92,579 46,860
--------- --------- --------- --------- ---------
Operating income...................................... 34,045 44,431 37,454 35,226 22,742
Interest expense...................................... 19 754 1,768 1,696 2,771
--------- --------- --------- --------- ---------
Income from continuing operations before taxes........ 34,026 43,677 35,686 33,530 19,971
Income tax expense.................................... 10,730 17,371 14,753 13,874 7,541
--------- --------- --------- --------- ---------
Income from continuing operations..................... 23,296 26,306 20,933 19,656 12,430
Gain (loss) from discontinued operations.............. (1,063) (2,088) (2,185) (976) 2,425
--------- --------- --------- --------- ---------
Net income............................................ $22,233 $24,218 $18,748 $18,680 $14,855
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings per share from continuing operations......... $2.04 $2.33 $0.88 $0.83 $0.51
Earnings per share.................................... 1.95 2.15 0.79 0.79 0.61
Weighted average number of shares outstanding......... 11,419,536 11,288,688 23,679,239 23,515,800 24,429,822
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
------------------------------- --------------------
1992 1993 1994 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SUMMARY BALANCE SHEET DATA:
Cash and cash equivalents............................. $4,228 $43,442 $20,446 $41,733 $12,720
Investment securities................................. -- -- -- -- 27,222
Investment in Asset Portfolios:
Loans............................................... -- 33,795 30,920 17,272 114,676
Partnerships and joint ventures..................... -- 2,503 22,491 14,157 30,052
Real estate......................................... -- 2,504 14,054 14,201 11,046
Asset-backed securities............................. -- -- 3,481 3,481 19,982
Total assets.......................................... 44,238 163,653 172,340 162,582 291,082
Notes payable......................................... 4,656 22,113 15,500 4,406 104,222
Mortgage warehouse debt............................... -- -- -- -- 5,693
Nonrecourse debt...................................... -- 6,000 959 4,761 30,605
Total indebtedness.................................... 4,656 28,113 16,459 9,167 140,520
Shareholders' equity.................................. 18,735 91,699 113,586 114,558 129,024

OTHER DATA:
Ratio of earnings to fixed charges (3)................ N/A(4) 58.9x 21.2x 20.8x 8.2x
Pro forma ratio of earnings to fixed charges (5)...... N/A N/A
EBITDA (6)............................................ $40,294(1) $45,668 $43,177 $37,325 $25,436
Interest coverage ratio (7)........................... N/A(4) 60.6x 24.4x 22.0x 9.2x
Pro forma interest coverage ratio (5)................. N/A N/A
Face Value of assets under management................. $8,060,400 $5,756,900 $3,088,700 $2,436,800 $3,040,700
Commercial mortgage loans originated (for the
period ended):
Face Value.......................................... -- -- $610,000 $185,200 $1,585,000
Number of loans..................................... -- -- 106 28 255
Commercial mortgage loans serviced:
Face Value.......................................... -- -- $2,555,000 $2,592,000 $2,970,000
Number of loans..................................... -- -- 592 559 749
</TABLE>

10
<PAGE>
- ------------------------------
(1) Includes the Company's operations for the two months ended December 31,
1992, and the combined operations of its predecessor entities for the ten
months ended October 31, 1992.

(2) Summary Income Statement and Other Data for the fiscal year ended December
31, 1994, and the nine months ended September 30, 1994, reflect data for
Holliday Fenoglio effective August 1, 1994, the effective date of its
acquisition by the Company.

(3) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of operating income before income taxes and fixed charges. Fixed
charges consist of interest expense.

(4) The Company had nominal interest expense in 1992 and it was not meaningful,
therefore, to calculate these ratios for the year ended December 31, 1992.

(5) Gives effect to the offering of the Convertible Subordinated Debentures, the
offering of the Notes hereby and the application of the respective net
proceeds therefrom, as if such events had occurred on January 1, 1994 and
1995, respectively. Does not give effect to the incurrence by a subsidiary
of the Company of additional indebtedness in 1995, which aggregated
approximately $115.8 million at November 30, 1995.

(6) EBITDA is calculated as operating income (excluding gain (loss) from
discontinued operations) before interest, income taxes, depreciation and
amortization. The Company has included information concerning EBITDA because
EBITDA is one measure of an issuer's historical ability to service its debt.
EBITDA should not be considered as an alternative to, or more meaningful
than, net income as an indicator of the Company's operating performance or
to cash flows as a measure of liquidity.

(7) Interest coverage ratio means the ratio of EBITDA to cash interest expense.

11
<PAGE>
RISK FACTORS

PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, AMONG OTHER THINGS, THE
FOLLOWING FACTORS IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING
THE NOTES OFFERED HEREBY.

UNCERTAIN NATURE OF THE ASSET ACQUISITION AND RESOLUTION BUSINESS

The outsourcing of the management and resolution of Asset Portfolios has
grown rapidly since the late 1980s; accordingly, the asset acquisition and
resolution business is relatively young and still evolving. This business is
affected by long-term cycles in the general economy. In addition, the Asset
Portfolios available for purchase by investors and/or management by third party
servicers such as the Company has declined since 1993. The Company cannot
predict what will be a normal annual volume of Asset Portfolios to be sold or
outsourced for management and resolution. Moreover, there cannot be any
assurance that Asset Portfolio purchasers/owners for whom the Company provides
Asset Portfolio management services will not build their own management and
resolution staffs and reduce or eliminate their outsourcing of these services.
As a result of these factors, it is difficult to predict the long-term future of
this business.

STRATEGIC SHIFT IN BUSINESS LINES

In early 1994, the Company made the strategic decision to diversify its
business lines and to reduce the Company's dependence on asset management and
resolution contracts with governmental agencies and certain other entities. The
Company has substantially increased its investments in Asset Portfolios. The
Company also pursues private sector Asset Portfolio management contracts,
generally through co-investing in Asset Portfolios. Since 1993, the Company has
also entered the commercial and residential mortgage banking businesses and has
purchased a pension advisory business.

As a result, the Company must simultaneously manage (i) a significant change
in its customer mix, (ii) the investment of the Company's own capital in Asset
Portfolios and (iii) the development of new business lines in which the Company
has not previously participated. All of these activities will require the
investment of additional capital and the significant involvement of senior
management to achieve a successful outcome. There is no assurance that the
Company will successfully execute this strategic transition.

GENERAL ECONOMIC CONDITIONS

Periods of economic slowdown or recession, rising interest rates or
declining demand for real estate may adversely affect certain segments of the
Company's business. Although such economic conditions may increase the number of
non-performing loans available for sale to or for management by the Company,
such conditions could adversely affect the resolution of Asset Portfolios held
by the Company for its own account or managed for others by the Company, lead to
a decline in prices or demand for collateral underlying Asset Portfolios or, in
the case of Asset Portfolios held for the Company's own account, increase the
cost of capital invested by the Company and the length of time that capital is
invested in a particular portfolio, thereby negatively impacting the rate of
return upon resolution of the portfolio. Economic downturns and rising interest
rates also may reduce the number of mortgage loan originations by the Company's
mortgage banking business and thereby may adversely affect the Company's
mortgage banking business.

FINANCIAL LEVERAGE

Following the Offering, the Company will have substantial indebtedness and,
as a result, significant debt service obligations. As of December 15, 1995,
after giving effect to the Offering and the application of the estimated net
proceeds therefrom, the Company would have had approximately $284.7 million
aggregate amount of indebtedness outstanding, representing 65% of its total
capitalization. See "Use of Proceeds" and "Capitalization."

The ratio of the Company's debt to equity could have important consequences
to purchasers of the Notes, including: (i) limiting the Company's ability to
obtain necessary additional financing to fund future working capital
requirements, Asset Portfolio investments, capital expenditures, acquisitions or
other general corporate requirements, (ii) requiring a significant portion of
the Company's cash flow from operations to be dedicated to debt service
requirements, thereby reducing the funds available for operations and future
business opportunities, (iii) requiring all of the indebtedness incurred under
the Revolving Loan Agreement

12
<PAGE>
to be repaid prior to the time any principal payments are required on the Notes,
thereby potentially impairing the Company's ability to make payments on the
Notes, and (iv) increasing the Company's vulnerability to adverse economic and
industry conditions. In addition, since certain of the Company's borrowings,
including borrowings under the Revolving Loan Agreement, will be at variable
rates of interest, the Company will be vulnerable to increases in interest
rates. The Company may incur additional indebtedness in the future, although its
ability to do so will be restricted by the Indenture and the Credit Agreements.
The ability of the Company to make scheduled payments under its present and
future indebtedness, or to refinance such indebtedness, will depend on, among
other things, the future operating performance of the Company, changes in
interest rates, general economic conditions, and the perception in the capital
markets of the Company's business, results of operations, leverage, financial
condition and business prospects. Each of these factors is to a large extent
subject to economic, financial, competitive and other factors beyond the
Company's control. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

The Credit Agreements contain numerous financial and operating covenants
that will limit the discretion of the Company's management with respect to
certain business matters. These covenants will place significant restrictions
on, among other things, the ability of the Company to make certain payments and
investments, and to sell or otherwise dispose of assets and merge or consolidate
with other entities. See "Description of Other Indebtedness." The Credit
Agreements also require the Company to meet certain financial ratios and tests.
A failure to comply with the obligations contained in the Credit Agreements
could result in an event of default under any of the Credit Agreements, the
Convertible Subordinated Debenture Indenture or the Indenture, which could
permit acceleration of the related indebtedness and acceleration of indebtedness
under other instruments that may contain cross-acceleration or cross-default
provisions. See "Description of Other Indebtedness."

SUBORDINATION OF THE NOTES

The Notes will be subordinated in right of payment in full to all existing
and future Senior Indebtedness of the Company, which includes all indebtedness
under the Revolving Loan Agreement. As of December 15, 1995, after giving effect
to the Offering and the application of the net proceeds therefrom, the Company
would have had Senior Indebtedness aggregating approximately $37.4 million and
would have had up to $91.8 million available under the Revolving Loan Agreement
which, if borrowed, would be included as Senior Indebtedness. In the event of
the liquidation, dissolution, reorganization or any similar proceeding regarding
the Company, the assets of the Company will be available to pay obligations on
the Notes only after Senior Indebtedness of the Company has been paid in full.
Accordingly, there may not be sufficient assets remaining to pay amounts due on
all or any of the Notes. See "Description of the Notes -- Subordination."

The Notes will be effectively subordinated to indebtedness, preferred stock
(if any) and liabilities of the Company's subsidiaries. As of November 30, 1995,
the aggregate amount of liabilities of the Company's subsidiaries was
approximately $171.4 million (excluding $53.1 million representing intercompany
notes of subsidiaries payable to the Company in respect of obligations that are
included in Senior Indebtedness of the Company. The Company's operations are
conducted principally through its wholly-owned subsidiaries. Accordingly, the
Company will be dependent upon the cash flow of, and receipt of dividends or
advances from, its subsidiaries in order to meet its debt obligations, including
the Company's obligations under the Notes. Since the Notes are obligations of
the parent company only, the Company's subsidiaries are not obligated or
required to pay any amounts pursuant to the Notes or to make funds available
therefor in the form of dividends or advances to the Company. In addition, since
the Company is a holding company, its principal assets consist of its equity
ownership position in its wholly-owned subsidiaries. The claims of holders of
the Notes effectively will be subordinated to the prior claims of holders of
preferred stock, if any, and creditors, including trade creditors, of the
Company's subsidiaries.

In addition to being subordinated to all existing and future Senior
Indebtedness of the Company, the Notes will not be secured by any of the
Company's assets. The Revolving Loan Agreement is secured by substantially all
of the assets of the Company not pledged under other credit facilities,
including stock of a

13
<PAGE>
majority of the Company's subsidiaries. If the Company becomes insolvent or is
liquidated, or if payment under the Revolving Loan Agreement is accelerated, the
lenders under the Revolving Loan Agreement would be entitled to exercise the
remedies available to a secured lender under applicable law and pursuant to the
Revolving Loan Agreement. Accordingly, such lenders will have a prior claim with
respect to such assets and subsidiary capital stock.

LIMITED COVENANTS

The covenants in the Indenture are limited and are not designed to protect
holders of the Notes in the event of a material adverse change in the Company's
financial condition or results of operations. The Indenture prohibits, among
other things, the Company from incurring Indebtedness for Money Borrowed (as
defined) if, immediately after giving effect thereto; (i) the aggregate amount
of the Senior Recourse Indebtedness (as defined) outstanding would exceed 450%
of the Company's Consolidated Capitalization (as defined), (ii) the aggregate
amount of Subordinated Indebtedness (as defined) outstanding would exceed 100%
of the Company's Consolidated Net Worth (as defined) and (iii) the Interest
Coverage Ratio (as defined) would be less than 1.25 to 1 for the preceding
twelve (12) month period, on a pro forma basis as if such additional
Indebtedness for Money Borrowed had been outstanding during the entire period.
The provisions of the Indenture should not be a significant factor in evaluating
whether the Company will be able to comply with its obligations under the Notes.
See "Description of the Notes."

NEED FOR ADDITIONAL FINANCING

The Company's ability to execute its business strategy depends to a
significant degree on its ability to obtain additional indebtedness and equity
capital. Other than as described in this Prospectus, the Company has no
commitments for additional borrowings or sales of equity and there can be no
assurance that the Company will be successful in consummating any such future
financing transactions on terms satisfactory to the Company, if at all. Factors
which could affect the Company's access to the capital markets, or the costs of
such capital, include changes in interest rates, general economic conditions,
and the perception in the capital markets of the Company's business, results of
operations, leverage, financial condition and business prospects. Each of these
factors is to a large extent subject to economic, financial, competitive and
other factors beyond the Company's control. See "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

DEPENDENCE ON SECURITIZATION PROGRAM

The Company likely will become more dependent upon its ability to pool and
sell loans in the secondary market in order to generate cash proceeds for new
originations and purchases. Accordingly, adverse changes in the secondary
mortgage market could impair the Company's ability to originate, purchase and
sell mortgage loans on a favorable or timely basis. Any such impairment could
have a material adverse effect upon the Company's business and results of
operations. In addition, in order to gain access to the secondary market, the
Company may rely on monoline insurance companies to provide, in exchange for
premiums, a guarantee on outstanding senior interests in the related
securitization trusts to enable it to obtain a "AAA/ Aaa" rating for such
interests. Any substantial reductions in the size or availability of the
secondary market for the Company's loans, or the unwillingness of monoline
insurance companies to guarantee the senior interests in the Company's loan
pools, could have a material adverse effect on the Company's financial position
and results of operations.

RISKS OF HEDGING TRANSACTIONS

The Company has in the past and may in the future enter into interest rate
or foreign currency financial instruments used for hedging purposes. While
intended to reduce the effects of volatility in interest rate or foreign
currency price movements, such transactions could cause the Company to recognize
losses depending on the terms of the instrument and the interest rate or foreign
currency price movement.

14
<PAGE>
COMPETITION

The Asset Portfolio management and other financial services industries in
which the Company operates are highly competitive. Some of the Company's
principal competitors in certain business lines are substantially larger and
better capitalized than the Company. Because of these resources, these companies
may be better able than the Company to obtain new customers, to acquire Asset
Portfolios, to pursue new business opportunities, or to survive periods of
industry consolidation. See "Business -- Competition."

The Company believes that its ability to acquire Asset Portfolios for its
own account will be important to its future growth. Acquisitions of Asset
Portfolios are often based on competitive bidding, where there are dangers of
bidding too low (which generates no business), as well as of bidding too high
(which could win the portfolio at an economically unattractive price). Asset
Portfolio acquisitions also require significant capital. There currently is
substantial competition for Asset Portfolio acquisitions and such competition
could increase in the future. See "Business -- Asset Acquisition and Resolution
Business -- Asset Portfolio Investment."

LIMITED MARKET FOR THE NOTES

The Notes are not currently authorized for quotation on any quotation system
or listed on any securities exchange. The Company intends to make application to
list the Notes on the New York Stock Exchange. The Company has been advised by
the Underwriter that pending such listing or if such listing is not accepted,
the Underwriter intends to make a market in the Notes. No assurance can be given
that an active trading market for the Notes will develop.

15
<PAGE>
RECENT DEVELOPMENTS

ACQUISITION OF CKSRS. Effective June 30, 1995, the Company acquired for
approximately $1.3 million substantially all of the assets of CKSRS, a
Miami-based commercial mortgage banking limited partnership specializing in the
origination, sale and servicing of mortgages on multi-family properties in
Florida.

ACQUISITION OF EQS. On October 27, 1995, the Company completed the
acquisition of the third-party securitized, commercial mortgage loan Master
Servicer and Special Servicer businesses of EQS. The purchase price was
approximately $16.9 million. At September 30, 1995, the EQS businesses acquired
by the Company had contracts to service approximately $6.0 billion of
securitized commercial mortgage loans. The Company believes that it is now one
of the largest servicers of securitized commercial mortgages in the United
States.

ACQUISITION OF ACACIA. Effective November 20, 1995, the Company completed
the purchase for approximately $4.5 million of substantially all of the pension
fund advisory contracts and certain other assets of Acacia. Acacia provides real
estate investment advisory services to pension and other institutional investors
in respect of investments in office, industrial and distressed real estate
properties. Through these contracts, to date approximately 35 clients have
invested over $970.0 million in commercial real estate representing
approximately 63 properties with over 13.5 million square feet of commercial
space and approximately 670 apartment units. Acacia is based in Boston and has
approximately 18 employees.

CONVERTIBLE SUBORDINATED DEBENTURE OFFERING. On November 27, 1995, the
Company completed an offering conducted in Europe (the "Convertible Subordinated
Debenture Offering"), pursuant to Regulation S promulgated under the Securities
Act, of $45.0 million aggregate principal amount of Convertible Subordinated
Debentures. The net proceeds (aggregating approximately $43.0 million) from such
offering were used to repay borrowings under the Revolving Loan Agreement. The
Convertible Subordinated Debentures bear interest at 8% per annum and will
mature on December 15, 2005. There is no sinking fund or amortization of
principal prior to maturity. The Convertible Subordinated Debentures are not
redeemable prior to December 15, 1996. The Convertible Subordinated Debentures
are convertible at the option of the holders into shares of Common Stock at a
conversion price of $12.50 per share (equivalent to a conversion rate of 80
shares of Common Stock per $1,000 principal amount of Convertible Subordinated
Debentures), subject to adjustment in certain events. The Convertible
Subordinated Debentures are unsecured obligations of the Company and
subordinated to all existing and future Senior Indebtedness (as defined in the
Convertible Subordinated Debenture Indenture) of the Company. The Convertible
Subordinated Debentures contain certain rights of the holder to require the
repurchase of the Convertible Subordinated Debentures (i) upon a Fundamental
Change (as defined in the Convertible Subordinated Debenture Indenture) and (ii)
if the Company is not able to maintain a Net Worth (as defined in the
Convertible Subordinated Debenture Indenture) of approximately $141.0 million
(which includes the net proceeds to the Company from the Common Stock offering
described below) plus the net proceeds to the Company from any other offering of
Common Stock by the Company subsequent to the date hereof. There are certain
other covenants restricting dividends on and redemptions of capital stock. See
"Description of Other Indebtedness -- Convertible Subordinated Debentures."

The Convertible Subordinated Debentures (and the underlying Common Stock)
have not been registered under the Securities Act and may not be offered or sold
in the United States without registration under the Securities Act (the Company
has agreed to register for resale under the Securities Act the underlying Common
Stock) or absent an applicable exemption from the registration requirements.

COMMON STOCK OFFERING. On December 13, 1995, the Company completed a
registered public offering of 2,000,000 shares of Common Stock (the "Common
Stock Offering"). Subsequent thereto, the Company sold an additional 300,000
shares of Common Stock upon exercise of the Underwriters' over-allotment option.
The net proceeds from such offering, including the over-allotment shares,
aggregated approximately $25.1 million and were used to repay borrowings under
the Revolving Loan Agreement. The price to the public was $11.75 per share and
the price to the Company per share was $11.10 (after an underwriting discount of
$ .65 per share). In addition to the offering of shares of Common Stock by the
Company, two institutional shareholders sold an aggregate of 2,300,000 shares of
Common Stock (including 300,000 shares sold pursuant to the exercise of the
underwriters' over-allotment option). The Company did not receive any proceeds
from the sale of these shares.

16
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the Notes offered hereby
(after deducting underwriting discounts and estimated expenses of the Offering)
will be approximately $ million ($ million if the Underwriters'
over-allotment option is exercised in full).

The Company intends to use the net proceeds to reduce the Company's
outstanding borrowings under the Revolving Loan Agreement (which had an
outstanding balance of approximately $61.0 million at December 15, 1995). For
the nine months ended September 30, 1995, the weighted average interest rate on
indebtedness under the Company's bank credit agreement (which was replaced on
September 29, 1995 by the Revolving Loan Agreement) was 8 1/5% per annum. The
indebtedness under the predecessor credit agreement and the Revolving Loan
Agreement was incurred primarily in connection with investments in Asset
Portfolios, the acquisition of CKSRS, the EQS Acquisition, the Acacia
Acquisition and other general corporate purposes. After application of the net
proceeds to the Company of the Offering, $ million would be available for
reborrowing under the Revolving Loan Agreement to be used for general corporate
purposes, which may include funding investments in Asset Portfolios, acquiring
new businesses or making strategic investments in companies that complement the
Company's business lines and strategies. Other than as disclosed in this
Prospectus, the Company has no understandings or agreements in respect of any
material acquisition. See "Description of Other Indebtedness -- Revolving Loan
Agreement" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

17
<PAGE>
CAPITALIZATION

The following table presents the capitalization of the Company at September
30, 1995, and (i) as adjusted to reflect the EQS Acquisition, the incurrence
through November 30, 1995 of $115.8 million of indebtedness under a warehouse
facility, the Acacia Acquisition, completion of the Convertible Subordinated
Debenture Offering and completion of the Common Stock Offering, and (ii) as
further adjusted to reflect the application of the estimated net proceeds from
the sale of the Notes offered hereby as described under "Use of Proceeds." The
table should be read in conjunction with the Consolidated Financial Statements
of the Company, the notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1995
------------------------------------
AS AS FURTHER
ACTUAL ADJUSTED (2) ADJUSTED (3)
---------- ----------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Debt(1):
Notes payable........................................................... $ 104,222 $ 60,806 $
Mortgage warehouse debt................................................. 5,693 121,458 121,458
Nonrecourse debt........................................................ 30,605 30,605 30,605
Senior Subordinated Notes............................................... -- --
Convertible Subordinated Debentures..................................... -- 45,000 45,000
---------- ----------- -----------
Total debt............................................................ 140,520 257,869
---------- ----------- -----------
Shareholders' equity:
Common Stock, par value $0.05 per share; 50,000,000 authorized shares
and 24,193,464 issued shares, as adjusted(4)........................... 1,210 1,310 1,310
Capital in excess of par................................................ 78,790 100,470 100,470
Reductions for employee stock........................................... (620) (620) (620)
Treasury stock, 24,339 shares........................................... (160) (160) (160)
Retained earnings....................................................... 49,804 49,804 49,804
---------- ----------- -----------
Total shareholders' equity............................................ 129,024 150,804 150,804
---------- ----------- -----------
Total capitalization.................................................. $ 269,544 $ 408,673
---------- ----------- -----------
---------- ----------- -----------
</TABLE>

- ------------------------------
(1) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources," "Description of
Other Indebtedness" and Note 5 of Notes to Consolidated Financial
Statements for a description of this indebtedness.

(2) Gives effect to the EQS Acquisition, the incurrence through November 30,
1995 of $115.8 million of indebtedness under a warehouse facility, the
Acacia Acquisition and completion of the Convertible Subordinated Debenture
Offering and the Common Stock Offering.

(3) Gives effect to the offering of Notes by the Company hereby and the
application of the net proceeds therefrom as described in "Use of
Proceeds."

(4) Does not include an aggregate of 1,775,948 shares of Common Stock reserved
for issuance at September 30, 1995, upon the exercise of outstanding stock
options and 2,405,665 shares available for future grants of options under
the Company's stock option plans. See Note 11 of Notes to Consolidated
Financial Statements.

18
<PAGE>
SUMMARY FINANCIAL AND OTHER DATA

19
<PAGE>
- ------------------------------
(1) Includes the Company's operations for the two months ended December 31,
1992, and the combined operations of its predecessor entities for the ten
months ended October 31, 1992.

(3) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of operating income before income taxes and fixed charges. Fixed
charges consist of interest expense.

(4) The Company had nominal interest expense in 1992 and it was not meaningful,
therefore, to calculate these ratios for the year ended December 31, 1992.

(7) Interest coverage ratio means the ratio of EBITDA to cash interest expense.

20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW
On December 31, 1993, BEI merged with Holdings. The BEI Merger was accounted
for as a "reverse acquisition" whereby Holdings was deemed to have acquired BEI
for financial reporting purposes. However, BEI, renamed AMRESCO, INC., remains
the continuing legal entity and registrant for Commission filing purposes.
Consistent with the reverse acquisition accounting treatment, the historical
financial statements of AMRESCO, INC. presented for the year ended December 31,
1993, and the two months ended December 31, 1992, are the consolidated financial
statements of Holdings and differ from the consolidated financial statements of
BEI as previously reported. The results of operations of BEI have been included
in the Company's financial statements from the date of acquisition.

The Company's business originally consisted almost entirely of providing
Asset Portfolio management and resolution services for government agencies and
certain financial institutions. In 1994, the Company concluded all its
significant business relationships with government agencies and the NationsBank
Contract and also began to shift its focus toward Asset Portfolio investing by
the Company and the development of new lines of financial service businesses.
Since the BEI Merger, the Company has extended its business lines to offer a
full range of mortgage banking services, has increased its interests in Asset
Portfolios and has disposed of certain non-core business lines. These
significant changes in the composition of the Company's business are reflected
in the Company's results of operations and may limit the comparability of the
Company's results from period to period.

The following discussion and analysis presents the significant changes in
the financial condition and results of continuing operations of the Company for
the years ended December 31, 1992, 1993 and 1994, and the nine month periods
ended September 30, 1994 and 1995. The historical data for 1992 is presented on
a pro forma basis with Holdings' predecessor businesses as if their acquisition
had occurred on January 1, 1992. Such information may not be comparable to the
Company's current operations. The results of operations of acquired businesses
are included in the Consolidated Financial Statements from the date of
acquisition. This discussion should be read in conjunction with the Consolidated
Financial Statements and Notes to Consolidated Financial Statements.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1992 1993 1994 1994 1995
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Management fees......................................... $ 40,222 $ 30,521 $ 27,991 $ 23,468 $ 15,136
Resolution fees......................................... 66,288 88,031 65,773 58,287 11,615
Asset Portfolio income.................................. -- 2,642 13,089 8,433 23,662
Mortgage banking fees................................... -- -- 6,176 1,967 14,077
Other revenues.......................................... 1,273 1,207 17,279 16,184 4,585
--------- --------- --------- --------- ---------
Total revenues before assistance revenue.............. 107,783 122,401 130,308 108,339 69,075
Assistance revenue...................................... 60,347 49,761 26,876 19,466 527
--------- --------- --------- --------- ---------
Total revenues........................................ 168,130 172,162 157,184 127,805 69,602
Expenses:
Personnel............................................... 49,556 63,618 65,585 52,268 35,961
Other general and administrative........................ 16,130 11,315 27,194 20,910 9,926
Interest................................................ 19 754 1,768 1,696 2,771
Profit participations................................... 8,052 3,037 75 (65) 446
--------- --------- --------- --------- ---------
Total expenses before reimbursable costs.............. 73,757 78,724 94,622 74,809 49,104
Reimbursable costs...................................... 60,347 49,761 26,876 19,466 527
--------- --------- --------- --------- ---------
Total expenses........................................ 134,104 128,485 121,498 94,275 49,631
Income from continuing operations before
taxes.................................................... 34,026 43,677 35,686 33,530 19,971
Income tax expense on continuing operations............... 10,730 17,371 14,753 13,874 7,541
--------- --------- --------- --------- ---------
Income from continuing operations......................... 23,296 26,306 20,933 19,656 12,430
Gain (loss) from discontinued operations.................. (1,063) (2,088) (2,185) (976) 2,425
--------- --------- --------- --------- ---------
Net Income................................................ $ 22,233 $ 24,218 $ 18,748 $ 18,680 $ 14,855
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

21
<PAGE>
RESULTS OF OPERATIONS

Revenues from the Company's asset management and resolution services include
fees charged for the management of Asset Portfolios and for the successful
resolution of the assets within such Asset Portfolios. The asset base of each
Asset Portfolio declines over the life of the portfolio, thus reducing asset
management fees as assets within that Asset Portfolio are resolved. Resolution
fees are earned as individual assets within an Asset Portfolio are resolved.
These fees, therefore, are subject to fluctuation based on the consideration
received, timing of the sale or collection of the managed assets and reaching
specified earnings levels on behalf of investors or investment partners. Certain
direct costs incurred, primarily through 1994, in the management of assets for
the FDIC were paid by the Company and billed to the FDIC. Such costs were
included in reimbursable costs and the related payment by the FDIC was included
in assistance revenue. Such costs did not affect net income, other than the
costs of such advanced funds, but at times required sizable capital resources
until reimbursed by the FDIC.

The Company classifies its investments in Asset Portfolios as loans,
partnerships and joint ventures, real estate, and asset-backed securities. The
original cost of an Asset Portfolio is allocated to individual assets within
that Asset Portfolio based on their relative fair value to the total purchase
price. The difference between gross estimated cash flows from loans and
asset-backed securities and their present value is accrued using the level yield
method of accounting. The Company accounts for its investments in partnerships
and joint ventures using the equity method of accounting, generally resulting in
the pass-through of the Company's pro rata share of the earnings of the
partnership or joint venture. Real estate is accounted for at the lower of cost
or estimated fair value. Gains and losses on the sale or collection of specific
assets are recognized on a specific identification basis. Loans, partnerships
and joint ventures, and real estate are carried at the lower of cost or
estimated fair value. The Company's investments in asset-backed securities are
classified as available for sale and are carried at estimated fair value
determined by discounting estimated cash flows at current market rates. Any
unrealized gains (losses) on asset-backed securities are excluded from earnings
and reported as a separate component of shareholders' equity, net of tax
effects.

Revenues from the Company's commercial mortgage banking activities are
earned from the origination and underwriting of commercial mortgage loans, the
placement of such loans with permanent investors and the subsequent servicing of
loans. Loan placement and servicing fees, commitment fees and real estate
brokerage commissions are recognized as earned. Placement and servicing expenses
are charged to expense as incurred.

Other revenues consist of interest on the Company's investments in cash
equivalents, consulting revenues earned on due diligence, interest and fees on
loans net of loan participations, and other miscellaneous income. Additionally,
the third quarter of 1994 includes the $10.0 million NationsBank Contract
conclusion fee.

In December 1994, the Company elected to dispose of the operations of
AMRESCO Services, Inc., its data processing and home banking subsidiary, in
order to concentrate efforts in the Company's primary lines of business. The
loss from such discontinued operations totaled approximately $1.1 million, $2.1
million, $2.2 million, and $1.0 million for years ended December 31, 1992, 1993,
and 1994 and the nine months ended September 30, 1994, respectively. This
subsidiary was sold on June 16, 1995 for a net gain of $2.4 million or $0.10 per
share.

NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1994

REVENUES. Revenues before assistance revenue for the nine months ended
September 30, 1995 compared to the corresponding period of 1994 decreased $39.3
million, or 36.2%. This decrease was due, in part, to an $8.3 million, or 35.5%,
decrease in management fees and a $46.7 million, or 80.1%, decrease in
resolution fees. In addition, other revenues decreased $11.6 million from 1994
to 1995, for a 71.7% decrease, primarily as a result of the NationsBank Contract
that concluded during the third quarter of 1994 for which the Company received
an early conclusion fee of $10.0 million in August 1994. The decreases also
resulted from reduced revenues from government sector contracts as these
contracts concluded. These decreases were partially offset by Asset Portfolio
income, which increased $15.2 million, due to a significant increase in

22
<PAGE>
investments in Asset Portfolios, and a $12.1 million increase in mortgage
banking revenue, primarily due to the inclusion of Holliday Fenoglio, which was
purchased in August 1994, and ACC, which commenced underwriting activities in
the fourth quarter of 1994.

EXPENSES. Total expenses before reimbursable costs decreased $25.7 million,
or 34.4%, for the first nine months of 1995 compared to the corresponding period
in 1994. The first nine months of 1994 included expenses of $20.7 million as
compared to none in the corresponding period in 1995 for the NationsBank
Contract that concluded in the third quarter of 1994 and for government sector
contracts that were concluding during 1994. Additionally, during the nine months
ended September 30, 1995, general and administrative expenses were reduced by a
$3.7 million change in estimate of accounts receivable bad debt reserve and
other accrued expenses related to concluded asset management contracts,
particularly the FDIC and RTC contracts. Receivables related to these contracts
declined $16.7 million between December 31, 1994 and September 30, 1995. Also,
the decrease in expenses for the nine months ended September 30, 1995, compared
to the nine months ended September 30, 1994, reflected the corporate downsizing
initiatives that began in the second half of 1994. The decline in expenses
related to concluding contracts was partially offset by increased operating
expenses related to the addition of the mortgage banking line of business and
the growth in the asset acquisition and resolution operations. The $1.1 million,
or 63.4%, increase in interest expense in 1995 reflects greater borrowing
related to increased investments in Asset Portfolios.

INCOME TAXES. The Company must have future taxable income to realize
recorded deferred tax assets, including net operating loss carryforward tax
benefits obtained in the BEI Merger. Certain of these benefits expire beginning
in 1995 and are subject to annual utilization limitations. Management believes
that recorded deferred tax assets will be realized in the normal course of
business. The decrease in the effective income tax rate for the nine months
ended September 30, 1995 was primarily due to permanent tax differences related
to mortgages sold by a partnership in which the Company owns an interest for
which the acquired tax basis exceeded the book basis.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

REVENUES. Revenues before assistance revenue for 1994 totaled $130.3
million compared to $122.4 million for 1993, an increase of $7.9 million, or
6.5%. Management fees decreased $2.5 million, or 8.3%, and resolution fees
declined $22.3 million, or 25.3%, during 1994, principally due to only eight
months of operations under the NationsBank Contract, as well as reduced revenues
from the government sector contracts as the contracts continued to conclude.
These declines were offset by a $10.4 million increase in Asset Portfolio
income, a $6.2 million increase in mortgage banking revenue due to the
acquisition of Holliday Fenoglio and the commencement of business by ACC. In
addition, there was an increase in other revenues of $16.1 million primarily due
to the $10.0 million conclusion fee from the NationsBank Contract and $3.8
million in revenue relating to the inclusion in 1994 of BEI operations,
primarily from the operations of a subsidiary for the period prior to its sale
in the first quarter of 1994 and its resulting sale.

EXPENSES. Total expenses before reimbursable costs increased by $15.9
million, or 20.2%, in 1994 primarily due to an increase in personnel costs of
$2.0 million and an increase in other general and administrative expenses of
$15.9 million. These increases were partially offset by a decrease in the profit
participations of $3.0 million. The increase in personnel costs was due to the
addition of personnel costs for BEI, Holliday and ACC, which was partially
offset by reductions in full time employees associated with concluded asset
management contracts. Other general and administrative expenses increased $15.9
million over 1993, primarily due to the inclusion of BEI and Holliday Fenoglio
in 1994 and the $2.8 million intangible write-off related to the conclusion of
the NationsBank Contract in 1994. The decrease of the profit participations of
$3.0 million, or 97.5%, was primarily due to the modification of the NationsBank
Contract effective April 1, 1993, that effected an exchange of NationsBank's
profit participation in the Company's income before taxes for a rebate of fees.
See "-- Year Ended December 31, 1993 Compared to Pro Forma Year Ended December
31, 1992 -- Profit Participation."

PRO FORMA INCOME SUMMARY. Revenues before assistance revenue for 1994
totaled $130.3 million compared to pro forma combined revenues before assistance
revenue of approximately $160.3 million, assuming the BEI Merger had been
consummated as of January 1, 1993. The $30.0 million, or 18.7%, decrease is
primarily due to a decrease in BEI revenues of $15.3 million and a decrease in
Holdings revenues

23
<PAGE>
of $14.7 million. The decline in revenues is primarily related to the conclusion
of certain asset management contracts during 1994 and the sale of certain
Company subsidiaries in the first quarter of 1994. Income from continuing
operations for 1994 totaled $20.9 million when compared to pro forma net income
of $28.3 million for 1993, after removing the impact of merger expenses, net
gain on sales of subsidiaries and discontinued operations for a decrease of $7.4
million, or 26.1%. Earnings per share for income from continuing operations was
$0.88 for 1994, compared to $1.34 for the previous year for a decrease of $0.46,
or 34.3%.

YEAR ENDED DECEMBER 31, 1993 COMPARED TO PRO FORMA YEAR ENDED DECEMBER 31, 1992

REVENUES. Revenues before assistance revenue for 1993 totaled $122.4
million compared to $107.8 million in 1992, an increase of $14.6 million, or
13.5%. During 1993, management and resolution fees from private contracts
increased approximately $25.1 million, or 33.4%, primarily due to the Company
reaching the highest incentive fee rate due to the level of collections on the
NationsBank Contract. Resolution fees from the FDIC contract increased
approximately $7.8 million, or 105.0%, primarily due to reaching a higher
resolution fee rate due to the level of cumulative collections. The increases in
resolution fees from the private and FDIC contracts were partially offset by
decreases of approximately $6.7 million, or 68.4%, and approximately $6.8
million, or 47.6%, in management and resolution fees, respectively, from the RTC
contracts. The decrease in fees on the RTC contracts was primarily due to the
lower volume of assets managed. Effective April 1, 1993, the NationsBank
Contract was renegotiated to reduce fees by providing for a 12.25% rebate of
fees earned on such contract. Rebated fees totaled $7.3 million for the last
nine months of 1993. Income from an Asset Portfolio purchased in August 1993
were $2.6 million.

EXPENSES. Total personnel and other general and administrative expenses
were $75.7 million for 1993 compared to $65.7 million for 1992 for an increase
of $10.0 million, or 15.2%. Personnel expense increased $14.1 million to $63.6
million in 1993 from $49.5 million in 1992. The majority of this increase was
due to 1993 being the first full year of operations of Holdings as a separate
entity, resulting in increases in employee benefit programs, additional
corporate personnel as well as staff additions for the private contracts.
Additionally, the incentive compensation and severance compensation plans were
expanded in 1993. Other general and administrative expenses decreased in 1993 to
$12.1 million from $16.1 million in 1992.

PROFIT PARTICIPATION. The profit participation by NationsBank Corporation
began with the acquisition of Holdings by private investors, effective October
31, 1992. The profit participation would have been $6.5 million higher, or $8.1
million on a pro forma basis, if the profit participation had been effective as
of January 1, 1992. Effective April 1, 1993, a rebate of fees on the NationsBank
Contract was granted in exchange for the termination of NationsBank
Corporation's profit participation in Holdings' income before taxes.

PRO FORMA INCOME SUMMARY. Pro Forma combined revenue before assistance
revenues, assuming the BEI Merger had been consummated as of January 1, 1992,
were approximately $160.3 million for 1993 compared to approximately $140.3
million for 1992. The $20.0 million, or 14.3%, increase in revenues was due to
an increase of Holdings' revenues of $14.6 million which has been previously
discussed and an increase of $5.4 million for BEI. The $5.4 million increase in
revenues for BEI was primarily due to new private asset management and
resolution contracts. Pro forma net income, after removing the impact of BEI's
merger expenses, net gain on sales of subsidiaries and discontinued operations,
resulted in net income of $28.3 million, up $4.5 million, or 18.9%, from $23.8
million for 1992. Earnings per share was $1.34 for 1993, compared to $1.14 for
the previous year, for an increase of $0.20, or 17.5%.

LIQUIDITY AND CAPITAL RESOURCES

Cash for investment in Asset Portfolios, originating/underwriting loans,
acquiring loans for securitization, general operating expenses and business
acquisitions is primarily obtained through cash flow and credit facilities,
including: advances on the corporate and portfolio credit lines, mortgage
warehouse lines and nonrecourse debt, retained earnings and cash flow from the
resolution of Asset Portfolios in which the Company invests.

On September 29, 1995, the Company entered into the $150.0 million Revolving
Loan Agreement which matures and is payable in full on September 29, 1997. (The
Revolving Loan Agreement initially included a $25.0 temporary bridge facility
that was permanently repaid with a portion of the net proceeds of the
Convertible Subordinated Debenture Offering.) By its terms, the Revolving Loan
Agreement has two

24
<PAGE>
primary components: (i) a $50.0 million revolving credit facility (the
"Corporate Facility") to be used for (A) general working capital purposes, (B)
acquisitions of equity interests in other persons, (C) certain permitted
investments, and (D) other business needs approved by the Banks that constitute
at least 50% of the lenders in number and have loaned 51% or more of the amount
then outstanding under the Revolving Loan Agreement and (ii) a $100.0 million
revolving credit facility (the "Portfolio Facility") to be used to (A) refinance
indebtedness incurred in connection with the purchase of certain Asset
Portfolios acquired prior to execution and delivery of the Revolving Loan
Agreement, (B) finance future acquisitions of Asset Portfolios, and (C) finance
acquisitions of entities for the purpose of resolving Asset Portfolios owned by
such entities. The banks' current commitment under the Revolving Loan Agreement
is limited to a total of $105.0 million, $35.0 million under the Corporate
Facility and $70.0 million under the Portfolio Facility. The additional amounts
under the Revolving Loan Agreement would become available to the Company upon
the participation by additional financial institutions in the syndicate for the
loan and upon an increase in the Company's borrowing base under this agreement.
There can be no assurance that such events will occur. The borrowing terms,
including interest, may be selected by the Company and tied to either the
NationsBank of Texas' variable rate (8 3/4% at September 30, 1995) or, for
advances on a term basis up to approximately 180 days, a rate equal to an
adjusted LIBOR rate (7 5/8% at September 30, 1995 for a term of 30 days). At
September 30, 1995, there was a balance of $33.0 million at 7 5/8% outstanding
under the Corporate Facility and $39.0 million at 7 5/8% and $5.0 million at
8 3/4% for a total of $44.0 million outstanding under the Portfolio Facility.
The combined balance outstanding under the Revolving Loan Agreement was $77.0
million at September 30, 1995. At November 30, 1995, the balance outstanding
under the Corporate Facility was $15.8 million including $2.8 million at 8 3/4%,
$8.0 million at 7 5/8% and $5.0 million at 7 9/16%, and the balance outstanding
under the Portfolio Facility was $22.4 million, including $20.0 million at
7 5/8% and $2.4 million at 8 3/4%. The combined balance outstanding under the
Revolving Loan Agreement was $38.2 million at November 30, 1995.

The Revolving Loan Agreement is secured by substantially all of the assets
of the Company not pledged under other credit facilities, including stock of a
majority of the Company's subsidiaries held by the Company. The Revolving Loan
Agreement requires the Company to meet certain financial tests, including
minimum consolidated tangible net worth, maximum consolidated funded debt to
consolidated capitalization ratio, minimum fixed charge coverage ratio, minimum
interest coverage ratio, maximum consolidated funded debt to consolidated
earnings before interest, taxes, depreciation and amortization ("EBITDA") ratio
and maximum corporate facility outstanding to consolidated EBITDA ratio. The
Revolving Loan Agreement contains covenants that, among other things, will limit
the incurrence of additional indebtedness, investments, asset sales, loans to
shareholders, dividends, transactions with affiliates, acquisitions, mergers and
consolidations, liens and encumbrances and other matters customarily restricted
in such agreements.

Prior to entering into the Revolving Loan Agreement, Holdings maintained a
$75.0 million line of credit with NationsBank of Texas which bore interest at
NationsBank of Texas' floating prime rate or an adjusted LIBOR rate plus 1 1/2%.
This line of credit was terminated with the execution of the Revolving Loan
Agreement.

During July 1995, two wholly-owned subsidiaries of the Company jointly
entered into a nonrecourse debt agreement for $27.5 million to support
wholly-owned Asset Portfolio purchases. This nonrecourse facility is secured by
all wholly-owned Asset Portfolios purchased with borrowings under this debt and
bears interest at the financing company's prime rate plus 1 1/2% or LIBOR plus
3%. There was a balance outstanding at September 30, 1995, of $21.9 million
under this nonrecourse debt agreement, $3.4 million at 10 1/4% and $18.5 million
at 8 15/16% At November 30, 1995, the balance outstanding under this debt
agreement was $18.9 million, $2.4 million at 10 1/4%, $14.5 million at 8 7/8%
and $2.0 million at 8 15/16%. This facility matures on July 31, 1998.

On April 28, 1995, ACC, a wholly-owned subsidiary of the Company, entered
into a $25.0 million warehouse line of credit agreement with NationsBank of
Texas (the "NationsBank Warehouse Facility") to support its commercial mortgage
financing. This facility is secured by loans originated through borrowings under
this facility and bears interest at either the prime rate announced from
time-to-time by NationsBank of Texas or an Adjusted LIBOR Rate (as defined in
the facility) plus 2%. The Company also is a guarantor

25
<PAGE>
on this facility. At September 30, 1995, an advance of $2.7 million was
outstanding at an interest rate of 7 13/16% and was paid in full prior to
November 30, 1995. The NationsBank Warehouse Facility matures on January 25,
1997.

On August 15, 1995, ACC, a wholly-owned subsidiary of the Company, entered
into a warehouse line of credit agreement with Residential Funding Corporation
(the "RFC Warehouse Facility") to facilitate multi-family mortgage loan
underwriting and origination. This facility is secured by the loans originated
through borrowings under this facility and the stated interest rate for this
line is an adjusted 30-day LIBOR rate plus 3% (8 33/50% at September 30, 1995).
At September 30, 1995, an advance of $3.0 million was outstanding at an interest
rate of 8 33/50%. At November 30, 1995, $10.4 million was outstanding at an
interest rate of 7 1/2%. Each borrowing under the RFC Warehouse Facility is due
60 days after funding.

On September 27, 1995, a wholly-owned subsidiary of the Company entered into
a Global Master Repurchase Agreement to support the purchase of certain
commercial mortgage pass-through certificates. A total of $8.7 million was
outstanding under this facility at September 30 and November 30, 1995. This
facility bears interest at 7 3/8%. This facility is secured by the Company's
investments in certain asset-backed securities.

On November 3, 1995, ARMC, a wholly-owned subsidiary of the Company, entered
into a $100.0 million warehouse line of credit (the "Prudential Warehouse
Facility"), increased to $150.0 million on November 30, 1995, with Prudential
Securities Realty Funding Corporation to finance the acquisition and warehousing
of residential mortgage loans. This facility is secured by the loans purchased
through borrowings under this facility and held for sale. The stated interest
rate for this line is LIBOR (as defined in the facility) plus 7/8% (which can be
adjusted retroactively under certain circumstances to LIBOR plus 2 2/5%). At
November 30, 1995, $115.8 million was outstanding under this facility. The
Prudential Warehouse Facility matures on March 29, 1996.

On November 27, 1995, the Company completed the sale of $45.0 million
principal amount of Convertible Subordinated Debentures. The net proceeds
(approximately $43.0 million) were used to repay indebtedness under the
Revolving Credit Agreement. See "Recent Developments."

On December 13, 1995, the Company completed a public offering of 2,000,000
shares of Common Stock. An additional 300,000 shares of Common Stock were sold
on December 19, 1995, upon exercise of the underwriters' over-allotment option.
The aggregate net proceeds to the Company (estimated to be approximately $25.1
million) were used to repay indebtedness under the Revolving Credit Agreement.
See "Recent Developments."

Accounts receivable decreased from $20.7 million at December 31, 1994, to
$7.7 million at September 30, 1995, due to the conclusion and expiration of
certain asset management contracts.

In 1996, the Company intends to pursue (i) additional Asset Portfolio
acquisition opportunities, by acquiring Asset Portfolios both for its own
account and as an investor with various capital partners who acquire such Asset
Portfolios, (ii) acquisitions of new businesses and (iii) expansion of current
businesses. The funds for such acquisitions and investments are anticipated to
be provided in 1996 by cash flows and borrowings under the Company's Revolving
Loan Agreement and the Notes offered hereby. As a result, interest expense in
1996 will be higher than the interest expense in 1995.

The Company believes that its funds on hand of $13.8 million at November 30,
1995, cash flow from operations, its unused borrowing capacity under its credit
lines, the anticipated net proceeds from this Offering, and its continuing
ability to obtain financing should be sufficient to meet its anticipated
operating needs and capital expenditures, as well as planned new acquisitions
and investments, for at least the next twelve months. The magnitude of the
Company's acquisition and investment program will be governed to some extent by
the availability of capital.

INFLATION

The Company has generally been able to offset cost increases with increases
in revenues. Accordingly, management does not believe that inflation has had a
material effect on its results of operations to date. However, there can be no
assurance that the Company's business will not be adversely affected by
inflation in the future.

26
<PAGE>
BUSINESS

GENERAL

The Company is a leading specialty financial services company engaged
primarily in Asset Portfolio acquisition and resolution and mortgage banking.
The Asset Portfolio acquisition and resolution business involves acquiring at a
substantial discount to Face Value and managing and resolving Asset Portfolios
to maximize cash recoveries. The Company manages and resolves Asset Portfolios
acquired by the Company alone, acquired by the Company with co-investors and
owned by third parties. The Company's mortgage banking business involves the
origination, placement and servicing of commercial real estate mortgages. In
addition, the Company has formed a residential mortgage banking business through
which the Company will purchase and securitize portfolios of residential
mortgages of borrowers who do not qualify for conventional loans and whose
borrowing needs are not being met by traditional financial institutions. The
Company also is entering the real estate pension advisory business through the
purchase of substantially all of the advisory contracts of Acacia.

BACKGROUND

- increasing the amount that the Company invests for its own account in
Asset Portfolios by capitalizing on its expertise in managing and
resolving Asset Portfolios for third parties;

- continuing to provide high quality management and resolution services to
co-investors and other third-party owners of Asset Portfolios;

- expanding its presence in the traditional mortgage banking market through
greater market penetration and by participating in the expanding market
for securitization of commercial and residential real estate mortgages;
and

- developing its new real estate pension advisory business to complement the
Company's existing business lines.

27
<PAGE>
ASSET ACQUISITION AND RESOLUTION BUSINESS

GENERAL. The Company manages and resolves Asset Portfolios acquired at a
substantial discount to Face Value by the Company alone and by the Company with
co-investors. The Company also manages and resolves Asset Portfolios owned by
third parties. Asset Portfolios generally include secured loans of varying
qualities and collateral types. The Company estimates that typically
approximately 85% of the loans in the Asset Portfolios in which the Company
invests are in payment default at the time of acquisition. Although some Asset
Portfolios include foreclosed real estate and other collateral, the Company
generally seeks Asset Portfolios that do not include such assets. Some Asset
Portfolio loans are loans for which resolution is tied primarily to the real
estate securing the loan. Other loans, however, are collateralized business
loans, the resolution of which may be based either on cash flow of a business or
on real estate and other collateral securing the loan. Collateralized business
loans generally have smaller Face Values and often are more quickly resolved
than more traditional real estate loans. The Company intends to focus to a
greater extent on collateralized business loans.

The Company obtains information on available Asset Portfolios from many
sources. Repeat business and referrals from Asset Portfolio sellers with whom
the Company previously has transacted business are an important and frequent
source of Asset Portfolios. The Company has developed relationships in which it
is a preferred Asset Portfolio purchaser for certain sellers. The Company
believes that it receives many Asset Portfolio solicitations that result
primarily from the Company's reputation as an active portfolio purchaser. Other
important sources of business include referrals from co-investors who seek the
Company's participation in Asset Portfolio purchases, focused contacts initiated
by senior management, public advertising of Asset Portfolios for sale and the
Company's nationwide presence.

Although the need for asset management and resolution services by
governmental agencies has substantially declined in recent years, the Company
believes that a permanent market for Asset Portfolio acquisition, management and
resolution services has emerged within the private sector. Whether because a
financial institution desires to reduce overhead costs, is not staffed to handle
large volumes of Asset Portfolios or simply does not want to distract management
and personnel with the intensive and time-consuming job of resolving Asset
Portfolios, many financial institutions now recognize that outside contractors
often are better staffed to manage and resolve Asset Portfolios. These financial
institutions include multi-national, money center, super-regional and regional
banking institutions nationwide and in Canada, as well as insurance companies.
Moreover, financial institutions have embraced the concept of packaging and
selling Asset Portfolios to investors as a means of disposing of non-performing
and under-performing loans and improving the financial institution's balance
sheet. Consolidations within the banking industry have reinforced this trend.
Insurance companies, which historically have avoided outsourcing Asset Portfolio
management or selling Asset Portfolios, also are emerging as sellers of Asset
Portfolios due in part to the implementation of risk-based capital rules for
insurance companies. Additionally, there is a market for management and
resolution services for delinquent or non-performing loans within performing
securitized loan pools. The Company believes that the significant volume of
annual performing loan securitizations makes this an attractive market in which
to participate.

The Company believes that opportunities for the acquisition, management and
resolution of Asset Portfolios are becoming increasingly evident in certain
international markets and that lenders in these markets are adopting many of the
Asset Portfolio management and resolution outsourcing techniques currently
utilized in the United States. Accordingly, the Company has opened offices in
Toronto (August 1994) and London (October 1995) in order to take advantage of
opportunities in Canada, the United Kingdom and certain other Western European
nations. The Company had $53.2 million (US$ Face Value) in Canadian Asset
Portfolios under management as of September 30, 1995, and subsequently was
designated as the Special Servicer for a Canadian Asset Portfolio of
approximately $370.0 million (US$ Face Value).

Because of the significant decline in Asset Portfolio management and
resolution services required by governmental agencies and the trend toward
outright sales of Asset Portfolios, the Company shifted its strategic focus to
becoming an active Asset Portfolio investor for its own account and a
co-investor with other Asset Portfolio buyers. The Company believes that as a
direct investor in Asset Portfolios it has a significant

28
<PAGE>
competitive advantage relative to the Company's competitors in the management
and resolution business. Moreover, the Company believes that direct investment
permits the Company to take advantage of the profit opportunities of Asset
Portfolio investing. The Company believes that it can gain market share in the
Asset Portfolio acquisition, management and resolution business due to its
financial strength; experience in managing and resolving Asset Portfolios;
national reputation; and strategic relationships with sellers and purchasers of
Asset Portfolios, including financial institutions, large corporate buyers,
investment banking firms and sophisticated private investors.

For the nine months ended September 30, 1995, $54.3 million (78.0%) of the
Company's gross revenues were attributable to its Asset Portfolio acquisition
and resolution business. The following table reflects the ownership composition
of the Asset Portfolios (based on their Face Value) under management by the
Company as of the dates indicated and further reflects the decline in the
management of Asset Portfolios for governmental agencies and the increase in the
Company's investment in Asset Portfolios since December 31, 1993:

<TABLE>
<CAPTION>
AT DECEMBER 31, 1993 AT DECEMBER 31, 1994 AT SEPTEMBER 30,
1995
---------------------- ---------------------- -------------------------
AMOUNT % OF TOTAL AMOUNT % OF TOTAL AMOUNT % OF TOTAL
--------- ----------- --------- ----------- ------------ -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Wholly-owned by the Company (1)........... $ 92.9 1.6% $ 143.3 4.6% $ 310.0 10.2%
Owned by the Company with co-investors
(2)...................................... 392.4 6.8 1,729.9 56.0 1,507.4 49.6
Owned by third parties:
Securitized mortgage pools.............. 268.8 4.7 315.0 10.2 411.3(3) 13.5
Government and other owners............. 5,002.8 86.9 900.5 29.2 812.0 26.7
--------- ----- --------- ----- ------------ -----
Total under management................ $ 5,756.9 100.0% $ 3,088.7 100.0% $ 3,040.7 100.0%
--------- ----- --------- ----- ------------ -----
--------- ----- --------- ----- ------------ -----
</TABLE>

-----------------------------
(1) Includes $0.0, $13.9 million and $44.0 million, respectively, of
asset-backed securities, and $2.5 million, $3.5 million and $5.2
million of real estate, respectively, at December 31, 1993 and 1994,
and at September 30, 1995.

(2) Includes the securitized Asset Portfolios managed by the Company as
Special Servicer in which the Company has invested, which aggregated
$354.3 million, $973.8 million and $790.7 million, respectively, at
December 31, 1993 and 1994, and at September 30, 1995.

(3) Does not include approximately $300.0 million of securitized
commercial mortgages for which EQS served as Special Servicer. See
"Recent Developments -- Acquisition of EQS."

The following table reflects, by ownership category, the number of Asset
Portfolios managed by the Company at September 30, 1995 and the number of assets
included in such portfolios:

<TABLE>
<CAPTION>
NUMBER OF ASSET NUMBER OF
PORTFOLIOS ASSETS
----------------- -----------
<S> <C> <C>
Wholly-owned by the Company.................................................. 35 1,124
Owned by the Company with co-investors....................................... 28 1,740
Owned by third parties:
Securitized mortgage pools (1)............................................. 3 426
Government and other owners................................................ 10 2,146
--- -----
Total under management................................................... 76 5,436
--- -----
--- -----
</TABLE>

-----------------------------
(1) Does not include Asset Portfolios for which EQS served as Special
Servicer. See "Recent Developments -- Acquisition of EQS."

29
<PAGE>
The following table reflects the Company's investment (at carrying value) in
Asset Portfolios as of the dates indicated below:

<TABLE>
<CAPTION>
AT DECEMBER 31, AT
SEPTEMBER 30,
1993 1994 1995
--------- --------- -------------
(IN MILLIONS)
<S> <C> <C> <C>
Wholly-owned by the Company (1)............................... $ 36.3 $ 37.9 $ 139.9
Owned by the Company with co-investors (2).................... 2.5 33.0 35.9
--------- --------- ------
Total..................................................... $ 38.8 $ 70.9 $ 175.8
--------- --------- ------
--------- --------- ------
</TABLE>

-------------------------------
(1) Includes $0.0, $3.5 million and $20.0 million, respectively, of
asset-backed securities, and $2.5 million, $3.5 million and $5.2
million of real estate, respectively, at December 31, 1993 and
1994, and at September 30, 1995.

(2) Includes the securitized Asset Portfolios managed by the Company as
Special Servicer in which the Company has invested, which
aggregated $1.7 million, $7.9 million and $8.6 million,
respectively, at December 31, 1993 and 1994, and at September 30,
1995.

ASSET PORTFOLIO INVESTMENT. The Company's business of investing in Asset
Portfolios is conducted either through the Company owning the Asset Portfolio
alone or with co-investors. At September 30, 1995, the Company's weighted
average investment in all Asset Portfolios in which it was a co-investor was 6%
of the aggregate purchase price of such portfolios. Consistent with the
Company's strategy of increasing its investment in Asset Portfolios in which it
is a co-investor, the Company's weighted average investment in such Asset
Portfolios purchased during the nine months ended September 30, 1995 was 20% of
the aggregate purchase price. Asset Portfolios acquired solely by the Company
have ranged up to $36.9 million (Face Value), whereas Asset Portfolios owned by
the Company with co-investors have ranged up to $405.5 million (Face Value). The
Company generally funds its share of any investment with a combination of
borrowings under its existing credit lines and internal cash flow. Future Asset
Portfolio purchases will depend on the availability of Asset Portfolios offered
for sale, the availability of capital and the Company's ability to submit
successful offers to purchase Asset Portfolios. As a result, Asset Portfolio
purchases can vary significantly from quarter to quarter. The following table
reflects the Company's total purchases (at cost) by fiscal quarter in Asset
Portfolios over the past seven quarters:

<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
-----------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1994 1994 1994 1994 1995 1995 1995
----------- ------------- ------------- ------------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Wholly-owned by
the Company (1)......... $ 6,761 $ 6,941 $ -- $ 21,014 $ 15,539 $ 62,499 $ 45,987
Owned by the Company with
co-investors (2)........ 5,125 8,948 11,306 7,900 6,294 8,480 325
----------- ------------- ------------- ------------- ------------- ------------- -------------
Total................ $ 11,886 $ 15,889 $ 11,306 $ 28,914 $ 21,833 $ 70,979 $ 46,312
----------- ------------- ------------- ------------- ------------- ------------- -------------
----------- ------------- ------------- ------------- ------------- ------------- -------------
</TABLE>

- ------------------------------
(1) Includes $3,497, $2,875 and $13,248 in the quarters ended June 30, 1994,
June 30, 1995 and September 30, 1995, respectively, for purchases of
asset-backed securities, but does not include any real estate assets.

(2) Includes $2,000, $1,601 and $4,000 of investments in securitized mortgage
pools purchased in the quarters ended March 31, 1994, June 30, 1994 and
December 31, 1994, respectively.

Prior to making an offer to purchase an Asset Portfolio, the Company
conducts an extensive investigation and evaluation of the individual loans
comprising 95% to 100% of the aggregate Face Value of all the loans in the
portfolio. This examination typically consists of analyzing the information made
available by the Asset Portfolio seller (generally, the respective credit and
collateral files for the loans), reviewing other relevant material that may be
available (including tax and judgment records), and analyzing the underlying
collateral (including conducting site inspections, obtaining value opinions from
third parties and consulting with any of the Company's asset managers who have
experience with the local market for such assets). The Company also reviews
information on the local economy and real estate markets in the area in which
the loan collateral is located. Because of its broad, nationwide experience in
managing assets, the Company often is able to draw on its asset management
experience in the specific market in which an asset is located.

30
<PAGE>
Unlike the original lender, the Company values Asset Portfolio loans based on
the present value of estimated total cash flow from resolution, with the
expectation that the loans will be resolved prior to scheduled maturity. The
Company's policy is to not refinance or renew purchased loans or grant new
credit.

Asset Portfolio evaluations are conducted almost exclusively by the
Company's employees who specialize in analysis of non-performing and
under-performing loans, often with further specialization based on geographic or
collateral-specific factors. Most of these employees have previously served the
Company (and some continue to serve) as asset managers with responsibility for
resolving such loans. Their asset management experience aids these individuals,
working together in teams, in making informed judgments about the status of each
loan and the underlying collateral, the probable cash flows from the loan, the
likely resolution of the loan and the time and expense required for such
resolution. The Company's personnel document these evaluations in standardized
Company formats.

Upon completion of evaluation forms, the Company compiles a database of
information about the loans in the Asset Portfolio. The primary focus of the
database is the anticipated recovery amount, timing and cost of the resolution
of the Asset Portfolio. Using its proprietary modeling system and loan
information database, the Company then determines the amount it will offer. The
offer is structured to achieve certain minimum rates of return. As of September
30, 1995, the Company had paid an average purchase price of 46% of the aggregate
Face Value on all of its wholly-owned Asset Portfolios and an average purchase
price of 56% of the aggregate Face Value on all of the Asset Portfolios owned by
the Company with co-investors.

When an Asset Portfolio is acquired (whether for the Company's own account
or with co-investors), the Company assumes the management of the loans in the
portfolio. Management includes responsibility both for servicing and for
resolving such loans. The Company's asset managers are given the supporting due
diligence information and projections relating to each newly-acquired loan for
which the manager assumes management responsibility. Because asset managers are
actively involved in the Asset Portfolio evaluation process, it is not unusual
for an asset manager to be given management responsibility for the specific
loans that the asset manager assisted in evaluating in the due diligence or
pricing processes. The Company believes that by combining the resolution and
evaluation activities, the Company achieves efficiency in loan resolution and
accuracy in loan evaluations.

Resolutions typically are accomplished through (i) negotiating with debtors
a discounted payoff, which may be accomplished through a refinancing by the
obligor with a lender other than the Company or (ii) foreclosure and sale of the
collateral. The Company generally seeks consensual resolution of each loan,
having found that a negotiated resolution usually maximizes the Company's or
investor's rate of return. The Company resolves most assets within an Asset
Portfolio within 18 months. The goal of the Company's asset resolution process
is to maximize in a timely manner cash recovery on each loan in an Asset
Portfolio.

In evaluating Asset Portfolios, the Company takes into account
concentrations of collateral located in specific regions of the United States
and Canada. As of September 30, 1995, the geographic dispersion of each primary
asset securing the loans in the Asset Portfolios in which the Company had
invested (whether for its own account or with co-investors) was as follows:

<TABLE>
<CAPTION>
FACE NUMBER OF
VALUE % OF TOTAL ASSETS % OF TOTAL
--------- ------------ ----------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Northeast..................................... $ 477.5 26.3% 1,228 42.9%
West.......................................... 716.6 39.4 766 26.8
Southwest..................................... 200.7 11.1 434 15.1
Midwest....................................... 109.1 6.0 96 3.3
Southeast..................................... 260.3 14.3 220 7.7
Canada........................................ 53.2 2.9 120 4.2
--------- ----- ----- -----
Total....................................... $ 1,817.4 100.0% 2,864 100.0%
--------- ----- ----- -----
--------- ----- ----- -----
</TABLE>

31
<PAGE>
The Company invests in both Asset Portfolios composed of collateralized
business loans and in Asset Portfolios composed of real estate collateralized
loans. Asset Portfolios purchased by the Company alone have tended to be
primarily composed of collateralized business loans, because many such Asset
Portfolios are within the size range generally sought by the Company. Asset
Portfolios composed primarily of real estate loans typically are larger and the
Company's investments in such portfolios usually are made with co-investors. At
September 30, 1995, the Company's total investment in wholly-owned Asset
Portfolios aggregated $310.0 million (Face Value), which was composed of $223.3
million (Face Value) (72.0%) of collateralized business loans, $37.5 million
(12.1%) of real estate loans, $44.0 million (14.2%) of asset-backed securities,
and $5.2 million (1.7%) of real estate.

In addition, as of September 30, 1995, the Asset Portfolios in which the
Company had invested (whether for its own account or with co-investors) included
approximately 2,900 individual assets. The Company has found that the market for
smaller portfolios is less competitive, because larger Asset Portfolio buyers
often elect not to consider these portfolios. In a recent industry trend, some
Asset Portfolio sellers are soliciting bids on portfolios consisting of small
groups of loans.

ASSET MANAGEMENT AND RESOLUTION SERVICES. The Company provides asset
management and resolution services to third parties pursuant to contracts with
the owner of an Asset Portfolio or a purchaser (including a partnership, joint
venture or other group in which the Company is a co-investor) of an Asset
Portfolio. Management of Asset Portfolios includes both loan resolution and
providing routine accounting services, monitoring collections of interest and
principal (if any), confirming (or advancing) insurance premium and tax payments
due on collateral, and generally overseeing and managing, if necessary,
collateral condition and performance.

Asset management and resolution contracts relating to Asset Portfolios
managed by the Company for third parties have a finite duration, typically three
to five years, and at September 30, 1995 covered Asset Portfolios that ranged up
to $429.8 million (Face Value). These contracts generally provide for the
payment of (i) a fixed annual management fee (generally between 50 and 75 basis
points based on the Face Value or original purchase price of the loans) with
revenues declining as assets under management decrease, (ii) a resolution fee
(generally between 50 and 150 basis points based on the net cash collections on
loans and assets) and (iii) a negotiated incentive fee for the successful
resolution of loans or assets, which is earned after a predetermined rate of
return for the portfolio owner or co-investor is achieved.

As part of its third-party asset management and resolution business, the
Company is aggressively pursuing contracts to serve as the designated Special
Servicer for pools of securitized mortgages. After a loan within a securitized
pool of performing loans becomes delinquent or non-performing, the Master
Servicer or Primary Servicer of the pool will contractually transfer
responsibility for resolution of that loan to the pool's designated Special
Servicer. Special Servicers earn an annual fee (typically approximately 50 basis
points of the Face Amount of the delinquent or non-performing loans subject to
Special Servicing), plus a 75 to 100 basis points resolution fee based on the
total cash flow from resolution of each such loan as it is received. As of
September 30, 1995 (pro forma with EQS), the Company was the designated Special
Servicer for securitized pools holding over $4.3 billion (Face Value) of loans,
$772.2 million (Face Value) of which had been assigned to the Company for
resolution in its capacity as Special Servicer.

The Company believes that its willingness to purchase participating
interests in the delinquent or non-performing portion of a securitized portfolio
provides the Company a significant competitive advantage in pursuing Special
Servicer contracts. The Company believes that acceptance of this risk is similar
to its Asset Portfolio acquisition business, and that the risk is acceptable
because the Company understands the loan valuations and will manage the loan
resolutions.

32
<PAGE>
MORTGAGE BANKING BUSINESS

GENERAL. The Company performs a wide range of commercial mortgage banking
services, including originating, underwriting, placement, selling and servicing
of commercial real estate loans through its Holliday Fenoglio and ACC mortgage
banking units. The Company also formed AMRESCO Residential Credit Corporation, a
residential mortgage banking business, through which the Company will purchase
and securitize portfolios composed of residential mortgages of borrowers who do
not qualify for conventional loans and whose borrowing needs are not met by
traditional financial institutions. For the nine month period ended September
30, 1995, $14.1 million (20%) of the Company's gross revenues were attributable
to the Company's mortgage banking business.

The Company believes that the real estate mortgage banking business offers
significant growth opportunities. There are an estimated $1.0 trillion of
commercial real estate mortgages outstanding and the Company estimates that
$125.0 billion to $150.0 billion in commercial real estate mortgages are
refinanced each year in addition to mortgage financing of new construction.
Originations of loans for new construction projects are cyclical and are
influenced by various factors including interest rates, general economic
conditions and demand patterns in individual real estate markets. The commercial
mortgage banking industry is fragmented, composed primarily of small local or
regional firms. The Company anticipates that expensive technological demands,
increasingly standardized underwriting requirements, more demanding borrowers
and lenders, and the emergence of a market for securitized commercial real
estate mortgage pools will likely push the commercial mortgage banking industry
toward greater consolidation. The Company believes that well-capitalized, full
service mortgage banking firms offering a variety of mortgage banking and loan
management services nationwide will emerge from this consolidation. The
Company's objective is to improve its position as a major nationwide full
service mortgage banker to the commercial real estate industry. The Company
intends to achieve this goal through the internal development of its mortgage
banking group and through strategic acquisitions of mortgage bankers which
either serve key real estate markets in the United States or provide niche or
specialized services that enhance the Company's product line.

COMMERCIAL MORTGAGE BANKING BUSINESS. As a leading full service commercial
mortgage broker and banker with offices in key markets throughout the United
States, the Company provides a wide range of real estate capital markets
services to owners and developers of the full range of commercial real estate
properties. The typical consumers of commercial real estate mortgage banking
services are both real estate developers and owners (as borrowers) and
investor/lenders (as funding sources). Due to the more specialized nature of
commercial mortgage lending and the smaller universe of lenders serving this
market (in each case relative to the residential mortgage market), borrowers
rely on commercial mortgage brokers and bankers to find competitive lenders, and
these lenders (particularly insurance companies and pension plans, which do not
generally have origination staffs located in multiple branches) rely on mortgage
brokers and bankers to source potential borrowers. Lenders generally include
banks, pension funds and insurance companies. In originating loans, Holliday
Fenoglio and ACC each work closely with both the borrower and potential lenders
from the time a loan prospect is first contacted, through the application and
proposal process, and throughout the documentation of the loan to final funding.
Holliday Fenoglio and ACC each typically perform extensive due diligence and
market analysis for the lenders in this process.

Holliday Fenoglio was one of the largest commercial mortgage bankers in the
United States in 1994 (based on origination volume) and primarily serves
commercial real estate developers and owners by originating commercial real
estate loans. Holliday Fenoglio primarily targets developers and owners of
higher-quality commercial and multi-family real estate properties. Holliday
Fenoglio originates prospective borrowers through its own commission-based
mortgage bankers in its offices located in Atlanta, Boca Raton, Buffalo, Dallas,
Houston, New York City and Orlando. The loans originated by Holliday Fenoglio
generally are funded by institutional lenders, primarily insurance companies,
with Holliday Fenoglio retaining the Primary Servicer rights on approximately
20% of such loans. The Company believes that Holliday Fenoglio's relationship
and credibility with the institutional lender network provide the Company a
competitive advantage in the commercial mortgage banking industry.

33
<PAGE>
ACC, which originated approximately $260.7 million of commercial real estate
mortgages during the nine months ended September 30, 1995, is a mortgage banker
that originates and underwrites commercial real estate loans that are funded
primarily by Conduit Purchasers rather than by institutional lenders such as
insurance companies. ACC, therefore, makes certain representations and
warranties concerning the loans it originates. These representations cover such
matters as title to the property, lien priority, environmental reviews and
certain other matters. ACC primarily targets originators of commercial mortgage
loans for commercial real estate properties that are suitable for sale to
Conduit Purchasers accumulating loans for securitization programs directly
through ACC's offices located in Dallas, Miami and Washington, D.C., as well as
through a network of approximately 20 independent mortgage brokers located
throughout the United States. ACC recently established a relationship with the
22 office commercial real estate finance unit of a major insurance company
whereby the insurance company has agreed to refer prospective borrowers to the
Company in instances where the prospective loan does not meet the insurer's
requirements (typically borrowers for medium-quality commercial properties).
Since ACC commenced underwriting activities and through September 30, 1995,
Holliday Fenoglio originated approximately 31% of the loans underwritten by ACC,
with Holliday Fenoglio and ACC each receiving fees for their respective
services.

The Company believes that through ACC, the Company has certain additional
significant advantages in the mortgage banking marketplace. First, through its
relationships with certain institutional investors, the Company is able to
underwrite and sell commercial mortgage loans, particularly in instances where
the borrower needs relatively quick access to funding for a particular project.
Through a warehouse credit facility arranged in early 1995, the Company is able
to underwrite and fund a loan and hold that loan for resale to a buyer. Second,
because of the Company's extensive experience in real estate markets, the
Company believes it can carefully evaluate the risks of such underwriting
transactions in order to minimize financial exposure to the Company in
underwriting and/or warehousing a loan.

In July 1995, the Company, through ACC, acquired CKSRS, whose primary
business is the origination, sale to Freddie Mac and servicing of multi-family
apartment mortgages in the state of Florida. Through CKSRS, the Company became a
member of the Freddie Mac multi-family seller/servicer program in Florida.
Through this acquisition, the Company will obtain access to a significant source
of funding for multi-family mortgages. The Company intends to expand its Freddie
Mac authorization to operate in other states. The Company has been approved by
Fannie Mae to participate in its DUS program. The Company expects Freddie Mac
and Fannie Mae loan originations to become a significant part of its mortgage
banking activities. Holliday Fenoglio is expected to be a significant source of
such loan originations. See "Recent Developments -- Acquisition of CKSRS."

The Company generally earns a fee of between 75 and 100 basis points of the
loan amount for originated or underwritten loans, plus certain additional
processing fees. From time to time, the Company also originates non-traditional
financing involving hybrid forms of debt, equity participations and other
creative financing structures. Fees for equity or joint venture structures are
typically higher. The table that follows reflects the loan origination activity
and loan origination and underwriting fee revenue for the nine months ended
September 30, 1995:

<TABLE>
<S> <C>
Origination:
Dollar volume................................................... $1,585.0
Number of loans................................................. 255
Origination and underwriting fees earned.......................... $12.2
Number of offices................................................. 10
</TABLE>

34
<PAGE>
After the evaluation of a loan prospect and the project financing needs, and
depending upon the type of property involved and its location, the Company
approaches institutional lenders that the Company believes would be interested
in funding the loan. The Company has established relationships with over 200
institutional lenders that include insurance companies, pension plans and
Conduit Purchasers. In 1994, the Company placed 289 loans with over 80 different
lenders. Twenty-six institutional lenders have retained the Company as their
respective exclusive or semi-exclusive loan originator in selected cities and
regions.

COMMERCIAL LOAN SERVICING BUSINESS. The Company serves as a Primary
Servicer for whole loans and as a Master Servicer for securitized pools of
commercial mortgages. For the nine months ended September 30, 1995, $1.9 million
(2.7%) of the Company's gross revenues were generated by its loan servicing
business (excluding Special Servicing). See "-- Asset Acquisition and Resolution
Business -- Asset Management and Resolution Services." The dominant users of
loan servicers are mortgage-backed bond trusts and similar securitized
asset-backed loan portfolios made up of numerous passive investors. Other
lenders often contract with the originating mortgage banker or other third-party
servicer to manage collection, accounting and other activities with respect to
the loan. The revenue stream from servicing contracts on commercial mortgages is
relatively predictable as prepayment penalties in commercial mortgages
discourage early loan payoffs, a risk that is more significant to servicers of
residential mortgage portfolios.

Primary Servicing involves collecting monthly mortgage payments, maintaining
escrow accounts for the payment of ad valorem taxes and insurance premiums on
behalf of borrowers, remitting payments of principal and interest promptly to
investors in the underlying mortgages, reporting to those investors on financial
transactions related to such mortgages, and generally administering the loans.
The Primary Servicer also must cause properties to be inspected periodically,
determine the adequacy of insurance coverage on each property, monitor
delinquent accounts for payment, and, in cases of extreme delinquency, institute
and complete either appropriate forbearance arrangements or foreclosure
proceedings on behalf of investors. Primary Servicers are typically paid an
annual fee ranging between 6 and 20 basis points of Face Value of the loans
under management. At September 30, 1995, the Company's Primary Servicing
portfolio totaled approximately $3.0 billion (Face Value).

Master Servicing involves providing administrative and reporting services to
securitized pools of mortgage-backed securities. Typically, mortgages underlying
mortgage-backed securities are serviced by a number of Primary Servicers. Under
most master servicing arrangements, the Primary Servicers retain principal
responsibility for administering the mortgage loans and the Master Servicer acts
as an intermediary in overseeing the work of the Primary Servicers, monitoring
their compliance with the issuer's standards, and consolidating their respective
periodic accounting reports for transmission to the issuer of the related
securities. The Company occasionally is designated as the full servicer for a
pool of mortgages, in which case the Company acts as Master, Primary and Special
Servicer for the pool. Master Servicers are typically paid an annual fee ranging
between 4 and 10 basis points of Face Value of the loans under management. The
average life of these securitized pools is expected to be approximately eight
years. At September 30, 1995, the Company's Master Servicing portfolio totaled
approximately $117.0 million (Face Value).

The market for servicing performing loan pools constitutes a much larger
potential market than the market for servicing non-performing and
under-performing assets. The Company believes that by gaining access to these
pools in a servicer capacity, opportunities exist for the Company to originate
loan refinancings as outstanding loans mature. In addition, the Company's
ability to also act as Special Servicer is a competitive advantage. The Company,
therefore, has targeted the market for performing loan management services as a
growth area for the Company. The Company has previously participated in this
market as a Primary Servicer of commercial real estate loans for loans
originated by the Company's mortgage banking unit and for loans owned by
investor clients.

On October 27, 1995, the Company acquired a substantial portion of the
assets of EQS, consisting exclusively of EQS' third-party loan pool servicing
contracts. See "Recent Developments." Management estimates that at September 30,
1995, EQS was Master Servicer on approximately $5.9 billion (Face Value),
including approximately $1.6 billion (Face Value) as full servicer, in loans
under the servicing contracts purchased in the EQS Acquisition.

35
<PAGE>
RESIDENTIAL MORTGAGE SECURITIZATION. Through ARMC, the Company intends to
purchase (in bulk from independent originators), warehouse, and securitize or
sell portfolios of residential mortgages of borrowers who do not qualify for
conventional loans and whose borrowing needs are not met by traditional
financial institutions. Such borrowers may not satisfy the more rigid
underwriting standards of the traditional residential mortgage lending market
for a number of reasons, such as blemished credit histories (from past loan
delinquencies or bankruptcy), inability to provide income verification data, or
lack of established credit history. Because this market is underserved by
traditional lenders, credit is less available, there is less competition, and
interest rates are higher than for higher credit quality mortgage borrowers. The
Company believes that the higher risk-adjusted profit opportunities offered by
this market are attractive. As of November 30, 1995, ARMC held mortgage
portfolios aggregating approximately $121.7 million.

The Company intends to securitize loans through the sale of mortgage-backed
securities in the public and private capital markets. The Company will seek to
utilize securitization structures that minimize the Company's capital
requirements, while still providing income to the Company. For example, the
Company may sell certificates for senior interests in a securitization, but
retain subordinated and/or interest-only certificates. The Company then would
have limited capital at risk, but would retain a portion of the cash flow from
the securitization. The Company also may seek to place bundled residential
mortgages through non-securitization transactions such as joint ventures with
insurance companies and pension funds.

To lead the Company's entry into this market, the Company recently hired an
experienced team of individuals from a major national consumer finance company.
This group managed their former employer's comparable residential mortgage
business. This group has estimated that between 1991 and 1995, it managed the
acquisition of over $2.0 billion of mortgage assets.

PENSION ADVISORY SERVICES

The Company believes that a market exists for quality real estate advisory
services to pension plans and other institutional investors in commercial real
estate. The Company believes that through the targeted hiring of high quality
personnel with proven track records and the purchase of advisory contracts from
other advisors, the Company can become a major provider of real estate advisory
services to institutional real estate investors such as pension plans. The
Company's acquisition of substantially all of the advisory contracts and the
hiring of pension advisory personnel of Acacia is the first step in the
implementation of this strategy. See "Recent Developments." Acacia principally
provides real estate investment advice to various institutional investors
(primarily pension funds) seeking to invest a portion of their funds in real
estate. The investors establish certain investment parameters with Acacia (E.G.,
amount of funds available for investment, type of property, geographic mix, form
of investment (loan, partnership, direct ownership), target rate of return and
investment term). Acacia then seeks investment opportunities it believes meet
the investors' parameters. The investors exercise varying degrees of control
over Acacia's investment decisions. Depending on the amount of discretion
granted by the client, Acacia also will make a recommendation, or the final
decision, concerning whether to sell a particular property and will direct the
work necessary to complete the sale. Although Acacia is paid acquisition and
disposition fees by some of its clients, its principal source of revenue is
asset management fees, which are based on the cash flow of the investments under
management or are negotiated at the time of the client's investment in a
property.

COMPETITION

The Company's competition varies by business line and geographic market.
Generally, competition within each of the business lines within which the
Company competes is fragmented, with national, local and regional competitors,
none of which dominates a particular business line. Certain of the Company's
competitors within each of its business lines are larger and have greater
financial resources than the Company.

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<PAGE>
LEGAL PROCEEDINGS

The Company is involved from time to time in various legal proceedings
arising in the ordinary course of business. In connection with the Company's
loan servicing, asset management and resolution activities, the Company
generally is indemnified by the party on whose behalf the Company is acting. The
Company also maintains insurance that management believes is adequate for the
Company's operations. None of the matters in which the Company is currently
involved, either individually or in the aggregate (and after consideration of
available indemnities and insurance), is expected to have a material adverse
effect on the Company's business or financial condition.

EMPLOYEES

At November 30, 1995, the Company and its subsidiaries employed 805
employees. Approximately 354 persons are employed in the Company's asset
management and resolution group, 301 persons are employed in the Company's
commercial real estate mortgage banking and services group, 10 persons are
employed in its residential mortgage group, 18 persons are employed in its
pension advisory services business, and 122 persons work in general corporate
administration. The Company believes that its employee relations are generally
good.

PROPERTIES

The Company leases approximately 65,000 square feet in the Woodall Rodgers
Tower in Dallas, Texas for its centralized corporate functions including
executive, business development and marketing, accounting, legal, human
resources and support. The lease provides for annual rent of $693,000 and has an
initial termination date of August 14, 1997. The Company also leases
approximately 197,000 square feet of space for an operations office and branch
offices pursuant to leases with varying terms.

37
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Set forth below are the names, ages, and a brief account of the business
experience of each person who is a director or executive officer of the Company.

<TABLE>
<CAPTION>
POSITION WITH THE COMPANY AND PRINCIPAL
NAME (AGE) OCCUPATION DURING THE PAST FIVE YEARS
- -------------------------- --------------------------------------------------------------------------------------
<S> <C>
Robert L. Adair III Mr. Adair serves as director, President and Chief Operating Officer of the Company
(52) (since December 1993). Mr. Adair previously served as Executive Vice President and
director of BEI (1989 to December 1993). His term as a director expires in 1997.

L. Keith Blackwell Mr. Blackwell serves as General Counsel and Secretary of the Company (since January
(54) 1994) and previously served as General Counsel and Secretary of Holdings (December
1993). Mr. Blackwell previously was an investor and consultant (May 1992 to December
1993) and served as Executive Vice President, General Counsel and Secretary of First
Gibraltar Bank, FSB (December 1988 to May 1992).

Randolph E. Brown Mr. Brown serves as Senior Vice President -- Commercial Group of the Company (since
(35) June 1995). Mr. Brown previously served as Director -- Business Development and
Acquisitions of the Company (1993 to June 1995), Director, Department Manager of
NationsBank of Texas (1991 to 1993) and Senior Vice President, Department Manager of
NationsBank of Texas (1990 to 1991).

James P. Cotton, Jr. Mr. Cotton serves as a director of the Company (since December 1993). His term expires
(56) in 1998. Mr. Cotton previously served as Chairman of the Board of BEI (1986 to
December 1993). Mr. Cotton also serves as Chairman of the Board and Chief Executive
Officer of USBA Holdings, Ltd., a provider of products and services to financial
institutions (since 1990).

Richard L. Cravey Mr. Cravey serves as a director of the Company. His term expires in 1996. Mr. Cravey
(51) previously served in the following positions: Chairman of the Board and Chief
Executive Officer of the Company (December 1993 to May 1994) and Chairman of the Board
of Holdings (1992 to December 1993). Mr. Cravey also holds the following positions:
Founder and Managing Director of Cravey, Green & Wahlen Incorporated, a private risk
capital investment firm (since 1985), its investment management affiliate, CGW
Southeast Management Company (since 1991) and its affiliates, CGW Southeast I, Inc.
(the general partner of CGW Southeast Partners I, L.P.) and CGW Southeast II, Inc.
(the general partner of CGW Southeast Partners II, L.P.) (since 1991); Director of
Commercial Bancorp of Georgia (since 1988); Director of Commercial Bancorp of Gwinnett
(since 1990); and Director of Cameron Ashley Inc., a national distributor of home
building products (since 1994).

Barry L. Edwards Mr. Edwards serves as Executive Vice President and Chief Financial Officer of the
(48) Company (since November 1994). Mr. Edwards previously served as Vice President and
Treasurer of Liberty Corporation, an insurance holding company (1979 to November
1994).

Gerald E. Eickhoff Mr. Eickhoff serves as a director of the Company. His term expires in 1996. Mr.
(49) Eickhoff also is a private investor (since December 1993). He previously served as
President, Chief Executive Officer and director of BEI (1986 to December 1993).
</TABLE>

38
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY AND PRINCIPAL
NAME (AGE) OCCUPATION DURING THE PAST FIVE YEARS
- -------------------------- --------------------------------------------------------------------------------------
<S> <C>
William S. Green Mr. Green serves as a director of the Company (since December 1993). His term expires
(53) in 1998. Mr. Green also holds the following positions: Managing Director of Cravey,
Green & Wahlen Incorporated, a private risk capital investment firm (since 1985), its
investment management affiliate, CGW Southeast Management Company (since 1991) and its
affiliates, CGW Southeast I, Inc. (the general partner of CGW Southeast Partners I,
L.P.) (since 1991) and CGW Southeast II, Inc. (the general partner of CGW Southeast
Partners II, L.P.) (since 1991); Director of DENTSPLY International, Inc., a
manufacturer of dental supplies, dental equipment and medical x-ray products (since
1987); and Director of Cameron Ashley Inc., a national distributor of home building
products (since 1994).

Harold E. Holliday, Jr. Mr. Holliday serves as Chairman of the Board and Chief Executive Officer of Holliday
(48) Fenoglio (since August 1994). Mr. Holliday previously served as President of Holliday,
Fenoglio, Dockerty & Gibson, Inc., a mortgage banking company (for more than five
years prior to August 1994).

Amy J. Jorgensen Ms. Jorgensen serves as a director of the Company. Her term expires in 1998. Ms.
(42) Jorgensen also serves as Managing Director of Greenbriar Associates LLC, which
provides advice and executes transactions relating to real estate assets and companies
(since 1995). Ms. Jorgensen previously served as President of the Jorgensen Company, a
consultant for real estate strategy and finance (April 1992 to September 1995) and as
Managing Director in the Real Estate Department of Morgan Stanley & Co. Incorporated
(1986 to February 1992).

Ronald B. Kirkland Mr. Kirkland serves as Vice President (since January 1994) and Chief Accounting
(51) Officer (since January 1995) of the Company. Mr. Kirkland previously served as
Controller of the Company (December 1993 to January 1995) and Holdings (December 1992
to December 1993) and as Senior Vice President and Controller of the Special Asset
Division of NationsBank of Texas (August 1988 to December 1992).

Robert H. Lutz, Jr. Mr. Lutz serves as Chairman of the Board and Chief Executive Officer of the Company
(46) (since May 1994). Mr. Lutz previously served as President of Allegiance Realty, a real
estate management company (November 1991 to May 1994); Executive Vice President of
Cousins Properties (February 1990 to October 1991); and President or Senior Vice
President of The Landmark Group (1980 to February 1990). His term as a director
expires in 1996.

Michael N. Maberry Mr. Maberry serves as President of ACC (since April 1994). Mr. Maberry previously was
(52) a Shareholder of the law firm of Winstead, Secrest & Minick (April 1989 to April
1994).
</TABLE>

39
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY AND PRINCIPAL
NAME (AGE) OCCUPATION DURING THE PAST FIVE YEARS
- -------------------------- --------------------------------------------------------------------------------------
<S> <C>
John J. McDonough Mr. McDonough serves as a director of the Company. His term expires in 1997. Mr.
(59) McDonough also serves or has served in the following positions: President and Chief
Executive Officer of McDonough Capital Company LLC, a company through which Mr.
McDonough conducts personal and family investments (since February 1995); Chairman of
the Board of SoftNet Systems, Inc., a company that develops, markets, installs and
services information and document management systems (since June 1995); Vice Chairman
(since 1993) and Chief Executive Officer (1993 to February 1995) of DENTSPLY
International, Inc., a manufacturer of dental supplies, dental equipment and medical
x-ray products; Chairman of the Board (1992 to 1993), Director (1983 to 1992), Chief
Executive Officer (1983 to 1993), President (1983 to 1991) and Treasurer (1983 to
1989) of GENDEX Corporation, a manufacturer of dental equipment and medical x-ray
products, which merged with DENTSPLY in June 1993; and Senior Vice President, Finance
(1981 to 1983) and Director (since 1992) of Newell Co., a New York Stock
Exchange-listed manufacturer of products for the do-it-yourself hardware and
housewares market.

Scott J. Reading Mr. Reading serves as President of AMRESCO Residential Credit Corporation (since
(51) August 1995). Mr. Reading previously served as Managing Director of Household
Financial Services, Inc., a division of Household International, Inc., a diversified
financial services company (June 1991 to August 1995), and Senior Vice President --
Human Resources of Household Finance Corporation, a subsidiary of Household
International, Inc., for more than one year prior thereto.

Bruce W. Schnitzer Mr. Schnitzer serves as a director of the Company. His term expires in 1997. Mr.
(51) Schnitzer previously served as Vice Chairman of the Board of BEI (1986 to December
1993). Mr. Schnitzer also serves as Chairman of Wand Partners Inc., an investment
advisory company (since 1987); Director of Life Partners Group, Inc., a life insurance
holding company (since 1990); and Director of Penncorp Financial Group, Inc. (since
1990).

Douglas R. Urquhart Mr. Urquhart serves as Senior Vice President -- Real Estate Group or Business
(50) Development (since June 1995). Mr. Urquhart previously served as Senior Vice President
-- Portfolio Acquisitions of the Company (January 1994 to June 1995); President of BEI
Real Estate Services, Inc. and BEI Management, Inc., a subsidiary of BEI (December
1992 to January 1994); and President of BEI Asset Managers, Inc., a subsidiary of BEI
(January 1989 to January 1994).
</TABLE>

40
<PAGE>
DESCRIPTION OF THE NOTES

The Notes are to be issued under the Indenture, dated as of
, 1996, between the Company and Bank One, Columbus,
N.A., as trustee (the "Trustee"). The following summary of certain provisions of
the Indenture does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the provisions of the Indenture
(including the definition of certain terms in the Indenture), the form of which
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. Wherever particular provisions and definitions of the
Indenture are referred to, such provisions and definitions are incorporated by
reference as part of the statements made, and the statements are qualified in
their entirety by such reference. Article and Section references are to Articles
and Sections of the Indenture.

GENERAL

The Notes offered by this Prospectus will be limited to $50.0 million
aggregate principal amount, plus up to an additional $7.5 million aggregate
principal amount if the Underwriters' over-allotment option is exercised in
full. The Notes will be issued in global or registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof. Interest
on the Notes will accrue from the date of original issuance and will be payable
on the 15th day of each month, commencing 15, 1996, at the rate per
annum stated on the cover page of this Prospectus. Interest will be payable to
the person in whose name the Note is registered at the close of business on the
10th day of the month of such Interest Payment Date. (Sections 201, 202, 301,
307, 308 and 311) The Notes will mature on 15, 2003, unless redeemed
earlier at the option of the Company or repaid earlier upon the death of a
Holder or upon the exercise of the conditional repayment option, each as set
forth below. See "-- Redemption at Option of the Company" and "-- Repayment
Option Upon Death."

Principal and interest will be payable at an office or agency to be
maintained by the Company in New York, New York and Columbus, Ohio, except that,
at the option of the Company, principal and interest may be paid by check mailed
to the person entitled thereto. (Sections 301, 307 and 1002) The Notes may be
presented for registration of transfer or exchange at an office or agency to be
maintained by the Company in New York, New York and Columbus, Ohio. (Section
305) The Notes will be exchangeable without service charge but the Company may
require payment to cover taxes or other government charges. (Section 305) The
Notes will not be secured by the assets of the Company or any of its
subsidiaries or Affiliates or otherwise. In addition, the rights of the Company
to participate in any distribution of assets of any subsidiary, including
Holliday Fenoglio, ACC, AMRESCO Advisors, Inc. (a subsidiary of the Company
formed in connection with the Acacia Acquisition) and ARMC, upon its liquidation
or reorganization or otherwise (and thus the ability of the Holders of the Notes
to benefit indirectly from such distribution) are subject to the prior claims of
creditors of the subsidiary.

So long as the Company is a reporting company under the Exchange Act, the
Company will furnish to Holders of the Notes annual reports of the Company
containing audited consolidated financial statements and interim reports with
unaudited consolidated summary financial data on a quarterly basis. If the
Company ceases to be a reporting company under the Exchange Act, the Company
will furnish to Holders of the Notes annual audited consolidated financial
statements and quarterly unaudited consolidated summary financial statements.
(Section 704)

REDEMPTION AT OPTION OF THE COMPANY

The Notes may not be redeemed prior to , 2001. The Notes
are subject to redemption at 100% of the principal amount thereof plus accrued
interest, at the option of the Company in whole at any time or in part from time
to time, commencing on , 2001, upon not less than 30 nor more
than 60 days' notice mailed to the registered Holders thereof. The redemption
price will be paid with interest accrued to the date fixed for redemption. If
the Company elects to redeem less than all of the Notes, the Trustee will select
which Notes to redeem using such method as it shall deem fair and appropriate,
including the selection for redemption of a portion of the principal amount of
any Note but not less than $1,000. On and after the redemption date, interest
will cease to accrue on the Notes or portions thereof called for redemption.
(Article Eleven)

41
<PAGE>
REPAYMENT OPTION UPON DEATH

Upon the death of any Holder of Notes, the Company will purchase such
Holder's Notes on request, if (i) the Notes have been registered in the Holder's
name since their date of issuance or for a period of six months prior to the
date of such Holder's death, whichever is less, (ii) the redemption payments
with respect to such Holder's Notes will not exceed $30,000 in principal amount
in any calendar year, (iii) the Company will not, after giving effect to such
payment, have made redemption payments on Notes of deceased Holders in an
aggregate amount exceeding $300,000 in principal amount in any twelve month
period (if such aggregate principal amount exceeds $300,000, then the Trustee
will repay such Notes up to $300,000 in principal amount in the order in which
such requests for repayment were received), (iv) either the Company or the
Trustee has been notified in writing of the request for redemption within one
year after the Holder's death, and if less than all of such Holder's Notes are
redeemed pursuant to such initial request, either the Company or the Trustee has
been notified in writing of subsequent requests for redemption of additional
Notes of such Holder within one year after any such preceding notice, (v) the
Company is not, after giving effect to such payment, in default under any Senior
Indebtedness, and (vi) the Company is not subject to any law, regulation,
agreement or administrative directive preventing such repayment. Notes for which
such repayment is requested shall, subject to the limitations described above,
be repaid at 100% of the principal amount thereof, together with interest
accrued to the repayment date, within 30 days following receipt by the Company
of the following: (i) a written request for payment signed by a duly authorized
representative of the Holder, which shall indicate the name of the deceased
Holder, the date of death of the deceased Holder and the principal amount of
Notes to be repaid, (ii) the certificates representing the Notes to be repaid
and (iii) evidence satisfactory to the Company and the Trustee of the death of
the Holder and evidence of authority of the representative to the extent
required by the Trustee. Authorized representatives of a Holder shall include
executors, administrators or other legal representatives of an estate, trustees
of a trust, joint owners of Notes owned in joint tenancy or tenancy by the
entirety, custodians, conservators, guardians, attorneys-in-fact and other
persons generally recognized as having legal authority to act on behalf of
others. (Section 1201)

The death of a person owning a Note in joint tenancy or tenancy by the
entirety with another or others shall be deemed the death of the Holder of the
Note, and the entire principal amount of the Note so held shall be subject to
repayment, together with interest accrued thereon to the repayment date. The
death of a person owning a Note by tenancy in common shall be deemed the death
of a Holder of a Note only with respect to the deceased Holder's interest in the
Note so held by tenancy in common; except that in the event a Note is held by
husband and wife as tenants in common, the death of either shall be deemed the
death of the Holder of the Note, and the entire principal amount of the Note so
held shall be subject to repayment. The death of a person who, during his or her
lifetime, was entitled to substantially all of the beneficial interests of
ownership of a Note, will be deemed the death of the Holder thereof for purposes
of this provision, regardless of the registered Holder, if such beneficial
interest can be established to the satisfaction of the Trustee. Such beneficial
interest will be deemed to exist in typical cases of nominee ownership,
ownership under the Uniform Transfers (or Gifts) to Minors Act, community
property or other joint ownership arrangements between a husband and wife and
trust arrangements where one person has substantially all of the beneficial
ownership interests in the Note during his or her lifetime. (Section 1201)

CONDITIONAL REPAYMENT OPTION

The Indenture provides that each Holder shall have the right to require the
Company to repurchase the Notes at a purchase price equal to 100% of the
principal amount, plus accrued and unpaid interest, upon the occurrence of any
event requiring that the Company repurchase, or make an offer to repurchase, any
Subordinated Indebtedness other than the Notes. In the event such a requirement
is effected with respect to Junior Indebtedness, the Holders of the Notes
requiring the Company to repurchase Notes must be paid in full prior to any
payment to the holders of Junior Indebtedness. In the event such a requirement
is effected with respect to Subordinated Indebtedness that is pari passu with
the Notes, the Holders of the Notes requiring the Company to repurchase Notes
must be paid concurrently with the holders of the pari passu Subordinated
Indebtedness. The Convertible Subordinated Debenture Indenture contains such a
repurchase requirement (i) in the event of any Fundamental Change (as defined in
the Convertible Subordinated Debenture Indenture) or (ii) if the Company's Net
Worth (as defined in the Convertible Subordinated

42
<PAGE>
Debenture Indenture) at the end of each of any two consecutive fiscal quarters
is less than the Minimum Net Worth (defined in the Convertible Subordinated
Debenture Indenture as approximately $141.0 million (which includes the net
proceeds to the Company from the Common Stock Offering) plus the net proceeds to
the Company from any other offering of Common Stock by the Company subsequent to
the date hereof). See "-- Convertible Subordinated Debentures."

SUBORDINATION

The Notes are subordinated, in the manner and to the extent hereinafter
described to the prior payment of all "Senior Indebtedness" of the Company.
Senior Indebtedness is defined as any Indebtedness for Money Borrowed (see
"Covenants -- Restrictions on Additional Indebtedness") whether outstanding on
the date of execution of the Indenture or thereafter created or incurred, unless
it is provided in the appropriate instrument that such Indebtedness for Money
Borrowed is subordinated to any other Indebtedness for Money Borrowed. (Sections
101 and 1301) Indebtedness for Money Borrowed is defined in the Indenture as any
of the following obligations of the Company or any subsidiary which by its terms
matures at or is extendable or renewable at the sole option of the obligor
without requiring the consent of the obligee to a date more than twelve months
after the date of the creation or incurrence of such obligation: (i) any
obligations, contingent or otherwise, for borrowed money or for the deferred
purchase price of property or services (including, without limitation, any
interest accruing subsequent to an event of default), (ii) all obligations
(including the Notes) evidenced by bonds, notes, debentures or other similar
instruments, (iii) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property),
except any such obligation that constitutes a trade payable and an accrued
liability arising in the ordinary course of business, if and to the extent any
of the foregoing indebtedness would appear as a liability upon a balance sheet
prepared in accordance with generally accepted accounting principles, (iv) all
Capitalized Lease Obligations, (v) all indebtedness of the type referred to in
clause (i), (ii), (iii) and (iv) above secured by (or for which the holder of
such indebtedness has an existing right, content or otherwise, to be secured by)
any lien upon or security interest in property of the Company or any subsidiary
(including, without limitation, accounts and contract rights), even though the
Company or any subsidiary has not assumed or become liable for the payment of
such indebtedness and (vi) any guarantee or endorsement (other than for
collection or deposit in the ordinary course of business) or discount with
recourse of, or other agreement, contingent or otherwise, to purchase,
repurchase, or otherwise acquire, to supply or advance funds or become liable
with respect to, any indebtedness or any obligation of the type referred to in
any of the foregoing clauses (i) through (v), regardless of whether such
obligation would appear on a balance sheet. As of December 15, 1995, the Company
had an aggregate of $85.2 million in outstanding Senior Indebtedness and an
aggregate of $ million in Indebtedness for Money Borrowed.

The Indenture contains certain standstill provisions, which provide that no
payments of principal of, or interest on, the Notes may be made and no Notes may
be redeemed or repurchased if at the time thereof the Trustee has received a
written notice (a "Default Notice") from the holder or holders of not less than
51% in principal amount of the outstanding Senior Indebtedness or any agent
therefor (a "Senior Agent") specifying that an event of default (a "Senior Event
of Default") under any Senior Indebtedness has occurred. Such standstill
provisions remain in effect until the first to occur of the following: (i) the
Senior Event of Default is cured, (ii) the Senior Event of Default is waived by
the holders of such Senior Indebtedness or the Senior Agent or (iii) the
expiration of 180 days after the date the Default Notice is received by the
Trustee if the maturity of such Senior Indebtedness has not been accelerated at
such time. Upon a distribution of assets, dissolution, winding up, total
liquidation or reorganization of the Company, all Senior Indebtedness must be
paid in full before any payment of principal or interest on the Notes can be
made. (Section 1301) Any subordination will not prevent the occurrence of an
"Event of Default" (as defined below) under the Indenture.

By reason of the subordination of the Notes, in the event of liquidation of
the Company, the Holders of the Notes will not receive payment until the Holders
of Senior Indebtedness have been satisfied and in such event Holders of Senior
Indebtedness may recover more than Holders of the Notes. Senior Indebtedness

43
<PAGE>
may also be issued or incurred in the future, subject only to certain
limitations on the ratio of Senior Indebtedness to Consolidated Capitalization.
See "-- Covenants -- Restrictions on Additional Indebtedness."

COVENANTS

The Indenture will contain a number of covenants relating to the Company and
its operations, including the following:

RESTRICTIONS ON ADDITIONAL INDEBTEDNESS. The Indenture limits the amount of
Indebtedness for Money Borrowed of the Company on a consolidated basis. The
Company may not create, incur, assume, guarantee or otherwise be liable for any
Indebtedness for Money Borrowed if, immediately after giving effect thereto: (i)
the aggregate amount of the Senior Recourse Indebtedness outstanding would
exceed 450% of the Company's Consolidated Capitalization, (ii) the aggregate
amount of Subordinated Indebtedness outstanding would exceed 100% of the
Company's Consolidated Net Worth or (iii) the Interest Coverage Ratio would be
less than 1.25 to 1 for the preceding twelve (12) month period, on a pro forma
basis as if such additional Indebtedness for Money Borrowed had been outstanding
during the entire period. "Consolidated Capitalization" is defined as the sum of
the Company's Subordinated Indebtedness plus its Consolidated Net Worth.
"Subordinated Indebtedness" is defined as all Indebtedness for Money Borrowed
except Senior Indebtedness (including the Notes, any indebtedness issued on a
pari passu basis with the Notes and any Junior Indebtedness). "Junior
Indebtedness" is defined as any Indebtedness for Money Borrowed of the Company,
whether outstanding on the date of execution of the Indenture or thereafter
created or incurred, if, in the instrument creating or evidencing such
Indebtedness for Money Borrowed or pursuant to which such Indebtedness for Money
Borrowed is outstanding, it is provided that (i) such indebtedness is junior in
right of payment to the Notes, (ii) no payments with respect to such
indebtedness may be made at any time that an Event of Default shall have
occurred and be continuing and (iii) no payments other than the payment of
interest may be made with respect to such indebtedness at any time the Notes are
outstanding. "Consolidated Net Worth" is defined as the excess, as determined in
accordance with generally accepted accounting principles, after appropriate
deduction for minority interests in the net worth of consolidated subsidiaries,
of the Company's assets over its liabilities. (Sections 101 and 1007) "Senior
Recourse Indebtedness" is defined as Senior Indebtedness minus any Indebtedness
for Money Borrowed of the Company or any of its subsidiaries that is (i)
specifically advanced to finance the acquisition of assets classified on the
Company's balance sheet as "assets held for sale" and (ii) either (a) secured by
the assets to which such indebtedness relates without recourse to the Company or
any of its subsidiaries or (b) issued under a loan agreement that requires each
advance to be repaid upon sale of the assets to which such advance relates
within no more than one year of the date of such advance. The Interest Coverage
Ratio is defined as the ratio of Consolidated EBITDA to Consolidated Interest
Expense. Consolidated EBITDA is defined as the sum of consolidated net income of
the Company and its subsidiaries before taxes and non-recurring gains or losses,
plus depreciation, amortization and interest expense. Consolidated Interest
Expense is defined as the interest expense required to be shown as such on the
financial statements of the Company and its subsidiaries, on a consolidated
basis. At September 30, 1995, the Company's Consolidated Capitalization was
approximately $ million, consisting of Consolidated Net Worth in the amount
of approximately $ million and $ million of Subordinated Indebtedness
on a consolidated basis and the Interest Coverage Ratio was to 1. Under the
foregoing restriction, and after giving effect to the sale of $50.0 million
principal amount of the Notes hereby (assuming the $7.5 million over-allotment
option is not exercised), the Company could have incurred approximately $
million of additional Senior Recourse Indebtedness and approximately $
million of additional Subordinated Indebtedness. (Sections 101 and 1007)

RESTRICTIONS ON DIVIDENDS, REDEMPTIONS AND OTHER PAYMENTS. The Indenture
provides that the Company cannot (i) declare or pay any dividend, either in cash
or property, on any shares of its capital stock (except dividends or other
distributions payable solely in shares of capital stock of the Company) or (ii)
purchase, redeem or retire any shares of its capital stock or any warrants,
rights or options to purchase or acquire any shares of its capital stock or
(iii) make any other payment or distribution, either directly or indirectly
through any subsidiary, in respect of its capital stock (such dividends,
purchases, redemptions, retirements, payments and distributions being herein
collectively called "Restricted Payments") if, after giving effect thereto,

44
<PAGE>
(1) an Event of Default would have occurred; or

(2) (A) the sum of (i) such Restricted Payments plus (ii) the aggregate
amount of all Restricted Payments made during the period after December 31,
1995 would exceed (B) the sum of (i) $10 million plus (ii) 50% of the
Company's Consolidated Net Income for each fiscal year commencing subsequent
to December 31, 1995 (with 100% reduction for a loss in any fiscal year),
plus (iii) the cumulative net proceeds received by the Company from the
issuance or sale after December 31, 1995 of capital stock of the Company.

Notwithstanding the foregoing, the Company may make a previously-declared
Restricted Payment if the declaration of such Restricted Payment was permitted
when made. The amount of any Restricted Payment payable in property shall be
deemed to be the fair market value of such property as determined by the Board
of Directors of the Company. (Section 1006)

CONSOLIDATION, MERGER OR TRANSFER. The Company may not consolidate with,
merge with, or transfer all or substantially all of its assets to another entity
where the Company is not the surviving corporation unless (i) such other entity
assumes the Company's obligations under the Indenture, and (ii) after giving
effect thereto, no event shall have occurred and be continuing which, after
notice or lapse of time, would become an Event of Default. (Section 801)

LIMITATION ON RANKING OF FUTURE INDEBTEDNESS. The Indenture provides that
the Company will not, directly or indirectly, incur, create, assume or guarantee
any Indebtedness for Money Borrowed which is
expressly subordinate in right of payment to any Senior Indebtedness, other than
Junior Indebtedness or indebtedness that is pari passu with the Notes in right
of payment. The incurrence of Senior Indebtedness which is unsecured shall not,
because of its unsecured status, be deemed to be subordinate in right of payment
to Senior Indebtedness which is secured. (Section 1013)

LIMITATIONS ON RESTRICTING SUBSIDIARY DIVIDENDS. The Indenture provides
that neither the Company nor its subsidiaries may create or otherwise cause to
become effective any consensual encumbrance or restriction of any kind on the
ability of any subsidiary of the Company to (i) pay dividends or make any other
distribution on its capital stock, (ii) pay any indebtedness owed to the Company
or any other subsidiary of the Company or (iii) make loans, advances or capital
contributions to the Company or any other subsidiary of the Company except in
certain specified circumstances. (Section 1014)

LIMITATION ON TRANSACTIONS WITH AFFILIATES. Neither the Company nor any
subsidiary may enter into any transactions with any Affiliate on terms and
conditions less favorable to the Company or such subsidiary, as the case may be,
than would be available at such time in a comparable transaction in arm's length
dealings with an unrelated Person as determined by the Company's Board of
Directors. These provisions do not apply to Restricted Payments otherwise
permitted under the Indenture, fees and compensation paid to, and indemnity
provided on behalf of, officers, directors, employees or consultants of the
Company or any subsidiary, as determined by the Company's Board of Directors or
its senior management in the exercise of their reasonable business judgment or
payments for goods and services purchased in the ordinary course of business on
an arm's length basis. (Section 1015)

EVENTS OF DEFAULT

An Event of Default includes: (i) failure to pay the principal on the Notes
when due at Maturity, upon redemption or upon repayment, as provided in the
Indenture, whether or not prohibited by the subordination provisions of the
Indenture, (ii) failure to pay any interest on the Notes for 10 days, whether or
not prohibited by the subordination provisions of the Indenture, (iii) failure
to perform any other covenants set forth in the Indenture for 30 days after
receipt of written notice from the Trustee or Holders of at least 25% in
principal amount of the outstanding Notes specifying the default and requiring
the Company to remedy such default, (iv) default in the payment at stated
maturity of indebtedness of the Company for money borrowed having an outstanding
principal amount due at stated maturity greater than $1 million and such default
having continued for a period of 30 days beyond any applicable grace period, (v)
an event of default as defined in any mortgage, indenture or instrument of the
Company shall have happened and resulted in acceleration of indebtedness which,
together with the principal amount of any other indebtedness so

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accelerated, exceeds $1 million or more at any time, and such default shall not
be cured or waived and such acceleration shall not have been rescinded or
annulled, (vi) certain events of insolvency, receivership or reorganization of
the Company or any subsidiary and (vii) entry of a final judgment, decree or
order against the Company for the payment of money in excess of $5 million and
such judgment, decree or order continues unsatisfied for 30 days without a stay
of execution. (Section 501)

The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a "default" (meaning, for this purpose, the events specified above
without grace periods), give the Holders of the Notes notice of all defaults
known to it which have occurred and remained uncured; provided that, except in
the case of a default in the payment of principal or interest on any of the
Notes, the Trustee shall be protected in withholding such notice if and so long
as it in good faith determines that the withholding of such notice is in the
interest of the Holders. (Section 602)

If an Event of Default shall occur and be continuing, the Trustee, in its
discretion may, and, at the written request of Holders of a majority in
aggregate principal amount of the outstanding Notes shall, proceed to protect
and enforce its rights and the rights of the Holders. If an Event of Default
shall occur and be continuing, either the Trustee or the Holders of at least 25%
in aggregate principal amount of outstanding Notes may accelerate the maturity
of all such outstanding Notes. The Holders of a majority in aggregate principal
amount of outstanding Notes may waive a default, except a default in the payment
of principal of or interest on any Note. If any Event of Default has occurred
and a declaration of acceleration made before a judgment or decree for payment
of money due is obtained, Holders of a majority of the outstanding Notes may
rescind the acceleration of the Notes if all Events of Default have been
remedied and all payments due, other than those due as a result of acceleration,
have been made. (Sections 502, 503, 512 and 513)

The Company must furnish quarterly to the Trustee an Officers Certificate
stating whether to the best knowledge of the signers, the Company is in default
under any of the provisions of the Indenture, and specifying all such defaults
and the nature thereof, of which they have knowledge. (Section 1011)

A Holder will not have any right to institute any proceeding with respect to
the Indenture or for any remedy thereunder, unless (i) such Holder shall have
previously given to the Trustee written notice of a continuing Event of Default,
(ii) the Holders of at least 25% in aggregate principal amount of the
outstanding Notes shall have made a written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as Trustee, (iii) the
Trustee shall have failed to institute such proceeding within 60 days and (iv)
the Trustee shall not have received from the Holders of a majority in aggregate
principal amount of the outstanding Notes a direction inconsistent with such
request. (Section 507) However, the Holder of any Note will have an absolute
right to receive payment of the principal of and interest on such Note on or
after the respective due dates and to institute suit for the enforcement of any
such payment. (Section 508)

MODIFICATION AND WAIVER

With certain limited exceptions which permit modifications of the Indenture
by the Company and the Trustee only, the Indenture may be modified by the
Company with the consent of Holders of not less than a majority in aggregate
principal amount of outstanding Notes; provided, however, that no such changes
shall without the consent of the Holder of each Note affected thereby (i) change
the maturity date of the principal of, or the due date of any installment of
interest on, any Note, (ii) reduce the principal of, or the rate of interest on,
any note, (iii) change the currency in which any portion of the principal of, or
interest on, any Note is payable, (iv) impair the right on institute suit for
the enforcement of any such payment, (v) reduce the above-stated percentage of
Holders of the outstanding Notes necessary to modify the Indenture, (vi) modify
the foregoing requirements or reduce the percentage of outstanding Notes
necessary to waive any past default or (vii) impair the optional right to
repayment provided the Holders. (Sections 513 and 902)

The Holders of a majority in aggregate principal amount of outstanding Notes
may waive compliance by the Company with certain restrictive provisions of the
Indenture. (Section 1012)

SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE

The Indenture provides that the Company may terminate its obligations under
the Indenture with respect to all the Notes by delivering to the Trustee, in
trust for such purpose, money, Government

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Obligations or both which, through the payment of interest and principal in
respect thereof in accordance with their terms, will provide on the due dates of
any payment of principal and interest, or a combination thereof, money in an
amount sufficient to discharge the entire indebtedness of the Notes. (Sections
401 and 402)

CONCERNING THE TRUSTEE

Bank One, Columbus, N.A. is Trustee under the Indenture and is also the Note
Registrar.

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DESCRIPTION OF OTHER INDEBTEDNESS

THE FOLLOWING SUMMARIES OF THE PRINCIPAL TERMS OF THE RESPECTIVE CREDIT
AGREEMENTS AND THE CONVERTIBLE SUBORDINATED DEBENTURE INDENTURE DO NOT PURPORT
TO BE COMPLETE AND ARE SUBJECT TO THE DETAILED PROVISIONS OF, AND QUALIFIED IN
THEIR ENTIRETY BY REFERENCE TO, SUCH AGREEMENTS. THE COMPANY WILL PROVIDE
WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF THIS PROSPECTUS IS DELIVERED,
UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY AGREEMENT
DESCRIBED IN THIS SECTION. SEE "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."

REVOLVING LOAN AGREEMENT

GENERAL. On September 29, 1995, the Company and certain of its subsidiaries
entered into the Revolving Loan Agreement with NationsBank of Texas, as agent
(the "Agent"), and other lending institutions party thereto (the "Banks"), which
replaced the Company's previous revolving line of credit with NationsBank. A
total of $77.0 million and $61.0 million was outstanding under such facility at
September 30, 1995 and December 15, 1995, respectively. The Company had no
outstanding letters of credit at September 30, 1995. At December 15, 1995, the
Company had outstanding $239,000 in face amount of letters of credit.

The Revolving Loan Agreement provides for (i) a $50.0 million Corporate
Facility to be used for (A) general working capital purposes, (B) acquisitions
of equity interests in other persons, (C) certain permitted investments, and (D)
other business needs approved by the Banks that constitute at least 50% of the
lenders in number and have loaned 51% or more of the amount then outstanding
under the Revolving Loan Agreement; (ii) a $100.0 million Portfolio Facility to
be used to (A) refinance indebtedness incurred in connection with the purchase
of certain Asset Portfolios acquired prior to execution and delivery of the
Revolving Loan Agreement, (B) finance future acquisitions of Asset Portfolios,
and (C) finance acquisitions of entities for the purpose of resolving Asset
Portfolios owned by such entities; and (iii) a sublimit of $10.0 million for
letters of credit. (The Revolving Loan Agreement initially included a $25.0
million temporary bridge facility that was permanently repaid with a portion of
the net proceeds of the Convertible Subordinated Debenture Offering.) The Banks'
current commitment under the Revolving Loan Agreement is limited to a total of
$105.0 million, $35.0 million under the Corporate Facility and $70.0 million
under the Portfolio Facility. The additional amounts under the Revolving Loan
Agreement would become available to the Company upon the participation by
additional financial institutions in the syndicate for the loan and upon an
increase in the Company's borrowing base under this agreement. There can be no
assurance that such events will occur.

The Company uses the Corporate Facility for general corporate purposes
including acquisitions and investments in asset portfolios, partnerships and
joint ventures and the Portfolio Facility to support investments in wholly-owned
asset portfolios.

RANKING. Indebtedness under the Revolving Loan Agreement constitutes Senior
Indebtedness.

SECURITY. Indebtedness under the Revolving Loan Agreement is secured by
substantially all the assets of the Company not pledged under other facilities,
including stock of a majority of the Company's subsidiaries.

INTEREST. Indebtedness under the Corporate Facility and the Portfolio
Facility generally bears interest at a rate based (at the Company's option) upon
the lesser of (i) the Variable Rate (defined as Agent's prime rate, as announced
from time to time) or (ii) the Adjusted LIBOR Rate (as defined in the Revolving
Loan Agreement).

MATURITY. The Corporate Facility will mature on September 29, 1997. The
Portfolio Facility will mature on September 27, 1996, subject to the Company's
right to extend the maturity date for the outstanding balance of the Portfolio
Facility for one additional year. Loans made pursuant to the Corporate Facility
and the Portfolio Facility may be borrowed, repaid and reborrowed from time to
time until the respective maturity thereof, subject to the satisfaction of
certain conditions on the date of any such borrowing.

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FEES. The Company paid to the Banks, upon execution and delivery of the
Revolving Loan Agreement, an aggregate commitment fee equal to $770,000. The
Company also will be required to pay to the Banks a facility fee (ranging from
20 to 37.5 basis points) per annum, payable in arrears on a quarterly basis, on
the committed undrawn amount of the Corporate Facility and the Portfolio
Facility, after adjustment for any letters of credit issued by the Banks under
the Revolving Loan Agreement. In addition, the Company will be required to pay
to the Agent (for the account of each Bank) certain fees in respect of letters
of credit issued under the Revolving Loan Agreement. The Company also will pay
to the Agent certain other fees for the Agent's role in structuring and
administering the Revolving Loan Agreement.

CONDITIONS TO FUNDING EXTENSIONS OF CREDIT. The obligation of the Banks to
make loans or extend letters of credit will be subject to the satisfaction of
certain customary conditions, including, without limitation, the absence of any
default under the Revolving Loan Agreement and all representations and
warranties under the Revolving Loan Agreement being true and correct in all
material respects.

COVENANTS. The Revolving Loan Agreement requires the Company to meet
certain financial tests, including minimum consolidated tangible net worth,
maximum consolidated funded debt to consolidated capitalization ratio, minimum
fixed charge coverage ratio, minimum interest coverage ratio, maximum
consolidated funded debt to consolidated EBITDA ratio and maximum Corporate
Facility outstanding to consolidated EBITDA ratio. The Revolving Loan Agreement
contains covenants that, among other things, will limit the incurrence of
additional indebtedness, investments, asset sales, loans to stockholders,
dividends, transactions with affiliates, acquisitions, mergers and
consolidations, liens and encumbrances and other matters customarily restricted
in such agreements. The Revolving Loan Agreement also contains additional
covenants that require the Company to maintain its properties and those of its
subsidiaries (including corporate franchises), together with insurance thereon,
to provide certain information to the Agent, including financial statements,
notices and reports, to permit inspections of the books and records of the
Company and its subsidiaries by the Agent, to comply with applicable laws,
including environmental laws and ERISA, to pay taxes, and to use the proceeds of
the loans solely for certain specified purposes.

EVENTS OF DEFAULT. The Revolving Loan Agreement contains customary events
of default, including payment defaults, covenant defaults (subject to certain
cure periods to be mutually agreed upon by the Company and the Agent), breaches
of representations and warranties, cross-defaults to certain other indebtedness,
certain events of bankruptcy and insolvency, judgment defaults in excess of
$500,000, failure of any guaranty or security agreement supporting the Revolving
Loan Agreement to be in full force and effect and change of control of the
Company.

INDEMNIFICATION. Under the Revolving Loan Agreement, the Company has agreed
to indemnify the Agent and the Banks from and against any and all liabilities,
losses, damages, costs and expenses of any kind (including, without limitations,
reasonable fees and disbursements of counsel for Agent and the Banks) that may
be incurred by Agent or any Bank relating to or arising out of the Revolving
Loan Agreement, provided that the Company is not liable for any such
liabilities, losses, damages, costs or expenses resulting from such indemnified
party's own gross negligence or willful misconduct. In addition, the Company has
agreed to indemnify the Banks against any and all present and future claims
related to tax payments (excluding income taxes of any Bank) in connection with
the loans made under the Revolving Loan Agreement.

ACC WAREHOUSE FACILITIES

NATIONSBANK

GENERAL. On April 28, 1995, ACC and the Company entered into the $25.0
million NationsBank Warehouse Facility, which ACC uses to finance the
origination and warehousing of certain mortgage loans. See "Business -- Mortgage
Banking Business." The Company has guaranteed certain of ACC's obligations under
the NationsBank Warehouse Facility. A total of $2.7 million was outstanding
under the NationsBank Warehouse Facility at September 30, 1995, which amount was
repaid prior to November 30, 1995. ACC uses the NationsBank Warehouse Facility
to support investments in mortgages pending sale.

RANKING. The Company's guarantee under the NationsBank Warehouse Facility
constitutes Senior Indebtedness of the Company.

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SECURITY. ACC's indebtedness under the NationsBank Warehouse Facility is
secured by all mortgage loans originated by ACC using funds obtained under the
NationsBank Warehouse Facility and related collection accounts.

INTEREST. Indebtedness under the NationsBank Warehouse Facility generally
bears interest at a rate based (at ACC's option) upon the lesser of (i) the
prime rate established by NationsBank of Texas, as announced from time to time
or (ii) the Adjusted LIBOR Rate (as defined in the NationsBank Warehouse
Facility) plus 2%.

MATURITY. The original maturity date of the NationsBank Warehouse Facility
is January 25, 1997, subject to certain limitations. Under certain
circumstances, ACC may extend the maturity date to January 25, 1998.

CONDITIONS TO EXTENSIONS OF CREDIT. The obligation of NationsBank of Texas
to make loans to ACC under the NationsBank Warehouse Facility is subject to
certain customary conditions including, without limitation, the delivery of
certain documents, instruments and applications by ACC, approval by NationsBank
of Texas of the mortgage loan to be originated by ACC, the absence of any
default under the NationsBank Warehouse Facility and all representations and
warranties under the NationsBank Warehouse Facility being true and correct.

COVENANTS. The NationsBank Warehouse Facility requires ACC to meet certain
financial tests, including minimum liquidity, maximum ratios of total
liabilities to tangible net worth and minimum tangible net worth. The
NationsBank Warehouse Facility also contains covenants that, among other things,
limit the incurrence of additional indebtedness, investments, asset sales,
distributions, transactions with affiliates, acquisitions, mergers and
consolidations, liens, encumbrances and other matters customarily restricted in
such agreements. The NationsBank Warehouse Facility also contains additional
covenants that require ACC to provide certain information to NationsBank of
Texas, including financial statements, notices and reports, to permit
inspections of the books and records of the Company and its subsidiaries by
NationsBank of Texas and to comply with applicable laws and to pay taxes.

EVENTS OF DEFAULT. The NationsBank Warehouse Facility contains customary
events of default, including payment defaults, breaches of representations and
warranties, cross-defaults to certain other indebtedness, certain events of
bankruptcy and insolvency, judgment defaults in excess of certain amounts,
failure of any guarantee or security agreement supporting the NationsBank
Warehouse Facility to be in full force and effect, a change in control of ACC,
changes in the basic business of ACC and changes in the individuals holding
certain offices with ACC.

INDEMNIFICATION. Under the NationsBank Warehouse Facility, ACC has agreed
to indemnify NationsBank of Texas and certain related parties from and against
any and all losses, liabilities, claims, damages, deficiencies, interest,
judgments, costs and expenses (including, without limitation, reasonable fees
and disbursements of counsel for NationsBank of Texas) that arise out of certain
matters described in the NationsBank Warehouse Facility, provided that ACC is
not liable for such matters resulting from the gross negligence or willful
misconduct of an indemnitee thereunder.

RESIDENTIAL FUNDING CORPORATION

GENERAL. On August 15, 1995, ACC entered into the RFC Warehouse Facility,
which ACC uses to facilitate multi-family mortgage loan underwriting and
origination. See "Business -- Mortgage Banking Business." A total of $3.0
million and $10.4 million was outstanding under the RFC Warehouse Facility at
September 30, 1995 and November 30, 1995, respectively. The RFC Warehouse
Facility is non-recourse to the Company.

SECURITY. ACC's indebtedness under the RFC Warehouse Facility is secured by
all mortgage loans originated by ACC using funds obtained under the RFC
Warehouse Facility.

INTEREST. Indebtedness under the RFC Warehouse Facility generally bears
interest at a rate based upon the LIBOR Rate (as defined in the RFC Warehouse
Facility) plus 3%.

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MATURITY. The stated maturity date will be provided in each note related to
each borrowing under the RFC Warehouse Facility and is expected to be
approximately 60 days from the date of each such borrowing.

CONDITIONS TO EXTENSIONS OF CREDIT. The obligation of Residential Funding
Corporation to make loans to ACC under the RFC Warehouse Facility is subject to
certain customary conditions including, without limitation, the delivery of
certain documents, instruments and applications by ACC, approval by Residential
Funding Corporation of the mortgage loans to be originated by ACC, the absence
of any default under the RFC Warehouse Facility, and all representations and
warranties under the RFC Warehouse Facility being true and correct.

COVENANTS. The RFC Warehouse Facility requires ACC to meet certain
financial tests, including a maximum ratio of debt to tangible net worth,
minimum tangible net worth and minimum Servicing Portfolio (as defined in the
RFC Warehouse Facility). The RFC Warehouse Facility also contains covenants
that, among other things, limit ACC's ability to liquidate, dissolve,
consolidate or merge or sell any substantial part of its assets, or acquire any
substantial part of the assets of another business. The RFC Warehouse Facility
also contains additional covenants that require ACC to provide certain
information to Residential Funding Corporation, including financial statements,
notices and reports, permit inspections of the books and records of ACC by
Residential Funding Corporation and to comply with applicable laws and to pay
taxes.

EVENTS OF DEFAULT. The RFC Warehouse Facility contains customary events of
default, including payment defaults (subject to certain cure periods), breaches
of covenants or representations and warranties, cross-defaults to certain other
indebtedness, certain events of bankruptcy and insolvency (including of the
Company) and judgment defaults in excess of certain amounts.

INDEMNIFICATION. Under the RFC Warehouse Facility, ACC has agreed to
indemnify Residential Funding Corporation and certain related parties from and
against any and all losses, liabilities, claims, damages, deficiencies,
interest, judgments, costs and expenses (including, without limitation,
reasonable fees and disbursements of counsel for Residential Funding
Corporation) that arise out of certain matters described in the RFC Warehouse
Facility, provided that ACC is not liable for such matters resulting from the
gross negligence or willful misconduct of an indemnitee thereunder.

ARMC WAREHOUSE FACILITY

GENERAL. On November 3, 1995, ARMC entered into the Prudential Warehouse
Facility. The Prudential Warehouse Facility is currently a $150.0 million credit
facility that ARMC uses to finance the acquisition and warehousing of certain
residential mortgage loans. See "Business -- Mortgage Banking Business --
Residential Mortgage Securitization." A total of $115.8 million was outstanding
under the Prudential Warehouse Facility at November 30, 1995. The Prudential
Warehouse Facility is non-recourse to the Company.

SECURITY. ARMC's indebtedness under the Prudential Warehouse Facility is
secured by all residential mortgage loans acquired by ARMC using funds obtained
under the Prudential Warehouse Facility.

INTEREST. Indebtedness under the Prudential Warehouse Facility generally
bears interest at a rate based upon LIBOR (as defined in the Prudential
Warehouse Facility) plus 7/8%; if Prudential Securities, Inc. is not the
underwriter on the eventual securitization of the mortgage loans securing this
warehouse loan, the interest rate may be increased to LIBOR plus 2 2/5%,
applicable retroactively.

MATURITY. The stated maturity date for the Prudential Warehouse Facility is
the earlier of (i) March 29, 1996 or (ii) the date on which the loans
collateralizing the Prudential Warehouse Facility are securitized.

CONDITIONS TO EXTENSIONS OF CREDIT. The obligation of Prudential Securities
Realty Funding Corporation to make loans to ARMC under the Prudential Warehouse
Facility is subject to certain customary conditions, including, without
limitation, the delivery of certain documents, instruments and applications by
ARMC, approval by Prudential Securities Realty Funding Corporation of the
mortgage loan pool to be acquired by ARMC, the absence of any default under the
Prudential Warehouse Facility, and all representations and warranties under the
Prudential Warehouse Facility being true and correct.

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COVENANTS. The Prudential Warehouse Facility requires ARMC to meet certain
financial tests, including minimum tangible equity capital, a minimum net equity
amount and a maximum leverage ratio. The Prudential Warehouse Facility also
contains covenants that, among other things, require ARMC to provide certain
information to Prudential Securities Realty Funding Corporation, including
financial statements and other reports regarding the mortgage loans, to maintain
adequate insurance, and to comply with the applicable laws.

EVENTS OF DEFAULT. The Prudential Warehouse Facility contains customary
events of default, including payment default, breaches of covenants or
representations and warranties, certain events of bankruptcy and insolvency
(including of the Company) and material adverse changes in the financial
condition of ARMC or the Company.

INDEMNIFICATION. Under the Prudential Warehouse Facility, ARMC has agreed
to indemnify Prudential Securities Realty Funding Corporation against all
liabilities, losses, damages, judgments, costs and expenses of any kind which
relate to or arise out of the Prudential Warehouse Facility, provided that ARMC
is not liable for such matters resulting from the negligence or willful
misconduct of Prudential.

AMBS REPURCHASE TRANSACTION

GENERAL. On September 27, 1995, AMRESCO MBS I, INC., a wholly-owned
subsidiary of the Company ("AMBS"), entered into a Repurchase Transaction (the
"Repurchase Transaction") which supplements, forms part of and is subject to a
Global Master Repurchase Agreement (the "Repurchase Agreement") with Nomura
Grand Cayman, Ltd. ("Nomura") to support the purchase on margin of certain
commercial mortgage pass-through certificates (the "Purchased Securities"). As
of November 30, 1995, $8.7 million was outstanding under the Repurchase
Transaction.

SECURITY. Indebtedness under the Repurchase Transaction is secured by a
first priority security interest in the Purchased Securities.

INTEREST. Indebtedness under the Repurchase Transaction bears interest at a
rate of 30 day LIBOR plus between 1 1/4% and 1 1/2% depending on the margin
(7 3/8% at November 30, 1995).

REPURCHASE DATE. The repurchase date for the Repurchase Transaction is
September 16, 1996, with a three month extension, at the option of Nomura.

EVENTS OF ACCELERATION. Upon the occurrence of (i) a material adverse
impact on (A) the creditworthiness of AMBS, (B) the ability of AMBS to perform
its obligations under the Repurchase Agreement, (C) the marketability or value
of the Purchased Securities or (D) the economic, political or financial
stability of the issuing or domicile country, (ii) governmental changes in
taxation or exchange controls which affect the Purchased Securities or relevant
financial markets or (iii) a drop of more than 5% in the market value of the
Purchased Securities in one day, Nomura may immediately accelerate the
repurchase date.

EVENTS OF DEFAULT. The Repurchase Transaction contains certain events of
default, including, among others, payment defaults, failure to maintain a
minimum margin, insolvency, breaches of representations and warranties,
suspension from a securities exchange or association, failure to maintain a
first priority security interest in the Purchased Securities and cross-defaults
in excess of certain amounts.

CONVERTIBLE SUBORDINATED DEBENTURES

GENERAL. On November 27, 1995, the Company entered into the Convertible
Subordinated Debenture Indenture with First Interstate Bank of Texas, National
Association, as trustee. Pursuant to the terms of the Convertible Subordinated
Debenture Indenture, an aggregate of $45.0 million of Convertible Subordinated
Debentures were issued. A portion of the net proceeds from the sale of the
Convertible Subordinated Debentures was applied to pay down indebtedness under
the Company's Revolving Loan Agreement.

RANKING. Indebtedness under the Convertible Subordinated Debenture
Indenture does not constitute Senior Indebtedness and will be subordinated to
the Notes.

SECURITY. Indebtedness under the Convertible Subordinated Debenture
Indenture is unsecured.

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INTEREST. Indebtedness under the Convertible Subordinated Debenture
Indenture bears interest at the rate of 8% per annum.

MATURITY. The Convertible Subordinated Debenture Indenture will mature on
December 15, 2005.

CONVERSION RIGHTS. The Convertible Subordinated Debentures are convertible
into Common Stock at the option of holders thereof at any time and from time to
time prior to and including maturity. The initial conversion price is $12.50 per
share, subject to adjustment in certain events.

CERTAIN RIGHTS TO REQUIRE REPURCHASE OF CONVERTIBLE SUBORDINATED
DEBENTURES. In the event of any Fundamental Change (as described below)
affecting the Company which constitutes a Repurchase Event (as described below)
occurring after the date of issuance of the Convertible Subordinated Debentures
and on or prior to maturity, each holder of Convertible Subordinated Debentures
will have the right, at the holder's option, to require the Company to
repurchase all or any part of the holder's Convertible Subordinated Debentures
at a price (the "Repurchase Price") equal to 101% of the principal amount
thereof, together with accrued and unpaid interest to the repurchase date.

The term "Fundamental Change" means the occurrence of any transaction or
event in connection with which all or substantially all of the Common Stock
shall be exchanged for, converted into, acquired for or constitute the right to
receive consideration (whether by means of an exchange offer, liquidation,
tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which is not all or substantially all common
stock which is (or, upon consummation of or immediately following such
transaction or event, will be) listed on a national securities exchange or
approved for quotation on the Nasdaq Stock Market or any similar system of
automated dissemination of quotations of securities prices. For purposes of the
definition of a "Fundamental Change," (i) "substantially all of the Common
Stock" shall mean at least 85% of the Common Stock outstanding immediately prior
to the transaction or event giving rise to a Fundamental Change and (ii)
consideration shall be "substantially all common stock" if at least 80% of the
fair value (as determined in good faith by the Board of Directors) of the total
consideration is attributable to common stock. A Fundamental Change would not
include an acquisition of a majority of the outstanding Common Stock by any
person or group so long as it does not result in termination of such listing or
approval for quotation.

A Repurchase Event is a right to require the Company to repurchase the
Convertible Subordinated Debentures and a Repurchase Event shall have occurred
if a Fundamental Change shall have occurred unless (i) the current market price
of the Common Stock is at least equal to the conversion price of the Convertible
Subordinated Debentures in effect immediately preceding the time of such
Fundamental Change or (ii) the consideration in the transaction or event giving
rise to such Fundamental Change to the holders of Common Stock consists of cash,
securities that are, or immediately upon issuance will be, listed on a national
securities exchange or quoted on the Nasdaq National Market (or any similar
system of automated dissemination of quotations of securities prices), or a
combination of cash and such securities, and the aggregate fair market value of
such consideration (which, in the case of such securities, shall be equal to the
average of the daily closing prices of such securities during the 10 consecutive
trading days commencing with the sixth trading day following consummation of
such transaction or event) is at least 105% of the conversion price of the
Convertible Subordinated Debentures in effect on the date immediately preceding
the closing date of such transaction or event.

OPTIONAL REDEMPTION. The Convertible Subordinated Debentures are not
redeemable prior to December 15, 1996. Thereafter the Convertible Subordinated
Debentures will be redeemable, at the Company's option, in whole and not in
part, at various redemption prices (expressed as a percentage). The Convertible
Subordinated Debentures may not be redeemed, however, after December 15, 1996,
and prior to December 15, 1998, unless, for twenty consecutive trading days
ending on the day immediately preceding the fifth day prior to notice of
redemption, the Closing Price (as defined) equals or exceeds 145% of the
conversion price.

COVENANTS. The Convertible Subordinated Debenture Indenture contains
covenants limiting dividends and redemptions, limiting restrictions on
subsidiary dividends and requiring that certain conditions be met prior to any
consolidation, merger or sale of assets of the Company.

53
<PAGE>
In addition, the Convertible Subordinated Debenture Indenture provides that
if the Company's Net Worth (as defined below) at the end of each of any two
consecutive fiscal quarters (the last day of such second fiscal quarter being
referred to as the "Acceleration Date"), respectively, is less than the Minimum
Net Worth (as defined below), then the Company shall make an irrevocable,
unconditional offer to all holders (an "Offer") to acquire, on a PRO RATA basis,
on or before the last day of the next following fiscal quarter or, if the
Acceleration Date is the last day of the Company's fiscal year, the 45th day
after the last day of the next following fiscal quarter (the "Accelerated
Payment Date"), $20.0 million aggregate principal amount of Convertible
Subordinated Debentures (or if less than such amount of Convertible Subordinated
Debentures are then outstanding, all of the Convertible Subordinated Debentures
outstanding at the time) at a purchase price equal to 100% of the principal
amount, plus accrued and unpaid interest, if any, to and including such
Accelerated Payment Date, which amounts or portion thereof upon acceptance of
such Offer by tender shall thereupon become due and payable.

"Minimum Net Worth" means approximately $141.0 million (which includes the
net proceeds to the Company from the Common Stock Offering) plus the net
proceeds to the Company from any other offering of Common Stock by the Company
subsequent to the date hereof. "Net Worth" of the Company as of any date means
the amount of equity of the holders of capital stock of the Company which would
appear on the balance sheet of the Company as of such date, determined in
accordance with generally accepted accounting practices.

EVENTS OF DEFAULTS. The Convertible Subordinated Debenture Indenture
contains certain customary events of default, including payment defaults,
covenant defaults (subject to certain cure periods), defaults of certain other
indebtedness, certain events of bankruptcy and insolvency and judgment defaults
in excess of $1.0 million.

54
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Purchase Agreement between the
Company and the Underwriters and to the receipt of certain legal opinions and
other closing conditions contemplated thereby, the Underwriters named below have
severally agreed to purchase from the Company the respective principal amount of
the Notes set forth opposite their names in the table below:

<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT OF NOTES
- --------------------------------------------------------------------------------------- ---------------
<S> <C>
Piper Jaffray Inc...................................................................... $

---------------
$ 50,000,000
---------------
---------------
</TABLE>

The nature of the obligations of the Underwriters is such that if any of the
Notes are purchased, all of them must be purchased.

The Underwriters have advised the Company that they propose to offer the
Notes to the public at the Price to Public and to selected dealers at such price
less a concession of not more than % of the principal amount of the Notes.
The Underwriters may allow, and such dealers may re-allow, concessions not in
excess of % of the principal amount of the Notes to certain other brokers and
dealers. After the initial public offering, the Price to Public and other
selling terms may be changed by the Underwriters.

The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an additional $7.5
million in aggregate principal amount of the Notes at the Price to Public less
the Underwriting Discount. The Underwriters may exercise such option to purchase
solely for the purpose of covering over-allotments, if any, incurred in the sale
of the Notes offered hereby. To the extent that the Underwriters exercise the
option, each of the Underwriters will be committed, subject to certain
exceptions, to purchase a principal amount of the Notes approximately
proportionate to the Underwriter's initial commitment, and the Company will be
obligated, pursuant to the option, to sell such Notes to the Underwriters.

The Company has made application to list the Notes for trading on the New
York Stock Exchange under the symbol "AMMB03". Pending such listing or if such
listing is not accepted, the Underwriters have each indicated an intention to
make a market in the Notes. However, no Underwriter is obligated to make a
market in the Notes and any market making may be discontinued at any time at the
sole discretion of such Underwriter. There can be no assurance that an active
trading market in the Notes will develop or that the Notes will not trade at a
discount to their principal amount.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Act, or to contribute to payments
which the Underwriters may be required to make in respect thereto.

LEGAL MATTERS

The validity of the Notes offered hereby will be passed upon for the Company
by L. Keith Blackwell, General Counsel of the Company. Certain other legal
matters will be passed upon for the Company by Haynes and Boone, L.L.P., Dallas,
Texas. Certain legal matters relating to the Notes offered hereby will be passed
upon for the Underwriters by Lindquist & Vennum P.L.L.P., Minneapolis,
Minnesota.

INDEPENDENT ACCOUNTANTS

The consolidated balance sheets of the Company as of December 31, 1993 and
1994, and the related statements of income, shareholders' equity and cash flows
for the period from November 1, 1992 through December 31, 1992 and the years
ended December 31, 1993 and 1994 and the combined statements of income and cash
flows of Holdings (predecessor of the Company) for the period January 1, 1992
through October 31, 1992 have been audited by Deloitte & Touche LLP, independent
accountants, as stated in their reports appearing herein.

55
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Consolidated Financial Statements of AMRESCO, INC.
Independent Auditors' Report............................................................................. F-2
Consolidated Balance Sheets, December 31, 1993 and 1994, and September 30, 1995 (Unaudited).............. F-3
Consolidated Statements of Income for the Two Months Ended December 31, 1992, the Years Ended December
31, 1993 and 1994, and the Nine Months Ended September 30, 1994 and 1995 (Unaudited).................... F-4
Consolidated Statements of Shareholders' Equity for the Two Months Ended December 31, 1992, the Years
Ended December 31, 1993 and 1994, and the Nine Months Ended September 30, 1995 (Unaudited).............. F-5
Consolidated Statements of Cash Flows for the Two Months Ended December 31, 1992, the Years Ended
December 31, 1993 and 1994, and the Nine Months Ended September 30, 1994 and 1995 (Unaudited)........... F-6
Notes to Consolidated Financial Statements............................................................... F-7

Combined Financial Statements of Predecessor Businesses
Independent Auditors' Report............................................................................. F-22
Combined Statement of Income for the Ten Months Ended October 31, 1992................................... F-23
Combined Statement of Cash Flows for the Ten Months Ended October 31, 1992............................... F-23
Notes to Combined Financial Statements................................................................... F-24
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors of AMRESCO, INC.:

We have audited the accompanying consolidated balance sheets of AMRESCO,
INC. and subsidiaries as of December 31, 1993 and 1994, and the related
consolidated statements of income, shareholders' equity and cash flows for the
two months ended December 31, 1992, and the years ended December 31, 1993 and
1994. These financial statements are the responsibility of AMRESCO, INC.'s
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of AMRESCO, INC. and subsidiaries
as of December 31, 1993 and 1994, and the results of their operations and their
cash flows for the two months ended December 31, 1992, and the years ended
December 31, 1993 and 1994, in conformity with generally accepted accounting
principles.

DELOITTE & TOUCHE LLP

Dallas, Texas
February 6, 1995

F-2
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
1993 1994 1995
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Cash and cash equivalents....................................................... $ 43,442 $ 20,446 $ 12,720
Investment securities (Note 5).................................................. 27,222
Accounts receivable, net of reserves of $826, $4,929 and $2,641, respectively... 39,399 20,682 7,657
Mortgage loans held for sale (Note 5)........................................... 6,042
Investments in asset portfolios (Notes 5 and 14):
Loans......................................................................... 33,795 30,920 114,676
Partnerships and joint ventures............................................... 2,503 22,491 30,052
Real estate................................................................... 2,504 14,054 11,046
Asset backed securities....................................................... 3,481 19,982
Deferred income taxes (Note 6).................................................. 18,173 17,207 12,810
Premises and equipment, net of accumulated depreciation of $2,108, $1,082 and
$1,781, respectively........................................................... 3,422 4,301 5,119
Intangible assets, net of accumulated amortization of $1,170, $1,226 and $3,056,
respectively (Notes 2 and 3)................................................... 10,209 30,668 30,377
Other assets (Notes 4, 10 and 14)............................................... 10,206 8,090 13,379
-------- -------- -------------
TOTAL ASSETS.................................................................... $163,653 $172,340 $291,082
-------- -------- -------------
-------- -------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Accounts payable.............................................................. $ 9,830 $ 4,891 $ 4,307
Accrued employee compensation and benefits (Notes 3, 11 and 12)............... 23,419 18,460 8,524
Notes payable (Note 5)........................................................ 22,113 15,500 104,222
Mortgage warehouse debt (Note 5).............................................. 5,693
Nonrecourse debt (Note 5)..................................................... 6,000 959 30,605
Income taxes payable (Note 6)................................................. 541 1,219 1,329
Payable to partners (Note 7).................................................. 3,399 3,907 950
Net liabilities of discontinued operation (Note 9)............................ 954
Other liabilities (Note 8).................................................... 6,652 12,864 6,428
-------- -------- -------------
Total liabilities........................................................... 71,954 58,754 162,058
-------- -------- -------------
COMMITMENTS AND CONTINGENCIES (Note 13)
SHAREHOLDERS' EQUITY (Note 11):
Preferred stock, $1.00 par value, authorized 5,000,000 shares; none
outstanding
Common stock, $.05 par value, authorized 50,000,000 shares; 22,309,817,
23,592,647 and 24,193,464 shares issued in 1993, 1994 and 1995,
respectively................................................................. 1,116 1,180 1,210
Capital in excess of par...................................................... 67,112 74,691 78,790
Reductions for employee stock................................................. (607) (429) (620)
Treasury stock, $0.05 par value, 24,339 shares in 1995........................ (160)
Retained earnings (Note 5).................................................... 24,078 38,144 49,804
-------- -------- -------------
Total shareholders' equity.................................................. 91,699 113,586 129,024
-------- -------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...................................... $163,653 $172,340 $291,082
-------- -------- -------------
-------- -------- -------------
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
TWO MONTHS NINE MONTHS ENDED
ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ------------------------ ------------------------
1992 1993 1994 1994 1995
------------ ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES (Note 3):
Asset management and resolution fees............. $ 37,678 $ 168,313 $ 120,640 $ 101,221 $ 27,278
Asset portfolio income........................... 2,642 13,089 8,433 23,662
Mortgage banking fees............................ 6,176 1,967 14,077
Other revenues................................... 157 1,207 17,279 16,184 4,585
------------ ----------- ----------- ----------- -----------
Total revenues................................. 37,835 172,162 157,184 127,805 69,602
------------ ----------- ----------- ----------- -----------
EXPENSES:
Personnel........................................ 16,814 84,347 79,018 62,268 36,827
Occupancy........................................ 763 3,329 4,108 3,106 1,903
Equipment........................................ 560 2,121 2,637 1,978 1,580
Professional fees................................ 5,085 17,517 11,593 9,156 2,359
General and administrative....................... 6,903 17,380 22,299 16,136 3,745
Interest (Note 5)................................ 19 754 1,768 1,696 2,771
Profit participations............................ 1,529 3,037 75 (65) 446
------------ ----------- ----------- ----------- -----------
Total expenses................................. 31,673 128,485 121,498 94,275 49,631
------------ ----------- ----------- ----------- -----------
Income from continuing operations before taxes..... 6,162 43,677 35,686 33,530 19,971
Income tax expense (Note 6)........................ 2,279 17,371 14,753 13,874 7,541
------------ ----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS.................. 3,883 26,306 20,933 19,656 12,430
------------ ----------- ----------- ----------- -----------
Discontinued operations (Note 9)
Loss from operations, net of $99, $1,392, $891,
and $651 income tax benefit for 1992, 1993,
1994, and the nine months ended September 30,
1994, respectively.............................. (148) (2,088) (1,287) (976)
Loss on disposal of AMRESCO Services, Inc.
(including provision of $923 for operating
losses during the phase-out period), less
applicable income tax benefit of $622........... (898)
Gain from sale of discontinued operations, net of
$1,617 income tax expense....................... 2,425
------------ ----------- ----------- ----------- -----------
Gain (Loss) from discontinued operations........... (148) (2,088) (2,185) (976) 2,425
------------ ----------- ----------- ----------- -----------
NET INCOME......................................... $ 3,735 $ 24,218 $ 18,748 $ 18,680 $ 14,855
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
Earnings per share for income from continuing
operations........................................ $ 0.34 $ 2.33 $ 0.88 $ 0.83 $ 0.51
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
Earnings per share for net income.................. $ 0.33 $ 2.15 $ 0.79 $ 0.79 $ 0.61
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
Weighted average number of shares outstanding...... 11,419,536 11,288,688 23,679,239 23,515,800 24,429,822
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON
CONVERTIBLE COMMON STOCK, STOCK,
PREFERRED STOCK NO PAR VALUE $0.05 PAR
-------------------- --------------------- VALUE
NUMBER NUMBER -----------
OF OF NUMBER OF
SHARES AMOUNT SHARES AMOUNT SHARES
--------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
NOVEMBER 1, 1992....................................................... 126,960 $ 12,696 515,000 $ 3,090
Net income.............................................................
--------- --------- ---------- --------- -----------
DECEMBER 31, 1992...................................................... 126,960 12,696 515,000 3,090
--------- --------- ---------- --------- -----------
Cancellation of stock and notes receivable (Note 11)................... (29,800) (179)
Employee stock compensation (Note 11).................................. 1,188
Dividends paid ($.35 per share)........................................
Conversion of convertible preferred stock (Note 2)..................... (126,960) (12,696) 623,531 12,696
Conversion of common stock (Note 2).................................... (1,108,731) (16,795) 11,120,530
Issuance of common stock for acquisition (Note 2)...................... 11,189,287
Net income.............................................................
--------- --------- ---------- --------- -----------
DECEMBER 31, 1993...................................................... 22,309,817
--------- --------- ---------- --------- -----------
Exercise of stock options (Note 11).................................... 711,590
Issuance of common stock for acquisition (Note 2)...................... 571,240
Tax benefits from employee stock compensation..........................
Repayments of notes receivable for officer's shares....................
Dividends paid ($.15 per share)........................................
Dividends declared ($.05 per share)....................................
Foreign currency translation adjustments...............................
Net income.............................................................
--------- --------- ---------- --------- -----------
DECEMBER 31, 1994...................................................... 23,592,647
--------- --------- ---------- --------- -----------
(Unaudited)
Exercise of stock options............................................ 394,480
Issuance of common stock for earnout................................. 112,002
Issuance of common stock for unearned stock compensation............. 94,335
Amortization of unearned stock compensation..........................
Tax benefits from employee stock compensation........................
Repayment of notes receivable for officers' shares...................
Settlement of notes receivable for officers' shares with common stock
(14,339 shares).....................................................
Acquisition of treasury stock (10,000 shares)........................
Dividends paid ($0.10 per share).....................................
Dividends declared ($0.05 per share).................................
Foreign currency translation adjustments.............................
Unrealized gain on assets available for sale.........................
Net income...........................................................
--------- --------- ---------- --------- -----------
SEPTEMBER 30, 1995 (unaudited)....................................... $ $ 24,193,464
--------- --------- ---------- --------- -----------
--------- --------- ---------- --------- -----------

CAPITAL IN REDUCTIONS
EXCESS OF FOR EMPLOYEE TREASURY
AMOUNT PAR STOCK STOCK
----------- ----------- ------------- -----------
<S> <C> <C>
NOVEMBER 1, 1992....................................................... $ $ $ (786) $
Net income.............................................................
----------- ----------- ------ -----------
DECEMBER 31, 1992...................................................... (786)
----------- ----------- ------ -----------
Cancellation of stock and notes receivable (Note 11)................... 179
Employee stock compensation (Note 11)..................................
Dividends paid ($.35 per share)........................................
Conversion of convertible preferred stock (Note 2).....................
Conversion of common stock (Note 2).................................... 556 16,239
Issuance of common stock for acquisition (Note 2)...................... 560 50,873
Net income.............................................................
----------- ----------- ------ -----------
DECEMBER 31, 1993...................................................... 1,116 67,112 (607)
----------- ----------- ------ -----------
Exercise of stock options (Note 11).................................... 35 1,560
Issuance of common stock for acquisition (Note 2)...................... 29 4,291
Tax benefits from employee stock compensation.......................... 1,728
Repayments of notes receivable for officer's shares.................... 178
Dividends paid ($.15 per share)........................................
Dividends declared ($.05 per share)....................................
Foreign currency translation adjustments...............................
Net income.............................................................
----------- ----------- ------ -----------
DECEMBER 31, 1994...................................................... 1,180 74,691 (429)
----------- ----------- ------ -----------
(Unaudited)
Exercise of stock options............................................ 20 1,146
Issuance of common stock for earnout................................. 5 772
Issuance of common stock for unearned stock compensation............. 5 644 (649)
Amortization of unearned stock compensation.......................... 149
Tax benefits from employee stock compensation........................ 1,537
Repayment of notes receivable for officers' shares................... 220
Settlement of notes receivable for officers' shares with common stock
(14,339 shares)..................................................... 89 (89)
Acquisition of treasury stock (10,000 shares)........................ (71)
Dividends paid ($0.10 per share).....................................
Dividends declared ($0.05 per share).................................
Foreign currency translation adjustments.............................
Unrealized gain on assets available for sale.........................
Net income...........................................................
----------- ----------- ------ -----------
SEPTEMBER 30, 1995 (unaudited)....................................... $ 1,210 $ 78,790 $ (620) $ (160)
----------- ----------- ------ -----------
----------- ----------- ------ -----------

TOTAL
RETAINED SHAREHOLDERS'
EARNINGS EQUITY
----------- -------------
NOVEMBER 1, 1992....................................................... $ $ 15,000
Net income............................................................. 3,735 3,735
----------- -------------
DECEMBER 31, 1992...................................................... 3,735 18,735
----------- -------------
Cancellation of stock and notes receivable (Note 11)...................
Employee stock compensation (Note 11).................................. 1,188
Dividends paid ($.35 per share)........................................ (3,875) (3,875)
Conversion of convertible preferred stock (Note 2)..................... --
Conversion of common stock (Note 2).................................... --
Issuance of common stock for acquisition (Note 2)...................... 51,433
Net income............................................................. 24,218 24,218
----------- -------------
DECEMBER 31, 1993...................................................... 24,078 91,699
----------- -------------
Exercise of stock options (Note 11).................................... 1,595
Issuance of common stock for acquisition (Note 2)...................... 4,320
Tax benefits from employee stock compensation.......................... 1,728
Repayments of notes receivable for officer's shares.................... 178
Dividends paid ($.15 per share)........................................ (3,441) (3,441)
Dividends declared ($.05 per share).................................... (1,179) (1,179)
Foreign currency translation adjustments............................... (62) (62)
Net income............................................................. 18,748 18,748
----------- -------------
DECEMBER 31, 1994...................................................... 38,144 113,586
----------- -------------
(Unaudited)
Exercise of stock options............................................ 1,166
Issuance of common stock for earnout................................. 777
Issuance of common stock for unearned stock compensation............. --
Amortization of unearned stock compensation.......................... 149
Tax benefits from employee stock compensation........................ 1,537
Repayment of notes receivable for officers' shares................... 220
Settlement of notes receivable for officers' shares with common stock
(14,339 shares)..................................................... --
Acquisition of treasury stock (10,000 shares)........................ (71)
Dividends paid ($0.10 per share)..................................... (2,398) (2,398)
Dividends declared ($0.05 per share)................................. (1,208) (1,208)
Foreign currency translation adjustments............................. 155 155
Unrealized gain on assets available for sale......................... 256 256
Net income........................................................... 14,855 14,855
----------- -------------
SEPTEMBER 30, 1995 (unaudited)....................................... $ 49,804 $ 129,024
----------- -------------
----------- -------------
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
TWO MONTHS YEAR ENDED DECEMBER NINE MONTHS ENDED
ENDED 31, SEPTEMBER 30,
DECEMBER 31, -------------------- --------------------
1992 1993 1994 1994 1995
------------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income...................................................... $ 3,735 $ 24,218 $ 18,748 $ 18,680 $ 14,855
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................... 581 2,955 3,028 2,198 2,694
Loss (Gain) on discontinued operation (Note 9).............. 1,645 (2,425)
Write-off of intangible related to contract conclusion...... 2,827 2,827
Deferred tax provision (benefit)............................ (603) (1,650) 966 2,705 4,397
Loss from disposition of premises and equipment............. 16 198 692 78
Employee stock compensation................................. 1,188 149
Increase (decrease) in cash for changes in (exclusive of
assets and liabilities acquired in business combinations):
Accounts receivable....................................... (10,417) 3,287 17,855 20,468 13,025
Other assets.............................................. 94 (3,848) 1,908 3,484 (3,894)
Accounts payable.......................................... 6,641 (4,924) (4,768) (6,614) (630)
Income taxes payable...................................... 2,783 (2,699) 678 3,191 (1,507)
Other liabilities......................................... (2,191) 17,391 (4,137) (2,782) (21,588)
------------- --------- --------- --------- ---------
Net cash provided by operating activities............... 639 35,918 38,948 44,849 5,154
------------- --------- --------- --------- ---------
INVESTING ACTIVITIES:
Cash and cash equivalents acquired through BEI merger......... 18,521
Purchase of investment securities, net........................ (27,222)
Cash used for purchase of subsidiaries........................ (17,830) (17,830) (1,295)
Loans originated or purchased................................. (7,767)
Purchase of asset portfolios.................................. (36,894) (62,580) (33,196) (139,123)
Collections on asset portfolios............................... 3,099 30,815 23,175 34,569
Proceeds from sale of subsidiaries............................ 1,385 1,385 6,250
Purchase of premises and equipment............................ (852) (2,141) (2,091) (1,627)
------------- --------- --------- --------- ---------
Net cash used in investing activities................... (16,126) (50,351) (28,557) (136,215)
------------- --------- --------- --------- ---------
FINANCING ACTIVITIES:
Proceeds from notes payable, mortgage warehouse debt and
nonrecourse debt............................................. 4,656 42,426 19,894 4,394 238,048
Repayment of notes payable, mortgage warehouse debt and
nonrecourse debt............................................. (3,045) (19,129) (31,547) (23,340) (113,987)
Payment of dividends.......................................... (3,875) (3,441) (2,266) (3,578)
Stock options exercised....................................... 1,595 1,381 1,166
Tax benefit of employee stock compensation.................... 1,728 1,652 1,537
Acquisition of treasury stock................................. (71)
Repayment of notes receivable for officer's shares............ 178 178 220
------------- --------- --------- --------- ---------
Net cash provided by (used in) financing activities..... 1,611 19,422 (11,593) (18,001) 123,335
------------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents............ 2,250 39,214 (22,996) (1,709) (7,726)
Cash and cash equivalents, beginning of period.................. 1,978 4,228 43,442 43,442 20,446
------------- --------- --------- --------- ---------
Cash and cash equivalents, end of period........................ $ 4,228 $ 43,442 $ 20,446 $ 41,733 $ 12,720
------------- --------- --------- --------- ---------
------------- --------- --------- --------- ---------
SUPPLEMENTAL DISCLOSURES:
Interest paid................................................. $ 5 $ 678 $ 1,533 $ 1,466 $ 2,912
Income taxes paid............................................. 23,460 8,507 3,619 2,990
Conversion of convertible preferred stock to common stock..... 12,696
Common stock issued for purchase of subsidiary................ 4,320 4,320 777
Common stock issued for unearned stock compensation........... 649
Holliday Fenoglio earnout liability........................... 3,883
Notes receivable received in connection with sale of
subsidiary................................................... 818 818
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF SEPTEMBER 30, 1995 AND FOR THE PERIODS
ENDED SEPTEMBER 30, 1994 AND 1995 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION -- On December 31, 1993, AMRESCO, INC., formerly BEI
Holdings, Ltd. (BEI), merged with AMRESCO Holdings, Inc. (Holdings). The merger
was accounted for as a "reverse acquisition" whereby Holdings was deemed to have
acquired BEI for financial reporting purposes. However, BEI, renamed AMRESCO,
INC. on May 23, 1994, remains the continuing legal entity and registrant for
Securities and Exchange Commission filing purposes. Consistent with the reverse
acquisition accounting treatment, the historical financial statements of
AMRESCO, INC. presented for the year ended December 31, 1993, and the two months
ended December 31, 1992, are the consolidated financial statements of Holdings
and differ from the consolidated financial statements of BEI as previously
reported. The operations of BEI have been included in the financial statements
from the date of acquisition. AMRESCO, INC. (the Company) is engaged primarily
in the business of portfolio acquisition, asset management and resolution, loan
origination/underwriting, servicing and real estate brokerage.

PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements include
the accounts of the Company, its subsidiaries and its controlled joint ventures.
Significant intercompany accounts and transactions have been eliminated in
consolidation.

REVENUE AND EXPENSE RECOGNITION -- Asset management and resolution fees from
management contracts are based on the amount of assets under management and the
net proceeds from the resolution of such assets, respectively, and are
recognized as earned. Expenses incurred in managing and administering the assets
subject to management contracts are charged to expense as incurred. Asset
resolution fees are accrued based on estimated collections and related costs.
Differences between estimated and actual amounts are recorded in the period of
determination. Loan placement fees, commitment fees, loan servicing fees and
real estate brokerage commissions are recognized as earned. Placement and
servicing expenses are charged to expense as incurred.

CASH EQUIVALENTS -- Cash equivalents include all highly liquid investments
with a maturity of three months or less when purchased.

INVESTMENT SECURITIES -- Investment Securities consist of short-term
investments such as Treasury bills, Federal agency securities and commercial
paper with a maturity of three months or less. The Company has the intent and
ability to hold these investments to maturity and are carried at amortized cost.
Because of the short maturities, cost estimates fair value. All investment
securities are pledged as collateral under the investment loan agreement. See
Note 5.

RECEIVABLES -- Receivables are recognized as earned according to the
respective management contracts. Included in accounts receivable are other
amounts due as reimbursement for certain expenses incurred or for funds advanced
on behalf of its customers. Receivables are due primarily from the Federal
Deposit Insurance Corporation (FDIC), the Resolution Trust Company (RTC) and
other customers. The Company's exposure to credit loss in the event that payment
is not received for revenue recognized equals the balance of accounts receivable
in the balance sheet.

MORTGAGE BANKING ACTIVITIES -- Mortgage loans held for sale are carried at
the lower of cost or market. Market is determined on an individual loan basis
based upon the estimated fair value of similar loans for the month of expected
delivery.

Statement of Financial Accounting Standards (SFAS) No. 122, "Accounting for
Mortgage Servicing Rights" (an amendment of SFAS No. 65), which is effective for
the fiscal year 1996, requires mortgage banking enterprises to recognize as
separate assets rights to service mortgage loans for others, whether such

F-7
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
rights are originated by the Company's own mortgage banking activities or
purchased from others. The Company will adopt SFAS No. 122 effective January 1,
1996, and expects that the impact of such adoption will be insignificant to its
financial condition and results of operations.

INVESTMENT IN ASSET PORTFOLIOS -- The Company classifies its investments in
asset portfolios as: loans, partnerships and joint ventures, real estate, and
asset-backed securities. The original cost of an asset portfolio is allocated to
individual assets within that asset portfolio based on their relative fair value
to the total purchase price. The difference between gross estimated cash flows
from loans and asset-backed securities and its present value is accrued using
the level yield method. The Company accounts for its investments in partnerships
and joint ventures using the equity method which generally results in the pass-
through of the Company's pro rata share of earnings as if the Company had a
direct investment in the underlying loans. Real estate is accounted for at the
lower of cost or estimated fair value. Gains and losses on the sale or
collection of specific assets are recognized on a specific identification basis.
Loans, partnerships and joint ventures, and real estate are carried at the lower
of cost or estimated fair value. The Company's investments in asset-backed
securities are classified as available for sale and are carried at estimated
fair value determined by discounting estimated cash flows at current market
rates. Any unrealized gains (losses) on asset-backed securities are excluded
from earnings and reported as a separate component of shareholders' equity, net
of tax effects.

Statement of Financial Accounting Standards (SFAS) No. 114, "Accounting by
Creditors for Impairment of a Loan", as amended by SFAS 118, which is effective
for fiscal year 1995, requires creditors to evaluate the collectibility of both
contractual interest and principal of loans when assessing the need for a loss
accrual. Impairment is measured based on the present value of the expected
future cash flows discounted at the loan's effective interest rate, or the fair
value of the collateral, less estimated selling costs, if the loan is collateral
dependent and foreclosure is probable. In management's judgment, because all
loans are purchased at substantial discounts, the adoption of SFAS 114 will have
an insignificant impact on the Company's financial condition and results of
operations. As of January 1, 1995, the Company adopted the provisions of SFAS
No. 114 "Accounting by Creditors for Impairment of a Loan" as amended by SFAS
118.

PREMISES AND EQUIPMENT -- Premises and equipment are stated at cost less
accumulated depreciation. The related assets are depreciated using the
straight-line method over their estimated service lives, which range from three
to twenty years. Improvements to leased property are amortized over the life of
the lease or the life of the improvement, whichever is shorter.

INTANGIBLE ASSETS -- Intangible assets represent the excess of purchase
price over the fair market value of net assets acquired in connection with the
purchases described in Note 2. These intangible assets, principally goodwill,
servicing rights and contracts acquired, are amortized using the straight-line
method over periods ranging from one to fifteen years. The Company periodically
assesses the recoverability of intangible assets and estimates the remaining
useful life by reviewing projected results of acquired operations, servicing
rights and contracts.

INCOME TAXES -- The Company accounts for income taxes in accordance with
SFAS No. 109, "Accounting for Income Taxes." Deferred taxes are recorded for
temporary differences between the bases of assets and liabilities as recognized
by tax laws and their bases as reported in the financial statements.

EARNINGS PER SHARE -- Earnings per share is computed by dividing net income
by the weighted average number of common shares and common share equivalents
outstanding. The weighted average number of shares outstanding for the years
ended December 31, 1993 and the two months ended December 31, 1992, is based on
the number of BEI shares of common stock and equivalents exchanged for Holdings
shares (see Note 2) and assumes the retroactive conversion of the preferred
stock.

F-8
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN OPERATIONS -- The Company has foreign subsidiaries located in
Canada. Assets and liabilities of the foreign subsidiaries are translated into
United States dollars at the prevailing exchange rate on the balance sheet date.
Revenue and expense accounts for these subsidiaries are translated using the
weighted average exchange rate during the period. These translation methods give
rise to cumulative foreign currency translation adjustments which are reported
as a separate component of equity.

INTERIM FINANCIAL INFORMATION -- The accompanying unaudited consolidated
financial statements of AMRESCO, INC. and subsidiaries (the "Company") have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine month periods ended September 30,
1994 and 1995, are not necessarily indicative of the results that may be
expected for the entire fiscal year or any other interim period.

RECLASSIFICATIONS -- Certain reclassifications of prior year amounts have
been made to conform to the current year presentation.

2. ACQUISITIONS AND ORGANIZATION
On November 20, 1992, a Stock Sale Agreement (the Agreement) was entered
into by AMRESCO Acquisition Corporation (Acquisition), an entity formed by CGW
Southeast Partners, L.P. I and II, to purchase the stock of Asset Management
Resolution Company and AMRESCO Holdings, Inc. effective as of October 31, 1992.
Acquisition and Holdings were merged, and Acquisition was renamed AMRESCO
Holdings, Inc. Prior to the transaction, the acquired companies were wholly
owned by NationsBank Corporation (the Seller). Additional payments were made to
the Seller based on Holdings' earnings. The Seller was entitled to 25% of pretax
income of Holdings in excess of certain agreed upon levels through June 30,
1997. Amounts paid and charged to expense under the Agreement during the two
months ended December 31, 1992 and the year ended December 31, 1993 were
$1,529,000 and $3,037,000, respectively. Certain provisions of the Agreement
related to the additional payments to the Seller were amended effective April 1,
1993, which replaced the earnout provisions with a rebate of 12.25% of revenues
from an asset management contract with the Seller through June 30, 1997. During
1993 and 1994, rebates of $7,347,000 and $6,437,000, respectively, were accrued
and charged against revenues in the period the revenues were earned. See Note 3.

The assets purchased and liabilities assumed as of October 31, 1992, were as
follows (in thousands):

<TABLE>
<S> <C>
Cash and cash equivalents......................................... $ 1,978
Accounts receivable............................................... 19,843
Intangible assets................................................. 4,748
Other assets...................................................... 6,771
Liabilities....................................................... (16,659)
---------
Net assets acquired........................................... $ 16,681
---------
---------
</TABLE>

On December 31, 1993, BEI merged with Holdings. The merger was accomplished
first by converting each outstanding share of Holdings' convertible preferred
stock into 4.91 shares of Holdings common stock. Each share of Holdings common
stock was then exchanged for 10.03 shares of BEI common stock for a total of
11,120,530 shares, resulting in Holdings becoming a subsidiary of BEI. The
purchase price, determined

F-9
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. ACQUISITIONS AND ORGANIZATION (CONTINUED)
based on the fair market value of the stock exchanged plus direct acquisition
costs, was allocated to the BEI assets and liabilities acquired based on their
fair market value at the date of acquisition. The BEI assets purchased and
liabilities assumed as of December 31, 1993, were as follows (in thousands):

<TABLE>
<S> <C>
Cash and cash equivalents......................................... $ 18,521
Accounts receivable............................................... 12,426
Net deferred tax asset............................................ 14,450
Intangible assets................................................. 6,566
Other assets...................................................... 12,856
Liabilities....................................................... (13,386)
---------
Net assets acquired........................................... $ 51,433
---------
---------
</TABLE>

Effective August 1, 1994, the Company acquired substantially all of the
assets of Holliday Fenoglio Dockerty & Gibson, Inc. and certain of its
affiliates (Holliday Fenoglio), which are originators and servicers of
commercial mortgages, for a maximum of approximately $33,000,000, based upon an
initial payment of $17,280,000 in cash and $4,320,000 in stock, and three
additional annual earnout payments if targeted earnings are met or exceeded in
1994, 1995 and 1996. For the period ended December 31, 1994, $3,883,000 was
accrued for the current year earnout payment. The transaction has been accounted
for as an asset purchase. The purchase price, determined based on the cash paid,
the fair market value of the Company stock issued and direct acquisition costs,
was allocated to the Holliday Fenoglio assets acquired based on the fair market
value at the date of acquisition. The Holliday Fenoglio assets purchased,
including acquisition costs, as of August 1, 1994, were as follows (in
thousands):

<TABLE>
<S> <C>
Premises and equipment............................................. $ 1,015
Loan servicing rights.............................................. 2,200
Goodwill and non-compete agreement................................. 18,907
Other assets....................................................... 78
---------
Net assets acquired............................................ $ 22,200
---------
---------
</TABLE>

The following pro forma consolidated results of operations for the twelve
months ended December 31, 1993 and 1994 are presented as if the acquisitions of
Holliday Fenoglio and BEI occurred on January 1, 1993 (in thousands, except per
share data):

<TABLE>
<CAPTION>
1993 1994
---------- ----------
<S> <C> <C>
Revenues.............................................................. $ 222,489 $ 174,017
Net Income............................................................ 25,913 19,661
Earnings per share.................................................... 1.14 .82
</TABLE>

Effective June 30, 1995, a wholly-owned subsidiary of the Company acquired
substantially all of the assets of CKSRS Housing Group, Ltd., a Miami,
Florida-based commercial mortgage banking company specializing in the
origination, sale and servicing of multifamily mortgages in Florida, for
$1,287,000. As of June 30, 1995, the purchase price was allocated as follows (in
thousands):

<TABLE>
<S> <C>
Mortgage servicing asset............................................ $ 300
Equipment, furniture and fixtures................................... 10
Goodwill and non-compete agreement.................................. 1,032
Liabilities......................................................... (55)
---------
Net assets of acquired company.................................. $ 1,287
---------
---------
</TABLE>

The shown allocation of the purchase price is based on the best available
information and is subject to adjustment.

F-10
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. ACQUISITIONS AND ORGANIZATION (CONTINUED)
On September 13, 1995, the Company signed a definitive agreement to acquire
from EQ Services, Inc. 22 contracts to service a total of $6.2 billion in
commercial real estate mortgages. The closing of the transaction is subject to
the satisfaction of certain customary conditions.

On October 11, 1995, the Company signed a definitive agreement with Acacia
Realty Advisors, Inc. to acquire 16 pension fund advisory contracts. The closing
of the transaction is subject to the satisfaction of certain customary
conditions.

3. ASSET MANAGEMENT CONTRACTS
The Company provides asset management and resolution services for private
investors, financial institutions, and government agencies. Generally, the
contracts provide for the payment of a fixed management fee which is reduced
proportionately as managed assets decrease, a resolution fee using specified
percentage rates based on net cash collections and an incentive fee for
resolution of certain assets. Asset management and resolution contracts are of a
finite duration, typically 3-5 years. Unless new assets are added to these
contracts during their terms, the amount of total assets under management
decreases over the terms of these contracts. The FDIC contract expired on
January 31, 1995. During 1994 all the existing asset management contracts with
the RTC expired.

On August 31, 1994, the Company and NationsBank Corporation concluded their
asset management contract (NationsBank Contract). The NationsBank Contract had
an original term expiring in June 1997 and, as provided, the Company received an
early conclusion fee of $10.0 million which is included in other revenues.
One-time expenses related to the NationsBank Contract conclusion included
incentive compensation of $1.2 million and $2.8 million for related intangible
write-offs.

Revenues from the Company's three largest customers, NationsBank
Corporation, the FDIC and the RTC, constituted 45%, 39% and 10%, respectively,
for the two months ended December 31, 1992, 46%, 39% and 6%, respectively, for
the year ended December 31, 1993, and 38%, 36% and 6% of total asset management
fees, respectively, for the year ended December 31, 1994.

4. OTHER ASSETS
The following table summarizes the components of other assets at December
31, 1993 and 1994, (in thousands):

<TABLE>
<CAPTION>
1993 1994
--------- ---------
<S> <C> <C>
Investments held for sale................................................ $ 1,637 $ 468
Mortgages/Notes receivable............................................... 1,710 2,236
Deferred compensation agreements with former officers.................... 1,072 1,629
Income taxes receivable.................................................. 2,849 1,135
Prepaid expenses......................................................... 939 412
Other.................................................................... 1,999 2,210
--------- ---------
Total other assets................................................... $ 10,206 $ 8,090
--------- ---------
--------- ---------
</TABLE>

Deferred compensation agreements include notes from two former officers of
BEI, who are currently directors, which were executed prior to its acquisition
by the Company. The amounts due represent the present value of non-interest
bearing notes due in 2006 and 2007 for advances for premiums on split-dollar
life insurance policies owned by the two directors. Cash surrender values of
approximately $607,000 and $850,000 at December 31, 1993 and 1994 respectively,
collateralize these notes, and the Company is a beneficiary under the life
insurance policies to the extent of total premiums advanced. Included in other
liabilities at December 31, 1993 and 1994 is $900,000 and $1,331,000,
respectively, representing the present

F-11
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. OTHER ASSETS (CONTINUED)
value of the Company's obligation to make future premium payments on such life
insurance policies. Included in mortgages/notes receivable are unsecured notes
from these former officers totaling $525,000 due in 1995 and bearing interest at
8 1/2%.

5. NOTES PAYABLE, MORTGAGE WAREHOUSE DEBT AND NONRECOURSE DEBT
Notes payable, mortgage warehouse debt and nonrecourse subordinated debt at
December 31, 1993 and 1994, and September 30, 1995 consist of the following (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1993 1994 1995
--------- --------- -------------
<S> <C> <C> <C>
Revolving credit line agreement with NationsBank of Texas, N.A.
(the Bank) for:
Advances on a 30 day term at 7 5/8%.............................. $ 72,000
Advances at 8 3/4%............................................... 5,000
Revolving credit line agreement with the Bank for:
Advance on a 182 day term at a 8 3/8%............................ $ 8,000
Advance at a prime rate of 8 1/2%................................ 7,500
Senior note payable to the Bank with interest at their prime rate
plus 1 1/2% payable monthly; collateralized by the investment in
asset portfolio. Monthly principal payments are the greater of
90% of the net cash flow of the portfolio or a minimum payment
as defined in the note. The note required that $2,000,000 in
cash and cash equivalents be maintained as a compensating
balance with the Bank........................................... $ 21,953
Revolving investment loan agreement with the Bank at 2%.......... 27,222
Other notes payable.............................................. 160
--------- --------- -------------
Total notes payable............................................ $ 22,113 $ 15,500 $ 104,222
--------- --------- -------------
--------- --------- -------------
Mortgage warehouse debt payable to the Bank at 7 13/16%............ $ 2,702
-------------
-------------
Mortgage warehouse debt payable at 8 33/50%........................ $ 2,991
-------------
-------------
Nonrecourse debt payable to two financial services companies....... $ 6,000 $ 959 $ 30,605
--------- --------- -------------
--------- --------- -------------
</TABLE>

A subsidiary of the Company had a nonrecourse subordinated note payable to a
financial services company collateralized by a second security interest in the
investment in asset portfolio. The note bears basic interest at the 90 day LIBOR
plus 4 1/2% (7 7/8% and 11% at December 31, 1993 and December 30, 1994,
respectively) payable monthly. Principal payments are due monthly, equal to 10%
of the net portfolio cash flow with the remaining outstanding balance due
December 30, 1996. The note is nonrecourse to the borrowing entity and the
Company. After repayment of the outstanding principal and basic interest,
contingent interest to provide the lender a 15% compounded rate is due from any
available net portfolio cash flow. Additionally, after the above payments are
made, and the subsidiary has recovered $6,337,000 (representing its equity in
the asset portfolio at December 31, 1993, the date of the loan, and capitalized
costs), the lender is entitled to receive 6% of the net portfolio cash flow. The
principal balance was fully repaid at January 31, 1995.

F-12
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. NOTES PAYABLE, MORTGAGE WAREHOUSE DEBT AND NONRECOURSE DEBT (CONTINUED)
On November 2, 1994, the Company entered into a $50,000,000 revolving credit
agreement with the Bank, which matures and is payable in full on April 30, 1996.
The line was temporarily increased to $75,000,000 until a greater revolver could
be established. The borrowing terms, including interest, may be selected by the
Company and tied to either the Bank's floating prime (8 1/2% at December 30,
1994) or, for advances on a term basis up to approximately 180 days, a rate
equal to an adjusted LIBOR rate plus 150 basis points (8 1/2% at December 30,
1994 for a term of 180 days). Interest is payable monthly and at the end of each
advance period as to the amounts with respect to which LIBOR is applicable. A
facility fee equal to 3/8% of the average daily unused portion of the line is
payable quarterly in arrears. As part of the agreement, the Company is subject
to both positive and negative covenants, such as liquidity maintenance, tangible
net worth requirements and minimum consolidated net income before taxes,
depreciation, amortization and interest. The credit line is secured by a pledge
of all stock of substantially all of the subsidiaries of the Company. The
Company has outstanding letters of credit totaling $833,000 at December 31,
1994, which reduce the available revolving line. This line of credit was
terminated with the new $175,000,000 revolving loan agreement described below.

Prior to entering into the revolving credit agreement described above,
Holdings maintained a $35,000,000 line of credit with the Bank which bore
interest at their prime rate plus 1/2%. This line of credit was terminated with
the $50,000,000 revolving credit agreement.

On January 20, 1995, the Company entered into a $35,000,000 revolving
investment loan agreement with the Bank. Proceeds of the loan are used to
acquire short-term investments which secure the loan. Interest is computed based
on market rates adjusted for the Company's credited funds at the Bank.

On April 28, 1995, a wholly-owned subsidiary of the Company entered into a
$25,000,000 revolving credit loan agreement with the Bank to facilitate mortgage
loan underwriting and origination. The stated interest rate for this line is the
Bank's floating prime rate (8 3/4% at September 30, 1995); however, the Company
may elect to have up to three traunches of debt bear interest at adjusted 30-day
LIBOR rate plus 2% (7 13/16% at September 30, 1995 for a term of 30 days), and
interest is payable monthly. Principal payments on the note are due monthly, and
are equal to the aggregate amount of all principal payments received by the
borrowing entity with respect to mortgage loan underwriting and origination. The
loan is collateralized by the mortgage loans and the borrowing entity/servicers
collection accounts.

On July 27, 1995, two wholly-owned subsidiaries of the Company jointly
entered into a $27,500,000 nonrecourse term loan agreement with a financial
services company to finance investments in Asset Portfolios. The loan is
collateralized by a security interest in the investments in asset portfolios of
the subsidiaries. The stated interest rate for this debt is the financial
company's floating prime rate plus 1 1/2% (10 1/4% at July 27, 1995); however,
the borrowing entities may elect to have up to three traunches of debt bear
interest at adjusted LIBOR rate plus 3% (8 15/16 at July 27, 1995 for a term of
180 days), with the term of each traunche to be up to 180 days. Interest is
payable monthly. Principal payments are due monthly and are equal to 90% of the
net portfolio cash flow for the preceding month. Additional principal reductions
may be required on a quarterly basis to meet minimum principal payment
requirements. The loan is nonrecourse to the Company and matures on July 31,
1998. As part of the agreement, the borrowing entities and the Company are
subject to both positive and negative covenants.

On August 15, 1995, a wholly-owned subsidiary of the Company entered into a
mortgage warehouse agreement with a funding corporation to facilitate
multi-family mortgage loan underwriting and origination. The stated interest
rate for this line is an adjusted 30-day LIBOR rate plus 3% (8 33/50% at
September 30, 1995), and interest and principal are payable upon the receipt of
the proceeds of the sale or other disposition of related mortgage loans. The
loan is secured by the mortgage loans originated by the Company and held for
sale under the facility. The Company is a guarantor on this facility. At
September 30, 1995, an advance of $2,991,000 was outstanding at an interest rate
of 8 33/50%.

F-13
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. NOTES PAYABLE, MORTGAGE WAREHOUSE DEBT AND NONRECOURSE DEBT (CONTINUED)
On September 27, 1995, a wholly-owned subsidiary of the Company entered into
a $8,696,000 Global Master Repurchase Agreement to support the purchase of
certain commercial mortgage pass-through certificates. The Agreement bears
interest at a rate based on LIBOR (7 3/8% at September 30, 1995) payable
monthly. This facility is secured by the commercial mortgage pass-through
certificates and repayment of principal is based on cash flow from such
securities.

On September 29, 1995, the Company entered into a $175,000,000 revolving
loan agreement with a syndicate of banks, led by the Bank which matures and is
payable in full on September 29, 1997. By its terms, the revolving loan
agreement has two primary components, $75,000,000 available under a corporate
facility (including $25,000,000 under a temporary bridge facility) and
$100,000,000 available under a portfolio facility. The syndicate's current
commitment under the revolving loan agreement is limited to a total of
$127,500,000; $68,900,000 under the corporate facility and $58,600,000 under the
portfolio facility. The additional amounts under the revolving loan agreement
would become available to the Company upon the participation by additional
financial institutions in the syndicate for the loan and upon an increase in the
Company's borrowing base under this agreement. There can be no assurance that
such events will occur. The borrowing terms, including interest, may be selected
by the Company and tied to either the Bank's variable rate (8 3/4% at September
30, 1995) or, for advances on a term basis up to approximately 180 days, a rate
equal to an adjusted LIBOR rate (7 5/8% at September 30, 1995 for a term of 180
days). Interest is payable quarterly and at the end of each advance period as to
the amounts with respect to which LIBOR is applicable. The revolving loan
agreement is secured by substantially all of the assets of the Company not
pledged under other credit facilities, including stock of a majority of the
Company's subsidiaries held by the Company. The revolving loan agreement
requires the Company to meet certain financial tests, including minimum
consolidated tangible net worth, maximum consolidated funded debt to
consolidated capitalization ratio, minimum fixed charge coverage ratio, minimum
interest coverage ratio, maximum consolidated funded debt to consolidated
earnings before interest, taxes, depreciation and amortization ("EBITDA") ratio
and maximum corporate facility outstanding to consolidated EBITDA ratio. The
revolving loan agreement contains covenants that, among other things, will limit
the incurrence of additional indebtedness, investments, asset sales, loans to
shareholders, dividends, transactions with affiliates, acquisitions, mergers and
consolidations, liens and encumbrances and other matters customarily restricted
in such agreements. On September 7, 1995, the Company entered into an interest
rate swap agreement to hedge a portion of this debt agreement. The swap
agreement has a notional amount of $25,000,000 and requires payment of interest
by the Company at a fixed rate of 5 4/5% and receipt of interest by the Company
at a floating rate equal to 30-day LIBOR.

6. INCOME TAXES
Income tax expense (benefit) consists of the following for the two months
ended December 31, 1992, and the years ended December 31, 1993, and 1994, (in
thousands):

<TABLE>
<CAPTION>
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal............................................................... $ 2,200 $ 14,533 $ 9,665
State................................................................. 583 3,096 2,609
--------- --------- ---------
Total current tax expense........................................... 2,783 17,629 12,274
Deferred tax expense (benefit).......................................... (603) (1,650) 966
--------- --------- ---------
Total income tax expense............................................ $ 2,180 $ 15,979 $ 13,240
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-14
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. INCOME TAXES (CONTINUED)
The net deferred tax asset at December 31, 1993 and 1994, consists of the
tax effects of temporary differences related to the following (in thousands):

<TABLE>
<CAPTION>
1993 1994
--------- ---------
<S> <C> <C>
Accounts receivable............................................................... $ 221 $ 1,386
Premises and equipment............................................................ 277 235
Intangible assets................................................................. 3,483 2,691
Investment in subsidiaries........................................................ 2,097 930
Accrued employee compensation..................................................... 1,911 3,261
Net operating loss carryforwards.................................................. 8,140 6,775
AMT credit carryforwards.......................................................... 602 602
Other............................................................................. 2,117 2,002
--------- ---------
Total deferred tax asset before valuation allowance............................. 18,848 17,882
Valuation allowance............................................................. (675) (675)
--------- ---------
Net deferred tax asset............................................................ $ 18,173 $ 17,207
--------- ---------
--------- ---------
</TABLE>

A reconciliation of income taxes on reported pretax income at statutory
rates to actual income tax expense for the two months ended December 31, 1992,
and the years ended December 31, 1993 and 1994, is as follows (in thousands):

<TABLE>
<CAPTION>
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Income tax at statutory rates........................................... $ 2,011 $ 14,069 $ 11,196
State income taxes, net of Federal tax benefit.......................... 169 1,910 1,606
Other................................................................... 438
--------- --------- ---------
Total income tax expense.............................................. $ 2,180 $ 15,979 $ 13,240
--------- --------- ---------
--------- --------- ---------
Income tax expense attributable to continuing operations................ $ 2,279 $ 17,371 $ 14,753
Income tax benefit attributable to discontinued operations.............. (99) (1,392) (1,513)
--------- --------- ---------
Total income tax expense.............................................. $ 2,180 $ 15,979 $ 13,240
--------- --------- ---------
--------- --------- ---------
</TABLE>

As a result of the acquisition of BEI, the Company has available for its use
BEI's net operating loss carryforwards existing at the acquisition date. The
Company is limited to utilizing approximately $4,245,000 of such losses
annually. The following are the expiration dates and the approximate net
operating loss carryforwards at December 31, 1994, (in thousands):

<TABLE>
<CAPTION>
EXPIRATION DATE AMOUNT
- ------------------------------------------------------------------------- ---------
<S> <C>
1995..................................................................... $ 812
1996..................................................................... 739
1997..................................................................... 2,325
1998..................................................................... 2,818
1999..................................................................... 1,333
2001..................................................................... 3,516
2002..................................................................... 2,071
2003..................................................................... 1,459
2006..................................................................... 372
2007..................................................................... 2,867
---------
$ 18,312
---------
---------
</TABLE>

F-15
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. PAYABLE TO PARTNERS
Payable to partners represents amounts owed to Esther Ritz Corporation
(Ritz) and other partners for their shares of the undistributed earnings of
various joint ventures and partnerships. The consolidated balance sheets at
December 31, 1993 and 1994, include the accounts of BEI-Ritz Joint Venture #1
and BEI-Ritz Joint Venture #2 (the Joint Ventures) of which the Company owns a
controlling interest. The Joint Ventures were formed in 1991 between BEI and
Ritz to participate in the bidding for contracts for the management and
disposition of assets owned by the RTC. The Joint Ventures make distributions to
the Company and to Ritz as cash is collected on the RTC contracts.

8. OTHER LIABILITIES
The following table summarizes the components of other liabilities at
December 31, 1993 and 1994, (in thousands):

<TABLE>
<CAPTION>
1993 1994
--------- ---------
<S> <C> <C>
Accrued earnout (Note 2)................................................. $ 0 $ 3,883
Deferred compensation obligations (Note 4)............................... 900 1,331
Dividends payable........................................................ 560 1,179
Lease abandonment accrual................................................ 1,250 964
Other.................................................................... 3,942 5,507
--------- ---------
Total other liabilities.............................................. $ 6,652 $ 12,864
--------- ---------
--------- ---------
</TABLE>

9. DISCONTINUED OPERATION
The Company adopted a plan on December 1, 1994, to discontinue its data
processing operations for the banking and asset management industry, to sell the
discontinued subsidiary, AMRESCO Services, Inc., or most of the assets of that
subsidiary, by June 30, 1995. The net liabilities of the subsidiary at December
31, 1994, were as follows (in thousands):

<TABLE>
<S> <C>
Accounts receivable................................................ $ 666
Premises and equipment and other assets............................ 341
Liabilities........................................................ (718)
Reserve for losses on discontinued operations...................... (1,243)
---------
Net liabilities of discontinued subsidiary..................... $ (954)
---------
---------
</TABLE>

Gross revenues applicable to the discontinued operations were $957,000,
$5,500,000 and $4,542,000 for the two months ended December 31, 1992, the year
ended December 31, 1993, and the eleven months ended November 30, 1994,
respectively. The loss from the discontinued operations for the period December
1, 1994 to December 31, 1994 was $95,000, net of $63,000 income tax benefit.

On June 16, 1995, the Company sold substantially all of the assets of
AMRESCO Services, Inc., for $6,250,000 in cash with a gain of approximately
$2,425,000, or $0.10 per share, net of certain transaction costs and $1,617,000
provision for income taxes. The book values of the net assets sold in the
transaction were as follows (in thousands; unaudited):

<TABLE>
<S> <C>
Cash................................................................. $ 283
Accounts receivable.................................................. 293
Premises and equipment............................................... 302
Other assets......................................................... 65
Liabilities.......................................................... (199)
---------
Net assets of discontinued subsidiary............................ $ 744
---------
---------
</TABLE>

F-16
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. SALE OF ASSETS
During 1994, the Company sold to outside parties substantially all of the
assets of its EnterChange division, acquired December 31, 1993 with the
acquisition of BEI, for approximately $1,500,000 in cash and $818,000 in
promissory notes. The sale of the EnterChange division is not expected to have
any material financial impact on the Company.

11. COMMON STOCK
The Company has incentive stock option plans for the benefit of key
individuals, including its directors, officers and key employees. In connection
with the merger of BEI and Holdings (See Note 2), certain granted options became
fully vested. The plans are administered by a committee of the Board of
Directors. The plans were adjusted to reflect the conversion of each share of
Holdings common stock into 10.03 shares of the Company's stock for the two
months ended December 31, 1992 and the years ended December 31, 1993. Stock
option activity under the plans for the two months ended December 31, 1992 and
the years ended December 31, 1993 and 1994 is as follows:

<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE PER
SHARES SHARE
---------- ----------------
<S> <C> <C>
Options outstanding at November 1, 1992........................ --
Granted...................................................... 411,230 $0.60
---------- ----------------
Options outstanding at December 31, 1992....................... 411,230 $0.60
Granted...................................................... 431,290 $3.50
Canceled..................................................... (70,210) $0.60
Acquired company options outstanding......................... 1,321,790 $2.25 to $4.50
---------- ----------------
Options outstanding at December 31, 1993....................... 2,094,100 $0.60 to $4.50
Granted...................................................... 500,000 $7.00 to $8.94
Exercised.................................................... (711,590) $0.60 to $3.50
Forfeited.................................................... (10,060) $3.50
---------- ----------------
Options outstanding at December 31, 1994....................... 1,872,450 $0.60 to $8.94
---------- ----------------
---------- ----------------
Options exercisable at December 31, 1994....................... 1,455,256 $0.60 to $8.94
---------- ----------------
---------- ----------------
Options available for grant at December 31, 1994............... 501,766
----------
----------
</TABLE>

At December 31, 1994, the Company has reserved a total of 2,374,216 shares
of common stock for exercise of stock options.

A stock subscription agreement and related shareholders' agreement (the
Stockholder Agreements) were entered into by the Company with various officers
and other parties (the Subscribers) on December 9, 1992. Such Stockholder
Agreements state that the Subscribers agreed to purchase a set number of shares
of capital stock, as defined. The purchase price was based on a purchase price
of $6.00 per share of common stock ($.60 per share after effect of the
conversion into Company stock). Certain executive officers purchased common
stock with cash and promissory notes. The notes accrue interest at 6% per annum
and are due and payable in December 2002 or within one year of termination of
employment. The shares are subject to certain restrictions and repurchase rights
pursuant to the Stockholder Agreements. In the event of termination prior to
December 2002, the Company could cancel unvested shares by canceling related
indebtedness based on the original issue price. Originally, 50% of the notes
were vested based upon performance and the remainder were time notes. As a
result of the merger with BEI, the performance notes were converted into time
notes. The conversion of the notes resulted in additional compensation expense
recorded during 1993 of $1,188,000. In addition, the shares are now fully
vested. The notes are secured by the

F-17
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. COMMON STOCK (CONTINUED)
stock acquired and are nonrecourse to the Subscribers. The notes are classified
as a reduction of shareholders' equity for financial reporting purposes. During
1993, $179,000 in notes receivable for officers' shares and the related common
stock were canceled. During 1994, a $178,000 note receivable was repaid.

On February 6, 1995, the Company's Board of Directors authorized the
repurchase of up to $6,000,000 of its common stock from time to time through
February 6, 1996. Any purchases, if made, would be in the open market at
prevailing prices or in privately negotiated transactions. The repurchased
shares would be held for existing or future stock option or employee benefit
plans and for possible stock splits or dividends.

12. EMPLOYEE COMPENSATION AND BENEFITS
Accrued employee compensation and benefits at December 31, 1993 and 1994,
includes amounts for incentive compensation, severance and benefits. Certain
employees are eligible to receive a bonus from a pool computed on 20% to 25% of
pretax income over predetermined minimum earning levels. In addition, certain
employees are covered by severance plans in the event their employment is
terminated due to reductions in the workforce. The Company accrues for such
costs over the service period. At December 31, 1993 and 1994, a total of
$6,777,000 and $5,144,000, respectively, was accrued for costs incurred or
expected to be incurred under the severance plans of continuing operations.

Effective January 1, 1993, the Company adopted the AMRESCO Retirement
Savings and Profit Sharing Plan (the Plan). The Plan qualifies under Section
401(k) of the Internal Revenue Code and incorporates both a savings component
and a profit sharing component for eligible employees. As determined each year
by the Board of Directors, the Company may match the employee contribution up to
6% of their base pay based on the Company's performance. For 1994, the matching
contribution was set at $.50 for each $1.00 contributed by the employees. In
addition to the matching savings contribution, the Company provides an annual
contribution to the profit sharing retirement component of the Plan on behalf of
all eligible employees. This portion of the Plan has been subsequently amended
to assure that the Company is not required to make an employer profit sharing
contribution to the Plan after 1993. However, it is anticipated that some level
of profit sharing contribution will continue in future periods. For the years
ended December 31, 1993 and 1994, the Company made profit sharing contributions
of $1,700,000 and $1,312,000, respectively. Allocation of the Company's
contribution will be based on a percentage of an employee's "weighted total
pay." Weighted total pay places a stronger emphasis on the age of the employee
and provides an increasingly larger profit sharing contribution as an employee
nears retirement.

13. COMMITMENTS AND CONTINGENCIES
The Company is committed to pay additional consideration to former owners of
an acquired subsidiary based on financial performance during 1994, 1995 and
1996. See Note 2.

The Company has entered into non-cancelable operating leases covering office
facilities which expire at various dates through 2000. Certain of the lease
agreements provide for minimum annual rentals with provisions to increase the
rents to cover increases in real estate taxes and other expenses of the lessor.
The Company also has cancelable leases on equipment which expire on various
dates through 1998. The total rent expense for the two months ended December 31,
1992, and the years ended December 31, 1993 and

F-18
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. COMMITMENTS AND CONTINGENCIES (CONTINUED)
1994, was approximately $876,000, $3,116,000 and $4,386,000, respectively. The
future minimum annual rental commitments under non-cancelable agreements having
a remaining term in excess of one year at December 31, 1994 are as follows (in
thousands):

<TABLE>
<S> <C>
Year Ended December 31,
1995.............................................................. $ 1,686
1996.............................................................. 1,509
1997.............................................................. 1,233
1998.............................................................. 814
1999.............................................................. 485
Thereafter........................................................ 149
</TABLE>

The Company is a defendant in various legal actions. In the opinion of
management, such actions will not materially affect the financial position or
results of operations of the consolidated company.

14. FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirement of SFAS No. 107,
"Disclosures About Fair Value of Financial Instruments." The estimated fair
value amounts have been determined by the Company using available market
information and appropriate valuation methodologies. However, considerable
judgment is necessarily required to interpret market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.

<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1994
---------------------- ----------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
--------- ----------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents......................................... $ 43,442 $ 43,442 $ 20,446 $ 20,446
Accounts receivable............................................... 39,399 39,399 20,682 20,682
Investment in asset portfolios:
Loans........................................................... 33,795 36,300 30,920 37,485
Partnerships and joint ventures................................. 22,491 25,200
Asset-backed securities......................................... 3,481 3,500
Other assets...................................................... 6,923 6,923 7,216 7,216

Liabilities:
Accounts payable.................................................. 9,830 9,830 4,891 4,891
Notes payable and other debt...................................... 28,113 28,113 16,459 16,459
Payable to partners............................................... 3,399 3,250 3,907 3,907
Letters of credit ($833).......................................... -- --
</TABLE>

The fair values of the investment in asset portfolios, notes payable and
payable to joint venture partner are estimated based on present values using
applicable rates to approximate current entry-value interest rates applicable to
each category of such financial instruments. The carrying amount of cash and
cash equivalents, accounts receivable, net of reserves, and accounts payable
approximates fair value. The Company has reviewed its exposure on standby
letters of credit and has determined that the fair value of such exposure is not
material. The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1993 and 1994. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since the date presented,
and therefore, current estimates of fair value may differ significantly from the
amounts presented herein.

F-19
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15. SUBSEQUENT EVENTS (UNAUDITED)

CONVERTIBLE SUBORDINATED DEBENTURE OFFERING. On November 27, 1995, the
Company completed an offering conducted in Europe, pursuant to Regulation S
promulgated under the Securities Act, of $45.0 million aggregate principal
amount of Convertible Subordinated Debentures. The net proceeds (aggregating
approximately $43.0 million) from such offering were used to repay borrowings
under the revolving credit line. The Convertible Subordinated Debentures bear
interest at 8% per annum and will mature on December 15, 2005. There is no
sinking fund or amortization of principal prior to maturity. The Convertible
Subordinated Debentures are not redeemable prior to December 15, 1996. The
Convertible Subordinated Debentures are convertible at the option of the holders
into shares of Common Stock at a conversion price of $12.50 per share
(equivalent to a conversion rate of 80 shares of Common Stock per $1,000
principal amount of Convertible Subordinated Debentures), subject to adjustment
in certain events. The Convertible Subordinated Debentures are unsecured
obligations of the Company and subordinated to all existing and future Senior
Indebtedness (as defined in the Convertible Subordinated Debenture Indenture) of
the Company. The Convertible Subordinated Debentures contain certain rights of
the holder to require the repurchase of the Convertible Subordinated Debentures
(i) upon a Fundamental Change (as defined in the Convertible Subordinated
Debenture Indenture) and (ii) if the Company is not able to maintain a Net Worth
(as defined in the Convertible Subordinated Debenture Indenture) of
approximately $141.0 million (which includes the net proceeds to the Company
from the Common Stock offering described below) plus the net proceeds to the
Company from any other offering of Common Stock by the Company subsequent to the
date hereof. There are certain other covenants restricting dividends on and
redemptions of capital stock.

COMMON STOCK OFFERING. On December 13, 1995, the Company completed a
registered public offering of 2,000,000 shares of Common Stock. Subsequent
thereto, the Company sold an additional 300,000 shares of Common Stock upon
exercise of the Underwriters' over-allotment option. The net proceeds from such
offering, including the over-allotment shares, aggregated approximately $25.1
million and were used to repay borrowings under the revolving credit line. The
price to the public was $11.75 per share and the price to the Company per share
was $11.10 (after an underwriting discount of $ .65 per share). In addition to
the offering of shares of Common Stock by the Company, two institutional
shareholders sold an aggregate of 2,300,000 shares of Common Stock (including
300,000 shares sold pursuant to the exercise of the underwriters' over-allotment
option). The Company did not receive any proceeds from the sale of these shares.
Assuming issuance of 2,300,000 shares of common stock at the beginning of each
of the periods January 1, 1994 and 1995 and application of related net proceeds
to the repayment of borrowings bearing an average interest cost of 8.2%,
earnings per share for the year ended December 31, 1994 and the nine months
ended September 30, 1995 for income from continuing operations would have been
$0.85 and $0.50, respectively, while earnings per share for net income would
have been $0.77 and $0.59, respectively.

F-20
<PAGE>
AMRESCO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of unaudited quarterly results of operations,
revised to reflect discontinued operations, for the years ended December 31,
1993 and 1994 (in thousands, except per share amounts):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues from continuing operations......................... $ 50,525 $ 36,814 $ 41,080 $ 43,743
Income from continuing operations before taxes.............. 11,756 11,245 12,344 8,332
Income from continuing operations........................... 7,143 6,842 7,442 4,879
Loss from discontinued operations........................... 277 326 355 1,130
Net income.................................................. 6,866 6,516 7,087 3,749
Earnings per share from continuing operations............... 0.63 0.61 0.66 0.43
Earnings per share.......................................... 0.61 0.58 0.63 0.33
</TABLE>

Nonrecurring charges of $2,209,000 related to write-off of software and
merger related compensation accruals were made during the quarter ended December
31, 1993. Quarterly financial data has been revised to reflect discontinued
operations.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues from continuing operations......................... $ 40,563 $ 40,460 $ 46,782 $ 29,379
Income from continuing operations before taxes.............. 9,244 9,307 14,979 2,156
Income from continuing operations........................... 5,358 5,425 8,873 1,277
Loss from discontinued operations........................... 422 316 238 1,209
Net income.................................................. 4,936 5,109 8,635 68
Earnings per share from continuing operations............... 0.23 0.23 0.37 0.05
Earnings per share.......................................... 0.21 0.22 0.36 0.00
</TABLE>

Nonrecurring income of $10,000,000 related to the conclusion of the
NationsBank Contract was recorded during the third quarter of 1994. Nonrecurring
accruals for the loss on discontinued operations were made during the fourth
quarter of 1994.

F-21
<PAGE>
INDEPENDENT AUDITORS' REPORT

AMRESCO:

We have audited the accompanying combined statements of income and cash
flows of Asset Management Resolution Company and AMRESCO Holdings, Inc. and
subsidiaries (together AMRESCO), both of which were under the common ownership
and management of NationsBank Corporation as of October 31, 1992, for the ten
months ended October 31, 1992. These combined financial statements are the
responsibility of AMRESCO management. Our responsibility is to express an
opinion on these combined financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, such 1992 financial statements, present fairly, in all
material respects, the combined results of AMRESCO's operations and cash flows
for the ten months ended October 31, 1992, in conformity with generally accepted
accounting principles.

DELOITTE & TOUCHE LLP

Dallas, Texas
March 26, 1993

F-22
<PAGE>
AMRESCO
(PREDECESSOR BUSINESSES)

FOR THE TEN MONTHS ENDED OCTOBER 31, 1992
(DOLLARS IN THOUSANDS)

COMBINED STATEMENT OF INCOME

<TABLE>
<S> <C>
REVENUES:
Asset management fees (Note 3).................................................... $ 129,179
Other............................................................................. 3,680
---------
Total revenues.............................................................. 132,859
---------
EXPENSES:
Personnel (Note 5)................................................................ 64,955
Occupancy......................................................................... 4,918
Equipment......................................................................... 3,534
Professional fees................................................................. 19,817
General and administrative........................................................ 5,533
---------
Total expenses.............................................................. 98,757
---------
Income before taxes............................................................... 34,102
Income tax expense (Note 4)....................................................... 10,795
---------
Net income.................................................................. $ 23,307
---------
---------

COMBINED STATEMENT OF CASH FLOWS
OPERATING ACTIVITIES:
Net income........................................................................ $ 23,307
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on retirement of property and equipment.................................... 16
Depreciation and amortization................................................... 5,240
Expenses paid by parent......................................................... 475
Increase (decrease) in cash for changes in:
Accounts receivable........................................................... 15,788
Deferred income taxes......................................................... (2,068)
Other assets.................................................................. (126)
Other liabilities............................................................. (1,050)
Income taxes payable.......................................................... 8,138
Accounts payable.............................................................. (10,233)
---------
Net cash provided by operating activities................................... 39,487
---------
INVESTING ACTIVITIES:
Expenditures for furniture, fixtures, and equipment............................... (5,117)
---------
FINANCING ACTIVITIES
Dividends paid.................................................................... (20,000)
---------
Net increase in cash and cash equivalents......................................... 14,370
Cash and cash equivalents, beginning of period.................................... 21,216
---------
Cash and cash equivalents, end of period.......................................... $ 35,586
---------
---------
</TABLE>

See notes to combined financial statements.

F-23
<PAGE>
AMRESCO

NOTES TO COMBINED FINANCIAL STATEMENTS

1. ORGANIZATION
Effective October 31, 1992, a Stock Sale Agreement (the Agreement) was
entered into by AMRESCO Acquisition Corporation, an entity formed by CGW
Southeast Partners, L.P. I and II and which was renamed AMRESCO Holdings, Inc.,
to purchase the stock of AMRESCO, Inc. and AMRESCO Holdings, Inc. (AHI). The
combined financial statements of AMRESCO (predecessor businesses of AMRESCO
Holdings, Inc.) consist of Asset Management Resolution Company (dba AMRESCO,
Inc.) and AHI, including its wholly owned subsidiaries, AMRESCO Services, Inc.,
AMRESCO Institutional, Inc. and AMRESCO Management, Inc.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AMRESCO is engaged primarily in the business of managing, servicing and
liquidating loans and related assets for various financial institutions,
government agencies and others. All transactions between AHI and its
subsidiaries and AMRESCO, Inc. and their predecessor businesses have been
eliminated in the combined financial statements.

REVENUE AND EXPENSE RECOGNITION -- Revenues, principally fees for the
management and collection of assets subject to management contracts, are
recognized as earned. Expenses incurred in managing and administering the assets
subject to management contracts are charged to expense as incurred. Asset
disposition fees are accrued based on estimated collections and related costs.
Differences between estimated and actual amounts are recorded in the period of
determination. Revenue from AMRESCO's largest customers constituted 42%, 39% and
16% of total asset management fees for the ten months ended October 31, 1992.

INCOME TAXES -- AMRESCO's tax provision and related balance sheet accounts
have been recorded in accordance with Statement of Financial Accounting
Standards No. 96. Current income tax provisions approximate taxes on a stand
alone basis to be paid or refunded for the applicable period. Deferred taxes are
provided on the temporary differences between the bases of assets and
liabilities as measured by tax laws and their bases as reported in the financial
statements.

3. CONTRACTS
AMRESCO performs asset management services primarily for NationsBank, the
FDIC and the RTC under management contracts. Generally, the contracts provide
for the payment of a fixed management fee which is reduced proportionately as
managed assets decrease, a disposition fee using specified percentage rates
based on net cash collections and an incentive fee for resolution of certain
assets. Contracts to manage, service and liquidate assets expire beginning
December 31, 1993 through June 30, 1997. AMRESCO, Inc. and the RTC agreed in
principle to effect an early termination of a full-service contract and a loan
administration contract no later than December 31, 1992. AMRESCO, Inc. collected
an agreed disposition fee on the book value of the remaining assets and, as of
December 31, 1992, returned the management of the assets to the RTC. A
significant amount of AMRESCO's revenues are derived under an asset management
contract beginning in 1992 between AMRESCO and NationsBank Corporation
(NationsBank).

4. INCOME TAXES
Prior to the acquisition, AMRESCO filed a consolidated tax return with its
parent, NationsBank. Income taxes were accrued as if AMRESCO filed separate
returns. No delineation was made of current and deferred taxes as NationsBank
allocated tax benefits to AMRESCO. The receipt of tax benefits were handled as a
capital contribution by the Parent. AMRESCO's acquisition was a taxable
transaction, and as a

F-24
<PAGE>
AMRESCO

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

4. INCOME TAXES (CONTINUED)
result, a new tax basis for the AMRESCO group was created. A reconciliation of
income taxes on reported pretax income at statutory rates to total income tax
expense is as follows for the ten months ended October 31, 1992 (in thousands):

<TABLE>
<S> <C>
Income tax at statutory rate (34%)..................................... $ 11,595
State income taxes (net of federal benefit)............................ 1,797
Change in prior-year estimate of Parent tax attributes................. (2,503)
Other.................................................................. (94)
---------
Income tax expense..................................................... $ 10,795
---------
---------
</TABLE>

5. RETIREMENT AND EMPLOYEE BENEFITS
Certain professional employees received a bonus from a pool computed on 20%
to 25% of pretax income over predetermined minimum earning levels for the ten
months ended October 31, 1992 and based upon NationsBank's bonus programs prior
to 1992. Certain employees are covered by severance plans in the event their
employment is terminated by AMRESCO. Until December 9, 1992, the Company
participated in a qualified retirement plan of NationsBank, which covered all
full-time, salaried employees and certain part-time employees. Pension expense
under this plan was accrued. The costs allocated from NationsBank were charged
to current operations and consist of several components of net pension cost
based on various actuarial assumptions regarding future experience under the
plan.

6. COMMITMENTS AND CONTINGENCIES
Total rent expense for the ten months ended October 31, 1992 was
approximately $3,220,000. AMRESCO is a defendant in or party to pending and
threatened legal actions and proceedings. Management believes, based upon the
opinion of legal counsel, that the actions and liability or loss, if any,
resulting from the final outcome of these proceedings will not be material in
the aggregate.

7. STOCKHOLDER'S EQUITY
The activity in stockholder's equity for the ten months ended October 31,
1992 is as follows (in thousands):

<TABLE>
<S> <C>
JANUARY 1, 1992....................................................... $ 30,935
Net income.......................................................... 23,307
Contribution by parent.............................................. 475
Dividends and distributions to parent............................... (42,169)
---------
OCTOBER 31, 1992...................................................... $ 12,548
---------
---------
</TABLE>

F-25
<PAGE>
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information or representations
must not be relied upon as having been authorized by the Company or the
Underwriters. Neither the delivery of this Prospectus nor any sales made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the registered securities to which it
relates. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Available Information............................ 2
Incorporation of Certain Documents by Reference.. 2
Certain Definitions.............................. 4
Summary.......................................... 6
Risk Factors..................................... 12
Recent Developments.............................. 16
Use of Proceeds.................................. 17
Capitalization................................... 18
Summary Financial and Other Data................. 19
Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 21
Business......................................... 27
Management....................................... 38
Description of the Notes......................... 41
Description of Other Indebtedness................ 48
Underwriting..................................... 55
Legal Matters.................................... 55
Independent Accountants.......................... 55
Index to Financial Statements.................... F-1
</TABLE>

$50,000,000

[LOGO]

% SENIOR SUBORDINATED NOTES
DUE 2003
--------------------

P R O S P E C T U S

--------------------
PIPER JAFFRAY INC.

, 1996
<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee........................ $ 11,500
NASD Filing Fee............................................................ 6,250
New York Stock Exchange listing fee........................................ 2,900
Printing Expenses.......................................................... *
Accounting Fees and Expenses............................................... *
Legal Fees and Expenses.................................................... *
Blue Sky Fees and Expenses (including counsel fees)........................ *
Fees of Trustee and Registrar Fees and Expenses............................ *
Rating Agency Fees and Expenses............................................ *
Miscellaneous Expenses..................................................... *
---------
Total.................................................................... $ *
---------
---------
</TABLE>

- ------------------------------
* To be provided by amendment.

All of the above expenses except the Securities and Exchange Commission
registration fee, the New York Stock Exchange listing fee and the NASD filing
fee are estimated. All of such expenses will be borne by the Company.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Amended and Restated Certificate of Incorporation (the
"Certificate") and the Company's Amended and Restated Bylaws (the "Bylaws")
provide that the Company shall indemnify, to the full extent permitted by law,
any person against liabilities arising from their service as directors,
officers, employees or agents of the Company. Section 145 of the DGCL empowers a
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.

Section 145 also empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person acted in any of the
capacities set forth above, against expenses (including attorney's fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted under similar standards, except
that no indemnification may be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the corporation
unless, and only to the extent that, the Court of Chancery or the court in which
such action was brought shall determine that despite the adjudication of
liability such person is fairly and reasonably entitled to indemnify for such
expenses which the court shall deem proper.

Section 145 further provides that indemnification provided for by Section
145 shall not be deemed exclusive of any other rights to which the indemnified
party may be entitled, and that the corporation is empowered to purchase and
maintain insurance on behalf of a director or officer of the corporation against

II-1
<PAGE>
any liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liabilities under Section 145.

The Certificate and the Bylaws provide that no director of the Company shall
be personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the director derived an improper personal benefit. Any
repeal or modification of this provision related to director's liability shall
not adversely affect any right or protection of a director of the Company
existing immediately prior to such repeal or modification. Further, if the DGCL
shall be repealed or modified, the elimination of liability of a director
provided in the Certificate and the Bylaws shall be to the fullest extent
permitted by the DGCL as so amended.

Reference is also made to the indemnification provisions contained in the
Purchase Agreement (a form of which is filed as Exhibit 1.1 hereto) with respect
to undertakings to indemnify the Company, its directors, officers and
controlling persons within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"), against certain liabilities, including liabilities under
the Securities Act or otherwise.

ITEM 16. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Purchase Agreement.
4.1 Revolving Loan Agreement, dated as of September 29, 1995, among the Company, certain subsidiaries of
the Company, NationsBank of Texas, N.A. as Agent, and the Banks named therein, filed as Exhibit 10(b)
to the Registrant's September 1995 10-Q, which exhibit is incorporated herein by reference.
4.2* First Amendment to Credit Agreement, dated as of November 21, 1995, among the Company and NationsBank
of Texas, N.A., as agent, and the Banks named therein, and consented to by certain of the Company's
subsidiaries.
4.3 Indenture dated as of November 27, 1995, between the Company and First Interstate Bank of Texas,
National Association, as Trustee, in respect of the 8% Convertible Subordinated Debentures due 2005,
filed as Exhibit 4.5 to Pre-Effective Amendment No. 1 to the Company's Registration Statement on Form
S-3 (No. 33-63683), which exhibit is incorporated herein by reference.
4.4* Form of Indenture to be entered into between the Company and Bank One, Columbus, N.A. in respect of
the Senior Subordinated Notes due 2003.
5.1* Opinion of L. Keith Blackwell, General Counsel of the Company, as to the validity of the Notes to be
offered.
12.1* Computation of Ratios.
23.1* Consent of L. Keith Blackwell, contained in the opinion filed as Exhibit 5.1.
23.2* Consent of Deloitte & Touche LLP.
24.1* Power of Attorney of the Directors and certain Executive Officers of the Company.
25.1* Statement of Eligibility Qualification of Trustee on Form T-1.
</TABLE>

- ------------------------
* Filed herewith.

II-2
<PAGE>
ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
Prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on the 21st day of December,
1995.

AMRESCO, INC.

By: /s/ L. KEITH BLACKWELL

-----------------------------------
L. Keith Blackwell
GENERAL COUNSEL AND SECRETARY

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the 21st day of December, 1995:

<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ------------------------------------------------------

<C> <S>
ROBERT H. LUTZ, JR.*
------------------------------------------- Chairman of the Board and
Robert H. Lutz, Jr. Chief Executive Officer

ROBERT L. ADAIR III*
------------------------------------------- Director, President and Chief Operating Officer
Robert L. Adair III

BARRY L. EDWARDS*
------------------------------------------- Executive Vice President and Chief Financial Officer
Barry L. Edwards (Principal Financial Officer)

JAMES P. COTTON, JR.*
------------------------------------------- Director
James P. Cotton, Jr.

RICHARD L. CRAVEY*
------------------------------------------- Director
Richard L. Cravey

------------------------------------------- Director
Gerald E. Eickhoff

WILLIAM S. GREEN*
------------------------------------------- Director
William S. Green

AMY J. JORGENSEN*
------------------------------------------- Director
Amy J. Jorgensen

JOHN J. MCDONOUGH*
------------------------------------------- Director
John J. McDonough

BRUCE W. SCHNITZER*
------------------------------------------- Director
Bruce W. Schnitzer

RONALD B. KIRKLAND*
------------------------------------------- Vice President and Chief Accounting Officer (Principal
Ronald B. Kirkland Accounting Officer)
</TABLE>

L. Keith Blackwell, by signing his name hereto, does sign and execute this
Registration Statement on behalf of each of the above-named officers and
directors of the Registrant on this 21st day of December, 1995, pursuant to
powers of attorneys executed on behalf of each of such officers and directors,
and filed with the Securities and Exchange Commission.

*By: /s/ L. KEITH BLACKWELL
- ------------------------------------
L. Keith Blackwell
ATTORNEY-IN-FACT

II-4
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. EXHIBIT NUMBERED PAGE
- ----------- ---------------------------------------------------------------------------------------- -------------
<C> <S> <C>
1.1* Form of Purchase Agreement.
4.1 Revolving Loan Agreement, dated as of September 29, 1995, among the Company, certain
subsidiaries of the Company, NationsBank of Texas, N.A. as Agent, and the Banks named
therein, filed as Exhibit 10(b) to the Registrant's September 1995 10-Q, which exhibit
is incorporated herein by reference.
4.2* First Amendment to Credit Agreement, dated as of November 21, 1995, among the Company
and NationsBank of Texas, N.A., as agent, and the Banks named therein, and consented to
by certain of the Company's subsidiaries.
4.3 Indenture dated as of November 27, 1995, between the Company and First Interstate Bank
of Texas, National Association, as Trustee, in respect of the 8% Convertible
Subordinated Debentures due 2005, filed as Exhibit 4.5 to Pre-Effective Amendment No. 1
to the Company's Registration Statement on Form S-3 (No. 33-63683), which exhibit is
incorporated herein by reference.
4.4* Form of Indenture to be entered into between the Company and Bank One, Columbus, N.A. in
respect of the Senior Subordinated Notes due 2003.
5.1* Opinion of L. Keith Blackwell, General Counsel of the Company, as to the validity of the
Notes to be offered.
12.1* Computation of Ratios.
23.1* Consent of L. Keith Blackwell, contained in the opinion filed as Exhibit 5.1.
23.2* Consent of Deloitte & Touche LLP.
24.1* Power of Attorney of the Directors and certain Executive Officers of the Company.
25.1* Statement of Eligibility Qualification of Trustee on Form T-1.
</TABLE>

- ------------------------
* Filed herewith.

<PAGE>

EXHIBIT 1.1

$50,000,000 PRINCIPAL AMOUNT OF __% SENIOR SUBORDINATED NOTES
DUE 2003(1)

AMRESCO, INC.

PURCHASE AGREEMENT

______________, 1996

PIPER JAFFRAY INC.
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402

Ladies and Gentlemen:

AMRESCO, INC., a Delaware corporation (the "Company"), proposes to
issue and sell to you (the "Underwriters") its __% Senior Subordinated
Notes due 2003 in an aggregate principal amount of $50,000,000 (the
"Firm Notes"). The Company has also granted to the Underwriters an
option to purchase up to an additional $7,500,000 in aggregate principal
amount of its __% Senior Subordinated Notes due 2003 on the terms and
for the purposes set forth in Section 3(b) hereof. Such additional __%
Senior Subordinated Notes due 2003 are referred to in this Agreement as
the "Option Notes", and the Firm Notes and the Option Notes, if
purchased, are hereinafter referred to as the "Notes" or the
"Securities". The Notes shall be issued under an indenture, dated as of
_____________, 1996 (the "Indenture"), between the Company and
_______________, as trustee (the "Trustee").

The Company hereby confirms its agreement with respect to the sale
of the Securities to the Underwriters.

1. REGISTRATION STATEMENT. A registration statement on Form S-3
(File No. 33-_____) with respect to the Securities, including a
preliminary form of prospectus, has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), and the rules and

_____________________

(1) Plus an option to purchase up to an additional $7,500,000 aggregate
principal amount of Notes to cover over-allotments.

<PAGE>

regulations ("Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under those acts, and has been filed with
the Commission. One or more amendments to such registration statement
have also been so prepared and have been, or will be, so filed. Copies
of such registration statement and amendments and each related
preliminary prospectus have been delivered to the Underwriters.

If the Company has elected not to rely upon Rule 430A of the Rules
and Regulations, the Company has prepared and will promptly file an
amendment to the registration statement and an amended prospectus. If
the Company has elected to rely upon Rule 430A of the Rules and
Regulations, it will prepare and file a prospectus pursuant to Rule
424(b) that discloses the information previously omitted from the
prospectus in reliance upon Rule 430A. Such registration statement as
amended at the time it is or was declared effective by the Commission,
and, in the event of any amendment thereto after the effective date and
prior to the First Closing Date (as hereinafter defined), but only from
and after the effectiveness of such amendment, including all financial
statements, schedules and exhibits thereto, all documents incorporated
by reference therein filed under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and any information deemed to be part of
the registration statement at the time of effectiveness pursuant to Rule
430A(b), if applicable, is hereinafter called the "Registration
Statement." The prospectus included in the Registration Statement at
the time it is or was declared effective by the Commission is
hereinafter called the "Prospectus," except that if any prospectus filed
by the Company with the Commission pursuant to Rule 424(b) of the Rules
and Regulations or any other prospectus provided to the Underwriters by
the Company for use in connection with the offering of the Securities
(whether or not required to be filed by the Company with the Commission
pursuant to Rule 424(b) of the Rules and Regulations) differs from the
prospectus on file at the time the Registration Statement is or was
declared effective by the Commission, the term "Prospectus" shall refer
to such differing prospectus from and after the time such prospectus is
filed with the Commission or transmitted to the Commission for filing
pursuant to such Rule 424(b) or from and after the time it is first
provided to the Underwriters by the Company for such use. The term
"Preliminary Prospectus" as used herein means any preliminary prospectus
included in the Registration Statement prior to the time it becomes or
became effective under the Act and any prospectus subject to completion
as described in Rule 430A of the Rules and Regulations. Reference made
herein to any Preliminary Prospectus or Prospectus, as amended or
supplemented, shall include all documents incorporated by reference
therein.

2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Underwriters as follows:

(a) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission or the securities authority
of any state or other jurisdiction and each Preliminary Prospectus, at
the time of filing thereof, did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The foregoing
shall not apply to statements in or omissions from any

<PAGE>

Preliminary Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by any Underwriter specifically for
use in the preparation thereof.

(b) As of the time the Registration Statement (or any
post-effective amendment thereto) is or was declared effective by the
Commission, upon the filing or first delivery to the Underwriters of the
Prospectus (or any supplement to the Prospectus) and at the First
Closing Date and Option Notes Closing Date (as hereinafter defined), (i)
the Registration Statement and Prospectus (in each case, as so amended
and/or supplemented) will conform in all material respects to the
applicable requirements of the Act, the Trust Indenture Act, the
Exchange Act (and its applicable rules and regulations) and the Rules
and Regulations, (ii) the Registration Statement (as so amended) will
not or did not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and (iii) the Prospectus (as so
supplemented) will not or did not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they are or were made, not misleading; except
that the foregoing shall not apply to statements in or omissions from
any such document in reliance upon, and in conformity with, written
information furnished to the Company by any Underwriter specifically for
use in the preparation thereof.

(c) The consolidated financial statements of the Company, together
with the related notes thereto, set forth or otherwise included in the
Registration Statement and Prospectus comply in all material respects
with the requirements of the Act and fairly present the financial
condition and the results of operations and changes in cash flows of the
Company and its Subsidiaries (as hereinafter defined) or its predecessor
or acquired businesses, as the case may be, at the date and for the
periods therein specified in conformity with generally accepted
accounting principles consistently applied throughout the periods
involved (except as otherwise stated therein), and the independent
public accountants whose reports are contained therein are independent
public accountants as required by the Act, The Exchange Act and the
Rules and Regulations. The financial statement schedules, if any,
included in the Registration Statement or incorporated by reference
therein, or in any post-effective amendment thereto, and the other
financial and statistical information included in the Prospectus under
the captions "Prospectus Summary" and "Summary Financial and Other
Data," present fairly and on a basis consistent with the books and
records of the Company the information stated therein.

(d) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement. This
Agreement has been duly authorized, executed and delivered by the
Company, and constitutes a valid, legal and binding obligation of the
Company, enforceable in accordance with its terms, except as rights to
indemnity hereunder may be limited by federal or state securities laws
and except as such enforceability may be limited by considerations of
public policy, bankruptcy, insolvency,

<PAGE>

reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity.

(e) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Indenture and the
Notes. The Indenture has been duly and validly authorized by the
Company and, when the Indenture has been executed and delivered, will be
a valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization or similar laws
affecting the rights of creditors generally and subject to general
principles of equity. The Notes sold hereunder have been duly and
validly authorized by the Company and, when the Notes have been executed
and authenticated in the manner set forth in the Indenture and issued,
sold, and delivered in the manner set forth in the Prospectus, will be
the valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms and the terms of the
Indenture, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity. The
Indenture will have been duly qualified under the Trust Indenture Act
upon effectiveness of the Registration Statement. The Indenture will be
substantially in the form filed as an exhibit to the Registration
Statement and will comply with the Trust Indenture Act and the
regulations thereunder. The Indenture and the Notes conform to the
descriptions thereof contained in the Registration Statement and the
Prospectus.

(f) The authorized capital stock of the Company is as set forth
under the caption "Capitalization" in the Prospectus. All of the
outstanding shares of capital stock have been duly authorized, validly
issued and are fully paid and non-assessable. All offers and sales of
the Company's capital stock or other securities prior to the date hereof
were at all relevant times duly registered under the Act or exempt from
the registration requirements of the Act by reason of Sections 3(b),
4(2) or 4(6) thereof and were duly registered or the subject of an
available exemption from the registration requirements of the applicable
state securities or Blue Sky laws. None of the issued shares of capital
stock of the Company or its predecessors or any of its Subsidiaries has
been issued or is owned or held in violation of any pre-emptive rights
of shareholders, and no preemptive rights or similar rights of any
security holders of the Company exist with respect to the Notes. The
Company has no agreement with any security holder as to which the
Company has not obtained waiver which gives such security holder the
right to require the Company to register under the Act any securities of
any nature owned or held by such person in connection with the
transactions contemplated by this Agreement.

(g) The execution, delivery and performance of this Agreement, the
Indenture and the Securities, the issuance and delivery of the
Securities, and the consummation of the transactions herein and therein
contemplated will not conflict with, or result in a breach or violation
of any of the terms and provisions of, or constitute a default under,
any statute, any agreement or instrument to which the Company or any of
its subsidiaries listed in Exhibit 21

<PAGE>

to the Registration Statement (collectively, the "Subsidiaries" or each
individually, a "Subsidiary") is a party or by which either the Company
or any Subsidiary is bound or to which any of their property is subject,
the Company's or any Subsidiary's charter or by-laws, or any order,
rule, regulation or decree of any court or governmental agency or body
having jurisdiction over the Company, any Subsidiary or any of their
respective properties, which breach, violation or default reasonably
could or might be expected, individually or in the aggregate with other
such breaches, violations or defaults, to result in a materially adverse
effect on the financial condition, assets, operations or prospects of
the Company and its Subsidiaries, taken as a whole. Other than those
already obtained or waivers from which have been obtained, no consent,
approval, authorization or order of, or filing with, any court or
governmental agency or body is required by the Company or any Subsidiary
for the execution, delivery and performance of this Agreement, the
Indenture or the Securities or for the consummation of the transactions
contemplated hereby and thereby, including the issuance, sale and
delivery of the Securities by the Company, except such as may be
required under the Act, the Trust Indenture Act or state securities or
blue sky laws.

(h) Neither the Company nor any Subsidiary is (i) in violation of
its respective certificate of incorporation or charter or its respective
by-laws or other organizational documents, (ii) in default (nor has an
event occurred which with notice or passage of time or both would
constitute such a default) under any bond, indenture, mortgage, deed of
trust, note, loan or credit agreement or other material agreement or
instrument to which any of them is a party or by which any of them or
any of their properties or assets may be bound or affected, (iii) in
violation of any order of any court, arbitrator or governmental body or
(iv) except as disclosed in the Registration Statement and the
Prospectus, in violation of or has violated any franchise, grant,
authorization, license, permit, judgment, decree, order, statute, rule
or regulation, which, in the case of clauses (i)-(iv) of this sentence,
would (individually or in the aggregate) (x) adversely affect the
legality, validity or enforceability of this Agreement, the Indenture or
the Securities, or any document related hereto or thereto or (y) have a
material adverse effect on the condition (financial or otherwise),
properties, assets, business, prospects or results of operations of the
Company and the Subsidiaries, considered as a whole, or (z) materially
impair the Company's ability to perform fully on a timely basis any
obligations which it has under this Agreement, the Indenture or the
Securities. The Company or the Subsidiaries hold all franchises,
grants, authorizations, licenses, permits, easements, consents,
certificates and orders of any governmental or self-regulatory body
required for the conduct of their respective businesses. The
descriptions in the Registration Statement and the Prospectus of
statutes, legal and governmental proceedings or contracts and other
documents are accurate and fairly present the information required to be
shown; and there are no statutes or legal or governmental proceedings
required to be described in the Registration Statement or the Prospectus
that are not described as required.

(i) Each of the Company and its material Subsidiaries (which
consist of Holliday Fengolio, Inc., AMRESCO Management, Inc., AMRESCO
Residential Credit Corporation, AMRESCO Capital Corporation, AMRESCO New
England, Inc. and Oak Cliff Financial,

<PAGE>

Inc. (the "Material Subsidiaries")) has been duly organized and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation or organization with full corporate power
and authority to own, lease and operate its properties and conduct its
business as currently being carried on and as described in the
Registration Statement and Prospectus; and is duly qualified to do
business as a foreign corporation and is in good standing in each other
jurisdiction in which it owns or leases real property of a nature, or
transacts business of a type, that would make such qualification
necessary and in which the failure to so qualify would have a material
adverse effect on the condition (financial or otherwise), properties,
assets, business, prospects or results of operation of the Company and
the Subsidiaries, considered as a whole. The Company and each of the
Subsidiaries have at all times maintained and continue to maintain all
licenses, permits or other authorizations required for the conduct of
its business, where the failure to maintain such licenses, permits or
other authorizations reasonably could or might be expected to result in
a materially adverse effect on the financial condition, assets,
operations or prospects of the Company and its Subsidiaries, taken as a
whole, and each of the Company and the Subsidiaries is in compliance
with the rules, regulations or other lawful directives established by
each regulatory authority having jurisdiction over the Company's or the
Subsidiary's respective business, conduct and affairs, including without
limitation the timely and accurate filing of all reports, statements,
documents, registrations, filings or submissions required to be filed by
it with any such regulatory authority, where the failure to comply with
such rules, regulations or other lawful directives reasonably could or
might be expected to result in a materially adverse effect on the
financial condition, assets, operations or prospects of the Company and
its Subsidiaries, taken as a whole.

(j) Except as disclosed in the Registration Statement and the
Prospectus, there is no action, suit, investigation or proceeding,
governmental or otherwise, pending, or to the best knowledge of the
Company, threatened, to which the Company or any Subsidiary is or may be
a party or of which the business or property of the Company or any
Subsidiary is or may be the subject which, in each case, is material to
the Company and the Subsidiaries, considered as a whole, or which seeks
to restrain, enjoin, prevent the consummation of or otherwise challenge
the issuance of the Securities or any of the other transactions
contemplated hereby or by the Indenture, or which questions the legality
or validity of any such transactions or which seeks to recover damages
or obtain other relief in connection with any of such transactions; and
there is no contract or document of a character required to be described
in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed as
required.

(k) All of the outstanding capital stock of each Subsidiary has
been duly authorized, validly issued and is fully paid and
non-assessable, and except as otherwise noted in the Prospectus, is
owned directly by the Company free and clear of any security interest,
claim, lien or other encumbrance. The Company and the Subsidiaries have
no subsidiaries other than those listed in Exhibit 21 to the
Registration Statement.

<PAGE>

(l) Each of the Company and the Subsidiaries, as the case may be,
has good and marketable title to the real or personal property described
in the Registration Statement or Prospectus as being owned by the
Company or a Subsidiary, respectively, in each case free and clear of
any liens, claims, security interests or other encumbrances except such
as are described in the Registration Statement and the Prospectus; the
property held under lease by the Company or any Subsidiary, as the case
may be, is held by them under valid and binding leases with only such
exceptions with respect to any particular lease as do not interfere in
any material respect with the conduct of the business of the Company or
the applicable Subsidiary.

(m) Other than its ownership interest in the Subsidiaries, the
Company owns no capital stock or other equity or ownership or
proprietary interest in any corporation, partnership, association, trust
or other entity.

(n) The Company and each of its Subsidiaries have filed all
necessary foreign, federal and state and local income and franchise tax
returns and paid all taxes shown as due thereon. Except as is otherwise
expressly stated in the Registration Statement or Prospectus, the
Company has no knowledge of any tax deficiency which might be asserted
against it which would materially and adversely affect the Company's
business or properties.

(o) Since the date of the most recent audited financial statements
included in the prospectus, neither the Company nor any of the
Subsidiaries has sustained any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, other than as disclosed in or contemplated by
the Prospectus.

(p) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, (i) neither the Company
nor any of the Subsidiaries has incurred any liabilities or obligations,
direct or contingent, or entered into any transactions, not in the
ordinary course of business, that are material to the Company and the
Subsidiaries taken as a whole, (ii) the Company has not purchased any of
its outstanding capital stock or declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock, (iii) there
has not been any change in the capital stock (except as a result of
shares issued upon exercise of stock options pursuant to existing stock
option plans of the Company and the Subsidiaries), long-term debt or,
otherwise than in the ordinary course of business consistent with past
practice, short-term debt of the Company or any of the Subsidiaries and
(iv) there has not been any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
financial position, results of operations or business of the Company and
the Subsidiaries taken as a whole, in each case other than as disclosed
in or contemplated by the Prospectus.

(q) Neither the Company nor any of its officers, directors of
affiliates has taken, directly or indirectly, any action designed to
cause or result in, or that has constituted or

<PAGE>

might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company.

(r) Neither the Company nor any of the Subsidiaries, nor any
director, officer, agent, employee or other person associated with or
acting on behalf of the Company or any such Subsidiary has, directly or
indirectly (i) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to political
activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political
parties or campaigns from corporate funds, (iii) violated any provisions
of the Foreign Corrupt Practices Act of 1977, as amended, or (iv) made
any bride, rebate, payoff, influence payment, kick back or other
unlawful payment.

(s) To the Company's knowledge, the operations of the Company and
its Subsidiaries with respect to any real property currently leased or
owned or by any means controlled by the Company or any Subsidiary (the
"Real Property") are in compliance with all federal, state and local
laws, ordinances, rules and regulations relating to occupational health
and safety and the environment (collectively "Laws"), except where the
failure to so comply would not have a material adverse effect on the
Company's business or results of operations, and the Company and its
Subsidiaries have all licenses, permits and authorizations necessary to
operate under all Laws and are in compliance with all terms and
conditions of such licenses, permits and authorizations; neither the
Company nor any Subsidiary has authorized, conducted or has knowledge of
the generation, transportation, storage, use, treatment, disposal or
release of any hazardous substance, hazardous waste, hazardous material,
hazardous constituent, toxic substance, pollutant, contaminate,
petroleum product, natural gas, liquefied gas or synthetic gas defined
in or regulated under any environmental law on, in or under any Real
Property in violation of any Laws, except where such violation would not
have a material adverse effect on the Company's business or results of
operations; and there is no material pending or threatened claim,
litigation or any administrative agency proceeding, nor has the Company
or any subsidiary received any written or oral notice from any
governmental entity or third party that (i) alleges a material violation
of any Laws by the Company or any Subsidiary; (ii) alleges the Company
or any Subsidiary is a liable party under the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section
9601 ET SEQ. or any state superfund law; (iii) alleges possible
contamination of the environment by the Company or any Subsidiary or (iv)
alleges possible contamination of the Real Property.

(t) The Company and its Subsidiaries own or have the right to use
all patents, patent applications, trademarks, trademark applications,
trade names, service marks, copyrights, franchises, trade secrets,
proprietary or other confidential information and intangible properties
and assets (collectively "Intangibles") necessary to their respective
businesses as presently conducted or as the Prospectus indicates the
Company or such Subsidiary proposes to conduct; to the Company's
knowledge, neither the Company nor any Subsidiary has infringed or is
infringing, and neither the Company nor any Subsidiary has received
notice of infringement with respect to, asserted Intangibles of others;
and, to the Company's

<PAGE>

knowledge, there is no infringement by others of Intangibles of the
Company or any of its Subsidiaries which would have a material adverse
effect on the Company and its Subsidiaries taken as a whole.

(u) The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the business
in which they are engaged by similarly situated companies; and neither
the Company nor any such Subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a comparable
cost, except as disclosed in the Prospectus.

(v) Each of the Company and its Subsidiaries makes and keeps
accurate books, records and accounts, which, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of its
assets and maintains a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in
accordance with management's general and specific authorization, (ii)
transactions are recorded as necessary to permit preparation of the
Company's consolidated financial statements in accordance with generally
accepted accounting principles and to maintain accountability for the
assets of the Company, (iii) access to the assets of the Company and
each of its Subsidiaries is permitted only in accordance with management's
general and specific authorization and (iv) the recorded
accountability for assets of the Company and each of its Subsidiaries is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.

(w) No Subsidiary is currently prohibited, directly or indirectly,
from paying any dividends to the Company, from making any other
distributions on such Subsidiary's capital stock, from repaying to the
Company any loans or advances to such Subsidiary or from transferring
any of such Subsidiary's property or assets to the Company or any other
Subsidiary, except as disclosed in the Prospectus.

(x) The Company is not, will not become as a result of the
transactions contemplated hereby, and does not intend to conduct its
business in any manner that would cause it to become an "investment
company" or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940.

(y) The Company's common stock, par value $0.05 per share (the
"Common Stock") is registered pursuant to Section 12(g) of the Exchange
Act and is qualified as a Nasdaq National Market security of The Nasdaq
Stock Market, Inc. The Company has taken no action designed to
terminate, or likely to have the effect of terminating, the registration
of the Common Stock under the Exchange Act or qualification of the
Common Stock on the Nasdaq National Market, nor has the Company received
any notification that the Commission or the NASD is contemplating
terminating such registration or qualification.

<PAGE>

(z) The Company has not distributed and will not distribute any
prospectus or other offering material in connection with the offering
and sale of the Securities other than any Preliminary Prospectus or the
Prospectus or other materials permitted by the Act to be distributed by
the Company.

(aa) The Company is in compliance with all provisions of Florida
Statutes Section 517.075 (Chapter 92-198, laws of Florida). The Company
does not do any business, directly or indirectly, with the government of
Cuba or with any person or entity located in Cuba.

(bb) The conditions for use of a Registration Statement on Form S-3
set forth in the General Instructions to Form S-3 have been satisfied
with respect to the Company and the transactions contemplated by this
Agreement and the Registration Statement.

(cc) Any certificate signed by any officer of the Company and
delivered to the Underwriters or to counsel for the Underwriters shall
be deemed a representation and warranty by the Company to each
Underwriter as to the matters covered thereby.

(dd) The Company has not incurred any liability for any finder's or
broker's fee or agent's commission in connection with the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby.

3. PURCHASE, SALE AND DELIVERY OF SECURITIES.

(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to issue and sell the Firm Notes to the
Underwriters, and the Underwriters agree to purchase the respective
principal amounts of Firm Notes set forth opposite each Underwriter's
name in Schedule I hereto. The purchase price for each Firm Note shall
be ____% of the principal amount thereof, which shall reflect an
Underwriting Discount of ____% of the principal amount of the Firm Notes
payable to the Underwriters. The obligation of each Underwriter to the
Company shall be to purchase from the Company that number of Firm Notes
set forth opposite the name of such Underwriter in Schedule I hereof.
In making this Agreement, each Underwriter is contracting severally and
not jointly. Except as provided in paragraph (c) of this Section 3 and
in Section 8 hereof, the agreement of each Underwriter is to purchase
only its respective amount of Firm Notes as specified in Schedule I.

The Firm Notes will be delivered by the Company to Piper Jaffray
Inc. for each Underwriter's account against payment of the purchase
price therefor by certified or official bank check or checks in next day
funds payable to the order of the Company at the offices of Piper
Jaffray Inc., Piper Jaffray Tower, 222 South Ninth Street, Minneapolis,
Minnesota, or such other location as may be mutually acceptable, at 9:00
a.m., Minneapolis time, on the third full business day following the
date hereof, or at such other time as the Underwriters and the Company
determine, such time and date of delivery being herein referred to as
the "First

<PAGE>

Closing Date." Certificates for the Firm Notes, each in definitive form
and in such denominations and registered in such names as the
Underwriters may request upon at least two business days' prior notice
to the Company, will be made available for checking and packaging at the
offices of Piper Jaffray Inc., Piper Jaffray Tower, 222 South Ninth
Street, Minneapolis, Minnesota, or such other location as may be
mutually acceptable, at least one business day prior to the First
Closing Date.

(b) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants to the Underwriters an option to
purchase up to $7,500,000 principal amount of Option Notes, at the same
purchase price as the Firm Notes, for use solely in covering any
over-allotments made by the Underwriters in the sale and distribution of
the Securities. The option granted hereunder may be exercised at any
time (but not more than once) within 30 days after the effective date of
this Agreement upon notice (confirmed in writing) by the Underwriters to
the Company setting forth the aggregate principal amount of Option Notes
as to which the Underwriters are exercising the option, the names and
denominations in which the Option Notes are to be registered and the
date and time, as determined by the Underwriters, when the Option Notes
are to be delivered, such time and date of purchase of the Option Notes
being herein referred to as the "Option Notes Closing" and "Option Notes
Closing Date", respectively; provided, however, that the Option Notes
Closing Date shall not be earlier than the First Closing Date nor
earlier than the second business day after the date on which the option
shall have been exercised. The First Closing Date and the Option Notes
Closing Date are sometimes herein individually called the "Closing Date"
and collectively called the "Closing Dates." The principal amount of
Option Notes to be sold by the Company to the Underwriters and purchased
by the Underwriters from the Company shall be determined by the
Underwriters. The option granted hereby may be canceled by the
Underwriters as to the Option Notes for which the options are
unexercised, at any time prior to the expiration of the 30-day period,
upon notice to the Company. No Option Notes shall be sold and delivered
unless the Firm Notes previously have been, or simultaneously are, sold
and delivered.

The Option Notes will be delivered by the Company to Piper
Jaffray Inc. for each Underwriter's account against payment of the
purchase price therefor by certified or official bank check or checks in
next day funds payable to the order of the Company at the offices of
Piper Jaffray Inc., Piper Jaffray Tower, 222 South Ninth Street,
Minneapolis, Minnesota, or such other location as may be mutually
acceptable at 9:00 a.m., Minneapolis time, on the Option Notes Closing
Date. The Option Notes in definitive form and in such denominations and
registered in such names as the Underwriters have set forth in the
notice of option exercise, will be made available for checking and
packaging at the office of Piper Jaffray Inc., Piper Jaffray Tower, 222
South Ninth Street, Minneapolis, Minnesota, or such other location as
may be mutually acceptable, at least one business day prior to the
Option Notes Closing Date.

<PAGE>

(c) It is understood that each Underwriter may (but shall not be
obligated to) make payment to the Company on behalf of another
Underwriter for the Securities to be purchased by such Underwriter.
Nothing herein contained shall constitute any of the Underwriters an
unincorporated association or partner with the Company or with each
other.

(d) The Underwriters propose to make a public offering of the
Notes directly to the public (which may include selected dealers and
special purchasers) as soon as the Underwriters deem practicable after
the Registration Statement becomes effective, at initial public offering
prices as set forth on the cover page of the Prospectus, subject to the
terms and conditions of this Agreement and in accordance with the
Prospectus. Such concessions from the public offering prices may be
allowed to selected dealers and other members of the National
Association of Securities Dealers, Inc. as the Underwriters may
determine, and the Underwriters will furnish the Company with such
information about the distribution arrangements as may be necessary for
inclusion in the Registration Statement. It is understood that the
public offering prices and concessions may vary after the initial public
offering.

4. COVENANTS. The Company covenants and agrees with the Underwriters
as follows:

(a) If the Registration Statement has not already been declared
effective by the Commission, the Company will use its best
efforts to cause the Registration Statement or any post-effective
amendments thereto to become effective as promptly as possible; the
Company will notify the Underwriters promptly of the time when the
Registration Statement or any post-effective amendment to the
Registration Statement has become effective or any supplement to the
Prospectus has been filed and of any request by the Commission for any
amendment or supplement to the Registration Statement or Prospectus or
additional information; if the Company has elected to rely on Rule 430A
of the Rules and Regulations, the Company will file a Prospectus
containing the information omitted therefrom pursuant to such Rule 430A
with the Commission within the time period required by, and otherwise in
accordance with the provisions of, Rules 424(b) and 430A of the Rules
and Regulations; the Company will prepare and file with the Commission,
promptly upon the request of the Underwriters, any amendments or
supplements to the Registration Statement or Prospectus that, in the
Underwriters' opinion, may be necessary or advisable in connection with
the distribution of the Securities by the Underwriters; and the Company
will not file any amendment or supplement to the Registration Statement
or Prospectus to which the Underwriters shall reasonably object by
notice to the Company after having been furnished a copy a reasonable
time prior to the filing.

(b) The Company will advise the Underwriters, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement, of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceeding for any such purpose; and
the Company will promptly use its

<PAGE>

best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such a stop order should be issued.

(c) Within the time during which a prospectus relating to the
Securities is required to be delivered under the Act, the Company will
comply as far as it is able with all requirements imposed upon it by the
Act, as now and hereafter amended, and by the Rules and Regulations, as
from time to time in force, so far as necessary to permit the
continuance of sales of or dealings in the Securities as contemplated by
the provisions hereof and the Prospectus. If during such period any
event occurs as a result of which the Prospectus would include an untrue
statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances then
existing, not misleading, or if during such period it is necessary to
amend the Registration Statement or supplement the Prospectus to comply
with the Act, the Company will promptly notify the Underwriters and will
amend the Registration Statement or supplement the Prospectus (at the
expense of the Company) so as to correct such statement or omission or
effect such compliance.

(d) The Company will use its best efforts to qualify the
Securities for sale under the securities laws of such jurisdictions as
the Underwriters may reasonably designate and to continue such
qualifications in effect so long as required for the distribution of the
Securities, except that the Company shall not be required in connection
therewith to qualify as a foreign corporation or to execute a general
consent to service of process in any state. In each jurisdiction in
which the Notes shall have been qualified as above provided, the Company
will make and file such statements and reports in each year as are or
may be reasonably required by the laws of such jurisdiction to permit
secondary trading of the same.

(e) The Company will furnish to the Underwriters copies of the
Registration Statement (two of which will be manually signed and will
include all exhibits), the Indenture, each Preliminary Prospectus, the
Prospectus, and all amendments and supplements to such documents, in
each case as soon as available and in such quantities as each
Underwriter may from time to time reasonably request.

(f) During a period of five years commencing with the date
hereof, the Company will furnish to each Underwriter who may so request
in writing, copies, without charge, of (i) all periodic and special
reports furnished to the securities holders of the Company, (ii) all
information, documents and reports filed with the Commission and (iii)
such additional information concerning the business and financial
condition of the Company and its Subsidiaries, if any, as each such
Underwriter may reasonably request.

(g) The Company will make generally available to its security
holders as soon as practicable, but in any event not later than 15
months after the end of the Company's current fiscal quarter, an
earnings statement (which need not be audited) covering a 12-month
period beginning after the effective date of the Registration Statement
that shall satisfy the provisions of Section 11(a) of the Act and Rule 158
of the Rules and Regulations.

<PAGE>

(h) The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement is prevented from becoming
effective under the provisions of Section 9(a) hereof or is terminated,
will pay or cause to be paid (i) all expenses (including transfer taxes
allocated to the respective transferees) incurred in connection with the
delivery to the Underwriters of the Securities, (ii) all expenses and
fees (including, without limitation, fees and expenses of the Company's
accountants and counsel but, except as otherwise provided below, not
including fees of the Underwriters' counsel) in connection with the
preparation, printing, filing, delivery, and shipping of the
Registration Statement (including the financial statements therein and
all amendments, schedules and exhibits thereto), the Securities, the
Indenture, each Preliminary Prospectus, the Prospectus, and any
amendment thereof or supplement thereto, and underwriting documents,
including Blue Sky Memoranda, (iii) all filing fees and fees and
disbursements of the Underwriters' counsel incurred in connection with
the qualification of the Securities for offering and sale by the
Underwriters or by dealers under the securities or blue sky laws of the
states and other jurisdictions which the Underwriters shall designate in
accordance with Section 4(d) hereof, (iv) the fees and expenses of the
Trustee and counsel for the Trustee, (v) the filing fees incident to any
required review by the National Association of Securities Dealers, Inc.
of the terms of the sale of the Securities, (vi) listing fees, if any,
(vii) fees or expenses, if any, incurred in connection with
investigating the legality of an investment in the Securities by certain
purchasers in certain jurisdictions and the preparation of memoranda
relating thereto, and (viii) all other reasonable costs and expenses
incident to the performance of its obligations hereunder that are not
otherwise specifically provided for herein. If the sale of the
Securities provided for herein is not consummated by reason of action by
the Company pursuant to Section 9(a) hereof which prevents this
Agreement from becoming effective, or by reason of any failure, refusal
or inability on the part of the Company to perform any material
agreement on its part to be performed, or because any other material
condition of the Underwriters' obligations hereunder required to be
fulfilled by the Company is not fulfilled, the Company will reimburse
the Underwriters for all reasonable out-of-pocket disbursements
(including fees and disbursements of counsel) incurred by the
Underwriters in connection with their investigation, preparing to market
and marketing the Securities or in contemplation of performing their
obligations hereunder. The Company shall not in any event be liable to
either Underwriter for loss of anticipated profits from the transactions
covered by this Agreement.

(i) The Company will apply the net proceeds from the sale of the
Securities to be sold by it hereunder for the purposes set forth in the
Prospectus and will file such reports with the Commission with respect
to sale of the Securities and the application of the proceeds therefrom
as required in accordance with Rule 463 under the Act or successor rules
or regulations.

(j) The Company has not taken and will not take, directly or
indirectly, any action designed to or which might reasonably be expected
to cause or result in, or which has constituted, the stabilization or
manipulation of the price of any security of the Company, whether to
facilitate the sale or resale of the Securities or otherwise.

<PAGE>
(k) The Company will file on a timely basis such registration
statements and other filings and take such other action as is required
pursuant to the Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder.

(l) So long as any of the Notes are outstanding, the Company will
furnish to each of you the reports required to be filed with the Trustee
pursuant to the Indenture, concurrently with such filing.

(m) The Company will use its best efforts to cause the Notes to be
listed on the New York Stock Exchange, Inc. upon issuance of the Notes
and will use its best efforts to cause the Notes to be so listed as long
as the Notes remain outstanding.

5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters under are subject to the accuracy, as of the date hereof
and at each of the First Closing Date and Option Notes Closing Date (as
if made at such Closing Date), of and compliance with all representations,
warranties and agreements of the Company contained herein, to the
performance by Company of its obligations hereunder and to the following
additional conditions:

(a) The Registration Statement shall have become effective not
later than 5:00 p.m., Minneapolis time, on the date of this Agreement,
or at such later time and date as the Underwriters shall approve and all
filings required by Rule 424 and Rule 430A of the Rules and Regulations
shall have been timely made; no stop order suspending the effectiveness
of the Registration Statement or any amendment thereof shall have been
issued; no proceedings for the issuance of such an order shall be
pending or threatened; and any request of the Commission for additional
information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the
Underwriters' satisfaction.

(b) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, neither the Company nor any Subsidiary
shall have incurred any material liabilities or obligations, direct or
contingent, or entered into any material transactions not in the
ordinary course of business; and there shall not have been any change in
the capital stock, or any material change in the short-term or long-term
debt of the Company, or any material adverse change, or any development
involving a prospective material adverse change, in the general affairs,
condition (financial or otherwise), business, key personnel, property,
prospects, net worth or results of operations of the Company and the
Subsidiaries, considered as a whole, that, in your judgment, makes it
unpractical or inadvisable to offer or deliver the Securities on the
terms and in the manner contemplated in the Prospectus.

(c) On each Closing Date, there shall have been furnished to the
Underwriters, the opinion of Haynes & Boone, L.L.P., counsel for the
Company, dated such Closing Date and addressed to the Underwriters, to
the effect that:

<PAGE>

(i) The Company has all requisite corporate power to execute,
deliver and perform this Agreement and this Agreement has been duly
authorized by all requisite corporate action, duly executed and duly
delivered by the Company and constitutes the valid and binding
obligation of the Company enforceable in accordance with its terms
except as rights to indemnity hereunder may be limited by federal or
state securities laws and except as such enforceability may be limited
by bankruptcy, insolvency, reorganization or similar laws affecting the
rights of creditors generally and subject to general principles of
equity.

(ii) The Company has all requisite corporate power to execute,
deliver and perform its obligations under the Indenture. The Indenture
has been duly and validly authorized by all requisite corporate action,
duly executed and duly delivered by the Company and constitutes a valid
and binding instrument of the Company, enforceable against the Company
in accordance with its terms except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws
affecting the rights of creditors generally and subject to general
principles of equity; the Notes being delivered on the Closing Date have
been duly and validly authorized, and, when executed, authenticated,
issued and delivered in accordance with the terms of the Indenture, will
constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms and entitled to the
benefits of the Indenture, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization or similar laws affecting the
rights of creditors generally and subject to general principles of
equity. The Notes and the Indenture conform, as to legal matters, to
the descriptions thereof contained in the Registration Statement and the
Prospectus. The Indenture complies in all respects with the Trust
Indenture Act. The Notes have been duly and properly listed for trading
on the New York Stock Exchange, Inc.

(iii) The execution, delivery and performance of this Agreement,
the Indenture and the Securities and the consummation of the
transactions herein and therein contemplated will not result in a breach
or violation of any of the terms and provisions of, or constitute a
default under, (a) any agreement or instrument known to such counsel to
which the Company or any Subsidiary is a party or by which any such
entity is bound or to which any of their property is subject, (b) the
Company's or any Subsidiary's charter or by-laws, or (c) any law of the
United States, any law of any state having jurisdiction over the Company
or any Subsidiary or their properties or the General Corporation Law of
the State of Delaware, and rules or regulations of the United States or
any state having jurisdiction over the Company or any Subsidiary or any
of their properties, which laws, rules or regulations generally apply to
transactions of this nature, or any order or decree known to such
counsel of any court or governmental agency or body having jurisdiction
over the Company, any Subsidiary or any of their respective properties
(except for federal and state securities laws which are not covered by
the opinions expressed in this paragraph (iii)), which breach,

<PAGE>

violation or default would have a material adverse effect on the condition
(financial or otherwise), properties, assets, business, prospects or
results of operations of the Company and the Subsidiaries, considered as
a whole; and no consent, approval, authorization or order of, or filing
with, any court or governmental agency or body is required by the
Company or any Subsidiary for the execution, delivery and performance of
this Agreement, the Indenture or the Securities or for the consummation
of the transactions contemplated hereby and thereby, including the
issuance or sale of the Securities by the Company, except as may be
required under the Act, the Trust Indenture Act or state securities laws.

(iv) The authorized capital stock of the Company is as set forth
under the caption "Capitalization" in the Prospectus. All of the
outstanding shares of capital stock of the Company are duly authorized,
validly issued and fully paid and non-assessable and have been issued in
compliance with applicable federal and state securities laws and
regulations. No statutory preemptive rights or registration rights, or,
to such counsel's knowledge, any contractual or other preemptive rights
or registration rights, of security holders of the Company exist with
respect to the issuance or sale of the Securities by the Company
pursuant to this Agreement and, to such counsel's knowledge, there are
no outstanding rights to require registration of shares of Common Stock
or other securities of the Company because of the filing of the
Registration Statement (except such rights as to which adequate waiver
has been obtained). All of the outstanding capital stock of each
Subsidiary has been duly authorized, validly issued and is fully paid
and non-assessable. Except as set forth in the Prospectus, the Company
or another Subsidiary is the registered holder of all the outstanding
shares of capital stock of each Subsidiary, and such shares are not
subject to any liens, pledges or other encumbrances.

(v) Except as disclosed in the Registration Statement and the
Prospectus, such counsel knows of no action, suit, investigation or
proceeding, governmental or otherwise, pending or overtly threatened
against the Company or any Subsidiary, or involving the business or
properties of the Company or any Subsidiary with respect to the issuance
and sale of the Securities pursuant to this Agreement and the Indenture
or which is required to be described in the Registration Statement or
Prospectus that is not disclosed as required. Such counsel does not know
of any contracts or documents of a character required to be described in
the Registration Statement or the Prospectus or to be filed as an exhibit
to the Registration Statement which are not described or filed as required.
The descriptions contained in the Registration Statement and Prospectus of
contracts and other documents are accurate and fairly present the
information required to be shown. The statements contained in the
Registration Statement or the Prospectus to the extent such statements
relate to matters of law, descriptions of statutes, legal or governmental
proceedings, regulatory matters or other legal matters or conclusions of
law, fairly summarize such matters.

<PAGE>

(vi) The Registration Statement has become effective under the
Act and the Indenture has been qualified under the Trust Indenture Act,
and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or threatened by the
Commission.

(vii) Each of the Company and the Subsidiaries has been duly
incorporated and is existing as a corporation in good standing under the
laws of its jurisdiction of incorporation with full corporate power to
own, lease and operate its properties and conduct its business as
described in the Registration Statement and Prospectus.

(viii) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company (other
than the financial statements and related schedules therein, as to which
such counsel need express no opinion) comply as to form in all material
respects with the requirements of the Act and the Rules and Regulations.
All documents filed pursuant to the Exchange Act and incorporated by
reference in the Registration Statement, any Preliminary Prospectus or
the Prospectus, or in any further amendments or supplements thereto,
comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder.

(ix) The Company is not, and upon and immediately after the
applicable Closing Date will not be, required to be registered under the
Investment Company Act of 1940, as amended, as an "investment company,"
and, to the knowledge of such counsel, is not a company "controlled" by
an "investment company," within the meaning of the Investment Company
Act of 1940, as amended.

In rendering such opinion such counsel may rely as to matters of fact
upon certificates of officers of the Company or any Subsidiary, as
appropriate, provided that the extent of such reliance is specified in such
opinion and such certificates are attached to the opinion delivered to the
Underwriters.

Such counsel shall also advise the Underwriters that although they do not
assume any responsibility for, and cannot guarantee the accuracy,
completeness or fairness of, the statements contained in the Registration
Statement or the Prospectus, on the basis of conferences with officers of the
Company and the Subsidiaries, examination of documents referred to or
incorporated by reference in the Registration Statement and Prospectus and
other procedures as such counsel deemed appropriate, nothing has come to the
attention of such counsel that causes such counsel to believe that the
Registration Statement or any further amendment thereto (other than the
financial statements and related schedules therein, as to which such counsel
need express no comment), contained or contains an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that
the Prospectus or any further

<PAGE>

amendment or supplement thereto (other than the financial statements and
related schedules therein, as to which such counsel need express no comment)
contained or contains an untrue statement of a material fact or omits or
omitted to state a material fact necessary to make the statements therein,
in the light of the circumstances in which they were made, not misleading.

(d) On each Closing Date, there shall have been furnished to the
Underwriters, the opinion of L. Keith Blackwell, Esq., General Counsel for the
Company, dated such Closing Date and addressed to the Underwriters, to the
effect that

(i) the Company is duly qualified to transact business as a foreign
corporation and in good standing under the laws of each other jurisdiction
in which it owns or leases material property, or conducts material
business, so as to require such qualification, except where the failure
to so qualify would not have a material adverse effect on the financial
position of the Company and its Subsidiaries, taken as a whole.

(ii) Each of the United States and Canadian Subsidiaries of the
Company is duly qualified to transact business as a foreign corporation
and is in good standing under the laws of each other United States and
Canadian jurisdiction in which it owns or leases material property, or
conducts material business, so as to require such qualification, except
where the failure to so qualify would not have a material adverse effect
on the financial position of the Company and its Subsidiaries, taken
as a whole.

(iii) Each sale of the Company's capital stock during the period from
December 13, 1992 through each Closing Date was, at the time of each sale,
registered or exempt from the registration requirements of the Act and
applicable state securities or Blue Sky laws.

(iv) To such counsel's knowledge, neither the Company nor any of the
Subsidiaries has (a) breached or otherwise violated any existing obligation
of the Company under any court order that names the Company as a party or
(b) violated applicable provisions of statutory law or regulation, in
either case where any such breach or violation would have a material
adverse effect on the financial position of the Company and its
Subsidiaries, taken as a whole.

(v) To such counsel's knowledge, (a) neither the Company nor any of
the Subsidiaries has violated its Certificate of Incorporation or Bylaws
and (b) neither the Company nor any of the Subsidiaries has breached or
otherwise violated any existing obligation under any material agreement
to which the Company or any Subsidiary is a party, in either case where
such breach or violation would have a material adverse effect on the
financial position of the Company and its Subsidiaries, taken as a whole.

<PAGE>

(e) On each Closing Date, there shall have been furnished to the
Underwriters, such opinion or opinions from Lindquist & Vennum P.L.L.P.,
counsel for the Underwriters, dated such Closing Date and addressed to the
Underwriters, with respect to the formation of the Company, the validity of
the Securities, the Registration Statement, the Prospectus and other related
matters as the Underwriters reasonably may request, and such counsel shall
have received such papers and information as they request to enable them to
pass upon such matters.

(f) On each Closing Date the Underwriters shall have received letters
from Deloitte & Touche, LLP, dated such Closing Date and addressed to the
Underwriters, confirming that they are independent public accountants within
the meaning of the Act and are in compliance with the applicable requirements
relating to the qualifications of accountants under Rule 2-01 of Regulation
S-X of the Commission, and stating, as of the date of such letter (or, with
respect to matters involving changes or developments since the respective
dates as of which specified financial information is given in the Prospectus,
as of a date not more than five days prior to the date of such letter), the
conclusions and findings of said firm with respect to the financial
information and other matters covered by its letter (as provided in Exhibit A
hereto) delivered to the Underwriters concurrently with the execution of this
Agreement, and the effect of the letter so to be delivered on such Closing
Date shall be to confirm the conclusions and findings set forth in such prior
letter.

(g) On each Closing Date, there shall have been furnished to the
Underwriters a certificate, dated such Closing Date and addressed to the
Underwriters, signed by the Chief Executive Officer and by the Chief
Financial Officer of the Company, to the effect that:

(i) The representations and warranties of the Company in this
Agreement are true and correct, in all material respects, as if made at
and as of such Closing Date, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be performed
or satisfied at or prior to such Closing Date;

(ii) To the best of their knowledge, no stop order or other order
suspending the effectiveness of the Registration Statement or any amendment
thereof or the qualification of the Securities for offering or sale has
been issued, and, to the best of their knowledge, no proceeding for that
purpose has been instituted or is contemplated by the Commission or any
state or regulatory body; and

(iii) The signers of said certificate have carefully examined the
Registration Statement and the Prospectus, and any amendments thereof or
supplements thereto, and (A) such documents contain all statements and
information required to be included therein, the Registration Statement, or
any amendment thereof, does not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Prospectus, as amended or supplemented, does not include any

<PAGE>

untrue statement of material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, (B) since the effective date of
the Registration Statement, there has occurred no event required to be set
forth in an amended or supplemented prospectus which has not been so set
forth, (C) except as disclosed in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, neither the Company nor any Subsidiary has
incurred any material liabilities or obligations, direct or contingent, or
entered into any material transactions not in the ordinary course of
business, or declared or paid any dividends or made any distribution of any
kind with respect to its capital stock, and except as disclosed in the
Prospectus, there has not been any change in the capital stock, or any
material change in the short-term or long-term debt, or any issuance of
options, warrants, convertible securities or other rights to purchase the
capital stock of the Company or any Subsidiary, or any material adverse
change, or any development involving a prospective material adverse change,
in the general affairs, condition (financial or otherwise), business, key
personnel, property, prospects, net worth or results of operations of the
Company and the Subsidiaries, considered as a whole, and (D) except as
stated in the Registration Statement and the Prospectus, there is not
pending, or, to the knowledge of the Company, threatened or contemplated,
any action, suit or proceeding to which the Company or any Subsidiary is a
party before or by any court or governmental agency, authority or body, or
any arbitrator, which might result in any material adverse change in the
condition (financial or otherwise), business, prospects or results of
operations of the Company and the Subsidiaries, considered as a whole.

(h) The Company shall have furnished to the Underwriters and their
counsel such additional documents, certificates and evidence as the
Underwriters or their counsel may have reasonably requested.

All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Underwriters and counsel for the
Underwriters. The Company will furnish the Underwriters with such conformed
copies of such opinions, certificates, letters and other documents as the
Underwriters shall reasonably request.

6. INDEMNIFICATION AND CONTRIBUTION.

(a) The Company and each Subsidiary, jointly and severally, agrees to
indemnify and hold harmless each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may
become subject, under the Act or otherwise (including in settlement of any
litigation if such settlement is effected with the written consent of the
Company), insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a

<PAGE>

material fact contained in the Registration Statement or incorporated therein
by reference, including the information deemed to be a part of the
Registration Statement at the time of effectiveness pursuant to Rule 430A, if
applicable, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse
each Underwriter for any legal or other expenses reasonably incurred by it in
connection with investigating or defending against such loss, claim, damage,
liability or action; provided, however, that neither the Company nor any
Subsidiary shall be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
such amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by the Underwriters specifically for use
in the preparation thereof.

(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Underwriter), insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
such amendment or supplement thereto, in reliance upon and in conformity with
written information furnished to the Company by such Underwriter,
specifically for use in the preparation thereof, and will reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending against any such loss, claim,
damage, liability or action.

(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve the indemnifying party from any
liability that it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any indemnified
party, and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in, and, to
the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory
to such indemnified party, and after notice from the indemnifying party to
such indemnified party of the indemnifying party's election so to

<PAGE>

assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party under such subsection for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided,
however, that if, in the sole judgment of the Underwriters, it is advisable
for the Underwriters to be represented as a group by separate counsel, the
Underwriters shall have the right to employ a single counsel to represent all
Underwriters who may be subject to a liability arising from any claim in
respect of which indemnity may be sought by the Underwriters under paragraph
(a) of this Section 6, in which event the reasonable fees and expenses of
such separate counsel shall be borne by the indemnifying party or parties and
remitted to the Underwriters for payment to such counsel as such fees and
expenses are incurred. An indemnifying party shall not be obligated under
any settlement agreement relating to any action under this Section 6 to which
it has not agreed in writing.

(d) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in subsection (a) or (b)
above, (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other from the offering of the Securities or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one hand
and the Underwriters on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total net proceeds from
the offering (before deducting expenses) received by the Company bear to the
total underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Underwriters and the parties' relevant intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company and the Underwriters agree that it
would not be just and equitable if contributions pursuant to this subsection
(d) were to be determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations
referred to in the first sentence of this subsection (d). The amount paid by
an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending against any
action or claim which is the subject of this subsection (d). Notwithstanding
the provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the

<PAGE>

Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages that such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this
subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.

(e) The obligations of the Company or any Subsidiary under this Section
6 shall be in addition to any liability which the Company or any Subsidiary
may otherwise have and shall extend, upon the same terms and conditions, to
each person, if any, who controls any Underwriter within the meaning of the
Act; and the obligations of the Underwriters under this Section 6 shall be in
addition to any liability that the respective Underwriters may otherwise have
and shall extend, upon the same terms and conditions, to each director of the
Company (including any person who, with his consent, is named in the
Registration Statement as about to become a director of the Company), to each
officer of the Company who has signed the Registration Statement and to each
person, if any, who controls the Company within the meaning of the Act.

7. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties, and agreements of the Company herein or in
certificates delivered pursuant hereto, and the agreements of the
Underwriters and the Company (and any Subsidiary) contained in Section 6
hereof, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any controlling
person thereof, or the Company or any of its officers, directors, or
controlling persons and shall survive delivery of, and payment for, the
Securities to and by the Underwriters hereunder.

8. SUBSTITUTION OF UNDERWRITERS.

(a) If any Underwriter shall fail to take up and pay for the
principal amount of Firm Notes agreed by such Underwriter to be purchased
hereunder, upon tender of such Firm Notes in accordance with the terms
hereof, and the principal amount of Firm Notes not purchased does not in
either case aggregate more than 10% of the aggregate principal amount of
Firm Notes set forth in Schedule I hereto, the remaining Underwriters shall
be obligated, severally, in proportion to the respective principal amount
of Firm Notes which they are obligated to purchase hereunder, to take up
and pay for the principal amount of Firm Notes that the withdrawing or
defaulting Underwriter agreed but failed to purchase.

(b) If any Underwriter shall fail to take up and pay for the
principal amount of Firm Notes agreed by such Underwriter to be purchased
hereunder, upon tender of such Firm Notes in accordance with the terms
hereof, and the principal amount of Firm Notes not purchased aggregates
more than 10% of the aggregate principal amount of Firm Notes set forth in
Schedule I hereto, and arrangements for the purchase of such Firm Notes by
other

<PAGE>

persons reasonably satisfactory to the Company are not made within 36 hours
thereafter, this Agreement shall terminate. In the event of any such
termination the Company shall not be under any liability to any Underwriter
(except to the extent provided in Section 4(h) and Section 6 hereof) nor
shall any Underwriter (other than an Underwriter who shall have failed,
otherwise than for some material reason permitted under this Agreement, to
purchase the principal amount of Firm Notes agreed by such Underwriter to
be purchased hereunder) be under any liability to the Company (except to
the extent provided in Section 6 hereof). Nothing contained herein shall
relieve a defaulting Underwriter from liability for its default.

If Firm Notes to which a default relates are to be purchased by
non-defaulting Underwriters or by any other party or parties, the
non-defaulting Underwriters or the Company shall have the right to postpone
the First Closing Date for not more than seven business days in order that
the necessary changes in the Registration Statement, Prospectus and any
other documents, as well as any other arrangements, may be effected. As
used herein, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 8.

9. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.

(a) This Agreement shall become effective at 10:00 a.m.,
Minneapolis time, on the first business day following the date hereof, or
at such earlier time after the effective date of the Registration Statement
as the Underwriters in their discretion shall first release the Securities
for sale to the public. For the purpose of this Section, the Securities
shall be deemed to have been released for sale to the public upon release
by the Underwriters of the publication of a newspaper advertisement
relating thereto or upon release by the Underwriters of telexes offering
the Securities for sale to securities dealers, whichever shall first occur.
By giving notice as hereinafter specified before the time this Agreement
becomes effective, the Underwriters or the Company may prevent this
Agreement from becoming effective without liability of any party to any
other party, except that the provisions of Section 4(h) and Section 6
hereof shall at all times be effective.

(b) The Underwriters shall have the right to terminate this
Agreement by giving notice as hereinafter specified at any time at or prior
to the First Closing Date, and the option referred to in Section 3(b), if
exercised, may be canceled at any time prior to the First Closing Date, if
(i) the Company shall have failed, refused or been unable, at or prior to
such Closing Date, to perform any agreement on its part to be performed
hereunder, (ii) any other condition of the Underwriters' obligations
hereunder is not fulfilled, (iii) trading on the New York Stock Exchange or
the American Stock Exchange shall have been wholly suspended, (iv) minimum
or maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required, on the New York Stock
Exchange or the American Stock Exchange, by such Exchange or by order of
the Commission or any other governmental authority having jurisdiction, (v)
a banking moratorium shall have been declared by Federal, New York, Texas
or Minnesota authorities, or (vi) there has occurred any

<PAGE>

material adverse change in the financial markets in the United States or
an outbreak of major hostilities (or an escalation thereof) in which the
United States is involved, a declaration of war by Congress, any other
substantial national or international calamity or any other event or
occurrence of a similar character shall have occurred since the execution
of this Agreement that, in your judgment, makes it impractical or
inadvisable to proceed with the completion of the sale of and payment for
the Securities. Any such termination shall be without liability of any
party to any other party except that the provisions of Section 4(h) and
Section 6 hereof shall at all times be effective.

(c) If the Underwriters elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this
Section, the Company shall be notified promptly by the Underwriters by
telephone or telegram, confirmed by letter. If the Company elects to
prevent this Agreement from becoming effective, the Underwriters shall be
notified by the Company by telephone or telegram, confirmed by letter.

10. INFORMATION FURNISHED BY UNDERWRITERS. The statements set forth in
the last paragraph of the cover page and under the caption "Underwriting" in
any Preliminary Prospectus and in the Prospectus constitute the written
information furnished by or on behalf of the Underwriters referred to in
Section 2 and Section 6 hereof.

11. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters,
shall be mailed, telegraphed or delivered to the Underwriters c/o Piper
Jaffray Inc., Piper Jaffray Tower, 222 South Ninth Street, Minneapolis,
Minnesota 55402, with a copy to Patrick Delaney, Esq., Lindquist & Vennum
P.L.L.P., 4200 IDS Center, Minneapolis, MN 55402, except that notices given
to an Underwriter pursuant to Section 6 hereof shall be sent to such
Underwriter at the address stated in the Underwriters' Questionnaire
furnished by such Underwriter in connection with this offering; if to the
Company, shall be mailed, telegraphed or delivered to it at 1845 Woodall
Rodgers Freeway, Dallas, Texas 75201 Attention: Chief Executive Officer, with
a copy to Michael M. Boone, Esq., Haynes & Boone, 3100 NationsBank Plaza,
31st Floor, 901 Main Street, Dallas, Texas 75205. All notices given by
telegram shall be promptly confirmed by letter. Any party to this Agreement
may change such address for notices by sending to the parties to this
Agreement written notice of a new address for such purpose.

12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns and the controlling persons, officers and
directors referred to in Section 6. Nothing in this Agreement is intended or
shall be construed to give to any other person, firm or corporation any legal
or equitable remedy or claim under or in respect of this Agreement or any
provision herein contained. The term "successors and assigns" as herein used
shall not include any purchaser, as such purchaser, of any of the Securities
from any of the Underwriters.

13. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Minnesota.

<PAGE>

Please sign and return to the Company the enclosed duplicates of this
letter whereupon this letter will become a binding agreement between the
Company and the Underwriters in accordance with its terms.

Very truly yours,

AMRESCO, INC.

By __________________________________
Its ______________________________
CONFIRMED
as of the date first
above mentioned

By: PIPER JAFFRAY INC.

By ___________________________
Managing Director
Acting on behalf of itself
and the other Underwriters

<PAGE>

SCHEDULE I

<TABLE>
<CAPTION>
Principal Amount
Underwriter of Firm Notes(1)
- ----------- ----------------
<S> <C>
Piper Jaffray Inc. .................................. $

-----------
Total...................................... $50,000,000
-----------
-----------
</TABLE>
____________
(1) The Underwriters may purchase up to an additional $7,500,000 in aggregate
principal amount of Notes, to the extent the option to purchase Option
Notes described in Section 3(b) of the Agreement is exercised, in the
proportions and in the manner described in the Agreement.

<PAGE>

EXHIBIT A

ACCOUNTANTS' LETTERS

1. A letter from Deloitte & Touche, LLP dated and delivered on the
date this Agreement is executed and a similar certificate or letter dated and
delivered on each Closing Date, confirming that they are independent public
accountants within the meaning of the Act and the published rules and
regulations thereunder, shall be issued to the Underwriters stating that:

(a) in their opinion, the consolidated financial statements and
schedules audited by them and included in the Prospectus and the
Registration Statement comply as to form in all material respects with
the applicable accounting requirements of the Act and the related published
rules and regulations thereunder; the financial statements of the Company
as and for the ____ month period ended ______________ [THE LATEST UNAUDITED
FINANCIAL STATEMENTS INCLUDED IN OR INCORPORATED BY REFERENCE INTO THE
PROSPECTUS] (the "Latest Balance Sheet Date") were reviewed by them in
accordance with the standards established by the American Institute of
Certified Public Accountants and based upon their review they are not
aware of any material modifications that should be made to such financial
statements for them to be in conformity with generally accepted accounting
principles, and such financial statements comply as to form in all material
respects with the applicable accounting requirements of the Act and the
applicable rules and regulations thereunder;

(c) on the basis of a limited review of unaudited consolidated
financial statements, including a reading of the latest available financial
statements, a reading of the minutes of the meetings of the Board of
Directors of the Company, and discussions with officials of the Company
responsible for financial and accounting matters as to transactions and
events subsequent to the Latest Balance Sheet Date, and such other
inquiries and procedures as they may specify, nothing has come to their
attention which, in their judgment, would indicate,

(i) that the unaudited consolidated financial statements of the
Company included or incorporated by reference in the Registration
Statement and Prospectus do not comply in form in all material
respects with the applicable accounting requirements of the Act and of
the related published rules and regulations, or that such unaudited
consolidated financial information contained or incorporated by
reference in the Registration Statement was not prepared in conformity
with generally accepted accounting principles applied on a basis
substantially consistent, in all material respects, with those
followed in the preparation of the audited financial statements of the
Company included therein;

(ii) at the date of the latest balance sheet read by them and at
a subsequent specified date not more than five business days prior to
the date of such letter there was any decrease in the common stock or
increase in long-term debt of the Company as compared with amounts
shown in the unaudited consolidated balance sheet dated as of the
Latest Balance Sheet Date, included in the Registration Statement,
except for changes which the Registration Statement discloses have
occurred or may occur;

<PAGE>

(iii) at the date of the latest balance sheet read by them and at
a subsequent specified date not more than five business days prior to
the date of such letter there were any decreases, as compared with
amounts shown in the balance sheet dated as of the Latest Balance
Sheet Date included in the Registration Statement, in total assets,
stockholders' equity of the Company, except for decreases which the
Registration Statement discloses have occurred or may occur or which
are described in such letter;

(iv) for the period from the Latest Balance Sheet Date to the
date of the latest statement of operations read by them there were
any decreases, as compared with the corresponding period of the
preceding year, in revenues or the total or per share amounts of net
income of the Company, except for decreases which the Registration
Statement discloses have occurred or may occur or which are described
in such letter;

(v) for the period from the date of the latest statement of
operations to a subsequent specified date not more than five business
days prior to the date of such letter, that certain conclusions
described in such letter were not correct, except as otherwise
described in the Registration Statement or such letter; and

(d) they have compared specific dollar amounts, numbers of shares,
and other financial information pertaining to the Company set forth in the
Registration Statement, which have been specified by the Underwriters prior
to the date of this Agreement, to the extent that such amounts, numbers and
information may be derived from the general accounting records of the
Company, and excluding any questions requiring any interpretation by legal
counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do
not constitute an audit in accordance with generally accepted auditing
standards) set forth in the letter, and found them to be in agreement.

<PAGE>
FIRST AMENDMENT TO CREDIT AGREEMENT

This FIRST AMENDMENT TO CREDIT AGREEMENT (this "AGREEMENT") is entered into
as of the 21st day of November, 1995, by and among AMRESCO, INC., a Delaware
corporation ("AMRESCO"), and the other entities designated as "Borrowers" on the
signature pages hereof (collectively, "BORROWERS") and NationsBank of Texas,
N.A., a national banking association, as agent ("AGENT"), for the Lenders
(collectively, "LENDERS"), as defined in the Loan Agreement (herein defined).

W I T N E S S E T H:
- - - - - - - - - -

WHEREAS, reference is made to the two revolving credit facilities in the
original aggregate principal amount of $175,000,000, governed by that certain
Revolving Loan Agreement (the "LOAN AGREEMENT") dated September 29, 1995,
executed by and among Lenders, Agent and Borrowers (each term used herein but
not otherwise defined herein shall be defined as set forth in the Loan
Agreement); and

WHEREAS, AMRESCO has duly authorized the creation of an issue of its 8%
Convertible Subordinated Debentures Due 2005 in the amount of $45,000,000, and
to provide therefor, AMRESCO has executed and delivered that certain Indenture
(herein so called) dated on or around November 21, 1995 by and between AMRESCO
and First Interstate Bank of Texas, N.A., as Trustee; and

WHEREAS, certain of the Lenders have agreed to increase their Loan
Commitment Amount; and

WHEREAS, Borrowers and Agent desire to amend Schedule I to the Loan
Agreement to reflect the changes in the Available Commitment resulting from the
funding of the Indenture and the increase in the Loan Commitment Amount of
certain of the Lenders.

A G R E E M E N T:
- - - - - - - - -

NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS: That, for and in
consideration of the covenants and agreements set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and confessed, Lenders, Borrowers and Agent hereby agree as
follows:

1. MODIFICATION OF SCHEDULE I; EXECUTION OF NEW NOTES. Borrowers and
Agent hereby agree that SCHEDULE I to the Loan Agreement is hereby deleted in
its entirety and replaced with SCHEDULE I attached hereto and incorporated
herein by reference for all purposes. Borrowers shall execute and deliver to
Agent (for

Page 1

<PAGE>

delivery to the Lenders) amended and restated Notes in favor of Lenders to
reflect such changes made to SCHEDULE I.

2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF BORROWERS. Each
Borrower hereby represents and warrants to, and agrees with, Agent and Lenders
as follows:

(a) AUTHORIZATION. The execution and delivery of this Agreement and
each other document executed herewith and the performance of all covenants
contemplated herein and therein have been duly authorized by each Borrower and
will not violate the articles of incorporation or bylaws of any Borrower or any
other material agreement to which any Borrower is a party, and the consent of no
other party or parties is required.

(b) NO CLAIMS OR DEFENSES. No Borrower has any offsets, claims,
counterclaims, defenses or other causes of action against Agent or any Lender
arising out of the Loans, the Loan Documents, the modifications of the Loans
pursuant to this Agreement, any document executed in connection herewith or
otherwise.

(c) BINDING OBLIGATION. This Agreement has been duly and validly
executed and delivered by each Borrower and constitutes a valid and legally
binding obligation of each Borrower enforceable in accordance with its terms,
except as enforcement may be limited by equitable principles or by bankruptcy,
insolvency, reorganization or other similar laws relating to or affecting
enforcement of creditors' rights generally.

3. NON-WAIVER OF RIGHTS OR REMEDIES. Except as otherwise set forth
herein, neither this Agreement nor any other document executed in connection
herewith constitutes or shall be deemed (a) a waiver of, or consent by Agent or
any Lender to any default or event of default which may exist or hereafter occur
under any of the Loan Documents, (b) a waiver by Agent or any Lender of any of
Borrowers' obligations under the Loan Documents, or (c) a waiver by Agent or any
Lender of any rights, offsets, claims, or other causes of action that Agent or
any Lender may have against any Borrower.

4. MODIFICATION EXPENSES. Borrowers agree to pay all legal fees and
other expenses incurred in connection with the preparation and negotiation of
this Agreement and each other document executed in connection herewith.

5. VALIDITY OF EXISTING DOCUMENTS. The Notes, the Loan Agreement and all
other Loan Documents, as modified hereby and by the other documents executed in
connection herewith, are each legal, valid, binding and enforceable in
accordance with their respective terms, are each in full force and effect, and
shall continue to inure to the benefit of and be binding upon each Borrower,
Agent and each Lender, and their respective successors and assigns.

Page 2

<PAGE>

6. ADDITIONAL DOCUMENTATION. The parties hereto shall execute such other
documents as Agent or its counsel may reasonably request to effect the
transactions contemplated hereby and to protect the liens and security interests
of the Security Documents, as modified by this Agreement and the other documents
executed in connection herewith.

7. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns.

8. CONFORMING PROVISIONS. Any and all of the terms and provisions of the
Notes, the Loan Agreement, the Security Documents and all of the other Loan
Documents, are hereby amended and modified wherever necessary, and even though
not specifically addressed herein, so as to conform to the amendments and
modifications thereto set forth in this Agreement and each other document
executed in connection herewith.

9. CAPTIONS. The captions, headings and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit, amplify,
or modify the terms and provisions hereof.

10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

11. COUNTERPARTS. This Agreement may be executed in a number of duplicate
counterparts, each of which shall be deemed an original for all purposes, and
all of which, collectively, shall constitute one agreement.

12. NO ORAL AGREEMENTS. THIS AGREEMENT, TOGETHER WITH EACH OTHER DOCUMENT
EXECUTED IN CONNECTION HEREWITH AND LOAN DOCUMENT, REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES HERETO CONCERNING THE MATTERS SET FORTH HEREIN,
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.

Page 3

<PAGE>

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day, month and year first above written.

BORROWERS:

AMRESCO, INC., a Delaware corporation

By: /s/ Thomas J. Andrus
---------------------------------------------------
Thomas J. Andrus,
Treasurer

AMRESCO ASSET MARKETING ADVISORS, INC.
AMRESCO CANADA, INC.
AMRESCO CAPITAL CORPORATION
AMRESCO EQUITIES CANADA INC.
AMRESCO FINANCIAL I, INC.
AMRESCO FUNDING CORPORATION
AMRESCO GENERAL PARTNERS, INC.
f/k/a DAPA-3, INC.
AMRESCO INSTITUTIONAL, INC.
AMRESCO-MBS I, INC.
AMRESCO MANAGEMENT, INC.
f/k/a BEI MANAGEMENT, INC.
AMRESCO MORTGAGE CAPITAL, INC.
AMRESCO NEW ENGLAND II, INC.
AMRESCO NEW HAMPSHIRE, INC.
AMRESCO RESIDENTIAL CREDIT CORPORATION
AMRESCO RHODE ISLAND, INC.
AMRESCO SERVICES, INC.
AMRESCO SERVICES CANADA INC.
AMRESCO 1994-N2, INC.
ANH, INC.
ASSET MANAGEMENT RESOLUTION COMPANY
BEI 1992-N1, INC.
BEI 1993-N3, INC.
BEI 1994-N1, INC.
BEI GOLEMBE FINANCIAL, INC.
BEI INSTITUTIONAL MANAGEMENT, INC.
BEI MULTI-POOL, INC.
BEI PORTFOLIO INVESTMENTS, INC.
BEI PORTFOLIO MANAGERS, INC.
BEI REAL ESTATE SERVICES, INC.
BEI REAL ESTATE SERVICES OF CALIFORNIA,
INC.
BEI REAL ESTATE SERVICES OF COLORADO, INC.
BEI SANJAC, INC.
BEI SOUTHWEST, INC.
BEI VENTURES, INC.
ENT, INC.
ENT GREAT LAKES, INC.

Page 4

<PAGE>

ENT MIDWEST, INC.
ENT NEW JERSEY, INC.
ENT SOUTHERN CALIFORNIA, INC.
GRANITE EQUITIES, INC.
HOLLIDAY FENOGLIO, INC.
LIFETIME HOMES OF NEW JERSEY, INC.
LIFETIME HOMES OF SOUTH CAROLINA, INC.
LIFETIME INVESTMENTS OF NEW JERSEY, INC.
PRESTON HOLLOW ASSET HOLDINGS, INC.
SPINNAKER REALTY CORPORATION
V.N.J. CORPORATION

By: /s/ Thomas J. Andrus
---------------------------------------------------
Thomas J. Andrus, as
Treasurer for each of the above
companies

AGENT:

NATIONSBANK OF TEXAS, N.A.,
a national banking association, as
Agent for Lenders

By: /s/ Brian Schneider
---------------------------------------------------
Brian Schneider,
Vice President

Page 5

<PAGE>

AMRESCO, INC.

AS ISSUER

Bank One, Columbus, N.A.

AS TRUSTEE

INDENTURE

_______________, 1996

__% SENIOR SUBORDINATED NOTES DUE 2003

<PAGE>

AMRESCO, INC.
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939, AS AMENDED
AND INDENTURE, DATED AS OF __________, 1996

Trust Indenture Act Indenture
Section Section

Section 310 (a)(1) .................................... 608
Section 310 (a)(2) .................................... 608
Section 310 (a)(3) .................................... Inapplicable
Section 310 (a)(4) .................................... Inapplicable
(b) .................................... 605
.................................... 609
Section 311 .................................... 605
Section 312 (a) .................................... 701
.................................... 702
(b) .................................... 702
(c) .................................... 702
Section 313 (a) .................................... 703
(b)(1) .................................... Inapplicable
(b)(2) .................................... 703
(c) .................................... 703
(d) .................................... 703
Section 314 (a) .................................... 704
.................................... 1012
(b) .................................... Inapplicable
(c)(1) .................................... 102
(c)(2) .................................... 102
(c)(3) .................................... Inapplicable
(d) .................................... Inapplicable
(e) .................................... 102
Section 315 (a) .................................... 601
.................................... 603
(b) .................................... 602
(c) .................................... 601
(d) .................................... 601
.................................... 603
(e) .................................... 603
.................................... 607
Section 316 (a)(1)(A).................................... 512
(a)(1)(B).................................... 513

<PAGE>

(a)(2) .................................... Inapplicable
(b) .................................... 508
(c) .................................... 104
Section 317 (a)(1) .................................... 503
(a)(2) .................................... 504
(b) .................................... 1003
Section 318 (a) .................................... 108

______________________________________________________
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.

iii

<PAGE>

TABLE OF CONTENTS
Page

ARTICLE ONE-DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION . . . 1
Section 101. Definitions.. . . . . . . . . . . . . . . . . . . . . 1
ACQUIRED INDEBTEDNESS. . . . . . . . . . . . . . . . . . . . . . . . 2
ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
AFFILIATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
AUTHENTICATING AGENT . . . . . . . . . . . . . . . . . . . . . . . . 2
AUTHORIZED NEWSPAPER . . . . . . . . . . . . . . . . . . . . . . . . 2
BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . 3
BOARD RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . 3
BUSINESS DAY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
CAPITALIZED LEASE OBLIGATION . . . . . . . . . . . . . . . . . . . . 3
COMMISSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
COMPANY REQUEST AND COMPANY ORDER. . . . . . . . . . . . . . . . . . 3
CONSOLIDATED . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
CONSOLIDATED CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . 3
CONSOLIDATED EBITDA. . . . . . . . . . . . . . . . . . . . . . . . . 4
CONSOLIDATED INTEREST EXPENSE. . . . . . . . . . . . . . . . . . . . 4
CONSOLIDATED NET INCOME. . . . . . . . . . . . . . . . . . . . . . . 4
CONSOLIDATED NET WORTH . . . . . . . . . . . . . . . . . . . . . . . 4
CONSOLIDATED SUBSIDIARY. . . . . . . . . . . . . . . . . . . . . . . 4
CORPORATE TRUST OFFICE . . . . . . . . . . . . . . . . . . . . . . . 4
CORPORATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
DEFAULT NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
DEFAULTED INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . 4
DEPOSITORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . 5
EXCLUSIVE POWER. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
GOVERNMENT OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . 5
HOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
INDEBTEDNESS FOR MONEY BORROWED. . . . . . . . . . . . . . . . . . . 5
INDENTURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . 6
INITIAL INTEREST ACCRUAL DATE. . . . . . . . . . . . . . . . . . . . 6
INTEREST COVERAGE RATIO. . . . . . . . . . . . . . . . . . . . . . . 6
INTEREST PAYMENT DATE. . . . . . . . . . . . . . . . . . . . . . . . 6
INTEREST RATE SWAP OBLIGATIONS . . . . . . . . . . . . . . . . . . . 6
ISSUE DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

<PAGE>

JUNIOR INDEBTEDNESS. . . . . . . . . . . . . . . . . . . . . . . . . 7
LEGAL HOLIDAY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
MATERIAL SUBSIDIARY. . . . . . . . . . . . . . . . . . . . . . . . . 7
MATURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
MAXIMUM ANNUAL REPAYMENT AMOUNT. . . . . . . . . . . . . . . . . . . 7
MONEY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
NONRECOURSE INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . 7
NOTE OR NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
NOTE REGISTER AND NOTE REGISTRAR . . . . . . . . . . . . . . . . . . 8
OFFICE OR AGENCY . . . . . . . . . . . . . . . . . . . . . . . . . . 8
OFFICERS' CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . . . 8
OPINION OF COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . 8
OUTSTANDING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
PAYING AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PERMITTED PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 9
PERSON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PLACE OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PREDECESSOR NOTE . . . . . . . . . . . . . . . . . . . . . . . . . . 9
REDEMPTION DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
REDEMPTION PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . 9
REGULAR RECORD DATE. . . . . . . . . . . . . . . . . . . . . . . . . 9
REPAYMENT DATE . . . . . . . . . . . . . . . . . . . . . . . . . . .10
REPAYMENT PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . .10
RESPONSIBLE OFFICER. . . . . . . . . . . . . . . . . . . . . . . . .10
RESTRICTED PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . .10
SENIOR AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
SENIOR EVENT OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . .10
SENIOR INDEBTEDNESS. . . . . . . . . . . . . . . . . . . . . . . . .10
SENIOR RECOURSE INDEBTEDNESS . . . . . . . . . . . . . . . . . . . .10
SPECIAL RECORD DATE. . . . . . . . . . . . . . . . . . . . . . . . .10
STATED MATURITY. . . . . . . . . . . . . . . . . . . . . . . . . . .10
SUBORDINATED INDEBTEDNESS. . . . . . . . . . . . . . . . . . . . . .10
SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
TRANSACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
TRUST INDENTURE ACT. . . . . . . . . . . . . . . . . . . . . . . . .11
TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
UNITED STATES. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
VICE PRESIDENT . . . . . . . . . . . . . . . . . . . . . . . . . . .11
VOTING STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Section 102. COMPLIANCE CERTIFICATES AND OPINIONS. . . . . . . . .11
Section 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. . . . . . . .12
Section 104. ACTS OF HOLDERS.. . . . . . . . . . . . . . . . . . .13
Section 105. NOTICES, ETC. TO TRUSTEE AND COMPANY. . . . . . . . .14

<PAGE>

Section 106. NOTICE TO HOLDERS OF NOTES; WAIVER. . . . . . . . . .15
Section 107. LANGUAGE OF NOTICES.. . . . . . . . . . . . . . . . .15
Section 108. CONFLICT WITH TRUST INDENTURE ACT.. . . . . . . . . .15
Section 109. EFFECT OF HEADINGS AND TABLE OF CONTENTS. . . . . . .15
Section 110. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . .15
Section 111. SEPARABILITY CLAUSE.. . . . . . . . . . . . . . . . .16
Section 112. BENEFITS OF INDENTURE.. . . . . . . . . . . . . . . .16
Section 113. GOVERNING LAW.. . . . . . . . . . . . . . . . . . . .16
Section 114. LEGAL HOLIDAYS. . . . . . . . . . . . . . . . . . . .16
Section 115. SCHEDULES . . . . . . . . . . . . . . . . . . . . . .16
Section 116. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . .16

ARTICLE TWO-FORM OF NOTES . . . . . . . . . . . . . . . . . . . . . . . .17
Section 201. FORMS GENERALLY.. . . . . . . . . . . . . . . . . . .17
Section 202. FORM OF FACE OF NOTE. . . . . . . . . . . . . . . . .18
Section 203. FORM OF REVERSE OF NOTE.. . . . . . . . . . . . . . .20
Section 204. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.. . .23
Section 205. NOTES IN GLOBAL FORM. . . . . . . . . . . . . . . . .23

ARTICLE THREE-THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . .23
Section 301. TITLE AND TERMS.. . . . . . . . . . . . . . . . . . .23
Section 302. CURRENCY; DENOMINATIONS.. . . . . . . . . . . . . . .24
Section 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING. . . .24
Section 304. TEMPORARY NOTES.. . . . . . . . . . . . . . . . . . .25
Section 305. REGISTRATION, TRANSFER AND EXCHANGE.. . . . . . . . .26
Section 306. MUTILATED, DESTROYED, LOST AND STOLEN NOTES.. . . . .28
Section 307. PAYMENT OF INTEREST; RIGHTS TO INTEREST PRESERVED.. .29
Section 308. PERSONS DEEMED OWNERS.. . . . . . . . . . . . . . . .30
Section 309. CANCELLATION. . . . . . . . . . . . . . . . . . . . .30
Section 310. AUTHENTICATION AND DELIVERY OF ORIGINAL ISSUE.. . . .31
Section 311. COMPUTATION OF INTEREST.. . . . . . . . . . . . . . .31

ARTICLE FOUR-SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . .31
Section 401. SATISFACTION AND DISCHARGE OF INDENTURE.. . . . . . .31
Section 402. APPLICATION OF TRUST MONEY. . . . . . . . . . . . . .32

ARTICLE FIVE-REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . .33
Section 501. EVENTS OF DEFAULT.. . . . . . . . . . . . . . . . . .33
Section 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. .35
Section 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY TRUSTEE . . . . . . . . . . . . . . . . . . . . .36
Section 504. TRUSTEE MAY FILE PROOFS OF CLAIM. . . . . . . . . . .36
Section 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
NOTES. . . . . . . . . . . . . . . . . . . . . . . .37
Section 506. APPLICATION OF MONEY COLLECTED. . . . . . . . . . . .37

<PAGE>

Section 507. LIMITATIONS ON SUITS. . . . . . . . . . . . . . . . .38
Section 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL
AND INTEREST . . . . . . . . . . . . . . . . . . . .39
Section 509. RESTORATION OF RIGHTS AND REMEDIES. . . . . . . . . .39
Section 510. RIGHTS AND REMEDIES CUMULATIVE. . . . . . . . . . . .39
Section 511. DELAY OR OMISSION NOT WAIVER. . . . . . . . . . . . .40
Section 512. CONTROL BY HOLDERS OF NOTES.. . . . . . . . . . . . .40
Section 513. WAIVER OF PAST DEFAULTS.. . . . . . . . . . . . . . .40
Section 514. WAIVER OF STAY OR EXTENSION LAWS. . . . . . . . . . .41

ARTICLE SIX-THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . .41
Section 601. CERTAIN DUTIES AND RESPONSIBILITIES.. . . . . . . . .41
Section 602. NOTICE OF DEFAULTS. . . . . . . . . . . . . . . . . .42
Section 603. CERTAIN RIGHTS OF TRUSTEE.. . . . . . . . . . . . . .42
Section 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES.. .44
Section 605. MAY HOLD NOTES. . . . . . . . . . . . . . . . . . . .44
Section 606. MONEY HELD IN TRUST.. . . . . . . . . . . . . . . . .44
Section 607. COMPENSATION AND REIMBURSEMENT. . . . . . . . . . . .44
Section 608. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.. . . . . . .45
Section 609. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.. .45
Section 610. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. . . . . . . .47
Section 611. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS . . . . . . . . . . . . . . . . . . . . . .47
Section 612. APPOINTMENT OF AUTHENTICATING AGENT.. . . . . . . . .48

ARTICLE SEVEN-HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY . . . . .50
Section 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
HOLDERS. . . . . . . . . . . . . . . . . . . . . . .50
Section 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO
HOLDERS. . . . . . . . . . . . . . . . . . . . . . .50
Section 703. REPORTS BY TRUSTEE. . . . . . . . . . . . . . . . . .50
Section 704. REPORTS BY COMPANY. . . . . . . . . . . . . . . . . .51

ARTICLE EIGHT-CONSOLIDATION, MERGER AND SALES . . . . . . . . . . . . . .52
Section 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.52
Section 802. SUCCESSOR PERSON SUBSTITUTED FOR COMPANY. . . . . . .53

ARTICLE NINE-SUPPLEMENTAL INDENTURES. . . . . . . . . . . . . . . . . . .53
Section 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS. .53
Section 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.. . .54
Section 903. EXECUTION OF SUPPLEMENTAL INDENTURES. . . . . . . . .55
Section 904. EFFECT OF SUPPLEMENTAL INDENTURES.. . . . . . . . . .55
Section 905. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES.. . . .55
Section 906. EFFECT ON SENIOR INDEBTEDNESS.. . . . . . . . . . . .55
Section 907. RECORD DATE.. . . . . . . . . . . . . . . . . . . . .56

vii

<PAGE>

ARTICLE TEN-COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . .56
Section 1001. PAYMENT OF PRINCIPAL AND INTEREST.. . . . . . . . . .56
Section 1002. MAINTENANCE OF OFFICE OR AGENCY.. . . . . . . . . . .56
Section 1003. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST.. . . . .57
Section 1004. CORPORATE EXISTENCE.. . . . . . . . . . . . . . . . .58
Section 1005. MAINTENANCE OF PROPERTIES.. . . . . . . . . . . . . .58
Section 1006. RESTRICTIONS ON DIVIDENDS, REDEMPTIONS AND OTHER
PAYMENTS . . . . . . . . . . . . . . . . . . . . . .59
Section 1007. LIMITATION ON INDEBTEDNESS FOR MONEY BORROWED.. . . .59
Section 1008. INSURANCE.. . . . . . . . . . . . . . . . . . . . . .60
Section 1009. PAYMENT OF TAXES AND OTHER CLAIMS.. . . . . . . . . .60
Section 1010. BOOKS AND RECORDS.. . . . . . . . . . . . . . . . . .60
Section 1011. STATEMENT BY OFFICERS AS TO DEFAULT.. . . . . . . . .61
Section 1012. WAIVER OF CERTAIN COVENANTS.. . . . . . . . . . . . .61
Section 1013. LIMITATION ON RANKING OF FUTURE INDEBTEDNESS. . . . .61
Section 1014. LIMITATIONS ON RESTRICTING SUBSIDIARY DIV . . . . . .62
Section 1015. LIMITATION ON TRANSACTIONS WITH AFFILIATES. . . . . .62
Section 1016. EXCEPTIONS TO COVENANTS.. . . . . . . . . . . . . . .63

ARTICLE ELEVEN-REDEMPTION OF NOTES. . . . . . . . . . . . . . . . . . . .63
Section 1101. RIGHT OF REDEMPTION.. . . . . . . . . . . . . . . . .63
Section 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE.. . . . . . . .63
Section 1103. SELECTION BY TRUSTEE OF NOTES TO BE REDEEMED. . . . .64
Section 1104. NOTICE OF REDEMPTION. . . . . . . . . . . . . . . . .64
Section 1105. DEPOSIT OF REDEMPTION PRICE.. . . . . . . . . . . . .65
Section 1106. NOTES PAYABLE ON REDEMPTION DATE. . . . . . . . . . .65
Section 1107. NOTES REDEEMED IN PART. . . . . . . . . . . . . . . .66

ARTICLE TWELVE-REPAYMENT AT THE OPTION OF HOLDERS . . . . . . . . . . . .67
Section 1201. REPAYMENT OPTION UPON DEATH OF HOLDER.. . . . . . . .67
Section 1202. DEPOSIT OF REPAYMENT PRICE. . . . . . . . . . . . . .69
Section 1203. NOTES PAYABLE ON REPAYMENT DATE.. . . . . . . . . . .69
Section 1204. NOTES REPAID IN PART. . . . . . . . . . . . . . . . .70

ARTICLE THIRTEEN-SUBORDINATION OF NOTES . . . . . . . . . . . . . . . . .70
Section 1301. NOTES SUBORDINATED TO SENIOR INDEBTEDNESS.. . . . . .70
Section 1302. SUBROGATION.. . . . . . . . . . . . . . . . . . . . .73
Section 1303. OBLIGATION OF COMPANY UNCONDITIONAL.. . . . . . . . .73
Section 1304. PAYMENTS ON NOTES PERMITTED.. . . . . . . . . . . . .74
Section 1305. EFFECTUATION OF SUBORDINATION BY TRUSTEE. . . . . . .74
Section 1306. NOTICE TO TRUSTEE AND KNOWLEDGE OF TRUSTEE. . . . . .74
Section 1307. TRUSTEE MAY HOLD SENIOR INDEBTEDNESS. . . . . . . . .75
Section 1308. RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS NOT
IMPAIRED . . . . . . . . . . . . . . . . . . . . . .75

viii

<PAGE>

ARTICLE FOURTEEN-RIGHT TO REQUIRE REPURCHASE. . . . . . . . . . . . . . .75
Section 1401. RIGHT TO REQUIRE REPURCHASE . . . . . . . . . . . . .75
Section 1402. NOTICE; METHOD OF EXERCISING REPURCHASE RIGHT . . . .75
Section 1403. DEPOSIT OF REPURCHASE PRICE . . . . . . . . . . . . .77
Section 1404. NOTES NOT REPURCHASED ON REPURCHASE DATE. . . . . . .77
Section 1405. NOTES REPURCHASED IN PART . . . . . . . . . . . . . .77
Section 1406. PRIORITY OF REPURCHASE RIGHTS . . . . . . . . . . . .77
Section 1407. DEFINITION OF REPURCHASE EVENT. . . . . . . . . . . .77

<PAGE>

INDENTURE, dated as of __________, 1996 (the "Indenture"), between
AMRESCO, INC., a corporation duly organized and existing under the laws of
the State of Delaware (hereinafter called the "Company"), having executive
offices located at 1845 Woodall Rodgers Freeway, Suite 1700, Dallas, Texas
75201 and BankOne, Columbus, N.A., a national banking corporation duly
organized and existing under the laws of United States (hereinafter called
the "Trustee"), having its principal corporate trust office at 100 East
Broad Street, Columbus Ohio 43215.

RECITALS OF THE COMPANY

The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of its __% Senior Subordinated Notes
due 2003 (hereinafter called the "Notes"), to be issued in such amount and to
have such provisions as are hereinafter set forth. All things necessary to
make this Indenture a valid agreement of the Company, in accordance with its
terms, have been done.

This Indenture is subject to the provisions of the Trust Indenture Act
of 1939, as amended, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder that are required to be part of
this Indenture and, to the extent applicable, shall be governed by such
provisions.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

For and in consideration of the premises and the purchase of the Notes
by the Holders (as hereinafter defined) thereof, it is mutually covenanted
and agreed, for the equal and proportionate benefit of all Holders from time
to time of the Notes, as follows:

ARTICLE ONE

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

SECTION 101. DEFINITIONS.

Except as otherwise expressly provided in this Indenture or unless the
context otherwise requires, for all purposes of this Indenture:

(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;

(2) all other terms used herein which are defined in the Trust
Indenture Act (as hereinafter defined), either directly or by reference
therein, have the meanings assigned to them therein;

<PAGE>

(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with United States generally
accepted accounting principles set forth in the opinions and pronouncements
of the Accounting Principles Board of the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board in effect from time to time ("GAAP") and, except
as otherwise herein expressly provided, the term "GAAP" with respect to any
computation required or permitted hereunder shall mean GAAP at the date of
such computation;

(4) the words "herein", "hereof", "hereto" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision; and

(5) the word "or" is always used inclusively (for example, the phrase
"A or B" means "A or B or both", not "either A or B but not both").

Certain terms used principally in certain Articles hereof are defined in
those Articles.

"ACQUIRED INDEBTEDNESS" means indebtedness of a Person existing at the time
such Person becomes a Subsidiary of the Company or assumed in connection with
the acquisition by the Company or a Subsidiary of the Company of assets from
such Person, and not incurred in connection with, or in anticipation of, such
Person becoming a Subsidiary of the Company or such acquisition.

"ACT", when used with respect to any Holder, has the meaning specified in
Section 104.

"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

"AUTHENTICATING AGENT" means any Person authorized by the Trustee pursuant
to Section 612 to act on behalf of the Trustee to authenticate Notes.

"AUTHORIZED NEWSPAPER" means a newspaper, in an official language of the
place of publication or in the English language, customarily published on each
day that is a Business Day in the place of publication, whether or not published
on days that are Legal Holidays in the place of publication, and of general
circulation in each place in connection with which the term is used or in the
financial community of each such place. Where successive publications are
required to be made in Authorized Newspapers, the successive publications may be
made in the same or in

<PAGE>

different newspapers in the same city meeting the foregoing requirements and
in each case on any day that is a Business Day in the place of publication.

"BOARD OF DIRECTORS" means the board of directors of the Company or any
duly authorized committee of that board.

"BOARD RESOLUTION" means a copy of one or more resolutions, certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification and delivered to the Trustee.

"BUSINESS DAY", with respect to any Place of Payment or other location,
means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a Legal
Holiday in such Place of Payment or other location.

"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real or personal property which obligations are
required to be classified and accounted for as capital lease obligations on a
balance sheet of such Person under GAAP and, for purposes of this Indenture, the
amount of such obligations at any date shall be the capitalized amount thereof
at such date, determined in accordance with GAAP.

"COMMISSION" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934 or, if at
any time after the execution of this Indenture such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.

"COMPANY" means the Person named as the "Company" in the first paragraph of
this instrument until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.

"COMPANY REQUEST" and "COMPANY ORDER" mean, respectively, a written request
or order, as the case may be, signed in the name of the Company by the Chairman
of the Board, a Vice Chairman of the Board, the Chief Executive Officer, the
President, a Vice President, the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary, of the Company, or by another officer of
the Company duly authorized to sign by a Board Resolution, and delivered to the
Trustee.

"CONSOLIDATED" when used in conjunction with any other defined term means
the aggregate amount of the items included within the defined term of the
Company on a consolidated basis, eliminating inter-company items.

"CONSOLIDATED CAPITALIZATION" means Subordinated Indebtedness plus
Consolidated Net Worth.

<PAGE>

"CONSOLIDATED EBITDA" means, for any period, determined in accordance with
GAAP on a consolidated basis for the Company and its Subsidiaries, the sum of
consolidated net income before taxes and non-recurring gains or losses, plus
depreciation, plus amortization, plus interest expense, each as deducted in
determining such consolidated net income before taxes.

"CONSOLIDATED INTEREST EXPENSE" means, for any period, the interest expense
which is required to be shown as such on the financial statements of the Company
and its Subsidiaries, on a consolidated basis, prepared in accordance with GAAP.

"CONSOLIDATED NET INCOME" means the amount of net income (loss) of the
Company and its Subsidiaries determined in accordance with GAAP; PROVIDED,
HOWEVER, that there shall not be included in Consolidated Net Income (1) any net
income (loss) of a Subsidiary for any period during which it was not a
Consolidated Subsidiary or (2) any net income (loss) of businesses, properties
or assets acquired or disposed of (by way of merger, consolidation, purchase,
sale or otherwise) by the Company or any Subsidiary for any period prior to the
acquisition thereof or subsequent to the disposition thereof.

"CONSOLIDATED NET WORTH" means the excess, as determined in accordance with
GAAP, after making appropriate deductions for any minority interest in the net
worth of Consolidated Subsidiaries, of (1) the assets of the Company and its
Consolidated Subsidiaries over (2) the liabilities of the Company and its
Consolidated Subsidiaries; PROVIDED, HOWEVER, that any write-up in the book
value of any assets owned subsequent to the date of this Indenture (other than a
write-up required for assets acquired in connection with the purchase of a
Person or business and taken at the time of such acquisition) shall not be taken
into account.

"CONSOLIDATED SUBSIDIARY" means a Subsidiary of the Company the financial
statements of which are consolidated with the financial statements of the
Company.

"CORPORATE TRUST OFFICE" means the principal corporate trust office of the
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of original execution of this Indenture
is located at 100 East Broad Street, Columbus, Ohio 43215.

"CORPORATION" includes corporations, associations, companies, joint stock
companies, limited liability companies or business trusts.

"DEFAULT NOTICE" has the meaning specified in Section 1301.

"DEFAULTED INTEREST" has the meaning specified in Section 307.

"DEPOSITORY" means, with respect to any Note issued in the form of one or
more global Notes, the Person designated as Depository by the Company in or
pursuant to this Indenture, which Person must be, to the extent required by
applicable law or regulation, a clearing agency

<PAGE>

registered under the Securities Exchange Act of 1934, as amended, and any
successor to such Person. If at any time there is more than one such Person,
"Depository" shall mean, with respect to any Notes, the qualifying entity
which has been appointed with respect to such Notes.

"EVENT OF DEFAULT" has the meaning specified in Section 501.

"EXCLUSIVE POWER" has the meaning specified in Section 1301.

"GAAP" has the meaning specified in Section 101(3).

"GOVERNMENT OBLIGATIONS" means direct obligations of the United States of
America, or any Person controlled or supervised by and acting as an agency or
instrumentality of such government, in each case where the payment or payments
thereunder are unconditionally guaranteed as a full faith and credit obligation
by such government and which are not callable or redeemable at the option of the
issuer or issuers thereof, and shall also include a depository receipt issued by
a bank or trust company as custodian with respect to any such Government
Obligation or a specific payment of interest on or principal of or other amount
with respect to any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, PROVIDED that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of or other amount with respect to the Government
Obligation evidenced by such depository receipt.

"HOLDER", when used with respect to the Notes, means the Person in whose
name such Note is registered in the Note Register.

"INDEBTEDNESS FOR MONEY BORROWED" means any of the following obligations of
the Company or any Subsidiary which by its terms matures at, or is extendable or
renewable at the sole option of the obligor without requiring the consent of the
obligee to, a date more than twelve months after the date of the creation or
incurrence of such obligation: (1) any obligations, contingent or otherwise, for
borrowed money or for the deferred purchase price of property, assets,
securities or services (including, without limitation, any interest accruing
subsequent to an event of default), (2) all obligations (including the Notes)
evidenced by bonds, notes, debentures or other similar instruments, (3) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired (even though the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), except any such
obligation that constitutes a trade payable and an accrued liability arising in
the ordinary course of business, if and to the extent any of the foregoing
indebtedness would appear as a liability upon a balance sheet prepared in
accordance with GAAP, (4) all Capitalized Lease Obligations, (5) all
indebtedness of the type referred to in Clause (1), (2), (3) or (4) above
secured by (or for which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured by) any lien upon or securities interest
in

<PAGE>

property of the Company or any Subsidiary (including, without limitation,
accounts and contract rights), even though the Company or any Subsidiary has
not assumed or become liable for the payment of such indebtedness, and (6)
any guarantee or endorsement (other than for collection or deposit in the
ordinary course of business) or discount with recourse of, or other
agreement, contingent or otherwise, to purchase, repurchase, or otherwise
acquire, to supply, or advance funds or become liable with respect to, any
indebtedness or any obligation of the type referred to in any of the
foregoing Clauses (1) through (6), regardless of whether such obligation
would appear on a balance sheet.

"INDENTURE" means this instrument as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof.

"INDEPENDENT PUBLIC ACCOUNTANTS" means a nationally recognized firm of
accountants that, with respect to the Company, are independent public
accountants within the meaning of the Securities Act of 1933, as amended, and
the rules and regulations promulgated by the Commission thereunder, who may be
the independent public accountants regularly retained by the Company or who may
be other independent public accountants. Such accountants or firm shall be
entitled to rely upon any Opinion of Counsel as to the interpretation of any
legal matters relating to the Indenture or certificates required to be provided
hereunder.

"INITIAL INTEREST ACCRUAL DATE" as to any Note means the date from which
interest shall begin to accrue in connection with the original issuance of such
Note, which shall be the date as of which such Note originally issued by the
Company to the initial purchaser thereof shall be dated, which shall be the date
upon which it was originally sold to such initial purchaser as designated by the
Company Order requesting authentication and delivery thereof.

"INTEREST COVERAGE RATIO" means, for any date of determination, the ratio
of (1) Consolidated EBITDA (2) Consolidated Interest Expense, each as determined
for the specified period.

"INTEREST PAYMENT DATE" means the Stated Maturity or an installment of
interest on the Notes.

"INTEREST RATE SWAP OBLIGATIONS" means the obligation of the Company or any
Subsidiary pursuant to any interest rate swap agreement, interest rate collar
agreement, forward rate agreement, interest rate cap insurance, option or
futures contract or other similar agreement or arrangement, and any renewal or
extension thereof, designed to protect the Company or any of its Subsidiaries
against interest rate risk.

<PAGE>

"ISSUE DATE" means the date on which the Notes are originally issued in
accordance with the terms of this Indenture.

"JUNIOR INDEBTEDNESS" means the principal amount of, and interest on, any
Indebtedness for Money Borrowed, whether now outstanding or hereafter created,
incurred, assumed or guaranteed, PROVIDED that in the instrument creating or
evidencing such Indebtedness for Money Borrowed or pursuant to which such
Indebtedness for Money Borrowed is outstanding it is provided that (1) such
indebtedness is junior in right of payment to the Notes; (2) no payments with
respect to such indebtedness may be made at any time that an Event of Default
shall have occurred and be continuing and (3) no payments other than the payment
of interest may be made with respect to such indebtedness at any time the Notes
are Outstanding; PROVIDED FURTHER that the Company's 8% Convertible Subordinated
Debentures due 2005, in the current aggregate outstanding principal amount of
$45,000,000, shall be considered "Junior Indebtedness" and shall be subordinate
to the Notes in right of payment and in rights upon liquidation.

"LEGAL HOLIDAY" with respect to any Place of Payment or other location,
means a Saturday, a Sunday or a day on which banking institutions or trust
companies in such Place of Payment or other location are not authorized or
obligated to be open.

"MATERIAL SUBSIDIARY" means Holliday Fenoglio, Inc., AMRESCO Management,
Inc., AMRESCO Residential Mortgage, Inc., AMRESCO Advisors, Inc., AMRESCO
Residential Credit Corporation, AMRESCO Capital Corporation, AMRESCO New
England, Inc., Oak Cliff Financial, Inc. and any other Subsidiary whose assets
or revenues comprise at least five percent (5%) of the assets or revenues of the
Company and the Subsidiaries on a consolidated basis as of the end of, or for
the, Company's most recently completed fiscal quarter, as determined from time
to time.

"MATURITY" means the date on which the principal of the Notes or an
installment of principal becomes due and payable as provided in this Indenture,
whether at the Stated Maturity or by declaration of acceleration, notice of
redemption, notice of option to elect repayment or otherwise, and includes any
Redemption Date.

"MAXIMUM ANNUAL REPAYMENT AMOUNT" means $300,000.

"MONEY", with respect to any payment, deposit or other transfer pursuant to
or contemplated by the terms hereof, means United States dollars or other
equivalent unit of legal tender for payment of public or private debts in the
United States of America.

"NONRECOURSE INDEBTEDNESS" means Indebtedness for Money Borrowed of the
Company or any of its Subsidiaries that is (i) specifically advanced to finance
the acquisition of assets classified on the Company's balance sheet as "assets
held for sale" and (ii) either (a) secured by the assets to which such
indebtedness relates without recourse to the Company or any of its Subsidiaries
or (b) issued under a loan agreement that requires each advance to be repaid
upon

<PAGE>

sale of the assets to which such advance specifically relates within no more
than one (1) year from the date of such advance.

"NOTE" or "NOTES" means any note or notes, as the case may be,
authenticated and delivered under this Indenture.

"NOTE REGISTER" AND "NOTE REGISTRAR" have the respective meanings specified
in Section 305.

"OFFICE OR AGENCY" means an office or agency of the Company maintained or
designated in a Place of Payment for the Notes pursuant to Section 1002 or any
other office or agency of the Company maintained or designated for, the payment
or surrender of the Notes pursuant to Section 1002 or, to the extent designated
or required by Section 1002 in lieu of such office or agency, the Corporate
Trust Office of the Trustee.

"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of the
Board, a Vice Chairman of the Board, the Chief Executive Officer, the President
or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary
or an Assistant Secretary of the Company, that complies with the requirements of
Section 314(e) of the Trust Indenture Act and is delivered to the Trustee.

"OPINION OF COUNSEL" means a written opinion of counsel, who may be an
employee of or counsel for the Company or other counsel who shall be reasonably
acceptable to the Trustee, that complies with the requirements of Section 314
(e) of the Trust Indenture Act.

"OUTSTANDING", when used with respect to any Notes, means, as of the date
of determination, all Notes theretofore authenticated and delivered under this
Indenture, except:

(1) any Note theretofore canceled by the Trustee or the Note Registrar or
delivered to the Trustee or the Note Registrar for cancellation;

(2) any Note or portion thereof for whose payment at the Maturity thereof
Money in the necessary amount has been theretofore deposited pursuant
hereto with the Trustee or any Paying Agent (other than the Company)
in trust or set aside and segregated in trust by the Company (if the
Company shall act as its own Paying Agent) for the Holders of the
Notes, PROVIDED that, if the Notes are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;

(3) any Note with respect to which the Company has effected defeasance
pursuant to Clauses (1)(b) and (3) of Section 401 hereof; and

<PAGE>

(4) any Note which has been paid pursuant to Section 306 or in exchange
for or in lieu of which other Notes have been authenticated and
delivered pursuant to this Indenture, unless there shall have been
presented to the Trustee proof satisfactory to it that such Note is
held by a bona fide purchaser in whose hands such Note is a valid
obligation of the Company;

PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Company or any other obligor upon the Notes or any Affiliate of the Company
or such other obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in making any
such determination or relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes which the Trustee knows to be
so owned shall be so disregarded. Notes so owned which shall have been pledged
in good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee (a) the pledgee's right so to act with respect to
such Notes and (b) that the pledgee is not the Company or any other obligor upon
the Notes or any Affiliate of the Company or such other obligor.

"PAYING AGENT" means any Person authorized by the Company to pay the
principal of or interest on any Note on behalf of the Company.

"PERMITTED PAYMENTS" has the meaning specified in Section 1301.

"PERSON" means any individual, Corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.

"PLACE OF PAYMENT" has the meaning set forth in Section 301.

"PREDECESSOR NOTE" of a Note means every previous Note evidencing all or a
portion of the same debt as that evidenced by such particular Note; and, for the
purposes of this definition, any Note authenticated and delivered under Section
306 in exchange for or in lieu of a lost, destroyed, mutilated or stolen Note
shall be deemed to evidence the same debt as the lost, destroyed, mutilated or
stolen Note.

"REDEMPTION DATE", with respect to any Note or portion thereof to be
redeemed, means the date fixed for such redemption pursuant to Article Eleven of
this Indenture.

"REDEMPTION PRICE", with respect to any Note or portion thereof to be
redeemed, means the price at which it is to be redeemed pursuant to Article
Eleven of this Indenture.

"REGULAR RECORD DATE" for the interest payable on any Note on any Interest
Payment Date therefor means the date, if any, specified in or pursuant to this
Indenture as the "Regular Record Date".

<PAGE>

"REPAYMENT DATE", with respect to any Note or portion thereof to be repaid
pursuant to Article Twelve, means the date fixed for such repayment pursuant to
Article Twelve of this Indenture.

"REPAYMENT PRICE", with respect to any Note or portion thereof to be repaid
pursuant to Article Twelve, means the price at which it is to be repaid pursuant
to Article Twelve of this Indenture.

"RESPONSIBLE OFFICER" means any officer of the Trustee at its Corporate
Trust Office and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.

"RESTRICTED PAYMENT" has the meaning specified in Section 1006.

"SENIOR AGENT" has the meaning specified in Section 1301.

"SENIOR EVENT OF DEFAULT" has the meaning specified in Section 1301.

"SENIOR INDEBTEDNESS" means the principal amount of, and interest on (1)
any Indebtedness for Money Borrowed, whether now outstanding or hereafter
created, incurred, assumed or guaranteed, unless in the instrument creating or
evidencing such Indebtedness for Money Borrowed or pursuant to which such
Indebtedness for Money Borrowed is outstanding it is provided that such
indebtedness is subordinate in right of payment or in rights upon liquidation to
any other Indebtedness for Money Borrowed and (2) renewals, extensions and
refundings of any such indebtedness.

"SENIOR RECOURSE INDEBTEDNESS" means Senior Indebtedness of the Company and
its Subsidiaries, on a consolidated basis, minus Non-recourse Indebtedness of
the Company and its Subsidiaries, on a consolidated basis.

"SPECIAL RECORD DATE" for the payment of any Defaulted Interest on any Note
means a date fixed by the Trustee pursuant to Section 307.

"STATED MATURITY" with respect to any Note or any installment of principal
thereof or interest thereon means the date established by this Indenture as the
fixed date on which the principal of such Note or such installment of principal
or interest is due and payable.

"SUBORDINATED INDEBTEDNESS" means all Indebtedness for Money Borrowed
except Senior Indebtedness.

<PAGE>

"SUBSIDIARY" means any Corporation of which at the time of determination
the Company or one or more Subsidiaries owns or controls directly or indirectly
more than 50% of the shares of Voting Stock;

"TRANSACTION" has the meaning specified in Section 1015.

"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended,
and any reference herein to the Trust Indenture Act or a particular provision
thereof shall mean such Act or provision, as the case may be, as amended or
replaced from time to time or as supplemented from time to time by rules or
regulations adopted by the Commission under or in furtherance of the purposes of
such Act or provision, as the case may be.

"TRUSTEE" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean
each Person who is then a Trustee hereunder.

"UNITED STATES", except as otherwise provided herein, means the United
States of America (including the states thereof and the District of Columbia),
its territories and possessions and other areas subject to its jurisdiction.

"VICE PRESIDENT", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "Vice President".

"VOTING STOCK" means stock of a Corporation of the class or classes having
general voting power under ordinary circumstances to elect at least a majority
of the board of directors, managers or trustees of such Corporation PROVIDED
that, for the purposes hereof, stock which carries only the right to vote
conditionally on the happening of an event shall not be considered Voting Stock
whether or not such event shall have happened.

SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.

Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents or any of them is specifically required by any provision of
this Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished.

<PAGE>

Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:

(1) a statement that each individual signing such certificate or
opinion has read such condition or covenant and the definitions herein
relating thereto;

(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;

(3) a statement that, in the opinion of each such individual, such
individual has made such examination or investigation as is necessary to
enable such individual to express an informed opinion as to whether or not
such condition or covenant has been complied with; and

(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.

SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.

In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.

Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous. Any such certificate of counsel or Opinion of Counsel or
representation of counsel may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an officer or
officers of the Company stating that the information with respect to such
factual matters is in the possession of the Company unless such counsel knows,
or in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to such matters are erroneous.

Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture or any Note, they may, but need not, be
consolidated and form one instrument.

<PAGE>

SECTION 104. ACTS OF HOLDERS.

(1) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent
duly appointed in writing. Except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent, or of the
holding by any Person of a Note, shall be sufficient for any purpose of
this Indenture and (subject to Section 315 of the Trust Indenture Act)
conclusive in favor of the Trustee and the Company and any agent of the
Trustee or the Company, if made in the manner provided in this Section.

Without limiting the generality of this Section, unless otherwise
provided in or pursuant to this Indenture, a Holder, including a Depository
that is a Holder of a global Note, may make, give or take, by a proxy, or
proxies, duly appointed in writing, any request, demand, authorization,
direction, notice, consent, waiver or other action provided in or pursuant
to this Indenture to be made, given or taken by Holders, and a Depository
that is a Holder of a global Note may provide its proxy or proxies to the
beneficial owners of interests in any such global Note through such
Depository's standing instructions and customary practices.

The Trustee shall fix a record date for the purpose of determining the
Persons who are beneficial owners of interests in any permanent global Note
held by a Depository entitled under the procedures of such Depository to
make, give or take, by a proxy or proxies duly appointed in writing, any
request, demand, authorization, direction, notice, consent, waiver or other
action provided in or pursuant to this Indenture to be made, given or taken
by Holders. If such a record date is fixed, the Holders on such record
date or their duly appointed proxy or proxies, and only such Persons, shall
be entitled to make, give or take such request, demand, authorization,
direction, notice, consent, waiver or other action, whether or not such
Holders remain Holders after such record date. No such request, demand,
authorization, direction, notice, consent, waiver or other action shall be
valid or effective if made, given or taken more than 90 days after such
record date.

(2) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient and in accordance with such reasonable rules as
the Trustee may determine; and the Trustee may in any instance require
further proof with respect to any of the matters referred to in this
Section.

<PAGE>

(3) The ownership, principal amount and serial numbers of Notes held
by any Person, and the date of the commencement and the date of the
termination of holding the same, shall be proved by the Note Register.

(4) If the Company shall solicit from the Holders of any Notes any
request, demand, authorization, direction, notice, consent, waiver or other
Act, the Company may at its option (but is not obligated to), by Board
Resolution, fix in advance a record date for the determination of Holders
of Notes entitled to give such request, demand, authorization, direction,
notice, consent, waiver or other Act. If such a record date is fixed, such
request, demand, authorization, direction, notice, consent, waiver or other
Act may be given before or after such record date, but only the Holders of
Notes of record at the close of business on such record date shall be
deemed to be Holders for the purpose of determining whether Holders of the
requisite proportion of Outstanding Notes have authorized or agreed or
consented to such request, demand, authorization, direction, notice,
consent, waiver or other Act, and for that purpose the Outstanding Notes
shall be computed as of such record date; PROVIDED that no such
authorization, agreement or consent by the Holders of Notes on such record
date shall be deemed effective unless it shall become effective pursuant to
the provisions of this Indenture not later than six months after the record
date.

(5) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Note shall bind every future
Holder of the same Note and the Holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done or suffered to be done by the Trustee, any Note
Registrar, any Paying Agent or the Company in reliance thereon, whether or
not notation of such action is made upon such Note.

SECTION 105. NOTICES, ETC. TO TRUSTEE AND COMPANY.

Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with:

(1) the Trustee by any Holder or the Company shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or
with the Trustee at its Corporate Trust Office, or

(2) the Company by the Trustee or any Holder shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, or sent by facsimile and
U.S. mail, first-class postage prepaid, to the Company addressed to the
attention of its Chief Financial Officer at the address of its principal
office specified in the first paragraph of this instrument or at any other
address previously furnished in writing to the Trustee by the Company.

<PAGE>

SECTION 106. NOTICE TO HOLDERS OF NOTES; WAIVER.

Except as otherwise expressly provided in this Indenture, where this
Indenture provides for notice to Holders of Notes of any event, such notice
shall be sufficiently given to Holders of Notes if in writing and mailed, first-
class postage prepaid, to each Holder of a Note affected by such event, at such
Holder's address as it appears in the Note Register, not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of such
notice.

In any case where notice to Holders of Notes is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder of a Note shall affect the sufficiency of such notice with
respect to other Holders of Notes. Any notice which is mailed in the manner
herein provided shall be conclusively presumed to have been duly given or
provided. In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.

Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders of Notes shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.

SECTION 107. LANGUAGE OF NOTICES.

Any request, demand, authorization, direction, notice, consent, election or
waiver required or permitted under this Indenture shall be in the English
language.

SECTION 108. CONFLICT WITH TRUST INDENTURE ACT.

If any provision hereof limits, qualifies or conflicts with any duties
under any required provision of the Trust Indenture Act imposed hereon by
Section 318(d) thereof, such required provision shall control.

SECTION 109. EFFECT OF HEADINGS AND TABLE OF CONTENTS.

The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.

SECTION 110. SUCCESSORS AND ASSIGNS.

All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.

<PAGE>

SECTION 111. SEPARABILITY CLAUSE.

In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, either wholly or partially, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, and such provisions shall be given effect to the fullest
extent permitted by law.

SECTION 112. BENEFITS OF INDENTURE.

Nothing in this Indenture or in the Notes, express or implied, shall give
to any Person, other than the parties hereto, any Note Registrar, any Paying
Agent, any Authenticating Agent and their respective successors hereunder and
the Holders of Notes, any benefit or any legal or equitable right, remedy or
claim under this Indenture.

SECTION 113. GOVERNING LAW.

This Indenture and the Notes shall be governed by and construed in
accordance with the laws of the State of Texas applicable to agreements made or
instruments entered into and, in each case, performed in said state, without
regard to principles of conflict of laws.

SECTION 114. LEGAL HOLIDAYS.

In any case where any Interest Payment Date, Redemption Date, Repayment
Date or Stated Maturity of any Note shall be a Legal Holiday at any Place of
Payment, then (notwithstanding any other provision of this Indenture) payment
need not be made at such Place of Payment on such date, but may be made on the
next succeeding day that is a Business Day at such Place of Payment with the
same force and effect as if made on the Interest Payment Date, Redemption Date,
Repayment Date or at the Stated Maturity, and no interest shall accrue on the
amount payable on such date or at such time for the period from and after such
Interest Payment Date, Redemption Date, Repayment Date or Stated Maturity, as
the case may be.

SECTION 115. SCHEDULES.

Any Schedules attached hereto are by this reference made a part hereof with
the same effect as if herein set forth in full.

SECTION 116. COUNTERPARTS.

This Indenture may be executed in any number of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one
and the same instrument.

<PAGE>

ARTICLE TWO

FORM OF NOTES

SECTION 201. FORMS GENERALLY.

Each Note issued pursuant to this Indenture shall be in substantially the
forms set forth in this Article, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture or any indenture supplemental hereto and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with any law or with any rule or regulation
of any stock exchange or as may, consistently herewith, be determined by the
officers executing such Note as evidenced by their execution of such Note. The
Notes shall be issuable in global and registered form only without coupons. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.

Definitive Notes shall be printed, lithographed or engraved or produced by
any combination of these methods on a steel engraved border or steel engraved
borders or may be produced in any other manner, all as determined by the
officers of the Company executing such Notes, as evidenced by their execution of
such Notes.

<PAGE>

SECTION 202. FORM OF FACE OF NOTE.

AMRESCO, INC.

__% SENIOR SUBORDINATED NOTE DUE 2003

$________________________ NO._____________________

AMRESCO, INC., a Delaware corporation (herein called the "Company"), for
value received, hereby promises to pay to _____________________
______________________________, or registered assigns, the principal sum of
________________________ Dollars on ______________, 2003 and to pay interest
thereon at the rate of __% per annum from the Initial Interest Accrual Date or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for, on the fifteenth (15th) day of each month commencing
_________, 1996 (each an "Interest Payment Date"), until the principal hereof is
paid or made available for payment.

The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, except as provided in the Indenture hereinafter
referred to, be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on the Regular Record
Date for such interest, which shall be the tenth (10th) day, whether or not a
Business Day, of the month of the respective Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date and either may be paid to the
Person in whose name this Note (or one or more Predecessor Notes) is registered
at the close of business on a Special Record Date for the payment of such
defaulted interest to be fixed by the Trustee, notice whereof shall be given to
the Holders not less than ten days prior to such Special Record Date, or may be
paid at any time in any other lawful manner, all as more fully provided in the
Indenture. Payment of the principal of and interest on this Note will be made
at the office or agency of the Company maintained for that purpose in Borough of
Manhattan, City of New York, New York and Columbus, Ohio, or in such other
office or agency as may be established by the Company pursuant to the Indenture
(initially the principal corporate trust office of the Trustee in
Columbus, Ohio (the "Corporate Trust Office")), in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; PROVIDED, HOWEVER, that payment of interest
on any Interest Payment Date other than at Maturity may be made at the option of
the Company by check mailed to the address of the Person entitled thereto as
such address shall appear in the Note Register. Payments of principal and
interest at maturity will be made against presentation of this Note at the
Corporate Trust Office (or such other office as may be established pursuant to
the Indenture), by check.

<PAGE>

Reference is hereby made to the further provisions of this Note set forth
on the reverse side hereof, which further provisions shall for all purposes have
the same effect as though fully set forth at this place.

Unless the Certificate of Authentication hereon has been executed by the
Trustee or an Authenticating Agent under the Indenture referred to on the
reverse hereof by the manual signature of one of its authorized officers, this
Note shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

IN WITNESS WHEREOF, the Company has caused this Note to be signed in its
name by the manual or facsimile signature of its Chief Executive Officer, its
President or one of its Vice Presidents and its corporate seal, or a facsimile
thereof, to be impressed or imprinted hereon, attested by the manual or
facsimile signature of its Secretary or one of its Assistant Secretaries.

Date:

AMRESCO, INC.

[Corporate Seal]
By:_____________________________________
Chief Executive Officer
ATTEST:
____________________________________
Secretary

<PAGE>

SECTION 203. FORM OF REVERSE OF NOTE.

AMRESCO, INC.

__% SENIOR SUBORDINATED NOTE DUE 2003

This Note is one of a duly authorized issue of Notes of the Company
designated as its __% Senior Subordinated Notes due 2003 (herein called the
"Notes') limited in aggregate principal amount to $50,000,000 (except for such
additional principal amounts, not to exceed $7,500,000, of Notes issued to cover
over-allotments in the initial public offering of the Notes) issued and to be
issued under an Indenture dated as of ___________, 1996 (herein called the
"Indenture"), between the Company and BankOne, Columbus, N.A., as Trustee
(herein called the "Trustee," which term includes any successor Trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights thereunder of
the Company, the Trustee and the Holders of the Notes, and the terms upon which
the Notes are, and are to be, authenticated and delivered.

The indebtedness of the Company evidenced by the Notes, including the
principal thereof and interest thereon (including post-default interest), (1) is
expressly subordinated, to the extent and to the manner set forth in the
Indenture, in right of payment to the prior payment in full of all of the
Company's obligations to holders of Senior Indebtedness and (2) is unsecured by
any collateral, including the assets of the Company or any of its Subsidiaries
or Affiliates. Each Holder of Notes, by acceptance thereof, (a) agrees to and
shall be bound by such provisions of the Indenture and all other provisions of
the Indenture; (b) authorizes and directs the Trustee to take such action on
such Holder's behalf as may be necessary or appropriate to effectuate the
Subordination of the Notes as provided in the Indenture; and (c) appoints the
Trustee as such Holder's attorney-in-fact for any and all such purposes.

The Notes may not be redeemed by the Company prior to __________, 2001. On
or after __________, 2001, the Notes may be redeemed, at the option of the
Company, in whole at any time or from time to time in part in increments of
$1,000, at 100% of the principal amount thereof, without premium, together with
interest thereon accrued to such Redemption Date. If fewer than all Notes are
redeemed, the Trustee will select the Notes to be redeemed by such method as the
Trustee may deem fair and appropriate.

Notice of redemption shall be given to the Holders of Notes to be redeemed
by mailing a notice of such redemption not less than 30 or more than 60 days
prior to the Redemption Date at their addresses as they shall appear on the Note
Register, all as provided in the Indenture.

If this Note (or a portion hereof) is duly called for redemption and funds
for payment are duly provided, this Note (or such portion hereof) shall cease to
bear interest from and after such Redemption Date.

<PAGE>

Upon the death of the Holder of this Note (if such person is a natural
Person), and upon the further receipt of a written request for repayment from a
duly authorized representative of the deceased Holder, along with a certified
copy of the Holder's death certificate, the Company will repay the principal
amount of this Note (up to $30,000 in principal amount per Holder in any
calendar year), together with interest accrued to the Repayment Date, within 30
days following receipt of such request (which shall be accompanied by the Notes
to be repaid and evidence of such representative's authority to act on behalf of
the Holder), in accordance with the provisions of the Indenture, if (1) this
Note has been registered in the Holder's name since its issue date or for a
period of at least six months prior to the date of the Holders's death,
whichever is less, (2) either the Company or the Trustee receives such written
request for repayment within one year after the Holder's death or, in the case
of subsequent requests for repayment, within one year of the preceding request,
provided that if either the Company or the Trustee receives such a written
request it will promptly notify the other, (3) the aggregate principal amount of
Notes repaid during the then current calendar year on account of the deaths of
all Holders does not exceed the Maximum Annual Repayment Amount (if such
aggregate principal amount exceeds the Maximum Annual Repayment Amount, the
Company shall repay such Notes up to the Maximum Annual Repayment Amount in
principal amount in the order in which requests for repayment were received),
(4) the Company is not and, after giving effect to such repayment, would not be
in default under any Senior Indebtedness, and (5) the Company is not subject to
any law, regulation, agreement or administrative directive preventing such
repayment.

In accordance with the terms of the Indenture, upon the occurrence of a
Repurchase Event, the Holder of this Note shall have the right, at such
Holder's option, to require the Company to purchase, and upon exercise of such
right, the Company shall purchase, all or any part of this Note on the date
that is 30 days after the date the Company gives notice of the Repurchase Event
at a price equal to 100% of the principal amount thereof, together with accrued
and unpaid interest.

Interest installments whose Stated Maturity is on the Redemption Date or
Repayment Date will be payable to the Holders of such Notes, or one or more
Predecessor Notes, of record at the close of business on the relevant Regular
Record Date referred to on the face hereof, all as provided in the Indenture.
In the event of redemption or repayment of this Note in part only, a new Note or
Notes for the unredeemed or unrepaid portion hereof shall be issued in the name
of the Holder hereof upon the surrender hereof.

Except as may be provided in the Indenture, if an Event of Default with
respect to the Notes shall occur and be continuing, the Trustee or the Holders
of not less than 25% in principal amount of the Outstanding Notes may declare
the principal of all the Notes due and payable in the manner and with the effect
provided in the Indenture. The Indenture provides that such declaration and its
consequences may, in certain events, be annulled by the Holders of a majority in
principal amount of the Outstanding Notes.

The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Notes at the time Outstanding.
The Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Notes at the time Outstanding,
on behalf of the Holders of all Notes, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the

<PAGE>

Holder of this Note shall be conclusive and binding upon such Holder and upon
all future Holders of this Note and of any Note issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Note.

No reference herein to the Indenture and no provisions of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, places and rate, and in the coin or currency, herein prescribed.

As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Note may be registered on the Note Register of the
Company, upon surrender of this Note for registration of transfer at the office
or agency of the Company to be maintained for that purpose in the Borough of
Manhattan, New York, New York and Columbus, Ohio or at such other office or
agency as may be established by the Company for such purpose pursuant to the
Indenture (initially the principal corporate trust office of the Trustee in
Columbus, Ohio), duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company, and duly executed by the Holder
hereof or such Holder's attorney duly authorized in writing, and thereupon one
or more new Notes, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.

The Notes are issuable only in registered form, without coupons, in
denominations of $1,000 or any amount in excess thereof which is an integral
multiple of $1,000. As provided in the Indenture, and subject to certain
limitations therein set forth, the Notes are exchangeable for a like aggregate
principal amount of Notes in authorized denominations, as requested by the
Holder surrendering the same.

No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

Prior to the due presentment of this Note for registration of transfer or
exchange, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Note is registered as the owner hereof
for all purposes, whether or not this Note be overdue, and neither the Company,
the Trustee, nor any such agent shall be affected by notice to the contrary.

Each Holder of a Note covenants and agrees by such Holder's acceptance
thereof to comply with and be bound by the foregoing provisions.

All terms used in this Note which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.

<PAGE>

SECTION 204. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.

Subject to Section 612, the Trustee's certificate of authentication shall
be in substantially the following form:

This is one of the Notes described herein.

Bank One, Columbus, N.A. as Trustee

Authentication
Date:_____________ By_______________________________________
Authorized Signatory

SECTION 205. NOTES IN GLOBAL FORM.

Notes may be issuable in global form (i.e., in the name of the nominee of a
Depository for purposes of book entry transfer), such that any such Note may
provide that it or any number of such Notes shall represent the aggregate amount
of all Outstanding Notes (or such lesser amount as is permitted by the terms
thereto from time to time endorsed thereon) and may also provide that the
aggregate amount of Outstanding Notes represented thereby may from time to time
be increased or reduced to reflect exchanges. Any endorsement of any Note in
global form to reflect the amount, or any increase or decrease in the amount, or
changes in the rights of Holders, of Outstanding Notes represented thereby shall
be made in such manner and by such Person or Persons as shall be specified
therein or in the Company Order to be delivered pursuant to Section 303 or 304
with respect thereto. Subject to the provisions of Section 303 and, if
applicable, Section 304, the Trustee shall deliver and redeliver any Note in
permanent global form in the manner and upon instructions given by the Person or
Persons specified therein or in the applicable Company Order. If a Company
Order pursuant to Section 303 or 304 has been, or simultaneously is, delivered,
any instructions by the Company with respect to a Note in global form shall be
in writing but need not be accompanied by or contained in an Officers'
Certificate and need not be accompanied by an Opinion of Counsel.

ARTICLE THREE

THE NOTES

SECTION 301. TITLE AND TERMS.

The aggregate principal amount of Notes which may be authenticated and
delivered under this Indenture is limited to $50,000,000 (except for such
additional principal amounts, not to exceed $7,500,000, of Notes issued to cover
over-allotments in the initial public offering of the

<PAGE>

Notes), except for Notes authenticated and delivered upon transfer of, or in
exchange for, or in lieu of other Notes pursuant to Sections 304, 305, 306,
905, 1107 and 1204.

The Notes shall be known and designated as the "__% Senior Subordinated
Notes due 2003 of the Company". The Stated Maturity of all principal shall be
___________, 2003, and they shall bear interest from the date and at the rate
per annum specified in, and such interest shall be payable on the dates
specified in, the form of Note set forth in Sections 202 and 203, until the
principal thereof is paid or made available for payment.

The principal of and interest on the Notes shall be payable at the Office
or Agency of the Company in Columbus, Ohio ("PLACE OF PAYMENT") maintained
for such purposes pursuant to Section 1002; PROVIDED, HOWEVER, that, at the
option of the Company, payment of interest may be made (subject to collection)
by check mailed to the address of the Person entitled thereto as such address
shall appear on the Note Register.

The Notes shall be redeemable prior to their Stated Maturity as provided in
Article Eleven.

The Notes may be repayable prior to their Stated Maturity as provided in
Article Twelve upon the death of a Noteholder or as provided in Article
Fourteenth upon the occurrence of a Repurchase Event.

The Notes shall be subordinated in right of payment to Senior Indebtedness,
whether outstanding at the date of this Indenture or thereafter created, as
provided in Article Thirteen.

SECTION 302. CURRENCY; DENOMINATIONS.

The principal of and interest on the Notes shall be payable in United
States dollars or other equivalent unit of legal tender for payment of public or
private debts in the United States of America. Notes shall be issuable in
registered form only without coupons in denominations of $1,000 and any integral
multiple thereof.

SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.

Notes shall be executed on behalf of the Company by its Chairman of the
Board, one of its Vice Chairmen of the Board, its Chief Executive Officer, its
President, its Treasurer or one of its Vice Presidents under its corporate seal
reproduced thereon and attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Notes may be manual
or facsimile.

Notes bearing the manual or facsimile signatures of individuals who were at
any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.

<PAGE>

At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Notes, executed by the Company, to the
Trustee for authentication and, PROVIDED that a Company Order for the
authentication and delivery of such Notes has been delivered to the Trustee, the
Trustee, in accordance with the Company Order and subject to the provisions
hereof, shall authenticate and deliver such Notes.

The Company may establish by Company Order that the Notes are to be issued
in whole or in part in the form of one or more global Notes. If so established,
the Company shall execute and the Trustee shall, in accordance with this Section
and the Company Order with respect to such Notes, authenticate and deliver one
or more global Notes in permanent form that (i) shall represent and shall be
denominated in an amount equal to the aggregate principal amount of the
Outstanding Notes to be represented by such global Note or Notes, (ii) shall be
registered in the name of the Depository for such global Note or Notes or the
nominee of such Depository, (iii) shall be delivered by the Trustee to such
Depository or pursuant to such Depository's instruction and (iv) shall bear a
legend substantially to the following effect: "Unless and until it is exchanged
in whole or in part for Notes in certificated form, this Note may not be
transferred except as a whole by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor Depository or
a nominee of such successor Depository" or to such other effect as the
Depository and the Trustee may agree.

Each Note shall be dated the date of its authentication.

No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for in Section 204 or 612
executed by or on behalf of the Trustee by the manual signature of one of its
authorized officers or by an Authenticating Agent. Such certificate upon any
Note shall be conclusive evidence, and the only evidence, that such Note has
been duly authenticated and delivered hereunder.

SECTION 304. TEMPORARY NOTES.

Pending the preparation of definitive Notes, the Company may execute and
deliver to the Trustee and, upon Company Order, the Trustee shall authenticate
and deliver, in the manner provided in Section 303, temporary Notes in lieu
thereof which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Notes in lieu of which they are issued, in registered form and with
such appropriate insertions, omissions, substitutions and other variations as
the officers of the Company executing such Notes may determine, as conclusively
evidenced by their execution of such Notes. Such temporary Notes may be in
global form.

Except in the case of temporary Notes in global form, which shall be
exchanged in accordance with the provisions thereof, if temporary Notes are
issued, the Company shall cause

<PAGE>

definitive Notes to be prepared without unreasonable delay. After the
preparation of definitive Notes, such temporary Notes shall be exchangeable
for such definitive Notes upon surrender of such temporary Notes at an Office
or Agency for such Notes, without charge to any Holder thereof. Upon
surrender for cancellation of any one or more temporary Notes, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Notes of authorized
denominations. Unless otherwise provided in or pursuant to this Indenture
with respect to a temporary global Note, until so exchanged the temporary
Notes shall in all respects be entitled to the same benefits under this
Indenture as definitive Notes.

SECTION 305. REGISTRATION, TRANSFER AND EXCHANGE.

The Company shall cause to be kept a register (herein sometimes referred to
as the "NOTE REGISTER") at an Office or Agency maintained pursuant to Section
1002 in which, subject to such reasonable regulations as it may prescribe, the
Company shall provide for the registration of the Notes and of transfers of the
Notes. The Trustee is hereby initially appointed as Note Registrar for the
Notes. In the event that the Trustee shall cease to be Note Registrar it shall
have the right to examine the Note Register at all reasonable times.

Upon surrender for registration of transfer of any Note at the Office or
Agency of the Company, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes, denominated as authorized in this Indenture,
of a like aggregate principal amount bearing a number not contemporaneously
outstanding and containing identical terms and provisions.

At the option of the Holder, Notes (except a global Note representing all
of the Outstanding Notes) may be exchanged for other Notes, in any authorized
denominations, and of a like aggregate principal amount, upon surrender of the
Notes to be exchanged at such Office or Agency. Whenever any Notes are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Notes which the Holder making the exchange is
entitled to receive.

Whenever any Notes are surrendered for exchange as contemplated by the
immediately preceding two paragraphs, the Company shall execute, and the Trustee
shall authenticate and deliver, the Notes which the Holder making the exchange
is entitled to receive.

Notwithstanding the foregoing, except as otherwise provided in or pursuant
to this Indenture, any global Note shall be exchangeable for definitive Notes
only if (i) the Depository is at any time unwilling, unable or ineligible to
continue as Depository and a successor depository is not appointed by the
Company within 60 days of the date the Company is so informed in writing, (ii)
the Company executes and delivers to the Trustee a Company Order to the effect
that such global Note shall be so exchangeable, or (iii) an Event of Default has
occurred and is continuing with respect to the Notes. If the beneficial owners
of interests in a global Note are entitled to exchange such interests for
definitive Notes of such series and of like tenor and principal amount

<PAGE>

of any authorized form and denomination as specified as contemplated by
Section 304, then without unnecessary delay but in any event not later than
the earliest date on which such interests may be so exchanged, the Company
shall deliver to the Trustee definitive Notes in such form and denominations
as are required by or pursuant to this Indenture, containing identical terms
and in aggregate principal amount equal to the principal amount of such
global Note, executed by the Company. On or after the earliest date on which
such interests may be so exchanged, such global Note shall be surrendered
from time to time by the Depository, and in accordance with instructions
given to the Trustee and the Depository (which instructions shall be in
writing but need not be contained in or accompanied by an Officers'
Certificate or be accompanied by an Opinion of Counsel), as shall be
specified in the Company Order with respect thereto to the Trustee, as the
Company's agent for such purpose, to be exchanged; provided, however, that no
such exchanges may occur during a period beginning at the opening of business
15 days before any such selection of Notes for redemption of the same series
and containing identical terms to be redeemed and ending on the relevant
Redemption Date. Promptly following any such exchange in part, such global
Note shall be returned by the Trustee to such Depository in accordance with
the instructions of the Company referred to above. If a Note is issued in
exchange for any portion of a global Note after the close of business at the
Office or Agency for such Note where such exchange occurs on or after (i) any
Regular Record Date for such Note and before the opening of business at such
Office or Agency on the next Interest Payment Date, or (ii) any Special
Record Date for such Note and before the opening of business at such Office
or Agency on the related proposed date for payment of interest or Defaulted
Interest, as the case may be, interest shall not be payable on such Interest
Payment Date or proposed date for payment, as the case may be, in respect of
such Note, but shall be payable on such Interest Payment Date or proposed
date for payment, as the case may be, only to the Person to whom interest in
respect of such portion of such global Note shall be payable in accordance
with the provisions of this Indenture.

All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Company evidencing the same debt and
entitling the Holders thereof to the same benefits under this Indenture as the
Notes surrendered upon such registration of transfer or exchange.

Every Note presented or surrendered for registration of transfer or for
exchange or redemption shall (if so required by the Company or the Note
Registrar for such Note) be duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Note
Registrar duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing.

No service charge shall be made for any registration of transfer or
exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Notes, other than exchanges
pursuant to Section 304, 905 or 1107 not involving any transfer.

<PAGE>

The Company shall not be required (1) to issue, register the transfer of or
exchange any Notes during a period beginning at the opening of business 15
calendar days before the day of the selection for redemption of Notes under
Section 1103 and ending at the close of business on the day of the mailing of
the relevant notice of redemption, or (2) to register the transfer of or
exchange any Note so selected for redemption in whole or in part, except in the
case of any Note to be redeemed in part, the portion thereof not to be redeemed,
or (3) to issue, register the transfer of or exchange any Note which, in
accordance with its terms, has been surrendered for repayment at the option of
the Holder, except the portion, if any, of such Note not to be so repaid.

SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN NOTES.

If any mutilated Note is surrendered to the Trustee, subject to the
provisions of this Section, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Note containing identical
terms and of like principal amount and bearing a number not contemporaneously
outstanding.

If there be delivered to the Company and to the Trustee (1) evidence to
their satisfaction of the destruction, loss or theft of any Note, and (2) such
Note or indemnity as may be required by them to save each of them and any agent
of either of them harmless, then, in the absence of notice to the Company or the
Trustee that such Note has been acquired by a bona fide purchaser (or any
equivalent person under any applicable statute, rule or regulation or
interpretation then in effect), the Company shall execute and, upon the
Company's request the Trustee shall authenticate and deliver, in exchange for or
in lieu of any such destroyed, lost or stolen Note, a new Note containing
identical terms and of like principal amount and bearing a number not
contemporaneously outstanding.

Notwithstanding the foregoing provisions of this Section, in case any
mutilated, destroyed, lost or stolen Note has become or is about to become due
and payable or redeemed by the Company pursuant to Article Eleven hereof, the
Company in its discretion may, instead of issuing a new Note, pay such Note.

Upon the issuance of any new Note under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.

Every new Note issued pursuant to this Section in lieu of any destroyed,
lost or stolen Note shall constitute an additional original contractual
obligation of the Company, whether or not the destroyed, lost or stolen Note
shall be at any time enforceable by anyone, and shall be entitled to all the
benefits of this Indenture equally and proportionately with any and all other
Notes duly issued hereunder.

<PAGE>

The provisions of this Section, as amended or supplemented pursuant to this
Indenture, shall be exclusive and shall preclude (to the extent lawful) all
other rights and remedies with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Notes.

SECTION 307. PAYMENT OF INTEREST; RIGHTS TO INTEREST PRESERVED.

Any interest on any Note which shall be payable and is punctually paid or
duly provided for on any Interest Payment Date shall be paid to the Person in
whose name such Note (or one or more Predecessor Notes) is registered as of the
close of business on the Regular Record Date for such interest.

Any interest on any Note which shall be payable, but shall not be
punctually paid or duly provided for, on any Interest Payment Date for such Note
(herein called "DEFAULTED INTEREST") shall forthwith cease to be payable to the
Holder thereof on the relevant Regular Record Date by virtue of having been a
Holder on such date; and such Defaulted Interest may be paid by the Company, at
its election in each case, as provided in Clause (1) or (2) below.

(1) The Company may elect to make payment of any Defaulted Interest
to the Person in whose name such Note (or a Predecessor Note thereof) shall
be registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on such Note and the date of the
proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of Money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit on or prior to the date of the
proposed payment, such Money when so deposited to be held in trust for the
benefit of the Person entitled to such Defaulted Interest as in this Clause
provided. Thereupon, the Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest which shall be not more than 15 days and
not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage prepaid,
to the Holder of such Note (or a Predecessor Note thereof) at such Holder's
address as it appears in the Note Register not less than 10 days prior to
such Special Record Date. The Trustee may, in its discretion, in the name
and at the expense of the Company cause a similar notice to be published at
least once in an Authorized Newspaper of general circulation in each Place
of Payment, but such publication shall not be a condition precedent to the
establishment of such Special Record Date and the failure of a Holder to
observe such published notice shall not entitle such Holder to additional
benefits or interest with respect to such Holder's Notes. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been mailed as aforesaid,

<PAGE>

such Defaulted Interest shall be paid to the Person in whose name such
Note (or a Predecessor Note thereof) shall be registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).

(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, if, after notice given by the Company
to the Trustee of the proposed payment pursuant to this Clause, such
payment shall be deemed practicable by the Trustee.

At the option of the Company, interest on the Notes may be paid (i) by
mailing a check to the address of the Person entitled thereto as such address
shall appear in the Note Register, or (ii) by wire transfer to an account
maintained by the Person entitled thereto as specified in the Note Register.

Subject to the foregoing provisions of this Section and Section 305, each
Note delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Note shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Note.

SECTION 308. PERSONS DEEMED OWNERS.

Prior to due presentment of a Note for registration of transfer or
exchange, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Note is registered in the Note Register
as the owner of such Note for the purpose of receiving payment of principal of
and (subject to Sections 305 and 307) interest on such Note and for all other
purposes whatsoever, whether or not any payment with respect to such Note shall
be overdue, and neither the Company, nor the Trustee or any agent of the Company
or the Trustee shall be affected by notice to the contrary.

No holder of any beneficial interest in any global Note held on its behalf
by a Depository shall have any rights under this Indenture with respect to such
global Note, and such Depository may be treated by the Company, the Trustee, and
any agent of the Company or the Trustee as the owner of such global Note for all
purposes whatsoever. None of the Company, the Trustee, any Paying Agent or the
Note Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a global Note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.

SECTION 309. CANCELLATION.

All Notes surrendered for payment, redemption, repayment pursuant to
Article Twelve, registration of transfer or exchange shall, if surrendered to
any Person other than the Trustee, be

<PAGE>

delivered to the Trustee, and any such Notes, as well as Notes surrendered
directly to the Trustee for any such purpose, shall be canceled promptly by
the Trustee. The Company may at any time deliver to the Trustee for
cancellation any Notes previously authenticated and delivered hereunder which
the Company may have acquired in any manner whatsoever, and all Notes so
delivered shall be canceled promptly by the Trustee. No Notes shall be
authenticated in lieu of or in exchange for any Notes canceled as provided in
this Section, except as expressly permitted by this Indenture. All canceled
Notes held by the Trustee shall be destroyed by the Trustee (who shall
deliver a certificate of destruction thereof to the Company), unless by a
Company Order the Company directs their return to it.

SECTION 310. AUTHENTICATION AND DELIVERY OF ORIGINAL ISSUE.

Forthwith upon the execution and delivery of this Indenture, or from time
to time thereafter, Notes up to the aggregate principal amount of $50,000,000
(plus such additional principal amounts, not to exceed $7,500,000, of Notes
issued to cover over allotments in the initial public offering of the Notes) may
be executed by the Company and delivered to the Trustee for authentication, and
shall thereupon be authenticated and delivered by the Trustee upon Company
Order, without any further action by the Company.

SECTION 311. COMPUTATION OF INTEREST.

Interest on the Notes shall be computed on the basis of a 360-day year of
twelve 30-day months. Interest shall be payable through and excluding any
Interest Payment Date and interest shall be payable through and including any
Redemption Date or Repayment Date.

ARTICLE FOUR

SATISFACTION AND DISCHARGE

SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.

Upon the direction of the Company by a Company Order, this Indenture shall
cease to be of further effect and the Trustee, on receipt of such Company Order,
at the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when

(1) either

(a) all Notes theretofore authenticated and delivered (other
than (i) Notes which have been mutilated, destroyed, lost or stolen
and which have been replaced or paid as provided in Section 306 and
(ii) Notes for whose payment Money has theretofore been deposited in
trust with the Trustee or segregated and held in trust by the Company
and thereafter repaid to the Company or discharged

<PAGE>
from such trust, as provided in Section 1003) have been delivered to
the Trustee for cancellation; or

(b) as to all Notes not so theretofore delivered to the Trustee
for cancellation the Company has irrevocably deposited or caused to be
deposited with the Trustee, as trust funds and/or obligations in trust
for such purpose, Money and/or Government Obligations which through
the payment of interest and principal in respect thereof in accordance
with their terms, without consideration of any reinvestment thereof,
will provide not later than the opening of business on the due dates
of any payment of principal and interest with respect thereto, or a
combination thereof, Money in an amount sufficient to pay and
discharge the entire indebtedness on such Notes not theretofore
delivered to the Trustee for cancellation, including the principal
thereof and interest thereon, to the date of such deposit (in the case
of Notes which have become due and payable) or to the Maturity
thereof, as the case may be;

(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company, including amounts owing to the Trustee; and

(3) the Company has delivered to the Trustee a certificate of
Independent Public Accountants certifying as to the sufficiency of the
amounts deposited pursuant to subclause (b) of Clause (1) of this Section
for payment of the principal and interest on the dates such payments are
due, and an Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent herein providing for or relating to the
satisfaction and discharge of this Indenture have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Trustee to any Authenticating Agent under Section 612 and, if Money and/or
Government Obligations shall have been deposited with the Trustee pursuant to
subclause (b) of Clause (1) of this Section, the obligations of the Trustee
under Section 402 and the last paragraph of Section 1003 shall survive.

SECTION 402. APPLICATION OF TRUST MONEY.

Subject to the provisions of the last paragraph of Section 1003, all Money
and Government Obligations deposited with the Trustee pursuant to Section 401
and all Money received by the Trustee in respect of Government Obligations
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and interest for
whose payment such Money has or Government Obligations have been deposited with
or received by the Trustee; but such Money and

<PAGE>

Government Obligations need not be segregated from other funds of the Trustee
except to the extent required by law.

ARTICLE FIVE

REMEDIES

SECTION 501. EVENTS OF DEFAULT.

"EVENT OF DEFAULT", wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or be effected by operation of law pursuant to any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body):

(1) default in the payment of any interest on any Note when such
interest becomes due and payable, and continuance of such default for a
period of 10 days, whether or not such payment is prohibited by the
provisions of Article Thirteen; or

(2) default in the payment of the principal of any Note when it
becomes due and payable at its Maturity or upon redemption or repayment,
whether or not such payment is prohibited by the provisions of Article
Thirteen; or

(3) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture or the Notes (other than a
covenant or warranty a default in the performance or the breach of which is
elsewhere in this Section specifically dealt with), or in Section 7 of the
Revolving Note Agreement dated September 29, 1995 between the Company and
certain of its Subsidiaries as borrowers and NationsBank of Texas N.A. and
certain other entities as lenders, and continuance of such default or
breach for a period of 30 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in principal amount of the
Outstanding Notes a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or

(4) default in the payment at stated maturity of any indebtedness of
the Company or any Subsidiary for money borrowed in principal amount due at
stated maturity in excess of $1,000,000, and such default shall continue,
without being cured, waived or consented to and without such indebtedness
being discharged, for a period of 30 days beyond any applicable period of
grace; or

(5) the occurrence of an event of default as defined in any mortgage,
indenture or instrument under which there may be issued, or by which there
may be secured or

<PAGE>

evidenced, any indebtedness of the Company or any Subsidiary for money
borrowed (or the payment of which is guaranteed by the Company), whether
such indebtedness now exists or shall hereafter be created, PROVIDED,
HOWEVER, that no such event of default shall constitute an Event of
Default hereunder unless the effect of such event of default is to cause
the acceleration of such indebtedness prior to its expressed maturity,
which together with the principal amount of any such other indebtedness
so caused to be accelerated, aggregates $1,000,000 or more at any one
point in time and such default shall not have been cured or waived and
such acceleration shall not have been rescinded or annulled; or

(6) the entry by a court or agency or supervisory authority having
competent jurisdiction of:

(a) a decree or order for relief in respect of the Company or
any Subsidiary in an involuntary proceeding under any applicable
bankruptcy, insolvency, reorganization or other similar law and such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or

(b) a decree or order adjudging the Company or any Subsidiary to
be insolvent, or approving a petition seeking reorganization,
arrangement, adjustment or composition of the Company or any
Subsidiary and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or

(c) a decree or order appointing any Person to act as a
custodian, receiver, liquidator, assignee, trustee or other similar
official of the Company or any Subsidiary or of any substantial part
of the property of the Company or any Subsidiary, as the case may be,
or ordering the winding up or liquidation of the affairs of the
Company or any Subsidiary and such decree or order shall remain
unstayed and in effect for a period of 60 consecutive days; or

(7) the commencement by the Company or any Subsidiary of a voluntary
proceeding under any applicable bankruptcy, insolvency, reorganization or
other similar law or of a voluntary proceeding seeking to be adjudicated
insolvent or the consent by the Company or any Subsidiary to the entry of a
decree or order for relief in an involuntary proceeding under any
applicable bankruptcy, insolvency, reorganization or other similar law or
to the commencement of any insolvency proceedings against it, or the filing
by the Company or any Subsidiary of a petition or answer or consent seeking
reorganization or relief under any applicable law, or the consent by the
Company or any Subsidiary to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or similar official of the Company or any Subsidiary or
any substantial part of the property of the Company or any Subsidiary or
the making by the Company or any Subsidiary of an assignment for the
benefit of creditors, or the taking of corporate action by the Company or
any Subsidiary in furtherance of any such action; or

<PAGE>

(8) a final judgment, judicial decree or order for the payment of
money in excess of $5,000,000 shall be rendered against the Company or any
Subsidiary and such judgment, decree or order shall continue unsatisfied
for a period of 30 days without a stay of execution.

SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.

If an Event of Default occurs and is continuing, then the Trustee or the
Holders of not less than 25% in principal amount of the outstanding Notes may
declare the principal of all the Notes, and the interest accrued thereon, to be
due and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by the Holders), and upon any such declaration such amount
shall become immediately due and payable.

At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the Money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of not less
than a majority in principal amount of the Outstanding Notes, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if

(1) the Company has paid or deposited with the Trustee a sum of Money
sufficient to pay

(a) all overdue installments of any interest on all Notes,

(b) the principal of any Notes which have become due otherwise
than by such declaration of acceleration and interest thereon at the
rate borne by such Notes,

(c) to the extent that payment of such interest is lawful,
interest upon overdue installments of any interest at the rate borne
by such Notes, and

(d) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and

(2) all Events of Default, other than the non-payment of the
principal of and interest on Notes which shall have become due solely by
such declaration of acceleration, shall have been cured or waived as
provided in Section 513.

No such rescission shall affect any subsequent default or impair any right
consequent thereon.

<PAGE>

SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.

The Company covenants that if

(1) default is made in the payment of any installment of interest on
any Note when such interest shall have become due and payable and such
default continues for a period of 10 days, or

(2) default is made in the payment of the principal of any Note at
its Maturity, the Company shall, upon demand of the Trustee, pay to the
Trustee, for the benefit of the Holders of such Notes, the whole amount of
money then due and payable with respect to such Notes, with interest upon
the overdue principal and, to the extent that payment of such interest
shall be legally enforceable, upon any overdue installments of interest at
the rate borne by such Notes, and, in addition thereto, such further amount
of Money as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.

If the Company fails to pay the Money it is required to pay the Trustee
pursuant to the preceding paragraph forthwith upon the demand of the Trustee,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the Money so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon such Notes and collect the Money
adjudged or decreed to be payable in the manner provided by law out of the
property of the Company or any other obligor upon such Notes, wherever situated.

If an Event of Default with respect to the Notes occurs and is continuing,
the Trustee may in its discretion proceed to protect and enforce its rights and
the rights of the Holders of Notes by such appropriate judicial proceedings as
the Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or such Notes or in aid of the exercise of any power granted herein or
therein, or to enforce any other proper remedy.

The rights and remedies under this Section 503 are in addition to the other
rights and remedies available under this Article 5 or otherwise legally
available.

SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.

In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the Notes
or the property of the Company or such other obligor or their creditors, the
Trustee (irrespective of whether the principal of the Notes shall then

<PAGE>

be due and payable as therein expressed or by declaration or otherwise
and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of any overdue principal or interest) shall
be entitled and empowered, by intervention in such proceeding or
otherwise,

(1) to file and prove a claim for the whole amount of the principal
and interest owing and unpaid in respect of the Notes and to file such
other papers or documents as may be necessary or advisable in order to have
the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents or counsel) and of the Holders of Notes allowed in such judicial
proceeding, and

(2) to collect and receive any Money or other property payable or
deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder of Notes to make such payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the Holders
of Notes, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel and any other amounts due the Trustee under Section 607.

Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a Note any
plan of reorganization, arrangement, adjustment or composition affecting the
Notes or the rights of any Holder thereof, or to authorize the Trustee to vote
in respect of the claim of any Holder of a Note in any such proceeding.

SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES.

All rights of action and claims under this Indenture or any of the Notes
may be prosecuted and enforced by the Trustee without the possession of any of
the Notes or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery or judgment, after provision for
the payment of the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, shall be for the ratable benefit of each
and every Holder of a Note in respect of which such judgment has been recovered.

SECTION 506. APPLICATION OF MONEY COLLECTED.

Any Money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such Money on account of principal or interest,
upon presentation of the Notes, and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:

<PAGE>

FIRST: To the payment of all amounts due the Trustee and any
predecessor Trustee under Section 607;

SECOND: In the case the principal of the Notes shall not have become
due and payable, to the payment of the amounts then due and unpaid upon the
Notes for interest in respect of which or for the benefit of which such
Money has been collected, in the order of the Maturity of the installments
of such interest, with interest, to the extent that such interest is lawful
and has been collected by the Trustee, upon overdue installments of
interest at the rate borne by the Notes, such payments to be made ratably,
without preference or priority of any kind, according to the aggregate
amounts due and payable on such Notes for interest;

THIRD: In the case the principal of the Notes shall have become due
and payable, to the payment of the amounts then due and unpaid upon the
Notes for principal and interest in respect of which or for the benefit of
which such Money has been collected, with interest, to the extent that such
interest is lawful and has been collected by the Trustee, upon overdue
installments of interest at the rate borne by the Notes, such payments to
be made ratably, without preference or priority of any kind, according to
the aggregate amounts due and payable on such Notes for principal and
interest, respectively; and

FOURTH: The balance, if any, to the Company.

SECTION 507. LIMITATIONS ON SUITS.

No Holder of any Note shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless

(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;

(2) the Holders of not less than 25% in principal amount of the
Outstanding Notes shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;

(3) such Holder or Holders have offered to the Trustee indemnity
satisfactory to the Trustee against the costs, fees, expenses and
liabilities to be incurred in compliance with such request (including
reasonable fees of counsel);

(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and

<PAGE>

(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Notes;

it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture or any Note to affect, disturb or prejudice the rights of any
other Holders, or to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all such Holders.

SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL AND
INTEREST.

Notwithstanding any other provision in this Indenture, the Holder of any
Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and (subject to Sections 305 and 307) interest on
such Note on the respective Stated Maturity or Maturities therefor specified in
such Note (or, in the case of redemption, on the Redemption Date or, in the case
of repayment at the option of such Holder, on the date such repayment is due)
and to institute suit for the enforcement of any such payment, and such right
shall not be impaired without the consent of such Holder.

SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.

If the Trustee or any Holder of a Note has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Company, the
Trustee and each such Holder shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and each such
Holder shall continue as though no such proceeding had been instituted.

SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.

Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Notes in the last paragraph of Section 306,
no right or remedy herein conferred upon or reserved to the Trustee or to each
and every Holder of a Note is intended to be exclusive of any other right or
remedy, and every right and remedy, to the extent permitted by law, shall be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.

<PAGE>

SECTION 511. DELAY OR OMISSION NOT WAIVER.

No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to any Holder of a Note may be exercised from time to time, and
as often as may be deemed expedient, by the Trustee or by such Holder, as the
case may be.

SECTION 512. CONTROL BY HOLDERS OF NOTES.

The Holders of a majority in principal amount of the Outstanding Notes
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to the Notes, PROVIDED that

(1) such direction shall not be in conflict with any rule of law or
with this Indenture,

(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and

(3) subject to Section 601, the Trustee need not take any action
which might be unjustly prejudicial to the rights of the other Holders of
Notes not joining in such action.

SECTION 513. WAIVER OF PAST DEFAULTS.

The Holders of not less than a majority in principal amount of the
Outstanding Notes on behalf of the Holders of all the Notes may waive any past
default hereunder and its consequences, except a default

(1) in the payment of the principal of or interest on any Note, or

(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Note.

Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.

<PAGE>

SECTION 514. WAIVER OF STAY OR EXTENSION LAWS.

The Company covenants that (to the extent that it may lawfully do so) it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company expressly waives (to the extent
that it may lawfully do so) all benefit or advantage of any such law and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.

ARTICLE SIX

THE TRUSTEE

SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.

(1) Except during the continuance of an Event of Default,

(a) the Trustee undertakes to perform such duties, and only such
duties, as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and

(b) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.

(2) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.

(3) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that

(a) this Subsection shall not be construed to limit the effect of
Subsection (1) of this Section;

<PAGE>

(b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;

(c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of a majority in principal amount of the Outstanding Notes,
relating to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture with respect to the Notes, provided
such direction shall not be in conflict with any rule of law or with this
Indenture; and

(d) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.

(4) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.

SECTION 602. NOTICE OF DEFAULTS.

Within 90 days after the occurrence of any Event of Default hereunder,
the Trustee shall transmit to the Holders of Notes, in the manner and to the
extent provided in Section 313(c) of the Trust Indenture Act, notice of such
default hereunder known to the Trustee, unless such default shall have been
cured or waived; PROVIDED, HOWEVER, that, except in the case of a default in
the payment of the principal of or interest on any Note, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interest of the Holders of Notes; and PROVIDED, FURTHER, that
in the case of any default of the character specified in Section 501(3) with
respect to Notes, no such notice to Holders shall be given until at least 30
days after the occurrence thereof. For the purpose of this Section, the term
"default" means any event which is, or after notice or lapse of time or both
would become, an Event of Default.

SECTION 603. CERTAIN RIGHTS OF TRUSTEE.

Subject to Sections 315(a) through 315(d) of the Trust Indenture Act:

(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice,

<PAGE>

request, direction, consent, order, bond, debenture, note, coupon or
other paper or document reasonably believed by it to be genuine and to
have been signed or presented by the proper party or parties;

(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or a Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;

(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence shall be herein specifically prescribed) may, in the absence
of bad faith on its part, rely upon an Officers' Certificate and/or Opinion
of Counsel;

(4) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;

(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders of Notes pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, fees, expenses and liabilities which might be incurred
by it, including reasonable fees of counsel, in complying with such request
or direction;

(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, coupon or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine,
during business hours and upon reasonable notice, the books, records and
premises of the Company, personally or by agent or attorney; and

(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.

<PAGE>

SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES.

The recitals contained herein and in the Notes, except the Trustee's
certificate of authentication, shall be taken as the statements of the
Company and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations
as to the validity or sufficiency of this Indenture or of the Notes, except
that the Trustee represents that it is duly authorized to execute and deliver
this Indenture, authenticate the Notes and perform its obligations hereunder
and that the statements made by it in a Statement of Eligibility and
Qualification on Form T-1 supplied to the Company are true and accurate,
subject to the qualifications set forth therein. Neither the Trustee nor any
Authenticating Agent shall be accountable for the use or application by the
Company of the Notes or the proceeds thereof. The Trustee shall not be
responsible for any statement made in any prospectus or similar document used
to sell the Notes.

SECTION 605. MAY HOLD NOTES.

The Trustee, any Authenticating Agent, any Paying Agent, any Note Registrar
or any other Person that may be an agent of the Trustee or the Company, in its
individual or any other capacity, may become the owner or pledgee of Notes and,
subject to Sections 310(b) and 311 of the Trust Indenture Act, may otherwise
deal with the Company with the same rights it would have if it were not Trustee,
Authenticating Agent, Paying Agent, Note Registrar or such other Person.

SECTION 606. MONEY HELD IN TRUST.

Except as provided in Section 402 and Section 1003, Money held by the
Trustee in trust hereunder need not be segregated from other funds except to the
extent required by law and shall be held uninvested. The Trustee shall be under
no liability for interest on any Money received by it hereunder except as
otherwise agreed with the Company.

SECTION 607. COMPENSATION AND REIMBURSEMENT.

The Company agrees:

(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by the Trustee hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation
of a trustee of an express trust);

(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable costs, expenses, disbursements
and advances incurred or made by the Trustee in accordance with any
provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to the Trustee's
negligence or bad faith; and

<PAGE>

(3) to indemnify the Trustee and its agents for, and to hold them
harmless against, any loss, liability or expense incurred without
negligence or bad faith on their part, arising out of or in connection with
the acceptance or administration of the trust hereunder, including the
costs and expenses of defending themselves against any claim or liability
in connection with the exercise or performance of any of their powers or
duties hereunder.

As security for the performance of the obligations of the Company under
this Section, the Trustee shall have a lien prior to the Notes upon all property
and funds held or collected by the Trustee as such, except funds held in trust
for the payment of principal of and interest on Notes. "Trustee" for the
purposes of this Section includes any predecessor Trustee, but negligence or bad
faith of any Trustee shall not be attributed to any other Trustee.

When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 501(6) or Section 501(7), the expenses
(including the reasonable compensation, expenses and disbursements of its
counsel) and the compensation for the services are intended to constitute
expenses of administration under any applicable federal or state bankruptcy,
insolvency or other similar law.

The obligations of the Company under this Section to compensate and
indemnify the Trustee and each predecessor Trustee and to pay or reimburse the
Trustee and each predecessor Trustee for expenses, disbursements and advances
shall constitute an additional obligation hereunder and shall survive the
satisfaction and discharge of this Indenture and the resignation or removal of
the Trustee and each predecessor Trustee.

SECTION 608. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.

There shall at all times be a Trustee hereunder that is a Corporation
organized and doing business under the laws of the United States of America, any
state thereof or the District of Columbia, authorized under such laws to
exercise corporate trust powers, or any other person permitted by the Trust
Indenture Act to act as trustee under an indenture qualified under the Trust
Indenture Act and that has a combined capital and surplus (computed in
accordance with Section 310(a)(2) of the Trust Indenture Act) of at least
$50,000,000. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.

SECTION 609. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.

(1) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee pursuant to Section 610.

<PAGE>

(2) The Trustee may resign at any time by giving written notice
thereof to the Company. If the instrument of acceptance by a successor
Trustee required by Section 610 shall not have been delivered to the
Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.

(3) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Notes delivered to the
Trustee and the Company.

(4) If at any time:

(a) the Trustee shall fail to comply with the obligations
imposed upon it under Section 310(b) of the Trust Indenture Act
after written request therefor by the Company or any Holder of a
Note who has been a bona fide Holder of a Note for at least six
months, or

(b) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or
of its property shall be appointed or any public officer shall
take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or
liquidation,

then, in any such case, (i) the Company, by or pursuant to a Board
Resolution, may remove the Trustee, or (ii) subject to Section 315(e) of
the Trust Indenture Act, any Holder of a Note who has been a bona fide
Holder of a Note for at least six months may, on behalf of such Holder and
all others similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor Trustee.

(5) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause,
the Company, by or pursuant to a Board Resolution, shall promptly appoint a
successor Trustee and shall comply with the applicable requirements of
Section 610. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall
be appointed by Act of the Holders of a majority in principal amount of the
Outstanding Notes delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of Section 610,
become the successor Trustee and supersede the successor Trustee appointed
by the Company. If no successor Trustee shall have been so appointed by
the Company or the Holders of Notes and accepted appointment in the manner
required by Section 610, any Holder of a Note who has been a bona fide
Holder of a Note for at least six months may, on behalf of such Holder and
all others similarly

<PAGE>

situated, petition any court of competent jurisdiction for the appointment
of a successor Trustee.

(6) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee by
mailing written notice of such event by first-class mail, postage prepaid,
to the Holders of Notes as their names and addresses appear in the Note
Register. Each notice shall include the name of the successor Trustee and
the address of its Corporate Trust Office.

SECTION 610. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.

Upon the appointment hereunder of any successor Trustee, such successor
Trustee so appointed shall execute, acknowledge and deliver to the Company and
the retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties hereunder of the retiring
Trustee; but, on the request of the Company or such successor Trustee, such
retiring Trustee, upon payment of all of its charges, shall execute and deliver
an instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and shall duly assign, transfer and deliver to
such successor Trustee all property and Money held by such retiring Trustee
hereunder, subject nevertheless to its claim, if any, provided for in Section
607.

Upon request of any Person appointed hereunder as a successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts referred to in this Section.

No Person shall accept its appointment hereunder as a successor Trustee
unless at the time of such acceptance such successor Person shall be qualified
and eligible under this Article.

SECTION 611. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.

Any Corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any Corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
Corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Notes shall have been authenticated but
not delivered by the Trustee then in office, any successor by merger, conversion
or consolidation to such authenticating Trustee may adopt such authentication
and deliver the Notes so authenticated with the same effect as if such successor
Trustee had itself authenticated such Notes.

<PAGE>

SECTION 612. APPOINTMENT OF AUTHENTICATING AGENT.

The Trustee may appoint one or more Authenticating Agents acceptable to the
Company with respect to the Notes which shall be authorized to act on behalf of
the Trustee to authenticate Notes issued upon original issue, exchange,
registration of transfer, partial redemption or pursuant to Section 306, and
Notes so authenticated shall be entitled to the benefits of this Indenture and
shall be valid and obligatory for all purposes as if authenticated by the
Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Notes by the Trustee or the Trustee's certificate
of authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.

Each Authenticating Agent shall be acceptable to the Company and, except as
provided in this Indenture, shall at all times be a Corporation that would be
permitted by the Trust Indenture Act to act as trustee under an indenture
qualified under the Trust Indenture Act, is authorized under applicable law and
by its charter to act as an Authenticating Agent and has a combined capital and
surplus (computed in accordance with Section 310(a)(2) of the Trust Indenture
Act) of at least $50,000,000. If at any time an Authenticating Agent shall
cease to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect specified in this Section.

Any Corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any Corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall be the successor of
such Authenticating Agent hereunder, provided such Corporation shall be
otherwise eligible under this Section, without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating Agent.

An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of Notes,
if any, as their names and addresses appear in the Note Register. Any successor
Authenticating Agent, upon acceptance of its appointment hereunder, shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.

<PAGE>

The Company agrees to pay each Authenticating Agent from time to time
reasonable compensation for its services under this Section. If the Trustee
makes such payments, it shall be entitled to be reimbursed for such payments,
subject to the provisions of Section 607.

The provisions of Sections 308, 604 and 605 shall be applicable to each
Authenticating Agent.

If an Authenticating Agent is appointed pursuant to this Section, the Notes
may have endorsed thereon, in addition to or in lieu of the Trustee's
certificate of authentication, an alternate certificate of authentication in the
following form:

This is one of the Notes described herein.

________________________________________________
As Authenticating Agent

By______________________________________________
Authorized Signatory

Authentication Date

____________________

<PAGE>

ARTICLE SEVEN

HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.

In accordance with Section 312(a) of the Trust Indenture Act, the Company
shall furnish or cause to be furnished to the Trustee

(1) semi-annually on __________ and __________ of each year, a list,
in each case in such form as the Trustee may reasonably require, of the
names and addresses of Holders as of the applicable date, and

(2) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished,

PROVIDED, HOWEVER, that so long as the Trustee is the Note Registrar no such
list shall be required to be furnished for Notes for which the Trustee acts as
Note Registrar.

SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.

The Trustee shall comply with the obligations imposed upon it pursuant to
Section 312 of the Trust Indenture Act.

Every Holder of Notes, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company, the Trustee, any Paying Agent
or any Note Registrar shall be held accountable by reason of the disclosure of
any such information as to the names and addresses of the Holders of Notes in
accordance with Section 312 of the Trust Indenture Act, regardless of the source
from which such information was derived, and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
Section 312(b) of the Trust Indenture Act.

SECTION 703. REPORTS BY TRUSTEE.

(1) Within 60 days after May 15 of each year, if required by Section
313(a) of the Trust Indenture Act, the Trustee shall transmit, pursuant to
Section 313(c) of the Trust Indenture Act, a brief report dated as of such
May 15 with respect to any of the events specified in said Section 313(a)
which may have occurred since the later of the immediately preceding May 15
and the date of this Indenture.

(2) The Trustee shall transmit the reports required by Section 313(a)
of the Trust Indenture Act at the times specified therein.

<PAGE>

(3) Reports pursuant to this Section shall be transmitted in the
manner and to the Persons required by Sections 313(c) and 313(d) of the Trust
Indenture Act.

SECTION 704. REPORTS BY COMPANY.

The Company, pursuant to Section 314(a) of the Trust Indenture Act, shall:

(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual reports
and of the information documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Company may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934; or, if the Company is not required to file
information, documents or reports pursuant to either of said Sections, then
it shall file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934 in
respect of a Note listed and registered on a national securities exchange
as may be prescribed from time to time in such rules and regulations;
provided that notwithstanding the requirements of such rules and
regulations, so long as any Note is Outstanding the Company shall file with
the Trustee at a minimum (a) as soon as practicable, but in any event no
more than ninety (90) days, after the end of each fiscal year, copies of a
balance sheet and statements of income and retained earnings of the Company
as of the end of and for such fiscal year, audited by Independent Public
Accountants, and (b) as soon as practicable, but in any event no more than
forty-five (45) days, after the end of each quarterly fiscal period, except
for the last quarterly fiscal period in each fiscal year, a summary
statement (which need not be audited) of income and retained earnings of
the Company for such period;

(2) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company, as the case may be, with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations;

(3) transmit to the Holders of Notes within 30 days after the filing
thereof with the Trustee, in the manner and to the extent provided in
Section 313(c) of the Trust Indenture Act, such summaries of any
information, documents and reports required to be filed by the Company
pursuant to paragraphs (1) and (2) of this Section as may be required by
rules and regulations prescribed from time to time by the Commission;
provided that notwithstanding the requirements of such rules and
regulations, so long as any Note is Outstanding the Company shall transmit
to the Holders of Notes, within 30 days after the filing thereof with the
Trustee, in the manner and to the extent provided in

<PAGE>

Section 313(c) of the Trust Indenture Act, the information, documents
and other reports required to be filed by the Company pursuant to
paragraph (1) of this Section; PROVIDED FURTHER that in lieu of any
Annual Report on Form 10-K or Quarterly Report on Form 10-Q, the Company
may transmit an annual or quarterly report, respectively, containing
financial statements and an undertaking to transmit such Form 10-K or
Form 10-Q, as the case may be, to any Holder upon request; and

(4) furnish to the Trustee the Officers' Certificates and notices
required by Section 1011 hereof.

ARTICLE EIGHT

CONSOLIDATION, MERGER AND SALES

SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.

Nothing contained in this Indenture shall prevent any consolidation or
merger of the Company with or into any other Person or Persons (whether or not
affiliated with the Company), or successive consolidations or mergers in which
the Company or its successor or successors shall be a party or parties, or shall
prevent any conveyance, transfer or lease of the property of the Company as an
entirety or substantially as an entirety, to any other Person (whether or not
affiliated with the Company); PROVIDED, HOWEVER, that:

(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially
as an entirety to any Person, the entity formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance
or transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a Person organized and existing under
the laws of the United States of America, any state thereof or the District
of Columbia and shall expressly assume, by an indenture supplemental
hereto, executed by the successor Person and delivered to the Trustee, in
form satisfactory to the Trustee, the due and punctual payment of the
principal of and interest on all the Notes and the performance of every
other covenant of this Indenture on the part of the Company to be performed
or observed;

(2) immediately after giving effect to such transaction, no event
which, after notice or lapse of time, or both, would become an Event of
Default shall have occurred and be continuing; and

(3) either the Company or the successor Person shall have delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, stating
that such consolidation, merger, conveyance, transfer or lease and such
supplemental indenture comply with this

<PAGE>

Article and that all conditions precedent herein provided for relating to
such transaction have been complied with.

For purposes of this Section and Section 802, a conveyance, transfer, sale
or lease of the properties and assets of the Company "substantially as an
entirety" shall mean a conveyance, transfer or lease of properties and assets of
the Company representing 80% or more of the fair value (as determined in good
faith by the Board of Directors) of all the Company's properties and assets on
the date of such conveyance, transfer, sale or lease.

SECTION 802. SUCCESSOR PERSON SUBSTITUTED FOR COMPANY.

Upon any consolidation or merger or any conveyance, transfer or lease of
the properties and assets of the Company substantially as an entirety to any
Person in accordance with Section 801, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein;
and thereafter, except in the case of a lease to another Person, the predecessor
Person shall be released from all obligations and covenants under this Indenture
and the Notes.

ARTICLE NINE

SUPPLEMENTAL INDENTURES

SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.

Without the consent of any Holder of Notes, the Company (when authorized by
or pursuant to a Board Resolution) and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, which shall
conform with the requirements of the Trust Indenture Act as then in effect and
be in form satisfactory to the Trustee, for any of the following purposes:

(1) to evidence the succession of another Person to the Company, and
the assumption by any such successor of the covenants of the Company herein
and in the Notes; or

(2) to add to or change any of the provisions of this Indenture to
change or eliminate any restrictions on the payment of principal of or
interest on Notes or to permit or facilitate the issuance of Notes in
uncertificated form, provided any such action shall not adversely affect
the interests of the Holders of Notes in any material respect; or

<PAGE>

(3) to cure any ambiguity or to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not adversely affect the
interests of the Holders of Notes in any material respect; or

(4) to supplement any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the defeasance and
discharge of any Notes pursuant to Article Four; provided that any such
action shall not adversely affect the interests of any Holder of a Note in
any material respect; or

(5) to add to the covenants of the Company for the benefit of the
Holders of the Notes (as shall be specified in such supplemental indenture
or indentures) or to surrender any right or power herein conferred upon the
Company; or

(6) to evidence and provide acceptance of the appointment of a
successor Trustee hereunder.

SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.

With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Notes, by Act of said Holders delivered to the Company
and the Trustee, the Company (when authorized by or pursuant to a Board
Resolution), and the Trustee may enter into one or more indentures supplemental
hereto (which shall conform with the requirements of the Trust Indenture Act as
then in effect) for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Indenture or of modifying in
any manner the rights of the Holders of Notes under this Indenture; PROVIDED,
HOWEVER, that no such supplemental indenture, without the consent of the Holder
of each Outstanding Note, shall

(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, or reduce the principal amount
payable upon the redemption thereof or otherwise, or change the rate of
interest thereon, or adversely affect the right of repayment at the option
of any Holder as contemplated by Article Twelve, or change the Place of
Payment, currency in which the principal of or interest on, is payable, or
impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date or, in the case of repayment at the option of
the Holder, on or after the date for repayment), or

(2) reduce the percentage in principal amount of the Outstanding
Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or

<PAGE>

(3) modify any of the provisions of this Section, or Section 513 or
Section 1012, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Note.

It shall not be necessary for any Act of Holders of Notes under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.

SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.

As a condition to executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trust created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 315 of the Trust Indenture Act) shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.

SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.

Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of a Note theretofore or thereafter authenticated and delivered hereunder shall
be bound thereby.

SECTION 905. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES.

Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and shall if required by the Trustee,
bear a notation in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Company shall so determine, new Notes so
modified as to conform, in the opinion of the Trustee and the Company, to any
such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding Notes.

SECTION 906. EFFECT ON SENIOR INDEBTEDNESS.

No supplemental indenture shall directly or indirectly modify the
provisions of Article Thirteen in any manner which might terminate or impair the
rights and benefits of subordination provided to the holders of Senior
Indebtedness pursuant to Article Thirteen.

<PAGE>

SECTION 907. RECORD DATE.

If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
but shall not be obligated to, fix a record date for the purpose of determining
the Holders entitled to consent to any supplemental indenture, agreement or
instrument or any waiver, and shall promptly notify the Trustee of any such
record date. If a record date is fixed those Persons who were Holders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to consent to such supplemental indenture, agreement or instrument or
waiver or to revoke any consent previously given, whether or not such Persons
continue to be Holders after such record date. The record date shall be a date
no more than 30 days prior to the first solicitation of Holders generally in
connection therewith and no later than the date such solicitation is completed.
No such consent shall be valid or effective for more than six months after such
record date. Subject to applicable law, until any supplemental indenture,
agreement, instrument or waiver becomes effective, or a consent to it by a
Holder of a Note shall cease to be valid and effective as set forth in the
preceding sentence, such consent is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note.

ARTICLE TEN

COVENANTS

SECTION 1001. PAYMENT OF PRINCIPAL AND INTEREST.

The Company will duly and punctually pay the principal of and interest on
the Notes in accordance with the terms thereof and this Indenture.

SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.

The Company shall maintain in each Place of Payment an Office or Agency
where Notes may be presented or surrendered for payment, where Notes may be
surrendered for registration, transfer or exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may
be served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such Office or Agency. The
Company hereby initially designates the Corporate Trust Office of the Trustee
as its Office or Agency for each of the foregoing purposes. If at any time
the Company shall fail to maintain any such required Office or Agency or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its
agent to receive all such presentations, surrenders, notices and demands.

<PAGE>

SECTION 1003. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST.

If the Company shall at any time act as its own Paying Agent, it shall, on
or before each due date of the principal of or interest on the Notes, segregate
and hold in trust for the benefit of the Persons entitled thereto a sum of Money
sufficient to pay the principal or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein provided, and
shall promptly notify the Trustee of its action or failure so to act.

Whenever the Company shall have one or more Paying Agents, it shall, on or
prior to each due date of the principal of or interest on the Notes, deposit
with any Paying Agent a sum of Money sufficient to pay the principal or interest
so becoming due, such sum to be held in trust for the benefit of the Persons
entitled thereto, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure so to act.

The Company shall cause each Paying Agent other than the Trustee or the
Company to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent shall:

(1) hold all sums held by it for the payment of the principal of or
interest on Notes in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise disposed of as
provided in this Indenture;

(2) give the Trustee notice of any Event of Default by the Company
(or any other obligor upon the Notes) in the making of any payment of
principal or interest on the Notes; and

(3) at any time during the continuance of any such Event of Default,
upon the written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent.

The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same terms as those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such Money.

Any Money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of or interest on any
Note and remaining unclaimed for two years after such principal or interest
shall have become due and payable shall be paid to the Company on Company
Request, or (if then held by the Company) shall be discharged from such trust;
and the Holder of such Note shall thereafter, as an unsecured general creditor,
look only to the Company for payment thereof, and all liability of the Trustee
or such Paying

<PAGE>

Agent with respect to such trust Money, and all liability of the Company as
trustee thereof, shall thereupon cease.

SECTION 1004. CORPORATE EXISTENCE.

Subject to Article Eight, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate
existence, rights (charter and statutory) and franchises of the Company and its
Material Subsidiaries; PROVIDED, HOWEVER, that the foregoing shall not obligate
the Company to preserve any such right or franchise if the Company shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Material Subsidiaries and that the loss
thereof will not have a material adverse effect on the business or financial
condition of the Company and its Subsidiaries, taken as a whole.

SECTION 1005. MAINTENANCE OF PROPERTIES.

The Company will:

(1) cause its properties and the properties of its Material
Subsidiaries (other than properties obtained by the Company or any
Subsidiary through foreclosure or other resolution of any loan) used or
useful in the conduct of the business of the Company and its Subsidiaries
to be maintained and kept in good condition, repair and working order and
supplied with all necessary facilities and equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED, HOWEVER, that
the foregoing shall not prevent the Company or a Subsidiary from
discontinuing the operation and maintenance of any of its properties if
such discontinuance is, in the judgment of the Company, desirable in the
conduct of its business and will not have a material adverse effect on the
business or financial condition of the Company and its Subsidiaries, taken
as a whole;

(2) take all appropriate steps to preserve, protect and maintain the
trademarks, trade names, copyrights, licenses and permits used in the
conduct of the business of the Company and its Material Subsidiaries;
PROVIDED, HOWEVER, that the foregoing shall not prevent the Company or a
Subsidiary from selling, abandoning or otherwise disposing of any such
trademark, trade name, copyright, license or permit if such sale,
abandonment or disposition is, in the judgment of the Company, desirable in
the conduct of its business and will not have a material adverse effect on
the business or financial condition of the Company and its Subsidiaries,
taken as a whole; and

(3) The Company and each of its Material Subsidiaries shall comply
with all statutes, laws, ordinances, or government rules and regulations to
which it is subject,

<PAGE>

noncompliance with which would materially adversely affect the business or
financial condition of the Company and its Subsidiaries, taken as a whole.

SECTION 1006. RESTRICTIONS ON DIVIDENDS, REDEMPTIONS AND OTHER PAYMENTS.

The Company shall not (i) declare or pay any dividend, either in cash or
property, on any shares of its capital stock (except dividends or other
distributions payable solely in shares of capital stock of the Company), (ii)
purchase, redeem or retire any shares of its capital stock or any warrants,
rights or options to purchase or acquire any shares of its capital stock or
(iii) make any other payment or distribution, either directly or indirectly
through any Subsidiary, in respect of the Company's capital stock (such
dividends, purchases, redemptions, retirements, payments and distributions being
herein collectively called "RESTRICTED PAYMENTS") if, after giving effect
thereto,

(1) an Event of Default would have occurred; or

(2) (A) the sum of (i) such Restricted Payments plus (ii) the
aggregate amount of all Restricted Payments made during the
period after December 31, 1995 would exceed (B) the sum of (i)
$10 million plus (ii) 50% of the Company's Consolidated Net
Income for each fiscal year commencing subsequent to December 31,
1995 (with 100% reduction for a loss in any fiscal year), plus
(iii) the cumulative net proceeds received by the Company from
the issuance or sale after December 31, 1995 of capital stock of
the Company.

Notwithstanding the foregoing, the Company may make a previously-declared
Restricted Payment if the, declaration of such Restricted Payment was permitted
under this Section when made. For purposes of this Section, the amount of any
Restricted Payment payable in property shall be deemed to be the fair market
value of such property as determined by the Board of Directors of the Company.

SECTION 1007. LIMITATION ON INDEBTEDNESS FOR MONEY BORROWED.

Neither the Company nor any Subsidiary will create, incur, assume,
guarantee or become liable with respect to any Indebtedness for Money Borrowed
if, immediately after giving effect to any such creation, incurrence, assumption
or guarantee (including giving effect to the retirement of any existing
indebtedness from the proceeds of such additional Indebtedness for Money
Borrowed):

(1) The aggregate amount of Senior Recourse Indebtedness outstanding would
exceed 450% of the Company's Consolidated Capitalization;

<PAGE>

(2) The aggregate amount of Subordinated Indebtedness outstanding would
exceed 100% of the Company's Consolidated Net Worth; or

(3) The Interest Coverage Ratio would be less than 1.25 to 1 for the
preceding twelve (12) month period, on a pro forma basis as if such
additional Indebtedness for Money Borrowed had been outstanding during
the entire period.

SECTION 1008. INSURANCE.

The Company shall carry and maintain, and cause each of its Subsidiaries to
carry and maintain, insurance with financially sound and reputable insurance
companies or associations in such amounts and covering such risks as is usually
carried by similarly-situated companies engaged in similar operations and owning
similar properties in similar geographic areas in which the Company or such
Subsidiary operates, PROVIDED that such insurance is generally available at
commercially reasonable rates, and further PROVIDED that the Company may self-
insure, or insure through captive insurers or insurance cooperatives to the
extent consistent with prudent business practices. Such insurance shall be in
such amounts, contain such terms, be in such forms and be for such periods as
are customary for such similarly-situated companies in the Company's industry or
insurance markets reasonably accessible by the Company. The Company will
provide and will cause each Subsidiary to provide such information and documents
reasonably requested by the Trustee from time to time with respect to the
Company's provision for insurance. The obligations evidenced by this covenant
shall be interpreted to reflect changes in insurance practices related to the
method in which insurance risks are covered in the North American and European
markets or in any other market in which the Company or its Subsidiaries, as the
case may be, reasonably places coverage.

SECTION 1009. PAYMENT OF TAXES AND OTHER CLAIMS.

The Company will pay or discharge or cause to be paid or discharged, before
the same shall become delinquent, (1) all material taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary and (2)
all material lawful claims for labor, material and supplies which, if unpaid,
might by law become a lien upon the property of the Company or any Subsidiary;
PROVIDED, HOWEVER, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which disputed amounts adequate reserves have
been established in accordance with GAAP.

SECTION 1010. BOOKS AND RECORDS.

The Company shall, and shall cause each Material Subsidiary to, at all
times keep proper books of record and account in which proper entries shall be
made in accordance with GAAP and, to the extent applicable, regulatory
accounting principles.

<PAGE>

SECTION 1011. STATEMENT BY OFFICERS AS TO DEFAULT.

(1) The Company will deliver to the Trustee, within 45 days after the
end of each calendar quarter, an Officers' Certificate, stating whether or
not to the best knowledge of the signers thereof the Company is in default
in the performance and observance of any of the terms, provisions and
conditions of this Indenture, (other than a term, provision or condition
specifically dealt with in Clause (2) of this Section 1011) setting forth
the arithmetical computations required to show compliance with the
provisions of Sections 1006 and 1007 during the previous year, and, if the
Company shall be in default, specifying all such defaults and the nature
and status thereof of which they may have knowledge.

(2) The Company will deliver to the Trustee, within five days after
any officer eligible hereunder to sign an Officers' Certificate becomes
aware of the occurrence thereof, written notice of any event which after
notice or lapse of time or both would become an Event of Default pursuant
to Clause (4) of Section 501, or the occurrence of any Repurchase Event
pursuant to Article Fourteen hereof.

(3) The Company will promptly notify the Trustee in writing of any
material adverse change in the business or financial condition of the
Company, including any threatened or initiated litigation which could have
a material adverse effect on the Company or its business or financial
condition.

SECTION 1012. WAIVER OF CERTAIN COVENANTS.

The Company may omit in any particular instance to comply with any term,
provision or condition set forth in Sections 1004 through 1007 and 1013 through
1015 with respect to the Notes if before the time for such compliance the
Holders of at least a majority in principal amount of the Outstanding Notes, by
Act of such Holders, either shall waive such compliance in such instance or
generally shall have waived compliance with such term, provision or condition,
but no such waiver shall extend to or affect such term, provision or condition
except to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such term, provision or condition shall remain in full force and
effect.

SECTION 1013. LIMITATION ON RANKING OF FUTURE INDEBTEDNESS.

The Company will not, directly or indirectly, incur, create, assume or
guarantee any Indebtedness for Money Borrowed which is expressly subordinate in
right of payment to any Senior Indebtedness, other than Junior Indebtedness or
indebtedness that is pari passu with the Notes in right of payment. For
purposes of this Section 1013, the incurrence of Senior Indebtedness which is
unsecured shall not, because of its unsecured status, be deemed to be
subordinate in right of payment to any Senior Indebtedness which is secured.

<PAGE>

SECTION 1014. LIMITATIONS ON RESTRICTING SUBSIDIARY DIVIDENDS.

The Company shall not and shall not permit any Subsidiary of the Company
to, create or otherwise cause to become effective any consensual encumbrance or
restriction of any kind on the ability of any Subsidiary of the Company to (a)
pay dividends or make any other distribution on its capital stock, (b) pay any
indebtedness owed to the Company or any other Subsidiary of the Company or (c)
make loans, advances, or capital contributions to the Company or any other
Subsidiary of the Company except (i) as set forth in the instrument evidencing
or the agreement governing Acquired Indebtedness of any acquired entity which
becomes a Subsidiary of the Company, PROVIDED, that any restriction or
encumbrance under such instrument or agreement existed at the time of
acquisition, was not put in place in anticipation of such acquisition, and is
not applicable to any Person, other than the Person or property or assets of the
Person so acquired; (ii) by agreements and transactions permitted under Section
1006; (iii) customary provisions restricting subletting or assignment of any
lease or license of the Company or any Subsidiary of the Company; (iv) any
encumbrance or restriction arising under applicable law; (v) any encumbrance or
restriction arising under indebtedness or other agreements existing on the date
of original issuance of the Notes; (vi) any restrictions, with respect to a
Subsidiary of the Company imposed pursuant to an agreement that has been entered
into for the sale or disposition of the stock, business, assets or properties of
such Subsidiary; (vii) any encumbrance or restriction arising under the terms of
purchase money obligations, but only to the extent such purchase money
obligations restrict or prohibit the transfer of the property so acquired;
(viii) any encumbrance or restriction arising under customary non-assignment
provisions in installment purchase contracts; (ix) any encumbrance or
restriction on the ability of any Subsidiary to transfer any of its property
acquired after the date hereof to the Company or any Subsidiary that is required
by a lender to, or purchaser of any indebtedness of, such Subsidiary in
connection with a financing of the acquisition of such property (including with
respect to the purchase of asset portfolios and pursuant to the underwriting or
origination of mortgage loans) by such Subsidiary; and (x) any encumbrance or
restriction pursuant to any agreement that extends, refinances, renews or
replaces any agreement described in the foregoing clauses (i) through (ix).

SECTION 1015. LIMITATION ON TRANSACTIONS WITH AFFILIATES.

The Company shall not, and shall not permit any of its Material
Subsidiaries to, enter into any transaction (or series of related transactions),
including, without limitation, any loan, advance, guarantee or capital
contribution to, or for the benefit of, or any sale, purchase, lease, exchange
or other disposition of any property or the rendering of any service, or any
other direct or indirect payment, transfer or other disposition (a
"Transaction"), involving payments in excess of $60,000, with any Affiliate of
the Company (other than a wholly-owned Subsidiary), on terms and conditions less
favorable to the Company or such Material Subsidiary, as the case may be, than
would be available at such time in a comparable Transaction in arm's length
dealings with an unrelated Person as determined by the Board of Directors, such
approval to be evidenced by a Board Resolution.

<PAGE>

The provisions of the immediately preceding paragraph will not apply to:

(1) Restricted Payments otherwise permitted pursuant to this
Indenture;

(2) fees and compensation (including amounts paid pursuant to
employee benefit plans) paid to, and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any
Subsidiary, as determined by the Board of Directors or the senior
management thereof in the exercise of their reasonable business judgment;
or

(3) payments for goods and services purchased in the ordinary course
of business on an arms-length basis.

SECTION 1016. EXCEPTIONS TO COVENANTS.

The Company shall not, and shall not permit any Subsidiary to, take or
permit to be taken any action or fail to take any action which is permitted by
any of the covenants contained in this Indenture if such action or omission
would result in the breach of any other covenant contained in this Indenture.

ARTICLE ELEVEN

REDEMPTION OF NOTES

SECTION 1101. RIGHT OF REDEMPTION.

The Notes shall not be redeemable at the option of the Company prior to
_________, 2001. The Company may, at its option, redeem all or any part of the
Notes at any time on or after __________, 2001, at the Redemption Price of 100%
of the principal amount thereof, without premium, together with interest accrued
to the Redemption Date. Redemption of Notes at the option of the Company as
permitted hereby shall be made in accordance with the terms of such Notes and
this Article.

SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE.

The election of the Company to redeem any Notes shall be evidenced by or
pursuant to a Board Resolution. In case of any redemption at the election of
the Company of less than all of the Notes, the Company shall, at least 45 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee), notify the Trustee of such Redemption Date and
of the principal amount of Notes to be redeemed.

<PAGE>

SECTION 1103. SELECTION BY TRUSTEE OF NOTES TO BE REDEEMED.

If less than all the Notes are to be redeemed, the particular Notes to be
redeemed shall be selected not less than 30 days prior to the Redemption Date by
the Trustee from the Outstanding Notes, by such method as the Trustee shall deem
fair and appropriate and which may provide for the selection for redemption of
portions of the principal amount of Notes; PROVIDED, HOWEVER, that no such
partial redemption shall reduce the portion of the principal amount of a Note
not redeemed to less than the minimum denomination for a Note established
herein.

The Trustee shall promptly notify the Company and the Note Registrar (if
other than itself) in writing of the Notes selected for redemption and, in the
case of any Notes selected for partial redemption, the principal amount thereof
to be redeemed.

For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Notes shall relate, in the case of
any Notes redeemed or to be redeemed only in part, to the portion of the
principal of such Notes which has been or is to be redeemed.

SECTION 1104. NOTICE OF REDEMPTION.

Notice of redemption shall be given in the manner provided in Section 106,
not less than 30 nor more than 60 days prior to the Redemption Date, to the
Holders of Notes to be redeemed. Failure to give notice by mailing in the
manner herein provided to the Holder of any Notes designated for redemption as a
whole or in part, or any defect in the notice to any such Holder, shall not
affect the validity of the proceedings for the redemption of any other Notes or
portion thereof.

Any notice that is mailed to the Holder of any Notes in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
such Holder receives the notice.

All notices of redemption shall state:

(1) the Redemption Date,

(2) the Redemption Price,

(3) if fewer than all Outstanding Notes are to be redeemed, the
identification (and, in the case of partial redemption, the principal
amount) of the particular Notes to be redeemed,

(4) in case any Note is to be redeemed in part only, the notice which
relates to such Note shall state that on and after the Redemption Date,
upon surrender of such Note,

<PAGE>

the Holder of such Note will receive, without charge to such Holder, a new
Note or Notes of authorized denominations for the principal amount thereof
remaining unredeemed,

(5) that, on the Redemption Date, the Redemption Price shall become
due and payable upon each such Note or portion thereof to be redeemed and
that interest thereon shall cease to accrue on and after said date,

(6) the place or places where such Notes are to be surrendered for
payment of the Redemption Price, and

(7) the CUSIP number of such Notes, if any (or any other numbers used
by a Depository to identify such Notes).

Notice of redemption of Notes to be redeemed at the election of the Company
shall be given by the Company or, at the Company's request, by the Trustee in
the name and at the expense of the Company.

SECTION 1105. DEPOSIT OF REDEMPTION PRICE.

On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) Money, in funds
available for payment by the Trustee on the Redemption Date, in an amount
sufficient to pay the Redemption Price of, and (except if the Redemption Date
shall be an Interest Payment Date) any accrued interest on, all the Notes or
portions thereof which are to be redeemed on that date.

SECTION 1106. NOTES PAYABLE ON REDEMPTION DATE.

Notice of redemption having been given as aforesaid, the Notes so to be
redeemed shall, on the Redemption Date, become due and payable at the Redemption
Price therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such Notes
shall cease to bear interest. Upon surrender of any such Note for redemption in
accordance with said notice, such Note shall be paid by the Company at the
Redemption Price, together with any accrued interest to the Redemption Date;
PROVIDED, HOWEVER, that installments of interest on Notes whose Stated Maturity
is on or prior to the Redemption Date shall be payable to the Holders of such
Notes, or one or more Predecessor Notes, registered as such at the close of
business on the Regular Record Dates therefor according to their terms and the
provisions of Section 307.

If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal, until paid, shall bear interest from the
Redemption Date at the rate prescribed therefor in the Note.

<PAGE>

SECTION 1107. NOTES REDEEMED IN PART.

Any Note which is to be redeemed only in part shall be surrendered at any
Office or Agency for such Note (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or such
Holder's attorney duly authorized in writing), and the Company shall execute and
the Trustee shall authenticate and deliver to the Holder of such Note, without
service charge, a new Note or Notes, of any authorized denomination as requested
by such Holder in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Note so surrendered. If a Note in
global form is so surrendered, the Company shall execute, and the Trustee shall
authenticate and deliver to the Depository for such Note in global form as shall
be specified in the Company Order with respect thereto to the Trustee, without
service charge, a new Note in global form in a denomination equal to and in
exchange for the unredeemed portion of the principal of the Note in global form
so surrendered.

<PAGE>

ARTICLE TWELVE

REPAYMENT AT THE OPTION OF HOLDERS

SECTION 1201. REPAYMENT OPTION UPON DEATH OF HOLDER.

(1) Upon the death of any Holder of Notes who is a natural Person,
and upon the further receipt by the Company or the Trustee of a written
request for repayment and satisfaction of the conditions set forth in
subsection (2) below, the Company shall be required to pay, in accordance
with the terms of this Article, the Repayment Price of, and (except if the
Repayment Date shall be an Interest Payment Date) any accrued interest on
all or such portion (which portion shall be an integral multiple of $1,000
in excess of the minimum authorized denomination) of the Note or Notes held
by the deceased Holder at the date of such Holder's death as requested,
provided that the Company shall not be required to make repayment payments
aggregating more than $30,000 in principal amount (plus accrued interest)
in any calendar year on a Note or Notes held by any one deceased Holder or
aggregating more than the Maximum Annual Repayment Amount in principal
amount (plus accrued interest) in any calendar year on Notes held by any
number of deceased Holders. The "REPAYMENT PRICE" of any Note repaid
pursuant to this Article shall be 100% of the principal amount thereof.
Subject to subsection (2) below, repayment of such Notes shall be made in
the order in which requests therefor are received (subject to the aforesaid
Maximum Annual Repayment Amount limitation) within 30 days following
receipt by the Company or the Trustee of the following:

(a) a written request for repayment of the Note or Notes signed
by a duly authorized representative of the Holder, which request shall
set forth the name of the deceased Holder, the date of death of the
deceased Holder, and the principal amount of the Note or Notes to be
repaid; and

(b) the certificates representing the Note or Notes to be
repaid; and

(c) evidence satisfactory to the Company and the Trustee of the
death of such deceased Holder and the authority of the
representative to such extent as may be required by the Trustee.

Notes not repaid in any calendar year because of the Maximum Annual
Repayment Amount may be held by the Trustee at the request of the authorized
representative of the deceased Holder and repaid in subsequent years in the
order in which such Notes are received.

(2) A Note or Notes held by the deceased Holder shall not be entitled
to repayment pursuant to this Section unless all of the following
conditions are met:

<PAGE>

(a) the Notes to be repaid shall have been registered on the
Note Register in the name of the deceased Holder since the issue date
of such Notes or for a period of at least six months prior to the date
of the deceased Holder's death, whichever is less; and

(b) the Company or the Trustee shall have received a written
request for repayment within one year after the date of the deceased
Holder's death or, in the case of requests for a subsequent repayment
of a Note or Notes held by such deceased Holder, within one year after
any such preceding request; and

(c) the Company shall not, after giving effect to such
repayment, have made repayment payments aggregating more than the
Maximum Annual Repayment Amount in principal amount (plus accrued
interest) of Notes within any twelve month period; and

(d) the Company shall not, after giving effect to such
repayment, be in default with respect to any Senior Indebtedness; and

(e) the Company shall not be subject to any law, regulation,
agreement or administrative directive preventing such repayment.

(3) Authorized representatives of a Holder shall include the
following: executors, administrators or other legal representatives of an
estate; trustees of a trust; joint owners of Notes owned in joint tenancy
or tenancy by the entirety; custodians; conservators; guardians; attorneys-
in-fact; and other Persons generally recognized as having legal authority
to act on behalf of another.

(4) For purposes of this Section, the death of a natural Person
owning a Note or Notes in joint tenancy or tenancy by the entirety with
another or others shall be deemed the death of the Holder of the Note or
Notes, and the entire principal amount of the Note or Notes so held shall
be subject to repayment, together with accrued interest thereon to the
Repayment Date, in accordance with the provisions of this Article. For
purposes of this Section, the death of a natural Person owning a Note or
Notes by tenancy in common shall be deemed the death of a Holder of Note or
Notes only with respect to the deceased Holder's interest in the Note or
Notes so held by tenancy in common; except that in the event a Note or
Notes are held by husband and wife as tenants in common, the death of
either shall be deemed the death of the Holder of the Note or Notes, and
the entire principal amount of the Note or Notes so held shall be subject
to repayment in accordance with the provisions of this Article. A natural
Person who, during such Person's lifetime, was entitled to substantially
all of the beneficial interests of ownership of Notes will, upon such
Person's death, be deemed the Holder thereof for purposes of this Section,
regardless of the registered holder, if such beneficial interest can be
established to the satisfaction of the Trustee. Such beneficial interest
will be deemed to exist in typical cases of nominee

<PAGE>

ownership, ownership under the Uniform Transfers (or Gifts) to Minors
Act, community property or other joint ownership arrangements between a
husband and wife, and trust arrangements where one Person has
substantially all of the beneficial ownership interests in Notes during
such Person's lifetime. Beneficial interests shall include the power to
sell, transfer or otherwise dispose of Notes and the right to receive
the proceeds therefrom, as well as principal thereof and interest
thereon.

(5) If Notes are issued in global form (i.e., in the name of the
nominee of a Depository for purposes of book-entry transfer) the Company or
the Trustee may adopt appropriate procedures to allow beneficial owners of
Notes to obtain payment in accordance with the requirements of the
Depository in the event of a request for repayment of the Notes pursuant to
this Section.

SECTION 1202. DEPOSIT OF REPAYMENT PRICE.

Within 30 days after the receipt by the Company or the Trustee of any
request for repayment of a Note or Notes or any portion thereof duly made
pursuant to Section 1201, the Company shall deposit with the Trustee or with a
Paying Agent (or, if the Company is acting as its own Paying Agent, segregate
and hold in trust as provided in Section 1003) an amount of Money sufficient to
pay the Repayment Price of, and (except if the Repayment Date shall be an
Interest Payment Date) any accrued interest on all the Notes or portions thereof
which are to be repaid on that date.

SECTION 1203. NOTES PAYABLE ON REPAYMENT DATE.

A written request having been made as aforesaid, the Note or Notes so to be
repaid shall, on the Repayment Date, become due and payable at the Repayment
Price, and from and after such date (unless the Company shall default in the
payment of the Repayment Price and accrued interest) such Notes shall cease to
bear interest. Upon surrender of any such Note for repayment in accordance with
said request, such Note shall be paid by the Company at the Repayment Price,
together with any accrued interest to the Repayment Date; PROVIDED, HOWEVER,
that installments of interest on Notes whose Stated Maturity is on or prior to
the Repayment Date shall be payable to the Holders of such Notes, or one or more
Predecessor Notes, registered as such at the close of business on the Regular
Record Dates therefor according to their terms and the provisions of Section
307.

If any Note to be repaid shall not be so paid upon surrender thereof for
repayment, the principal, until paid, shall bear interest from the Repayment
Date at the rate prescribed therefor in the Note.

<PAGE>

SECTION 1204. NOTES REPAID IN PART.

Any Note which is to be repaid only in part shall be surrendered at any
office or Agency for such Note (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or such
Holder's attorney duly authorized in writing), and the Company shall execute and
the Trustee shall authenticate and deliver to the Holder of such Note, without
service charge, a new Note or Notes, containing identical terms and provisions,
of any authorized denomination as requested by such Holder in aggregate
principal amount equal to and in exchange for the unpaid portion of the
principal of the Note so surrendered. If a Note in global form is so
surrendered, the Company shall execute, and the Trustee shall authenticate and
deliver to the Depository for such Note in global form as shall be specified in
the Company Order with respect thereto to the Trustee, without service charge, a
new Note in global form in a denomination equal to and in exchange for the
unpaid portion of the principal of the Note in global form so surrendered.

ARTICLE THIRTEEN

SUBORDINATION OF NOTES

SECTION 1301. NOTES SUBORDINATED TO SENIOR INDEBTEDNESS.

(1) The Company covenants and agrees, and each Holder of Notes, by
such Holder's acceptance thereof, likewise covenants and agrees, and for
purposes of Section 508 consents, that the indebtedness represented by the
Notes and the payment of the principal of and interest on each and all of
the Notes is hereby expressly subordinated, to the extent and in the manner
hereinafter set forth, in right of payment to the prior payment in full of
all Senior Indebtedness.

(2) The Trustee, the Company and the Holders of Notes hereby agree
that, until all Senior Indebtedness has been paid in full, the Holders of
Notes shall be permitted to retain only the following payments of principal
and interest paid by the Company in respect of Notes (all such payments
being referred to herein as "PERMITTED PAYMENTS"), and all such payments
that are not Permitted Payments will be turned over by the Trustee or the
Holders of Notes to the holder or holders of Senior Indebtedness or any
agent therefor (a "SENIOR AGENT") for the benefit of the holder or holders
of Senior Indebtedness:

(a) principal payment of the Notes, whether (i) at the Stated
Maturity, (ii) at the Company's option as provided in Article Eleven,
(iii) as a result of the death of one or more Holders as provided in
Section 1201 or (iv) following exercise by a Holder of the repurchase
rights provided in Section 1401; provided

<PAGE>

that all such principal payments are subject to the restrictions set
forth in Section 1301(3) hereof; and

(b) payments of interest in respect of the Notes; provided that
all such principal payments are subject to the restrictions set forth
in Section 1301(3) hereof.

(3) From and after the receipt by the Trustee of a written notice
(the "Default Notice") from the holder or holders of not less than 51% in
principal amount of the outstanding Senior Indebtedness or any Senior Agent
specifying that an event of default under any Senior Indebtedness (a
"Senior Event of Default") has occurred, the Company may not make any
principal payments described in Section 1301(2)(a) or interest payments
described in Section 1301(2)(b) to the Holders of Notes and neither the
Trustee nor the Holders of not less than 25% in principal amount of the
Outstanding Notes may accelerate the maturity of such Notes as provided in
Section 502, until the first to occur of the following:

(a) such Senior Event of Default is cured, or

(b) such Senior Event of Default is waived by the holders of
such Senior Indebtedness or the Senior Agent, or

(c) the expiration of 180 days after the date the Default Notice
is received by the Trustee, if the maturity of such Senior
Indebtedness has not been accelerated at such time.

Upon payment in full of the Senior Indebtedness, payment of principal
and interest may be made to the Holders of Notes.

(4) Upon a payment or distribution to creditors of the Company in a
liquidation, dissolution, or winding up of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to
the Company or its property or an assignment for the benefit of creditors
or any marshaling of the Company's assets and liabilities:

(a) the holders of all Senior Indebtedness shall first be
entitled to receive payment of the full amount due thereon in respect
of principal and interest, or adequate provision shall be made for
such payment, before the Holders of any of the Notes are entitled to
receive any payment on account of the principal of or interest on the
indebtedness evidenced by the Notes;

(b) any payment by, or distribution of assets of, the Company of
any kind or character, whether in cash, property or securities (other
than securities of

<PAGE>

the Company as reorganized or readjusted or securities of the
Company or any other Corporation provided for by a plan of
reorganization or readjustment the payment of which is
subordinate, at least to the extent provided in this Article with
respect to the Notes, to the payment of all Senior Indebtedness,
provided that the rights of the holders of Senior Indebtedness are
not impaired by such reorganization or readjustment), to which the
Holders of any of the Notes or the Trustee would be entitled
except for the provisions of this Article shall be paid or
delivered by the person making such payment or distribution,
whether a trustee in bankruptcy, a receiver or liquidating trustee
or otherwise, directly to the holders of Senior Indebtedness or
any Senior Agent, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness held or
represented by each, to the extent necessary to make payment in
full of all Senior Indebtedness remaining unpaid after giving
effect to any concurrent payment or distribution (or provision
therefor) to the holders of such Senior Indebtedness, before any
payment or distribution is made to the Holders of the indebtedness
veidenced by the Notes or to the Trustee under this Indenture; and

(c) in the event that, notwithstanding the foregoing, any
payment by, or distribution of assets of, the Company of any kind or
character, whether in cash, property or securities (other than
securities of the Company as reorganized or readjusted or securities
of the Company or any other Corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at
least to the extent provided in this Article with respect to the
Notes, to the payment of all Senior Indebtedness, provided that the
rights of the holders of Senior Indebtedness are not impaired by such
reorganization or readjustment), shall be received by the Trustee or
the Holders of any of the Notes before all Senior Indebtedness is paid
in full, such payment or distribution shall be paid over to the
holders of such Senior Indebtedness or any Senior Agent, ratably as
aforesaid, for application to the payment of all Senior Indebtedness
remaining unpaid until all such Senior Indebtedness shall have been
paid in full, after giving effect to any concurrent payment or
distribution (or provision therefor) to the holders of such Senior
Indebtedness.

(5) The Holders and the Trustee acknowledge that the holders of
Senior Indebtedness and the Holders of Notes, respectively, are entitled to
exercise certain rights and powers with respect to the Company from time to
time, whether before or after an occurrence of an Event of Default, and the
exercise of any such right or power by one creditor may preclude the
exercise of a similar right or power by one or more other creditors (any
such right or power being herein called an "Exclusive Power"). To the
extent that any holder or holders of Senior Indebtedness or any Senior
Agent actually exercises any Exclusive Power, then the Trustee and the
Holders of Notes agree to refrain from exercising any substantially similar
Exclusive Power to the extent necessary to permit the holders of Senior
Indebtedness to benefit from their actions.

<PAGE>

(6) No amendment, modification, extension, replacement, restatement
or substitution of the Senior Indebtedness, or of any agreement or note now
or hereafter in effect pertaining to such Senior Indebtedness, shall
nullify, impair, limit, alter or modify the provisions of Article 13 of
this Indenture.

(7) Notices to holders of Senior Indebtedness shall be made to each
holder of Senior Indebtedness or, if holders of Senior Indebtedness have
appointed a Senior Agent, then to such Senior Agent, and shall be made in
the manner specified in the document evidencing such holder's Senior
Indebtedness if such a manner is so specified therein.

SECTION 1302. SUBROGATION.

Subject to the payment in full of all Senior Indebtedness, the Holders of
the Notes shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments or distributions of cash, property or Notes of
the Company applicable to such Senior Indebtedness until all amounts owing on
the Notes shall be paid in full, and, as between the Company, its creditors
other than holders of Senior Indebtedness, and the Holders of the Notes, no such
payment or distribution made to the holders of Senior Indebtedness by virtue of
this Article which otherwise would have been made to the Holders of the Notes
shall be deemed to be a payment by the Company on account of the Senior
Indebtedness, and no such payments or distributions to the Holders of the Notes
of cash, property or Notes otherwise distributable to the holders of Senior
Indebtedness shall, as between the Company, its creditors other than the holders
of Senior Indebtedness, and the Holders of the Notes, be deemed to be a payment
by the Company on account of the Notes, it being understood that the provisions
of this Article are and are intended solely for the purpose of defining the
relative rights of the Holders of the Notes, on the one hand, and the holders of
Senior Indebtedness, on the other hand.

SECTION 1303. OBLIGATION OF COMPANY UNCONDITIONAL.

Nothing contained in this Article or elsewhere in this Indenture or in the
Notes is intended to or shall impair, as between the Company, its creditors
other than the holders of Senior Indebtedness, and the Holders of the Notes, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders of the Notes the principal of and interest on the Notes as and when the
same shall become due and payable in accordance with their terms, or is intended
to or shall affect the relative rights of the Holders of the Notes and creditors
of the Company other than the holders of Senior Indebtedness, nor shall anything
herein or therein prevent the Trustee or the Holder of any Note from exercising
all remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article of the holders of
Senior Indebtedness in respect of cash, property or Notes of the Company
received upon the exercise of any such remedy.

Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee and the Holders of the Notes shall be entitled to rely
upon any order or decree made by

<PAGE>

any court of competent jurisdiction in which any such dissolution, winding
up, liquidation or reorganization proceeding affecting the affairs of the
Company is pending or upon a certificate of the trustee in bankruptcy,
receiver, assignee for the benefit of creditors, liquidating trustee or agent
or other person making any payment or distribution, delivered to the Trustee
or to the Holders of the Notes, for the purpose of ascertaining the persons
entitled to participate in such payment or distribution, the holders of the
Senior Indebtedness and other indebtedness of the Company, the amount thereof
or payable thereon, the amount paid or distributed thereon and all other
facts pertinent thereto or to this Article.

SECTION 1304. PAYMENTS ON NOTES PERMITTED.

Nothing contained in this Article or elsewhere in this Indenture, or in any
of the Notes, shall affect the obligation of the Company to make, or prevent the
Company from making, payment of the principal of and interest on the Notes in
accordance with the provisions hereof and thereof, except as otherwise provided
in this Article.

SECTION 1305. EFFECTUATION OF SUBORDINATION BY TRUSTEE.

Each Holder of Notes, by such Holder's acceptance thereof, authorizes and
directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article and appoints the Trustee such Holder's attorney-in-fact for any and all
such purposes.

SECTION 1306. NOTICE TO TRUSTEE AND KNOWLEDGE OF TRUSTEE.

Notwithstanding the provisions of this Article or any other provisions of
this Indenture, the Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment of Moneys
to or by the Trustee, or the taking of any other action by the Trustee, unless
and until the Trustee shall have received written notice thereof from the
Company, any Holder of Notes, any Paying Agent of the Company or the holder or
representative of any class of Senior Indebtedness.

The Company shall give written notice to the Trustee of any fact known to
the Company which would prohibit the making of any payment to or by the Trustee
in respect of the Notes. Prior to the receipt of such notice, the Trustee shall
be entitled in all respects to assume that no such facts exist.

<PAGE>

SECTION 1307. TRUSTEE MAY HOLD SENIOR INDEBTEDNESS.

The Trustee shall be entitled to all the rights set forth in this Article
with respect to any Senior Indebtedness at the time held by it, to the same
extent as any other holder of Senior Indebtedness, and nothing in this Indenture
shall deprive the Trustee of any of its rights as such holder.

SECTION 1308. RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS NOT IMPAIRED.

No right of any present or future holder of any Senior Indebtedness to
enforce the subordination herein shall at any time or in any way be prejudiced
or impaired by any act or failure to act on the part of the Company or by any
non-compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.

ARTICLE FOURTEEN

RIGHT TO REQUIRE REPURCHASE

SECTION 1401. RIGHT TO REQUIRE REPURCHASE.

In the event that there shall occur a Repurchase Event (as defined in
Section 1407), then each Holder shall have the right, at such Holder's option,
to require the Company to purchase, and upon the exercise of such right, the
Company shall purchase, all or any part of such Holder's Notes on the date (the
"Repurchase Date") that is 30 days after the date the Company gives notice of
the Repurchase Event as contemplated in Section 1402(a) at a price (the
"Repurchase Price") equal to 100% of the principal amount thereof, together with
accrued and unpaid interest to the Repurchase Date. Such right to require the
repurchase of Notes shall not continue after a discharge of the Company from its
obligations with respect to the Notes in accordance with Article Four.

SECTION 1402. NOTICE; METHOD OF EXERCISING REPURCHASE RIGHT.

(1) On or before the 15th day after the Repurchase Event, the
Company, or, upon Company Request transmitted to the Trustee within 5
days of such Repurchase Event, the Trustee (in the name and at the
expense of the Company), shall give notice of the occurrence of the
Repurchase Event and of the repurchase right set forth herein arising
as a result thereof by first-class mail, postage prepaid, to each
Holder of the Notes at such Holder's address appearing in the Note
Register. The Company shall also deliver a copy of such notice of a
repurchase right to the Trustee.

<PAGE>

Each notice of a repurchase right shall state:

(a) that the notice is being made pursuant to Section 1401 and a
description of the circumstances triggering the repurchase
right,

(b) the Repurchase Date,

(d) the Repurchase Price,

(e) the instructions a Holder must follow to exercise a
repurchase right, and

No failure of the Company to give the foregoing notice shall
limit any Holder's right to exercise a repurchase right. The Trustee
shall have no affirmative obligation to determine if there shall have
occurred a Repurchase Event.

(2) To exercise the repurchase right, a Holder shall deliver to
the Company (or an agent designated by the Company for such purpose in
the notice referred to in (1) above) and to the Trustee on or before
the fifteenth (15th) day prior to the Repurchase Date (i) written
notice of the Holder's exercise of such right, which notice shall set
forth the name of the Holder, the principal amount of the Note or
Notes (or portion of a Note) to be repurchased, and a statement that
an election to exercise the repurchase right is being made thereby,
and (ii) the Note or Notes with respect to which the repurchase right
is being exercised, duly endorsed for transfer to the Company. Such
written notice shall be irrevocable following the close of business on
the fifth (5th) day prior to the Repurchase Date; PROVIDED, HOWEVER,
that the Company, in its sole and absolute discretion, may consent to
the withdrawal of any Notes after such date and prior to the
Repurchase Date. If the Repurchase Date falls between any Regular
Record Date and the next succeeding Interest Payment Date, Notes to be
repurchased must be accompanied by a check from the Holder of an
amount equal to the interest thereon which the registered Holder
thereof is to receive on such Interest Payment Date. Upon receipt of
any such check, the Trustee shall forward such check to the Company.

(3) In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall on the Repurchase
Date pay or cause to be paid in cash to the Holder thereof the
Repurchase Price of the Note or Notes as to which the repurchase right
had been exercised. In the event that a repurchase right is exercised
with respect to less than the entire principal amount of a surrendered

<PAGE>

Note, the Company shall execute and deliver to the Trustee and the
trustee shall authenticate for issuance in the name of the Holder a
new Note or Notes in the aggregate principal amount of the
unrepurchased portion of such surrendered Note.

SECTION 1403. DEPOSIT OF REPURCHASE PRICE.

On or before the Repurchase Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money, which shall be good funds on the Repurchase Date, sufficient to pay the
Repurchase Price of the Notes which are to be repurchased on the Repurchase
Date.

SECTION 1404. NOTES NOT REPURCHASED ON REPURCHASE DATE.

If a Note surrendered for repurchase shall not be so paid on the Repurchase
Date, the principal shall, until paid, bear interest to the extent permitted by
applicable law from the Repurchase Date at a rate per annum borne by such Note.

SECTION 1405. NOTES REPURCHASED IN PART.

Any Note which is to be repurchased only in part shall be surrendered at
any office or agency of the Company designated for that purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Note without service charge, a new Note or
Notes of any authorized denomination as requested by such Holder, in aggregate
principal amount equal to and in exchange for the unrepurchased portion of the
principal of the Note so surrendered.

SECTION 1406. PRIORITY OF REPURCHASE RIGHTS.

If the Repurchase Event is effected with respect to Junior Indebtedness,
the Holders of the Notes requiring the Company to repurchase Notes must be paid
in full pursuant to the terms and conditions of this Article Fourteen prior to
any payments being made to the Holders of Junior Indebtedness. If the
Repurchase Event is effected with respect to Subordinated Indebtedness that is
pari passu with the Notes, the Holders of the Notes requiring the Company to
repurchase Notes must be paid concurrently with the Holders of the pari passu
Subordinated Indebtedness.

SECTION 1407. DEFINITION OF REPURCHASE EVENT.

For purposes of this article, a "Repurchase Event" shall have
occurred upon the occurrence of any event requiring that the Company
repurchase, or make an offer to repurchase,

<PAGE>

any Subordinated Indebtedness, whether now outstanding or issued in the
future, other than the Notes, including, without limitation, the
repurchase options contained in the Section 1010 and Article Fourteen of
the Indenture dated as of November 27, 1995 between the Company and
First Interstate Bank of Texas, National Association, issued with
respect to the Company's 8% Convertible Subordinated Debentures Due 2005.

* * * * *

This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals, if any, to be hereunto
affixed, all as of the day and year first above written.

[SEAL] AMRESCO, INC.

By______________________________________
Name:
Title:

Attest:

____________________________________

[SEAL] BankOne, Columbus, N.A., as Trustee

By_______________________________________
Name:
Title:

Attest:

____________________________________

<PAGE>

STATE OF __________ )
) SS.:
COUNTY OF ________ )

On the _______ day of __________________________, 199_, before me
personally came ___________________________, to me known, who, being by me
duly sworn, did depose and say that he is the __________________ of AMRESCO,
INC., a Delaware corporation, one of the persons described in and who executed
the foregoing instrument; that he knows the seal of said Corporation; that the
seal affixed to said instrument is such Corporation's seal; that it was so
affixed by authority of the Board of Directors of said Corporation; and that he
signed his name thereto by like authority.

________________________________________
Notary Public

[NOTARIAL SEAL]

STATE OF _________ )
) SS.
COUNTY OF ________ )

On the ___________ day of_______________________, 199_, before me
personally came ____________________________, to me known, who, being by me duly
sworn, did depose and say that he is a _______________________ of BankOne,
Columbus, N.A., a national banking corporation organized and existing under the
laws of this United States, one of the persons described in and who executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such Corporation's seal; that it was so affixed by
authority of the Board of Directors of said Corporation; and that he signed his
name to said instrument by authority of the Board of Directors of said
corporation.

________________________________________
Notary Public

[NOTARIAL SEAL]

<PAGE>

EXHIBIT 5.1

[AMRESCO, INC. LETTERHEAD]

December 21, 1995

AMRESCO, INC.
1845 Woodall Rodgers Freeway
Suite 1700
Dallas, Texas 75201

Re: Registration on Form S-3 of $57,500,000 in aggregate principal amount
of Senior Subordinated Notes due 2003

Gentlemen:

I am general counsel of AMRESCO, INC., a Delaware corporation (the
"Company"), and have acted as such in connection with the registration and
sale under the Securities Act of 1933, as amended (the "Securities Act"), of
up to $57,500,000 in aggregate principal amount of Senior Subordinated Notes
due 2003 (the "Notes") pursuant to an Indenture (the "Indenture") to be
entered into between Bank One, Columbus, N.A. (the "Trustee") and the
Company. The Notes are being registered pursuant to a Registration Statement
on Form S-3 (the Registration Statement, as amended or supplemented, is
hereinafter referred to as the "Registration Statement") filed with the
Securities and Exchange Commission under the Securities Act. The Notes are
being sold pursuant to a Purchase Agreement (the "Purchase Agreement") to be
entered into between the Company and Piper Jaffray Inc. and certain other
underwriters to be named in the Purchase Agreement (the "Underwriters").

I have examined such documents, records and matters of law as I have
deemed necessary for the purposes of this opinion. Based upon the foregoing,
and having due regard for such legal considerations as I deem relevant, I am
of the opinion that when (a) the Indenture has been duly executed by the
parties thereto and (b) the Notes have been duly executed and delivered by
the Company, authenticated by the Trustee and issued in accordance with the
terms of the Indenture and the Purchase Agreement against payment of the
consideration therefor, the Notes will be valid and legally binding
obligations of the Company, enforceable in accordance with their terms except
as enforceability may be limited by (1) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect
affecting the rights of creditors generally, (2) provisions of applicable law
pertaining to the voidability of preferential or fraudulent transfers

<PAGE>

AMRESCO, INC.
December 21, 1995
Page 2

and conveyances and (3) the fact that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought. In addition, certain other provisions of the Notes
may be unenforceable in whole or in part under the laws (including judicial
decisions) of the State of Texas or the United States of America; provided,
however, that the inclusion of any such provisions and any limitations
imposed by such laws on the enforceability of the Notes will not affect the
validity or enforceability as a whole of any of the Notes and will not
prevent the holders thereof from the ultimate realization of the practical
rights and benefits afforded by such documents, except for the economic
consequences of any judicial, administrative or other procedural delay which
may result from the application of any such law.

With respect to the Indenture, I advise you that when the Registration
Statement is declared effective under the Securities Act, the Indenture will
be deemed to have been qualified under the Trust Indenture Act of 1939, as
amended.

In rendering the foregoing opinions, I have relied as to certain factual
matters upon certificates of officers of the Company and public officials,
and I have not independently checked or verified the accuracy of the
statements contained therein.

The opinions expressed above are specifically limited to the laws of the
State of Texas, the General Corporation Laws, as amended, of the State of
Delaware, and the federal laws of the United States of America.

I hereby consent to the filing of this opinion with the Securities and
Exchange Commission as Exhibit 5.1 to the Registration Statement and to the
reference to me under the caption "Legal Matters" in the Prospectus
constituting a part of the Registration Statement.

Very truly yours,

/s/ L. KEITH BLACKWELL

L. Keith Blackwell
General Counsel and Secretary

<PAGE>

AMRESCO, INC.
EXHIBIT 12.1 - COMPUTATION OF RATIOS

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES:

NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- ------------------
1992(1) 1993 1994(2) 1994(2) 1995
-------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
FIXED CHARGES:
Interest expense $ 19 $ 754 $ 1,768 $ 1,696 $ 2,771
------- ------- -------- ------- -------
------- ------- -------- ------- -------

EARNINGS:
Net income 22,233 24,218 18,748 18,680 14,855
Add:
Discounted operations 1,063 2,088 2,185 976 (2,425)
Income tax expense 10,730 17,371 14,753 13,874 7,541
Fixed charges 19 754 1,768 1,696 2,771
------- ------- -------- ------- -------
Total earnings $34,045 $44,431 $37,454 $35,226 $22,742
------- ------- -------- ------- -------
------- ------- -------- ------- -------

RATIO OF EARNINGS TO FIXED CHARGES See note (3) 58.9x 21.2x 20.8x 8.2x
------- -------- ------- -------
------- -------- ------- -------

COMPUTATION OF INTEREST COVERAGE RATIO:

EBITDA(4):
Income from continuing operations $23,296 $26,306 $20,933 $19,656 $12,430
Income tax expense 10,730 17,371 14,753 13,874 7,541
Interest expense 19 754 1,768 1,696 2,771
Depreciation and amortization expense 6,249 1,237 5,723 2,099 2,694
------- ------- ------- ------- -------
EBITDA $40,294 $45,668 $43,177 $37,325 $25,436
------- ------- -------- ------- -------
------- ------- -------- ------- -------
INTEREST EXPENSE $ 19 $ 754 $ 1,768 $ 1,696 $ 2,771
------- ------- -------- ------- -------
------- ------- -------- ------- -------
INTEREST COVERAGE RATIO See note (3) 60.6x 24.4x 22.0x 9.2x
------- -------- ------- -------
------- -------- ------- -------
</TABLE>

(1) Includes the Company's operations for the two months ended December 31,
1992, and the combined operations of its predecessor entities for the ten
months ended October 31, 1992.

(2) Summary Income Statement and Other Data for the fiscal year ended
December 31, 1994, and the nine months ended September 30, 1994, reflect
data for Holliday Fenoglio effective August 1, 1994, the effective date
of its acquisition by the Company.

(3) The Company had nominal interest expense in 1992 and it was not
meaningful, therefore, to calculate these ratios for the year ended
December 31, 1992.

(4) The Company has included information concerning EBITDA because EBITDA is
one measure of an issuer's historical ability to service its debt. EBITDA
should not be considered as an alternative to, or more meaningful than,
net income as an indicator of the Company's operating performance or to
cash flows as a measure of liquidity.

<PAGE>

EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of AMRESCO, INC. on Form
S-3 of our report dated February 6, 1995 on AMRESCO, INC. and of our report
dated March 26, 1993 on AMRESCO (predecessor businesses), included and
incorporated by reference in the Annual Report on Form 10-K of AMRESCO, INC.
for the year ended December 31, 1994, and to the use of our report dated
February 6, 1995 on AMRESCO, INC. and of our report dated March 26, 1993 on
AMRESCO (predecessor businesses), appearing in the Prospectus, which is part
of this Registration Statement. We also consent to the reference to us under
the headings "Summary Financial and Other Data" and "Independent Accountants"
in such Prospectus.

/s/ DELOITTE & TOUCHE LLP
Dallas, Texas

December 21, 1995

<PAGE>

EXHIBIT 24.1

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Robert H. Lutz, Jr., Robert L. Adair
III and L. Keith Blackwell, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, acting alone, to sign, execute
and file with the Securities and Exchange Commission and any state securities
regulatory board or commission any documents relating to the proposed
issuance and registration of the securities offered pursuant to the
Registration Statement of AMRESCO, INC. on Form S-3 under the Securities Act
of 1933, including any amendment or amendments relating thereto, with all
exhibits and any and all documents required to be filed with respect thereto
with any regulatory authority, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises in order to effectuate the same as fully to all intents and purposes
as he might or could do if personally present, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROBERT H. LUTZ, JR. Chairman of the Board and December 21, 1995
- --------------------------- Chief Executive Officer
Robert H. Lutz, Jr.

/s/ ROBERT L. ADAIR III Director, President and December 21, 1995
- --------------------------- Chief Operating Officer
Robert L. Adair III

/s/ BARRY L. EDWARDS Executive Vice President and December 21, 1995
- --------------------------- Chief Financial Officer
Barry L. Edwards (Principal Financial Officer)

/s/ JAMES P. COTTON, JR. Director December 21, 1995
- ---------------------------
James P. Cotton, Jr.

/s/ RICHARD L. CRAVEY Director December 21, 1995
- ---------------------------
Richard L. Cravey

Director December 21, 1995
- ---------------------------
Gerald E. Eickhoff

/s/ WILLIAM S. GREEN Director December 21, 1995
- ---------------------------
William S. Green

</TABLE>

<PAGE>

<TABLE>
<S> <C> <C>
/s/ AMY J. JORGENSEN Director December 21, 1995
- ---------------------------
Amy J. Jorgensen

/s/ JOHN J. MCDONOUGH Director December 21, 1995
- ---------------------------
John J. McDonough

/s/ BRUCE W. SCHNITZER Director December 21, 1995
- ---------------------------
Bruce W. Schnitzer

/s/ RONALD B. KIRKLAND Vice President and Chief December 21, 1995
- --------------------------- Accounting Officer
Ronald B. Kirkland (Principal Accounting Officer)

</TABLE>

<PAGE>

Registration No.

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

FORM T-1

STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE

BANK ONE, COLUMBUS, N.A.

Not Applicable 31-4148768
(State of Incorporation (I.R.S. Employer
if not a national bank) Identification No.)

100 East Broad Street, Columbus, Ohio 43271-0181
(Address of trustee's principal (Zip Code)
executive offices)

Victoria Pavlick
c/o Bank One Trust Company, NA
100 East Broad Street
Columbus, Ohio 43271-0181
(614) 248-6180
(Name, address and telephone number of agent for service)

____________________

AMRESCO, INC.
(Exact name of obligor as specified in its charter)

Delaware 59-1781257
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)

1845 Woodall Rodgers Freeway 75201
Dallas, Texas (Zip Code)
(Address of principal executive
offices)

SENIOR SUBORDINATED NOTES DUE 2003

(Title of the Indenture securities)
<PAGE>

GENERAL

1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:

(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.

Comptroller of the Currency, Washington, D.C.

Federal Reserve Bank of Cleveland, Cleveland, Ohio

Federal Deposit Insurance Corporation, Washington, D.C.

The Board of Governors of the Federal Reserve System, Washington, D.C.

(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

The trustee is authorized to exercise corporate trust powers.

2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.

The obligor is not an affiliate of the trustee.

16. LIST OF EXHIBITS
LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY
AND QUALIFICATION. (EXHIBITS IDENTIFIED IN PARENTHESES, ON FILE WITH THE
COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS EXHIBITS HERETO.)

Exhibit 1 - A copy of the Articles of Association of the trustee as now in
effect.

Exhibit 2 - A copy of the Certificate of Authority of the trustee to commence
business, see Exhibit 2 to Form T-1, filed in connection with Form S-3 relating
to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003, Securities and
Exchange Commission File No. 33-50709.

Exhibit 3 - A copy of the Authorization of the trustee to exercise corporate
trust powers, see Exhibit 3 to Form T-1, filed in connection with Form S-3
relating to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003,
Securities and Exchange Commission File No. 33-50709.

Exhibit 4 - A copy of the Bylaws of the trustee as now in effect.

Exhibit 5 - Not applicable.

Exhibit 6 - The consent of the trustee required by Section 321(b) of the Trust
Indenture Act of 1939, as amended.

Exhibit 7 - Report of Condition of the trustee as of the close of business on
September 30, 1995, published pursuant to the requirements of the Comptroller of
the Company.

Exhibit 8 - Not applicable.

Exhibit 9 - Not applicable.

Items 3 through 15 are not answered pursuant to General Instruction B which
requires responses to Item 1, 2 and 16 only, if the obligor is not in default.

<PAGE>

SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, Bank One, Columbus, N.A., a national banking
association organized under the National Banking Act, has duly caused this
statement of eligibility and qualification to be signed on its behalf by the
undersigned, thereunto duly authorized, all in Columbus, Ohio, on December
19, 1995.

Bank One, Columbus, N.A.

By: /s/ Victoria Pavlick
---------------------------------
Victoria Pavlick
Authorized Signer

<PAGE>

Exhibit 1

BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLES OF ASSOCIATION

For the purpose of organizing an association to carry on the business of
banking under the laws of the United States, the following Articles of
Association are entered into:

FIRST. The title of this Association shall be BANK ONE, COLUMBUS, NATIONAL
ASSOCIATION.

SECOND. The main office of the Association shall be in Columbus, County of
Franklin, State of Ohio. The general business of the Association shall be
conducted at its main office and its branches.

THIRD. The Board of Directors of this Association shall consist of not less
than five nor more than twenty-five Directors, the exact number of Directors
within such minimum and maximum limits to be fixed and determined from
time-to-time by resolution of the shareholders at any annual or special meeting
thereof, provided, however, that the Board of Directors, by resolution of a
majority thereof, shall be authorized to increase the number of its members by
not more than two between regular meetings of the shareholders. Each Director,
during the full term of his directorship, shall own, as qualifying shares, the
minimum number of shares of either this Association or of its parent bank
holding company in accordance with the provisions of applicable law. Unless
otherwise provided by the laws of the United States, any vacancy in the Board of
Directors for any reason, including an increase in the number thereof, may be
filled by action of the Board of Directors.

FOURTH. The annual meeting of the shareholders for the election of
Directors and the transaction of whatever other business may be brought before
said meeting shall be held at the main office of this Association or such other
place as the Board of Directors may designate, on the day of each year specified
therefor in the By-Laws, but if no election is held on that day, it may be held
on any subsequent business day according to the provisions of law; and all
elections shall be held according to such lawful regulations as may be
prescribed by the Board of Directors.

FIFTH. The authorized amount of capital stock of this Association shall be
2,073,750 shares of common stock of the par value of Ten Dollars ($10) each; but
said capital stock may be increased or decreased from time-to-time, in
accordance with the provisions of the laws of the United States.

No holder of shares of the capital stock of any class of the Association
shall have the preemptive or preferential right of subscription to any share of
any class of stock of this Association, whether now or hereafter authorized or
to any obligations convertible into stock of this Association, issued or sold,
nor any right of subscription to any thereof other than such, if any, as the
Board of Directors, in its discretion, may from time-to-time determine and at
such price as the Board of Directors may from time-to-time fix.

This Association, at any time and from time-to-time, may authorize and
issue debt obligations, whether or not subordinated, without the approval of the
shareholders.

SIXTH. The Board of Directors shall appoint one of its members President of
the Association, who shall be Chairman of the Board, unless the Board appoints
another director to be the Chairman. The Board of Directors shall have the
power to appoint one or more Vice Presidents and to appoint a Secretary and such
other officers and employees as may be required to transact the business of this
Association.

The Board of Directors shall have the power to define the duties of the
officers and employees of this Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of this
Association shall be made; to manage and administer the business and affairs of
this Association; to make all By-Laws that it may be lawful for them to make;
and generally to do and perform all acts that it may be legal for a Board of
Directors to do and perform.

SEVENTH. The Board of Directors shall have the power to change the location
of the main office to any other place within the limits of the City of Columbus,
Ohio, without the approval of the shareholders but subject to the approval of
the Comptroller of the Currency; and shall have the power to establish or change
the location of any branch or branches of this Association to any other
location, without the approval of the shareholders but subject to the approval
of the Comptroller of the Currency.

EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.

NINTH. The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than 10 percent of the stock of
this Association, may call a special meeting of shareholders at any time.
Unless otherwise provided by the laws of the United States, a notice of the
time, place and purpose of every annual and special meeting of the shareholders
shall be given by first-class mail, postage prepaid, mailed at least ten days
prior to the date of such meeting to each shareholder of record at his address
as shown upon the books of this Association.

TENTH. Every person who is or was a Director, officer or employee of the
Association or of any other corporation which he served as a Director, officer
or employee at the request of the Association as part of his regularly assigned
duties may be indemnified by the Association in accordance with the provisions
of this paragraph against all liability (including, without limitation,
judgments, fines, penalties and settlements) and all reasonable expenses
(including, without limitation, attorneys' fees and investigative expenses) that
may be incurred or paid by him in connection with any claim, action, suit or
proceeding, whether civil, criminal or administrative (all referred to hereafter
in this paragraphs as "Claims") or in connection with any appeal relating
thereto in which he may become involved as a party or otherwise or with which he
may be threatened by reason of his being or having been a Director, officer or
employee of the Association or such other corporation, or by reason of any
action taken or omitted by him in his capacity as such Director, officer or
employee, whether or not he continues to be such at the time such liability or
expenses are incurred, provided that nothing contained in this paragraph shall
be construed to permit indemnification of any such person who is adjudged guilty
of, or liable for, willful misconduct, gross neglect of duty or criminal acts,
unless, at the time such indemnification is sought, such indemnification in such
instance is permissible under applicable law and regulations, including
published rulings of the Comptroller of the Currency or other appropriate
supervisory or regulatory authority, and provided further that there shall be no
indemnification of directors, officers, or employees against expenses,
penalties, or other payments incurred in an administrative proceeding or action
instituted by an appropriate regulatory agency which proceeding or action
results in a final order assessing civil money penalties or requiring
affirmative action by an individual or individuals in the form of payments to
the Association. Every person who may be indemnified under the provisions of
this paragraph and who has been wholly successful on the merits with respect to
any Claim shall be entitled to indemnification as of right. Except as provided
in the preceding sentence, any indemnification under this paragraph shall be at
the sole discretion of the Board of Directors and shall be made only if the
Board of Directors or the Executive Committee acting by a quorum consisting of
Directors who are not parties to such Claim shall find or if independent legal
counsel (who may be the regular counsel of the Association) selected by the
Board of Directors or Executive Committee whether or not a disinterested quorum
exists shall render their opinion that in view of all of the circumstances then
surrounding the Claim, such indemnification is equitable and in the best
interests of the Association. Among the circumstances to be taken into
consideration in arriving at such a finding or opinion is the existence or
non-existence of a contract of insurance or indemnity under which the
Association would be wholly or partially reimbursed for such indemnification,
but the existence or non-existence of such insurance is not the sole
circumstance to be considered nor shall it be wholly determinative of whether
such indemnification shall be made. In addition to such finding or opinion, no
indemnification under this paragraph shall be made unless the Board of Directors
or the Executive Committee acting by a quorum consisting of Directors who are
not parties to such Claim shall find or if independent legal counsel (who may be
the regular counsel of the Association) selected by the Board of Directors or
Executive Committee whether or not a disinterested quorum exists shall render
their opinion that the Director, officer or employee acted in good faith in what
he reasonably believed to be the best interests of the Association or such other
corporation and further in the case of any criminal action or proceeding, that
the Director, officer or employee reasonably believed his conduct to be lawful.
Determination of any Claim by judgment adverse to a Director, officer or
employee by settlement with or without Court approval or conviction upon a plea
of guilty or of NOLOCONTENDERE or its equivalent shall not create a presumption
that a Director, officer or employee failed to meet the standards of conduct set
forth in this paragraph. Expenses incurred with respect to any Claim may be
advanced by the Association prior to the final disposition thereof upon receipt
of an undertaking satisfactory to the Association by or on behalf of the
recipient to repay such amount unless it is ultimately determined that he is
entitled to indemnification under this paragraph. The rights of indemnification
provided in this paragraph shall be in addition to any rights to which any
Director, officer or employee may otherwise be entitled by contract or as a
matter of law. Every person who shall act as a Director, officer or employee of
this Association shall be conclusively presumed to be doing so in reliance upon
the right of indemnification provided for in this paragraph.

<PAGE>

ELEVENTH. These Articles of Association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount.

<PAGE>

Exhibit 1

BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLES OF ASSOCIATION

For the purpose of organizing an association to carry on the business of
banking under the laws of the United States, the following Articles of
Association are entered into:

FIRST. The title of this Association shall be BANK ONE, COLUMBUS, NATIONAL
ASSOCIATION.

SECOND. The main office of the Association shall be in Columbus, County of
Franklin, State of Ohio. The general business of the Association shall be
conducted at its main office and its branches.

THIRD. The Board of Directors of this Association shall consist of not
less than five nor more than twenty-five Directors, the exact number of
Directors within such minimum and maximum limits to be fixed and determined from
time-to-time by resolution of the shareholders at any annual or special meeting
thereof, provided, however, that the Board of Directors, by resolution of a
majority thereof, shall be authorized to increase the number of its members by
not more than two between regular meetings of the shareholders. Each Director,
during the full term of his directorship, shall own, as qualifying shares, the
minimum number of shares of either this Association or of its parent bank
holding company in accordance with the provisions of applicable law. Unless
otherwise provided by the laws of the United States, any vacancy in the Board of
Directors for any reason, including an increase in the number thereof, may be
filled by action of the Board of Directors.

<PAGE>

laws of the United States.

This Association, at any time and from time-to-time, may authorize and
issue debt obligations, whether or not subordinated, without the approval of the
shareholders.

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<PAGE>

EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.

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<PAGE>

penalties or requiring affirmative action by an individual or individuals in
the form of payments to the Association. Every person who may be indemnified
under the provisions of this paragraph and who has been wholly successful on
the merits with respect to any Claim shall be entitled to indemnification as
of right. Except as provided in the preceding sentence, any indemnification
under this paragraph shall be at the sole discretion of the Board of
Directors and shall be made only if the Board of Directors or the Executive
Committee acting by a quorum consisting of Directors who are not parties to
such Claim shall find or if independent legal counsel (who may be the regular
counsel of the Association) selected by the Board of Directors or Executive
Committee whether or not a disinterested quorum exists shall render their
opinion that in view of all of the circumstances then surrounding the Claim,
such indemnification is equitable and in the best interests of the
Association. Among the circumstances to be taken into consideration in
arriving at such a finding or opinion is the existence or non-existence of a
contract of insurance or indemnity under which the Association would be
wholly or partially reimbursed for such indemnification, but the existence or
non-existence of such insurance is not the sole circumstance to be considered
nor shall it be wholly determinative of whether such indemnification shall be
made. In addition to such finding or opinion, no indemnification under this
paragraph shall be made unless the Board of Directors or the Executive
Committee acting by a quorum consisting of Directors who are not parties to
such Claim shall find or if independent legal counsel (who may be the regular
counsel of the Association) selected by the Board of Directors or Executive
Committee whether or not a disinterested quorum exists shall render their
opinion that the Director, officer or employee acted in good faith in what he
reasonably believed to be the best interests of the Association or such other
corporation and further in the case of any criminal action or proceeding,
that the Director, officer or employee reasonably believed his conduct to be
lawful. Determination of any Claim by judgment adverse to a Director, officer
or employee by settlement with or without Court approval or conviction upon a
plea of guilty or of NOLOCONTENDERE or its equivalent shall not create a
presumption that a Director, officer or employee failed to meet the standards
of conduct set forth in this paragraph. Expenses incurred with respect to
any Claim may be advanced by the Association prior to the final disposition
thereof upon receipt of an undertaking satisfactory to the Association by or
on behalf of the recipient to repay such amount unless it is ultimately
determined that he is entitled to indemnification under this paragraph. The
rights of indemnification provided in

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<PAGE>

this paragraph shall be in addition to any rights to which any Director,
officer or employee may otherwise be entitled by contract or as a matter of
law. Every person who shall act as a Director, officer or employee of this
Association shall be conclusively presumed to be doing so in reliance upon the
right of indemnification provided for in this paragraph.

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<PAGE>

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<PAGE>

Exhibit 4

BY-LAWS
OF
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION

ARTICLE I
MEETING OF SHAREHOLDERS

SECTION 1.01. ANNUAL MEETING. The regular annual meeting of the Shareholders
of the Bank for the election of Directors and for the transaction of such
business as may properly come before the meeting shall be held at its main
banking house, or other convenient place duly authorized by the Board of
Directors, on the third Monday of January of each year, or on the next
succeeding banking day, if the day fixed falls on a legal holiday. If from any
cause, an election of directors is not made on the day fixed for the regular
meeting of shareholders or, in the event of a legal holiday, on the next
succeeding banking day, the Board of Directors shall order the election to be
held on some subsequent day, as soon thereafter as practicable, according to the
provisions of law; and notice thereof shall be given in the manner herein
provided for the annual meeting. Notice of such annual meeting shall be given
by or under the direction of the Secretary or such other officer as may be
designated by the Chief Executive Officer by first-class mail, postage prepaid,
to all shareholders of record of the Bank at their respective addresses as shown
upon the books of the Bank mailed not less than ten days prior to the date fixed
for such meeting.

SECTION 1.02. SPECIAL MEETINGS. A special meeting of the shareholders of this
Bank may be called at any time by the Board of Directors or by any three or more
shareholders owning, in the aggregate, not less than ten percent of the stock of
this Bank. The notice of any special meeting of the shareholders called by the
Board of Directors, stating the time, place and purpose of the meeting, shall be
given by or under the direction of the Secretary, or such other officer as is
designated by the Chief Executive Officer, by first-class mail, postage prepaid,
to all shareholders of record of the Bank at their respective addresses as shown
upon the books of the Bank, mailed not less than ten days prior to the date
fixed for such meeting.

Any special meeting of shareholders shall be conducted and its proceedings
recorded in the manner prescribed in these By-Laws for annual meetings of
shareholders.

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<PAGE>

SECTION 1.03. SECRETARY OF SHAREHOLDERS' MEETING. The Board of Directors may
designate a person to be the Secretary of the meetings of shareholders. In the
absence of a presiding officer, as designated in these By-Laws, the Board of
Directors may designate a person to act as the presiding officer. In the event
the Board of Directors fails to designate a person to preside at a meeting of
shareholders and a Secretary of such meeting, the shareholders present or
represented shall elect a person to preside and a person to serve as Secretary
of the meeting.

The Secretary of the meetings of shareholders shall cause the returns made
by the judges and election and other proceedings to be recorded in the minute
book of the Bank. The presiding officer shall notify the directors-elect of
their election and to meet forthwith for the organization of the new board.

The minutes of the meeting shall be signed by the presiding officer and the
Secretary designated for the meeting.

SECTION 1.04. JUDGES OF ELECTION. The Board of Directors may appoint as many
as three shareholders to be judges of the election, who shall hold and conduct
the same, and who shall, after the election has been held, notify, in writing
over their signatures, the secretary of the shareholders' meeting of the result
thereof and the names of the Directors elected; provided, however, that upon
failure for any reason of any judge or judges of election, so appointed by the
directors, to serve, the presiding officer of the meeting shall appoint other
shareholders or their proxies to fill the vacancies. The judges of election at
the request of the chairman of the meeting, shall act as tellers of any other
vote by ballot taken at such meeting, and shall notify, in writing over their
signatures, the secretary of the Board of Directors of the result thereof.

SECTION 1.05. PROXIES. In all elections of Directors, each shareholder of
record, who is qualified to vote under the provisions of Federal Law, shall have
the right to vote the number of shares of record in his name for as many persons
as there are Directors to be

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<PAGE>

elected, or to cumulate such shares as provided by Federal Law. In deciding
all other questions at meetings of shareholders, each shareholder shall be
entitled to one vote on each share of stock of record in his name.
Shareholders may vote by proxy duly authorized in writing. All proxies used
at the annual meeting shall be secured for that meeting only, or any
adjournment thereof, and shall be dated, and if not dated by the shareholder,
shall be dated as of the date of receipt thereof. No officer or employee of
this Bank may act as proxy.

SECTION 1.06. QUORUM. Holders of record of a majority of the shares of the
capital stock of the Bank, eligible to be voted, present either in person or by
proxy, shall constitute a quorum for the transaction of business at any meeting
of shareholders, but shareholders present at any meeting and constituting less
than a quorum may, without further notice, adjourn the meeting from time to time
until a quorum is obtained. A majority of the votes cast shall decide every
question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the Articles of Association.

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<PAGE>

ARTICLE II
DIRECTORS

SECTION 2.01. MANAGEMENT OF THE BANK. The business of the Bank shall be
managed by the Board of Directors. Each director of the Bank shall be the
beneficial owner of a substantial number of shares of BANC ONE CORPORATION and
shall be employed either in the position of Chief Executive Officer or active
leadership within his or her business, professional or community interest which
shall be located within the geographic area in which the Bank operates, or as an
executive officer of the Bank. A director shall not be eligible for nomination
and re-election as a director of the Bank if such person's executive or
leadership position within his or her business, professional or community
interests which qualifies such person as a director of Bank terminates. The age
of 70 is the mandatory retirement age as a director of the Bank. When a
person's eligibility as director of the Bank terminates, whether because of
change in share ownership, position, residency or age, within 30 days after such
termination, such person shall submit his resignation as a director to be
effective at the pleasure of the Board provided, however, that in no event shall
such person be nominated or elected as a director. Provided, however, following
a person's retirement or resignation as a director because of the age
limitations herein set forth with respect to election or re-election as a
director, such person may, in special or unusual circumstances, and at the
discretion of the Board, be elected by the directors as a Director Emeritus of
the Bank for a limited period of time. A Director Emeritus shall have the right
to participate in board meetings but shall be without the power to vote and
shall be subject to re-election by the Board at its organizational meeting
following the Bank's annual meeting of shareholders.

SECTION 2.02. QUALIFICATIONS. Each director shall have the qualification
prescribed by law. No person elected a director may exercise any of the powers
of his office until he has taken the oath of such office.

SECTION 2.03. TERM OF OFFICE/VACANCIES. A director shall hold office until the
annual meeting for the year in which his term expires and until his successor
shall be elected and shall qualify, subject, however, to his prior death,
resignation, or removal from office.

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<PAGE>

Whenever any vacancy shall occur among the directors, the remaining directors
shall constitute the directors of the Bank until such vacancy is filled by
the remaining directors, and any director so appointed shall hold office for
the unexpired term of his or her successor. Notwithstanding the foregoing,
each director shall hold office and serve at the pleasure of the Board.

SECTION 2.04. ORGANIZATION MEETING. The directors elected by the shareholders
shall meet for organization of the new board at the time fixed by the
presiding officer of the annual meeting. If at the time fixed for such
meeting there is no quorum present, the Directors in attendance may adjourn
from time to time until a quorum is obtained. A majority of the number of
Directors elected by the shareholders shall constitute a quorum for the
transaction of business.

SECTION 2.05. REGULAR MEETINGS. The regular meetings of the Board of Directors
shall be held on the third Monday of each calendar month excluding March and
July, which meeting will be held at 4:00 p.m. When any regular meeting of the
Board falls on a holiday, the meeting shall be held on such other day as the
Board may previously designate or should the Board fail to so designate, on such
day as the Chairman of the Board of President may fix. Whenever a quorum is not
present, the directors in attendance shall adjourn the meeting to a time not
later than the date fixed by the Bylaws for the next succeeding regular meeting
of the Board.

SECTION 2.06. SPECIAL MEETINGS. Special meetings of the Board of Directors
shall be held at the call of the Chairman of the Board or President, or at the
request of two or more Directors. Any special meeting may be held at such place
in Franklin County, Ohio, and at such time as may be fixed in the call. Written
or oral notice shall be given to each Director not later than the day next
preceding the day on which special meeting is to be held, which notice may be
waived in writing. The presence of a Director at any meeting of the Board shall
be deemed a waiver of notice thereof by him. Whenever a quorum is not present
the Directors in attendance shall adjourn the special meeting from day to day
until a quorum is obtained.

SECTION 2.07. QUORUM. A majority of the Directors shall constitute a quorum at
any

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<PAGE>

meeting, except when otherwise provided by law; but a lesser number may
adjourn any meeting, from time-to-time, and the meeting may be held, as
adjourned, without further notice. When, however, less than a quorum as
herein defined, but at least one-third and not less than two of the
authorized number of Directors are present at a meeting of the Directors,
business of the Bank may be transacted and matters before the Board approved
or disapproved by the unanimous vote of the Directors present.

SECTION 2.08. COMPENSATION. Each member of the Board of Directors shall
receive such fees for, and transportation expenses incident to, attendance at
Board and Board Committee Meetings and such fees for service as a Director
irrespective of meeting attendance as from time to time are fixed by resolution
of the Board; provided, however, that payment hereunder shall not be made to a
Director for meetings attended and/or Board service which are not for the Bank's
sole benefit and which are concurrent and duplicative with meetings attended or
board service for an affiliate of the Bank for which the Director receives
payment; and provided further, that payment hereunder shall not be made in the
case of any Director in the regular employment of the Bank or of one of its
affiliates.

SECTION 2.09. EXECUTIVE COMMITTEE. There shall be a standing committee of the
Board of Directors known as the Executive Committee which shall possess and
exercise, when the Board is not in session, all powers of the Board that may
lawfully be delegated. The Executive Committee shall also exercise the powers
of the Board of Directors in accordance with the Provisions of the "Employees
Retirement Plan" and the "Agreement and Declaration of Trust" as the same now
exist or may be amended hereafter. The Executive Committee shall consist of not
fewer than four board members, including the Chairman of the Board and President
of the Bank, one of whom, as hereinafter required by these By-laws, shall be the
Chief Executive Officer. The other members of the Committee shall be appointed
by the Chairman of the Board or by the President, with the approval of the Board
and shall continue as members of the Executive Committee until their successors
are appointed, provided, however, that any member of the Executive Committee may
be removed by the Board upon a majority vote thereof at any regular or special
meeting of the Board. The Chairman or President shall fill any vacancy in the
Committee by the appointment of another Director, subject to the approval of the
Board of Directors. The regular meetings of the Executive Committee shall be
held on a regular basis as scheduled

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<PAGE>

by the Board of Directors. Special meetings of the Executive Committee shall
be held at the call of the Chairman or President or any two members thereof
at such time or times as may be designated. In the event of the absence of
any member or members of the Committee, the presiding member may appoint a
member or members of the Board to fill the place or places of such absent
member or members to serve during such absence. Not fewer than three members
of the Committee must be present at any meeting of the Executive Committee to
constitute a quorum, provided, however that with regard to any matters on
which the Executive Committee shall vote, a majority of the Committee members
present at the meeting at which a vote is to be taken shall not be officers
of the Bank and, provided further, that if, at any meeting at which the
Chairman of the Board and President are both present, Committee members who
are not officers are not in the majority, then the Chairman of the Board or
President, which ever of such officers is not also the Chief Executive
Officer, shall not be eligible to vote at such meeting and shall not be
recognized for purposes of determining if a quorum is present at such
meeting. When neither the Chairman of the Board nor President are present,
the Committee shall appoint a presiding officer. The Executive Committee
shall keep a record of its proceedings and report its proceedings and the
action taken by it to the Board of Directors.

SECTION 2.10 COMMUNITY REINVESTMENT ACT AND COMPLIANCE POLICY COMMITTEE. There
shall be a standing committee of the Board of Directors known as the Community
Reinvestment Act and Compliance Policy Committee the duties of which shall be,
at least once in each calendar year, to review, develop and recommend policies
and programs related to the Bank's Community Reinvestment Act Compliance and
regulatory compliance with all existing statutes, rules and regulations
affecting the Bank under state and federal law. Such Committee shall provide
and promptly make a full report of such review of current Bank policies with
regard to Community Reinvestment Act and regulatory compliance in writing to the
Board, with recommendations, if any, which may be necessary to correct any
unsatisfactory conditions. Such Committee may, in its discretion, in fulfilling
its duties, utilize the Community Reinvestment Act officers of the Bank, Banc
One Ohio Corporation and Banc One Corporation and may engage outside Community
Reinvestment Act experts, as approved by the Board, to review, develop and
recommend policies and programs as herein required. The Community Reinvestment
Act and regulatory compliance policies and procedures established and the
recommendations made shall be consistent

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<PAGE>

with, and shall supplement, the Community Reinvestment Act and regulatory
compliance programs, policies and procedures of Banc One Corporation and Banc
One Ohio Corporation. The Community Reinvestment Act and Compliance Policy
Committee shall consist of not fewer than four board members, one of whom
shall be the Chief Executive Officer and a majority of whom are not officers
of the Bank. Not fewer than three members of the Committee, a majority of
whom are not officers of the Bank, must be present to constitute a quorum.
The Chairman of the Board or President of the Bank, whichever is not the
Chief Executive Officer, shall be an ex officio member of the Community
Reinvestment Act and Compliance Policy Committee. The Community Reinvestment
Act and Compliance Policy Committee, whose chairman shall be appointed by the
Board, shall keep a record of its proceedings and report its proceedings and
the action taken by it to the Board of Directors.

SECTION 2.11. TRUST COMMITTEES. There shall be two standing Committees
known as the Trust Management Committee and the Trust Examination Committee
appointed as hereinafter provided.

SECTION 2.12. OTHER COMMITTEES. The Board of Directors may appoint such
special committees from time to time as are in its judgment necessary in the
interest of the Bank.

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<PAGE>

ARTICLE III
OFFICERS, MANAGEMENT STAFF AND EMPLOYEES

SECTION 3.01. OFFICERS AND MANAGEMENT STAFF.

(a) The officers of the Bank shall include a President, Secretary and
Security Officer and may include a Chairman of the Board, one or more
Vice Chairmen, one or more Vice Presidents (which may include one or
more Executive Vice Presidents and/or Senior Vice Presidents) and one or
more Assistant Secretaries, all of whom shall be elected by the Board.
All other officers may be elected by the Board or appointed in writing
by the Chief Executive Officer. The salaries of all officers elected by
the Board shall be fixed by the Board. The Board from time-to-time
shall designate the President or Chairman of the Board to serve as the
Bank's Chief Executive Officer.

(b) The Chairman of the Board, if any, and the President shall be elected by
the Board from their own number. The President and Chairman of the
Board shall be re-elected by the Board annually at the organizational
meeting of the Board of Directors following the Annual Meeting of
Shareholders. Such officers as the Board shall elect from their own
number shall hold office from the date of their election as officers
until the organization meeting of the Board of Directors following the
next Annual Meeting of Shareholders, provided, however, that such
officers may be relieved of their duties at any time by action of the
Board in which event all the powers incident to their office shall
immediately terminate.
(c) Except as provided in the case of the elected officers who are members
of the Board, all officers, whether elected or appointed, shall hold
office at the pleasure of the Board. Except as otherwise limited by law
or these By-laws, the Board assigns to Chief Executive Officer and/or
his designees the authority to appoint and dismiss any elected or
appointed officer or other member of the Bank's management staff and
other employees of the Bank, as the person in charge of and responsible
for any branch office, department, section, operation, function,
assignment or duty in the Bank.

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<PAGE>

(d) The management staff of the Bank shall include officers elected by the
Board, officers appointed by the Chief Executive Officer, and such other
persons in the employment of the Bank who, pursuant to written
appointment and authorization by a duly authorized officer of the Bank,
perform management functions and have management responsibilities.
Any two or more offices may be held by the same person except that no
person shall hold the office of Chairman of the Board and/or President
and at the same time also hold the office of Secretary.

(e) The Chief Executive Officer of the Bank and any other officer of the
Bank, to the extent that such officer is authorized in writing by the
Chief Executive Officer, may appoint persons other than officers who are
in the employment of the Bank to serve in management positions and in
connection therewith, the appointing officer may assign such title,
salary, responsibilities and functions as are deemed appropriate by him,
provided, however, that nothing contained herein shall be construed as
placing any limitation on the authority of the Chief Executive Officer
as provided in this and other sections of these By-Laws.

SECTION 3.02. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the Bank
shall have general and active management of the business of the Bank and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. Except as otherwise prescribed or limited by these By-Laws, the Chief
Executive Officer shall have full right, authority and power to control all
personnel, including elected and appointed officers, of the Bank, to employ or
direct the employment of such personnel and officers as he may deem necessary,
including the fixing of salaries and the dismissal of them at pleasure, and to
define and prescribe the duties and responsibility of all Officers of the Bank,
subject to such further limitations and directions as he may from time-to-time
deem proper. The Chief Executive Officer shall perform all duties incident to
his office and such other and further duties, as may, from time-to-time, be
required of him by the Board of Directors or the shareholders. The
specification of authority in these By-Laws wherever and to whomever granted
shall not be construed to limit in any manner the general powers of delegation
granted to the Chief Executive Officer in conducting the business of the Bank.
The Chief Executive Officer or, in his absence, the Chairman of the Board or
President of the Bank, as designated by the Chief Executive Officer, shall
preside at all meetings of shareholders and

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<PAGE>

meetings of the Board. In the absence of the Chief Executive Officer, such
officer as is designated by the Chief Executive Officer shall be vested with
all the powers and perform all the duties of the Chief Executive Officer as
defined by these By-Laws. When designating an officer to serve in his
absence, the Chief Executive Officer shall select an officer who is a member
of the Board of Directors whenever such officer is available.

SECTION 3.03. POWERS OF OFFICERS AND MANAGEMENT STAFF. The Chief Executive
Officer, the Chairman of the Board, the President, and those officers so
designated and authorized by the Chief Executive Officer are authorized for an
on behalf of the Bank, and to the extent permitted by law, to make loans and
discounts; to purchase or acquire drafts, notes, stock, bonds, and other
securities for investment of funds held by the Bank; to execute and purchase
acceptances; to appoint, empower and direct all necessary agents and attor-
neys; to sign and give any notice required to be given; to demand payment and/or
to declare due for any default any debt or obligation due or payable to the Bank
upon demand or authorized to be declared due; to foreclose any mortgages, to
exercise any option, privilege or election to forfeit, terminate, extend or
renew any lease; to authorize and direct any proceedings for the collection of
any money or for the enforcement of any right or obligation; to adjust, settle
and compromise all claims of every kind and description in favor of or against
the Bank, and to give receipts, releases and discharges therefor; to borrow
money and in connection therewith to make, execute and deliver notes, bonds or
other evidences of indebtedness; to pledge or hypothecate any securities or
any stocks, bonds, notes or any property real or personal held or owned by the
Bank, or to rediscount any notes or other obligations held or owned by the
Bank, to employ or direct the employment of all personnel, including elected and
appointed officers, and the dismissal of them at pleasure, and in furtherance of
and in addition to the powers hereinabove set forth to do all such acts and to
take all such proceedings as in his judgment are necessary and incidental to the
operation of the Bank.

Other persons in the employment of the Bank, including but not limited to
officers and other members of the management staff, may be authorized by the
Chief Executive Officer, or by an officer so designated and authorized by the
chief Executive Officer, to perform the powers set forth above, subject,
however, to such limitations and conditions as are set forth in the
authorization given to such persons.

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<PAGE>

SECTION 3.04. SECRETARY. The Secretary or such other officers as may be
designated by the Chief Executive Officer shall have supervision and control of
the records of the Bank and, subject to the direction of the Chief Executive
Officer, shall undertake other duties and functions usually performed by a
corporate secretary. Other officers may be designated by the Chief Executive
Officer or the Board of Directors as Assistant Secretary to perform the duties
of the Secretary.

SECTION 3.05. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman of
the Board, President, any officer being a member of the Bank's management staff
who is also a person in charge of and responsible for any department within the
Bank and any other officer to the extent such officer is so designated and
authorized by the Chief Executive Officer, the Chairman of the Board, the
President, or any other officer who is a member of the Bank's management staff
who is in charge of and responsible for any department within the Bank, are
hereby authorized on behalf of the Bank to sell, assign, lease, mortgage,
transfer, deliver and convey any real or personal property now or hereafter
owned by or standing in the name of the Bank or its nominee, or held by this
Bank as collateral security, and to execute and deliver such deeds, contracts,
leases, assignments, bills of sale, transfers or other papers or documents as
may be appropriate in the circumstances; to execute any loan agreement, security
agreement, commitment letters and financing statements and other documents on
behalf of the Bank as a lender; to execute purchase orders, documents and
agreements entered into by the Bank in the ordinary course of business, relating
to purchase, sale, exchange or lease of services, tangible personal property,
materials and equipment for the use of the Bank; to execute powers of attorney
to perform specific or general functions in the name of or on behalf of the
Bank; to execute promissory notes or other instruments evidencing debt of the
Bank; to execute instruments pledging or releasing securities for public funds,
documents submitting public fund bids on behalf of the Bank and public fund
contracts; to purchase and acquire any real or personal property including loan
portfolios and to execute and deliver such agreements, contracts or other papers
or documents as may be appropriate in the circumstances; to execute any
indemnity and fidelity bonds, proxies or other papers or documents of like or
different character necessary, desirable or incidental to the conduct of its
banking business; to execute and deliver settlement agreements or other papers
or documents as may be appropriate in connection with a dismissal authorized by
Section 3.01(c) of these By-laws;

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<PAGE>

to execute agreements, instruments, documents, contracts or other papers of
like or difference character necessary, desirable or incidental to the
conduct of its banking business; and to execute and deliver partial releases
from and discharges or assignments of mortgages, financing statements and
assignments or surrender of insurance policies, now or hereafter held by this
Bank.

The Chief Executive Officer, Chairman of the Board, President, any officer
being a member of the Bank's management staff who is also a person in charge of
and responsible for any department within the Bank, and any other officer of the
Bank so designated and authorized by the Chief Executive Officer, Chairman of
the Board, President or any officer who is a member of the Bank's management
staff who is in charge of and responsible for any department within the Bank are
authorized for and on behalf of the Bank to sign and issue checks, drafts, and
certificates of deposit; to sign and endorse bills of exchange, to sign and
countersign foreign and domestic letters of credit, to receive and receipt for
payments of principal, interest, dividends, rents, fees and payments of every
kind and description paid to the Bank, to sign receipts for property acquired by
or entrusted to the Bank, to guarantee the genuineness of signatures on
assignments of stocks, bonds or other securities, to sign certifications of
checks, to endorse and deliver checks, drafts, warrants, bills, notes,
certificates of deposit and acceptances in all business transactions of the
Bank.

Other persons in the employment of the Bank and of its subsidiaries,
including but not limited to officers and other members of the management staff,
may be authorized by the Chief Executive Officer, Chairman of the Board,
President or by an officer so designated by the Chief Executive Officer,
Chairman of the Board, or President to perform the acts and to execute the
documents set forth above, subject, however, to such limitations and conditions
as are contained in the authorization given to such person.

SECTION 3.06. PERFORMANCE BOND. All officers and employees of the Bank shall
be bonded for the honest and faithful performance of their duties for such
amount as may be prescribed by the Board of Directors.

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<PAGE>

ARTICLE IV
TRUST DEPARTMENT

SECTION 4.01. TRUST DEPARTMENT. Pursuant to the fiduciary powers granted to
this Bank under the provisions of Federal Law and Regulations of the
Comptroller of the Currency, there shall be maintained a separate Trust
Department of the Bank, which shall be operated in the manner specified
herein.

SECTION 4.02. TRUST MANAGEMENT COMMITTEE. There shall be a standing
Committee known as the Trust Management Committee, consisting of at least
five members, a majority of whom shall not be officers of the Bank. The
Committee shall consist of the Chairman of the Board who shall be Chairman of
the Committee, the President, and at least three other Directors appointed
by the Board of Directors and who shall continue as members of the Committee
until their successors are appointed. Any vacancy in the Trust Management
Committee may be filled by the Board at any regular or special meeting. In
the event of the absence of any member or members, such Committee may, in its
discretion, appoint members of the Board to fill the place of such absent
members to serve during such absence. Three members of the Committee shall
constitute a quorum. Any member of the Committee may be removed by the Board
by a majority vote at any regular or special meeting of the Board. The
Committee shall meet at such times as it may determine or at the call of the
Chairman, or President or any two members thereof.

The Trust Management Committee, under the general direction of the Board
of Directors, shall supervise the policy of the Trust Department which shall be
formulated and executed in accordance with Law, Regulations of the Comptroller
of the Currency, and sound fiduciary principles.

SECTION 4.03. TRUST EXAMINATION COMMITTEE. There shall be a standing
Committee known as the Trust Examination Committee, consisting of three
directors appointed by the Board of Directors and who shall continue as
members of the committee until their successors are appointed. Such members
shall not be active officers of the Bank. Two members of the Committee shall
constitute a quorum. Any member of the Committee may

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<PAGE>

be removed by the Board by a majority vote at any regular or special meeting
of the Board. The Committee shall meet at such times as it may determine or
at the call of two members thereof.

This Committee shall, at least once during each calendar year and within
fifteen months of the last such audit, or at such other time(s) as may be
required by Regulations of the Comptroller of the Currency, make suitable
audits of the Trust Department or cause suitable audits to be made by
auditors responsible only to the Board of Directors, and at such time shall
ascertain whether the Department has been administered in accordance with
Law, Regulations of the Comptroller of the Currency and sound fiduciary
principles.

The Committee shall promptly make a full report of such audits in
writing to the Board of Directors of the Bank, together with a recommendation
as to what action, if any, may be necessary to correct any unsatisfactory
condition. A report of the audits together with the action taken thereon
shall be noted in the Minutes of the Board of Directors and such report shall
be a part of the records of this Bank.

SECTION 4.04. MANAGEMENT. The Trust Department shall be under the
management and supervision of an officer of the Bank or of the trust
affiliate of the Bank designated by and subject to the advice and direction
of the Chief Executive Officer. Such officer having supervisory
responsibility over the Trust Department shall do or cause to be done all
things necessary or proper in carrying on the business of the Trust
Department in accordance with provisions of law and applicable regulations.

SECTION 4.05. HOLDING OF PROPERTY. Property held by the Trust Department
may be carried in the name of the Bank in its fiduciary capacity, in the name
of Bank, or in the name of a nominee or nominees.

SECTION 4.06. TRUST INVESTMENTS. Funds held by the Bank in a fiduciary
capacity awaiting investment or distribution shall not be held uninvested or
undistributed any longer than is reasonable for the proper management of the
account and shall be invested in accordance with the instrument establishing
a fiduciary relationship and local law. Where such instrument does not
specify the character or class of investments to be made and does not vest in
the Bank any discretion in the matter, funds held pursuant to such instrument

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<PAGE>

shall be invested in any investment which corporate fiduciaries may invest
under local law.

The investments of each account in the Trust Department shall be kept
separate from the assets of the Bank, and shall be placed in the joint
custody or control of not less than two of the officers or employees of the
Bank or of the trust affiliate of the Bank designated for the purpose by the
Trust Management Committee.

SECTION 4.07. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman
of the Board, President, any officer of the Trust Department, and such other
officers of the trust affiliate of the Bank as are specifically designated
and authorized by the Chief Executive Officer, the President, or the officer
in charge of the Trust Department, are hereby authorized, on behalf of this
Bank, to sell, assign, lease, mortgage, transfer, deliver and convey any real
property or personal property and to purchase and acquire any real or
personal property and to execute and deliver such agreements, contracts, or
other papers and documents as may be appropriate in the circumstances for
property now or hereafter owned by or standing in the name of this Bank, or
its nominee, in any fiduciary capacity, or in the name of any principal for
whom this Bank may now or hereafter be acting under a power of attorney, or
as agent and to execute and deliver partial releases from any discharges or
assignments or mortgages and assignments or surrender of insurance policies,
to execute and deliver deeds, contracts, leases, assignments, bills of sale,
transfers or such other papers or documents as may be appropriate in the
circumstances for property now or hereafter held by this Bank in any
fiduciary capacity or owned by any principal for whom this Bank may now or
hereafter be acting under a power of attorney or as agent; to execute and
deliver settlement agreements or other papers or documents as may be
appropriate in connection with a dismissal authorized by Section 3.01(c) of
these By-laws; provided that the signature of any such person shall be
attested in each case by any officer of the Trust Department or by any other
person who is specifically authorized by the Chief Executive Officer, the
President or the officer in charge of the Trust Department.

The Chief Executive Officer, Chairman of the Board, President, any officer
of the Trust Department and such other officers of the trust affiliate of the
Bank as are specifically designated and authorized by the Chief Executive
Officer, the President, or the officer in charge of the Trust Department, or
any other person or corporation as is specifically

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<PAGE>

authorized by the Chief Executive Officer, the President or the officer in
charge of the Trust Department, are hereby authorized on behalf of this Bank,
to sign any and all pleadings and papers in probate and other court
proceedings, to execute any indemnity and fidelity bonds, trust agreements,
proxies or other papers or documents of like or different character
necessary, desirable or incidental to the appointment of the Bank in any
fiduciary capacity and the conduct of its business in any fiduciary capacity;
also to foreclose any mortgage, to execute and deliver receipts for payments
of principal, interest, dividends, rents, fees and payments of every kind and
description paid to the Bank; to sign receipts for property acquired or
entrusted to the Bank; also to sign stock or bond certificates on behalf of
this Bank in any fiduciary capacity and on behalf of this Bank as transfer
agent or registrar; to guarantee the genuineness of signatures on assignments
of stocks, bonds or other securities, and to authenticate bonds, debentures,
land or lease trust certificates or other forms of security issued pursuant
to any indenture under which this Bank now or hereafter is acting as Trustee.
Any such person, as well as such other persons as are specifically
authorized by the Chief Executive Officer or the officer in charge of the
Trust Department, may sign checks, drafts and orders for the payment of money
executed by the Trust Department in the course of its business.

SECTION 4.08. VOTING OF STOCK. The Chairman of the Board, President, any
officer of the Trust Department, any officer of the trust affiliate of the
Bank and such other persons as may be specifically authorized by Resolution
of the Trust Management Committee or the Board of Directors, may vote shares
of stock of a corporation of record on the books of the issuing company in
the name of the Bank or in the name of the Bank as fiduciary, or may grant
proxies for the voting of such stock of the granting if same is permitted by
the instrument under which the Bank is acting in a fiduciary capacity, or by
the law applicable to such fiduciary account. In the case of shares of stock
which are held by a nominee of the Bank, such shares may be voted by such
person(s) authorized by such nominee.

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<PAGE>

ARTICLE V
STOCKS AND STOCK CERTIFICATES

SECTION 5.01. STOCK CERTIFICATES. The shares of stock of the Bank shall be
evidenced by certificates which shall bear the signature of the Chairman of the
Board, the President, or a Vice President (which signature may be engraved,
printed or impressed), and shall be signed manually by the Secretary, or any
other officer appointed by the Chief Executive Officer for that purpose.

In case any such officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such before such
certificate is issued, it may be issued by the Bank with the same effect as if
such officer had not ceased to be such at the time of its issue. Each such
certificate shall bear the corporate seal of the Bank, shall recite on its fact
that the stock represented thereby is transferable only upon the books of the
Bank properly endorsed and shall recite such other information as is required by
law and deemed appropriate by the Board. The corporate seal may be facsimile
engraved or printed.

SECTION 5.02. STOCK ISSUE AND TRANSFER. The shares of stock of the Bank shall
be transferable only upon the stock transfer books of the Bank and except as
hereinafter provided, no transfer shall be made or new certificates issued
except upon the surrender for cancellation of the certificate or certificates
previously issued therefor. In the case of the loss, theft, or destruction of
any certificate, a new certificate may be issued in place of such certificate
upon the furnishing of any affidavit setting forth the circumstances of such
loss, theft, or destruction and indemnity satisfactory to the Chairman of the
Board, the President, or a Vice President. The Board of Directors, or the Chief
Executive Officer, may authorize the issuance of a new certificate therefor
without the furnishing of indemnity. Stock Transfer Books, in which all
transfers of stock shall be recorded, shall be provided.

The stock transfer books may be closed for a reasonable period and under
such conditions as the Board of Directors may at any time determine for any
meeting of shareholders, the payment of dividends or any other lawful purpose.
In lieu of closing the transfer books, the Board may, in its discretion, fix a
record date and hour constituting a

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<PAGE>

reasonable period prior to the day designated for the holding of any meeting
of the shareholders or the day appointed for the payment of any dividend or
for any other purpose at the time as of which shareholders entitled to notice
of and to vote at any such meeting or to receive such dividend or to be
treated as shareholders for such other purpose shall be determined, and only
shareholders of record at such time shall be entitled to notice of or to vote
at such meeting or to receive such dividends or to be treated as shareholders
for such other purpose.

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<PAGE>

ARTICLE VI
MISCELLANEOUS PROVISIONS

SECTION 6.01. SEAL. The impression made below is an impression of the seal
adopted by the Board of Directors of BANK ONE, COLUMBUS, NATIONAL ASSOCIATION.
The Seal may be affixed by any officer of the Bank to any document executed by
an authorized officer on behalf of the Bank, and any officer may certify any
act, proceedings, record, instrument or authority of the Bank.

SECTION 6.02. BANKING HOURS. Subject to ratification by the Executive
Committee, the Bank and each of its Branches shall be open for business on such
days and during such hours as the Chief Executive Officer of the Bank shall,
from time to time, prescribe.

SECTION 6.03. MINUTE BOOK. The organization papers of this Bank, the Articles
of Association, the returns of the judges of elections, the By-Laws and any
amendments thereto, the proceedings of all regular and special meetings of the
shareholders and of the Board of Directors, and reports of the committees of the
Board of Directors shall be recorded in the minute book of the Bank. The
minutes of each such meeting shall be signed by the presiding Officer and
attested by the secretary of the meetings.

SECTION 6.04. AMENDMENT OF BY-LAWS. These By-Laws may be amended by vote of a
majority of the Directors.

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<PAGE>

EXHIBIT 6

Securities and Exchange Commission
Washington, D.C. 20549

CONSENT

The undersigned, designated to act as Trustee under the Indenture for Amresco,
Inc. described in the attached Statement of Eligibility and Qualification, does
hereby consent that reports of examinations by Federal, State, Territorial, or
District Authorities may be furnished by such authorities to the Commission upon
the request of the Commission.

This Consent is given pursuant to the provision of Section 321(b) of the Trust
Indenture Act of 1939, as amended.

Bank One, Columbus, N.A.

Dated: December 19, 1995 By: /s/ VICTORIA PAVLICK
------------------------------
Victoria Pavlick
Authorized Signer

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<PAGE>

Exhibit 7

Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 1996

FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL

- --------------------------------------------------------------------------------

[Logo] Please refer to page I, /1/
Table of Contents, for
the required disclosure
of estimated burden.

- --------------------------------------------------------------------------------

CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES-FFIEC 031

REPORT AT THE CLOSE OF BUSINESS SEPTEMBER 30, 1995 (950930)
-------
(RCRI 9999)

- --------------------------------------------------------------------------------

This report is required by law: 12 U.S.C. Section 324 (State member banks); 12
U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161 (National
banks).

This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.

- --------------------------------------------------------------------------------

NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.

I, Richard D. Nadler, Controller
-------------------------------
Name and Title of Officer Authorized to Sign Report

of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and are true
to the best of my knowledge and belief.

/s/ R. D. Nadler
- ----------------------------------------------
Signature of Officer Authorized to Sign Report

10/29/95
- ----------------------------------------------
Date of Signature

The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in some
cases differ from generally accepted accounting principles.

We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.

/s/ Frederick L. Cullen
- ---------------------------------
Director (Trustee)

/s/ Robert G. Davis
- ---------------------------------
Director (Trustee)

/s/ William M. Bennett
- ---------------------------------
Director (Trustee)

- --------------------------------------------------------------------------------
For Banks Submitting Hard Copy Report Forms:

State Member Banks: Return the original and one copy to the appropriate Federal
Reserve District Bank.

State Nonmember Banks: Return the original only in the SPECIAL RETURN ADDRESS
ENVELOPE PROVIDED. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.

National banks: Return the original only in the SPECIAL RETURN ADDRESS ENVELOPE
PROVIDED. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.

- --------------------------------------------------------------------------------

Banks should affix the address label in this space.

CALL NO. 193 31 09-30-95

STBK: 39-1580 00088 STCERT: 39-06559

BANK ONE, COLUMBUS, NATIONAL ASSOCIA
100 EAST BROAD STREET
COLUMBUS, OH 43271

Board of Governors of the Federal Reserve System. Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE>

FFIEC 031
Page I
/2/
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES
- --------------------------------------------------------------------------------

TABLE OF CONTENTS

Signature Page Cover

Report of Income

Schedule RI-Income Statement. . . . . . . . . . . . . . . . . . . . .RI-1, 2, 3

Schedule RI-A-Changes in Equity Capital. . . . . . . . . . . . . . . . . . .RI-4

Schedule RI-B-Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RI-4, 5

Schedule RI-C-Applicable Income Taxes by
Taxing Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . .RI-5

Schedule RI-D-Income from
International Operations . . . . . . . . . . . . . . . . . . . . . . . . .RI-6

Schedule RI-E-Explanations . . . . . . . . . . . . . . . . . . . . . . . RI-7, 8

Report of Condition

Schedule RC-Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . RC-1, 2

Schedule RC-A-Cash and Balances Due
From Depository Institutions . . . . . . . . . . . . . . . . . . . . . . .RC-3

Schedule RC-B-Securities . . . . . . . . . . . . . . . . . . . . . . .RC-3, 4, 5

Schedule RC-C-Loans and Lease Financing
Receivables:
Part I. Loans and Leases . . . . . . . . . . . . . . . . . . . . . . . RC-6, 7
Part II. Loans to Small Businesses and
Small Farms (included in the forms for
June 30 only) . . . . . . . . . . . . . . . . . . . . . . . . . . . RC-7a, 7b

Schedule RC-D-Trading Assets and Liabilities
(to be completed only by selected banks) . . . . . . . . . . . . . . . . .RC-8

Schedule RC-E-Deposit Liabilities. . . . . . . . . . . . . . . . . .RC-9, 10, 11

Schedule RC-F-Other Assets . . . . . . . . . . . . . . . . . . . . . . . . RC-11

Schedule RC-G-Other Liabilities. . . . . . . . . . . . . . . . . . . . . . RC-11

Schedule RC-H -Selected Balance Sheet Items
for Domestic Offices . . . . . . . . . . . . . . . . . . . . . . . . . . RC-12

Schedule RC-1- Selected Assets and Liabilities
of IBFs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RC-13

Schedule RC-K-Quarterly Averages . . . . . . . . . . . . . . . . . . . . . RC-13

Schedule RC-L-Off-Balance Sheet
Items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RC-14, 15, 16

Schedule RC-M-Memoranda. . . . . . . . . . . . . . . . . . . . . . . . RC-17, 18

Schedule RC-N-Past Due and Nonaccrual
Loans, Leases, and Other Assets. . . . . . . . . . . . . . . . . . . RC-19, 20

Schedule RC-0-Other Data for Deposit
Insurance Assessments. . . . . . . . . . . . . . . . . . . . . . . . RC-21, 22

Schedule RC-R-Risk-Based Capital . . . . . . . . . . . . . . . . . . . RC-23, 24

Optional Narrative Statement Concerning
the Amounts Reported in the Reports
of Condition and Income. . . . . . . . . . . . . . . . . . . . . . . . . RC-25

Special Report (to be completed by all banks)

Schedule RC-J-Repricing Opportunities (sent only to
and to be completed only by savings banks)

Disclosure of Estimated Burden

The estimated average burden associated with this information collection is 31.6
hours per respondent and is estimated to vary from 15 to 225 hours per response,
depending on individual circumstances. Burden estimates include the time for
reviewing instructions, gathering and maintaining data in the required form, and
completing the information collection, but exclude the time for compiling and
maintaining business records in the normal course of a respondent's activities.
Comments concerning the accuracy of this burden estimate and suggestions for
reducing this burden should be directed to the Office of Information and
Regulatory Affairs, Office of Management and Budget. Washington, D.C. 20503, and
to one of the following:

Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 2051
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219

Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429

For information or assistance, National and State nonmember banks should contact
the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington, D.C.
20429, toll free on (800) 688-FDIC(3342), Monday through Friday between 8:00
a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.

<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RI-1
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Consolidated Report of Income
for the period January 1, 1995-September 30, 1995

All Report of Income schedules are to be reported on a calendar year-to-date basis in thousands of dollars.

Schedule RI--Income Statement

1480
-----------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

1. Interest income:
a. Interest and fee income on loans:
(1) In domestic offices:
(a) Loans secured by real estate. . . . . . . . . . . . . . . . . . . . . . . . . . 4011 78,290 1.a.(1)(a)
(b) Loans to depository institutions. . . . . . . . . . . . . . . . . . . . . . . . 4019 4 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers . . . . . . 4024 467 1.a.(1)(c)
(d) Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . . . . . 4012 42,063 1.a.(1)(d)
(e) Acceptances of other banks. . . . . . . . . . . . . . . . . . . . . . . . . . . 4026 0 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures:
(1) Credit cards and related plans. . . . . . . . . . . . . . . . . . . . . . . 4054 209,384 1.a.(1)(f)(1)
(2) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4055 73,587 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions. . . . . . . . . . . . . 4056 0 1.a.(1)(g)
(h) Obligations (other than securities and Leases) of states and political
subdivisions in the U.S.:
(1) Taxable obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4503 97 1.a.(1)(h)(1)
(2) Tax-exempt obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 4504 1,165 1.a.(1)(h)(2)
(i) All other loans in domestic offices . . . . . . . . . . . . . . . . . . . . . . 4059 0 1.a.(2)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs . . . . . . . . . . . 4059 0 1.a.(2)
b. Income from lease financing receivables:
(1) Taxable leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4505 35,651 1.b.(1)
(2) Tax-exempt leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4307 341 1.b.(2)
c. Interest income on balances due from depository institutions:(1)
(1) In domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4105 0 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs . . . . . . . . . . . 4106 1,642 1.c.(2)
d. Interest and dividend income on securities:
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations . . 4027 28,181 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.:
(a) Taxable securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4506 0 1.d.(2)(a)
(b) Tax-exempt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4507 2,594 1.d.(2)(b)
(3) Other domestic debt securities. . . . . . . . . . . . . . . . . . . . . . . . . . . 3657 1,553 1.d.(3)
(4) Foreign debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3658 176 1.d.(4)
(5) Equity securities (including investments in mutual funds) . . . . . . . . . . . . . 3659 173 1.d.(5)
e. Interest income from trading assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 4069 0 1.e
-----------------

</TABLE>

- ---------------
(1) Includes interest income on time certificates of deposit not held for
trading.

3
<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RI-2
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Schedule RI--Continued

Dollar Amounts in Thousands Year-to-date
- --------------------------------------------------------------------------------------------------------
RIAD Bil Mil Thou
<S> <C> <C>

1. Interest income (continued)
f. Interest income on federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank and of its Edge
and Agreement subsidiaries, and in IBFs . . . . . . . . . . . . . . . . . . . 4020 11,883 1.f.
g. Total interest income (sum of items 1.a through 1.f). . . . . . . . . . . . . 4107 490,031 1.g.
2. Interest expense:
a. Interest on deposits:
(1) Interest on deposits in domestic offices:
(a) Transaction accounts (NOW accounts, ATS accounts, and
telephone and preauthorized transfer accounts) . . . . . . . . . . . 4508 5,931 2.a.(1)(a)
(b) Nontransaction accounts:
(1) Money market deposit accounts (MMDAS). . . . . . . . . . . . . . 4509 33,004 2.a.(1)(b)(1)
(2) Other savings deposits . . . . . . . . . . . . . . . . . . . . . 4511 17,288 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more . . . . . . . . 4174 3,509 2.a.(1)(b)(3)
(4) All other time deposits. . . . . . . . . . . . . . . . . . . . . 4512 54,851 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement
subsidiaries, and IBFs . . . . . . . . . . . . . . . . . . . . . . . . . 4172 20,080 2.a.(2)
b. Expense of federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and of its
Edge and Agreement subsidiaries, and in IBFs. . . . . . . . . . . . . . . . . 4180 42,543 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading
liabilities, and other borrowed money . . . . . . . . . . . . . . . . . . . . 4185 16,334 2.c.
d. Interest on mortgage indebtedness and obligations under capitalized
leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4072 295 2.d.
e. Interest on subordinated notes and debentures . . . . . . . . . . . . . . . . 4200 7,645 2.e.
f. Total interest expense (sum of items 2.a through 2.e) . . . . . . . . . . . . 4073 201,480 2.f.
3. Net interest income (item 1.g minus 2.f) . . . . . . . . . . . . . . . . . . . . RIAD 4074 288,551 3.
4. Provisions:
a. Provision for loan and lease losses . . . . . . . . . . . . . . . . . . . . . RIAD 4230 65,573 4.a.
b. Provision for allocated transfer risk . . . . . . . . . . . . . . . . . . . . RIAD 4243 0 4.b.
5. Noninterest income:
a. Income from fiduciary activities. . . . . . . . . . . . . . . . . . . . . . . 4070 11,891 5.a.
b. Service charges on deposit accounts in domestic offices . . . . . . . . . . . 4080 25,765 5.b.
c. Trading gains (losses) and fees from foreign exchange transactions. . . . . . 4075 1,263 5.c.
d. Other foreign transaction gains (losses). . . . . . . . . . . . . . . . . . . 4076 245 5.d.
e. Other gains (losses) and fees from trading assets and liabilities . . . . . . 4077 0 5.e.
f. Other noninterest income:
(1) Other fee income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5407 248,023 5.f.(1)
(2) All other noninterest income* . . . . . . . . . . . . . . . . . . . . . . 5408 61,610 5.f.(2)
g. Total noninterest income (sum of items 5.a through 5.f) . . . . . . . . . . . RIAD 4079 348,797 5.g.
6. a. Realized gains (losses) on held-to-maturity securities. . . . . . . . . . . . RIAD 3521 53 6.a.
b. Realized gains (losses) on available-for-sale securities. . . . . . . . . . . RIAD 3196 0 6.b.
7. Noninterest expense:
a. SaLaries and employee benefits. . . . . . . . . . . . . . . . . . . . . . . . 4135 98,275 7.a.
b. Expenses of premises and fixed assets (net of rental income)
excluding salaries and employee benefits and mortgage interest). . . . . . . 4217 17,696 7.b.
c. Other noninterest expense*. . . . . . . . . . . . . . . . . . . . . . . . . . 4092 311,570 7.c.
d. Total noninterest expense (sum of items 7.a through 7.c). . . . . . . . . . . RIAD 4093 427,541 7.d.
8. Income (loss) before income taxes and extraordinary items and other
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d). . . . RIAD 4301 144,287 8.
9. ApplicabLe income taxes (on item 8). . . . . . . . . . . . . . . . . . . . . . . RIAD 4302 47,676 9.
10. Income (loss) before extraordinary items and other adjustments (item 8
minus 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RIAD 4300 96,611 10.
--------------------------------------

</TABLE>

- ---------------
* Describe on ScheduLe RI-E--Explanations.

4
<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RI-1
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Schedule RI--Continued

Year-to-date
-----------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>

11. Extraordinary items and other adjustments:
a. Extraordinary items and other adjustments, gross of income taxes* . . . . . . 4310 0 11.a.
b. Applicable income taxes (on item 11.a)* . . . . . . . . . . . . . . . . . . . 4315 0 11.b.
c. Extraordinary items and other adjustments, net of income taxes
(item 11.a minus 11.b) . . . . . . . . . . . . . . . . . . . . . . . . . . . RIAD 4320 0 11.c.
12. Net income (loss) (sum of items 10 and 11.c) . . . . . . . . . . . . . . . . . . RIAD 4340 96,611 11.c.
--------------------------------------

</TABLE>

1481
-----------------
Year-to-date
-----------------
Memoranda Dollar Amounts in Thousands RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

1. Interest expense incurred to carry tax-exempt securities, loans, and teases acquired after
August 7, 1986, that is not deductible for federal income tax purposes . . . . . . . . . . 4513 233 M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices
(included in Schedule RI, item 8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8431 490 M.2.
3. Estimated foreign tax credit included in applicable income taxes, items 9 and 11.b above . 4309 0 M.3.
4. To be completed only by banks with $1 billion or more in total assets:
Taxable equivalent adjustment to "Income (loss) before income taxes and extraordinary
items and other adjustments" (item 8 above). . . . . . . . . . . . . . . . . . . . . . . . 1244 2,344 M.4.
5. Number of full-time equivalent employees on payroll at end of current period (round to Number
nearest whole number). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4150 3,385 M.5.
6. Not applicable
7. If the reporting bank has restated its balance sheet as a result of applying push down MM DD YY
accounting this calendar year, report the date of the bank's acquisition . . . . . . . . . 9106 00/00/00 M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments)
(included in Schedule RI, items 5.c and 5.e): Bil Mil Thou
a. Interest rate exposures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8757 0 M.8.a.
b. Foreign exchange exposures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8758 0 M.8.b.
c. Equity security and index exposures . . . . . . . . . . . . . . . . . . . . . . . . . . 8759 0 M.8.c.
d. Commodity and other exposures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8760 0 M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading:
a. Net increase (decrease) to interest income. . . . . . . . . . . . . . . . . . . . . . . 8761 (11,324) M.9.a.
b. Net (increase) decrease to interest expense . . . . . . . . . . . . . . . . . . . . . . 8762 (524) M.9.b.
c. Other (noninterest) allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8763 4,855 M.9.c.
-----------------

</TABLE>

- ---------------
* Describe on ScheduLe RI-E--Explanations.

5
<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RI-4
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
Schedule RI-A--Changes in Equity Capital

Indicate decreases and losses in parentheses.

-------
1483
------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Total equity capital originally reported in the December 31, 1994, Reports of Condition
and Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3215 533,224 1.
2. Equity capital adjustments from amended Reports of income, net*. . . . . . . . . . . . . 3216 0 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) . . . . . . . . . . 3217 533,224 3.
4. Net income (loss) (must equal Schedule RI, item 12). . . . . . . . . . . . . . . . . . . 4340 96,611 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net . . . . . . . . . . . 4346 0 5.
6. Changes incident to business combinations, net . . . . . . . . . . . . . . . . . . . . . 4356 0 6.
7. LESS: Cash dividends declared on preferred stock . . . . . . . . . . . . . . . . . . . . 4470 0 7.
8. LESS: Cash dividends declared on common stock. . . . . . . . . . . . . . . . . . . . . . 4460 10,000 8.
9. Cumulative effect of changes in accounting principles from prior years* (see
instructions for this schedule). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4411 0 9.
10. Corrections of material accounting errors from prior years* (see instructions for
this schedule) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4412 0 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities . . . . 8433 644 11.
12. Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . 4414 0 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) 4415 0 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal
Schedule RC, item 28). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3210 620,479 14.
------------------

- ---------
*Describe on Schedule RI-E--Explanations.

</TABLE>

Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses

Part I. Charge-offs and Recoveries on Loans and Leases

Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.

<TABLE>
<CAPTION>
-------
1486
-----------------------------------------
(Column A) (Column B)
Charge-offs Recoveries
-----------------------------------------
Calendar year-to-date
-----------------------------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Loans secured by real estate:
a. To U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . 4651 1,413 4661 3,841 1.a.
b. To non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . 4652 0 4662 0 1.b.
2. Loans to depository institutions and acceptances of other banks:
a. To U.S. banks and other U.S. depository institutions. . . . . . . 4653 0 4663 0 2.a.
b. To foreign banks. . . . . . . . . . . . . . . . . . . . . . . . . 4654 0 4664 0 2.b.
3. Loans to finance agricultural production and other loans to farmers. 4655 0 4665 9 3.
4. Commercial and Industrial loans:
a. To U.S. addressees (domicile). . . . . . . . . . . . . . . . . . . 4645 845 4617 1,331 4.a.
b. To non-U.S. addressees (domicile). . . . . . . . . . . . . . . . . 4646 0 4618 0 4.b.
5. Loans to individuals for household, family, and other personal
expenditures:
a. Credit cards and related plans . . . . . . . . . . . . . . . . . . 4656 45,536 4666 8,813 5.a.
b. Other (includes single payment, installment, and all student loans) 4657 23,442 4667 8,177 5.b.
6. Loans to foreign governments and official institutions. . . . . . . . 4643 0 4627 0 6.
7. All other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 4644 0 4628 68 7.
8. Lease financing receivables:
a. Of U.S. addressees (domicile). . . . . . . . . . . . . . . . . . . 4658 769 4668 183 8.a.
b. Of non-U.S. addressees (domicile). . . . . . . . . . . . . . . . . 4659 0 4669 0 8.b.
9. Total (sum of items 1 through 8). . . . . . . . . . . . . . . . . . . 4635 72,005 4605 22,422 9.
-----------------------------------------

</TABLE>

<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-SK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RI-5
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
Schedule RI-B--Continued

Part I. Continued

-----------------------------------------
(Column A) (Column B)
Charge-offs Recoveries
-----------------------------------------
Calendar year-to-date
-----------------------------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1-3. Not applicable
4. Loans to finance commercial real estate, construction, and land
development activities (not secured by real estate) included in
Schedule RI-8, part 1, items 4 and 7, above. . . . . . . . . . . . . . 5409 0 5410 0 m.4.
5. Loans secured by real estate in domestic offices (included in
Schedule RI-B, part 1, item 1, above):
a. Construction and land development. . . . . . . . . . . . . . . . . 3582 58 3583 3 m.5.a.
b. Secured by farmland. . . . . . . . . . . . . . . . . . . . . . . . 3584 0 3585 9 m.5.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 family residential
properties and extended under lines of credit. . . . . . . . . 5411 817 5412 52 m.5.c.(1)
(2) All other Loans secured by 1-4 family residential properties . 5413 396 5414 278 m.5.c.(2)
d. Secured by multifamiLy (5 or more) residential properties . . . . . 3588 0 3589 346 m.5.d.
e. Secured by nonfarm nonresidential properties. . . . . . . . . . . . 3590 142 3591 3,153 m.5.e.
-----------------------------------------

</TABLE>

Part II. Changes in Allowance for Loan and Lease Losses

<TABLE>
<CAPTION>
------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Balance originally reported in the December 31, 1994, Reports of Condition and Income . . 3124 120,654 1.
2. Recoveries (must equal part 1, item 9, column B above). . . . . . . . . . . . . . . . . . 4605 22,422 2.
3. LESS: Charge-offs (must equal part 1, item 9, column A above) . . . . . . . . . . . . . . 4635 72,005 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a). . . . . . . . . . 4230 65,573 4.
5. Adjustments* (see instructions for this schedule) . . . . . . . . . . . . . . . . . . . . 4815 0 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC,
item 4.b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3123 136,644 6.

</TABLE>
- ---------
*Describe on Schedule RI-E--Explanations.

Schedule RI-C--Applicable Income Taxes by Taxing Authority

Schedule RI-C is to be reported with the December Report of Income.

<TABLE>
<CAPTION>
-----------------
1489
-----------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4780 N/A 1.
2. State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4790 N/A 2.
3. Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4795 N/A 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b). . . . 4770 N/A 4.
5. Deferred portion of item 4. . . . . . . . . . . . . . . . . . . . RIAD 4772 N/A 5.
-------------------------------------------------
</TABLE>

<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-SK: 39-1580
Address: 100 East Broad Street Page R1-6
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
Schedule RI-D--Income from International Operations

For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs where
international operations account for more than 10 percent of total revenues,
total assets, or net income.

Part I. Estimated Income from International Operations

-------
1492
-------------
Year-to-date
-----------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries,
and IBFS:
a. Interest income booked . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4837 1,818 1.a.
b. Interest expense booked. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4838 20,081 1.b.
C. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and
IBFs (item l.a minus l.b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4839 (18,263) 1.c.
2. Adjustments for booking Location of international operations:
a. Net interest income attributable to international operations booked at domestic offices 4840 0 2.a.
b. Net interest income attributable to domestic business booked at foreign offices. . . . 4841 0 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) . . . . . . . . . . . . . . . . . 4842 0 2.c.
3. Noninterest income and expense attributable to international operations:
a. Noninterest income attributable to international operations. . . . . . . . . . . . . . 4097 0 3.a.
b. Provision for loan and tease losses attributable to international operations . . . . . 4235 0 3.b.
c. Other noninterest expense attributable to international operations . . . . . . . . . . 4239 0 3.c.
d. Net noninterest income (expense) attributable to international operations (item
3.a minus 3.b and 3.c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4843 0 3.d.
4. Estimated pretax income attributable to international operations before capital allocation
adjustment (sum of items l.c, 2.c, and 3.d) . . . . . . . . . . . . . . . . . . . . . . . 4844 (18,263) 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect
the effects of equity capital on overall bank funding costs . . . . . . . . . . . . . . . 4845 0 5.
6. Estimated pretax income attributable to international operations after capital allocation
adjustment (sum of items 4 and 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4846 (18,263) 6.
7. Income taxes attributable to income from international operations as estimated in item 6. 4797 (6,392) 7.
8. Estimated net income attributable to international operations (item 6 minus 7). . . . . . 4341 (11,871) 8.
-----------------

</TABLE>

Memoranda

<TABLE>
<CAPTION>
-----------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Intracompany interest income included in item l.a above . . . . . . . . . . . . . . . . . 4847 0 M.1
2. Intracompany interest expense included in item l.b above. . . . . . . . . . . . . . . . . 4848 0 M.2.
-----------------
</TABLE>

Part II. Supplementary Details on Income from International Operations Require
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts

<TABLE>
<CAPTION>
-------------
Year-to-date
-----------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

1. Interest income booked at IBFs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4849 0 1.
2. interest expense booked at IBFs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4850 0 2.
3. Noninterest income attributable to international operations booked at domestic offices
(excluding IBFS):
a. Gains (Losses) and extraordinary items . . . . . . . . . . . . . . . . . . . . . . . . 5491 0 3.a.
b. Fees and other noninterest income. . . . . . . . . . . . . . . . . . . . . . . . . . . 5492 0 3.b.
4. Provision for loan and lease losses attributable to international operations booked at
domestic offices (excluding IBFS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4852 0 4.
5. Other noninterest expense attributable to international operations booked at domestic
offices (excluding IBFS). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4853 0 5.

</TABLE>

<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA CALL Date: 9/30/95 ST-SK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RI-7
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Schedule RI-E--Explanations

Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.

Detail all adjustments in Schedule RI-A and RI-B, all extraordinary items and
other adjustments in Schedule RI, and all significant items of other
noninterest income and other noninterest expense in Schedule RI. (See
instructions for details.)

-------
1495
-------------
Year-to-date
-----------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2))
Report amounts that exceed 10% of Schedule RI, item 5.f.(2):
a. Net gains on other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . . 5415 0 1.a.
b. Net gains on sales of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5416 0 1.b.
c. Net gains on sales of premises and fixed assets . . . . . . . . . . . . . . . . . . . . 5417 0 1.c.
Itemize and describe the three largest other amounts that exceed 10% of Schedule RI,
item 5.f.(2):
d. TEXT 4461 Card Processing Income 4461 49,934 1.d.
e. TEXT 4462 4462 1.e.
f. TEXT 4463 4463 1.f.
2. Other noninterest expense (from Schedule RI, item 7.c):
a. Amortization expense of intangible assets . . . . . . . . . . . . . . . . . . . . . . . 4531 5,478 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c:
b. Net losses on other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . 5418 0 2.b.
c. Net losses on sales of loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5419 0 2.c.
d. Net Losses on sales of premises and fixed assets. . . . . . . . . . . . . . . . . . . . 5420 0 2.d.
Itemize and describe the three Largest other amounts that exceed 10% of ScheduLe RI,
item 7.c:
e. TEXT 4464 Card Processing Expense 4464 85,939 2.e.
f. TEXT 4467 Card Servicing Expenses 4467 36,181 2.f.
g. TEXT 4468 Communication Expense 4468 32,373 2.g.
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and applicable
income tax effect (from Schedule RI, item 11.b) (itemize and describe all extraordinary
item and other adjustments):
a. (1) TEXT 4469 4469 3.a.(1)
(2) Applicable income tax effect RIAD 4486 3.a.(2)
b. (1) TEXT 4487 4487 3.b.(1)
(2) Applicable income tax effect RIAD 4488 3.b.(2)
c. (1) TEXT 4489 4489 3.c.(1)
(2) Applicable income tax effect RIAD 4491 3.c.(2)
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, item 2)
(itemize and describe all adjustments):
a. TEXT 4492 4492 4.a.
b. TEXT 4493 4493 4.b.
5. Cumulative effect of changes in accounting principles from prior years
(from Schedule RI-A, item 9) (itemize and describe all changes in accounting principles):
a. TEXT 4494 4494 5.a.
b. TEXT 4495 4495 5.b.
6. Corrections of material accounting errors frown prior years (from Schedule RI-A, item 10)
(itemize and describe all corrections):
a. TEXT 4496 4496 6.a.
b. TEXT 4497 4497 6.b.
----------------------------------------------------------------------------------------------------------

</TABLE>
9

<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-SK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page R1-8
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Schedule RI-E--Continued

-------------
Year-to-date
-----------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

7. Other transactions with parent holding company (from ScheduLe RI-A, item 13)
(itemize and describe all such transactions):
a. TEXT 4498 4498 7.a.
b. TEXT 4499 4499 7.b.
8. Adjustments to allowance for Loan and lease Losses (from ScheduLe RI-S, part 11, item
(itemize and describe all adjustments):
a. TEXT 4521 4521 8.a.
b. TEXT 4522 4522 8.b.
-----------------
9. Other explanations (the space below is provided for the bank to briefly describe, at its 1498 1499
option, any other significant items affecting the Report of Income): -----------------
No comment /X/ (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT 4769)

</TABLE>

<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-1
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for September 30, 1995

All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding as of the last
business day of the quarter.

Schedule RC--Balance Sheet

C400
-----------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin(1) . . . . . . . . . . . . . . . . . 0081 556,131 1.a.
b. Interest-bearing balances(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0071 0 1.b.
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A). . . . . . . . . . . . . . . 1754 79,762 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D). . . . . . . . . . . . . . 1773 469,972 2.b.
3. Federal funds sold and securities purchased under agreements to resell in domestic offices
of the bank and of its Edge and Agreement subsidiaries, and in IBFS:
a. Federal funds sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0276 76,375 3.a.
b. Securities purchased under agreements to resell . . . . . . . . . . . . . . . . . . . . 0277 17,936 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule RC-C). . RCFD 2122 5,849,734 4.a.
b. LESS: Allowance for loan and lease losses. . . . . . . . . . . . RCFD 3123 136,644 4.b.
c. LESS: Allocated transfer risk reserve. . . . . . . . . . . . . . RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c). . . . . . . . . . . . . . . . . . 2125 5,713,090 4.d.
5. Trading assets (from Schedule RC-D) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3545 0 5.
6. Premises and fixed assets (including capitalized leases). . . . . . . . . . . . . . . . . 2145 58,533 6.
7. other real estate owned (from Schedule RC-M). . . . . . . . . . . . . . . . . . . . . . . 2150 2,070 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M). 2130 236 8.
9. Customers' liability to this bank on acceptances outstanding. . . . . . . . . . . . . . . 2155 6,025 9.
10. Intangible assets (from Schedule RC-M). . . . . . . . . . . . . . . . . . . . . . . . . . 2143 42,142 10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2160 374,195 11.
12. Total assets (sum of items 1 through 11). . . . . . . . . . . . . . . . . . . . . . . . . 2170 7,396,467 12.

</TABLE>

- ---------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.

11
<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-2
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Schedule RC--Continued

---------------------
Dollar Amounts in Thousands Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

LIABILITIES
13. Deposits:
a. in domestic offices (sum of totals of columns A and C from Schedule RC-E,
part 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCOM 2200 4,135,438 13.a.
(1) Noninterest-bearing(1). . . . . . . . . . . . . . . . . . RCOM 6631 1,129,753 13.a.(1)
(2) Interest-bearing. . . . . . . . . . . . . . . . . . . . . RCOM 6636 3,005,685 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E,
part 11). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFN 2200 391,213 13.b.
(1) Noninterest-bearing . . . . . . . . . . . . . . . . . . . RCFN 6631 0 13.b.(1)
(2) Interest-bearing. . . . . . . . . . . . . . . . . . . . . RCFN 6636 391,213 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase in domestic
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 0278 953,322 14.a.
b. Securities sold under agreements to repurchase. . . . . . . . . . . . . . . . . . . RCFD 0279 0 14.b.
15. a. Demand notes issued to the U.S. Treasury. . . . . . . . . . . . . . . . . . . . . . RCOM 2840 33,685 15.a.
b. Trading liabilities (from Schedule RC-D). . . . . . . . . . . . . . . . . . . . . . RCFD 3548 0 15.b.
16. Other borrowed money:
a. With original maturity of one year or less. . . . . . . . . . . . . . . . . . . . . RCFD 2332 838,491 16.a.
b. With original maturity of more than one year. . . . . . . . . . . . . . . . . . . . RCFD 2333 1,135 16.b.
17. Mortgage indebtedness and obligations under capitalized leases . . . . . . . . . . . . RCFD 2910 4,178 17.
18. Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . . . RCFD 2920 6,025 18.
19. Subordinated notes and debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3200 189,219 19.
20. Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2936 223,282 20.
21. Total liabilities (sum of items 13 through 20) . . . . . . . . . . . . . . . . . . . . RCFD 2948 6,775,988 21.

22. Limited-life preferred stock and related surplus . . . . . . . . . . . . . . . . . . . RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . RCFD 3838 0 23.
24. Common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 20,738 24.
25. Surplus (exclude all surplus related to preferred stock). . . . . . . . . . . . . . . RCFD 3839 107,356 25.
26. a. Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . RCFD 3632 492,071 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities . . . . . . RCFD 8434 314 26.b.
27. Cumulative foreign currency translation adjustments . . . . . . . . . . . . . . . . . RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27) . . . . . . . . . . . . . . . . . . RCFD 3210 620,479 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of
items 21, 22, and 28) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3300 7,396,467 29.
---------------------

Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best
describes the most comprehensive level of auditing work performed for the bank Number
by independent external auditors as of any date during 1994 . . . . . . . . . . . . . . RCFD 6724 N/A M.1.

</TABLE>

1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank

2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)

3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)

4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)

5 = Review of the bank's financial statements by external auditors

6 = Compilation of the bank's financial statements by external auditors

7 = Other audit procedures (excluding tax preparation work)

8 = No external audit work

- ---------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.

12
<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-3
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.

C405
-------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
-------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCOM Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>

1. Cash items in process of collection, unposted debits, and currency and
coin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0022 431,703 1.
a. Cash items in process of collection and unposted debits. . . . . . . 0020 395,821 1.a.
b. Currency and coin. . . . . . . . . . . . . . . . . . . . . . . . . . 0080 35,882 1.b.
2. Balances due from depository institutions in the U.S. . . . . . . . . . 0082 28,093 2.
a. U.S. branches and agencies of foreign banks (including their IBFS) . 0083 0 2.a.
b. Other commercial banks in the U.S. and other depository
institutions in the U.S. (including their IBFS). . . . . . . . . . . 0085 28,093 2.b.
3. Balances due from banks in foreign countries and foreign central banks. 0070 1,723 3.
a. Foreign branches of other U.S. banks . . . . . . . . . . . . . . . . 0073 0 3.a.
b. Other banks in foreign countries and foreign central banks . . . . . 0074 1,723 3.b.
4. Balances due from Federal Reserve Banks . . . . . . . . . . . . . . . . 0090 94,612 0090 96,612 4.
5. Total (sum of items 1 through 4) (total of column A must equal
Schedule RC, sum of items 1.a and 1.b). . . . . . . . . . . . . . . . . 0010 556,131 0010 556,131 5.
-------------------------------------

Memorandum Dollar Amounts in Thousands RCOM Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2,
column B above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0050 28,093 M.1.

</TABLE>

Schedule RC-B--Securities

Exclude assets held for trading.

C410
-----------------------------------------------------------------------------
Held-to maturity Available-for-sale
-----------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value (1)
-----------------------------------------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

1. U.S. Treasury securities. . . . 0211 0 0213 0 1286 143,603 1287 143,500 1.
2. U.S. Government agency
and corporation obligations
(exclude mortgage-backed
securities):
a. Issued by U.S. Govern-
ment agencies(2) . . . . . . 1289 0 1290 0 1291 0 1293 0 2.a.
b. Issued by U.S.
Government-sponsored
agencies(3). . . . . . . . . 1294 21,221 1295 21,226 1297 297,428 1298 297,898 2.b.
-----------------------------------------------------------------------------

</TABLE>

- ---------------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations, and Export-Import Bank
participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.

13
<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-4
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Schedule RC-B--Continued

-----------------------------------------------------------------------------
Held-to maturity Available-for-sale
-----------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value (1)
-----------------------------------------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

3. Securities issued by states
and political subdivisions
in the U.S.:
a. General obligations. . . . 1676 12,151 1677 15,942 1678 0 1679 0 3.a.
b. Revenue obligations. . . . 1681 18,313 1686 16,515 1690 0 1691 0 3.b.
c. Industrial development
and similar obligations. . 1694 10,708 1695 10,801 1696 0 1697 0 3.c.
4. Mortgage-backed
securities (MBS):
a. Pass-through securities:
(1) Guaranteed by
GNMA . . . . . . . . 1698 0 1699 0 1701 0 1702 0 4.a.(1)
(2) Issued by FNMA
and FHLMC. . . . . . 1703 491 1705 513 1706 0 1707 0 4.a.(2)
(3) Other pass-through
securities . . . . . 1709 6,634 1710 6,430 1711 6,060 1713 6,229 4.a.(3)
b. Other mortgage-backed
securities (include CMOs,
REMICs, and stripped
MBS):
(1) Issued or guaranteed
by FNMA, FHLMC,
or GNMA. . . . . . . 1714 6,777 1715 6,882 1716 18,291 1717 18,238 4.b.(1)
(2) Collateralized
by MBS issued or
guaranteed by FNMA
FHLMC, or GNMA . . . 1718 0 1719 0 1731 0 1732 0 4.b.(2)
(3) All other mortgage-
backed securities. . 1733 0 1734 0 1735 262 1736 263 4.b.(3)
5. Other debt securities:
a. Other domestic debt
securities . . . . . . . . 1737 717 1738 741 1739 0 1741 0 5.a.
b. Foreign debt
securities . . . . . . . . 1742 2,750 1743 2,750 1744 0 1746 0 5.b.
6. Equity securities:
a. investments in mutual
funds. . . . . . . . . . . 1747 0 1748 0 6.a.
b. Other equity securities
with readily determin-
able fair values . . . . . 1749 0 1751 0 6.b.
c. All other equity
securities(1). . . . . . . 1752 3,844 1753 3,844 6.c.
7. Total (sum of item 1
through 6) (total of
column A must equal
Schedule RC, item 2.a)
(total of column D must
equal Schedule RC,
item 2.b) . . . . . . . . . . 1754 79,762 1771 81,800 1772 469,488 1773 469,972 7.

</TABLE>

(1) includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.

14
<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-5
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Schedule RC-B--Continued

C412
------
Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

1. Pledged securities(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0416 530,377 M.1.
2. Maturity and repricing data for debt securities(2)(3)(4) (excluding those in nonaccrual
status):
a. Fixed rate debt securities with a remaining maturity of:
(1) Three months or less. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0343 124,960 M.2.a.(1)
(2) Over three months through 12 months . . . . . . . . . . . . . . . . . . . . . . . . 0344 1,512 M.2.a.(2)
(3) Over one year through five years. . . . . . . . . . . . . . . . . . . . . . . . . . 0345 97,668 M.2.a.(3)
(4) Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0346 35,398 M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4) . 0347 259,538 M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of:
(1) Quarterly or more frequently. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4544 282,683 M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly . . . . . . . . . . 4545 2,750 M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually. . . . . . . 4551 0 M.2.b.(3)
(4) Less frequently than every five years . . . . . . . . . . . . . . . . . . . . . . . 4552 919 M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through
2.b.(4)). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4553 286,352 M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total
debt securities from Schedule RC-8, sum of items 1 through 5, columns A and D, minus
nonaccrual debt securities included in Schedule RC-N, item 9, column C). . . . . . . . . 0393 545,890 M.2.c.
3. Not applicable
4. Held-to-maturity debt securities restructured and in compliance with modified terms
(included in Schedule RC-B, item 3 through 5, column A, above). . . . . . . . . . . . . . . 5365 0 M.4.
5. Not applicable
6. Floating rate debt securities with a remaining maturity of one year or less(2)(5) (to be
completed by all banks) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5519 150,384 M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or
trading securities during the calendar year-to-date (report the amortized cost at date of
sale or transfer) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1778 0 M.7.
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale
accounts in Schedule RC-8, item 4.b):
a. Amortized cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8780 0 M.8.a.
b. Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8781 0 M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in
Schedule RC-8, items 2, 3, and 5):
a. Amortized cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8782 21,219 M.9.a.
b. Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8783 21,226 M.9.b.
-----------------

</TABLE>

- ---------------
(2) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum item 2 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
(5) For commercial banks, the debt securities included in Memorandum item 6
will also have been reported in Memorandum item 2.b above. For savings
banks, the debt securities included in Memorandum item 6 will also have
been reported in supplemental Schedule RC-J, part 1, item 4. Savings banks
should note that available-for-sale debt securities are reported at fair
value in Memorandum item 6 and at amortized cost in Schedule RC-J.

15
<PAGE>

<TABLE>
<C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, MA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 03
Address: 100 East Broad Street Page RC-6
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
Schedule RC-C--Loans and Lease Financing Receivables
</TABLE>

Part I. Loans and Leases

Do not deduct the allowance for loan and lease losses from amounts
reported in this schedule. Report total loans and leases, net of unearned
income. Exclude assets held for trading.

----
C415
-------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
-------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCOM Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Loans secured by real estate. . . . . . . . . . . . . . . . . . . . . 1410 1,213,480 1.
a. Construction and Land development . . . . . . . . . . . . . . . . 1415 138,975 1.a.
b. Secured by farmland (including farm residential and other
improvements) . . . . . . . . . . . . . . . . . . . . . . . . . . 1420 7,225 1.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end Loans secured by 1-4 family residential
properties and extended under lines of credit . . . . . . . . 1797 373,273 1.c.(1)
(2) All other loans secured by 1-4 family residential properties:
(a) Secured by first liens. . . . . . . . . . . . . . . . . . 5367 183,006 1.c.(2)
(b) Secured by junior liens . . . . . . . . . . . . . . . . . 5368 105,273 1.c.(2)
d. Secured by multifamily (5 or more) residential properties . . . . 1460 58,594 1.d.
e. Secured by nonfarm nonresidential properties. . . . . . . . . . . 1480 347,134 1.e.
2. Loans to depository institutions:
a. To commercial banks in the U.S. . . . . . . . . . . . . . . . . . 1505 210 2.a.
(1) To U.S. branches and agencies of foreign banks. . . . . . . . 1506 0 2.a.(1)
(2) To other commercial banks in the U.S. . . . . . . . . . . . . 1507 210 2.a.(2)
b. To other depository institutions in the U.S . . . . . . . . . . . 1517 47 1517 47 2.b.
c. To banks in foreign countries . . . . . . . . . . . . . . . . . . 1510 277 2.c.
(1) To foreign branches of other U.S. banks . . . . . . . . . . . 1513 0 2.c.(1)
(2) To other banks in foreign countries . . . . . . . . . . . . . 1516 277 2.c.(2)
3. Loans to finance agricultural production and other loans
to farmers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1590 8,067 1590 8,067 3.
4. Commercial and industrial Loans:
a. To U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . 1763 774,835 1763 774,835 4.a.
b. To non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . 1764 0 1764 0 4.b.
5. Acceptances of other banks:
a. Of U.S. banks . . . . . . . . . . . . . . . . . . . . . . . . . . 1756 0 1756 0 5.a.
b. of foreign banks. . . . . . . . . . . . . . . . . . . . . . . . . 1757 0 1757 0 5.b.
6. Loans to individuals for household, family, and other personal
expenditures (i.e., consumer Loans) (includes purchased paper) . . . 1975 3,092,582 6.
a. Credit cards and related plans (includes check credit and other
revolving credit plans) . . . . . . . . . . . . . . . . . . . . . 2008 2,371,821 6.a.
b. other (includes single payment, installment, and all
student loans). . . . . . . . . . . . . . . . . . . . . . . . . . 2011 720,761 6.b.
7. Loans to foreign governments and official institutions (including
foreign central banks) . . . . . . . . . . . . . . . . . . . . . . . 2081 0 2081 0 7.
8. Obligations (other than securities and Leases) of states and
political subdivisions in the U.S. (includes nonrated
industrial development obligations). . . . . . . . . . . . . . . . . 2107 20,415 2107 20,415 8.
9. Other Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1563 110,399 9.
a. Loans for purchasing or carrying securities
(secured and unsecured) . . . . . . . . . . . . . . . . . . . . . 1545 8,850 9.a.
b. All other loans (exclude consumer loans). . . . . . . . . . . . . 1564 101,549 9.b.
10. Lease financing receivables (net of unearned income) . . . . . . . . 2165 631,423 10.
a. Of U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . 2182 631,423 10.a.
b. Of non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . 2183 0 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above. . . 2123 2,001 2123 2,001 11.
12. Total loans and leases, net of unearned income (sum of items 1
through 10 minus item 11) (total of column A must equal
Schedule RC, item 4.a) . . . . . . . . . . . . . . . . . . . . . . . 2122 5,849,734 2122 5,849,734 12.
-------------------------------------
</TABLE>

<PAGE>

<TABLE>
<C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-7
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
</TABLE>

Schedule RC-C--Continued

Part I. Continued

-----------------------------------
(Column A) (Column B)
Consolidated Domestic
Memoranda Bank Offices
-------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCOM Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above. . . . . . 1496 0 1496 0 M.1.
2. Loans and leases restructured and in compliance with modified terms
(included in Schedule RC-C, part 1, above and not reported as past
due or nonaccrual in Schedule RC-N, Memorandum item 1):
a. Loans secured by real estate: -----------------
(1) To U.S. addressees (domicile) . . . . . . . . . . . . . . . . 1687 0 M.2.a.(1)
(2) To non-U.S. addressees (domicile) . . . . . . . . . . . . . . 1689 0 M.2.a.(2)
b. All other loans and all lease financing receivables (exclude
loans to individuals for household, family, and other personal
expenditures) . . . . . . . . . . . . . . . . . . . . . . . . . . 8691 0 M.2.b.
c. Commercial and industrial Loans to and lease financing
receivables of non-U.S. addressees (domicile) included in
Memorandum item 2.b above . . . . . . . . . . . . . . . . . . . . 8692 0 M.2.c.
3. Maturity and repricing data for loans and Leases(l) (excluding those
in nonaccrual status):
a. Fixed rate loans and leases with a remaining maturity of:
(1) Three months or less. . . . . . . . . . . . . . . . . . . . . 0348 163,655 M.3.a.(1)
(2) Over three months through 12 months . . . . . . . . . . . . . 0349 220,405 M.3.a.(2)
(3) Over one year through five years. . . . . . . . . . . . . . . 0356 1,305,884 M.3.a.(3)
(4) Over five years . . . . . . . . . . . . . . . . . . . . . . . 0357 286,270 M.3.a.(4)
(5) Total fixed rate loans and leases (sum of Memorandum
items 3.a.(l) through 3.a.(4)). . . . . . . . . . . . . . . . 0358 1,976,214 M.3.a.(5)
b. Floating rate loans with a repricing frequency of:
(1) Quarterly or more frequently. . . . . . . . . . . . . . . . . 4554 3,338,935 M.3.b.(1)
(2) Annually or more frequently, but less frequently than
quarterly . . . . . . . . . . . . . . . . . . . . . . . . . . 4555 497,117 M.3.b.(2)
(3) Every five years or more frequently, but less frequently than
annually. . . . . . . . . . . . . . . . . . . . . . . . . . . 4561 6,947 M.3.b.(3)
(4) Less frequently than every five years . . . . . . . . . . . . 4564 0 M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(l)
through 3.b.(4)). . . . . . . . . . . . . . . . . . . . . . . 4567 3,842,999 M.3.b.(5)
c. Total Loans and leases (sum of Memorandum items 3.a.(5) and
3-b.(5)) (must equal the sum of total Loans and leases, net, from
Schedule RC-C, part I, item 12, plus unearned income from
Schedule RC-C, part 1, item 11, minus total nonaccrual loans and
leases from Schedule RC-N, sum of items 1 through 8, column C). . 1479 5,819,213 M.3.c.
4. Loans to finance commercial real estate, construction, and land
development activities (not secured by real estate) included in
Schedule RC-C, part 1, items 4 and 9, column A, page RC-6(2) . . . . 2746 14,989 M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part 1,
above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5369 0 M.5.
-----------------
6. Adjustable rate closed-end loans secured by first liens on 1-4 family RCOM Bil Mil Thou
residential properties (included in Schedule RC-C, part 1, item -----------------
1.c.(2)(a), column B, page RC-6) . . . . . . . . . . . . . . . . . . 5370 99,228 M.6.
-------------------------------------
</TABLE>

- -------------
1) Memorandum item 3 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
2) Exclude loans secured by real estate that are included in Schedule RC-C,
part 1, item 1, column A.

<PAGE>

<TABLE>
<C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC O31
Address: 100 East Broad Street Page RC-8
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
</TABLE>

Schedule RC-D--Trading Assets and Liabilities

Schedule RC-D is to be completed only by banks with $1 billion or more in total
assets or with $2 billion or more in par/notional amount of off-balance sheet
derivative contracts (as reported in Schedule RC-L, item 14.a through 14.e,
columns A through D).

<TABLE>
<CAPTION>
-------
C420 --
----------------------------------------------
Dollar Amounts in Thousands Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
1. U.S. Treasury securities in domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . .RCOM 3531 0 1.
2. U.S. Government agency and corporation obligations in domestic offices (exclude mortgage-
backed securities). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .RCOM 3532 0 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices. . . . .RCOM 3533 0 3.
4. Mortgage-backed securities (MBS) in domestic offices:
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA . . . . . . . . . . . .RCOM 3534 0 4.a
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA
(include CMOs, REMICs, and stripped MBS). . . . . . . . . . . . . . . . . . . . . . . . . .RCOM 3535 0 4.b
c. All other mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .RCOM 3536 0 4.c
5. Other debt securities in domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . .RCOM 3537 0 5.
6. Certificates of deposit in domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . .RCOM 3538 0 6.
7. Commercial paper in domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .RCOM 3539 0 7.
8. Bankers acceptances in domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . .RCOM 3540 0 8.
9. Other trading assets in domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . . .RCOM 3541 0 9.
10. Trading assets in foreign offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .RCFN 3542 0 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity
contracts:
a. In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCOM 3543 0 11.a
b. In foreign offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFN 3544 0 11.b
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) . . . . . . . RCFD 3545 0 12.
--------------------

--------------------
Bil Mil Thou
--------------------
LIABILITIES
13. Liability for short positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .RCFD 3546 0 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity
contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .RCFD 3547 0 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b). . . . .RCFD 3548 0 15.
--------------------
</TABLE>

<PAGE>

<TABLE>
<C> <C>
Legal Title of Rank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-9
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
</TABLE>

Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices

<TABLE>
<CAPTION>
----------
C425
--------------------------------------------------------
Nontransaction
Transaction Accounts Accounts
--------------------------------------------------------
(Column A) (Column B) (Column C)
Total transaction Memo: Total Total
accounts (including demand deposits nontransaction
total demand (included in accounts
deposits) column A) (including MMDAs)
---------------------------------------------------------
Dollar Amounts in Thousands RCOM Bil Mil Thou RCOM Bil Mil Thou RCOM Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Deposits of:
1. individuals, partnerships, and corporations . . . . . . . 2201 1,224,051 2240 927,068 2346 2,670,856 1.
2. U.S. Government . . . . . . . . . . . . . . . . . . . . . 2202 7,641 2280 7,641 2520 0 2.
3. States and political subdivisions in the U.S. . . . . . . 2203 37,392 2290 27,220 2530 24,088 3.
4. Commercial banks in the U.S . . . . . . . . . . . . . . . 2206 92,765 2310 92,765 4.
a. U.S. branches and agencies of foreign banks. . . . . . 2347 0 4.a.
b. Other commercial banks in the U.S. . . . . . . . . . . 2348 3,586 4.b.
5. Other depository institutions in the U.S. . . . . . . . . 2207 9,427 2312 9,427 2349 0 5.
6. Banks in foreign countries. . . . . . . . . . . . . . . . 2213 2,319 2320 2,319 6.
a. Foreign branches of other U.S. banks . . . . . . . . . 2367 0 6.a.
b. Other banks in foreign countries . . . . . . . . . . . 2373 0 6.b.
7. Foreign governments and official institutions
(including foreign central banks) . . . . . . . . . . . . 2216 0 2300 0 2377 0 7.
8. Certified and official checks . . . . . . . . . . . . . . 2330 63,313 2330 63,313 8.
9. Total (sum of items 1 through 8) (sum of
columns A and C must equal Schedule RC,
item 13.a). . . . . . . . . . . . . . . . . . . . . . . . 2215 1,436,908 2210 1,129,753 2385 2,698,530 9.
---------------------------------------------------------
</TABLE>

Memoranda

------------------
Dollar Amounts in Thousands RCOM Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C):
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts. . . . . . . . . . . . . 6835 247,242 M.1.a.
b. Total brokered deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2365 4,678 M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above):
(1) Issued in denominations of less than $100,000. . . . . . . . . . . . . . . . . . . . . . 2343 169 M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater than
$100,000 and participated out by the broker in shares of $100,000 or less. . . . . . . . 2344 4,048 M.1.c.(2)
d. Total deposits denominated in foreign currencies . . . . . . . . . . . . . . . . . . . . . . 3776 0 M.1.d.
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S.
reported in item 3 above which are secured or collateralized as required under state law). . 5590 55,752 M.1.e.
2. Components of total nontransaction accounts (sum of Memorandum items 2.a through 2.d
must equal item 9, column C above):
a. Savings deposits:
(1) Money market deposit accounts (MMDAs). . . . . . . . . . . . . . . . . . . . . . . . . . 6810 1,050,955 M.2.a.(1)
(2) Other savings deposits (excludes MMDAs). . . . . . . . . . . . . . . . . . . . . . . . . 0352 498,176 M.2.a.(2)
b. Total time deposits of less than $100,000. . . . . . . . . . . . . . . . . . . . . . . . . . 6648 1,044,935 M.2.b.
c. Time certificates of deposit of $100,000 or more . . . . . . . . . . . . . . . . . . . . . . 6645 104,464 M.2.c.
d. Open-account time deposits of $100,000 or more . . . . . . . . . . . . . . . . . . . . . . . 6646 0 M.2.d.
3. All NOW accounts (included in column A above) . . . . . . . . . . . . . . . . . . . . . . . . . 2398 307,155 M.3.
------------------
</TABLE>

<PAGE>

<TABLE>
<C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-10
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
</TABLE>

Schedule RC-E--Continued

Part I. Continued

Memoranda (continued)

- ------------------------------------------------------------------------------------------------------------------------------------
Deposit Totals for FDIC Insurance Assessments -----------------
Dollar Amounts in Thousands RCOM Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4. Total deposits in domestic offices (sum of item 9, column A and item 9, column C)
(must equal Schedule RC, item 13.a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2200 4,135,438 M.4

a. Total demand deposits (must equal item 9, column B). . . . . . . . . . . . . . . . . . . . . 2210 1,129,753 M.4.a
b. Total time and savings deposits(1) (must equal item 9, column A plus item 9, column C
minus item 9, column B). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2350 3,005,685 M.4.b
-----------------
------------
(1) For FDIC insurance assessment purposes, "total time and savings deposits"
consists of nontransaction accounts and all transaction accounts other
than demand deposits.
</TABLE>

------------------
Dollar Amounts in Thousands RCOM Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5. Time deposits of less than $100,000 and open-account time deposits of $100,000 or more
(included in Memorandum items 2.b and 2.d above) with a remaining maturity or repricing
frequency of:(l)
a. Three months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0359 129,706 M.5.a
b. Over three months through 12 months (but not over 12 months) . . . . . . . . . . . . . . . . 3644 434,535 M.5.b
6. Maturity and repricing data for time certificates of deposit of $100,000 or more: (l)
a. Fixed rate time certificates of deposit of $100,000 or more with a remaining maturity of:
(1) Three months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2761 59,276 M.6.a.(1)
(2) Over three months through 12 months. . . . . . . . . . . . . . . . . . . . . . . . . . . 2762 19,704 M.6.a.(2)
(3) Over one year through five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2763 22,792 M.6.a.(3)
(4) Over five years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2765 2,692 M.6.a.(4)
(5) Total fixed rate time certificates of deposit of $100,000 or more (sum of
Memorandum items 6.a.(1) through 6.a.(4) . . . . . . . . . . . . . . . . . . . . . . . . 2767 104,464 M.6.a.(5)
b. Floating rate time certificates of deposit of $100,000 or more with a repricing
frequency of:
(1) Quarterly or more frequently . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4568 0 M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly. . . . . . . . . . . . . 4569 0 M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually . . . . . . . . . 4571 0 M.6.b.(3)
(4) Less frequently than every five years. . . . . . . . . . . . . . . . . . . . . . . . . . 4572 0 M.6.b.(4)
(5) Total floating rate time certificates of deposit of $100,000 or more (sum of
Memorandum items 6.b.(1) through 6.b.(4)). . . . . . . . . . . . . . . . . . . . . . . . 4573 0 M.6.b.(5)
c. Total time certificates of deposit of $100,000 or more (sum of Memorandum items 6.a.(5)
and 6.b.(5)) (must equal Memorandum item 2.c. above) . . . . . . . . . . . . . . . . . . . . 6645 104,464 M.6.c.
------------------
</TABLE>
- ---------------
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.

20
<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA call Date: 9/30/95 ST-BK: 39-1580
Address: 100 East Broad Street
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Schedule RC-E--Continued

Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFs)

---------------------
Dollar Amounts in Thousands RCFN Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Deposits of:
1. Individuals, partnerships, and corporations 2621 391,213 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) 2623 0 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs) 2625 0 3.
4. Foreign governments and official institutions (including foreign central banks) 2650 0 4.
5. Certified and official checks 2330 0 5.
6. All other deposits 2668 0 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) 2220 391,213 7.
----------------------

Schedule RC-F--Other Assets

------------
C435 --
----------------------
Dollar Amounts in Thousands Bil Mil Thou
- --------------------------------------------------------------------------------------------------------
1. income earned, not collected on loans RCFD 2164 56,662 1.
2. Net deferred tax assets(l) RCFD 2148 0 2.
3. Excess residential mortgage servicing fees receivable. RCFD 5371 0 3.
4. Other (itemize amounts that exceed 25% of this item). RCFD 2168 317,5331 4.
a. TEXT 3549 Cash Surrender VaLue of Life Insurance RCFD 3549 129,380 4.a.
b. TEXT 3550 RCFD 3550 4.b.
C. TEXT 3551 RCFD 3551 4.c.
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) RCFD 2160 374,1951 5.
----------------------

Memorandum

----------------------
Dollar Amounts in Thousands Bil Mil Thou
- --------------------------------------------------------------------------------------------------------
1. Deferred tax assets disallowed for regulatory capital purposes RCFD 5610 0 M.l.
----------------------

Schedule RC-G--Other Liabilities

------------
C430 --
----------------------
Dollar Amounts in Thousands Bil Mil Thou
- --------------------------------------------------------------------------------------------------------
1. a. Interest accrued and unpaid on deposits in domestic offices(2) RCOM 3645 27,263 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) RCFD 3646 78,704 l.b.
2. Net deferred tax liabilities(l) RCFD 3049 48,927 2.
3. Minority interest in consolidated subsidiaries. RCFD 3000 0 3.
4. Other (itemize amounts that exceed 25% of this item). RCFD 2938 68,388 4.
a. TEXT 3552 Deferred Fees Received on Swaps RCFD 3552 37,955 4.a.
b. TEXT 3553 Accrued Credit Card Customer Awards RCFD 3553 24,005 4.b.
c. TEXT 3554 RCFD 3554 4.c.
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) RCFD 2930 223,282 5.
----------------------

- ------------------
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.

</TABLE>

<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95
Address: 100 East Broad Street ST-BK: 39-1580 FFIEC 0
City, State Zip: Columbus, OH 43271-1066 Page RC-12
FDIC Certificate No.: 06559

Schedule RC-H--Selected Balance Sheet Items for Domestic Offices

<TABLE>
<CAPTION>
<S> <C>
------------
C440 --
----------------------
Domestic Offices
----------------------
Dollar Amounts in Thousands RCOM Bil Mil Thou
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Customers' liability to this bank on acceptances outstanding 2155 6,025 1.
2. Bank's liability on acceptances executed and outstanding 2920 6,025 2.
3. Federal funds sold and securities purchased under agreements to resell 1350 94,311 3.
4. Federal funds purchased and securities sold under agreements to repurchase 2800 953,322 4.
5. Other borrowed money 3190 839,626 5.
EITHER
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs 2163 N/A 6.
OR
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs 2941 396,026 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement
subsidiaries, and IBFs) 2192 7,393,655 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement
subsidiaries, and IBFS) 3129 6,377,150 9.
----------------------

Items 10-17 include held-to-maturity and available-for-sale securities in
domestic offices.

----------------------
RCOM Bil Mil Thou
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
10. U.S. Treasury securities 1779 143,500 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed
securities) 1785 319,119 11.
12. Securities issued by states and political subdivisions in the U.S. 1786 41,172 12.
13. Mortgage-backed securities (MBS):
a. Pass-through securities:
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA 1787 491 13.a
(2) Other pass-through securities 1869 12,863 13.a
b. Other mortgage-backed securities (include CMOs, REMICS, and stripped MBS):
(1) Issued or guaranteed by FNM14A, FHLMC, or GNMA 187 25,015 13.b
(2) All other mortgage-backed securities 2253 263 13.b
14. Other domestic debt securities 3159 717 14.
15. Foreign debt securities 3160 0 15.
16. Equity securities:
a. Investments in mutual funds 3161 0 16.a
b. Other equity securities with readily determinable fair values 3162 0 16.b
c. All other equity securities 3169 3,844 16.c
17. Total held-to-maturity and available-for-sale securities (sum of items
10 through 16) 3170 546,984 17.
----------------------

Memorandum (to be completed only by banks with IEFs and other "foreign" offices)

----------------------
Dollar Amounts in Thousands RCOM Bil Mil Thou
- --------------------------------------------------------------------------------------------------------
EITHER
1. Net due from the IBF of the domestic offices of the reporting bank 3051 N/A M.l.
OR
2. Net due to the IBF of the domestic offices of the reporting bank 3059 N/A M.2.
</TABLE>

<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/3/95 ST-BCL
Address: 100 East Broad Street 39-1580 PFIEC 031
City, State Zip: Columbus, OH 43271-1066 Page RC-13
FDIC Certificate No.: 06559

Schedule RC-I--Selected Assets and Liabilities of IBFs

To be completed only by banks with IBFs and other "foreign" offices.

<TABLE>
<CAPTION>
<S> <C>
-----
C445 --
------------------
Dollar Amounts in Thousands RCFN Bil Mil Thou
- ----------------------------------------------------------------------------------------------------
1. Total IRBF assets of the consolidated bank (component of Schedule RC, item 12) 2133 N/A 1.
2. Total ISF loans and lease financing receivables (component
of schedule RC-C, part 1, item 12, column A) 2076 N/A 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part 1,
item 4, column A) 2077 N/A 3.
4. Total IBF liabilities (component of Schedule RC, item 21) 2898 N/A 4.
5. IBF deposit liabilities due to banks, including other IBFs
(component of Schedule RC-E, part II, items 2 and 3) 2379 N/A 5.
6. Other IBF deposit liabilities (component of Schedule RC-E,
part II, items 1, 4, 5, and 6) 2381 N/A 6.
-------------------

Schedule RC-K--Quarterly Averages(1)

-----
C445 --
------------------
Dollar Amounts in Thousands Bil Mil Thou
- ----------------------------------------------------------------------------------------------------
ASSETS
1. Interest-bearing balances due from depository institutions RCFD 3381 957 1.
2. U.S. Treasury securities and U.S. Government agency and corporation
obligations(2) RCFD 3382 500,121 2.
3. Securities issued by states and political subdivisions in the U.S.(2) RCFD 3383 41,069 3.
4. a. Other debt securities(2) RCFD 3647 18,530 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal
Reserve stock) RCFD 3648 3,844 4.b.
5. Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and
in IBFs RCFD 3365 186,425 5.
6. Loans:
a. Loans in domestic offices:
(1) Total loans RCOM 3360 4,949,379 6.a.(1)
(2) Loans secured by real estate RCOM 3385 1,167,504 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers RCOM 3386 7,633 6.a.(3)
(4) Commercial and industrial loans RCOM 3387 750,452 6.a.(4)
(5) Loans to individuals for household, family, and other personal
expenditures RCOM 3388 2,856,341 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs RCFN 3360 0 6.b.
7. Trading assets RCFD 3401 0 7.
8. Lease financing receivables (net of unearned income) RCFD 3484 601,730 8.
9. Total assets(4) RCFD 3368 7,040,300 9.
LIABILITIES
10. Interest-bearing transaction accounts in domestic offices (NOW accounts,
ATS accounts, and telephone and preauthorized transfer accounts)
(exclude demand deposits) RCOM 3485 311,680 10.
11. Nontransaction accounts in domestic offices:
a. Money market deposit accounts (MKDAS) RCOM 3486 971,141 11.a.
b. Other savings deposits RCOM 3487 592,169 11.b.
c. Time certificates of deposit of S100,000 or more RCOW 3345 112,785 11.c.
d. All other time deposits RCOM 3469 1,073,499 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement
subsidiaries, and IBFs RCFN 3404 438,274 12.
13. Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and
in IBFs RCFD 3353 1,077,973 13.
14. Other borrowed money RCFD 3355 233,585 14.
----------------------
- -----------------------------
</TABLE>
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or (2) an average of weekly figures (i.e.,
the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
cost.
(4) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.

<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-SK: 39-1580
Address: 100 East Broad Street FFIEC 031
City, State Zip: Columbus, OH 43271-1066 Page RC-14
FDIC Certificate No.: 06559

Schedule RC-L--Off-Balance Sheet Items

Please read carefully the instructions for the preparation of Schedule RC-L.
some of the amounts reported in ScheduLe RC-L are regarded as volume
indicators and not necessarily as measures of risk.

<TABLE>
<CAPTION>
<S> <C>
-----
C460 --
------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------
1. Unused commitments:
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g.,
home equity lines 3814 314,878 1.a.
b. Credit card lines 3815 25,306,390 1.b.
c. Commercial real estate, construction, and land development:
(1) Commitments to fund loans secured by real estate 3816 107,508 1.c.(1)
(2) Commitments to fund loans not secured by real estate 6550 1,399 1.c.(2)
d. Securities underwriting 3817 0 1.d.
e. Other unused commitments 3818 1,411,189 1.e.
2. Financial standby letters of credit and foreign office guarantees 3819 488,410 2.
a. Amount of financial standby letters of credit conveyed
to others RCFD 3820 197,603 2.a.
------------------
3. Performance standby letters of credit and foreign office guarantees 3821 78,044 3.
a. Amount of performance standby letters of credit conveyed
to others RCFD 3822 15,656 3.a.
-------------------
4. Commercial and similar letters of credit 3411 80,461 4.
5. Participations in acceptances (as described in the instructions) conveyed to
others by the reporting bank 3428 0 5.
6. Participations in acceptances (as described in the instructions) acquired by
the reporting (nonaccepting) bank 3429 0 6.
7. Securities borrowed 3432 0 7.
8. Securities lent (including customers securities lent where the customer is
indemnified against loss by the reporting bank) 3433 0 8.
9. Mortgages transferred (i.e., sold or swapped) with recourse that have been
treated as sold for Call Report purposes:
a. FNMA and FHLMC residential mortgage loan pools:
(1) Outstanding principal balance of mortgages transferred as of the
report date 3650 0 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report
date 3651 0 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage
loan pools:
(1) Outstanding principal balance of mortgages transferred as of the
report date 3652 0 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report
date 3653 0 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools:
(1) outstanding principal balance of mortgages transferred as of the
report date 3654 0 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date 3655 0 9.c.(2)
10. When-issued securities:
a. Gross commitments to purchase 3434 0 10.a.
b. Gross commitments to sell 3435 0 10.b.
11. Spot foreign exchange contracts 8765 12,504 11.12.
All other off-balance sheet liabilities (exclude off-balance sheet
derivatives) (itemize and describe each component of this item over 25% of
Schedule RC, item 28, "Total equity capital") 3430 0 12.
------------ ---------
a. TEXT 3555 RCFD 3555 12.a.
----------------------------------------------------------------------
b. TEXT 3556 RCFD 3556 12.b.
----------------------------------------------------------------------
c. TEXT 3557 RCFD 3557 12.c.
----------------------------------------------------------------------
d. TEXT 3558 RCFD 3558 12.d.
----------------------------------------------------------------------
13. All other off-balance sheet assets (exclude off-balance sheet derivatives)
(itemize and describe each component of this item over 25% of Schedule RC,
item 28, "Total equity capital") 5591 83,506 13.
------------ ---------
a. TEXT 5592 RCFD 5592 13.a.
----------------------------------------------------------------------
b. TEXT 5593 RCFD 5593 13.b.
----------------------------------------------------------------------
c. TEXT 5594 RCFD 5594 13.c.
----------------------------------------------------------------------
d. TEXT 5595 RCFD 5595 13.d.
----------------------------------------------------------------------
</TABLE>

<PAGE>

Schedule RC-L--Continued

<TABLE>
<CAPTION>
(Column A) (Column B) (Column C) (Column D)
Interest Rate Foreign Exchange Equity Derivative Commodity and
Dollar Amounts in Thousands Contracts Contracts Contracts Other contracts
- ---------------------------- -------------- ---------------- ----------------- ---------------
Off-balance Sheet Derivatives Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou
Position Indicators
<S> <C> <C> <C> <C>

14. Gross amounts (e.g., notional
amounts) (for each column, sum of
items 14.a through 14.e must equal
sum of items 15, 16.a, and 16.b):

a. Futures contracts 0 0 0 0 14.a.
RCFD 8693 RCFD 8694 RCFD 8695 RCFD 8696

b. Forward contracts 60,000 140,167 0 0 14.b.
RCFD 8697 RCFD 8698 RCFD 8699 RCFD 8700

c. Exchange-traded option contracts:
(1) Written options 0 0 0 0 14.c.(1)
RCFD 8701 RCFD 8702 RCFD 8703 RCFD 8704

(2) Purchased options 0 0 0 0 14.c.(2)
RCFD 8705 RCFD 8706 RCFD 8707 RCFD 8708

d. Over-the-counter option contracts:

(1) Written options 2,680,077 0 0 0 14.d.(1)
RCFD 8709 RCFD 8710 RCFD 8711 RCFD 8712

(2) Purchased options 3,956,077 0 0 0 14.d.(2)
RCFD 8713 RCFD 8714 RCFD 8715 RCFD 8716

e. Swaps 21,360,879 0 0 0 14.e.
RCFD 3450 RCFD 3826 RCFD 8719 RCFD 8720

15. Total gross notional
amount of derivative contracts
held for trading 0 0 0 0 15.
RCFD A126 RCFD A127 RCFD 8723 RCFD 8724

16. Total gross notional
amount of derivative contracts
held for purposes other than
trading:

a. Contracts marked to market 871,310 140,167 0 0 16.a.
RCFD 8725 RCFD 8726 RCFD 8727 RCFD 8728

b. Contracts not marked to market 27,185,723 0 0 0 16.b.
RCFD 8729 ECFD 8730 RCFD 8731 RCFD 8732

</TABLE>

<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-16
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Schedule RC-L--Continued

-----------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
- ---------------------------------- Contracts Contracts Contracts Other Contracts
Off-balance Sheet Derivatives -----------------------------------------------------------------------------
Position Indicators RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>

17. Gross fair values of
derivative contracts:
a. Contracts held for
trading:
(1) Gross positive
fair value. . . . . . 8733 0 8734 0 8735 0 8736 0 17.a.(1)
(2) Gross negative
fair value. . . . . . 8737 0 8738 0 8739 0 8740 0 17.a.(2)
b. Contracts held for
purposes other than
trading that are marked
to market:
(1) Gross positive
fair value. . . . . . 8741 1,525 8742 1,492 8743 0 8744 0 17.b.(1)
(2) Gross negative
fair value. . . . . . 8745 1,861 8746 1,488 8747 0 8748 0 17.b.(2)
c. Contracts held for
purposes other than
trading that are not
marked to market:
(1) Gross positive
fair value. . . . . . 8749 122,256 8750 0 8751 0 8752 0 17.c.(1)
(2) Gross negative
fair value. . . . . . 8753 129,021 8754 0 8755 0 8756 0 17.c.(2)
-----------------------------------------------------------------------------

Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

1.-2. Not applicable
3. Unused commitments with an original maturity exceeding one year that are reported in
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of
commitments that are fee paid or otherwise legally binding). . . . . . . . . . . . . . . . 3833 953,216 M.3.
a. Participations in commitments with an original maturity
exceeding one year conveyed to others . . . . . . . . . . . . . . RCFD 3834 116,042 M.3.a.
4. To be completed only by banks with $l billion or more in total assets:
Standby letters of credit and foreign office guarantees (both financial and performance)
issued to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3,
above. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3377 1,013 M.4.
5. To be completed for the September report only:
installment loans to individuals for household, family, and other personal expenditures
that have been securitized and sold without recourse (with servicing retained), amounts
outstanding by type of loan:
a. Loans to purchase private passenger automobiles . . . . . . . . . . . . . . . . . . . . 2741 0 M.5.a.
b. Credit cards and related plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2742 3,440,000 M.5.b.
c. All other consumer installment credit (including mobile home loans) . . . . . . . . . . 2743 54,408 M.5.c.
-----------------

</TABLE>

26
<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-17
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Schedule RC-M--Memoranda
C465
-----------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

1. Extensions of credit by the reporting bank to its executive officers, directors, principal
shareholders, and their related interests as of the report date:
a. Aggregate amount of all extensions of credit to alt executive officers, directors,
principal shareholders, and their related interests . . . . . . . . . . . . . . . . . . 6164 214,507 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount
of all extensions of credit by the reporting bank (including extensions of credit to
related interests) equals or exceeds the lesser of $500,000 or
5 percent of total capital as defined for this purpose in Number
agency regulations. . . . . . . . . . . . . . . . . . . . . . . . RCFD 6165 10 1.b.
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches
and agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b). . . . . . . 3405 0 2.
3. Not applicable.
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others
(include both retained servicing and purchased servicing):
a. Mortgages serviced under a GNMA contract. . . . . . . . . . . . . . . . . . . . . . . . 5500 0 4.a.
b. Mortgages serviced under a FHLMC contract:
(1) Serviced with recourse to servicer. . . . . . . . . . . . . . . . . . . . . . . . . 5501 0 4.b.(1)
(2) Serviced without recourse to servicer . . . . . . . . . . . . . . . . . . . . . . . 5502 0 4.b.(2)
c. Mortgages serviced under a FNMA contract:
(1) Serviced under a regular option contract. . . . . . . . . . . . . . . . . . . . . . 5503 0 4.c.(1)
(2) Serviced under a special option contract. . . . . . . . . . . . . . . . . . . . . . 5504 0 4.c.(2)
d. Mortgages serviced under other servicing contracts. . . . . . . . . . . . . . . . . . . 5505 0 4.d.
5. To be completed only by banks with $1 billion or more in total assets:
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must
equal Schedule RC, item 9):
a. U.S. addressees (domicile). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2103 6,025 5.a.
b. Non-U.S. addressees (domicile). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2104 0 5.b.
6. Intangible assets:
a. Mortgage servicing rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3164 0 6.a.
b. Other identifiable intangible assets:
(1) Purchased credit card relationships . . . . . . . . . . . . . . . . . . . . . . . . 5506 25,986 6.b.(1)
(2) All other identifiable intangible assets. . . . . . . . . . . . . . . . . . . . . . 5507 3,067 6.b.(2)
c. Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3163 13,089 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10). . . . . . . . . 2143 42,142 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been
grandfathered or are otherwise qualifying for regulatory capital purposes . . . . . . . 6442 0 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to
redeem the debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3295 0 7.
-----------------

</TABLE>

- ---------------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.

27
<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-18
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Schedule RC-M--Continued

---------------------
Dollar Amounts in Thousands Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

8. a. Other real estate owned:
(1) Direct and indirect investments in real estate ventures . . . . . . . . . . . RCFD 5372 0 8.a.(1)
(2) All other real estate owned:
(a) Construction and land development in domestic offices . . . . . . . . . . RCOM 5508 0 8.a.(2)(a)
(b) Farmland in domestic offices. . . . . . . . . . . . . . . . . . . . . . . RCOM 5509 0 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices . . . . . . . . . . RCOM 5510 170 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices. . . . RCOM 5511 0 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices . . . . . . . . . . RCOM 5512 1,900 8.a.(2)(e)
(f) In foreign offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFN 5513 0 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7). . . RCFD 2150 2,070 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies:
(1) Direct and indirect investments in real estate ventures. . . . . . . . . . . . RCFD 5374 0 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies. RCFD 5375 236 8.b.(2)
(3) Total (sum of items B.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8). . . RCFD 2130 236 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies . . . . . . . RCFD 5376 9,040 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC,
item 23, "Perpetual preferred stock and related surplus". . . . . . . . . . . . . . . RCFD 3778 0 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include
proprietary, private label, and third party products):
a. Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCOM 6441 49 10.a.
b. Equity securities funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCOM 8427 6,121 10.b.
c. Debt securities funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCOM 8428 1,740 10.c.
d. Other mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCOM 8429 0 10.d.
e. Annuities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCOM 8430 6,454 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through
10.e above). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCOM 8784 2,556 10.f.
---------------------

Memorandum Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

1. Interbank holdings of capital instruments (to be completed for the December report only):
a. Reciprocal holdings of banking organizations' capital instruments . . . . . . . . . . . 3836 N/A M.1.a.
b. Nonreciprocal holdings of banking organizations' capital instruments. . . . . . . . . . 3837 N/A M.1.b.
-----------------
</TABLE>

28
<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-19
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Schedule RC-N--Past Due and Nonaccrual Loans, Leases,
and Other Assets

The FFIEC regards the information reported in all of Memorandum item 1, in items 1 through 10, column A, and in Memorandum items 2
through 4, column A, as confidential.

C470
---------------------------------------------------------
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
---------------------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

1. Loans secured by real estate:
a. To U.S. addressees (domicile) . . . . . . . . . 1245 1246 3,703 1247 13,919 1.a.
b. To non-U.S. addressees (domicile) . . . . . . . 1248 1249 0 1250 0 1.b.
2. Loans to depository institutions and acceptances
of other banks:
a. To U.S. banks and other U.S. depository
institutions . . . . . . . . . . . . . . . . . 5377 5378 0 5379 0 2.a.
b. To foreign banks. . . . . . . . . . . . . . . . 5380 5381 0 5382 0 2.b.
3. Loans to finance agricultural production and
other loans to farmers . . . . . . . . . . . . . . 1594 1597 0 1583 101 3.
4. Commercial and industrial loans:
a. To U.S. addressees (domicile) . . . . . . . . . 1251 1252 3,766 1253 12,322 4.a.
b. To non-U.S. addressees (domicile) . . . . . . . 1254 1255 0 1256 0 4.b.
5. Loans to individuals for household, family, and
other personal expenditures:
a. Credit cards and related plans. . . . . . . . . 5383 5384 26,841 5385 0 5.a.
b. Other (includes single payment, installment,
and all student loans). . . . . . . . . . . . . 5386 5387 10,758 5388 4,260 5.b.
6. Loans to foreign governments and official
institutions . . . . . . . . . . . . . . . . . . . 5389 5390 0 5391 0 6.
7. All other loans. . . . . . . . . . . . . . . . . . 5459 5460 4 5461 1,093 7.
8. Lease financing receivables:
a. Of U.S. addressees (domicile) . . . . . . . . . 1257 1258 469 1259 827 8.a.
b. Of non-U.S. addressees (domicile) . . . . . . . 1271 1272 0 1791 0 8.b.
9. Debt securities and other assets (exclude other
real estate owned and other repossessed assets). . 3505 3506 0 3507 15,374 9.
---------------------------------------------------------

Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and
leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in
items 1 through 8.

RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10. Loans and leases reported in items 1
through 8 above which are wholly or partially
guaranteed by the U.S. Government. . . . . . . . . 5612 5613 5,004 5614 1,405 10.
a. Guaranteed portion of loans and leases
included in item 10 above . . . . . . . . . . . 5615 5616 5,004 5617 1,390 11.a.
---------------------------------------------------------
</TABLE>

29
<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-20
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Schedule RC-N--Continued

C473
---------------------------------------------------------
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
Memoranda ---------------------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

1. Restructured loans and leases included in
Schedule RC-N, items 1 through 8, above (and not
reported in Schedule RC-C, part 1, Memorandum
item 2). . . . . . . . . . . . . . . . . . . . . 1658 1659 1661 M.1.
2. Loans to finance commercial real estate,
construction, and land development activities
(not secured by real estate) included in
Schedule RC-N, items 4 and 7, above. . . . . . . 6558 6559 0 6560 4,287 M.2.
---------------------------------------------------------
3. Loans secured by real estate in domestic offices RCOM Bil Mil Thou RCOM Bil Mil Thou RCOM Bil Mil Thou
(included in Schedule RC-N, item 1, above): ---------------------------------------------------------
a. Construction and land development . . . . . . 2759 2769 4 3492 2,583 M.3.a.
b. Secured by farmland . . . . . . . . . . . . . 3493 3494 0 3495 16 M.3.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by
1-4 family residential properties and
extended under lines of credit. . . . . . 5398 5399 537 5400 612 M.3.c.(1)
(2) All other loans secured by 1-4 family
residential properties. . . . . . . . . . 5401 5402 1,797 5403 5,970 M.3.c.(2)
d. Secured by multifamily (5 or more) residential
properties. . . . . . . . . . . . . . . . . . 3499 3500 32 3501 0 M.3.d.
e. Secured by nonfarm nonresidential properties. 3502 3503 1,333 3504 4,738 M.3.e
---------------------------------------------------------

-------------------------------------
(Column A) (Column B)
Past due 30 Past due 90
through 89 days days or more
Memoranda -------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4. Interest rate, foreign exchange rate, and other
commodity and equity contracts:
a. Book value of amounts carried as assets. . . . 3522 3528 0 M.4.a
b. Replacement cost of contracts with a
positive replacement cost. . . . . . . . . . . 3529 3530 0 M.4.b.
-------------------------------------
</TABLE>

<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-21
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Schedule RC-0--Other Data for Deposit Insurance Assessments

----
C475
--------------------
Dollar Amounts in Thousands RCOM Bil Mil Thou
- -----------------------------------------------------------------------------------------
<S> <C> <C>
1. Unposted debits (see instructions):
a. Actual amount of all unposted debits....................... 0030 N/A 1.a.
OR
b. Separate amount of unposted debits:
(1) Actual amount of unposted debits to demand deposits.... 0031 0 1.b.(1)
(2) Actual amount of unposted debits to time and savings
deposits(1).............................................. 0032 0 1.b.(2)
2. Unposted credits (see instructions):
a. Actual amount of all unposted credits...................... 3510 N/A 2.a.
OR
b. Separate amount of unposted credits:
(1) Actual amount of unposted credits to demand deposits... 3512 0 2.b.(1)
(2) Actual amount of unposted credits to time and savings
deposits(1).............................................. 3514 0 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust
department (not included in total deposits in
domestic offices)............................................. 3520 0 3.
4. Deposits of consolidated subsidiaries in domestic offices
and in insured branches in Puerto Rico and U.S. territories
and possessions (not included in total deposits):
a. Demand deposits of consolidated subsidiaries............... 2211 7,187 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries.. 2351 11,816 4.b.
c. Interest accrued and unpaid on deposits of consolidated
subsidiaries............................................... 5514 0 4.c.
5. Deposits in insured branches in Puerto Rico and U.S.
territories and possessions:
a. Demand deposits in insured branches (included in Schedule
RC-E, Part II)............................................. 2229 0 5.a.
b. Time and savings deposits(1) in insured branches
(included in ScheduLe RC-E, Part II)....................... 2383 0 5.b.
c. Interest accrued and unpaid on deposits in insured
branches (included in ScheduLe RC-G, item 1.b)............. 5515 0 5.c.
----------------------------
----------------------------

Item 6 is not applicable to state nonmember banks that have not
been authorized by the
Federal Reserve to act as pass-through correspondents.
6. Reserve balances actually passed through to the Federal
Reserve by the reporting bank on behalf of its respondent
depository institutions that are also reflected as deposit
liabilities of the reporting bank:
a. Amount reflected in demand deposits (included in Schedule
RC-E, Part I, Memorandum item 4.a).......................... 2314 0 6.a.
b. Amount reflected in time and savings deposits(1) (included
in ScheduLe RC-E, Part I, Memorandum item 4.b).............. 2315 0 6.b.
7. Unamortized premiums and discounts on time and savings
deposits:(1)
a. Unamortized premiums........................................ 5516 0 7.a.
b. Unamortized discounts....................................... 5517 0 7.b.
----------------------------
----------------------------

8. To be completed by banks with "Oaker deposits."
Total "Adjusted Attributable Deposits" of all institutions
acquired under Section 5(d)(3) of the Federal Deposit
Insurance Act (from most recent FDIC Oaker Transaction
Worksheet(s)).................................................. 5518 N/A 8.
----------------------------
----------------------------

9. Deposits in Lifeline accounts................................. 5596 9.
10. Benefit-responsive "Depository institution Investment
Contracts" (included in total deposits in domestic offices)... 8432 0 10.
----------------------------
</TABLE>
- ----------------
(1) For FDIC insurance assessment purposes, "time and savings
deposits" consists of nontransaction accounts and all
transaction accounts other than demand deposits.

<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-22
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Schedule RC-0--Continued

--------------------
Dollar Amounts in Thousands RCOM Bil Mil Thou
- -----------------------------------------------------------------------------------------
<S> <C> <C>
11. Adjustments to demand deposits in domestic offices reported
in ScheduLe RC-E for certain reciprocal demand balances:
a. Amount by which demand deposits would be reduced if
reciprocal demand balances between the reporting bank
and savings associations were reported on a net basis
rather than a gross basis in Schedule RC-E................ 6785 0 11.a.
b. Amount by which demand deposits would be increased if
reciprocal demand balances between the reporting bank
and U.S. branches and agencies of foreign banks were
reported on a gross basis rather than a net basis in
Schedule RC-E............................................. A181 0 11.b.
c. Amount by which demand deposits would be reduced if cash
items in process of collection were included in the
calculation of net reciprocal demand balances between
the reporting bank and the domestic offices of U.S.
banks and savings associations in Schedule RC-E........... A182 0 11.c.

Memoranda (to be completed each quarter except as noted)

--------------------
Dollar Amounts in Thousands RCOM Bil Mil Thou
- -----------------------------------------------------------------------------------------
1. Total deposits in domestic offices of the bank (sum of
Memorandum items 1.a.(1) and 1.b.(1) must equal
Schedule RC, item 13.a):
a. Deposit accounts of S100,000 or less:
(1) Amount of deposit accounts of $100,000 or less.......... 2702 2,480,222 M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less Number
(to be completed for the June ------------------
report only).........................RCOM 3779 N/A M.1.a.(2)
b. Deposit accounts of more than $100,000:
(1) Amount of deposit accounts of more than $100,000........ 2710 1,655,216 M.l.b.(l)
-------------------
(2) Amount of deposit accounts of more Number
than $100,000.......................RCOM 2722 3,702 M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of
the bank:
a. An estimate of your bank's uninsured deposits can be
determined by multiplying the number of deposit accounts
of more than $100,000 reported in Memorandum item 1.b.(2)
above by S100,000 and subtracting the result from the
amount of deposit accounts of more than S100,000 reported
in Memorandum item 1.b.(1) above.

Indicate in the appropriate box at the right whether your bank YES NO
has a method or procedure for determining a better estimate -------------------
of uninsured deposits than the estimate described above...... RCOM 6861 X M.2.a.

b. If the box marked YES has been checked, report the RCOM Bil Mil Thou
estimate of uninsured deposits determined by using your --------------------
bank's method or procedure.................................. 5597 N/A M.2.b.

- --------------------------------------------------------------------------------------------------
Person to whom questions about the Reports of Condition and Income should be directed: c477

Elizabeth G. Gilliland, Assistant Vice-President (614) 248-8563
- ------------------------------------------------ ---------------------------------
Name and Title (TEXT 8901) Area code/phone number/extension
(TEXT 8902)

</TABLE>
32
<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-SK: 39-1580 FFIEC 031
Address : 100 East Broad Street Page RC-23
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

SCHEDULE RC-R--RISK-BASED CAPITAL

This schedule must be completed by alL banks as follows: Banks that reported
total assets of $1 billion or more in Schedule RC, item 12, for June 30,
1994, must complete items 2 through 9 and Memoranda items 1 and 2. Banks with
assets of Less than $1 billion must complete items 1 and 2 below or ScheduLe
RC-R in its entirety, depending on their response to item 1 below.

1. Test for determining the extent to which Schedule RC-R must C480
be completed. To be completed only by banks with total assets ------------
of Less than $1 billion. Indicate in the appropriate box at the YES NO
right whether the bank has total capital greater than or equal ------------
to eight percent of adjusted total assets....................... RCFD 6056 1.

For purposes of this test, adjusted total assets equals
total assets less cash, U.S. Treasuries, U.S. Government
agency obligations, and 80 percent of U.S. Government-sponsored
agency obligations plus the aLLowance for loan and lease losses
and selected off-balance sheet items as reported on Schedule RC-L
(see instructions).

If the box marked YES has been checked, then the bank only
has to complete item 2 below. If the box marked NO has been checked,
the bank must complete the remainder of this schedule.

A NO response to item 1 does not necessarily mean that the
bank's actual risk-based capital ratio is less than eight percent
or that the bank is not in compliance with the risk-based capital guidelines.

-------------------------------------------
(Column A) (Column B)
Subordinated Debt(1) Other
Item 2 is to be completed by all banks. and Intermediate Limited-
Term Preferred Life Capital
Stock instruments
-------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. Subordinated debt(1) and other limited-life
capital instruments (original weighted average
maturity of at Least five years) with a remaining
maturity of:
a. One year or less................................ 3780 0 3786 0 2.a.
b. Over one year through two years................. 3781 0 3787 0 2.b.
c. Over two years through three years.............. 3782 0 3788 0 2.c.
d. Over three years through four years............. 3783 0 3789 0 2.d.
e. Over four years through five years.............. 3784 0 3790 0 2.e.
f. Over five years................................. 3785 189,219 3791 0 2.f.
3. Not applicable

-------------------------------------------
Items 4-9 and Memoranda items 1 and 2 are to be completed (Column A) (Column B)
by banks that answered NO to item 1 above and Assets Credit Equiv-
by banks with total assets of $1 billion or more. Recorded alent Amount
on the of Off-Balance
Balance Sheet Sheet Items(2)
-------------------------------------------
RCFD Bil Mil Thou RCFD Bil Mil Thou
-------------------------------------------
Assets and credit equivalent amounts of off-balance
sheet items assigned to the Zero percent risk category:
a. Assets recorded on the balance sheet:
(1) Securities issued by, other claims on, and
claims unconditionally guaranteed by, the
U.S. Government and its agencies and other
DECO central governments........................ 3794 150,474 4.a.(1)
(2) All other....................................... 3795 134,395 4.a.(2)
b. Credit equivalent amount of off-balance
sheet items......................................... 3796 146,834 4.b.

- ------------------
1) Exclude mandatory convertible debt reported in Schedule RC-M,
item 7.
2) Do not report in column B the risk-weighted amount of assets
reported in column A.

</TABLE>

<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/95 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC.
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Schedule RC-R--Continued

Dollar Amounts in Thousands

----------------------------------------
(Column A) (Column B)
Assets Credit Equiv-
Recorded alent Amount
on the of Off-Balance
Balance Sheet Sheet Item(1)
----------------- -------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
----------------- -------------------

<S> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items
assigned to the 20 percent risk category:
a. Assets recorded on the balance sheet:
(1) claims conditionally guaranteed by the U.S.
Government and its agencies and other DEOC central
governments 3798 139,581 5.a.(1)
(2) Claims collateralized by securities issued by the
U.S. Government and its agencies and other DEOC central
governments; by securities issued by U.S. Government-
sponsored agencies; and by cash on deposit 3799 0 5.a.(2)
(3) All other 3800 911,257 5.a.(3)
b. Credit equivalent amount of off-balance sheet items 3801 452,891 5.b
6. Assets and credit equivalent amounts of off-balance sheet
items assigned to the 50 percent risk category:
a. Assets recorded on the balance sheet 3802 208,249 6.a

b. Credit equivalent amount of off-balance sheet items 3803 4,946 6.b
7. Assets and credit equivalent amounts of off-balance sheet
items assigned to the 100 percent risk category:
a. Assets recorded on the balance sheet 3804 5,988,671 7.a
b. Credit equivalent amount of off-balance sheet items 3805 597,477 7.b
8. Onbalance sheet asset values excluded from the calculation
of the risk-based capital ratio(2)
9. Total assets recorded on the balance sheet (sum of 3806 484 8
items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal
Schedule RC, item 12 plus items 4.b and 4.c) 3807 7,533,111 9.

Memoranda
Dollar Amounts in Thousands RCFD Bit Mit Thou
- -------------------------------------------------------------------------------------------------------------------
1. Current credit exposure across all off-balance sheet
derivative contracts covered by the
risk-based capital standards 8764 125,274 M.1.

with a remaining maturity of
----------------------------------------------------------------------
(Column A) (Column B) (Column C)
One year or less Over one year Over 5 years
through five years
------------------------------------------------------------------------
RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou RFCD Tril Bil Mil Thou
------------------------------------------------------------------------
2. Notional principal amounts of
through five years
off-balance sheet derivative contracts(3):
a. Interest rate contracts 3809 8,735,353 8766 10,569,917 8767 499,200 M.2.a
b. Foreign exchange contracts 3812 139,534 8769 0 8770 0 M.2.b
c. Gold contracts 8771 0 8772 0 8773 0 M.2.c
d. Other precious metals contracts 8774 0 8775 0 8776 0 M.2.d
e. Other commodity contracts 8777 0 8778 0 8779 0 M.2.e
f. Equity derivative contracts A000 0 A001 0 A002 0 M.2.f

- -----------------------
(1) Do not report in column B the risk-weighted amount of assets
reported in column A.
(2) Include the difference between the fair value and the
amortized cost of available-for-sale securities in item 8 and
report the amortized cost of these securities in item 4 through 7
above. Item 8 also includes on-balance sheet asset values (or
portions thereof) of off-balance sheet interest rate,
foreign exchange rate, and commodity contracts and those
contracts (e.g. futures contracts) not subject to risk-based
capital. Exclude from item 8 margin accounts and accrued
receivables as well as any portion of the allowance for Loan and
lease losses in excess of the amount that may be included in Tier 2 capital.
(3) Exclude foreign exchange contracts with an original maturity
of 14 days or less and all futures contracts.

34
</TABLE>

<PAGE>

Legal TitLe of Bank: BANK ONE, COLUMBUS, NA CALL Date: 9/30/95 ST-B
Address: 100 East Broad Street
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on September 30, 1995

BANK ONE, COLUMBUS, NA Columbus Ohio
- ---------------------------- ------------------------- --------------------
Legal Title of Bank City State

The management of the reporting bank may, if it wishes, submit a brief
narrative statement on the amounts reported in the Reports of Condition and
Income. This optional statement will be made available to the public, along
with the publicly available data in the Reports of Condition and Income, in
response to any request for individual bank report data. However, the
information reported in column A and in all of Memorandum item 1 of Schedule
RC-N is regarded as confidential and will not be released to the public.
BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE
STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL
BANK CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS
IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE
MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks
choosing not to make a statement may check the "No comment" box below and
should make no entries of any kind in the space provided for the narrative
statement; i.e., D0 NOT enter in this space such phrases as "No statement,"
"Not applicable," "N/A," "No comment," and "None."

The optional statement must be entered on this sheet. The statement should
not exceed 100 words. Further, regardless of the number of words, the
statement must not exceed 750 characters, including punctuation, indentation,
and standard spacing between words and sentences. If any submission should
exceed 750 characters, as defined, it will be truncated at 750 characters
with no notice to the submitting bank and the truncated statement will appear
as the bank's statement both on agency computerized records and in
computer-file releases to the public.

All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who
thereby attests to its accuracy.

If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing
narrative statement will be deleted from the files, and from disclosure; the
bank, at its option, may replace it with a statement, under signature,
appropriate to the amended data.

The optional narrative statement will appear in agency records and in release
to the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.

- -------------------------------------------------------------------------------
No comment /_/ (RCOM 6979) / C471 / C472 /

BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)

For regulatory purposes, the Bank defers the recognition of certain excess
income relating to securitized loan sales until cash is received. The effect
of this accounting method has decreased net income for the current year
$20,376,000 and decreased retained earnings on a cumulative basis $94,233,000.

10-27-95
-------------------------------------- --------------------
Signature of Executive Officer of Bank Date of Signature

<PAGE>

Legal Title of Bank: BANK ONE, COLUMBUS, NA CALL Date: 9/30/95 ST-B
Address: 100 East Broad Street
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559

THIS PAGE IS TO BE COMPLETED BY ALL BANKS
- --------------------------------------------------------------------------------
CALL NO. 193 31 09-30-95 OMB No. For OCC: 1557-0081
STBK: 39-1580 00088 STCERT: 39-06559 OMB No. For FDIC: 3064-0052
OMB No. For Federal Reserve: 7100-0036
Expiration Date: 3/31/96

BANK ONE, COLUMBUS, NATIONAL ASSOCIA SPECIAL REPORT
100 EAST BROAD STREET (Dollar Amounts in Thousands)
COLUMBUS, OH 43271
- --------------------------------------------------------------------------------
CLOSE OF BUSINESS FDIC Certificate Number
DATE 06559 C-700
9/30/95
- --------------------------------------------------------------------------------
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
- --------------------------------------------------------------------------------
The following information is required by Public Laws 90-44 and 102-242, but
does not constitute a part of the Report of Condition. With each Report of
Condition, these Laws require all banks to furnish a report of all loans or
other extensions of credit to their executive officers made since the date
of the previous Report of Condition. Data regarding individual loans or
other extensions of credit are not required. If no such loans or other
extensions of credit were made during the period, insert "none"
against subitem (a). (Exclude the first $15,000 of indebtedness of each
executive officer under bank credit card plan.) See Sections 215.2 and 215.3
of Title 12 of the Code of Federal Regulations (Federal Reserve Board
Regulation 0) for the definitions of "executive officer" and "extension
of credit," respectively. Exclude loans and other extensions of credit
to directors and principal shareholders who are not executive officers.
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
a. Number of loans made to executive officers since the previous Call Report date RCFD 3561 6 a.
----------------
b. Total dollar amount of above loans (in thousands of dollars) RCFD 3562 141 b.
----------------
c. Range of interest charged on above loans
(example: 9 3/4% = 9.75) RCFD 7701 9.25 % to RCFD 7702 18.65 % c.
- -----------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT DATE (Month, Day, Year)

/s/ Elizabeth G. Giltiland 10/30/95
- -----------------------------------------------------------------------------------------------------
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) AREA CODE/PHONE NUMBER
Elizabeth G. Giltiland, Assistant Vice-President EXTENSION (TEXT 8906)
(614) 248-8563

- -----------------------------------------------------------------------------------------------------
FDIC 8040/53 (6-95)
</TABLE>
36