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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 1997
REGISTRATION NO. 333-27853
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Pre-Effective
Amendment No. 1
to
Form S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMRESCO, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 700 NORTH PEARL 59-1781257
(STATE OR OTHER JURISDICTION OF SUITE 2400, LB 342 (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) DALLAS, TEXAS 75201 IDENTIFICATION NO.)
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(214) 953-7700
(Address, including zip code, and telephone
number, including area code, of
registrant's principal executive offices)
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L. KEITH BLACKWELL
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
700 NORTH PEARL STREET, SUITE 2400, LB 342
SUITE 1700
DALLAS, TEXAS 75201
(214) 953-7700
FAX: (214) 953-7757
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
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. [X]
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. [X]
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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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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 AND ANY PROSPECTUS SUPPLEMENT 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.
Subject to Completion - Preliminary Prospectus dated July , 1997
$500,000,000
[LOGO]
COMMON STOCK, PREFERRED STOCK, DEBT SECURITIES,
SECURITIES WARRANTS AND UNITS
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AMRESCO, INC. (the "Company") may offer from time to time,
together or separately, (i) shares of its common stock, par value $0.05 per
share (the "Common Stock"), (ii) shares of its preferred stock, par value
$1.00 per share (the "Preferred Stock"), (iii) its unsecured debt securities,
which may be either senior (the "Senior Debt Securities") or subordinated
(the "Subordinated Debt Securities" and, together with the Senior Debt
Securities, the "Debt Securities") and (iv) warrants (collectively, the
"Securities Warrants") to purchase Debt Securities (the "Debt Securities
Warrants"), Preferred Stock (the "Preferred Stock Warrants") or Common Stock
(the "Common Stock Warrants"), in amounts, at prices and on terms to be
determined at the time of the offering thereof. The Common Stock, Preferred
Stock, Debt Securities and Securities Warrants (collectively, the
"Securities") may be offered independently or together in any combination
("Units") for sale directly to purchasers or through dealers, underwriters or
agents to be designated. The Subordinated Debt Securities and Preferred Stock
may be convertible or exchangeable into other series of Debt Securities,
Preferred Stock or Common Stock. The Securities offered pursuant to this
Prospectus may be issued in one or more series or issuances the aggregate
offering price of which will not exceed $500.0 million (or the equivalent
thereof if the Debt Securities are denominated in one or more foreign
currencies or foreign currency units).
The specific terms of the Securities in respect of which this Prospectus
is being delivered (the "Offered Securities") will be set forth in an
accompanying supplement to this Prospectus (each, a "Prospectus Supplement"),
including, where applicable, (i) in the case of Common Stock, the aggregate
number of shares offered and by whom offered, (ii) in the case of the
Preferred Stock, the specific designation, the aggregate number of shares
offered, the dividend rate (or method of calculation thereof), the dividend
period and dividend payment dates, whether such dividends will be cumulative
or noncumulative, the liquidation preference, voting rights, if any, any
terms for optional or mandatory redemption, any terms for conversion or
exchange into other series of Debt Securities or Common Stock and any other
special terms, (iii) in the case of Debt Securities, the specific
designation, aggregate principal amount, ranking as Senior Debt Securities or
Subordinated Debt Securities, authorized denominations, maturity, any
premium, rate or method of calculation of interest, if any, and dates for
payment thereof, any terms for optional or mandatory redemption, any sinking
fund provisions, any terms for conversion or exchange into other series of
Debt Securities, Preferred Stock or Common Stock and any other special terms,
(iv) the terms of any Securities Warrants offered, including where
applicable, the exercise price, detachability, duration and other specific
terms not described in this Prospectus and (v) the initial public offering
price and the net proceeds to the Company from and other specific terms
relating to the Offered Securities. The Prospectus Supplement will also
contain information, where applicable, about certain material United States
Federal income tax considerations relating to the particular Securities
offered hereby. The Prospectus Supplement will also contain information,
where applicable, as to any listing on a national securities exchange of the
Securities covered by such Prospectus Supplement.
The Senior Debt Securities will rank pari passu in right of payment with
all unsubordinated indebtedness of the Company, but, except to the extent
such Senior Debt Securities are secured by collateral, will be effectively
subordinated to the rights of holders of secured unsubordinated indebtedness
of the Company to the extent of the value of the collateral securing such
indebtedness. The Senior Debt Securities will rank senior to all unsecured
subordinated indebtedness of the Company. The Subordinated Debt Securities
will be subordinate in right of payment to all existing and future Senior
Debt (as defined herein) of the Company, including any Senior Debt
Securities.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
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FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY, SEE "RISK FACTORS"
BEGINNING ON PAGE 5 HEREIN AND "RISK FACTORS" IN THE PROSPECTUS SUPPLEMENT
ACCOMPANYING THIS PROSPECTUS.
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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.
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The Company may sell the Securities (i) through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate,
with such underwriters to be designated at the time of sale, (ii) through
agents designated from time to time or (iii) directly. The names of any
underwriters or agents of the Company involved in the sale of the Securities,
the public offering price or purchase price thereof, any applicable
commissions or discounts, any other terms of the offering of such Securities
and the net proceeds to the Company from such sale will be set forth in the
applicable Prospectus Supplement. See "Plan of Distribution" for possible
indemnification arrangements for agents, dealers and underwriters.
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The date of this Prospectus is ______, 1997
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THE COMPANY
Certain terms used in this Prospectus are defined in the "Glossary"
beginning on page 28 herein. Certain terms used in connection with the Debt
Securities are defined under the caption "Description of Securities -- Debt
Securities -- Certain Definitions."
General. The Company is a leading specialty financial services company
engaged in residential mortgage banking, commercial mortgage banking, asset
management, commercial finance and institutional real estate investment
advisory services.
RESIDENTIAL MORTGAGE BANKING
The Company originates, acquires, warehouses and securitizes sub-prime
loans. Borrowers under such loans 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. The Company believes that this market is large
and is underserved by traditional lenders. Therefore, there is less
competition in this market and interest rates are higher than on mortgage
loans for more creditworthy borrowers. The Company believes that the higher
interest rates offered by the sub-prime loan market are attractive even after
taking into account the potentially greater credit risk associated with such
borrowers.
COMMERCIAL MORTGAGE BANKING
The Company performs a wide range of commercial mortgage banking
services, including originating, underwriting, placing, selling, securitizing
and servicing commercial real estate loans through Holliday Fenoglio, ACC and
AMRESCO Services.
Holliday Fenoglio primarily serves commercial real estate developers and
owners by originating commercial real estate loans and acting as a broker on
commercial real estate sales through its own commission-based mortgage
bankers. The loans originated by Holliday Fenoglio generally are funded by
institutional lenders, principally insurance companies, and by ACC and other
Conduit Purchasers. Holliday Fenoglio generally retains Primary Servicer
rights on a portion of the loans originated by it. The Company believes that
Holliday Fenoglio's relationship and credibility with its institutional
lender network provide the Company with a competitive advantage in the
commercial mortgage banking industry.
ACC is a mortgage banker that originates, underwrites and securitizes
commercial real estate loans that are funded primarily by Conduit Purchasers
and Fannie Mae. ACC has established a partnership with a major Wall Street
investment bank which funds a significant portion of ACC's commercial real
estate loan originations and through which ACC and the investment bank share
in the accumulation and securitization profits and risks. ACC serves its
market directly through branch offices, as well as through a network of
independent mortgage brokers, including Holliday Fenoglio. ACC is approved by
Fannie Mae to participate in its DUS program, which ACC believes makes it a
more competitive loan originator and underwriter of multifamily mortgages.
ACC is also an approved lender in the Freddie Mac multifamily seller/servicer
program in the states of Florida, North Carolina and South Carolina.
AMRESCO Services serves as a Primary Servicer for whole loans and as a
Master/Full Servicer for securitized pools of commercial mortgages. The
dominant users of commercial loan servicers are commercial mortgage-backed
bond trusts and similar securitized commercial asset-backed loan portfolios
held by numerous passive investors. Historically, the revenue stream from
servicing contracts on commercial mortgages has been relatively predictable
due in part to prepayment penalties in commercial mortgages that tend to
discourage early loan payoffs.
ASSET MANAGEMENT
The Company manages and resolves Asset Portfolios acquired at a 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 fee owned real estate and secured loans of
varying qualities and collateral types. The majority of the loans in the
Asset Portfolios in which the Company invests are in default at the time of
acquisition. Asset Portfolios purchased by the Company
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are currently comprised of real estate secured loans and 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. While the
majority of the Asset Portfolios managed or owned by the Company are located
in the United States, the Company has opened offices in Toronto and London
through which it pursues Asset Portfolio acquisition opportunities and
manages its investments in Canada and Western Europe. The Company and a major
Wall Street bank were recently awarded a contract to buy an Asset Portfolio
in Mexico. The Company may seek further opportunities in Mexico. The Company
may open offices and seek strategic alliances in other international markets.
COMMERCIAL FINANCE
The Company's commercial finance business was formally commenced in 1996.
The Company intends to expand its commercial finance business through
acquisitions of targeted niche finance companies and internal start-ups. The
Company's commercial finance business currently involves: (i) providing high
yield debt financing for the real estate and communications industries and
for businesses and projects which are unable to access traditional lending
sources, (ii) providing construction financing for builders of single family
residences, (iii) originating, acquiring, warehousing, securitizing and
servicing loans to franchises with single franchise and multiple franchise
operations, and (iv) equipment leasing and related financing activities.
INSTITUTIONAL REAL ESTATE INVESTMENT ADVISORY
The Company provides real estate investment advice to various
institutional investors (primarily pension funds) seeking to invest in real
estate and related investments. Although the Company is paid acquisition,
disposition and performance-based incentive fees by some of its clients, its
principal form of revenue from this activity is asset management fees, which
are based on the cash flow or value of the investments under management.
The Company is marketing to institutional investors the opportunity to
invest in Subordinated Certificates issued in commercial and residential
mortgage securitizations through investment funds or other entities being
organized by the Company. The Company believes that because of its experience
in evaluating and underwriting higher risk loans, it can take advantage of
investment opportunities that are presented by such Subordinated
Certificates. The Company expects that a majority of its own investments in
Subordinated Certificates in the future will be through these funds or
entities. As a policy, the Company will not sell to these funds Subordinated
Certificates created in securitizations organized by the Company.
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The Company is a Delaware corporation. The Company's principal executive
offices are located at 700 North Pearl Street, Suite 2400, Dallas, Texas
75201 and its telephone number at that address is (214) 953-7700.
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RISK FACTORS
Investors should carefully consider the following matters in connection
with an investment in any particular Securities in addition to the other
information contained or incorporated by reference in this Prospectus or any
accompanying Prospectus Supplement.
RISKS ASSOCIATED WITH RAPID GROWTH AND ENTRY IN NEW BUSINESSES
In early 1994, the Company made the strategic decision to diversify its
business lines. The Company has entered the residential mortgage banking,
commercial mortgage banking, commercial finance and institutional real estate
investment advisory businesses through a combination of acquisitions and the
internal start-up of new business lines. These businesses contributed in the
aggregate approximately 50% and 68 % of the Company's operating profit for
the year ended December 31, 1996 and for the six months ended June 30, 1997,
respectively, and the Company expects they will continue to contribute a
substantial portion of its revenue and operating income for the foreseeable
future. The Company has also increased its investments in Asset Portfolios.
The rapid entry of the Company into these business lines has resulted in
increased demands on the Company's personnel and systems. As part of its
business strategy, the Company intends to acquire additional businesses which
complement the Company's core capabilities in specialty financial services.
The Company must successfully continue its assimilation of multiple acquired
businesses with differing markets, customer bases, financial products,
systems and managements. An inability to assimilate acquired businesses could
have an adverse effect on the Company's financial condition and results of
operations. The Company's ability to support, manage and control continued
growth is dependent upon, among other things, its ability to hire, train,
supervise and manage its workforce and to continue to develop the skills
necessary for the Company to compete successfully in its new business lines.
There can be no assurance that the Company will successfully meet all of
these challenges.
NEED FOR ADDITIONAL FINANCING
General. The Company's ability to execute its business strategy depends
to a significant degree on its ability to obtain additional indebtedness and
equity capital. The Company has no commitments for additional borrowings or
sales of equity capital 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 and
competitive factors beyond the Company's control. In addition, covenants
under the Company's current and future debt securities and credit facilities
may significantly restrict the Company's ability to incur additional
indebtedness and to issue Preferred Stock. The Company's ability to repay its
outstanding indebtedness, including the Debt Securities, at maturity may
depend on its ability to refinance such indebtedness, which could be
adversely affected if the Company does not have access to the capital markets
for the sale of additional debt or equity securities through public offerings
or private placements on terms reasonably satisfactory to the Company.
Dependence on Warehouse Financing. The Company's residential mortgage
banking, commercial mortgage banking and commercial finance securitization
businesses depend upon warehouse facilities with financial institutions or
institutional lenders to finance the Company's origination and purchase of
loans on a short-term basis pending sale or securitization. Implementation of
the Company's growth strategy requires continued availability of warehouse
facilities and may require increases in the capacity of warehouse facilities.
There can be no assurance that such financing will be available on terms
reasonably satisfactory to the Company. The inability of the Company to
arrange additional warehouse facilities or to extend or replace existing
facilities when they expire would have a material adverse effect on the
Company's business, financial condition and results of operations and on the
Company's outstanding securities.
RISKS OF SECURITIZATION
Significance of Securitization. The Company currently believes that it
will become increasingly dependent upon its ability to securitize mortgage
loans and other loans by pooling and subsequently selling them in the
secondary market in order to generate revenues, earnings and cash flows.
Accordingly, adverse changes in the secondary market for such loans could
impair the Company's ability to originate, purchase and sell mortgage loans
and other 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. The Company endeavors to effect a securitization
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of its residential mortgage loans on at least a quarterly basis and its
commercial mortgage and commercial finance loans on at least a semi-annual
basis. However, market and other considerations, including the conformity of
loans to insurance company and rating agency requirements, could affect the
timing of such transactions. Any delay in the sale of loans beyond the
reporting period in which such sale is anticipated to occur would delay any
expected gain on sale and adversely affect the Company's reported earnings
for such reporting period.
Investment in Subordinated Certificates. The Company invests in
Subordinated Certificates created in securitizations completed by the Company
or purchased from third parties. At December 31, 1996, the Company's
aggregate investment in Subordinated Certificates was approximately $130
million based on the estimated fair value of the Subordinated Certificates at
that time. The Subordinated Certificates entitle the holder to the excess of
the interest and principal paid by borrowers on the loans pooled in the
securitization over the interest and principal passed through to other
investors in the securities created in the securitization transaction, less
the normal servicing and other fees and credit losses realized. The estimated
fair value of the Subordinated Certificates is computed using prepayment,
default and interest rate assumptions that the Company believes market
participants would use for similar instruments at the time of sale. These
assumptions may not reflect actual experience. Accordingly, no assurance can
be given that these securities could in fact be sold or recovered at their
stated values on the balance sheet, if at all.
Contingent Risks. Although the Company sells substantially all the
mortgage loans and other loans which it originates or purchases, the Company
retains some degree of credit risk on substantially all loans sold. During
the period of time that loans are held pending sale, the Company is subject
to the various business risks associated with the lending business, including
the risk of borrower default, the risk of foreclosure and the risk that a
rapid increase in interest rates would result in a decline in the value of
loans to potential purchasers. The documents governing the Company's
securitization program require the Company to establish deposit accounts or
build over-collateralization levels through retention of distributions
otherwise payable to the holders of the Subordinated Certificates. Such
amounts serve as credit enhancement for the related trust and are therefore
available to fund losses realized on loans held by such trust. In addition,
documents governing the Company's securitization program require the Company
to commit to repurchase or replace loans which do not conform to the
representations and warranties made by the Company at the time of sale.
Retained Risks of Securitized Loans. The Company makes various
representations with respect to the loans that it pools and securitizes. The
Company's representations rely in part on similar representations made by the
originators of such loans when they were purchased by the Company. In the
event of a breach of its representations, the Company may be required to
repurchase or replace the related loan using its own funds. While the Company
may have a claim against the originator in the event of a breach of any of
these representations made by the originators, the Company's ability to
recover on any such claim will be dependent on the financial condition of the
originator. There can be no assurance that the Company will not experience a
material loss in respect of any of these contingencies.
Importance of Credit Enhancement. To market residential mortgage-backed,
commercial mortgage-backed and commercial loan-backed securities, the
Company has in the past used various means of credit enhancement to obtain a
"AAA/Aaa" rating for such securities. In its residential mortgage-backed and
commercial loan-backed securitizations, the Company has relied to a
significant extent on monoline insurance companies to provide such credit
enhancement. Any 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 RELATED TO SUB-PRIME LOANS
The sub-prime loan market is comprised of credit-impaired borrowers who
generally have significant equity in their homes and whose borrowing needs
are not currently met by traditional financial institutions. Loans made to
such borrowers may entail a higher risk of delinquency and higher losses than
loans made to more creditworthy borrowers. While the Company believes that
the underwriting criteria and collection methods it employs enable it to
reduce the higher risks inherent in loans made to credit-impaired borrowers,
no assurance can be given that such criteria or methods will afford adequate
protection against higher delinquencies, foreclosures or losses than
anticipated and, as a result, the Company's financial condition or results of
operation could be adversely affected.
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SERVICING RISKS; BORROWER DELINQUENCIES AND CLAIMS
When borrowers are delinquent in making monthly payments on commercial
mortgage loans serviced by the Company, the Company is required to advance
interest payments with respect to such delinquent loans to the extent that
the Company deems such advances ultimately recoverable. These advances
require funding from the Company's capital resources but have priority of
repayment from collections or recoveries on the loans in the related pool in
the succeeding month. In the ordinary course of its business, the Company is
subject to claims made against it by borrowers and private investors arising
from, among other things, losses that are claimed to have been incurred as a
result of alleged breaches of fiduciary obligations, misrepresentations,
errors and omissions of employees and officers of the Company (including its
appraisers), incomplete documentation and failures by the Company to comply
with various laws and regulations applicable to its business. The Company
believes that liability with respect to any currently asserted claims or
legal actions is not likely to be material to the Company's consolidated
financial position or results of operations; however, any claims asserted in
the future may result in legal expenses or liabilities which could have a
material adverse effect on the Company's financial position and results of
operations.
As a participant in the Fannie Mae DUS program, the Company must accept a
first loss risk on loans originated by the Company. In addition, the Company
must also make certain representations and warranties concerning loans
originated by the Company and sold to Conduit Purchasers or Fannie Mae. These
representations cover such matters as title to the property, lien priority,
environmental reviews and certain other matters.
ASSET PERFORMANCE ASSUMPTIONS
The Company's business, financial condition, results of operations and
liquidity depend, to a material extent, on the performance of loans owned
directly or backing securities purchased and sold by the Company. The
carrying value of the Company's Asset Portfolios, Subordinated Certificates
and certain other assets have been determined in part using estimates of
future cash flows based on assumptions concerning future default and
prepayment rates that are consistent with the Company's historical experience
and market conditions and present value discount rates that the Company
believes would be requested by an unrelated purchaser of an identical stream
of estimated cash flows. Management believes that the Company's estimates of
cash flows were reasonable at the time such estimates were made. However, the
actual rates of default and/or prepayment on such assets may exceed those
estimated and consequently may adversely affect the carrying values of such
assets, anticipated future cash flows, results of operations and reported
earnings. The Company periodically reviews its loss and prepayment
assumptions in relation to current performance of the loans and market
conditions and, if necessary, provides for the impairment of the respective
asset. The Company's business, financial condition and results of operations
could be materially adversely affected by such adjustments in the future. No
assurance can be given that loan losses and prepayments will not exceed the
Company's estimates or that such assets could be sold at their stated value
on the balance sheet, if at all.
INTEREST RATES
Since certain of the Company's borrowings, including borrowings under the
Revolving Loan Agreement, are at variable rates of interest, the Company may
be impacted by increases in interest rates. In addition, the value of its
interest-earning assets and liabilities may be directly affected by the level
of and fluctuations in interest rates. The Company monitors the interest rate
environment and employs prefunding or other hedging strategies designed to
mitigate the impact of changes in interest rates. However, there can be no
assurance that the profitability of the Company would not be adversely
affected during any period of changes in interest rates. A significant
decline in interest rates could result in increased prepayment of outstanding
loans.
A substantial and sustained increase in interest rates could adversely
affect the ability of the Company to originate loans and could reduce the
gains recognized by the Company upon their securitization and sale. A
significant decline in interest rates could decrease the size of the
Company's residential Subordinated Certificates by increasing the level of
loan prepayments. Fluctuating interest rates also may affect the net interest
income earned by the Company resulting from the difference between the yield
to the Company on mortgage loans held pending sale and the interest paid by
the Company for funds borrowed under the Company's warehouse credit
facilities or otherwise. In addition, inverse or flattened interest yield
curves could have an adverse impact on the earnings of the Company because
the loans pooled and sold by the Company have long-term rates while the
senior interest in the related trusts are priced on the basis of intermediate
rates.
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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 movements.
FOREIGN OPERATIONS; CURRENCY RISKS
The Company's asset management and resolution business has entered into,
and intends to continue to enter into, contracts to purchase and to manage
and resolve Asset Portfolios located in Canada, Mexico and Western Europe and
may in the future expand into other foreign countries. Foreign operations are
subject to various special risks, including currency translation risks and
currency exchange rate fluctuations (which the Company intends to mitigate
with currency hedging arrangements as available and economical) and exchange
controls. Changes in foreign exchange rates may have an adverse effect on the
Company's financial condition and results of operations. In addition,
earnings of foreign operations are subject to foreign income taxes that
reduce cash flow available to meet debt service requirements and other
obligations of the Company, which may be payable even if the Company has no
earnings on a consolidated basis.
CYCLICALITY OF AND COMPETITION IN THE ASSET MANAGEMENT BUSINESS
The asset management business is affected by long-term cycles in the
general economy. In addition, the volume of domestic Asset Portfolios
available for purchase by investors or management by third party servicers
such as the Company has generally declined since 1993 as large pools of
distressed assets acquired by governmental agencies in the 1980's and early
1990's have been resolved or sold. The Company cannot predict what will be a
normal annual volume of Asset Portfolios to be sold or outsourced for
management and resolution. Moreover, 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 bids
to purchase Asset Portfolios. The acquisition of Asset Portfolios has become
highly competitive in the United States. This may require the Company to
acquire Asset Portfolios at higher prices thereby lowering profit margins on
the resolutions of such Asset Portfolios. Under certain circumstances, the
Company may choose not to bid for Asset Portfolios which it believes cannot
be acquired at attractive prices. As a result of all the above factors, Asset
Portfolio purchases may vary significantly from quarter to quarter.
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 nonperforming 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,
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 Asset Portfolio, thereby
negatively impacting the rate of return realized from such Asset Portfolio.
Economic downturns and rising interest rates also may reduce the number of
loan originations by the Company's residential mortgage banking, commercial
mortgage banking and commercial finance businesses and negatively impact its
securitization activity.
In addition, periods of economic slowdown or recession, whether general,
regional or industry-related, may increase the risk of default on mortgage
loans and other loans and may have an adverse effect on the Company's
business, financial condition and results of operations. Such periods also
may be accompanied by decreased consumer demand for residential mortgages,
resulting in declining values of homes securing outstanding loans, thereby
weakening collateral coverage and increasing the possibility of losses in the
event of default. Significant increases in homes for sale during recessionary
economic periods may depress the prices at which foreclosed homes may be sold
or delay the timing of such sales. There can be no assurance that the housing
markets will be adequate for the sale of foreclosed homes and any material
deterioration of such markets could reduce recoveries from the sale of
collateral.
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<PAGE> 11
GOVERNMENT REGULATION
The operations of the Company are subject to regulation by federal, state
and local government authorities, as well as to various laws and judicial and
administrative decisions, that impose requirements and restrictions
affecting, among other things, the Company's loan originations, credit
activities, maximum interest rates, finance and other charges, disclosures to
customers, the terms of secured transactions, collection, repossession and
claims handling procedures, multiple qualification and licensing requirements
for doing business in various jurisdictions, and other trade practices.
Although the Company believes that it is in compliance in all material
respects with applicable local, state and federal laws, rules and
regulations, there can be no assurance that more restrictive laws, rules or
regulations will not be adopted in the future that could make compliance more
difficult or expensive, restrict the Company's ability to originate, purchase
or sell loans, further limit or restrict the amount of interest and other
charges earned on loans originated or purchased by the Company, further limit
or restrict the terms of loan agreements, or otherwise adversely affect the
business or prospects of the Company. There are also, among other risks,
uncertainties concerning the business practice of paying back points to
residential mortgage brokers.
COMPETITION
All of the business lines 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.
The Company is experiencing greater competition in its residential
mortgage banking business. The Company has experienced increasing competition
from other Conduit Purchasers in the acquisition of sub-prime loan
portfolios. In addition, the Company expects to encounter significant
competition in the sub-prime loan origination market.
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 Asset Portfolio at an economically unattractive price).
In addition, the increasing competition in this business line has caused the
Company to experience decreasing profit margins in its Asset Portfolio
business in order to remain a competitive bidder for Asset Portfolios and has
caused the Company to redeploy its capital in other more profitable product
lines.
The Company also encounters significant competition in its other business
lines. The commercial mortgage banking business is highly fragmented with
certain large national competitors and significant localized competition. In
addition, within the commercial loan origination and residential mortgage
securitization businesses, access to and the cost of capital are critical to
the Company's ability to compete. The Company must compete with numerous
competitors, many of whom have superior access to capital sources and can
arrange or obtain lower cost of capital for customers.
Other. The Company also encounters significant competition in its other
business lines. The Company must compete with numerous competitors, many of
which have superior access to capital sources and can arrange or obtain lower
cost capital for customers.
ANTI-TAKEOVER CONSIDERATIONS
The Company's Restated Certificate of Incorporation, as amended, and
Amended and Restated Bylaws include a number of provisions that may have the
effect of encouraging persons considering unsolicited tender offers or other
unilateral takeover proposals to negotiate with the Company's Board of
Directors rather than pursue non-negotiated takeover attempts. These
provisions include a staggered Board of Directors, authorized "blank check"
preferred stock, super majority voting requirements on certain matters and
prohibitions against certain business combinations. The Indentures governing
the Senior Subordinated Notes and Senior Notes require the Company to
repurchase all outstanding Senior Subordinated Notes and Senior Notes in the
event of certain change of control transactions. In addition, on May 28,
1997, the Company adopted a Stockholders Rights Plan pursuant to which rights
were distributed to stockholders of record as of June 9, 1997. The
Stockholders Rights Plan provides, among other things, that if a person (or
group of affiliated or associated persons) acquires (or ten (10) days after
the commencement of a tender offer to acquire) "beneficial ownership" of 15%
or more of the outstanding shares of Common Stock, the rights previously
distributed to stockholders, other than
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<PAGE> 12
those owned by such acquiring person or group, will become exercisable. Under
the Stockholders Rights Plan, the acquisition of 15% or more of the
outstanding Common Stock or the completion of the tender offer will entitle
the holder to purchase shares of Common Stock having a market value equal to
twice the purchase price of the right. These anti-takover provisions could
have the effect of discouraging or making more difficult a merger, tender
offer, other business combination or proxy contest, even if such event would
be favorable to the interests of the stockholders. See "Description of
Securities--Delaware Law and Certain Corporate Provisions."
FORWARD-LOOKING STATEMENTS
This Prospectus and any Prospectus Supplement may contain or incorporate
by reference forward-looking statements. The factors identified under "Risk
Factors" are important factors (but not necessarily all important factors)
that could cause actual results to differ materially from those expressed in
any forward-looking statement made by, or on behalf of, the Company (or its
subsidiaries).
Where any such forward-looking statement includes a statement of the
assumptions or bases underlying such forward-looking statement, the Company
cautions that, while such assumptions or bases are believed to be reasonable
and are made in good faith, assumed facts or bases almost always vary from
actual results, and the differences between assumed facts or bases and actual
results can be material, depending upon the circumstances. Where, in any
forward-looking statement, the Company (or its subsidiaries), or its
management, express an expectation or belief as to future results, such
expectation or belief is expressed in good faith and is believed to have a
reasonable basis, but there can be no assurance that the statement of
expectation or belief will result or be achieved or accomplished. The words
"believe", "expect", "estimate", "project" and "anticipate" and similar
expressions identify forward-looking statements.
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<PAGE> 13
USE OF PROCEEDS
The net proceeds from the sale of the Offered Securities, together with
internally generated funds, will be used (i) to repay, redeem or repurchase
outstanding indebtedness of the Company, (ii) for general operations of the
Company, including acquisitions, investments, capital expenditures and
working capital requirements and (iii) for such other purposes as may be
specified in the related Prospectus Supplement.
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's and its predecessors'
consolidated ratios of earnings to fixed charges and earnings to combined
fixed charges and Preferred Stock dividends for each of the three months
ended March 31, 1997 and 1996 and the years ended December 31, 1996, 1995,
1994, 1993 and 1992 on an historical basis.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------- -----------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1) 1.8x 2.6x 2.4x 5.4x 21.2x 58.9x (2)
Ratio of earnings to combined fixed charges
and Preferred Stock dividends(3) 1.8x 2.6x 2.4x 5.4x 21.2x 58.9x (2)
</TABLE>
- ----------
(1) 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 and amortization of
debt issuance costs.
(2) The Company or its predecessors had no interest expense in 1992.
(3) The Company did not have any Preferred Stock outstanding during any of
these periods.
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<PAGE> 14
DESCRIPTION OF SECURITIES
The following description of the terms of the Securities sets forth
certain general terms and provisions of the Securities to which any
Prospectus Supplement may relate. The particular terms of the Securities
offered by any Prospectus Supplement and the extent, if any, to which such
general provisions may apply to the Securities so offered will be described
in the Prospectus Supplement relating to such Securities.
The Company is authorized to issue 150,000,000 shares of Common Stock,
par value $0.05 per share, and 5,000,000 shares of Preferred Stock, par value
$1.00 per share. As of July 15, 1997, the Company had issued and outstanding
36,091,656 shares of Common Stock and no shares of Preferred Stock. As of
such date, there were approximately 2,817 holders of record of the
outstanding shares of Common Stock.
The following summary of the Company's Common Stock and Preferred Stock
is qualified in its entirety by reference to the Company's Restated
Certificate of Incorporation (the "Certificate of Incorporation"), its
Amended and Restated Bylaws (the "Bylaws"), and the Delaware General
Corporation Law, as amended (the "DGCL").
COMMON STOCK
General. Subject to such preferential rights as may be granted by the
Board of Directors in connection with any issuances of Preferred Stock,
holders of shares of Common Stock are entitled to receive such dividends as
may be declared by the Board of Directors in its discretion from funds
legally available therefor. Since October 1995, the Company has not paid cash
dividends. The Board of Directors currently intends to retain all earnings to
support anticipated growth in the current operations of the Company and to
finance future expansion. The Company's Revolving Loan Agreement, the Senior
Subordinated Notes Indenture and the Senior Notes Indenture restrict the
payment of cash dividends unless certain earnings tests are satisfied.
Additional restrictions on the payment of cash dividends may be imposed in
connection with future issuances of Preferred Stock and indebtedness by the
Company, including issuances of Debt Securities and Preferred Stock
contemplated by this Prospectus. Further declarations and payments of cash
dividends, if any, will also be determined in light of then-current
conditions, including the Company's earnings, operations, capital
requirements, liquidity, financial condition, restrictions in financing
agreements and other factors deemed relevant by the Board of Directors. Upon
the liquidation, dissolution or winding up of the Company, after payment of
creditors, the remaining net assets of the Company will be distributed pro
rata to the holders of Common Stock, subject to any liquidation preference of
the holders of Preferred Stock which may then be outstanding. There are no
preemptive rights, conversion rights, or redemption or sinking fund
provisions with respect to the shares of Common Stock. All of the outstanding
shares of Common Stock are duly and validly authorized and issued, fully paid
and non-assessable.
Voting Rights. Holders of Common Stock are entitled to one vote per share
of Common Stock held of record on all such matters submitted to a vote of the
stockholders. Holders of the shares of Common Stock do not have cumulative
voting rights. As a result, the holders of a majority of the outstanding
shares of Common Stock voting for the election of directors can elect all the
directors, and, in such event, the holders of the remaining shares of Common
Stock will not be able to elect any persons to the Board of Directors.
Delaware Law and Certain Corporate Provisions. The Company is subject to
the provisions of Section 203 of the DGCL. In general, this statute prohibits
a publicly-held Delaware corporation from engaging, under certain
circumstances, in a "business combination" with an "interested stockholder"
for a period of three years after the date of the transaction in which the
person becomes an interested stockholder, unless either (i) prior to the date
at which the stockholder became an interested stockholder the Board of
Directors approved either the business combination or the transaction in
which the person becomes an interested stockholder, (ii) the stockholder
acquires more than 85% of the outstanding voting stock of the corporation
(excluding shares held by directors who are officers or held in certain
employee stock plans) upon consummation of the transaction in which the
stockholder becomes an interested stockholder or (iii) the business
combination is approved by the Board of Directors and by two-thirds of the
outstanding voting stock of the corporation (excluding shares held by the
interested stockholder) at a meeting of the stockholders (and not by written
consent) held on or subsequent to the date on which the person became an
"interested stockholder". An "interested stockholder" is a person who,
together with affiliates and associates, owns (or is an affiliate or
associate of the corporation and, together with affiliates and associates, at
any time within the prior three years did own) 15% or more of the
corporation's voting stock. Section 203 defines a "business combination" to
include, without limitation, mergers, consolidations, stock sales and asset
based transactions and other transactions resulting in a financial benefit to
the interested stockholder.
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<PAGE> 15
The Company's Certificate of Incorporation and Bylaws contain a number of
provisions relating to corporate governance and to the rights of
stockholders. Certain of these provisions may be deemed to have a potential
"anti-takeover" effect in that such provisions may delay, defer or prevent a
change of control of the Company. These provisions include (i) the
classification of the Board of Directors into three classes, each class
serving for staggered three-year terms; (ii) the authority of the Board of
Directors to determine the size of the Board of Directors, subject to certain
minimums and maximums; (iii) the authority of certain members of the Board of
Directors to fill vacancies on the Board of Directors; (iv) a requirement
that special meetings of stockholders may be called only by the Board of
Directors, the Chairman of the Board or holders of at least one-tenth of all
the shares entitled to vote at the meeting; (v) the elimination of
stockholder action by written consent; (vi) the authority of the Board of
Directors to issue series of Preferred Stock with such voting rights and
other powers as the Board of Directors may determine; (vii) the requirement
that the Article in the Certificate of Incorporation creating the staggered
board may only be amended by the vote of at least 66 2/3% of the voting
securities of the Company; and (viii) a requirement that any business
combination between the Company and a beneficial owner of more than five
percent of any class of an equity security of the Company must be approved by
the holders of a majority of the Company's securities, excluding those
securities held by such beneficial owner, voted at a meeting called for the
purpose of approving such business combination.
Indemnification and Limited Liability. The Company's Certificate of
Incorporation and Bylaws require the Company to indemnify the directors and
officers of the Company to the fullest extent permitted by law. In addition,
as permitted by the DGCL, the Company's Certificate of Incorporation and
Bylaws provide that no director of the Company will be personally liable to
the Company or its stockholders for monetary damages for such director's
breach of duty as a director. This limitation of liability does not relieve
directors from liability for (i) any breach of the director's duty of loyalty
to the Company or its stockholders, (ii) acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
any liability under Section 174 of the DGCL for unlawful distributions or
(iv) any transaction from which the director derived an improper personal
benefit. This provision of the Certificate of Incorporation will limit the
remedies available to a stockholder who is dissatisfied with a decision of
the Board of Directors protected by this provision, and such stockholder's
only remedy in that circumstance may be to bring a suit to prevent the action
of the Board of Directors. In many situations, this remedy may not be
effective, including instances when stockholders are not aware of a
transaction or an event prior to action of the Board of Directors in respect
of such transaction or event.
Subject to certain limitations, the Company's officers and directors are
insured against losses arising from claims made against them for wrongful
acts which they may become obligated to pay or for which the Company may be
required to indemnify them.
Other Matters. The Common Stock is quoted as a national market security
by the NASDAQ Stock Market, Inc. The Common Stock is identified as such
market by the symbol "AMMB." The Bank of New York, New York, New York, is the
transfer agent and registrar for the Common Stock.
PREFERRED STOCK
The description of certain provisions of the Preferred Stock set forth
below and in any Prospectus Supplement does not purport to be complete and is
subject to and qualified in its entirety by reference to the Company's
Certificate of Incorporation, and the Certificate of Designation relating to
each series of Preferred Stock, which will be filed with the Secretary of
State of Delaware and the Commission in connection with the offering of such
series of Preferred Stock.
General. The Board of Directors may, without approval of the Company's
stockholders, establish series of Preferred Stock having such voting powers,
and such designations, preferences and relative, participating, optional and
other special rights, and qualifications, limitations or restrictions
thereof, as the Board of Directors may determine.
The Preferred Stock will have the dividend, liquidation and voting rights
set forth below unless otherwise provided in the Prospectus Supplement
relating to a particular series of Preferred Stock. Reference is made to the
Prospectus Supplement relating to the particular series of Preferred Stock
offered thereby for specific terms, including: (i) the designation and stated
value per share of such Preferred Stock and the number of shares offered;
(ii) the amount of liquidation preference per share; (iii) the price at which
such Preferred Stock will be issued; (iv) the dividend rate (or method of
calculation), the dates on which dividends will be payable, whether such
dividends will be cumulative or noncumulative and, if cumulative, the dates
from which dividends will accrue; (v) any redemption or sinking fund
provisions; (vi) any terms by which such series of Preferred Stock may be
convertible into or exchanged for Common Stock or Debt Securities; and (vii)
any additional or other rights, preferences, privileges, limitations and
restrictions relating to such series of Preferred Stock.
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<PAGE> 16
The Preferred Stock will be issued in one or more series. The holders of
Preferred Stock will have no preemptive rights. Preferred Stock will be fully
paid and nonassessable upon issuance against full payment of the purchase
price therefor. Unless otherwise specified in the Prospectus Supplement
relating to a particular series of Preferred Stock, each series of Preferred
Stock will, with respect to dividend rights and rights on liquidation,
dissolution and winding up of the Company, rank prior to the Common Stock
(the "Junior Stock") and on a parity with each other series of Preferred
Stock (the "Parity Stock").
Dividend Rights. Holders of the Preferred Stock of each series will be
entitled to receive when, as and if declared by the Board of Directors of the
Company, out of funds legally available therefor, cash dividends at such
rates and on such dates as are set forth in the Prospectus Supplement
relating to such series of Preferred Stock. Such rate may be fixed or
variable or both. Each such dividend will be payable to the holders of record
as they appear on the stock books of the Company on such record dates as will
be fixed by the Board of Directors of the Company. Dividends on any series of
the Preferred Stock may be cumulative or noncumulative, as provided in the
Prospectus Supplement relating thereto. If the Board of Directors of the
Company fails to declare a dividend payable on a dividend payment date on any
series of Preferred Stock for which dividends are noncumulative, then the
right to receive a dividend in respect of the dividend period ending on such
dividend payment date will be lost, and the Company will have no obligation
to pay the dividend accrued for that period, whether or not dividends are
declared for any future period. Dividends on shares of each series of
Preferred Stock for which dividends are cumulative will accrue from the date
set forth in the applicable Prospectus Supplement.
The Preferred Stock of each series will include customary provisions (i)
restricting the payment of dividends or the making of other distributions on,
or the redemption, purchase or other acquisition of, Junior Stock unless full
dividends, including in the case of cumulative Preferred Stock, accruals, if
any, in respect of prior dividend periods, on the shares of such series of
Preferred Stock have been paid and (ii) providing for the pro rata payment of
dividends on such series and other Parity Stock when dividends have not been
paid in full upon such series and other Parity Stock.
Rights Upon Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of each
series of Preferred Stock will be entitled to receive out of assets of the
Company available for distribution to stockholders, before any distribution
of assets is made to holders of Junior Stock, liquidating distributions in
the amount set forth in the Prospectus Supplement relating to such series of
Preferred Stock plus an amount equal to accrued and unpaid dividends. If,
upon any voluntary or involuntary liquidation, dissolution or winding up of
the Company, the amounts payable with respect to the Preferred Stock of any
series and any Parity Stock are not paid in full, the holders of the
Preferred Stock of such series and of such Parity Stock will share ratably in
any such distribution of assets of the Company in proportion to the full
respective preferential amounts (which may include accumulated dividends) to
which they are entitled. After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of such series of
Preferred Stock will have no right or claim to any of the remaining assets of
the Company. Neither the sale of all or a portion of the Company's assets nor
the merger or consolidation of the Company into or with any other corporation
shall be deemed to be a dissolution, liquidation or winding up, voluntarily
or involuntarily, of the Company.
Voting Rights. Except as indicated below or in the Prospectus Supplement
relating to a particular series of the Preferred Stock, or except as
expressly required by the DGCL, the holders of the Preferred Stock will not
be entitled to vote. In the event the Company issues shares of a series of
the Preferred Stock, unless otherwise indicated in the Prospectus Supplement
relating to such series, each share will be entitled to one vote on matters
on which holders of such series are entitled to vote. In the case of any
series of Preferred Stock having one vote per share on matters on which
holders of such series are entitled to vote, the voting power of such series,
on matters on which holders of such series and holders of any other series of
Preferred Stock are entitled to vote as a single class, will depend on the
number of shares in such series, not the aggregate stated value, liquidation
preference or initial offering price of the shares of such series of the
Preferred Stock.
DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. Particular terms of the Debt Securities
offered by any Prospectus Supplement and the extent, if any, to which such
general and specific provisions may apply to the Debt Securities so offered
will be described in the Prospectus Supplement relating to such Debt
Securities. The Debt Securities may be issued either separately, or together
with, or upon conversion of or in exchange for, other Securities.
14
<PAGE> 17
The Senior Debt Securities and the Subordinated Debt Securities will be
issued under the indentures (the "Senior Indenture" and the "Subordinated
Indenture," respectively) between the Company and the Trustee named in the
applicable Prospectus Supplement. The forms of Senior Indenture and
Subordinated Indenture (collectively, the "Indentures") have been filed as
exhibits to the Company's Registration Statement on Form S-3 (No. 333-6031)
and the Company's Form 8-K dated March 12, 1997, respectively. The following
brief summary of certain provisions of the Indentures does not purport to be
complete and is subject to, and is qualified in its entirety by reference to
all of the provisions of, the Indentures, and is further qualified by any
description contained in the applicable Prospectus Supplement or Prospectus
Supplements. Certain terms capitalized and not otherwise defined herein are
defined in the Indentures. Wherever particular sections or defined terms of
the Indentures are referred to, such sections or defined terms are
incorporated herein by reference.
General. The Debt Securities may be issued from time to time in one or
more series. The terms of each series of Debt Securities, including without
limitation any restrictive covenants with respect thereto, will be
established by or pursuant to a resolution of the Board of Directors of the
Company and set forth or determined in the manner provided in an Officers'
Certificate or by a supplemental indenture. The particular terms of the Debt
Securities offered pursuant to any Prospectus Supplement or Prospectus
Supplements will be described in such Prospectus Supplement or Prospectus
Supplements. (Indenture Section 301)
The amount of Debt Securities offered by this Prospectus will be limited
to the amount of Securities set forth on the cover of this Prospectus that
have not been otherwise issued or reserved for issuance. The Indentures will
not limit the aggregate principal amount of Debt Securities that may be
issued thereunder. (Indenture Section 301)
The Senior Debt Securities will rank pari passu in right of payment with
all unsubordinated indebtedness of the Company, but, except to the extent
such Senior Debt Securities are secured by collateral, will be effectively
subordinated to the rights of holders of secured unsubordinated indebtedness
of the Company to the extent of the value of the collateral securing such
indebtedness. The Senior Debt Securities will rank senior to all unsecured
subordinated indebtedness of the Company. The Subordinated Debt Securities
will be unsecured and will be subordinated in right of payment to all
existing and future Senior Debt of the Company, including the Senior Debt
Securities, as described under "Subordination of Subordinated Debt
Securities."
The applicable Prospectus Supplement will indicate the form, registered
or bearer, and denominations in which Debt Securities of any series may be
issued. Debt Securities may be issuable in the form of one or more Global
Securities, as described below under "Global Securities." The Debt Securities
(other than those issued in the form of a Global Security) are exchangeable
or transferable without charge therefor, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith and require the holders to furnish appropriate
endorsements and transfer documents. (Indenture Section 305)
Debt Securities may be issued as original issue discount securities to be
sold at a substantial discount below their principal amount. Special federal
income tax and other considerations applicable thereto and special federal
tax and other considerations applicable to any Debt Securities which are
denominated in a currency other than U.S. dollars will be described in the
Prospectus Supplement or Prospectus Supplements relating thereto.
Principal of and any premium and interest on the Debt Securities will be
payable, and the transfer of the Debt Securities will be registrable at the
office or agency maintained for such purpose. Interest on any Debt Security
that is payable will be paid to the Person in whose name that Debt Security
is registered in the Security Register. In addition, payment of interest may
be made at the option of the Company by check mailed to the address of the
Person entitled thereto as it appears on the Security Register or by wire
transfer to an account maintained by the Person entitled to such interest.
(Indenture Sections 301 and 307)
The applicable Prospectus Supplement or Prospectus Supplements will
describe the terms of the Debt Securities offered thereby, including the
following: (i) the title of the offered Debt Securities and whether the
offered Debt Securities are Senior Debt Securities or Subordinated Debt
Securities; (ii) any limit on the aggregate principal amount of the offered
Debt Securities; (iii) the Person to whom any interest on the offered Debt
Securities will be payable, if other than the Person in whose name they are
registered on the regular record date for such interest; (iv) the date or
dates, or the method by which such date or dates are determined or extended,
on which the principal or installments of principal and premium, if any, of
the offered Debt Securities is or are payable; (v) the rate or rates (which
may be fixed or variable) at which the offered Debt Securities will bear
interest, if any, or the method by which such rate or rates shall be
determined, the date from which any such interest will accrue, the dates on
which such interest on the offered Debt Securities will be
15
<PAGE> 18
payable and the regular record dates therefor, the circumstances, if any, in
which the Company may defer interest payments and the basis for calculating
interest if other than a 360-day year of twelve 30-day months; (vi) the place
or places where the principal of and premium, if any, and interest on the
offered Debt Securities will be payable and the offered Debt Securities may
be surrendered for registration of transfer or exchange if other than those
provided for in the Senior Indenture or the Subordinated Indenture; (vii) if
applicable, the period or periods within which, the price or prices at which
and the terms and conditions upon which the offered Debt Securities may be
redeemed, in whole or in part, at the option of the Company; (viii) the
obligation, if any, of the Company to redeem or purchase Debt Securities of
the series pursuant to any sinking fund or analogous provisions or at the
option of a holder thereof and the period or periods within which, the price
or prices at which and the terms and conditions upon which Debt Securities of
the series shall be redeemed or purchased in whole or in part pursuant to
such obligation; (ix) whether the Debt Securities of the series will be
convertible into shares of Common Stock and/or exchangeable for other
securities, and if so, the terms and conditions upon which such Debt
Securities will be so convertible or exchangeable and any deletions from or
modifications or additions to the applicable Indenture to permit or to
facilitate the issuance of such convertible or exchangeable Debt Securities
or the administration thereof; (x) the identity of each Security Registrar
and Paying Agent if other than or in addition to the Trustee; (xi) if the
amount of principal of or any premium or interest on the offered Debt
Securities may be determined by reference to an index or pursuant to a
formula, the manner in which such amounts shall be determined; (xii) the
applicability of, and any addition to or change in the covenants and
definitions set forth in the applicable Indenture; (xiii) the denominations
in which any offered Debt Securities will be issuable, if other than
denominations of $1,000 or any amount in excess thereof which is an integral
multiple of $1,000; (xiv) if other than U.S. dollars the currency or
currencies for the payment of principal of and any premium and interest on
the offered Debt Securities and the manner of determining the U.S. dollar
equivalent of the principal amount thereof for purposes of the definition of
"outstanding" and, if the principal of or any premium or interest on the
offered Debt Securities is to be payable, at the election of the Company or
the holder thereof, in one or more currencies other than that or those in
which the offered Debt Securities are stated to be payable, the currency,
currencies or currency units in which payment of the principal of and any
premium and interest on such offered Debt Securities of such series as to
which such election is made shall be payable, and the periods within which
and the terms and conditions upon which such election is to be made; (xv) any
other event or events of default applicable with respect to the offered Debt
Securities in addition to or in lieu of those described below under "Events
of Default" and any change in the right of the Trustee or the holders to
declare the principal of or any premium or interest on the offered Debt
Securities due and payable; (xvi) if less than the principal amount thereof,
the portion of the principal payable upon acceleration of such Debt
Securities following an Event of Default; (xvii) whether such Debt Securities
are to be issued in whole or in part in the form of one or more Global
Securities and, if so, the identity of the depositary for such Global
Security or Securities, and any circumstances under which any such Global
Security may be exchanged for Debt Securities registered in the name of, and
any transfer of such Global Security may be registered to, a Person other
than such depositary or its nominee, if other than those described in the
applicable Indenture (see "Global Securities"); (xviii) if applicable, that
the offered Debt Securities, in whole or in any specified part, are not
defeasible; and (xix) any other terms of the offered Debt Securities not
inconsistent with the provisions of the applicable Indenture. (Indenture
Section 301)
If the purchase price of any Debt Securities is payable in a currency
other than U.S. dollars or if principal of or premium, if any, or interest,
if any, on any of the Debt Securities is payable in any currency other than
U.S. dollars, the specific terms and other information with respect to such
Debt Securities and such foreign currency, including any material foreign
currency risks, will be specified in the Prospectus Supplement or Prospectus
Supplements relating thereto.
Under the Indentures, the terms of the Debt Securities of any series may
differ, and the Company, without the consent of the holders of the Debt
Securities of any series, may reopen a previous series of Debt Securities and
issue additional Debt Securities of such series or establish additional terms
of such series.
Redemption. Except as set forth in the Prospectus Supplement with respect
to any offered Debt Securities or series thereof, the Company is not required
to make mandatory redemption or sinking fund payments with respect to the
Debt Securities. The Prospectus Supplement relating to any offered Debt
Securities or series thereof will specify the provisions, if any, regarding
sinking fund provisions related to such Debt Securities or series thereof.
The Indentures provide that the Company may deliver outstanding Debt
Securities of like tenor of a series (other than any previously called for
redemption) and may apply as a credit Debt Securities of like tenor of a
series which have been redeemed either at the election of the Company
pursuant to the terms of such Debt Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such Debt
Securities, in each case in satisfaction of all or any part of any sinking
fund payment with respect to the Debt Securities of like tenor of such series
required to be made pursuant to the terms of such Securities as provided for
by the terms of such series. (Indenture Sections 1202 and 1203)
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The Indentures provide that, if less than all of the Debt Securities of
any series are to be redeemed at any time, selection of Debt Securities for
redemption will be made by the Trustee by such method as the Trustee shall
deem fair and appropriate, and portions of the Debt Securities selected for
redemption shall be in amounts equal to the minimum authorized denomination
for Debt Securities of like tenor of that series or any integral multiple
thereof of principal amount of Debt Securities of such series of a
denomination larger than the minimum authorized denomination for Debt
Securities of that series. Notices of redemption shall be mailed by first
class mail at least 30 but not more than 60 days before the redemption date
to each Holder of Debt Securities to be redeemed at its registered address.
If any Debt Security is to be redeemed in part only, the notice of redemption
that relates to such Debt Security shall state the portion of the principal
amount thereof to be redeemed. A new Debt Security in principal amount equal
to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Debt Security. On and after the
redemption date, interest ceases to accrue on Debt Securities or portions of
them called for redemption. (Indenture Sections 1103, 1104, 1106 and 1107)
Repurchase at the Option of Holders. Except as set forth in the
Prospectus Supplement with respect to any offered Debt Securities or any
series thereof, the Indentures do not contain provisions that permit the
Holders of the Debt Securities to require that the Company repurchase or
redeem the Debt Securities in the event of a sale of assets or a takeover,
recapitalization or similar restructuring, nor does the Indenture contain
covenants specifically designed to protect holders in the event of a highly
leveraged transaction involving the Company.
Covenants. The Indentures contain certain covenants relating to the
Company and its operations, including covenants requiring the Company to (i)
punctually pay interest and principal of Debt Securities, (ii) maintain of an
office or agency in each place of payment in respect of the Debt Securities,
(iii) hold in trust money for payment of interest or principal on Debt
Securities, (iv) preserve the corporate existence, rights and franchises of
the Company and its Material Subsidiaries (as defined in the Indentures), (v)
generally maintain its properties and trademarks and to comply with
applicable statutes, laws, ordinances and regulations, (vi) maintain adequate
insurance, (vii) timely pay or discharge material tax obligations and claims
for labor, material and supplies, which, if unpaid, might become a lien upon
the property of the Company or any Subsidiary, (viii) keep proper books of
record and account and (ix) provide to the Trustee quarterly statements of
compliance with the Indentures and notice of any event which after notice or
lapse of time or both would become an Event of Default or the occurrence of
any Repurchase Event. Certain of these covenants are subject to various
exceptions and qualifications as set forth in the Indentures.
Certain additional covenants in respect of the Company may be set forth
the Prospectus Supplement accompanying this Prospectus.
Consolidation, Merger or Transfer. The Indentures provide that 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 applicable 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. The Indentures do not
quantify what constitutes "all or substantially all" of the Company's assets.
The Indentures provide that the Notes and Indentures shall be governed by and
construed in accordance with the laws of the State of Texas. Assuming such
law as currently in effect governs the meaning of "all or substantially all,"
there currently is no established quantitative definition of "all or
substantially all" of the assets of a corporation under applicable law. An
analysis of all the then relevant facts and circumstances and relevant legal
authorities would be required at the time of determination to establish
whether or not a sale of "all or substantially all" assets has occurred.
(Indenture Section 801)
Events of Default. The Indentures provide that each of the following
constitutes an Event of Default with respect to the Debt Securities of any
series issued pursuant to the Indentures: (i) failure to pay the principal on
the Debt Securities of that series when due; (ii) failure for 30 consecutive
days (for Debt Securities that pay interest less frequently than monthly) or
10 consecutive days (for Debt Securities that pay interest monthly) to pay
when due any interest on the Debt Securities of that series; (iii) failure to
deposit any sinking fund payment, when and as due, in respect of the Debt
Securities of that series; (iv) failure to perform, or a breach of, any
covenant or warranty set forth in the Indenture for 30 consecutive days after
receipt of written notice from the Trustee or Holders of at least 25% in
principal amount of the outstanding Debt Securities specifying the default
and requiring the Company to remedy such default; (v) an event of default as
defined in any indenture or instrument under which the Company or any
Material Subsidiary shall have Outstanding at least $1.0 million aggregate
principal amount of indebtedness shall have happened and resulted in
acceleration of such indebtedness and such default shall not have been cured
or waived and such acceleration shall not have been rescinded or annulled for
a period of 30 consecutive days, (vi) certain events of insolvency,
receivership or reorganization of the Company or any Material Subsidiary and
(vii) entry of a final judgment, decree or order against the Company or any
Material Subsidiary for the payment of money in excess of $5.0 million and
such judgment, decree or order continues unsatisfied for 30 consecutive days
without a stay of execution. (Indenture Section 501)
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If any Event of Default occurs and is continuing with respect to any
series of Debt Securities, the Trustee or the Holders of at least 25% in
aggregate principal amount of the then outstanding Debt Securities of such
series may declare the unpaid principal amount (or, if any of the Debt
Securities of that series are Original Issue Discount Debt Securities, such
lesser portion of the principal amount of such Debt Securities as may be
specified in the terms thereof), premium, if any, and any accrued and unpaid
interest on all the Debt Securities of such series to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, with respect
to the Company or any Material Subsidiary of the Company, all principal,
premium, if any and interest on outstanding Debt Securities will become due
and payable without further action or notice. Holders of the Debt Securities
may not enforce the respective Indentures or the Debt Securities except as
provided in the Indentures. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Debt Securities of any
series may direct the Trustee in its exercise of any trust or power with
respect to such series of Debt Securities. The Trustee may withhold from
Holders of the Debt Securities of any series notice of any continuing Default
or Event of Default (except a Default or Event of Default in payment on any
Debt Security of any series or in the payment of any sinking fund installment
with respect to such series) if it in good faith determines that withholding
notice is in their interest. (Indenture Sections 502, 507, 512 and 602)
The Holders of a majority in aggregate principal amount of the Debt
Securities of any series then outstanding by notice to the Trustee may on
behalf of the Holders of all of the Debt Securities of such series waive any
existing Default or Event of Default with respect to such series of Debt
Securities and its consequences under the applicable Indenture except a
continuing Default or Event of Default with respect to such series in the
payment of interest on, or the principal of, or premium, if any, on the Debt
Securities of such series. (Indenture Section 513)
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee, subject to certain exceptions. (Indenture Section 512) The
Indentures provide that in case an Event of Default shall occur and be
continuing, the Trustee will be required, in the exercise of its power, to
use the degree of care of a prudent person in the conduct of such person's
own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture unless
the Trustee receives reasonable security or indemnity against any loss,
liability or expense. (Indenture Sections 601 and 603)
The Company is required to deliver to the Trustee quarterly a statement
regarding compliance with the Indentures, and the Company is required upon
becoming aware of any Default or Event of Default with respect to a series of
Debt Securities due to any event of default under any other indenture or
instrument to deliver to the Trustee a statement specifying such Default or
Event of Default and what action the Company is taking or proposes to take
with respect thereto. (Indenture Section 703)
Defeasance Provisions. The Company will be discharged from any and all
obligations in respect of the Debt Securities of any series (except for
certain obligations to register the transfer or exchange of Debt Securities,
to replace destroyed, stolen, lost or mutilated Debt Securities, to maintain
paying agencies and to hold moneys for payment in trust) on the 91st day
after the date of deposit with the Trustee, in trust, of money, U.S.
Government Obligations which through the payment of interest and principal
thereof in accordance with their terms will provide money, or a combination
thereof, in an amount sufficient to pay any installment of principal of (and
premium, if any) and interest on and any mandatory sinking fund payments in
respect of the Debt Securities of such series on the dates on which such
payments are due and payable in accordance with the terms of the applicable
Indenture and such Debt Securities. Any such discharge is also subject to
certain other conditions, including the limitation that such discharge may
only occur if there has been a change in applicable federal law, or the
Company has delivered to the Trustee an Opinion of Counsel to the effect that
such a discharge will not cause the holders of such series of Debt Securities
to recognize income, gain or loss for federal income tax purposes and that
such holders will be subject to federal income tax on the same amount and in
the same manner and at the same times as would have been the case had such
deposit, defeasance and discharge not occurred, and that such discharge will
not cause any outstanding Debt Securities then listed on any securities
exchange to be de-listed as a result thereof. (Indenture Section 403)
The Company may omit to comply with certain restrictive covenants with
respect to the Debt Securities of any series. If the Company elects not to
comply with any term, provision or condition in any such covenant, the
Company must deposit with the Trustee money, U.S. Government Obligations
which through the payment of interest and principal thereof in accordance
with their terms will provide money, or a combination thereof, in an amount
sufficient to pay any installment of principal of (and premium, if any) and
interest on and any mandatory sinking fund payments in respect of the Debt
Securities of such series on the dates on which such payments are due and
payable in accordance with the terms of the applicable Indenture and such
Debt Securities. Any such covenant defeasance is also subject to certain
other conditions, including the delivery to the Trustee of an opinion of
counsel to the effect that the deposit and related covenant defeasance will
not cause the holders of the Debt Securities to recognize income, gain or
loss for federal income tax purposes and that
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such holders will be subject to federal income tax on the same amount and in
the same manner and at the same times as would have been the case had such
deposit and defeasance not occurred. (Indenture Section 1009)
In the event the Company omits compliance with certain covenants of the
Indenture and the Debt Securities issued pursuant thereto are declared due
and payable because of the occurrence of any event of default, although the
amount of money and U.S. Government Obligations on deposit with the Trustee
will be sufficient to pay amounts due on the Debt Securities at the time of
their stated maturity, it may not be sufficient to pay amounts due on the
Debt Securities at the time of the acceleration resulting from such event of
default.
In such event, the Company shall remain liable for all such payments.
Subordination of Subordinated Debt Securities. The Subordinated Debt
Securities will be subordinate and subject in right of payment, to the extent
and in the manner set forth in the Subordinated Indenture, to the prior
payment in full of all Senior Debt. Upon any distribution to creditors in a
liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshaling of assets and liabilities or any bankruptcy,
insolvency or similar proceeding involving the Company, the holders of Senior
Debt will be entitled to receive payment in full in cash of all Obligations
(as defined in the Subordinated Indenture) due on or to become due on or in
respect of all Senior Debt, before the holders of Subordinated Debt
Securities are entitled to receive any payment or distribution of any kind,
whether in cash, property or securities, by set off or otherwise on account
of the principal of (and premium, if any) or interest on the Subordinated
Debt Securities or on account of any purchase, redemption or other
acquisition of Subordinated Debt Securities by the Company, any Subsidiary of
the Company, the Trustee or any Paying Agent or on account of any other
obligation of the Company in respect of any Subordinated Debt Securities
(excluding (i) shares of stock or securities of the Company or another
corporation provided for by a plan of reorganization or readjustment that are
subordinated in right of payment to all then outstanding Senior Debt to
substantially the same extent as, or to a greater extent than, the
Subordinated Debt Securities are so subordinated and (ii) payments of assets
from any defeasance trust which have been on deposit for 90 consecutive days
without the occurrence of blockage of payment on any such series of
Subordinated Debt Securities as described below) ("Securities Payments").
Until the Senior Debt is paid in full, any Securities Payment to which the
holders of Subordinated Debt Securities or the Trustee for their benefit
would be entitled, will be paid or delivered by the Company or any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, directly to the holders of Senior Debt or their
representative or representatives or the trustee or trustees under any
indenture pursuant to which any instruments evidencing, any Senior Debt may
have been issued. (Subordinated Indenture Sections 1301 and 1302)
The Subordinated Indenture contains certain standstill provisions, which
provide that no payments of principal of, or interest on, the Subordinated
Debt Securities may be made and no Subordinated Debt Securities may be
accelerated 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 Debt or any agent therefor (a
"Senior Agent") specifying that an event of default (a "Senior Event of
Default") under any Senior Debt has occurred. Such standstill will 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 Debt 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 Debt has not been accelerated at such time. Any such
standstill will not prevent the occurrence of an "Event of Default" under the
Subordinated Indenture.
In the event that the Trustee receives any Securities Payment prohibited
by the subordination provisions of the Subordinated Indenture, such payment
will be held by the Trustee in trust for the benefit of, and will immediately
be paid over upon written request to, the holders of Senior Debt or their
representative or representatives, or the trustee or trustees under any
applicable indenture for application to the payment of Senior Debt.
(Subordinated Indenture Section 1304) Such subordination will not prevent the
occurrence of any event of default in respect of the Subordinated Debt
Securities.
By reason of such subordination, in the event of the insolvency of the
Company, holders of Senior Debt may receive more, ratably, and holders of the
Subordinated Debt Securities having a claim pursuant to such securities may
receive less, ratably, than the other creditors of the Company. There may
also be interruption of scheduled interest and principal payments resulting
from events of default on Senior Debt.
Modification and Waiver. Modifications and amendments of the respective
Indentures may be made by the Company and the Trustee with the consent of the
holders of not less than a majority in aggregate principal amount of the
outstanding Debt Securities of all series affected by such modification or
amendment (voting as one class); provided, however, that no such modification
or amendment may, without the consent of the holder of each outstanding Debt
Security affected thereby, (i) change the stated maturity of the principal
of, or any installment of principal of or interest on, any Debt Security,
reduce the principal amount of, or premium or interest on, any Debt Security,
reduce the amount of principal of an Original Issue Discount Debt Security
due and payable upon acceleration of the maturity
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thereof, change the place of payment where or coin or currency in which the
principal of, or any premium or interest on, any Debt Security is payable, or
impair the right to institute suit for the enforcement of any payment on or
after the stated maturity of any Debt Security, (ii) reduce the percentage in
principal amount of outstanding Debt Securities of any series, the consent of
the holders of which is required for modification or amendment of the Senior
Indenture or for waiver of compliance with certain provisions of the Senior
Indenture or for waiver of certain defaults or (iii) modify any of the
various sections relating to above-described provisions. (Indenture Section
902)
The holders of not less than a majority in aggregate principal amount of
the outstanding Debt Securities of each series may, on behalf of the holders
of all Debt Securities of that series, waive, insofar as that series is
concerned, compliance by the Company with certain restrictive provisions of
the Indenture. (Indenture Section 1011) The holders of not less than a
majority in aggregate principal amount of the Outstanding Debt Securities of
each series may, on behalf of the holders of all Debt Securities of that
series, waive any past default under the Indenture with respect to Debt
Securities of that series, except a default (i) in the payment of principal
of, or any premium or interest on, any Debt Security of such series when due
(other than amounts due and payable solely upon acceleration), or (ii) in
respect of a covenant or provision of the Indenture which cannot be modified
or amended without the consent of the holder of each outstanding Debt
Security of such series affected. (Indenture Section 513) The definition of
"Senior Debt" in the Subordinated Indenture may not be amended or modified in
a manner adverse to the holders of then outstanding Senior Debt without the
consent of the holders of all Senior Debt affected thereby. (Subordinated
Indenture Section 908)
The Indentures provide that, in determining whether the holders of the
requisite principal amount of the outstanding Debt Securities have given any
request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Debt
Security that will be deemed to be outstanding will be the amount of the
principal thereof that would be due and payable as of the date of such
determination upon acceleration of the maturity thereof to such date and (ii)
the principal amount of a Debt Security denominated in a foreign currency or
currency unit that will be deemed to be outstanding will be the United States
dollar equivalent, determined as of the date of original issuance of such
Debt Security, of the principal amount of such Debt Security (or, in the case
of an Original Issue Discount Debt Security, the United States dollar
equivalent, determined as of the date of original issuance of such Debt
Security, of the amount determined as provided in (i) above). (Indenture
Section 101)
Global Securities. The following description will apply to any series of
Debt Securities issued, in whole or in part, in the form of a Global Security
or Global Securities deposited with, or on behalf of, The Depository Trust
Company ("DTC") (each such Debt Security represented by a Global Security,
being herein referred to as a "Book-Entry Security").
Upon initial issuance, all Book-Entry Securities of the same series and
bearing interest, if any, at the same rate or pursuant to the same formula
and having the same date of issuance, redemption provisions, if any,
repayment provisions, if any, stated maturity and other terms will be
represented by a single Global Security. Each Global Security representing
Book-Entry Securities will be deposited with, or on behalf of, DTC and will
be registered in the name of DTC or a nominee of DTC. Unless otherwise
specified in the applicable Prospectus Supplement, all Book-Entry Securities
will be denominated in U.S. dollars.
Upon the issuance of a Global Security, DTC will credit accounts held
with it with the respective principal or face amounts of the Book-Entry
Securities represented by such Global Security. The accounts to be credited
shall be designated initially by the Agent through which the Debt Security
was sold or, to the extent that such Debt Securities are offered and sold
directly, by the Company. Ownership of beneficial interests in a Global
Security will be limited to institutions that have accounts with DTC
("participants") and to persons that may hold interests through such
participants. Ownership of beneficial interests by participants in a Global
Security will be shown on, and the transfer of that ownership interest will
be effected only through, records maintained by DTC for such Global Security.
Ownership of beneficial interests in such Global Security by persons that
hold through participants will be shown on, and the transfer of that
ownership interest within such participant will be effected only through,
records maintained by such participant.
Payment of principal of, premium, if any, and interest, if any, on
Book-Entry Securities represented by any such Global Security will be made to
DTC or its nominee, as the case may be, as the sole registered holder of the
Book-Entry Securities represented thereby for all purposes under the
Indentures. None of the Company, the Trustee, the Paying Agent or any agent
of the Company or the Trustee will have a responsibility or liability for any
aspect of DTC's records relating to or payments made on account of beneficial
ownership interests in a Global Security representing any Book-Entry
Securities or any other aspect of the relationship between DTC and its
participants or the relationship between such participants and the owners of
beneficial interests in a Global Security owning through such participants or
for maintaining, supervising or reviewing any of DTC's records relating to
such beneficial ownership interests.
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The Company has been advised by DTC that upon receipt of any payment of
principal of, premium, if any, or interest, if any, on any such Global
Security, DTC will immediately credit, on its book-entry registration and
transfer system, the accounts of participants with payments in amounts
proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of DTC. Payments by
participants to owners of beneficial interests in a Global Security held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held by such
participants for customer accounts registered in "street name," and will be
the sole responsibility of such participants.
No Global Security may be transferred except as a whole by a nominee of
DTC to DTC or to another nominee of DTC, or by DTC or any such nominee to a
successor of DTC or a nominee of such successor.
A Global Security representing Book-Entry Securities is exchangeable for
certificated Debt Securities of the same series and bearing interest, if any,
at the same rate or pursuant to the same formula, having the same date of
issuance, redemption provisions, if any, repayment provisions, if any, stated
maturity and other terms and of differing authorized denominations
aggregating a like amount, if any, if (i) DTC notifies the Company that it is
unwilling or unable to continue as depositary for such Global Security or if
at any time DTC ceases to be a clearing agent registered under the Exchange
Act, (ii) the Company, in its sole discretion, determines that such Global
Security shall be exchangeable for certificated Debt Securities or (iii)
there shall have occurred and be continuing an Event of Default with respect
to the Book-Entry Securities. Such certificated Debt Securities shall be
registered in the names of the owners of the beneficial interests in such
Global Security as provided by DTC's relevant participants (as identified by
DTC).
Owners of beneficial interests in a Global Security will not be
considered the registered holders thereof for any purpose under the
applicable Indenture and no Global Security representing Book-Entry
Securities shall be exchangeable or transferrable. Accordingly, each person
owning a beneficial interest in such a Global Security must rely on the
procedures of DTC and, if such person is not a participant, on the procedures
of the participant through which such person owns its interest, to exercise
any rights of a registered holder under the applicable Indenture. The laws of
some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in certificated form. Such limits and
such laws may impair the ability to transfer beneficial interests in a Global
Security.
DTC, as the registered holder of each Global Security, may appoint agents
and otherwise authorize participants to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action which a
registered holder is entitled to give or take under the applicable Indenture.
The Company understands that under existing industry practices, in the event
that the Company requests any action of registered holders or that an owner
of a beneficial interest in such a Global Security desires to give or take
any action which a registered holder is entitled to give or take under such
Indenture, DTC would authorize the participants holding the relevant
beneficial interests to give or take such action, and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.
DTC has advised the Company that DTC is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered under the Exchange
Act. DTC was created to hold the securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical
movement of securities certificates. DTC's participants include securities
brokers and dealers, banks (which may include the Trustee), trust companies,
clearing corporations, and certain other organizations some of whom (and/or
their representatives) own DTC. Access to DTC's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
Certain Definitions. Set forth below are certain defined terms used in
the Indentures. Reference is made to the Indentures for a full disclosure of
all such terms, as well as any other capitalized terms used herein for which no
definition is provided. (Indenture Section 101)
"Funded Debt" 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 360 days 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, assets, securities or
services (including, without limitation, any interest accruing subsequent to
an event of default), (ii) all obligations (including the Debt Securities)
evidenced by bonds, notes, debentures or other similar instruments,
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(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 Capital Lease Obligations, (v) liabilities of the Company actually due
and payable under banker's acceptances or letters of credit, (vi) all
indebtedness of the type referred to in clause (i), (ii), (iii), (iv) or (v)
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
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 (vii) 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 (vi), regardless of
whether such obligation would appear on a balance sheet.
"Junior Indebtedness" means all Funded Debt except Senior Debt.
"Material Subsidiary" means Holliday Fenoglio, Inc., AMRESCO Management,
Inc., AMRESCO Residential Mortgage Corporation, AMRESCO Advisors, Inc.,
AMRESCO Residential Credit Corporation, AMRESCO Residential Capital Markets,
Inc., 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.
"Original Issue Discount Security" means any Debt Security which provides
for an amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration of the maturity thereof pursuant to the
terms of the applicable Indenture.
"pari passu" means, with respect to the ranking of any indebtedness of
any Person in relation to other indebtedness of such Person, that such
indebtedness (a) either (i) is not subordinate in right of payment to any
other indebtedness of such Person or (ii) is subordinate in right of payment
to the same indebtedness of such Person as is the other and is so subordinate
to the same extent and (b) is not subordinate in right of payment to the
other or to any indebtedness of such Person as to which the other is not so
subordinate.
"Senior Debt" means any Funded Debt 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 Funded Debt is subordinated
to any other Funded Debt.
"Subsidiary," means, with respect to any Person, (i) any Corporation of
which at the time of determination more than 50% of the shares of Voting
Stock is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or one or
more Subsidiaries of such Person (or any combination thereof).
"U.S. 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 U.S. Government Obligation or a specific payment of
interest on or principal of or other amount with respect to any such U.S.
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 U.S. Government Obligation or the specific
payment of interest on or principal of or other amount with respect to the
U.S. Government Obligation evidenced by such depository receipt.
SECURITIES WARRANTS
The Company may issue Securities Warrants for the purchase of Debt
Securities, Preferred Stock or Common Stock. Securities Warrants may be
issued independently or together with other Securities offered by any
Prospectus Supplement and may be attached to or separate from such other
Securities. Each series of Securities Warrants will be issued under a
separate warrant agreement (a "Securities
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Warrant Agreement") to be entered into between the Company and a bank or
trust company as Securities Warrant Agent, all as set forth in the Prospectus
Supplement relating to the particular issue of offered Securities Warrants.
The Securities Warrant Agent will act solely as an agent of the Company in
connection with the Securities Warrant Certificates and will not assume any
obligation or relationship of agency or trust for or with any holders of
Securities Warrant Certificates or beneficial owners of Securities Warrants.
Copies of the forms of Securities Warrant Agreements, including the forms of
Securities Warrant Certificates representing the Securities Warrants, will be
filed or incorporated by reference as exhibits to the Registration Statement
to which this Prospectus pertains. The following summaries of certain
provisions of the forms of Securities Warrant Agreements and Securities
Warrant Certificates do not purport to be complete and are subject to and are
qualified in their entirety by reference to all the provisions of the
Securities Warrant Agreements and the Securities Warrant Certificates.
General. If Securities Warrants are offered, the applicable Prospectus
Supplement will describe the terms of such Securities Warrants, including, in
the case of Securities Warrants for the purchase of Debt Securities, the
following where applicable: (i) the offering price; (ii) the currencies in
which such Securities Warrants are being offered; (iii) the designation,
aggregate principal amount, currencies, denominations and terms of the series
of Debt Securities purchasable upon exercise of such Securities Warrants:
(iv) the designation and terms of any series of Securities with which such
Securities Warrants are being offered and the number of such Securities
Warrants being offered with each such Security; (v) the date on and after
which such Securities Warrants and the related series of Securities will be
transferable separately; (vi) the principal amount of the series of Debt
Securities purchasable upon exercise of each such Securities Warrant and the
price at which and currencies in which such principal amount of Debt
Securities of such series may be purchased upon such exercise; (vii) the date
on which the right to exercise such Securities Warrants shall commence and
the date (the "Expiration Date") on which such right shall expire; (viii)
whether the Securities Warrants will be issued in registered or bearer form;
(ix) a discussion of any material United States federal income tax
consequences; and (x) any other terms of such Securities Warrants.
In the case of Securities Warrants for the purchase of Preferred Stock or
Common Stock. the applicable Prospectus Supplement will describe the terms of
such Securities Warrants, including the following where applicable: (i) the
offering price; (ii) the aggregate number of shares purchasable upon exercise
of such Securities Warrants and, in the case of Securities Warrants for
Preferred Stock, the designation, aggregate number and terms of the series of
Preferred Stock purchasable upon exercise of such Securities Warrants; (iii)
the designation and terms of the series of Securities with which such
Securities Warrants are being offered and the number of such Securities
Warrants being offered with each such Security; (iv) the date on and after
which such Securities Warrants and the related series of Securities will be
transferable separately; (v) the shares of Preferred Stock or Common Stock
purchasable upon exercise of each such Securities Warrant and the price at
which such shares of Preferred Stock or Common Stock may be purchased upon
each exercise; (vi) the date on which the right to exercise such Securities
Warrants shall commence and the expiration date thereof; (vii) a discussion
of any material United States federal income tax consequences; and (viii) any
other terms of such Securities Warrants. Securities Warrants for the purchase
of Preferred Stock or Common Stock will be offered and exercisable for U.S.
dollars only and will be in registered form only.
Securities Warrant Certificates may be exchanged for new Securities
Warrant Certificates of different denominations, may (if in registered form)
be presented for registration of transfer and may be exercised at the
corporate trust office of the Securities Warrant Agent or any other office
indicated in the applicable Prospectus Supplement. Prior to the exercise of
any Securities Warrant to purchase Debt Securities, holders of such
Securities Warrants will not have any of the rights of holders of the Debt
Securities purchasable upon such exercise, including the right to receive
payments of principal of, premium, if any, or interest, if any, on the Debt
Securities purchasable upon such exercise or to enforce covenants in the
applicable Indenture. Prior to the exercise of any Securities Warrants to
purchase Preferred Stock or Common Stock, holders of such Securities Warrants
will not have any rights of holders of the Preferred Stock or Common Stock
purchasable upon such exercise, including the right to receive payment of
dividends, if any, on the Preferred Stock or Common Stock purchasable upon
such exercise or to exercise any applicable right to vote.
Exercise of Securities Warrants. Each Securities Warrant will entitle the
holder thereof to purchase such principal amount of Debt Securities or shares
of Preferred Stock or Common Stock, as the case may be, at such exercise
price as shall in each case be set forth in, or calculable from, the
Prospectus Supplement relating to the offered Securities Warrants. After the
close of business on the Expiration Date (or such later date to which such
Expiration Date may be extended by the Company), unexercised Securities
Warrants will become void.
Securities Warrants may be exercised by delivering to the Securities
Warrant Agent payment as provided in the applicable Prospectus Supplement of
the amount required to purchase the Debt Securities, Preferred Stock or
Common Stock, as the case may be, purchasable upon such exercise together
with certain information set forth on the reverse side of the Securities
Warrant Certificate. Securities Warrants
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<PAGE> 26
will be deemed to have been exercised upon receipt of payment of the exercise
price, subject to the receipt of the Securities Warrant Certificate
evidencing such Securities Warrants. Upon receipt of such payment and the
Securities Warrant Certificate properly completed and duly executed at the
corporate trust office of the Securities Warrant Agent or any other office
indicated in the applicable Prospectus Supplement, the Company will, as soon
as practicable, issue and deliver the Debt Securities, Preferred Stock or
Common Stock, as the case may be, purchasable upon exercise. If fewer than
all of the Securities Warrants represented by such Securities Warrant
Certificate are exercised, a new Securities Warrant Certificate will be
issued for the remaining amount of Securities Warrants.
Amendments and Supplements to Securities Warrant Agreement. The
Securities Warrant Agreements may be amended or supplemented without the
consent of the holders of the Securities Warrants issued thereunder to effect
changes that are not inconsistent with the provisions of the Securities
Warrants and that do not adversely affect the interests of the holders of the
Securities Warrants.
Common Stock Warrant Adjustments. The exercise price of, and the number
of shares of Common Stock covered by, a Common Stock Warrant are subject to
adjustment in certain events, including (i) the issuance of capital stock as
a dividend or distribution on the Common Stock; (ii) subdivisions and
combinations of the Common Stock; (iii) the issuance to all holders of Common
Stock of certain rights or warrants entitling them to subscribe for or
purchase Common Stock within 45 days after the date fixed for the
determination of the stockholders entitled to receive such rights or
warrants, at less than the current market price (as defined in the Warrant
Agreement for such series of Common Stock Warrants) and (iv) the distribution
to all holders of Common Stock of evidences of indebtedness or assets of the
Company (excluding certain cash dividends and distributions described below)
or rights or warrants (excluding those referred to above). In the event that
the Company shall distribute any rights or warrants to acquire capital stock
pursuant to clause (iv) above (the "Capital Stock Rights") pursuant to which
separate certificates representing such Capital Stock Rights will be
distributed subsequent to the initial distribution of such Capital Stock
Rights (whether or not such distribution shall have occurred prior to the
date of the issuance of a series of Common Stock Warrants), such subsequent
distribution shall be deemed to be the distribution of such Capital Stock
Rights; provided that the Company may, in lieu of making any adjustment in
the exercise price of and the number of shares of Common Stock covered by a
Common Stock Warrant upon a distribution of separate certificates
representing such Capital Stock Rights, make proper provision so that each
holder of such a Common Stock Warrant who exercises such Common Stock Warrant
(or any portion thereof) (a) before the record date for such distribution of
separate certificates shall be entitled to receive upon such exercise shares
of Common Stock issued with Capital Stock Rights and (b) after such record
date and prior to the expiration, redemption or termination of such Capital
Stock Rights shall be entitled to receive upon such exercise, in addition to
the shares of Common Stock issuable upon such exercise, the same number of
such Capital Stock Rights as would a holder of the number of shares of Common
Stock that such Common Stock Warrant so exercised would have entitled the
holder thereof to acquire in accordance with the terms and provisions
applicable to the Capital Stock Rights if such Common Stock Warrant was
exercised immediately prior to the record date for such distribution. Common
Stock owned by or held for the account of the Company or any majority owned
Subsidiary shall not be deemed outstanding for the purpose of any adjustment.
No adjustment in the exercise price of and the number of shares of Common
Stock covered by a Common Stock Warrant will be made for regular quarterly or
other periodic or recurring cash dividends or distributions or for cash
dividends or distributions to the extent paid from retained earnings. No
adjustment will be required unless such adjustment would require a change of
at least 1% in the exercise price then in effect; provided that any such
adjustment not so made will be carried forward and taken into account in any
subsequent adjustment; and provided further that any such adjustment not so
made shall be made no later than three years after the occurrence of the
event requiring such adjustment to be made or carried forward. Except as
stated above, the exercise price of and the number of shares of Common Stock
covered by a Common Stock Warrant will not be adjusted for the issuance of
Common Stock or any securities convertible into or exchangeable for Common
Stock, or securities carrying the right to purchase any of the foregoing.
In the case of (i) a reclassification of or change to the Common Stock,
other than changes in par value, (ii) a consolidation or merger involving the
Company, other than where the Company is the continuing corporation and
reclassification or change, as described in (i) above, is involved or (iii) a
sale or conveyance to another corporation of the property and assets of the
Company as an entirety or substantially as an entirety, the holders of the
Common Stock Warrants then outstanding will be entitled thereafter to convert
such Common Stock Warrants into the kind and amount of shares of stock and
other securities or property which they would have received upon such
reclassification, change, consolidation, merger, sale or conveyance had such
Common Stock Warrants been exercised immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance.
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PLAN OF DISTRIBUTION
The Company may offer and sell the Offered Securities in one or more of
the following ways: (i) through underwriters or dealers, (ii) through agents
or (iii) directly to one or more purchasers. The Prospectus Supplement with
respect to a particular offering of a series of Offered Securities will set
forth the terms of the offering of such Offered Securities, including the
name or names of any underwriters or agents with whom the Company has entered
into arrangements with respect to the sale of such Offered Securities, the
public offering or purchase price of such Offered Securities and the proceeds
to the Company from such sales and any underwriting discounts, agency fees or
commissions and other items constituting underwriters' compensation, the
initial public offering price, any discounts or concessions to be allowed or
re-allowed or paid to dealers and any securities exchange, if any, on which
such Offered Securities may be listed. Dealer trading may take place in
certain of the Offered Securities, including Offered Securities not listed on
any securities exchange.
If underwriters are involved in the offer and sale of Offered Securities,
the Offered Securities will be acquired by the underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The Offered Securities may be
offered to the public either through underwriting syndicates represented by
managing underwriters, or by underwriters without a syndicate, all of which
underwriters in either case will be designated in the applicable Prospectus
Supplement. Unless otherwise set forth in the applicable Prospectus
Supplement, under the terms of the underwriting agreement, the obligations of
the underwriters to purchase Offered Securities will be subject to certain
conditions precedent and the underwriters will be obligated to purchase all
of the Offered Securities if any are purchased. Any initial public offering
price and any discounts or concessions to be allowed or re-allowed or paid to
dealers may be changed from time to time.
Offered Securities may be offered and sold directly by the Company or
through agents designated by the Company from time to time. Any agent
involved in the offer or sale of the Offered Securities with respect to which
this Prospectus is delivered will be named in, and any commissions payable by
the Company to such agent will be set forth in or calculable from, the
applicable Prospectus Supplement. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis
for the period of its appointment.
If so indicated in the applicable Prospectus Supplement, the Company may
authorize underwriters, dealers or agents to solicit offers by certain
institutions to purchase the Offered Securities from the Company at the
public offering price set forth in such Prospectus Supplement pursuant to
delayed delivery contracts ("Delayed Delivery Contracts") providing for
payment and delivery on the date or dates stated in the Prospectus
Supplement. Each Delayed Delivery Contract will be for an amount of the
Offered Securities not less than and, unless the Company otherwise agrees,
the aggregate amount of the Offered Securities sold pursuant to Delayed
Delivery Contracts shall be not more than the respective minimum and maximum
amounts stated in the Prospectus Supplement. Institutions with which Delayed
Delivery Contracts, when authorized, may be made include commercial and
savings banks, insurance companies, pension funds, investment companies and
educational and charitable institutions, but shall in all cases be subject to
the approval of the Company in its sole discretion. The obligations of the
purchaser under any Delayed Delivery Contract to pay for and take delivery of
the Offered Securities will not be subject to any conditions except that (i)
the purchase of the Offered Securities by such institution shall not at the
time of delivery be prohibited under the laws of the jurisdiction to which
such institution is subject and (ii) any related sale of the Offered
Securities to underwriters shall have occurred. A commission set forth in the
Prospectus Supplement will be paid to underwriters soliciting purchases of
the Offered Securities pursuant to Delayed Delivery Contracts accepted by the
Company. The underwriters will not have any responsibility in respect of the
validity or performance of Delayed Delivery Contracts.
The Debt Securities, the Preferred Stock and the Securities Warrants will
be new issues of securities with no established trading market. Any
underwriters to whom Offered Securities are sold by the Company for public
offering and sale may make a market in such Offered Securities, but such
underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. No assurance can be given as to the
liquidity of the trading market for any Offered Securities.
Any underwriter, dealer or agent participating in the distribution of the
Offered Securities may be deemed to be an underwriter, as that term is
defined in the Securities Act, of the Offered Securities so offered and sold
and any discounts or commissions received by it from the Company and any
profit realized by it on the sale or resale of the Offered Securities may be
deemed to be underwriting discounts and commissions under the Securities Act.
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<PAGE> 28
Under agreements entered into with the Company, underwriters, dealers and
agents may be entitled to indemnification by the Company against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which the underwriters or agents may be
required to make in respect thereof.
Underwriters, dealers and agents also may be customers of, engage in
transactions with, or perform other services for the Company in the ordinary
course of business.
LEGAL MATTERS
The validity of the shares of Common Stock, the Preferred Stock, the Debt
Securities and Securities Warrants offered hereby will be passed upon for the
Company by L. Keith Blackwell as General Counsel of the Company. Mr.
Blackwell currently owns beneficially 8,904 shares of Common Stock (excluding
10,501 unvested shares allocated under the Company's restricted stock plan)
and holds options to purchase 46,165 shares of Common Stock.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report which is incorporated herein by reference
and has been so incorporated in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
The consolidated balance sheets of Quality Mortgage USA, Inc. as of
September 30, 1995 and 1996, and the consolidated statements of income,
stockholder's equity and cash flows for each of the two years in the period
ended September 30, 1996, incorporated by reference in the Prospectus, have
been incorporated by reference herein in reliance of the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.
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 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. Such documents may also be obtained at the website maintained by the
Commission (http://www.sec.gov). The Company's Common Stock is quoted on the
Nasdaq National Market and such reports, proxy statements and other
information may be inspected at the National Association of Securities
Dealers, Inc., 1735 K. Street N.W., Washington, D.C. 20006. The Company's 10%
Senior Subordinated Notes due 2003, the 8.75% Senior Notes due 1999 and the
10% Senior Subordinated Notes due 2004 are listed for trading on the New York
Stock Exchange. Reports and other information concerning the Company can be
inspected at the offices of such Exchange, 20 Broad Street, New York, New
York 10005.
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 Securities. 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.
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$," "dollars,"
"U.S. dollars," or "U.S.$").
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<PAGE> 29
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: (i) Annual Report on Form 10-K for the year ended
December 31, 1996 (filed March 31, 1997; File No. 1-11579), (ii) Current
Report on Form 8-K dated March 7, 1997 (filed March 7, 1997; File No.
001-11599), (iii) Current Report on Form 8-K dated March 12, 1997 (filed
March 27, 1997; File No. 001-1159), (iv) Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997 (filed May 15, 1997; File No. 001-11599),
(iv) Current Report on Form 8-K dated May 28, 1997; (filed May 30 , 1997;
File No. 001-1159) and (v) the description of the Company's Common Stock
contained in the Company's Registration Statement on Form 8-A dated May 28,
1997 (filed May 30, 1997; File No. 000-08630).
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 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, 700 North Pearl
Street, Suite 2400, LB 342, Dallas, Texas 75201, Attention: L. Keith
Blackwell, Vice President, General Counsel and Secretary. Telephone requests
may be directed to L. Keith Blackwell, Vice President, General Counsel and
Secretary of the Company, at (214) 953-7700.
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GLOSSARY
The following are certain defined terms which may be used in this
Prospectus and any accompanying Prospectus Supplement:
"ACACIA" means Acacia Realty Advisors, Inc.
"ACC" means AMRESCO Capital Corporation, a subsidiary of the Company.
"AMRESCO RESIDENTIAL" means, collectively, ARMC and AMRESCO Residential
Credit Corporation, subsidiaries of the Company.
"AMRESCO SERVICES" means a division of AMRESCO Management, Inc., a
subsidiary of the Company.
"ARCMI" means AMRESCO Residential Capital Markets, Inc., a subsidiary of
the Company.
"ARMC" means AMRESCO Residential Mortgage Corporation, a subsidiary 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.
"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
obtains its funds by selling ownership interests in the trust to public or
private investors.
"CREDIT AGREEMENTS" means the Revolving Loan Agreement and the Warehouse
Agreements.
"CREDIT ENHANCEMENT" means the method by which a seller of asset-backed
securities achieves a higher credit rating with respect to such securities than
the credit rating of the assets collateralizing such securities. Credit
enhancement is often achieved through the use of financial guaranty insurance
policies.
"DTC" means The Depository Trust Company or its nominees.
"DUS" means the Delegated Underwriting and Servicing program established
by Fannie Mae that permits a DUS approved lender to commit and close loans for
multi-family mortgages for resale to Fannie Mae without Fannie Mae's prior
approval of such loans.
"EQS" means, collectively, EQ Services, Inc. and Equitable Real Estate
Investment Management, Inc.
"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.
"FULL SERVICER" means an entity which serves as Primary Servicer, Master
Servicer and Special Servicer on an Asset Portfolio.
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"HOLLIDAY FENOGLIO" means Holliday Fenoglio, Inc., a subsidiary of the
Company.
"MASTER SERVICER" means an entity which provides administrative services
with respect to securitized pools of mortgage-backed securities.
"NATIONSBANK OF TEXAS" means NationsBank of Texas, N.A.
"PRIMARY SERVICER" means an entity which provides various administrative
services with respect to loans such as collecting monthly mortgage payments,
maintaining escrow accounts for the payment of 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.
"QUALITY" means Quality Mortgage USA, Inc., a California corporation.
"REVOLVING LOAN AGREEMENT" means the First Amended and Restated Revolving
Loan Agreement dated as of April 25, 1996 and as subsequently amended, 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, mortgage-backed or
commercial loan-backed securities.
"SENIOR SUBORDINATED NOTES" means the Company's 10% Senior Subordinated
Notes due 2003 and the Company's 10% Senior Subordinated Notes due 2004,
collectively.
"SENIOR SUBORDINATED NOTES INDENTURE" means the Indenture dated January
15, 1996, governing the Senior Subordinated Notes.
"SPECIAL SERVICER" means an entity which provides asset management and
resolution services with respect to non-performing or under-performing loans
within a pool of performing loans and/or mortgages.
"SUBORDINATED CERTIFICATES" means the unrated and uninsured tranches of
collaterlized residential or commercial mortgage-backed securities which are
included under the caption "Retained Interests in Securitizations trading" in
the Company's consolidated balance sheet.
"SUB-PRIME LOAN" means a residential mortgage loan to borrowers who do
not qualify for conventional loans or whose borrowing needs are not met by
traditional residential mortgage lenders. 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.
"WAREHOUSE" means a type of lending arrangement whereby loans funded or
purchased and held for sale are financed by financial institutions or
institutional lenders on a short-term basis and secured by the underlying
loans.
"WAREHOUSE AGREEMENTS" mean all warehouse loan facilities entered into by
the Company from time to time.
<PAGE> 32
================================================================================
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in
this Prospectus in connection with the offer made by this Prospectus and
if given or made, such information or representations must not be relied
upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or solicitation by anyone in any state in
which such offer or solicitation is not qualified to do so or to anyone to
whom it is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus nor any AMRESCO, INC. sale made hereunder
shall, under any circumstances, create any implication that the
information contained herein is correct as of any time subsequent to the
date hereof.
--------------------
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE COMPANY.............................................3
RISK FACTORS............................................5
USE OF PROCEEDS........................................11
RATIOS OF EARNINGS TO FIXED
CHARGES AND EARNINGS TO
COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS........................11
DESCRIPTION OF SECURITIES..............................12
PLAN OF DISTRIBUTION...................................25
LEGAL MATTERS..........................................26
EXPERTS............................................... 26
AVAILABLE INFORMATION..................................26
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE...............................27
GLOSSARY.............................................. 28
</TABLE>
================================================================================
================================================================================
AMRESCO, INC
-------------------
PROSPECTUS
-------------------
================================================================================
30
<PAGE> 33
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC Registration Fee $151,156
Printing Expenses 5,000
Accounting Fees and Expenses 1,000
Legal Fees and Expenses 1,000
Blue Sky Fees and Expenses -0-
Indenture Trustees Fees and Expenses -0-
Fees of Transfer Agent and Registrar -0-
Miscellaneous Expenses 5,000
Total........................................$163,156
</TABLE>
All of the above expenses except the Securities and Exchange Commission
registration fee are estimated and include only those fees and expenses
associated with preparing this Registration Statement. All of such expenses
will be borne by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Restated Certificate of Incorporation, as amended (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 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
II-1
<PAGE> 34
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.
The Company maintains insurance for its officers and directors which
provides for indemnification of officers and directors. The premiums for such
insurance are paid by the Company.
ITEM 16. EXHIBITS
Exhibit No. Exhibit
1.1 - Form of Purchase Agreement for Debt Securities (1)
1.2 - Form of Underwriting Agreement for Preferred Stock (1)
1.3 - Form of Underwriting Agreement for Common Stock (1)
4.1 - Specimen Common Stock Certificate of Registrant (2)
4.2 - Senior Indenture (1)
4.3 - Subordinated Indenture (3)
4.4* - Form of Certificate of Designation for Preferred Stock
4.5* - Specimen Preferred Stock Certificate
4.6* - Form of Warrant Agreement
4.7* - Specimen Warrant Certificate
5.1 - Opinion of L. Keith Blackwell, General Counsel of the
Company, regarding legality of securities being
registered.
12.1 - Statement of Computation of Ratio of Earnings to Fixed
Charges (4).
12.2 - Statement of Computation of Ratio of Earnings to Fixed
Charges and Preferred Stock Dividends (4).
23.1 - Consent of L. Keith Blackwell, contained in the
opinion filed as Exhibit 5.1.
23.2 - Consent of Deloitte & Touche L.L.P. (4)
23.3 - Consent of Coopers & Lybrand L.L.P. (4)
24.1 - Powers of Attorney (4).
25.1 - Statement of Eligibility of Senior Trustee on Form
T-1 (1)
25.2 - Statement of Eligibility of Subordinated Trustee on
Form T-1 (1)
--------------------
* To be filed in the event of the issuance of
Preferred Stock or Warrants, as the case may be.
(1) Previously filed with the Commission as an Exhibit to
the Registrant's Form S-3 Registration Statement (No.
333-6031) and incorporated herein by reference
(2) Previously filed with the Commission as an Exhibit to
the Registrant's Form S-3 Registration Statement (No.
33-63683) and incorporated herein by reference
(3) Previously filed with the Commission as an Exhibit to
the Registrant's Current Report on Form 8-K dated
March 12, 1997 (No. 001-1159) and incorporated herein
by reference
(4) Previously filed with the Commission as an Exhibit to
the Registrant's Form S-3 Registration Statement (No.
333-27853) and incorporated herein by reference
II-2
<PAGE> 35
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement (notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more than
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement).
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in this registration statement.
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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; and
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
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.
II-3
<PAGE> 36
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.
The undersigned Registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act of 1939, as amended
(the "Act"), in accordance with the rules and regulations prescribed by the
Commission under Section 305(b)(2) of the Act.
II-4
<PAGE> 37
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
Amendment No. 1 to Registration Statement (File No. 333-27853) to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Dallas, State of Texas, on the 18th day of July, 1997.
AMRESCO, INC.
By: // ROBERT H. LUTZ, JR.*
------------------------------------
Robert H. Lutz, Jr.
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities and on the 18th day of July, 1997:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
ROBERT H. LUTZ, JR. * Chairman of the Board and
- -------------------------------- Chief Executive Officer
Robert H. Lutz, Jr.
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
GERALD E. EICKHOFF * Director
- --------------------------------
Gerald E. Eickhoff
EDWIN A. WAHLEN, JR. * Director
- --------------------------------
Edwin A. Wahlen, Jr.
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
Ronald B. Kirkland (Principal Accounting Officer)
</TABLE>
*By: /s/ L. KEITH BLACKWELL
----------------------------
L. Keith Blackwell
Attorney-in-Fact
II-5
<PAGE> 38
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Exhibit Numbered Page
----------- ------- -------------
<S> <C> <C>
1.1 Form of Purchase Agreement for Debt Securities (1)
1.2 Form of Underwriting Agreement for Preferred Stock (1)
1.3 Form of Underwriting Agreement for Common Stock (1)
4.1 Specimen Common Stock Certificate of the Registrant (2)
4.2 Senior Indenture (1)
4.3 Subordinated Indenture (3)
4.4* Form of Certificate of Designation for Preferred Stock
4.5* Specimen Preferred Stock Certificate
4.6* Form of Warrant Agreement
4.7* Specimen Warrant Certificate
5.1 Opinion of L. Keith Blackwell, General Counsel of the Company, regarding legality of
securities being registered.
12.1 Statement of Computation of Ratio of Earnings to Fixed Charges (4)
12.2 Statement of Computation of Ratio of Earnings to Fixed Charges and Preferred Stock
Dividends (4)
23.1 Consent of L. Keith Blackwell, contained in the opinion filed as Exhibit 5.1
23.2 Consent of Deloitte & Touche L.L.P. (4)
23.3 Consent of Cooper & Lybrand L.L.P. (4)
24.1 Powers of Attorney (4)
25.1 Statement of Eligibility of Senior Trustee on Form T-1 (1)
25.2 Statement of Eligibility of Subordinated Trustee on Form T-1 (1)
</TABLE>
--------------------
* To be filed in the event of the issuance of
Preferred Stock or Warrants, as the case may be.
(1) Previously filed with the Commission as an Exhibit to
the Registrant's Form S-3 Registration Statement (No.
333-6031) and incorporated herein by reference
(2) Previously filed with the Commission as an Exhibit to
the Registrant's Form S-3 Registration Statement (No.
33-63683) and incorporated herein by reference
(3) Previously filed with the Commission as an Exhibit to
the Registrant's Current Report on Form 8-K dated March
12, 1997 (No. 001-1159) and incorporated herein by
reference
(4) Previously filed with the Commission as an Exhibit to
the Registrant's Form S-3 Registration Statement (No.
333-27853) and incorporated herein by reference
II-6
<PAGE> 1
AMRESCO, INC. EXHIBIT 5.1
700 N. Pearl, Suite 2400
Dallas, TX 75201
Re: Registration Statement on Form S-3 of $500,000,000 aggregate
initial offering price of Securities
Ladies and Gentlemen:
I am general counsel of AMRESCO, INC., a Delaware corporation (the
"Company"), and have acted as such in connection with a Registration Statement
on Form S-3 (the "Registration Statement") relating to the sale by the Company
from time to time of (i) its unsecured debt securities, which may be either
senior debt securities (the "Senior Debt Securities") or subordinated debt
securities (the "Subordinated Debt Securities") and, together with the Senior
Debt Securities, (the "Debt Securities"); (ii) shares of its preferred stock,
$1.00 par value per share (the "Preferred Stock"), in one or more series; (iii)
shares of its common stock, par value $0.05 per share (the "Common Stock"); and
(iv) warrants (collectively, the "Securities Warrants") to purchase Debt
Securities (the "Debt Securities Warrants"), Preferred Stock (the "Preferred
Stock Warrants") or share of Common Stock (the "Common Stock Warrants"), for an
aggregate initial public offering price of up to $500,000,000 (or the
equivalent in foreign currencies, currency units or composite currencies (each,
a "Currency")). The Debt Securities, Preferred Stock, Common Stock and
Securities Warrants are herein collectively referred to as the "Securities."
I have examined such documents, records and matters of law as I have
deemed necessary for the purposes of this opinion. In rendering the following
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.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to them by the Registration Statement.
Based on the foregoing and having due regard for such legal
consideration as I deem relevant, I am of the opinion that:
1. (a) When the Debt Securities have been duly established by the
applicable Indentures (including, without limitation, the adoption by the Board
of Directors of the Company of a resolution duly authorizing the issuance and
delivery of the Debt Securities) duly authenticated by the trustee and duly
executed and delivered on behalf of the Company against payment therefor in
accordance with the terms and provisions of the applicable Indenture and as
contemplated by the Registration Statement, the Prospectus and the related
Prospectus Supplement(s), (b) when the Registration Statement and any required
post-effective amendment thereto and any and all Prospectus Supplement(s)
required by applicable laws have all become effective under the Securities Act,
and (c) assuming that the terms of the Debt Securities and the Indentures as
executed and delivered are as described in the Registration Statement, the
Prospectus and the related Prospectus Supplement(s), the Debt Securities will
be constituted valid and legally binding obligations of the Company,
enforceable against the Company in accordance with the terms of the Debt
Securities.
2. (a) When the Securities Warrants have been duly executed and
delivered (including, without limitation, the adoption by the Board of
Directors of the Company of a resolution duly authorizing the issuance and
delivery of the Securities Warrants), and issued and sold in the form and in
the manner contemplated in the Registration Statement, the Prospectus and the
related Prospectus Supplement(s), (b) when the Registration Statement and any
required post-effective amendment thereto and any and all Prospectus
Supplement(s) required by applicable law have all become effective under the
Securities Act, (c) assuming that the terms of the Securities Warrants as
executed and delivered are as described in the Registration Statement, the
Prospectus and the related Prospectus Supplement(s), the Securities Warrants
will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms.
<PAGE> 2
3. The Company has the authority pursuant to its Restated
Certificate of Incorporation, as amended, to issue up to 5,000,000, shares of
Preferred Stock. When a series of Preferred Stock has been duly established in
accordance with the terms of the Restated Certificate of Incorporation and
applicable law, and upon adoption by the Board of Directors of the Company of a
resolution in form and content as required by applicable law and upon issuance
and delivery of and payment for such shares in the manner contemplated by the
Registration Statement, the Prospectus and the related Prospectus Supplement(s)
and by such resolution, such shares of such series of Preferred Stock
(including any Preferred Stock duly issued (i) upon the exercise of any
Securities Warrants exercisable for Preferred Stock or (ii) upon the exchange
or conversion of Debt Securities that are exchangeable or convertible into
Preferred Stock) will be validly issued, fully paid and nonassessable.
4. The Company has the authority pursuant to its Restated
Certificate of Incorporation, as amended, to issue up to 50,000,000 shares of
Common Stock. Upon adoption by the Board of Directors of the Company of a
resolution in form and content as required by applicable law and upon issuance
and delivery of and payment for such shares in the manner contemplated by the
Registration Statement, the Prospectus and the related Prospectus Supplement(s)
and by such resolution, such shares of Common Stock (including any Common Stock
duly issued (i) upon the exchange or conversion of any shares of Preferred
Stock that are exchangeable or convertible into Common Stock or (ii) upon the
exercise of any Securities Warrants exercisable for Common Stock or (iii) upon
the exchange or conversion of Debt Securities that are exchangeable or
convertible into Common Stock) will be validly issued, fully paid and
nonassessable.
The opinions set forth above are subject to the following
qualifications and exceptions:
(a) My opinions are subject to (i) the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar law of general application affecting creditors' rights, (ii)
provisions of applicable law pertaining to the voidability of
preferential or fraudulent transfers and conveyances and (iii) 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 Securities
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
Securities will not affect the validity or enforceability as a whole
of any of the Securities and will not prevent the holders thereof from
the ultimate realization of the practical rights and benefits afforded
by such Securities, except for the economic consequences of any
judicial, administrative or other procedural delay which may result
from the application of any such law.
(b) My opinions are subject to the effect of general
principles of equity, including (without limitation) concepts of
materiality, reasonableness, good faith and fair dealing, and other
similar doctrines affecting the enforceability of agreements generally
(regardless of whether considered in a proceeding in equity or at
law).
(c) In rendering the opinions set forth above, I have
assumed that, at the time of the authentication and delivery of a
series of Securities, the resolutions of the Board of Directors
referred to above will not have been modified or rescinded, there will
not have occurred any change in the law affecting the authorization,
execution, delivery, validity or enforceability of the Securities, the
Registration Statement will have been declared effective by the
Commission and will continue to be effective, none of the particular
terms of a series of Securities will violate any applicable law and
neither the issuance and sale thereof nor the compliance by the
Company with the terms thereof will result in a violation of any
agreement or instrument then binding upon the Company or any order of
any court or governmental body having jurisdiction over the Company.
(d) As of the date of this opinion, a judgment for money
in an action based on a Debt Security denominated in a foreign
currency or currency unit in a federal or State court in the United
States ordinarily would be enforced in the United States only in
United States dollars. The date used to determine the rate of
<PAGE> 3
conversion into United States dollars of the Currency in which a
particular Debt Security is denominated will depend upon various
factors, including which court renders the judgment.
My opinions expressed above are limited to the laws of the State of
Texas, the Delaware General Corporation Law 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 to reference
me under the caption "Legal Matters" in the Prospectus constituting a part of
the Registration Statement.
Dated: May 27 , 1997
Very truly yours,
/s/ L. KEITH BLACKWELL
----------------------------------------
L. Keith Blackwell
Vice President, General Counsel and
Secretary
