<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 4, 1997
REGISTRATION NO. 333-27853
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
Pre-Effective
Amendment No. 2
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
AMRESCO, INC.
(Exact name of registrant as specified in its charter)
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.)
(214) 953-7700
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------
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)
------------------
<PAGE> 2
------------------
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]
------------------
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.
i
<PAGE> 3
Subject to Completion - Preliminary Prospectus dated August___, 1997
$500,000,000
[LOGO]
COMMON STOCK, PREFERRED STOCK, DEBT SECURITIES,
SECURITIES WARRANTS AND UNITS
------------------
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.
<PAGE> 4
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" BEGINNING ON PAGE S-10 IN THE PROSPECTUS
SUPPLEMENT ACCOMPANYING THIS PROSPECTUS.
------------------
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.
------------------
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.
------------------
The date of this Prospectus is ______, 1997
2
<PAGE> 5
THE COMPANY
Certain terms used in this Prospectus are defined in the "Glossary" beginning
on page 29 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. ACC has established AMRESCO Commercial Mortgage
Funding, L.P., a Delaware limited partnership, with an affliate of Goldman
Sachs & Co. The partnership funds a significant portion of ACC's commercial
real estate loan originations and ACC and the Goldman Sachs & Co. affliate
share equally 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
3
<PAGE> 6
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.
-------------------------
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.
4
<PAGE> 7
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
5
<PAGE> 8
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.
6
<PAGE> 9
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.
7
<PAGE> 10
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.
8
<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
9
<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.
10
<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 1.8x 2.6x 2.4x 5.4x 21.2x 58.9x (2)
and Preferred Stock dividends(3)
</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.
11
<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.
12
<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.
13
<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)
16
<PAGE> 19
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 set forth in the
Indentures, none of which are material.
Certain additional covenants in respect of the Company may be set forth in
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. The inability to quantify what constitutes "all or
substantially all" of the Company's assets may adversely effect the ability of a
holder of Debt Securities to determine whether it is entitled to the
protections of the covenant in respect of a particular transaction and may
impair the ability of a holder of Debt Securities to enforce its rights under an
Indenture in connection with a particular transaction. (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
17
<PAGE> 20
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)
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.
18
<PAGE> 21
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 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.
19
<PAGE> 22
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 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.
20
<PAGE> 23
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.
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.
21
<PAGE> 24
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, (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
22
<PAGE> 25
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 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
23
<PAGE> 26
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 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
24
<PAGE> 27
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.
25
<PAGE> 28
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.
26
<PAGE> 29
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.$").
27
<PAGE> 30
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.
28
<PAGE> 31
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.
29
<PAGE> 32
"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> 33
================================================================================
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 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 . . . . . . . . . . . . . 26
LEGAL MATTERS . . . . . . . . . . . . . . . . . 27
EXPERTS . . . . . . . . . . . . . . . . . . . . 27
AVAILABLE INFORMATION . . . . . . . . . . . . . 27
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE . . . . . . . . . . . 28
GLOSSARY . . . . . . . . . . . . . . . . . . . 29
</TABLE>
AMRESCO, INC.
-------------------------
PROSPECTUS
-------------------------
================================================================================
31
<PAGE> 34
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> 35
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
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <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
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-2
<PAGE> 36
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> 37
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> 38
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. 2 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 4th day of August, 1997.
AMRESCO, INC.
By: /s/ 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. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the 4th day of August, 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)
*By: /s/ L. Keith Blackwell
---------------------------
L. Keith Blackwell
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 39
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Exhibit Numbered Page
- ----------- ------- -------------
<S> <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
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.
<PAGE> 2
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.
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.
(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).
<PAGE> 3
(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.
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: August 4, 1997
Very truly yours,
/s/ L. Keith Blackwell
-----------------------------------
L. Keith Blackwell
Vice President, General Counsel and
Secretary
<PAGE> 1
CONFORMED COPY
EXHIBIT 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
--------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
--------------------------
AMRESCO, INC.
(Exact name of obligor as specified in its charter)
Delaware 59-1781257
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
700 North Pearl
Suite 2400, LB 342
Dallas, Texas 75201
(Address of principal executive offices) (Zip code)
--------------------------
Debt Securities
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 22nd day of July, 1997.
THE BANK OF NEW YORK
By: /S/ VIVIAN GEORGES
-----------------------------------
Name: VIVIAN GEORGES
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE> 5
================================================================================
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ............ $ 8,249,820
Interest-bearing balances ..................................... 1,031,026
Securities:
Held-to-maturity securities ................................... 1,118,463
Available-for-sale securities ................................. 3,005,838
Federal funds sold and Securities purchased under agreements
to resell ..................................................... 3,100,281
Loans and lease financing receivables:
Loans and leases, net of unearned income ............32,895,077
LESS: Allowance for loan and lease losses ..............633,877
LESS: Allocated transfer risk reserve ......................429
Loans and leases, net of unearned income, allowance,
and reserve ................................................. 32,260,771
Assets held in trading accounts ................................. 1,715,214
Premises and fixed assets (including capitalized leases) ........ 684,704
Other real estate owned ......................................... 21,738
Investments in unconsolidated subsidiaries and associated
companies ..................................................... 195,761
Customers' liability to this bank on acceptances outstanding .... 1,152,899
Intangible assets ............................................... 683,503
Other assets .................................................... 1,526,113
-----------
Total assets .................................................... $54,746,131
===========
LIABILITIES
Deposits:
In domestic offices ........................................... $25,614,961
Noninterest-bearing .................................10,564,652
Interest-bearing ....................................15,050,309
In foreign offices, Edge and Agreement subsidiaries,
and IBF's ..................................................... 15,103,615
Noninterest-bearing ....................................560,944
Interest-bearing ....................................14,542,671
Federal funds purchased and Securities sold under agreements
to repurchase ................................................. 2,093,286
Demand notes issued to the U.S. Treasury ........................ 239,354
Trading liabilities ............................................. 1,399,064
Other borrowed money:
With remaining maturity of one year or less ................... 2,075,092
With remaining maturity of more than one year ................. 20,679
Bank's liability on acceptances executed and outstanding ........ 1,160,012
Subordinated notes and debentures ............................... 1,014,400
Other liabilities ............................................... 1,840,245
-----------
Total liabilities ............................................... 50,560,708
-----------
EQUITY CAPITAL
Common stock .................................................... 942,284
Surplus ......................................................... 731,319
Undivided profits and capital reserves .......................... 2,544,303
Net unrealized holding gains (losses) on available-for-sale
securities .................................................... ( 19,449)
Cumulative foregin currency translation adjustments ............. ( 13,034)
-----------
Total equity capital ............................................ 4,185,423
-----------
Total liabilities and equity capital ............................ $54,746,131
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Alan R. Griffith )
J. Carter Bacot ) Directors
Thomas A. Renyi )
================================================================================
