Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-8630
AMRESCO, INC.
(Exact name of Registrant as specified in its charter)
Delaware 59-1781257
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 N. Pearl Street, Suite 2400, LB 342
Dallas, Texas 75201-7424
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (214) 953-7700
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No __
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
36,037,997 shares of common stock, $.05 par value per share, as
of May 9, 1997.
AMRESCO, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1997 3
and December 31, 1996
Consolidated Statements of Income - Three
Months Ended March 31, 1997 and 1996 4
Consolidated Statement of Shareholders'
Equity - Three Months Ended March 31, 1997 5
Consolidated Statements of Cash Flows - Three
Months Ended March 31, 1997 and 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of 8
Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE 14
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
AMRESCO, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share amounts)
March 31, December 31,
1997 1996
(Unaudited)
ASSETS
Cash and cash equivalents $ 33,577 $ 29,046
Temporary investments 34,190
Accounts receivable, net of reserves of 13,510 12,243
$1,796 and $1,611, respectively
Mortgage loans held for sale, net 651,431 376,029
Loans, net 71,560 42,188
Investments in purchased loan and other
asset portfolios 298,082 251,060
Asset backed securities-available for sale 86,219 55,678
Retained interests in securitizations-trading 182,086 130,328
Deferred income taxes 20,331 13,285
Premises and equipment, net of accumulated
depreciation of $6,393 and $5,285,respectively 17,941 18,228
Intangible assets, net of accumulated
amortization of $12,983 and $11,110,respectively 119,832 87,219
Other assets 35,853 26,447
TOTAL ASSETS $1,530,422 $1,075,941
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued compensation
and benefits $ 23,732 $ 30,509
Notes payable 237,667 260,092
Warehouse loans payable 598,700 354,562
Senior notes, due 1999 57,500 57,500
Senior subordinated notes, due 2003 57,500 57,500
Senior subordinated notes, due 2004 192,500
Income taxes payable 8,974 3,742
Other liabilities 12,927 10,521
Total liabilities 1,189,500 774,426
SHAREHOLDERS' EQUITY:
Common stock, $0.05 par value, authorized
50,000,000 shares; 35,980,214 and
33,796,145 shares issued, respectively 1,799 1,690
Capital in excess of par 248,116 213,843
Reductions for employee stock (3,768) (1,129)
Treasury stock, $0.05 par value, 24,339
shares in 1997 and 1996, respectively (160) (160)
Net unrealized gains (losses) (648) 249
Retained earnings 95,583 87,022
Total shareholders' equity 340,922 301,515
TOTAL LIABILITIES AND SHAREHOLDERS'EQUITY $1,530,422 $1,075,941
See notes to consolidated financial statements.
AMRESCO, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months
Ended
March 31,
1997 1996
REVENUES:
Interest and other investment income $37,071 $18,172
Gain on sale of loans and investments, net 18,111 2,008
Mortgage banking and servicing fees 13,328 6,605
Asset management and resolution fees 5,727 9,223
Other revenues 603 888
Total revenues 74,840 36,896
EXPENSES:
Personnel 29,795 16,500
Interest 16,159 5,167
Other general and administrative 10,388 5,137
Provision for loan losses 1,920
Depreciation and amortization 2,972 1,997
Total expenses 61,234 28,801
Income before income taxes 13,606 8,095
Income tax expense 5,045 3,300
NET INCOME $ 8,561 $ 4,795
Earnings per share:
Primary $0.25 $0.18
Fully-diluted 0.25 0.17
Weighted average number of
common shares outstanding and
common share equivalents 34,768,706 27,369,390
See notes to consolidated financial statements.
AMRESCO, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three Months Ended March 31, 1997
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
$0.05 Par Value
Capital Reductions Net
Number In For Unrealized Total
of Amount Excess Employee Treasury Gains Retained Shareholders'
Shares Par Stock Stock (losses) Earnings Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1997 33,796,145 $1,690 $213,843 $(1,129) $(160) $ 249 $87,022 $301,515
Purchase of 1,935,539 97 30,866 30,963
subsidiary
Grant of 153,084 8 3,035 (3,043)
restricted stock
Exercise of stock 95,446 4 551 555
options
Amortization of
unearned stock 404 404
compensation
Tax benefits from
employee stock 192 192
compensation
Additional costs
from conversion of
convertible debt (371) (371)
Foreign currency
translation adjustments (146) (146)
Unrealized loss
on securities available (751) (751)
for sale, net
Net income 8,561 8,561
March 31, 1997 35,980,214 $1,799 $248,116 $(3,768) $(160) $(648) $95,583 $340,922
</TABLE>
See notes to consolidated financial statements.
AMRESCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended
March 31,
1997 1996
OPERATING ACTIVITIES:
Net income $ 8,561 $ 4,795
Adjustments to reconcile net income to
net cash used in operating activities:
Gain on sale of mortgage loans and other (18,111) (2,008)
securities
Depreciation and amortization 2,972 1,997
Accretion of interest income (8,806) (1,375)
Deferred tax provision (benefit) (2,741) 95
Other 404 399
Increase (decrease) in cash for changes
in (exclusive of assets and liabilities
acquired in business combinations):
Accounts receivable 78 5,155
Mortgage loans held for sale, net (209,320) (92,675)
Warehouse loans payable, net 156,847 68,331
Other assets (1,993) (6,681)
Accounts payable and accrued
compensation and benefits 819 (3,259)
Income taxes payable 5,232 397
Other liabilities (7,876) (7,182)
Net cash used in operating activities (73,934) (32,011)
INVESTING ACTIVITIES:
Sale (purchase) of temporary 34,190 (11,104)
investments, net
Acquisition of purchased loan and other (95,222) (29,877)
asset portfolios
Collections on purchased loan and other 21,046 19,192
asset portfolios
Purchase of asset backed securities (31,957)
Proceeds from collections on asset 1,416 319
backed securities
Proceeds from collections on retained 1,128
interests in securitizations
Cash received in purchase of subsidiary 930
Investment in joint venture (1,711)
Purchase of premises and equipment (675) (1,229)
Net cash used in investing activities (70,855) (22,699)
FINANCING ACTIVITIES:
Net proceeds from notes payable and other 199,993 171,762
debt
Net proceeds from issuance of senior 186,631
subordinated notes
Repayment of notes payable and other (238,051) (115,551)
debt
Stock options exercised 555 535
Tax benefit of employee stock 192 163
compensation
Net cash provided by financing 149,320 56,909
activities
Net increase in cash and cash equivalents 4,531 2,199
Cash and cash equivalents, beginning of 29,046 16,139
period
Cash and cash equivalents, end of period $ 33,577 $ 18,338
SUPPLEMENTAL DISCLOSURE:
Common stock issued for the purchase $30,963
of subsidiary
Exchange of loans held for sale for 13,932 $17,823
retained interests in securitizations
Common stock issued for unearned stock 3,043
compensation
Income taxes paid 1,919 3,327
Interest paid 16,442 4,276
Common stock canceled for unearned (79)
stock compensation
See notes to consolidated financial statements.
AMRESCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
1. Basis of Presentation and Summary of Significant Accounting Policies
The accompanying unaudited consolidated financial statements
of AMRESCO, INC. and subsidiaries (the "Company") have been
prepared by the Company in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three
month period ended March 31, 1997 are not necessarily indicative
of the results that may be expected for the entire fiscal year or
any other interim period. It is recommended that these
statements be read in conjunction with the Company's consolidated
financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
Certain reclassifications of prior period amounts have been made
to conform to the current period presentation.
New Accounting Standards - On January 1, 1997, the Company
adopted Statement of Financial Accounting Standards ("SFAS") No.
125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities," which requires an entity to
recognize the financial and servicing assets it controls and the
liabilities it has incurred and to derecognize financial assets
when control has been surrendered. Retained interests in assets
sold are measured by allocating the previous carrying amount
between the assets sold and retained interests based on their
relative fair values at the date of transfer. The gain on sale
of mortgage loans and other securities for the three months ended
March 31, 1997 includes approximately $0.7 million related to an
unrealized gain on valuation of the retained interest in a March
1997 securitization as the Company is required to report its
retained interests in securitizations as trading securities which
must be measured at fair value.
In February 1997, the Financial Accounting Standards Board
issued SFAS No. 128 "Earnings Per Share," which establishes new
standards for computing and presenting earnings per share ("EPS")
and is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods;
earlier application is not permitted. Under the requirements of
SFAS No. 128, basic and diluted EPS for the three months ended
March 31, 1997 and 1996 would have been the same as the currently
presented primary and fully-diluted earnings per share.
2. Acquisition
On March 31, 1997, the Company purchased the stock of
Commercial Lending Corporation and the operations and specific
assets of certain of its affiliates ("CLC"). CLC's primary line
of business is originating, securitizing and servicing franchise
loans. The purchase price consisted of (i) approximately 1.9
million shares of the Company's common stock, (ii) the assumption
of certain liabilities estimated at $14,000,000 and (iii)
contingent earnout payments of additional shares of the Company's
common stock based upon the operating performance of the acquired
entities through March 31, 2000. The acquisition of CLC was
recorded as a purchase acquisition.
3. Notes Payable and Other Debt
Revolving Loan Agreement - During the first quarter of 1997,
the Company amended its revolving loan agreement (the "Revolving
Loan Agreement") with a syndicate of lenders, led by NationsBank
of Texas, N.A. ("Bank"). The Revolving Loan Agreement was
amended to provide for a maximum credit facility of $350.0
million of which $60.0 million could be available on a term
basis. As of March 31, 1997, the Bank's commitment under the
revolving portion of the Revolving Loan Agreement was $290.0
million with a maturity date of May 31, 1999 and the commitment
under the term facility of the Revolving Loan Agreement was $25.0
million with a maturity date of May 31, 2001.
On February 7, 1997, the Company and certain of its
subsidiaries entered into a $25.0 million bridge loan facility
with the Bank secured with the same collateral securing the
Revolving Loan Agreement. The bridge loan facility was repaid
and retired in April 1997.
Senior Subordinated Notes - On March 12, 1997, the Company
issued $192,500,000 aggregate principal amount of senior
subordinated notes. The notes bear interest at 10% per annum and
mature on March 15, 2004. The notes are unsecured obligations of
the Company and are subordinated to prior payment of all existing
and future senior debt and to indebtedness and other liabilities
of the Company's subsidiaries. The notes are not redeemable
prior to maturity.
4. Subsequent Events
Warehouse Debt - On April 1, 1997, a subsidiary of the
Company entered into an Interim Warehouse and Security Agreement
with Prudential Securities Credit Corporation for an amount not
to exceed $150.0 million (the "Repurchase Facility") to finance
the origination of certain franchise loans and construction loans
to franchisees of certain approved franchise concepts.
Indebtedness under the Repurchase Facility is secured by the
loans originated with funds advanced under the Repurchase
Facility.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
AMRESCO, INC. (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. The residential mortgage banking business
involves originating, acquiring, warehousing and securitizing non-
conforming (sub-prime grade) loans. The commercial mortgage
banking business involves the origination, underwriting,
placement, securitization and servicing of commercial real estate
mortgages. The asset management business involves acquiring
asset portfolios at a substantial discount to face value and
managing and resolving such asset portfolios to maximize cash
recoveries. The commercial finance business involves providing
short and mid-term special situation and franchise financing,
securitization and servicing. The Company's institutional real
estate investment advisory subsidiary provides real estate
investment advice to various institutional investors (primarily
pension funds). The Company's business may be affected by many
factors, including real estate and other asset values, the
availability and price of assets and residential mortgages to be
purchased, the level of and fluctuations in interest rates,
changes in the securitization market and competition. In
addition, the Company's operations require continued access to
short and long term sources of financing.
On March 31, 1997, the Company purchased the stock of
Commercial Lending Corporation and the operations and specific
assets of certain of its affiliates ("CLC"). CLC's primary line
of business is originating, securitizing and servicing franchise
loans. The purchase price consisted of (i) approximately 1.9
million shares of the Company's common stock, (ii) the assumption
of certain liabilities estimated at $14,000,000 and (iii)
contingent earnout payments of additional shares of the Company's
common stock based upon the operating performance of the acquired
entities through March 31, 2000.
Throughout 1996 and continuing into 1997, the Company has
extended its business lines to offer a full range of mortgage
banking services including the origination, acquisition and
securitization of sub-prime residential mortgages and extending
commercial loan origination and servicing. The Company has also
increased its investment in asset portfolios and developed and
expanded its commercial finance operations. These significant
changes in the composition of the Company's business are
reflected in the Company's results of operations and may limit
the comparability of the Company's results from period to period.
Results of Operations
The following discussion and analysis presents the
significant changes in results of continuing operations of the
Company for the three months ended March 31, 1997 and 1996 by
primary business lines. The results of operations of acquired
businesses are included in the consolidated financial statements
from the date of acquisition. This discussion should be read in
conjunction with the consolidated financial statements and notes
thereto.
Three Months
(dollars in thousands, except per share data) Ended
March 31,
1997 1996
Revenues:
Residential mortgage banking $36,431 $ 5,776
Commercial mortgage banking 16,672 9,375
Asset management 18,968 20,708
Commercial finance 1,953 246
Institutional real estate investment advisory 1,779 967
Corporate, other and intercompany eliminations (963) (176)
Total revenues 74,840 36,896
Operating expenses:
Residential mortgage banking 24,630 2,300
Commercial mortgage banking 12,246 8,134
Asset management 9,530 11,053
Commercial finance 2,071 102
Institutional real estate investment advisory 1,491 816
Corporate, other and intercompany eliminations 11,266 6,396
Total operating expenses 61,234 28,801
Operating profit:
Residential mortgage banking 11,801 3,476
Commercial mortgage banking 4,426 1,241
Asset management 9,438 9,655
Commercial finance (118) 144
Institutional real estate investment advisory 288 151
Corporate, other and intercompany eliminations (12,229) (6,572)
Total operating profit 13,606 8,095
Income tax expense 5,045 3,300
Net income $8,561 $ 4,795
Earnings per share:
Primary $0.25 $0.18
Fully-diluted 0.25 0.17
Weighted average shares outstanding and 34,768,706 27,369,390
equivalents
Three Months Ended March 31, 1997 Compared to Three Months Ended
March 31, 1996
The Company reported a 103% increase in revenues, a 68%
increase in operating profit and a 79% increase in net income for
the first quarter of 1997 compared to the same period in 1996.
The increases were due primarily to additional contributions by
the residential and commercial mortgage banking businesses.
Weighted average shares outstanding and equivalents for the three
months ended March 31, 1997 increased 27% over the same period of
1996 due primarily to the public offering of the Company's stock
and the conversion of the Company's Convertible Subordinated
Debentures, both of which occurred in late 1996. Fully-diluted
earnings per share increased 47% from $0.17 per share for the
first quarter of 1996 to $0.25 per share for the first quarter of
1997.
Residential Mortgage Banking. Revenues for the three months
ended March 31, 1997 primarily consisted of $17.8 million of gain
on the securitization and sale of residential mortgage loans,
$17.0 million in interest and other investment income and $1.6
million of mortgage banking fees. The $30.7 million increase in
revenues from the same period in 1996 reflects the maturation of
the residential mortgage banking business, which was initiated in
September 1995. The increase in revenues was primarily composed
of a $15.8 million increase in gain on the securitization and
sale of residential mortgage loans and a $13.3 million increase
in interest and other investment income. The increased gain on
the securitization and sale of residential mortgage loans is due
primarily to the securitization and sale of approximately $698.0
million of residential mortgage loans, including gains recognized
from the transfer to the securitization trustee of $142.0 million
of loans securitized in December 1996 which were transferred to
the trust in 1997, compared to gains on $275.0 million of loans
securitized in the first quarter of 1996. Additionally, loans
originated by the newly created AMRESCO Residential Mortgage
Corporation ("ARMC") (the subsidiary which acquired substantially
all of the assets of Quality Mortgage USA, Inc.), which have a
lower basis than loans purchased from third parties and thus
resulting in larger gains, were included in the first quarter
1997 securitization. Interest and other investment income
primarily consists of interest earned on mortgage loans held for
sale, which have increased significantly since early 1996, and
accrued earnings on retained interests in securitizations.
Operating expenses for the three months ended March 31, 1997
were primarily comprised of $10.7 million in interest expense,
$8.4 million in personnel expense and $3.7 million in other
general and administrative expense. The $10.7 million in
interest expense primarily relates to borrowing under warehouse
loans payable which funded the origination, acquisition and
warehousing of mortgage loans held for sale. Personnel and other
general and administrative costs increased significantly from the
prior year period due primarily to the increased operations of
the residential business through ARMC.
Commercial Mortgage Banking. Revenues for the three months
ended March 31, 1997 consisted of $11.8 million in origination,
underwriting and servicing revenues and $4.9 million in interest
and other investment income. Origination, underwriting and
servicing revenues increased $5.2 million from the prior year
period due primarily to originations of $1.0 billion in the
current period compared to $0.5 billion in the same period of
1996. Interest and other investment income increased $2.1
million due primarily to interest earned on mortgage loans held
for sale which have increased significantly since early 1996.
Operating expenses for the three months ended March 31, 1997
were primarily comprised of $8.8 million in personnel expense,
$2.3 million in other general and administrative expense and $1.0
million in interest expense. The $4.1 million increase in
expenses was due primarily to an increase of $3.0 million in
personnel expenses related to commissions on increased
originations, an increase of $0.6 million in other general and
administrative expense due to expanded operations and an increase
of $0.6 million in interest expense related to warehousing a
higher volume of loans.
Asset Management. Revenues for the first
quarter of 1997 were primarily comprised of $14.0 million in
interest and other investment income and $4.2 million in asset
management and resolution fees. The $1.7 million, or 8%,
decrease in revenues from the same period of 1996 was primarily
comprised of a $4.1 million decrease in management and resolution
fees, offset by a $2.0 million increase in interest and other
investment income. Asset management and resolution fees
decreased as a result of a shift in business away from primarily
managing and investing in partnerships and joint ventures to
investing in wholly-owned portfolios. Interest and other
investment income increased due to a significant increase in
aggregate investments for the Company's own account since early
1996.
Operating expenses for the quarter ended March 31, 1997 were
primarily comprised of $3.2 million in interest expense, $3.2
million in personnel costs and $3.0 million in other general and
administrative expenses. The $1.5 million, or 14%, decrease in
expenses over the same period in 1996 was due primarily to a
decrease in personnel expenses resulting from a lower level of
assets being managed.
Commercial Finance. The Company acquired CLC on March 31,
1997 and hired an experienced team formerly with a financial
institution to form its construction finance unit in the first
quarter of 1997. First quarter 1997 revenues of $2.0 million
were earned in conjunction with providing high yield debt
financing for businesses and projects which were unable to access
traditional lending sources as well as providing construction
financing for builders of single family residences. Operating
expenses of $2.1 million were primarily comprised of $0.7 million
in personnel expenses, $0.5 million in interest expense, a $0.5
million provision for loan losses and $0.3 million in other
general and administrative expenses.
Institutional Real Estate Investment Advisory. First
quarter 1997 revenues were primarily comprised of $1.5 million of
revenue earned in conjunction with providing real estate
investment advisory services to institutional and corporate
investors, including acquisition, portfolio/asset management and
disposition services and $0.2 million in interest and other
investment income. Operating expenses of $1.5 million were
incurred, primarily including $0.9 million in personnel expense
and $0.5 million in other general and administrative expenses.
Corporate, Other and Intercompany Eliminations. Operating
losses in this area for the three months ended March 31, 1997
increased $5.7 million, or 86%, over the comparable 1996 quarter.
The increase is primarily due to increases in personnel costs and
other overhead related to expanded operations from the first
quarter of 1996.
Liquidity and Capital Resources
Cash and cash equivalents totaled $33.6 million at March 31,
1997. Cash flows used by operating activities plus principal
cash collections on investments totaled a $16.2 million usage for
the first three months of 1997 compared to a $12.5 million usage
for the same period in 1996. The following table is a summary of
cash flow activity during the first three months of 1997 and 1996
(dollars in millions):
For the Three Months
Ended March 31,
1997 1996
Cash used by operations and collections
on investments, net $(16.2) $(12.5)
Cash flows used by operations (73.9) (32.0)
Cash provided by borrowings, net 148.6 56.2
Cash used for purchase of investments (127.2) (41.0)
Ratio of core debt (excluding warehouse
debt and investment line) to capital 1.6:1 1.1:1
Ratio of total debt (excluding 3.4:1 2.3:1
investment line) to capital
Interest coverage ratio * 2.0x 3.0x
* Interest coverage ratio is defined as the ratio of
earnings before interest, taxes, depreciation and
amortization to interest expense.
The following table shows the components of the Company's
capital structure at March 31, 1997 and December 31, 1996
(dollars in millions):
March % of December % of
31, 1997 Total 31, 1996 Total
Stockholders' equity $340.9 23% $301.5 30%
Warehouse loans payable 598.7 40% 354.6 36%
Notes payable 237.7 16% 225.9 22%
(excluding investment
line)
Senior notes, due 1999 57.5 4% 57.5 6%
Senior subordinated 57.5 4% 57.5 6%
notes, due 2003
Senior subordinated 192.5 13% - -
notes, due 2004
Total assets increased $454.5 million to $1,530.4 million at
March 31, 1997 from $1,075.9 million at December 31, 1996. This
increase was due primarily to (i) the increase in mortgage loans
held for sale resulting from the origination and acquisition of
residential loans for securitization and sale, (ii) the increase
in retained interests in securitizations due to a securitization
of approximately $556.0 million of residential mortgage loans and
the purchase of retained interests related to the CLC
acquisition, (iii) an increase in purchased loan and other asset
portfolios, (iv) an increase in intangibles primarily related to
the Company's purchase of CLC, (v) an increase in asset backed
securities and (vi) an increase in loans offset by a decrease in
temporary investments as the Company no longer needed to maintain
a temporary investment balance.
During the first quarter of 1997, the Revolving Loan
Agreement was amended to provide a $290.0 million commitment
under the revolving credit facility with a maturity date of May
31, 1999 and a $25.0 million commitment under the term facility
which matures May 31, 2000. As of March 31, 1997, $149.9 million
was outstanding under the credit facility.
On March 12, 1997, the Company issued $192,500,000 aggregate
principal amount of senior subordinated notes. The notes bear
interest at 10% per annum and mature on March 15, 2004. The
notes are unsecured obligations of the Company and are
subordinated to prior payment of all existing and future senior
debt and to indebtedness and other liabilities of the Company's
subsidiaries. The notes are not redeemable prior to maturity.
Delinquency levels of loans securitized by the Company have
increased primarily due to the maturing of the pools.
Delinquencies are expected to rise as the pools continue to
mature until foreclosed properties begin to be liquidated.
Delinquencies and charge-offs related to retained interests in
securitizations were as follows:
Days Delinquent
Month End Date 30-59 60-89 90+ Total Charge-offs
3/31/97 1.96% 1.03% 2.54% 5.53% 0.03%
12/31/96 1.67% 1.01% 2.67% 5.36% 0.01%
During the next twelve months, the Company intends to pursue
(i) additional investment opportunities by acquiring assets both
for its own account and as an investor with various capital
partners who acquire such investments, (ii) additional loans by
the commercial finance business, (iii) acquisitions of new
businesses and (iv) expansion of current businesses. The funds
for such acquisitions and investments are anticipated to be
provided by cash flows and borrowings under the Company's
Revolving Loan Agreement. As a result, interest expense for the
remainder of 1997 is expected to be higher than interest expense
for the corresponding period in 1996.
The Company believes its funds on hand of $33.6 million at
March 31, 1997, its cash flow from operations, its unused
borrowing capacity under its credit lines and its continuing
ability to obtain financing should be sufficient to meet its
anticipated operating needs and capital expenditures, as well as
planned new acquisitions and investments, for at least the next
twelve months. The magnitude of the Company's acquisition and
investment program will be governed to some extent by the
availability of capital.
Private Litigation Securities Reform Act of 1995
This report contains forward-looking statements based on
current expectations that involve a number of risks and
uncertainties. The forward-looking statements are made pursuant
to safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The factors that could cause actual results
to differ materially include the following: industry conditions
and competition, interest rates, business mix, availability of
additional financing, and the risks described from time to time
in the Company's reports to the Securities and Exchange
Commission.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits and Exhibit Index
Exhibit No.
10.(a) First Modification of Second Amended and Restated
Loan Agreement among AMRESCO INC., and Morgan
Stanley Mortgage Capital, Inc. and other entities
designated as "Borrowers", and NationsBank of Texas,
N.A., as agent for the "Lenders".
10.(b) Second Modification of Second Amended and Restated
Loan Agreement among AMRESCO INC., and Morgan
Stanley Mortgage Capital, Inc. and other entities
designated as "Borrowers", and NationsBank of Texas,
N.A., as agent for the "Lenders".
11 Computation of Per Share Earnings.
27 Financial Data Schedule.
(b) Reports on Form 8-K
The Registrant filed a Current Report on Form 8-K,
dated March 12, 1997, reporting pursuant to Items 5 and 7
of such Form the offering of Senior Subordinated Notes.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMRESCO, INC.
Registrant
Date: May 12, 1997 By: /s/Barry L. Edwards
Barry L. Edwards
Executive Vice President
and Chief Financial Officer
FIRST MODIFICATION OF SECOND AMENDED
AND RESTATED LOAN AGREEMENT
THIS FIRST MODIFICATION OF SECOND AMENDED AND RESTATED LOAN
AGREEMENT (this "Agreement") is entered into this 25th day of
February, 1997, by and between AMRESCO, INC., a Delaware
corporation ("AMRESCO"), and the other entities designated as
"Borrowers" in Exhibit A attached hereto (collectively,
"Borrowers"), and NationsBank of Texas, N.A., a national banking
association, as agent ("Agent") for the Lenders (as defined in the
Loan Agreement (defined below)).
W I T N E S S E T H:
WHEREAS, reference is made to the revolving credit facility in
the maximum principal amount of $275,000,000, governed by that
certain Second Amended and Restated Loan Agreement (the "Loan
Agreement") dated February 7, 1997, executed by and among certain
Lenders (the "Lenders"), Agent and Borrowers (each term used herein
but not otherwise defined herein shall be defined as set forth in
the Loan Agreement); and
WHEREAS, Borrowers and The Nippon Credit Bank, Ltd., New York
Branch, a Japanese corporation ("Nippon"), have requested that
certain changes be made to the Loan Agreement, including without
limitation, that Nippon's Revolving Loan Commitment Amount be
increased to $15,000,000, such increase to be evidenced by a
promissory note in the form attached to the Loan Agreement as
Exhibit A, executed by Borrowers and payable to the order of Nippon
in the maximum principal amount of $5,000,000 ("Nippon Note"); and
WHEREAS, Agent on behalf of the Lenders has agreed to the
above request, subject to the terms and conditions contained
herein.
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, That for and
in consideration of the terms and conditions contained herein and
for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties hereto,
Agent on behalf of the Lenders and Borrowers hereby agree as
follows:
1. Amended Schedule I. Schedule I of the Loan Agreement
shall be, and is hereby, amended and restated in its entirety as
set forth on Exhibit A attached hereto and incorporated herein by
reference for all purposes.
2. Definition of Loan Documents. The definition of "Loan
Documents", as defined in the Loan Agreement and as used in the
Loan Agreement, the other Loan Documents and herein, shall be, and
is hereby, modified to include this Agreement and any and all
documents executed in connection herewith.
3. Conditions Precedent to this Agreement. As conditions
precedent to this Agreement and the modifications to the Loan
Agreement pursuant hereto, all of the following shall have been
satisfied:
(a) Borrowers shall have executed and delivered to Agent this
Agreement and the Nippon Note; and
(b) Borrowers shall have delivered to Agent all resolutions,
powers of attorney, certificates or documents as Agent may request
relating to (i) the existence of Borrowers, and (ii) the corporate
and partnership authority for the execution and validity of this
Agreement, together with all other documents, instruments and
agreements and any other matters relevant hereto or thereto, all in
form and content satisfactory to Agent.
4. Reaffirmation of Debt. Borrowers hereby agree and
acknowledge that they are well and truly indebted to Lenders
pursuant to the terms of the Notes and the other Loan Documents, as
modified hereby.
5. Ratification. Except as otherwise expressly modified by
this Agreement, all terms and provisions of the Loan Agreement, the
Notes, and the other Loan Documents shall remain unchanged and
hereby are ratified and confirmed and shall be and shall remain in
full force and effect, enforceable in accordance with their terms.
6. Payment of Expenses. Borrowers agree to provide to
Lenders, upon demand, the reasonable attorneys' fees and expenses
of Agent's counsel, filing and recording fees and other reasonable
expenses incurred by Agent in connection with this Agreement.
7. Further Assurances. Borrowers shall execute and deliver
to Agent such other documents as may be necessary or as may be
required, in the opinion of counsel to Agent, to effect the
transactions contemplated hereby and to protect the liens and
security interests.
8. Binding Agreement. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties' respective heirs,
representatives, successors and assigns.
9. Enforceability. In the event the enforceability or
validity of any portion of this Agreement, the Loan Agreement, the
Notes, or any of the other Loan Documents is challenged or
questioned, such provision shall be construed in accordance with,
and shall be governed by, whichever applicable federal or Texas law
would uphold or would enforce such challenged or questioned
provision.
10. Counterparts. This Agreement may be executed in several
counterparts, all of which are identical, each of which shall be
deemed an original, and all of which counterparts together shall
constitute one and the same instrument.
11. Choice of Law. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT FEDERAL LAWS
PREEMPT THE LAWS OF THE STATE OF TEXAS.
12. Entire Agreement. This Agreement, the Loan Agreement and
the Notes, together with the other Loan Documents, contain the
entire agreements between the parties relating to the subject
matter hereof and thereof and all prior agreements relative thereto
which are not contained herein or therein are terminated.
THIS AGREEMENT AND THE OTHER WRITTEN INSTRUMENTS, AGREEMENTS
AND DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT, AND THE
LOAN AGREEMENT, THE NOTES, AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed effective as of
the date first written above.
BORROWERS:
AMRESCO, INC., a Delaware corporation
By:_____________________________________
Thomas J. Andrus,
Treasurer
AFC EQUITIES, INC.
AMRESCO ATLANTA INDUSTRIAL, INC.
AMRESCO BUILDERS GROUP, INC.
AMRESCO CANADA, INC.
AMRESCO CAPITAL CORPORATION
AMRESCO CAPITAL LIMITED, INC.
AMRESCO CONSOLIDATION CORP. f/k/a AMRESCO
MORTGAGE CAPITAL, INC.
AMRESCO EQUITIES CANADA INC.
AMRESCO FINANCIAL I, INC.
AMRESCO FINANCIAL I, L.P.
AMRESCO FUNDING CORPORATION
AMRESCO INSTITUTIONAL, INC.
AMRESCO INVESTMENTS, INC.
AMRESCO JERSEY VENTURES LIMITED
AMRESCO MANAGEMENT, INC.
AMRESCO NEW ENGLAND, L.P.
AMRESCO NEW ENGLAND II, L.P.
AMRESCO NEW ENGLAND, INC.
AMRESCO NEW ENGLAND II, INC.
AMRESCO NEW HAMPSHIRE, INC.
AMRESCO NEW HAMPSHIRE, L.P.
AMRESCO OVERSEAS, INC. f/k/a AMRESCO
SERVICES, INC.
AMRESCO PORTFOLIO INVESTMENTS, INC.
AMRESCO PRINCIPAL MANAGERS I, INC.
AMRESCO PRINCIPAL MANAGERS II, INC.
AMRESCO RESIDENTIAL CAPITAL MARKETS, INC.
AMRESCO RESIDENTIAL CONDUIT, INC.
AMRESCO RESIDENTIAL CREDIT CORPORATION
AMRESCO RESIDENTIAL MORTGAGE CORPORATION
AMRESCO RHODE ISLAND, INC.
AMRESCO SERVICES CANADA INC.
AMRESCO UK HOLDINGS LIMITED
AMRESCO UK LIMITED
AMRESCO UK VENTURES LIMITED
AMRESCO VENTURES, INC. f/k/a AMRESCO
GENERAL PARTNERS, INC.
AMRESCO 1994-N2, INC.
ASSET MANAGEMENT RESOLUTION COMPANY
BEI 1992 - N1, INC.
BEI 1993 - N3, INC.
BEI 1994 - N1, INC.
BEI MULTI-POOL, INC.
BEI PORTFOLIO INVESTMENTS, INC.
BEI PORTFOLIO MANAGERS, INC.
BEI REAL ESTATE SERVICES, INC.
BEI SANJAC, INC.
ENT MIDWEST, INC.
ENT NEW JERSEY, INC.
ENT SOUTHERN CALIFORNIA, INC.
GRANITE EQUITIES, INC.
HOLLIDAY FENOGLIO, INC.
LIFETIME HOMES, INC., f/k/a LIFETIME
HOMES OF NEW JERSEY, INC.
OAK CLIFF FINANCIAL, INC.
OLD MIDLAND HOUSE LIMITED
PRESTON HOLLOW ASSET HOLDINGS, INC.
By: AMRESCO, INC., a Delaware
corporation, as attorney-in-fact
By:________________________________
Thomas J. Andrus, as
Treasurer
AGENT:
NATIONSBANK OF TEXAS, N.A.,
a national banking association, as
Agent for Lenders
By:_____________________________________
Brian K. Schneider,
Vice President
SCHEDULE I
LENDERS AND BORROWERS
I. LENDERS, AGENT AND ARRANGER
A. AGENT:
NationsBank of Texas, N.A.
Commercial Banking Division
901 Main Street, 7th Floor
Dallas, Texas 75202
Attn: Brian Schneider
Fax No.: (214) 508-0388
B. ARRANGER:
NationsBanc Capital Markets, Inc.
901 Main Street, 66th Floor
Dallas, Texas 75202
Attn: Joseph Siegel, Jr.
Fax No.: (214) 508-2881
C. REVOLVING LENDERS:
NationsBank of Texas, N.A.
901 Main Street, 7th Floor
Dallas, Texas 75202
Attn: Brian Schneider
Tel: (214) 508-0365
Fax: (214) 508-3138
Bank One, Texas, NA
1717 Main Street, 3rd Floor
Dallas, Texas 75201
Attn: Kathleen Costello Stewart
Tel: (214) 290-2709
Fax: (214) 290-2275
Wells Fargo Bank (Texas), N.A.
1445 Ross Avenue, 3rd Floor
Dallas, Texas 75202
Attn: Craig T. Scheef
Tel: (214) 740-1548
Fax: (214) 740-1519
Comerica Bank - Texas
8828 Stemmons, Suite 441
Dallas, Texas 75247
Attn: David Terry
Tel: (972) 841-4419
Fax: (972) 263-9837
Bank United of Texas
101 Ygnacio Valley Road
Walnut Creek, CA 94596
Attn: Michael D. McAuley
Tel: (510) 210-8060
Fax: (510) 210-8065
The Bank of New York
One Wall Street, 17th Floor
New York, New York 10286
Attn: Robert A. Tweed
Tel: (212) 635-6465
Fax: (212) 635-6468
The Nippon Credit Bank, Ltd.
New York Branch
245 Park Avenue
New York, New York 10167
Attn: ________________
Tel: (212) 984-1319
Fax: (212) 490-3895
<TABLE>
<CAPTION>
Additional
Initial Revolving Revolving Loan New Revolving New Revolving Participation
Loan Commitment Commitment Loan Commitment Loan Fee
Amount Amount Amount Percentage Amount
Revolving Lenders:
<S> <C> <C> <C> <C> <C>
NationsBank $50,000,000 $0 $50,000,000 23.25581%
Bank One $35,000,000 $10,000,000 $45,000,000 20.93023% $25,000
Wells Fargo $25,000,000 $0 $25,000,000 11.62791%
Comerica $20,000,000 $0 $20,000,000 9.30233%
Bank United $30,000,000 $0 $30,000,000 13.95349%
Bank of New York $15,000,000 $15,000,000 $30,000,000 13.95349% $22,500
Nippon Credit Bank $10,000,000 $5,000,000 $15,000,000 6.97674% $5,000
Total $185,000,000 $30,000,000 $215,000,000 100% $62,500
</TABLE>
II. BORROWERS
AFC EQUITIES, INC.
AMRESCO ATLANTA INDUSTRIAL, INC.
AMRESCO BUILDERS GROUP, INC.
AMRESCO CANADA, INC.
AMRESCO CAPITAL CORPORATION
AMRESCO CAPITAL LIMITED, INC.
AMRESCO CONSOLIDATION CORP. f/k/a AMRESCO
MORTGAGE CAPITAL, INC.
AMRESCO EQUITIES CANADA INC.
AMRESCO FINANCIAL I, INC.
AMRESCO FINANCIAL I, L.P.
AMRESCO FUNDING CORPORATION
AMRESCO INSTITUTIONAL, INC.
AMRESCO INVESTMENTS, INC.
AMRESCO JERSEY VENTURES LIMITED
AMRESCO MANAGEMENT, INC.
AMRESCO NEW ENGLAND, L.P.
AMRESCO NEW ENGLAND II, L.P.
AMRESCO NEW ENGLAND, INC.
AMRESCO NEW ENGLAND II, INC.
AMRESCO NEW HAMPSHIRE, INC.
AMRESCO NEW HAMPSHIRE, L.P.
AMRESCO OVERSEAS, INC. f/k/a AMRESCO
SERVICES, INC.
AMRESCO PORTFOLIO INVESTMENTS, INC.
AMRESCO PRINCIPAL MANAGERS I, INC.
AMRESCO PRINCIPAL MANAGERS II, INC.
AMRESCO RESIDENTIAL CAPITAL MARKETS, INC.
AMRESCO RESIDENTIAL CONDUIT, INC.
AMRESCO RESIDENTIAL CREDIT CORPORATION
AMRESCO RESIDENTIAL MORTGAGE CORPORATION
AMRESCO RHODE ISLAND, INC.
AMRESCO SERVICES CANADA INC.
AMRESCO UK HOLDINGS LIMITED
AMRESCO UK LIMITED
AMRESCO UK VENTURES LIMITED
AMRESCO VENTURES, INC. f/k/a AMRESCO GENERAL
PARTNERS, INC.
AMRESCO 1994-N2, INC.
ASSET MANAGEMENT RESOLUTION COMPANY
BEI 1992 - N1, INC.
BEI 1993 - N3, INC.
BEI 1994 - N1, INC.
BEI MULTI-POOL, INC.
BEI PORTFOLIO INVESTMENTS, INC.
BEI PORTFOLIO MANAGERS, INC.
BEI REAL ESTATE SERVICES, INC.
BEI SANJAC, INC.
ENT MIDWEST, INC.
ENT NEW JERSEY, INC.
ENT SOUTHERN CALIFORNIA, INC.
GRANITE EQUITIES, INC.
HOLLIDAY FENOGLIO, INC.
LIFETIME HOMES, INC., f/k/a LIFETIME HOMES OF
NEW JERSEY, INC.
OAK CLIFF FINANCIAL, INC.
OLD MIDLAND HOUSE LIMITED
PRESTON HOLLOW ASSET HOLDINGS, INC.
c/o AMRESCO, INC.
700 N. Pearl Street
Suite 2400, LB 342
Dallas, Texas 75201-7424
Attn: Treasurer
Fax No.: (214) 953-7757
SECOND MODIFICATION OF SECOND AMENDED
AND RESTATED LOAN AGREEMENT
THIS SECOND MODIFICATION OF SECOND AMENDED AND RESTATED LOAN
AGREEMENT (this "Agreement") is entered into as of the 31st day of
March, 1997, by and between AMRESCO, INC., a Delaware corporation
("AMRESCO"), and the other entities designated as "Borrowers" in
Exhibit A attached hereto (collectively, "Borrowers"), NationsBank
of Texas, N.A., a national banking association, as agent ("Agent")
for itself and the other Lenders (as defined in the Loan Agreement
(defined below)), and the other Lenders.
W I T N E S S E T H:
WHEREAS, reference is made to the credit facilities in the
maximum principal amount of $350,000,000, governed by that certain
Second Amended and Restated Loan Agreement (as amended from time to
time, the "Loan Agreement") dated February 7, 1997, executed by and
among certain Lenders (the "Lenders"), Agent and Borrowers (each
term used herein but not otherwise defined herein shall be defined
as set forth in the Loan Agreement); and
WHEREAS, Borrowers have requested that certain changes be made
to the Loan Agreement, including without limitation, (a) the
addition of several entities as lenders thereunder, and (b) the
modification of certain definitions and certain negative covenants
set forth therein; and
WHEREAS, Agent and the other Lenders have agreed to the above
requests, subject to the terms and conditions contained herein.
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, That for and
in consideration of the terms and conditions contained herein and
for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties hereto,
Agent, the other Lenders and Borrowers hereby agree as follows:
1. Definitions. Section 1.1 of the Loan Agreement is hereby
amended as follows:
(a) The following definitions are amended and restated
in their entirety to read as follows:
Additional Debt means any Debt of any Borrower (other
than AMRESCO) which Borrower was or is hereafter established
for the purpose of making Mortgage Investments or Franchise
Investments and conducting all activities ancillary to making
Mortgage Investments or Franchise Investments; provided that
(a) other than the guaranty by AMRESCO of the ACC Warehouse
Line, neither AMRESCO nor any Borrower other than the Borrower
using the proceeds of such Debt for the purposes described
above or co-borrowers (other than AMRESCO) on such Debt, shall
have any payment obligation with respect to, or give any
collateral to secure, such Debt, (b) any such Debt shall be
fully collateralized at its inception, and (c) in no event
shall the aggregate amount of Cash Contributed Capital exceed
the greater of (i) 7.5% of Total Capital or (ii) 10% of the
balance sheet value of Mortgage Investments and Franchise
Assets securing the Additional Debt outstanding on the date of
determination. The balance sheet value of such Mortgage
Investments and Franchise Investments shall be determined in
accordance with GAAP and marked to market no less than
quarter-annually.
Amendment Fee has the meaning set forth in Section 2.3(f)
hereof.
Adjusted EBITDA means the difference between (a)
Consolidated EBITDA and (b) any Net Gains.
EBITDA Availability shall be equal to the lesser of (a)
$250,000,000, or (b) the product of (i) 2.5 times (ii)
Adjusted EBITDA calculated for the immediately preceding
twelve consecutive months, provided, that, if Adjusted EBITDA
declines for two (2) consecutive fiscal quarters, then, as of
the quarter end for the second quarter of such decline and
continuing thereafter, Adjusted EBITDA shall be the lesser of
(x) Adjusted EBITDA calculated for the immediately preceding
twelve (12) months or (y) Adjusted EBITDA calculated for the
immediately preceding three (3) months and annualized.
Eligible Assignee means (a) a Lender; (b) an Affiliate of
a Lender; and (c) any other Person approved by the Agent (such
approval not to be unreasonably withheld or delayed) and,
unless an Event of Default has occurred and is continuing at
the time any assignment is effected in accordance with Section
11.10, AMRESCO, such approval not to be unreasonably withheld
or delayed by AMRESCO and such approval to be deemed given by
AMRESCO if no objection is received by the assigning Lender
and the Agent from AMRESCO within two (2) Business Days after
notice of such proposed assignment has been provided by the
assigning Lender to AMRESCO; provided, however, that (i) none
of the Borrowers nor any Affiliate of any of the Borrowers
shall qualify as an Eligible Assignee and (ii) AMRESCO shall
have the right set forth in Section 11.10(g).
Excluded Subsidiaries means, collectively, (a) AMRESCO
Advisors, Inc., a Texas corporation, and any other existing or
future Subsidiary of any Borrower which is subject to the
Investment Advisors Act of 1940, as amended, and (b) AMRESCO-MBS I,
Inc., a Delaware corporation, AMRESCO Commercial, ARSC,
ACCC, and such other Subsidiaries as are designated in writing
to Agent by AMRESCO as Excluded Subsidiaries.
Fixed Charge Coverage Ratio means, for any date of
determination, the ratio of (a) the sum of (i) Adjusted
EBITDA plus (ii) Consolidated Lease Expense, both for the
immediately preceding twelve calendar months, to (b) the sum
of (i) Consolidated Interest Expense plus (ii) Consolidated
Lease Expense, both for the immediately preceding twelve
calendar months.
Franchise Investments means loans to business franchises
or investments in securities backed by loans to such business
franchises.
Interest Coverage Ratio means, for any date of
determination, the ratio of (a) Adjusted EBITDA for the
immediately preceding twelve calendar months to (b)
Consolidated Interest Expense for the immediately preceding
twelve calendar months.
LIBOR Margin means the applicable margins based on
AMRESCO's Senior Consolidated Funded Debt to Adjusted EBITDA
ratio computed as of the last day of each calendar quarter on
a trailing four-quarter basis or a Qualified Investment Rating
(whichever results in the lowest applicable margin), as
determined pursuant to Schedule II attached hereto.
Qualified Investment Rating means the highest currently
effective rating of the Credit Facilities, rated together, at
the time of determination, if any, given by Fitch Investors
Service, Inc., Standard & Poor's Ratings Group (a Division of
McGraw-Hill, Inc.), Moody's Investors Services, Inc., Duff &
Phelps Credit Rating Co. ("DCR") or such other rating agency
acceptable to the Required Lenders; provided, that if DCR
gives a rating higher than BBB- and such rating is the highest
currently effective rating, the Qualified Investment Rating
shall be the higher of (a) the highest rating other than the
rating given by DCR, or (b) the previous rating given by DCR
which was BBB- or lower.
Revolving Credit Facility means the revolving line of
credit created pursuant to this Agreement in an amount equal
to the lesser of (a) an amount equal to (i) $350,000,000 less
(ii) the Term Facility, or (b) the Revolving Commitment.
Revolving Facility Termination Date means May 31, 1999.
Term Facility means the term facility created by this
Agreement in an amount not to exceed Sixty Million and No/100
Dollars ($60,000,000.00), evidenced by the promissory notes to
be made by Borrowers to each Term Lender in the amount of such
Term Lender's Term Loan Commitment Amount.
(b) Subparagraph (h) of the definition of "Required
Lenders" is hereby amended and restated as set forth below:
(h) After the occurrence of an Event of Default, all
other decisions, consents and votes required by the Lenders
will require the approval of the Lenders holding at the time
in question a portion of the Credit Facilities (including
participations in Letters of Credit) equal to or greater than
51% of the sum of (i) the aggregate unpaid principal amount of
the Notes, plus (ii) the Letter of Credit Exposure, plus (iii)
the Commercial Paper Reserve (unless the approval or consent
of only the Revolving Lenders or the Term Lenders is
specifically required by the Loan Documents); provided, that,
after the occurrence of an Event of Default which has been
waived, the approval of Revolving Lenders holding at the time
in question a portion of the Revolving Credit Facility equal
to or greater than 51% of the Revolving Commitment shall be
required prior to making the initial Advance under the
Revolving Credit Facility subsequent to such waiver.
In addition, (i) subparagraphs (a), (b) and (c) of the definition
of "Required Lenders" are hereby modified to require the approval
of all Lenders prior to an increase in the Applicable Rate related
to either Credit Facility, other than an increase in the interest
rate after the occurrence of a Default as permitted by the Loan
Agreement, and (ii) the reference to Section 11.10(a)(i) in
subparagraph (a) is hereby modified to reference Section 11.10(a)
and (g).
(c) The following definition is hereby added to Section
1.1 of the Loan Agreement:
Net Gain means the difference between (a) any gain from
the sale of assets in connection with the creation of asset-backed
securities which would be required to be reported by
any Borrower on such Borrower's financial statements in
accordance with GAAP for the period for which such gain is
being calculated, including, without limitation, any non-cash
revenues related to mortgage origination or mortgage
servicing, and (b) the sum of (i) the cash portion of the gain
included in clause (a) above, which consists of (x) the cash
net origination fees received in connection with the loans
supporting the asset-backed securities, and (y) the cash
portion of the gain realized from the sale of assets in
connection with such asset-backed securities plus (ii) any
expenses incurred, directly or indirectly, in connection with
such creation of asset-backed securities to the extent such
expenses exceed the cash portion of the gain calculated
pursuant to clause (b)(i) above.
(d) In connection with the Term Facility, the definition
of "Borrowers" shall be, and is hereby, modified to exclude AMRESCO
Jersey Ventures Limited, AMRESCO UK Holdings Limited, AMRESCO UK
Limited, AMRESCO UK Ventures Limited, Old Midland House Limited and
any future foreign subsidiaries of AMRESCO (collectively the
"Foreign Entities"), and none of the Foreign Entities shall be a
"Maker" as such term is defined in each Term Note. However, each
Foreign Entity agrees to jointly and severally guarantee the
payment in full of all amounts outstanding under the Term Notes (in
the Dollar Equivalent of such amounts). Lenders, Borrowers and the
Foreign Entities understand and agree that wherever the term
"Borrowers" is used in the Loan Documents, such term shall also
refer to the Foreign Entities in their capacity as guarantors of
the Term Facility.
2. Commitment. Subsection (a) of Section 2.1 of the Loan
Agreement shall be amended and restated in its entirety as follows:
(a) Revolving Credit Facility Advances. Each Revolving
Lender severally agrees to make in the manner set forth in
Section 2.2, its pro rata part (based on its Revolving Loan
Percentage) of one or more Advances for general corporate
purposes, which, subject to the Loan Documents, any Borrower
may borrow, repay, and reborrow under this Agreement;
provided, that, (A) each such Advance must occur on a Business
Day and no later than the Business Day immediately preceding
the Revolving Facility Termination Date, (B) each such Advance
must be in an amount not less than the limitations provided in
Section 2.2, and (C) on any date of determination, the
outstanding principal balance of the Revolving Credit Facility
shall never exceed the lesser of (1) the difference between
(a) the Borrowing Base, minus (b) the aggregate amount
outstanding under the Term Facility, (2) an amount equal to
the difference between (a) the Revolving Commitment, minus (b)
the sum of (i) the Letter of Credit Exposure, plus (ii) the
Commercial Paper Reserve, or (3) $310,000,000. In no event
shall any Revolving Lender be required to make any Advances in
excess of such Lender's Revolving Loan Percentage of the
amount required to be advanced by the Revolving Lenders under
the above provisions of this Section 2.1 or which would cause
any Revolving Lender to have made Advances in excess of such
Lender's Revolving Loan Commitment Amount. In the event that
as of the Closing Date, the Revolving Commitment does not
equal the lesser of (i) Three Hundred Ten Million and No/100
Dollars ($310,000,000.00), or (ii) the difference between (1)
$350,000,000, less (2) the Term Facility, Revolving Lenders
acceptable to both Agent and AMRESCO may be added to this
Agreement until such time that the Revolving Commitment equals
the lesser the preceding (i) or (ii). Agent and Borrowers
shall execute a supplement to this Agreement evidencing the
additional Revolving Lenders and their Revolving Loan
Commitment Amount and Revolving Loan Percentage, and shall
distribute a copy of such schedule to the other Lenders as
soon as practicably possible.
3. Fees. Subsection (f) of Section 2.3 of the Loan
Agreement shall be amended and restated in its entirety as follows:
(f) Amendment Fee. Borrowers shall pay to Agent, in
addition to such other fees and charges which Lenders may
require, a fee (the "Amendment Fee") of an amount not less
than the product of (i) five one hundredths of one percent
(.05%) times (ii) the Revolving Commitment and the aggregate
outstanding unpaid principal amount under the Term Notes, for
each material amendment to this Agreement initiated by any
Borrower and entered into by Agent, the Lenders and Borrowers
after the date hereof; provided, that, no such fee shall be
required in connection with any amendment to this Agreement
the sole purpose of which is to add any Person as a Lender or
Borrower hereunder. Such Amendment Fee shall be distributed
by Agent to each Lender in accordance with either its
Revolving Loan Percentage or Term Loan Percentage, as
applicable.
4. Payments of Advances; Reduction of the Commitment Amount.
(a) Subsection (a) of Section 3.6 of the Loan Agreement
shall be amended and restated in its entirety as follows:
(a) At any time prior to the occurrence of an Event of
Default, Borrowers may by notice from AMRESCO to Agent prior
to 10:00 a.m. (Dallas, Texas time) on the date on which
prepayment under this Section 3.6 is to be made, voluntarily
prepay amounts outstanding under the Revolving Credit Facility
from time to time and at any time, in whole or in part,
without premium or penalty; provided, that (i) each such
partial payment must be in a minimum amount of at least One
Million and No/100 Dollars ($1,000,000.00) (or, as to
prepayment of portions thereof which are Alternate Currency
Advances, the Dollar Equivalent thereof), and (ii) Borrowers
shall pay any related Consequential Losses or Alternate
Currency Losses within ten days after Agent's demand therefor.
Each such optional prepayment shall be applied to the
Revolving Credit Facility ratably in accordance with Section
3.9 to pay the amounts owed to each Revolving Lender
thereunder. At any time subsequent to the Revolving Facility
Termination Date or the termination of the Revolving Credit
Facility, but prior to the occurrence of an Event of Default,
Borrowers may by notice from AMRESCO to Agent prior to 10:00
a.m. (Dallas, Texas time) on the date on which prepayment
under this Section 3.6 is to be made, voluntarily prepay
amounts outstanding under the Term Facility from time to time
and at any time, in whole or in part, without premium or
penalty; provided, that Borrowers shall pay any related
Consequential Losses within ten days after Agent's demand
therefor. Each such optional prepayment shall be applied to
the Term Facility ratably in accordance with Section 3.9 to
pay the amounts owed to each Term Lender thereunder.
(b) Agent, Lenders and Borrowers hereby agree that the
last two sentences of Section 3.6(f) apply to all of Section 3.6.
(c) The following subsection (g) shall be added to
Section 3.6 of the Loan Agreement:
(g) As long as no Event of Default has occurred and is
continuing, Borrower shall make such regularly scheduled
principal payments under the Term Facility as are set forth in
the Term Notes; provided, that prior to the Revolving Facility
Termination Date or the termination of the Revolving Credit
Facility, the aggregate amount of such principal payments
under the Term Facility during the twelve (12) month period
immediately preceding any such payment shall not exceed one
percent (1%) of the aggregate outstanding balance under the
Term Notes at the beginning of such twelve (12) month period.
5. Release of Collateral. Section 5.9 of the Loan Agreement
shall be amended and restated in its entirety as follows:
Section 5.9. Release of Collateral. Prior to the
occurrence of a Default or an Event of Default, Borrowers
shall be entitled to obtain a release of the Lenders' Liens
with respect to certain of the Collateral designated by
Borrowers so long as (a) either (i) the Collateral being
released is not required to be pledged to the Lenders pursuant
to the terms of this Agreement, (ii) the Collateral being
released is being sold by such Borrower (provided, that, if
the purchaser or transferee in connection with such sale is an
Excluded Subsidiary, the book value [determined in accordance
with GAAP] of any item of Collateral being released does not
exceed three percent (3%) of Total Capital and the aggregate
book value [determined in accordance with GAAP] of all items
of Collateral so released over the immediately preceding
twelve month period does not exceed ten percent (10%) of Total
Capital), or (iii) the Collateral being released is being
pledged by such Borrower to secure Debt which such Borrower is
entitled to incur under Section 8.5 and such Borrower is
entitled under Section 8.7 to grant a lien on such Collateral
being released in favor of the Person for whom, and securing
the Debt which, such lien is then being created to secure, (b)
Borrowers shall continue to be in compliance under this
Agreement following the release of such Lenders' Liens, and
(c) Borrowers have reduced the amount outstanding under the
Credit Facilities in an amount deemed satisfactory by Agent,
in its sole discretion, due to such release of Collateral.
5. Coverage Ratios. Section 8.3 of the Loan Agreement shall
be amended and restated in its entirety as follows:
Section 8.3. Coverage Ratios. Borrowers shall not
permit (a) the Fixed Charge Coverage Ratio to be less than
1.50 to 1.00; and (b) the Interest Coverage Ratio to be less
than 1.50 to 1.00.
6. Senior Consolidated Funded Debt to Adjusted EBITDA.
Section 8.4 of the Loan Agreement shall be amended and restated in
its entirety as follows:
Section 8.4. Senior Consolidated Funded Debt to
Adjusted EBITDA. As of the last day of any calendar quarter,
Borrowers shall not permit Senior Consolidated Funded Debt to
Adjusted EBITDA (for the immediately preceding four calendar
quarters) to be greater than 3.25 to 1.0.
7. Permitted Debt. Subsections (b), (d) and (l) of Section
8.5 of the Loan Agreement shall be amended and restated in their
entirety as follows:
(b) any Borrower or any Excluded Subsidiary may have liability
under unsecured Interest and Foreign Exchange Hedge
Agreements, so long as (i) there is no recourse to any
Borrower or Excluded Subsidiary under any such Interest and
Foreign Exchange Hedge Agreements other than the Borrower or
Excluded Subsidiary entering into such Interest and Foreign
Exchange Agreement, (ii) each such Interest and Foreign
Exchange Hedge Agreement has a maturity of no more than seven
years, (iii) the purpose of each such Interest and Foreign
Exchange Hedge Agreement is to hedge the Borrowers' interest
rate or foreign exchange or other business risk, and is not
speculative in nature, and (iv) the Borrowers do not deviate
from the current practices and policies related to obtaining
Interest and Foreign Exchange Hedge Agreements in effect on
the date hereof as such practices and policies may be
reasonably changed so long as such changes are consistent with
such practices and policies in effect on the date hereof;
(d) the Investment Line of Credit and all Additional Debt in
an aggregate amount outstanding not to exceed One Billion
Seven Hundred Fifty Million and No/100 Dollars
($1,750,000,000); and
(l) Excluded Subsidiary Debt, provided, that the outstanding
principal balance of each credit facility constituting a part
of the Excluded Subsidiary Debt shall in no event be less than
sixty-five percent (65%) of the lesser of (i) the purchase
price of the assets purchased with such credit facility, and
(ii) the market value of such assets marked to market in
accordance with, and as required by, GAAP.
8. Permitted Liens. Subsection (h) of Section 8.7 of the
Loan Agreement shall be amended and restated in its entirety as
follows:
(h) Liens securing the Investment Line of Credit or Liens
securing any Additional Debt covering Mortgage Investments or
Franchise Investments;
9. Permitted Investments. Section 8.10 of the Loan
Agreement shall be amended and restated in its entirety as follows:
Section 8.10. Investments. Without the prior written
consent of Required Lenders, no Borrower shall, and no
Borrower shall permit any of its Subsidiaries to, directly or
indirectly, make any loans, advances, extensions of credit or
capital contributions to, make any investment in, or purchase
any stock or securities of, or interest in, any Person
(including, without limitation, a Subsidiary of any Borrower
unless such Subsidiary has become a "Borrower" under the
Credit Facilities), except for
(a) Permitted Investments;
(b) Related Investments with respect to which (i) in the case
of an Acquisition, the board of directors of the entity being
acquired has approved such Acquisition, (ii) the assets,
property or business acquired or invested in shall be in a
business or activity consistent with the business and activity
presently engaged in by Borrowers and approved under the Loan
Documents, and (iii) the Related Investment Consideration is
less than 5% of Total Capital or, with respect to any
Acquisition of a corporate entity which causes a change of
control of such entity, such Related Investment Consideration
does not exceed $10,000,000;
(c) any investment in or purchase of any Asset Portfolio which
does not exceed 15% of Total Capital;
(d) any investment in or purchase of any Acquired Loan which
does not exceed 5% of Total Capital;
(e) any investment in or a funding of any High Yield Loan
where the investment in or funding of the original principal
balance of such High Yield Loan does not exceed 5% of Total
Capital;
(f) investments in Interest and Foreign Hedge Agreements;
(g) investments in commercial and residential mortgages or
mortgage-backed securities (including, without limitation,
purchased residuals), other than the Retained Residential
Residual Interests and the Retained Commercial Residual
Interests, provided, that each such investment shall not
exceed 10% of Total Capital;
(h) investments in real estate so long as the aggregate of
such investments does not exceed 15% of Total Capital;
(i) investments in Retained Residential Residual Interests or
Retained Commercial Residual Interests;
(j) any investment in or purchase of Permitted Foreign Assets
(based on Dollar Equivalent) which does not exceed 10% of
Total Capital;
(k) loans to any employee of any Borrower or any Subsidiary of
any Borrower so long as the aggregate of such loans does not
exceed $1,500,000;
(l) investments in NIM Trusts so long as the aggregate of such
investments at any time does not exceed 20% of Total Capital;
and
(m) investments in Excluded Subsidiaries so long as the
aggregate of such investments does not exceed 25% of Total
Capital (other than the investment in ARSC for which there
will be no limit so long as the Lenders have a first and prior
lien and security interest on all of the assets and stock of
ARSC and ARSC has no Debt other than Debt under this
Agreement);
provided, in no event shall any investment permitted pursuant
to the preceding clauses (b) through (m) be permitted if there
shall exist a Default or Event of Default, or if after giving
effect to any such investment, Borrowers shall not be in
compliance with any covenant set forth in the Loan Documents.
If any investment satisfies one of the preceding clauses (b),
(c),(d),(e),(g), or (j), then such investment will not be
required to satisfy any requirement set forth in the remaining
clauses (b),(c),(d),(e),(g), or (j).
10. Distributions. Section 8.11 of the Loan Agreement shall
be amended and restated in its entirety as follows:
Section 8.11. Distributions. No Borrower shall make or
declare any Distributions after the occurrence of a Default.
Prior to the occurrence of a Default, (a) AMRESCO shall be
entitled to make Distributions in an amount not to exceed
twenty-five percent (25%) of the net income of AMRESCO
(determined in accordance with GAAP) on a consolidated basis
for the twelve month period immediately preceding such
Distribution and (b) each Borrower (other than AMRESCO) shall
be entitled to make Distributions to another Borrower.
11. Events of Default. Subsection (e) of Section 9.1 of the
Loan Agreement shall be amended and restated in its entirety as
follows:
(e) The occurrence of (1) any event or condition which
(i) results in the acceleration of the maturity of any Debt of
any Borrower, or (ii) constitutes a default under any Debt of
any Borrower, provided, that if notice is required to be given
under the documents evidencing or securing such Debt prior to
acceleration thereof, it shall not be an Event of Default
hereunder until Borrower has received written notice of such
default, (2) any event or condition which would require any
Borrower or any Excluded Subsidiary to make a payment under
any Interest and Foreign Exchange Hedge Agreement, and the
effect of making such payment, would cause Borrowers to
violate any provision of Article VIII hereunder as tested on
the date any such Interest or Foreign Hedge Agreement payment
became payable, or (3) a default or event of default under the
documents evidencing or securing (i) the Approved Subordinated
Debt, (ii) the Approved Senior Debt, (iii) any indebtedness
under the ACMF Transaction Documents, (iv) the Additional
Debt, or (v) any Bridge Debt, or the payment by any Borrower,
or the approval of the board of directors of any Borrower for
the payment, of amounts under any of the preceding clauses
(2)(i) or (2)(ii) in excess of the regularly scheduled
payments thereunder, or which would otherwise cause a
violation by any Borrower of any covenant or condition
contained in any of the Loan Documents;
12. Remedies. The first paragraph and subsection (a) of
Section 9.2 of the Loan Agreement shall be amended and restated in
their entirety as follows:
Section 9.2. Remedies. Upon the occurrence of an Event
of Default, Agent, at the direction and election of the
Required Lenders, acting by or through any of its agents,
trustees or other Persons, without notice (unless expressly
provided for herein), demand or presentment (including,
without limitation, notice of default, notice of intent to
accelerate or of acceleration) all of which are hereby waived,
and in addition to any other provision of this Agreement or
any other Loan Document, may exercise any or all of the
following rights, remedies and recourses:
(a) Terminate Lenders commitment to make Advances
hereunder and declare the unpaid principal balance of each of
the Notes, the accrued and unpaid interest thereon and any
other accrued but unpaid portion of the Obligations to be
immediately due and payable, without notice (expressly
including, but not limited to, notice of default, notice of
intent to accelerate or of acceleration), except any notice
that is expressly required by the terms of this Agreement,
presentment, protest, demand or action of any nature
whatsoever, each of which hereby is expressly waived by each
of the Borrowers, whereupon the same shall become immediately
due and payable. Notwithstanding the foregoing or anything to
the contrary contained herein or in any other Loan Document,
upon the occurrence of an Event of Default described in
Section 9.1(f) or Section 9.1(g) by any Borrower, the entire
unpaid principal balance of the Notes, and all accrued, unpaid
interest thereon shall automatically be accelerated and
immediately be due and payable in full, without notice
(expressly including, but not limited to, notice of default,
intent to accelerate or of acceleration), presentment,
protest, demand or action of any nature whatsoever, each of
which hereby is expressly waived by each of the Borrowers;
provided, however, that if accelerated automatically pursuant
to this sentence, the Notes and all such indebtedness may be
reinstated at the option and upon the written approval of the
Required Lenders.
13. Expenses; Documentary Taxes; Indemnification. Section
11.4 of the Loan Agreement shall be modified such that the sentece
from such section which reads "Borrowers shall, jointly and
severally, indemnify Agent and each Lender against any Taxes (other
than Taxes on the income of any Lender) imposed by reason of the
execution and delivery of this Agreement or the Notes." shall be
amended and restated to read as follows:
Borrowers shall, jointly and severally, indemnify Agent
and each Lender against any Taxes (other than Taxes on the
income of any Lender) imposed by reason of the execution,
performance and delivery of this Agreement or the Notes.
14. Assignments and Participations. Section 11.10 of the
Loan Agreement shall be amended and restated in its entirety as
follows:
Assignments and Participations. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and
assigns; provided that no Borrower shall, directly or
indirectly, assign or transfer, or attempt to assign or
transfer, any of its rights, duties or obligations under this
Agreement without the express prior written consent of all of
the Lenders. Lenders may assign to one or more Eligible
Assignees all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a
portion of its Note and its Revolving Loan Commitment Amount
or Term Loan Commitment Amount, as applicable); provided,
however, that
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to
another Lender or an assignment of all of a Lender's rights
and obligations under this Agreement, any such partial
assignment shall be in an amount at least equal to (1) as to
the Term Facility, Five Million and No/100 Dollars
($5,000,000.00), and (2) as to the Revolving Facility, the
lesser of Five Million and No/100 Dollars ($5,000,000.00) or
6% of the Revolving Commitment in effect from time to time;
(iii) each such assignment by a Lender shall be
of a constant, and not varying, percentage of all of its
rights and obligations under this Agreement and the applicable
Note; and
(iv) the parties to such assignment shall
execute and deliver to the Agent for its acceptance an
Assignment and Acceptance in the form of Exhibit D hereto,
together with any Note subject to such assignment and a
processing fee of $3,500.
Upon execution, delivery, and acceptance of such Assignment
and Acceptance, the assignee thereunder shall be a party
hereto and, to the extent of such assignment, have the
obligations, rights, and benefits of a Lender hereunder and
the assigning Lender shall, to the extent of such assignment,
relinquish its rights and be released from its obligations
under this Agreement. Upon the consummation of any assignment
pursuant to this Section, the assignor, the Agent and the
Borrowers shall make appropriate arrangements so that, if
required, new Notes are issued to the assignor and the
assignee. If the assignee is not incorporated under the laws
of the United States of America or a state thereof, it shall
deliver to AMRESCO and Agent certification as to exemption
from deduction or withholding of Taxes in accordance with
Section 11.20.
(b) Agent shall maintain at its address referred to in
Schedule I a copy of each Assignment and Acceptance delivered
to and accepted by it and a register for the recordation of
the names and addresses of the Lenders and the Revolving Loan
Commitment Amount or Term Loan Commitment Amount, as
applicable, owing to, each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the
Borrowers, Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available
for inspection by AMRESCO or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(c) Upon its receipt of an Assignment and Acceptance
executed by the parties thereto, together with any Note
subject to such assignment and payment of the processing fee,
the Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit D
hereto, (i) accept such Assignment and Acceptance, (ii) record
the information contained therein in the Register and (iii)
give prompt notice thereof to the parties thereto.
(d) Each Lender may sell participations to one or more
Persons in all or a portion of its rights and obligations
under this Agreement (including all or a portion of its
Revolving Loan Commitment Amount or Term Loan Commitment
Amount, as applicable, and its Note); provided, however, that
(i) such Lender's obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of
such obligations, (iii) prior to an Event of Default which
has occurred and is continuing, such participant shall be
approved by AMRESCO, such approval not to be unreasonably
withheld or delayed by AMRESCO and such approval to be deemed
given by AMRESCO if no objection is received by the selling
Lender from AMRESCO within two (2) Business Days after notice
of such proposed participation has been provided by the
selling Lender to AMRESCO (provided, that, AMRESCO shall have
the right set forth in clause (g) below), (iv) the participant
shall be entitled to the benefit of the yield protection
provisions contained in Article III, and (v) AMRESCO shall
continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under
this Agreement, and such Lender shall retain the sole right to
enforce the obligations of the Borrowers relating to its Note
and to approve any amendment, modification, or waiver of any
provision of this Agreement (other than amendments,
modifications, or waivers decreasing the amount of principal
of or the rate at which interest is payable on such Note,
extending any scheduled principal payment date or date fixed
for the payment of interest on such Note or extending the
Revolving Facility or Term Facility, as applicable).
(e) Notwithstanding any other provision set forth in
this Agreement, any Lender may at any time assign and pledge
all or any portion of its Note or any amount outstanding
thereunder to any Federal Reserve Bank as collateral security
pursuant to Regulation A and any Operating Circular issued by
such Federal Reserve Bank. No such assignment shall release
the assigning Lender from its obligations hereunder.
(f) Any Lender may furnish any information concerning
the Borrowers or any of their Subsidiaries in the possession
of such Lender from time to time to assignees and participants
(including prospective assignees and participants), subject,
however, to the provisions of Section 7.3 hereof; and
provided, that until AMRESCO has approved or disapproved a
prospective assignee or participant pursuant to this Agreement
(if such approval is permitted by this Agreement), any Lender
may provide to such prospective assignee or participant only
information available to the public.
(g) In the event a Lender proposes to assign or
participate its interest in, or otherwise wants to be taken
out of, either of the Credit Facilities, AMRESCO shall have
the right, subject to the unanimous consent of all other
Lenders (or deemed consent in the manner provided below), to
prepay to the affected Lender an amount equal to the proposed
assignment or participation or pay-off, and the Revolving
Commitment or Term Facility (as applicable) of such Lender
will be permanently reduced by such amount; provided, that in
order to exercise such right, (i) there shall not have
occurred any Default which is continuing on the date of the
proposed prepayment, (ii) in the case of a proposed assignment
or participation, AMRESCO shall notify Agent of its desire to
make the prepayment above described within the period
established for AMRESCO's approval or disapproval of a
prospective assignee or participant as set forth in the
definition of "Eligible Assignee" and subsection (d) above,
(iii) AMRESCO shall make such prepayment to Agent (for
distribution to the applicable Lender) within two (2) Business
Days after receiving notice of approval of the Lenders.
AMRESCO and Lenders understand and agree that if Lenders'
approval is not received by AMRESCO within ten (10) Business
Days of AMRESCO's notice sent pursuant to clause (ii) above,
such request shall be deemed disapproved, unless the Lenders
holding at the time in question a portion of the Credit
Facilities (including participations in Letters of Credit, but
excluding the interest of the assigning, participating or
existing Lender) equal to or greater than 75% of the sum of
(1) the Revolving Commitment, plus (2) the aggregate unpaid
principal amount of the Term Notes have approved such
prepayment in writing within such ten day period and none of
the other Lenders have objected to such prepayment in writing
within such ten day period.
15. Taxes. The following Section 11.20 shall be added to the
Loan Agreement in its entirety as follows:
Section 11.20 Taxes. Each Lender (or Transferee) that
is not a corporation or partnership created or organized in or
under the laws of the United States, any estate that is
subject to federal income taxation regardless of the source of
its income or any trust which is subject to the supervision of
a court within the United States and the control of a United
States fiduciary as described in section 7701(a)(30) of the
Internal Revenue Code (a "Non-U.S. Lender") shall deliver to
AMRESCO and Agent (or, in the case of a Participant, to the
Lender from which the related participation shall have been
purchased) on or before the date on which it becomes a party
to this Agreement (or, in the case of a Participant, on or
before the date on which such Participant purchases the
related participation) either:
(a) (x) two duly completed and signed copies of
either Internal Revenue Service Form 1001 (relating to such
Non-U.S. Lender and entitling it to a complete exemption from
withholding of U.S. Taxes on all amounts to be received by
such Non-U.S. Lender pursuant to this Agreement and the other
Loan Documents) or Form 4224 (relating to all amounts to be
received by such Non-U.S. Lender pursuant to this Agreement
and the other Loan Documents), or successor and related
applicable forms, as the case may be, and (y) two duly
completed and signed copies of Internal Revenue Service Form
W-8 or W-9, or successor and related applicable forms, as the
case may be; ;or
(b) in the case of a Non-U.S. Lender that is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code
and that does not comply with the requirements of clause (a)
hereof, (x) a statement in a form as shall be reasonably
requested by AMRESCO from time to time) to the effect that
such Non-U.S. Lender is eligible for a complete exemption from
withholding of U.S. Taxes under Code Section 87(b) or 881(c),
and (y) two duly completed and signed copies of Internal
Revenue Service Form W-8 or successor and related applicable
forms.
Further, each Non-U.S. Lender agrees to deliver to AMRESCO and
Agent, and if applicable, the assigning Lender (or, in the
case of a Participant, to the Lender from which the related
participation shall have been purchased) two further duly
completed and signed copies of such Forms 1001, 4224, W-8 or
W-9, as the case may be, or successor and related applicable
forms, on or before the date that any such form expires or
becomes obsolete and promptly after the occurrence of any
event requiring a change from the most recent form(s)
previously delivered by it to the Borrowers (or, in the case
of a Participant, to the Lender from which the related
participation shall have been purchased) in accordance with
applicable United States laws and regulations; unless, in any
such case, any change in law or regulation has occurred
subsequent to the date such Lender became a party to this
Agreement (or in the case of a Participant, the date on which
such Participant purchased the related participation) which
renders all such forms inapplicable or which would prevent
such Lender (or Participant) from properly completing and
executing any such form with respect to it and such Lender
promptly notifies AMRESCO and Agent (or, in the case of a
Participant, the Lender from which the related participation
shall have been purchased) if it is no longer able to deliver,
or if it is required to withdraw or cancel, any form or
statement previously delivered by it pursuant to this Section
11.20. A Non-U.S. Lender shall not be required to deliver any
form or statement pursuant to the immediately preceding
sentences in this Section 11.20 that such Non-U.S. Lender is
not legally able to deliver (it being understood and agreed
that AMRESCO shall withhold or deduct such amounts from any
payments made to such Non-U.S. Lender that the Borrowers
reasonably determines are required by law and that payments
resulting from a failure to comply with this Section 11.20
shall not be subject to payment or indemnity by the Borrowers
pursuant to Section 11.4).
16. Judgment Currency. The following Section 11.21 shall be
added to the Loan Agreement in its entirety as follows:
11.21 Judgment Currency.
(a) If, for the purposes of obtaining judgment in
any court, it is necessary to convert a sum due hereunder or
any other Loan Document in one currency into another currency,
the rate of exchange used shall be that at which in accordance
with normal banking procedures Agent could purchase the first
currency with such other currency on the Business Day
preceding that on which final judgment is given. The
obligation of Borrowers in respect of any such sum due from
them to Agent, the Lenders, or any other Person hereunder (the
"Judgment Creditors") or under the other Loan Documents shall,
notwithstanding any judgment in a currency (the "Judgment
Currency") other than that in which such sum is denominated in
accordance with the applicable provisions of this Agreement
(the "Agreement Currency"), be discharged only to the extent
that on the Business Day following receipt by the Judgment
Creditor(s) of any sum adjudged to be so due in the Judgment
Currency, Agent may in accordance with normal banking
procedures purchase the Agreement Currency with the Judgment
Currency. If the amount of the Agreement Currency so
purchased is less than the sum originally due to the Judgment
Creditor(s) in the Agreement Currency, Borrowers jointly and
severally agree, as a separate obligation and notwithstanding
any such judgment, to indemnify the Judgment Creditor(s)
against such loss. If the amount of the Agreement Currency so
purchased is greater than the sum originally due to the
Judgment Creditor(s) in such currency, the Judgment Creditor
receiving such overpayment agrees to return the amount of any
excess received by such entity to Borrowers (or to any other
Person who may be entitled thereto under applicable law).
(b) Borrowers jointly and severally promise to
indemnify each Judgment Creditor against and hold each
Judgment Creditor harmless from all loss and damage resulting
from any change in exchange rates between the date any claim
is reduced to judgment and the date of payment (or, in the
case of partial payments, the date of each partial payment)
thereof by Borrowers, or any of Borrowers. This indemnity
shall constitute an obligation separate and independent from
the other obligations contained in this Agreement, shall give
rise to a separate and independent cause of action, shall
apply irrespective of any indulgence granted by Agent, the
Required Lenders, or the Lenders from time to time, and shall
continue in full force and effect notwithstanding any judgment
or order for a liquidated sum in respect of an amount due
hereunder or under any judgment or order.
17. Amended Schedule I. Schedule I of the Loan Agreement
shall be, and is hereby, amended and restated in its entirety as
set forth on Exhibit A attached hereto and incorporated herein by
reference for all purposes.
18. Amended Schedule II. Schedule II of the Loan Agreement
shall be, and is hereby, amended and restated in its entirety as
set forth on Exhibit B attached hereto and incorporated herein by
reference for all purposes.
19. Definition of Loan Documents. The definition of "Loan
Documents", as defined in the Loan Agreement and as used in the
Loan Agreement, the other Loan Documents and herein, shall be, and
is hereby, modified to include this Agreement and any and all
documents executed in connection herewith.
20. Conditions Precedent to this Agreement. As conditions
precedent to this Agreement and the modifications to the Loan
Agreement pursuant hereto, all of the following shall have been
satisfied:
(a) Borrowers shall have executed and delivered to Agent (i)
this Agreement and (ii) each new Note required to be executed
pursuant to the Loan Agreement payable to each new Lender under the
Credit Facilities; and
(b) Borrowers shall have delivered to Agent all resolutions,
powers of attorney, certificates or documents as Agent may request
relating to (i) the existence of Borrowers, and (ii) the corporate
and partnership authority for the execution and validity of this
Agreement, together with all other documents, instruments and
agreements and any other matters relevant hereto or thereto, all in
form and content satisfactory to Agent.
21. Reaffirmation of Debt. Borrowers hereby agree and
acknowledge that they are well and truly indebted to Lenders
pursuant to the terms of the Notes and the other Loan Documents, as
modified hereby.
22. Ratification. Except as otherwise expressly modified by
this Agreement, all terms and provisions of the Loan Agreement, the
Notes, and the other Loan Documents shall remain unchanged and
hereby are ratified and confirmed and shall be and shall remain in
full force and effect, enforceable in accordance with their terms.
23. Default. Except as otherwise expressly modified by this
Agreement, no Event of Default has occurred and is continuing under
any of the Loan Documents.
24. Payment of Expenses. Borrowers agree to provide to
Lenders, upon demand, the reasonable attorneys' fees and expenses
of Agent's counsel, filing and recording fees and other reasonable
expenses incurred by Agent in connection with this Agreement.
25. Further Assurances. Borrowers shall execute and deliver
to Agent such other documents as may be necessary or as may be
required, in the opinion of counsel to Agent, to effect the
transactions contemplated hereby and to protect the liens and
security interests.
26. Binding Agreement. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties' respective heirs,
representatives, successors and assigns.
27. Enforceability. In the event the enforceability or
validity of any portion of this Agreement, the Loan Agreement, the
Notes, or any of the other Loan Documents is challenged or
questioned, such provision shall be construed in accordance with,
and shall be governed by, whichever applicable federal or Texas law
would uphold or would enforce such challenged or questioned
provision.
28. Counterparts. This Agreement may be executed in several
counterparts, all of which are identical, each of which shall be
deemed an original, and all of which counterparts together shall
constitute one and the same instrument.
29. Choice of Law. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT FEDERAL LAWS
PREEMPT THE LAWS OF THE STATE OF TEXAS.
30. Entire Agreement. This Agreement, the Loan Agreement and
the Notes, together with the other Loan Documents, contain the
entire agreements between the parties relating to the subject
matter hereof and thereof and all prior agreements relative thereto
which are not contained herein or therein are terminated.
THIS AGREEMENT AND THE OTHER WRITTEN INSTRUMENTS, AGREEMENTS
AND DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT, AND THE
LOAN AGREEMENT, THE NOTES, AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. IN WITNESS WHEREOF, this Agreement is executed effective as of
the date first written above.
BORROWERS:
AMRESCO, INC., a Delaware corporation
By:_____________________________________
Thomas J. Andrus,
Treasurer
AFC EQUITIES, INC.
AMRESCO ATLANTA INDUSTRIAL, INC.
AMRESCO BUILDERS GROUP, INC.
AMRESCO CANADA, INC.
AMRESCO CAPITAL CORPORATION
AMRESCO CAPITAL LIMITED, INC.
AMRESCO CONSOLIDATION CORP. f/k/a AMRESCO
MORTGAGE CAPITAL, INC.
AMRESCO EQUITIES CANADA INC.
AMRESCO FINANCIAL I, INC.
AMRESCO FINANCIAL I, L.P.
AMRESCO FUNDING CORPORATION
AMRESCO INSTITUTIONAL, INC.
AMRESCO INVESTMENTS, INC.
AMRESCO JERSEY VENTURES LIMITED
AMRESCO MANAGEMENT, INC.
AMRESCO NEW ENGLAND, L.P.
AMRESCO NEW ENGLAND II, L.P.
AMRESCO NEW ENGLAND, INC.
AMRESCO NEW ENGLAND II, INC.
AMRESCO NEW HAMPSHIRE, INC.
AMRESCO NEW HAMPSHIRE, L.P.
AMRESCO OVERSEAS, INC. f/k/a AMRESCO
SERVICES, INC.
AMRESCO PORTFOLIO INVESTMENTS, INC.
AMRESCO PRINCIPAL MANAGERS I, INC.
AMRESCO PRINCIPAL MANAGERS II, INC.
AMRESCO RESIDENTIAL CAPITAL MARKETS, INC.
AMRESCO RESIDENTIAL CONDUIT, INC.
AMRESCO RESIDENTIAL CREDIT CORPORATION
AMRESCO RESIDENTIAL MORTGAGE CORPORATION
AMRESCO RHODE ISLAND, INC.
AMRESCO SERVICES CANADA INC.
AMRESCO UK HOLDINGS LIMITED
AMRESCO UK LIMITED
AMRESCO UK VENTURES LIMITED
AMRESCO VENTURES, INC. f/k/a AMRESCO
GENERAL PARTNERS, INC.
AMRESCO 1994-N2, INC.
ASSET MANAGEMENT RESOLUTION COMPANY
BEI 1992 - N1, INC.
BEI 1993 - N3, INC.
BEI 1994 - N1, INC.
BEI MULTI-POOL, INC.
BEI PORTFOLIO INVESTMENTS, INC.
BEI PORTFOLIO MANAGERS, INC.
BEI REAL ESTATE SERVICES, INC.
BEI SANJAC, INC.
CLC LEASING, INC.
COMMONWEALTH TRUST DEED SERVICES, INC.
COMMERCIAL LENDING CORPORATION
ENT MIDWEST, INC.
ENT NEW JERSEY, INC.
ENT SOUTHERN CALIFORNIA, INC.
EXPRESS FUNDING, INC.
GRANITE EQUITIES, INC.
HOLLIDAY FENOGLIO, INC.
LIFETIME HOMES, INC., f/k/a LIFETIME
HOMES OF NEW JERSEY, INC.
OAK CLIFF FINANCIAL, INC.
OLD MIDLAND HOUSE LIMITED
PRESTON HOLLOW ASSET HOLDINGS, INC.
QUALITY FUNDING, INC.
QUALITY TRUSTEE SERVICES, INC.
SAVE-MORE INSURANCE SERVICES, INC.
WHITEROCK INVESTMENTS, INC.
By: AMRESCO, INC., a Delaware
corporation, as attorney-in-fact
By:________________________________
Thomas J. Andrus, as
Treasurer
AGENT:
NATIONSBANK OF TEXAS, N.A.,
a national banking association, as
Agent for Lenders
By:_____________________________________
Brian K. Schneider,
Vice President
REVOLVING LENDERS:
NATIONSBANK OF TEXAS, N.A., a
national banking association
By:_________________________________
Brian K. Schneider,
Vice President
BANK ONE, TEXAS, NA,
a national banking association
By:________________________________
Name:______________________________
Title:_____________________________
WELLS FARGO BANK (TEXAS), N.A.,
a national banking association
By:________________________________
Name:______________________________
Title:_____________________________
COMERICA BANK - TEXAS,
a state banking association
By:________________________________
Name:______________________________
Title:_____________________________
BANK UNITED,
a federal savings bank
By:________________________________
Name:______________________________
Title:_____________________________
THE BANK OF NEW YORK,
a national banking association
By:________________________________
Name:______________________________
Title:_____________________________
THE NIPPON CREDIT BANK, LTD.
By:________________________________
Name:______________________________
Title:_____________________________
FLEET BANK, N.A.,
a national banking association
By:________________________________
Name:______________________________
Title:_____________________________
THE SUMITOMO BANK, LTD.
By:________________________________
Name:______________________________
Title:_____________________________
PNC BANK, KENTUCKY, INC.
By:________________________________
Name:______________________________
Title:_____________________________
IMPERIAL BANK
By:________________________________
Name:______________________________
Title:_____________________________
TERM LENDERS:
NATIONSBANK OF TEXAS, N.A., a
national banking association
By:____________________________________
Brian K. Schneider,
Vice President
ALLSTATE INSURANCE COMPANY
By:________________________________
Name:______________________________
Title:_____________________________
Exhibit A
SCHEDULE I
LENDERS AND BORROWERS
I. LENDERS, AGENT AND ARRANGER
A. AGENT:
NationsBank of Texas, N.A.
Commercial Banking Division
901 Main Street, 7th Floor
Dallas, Texas 75202
Attn: Brian Schneider
Fax No.: (214) 508-0388
B. ARRANGER:
NationsBanc Capital Markets, Inc.
901 Main Street, 66th Floor
Dallas, Texas 75202
Attn: Joseph Siegel, Jr.
Fax No.: (214) 508-2881
C. REVOLVING LENDERS:
NationsBank of Texas, N.A.
901 Main Street, 7th Floor
Dallas, Texas 75202
Attn: Brian Schneider
Tel: (214) 508-0365
Fax: (214) 508-3138
Bank One, Texas, NA
1717 Main Street, 4th Floor
Dallas, Texas 75201
Attn: Kathleen C. Stewart
Tel: (214) 290-2709
Fax: (214) 290-2275
with a copy of all notices to:
Bank One, Texas, NA
1717 Main Street, 4th Floor
Dallas, Texas 75201
Attn: Kristin Blanchard
Tel: (214) 290-3028
Fax: (214) 290-2275
Wells Fargo Bank (Texas), N.A.
1445 Ross Avenue, 3rd Floor
Dallas, Texas 75202
Attn: Craig T. Scheef
Tel: (214) 740-1548
Fax: (214) 740-1519
Comerica Bank - Texas
8828 Stemmons, Suite 441
Dallas, Texas 75247
Attn: David Terry
Tel: (972) 841-4419
Fax: (972) 263-9837
Bank United of Texas
101 Ygnacio Valley Road
Walnut Creek, CA 94596
Attn: Michael D. McAuley
Tel: (510) 210-8060
Fax: (510) 210-8065
The Bank of New York
One Wall Street, 17th Floor
New York, New York 10286
Attn: Robert A. Tweed
Tel: (212) 635-6465
Fax: (212) 635-6468
The Nippon Credit Bank, Ltd.
New York Branch
245 Park Avenue
New York, New York 10167
Attn: Peter Amari
Tel: (212) 984-1319
Fax: (212) 490-3895
Fleet Bank, N.A.
592 5th Avenue
New York, New York 10036
Attn: Robert Pierson
The Sumitomo Bank, Limited
1601 Elm Street, Suite 4250
Dallas, Texas 75201
Attn: Michael R. Pavell
PNC Bank, Kentucky, Inc.
500 West Jefferson, Suite 1200
Louisville, KY 40202
Attn: Janice Wallace
Imperial Bank
9920 S. LaCienega Blvd.
Englewood, CA 90301
Attn: Rya Vadalma
D. TERM LENDERS:
NationsBank of Texas, N.A.
901 Main Street, 7th Floor
Dallas, Texas 75202
Attn: Brian Schneider
Tel: (214) 508-0365
Fax: (214) 508-3138
Allstate Insurance Companies
3075 Sanders Road, Suite G3A
Northbrook, IL 60062-7127
Attn: Jerry Zinkula
Revolving Revolving
Loan Loan Participation
Commitment Percentage Fee Amount
Amount
Revolving Lenders:
NationsBank $50,000,000 17.24138% $100,000
Bank One $45,000,000 15.51724% $90,000
Wells Fargo $25,000,000 8.62069% $31,250
Comerica $20,000,000 6.89655% $15,000
Bank United $30,000,000 10.34483% $37,500
Bank of New York $30,000,000 10.34483% $37,500
Nippon Credit Bank $15,000,000 5.17241% $11,250
Sumitomo $25,000,000 8.62069% $62,500
Fleet $25,000,000 8.62069% $62,500
PNC $15,000,000 5.17241% $22,500
Imperial $10,000,000 3.44828% $15,000
Total $290,000,000 100% $485,000
Term Loan
Commitment Term Loan Participation
Amount Percentage Fee Amount
Term Lenders:
Allstate $10,000,000 40.00% $25,000
*Indosuez $15,000,000 60.00% $37,500
Total $25,000,000 100% $62,500
* -- These entities will become Term Lenders after assignment.
II. BORROWERS
AFC EQUITIES, INC.
AMRESCO ATLANTA INDUSTRIAL, INC.
AMRESCO BUILDERS GROUP, INC.
AMRESCO CANADA, INC.
AMRESCO CAPITAL CORPORATION
AMRESCO CAPITAL LIMITED, INC.
AMRESCO CONSOLIDATION CORP. f/k/a AMRESCO
MORTGAGE CAPITAL, INC.
AMRESCO EQUITIES CANADA INC.
AMRESCO FINANCIAL I, INC.
AMRESCO FINANCIAL I, L.P.
AMRESCO FUNDING CORPORATION
AMRESCO INSTITUTIONAL, INC.
AMRESCO INVESTMENTS, INC.
AMRESCO JERSEY VENTURES LIMITED
AMRESCO MANAGEMENT, INC.
AMRESCO NEW ENGLAND, L.P.
AMRESCO NEW ENGLAND II, L.P.
AMRESCO NEW ENGLAND, INC.
AMRESCO NEW ENGLAND II, INC.
AMRESCO NEW HAMPSHIRE, INC.
AMRESCO NEW HAMPSHIRE, L.P.
AMRESCO OVERSEAS, INC. f/k/a AMRESCO SERVICES, INC.
AMRESCO PORTFOLIO INVESTMENTS, INC.
AMRESCO PRINCIPAL MANAGERS I, INC.
AMRESCO PRINCIPAL MANAGERS II, INC.
AMRESCO RESIDENTIAL CAPITAL MARKETS, INC.
AMRESCO RESIDENTIAL CONDUIT, INC.
AMRESCO RESIDENTIAL CREDIT CORPORATION
AMRESCO RESIDENTIAL MORTGAGE CORPORATION
AMRESCO RHODE ISLAND, INC.
AMRESCO SERVICES CANADA INC.
AMRESCO UK HOLDINGS LIMITED
AMRESCO UK LIMITED
AMRESCO UK VENTURES LIMITED
AMRESCO VENTURES, INC. f/k/a AMRESCO GENERAL
PARTNERS, INC.
AMRESCO 1994-N2, INC.
ASSET MANAGEMENT RESOLUTION COMPANY
BEI 1992 - N1, INC.
BEI 1993 - N3, INC.
BEI 1994 - N1, INC.
BEI MULTI-POOL, INC.
BEI PORTFOLIO INVESTMENTS, INC.
BEI PORTFOLIO MANAGERS, INC.
BEI REAL ESTATE SERVICES, INC.
BEI SANJAC, INC.
CLC LEASING, INC.
COMMONWEALTH TRUST DEED SERVICES, INC.
COMMERCIAL LENDING CORPORATION
ENT MIDWEST, INC.
ENT NEW JERSEY, INC.
ENT SOUTHERN CALIFORNIA, INC.
EXPRESS FUNDING, INC.
GRANITE EQUITIES, INC.
HOLLIDAY FENOGLIO, INC.
LIFETIME HOMES, INC., f/k/a LIFETIME HOMES OF
NEW JERSEY, INC.
OAK CLIFF FINANCIAL, INC.
OLD MIDLAND HOUSE LIMITED
PRESTON HOLLOW ASSET HOLDINGS, INC.
QUALITY FNDING, INC.
QUALITY TRUSTEE SERVICES, INC.
SAVE-MORE INSURANCE SERVICES, INC.
WHITEROCK INVESTMENTS, INC.
c/o AMRESCO, INC.
700 N. Pearl Street
Suite 2400, LB 342
Dallas, Texas 75201-7424
Attn: Treasurer
Fax No.: (214) 953-7757
Exhibit B
SCHEDULE II
COMMITMENT FEE PERCENTAGE; LIBOR MARGIN
Senior Consolidated Funded Debt/ Qualified Applicable Commitment
Adjusted EBITDA Investment LIBOR Fee
Rating Margin Percentages
Greater than 2.25 to 1.0 BB+/Ba1, or (a) 175.0 b.p. 37.2 b.p.
lower (b) 225.0 b.p.
Less than or equal to 2.25 to 1.0, BBB-/Baa3 (a) 150.0 b.p. 25.0 b.p.
but greater than 1.75 to 1.0 (b) 200.0 b.p.
Less than or equal to 1.75 to 1.0, BBB/Baa2 (a) 125.0 b.p. 25.0 b.p.
but greater than 1.25 to 1.0 (b) 175.0 b.p.
Less than or equal to 1.25 to 1.0 A-/A3 or (a) 100.0 b.p. 20.0 b.p.
better (b) 150.0 b.p.
(a) - The Applicable LIBOR Margin for the Revolving Credit Facility.
(b) - The Applicable LIBOR Margin for the Term Facility.
Borrowers' Senior Consolidated Funded Debt to Adjusted EBITDA ratio
shall be computed on a trailing four quarter basis. The applicable
LIBOR Margin or Commitment Fee Percentage shall be based on whichever of the
Senior Consolidated Funded Debt to Adjusted EBITDA ratio or Qualified
Investment Rating would produce the lowest LIBOR Margin or Commitment
Fee Percentage.
Page 1
AMRESCO, INC.
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS
Three Months Ended
March 31,
1997 1996
Primary:
Net income $8,561,000 $4,795,000
Weighted average common
shares outstanding 33,909,405 26,721,444
Net effect of dilutive
stock options based on the
Treasury stock method
using average market price 859,301 647,946
Total 34,768,706 27,369,390
Earnings per share $0.25 $0.18
Fully diluted:
Net income $8,561,000 $4,795,000
Interest expense related to
convertible debentures,
net of income tax expense 576,000
Adjusted net income $8,561,000 $5,371,000
Weighted average common
shares outstanding,
assuming conversion of
convertible debentures to
3,600,000 shares of common
stock in November 1995 33,909,405 30,321,444
Net effect of dilutive
stock options based on the
Treasury stock method
using the higher of
average or ending market
price 859,301 926,255
Total 34,768,706 31,247,699
Earnings per share $0.25 $0.17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted AMRESCO, INC.
March 31, 1997 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 33,577
<SECURITIES> 0
<RECEIVABLES> 15,306
<ALLOWANCES> (1,796)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 24,334
<DEPRECIATION> 6,393
<TOTAL-ASSETS> 1,530,422
<CURRENT-LIABILITIES> 0
<BONDS> 545,167
0
0
<COMMON> 1,799
<OTHER-SE> 339,123
<TOTAL-LIABILITY-AND-EQUITY> 1,530,422
<SALES> 0
<TOTAL-REVENUES> 74,840
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 43,155
<LOSS-PROVISION> 1,920
<INTEREST-EXPENSE> 16,159
<INCOME-PRETAX> 13,606
<INCOME-TAX> 5,045
<INCOME-CONTINUING> 8,561
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,561
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
