<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 16, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
AMRESCO, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 59-1781257
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 NORTH PEARL STREET
SUITE 2400, LB 342
DALLAS, TEXAS 75201
(214) 953-7700
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
----------------------
L. KEITH BLACKWELL
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
700 NORTH PEARL STREET
SUITE 2400, LB 342
DALLAS, TEXAS 75201
(214) 953-7700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Title of Each Class of Securities Proposed Maximum Aggregate
to be Registered Offering Price (1) Amount of Registration Fee
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Debt Securities (2) (6) (6)
Preferred Stock, par value $1.00 per share (3) (6) (6)
Common Stock, par value $0.05 per share (4) (6) (6)
Securities Warrants (5) (6) (6)
- -------------------------------------------------------------------------------------------------------------
Total $1,000,000(7) $295
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The proposed maximum aggregate offering price has been estimated solely for
the purpose of calculating the registration fee pursuant to Rule 457(o)
under the Securities Act of 1933, as amended (the "Securities Act"). The
proposed maximum offering price per unit will be determined from time to
time by the registrant in connection with the issuance by the registrant of
the securities registered hereunder.
(2) Subject to note (7) below, an indeterminate principal amount of Debt
Securities is being registered hereunder. The aggregate amount registered
represents the principal amount of any Debt Securities issued at their
principal amount and the issue price (rather than the principal amount) of
any Debt Securities issued at an original issue discount. Also being
registered hereunder is an indeterminate principal amount of Debt Securities
as shall be (a) issuable (i) upon conversion or exchange of Preferred Stock
or other Debt Securities registered hereunder and (ii) upon exercise of the
Securities Warrants registered hereunder and (b) necessary to adjust the
principal amount of Debt Securities from time to time reserved for issuance
upon such exercise in accordance with the anti-dilution provisions of any
convertible or exchangeable Preferred Stock or other Debt Securities or the
Securities Warrants.
(3) Subject to note (7) below, an indeterminate number of shares of Preferred
Stock as may be sold, from time to time, by the registrant is being
registered hereunder. Also being registered hereunder is an indeterminate
number of shares of Preferred Stock as shall be (a) issuable upon exchange
of Debt Securities into Preferred Stock or exercise of the Securities
Warrants registered hereunder and (b) necessary to adjust the number of
shares of Preferred Stock from time to time reserved for issuance upon such
exercise in accordance with the anti-dilution provisions of the Securities
Warrants or exchangeable Debt Securities.
(4) Subject to note (7) below, an indeterminate number of shares of Common Stock
as may be sold, from time to time, by the registrant is being registered
hereunder. Also being registered hereunder is an indeterminate number of
shares of Common Stock as shall be (a) issuable (i) upon conversion or
redemption of Preferred Stock or Debt Securities registered hereunder and
(ii) upon exercise of Securities Warrants registered hereunder, (b)
necessary to adjust the number of shares of Common Stock from time to time
reserved for issuance upon such conversion, redemption or exercise in
accordance with the anti-dilution provisions of the Debt Securities,
Preferred Stock or Securities Warrants, respectively, and (c) issuable as a
result of a stock split, stock dividend or other adjustment to or change in
the outstanding shares of Common Stock.
(5) Subject to note (7) below, an indeterminate number of Securities Warrants as
may be sold, from time to time, by the registrant is being registered
hereunder.
(6) Not applicable pursuant to General Instruction II.D. of Form S-3.
(7) In no event will the aggregate initial offering price of all securities
issued from time to time pursuant to this Registration Statement exceed
$1,000,000 or the equivalent thereof in one or more foreign currencies,
foreign currency units or composite currencies. The aggregate amount of
Common Stock registered hereunder is further limited to that which is
permissible under Rule 415(a)(4) under the Securities Act. The securities
registered hereunder may be sold separately or as units with other
securities registered hereunder.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. +
+ A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH +
+ THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD +
+ NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION +
+ STATEMENT BECOMESEFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER +
+ TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE +
+ OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+ WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+ SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
$1,000,000
[AMRESCO LOGO]
COMMON STOCK, PREFERRED STOCK, DEBT SECURITIES,
SECURITIES WARRANTS AND UNITS
_______________
AMRESCO, INC. (the "Company") may offer from time to time, together or
separately, (i) shares of its common stock, par value $0.05 per share (the
"Common Stock"), (ii) shares of its preferred stock, par value $1.00 per share
(the "Preferred Stock"), which may be issued in the form of depositary shares
evidencing depositary receipts ("Depositary Shares"), (iii) its debt securities,
which may be either senior (the "Senior Debt Securities") or subordinated (the
"Subordinated Debt Securities" and, together with the Senior Debt Securities,
the "Debt Securities") and (iv) warrants (collectively, the "Securities
Warrants") to purchase Debt Securities (the "Debt Securities Warrants"),
Preferred Stock (the "Preferred Stock Warrants"), Depositary Shares (the
"Depositary Share Warrants") or Common Stock (the "Common Stock Warrants"), in
amounts, at prices and on terms to be determined at the time of the offering
thereof. The Common Stock, Preferred Stock, Depositary Shares, Debt Securities
and Securities Warrants (collectively, the "Securities") may be offered
independently or together in any combination ("Units") for sale directly to
purchasers or through dealers, underwriters or agents to be designated. The
Subordinated Debt Securities and Preferred Stock may be convertible or
exchangeable into other series of Debt Securities, Preferred Stock or Common
Stock. The Securities offered pursuant to this Prospectus may be issued in one
or more series or issuances the aggregate offering price of which will not
exceed $1.0 million (or the equivalent thereof if the Debt Securities are
denominated in one or more foreign currencies or foreign currency units).
The specific terms of the Securities in respect of which this Prospectus is
being delivered (the "Offered Securities") will be set forth in an accompanying
supplement to this Prospectus (each, a "Prospectus Supplement"), including,
where applicable, (i) in the case of Common Stock, the aggregate number of
shares offered and by whom offered, (ii) in the case of the Preferred Stock, the
specific designation, the aggregate number of shares offered, the dividend rate
(or method of calculation thereof), the dividend period and dividend payment
dates, whether such dividends will be cumulative or noncumulative, the
liquidation preference, voting rights, if any, any terms for optional or
mandatory redemption, any terms for conversion or exchange into other series of
Debt Securities or Common Stock, any other special terms and, if issued in the
form of Depositary Shares, the number of shares of Preferred Stock represented
by each Depositary Share, (iii) in the case of Debt Securities, the specific
designation, aggregate principal amount, ranking as Senior Debt Securities or
Subordinated Debt Securities, authorized denominations, maturity, any premium,
rate or method of calculation of interest, if any, and dates for payment
thereof, any terms for optional or mandatory redemption, any sinking fund
provisions, any terms for conversion or exchange into other series of Debt
Securities, Preferred Stock or Common Stock and any other special terms, (iv)
the terms of any Securities Warrants offered, including where applicable, the
exercise price, detachability, duration and other specific terms not described
in this Prospectus and (v) the initial public offering price and the net
proceeds to the Company from and other specific terms relating to the Offered
Securities. The Prospectus Supplement will also contain information, where
applicable, about certain material United States federal income tax
considerations relating to the particular Securities offered hereby. The
Prospectus Supplement will also contain information, where applicable, as to any
listing on a national securities exchange of the Securities covered by such
Prospectus Supplement.
The Senior Debt Securities will rank pari passu in right of payment with
all unsubordinated indebtedness of the Company, but, except to the extent such
Senior Debt Securities are secured by collateral, will be effectively
subordinated to the rights of holders of secured unsubordinated indebtedness of
the Company to the extent of the value of the collateral securing such
indebtedness. The Senior Debt Securities will rank senior to all unsecured
subordinated indebtedness of the Company. The Subordinated Debt Securities will
be subordinate in right of payment to all existing and future Senior Debt (as
defined herein) of the Company, including any Senior Debt Securities.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY, SEE "RISK FACTORS"
BEGINNING ON PAGE 5 HEREIN AND "RISK FACTORS" IN THE PROSPECTUS SUPPLEMENT
ACCOMPANYING THIS PROSPECTUS.
_______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
_______________
The Company may sell the Securities (i) through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate,
with such underwriters to be designated at the time of sale, (ii) through agents
designated from time to time or (iii) directly. The names of any underwriters
or agents of the Company involved in the sale of the Securities, the public
offering price or purchase price thereof, any applicable commissions or
discounts, any other terms of the offering of such Securities and the net
proceeds to the Company from such sale will be set forth in the applicable
Prospectus Supplement. See "Plan of Distribution" for possible indemnification
arrangements for agents, dealers and underwriters.
_______________
The date of this Prospectus is , 1998
<PAGE>
THE COMPANY
Certain terms used in this Prospectus are defined in the "Glossary" beginning
on page 36 herein. Certain terms used in connection with the Debt Securities
are defined under the caption "Description of Securities -- Debt Securities --
Certain Definitions."
GENERAL
The Company is a leading diversified financial services company specializing
in real estate lending, commercial finance and the acquisition, resolution and
servicing of nonperforming and underperforming commercial loans. The Company
began operations in 1987 providing asset management and resolution services to
governmental agencies, financial institutions and others relating to
nonperforming and underperforming loans. In early 1994, the Company made the
decision to diversify its business lines and build "franchise" business units
that could use the Company's core real estate management and lending expertise
to pursue growth in markets that were being underserved by traditional lenders.
Since that time, the Company has entered the commercial mortgage banking,
residential mortgage banking, home equity lending and commercial finance
businesses and oriented its asset management activities towards direct
investments in asset portfolios and the special servicing of large portfolios of
asset-backed securities.
As a result of the Company's diversification efforts, the Company currently
operates in the following five different business lines: asset management,
commercial mortgage banking, residential mortgage banking, commercial finance
and home equity lending. The Company's revenues principally consist of interest
and other investment income (including interest on loans held for sale and from
retained interests in securitizations), fees from asset management activities
and from the origination, underwriting and servicing of loans and revenues
derived from the gain on sale of loans and investments. The Company funds these
operations with its credit lines (including warehouse lines of credit) and with
the proceeds received from securitizations.
ASSET MANAGEMENT
The Company acquires, manages and resolves portfolios of real estate loans and
other assets acquired at a discount and provides special servicing for
nonperforming and underperforming loans in commercial mortgage-backed bond
trusts and similar securitized commercial asset-backed loan portfolios.
The Company is the product of the December 1993 merger of two asset management
and resolution companies, BEI Holdings, Inc. and the former asset management and
resolution unit of a predecessor to NationsBank, N.A. The 1993 merger created
one of the leading asset management and resolution service companies in the
United States. The Company and its predecessors have managed over $35.0 billion
(Face Value) of asset portfolios since 1987. A majority of these assets have
been located in the United States, with the remainder located primarily in
Canada and Western Europe. The Company has recently begun to open additional
offices outside the United States and seek opportunities for asset management
and investments in other international markets.
COMMERCIAL MORTGAGE BANKING
General. The Company performs a wide range of commercial mortgage banking
services, including originating, underwriting, placing, selling, securitizing
and servicing commercial real estate loans, through its subsidiaries Holliday
Fenoglio Fowler, AMRESCO Capital and AMRESCO Services.
Real Estate Capital Markets. Holliday Fenoglio Fowler, a commercial mortgage
banker, primarily serves commercial real estate developers and owners by
arranging commercial real estate loans and acting as a broker on commercial real
estate sales through its own commission-based mortgage bankers. The loans
arranged by Holliday Fenoglio Fowler generally are funded by institutional
lenders, principally insurance companies, and by AMRESCO Capital and other
Conduit Purchasers.
2
<PAGE>
Commercial Real Estate Lending. AMRESCO Capital originates, underwrites,
warehouses and securitizes commercial real estate loans. AMRESCO Capital serves
its market directly through branch offices, as well as through a network of
independent mortgage brokers and commercial mortgage bankers, including Holliday
Fenoglio Fowler. AMRESCO Capital is approved by Fannie Mae to participate in its
DUS program, which AMRESCO Capital believes makes it a more competitive loan
originator and underwriter of multifamily mortgages. AMRESCO Capital is also an
approved lender in the Freddie Mac Program Plus(R) multifamily seller/servicer
program in the states of Florida, New York, North Carolina and South Carolina.
Commercial Loan Servicing. AMRESCO Services is a servicer for securitized
pools of commercial mortgages and whole loans. The dominant users of commercial
loan servicers are commercial mortgage-backed bond trusts and other owners of
commercial real estate loans, including lenders accumulating loans for
securitization or sale that contract for servicing on an interim basis.
Historically, the revenue stream from servicing contracts on commercial
mortgages has been relatively predictable due in part to prepayment penalties in
commercial mortgages that tend to discourage early loan payoffs.
HOME EQUITY LENDING
Through AMRESCO Residential, the Company originates, acquires, warehouses,
services and securitizes conventional, nonconforming home equity mortgage loans.
Prior to July 1998, this business line was known as the Company's residential
mortgage banking line of business.
The Company targets borrowers having credit profiles that preclude their loans
from being sold in the secondary markets to government agencies. Such credit
profiles may include consumer or mortgage loan delinquencies, high debt-to-
income ratios, previous bankruptcy or inability to provide income documentation.
Borrowers in the Company's targeted market typically have significant equity in
their homes and may be charged higher interest rates for loans than more
creditworthy borrowers.
The Company obtains home equity mortgage loans through portfolio acquisitions,
correspondent lending, wholesale broker operations and various retail channels,
including telemarketing, direct mail and retail branches. The Company has
adopted a diversification strategy to reduce its reliance on portfolio
acquisitions through the development of multiple product channels.
The Company has performed delinquency management and related servicing
functions for certain asset portfolios it acquired in October 1996 and for loans
originated by the Company after October 1, 1997 or acquired by it on a servicing
released basis. In addition, the Company is in the process of developing the
appropriate infrastructure and systems to support a broader array of customer
intensive servicing functions, including general customer relations, which the
Company believes will provide the opportunity to manage and improve the
performance of its home equity mortgage loan portfolios by mitigating credit
losses and prepayment risk through direct involvement with borrowers. The
Company will continue to utilize recognized third party providers for
standardized, systems intensive servicing functions, such as payment processing
and tax, insurance and investor reporting.
COMMERCIAL FINANCE
In 1996, the Company organized the Commercial Finance Group to provide
financing to commercial borrowers in various targeted lending markets. The
Commercial Finance Group focuses on (i) loans to franchisees of nationally
recognized restaurant, hospitality and service organizations, (ii) special
situation mid-to-high yield lending, with an emphasis on the real estate and
communications industries, (iii) small business lending and (iv) single family
residential construction lending. Loans originated by the franchise lending and
small business lending operations are sold to third parties, principally through
securitization, while the real estate, communications and single family
residential construction loans are generally retained for the Company's own
portfolio. Other ancillary products, services and investments provided by the
Commercial Finance Group include equipment leasing and loan servicing.
3
<PAGE>
RESIDENTIAL MORTGAGE BANKING
On August 11, 1998, the Company acquired MIC. MIC is a Florida-based
residential mortgage banking company. MIC conducts retail loan originations,
originating conforming loans through a network of approximately 30 retail
branches throughout the United States. As of the date of this Prospectus, MIC
is the largest producer of VA streamlined re-financed loans (otherwise known as
interest rate reduction refinance loans) in the United States. MIC immediately
sells all the loans it originates and servicing rights to third parties in order
to realize immediate cash proceeds and reduce accumulation risk. The activities
conducted by MIC have become the Company's fifth line of business, known as
"Residential Mortgage Banking."
_______________
The Company is a Delaware corporation. The Company's principal executive
offices are located at and its mailing address is 700 North Pearl Street, Suite
2400, Dallas, Texas 75201, and its telephone number at that address is (214)
953-7700.
4
<PAGE>
RISK FACTORS
Investors should carefully consider the following matters in connection with
an investment in any particular Securities in addition to the other information
contained or incorporated by reference in this Prospectus or any accompanying
Prospectus Supplement.
RISKS ASSOCIATED WITH RAPID GROWTH AND ENTRY IN NEW BUSINESSES
In early 1994, the Company made the strategic decision to diversify its
business lines. The Company has entered the commercial mortgage banking, home
equity lending, residential mortgage banking and commercial finance businesses
through a combination of acquisitions and the internal start-up of new business
lines. These businesses recently have contributed a substantial portion of the
Company's operating profit, and the Company expects they will continue to
contribute a substantial portion of its revenue and operating income for the
foreseeable future. The Company has also increased its investments in asset
portfolios. The rapid entry of the Company into these business lines has
resulted in increased demands on the Company's personnel and systems. As part
of its business strategy, the Company intends to acquire additional businesses
which complement the Company's core capabilities in financial services. The
Company must successfully continue its assimilation of multiple acquired
businesses with differing markets, customer bases, financial products, systems
and managements. An inability to assimilate acquired businesses could have an
adverse effect on the Company's financial condition and results of operations.
The Company's ability to support, manage and control continued growth is
dependent upon, among other things, its ability to hire, train, supervise and
manage its workforce and to continue to develop the skills necessary for the
Company to compete successfully in its new business lines. There can be no
assurance that the Company will successfully meet all of these challenges.
NEED FOR ADDITIONAL FINANCING
General. The Company's ability to execute its business strategy and expand its
operations depends to a significant degree on its ability to obtain additional
indebtedness and equity capital. The Company has no commitments for borrowings
in addition to those under its current debt securities and credit facilities,
and the Company has no commitments for future sales of equity capital. There can
be no assurance that the Company will be successful in consummating any such
future financing transactions on terms satisfactory to the Company, if at all.
Factors which could affect the Company's access to the capital markets, or the
costs of such capital, include changes in interest rates, general economic
conditions and the perception in the capital markets of the Company's business,
results of operations, leverage, financial condition and business prospects.
Each of these factors is to a large extent subject to economic, financial and
competitive factors beyond the Company's control. In addition, covenants under
the Company's current and future debt securities and credit facilities may
significantly restrict the Company's ability to incur additional indebtedness
and to issue Preferred Stock. The Company's ability to repay its outstanding
indebtedness, including the Debt Securities, at maturity may depend on its
ability to refinance such indebtedness, which could be adversely affected if the
Company does not have access to the capital markets for the sale of additional
debt or equity securities through public offerings or private placements on
terms reasonably satisfactory to the Company.
Dependence on Warehouse Financing. The Company's home equity lending,
commercial mortgage banking and commercial finance securitization businesses
depend upon warehouse facilities with financial institutions or institutional
lenders to finance the Company's origination and purchase of loans on a short-
term basis pending sale or securitization. Implementation of the Company's
growth strategy requires continued availability of warehouse facilities and may
require increases in the capacity of warehouse facilities. There can be no
assurance that such financing will be available on terms reasonably satisfactory
to the Company. The inability of the Company to arrange additional warehouse
facilities or to extend or replace existing facilities when they expire would
have a material adverse effect on the Company's business, financial condition
and results of operations and on the Company's outstanding securities.
5
<PAGE>
INTEREST RATES
The Company's businesses are directly affected by the level of and
fluctuations in interest rates. Fluctuating interest rates may also affect the
net interest income earned by the Company, particularly with respect to
commercial mortgage backed securities and asset backed securities, resulting
from the difference between the yield to the Company on mortgage loans pending
sale and the interest paid by the Company for funds borrowed under the Company's
warehouse credit facilities or otherwise. A decline in interest rates could
result in increased prepayments of outstanding loans, which could negatively
affect the estimated fair value of the Subordinated Certificates held by the
Company.
An increase in interests rates also could have a negative impact on the
Company. Because certain of the Company's borrowings, including borrowings
under the Revolving Loan Agreement, are at variable rates of interest and the
rates charged on most loans the Company originates are fixed, increases in
interest rates after the loans are originated and prior to their sale could
adversely affect the results of operations and financial condition of the
Company. In addition, increase in interest rates prior to sale of the loans also
could reduce the gain on securitized loan sales earned by the Company. As a
majority of the securitization investors are paid based on a fixed interest
rate, the ultimate sale of the Company's loans will fix the spread between the
interest rates paid by borrowers and the pass through interest rates paid to
investors in securitization transactions with respect to such loans, although
increases in interest rates may narrow the potential spread that existed at the
time the loans were originated by the Company. A substantial and sustained
increase in interest rates could decrease the demand for loans at such rates,
which could adversely affect the ability of the Company to originate loans, and
could reduce the gains recognized by the Company upon their securitization and
sale. Furthermore, such a substantial and sustained increase could increase
market pressure to reduce origination fees or servicing spreads.
In addition, inverse or flattened yield curves could have an adverse impact
on the earnings of the Company because the loans pooled and sold by the Company
have long-term rates while the senior interest in the related trusts are priced
on the basis of intermediate interest rates.
The Company monitors the interest rate environment and employs prefunding
or other hedging strategies designed to mitigate the impact of changes in
interest rates. However, there can be no assurance that the profitability of
the Company would not be adversely affected during any period of changes in
interest rates.
GENERAL ECONOMIC CONDITIONS
In addition to fluctuating interest rates, uncertainty and volatility in
the capital markets, periods of economic slowdown or recession or declining
demand for real estate may adversely affect certain segments of the Company's
business. Although such economic conditions may increase the number of
nonperforming loans available for sale to or for management by the Company, such
conditions could adversely affect the resolution of asset portfolios held by the
Company for its own account or managed for others, lead to a decline in prices
or demand for collateral underlying asset portfolios or, in the case of asset
portfolios held for the Company's own account, increase the cost of capital
invested by the Company and the length of time that capital is invested in a
particular asset portfolio, thereby negatively impacting the rate of return
realized from such asset portfolio. Economic downturns may also reduce the
number of loan originations by the Company's home equity lending, commercial
mortgage banking, residential mortgage banking and commercial finance businesses
and negatively impact its securitization activity. Finally, widening spreads in
the capital markets may reduce the profitability of the Company's
securitizations.
In addition, periods of economic slowdown or recession, whether general,
regional or industry-related, may increase the risk of default on mortgage loans
and other loans and may have an adverse effect on the Company's business,
financial condition and results of operations. Such periods also may be
accompanied by decreased consumer demand for home equity mortgages, resulting in
declining values of homes securing outstanding loans, thereby weakening
collateral coverage and increasing the possibility of losses in the event of
default. Significant increases in homes for sale during recessionary economic
periods may depress the prices at which foreclosed homes may be sold or delay
the
6
<PAGE>
timing of such sales. There can be no assurance that the housing markets
will be adequate for the sale of foreclosed homes and any material deterioration
of such markets could reduce recoveries from the sale of collateral.
RISKS OF SECURITIZATION
Significance of Securitization. The Company currently believes that it will
continue to be dependent upon its ability to securitize mortgage loans and other
loans by pooling and subsequently selling them in the secondary market in order
to generate revenues, earnings and cash flows. Accordingly, adverse changes in
the secondary market for such loans could impair the Company's ability to
originate, purchase, warehouse and sell mortgage loans and other loans on a
favorable or timely basis. Any such impairment could have a material adverse
effect upon the Company's business and results of operations. The Company
endeavors to effect a securitization of its home equity loans on at least a
quarterly basis and its commercial mortgage and commercial finance loans on at
least a semi-annual basis. However, market and other considerations, including
the conformity of loans to insurance company and rating agency requirements,
could affect the timing of such transactions. Any delay in the sale of loans
beyond the reporting period in which such sale is anticipated to occur would
delay any expected gain on sale and adversely affect the Company's reported
earnings for such reporting period.
Investment in Subordinated Certificates. The Company invests in Subordinated
Certificates created in securitizations completed by the Company or purchased
from third parties. At June 30, 1998, the Company's aggregate investment in
Subordinated Certificates was approximately $392.8 million based on the
estimated fair value of the Subordinated Certificates at that time. The
Subordinated Certificates entitle the holder to the excess of the interest and
principal paid by borrowers on the loans pooled in the securitization over the
interest and principal passed through to other investors in the securities
created in the securitization transaction, less the normal servicing and other
fees and credit losses realized. The estimated fair value of the Subordinated
Certificates is computed using prepayment, default and interest rate assumptions
that the Company believes market participants would use for similar instruments
at the time of sale. These assumptions may not reflect actual future results.
Accordingly, no assurance can be given that these securities could in fact be
sold or recovered at their stated values on the balance sheet, if at all.
Contingent Risks. Although the Company sells substantially all the mortgage
loans and other loans which it originates or purchases, the Company retains some
degree of credit risk on substantially all loans sold. During the period of
time that loans are held pending sale, the Company is subject to the various
business risks associated with the lending business, including the risk of
borrower default, the risk of foreclosure and the risk that a rapid increase in
interest rates would result in a decline in the value of loans to potential
purchasers. The documents governing the Company's securitization program require
the Company to establish deposit accounts or build over-collateralization levels
through retention of distributions otherwise payable to the holders of the
Subordinated Certificates. Such amounts serve as credit enhancement for the
related trust and are therefore available to fund losses realized on loans held
by such trust. In addition, documents governing the Company's securitization
program require the Company to commit to repurchase or replace loans which do
not conform to the representations and warranties made by the Company at the
time of sale.
Retained Risks of Securitized Loans. The Company makes various
representations with respect to the loans that it pools and securitizes. The
Company's representations rely in part on similar representations made by the
originators of such loans when they were purchased by the Company. In the event
of a breach of its representations, the Company may be required to repurchase or
replace the related loan using its own funds. While the Company may have a
claim against the originator in the event of a breach of any of these
representations made by the originators, the Company's ability to recover on any
such claim will be dependent on the financial condition of the originator.
There can be no assurance that the Company will not experience a material loss
in respect of any of these contingencies.
Importance of Credit Enhancement. To market home equity mortgage-backed,
commercial mortgage-backed and commercial loan-backed securities, the Company
has in the past used various means of credit enhancement to obtain a "AAA/Aaa"
rating for such securities. From time to time, the Company may utilize
insurance policies issued by monoline insurance companies to provide the credit
enhancement necessary to obtain investment grade ratings for home
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equity mortgage-backed securities issued in securitization transactions. Any
unwillingness of monoline insurance companies to guarantee the senior interests
in the Company's loan pools could have a material adverse effect on the
Company's financial position and results of operations.
ASSET PERFORMANCE ASSUMPTIONS
The Company's business, financial condition, results of operations and
liquidity depend, to a material extent, on the performance of loans owned
directly or backing securities purchased and sold by the Company. The carrying
value of the Company's asset portfolios, Subordinated Certificates and certain
other assets have been determined in part using estimates of future cash flows
based on assumptions concerning future default and prepayment rates that are
consistent with the Company's historical experience and market conditions and
present value discount rates that the Company believes would be requested by an
unrelated purchaser of an identical stream of estimated cash flows. Management
believes that the Company's estimates of cash flows were reasonable at the time
such estimates were made. However, the actual rates of default and/or
prepayment on such assets may exceed those estimated and consequently may
adversely affect the carrying values of such assets, anticipated future cash
flows, results of operations and reported earnings. The Company periodically
reviews its loss and prepayment assumptions in relation to current performance
of the loans and market conditions and, if necessary, provides for the
impairment of the respective asset. The Company's business, financial condition
and results of operations could be materially adversely affected by such
adjustments in the future. No assurance can be given that loan losses and
prepayments will not exceed the Company's estimates or that such assets could be
sold at their stated value on the balance sheet, if at all.
RISKS RELATED TO SUB-PRIME LOANS
The sub-prime loan market is comprised of credit-impaired borrowers who
generally have significant equity in their homes and whose borrowing needs are
not currently met by traditional financial institutions. Loans made to such
borrowers may entail a higher risk of delinquency and higher losses than loans
made to more creditworthy borrowers. While the Company believes that the
underwriting criteria and collection methods it employs enable it to reduce the
higher risks inherent in loans made to credit-impaired borrowers, no assurance
can be given that such criteria or methods will afford adequate protection
against higher delinquencies, foreclosures or losses than anticipated and, as a
result, the Company's financial condition or results of operation could be
adversely affected.
SERVICING RISKS; BORROWER DELINQUENCIES AND CLAIMS
When borrowers are delinquent in making monthly payments on commercial
mortgage loans serviced by the Company, the Company is required to advance
interest payments with respect to such delinquent loans to the extent that the
Company deems such advances ultimately recoverable. These advances require
funding from the Company's capital resources but have priority of repayment from
collections or recoveries on the loans in the related pool in the succeeding
month. In the ordinary course of its business, the Company is subject to claims
made against it by borrowers and private investors arising from, among other
things, losses that are claimed to have been incurred as a result of alleged
breaches of fiduciary obligations, misrepresentations, errors and omissions of
employees and officers of the Company (including its appraisers), incomplete
documentation and failures by the Company to comply with various laws and
regulations applicable to its business. The Company believes that liability
with respect to any currently asserted claims or legal actions is not likely to
be material to the Company's consolidated financial position or results of
operations; however, any claims asserted in the future may result in legal
expenses or liabilities which could have a material adverse effect on the
Company's financial position and results of operations.
As a participant in the Fannie Mae DUS program, the Company must accept a
first loss risk on loans originated by the Company. In addition, the Company
must also make certain representations and warranties concerning loans
originated by the Company and sold to Conduit Purchasers or Fannie Mae. These
representations cover such matters as title to the property, lien priority,
environmental reviews and certain other matters.
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RISKS OF HEDGING TRANSACTIONS
The Company has in the past and may in the future enter into interest rate or
foreign currency financial instruments used for hedging purposes. While
intended to reduce the effects of volatility in interest rate or foreign
currency price movements, such transactions could cause the Company to recognize
losses depending on the terms of the instrument and the interest rate or foreign
currency price movements.
FOREIGN OPERATIONS; CURRENCY RISKS
The Company's asset management and resolution business has entered into, and
intends to continue to enter into, contracts to purchase and to manage and
resolve asset portfolios located in Canada, Mexico and Western Europe and may in
the future expand into other foreign countries. Foreign operations are subject
to various special risks, including currency translation risks and currency
exchange rate fluctuations (which the Company intends to mitigate with currency
hedging arrangements as available and economical) and exchange controls.
Changes in foreign exchange rates may have an adverse effect on the Company's
financial condition and results of operations. In addition, earnings of foreign
operations are subject to foreign income taxes that reduce cash flow available
to meet debt service requirements and other obligations of the Company, which
may be payable even if the Company has no earnings on a consolidated basis.
CYCLICALITY OF AND COMPETITION IN THE ASSET MANAGEMENT BUSINESS
The asset management business is affected by long-term cycles in the general
economy. In addition, the volume of domestic asset portfolios available for
purchase by investors or management by third party servicers such as the Company
has generally declined since 1993 as large pools of distressed assets acquired
by governmental agencies in the 1980's and early 1990's have been resolved or
sold. The Company cannot predict what will be a normal annual volume of asset
portfolios to be sold or outsourced for management and resolution. Moreover,
future asset portfolio purchases will depend on the availability of asset
portfolios offered for sale, the availability of capital and the Company's
ability to submit successful bids to purchase asset portfolios. The acquisition
of asset portfolios has become highly competitive in the United States. This
may require the Company to acquire asset portfolios at higher prices thereby
lowering profit margins on the resolutions of such asset portfolios. Under
certain circumstances, the Company may choose not to bid for asset portfolios
which it believes cannot be acquired at attractive prices. As a result of all
the above factors, asset portfolio purchases may vary significantly from quarter
to quarter.
GOVERNMENT REGULATION
The operations of the Company are subject to regulation by federal, state and
local government authorities, as well as to various laws and judicial and
administrative decisions, that impose requirements and restrictions affecting,
among other things, the Company's loan originations, credit activities, maximum
interest rates, finance and other charges, disclosures to customers, the terms
of secured transactions, collection, repossession and claims handling
procedures, multiple qualification and licensing requirements for doing business
in various jurisdictions, and other trade practices. Although the Company
believes that it is in compliance in all material respects with applicable
local, state and federal laws, rules and regulations, there can be no assurance
that more restrictive laws, rules or regulations will not be adopted in the
future that could make compliance more difficult or expensive, restrict the
Company's ability to originate, purchase or sell loans, further limit or
restrict the amount of interest and other charges earned on loans originated or
purchased by the Company, further limit or restrict the terms of loan
agreements, or otherwise adversely affect the business or prospects of the
Company. There are also, among other risks, uncertainties concerning the
business practice of paying back points to home equity mortgage brokers.
COMPETITION
General. The Company's competition varies by business line and geographic
market. Generally, competition within each of the business lines in which the
Company competes is fragmented, with national, local and regional
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competitors, none of which dominates a particular business line. Certain of the
Company's competitors within each of its business lines are larger and have
greater financial resources than the Company.
Asset Management. The Asset Management business is a nationwide (and
increasingly international) business with numerous financially strong and
experienced competitors. The Company believes that its ability to acquire asset
portfolios for its own account will be important to its future growth.
Recently, the Company has encountered increased competition in the market for
asset portfolios which could cause the Company to experience decreasing profit
margins in this business line in order to remain a competitive bidder for asset
portfolios. In addition, declining profit margins presented by current bidding
opportunities has caused the Company to redeploy its capital in more profitable
product lines. Asset portfolio acquisitions also require significant capital.
The Company's competitors in the Asset Management business include Lennar Corp.,
Archon (an affiliate of Goldman, Sachs & Co.), J.E. Roberts Companies, GMAC and
First City Financial Corp.
Commercial Mortgage Banking. The Company's commercial mortgage banking
business consists of real estate capital markets, commercial real estate lending
and commercial loan servicing business lines. In each of these business lines,
the Company competes on a nationwide basis. The real estate capital markets and
commercial real estate lending businesses are fragmented, composed primarily of
small local or regional firms. The Company believes that the commercial
mortgage banking industry is moving toward greater consolidation and that well
capitalized, full service, nationwide mortgage banking firms will emerge from
this consolidation. The Company's objective is to improve its position as a
major nationwide full service mortgage banker to the commercial real estate
industry. The Company's competitors in the commercial mortgage banking business
include Nomura Asset Capital Corporation, GMAC (commercial real estate finance),
L.J. Melody & Co. and Washington Mortgage Corporation.
The commercial loan servicing business is highly competitive. Distinct
markets have developed for the servicing of performing loan pools, under-
performing loan pools and non-performing loan pools. The Company has focused
its commercial loan servicing business on the market for performing loan pools,
the servicing market that management believes has the greatest potential for
growth. The Company's competitors in the commercial loan servicing business
include GMAC Commercial Mortgage Corporation, Midland Loan Services, L.P., G.E.
Capital Asset Management and First Union Bank.
Home Equity Lending. The Company recently has encountered increased
competition in the market for conventional, nonconforming home equity mortgage
loans as more originators and Conduit Purchasers enter this market. This could
impact origination and acquisition volume and profit margins. Certain of the
Company's larger, national competitors have access to greater financial
resources and lower costs of capital. The Company's competitors in the home
equity mortgage banking business include the Associates, United Companies
Financial, The Money Store (an affiliate of First Union Bank) and Conti Mortgage
Corp.
Commercial Finance. The markets in which the Commercial Finance Group
operates are highly competitive and are characterized by competitive factors
that vary based upon product and geographic region. The Commercial Finance
Group's competitors include captive and independent diversified finance
companies, specialty finance companies (including specialty franchise finance
companies), commercial banks, thrift institutions, asset-based lenders, real
estate investment trusts and leasing companies. Many of the competitors of the
Commercial Finance Group are large companies that have substantial capital,
technological and marketing resources, and some of these companies may have
lower costs of capital than is available to the Commercial Finance Group.
Residential Mortgage Banking. The Company has recently engaged, through MIC,
in the residential mortgage banking business. There are numerous competitors in
the residential mortgage banking business, certain of which are larger and have
access to greater financial resources and lower costs of capital than the
Company.
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ANTI-TAKEOVER CONSIDERATIONS
The Company's Restated Certificate of Incorporation, as amended, and Amended
and Restated Bylaws include a number of provisions that may have the effect of
encouraging persons considering unsolicited tender offers or other unilateral
takeover proposals to negotiate with the Company's Board of Directors rather
than pursue non-negotiated takeover attempts. These provisions include a
staggered Board of Directors, authorized "blank check" preferred stock, super
majority voting requirements on certain matters and prohibitions against certain
business combinations. The Indentures governing the Senior Subordinated Notes
and Senior Notes require the Company to repurchase all outstanding Senior
Subordinated Notes and Senior Notes in the event of certain change of control
transactions. In addition, on May 28, 1997, the Company adopted a Stockholders
Rights Plan pursuant to which rights were distributed to stockholders of record
as of June 9, 1997. The Stockholders Rights Plan provides, among other things,
that if a person (or group of affiliated or associated persons) acquires (or ten
(10) days after the commencement of a tender offer to acquire) "beneficial
ownership" of 15% or more of the outstanding shares of Common Stock, the rights
previously distributed to stockholders, other than those owned by such acquiring
person or group, will become exercisable. Under the Stockholders Rights Plan,
the acquisition of 15% or more of the outstanding Common Stock or the completion
of the tender offer will entitle the holder to purchase shares of Common Stock
having a market value equal to twice the purchase price of the right. These
anti-takeover provisions could have the effect of discouraging or making more
difficult a merger, tender offer, other business combination or proxy contest,
even if such event would be favorable to the interests of the stockholders. See
"Description of Securities -- Delaware Law and Certain Corporate Provisions."
YEAR 2000 READINESS
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process date fields containing a two-
digit year is commonly referred to as the "Year 2000 Issue." As the year 2000
approaches, such systems may recognize a date using "00" as the year 1900 rather
than the year 2000 and be unable to accurately process certain date-based
information. This error could potentially result in a system failure or
miscalculation causing disruptions of operations, including, among other things,
a temporary inability to process transactions or engage in similar normal
business activities.
The Company has reviewed its mission-critical computer systems in order to
evaluate necessary modifications for Year 2000 readiness. The Company does not
anticipate any material difficulties in achieving Year 2000 readiness with
respect to the Company's mission-critical computer systems. Furthermore, the
Company does not anticipate that it will incur material expenditures in
connection with any modifications necessary to achieve Year 2000 readiness. In
addition, the Company is in the process of communicating with others with whom
it does significant business to determine their Year 2000 readiness status and
the extent to which the Company could be affected by any third party Year 2000
readiness issues. Although the Company has not received responses from all
third parties with whom it does business, the Company does not anticipate that
it will be materially affected by any third party Year 2000 readiness issues.
However, there can be no assurance that the systems of the Company or those of
other companies on which the Company's systems rely will be timely converted, or
that a failure to convert by another company, or a conversion that is
incompatible with the Company's systems, would not have a material adverse
effect on the Company.
The anticipated costs and timeliness of completion of Year 2000 modifications
are based on management's best estimates, which were derived using numerous
assumptions relating to future events, including, without limitation, the
continued availability of certain resources and third party modification plans.
However, there can be no assurance that the estimates and assumptions will prove
to be accurate.
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FORWARD-LOOKING STATEMENTS
This Prospectus and any Prospectus Supplement may contain or incorporate by
reference forward-looking statements. The factors identified under "Risk
Factors" are important factors (but not necessarily all important factors) that
could cause actual results to differ materially from those expressed in any
forward-looking statement made by, or on behalf of, the Company (or its
subsidiaries).
Where any such forward-looking statement includes a statement of the
assumptions or bases underlying such forward-looking statement, the Company
cautions that, while such assumptions or bases are believed to be reasonable and
are made in good faith, assumed facts or bases almost always vary from actual
results, and the differences between assumed facts or bases and actual results
can be material, depending upon the circumstances. Where, in any forward-
looking statement, the Company (or its subsidiaries), or its management, express
an expectation or belief as to future results, such expectation or belief is
expressed in good faith and is believed to have a reasonable basis, but there
can be no assurance that the statement of expectation or belief will result or
be achieved or accomplished. The words "believe", "expect", "estimate",
"project" and "anticipate" and similar expressions identify forward-looking
statements.
USE OF PROCEEDS
The net proceeds from the sale of the Offered Securities, together with
internally generated funds, will be used (i) to repay, redeem or repurchase
outstanding indebtedness of the Company, (ii) for general operations of the
Company, including acquisitions, investments, capital expenditures and working
capital requirements and (iii) for such other purposes as may be specified in
the related Prospectus Supplement.
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's and its predecessors'
consolidated ratios of earnings to fixed charges and earnings to combined fixed
charges and Preferred Stock dividends for each of the six months ended June 30,
1998 and 1997 and the years ended December 31, 1997, 1996, 1995, 1994 and 1993
on an historical basis.
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------- ------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1) 1.5x 1.8x 1.9x 2.4x 5.4x 21.2x 58.9x
Ratio of earnings to combined fixed
charges and Preferred Stock
dividends(2).......................... 1.5x 1.8x 1.9x 2.4x 5.4x 21.2x 58.9x
</TABLE>
__________
(1) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of operating income before income taxes and fixed charges. Fixed
charges consist of interest expense and amortization of debt issuance costs.
(2) The Company did not have any Preferred Stock outstanding during any of these
periods.
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DESCRIPTION OF SECURITIES
The following description of the terms of the Securities sets forth certain
general terms and provisions of the Securities to which any Prospectus
Supplement may relate. The particular terms of the Securities offered by any
Prospectus Supplement and the extent, if any, to which such general provisions
may apply to the Securities so offered will be described in the Prospectus
Supplement relating to such Securities.
The Company is authorized to issue 150,000,000 shares of Common Stock, par
value $0.05 per share, and 5,000,000 shares of Preferred Stock, par value $1.00
per share. As of September 4, 1998, the Company had issued and outstanding
46,097,685 shares of Common Stock and no shares of Preferred Stock. As of such
date, there were approximately 2,632 holders of record of the outstanding shares
of Common Stock.
The following summary of the Company's Common Stock and Preferred Stock is
qualified in its entirety by reference to the Company's Restated Certificate of
Incorporation, as amended (the "Certificate of Incorporation"), its Amended and
Restated Bylaws (the "Bylaws"), and the Delaware General Corporation Law, as
amended (the "DGCL").
COMMON STOCK
General. Subject to such preferential rights as may be granted by the Board
of Directors in connection with any issuances of Preferred Stock, holders of
shares of Common Stock are entitled to receive such dividends as may be declared
by the Board of Directors in its discretion from funds legally available
therefor. Since October 1995, the Company has not paid cash dividends. The
Board of Directors currently intends to retain all earnings to support
anticipated growth in the current operations of the Company and to finance
future expansion. The Revolving Loan Agreement restricts the payment of
dividends if such payment would cause the Company to fail to meet certain
financial tests and ratios. The Senior Subordinated Notes Indenture and the
Senior Notes Indenture also restrict the payment of cash dividends unless
certain earnings tests are satisfied. Additional restrictions on the payment of
cash dividends may be imposed in connection with future issuances of Preferred
Stock and indebtedness by the Company, including issuances of Debt Securities
and Preferred Stock contemplated by this Prospectus. Further declarations and
payments of cash dividends, if any, will also be determined in light of then-
current conditions, including the Company's earnings, operations, capital
requirements, liquidity, financial condition, restrictions in financing
agreements and other factors deemed relevant by the Board of Directors. Upon the
liquidation, dissolution or winding up of the Company, after payment of
creditors, the remaining net assets of the Company will be distributed pro rata
to the holders of Common Stock, subject to any liquidation preference of the
holders of Preferred Stock which may then be outstanding. There are no
preemptive rights, conversion rights, or redemption or sinking fund provisions
with respect to the shares of Common Stock. All of the outstanding shares of
Common Stock are duly and validly authorized and issued, fully paid and non-
assessable.
Voting Rights. Holders of Common Stock are entitled to one vote per share of
Common Stock held of record on all such matters submitted to a vote of the
stockholders. Holders of the shares of Common Stock do not have cumulative
voting rights. As a result, the holders of a majority of the outstanding shares
of Common Stock voting for the election of directors can elect all the
directors, and, in such event, the holders of the remaining shares of Common
Stock will not be able to elect any persons to the Board of Directors.
Delaware Law and Certain Corporate Provisions. The Company is subject to the
provisions of Section 203 of the DGCL. In general, this statute prohibits a
publicly-held Delaware corporation from engaging, under certain circumstances,
in a "business combination" with an "interested stockholder" for a period of
three years after the date of the transaction in which the person becomes an
interested stockholder, unless either (i) prior to the date at which the
stockholder became an interested stockholder the Board of Directors approved
either the business combination or the transaction in which the person becomes
an interested stockholder, (ii) the stockholder acquires more than 85% of the
outstanding voting stock of the corporation (excluding shares held by directors
who are officers or held in certain employee stock plans) upon consummation of
the transaction in which the stockholder becomes an interested stockholder or
(iii) the business combination is approved by the Board of Directors and by two-
thirds of the outstanding voting stock of the corporation (excluding shares held
by the interested stockholder) at a meeting of the stockholders (and not by
written consent) held on or subsequent to the date on which the person became an
"interested stockholder."
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An "interested stockholder" is a person who, together with affiliates and
associates, owns (or is an affiliate or associate of the corporation and,
together with affiliates and associates, at any time within the prior three
years did own) 15% or more of the corporation's voting stock. Section 203
defines a "business combination" to include, without limitation, mergers,
consolidations, stock sales and asset based transactions and other transactions
resulting in a financial benefit to the interested stockholder.
The Company's Certificate of Incorporation and Bylaws contain a number of
provisions relating to corporate governance and to the rights of stockholders.
Certain of these provisions may be deemed to have a potential "anti-takeover"
effect in that such provisions may delay, defer or prevent a change of control
of the Company. These provisions include: (i) the classification of the Board
of Directors into three classes, each class serving for staggered three-year
terms; (ii) the authority of the Board of Directors to determine the size of the
Board of Directors, subject to certain minimums and maximums; (iii) the
authority of certain members of the Board of Directors to fill vacancies on the
Board of Directors; (iv) a requirement that special meetings of stockholders may
be called only by the Board of Directors, the Chairman of the Board or holders
of at least one-tenth of all the shares entitled to vote at the meeting; (v) the
elimination of stockholder action by written consent; (vi) the authority of the
Board of Directors to issue series of Preferred Stock with such voting rights
and other powers as the Board of Directors may determine; (vii) the requirement
that the Article in the Certificate of Incorporation creating the staggered
board may only be amended by the vote of at least 66 2/3% of the voting
securities of the Company; and (viii) a requirement that any business
combination between the Company and a beneficial owner of more than five percent
of any class of an equity security of the Company must be approved by the
holders of a majority of the Company's securities, excluding those securities
held by such beneficial owner, voted at a meeting called for the purpose of
approving such business combination.
Indemnification and Limited Liability. The Company's Certificate of
Incorporation and Bylaws require the Company to indemnify the directors and
officers of the Company to the fullest extent permitted by law. In addition, as
permitted by the DGCL, the Company's Certificate of Incorporation and Bylaws
provide that no director of the Company will be personally liable to the Company
or its stockholders for monetary damages for such director's breach of duty as a
director. This limitation of liability does not relieve directors from
liability for (i) any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) any liability under
Section 174 of the DGCL for unlawful distributions or (iv) any transaction from
which the director derived an improper personal benefit. This provision of the
Certificate of Incorporation will limit the remedies available to a stockholder
who is dissatisfied with a decision of the Board of Directors protected by this
provision, and such stockholder's only remedy in that circumstance may be to
bring a suit to prevent the action of the Board of Directors. In many
situations, this remedy may not be effective, including instances when
stockholders are not aware of a transaction or an event prior to action of the
Board of Directors in respect of such transaction or event.
Subject to certain limitations, the Company's officers and directors are
insured against losses arising from claims made against them for wrongful acts
which they may become obligated to pay or for which the Company may be required
to indemnify them.
Other Matters. The Common Stock is quoted as a national market security by
the Nasdaq Stock Market, Inc. The Common Stock is identified on such market by
the symbol "AMMB." The Bank of New York, New York, New York, is the transfer
agent and registrar for the Common Stock.
PREFERRED STOCK
The description of certain provisions of the Preferred Stock set forth below
and in any Prospectus Supplement does not purport to be complete and is subject
to and qualified in its entirety by reference to the Company's Certificate of
Incorporation and the Certificate of Designation relating to each series of
Preferred Stock, which will be filed with the Secretary of State of Delaware and
the Commission in connection with the offering of such series of Preferred
Stock.
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General. The Board of Directors may, without approval of the Company's
stockholders, establish series of Preferred Stock having such voting powers, and
such designations, preferences and relative, participating, optional and other
special rights, and qualifications, limitations or restrictions thereof, as the
Board of Directors may determine.
The Preferred Stock will have the dividend, liquidation and voting rights set
forth below unless otherwise provided in the Prospectus Supplement relating to a
particular series of Preferred Stock. Reference is made to the Prospectus
Supplement relating to the particular series of Preferred Stock offered thereby
for specific terms, including: (i) the designation and stated value per share of
such Preferred Stock and the number of shares offered; (ii) the amount of
liquidation preference per share; (iii) the price at which such Preferred Stock
will be issued; (iv) the dividend rate (or method of calculation), the dates on
which dividends will be payable, whether such dividends will be cumulative or
noncumulative and, if cumulative, the dates from which dividends will accrue;
(v) any redemption or sinking fund provisions; (vi) any terms by which such
series of Preferred Stock may be convertible into or exchanged for Common Stock
or Debt Securities; and (vii) any additional or other rights, preferences,
privileges, limitations and restrictions relating to such series of Preferred
Stock.
The Preferred Stock will be issued in one or more series. The holders of
Preferred Stock will have no preemptive rights. Preferred Stock will be fully
paid and nonassessable upon issuance against full payment of the purchase price
therefor. Unless otherwise specified in the Prospectus Supplement relating to a
particular series of Preferred Stock, each series of Preferred Stock will, with
respect to dividend rights and rights on liquidation, dissolution and winding up
of the Company, rank prior to the Common Stock (the "Junior Stock") and on a
parity with each other series of Preferred Stock (the "Parity Stock").
As described under "Depositary Shares" below, the Company may, at its option,
elect to offer Depositary Shares evidenced by depositary receipts, each
representing an interest in a fraction (to be specified in the Prospectus
Supplement relating to the particular series of Preferred Stock) of a share of
the particular series of Preferred Stock, issued and deposited with a
depositary, in lieu of offering any shares of such Preferred Stock. See
"Depositary Shares."
Dividend Rights. Holders of the Preferred Stock of each series will be
entitled to receive when, as and if declared by the Board of Directors of the
Company, out of funds legally available therefor, cash dividends at such rates
and on such dates as are set forth in the Prospectus Supplement relating to such
series of Preferred Stock. Such rate may be fixed or variable or both. Each
such dividend will be payable to the holders of record as they appear on the
stock books of the Company on such record dates as will be fixed by the Board of
Directors of the Company. Dividends on any series of the Preferred Stock may be
cumulative or noncumulative, as provided in the Prospectus Supplement relating
thereto. If the Board of Directors of the Company fails to declare a dividend
payable on a dividend payment date on any series of Preferred Stock for which
dividends are noncumulative, then the right to receive a dividend in respect of
the dividend period ending on such dividend payment date will be lost, and the
Company will have no obligation to pay the dividend accrued for that period,
whether or not dividends are declared for any future period. Dividends on
shares of each series of Preferred Stock for which dividends are cumulative will
accrue from the date set forth in the applicable Prospectus Supplement.
The Preferred Stock of each series will include customary provisions (i)
restricting the payment of dividends or the making of other distributions on, or
the redemption, purchase or other acquisition of, Junior Stock unless full
dividends, including in the case of cumulative Preferred Stock, accruals, if
any, in respect of prior dividend periods, on the shares of such series of
Preferred Stock have been paid and (ii) providing for the pro rata payment of
dividends on such series and other Parity Stock when dividends have not been
paid in full upon such series and other Parity Stock.
Rights Upon Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of each
series of Preferred Stock will be entitled to receive out of assets of the
Company available for distribution to stockholders, before any distribution of
assets is made to holders of Junior Stock, liquidating distributions in the
amount set forth in the Prospectus Supplement relating to such series of
Preferred Stock plus an amount equal to accrued and unpaid dividends. If, upon
any voluntary or involuntary liquidation, dissolution or winding up of the
Company, the amounts payable with respect to the Preferred Stock of any series
and any Parity Stock are not
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paid in full, the holders of the Preferred Stock of such series and of such
Parity Stock will share ratably in any such distribution of assets of the
Company in proportion to the full respective preferential amounts (which may
include accumulated dividends) to which they are entitled. After payment of the
full amount of the liquidating distribution to which they are entitled, the
holders of such series of Preferred Stock will have no right or claim to any of
the remaining assets of the Company. Neither the sale of all or a portion of the
Company's assets nor the merger or consolidation of the Company into or with any
other corporation shall be deemed to be a dissolution, liquidation or winding
up, voluntarily or involuntarily, of the Company.
Voting Rights. Except as indicated below or in the Prospectus Supplement
relating to a particular series of the Preferred Stock, or except as expressly
required by the DGCL, the holders of the Preferred Stock will not be entitled to
vote. In the event the Company issues shares of a series of the Preferred
Stock, unless otherwise indicated in the Prospectus Supplement relating to such
series, each share will be entitled to one vote on matters on which holders of
such series are entitled to vote. In the case of any series of Preferred Stock
having one vote per share on matters on which holders of such series are
entitled to vote, the voting power of such series, on matters on which holders
of such series and holders of any other series of Preferred Stock are entitled
to vote as a single class, will depend on the number of shares in such series,
not the aggregate stated value, liquidation preference or initial offering price
of the shares of such series of the Preferred Stock.
DEPOSITARY SHARES
If so indicated in the applicable Prospectus Supplement, shares of Preferred
Stock in any series will be represented by Depositary Receipts (as defined
below) evidencing Depositary Shares, each equivalent to a specified fractional
interest in a share of such series of Preferred Stock. The description set
forth below and in any Prospectus Supplement of certain provisions of the
Deposit Agreement (as defined below) and of the Depositary Shares and Depositary
Receipts does not purport to be complete and is subject to and qualified in its
entirety by reference to the Deposit Agreement and Depositary Receipts relating
to such series of Preferred Stock, forms of which are filed as exhibits to the
Registration Statement of which this Prospectus forms a part.
General. In the event that the Company elects to offer interests in fractions
of shares of a series of Preferred Stock in lieu of shares of such series of
Preferred Stock, the Company will provide for the issuance by a Depositary of
receipts ("Depositary Receipts") for Depositary Shares, each of which will
represent an interest in a fraction (to be set forth in the related Prospectus
Supplement) of a share of a particular series of the Preferred Stock as
described below.
The shares of any series of Preferred Stock underlying the Depositary Shares
will be deposited under a separate Deposit Agreement (the "Deposit Agreement"),
between the Company and a bank or trust company selected by the Company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000 (the "Depositary"). The Prospectus Supplement
relating to a series of Series Preferred Stock represented by Depositary Shares
will set forth the name and address of the Depositary. Subject to the terms of
the Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a share of a series of Preferred Stock
underlying such Depositary Shares, to all the rights and preferences of the
series of Preferred Stock underlying such Depositary Share (including dividend,
voting, redemption, conversion and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued pursuant
to the Deposit Agreement.
Pending the preparation of definitive Depositary Receipts, the Depositary may,
upon the written order of the Company, issue temporary Depositary Receipts
substantially identical to (and entitling the holders thereof to all the rights
pertaining to) the definitive Depositary Receipts but not in definitive form.
Definitive Depositary Receipts will be prepared thereafter without unreasonable
delay, and temporary Depositary Receipts will be exchangeable for definitive
Depositary Receipts at the Company's expense.
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Dividends and Other Distributions. The Depositary will distribute all cash
dividends or other cash distributions in respect of shares of a series of
Preferred Stock to the record holders of Depositary Shares in proportion,
insofar as practicable, to the number of Depositary Shares owned by such
holders.
In the event of a distribution other than cash in respect of shares of a
series of Preferred Stock, the Depositary will distribute property received by
it to the record holders of Depositary Shares in proportion, insofar as
practicable, to the number of Depositary Shares owned by such holders, unless
the Depositary determines that it is not feasible to make such distribution, in
which case the Depositary may, with the approval of the Company, adopt such
method as it deems equitable and practicable for the purpose of effecting such
distribution, including sale (at public or private sale) of such property and
distribution of the net proceeds from such sale to such holders.
The amount distributed in any of the foregoing cases will be reduced by any
amount required to be withheld by the Company or the Depositary on account of
taxes.
Redemption of Depositary Shares. If a series of Preferred Stock underlying
the Depositary Shares is subject to redemption, the Depositary Shares will be
redeemed from the proceeds received by the Depositary resulting from the
redemption, in whole or in part, of such series of Preferred Stock held by the
Depositary. The redemption price per Depositary Share will be equal to the
applicable fraction of the redemption price per share payable with respect to
such series of Preferred Stock. Whenever the Company redeems shares of a series
of Preferred Stock held by the Depositary, the Depositary will redeem as of the
same redemption date the number of Depositary Shares relating to shares of such
series of Preferred Stock so redeemed. If less than all the Depositary Shares
are to be redeemed, the Depositary Shares to be redeemed will be selected by lot
or pro rata as may be determined by the Depositary to be equitable.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
moneys payable upon such redemption and any money or other property to which the
holders of such Depositary Shares were entitled upon such redemption upon
surrender to the Depositary of the Depositary Receipts evidencing such
Depositary Shares.
Record Date. Whenever (i) any cash dividend or other cash distribution shall
become payable, any distribution other than cash shall be made, or any rights,
preferences, or privileges shall be offered with respect to the shares of a
series of Preferred Stock underlying the Depositary Shares, or (ii) the
Depositary shall receive notice of any meeting at which holders of shares of
such series of Preferred Stock are entitled to vote or of which holders of
shares of such series of Preferred Stock are entitled to notice, or of any
election on the part of the Company to call for redemption any shares of such
series of Preferred Stock, the Depositary shall in each such instance fix a
record date (which shall be the same date as the record date for the shares of
such series of Preferred Stock) for the determination of the holders of
Depositary Shares (x) who shall be entitled to receive such dividend,
distribution, rights, preferences or privileges, (y) who shall be entitled to
give instructions for the exercise of voting rights at any such meeting or to
receive notice of such meeting, or (z) who shall be subject to such redemption,
subject to the provisions of the Deposit Agreement.
Voting. Upon receipt of notice of any meeting at which holders of shares of a
series of Preferred Stock underlying the Depositary Shares are entitled to vote,
the Depositary will mail the information contained in such notice of meeting to
the record holders of Depositary Shares relating to such series of Preferred
Stock. Each record holder of Depositary Shares on the record date (which will
be the same date as the record date for the underlying series of Preferred
Stock) will be entitled to instruct the Depositary as to the exercise of the
voting rights pertaining to the number of shares of the series of Preferred
Stock represented by such holder's Depositary Shares. The Depositary will
endeavor, insofar as practicable, to vote the number of shares of the series of
Preferred Stock represented by such Depositary Shares in accordance with such
instructions, and the Company has agreed to take all reasonable action which may
be deemed necessary by the Depositary in order to enable the Depositary to do
so.
The Depositary will abstain from voting shares of a series of Preferred Stock
to the extent it does not receive specific written voting instructions from the
holders of Depositary Shares representing such series of Preferred Stock.
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Withdrawal of Underlying Preferred Stock. Unless otherwise indicated in the
applicable Prospectus Supplement, upon surrender of Depositary Receipts at the
Corporate Office (as defined in the Deposit Agreement) of the Depositary, the
owner of the Depositary Shares evidenced thereby will be entitled to delivery at
such office of certificates evidencing the number of shares of the series of
Preferred Stock (but only in whole shares of such series of Preferred Stock)
represented by such Depositary Receipts. If the Depositary Receipts delivered
by a holder evidence a number of Depositary Shares in excess of the number of
Depositary Shares representing the number of whole shares of the series of
Preferred Stock to be withdrawn, the Depositary will at the same time deliver to
such holder a new Depositary Receipt or Receipts evidencing such excess number
of Depositary Shares.
Amendment and Termination of Deposit Agreement. The form of Depositary
Receipts and any provision of the Deposit Agreement may at any time be amended
by agreement between the Company and the Depositary. However, any amendment
that imposes any fees, taxes, or other charges payable by holders of Depositary
Shares (other than taxes and other governmental charges, fees and other expenses
payable by such holders as stated under "Charges of Depositary"), or that
otherwise prejudices any substantial existing right of holders of Depositary
Shares, will not take effect as to outstanding Depositary Shares until the
expiation of 90 days after notice of such amendment has been mailed to the
record holders of outstanding Depositary Shares. Every holder of Depositary
Shares at the time any such amendment becomes effective shall be deemed to
consent and agree to such amendment and to be bound by the Deposit Agreement, as
so amended.
Whenever so directed by the Company, the Depositary will terminate the Deposit
Agreement after mailing notice of such termination to the record holders of all
Depositary Shares then outstanding at least 30 days prior to the date fixed in
such notice for such termination. The Depositary may likewise terminate the
Depositary Agreement if at any time 45 days shall have expired after the
Depositary shall have delivered to the Company a written notice of its election
to resign and a successor depositary shall not have been appointed and accepted
its appointment. If any Depositary Shares remain outstanding after the date of
termination, the Depositary thereafter will discontinue the transfer of
Depositary Shares, will suspend the distribution of dividends to the holders
thereof, and will not give any further notices (other than notice of such
termination) or perform any further acts under the Deposit Agreement except as
provided below and except that the Depositary will continue to collect dividends
on the series of Preferred Stock underlying such Depositary Shares and any other
distributions with respect thereto. At any time after the expiration of two
years from the date of termination, the Depositary may sell shares of the series
of Preferred Stock then held by it at public or private sale, at such place or
places and upon such terms as it deems proper and may thereafter hold the net
proceeds of any such sale, together with any money and other property then held
by it, without liability for interest thereon, for the pro rata benefit of the
holders of Depositary Shares. The Company does not presently intend to
terminate any Deposit Agreement or to permit the resignation of any Depositary
without appointment a successor depositary.
Changes of Depositary. The Company will pay all charges of the Depositary,
including charges in connection with the initial deposit of shares of any series
of Preferred Stock, the initial execution and delivery of the Depositary
Receipts, the distribution of information to the holders of Depositary Receipts
with respect to matters on which such series of Preferred Stock is entitled to
vote, withdrawals of shares of such series of Preferred Stock, or redemption or
conversion of shares of such series of Preferred Stock, except for taxes
(including transfer taxes, if any) and other governmental charges and such other
charges as are provided in the Deposit Agreement to be at the expense of holders
of Depositary Receipts.
Miscellaneous. The Depositary will make available for inspection by holders
of Depositary Receipts at its Corporate Office any reports and communications
from the Company that are delivered to the Depositary and made generally
available to the holders of shares of the series of Preferred Stock underlying
the Depositary Shares.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control from or in performing its
obligations under the Deposit Agreement.
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STOCKHOLDER RIGHTS PLAN
On May 28, 1997, the Board of Directors of the Company declared a dividend of
one right to purchase one one-thousandth of a share of Series A Preferred Stock
(a "Right") for each outstanding share of Common Stock to the holders of record
on June 9, 1997 and authorized and directed the issuance of one Right with
respect to each share of Common Stock that shall become outstanding prior to the
occurrence of certain terminating events. The Rights were issued with a
purchase price of $125 per one one-thousandth of a share of Series A Preferred
Stock (the "Purchase Price"). Currently, the Rights trade with the shares of
Common Stock. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Company and The Bank of New York,
as Rights Agent (the "Rights Agent").
The Purchase Price, the number and kind of shares covered by each Right and
the number of Rights outstanding are subject to adjustment from time to time to
prevent dilution upon the occurrence of certain events described in the Rights
Agreement. The Rights will separate from the Common Stock upon the earlier of
(i) ten (10) business days following a public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, beneficial ownership of fifteen percent (15%)
or more of the outstanding shares of Common Stock (the "Stock Acquisition
Date"), or (ii) ten (10) business days (or such later date as the Board of
Directors shall determine) following the commencement of a tender or exchange
offer that would result in a person or group beneficially owning fifteen percent
(15%) or more of such outstanding shares of Common Stock. The date the Rights
separate is referred to as the "Distribution Date." The Rights are not
exercisable until the Distribution Date and will expire at the close of business
on June 9, 2007, unless earlier redeemed by the Company as described below. As
soon as practicable after the Distribution Date, Rights Certificates will be
mailed to holders of record of the Common Stock as of the close of business on
the Distribution Date and, thereafter, the separate Rights Certificates will
represent the Rights.
In the event that (i) the Company is the surviving corporation in a merger or
other business combination with an Acquiring Person (or any associate or
affiliate thereof) and its Common Stock remains outstanding and unchanged, (ii)
any person shall acquire beneficial ownership of more than fifteen percent (15%)
of the outstanding shares of Common Stock (except pursuant to (A) certain
consolidations or mergers involving the Company or sales or transfers of the
combined assets, cash flow or earning power of the Company and its subsidiaries
or (B) an offer for all outstanding shares of Common Stock at a price and upon
terms and conditions which a majority of the Disinterested Directors (as defined
below) determines to be in the best interests of the Company and its
stockholders), or (iii) there occurs a reclassification of securities, a
recapitalization of the Company or any of certain business combinations or other
transactions (other than certain consolidations and mergers involving the
Company and sales or transfers of the combined assets, cash flow or earning
power of the Company and its subsidiaries) involving the Company or any of its
subsidiaries which has the effect of increasing by more than 1% the
proportionate share of any class of the outstanding equity securities of the
Company or any of its subsidiaries beneficially owned by an Acquiring Person (or
any associate or affiliate thereof), each holder of a Right (other than the
Acquiring Person and certain related parties) will thereafter have the right to
receive, upon exercise, Common Stock (or, in certain circumstances, cash,
property or other securities of the Company) having a value equal to two times
the Purchase Price of the Right. However, Rights are not exercisable following
the occurrence of any of the events described above until such time as the
Rights are no longer redeemable by the Company as described below.
Notwithstanding any of the foregoing, following the occurrence of any of the
events described in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person will be null and void.
In the event that, at any time following the Stock Acquisition Date, (i) the
Company enters into a merger or other business combination transaction in which
the Company is not the surviving corporation, (ii) the Company is the surviving
corporation in a consolidation, merger or similar transaction pursuant to which
all or part of the outstanding shares of Common Stock are changed into or
exchanged for stock or other securities of any other person or cash or any other
property or (iii) more than 50% of the combined assets, cash flow or earning
power of the Company and its subsidiaries is sold or transferred (in each case
other than certain consolidations with, mergers with and into, or sales of
assets, cash flow or earning power by or to subsidiaries of the Company as
specified in the Rights Agreement), each
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holder of a Right (except Rights which previously have been voided as set forth
above) shall thereafter have the right to receive, upon exercise, common stock
of the acquiring company having a value equal to two times the Purchase Price of
the Right. The events described in this paragraph and in the preceding paragraph
are referred to as "Triggering Events."
At any time after any person or group becomes an Acquiring Person and prior to
the acquisition by such person or group of 50% or more of the outstanding shares
of Common Stock, the Board of Directors of the Company may, without payment of
the Purchase Price by the holder, exchange the Rights (other than Rights owned
by such person or group, which will become void), in whole or in part, for
shares of Common Stock at an exchange ratio of one-half the number of shares of
Common Stock (or in certain circumstances Preferred Stock) for which a Right is
exercisable immediately prior to the time of the Company's decision to exchange
the Rights (subject to adjustment).
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
in a manner which causes the Rights to become exercisable. The Company
believes, however, that the Rights should neither affect any prospective offeror
that is willing to negotiate with the Board of Directors of the Company nor
interfere with any merger or other business combination approved by the Board of
Directors of the Company. At any time until 10 business days following the
Stock Acquisition Date, the Company may redeem the Rights in whole, but not in
part, at a price of $0.001 per Right (payable in cash, shares of Common Stock or
other consideration deemed appropriate by the Board of Directors).
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date; provided, that
any amendments after the Stock Acquisition Date must be approved by a majority
of the Disinterested Directors. The term "Disinterested Director" means any
member of the Board of Directors of the Company who was a member of the Board
prior to the date of the Rights Agreement, and any person who is subsequently
elected to the Board if such person is recommended or approved by a majority of
the Disinterested Directors, but shall not include an Acquiring Person, or an
affiliate or associate of an Acquiring Person, or any representative of the
foregoing entities. After the Distribution Date, the provisions of the Rights
Agreement may be amended by the Board in order to cure any ambiguity,
inconsistency or defect, to make changes which do not adversely affect the
interest of holders of Rights (excluding the interest of any Acquiring Person)
or to shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable; and, provided, that any
amendments after the Stock Acquisition Date must be approved by a majority of
the Disinterested Directors.
Copies of the Rights Agreement are also available free of charge from the
Rights Agent. The foregoing description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement.
DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. Particular terms of the Debt Securities
offered by any Prospectus Supplement and the extent, if any, to which such
general and specific provisions may apply to the Debt Securities so offered will
be described in the Prospectus Supplement relating to such Debt Securities. The
Debt Securities may be issued either separately, or together with, or upon
conversion of or in exchange for, other Securities.
The Senior Debt Securities and the Subordinated Debt Securities will be issued
under the indentures (the "Senior Indenture" and the "Subordinated Indenture,"
respectively) between the Company and the Trustee named in the applicable
Prospectus Supplement. The forms of Senior Indenture and Subordinated Indenture
(collectively, the "Indentures") have been filed as exhibits to the Company's
Registration Statement on Form S-3 (No. 333-6031) and the Company's Form 8-K
dated March 12, 1997, respectively. The following brief summary of certain
provisions of the Indentures does not purport to be complete and is subject to,
and is qualified in its entirety by reference to all of the provisions of, the
Indentures, and is further qualified by any description contained in the
applicable Prospectus
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Supplement or Prospectus Supplements. Certain terms capitalized and not
otherwise defined herein are defined in the Indentures. Wherever particular
sections or defined terms of the Indentures are referred to, such sections or
defined terms are incorporated herein by reference.
General. The Debt Securities may be issued from time to time in one or more
series. The terms of each series of Debt Securities, including without
limitation any restrictive covenants with respect thereto, will be established
by or pursuant to a resolution of the Board of Directors of the Company and set
forth or determined in the manner provided in an Officers' Certificate or by a
supplemental indenture. The particular terms of the Debt Securities offered
pursuant to any Prospectus Supplement or Prospectus Supplements will be
described in such Prospectus Supplement or Prospectus Supplements. (Indenture
Section 301)
The amount of Debt Securities offered by this Prospectus will be limited to
the amount of Securities set forth on the cover of this Prospectus that have not
been otherwise issued or reserved for issuance. The Indentures will not limit
the aggregate principal amount of Debt Securities that may be issued thereunder.
(Indenture Section 301)
The Senior Debt Securities will rank pari passu in right of payment with all
unsubordinated indebtedness of the Company, but, except to the extent such
Senior Debt Securities are secured by collateral, will be effectively
subordinated to the rights of holders of secured unsubordinated indebtedness of
the Company to the extent of the value of the collateral securing such
indebtedness. The Senior Debt Securities will rank senior to all unsecured
subordinated indebtedness of the Company. The Subordinated Debt Securities will
be unsecured and will be subordinated in right of payment to all existing and
future Senior Debt of the Company, including the Senior Debt Securities, as
described under "Subordination of Subordinated Debt Securities."
The applicable Prospectus Supplement will indicate the form, registered or
bearer, and denominations in which Debt Securities of any series may be issued.
Debt Securities may be issuable in the form of one or more Global Securities, as
described below under "Global Securities." The Debt Securities (other than those
issued in the form of a Global Security) are exchangeable or transferable
without charge therefor, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith
and require the holders to furnish appropriate endorsements and transfer
documents. (Indenture Section 305)
Debt Securities may be issued as original issue discount securities to be sold
at a substantial discount below their principal amount. Special federal income
tax and other considerations applicable thereto and special federal tax and
other considerations applicable to any Debt Securities which are denominated in
a currency other than U.S. dollars will be described in the Prospectus
Supplement or Prospectus Supplements relating thereto.
Principal of and any premium and interest on the Debt Securities will be
payable, and the transfer of the Debt Securities will be registrable at the
office or agency maintained for such purpose. Interest on any Debt Security
that is payable will be paid to the Person in whose name that Debt Security is
registered in the Security Register. In addition, payment of interest may be
made at the option of the Company by check mailed to the address of the Person
entitled thereto as it appears on the Security Register or by wire transfer to
an account maintained by the Person entitled to such interest. (Indenture
Sections 301 and 307)
The applicable Prospectus Supplement or Prospectus Supplements will describe
the terms of the Debt Securities offered thereby, including the following: (i)
the title of the offered Debt Securities and whether the offered Debt Securities
are Senior Debt Securities or Subordinated Debt Securities; (ii) any limit on
the aggregate principal amount of the offered Debt Securities; (iii) the Person
to whom any interest on the offered Debt Securities will be payable, if other
than the Person in whose name they are registered on the regular record date for
such interest; (iv) the date or dates, or the method by which such date or dates
are determined or extended, on which the principal or installments of principal
and premium, if any, of the offered Debt Securities is or are payable; (v) the
rate or rates (which may be fixed or variable) at which the offered Debt
Securities will bear interest, if any, or the method by which such rate or rates
shall be determined, the date from which any such interest will accrue, the
dates on which such interest on the offered Debt Securities will be payable and
the regular record dates therefor, the circumstances, if any, in which the
Company may
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defer interest payments and the basis for calculating interest if other than a
360-day year of twelve 30-day months; (vi) the place or places where the
principal of and premium, if any, and interest on the offered Debt Securities
will be payable and the offered Debt Securities may be surrendered for
registration of transfer or exchange if other than those provided for in the
Senior Indenture or the Subordinated Indenture; (vii) if applicable, the period
or periods within which, the price or prices at which and the terms and
conditions upon which the offered Debt Securities may be redeemed, in whole or
in part, at the option of the Company; (viii) the obligation, if any, of the
Company to redeem or purchase Debt Securities of the series pursuant to any
sinking fund or analogous provisions or at the option of a holder thereof and
the period or periods within which, the price or prices at which and the terms
and conditions upon which Debt Securities of the series shall be redeemed or
purchased in whole or in part pursuant to such obligation; (ix) whether the Debt
Securities of the series will be convertible into shares of Common Stock and/or
exchangeable for other securities, and if so, the terms and conditions upon
which such Debt Securities will be so convertible or exchangeable and any
deletions from or modifications or additions to the applicable Indenture to
permit or to facilitate the issuance of such convertible or exchangeable Debt
Securities or the administration thereof; (x) the identity of each Security
Registrar and Paying Agent if other than or in addition to the Trustee; (xi) if
the amount of principal of or any premium or interest on the offered Debt
Securities may be determined by reference to an index or pursuant to a formula,
the manner in which such amounts shall be determined; (xii) the applicability
of, and any addition to or change in the covenants and definitions set forth in
the applicable Indenture; (xiii) the denominations in which any offered Debt
Securities will be issuable, if other than denominations of $1,000 or any amount
in excess thereof which is an integral multiple of $1,000; (xiv) if other than
U.S. dollars the currency or currencies for the payment of principal of and any
premium and interest on the offered Debt Securities and the manner of
determining the U.S. dollar equivalent of the principal amount thereof for
purposes of the definition of "outstanding" and, if the principal of or any
premium or interest on the offered Debt Securities is to be payable, at the
election of the Company or the holder thereof, in one or more currencies other
than that or those in which the offered Debt Securities are stated to be
payable, the currency, currencies or currency units in which payment of the
principal of and any premium and interest on such offered Debt Securities of
such series as to which such election is made shall be payable, and the periods
within which and the terms and conditions upon which such election is to be
made; (xv) any other event or events of default applicable with respect to the
offered Debt Securities in addition to or in lieu of those described below under
"Events of Default" and any change in the right of the Trustee or the holders to
declare the principal of or any premium or interest on the offered Debt
Securities due and payable; (xvi) if less than the principal amount thereof, the
portion of the principal payable upon acceleration of such Debt Securities
following an Event of Default; (xvii) whether such Debt Securities are to be
issued in whole or in part in the form of one or more Global Securities and, if
so, the identity of the depositary for such Global Security or Securities, and
any circumstances under which any such Global Security may be exchanged for Debt
Securities registered in the name of, and any transfer of such Global Security
may be registered to, a Person other than such depositary or its nominee, if
other than those described in the applicable Indenture (see "Global
Securities"); (xviii) if applicable, that the offered Debt Securities, in whole
or in any specified part, are not defeasible; and (xix) any other terms of the
offered Debt Securities not inconsistent with the provisions of the applicable
Indenture. (Indenture Section 301)
If the purchase price of any Debt Securities is payable in a currency other
than U.S. dollars or if principal of or premium, if any, or interest, if any, on
any of the Debt Securities is payable in any currency other than U.S. dollars,
the specific terms and other information with respect to such Debt Securities
and such foreign currency, including any material foreign currency risks, will
be specified in the Prospectus Supplement or Prospectus Supplements relating
thereto.
Under the Indentures, the terms of the Debt Securities of any series may
differ, and the Company, without the consent of the holders of the Debt
Securities of any series, may reopen a previous series of Debt Securities and
issue additional Debt Securities of such series or establish additional terms of
such series.
Redemption. Except as set forth in the Prospectus Supplement with respect to
any offered Debt Securities or series thereof, the Company is not required to
make mandatory redemption or sinking fund payments with respect to the Debt
Securities. The Prospectus Supplement relating to any offered Debt Securities
or series thereof will specify the provisions, if any, regarding sinking fund
provisions related to such Debt Securities or series thereof. The Indentures
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provide that the Company may deliver outstanding Debt Securities of like tenor
of a series (other than any previously called for redemption) and may apply as a
credit Debt Securities of like tenor of a series which have been redeemed either
at the election of the Company pursuant to the terms of such Debt Securities or
through the application of permitted optional sinking fund payments pursuant to
the terms of such Debt Securities, in each case in satisfaction of all or any
part of any sinking fund payment with respect to the Debt Securities of like
tenor of such series required to be made pursuant to the terms of such
Securities as provided for by the terms of such series. (Indenture Sections
1202 and 1203)
The Indentures provide that, if less than all of the Debt Securities of any
series are to be redeemed at any time, selection of Debt Securities for
redemption will be made by the Trustee by such method as the Trustee shall deem
fair and appropriate, and portions of the Debt Securities selected for
redemption shall be in amounts equal to the minimum authorized denomination for
Debt Securities of like tenor of that series or any integral multiple thereof of
principal amount of Debt Securities of such series of a denomination larger than
the minimum authorized denomination for Debt Securities of that series. Notices
of redemption shall be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each Holder of Debt Securities to be
redeemed at its registered address. If any Debt Security is to be redeemed in
part only, the notice of redemption that relates to such Debt Security shall
state the portion of the principal amount thereof to be redeemed. A new Debt
Security in principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original Debt
Security. On and after the redemption date, interest ceases to accrue on Debt
Securities or portions of them called for redemption. (Indenture Sections 1103,
1104, 1106 and 1107)
Repurchase at the Option of Holders. Except as set forth in the Prospectus
Supplement with respect to any offered Debt Securities or any series thereof,
the Indentures do not contain provisions that permit the Holders of the Debt
Securities to require that the Company repurchase or redeem the Debt Securities
in the event of a sale of assets or a takeover, recapitalization or similar
restructuring, nor does the Indenture contain covenants specifically designed to
protect holders in the event of a highly leveraged transaction involving the
Company.
Covenants. The Indentures contain certain covenants relating to the Company
and its operations, including covenants requiring the Company to (i) punctually
pay interest and principal of Debt Securities, (ii) maintain an office or agency
in each place of payment in respect of the Debt Securities, (iii) hold in trust
money for payment of interest or principal on Debt Securities, (iv) preserve the
corporate existence, rights and franchises of the Company and its Material
Subsidiaries (as defined in the Indentures), (v) generally maintain its
properties and trademarks and to comply with applicable statutes, laws,
ordinances and regulations, (vi) maintain adequate insurance, (vii) timely pay
or discharge material tax obligations and claims for labor, material and
supplies, which, if unpaid, might become a lien upon the property of the Company
or any Subsidiary, (viii) keep proper books of record and account and (ix)
provide to the Trustee quarterly statements of compliance with the Indentures
and notice of any event which after notice or lapse of time or both would become
an Event of Default or the occurrence of any Repurchase Event. Certain of these
covenants are subject to various exceptions and qualifications as set forth in
the Indentures.
Certain additional covenants in respect of the Company may be set forth in the
Prospectus Supplement accompanying this Prospectus.
Consolidation, Merger or Transfer. The Indentures provide that the Company
may not consolidate with, merge with, or transfer all or substantially all of
its assets to another entity where the Company is not the surviving corporation
unless (i) such other entity assumes the Company's obligations under the
applicable Indenture and (ii), after giving effect thereto, no event shall have
occurred and be continuing which, after notice or lapse of time, would become an
Event of Default. The Indentures do not quantify what constitutes "all or
substantially all" of the Company's assets. The Indentures provide that the
Notes and Indentures shall be governed by and construed in accordance with the
laws of the State of Texas. Assuming such law as currently in effect governs
the meaning of "all or substantially all," there currently is no established
quantitative definition of "all or substantially all" of the assets of a
corporation under applicable law. An analysis of all the then relevant facts
and circumstances and relevant legal authorities would be
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required at the time of determination to establish whether or not a sale of "all
or substantially all" assets has occurred. (Indenture Section 801)
Events of Default. The Indentures provide that each of the following
constitutes an Event of Default with respect to the Debt Securities of any
series issued pursuant to the Indentures: (i) failure to pay the principal on
the Debt Securities of that series when due; (ii) failure for 30 consecutive
days (for Debt Securities that pay interest less frequently than monthly) or 10
consecutive days (for Debt Securities that pay interest monthly) to pay when due
any interest on the Debt Securities of that series; (iii) failure to deposit any
sinking fund payment, when and as due, in respect of the Debt Securities of that
series; (iv) failure to perform, or a breach of, any covenant or warranty set
forth in the Indenture for 30 consecutive days after receipt of written notice
from the Trustee or Holders of at least 25% in principal amount of the
outstanding Debt Securities specifying the default and requiring the Company to
remedy such default; (v) an event of default as defined in any indenture or
instrument under which the Company or any Material Subsidiary shall have
Outstanding at least $1.0 million aggregate principal amount of indebtedness
shall have happened and resulted in acceleration of such indebtedness and such
default shall not have been cured or waived and such acceleration shall not have
been rescinded or annulled for a period of 30 consecutive days; (vi) certain
events of insolvency, receivership or reorganization of the Company or any
Material Subsidiary; and (vii) entry of a final judgment, decree or order
against the Company or any Material Subsidiary for the payment of money in
excess of $5.0 million and such judgment, decree or order continues unsatisfied
for 30 consecutive days without a stay of execution. (Indenture Section 501)
If any Event of Default occurs and is continuing with respect to any series of
Debt Securities, the Trustee or the Holders of at least 25% in aggregate
principal amount of the then outstanding Debt Securities of such series may
declare the unpaid principal amount (or, if any of the Debt Securities of that
series are Original Issue Discount Debt Securities, such lesser portion of the
principal amount of such Debt Securities as may be specified in the terms
thereof), premium, if any, and any accrued and unpaid interest on all the Debt
Securities of such series to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company or any Material Subsidiary
of the Company, all principal, premium, if any and interest on outstanding Debt
Securities will become due and payable without further action or notice.
Holders of the Debt Securities may not enforce the respective Indentures or the
Debt Securities except as provided in the Indentures. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Debt Securities of any series may direct the Trustee in its exercise of any
trust or power with respect to such series of Debt Securities. The Trustee may
withhold from Holders of the Debt Securities of any series notice of any
continuing Default or Event of Default (except a Default or Event of Default in
payment on any Debt Security of any series or in the payment of any sinking fund
installment with respect to such series) if it in good faith determines that
withholding notice is in their interest. (Indenture Sections 502, 507, 512 and
602)
The Holders of a majority in aggregate principal amount of the Debt Securities
of any series then outstanding by notice to the Trustee may on behalf of the
Holders of all of the Debt Securities of such series waive any existing Default
or Event of Default with respect to such series of Debt Securities and its
consequences under the applicable Indenture except a continuing Default or Event
of Default with respect to such series in the payment of interest on, or the
principal of, or premium, if any, on the Debt Securities of such series.
(Indenture Section 513)
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee, subject to certain exceptions. (Indenture Section 512) The Indentures
provide that in case an Event of Default shall occur and be continuing, the
Trustee will be required, in the exercise of its power, to use the degree of
care of a prudent person in the conduct of such person's own affairs. Subject
to such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture unless the Trustee receives reasonable
security or indemnity against any loss, liability or expense. (Indenture
Sections 601 and 603)
The Company is required to deliver to the Trustee quarterly a statement
regarding compliance with the Indentures, and the Company is required upon
becoming aware of any Default or Event of Default with respect to a series of
Debt
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Securities due to any event of default under any other indenture or instrument
to deliver to the Trustee a statement specifying such Default or Event of
Default and what action the Company is taking or proposes to take with respect
thereto. (Indenture Section 703)
Defeasance Provisions. The Company will be discharged from any and all
obligations in respect of the Debt Securities of any series (except for certain
obligations to register the transfer or exchange of Debt Securities, to replace
destroyed, stolen, lost or mutilated Debt Securities, to maintain paying
agencies and to hold moneys for payment in trust) on the 91st day after the date
of deposit with the Trustee, in trust, of money, U.S. Government Obligations
which through the payment of interest and principal thereof in accordance with
their terms will provide money, or a combination thereof, in an amount
sufficient to pay any installment of principal of (and premium, if any) and
interest on and any mandatory sinking fund payments in respect of the Debt
Securities of such series on the dates on which such payments are due and
payable in accordance with the terms of the applicable Indenture and such Debt
Securities. Any such discharge is also subject to certain other conditions,
including the limitation that such discharge may only occur if there has been a
change in applicable federal law, or the Company has delivered to the Trustee an
Opinion of Counsel to the effect that such a discharge will not cause the
holders of such series of Debt Securities to recognize income, gain or loss for
federal income tax purposes and that such holders will be subject to federal
income tax on the same amount and in the same manner and at the same times as
would have been the case had such deposit, defeasance and discharge not
occurred, and that such discharge will not cause any outstanding Debt Securities
then listed on any securities exchange to be de-listed as a result thereof.
(Indenture Section 403)
The Company may omit to comply with certain restrictive covenants with respect
to the Debt Securities of any series. If the Company elects not to comply with
any term, provision or condition in any such covenant, the Company must deposit
with the Trustee money, U.S. Government Obligations which through the payment of
interest and principal thereof in accordance with their terms will provide
money, or a combination thereof, in an amount sufficient to pay any installment
of principal of (and premium, if any) and interest on and any mandatory sinking
fund payments in respect of the Debt Securities of such series on the dates on
which such payments are due and payable in accordance with the terms of the
applicable Indenture and such Debt Securities. Any such covenant defeasance is
also subject to certain other conditions, including the delivery to the Trustee
of an opinion of counsel to the effect that the deposit and related covenant
defeasance will not cause the holders of the Debt Securities to recognize
income, gain or loss for federal income tax purposes and that such holders will
be subject to federal income tax on the same amount and in the same manner and
at the same times as would have been the case had such deposit and defeasance
not occurred. (Indenture Section 1009)
In the event the Company omits compliance with certain covenants of the
Indenture and the Debt Securities issued pursuant thereto are declared due and
payable because of the occurrence of any event of default, although the amount
of money and U.S. Government Obligations on deposit with the Trustee will be
sufficient to pay amounts due on the Debt Securities at the time of their stated
maturity, it may not be sufficient to pay amounts due on the Debt Securities at
the time of the acceleration resulting from such event of default. In such
event, the Company shall remain liable for all such payments.
Subordination of Subordinated Debt Securities. The Subordinated Debt
Securities will be subordinate and subject in right of payment, to the extent
and in the manner set forth in the Subordinated Indenture, to the prior payment
in full of all Senior Debt. Upon any distribution to creditors in a
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshaling of assets and liabilities or any bankruptcy, insolvency
or similar proceeding involving the Company, the holders of Senior Debt will be
entitled to receive payment in full in cash of all Obligations (as defined in
the Subordinated Indenture) due on or to become due on or in respect of all
Senior Debt, before the holders of Subordinated Debt Securities are entitled to
receive any payment or distribution of any kind, whether in cash, property or
securities, by set off or otherwise on account of the principal of (and premium,
if any) or interest on the Subordinated Debt Securities or on account of any
purchase, redemption or other acquisition of Subordinated Debt Securities by the
Company, any Subsidiary of the Company, the Trustee or any Paying Agent or on
account of any other obligation of the Company in respect of any Subordinated
Debt Securities (excluding (i) shares of stock or securities of the Company or
another corporation provided for by a plan of reorganization or readjustment
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that are subordinated in right of payment to all then outstanding Senior Debt to
substantially the same extent as, or to a greater extent than, the Subordinated
Debt Securities are so subordinated and (ii) payments of assets from any
defeasance trust which have been on deposit for 90 consecutive days without the
occurrence of blockage of payment on any such series of Subordinated Debt
Securities as described below) ("Securities Payments"). Until the Senior Debt
is paid in full, any Securities Payment to which the holders of Subordinated
Debt Securities or the Trustee for their benefit would be entitled, will be paid
or delivered by the Company or any receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, directly to
the holders of Senior Debt or their representative or representatives or the
trustee or trustees under any indenture pursuant to which any instruments
evidencing, any Senior Debt may have been issued. (Subordinated Indenture
Sections 1301 and 1302)
The Subordinated Indenture contains certain standstill provisions, which
provide that no payments of principal of, or interest on, the Subordinated Debt
Securities may be made and no Subordinated Debt Securities may be accelerated if
at the time thereof the Trustee has received a written notice (a "Default
Notice") from the holder or holders of not less than 51% in principal amount of
the outstanding Senior Debt or any agent therefor (a "Senior Agent") specifying
that an event of default (a "Senior Event of Default") under any Senior Debt has
occurred. Such standstill will remain in effect until the first to occur of the
following: (i) the Senior Event of Default is cured, (ii) the Senior Event of
Default is waived by the holders of such Senior Debt or the Senior Agent or
(iii) the expiration of 180 days after the date the Default Notice is received
by the Trustee if the maturity of such Senior Debt has not been accelerated at
such time. Any such standstill will not prevent the occurrence of an "Event of
Default" under the Subordinated Indenture.
In the event that the Trustee receives any Securities Payment prohibited by
the subordination provisions of the Subordinated Indenture, such payment will be
held by the Trustee in trust for the benefit of, and will immediately be paid
over upon written request to, the holders of Senior Debt or their representative
or representatives, or the trustee or trustees under any applicable indenture
for application to the payment of Senior Debt. (Subordinated Indenture Section
1304) Such subordination will not prevent the occurrence of any event of default
in respect of the Subordinated Debt Securities.
By reason of such subordination, in the event of the insolvency of the
Company, holders of Senior Debt may receive more, ratably, and holders of the
Subordinated Debt Securities having a claim pursuant to such securities may
receive less, ratably, than the other creditors of the Company. There may also
be interruption of scheduled interest and principal payments resulting from
events of default on Senior Debt.
Modification and Waiver. Modifications and amendments of the respective
Indentures may be made by the Company and the Trustee with the consent of the
holders of not less than a majority in aggregate principal amount of the
outstanding Debt Securities of all series affected by such modification or
amendment (voting as one class); provided, however, that no such modification or
amendment may, without the consent of the holder of each outstanding Debt
Security affected thereby, (i) change the stated maturity of the principal of,
or any installment of principal of or interest on, any Debt Security, reduce the
principal amount of, or premium or interest on, any Debt Security, reduce the
amount of principal of an Original Issue Discount Debt Security due and payable
upon acceleration of the maturity thereof, change the place of payment where or
coin or currency in which the principal of, or any premium or interest on, any
Debt Security is payable, or impair the right to institute suit for the
enforcement of any payment on or after the stated maturity of any Debt Security,
(ii) reduce the percentage in principal amount of outstanding Debt Securities of
any series, the consent of the holders of which is required for modification or
amendment of the Senior Indenture or for waiver of compliance with certain
provisions of the Senior Indenture or for waiver of certain defaults or (iii)
modify any of the various sections relating to above-described provisions.
(Indenture Section 902)
The holders of not less than a majority in aggregate principal amount of the
outstanding Debt Securities of each series may, on behalf of the holders of all
Debt Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the Indenture.
(Indenture Section 1011) The holders of not less than a majority in aggregate
principal amount of the Outstanding Debt Securities of each series may, on
behalf of the holders of all Debt Securities of that series, waive any past
default under the Indenture with respect to Debt Securities of that series,
except a default (i) in the payment of principal of, or any premium or interest
on, any Debt
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Security of such series when due (other than amounts due and payable solely upon
acceleration), or (ii) in respect of a covenant or provision of the Indenture
which cannot be modified or amended without the consent of the holder of each
outstanding Debt Security of such series affected. (Indenture Section 513) The
definition of "Senior Debt" in the Subordinated Indenture may not be amended or
modified in a manner adverse to the holders of then outstanding Senior Debt
without the consent of the holders of all Senior Debt affected thereby.
(Subordinated Indenture Section 908)
The Indentures provide that, in determining whether the holders of the
requisite principal amount of the outstanding Debt Securities have given any
request, demand, authorization, direction, notice, consent or waiver thereunder
or whether a quorum is present at a meeting of holders of Debt Securities, (i)
the principal amount of an Original Issue Discount Debt Security that will be
deemed to be outstanding will be the amount of the principal thereof that would
be due and payable as of the date of such determination upon acceleration of the
maturity thereof to such date and (ii) the principal amount of a Debt Security
denominated in a foreign currency or currency unit that will be deemed to be
outstanding will be the United States dollar equivalent, determined as of the
date of original issuance of such Debt Security, of the principal amount of such
Debt Security (or, in the case of an Original Issue Discount Debt Security, the
United States dollar equivalent, determined as of the date of original issuance
of such Debt Security, of the amount determined as provided in (i) above).
(Indenture Section 101)
Global Securities. The following description will apply to any series of Debt
Securities issued, in whole or in part, in the form of a Global Security or
Global Securities deposited with, or on behalf of, The Depository Trust Company
("DTC") (each such Debt Security represented by a Global Security, being herein
referred to as a "Book-Entry Security").
Upon initial issuance, all Book-Entry Securities of the same series and
bearing interest, if any, at the same rate or pursuant to the same formula and
having the same date of issuance, redemption provisions, if any, repayment
provisions, if any, stated maturity and other terms will be represented by a
single Global Security. Each Global Security representing Book-Entry Securities
will be deposited with, or on behalf of, DTC and will be registered in the name
of DTC or a nominee of DTC. Unless otherwise specified in the applicable
Prospectus Supplement, all Book-Entry Securities will be denominated in U.S.
dollars.
Upon the issuance of a Global Security, DTC will credit accounts held with it
with the respective principal or face amounts of the Book-Entry Securities
represented by such Global Security. The accounts to be credited shall be
designated initially by the Agent through which the Debt Security was sold or,
to the extent that such Debt Securities are offered and sold directly, by the
Company. Ownership of beneficial interests in a Global Security will be limited
to institutions that have accounts with DTC ("participants") and to persons that
may hold interests through such participants. Ownership of beneficial interests
by participants in a Global Security will be shown on, and the transfer of that
ownership interest will be effected only through, records maintained by DTC for
such Global Security. Ownership of beneficial interests in such Global Security
by persons that hold through participants will be shown on, and the transfer of
that ownership interest within such participant will be effected only through,
records maintained by such participant.
Payment of principal of, premium, if any, and interest, if any, on Book-Entry
Securities represented by any such Global Security will be made to DTC or its
nominee, as the case may be, as the sole registered holder of the Book-Entry
Securities represented thereby for all purposes under the Indentures. None of
the Company, the Trustee, the Paying Agent or any agent of the Company or the
Trustee will have a responsibility or liability for any aspect of DTC's records
relating to or payments made on account of beneficial ownership interests in a
Global Security representing any Book-Entry Securities or any other aspect of
the relationship between DTC and its participants or the relationship between
such participants and the owners of beneficial interests in a Global Security
owning through such participants or for maintaining, supervising or reviewing
any of DTC's records relating to such beneficial ownership interests.
The Company has been advised by DTC that upon receipt of any payment of
principal of, premium, if any, or interest, if any, on any such Global Security,
DTC will immediately credit, on its book-entry registration and transfer system,
the accounts of participants with payments in amounts proportionate to their
respective beneficial interests in
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the principal amount of such Global Security as shown on the records of DTC.
Payments by participants to owners of beneficial interests in a Global Security
held through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held by such
participants for customer accounts registered in "street name," and will be the
sole responsibility of such participants.
No Global Security may be transferred except as a whole by a nominee of DTC to
DTC or to another nominee of DTC, or by DTC or any such nominee to a successor
of DTC or a nominee of such successor.
A Global Security representing Book-Entry Securities is exchangeable for
certificated Debt Securities of the same series and bearing interest, if any, at
the same rate or pursuant to the same formula, having the same date of issuance,
redemption provisions, if any, repayment provisions, if any, stated maturity and
other terms and of differing authorized denominations aggregating a like amount,
if any, if (i) DTC notifies the Company that it is unwilling or unable to
continue as depositary for such Global Security or if at any time DTC ceases to
be a clearing agent registered under the Exchange Act, (ii) the Company, in its
sole discretion, determines that such Global Security shall be exchangeable for
certificated Debt Securities or (iii) there shall have occurred and be
continuing an Event of Default with respect to the Book-Entry Securities. Such
certificated Debt Securities shall be registered in the names of the owners of
the beneficial interests in such Global Security as provided by DTC's relevant
participants (as identified by DTC).
Owners of beneficial interests in a Global Security will not be considered the
registered holders thereof for any purpose under the applicable Indenture and no
Global Security representing Book-Entry Securities shall be exchangeable or
transferrable. Accordingly, each person owning a beneficial interest in such a
Global Security must rely on the procedures of DTC and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest, to exercise any rights of a registered holder under the applicable
Indenture. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in certificated form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Security.
DTC, as the registered holder of each Global Security, may appoint agents and
otherwise authorize participants to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action which a
registered holder is entitled to give or take under the applicable Indenture.
The Company understands that under existing industry practices, in the event
that the Company requests any action of registered holders or that an owner of a
beneficial interest in such a Global Security desires to give or take any action
which a registered holder is entitled to give or take under such Indenture, DTC
would authorize the participants holding the relevant beneficial interests to
give or take such action, and such participants would authorize beneficial
owners owning through such participants to give or take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
DTC has advised the Company that DTC is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered under the Exchange
Act. DTC was created to hold the securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include securities brokers and
dealers, banks (which may include the Trustee), trust companies, clearing
corporations, and certain other organizations some of whom (and/or their
representatives) own DTC. Access to DTC's book-entry system is also available
to others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a participant, either directly
or indirectly.
Certain Definitions. Set forth below are certain defined terms used in the
Indentures. Reference is made to the Indentures for a full disclosure of all
such terms, as well as any other capitalized terms used herein for which no
definition is provided. (Indenture Section 101)
"Funded Debt" means any of the following obligations of the Company or any
Subsidiary which by its terms matures at or is extendable or renewable at the
sole option of the obligor without requiring the consent of the obligee
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to a date more than 360 days after the date of the creation or incurrence of
such obligation: (i) any obligations, contingent or otherwise, for borrowed
money or for the deferred purchase price of property, assets, securities or
services (including, without limitation, any interest accruing subsequent to an
event of default), (ii) all obligations (including the Debt Securities)
evidenced by bonds, notes, debentures or other similar instruments, (iii) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired (even though the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), except any such
obligation that constitutes a trade payable and an accrued liability arising in
the ordinary course of business, if and to the extent any of the foregoing
indebtedness would appear as a liability upon a balance sheet prepared in
accordance with generally accepted accounting principles, (iv) all Capital Lease
Obligations, (v) liabilities of the Company actually due and payable under
banker's acceptances or letters of credit, (vi) all indebtedness of the type
referred to in clause (i), (ii), (iii), (iv) or (v) above secured by (or for
which the holder of such indebtedness has an existing right, contingent or
otherwise, to be secured by) any lien upon or security interest in property of
the Company or any Subsidiary (including, without limitation, accounts and
contract rights), even though the Company or any Subsidiary has not assumed or
become liable for the payment of such indebtedness and (vii) any guarantee or
endorsement (other than for collection or deposit in the ordinary course of
business) or discount with recourse of, or other agreement, contingent or
otherwise, to purchase, repurchase, or otherwise acquire, to supply, or advance
funds or become liable with respect to, any indebtedness or any obligation of
the type referred to in any of the foregoing clauses (i) through (vi),
regardless of whether such obligation would appear on a balance sheet.
"Junior Indebtedness" means all Funded Debt except Senior Debt.
"Material Subsidiary" means Holliday Fenoglio, Inc., AMRESCO Management, Inc.,
AMRESCO Residential Mortgage Corporation, AMRESCO Advisors, Inc., AMRESCO
Residential Credit Corporation, AMRESCO Residential Capital Markets, Inc.,
AMRESCO Capital Corporation, AMRESCO New England, Inc., Oak Cliff Financial,
Inc. and any other Subsidiary whose assets or revenues comprise at least five
percent (5%) of the assets or revenues of the Company and the Subsidiaries on a
consolidated basis as of the end of, or for the, Company's most recently
completed fiscal quarter, as determined from time to time.
"Original Issue Discount Security" means any Debt Security which provides for
an amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof pursuant to the terms of the
applicable Indenture.
"pari passu" means, with respect to the ranking of any indebtedness of any
Person in relation to other indebtedness of such Person, that such indebtedness
(a) either (i) is not subordinate in right of payment to any other indebtedness
of such Person or (ii) is subordinate in right of payment to the same
indebtedness of such Person as is the other and is so subordinate to the same
extent and (b) is not subordinate in right of payment to the other or to any
indebtedness of such Person as to which the other is not so subordinate.
"Senior Debt" means any Funded Debt whether outstanding on the date of
execution of the Indenture or thereafter created or incurred, unless it is
provided in the appropriate instrument that such Funded Debt is subordinated to
any other Funded Debt.
"Subsidiary" means, with respect to any Person, (i) any Corporation of which
at the time of determination more than 50% of the shares of Voting Stock is at
the time owned or controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of that Person (or a combination thereof) and
(ii) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or one or more Subsidiaries of such
Person (or any combination thereof).
"U.S. Government Obligations" means direct obligations of the United States of
America, or any Person controlled or supervised by and acting as an agency or
instrumentality of such government, in each case where the payment or payments
thereunder are unconditionally guaranteed as a full faith and credit obligation
by such government and which are not callable or redeemable at the option of the
issuer or issuers thereof, and shall also include a depository receipt
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issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of or
other amount with respect to any such U.S. Government Obligation held by such
custodian for the account of the holder of a depository receipt, provided that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of interest on or principal of or other
amount with respect to the U.S. Government Obligation evidenced by such
depository receipt.
SECURITIES WARRANTS
The Company may issue Securities Warrants for the purchase of Debt Securities,
Preferred Stock or Common Stock. Securities Warrants may be issued
independently or together with other Securities offered by any Prospectus
Supplement and may be attached to or separate from such other Securities. Each
series of Securities Warrants will be issued under a separate warrant agreement
(a "Securities Warrant Agreement") to be entered into between the Company and a
bank or trust company as Securities Warrant Agent, all as set forth in the
Prospectus Supplement relating to the particular issue of offered Securities
Warrants. The Securities Warrant Agent will act solely as an agent of the
Company in connection with the Securities Warrant Certificates and will not
assume any obligation or relationship of agency or trust for or with any holders
of Securities Warrant Certificates or beneficial owners of Securities Warrants.
Copies of the forms of Securities Warrant Agreements, including the forms of
Securities Warrant Certificates representing the Securities Warrants, will be
filed or incorporated by reference as exhibits to the Registration Statement to
which this Prospectus pertains. The following summaries of certain provisions
of the forms of Securities Warrant Agreements and Securities Warrant
Certificates do not purport to be complete and are subject to and are qualified
in their entirety by reference to all the provisions of the Securities Warrant
Agreements and the Securities Warrant Certificates.
General. If Securities Warrants are offered, the applicable Prospectus
Supplement will describe the terms of such Securities Warrants, including, in
the case of Securities Warrants for the purchase of Debt Securities, the
following where applicable: (i) the offering price; (ii) the currencies in which
such Securities Warrants are being offered; (iii) the designation, aggregate
principal amount, currencies, denominations and terms of the series of Debt
Securities purchasable upon exercise of such Securities Warrants; (iv) the
designation and terms of any series of Securities with which such Securities
Warrants are being offered and the number of such Securities Warrants being
offered with each such Security; (v) the date on and after which such Securities
Warrants and the related series of Securities will be transferable separately;
(vi) the principal amount of the series of Debt Securities purchasable upon
exercise of each such Securities Warrant and the price at which and currencies
in which such principal amount of Debt Securities of such series may be
purchased upon such exercise; (vii) the date on which the right to exercise such
Securities Warrants shall commence and the date (the "Expiration Date") on which
such right shall expire; (viii) whether the Securities Warrants will be issued
in registered or bearer form; (ix) a discussion of any material United States
federal income tax consequences; and (x) any other terms of such Securities
Warrants.
In the case of Securities Warrants for the purchase of Preferred Stock or
Common Stock, the applicable Prospectus Supplement will describe the terms of
such Securities Warrants, including the following where applicable: (i) the
offering price; (ii) the aggregate number of shares purchasable upon exercise of
such Securities Warrants and, in the case of Securities Warrants for Preferred
Stock, the designation, aggregate number and terms of the series of Preferred
Stock purchasable upon exercise of such Securities Warrants; (iii) the
designation and terms of the series of Securities with which such Securities
Warrants are being offered and the number of such Securities Warrants being
offered with each such Security; (iv) the date on and after which such
Securities Warrants and the related series of Securities will be transferable
separately; (v) the shares of Preferred Stock or Common Stock purchasable upon
exercise of each such Securities Warrant and the price at which such shares of
Preferred Stock or Common Stock may be purchased upon each exercise; (vi) the
date on which the right to exercise such Securities Warrants shall commence and
the expiration date thereof; (vii) a discussion of any material United States
federal income tax consequences; and (viii) any other terms of such Securities
Warrants. Securities Warrants for the purchase of Preferred Stock or Common
Stock will be offered and exercisable for U.S. dollars only and will be in
registered form only.
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Securities Warrant Certificates may be exchanged for new Securities Warrant
Certificates of different denominations, may (if in registered form) be
presented for registration of transfer and may be exercised at the corporate
trust office of the Securities Warrant Agent or any other office indicated in
the applicable Prospectus Supplement. Prior to the exercise of any Securities
Warrant to purchase Debt Securities, holders of such Securities Warrants will
not have any of the rights of holders of the Debt Securities purchasable upon
such exercise, including the right to receive payments of principal of, premium,
if any, or interest, if any, on the Debt Securities purchasable upon such
exercise or to enforce covenants in the applicable Indenture. Prior to the
exercise of any Securities Warrants to purchase Preferred Stock or Common Stock,
holders of such Securities Warrants will not have any rights of holders of the
Preferred Stock or Common Stock purchasable upon such exercise, including the
right to receive payment of dividends, if any, on the Preferred Stock or Common
Stock purchasable upon such exercise or to exercise any applicable right to
vote.
Exercise of Securities Warrants. Each Securities Warrant will entitle the
holder thereof to purchase such principal amount of Debt Securities or shares of
Preferred Stock or Common Stock, as the case may be, at such exercise price as
shall in each case be set forth in, or calculable from, the Prospectus
Supplement relating to the offered Securities Warrants. After the close of
business on the Expiration Date (or such later date to which such Expiration
Date may be extended by the Company), unexercised Securities Warrants will
become void.
Securities Warrants may be exercised by delivering to the Securities Warrant
Agent payment as provided in the applicable Prospectus Supplement of the amount
required to purchase the Debt Securities, Preferred Stock or Common Stock, as
the case may be, purchasable upon such exercise together with certain
information set forth on the reverse side of the Securities Warrant Certificate.
Securities Warrants will be deemed to have been exercised upon receipt of
payment of the exercise price, subject to the receipt of the Securities Warrant
Certificate evidencing such Securities Warrants. Upon receipt of such payment
and the Securities Warrant Certificate properly completed and duly executed at
the corporate trust office of the Securities Warrant Agent or any other office
indicated in the applicable Prospectus Supplement, the Company will, as soon as
practicable, issue and deliver the Debt Securities, Preferred Stock or Common
Stock, as the case may be, purchasable upon exercise. If fewer than all of the
Securities Warrants represented by such Securities Warrant Certificate are
exercised, a new Securities Warrant Certificate will be issued for the remaining
amount of Securities Warrants.
Amendments and Supplements to Securities Warrant Agreement. The Securities
Warrant Agreements may be amended or supplemented without the consent of the
holders of the Securities Warrants issued thereunder to effect changes that are
not inconsistent with the provisions of the Securities Warrants and that do not
adversely affect the interests of the holders of the Securities Warrants.
Common Stock Warrant Adjustments. The exercise price of, and the number of
shares of Common Stock covered by, a Common Stock Warrant are subject to
adjustment in certain events, including (i) the issuance of capital stock as a
dividend or distribution on the Common Stock; (ii) subdivisions and combinations
of the Common Stock; (iii) the issuance to all holders of Common Stock of
certain rights or warrants entitling them to subscribe for or purchase Common
Stock within 45 days after the date fixed for the determination of the
stockholders entitled to receive such rights or warrants, at less than the
current market price (as defined in the Warrant Agreement for such series of
Common Stock Warrants); and (iv) the distribution to all holders of Common Stock
of evidences of indebtedness or assets of the Company (excluding certain cash
dividends and distributions described below) or rights or warrants (excluding
those referred to above). In the event that the Company shall distribute any
rights or warrants to acquire capital stock pursuant to clause (iv) above (the
"Capital Stock Rights") pursuant to which separate certificates representing
such Capital Stock Rights will be distributed subsequent to the initial
distribution of such Capital Stock Rights (whether or not such distribution
shall have occurred prior to the date of the issuance of a series of Common
Stock Warrants), such subsequent distribution shall be deemed to be the
distribution of such Capital Stock Rights; provided that the Company may, in
lieu of making any adjustment in the exercise price of and the number of shares
of Common Stock covered by a Common Stock Warrant upon a distribution of
separate certificates representing such Capital Stock Rights, make proper
provision so that each holder of such a Common Stock Warrant who exercises such
Common Stock Warrant (or any portion thereof) (a) before the record date for
such distribution of separate certificates shall be entitled to receive upon
such exercise shares of Common Stock issued with Capital Stock Rights and (b)
after such record date and prior
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to the expiration, redemption or termination of such Capital Stock Rights shall
be entitled to receive upon such exercise, in addition to the shares of Common
Stock issuable upon such exercise, the same number of such Capital Stock Rights
as would a holder of the number of shares of Common Stock that such Common Stock
Warrant so exercised would have entitled the holder thereof to acquire in
accordance with the terms and provisions applicable to the Capital Stock Rights
if such Common Stock Warrant was exercised immediately prior to the record date
for such distribution. Common Stock owned by or held for the account of the
Company or any majority owned Subsidiary shall not be deemed outstanding for the
purpose of any adjustment.
No adjustment in the exercise price of and the number of shares of Common
Stock covered by a Common Stock Warrant will be made for regular quarterly or
other periodic or recurring cash dividends or distributions or for cash
dividends or distributions to the extent paid from retained earnings. No
adjustment will be required unless such adjustment would require a change of at
least 1% in the exercise price then in effect; provided that any such adjustment
not so made will be carried forward and taken into account in any subsequent
adjustment; and provided further that any such adjustment not so made shall be
made no later than three years after the occurrence of the event requiring such
adjustment to be made or carried forward. Except as stated above, the exercise
price of and the number of shares of Common Stock covered by a Common Stock
Warrant will not be adjusted for the issuance of Common Stock or any securities
convertible into or exchangeable for Common Stock, or securities carrying the
right to purchase any of the foregoing.
In the case of (i) a reclassification of or change to the Common Stock, other
than changes in par value, (ii) a consolidation or merger involving the Company,
other than where the Company is the continuing corporation and reclassification
or change, as described in (i) above, is involved or (iii) a sale or conveyance
to another corporation of the property and assets of the Company as an entirety
or substantially as an entirety, the holders of the Common Stock Warrants then
outstanding will be entitled thereafter to convert such Common Stock Warrants
into the kind and amount of shares of stock and other securities or property
which they would have received upon such reclassification, change,
consolidation, merger, sale or conveyance had such Common Stock Warrants been
exercised immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance.
PLAN OF DISTRIBUTION
The Company may offer and sell the Offered Securities in one or more of the
following ways: (i) through underwriters or dealers, (ii) through agents or
(iii) directly to one or more purchasers. The Prospectus Supplement with
respect to a particular offering of a series of Offered Securities will set
forth the terms of the offering of such Offered Securities, including the name
or names of any underwriters or agents with whom the Company has entered into
arrangements with respect to the sale of such Offered Securities, the public
offering or purchase price of such Offered Securities and the proceeds to the
Company from such sales and any underwriting discounts, agency fees or
commissions and other items constituting underwriters' compensation, the initial
public offering price, any discounts or concessions to be allowed or re-allowed
or paid to dealers and any securities exchange, if any, on which such Offered
Securities may be listed. Dealer trading may take place in certain of the
Offered Securities, including Offered Securities not listed on any securities
exchange.
If underwriters are involved in the offer and sale of Offered Securities, the
Offered Securities will be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The Offered Securities may be offered to the
public either through underwriting syndicates represented by managing
underwriters, or by underwriters without a syndicate, all of which underwriters
in either case will be designated in the applicable Prospectus Supplement.
Unless otherwise set forth in the applicable Prospectus Supplement, under the
terms of the underwriting agreement, the obligations of the underwriters to
purchase Offered Securities will be subject to certain conditions precedent and
the underwriters will be obligated to purchase all of the Offered Securities if
any are purchased. Any initial public offering price and any discounts or
concessions to be allowed or re-allowed or paid to dealers may be changed from
time to time.
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Offered Securities may be offered and sold directly by the Company or through
agents designated by the Company from time to time. Any agent involved in the
offer or sale of the Offered Securities with respect to which this Prospectus is
delivered will be named in, and any commissions payable by the Company to such
agent will be set forth in or calculable from, the applicable Prospectus
Supplement. Unless otherwise indicated in the Prospectus Supplement, any such
agent will be acting on a best efforts basis for the period of its appointment.
If so indicated in the applicable Prospectus Supplement, the Company may
authorize underwriters, dealers or agents to solicit offers by certain
institutions to purchase the Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to delayed
delivery contracts ("Delayed Delivery Contracts") providing for payment and
delivery on the date or dates stated in the Prospectus Supplement. Each Delayed
Delivery Contract will be for an amount of the Offered Securities not less than
and, unless the Company otherwise agrees, the aggregate amount of the Offered
Securities sold pursuant to Delayed Delivery Contracts shall be not more than
the respective minimum and maximum amounts stated in the Prospectus Supplement.
Institutions with which Delayed Delivery Contracts, when authorized, may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies and educational and charitable institutions, but shall in
all cases be subject to the approval of the Company in its sole discretion. The
obligations of the purchaser under any Delayed Delivery Contract to pay for and
take delivery of the Offered Securities will not be subject to any conditions
except that (i) the purchase of the Offered Securities by such institution shall
not at the time of delivery be prohibited under the laws of the jurisdiction to
which such institution is subject and (ii) any related sale of the Offered
Securities to underwriters shall have occurred. A commission set forth in the
Prospectus Supplement will be paid to underwriters soliciting purchases of the
Offered Securities pursuant to Delayed Delivery Contracts accepted by the
Company. The underwriters will not have any responsibility in respect of the
validity or performance of Delayed Delivery Contracts.
The Debt Securities, the Preferred Stock and the Securities Warrants will be
new issues of securities with no established trading market. Any underwriters
to whom Offered Securities are sold by the Company for public offering and sale
may make a market in such Offered Securities, but such underwriters will not be
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
any Offered Securities.
Any underwriter, dealer or agent participating in the distribution of the
Offered Securities may be deemed to be an underwriter, as that term is defined
in the Securities Act, of the Offered Securities so offered and sold and any
discounts or commissions received by it from the Company and any profit realized
by it on the sale or resale of the Offered Securities may be deemed to be
underwriting discounts and commissions under the Securities Act.
Under agreements entered into with the Company, underwriters, dealers and
agents may be entitled to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which the underwriters or agents may be required to
make in respect thereof.
Underwriters, dealers and agents also may be customers of, engage in
transactions with, or perform other services for the Company in the ordinary
course of business.
LEGAL MATTERS
The validity of the shares of Common Stock, the Preferred Stock, the Debt
Securities and Securities Warrants offered hereby will be passed upon for the
Company by L. Keith Blackwell as General Counsel of the Company. As of
September 4, 1998, Mr. Blackwell owned beneficially 12,605 shares of Common
Stock (excluding 12,250 unvested shares allocated under the Company's restricted
stock plan) and holds options to purchase 213,275 shares of Common Stock.
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EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report which is incorporated herein by reference
and has been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In accordance with the
Exchange Act, the Company files reports, proxy and information statements and
other information with the Securities and Exchange Commission (the
"Commission"). The reports, proxy and information statements and other
information can be inspected and copied at the public reference facilities that
the Commission maintains at the Public Reference Room, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at 7
World Trade Center, 13th Floor, New York, New York 10048, and Suite 1400, 500
West Madison Street, Chicago, Illinois 60661. Copies of these materials can be
obtained at prescribed rates from the Public Reference Section of the Commission
at the principal offices of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549. Such documents may also be obtained at the website maintained by
the Commission (http://www.sec.gov). Information on the operation of the
Company's Public Reference Room may be obtained by calling the Commission at 1-
800-SEC-0330. The Company's Common Stock is quoted on the Nasdaq National
Market and such reports, proxy and information statements and other information
may be inspected at the National Association of Securities Dealers, Inc., 1735
K. Street N.W., Washington, D.C. 20006. The Company's 10% Senior Subordinated
Notes due 2003, the 8.75% Senior Notes due 1999 and the 10% Senior Subordinated
Notes due 2004 are listed for trading on the New York Stock Exchange. Reports
and other information concerning the Company can be inspected at the offices of
such Exchange, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on Form S-3
(the "Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Securities. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement, certain items of which are
contained in schedules and exhibits to the Registration Statement as permitted
by the rules and regulations of the Commission. Statements made in the
Prospectus concerning the contents of any documents referred to herein are not
necessarily complete. With respect to each such document filed with the
Commission as an exhibit to the Registration Statement, reference is made to the
exhibit for a more complete description, and each such statement shall be deemed
qualified in its entirety by such reference.
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$," "dollars," "U.S.
dollars," or "U.S.$").
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference in
this Prospectus: (i) Annual Report on Form 10-K for the year ended December 31,
1997 (filed March 27, 1998; File No. 001-11599), (ii) Quarterly Report on Form
10-Q for the quarter ended March 31, 1998 (filed May 5, 1998; File No. 001-
11599), (iii) Quarterly Report on Form 10-Q for the quarter ended June 30, 1998
(filed August 14, 1998; Commission File No. 001-11599), (iv) Current Report on
Form 8-K dated August 19, 1998 (filed August 21, 1998; Commission File No. 001-
11599) and (v) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A dated May 28, 1997 (filed May 30,
1997; File No. 000-08630).
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus shall be
deemed to be incorporated by reference herein. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed superseded or modified for
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purposes of this Prospectus to the extent that a statement contained herein (or
in any other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of any such person, a copy of any or all of the documents incorporated
by reference (other than exhibits to such documents which are not specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to the Company, 700 North Pearl Street, Suite 2400, LB 342,
Dallas, Texas 75201, Attention: L. Keith Blackwell, Senior Vice President,
General Counsel and Secretary. Telephone requests may be directed to L. Keith
Blackwell, Senior Vice President, General Counsel and Secretary of the Company,
at (214) 953-7700.
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GLOSSARY
The following are certain defined terms which may be used in this Prospectus
and any accompanying Prospectus Supplement:
"AMRESCO CAPITAL" means AMRESCO Capital, L.P., a subsidiary of the Company.
"AMRESCO RESIDENTIAL" means, collectively, ARMC and AMRESCO Residential Credit
Corporation, subsidiaries of the Company.
"AMRESCO SERVICES" means a division of AMRESCO Services, L.P., a subsidiary of
the Company.
"ARMC" means AMRESCO Residential Mortgage Corporation, a subsidiary of the
Company.
"COMPANY" means, unless otherwise stated in this Prospectus or unless the
context otherwise requires, the Company and each of its subsidiaries.
"CONDUIT PURCHASERS" means investment bankers and other financial
intermediaries who purchase or otherwise accumulate pools or portfolios of loans
having common features (e.g., real estate mortgages, etc.), with the intent of
securitizing such loan assets and selling them to a trust that obtains its funds
by selling ownership interests in the trust to public or private investors.
"CREDIT ENHANCEMENT" means the method by which a seller of asset-backed
securities achieves a higher credit rating with respect to such securities than
the credit rating of the assets collateralizing such securities. Credit
enhancement is often achieved through the use of financial guaranty insurance
policies.
"DTC" means The Depository Trust Company or its nominees.
"DUS" means the Delegated Underwriting and Servicing program established by
Fannie Mae that permits a DUS approved lender to commit and close loans for
multi-family mortgages for resale to Fannie Mae without Fannie Mae's prior
approval of such loans.
"FACE VALUE" means, with respect to any loan or asset portfolio, the aggregate
unpaid principal balance of a loan or loans.
"FANNIE MAE" means the Federal National Mortgage Association.
"FREDDIE MAC" means the Federal Home Loan Mortgage Corporation.
"HOLLIDAY FENOGLIO FOWLER" means Holliday Fenoglio Fowler, L.P., a subsidiary
of the Company.
"MIC," unless the context otherwise requires, means Mortgage Investors
Corporation, an Ohio corporation, and MSPI, Inc., formerly known as Marketing
Solution Publications, Inc., a Michigan corporation and an affiliated company of
Mortgage Investors Corporation.
"REVOLVING LOAN AGREEMENT" means the Credit Agreement dated as of August 12,
1998 among AMRESCO, INC., NationsBank, N.A., as administrative agent, Credit
Suisse First Boston, as syndication agent, and the lending institutions and
funds which are parties thereto from time to time.
"SECURITIZATION" and "SECURITIZED" mean a transaction in which loans
originated or purchased by an entity are sold to special purpose entities
organized for the purpose of issuing asset-backed, mortgage-backed or commercial
loan-backed securities.
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"SENIOR NOTES" means the Company's 8.75% Senior Notes, Series 1996-A, due
1999.
"SENIOR SUBORDINATED NOTES" means the Company's 10% Senior Subordinated Notes
due 2003, the Company's 10% Senior Subordinated Notes due 2004 and the Company's
9 7/8% Senior Subordinated Notes due 2005, collectively.
"SENIOR SUBORDINATED NOTES INDENTURE" means the Indenture dated January 15,
1996, governing the Senior Subordinated Notes.
"SUBORDINATED CERTIFICATES" means the unrated and uninsured tranches of
collateralized residential or commercial mortgage-backed securities which are
included under the caption "Retained Interests in Securitizations-Trading" in
the Company's consolidated balance sheet.
"SUB-PRIME LOAN" means a residential mortgage loan to borrowers who do not
qualify for conventional loans or whose borrowing needs are not met by
traditional residential mortgage lenders. Such borrowers may not satisfy the
more rigid underwriting standards of the traditional residential mortgage
lending market for a number of reasons, such as blemished credit histories (from
past loan delinquencies or bankruptcy), inability to provide income verification
data or lack of established credit history.
"VA" means the United States Department of Veteran Affairs.
"WAREHOUSE" means a type of lending arrangement whereby loans funded or
purchased and held for sale are financed by financial institutions or
institutional lenders on a short-term basis and secured by the underlying loans.
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No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus and if given or
made, such information or representations must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to sell
or solicitation by anyone in any state in which such offer or solicitation is
not qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that the
information contained herein is correct as of any time subsequent to the date
hereof or that there has been no change in the affairs of the Company since such
date.
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Table of Contents
Page
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The Company..................................................... 2
Risk Factors.................................................... 5
Forward-Looking Statements...................................... 12
Use of Proceeds................................................. 12
Ratios of Earnings to Fixed Charges and Earnings to Combined
Fixed Charges.................................................. 12
Description of Securities....................................... 13
Plan of Distribution............................................ 32
Legal Matters................................................... 33
Experts......................................................... 34
Available Information........................................... 34
Incorporation of Certain Documents by Reference................. 34
Glossary........................................................ 36
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AMRESCO, INC.
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PROSPECTUS
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Securities and Exchange Commission Registration Fee................... $295
Nasdaq National Market Listing Fee.................................... *
Printing Expenses..................................................... *
Accounting Fees and Expenses.......................................... *
Legal Fees and Expenses............................................... *
Fees of Transfer Agent and Registrar.................................. *
Miscellaneous Expenses................................................ *
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Total.............................................................. $ *
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- -----------------
* To be completed by amendment.
All of the above expenses except the Securities and Exchange Commission
registration fee and the Nasdaq National Market listing fee are estimated. All
of such expenses will be borne by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Restated Certificate of Incorporation, as amended (the
"Certificate"), and the Company's Amended and Restated Bylaws (the "Bylaws")
provide that the Company shall indemnify, to the full extent permitted by law,
any person against liabilities arising from their service as directors,
officers, employees or agents of the Company. Section 145 of the DGCL empowers a
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Section 145 also empowers a corporation to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person acted in any of the
capacities set forth above, against expenses (including attorney's fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted under similar standards, except
that no indemnification may be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the corporation
unless, and only to the extent that, the Court of Chancery or the court in which
such action was brought shall determine that despite the adjudication of
liability such person is fairly and reasonably entitled to indemnify for such
expenses which the court shall deem proper.
Section 145 further provides that indemnification provided for by Section 145
shall not be deemed exclusive of any other rights to which the indemnified party
may be entitled, and that the corporation is empowered to purchase and maintain
insurance on behalf of a director or officer of the corporation against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liabilities under Section 145.
II-1
<PAGE>
The Certificate and the Bylaws provide that no director of the Company shall
be personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the director derived an improper personal benefit. Any
repeal or modification of this provision related to director's liability shall
not adversely affect any right or protection of a director of the Company
existing immediately prior to such repeal or modification. Further, if the DGCL
shall be repealed or modified, the elimination of liability of a director
provided in the Certificate and the Bylaws shall be to the fullest extent
permitted by the DGCL as so amended.
The Company maintains insurance for its officers and directors which provides
for indemnification of officers and directors. The premiums for such insurance
are paid by the Company.
ITEM 16. EXHIBITS
EXHIBIT NO. EXHIBIT
- ------------- -------
1.1 Form of Purchase Agreement for Debt Securities, filed as Exhibit
1.1 to the Company's Registration Statement on Form S-3 (No. 333-
6031), which exhibit is incorporated herein by reference.
1.2/(b)/ Form of Underwriting Agreement for Preferred Stock.
1.3/(b)/ Form of Underwriting Agreement for Common Stock.
4.1 Restated Certificate of Incorporation, filed as Exhibit 3(a) to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, which exhibit is incorporated herein by
reference.
4.2 Amended and Restated Bylaws effective as of February 25, 1997,
filed as Exhibit 3(b) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996, which exhibit is
incorporated herein by reference.
4.3 Rights Agreement, dated as of May 28, 1997, by and between the
Company and the Bank of New York, as Rights Agent, filed as
Exhibit 4 to the Company's Current Report on Form 8-K dated May
28, 1997, which exhibit is incorporated herein by reference.
4.4 Specimen Common Stock Certificate, filed as Exhibit 4.4 to the
Company's Registration Statement on Form S-3 (No. 33-63683),
which exhibit is incorporated herein by reference.
4.5 Senior Indenture, filed as Exhibit 4.2 to the Company's
Registration Statement on Form S-3 (No. 333-6031), which exhibit
is incorporated herein by reference.
4.6 Subordinated Indenture, filed as Exhibit 4.1 to the Company's
Current Report on Form 8-K dated March 12, 1997 (No. 001-11599),
which exhibit is incorporated herein by reference.
4.7/(c)/ Form of Certificate of Designations for Preferred Stock.
4.8/(c)/ Specimen Preferred Stock Certificate.
4.9/(c)/ Form of Warrant Agreement.
4.10/(c)/ Specimen Warrant Certificate.
4.11/(b)/ Form of Deposit Agreement.
4.12/(b)/ Specimen Depositary Receipt.
4.13 Credit Agreement dated as of August 12, 1998 among AMRESCO, INC.
and NationsBank, N.A., as administrative agent, Credit Suisse
First Boston, as syndication agent, and the lending institutions
and funds which are parties thereto from time to time, filed as
Exhibit 10.1 to the Company's Registration Statement on Form S-3
(No. 333-62145), which exhibit is incorporated herein by
reference.
5.1/(a)/ Opinion of L. Keith Blackwell, General Counsel of the Company,
regarding legality of the securities being registered.
23.1/(a)/ Consent of L. Keith Blackwell, contained in the opinion filed as
Exhibit 5.1.
23.2/(a)/ Consent of Deloitte & Touche LLP.
24.1/(a)/ Power of Attorney of the Directors and certain Executive Officers
of the Company (included on page II-5).
II-2
<PAGE>
25.1 Statement of Eligibility of Senior Trustee on Form T-1, filed as
Exhibit 25.1 to the Company's Registration Statement on Form S-3
(No. 333-27853), which exhibit is incorporated herein by
reference.
25.2 Statement of Eligibility of Subordinated Trustee on Form T-1,
filed as Exhibit 25.2 to the Company's Registration Statement on
Form S-3 (No. 333-6031), which exhibit is incorporated herein by
reference.
- --------------
(a) Filed herewith.
(b) To be filed by amendment.
(c) To be filed in the event of the issuance of Preferred Stock or Warrants, as
the case may be.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b), if, in
the aggregate, the changes in volume and price represent no more than
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
Provided, however; That paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on the 15th day of September,
1998.
AMRESCO, INC.
By: /s/ L. KEITH BLACKWELL
------------------------------
L. Keith Blackwell
Senior Vice President, General
Counsel and Secretary
Each person whose signature appears below does hereby make, constitute and
appoint Robert H. Lutz, Jr., Robert L. Adair III and L. Keith Blackwell and each
of them his true and lawful attorney with full power of substitution to execute,
deliver and file with the Securities and Exchange Commission, for and on his
behalf and in his capacity or capacities as stated above or below, any amendment
(including post-effective amendments) to the Registration Statement with all
exhibits thereto, making such changes in the Registration Statement as the
Registrant deems appropriate.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
and on the 15th day of September, 1998:
SIGNATURE TITLE
--------- -----
/s/ ROBERT H. LUTZ, JR. Chairman of the Board and
- ----------------------------- Chief Executive Officer
Robert H. Lutz, Jr.
/s/ ROBERT L. ADAIR III Director, President and
- ----------------------------- Chief Operating Officer
Robert L. Adair III
/s/ BARRY L. EDWARDS Executive Vice President and
- ----------------------------- Chief Financial Officer
Barry L. Edwards (Principal Financial Officer)
/s/ JAMES P. COTTON, JR. Director
- -----------------------------
James P. Cotton, Jr.
/s/ RICHARD L. CRAVEY Director
- -----------------------------
Richard L. Cravey
/s/ GERALD E. EICKHOFF Director
- -----------------------------
Gerald E. Eickhoff
/s/ SIDNEY E. HARRIS Director
- -----------------------------
Sidney E. Harris
/s/ AMY J. JORGENSEN Director
- -----------------------------
Amy J. Jorgensen
/s/ BRUCE W. SCHNITZER Director
- -----------------------------
Bruce W. Schnitzer
/s/ RONALD B. KIRKLAND Vice President and Chief
- ----------------------------- Accounting Officer
Ronald B. Kirkland (Principal Accounting Officer)
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. EXHIBIT PAGE
- ----------- ------- ------------
<S> <C> <C>
1.1 Form of Purchase Agreement for Debt Securities, filed as Exhibit 1.1 to the
Company's Registration Statement on Form S-3 (No. 333-6031), which
exhibit is incorporated herein by reference.
1.2/(b)/ Form of Underwriting Agreement for Preferred Stock.
1.3/(b)/ Form of Underwriting Agreement for Common Stock.
4.1 Restated Certificate of Incorporation, filed as Exhibit 3(a) to the
Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997,
which exhibit is incorporated herein by reference.
4.2 Amended and Restated Bylaws effective as of February 25, 1997, filed as
Exhibit 3(b) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, which exhibit is incorporated herein by
reference.
4.3 Rights Agreement, dated as of May 28, 1997, by and between the Company
and the Bank of New York, as Rights Agent, filed as Exhibit 4 to the
Company's Current Report on Form 8-K dated May 28, 1997, which exhibit
is incorporated herein by reference.
4.4 Specimen Common Stock Certificate, filed as Exhibit 4.4 to the Company's
Registration Statement on Form S-3 (No. 33-63683), which exhibit is
incorporated herein by reference.
4.5 Senior Indenture, filed as Exhibit 4.2 to the Company's Registration
Statement on Form S-3 (No. 333-6031), which exhibit is incorporated herein
by reference.
4.6 Subordinated Indenture, filed as Exhibit 4.1 to the Company's Current
Report on Form 8-K dated March 12, 1997 (No. 001-11599), which exhibit
is incorporated herein by reference.
4.7/(c)/ Form of Certificate of Designations for Preferred Stock.
4.8/(c)/ Specimen Preferred Stock Certificate.
4.9/(c)/ Form of Warrant Agreement.
4.10/(c)/ Specimen Warrant Certificate.
4.11/(b)/ Form of Deposit Agreement.
4.12/(b)/ Specimen Depositary Receipt.
4.13 Credit Agreement dated as of August 12, 1998 among AMRESCO, INC. and
NationsBank, N.A., as administrative agent, Credit Suisse First Boston, as
syndication agent, and the lending institutions and funds which are parties
thereto from time to time, filed as Exhibit 10.1 to the Company's
Registration Statement on Form S-3 (No. 333-62145), which exhibit is
incorporated herein by reference.
5.1/(a)/ Opinion of L. Keith Blackwell, General Counsel of the Company, as to the
validity of Common Stock to be offered.
23.1/(a)/ Consent of L. Keith Blackwell, contained in the opinion filed as Exhibit 5.1.
23.2/(a)/ Consent of Deloitte & Touche LLP.
24.1/(a)/ Power of Attorney of the Directors and certain Executive Officers of the
Company (included on page II-5)
25.1 Statement of Eligibility of Senior Trustee on Form T-1, filed as Exhibit
25.1
to the Company's Registration Statement on Form S-3 (No. 333-27853),
which exhibit is incorporated herein by reference.
25.2 Statement of Eligibility of Subordinated Trustee on Form T-1, filed as
Exhibit 25.2 to the Company's Registration Statement on Form S-3
(No. 333-6031), which exhibit is incorporated herein by reference.
</TABLE>
- ------------------------
(a) Filed herewith.
(b) To be filed by amendment.
(c) To be filed in the event of the issuance of Preferred Stock or Warrants, as
the case may be.
<PAGE>
EXHIBIT 5.1
September 15, 1998
AMRESCO, INC.
700 North Pearl, Suite 2400
Dallas, Texas 75201
Re: Registration Statement on Form S-3 of $1,000,000 Aggregate Initial
Offering Price of Securities
Ladies and Gentlemen:
I have acted as counsel for AMRESCO, INC., a Delaware corporation (the
"Company"), in connection with the above-referenced Registration Statement on
Form S-3 (the "Registration Statement") relating to the sale by the Company from
time to time of (i) shares of its common stock, par value $.05 per share (the
"Common Stock"), (ii) shares of its preferred stock, $1.00 par value per share
(the "Preferred Stock"), in one or more series, any series of which may be
issued in the form of depositary shares evidenced by depositary receipts
("Depositary Shares"), (iii) its debt securities, which may be either senior
debt securities (the "Senior Debt Securities") or subordinated debt securities
(the "Subordinated Debt Securities" and, together with the Senior Debt
Securities, the "Debt Securities"), and (iv) warrants (collectively, the
"Securities Warrants") to purchase shares of Common Stock (the "Common Stock
Warrants"), shares of Preferred Stock (the "Preferred Stock Warrants"),
Depositary Shares ("Depositary Share Warrants") or Debt Securities (the "Debt
Securities Warrants"), for an aggregate initial public offering price of up to
$1,000,000 (or the equivalent in foreign currencies, currency units or composite
currencies). The Common Stock, Preferred Stock, Depositary Shares, Debt
Securities and Securities Warrants are herein collectively referred to as the
"Securities." Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in the Registration Statement or the
Accord (as defined below).
This Opinion Letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications and
exceptions, definitions, limitations on coverage and other limitations, all as
more particularly described in the Accord, and this Opinion Letter should be
read in conjunction threwith. The law covered by the opinions expressed herein
is limited to the Federal Law of the United States, the Law of the State of
Texas and the statutes comprising the Delaware General Corporation Law.
Subject to the foregoing, I am of the opinion that:
1. (a) When the Debt Securities have been duly established by the
applicable Indentures (including, without limitation, the adoption by the Board
of Directors of the Company of a resolution duly authorizing the issuance and
delivery of the Debt Securities), duly authenticated by the trustee and duly
executed and delivered on behalf of the Company against payment therefor in
accordance with the terms and provisions of the applicable Indenture and as
contemplated by the Registration Statement, the Prospectus and the related
Prospectus Supplement(s), (b) when the Registration Statement and any required
post-effective amendment thereto and any and all Prospectus Supplement(s)
required by applicable laws have all become effective under the Securities Act
and (c) assuming that the terms of the Debt Securities and the Indentures as
executed and delivered are as described in the Registration Statement, the
Prospectus and the related Prospectus Supplement(s), the Debt Securities will be
constituted valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their terms.
2. (a) When the Securities Warrants have been duly executed and delivered
(including, without limitation, the adoption by the Board of Directors of the
Company of a resolution duly authorizing the issuance and delivery of the
Securities Warrants), and issued and sold in the form and in the manner
contemplated in the Registration
<PAGE>
AMRESCO, INC.
September 15, 1998
Page 2
Statement, the Prospectus and the related Prospectus Supplement(s), (b) when the
Registration Statement and any required post-effective amendment thereto and any
and all Prospectus Supplement(s) required by applicable law have all become
effective under the Securities Act and (c) assuming that the terms of the
Securities Warrants as executed and delivered are as described in the
Registration Statement, the Prospectus and the related Prospectus Supplement(s),
the Securities Warrants will constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms.
3. The Company has the authority pursuant to its Restated Certificate of
Incorporation, as amended (the "Certificate"), to issue up to 5,000,000, shares
of Preferred Stock. When a series of Preferred Stock has been duly established
in accordance with the terms of the Certificate and applicable law, and upon
adoption by the Board of Directors of the Company of a resolution in form and
content as required by applicable law and upon issuance and delivery of and
payment for such shares in the manner contemplated by the Registration
Statement, the Prospectus and the related Prospectus Supplement(s) and by such
resolution, such shares of such series of Preferred Stock (including any
Preferred Stock duly issued (i) upon the exercise of any Securities Warrants
exercisable for Preferred Stock or (ii) upon the exchange or conversion of Debt
Securities that are exchangeable or convertible into Preferred Stock) will be
validly issued, fully paid and nonassessable.
4. (a) When the Deposit Agreement relating to the issuance of Depositary
Shares has been duly executed and delivered by the Company and the Depositary
(including, without limitation, the adoption by the Board of Directors of the
Company of a resolution in form and content as required by applicable law
authorizing the issuance and delivery of the Depositary Shares and the series of
Preferred Stock to be represented thereby), (b) when the series of Preferred
Stock represented by such Depositary Shares has been duly established in
accordance with the terms of the Certificate and applicable law, (c) upon the
issuance and delivery of the Preferred Stock represented by the Depositary
Shares to the Depositary against receipt of depositary receipts evidencing such
Depositary Shares in the manner contemplated by the Depositary Agreement and the
resolutions of the Board of Directors of the Company and (d) upon issuance and
delivery of and payment for the Depositary Shares in the manner contemplated by
the Registration Statement, the Prospectus and the related Prospectus
Supplement(s) and by the resolutions of the Board of Directors, such Depositary
Shares (including any Depositary Shares duly issued (i) upon the exercise of any
Securities Warrants exercisable for Depositary Shares or (ii) upon the exchange
or conversion of Debt Securities that are exchangeable or convertible into
Depositary Shares) will be validly issued, fully paid and nonassessable.
5. The Company has the authority pursuant to its Certificate, to issue up
to 150,000,000 shares of Common Stock. Upon adoption by the Board of Directors
of the Company of a resolution in form and content as required by applicable law
and upon issuance and delivery of and payment for such shares in the manner
contemplated by the Registration Statement, the Prospectus and the related
Prospectus Supplement(s) and by such resolution, such shares of Common Stock
(including any Common Stock duly issued (i) upon the exchange or conversion of
any shares of Preferred Stock that are exchangeable or convertible into Common
Stock, (ii) upon the exercise of any Securities Warrants exercisable for Common
Stock or (iii) upon the exchange or conversion of Debt Securities that are
exchangeable or convertible into Common Stock) will be validly issued, fully
paid and nonassessable.
Without limiting the generality of the qualifications and exceptions,
limitations on coverage and other limitations described in the Accord, the
opinions set forth above are expressly subject to the following qualifications
and exceptions:
(a) The opinions are subject to the Bankruptcy and Insolvency
Exception. In addition, certain other provisions of the Securities may be
unenforceable in whole or in part under the laws (including judicial
decisions) of the State of Texas or the United States of America; provided,
however, that the inclusion of any such provisions and any limitations
imposed by such laws on the enforceability of the Securities will not
affect the validity or enforceability as a whole of any of the Securities.
<PAGE>
AMRESCO, INC.
September 15, 1998
Page 2
(b) The opinions are subject to the Equitable Principles Limitation.
(c) In rendering the opinions set forth above, I have assumed that, at
the time of the authentication and delivery of a series of Securities, the
resolutions of the Board of Directors referred to above will not have been
modified or rescinded, and there will not have occurred any change in the
law affecting the authorization, execution, delivery, validity or
enforceability of the Securities.
This Opinion Letter is provided to you for your benefit and for the benefit
of the Securities and Exchange Commission (the "Commission"), in each case,
solely with regard to the Registration Statement, may be relied upon by you and
the Commission only in connection with the Registration Statement, and may not
be relied upon by any other person or for any other purpose without the prior
written consent of the undersigned.
I hereby consent to the filing of this Opinion Letter as an exhibit to the
Registration Statement and the use of my name wherever appearing in the
Registration Statement.
Very truly yours,
/s/ L. Keith Blackwell
---------------------------------
L. Keith Blackwell
General Counsel
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
AMRESCO, INC. on Form S-3 of our report dated February 2, 1998, appearing in the
Annual Report on Form 10-K of AMRESCO, INC. for the year ended December 31,
1997 and to the reference to us under the heading "Experts" in the Prospectus,
which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
Dallas, Texas
September 15, 1998
