UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Fiscal Year Ended December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-8630
AMRESCO, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-1781257
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
700 N. Pearl St. Ste 2400 LB 342 Dallas, TX 75201-7424
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (214) 953-7700
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on which Registered
10% Senior Subordinated Notes due 2003 New York Stock Exchange
8.75% Senior Notes due 1999 New York Stock Exchange
10% Senior Subordinated Notes due 2004 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Shares of common stock, par value $0.05 per share
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ]
As of March 23, 1998, 42,781,510 shares of the registrant's
common stock were outstanding. The aggregate market value of the
voting stock held by non-affiliates of the registrant, computed
by reference to the closing price of such stock as of March 23,
1998, was approximately $1,321,000,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement to be filed for the
Annual Meeting of Shareholders to be held on May 18, 1998, are
incorporated by reference in Part III hereof.
PART I
Item 1. Business
General
AMRESCO, INC. (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 residential mortgage banking,
commercial mortgage banking, commercial finance and loan
servicing 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 four different business lines with revenues
for the year ended December 31, 1997 as follows: asset
management - $109.1 million (26% of revenues); commercial
mortgage banking - $97.5 million (23% of revenues); residential
mortgage banking - $166.4 million (39% of revenues) and
commercial finance - $51.2 million (12% of revenues).
The Company has experienced significant growth since making
the strategic decision to diversify its business lines. The
Company's total assets have increased from $172.3 million at
December 31, 1994 to $2.6 billion at December 31, 1997. The
Company's revenues have increased from $129.8 million for the
year ended December 31, 1994 to $423.8 million for the year
ended December 31, 1997.
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's residential
mortgage banking, commercial mortgage banking and commercial
finance activities resulted in loan fundings and acquisitions of
$5.9 billion and $2.6 billion for the years ended December 31,
1997 and 1996, respectively. The Company funds these operations
with its credit lines (including warehouse lines of credit) and
with the proceeds received from securitizations. For the years
ended December 31, 1997 and 1996, the Company securitized and
sold $3.0 billion and $1.7 billion of loans, respectively. For
the years ended December 31, 1997 and 1996, the non-cash
component of gain on sale represented 20.0% and 8.5% of revenues,
respectively. At December 31, 1997, the Company's loan servicing
portfolio was $25.9 billion as compared to $13.5 billion at
December 31, 1995. The Company's investments in loans and asset
portfolios has increased from $69.2 million at December 31, 1994
to $648.7 million at December 31, 1997, while total assets being
managed and resolved for third parties have decreased reflecting
a changing market for asset portfolio management and the
Company's strategic shift towards direct investments in asset
portfolios.
Business Strategy
The Company's business strategy focuses on continuing its
diversification efforts while building on its core strengths in
order to support continued growth in earnings and assets. The
following principles are significant to the execution of the
Company's business strategy in the future:
Maintain a leadership position in, and enhance profitability
of, its business units.
Continue to diversify its sources of earnings through the
balanced development of its existing business lines and the
development of additional business lines that leverage existing
capabilities and complement the Company's core franchises.
Maintain an emphasis on growth in cash flows and earnings
per share.
Allocate capital to, and pursue growth in, markets that are
fragmented, underserved or otherwise have prospects for
sustainable growth and favorable risk-adjusted returns.
Enhance liquidity by maintaining access to multiple funding
sources and seeking lower cost of funds through improved debt
ratings.
Focus on improvements in operating margins by managing the
growth of operating expenses relative to revenue growth.
Recent Developments
On February 23, 1998, the Company completed a registered
public offering of 5.2 million shares of common stock. The net
proceeds from such offering, after underwriters discount and
offering expenses, aggregated approximately $147.6 million and
were used to repay borrowings under the Revolving Loan Agreement.
The price to the public was $30.00 per share and the proceeds to
the Company per share were $28.56, after underwriting discounts.
On February 24, 1998 and March 10, 1998, the Company issued
$290.0 million and $40.0 million, respectively, aggregate
principal amount of senior subordinated notes. The notes bear
interest at 9.875% per annum and mature on March 15, 2005. The
net proceeds from the February 24, 1998 offering aggregated
approximately $281.7 million and were used to repay borrowings
under the Revolving Loan Agreement and certain warehouse lines
and the net proceeds from the March 10, 1998 offering aggregated
approximately $39.0 million and were used for general corporate
purposes. The notes are unsecured obligations of the Company and
are subordinated to prior payment of all existing and future
senior debt and to indebtedness and other liabilities of the
Company's subsidiaries.
Effective as of January 1, 1998, the Company acquired the
commercial mortgage banking business of Fowler, Goedecke, Ellis &
O'Connor Incorporated for $16.0 million in cash and stock, plus
up to an additional $8.0 million in cash and stock over three
years in the event certain performance goals are met or exceeded
during the fiscal years 1998, 1999 and 2000. Fowler, Goedecke,
Ellis & O'Connor Incorporated has offices in Massachusetts,
Connecticut, New York and New Jersey and employed 17 mortgage
bankers at December 31, 1997.
On January 28, 1998, the Company consummated the acquisition
of the business and operations of City Federal Funding & Mortgage
Corp. ("City Federal") and its affiliate, Finance America
Corporation, for $10.0 million in cash and stock, plus up to an
additional $8.5 million in cash and stock over three years in the
event certain performance goals are met or exceeded during fiscal
years 1998, 1999 and 2000. City Federal is a residential
mortgage banker focusing on originations through its six East
Coast-based retail branch offices.
The Company recently announced the formation of a joint venture
with Banco Bilbao Vizcaya, Spain's largest bank, for the purpose
of asset acquisitions and loan management in Mexico.
Business Activities
The Company's primary businesses are organized along the
following lines: asset management, commercial mortgage banking,
residential mortgage banking and commercial finance.
Asset Management Business
General. The Company manages and resolves portfolios of
performing, underperforming and nonperforming loans and provides
special servicing for nonperforming or 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 NationsBank of Texas, N.A. The
1993 merger created one of the leading asset management and
resolution companies in the United States. The Company and its
predecessors have managed over $35.0 billion (Face Value) of
asset portfolios since 1987.
Asset Portfolio Management. The Company manages and resolves
asset portfolios acquired at a discount to Face Value by the
Company alone and by the Company with co-investors. The Company
also manages and resolves asset portfolios owned by third
parties.
Management of asset portfolios includes managing and resolving
loans and providing routine accounting servicing functions.
Asset portfolios generally include secured loans of varying
qualities and collateral types. The majority of the loans in
which the Company invests are in payment default at the time of
acquisition. Asset portfolios purchased by the Company are
comprised of secured loans and real estate loans, the resolution
of which may be based either on cash flow of a business or on
real estate and other collateral securing the loan. The Company
does not invest in loans with known environmental liabilities,
unless the environmental risks can be quantified and discounted
appropriately.
The Company obtains information on available asset portfolios
from many sources, including banks, insurance companies and other
lenders. Repeat business and referrals from asset portfolio
sellers with whom the Company previously has transacted business
are an important and frequent source of business. The Company
has developed relationships in which it is a preferred purchaser
of asset portfolios from certain sellers. The Company believes
that it receives many asset portfolio solicitations that result
primarily from the Company's reputation as an active portfolio
purchaser. Other important sources of business include referrals
from co-investors who seek the Company's participation in asset
portfolio purchases, focused contacts initiated by senior
management, public advertising of asset portfolios for sale and
the Company's nationwide presence.
The Company believes that an active market for asset portfolio
acquisition, management and resolution services exists within the
private sector. Many financial institutions now use outside
contractors to manage and resolve asset portfolios for a variety
of reasons, including a desire to reduce overhead costs,
inadequate staffing to handle large volumes of nonperforming and
underperforming loans or a need to avoid management and personnel
distractions with the intensive and time-consuming job of
resolving loans. These financial institutions include banks in
the United States, Canada and Europe, as well as insurance
companies in the United States. Moreover, financial institutions
have embraced the concept of packaging and selling asset
portfolios to investors as a means of disposing of nonperforming
and underperforming loans and improving the financial
institution's balance sheet. Consolidations within the banking
industry have reinforced this trend. Insurance companies, which
historically have avoided outsourcing asset portfolio management
or selling asset portfolios, also are emerging as sellers of
asset portfolios due in part to the implementation of risk-based
capital rules for insurance companies.
The Company believes that opportunities for the acquisition,
management and resolution of asset portfolios are becoming
increasingly evident in certain international markets and that
lenders in these markets are adopting many of the asset portfolio
management and resolution outsourcing techniques currently
utilized in the United States. Accordingly, the Company has
opened offices in Toronto (August 1994), employing 14 persons,
and London (October 1995), employing 10 persons, each at December
31, 1997, in order to take advantage of both investment and
servicing opportunities in Canada, the United Kingdom and certain
other Western European nations. During 1997, the Company and a
major Wall Street bank acquired an asset portfolio in Mexico.
The Company recently announced the formation of a joint venture
with Banco Bilbao Vizcaya, Spain's largest bank, for the purpose
of asset acquisitions and loan management in Mexico. The Company
believes that the international markets are less competitive and,
as a result, provide more attractive investments and greater
profit margins. The Company may open other offices and seek
strategic alliances in other international markets. The Company
had $173.0 million (Face Value) in Canadian asset portfolios,
$309.3 million (Face Value) in United Kingdom asset portfolios
and $8.3 million (Face Value) in Mexican asset portfolios under
management as of December 31, 1997.
The Company believes that direct investment permits the
Company to take advantage of the profit opportunities of asset
portfolio investing. The Company believes that it can gain
market share in the asset portfolio acquisition, management and
resolution business due to its financial strength, experience in
managing and resolving asset portfolios, national reputation and
strategic relationships with sellers and purchasers of asset
portfolios, including financial institutions, large corporate
buyers, investment banking firms and sophisticated private
investors.
Asset Portfolio Investment. Prior to making an offer to
purchase an asset portfolio, the Company conducts an extensive
investigation and evaluation of the individual loans generally
comprising 100% of the aggregate Face Value of all the loans
therein, except in rare instances where an unusually large number
of smaller assets are being purchased. This examination
typically consists of analyzing the information made available by
the seller (generally, the respective credit and collateral files
for the loans), reviewing other relevant material that may be
available (including tax and judgment records), and analyzing the
underlying collateral (including conducting site inspections,
obtaining value opinions from third parties and consulting with
any of the Company's asset managers who have experience with the
local market for such assets). The Company also reviews
information on the local economy and real estate markets in the
area in which the loan collateral is located. Because of its
broad, nationwide experience in managing assets, the Company
often is able to draw on its asset management experience in the
specific market in which an asset is located. Unlike the
original lender, the Company values loans based on the present
value of estimated total cash flow from resolution, with the
expectation that the loans will be resolved prior to scheduled
maturity. Generally, the Company does not refinance or renew
purchased loans or grant new credit.
Asset portfolio evaluations are conducted almost exclusively
by the Company's employees who specialize in analysis of
nonperforming and underperforming loans, often with further
specialization based on geographic or collateral-specific
factors. Most of these employees have previously served the
Company (and some continue to serve) as asset managers with
responsibility for resolving such loans. Their asset management
experience aids these individuals, working together in teams, in
making informed judgments about the status of each loan and the
underlying collateral, the probable cash flows from the loan, the
likely resolution of the loan and the time and expense required
for such resolution.
Loan resolutions are typically accomplished through (i)
negotiating a discounted payoff with debtors, which may be
accomplished through a refinancing by the obligor with a lender
other than the Company, or (ii) foreclosure and sale of the
collateral. The Company generally seeks consensual resolution of
each loan, having found that a negotiated resolution usually
maximizes the Company's or investor's rate of return.
Historically, the Company has resolved the majority of the assets
in an asset portfolio within 18 months of acquisition. The goal
of the Company's loan resolution process is to maximize in a
timely manner the cash recovery on each loan in an asset
portfolio.
The Company invests in collateralized business loans and in
real estate collateralized loans. At December 31, 1997, the Face
Value of the Company's wholly-owned asset portfolios aggregated
approximately $593.4 million, which was composed of approximately
$431.1 million (72.6%) of collateralized business loans,
approximately $77.5 million (13.1%) of asset-backed securities
and approximately $84.8 million (14.3%) of real estate.
For the years ended December 31, 1997 and 1996, $17.2 million
(4.1%) and $29.8 million (14.9%), respectively, of the Company's
revenues were attributable to its asset portfolio management
business. The following table reflects the ownership composition
of the asset portfolios (based on their Face Value) under
management by the Company as of December 31, 1997, 1996, 1995 and
1994 and further reflects the decline in the management of asset
portfolios for governmental agencies and the increase in the
Company's wholly-owned investment in asset portfolios since
December 31, 1994. Certain reclassifications of prior period
amounts have been conformed to the current year presentation.
<TABLE>
<CAPTION>
1997 1996 1995 1994
% of % of % of % of
Amount Total Amount Total Amount Total Amount Total
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wholly-owned by the Company (1) $593.4. 30.6% $572.2 20.7% $ 354.3 9.6 $ 140.4 4.6%
Owned by the Company with 422.9 21.8 836.0 30.1 1,558.1 42.2 1,675.9 55.3
co-investors (2)
Owned by third parties:
Securitized mortgage pools 459.2 23.7 618.0 22.3 738.3 20.0 315.0 10.4
Government and other owners 462.1 23.8 744.4 26.9 1,043.2 28.2 900.5 29.7
Total under management $1,937.6 100.0% $2,770.6 100.0% $3,693.9 100.0% $3,031.8 100.0%
</TABLE>
(1) Includes $77.5 million, $122.8 million, $66.8 million and
$13.9 million of asset-backed securities, and $84.8 million,
$18.3 million, $1.7 million and $0.6 million of real estate as
of December 31, 1997, 1996, 1995 and 1994, respectively.
(2) Includes the securitized asset portfolios managed by the
Company in which the Company has invested, which aggregated
$174.9 million, $472.2 million, $775.3 million and $973.8 million
as of December 31, 1997, 1996, 1995 and 1994, respectively.
The following table reflects the Company's investment in asset
portfolios as of December 31, 1997, 1996, 1995 and 1994:
As of December 31,
1997 1996 1995 1994
(dollars in millions)
Wholly-owned by the Company(1) $494.9 $274.9 $172.6 $34.4
Owned by the Company with co-investors(2) 22.8 27.7 34.3 33.7
Total $517.7 $302.6 $206.9 $68.1
(1) Includes $104.1 million, $55.6 million, $33.9 million and
$3.5 million of asset-backed securities, and $97.1 million,
$20.4 million, $5.7 million and $14.1 million of real estate
as of December 31, 1997, 1996, 1995 and 1994, respectively.
(2) Includes the securitized asset portfolios managed by the
Company in which the Company has invested, which aggregated
$4.7 million, $7.6 million, $8.9 million and $7.9 million as
of December 31, 1997, 1996, 1995 and 1994, respectively.
Special Servicing. As part of its third-party asset
management and resolution business, the Company aggressively
pursues contracts to serve as the designated special servicer for
pools of securitized commercial mortgages. After a loan within a
securitized pool of performing loans becomes delinquent or
nonperforming, the master servicer or primary servicer of the
pool will contractually transfer responsibility for resolution of
that loan to the pool's designated special servicer. Special
servicers earn an annual fee (typically approximately 50 basis
points of the Face Value of the delinquent or nonperforming loans
subject to special servicing), plus a 50 to 200 basis points
resolution fee based on the total cash flow from resolution of
each such loan as it is received. As of December 31, 1997, the
Company was the designated special servicer for securitized pools
holding approximately $13.5 billion (Face Value) of loans,
$459.2 million (Face Value) of which had been assigned to the
Company for resolution in its capacity as special servicer. The
Company believes that its willingness to purchase participating
interests in the delinquent or nonperforming portion of a
securitized portfolio provides the Company a significant
competitive advantage in pursuing master/full and special
servicer contracts.
Commercial Mortgage Banking Business
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 Holliday Fenoglio Fowler, AMRESCO Capital
and AMRESCO Services.
Industry Trends. The Company believes that the commercial
real estate mortgage banking business offers significant growth
opportunities. There are an estimated $1.0 trillion of
commercial real estate mortgages outstanding within the United
States and the Company estimates that $125.0 billion to $150.0
billion in commercial real estate mortgages are refinanced each
year in addition to mortgage financing of new construction.
Originations of loans for new construction projects are cyclical
and are influenced by various factors including interest rates,
general economic conditions and demand patterns in individual
real estate markets. The Company anticipates that expensive
technological demands, increasingly standardized underwriting
requirements, more demanding borrowers and lenders and the growth
of a market for securitized commercial real estate mortgage pools
will likely push the commercial mortgage banking industry toward
greater consolidation. The Company believes that well-
capitalized, full service, nationwide mortgage banking firms
offering a variety of mortgage banking and loan management
services will emerge from this consolidation. The Company's
objective is to improve its position as a major nationwide full
service mortgage banker to the commercial real estate industry.
The Company intends to achieve this goal through the internal
development of its commercial mortgage banking group and through
strategic acquisitions of commercial mortgage bankers which
either serve key real estate markets in the United States or
provide niche or specialized services that enhance the Company's
product line.
Real Estate Capital Markets. The Company provides a wide
range of real estate capital markets services to lenders on, and
owners and developers of, commercial real estate properties. The
typical consumers of commercial real estate mortgage banking
services are both real estate developers and owners (as
borrowers) and investor/lenders (as funding sources). Due to the
specialized nature of commercial mortgage lending, borrowers rely
on commercial mortgage bankers to find competitive lenders, and
these lenders (particularly insurance companies and pension
plans, which do not generally have origination staffs located in
multiple branches) rely on commercial mortgage bankers to source
potential borrowers. Lenders generally include banks, pension
funds and insurance companies. In arranging loans, the Company
works closely with both the borrower and potential lenders from
the time a loan prospect is first contacted, through the
application and proposal process and throughout the documentation
of the loan to final funding.
Holliday Fenoglio Fowler was one of the largest commercial
mortgage bankers in the United States in 1997 (based on
origination volume) and primarily serves commercial real estate
developers and owners by arranging commercial real estate loans
and providing brokerage and other real estate capital markets
services for commercial real estate transactions. Holliday
Fenoglio Fowler arranged approximately $4.7 billion and $2.5
billion of commercial real estate loans during 1997 and 1996,
respectively. Holliday Fenoglio Fowler principally targets
developers and owners of commercial and multifamily real estate
properties. Holliday Fenoglio Fowler services prospective
borrowers through its own commission-based mortgage bankers in
its offices located in Atlanta, Boca Raton, Boston, Buffalo,
Dallas, Houston, Miami, New York City, Orange County
(California), Orlando, Portland (Oregon) and San Diego. The
loans arranged by Holliday Fenoglio Fowler generally are funded
by institutional lenders, primarily insurance companies, and by
Conduit Purchasers. The Company estimates that Holliday Fenoglio
Fowler has retained the servicing rights on approximately 41% of
such loans over the last three years. The Company believes that
Holliday Fenoglio Fowler's relationship and credibility with its
institutional lender network provide the Company a competitive
advantage in the commercial mortgage banking industry.
The Company provided brokerage and other real estate capital
markets services on commercial real estate sales and other real
estate transactions, including joint ventures and participating
mortgages of approximately $6.1 billion and $3.1 billion during
1997 and 1996, respectively. For the year ended December 31,
1997 and 1996, Holliday Fenoglio Fowler earned $46.9 million and
$26.6 million, respectively, for brokerage services.
Holliday Fenoglio Fowler generally earns a fee of between 50
and 100 basis points of the loan amount for originated or
underwritten loans, plus certain additional processing fees.
From time to time, Holliday Fenoglio Fowler also originates
nontraditional financing involving hybrid forms of debt, equity
participation's and other creative financing structures. Fees
for equity or joint venture structures are typically higher.
Holliday Fenoglio Fowler has established relationships with
over 210 institutional lenders that include insurance companies,
pension plans and Conduit Purchasers. In 1997 and 1996, Holliday
Fenoglio Fowler placed 709 and 410 loans with approximately 409
and 107 different lenders, respectively. Thirty-seven
institutional lenders have retained Holliday Fenoglio Fowler as
their respective exclusive or semi-exclusive loan originator in
selected cities and regions.
Holliday Fenoglio Fowler has significantly expanded its East
Coast business with the recent acquisition of the business and
operations of Fowler, Goedecke, Ellis & O'Connor Incorporated.
Commercial Real Estate Lending. AMRESCO Capital, which
originated and underwrote approximately $1,726.7 million and
$632.7 million of commercial real estate mortgages during 1997
and 1996, respectively, is a commercial mortgage banker that
originates, underwrites, accumulates and securitizes commercial
real estate loans. As a securitized lender, AMRESCO Capital
makes certain representations and warranties concerning the loans
it originates. These representations cover title to the
property, lien priority, environmental reviews and certain other
matters. AMRESCO Capital targets mortgage loans for commercial
real estate properties suitable for securitization transactions.
AMRESCO Capital serves its market directly through AMRESCO
Capital's offices located in Atlanta, Buffalo, Chicago, Dallas,
Denver, Irvine, Louisville, Miami, Phoenix, Seattle,
Washington D.C. and Winston-Salem, as well as through a network
of approximately 40 independent mortgage brokers located
throughout the United States. These independent mortgage brokers
serve AMRESCO Capital on a nonexclusive basis and receive fees
and a commission based on loan size and other pertinent factors
in respect of each loan closed. For year ended December 31,
1997, approximately 39% of the loans underwritten by AMRESCO
Capital were originated by Holliday Fenoglio Fowler.
Since inception, the commercial real estate loans
originated by the Company have consisted of fixed rate mortgage
loans secured by first liens on fee simple or leasehold interests
in multifamily, retail, office, hotel, industrial, health care-
related and self-storage properties. The commercial mortgage
loans originated during the year ended December 31, 1997, had
mortgage loan balances ranging from $0.6 million to
$38.1 million, coupon rates ranging from 6.8% to 10.3%, original
terms to maturity ranging from 60 months to 360 months and loan-
to-value ratios ranging from 33% to 90%. At December 31, 1997, a
substantial portion of the mortgage loans originated by the
Company have been "balloon" mortgage loans that have an
amortization schedule longer, and in some cases significantly
longer, than the remaining term of the loan, thereby leaving a
substantial outstanding principal amount due and payable on its
maturity date unless earlier prepaid. Substantially all of the
commercial mortgage loans originated by the Company have
substantial prepayment penalties if the borrower prepays the loan
within a specified time period from the date of origination.
The Company is broadening its commercial real estate lending
program to include variable rate loans, as well as loans with
balances exceeding $50.0 million. The Company anticipates that
variable rate loans and large balance loans will constitute an
increasing proportion of total originations in the future.
The commercial real estate loans originated or acquired by
AMRESCO Capital are underwritten in general accordance with
guidelines designed to evaluate the borrowers ability to satisfy
the repayment conditions of the loan. These underwriting
procedures require a property analysis (including site
inspection), an analysis of the borrowers cash flows and debt
service coverage, a property appraisal and analysis of loan-to-
value, an environmental site assessment, a physical assessment
report and an in-depth review of the borrower and its principals
with respect to credit history and prior experience as an owner
and operator of commercial real estate properties. In addition,
each borrower is required to have obtained a title insurance
policy and property insurance with specified coverages. AMRESCO
Capital also reviews industry data regarding the local real
estate market in which the mortgaged property is located.
AMRESCO Capital is approved by Fannie Mae to participate in
its DUS program. An approved DUS lender is delegated the
authority to approve, commit and close loans for multifamily
mortgages on a national basis with the assurance that Fannie Mae
will purchase the loans. In contrast to a "prior approval"
lender, DUS lenders do not need to obtain the approval of Fannie
Mae prior to making the loan. In return for the delegated
authority to make loans and the subsequent purchase of such loans
by Fannie Mae, DUS lenders must maintain a minimum capital base,
and retain a certain level of credit risk on the loans they make.
The DUS lender takes first loss risk up to 5% of the loan amount,
and above 5% Fannie Mae and the DUS lender share the loss, with
the DUS lender's maximum loss capped at 20% of the loan amount.
AMRESCO Capital, as a DUS lender, had experienced no losses on
its portfolio of sold DUS loans as of December 31, 1997.
AMRESCO Capital is one of only 28 currently approved DUS
lenders. While all DUS lenders operate on a national basis, the
Company believes that 10 such lenders account for the majority of
DUS volume. The Company believes that AMRESCO Capital, as one of
the few DUS lenders, has certain competitive advantages in the
multifamily mortgage origination business. These advantages
include the competitive pricing afforded by Fannie Mae's position
as the largest purchaser of housing related mortgages in the
nation and the ability to commit and close mortgages without the
delay and the accompanying market risks of such delay for an
approval process by the mortgage purchaser. For these reasons,
the Company expects Fannie Mae loan originations to become a
significant part of its commercial mortgage banking activities.
Holliday Fenoglio Fowler has been and is expected to be a
significant source of such loan originations.
AMRESCO Capital is also a member of the Freddie Mac Program
Plusr multifamily seller/servicer program in Florida, New York,
North Carolina and South Carolina and intends to expand into
other states. Through this program, the Company sells to Freddie
Mac and services multifamily apartment mortgages in these states.
In 1997, AMRESCO Capital originated commercial real estate
loans primarily through AMRESCO Commercial Mortgage
Funding, L.P., a limited partnership in which AMRESCO Capital and
an affiliate of Goldman Sachs & Co. have shared equally in the
accumulation and securitization profits and risks. Effective
December 19, 1997, the partnership between AMRESCO Capital and
the Goldman Sachs & Co. affiliate was revised. Any accumulation
and securitization profit or loss from commercial real estate
loans for which loan applications were received on or before
November 13, 1997 (except for specified loans aggregating
approximately $120.3 million) will be shared equally by AMRESCO
Capital and the Goldman, Sachs & Co. affiliate. All profits and
risks associated with commercial real estate loans originated
after November 13, 1997, as well as the profits and risks
relating to specified loans aggregating approximately
$120.3 million for which loan applications were received prior to
November 13, 1997, will be for the sole account of AMRESCO
Capital. Goldman Sachs & Co. or its affiliates will continue to
provide funding, distribution and related services to AMRESCO
Capital pursuant to a separate agreement.
Commercial Loan Servicing. AMRESCO Services is a servicer for
securitized pools of commercial mortgages and whole loans. The
average life of these securitized pools is expected to be
approximately eight years. At December 31, 1997, AMRESCO
Services acted as servicer with respect to approximately
$20.2 billion of 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 as prepayment penalties in commercial
mortgages tend to discourage early loan payoffs.
Primary servicing of whole loans involves collecting monthly
mortgage payments, maintaining escrow accounts for the payment of
ad valorem taxes and insurance premiums on behalf of borrowers,
remitting payments of principal and interest promptly to
investors in the underlying mortgages, reporting to those
investors on financial transactions related to such mortgages and
generally administering the loans. The servicer of whole loans
also must cause properties to be inspected periodically,
determine the adequacy of insurance coverage on each property and
monitor delinquent accounts for payment. Servicer rates are
determined by a bidding and negotiating process. AMRESCO
Services is rated "strong" as a primary servicer by Standard &
Poor's, which is the highest rating given by that rating agency
to primary servicers as of December 31, 1997. AMRESCO Services
has also received an "acceptable" rating from Fitch.
Master servicing involves providing administrative and
reporting services to securitized pools of mortgage-backed
securities. Typically, mortgages underlying mortgage-backed
securities are serviced by a number of primary servicers. Under
most master servicing arrangements, the primary servicers retain
principal responsibility for administering the mortgage loans and
the master servicer acts as an intermediary in overseeing the
work of the primary servicers, monitoring their compliance with
the issuer's standards and consolidating their respective
periodic accounting reports for transmission to the
securitization trustee in respect of the related securities. The
Company frequently is designated as the full servicer for a pool
of mortgages, in which case the Company acts as master, primary,
and, in some cases, special servicer for the pool. Master/full
servicers are typically paid fees based on the Face Value of
loans under management, and the compensation is determined by a
bidding and negotiating process. In October 1996, the Company
received the first public "above average" commercial master
servicer rating ever awarded by Standard & Poor's. The "above
average" rating is the highest rating given by Standard & Poor's
to master servicers. The Company is also rated "acceptable" by
Fitch as a master servicer.
Residential Mortgage Banking Business
General. Through AMRESCO Residential, the Company originates,
acquires, warehouses and securitizes residential mortgage loans.
AMRESCO Residential's loan production has increased to
$3.6 billion from $1.9 billion for the years ended December 31,
1997 and 1996, respectively.
Industry Trends. Although studies and reports on the size of
the market for conventional, nonconforming
residential mortgage loans vary significantly, these studies and
reports do generally confirm that the market has experienced, and
continues to experience, significant growth. One industry
publication, Inside B&C Lending, reported originations of "B"
credit and "C" credit loans of $124.5 billion for the year ended
December 31, 1997, which represents an increase of 28% over the
same period in 1996. The Company believes that the growth in the
market has been attributable to, among other factors: (i) a
large number of borrowers seeking to consolidate their revolving
credit debt and auto loans for a lower rate and payment;
(ii) slow growth in real estate appreciation causing an increase
in the number of borrowers seeking to make home improvements;
(iii) increased entry into the home loan market by
commercial banks as well as the growth in the number and size of
mortgage brokers making home loan financing more readily
available; and (iv) growth in overall consumer awareness of the
availability of home loan financing. In addition, the asset-
backed securitization market has provided an important source of
financing for originators of home equity loans.
Borrower Profile and Underwriting. The Company targets
borrowers that have credit profiles that preclude their loans
from being sold in the government agency secondary markets. 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 believes that the
higher interest rates and the more favorable loan-to-value
characteristics of this market mitigate the greater credit risk
associated with such borrowers and make this an attractive market
for the Company.
The residential mortgage loans originated or acquired by the
Company are underwritten in accordance with the Company's
guidelines or the guidelines of the third party originator which
have been submitted to and approved by the Company. The Company
performs due diligence on all residential mortgage loans which it
acquires to assure compliance with underwriting standards. Under
the guidelines used or approved by the Company, various risks are
used to grade the likelihood that the mortgagor will satisfy the
repayment conditions of the mortgage loan. These risk categories
establish the maximum permitted loan-to-value ratio and loan
amount, given the occupancy status of the mortgaged property and
the mortgagor's credit history and debt ratio. In general,
higher credit risk mortgage loans are graded in categories which
permit higher debt ratios and more (or more recent) major
derogatory credit items such as outstanding judgments or prior
bankruptcies. The underwriting guidelines generally establish
lower loan-to-value ratios and loan amounts for higher credit
risk mortgage loans.
Loan Products. The residential mortgage loans originated and
acquired by the Company consist of fixed and adjustable rate
conventional, nonconforming mortgage loans with remaining terms
to maturity of not more than 360 months and secured by deeds of
trust, security deeds or mortgages. The properties securing the
residential mortgage loans consist primarily of single family
residences (which may be attached, detached, part of a two-to-
four-family dwelling, a condominium unit or a unit in a planned
unit development). The properties securing the residential
mortgage loans may be owner occupied or non-owner occupied
investment properties. The Company's residential mortgage loan
products include fixed rate loans that bear a fixed rate of
interest for the life of the loan, adjustable rate loans that
bear interest at rates that adjust, along with related monthly
payments, periodically (generally semiannually) based on a
specified financial index or quoted rate and loans that bear a
fixed rate of interest for a specified period following
origination (generally 2, 3 or 5 years) with periodic rate
adjustments thereafter based on a specified financial index or
quoted rate. In a majority of cases, the residential mortgage
loans can be prepaid by the mortgagor in whole or in part at any
time, although the mortgagor may be required to pay a fee in
connection with certain prepayments. For residential mortgage
loans included in securitizations consummated between January 1,
1996 and December 31, 1997, the pools of residential mortgage
loans have exhibited the following characteristics: weighted
average loan-to-value ratios, based upon the lower of the sales
prices and the appraised values of the related properties at the
time the time of origination, ranging from 66% to 75%, weighted
average remaining term to maturity ranging from 318 months to 357
months, average loan balances ranging from $66,000 to $106,000
and weighted average coupon rates ranging from 9.8% to 11.3%.
Loan Sources. The Company obtains residential mortgage loans
through portfolio acquisitions, correspondent lending, wholesale
broker operations and various retail channels, including
telemarketing, direct mail and retail branches. Portfolio
acquisitions involve the purchase of pools of closed mortgage
loans with aggregate principal balances in excess of $2.0 million
from mortgage banks and other financial institutions throughout
the United States. Correspondent lending involves the
acquisition of closed loans one at a time (i.e., on a "flow"
basis) through a network of correspondent financial institutions.
Wholesale operations involve the origination of loans through the
Company's network of branch offices and through its centralized
wholesale operations. The acquisition of the assets and
operations of Quality Mortgage USA in October 1996 provided the
Company with a nationwide network of 53 branch offices that
originate loans through relationships with over 3,000 mortgage
brokers. In its centralized wholesale operations, the Company
serves mortgage brokers who do not come within the area of
service of one of the Company's branch offices. Retail
operations involve consumer direct mail and telemarketing, as
well as retail branch operations. In its retail operations the
Company works directly with consumers to originate, underwrite
and close mortgage loans. Although retail originations currently
represent only a small percentage of total loan volumes, the
Company anticipates that an increasing proportion of its
residential mortgage loans will be sourced through the retail
channel. On January 28, 1998, the Company acquired the business
and operations of City Federal Funding & Mortgage Corp., a
residential mortgage banker with six East Cost-based retail
offices.
The diversification of the Company's sources of loan
production has resulted in the correspondent, wholesale and
retail channels of distribution becoming increasingly important
contributors to total residential mortgage loan production. The
following table sets forth aggregate dollar amounts (in millions)
and percentage of all loans originated or acquired by the Company
by each product channel for the years ended December 31, 1997 and
1996:
1997 1996
$ % $ %
Portfolio acquisitions $2,583.8 71.0 $1,817.5 93.5
Correspondent lending 160.3 4.4 9.3 0.5
Wholesale 854.8 23.5 106.6 5.5
Retail 41.4 1.1 10.6 0.5
Total $3,640.3 100.0% $1,944.0 100.0%
Securitization and Sale. The Company pools the residential
mortgage loans it originates and purchases to create asset-backed
securities which it typically sells on a quarterly basis. During
the year ended December 31, 1997, the Company securitized
approximately $2.8 billion in residential mortgages in public and
private offerings of asset-backed securities. Once the Company
accumulates loans of an aggregate principal amount sufficient to
permit efficient securitization of the loan pool (generally, in
excess of $500.0 million), the loans are conveyed to a special
purpose trust that sells into the secondary market various
tranches of rated collateralized asset-backed securities
representing undivided interests in the revenue streams generated
by the loans. Each month, collections of principal and interest
on the residential mortgages are used by the trustee of the
securitization trusts to pay the holders of the related asset-
backed securities, to build over-collateralization by using
excess interest to pay down principal on such securities and to
pay expenses, with any remaining cash flows paid to the holders
of the unrated securities. The holders of unrated securities
absorb losses and the negative impact of prepayments,
delinquencies and losses before holders of other asset-backed
securities issued in the securitization. The unrated securities
issued by the trust are purchased by the Company and are included
in "Retained Interests in Securitizations - Trading" in the
Company's Consolidated Balance Sheet. From time to time, the
Company acquires rated and unrated securities from sub-prime,
jumbo and non-standard residential mortgage securitizations
organized by third parties if such securities are considered by
management to be suitable investments.
The asset-backed securities publicly sold to date by the
Company have received investment grade ratings from a recognized
statistical rating organization, such as Standard & Poor's
Ratings Service or Moody's Investors Service, Inc. To achieve
these ratings the Company has used various credit enhancement
techniques, including subordination among classes of securities,
over-collateralization techniques, financial guaranty insurance
or a combination of the foregoing.
The Company utilizes the net proceeds from securitizations to
pay down outstanding warehouse facilities and to originate and
purchase additional residential mortgages and commercial real
estate loans. The Company has also pooled and re-securitized
securities retained from its securitizations, with the resulting
certificates ("Net Interest Margin Certificates") being sold in
private sales to institutional investors. In September 1997, the
Company completed a private sale of Net Interest Margin
Certificates for net proceeds of approximately $102.9 million.
The Company intends, from time to time, to re-securitize
securities retained from its securitizations and sell the
resulting Net Interest Margin Certificates to reduce the
Company's capital exposure with respect to retained interests in
securitizations and to generate additional borrowing capacity
under the Revolving Loan Agreement. However, no assurance can be
given that such opportunities will be available in the future.
The Company, through AMRESCO Residential, uses warehouse
facilities with financial institutions to finance its origination
and purchase of loans on a short-term basis pending
securitization. At December 31, 1997, AMRESCO Residential had an
aggregate borrowing capacity of $1.6 billion under three
warehouse facilities of which $703.7 million was available.
Residential Loan Servicing. Since the acquisition of the
assets and business of Quality Mortgage USA in October 1996, the
Company has performed delinquency management and related
servicing functions for the asset portfolios acquired from
Quality Mortgage USA and for loans originated by the Company
after October 1, 1997 or acquired by it on a servicing released
basis. As of December 31, 1997, the Company was the special
servicer for $314.6 million of residential mortgage loans. 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. The Company believes that customer intensive
servicing functions, such as collections, delinquency management
and general customer relations provide the opportunity to manage
and improve the performance of its residential 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
portfolios of residential mortgage loans currently being serviced
by such providers, as well as for standardized, systems intensive
servicing functions, such as payment processing and tax,
insurance and investor reporting.
Portfolio Performance. The following table provides
information with respect to prepayments, delinquencies and net
losses for each of the Company's securitizations as of November
30, 1997, prior to any potential recoveries:
Original Current CPR % Delinquencies(2) % Net
Security Date Balance Balance Actual(1) 30-59 60-89 90+ Losses(3)
(dollars in millions)
1996-1 01/25/96 $275 $145 29.49% 1.40% 0.71% 10.13% 0.58%
1996-2 04/25/96 257 111 41.21 2.17 1.83 9.60 0.18
1996-3 06/20/96 267 197 19.51 1.13 0.88 6.35 0.08
1996-4 08/28/96 311 182 34.97 2.06 1.22 10.76 0.04
1996-5 12/18/96 700 531 25.96 2.94 1.75 8.79 0.02
1997-1 03/26/97 605 536 16.50 2.72 1.57 5.62 0.00
1997-2 06/12/97 740 695 13.99 2.38 1.17 4.06 0.00
1997-3 09/16/97 950 935 9.50 2.24 1.20 1.09 0.00
Weighted average (4) 18.09% 2.34% 1.32% 5.17% 0.06%
(1) The Constant Prepayment Rate ("CPR") represents the rate
of prepayment experienced by the referenced securitized pool
of mortgage loans, expressed as an annual rate, relative to
the outstanding principal balance over the life of mortgage
loans.
(2) The period of delinquency is based on the number of days
payments are contractually past due. The delinquency
statistics for the 90+ days data includes loans in
foreclosure.
(3) Net Losses represents the aggregate amount, expressed as a
percentage of the original balance, which has been determined to
be uncollectible relating to mortgage loans, less recoveries from
liquidation proceeds and deficiency judgments.
(4) Based on the current balance at November 30, 1997.
Commercial Finance Business
General. In 1996, the Company organized the Commercial
Finance Group to provide financing to commercial borrowers in
various targeted lending markets. The Company focuses on
(i) loans to franchisees of nationally recognized restaurant,
hospitality and automotive organizations, (ii) structured finance
activities, with an emphasis on the real estate and
communications industries, and (iii) single family residential
construction lending. Loans originated by the franchise lending
operation are sold to third parties, principally through
securitization, while the real estate, communications and single
family residential construction loans are retained for the
Company's own portfolio. Other ancillary products, services and
investments provided by the Commercial Finance Group include
equipment leasing, small business lending and loan servicing.
Franchise Lending. ACLC's primary line of business is the
origination, securitization and servicing of loans made to
franchisees of nationally recognized fast food chains, family
dining establishments, hotels and motels, automotive aftermarket
servicers and truck stops. These borrower profiles emphasize,
among other things, the borrower's experience with the particular
operating concept (i.e., fast food, quick oil change, etc.) and
the cash flow of the respective operating units. Management
believes that this product can be expanded to include other small
business loans made to operators with similar borrowing profiles.
According to the International Franchise Association, franchises
comprise one out of every 12 businesses in the United States.
The Franchise Trade Association has estimated that by the year
2000 over 50% of retail sales, or approximately $1 trillion, will
be generated by franchises.
The table set forth below provides information regarding the
distribution of loans serviced by franchise category as of
December 31, 1997 (dollars in thousands):
Percentage
Total of Total
Outstanding Outstanding
Number Loan Loan
Franchise Group of Loans Amount Amount
Quick service restaurants 788 $346,948 61.6%
Casual dining 125 85,380 15.1
Automotive after market services 161 58,391 10.4
Truck stop 14 29,529 5.2
Hospitality services 8 27,032 4.8
Other 19 16,438 2.9
Total 1,115 $563,718 100.0%
ACLC provides loans primarily for the refinancing, remodeling
or purchase of existing facilities. ACLC also offers
construction lending to franchisee borrowers to finance the
construction of new facilities. The loans are funded primarily
by a dedicated warehouse facility until they are securitized and
sold. During the nine months since the acquisition of ACLC
(ending December 31, 1997), the franchise loans originated by
ACLC had loan balances ranging from $0.03 million to
$10.5 million, a coupon rate ranging from 8.3% to 10.7%, an
original term to maturity ranging from 60 months to 180 months
and a remaining term to maturity ranging from 54 months to
180 months.
The franchise loans are generally originated in accordance
with ACLC's underwriting guidelines, which focus on, among other
things, the borrowers ability to repay the loan, the adequacy of
the cash flow at the franchise unit(s), the real and tangible
personal property that may serve as collateral for the loan, the
experience of the borrower, the sales and demographic trends at
the franchise units being financed and the credit history of the
borrower and its principal shareholders. The underwriting
process involves background checks of, and personal interviews
with, prospective borrowers designed to further ACLC's
understanding of the borrowers' business, the character and
managerial qualities of the borrowers' management and the future
direction, growth and financing needs of the borrowers' business.
At December 31, 1997, ACLC had experienced no losses on loans in
its servicing portfolio.
ACLC generates loan volume using a combination of marketing
efforts that include direct solicitation, direct mail, convention
attendance and referrals from previous borrowers. During the
nine months since the acquisition of ACLC (ending December 31,
1997), ACLC had originated loans to borrowers in 35 states, with
the greatest concentration of borrowers (by original principal
amount of loans) being in Florida ($20.5) million, Texas
($19.3 million) and Oregon ($18.4 million).
In the second and fourth quarters of 1997, ACLC completed
securitizations of approximately $132.5 million and $165.9
million of loans, respectively. The investment grade securities
in such securitizations were sold in private placements to
investors and the residual interest securities were retained by
ACLC. The investment grade certificates were rated "Aaa" by
Moody's Investors Service, Inc., "AAA" by Standard & Poor's and
"AAA" by Duff & Phelps Credit Rating Co. The ratings on the
securities offered to investors were achieved by (i) limited
cross-guarantee loan provisions for the various borrowers within
the securitization and (ii) financial guarantee insurance
provided by Capital Markets Assurance Corporation.
ACLC retains the servicing rights to loans following
securitization. ACLC has developed a proprietary servicing
system due to the accounting requirements for the credit
enhancement and the other features of ACLC's franchise lending
program. At December 31, 1997, ACLC was servicing 1,115
franchise related loans with aggregate balances of
$563.7 million. The table set forth below provides information
regarding ACLC's underlying borrower delinquency experience for all
franchise related loans originated by ACLC as of December 31, 1997
and March 31, 1997 (dollars in thousands):
December March
31, 1997 31, 1997
Total loan balances at end of period (1) $563,718 $341,395
Delinquencies (2):
31-60 Days
61-90 Days $ 961
91+ Days $5,729 5,911
Total delinquencies $5,729 $6,872
Total delinquencies as a percentage of 1.02% 2.01%
total loan balances (3)
(1) The Company acquired the business and assets of ACLC
effective March 31, 1997.
(2) The period of delinquency is based on the number of days
payments are contractually past due.
(3) Reflects contractual delinquencies. At December 31,
1997, all borower delinquencies in respect of franchise loans were
paid by borrower cross guarantees. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Securitization Practices" for a discussion of
borrower cross guarantees.
ACLC also originates, underwrites and closes loans that are
funded by a third party conduit lender but only for credits that
do not fit the profile for ACLC's securitizable loan products.
The conduit lender then includes these loans in their
securitization and ACLC records a gain from the sale to the
conduit lender. ACLC also provides lease financing for business
equipment, primarily restaurant equipment based on referrals from
franchise borrowers.
Special Situation Lending. In 1995, the Company began making
commercial loans through AMRESCO Funding. AMRESCO Funding
provides mid- to high-yield financing to borrowers in special
situations that have been unable to obtain financing from
traditional funding sources. In these transactions, the Company
funds senior and subordinated indebtedness generally ranging from
$2.0 million to $10.0 million for terms of one to four years to
borrowers with an established management record. Borrowers
targeted by AMRESCO Funding usually have reputations for
enhancing value, but may lack the financial capacity to qualify
for bank financing beyond a certain level. Loan structures vary
as they are usually customized to fit the characteristics and
purpose of the loans. Income is generally derived by a
combination of interest, fees and (in some cases) a net profit
interest.
AMRESCO Funding lending activity for the years ended December
31, 1997, 1996 and 1995 was as follows (dollars in thousands):
Year Ended
December 31,
1997 1996 1995
Beginning Principal Balance $ 33,597 $ 1,712 $ 0
Principal Advances 156,818 36,415 1,720
Principal Payments (41,521) (4,530) (8)
Ending Principal Balance $148,894 $33,597 $1,712
AMRESCO Funding lends primarily to the commercial real estate
and communications industries (radio and television) from loan
production offices in Texas, California, Oregon, Massachusetts,
Virginia and Canada. Commercial real estate loans, loans to
borrowers in the communications industry and venture capital
loans accounted for $107.6 million (72%), $38.3 million (26%) and
$3.0 million (2%), respectively, of AMRESCO Fundings total
principal balance at December 31, 1997.
AMRESCO Funding tailors its underwriting processes to suit the
industries, borrower types and various loan structures
encountered in its business. The underwriting process for loans
takes into account special risks associated with mid-to-high
yield lending, including an in-depth assessment of the character,
experience (including operating history) and financial capacity
of the borrower or the borrowers' principal(s), a detailed
analysis of the business, property or project being financed and
an analysis of the market in which the borrower operates,
including competition and market share data, comparable
properties or businesses, as well as more general information
such as population, job growth, median income and demographic
data.
The loans originated in AMRESCO Funding's business are
serviced by AMRESCO Services. As of December 31, 1997, AMRESCO
Services was servicing 38 loans with aggregate balances of
$142.0 million for AMRESCO Funding. As of December 31, 1997,
AMRESCO Funding had experienced no delinquencies or losses on its
portfolio of outstanding loans and had established loan loss
reserves of $5.2 million or 3.4% of aggregate loan balances.
Single Family Residential Construction Lending. In January
1997, the Company established AMRESCO Builders Group to provide
construction financing to builders of homes for first time and
first move-up buyers. To facilitate this effort, the Company
hired an experienced lending and servicing team formerly
associated with a Texas financial institution. AMRESCO Builders
Group targets experienced homebuilders that are starting from 100
to 1,500 units per year. These homes generally are in the
$90,000 to $200,000 price range. Prospective borrowers must also
have a minimum of three years proven experience in building and
selling homes, satisfactory financial condition and acceptable
credit history. AMRESCO Builders Group also provides a limited
amount of acquisition and development lending for residential
lots which will serve as feeder stock for the construction loan
program. AMRESCO Builders Group funds loans through a dedicated
warehouse debt facility.
As of December 31, 1997, the residential construction loans
originated by AMRESCO Builders Group have consisted of adjustable
rate loans secured by first liens on homes under construction or
lots. As of December 31, 1997, the loans have evidenced the
following characteristics: maturities from six months (loans on
developed lots) to eighteen months (acquisition and development
loans), interest rates ranging from 9.5% to 12.0% for single
family construction loans and acquisition and development loans.
AMRESCO Builders Group currently has loan production offices
in California, Arizona, Nevada, Georgia and Florida. AMRESCO
Builders Group producers target markets that its management
believes have large or growing populations with qualifying
incomes of home buying age. As of December 31, 1997, AMRESCO
Builders Group loan balances outstanding were $65.5 million on
commitments of $114.1 million. As of December 31, 1997, AMRESCO
Builders Group had experienced no delinquencies or losses on its
portfolio of outstanding loans and had established loan loss
reserves of $0.5 million or 0.7% of aggregate loan balances.
All loan processing, administration and servicing is performed
in Houston, Texas. This process maximizes the benefits of
current technology by electronically storing and tracking loan
documents and information and allows AMRESCO Builders Group to
provide a high level of service to borrower customers. For
example, builder home completion records in the servicing system
can be electronically updated by a computer download from
inspectors in the field thereby speeding payment of draw
requests. AMRESCO Builders Group believes that this level of
service provides added value to the borrower while minimizing
administrative cost.
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 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 re-deploy 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.
Residential Mortgage Banking. The Company recently has
encountered increased competition in the market for conventional,
nonconforming residential 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 residential mortgage banking
business include the Associates, United Companies Financial,
Money Store 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.
Employees
At December 31, 1997, the Company and its subsidiaries
employed 1,650 persons. Of that total, 208 were employed in the
asset management group, 516 in the commercial mortgage banking
group, 600 persons in the residential mortgage banking group, 112
in the commercial finance business and 214 in general corporate
administration. The Company believes that its employee relations
are generally good. The Company has no collective bargaining
arrangements.
Certain Definitions
The following are certain defined terms used herein:
"ACLC" means AMRESCO Commercial Lending Corporation, a
subsidiary of the Company.
"AMRESCO Builders Group" means AMRESCO Builders Group, Inc.
a subsidiary of the Company.
"AMRESCO Capital" means AMRESCO Capital L.P., a limited
partnership.
"AMRESCO Funding" means AMRESCO Funding Corporation, a
subsidiary of the Company.
"AMRESCO Residential" means, collectively, ARCMI, ARMC and
AMRESCO Residential Credit Corporation, subsidiaries of the
Company.
"AMRESCO Services" means a division of AMRESCO Management,
Inc., a subsidiary of the Company.
"ARCMI" means, AMRESCO Residential Capital Markets, Inc., a
subsidiary of the Company.
"ARMC" means, AMRESCO Residential Mortgage Corporation, an
indirect subsidiary of the Company through which the Company
acquired substantially all the operating assets of Quality.
"BEI" means BEI Holdings, Ltd.
"Company" means, unless otherwise stated herein or unless
the context otherwise requires, the Company and each of its
subsidiaries.
"Conduit Purchasers" means investment bankers and other
financial intermediaries who purchase or otherwise accumulate
pools or portfolios of loans having common features (e.g., real
estate mortgages, etc.), with the intent of securitizing such
loan assets and selling them to a trust that secures its funds by
selling ownership interests in the trust to public or private
investors.
"DUS" means the Delegated Underwriting and Servicing
program established by Fannie Mae that permits a DUS approved
lender to commit and close loans for multifamily mortgages for
resale to Fannie Mae without Fannie Mae's prior approval of such
loans.
"EQS" means, collectively, EQ Services, Inc. and Equitable
Real Estate Investment Management, Inc.
"Face Value" means, with respect to any loan or Asset
Portfolio, the aggregate unpaid principal balance of a loan or
loans.
"Fannie Mae" means the Federal National Mortgage
Association.
"FDIC" means the Federal Deposit Insurance Corporation.
"Freddie Mac" means the Federal Home Loan Mortgage
Corporation.
"Holdings" means AMRESCO Holdings, Inc.
"Holliday Fenoglio Fowler" means Holliday Fenoglio Fowler,
L.P., a limited partnership.
"Master Servicer" means an entity that provides
administrative services to securitized pools of mortgage-backed
securities.
"Net Interest Margin Certificates" means the securities
created by the Company from re-securitization of asset-backed
securities retained by the Company from its original
securitizations. The Company seeks to sell such Net Interest
Margin Certificates to institutional investors in private sales.
"Quality Mortgage USA" means Quality Mortgage USA, Inc., a
California corporation.
"Revolving Loan Agreement" means the Third Amended and
Restated Revolving Loan Agreement dated as of September 30, 1997
and as subsequently amended, among the Company, NationsBank of
Texas, N.A., as Agent, Bank One, Texas N.A., as Co-Agent and
NationsBank of Texas N.A. and certain other designated entities,
as lenders.
"RTC" means the Resolution Trust Corporation.
"securitization" and "securitized" mean a transaction in
which loans originated or purchased by an entity are sold to
special purpose entities organized for the purpose of issuing
asset-backed securities.
Item 2. Properties
The Company leases approximately 162,745 square feet in the
North Tower of the Plaza of the Americas in Dallas, Texas for its
centralized corporate functions including executive, business
development and marketing, accounting, legal, human resources and
support. This lease has an initial termination date of October
31, 2006 and has an initial annual base rent of approximately
$2.0 million. The Company also leases space for branch offices
pursuant to leases with varying terms.
The Company believes that its facilities are adequate for
its immediate needs and that additional or substitute space is
available, if needed, to accommodate expansion.
Item 3. Legal Proceedings
The Company is involved from time to time in various legal
proceedings arising in the ordinary course of business. In
connection with the Company's loan servicing, asset management
and resolution activities, the Company is indemnified to varying
degrees by the party on whose behalf the Company is acting. The
Company also maintains insurance that management believes is
adequate for the Company's operations. None of the legal
proceedings in which the Company is currently involved, either
individually or in the aggregate (and after consideration of
available indemnities and insurance), is expected to have a
material adverse effect on the Company's business or financial
condition.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's
security holders during the fiscal quarter ended December 31,
1997.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
The Company's common stock (Symbol: AMMB) is listed on the
Nasdaq Stock Market. At March 23, 1998, there were approximately
2,699 stockholders of record of the Company's common stock.
Presented below are the high and low last sale prices per share
for 1997 and 1996, as reported by NASDAQ. The Company
discontinued declaring dividends beginning with the fourth
quarter of 1995 and the Company does not expect to declare
dividends on its common stock in the foreseeable future.
High Low
1996
First Quarter $14.625 $11.875
Second Quarter 19.313 15.000
Third Quarter 24.375 17.250
Fourth Quarter 27.250 20.625
1997
First Quarter $25.500 $15.125
Second Quarter 21.500 13.875
Third Quarter 37.125 21.750
Fourth Quarter 37.125 24.000
Item 6. Selected Financial Data
The selected financial data set forth below for the five
years ended December 31, 1997 has been derived from the Company's
audited consolidated financial statements (in thousands of
dollars, except per share amounts). This information should be
read in conjunction with "Item 1. Business" and "Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations," as well as the audited consolidated
financial statements and notes thereto included in "Item 8.
Financial Statements and Supplementary Data."
AMRESCO, INC. (1)
Year Year Year Year Year
Ended Ended Ended Ended Ended
December December December December December
31, 31, 31, 31, 31,
1997 1996 1995 1994 1993
(in thousands, except per share data)
Operating Results:
Revenues $423,755 $200,067 $110,486 $129,791 $122,401
Income from
continuing operations 56,224 31,332 18,665 20,933 26,306
Net Income 56,224 31,332 21,090 18,748 24,218
Earnings per share for
income from continuing
operations:
Basic 1.58 1.15 0.77 0.91 2.37
Diluted 1.53 1.06 0.75 0.88 2.33
Earnings per share:
Basic 1.58 1.15 0.87 0.82 2.18
Diluted 1.53 1.06 0.85 0.79 2.15
Dividends per share (2) 0.15 0.20 0.35
Balance Sheet Data:
Total assets 2,633,848 1,075,941 521,713 172,340 163,653
Long-term obligations 695,845 293,956 112,500 6,000
Total liabilities 2,225,348 774,426 360,919 58,754 71,954
Total shareholders' 408,500 301,515 160,794 113,586 91,699
equity
(1) On December 31, 1993, AMRESCO, INC., formerly BEI, merged
with Holdings. The merger was accounted for as a "reverse
acquisition" whereby Holdings was deemed to have acquired BEI for
financial reporting purposes. However, BEI, renamed AMRESCO,
INC., remains the continuing legal entity and registrant for
Securities and Exchange Commission filing purposes. Consistent
with the reverse acquisition accounting treatment, the historical
financial statements of AMRESCO, INC. presented for the year
ended December 31, 1993 are the consolidated financial statements
of Holdings and differ from the consolidated financial statements
of BEI as previously reported. The results of operations of BEI
have been included in the Company's financial statements from the
date of acquisition.
(2) In 1993 dividends of $0.35 per share were paid by Holdings
to its shareholders prior to the merger with BEI.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
The Company is a leading diversified financial services
company with four principal lines of business: asset management,
commercial mortgage banking, residential mortgage banking and
commercial finance. The asset management business involves
acquiring asset portfolios at a substantial discount to face
value and managing and resolving such asset portfolios to
maximize cash recoveries. In addition, in its asset management
business, the Company provides special servicing for
nonperforming and underperforming loans in commercial mortgage-
backed bond trusts and similar securitized commercial asset-
backed loan portfolios. The commercial mortgage banking business
involves the full range of real estate capital markets functions,
including the origination, underwriting, placement,
securitization and servicing of commercial real estate mortgages
and commercial real estate brokerage. The residential mortgage
banking business involves originating, acquiring, warehousing,
securitizing and servicing nonconforming loans. In its
commercial finance business, the Company focuses on (i) loans to
franchisees of nationally recognized restaurant, hospitality and
service organizations, (ii) structured finance and (iii) single
family residential construction lending. The Company's
businesses may be affected by many factors, including
fluctuations in real estate and other asset values, the
availability and price of assets and residential mortgages to be
purchased, the level of and fluctuations in interest rates, the
level of and fluctuations in prepayment, default and loss rates
with respect to loans owned or serviced by the Company and
certain of its securitized loan pools, changes in the
securitization market and competition. In addition, the
Company's operations require continued access to short and long
term sources of financing.
In 1994, the Company concluded substantially all of its
asset management relationships with government agencies and
financial institutions and also began to shift its focus toward
direct investment in asset portfolios and the development of new
lines of financial service businesses. The Company has extended
its business lines to offer a full range of mortgage banking
services, increased the amount it invests in asset portfolios,
began its commercial finance business and disposed of certain
non-core business lines. These significant changes in the
composition of the Company's business are reflected in the
Company's results of operations and may limit the comparability
of the Company's results from period to period.
Revenues from the Company's asset management activities
primarily consist of earnings on asset portfolios, fees charged
for the management of asset portfolios and for the successful
resolution of the assets within such asset portfolios and gains
on sale of investments. The Company's revenues from its
commercial mortgage banking activities are primarily earned from
fees generated by the origination and underwriting of commercial
real estate mortgage loans, the placement of such loans with
permanent investors and the servicing of loans, interest earned
on commercial loans held for sale and gains on the sale and
securitization of commercial mortgage loans held for sale earned
either through a joint venture, as was the case in 1997, or
through the Company's own expected securitization activity.
Revenues from the Company's residential mortgage banking
activities primarily consist of interest earned on originated and
purchased residential mortgage loans, accrued earnings on
retained interests in securitizations and gains on the
securitization and sale of residential mortgage loans and other
related securities. Revenues from the Company's commercial
finance business are primarily earned from interest and fees on
structured finance activities, loans to franchisees of nationally
recognized restaurant, hospitality and service organizations,
loans to single family residential contractors, accrued earnings
on retained interests in securitizations and gains on the
securitization and sale of franchise loans and other related
securities. Corporate and other revenues primarily consist of
interest earned on investments, other miscellaneous income and
intercompany eliminations. Corporate and other expenses
primarily include corporate personnel and overhead and certain
incentive compensation, unallocated interest expense and
amortization of intangibles.
The Company computes a gain or loss on the sale and
securitization of loans and other related securities based on the
fair value of proceeds received over the allocated basis of the
assets sold. Retained interests in assets sold are initially
recorded at their allocated basis; however, the Company's
retained interests are classified as trading securities and are
carried at fair market value. The retained interests in
securitizations are valued at the discounted present value of the
cash flows expected to be realized over the anticipated average
life of the assets sold after future estimated credit losses,
estimated prepayments and normal servicing and other fees related
to assets sold. The discounted present value of such retained
interests is computed using management's assumptions of market
discount rates, prepayment rates, default rates, credit losses
and other costs. The Company typically retains an interest in
its securitizations of residential mortgage loans and franchise
finance receivables in the form of interest only and residual
securities. The Company has not retained an interest in its
securitization of commercial mortgage-backed loans.
Results of Operations
The following discussion and analysis presents the
significant changes in financial condition and results of
continuing operations of the Company by primary business line for
the years ended December 31, 1997, 1996 and 1995. The results of
operations of acquired businesses are included in the
consolidated financial statements from the date of acquisition.
This discussion should be read in conjunction with the
consolidated financial statements and notes thereto (in
thousands, except per share data).
1997 1996 1995
Revenues:
Asset management $109,063 $88,755 $81,596
Commercial mortgage banking 97,533 54,625 26,573
Residential mortgage banking 166,407 56,864 2,307
Commercial finance 51,212 2,947
Corporate, other and intercompany
eliminations (460) (3,124) 10
Total revenues 423,755 200,067 110,486
Operating expenses:
Asset management 61,944 45,756 38,135
Commercial mortgage banking 67,045 40,131 20,550
Residential mortgage banking 118,223 29,052 1,694
Commercial finance 30,321 2,252
Corporate, other and intercompany 54,125 32,410 19,849
eliminations
Total operating expenses 331,658 149,601 80,228
Operating profit:
Asset management 47,119 42,999 43,461
Commercial mortgage banking 30,488 14,494 6,023
Residential mortgage banking 48,184 27,812 613
Commercial finance 20,891 695
Corporate, other and intercompany (54,585) (35,534) (19,839)
eliminations
Total operating profit 92,097 50,466 30,258
Income tax expense 35,873 19,134 11,593
Income from continuing operations 56,224 31,332 18,665
Gain from discontinued operations 2,425
Net income $56,224 $31,332 $21,090
Earnings per share from
continuing operations (1):
Basic $1.58 $1.15 $0.77
Diluted 1.53 1.06 0.75
Earnings per share (1):
Basic $1.58 $1.15 $0.87
Diluted 1.53 1.06 0.85
Weighted average number of
common shares outstanding - basic 35,610 27,232 24,173
(1) Prior periods restated for the adoption of Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share."
Year Ended December 31, 1997 Compared to Year Ended December 31,
1996
The Company reported a 112% increase in revenues from $200.1
million to $423.8 million, an 82% increase in operating profit
from $50.5 million to $92.1 million and a 79% increase in net
income from $31.3 million to $56.2 million compared to the prior
year period. The increases were due primarily to additional
contributions by residential mortgage banking, commercial finance
and commercial mortgage banking operations. Weighted average
common shares outstanding increased 31% due primarily to the late
1996 conversion of the Company's convertible subordinated
debentures, the late 1996 public offering of the Company's common
stock and the March 1997 purchase of AMRESCO Commercial Lending
Corporation ("ACLC") with the Company's common stock. Diluted
earnings per share increased 44% from $1.06 to $1.53.
Asset Management. Revenues for the year ended December 31,
1997 primarily consisted of $64.6 million in interest and other
investment income, $24.9 million in asset management and
resolution fees and $18.0 million of gains on sales of loans and
investments. The $20.3 million increase in revenues from $88.8
million for 1996 to $109.1 million for the year ended December
31, 1997 was primarily comprised of a $16.7 million increase in
gain on sale of loans and investments and a $13.8 million
increase in interest and other investment income offset, in part,
by a $9.3 million decrease in management and resolution fees.
Gain on sale of loans and investments increased due primarily to
the sales of asset-backed securities and sales of foreclosed real
estate. Interest and other investment income increased due
primarily to a significant increase in aggregate investments for
the Company's own account since early 1996. Asset management and
resolution fees decreased as a result of a shift in business away
from primarily managing and investing in partnerships and joint
ventures to investing in wholly-owned portfolios.
Operating expenses for the year ended December 31, 1997
primarily consisted of $22.6 million in interest expense, $17.4
million in personnel cost, $16.7 million in other general and
administrative expenses and a $4.5 million provision for
investment and loan losses. The $16.1 million increase in
expenses from $45.8 million for the prior year to $61.9 million
for the year ended December 31, 1997 was due primarily to an $8.0
million increase in other general and administrative expenses
primarily related to increased foreclosed real estate expenses, a
$7.3 million increase in interest expense related to the
financing of increased levels of investments from early 1996, and
a $4.5 million provision on owned portfolios and special
servicing receivables, offset, in part, by a $3.5 million
decrease in personnel expenses resulting from a lower level of
assets being managed.
Commercial Mortgage Banking. Revenues for the year ended
December 31, 1997 primarily consisted of $64.5 million in
origination, underwriting and servicing revenues, $19.2 million
in interest and other investment income and $13.9 million in
income from equity affiliate. The $42.9 million increase in
revenues from $54.6 million for the prior year period to $97.5
million for the year ended December 31, 1997 relates to an
increase of $24.4 million in mortgage banking and servicing
revenues due primarily to transaction volume of $7.8 billion
during 1997 compared to $3.8 billion for 1996. Income from
equity affiliate of $13.9 million for 1997 was due to income from
AMRESCO Capital's 50% share in a joint venture which originated
and securitized loans. Interest and other investment income
increased $4.9 million due primarily to interest earned on loans
held for sale and escrow deposits, both of which have increased
significantly since early 1996.
In 1997, the Company originated commercial real estate loans
primarily through a joint venture in which the Company and a
large investment-banking firm shared equally in the accumulation
and securitization profits and risks. Effective December 19,
1997, the partnership between the Company and the investment-
banking firm was revised. Any accumulation and securitization
profit or loss from commercial real estate loans for which loan
applications were received on or before November 13, 1997 (except
for specified loans aggregating approximately $120.3 million)
will be shared equally by the Company and the investment-banking
firm. All profits and risks associated with commercial real
estate loans originated after November 13, 1997, as well as the
profits and risks relating to specified loans aggregating
approximately $120.3 million for which loan applications were
received prior to November 13, 1997, will be for the sole account
of the Company. The investment-banking firm will continue to
provide funding, distribution and related services to the Company
pursuant to a separate agreement.
Operating expenses for the year ended December 31, 1997
primarily consisted of $49.3 million in personnel expense, $12.4
million in other general and administrative expense and $3.2
million in interest expense. The $26.9 million increase in
expenses from $40.1 million for the prior year to $67.0 million
for the year ended December 31, 1997 was due primarily to an
increase of $19.9 million in personnel expenses primarily related
to commissions on increased originations and an increase of $4.5
million in other general and administrative expense due to
expanded operations.
Residential Mortgage Banking. Revenues for the year ended
December 31, 1997 primarily consisted of $90.1 million in
interest and other investment income and $69.6 million of gains
on securitization and sale of residential mortgage loans and
related securities. The $109.5 million increase in revenues from
$56.9 million for the prior year period to $166.4 million for the
year ended December 31, 1997 primarily related to increased
levels of loan originations, acquisitions and securitizations and
the acquisition by AMRESCO Residential Mortgage Corporation
("ARMC") of the assets and business of Quality Mortgage USA
("Quality"). The increase in revenues was primarily comprised of
a $52.7 million increase in gain on the securitization and sale
of residential mortgage loans and a $50.3 million increase in
interest and other investment income.
The increased gain on the securitization and sale of
residential mortgage loans was due primarily to the
securitization and sale of approximately $3.0 billion of
residential mortgage loans during the year ended December 31,
1997, including approximately $142.0 million of residential
mortgage loans securitized on a pre-fund basis in December 1996,
as compared to gains on approximately $1.7 billion of loans
securitized and sold in 1996. In addition to greater loan
volumes, the increase in gain on securitization and sale was
attributable in part to the inclusion of loans in the 1997
securitizations originated by ARMC, which had a lower basis than
loans purchased from third parties and thus resulted in larger
gains. Gains for 1997 were reduced by losses from futures
contracts used for hedging activities.
Interest and other investment income primarily consisted of
interest earned on loans held for sale, which have increased
significantly since early 1996, and retained interests in
securitizations (including related hedging and mark-to-market
activities). During 1997, the Company recognized a loss of $4.9
million from futures contracts used for hedging activities
associated with its retained interests in securitizations offset,
in part, by mark-to-market gains of $2.5 million on its retained
interests in securitizations.
Operating expenses for the year ended December 31, 1997
primarily consisted of $53.9 million in interest expense, $37.9
million in personnel expense, $17.3 million in other general and
administrative expense and $7.6 million of provisions for
investment and loan losses. Operating expenses increased by
$89.2 million from $29.1 million for the prior year period to
$118.2 million for the year ended December 31, 1997. This
increase primarily consisted of $35.4 million in interest
expense, $31.5 million in personnel expense, $13.5 million in
other general and administrative expenses and $7.6 million in
provisions for investment and loan losses. Interest expense
primarily related to borrowings under warehouse loans payable
which funded the origination, acquisition and warehousing of
mortgage loans held for sale. Personnel and other general and
administrative costs increased significantly from the prior year
period due primarily to the increased operations of the
residential business through ARMC. The provision for loan losses
related primarily to delinquent loans the Company elected to
repurchase from the securitization trustee in certain of the
Company's securitizations.
Commercial Finance. Revenues for the year ended December
31, 1997 primarily consisted of $30.4 million of interest and
other investment income and $15.8 million of gain on
securitization and sale of loans and investments. The $48.3
million increase in revenues from $2.9 million for the prior year
period to $51.2 million for the year ended December 31, 1997
relates primarily to the acquisition of ACLC in March 1997 and
increased lending activity. Interest and other investment income
increased $27.6 million due primarily to interest earned on
loans, securities retained in securitizations and escrow
deposits, all of which have increased significantly since early
1996. The $15.8 million gain primarily relates to gain on
securitization and sale of approximately $266.0 million of
franchise loans in 1997 by ACLC.
Operating expenses for the year ended December 31, 1997
primarily consisted of $13.2 million in interest expense, $8.2
million in personnel cost, $4.6 million of provision for loan
losses and $4.2 million in other general and administrative
expenses. The $28.1 million increase in expenses from $2.3
million for the prior year to $30.3 million for the year ended
December 31, 1997 was due primarily to an increase of $12.3
million in interest expense related to the financing for
increased levels of investments from 1996, $7.9 million in
personnel expense related to expanded operations, $4.6 million of
additional provision for loan losses and $3.1 million in other
general and administrative expenses primarily related to expanded
operations.
Corporate, Other and Intercompany Eliminations. Operating
losses for the year ended December 31, 1997 increased $19.1
million due primarily to increases in personnel costs and other
overhead related to expanded operations. The rapid growth of the
residential mortgage banking, commercial mortgage banking and
commercial finance operations have necessitated the hiring of
additional personnel and the related development of corporate
infrastructure. The Company anticipates that the costs
associated with the corporate function will continue to decrease
as a percentage of revenues over time as the corporate support
systems and infrastructure are able to support a greater base of
revenue generating operations.
Income Taxes. The Company must have future taxable income
to realize recorded deferred tax assets. Certain of these
benefits expire beginning in 2001 and are subject to annual
utilization limitations. Management believes that recorded net
deferred tax assets will be realized in the normal course of
business. The increase in the 1997 effective tax rate to 39.0%
from 37.9% in 1996 was due primarily to the amortization of the
intangible asset recorded related to the ACLC acquisition, which
is not deductible for tax purposes.
Year Ended December 31, 1996 Compared to Year Ended December 31,
1995
The Company reported an 81% increase in revenues from $110.5
million to $200.1 million, a 67% increase in operating profit
from $30.3 million to $50.5 million and a 68% increase in income
from continuing operations from $18.7 million to $31.3 million
compared to the prior year period. The increases were due
primarily to growth in the residential and commercial mortgage
banking operations. Weighted average common shares outstanding
increased 13% due primarily to the issuance of 2.3 million shares
of common stock in late 1995 and the issuance of 3.0 million
shares of common stock in late 1996. Diluted earnings per share
from continuing operations increased 41% over 1995 primarily due
to a 68% increase in income from continuing operations offset by
the increase in weighted average shares outstanding and
equivalents used to compute diluted per share amounts.
Asset Management. Revenues for the year ended December 31,
1996 primarily consisted of $50.8 million in interest and other
investment income and $34.2 million in management and resolution
fees. The $7.2 million increase from $81.6 million for 1995 to
$88.8 million for 1996 primarily consisted of an increase of
$13.9 million in interest and other investment income offset, in
part, by a decrease of $6.3 million in asset management and
resolution fees. The increase in interest and other investment
income and the decrease in asset management and resolution fees
relate to a shift from primarily managing and investing in
partnerships and joint ventures to investing in wholly-owned
portfolios.
Operating expenses for the year ended December 31, 1996
consisted of $20.9 million in personnel expenses, $15.3 million
in interest expense and $8.8 million in other general and
administrative expenses. The $7.7 million increase from $38.1
million for the year ended December 31, 1995 to $45.8 million for
the year ended December 31, 1996 was primarily comprised of
increases of $3.7 million in interest expense and $3.1 million in
other general and administrative expenses. Interest expense
increased due primarily to the financing incurred on a $99.6
million increase in aggregate investments and other general and
administrative costs increased due primarily to increased
foreclosed real estate expenses.
Commercial Mortgage Banking. Revenues for the year ended
December 31, 1996 primarily consisted of $40.0 million in
mortgage banking and servicing fees and $14.3 million in interest
and other investment income. The $28.1 million increase in
revenues from $26.6 million for the year ended December 31, 1995
to $54.6 million for the year ended December 31, 1996 relates
primarily to increases of $15.6 million in mortgage banking and
servicing fees and $12.2 million of interest and other investment
income due primarily to the inclusion of the operations of the
commercial loan servicing business acquired in October 1995 and
to increases in the loan origination and servicing volumes of the
Company's mortgage banking operations.
Operating expenses for the year ended December 31, 1996
primarily consisted of $29.3 million in personnel expenses, $7.9
million in other general and administrative expenses and $2.3
million in interest expense. The $19.6 million increase in
operating expenses from $20.6 million for 1995 to $40.1 million
for the year ended December 31, 1996, was due primarily to an
increase of $13.2 million in personnel expenses and a $4.2
million increase in other general and administrative expenses.
The increase in expenses was primarily due to the inclusion of
operations of the commercial loan servicing business acquired in
October 1995 and the growth in commercial mortgage banking
operations which were initiated in late 1994.
Residential Mortgage Banking. The Company initiated the
operation of the residential mortgage banking business in
September 1995. Revenues for the year ended December 31, 1996
primarily consisted of $39.8 million of interest and other
investment income and $16.9 million of gains on sales of loans
and investments. The $16.9 million gain on sale of loans and
investments resulted from securitizations and sales of
approximately $1.7 billion of residential mortgage loans, which
excludes $142.0 million which was pre-funded but the loans were
not sold until 1997. Revenues for 1996 include $2.8 million in
interest and other investment income and $2.4 million of gains on
sales of loans and investments related to the acquisition of
substantially all of the assets of Quality which were purchased
by the Company effective October 25, 1996.
Operating expenses for the year ended 1996 primarily
consisted of $18.5 million in interest expense, $6.4 million in
personnel expenses and $3.8 million in other general and
administrative expenses. Interest expense primarily relates to
borrowings under warehouse loans payable, which funded the
origination, acquisition and holding of mortgage loans held for
sale. Expenses for 1996 include $4.6 million in personnel costs,
$2.8 million in other general and administrative expenses and
$1.1 million in interest expense related to the operations
acquired from Quality on October 25, 1996.
Commercial Finance. The Company began operations of its
commercial finance business in 1996. Revenues for the year ended
December 31, 1996 primarily consisted of $2.8 million in interest
and other investment income earned from providing high yield debt
financing for businesses and projects that were unable to access
traditional lending sources. Expenses primarily consisted of
$1.0 million of other general and administrative expenses and
$1.0 million of interest expense.
Corporate, Other and Intercompany Eliminations. Operating
loss increased $15.7 million from $19.8 million for the year
ended December 31, 1995 to $35.5 million for the year ended
December 31, 1996 due primarily to increases in personnel
expenses and other overhead and interest expense related to
expanded operations.
Discontinued Operations. On June 16, 1995, the Company
disposed of the operations of its data processing and home-
banking subsidiary for a net gain of $2.4 million, or $0.10 per
share.
Liquidity and Funding
Liquidity is a measure of a company's ability to meet
potential cash requirements, including ongoing commitments to
repay borrowings, fund investment and lending activities and for
general business purposes. Cash for investing, originating and
underwriting loans, acquiring loans for securitization, general
operating expenses and business acquisitions is primarily
obtained through cash flow from operations and credit facilities,
including advances on the corporate and portfolio credit lines,
mortgage warehouse lines, s,s,
mortgage warehouse lines, s,
mortgage warehouse lines, nonrecourse debt and other financings.
The Company has significant ongoing liquidity needs to
support its existing business and continued growth. The
Company's liquidity is actively managed on a daily basis and the
Company's financial status, including its liquidity, is reviewed
periodically by the Board of Directors. This process is intended
to ensure the maintenance of sufficient funds to meet the needs
of tmillion and $29.0
million at December 31, 1997 and 1996, respectively. Cash flows
from operating activities plus principal cash collections on
loans, asset portfolios and asset-backed securities totaled
$196.9 million for the year ended December 31, 1997 compared to
$56.6 million for 1996. The increase in cash flows from these
activities resulted primarily from collections on asset
portfolios and asset-backed securities. The following is a
summary of certain cash flow data (dollars in thousands):
Year Ended
December 31,
1997 1996
Net cash used in operating activities $(103,952) $ (50,376)
Net cash used in investing activities (347,170) (223,804)
Net cash provided by financing activities 447,942 287,087
Other financial measures:
Cash flow from operations and collections on
loans, asset portfolios and asset-backed securities 196,904 56,646
Cash provided by new capital and borrowings,
net (excluding warehouse loans payable) 441,994 283,574
Cash used for purchase of asset portfolios and
asset-backed securities andoriginations of loans (675,618) (240,756)
Ratio of total debt to equity (1) 5.2:1 2.3:1
Ratio of core debt to equity (2) 2.1:1 1.1:1
EBITDA (3) 208,608 96,105
Interest coverage ratio (4) 2.0x 2.6x
(1) Excludes an investment line of credit for 1996.
(2) Excludes indebtedness under warehouse lines of credit and,
for 1996, the investment line of credit.
(3) EBITDA is calculated as operating income before interest,
income taxes, depreciation and amortization. The Company has
included information concerning EBITDA because EBITDA is one
measure of an issuer's historical ability to service its
indebtedness. EBITDA should not be considered as an
alternative to, or more meaningful than, net income as an
indicator of the Company's operating performance or to cash
flows as a measure of liquidity.
(4) Interest coverage ratio means the ratio of earnings before
interest, taxes, depreciation and amortization to cash
interest expense.
The following table shows the components of the Company's
capital structure, including certain short-term debt, as of
December 31, 1997 and 1996 (dollars in millions):
1997 1996
% of % of
Dollars Total Dollars Total
Shareholders' equity $ 408.5 16% $301.5 30%
Senior notes 57.5 2 57.5 6
Senior subordinated notes 250.0 10 57.5 6
Mortgage warehouse loans 1,268.6 51 354.6 36
Notes payable (excluding 531.6 21 225.9 22
Total $2,516.2 100% $997.0 100%
Total assets increased $1.6 billion to $2.6 billion at
December 31, 1997 from $1.1 billion at December 31, 1996. This
increase was due primarily to an increase in loans held for sale,
retained interests in securitizations and an increase in loans
and asset portfolios.
On March 12, 1997, the Company issued $192.5 million
aggregate principal amount of senior subordinated notes. The
notes bear interest at 10% per annum and mature on March 15,
2004. The notes are unsecured obligations of the Company and are
subordinated to prior payment of all existing and future senior
debt and to indebtedness and other liabilities of the Company's
subsidiaries. The notes are not redeemable prior to maturity.
On May 30, 1997, the Revolving Loan Agreement was amended to
provide a $350.0 million commitment under the revolving credit
facility with a maturity date of May 31, 1999 and a $60.0 million
commitment under the term facility, which matures May 31, 2001.
Effective as of September 30, 1997, the Company amended the
Revolving Loan Agreement to, among other things, increase the
borrowing limits provided for therein from $350.0 million to
$550.0 million, of which up to $455.0 million was available
pursuant to lender commitments at December 31, 1997. As of March
20, 1998, lender commitments under the Revolving Loan Agreement
were $540.0 million. Assuming commitments were received for the
full $550.0 million, the Revolving Loan Agreement would permit up
to $490.0 million to be incurred pursuant to a revolving credit
facility and $100.0 million to be incurred pursuant to a term
facility, subject to a combined borrowing limit of $550.0
million. At December 31, 1997, the outstanding balance of the
Revolving Loan Agreement was approximately $388.3 million,
resulting in a borrowing capacity at that time of approximately
$66.7 million.
In February 1998, the Company completed a registered public
offering of approximately 5.2 million shares of common stock
including the underwriters' over-allotment option. The net
proceeds from such offering aggregated approximately $147.8
million and were used to repay borrowings under the Company's
Revolving Loan Agreement. The price to the public was $30.00 per
share and the proceeds to the Company were $28.56 per share,
after underwriting discounts. Additionally, in February and
March 1998, the Company issued $290.0 million and $40.0 million,
respectively, aggregate principal amount of senior subordinated
notes. The net proceeds from the February 1998 offering
aggregated approximately $281.7 million and were used to repay
borrowings under the Company's Revolving Loan Agreement and other
indebtedness and the net proceeds from the March 1998 offering
aggregated approximately $39.0 million and were used for general
corporate purposes. The February and March 1998 senior
subordinated notes bear interest at 9.875% per annum and mature
on March 15, 2005. The notes are unsecured obligations of the
Company and are subordinated to prior payment of all existing and
future senior debt and to indebtedness and other liabilities of
the Company and its subsidiaries. The following table sets forth
the components of the Company's capital structure, including
certain short term debt, as of December 31, 1997 and the
unaudited pro forma capital structure of the Company as of
December 31, 1997 adjusted to give effect to the common stock and
notes offerings, and the use of proceeds therefrom, completed in
February and March 1998 (dollars in millions):
Actual Pro forma
% of % of
Dollars Total Dollars Total
Shareholders' equity $ 408.5 16% $ 556.3 21%
Senior notes 57.5 2 57.5 2
Senior subordinated notes 250.0 10 580.2 22
Mortgage warehouse loans 1,268.6 51 1,216.7 46
Notes payable 531.6 21 253.9 9
Total $2,516.2 100% $2,664.6 100%
Following the consummation of these common stock and notes
offerings, management anticipates that the Company's borrowing
capacity under the Revolving Loan Agreement, other credit
facilities and funds from operations will be sufficient to fund
the Company's operations through mid-1999.
Securitization Practices
The Company has utilized warehouse lines of credit and
securitizations to fund the growth of its residential mortgage
banking, commercial real estate lending and franchise finance
operations. The Company believes that the ability to accumulate
loans under warehouse lines of credit and to repay the loans with
the proceeds of a subsequent securitization of the loans has
permitted the Company to deploy its capital resources across a
broader revenue generating base than would have been possible
using traditional corporate debt financing techniques. In
addition, the gain recognized on the securitization of loans and
the interest income derived from securities retained by the
Company from securitizations provide an important source of
revenue. In determining the amount of gain on sale from
securitizations and the value of retained securities, the Company
employs discount rates and assumes prepayment rates and a loss
experience that it believes are reasonable and prudent. The
Company periodically evaluates the assumptions used and makes any
adjustments to assumed prepayment rates, default rates and
discount rates that may be necessary or appropriate given the
market conditions at that time or other appropriate factors.
The Company views prepayment rates in the residential
markets as less predictable than in other markets, such as the
commercial real estate lending and franchise finance markets
where prepayment penalties tend to discourage prepayments. It
has been the Company's practice to employ conservative
assumptions with respect to prepayment and loss rates for its
residential mortgage loan securitizations. For its residential
mortgage loan securitizations for the years ended December 31,
1997 and 1996, the Company has initially valued its retained
interest using a discount rate of 20% and has assumed prepayment
methodologies which reflect over the life constant prepayment
rates ranging from 19% to 30% and blended annualized loss rates
ranging from 0.50% to 0.625% with variations within the ranges
primarily depending upon mix of loan types.
The Company has also used a 20% discount rate in its
franchise loan securitizations in 1997. However, the Company has
assumed no prepayments or losses with respect to loans in these
securitized portfolios. ACLC structures its franchise loans with
limited cross guarantees between borrowers such that the
borrowers within a defined pool of loans absorb the first 5% of
net losses. At the present time, the Company considers it
unlikely that net losses on franchise loan portfolios will exceed
5%. ACLC and its predecessors have experienced no losses on
franchise loans since their inception in 1993. Accordingly,
losses are assumed to be zero. The "no prepayments" assumption
is based on ACLC's historical prepayment experience and the
significant prepayment penalties applicable to the franchise
loans which compensate the Company for much of any lost earnings
from prepayments.
Other Matters
On March 31, 1997, the Company purchased the stock of
Commercial Lending Corporation and the operations and specific
assets of certain affiliates and renamed the business AMRESCO
Commercial Lending Corporation. ACLC's primary line of business
is originating, securitizing, selling and servicing franchise
loans. The purchase price consisted of (i) approximately 2.1
million shares of the Company's Common Stock valued at $34.3
million (including 0.2 million additional shares issued in July
1997 valued at $3.3 million pursuant to the original acquisition
terms), (ii) the assumption of certain liabilities and (iii)
contingent earnout payments of additional shares of the Company's
Common Stock based upon the operating performance of the acquired
entities through March 31, 2000. The acquisition of ACLC was
recorded as a purchase acquisition.
On January 1, 1997, the Company adopted SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities," which requires an entity to
recognize the financial and servicing assets it controls and the
liabilities it has incurred and to derecognize financial assets
when control has been surrendered. Retained interests in assets
sold are measured by allocating the previous carrying amount
between the assets sold and retained interests based on their
relative fair values at the date of transfer. The adoption of
SFAS No. 125 did not have a material impact on the Company's
financial position or results of operations.
On December 31, 1997, the Company adopted SFAS No. 128,
"Earnings Per Share," which establishes new standards for
computing and presenting earnings per share ("EPS"). Prior year
amounts have been restated for the new EPS presentation. On
December 31, 1997, the Company also adopted SFAS No. 129,
"Disclosure of Information about Capital Structure," which
establishes standards for disclosing information about an
entity's capital structure.
In June 1997, SFAS No. 130, "Reporting Comprehensive
Income," was issued which establishes standards for reporting and
display of comprehensive income and its components in the
financial statements. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information," which
was also issued in June 1997, establishes standards for the way
public companies disclose information about operating segments,
products and services, geographic areas and major customers.
SFAS No. 131 is effective for financial statements for periods
beginning after December 15, 1997. The Company anticipates that
its segments to be disclosed in 1998 will be asset management,
commercial mortgage banking, residential mortgage banking,
commercial finance and corporate. In February 1998, SFAS No.
132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits," was issued which is effective for
fiscal years beginning after December 31, 1997. The Company
adopted these standards for disclosure effective January 1, 1998.
Year 2000
Substantially all of the systems used by the Company, as
well as vendor and business partner systems, are expected to be
year 2000 compliant by January 1, 1999. Although the Company
expects all of its systems to be year 2000 compliant by January
1, 1999, there can be no assurance that all vendor and business
partner systems will be year 2000 compliant. The Company's cost
to comply with the year 2000 initiative is not expected to be
significant.
Private Litigation Securities Reform Act of 1995
This report contains forward-looking statements based on
current expectations that involve a number of risks and
uncertainties. The forward-looking statements are made pursuant
to safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The factors that could cause actual results
to differ materially include the following: industry conditions
and competition, interest rates, business mix, availability of
additional financing, and the risks described from time to time
in the Company's reports to the Securities and Exchange
Commission.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements on Page F-1 of this Annual
Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item is set forth under the
caption "Management" in the Company's definitive Proxy Statement
(the "Proxy Statement"), which will be filed with the Securities
and Exchange Commission pursuant to Regulation 14A under the
Securities Exchange Act of 1934 and is incorporated by reference.
Item 11. Executive Compensation
The information required by this Item is set forth under the
caption "Executive Compensation" in the Proxy Statement, which
will be filed with the Securities and Exchange Commission
pursuant to Regulation 14A under the Securities Exchange Act of
1934 and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information required by this Item is set forth under the
caption "Security Ownership of Certain Beneficial Owners and
Management" in the Proxy Statement, which will be filed with the
Securities and Exchange Commission pursuant to Regulation 14A
under the Securities Exchange Act of 1934 and is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is set forth under the
caption "Certain Relationships and Related Transactions" in the
Proxy Statement, which will be filed with the Securities and
Exchange Commission pursuant to Regulation 14A under the
Securities Exchange Act of 1934 and is incorporated herein by
reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(1) Financial Statements
See Index to Financial Statements on page F-1 of this Annual
Report on Form 10-K.
(2) Financial Statement Schedules
Financial statement schedules under the applicable rules and
regulations of the Securities and Exchange Commission have been
omitted as the schedules are not applicable or the information
required thereby is included in the Company's consolidated
financial statements or notes thereto.
(3) Exhibits
The following instruments are included as exhibits to the
report. Exhibits incorporated by reference are so indicated.
Exhibit
Number Description of Exhibit
3.(a) Restated Certificate of Incorporation. (1)
(b) Amended and Restated Bylaws effective as of February 25,
1997 filed as exhibit 3 (b) to Registrant's Form 10-K for
the fiscal year ended December 31, 1996, which is
incorporated herein by reference.
4.(a) See Exhibits 3(a) and (b).
(b) Indenture, dated as of January 15, 1996, between the
Registrant and Bank One, Columbus, N.A., as trustee,
filed as Exhibit 4.1 to the Registrant's Form 8-K dated
February 2, 1996, which exhibit is incorporated herein by
reference.
(c) Indenture, dated as of March 1, 1997, between the Company
and Bank One, Columbus, N.A., as trustee, filed as
Exhibit 4.1 to the Registrant's Form 8-K dated March 12,
1997, which exhibit is incorporated herein by reference.
(d) Officers' Certificate and Company Order dated as of March
12, 1997, establishing the terms of the Company's Senior
Subordinated Notes, Series 1997-A due 2004, filed as
Exhibit 4.2 to the Registrant's Form 8-K dated March 12,
1997, which exhibit is incorporated herein by reference.
(e) Officers' Certificate and Company Order dated as of
February 23, 1998, establishing the terms of the
Company's Senior Subordinated Notes, Series 1998-A due
2005. (1)
(f) 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.
10.(a) Form of Indemnification Agreement together with a list of
all officers and directors who have signed such
agreement, filed as Exhibit 10(g) to the Registrant's
Annual Report on Form 10-K for the year ended October 31,
1987, which exhibit is incorporated herein by reference.
(b) Form of Indemnification Agreement dated as of August 24,
1993, together with a list of all officers and directors
who have signed such agreement, filed as Exhibit 10(g) to
the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 31, 1993, which exhibit is
incorporated herein by reference.
(c) Fifth Amended and Restated Incentive Stock Option Plan
dated as of November 20, 1990, filed as Exhibit 10(h) to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1991, which exhibit is incorporated
herein by references.(2)
(d) Fourth Amended and Restated Stock Option Plan dated as of
November 20, 1991, filed as Exhibit 10(i) to the
Registrants Annual Report on Form 10-K for the year ended
December 31, 1991, which exhibit is incorporated herein
by reference.(2)
(e) Stock Option Agreement, dated as of April 17, 1990,
between the Registrant and Bruce W. Schnitzer, and
Termination of Warrant between Mr. Schnitzer and the
Registrant, filed as Exhibit 10(s) to the Registrant's
Annual Report on Form 10-K for the year ended October 31,
1990, which exhibit is incorporated herein by
reference.(2)
(f) Promissory Note dated October 31, 1990 issued by James P.
Cotton, Jr. to the Registrant, filed as Exhibit 10(s) to
the Registrant's Annual Report on Form 10-K for the year
ended October 31, 1990, which exhibit is incorporated
herein by reference.
(g) Promissory Note dated October 31, 1990 issued by
Gerald E. Eickhoff to the Registrant, filed as
Exhibit 10(w) to the Registrant's Annual Report Form 10-K
for the year ended October 31, 1990, which exhibit is
incorporated herein by reference.
(h) Registrant's 1993 Key Individual Stock Option Plan filed
as Exhibit 10(z) to the Registration Statement of
Registrant on Form S-4 under the Securities Act of 1993
(File No. 33-72732), which exhibit is incorporated
herein by reference.(2)
(i) Indemnification Agreement, dated March 30, 1993, between
AMRESCO Holdings, Inc. and Richard L. Cravey, filed as
Exhibit 10(ab) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993, which
exhibit is incorporated herein by reference.
(j) Indemnification Agreement, dated March 30, 1993, between
AMRESCO Holdings, and William S. Green, filed as
Exhibit 10(ac) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993, which
exhibit is incorporated herein by reference.
(k) The Registrant's Retirement Savings and Profit Sharing
Plan and Trust filed as Exhibit 10(ag) to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993, which exhibit is incorporated
herein by reference.(2)
(l) The Registrant's Retention Bonus Plan, as amended, filed
as Exhibit 10(ah) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993 and as
Exhibit 10(y) to the Registration Statement of the
Registrant on Form S-4 under the Securities Act of 1993
(File No. 33-72321), which exhibits are incorporated
herein by reference.(2)
(m) The Registrant's Severance Pay Plan filed as
Exhibit 10(ai) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993, which
exhibit is incorporated herein by reference.(2)
(n) The Registrant's Thrift Restoration Plan filed as
Exhibit 10(ak) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993, which
exhibit is incorporated herein by reference.(2)
(o) Employment Agreement, dated as of May 31, 1994, between
Registrant and Robert H. Lutz, Jr., filed as
Exhibit 10(y) to the Registrant's Form 10-K for the
fiscal year ended December 31, 1994, which exhibit is
incorporated herein by reference.(2)
(p) Amendment to Stock Option Agreement, dated as of April 1,
1995, between the Registrant and Bruce W. Schnitzer
filed as Exhibit 10(an) to the Registrant's Form 10-K for
the fiscal year ended December 31, 1995, which exhibit is
incorporated herein by reference. (2)
(q) Office Lease, dated as of February 9, 1996, between K-P
Plaza Limited Partnership and the Registrant filed as
Exhibit 10(ao) to the Registrant's Form 10-K for the
fiscal year ended December 31, 1995, which exhibit is
incorporated herein by reference.
(r) First Amendment to Office Lease dated July 17, 1996. (1)
(s) Second Amendment to Lease Agreement dated May 27, 1997.
(1)
(t) Third Amendment to Lease Agreement dated September 22,
1997. (1)
(u) Lease Expansion and Fourth Amendment to Lease Agreement
dated January 6, 1998. (1)
(v) Third Amended and Restated Loan Agreement dated as of
September 30, 1997 by and among AMRESCO, INC. and certain
of its subsidiaries and NationsBank of Texas, N.A., as
Agent, Bank One, Texas N.A., as Co-Agent and NationsBank
of Texas N.A. and certain other designated entities, as
lenders. (1)
(w) Form of Severance Agreement, dated as of May 29, 1996,
with Robert H Lutz, Jr., Robert L. Adair, Barry L.
Edwards, L. Keith Blackwell, Ronald B. Kirkland and
Ronald Castleman filed as exhibit 10.(x) to the
registrants Form 10-K for the fiscal year ended December
31, 1996, which is incorporated herein by reference. (2)
(x) Form of Letter Agreement, dated as of March 20, 1997,
with Harold E. Holliday, Jr. and Scott J. Reading filed
as exhibit 10.(y) to the registrants Form 10-K for the
fiscal year ended December 31, 1996, which is
incorporated herein by reference. (2)
(y) Incentive Compensation Program, dated August 15, 1996,
for certain employees of AMRESCO Residential Credit
Corporation filed as exhibit 10.(z) to the registrants
Form 10-K for the fiscal year ended December 31, 1996,
which is incorporated herein by reference. (2)
(z) AMRESCO Deferred Compensation Program, dated as of
January 1, 1996 filed as exhibit 10.(aa) to the
registrants Form 10-K for the fiscal year ended December
31, 1996, which is incorporated herein by reference. (2)
(aa) Amendment No. 1 to AMRESCO Deferred Compensation Program,
dated December 31, 1996 filed as exhibit 10.(ab) to the
Registrant's Form 10-K for the fiscal year ended December
31, 1996, which is incorporated herein by reference. (2)
(ab) AMRESCO, INC. 1997 Stock Option Plan filed as exhibit
10.(ac) to the registrants Form 10-K for the fiscal year
ended December 31, 1996, which is incorporated herein by
reference. (2)
(ac) AMRESCO, INC. 1995 Stock Option and Award Plan, as
amended and restated. (1) (2)
11. Statement re: Computation of Per Share Earnings. (1)
21. Subsidiaries of the Registrant. (1)
23. Consent of Independent Auditors-Deloitte and Touche
LLP (1)
27.(a) Financial Data Schedule- Fiscal year end 1997. (1)
(b) Financial Data Schedule - Fiscal year ends 1995, 1996,
and Quarters 1, 2 and 3 of 1996. (1)
(c) Financial Data Schedule - Quarters 1, 2, and 3 of 1997.
(1)
(1) Filed herewith.
(2) Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to
Item 14(c) of this Report.
Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of
fiscal year 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized on the 27th day of March, 1998.
AMRESCO, INC.
By: /s/ L. Keith Blackwell
L. Keith Blackwell
Vice President, General Counsel
and Secretary
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the 27th day of March, 1998:
Signature Title
ROBERT H. LUTZ, JR. Chairman of the Board and
Robert H. Lutz, Jr. Chief Executive Officer
ROBERT L. ADAIR III Director, President and
Robert L. Adair III Chief Operating Officer
BARRY L. EDWARDS Executive Vice President and Chief Financial
Barry L Edwards Officer (Principle Financial Officer)
JAMES P. COTTON, JR Director
James P. Cotton, Jr.
RICHARD L. CRAVEY Director
Richard L. Cravey
GERALD E. EICKHOFF Director
Gerald E. Eickhoff
EDWIN A. WAHLEN, JR Director
Edwin A. Wahlen, Jr.
AMY J. JORGENSEN Director
Amy J. Jorgensen
BRUCE W. SCHNITZER Director
Bruce W. Schnitzer
SIDNEY E. HARRIS Director
Sidney E. Harris
RON B. KIRKLAND Vice President and Chief Accounting Officer
Ron B. Kirkland (Principle Accounting Officer)
INDEX TO FINANCIAL STATEMENTS
Page
I. Financial
Statements of AMRESCO, INC. and Subsidiaries
Consolidated Balance Sheets, December 31, 1997 and 1996 F-2
Consolidated Statements of Income for the Years Ended December F-3
31, 1997, 1996 and 1995
Consolidated Statements of Shareholder's Equity for the Years F-4
Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the Years Ended F-5
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements F-6
Independent Auditor's Report F-24
AMRESCO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
(In thousands, except for share amounts)
1997 1996
ASSETS
Cash and cash equivalents $ 25,866 $ 29,046
Temporary investments 34,190
Loans held for sale, net 1,330,337 376,029
Loans and asset portfolios, net 648,694 293,248
Retained interests in securitizations - trading (at 294,062 130,328
fair value)
Asset-backed securities - available for sale (at fair 107,677 55,678
value)
Accounts receivable, net of reserves of $455 and 19,183 12,243
$1,611, respectively
Deferred income taxes 28,324 13,285
Premises and equipment, net of accumulated 10,147 18,228
depreciation of $10,641 and $5,285, respectively
Intangible assets, net of accumulated amortization of 113,841 87,219
$20,038 and $11,110, respectively
Other assets 55,717 26,447
TOTAL ASSETS $2,633,848 $1,075,941
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Accounts payable $ 22,821 $ 15,988
Accrued employee compensation and benefits 33,609 14,521
Notes payable 531,573 260,092
Warehouse loans payable 1,268,665 354,562
Senior notes 57,500 57,500
Senior subordinated notes 250,000 57,500
Income taxes payable 19,185 3,742
Other liabilities 41,995 10,521
TOTAL LIABILITIES 2,225,348 774,426
COMMITMENTS AND CONTINGENCIES (Note 12)
SHAREHOLDERS' EQUITY:
Common stock, $0.05 par value, authorized 150,000,000
shares; 36,543,210 and 33,796,145 shares issued, 1,827 1,690
respectively
Capital in excess of par 257,941 213,843
Reductions for employee stock (2,713) (1,129)
Treasury stock, $0.05 par value, 24,339 shares in (160) (160)
1997 and 1996
Net unrealized gains (losses) 8,359 249
Retained earnings 143,246 87,022
TOTAL SHAREHOLDERS' EQUITY 408,500 301,515
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,633,848 $1,075,941
See notes to consolidated financial statements.
AMRESCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1997, 1996 and 1995
(In thousands, except per share data)
1997 1996 1995
REVENUES:
Interest and other investment income $203,647 $103,639 $ 40,105
Gain on sale of loans and investments, net 103,385 18,394 1,382
Mortgage banking and servicing fees 75,250 40,697 24,382
Asset management and resolution fees 24,948 34,300 41,295
Income from equity affiliate 13,930
Other revenues 2,595 3,037 3,322
Total revenues 423,755 200,067 110,486
EXPENSES:
Personnel 146,018 78,864 52,852
Interest 102,063 36,763 6,921
Other general and administrative 51,365 21,903 16,121
Provisions for loan and asset portfolio 17,764 3,195
losses
Depreciation and amortization 14,448 8,876 4,334
Total expenses 331,658 149,601 80,228
Income from continuing operations before 92,097 50,466 30,258
Income tax expense 35,873 19,134 11,593
INCOME FROM CONTINUING OPERATIONS 56,224 31,332 18,665
Gain from discontinued operations, net of 2,425
income taxes (Note 14)
NET INCOME $ 56,224 $ 31,332 $ 21,090
Earnings per share from continuing
operations:
Basic $1.58 $1.15 $0.77
Diluted 1.53 1.06 0.75
Earnings per share:
Basic $1.58 $1.15 $0.87
Diluted 1.53 1.06 0.85
Weighted average number of common shares 35,610 27,232 24,173
outstanding - basic
See notes to consolidated financial statements.
AMRESCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1997, 1996 and 1995
(In thousands, except share data)
<TABLE>
<CAPTION>
Common Stock
$0.05 par value
Reduction Net
Number Capital in for Unrealized Total
of Excess of Employee Treasury Gains Retained Shareholders
Shares Amount Par Stock Stock (Losses) Earnings Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1995 23,592,647 $1,180 $ 74,691 $ (429) $ (62) $ 38,206 $113,586
Common stock offering 2,300,000 115 24,995 25,110
Exercise of stock
options (including 434,480 22 3,211 3,233
tax benefit)
Issuance of common
stock for unearned
stock compensation 250,202 12 2,385 (2,397)
Issuance of common 112,002 5 772 777
stock for earnout
Dividends paid ($0.15 (3,606) (3,606)
per share)
Other 588 $(160) 176 604
Net income 21,090 21,090
DECEMBER 31, 1995 26,689,331 1,334 106,054 (2,238) (160) 114 55,690 160,794
Common stock offering 2,992,148 150 60,740 60,890
Debt conversion to 3,600,000 180 42,879 43,059
common stock
Exercise of stock
options (including 466,760 23 3,475 3,498
tax benefit)
Issuance of common 57,186 3 774 777
stock for earnout
Amortization of 1,015 1,015
unearned stock
compensation
Other (9,280) (79) 94 135 150
Net income 31,332 31,332
DECEMBER 31, 1996 33,796,145 1,690 213,843 (1,129) (160) 249 87,022 301,515
Issuance of common 2,094,944 105 34,203 34,308
stock for acquisition
Exercise of stock
options (including 441,915 21 5,927 5,948
tax benefit)
Issuance of common
stock for unearned 169,084 9 3,335 (3,344)
stock compensation
Issuance of common 43,622 2 775 777
stock for earnout
Amortization of 1,718 1,718
unearned stock
compensation
Unrealized gain on
investments available 8,145 8,145
for sale, net
Other (2,500) (142) 42 (35) (135)
Net income 56,224 56,224
DECEMBER 31, 1997 36,543,210 $1,827 $257,941 $(2,713) $(160) $8,359 $143,246 $408,500
</TABLE>
See notes to consolidated financial statements.
AMRESCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997, 1996 and 1995
(In thousands)
<TABLE>
<CAPTION>
1997 1996 1995
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 56,224 $ 31,332 $ 21,090
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Gain on sale of loans and investments (103,385) (18,394) (1,382)
Depreciation and amortization 14,448 8,876 4,334
Accretion of interest income (35,233) (13,063)
Gain on sale of discontinued operations (2,425)
Provisions for loan and asset portfolio losses 17,764 3,195
Deferred tax provision (benefit) (15,039) (1,101) 5,023
Other (548) 1,015 346
Increase (decrease) in cash for changes in
(exclusive of assets and liabilities acquired in
business combinations):
Accounts receivable, net (6,833) 6,369 4,757
Loans held for sale, net (1,026,535) (234,325)(160,843)
Retained interests in securitizations 105,607 46,739
Other assets (11,298) (6,441) (2,608)
Accounts payable and accrued compensation and 10,595 1,393 (2,272)
benefits
Warehouse loans payable 826,812 116,962 153,158
Income taxes payable 15,443 845 61
Other liabilities 48,026 6,222 (11,577)
Net cash provided by (used in) operating (103,952) (50,376) 7,662
activities
INVESTING ACTIVITIES:
Sale (purchase) of temporary investments, net 34,190 (12,248) (21,942)
Origination of loans and purchase of asset (599,937) (218,879)(166,180)
Collections on loans and asset portfolios 240,552 106,785 57,208
Purchase of asset-backed securities available (75,681) (21,877) (43,516)
for sale
Proceeds from sale of and collections on asset- 60,304 237 13,067
backed securities available for sale
Purchase of interests in securitizations (12,149)
Cash used for purchase of subsidiaries (2,176) (57,437) (22,323)
Investment in and advances to joint venture (25,065) (13,905)
Distribution from joint venture 17,789
Proceeds from sales of subsidiaries 6,250
Proceeds from sale of premises 15,813
Purchase of premises and equipment (12,959) (6,480) (2,384)
Net cash used in investing activities (347,170) (223,804)(191,969)
FINANCING ACTIVITIES:
Net proceeds from notes payable and other debt 1,083,291 1,108,720 565,311
Repayment of notes payable and other debt (827,443) (886,036)(408,974)
Payment of dividends (4,785)
Proceeds from issuance of senior subordinated 186,146
notes
Proceeds from common stock offerings 60,890 25,110
Stock options exercised and tax benefits from 5,948 3,498 3,233
employee stock compensation
Other 15 105
Net cash provided by financing activities 447,942 287,087 180,000
Net increase (decrease) in cash and cash (3,180) 12,907 (4,307)
equivalents
Cash and cash equivalents, beginning of year 29,046 16,139 20,446
Cash and cash equivalents, end of year $ 25,866 $ 29,046 $ 16,139
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 92,965 $ 35,667 $5,494
Income taxes paid 35,826 18,289 4,813
Exchange of loans held for sale for retained 149,706 105,612
interests in securitizations
Common stock issued for purchase of 35,085 777 777
subsidiaries and earnouts
Common stock issued for unearned stock 3,344 2,397
compensation
Conversion of convertible debt to common stock 45,000
Accrued earnout payment for purchase of 3,883 3,883
mortgage banking subsidiary
</TABLE>
See notes to consolidated financial statements.
AMRESCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
AMRESCO, INC. (the "Company") is engaged primarily in the
business of real estate lending, commercial finance and the
acquisition, resolution and servicing of nonperforming and
underperforming commercial loans. The Company's business may be
affected by many factors, including real estate and other asset
values, the level of and fluctuations in interest rates, changes
in the securitization market and competition. In addition, the
Company's operations require continued access to short and long
term sources of financing.
Principles of Consolidation. The consolidated financial
statements include the accounts of the Company and its majority
owned subsidiaries. Significant intercompany accounts and
transactions have been eliminated in consolidation.
Interest Income. The Company's interest income consists of
interest earned on loans and asset portfolios and accrued
earnings on securities purchased or retained from securitization
trusts. Interest income on loans and retained interests in
securitizations is recorded as earned. Interest income
represents the interest earned on the loans during the
warehousing period (the period prior to their securitization), as
well as loans held on the balance sheet on a long-term basis, and
the recognition of interest income on the securities retained
after securitization. Interest income is recognized using the
effective yield method and includes accretion of discounts and
amortization of premiums.
Gain on Sale of Loans and Investments. The Company computes
a gain or loss on the sale and securitization of loans and
investments based on the fair value of proceeds received over the
allocated basis of the assets sold based upon their relative fair
values at the date of sale. Retained interests in assets sold
are initially recorded at their allocated basis and are
classified as trading securities which are carried at estimated
fair market value.
Mortgage Banking and Servicing Fees. Loan placement fees,
commitment fees, loan servicing fees and real estate brokerage
commissions are recognized as earned. Placement and servicing
expenses are charged to expense as incurred.
Asset Management and Resolution Fees. Asset management and
resolution fees from management contracts are based on the amount
of assets under management and the net proceeds from the
resolution of such assets, respectively, and are recognized as
earned. Expenses incurred in managing and administering the
assets subject to management contracts are charged to expense as
incurred. The Company provides asset management and resolution
services primarily for private investors. Generally, the
contracts provide for the payment of a fixed management fee which
is reduced proportionately as managed assets decrease, a
resolution fee using specified percentage rates based on net cash
collections and an incentive fee for resolution of certain
assets. Asset management and resolution contracts are of a
finite duration, typically three to five years. Unless new
assets are added to these contracts during their terms, the
amount of total assets under management decreases over the terms
of these contracts. In December 1995, the Company received a
$4.0 million final settlement from the Resolution Trust
Corporation for certain contracts, all of which expired in 1994.
Income from Equity Affiliate. Income from equity affiliate
represents the Company's proportionate share of the operating
results of the Company's investment in a joint venture accounted
for on the equity method.
Cash and Cash Equivalents. Cash and cash equivalents
include all highly liquid investments with a maturity of three
months or less when purchased.
Temporary Investments. Temporary investments consist of
short-term investments such as Treasury bills, federal agency
securities and commercial paper with a maturity of three months
or less when purchased and are carried at amortized cost, which
approximates fair value. All temporary investments were pledged
as collateral under an investment loan agreement (see Note 7).
Accounts Receivable. Receivables are recorded as the
related revenues are earned according to the respective
management contracts. The Company's exposure to credit loss in
the event that payment is not received for revenue recognized
equals the balance of accounts receivable on the balance sheet.
Loans Held for Sale, net. Loans held for sale are carried
at the lower of cost or market, net of deferred loan origination
fees and associated direct costs and an allowance for loan loss.
Loan origination fees and associated direct costs are deferred
and recognized upon sale. Market value is determined based upon
the estimated fair value of similar loans for the month of
expected delivery.
Loans and Asset Portfolios, net. Loans are stated at face
value, net of deferred loan origination fees and associated
direct costs and net of an allowance for loan losses. Loan
origination fees and incremental direct costs are deferred and
recognized over the life of the loan as an adjustment to yield,
using the interest method. Asset portfolios consist of pools of
loans or real estate acquired at significant discounts to face
value. The Company classifies its asset portfolios as loan
portfolios, partnerships and joint ventures and real estate. The
original cost of an asset portfolio is allocated to individual
assets within that portfolio based on their relative fair value
to the total purchase price. The difference between gross
estimated cash flows from loans and its cost is accrued using the
level yield method. The Company accounts for its investments in
partnerships and joint ventures using the equity method which
generally results in the pass-through of the Company's pro rata
share of earnings as if the Company had a direct investment in
the underlying assets. Loan portfolios, partnerships and joint
ventures, and real estate are carried at the lower of cost or
estimated fair value.
Allowances for Loan and Asset Portfolio Losses. The Company
provides for estimated loan and asset portfolio losses by
establishing allowances for losses through a charge to earnings.
Actual losses reduce, and subsequent recoveries increase, each
allowance. Management's periodic evaluation of each allowance
for estimated losses is based upon an analysis of the portfolio,
historical loss experience, economic conditions and trends,
collateral values and other relevant factors.
Asset-Backed Securities. The Company's investments in asset-
backed securities are classified as available for sale and are
carried at estimated fair value determined by quoted market rates
when available, otherwise by discounting estimated cash flows at
current market rates. Any unrealized gains or losses on asset-
backed securities are excluded from earnings and reported as a
separate component of shareholders' equity, net of tax effects.
Any impairment, other than temporary, in the value of a security
will be included in earnings.
Retained Interests in Securitizations. Retained interests
in securitizations are classified as trading and are carried at
estimated fair market value. The carrying value of the retained
interests in securitizations is analyzed by the Company on a
disaggregated basis to determine whether historical prepayment
and loss experience, economic conditions and trends, collateral
values and other relevant factors have had an impact on the
carrying value. Changes in market value are included in
earnings. Cash flows for retained interests in securitizations
are generally subordinated to other security holders in a
securitization trust. The retained interests in securitizations
are valued at the discounted present value of the cash flows
expected to be realized over the anticipated average life of the
assets sold after estimated future credit losses, estimated
prepayments and normal servicing and other related fees. The
discounted present value of such retained interests is computed
using management's assumptions of market discount rates,
prepayment rates, default rates, credit losses and other costs
(see Note 5).
Premises and Equipment. Premises and equipment, primarily
building and improvements, are stated at cost less accumulated
depreciation. The related assets are depreciated using the
straight-line method over their estimated service lives, which
range from one to fifteen years. Improvements to leased property
are amortized over the life of the lease or the life of the
improvement, whichever is shorter.
Intangible Assets. Intangible assets represent the excess
of purchase price over the fair market value of tangible net
assets acquired in connection with the purchases of other
businesses. These intangible assets, principally goodwill,
servicing rights and contracts acquired, are amortized using the
straight-line method over periods ranging from one to twenty-two
years. The Company periodically assesses the recoverability of
intangible assets and estimates the remaining useful life by
reviewing projected results of acquired operations, servicing
rights and contracts.
Income Taxes. The Company and its subsidiaries file
consolidated tax returns. Deferred income taxes are recorded for
temporary differences between the bases of assets and liabilities
as recognized by tax laws and their carrying value as reported in
the financial statements.
Earnings per Share. Basic earnings per share is calculated
by dividing income available to common shareholders by the
weighted-average number of common shares outstanding during the
period. Diluted earnings per share is calculated by dividing
income available to common shareholders plus the after tax amount
of interest recognized in the period associated with any
convertible debt by the weighted-average number of common shares
outstanding including the number of additional common shares that
would have been outstanding if any dilutive potential common
shares had been issued during the period.
Foreign Currency Translation. Assets and liabilities of
foreign subsidiaries are translated into United States dollars at
the prevailing exchange rate on the balance sheet date. Revenue
and expense accounts for these subsidiaries are translated using
the weighted-average exchange rate during the period. These
translation methods give rise to cumulative foreign currency
translation adjustments, which are reported as a component of
shareholders' equity.
Derivative Financial Instruments. Derivative financial
instruments are utilized by the Company to reduce interest rate
risk. Derivative financial instruments include interest rate
swaps and caps and futures and forward contracts. The Company
does not hold or issue derivative financial instruments for
speculative or trading purposes. Gains and losses resulting from
the termination of derivative financial instruments are
recognized over the shorter of the remaining original contract
lives of the derivative financial instruments or the lives of the
related hedged positions or, if the hedged positions are sold,
are recognized in the current period as gain or loss on sale (see
Note 13).
New Accounting Standards. In 1997, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities," which requires an entity to
recognize the financial and servicing assets it controls and the
liabilities it has incurred and to derecognize financial assets
when control has been surrendered. Retained interests in assets
sold are measured by allocating the previous carrying amount
between the assets sold and retained interests based on their
relative fair values at the date of transfer. The adoption of
SFAS No. 125 did not have a significant impact upon the Company's
financial condition or results of operations.
On December 31, 1997, the Company adopted SFAS No. 128,
"Earnings Per Share," which established new standards for
computing and presenting earnings per share ("EPS") by replacing
the presentation of primary EPS with a presentation of basic EPS.
Primary EPS included common stock equivalents while basic EPS
excludes them. This change simplifies the computation of EPS and
requires the dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex
capital structures. Prior year amounts have been restated to
reflect the new method of calculation.
In June 1997, SFAS No. 130, "Reporting Comprehensive
Income," was issued which establishes standards for reporting and
display of comprehensive income and its components in the
financial statements. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information," which
was also issued in June 1997, establishes standards for the way
public companies disclose information about operating segments,
products and services, geographic areas and major customers.
SFAS No. 131 is effective for financial statements for periods
beginning after December 15, 1997. The Company anticipates that
its segments to be disclosed in 1998 will be asset management,
commercial mortgage banking, residential mortgage banking,
commercial finance and corporate. In February 1998, SFAS No.
132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits," was issued which is effective for
fiscal years beginning after December 31, 1997. The Company
adopted these standards for disclosure effective January 1, 1998.
Use of Estimates. The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect
reported amounts of certain assets, liabilities, revenues and
expenses. Significant estimates include the valuation of
retained interests in securitizations, asset-backed securities
and the allowances for loan and asset portfolio losses. Actual
results may differ from such estimates.
Reclassifications. Certain reclassifications of prior year
amounts have been made to conform to the current year
presentation.
2. Acquisitions
All of the Company's acquisitions have been accounted for as
purchases. Operations of acquired companies are included with
those of the Company after the acquisition date. Goodwill
related to the following acquisitions is amortized using the
straight line method over 15 years.
On March 31, 1997, the Company purchased the stock of
Commercial Lending Corporation and the operations and specific
assets of certain of its affiliates ("CLC"). CLC's primary line
of business is originating, securitizing, selling and servicing
franchise loans. The purchase price consisted of approximately
2.1 million shares of the Company's common stock valued at $34.3
million, the assumption of certain liabilities and contingent
earnout payments of additional shares of the Company's common
stock based upon a percentage of adjusted net income of the
acquired entities through March 31, 2000. Approximately 300,000
shares of the Company's common stock are issuable in 1998 based
on 1997 results. The purchase price, which was based upon
preliminary estimates and is subject to adjustment, was allocated
as follows (in thousands):
Cash and cash equivalents $ 930
Accounts receivable 1,345
Loans held for sale 86,600
Retained interests in 7,848
securitizations
Deferred income taxes 705
Intangible assets - goodwill 41,023
Other assets 1,403
Accounts payable and accrued (296)
liabilities
Warehouse loans payable (87,291)
Notes payable (15,633)
Other liabilities (2,326)
Net assets acquired $34,308
The following pro forma financial information for the twelve
months ended December 31, 1997 and 1996 is presented as if the
CLC acquisition occurred at the beginning of the periods
presented and is not necessarily indicative of the results of
operations that would have occurred if CLC would have been
purchased on these dates or of results that may occur in the
future (in thousands, except per share data):
Year Ended
December 31,
1997 1996
Total revenues $425,913 $205,621
Net income 55,513 30,561
Earnings per share:
Basic $1.54 $1.04
Diluted 1.49 0.97
On October 25, 1996, the Company purchased substantially all
of the operating assets of Quality Mortgage USA, Inc.
("Quality") for $65.0 million in cash and the assumption of
warehouse indebtedness and certain other liabilities. Quality
was an originator of non-conforming residential mortgages. The
purchase price was allocated as follows (in thousands):
Cash and cash equivalents $10,667
Retained interests in securitizations 29,628
Loans held for sale 86,371
Intangible assets - goodwill 38,651
Premises and equipment 9,028
Accounts payable and accrued liabilities (4,591)
Warehouse loans payable (84,442)
Notes payable (20,312)
Net assets acquired $65,000
On October 27, 1995, the Company completed the acquisition
of the third-party securitized, commercial mortgage loan Master
Servicer and Special Servicer operating assets of EQ Services,
Inc. and Equitable Real Estate Investment Management, Inc. for
cash of $16.9 million, primarily consisting of servicing
contracts and other intangibles.
Effective August 1, 1994, the Company acquired substantially
all of the assets of Holliday Fenoglio Dockerty & Gibson, Inc.
and certain of its affiliates ("Holliday Fenoglio"), which were
originators and servicers of commercial mortgages, for
approximately $33.0 million, based upon an initial payment of
$17.3 million in cash and $4.3 million in stock, and three
additional annual earnout payments if targeted earnings are met
or exceeded in 1994, 1995 and 1996. For each of the periods
ended December 31, 1996, 1995 and 1994, $3.9 million was accrued
for the respective year's earnout payment. The purchase price,
determined based on the cash paid, the fair market value of the
Company stock issued and direct acquisition costs, was allocated
to the Holliday Fenoglio assets acquired based on the fair market
value at the date of acquisition.
3. Loans Held for Sale
Loans held for sale were originated or acquired by the
Company and are held for future securitization or sale. Such
loans have mortgages on the underlying real estate or first liens
on franchise related property and equipment. All of the
Company's loans held for sale are pledged as collateral under the
Company's various debt facilities. The maximum accounting loss
if the borrower fails to pay is the carrying value. The Company
does not believe it has significant concentration risk in any
geographic area that could have a detrimental effect upon the
Company. Loans held for sale at December 31, 1997 and 1996
consisted of the following (in thousands):
1997 1996
Single family residential mortgage loans $995,038 $310,635
Commercial and multifamily mortgage loans 286,657 66,784
Franchise loans 57,026
1,338,721 377,419
Allowance for loan losses (8,384) (1,390)
Balance, end of year, net $1,330,337 $376,029
At December 31, 1997, the Company was committed to sell as
part of a December 1997 securitization approximately $32.0
million of franchise loans.
The Company participates in the Federal National Mortgage
Association ("FNMA") Delegated Underwriting and Servicing ("DUS")
program. As a DUS lender, a subsidiary of the Company takes
first loss risk up to 5% of the loan amount and above 5% FNMA and
the subsidiary of the Company share the loss, with the subsidiary
of the Company's maximum loss capped at 20% of the loan amount.
The Company has experienced no losses in its $400.8 million
portfolio of sold DUS loans at December 31, 1997.
The activity in the allowance for loan losses for loans held
for sale for the years ended December 31, 1997 and 1996 is
summarized as follows (in thousands):
1997 1996
Balance, beginning of year $1,390
Provision for loan losses 8,083 $1,390
Charge-offs (1,089)
Balance, end of year $8,384 $1,390
4. Loans and Asset Portfolios
The Company's loans consist primarily of high yield loans to
businesses and projects that were unable to access traditional
lending sources and loans for single family residential
construction. Asset portfolios consist of loans purchased at a
substantial discount from their principal amount, real estate and
investments in partnerships and joint ventures that invest in
such assets. Included in loans at December 31, 1997 and 1996
were net deferred loan origination fees and costs which
aggregated approximately $5.6 million and $0.9 million,
respectively. Substantially all of the Company's loan and asset
portfolios are backed by commercial mortgage real estate. All of
the Company's loans and asset portfolios are collateral under the
Company's notes payable and other debt. The Company does not
believe it has significant concentration risk in any geographic
area that could have a detrimental effect upon the Company. The
maximum accounting loss if the borrower fails to pay is the
carrying value. Loans and asset portfolios at December 31, 1997
and 1996 consisted of the following (in thousands):
1997 1996
Loans:
Commercial loans $168,347 $43,028
Residential construction loans 65,931
Total loans 234,278 43,028
Asset portfolios:
Commercial real estate mortgages 296,591 199,540
Real estate 100,315 23,862
Partnerships and joint ventures 26,012 27,723
Total asset portfolios 422,918 251,125
Allowance for loan and asset portfolio losses (8,502) (905)
Balance, end of year, net $648,694 $293,248
The activity in the allowance for loan and asset portfolio
losses for the years ended December 31, 1997 and 1996 is
summarized as follows (in thousands):
1997 1996
Balance, beginning of year $ 905 $ 8
Provision for loan and asset portfolio losses 9,136 897
Charge-offs (1,539)
Balance, end of year $8,502 $905
5. Investments in Asset-backed Securities and Retained
Interests in Securitizations
Asset-backed securities available for sale, carried at
estimated fair value, at December 31, 1997 and 1996, were as
follows (in thousands):
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gain Loss Fair
Value
1997 $98,490 $10,174 $(987) $107,677
1996 54,902 1,580 (804) 55,678
Net proceeds from sales of asset-backed securities
aggregated $52.3 million and $14.2 million for the years ended
December 31, 1997 and 1995, respectively, which resulted in gross
realized gains of $15.2 million and $0.4 million in 1997 and
1995, respectively. Net proceeds from sales of asset-backed
securities and the resulting gain were insignificant in 1996.
Maturities of securities available for sale are not presented
because the loans underlying such securities are subject to
prepayment. All of the Company's asset-backed securities are
collateral under the Company's notes payable and other debt.
For its residential mortgage loan securitizations for the
years ended December 31, 1997 and 1996, the Company has initially
valued its retained interests using a discount rate of 20% and
assumed prepayment methodologies which contemplated over the life
constant prepayment rates ranging from 19% to 30% and blended
annualized loss rates ranging from 0.50% to 0.625% with
variations within the ranges primarily depending upon mix of loan
types.
The Company has also employed a 20% discount rate in its
franchise loan securitizations in 1997. However, the Company has
assumed no prepayments or losses with respect to loans in the
securitized franchise loan portfolios. The "no losses"
assumption is based on the fact that the Company and its
predecessors have experienced no losses on franchise loans since
the inception of lending in 1993. The Company structures its
franchise loans with limited cross guarantees between borrowers
such that the borrowers within a defined pool of loans absorb the
first 5% of net losses. At the present time, the Company
considers it unlikely that net losses on franchise loan
portfolios will exceed 5%. Accordingly, losses are assumed to be
zero. The "no prepayments" assumption is based on the
significant prepayment penalties applicable to the franchise
loans and historical prepayment experience.
Net proceeds from sale of retained interests in
securitizations in 1997 and 1996 were $102.2 million and $44.0
million, respectively.
During 1997, the Company completed seven transactions in
which asset-backed securities and retained interests in
securitizations were measured by allocating the previous carrying
amount between the assets sold and the interests retained based
on their relative fair values at the date of transfer. The
interests retained were subsequently marked-to-market which
resulted in a $13.4 million increase in the value of asset-backed
securities, which is reflected net of tax effects in
shareholders' equity, and a $5.7 million increase in retained
interests in securitizations, which is reflected as additional
gain on sale of loans and investments. In all of the Company's
securitization transactions completed in 1997 and 1996, the
Company has not retained any recourse obligation, other than
retained interests, with respect to the assets sold other than
standard representations and warranties.
6. Investment in Commercial Mortgage Banking Joint Venture
In November 1996, the Company entered into a joint venture
partnership agreement with a large investment banking firm to
fund and securitize commercial mortgage loans. The Company owns
a 50% interest in AMRESCO Commercial Mortgage Funding L.P. ("ACLI
Joint Venture") and accounts for its investment using the equity
method. The Company's investment and advances at December 31,
1997 and 1996 were $23.2 million and $13.6 million, respectively,
and were included in other assets. Effective December 19, 1997,
the partnership agreement was revised. Any accumulation and
securitization profit or loss from commercial real estate loans
for which loan applications were received on or before
November 13, 1997 (except for specified loans aggregating
approximately $120.3 million) will be shared equally by the
Company and the joint venture affiliate. All profits and risks
associated with commercial real estate loans originated after
November 13, 1997, as well as the profits and risks relating to
specified loans aggregating approximately $120.3 million for
which loan applications were received prior to November 13, 1997,
will be for the sole account of the Company. The joint venture
partner or its affiliates will continue to provide funding,
distribution and related services to the Company pursuant to a
separate agreement. The following is a summary of the financial
position and results of operations of the ACLI Joint Venture at
December 31, 1997 and 1996 and for the year ended December 31,
1997 and from inception through December 31, 1996 (in thousands):
1997 1996
Loans held for sale $482,184 $256,727
Total assets 512,010 277,209
Warehouse loans payable 441,757 237,706
Partner equity 41,519 31,900
Revenues $58,774 $6,307
Operating expenses 30,915 813
Net income $27,859 $5,494
7. Notes Payable and Other Debt:
The Company's notes payable and other debt at December 31,
1997 and 1996, consisted of the following (in thousands):
1997 1996
Notes payable:
Revolving loan agreements $388,345 $178,956
Revolving investment loan agreements 34,190
Non-recourse debt 143,228 46,823
Other 123
Total notes payable $531,573 $260,092
Warehouse loans payable:
Residential mortgage banking facilities $916,006 $289,136
Commercial mortgage banking facilities 258,046 65,426
Commercial finance facilities 94,613
Total warehouse loans payable $1,268,665 $354,562
8.75% senior notes due July 1, 1999 $57,500 $57,500
Senior subordinated notes:
10.0% notes due January 15, 2003 $57,500 $57,500
10.0% notes due March 15, 2004 192,500
Total senior subordinated notes $250,000 $57,500
Revolving Loan Agreements. Effective February 7, 1997, the
Company and certain of its subsidiaries entered into the
Revolving Loan Agreement (the "Revolving Loan Agreement") with
NationsBank of Texas, N.A. ("NationsBank" and, in its capacity as
agent, the "Agent"), and other lending institutions party
thereto, as lenders (collectively, the "Banks"), which replaced
the Company's previous revolving line of credit with NationsBank
as agent bank. The Revolving Loan Agreement was amended
effective as of September 30, 1997 to increase borrowing limits
thereunder, among other things.
The Revolving Loan Agreement constitutes senior debt and
provides for a $550.0 million credit facility, of which up to
$455.0 million was available pursuant to lender commitments at
December 31, 1997. Assuming commitments were received for the
full $550.0 million, the Revolving Loan Agreement would permit up
to $490.0 million of indebtedness to be incurred pursuant to a
revolving credit facility and $100.0 million to be incurred
pursuant to a term facility, subject to a combined borrowing
limit of $550.0 million. Interest is payable quarterly and at
the end of each advance period. The Revolving Loan Agreement is
secured by substantially all of the assets of the Company not
pledged under other credit facilities, including stock of a
majority of the Company's subsidiaries. Indebtedness under the
Revolving Loan Agreement generally bears interest at a rate based
(at the Company's option) upon (i) the variable rate (defined as
the greater of the Agent's prime rate, as announced from time to
time) and the federal funds rate (as defined in the Revolving
Loan Agreement plus 0.50%) or (ii) the adjusted London Interbank
Offered Rate ("LIBOR") rate (as defined in the Revolving Loan
Agreement). All advances funded in foreign currencies bear
interest at the alternate currency rate (as defined in the
Revolving Loan Agreement). The revolving credit facility portion
of the Revolving Loan Agreement will mature on May 31, 1999 and
the term facility portion of the Revolving Loan Agreement will
mature on May 31, 2001. At December, 31, 1997, a total of $388.3
million was outstanding under this facility bearing interest at
7.7% with availability under the Revolving Loan Agreement of
$66.7 million. At December 31 1997, the Company had outstanding
$8.5 million in face amount of letters of credit pursuant to such
facility.
On January 30, 1998, the Revolving Loan Agreement was
amended to provide total availability of up to $490.0 million
pursuant to lender commitments.
Revolving Investment Loan Agreement. On January 20, 1995,
the Company entered into a $35.0 million revolving investment
loan agreement with a bank, amended as of March 5, 1996 and
increased to $80.0 million. Proceeds of the loan were used to
acquire short-term investments which secure the loan. Interest
was computed based on market rates adjusted for the Company's
credited funds at a bank. In January 1997, the Company
discontinued its revolving investment loan agreement and related
temporary investment activities.
Non-recourse Debt and Warehouse Loans Payable. Non-recourse
debt is used primarily to fund purchases of mortgage backed
securities and real estate and is secured by the specific assets
purchased totaling $190.4 million at December 31, 1997.
Warehouse debt is used primarily to fund purchases and
originations of residential and commercial loans and is secured
by the specific assets funded with such debt totaling $1.4
billion at December 31, 1997. The following table summarizes the
Company's non-recourse debt and warehouse loans payable at
December 31, 1997 (in thousands of dollars):
<TABLE>
<CAPTION>
Maximum Outstanding Maturity December 31, 1997
Lender Available Balance Date Base Interest Rate Interest Rate
Non-recourse:
<S> <C> <C> <C> <C> <C>
Master Repurchase $51,667 $51,667 30-day renewals As determined by contract 6.65%
Merrill Lynch 43,539 41,500 November 2000 As determined by contract 7.95
Bayerische 28,394 25,026 March 2000 90-day LIBOR + 1.25% 8.53
Master Repurchase 21,581 21,581 30-day renewals 30-day LIBOR + 1.40% 6.72
Global Master 3,454 3,454 July 1998 30-day LIBOR + 1.40% 7.36
Repurchase Agreement
Total non-recourse $148,635 $143,228
Warehouse debt:
Residential mortgage banking:
Morgan Stanley $619,656 $619,656 October 1998 Eurodollar + 0.45% to 0.90% 6.33%
Prudential (1) 500,000 284,516 February 1998 LIBOR + 0.70% to 2.00% 6.34
First Boston 500,000 11,834 Various LIBOR + 0.60% to 1.40% 6.59
Total residential $1,619,656 $916,006
mortgage banking
Commercial mortgage banking:
Goldman $500,000 $147,631 December 1998 LIBOR + 0.90% 6.86%
RFC 110,415 110,415 60 to 80 days LIBOR + 1.25% to 3.0% 7.07
Total commercial $610,415 $258,046
mortgage banking
Commercial finance:
Bank United $ 55,000 $ 51,869 September 1999 LIBOR + 1.85% to 2.75% 7.57%
Prudential (1) 150,000 42,744 March 1998 LIBOR + 0.95% to 2.0% 6.84
Total commercial $205,000 $ 94,613
finance
</TABLE>
(1) The $150.0 million credit facility is subject to a $500.0
million combined facility limit with the Prudential residential
warehouse facility for the purpose of facilitating the
origination and warehousing of franchise and construction loans.
8.75% Senior Notes Due July 1, 1999. On July 1, 1996, the
Company issued $57.5 million principal amount of senior notes
with net proceeds of approximately $55.8 million. There is no
sinking fund or amortization of principal prior to maturity and
the senior notes are not redeemable prior to maturity. The debt
offering costs have been included in other assets and are
amortized over the life of the debt using the effective interest
method. The senior notes are unsecured senior obligations of the
Company and 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.
10% Senior Subordinated Notes Due January 15, 2003. On
January 30, 1996, the Company issued $57.5 million principal
amount of senior subordinated notes with net proceeds of
approximately $54.9 million. There is no sinking fund or
amortization of principal prior to maturity and the senior
subordinated notes are not redeemable prior to January 15, 2001.
The debt offering costs were included in other assets and are
amortized over the life of the debt using the effective interest
method. The senior subordinated notes are unsecured general
obligations of the Company and subordinated to all existing and
future senior indebtedness (as defined in the Indenture) of the
Company.
10% Senior Subordinated Notes Due March 15, 2004. On March
12, 1997, the Company issued $192.5 million aggregate principal
amount of senior subordinated notes with net proceeds of
approximately $186.6 million. The senior subordinated notes are
unsecured obligations of the Company and are subordinated to
prior payment of all existing and future senior debt and to
indebtedness and other liabilities of the Company's subsidiaries.
The notes are not redeemable prior to maturity.
Covenants -- Each of the Company's notes payable and other
debt agreements has certain covenants which include financial
tests, including minimum consolidated tangible net worth, maximum
consolidated funded debt to consolidated capitalization ratio,
minimum fixed charge coverage ratio, minimum interest coverage
ratio, maximum consolidated funded debt to consolidated earnings
before interest, taxes, depreciation and amortization ("EBITDA")
ratio and maximum corporate facility outstanding to consolidated
EBITDA ratio. The agreements also contain covenants that, among
other things, limit the incurrence of additional indebtedness,
investments, asset sales, loans to shareholders, dividends,
transactions with affiliates, acquisitions, mergers and
consolidations, liens and encumbrances and other matters
customarily restricted.
On December 24, 1997, the Company entered into a futures
agreement to hedge the interest rate on the anticipated February
1998 issuance of subordinated debt (see Notes 13 and 15). The
agreement matures on March 15, 1998.
Aggregate amounts of notes payable and other debt that
mature during the next five years were as follows (in thousands):
For the Year Ended December 31,
1998 1999 2000 2001 2002 Thereafter
Notes payable $ 482,033 $ 8,040 $41,500
Warehouse loans payable 1,216,796 51,869
8.75% senior notes due 57,500
July 1, 1999
Senior subordinated notes $250,000
Total $1,698,829 $117,409 $41,500 $250,000
8. Income Taxes
Income tax expense (benefit) consisted of the following for
the years ended December 31, 1997, 1996 and 1995 (in thousands):
1997 1996 1995
Current:
Federal $47,794 $18,456 $ 6,040
State 3,118 1,779 2,147
Total current tax expense 50,912 20,235 8,187
Deferred tax expense (benefit):
Federal (14,118) (1,004) 3,706
State (921) (97) 1,317
Total deferred tax expense (benefit) (15,039) (1,101) 5,023
Total income tax expense $35,873 $19,134 $13,210
Income tax expense attributable to:
Continuing operations $35,873 $19,134 $11,593
Discontinued operations 1,617
Total income tax expense $35,873 $19,134 $13,210
A reconciliation of income taxes on reported pretax income
at statutory rates to actual income tax expense for the years
ended December 31, 1997, 1996 and 1995, is as follows (dollars in
thousands):
1997 1996 1995
Dollars Rate Dollars Rate Dollars Rate
Income tax at statutory rates $32,234 35% $17,663 35% $12,005 35%
State income taxes, net of 3,639 4 1,471 3 1,205 4
Federal tax benefit
Total income tax expense $35,873 39% $19,134 38% $13,210 39%
The net deferred tax assets at December 31, 1997 and 1996,
consisted of the tax effects of temporary differences related to
the following (in thousands):
1997 1996
Securitized loans and investments $ 9,222 $ 1,176
Reserves for loan and asset portfolio losses 7,556 2,917
Net operating loss carryforwards of acquired companies 7,327 3,848
Accrued employee compensation 2,782 1,414
Intangible assets 2,721 2,128
AMT credit carryforwards 602 602
Investment in subsidiaries 426 477
Allowance for uncollectible accounts receivable 246 275
Other 1,717 1,123
Deferred tax asset before valuation allowance 32,599 13,960
Valuation allowance (4,275) (675)
Net deferred tax asset $28,324 $13,285
Realization of deferred tax assets is dependent on
generating sufficient taxable income prior to expiration of the
loss carryforwards. Although realization is not assured,
management believes it is more likely than not that all of the
deferred tax asset, net of applicable valuation allowance, will
be realized. The valuation allowance for deferred tax assets
increased by $3.6 million in 1997 due to the acquisition of net
operating losses from CLC. To the extent that the acquired net
operating losses are utilized, the resulting decrease in the
valuation allowance will be credited to goodwill. The amount of
the deferred tax asset considered realizable could be reduced or
increased if estimates of future taxable income during the
carryforward period are reduced or increased. As a result of
acquisitions, the Company has available for its use the acquired
net operating loss carryforwards existing at the acquisition
dates. The Company is subject to certain annual limitations on
the utilization of such losses. The following were the
expiration dates and the approximate net operating loss
carryforwards at December 31, 1997 (in thousands):
Expiration Date Amount
2001 $2,705
2002 2,071
2003 1,459
2006 372
2007 2,867
2010 150
2011 10,114
Total $19,738
9. Employee Stock Compensation
The Company has a stock option and award plan for the
benefit of key individuals, including its directors, officers and
key employees. The plan is administered by a committee of the
Board of Directors. Stock option activity under the plan for the
years ended December 31, 1997, 1996 and 1995 was as follows:
Weighted
Option Average
Number Price Per Option
of Share Price Per
Shares Range Share
Options outstanding at January 1, 1995 1,872,450 $0.60 - $ 4.50 $ 4.41
Granted 872,160 6.88 - 11.38 9.78
Exercised (434,480) 0.60 - 6.88 2.99
Forfeited (8,337) 2.75 - 3.75 3.15
Options outstanding at December 31, 1995 2,301,793 0.60 - 11.38 6.77
Granted 45,500 13.13 - 21.75 17.39
Exercised (466,760) 3.50 - 11.38 4.28
Forfeited (68,181) 4.50 - 11.38 6.98
Options outstanding at December 31, 1996 1,812,352 0.60 - 21.75 7.67
Granted 2,458,239 17.63 - 34.56 20.16
Exercised (441,915) 0.60 - 21.75 6.33
Forfeited (11,796) 6.88 - 11.38 9.34
Options outstanding at December 31, 1997 3,816,880 0.60 - 34.56 15.87
Options exercisable at December 31, 1997 1,464,591 0.60 - 34.56 11.25
Options available for grant at 31, 1997 2,928,559
The following table summarizes information about stock
options outstanding at December 31, 1997:
Weighted Weighted Weighted
Average Average Average
Remaining Exercise Price Price of
Range of Option Contractual of Outstanding Options Exercisable
Exercise Prices Outstanding Life Options Exercisable Options
$ 0.60 - $ 2.75 125,045 3 $ 2.49 125,045 $ 2.49
3.50 136,490 6 3.50 136,490 3.50
6.88 - 7.00 361,546 7 6.93 260,788 6.95
7.50 - 9.38 228,100 6 8.25 221,700 8.21
11.38 486,740 8 11.38 281,900 11.38
13.13 - 18.63 177,000 9 17.83 15,000 15.07
19.88 2,200,959 9 19.88 399,968 19.88
20.25 - 35.56 101,000 9 29.43 23,700 28.33
Total 3,816,880 15.87 1,464,591 11.25
At December 31, 1997, the Company has reserved a total of
3,816,880 shares of common stock for exercise of stock options.
The Company applies Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," in accounting for
its stock option and award plans. Under the terms of the plans,
the exercise price of each option is equal to the market price of
the Company's stock on the date of grant. Accordingly, no
compensation expense has been recognized under these plans. Net
income and earnings per share on a pro forma basis as if the
Company had utilized fair value accounting methodology would have
been as follows (in thousands, except per share data):
For the Years Ended
December 31,
1997 1996 1995
Net income:
As reported $56,224 $31,332 $21,090
Pro forma 43,264 30,015 19,102
Basic earnings per share:
As reported $1.58 $1.15 $0.87
Pro forma 1.21 1.10 0.79
Diluted earnings per share:
As reported $1.53 $1.06 $0.85
Pro forma 1.18 1.01 0.77
The estimated fair value of options granted during 1997 and
1996 was $11.08 and $9.61 per share, respectively. For purposes
of determining fair value of each option, the Company used the
Black-Scholes model with the following assumptions:
1997 1996
Risk-free interest rate 5.82% - 6.26% 5.98% - 7.21%
Expected life 7 years 7 - 8 years
Expected volatility 43% - 46% 43% - 45%
Expected dividends - -
A stock subscription agreement and related shareholders'
agreement were entered into by the Company with various officers
and other parties on December 9, 1992. The purchase price was
based on $0.60 per share. Certain executive officers purchased
common stock with cash and promissory notes. The notes accrue
interest at 6% per annum and are due and payable in December 2002
or within one year of termination of employment. The shares are
subject to certain restrictions and repurchase rights pursuant to
the shareholder agreements. In the event of termination of
employment prior to December 2002, the Company could cancel
unvested shares by canceling related indebtedness based on the
original issue price. The notes are secured by the stock
acquired and are non-recourse to the subscribers. The notes are
classified as a reduction of shareholders' equity for financial
reporting purposes. At December 31, 1997 and 1996, reductions
or employee stock included notes receivable for officers' sharesof
$0.1 million.
During 1996, the Company instituted a stock compensation
plan that covers certain senior managers of the Company. The
awards are contingent on certain earnings levels being reached by
the Company in 1998 and will award participants two times their
1996 annual salary in restricted common stock of the Company of
which 20% would vest immediately and the remainder would vest at
the rate of 20% per year. No compensation expense was recorded
in 1997 or 1996 related to this plan.
During 1997, the Company issued 166,584 shares of restricted
common stock at prices ranging from $16.63 per share to $35.50
per share, with a weighted average price of $19.77 per share,
under the Company's stock option and award plan. The Company's
restricted stock typically vests over a period of five years with
certain 1997 grants vesting in lump sum in the year 2000. During
1997, 1996 and 1995, $1.7 million, $1.0 million and $0.3 million,
in unearned stock compensation was amortized as compensation
expense, respectively. At December 31, 1997, 1996 and 1995,
reductions for employee stock included unearned stock
compensation of $2.6 million, $1.0 million and $2.1 million,
respectively. The Company did not issue any shares of restricted
common stock during 1996 under the Company's stock option and
award plan.
10. Common Stock
In November and December 1996, the Company completed a
registered public offering of 3.0 million shares of common stock
including the underwriters' over-allotment option. The net
proceeds from such offering aggregated approximately $60.4
million. The price to the public was $21.25 per share and the
proceeds to the Company were $20.35 per share, after underwriting
discounts.
On December 27, 1996, the Company redeemed its outstanding
8% convertible subordinated debentures due 2005 (the "Convertible
Debentures"). The Convertible Debentures, with an aggregate face
amount of $45.0 million, were converted into 3.6 million shares
of the Company's common stock at a conversion price of $12.50 per
share. All unamortized debt-offering costs related to the
Convertible Debentures and included in other assets were recorded
as a reduction to capital in excess of par.
In December 1995, the Company completed a registered public
offering of 2.3 million shares of common stock including the
underwriters' over-allotment option. The net proceeds from such
offering aggregated approximately $25.1 million. The price to
the public was $11.75 per share and the proceeds to the Company
were $11.10 per share, after underwriting discounts.
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 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.
A reconciliation of the numerators and denominators of the
basic and diluted EPS computations for income from continuing
operations is as follows (in thousands):
1997 1996 1995
Income from continuing operations
(basic earnings) $56,224 $31,332 $18,665
Effect of convertible debt,
net of taxes 2,196 183
Income from continuing operations
(diluted earnings) $56,224 $33,528 $18,848
Weighted average shares outstanding (basic) 35,610 27,232 24,173
Assuming conversion of convertible debt 3,600 300
Dilutive stock options 1,053 942 555
Weighted average shares outstanding (diluted) 36,663 31,774 25,028
11. Employee Compensation and Benefits
Accrued employee compensation and benefits at December 31,
1997 and 1996, included amounts for incentive compensation,
severance and benefits. Certain employees are eligible to
receive a bonus from a pool computed on pretax income over
predetermined minimum earning levels.
The AMRESCO Retirement Savings and Profit Sharing Plan
("Plan") qualifies under Section 401(k) of the Internal Revenue
Code and incorporates both a savings component and a profit
sharing component for eligible employees. As determined each
year by the Board of Directors, the Company may match the
employee contribution up to 6% of their base pay based on the
Company's performance. For 1997 and 1996, the matching
contribution was set at $.50 for each $1.00 contributed by the
employees. In addition to the matching savings contribution, the
Company provided an annual contribution to the profit sharing
retirement component of the Plan on behalf of all eligible
employees. This portion of the Plan has been amended to assure
that the Company is not required to make an employer profit
sharing contribution to the Plan. However, it is anticipated
that some level of profit sharing contribution will continue in
future periods. For the years ended December 31, 1997, 1996 and
1995, the Company accrued profit sharing contributions of $3.1
million, $1.5 million and $1.2 million, respectively. Allocation
of the Company's contribution will be based on a percentage of an
employee's weighted total pay. Weighted total pay places a
stronger emphasis on the age of the employee and provides an
increasingly larger profit sharing contribution as an employee
nears retirement.
12. Commitments and Contingencies
The Company has entered into non-cancelable operating leases
covering office facilities which expire at various dates through
2006. Certain of the lease agreements provide for minimum annual
rentals with provisions to increase the rents to cover increases
in real estate taxes and other expenses of the lessor. The
Company also has leases on equipment, some of which are
non-cancelable, which expire on various dates through 1999. The
total rent expense for the years ended December 31, 1997, 1996
and 1995, was approximately $9.9 million, $5.3 million and $3.7
million, respectively. The future minimum annual rental
commitments under non-cancelable operating lease agreements
having a remaining term in excess of one year at December 31,
1997 were as follows (in thousands):
Year Ended December 31,
1998 $8,314
1999 7,869
2000 6,697
2001 5,151
2002 4,251
Thereafter 13,977
Certain pending or threatened legal actions have alleged
that the Company may be liable with respect to certain actions
which allege that Quality violated certain provisions of the Real
Estate Settlement Procedures Act ("RESPA") when it made certain
payments to brokers in transactions that occurred prior to
October 25, 1996. The Company did not assume any liabilities for
litigation arising out of the operations of Quality prior to
October 25, 1996, the date the Company purchased substantially
all of the assets of Quality. In addition to not assuming any
liabilities relating to such litigation, the Company obtained an
indemnification aggregating $10.0 million from Quality, its
shareholders and certain individuals which would be applicable to
such litigation. Therefore, the Company does not believe that it
has any liability with respect to such litigation against
Quality. Even though the Company has continued, in certain
instances, to make these types of payments to brokers, the
Company does not believe that it has significant exposure to loss
for any alleged violation of RESPA since it believes the payments
it has made are not a violation of RESPA and such payments have
been made on only a small portion of the residential mortgage
loans which it has originated.
The Company is a defendant in other various legal actions.
In the opinion of management, such actions will not materially
affect the financial position, results of operations or cash
flows of the Company.
13. Financial Instruments and Risk Management
The Company is a party to financial instruments with off-
balance sheet risk in the normal course of business to hedge
against changes in interest rates. The Company may reduce its
exposure to fluctuations in interest rates by creating offsetting
positions through the use of derivative financial instruments.
Derivatives are used to lower funding costs, to diversify sources
of funding, or to alter interest rate exposures arising from
mismatches between assets and liabilities. The Company currently
does not use derivative financial instruments for trading or
speculative purposes, nor is the Company party to highly
leveraged derivatives. These financial instruments include
interest rate swap and cap agreements, commitments to sell
certain mortgage loans and forward and futures contracts. The
instruments involve, to varying degrees, elements of interest
rate risk in excess of the amount recognized in the consolidated
statements of financial condition. The Company controls the risk
of its hedging agreements, interest rate swap and cap agreements
and forward and futures contracts through approvals, limits and
monitoring procedures.
Futures and forward contracts are commitments to either
purchase or sell designated financial instruments at a future
date for a specified price and may be settled in cash or through
delivery. Initial margin requirements are met in cash or other
instruments. Futures contracts have little credit risk because
futures exchanges are the counterparties. Forward agreements and
interest rate swaps and caps are subject to the creditworthiness
of the counterparties, which are principally large financial
institutions.
The notional amount of derivatives do not represent amounts
exchanged by the parties and, thus, are not a measure of the
exposure of the Company through its use of derivatives. The
amounts exchanged are calculated on the basis of the notional
amounts and the other terms of the derivatives, which relate to
interest rates, exchange rates, securities prices, or financial
or other indexes. Market values of derivatives transactions
fluctuate based upon movements in the underlying financial
indices such as interest rates. Market values are monitored on a
continual basis through external pricing mechanisms and internal
calculations. The Company's objective measurement system
together with risk limits and timely reporting to senior
management help to mitigate the risks associated with market
fluctuations. In the event that a derivative product were
terminated prior to its contractual maturity, it is the Company's
policy to recognize the resulting gain or loss over the shorter
of the remaining original life of the derivative financial
instrument or the life of the underlying hedged asset or
liability. If the item being hedged is sold, settled or
terminated, the derivative financial instrument is marked-to-
market and any gain (loss) is recognized in earnings. In 1997
and 1996, the Company did not terminate any derivatives
transactions prior to contractual maturity.
At December 31, 1997, the Company had two forward contracts
to sell ten-year U.S. Treasury securities at contracted forward
prices. One contract for $31.5 million matured on January 13,
1998 and hedged $35.6 million in carrying value of the fixed
portion of the Company's asset-backed security investment
portfolio. The remaining contract in the amount of $16.7 million
matures on June 1, 1998 and hedges a portion of the value of
$57.0 million of franchise loans held for sale. The Company also
had four forward contracts to sell Fannie Mae mortgage-backed
securities totaling $101.5 million maturing in January 1998 that
hedge loans held for sale. Any gain (loss) on forward contracts
is deferred and recognized when the loans being hedged are sold.
At December 31, 1997, the company had sold U.S. Treasury
futures contracts with a notional amount of $445.2 million
outstanding to hedge residential mortgage loans held for sale
with a carrying value of approximately $1.1 billion. These
contracts expire on various dates through March 27, 1998. The
futures contracts are marked-to-market and any gain (loss) is
deferred until the related loans are sold.
At December 31, 1997, the Company had Eurodollar futures
contracts with a notional amount of $6.0 billion to hedge
retained interests in securitizations. The Company's retained
interests in securitizations bear the interest rate risk of
senior securities that re-price monthly while the related
underlying loans re-price from six months to five years. Total
variable rate certificates underlying the Company's retained
interest total approximately $2.1 billion at December 31, 1997.
In addition, the Company purchased Eurodollar futures call
options and put options which expire on various dates through
June 1998 to hedge the retained interests and/or effectively
close the open futures positions. The Company also had an
amortizing interest rate cap with a beginning notional amount of
$1.9 billion hedging retained interests in securitizations. The
cap becomes effective February 25, 1998 and requires monthly
payments from the counterparty when one month LIBOR exceeds
5.9375%. The notional amount amortizes monthly based upon levels
agreed to with the counterparty through the expiration of the
agreement on July 26, 1999. The Company paid an initial premium
of approximately $3.2 million for the cap. All such futures,
options on futures contracts and caps are marked-to-market as are
the retained interests in securitization. All realized and
unrealized gains (losses) are recognized in earnings.
At December 31, 1997, the Company sold U.S. Treasury futures
with a notional amount of $250.0 million to hedge the anticipated
issuance of an equal amount of long-term debt in February 1998
(see Note 15). The contract matures on March 20, 1998 and any
gains or losses realized on the sale will be recognized over the
term of the debt.
The Company purchases interest rate swap and cap agreements
to reduce the impact of changes in interest rates on its floating
rate debt. The Company enters into these agreements to change
the fixed/variable interest rate mix of the debt portfolio to
reduce the Company's aggregate risk to movements in interest
rates. Accordingly, the Company enters into agreements to
effectively convert variable-rate debt to fixed-rate debt to
reduce the Company's risk of incurring higher interest costs due
to rising interest rates. The cap agreements entitle the Company
to receive from the counterparties the amounts, if any, by which
an interest rate index exceeds agreed-upon thresholds. At
December 31, 1997, the Company had three such agreements
outstanding with a total notional amount of $64.6 million which
hedge floating rate debt with a carrying value of $62.6 million.
The agreements have cap rates ranging from 6.19% to 6.69% based
upon one month LIBOR and expire on various dates between May 22,
1998 and November 17, 1999. The Company had another cap with a
notional amount of $14.1 million which does not become effective
until May 22, 1998. This cap has a LIBOR rate threshold of 6.68%
and expires November 17, 1999. The premiums paid for interest
rate cap agreements purchased are included in other assets in the
consolidated statements of financial condition and are amortized
to interest expense over the terms of the agreements. At
December 31, 1997, unamortized premiums amounted to $3.1 million.
Amounts received under cap agreements are recognized as yield
adjustments to the related debt. At December 31, 1996 the
Company had one swap with a notional amount of $25.0 million
outstanding which allowed the company to establish fixed interest
rates on a portion of its outstanding debt. This swap matured in
September 1997 and the Company had no swaps outstanding as of
December 31, 1997.
Credit risk represents the accounting loss that would be
recognized at the reporting date if counterparties failed
completely to perform as contracted. Concentrations of credit
risk that arise from financial instruments exist for
counterparties when they have similar economic characteristics
that would cause their ability to meet contractual obligations to
be similarly affect by changes in economic or other conditions.
The Company uses commercial rating agencies to evaluate the
credit quality of the counterparties, all of whom are major
international financial institutions. The Company does not have
a significant exposure to any individual counterparty and does
not anticipate a loss resulting from any credit risk of these
institutions.
The following disclosure of the estimated fair value of
financial instruments is made in accordance with the requirements
of SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments." The estimated fair value amounts have been
determined by the Company using available market information and
appropriate valuation methodologies. However, considerable
judgment is necessarily required to interpret market data to
develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts
the Company could realize in a current market exchange. The use
of different market assumptions and/or estimation methodologies
may have a material effect on the estimated fair value amounts.
December 31, 1997 December 31, 1996
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
(Dollars in thousands)
Assets:
Cash and cash equivalents $ 25,866 $ 25,866 $ 29,046 $ 29,046
Temporary investments 34,190 34,190
Accounts receivable, net 19,183 19,183 12,243 12,243
Loans held for sale, net 1,330,337 1,330,337 376,029 375,729
Loans and asset portfolios, net 648,694 674,081 293,248 309,583
Asset-backed securities - 107,677 107,677 55,678 55,678
available for sale
Retained interests in 294,062 294,062 130,328 130,328
securitizations - trading
Liabilities:
Accounts payable 22,821 22,821 15,988 15,988
Notes payable and warehouse 1,800,238 1,800,238 614,654 614,654
loans payable
Senior notes 57,500 58,147 57,500 58,988
Senior subordinated notes 250,000 257,356 57,500 58,844
Derivative Financial
Instruments:
Interest rate swaps (41)
Interest rate caps 2,498
Forward contracts (88) 77
Futures contracts (6,682) 256
Call options 8,979
Put options 135
The fair value of loans, asset portfolios, asset-backed
securities, retained interests in securitizations, notes payable
and other debt, senior notes and senior subordinated notes were
estimated based on quoted market prices when available,
otherwise, they were based on present values of estimated cash
flows using current entry-value interest rates applicable to each
category of such financial instruments (which notes reflect the
credit risk applicable to the instruments). Mortgage loans held
for sale were valued at their contracted sales prices. The
carrying amount of cash and cash equivalents, temporary
investments, accounts receivable, net of reserves and accounts
payable approximated fair value. The Company has reviewed its
exposure on standby letters of credit and has determined that the
fair value of such exposure is not material. The fair values of
the interest rate swap and cap agreements, forward and futures
contracts and call and put options were estimated using market
quotes. The fair value estimates presented herein were based on
pertinent information available to management as of December 31,
1997 and 1996. Although management is not aware of any factors
that would significantly affect the estimated fair value amounts,
such amounts have not been comprehensively revalued for purposes
of these financial statements since the date presented, and
therefore, current estimates of fair value may differ
significantly from the amounts presented herein.
14. Discontinued Operations
The Company adopted a plan on December 1, 1994 to
discontinue its data processing operations for the banking and
asset management industry and to sell substantially all of the
assets of the related subsidiary by June 30, 1995. On June 16,
1995, the Company sold substantially all of the assets of its
data processing operations for the banking and asset management
industry for $6.3 million in cash and recorded a gain of $2.4
million, or $0.10 per share, net of certain transaction costs and
a $1.6 million provision for income taxes.
15. Subsequent Events
On February 24, 1998, the Company issued options to purchase
approximately 331,000 shares of common stock and approximately
166,000 restricted shares to certain key employees and directors.
On February 23, 1998, the Company completed a registered
public offering of 5.2 million shares of common stock including
the underwriters' over-allotment option. The net proceeds from
such offering, after underwriters discount and offering expenses,
aggregated approximately $147.6 million and were used to repay
borrowings under the Revolving Loan Agreement. The price to the
public was $30.00 per share and the proceeds to the Company were
$28.56 per share, after underwriting discounts.
On February 24, 1998 and March 10, 1998, the Company issued
$290.0 million and $40.0 million, respectively, aggregate
principal amount of senior subordinated notes. The notes bear
interest at 9.875% per annum and mature on March 15, 2005. The
net proceeds from the February 24, 1998 offering aggregated
approximately $281.7 million and were used to repay borrowings
under the Revolving Loan Agreement and certain warehouse lines
and the net proceeds from the March 10, 1998 offering aggregated
approximately $39.0 million and were used for general corporate
purposes. The notes are unsecured obligations of the Company and
are subordinated to prior payment of all existing and future
senior debt and to indebtedness and other liabilities of the
Company's subsidiaries.
16. Quarterly Financial Data (Unaudited)
The following is a summary of unaudited quarterly results of
operations for the years ended December 31, 1997 and 1996 (in
thousands, except per share amounts):
Year Ended December 31, 1997
First Second Third Fourth
Quarter Quarter Quarter Quarter
Revenues $74,840 $103,881 $112,786 $132,248
Income before income taxes 13,606 20,686 25,552 32,253
Net income 8,561 12,486 15,336 19,841
Earnings per share:
Basic 0.25 0.35 0.42 0.55
Diluted 0.25 0.34 0.41 0.53
Year Ended December 31, 1996
First Second Third Fourth
Quarter Quarter Quarter Quarter
Revenues $36,896 $46,813 $45,486 $70,872
Income before income taxes 8,095 11,851 13,721 16,799
Net income 4,795 7,348 8,556 10,633
Earnings per share:
Basic 0.18 0.27 0.32 0.37
Diluted 0.17 0.25 0.29 0.34
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of AMRESCO, INC.:
We have audited the accompanying consolidated balance sheets
of AMRESCO, INC. and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years
in the period ended December 31, 1997. These financial
statements are the responsibility of AMRESCO, INC.'s management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial position
of AMRESCO, INC. and subsidiaries as of December 31, 1997 and
1996, and the results of their operations and their cash flows
for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting
principles.
\s\ Deloitte & Touche LLP
Dallas, Texas
February 2, 1998 (except Note 15, which is as of March 11, 1998)
RESTATED
CERTIFICATE OF INCORPORATION
OF
AMRESCO, INC.
The following is the Restated Certificate of Incorporation
of AMRESCO, INC., a corporation organized under the laws of
Delaware. The original Certificate of Incorporation of AMRESCO,
INC. was filed with the Secretary of State of the State of
Delaware on July 27, 1977, and said corporation was incorporated
under the name "Lifetime Communities, Inc." This Restated
Certificate of Incorporation was duly adopted by the directors of
said corporation in accordance with the provisions of Section 245
of the General Corporation Law of the State of Delaware. This
Restated Certificate of Incorporation restates and integrates but
does not further amend the provisions of the corporation's
certificate of incorporation. There is no discrepancy between the
provisions of the corporation's certificate of incorporation, as
amended, and this Restated Certificate of Incorporation. This
Restated Certificate of Incorporation shall be effective at 5:00
p.m. E.D.T. on May 29, 1997.
The Restated Certificate of Incorporation is as follows:
FIRST: The name of this corporation is:
AMRESCO, INC.
SECOND: The address of its registered office in the State
of Delaware, is 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any
lawful act or activity for which a corporation may be organized
under the General Corporation Law of Delaware.
FOURTH: (a) The total number of shares of stock which the
corporation shall have authority to issue is One Hundred and
Fifty-Five million (155,000,000) shares which shall be divided
into classes as follows: One Hundred and Fifty Million
(150,000,000) shares shall be common stock, each share of which
shall have a par value of $.05 (five cents ); and five million
(5,000,000) shares shall be preferred stock, each share of which
shall have a par value of $1.00 (one dollar) having such voting
powers, full or limited, or no voting powers, designations,
preferences and relative participating, optional or other special
rights, and qualifications, limitations or restrictions thereof
as may be fixed by resolution of the Board of Directors.
(b) The holders of common stock shall be entitled to one
vote for each share of stock held. Subject to limitations
prescribed by law, this Certificate of Incorporation, and
any resolution adopted by the Board of Directors pursuant to
this Article relating to preferred stock:
(1) the holders of common stock shall have the right
to vote for the election of directors of the corporation or on
any other matter;
(2) dividends may be paid upon the common stock as and
when declared by the Board of Directors out of any funds legally
available therefor;
(3) upon any dissolution or distribution of the assets
of the corporation, whether voluntary or involuntary, the
remaining net assets of the corporation shall be distributed pro
rata to the holders of the common stock.
(c) The Board of Directors is authorized, subject to
limitations prescribed by law, to provide for the issuance of
shares of preferred stock in series, and by filing a certificate
pursuant to the General Corporation Law of Delaware, to establish
the number of shares to be included in each such series, and to
fix voting powers, designations, preferences and relative,
participating, optional or other special rights and
qualifications, limitations or restrictions of the shares of each
such series. The authority of the Board of Directors with
respect to each series shall include, but not be limited to,
determination of the following:
(1) the number of shares constituting that series and
the distinctive designation of that series;
(2) the dividend rate on the shares of that series,
whether dividends shall be
cumulative, and if so, from which date or dates;
(3) whether that series shall have voting rights, in
addition to the voting rights provided by law, and, if
so, the terms of such voting rights;
(4) whether that series shall have conversion
privileges, and if so, the terms and conditions of such
conversion, including provision for adjustment of the
conversion rate in such events as the Board of Directors
shall determine;
(5) whether or not the shares of that series shall be
redeemable, and if so, the terms and conditions of such
redemption, including the date or dates upon or after which
they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(6) the rights of the shares of that series in the
event of voluntary or involuntary liquidation, dissolution
or winding up of the corporation; and
(7) any other relative rights, preferences and
limitations of that series.
FIFTH: The corporation is to have perpetual existence.
SIXTH: The property, affairs and business of the
corporation shall be managed by its Board of Directors consisting
of not less than seven (7) nor more than fifteen (15) persons.
The exact number of directors within the maximum and minimum
limitations specified herein shall be fixed from time to time by
resolution of the Board of Directors. The directors shall be
classified with respect to the time during which they shall
severally hold office by dividing them into three classes, as
nearly equal in number as possible. All directors shall hold
office until their successors shall be elected and shall qualify.
At the first meeting of the stockholders of the corporation held
for the election of such classified Board of Directors, the
directors of the first class shall be elected for a term of one
year, the directors of the second class for a term of two years,
and the directors of the third class for a term of three years.
At each annual meeting of stockholders held thereafter, the
successors to the class of directors whose terms shall expire
that year shall be elected to hold office for a term of three
years, so that the term of office of one class of directors shall
expire in each year. The directors shall have the power, from
time to time and at any time, when the stockholders are not
assembled at a meeting, to increase or decrease their own number,
within the maximum and minimum limitations specified herein, by
resolution of the Board of Directors. If the number of directors
be increased, all of the additional directors may be elected and
classified by a majority of the directors in office at the time
of the increase, or, if not so elected prior to the next annual
meeting of stockholders, they shall be elected and classified by
plurality vote by the stockholders at such annual meeting.
Directors need not be stockholders.
SEVENTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly
authorized:
To make, alter or repeal the bylaws of the corporation.
To authorize and cause to be executed mortgages and
liens upon the real and personal
property of the corporation.
To set apart out of any of the funds of the corporation
available for dividends a
reserve or reserves for any proper purpose and to abolish
any such reserve in the manner in which it was created.
To determine whether any, and, if any, what part, of
the net profits of the corporation
or of its net assets in excess of its capital shall be
declared in dividends and paid to the stockholders, and to
direct and determine the use and disposition of any such net
profits or such net assets in excess of capital.
To fix from time to time the amount of profits of the
corporation to be reserved as
working capital or for any other lawful purpose.
To establish bonus, profit-sharing or other types of
incentive or compensation plans
for the employees (including officers and directors) of the
corporation and to fix the amount of profits to be
distributed or shared and to determine the persons to
participate in any such plans and the amounts of their
respective participations.
Subject to the applicable provisions of the bylaws then
in effect, to determine from time to time, whether and
to what extent and at what times and places and under
what conditions and regulations the accounts and books
of the corporation or any of them, shall be open to the
inspection of the stockholders, and no stockholder
shall have any right to inspect any account or book or
document of the company except as conferred by the laws
of the State of Delaware, unless and until authorized
to do so by resolution of the Board of Directors or of
the stockholders of the corporation.
By a majority of the whole Board of Directors, to
designate one or more committees, each committee to
consist of two or more of the directors of the
corporation. The Board of Directors may designate one
or more directors as alternate members of any
committee, who may replace any absent or disqualified
member at any meeting of the committee. Any such
committee, to the extent provided in the resolution or
in the bylaws of the corporation, shall have and may
exercise the powers of the Board of Directors in the
management of the business and affairs of the
corporation, and may authorize the seal of the
corporation to be affixed to all papers which may
require it; but no such committee shall have the power
or authority in reference to amending the certificate
of incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of
the corporation's property and assets, recommending to
the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of
the corporation; and, unless the resolution or bylaws
expressly so provide, no such committee shall have the
power or authority to declare a dividend or to
authorize the issuance of stock, provided, however, the
bylaws may provide that in the absence or
disqualification of any member of such committee or
committees, the member or members thereof present at
any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or
disqualified member.
No contract or other transaction between the
corporation and any other corporation and no other act
of the corporation shall, in the absence of fraud, in
any way be affected or invalidated by the fact that any
of the directors of the corporation are pecuniarily or
otherwise interested in, or are directors or officers
of such other corporation. Any director of the
corporation individually or any firm or association of
which any director may be a member, may be a party to,
or may be pecuniarily or otherwise interested in any
contract or transaction of the corporation, provided
that the fact that he individually or such firm or
association is so interested shall be disclosed or
shall have been known to the Board of Directors and the
contract or transaction is approved in good faith by
the affirmative votes of a majority of the
disinterested directors, even though the disinterested
directors may be less than a quorum. Any director of
the corporation who is also a director or officer of
such other corporation or who is so interested may be
counted in determining existence of quorum at any
meeting of the Board of Directors which shall authorize
any such contract or transaction. Any director of the
corporation may vote upon any contract or other
transaction between the corporation and any subsidiary
or affiliated corporation without regard to the fact
that he is also a director of such subsidiary or
affiliated corporation.
The corporation shall indemnify, to the full extent that it
shall have power under applicable law to do so and in the
manner permitted by such law, any person made or threatened
to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that
he is or was a director or officer of the corporation. The
corporation may indemnify, to the full extent it shall have
power under applicable law to do so and in a manner
permitted by such law, any person made or threatened to be
made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was an
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, or participant in, another
corporation, partnership, joint venture, trust or other
enterprise. The indemnification provided by this paragraph
shall not be deemed exclusive of any other rights to which
any person seeking indemnification may be entitled under any
bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has
ceased to be such director, officer, employee, agent or
participant and shall inure to the benefit of the heirs,
executors and administrators of such a person.
In addition to the powers and authorities herein before or
by statute expressly conferred upon it, the Board of
Directors may exercise all such powers and do all such acts
and things as may be exercised or done by the corporation,
subject, nevertheless, to the provisions of the laws of the
State of Delaware, of this Restated Certificate of
Incorporation and of the Bylaws of the corporation.
EIGHTH: Whenever a compromise or arrangement is proposed
between this corporation and its creditors or any class of them
and/or between this corporation and its stockholders or any class
of them, any court of equitable jurisdiction within the State of
Delaware may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this
corporation under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for this corporation under
the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as
the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in
value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the
case may be, agree to any compromise or arrangement and to any
reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and
the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders
or class of stockholders, of this corporation, as the case may
be, and also on this corporation.
NINTH: Meetings of stockholders and directors may be held
within or without the State of Delaware, as the Bylaws may
provide. The books of the corporation may be kept (subject to
any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time
to time by the Board of Directors or in the Bylaws of the
corporation. Elections of directors need not be by written
ballot unless the Bylaws of the corporation shall so provide.
TENTH: The corporation reserves the right to amend,
alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter
prescribed by statute or by this Certificate of Incorporation,
and all rights conferred upon stockholders herein are granted
subject to this reservation.
Article Sixth may not be amended, altered, changed or
repealed without the approval of the holders of 66 & 2/3% of the
voting securities of the corporation.
ELEVENTH: No holder of any of the shares of the stock of
this corporation of any class shall be entitled as of right to
purchase or subscribe for any unissued stock of any class or any
additional stock of any class to be issued by reason of any
increase of the authorized capital stock of the corporation of
any class, or to purchase or subscribe for bonds, certificates of
indebtedness, debentures or other securities or obligations
convertible into, or carrying any right to purchase, any stock of
any class, but any such unissued stock or such additional
authorized issue of any stock or other securities or obligations
convertible into, or carrying any right to purchase, any stock of
any class, may be issued and disposed of pursuant to resolutions
of the Board of Directors to such persons, firms, companies or
associations and upon such terms as may be deemed advisable by
the Board of Directors in the exercise of its discretion.
TWELFTH: If any person, firm or corporation (collectively
referred to as the "Owner") or any persons, firm or corporation
controlling the Owner, controlled by the Owner or under common
control with the Owner, or any group of which the Owner or any of
the foregoing persons, firms or corporations are members, or any
other group controlling the Owner, controlled by the Owner, or
under common control with the Owner, owns of record, or owns
beneficially, directly or indirectly, more than 5% of any class
of equity security of the corporation, then, subject to
applicable statutory requirements, any merger or consolidation of
the corporation with the Owner, or any sale, lease or exchange of
substantially all of the assets of the corporation or the Owner
to the other may not be effected without the consent of the
holders of a majority of the corporation's securities voted at
the meeting called for that purpose, other than those voting
securities owned by the Owner, as defined in this Article
Twelfth, given in person or by proxy at such meeting.
THIRTEENTH: No action required or permitted to be taken
by the stockholders of the corporation at any annual or special
meeting of such stockholders may be taken except at the annual or
a special meeting of stockholders duly called as provided in the
Bylaws of the corporation. Special meetings of stockholders may
be called at any time by the Board of Directors or the Chairman
of the Board; and shall be called by the Board of Directors or
the Chairman of the Board at the request of the holders of not
less than one-tenth of all the shares entitled to vote at the
meeting.
FOURTEENTH: No director of the corporation shall have, or
incur, any personal liability to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as
a director; provided, that this provision shall not eliminate or
limit the liability of a director (i) for any breach of such
director's duty of loyalty to the corporation or its
stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
the law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit. If the Delaware
General Corporation Law shall be hereafter repealed or modified,
the elimination of liability of a director herein provided shall
be to the fullest extent permitted by the Delaware General
Corporation Law as amended. Any repeal or modification of this
provision shall not adversely affect any right or protection of a
director of the corporation existing immediately prior to such
repeal or modification.
IN WITNESS WHEREOF, said AMRESCO, INC. has caused this
Restated Certificate of Incorporation to be signed by Robert H.
Lutz, Jr., its Chairman of the Board and Chief Executive Officer
and L. Keith Blackwell, its Vice President, General Counsel and
Secretary, this 29th day of May, 1997.
AMRESCO, INC.
By:________________________________
Robert H. Lutz, Jr.
Chairman of the Board
And Chief Executive Officer
ATTEST:
By:____________________________
L. Keith Blackwell,Vice President
General Counsel and Secretary
AMRESCO, INC.
Senior Subordinated Notes, Series 1998-A due 2005
Officers' Certificate and Company Order
Pursuant to the Subordinated Notes Indenture dated as of
March 1, 1997 (the "Master Indenture") between AMRESCO, INC. (the
"Company") and Bank One, N.A., as Trustee (the "Trustee"),
resolutions adopted by the Company's Board of Directors on
February 25, 1997 and January 28, 1998 and resolutions adopted by
the Company's Pricing Committee as of February 23, 1998, this
Officers' Certificate and Company Order is being delivered to the
Trustee to establish the terms of a series of Securities in
accordance with Section 301 of the Master Indenture, to establish
the form of the Securities of such series in accordance with
Section 201 of the Master Indenture and to establish the
procedures for the authentication and delivery of the Securities
of such series pursuant to Section 303 of the Master Indenture.
Capitalized terms used and not otherwise defined herein
shall have the meanings assigned to them in the Master Indenture.
The Company has complied with all conditions precedent
provided for in the Master Indenture relating to the
establishment of (i) a series of Securities, (ii) the forms of
such series of Securities and (iii) the procedures for the
authentication and delivery of such series of Securities.
A. Establishment of Series Pursuant to Section 301 of the
Master Indenture.
The Company hereby establishes, pursuant to Section 301 of
the Master Indenture, a series of Securities that shall have the
following terms:
1. The series of Securities being authorized hereby shall bear
the title "9.875% Series 1998-A Senior Subordinated Notes due
2005" (the "Notes").
2. The aggregate principal amount of the Notes shall be limited
to $350,000,000 (except for Notes authenticated and delivered
pursuant to Section 306 of the Master Indenture, and except for
any Notes which, pursuant to Section 303 of the Master Indenture,
are deemed never to have been authenticated and delivered
thereunder).
3. Interest on each Note shall be payable to the Person in
whose name such Note is registered at the close of business on
the first day of the month (whether or not a Business Day) in
which the relevant Interest Payment Date (as defined in paragraph
5 hereof) occurs.
4. The Notes shall mature on March 15, 2005, at which time the
entire principal amount of the Notes and accrued but unpaid
interest on the Notes will be due and payable.
1.
5. Each Note shall bear interest at the annual rate of 9.875%.
Interest on the Notes shall be payable semi-annually on March 15
and September 15 of each year, or, if any such day is not a
Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest payable on any Interest
Payment Date shall include interest on the Notes to and excluding
such Interest Payment Date. The first Interest Payment Date
shall be September 15, 1998, and shall include interest from
February 27, 1998 to and excluding the first Interest Payment
Date. Interest on the Notes will be computed on the basis of a
360-day year of twelve 30-day months. If any Interest Payment
Date does not fall on a Business Day, any interest payment due on
such Interest Payment Date shall be made on the next succeeding
Business Day with the same force and effect as if made on such
Interest Payment Date, and no interest shall be payable on such
interest payment for the period from and after such Interest
Payment Date through the date of such payment.
6. The principal of and interest on the Notes shall be payable,
and the Notes may be exchanged or transferred at an office or
agency to be maintained by the Company in the Borough of
Manhattan, the City of New York, New York, and Columbus, Ohio,
except that, at the option of the Company, payment of interest
may be by check mailed to the address of each Holder as such
address appears on the Security Register.
7. The Notes are subject to redemption, at the Company's
option, at any time in whole, or from time to time in part, on or
after March 15, 2002, and prior to maturity, upon not less than
30 nor more than 60 days' prior notice mailed by first class mail
to each Holder's last address as it appears on the Security
Register, at the following redemption prices (expressed as a
percentage of principal amount), plus accrued and unpaid interest
(if any) to the date of redemption (subject to the right of
Holders of record on the relevant record date that is on or prior
to the redemption date to receive interest due on an Interest
Payment Date), if redeemed during the 12-month period commencing
March 15, of the years set forth below:
Redemption Price
2002 104.938%
2003 102.469%
2004 and thereafter 100.000%
8. The Company shall have no obligation to redeem or purchase
Notes at the option of a Holder thereof or pursuant to any
sinking fund or analogous provisions, except as set forth below:
(a) Right to Require Repurchase. In the event that
there shall occur a Repurchase Event (as defined in
paragraph (g)), then each Holder shall have the right, at
such Holder's option, to require the Company to purchase,
and upon the exercise of such right, the Company shall
purchase, all or any part of such Holder's Notes on the date
(the "Repurchase Date") that is 30 days after the date the
Company gives notice of the Repurchase Event as contemplated
in paragraph (b)(1) at a price (the "Repurchase Price")
equal to 100% of the principal amount thereof, together with
accrued and unpaid interest to the Repurchase Date; provided
that, if the Repurchase Event is a Change of Control, the
Repurchase Price shall be equal to 101% of the principal
amount of the Holder's Notes, together with accrued and
unpaid interest to the Repurchase Date. Such right to
require the repurchase of Notes shall not continue after a
discharge of the Company from its obligations with respect
to the Notes in accordance with Article Four of the Master
Indenture.
(b) Notice; Method of Exercising Repurchase Right.
(1) On or before the 15th day after the
Repurchase Event, the Company, or, upon Company Request
transmitted to the Trustee within 5 days of such
Repurchase Event, the Trustee (in the name and at the
expense of the Company), shall give notice of the
occurrence of the Repurchase Event and of the
repurchase right set forth herein arising as a result
thereof by first-class mail, postage prepaid, to each
Holder of the Notes at such Holder's address appearing
in the Security Register. Such notice shall be deemed
to have been given at the time of posting of such by
first-class mail. The Company shall also deliver a copy
of such notice of a repurchase right to the Trustee.
Each notice of a repurchase right shall state:
(i) that the notice is being made pursuant
to paragraph 8(a) of this Officer's
Certificate and Company Order and that all
Notes tendered shall be accepted for payment.
Such notice shall also state (A) that any
Note not tendered shall continue to accrue
interest, if any; (B) that, unless the
Company defaults in the payment of the
Repurchase Price, all Notes accepted for
payment in respect of a Repurchase Event
shall cease to accrue interest, if any, after
the Repurchase Date; (C) in the event the
repurchase right is exercised with respect to
less than the entire principal amount of a
surrendered Note, the Company shall execute
and deliver to the Trustee and the Trustee
shall authenticate for issuance in the name
of the Holder a new Note or Notes in the
aggregate principal amount of the
unrepurchased portion of such surrendered
Note (which unrepurchased portion must be in
a principal amount of $1,000 or an integral
multiple thereof); and (D) a description of
the circumstances triggering the repurchase
right, including, in the case of a Change of
Control, the relevant facts regarding such
Change of Control (including, but not limited
to, information with respect to pro forma
historical income, cash flow and
capitalization after giving effect to such
Change in Control);
(ii) the Repurchase Date;
(iii) the date on which withdrawal rights
terminate and the date by which the
repurchase right must be exercised;
(iv) the Repurchase Price; and
(v) the instructions a Holder must follow to
exercise a repurchase right.
No failure of the Company to give the foregoing
notice shall limit any Holder's right to exercise a
repurchase right. The Trustee shall have no
affirmative obligation to determine if there shall have
occurred a Repurchase Event.
(2) To exercise the repurchase right, a Holder
shall deliver to the Company (or an agent designated by
the Company for such purpose in the notice referred to
in (1) above) and to the Trustee on or before the
Business Day prior to the Repurchase Date (i) written
notice of the Holder's exercise of such right, which
notice shall set forth the name of the Holder, the
principal amount of the Note or Notes (or portion of a
Note) to be repurchased, and a statement that an
election to exercise the repurchase right is being made
thereby, and (ii) the Note or Notes with respect to
which the repurchase right is being exercised, duly
endorsed for transfer to the Company. A Holder shall
be entitled to withdraw its election if the Trustee
receives, on or before the close of business on the
second Business Day prior to the Repurchase Date a
telegram, telex, facsimile transmission or letter
setting forth the name of such Holder, the principal
amount of the Notes theretofore delivered for
repurchase, and a statement as to the principal amount
of Notes as to which such Holder is withdrawing its
notice, and after the close of business on such second
Business Day prior to the Repurchase Date all written
notices of repurchase not theretofore withdrawn shall
be irrevocable; provided, however, that the Company, in
its sole and absolute discretion, may consent to the
withdrawal of any Notes after such date and prior to
the Repurchase Date. If the Repurchase Date falls
between any Regular Record Date and the next succeeding
Interest Payment Date, Notes to be repurchased must be
accompanied by a check from the Holder of an amount
equal to the interest thereon which the registered
Holder thereof is to receive on such Interest Payment
Date. Upon receipt of any such check, the Trustee
shall forward such check to the Company.
(3) In the event a repurchase right shall be
exercised in accordance with the terms hereof, the
Company shall on the Repurchase Date pay or cause to be
paid in cash to the Holder thereof the Repurchase Price
of the Note or Notes as to which the repurchase right
had been exercised. In the event that a repurchase
right is exercised with respect to less than the entire
principal amount of a surrendered Note, the Company
shall execute and deliver to the Trustee and the
Trustee shall authenticate for issuance in the name of
the Holder a new Note or Notes in the aggregate
principal amount of the unrepurchased portion of such
surrendered Note.
(4) The Company shall comply with the
requirements of Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable to
such party in connection with the repurchase of the
Notes as a result of a Repurchase Event.
(c) Deposit of Repurchase Price. On or before the
Repurchase Date, the Company shall deposit with the Trustee
or with a Paying Agent (or, if the Company is acting as its
own Paying Agent, segregate and hold in trust as provided in
Section 1003 of the Master Indenture) an amount of money,
which shall be good funds on the Repurchase Date, sufficient
to pay the Repurchase Price of the Notes which are to be
repurchased on the Repurchase Date.
(d) Notes Not Repurchased on Repurchase Date. If a
Note surrendered for repurchase shall not be so paid on the
Repurchase Date, the principal shall, until paid, bear
interest to the extent permitted by applicable law from the
Repurchase Date at the rate per annum borne by such Note.
(e) Notes Repurchased In Part. Any Note which is to
be repurchased only in part shall be surrendered at any
office or agency of the Company designated for that purpose
pursuant to Section 1002 of the Master Indenture (with, if
the Company or the Trustee so requires, due endorsement by,
or written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the
Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Note without service
charge, a new Note or Notes of any authorized denomination
as requested by such Holder, in aggregate principal amount
equal to and in exchange for the unrepurchased portion of
the principal of the Note so surrendered.
(f) Priority of Repurchase Rights. If the Repurchase
Event is the occurrence of an event requiring an offer to
repurchase Junior Debt, the Holders of the Notes requiring
the Company to repurchase Notes must be paid in full
pursuant to the terms and conditions of this paragraph 8
prior to any payments being made to the holders of Junior
Debt. If the Repurchase Event is the occurrence of an event
requiring an offer to repurchase Subordinated Debt that is
pari passu with the Notes, the Holders of the Notes
requiring the Company to repurchase Notes must be paid
concurrently with the holders of such pari passu
Subordinated Debt.
(g) Definition of Repurchase Event. For purposes of
this paragraph 8, a "Repurchase Event" shall have occurred
upon the occurrence of either (i) any event requiring that
the Company repurchase, or make an offer to repurchase, any
Senior Debt or Subordinated Debt other than the Notes,
whether now outstanding or issued in the future or (ii) a
Change of Control (as defined in paragraph (h)).
(h) Definition of Change of Control. For purposes of
this paragraph 8, a "Change of Control" means the occurrence
of one or more of the following events: (A) a person or
entity or group of persons or entities acting in concert as
a partnership, limited partnership, syndicate or other group
shall, as a result of a tender or exchange offer, open
market purchases, privately negotiated purchases or
otherwise, have become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of Voting
Stock of the Company representing 50% or more of the
combined voting power of the outstanding Voting Stock of the
Company; (B) the consummation of (x) any consolidation or
merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which
shares of the Company's Voting Stock would be converted into
cash, securities or other property, other than a merger of
the Company in which the holders of the Company's Voting
Stock immediately prior to the merger have a majority of
voting power with respect to the Voting Stock of the
surviving corporation immediately after the merger, or (y)
any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or
substantially all the assets of the Company, other than a
sale or other transfer in which the holders of the Company's
Voting Stock immediately prior to such sale or transfer have
a majority of voting power with respect to the Voting Stock
of the transferee corporation immediately after such sale or
other transfer; (C) the shareholders of the Company shall
approve any plan or proposal for the liquidation or
dissolution of the Company, other than a liquidation or
dissolution in which the holders of the Company's Voting
Stock immediately prior to such liquidation or dissolution
have the same proportionate share of voting power with
respect to the Voting Stock of the corporation which will
hold all or substantially all of the assets of the Company
immediately after such liquidation or dissolution; or (D)
individuals who at the date of this Officer's Certificate
and Company Order constitute the Board of Directors shall
cease for any reason to constitute at least a majority
thereof, unless the election or the nomination for election
by the Company's shareholders of each new director was
approved by a vote of at least a majority of the directors
who were members of such Board of Directors at the time of
such nomination or election.
9. The Notes shall not be convertible into shares of capital
stock or exchangeable for other securities.
10. The Trustee shall be the Security Registrar and Paying Agent
for the Notes.
11. Neither the amount of principal of, nor any premium or
interest on, any Notes shall be determined by reference to an
index or pursuant to a formula.
12. In addition to the covenants set forth in the Master
Indenture, the Notes shall be subject to the following
restrictive covenants:
(a) In addition to those terms defined in the Master
Indenture, the following terms shall have the meanings
assigned when used in connection with the Notes:
The term "Acquired Indebtedness" means indebtedness of
a Person existing at the time such Person becomes a
Subsidiary of the Company or assumed in connection with the
acquisition by the Company or a Subsidiary of the Company of
assets from such Person, and not incurred in connection
with, or in anticipation of, such Person becoming a
Subsidiary of the Company or such acquisition.
The term "Consolidated Capitalization" means, for any
date as of which such determination is being made, the sum
of Subordinated Debt plus Consolidated Net Worth, in each
case as set forth on the consolidated balance sheet of the
Company and its Subsidiaries prepared in accordance with
GAAP, as of the end of the most recently completed fiscal
quarter of the Company for which consolidated financial
statements of the Company are available.
The term "Consolidated EBITDA" means, for any period,
the sum of (i) Consolidated Net Income before taxes and, to
the extent deducted in calculating Consolidated Net Income,
(ii) depreciation expense, plus amortization of intangibles,
plus interest expense, each as deducted in determining such
Consolidated Net Income before taxes, determined in
accordance with GAAP on a consolidated basis for the Company
and its Subsidiaries.
The term "Consolidated Interest Expense" means, for any
period, the interest expense which is required to be shown
as such on the financial statements of the Company and its
Subsidiaries, on a consolidated basis, prepared in
accordance with GAAP.
The term "Consolidated Net Income" means, for any
period, the amount of Consolidated Net Income (loss) of the
Company, determined in accordance with GAAP; provided,
however, that there shall not be included in Consolidated
Net Income (1) any net income (loss) of a Subsidiary of the
Company for any period during which it was not a
Consolidated Subsidiary (provided that equity method of
accounting affiliates shall not be excluded); (2) any net
income (loss) of businesses, properties or assets acquired
or disposed of (by way of merger, consolidation, purchase,
sale or otherwise) by the Company or any Subsidiary of the
Company for any period prior to the acquisition thereof or
subsequent to the disposition thereof, including any net
income (loss) of any person acquired by the Company or a
Subsidiary of the Company in a transaction accounted for as
a pooling of interests, for any period prior to the date of
acquisition; (3) all extraordinary gains and losses, net of
any tax effect; (4) the cumulative effect of a change in
accounting principles; and (5) the net income of any
Subsidiary of the Company to the extent that the declaration
or payment of dividends or similar distributions by that
Subsidiary of such income is not at the time permitted by
the express terms of its organizational documents or any
agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to such
Subsidiary.
The term "Consolidated Net Worth" means, for any date
as of which such determination is being made, the excess, as
determined in accordance with GAAP, after appropriate
deduction for minority interests in the net worth of
Consolidated Subsidiaries, of the Company's assets over its
liabilities, in each case as set forth on the consolidated
balance sheet of the Company and its Subsidiaries prepared
in accordance with GAAP, as of the end of the most recently
completed fiscal quarter of the Company for which
consolidated financial statements of the Company are
available.
The term "Consolidated Subsidiary" means a Subsidiary
of the Company, the financial statements of which are
consolidated with the financial statements of the Company in
accordance with GAAP.
The term "Disqualified Stock" means any capital stock
that by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable), or
upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the option of the holder
thereof, in whole or in part, on or prior to the scheduled
maturity of the Notes.
"Funded Debt" means any of the following obligations of
the Company or any Subsidiary of the Company which by its
terms matures at or is extendable or renewable at the sole
option of the obligor without requiring the consent of the
obligee to a date more than 360 days after the date of the
creation or incurrence of such obligation: (i) any
obligations, contingent or otherwise, for borrowed money or
for the deferred purchase price of property, assets,
securities or services (including, without limitation, any
interest accruing subsequent to an event of default), (ii)
all obligations (including the Notes) evidenced by bonds,
notes, debentures or other similar instruments, (iii) all
indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property
acquired (even though the rights and remedies of the seller
or lender under such agreement in the event of default are
limited to repossession or sale of such property), except
any such obligation that constitutes a trade payable and an
accrued liability arising in the ordinary course of
business, if and to the extent any of the foregoing
indebtedness would appear as a liability upon a balance
sheet prepared in accordance with GAAP, (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
clauses (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 of the Company (including, without limitation,
accounts and contract rights), even though the Company or
any Subsidiary of the Company 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
prepared in accordance with GAAP.
"Incur" means to issue, assume, guarantee, incur or
otherwise become liable for any Indebtedness; provided,
however, that any Indebtedness of a Person existing at the
time such person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to
be Incurred by such Subsidiary at the time it becomes a
Subsidiary. Any Indebtedness issued at a discount
(including Indebtedness on which interest is payable through
the issuance of additional Indebtedness) shall be deemed
Incurred at the time of original issuance of the
Indebtedness at the initial accreted amount thereof. The
term "Incurrence" when used as a noun shall have a
correlative meaning.
"Indebtedness" is defined as any obligations of the
Company or any Subsidiary of the Company that would
constitute Funded Debt but for their term of maturity.
The term "Interest Coverage Ratio" means, for any date
of determination, the ratio of (1) Consolidated EBITDA for
the immediately preceding four most recent consecutive
calendar quarters ending prior to the date of such
determination for which consolidated financial statements of
the Company are available, to (2) Consolidated Interest
Expense for such four consecutive calendar quarters;
provided, however, that:
(i) if the Company or any Subsidiary of the
Company has Incurred any Senior Recourse Debt (other than
pursuant to the Revolving Loan Agreement, as amended from
time to time, or any successor or replacement facilities) or
Subordinated Debt since the beginning of such period that
remains outstanding on such date of determination or if the
transaction giving rise to the need to calculate the
Interest Coverage Ratio is an Incurrence of Indebtedness;
Consolidated EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving effect on a pro
forma basis to (A) the Incurrence of such Senior Recourse
Debt (other than pursuant to the Revolving Loan Agreement,
as amended from time to time, or any successor or
replacement facilities) or Subordinated Debt as if it had
been Incurred on the first day of such period and (B) the
discharge of any other Indebtedness repaid, cancelled,
defeased or otherwise discharged with the proceeds of such
new Senior Recourse Debt or Subordinated Debt as if such
discharge had occurred on the first day of such period;
(ii) if since the beginning of such period the
Company or any Subsidiary of the Company shall have disposed
of its equity investment in a Subsidiary such that such
Subsidiary is no longer consolidated on a consolidated
balance sheet of the Company prepared in accordance with
GAAP, then (A) Consolidated EBITDA for such period shall be
reduced by an amount equal to the portion of Consolidated
EBITDA (if positive) directly attributable to such divested
Subsidiary for such period, and (B) Consolidated Interest
Expense for such period shall be reduced by an amount equal
to the portion of Consolidated Interest Expense for such
period directly attributable to such Subsidiary to the
extent the Company and its other Subsidiaries are no longer
liable for such Indebtedness after such sale or other
disposition; and
(iii) if since the beginning of such period
the Company or any Subsidiary of the Company shall have
acquired or made an equity investment in a person which as a
result thereof became a Subsidiary which is consolidated on
a consolidated balance sheet of the Company prepared in
accordance with GAAP, then Consolidated EBITDA and
Consolidated Interest Expense for such period shall be
calculated on a pro forma basis giving effect thereto (and
to the Incurrence of any Indebtedness Incurred by the
Company or any of its Subsidiaries to finance such
acquisition or investment) as if such acquisition or
investment had occurred on the first day of such period.
For purposes of this definition, if any Indebtedness
bears a floating rate of interest and is being given pro
forma effect, the interest expense on such Indebtedness
shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire
period.
The term "Junior Debt" means the principal amount of,
premium, if any, and interest on, and any other amounts
payable in respect of, any Funded Debt, whether outstanding
on the date of execution of the Subordinated Indenture or
thereafter Incurred; provided that in the instrument
creating or evidencing such Funded Debt or pursuant to which
such Funded Debt is outstanding it is provided that (1) such
Indebtedness is junior in right of payment to the Notes, (2)
no payments with respect to such Indebtedness may be made at
any time that an Event of Default shall have occurred and be
continuing and (3) no payments other than the payment of
interest may be made with respect to such Indebtedness at
any time the Notes are Outstanding.
"Material Subsidiary" is defined as Holliday Fenoglio
Fowler, L.P., AMRESCO Services, L.P., AMRESCO Residential
Mortgage Corporation, AMRESCO Residential Credit
Corporation, AMRESCO Commercial Lending Corporation and any
other Subsidiary of the Company whose assets or revenues
comprise at least five percent (5%) of the assets or
revenues of the Company and the Subsidiaries of the Company
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.
"Net Cash Proceeds" means, with respect to any issuance
or sale of capital stock, the cash proceeds of such issuance
or sale net of attorneys' fees, accountants' fees,
underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees
actually incurred in connection with such issuance or sale
and net of taxes paid or payable as a result thereof.
"Revolving Loan Agreement" means the Third Amended and
Restated Revolving Loan Agreement dated as of September 30,
1997 and as subsequently amended, among the Company,
NationsBank of Texas, N.A. and Bank One, Texas, N.A., as Co-
Agents, and the lenders which are parties thereto from time
to time.
The term "Senior Recourse Debt" means Senior Debt minus
any Funded Debt of the Company or any of its Subsidiaries
that is (A)(i) specifically advanced to finance the
acquisition of assets classified on the Company's balance
sheet as "assets held for sale" and (ii) either (a) secured
by the assets to which such indebtedness relates without
recourse to the Company or any of its Subsidiaries or (b)
issued under a loan agreement that requires each advance to
be repaid upon sale of the assets to which such advance
relates within no more than one year from the date of such
advance or (B) advanced to a Subsidiary of the Company or
group of Subsidiaries of the Company formed for the sole
purpose of acquiring or holding a portfolio of assets (i)
against which a loan is obtained that is made without
recourse to, and with no cross-collateralization against the
assets of, the Company or any other Subsidiary of the
Company, and (ii) upon complete or partial liquidation of
which the loan must be correspondingly completely or
partially repaid, as the case may be.
The term "Total Funded Recourse Debt" means Senior
Recourse Debt plus Subordinated Debt.
(b) The Company may not, and may not permit any of its
Subsidiaries to, directly or indirectly, Incur any Funded
Debt if, immediately after giving effect thereto (including
giving effect to the substantially concurrent retirement of
any existing indebtedness from the proceeds of such
additional Funded Debt):
(1) the aggregate amount of Senior Recourse Debt
outstanding would exceed 450% of the Company's
Consolidated Capitalization; or
(2) the aggregate amount of Total Funded Recourse Debt
outstanding would exceed 600% of the Company's
Consolidated Net Worth; or
(3) the aggregate amount of Subordinated Debt
outstanding would exceed 100% of the Company's
Consolidated Net Worth.
(c) The Company may not, and may not permit any of its
Subsidiaries to, directly or indirectly, Incur any Senior
Recourse Debt (other than pursuant to the Revolving Loan
Agreement, as amended from time to time, or any successor or
replacement facilities) or Subordinated Debt if, immediately
after giving effect thereto (including giving effect to the
substantially concurrent retirement of any existing
Indebtedness from the proceeds of such additional
Indebtedness) the Interest Coverage Ratio would be less than
1.25 to 1.00.
(d) The Company may not, and may not permit any of its
Subsidiaries to, directly or indirectly, (i) declare or pay
any dividend or make any distribution on or in respect of,
either in cash or property, any shares of its capital stock
(except dividends or other distributions payable solely in
shares of its capital stock (other than Disqualified Stock),
and except for dividends or distributions payable to the
Company or any of its Subsidiaries (and, if such Subsidiary
is not wholly-owned by the Company, to such Subsidiary's
other stockholders on a pro rata basis)), (ii) purchase,
redeem or retire or otherwise acquire for value any shares
of its capital stock or any warrants, rights or options to
purchase or acquire any shares of capital stock of the
Company, or (iii) purchase, repurchase, redeem, defease or
otherwise acquire for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment, any
Junior Debt of the Company or any of its Subsidiaries (other
than the purchase, repurchase or other acquisition of Junior
Debt acquired in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each
case within one year of the date of such acquisition) (such
dividends, purchases, redemptions, retirements, defeasance,
payments and distributions being herein collectively called
"Restricted Payments") if, after giving effect thereto,
(1) an Event of Default under the Master Indenture
would have occurred or has occurred and is continuing;
or
(2) (A) the sum of (i) such Restricted Payments plus
(ii) the aggregate amount of all Restricted
Payments made during the period after December 31,
1996 would exceed (B) the sum of (i) $50 million
plus (ii) 50% of the Company's Consolidated Net
Income accrued during the period (treated as one
accounting period) from the beginning of the first
fiscal quarter commencing after December 31, 1996
to the end of the most recent fiscal quarter
ending prior to the date of such Restricted
Payment for which consolidated financial
statements of the Company are available (with 100%
reduction for a loss in any fiscal year), plus
(iii) the cumulative Net Cash Proceeds received by
the Company from the issuance or sale after
December 31, 1996 of capital stock of the Company,
other than Disqualified Stock or the sale of
capital stock to a Subsidiary of the Company or an
employee stock ownership plan maintained by the
Company, plus (iv) the amount of any Indebtedness,
as shown on the most recent balance sheet of the
Company prepared in accordance with GAAP, that has
been converted into common stock of the Company
after December 31, 1996; or
(3) the Company would not be able to Incur at least an
additional $1.00 of Funded Debt under the
covenants set forth in paragraph 12(b) or 12(c).
Notwithstanding the foregoing, the Company may make a
previously-declared Restricted Payment within 60 days after
the date of declaration thereof if the declaration of such
Restricted Payment was permitted under this paragraph 12(d)
when made. For purposes of this paragraph 12(d), the amount
of any Restricted Payment payable in property shall be
deemed to be the fair market value of such property as
determined by the Board of Directors of the Company.
(e) The Company shall not, directly or indirectly,
Incur any Funded Debt which is expressly subordinate in
right of payment to any Senior Debt, other than Junior Debt
or indebtedness that is pari passu with the Notes in right
of payment. For purposes of this paragraph 12(e), the
Incurrence of Senior Debt which is unsecured shall not,
because of its unsecured status, be deemed to be subordinate
in right of payment to any Senior Debt which is secured.
(f) The Company shall not and shall not permit any
Subsidiary of the Company to, create or otherwise cause to
become effective any consensual encumbrance or restriction
of any kind on the ability of any Subsidiary of the Company
to (a) pay dividends or make any other distribution on its
capital stock, (b) pay any indebtedness owed to the Company
or any other Subsidiary of the Company or (c) make loans,
advances, or capital contributions or transfer assets or
properties to the Company or any other Subsidiary of the
Company except (i) as set forth in the instrument evidencing
or the agreement governing Acquired Indebtedness of any
acquired entity which becomes a Subsidiary of the Company,
provided, that any restriction or encumbrance under such
instrument or agreement existed at the time of acquisition,
was not put in place in anticipation of such acquisition,
and is not applicable to any Person, other than the Person
or property or assets of the Person so acquired; (ii) as set
forth in, or permitted by, the Master Indenture, the Notes
and the Company Order; (iii) customary provisions
restricting subletting or assignment of any lease or license
of the Company or any Subsidiary of the Company; (iv) any
encumbrance or restriction arising under applicable law;
(v) any encumbrance or restriction arising under
indebtedness or other agreements existing on the date of
original issuance of the Notes; (vi) any restrictions with
respect to a Subsidiary of the Company imposed pursuant to
an agreement that has been entered into for the sale or
disposition of the stock, business, assets or properties of
such Subsidiary; (vii) any encumbrance or restriction
arising under the terms of purchase money obligations, but
only to the extent such purchase money obligations restrict
or prohibit the transfer of the property so acquired;
(viii) any encumbrance or restriction arising under
customary non-assignment provisions in installment purchase
contracts; (ix) any encumbrance or restriction on the
ability of any Subsidiary to transfer any of its property
acquired after the date hereof to the Company or any
Subsidiary that is required by a lender to, or purchaser of
any indebtedness of, such Subsidiary in connection with a
financing of the acquisition of such property (including
with respect to the purchase of asset portfolios and
pursuant to the underwriting or origination of mortgage
loans) by such Subsidiary; and (x) any encumbrance or
restriction pursuant to any agreement that extends,
refinances, renews or replaces any agreement described in
the foregoing clauses (i) through (ix).
(g) The Company shall not, and shall not permit any of
its Material Subsidiaries to, enter into any transaction (or
series of related transactions), including, without
limitation, any loan, advance, guarantee or capital
contribution to, or for the benefit of, or any sale,
purchase, lease, exchange or other disposition of any
property or the rendering of any service, or any other
direct or indirect payment, transfer or other disposition (a
"Transaction"), involving payments in excess of $60,000,
with any Affiliate of the Company (other than a wholly-owned
Subsidiary), on terms and conditions less favorable to the
Company or such Material Subsidiary, as the case may be,
than would be available at such time in a comparable
Transaction in arm's length dealings with an unrelated
Person as determined by the Board of Directors.
The provisions of the immediately preceding paragraph
will not apply to:
(1) Restricted Payments otherwise permitted
pursuant to the Master Indenture and this Officer's
Certificate and Company Order;
(2) fees and compensation (including amounts paid
pursuant to employee benefit plans) paid to, and
indemnity provided on behalf of, officers, directors,
employees or consultants of the Company or any
Subsidiary, as determined by the Board of Directors or
the senior management thereof in the exercise of their
reasonable business judgment; or
(3) payments for goods and services purchased in
the ordinary course of business on an arms-length
basis.
(h) The Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, Incur,
assume or suffer to exist any lien, pledge, charge or other
encumbrance ("Lien") that secures obligations in respect of
any Subordinated Debt or Junior Debt on any asset or
property of the Company or such Subsidiary (including the
capital stock of any such Subsidiary), or any income or
profits therefrom, or assign or convey any right to receive
income therefrom, unless the Notes are equally and ratably
secured with the obligations so secured (or senior to, in
the event the Lien relates to Junior Debt) until such time
as such obligations are no longer secured by a Lien.
13. The Notes shall be issued in denominations of $1,000 and any
integral multiple thereof.
14. The Notes shall be denominated, and payments of principal of
and any premium and interest on the Notes shall be made, in the
currency of the United States of America.
15. The Notes shall be subject to the events of default
specified in Section 501, paragraphs (1) through (8), of the
Master Indenture.
16. The portion of the principal amount of the Notes which shall
be payable upon declaration of acceleration of Maturity thereof
pursuant to Section 502 of the Master Indenture shall be the
entire principal amount thereof.
17. The Notes shall initially be issued as book-entry notes in
the form of one or more fully registered global securities which
will be deposited with, or on behalf of, The Depository Trust
Company, as depositary ("DTC"), and registered in the name of
DTC's nominee. Beneficial interests in the Notes will be shown
on, and transfers thereof will be effected only through, records
maintained by DTC and its participants. Except as described in
the Master Indenture, Notes in definitive certificated form shall
not be issuable to any Person other than DTC and such global
security may not be exchanged for Notes registered in the name
of, nor may any transfer of such global security be registered
to, any Person other than DTC or its nominee.
18. The Notes shall be governed by the defeasance provisions of
Section 403 and any other applicable sections of the Master
Indenture.
19. The Notes shall be issued in fully registered form only,
without coupons.
20. The Notes shall be unsecured obligations of the Company and
shall be subordinated in right of payment to the prior payment in
full of all Senior Debt to the extent provided in the Master
Indenture. Each Holder, by accepting delivery of a Note, agrees
to such subordination. The Notes shall be pari passu in right of
payment with the Company's 10% Senior Subordinated Notes due 2004
and the Company's 10% Senior Subordinated Notes due 2003.
1.
B. Establishment of Form of Note Pursuant to Section 201 of the
Master Indenture.
The Company hereby establishes, pursuant to Section 201 of
the Master Indenture, that the Notes shall be substantially in
the form attached as Exhibit A hereto.
C. Order for Authentication and Delivery of Notes Pursuant to
Section 303 of the Master Indenture.
Pursuant to Section 303 of the Master Indenture, the Company
hereby orders that the Trustee shall authenticate and deliver to
DTC the global securities representing the Notes delivered by the
Company to the Trustee, as provided in Section 303 of the Master
Indenture.
D. Compliance.
The undersigned have read the pertinent sections of the
Master Indenture, including the related definitions contained
therein. The undersigned have examined the resolutions adopted
by the Board of Directors of the Company and the Pricing
Committee of the Company's Board of Directors. In the opinion of
the undersigned, the undersigned have made such examination or
investigation as is necessary to enable the undersigned to
express an informed opinion as to whether or not the conditions
precedent to the establishment of (i) a series of Securities,
(ii) the forms of such series of Securities and (iii) the
procedures for the authentication and delivery of such series of
Securities contained in the Master Indenture have been complied
with. In the opinion of the undersigned, such conditions have
been complied with.
Dated as of: February 23, 1998
AMRESCO, INC.
By:
Robert H. Lutz, Jr.
Chairman of the Board and
Chief Executive Officer
By:
Barry L. Edwards
Executive Vice President and
Chief Financial Officer
EXHIBIT A
FORM OF NOTE
REGISTERED No. 1998A-2
AMRESCO, INC.
9.875% Series 1998-A, Senior Subordinated Notes due 2005
Registered Principal Amount: $_______________
CUSIP No.: 031909AE4
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the Company (as defined below) or its
agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in
such other name as requested by an authorized representative of
DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL since the registered owner
hereof, Cede & Co., has an interest herein.
This Note is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name
of Cede & Co., as a nominee for DTC. This Note is exchangeable
for Notes registered in the name of a Person other than DTC or
its nominee only in the limited circumstances described in the
Indenture, and no transfer of this Note (other than a transfer of
this Note as a whole by DTC to a nominee of DTC or by any nominee
of DTC to DTC or another nominee of DTC) may be registered except
in such limited circumstances.
AMRESCO, INC., a corporation duly organized and existing
under the laws of Delaware (herein called the "Company", which
term includes any successor Person under the Indenture (as such
term is defined on the reverse hereof)), for value received,
hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of ______________________ ($__________) on
March 15, 2005, and to pay interest thereon semi-annually on
March 15 and September 15 of each year (each an "Interest Payment
Date"), from February 27, 1998, or from the most recent Interest
Payment Date to which interest has been paid or duly provided
for, commencing September 15, 1998, at the rate of 9.875% per
annum, until the principal hereof is paid or made available for
payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in
such Indenture, be paid to the Person in whose name this Note is
registered at the close of business on the first day of the month
(whether or not a Business Day) in which the relevant Interest
Payment Date occurs. If any Interest Payment Date does not fall
on a Business Day, any interest payment due on such Interest
Payment Date shall be made on the next succeeding Business Day
with the same force and effect as if made on such Interest
Payment Date, and no interest shall be payable on such interest
payment for the period from and after such Interest Payment Date
through the date of such payment. Any interest on this Note that
is not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such date and may either be
paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to holders
of the Notes not less than 10 days prior to such Special Record
Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on
which the Notes may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the
Indenture.
Payment of the principal of (and premium, if any) and any
interest due on this Note will be made at the office or agency of
the Company maintained for that purpose in same day funds, in the
City of Columbus, Ohio or New York, New York in such coin or
currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.
So long as DTC or its nominee, Cede & Co., is the sole registered
Holder of this Note, such payments will be made by the Trustee
directly to DTC or to such nominee.
Reference is hereby made to the further provisions of this
Note set forth below, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee referred to below by
manual signature, this Note shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument
to be duly executed under its corporate seal.
Dated: February 27, 1998 AMRESCO, INC.
By:
Barry L. Edwards
Executive Vice President and
Chief Financial Officer
Attest:
L. Keith Blackwell, Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated
therein and issued pursuant to the within-mentioned Indenture.
Bank One, N.A., as Trustee
By:
Authorized Signatory
AMRESCO, INC.
9.875% Series 1998-A Senior Subordinated Notes, due 2005
This Note is one of a duly authorized issue of securities of
the Company (the "Securities") issued and to be issued in one or
more series under a Subordinated Notes Indenture dated as of
March 1, 1997, between the Company and Bank One, N.A., as Trustee
(the "Trustee," which term includes any successor trustee under
the Subordinated Notes Indenture), as supplemented by an
Officers' Certificate and Company Order dated as of February 23,
1998, pursuant to such Subordinated Notes Indenture establishing
the Notes (such Subordinated Notes Indenture, as supplemented by
such Officer's Certificate and Company Order, being herein called
the "Indenture"), to which Indenture reference is hereby made for
a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and
the Holders of the Notes and of the terms upon which the Notes
are, and are to be, authenticated and delivered. This Security
is one of the series designated as 9.875% Series 1998-A Senior
Subordinated Notes due 2005 (the "Notes"), limited in aggregate
principal amount to $350,000,000. By the terms of the Indenture,
additional Securities of other separate series, which may vary as
to date, amount, Stated Maturity, interest rate or method of
calculating the interest rate and in other respects as therein
provided, may be issued in an unlimited principal amount.
The indebtedness evidenced by the Notes is, to the extent
and in the manner provided in the Indenture, subordinate and
subject in right of payment to the prior payment of specified
obligations to holders of Senior Debt, as defined in the
Indenture, and this Note is issued subject to such provisions and
each Holder of this Note, by accepting the same, agrees to and
shall be bound by such provisions and authorizes the Trustee, on
such Holder's behalf, to take such action as may be necessary or
appropriate to effectuate the subordination as provided in the
Indenture and appoints the Trustee his attorney-in-fact for such
purpose.
As set forth in, and subject to, the provisions of the
Indenture, no Holder of any Note of this series will have any
right to institute any proceeding, judicial or otherwise, with
respect to the Indenture, or for the appointment of a receiver or
trustee, or for any other remedy under the Indenture, unless such
Holder shall have previously given to the Trustee written notice
of a continuing Event of Default with respect to the Notes, the
Holders of not less than 25% in principal amount of the
Outstanding Notes of this series shall have made written request
to the Trustee to institute proceedings in its own name as
Trustee, furnished the Trustee reasonable indemnity, and within
60 days the Trustee shall not have received from the Holders of a
majority in principal amount of the Outstanding Notes a direction
inconsistent with such request and shall have failed to institute
such proceeding; provided, however, that such limitations do not
apply to a suit instituted by the Holder hereof for the
enforcement of payment of the principal of (and premium, if any)
and interest on this Note on or after the respective due dates
expressed herein.
The Notes are subject to redemption, at the Company's
option, at any time in whole, or from time to time in part, on or
after March 15, 2002, and prior to maturity, upon not less than
30 nor more than 60 days' prior notice mailed by first class mail
to each Holder's last address as it appears on the Security
Register, at the following redemption prices (expressed as a
percentage of principal amount), plus accrued and unpaid interest
(if any) to the date of redemption (subject to the right of
Holders of record on the relevant record date that is on or prior
to the redemption date to receive interest due on an Interest
Payment Date), if redeemed during the 12-month period commencing
March 15, of the years set forth below:
Redemption Price
2002 104.938%
2003 102.469%
2004 and thereafter 100.000%
The Notes are not subject to any sinking fund.
In accordance with the terms of the Indenture, upon the
occurrence of a Repurchase Event, the Holder of this Note shall
have the right, at such Holder's option, to require the Company
to purchase, and upon exercise of such right, the Company shall
purchase, all or any part of this Note on the date that is 30
days after the date the Company gives notice of the Repurchase
Event at a price equal to 100% of the principal amount thereof,
together with accrued and unpaid interest; provided that if the
Repurchase Event is a Change of Control of the Company, the price
will be equal to 101% of the principal amount thereof, together
with accrued and unpaid interest.
In the event of redemption of this Note in part only, a new
Note or Notes of like tenor of an authorized denomination for the
unredeemed portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof, and, in the event of
transfer or exchange, a new Note or Notes of like tenor and for a
like aggregate principal amount will be issued to the Holder, in
the case of exchange, or the designated transferee or
transferees, in the case of transfer.
If an Event of Default with respect to Notes shall occur and
be continuing, the principal of the Notes may (subject to the
conditions set forth in the Indenture) be declared due and
payable in the manner and with the effect provided in the
Indenture.
The Indenture contains provisions for defeasance at any time
of the Company's obligations in respect of (i) the entire
indebtedness of this Note or (ii) certain restrictive covenants
with respect to this Note, in each case upon compliance with
certain conditions set forth therein.
The Indenture permits, with exceptions as therein provided,
the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the
Securities of each series to be affected under the Indenture at
any time by the Company and the Trustee with the consent of the
Holders of not less than a majority in aggregate principal amount
of the Securities at the time Outstanding of each series to be
affected and, for certain purposes, without the consent of the
Holders of any Securities at the time Outstanding. The Indenture
also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities of
each series at the time Outstanding, on behalf of the Holders of
all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequence. Any such
consent or waiver by the Holder of this Note shall bind such
Holder and every future Holder of this Note and of any Note
issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not notation of such consent
or waiver is made upon this Note.
No reference herein to the Indenture and no provision of
this Note or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of (and premium, if any) and interest on
this Note at the times, place and rate, and in the coin or
currency, herein prescribed.
The Notes are issuable only in registered form, without
coupons, in denominations of $1,000 and any amount in excess
thereof which is an integral multiple of $1,000. As described in
the Indenture, the Notes may be issued as book-entry notes in the
form of one fully registered Global Security bearing the legend
specified in the Indenture regarding certain restrictions on
registration of transfer and exchange, deposited with, or on
behalf of, DTC, and registered in the name of DTC's nominee. As
provided in the Indenture, and subject to certain limitations
(including additional limitations in the event that this Note is
a Global Security) therein set forth, Notes are exchangeable for
a like aggregate principal amount of Notes and of like tenor of a
different authorized denomination, as requested by the Holder
surrendering the same.
As provided in the Indenture and subject to certain
limitations therein set forth (including additional limitations
in the event that this Note is a Global Security), the transfer
of this Note is registrable in the Security Register, upon
surrender of this Note for registration of transfer at the office
or agency of the Company in any place where the principal of (and
premium, if any) and interest on Note are payable, duly endorsed
by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or such Holder's attorney duly
authorized in writing and thereupon one or more new Notes of like
tenor of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or
transferees.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Prior to due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Note is
registered in the Security Register as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the
Company, the Trustee nor any such agent shall be affected by
notice to the contrary.
The Notes shall be governed by and construed in accordance
with the laws of the State of Texas.
All terms used in this Note which are defined in the
Indenture shall have the meanings assigned to them in the
Indenture.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns,
and transfers unto
(Name, Address, and Taxpayer Identification Number of Assignee)
this Note and all rights thereunder, hereby irrevocably
constituting and appointing_______________________________attorney
to transfer this Note on the books of the Company with full
power of substitution in the premises.
Dated:
Signature Guaranteed: (Signature)
Notice: This signature on this
assignment must correspond with
the name as written upon the
face of this Note, in every
particular, without alteration
or enlargement or any change
whatsoever.
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Sections 3.7 or 3.9 of the Indenture, check
the box:
o
If you want to elect to have only part of this Security
purchased by the Company pursuant to Sections 3.7 or 3.9 of the
Indenture, state the amount in principal amount (must be integral
multiple of $1,000): $__________
Date: Your Signature:
(Sign exactly as your name appears on the
other side of the Security)
Signature Guarantee:
(Signature must be guaranteed)
The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations
and credit unions with membership in an approved signature
guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15.
FIRST AMENDMENT TO OFFICE LEASE
This First Amendment to Office Lease ("Amendment") is
effective as of the _____ day of July, 1996, by and between K-P
PLAZA LIMITED PARTNERSHIP, a Texas limited partnership
("Landlord"), and AMRESCO, INC., a Delaware corporation
("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord and Tenant have heretofore entered into
that certain Office Lease dated February 9, 1996 (the "Lease"),
covering certain premises (the "Premises") located on the entire
17th, 22nd, 23rd, 24th, and 25th floors and part of the 16th
floor of the North Tower in the Plaza of the Americas, 700 North
Pearl, Dallas, Texas;
WHEREAS, pursuant to Section 2 of the Lease, Tenant has the
right to increase or decrease the rentable square footage of the
Premises by up to fifteen percent (15%) upon written notice to
Landlord contemporaneously with the delivery of Tenant's Working
Drawings;
WHEREAS, Tenant has exercised its right to increase the
Premises by 5,327 rentable square feet of space located on the
16th floor of the North Tower (bringing the total square rentable
footage of the Premises to 130,606); and
WHEREAS, Tenant and Landlord desire to enter into this
Amendment to evidence the increase in the square footage of the
Premises pursuant to Section 2 of the Lease, all upon the terms
and conditions contained in this Amendment;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by both
Landlord and Tenant, the parties hereby agree as follows:
1. Definitions. All capitalized terms used herein and not
otherwise defined in this Amendment have the same meaning as in
the Lease.
2. Premises. The second sentence of Section 2 of the Lease is
deleted in its entirety and the following sentence is substituted
in lieu thereof:
Landlord and Tenant hereby stipulate and agree that:
(a) The rentable area of the Premises
(excluding the Storage Space) is 130,606
square feet, consisting of 23,965 square feet
on each of the 17th, 22nd, 23rd, 24th, and
25th floors of the North Tower and 10,781
square feet on the 16th floor of the North
Tower; and
(b) The rentable area of the Office Portion
is one million twenty-eight thousand
(1,028,000) square feet.
Additionally, the reference to the square footage of the
Premises contained in the definition of the term "Premises" in
the Basic Lease Information is increased from "125,279 rentable
square feet" to "130,606 rentable square feet."
3. Exhibit "A". Page A-1 of Exhibit "A" to the Lease is
deleted in its entirety and the Exhibit "A" Page A-1 attached to
this Amendment (showing the floor plan of the Premises with the
additional square footage added by this Amendment) is substituted
in lieu thereof.
4. Prepaid Rent. The amount of Prepaid Rent shown in the Basic
Lease Information is increased from $125,279.00 to $130,606.00.
At the time the Lease was executed, Tenant paid Landlord
$125,279.00 as Prepaid Rent pursuant to Section 4.a. of the
Lease. Contemporan-ously with the execution of this Amendment,
Tenant shall pay Landlord $5,327.00 -- such amount to be added to
the original Prepaid Rent increasing the total amount of the
Prepaid Rent to $130,606.00, all of which shall be applied to the
Basic Rental for November 1996.
5. Tenant's Proportionate Share. The definition of the term
"Tenant's Proportionate Share" in the Basic Lease Information is
deleted and the following definition of the term "Tenant's
Proportionate Share" is substituted in lieu thereof:
It is stipulated and agreed that for all purposes under
this Lease the Tenant's Proportionate Share is obtained
by dividing (i) the 130,606 rentable square feet in the
Premises (which includes a pro rata share of the Common
Areas) by (ii) the total rentable square feet in the
Office Portion.
6. Tenant Allowance. Landlord and Tenant acknowledge that the
Tenant Allowance under Exhibit "D" to the Lease equals $3,559,014
(based on the stipulated rentable area of the Premises being
130,606 square feet.)
7. Exhibit "E". Exhibit "E" to the Lease is deleted in its
entirety and the Exhibit "E" attached to this Amendment (showing
the Basic Rental applicable to the increased square footage of
the Premises) is substituted in lieu thereof.
8. Parking. Landlord and Tenant acknowledge that Tenant may
use 87 undesignated vehicular parking spaces in the Parking
Garage pursuant to Exhibit "G" to the Lease (based on the
stipulated rentable area of the Premises being 130,606 square
feet.)
9. Authority. Each individual signing below represents that
he/she has been duly authorized to execute and deliver this
Amendment and that same shall be binding on Landlord and Tenant
(as applicable) on whose behalf he/she is signing.
10. Entire Agreement. This Amendment embodies the entire
agreement between the parties with respect to the subject matter
hereof and cannot be varied except by the written agreement of
the parties.
11. Successors and Assigns. All of the terms, covenants,
provisions, and conditions of this Amendment are hereby made
binding on the executors, heirs, administrators, successors, and
permitted assigns of both parties hereto.
12. Interpretation. The parties hereto acknowledge that each
party and its counsel has reviewed this Amendment and that the
normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party will not be
employed in the interpretation of this Amendment.
13. Severability. If any provision of this Amendment is held to
be illegal, invalid, or unenforceable under present or future
laws, such provision(s) shall be fully severable, and this
Amendment, and the remaining provisions of this Amendment shall
remain in full force and effect and not be affected by the
illegal, invalid, or unenforceable provision(s) or by its
severance from this Amendment, provided that both parties may
still effectively realize the complete benefit of the
transaction.
14. Headings. The captions used in connection with the sections
of this Amendment are for convenience only and shall not be
deemed to construe or limit the meaning of the language of this
Amendment.
15. Lease. As amended hereby, the Lease shall continue in full
force and effect and is ratified and confirmed by Landlord and
Tenant. All of the terms and conditions of the Lease (including,
without limitation, the provisions relating to the payment of
Basic Rental and the Tenant Allowance and the use of parking
spaces in the Parking Garage) are applicable to the Premises, as
increased by this Amendment.
1. 16. Counterparts. This Amendment may be executed in
multiple counterparts and signature pages from any counterpart
may be appended to any other counterpart. All counterparts shall
construe a single, unified instrument.
EFFECTIVE as of the date first set forth above.
LANDLORD: TENANT:
K-P PLAZA LIMITED PARTNERSHIP, AMRESCO, INC.,
a Texas limited partnership a Delaware corporation
By: K-P Plaza Dallas, Inc.,
its general partner By:
Title:
By:
Title:
Second Amendment to Lease Agreement
This Second Amendment to Lease Agreement ("Second
Amendment") is effective as of the 27th day of May, 1997, between
K-P Plaza Limited Partnership, a Texas limited partnership
("Landlord"), and AMRESCO, Inc., a Delaware corporation
("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord and Tenant entered into that certain
Office Lease Agreement dated February 9, 1996, as amended by that
certain First Amendment to Office Lease dated July 17, 1996
("First Amendment") (such Office Lease Agreement, as amended by
the First Amendment, is hereafter referred to as the "Lease"),
covering approximately 130,606 rentable square feet of area
("Original Premises") located on the entire 17th, 22nd, 23rd,
24th, and 25th floors and part of the 16th floor as more
particularly described in the Lease and commonly referred to as
Suite 2500 in the office building located at 700 North Pearl
Street (the "Building") within the development commonly known as
the Plaza of the Americas situated on Blocks 257 and 258 in the
City of Dallas, Texas;
WHEREAS, the Lease expires on October 31, 2006; and
WHEREAS, Landlord and Tenant desire to amend the Lease to,
among other things, temporarily expand the Original Premises by
an additional 3,858 rentable square feet of area on the 16th
floor of the Building as shown on EXHIBIT "A" to this Second
Amendment ("Temporary Premises"), all as more fully set forth in
this Second Amendment;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged,
Landlord and Tenant hereby agree to amend the Lease as follows:
1. Definitions. Unless otherwise defined, all defined terms in
this Second Amendment have the same meaning as in the Lease.
2. Premises. Beginning on May 27, 1997, and continuing only
until and including December 31, 1997, the Premises as described
in the Basic Office Lease Information incorporated into the Lease
will increase by 3,858 rentable square feet of area so that the
Premises will total 134,464 rentable square feet of area as
depicted on Exhibit "A" to this Second Amendment. From and after
January 1, 1998, the Premises will revert to the Original
Premises, and Tenant shall have no further right to occupy the
Temporary Premises. If Tenant fails to vacate the Temporary
Premises by December 31, 1997, then Tenant shall be a tenant at
will with respect to the Temporary Premises, and the provisions
of Section 22 of the Lease entitled "Holding Over" will apply to
Tenant's occupancy of the Temporary Premises.
3. Term. The Term of the Lease remains unchanged by this
Second Amendment.
4. Basic Rental. Beginning on May 27, 1997, and continuing
only until and including December 31, 1997, Tenant shall pay
Landlord Basic Rental for the Temporary Premises in the manner
provided in Section 4.a of the Lease at the annual rate of $14.50
per rentable square foot of area within the Temporary Premises
(i. e., $4,661.75 per month). Beginning on May 27, 1997, and
continuing only until and including December 31, 1997, Tenant, in
addition to the Basic Rental set forth above, shall pay Landlord
in the manner provided for in the Lease all other amounts due
under the Lease applicable to the Temporary Premises, including,
without limitation, the amounts set forth in Section 4.c, 4.d,
and 4.e of the Lease. Nothing in this Second Amendment affects
the payment of Basic Rental or other sums due under the Lease for
the Original Premises, the payment of which is governed by the
terms of the Lease.
5. Tenant Improvements; As is. Tenant agrees to accept the
Temporary Premises in its "as is" condition as of the date of
this Second Amendment without any representation or warranty from
Landlord with respect to its condition or its suitability for any
particular purpose. Landlord has no obligation to construct any
tenant improvements within the Temporary Premises, and any tenant
improvements constructed therein by Tenant will be subject to all
terms and provisions of the Lease, including, without limitation,
the provisions of Section 8 thereof.
6. Brokerage. Tenant warrants that it has had no dealings with
any broker or agent in connection with the negotiation or
execution of the Lease or this Second Amendment other than with
Prentiss Properties Limited, Inc., and both Landlord and Tenant
agree to indemnify each other and hold each other harmless from
and against any and all costs (including investigation and
defense costs) and expenses, claims for commissions or other
payments by any broker or agent who alleges to have performed
services on behalf of the indemnifying party.
7. Management Company. Tenant acknowledges that Prentiss
Properties Limited, Inc. is the Building's management and leasing
agent.
8. Authority. Each individual signing below represents that
he/she has been duly authorized to execute and deliver this
Second Amendment and that same shall be binding on Landlord and
Tenant (as applicable) on whose behalf he/she is signing.
9. Entire Agreement. This Second Amendment, together with the
provisions of the Lease, embody the entire agreement between the
parties with respect to the subject matter hereof and cannot be
varied except by written agreement of the parties.
10. Successors and Assigns. All of the terms, covenants,
provisions, and conditions of this Second Amendment are hereby
made binding on the executors, heirs, administrators, successors,
and permitted assigns of both parties hereto.
11. Headings. The captions used in connection with the sections
of this Second Amendment are for convenience only and shall not
be deemed to construe or limit the meaning of the language of
this Second Amendment.
12. Conflict. In the event of any conflict between the
provisions of this Second Amendment and the provisions of the
Lease, the provisions of this Second Amendment will govern and
control.
13. Lease. As amended hereby, the Lease will govern the
Temporary Premises and will continue in full force and effect and
is ratified and confirmed by Landlord and Tenant. From and after
the date of this Second Amendment, the term "Lease", when used in
the Lease, will mean the Lease, as further amended by this Second
Amendment.
14. Counterparts. This Second Amendment may be executed in
multiple counterparts and signature pages from any counterpart
may be appended to any other counterpart. All counterparts shall
constitute a single, unified instrument.
Witness the Execution Hereof, effective as of the date first
set forth above.
AMRESCO, Inc., a Delaware corporation
By:
Title:
K-P Plaza Limited Partnership,
a Texas limited partnership
By: K-P Plaza Dallas, Inc.,
its general partner
By:
Title:
Third Amendment to Lease Agreement
This Third Amendment to Lease Agreement ("Third Amendment")
is effective as of the day of September, 1997,
between K-P Plaza Limited Partnership, a Texas limited
partnership ("Landlord"), and AMRESCO, Inc., a Delaware
corporation ("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord and Tenant entered into that certain
Office Lease Agreement dated February 9, 1996, as amended by that
certain First Amendment to Office Lease dated July 17, 1996
("First Amendment"), covering approximately 130,606 rentable
square feet of area ("Original Premises") located on the entire
17th, 22nd, 23rd, 24th, and 25th floors and part of the 16th
floor as more particularly described in the Lease and commonly
referred to as Suite 2500 in the office building located at 700
North Pearl Street (the "Building") within the development
commonly known as the Plaza of the Americas situated on Blocks
257 and 258 in the City of Dallas, Texas;
WHEREAS, Landlord and Tenant entered into that Second
Amendment to Lease Agreement dated May 27, 1997 ("Second
Amendment"), whereby Tenant leased 3,858 rentable square feet of
area located on the 16th floor of the Building on a temporary
basis (the Temporary Space"), all as set forth in the Second
Amendment (such Office Lease Agreement, as amended by the First
Amendment and Second Amendment, is hereafter referred to as the
"Lease")
WHEREAS, the Lease expires on October 31, 2006; and
WHEREAS, Landlord and Tenant desire to amend the Lease to,
among other things, temporarily expand the Premises by an
additional 3,128 rentable square feet of area common known as
Suite 1630 on the 16th floor of the Building as shown on EXHIBIT
"A" to this Third Amendment ("Additional Temporary Premises"),
all as more fully set forth in this Third Amendment;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged,
Landlord and Tenant hereby agree to amend the Lease as follows:
1. Definitions. Unless otherwise defined, all defined terms in
this Third Amendment have the same meaning as in the Lease.
2. Premises. Beginning on September 15, 1997, and continuing
only until and including March 31, 1998, the Premises as
described in the Basic Office Lease Information incorporated into
the Lease will increase by 3,128 rentable square feet of area so
that the Premises will total 137,592 rentable square feet of area
as depicted on Exhibit "A" to this Third Amendment. From and
after April 1, 1998, the Premises will revert to the Original
Premises, and Tenant shall have no further right to occupy the
Additional Temporary Premises. If Tenant fails to vacate the
Additional Temporary Premises by March 31, 1998, then Tenant
shall be a tenant at will with respect to the Additional
Temporary Premises, and the provisions of Section 22 of the Lease
entitled "Holding Over" will apply to Tenant's occupancy of the
Additional Temporary Premises.
3. Term. The Term of the Lease remains unchanged by this Third
Amendment.
4. Basic Rental. Beginning on September 15, 1997, and
continuing only until and including March 31, 1998, Tenant shall
pay Landlord Basic Rental for the Additional Temporary Premises
in the manner provided in Section 4.a of the Lease at the annual
rate of $16.00 per rentable square foot of area within the
Additional Temporary Premises (i. e., $4,170.67 per month).
Beginning on September 15, 1997, and continuing only until and
including March 31, 1998, Tenant, in addition to the Basic Rental
set forth above, shall pay Landlord in the manner provided for in
the Lease all other amounts due under the Lease applicable to the
Additional Temporary Premises, including, without limitation, the
amounts set forth in Section 4.c, 4.d, and 4.e of the Lease.
Nothing in this Third Amendment affects the payment of Basic
Rental or other sums due under the Lease for the Original
Premises or the Temporary Space, the payment of which is governed
by the terms of the Lease.
5. Tenant Improvements; As is. Tenant agrees to accept the
Additional Temporary Premises in its "as is" condition as of the
date of this Third Amendment without any representation or
warranty from Landlord with respect to its condition or its
suitability for any particular purpose. Landlord has no
obligation to construct any tenant improvements within the
Additional Temporary Premises, and any tenant improvements
constructed therein by Tenant will be subject to all terms and
provisions of the Lease, including, without limitation, the
provisions of Section 8 thereof.
6. Brokerage. Tenant warrants that it has had no dealings with
any broker or agent in connection with the negotiation or
execution of the Lease or this Third Amendment other than with
Prentiss Properties Limited, Inc., and both Landlord and Tenant
agree to indemnify each other and hold each other harmless from
and against any and all costs (including investigation and
defense costs) and expenses, claims for commissions or other
payments by any broker or agent who alleges to have performed
services on behalf of the indemnifying party.
7. Management Company. Tenant acknowledges that Prentiss
Properties Limited, Inc. is the Building's management and leasing
representative.
8. Authority. Each individual signing below represents that
he/she has been duly authorized to execute and deliver this Third
Amendment and that same shall be binding on Landlord and Tenant
(as applicable) on whose behalf he/she is signing.
9. Entire Agreement. This Third Amendment, together with the
provisions of the Lease, embody the entire agreement between the
parties with respect to the subject matter hereof and cannot be
varied except by written agreement of the parties.
10. Successors and Assigns. All of the terms, covenants,
provisions, and conditions of this Third Amendment are hereby
made binding on the executors, heirs, administrators, successors,
and permitted assigns of both parties hereto.
11. Headings. The captions used in connection with the sections
of this Third Amendment are for convenience only and shall not be
deemed to construe or limit the meaning of the language of this
Third Amendment.
12. Conflict. In the event of any conflict between the
provisions of this Third Amendment and the provisions of the
Lease, the provisions of this Third Amendment will govern and
control.
13. Lease. As amended hereby, the Lease will govern the
Additional Temporary Premises and will continue in full force and
effect and is ratified and confirmed by Landlord and Tenant.
From and after the date of this Third Amendment, the term
"Lease", when used in the Lease, will mean the Lease, as further
amended by this Third Amendment.
14. Counterparts. This Third Amendment may be executed in
multiple counterparts and signature pages from any counterpart
may be appended to any other counterpart. All counterparts shall
constitute a single, unified instrument.
Witness the Execution Hereof, effective as of the date first
set forth above.
AMRESCO, Inc., a Delaware corporation
By:
Title:
K-P Plaza Limited Partnership,
a Texas limited partnership
By: K-P Plaza Dallas, Inc.,
its general partner
By:
Title:
Lease Expansion and Fourth Amendment to Lease Agreement
This Lease Expansion and Fourth Amendment to Lease Agreement
("Fourth Amendment") is entered into as of the _____ day of
, 1997, between KAB Plaza Partners, L. P., a Texas limited
partnership ("Landlord"), and AMRESCO, INC., a Delaware
corporation ("Tenant").
W I T N E S S E T H :
WHEREAS, K-P Plaza Limited Partnership, a Texas limited
partnership ("K-P Plaza"), and Tenant entered into that certain
Office Lease dated February 9, 1996, as amended by that certain
First Amendment to Office Lease dated July 17, 1996 ("First
Amendment"), covering approximately 130,606 rentable square feet
of area ("Original Premises") located on the entire 17th, 22nd,
23rd, 24th, and 25th floors and part of the 16th floor as more
particularly described in the Lease and commonly referred to as
Suite 2400 in the office building located at 700 North Pearl
Street (the "North Tower") within the development commonly known
as the Plaza of the Americas situated on Blocks 257 and 258 in
the City of Dallas, Texas;
WHEREAS, K-P Plaza and Tenant entered into that Second
Amendment to Lease Agreement dated May 27, 1997 ("Second
Amendment"), whereby Tenant leased 3,858 rentable square feet of
area located on the 16th floor of the North Tower on a temporary
basis until December 31, 1997 (the "Temporary Premises"), all as
set forth in the Second Amendment;
WHEREAS, K-P Plaza and Tenant entered into that Third
Amendment to Lease Agreement dated September 22, 1997 ("Third
Amendment"), whereby Tenant leased an additional 3,128 rentable
square feet of area located on the 16th floor of the North Tower
on a temporary basis until March 31, 1998 ("Additional Temporary
Premises"), all as set forth in the Third Amendment (such Office
Lease Agreement, as amended by the First, Second, and Third
Amendments, is hereafter referred to as the "Lease");
WHEREAS, Landlord is the successor-in-interest to K-P Plaza
and has assumed all of K-P Plaza's obligations under the Lease;
and
WHEREAS, Landlord and Tenant desire to amend the Lease to,
among other things, expand the Premises (as described in the
Basic Office Lease Information incorporated into the Lease) by an
additional 32,139 rentable square feet of area on the 16th and
19th floors of the North Tower as shown on Exhibit "A" to this
Fourth Amendment, all as more fully set forth in this Fourth
Amendment, which areas also shall replace the areas subject to
Tenant's expansion option set forth in Exhibit "K" of the Lease;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged,
Landlord and Tenant hereby agree to amend the Lease as follows:
1. Definitions. Unless otherwise defined, all defined terms in
this Fourth Amendment have the same meaning as in the Lease.
2. Premises. Beginning on January 1, 1998, the Premises as
described in the Basic Office Lease Information incorporated into
the Lease will expand to include the 32,139 rentable square feet
of area located on the 16th and 19th floors of the North Tower as
shown on Exhibit "A" to this Fourth Amendment ("Expansion
Premises"). Thereafter, the Premises as described in the Basic
Office Lease Information incorporated into the Lease will total
162,745 rentable square feet of area -- which Premises will
include the space on the 16th floor of the North Tower that
presently consists of the Temporary Premises and the Additional
Temporary Premises. Notwithstanding the terms of the Second and
Third Amendments to the contrary, on January 1, 1998, the
Temporary Premises and the Additional Temporary Premises will
become part of the Premises as described in the Basic Office
Lease Information incorporated into the Lease, and the lease of
such space will be governed by the terms of this Fourth Amendment
and not by the terms of the Second or Third Amendment. Upon
delivery of all of the Expansion Premises, Tenant shall execute
and deliver to Landlord, within 10 days after Landlord has
requested same, a letter confirming (i) the Tenant's acceptance
of the Expansion Premises, (ii) the Rent Commencement Date for
Expansion (as hereafter defined), and (iii) that Landlord has
performed all of its obligations with respect to the Expansion
Premises.
3. Term. The Term of the Lease (i) remains unchanged by this
Fourth Amendment and (ii) applies to the Expansion Premises.
4. Basic Rental. Beginning on the date which is the earlier
of: (i) Tenant's occupancy of any portion of the Expansion
Premises for the conduct of business or (ii) March 1, 1998 (the
earlier of such dates being hereinafter referred to as the "Rent
Commencement Date for Expansion"), and continuing until the end
of the Term subject to the provisions of Section 2 of this Fourth
Amendment, the Basic Rental applicable to the Expansion Premises
is set forth in the following schedule and is payable in the
manner provided in Article 4 of the Lease:
Rental Rate per
Months Square Foot of Rent Due
Rentable Area of
Expansion Premises
Rent Commencement Date for $15.75 $42,182.44 per month
Expansion - October 31, 1998
Nov. 1, 1998 - Oct. 31, 1997 $16.00 $42,852.00 per month
Nov. 1, 1999 - Oct. 31, 2000 $16.25 $43,521.56 per month
Nov. 1, 2000 - Oct. 31, 2001 $16.50 $44,191.13 per month
Nov. 1, 2001 - Oct. 31, 2002 $16.75 $44,860.69 per month
Nov. 1, 2002 - Oct. 31, 2003 $17.00 $45,530.25 per month
Nov. 1, 2003 - Oct. 31, 2004 $17.25 $46,199.81 per month
Nov. 1, 2004 - Oct. 31, 2005 $17.50 $46,869.38 per month
Nov. 1, 2005 - Oct. 31, 2006 $17.75 $47,538.94 per month
The Basic Rental set forth above applicable to the Expansion
Premises includes Tenant's Proportionate Share of Basic Costs for
the calendar year commencing January 1, 1998, and ending December
31, 1998, but does not include Tenant's share of electrical and
other utility charges described in Section 4.c of the Lease and
elsewhere. In addition to the Basic Rental applicable to the
Expansion Premises set forth above, Tenant shall pay Landlord in
the manner provided for in the Lease all other amounts due under
the Lease applicable to the Original Premises and the Expansion
Premises, including, without limitation, (i) Tenant's share of
the Excess described in Exhibit "C" to the Lease for the years
after 1998, (ii) the Electrical Costs as set forth in Section 4.c
of the Lease, and (iii) the Basic Rental applicable to the
Original Premises set forth in Exhibit "E" of the First
Amendment. Except as otherwise expressly provided herein,
nothing in this Fourth Amendment effects the payment of Basic
Rental or other sums due under the Lease or its amendments. For
the purposes of calculating the Excess applicable to the
Expansion Premises under Exhibit "C" of the Lease, the cap on
Controllable Expenses applies, but the Expense Stop applicable to
the Expansion Premises shall be calculated using Basic Cost for
the calendar year 1998.
5. Tenant's Proportionate Share. Except for the adjustments
set forth in this Paragraph 5, Landlord and Tenant stipulate and
agree that for all purposes under this Lease, effective from and
after Rent Commencement Date for Expansion, the Tenant's
Proportionate Share is 15.565%. It is further stipulated and
agreed that for all purposes under this Lease, the Tenant's
Proportionate Share is obtained by dividing (i) the 162,745
rentable square feet in the Premises (which includes a pro rata
share of the Common Areas) by (ii) 1,045,551. The foregoing
numbers of rentable square feet are stipulations and establish a
material part of the economic basis for the execution of this
Lease by Landlord and shall not be adjusted unless the rentable
area of Premises is increased or decreased by the addition or
deletion of rentable area within the Buildings and an appropriate
amendment to this Lease is executed.
6. Tenant Improvements; As Is.
A. TENANT AGREES TO ACCEPT THE EXPANSION PREMISES IN ITS
"AS IS" CONDITION AS OF THE DATE OF THIS FOURTH AMENDMENT WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND BY LANDLORD, INCLUDING ANY
WARRANTY OF HABITABILITY OR FITNESS FOR ANY PARTICULAR USE.
Tenant shall construct all tenant improvements to the Expansion
Premises (the "Work") pursuant to plans and specifications to be
prepared and agreed upon by Landlord and Tenant (the "Plans").
Approval by Landlord of the Plans is not a representation or
warranty of Landlord that such drawings are adequate for any use,
purpose, or condition, or that such drawings comply with any
applicable law or code, but is merely the consent of Landlord to
the performance of the Work. All changes in the Work must
receive the prior written approval of Landlord, and in the event
of any such approved change Tenant shall, upon completion of the
Work, furnish Landlord with an accurate, reproducible "as-built"
plan (e.g., sepia) of the improvements as constructed, which plan
shall be incorporated into this Lease by this reference for all
purposes.
B. Tenant shall perform all Work using contractors
approved by Landlord in writing prior to the commencement of the
Work, which approval must not be unreasonably withheld or
delayed. Additionally, Landlord must approve in writing all
major subcontractors performing any portion of the Work involving
the structural, mechanical, electrical, and plumbing components
of the Work, which approval may be granted or withheld in
Landlord's sole discretion. Landlord must approve the
construction contract entered into by Tenant and its general
contractor, which approval shall not be unreasonably withheld,
conditioned or delayed, and such contract must provide for a 10%
retainage to be withheld by Tenant throughout the progress of the
Work and for the final payment to such contractor of such
retainage to be made no earlier than 30 days following the
completion of the Work. All Work must be performed in a good and
workmanlike manner that is free of defects and is in strict
conformance with the Plans and all applicable laws, ordinances,
regulations, and codes. The Work must be performed in such a
manner and at such times as to maintain harmonious labor
relations and not to interfere with or delay Landlord's other
contractors, the operation of the Buildings, and the occupancy
thereof by other tenants. All contractors and subcontractors
shall contact Landlord and schedule time periods during which
they may use Buildings' facilities in connection with the Work
(e.g., elevators, excess electricity, etc.)
C. Tenant shall bear the entire cost of performing the
Work (including, without limitation, design of the Work,
preparation of the Plans, and the payment of applicable taxes and
insurance costs) -- all of which costs are herein collectively
called the "Total Construction Costs"; provided, however, Tenant
will receive a construction allowance from Landlord equal to
$567,689.25 [representing the sum of: (i) $21.90 multiplied by
the first 10,000 rentable square feet of area within the
Expansion Premises (i. e., $219,000.00) and (ii) $15.75
multiplied by the 22,139 rentable square foot of area within the
balance of the Expansion Premises (i. e., $348,689.25)] (such sum
being the "Construction Allowance") for the sole purpose of
paying a portion of the Total Construction Costs. Landlord shall
pay the Construction Allowance to Tenant no more frequently than
once per month on or before 30 days following Landlord's receipt
of the following items from Tenant: (i) an Application and
Certificate for Payment (AIA Document G702) fully executed by
Tenant's architect, (ii) paid invoices from architects,
subcontractors, and suppliers evidencing the cost of performing
the Work, (iii) lien waivers from Tenant's general contractor and
all parties referenced in item (ii) above, and (iv) with respect
to the final payment of the Construction Allowance, a certificate
of occupancy from the appropriate governmental authority, if
applicable to the Work, or evidence of governmental inspection
and approval of the Work.
D. Tenant, its contractors, and their subcontractors
shall, at their sole expense, maintain in effect at all times
during the full term of the Work, insurance coverages with limits
not less than those set forth below with insurers licensed to do
business in Texas and acceptable to Landlord and under forms of
policies satisfactory to Landlord. None of the requirements
contained herein as to types, limits, and Landlord's approval of
insurance coverage to be maintained by the above-mentioned
parties are intended to and shall not in any manner limit or
qualify the liabilities and obligations assumed by Tenant under
the Lease.
Minimum Amounts
Coverage and Limits
1. Worker's Compensation
a) Workers' Compensation Statutory Limits
Employer's Liability $100,000
This policy shall contain a Waiver of Subrogation in favor of Landlord.
2. Commercial General Liability
a) Bodily Injury/Property Damage $500,000
each occurrence
or equivalent/$500,000
aggregate
This policy shall be on a form acceptable to Landlord,
endorsed to include Landlord as an additional insured during
the term of the contract, state that this insurance is
primary insurance as regards to any other insurance carried
by Landlord, and shall include the following coverages:
a) Premises/Operations
b) Independent Contractors
c) Completed Operations for a period of two years
following acceptance of contractor's work
d) Broad Form Contractual Liability in support of the
Indemnity section of this Lease.
e) Broad Form Property Damage
f) Personal Injury Liability with contractual and
employee exclusions removed
3. Comprehensive Automobile Liability
a) Bodily Injury $250,000 per person
$500,000 per occurrence
b) Property Damage $100,000 per occurrence
4. Umbrella Excess Liability Insurance
a) Bodily Injury/Property $5,000,000 per occurrence
$5,000,000 aggregate
5. Builder's Risk Policy
Unless otherwise provided, Tenant shall purchase and
maintain property insurance upon the Work at the site
to the full insurable value thereof. This insurance
shall include the interest of Landlord, Tenant,
contractor, and subcontractors in the Work and shall be
written on an all risk form.
The policy shall be written on an excess basis above
coverages as described in 1, 2, and 3 above, naming
Landlord as additional insured.
6. Contractor's Equipment Policy
Any such insurance policy covering contractor or its
subcontractor's equipment and tools against loss by
physical damage shall include an endorsement waiving
the insurer's right of subrogation against Landlord.
7. Tenant's architect and engineer shall, at their sole
expense, maintain in effect at all times during the
full term of the Work, insurance coverages with limits
not less than those set forth in 1, 2, and 3 above, as
well as professional liability insurance with a limit
of not less than $1,000,000 per occurrence and
$1,000,000 aggregate and with Landlord named as an
additional insured.
Evidence of the above coverages, represented by Certificates of
Insurance issued by the insurance carrier must be furnished to
Landlord prior to the contractor's starting work. Certificates
of Insurance shall specify the additional insured status
mentioned above as well as the Waivers of Subrogation. Such
Certificates of Insurance shall state that Landlord will be
notified in writing 30 days prior to cancellation, material
change, or renewal of insurance.
E. If a delay in the performance of the Work occurs (a)
because of any change by Tenant to the Plans, (b) because of any
specification by Tenant of materials or installations in addition
to or other than Landlord's standard finish-out materials, or (c)
if Tenant otherwise delays completion of the Work, then,
notwithstanding any provision to the contrary in this Lease,
Tenant's obligation to pay Rent with respect to the Expansion
Premises will commence on the scheduled Rent Commencement Date
for Expansion.
F. Landlord or its designee shall supervise the Work and
act as a liaison between the contractor and Tenant.
7. Parking. Effective on the Rent Commencement Date for
Expansion, in addition to Tenant's right to utilize certain
parking spaces in the Parking Garage as set forth in Exhibit "G"
to the Lease and so long as Tenant is not in material default
under this Lease (nor does any condition exists that with the
passage of time or the giving of notice, or both, will constitute
a default), Tenant is permitted (but not obligated to) utilize
twenty-two (22) additional undesignated parking space in the
Parking Garage, subject to such rates, terms, conditions and
regulations as are from time to time charged or applicable to
patrons of the Parking Garage. The current market rate being
charged patrons of the Parking Garage for undesignated parking
spaces is $115 a month per space. Except as otherwise set forth
in this Fourth Amendment, the terms of Exhibit "G" to the Lease
will apply to Tenant's use of such spaces.
8. Brokerage. Tenant warrants that it has had no dealings
with any broker or agent in connection with the negotiation or
execution of the Lease or this Fourth Amendment other than with
Prentiss Properties Limited, Inc. and Cushman & Wakefield of
Texas, Landlord shall pay such brokers all lease commissions
arising out of this Fourth Amendment pursuant to a separate
agreement. Both Landlord and Tenant agree to indemnify each
other and hold each other harmless from and against any and all
costs (including investigation and defense costs) and expenses,
claims for commissions or other payments by any broker or agent
who alleges to have performed services on behalf of the
indemnifying party.
9. Expansion Option Exhibit. Exhibit "K" of the Lease
entitled "Expansion Options" and all references thereto are
hereby deleted in their entirety and the following paragraph
substituted in lieu thereof:
So long as Tenant is not in material default under this
Lease (nor does any condition exists that with the
passage of time or the giving of notice, or both, will
constitute a default), Tenant shall have the one-time
option (the "Expansion Option") to increase the area of
the Premises by a minimum of 9,000 rentable square feet
and a maximum of 11,000 rentable square feet
("Expansion Option Space") located either (i) on a
floor in the North Tower contiguous to a floor
containing the then existing Premises or (ii) on the
same floor and adjacent to the then existing Premises -
- as such Expansion Option Space is designated by
Landlord and reasonably acceptable to Tenant. The
Expansion Option Space must be either (i) in one block
of contiguous space or (ii) in separate blocks of space
that, when combined, will total the Expansion Option
Space, and all of the Expansion Option Space is subject
to the renewal, expansion, or other rights of other
tenants as of the date of this Fourth Amendment.
Tenant may exercise the Expansion Option (if at all) by
delivery of written notice to Landlord no later than
January 1, 2003 (such deadline by which Tenant must
exercise the Expansion Option is hereinafter referred
to as the "Exercise Date"). In the event that Tenant
fails to timely exercise the Expansion Option, Tenant
shall have no further expansion rights; time being of
the essence with respect to Tenant's exercise thereof.
Following the exercise by Tenant of the Expansion
Option, Landlord shall deliver to Tenant possession of
the Expansion Option Space in its "AS IS" condition no
earlier than June 1, 2003, and no later than January
31, 2004 (such date of delivery hereinafter referred to
as the "Delivery Date for Expansion Option"). The
Basic Rental for the Expansion Option Space will
commence on the date which is sixty (60) days following
the Delivery Date for Expansion Option and will equal
the prevailing Market Rate (as defined in Exhibit "P"
to this Lease) at the Delivery Date for Expansion
Option, as adjusted in the manner provided in this
Lease. Prior to the Delivery Date for Expansion
Option, Landlord and Tenant shall join in executing and
delivering an amendment to the Lease clearly
identifying the location and rentable square footage of
the Expansion Option Space and specifying the Basic
Rental and other Rent payable with respect to the
Expansion Option Space. Except as set forth in this
exhibit, Tenant's lease of the Expansion Option Space
will otherwise be on the same terms and conditions as
are set forth in this Lease with the same Expiration
Date.
Tenant's rights under this Exhibit "K" shall terminate
if (a) this Lease or Tenant's right to possession of
the Premises is terminated, (b) Tenant assigns its
interest in this Lease without Landlord's consent, or
(c) Tenant sublets any portion of the Premises without
Landlord's consent.
10. Management Company. Tenant acknowledges that Prentiss
Properties Limited, Inc. is the Landlord's management and leasing
representative.
11. Authority. Each individual signing below represents
that he/she has been duly authorized to execute and deliver this
Fourth Amendment and that same shall be binding on Landlord and
Tenant (as applicable) on whose behalf he/she is signing.
12. Entire Agreement. This Fourth Amendment, together with
the provisions of the Lease, embody the entire agreement between
the parties with respect to the subject matter hereof and cannot
be varied except by written agreement of the parties.
13. Successors and Assigns. All of the terms, covenants,
provisions, and conditions of this Fourth Amendment are hereby
made binding on the executors, heirs, administrators, successors,
and permitted assigns of both parties hereto.
14. Headings. The captions used in connection with the
sections of this Fourth Amendment are for convenience only and
shall not be deemed to construe or limit the meaning of the
language of this Fourth Amendment.
15. Conflict. In the event of any conflict between the
provisions of this Fourth Amendment and the provisions of the
Lease, the provisions of this Fourth Amendment will govern and
control.
16. Lease. As amended hereby, the Lease will govern the
Expansion Premises and will continue in full force and effect and
is ratified and confirmed by Landlord and Tenant. From and after
the date of this Fourth Amendment, the term "Lease", when used in
the Lease, will mean the Lease, as further amended by this Fourth
Amendment.
17. Counterparts. This Fourth Amendment may be executed in
multiple counterparts and signature pages from any counterpart
may be appended to any other counterpart. All counterparts shall
constitute a single, unified instrument.
Witness the Execution Hereof, effective as of the date set
forth above.
AMRESCO, INC., a Delaware corporation
By:
Title:
KAB Plaza Partners, L. P.,
a Texas limited partnership
By: AB Sub II, Inc.,
its general partner
By:
Title:
THIRD AMENDED AND RESTATED LOAN AGREEMENT
THIS THIRD AMENDED AND RESTATED LOAN AGREEMENT is entered
into as of the 30th day of September, 1997, by and among AMRESCO,
INC., a Delaware corporation, and AMRESCO UK Holdings Limited, a
corporation formed under the laws of the United Kingdom, as
borrowers, and NationsBank of Texas, N.A., a national banking
association, for itself and as agent, Bank One, Texas, N.A., a
national banking association, as co-agent, and the lending
institutions designated as "Lenders" on Schedule I hereto (as
modified from time to time).
PRELIMINARY STATEMENT
I. Agent, certain of the Lenders and the ABorrowers@ therein
named (the "Second Agreement Borrowers") executed that certain
Second Amended and Restated Loan Agreement (as modified and
amended, the "Second Loan Agreement") dated as of February 7,
1997, wherein certain of the Lenders agreed to make a revolving
credit facility and a term facility available to the Second
Agreement Borrowers in an aggregate amount not to exceed Three
Hundred Fifty Million and No/100 Dollars ($350,000,000).
II. The Second Loan Agreement was modified by (a) that certain
First Modification of Second Amended and Restated Loan Agreement
dated as of February 25, 1997, by and among the Second Agreement
Borrowers and Agent, (b) that certain Second Modification of
Second Amended and Restated Loan Agreement dated as of March 31,
1997, by and among Agent, the Lenders (as therein defined),
AMRESCO, INC. and the other entities designated as "Borrowers" in
Schedule I attached thereto, and (c) that certain Third
Modification of Second Amended and Restated Loan Agreement dated
as of May 30, 1997, by and among the Lenders (as therein
defined), Agent, AMRESCO, INC. and the other entities designated
as "Borrowers" in Schedule I attached thereto.
III. AMRESCO, INC. has requested that Agent and Lenders modify,
amend and restate the Second Loan Agreement in order to, in part,
(a) increase the revolving credit facility to an aggregate amount
not to exceed Four Hundred Ninety Million and No/100 Dollars
($490,000,000), (b) revise certain financial covenants set forth
in the Second Loan Agreement and (c) for AMRESCO INC.'s
convenience change the structure to cause AMRESCO, INC. and
AMRESCO UK Holdings Limited to be the borrowers thereunder and
the other subsidiaries of AMRESCO, INC. (other than certain
excluded subsidiaries) to be guarantors rather than borrowers
under the credit facilities. Upon and subject to the terms of
this Agreement and each of the other Loan Documents, Agent and
Lenders are willing to modify, amend and restate the Second Loan
Agreement. Accordingly, in consideration of the mutual covenants
contained herein, Borrower, Guarantors, Agent and Lenders (each
as herein defined) agree as follows:
ARTICLE I
TERMS DEFINED
Section 1.1. Definitions. The following terms, as used
herein, have the following meanings:
Account Debtor means, collectively, the "borrower" and each
other obligor, guarantor or other liable party under any Assigned
Loan.
Acquisition means any transaction pursuant to which Borrower
or any of its Subsidiaries, (a) whether by means of a capital
contribution or purchase or other acquisition of stock or other
securities or other equity participation or interest, (i)
acquires more than 50% of the equity interest in any Person
pursuant to a solicitation by Borrower or such Subsidiary of
tenders of equity securities of such Person, or through one or
more negotiated block, market, private or other transactions, or
a combination of any of the foregoing, or (ii) makes any
corporation a Subsidiary of Borrower or such Subsidiary, or
causes any corporation, other than a Subsidiary of Borrower or
such Subsidiary, to be merged into Borrower or such Subsidiary
(or agrees to be merged into any other corporation other than a
wholly-owned Subsidiary (excluding directors' qualifying shares)
of Borrower or such Subsidiary), or (b) purchases all or
substantially all of the business or assets of any Person or of
any operating division of any Person.
Acquisition Consideration means consideration given or the
amount of the Investment made by Borrower or any Subsidiary of
Borrower in an Acquisition, including, without limitation, (a)
capital stock or other securities or equity so given or invested,
plus (b) the fair market value of any cash, property or services
given or invested, plus (c) the amount of any Debt assumed,
incurred or guaranteed by Borrower or any Subsidiary of Borrower
in connection with such Acquisition.
Additional Term Loans means any and all Term Loans funded
after the Closing Date pursuant to an increase in the Term
Facility as contemplated by Section 2.1(c).
Adjusted Asset Amount at any time of determination means the
sum of the value of Borrower=s assets on a consolidated basis as
shown on a consolidated balance sheet for Borrower prepared in
accordance with GAAP adjusted by the leverage advance rates
therefor as shown on Schedule III attached hereto, as such
schedule may be changed from time to time by Borrower and
Required Lenders; provided, that, any asset shown on Borrower's
balance sheet prepared in accordance with GAAP and not included
in Schedule III shall be deemed to have a leverage advance rate
of zero.
Adjusted EBITDA means the difference between (a)
Consolidated EBITDA and (b) any Net Gains.
Adjusted LIBOR Rate shall mean on the applicable Effective
Date, with respect to a LIBOR Rate Advance or LIBOR Rate Portion,
a rate per annum equal to the sum of (a) the quotient of (i) the
LIBOR Rate on the applicable Effective Date, divided by (ii) the
remainder of 1.00 minus the LIBOR Reserve Requirement, if any, on
the applicable Effective Date, plus (b) the FDIC Percentage in
effect on the applicable Effective Date, together with any
additional impositions, assessments, fees or surcharges that may
be imposed on Agent or any Lender (expressed as a percentage), to
the extent such impositions, assessments, fees or surcharges are
not reflected in the FDIC Percentage or the LIBOR Reserve
Requirement and are generally imposed on banks with
capitalization and supervisory risk factors comparable to Agent,
plus (c) the LIBOR Margin.
Adjusted Net Worth means the sum of Consolidated Tangible
Net Worth plus fifty percent (50%) of the outstanding principal
balance of Approved Subordinated Debt.
Administrative Fee means an aggregate annual fee to be paid
to Agent as set forth in a separate letter between Agent and
Borrower.
Advance means an Advance made by either the Revolving
Lenders (including Revolving Lenders advancing funds under
Competitive Bid Notes) or the Term Lenders, as applicable, to
Borrower under the applicable Credit Facility pursuant to the
terms and conditions of this Agreement.
Affiliate means, as to any Person, any Subsidiary of such
Person, or any Person which, directly or indirectly, controls, is
controlled by, or is under common control with such Person. For
the purposes of this definition, "control" means the possession
of the power to direct or cause the direction of management and
policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
Agent means NationsBank, in its capacity as agent for the
Lenders hereunder, or any successor agent pursuant to Section
10.12 or Section 10.13 or any agreement entered into pursuant to
Section 10.16.
Aggregate Loan Percentage means, with respect to each
Lender, the fraction, expressed as a percentage, obtained by
dividing (a) the sum of (i) the aggregate principal amount
outstanding on the date of determination under the Term Note
and/or Revolving Note and/or the Competitive Note payable to such
Lender, plus (ii) such Lender's portion of the Letter of Credit
Exposure, divided by (b) the aggregate principal amount
outstanding on the date of determination under the Notes plus the
Letter of Credit Exposure.
Agreement means this Third Amended and Restated Loan
Agreement and all renewals, extensions, modifications, amendments
and rearrangements thereof.
Alternate Currency means British pounds sterling, Canadian
dollars, French francs, Deutsche marks, Italian lira, Spanish
peseta, Japanese yen, Australian dollars and Dutch guilders and
the currency of any other foreign country agreed to by the
Revolving Lenders from time to time.
Alternate Currency Advance means an Advance which is funded
in Alternate Currency and bears interest at the Alternate
Currency Rate.
Alternate Currency Base Rate means for any Interest Period
for each Alternate Currency Advance, the rate of interest
determined by Agent at which deposits in the applicable Alternate
Currency (except for British pounds sterling or any other
Alternate Currency for which there is not a quote available on
the Telerate Screen) for the relevant Interest Period are offered
based on information presented on the Telerate Screen as of 11:00
A.M. (London time) on the day which is two (2) Business Days
prior to the first day of such Interest Period; provided, that if
at least two such offered rates appear on the Telerate Screen in
respect of such Interest Period, the arithmetic mean of all such
rates (as determined by Agent) will be the rate used; provided,
further, if (i) the Telerate System ceases to provide the
required quotation, or (ii) with respect to any Alternate
Currency Advance made in British pounds sterling or any other
Alternate Currency for which there is not a quote available on
the Telerate Screen, such rate shall be the per annum rate of
interest determined by the arithmetic average (rounded upward, if
necessary, to the nearest .01%) of the respective rates per annum
at which deposits in British pounds sterling or such other
Alternate Currency would be offered to each of the Reference
Banks in the London interbank market at approximately 11:00 A.M.
(London time) two Business Days before the first day of such
Interest Period in an amount approximately equal to the principal
amount in British pounds sterling or such other Alternate
Currency of the related Alternate Currency Advance to which such
Interest Period is to apply and for a period of time comparable
to such Interest Period.
Alternate Currency Loss has the meaning set forth in Section 3.6(f).
Alternate Currency Note has the meaning set forth in Section 3.14.
Alternate Currency Option has the meaning set forth in Section 2.2(c).
Alternate Currency Rate shall mean, on the applicable
Effective Date with respect to an Alternate Currency Advance, a
rate per annum equal to the sum of (a) the quotient of (i) the
Alternate Currency Base Rate on the applicable Effective Date,
divided by (ii) the remainder of 1.00 minus the LIBOR Reserve
Requirement, if any, on the applicable Effective Date, plus
(b) the FDIC Percentage in effect on the applicable Effective
Date, together with any additional impositions, assessments, fees
or surcharges that may be imposed on Agent or any Lender
(expressed as a percentage), to the extent such impositions,
assessments, fees or surcharges are not reflected in the FDIC
Percentage or the LIBOR Reserve Requirement and are generally
imposed on banks with capitalization and supervisory risk factors
comparable to Agent, plus (c) the LIBOR Margin.
AMRESCO means AMRESCO, INC., a Delaware corporation.
AMRESCO UK means AMRESCO UK Holdings Limited, a corporation
formed under the laws of the United Kingdom.
Applicable Environmental Laws has the meaning set forth in
Section 7.7.
Applicable Lending Office means with respect to each Lender,
such Lender's domestic lending office (as designated by such
Lender) for Variable Rate Advances or Variable Rate Portions, and
such Lender's Eurodollar lending office (as designated by such
Lender) for LIBOR Rate Advances, LIBOR Rate Portions, Alternate
Currency Advances and Competitive Bid Advances.
Applicable Rate means at any time, (a) with respect to a
Variable Rate Advance or a Variable Rate Portion, a rate per
annum equal to the Variable Rate, (b) with respect to a LIBOR
Rate Advance or LIBOR Rate Portion, a rate per annum equal to the
Adjusted LIBOR Rate, and (c) with respect to an Alternate
Currency Advance, a rate per annum equal to the Alternate
Currency Rate.
Approved Senior Debt means Debt issued by AMRESCO which is
unsecured and senior to other unsecured Debt of AMRESCO and the
terms of which have been approved in writing by the Required
Lenders and shall include, without limitation, the Debt evidenced
by promissory notes aggregating $57,500,000 issued pursuant to
the terms of the Senior Indenture as Series 1996-A due 1999, and
pursuant to that certain Officers' Certificate and Company Order
dated as of July 19, 1996.
Approved Subordinated Debt means Debt issued by AMRESCO
which is unsecured and subordinated to payment of the Credit
Facilities and the terms of which (including, without limitation,
the subordination provisions thereof) have been approved in
writing by the Required Lenders, and shall include, without
limitation, (a) the Debt evidenced by notes made pursuant to the
terms of that certain Indenture (the "January Indenture") dated
January 15, 1996, executed by and between AMRESCO and Bank One,
Columbus, N.A., as Trustee, and (b) any other promissory notes
evidencing subordinated debt issued on terms consistent with
those of the January Indenture, provided that (i) Agent has
received projections from AMRESCO showing financial covenant
compliance following issuance of such notes; (ii) no Default or
Event of Default has occurred and has not been cured; and (iii)
Agent has approved the terms for the issuance of such promissory
notes, including, without limitation, the terms regarding
subordination of such promissory notes to the Credit Facilities.
Arranger means NationsBanc Capital Markets, Inc.
Asset Portfolio Report means a report showing various
information concerning each Asset Portfolio which is included as
an Eligible Investment, such report being in form as attached to
the Borrowing Base Schedule as Annex A.
Asset Portfolios means one or more pools or portfolios of
(a) performing, non-performing or under-performing loans, and/or
(b) real estate or other assets acquired in connection with the
foreclosure, restructure or settlement of non-performing or
under-performing loans, together with all documents, instruments,
certificates and other information related thereto.
Assigned Loans means all Borrowing Base Loans and all other
loans owned or hereafter originated or acquired by Borrower or
any Guarantor which are not pledged to secure Debt other than the
Credit Facilities to the extent permitted by Section 8.7 hereof.
Assignment and Acceptance has the meaning set forth in
Section 11.10.
Authorized Officer means, as to Borrower or any other
Person, any of its Chairman, Vice-Chairman, President, Executive
Vice President(s), Chief Financial Officer, Chief Accounting
Officer, Treasurer or Assistant Treasurer, who is duly authorized
by the Board of Directors of such Person to execute the Loan
Documents or any other documents or certificates to be executed
by such Person hereunder or in connection with any Advance or
Letter of Credit.
Base Rate means, on any date of determination, the greater
of (a) the rate of interest per annum most recently announced by
Agent as its prime rate in effect at its principal office (which,
in the case of NationsBank shall mean its principal office in
Dallas, Texas), automatically fluctuating upward and downward
until and at the time specified in each such announcement without
special notice to Borrower or any other Person, which prime rate
may not necessarily represent the lowest or best rate actually
charged to a customer and (b) the sum of the Federal Funds Rate
plus .50%.
Borrower means, collectively, AMRESCO, AMRESCO UK and, with
respect to the Revolving Credit Facility, any other direct makers
on the Revolving Notes as designated by AMRESCO in accordance
with this Agreement, and their successors and assigns. In
connection with the Term Facility, the definition of "Borrower"
shall exclude AMRESCO UK, and AMRESCO UK shall not be a "Maker"
as that term is used in the Term Note. However, AMRESCO UK
agrees to guarantee the payment in full of all amounts
outstanding under the Term Notes (in the Dollar Equivalent of
such amounts). Lenders, AMRESCO and AMRESCO UK understand and
agree that whenever the term ABorrower A is used in the Loan
Documents, such term shall also refer to AMRESCO UK in its
capacity as guarantor of the Term Facility.
Borrower Due Diligence Reports means the various written
reports, information and other materials that Borrower or a
Guarantor prepared or assembled and has available at the offices
designated in Section 7.12 hereof containing descriptions and
evaluations of the Portfolio Loans and Mortgaged Properties
included in a particular Asset Portfolio, and Borrower's or the
applicable Guarantor=s assessments and projections regarding
same, or other information regarding such Portfolio Loans and the
Mortgaged Property, including copies of purchase agreements,
copies of any appraisals or environmental site assessments, and
the "Round Table" books for each such Asset Portfolio summarizing
Borrower's or the applicable Guarantor=s due diligence regarding
such Portfolio Loans and the Mortgaged Property.
Borrowing Base means an amount equal to the lesser of (a)
the sum of (i) the Revolving Commitment, plus (ii) the aggregate
amount outstanding under the Term Facility, or (b) the sum of (i)
the Portfolio Borrowing Base, plus (ii) EBITDA Availability.
Borrowing Base Loans means the Portfolio Loans which are
Eligible Investments.
Borrowing Base Schedule means the schedule which (a) lists
each Eligible Investment and the current Net Investment Value
thereof with any back-up schedule required by Section 7.1(f)
(including, without limitation, a completed Asset Portfolio
Report), (b) the aggregate Net Investment Values of the
Performing Borrowing Base Loans included in Eligible Investments,
(c) designates the number of months since each such Eligible
Investment was initially acquired by Borrower or any Guarantor,
(d) shows the net present value (discounted at nine percent (9%))
of the Projected Net Cash Flow from Eligible Investments for each
Eligible Investment, (e) shows the aggregate Net Investment Value
and aggregate net present values of Projected Net Cash Flow
related to any Wholly-Owned Real Estate Portfolios included in
the Borrowing Base, (f) calculates the Borrowing Base and shows
how such calculation was made, and (g) shows the calculation of
EBITDA Availability.
Borrowing Date means the date on which an Advance is made
under this Agreement.
Bridge Debt means Debt of AMRESCO to one or more of the
Lenders in an aggregate amount outstanding at any time not to
exceed Fifty Million and No/100 Dollars ($50,000,000.00), which
Debt may be included in the Obligations and secured by the
Collateral, but, if it is secured by the Collateral, shall be
subordinate to the Credit Facilities for certain purposes as set
forth in Section 10.6.
Business Day means (a) for all purposes other than as
covered by clause (b) of this definition, any day of the week,
other than Saturday, Sunday or other day Agent or any Lender is
required or authorized by law or executive order to close, and
(b) with respect to all requests, notices and determinations in
connection with LIBOR Rate Advances, LIBOR Rate Portions and
Alternate Currency Advances, a day which is a Business Day
described in clause (a) of this definition and which is a day
other than a day on which banks are required or authorized to
close in the London interbank market or other city in which an
Alternate Currency Advance is to be paid or advanced.
Cash Contributed Capital means any capital or intercompany
loan received by any Guarantor obligated to pay any Warehouse
Line or Permitted Secured Debt for the purpose of funding any
part of the Equity Portion.
Change in Control means (a) the acquisition by a person (as
such term is used in Section 13(d) and Section 14(d)(2) of the
Exchange Act) or related persons constituting a group (as such
term is used in Rule 13d-5 under the Exchange Act) of the
beneficial ownership of issued and outstanding shares of the
voting stock of AMRESCO, the result of which acquisition is that
such person or such group possess in excess of 50% of the
combined voting power of all the issued and outstanding voting
stock of AMRESCO, or (b) during any period of twelve consecutive
calendar months, individuals who were directors of AMRESCO on the
first day of such period shall cease to constitute a majority of
the Board of Directors of AMRESCO.
Closing Date means the effective date of execution of this
Agreement as designated in the first paragraph of this Agreement.
Code means the Internal Revenue Code of 1986, as amended.
Collateral means all property, assets and interests of any
kind securing the Credit Facilities (including, without
limitation, all Advances and the Letters of Credit) pursuant to
this Agreement or any of the other Loan Documents, which shall
include, without limitation, (a) all of the issued and
outstanding stock of each Guarantor and each of Borrower's and
Guarantors' Subsidiaries (except for the Foreign Obligors and the
Excluded Subsidiaries) and sixty-five percent (65%) of the issued
and outstanding stock of each Foreign Obligor, (b) all Borrowing
Base Loans, and (c) all other Assigned Loans and other assets not
otherwise described in this definition which are owned by
Borrower or any Guarantor and which are not pledged as collateral
(to the extent permitted by Section 8.7) for Debt other than the
Credit Facilities; provided, however, that assets of AMRESCO MBS
II, Inc. shall not be pledged as Collateral so long as such
entity is subject to a negative pledge under the terms of Debt
permitted by Section 8.5.
Collateral Assignment means, collectively, all collateral
assignments, debentures, charges and any other documents or
assignments of any kind assigning or creating liens on promissory
notes and liens, executed by Borrower or any Guarantor in favor
of Agent, on behalf and for the benefit of Lenders, as security
for the Credit Facilities, which collateral assignment,
debentures, charges or other documents or assignments are
intended to cover all of the Assigned Loans and all renewals,
modifications, amendments, supplements and restatements thereof,
including, without limitation, (a) that certain Collateral
Assignment of Promissory Notes and Liens dated as of September
29, 1995, executed by and between AMRESCO and certain of the
Guarantors and Agent and that certain Collateral Assignment of
Promissory Notes and Liens dated as of March 1, 1996, executed by
and between AMRESCO and certain of the Guarantors and Agent, as
modified by (i) that certain First Modification of Collateral
Assignment of Promissory Notes and Liens (herein so called) dated
as of April 25, 1996, executed by and between AMRESCO and certain
of the Guarantors and Agent, (ii) that certain Second
Modification of Collateral Assignment of Promissory Notes and
Liens (herein so called) dated as of February 7, 1997, executed
by and between AMRESCO, Guarantors and Agent, substantially in
the form agreed to by AMRESCO and Agent, and (iii) that certain
Third Modification of Collateral Assignment of Promissory Notes
and Liens (herein so called) dated the Closing Date, executed by
and between AMRESCO, Guarantors and Agent, substantially in the
form agreed to by AMRESCO and Agent, and (b) that certain
Composite Guarantee and Debenture, as amended from time to time,
by and among AMRESCO UK and others, and Agent.
Commitment Fee shall mean the non-refundable fee equal to
the product of (a) the applicable percentage in effect as
computed pursuant to Schedule II attached hereto, times (b) the
average daily unused portion of the Revolving Commitment after
adjustment for the Letter of Credit Exposure.
Competitive Bid Acceptance Notice is defined in Section 2.3.
Competitive Bid Advance means a borrowing hereunder
consisting of the aggregate amount of the several Competitive Bid
Loans made on the same Borrowing Date by some or all of the
Revolving Lenders to Borrower for the same Interest Period.
Competitive Bid Auction means a solicitation of Competitive
Bid Quotes setting forth Competitive Bid Margins pursuant to
Section 2.3.
Competitive Bid Loan meas a Loan made by a Revolving Lender
pursuant to Section 2.3, denominated in Dollars, which bears
interest at a Eurodollar Bid Rate.
Competitive Bid Margin means the margin above or below the
applicable LIBOR Rate offered for a Competitive Bid Loan,
expressed as a percentage (rounded to the nearest 1/100 of 1%) to
be added or subtracted from such LIBOR Rate.
Competitive Bid Note means a promissory note in
substantially the form of Exhibit A-3 hereto, with appropriate
insertions, duly executed and delivered by Borrower and payable
to the order of the applicable Revolving Lender, including,
without limitation, any amendment, modification, renewal or
replacement of such promissory note.
Competitive Bid Quote means a Competitive Bid Quote
substantially in the form of Exhibit E-2 hereto completed and
delivered by a Revolving Lender to Agent in accordance with
Section 2.3.
Competitive Bid Quote Request means a Competitive Bid Quote
Request substantially in the form of Exhibit E hereto completed
and delivered by Borrower to Agent in accordance with Section
2.3.
Consequential Loss has the meaning set forth in
Section 3.6(e).
Consolidated EBITDA means, for any period, determined in
accordance with GAAP on a consolidated basis for AMRESCO and its
Subsidiaries, the sum of consolidated net income before taxes and
non-recurring gains or losses, plus depreciation, plus
amortization, plus interest expense, each as deducted in
determining such consolidated net income before taxes.
Consolidated Interest Expense means, for any period, the
interest expense which is required to be shown as such on the
financial statements of AMRESCO and its Subsidiaries, on a
consolidated basis, prepared in accordance with GAAP.
Consolidated Lease Expense means, for any period, the lease
expense under all Operating Leases for AMRESCO and its
Subsidiaries on a consolidated basis.
Consolidated Net Income means, as of the first day of each
calendar quarter, the net income after taxes of AMRESCO and its
Subsidiaries, on a consolidated basis, determined in accordance
with GAAP, for the immediately preceding calendar quarter, which
amount shall be zero if there was a net loss for the immediately
preceding calendar quarter.
Consolidated Tangible Net Worth means, as of any date, (a)
the total shareholder's equity (including capital stock,
additional paid-in capital and retained earnings after deducting
treasury stock) which would appear on a consolidated balance
sheet of AMRESCO and its Subsidiaries prepared as of such date in
accordance with GAAP, less (b) the aggregate book value of
Intangible Assets shown on such balance sheet of such Person,
prepared in accordance with GAAP and less (c) unamortized debt
discount and expenses.
Contingent Obligation of any Person means any obligation,
contingent or otherwise, of such Person (a) directly or
indirectly guaranteeing any Debt or other obligation of any other
Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether
arising by virtue of partnership arrangements, by agreements to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions, by
"comfort letter" or other similar undertaking of support or
otherwise), or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Debt or other obligation of
the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part), or (b) assuring any
creditor or purchaser from such Person against loss, including
without limitation, any recourse obligation with respect to loans
or other receivables sold with recourse to such Person, provided
that the term Contingent Obligation shall not include loan
commitments or loan take-out agreements which are typically
issued by providers of long-term debt, or endorsements for
collection or deposit in the ordinary course of business.
Credit Facilities means the Revolving Credit Facility
(including all Competitive Bid Loans) and the Term Facility.
Credit Period means the period commencing on the date of
this Agreement and ending on the Revolving Facility Termination
Date or Term Facility Termination Date, as applicable.
Custodial Agreement means each Custodial Agreement in form
approved by Agent by and between the Custodian, AMRESCO, for
itself and on behalf of AMRESCO UK and Guarantors, and Agent,
whereby Custodian agrees to act as bailee for the documents
evidencing certain of the Assigned Loans, as any such Custodial
Agreement may be amended or supplemented from time to time,
together with any replacement or substitution therefor.
Custodian means a financial institution or other Person
approved by the Required Lenders to act as a custodian under a
Custodial Agreement.
Debt of any Person means at any date, without duplication,
(a) all indebtedness, obligations and liabilities of such Person
for borrowed money, (b) all indebtedness, obligations and
liabilities of such Person evidenced by bonds, debentures, notes
or other similar instruments, whether recourse or non-recourse
and whether secured or unsecured, (c) all other indebtedness
(including capitalized lease obligations) of such Person on which
interest charges are customarily paid or accrued, (d) all other
indebtedness and obligations of such Person including, without
limitation, trade payables and obligations under Interest and
Foreign Exchange Hedge Agreements, (e) all obligations for
indebtedness in respect of Contingent Obligations of such
Person, (f) the unfunded or unreimbursed portion of all letters
of credit issued for the account of such Person, and (g) all
personal liability of such Person as a general partner or joint
venturer of a partnership or joint venture for obligations of
such partnership or joint venture of the nature described in
(a) through (f) preceding.
Default means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of
time or both would, unless cured or waived, become an Event of
Default.
Default Rate means the fluctuating per annum rate of
interest equal to the lesser of (a) four percent (4.0%) plus the
Base Rate, or (b) the Maximum Lawful Rate.
Designated Countries means Canada, the United Kingdom and
such additional countries as approved from time to time by the
Required Lenders.
Designated Successor Agent means, at any given time, the
Lender other than Agent which has the largest Aggregate Loan
Percentage; provided, however, if two or more such Lenders have
the same Aggregate Loan Percentage at such time, then the
Designated Successor Agent shall be such of those Lenders having
the same Aggregate Loan Percentage which has the largest net
worth; and, provided further, that if the Required Lenders object
to the newly named Designated Successor Agent, or if any Lender
determined to be a Designated Successor Agent declines to serve
as successor Agent, in writing delivered to the outgoing Agent
within seven (7) Business Days after such Designated Successor
Agent is determined, then the Lender other than Agent or such
rejected or declining Designated Successor Agent which has the
next largest Aggregate Loan Percentage shall be the Designated
Successor Agent. For each such Lender that is a member of a bank
holding company, its net worth shall be deemed to be the
consolidated net worth of its bank holding company.
DIDMCA means the Depositary Institutions Deregulation and
Monetary Control Act of 1980, Public Law 96-221, as amended,
codified at 12 U.S.C. '1735f-7.
Distribution by any Person, means (a) with respect to any
stock issued by such Person or any partnership or joint venture
interest of such person, the retirement, redemption, repurchase,
or other acquisition for value of such stock, partnership or
joint venture interest, (b) the declaration or payment (without
duplication) of any dividend or other distribution, whether
monetary or in kind, on or with respect to any stock, partnership
or joint venture of any Person, and (c) any other payment or
distribution of assets of a similar nature or in respect of an
equity investment.
Dollar Equivalent means the equivalent in Dollars of any
Alternate Currency or with respect to Letters of Credit, other
currency approved by Agent and the Issuing Lender. For purposes
of this Agreement, Dollar Equivalent shall be determined by using
the quoted spot rate at which NationsBank or any affiliate of
NationsBank offers to exchange Dollars for such currency prior to
10:00 a.m. (Dallas, Texas time) two Business Days prior to the
date on which such equivalent is to be determined pursuant to the
provisions of this Agreement. Agent shall notify each affected
Lender of such determination on such date. The Dollar Equivalent
of each Alternate Currency Advance (or Letter of Credit
denominated in an Alternate Currency or other currency approved
by Agent and the Issuing Lender) shall be recalculated hereunder
on each date it is necessary to determine the unused portion of
each Lender's Revolving Loan Commitment Amount or any Advances
outstanding on such date.
Dollars and the "$" symbol shall refer to currency of the
United States of America.
Domestic Portfolio means an Asset Portfolio consisting of
Portfolio Loans secured by assets or payable by Persons located
in the United States of America and included in the Borrowing
Base.
EBITDA Availability shall be equal to the lesser of (a)
$450,000,000 (which amount shall be increased to $500,000,000 if
the aggregate Revolving Commitment and Term Loan Commitment
Amounts are increased to $550,000,000 as contemplated by Section
2.1(d)) or (b) the product of (i) 2.5 times (ii) Adjusted EBITDA
calculated for the immediately preceding twelve consecutive
months, provided, that, if Adjusted EBITDA declines for two (2)
consecutive fiscal quarters, then, as of the quarter end for the
second quarter of such decline and continuing thereafter,
Adjusted EBITDA shall be the lesser of (x) Adjusted EBITDA
calculated for the immediately preceding twelve (12) months or
(y) Adjusted EBITDA calculated for the immediately preceding
three (3) months and annualized.
Effective Date means the date selected by Borrower to be the
first day of the applicable Interest Period related to a LIBOR
Rate Advance, LIBOR Rate Portion or an Alternate Currency
Advance.
Eligible Assignee means (a) a Lender; (b) an Affiliate of a
Lender; or (c) any other Person approved by the Agent (such
approval not to be unreasonably withheld or delayed) and, unless
an Event of Default has occurred and is continuing at the time
any assignment is effected in accordance with Section 11.10,
AMRESCO, such approval not to be unreasonably withheld or delayed
by AMRESCO; provided, however, that none of Borrower, Guarantors
or any Affiliate of Borrower or any of the Guarantors shall
qualify as an Eligible Assignee.
Eligible Investments are investments in Asset Portfolios
(a) which are wholly-owned by Borrower or any Guarantor, (b) for
which Lenders have a perfected, first priority lien or security
interest in the related Portfolio Loans and other assets included
in such Asset Portfolios (except (i) for the net profits interest
granted by AMRESCO New Hampshire, Inc. to Heller Financial, Inc.
and referenced in Section 8.7(f) and (ii) that Lenders may not
have filed a Mortgage received with respect to any or all of the
Mortgaged Properties), and (c) with respect to which Borrower or
Guarantors have timely delivered all related documents and
agreements required to be delivered under the applicable
Custodial Agreements.
Employee Plan means at any time an employee benefit plan as
defined in Section 3(3) of ERISA that is now or was previously
maintained, sponsored or contributed to by Borrower or any
Guarantor or any ERISA Affiliate of Borrower or any Guarantor.
Equity Portion means the excess of (a) the balance sheet
value of assets securing Permitted Secured Debt and Warehouse
Lines outstanding on the date of determination, such value
determined in accordance with GAAP and marked to market no less
than quarter-annually, less (b) the related Permitted Secured
Debt and Warehouse Lines, respectively.
ERISA means the Employee Retirement Income Security Act of
1974, as amended from time to time, together with all regulations
issued pursuant thereto.
ERISA Affiliate means any person that is treated as a single
employer with Borrower or any Guarantor under Section 414 of the
Code.
Eurodollar Bid Rate means, with respect to a Competitive Bid
Loan made by a given Revolving Lender for the relevant Interest
Period, the sum of (a) the LIBOR Rate and (b) the Competitive Bid
Margin offered by such Revolving Lender and accepted by Borrower
pursuant to Section 2.3.
Event of Default has the meaning set forth in Section 9.1.
Exchange Act shall mean the Securities Exchange Act of 1934,
as amended.
Excluded Loans means those loans which are secured by bank
stock, time shares, property with significant environmental clean
up requirements (as determined by Agent), any assets which are
located outside of the United States (other than Designated
Countries), or other assets designated by Agent from time to time
in writing to AMRESCO.
Excluded Subsidiaries means, collectively, (a) AMRESCO
Advisors, Inc., a Texas corporation, and any other existing or
future Subsidiary of Borrower which is subject to the Investment
Advisors Act of 1940, as amended, and (b) all Subsidiaries
established as bankruptcy remote special purpose entities in
connection with asset securitizations.
Excluded Subsidiary Debt means Permitted Secured Debt of any
Excluded Subsidiary.
FDIC Percentage shall mean, on any day, the net assessment
rate (expressed as a percentage rounded to the next highest 1/100
of 1%) which is in effect on such day (under the regulations of
the Federal Deposit Insurance Corporation or any successor) for
determining the assessments paid by Agent to the Federal Deposit
Insurance Corporation (or any successor) for insuring
Eurocurrency deposits made in dollars at Agent's principal
offices (which for NationsBank shall be its offices in Dallas,
Texas, or, if applicable, the Applicable Lending Office). Each
determination of said percentage made by Agent shall, in the
absence of manifest error, be binding and conclusive.
Federal Funds Rate means, for any day, the rate per annum
(rounded upwards if necessary, to the nearest 1/100th of 1%)
equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (a) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day, and (b) if no
such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate
quoted to Agent on such day on such transactions from three
Federal funds brokers of recognized standing.
Fiscal Year means any fiscal year of Borrower or any
Guarantor commencing on January 1 and ending on December 31.
Fixed Charge Coverage Ratio means, for any date of
determination, the ratio of (a) the sum of (i) Adjusted EBITDA
plus (ii) Consolidated Lease Expense, both for the immediately
preceding twelve calendar months, to (b) the sum of
(i) Consolidated Interest Expense plus (ii) Consolidated Lease
Expense, both for the immediately preceding twelve calendar
months.
Foreign Obligors means AMRESCO UK and any Guarantor
incorporated or operating outside of the United States.
Foreign Portfolio means an Asset Portfolio consisting
primarily of Portfolio Loans secured by assets or payable by
Persons located in the Designated Countries and included in the
Borrowing Base.
GAAP means generally accepted accounting principles
consistently applied as in effect at the time of application of
the provisions hereof; provided, however, that wherever in this
Agreement principles of consolidation different from those
required by generally accepted accounting principles are
specified, the principles of consolidation specified in this
Agreement shall govern.
Governmental Authority means any government, any state or
other political subdivision thereof, or any Person exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
Guarantor means each Subsidiary of Borrower (other than
Excluded Subsidiaries), and its respective successors and
assigns.
Guaranty Agreement means the Subsidiary Guaranty executed by
each Guarantor in favor of Agent, for the ratable benefit of
Lenders, guaranteeing payment and performance of the Obligations,
as it may be amended or modified or in effect from time to time.
Impositions means all real estate and personal property
taxes; charges for any easement, license or agreement maintained
for the benefit of any of the real property of Borrower or any
Guarantor, or any part thereof; and all other taxes, charges and
assessments and any interest, costs or penalties with respect
thereto, general and special, ordinary and extraordinary,
foreseen and unforeseen, of any kind and nature whatsoever, which
at any time prior to or after the execution hereof may be
assessed, levied or imposed upon any of the real property of
Borrower or any Guarantor, or any part thereof, or the ownership,
use, sale, occupancy or enjoyment thereof, in each case which, if
not timely paid or otherwise discharged, would materially and
adversely affect (a) such ownership, use, sale, occupancy or
enjoyment, or (b) the financial condition of Borrower or any
Guarantor.
Intangible Assets of any Person means those assets of such
Person which are (a) deferred assets, other than prepaid
insurance and prepaid taxes, (b) patents, copyrights, trademarks,
tradenames, franchises, goodwill, experimental expenses and other
similar assets which would be classified as intangible assets on
a balance sheet of such Person, prepared in accordance with GAAP,
and (c) unamortized discount and expenses.
Interest Adjustment Date shall mean the earlier of either
the last day of an Interest Period or, as applicable, the
Revolving Facility Termination Date or Term Facility Termination
Date.
Interest and Foreign Exchange Hedge Agreements shall mean
any and all agreements, devices or arrangements designed to
protect at least one of the parties thereto from the fluctuations
of interest rates, exchange rates or forward rates applicable to
such party's assets, liabilities or exchange transactions,
including, but not limited to, dollar-denominated or cross-
currency interest rate exchange agreements, forward currency
exchange agreements, interest rate cap or collar protection
agreements, forward rate currency or interest rate options, puts
and warrants, as the same may be amended or modified and in
effect from time to time, and any and all cancellations, buy
backs, reversals, terminations or assignments of any of the
foregoing.
Interest Period shall mean, with respect to a LIBOR Rate
Advance, LIBOR Rate Portion, Alternate Currency Advance or
Competitive Bid Loan, a period selected by AMRESCO which is not
less than thirty (30) days and not in excess of one hundred
eighty (180) days, commencing on the Effective Date of such LIBOR
Rate Advance, LIBOR Rate Portion or Alternate Currency Advance,
or the Borrowing Date with respect to a Competitive Bid Loan;
provided that (a) any Interest Period ending on a date later than
the Revolving Facility Termination Date or the Term Facility
Termination Date, as applicable, shall be deemed to end on the
Revolving Facility Termination Date or the Term Facility
Termination Date, as applicable; (b) if any Interest Period would
otherwise end on a day which is not a Business Day, such Interest
Period shall end on the next succeeding Business Day, except that
if the next Business Day would fall in the next calendar month,
the Interest Period shall end on the immediately preceding
Business Day; and (c) any Interest Period that begins on the last
day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of a
calendar month.
Interest Rate Exposure Report shall mean a report showing
the aggregate amount of Borrower=s and each Guarantor's potential
liability under each Interest and Foreign Exchange Hedge
Agreement and how such liability was calculated, together with
evidence satisfactory to Agent that the amount of such potential
liability has been confirmed by the bank counterparty to such
Interest and Foreign Exchange Hedge Agreement.
Investment Line of Credit means a line of credit to AMRESCO
made by NationsBank, such line of credit being in an amount not
to exceed Eighty Million and No/100 Dollars ($80,000,000.00) for
the purchase of liquid short-term investments, as the same may be
renewed, extended, modified, amended or replaced from time to
time.
Investments has the meaning set forth in Section 8.10
hereof.
Invitation for Competitive Bid Quotes means an Invitation
for Competitive Bid Quotes substantially in the form of Exhibit E-
1 hereto, completed and delivered by Agent to Revolving Lenders
in accordance with Section 2.3(c).
Issuing Lender means NationsBank in its capacity as issuer
of the Letters of Credit.
Legal Requirements means (a) any and all present and future
judicial decisions, statutes, laws, rulings, rules, orders,
regulations, permits, licenses, certificates, or ordinances of
any Governmental Authority in any way applicable to Borrower or
any Subsidiary of Borrower, (b) the presently or subsequently
effective bylaws and articles of incorporation and any other form
of business association agreement of Borrower or any Subsidiary
of Borrower, (c) any and all covenants, conditions or
restrictions applicable to the Collateral or the ownership, use
or occupancy thereof, and (d) any and all leases or contracts
(written or oral) of any nature that relate in any way to any
Collateral, or any portion thereof, or to which Borrower or any
Subsidiary of Borrower may be bound, and in each case which, if
violated, would materially and adversely affect (i) the present
or potential ownership, use, sale, occupancy or possession of the
Collateral or any part thereof, by Borrower or any such
Subsidiary, (ii) the Lenders' Liens or (iii) the financial
condition of Borrower or any such Subsidiary.
Lenders means each of the financial institutions listed as a
"Lender" on Schedule I attached hereto as the same may be
modified or amended from time to time, which term shall include
both the Revolving Lenders and the Term Lenders.
Lenders' Liens means all liens, security interests, charges,
pledges or encumbrances created by the Loan Documents.
Letter of Credit Exposure means the aggregate amount of the
unfunded portion of each Letter of Credit outstanding at any
time.
Letter of Credit Fee has the meaning set forth in
Section 2.4(c).
Letters of Credit means all letters of credit issued by the
Issuing Lender for the account of Borrower pursuant to this
Agreement.
LIBOR Margin means the applicable margins based on AMRESCO's
Qualified Investment Rating, as determined pursuant to Schedule
II attached hereto.
LIBOR Rate shall mean, with respect to a LIBOR Rate Advance
or LIBOR Rate Portion for the Interest Period applicable thereto,
the rate of interest determined by Agent at which deposits in
dollars for the relevant Interest Period are offered based on
information presented on the Telerate Screen as of 11:00 A.M.
(London time) on the day which is two (2) Business Days prior to
the first day of such Interest Period; provided, that if at least
two such offered rates appear on the Telerate Screen in respect
of such Interest Period, the arithmetic mean of all such rates
(as determined by Agent) will be the rate used; provided,
further, that if the Telerate System ceases to provide LIBOR
quotations, such rate shall be the average rate of interest
determined by Agent (rounded upward to the nearest .01%) at which
deposits in Dollars are offered for the relevant Interest Period
by Agent (or its successor) to banks with combined capital and
surplus in excess of $500,000,000 in the London interbank market
as of 11:00 A.M. (London time) on the applicable Effective Date.
LIBOR Rate Advance shall mean an Advance under the Revolving
Credit Facility which bears interest computed with reference to
the LIBOR Rate.
LIBOR Rate Portion shall mean any portion of the Term
Facility which bears interest computed with reference to the
LIBOR Rate.
LIBOR Reserve Requirement shall mean, on any day, that
percentage (expressed as a decimal fraction) which is in effect
on such date, as provided by the Federal Reserve System for
determining the maximum reserve requirements generally applicable
to financial institutions regulated by the Federal Reserve Board
comparable in size and type to Agent (including, without
limitation, basic supplemental, marginal and emergency reserves)
under Regulation D with respect to "Eurocurrency liabilities" as
currently defined in Regulation D, or under any similar or
successor regulation with respect to Eurocurrency liabilities or
Eurocurrency funding (or, if reserves for Eurocurrency
liabilities are not separately stated in such regulations, the
other applicable category of liabilities which includes deposits
by reference to which the interest rate on a LIBOR Rate Advance,
LIBOR Rate Portion or Alternate Currency Advance is determined).
Each determination by Agent of the LIBOR Reserve Requirement,
shall, in the absence of manifest error, be conclusive and
binding.
Lien means with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in
respect of such asset. For the purposes of this Agreement, a
Person shall be deemed to own subject to a Lien any asset which
it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or
other title retention agreement relating to such asset.
Loan Documents means this Agreement, the Notes, the Pledge
Agreements, the Letters of Credit, the LOC Applications, the
Collateral Assignment, the Lockbox Agreement, the Security
Agreement, all related financing statements, the Guaranty
Agreement and all other agreements, statements, certificates,
documents or instruments evidencing, securing or pertaining to
either or both of the Credit Facilities (including the Letters of
Credit) or otherwise executed and/or delivered from time to time
pursuant to or in connection with this Agreement, as the same may
be modified, amended, renewed, extended, rearranged, restated or
replaced from time to time.
LOC Application has the meaning set forth in Section 2.2(e).
Lockbox means a post office box, or collectively post office
boxes, established by Borrower and Guarantors and Lockbox Agent
pursuant to the provisions of Section 5.7 and the Lockbox
Agreement.
Lockbox Account means a cash collateral account or accounts
maintained with Lockbox Agent and styled "(name of Borrower or
particular Guarantor) Lockbox Account for the Benefit and Under
the Control of NationsBank of Texas, N.A., as Agent for Lenders,"
which accounts shall be (a) subject to the provisions of Section
5.7., and (b) pledged and assigned to Lenders as additional
security for the payment, performance and observance of the
Obligations.
Lockbox Agent means NationsBank.
Lockbox Agreement means (a) that certain Lockbox Agreement,
dated as of September 29, 1995, executed by and among Borrower
and certain of the Guarantors, Agent and Lockbox Agent, and all
amendments, modifications and replacements thereof, including,
without limitation, as modified by (i) that certain First
Modification of Lockbox Agreement (herein so called) dated as of
April 25, 1996, executed by and between Borrower and certain of
the Guarantors, Agent and Lockbox Agent, (ii) that certain Second
Modification of Lockbox Agreement (herein so called) dated as of
February 7, 1997, executed by and between Borrower and certain of
the Guarantors, Agent and Lockbox Agent, substantially in the
form agreed to by AMRESCO and Agent, and (iii) that certain Third
Modification of Lockbox Agreement (herein so called) dated the
Closing Date, executed by and among Borrower, Guarantors, Agent
and Lockbox Agent, substantially in the form agreed to by AMRESCO
and Agent, and (b) any other similar agreement or arrangement
which is created to cause the proceeds of Assigned Loans or other
Collateral to be placed under Agent=s (for the benefit of
Lenders) dominion and control.
Margin Regulations mean Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System, as in effect
from time to time.
Margin Stock means "margin stock" as defined in
Regulation U.
Maximum Lawful Rate means the maximum rate (or, if the
context so permits or requires, an amount calculated at such
rate) of interest which, at the time in question would not cause
the interest charged on either of the Credit Facilities at such
time to exceed the maximum amount which Lenders would be allowed
to contract for, charge, take, reserve, or receive under
applicable federal or state law after taking into account, to the
extent required by applicable law, any and all relevant payments,
fees or charges under the Loan Documents. If and to the extent
the laws of the State of Texas are applicable for purposes of
determining the "Maximum Lawful Rate", such term shall mean the
"weekly ceiling" from time to time in effect under Chapter 1D of
Article 5069, Title 79, Revised Civil Statutes of Texas, 1925, as
amended, or, if permitted by applicable law and effective upon
the giving of the notices required by such Article 5069 (or
effective upon any other date otherwise specified by applicable
law), the "quarterly ceiling" or "annualized ceiling" from time
to time in effect under such Article 5069, whichever Agent shall
elect to substitute for the "weekly ceiling," and vice versa,
each such substitution to have the effect provided in such
Article 5069, and Agent shall be entitled to make such election
from time to time and one or more times and, without notice to
any Borrower, to leave any such substitute rate in effect for
subsequent periods in accordance with such Article 5069. If
under applicable law there is no legal limitation on the amount
or rate of interest that may be charged on amounts outstanding
under either of the Credit Facilities, there shall be no Maximum
Lawful Rate under the applicable Credit Facility, notwithstanding
any reference thereto herein or in any of the Loan Documents.
Minimum Notice Requirement has the meaning set forth in
Section 3.5.
Modification Fee has the meaning set forth in Section 2.4
(f) hereof.
Mortgage means any deed of trust, mortgage, fixed or
floating charge or other lien document covering a Mortgaged
Property executed by Borrower or any Guarantor, granted to Agent,
for the benefit of the Lenders, to secure repayment of the Credit
Facilities and the other Obligations, substantially in the form
approved by Agent, and all renewals, extensions, modifications,
amendments or supplements thereto, and all mortgages, deeds of
trust, fixed or floating charges or other documents given in
renewal, extension, modification, restatement or replacement
thereof.
Mortgaged Property or Mortgaged Properties means any and all
lots or parcels of land which Borrower or any Guarantor owns on
the Closing Date or which it may hereafter acquire and which has
not been granted as collateral for Debt other than the Credit
Facilities as permitted by Section 8.7 hereof (including, without
limitation, land included in an Asset Portfolio or any Underlying
Real Estate which Borrower or any Guarantor may hereafter own as
a result of a foreclosure or deed-in-lieu of foreclosure or
otherwise), and improvements, fixtures and personal property
located thereon and all other property referenced in and subject
to the Mortgages. The Mortgaged Property is intended to include
all of the above-described real property whether or not a
Mortgage is actually granted or filed.
NationsBank means NationsBank of Texas, N.A., a national
banking association, and its successors.
Net Collections for any calendar month means an amount equal
to (a) any and all cash proceeds received by Borrower or any
Guarantor from its ownership, management and disposition of any
and all assets in any Asset Portfolio, including, without
limitation, interest and principal payments on the applicable
Borrowing Base Loan from any source, loan settlement payments,
any restructure or commitment or other loan fees, payments on any
judgments or settlement of litigation with respect to the
applicable Borrowing Base Loan, proceeds from the sale of the
applicable Borrowing Base Loan or Mortgaged Property, and income
from any Mortgaged Property, but excluding any escrow deposits
paid to Borrower or any Guarantor for tax or insurance escrows
under the applicable Borrowing Base Loan, minus (b) expenses
incurred and paid by Borrower or any Guarantor from, and any
normal and customary expenses reserved or accrued on a monthly
basis related to, its ownership, management and sale of assets in
the Asset Portfolio (including without limitation any advances of
committed principal that Borrower or any Guarantor is legally
required to make under the applicable Borrowing Base Loan) (such
expenses not to exceed in the aggregate 10% of the gross
collections from such assets); it being expressly understood and
agreed that there shall be no deduction for any disbursements by
Borrower or any Guarantor of any tax or insurance escrows held
for the applicable Borrowing Base Loan.
Net Gain means the difference between (a) any gain from the
sale of assets in connection with the creation of asset-backed
securities which would be required to be reported by Borrower or
any Guarantor on Borrower=s or any Guarantor=s financial
statements in accordance with GAAP for the period for which such
gain is being calculated, including, without limitation, any non-
cash revenues related to mortgage origination or mortgage
servicing, and (b) the sum of (i) the cash portion of the gain
included in clause (a) above, which consists of (x) the cash net
origination fees received in connection with the loans supporting
such asset-backed securities, and (y) the cash portion of the
gain realized from the sale of assets in connection with such
asset-backed securities plus (ii) any expenses incurred, directly
or indirectly, in connection with such creation of asset-backed
securities to the extent such expenses exceed the cash portion of
the gain calculated pursuant to clause (b) (i) above.
Net Investment Value means the Net Purchase Price less the
Net Collections actually received by Borrower or any Guarantor as
of the date of determination from the applicable Borrowing Base
Loans less any write down of the value of the applicable
Borrowing Base Loans required by GAAP or otherwise made by
Borrower or any Guarantor.
Net Investment Value Availability means the sum of all
amounts obtained by multiplying the Net Investment Value of each
Eligible Investment times the applicable "Borrowing Percentage"
set forth below (provided that (a) the "Borrowing Percentage" of
Performing Borrowing Base Loans shall be 80%, notwithstanding the
time elapsed since the initial purchase, and (b) the Net
Investment Value Availability attributable to Performing
Borrowing Base Loans shall not exceed the lesser of $20,000,000
or 25% of the Net Investment Value Availability attributable to
Non-Performing Borrowing Base Loans):
Time Elapsed Since Initial
Purchase By Borrower or any Guarantor Borrowing
of Eligible Investment Percentage
Less than 6 months 80%
Greater than or equal to 6 months, but less than 12 months 70%
Greater than or equal to 12 months, but less than 18 months 60%
Greater than or equal to 18 months, but less than 24 months 25%
Greater than or equal to 24 months 0%
Net Present Value Availability means the quotient of (a) the
net present value (discounted at 9%) of the Projected Net Cash
Flow from Eligible Investments (provided, that, with respect to
the Projected Net Cash Flow from any Eligible Investment in which
Heller Financial, Inc. has a profits interest as described in
Section 8.7(f), Borrower shall include only 75% of the net
present value of such Projected Net Cash Flow for the purposes of
this calculation), divided by (b) 1.70.
Net Purchase Price means the actual purchase price paid by
Borrower or the applicable Guarantor for a Borrowing Base Loan,
excluding (a) any costs or adjustments for legal fees, travel,
due diligence expenses or other "soft" costs, and (b) the portion
of the purchase price allocated to Excluded Loans.
NIM Trusts means net interest margin trusts created by any Subsidiary.
Non-Performing Borrowing Base Loan means any Borrowing Base
Loan that is not a Performing Borrowing Base Loan.
Notes means the Term Notes, the Revolving Notes, the
Alternate Currency Notes and the Competitive Bid Notes.
Obligations means all present and future indebtedness,
obligations and liabilities, or any part thereof, of Borrower or
any Guarantor now or hereafter existing or arising under or in
connection with this Agreement, the Notes or any other of the
Loan Documents (specifically including, without limitation, the
principal amount outstanding under the Notes), together with:
(a) all interest accrued thereon; (b) all reasonable costs,
expenses, and attorneys' fees of counsel to Agent and Lenders (as
a group) and of counsel to any Lender (subject to the limitations
set forth in Section 11.4) incurred in the documentation of any
amendments, waivers or extensions of the Loan Documents or
administration, enforcement or collection thereof (specifically
including, without limitation, any of the foregoing incurred in
connection with any bankruptcy or other insolvency proceedings of
Borrower or any Guarantor); (c) the reimbursement and payment of
all sums which might be advanced by Agent or any Lender to pay or
satisfy amounts required to be paid by Borrower or any Guarantor
under this Agreement or under any other Loan Document; (d) all
liability which Borrower or any Guarantor may incur with respect
to any Interest and Foreign Exchange Hedge Agreements between
Borrower or any Guarantor and any Lender or under any Bridge
Debt; and (e) all costs, charges, reasonable commissions,
reasonable attorneys' fees and expenses owing and to become owing
in connection with the documentation, administration, enforcement
and collection of the foregoing obligations and indebtedness, and
those owing or to become owing in connection with the
repossession, operation, maintenance, preservation or foreclosure
of any or all of the Collateral; regardless of whether such
indebtedness, obligations and liabilities are direct, indirect,
fixed, contingent, liquidated, unliquidated, joint, several or
joint and several. The Obligations shall include all renewals,
extensions, modifications, rearrangements and replacements of any
of the above-described obligations and indebtedness.
Operating Lease means any operating lease, as defined in the
Financial Accounting Standard Board Statement of Financial
Accounting Standards No. 13 dated November, 1976, or otherwise in
accordance with GAAP.
Participation Fee means the nonrefundable participation fee
to be paid by Borrower to each of the Lenders in accordance with
Section 2.4 hereof in the amounts shown for each such Lender on
Schedule I attached hereto, if any, or as otherwise agreed to
between Borrower and each Lender.
PBGC means the Pension Benefit Guaranty Corporation, or its
successors.
Pension Plan means any Employee Plan that is now or was
previously covered by Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Code.
Performing Borrowing Base Loan means each Borrowing Base
Loan (a) which, over the immediately preceding 90-day period, has
accrued and been paying interest and principal no less often than
quarterly (and with no less than two such payments having been
made) in an amount which is sufficient to amortize the legal
balance of the Borrowing Base Loan as of the time of its
acquisition by Borrower or a Guarantor (less any payments
received and applied to reduce such Borrowing Base Loan), and
interest thereon at a rate not less than the existing Base Rate,
in equal installments over fifteen years, and (b) which at no
time during the immediately preceding 90-day period has been 30
or more days past due.
Permitted Encumbrances means with respect to any asset in an
Asset Portfolio or any Mortgaged Property:
(a) Liens securing the Notes in favor of the Lenders;
(b) Exceptions affecting title which are shown in a
Title Policy included in Borrower's or any Guarantor's files or
are described with respect to a particular Portfolio Loan,
Mortgaged Property or parcel of the Underlying Real Estate in the
applicable Borrower Due Diligence Reports;
(c) In the case of any portion of the Mortgaged
Property that is not covered by a Title Policy, minor defects in
title or customary easements, platted building lines, restrictive
covenants, mineral reservations and similar exceptions affecting
title which do not secure the payment of money;
(d) Inchoate statutory or operators' liens securing
obligations for labor, services, materials and supplies furnished
to the Mortgaged Properties, which (i) are not delinquent, or
(ii) are being contested by Borrower or any Guarantor in good
faith and for which Borrower or such Guarantor has obtained a
proper payment and performance bond in the amount of the
contested claim;
(e) Mechanics', materialmen's, warehousemen's,
journeymen's and carriers' liens and other similar liens arising
by operation of law or statute in the ordinary course of business
if (i) the underlying claim is not delinquent and did not in any
event cover a billing period not exceeding sixty (60) days, or
(ii) unless the claim giving rise to such lien is being contested
by Borrower or any Guarantor in good faith and for which Borrower
or such Guarantor has obtained a proper payment and performance
bond in the amount of the contested claim; and
(f) Liens for Taxes or Impositions not yet due or not
yet delinquent, or, if delinquent, that are being contested by
Borrower or any Guarantor as permitted by and in accordance with
the terms and conditions set forth in Section 7.5.
Permitted Secured Debt means indebtedness of any Borrower,
Guarantor or, as applicable, Excluded Subsidiary (a) used to
finance the acquisition of, or refinance the costs of carrying,
assets by such Person which is secured solely by the assets
acquired or refinanced with such financing and (b) with respect
to which or to the portion of which such Person has no liability
for payment other than the assets pledged, or liability is
limited only to the Person who owns the assets; provided,
however, that the aggregate Cash Contributed Capital (which may
include the quantifiable Contingent Obligation of any guaranty
given in lieu of capital, so long as such Contingent Obligation
is included as Debt in calculating the covenants contained in
Sections 8.2 and 8.3) with respect to Permitted Secured Debt may
not exceed 35% of the balance sheet value of assets securing the
Permitted Secured Debt outstanding on the date of determination
(the balance sheet value of such loans and securities securing
such Debt shall be determined in accordance with GAAP and marked
to market no less than quarter-annually or, at Agent=s request,
more frequently).
Permitted Secured Debt and Warehouse Lines Report and
Certification means a report (a) showing such information
concerning the Permitted Secured Debt and Warehouse Lines as
required by Agent from time to time, including, without
limitation, the amount of each such Permitted Secured Debt and
Warehouse Lines and the entities obligated as borrowers
thereunder, and (b) certifying compliance by Borrower and
Guarantors with the limitations on Permitted Secured Debt,
Warehouse Lines and Cash Contributed Capital contained in this
Agreement, in detail satisfactory to Agent.
Person means an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any
other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
Pledge Agreement shall mean the Stock Pledge Agreement or
Stock Pledge Agreements executed by and between Borrower or the
appropriate Guarantors and Agent, covering all of the issued and
outstanding stock of each Subsidiary of Borrower and Guarantors
which is incorporated in the United States (other than stock of
the Excluded Subsidiaries) and sixty-five percent (65%) of the
stock of each Foreign Obligor and all amendments, modifications
and replacements thereof, such amendments and modifications
substantially in the form previously agreed to by AMRESCO and
Agent.
Pledged Asset Schedule and Certification means a schedule of
all assets which are owned by Borrower and Guarantors and
required to be pledged to Agent for the benefit of the Lenders
pursuant to the Loan Documents, and a certification that such
assets have been so pledged; provided, that any assets listed
therein but not so pledged shall be pledged to Agent for the
benefit of the Lenders as soon as practical but in no case more
than sixty (60) days after the end of the immediately preceding
calendar quarter.
Portfolio Borrowing Base shall be equal to the lesser of (a)
$150,000,000, (b) the Net Investment Value Availability, or (c)
the Net Present Value Availability; provided that the portion of
the Portfolio Borrowing Base attributable to (i) Wholly-Owned
Real Estate Portfolios shall not exceed 33% of the Wholly-Owned
Non-Real Estate Portfolios, and (ii) the Foreign Portfolios shall
not exceed $75,000,000.
Portfolio Loans means the loans and mortgages included in
any Asset Portfolio acquired by Borrower or any of the
Guarantors, and which have not been disposed of by Borrower or
any such Guarantor, as contemplated and permitted by this
Agreement and the other Loan Documents.
Principal Debt means, at the time of any determination
thereof, the aggregate unpaid principal balance of all Advances.
Projected Net Cash Flow means the net cash flow which
Borrower and Guarantors reasonably expect to receive from an
Asset Portfolio (excluding net cash flow from Excluded Loans)
which has been determined in a manner consistent with Borrower=s
and Guarantors= past practices and not less comprehensive than
Standard Industry Practices, which cash flow projection has been
made or updated not later than six months from the date when it
is to be used under this Agreement.
Purchase Money Lien has the meaning set forth in Section 8.7.
Qualified Investment Rating means the highest currently
effective rating of the Credit Facilities, rated together, at the
time of determination, given by Standard & Poor's Ratings Group
(a Division of McGraw-Hill, Inc.) ("S&P"), Moody's Investors
Service, Inc. ("Moody's") or such other rating agency acceptable
to the Required Lenders; provided, that if both S&P and Moody's
give a rating for the Credit Facilities, the Qualified Investment
Rating shall be the higher of such ratings unless such ratings
are two or more classifications apart in which event the
Qualified Investment Rating shall be the rating which is half way
between such two ratings.
Real Estate Loans means Portfolio Loans (a) which have a
purchase price of greater than Two Million Five Hundred Thousand
and No/100 Dollars ($2,500,000.00), (b) which are secured by
land, office buildings, retail centers, hotels/motels,
multi-family properties, or industrial properties, (c) if
improved, which are secured by non-owner occupied facilities, and
(d) where the primary source of repayment is proceeds from the
operation or liquidation of the real estate. A loan must meet
all of the above tests to be deemed a Real Estate Loan.
Reference Banks means the Applicable Lending Office of
NationsBank, Wells Fargo Bank (Texas), N.A. and Bank One, Texas,
NA, and such substitute bank or banks as may be mutually agreed
to by AMRESCO and Agent.
Register has the meaning set forth in Section 11.10 hereof.
Regulation U means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time and
shall include any successor or other regulation or official
interpretation of the Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or
carrying margin stocks that is applicable to member banks of the
Federal Reserve System.
Regulatory Change shall mean the adoption of any applicable
law, rule or regulation, or any change in any applicable law,
rule or regulation, or any change in the interpretation or
administration thereof by any Governmental Authority charged with
the administration thereof.
Representatives has the meaning set forth in Section 10.4.
Request for Advance means a written request for an Advance
or a Letter of Credit, substantially in the form attached hereto
as Exhibit B, which shall (a) specify (i) the date of such
Advance or Letter of Credit, which shall be a Business Day, (ii)
which portion, if any, of such Advance is to be a LIBOR Rate
Advance or Variable Rate Advance or an Alternate Currency
Advance, and (iii) the aggregate amount of all outstanding
Advances or Letters of Credit before and after giving effect to
the requested Advance or Letter of Credit, as applicable; and (b)
contain a certification of an Authorized Officer of AMRESCO as of
the date of such Advance or Letter of Credit certifying (i) as to
the solvency of Borrower and Guarantors (determined in accordance
with Section 6.19), (ii) that the intended use of the proceeds of
such Advance or Letter of Credit does not violate the provisions
of this Agreement (including, without limitation, Sections 2.1,
6.15 and 7.10) or any other Loan Document, (iii) as to the
matters set forth in Section 4.2(b) and (c), in the case of an
Advance, or the matters set forth in Section 4.3(c) and (d), in
the case of a Letter of Credit, and (iv) with respect to an
Advance for the purchase of an Asset Portfolio which is included
in the then current Borrowing Base, that Borrower and Guarantors
possess or will possess on the funding date of such Advance, the
originals of the promissory notes evidencing the Portfolio Loans
included in such Asset Portfolio and will deliver such original
promissory notes to a Custodian on the Business Day following the
acquisition of such Asset Portfolio.
Required Lenders means:
(a) The approval of all Lenders will be required
to (i) change the definition of Aggregate Loan Percentage,
(ii) change subparagraphs (a), (e), (f), (g) or (h) of the
definition of Required Lenders, (iii) release any Lenders'
Liens on any Collateral after the occurrence of an Event of
Default, or, prior to the occurrence of an Event of Default,
release Lenders' Liens on all of the Collateral, thereby
causing the Credit Facilities to be unsecured, (iv) amend or
modify Section 3.9 of this Agreement, (v) after the
occurrence of an Event of Default, change the Applicable
Rate or any fees payable to any Lender (excluding Agent in
such capacity or the Arranger), (vi) increase the amount of
either Credit Facility, (vii) reinstate any of the Notes and
other indebtedness pursuant to the provisions in Section
9.2(a) hereof, (viii) increase the Applicable Rate related
to either Credit Facility other than an increase in the
interest rate after the occurrence of a Default as permitted
by the Loan Agreement, or (ix) change the consent of Lenders
required by Section 11.10(a) and (f) hereof.
(b) The approval of (1) all Revolving Lenders
will be required to (i) prior to the occurrence of an Event
of Default, change the Applicable Rate related to the
Revolving Credit Facility, (ii) prior to the occurrence of
an Event of Default, change the amount of any fees payable
to the Revolving Lenders (excluding the Agent in such
capacity or the Arranger), (iii) extend the Revolving
Facility Termination Date or the due date of any installment
of principal or interest or any fees applicable to the
Revolving Credit Facility, (iv) forgive any principal or
interest applicable to the Revolving Credit Facility, or (v)
change subparagraph (d) or this subparagraph (b) of the
definition of Required Lenders, and (2) each Lender holding
a Competitive Bid Loan will be required, with respect to the
interest rate, and payments of principal and interest with
respect to, the Competitive Bid Loan to which it is a party.
(c) The approval of all Term Lenders will be
required to (i) prior to the occurrence of an Event of
Default, change the Applicable Rate related to the Term
Facility, (ii) prior to the occurrence of an Event of
Default, change the amount of any fees payable to the Term
Lenders (excluding the Agent in such capacity or the
Arranger), (iii) extend the Term Facility Termination Date
or the due date of any installment of principal or interest
or any fees applicable to the Term Facility, (iv) forgive
any principal or interest applicable to the Term Facility,
or (v) change this subparagraph (c) of the definition of
Required Lenders.
(d) With respect to the determination of
additional currencies available for Alternate Currency
Advances, the Revolving Lenders holding at the time in
question a portion of the Revolving Credit Facility
(including participations in Letters of Credit) equal to or
greater than 75% of the sum of (i) the aggregate unpaid
principal amount of the Revolving Notes, plus (ii) the
Letter of Credit Exposure (or, if no Advances or Letters of
Credit are outstanding, then Revolving Lenders holding at
the time in question 75% of the Revolving Commitment).
(e) With respect to (i) modifying the schedule of
principal payments to be made under any of the Notes other
than as set forth in subparagraphs (b) and (c) of this
definition, (ii) modifying any provisions of Section 3.6
hereof, or (iii) the determination of additional Designated
Countries in connection with Foreign Portfolios the Lenders
holding at the time in question a portion of the Credit
Facilities (including participations in Letters of Credit)
equal to or greater than 75% of the sum of (1) the Revolving
Commitment, plus (2) the aggregate unpaid principal amount
of the Term Notes.
(f) With respect to changing any of the financial
covenants set forth in the provisions of Sections 8.1, 8.2,
8.3 and 8.4 hereof, the Lenders holding at the time in
question a portion of the Credit Facilities (including
participations in Letters of Credit) equal to or greater
than 66.67% of the sum of (i) the Revolving Commitment, plus
(ii) the aggregate unpaid principal amount of the Term
Notes.
(g) Prior to the occurrence of an Event of
Default, all other decisions, consents and votes required by
the Lenders will require the approval of the Lenders holding
at the time in question a portion of the Credit Facilities
(including participations in Letters of Credit) equal to or
greater than 51% of the sum of (i) the Revolving Commitment,
plus (ii) the aggregate unpaid principal amount of the Term
Notes (unless the approval or consent of only the Revolving
Lenders or the Term Lenders is specifically required by the
Loan Documents).
(h) After the occurrence of an Event of Default,
all other decisions, consents and votes required by the
Lenders will require the approval of the Lenders holding at
the time in question a portion of the Credit Facilities
(including participations in Letters of Credit) equal to or
greater than 51% of the sum of (i) the aggregate unpaid
principal amount of the Notes, plus (ii) the Letter of
Credit Exposure (unless the approval or consent of only the
Revolving Lenders or the Term Lenders is specifically
required by the Loan Documents); provided, that, after the
occurrence of an Event of Default which has been waived, the
approval of Revolving Lenders holding at the time in
question a portion of the Revolving Credit Facility equal to
or greater than 51% of the Revolving Commitment shall be
required prior to making the initial Advance under the
Revolving Credit Facility subsequent to such waiver.
Residual Interests Report shall mean a report satisfactory
to Agent listing the Retained Residential Residual Interests
owned by Borrower or any Subsidiary of Borrower.
Revolving Commitment means the aggregate Revolving Loan
Commitment Amounts committed to by Revolving Lenders under this
Agreement on the date of determination, evidenced by a promissory
note to be made by Borrower to each Revolving Lender in the
amount of such Revolving Lender's applicable Revolving Loan
Commitment Amount.
Revolving Credit Facility means the revolving line of credit
created pursuant to this Agreement in an amount equal to the
lesser of (a) $490,000,000 minus the original principal amount of
any Additional Term Loans, or (b) the Revolving Commitment.
Revolving Facility Termination Date means May 31, 1999.
Revolving Lenders means those Lenders designated as the
Revolving Lenders in Schedule I attached hereto, as modified or
amended from time to time pursuant to this Agreement, and their
permitted successors and assigns.
Revolving Loan Commitment Amount means, with respect to each
Revolving Lender, the amount indicated as such Revolving Lender's
Revolving Loan Commitment Amount opposite the name of such
Revolving Lender in Schedule I, as such amount (a) may be reduced
from time to time, as a result of a reduction in the Revolving
Commitment as provided herein, or (b) may be adjusted from time
to time to account for any assignment of a Revolving Lender's
interest as provided in Section 11.10 of this Agreement.
Revolving Loan Percentage means, with respect to the
Revolving Credit Facility and each Revolving Lender, the
percentage indicated as such Lender's Revolving Loan Percentage
opposite the name of such Lender on Schedule I, as such
percentage may be adjusted from time to time to account for any
assignments of a Revolving Lender's interest as provided in
Section 11.10.
Revolving Notes means those certain promissory notes
evidencing the Revolving Credit Facility, executed by Borrower
and payable to the order of each Revolving Lender in the amount
of such Revolving Lender's Revolving Loan Commitment Amount, and
in the form attached hereto as Exhibit A.
Rights means rights, remedies, powers, privileges and benefits.
SEC means the federal Securities and Exchange Commission,
and its successors.
Security Agreement means a Security Agreement dated as of
September 29, 1995, and any other security agreements, executed
by and between certain of the original borrowers under the Credit
Facilities and Agent, and all amendments, modifications and
replacements thereof, including, without limitation, as modified
by (a) that certain First Modification of Security Agreement
(herein so called) dated as of April 25, 1996, executed by and
between the original borrowers under the Credit Facilities (other
than AMRESCO Jersey Ventures Limited, AMRESCO UK, AMRESCO UK
Ventures Limited, AMRESCO UK Limited and Old Midland House
Limited) and Agent, and (b) that certain Second Modification of
Security Agreement (herein so called) dated February 7, 1997,
executed by and between AMRESCO, Guarantors (other than AMRESCO
Jersey Ventures Limited, AMRESCO UK Ventures Limited, AMRESCO UK
Limited and Old Midland House Limited) and Agent, and (c) that
certain Third Modification of Security Agreement (herein so
called) dated the Closing Date, executed by and between AMRESCO,
Guarantors (other than AMRESCO Jersey Ventures Limited, AMRESCO
UK Ventures Limited, AMRESCO UK Limited and Old Midland House
Limited) and Agent, substantially in the form agreed to by
AMRESCO and Agent.
Security Documents means the Collateral Assignment, the
Security Agreement, the Pledge Agreements, the Lockbox Agreement,
all Mortgages and all other documents or instruments granting a
Lien in favor of the Lenders (or Agent for the benefit or on
behalf of the Lenders) as collateral for the Credit Facilities,
and all financing statements related thereto, and all
modifications, renewals or extensions thereof and any documents
executed in modification, renewal, extension or replacement
thereof.
Senior Indenture means that certain Indenture dated July 1,
1996, executed by and between AMRESCO and Comerica Bank, as
Trustee, as amended.
Standard Industry Practices means such due diligence,
collateral control and collection procedures that are customarily
followed by Persons actively engaged in the business of acquiring
Asset Portfolios in a bulk transaction.
Structure Fee means the fee to be paid by AMRESCO to the
Arranger pursuant to a separate letter to be executed by AMRESCO
and Arranger effective on the Closing Date.
Subsidiary means, (a) for any Person other than AMRESCO, any
corporation or other entity of which securities or other
ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing
similar functions (including that of a general partner) are at
the time directly or indirectly owned, collectively, by such
Person and any Subsidiaries of such Person or (b) for AMRESCO,
any corporation wholly-owned by AMRESCO or any other entity of
which 100% of the securities or other ownership interests are at
the time directly or indirectly owned, collectively, by AMRESCO
and any Subsidiaries of AMRESCO. The term Subsidiary shall
include Subsidiaries of Subsidiaries (and so on).
Supplement to Schedule I means an addendum to this
Agreement, the other Loan Documents, Schedule I to the Collateral
Assignment, and Schedule I to the Security Agreement, in form as
previously agreed to between AMRESCO and Agent as contemplated by
Section 2.5.
Taxes means all taxes, assessments, filing or other fees,
levies, imposts, duties, deductions, withholdings, stamp taxes,
interest equalization taxes, capital transaction taxes, foreign
exchange taxes or other charges of any nature whatsoever, from
time to time or at any time imposed by law or any federal, state
or local governmental agency (foreign or domestic). "Tax" means
any one of the foregoing.
Telerate Screen means the display designated as Screen 3750
(as to Dollars, and any other applicable Alternate Currency shown
thereon) or Screen 3740 (as to Canadian dollars) on the Telerate
System or such other screen on the Telerate System as shall
display the London interbank offered rates for deposits in U.S.
dollars or the applicable Alternate Currency quoted by selected
banks.
Term Facility means the term facility created by this
Agreement in an amount not to exceed One Hundred Million and
No/100 Dollars ($100,000,000) (which amount includes any
Additional Term Loans) evidenced by the promissory notes to be
made by Borrower to each Term Lender in the amount of such Term
Lender's Term Loan Commitment Amount.
Term Facility Termination Date means May 31, 2001.
Term Lenders means, as to the Term Facility, such financial
institutions listed as Term Lenders on Schedule I attached
hereto, and their permitted successors or assigns, as the same
may be amended to include Term Lenders under Additional Term
Loans.
Term Loan Commitment Amount means, with respect to each Term
Lender, the amount indicated as such Term Lender's Term Loan
Commitment Amount opposite the name of such Term Lender in
Schedule I, as such amount may be adjusted from time to time to
account for any assignment of a Term Lender's interest, and as
Schedule I may be amended to include Term Lenders under
Additional Term Loans.
Term Loan Percentage means, with respect to the Term
Facility and each Term Lender, the percentage indicated as such
Lender's Term Loan Percentage opposite the name of such Term
Lender on Schedule I, as such percentage may be adjusted from
time to time to account for any assignments of a Term Lender's
interest as provided in Section 11.10, and as such percentage may
be changed to reflect the loan percentages of Term Lenders under
Additional Term Loans.
Term Notes means those certain promissory notes evidencing
the Term Facility, executed by Borrower and payable to the order
of each Term Lender in the amount of such Lender's Term Loan
Commitment Amount, and in the form as attached hereto as Exhibit
A-1.
Title Company means a title company or title companies
selected by Borrower or any Guarantor and not disapproved by
Agent, together with any issuing agent that issues all or any
part of a Title Policy.
Title Policy means a Mortgagee or Loan Policy of Title
Insurance issued and underwritten by a Title Company for the
benefit of (a) Agent, on behalf of the Lenders, covering that
portion of the Mortgaged Property therein described and insuring
the lien of the Mortgage which covers such portion of the
Mortgaged Property, or (b) Borrower or any Guarantor insuring a
lien on Underlying Real Estate securing an Assigned Loan.
Total Consolidated Debt at any date of determination means
the sum of (a) consolidated Debt of Borrower and its Subsidiaries
which would be reflected on the consolidated balance sheet of
Borrower and its Subsidiaries prepared in accordance with GAAP if
such balance sheet were prepared as of such date of
determination, plus (b) the unfunded obligations of Borrower or
any Guarantor under outstanding letters of credit, plus (c) the
amount of any Contingent Obligations which are reasonably
quantifiable by Borrower (as confirmed by Agent) and which do not
duplicate any amounts otherwise included under this definition of
Total Consolidated Debt.
Transfer of Lien means an absolute assignment of note and
liens (including, without limitation, all mortgages and any other
security for each of the Assigned Loans) or other similar
document transferring a lien or security interest, executed by
AMRESCO or any Guarantor to Agent, for the benefit of the
Lenders, in the form agreed to by Borrower and Agent (which
document may also be referred to as an "Assignment of Lien" in
certain states).
UCC means the Uniform Commercial Code in effect under the
laws of the State of Texas, as amended, or, if stated with
reference to another jurisdiction, the Uniform Commercial Code as
adopted in the relevant jurisdiction.
UK Subsidiaries means, collectively, all Subsidiaries of
AMRESCO formed under the laws of the United Kingdom.
Underlying Obligor means any obligor under any residential
or commercial mortgage loan originated or funded by Borrower or
any Guarantor, provided, that the primary business of Borrower or
such Guarantor is the origination or funding of such residential
or commercial mortgage loans.
Underlying Real Estate means the real property, together
with all improvements thereon, which secures any of the Assigned
Loans or any one of such parcels of real property.
Variable Rate means a fluctuating rate of interest equal to
the Base Rate.
Variable Rate Advance shall mean an Advance under the
Revolving Credit Facility which will bear interest computed with
reference to the Variable Rate.
Variable Rate Portion shall mean that portion of the Term
Facility which bears interest computed with reference to the
Variable Rate.
Warehouse Lines means any Debt of Borrower or any Guarantor
created for the purpose of acquiring or originating loans and
securities which are intended to be sold, repaid or otherwise
liquidated in order to make payments on such Debt and which are
related to the lines of business of Borrower and the Guarantors
permitted by Section 7.2 hereof, including, without limitation,
commercial and residential mortgages or mortgage backed
securities, loans to business franchises or securities backed by
loans to business franchises, builder loans and commercial
finance loans; provided that (a) any such Debt shall be fully
collateralized at its inception, (b) in no event shall the
aggregate amount of Cash Contributed Capital exceed 20% of the
balance sheet value of loans or securities securing the Warehouse
Lines outstanding on the date of determination (the balance sheet
value of such loans and securities securing such Debt shall be
determined in accordance with GAAP and marked to market no less
than quarter-annually), and (c) there shall exist at the
inception of such Debt a strategy for selling or otherwise
liquidating specific collateral securing such Debt in a
commercially reasonable manner within the time period typically
required in the industry and by AMRESCO and its Subsidiaries for
such specific collateral, but in no event more than twenty-four
(24) months following its inclusion as collateral for the
applicable Debt.
Wholly-Owned Non-Real Estate Portfolios means Asset
Portfolios that are 100% owned by Borrower or any Guarantor where
less than 50% of the Net Purchase Price is allocated to Real
Estate Loans.
Wholly-Owned Real Estate Portfolios means Asset Portfolios
that are 100% owned by Borrower or any Guarantor where 50% or
more of the Net Purchase Price is allocated to Real Estate Loans.
Section 1.2. Singular and Plural of Definitions. Each
term defined in the singular form in Section 1.1 shall mean the
plural thereof when the plural form of such term is used in this
Agreement, and each term defined in the plural form in
Section 1.1 shall mean the singular thereof when the singular
form of such term is used in this Agreement.
Section 1.3. Substantive Definitions. The terms,
provisions and agreements set forth in the definitions contained
in Section 1.1 shall be substantive terms of this Agreement and
fully binding on the parties hereto.
Section 1.4. Money. Unless stipulated otherwise, all
references herein or in any of the Loan Documents to "Dollars,"
"$," "money," "payments" or other similar financial or monetary
terms are references to lawful money of the United States of
America.
Section 1.5. Captions; References. The captions in this
Agreement and in the table of contents hereof are for convenience
of reference only and shall not define, affect or limit any of
the terms or provisions hereof. All references herein to
Articles and Sections are, unless specified otherwise, references
to articles and sections of this Agreement. Unless specifically
indicated otherwise, all references herein to an "Exhibit,"
"Annex" or "Schedule" are references to exhibits, annexes or
schedules attached hereto, all of which are incorporated herein
and made a part hereof for all purposes, the same as if set forth
fully herein, it being understood that if any exhibit, annex or
schedule attached hereto which is to be executed and delivered
contains blanks, the same shall be completed correctly and in
accordance with this Agreement prior to or at the time of the
execution and delivery thereof. The words "herein," "hereof,"
"hereunder" and other similar compounds of the word "here" when
used in this Agreement shall refer to the entire Agreement and
not to any particular provision or section unless specifically
indicated otherwise.
Section 1.6. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein
shall be interpreted, all accounting determinations hereunder
shall be made, and all financial statements required to be
delivered hereunder shall be prepared in accordance with GAAP.
ARTICLE II
COMMITMENT
Section 2.1. Commitment. Subject to and upon the terms,
covenants and conditions of this Agreement:
(a) Revolving Credit Facility Advances. Each
Revolving Lender severally agrees to make in the manner set forth
in Section 2.2, its pro rata part (based on its Revolving Loan
Percentage) of one or more Advances for general corporate
purposes, which, subject to the Loan Documents, Borrower may
borrow, repay, and reborrow under this Agreement; provided, that,
(i) each such Advance must occur on a Business Day and no later
than the Business Day immediately preceding the Revolving
Facility Termination Date, (ii) each such Advance must be in an
amount not less than the limitations provided in Section 2.2, and
(iii) on any date of determination, the outstanding principal
balance of the Revolving Credit Facility (including the
outstanding balance of all Competitive Bid Loans) shall never
exceed the lesser of (A) the difference between (1) the Borrowing
Base, minus (2) the aggregate amount outstanding under the Term
Facility, (B) the difference between (1) the Revolving
Commitment, minus (2) the Letter of Credit Exposure, or (C) the
difference between (1) $490,000,000, minus (2) the original
principal amount of the Additional Term Loans. Except as
provided in Section 2.3 hereof, in no event shall any Revolving
Lender be required to make any Advances in excess of such
Lender's Revolving Loan Percentage of the amount required to be
advanced by the Revolving Lenders under the above provisions of
this Section 2.1 or which would cause any Revolving Lender to
have made Advances in excess of such Lender's Revolving Loan
Commitment Amount.
(b) Letters of Credit. Each Revolving Lender agrees
to cause Letters of Credit to be issued by the Issuing Lender for
the account of Borrower (provided any such Letter of Credit can
be issued in the name of any Guarantor) for any of the purposes
for which Borrower can obtain an Advance; provided, that (i) each
such Letter of Credit shall be issued on a Business Day,
(ii) after the issuance of any such Letter of Credit, (A) the
Letter of Credit Exposure must be less than or equal to the
Revolving Commitment (as the same may be adjusted as herein
provided) less the sum of all outstanding Advances under the
Revolving Credit Facility, and (B) the Letter of Credit Exposure
shall not exceed ten percent (10%) of the Revolving Commitment,
and (iii) each such Letter of Credit must have an expiration date
no later than the Revolving Facility Termination Date. To the
extent that funds are ever drawn under any of the Letters of
Credit, each such draw will be paid by the Issuing Lender, and
each of the Revolving Lenders will make an Advance in the amount
of such Lender's Revolving Loan Percentage of the amount so paid
by the Issuing Lender to reimburse the Issuing Lender for such
draw.
(c) Term Facility Advances. Each Term Lender which is
a party to this Agreement on the Closing Date has funded or
acquired its Term Loan Commitment Amount prior to the Closing
Date. Any Term Lenders providing Additional Term Loans shall
advance the amounts thereof as and when agreed to by Borrower,
Agent and such Term Lenders.
(d) Increase in Aggregate Commitment. So long as no
Default or Event of Default shall have occurred and be
continuing, Borrower shall have the right from time to time upon
prior written notice to Agent to increase the Revolving
Commitment or the Term Facility; provided, that in no event shall
(i) the aggregate Revolving Commitment and aggregate Term Loan
Commitment Amounts be increased to an amount greater than
$550,000,000 and (ii) the aggregate Term Loan Commitment Amounts
exceed the maximum amount of the Term Facility; provided,
further, that:
(1) Any increase in the Revolving Commitment
which is accomplished by increasing the Revolving Loan
Commitment Amount of any Revolving Lender or Revolving
Lenders who are at the time of such increase party to this
Agreement (which Revolving Lender or Revolving Lenders shall
consent to such increase in their sole and absolute
discretion) shall be subject to the following terms: (i)
this Agreement will be amended by Borrower, the Agent and
those Revolving Lender(s) whose Commitment(s) is or are
being increased to reflect the revised Revolving Loan
Commitment Amounts of each such Revolving Lender, (ii) Agent
will deliver an updated Schedule I to Borrower and each of
the Revolving Lenders reflecting the revised Revolving Loan
Commitment Amounts and Revolving Loan Percentage of each of
the Revolving Lenders, (iii) the Advances under the
Revolving Credit Facility and Revolving Loan Percentages
will be reallocated on the effective date of such increase
among the Revolving Lenders in accordance with their revised
Revolving Loan Percentages (and Borrower shall pay any and
all costs required pursuant to Section 3.6 in connection
with such reallocation as if such reallocation were a
prepayment), and (iv) Borrower will deliver new Revolving
Note(s) to the Revolving Lender or Revolving Lenders whose
Revolving Loan Commitment Amount(s) is or are being
increased reflecting the revised Revolving Loan Commitment
Amount of such Revolving Lender(s).
(2) Any increase in the Revolving Commitment
which is accomplished by addition of a new Revolving Lender
under this Agreement shall be subject to the following
terms: (i) such new Revolving Lender shall be an Eligible
Assignee and shall be subject to the consent of Agent and,
prior to the occurrence and during the continuance of a
Default, Borrower , which consent shall not be unreasonably
withheld, (ii) this Agreement will be amended by Borrower,
the Agent and the party becoming an additional Revolving
Lender hereunder to reflect the addition of such party as a
Lender hereunder, (iii) Agent will deliver an updated
Schedule I to Borrower and each of the Lenders reflecting
the revised Revolving Loan Commitment Amounts and Revolving
Loan Percentages of each of the Revolving Lenders, (iv) the
outstanding Advances under the Revolving Credit Facility and
Revolving Loan Percentages will be reallocated on the
effective date of such increase among the Revolving Lenders
in accordance with their revised Revolving Loan Percentages
(and Borrower shall pay any and all costs required pursuant
to Section 3.6 in connection with such reallocation as if
such reallocation were a prepayment) and (v) Borrower will
deliver a Revolving Note to such party.
(3) Any increase in the Term Facility which is
accomplished by addition of a new Term Lender under this
Agreement shall be subject to the following terms: (i) such
new Term Lender shall be an Eligible Assignee and shall be
subject to the consent of Agent and, prior to the
occurrence and during the continuance of a Default,
Borrower, which consent shall not be unreasonably withheld,
(ii) this Agreement will be amended by Borrower, the Agent
and the party becoming an additional Term Lender hereunder
to reflect the addition of such party as a Lender hereunder,
(iii) Agent will deliver an updated Schedule I to Borrower,
and each of the Lenders reflecting the revised Term Loan
Commitment Amounts and Term Loan Percentages of each of the
Term Lenders, and (iv) Borrower will deliver a Term Note to
such party.
(4) Any increase in the Term Facility which is
accomplished by increasing the Term Loan Commitment Amount
of any Term Lender or Term Lenders who are at the time of
such increase party to this Agreement (which Term Lender or
Term Lenders shall consent to such increase in their sole
and absolute discretion) shall be subject to the following
terms: (i) this Agreement will be amended by Borrower, the
Agent and those Term Lender(s) whose Commitment(s) is or are
being increased to reflect the revised Term Loan Commitment
Amounts of each such Term Lender, (ii) Agent will deliver an
updated Schedule I to Borrower and each of the Lenders
reflecting the revised Term Loan Commitment Amounts and Term
Loan Percentages of each of the Term Lenders, and (iii)
Borrower will deliver new Term Note(s) to the Term Lender or
Term Lenders whose Term Loan Commitment Amount(s) is or are
being increased reflecting the revised Term Loan Commitment
Amount of such Term Lender(s).
Section 2.2. Method of Borrowing under Revolving Credit
Facility. Subject to the terms and conditions of this Agreement,
Borrower shall be entitled to obtain Advances and Letters of
Credit (which can be issued in the name of any Guarantor) from
Revolving Lenders under the Revolving Credit Facility pursuant to
Section 2.1 in the following manner:
(a) Variable Rate Advances. In the case of any
Variable Rate Advance, AMRESCO (acting for itself or on behalf of
each other Borrower), through an Authorized Officer, shall give
Agent prior to 10:00 a.m., Dallas, Texas time, on the date of any
such proposed Advance, an irrevocable written notice of its
intention to borrow or reborrow such Variable Rate Advance
hereunder. Such notice of borrowing shall specify the requested
funding date, which shall be a Business Day, the amount of the
proposed aggregate Variable Rate Advances to be made by Lenders
and shall be accompanied by the documents required to be
delivered pursuant to Article IV. The aggregate amount of
Variable Rate Advances to be made on any funding date shall not
be less than One Million and No/100 Dollars ($1,000,000.00) or
greater whole multiples of One Hundred Thousand and No/100
Dollars ($100,000.00).
(b) LIBOR Rate Advances. In the case of LIBOR Rate
Advances, AMRESCO (acting for itself or on behalf of each other
Borrower) an Authorized Officer, shall give Agent at least three
Business Days' irrevocable written notice of its intention to
borrow or reborrow such advance hereunder. Notice shall be given
to Agent prior to 10:00 a.m., Dallas, Texas time, in order for
such Business Day to count toward the minimum number of Business
Days required. LIBOR Rate Advances shall in all cases be subject
to availability and to Section 3.5 hereof. For LIBOR Rate
Advances, the notice of borrowing shall specify (i) the requested
funding date, which shall be a Business Day, (ii) the amount of
the proposed aggregate LIBOR Rate Advances to be made by the
Revolving Lenders, (iii) the Interest Period selected by AMRESCO
(provided that no such Interest Period shall extend past the
Revolving Facility Termination Date) and (iv) AMRESCO's election
of the Effective Date on which the LIBOR Rate Advances shall
begin. The aggregate amount of LIBOR Rate Advances to be made on
any funding date shall not be less than Five Million and No/100
Dollars ($5,000,000.00) or greater whole multiples of One Million
and No/100 Dollars ($1,000,000.00).
(c) Alternate Currency Option. In the case of any
Alternate Currency Advance, AMRESCO (acting for itself or on
behalf of each other Borrower), through an Authorized Officer,
shall give Agent at least three Business Days' irrevocable
written notice of its intention to borrow or reborrow such
advance hereunder (the "Alternate Currency Option"). Notice
shall be given to Agent prior to 10:00 a.m., Dallas, Texas time,
in order for such Business Day to count toward the minimum number
of Business Days required. Alternate Currency Advances shall in
all cases bear interest at the Alternate Currency Rate computed
with respect to the applicable Alternate Currency and be subject
to availability and to Section 3.5 hereof. Such notice of
borrowing shall specify (i) the requested funding date, which
shall be a Business Day, (ii) the Dollar Equivalent of the amount
of the proposed Alternate Currency Advance, (iii) the currency of
such proposed Alternate Currency Advance, (iv) the Interest
Period selected by AMRESCO (provided that no such Interest Period
shall extend past the Revolving Facility Termination Date) and
(v) AMRESCO's election of the Effective Date on which the
Alternate Currency Advance shall begin. The aggregate amount of
Alternate Currency Advances to be made on any funding date shall
not be less than Two Million Five Hundred Thousand and No/100
Dollars ($2,500,000.00) (in its Dollar Equivalent), or greater
whole multiples of One Million and No/100 Dollars ($1,000,000.00)
(in its Dollar Equivalent).
(d) Notice To Revolving Lenders. Agent shall promptly
notify Revolving Lenders of each notice received from AMRESCO
pursuant to this Section 2.2. Each Revolving Lender shall, not
later than noon, Dallas, Texas time, on the date of any such
Advance, deliver to Agent, at its address set forth herein, such
Lender's Revolving Loan Percentage of such Advance in immediately
available funds in accordance with Agent's instructions. Prior
to 2:00 p.m., Dallas, Texas time, on the date of any Advance
hereunder Agent shall, subject to satisfaction of the conditions
set forth in Article IV, disburse the amounts made available to
Agent by the Revolving Lenders by (i) transferring such amounts
by wire transfer pursuant to AMRESCO's instructions, or (ii) in
the absence of such instructions, crediting such amounts to the
account of AMRESCO maintained with Agent. All Advances shall be
made by each Revolving Lender according to its Revolving Loan
Percentage.
(e) Method of Issuing Letters of Credit. Not less
than three (3) Business Days prior to the requested date of
issuance of any Letter of Credit, AMRESCO (for itself or on
behalf of each other Borrower) shall deliver to Agent a Request
For Advance and shall execute and deliver to the Issuing Lender
the customary letter of credit application and agreement used by
the Issuing Lender from time to time (the "LOC Application").
Nothing in this Agreement shall prohibit the Issuing Lender from
modifying the form of LOC Application in effect from time to time
in connection with the issuance of any Letter of Credit, provided
that, such modification does not substantially modify this
Agreement to the detriment of Borrower. In the event of a direct
conflict between the provisions of the LOC Application and this
Agreement, the provisions of this Agreement shall govern. In no
event shall a Letter of Credit have an expiration date which is
later than the Revolving Facility Termination Date. Letters of
Credit may be standby letters of credit only and may be issued on
behalf of either Borrower or any Guarantor. Upon satisfaction of
the applicable conditions precedent set forth in Article IV, and
subject to the other terms and conditions of this Agreement, the
Issuing Lender shall issue Letters of Credit for the account of
any Borrower or any Guarantor within three (3) Business Days from
receipt by the Issuing Lender of the fully-executed LOC
Application (so long as the requested terms of such Letter of
Credit are acceptable to the Issuing Lender in its reasonable
discretion).
Borrower shall be entitled to have issued under the
Revolving Credit Facility, subject to the terms of this
Agreement, Letters of Credit denominated in an Alternate Currency
or other currency as approved by Agent and the Issuing Lender,
provided, that, if drawn, each Lender shall be required to fund
its pro rata part of the Dollar Equivalent of such Advance. Each
such Advance shall be subject to the terms and conditions of this
Agreement related to Advances. The amount to be reserved under
the Revolving Credit Facility related to any such Letter of
Credit issued in an Alternate Currency or other currency approved
by Agent and the Issuing Lender, and therefore the Letter of
Credit Exposure related thereto, shall be an amount equal to 115%
of the amount remaining to be funded under any said Letter of
Credit from time to time (in Dollar Equivalent calculated from
time to time).
Immediately upon the issuance of each Letter of Credit, the
Issuing Lender shall be deemed to have sold and transferred to
each Revolving Lender, and each Revolving Lender shall be deemed
to have purchased and received from the Issuing Lender, in each
case irrevocably and without any further action by any party, an
undivided interest and participation in such Letter of Credit,
each drawing thereunder and the obligations of Borrower under
this Agreement in respect thereof in an amount equal to the
product of (x) such Lender's Revolving Loan Percentage times (y)
the maximum amount available to be drawn under such Letter of
Credit (assuming compliance with all conditions to drawing).
Subject to the limits referred to above, Borrower may request the
issuance of Letters of Credit under this Section 2.2(e), repay
any Advances under the Revolving Credit Facility resulting from
drawings thereunder pursuant to this Section 2.2(e) and request
the issuance of additional Letters of Credit under this Section
2.2(e).
The payment by the Issuing Lender of a draft drawn under any
Letter of Credit shall constitute for all purposes of this
Agreement the making by the Issuing Lender of an Advance under
the Revolving Credit Facility, which shall bear interest at the
Variable Rate, in the amount of such draft (but without any
requirement for compliance with the conditions set forth in
Article IV hereof). In the event that a drawing under any Letter
of Credit is not reimbursed by Borrower by 10:00 a.m. (Dallas
time) on the first Business Day after such drawing, the Issuing
Lender shall promptly notify Agent and each other Revolving
Lender. Each such Revolving Lender shall, on the first Business
Day following such notification, make an Advance, which shall
bear interest at the Variable Rate, and shall be used to repay
the applicable portion of the Issuing Lender's advance with
respect to such Letter of Credit, in an amount equal to the
amount of its participation in such drawing for application to
reimburse the Issuing Lender (but without any requirement for
compliance with the applicable conditions set forth in Article IV
hereof) and shall make available to Agent for the account of the
Issuing Lender, by deposit at Agent's office, in same day funds,
the amount of such Advance. In the event that any Revolving
Lender fails to make available to Agent for the account of the
Issuing Lender the amount of such Advance, the Issuing Lender
shall be entitled to recover such amount on demand from such
Revolving Lender together with interest thereon at a rate per
annum equal to the lesser of (i) the Maximum Lawful Rate or (ii)
the Federal Funds Rate.
Section 2.3 Competitive Bid Loans
(a) Competitive Bid Advances. In addition to Advances
pursuant to Sections 2.1 and 2.2, but subject to all of the terms
and conditions of this Agreement (including, without limitation,
the limitation set forth in Section 2.1 as to the maximum
aggregate principal amount of all outstanding Advances under the
Revolving Credit Facility), Borrower may, as set forth in this
Section 2.3, request the Revolving Lenders, prior to the
Revolving Facility Termination Date, to make offers to make
Competitive Bid Advances to Borrower. Each Revolving Lender may,
but shall have no obligation to, make such offers and Borrower
may, but shall have no obligation to, accept any such offers in
the manner set forth in this Section 2.3. Competitive Bid
Advances shall be evidenced by the Competitive Bid Notes. Each
Competitive Bid Advance shall be repaid in full by Borrower on
the last day of the Interest Period applicable thereto.
(b) Competitive Bid Quote Request. When Borrower wishes to
request offers to make Competitive Bid Loans under this Section
2.3, Borrower shall transmit to Agent by telecopy a Competitive
Bid Quote Request to be received no later than 11:00 a.m., Dallas
time, at least five Business Days prior to the Borrowing Date
proposed therein, specifying in accordance with all of the terms
of this Agreement:
(i) the proposed Borrowing Date for the proposed
Competitive Bid Advance;
(ii) the aggregate principal amount of such Competitive
Bid Advance; and
(iii) the Interest Period applicable thereto.
Borrower may request offers to make Competitive Bid Loans for
more than one Interest Period in a single Competitive Bid Quote
Request. No Competitive Bid Quote Request shall be given within
five Business Days (or upon reasonable prior notice to the
Revolving Lenders, such other number of days as Borrower and
Agent may agree) of any other Competitive Bid Quote Request.
Each Competitive Bid Quote Request shall be in a minimum amount
of $5,000,000 or a larger multiple of $1,000,000. Borrower shall
not be entitled to have more than four Competitive Bid Loans
outstanding at any time. A Competitive Bid Quote Request that
does not conform substantially to the format of Exhibit E hereto
shall be rejected, and Agent shall promptly notify Borrower of
such rejection by telecopy.
(c) Invitation for Competitive Bid Quotes. Promptly upon
receipt of a Competitive Bid Quote Request that is not rejected
pursuant to Section 2.3(b), Agent shall send to each of the
Revolving Lenders by telecopy an Invitation for Competitive Bid
Quotes which shall constitute an invitation by Borrower to each
Revolving Lender to submit Competitive Bid Quotes offering to
make the Competitive Bid Loans to which such Competitive Bid
Quote Request relates in accordance with this Section 2.3.
(d) Submission and Contents of Competitive Bid Quotes.
(i) Each Revolving Lender may, in its sole discretion,
submit a Competitive Bid Quote containing an offer or offers
to make Competitive Bid Loans in response to any Invitation
for Competitive Bid Quotes. Each Competitive Bid Quote must
comply with the requirements of this Section 2.3 and must be
submitted to Agent by telecopy at its offices specified in
or pursuant to Section 11.2 not later than 1:00 p.m., Dallas
time, at least four Business Days prior to the proposed
Borrowing Date (or upon reasonable prior notice to the
Revolving Lenders, such other time and date as Borrower and
Agent may agree). Subject to Articles IV and IX, any
Competitive Bid Quote so made shall be irrevocable except
with the written consent of Borrower.
(ii) Each Competitive Bid Quote shall in any case
specify: (1) the proposed Borrowing Date, which shall be the
same as that set forth in the applicable Invitation for
Competitive Bid Quotes; (2) the principal amount of the
Competitive Bid Loan for which each such offer is being
made, (x) which principal amount may be greater than, less
than or equal to the Revolving Loan Commitment Amount of the
quoting Lender, but in no case greater than an amount which
would cause the then outstanding Advances under the
Revolving Credit Facility, plus the Letter of Credit
Exposure, plus the outstanding balances of all Competitive
Bid Loans to exceed the Revolving Commitment, (y) which
principal amount must be at least $2,000,000 and an integral
multiple of $500,000, and (z) which principal amount may not
exceed the principal amount of Competitive Bid Loans for
which offers were requested; (3) the Competitive Bid Margin
offered for each such Competitive Bid Loan; (4) the minimum
or maximum amount, if any, of the Competitive Bid Loan which
may be accepted by Borrower; (5) the applicable Interest
Period; and (6) the identity of the quoting Lender.
(iii) Agent shall reject any Competitive Bid Quote
that: (1) is not substantially in the form of Exhibit E-2
hereto or does not specify all of the information required
by Section 2.3(d)(ii); (2) contains qualifying, conditional
or similar language, other than any such language contained
in Exhibit E-2 hereto; (3) proposes terms other than or in
addition to those set forth in the applicable Invitation for
Competitive Bid Quotes, except as contemplated by Section
2.3(d)(ii); or (4) arrives after the time set forth in
Section 2.3(b).
(iv) If any Competitive Bid Quote shall be rejected
pursuant to Section 2.3(d)(iii), then Agent shall notify the
relevant Revolving Lender of such rejection as soon as
practicable.
(e) Notice to Borrower. Agent shall promptly notify
Borrower of (1) the terms of any Competitive Bid Quote submitted
by a Revolving Lender that is in accordance with this Section 2.3
and (2) if not disregarded by Agent in accordance with the
immediately succeeding sentence, of any Competitive Bid Quote
that is in accordance with this Section 2.3 which amends,
modifies or is otherwise inconsistent with a previous Competitive
Bid Quote submitted by such Revolving Lender with respect to the
same Competitive Bid Quote Request. Any such subsequent
Competitive Bid Quote shall be disregarded by Agent unless such
subsequent Competitive Bid Quote specifically states that it is
submitted solely to correct a manifest error in such former
Competitive Bid Quote. Agent=s notice to Borrower shall specify
the aggregate principal amount of Competitive Bid Loans for which
offers have been received for each Interest Period specified in
the related Competitive Bid Quote Request and the respective
principal amounts and Competitive Bid Margins so offered.
(f) Acceptance and Notice by Borrower. Subject to the
receipt of the notice from Agent referred to in this Section 2.3,
not later than 11:00 a.m. (Dallas time) at least three Business
Days prior to the proposed Borrowing Date, Borrower shall notify
Agent of Borrower=s acceptance or rejection of each offer
received by it pursuant to this Section 2.3; provided, however,
that the failure by Borrower to give such notice to Agent shall
be deemed to be a rejection by Borrower of all such offers. In
the case of acceptance, such notice (a ACompetitive Bid
Acceptance Notice@) shall specify the aggregate principal amount
of offers for each Interest Period that are accepted. Borrower
may accept or reject any Competitive Bid Quote in whole or in
part (subject to the terms of this Section 2.3); provided that:
(i) the aggregate principal amount of each Competitive
Bid Advance may not exceed the applicable amount set forth
in the related Competitive Bid Quote Request;
(ii) acceptance of offers may only be made on the basis
of ascending Competitive Bid Margins; and
(iii) Borrower may not accept any offer of the type
described in this Section 2.3 or that otherwise fails to
comply with the requirements of this Agreement for the
purpose of obtaining a Competitive Bid Loan under this
Agreement.
(g) Allocation by Agent. If offers are made by two or
more Revolving Lenders with the same Competitive Bid Margins for
a greater aggregate principal amount than the amount in respect
of which offers are permitted to be accepted for the related
Interest Period, the principal amount of Competitive Bid Loans in
respect of which such offers are accepted shall be allocated by
Agent among such Revolving Lenders as nearly as possible (in such
multiples as Agent may deem appropriate) in proportion to the
aggregate principal amount of such offers; provided, however,
that no Revolving Lender shall be allocated a portion of any
Competitive Bid Advance which is less than the minimum amount
which such Revolving Lender has indicated that it is willing to
accept. Allocations by Agent of the amounts of Competitive Bid
Loans shall be conclusive in the absence of manifest error.
Agent shall promptly, but in any event on the same Business Day,
notify each Revolving Lender of its receipt of a Competitive Bid
Acceptance Notice and the aggregate principal amount of each
Competitive Bid Advance allocated to each participating Revolving
Lender.
(h) Commitment to Lend Not Reduced and Other Agreements.
The agreement of a Revolving Lender to make a Competitive Bid
Loan hereunder shall not reduce such Revolving Lender's
obligation to fund other Advances under the Revolving Credit
Facility to the extent of such Revolving Lender's Revolving Loan
Commitment Amount, it being expressly acknowledged and agreed
that the agreement to make a Competitive Bid Loan is optional on
the part of such Revolving Lender and in addition to its
Revolving Loan Commitment Amount. The amount of Competitive Bid
Loans shall not reduce the Revolving Loan Commitment Amount of
any Lender for purposes of calculating the Commitment Fee.
Borrower shall pay to Agent an administrative fee of $1,000 for
each Competitive Bid Quote Request, payable on the date each such
Competitive Bid Request is transmitted to Agent. In no event
shall the aggregate amount of Competitive Bid Loans outstanding
at any time exceed $75,000,000.
Section 2.4. Fees.
(a) Participation Fee. In consideration for the commitment
of each Revolving Lender to make Advances under the Revolving
Credit Facility upon the terms and conditions set forth in this
Agreement and the reserving of sufficient funds by each Revolving
Lender from which to make disbursement of the Advances under the
Revolving Credit Facility, Borrower shall pay to each such
Revolving Lender on the Closing Date its Participation Fee. In
consideration for the commitment of each Term Lender to fund its
pro rata part of the Term Facility upon the terms and conditions
set forth in this Agreement and the reserving of sufficient funds
by each Term Lender from which to make such Advance under the
Term Facility, Borrower shall pay to each such Term Lender its
Participation Fee when such Term Lender funds its Term Loan
Commitment Amount.
(b) Commitment Fee. Throughout the Credit Period, Borrower
shall pay to Agent for the account of each Revolving Lender, such
Revolving Lender's Revolving Loan Percentage of the Commitment
Fee, such fee to be computed based on the number of actual days
elapsed assuming each calendar year consisted of 360 days, and
due and payable quarterly in arrears, commencing on January 1,
1998, and continuing on the first day of each calendar quarter
thereafter, with a final payment of such Commitment Fee being due
and payable upon the Revolving Facility Termination Date.
(c) Letter of Credit Fees. Borrower shall pay to Agent for
the account of each Revolving Lender a letter of credit fee (the
"Letter of Credit Fee") (which shall be payable quarterly in
arrears, commencing on January 1, 1998, and continuing on the
first day of each calendar quarter thereafter, with a final
payment of such Letter of Credit Fee being due and payable on the
Revolving Facility Termination Date) on the average daily amount
available for drawing under all outstanding Letters of Credit
(using the Dollar Equivalent for any Letters of Credit
denominated in an Alternate Currency) at the per annum
percentages determined in accordance with Schedule II hereof.
The fee payable in respect of the Letters of Credit shall be
subject to reduction or increase, as set forth in Schedule II.
Subject to Section 11.8 hereof, such fee shall be computed on the
basis of the actual number of days elapsed. In addition to the
Letter of Credit Fee, Borrower shall pay to Agent for the account
of the Issuing Lender an issuance fee (which shall be due and
payable on the date of issuance of each Letter of Credit) in an
amount equal to Three Hundred and No/100 Dollars ($300.00).
(d) Structure Fee. In consideration for the
Arranger's efforts in structuring the Credit Facilities and
arranging for such Credit Facilities, Borrower agrees to execute
on or before the Closing Date a letter reasonably satisfactory to
Agent and Arranger concerning the Structure Fee and to pay to
Arranger the Structure Fee in accordance with such letter.
(e) Administrative Fees. In consideration for Agent's
administration services under the Credit Facilities, Borrower
agrees to pay Agent the Administrative Fee in advance in equal
quarterly payments, commencing on January 1, 1998, and continuing
on the first day of each calendar quarter thereafter, until such
time the Notes are paid in full, all Letters of Credit have been
terminated, and Lenders' commitment to make Advances under this
Agreement have been terminated.
(f) Modification Fee. Borrower shall pay to Agent, in
addition to such other fees and charges which Lenders may
require, a fee (the "Modification Fee") of an amount not less
than either (i) the product of five one hundredths of one percent
(.05%) times the Revolving Commitment and the aggregate
outstanding unpaid principal amount under the Term Notes or (ii)
as otherwise agreed to by Borrower and Lenders, for each
material amendment to this Agreement initiated by Borrower and
entered into by Agent, the Lenders and Borrower after the date
hereof; provided, that, no such fee shall be required in
connection with any amendment to this Agreement the sole purpose
of which is to (x) add any Person as a Lender hereunder or to
amend Schedule I or (y) waive or amend Section 8.1 due to
Borrower=s non-compliance with such covenant due to any
Acquisition. Such Modification Fee shall be distributed by Agent
to each Lender in accordance with either its Revolving Loan
Percentage or Term Loan Percentage, as applicable.
Section 2.5. Additional Guarantors or Borrowers. Upon the
earlier to occur of (1) thirty (30) days after the filing of
articles of incorporation, certificates of limited partnership or
similar organizational documents with the appropriate
Governmental Authority of any future Subsidiary of Borrower or
(2) two (2) Business Days prior to the date that such Subsidiary
obtains from Borrower proceeds of an Advance under the Revolving
Credit Facility or includes any of its assets in the Borrowing
Base, Borrower shall cause to be delivered to Agent (a) a
Supplement to Schedule I properly executed by such future
Subsidiary (other than an Excluded Subsidiary), (b) a Guaranty
Agreement, executed by such future Subsidiary (other than an
Excluded Subsidiary), (c) a contribution and indemnification
agreement, in form and substance satisfactory to Agent, executed
by Borrower, Agent and all of the Guarantors, (d) a Pledge
Agreement and all financing statements related thereto, properly
executed by the appropriate Borrower or Guarantor pursuant to
which all of the outstanding shares of stock of such future
Subsidiary (other than the Excluded Subsidiaries) are pledged to
Agent (for the benefit of Lenders), together with the original
stock certificates accompanied by stock powers executed in blank
by the appropriate Borrower or Guarantor evidencing the shares of
stock required to be pledged under this Agreement, and (e) all
resolutions, certificates or documents Agent may reasonably
request relating to the formation, existence and good standing of
such future Subsidiary, corporate authority for the execution and
validity of the Loan Documents described in clauses (a), (b), (c)
and (d) immediately above and any other documents and matters
relevant to the formation of such future Subsidiary and its
status as a Guarantor hereunder (if applicable), all in form and
substance satisfactory to Agent, which resolutions, certificates
and documents shall include, without limitation, (i) the articles
of incorporation and bylaws of such future Subsidiary,
(ii) resolutions of the board of directors of such future
Subsidiary authorizing the execution of the Loan Documents
described in clauses (a), (b), (c) and (d) immediately above on
behalf of such future Subsidiary and the granting of all the
relevant Lenders' Liens as security for the Credit Facilities and
the Letters of Credit, (iii) certificates of incumbency for the
officers of such future Subsidiary, and (iv) certificates of
corporate existence and good standing issued by the state of
incorporation of such future Subsidiary and from the appropriate
Governmental Authority of each state in which such future
Subsidiary is required by applicable law to be qualified. In
lieu of causing a Subsidiary of Borrower to be a Guarantor under
this Agreement, Borrower may cause such Subsidiary to be a co-
Borrower under this Agreement if necessary for tax purposes
(provided that Foreign Obligors shall only be allowed to be
Guarantors, and not a Borrower, with respect to the Term
Facility).
ARTICLE III
TERMS OF THE CREDIT FACILITIES
Section 3.1. Notes. The Credit Facilities shall be
evidenced by the Notes. Each Revolving Lender shall receive an
originally executed Revolving Note in an amount equal to such
Lender's Revolving Loan Commitment Amount. Each Term Lender
shall receive an originally executed Term Note in an amount equal
to such Lender's Term Loan Commitment Amount. Each Revolving
Lender providing a Competitive Bid Loan shall receive an
appropriate, originally executed Competitive Bid Note.
Section 3.2. Maturity. All outstanding principal of the
Revolving Notes, together with all accrued but unpaid interest
and other amounts owed with respect thereto, shall be due and
payable in full on the Revolving Facility Termination Date. All
outstanding principal of the Term Notes, together with all
accrued but unpaid interest and other amounts owed with respect
thereto, shall be due and payable in full on the Term Facility
Termination Date. All outstanding principal of any Competitive
Bid Note shall be due and payable on the last day of the
applicable Interest Period.
Section 3.3. Interest Rate. Interest on the Notes (other
than Competitive Bid Notes) shall accrue at a rate per annum
equal to the lesser of (a) the Applicable Rate as selected by
AMRESCO pursuant to this Agreement, subject, however, to the
provisions of Section 11.8, or (b) the Maximum Lawful Rate;
provided, however, if at any time the Applicable Rate exceeds the
Maximum Lawful Rate, resulting in the charging of interest
hereunder to be limited to the Maximum Lawful Rate, then any
subsequent reduction in the Applicable Rate shall not reduce the
rate of interest below the Maximum Lawful Rate until the total
amount of interest accrued on the indebtedness evidenced hereby
equals the amount of interest which would have accrued on such
indebtedness if the Applicable Rate had at all times been in
effect.
Without notice to Borrower or anyone else, the Variable Rate
and the Maximum Lawful Rate shall each automatically fluctuate
upward and downward as and in the amount by which the Base Rate
and Maximum Lawful Rate, respectively, fluctuate, subject always
to limitations contained in this Agreement. In addition, the
Adjusted LIBOR Rate and the Alternate Currency Rate shall
fluctuate upward and downward as and in the amount by which the
LIBOR Margin fluctuates, subject always to limitations contained
in this Agreement, any such changes in the LIBOR Margin and,
therefore, the Adjusted LIBOR Rate or Alternate Currency Rate, as
applicable, to occur on the Business Day following the receipt by
Agent of evidence satisfactory to Agent of a change in the
Qualified Investment Rating.
Section 3.4. Interest Payments. Interest on the Notes,
computed as provided in Section 3.11, shall be due and payable as
it accrues on (a) the first day of each calendar quarter
commencing on October 1, 1997, and continuing on the first day of
each January, April, July and October thereafter until, as
applicable, either the Revolving Facility Termination Date or the
Term Facility Termination Date, and (b) at the end of each
Interest Period as to any LIBOR Rate Portion, LIBOR Rate Advance,
Alternate Currency Advance or Competitive Bid Note then expiring,
and on demand after, as applicable, the Revolving Facility
Termination Date or the Term Facility Termination Date so long as
any principal of any Note remains unpaid.
Section 3.5. Conversion of Revolving Credit Advances;
Interest Rate Elections under Term Facility; Regulatory Change.
(a) Upon at least three (3) Business Days' prior written
notice from AMRESCO to Agent ("Minimum Notice Requirement"),
Borrower may, on any Interest Adjustment Date (other than the
Revolving Facility Termination Date or Term Facility Termination
Date, as applicable), convert amounts of any LIBOR Rate Advances
or LIBOR Rate Portion, as applicable, into Variable Rate Advances
or a Variable Rate Portion, as applicable, with interest accruing
thereon with reference to the Variable Rate, as provided in
Section 3.3 above.
(b) Upon satisfaction by AMRESCO of the Minimum Notice
Requirement, and subject to the conditions provided in this
Agreement or the Notes, Borrower may, on any date prior to the
Revolving Facility Termination Date or Term Facility Termination
Date, as applicable, convert amounts of not less than Five
Million and No/100 Dollars ($5,000,000.00) in the aggregate on
the same date, or any whole multiple of One Million and No/100
Dollars ($1,000,000.00) in excess thereof of any Variable Rate
Advances or a Variable Rate Portion, as applicable, into LIBOR
Rate Advances or LIBOR Rate Portions, as applicable, with
interest accruing thereon with reference to the Adjusted LIBOR
Rate, as provided in Section 3.3 above, for the Interest Period
selected in such notice. AMRESCO may make a LIBOR Rate election
with respect to each Advance of the Term Facility by satisfying
the Minimum Notice Requirement prior to the related funding of
the Term Facility.
Each notice of Adjusted LIBOR Rate election by Borrower
shall include (i) the amount of the proposed aggregate LIBOR Rate
Advances or the LIBOR Rate Portions, as applicable, (ii) the
Interest Period selected by AMRESCO, and (iii) the Effective
Date, and is subject to the following conditions: (1) the
Interest Period shall be limited to a period commencing on the
Effective Date and ending on a date one, two, three, four or six
months later elected by AMRESCO in its notice to Agent; (2)
AMRESCO's written notice of an election shall be received by
Agent in time to satisfy the Minimum Notice Requirement; (3) the
last day of the Interest Period will not be subsequent in time to
the Revolving Facility Termination Date or Term Facility
Termination Date, as applicable; (4) in the case of a
continuation of a LIBOR Rate Advance or LIBOR Rate Portion, the
Interest Period applicable after such continuation shall commence
on the last day of the preceding Interest Period; (5) no LIBOR
Rate election shall be made if Agent determines by reason of
circumstances affecting the interbank Eurodollar market that
either adequate or reasonable means do not exist for ascertaining
the Adjusted LIBOR Rate for any Interest Period, or it becomes
impracticable for Agent or any Lender under the applicable Credit
Facility to obtain funds by purchasing U.S. dollars in the
interbank Eurodollar market, or if Agent or any Lender under the
applicable Credit Facility determines that the Adjusted LIBOR
Rate will not adequately or fairly reflect the costs to such
Lender of maintaining the applicable LIBOR Rate Advances or LIBOR
Rate Portion, as applicable, at such rate, or if as a result of
any Regulatory Change, it shall become unlawful or impossible for
Lenders under the applicable Credit Facility to maintain any such
LIBOR Rate election; (6) there shall never be more than fifteen
(15) LIBOR Rate Advances, in the aggregate, in effect at any one
time under the Revolving Credit Facility and no more than five
(5) LIBOR Rate Portions in effect at any one time under the Term
Facility; and (7) no LIBOR Rate election shall be made after the
occurrence and during the continuance of a Default or Event of
Default.
(c) As a condition to each Alternate Currency Advance,
Borrower shall select an Alternate Currency Rate (based on the
applicable Alternate Currency) to be applicable thereto;
provided, that each such Alternate Currency Advance must be in an
amount of not less than Two Million Five Hundred Thousand and
No/100 Dollars ($2,500,000.00) (in its Dollar Equivalent) in the
aggregate on the same date, or any whole multiple of One Million
and No/100 Dollars ($1,000,000.00) (in its Dollar Equivalent) in
excess thereof; and provided, further, that (1) no Alternate
Currency election shall be made if Agent or any Revolving Lender
determines that, as a result of any Regulatory Change, it shall
become unlawful, impracticable or impossible for Revolving
Lenders to maintain any such Alternate Currency election; (2)
there shall never be more than ten (10) Alternate Currency
Advances, in the aggregate, in effect at any one time under the
Revolving Credit Facility; (3) in no event shall the Dollar
Equivalent amount of the requested Alternate Currency Advance
plus the then current outstanding balance of all previous
Alternate Currency Advances based on the Dollar Equivalent
thereof (as of the Business Day immediately prior to the date of
such Advance) exceed $75,000,000 in the aggregate; (4) no
Alternate Currency election shall be made after the occurrence
and during the continuance of a Default or Event of Default; and
(5) Revolving Lenders shall not be required to make any Alternate
Currency Advance if the applicable Alternate Currency Rate would
be limited to the Maximum Lawful Rate pursuant to Section 3.3.
Upon the expiration of any Interest Period applicable to an
Alternate Currency Advance and provided that no Default has
occurred and Borrower is entitled to have outstanding such
Alternate Currency Advance under this Agreement, the Alternate
Currency Advance shall continue for an Interest Period having the
same duration as the Interest Period then ended (but not beyond
the Revolving Facility Termination Date) unless Borrower shall,
upon three (3) Business Days prior written notice, elect a
different Interest Period. Upon the occurrence of an Event of
Default, Agent may convert all Alternate Currency Advances into
the Dollar Equivalent at the end of the respective Interest
Periods therefor.
(d) To the extent Borrower has not made an effective
election under and in accordance with subparagraphs (a) or (b)
above (including, without limitation, at the expiration of an
Interest Period or, as of the Closing Date, with respect to the
Advance of the Term Facility), the Applicable Rate shall be the
Variable Rate. If Borrower has failed to make such election at
the end of an Interest Period under the Revolving Credit
Facility, the Revolving Lenders shall be deemed to have made a
Variable Rate Advance in Dollars and in the amount, and in
replacement, of the LIBOR Rate Advance then maturing. If
Borrower has failed to make such elections at the end of any
Interest Period under the Term Facility, the applicable LIBOR
Rate Portion shall expire and convert to a Variable Rate Portion.
To the extent Borrower has not made an effective election under
clause (c) above prior to the expiration of the applicable
Interest Period with respect to Alternate Currency Advances, then
Borrower shall be deemed to have elected an Interest Period in
accordance with the penultimate sentence of clause (c) above.
(e) If, on or after the Closing Date, any Regulatory Change
shall make it unlawful, impracticable or impossible for any
Lender (or its Eurodollar lending office) to make, maintain or
fund LIBOR Rate Advances, LIBOR Rate Portions, Alternate Currency
Advances or Competitive Bid Advances, as applicable, and such
Lender shall so notify Agent, Agent shall forthwith give notice
thereof to the other applicable Lenders and AMRESCO, whereupon
until such Lender notifies AMRESCO and Agent that the
circumstances giving rise to such suspension no longer exist, the
obligation of such Lender to maintain or fund LIBOR Rate Portions
or to make LIBOR Rate Advances or Alternate Currency Advances or
to maintain the funding under a Competitive Bid Note, as the case
may be, shall be suspended. If such Lender shall determine that
it may not lawfully continue to maintain and fund any of its
outstanding LIBOR Rate Advances, LIBOR Rate Portions, Alternate
Currency Advances or amounts under a Competitive Bid Note, to
maturity and shall so specify in such notice, Borrower shall
immediately prepay in full the then outstanding principal amount
of such Lender's portion of the LIBOR Rate Advances, Alternate
Currency Advances or Competitive Bid Notes, as the case may be,
together with accrued interest thereon, or, if applicable, any
LIBOR Rate Portion shall immediately convert to a Variable Rate
Portion. Concurrently with prepaying such portion of the LIBOR
Rate Advances or Alternate Currency Advances, as the case may be,
Borrower shall borrow a Variable Rate Advance and/or an Advance
in Dollars, as the case may be, in an equal principal amount from
such Lender (on which interest and principal shall be payable
contemporaneously with the related LIBOR Rate Advances or
Alternate Currency Advances, as the case may be, of the other
Lenders), and such Lender shall make such Variable Rate Advance
or Advance in Dollars, as the case may be. If a Lender shall be
unable to make, maintain or fund LIBOR Rate Advances, LIBOR Rate
Portions or Alternate Currency Advances as above provided for
more than sixty days, and the other Lenders are not similarly
restricted, Borrower shall be entitled to designate an Eligible
Assignee acceptable to Agent to purchase the interest of the
Lender which is unable to fund LIBOR Rate Advances, LIBOR Rate
Portions or Alternate Currency Advances, as the case may be, and
such Lender shall sell its interest to such Eligible Assignee
within ten Business Days of Borrower's request. Any such
purchase shall be in accordance with and subject to the
provisions of Section 11.10.
(f) Borrower shall promptly indemnify (i) Agent and Lenders
against any loss or expense which Agent or Lenders may, as a
consequence of Borrower's failure to make a payment on the date
such payment is due hereunder, or the payment, prepayment or
conversion of any LIBOR Rate Advances, LIBOR Rate Portions,
Alternate Currency Advances or amounts due under Competitive Bid
Notes hereunder on a day other than an Interest Adjustment Date
or, in the case of Competitive Bid Notes, the last day of the
applicable Interest Period, sustain or incur in liquidating or
employing deposits from third parties acquired to effect, fund or
maintain any such LIBOR Rate Advances, LIBOR Rate Portions,
Alternate Currency Advances or Competitive Bid Advances or any
part thereof, including, without limitation, any Consequential
Loss or Alternate Currency Loss; (ii) Lenders against and
reimburse Lenders for increased costs to Lenders, as a result of
any Regulatory Change, in the maintaining of any LIBOR Rate
Advances, LIBOR Rate Portions, Alternate Currency Advances or
Competitive Bid Advances; Agent shall give AMRESCO written notice
of such costs within ninety (90) days of its or any Lender's
implementation and/or compliance with any such Regulatory Change,
and such costs shall be reimbursed to such Lender prior to the
earlier of (A) the Revolving Facility Termination Date or the
Term Facility Termination Date, as applicable, or (B) ten (10)
days following written notice thereof from Agent to AMRESCO; and
(iii) Agent and Revolving Lenders against any loss which Agent or
Revolving Lenders may sustain or incur, as a consequence of
Borrower=s failure to (A) pay any Alternate Currency Advance on
the date due or in the Alternate Currency in which it was made or
(B) borrow Alternate Currency Advances on the date for such
borrowing specified in the relevant Request for Advance,
including without limitation, any loss (1) arising from any
change in the value of Dollars in relation to any such Alternate
Currency Advance which was not paid on the date due between the
date such payment was due and the date of payment, or which was
not paid in the Alternate Currency in which it was made, or (2)
incurred in liquidating or closing out any foreign currency
contract undertaken by such Revolving Lender in funding or
maintaining such Alternate Currency Advance, all as determined by
such Revolving Lender in its sole discretion. All payments made
pursuant to this paragraph shall be made free and clear, without
reduction for, or account of, any present or future taxes or
other levies of any nature, excluding net income and franchise
taxes.
Section 3.6. Payments of Advances; Reduction of Commitment
Amount.
(a) At any time prior to the occurrence of an Event of
Default, Borrower may by notice from AMRESCO to Agent prior to
10:00 a.m. (Dallas, Texas time) on the date on which prepayment
under this Section 3.6 is to be made, voluntarily prepay amounts
outstanding under the Revolving Credit Facility from time to time
and at any time, in whole or in part, without premium or penalty;
provided, that (i) each such partial payment must be in a minimum
amount of at least One Million and No/100 Dollars ($1,000,000.00)
(or, as to prepayment of portions thereof which are Alternate
Currency Advances, the Dollar Equivalent thereof), and (ii)
Borrower shall pay any related Consequential Losses or Alternate
Currency Losses within ten days after Agent's demand therefor.
Each such optional prepayment shall be applied to the Revolving
Credit Facility ratably in accordance with Section 3.9 to pay the
amounts owed to each Revolving Lender thereunder. At any time
subsequent to the Revolving Facility Termination Date or the
termination of the Revolving Credit Facility, but prior to the
occurrence of an Event of Default, Borrower may by notice from
AMRESCO to Agent prior to 10:00 a.m. (Dallas, Texas time) on the
date on which prepayment under this Section 3.6 is to be made,
voluntarily prepay amounts outstanding under the Term Facility
from time to time and at any time, in whole or in part, without
premium or penalty; provided, that Borrower shall pay any related
Consequential Losses within ten days after Agent's demand
therefor. Each such optional prepayment shall be applied to the
Term Facility ratably in accordance with Section 3.9 to pay the
amounts owed to each Term Lender thereunder. Borrower shall not
be entitled to prepay any Competitive Bid Note unless Borrower
simultaneously with such payment pays any Consequential Loss
resulting from such prepayment.
(b) Borrower shall make mandatory prepayments under the
Revolving Credit Facility prior to the occurrence of an Event of
Default in an amount equal to (a) the excess, if any, of the sum
of the outstanding principal balance of the Revolving Credit
Facility (including amounts outstanding under Competitive Bid
Notes), plus the Letter of Credit Exposure, at any time over the
lesser of (1) the Borrowing Base less the amount outstanding
under the Term Facility, and (2) the Revolving Commitment; and,
(b) the net sale proceeds received by Borrower from the sale of
any asset which has either a value at the time of the sale (as
shown on the books of Borrower), or an aggregate sales price and
all other consideration for such sale, in excess of $2,500,000.00
(excluding, however, the proceeds from the sale of any Borrowing
Base Loan, if, within five Business Days from the receipt by
Borrower of such sale proceeds, either such proceeds are used to
reduce the outstanding balance of the Revolving Credit Facility
or AMRESCO delivers to Agent an updated Borrowing Base Schedule
showing that the aggregate outstanding Advances under the
Revolving Credit Facility (including amounts outstanding under
Competitive Bid Notes) do not exceed an aggregate amount equal to
the Borrowing Base less the amount outstanding under the Term
Facility). Borrower shall pay on demand given by Agent any
Consequential Loss arising as a result of any such mandatory
prepayments.
(c) Borrower shall make mandatory prepayments under the
Revolving Credit Facility prior to the occurrence of an Event of
Default, and under both Credit Facilities pro rata after the
occurrence of an Event of Default, in the amount of the proceeds
received by any Subsidiary from the creation of the NIM Trusts.
(d) Borrower may, prior to the occurrence of an Event of
Default, fully or partially, reduce the Revolving Commitment,
provided that (i) notice of such reduction must be received by
Agent by 10:00 a.m. Dallas, Texas, time on the fifth Business Day
preceding the effective date of such reduction, (ii) each such
reduction in the Revolving Commitment must be in a minimum amount
of $10,000,000.00 or any whole multiple of $1,000,000.00 in
excess thereof (or, as to the reduction of portions thereof which
are Alternate Currency Advances, the Dollar Equivalent thereof),
(iii) Borrower shall not be entitled to an increase in the
Revolving Commitment once it has been so reduced, (iv) if the sum
of the aggregate outstanding principal balance of the Revolving
Credit Facility (including amounts outstanding under Competitive
Bid Notes), plus the Letter of Credit Exposure, exceeds the
Revolving Commitment as so reduced, Borrower shall make a
mandatory prepayment on the principal amount of the Revolving
Credit Facility in at least the amount of such excess, together
with any Consequential Loss or Alternate Currency Loss arising as
a result thereof, and (v) in no event shall Borrower be entitled
to so reduce the Revolving Commitment below $20,000,000.00,
unless Borrower has elected to terminate the Revolving Credit
Facility in full.
(e) If Borrower shall prepay any LIBOR Rate Advance, LIBOR
Rate Portion or Competitive Bid Loan prior to the expiration of
its applicable Interest Period, a prepayment fee shall be due to
Revolving Lenders, Term Lenders or the applicable holder of the
Competitive Bid Loan in an amount equal to the consequential loss
(the "Consequential Loss") incurred by such Revolving Lenders,
Term Lenders or the applicable holder of the Competitive Bid Loan
as a result of any such prepayment, such Consequential Loss to be
computed as the product of (i) the amount of the sum so prepaid
multiplied by (ii) the difference (but not less than 0.00) of
(A) the 360-day interest yield (as of the applicable Effective
Date or Borrowing Date, as applicable, and expressed as a
decimal) on a Treasury Obligation selected by Agent and having,
as of the applicable Effective Date or Borrowing Date, a
remaining term until its maturity approximately equal to the
original Interest Period, minus (B) the 360-day interest yield
(as of the Business Day immediately preceding the prepayment date
and expressed as a decimal) on a Treasury Obligation selected by
Agent and having, as of the Business Day preceding the prepayment
date, a remaining term until maturity approximately equal to the
unexpired portion of the Interest Period, multiplied by (iii) the
quotient of (A) the number of calendar days in the unexpired
portion of the Interest Period, divided by (B) 360. For purposes
of computing a prepayment fee, the Treasury Obligations selected
by Agent shall be from among those included in the over-the-
counter quotations supplied to The Wall Street Journal by the
Federal Reserve Bank of New York City based on transactions of
$1,000,000.00 or more. Any prepayment fee required to be paid by
Borrower pursuant to this Section 3.6 or any other provisions of
this Agreement or of the other Loan Documents in connection with
the prepayment of any LIBOR Rate Advances, LIBOR Rate Portions or
Competitive Bid Loans shall be due and payable whether such
prepayment is being made voluntarily or involuntarily, including,
without limitation, as a result of an acceleration of sums due
under LIBOR Rate Advances, LIBOR Rate Portions, Competitive Bid
Loans or any part thereof due to an Event of Default.
(f) If Borrower shall prepay any Alternate Currency Advance
or for whatever reason an Alternate Currency Advance is converted
to Dollars prior to the expiration of its applicable Interest
Period, a prepayment fee shall be due to Revolving Lenders for
any loss, cost, liability, or expense (an "Alternate Currency
Loss") which any Revolving Lender incurs as a result thereof,
including, without limitation, (i) any loss or reasonable expense
sustained or incurred in liquidating or employing deposits from
third Persons acquired to effect or maintain such Alternate
Currency Advance or any part thereof, (ii) an amount equal to the
excess, if any of (A) its cost of obtaining the funds for the
Alternate Currency Advance being prepaid or converted prior to
the expiration of its applicable Interest Period for the period
from the date of such prepayment or conversion to the last day of
the Interest Period for such Alternate Currency Advance, over (B)
the amount of interest (as reasonably determined by such
Revolving Lender) that would be realized by such Revolving Lender
in re-employing the funds so prepaid or converted for such
Interest Period, (iii) any loss incurred in liquidating or
closing out any foreign currency contract undertaken by such
Revolving Lender in funding or maintaining such Alternate
Currency Advance, and (iv) any loss arising from any change in
the value of Dollars in relation to any such Alternate Currency
Advance which was not paid on the date due between the date such
payment was due and the date of payment, or which was not paid in
the Alternate Currency in which it was made, all as determined by
such Revolving Lender in its good faith discretion, but otherwise
without penalty.
(g) As long as no Event of Default has occurred and is
continuing, Borrower shall make such regularly scheduled
principal payments under the Term Facility as are set forth in
the Term Notes; provided, that prior to the Revolving Facility
Termination Date or the termination of the Revolving Credit
Facility, the aggregate amount of such principal payments under
the Term Facility during the twelve (12) month period immediately
preceding any such payment shall not exceed one percent (1%) of
the aggregate outstanding balance under the Term Notes at the
beginning of such twelve (12) month period.
A Revolving Lender (through the Agent) must request compensation
under this Section 3.6 as promptly as practicable after it
obtains knowledge of the event which entitles it to such
compensation, but in any event within 180 days after it obtains
such knowledge and pursuant to a certificate which sets forth the
amount such Revolving Lender is entitled to receive pursuant to
this Section 3.6 and the basis for determining such amount, which
certificate shall be conclusive as to the matters set forth
therein in the absence of manifest error. Any amounts received
by Agent from Borrower pursuant hereto shall be disbursed by
Agent in immediately available funds to the Revolving Lenders
requesting such amounts.
Section 3.7. Schedules on Notes. Each Revolving Lender is
hereby authorized to record the date and amount of the initial
principal balance of its Revolving Note and the date and amount
of each advance and repayment of principal on such Revolving
Note, and to attach any such recording as a schedule to the
Revolving Note whereupon such schedule shall constitute a part of
such Revolving Note for all purposes. Any such recording shall
constitute prima facie evidence of the accuracy of the
information so recorded; provided that the absence or inaccuracy
of any such schedule or notation thereon shall not limit or
otherwise affect the liability of Borrower for the repayment of
all amounts outstanding under the Revolving Notes together with
interest thereon.
Section 3.8. General Provisions as to Payments. All
payments and indemnities required to be made by Borrower under
any of the Loan Documents shall be joint and several obligations
of Borrower. Borrower shall make each payment of principal and
interest on either of the Credit Facilities and all fees payable
hereunder or under any other Loan Document not later than
12:00 noon (Dallas time) on the date when due, in Federal or
other funds immediately available in Dallas, Texas, to Agent at
Agent's address for payments set forth in Schedule I. Agent will
promptly (and if such payment is received by Agent by 12:00 noon
(Dallas, Texas time), and otherwise if reasonably possible, on
the same Business Day, and in any event not later than the next
Business Day after receipt of such payment) distribute to each
Lender under the Credit Facility on which a payment is made a
payment on the applicable Note, in accordance with such Lender's
pro rata share of each such payment received by Agent. For
purposes of calculating accrued interest on either of the Credit
Facilities, any payment received by Agent as aforesaid by
12:00 noon (Dallas, Texas time) on any Business Day shall be
deemed made on such day; otherwise, such payment shall be deemed
made on the next Business Day after receipt by Agent. Whenever
any payment of principal or interest on either of the Credit
Facilities, or any fees under the Loan Documents, shall be due on
a day which is not a Business Day, the date for payment thereof
shall be extended to the next succeeding Business Day. If the
date for any payment of principal is extended by operation of law
or otherwise, interest thereon shall be payable for such extended
time.
Section 3.9. Application of Payments. Prior to the
occurrence of an Event of Default, all payments made on the
Revolving Credit Facility, the Term Facility or the Competitive
Bid Loans shall be applied against the Revolving Credit Facility,
the Term Facility or the Competitive Bid Loans as designated by
AMRESCO (other than any payments required under the Term Notes)
and shall be paid to each Revolving Lender or Term Lender, as
applicable, in accordance with its Revolving Loan Percentage or
Term Loan Percentage, respectively, or to the holder of the
applicable Competitive Bid Note, subject to the provisions of
Article X and any provision in the Loan Documents or agreements
among the applicable Lenders providing for the application of
such proceeds against expenses or other amounts. After the
occurrence of an Event of Default and for a period of thirty days
after notice of such Event of Default has been received and
acknowledged by, or delivered by, Agent, all payments made on the
Credit Facilities (other than scheduled payments on the Credit
Facilities and any provisions in the Loan Documents providing for
the application of such proceeds against expenses and other
amounts) shall be applied first against the Revolving Credit
Facility. If an Event of Default continues uncured or unwaived
after said thirty-day period, payments on the Credit Facilities
shall be ratably paid to each Lender in accordance with its
Aggregate Loan Percentage, subject to Article X and any provision
in the Loan Documents or agreements among the Lenders providing
for the application of such amounts. Revolving Lenders and
Borrower agree that in the event an Event of Default continues
uncured or unwaived after the above-referenced thirty day period,
the Revolving Lenders shall make an Advance to each of the Term
Lenders and holders of Competitive Bid Loans in an amount equal
to the net aggregate payments applied against the Revolving
Credit Facility during such thirty-day period times the Aggregate
Loan Percentage of such Term Lenders and holders of Competitive
Bid Loans. The Advance or Advances so made shall not require any
action on the part of Borrower and shall be made notwithstanding
Borrower=s failure to comply with the conditions for making
Advances under the Revolving Credit Facility. Except as (a) to
principal payments made pursuant to Section 3.6(a),(b),(c) or
(d)(iv), (b) provided in Section 9.10, and (c) otherwise
specifically provided in this Agreement or in any Loan Document,
all prepayments on the respective Credit Facilities (including
Competitive Bid Loans) shall be applied against accrued but
unpaid interest and then against the principal portion of the
applicable Credit Facility; provided, however, that, unless
otherwise designated by AMRESCO or required by law, prepayments
and involuntary payments received by the holder hereof and
applied to principal hereunder shall be applied first to the
Variable Rate Advances or Variable Rate Portion, as applicable,
in Dollars (or that portion of LIBOR Rate Advances or LIBOR Rate
Portions, as applicable, not subject to a prepayment penalty),
second to the LIBOR Rate Advances or LIBOR Rate Portions, as
applicable, in Dollars, third, to the Competitive Bid Loans and
fourth to the Alternate Currency Advances.
Section 3.10. Post-Default Interest; Past Due Principal and
Interest. After maturity of the Notes or the occurrence of an
Event of Default, the outstanding principal balance of the Notes
shall, at the option of the Required Lenders, bear interest at
the Default Rate. Any past due principal of and, to the extent
permitted by law, past due interest on the Notes shall bear
interest, payable as it accrues on demand, for each day until
paid at the Default Rate. Such interest shall continue to accrue
at the Default Rate notwithstanding the entry of a judgment with
respect to any of the Obligations or the foreclosure of any of
the Lenders' Liens, except as otherwise provided by applicable
law.
Section 3.11. Computation of Interest and Fees. All
interest payable on the Notes hereunder or the amount of any fees
hereunder shall be computed based on the number of days elapsed
and 360 days per year (or 365 days for Alternate Currency
Advances in British pounds sterling), subject to the provisions
hereof limiting interest to the maximum permitted by applicable
law.
Section 3.12. Capital Adequacy. If any present or future
law, governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law) or the
interpretation thereof by a court or governmental authority with
appropriate jurisdiction affects the amount of capital required
or expected to be maintained by any Lender or any corporation
controlling such Lender and such Lender reasonably determines
that the amount of capital so required or expected to be
maintained is increased by or based upon the existence of the
Credit Facilities or the Letters of Credit, then such Lender may
notify AMRESCO of such fact, and commencing ninety (90) days
following such notice, Borrower shall pay to such Lender or Agent
(for such Lender) from time to time on demand, as an additional
fee payable hereunder, such amount as Lender shall determine in
good faith and certify in a notice to AMRESCO in reasonable
detail to be an amount that will adequately compensate such
Lender in light of these circumstances for its increased costs of
maintaining such capital. Each Lender shall allocate such cost
increases among its customers in good faith and on an equitable
basis.
Section 3.13. Deposit of Cash Collateral. Upon the
occurrence of any Event of Default, Borrower shall, on the next
succeeding Business Day, deposit in a segregated, interest
bearing account with Agent such funds as Agent may request, up to
a maximum amount equal to the aggregate existing Letter of Credit
Exposure. Any funds so deposited shall be held by Agent as
security for the Obligations (including the Letters of Credit)
and Borrower will, in connection therewith, execute and deliver
such assignments and security agreements in form and substance
satisfactory to Agent which Agent may, in its discretion,
require. As drafts or demands for payment are presented under
any Letter of Credit, Borrower hereby irrevocably directs Agent
to apply such funds to satisfy such drafts or demands. When all
Letters of Credit have expired and the Revolving Notes have been
repaid in full (and Lenders have no obligation to make further
Advances or issue Letters of Credit hereunder) or such Event of
Default has been cured to the satisfaction of Agent, Agent shall
release to AMRESCO any remaining funds deposited under this
Section 3.13. Whenever Borrower is required to make deposits
under this Section 3.13 and fail to do so on the day such deposit
is due, Revolving Lenders may make such deposit using any funds
of Borrower then available to any Revolving Lender.
Section 3.14. Alternate Currency Notes. In order to
satisfy various Legal Requirements applicable to certain Foreign
Portfolios or for any other purpose for which Borrower can obtain
an Alternate Currency Advance (including, without limitation,
Legal Requirements related to the deductibility of interest on
Alternate Currency Advances used to fund the acquisition of such
Foreign Portfolios or for such other purposes), Borrower has
requested that they be allowed to separately document the
fundings for, or refinancing of, the acquisition of any such
Foreign Portfolios or for such other purposes. Revolving Lenders
hereby approve such request subject to Agent being satisfied that
such additional documentation is appropriate. If approved by
Agent, Borrower which desires to acquire the applicable Foreign
Portfolio or to make a capital contribution to the Guarantor
making any such acquisition or to acquire or invest in any asset
or Person for the purpose for which Borrower can obtain an
Alternate Currency Advance may each execute and deliver to
NationsBank a promissory note or notes (the "Alternate Currency
Note") in an amount equal to the proceeds to be funded for such
acquisition. The terms of such Alternate Currency Note shall be
satisfactory to Agent in all respects. Agent, on behalf of
Lenders, shall then acquire the Alternate Currency Note from
NationsBank, and Borrower shall simultaneously with the delivery
of the Alternate Currency Note deliver to Agent a Request For
Advance for an Alternate Currency Advance in an amount sufficient
to enable Revolving Lenders to acquire the Alternate Currency
Note. Borrower and NationsBank understand and agree that
NationsBank shall not fund an Alternate Currency Note until such
time that Revolving Lenders have funded or are prepared to
simultaneously fund an Alternate Currency Advance to acquire such
Alternate Currency Note. The purchase price for each Alternate
Currency Note shall be equal to the outstanding principal balance
thereof, together will all accrued but unpaid interest thereon,
and, upon such payment, NationsBank shall endorse such Alternate
Currency Note to Agent, on behalf of Revolving Lenders, without
recourse or warranty. Payments of principal and interest made on
any Alternate Currency Note shall be applied against the
principal and interest on the Alternate Currency Advance made by
Revolving Lenders to acquire such Alternate Currency Note. In
addition, upon repayment by Borrower of all principal and accrued
but unpaid interest on any Alternate Currency Advance used to
acquire an Alternate Currency Note, than Agent, on behalf of
Revolving Lenders, shall return such Alternate Currency Note to
the maker thereof marked "Paid."
ARTICLE IV
CONDITIONS TO CLOSING
Section 4.1. Conditions To Closing. The obligation of the
Revolving Lenders to fund the first Advance under the Revolving
Credit Facility after the Closing Date, the Issuing Lender to
issue any Letter of Credit after the Closing Date, any Term
Lender to fund any additional Term Loan, or any Revolving Lender
to fund a Competitive Bid Loan, whichever is first, as provided
herein is subject to the satisfaction of the following conditions
and requirements:
(a) receipt by Agent of (i) this Agreement, properly
executed by Borrower, and (ii) evidence acceptable to Agent that
Borrower has paid all fees and expenses required to be paid by
Borrower as of the date of such Advance or issuance;
(b) receipt by each Lender of its Note, properly
executed by Borrower, together with its Participation Fee and
Modification Fee, if applicable;
(c) receipt by Agent of one or more Pledge Agreements,
and all financing statements related thereto, properly executed
by the appropriate Borrower or Guarantor, together with the
original stock certificates accompanied by stock powers executed
in blank by the appropriate Borrower or Guarantor evidencing all
of the outstanding shares of stock of each Subsidiary of Borrower
and Guarantors which is incorporated in the United States (other
than stock of the Excluded Subsidiaries and sixty-five percent
(65%) of the stock of the Foreign Obligors.
(d) receipt by Agent of each Third Modification of
Collateral Assignment and all financing statements related
thereto, properly executed by Borrower and the appropriate
Guarantors;
(e) receipt by Agent of the Third Modification of
Security Agreement and all financing statements related thereto,
properly executed by Borrower and the appropriate Guarantors;
(f) receipt by Agent of the Third Modification of
Lockbox Agreement and all financing statements related thereto,
properly executed by Borrower, Guarantors and the Lockbox Agent;
(g) receipt by the Custodians of the original
promissory notes evidencing the Assigned Loans owned by Borrower
or any Guarantor as of the Closing Date, together with allonge
endorsements attached thereto (in form acceptable to Agent)
executed in blank by Borrower or the appropriate Guarantor, and
all other documents required to be delivered to the Custodian
pursuant to the terms of the Custodial Agreement, the Collateral
Assignment or the other Loan Documents (including, without
limitation, as required by Sections 5.2 and 5.3 hereof);
(h) receipt by Agent from each Custodian of the
certificate required to be delivered under its respective
Custodial Agreement to reflect receipt by the Custodian of the
items referenced in (g) above;
(i) receipt by Agent of the Guaranty Agreement
executed by each Subsidiary of Borrower other than the Excluded
Subsidiaries;
(j) receipt by Agent of a contribution and
indemnification agreement in form and substance satisfactory to
Agent executed by Borrower and each Subsidiary of Borrower other
than the Excluded Subsidiaries;
(k) receipt by Agent of an opinion of general counsel
for Borrower and each Guarantor, opining as to the due
organization and existence of Borrower and each Guarantor, the
enforceability of each of the Loan Documents and such other
matters as Agent may reasonably request, in form and substance
satisfactory to Agent;
(l) receipt by Agent of all resolutions, certificates
or documents it may reasonably request relating to the formation,
existence and good standing of Borrower and each Guarantor on the
date hereof, corporate authority for the execution and validity
of this Agreement and the other Loan Documents, and any other
matters relevant to this Agreement, all in form and substance
satisfactory to Agent, which resolutions, certificates and
documents shall include, without limitation, (i) the articles of
incorporation and bylaws of Borrower and each Guarantor,
(ii) resolutions of the board of directors of Borrower and each
Guarantor authorizing the execution of the Loan Documents on
behalf of each such Borrower and Guarantor and the granting of
all the Lenders' Liens as security for the Credit Facilities and
the Letters of Credit, (iii) certificates of incumbency for the
officers of Borrower and each Guarantor, and (iv) certificates of
corporate existence and good standing issued by the state of
incorporation of Borrower and each Guarantor and, as requested by
Agent, from the appropriate governmental authority of each state
in which Borrower and each Guarantor is required by applicable
law to be qualified;
(m) receipt by Agent of filing officer certificates
(or commercial reports similar thereto, if satisfactory to Agent)
under Section 9-407(2) of the UCC, releases or partial releases
of liens or financing statements, and other evidence satisfactory
to Agent that there are no Liens on any assets of Borrower or any
Guarantor, except Liens permitted by Section 8.7 hereof;
(n) satisfaction of all conditions contained in
Section 4.2 if an Advance is being made, or satisfaction of all
conditions contained in Section 4.3 if a Letter of Credit is
being issued;
(o) receipt by Agent of copies of certificates of
insurance for each policy maintained by Borrower or any
Guarantor, together with evidence of payment of all premiums
thereon; and
(p) receipt by Agent and/or Lenders of all other
documents, instruments, certificates and information to be
delivered on or before the Closing Date pursuant to the terms of
this Agreement and the other Loan Documents.
All the documents, instruments, certificates, information,
evidences and opinions referred to in this Section 4.1 shall be
delivered to Agent no later than the Closing Date, and Lenders
shall not be bound by or obligated hereunder until Agent has
received all such items.
Section 4.2. Conditions To All Advances. The obligation
of Lenders to fund any Advance as provided herein is subject to
the satisfaction of the following conditions and requirements:
(a) timely receipt by Agent of a Request For Advance
(which shall be appropriately modified to Agent's satisfaction
with respect to the funding of the Term Facility);
(b) immediately before and after giving effect to such
Advance, no Default shall have occurred and be continuing and the
making of such Advance shall not cause a Default;
(c) the representations and warranties contained in
this Agreement and in the other Loan Documents shall be true and
correct in all material respects on and as of the date of such
Advance, except that all representations and warranties that
speak as of a particular date shall only be required on the date
of each such Advance to be true and correct in all material
respects as of the date to which such representation or warranty
speaks and not as of any subsequent date; and
(d) such other information and documentation as Agent
shall reasonably deem necessary or desirable in connection with
the funding of such Advance.
Section 4.3. Conditions to Letters of Credit. The
obligation of the Issuing Lender to issue any Letter of Credit as
provided herein is subject to the satisfaction by Borrower of the
following conditions and requirements:
(a) timely receipt by the Issuing Lender of a fully
completed LOC Application;
(b) timely receipt by Agent of a Request For Advance;
(c) immediately before and after the issuance of such
Letter of Credit, no Default shall have occurred and be
continuing and the issuance of any Letter of Credit shall not
cause a Default;
(d) the representations and warranties contained in
this Agreement and in the other Loan Documents shall be true in
all material respects on and as of the date of issuance of such
Letter of Credit, except that all representations and warranties
that speak as of a particular date shall only be required on the
date of issuance of each such Letter of Credit to be true and
correct in all material respects as of the date to which such
representation or warranty speaks and not as of any subsequent
date;
(e) timely receipt by Agent (on behalf of the Issuing
Lender) of the issuance fee required to be paid by the Issuing
Lender related to the issuance of such Letter of Credit; and
(f) such other information and documentation as Agent
or the Issuing Lender shall reasonably deem necessary or
desirable in connection with the issuance of such Letter of
Credit.
ARTICLE V
COLLATERAL AND GUARANTIES
Section 5.1. Security and Guaranties. The Credit
Facilities, the Letters of Credit, and the Obligations (as
modified and increased pursuant to this Agreement) shall all be
(a) secured by the liens and security interests created by the
Security Documents and any and all other Collateral described
herein, and all proceeds thereof, until the particular item of
Collateral is released or until the Letters of Credit have
expired and the Credit Facilities and all the Obligations are
paid and performed in full (and any obligation of Lenders to make
Advances has been terminated) and (b) guaranties by each
Subsidiary (other than an Excluded Subsidiary) pursuant to the
terms of the Guaranty Agreement. Borrower and Lenders understand
and agree that the term "Obligations" as used in the Security
Documents is intended to, and shall mean, the Obligations as
modified and increased by this Agreement, and therefore, the
liens and security interests created and evidenced by the
Security Documents secure, and the Guaranty Agreement guaranty,
all such Obligations.
Section 5.2. Requirements For Assigned Loans. With
respect to each of the Assigned Loans, Borrower or the applicable
Guarantor shall deliver to a Custodian the documents required by
the applicable Custodial Agreement which shall include, without
limitation, the following:
(a) Either (i) the original promissory note or notes
evidencing the Assigned Loan properly endorsed showing
endorsements thereof from the original holder thereof, and all
subsequent holders, to Borrower or the applicable Guarantor,
together with an endorsement thereof by Borrower or such
Guarantor to Agent, on behalf of Lenders (in form satisfactory
to Agent), which endorsement may be an allonge endorsement,
(ii) with respect to any Assigned Loan where the original
promissory note has been lost, an original lost note affidavit in
form which is sufficient under the UCC or the laws of any
applicable jurisdiction to enable the owner thereof to maintain
an action on the related promissory notes and recover from any
party liable thereon, and properly executed by the Person which
sold such promissory note to Borrower or the applicable
Guarantor, (iii) with respect to any Assigned Loan for which
Borrower or a Guarantor has a participation interest, the
original or a copy of the participation certificate or agreement
evidencing Borrower's or applicable Guarantor=s interest in such
Assigned Loan, or (iv) with respect to any Assigned Loan for
which a Borrower or a Guarantor has a judgment, an original
Assignment of Judgment (as defined in the Collateral Assignment);
(b) Copies of the mortgage, deed of trust or other
security documents by which a lien or security interest has been
granted to secure the Assigned Loan;
(c) An original Transfer of Liens properly executed
and acknowledged by Borrower or the appropriate Guarantor;
(d) To the extent in the possession of Borrower or a
Guarantor or an Affiliate of Borrower or a Guarantor, a Title
Policy and certificate of hazard and/or liability insurance with
respect to any Underlying Real Estate; and
(e) Such other information related to the Underlying
Real Estate, to the extent in the possession of Borrower, any
Guarantor or an Affiliate of Borrower or any Guarantor, as Agent
shall reasonably request.
Section 5.3. Requirements for Mortgaged Properties. With
respect to each of the Mortgaged Properties, Borrower or
Guarantor which owns such Mortgaged Property shall deliver to a
Custodian the documents required by the applicable Custodial
Agreement with respect thereto which shall include, without
limitation, the following:
(a) A copy of the deed or conveyance instrument by
which the applicable Borrower or the applicable Guarantor took
title to the Mortgaged Property;
(b) A Title Policy (which Title Policy may be a
mortgagee policy of title insurance which has converted to an
owner's policy of title insurance after foreclosure), for each
Mortgaged Property with a value in excess of One Hundred Thousand
and No/100 Dollars ($100,000.00) and, unless covered under an
umbrella policy approved by Agent, a certificate of hazard and/or
liability insurance covering the Mortgaged Property;
(c) An original, properly executed and acknowledged
Mortgage, together with a financing statement related thereto;
and
(d) Such other information as Agent shall reasonably
request.
Section 5.4. Recording. The Custodial Agreements shall
provide that the Custodian shall hold the original of each
Mortgage (and related financing statement) and Transfer of Liens
for recording in the appropriate real estate (or UCC, as
appropriate) records if and when (i) a Default occurs, or
(ii) Agent delivers ten (10) days prior written notice to the
Custodians and AMRESCO that the Required Lenders require the
recordation of such Mortgages (and related financing statements)
or Transfers of Liens. After the occurrence of any of the above
events, the Custodians or Agent shall record all Mortgages (and
related financing statements) and Transfers of Liens then held by
the Custodians, and Borrower shall be required to pay, or
reimburse the Lenders for the payment of, all filing fees,
mortgage and stamp taxes and other expenses incurred by Lenders,
Agent or Custodians in connection with the recordation of the
Mortgages (and related financing statements) and Transfers of
Liens.
Section 5.5. Timing of Deliveries. The items referenced
in Sections 5.2 and 5.3 must be delivered to a Custodian under a
Custodial Agreement within the time periods specified in such
Custodial Agreement, and Borrower or the appropriate Guarantor
must deliver to Agent a supplement to the Collateral Assignment
covering any Assigned Loans or Mortgaged Property acquired by
Borrower or any Guarantor after the Closing Date, no later than
the earlier to occur of (i) a Default, (ii) thirty (30) days
after the effective date of the acquisition by Borrower or the
applicable Guarantor of such Assigned Loans or Mortgaged
Property, or (iii) the date on which Borrower requests that such
Assigned Loans or Mortgaged Property be included in the Borrowing
Base.
Section 5.6. Agent's Discretion. All requirements for the
Collateral are imposed solely and exclusively for the benefit of
the Lenders but are to be enforced and monitored solely and
exclusively by Agent in accordance with the provisions of the
Loan Documents. No Person (including Borrower, any Guarantor or
any other Lender) other than Agent shall have any standing to
require satisfaction of any such requirements. Agent shall be
entitled to require delivery of the items referenced in Section
5.2 and Section 5.3 at any time and, from time to time (subject
to the limitation contained in Section 5.4), and the failure of
Agent to request any such items at any particular time shall not
constitute a waiver of the Lenders' rights to thereafter require
that such items be delivered.
Section 5.7. Lockbox; Lockbox Account.
(a) Notwithstanding any provision herein or in the
other Loan Documents to the contrary, Borrower and Guarantors
agree that they have instructed, or will cause instructions to be
given to, all Account Debtors, or contemporaneously with the
execution of this Agreement or within thirty (30) days after the
addition of an Asset Portfolio to the Borrowing Base will
instruct, or will cause instructions to be given to, all Account
Debtors, pursuant to a letter from Borrower or the appropriate
Guarantor or the seller of such Asset Portfolio in form approved
by Agent, to mail all payments and other remittances owing with
respect to the Assigned Loans directly to the Lockbox. Lockbox
Agent will have exclusive and unrestricted access to the Lockbox
and will have complete and exclusive authority to receive, pick
up and open all mail addressed to the Lockbox, whether
registered, certified, insured or otherwise. Neither Borrower
nor any Guarantors will have access to or control over the
Lockbox or any checks or monies received in the Lockbox. All
items received and monies collected in connection with the
Assigned Loans will be processed by the Lockbox Agent pursuant to
the terms of the Lockbox Agreement, and in the event any checks
or monies shall be submitted to Borrower or any Guarantor by any
Account Debtor under the Assigned Loans, or shall otherwise come
into the possession of Borrower or any Guarantor, the same shall
be deemed held by Borrower or such Guarantor in trust for
Lenders, and Borrower or such Guarantor shall deliver the same
to the Lockbox Agent within three (3) Business Days after
received by Borrower or such Guarantor, endorsed if appropriate,
for deposit into the Lockbox Account.
(b) Prior to the occurrence of a Default, on each
Business Day during each Credit Period, the Lockbox Agent shall,
and Borrower and each Guarantor hereby authorize and instruct the
Lockbox Agent to, withdraw all funds from the Lockbox Account, if
any, and deposit same into AMRESCO's operating account at
NationsBank as designated in writing from time to time by AMRESCO
to the Lockbox Agent. Upon the occurrence of a Default and
thereafter, all amounts in the Lockbox Account shall be disbursed
to and applied by Lockbox Agent and Agent to reduce the
outstanding obligations as provided in Section 9.10.
(c) Notwithstanding anything herein to the contrary,
Agent shall be entitled to establish, in lieu of the lock-box
arrangement otherwise described in this Section 5.7, a trust or
similar account arrangement in those countries where lock-box
arrangements are not commonly used. Without limiting the
generality of the previous sentence, Lenders, Borrower and
Guarantors agree that AMRESCO UK, AMRESCO UK Ventures Limited,
AMRESCO UK Limited and Old Midland House Limited shall not be
subject to the previous provisions of this Section 5.7, but shall
be subject to similar obligations with respect to any "Trust
Account" established by or for the benefit of such Persons in the
United Kingdom as set forth in Clause 6 of that certain Composite
Guarantee and Debenture dated June 7, 1996, executed by and among
each of such Persons and Agent.
Section 5.8. Release of Collateral. Prior to the
occurrence of a Default or an Event of Default, Borrower and
Guarantors shall be entitled to obtain a release of the Lenders'
Liens with respect to certain of the Collateral designated by
Borrower so long as (a) either (i) the Collateral being released
is not required to be pledged to the Lenders pursuant to the
terms of this Agreement, (ii) the Collateral being released is
being sold by Borrower or the applicable Guarantor (provided,
that, if the purchaser or transferee in connection with such sale
is an Excluded Subsidiary, the book value [determined in
accordance with GAAP] of any item of Collateral being released
does not exceed three percent (3%) of Adjusted Net Worth and the
aggregate book value [determined in accordance with GAAP] of all
items of Collateral so released over the immediately preceding
twelve month period does not exceed ten percent (10%) of Adjusted
Net Worth), or (iii) the Collateral being released is being
pledged by Borrower or such Guarantor to secure Debt which
Borrower or such Guarantor is entitled to incur under Section 8.5
and Borrower or such Guarantor is entitled under Section 8.7 to
grant a lien on such Collateral being released in favor of the
Person for whom, and securing the Debt which, such lien is then
being created to secure, (b) Borrower and Guarantors shall
continue to be in compliance under this Agreement following the
release of such Lenders' Liens, and (c) Borrower has reduced the
amount outstanding under the Credit Facilities in an amount
deemed satisfactory by Agent, in its sole discretion, due to such
release of Collateral. If Collateral is released as part of an
asset exchange or capital contribution in connection with an
Investment permitted by this Agreement, then condition (c) above
can be satisfied by Borrower granting to Agent (for the benefit
of Lenders) liens or security interests in Collateral of the same
value as the Collateral being released as determined by Agent in
its sole discretion.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Borrower and each Guarantor represent and warrant to Lenders
that:
Section 6.1. Existence and Power of Borrower and
Guarantors. Each Borrower and Guarantor (a) is a corporation or
partnership, as appropriate, duly created, validly existing and
in good standing under the laws of the state, province or country
under which it is organized, and is or will be qualified and in
good standing as a foreign corporation or partnership, as
appropriate, under the laws of each state where such
qualification is necessary for Borrower or such Guarantor to
conduct its business; and (b) has all corporate or partnership,
as appropriate, powers and all governmental licenses,
authorizations, consents and approvals required to carry on its
business as now conducted and as contemplated to be conducted,
except where the failure to have any such item would not have a
material adverse effect on Borrower's or such Guarantor's
business and financial condition.
Section 6.2. Subsidiaries. Other than the Excluded
Subsidiaries, all direct and indirect Subsidiaries of AMRESCO are
Guarantors or a Borrower. All stock of each Subsidiary other
than Foreign Obligors and sixty-five percent (65%) of the stock
of each Foreign Obligor has been collaterally assigned to Agent
(on behalf of Lenders) pursuant to a Pledge Agreement, other than
stock of Excluded Subsidiaries. No Guarantor is an Excluded
Subsidiary.
Section 6.3. Authorization; Contravention. The execution,
delivery and performance of this Agreements, the Notes, the LOC
Applications, the Security Documents, the Guaranty Agreement and
the other Loan Documents by Borrower and each Guarantor as
appropriate, are within Borrower's or such Guarantor=s corporate
or partnership, as appropriate, powers, have been duly authorized
by all necessary corporate or partnership, as appropriate,
action, require no action by or in respect of, or filing with,
any governmental body, agency or official and do not contravene,
or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation, bylaws or
partnership agreement, as appropriate, of Borrower or any such
Guarantor or of any agreement, judgment, injunction, order,
decree or other instrument binding upon Borrower or any such
Guarantor or result in the creation or imposition of any Lien on
any asset of Borrower or any such Guarantor except Liens securing
the Notes.
Section 6.4. Enforceable Obligations. This Agreement, the
Notes, the LOC Applications and the other Loan Documents each
constitutes a valid and binding agreement of Borrower to the
extent Borrower is a party thereto, enforceable in accordance
with its terms except as (a) the enforceability thereof may be
limited by bankruptcy, insolvency, fraudulent transfer or similar
laws affecting creditors rights generally, and (b) the
availability of equitable remedies may be limited by equitable
principles of general applicability. The Guaranty Agreement and
the other Loan Documents each constitutes a valid and binding
agreement of each Guarantor to the extent such Guarantor is a
party thereto, enforceable in accordance with its terms except as
(a) the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent transfer or similar laws affecting
creditors rights generally, and (b) the availability of equitable
remedies may be limited by equitable principles of general
applicability.
Section 6.5. Financial Information.
(a) The current financial statements of Borrower and
each Guarantor and all of the other financial reports and
information of Borrower and each Guarantor that have been
delivered to Lenders are true and correct in all material
respects as of the date of such current financial statements and
other reports and information.
(b) Except as disclosed in writing to Lenders prior to
the execution and delivery of this Agreement, since June 30,
1997, there has been no material adverse change in the business,
financial position or results of operations of Borrower or any
Guarantor; and, there exists no condition, event or occurrence
that, individually or in the aggregate, could reasonably be
expected to result in a material adverse change in the business,
financial position or results of operations of Borrower or any
Guarantor.
Section 6.6. Litigation. There is no action, suit or
proceeding pending against, or to the knowledge of Borrower,
threatened against or affecting, Borrower or any Guarantor before
any court or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse
decision which could materially adversely affect the business,
financial position or results of operations of Borrower or any
Guarantor or which could in any manner draw into question the
validity of the Loan Documents.
Section 6.7. ERISA.
(a) Each Employee Plan has been maintained and
administered in substantial compliance with the applicable
requirements of the Code and ERISA. No circumstances exist with
respect to any Employee Plan that could have a material adverse
effect on Borrower or any Guarantor.
(b) With respect to each Pension Plan, (i) no
accumulated funding deficiency (within the meaning of
Section 412(a) of the Code), whether waived or unwaived, exists;
(ii) the present value of accrued benefits (based on the most
recent actuarial valuation prepared for each such plan, if any,
in accordance with ongoing assumptions) does not exceed the
current value of plan assets allocable to such benefits by a
material amount; (iii) no reportable event (within the meaning of
Section 4043 of ERISA) other than purchases and sales of
securities from a plan trustee as reported in the audited
financial statements of such plan has occurred; (iv) no
uncorrected prohibited transactions (within the meaning of
Section 4975 of the Code) exist which could have a material
adverse effect on Borrower or any Guarantor; (v) to the extent
such plan is covered by PBGC, no material liability to the PBGC
exists and no circumstances exist that could reasonably be
expected to result in any such liability; and (vi) no material
withdrawal liability (within the meaning of Section 4201(a) of
ERISA) exists and no circumstances exist that could reasonably be
expected to result in any such liability.
(c) As of the date hereof, neither Borrower nor any
Guarantor has any obligation under any Employee Plan to provide
post-employment health care benefits to any of its current or
former employees, except as may be required by Section 4980B of
the Code.
Section 6.8. Taxes and Filing of Tax Returns. Borrower
and each Guarantor have filed all material tax returns required
to have been filed and has paid all Taxes shown to be due and
payable on such returns, including interest and penalties, and
all other Taxes which are payable by such party, to the extent
the same have become due and payable other than Taxes with
respect to which a failure to pay would not have a material
adverse effect on Borrower or any Guarantor. Neither Borrower
nor any Guarantor has any knowledge of any proposed Tax
assessment against Borrower or any Guarantor other than customary
ad valorem taxes or other Taxes to become due in the normal
course of business, and all Tax liabilities of Borrower and each
Guarantor are adequately provided for. No income tax liability
of Borrower or any Guarantor has been asserted by the Internal
Revenue Service for Taxes in excess of those already paid, the
payment of which would have a material adverse affect on Borrower
or any Guarantor.
Section 6.9. Ownership of Assets. Borrower and each
Guarantor have good and indefeasible title to all of the
Collateral and all other assets reflected on its most current
financial statements delivered to Lenders. Except for Permitted
Encumbrances and liens permitted by Section 8.7 hereof, there is
no Lien on any property of Borrower or any Guarantor, and the
execution, delivery, performance or observance of the Loan
Documents will not require or result in the creation of any Lien
(except Lenders' Liens) on any such property. Borrower and each
Guarantor have properly granted to Lenders a perfected security
interest or lien in all Assigned Loans and other Collateral and a
valid first lien on all Mortgaged Properties owned by Borrower or
any Guarantor which have not been previously released pursuant to
the terms of the applicable Custodial Agreement (including,
without limitation, all Assigned Loans and Mortgaged Properties
included in the current Borrowing Base). Borrower and
Guarantors have requested as an accommodation to Borrower and
Guarantors because of the number of Assigned Loans and for ease
of administering the Credit Facilities that the Assigned Loans be
endorsed by using an allonge endorsement, and Borrower and
Guarantors acknowledge that, if an allonge endorsement is so used
in connection with an Assigned Loan, Borrower and Guarantors
intend such endorsement to be a part of the Assigned Loan as
fully as if such endorsement was made on the instrument itself.
Section 6.10. Business; Compliance. Borrower and each
Guarantor have performed and abided by all obligations required
to be performed by it under any license, permit, order,
authorization, grant, contract, agreement, or regulation to which
it is a party or by which it or any of its assets are bound and
which, if Borrower or such Guarantor were to fail to perform or
abide by, such failure would have a material adverse effect on
the business operations of Borrower or such Guarantor.
Section 6.11. Licenses, Permits. Borrower and each
Guarantor possess such valid franchises, licenses, permits,
consents, authorizations, exemptions and orders of Governmental
Authorities, as are necessary to carry on its business as now
being conducted, other than violations which would not (either
individually or collectively) have a material adverse effect on
the financial condition or operations of Borrower or any
Guarantor.
Section 6.12. Compliance with Law. The business and
operations of Borrower and each Guarantor have been and are being
conducted in accordance with all applicable laws, rules and
regulations of all Governmental Authorities, other than
violations which would not (either individually or collectively)
have a material adverse effect on the financial condition or
operations of Borrower or any Guarantor.
Section 6.13. Full Disclosure. All information heretofore
furnished by Borrower or any Guarantor (or any other party on
Borrower=s or any Guarantor's behalf) to Agent and Lenders for
purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all such information
hereafter furnished by Borrower or any Guarantor to Agent and any
Lender will be, true and accurate in every material respect and
shall be, to the best of the knowledge and belief of the party
furnishing such information, without material omission. Borrower
and each Guarantor have, to the best of their knowledge,
disclosed to Agent in writing any and all facts which might
reasonably be expected to materially and adversely affect the
business, operations, prospects or condition, financial or
otherwise, of Borrower or any Guarantor, or the ability of
Borrower or any Guarantor to perform its obligations under this
Agreement or the other Loan Documents.
Section 6.14. Environmental Matters.
(a) With respect to assets of Borrower and Guarantors,
other than any Mortgaged Property, and except for conditions,
circumstances or violations that would not, individually or in
the aggregate, have a material adverse effect on the financial
condition, operation or business of Borrower or any Guarantor,
neither Borrower nor any Guarantor (i) knows of any environmental
condition or circumstance, such as the presence of any hazardous
substance (as defined in Section 7.7), adversely affecting the
properties or operation of Borrower or any Guarantor, (ii) has
received any report of a violation by Borrower or any Guarantor
of any Applicable Environmental Law, or (iii) knows that Borrower
or any Guarantor is under any obligation to remedy any violation
of any Applicable Environmental Laws.
(b) With respect to the Mortgaged Properties, (i) no
portion of any Mortgaged Property is contaminated by any
substance or material presently identified to be toxic or
hazardous according to any Applicable Environmental Law,
including, without limitation, any asbestos, polychlorinated
biphenyl, radioactive substance, methane, volatile hydrocarbons,
industrial solvents or any other material or substance which has
in the past or could foreseeably at the present time or at any
time in the future cause or constitute a material health, safety
or other environmental hazard to any Person or property, except
as otherwise disclosed in the Borrower Due Diligence Reports or
the applicable investment approval reports (ii) neither Borrower
nor any Guarantor nor, to the knowledge of Borrower or any
Guarantor, any other Person has caused or suffered to occur a
discharge, spillage, uncontrolled loss, seepage or filtration of
oil or petroleum or chemical liquids or solids, liquid or gaseous
products or hazardous waste, or hazardous substance at, upon,
under or within any portion of any Mortgaged Property or any
contiguous real estate which either (A) would be a violation of
Applicable Environmental Law or (B) has not been remediated so as
to cure any violation of Applicable Environmental Law (such
remediation having been accomplished without increasing the
potential environmental liability of Borrower or any Guarantor or
Lender), (iii) neither Borrower nor any Guarantor nor, to the
knowledge of Borrower or any Guarantor, any other Person has been
or is involved in operations at or near any portion of any
Mortgaged Property which could lead to the imposition on
Borrower, any Guarantor or any operator of such Mortgaged
Property of liability which could have a material adverse effect
on the financial condition or business operations of Borrower or
any Guarantor, or the creation of a lien on such property, under
any Applicable Environmental Law, (iv) neither Borrower, any
Guarantor nor any other Person has permitted any tenant or
occupant of any portion of any Mortgaged Property, to engage in
any activity that could lead to the imposition of liability on
such tenant or occupant, Borrower, any Guarantor or any operator
of any of such property which could have a material adverse
effect on the financial condition or business operations of
Borrower or any Guarantor, or could lead to the creation of a
lien on such property, under any Applicable Environmental Law, or
(v) to the knowledge of Borrower and Guarantors, no part of any
Mortgaged Property is contaminated by any substance or material
presently identified to be toxic or hazardous according to any
Applicable Environmental Law, except as otherwise disclosed in
the Borrower Due Diligence Reports or otherwise described in
writing to Agent.
(c) With respect to the Underlying Real Estate, to the
knowledge of Borrower and Guarantors, no part of any Underlying
Real Estate is contaminated by any substance or material
presently identified to be toxic or hazardous according to any
Applicable Environmental Law, or if any part of any Mortgaged
Property or any Underlying Real Estate is so contaminated the
holder of the related Assigned Loan is not subject to liability
resulting from such contamination because such party is a secured
lender, as opposed to an owner, of such property.
Section 6.15. Purpose of Credit. Borrower will use the
proceeds of the Credit Facilities for the purposes stated in
Section 2.1(a) hereof. No part of the proceeds of either of the
Credit Facilities will be used, directly or indirectly, for a
purpose which violates any law, rule or regulation. Borrower
will not, directly or indirectly, use any of the proceeds of
either of the Credit Facilities for the purpose of purchasing or
carrying, or retiring any Debt which was originally incurred to
purchase or carry, any "margin stock" as defined in the Margin
Regulations, or to purchase or carry any "security that is
publicly-held" within the meaning of Regulation T of the Board of
Governors of the Federal Reserve System, or otherwise take or
permit any action which would involve a violation of such Margin
Regulations or any other regulation of such Board of Governors.
The Credit Facilities are not secured, directly or indirectly, in
whole or in part, by collateral that includes any "margin stock"
within the meaning of the Margin Regulations. Borrower will not
engage principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or
carrying any "margin stock" within the meaning of the Margin
Regulations.
Section 6.16. Governmental Regulations. Neither Borrower
nor any Guarantor is subject to regulation under the Investment
Advisers Act of 1940, as amended. Neither Borrower nor any
Guarantor is subject to regulation under the Investment Company
Act of 1940, as amended, the Public Utility Holding Company Act
of 1935, as amended, any Margin Regulations or any other law,
rule or regulation which regulates the incurrence of Debt.
Section 6.17. Indebtedness. Neither Borrower nor any
Guarantor is an obligor on any Debt other than Debt permitted by
Section 8.5. Neither Borrower nor any Guarantor is (nor will
Borrower or any Guarantor ever become) an obligor on any Debt of
any Excluded Subsidiary, and none of the assets of Borrower or
any Guarantor have been pledged to secure, or otherwise given as
security for, any Debt of any Excluded Subsidiary.
Section 6.18. Insurance. Borrower and each Guarantor
maintains with financially sound, responsible and reputable
insurance companies or associations (or, as to workers'
compensation or similar insurance, with an insurance fund or by
self-insurance authorized by the jurisdictions in which it
operates) insurance concerning its properties and business
against such casualties and contingencies and of such types and
in such amounts (and with co-insurance and deductibles) as is
customary for the same or similar businesses.
Section 6.19. Solvency. On a consolidated basis as of the
Closing Date (a) the aggregate fair market value of Borrower=s
assets exceeds its liabilities (whether contingent, subordinated,
unmatured, unliquidated, or otherwise), (b) Borrower has
sufficient cash flow to enable it to pay its Debts as they
mature, and (c) Borrower has a reasonable amount of capital to
conduct its respective businesses as presently contemplated.
Section 6.20. Due Diligence Procedures. The due diligence,
collateral control and collection procedures used by Borrower and
Guarantors with respect to the Assigned Loans are no less
stringent than Standard Industry Practices. All Borrower Due
Diligence Reports have been prepared or reviewed by Borrower or a
Guarantor. The factual information contained in the Borrower Due
Diligence Reports, including without limitation, regarding title
to and the condition of each Borrowing Base Loan (but not
including valuation amounts and cash flow projections) has not
been intentionally misstated by Borrower or any Guarantor, and,
with respect to the Asset Portfolios taken as a whole, the
Borrower Due Diligence Reports accurately reflected the material
facts concerning each of the Borrowing Base Loans and Mortgaged
Properties included in such Asset Portfolios at the time the
Borrower Due Diligence Reports were prepared.
ARTICLE VII
AFFIRMATIVE COVENANTS
Borrower and each Guarantor covenant and agree that, so long
as the Revolving Lenders' commitment to make Advances under the
Revolving Credit Facility remains in effect, any amounts remain
outstanding under the Term Facility, any Letters of Credit remain
outstanding or any of the Obligations remain unpaid:
Section 7.1. Information From AMRESCO. AMRESCO will
deliver, or cause to be delivered, to Agent on behalf of Lenders:
(a) As soon as available and in any event within one
hundred twenty (120) days after the end of each Fiscal Year of
AMRESCO, a consolidated balance sheet of AMRESCO and its
Subsidiaries as of the end of such Fiscal Year and the related
statements of income and cash flow for such Fiscal Year, setting
forth in each case in comparative form the figures for the
previous Fiscal Year, all reported by AMRESCO in accordance with
GAAP and audited by Deloitte & Touche (or its successors) or
other independent public accountants reasonably acceptable to
Agent.
(b) As soon as available and in any event within
forty-five (45) days after the end of each calendar quarter, a
consolidated cash flow statement and a consolidating and
consolidated balance sheet and related statement of income of
AMRESCO and its Subsidiaries as of the end of such quarter and
year-to-date, all certified by the chief financial officer, the
chief accounting officer or Treasurer of AMRESCO as to fairness
of presentation and as to whether such financial statements
fairly reflect the financial condition of AMRESCO and its
Subsidiaries as of the date of delivery thereof, subject to year-
end adjustments. Such financial statements shall be prepared in
conformity with GAAP, except that certain information and note
disclosures normally included in annual financial statements
prepared in accordance with GAAP may be condensed or omitted
provided that the disclosures made are adequate to make the
information presented not misleading, and GAAP shall be applied
on a basis consistent with the financial statements referred to
in Section 7.1(a).
(c) Simultaneously with the delivery of each set of
financial statements referred to in Sections 7.1(a) and (b), a
certificate of an Authorized Officer of AMRESCO, in the form as
attached hereto as Exhibit C, (i) setting forth in reasonable
detail the calculations required to establish whether Borrower
was in compliance with the requirements of Sections 8.1 through
and including Section 8.4 on the date of such financial
statements, and (ii) with respect to only the financial
statements delivered pursuant to Sections 7.1(a) and (b),
stating, to the best of such Authorized Officer's knowledge and
belief, whether or not such financial statements fairly reflect
the financial condition of AMRESCO and its Subsidiaries and
results of AMRESCO's and its Subsidiaries' operations as of the
date of the delivery of such financial statements.
(d) Promptly after the filing thereof, a true, correct
and complete copy of each Form 10-K and Form 10-Q and each other
report filed by or on behalf of AMRESCO with the SEC.
(e) Immediately upon the occurrence of any Default, a
certificate of an Authorized Officer of AMRESCO setting forth the
details thereof and the action which AMRESCO or any applicable
Guarantor is taking or proposes to take with respect thereto.
(f) Within fifteen (15) days after the end of each
calendar month, a current Borrowing Base Schedule, including an
Asset Portfolio Report (which, at the request of Agent, shall
include a detailed listing of each Assigned Loan included in the
Borrowing Base). If Agent disapproves a Borrowing Base Schedule,
the most recent Borrowing Base Schedule which has not been
disapproved by Agent shall be deemed to be the effective
Borrowing Base Schedule. AMRESCO shall also deliver a Borrowing
Base Schedule with each Request for Advance if, since the date of
the currently effective Borrowing Base Schedule, either Borrower
or any Guarantor has (A) sold or otherwise disposed of either
(x) an asset which contributed an amount equal to or greater than
Two Million Five Hundred Thousand and No/100 Dollars
($2,500,000.00) to the Net Investment Value of its applicable
Asset Portfolio or (y) any Asset Portfolio included in the
currently effective Borrowing Base or (B) desires to include new
Eligible Investments in the Borrowing Base.
(g) Upon Agent's request from time to time, an
Interest Rate Exposure Report.
(h) Within forty-five (45) days after the end of each
calendar quarter, (i) a Residual Interests Report, (ii) an
organizational chart showing AMRESCO and its Subsidiaries, (iii)
a Permitted Secured Debt and Warehouse Lines Report and
Certification, (iv) a Pledged Asset Schedule and Certification,
and (v) a report in form satisfactory to Agent detailing any
loans which had been sold or securitized by Borrower or any
Subsidiary, but which were required to be repurchased by Borrower
or any Subsidiary if the amount of such loans which Borrower or
any Subsidiary were required to repurchase exceeds $2,000,000.00
in the aggregate during such quarter.
(i) Prompt notification of (i) any material adverse
change in the financial condition of Borrower or any Guarantor,
including, without limitation, the occurrence of any litigation
which could reasonably be expected to have a material adverse
effect on Borrower or any Guarantor, or (ii) the occurrence of
any acceleration of the maturity of any indebtedness owing by
Borrower or any Guarantor, or any default under any indenture,
mortgage, agreement, contract or other instrument to which
Borrower or any Guarantor is a party or by which Borrower or any
Guarantor or any properties of Borrower or any Guarantor are
bound, if such default or acceleration might have a material
adverse effect upon the financial condition of Borrower or any
Guarantor.
(j) From time to time such additional information
regarding the financial position or business of Borrower and/or
any of Borrower's Subsidiaries as Agent, at the request of any
Lender, may reasonably request, including, without limitation,
financial projections of Borrower or any Guarantor and
information concerning the insurance being maintained by Borrower
and Guarantors.
Section 7.2. Business of Borrower and Guarantors. The
primary business of Borrower and each Guarantor is, and Borrower
and each Guarantor covenant that it shall remain, a financial
services company which specializes in residential and commercial
mortgage banking, commercial finance, asset management and
related capital market activities.
Section 7.3. Right of Inspection; Confidentiality and Non-
Solicitation. Borrower and each Guarantor will permit Agent or
any Lender, or any officer, employee or agent of any such party,
to visit and inspect any of the assets of Borrower or any
Guarantor, examine the books of record and accounts of Borrower
or any Guarantor (including, without limitation, all Borrower Due
Diligence Reports), take copies and extracts therefrom, and
discuss the affairs, finances and accounts of Borrower or any
Guarantor with the respective officers, accountants and auditors
of Borrower or any Guarantor, all at such reasonable times and as
often as Agent or any Lender may reasonably require, all at the
expense of Borrower; provided, that, prior to the occurrence of a
Default, each Lender will make no more than two such visits or
inspections in any twelve month period. Each Lender covenants
and agrees to preserve the confidentiality of any financial data
concerning Borrower, any Subsidiary of Borrower or related to
Borrower's, or any Borrower's Subsidiaries' businesses or
operations or any information with respect to which Borrower or
any Subsidiary has (a) an obligation of confidentiality to a
third party (to the extent such obligation has been disclosed to
such Lender) or (b) informed such Lender of the confidential
nature of the specific information, except to the extent such
Lender is required to disclose such information pursuant to any
applicable law, rule, regulation or order of any Governmental
Authority; provided that (i) any information contained in any
annual report, or any Form 10-K, Form 10-Q or Form 8-K reports
(if any) which have been delivered to the SEC, or any other
annual or quarterly reports to the stockholders of Borrower
subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended, proxy material delivered to the
stockholders of any Borrower or any report delivered to the SEC,
or any other information that is in the public domain or has
become publicly known, shall not in any event be deemed
confidential, and (ii) each Lender may make any information
received by it available (A) to a transferee of or participant in
any interest in either of the Credit Facilities or the Notes,
provided that such transferee or participant agrees in writing to
be bound by the provisions of this Section 7.3, (B) to any
accountants or other professionals engaged by such Lender,
provided that each such accountant or professional agrees to be
bound by the provisions of this Section 7.3, or (C) in connection
with the enforcement of any of the Loan Documents or any
litigation in connection therewith. Additionally, each Lender
covenants and agrees to preserve the confidentiality of this
Agreement and the transactions contemplated herein, except as set
forth in (ii)(A),(B) and (C) of the preceding sentence. Further
each Lender agrees that, during the term of the Credit
Facilities, it will not use the information provided by AMRESCO
and not otherwise generally known or obtainable through sources
other than AMRESCO to take any action to personally, by telephone
or mail, solicit any Underlying Obligor for any purpose which is
in conflict with the services and products which AMRESCO is
providing or can provide with AMRESCO's current products and
services to such Underlying Obligor, including to refinance loans
made by AMRESCO to such Underlying Obligor, without the prior
written consent of AMRESCO. It is understood and agreed that all
rights, title and interest in and to the list of such Underlying
Obligors and data relating to their mortgages are the property of
AMRESCO, and Lenders shall take no action to undermine these
rights and benefits.
Section 7.4. Maintenance of Insurance. Borrower and each
Guarantor will at all times maintain or cause to be maintained
insurance covering its respective risks as are customarily
carried by businesses similarly situated including, without
limitation, the following: (a) worker's compensation insurance;
(b) comprehensive general public liability and property damage
insurance in respect of all activities in which Borrower or such
Guarantor might incur personal liability for the death or injury
of an employee or third person, or damage to or destruction of
another's property; (c) insurance against loss or damage by fire,
lightning, hail, tornado, explosion and other similar risk; and
(d) comprehensive automobile liability insurance. Borrower and
each Guarantor shall maintain coverage with respect to the
foregoing risks in such coverage amounts as are customarily
carried by businesses similarly situated.
Section 7.5. Payment of Taxes, Impositions and Claims.
Borrower and each Guarantor shall pay (a) all Taxes imposed upon
it or any of its assets or with respect to any of its franchises,
business, income or profits, and all Impositions not later than
the due date thereof, or before any material penalty or interest
may accrue thereon and (b) all material claims (including,
without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by
law have or might become a Lien on any of its assets; provided,
however, payment of Taxes, Impositions or claims shall not be
required if and for so long as (i) the amount, applicability or
validity thereof is currently being contested in good faith by
appropriate action promptly initiated and diligently conducted in
accordance with good business practices and no material part of
the property or assets of Borrower or any Guarantor are subject
to levy or execution, (ii) Borrower or such Guarantor as required
in accordance with GAAP, shall have set aside on its books
reserves (segregated to the extent required by GAAP) deemed by it
to be adequate with respect thereto, and (iii) Borrower or such
Guarantor has notified Agent of such circumstances, in detail
satisfactory to Agent, and, provided further, that Borrower or
such Guarantor shall pay any such Tax, Imposition or claim if
such contest is not successful and in any event prior to the
commencement of any action to realize upon or foreclose any Lien
against any part of the Collateral.
Section 7.6. Compliance with Laws and Documents. Borrower
shall at all times comply, and cause each of its Subsidiaries to
comply, with all Legal Requirements, the articles of
incorporation and bylaws of Borrower, and each of Borrower's
Subsidiaries, and any other agreement to which Borrower, or any
Subsidiary of Borrower is a party, unless its failure to so
comply alone or in the aggregate would not have a material
adverse effect on the financial condition or operations of
Borrower, together with its Subsidiaries taken as a whole.
Section 7.7. Environmental Law Compliance and Indemnity.
Borrower and each Guarantor agree to promptly pay and discharge
when due all debts, claims, liabilities and obligations with
respect to any clean-up measures necessary for Borrower or any
Guarantor to comply with Applicable Environmental Laws affecting
Borrower or any Guarantor, provided that, with respect to any
single tract or parcel of real property, neither Borrower nor any
Guarantor shall be required to take such action if failure to
take such action would not have a material adverse effect on the
financial condition of Borrower or any Guarantor or would, in the
reasonable opinion of Agent, have the potential for creating any
liability or claim against Agent or any of the Lenders. Borrower
and Guarantors hereby, jointly and severally, indemnify and agree
to defend and hold Agent and each Lender and its successors and
assigns harmless from and against any and all claims, demands,
causes of action, loss, damage, liabilities, costs and expenses
(including reasonable attorneys' fees and court costs) of any and
every kind or character, known or unknown, fixed or contingent,
asserted against or incurred by Agent or any Lender at any time
and from time to time including, without limitation, those
asserted or arising subsequent to the payment or other
satisfaction of the Notes and expiration of the Letters of
Credit, by reason of, arising out of or related in any way to
Agent's and Lenders' entering into this Agreement and the
transactions herein contemplated, INCLUDING MATTERS WHICH IN
WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE ORDINARY
NEGLIGENCE OF AGENT OR ANY LENDER OR FOR WHICH AGENT OR ANY
LENDER MAY HAVE STRICT LIABILITY, BUT EXCLUDING MATTERS ARISING
OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF AGENT OR ANY
LENDER. It shall not be a defense to the covenant of Borrower
and Guarantors to indemnify that the act, omission, event or
circumstance did not constitute a violation of any Applicable
Environmental Law at the time of its existence or occurrence.
The terms "hazardous substance" and "release" shall have the
meanings specified in the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), and the terms "solid waste"
and "disposed" shall have the meanings specified in the Resource
Conservation and Recovery Act of 1976 ("RCRA"); provided, to the
extent that any other applicable laws of the United States of
America or political subdivision thereof establish a meaning for
"hazardous substance," "release," "solid waste," or "disposed"
which is broader than that specified in either SARA or RCRA, such
broader meaning shall apply. As used in this Agreement,
"Applicable Environmental Law" shall mean and include the
singular, and "Applicable Environmental Laws" shall mean and
include the collective aggregate of the following: Any law,
statute, ordinance, rule, regulation, order or determination of
any governmental authority or any board of fire underwriters (or
other body exercising similar functions), or any restrictive
covenant or deed restriction (recorded or otherwise) affecting
Borrower or any Guarantor pertaining to health, safety or the
environment, including, without limitation, all applicable flood
disaster laws and health, safety and environmental laws and
regulations pertaining to health, safety or the environment,
including without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Superfund Amendments
and Reauthorization Act of 1986, the Occupational Safety and
Health Act, the Texas Water Code, the Texas Solid Waste Disposal
Act, the Texas Workers' Compensation Laws, and any federal, state
or municipal laws, ordinances, regulations or law which may now
or hereafter require removal of asbestos or other hazardous
wastes from any property of Borrower or any Guarantor or impose
any liability on Agent or any Lender related to asbestos or other
hazardous wastes in any property of Borrower or any Guarantor.
The provisions of this Section 7.7 shall survive the repayment of
the Notes and expiration of the Letters of Credit. In the event
of the transfer of the Notes or any portion thereof, each Lender
or any prior holder of the Notes and any participants shall
continue to be benefitted by this indemnity and agreement with
respect to the period of such holding of the Notes.
Section 7.8. Covenant Compliance. Borrower and each
Guarantor shall perform and comply with all covenants,
obligations and agreements contained in this Agreement and in the
other Loan Documents.
Section 7.9. Quantity and Quality of Documents. All
certificates, opinions, reports and documents to be delivered
from time to time hereunder shall be in such number of
counterparts as Agent may reasonably request and in form
reasonably acceptable to Agent, and counterpart signature pages
to any such documents may be attached to and shall, together with
all counterparts, constitute one and the same document.
Section 7.10. Use of Proceeds. Borrower and each Guarantor
will use the proceeds of the Credit Facilities (including the
Letters of Credit) solely for the purposes represented in this
Agreement and shall not use such proceeds, directly or
indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any Margin Stock, and none of
such proceeds will be used in violation of applicable law
(including, without limitation, the Margin Regulations).
Section 7.11. Additional Documents. Within ten (10)
Business Days after request by Agent, Borrower and each Guarantor
agree that they will execute and deliver or cause to be executed
and delivered to Agent upon Agent's request such other and
further instruments, documents or certificates as in the judgment
of Agent may be required to better effectuate the transactions
contemplated herein or to conform, create, evidence, perfect,
preserve or maintain the Lenders' Liens (including, without
limitation, the Lenders' Liens with respect to the Securities (as
defined in the Pledge Agreement)) or the Lenders' rights
hereunder or under the other Loan Documents, and Borrower and
each Guarantor shall do all such additional acts, give such
assurances and execute such instruments as Agent may reasonably
require to vest more completely in and assure to Lenders their
rights under this Agreement.
Section 7.12. Compliance With Due Diligence Standards;
Offices and Files. Borrower and each Guarantor shall at all
times comply with Standard Industry Practices and Borrower=s and
each Guarantor=s past procedures related to due diligence,
collateral control, collection and reporting procedures with
respect to all Assigned Loans. Borrower's and each Guarantor's
chief executive office shall at all times be maintained at 700 N.
Pearl Street, Suite 2400, LB# 342, Dallas, Texas, 75201, and
Borrower's and each Guarantor's books, records and files related
to the Borrowing Base Loans (including, without limitation, the
Borrower Due Diligence Reports) shall at all times be maintained
at Borrower's chief executive office or Borrower's office at 10
Dorrance Street, Providence, Rhode Island, or Two Corporate Park,
Suite 100, Irvine, California 92714, unless in either such
instance, AMRESCO gives Agent thirty (30) days prior written
notice of a change in address. Borrower and each Guarantor shall
maintain all files related to the Borrowing Base Loans in a
reasonably prudent manner.
Section 7.13. Appraisals. Agent may require, and Borrower
or the appropriate Guarantor shall deliver to Agent promptly upon
request therefor (but no more than once each twelve month period)
with respect to any given portion of the Mortgaged Property which
has a cost in excess of One Hundred Thousand and No/100 Dollars
($100,000.00) and for which the Lenders have requested the
recordation of a Mortgage under this Agreement, a new appraisal
for such portion of the Mortgaged Property. If required by
applicable regulations, Agent may order any such appraisal
directly, and Borrower or Guarantors shall reimburse Agent for
the reasonable cost of such appraisal upon request by Agent.
Agent shall provide AMRESCO with a copy of any such appraisal
ordered by Agent. Each such appraisal shall be in form and
substance satisfactory to Agent.
ARTICLE VIII
NEGATIVE COVENANTS
Borrower and each Guarantor covenant and agree that without
the prior written consent of the Required Lenders, so long as
Lenders' commitment to make Advances under the Revolving Credit
Facility remains in effect, any amounts remain outstanding under
the Term Facility, any Letters of Credit remain outstanding or
any of the Obligations remain unpaid:
Section 8.1. Minimum Consolidated Tangible Net Worth.
Borrower shall not permit Consolidated Tangible Net Worth to be
less than the sum of (a) One Hundred Eighty-Two Million and
No/100 Dollars ($182,000,000), plus (b) seventy-five percent
(75%) of the cumulative Consolidated Net Income for each calendar
quarter commencing on July 1, 1997, through the quarter ending
immediately prior to, or on, the date as of which compliance with
this covenant is being measured, plus (c) seventy-five percent
(75%) of the amount of any proceeds (less reasonable and
customary transaction costs) received by AMRESCO from the
issuance of any additional shares of stock or other equity
instruments.
Section 8.2. Leverage Ratios. Borrower shall not permit
(a) an amount equal to (i)Total Consolidated Debt less (ii)
Approved Subordinated Debt as a percentage of an amount equal to
(i) Consolidated Tangible Net Worth plus (ii) Approved
Subordinated Debt to be greater than 450%, and (b) an amount
equal to Total Consolidated Debt less fifty percent (50%) of the
face value of all Approved Subordinated Debt as of the last day
of any fiscal quarter of Borrower to exceed the Adjusted Asset
Amount at such time.
Section 8.3. Coverage Ratio. Borrower shall not permit
the Fixed Charge Coverage Ratio to be less than 1.35 to 1.00.
Section 8.4. Adjusted EBITDA Maintenance. As of the end
of any fiscal quarter of Borrower, Borrower shall not permit its
Adjusted EBITDA for the immediately preceding four (4) quarters
to be less than (a) $145,000,000 as of December 31, 1997, (b)
$175,000,000 as of March 31, 1998, (c) $205,000,000 as of June
30, 1998, (d) $240,000,000 as of September 30, 1998, and (e)
$295,000,000 as of the end of any fiscal quarter of Borrower
after October 1, 1998.
Section 8.5. Permitted Debt. Neither Borrower nor any
Subsidiary of Borrower shall incur any Debt, except
(a) the Credit Facilities (including the Letters of
Credit);
(b) Borrower or any Guarantor or any Excluded
Subsidiary may have liability under unsecured Interest and
Foreign Exchange Hedge Agreements, so long as (i) there is no
recourse to Borrower, any Guarantor or any Excluded Subsidiary
under any such Interest and Foreign Exchange Hedge Agreements
other than the Borrower, Guarantor or Excluded Subsidiary
entering into such Interest and Foreign Exchange Agreement, (ii)
each such Interest and Foreign Exchange Hedge Agreement has a
maturity of no more than seven years, (iii) the purpose of each
such Interest and Foreign Exchange Hedge Agreement is to hedge
the applicable Borrower's, Guarantor's or Excluded Subsidiary's
interest rate or foreign exchange or other business risk, and is
not speculative in nature, and (iv) neither Borrower, any
Guarantor nor any Excluded Subsidiary deviates from the current
practices and policies related to obtaining Interest and Foreign
Exchange Hedge Agreements in effect on the date hereof as such
practices and policies may be reasonably changed so long as such
changes are consistent with such practices and policies in effect
on the date hereof;
(c) obligations under secured Interest and Foreign
Exchange Hedge Agreements, so long as the provider of any such
Interest and Foreign Exchange Hedge Agreements is a Lender and
such Lender=s Liens are evidenced by the Security Documents
securing the Credit Facilities;
(d) the Investment Line of Credit, Warehouse Lines and
all Permitted Secured Debt;
(e) Debt of any Borrower or Guarantor to any other
Borrower, Guarantor or Excluded Subsidiary (subject to the
limitation contained in Section 8.10(c) or elsewhere in this
Agreement);
(f) Debt secured by purchase money security interests;
(g) Contingent Obligations in connection with Debt
which is otherwise permitted in this Section 8.5 (so long as any
such Contingent Obligation does not exceed the amount of the
related Debt), except (i) in connection with Debt which is
secured, other than the Debt set forth in Section 8.5(p), and
(ii) where such contingent obligations are specifically
prohibited by this Agreement;
(h) Contingent Obligations in the form of indemnity
obligations or typical repurchase obligations related to the sale
by Borrower or any Guarantor of assets in the ordinary course of
its business, including the securitization of loans;
(i) Leases of office space and office equipment used
by Borrower or any Guarantor in the ordinary course of its
business;
(j) Debt in respect of current accounts payable
incurred in the ordinary course of Borrower's or any Guarantor=s
business;
(k) Approved Subordinated Debt or Approved Senior
Debt; provided that neither Borrower nor any Subsidiary shall
make payments on or redeem, or approve by board of director
action or otherwise the payment of any amounts on, or redemption
of, the Approved Subordinated Debt or Approved Senior Debt after
the occurrence of a Default or, prior to the occurrence of a
Default, which would exceed the scheduled payments due under the
documents evidencing the Approved Subordinated Debt or the
Approved Senior Debt, such prohibited payments including any
payments made under Article 11 of that certain Indenture, dated
January 15, 1996, by and between AMRESCO and Bank One, Columbus,
N.A., as Trustee;
(l) Excluded Subsidiary Debt, provided, that neither
Borrower nor any Guarantor shall have any obligation (contingent
or otherwise) with respect to any such Excluded Subsidiary Debt;
(m) Contingent Obligations which are quantifiable and
included in the ratios computed pursuant to Section 8.2 and which
are given in lieu of an Investment permitted by Section 8.10
hereof;
(o) the Bridge Debt (Lenders hereby agreeing that
Agent shall be entitled to execute on behalf of Lenders any
documents or agreements approved by Agent acknowledging that the
Bridge Debt is included in the Obligations and secured by the
Collateral, subject, however, to the provisions of Section 10.6
hereof); and
(p) Debt of the UK Subsidiaries (or any of them),
provided that such Debt shall not exceed ,125,000,000 pounds
sterling in the aggregate and can be secured only by the assets
acquired with the proceeds of such Debt, all of which assets are
to be located outside, or payable by Persons located outside, the
United States other than a guaranty by AMRESCO.
Section 8.6. Limitation on Sale of Properties. Neither
Borrower nor any Guarantor shall sell, assign, convey, exchange,
lease or otherwise dispose of any of its properties, rights,
assets or business, whether now owned or hereafter acquired,
except in the ordinary course of its business.
Section 8.7. Permitted Liens. Borrower shall not , and
Borrower shall not permit any of its Subsidiaries to, create,
incur, assume or suffer to exist any Lien upon any of its assets
(including, without limitation, the stock of any Subsidiary
incorporated outside of the United States and not pledged to
Lenders) or to give a negative pledge to any Person with respect
to any of its assets, except for (a) the Lenders' Liens; (b) the
Permitted Encumbrances; (c) with respect to equipment or
inventory, (i) landlord's Liens arising in the ordinary course of
Borrower's or any Subsidiary=s business and (ii) Liens on
equipment or supplies hereafter acquired by Borrower or any
Subsidiary in the ordinary course of Borrower's or such
Subsidiary=s business to secure the purchase price of such
equipment or supplies and any such Lien existing on such
equipment or supplies at the time of acquisition by Borrower or
such Subsidiary (individually, a "Purchase Money Lien"), provided
that (1) no Purchase Money Lien shall cover any property other
than the equipment or supplies so acquired, and (2) the Debt
secured by such Purchase Money Lien shall not exceed one hundred
percent (100%) of the purchase price of such equipment or
supplies; (d) Liens on the Collateral to secure obligations under
Interest and Foreign Exchange Hedge Agreements, so long as the
provider of any such Interest and Foreign Exchange Hedge
Agreement is a Lender and such Liens are evidenced by the
Security Documents securing the Credit Facilities; (e) Liens to
secure permitted Excluded Subsidiary Debt, provided that (i) no
such Lien shall cover any property other than property purchased
or refinanced with proceeds of permitted Excluded Subsidiary
Debt, and (ii) the Excluded Subsidiary Debt secured by such Lien
shall not exceed one hundred percent (100%) of the purchase price
of such property; (f) the six percent (6%) net profits interest
granted by AMRESCO New Hampshire, Inc. to Heller Financial, Inc.
pursuant to Section 3.6 of that certain Term Loan Agreement,
dated as of December 31, 1993, among AMRESCO New Hampshire, Inc.,
AMRESCO Holdings, Inc. and Heller Financial, Inc.; (g) Liens
involuntarily filed against any asset of Borrower or any
Subsidiary, provided, that within fifteen (15) days after such
filing, Borrower or the applicable Subsidiary has obtained a
release of any such Lien or is contesting the filing of such Lien
in good faith and an adequate bond has been obtained to satisfy
in full any claim which such Lien secures; (h) Liens securing the
Investment Line of Credit or Permitted Secured Debt or Liens
securing any Warehouse Lines to the extent permitted by the
definition of Permitted Secured Debt or Warehouse Lines; and (i)
Liens securing the Debt of the UK Subsidiaries permitted by
Section 8.5(p).
Section 8.8. Limitation on Loans to Shareholders. Neither
Borrower nor any Subsidiary of Borrower shall advance any Debt to
Borrower's or any Guarantor's shareholders, except for Debt
advanced to Borrower or a shareholder which is also a Guarantor
or an employee (as permitted by Section 8.10), without the prior
written consent of the Required Lenders.
Section 8.9. Consolidations, Mergers, Sales of Assets, and
Maintenance. Borrower shall not, and Borrower shall not permit
any of its Subsidiaries to, (a) consolidate or merge with or into
any other Person except for (i) mergers of any Guarantor into
Borrower or another Guarantor or (ii) mergers of any Guarantor
with or into any other Person which also becomes a "Guarantor"
under this Agreement and delivers all Loan Documents required by
this Agreement and otherwise complies with Section 2.5, so long
as, if applicable, such merger would satisfy the conditions of
Section 8.10(a) or (b) if it were applicable, and in the case of
a consolidation or merger by any Subsidiary of AMRESCO with
another Person, AMRESCO will remain the direct or indirect owner
of all of the outstanding capital stock and other equity
securities of the continuing or surviving corporation, (b) sell,
lease, abandon or otherwise transfer all or any material part of
its assets to any Person, in one or a series of related
transactions, other than the sale of assets singly or in bulk in
the normal course of business, (c) other than in connection with
(i) a consolidation or merger permitted in clause (a) immediately
above or (ii) the dissolution of any Guarantor of which Agent has
been notified and the distribution of all of the assets of such
Guarantor to another Guarantor, terminate, or fail to maintain,
its corporate existence or qualification, as applicable, in the
state of its incorporation and any other applicable jurisdiction
where the business of such Guarantor requires such qualification
(provided that nothing herein shall permit the dissolution of
AMRESCO or the failure of AMRESCO to maintain its corporate
existence and qualification to do business as elsewhere required
in this Agreement), or (d) terminate, or fail to maintain, its
good standing and qualification to transact business in all
jurisdictions where the failure to maintain its good standing or
qualification to transact business could have a material adverse
effect on its financial condition or operations.
Section 8.10. Investments. Without the prior written
consent of Required Lenders, Borrower shall not, and Borrower
shall not permit any of its Subsidiaries to, directly or
indirectly, make any loans, advances, extensions of credit or
capital contributions to, make any investment in, or purchase any
stock or securities of, or interest in, any Person (collectively
"Investments"), except for
(a) Acquisitions involving a stock purchase approved
by the board of directors of the entity being acquired and
consistent with the business of AMRESCO as set forth in Section
7.2 hereof, so long as concurrently with such Investment such
entity becomes a Borrower or Guarantor;
(b) Investments with respect to any Acquisition in
which the board of directors of the entity being acquired has not
approved such Acquisition, provided that (i) the assets, property
or business acquired or invested in shall be consistent with the
business of AMRESCO as set forth in Section 7.2, and (ii) the
Acquisition Consideration does not exceed $10,000,000;
(c) Excluded Subsidiaries, provided, that the
aggregate Investment does not exceed 15% of Adjusted Net Worth;
(d) loans to any employee of Borrower or any
Subsidiary of Borrower (i) to facilitate relocations and (ii)
other loans to employees so long as the aggregate of such loans
does not exceed $1,500,000;
(e) Investments made by Borrower or any Subsidiary of
Borrower in the ordinary course of its business as contemplated
by Section 7.2 hereof; and
(f) any other Investments which would otherwise be
prohibited by this section so long as the aggregate amount (at
original cost) of all such Investments of Borrower and its
Subsidiaries at any time shall be less than 20% of Consolidated
Tangible Net Worth.
Notwithstanding the foregoing, in no event shall (x) any
Investment permitted pursuant to this Section 8.10 be permitted
if (i) there shall exist a Default or Event of Default, or (ii)
if after giving effect to any such Investment, Borrower or
Guarantors shall not be in compliance with any covenant set forth
in the Loan Documents, and (y) the aggregate amount of
Investments (at original cost) made by AMRESCO and Guarantors
incorporated or operating in the United States to Foreign
Obligors shall not exceed twenty percent (20%) of Adjusted Net
Worth.
Section 8.11. Distributions. Neither Borrower nor any
Guarantor shall make or declare any Distributions after the
occurrence of a Default. Prior to the occurrence of a Default,
(a) AMRESCO shall be entitled to make Distributions in an amount
not to exceed twenty-five percent (25%) of the net income of
AMRESCO (determined in accordance with GAAP) on a consolidated
basis for the twelve month period immediately preceding such
Distribution and (b) each Borrower (other than AMRESCO) and
Guarantor shall be entitled to make Distributions to Borrower or
another Guarantor.
Section 8.12. Limitation on Contingent Liabilities.
Neither Borrower nor any Guarantor shall create, incur, assume or
suffer to exist any contingent liabilities, except for Contingent
Obligations permitted by Section 8.5 and litigation claims which
do not result in a violation of Section 9.1(i).
Section 8.13. Transactions with Affiliates. Neither
Borrower nor any Guarantor shall engage in any transaction with
an Affiliate of Borrower or any Guarantor unless such transaction
is (a) between Borrower and any Guarantor or between Guarantors
or (b) is generally as favorable to Borrower or such Guarantor as
could be obtained in an arm's length transaction with an
unaffiliated Person in accordance with prevailing industry
customs and practices.
Section 8.14. Employee Plans.
(a) Neither Borrower nor any Guarantor shall, nor
shall any such Person cause any member of its Controlled Group
(as that term is defined in the Code) to, fail to maintain and
administer any Employee Plan in accordance with the applicable
requirements of the Code and ERISA. Neither Borrower nor any
Guarantor shall permit or suffer to exist any circumstances with
respect to any Employee Plan that could have a material adverse
effect on Borrower or such Guarantor.
(b) With respect to any Pension Plan, neither Borrower
nor any Guarantor shall (i) permit any accumulated funding
deficiency (within the meaning of Section 412(a) of the Code),
whether waived or unwaived, to exist; (ii) permit the present
value of accrued benefits (based on the most recent actuarial
valuation prepared for each such plan, if any, in accordance with
ongoing actuarial assumptions) to exceed the current value of
plan assets allocable to such benefits by a material amount;
(iii) permit any reportable event (within the meaning of
Section 4043 of ERISA) to occur, other than purchases and sales
of securities from a plan trustee as reported in the audited
financial statements of such plan; (iv) permit a prohibited
transaction (within the meaning of Section 4975 of the Code) to
occur which has or could have a material adverse effect on
Borrower or any Guarantor; (v) incur any material liability to
the PBGC; or (vi) incur any material withdrawal liability (within
the meaning of Section 4201(a) of ERISA).
(c) Neither Borrower nor any Guarantor shall incur a
material obligation to provide post-employment health care
benefits to any of its current or former employees, except as may
be required by Section 4980B of the Code or otherwise required by
law.
Section 8.15. Use Violations. Neither Borrower nor any
Guarantor shall use, maintain, operate or occupy, or allow the
use, maintenance, operation or occupancy of, any of its
properties in any manner which (a) violates any Legal Requirement
unless such violation would not have a material adverse effect on
the financial condition, operations or business of Borrower or
any Guarantor, (b) may be dangerous unless safeguarded as
required by law, (c) constitutes a public or private nuisance,
(d) makes void, voidable or cancelable any insurance then in
force with respect thereto or (e) makes void, voidable, or
cancelable any governmental permit.
Section 8.16. Exceptions to Covenants. Neither Borrower
nor any Guarantor shall take or permit to be taken any action or
fail to take any action which is permitted by any of the
covenants contained in this Agreement if such action or omission
would result in the breach of any other covenant contained in
this Agreement.
Section 8.17. Fiscal Year and Accounting Methods. Neither
Borrower nor any Guarantor will change its Fiscal Year or its
method of accounting (other than changes as are concurred with by
Borrower's or such Guarantor's independent public accountants as
being required by GAAP).
Section 8.18. Governmental Regulations. Neither Borrower
nor any Guarantor will conduct its business in such a way that it
will become subject to regulation under the Investment Advisers
Act of 1940, as amended. Neither Borrower nor any Guarantor will
conduct its business in such a way that it will become subject to
regulation under the Investment Company Act of 1940, as amended,
or the Public Utility Holding Company Act of 1935, as amended, or
any other laws, rules or regulations which regulate the
incurrence of Debt.
ARTICLE IX
DEFAULTS AND REMEDIES
Section 9.1. Events of Default. The term "Event of
Default" as used in this Agreement, shall mean any one of the
following:
(a) The failure of Borrower to pay when due any
principal of or interest on the Notes, or any fees, charges or
any other amounts payable to Agent, Arranger, or any Lender
hereunder or under any of the Notes or other Loan Documents,
including, without limitation, the Participation Fees, the
Commitment Fees, the Agent's Administrative Fee, the Structure
Fee and Letter of Credit Fees;
(b) The failure, refusal or neglect of Borrower or any
Guarantor to observe, perform or comply with any covenant or
agreement contained in Article VIII other than Sections 8.13 and
8.14;
(c) The failure, refusal or neglect of Borrower or any
Guarantor to properly observe, perform or comply with any
covenant, agreement or obligation contained in this Agreement, or
any of the other Loan Documents [other than those covered by
Sections 9.1(a) and (b)] and the continuation of such failure,
refusal or neglect for fifteen (15) days after written notice
thereof has been given to AMRESCO by Agent or a representative of
Agent;
(d) Any representation, warranty, certification or
statement made by Borrower or any Guarantor (either for itself or
for any other Person) in this Agreement or by Borrower, any
Guarantor or any other Person on behalf of Borrower or any
Guarantor in any certificate, financial statement or other
document delivered pursuant to this Agreement or any other Loan
Document shall prove to have been untrue in any material respect
when made or deemed to have been made;
(e) The occurrence of (1) any event or condition which
(i) results in the acceleration of the maturity of any Debt of
Borrower or any Guarantor, or (ii) constitutes a default under
any Debt of Borrower or any Guarantor, provided, that if notice
is required to be given under the documents evidencing or
securing such Debt prior to acceleration thereof, it shall not be
an Event of Default hereunder until Borrower has received written
notice of such default, (2) any event or condition which would
require Borrower, any Guarantor or any Excluded Subsidiary to
make a payment under any Interest and Foreign Exchange Hedge
Agreement, and the effect of making such payment, would cause
Borrower or any Guarantor to violate any provision of Article
VIII hereunder as tested on the date any such Interest or Foreign
Hedge Agreement payment became payable or (3) a default or event
of default under the documents evidencing or securing (i) the
Approved Subordinated Debt, (ii) the Approved Senior Debt, (iii)
the Permitted Secured Debt, (iv) the Warehouse Lines, or (v) any
Bridge Debt, or the payment by Borrower or any Guarantor, or the
approval of the board of directors of Borrower or any Guarantor
for the payment, of amounts under any of the preceding clauses
(2)(i) or (2)(ii) in excess of the regularly scheduled payments
thereunder, or which would otherwise cause a violation by
Borrower or any Guarantor of any covenant or condition contained
in any of the Loan Documents;
(f) The filing or commencement by Borrower or any
Subsidiary of Borrower of a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect
to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect, or seeking the
appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its
property, or Borrower or any Subsidiary of Borrower shall consent
to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as
they become due, or shall take any corporate action to authorize
any of the foregoing; provided, however, that, with respect to
any violation of this Section 9.1(f) that pertains to a
Subsidiary of Borrower (which Subsidiary is not also a
Guarantor), it shall not be an Event of Default if such violation
does not (i) otherwise result in an Event of Default or (ii) have
a material adverse effect on the business, financial position or
results of operations of Borrower or any Guarantor;
(g) The filing or commencement of an involuntary case
or other proceeding against Borrower or any Subsidiary of
Borrower seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of sixty (60) days;
or an order for relief shall be entered against Borrower or any
Subsidiary of Borrower under the federal bankruptcy laws as now
or hereafter in effect; provided, however, that, with respect to
any violation of this Section 9.1(g) that pertains to a
Subsidiary of Borrower (which Subsidiary is not also a
Guarantor), it shall not be an Event of Default if such violation
does not (i) otherwise result in an Event of Default or (ii) have
a material adverse effect on the business, financial position or
results of operations of Borrower or any Guarantor;
(h) The liquidation or dissolution of Borrower or any
Guarantor, other than any liquidation or dissolution of any
Guarantor permitted by Section 8.9;
(i) One or more judgments or orders for the payment of
money aggregating in excess of $500,000.00 shall be rendered
against Borrower and/or any Subsidiary of Borrower and such
judgment or order (A) shall continue unsatisfied and unstayed
(unless bonded with a supersedeas bond at least equal to such
judgment or order) for a period of thirty (30) days, unless
Borrower or any such Subsidiary has obtained an indemnification
of the full amount of such judgment or order by a third party
approved by the Required Lenders [it being acknowledged that an
indemnification from any Lender or the Resolution Trust
Corporation shall be deemed an approved third party for purposes
of this subparagraph (i)] pursuant to a written indemnification
agreement approved by the Required Lenders, or (B) is not fully
paid and satisfied at least ten (10) days prior to the date on
which any of its assets may be lawfully sold to satisfy such
judgment or order;
(j) The Lenders' Liens with respect to the Collateral,
or any part thereof, shall not constitute first and prior liens
and/or security interests; or
(k) There shall occur a Change in Control.
It is understood and agreed by Borrower and each Guarantor
that any of the foregoing "Events of Default" shall constitute an
Event of Default under each of the Notes, and that such "Events
of Default" are cumulative and in addition to any default or
events of default contained in any of the other Loan Documents,
and that in the event of any discrepancy or inconsistency between
any Event of Default hereunder and any default or event of
default contained in any other Loan Document, the description of
the Event of Default stated herein shall control.
Section 9.2. Remedies. Upon the occurrence of an Event of
Default, Agent may, and at the direction and election of the
Required Lenders shall, acting by or through any of its agents,
trustees or other Persons, without notice (unless expressly
provided for herein), demand or presentment (including, without
limitation, notice of default, notice of intent to accelerate or
of acceleration) all of which are hereby waived, and in addition
to any other provision of this Agreement or any other Loan
Document, exercise any or all of the following rights, remedies
and recourses:
(a) Terminate Lenders= commitment to make Advances
hereunder and declare the unpaid principal balance of each of the
Notes, the accrued and unpaid interest thereon and any other
accrued but unpaid portion of the Obligations to be immediately
due and payable, without notice (expressly including, but not
limited to, notice of default, notice of intent to accelerate or
of acceleration), except any notice that is expressly required by
the terms of this Agreement, presentment, protest, demand or
action of any nature whatsoever, each of which hereby is
expressly waived by Borrower, whereupon the same shall become
immediately due and payable. Notwithstanding the foregoing or
anything to the contrary contained herein or in any other Loan
Document, upon the occurrence of an Event of Default described in
Section 9.1(f) or Section 9.1(g) by Borrower, the entire unpaid
principal balance of the Notes, and all accrued, unpaid interest
thereon shall automatically be accelerated and immediately be due
and payable in full, without notice (expressly including, but not
limited to, notice of default, intent to accelerate or of
acceleration), presentment, protest, demand or action of any
nature whatsoever, each of which hereby is expressly waived by
Borrower; provided, however, that if accelerated automatically
pursuant to this sentence, the Notes and all such indebtedness
may be reinstated at the option and upon the written approval of
the Required Lenders.
(b) Enter upon the Mortgaged Property or any other
Collateral or any part thereof and take exclusive possession
thereof and of all books, records and accounts relating thereto
(including, without limitation, all Borrower Due Diligence
Reports). If Borrower or any Guarantor remains in possession of
all or any part of the Collateral after an Event of Default
occurs and is continuing and without Agent's prior written
consent thereto, Agent may invoke any and all legal remedies to
dispossess Borrower or such Guarantor, including specifically one
or more actions for declaratory or injunctive relief, forcible
entry and detainer, trespass to try title and writ of
restriction. Nothing contained in the foregoing sentence shall,
however, be construed to impose any greater obligation or any
prerequisites to acquiring possession of the Collateral or any
part thereof after an Event of Default occurs than would have
existed in the absence of such sentence.
(c) Hold, lease, manage, operate or otherwise use or
permit the use of the Mortgaged Property, the Assigned Loans and
all other Collateral, or any part thereof, either by itself or by
other Persons, in such manner, for such time and upon such other
terms as Agent may deem to be prudent and reasonable under the
circumstances (making such repairs, alterations, additions and
improvements thereto and taking any and all other action with
reference thereto, from time to time, as Agent shall deem
necessary or desirable), and apply all proceeds from the
Mortgaged Property, the Assigned Loans and all other Collateral
in connection therewith in accordance with the provisions of
Section 9.10 hereof.
(d) Sell or offer for sale the Collateral, or any part
thereof, in such portions, order and parcels as Agent may
determine, with or without having first taken possession of same,
in accordance with the provisions of the applicable Loan
Documents and applicable Legal Requirements.
(e) Make application to a court of competent
jurisdiction, as a matter of strict right and, except as
otherwise provided by applicable law, without notice to Borrower
or without regard to the adequacy of the Collateral for the
payment of the Obligations, for the appointment of a receiver of
the Collateral, or any part thereof, and, to the extent permitted
by applicable law, Borrower does hereby irrevocably consent to
such appointment. Any such receiver shall have all the usual
powers and duties of receivers in similar cases, including the
full power to rent, maintain, sell, dispose and otherwise operate
the Collateral, or any part thereof, upon such terms that may be
approved by the court, and shall apply all proceeds from such
operation of the Collateral in accordance with the provisions of
Section 9.10 hereof.
(f) Exercise any and all other rights, remedies and
recourses granted hereunder or under the other Loan Documents or
otherwise now or hereafter existing in equity, at law, by virtue
of statute or otherwise.
Section 9.3. Rights of Set-Off.
(a) In addition to the Lender's Liens, Borrower and
each Guarantor hereby expressly grant to Lenders the right of
setoff against all deposits and other sums at any time held or
credited by or due from any Lender to Borrower or any Guarantor,
in accordance with the provisions of this Section 9.3. The
rights of each Lender under this Section 9.3 are in addition to
other rights and remedies (including, without limitation, other
rights of setoff under law or equity) which such Lender may have
under law or by agreement.
(b) Upon the occurrence and during the continuance of
any Event of Default, each Lender is hereby authorized at any
time and from time to time, to the fullest extent permitted by
law, at its option, without notice or demand and without
liability, to set off and apply any and all deposits (general or
special, time or demand, provisional or final, excepting,
however, any fiduciary or escrow accounts established by Borrower
or any Guarantor into which only funds of unrelated third-parties
are deposited, and provided that Borrower or such Guarantor has
informed such Lender and Agent of the nature of such accounts) at
any time held, and other indebtedness at any time owing, by any
Lender to or for the credit or the account of Borrower or any
Guarantor against any and all of the Obligations now or hereafter
existing under this Agreement, the Notes and the other Loan
Documents, in such order and manner as such Lender may determine,
subject, however, to the agreements contained in Section 10.14
hereof, regardless of whether such Lender shall have made any
demand under this Agreement or the Notes and although such
obligations may be unmatured.
(c) Borrower and each Guarantor agree, to the fullest
extent it may effectively do so under applicable law, that each
Lender and any holder of a participation in any of the Notes
(with the appropriate consent of such Lender) may exercise rights
of setoff or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were
a direct creditor of Borrower or such Guarantor in the amount of
such participation.
Section 9.4. Remedies Cumulative, Concurrent and
Non-Exclusive. Lenders shall have all rights, remedies and
recourses granted in the Loan Documents, and available at law or
equity and same (a) shall be cumulative and concurrent, (b) may
be pursued separately, successively or concurrently against
Borrower or any Guarantor, or any others obligated under any of
the Notes, or against any one or more of them, at the sole
discretion of Lenders, (c) may be exercised as often as the
occasion therefor shall arise, it being agreed by Borrower and
each Guarantor that the exercise or failure to exercise any of
same shall in no event be construed as a waiver or release
thereof or of any other right, remedy or recourse, and (d) are
intended to be, and shall be, non-exclusive.
Section 9.5. No Conditions Precedent to Exercise Remedies.
Borrower and each other Person hereafter obligated for payment or
fulfillment of all or any part of the Obligations shall not,
except as otherwise provided by applicable law, be relieved of
such obligation by reason of (a) the failure of a trustee to
comply with any request of Borrower, or any other Person so
obligated to foreclose the Lenders' Liens or to enforce any
provisions of the Loan Documents, (b) the release, regardless of
consideration, of any Person obligated with respect to the
Obligations, or of the Collateral or any part thereof, or the
addition of any other property to the Collateral, (c) any
agreement or stipulation between any subsequent owner of the
Collateral and Agent or any Lender extending, renewing,
rearranging or in any other way modifying the terms of the Loan
Documents without first having obtained the consent of, given
notice to or paid any consideration to Borrower, or such other
Person, and in such event, Borrower and all such other Persons
shall continue to be liable to make payments in accordance with
the terms of any such extension or modification agreement unless
expressly released and discharged in writing by the Required
Lenders, and (d) any other act or occurrence, save and except the
complete payment of the Obligations. Borrower and each Guarantor
waive any right to require Lenders to proceed against any other
Person, exhaust any Collateral, or pursue any other remedy in
Lenders' power. All dealings between Borrower, any Guarantor and
any Lender, whether or not resulting in the creation of the
Obligations, shall conclusively be presumed to have been had or
consummated upon reliance upon this Agreement. Borrower and each
Guarantor authorize Lenders, without notice or demand and without
any reservation of rights against Borrower or any Guarantor and
without affecting liability hereunder or on the Obligations, from
time to time, to (i) renew, extend for any period, accelerate,
modify, compromise, settle, or release the obligation of any
other Person that may be obligated with respect to any or all of
the Obligations or Collateral; (ii) take and hold any other
property as collateral, other than the Collateral, for the
payment of any or all of the Obligations, and exchange, enforce,
waive, and release any or all of the Collateral or other
property; and (iii) after the occurrence of an Event of Default,
apply the Collateral or other property and direct the order or
manner of sale thereof in accordance with the terms of this
Agreement and the Security Documents.
Section 9.6. Release of and Resort to Collateral. The
release or substitution of all or any part of the Collateral,
regardless of consideration, shall not in any way impair, affect,
subordinate, or release the Lenders' Liens or their status as
first and prior Liens in and to any remaining Collateral. For
payment and performance of the Obligations, Lenders may resort to
any other security therefor held by a trustee in such order and
manner as Required Lenders may elect.
Section 9.7. Waivers. To the full extent permitted by
law, Borrower and each Guarantor hereby irrevocably and
unconditionally waive and release (a) all benefit that might
accrue to Borrower or any Guarantor by virtue of any present or
future law exempting the Collateral from attachment, levy or sale
on execution or providing for any appraisement, evaluation, stay
of execution, exemption from civil process, redemption or
extension of time for payment, (b) except as specifically
provided for herein, all notices of any Default or Event of
Default or of any trustee's or Lenders' election to exercise or
his or their actual exercise of any right, remedy or recourse
provided for under the Loan Documents, (c) any right to a
marshalling of assets with respect to the Notes or the Letters of
Credit or any of the Collateral or any Debt of Borrower or any
Guarantor, or a sale in inverse order of alienation and
(d) except as specifically provided for herein, any and all right
to receive demand, grace, notice, presentment for payment,
protest, notice of intention to accelerate the Obligations or
notice of acceleration of the Obligations.
Section 9.8. Discontinuance of Proceedings. In case Agent
shall have proceeded to invoke any right, remedy or recourse
permitted under the Loan Documents and shall thereafter elect to
discontinue or abandon same for any reason, Agent shall have the
unqualified right to do so and, in such event, Borrower, each
Guarantor and Lenders shall be restored to their former positions
with respect to the Obligations, the Loan Documents, the
Collateral and otherwise, and the rights, remedies, recourses and
powers of Agent and Lenders shall continue as if same had never
been invoked.
Section 9.9. Power of Attorney. Borrower and each
Guarantor hereby irrevocably appoint Agent, acting for all the
Lenders, as the true and lawful attorney of Borrower or such
Guarantor with full power of substitution for, and on behalf of
Borrower and such Guarantor, and in its name, upon the request
and instruction of Borrower and such Guarantor and in any event
after the occurrence of an Event of Default (or prior to the
occurrence of any Event of Default if Agent otherwise reasonably
believes it is necessary to take such action), to take any action
to preserve, maintain, protect or enforce the rights and
interests of Borrower or such Guarantor with respect to the
Collateral, including, without limitation, to (i) endorse any
Assigned Loans to Agent, on behalf of Lenders, or to any other
Person, (ii) enforce, cure any default or otherwise act with
respect to any leases, sales contracts, management or marketing
contracts or any other agreements pertaining to or affecting any
of the Mortgaged Property, (iii) take all such action and to
execute all such documents as Agent deems necessary or desirable
to operate or preserve or protect the Assigned Loans and the
collateral therefor, the Mortgaged Property or any other
Collateral, (iv) sue for, demand or collect any sums owing to
Borrower or any Guarantor under the Assigned Loans or under
leases or other agreements affecting the Mortgaged Property and
(v) exercise rights of Borrower or any Guarantor under any
purchase agreement related to any Assigned Loan. The power so
vested in Agent under this Section 9.9 is one coupled with an
interest and shall be irrevocable, except by written instrument
executed jointly by Borrower, each Guarantor and Agent and filed
for record in the Office of the County Clerk of Dallas County,
Texas. Notwithstanding the foregoing, Agent shall be under no
obligation to exercise any of the foregoing rights or take any
action necessary to preserve any right in any asset subject to
the Lenders' Liens against any other Person, and Agent, to the
extent permitted herein or by applicable law, may exercise any of
the foregoing rights without incurring any responsibility or
liability to Borrower or any other Person and without in any way
affecting the Obligations or any other obligations of Borrower or
any Guarantor to Lenders. Borrower and Guarantors, jointly and
severally, agree to reimburse Agent and Lenders upon demand for
any costs and expenses, including, without limitation, reasonable
attorneys' fees and collection costs, that Agent or any Lender
may incur while acting as the attorney-in-fact of Borrower and
Guarantors as provided hereunder (or pursuant to the
attorney-in-fact herein created), all of which costs and expenses
shall be included in the Obligations.
Section 9.10. Application of Proceeds. All payments on the
Notes or the Letters of Credit received by any Lender during the
existence of an Event of Default (unless otherwise elected by
Lenders), and the proceeds of any sale or disposition of, and all
proceeds generated by the holding, leasing, operation or other
use of, the Collateral, or any part thereof, during the existence
of an Event of Default and upon the exercise of Lenders' rights
and remedies hereunder or under any of the other Loan Documents,
shall be applied by Lenders, the applicable trustee or the
receiver, if one is appointed, to the extent that funds are so
available therefrom, as determined by the Required Lenders
(provided that, as among themselves, Lenders agree that any such
proceeds shall be applied as contemplated by Article X hereof).
ARTICLE X
AGENT AND THE LENDERS
Section 10.1. Appointment and Authorization of Agent.
(a) Each Lender hereby irrevocably appoints and authorizes
Agent as its nominee and agent, in its name and on its behalf:
(i) to act as nominee for and on behalf of such Lender in and
under all Loan Documents; (ii) to arrange the means whereby the
funds of the Lenders are to be made available to Borrower under
the Loan Documents; (iii) to take such action as may be requested
by any Lender under the Loan Documents (when such Lender is
entitled to make such request under the Loan Documents and after
such requesting Lender has obtained the concurrence of such other
Lenders as may be required under the Loan Documents); (iv) to
receive all documents and items to be furnished to Lenders under
the Loan Documents; (v) to promptly distribute to each Lender the
material information, requests, documents and items received from
Borrower or Guarantors under the Loan Documents; (vi) to promptly
distribute to each Lender such Lender's Aggregate Loan Percentage
of each payment or prepayment in accordance with the terms of the
Loan Documents; and (vii) to deliver to the appropriate Persons
requests, demands, approvals and consents received from Lenders.
(b) The obligations of Agent hereunder are only those
expressly set forth herein. Each Lender and Borrower and each
Guarantor agree that Agent is not a fiduciary for Lenders or for
Borrower or Guarantors but simply is acting in the capacity
described herein to alleviate administrative burdens for both
Borrower and Lenders and that Agent has no duties or
responsibilities to Lenders, Borrower or Guarantors except those
expressly set forth herein. Without limiting the generality of
the foregoing, Agent shall not be required to take any action or
exercise any right or remedy with respect to any Default or Event
of Default, except if requested by the Required Lenders.
Notwithstanding the administrative authority delegated to Agent,
Agent shall not cause or permit any modification of the Loan
Documents or take other action relating to either or both of the
Credit Facilities specifically requiring the consent or approval
of the Required Lenders without such consent or approval. Action
taken by Agent including, without limitation, any exercise of
remedies or initiation of suit or other legal proceedings made in
accordance with the instructions of the Required Lenders or as
otherwise permitted by this Article X, shall be binding upon each
of the Lenders. Each Lender specifically acknowledges that it
has reviewed and approved the voting and other provisions of this
Agreement and the other Loan Documents setting forth the relative
rights and obligations among the Lenders and agrees to be bound
by such provisions notwithstanding that such Lender is only a
Revolving Lender or only a Term Lender, and acknowledges that
Agent (and counsel for the Lenders, as a group) are acting on
behalf of all the Lenders and not the Revolving Lenders, as a
group, and Term Lenders, as a separate group.
(c) Agent, in its capacity as a Lender, shall have the same
Rights under the Loan Documents as any other Lender and may
exercise the same as though it were not acting as Agent, and any
resignation by Agent hereunder shall not impair or otherwise
affect any Rights which it has or may have in its capacity as an
individual Lender.
(d) Agent may now or hereafter be engaged in one or more
loan, letter of credit, leasing, or other financing transactions
with Borrower or any Guarantor, act as trustee or depositary for
Borrower or any Guarantor or otherwise be engaged in other
transactions with Borrower, any Guarantor and/or their Affiliates
(collectively, the "other activities") not the subject of the
Loan Documents. Without limiting the Rights of Lenders
specifically set forth in the Loan Documents, Agent shall not be
responsible to account to Lenders for such other activities, and
no Lender shall have any interest in any other activities, any
present or future guaranties by or for the account of Borrower or
any Guarantor which are not contemplated or included in the Loan
Documents (any present or future offset exercised by Agent in
respect of such other activities), any present or future property
taken as security for any such other activities, or any property
now or hereafter in the possession or control of Agent which may
be or become security for the Obligations by reason of the
general description of indebtedness secured or of property
contained in any other agreements, documents or instruments
related to any such other activities; provided that, if any
payments in respect of such guaranties, such property or the
proceeds thereof or any offset shall be applied to reduction of
the Obligations, then each Lender shall be entitled to share in
such application pursuant to the terms of this Agreement.
Section 10.2. Possession of Instruments by Agent.
Agent shall exercise all rights and remedies under the Loan
Documents and take all actions with respect thereto in accordance
with the request or direction of the Required Lenders, or
otherwise as and to the extent provided herein or in the other
Loan Documents; provided, however, that Agent may take such
actions in its name without the joinder of Lenders, and Borrower,
Guarantors and all third parties shall be entitled to rely on the
actions taken by Agent with respect to the execution by Agent of
any and all agreements, financing statements, affidavits, notices
or any other type of document or instrument pertaining thereto,
including, without limitation, in connection with the exercise of
any rights or remedies of Lenders under the Loan Documents (and
specifically including any foreclosure proceedings under any of
the Security Documents or other legal proceedings), and the same
shall be binding upon all Lenders as to any third party relying
on such actions of Agent. Agent shall also be the named secured
party or beneficiary under the Security Documents and shall take
and maintain possession of all the Security Documents, as agent
for and on behalf of all Lenders, and the grant to Agent of any
Lien under any Security Document shall be for the ratable benefit
of all Lenders.
Section 10.3. Expenses. Each Lender shall pay its
Aggregate Loan Percentage of any reasonable expenses (including,
without limitation, court costs, reasonable attorneys' fees and
other costs of collection) incurred by Agent in connection with
any of the Loan Documents if Agent does not receive reimbursement
therefor from other sources within thirty (30) days after
incurred; provided that, and subject to the terms and conditions
of Section 11.4, each Lender shall be entitled to receive its
Aggregate Loan Percentage of any reimbursement for such expenses,
or part thereof, which Agent subsequently receives from such
other sources.
Section 10.4. Delegation of Duties; Reliance;
Consultation. Lenders may perform any of their duties or
exercise any of their Rights under the Loan Documents by or
through Agent, and Lenders and Agent may perform any of their
duties or exercise any of their Rights under the Loan Documents
by or through their respective officers, directors, employees,
attorneys, agents, or other representatives (collectively,
"Representatives"). Agent, Lenders, and their respective
Representatives shall (a) be entitled to rely upon (and shall be
protected in relying upon) any writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telecopy,
telegram, telex or teletype message, statement, order or other
documents or conversation believed by any of them to be genuine
and correct and to have been signed or made by the proper Person
and, with respect to legal matters, upon opinion of counsel
selected by Agent or such Lender, (b) be entitled to deem and
treat each Lender as the owner and holder of its Revolving Loan
Percentage or Term Loan Percentage, as applicable, for all
purposes until, subject to Section 11.10, written notice of the
assignment or transfer thereof shall have been given to and
received by Agent (and, any request, authorization, consent or
approval of any Lender shall be conclusive and binding on each
subsequent holder, assignee, or transferee of such Lender's
Revolving Loan Percentage or Term Loan Percentage, as applicable,
or Participant therein until such notice is given and received),
and (c) not be deemed to have notice of the occurrence of a
Default or an Event of Default unless notified thereof by another
Lender or AMRESCO. Agent may consult with legal counsel,
independent public accountants, consultants, appraisers and other
experts selected by Agent, and shall not be liable for any action
taken or omitted to be taken by Agent in good faith in accordance
with the advice of such counsel, accountants or experts. Any
such counsel, accountants or other experts shall be engaged to
represent and render services to all Lenders as a group, and not
the Revolving Lenders as a group, and the Term Lenders as a
separate group, unless otherwise specified by Agent.
Section 10.5. Limitation of Agent's Liability.
(a) Neither Agent nor any of its Representatives shall be
liable for any action taken or omitted to be taken by it or them
under the Loan Documents in good faith and believed by it or them
to be within the discretion or power conferred upon it or them by
the Loan Documents or be responsible for the consequences of any
error of judgment or negligence, except for gross negligence or
willful misconduct, and neither Agent nor any of its
Representatives has a fiduciary relationship with any Lender by
virtue of the Loan Documents (provided that nothing herein shall
negate the obligation of Agent to account for funds received by
it for the account of any Lender).
(b) Unless indemnified to its satisfaction against loss,
cost, liability, and expense, Agent shall not be compelled to do
any act under the Loan Documents or to take any action toward the
execution or enforcement of the powers thereby created or to
prosecute or defend any suit in respect of the Loan Documents.
If Agent requests instructions from Lenders with respect to any
act or action (including, but not limited to, any failure to act)
in connection with any Loan Document, Agent shall be entitled
(but shall not be required) to refrain (without incurring any
liability to any Person by so refraining) from such act or action
unless and until it has received such instructions. In no event,
however, shall Agent or any of its Representatives be required to
take any action which it or they reasonably determine could incur
for it or them criminal or civil liability.
(c) Agent (and its Representatives) shall not be
responsible in any manner to any Lender or any participant of a
Lender for, and each Lender represents and warrants that it has
not relied upon Agent in respect of, (i) the creditworthiness of
Borrower or any Guarantor and the risks involved to such Lender,
(ii) the effectiveness, enforceability, genuineness, validity, or
the due execution of any Loan Document, (iii) any representation,
warranty, document, certificate, report, or statement made
therein or furnished thereunder or in connection therewith, (iv)
the existence, priority, or perfection of any Lien granted or
purported to be granted under any Loan Document, (v) the
observation of or compliance with any of the terms, covenants, or
conditions of any Loan Document on the part of Borrower or any
Guarantor, or (vi) the relative Rights of the Lenders as among
themselves. Each Lender jointly and severally agrees to
indemnify Agent and hold it harmless from and against (but
limited to such Lender's Aggregate Loan Percentage of) any and
all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, reasonable expenses, and
reasonable disbursements of any kind or nature whatsoever
(including counsel fees and disbursements) which may be imposed
on, asserted against, or incurred by Agent in any way relating to
or arising out of the Loan Documents or any action taken or
omitted by Agent under the Loan Documents (provided that,
although Agent shall have the right to be indemnified for its
ordinary negligence, Agent shall not have the right to be
indemnified hereunder for its own fraud, gross negligence, or
willful misconduct).
Section 10.6. Default; Collateral. Upon the
occurrence and continuance of a Default or an Event of Default,
Agent shall make a recommendation to Lenders of any actions to be
taken, and each Lender agrees to promptly confer with the other
Lenders in order that Lenders can consider such course of action
or any other actions to be taken for the enforcement of the
Rights of Lenders; provided that Agent shall be entitled (but not
obligated) to proceed to take any actions necessary in its
reasonable judgment to preserve Rights, pending agreement by
Lenders on the course of action to be taken. If the Required
Lenders cannot agree on a course of action to be taken within
sixty (60) days following Agent's initial recommendation, Agent
shall thereafter take such action as Agent deems advisable to
enforce the Rights of Lenders; provided, that if, after Agent has
begun taking such action, the Required Lenders agree on a course
of action contrary to that undertaken by Agent, then Agent shall
change its course of action so as to follow the course of action
agreed upon by the Required Lenders. Any action directed or
approved by the Required Lenders, including without limitation,
any exercise of remedies or initiation of suit or other legal
proceedings, shall be binding upon each Lender. In actions with
respect to any property of Borrower or any Guarantor, Agent is
acting for the account of each Lender to the extent of each
Lender's Aggregate Loan Percentage. Any and all agreements to
subordinate (whether made heretofore or hereafter) other indebted
ness or obligations of Borrower or any Guarantor to the
Obligations shall be construed as being for the benefit of each
Lender to the extent of its respective Aggregate Loan Percentage.
If Agent acquires any security for the Obligations or any
guaranty of the Obligations upon or in lieu of foreclosure, the
same shall be held for the benefit of each Lender in proportion
to such Lender's respective Aggregate Loan Percentage.
Lenders agree, among themselves, that unless otherwise
agreed to by Agent and the Required Lenders, all monies collected
or received by Agent after the occurrence of an Event of Default
in respect of the security for the Credit Facilities, directly or
indirectly, or by any other means shall be applied (a) to the
Administrative Fee and all costs of collection or maintenance of
the Collateral, and then to either interest or principal of the
Credit Facilities as recommended by Agent and approved by the
Required Lenders (except that any amounts to be applied to
interest or principal shall be distributed to Lenders based on
their Aggregate Loan Percentage) until the Credit Facilities
(including the Competitive Bid Loans) are paid in full, (b) to
the amounts owed to any Lender under any Interest and Foreign
Exchange Hedge Agreement, only after payment in full of the
outstanding principal and interest under the Credit Facilities,
and (c) to the amounts owed under the Bridge Debt, but only after
payment in full of the outstanding principal and interest under
the Credit Facilities and the amounts owed to all Lenders under
any Interest and Foreign Exchange Hedge Agreement.
Section 10.7. Lenders' Decision. Lenders agree as
among themselves that any decisions or elections to be made by
Lenders (and not Agent) under this Agreement and the other Loan
Documents shall be made by the Required Lenders, except in the
case, if any, where a specific different number or percentage of
Lenders is expressly required under this Agreement or any other
Loan Documents (use of the terms "Lenders" in any of the Loan
Documents, without an express provision for different voting
rights other than as set forth in the definition of Required
Lenders, does not imply that unanimous consent is thereby
required). Agent may, at its election, request any
determination, vote, consent or approval by Lenders in writing or
orally (by telephone or in person), and Agent shall be entitled
to take or refrain from taking any action if it has received the
oral or written approval of those Lenders which would satisfy the
requirements set forth in the definition of Required Lenders,
without having to contact or solicit the vote of any other
Lenders. In addition, if any request by Agent for Lenders'
determination or approval hereunder is made in writing and such
writing contains written notice to Lenders requesting a response
within five Business Days, or longer, from the date Lenders are
deemed to have received notice as herein provided (and setting
forth the actual date of the last day of the Lender reply
period), then Lenders shall use reasonable efforts to reply
within the applicable reply period, provided, that if any such
Lender does not reply within the applicable reply period, such
Lender shall be deemed not to have approved of or consented to or
concurred with such recommendation or determination.
Section 10.8. Limitation of Liability of Lenders. To
the extent permitted by law, (a) neither Agent nor any Lender or
participant of a Lender shall incur any liability to any other
Lender or participant of a Lender except for acts or omissions in
bad faith, and (b) neither Agent nor any Lender or participant of
a Lender shall incur any liability to Borrower, Guarantors or any
other Person for any act or omission of any other Lender or any
participant.
Section 10.9. Relationship of Lenders. Nothing herein
shall be construed as creating a partnership or venture among
Agent and Lenders or among Lenders.
Section 10.10. Debtor-Creditor Relationship. Each Lender
has and shall maintain a direct creditor-debtor relationship with
Borrower and will have direct recourse, singly or in the
aggregate, against Borrower and Guarantors, subject to the terms
and conditions of the Loan Documents. Notwithstanding the
foregoing, any right, remedy, action, omission or waiver
respecting this Agreement, the Notes, the Security Documents and
the other Loan Documents shall only be exercised, made, taken, or
permitted by Agent, acting upon the direction of the Required
Lenders, as the agent for all Lenders; provided, however, that if
the Required Lenders have elected and directed Agent to institute
suit against Borrower or any Guarantor for payment of any past
due amounts under the Notes or any other Obligations for which
Lenders have recourse against Borrower or any Guarantor, or in
the event of any bankruptcy proceedings or other legal
proceedings relating to this Agreement against Borrower or any
Guarantor, each Lender shall be entitled, at its option, to bring
or join in such proceedings in its own name.
Section 10.11. Credit Decisions. Each Lender acknowledges
that it has, independently and without reliance upon Agent or any
other Lender, and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision
to enter into this Agreement and each of the other Loan Documents
to which it is a party or to which Agent is a party for its
benefit. Each Lender also acknowledges that it will,
independently and without reliance upon Agent or any other
Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit
decisions in taking or not taking any action under this Agreement
or with respect to either Credit Facility.
Section 10.12. Removal of Agent. Lenders, acting by written
notice to Agent from and agreed to by all Lenders other than
Agent, may remove for cause the then current Agent, as Agent, and
appoint one of the other Lenders as the successor Agent. Upon
the appointment of a successor Agent, the removed Agent and the
successor Agent shall execute such documents as any Lender may
reasonably request to reflect such appointment of a successor
Agent and shall notify AMRESCO of such change in Agent. The
successor Agent shall be vested with all rights, powers and
privileges and be bound to all duties, obligations and
responsibilities of Agent in and under this Agreement and the
other Loan Documents; provided, however, that until such time as
AMRESCO is notified in writing signed by both the removed and
successor Agent as to the appointment of the successor Agent,
Borrower and Guarantors shall be entitled to rely on any
decision, approval or other act by the removed Agent as binding
on Lenders, and may pay to Agent any amounts due or owing by
Borrower under the Loan Documents.
Section 10.13. Resignation by Agent. An Agent's status as
Agent under this Agreement shall automatically terminate fifteen
(15) days after the closing or liquidation of such Agent or
fifteen (15) days after such Agent is adjudicated insolvent.
Additionally, Agent may resign its position as Agent at any time
by giving at least thirty (30) days written notice thereof to
AMRESCO and the other Lenders. Upon any such occurrence causing
a termination of Agent or the delivery of such notice of
resignation from Agent, the Required Lenders and AMRESCO shall
select a successor Agent. If the Required Lenders and AMRESCO
cannot agree upon the choice of the successor Agent within ten
(10) days after the occurrence causing a termination in the case
of a termination of Agent, or ten (10) days prior to the
effective resignation date set forth in Agent's resignation
notice in the case of a resignation by Agent, then the Designated
Successor Agent shall become the successor Agent. AMRESCO shall
be entitled to participate in the selection of the replacement
Agent only prior to the occurrence of a Default. Upon any such
termination or resignation, (a) the successor Agent shall
automatically be vested with all rights, powers and privileges
and be bound to all duties, obligations and responsibilities of
Agent in and under this Agreement and the other Loan Documents
and shall thereafter be deemed the "Agent" for all purposes under
the Loan Documents and (b) such terminating or resigning Agent
shall act only in a custodial capacity for the holding by it of
any funds theretofore received from Borrower and any such funds
shall be held in trust for the benefit of Lenders or Borrower, as
the case may be. Additionally, upon the successor Agent becoming
Agent as provided in this Section 10.13, the terminating or
resigning Agent and the new Agent shall execute such documents as
any Lender may reasonably request to reflect such succession.
All costs incurred in connection with the execution of such
documents shall be paid by Lenders in proportion to each Lender's
Aggregate Loan Percentage.
Section 10.14. Sharing of Payments and Setoffs. Each Lender
agrees that if it should receive any amount (whether by voluntary
payment, by realization upon any Collateral, by the exercise of
the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Loan Documents
or otherwise) which is applicable to the payment of the principal
of or interest on either of the Credit Facilities, of a sum which
with respect to the related sum or sums received by the other
Lenders exceeds such Lender's Aggregate Loan Percentage, then
such Lender receiving such excess payment shall purchase without
recourse or warranty from the other Lenders an interest in the
indebtedness of Borrower to such Lenders in such amount as shall
result in a proportional participation by all of the Lenders in
such amount; provided that if all or any portion of such excess
amount is thereafter recovered from such Lender, such purchase
shall be rescinded and the purchase price restored to the extent
of such recovery, but without interest. This Section 10.14 shall
not impair the right of any Lender to exercise any right of
setoff or counterclaim it may have with respect to any funds in
an account pledged to such Lender to secure only indebtedness
other than the Obligations, and to apply the amount received or
subject to such exercise to the payment of such other
indebtedness, it being expressly agreed by all Lenders, however,
that until the Obligations are paid and satisfied in full, any
and all amounts received by any Lender from offset of any account
of Borrower or any Guarantor that either (a) constitutes
Collateral or (b) contains funds exclusively derived from or
related to the Collateral, shall be applied to the Obligations,
and not to any other indebtedness of Borrower or any Guarantor
to such Lender, except in the case of a certificate of deposit or
other designated account (but in no event any operating account
of Borrower or any Guarantor) that is specifically pledged or
assigned to a Lender as security for indebtedness other than the
Obligations.
Section 10.15. Non-Advancing Lenders. In the event that
Revolving Lender shall fail or refuse to advance its Revolving
Loan Percentage of any Advance under the Revolving Credit
Facility, or any Lender shall fail or refuse to advance its
Aggregate Loan Percentage of any payment or reimbursement by
Lenders as required hereunder, or of any amount to be funded
pursuant to Section 10.3, when it is obligated to do so, Agent
shall notify, in the case of the failure or refusal to make an
Advance under the Revolving Credit Facility, the Revolving
Lenders, and, in all other instances, the other Lenders, and such
remaining Revolving Lenders or all other Lenders, as applicable,
or any of them, may elect, at their sole option and discretion
(without any obligation whatsoever to do so), to advance such
non-advancing Lender's portion, pro rata in accordance with the
proportion that (i) in the case of the failure or refusal to make
an Advance under the Revolving Credit Facility, the Revolving
Loan Percentage of each Revolving Lender electing to make such
advance bears to the Revolving Loan Percentages of all Revolving
Lenders electing to make such advance, or (ii) in all other
instances, the Aggregate Loan Percentage of each Lender electing
to make such advance bears to the Aggregate Loan Percentage of
all Lenders electing to make such advance. Upon making any such
advance, and notwithstanding anything to the contrary expressed
or implied herein or in the Notes or any other Loan Document, all
subsequent payments made on the Revolving Credit Facility, or
both Credit Facilities, as applicable, and all proceeds realized
from the sale of any Collateral securing the Credit Facilities or
from the exercise of right of setoff or other remedies under this
Agreement or the other Loan Documents, shall be applied, in the
manner described below, only to Revolving Lenders, or all other
Lenders, as applicable, other than the non-advancing Lender (and
the non-advancing Lender shall not be entitled to receive the
same), until the amounts advanced by such advancing Revolving
Lenders, or all other Lenders, as applicable, on behalf of the
non-advancing Lender (together with the interest earned thereon
pursuant to this Agreement and the applicable Notes), have been
repaid in full. As among Lenders other than the non-advancing
Lender, Lenders that advanced funds on behalf of the
non-advancing Lender shall receive the portion the non-advancing
Lender would have been entitled to receive had it advanced
(together with the interest earned thereon pursuant to this
Agreement and the applicable Notes), to be applied pro rata in
accordance with the amounts advanced by each such advancing
Lender, until the amounts advanced by such Lenders on behalf of
the non-advancing Lender (together with the interest earned
thereon pursuant to this Agreement and the applicable Notes),
have been repaid in full; any Revolving Lender that advanced only
on its own behalf based on its Revolving Loan Percentage shall be
repaid based on such Revolving Loan Percentage or its Aggregate
Loan Percentage, as applicable. In addition, any Lenders that
advance funds on behalf of a non-advancing Lender pursuant to
this Section 10.15 shall (i) receive a proportionate share (based
on the amounts so advanced by such Lenders) of the amount the
non-advancing Lender would have been entitled to receive of any
distribution of any Collateral securing the Credit Facilities in
the event the same are distributed among Lenders, and (ii) have a
claim against such non-advancing Lender for the amounts so
advanced and shall be entitled to all rights and remedies at law
or in equity to recover any unpaid amounts. A non-advancing
Lender shall not be entitled to vote on any matters hereunder or
related to either or both of the Credit Facilities (and its
interest shall be excluded for purposes of determining the
requisite percentage or number of Lenders for a vote) so long as
such Lender remains a non-advancing Lender.
Section 10.16. Benefit of Lenders. All terms, conditions
and agreements set forth in this Article X, specifically
including, without limitation, the provisions of Section 10.14
are for the sole and exclusive benefit of Lenders, and neither
Borrower, Guarantors nor any other Person shall be entitled to
rely on or seek the benefit of such provisions; provided,
however, that Borrower and Guarantors shall be entitled to rely
on any decision, approval or other act by Agent as binding
Lenders.
Section 10.17. Duties and Rights of Co-Agent. Bank One,
Texas, N.A., as co-agent hereunder, shall have no duties under
this Agreement or the other Loan Documents, and shall have no
rights, in its capacity as co-agent hereunder.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Continuing Agreement. This is a
continuing Agreement and all the rights, powers and remedies of
Lenders hereunder and all agreements and obligations of Borrower,
Guarantors, and Lenders hereunder, shall continue to exist until
the Notes have been paid in full, the commitment of Lenders to
make Advances hereunder has been terminated, all Letters of
Credit have been terminated and all other Obligations have been
paid in full.
Section 11.2. Notices. All notices, requests and
other communications to any party hereunder shall be in writing
(including bank wire, telecopy or similar writing), except for
any telephone notices as specifically provided for herein, may be
personally served or sent by telecopier, mail or the express mail
service of the United States Postal Service, Federal Express or
other equivalent overnight or expedited delivery service, and
(a) if given by personal service or telecopier (confirmed by
telephone), it shall be deemed to have been given upon receipt;
(b) if sent by telecopier without telephone confirmation, it
shall be deemed to have been given twenty-four (24) hours after
being given; (c) if sent by mail, it shall be deemed to have been
given upon the earlier of (i) actual receipt, or (ii) three (3)
Business Days after deposit in a depository of the United States
Postal Service, first class mail, postage prepaid; (d) if sent by
Federal Express, the express mail service of the United States
Postal Service or other equivalent overnight or expedited
delivery service, it shall be deemed given upon the earlier of
(i) actual receipt or (ii) twenty-four (24) hours after delivery
to such overnight or expedited delivery service, delivery charges
prepaid, and properly addressed to Agent, Borrower, the
applicable Guarantor or the applicable Lender; provided that
notices to Agent under Article III and Article IV shall not be
effective until received. For purposes hereof, the address of
the parties to this Agreement shall be as set forth in Schedule I
attached hereto. Any party may, by proper written notice
hereunder to the other parties, change the address to which
notices shall thereafter be sent to it. Notwithstanding anything
to the contrary implied or expressed herein, the notice
requirements herein (including the method, timing or deemed
giving of any notice) is not intended to and shall not be deemed
to increase the number of days or to modify the method of notice
or to otherwise supplement or affect the requirements for any
notice required or sent pursuant to any Legal Requirement
(including, without limitation, any applicable statutory or law
requirement), or otherwise given hereunder, that is not required
under this Agreement or the other Loan Documents. The provisions
of this Section 11.2 shall control over any conflicting
contractual notice provisions contained in the Loan Documents.
Section 11.3. No Waivers. No failure or delay by
Agent or any Lender in exercising any right, power or privilege
hereunder or under the Notes or any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law or in any of
the other Loan Documents.
Section 11.4. Expenses; Documentary Taxes;
Indemnification. Borrower and Guarantors, jointly and severally,
agree to pay (a) all expenses of Agent and the reasonable fees
and disbursements of legal counsel for Lenders as a group, in
connection with the negotiation, documentation and closing of the
Credit Facilities, and thereafter all reasonable expenses of
Agent and Lenders in connection with any waiver or consent
hereunder or under the other Loan Documents or any amendment,
supplement or replacement of any of the Loan Documents, or any
Default or alleged Default hereunder; and (b) if a Default or an
Event of Default occurs, all out-of-pocket expenses incurred by
Agent or Lenders, including fees and disbursements of legal
counsel in connection with such Event of Default and collection
and other enforcement proceedings resulting therefrom (including,
without limitation, any bankruptcy or other insolvency
proceedings), fees of auditors and consultants incurred in
connection therewith and investigation expenses incurred by
Lenders in connection therewith. Borrower and Guarantors shall,
jointly and severally, indemnify Agent and each Lender against
any Taxes (other than Taxes on the income of any Lender) imposed
by reason of the execution, performance and delivery of this
Agreement or the Notes. Borrower and Guarantors further shall,
jointly and severally, indemnify Agent and each Lender and hold
Agent and each Lender harmless from and against any and all
liabilities, losses, damages, costs and expenses of any kind
(including, without limitation, the reasonable fees and
disbursements of counsel for Agent and Lenders in connection with
any investigative, administrative or judicial proceeding, whether
or not Agent or Lenders shall be designated a party thereto)
which may be incurred by Agent or any Lender relating to or
arising out of this Agreement or any actual or proposed use of
proceeds of the Notes or the Letters of Credit; PROVIDED THAT
NEITHER AGENT NOR ANY LENDER SHALL HAVE THE RIGHT TO BE
INDEMNIFIED HEREUNDER FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, IT BEING THE INTENTION HEREBY THAT AGENT AND EACH
LENDER SHALL BE INDEMNIFIED FOR THE CONSEQUENCES OF ITS
NEGLIGENCE WHETHER IN WHOLE OR IN PART.
Section 11.5. Amendments and Waivers; Consent to
Deviation. Any provision of this Agreement, the Notes or the
other Loan Documents may be amended or waived if, but only if,
such amendment or waiver is in writing and is signed by Borrower,
Agent and Required Lenders.
Section 11.6. Survival. All representations,
warranties and covenants made by Borrower or any Guarantor herein
or in any certificate or other instrument delivered by it or on
its behalf under the Loan Documents shall be considered to have
been relied upon by Lenders and shall survive the delivery to
Agent or Lenders of such Loan Documents or the extension of any
of the Notes or the issuance of any of the Letters of Credit (or
any part thereof), regardless of any investigation made by or on
behalf of Agent or any Lender.
Section 11.7. Prior Understandings; No Defenses;
Release; No Oral Agreements. This Agreement supersedes all other
prior understandings and agreements, whether written or not,
between the parties hereto relating specifically to the
transactions provided for herein. Borrower and each Guarantor
confirm that there are no existing defenses, claims,
counterclaims or rights of offset against any Lender in
connection with the negotiation, preparation, execution,
performance or any other matters related to this Agreement or any
of the other Loan Documents executed as of the date hereof and
any of the transactions contemplated thereby, and Borrower and
each Guarantor hereby expressly release and discharge each
Lender, and its Representatives, from any and all such claims,
known or unknown. Borrower and each Guarantor further confirm
that no Lender has made any agreements with, or commitments or
representations to, Borrower or any Guarantor (either in writing
or orally) other than as expressly stated herein or in the other
Loan Documents executed as of the date hereof.
THIS WRITTEN LOAN AGREEMENT, TOGETHER WITH THE OTHER WRITTEN
LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENT OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
To the fullest extent applicable, Borrower, each Guarantor and
Lender acknowledge and agree that this Agreement and each of the
other Loan Documents shall be subject to Section 26.02 of the
Texas Business and Commerce Code.
Section 11.8. Limitation on Interest. It is expressly
stipulated and agreed to be the intent of Borrower and Lenders at
all times to comply with the applicable law governing the maximum
rate or amount of interest payable on or in connection with the
Notes, the Credit Facilities and the Letters of Credit. If the
applicable law is ever judicially interpreted so as to render
usurious any amount called for under the Notes or under any of
the other Loan Documents, or contracted for, charged, taken,
reserved or received with respect to any of the Notes or the
Letters of Credit, or if acceleration of the maturity of the
Notes, any prepayment by Borrower, or any other circumstance
whatsoever, results in any Lender having been paid any interest
in excess of that permitted by applicable law, then it is the
express intent of Borrower and Lenders that all excess amounts
theretofore collected by Lenders be credited on the principal
balance of the Notes (or, if the Notes have been or would thereby
be paid in full, refunded to Borrower), and the provisions of the
Notes and the other applicable Loan Documents immediately be
deemed reformed and the amounts thereafter collectible hereunder
and thereunder reduced, without the necessity of the execution of
any new document, so as to comply with the applicable law, but so
as to permit the recovery of the fullest amount otherwise called
for hereunder and thereunder. The right to accelerate the
maturity of the Notes does not include the right to accelerate
any interest which has not otherwise accrued on the date of such
acceleration, and Lenders do not intend to collect any unearned
interest in the event of acceleration. All sums paid or agreed
to be paid to Lenders for the use, forbearance or detention of
the indebtedness evidenced hereby or by the Notes shall, to the
extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such
indebtedness until payment in full so that the rate or amount of
interest on account of such indebtedness does not exceed the
Maximum Lawful Rate or maximum amount of interest permitted under
applicable law. The term "applicable law" as used herein shall
mean the laws of the State of Texas, or DIDMCA or any other
applicable United States federal law to the extent that it
permits Lenders to contract for, charge, take, reserve or receive
a greater amount of interest than under Texas law. The
provisions of this Section 11.8 shall control all agreements
between Borrower and Lenders.
Section 11.9. Invalid Provisions. If any provision of
the Loan Documents is held to be illegal, invalid, or
unenforceable under present or future laws effective during the
term thereof, such provision shall be fully severable, the Loan
Documents shall be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part
thereof, and the remaining provisions thereof shall remain in
full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance
therefrom. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision there shall be added automatically as a
part of the Loan Documents a provision as similar in terms to
such illegal, invalid, or unenforceable provision as may be
possible and be legal, valid and enforceable.
Section 11.10. Assignments and Participations. (a) The
provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
and assigns; provided that (i) Borrower shall not, directly or
indirectly, assign or transfer, or attempt to assign or transfer,
any of its rights, duties or obligations under this Agreement
without the express prior written consent of all of the Lenders.
Any Lender may assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Note and
its Revolving Loan Commitment Amount or Term Loan Commitment
Amount, as applicable); provided, however, that
(i) each such assignment shall be to an Eligible
Assignee;
(ii) except in the case of an assignment to
another Lender or an assignment of all of a Lender=s rights
and obligations under this Agreement, any such partial
assignment shall be in an amount at least equal to (1) as to
the Term Facility, Five Million and No/100 Dollars
($5,000,000.00), and (2) as to the Revolving Facility, the
lesser of Five Million and No/100 Dollars ($5,000,000.00) or
6% of the Revolving Commitment in effect from time to time;
(iii) each such assignment by a Lender shall be of
a constant, and not varying, percentage of all of its rights
and obligations under this Agreement and the applicable
Note; and
(iv) the parties to such assignment shall execute and
deliver to Agent for its acceptance an Assignment and
Acceptance in the form of Exhibit D hereto, together with
any Note subject to such assignment and a processing fee of
$3,500.
Upon execution, delivery, and acceptance of such Assignment
and Acceptance, the assignee thereunder shall be a party
hereto and, to the extent of such assignment, have the
obligations, rights, and benefits of a Lender hereunder and
the assigning Lender shall, to the extent of such
assignment, relinquish its rights and be released from its
obligations under this Agreement. Upon the consummation of
any assignment pursuant to this Section, the assignor, Agent
and Borrower shall make appropriate arrangements so that, if
required, new Notes are issued to the assignor and the
assignee. If the assignee is not incorporated under the
laws of the United States of America or a state thereof, it
shall deliver to AMRESCO and Agent certification as to
exemption from deduction or withholding of Taxes in
accordance with Section 11.20.
(b) Agent shall maintain at its address referred to in
Schedule I a copy of each Assignment and Acceptance delivered to
and accepted by it and a register for the recordation of the
names and addresses of the Lenders and the Revolving Loan
Commitment Amount or Term Loan Commitment Amount, as applicable,
owing to, each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and Borrower, Agent and the
Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by
AMRESCO or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(c) Upon its receipt of an Assignment and Acceptance
executed by the parties thereto, together with any Note subject
to such assignment and payment of the processing fee, Agent
shall, if such Assignment and Acceptance has been completed and
is in substantially the form of Exhibit D hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to
the parties thereto.
(d) Each Lender may sell participations to one or more
Persons in all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Revolving Loan
Commitment Amount or Term Loan Commitment Amount, as applicable,
and its Note); provided, however, that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii)
such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) prior to an
Event of Default which has occurred and is continuing, such
participant shall be approved by AMRESCO, such approval not to be
unreasonably withheld or delayed by AMRESCO and such approval to
be deemed given by AMRESCO if no objection is received by the
selling Lender from AMRESCO within two (2) Business Days after
notice of such proposed participation has been provided by the
selling Lender to AMRESCO, (iv) the participant shall be
entitled to the benefit of the yield protection provisions
contained in Article III, and (v) AMRESCO shall continue to deal
solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement, and such
Lender shall retain the sole right to enforce the obligations of
Borrower relating to its Note and to approve any amendment,
modification, or waiver of any provision of this Agreement (other
than amendments, modifications, or waivers decreasing the amount
of principal of or the rate at which interest is payable on such
Note, extending any scheduled principal payment date or date
fixed for the payment of interest on such Note or extending the
Revolving Facility or Term Facility, as applicable).
(e) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time assign and pledge all or
any portion of its Note or any amount outstanding thereunder to
any Federal Reserve Bank as collateral security pursuant to
Regulation A and any Operating Circular issued by such Federal
Reserve Bank. No such assignment shall release the assigning
Lender from its obligations hereunder.
(f) Any Lender may furnish any information concerning
Borrower or any of the Subsidiaries in the possession of such
Lender from time to time to assignees and participants (including
prospective assignees and participants), subject, however, to the
provisions of Section 7.3 hereof; and provided, that until
AMRESCO has approved or disapproved a prospective assignee or
participant pursuant to this Agreement (if such approval is
permitted by this Agreement), any Lender may provide to such
prospective assignee or participant only information available to
the public.
Section 11.11. Senior Debt; Borrower Subordination. The
indebtedness of Borrower and Guarantors hereunder and under the
Notes and all of the Obligations is intended to be and shall be
senior to any subordinated indebtedness of Borrower or any
Guarantor or any other indebtedness of Borrower or any Guarantor
secured by a Lien on any portion of the Collateral (the foregoing
shall not in any way imply Lenders' consent to any such
subordinate debt or Liens which is not otherwise permitted by
this Agreement). The Notes and any other amounts advanced to or
on behalf of Borrower or any other Person pursuant to the terms
of this Agreement or any other Loan Document, shall never be in a
position subordinate to any Debt of Borrower or any Guarantor
owing to any other Person, except with the knowledge and written
consent of Lenders. If Borrower or any Guarantor is now or
hereafter becomes indebted to Borrower or any other Guarantor,
(a) such indebtedness and all interest thereon shall, at all
times, be subordinate in all respects to the Obligations and to
all liens, security interests and rights now or hereafter
existing to secure the Obligations; and (b) Borrower or any other
Guarantor holding such inter-company indebtedness shall not be
entitled after the occurrence of a Default to enforce or receive
payment, directly or indirectly, of any such indebtedness until
the Obligations have been fully and finally paid and performed.
Section 11.12. Revolving Loan. Borrower and Lenders hereby
agree that, except for Section 15.10(b) thereof, the provisions
of Art. 5069-15.01 et seq. of the Revised Civil Statues of Texas,
1925, as amended (regulating certain revolving credit loans and
revolving triparty accounts) shall not govern or in any manner
apply to the Notes, the Letters of Credit or the Loan Documents.
Section 11.13. Construction. The parties hereto acknowledge
and agree that neither this Agreement nor any other Loan Document
shall be construed more favorably in favor of one than the other
based upon which party drafted the same, it being acknowledged
that all parties hereto contributed substantially to the
negotiations and preparation of this Agreement and the other Loan
Documents.
Section 11.14. APPLICABLE LAW. THIS AGREEMENT, THE NOTES
AND ALL THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS, EXCEPT TO
THE EXTENT THAT THE LAWS OF ANOTHER JURISDICTION GOVERN THE
CREATION, PERFECTION OR ENFORCEMENT OF INTERESTS, OR THE
REMEDIES, RELATED TO ANY PART OF THE COLLATERAL, OR TO THE EXTENT
THAT UNITED STATES FEDERAL LAW APPLIES PURSUANT TO SECTION 11.8
OR OTHERWISE.
Section 11.15. Submission To Jurisdiction; Service of
Process.
(a) Any legal action or proceeding with respect to this
Agreement or the Notes or any other Loan Document may be brought
in the courts of the State of Texas or of the United States of
America for the Northern District of Texas, and, by execution and
delivery of this Agreement, Borrower and each Guarantor hereby
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The
parties hereto hereby irrevocably waive any objection, including,
without limitation, any objection to the laying of venue or based
on the grounds of forum non conveniens, which any of them may now
or hereafter have to the bringing of any such action or
proceeding in such respective jurisdictions.
(b) Borrower and each Guarantor irrevocably consent to the
service of process of any of the aforesaid courts in any such
action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to Borrower or
such Guarantor at its address provided herein.
(c) Nothing contained in this Section 11.15 shall affect
the right of Agent, any Lender or any holder of a Note to serve
process in any other manner permitted by law or commence legal
proceedings or otherwise proceed against Borrower in any other
jurisdiction.
Section 11.16. JURY TRIAL WAIVER. BORROWER, GUARANTORS AND
LENDERS EACH HEREBY WAIVE ANY RIGHT TO A JURY TRIAL WITH RESPECT
TO ANY MATTER ARISING OR RELATING TO THIS AGREEMENT, THE NOTES OR
THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY.
Section 11.17. Counterparts. This Agreement and all
amendments hereto, and all the other Loan Documents may be
executed in any number of original counterparts, each of which
when so executed and delivered shall be an original, and all of
which, collectively, shall constitute one and the same agreement,
it being understood and agreed that the signature pages may be
detached from one or more counterparts and combined with the
signature pages from any other counterpart in order that one or
more fully executed originals may be assembled.
Section 11.18. Inconsistent Provisions. In the event of any
conflict or inconsistency between the terms of this Agreement and
the terms of the other Loan Documents, the terms of this
Agreement shall control.
Section 11.19. Non-Waiver of Rights or Remedies. Except as
otherwise set forth herein, this Agreement shall not be deemed
(a) a waiver of, or consent by Agent or any Lender to any default
or event of default which may exist or hereafter occur under the
Second Loan Agreement or any of the Loan Documents, (b) a waiver
by Agent or any Lender of any of Borrower's or Guarantor's
obligations under the Second Loan Agreement or the Loan
Documents, or (c) a waiver by Agent or any Lender of any rights,
offsets, claims, or other causes of action that Agent or any
Lender may have against Borrower or any Guarantor.
Section 11.20. Taxes. Each Lender that is not a corporation
or partnership created or organized in or under the laws of the
United States, any estate that is subject to federal income
taxation regardless of the source of its income or any trust
which is subject to the supervision of a court within the United
States and the control of a United States fiduciary as described
in section 7701 (a) (30) of the Internal Revenue Code (a "Non-
U.S. Lender") shall deliver to AMRESCO and Agent (or, in the case
of a participant, to the Lender from which the related
participation shall have been purchased ) on or before the date
on which it becomes a party to this Agreement (or, in the case of
a participant, on or before the date on which such participant
purchases the related participation) either:
(a) (x) two duly completed and signed copies of either
Internal Revenue Service Form 1001 (relating to such Non-U.S.
Lender and entitling it to a complete exemption from withholding
of U.S. Taxes on all amounts to be received by such Non-U.S.
Lender pursuant to this Agreement and the other Loan Documents)
or Form 4224 (relating to all amounts to be received by such Non-
U.S. Lender pursuant to this Agreement and the other Loan
Documents), or successor and related applicable forms, as the
case may be, or (y) two duly completed and signed copies of
Internal Revenue Service Form W-8 or W-9, or successor and
related applicable forms, as the case may be; or
(b) in the case of a Non-U.S. Lender that is not a
"bank" within the meaning of Section 881 (c) (3) (A) of the Code
and that does not comply with the requirements of clause (a)
hereof, (x) a statement in a form as shall be reasonably
requested by AMRESCO from time to time to the effect that such
Non-U.S. Lender is eligible for a complete exemption from
withholding of U.S. Taxes under Code Section 87(b) or 881(c), and
(y) two duly completed and signed copies of Internal Revenue
Service Form W-8 or successor and related applicable forms.
Further, each Non-U.S. Lender agrees to deliver to AMRESCO and
Agent, and if applicable, the assigning Lender (or, in the case
of a participant, to the Lender from which the related
participation shall have been purchased) two further duly
completed and signed copies of such Forms 1001, 4224, W-8 or W-9,
as the case may be, or successor and related applicable forms, on
or before the date that any such form expires or becomes obsolete
and promptly after the occurrence of any event requiring a change
from the most recent form(s) previously delivered by it to
AMRESCO (or, in the case of a participant, to the Lender from
which the related participation shall have been purchased) in
accordance with applicable United States laws and regulations;
unless, in any such case, any change in law or regulations has
occurred subsequent to the date such Lender became a party to
this Agreement ( or in the case of a participant, the date on
which such participant purchased the related participation) which
renders all such forms inapplicable or which would prevent such
Lender (or participant) from properly completing and executing
any such form with respect to it and such Lender promptly
notifies AMRESCO and Agent (or, in the case of a participant, the
Lender from which the related participation shall have been
purchased) if it is no longer able to deliver, or if it is
required to withdraw or cancel, any form or statement previously
delivered by it pursuant to this Section 11.20. A Non-U.S. Lender
shall not be required to deliver any form or statement pursuant
to the immediately preceding sentences in this Section 11.20 that
such Non-U.S. Lender is not legally able to deliver it being
understood and agreed that AMRESCO shall withhold or deduct such
amount from any payments made to such Non-U.S. Lender that
AMRESCO reasonably determines are required by law that payments
resulting from a failure to comply with this Section 11.20 shall
not be subject to payment or indemnity by Borrower and Guarantors
pursuant to Section 11.4).
Section 11.21. Judgment Currency.
(a) If, for the purposes of obtaining judgment in any
court, it is necessary to convert a sum due hereunder or under
any other Loan Document in one currency into another currency,
the rate of exchange used shall be that at which in accordance
with normal banking procedures Agent could purchase the first
currency with such other currency on the Business Day preceding
that on which final judgment is given. The obligation of
Borrower and Guarantors in respect of any such sum due from it to
Agent, the Lenders, or any other Person hereunder (the "Judgment
Creditors") or under the other Loan Documents shall,
notwithstanding any judgment in a currency (the "Judgment
Currency") other than that in which such sum is denominated in
accordance with the applicable provisions of this Agreement (the
"Agreement Currency"), be discharged only to the extent that on
the Business Day following receipt by the Judgment Creditor(s) of
any sum adjudged to be so due in the Judgment Currency, Agent may
in accordance with normal banking procedures purchase the
Agreement Currency with the Judgment Currency. If the amount of
the Agreement Currency so purchased is less than the sum
originally due to the Judgment Creditor(s) in the Agreement
Currency, Borrower and each Guarantor jointly and severally
agree, as a separate obligation and notwithstanding any such
judgment, to indemnify the Judgment Creditor(s) against such
loss. If the amount of the Agreement Currency so purchased is
greater than the sum originally due to the Judgment Creditor(s)
in such currency, the Judgment Creditor receiving such
overpayment agrees to return the amount of any excess received by
such entity to Borrower (or to any other Person who may be
entitled thereto under applicable law).
(b) Borrower and each Guarantor jointly and severally
promise to indemnify each Judgment Creditor against and hold each
Judgment Creditor harmless from all loss and damage resulting
from any change in exchange rates between the date any claim is
reduced to judgment and the date of payment (or, in the case of
partial payments, the date of each partial payment) thereof by
Borrower or any Guarantor. This indemnity shall constitute an
obligation separate and independent from the other obligations
contained in this Agreement, shall give rise to a separate and
independent cause of action, shall apply irrespective of any
indulgence granted by Agent, the Required Lenders, or the Lenders
from time to time, and shall continue in full force and effect
notwithstanding any judgment or order for a liquidated sum in
respect of an amount due hereunder or under any judgment or
order.
Section 11.22. Consolidated Group. Borrower and Guarantors
are engaged in the businesses set forth in Section 7.2 of this
Agreement. These operations require financing on a basis such
that the credit supplied can be made available from time to time
to Borrower and Guarantors, as required for the continued
successful operation of Borrower and Guarantors. Borrower and
Guarantors have requested that Lenders make the Credit Facilities
available primarily for the purposes of financing the operations
of Borrower and Guarantors. Borrower and Guarantors expect to
derive benefit (and the boards of directors or other governing
body of each of Borrower and Guarantors may reasonably be
expected to derive benefit), directly or indirectly, from the
Credit Facilities established by Lenders, both in their separate
capacities and as members of the group of companies, since the
successful operation and condition of Borrower and each Guarantor
is dependent on the continued successful performance of the
functions of the group as a whole.
Section 11.23. Amendment and Restatement/Renewal and
Extension. The Credit Facilities are in renewal and extension of
(but do not extinguish) the Revolving Credit Facility and the
Term Facility, respectively. This Agreement renews and extends
and amends and restates in its entirety the Second Loan
Agreement. Borrower and Guarantors acknowledge and agree that
all liens and security interests securing the Credit Facilities
under the Second Loan Agreement are hereby renewed and extended
and continue to secure the Credit Facilities as renewed and
extended and amended and restated pursuant to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers effective as of the Closing Date.
BORROWER:
AMRESCO, INC., a Delaware corporation
By:
Thomas J. Andrus,
Treasurer
AMRESCO UK HOLDINGS LIMITED, a United
Kingdom corporation
By: AMRESCO, INC., a Delaware
corporation, as attorney-in-fact
By:
Thomas J. Andrus,
Treasurer
ACKNOWLEDGED AND AGREED TO as of the
30th day of September, 1997 by:
GUARANTORS:
AFC EQUITIES, INC.
AMRESCO ATLANTA INDUSTRIAL, INC.
AMRESCO BUILDERS GROUP, INC.
AMRESCO CANADA, INC.
AMRESCO CAPITAL CONDUIT CORPORATION
AMRESCO CAPITAL LIMITED, INC.
AMRESCO CAPITAL, L.P.
AMRESCO COMMERCIAL LENDING CORPORATION
AMRESCO CONSOLIDATION CORP. f/k/a
AMRESCO MORTGAGE CAPITAL, INC.
AMRESCO EQUITIES CANADA INC.
AMRESCO FINANCIAL I, INC.
AMRESCO FINANCIAL I, L.P.
AMRESCO FUNDING CORPORATION
AMRESCO FUNDING GEORGIA, L.P.
AMRESCO FUNDING INVESTORS, INC.
AMRESCO FUNDING MANAGEMENT, INC.
AMRESCO FUNDING MID-ATLANTIC, INC.
AMRESCO FUNDING PACIFIC, INC.
AMRESCO INSTITUTIONAL, INC.
AMRESCO INVESTMENTS, INC.
AMRESCO JERSEY VENTURES LIMITED
AMRESCO MANAGEMENT, INC.
AMRESCO MBS II, INC.
AMRESCO MORTGAGE CAPITAL LIMITED-1, INC.
AMRESCO MORTGAGE SERVICES LIMITED, INC.
AMRESCO NEW ENGLAND, L.P.
AMRESCO NEW ENGLAND II, L.P.
AMRESCO NEW ENGLAND, INC.
AMRESCO NEW ENGLAND II, INC.
AMRESCO NEW HAMPSHIRE, INC.
AMRESCO NEW HAMPSHIRE, L.P.
AMRESCO OVERSEAS, INC.
AMRESCO PORTFOLIO INVESTMENTS, INC.
AMRESCO PRINCIPAL MANAGERS I, INC.
AMRESCO PRINCIPAL MANAGERS II, INC.
AMRESCO RESIDENTIAL CAPITAL MARKETS, INC.
AMRESCO RESIDENTIAL CONDUIT, INC.
AMRESCO RESIDENTIAL CREDIT CORPORATION
AMRESCO RESIDENTIAL MORTGAGE CORPORATION
AMRESCO RESIDENTIAL PROPERTIES, INC.
AMRESCO RETAIL VENTURES, LTD
AMRESCO RETAIL VENTURES II, LTD.
AMRESCO RHODE ISLAND, INC.
AMRESCO SERVICES CANADA INC.
AMRESCO SERVICES, L.P.
AMRESCO UK LIMITED
AMRESCO UK VENTURES LIMITED
AMRESCO VENTURES, INC. f/k/a
AMRESCO GENERAL PARTNERS, INC.
AMRESCO 1994-N2, INC.
ASSET MANAGEMENT RESOLUTION COMPANY
BEI 1992 - N1, INC.
BEI 1993 - N3, INC.
BEI 1994 - N1, INC.
BEI MULTI-POOL, INC.
BEI PORTFOLIO INVESTMENTS, INC.
BEI PORTFOLIO MANAGERS, INC.
BEI REAL ESTATE SERVICES, INC.
BEI SANJAC, INC.
COMMONWEALTH TRUST DEED SERVICES, INC.
ENT MIDWEST, INC.
ENT NEW JERSEY, INC.
ENT SOUTHERN CALIFORNIA, INC.
EXPRESS FUNDING, INC.
GRANITE EQUITIES, INC.
LIFETIME HOMES, INC., f/k/a LIFETIME HOMES OF
NEW JERSEY, INC.
HOLLIDAY FENOGLIO, L.P.
OAK CLIFF FINANCIAL, INC.
OLD MIDLAND HOUSE LIMITED
PRESTON HOLLOW ASSET HOLDINGS, INC.
QUALITY FUNDING, INC.
SAVE-MORE INSURANCE SERVICES INC.
WHITEROCK INVESTMENTS, INC.
By: AMRESCO, INC., a Delaware corporation,
as attorney-in-fact
By:
Thomas J. Andrus, as
Treasurer
AGENT:
NATIONSBANK OF TEXAS, N.A.,
a national banking association, as
Agent for Lenders
By:
Elizabeth Kurilecz
Senior Vice President
REVOLVING LENDERS:
NATIONSBANK OF TEXAS, N.A., a
national banking association
By:_________________________________
Elizabeth Kurilecz
Senior Vice President
BANK ONE, TEXAS, NA,
a national banking association
By:________________________________
Name:______________________________
Title:_____________________________
WELLS FARGO BANK (TEXAS), N.A.,
a national banking association
By:________________________________
Name:______________________________
Title:_____________________________
COMERICA BANK - TEXAS,
a state banking association
By:________________________________
Name:______________________________
Title:_____________________________
BANK UNITED,
a federal savings bank
By:________________________________
Name:______________________________
Title:_____________________________
THE BANK OF NEW YORK,
a national banking association
By:________________________________
Name:______________________________
Title:_____________________________
FLEET BANK, N.A.,
a national banking association
By:________________________________
Name:______________________________
Title:_____________________________
THE SUMITOMO BANK, LIMITED
By:________________________________
Name:______________________________
Title:_____________________________
By:________________________________
Name:______________________________
Title:_____________________________
PNC BANK, KENTUCKY, INC.
By:________________________________
Name:______________________________
Title:_____________________________
IMPERIAL BANK
By:________________________________
Name:______________________________
Title:_____________________________
TERM LENDERS:
ALLSTATE INSURANCE COMPANY
By:________________________________
Name:______________________________
Title:_____________________________
By:________________________________
Name:______________________________
Title:_____________________________
INDOSUEZ CAPITAL FUNDING II, LIMITED
By: Indosuez Capital Luxembourg, SA, as
Collateral Manager
By:___________________________
Name:_________________________
Title:________________________
NATIONSBANK OF TEXAS, N.A., a
national banking association
By:
Elizabeth Kurilecz
Senior Vice President
STRATA FUNDING LTD.
By:________________________________
Name:______________________________
Title:_____________________________
CERES FINANCE LTD.
By:________________________________
Name:______________________________
Title:_____________________________
AMARA-2 FINANCE LTD.
By:________________________________
Name:______________________________
Title:_____________________________
KZH HOLDING CORPORATION III
By:________________________________
Name:______________________________
Title:_____________________________
THIRD AMENDED AND RESTATED LOAN AGREEMENT
Dated as of
September 30, 1997
among
AMRESCO, INC.
and
AMRESCO UK HOLDINGS LIMITED
as Borrower
and
NATIONSBANK OF TEXAS, N.A.
as Agent,
BANK ONE, TEXAS, N.A., as co-agent,
and
NATIONSBANK OF TEXAS, N.A.
AND THE OTHER ENTITIES DESIGNATED HEREIN
as Lenders
TABLE OF CONTENTS
ARTICLE I
TERMS DEFINED 2
Section 1.1. Definitions 2
Section 1.2. Singular and Plural of Definitions 32
Section 1.3. Substantive Definitions 32
Section 1.4. Money 32
Section 1.5. Captions; References 32
Section 1.6. Accounting Terms and Determinations 33
ARTICLE II
COMMITMENT 33
Section 2.1. Commitment 33
Section 2.2. Method of Borrowing 35
Section 2.3 Competitive Bid Loans 38
Section 2.4. Fees 41
Section 2.5. Additional Guarantors or Borrowers 43
ARTICLE III
TERMS OF THE CREDIT FACILITIES 43
Section 3.1. Notes 43
Section 3.2. Maturity 44
Section 3.3. Interest Rate 44
Section 3.4. Interest Payments 44
Section 3.5. Conversion of Revolving Credit Advances;
Interest Rate Elections
under Term Facility; Regulatory Change 44
Section 3.6. Payments of Advances; Reduction of
Commitment Amount 48
Section 3.7. Schedules on Notes 51
Section 3.8. General Provisions as to Payments 51
Section 3.9. Application of Payments 51
Section 3.10. Post-Default Interest; Past Due
Principal and Interest 52
Section 3.11. Computation of Interest and Fees 52
Section 3.12. Capital Adequacy 52
Section 3.13. Deposit of Cash Collateral 53
Section 3.14. Alternate Currency Notes 53
ARTICLE IV
CONDITIONS TO CLOSING 54
Section 4.1. Conditions To Closing 54
Section 4.2. Conditions To All Advances 56
Section 4.3. Conditions to Letters of Credit 56
ARTICLE V
COLLATERAL AND GUARANTIES 57
Section 5.1. Security and Guaranties 57
Section 5.2. Requirements For Assigned Loans. 57
Section 5.3. Requirements for Mortgaged Properties 58
Section 5.4. Recording 59
Section 5.5. Timing of Deliveries 59
Section 5.6. Agent's Discretion 59
Section 5.7. Lockbox; Lockbox Account 59
Section 5.8. Release of Collateral. 60
ARTICLE VI
REPRESENTATIONS AND WARRANTIES 61
Section 6.1. Existence and Power of Borrower and Guarantors 61
Section 6.2. Subsidiaries 61
Section 6.3. Authorization; Contravention 61
Section 6.4. Enforceable Obligations 62
Section 6.5. Financial Information 62
Section 6.6. Litigation 62
Section 6.7. ERISA 62
Section 6.8. Taxes and Filing of Tax Returns 63
Section 6.9. Ownership of Assets 63
Section 6.10. Business; Compliance 64
Section 6.11. Licenses, Permits 64
Section 6.12. Compliance with Law 64
Section 6.13. Full Disclosure 64
Section 6.14. Environmental Matters 64
Section 6.15. Purpose of Credit 65
Section 6.16. Governmental Regulations 66
Section 6.17. Indebtedness 66
Section 6.18. Insurance 66
Section 6.19. Solvency 66
Section 6.20. Due Diligence Procedures 66
ARTICLE VII
AFFIRMATIVE COVENANTS 67
Section 7.1. Information From AMRESCO 67
Section 7.2. Business of Borrower and Guarantors 69
Section 7.3. Right of Inspection 69
Section 7.4. Maintenance of Insurance 70
Section 7.5. Payment of Taxes, Impositions and Claims 70
Section 7.6. Compliance with Laws and Documents 70
Section 7.7. Environmental Law Compliance and Indemnity 70
Section 7.8. Covenant Compliance 72
Section 7.9. Quantity and Quality of Documents 72
Section 7.10. Use of Proceeds 72
Section 7.11. Additional Documents 72
Section 7.12. Compliance With Due Diligence Standards;
Offices and Files 72
Section 7.13. Appraisal 73
ARTICLE VIII
NEGATIVE COVENANTS 73
Section 8.1. Minimum Consolidated Tangible Net Worth 73
Section 8.2. Leverage Ratios 73
Section 8.3. Coverage Ratio 73
Section 8.4. Adjusted EBITDA Maintenance. 73
Section 8.5. Permitted Debt 74
Section 8.6. Limitation on Sale of Properties 75
Section 8.7. Permitted Liens 75
Section 8.8. Limitation on Loans to Shareholders 76
Section 8.9. Consolidations, Mergers, Sales of Assets,
and Maintenance 76
Section 8.10. Investments 77
Section 8.11. Distributions 78
Section 8.12. Limitation on Contingent Liabilities 78
Section 8.13. Transactions with Affiliates 78
Section 8.14. Employee Plans 78
Section 8.15. Use Violations 79
Section 8.16. Exceptions to Covenants 79
Section 8.17. Fiscal Year and Accounting Methods 79
Section 8.18. Governmental Regulations 79
ARTICLE IX
DEFAULTS AND REMEDIES 79
Section 9.1. Events of Default 79
Section 9.2. Remedies 82
Section 9.3. Rights of Set-Off 83
Section 9.4. Remedies Cumulative, Concurrent and
Non-Exclusive 84
Section 9.5. No Conditions Precedent to Exercise Remedies 84
Section 9.6. Release of and Resort to Collateral 85
Section 9.7. Waivers 85
Section 9.8. Discontinuance of Proceedings 85
Section 9.9. Power of Attorney 85
Section 9.10. Application of Proceeds 86
ARTICLE X
AGENT AND THE LENDERS 86
Section 10.1. Appointment and Authorization of Agent 86
Section 10.2. Possession of Instruments by Agent 88
Section 10.3. Expenses 88
Section 10.4. Delegation of Duties; Reliance; Consultation 88
Section 10.5. Limitation of Agent's Liability 89
Section 10.6. Default; Collateral 90
Section 10.7. Lenders' Decision 90
Section 10.8. Limitation of Liability of Lenders 91
Section 10.9. Relationship of Lenders 91
Section 10.10. Debtor-Creditor Relationship 91
Section 10.11. Credit Decisions 91
Section 10.12. Removal of Agent 92
Section 10.13. Resignation by Agent 92
Section 10.14. Sharing of Payments and Setoffs. 92
Section 10.15. Non-Advancing Lenders. 93
Section 10.16. Benefit of Lenders 94
ARTICLE XI
MISCELLANEOUS 94
Section 11.1. Continuing Agreement 94
Section 11.2. Notices 94
Section 11.3. No Waivers 95
Section 11.4. Expenses; Documentary Taxes; Indemnification 95
Section 11.5. Amendments and Waivers; Consent to Deviation 96
Section 11.6. Survival 96
Section 11.7. Prior Understandings; No Defenses; Release;
No Oral Agreements 96
Section 11.8. Limitation on Interest 97
Section 11.9. Invalid Provisions 97
Section 11.10. Assignments and Participations 97
Section 11.11. Senior Debt; Borrower Subordination 99
Section 11.12. Revolving Loan 100
Section 11.13. Construction 100
Section 11.14. APPLICABLE LAW 100
Section 11.15. Submission To Jurisdiction; Service of
Process 100
Section 11.16. JURY TRIAL WAIVER 101
Section 11.17. Counterparts 101
Section 11.18. Inconsistent Provisions 101
Section 11.19. Non-Waiver of Rights or Remedies 101
Section 11.20. Taxes 101
Section 11.21. Judgment Currency. 102
Section 11.22. Consolidated Group 103
SCHEDULES AND EXHIBITS
SCHEDULE I - LENDERS AND BORROWER
SCHEDULE II - COMMITMENT FEE PERCENTAGE; LIBOR MARGIN
SCHEDULE III - CAPITAL ADEQUACY TEST
EXHIBIT A - REVOLVING NOTE
EXHIBIT A-1 - TERM NOTE
EXHIBIT A-3 - COMPETITIVE BID NOTE
EXHIBIT B - REQUEST FOR ADVANCE
EXHIBIT C - FORM OF COMPLIANCE LETTER
EXHIBIT D - ASSIGNMENT AND ACCEPTANCE
EXHIBIT E - REQUEST FOR COMPETITIVE BID QUOTE
EXHIBIT E-1 - INVITATION FOR COMPETITIVE BID QUOTE
EXHIBIT E-2 - COMPETITIVE BID QUOTE
SCHEDULE I
LENDER AND BORROWER
I. LENDERS, AGENT AND ARRANGER
A. AGENT:
NationsBank of Texas, N.A.
Commercial Banking Division
901 Main Street, 7th Floor
Dallas, Texas 75202
Attn: Elizabeth Kurilecz
Fax No.: (214) 508-0388
B. ARRANGER:
NationsBanc Capital Markets, Inc.
901 Main Street, 66th Floor
Dallas, Texas 75202
Attn: Joseph Siegel, Jr.
Fax No.: (214) 508-2881
C. REVOLVING LENDERS:
NationsBank of Texas, N.A.
901 Main Street, 7th Floor
Dallas, Texas 75202
Attn: Elizabeth Kurilecz
Tel: (214) 508-0975
Fax: (214) 508-0338
Bank One, Texas, NA
1717 Main Street, 4th Floor
Dallas, Texas 75201
Attn: Kathleen C. Stewart
Tel: (214) 290-2709
Fax: (214) 290-2275
with a copy of all notices to:
Bank One, Texas, NA
1717 Main Street, 4th Floor
Dallas, Texas 75201
Attn: Kristin Blanchard
Tel: (214) 290-3028
Fax: (214) 290-2275
Wells Fargo Bank (Texas), N.A.
1445 Ross Avenue, 3rd Floor
Dallas, Texas 75202
Attn: Craig T. Scheef
Tel: (214) 740-1548
Fax: (214) 740-1519
Comerica Bank - Texas
8828 Stemmons, Suite 441
Dallas, Texas 75247
Attn: David Terry
Tel: (972) 841-4419
Fax: (972) 263-9837
Bank United
1646 North California Blvd.
Suite 342
Walnut Creek, CA 94596
Attn: Michael D. McAuley
Tel: (510) 210-8060
Fax: (510) 210-8065
The Bank of New York
One Wall Street, 17th Floor
New York, New York 10286
Attn: Robert A. Tweed
Tel: (212) 635-6465
Fax: (212) 635-6468
Fleet Bank, N.A.
1185 Avenue of the Americas
16th Floor
New York, New York 10036
Attn: Robert Pierson
Tel: (212) 819-6078
Fax: (212) 819-6207
The Sumitomo Bank, Limited
1601 Elm Street, Suite 4250
Dallas, Texas 75201
Attn: Michael R. Pavell
Tel: (214) 979-0925
Fax: (214) 979-0571
PNC Bank, Kentucky, Inc.
500 West Jefferson, Suite 1200
Louisville, KY 40202
Attn: Janice Wallace
Tel: (502) 581-3112
Fax: (502) 581-3844
Imperial Bank
9920 S. LaCienega Blvd.
Englewood, CA 90301
Attn: John Farrace
D. TERM LENDERS:
Allstate Insurance Companies
3075 Sanders Road, Suite G3A
Northbrook, IL 60062-7127
Attn: Jerry Zinkula
Indosuez Capital Funding II, Limited
c/o Indosuez Capital
1211 Avenue of the Americas
New York, New York 10036-8701
Strata Funding Ltd.
c/o Chancellor LGT Secured Management, Inc.
1166 Avenue of Americas
New York, New York 10036
Attention: Christopher E. Jansen
Ceres Finance Ltd.
c/o Chancellor LGT Secured Management, Inc.
1166 Avenue of Americas
New York, New York 10036
Attention: Christopher E. Jansen
Amara-2 Finance Ltd.
c/o Chancellor LGT Secured Management, Inc.
1166 Avenue of Americas
New York, New York 10036
Attention: Christopher E. Jansen
KZH Holding Corporation III
c/o The Chase Manhattan Bank
450 W. 33rd Street, 15th Floor
New York, New York 10001
NationsBank of Texas, N.A.
901 Main Street, 7th Floor
Dallas, Texas 75202
Attn: Elizabeth Kurilecz
Tel: (214) 508-0975
Fax: (214) 508-0338
Revolving Loan Revolving Modification
Commitment Loan Fee Amount
Amount Percentage for this
Agreement
Revolving
Lenders:
NationsBank $55,000,000 18.644068% $37,500.00
Bank One $50,000,000 16.949153% $33,750.00
Wells Fargo $35,000,000 11.864407% $26,250.00
Comerica $30,000,000 10.169491% $22,500.00
Bank United $30,000,000 10.169491% $22,500.00
Bank of New $30,000,000 10.169491% $22,500.00
York
Fleet $25,000,000 8.474576% $18,750.00
Sumitomo $15,000,000 5.084746% $11,250.00
PNC $15,000,000 5.084746% $11,250.00
Imperial $10,000,000 3.389831% $7,500.00
Total $290,000,000 100.00000% $213,750.00
Term Loan Term Loan Modification
Commitment Percentage Fee Amount for
Amount this Agreement
Term Lenders:
NationsBank $15,000,000 25.000000% $0
Indosuez $15,000,000 25.000000% $11,250.00
Allstate $10,000,000 16.66667% $7,500.00
KZH III $5,000,000 8.333334% $3,750.00
Strata $5,000,000 8.333334% $3,750.00
Ceres $5,000,000 8.333334% $3,750.00
Amara-2 $5,000,000 8.333334% $3,750.00
Total $60,000,000 100.00000% $ 33,750.00
II. BORROWER
AMRESCO, INC.
AMRESCO UK HOLDINGS LIMITED
700 N. Pearl Street
Suite 2400, LB 342
Dallas, Texas 75201-7424
Attn: Treasurer
Fax No.: (214) 953-7757
SCHEDULE II
COMMITMENT FEE PERCENTAGE; LIBOR MARGIN
Qualified Applicable Commitment Letter of
Investment LIBOR Fee Credit Fee
Rating Margin Percentages Percentage
s
B+/B1 or Lower (a) 175.0 b.p. 37.5 b.p. 150 b.p
(b) 225.0 b.p.
BB-/Ba3 (a) 150.0 b.p. 25.0 b.p. 100 b.p
(b) 225.0 b.p.
BB/Ba2 (a) 125.0 b.p. 25.0 b.p. 100 b.p
(b) 200.0 b.p.
BBB-/Baa3 (a) 100.0 b.p. 20.0 b.p. 100 b.p
(b) 175.0 b.p.
(a) - The Applicable LIBOR Margin for the Revolving Credit Facility.
(b) - The Applicable LIBOR Margin for the Term Facility.
SCHEDULE III
CAPITAL ADEQUACY TEST
LEVERAGE
ASSETS ADVANCE RATE
%
Cash and Equivalents 100%
Temporary Investments 100%
Accounts Receivable (net of reserves)
Management Contracts 85%
Loans held for sale, net
Residential Mortgage 100%
Commercial Mortgage - FNMA 99%
Commercial Mortgage - Other 95%
Commercial Finance 95%
Loans, Net
Residential Mortgage 100%
Commercial Mortgage - Servicing Advances 90%
Commercial Finance 85%
Corporate and other 85%
Investments in Purch. Loan and Other Asset Port.
Loan Portfolios
Foreign 80%
Domestic 80%
Real Estate
Foreign 80%
Domestic 80%
Partnerships and Joint Ventures 70%
Asset Backed and Other Securities
Available for Sale 75%
Retained Interests in Securitizations-Trading
Residential Mortgage 70%
Retained Interests in Securitizations-Trading
Commercial Lending 85%
Premises and equipment, Net of
Acc. Depreciation 50%
EXHIBIT A
REVOLVING NOTE
$________________ Dallas, Texas _________ __, 1997
FOR VALUE RECEIVED, AMRESCO, INC., a Delaware corporation, and
the other parties executing this Note or hereafter added hereto
as "Maker" (collectively "Makers"), hereby, jointly and
severally, promise to pay to the order of
_____________________________ ("Lender") in care of Agent, at its
banking house in the City of Dallas, Dallas County, Texas, or at
such other address in Dallas County, Texas, given to Makers by
Agent, the principal sum of ____________________________ Dollars
($______________), or so much thereof as may be advanced and
outstanding, together with interest, as hereinafter described.
This Note has been executed and delivered pursuant to the
terms of that certain Third Amended and Restated Loan Agreement
(as the same may be modified, amended, supplemented, extended or
restated from time to time, the "Loan Agreement") dated the date
hereof, executed by and among Makers, Agent and the Lenders
(which includes the payee of this Note) and is one of the notes
defined therein as a "Revolving Note", the terms and provisions
of the Loan Agreement related to this Note being incorporated
herein by reference for all purposes. Each capitalized term not
expressly defined herein shall have the meaning given to such
term under the Loan Agreement. The terms of the Loan Agreement
shall govern in the case of any inconsistency between such terms
and the terms hereof.
This Note is secured by the Collateral Assignment, the Pledge
Agreements, the Security Agreement, the Mortgages, the other
Security Documents and all the other Loan Documents, and all
liens and security interests created or evidenced thereby. Any
holder shall be entitled to all benefits and remedies and
security set forth in the Loan Agreement and all the other Loan
Documents. [This Note renews, extends and replaces that certain
Promissory Note dated ______________, in the amount of $________,
executed by Makers, payable to Lender.]
1.Interest and Payment.
(a) Maturity. The principal of this Note and all accrued
but unpaid interest hereon shall be due and payable in full on
the Revolving Facility Termination Date.
(b) Accrual of Interest. Subject to Paragraph 1(f) below,
interest on this Note shall accrue at a rate per annum equal to
the lesser of (i) at Makers' option, the Variable Rate or the
Adjusted LIBOR Rate, subject, however, to the provisions of the
Loan Agreement, or (ii) the Maximum Lawful Rate; provided,
however, that as to any portion of the outstanding principal
balance hereof that is not subject to an effective election of or
conversion to the Adjusted LIBOR Rate in accordance with the
terms of the Loan Agreement, interest on such portion of this
Note shall accrue interest at the lesser of (i) the Variable Rate
or (ii) the Maximum Lawful Rate. Interest on this Note shall be
calculated at a daily rate equal to 1/360 of the annual
percentage rate which this Note bears, subject to the provisions
hereof limiting interest to the Maximum Lawful Rate. Without
notice to any Maker or any other Person, the Variable Rate and
the Maximum Lawful Rate shall each automatically fluctuate upward
and downward as and in the amount by which the Base Rate and the
Maximum Lawful Rate, respectively, fluctuate, subject always to
limitations contained in this Note and the Loan Agreement.
(c) Agreements Concerning Pricing Election. Reference
should be made to the provisions of Section 3.5 of the Loan
Agreement concerning the terms, manner and agreements related to
the interest rate elections available to Makers under this Note.
(d) Principal and Interest Payments. Principal and interest
hereon shall be due and payable as is provided in Article III of
the Loan Agreement, which provides, in part, for quarterly
payments of interest on the first (1st) day of each calendar
quarter, commencing on October 1, 1997, and continuing on the
first (1st) day of each January, April, July and October during
the Credit Period.
(e) Costs Due to Regulatory Changes. Makers shall indemnify
Lender against and reimburse Lender for increased costs to
Lender, as a result of any Regulatory Change, in the maintaining
of any LIBOR Rate Advance or Alternate Currency Advance. All
payments made pursuant to this paragraph shall be made free and
clear, without reduction for, or account of, any present or
future taxes or other levies of any nature, excluding net income
and franchise taxes.
(f) Default Rate. After maturity of this Note or the
occurrence of an Event of Default, the outstanding principal
balance of this Note shall, at the option of the Required
Lenders, bear interest at the Default Rate. Any past due
principal, and to the extent permitted by law, past due interest
on this Note shall bear interest, payable as it accrues on
demand, for each day until paid at the Default Rate. Such
interest shall continue to accrue at the Default Rate
notwithstanding the entry of a judgment with respect to any of
the Obligations or the foreclosure of any of the Lenders' Liens,
unless otherwise provided by law.
(g) Maximum Lawful Rate Adjustments. If at any time the
Applicable Rate shall be limited to the Maximum Lawful Rate, any
subsequent reductions in the Applicable Rate shall not reduce the
rate of interest on this Note below the Maximum Lawful Rate until
the total amount of interest accrued equals the amount of
interest which would have accrued if the Applicable Rate had at
all times been in effect. In the event that at maturity (stated
or by acceleration), or at the final payment of the Revolving
Credit Facility, the total amount of interest paid or accrued on
the Revolving Credit Facility is less than the amount of interest
which would have accrued if the Applicable Rate had at all times
been in effect with respect thereto, then at such time, to the
extent permitted by law, Makers shall pay to Agent, for the
ratable benefit of the Lenders, an amount equal to the difference
between (a) the lesser of the amount of interest which would have
accrued if the Applicable Rate had at all times been in effect
and the amount of interest which would have accrued if the
Maximum Lawful Rate had at all times been in effect, and (b) the
amount of interest actually paid on the Revolving Credit
Facility.
2.Default. The occurrence of a Default or an Event of
Default, under and as defined in the Loan Agreement, shall
constitute, respectively, a Default or an Event of Default under
this Note.
3.Remedies.
(a) All Remedies Available. Upon the occurrence of an Event
of Default, the holder hereof, acting by and through Agent in
accordance with the terms of Articles IX and X of the Loan
Agreement, shall have the right to declare the entire unpaid
principal balance of, and all accrued unpaid interest on, this
Note at once due and payable (and upon such declaration, the same
shall be at once due and payable), to foreclose any and all liens
and security interests securing payment hereof, to offset against
this Note any sum or sums owed by it to Maker, and to exercise
any of its other rights, powers and remedies under this Note,
under the Loan Agreement or any other Loan Document, or at law or
in equity.
(b) No Waiver. Neither the failure by the holder hereof to
exercise, nor delay by the holder hereof in exercising, the right
to accelerate the maturity of this Note or any other right, power
or remedy upon any Default or Event of Default shall be construed
as a waiver of such Default or Event of Default or as a waiver of
the right to exercise any such right, power or remedy at any
time. No single or partial exercise by the holder hereof of any
right, power or remedy shall exhaust the same or shall preclude
any other or further exercise thereof, and every such right,
power or remedy may be exercised at any time and from time to
time. All rights and remedies provided for in this Note and in
any other Loan Document are cumulative of each other and of any
and all other rights and remedies existing at law or in equity,
and the holder hereof shall, in addition to the rights and
remedies provided herein or in any other Loan Document, be
entitled to avail itself of all such other rights and remedies as
may now or hereafter exist at law or in equity for the collection
of the indebtedness owing hereunder, and the resort to any right
or remedy provided for hereunder or under any such other Loan
Document or provided for by law or in equity shall not prevent
the concurrent or subsequent employment of any other appropriate
rights or remedies. Without limiting the generality of the
foregoing provisions, the acceptance by the holder hereof from
time to time of any payment under this Note which is past due or
which is less than the payment in full of all amounts due and
payable at the time of such payment, shall not (i) constitute a
waiver of or impair or extinguish the rights of the holder hereof
to accelerate the maturity of this Note or to exercise any other
right, power or remedy at the time or at any subsequent time, or
nullify any prior exercise of any such right, power or remedy, or
(ii) constitute a waiver of the requirement of punctual payment
and performance, or a novation in any respect.
4.Usury Savings Provisions.
(a) General Limitation. Notwithstanding anything herein or
in any other Loan Documents, expressed or implied, to the
contrary, in no event shall any interest rate charged hereunder
or under any of the other Loan Documents, or any interest
contracted for, collected or received by Lender or any holder
hereof, exceed the Maximum Lawful Rate.
(b) Intent of Parties. It is expressly stipulated and
agreed to be the intent of Makers and Lender at all times to
comply with the applicable law governing the maximum rate or
amount of interest payable on or in connection with this Note.
If the applicable law is ever judicially interpreted so as to
render usurious any amount called for under this Note or under
any of the other Loan Documents, or contracted for, charged,
taken, reserved or received with respect to this Note, or if
acceleration of the maturity of this Note, any prepayment by
Makers, or any other circumstance whatsoever, results in Lender
having been paid any interest in excess of that permitted by
applicable law, then it is the express intent of Makers and
Lender that all excess amounts theretofore collected by Lender be
credited on the principal balance of this Note (or, if this Note
has been or would thereby be paid in full, refunded to Makers),
and the provisions of this Note and the other applicable Loan
Documents immediately be deemed reformed and the amounts
thereafter collectible hereunder and thereunder reduced, without
the necessity of the execution of any new document, so as to
comply with the applicable law, but so as to permit the recovery
of the fullest amount otherwise called for hereunder and
thereunder. The right to accelerate the maturity of this Note
does not include the right to accelerate any interest which has
not otherwise accrued on the date of such acceleration, and
Lender does not intend to collect any unearned interest in the
event of acceleration. All sums paid or agreed to be paid to
Lender for the use, forbearance or detention of the indebtedness
evidenced hereby or by any other Loan Document shall, to the
extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such
indebtedness until payment in full so that the rate or amount of
interest on account of such indebtedness does not exceed the
Maximum Lawful Rate. The term "applicable law" as used herein
shall mean the laws of the State of Texas, or DIDMCA or any other
applicable United States federal law to the extent that it
permits Lender to contract for, charge, take, reserve or receive
a greater amount of interest than under Texas law. The
provisions of this paragraph shall control all agreements between
Makers and Lender.
5.General Provisions.
(a) Business Days. Whenever any payment shall be due under
this Note on a day which is not a Business Day, the date on which
such payment is due shall be extended to the next succeeding
Business Day, and such extension of time shall be included in the
computation of the amount of interest then payable.
(b) Manner of Payment. The manner in which payments are to
be made on this Note shall be governed by the provisions hereof
and the Loan Agreement, including, without limitation, Article
III of the Loan Agreement.
(c) Prepayments. Prepayments may be made, and as provided
in Section 3.6 of the Loan Agreement are required to be made, on
this Note subject to and in accordance with Section 3.6 of the
Loan Agreement.
(d) Application of Payments. All payments made on this Note
shall be applied in accordance with Sections 3.6, 3.9 and 9.10 of
the Loan Agreement, as applicable. Nothing herein shall limit or
impair any rights of any holder hereof to apply as provided in
the Loan Documents any past due payments, any proceeds from the
disposition of any collateral by foreclosure or other collections
after default. Except to the extent specific provisions are set
forth in this Note or another Loan Document with respect to
application of payments, all payments received by the holder
hereof shall be applied, to the extent thereof, to the
indebtedness owing by Makers to the holder hereof in such order
and manner as the Required Lenders shall deem appropriate, any
instructions from Makers or anyone else to the contrary
notwithstanding.
(e) Costs of Collection. If any holder of this Note retains
an attorney in connection with any default or at maturity or to
collect, enforce or defend this Note or any other Loan Document
in any lawsuit or in any probate, reorganization, bankruptcy or
other proceeding, or if any Maker sues any holder of this Note in
connection with this Note or any other Loan Document and does not
prevail, then Makers agree to pay to each such holder, in
addition to principal and interest, all costs and expenses
incurred by such holder in trying to collect this Note or in any
such suit or proceeding, including reasonable attorneys' fees.
(f) Waivers and Acknowledgments. Each Maker and all
sureties, endorsers, guarantors and any other party now or
hereafter liable for the payment of this Note in whole or in
part, hereby severally (i) waive demand, presentment for payment,
notice of dishonor and of nonpayment, protest, notice of protest,
notice of intent to accelerate, notice of acceleration and all
other notice (except only for any notice that is specifically
required by the terms of the Loan Agreement or any other Loan
Document), filing of suit and diligence in collecting this Note
or enforcing any of the security herefor; (ii) agree to any
substitution, subordination, exchange or release of any such
security or the release of any party primarily or secondarily
liable hereon; (iii) agree that the holder hereof shall not be
required first to institute suit or exhaust its remedies against
any Maker or others liable or to become liable hereon or to
enforce its rights against them or any security herefor; (iv)
consent to any extension or postponement of time of payment of
this Note for any period or periods of time and to any partial
payments, before or after maturity, and to any other indulgences
with respect hereto, without notice thereof to any of them; and
(v) submit (and waive all rights to object) to personal
jurisdiction in the State of Texas, and venue in Dallas County,
Texas, for the enforcement of any and all obligations under the
Loan Documents.
(g) Amendments in Writing. This Note may not be changed,
amended or modified except in a writing expressly intended for
such purpose and executed by the party against whom enforcement
of the change, amendment or modification is sought.
(h) Purpose of Proceeds. The proceeds of this Note will be
used solely for business purposes and not for personal, family,
household or agricultural purposes.
(i) Notices. Any notice required or which any party desires
to give under this Note shall be given and effective as provided
in Section 11.2 of the Loan Agreement.
(j) Assignments/Participations. Makers acknowledge and
agree that the holder of this Note may, at any time and from time
to time, assign all or a portion of its interest in the Revolving
Credit Facility or transfer to any Person a participation
interest in the Revolving Credit Facility, subject to and in
accordance with the terms and conditions of the Loan Agreement,
including Section 11.10 thereof.
(k) Successors and Assigns. All of the covenants,
stipulations, promises and agreements contained in this Note by
or on behalf of Makers shall bind their successors and assigns
and shall be for the benefit of Lender and any holder hereof, and
their successors and assigns, whether so expressed or not,
subject, however, to the provisions of Section 11.10 of the Loan
Agreement.
(l) GOVERNING LAW. THIS NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY TEXAS LAW, EXCEPT TO THE EXTENT
THAT THE LAWS OF ANOTHER JURISDICTION GOVERN THE CREATION,
PERFECTION OR ENFORCEMENT OF INTERESTS, OR THE REMEDIES RELATED
TO ANY PART OF THE COLLATERAL, OR TO THE EXTENT THAT UNITED
STATES FEDERAL LAW APPLIES PURSUANT TO SECTION 11.8 OF THE LOAN
AGREEMENT OR OTHERWISE.
(m) Time of the Essence. Time shall be of the essence in
this Note with respect to all of Makers' obligations hereunder.
(n) INTEGRATION. THIS NOTE AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, Maker has duly executed this Note as of
the date first above written.
MAKERS:
AMRESCO, INC., a Delaware
corporation
By:
Thomas J. Andrus,
Treasurer
(VARIOUS MAKERS)
By:
Name:
Title:
EXHIBIT A-1
TERM NOTE
$________________ Dallas, Texas __________ __, 1997
FOR VALUE RECEIVED, AMRESCO, INC., a Delaware corporation, and
the other parties executing this Note or hereafter added hereto
as "Maker" (collectively "Makers"), hereby, jointly and
severally, promise to pay to the order of
_____________________________ ("Lender") in care of Agent, at its
banking house in the City of Dallas, Dallas County, Texas, or at
such other address in Dallas County, Texas, given to Makers by
Agent, the principal sum of ____________________________ Dollars
($______________), or so much thereof as may be advanced and
outstanding, together with interest, as hereinafter described.
This Note has been executed and delivered pursuant to the
terms of that certain Third Amended and Restated Loan Agreement
(as the same may be modified, amended, supplemented, extended or
restated from time to time, the "Loan Agreement") dated the date
hereof, executed by and among Makers, Agent and the Lenders
(which includes the payee of this Note) and is one of the notes
defined therein as a "Term Note", the terms and provisions of the
Loan Agreement related to this Note being incorporated herein by
reference for all purposes. Each capitalized term not expressly
defined herein shall have the meaning given to such term under
the Loan Agreement. The terms of the Loan Agreement shall govern
in the case of any inconsistency between such terms and the terms
hereof.
This Note is secured by the Collateral Assignment, the Pledge
Agreements, the Security Agreement, the Mortgages, the other
Security Documents and all the other Loan Documents, and all
liens and security interests created or evidenced thereby. Any
holder shall be entitled to all benefits and remedies and
security set forth in the Loan Agreement and all the other Loan
Documents. [This Note renews, extends and replaces that certain
Promissory Note dated ______________, in the amount of $________,
executed by Makers, payable to Lender.]
1.Interest and Payment.
(a) Maturity. The principal of this Note and all accrued
but unpaid interest hereon shall be due and payable in full on
the Term Facility Termination Date.
(b) Accrual of Interest. Subject to Paragraph 1(f) below,
interest on this Note shall accrue at a rate per annum equal to
the lesser of (i) at Makers' option, the Variable Rate or the
Adjusted LIBOR Rate, subject, however, to the provisions of the
Loan Agreement, or (ii) the Maximum Lawful Rate; provided,
however, that as to any portion of the outstanding principal
balance hereof that is not subject to an effective election of or
conversion to the Adjusted LIBOR Rate in accordance with the
terms of the Loan Agreement, interest on such portion of this
Note shall accrue interest at the lesser of (i) the Variable Rate
or (ii) the Maximum Lawful Rate. Interest on this Note shall be
calculated at a daily rate equal to 1/360 of the annual
percentage rate which this Note bears, subject to the provisions
hereof limiting interest to the Maximum Lawful Rate. Without
notice to any Maker or any other Person, the Variable Rate and
the Maximum Lawful Rate shall each automatically fluctuate upward
and downward as and in the amount by which the Base Rate and the
Maximum Lawful Rate, respectively, fluctuate, subject always to
limitations contained in this Note and the Loan Agreement.
(c) Agreements Concerning Pricing Election. Reference
should be made to the provisions of Section 3.5 of the Loan
Agreement concerning the terms, manner and agreements related to
the interest rate elections available to Makers under this Note.
(d) Principal and Interest Payments. Principal and interest
hereon shall be due and payable as is provided in Article III of
the Loan Agreement, which provides, in part, for (i) quarterly
payments of interest on the first (1st) day of each calendar
quarter, commencing on October 1, 1997, and continuing on the
first (1st) day of each January, April, July and October during
the Credit Period, and (ii) an annual principal payment in an
amount equal to $_______[1% of the principal] on April 15 of each
year, commencing on April 15, 1998, and continuing on each April
15 thereafter during the Credit Period.
(e) Costs Due to Regulatory Changes. Makers shall indemnify
Lender against and reimburse Lender for increased costs to
Lender, as a result of any Regulatory Change, in the maintaining
of any LIBOR Rate Portion. All payments made pursuant to this
paragraph shall be made free and clear, without reduction for, or
account of, any present or future taxes or other levies of any
nature, excluding net income and franchise taxes.
(f) Default Rate. After maturity of this Note or the
occurrence of an Event of Default, the outstanding principal
balance of this Note shall, at the option of the Required
Lenders, bear interest at the Default Rate. Any past due
principal, and to the extent permitted by law, past due interest
on this Note shall bear interest, payable as it accrues on
demand, for each day until paid at the Default Rate. Such
interest shall continue to accrue at the Default Rate
notwithstanding the entry of a judgment with respect to any of
the Obligations or the foreclosure of any of the Lenders' Liens,
unless otherwise provided by law.
(g) Maximum Lawful Rate Adjustments. If at any time the
Applicable Rate shall be limited to the Maximum Lawful Rate, any
subsequent reductions in the Applicable Rate shall not reduce the
rate of interest on this Note below the Maximum Lawful Rate until
the total amount of interest accrued equals the amount of
interest which would have accrued if the Applicable Rate had at
all times been in effect. In the event that at maturity (stated
or by acceleration), or at the final payment of the Term
Facility, the total amount of interest paid or accrued on the
Term Facility is less than the amount of interest which would
have accrued if the Applicable Rate had at all times been in
effect with respect thereto, then at such time, to the extent
permitted by law, Makers shall pay to Agent, for the ratable
benefit of the Lenders, an amount equal to the difference between
(a) the lesser of the amount of interest which would have accrued
if the Applicable Rate had at all times been in effect and the
amount of interest which would have accrued if the Maximum Lawful
Rate had at all times been in effect, and (b) the amount of
interest actually paid on the Term Facility.
2.Default. The occurrence of a Default or an Event of
Default, under and as defined in the Loan Agreement, shall
constitute, respectively, a Default or an Event of Default under
this Note.
3.Remedies.
(a) All Remedies Available. Upon the occurrence of an Event
of Default, the holder hereof, acting by and through Agent in
accordance with the terms of Articles IX and X of the Loan
Agreement, shall have the right to declare the entire unpaid
principal balance of, and all accrued unpaid interest on, this
Note at once due and payable (and upon such declaration, the same
shall be at once due and payable), to foreclose any and all liens
and security interests securing payment hereof, to offset against
this Note any sum or sums owed by it to Maker, and to exercise
any of its other rights, powers and remedies under this Note,
under the Loan Agreement or any other Loan Document, or at law or
in equity.
(b) No Waiver. Neither the failure by the holder hereof to
exercise, nor delay by the holder hereof in exercising, the right
to accelerate the maturity of this Note or any other right, power
or remedy upon any Default or Event of Default shall be construed
as a waiver of such Default or Event of Default or as a waiver of
the right to exercise any such right, power or remedy at any
time. No single or partial exercise by the holder hereof of any
right, power or remedy shall exhaust the same or shall preclude
any other or further exercise thereof, and every such right,
power or remedy may be exercised at any time and from time to
time. All rights and remedies provided for in this Note and in
any other Loan Document are cumulative of each other and of any
and all other rights and remedies existing at law or in equity,
and the holder hereof shall, in addition to the rights and
remedies provided herein or in any other Loan Document, be
entitled to avail itself of all such other rights and remedies as
may now or hereafter exist at law or in equity for the collection
of the indebtedness owing hereunder, and the resort to any right
or remedy provided for hereunder or under any such other Loan
Document or provided for by law or in equity shall not prevent
the concurrent or subsequent employment of any other appropriate
rights or remedies. Without limiting the generality of the
foregoing provisions, the acceptance by the holder hereof from
time to time of any payment under this Note which is past due or
which is less than the payment in full of all amounts due and
payable at the time of such payment, shall not (i) constitute a
waiver of or impair or extinguish the rights of the holder hereof
to accelerate the maturity of this Note or to exercise any other
right, power or remedy at the time or at any subsequent time, or
nullify any prior exercise of any such right, power or remedy, or
(ii) constitute a waiver of the requirement of punctual payment
and performance, or a novation in any respect.
4.Usury Savings Provisions.
(a) General Limitation. Notwithstanding anything herein or
in any other Loan Documents, expressed or implied, to the
contrary, in no event shall any interest rate charged hereunder
or under any of the other Loan Documents, or any interest
contracted for, collected or received by Lender or any holder
hereof, exceed the Maximum Lawful Rate.
(b) Intent of Parties. It is expressly stipulated and
agreed to be the intent of Makers and Lender at all times to
comply with the applicable law governing the maximum rate or
amount of interest payable on or in connection with this Note.
If the applicable law is ever judicially interpreted so as to
render usurious any amount called for under this Note or under
any of the other Loan Documents, or contracted for, charged,
taken, reserved or received with respect to this Note, or if
acceleration of the maturity of this Note, any prepayment by
Makers, or any other circumstance whatsoever, results in Lender
having been paid any interest in excess of that permitted by
applicable law, then it is the express intent of Makers and
Lender that all excess amounts theretofore collected by Lender be
credited on the principal balance of this Note (or, if this Note
has been or would thereby be paid in full, refunded to Makers),
and the provisions of this Note and the other applicable Loan
Documents immediately be deemed reformed and the amounts
thereafter collectible hereunder and thereunder reduced, without
the necessity of the execution of any new document, so as to
comply with the applicable law, but so as to permit the recovery
of the fullest amount otherwise called for hereunder and
thereunder. The right to accelerate the maturity of this Note
does not include the right to accelerate any interest which has
not otherwise accrued on the date of such acceleration, and
Lender does not intend to collect any unearned interest in the
event of acceleration. All sums paid or agreed to be paid to
Lender for the use, forbearance or detention of the indebtedness
evidenced hereby or by any other Loan Document shall, to the
extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such
indebtedness until payment in full so that the rate or amount of
interest on account of such indebtedness does not exceed the
Maximum Lawful Rate. The term "applicable law" as used herein
shall mean the laws of the State of Texas, or DIDMCA or any other
applicable United States federal law to the extent that it
permits Lender to contract for, charge, take, reserve or receive
a greater amount of interest than under Texas law. The
provisions of this paragraph shall control all agreements between
Makers and Lender.
5.General Provisions.
(a) Business Days. Whenever any payment shall be due under
this Note on a day which is not a Business Day, the date on which
such payment is due shall be extended to the next succeeding
Business Day, and such extension of time shall be included in the
computation of the amount of interest then payable.
(b) Manner of Payment. The manner in which payments are to
be made on this Note shall be governed by the provisions hereof
and the Loan Agreement, including, without limitation, Article
III of the Loan Agreement.
(c) Prepayments. Prepayments may be made, and as provided
in Section 3.6 of the Loan Agreement are required to be made, on
this Note subject to and in accordance with Section 3.6 of the
Loan Agreement.
(d) Application of Payments. All payments made on this Note
shall be applied in accordance with Sections 3.6, 3.9 and 9.10 of
the Loan Agreement, as applicable. Nothing herein shall limit or
impair any rights of any holder hereof to apply as provided in
the Loan Documents any past due payments, any proceeds from the
disposition of any collateral by foreclosure or other collections
after default. Except to the extent specific provisions are set
forth in this Note or another Loan Document with respect to
application of payments, all payments received by the holder
hereof shall be applied, to the extent thereof, to the
indebtedness owing by Makers to the holder hereof in such order
and manner as the Required Lenders shall deem appropriate, any
instructions from Makers or anyone else to the contrary
notwithstanding.
(e) Costs of Collection. If any holder of this Note retains
an attorney in connection with any default or at maturity or to
collect, enforce or defend this Note or any other Loan Document
in any lawsuit or in any probate, reorganization, bankruptcy or
other proceeding, or if any Maker sues any holder of this Note in
connection with this Note or any other Loan Document and does not
prevail, then Makers agree to pay to each such holder, in
addition to principal and interest, all costs and expenses
incurred by such holder in trying to collect this Note or in any
such suit or proceeding, including reasonable attorneys' fees.
(f) Waivers and Acknowledgments. Each Maker and all
sureties, endorsers, guarantors and any other party now or
hereafter liable for the payment of this Note in whole or in
part, hereby severally (i) waive demand, presentment for payment,
notice of dishonor and of nonpayment, protest, notice of protest,
notice of intent to accelerate, notice of acceleration and all
other notice (except only for any notice that is specifically
required by the terms of the Loan Agreement or any other Loan
Document), filing of suit and diligence in collecting this Note
or enforcing any of the security herefor; (ii) agree to any
substitution, subordination, exchange or release of any such
security or the release of any party primarily or secondarily
liable hereon; (iii) agree that the holder hereof shall not be
required first to institute suit or exhaust its remedies against
any Maker or others liable or to become liable hereon or to
enforce its rights against them or any security herefor; (iv)
consent to any extension or postponement of time of payment of
this Note for any period or periods of time and to any partial
payments, before or after maturity, and to any other indulgences
with respect hereto, without notice thereof to any of them; and
(v) submit (and waive all rights to object) to personal
jurisdiction in the State of Texas, and venue in Dallas County,
Texas, for the enforcement of any and all obligations under the
Loan Documents.
(g) Amendments in Writing. This Note may not be changed,
amended or modified except in a writing expressly intended for
such purpose and executed by the party against whom enforcement
of the change, amendment or modification is sought.
(h) Purpose of Proceeds. The proceeds of this Note will be
used solely for business purposes and not for personal, family,
household or agricultural purposes.
(i) Notices. Any notice required or which any party desires
to give under this Note shall be given and effective as provided
in Section 11.2 of the Loan Agreement.
(j) Assignments/Participations. Makers acknowledge and
agree that the holder of this Note may, at any time and from time
to time, assign all or a portion of its interest in the Term
Facility or transfer to any Person a participation interest in
the Term Facility, subject to and in accordance with the terms
and conditions of the Loan Agreement, including Section 11.10
thereof.
(k) Successors and Assigns. All of the covenants,
stipulations, promises and agreements contained in this Note by
or on behalf of Makers shall bind their successors and assigns
and shall be for the benefit of Lender and any holder hereof, and
their successors and assigns, whether so expressed or not,
subject, however, to the provisions of Section 11.10 of the Loan
Agreement.
(l) GOVERNING LAW. THIS NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY TEXAS LAW, EXCEPT TO THE EXTENT
THAT THE LAWS OF ANOTHER JURISDICTION GOVERN THE CREATION,
PERFECTION OR ENFORCEMENT OF INTERESTS, OR THE REMEDIES RELATED
TO ANY PART OF THE COLLATERAL, OR TO THE EXTENT THAT UNITED
STATES FEDERAL LAW APPLIES PURSUANT TO SECTION 11.8 OF THE LOAN
AGREEMENT OR OTHERWISE.
(m) Time of the Essence. Time shall be of the essence in
this Note with respect to all of Makers' obligations hereunder.
(n) INTEGRATION. THIS NOTE AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, Maker has duly executed this Note as of
the date first above written.
MAKERS:
AMRESCO, INC., a Delaware corporation
By:_____________________________________
Name:___________________________________
Title:__________________________________
(VARIOUS MAKERS)
By:
Name:
Title:
The undersigned (each a "Guarantor") hereby agree that (a)
each is jointly and severally liable for the payment in full of
the indebtedness evidenced by this Term Note, (b) each shall take
any and all actions necessary to insure Lender is paid such
amount in full, (c) each shall increase the amount payable to
such Lender to an amount which, after deduction from such
increased amount of the taxes required to be held or deducted
therefrom solely as a result of the payment by Guarantor of such
amount, will yield to the Lender the amount stated to be payable
with respect thereto, and (d) any and all amounts paid pursuant
to this guaranty shall be paid in U.S. Dollars without
consideration to any currency exchange rate.
TERM GUARANTORS:
[FOREIGN ENTITIES]
By: AMRESCO, INC., a Delaware
corporation, as attorney-in-fact
By:
Name:
Title:
AMRESCO, INC,
1997 STOCK OPTION AND AWARD PLAN
(Amended and Restated as of February 24, 1998)
ARTICLE 1. Establishment, Purpose and Duration
1.1 Establishment of the Plan. AMRESCO, INC., a Delaware
corporation (hereinafter referred to as "AMRESCO"), hereby
establishes a stock option and award plan to be known as the
"AMRESCO, INC. 1997 Stock Option and Award Plan" (the "Plan"), as
set forth in this document. The Plan permits the grant of
Nonqualified Stock Options, Incentive Stock Options, Performance
Shares and Restricted Stock.
The effective date of the Plan is May 28, 1997 (the
"Effective Date") and the Plan shall remain in effect as provided
in Section 1.3.
1.2 Purpose of the Plan. The purpose of the Plan is to
secure for AMRESCO and its stockholders the benefits of the
incentive inherent in stock ownership in AMRESCO by key
employees, directors and other persons who are largely
responsible for its future growth and continued success. The
Plan promotes the success and enhances the value of AMRESCO by
linking the personal interests of Participants to those of
AMRESCO's stockholders, and by providing Participants with an
incentive for outstanding performance.
The Plan is further intended to provide flexibility to
AMRESCO in its ability to motivate, attract and retain the
services of Participants upon whose judgment, interest and
special effort the successful conduct of its operation largely
depends.
1.3 Duration of the Plan. The Plan shall commence on the
Effective Date and shall remain in effect, subject to the right
of the Board of Directors to amend or terminate the Plan at any
time pursuant to Article 13, until the day prior to the tenth
(10th) anniversary of the Effective Date.
ARTICLE 2. Definitions
Whenever used herein, the following terms shall have the
meanings set forth below and, when the meaning is intended, the
initial letter of the word is capitalized:
(a) "Award" means, individually or collectively, a grant
under this Plan of Nonqualified Stock Options, Incentive Stock
Options, Performance Shares or Restricted Stock.
(b) "Award Agreement" means an agreement entered into by
each Participant and AMRESCO, setting forth the terms and
provisions applicable to Awards granted to Participants
hereunder.
(c) "Beneficial Owner" or "Beneficial Ownership" shall have
the meaning ascribed to such term in Rule 13d-3 of the General
Rules and Regulations under the Exchange Act.
(d) "Board" or "Board of Directors" means the board of
directors of AMRESCO.
(e) "Cause" means: (i) willful misconduct on the part of a
Participant that is materially detrimental to AMRESCO; or (ii)
the indictment of a Participant for the commission of a felony.
The existence of "Cause" under either (i) or (ii) shall be
determined by the Committee. Notwithstanding the foregoing, if
the Participant has entered into an employment agreement that is
binding as of the date of employment termination, and if such
employment agreement defines "Cause" and/or provides a means of
determining whether "Cause" exists, the definition of "Cause" and
the means of determining whether "Cause" exists provided for in
the employment agreement shall apply to the Participant for
purposes hereof.
(f) "Change in Control" shall be deemed to have occurred
if:
(i) An acquisition by any Person of Beneficial
Ownership of the Shares then outstanding ("AMRESCO Common
Stock Outstanding") or the voting securities of AMRESCO then
outstanding entitled to vote generally in the election of
directors ("AMRESCO Voting Securities Outstanding");
provided such acquisition of Beneficial Ownership would
result in the Person's beneficially owning (within the
meaning of Rule 13d-3 promulgated under the Exchange Act)
twenty-five percent (25%) or more of AMRESCO Common Stock
Outstanding or twenty-five percent (25%) or more of the
combined voting power of AMRESCO Voting Securities
Outstanding; and provided further, that immediately prior to
such acquisition such Person was not a direct or indirect
Beneficial Owner of twenty-five percent (25%) or more of
AMRESCO Common Stock Outstanding or twenty-five percent
(25%) or more of the combined voting power of AMRESCO Voting
Securities Outstanding, as the case may be; or
(ii) The approval of the stockholders of AMRESCO of a
reorganization, merger, consolidation, complete liquidation
or dissolution of AMRESCO, the sale or disposition of all or
substantially all of the assets of AMRESCO or similar
corporate transaction (in each case referred to in this
Section 2(f) as a "Corporate Transaction") or, if
consummation of such Corporate Transaction is subject, at
the time of such approval by stockholders, to the consent of
any government or governmental agency, the obtaining of such
consent (either explicitly or implicitly); or
(iii) A change in the composition of the Board such
that the individuals who, as of the Effective Date,
constitute the Board (such Board shall be hereinafter
referred to as the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided,
however, for purposes of this Section 2(f), that any
individual who becomes a member of the Board subsequent to
the Effective Date whose election, or nomination for
election by AMRESCO's stockholders, was approved by a vote
of at least a majority of those individuals who are members
of the Board and who were also members of the Incumbent
Board (or deemed to be such pursuant to this proviso) shall
be considered as though such individual were a member of the
Incumbent Board; but, provided, further, that any such
individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act, including any successor
to such Rule) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than
the Board shall not be so considered as a member of the
Incumbent Board.
Notwithstanding the provisions set forth in subparagraphs (i) and
(ii) of this Section 2(f), the following shall not constitute a
Change in Control for purposes hereof: (1) any acquisition of
shares of common stock of AMRESCO by, or consummation of a
Corporate Transaction with, any Subsidiary or an employee benefit
plan (or related trust) sponsored or maintained by AMRESCO or an
affiliate; or (2) any acquisition of shares of common stock of
AMRESCO, or consummation of a Corporate Transaction, following
which more than fifty percent (50%) of the shares of common stock
then outstanding of the corporation resulting from such
acquisition or Corporate Transaction and more than fifty percent
(50%) of the combined voting power of the voting securities then
outstanding of such corporation entitled to vote generally in the
election of directors, is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were Beneficial Owners of AMRESCO Common Stock
Outstanding and AMRESCO Voting Securities Outstanding,
respectively, immediately prior to such acquisition or Corporate
Transaction in substantially the same proportions as their
ownership, immediately prior to such acquisition or Corporate
Transaction, of AMRESCO Common Stock Outstanding and AMRESCO
Voting Securities Outstanding, as the case may be.
(g) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(h) "Committee" means the committee appointed by the Board
to administer the Plan with respect to grants of Awards, as
specified in Article 3.
(i) "Director" means any individual who is a member of the
Board of Directors.
(j) "Disability" shall have the meaning ascribed to such
term in the AMRESCO long-term disability plan covering the
Participant, or in the absence of such plan, a meaning consistent
with Section 22(e)(3) of the Code.
(k) "Employee" means any full-time, salaried employee of
AMRESCO, or AMRESCO's Subsidiaries.
(l) "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, or any successor act thereto.
(m) "Fair Market Value" shall be determined as follows:
(i) If, on the relevant date, the Shares, are traded
on a national or regional securities exchange or on The
Nasdaq Stock Market ("Nasdaq") and closing sale prices for
the Shares are customarily quoted, on the basis of the
closing sale price on the principal such securities exchange
on which the Shares may then be traded or, if there is no
such sale on the relevant date, then on the immediately
preceding day on which a sale was reported;
(ii) If, on the relevant date, the Shares are not
listed on any securities exchange or traded on Nasdaq, but
nevertheless are publicly traded and reported on Nasdaq
without closing sale prices for the Shares being customarily
quoted, on the basis of the mean between the closing bid and
asked quotations in such other over-the-counter market as
reported by Nasdaq; but, if there are no bid and asked
quotations in the over-the-counter market as reported by
Nasdaq on that date, then the mean between the closing bid
and asked quotations in the over-the-counter market as
reported by Nasdaq on the immediately preceding day such bid
and asked prices were quoted; and
(iii) If, on the relevant date, the Shares are not
publicly traded as described in (i) or (ii), on the basis of
the good faith determination of the Committee.
(n) "Final Award" means the actual award earned during a
performance period by a Participant, as determined by the
Committee at the end of the performance period pursuant to
Article 7.
(o) "Incentive Payment Date" means the seventy-fifth (75th)
day following the last day of the performance period during which
the Final Award under Article 7 was earned, or such earlier date
upon which Final Awards are paid to Participants.
(p) "Incentive Stock Option" or "ISO" means an option to
purchase Shares granted under Article 6 which is designated as an
Incentive Stock Option and is intended to meet the requirements
of Section 422 of the Code.
(q) "Insider" shall mean a Person who is, on the relevant
date, a director, officer or ten percent (10%) beneficial owner
of any class of AMRESCO's equity securities that is registered
pursuant to Section 12 of the Exchange Act, all as defined under
Section 16 of the Exchange Act.
(r) "Named Executive Officer" means a Participant who, as
of the date of vesting and/or payout of an Award is one of the
group of "covered employees," as defined in the regulations
promulgated under Code Section 162(m), or any successor statute.
(s) "Nonqualified Stock Option" or "NQSO" means an option
to purchase Shares granted under Article 6 which is not intended
to meet, or does not meet, the requirements of Code Section 422.
(t) "Option" means an Incentive Stock Option or a
Nonqualified Stock Option.
(u) "Option Price" means the price at which a Share may be
purchased by a Participant pursuant to an Option, as determined
by the Committee.
(v) "Participant" means an Employee, director or other
Person who has been granted an Award which is outstanding.
(w) "Performance Share" means an Award granted to an
Employee, as described in Article 7.
(x) "Person" shall have the meaning ascribed to such term
in Section 3(a)(9) of the Exchange Act and used in Section 13(d)
and 14(d) thereof, including a "group" as defined in Section
13(d) thereof.
(y) "Plan Year" shall mean, for purposes of Article 7,
AMRESCO's fiscal year which coincides with each calendar year
during the term hereof.
(z) "Retirement" shall have the meaning ascribed to such
term in the AMRESCO, INC. Retirement Savings and Profit Sharing
Plan and Trust.
(aa) "Restricted Stock" means an Award of restricted Shares
granted in accordance with the terms of Article 8 and the other
provisions hereof.
(ab) "Shares" means the shares of AMRESCO common stock, par
value $0.05 per share.
(ac) "Subsidiary" means any corporation, partnership, joint
venture or other entity in which AMRESCO has a fifty percent
(50%) or greater voting interest.
ARTICLE 3. Administration
3.1 The Committee. The Plan shall be administered by the
Stock Option and Bonus Committee of the Board, or by any other
Committee appointed by the Board consisting of not less than two
(2) Directors who are "non-employee directors" under Rule 16b-3
or any successor thereto under the Exchange Act. The members of
the Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board of Directors.
The Committee shall be comprised solely of non-employee
directors who are eligible to administer the Plan pursuant to
Rule 16b-3(b)(3) or any successor thereto under the Exchange Act.
However, if for any reason any member of the Committee does not
qualify to administer the Plan, as contemplated by Rule 16b-
3(b)(3) of the Exchange Act, the Board of Directors may appoint a
new Committee member who complies with Rule 16b-3(b)(3).
3.2 Authority of the Committee. Subject to the provisions
hereof, the Committee shall have full power to select the
Employees and other Persons who are responsible for the future
growth and success of AMRESCO, who may include, without
limitation, consultants, independent contractors or other
providers of services to AMRESCO, who shall participate herein
(who may change from year to year); determine the size and types
of Awards; determine the terms and conditions of Awards in a
manner consistent herewith (including vesting provisions and the
duration of the Awards); construe and interpret the Plan and any
agreement or instrument entered into hereunder; establish, amend
or waive rules and regulations for the Plan's administration; and
(subject to the provisions of Article 13) amend the terms and
conditions of any outstanding Award to the extent such terms and
conditions are within the discretion of the Committee as provided
herein, including to establish different terms and conditions
relating to the effect of the termination of employment or other
service to AMRESCO. Further, the Committee shall make all other
determinations which may be necessary or advisable for the
administration hereof. As permitted by law, the Committee may
delegate its authority hereunder.
3.3 Decisions Binding. All determinations and decisions
made by the Committee pursuant to the provisions hereof and all
related orders and resolutions of the Board shall be final,
conclusive and binding on all Persons, including AMRESCO, the
stockholders, Employees, Participants and their estates and
beneficiaries.
ARTICLE 4. Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in
Section 4.3, the total number of Shares available for grant of
Awards shall be an aggregate of three million (3,000,000). These
Shares may, in the discretion of AMRESCO, be either authorized
but unissued Shares or shares held as treasury shares, including
Shares purchased by AMRESCO.
The following rules shall apply for purposes of the
determination of the number of Shares available for grant
hereunder;
(a) The grant of an option or Restricted Stock shall
reduce the Shares available for grant hereunder by the
number of shares subject to such Award.
(b) The Committee shall in each case determine the
appropriate number of Shares to deduct from the authorized
pool in connection with the grant of Performance Shares.
(c) While an Option, Restricted Stock or Performance
Share is outstanding, it shall be counted against the
authorized pool of Shares, regardless of its vested status.
(d) In the event an Award is paid in the form of
Shares or derivatives of Shares, the authorized pool shall
be reduced by the number of Shares or Share derivatives paid
to the Participant, as determined by the Committee.
(e) To the extent that an Award is settled in cash
rather than in Shares, the authorized Share pool shall be
credited with the appropriate number of Shares represented
by the cash settlement of the Award, as determined at the
sole discretion of the Committee (subject to the limitation
set forth in Section 4.2).
4.2 Lapsed Awards. If any Award is canceled, terminates,
expires or lapses for any reason, any Shares subject to such
Award shall again be available for the grant of an Award.
However, in the event that prior to the Award's cancellation,
termination, expiration or lapse, the holder of the Award at any
time received one (1) or more "benefits of ownership" pursuant to
such Award (as defined by the Securities and Exchange Commission,
pursuant to any rule or interpretation promulgated under Section
16 of the Exchange Act), the Shares subject to such Award shall
not be made available for regrant hereunder.
4.3 Adjustments in Authorized Shares. In the event of any
change in corporate capitalization, such as a stock split, or a
corporate transaction, such as any merger, consolidation,
separation, including a spin-off, or other distribution of stock
or property of AMRESCO, any reorganization (whether or not such
reorganization comes within the definition of such term in Code
Section 368) or any partial or complete liquidation of AMRESCO,
such adjustment shall be made in the number and class of Shares
which may be delivered hereunder, and in the number and class of
and/or price of Shares subject to outstanding Awards, as may be
determined to be appropriate and equitable by the Committee, in
its sole discretion, to prevent dilution or enlargement of
rights; provided, however, that the number of Shares subject to
any Award shall always be a whole number and the Committee shall
make such adjustments as are necessary to insure Awards of whole
Shares.
ARTICLE 5. Eligibility and Participation
Any key Employee or Director of AMRESCO, or of any
Subsidiary, including any such Employee who is also a director of
AMRESCO, or of any Subsidiary, or any other Person, including
consultants, independent contractors or other service providers,
whose judgment, initiative and efforts contribute or may be
expected to contribute materially to the successful performance
of AMRESCO or any Subsidiary shall be eligible to receive an
Award. In determining the Employees and other Persons to whom an
Award shall be granted and the number of Shares which may be
granted pursuant to that Award, the Committee shall take into
account the duties of the respective Person, their present and
potential contributions to the success of AMRESCO or any
Subsidiary, and such other factors as the Committee shall deem
relevant in connection with accomplishing the purpose hereof.
ARTICLE 6. Stock Options
6.1 Grant of Options.
(a) Eligible Persons other than Outside Directors. Subject
to the terms and provisions hereof, Options may be granted to
Employees or other Persons at any time and from time to time as
shall be determined by the Committee. The Committee shall have
discretion in determining the number of Shares subject to Options
granted to each Participant; provided, however, that in the case
of any ISO, only an Employee may receive such grant and the
aggregate Fair Market Value (determined at the time such Option
is granted) of the Shares to which ISOs are exercisable for the
first time by the Optionee during any calendar year (hereunder
and under all other Incentive Stock Option Plans of AMRESCO and
any Subsidiary) shall not exceed $100,000. The Committee may
grant a Participant ISOs, NQSOs or a combination thereof, and may
vary such Awards among Participants.
The maximum number of Options that a Named Executive Officer
can be granted hereunder during any twelve month period is
300,000.
(b) Outside Directors. Subject to the terms and
provisions hereof, Options shall be granted to Outside Directors
as follows:
(i) Each Outside Director elected or appointed to the
Board for the first time after February 25, 1997 shall be
granted an NQSO to purchase 15,000 Shares on the date of
such election or appointment; and
(ii) Each Outside Director upon his or her re-election
at the first meeting of the stockholders to elect Directors
following the expiration of the Triennial Period shall be
granted an NQSO to purchase 15,000 Shares.
Each such Option shall have an Option Price equal to one hundred
percent (100%) of the Fair Market Value of a Share on the date of
grant, shall have a term of ten (10) years and shall vest twenty
percent (20%) on the date of grant and (20%) on each anniversary
thereof. For purposes of this Section 6.1(b), the term "Outside
Director" shall mean any Director that is not an employee of the
Company or any Subsidiary. Further, the term "Triennial Period"
shall mean, in respect of any Outside Director, the three year
period beginning on the date of the last grant of Options to such
Outside Director under Section 6.1(b), and ending three calendar
years thereafter.
6.2 Award Agreement. Each Option grant shall be evidenced
by an Award Agreement that shall specify the Option Price, the
duration of the Option, the number of Shares to which the Option
pertains and such other provisions as the Committee shall
determine. The Award Agreement shall further specify whether the
Award is intended to be an ISO or an NQSO. Any portion of an
Option that is not designated as an ISO or otherwise fails or is
not qualified to be treated as an ISO (even if designated as an
ISO) shall be a NQSO.
6.3 Option Price. The Option Price for each grant of an
ISO shall be not less than one hundred percent (100%) of the Fair
Market Value of a Share on the date the ISO is granted. In no
event, however, shall any Participant, who at the time he would
otherwise be granted an Option owns (within the meaning of
Section 424(d) of the Code) stock of AMRESCO possessing more than
ten percent (10%) of the total combined voting power of all
classes of stock of AMRESCO be eligible to receive an ISO at an
Option Price less than one hundred ten percent (110%) of the Fair
Market Value of a Share on the date the ISO is granted. The
price at which each Share covered by each NQSO shall be purchased
by an Optionee shall be established by the Committee in its sole
discretion.
6.4 Duration of Options. Each Option shall expire at such
time as the Committee shall determine at the time of grant;
provided, however, that no Option shall be exercisable later than
the tenth (10th) anniversary date of its grant; provided,
further, however, that any ISO granted to any Participant who at
such time owns (within the meaning of Section 424(d) of the Code)
stock of AMRESCO possessing more than ten percent (10%) of the
total combined voting power of all classes of stock in AMRESCO,
shall be exercisable not later than the fifth (5th) anniversary
date of its grant.
6.5 Exercise of Options. Options shall be exercisable at
such times and be subject to such restrictions and conditions the
Committee shall in each instance approve, which need not be the
same for each grant or each Participant. Each Option shall be
exercisable for such number of Shares and at such time or times,
including periodic installments, as may be determined by the
Committee at the time of the grant. Except as otherwise provided
in the Award Agreement and Article 12, the right to purchase
Shares that are exercisable in periodic installments shall be
cumulative so that when the right to purchase any Shares has
accrued, such Shares or any part thereof may be purchased at any
time thereafter until the expiration or termination of the
Option.
6.6 Payment. Options shall be exercised by the delivery of
a written notice of exercise to AMRESCO, setting forth the number
of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares. The Option Price
upon exercise of any Option shall be payable to AMRESCO in full
either: (a) in cash, or (b) if approved by the Committee, by
tendering previously acquired Shares having an aggregate Fair
Market Value at the time of exercise equal to the total Option
Price, or (c) by a combination of (a) and (b). The Committee
also may allow cashless exercises as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities
law restrictions, or by any other means which the Committee
determines to be consistent with the Plan's purpose and
applicable law.
As soon as practicable after receipt of a written
notification of exercise and full payment, AMRESCO shall deliver
to the Participant, in the Participant's name, Share certificates
in an
appropriate amount based upon the number of Shares purchased
under the Option(s).
6.7 Termination of Employment Due to Death or Disability.
Unless otherwise provided by the Committee in an Award Agreement,
the following rules shall apply in the event of the Participant's
termination of employment due to death or Disability. With
respect to a Participant that is a non-employee director of
AMRESCO or is otherwise not an Employee, the following references
to employment shall be deemed to be references to service as a
director or in such other capacity as is determined by the
Committee:
(a) Termination by Death. In the event the
Participant dies while actively employed, all outstanding
Options granted to that Participant shall immediately vest
and shall remain exercisable at any time prior to their
expiration date, or for two (2) years after the date of
death, whichever period is shorter, by (i) such Person(s) as
shall have been named as the Participant's beneficiary, (ii)
such Person(s) that have acquired the Participant's rights
under such Options by will or by the laws of descent and
distribution, (iii) the Participant's estate or
representative of the Participant's estate or (iv) by a
transferee of the Option who has acquired the Option in a
transaction that is permitted by Section 6.9.
(b) Termination by Disability. In the event the
employment of a Participant is terminated by reason of
Disability, all outstanding Options granted to that
Participant shall immediately vest as of the date the
Committee determines the definition of Disability to have
been satisfied and shall remain exercisable at any time
prior to their expiration date, or for one (1) year after
the date that the Committee determines the definition of
Disability to have been satisfied, whichever period is
shorter, by the Participant's duly appointed guardian or
other legal representative.
(c) Employment Termination Followed by Death. In the
event that a Participant's employment terminates by reason
of Disability, and within the exercise period following such
termination the Participant dies, then the remaining
exercise period for outstanding Options shall be one (1)
year following death. Such Options shall be exercisable by
the Persons specified in subsection (a) above.
6.8 Termination of Employment for Other Reasons. If the
employment of a Participant shall terminate for any reason other
than the reasons set forth in Section 6.7, all Options held by
the Participant which are not vested as of the effective date of
employment termination immediately shall be forfeited to AMRESCO
(and shall once again become available for grant hereunder).
However, the Committee, in its sole discretion, shall have the
right to immediately vest all or any portion of such Options,
subject to such terms as the Committee, in its sole discretion,
deems appropriate.
In the event an Employee's employment is terminated by
AMRESCO for Cause, or an Employee voluntarily terminates his
employment, the rights under any then vested outstanding Options
shall terminate immediately upon such termination of employment.
If the Employee's employment is terminated by AMRESCO without
Cause, any Options vested as of the date of termination shall
remain exercisable at any time prior to their expiration date or
for three (3) months after his date of termination of employment,
whichever period is shorter.
6.9 Limited Transferability. A Participant may transfer an
Option to members of his or her Immediate Family, to one or more
trusts for the benefit of such Immediate Family members, or to
one or more partnerships where such Immediate Family members are
the only partners, if (i) the Award Agreement evidencing such
Option expressly provides that the Option may be transferred and
(ii) the Participant does not receive any consideration in any
form whatsoever for said transfer thereof. Any Option so
transferred shall continue to be subject to the same terms and
conditions in the hands of the transferee as were applicable to
said Option immediately prior to the transfer thereof. Any
reference in any such Award Agreement to the employment by or
performance of services for AMRESCO by the Participant shall
continue to refer to the employment of or performance by the
transferring Participant. For purpose hereof, "Immediate Family"
shall mean the Participant and the Participant's spouse, and
their respective ancestors and descendants. Any Option that is
granted pursuant to any Award Agreement that did not initially
expressly allow the transfer of said Option and that has not been
amended to expressly permit such transfer, shall not be
transferable by the Participant otherwise than by will or by the
laws of descent and distribution and such Option thus shall be
exercisable during the Participant's lifetime only by the
Participant.
ARTICLE 7. Performance Shares
7.1 Grant of Performance Shares. Subject to the terms
hereof, Performance Shares may be granted to eligible Employees
at any time and from time to time for no consideration, as shall
be determined by the Committee. The Committee shall have
complete discretion in determining the number of Performance
Shares granted to each Participant; provided, however, that
unless and until AMRESCO's stockholders vote to change the
maximum number of Performance Shares that may be earned by any
one Named Executive Officer (subject to the terms of Article 13),
none of the Named Executive Officers may earn more than three
hundred thousand (300,000) Performance Shares with respect to any
performance period.
7.2 Value of Performance Shares. Each Performance Share
shall have a value equal to the Fair Market Value of a Share on
the date the Performance Share is earned. The Committee shall
set performance goals in its discretion which, depending on the
extent to which they are met, will determine the number of
Performance Shares that will be earned by the Participants. The
time period during which the performance goals must be met shall
be called a "performance period." Performance periods shall, in
all cases, equal or exceed two (2) years in length. The
performance goals shall be established at the beginning of the
performance period (or within such time period as is permitted by
Code Section 162(m)).
Unless and until AMRESCO's stockholders vote to change the
general performance measures (subject to the terms of Article
13), the attainment of which shall determine the number of
Performance Shares earned hereunder, the Committee will use one
or more of the following performance measures for purposes of
grants to Named Executive Officers: total shareholder return,
return on assets, return on equity, earnings per share and ratio
of operating overhead to operating revenue. Each Plan Year, the
Committee, in its sole discretion, may select among the
performance measures specified in this Section 7.2 and set the
relative weights to be given to such performance measures.
However, in the case of Participants who are not Named Executive
Officers, the Committee may approve performance measures that are
not specified in this Section 7.2 without obtaining stockholder
approval of such measures.
In the event that applicable tax and/or securities laws
(including, but not limited to, Code Section 162(m) and Section
16 of the Exchange Act) change to permit Committee discretion to
alter the governing performance measures without obtaining
stockholder approval of such changes, the Committee shall have
sole discretion to make such changes without obtaining
stockholder approval.
7.3 Earning of Performance Shares. After the applicable
performance period has ended, the Committee shall certify the
extent to which the established performance goals have been
achieved. Subsequently, each holder of Performance Shares shall
be entitled to receive payout on the number of Performance Shares
earned by the Participant over the performance period, to be
determined as a function of the extent to which the corresponding
performance goals have been achieved. The Committee may, in its
sole discretion, decrease the amount of a Final Award otherwise
payable to a Participant under this Article 7. The Committee
shall have no discretion, however, to increase the amount of a
Final Award otherwise payable to a Named Executive Officer under
this Article 7.
7.4 Form and Timing of Payment of Performance Shares.
Payment of earned Performance Shares shall be made, in a single
lump sum, promptly but in no event later than the Incentive
Payment Date. The Committee, in its sole discretion, may pay
earned Performance Shares in the form of cash or in Shares (or in
a combination thereof) which have, as of the close of the
applicable performance period, an aggregate Fair Market Value
equal to the value of the earned Performance Shares.
7.5 Termination of Employment Due to Death, Disability or
at the Request of AMRESCO Without Cause. In the event the
employment of a Participant is terminated by reason of death,
Disability or by AMRESCO without Cause during a performance
period, the Participant shall receive a prorated payout with
respect to the Performance Shares. The prorated payout shall be
determined by the Committee, in its sole discretion, and shall be
based upon the length of time that the Participant held the
Performance Shares during the performance period, and shall
further be adjusted based on the achievement of the established
performance goals at the time of his termination.
Payment of earned Performance Shares shall be made at the
same time payments are made to Participants who did not terminate
employment during the applicable performance period.
7.6 Termination of Employment for Other Reasons. In the
event that a Participant's employment terminates for any reason
other than those reasons set forth in Section 7.5, all
Performance Shares shall be forfeited by the Participant to
AMRESCO.
7.7 Nontransferability. Unless the Committee provides
otherwise in the Award Agreement, Performance Shares may not be
sold, transferred, pledged, assigned or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, a Participant's Performance Shares rights
hereunder shall be exercisable during the Participant's lifetime
only by the Participant or the Participant's legal
representative.
ARTICLE 8. Restricted Stock
8.1 Grants. The Committee may from time to time in its
discretion grant Restricted Stock to Employees and may determine
the number of Shares of Restricted Stock to be granted and the
terms and conditions of, and the amount of payment, if any, to be
made by the Employee for, such Restricted Stock. A grant of
Restricted Stock may require the Employee to pay for such Shares
of Restricted Stock, but the Committee may establish a price
below Fair Market Value at which the Employee can purchase the
Shares of Restricted Stock. Each grant of Restricted Stock will
be evidenced by an Award Agreement containing terms and
conditions not inconsistent herewith as the Committee shall
determine to be appropriate in its sole discretion. Such
Restricted Stock shall be granted subject to the restrictions
prescribed pursuant hereto and the Award Agreement.
8.2 Restricted Period; Lapse of Restrictions. At the time
a grant of Restricted Stock is made, the Committee shall
establish a period or periods of time (the "Restricted Period")
applicable to such grant which, unless the Committee otherwise
provides, shall not be less than one (1) year. Subject to the
other provisions of this Article 8, at the end of the Restricted
Period all restrictions shall lapse and the Restricted Stock
shall vest in the Participant. At the time a grant is made, the
Committee may, in its discretion, prescribe conditions for the
incremental lapse of restrictions during the Restricted Period
and for the lapse or termination of restrictions upon the
occurrence of other conditions in addition to or other than the
expiration of the Restricted Period with respect to all or any
portion of the Restricted Stock. Such conditions may, but need
not, include without limitation, (a) the death, Disability or
Retirement of the Employee to whom Restricted Stock is granted or
(b) the occurrence of a Change in Control. The Committee may
also, in its discretion, shorten or terminate the Restricted
Period, or waive any conditions for the lapse or termination of
restrictions with respect to all or any portion of the Restricted
Stock at any time after the date the grant is made.
8.3 Rights of Holder; Limitations Thereon. Upon a grant of
Restricted Stock, a stock certificate (or certificates)
representing the number of Shares of Restricted Stock granted to
the Employee shall be registered in the Employee's name and shall
be held in custody by AMRESCO or a bank selected by AMRESCO for
the Employee's account. Following such registration, the
Employee shall have the rights and privileges of a stockholder as
to such Restricted Stock, including the right to receive
dividends and to vote such Restricted Stock, except that, the
right to receive cash dividends shall be the right to receive
such dividends either in cash currently or by payment in
Restricted Stock, as the Committee shall determine, and except
further that, the following restrictions shall apply:
(a) The Employee shall not be entitled to delivery of
a certificate until the expiration or termination of the
Restricted Period for the Shares represented by such
certificate and the satisfaction of any and all other
conditions prescribed by the Committee;
(b) None of the Shares of Restricted Stock may be
sold, transferred, assigned, pledged, or otherwise
encumbered or disposed of during the Restricted Period and
until the satisfaction of any and all other conditions
prescribed by the Committee; and
(c) All of the Shares of Restricted Stock that have
not vested shall be forfeited and all right of the Employee
to such Restricted Stock shall terminate without further
obligation on the part of AMRESCO unless the Employee has
remained a full-time employee of AMRESCO or any of its
Subsidiaries until the expiration or termination of the
Restricted Period and the satisfaction of any and all other
conditions prescribed by the Committee applicable to such
Restricted Stock. Upon the forfeiture of any Shares of
Restricted Stock, such forfeited Shares shall be transferred
to AMRESCO without further action by the Employee, and
shall, in accordance with Section 4.2, again be available
for grant hereunder.
With respect to any Shares received as a result of
adjustments under Section 4.3 and any Shares received with
respect to cash dividends declared on Restricted Stock, the
Participant shall have the same rights and privileges, and be
subject to the same restrictions, as are set forth in this
Article 8.
8.4 Delivery of Unrestricted Shares. Upon the expiration
or termination of the Restricted Period for any Shares of
Restricted Stock and the satisfaction of any and all other
conditions prescribed by the Committee, the restrictions
applicable to such Restricted Stock shall lapse and a stock
certificate for the number of Shares of Restricted Stock with
respect to which the restrictions have lapsed shall be delivered,
free of all such restrictions except any that may be imposed by
law, to the holder of the Restricted Stock. AMRESCO shall not be
required to deliver any fractional Share but will pay, in lieu
thereof, the Fair Market Value (determined as of the date the
restrictions lapse) of such fractional share to the holder
thereof. Prior to or concurrently with the delivery of a
certificate for Restricted Stock, the holder shall be required to
pay an amount necessary to satisfy any applicable federal, state
and local tax requirements as set out in Article 14.
8.5 Nonassignability of Restricted Stock. Unless the
Committee provides otherwise in the Award Agreement, no grant of,
nor any right or interest of a Participant in or to any
Restricted Stock, or in any instrument evidencing any grant
hereunder, may be assigned, encumbered or transferred except, in
the event of the death of a Participant, by will or the laws of
descent and distribution.
ARTICLE 9. Beneficiary Designation
Each Participant hereunder may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit hereunder is to be paid in case
of his or her death before he or she receives any or all of such
benefit. Each such designation shall revoke all prior
designations by the same Participant, shall be in a form
prescribed by AMRESCO and shall be effective only when filed by
the Participant, in writing, with AMRESCO during the
Participant's lifetime. In the absence of any such designation,
benefits remaining unpaid at the Participant's death shall be
paid to the Participant's estate.
The spouse of a married Participant domiciled in a community
property jurisdiction shall
join in any designation of beneficiary or beneficiaries other
than the spouse.
ARTICLE 10. Deferrals
The Committee may permit a Participant to defer to another
plan or program such Participant's receipt of the payment of cash
or the delivery of Shares that would otherwise be due to such
Participant by virtue of the exercise of an Option, the
satisfaction of any requirements or goals with respect to
Performance Shares or the vesting of Restricted Stock. If any
such deferral election is required or permitted, the Committee
shall, in its sole discretion, establish rules and procedures for
such payment deferrals.
ARTICLE 11. Rights of Employees
11.1 Employment. Nothing herein shall interfere with or
limit in any way the right of AMRESCO or a Subsidiary to
terminate any Participant's employment or engagement by AMRESCO
at any time, nor confer upon any Participant any right to
continue in the employ or service of AMRESCO or a Subsidiary.
For purpose hereof, transfer of employment of a Participant
between AMRESCO and any one of its Subsidiaries (or between
Subsidiaries) shall not be deemed a termination of employment.
11.2 Participation. No Employee shall have the right to
be selected to receive an
Award, or, having been so selected, to be selected to receive a
future Award.
ARTICLE 12. Change in Control
Upon the occurrence of a Change in Control, except as
provided in the Award Agreement
or unless otherwise specifically prohibited by the terms of
Article 17.
(a) Any and all Options granted hereunder shall
become fully vested and immediately exercisable;
(b) The target payout opportunity attainable under all
outstanding Performance Shares shall be deem to have been
fully earned for the entire performance period(s) as of the
effective date of the Change in Control, and all earned
Performance Shares shall be paid out in accordance with
Section 7.4 to Participants within thirty (30) days
following the effective date of the Change in Control;
(c) All restrictions on a grant of Restricted Stock
shall lapse and such Restricted Stock shall be delivered to
the Participant in accordance with Section 8.4; and
(d) Subject to Article 13, the Committee shall have
the authority to make any modifications to the Awards as
determined by the Committee to be appropriate before the
effective date of the Change in Control.
ARTICLE 13. Amendment, Modification and Termination
13.1 Amendment Modification and Termination. The Board may,
at any time and from time to time, alter, amend, suspend or
terminate the Plan in whole or in part.
13.2 Awards Previously Granted. No termination, amendment
or modification hereof shall adversely affect in any material way
any Award previously granted hereunder, without the written
consent of the Participant holding such Award. The Committee,
with the written consent of the Participant holding such Award,
shall have the authority to cancel Awards outstanding and grant
replacement Awards therefor.
13.3 Compliance With Code Section 162(m). At all times when
the Committee determines that compliance with Code Section 162(m)
is desired, all Awards shall comply with the requirements of Code
Section 162(m). In addition, in the event that changes are made
to Code Section 162(m) to permit greater flexibility with respect
to any Award or Awards, the Committee may, subject to this
Article 13, make any adjustments it deems appropriate.
ARTICLE 14. Withholding
14.1 Tax Withholding. AMRESCO shall have the power and the
right to deduct or withhold, or require a Participant to remit to
AMRESCO, an amount sufficient to satisfy federal, state and local
taxes (including the Participant's FICA obligation) required by
law to be withheld with respect to any taxable event arising in
connection with an Award.
14.2 Share Withholding. With respect to withholding
required upon the exercise of Options, or upon any other taxable
event as a result of Awards granted hereunder which are to be
paid in the form of Shares, a Participant may elect, subject to
the approval of the Committee, to satisfy the withholding
requirement, in whole or in part, by having AMRESCO withhold
Shares having a Fair Market Value on the date the tax is to be
determined equal to the minimum statutory total tax which could
be imposed on the transaction. All elections shall be
irrevocable, made in writing, signed by the Participant, and
elections by Insiders shall additionally comply with all legal
requirements applicable to Shares transactions by such
Participants.
ARTICLE 15. Indemnification
Each person who is or shall have been a member of the
Committee, or the Board, shall be indemnified and held harmless
by AMRESCO against and from any loss, cost, liability or expense
that may be imposed upon or reasonably incurred by him or her in
connection with or resulting from any claim, action, suit or
proceeding to which he or she may be party or in which he or she
may be involved by reason of any action taken or failure to act
hereunder and against and from any and all amounts paid by him or
her in settlement thereof, with AMRESCO's approval, or paid by
him in satisfaction of any judgment in any such action, suit or
proceeding against him, provided he shall give AMRESCO an
opportunity, at its own expense, to handle and defend the same
before he undertakes to handle and defend it on his own behalf.
The foregoing right of indemnification shall be in addition to
any other rights of indemnification to which such persons may be
entitled under AMRESCO's Certificate of Incorporation or Bylaws,
as a matter of law, or otherwise, or any power that AMRESCO may
have to indemnify them or hold them harmless.
ARTICLE 16. Successors
All obligations of AMRESCO hereunder, with respect to
Awards, shall be binding on any successor to AMRESCO, whether the
existence of such successor is the result of a direct or indirect
purchase, merger, consolidation or otherwise, of all or
substantially all of the business and/or assets of AMRESCO.
ARTICLE 17. Legal Construction
17.1 Gender and Number. Except where otherwise indicated by
the context, any masculine term used herein also shall include
the feminine; the plural shall include the singular and the
singular shall include the plural.
17.2 Severability. In the event any provision hereof shall
be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts hereof, and the
Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.
17.3 Requirements of Law. The granting of Awards and the
issuance of Shares under the Plan shall be subject to all
applicable laws, rules and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may
be required.
17.4 Regulatory Approvals and Listing. AMRESCO shall not be
required to issue any certificate or certificates for Shares
hereunder prior to (i) obtaining any approval from any
governmental agency which AMRESCO shall, in its discretion,
determine to be necessary or advisable, (ii) the admission of
such Shares to listing on any national securities exchange or
Nasdaq on which AMRESCO's Shares may be listed and (iii) the
completion of any registration or other qualification of such
Shares under any state or federal law or ruling or regulations of
any governmental body which AMRESCO shall, in its sole
discretion, determine to be necessary or advisable.
Notwithstanding any other provision set forth herein, if
required by the then-current Section 16 of the Exchange Act, any
"derivative security": or "equity security" offered pursuant
hereto to any Insider may not be sold or transferred for at least
six (6) months after the date of grant of such Award. The terms
"equity security" and "derivative security" shall have the
meanings ascribed to them in the then-current Rule 16(a) under
the Exchange Act.
17.5 Securities Law Compliance. With respect to Insiders,
transactions hereunder are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange
Act. To the extent any provisions hereof or action by the
Committee fails to so comply, it shall be deemed null and void,
to the extent permitted by law and deemed advisable by the
Committee.
17.6 Governing Law. To the extent not preempted by
federal law, the Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the
State of Delaware.
AMRESCO, INC.
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Basic:
Income from continuing operations $56,224,000 $31,332,000 $18,665,000
Income from disontinued operations 2,425,000
Net income $56,224,000 $31,332,000 $21,090,000
Weighted average common shares outstanding 35,692,030 27,254,346 24,135,543
Contingently issuable shares 12,735 14,297 37,231
Restricted shares (94,387) (36,842)
Total 35,610,378 27,231,801 24,172,774
Continuing operations per share $1.58 $1.15 $0.77
Discontinued operations per share 0.10
Earnings per share $1.58 $1.15 $0.87
Diluted:
Income from continuing operations $56,224,000 $31,332,000 $18,665,000
Effects of convertible debt net of taxes 2,196,000 183,000
Dilutive income from continuing operations 56,224,000 33,528,000 18,848,000
Income from discontinued operations 2,425,000
Net income $56,224,000 $33,528,000 $21,273,000
Weighted average common shares outstanding 35,692,030 27,254,346 24,135,543
Contingently issuable shares 12,735 14,297 37,231
Additional shares assuming conversion
of convertible debentures to 3,600,000
of common stock in November 1995 3,600,000 300,000
Net effect of dilutive stock options
based on the Treasury stock method
using the average market price 958,712 905,128 554,797
Total 36,663,477 31,773,771 25,027,571
Continuing operations per share $1.53 $1.06 $0.75
Discontinued operations per share 0.10
Earnings per share $1.53 $1.06 $0.85
</TABLE>
AMRESCO, INC.
Subsidiaries and Affiliates
AMRESCO, INC.
11 LASALLE, LLC
AFC EQUITIES, INC.
AFC EQUITIES, L.P.
AFC EQUITIES MANAGEMENT, INC.
ACLC FUNDING CORPORATION
ALPINE, INC.
AMREIT I, INC.
AMRESCO 1994-N2, INC.
AMRESCO ADVISORS, INC.
AMRESCO ATLANTA INDUSTRIAL, INC.
AMRESCO BUILDERS GROUP INC.
AMRESCO CMF, INC.
AMRESCO CANADA INC.
AMRESCO CAPITAL, L.P.
AMRESCO CAPITAL CONDUIT CORPORATION
AMRESCO CAPITAL LIMITED, INC.
AMRESCO CAPITAL TRUST, INC.
AMRESCO COMMERCIAL LENDING CORPORATION
AMRESCO COMMERCIAL MORTGAGE FUNDING I CORPORATION
AMRESCO COMMERCIAL MORTGAGE FUNDING, L.P.
AMRESCO CONSOLIDATION CORP.
AMRESCO EQUITY INVESTMENTS, INC.
AMRESCO EQUITY INVESTMENTS II, INC.
AMRESCO EQUITIES CANADA INC.
AMRESCO FINANCIAL I, INC.
AMRESCO FINANCIAL I, L.P.
AMRESCO FUNDING CANADA INC.
AMRESCO FUNDING CORPORATION
AMRESCO FUNDING INVESTORS, INC.
AMRESCO FUNDING MANAGEMENT, INC.
AMRESCO FUNDING OF GEORGIA, L.P.
AMRESCO FUNDING MID-ATLANTIC, INC.
AMRESCO FUNDING PACIFIC, INC.
AMRESCO-INSTITUTIONAL, INC.
AMRESCO INVESTMENTS, INC.
AMRESCO LEASING CORPORATION
AMRESCO-MBS I, INC.
AMRESCO-MBS II, INC.
AMRESCO-MBS III, INC.
AMRESCO MANAGEMENT, INC.
AMRESCO MID ATLANTIC, INC.
AMRESCO MORTGAGE CAPITAL, INC.
AMRESCO MORTGAGE CAPITAL LIMITED-I, INC.
AMRESCO MORTGAGE SERVICES LIMITED, INC.
AMRESCO NEW ENGLAND, INC.
AMRESCO NEW ENGLAND, L.P.
AMRESCO NEW ENGLAND II, INC.
AMRESCO NEW ENGLAND II, L.P.
AMRESCO NEW HAMPSHIRE, INC.
AMRESCO NEW HAMPSHIRE, L.P.
AMRESCO OVERSEAS, INC.
AMRESCO PORTFOLIO INVESTMENTS, INC.
AMRESCO PRINCIPAL MANAGERS I, INC.
AMRESCO PRINCIPAL MANAGERS II, INC.
AMRESCO RESIDENTIAL CAPITAL MARKETS, INC.
AMRESCO RESIDENTIAL CREDIT CORPORATION
AMRESCO RESIDENTIAL MORTGAGE CORPORATION
AMRESCO RESIDENTIAL PROPERTIES, INC.
AMRESCO RESIDENTIAL SECURITIES CORPORATION
AMRESCO RETAIL VENTURES I LIMITED
AMRESCO RETAIL VENTURES II LIMITED
AMRESCO RHODE ISLAND, INC.
AMRESCO SECURITIES, INC.
AMRESCO SERVICES, L.P.
AMRESCO SERVICES CANADA INC.
AMRESCO TEXAS, INC.
AMRESCO UK HOLDINGS LIMITED
AMRESCO UK LIMITED
AMRESCO UK VENTURES LIMITED
AMRESCO JERSEY VENTURES LIMITED
AMRESCO LEASING CORPORATION
AMRESCO VENTURES, INC.
ASSET MANAGEMENT RESOLUTION COMPANY
BCS ASSET MANAGEMENT CORPORATION
BCS MANAGEMENT CORP. I
BEI 1992-N1, INC.
BEI 1993-N3, INC.
BEI 1994-N1, INC.
BEI MULTI-POOL, INC.
BEI PORTFOLIO INVESTMENTS, INC.
BEI PORTFOLIO MANAGERS, INC.
BEI REAL ESTATE SERVICES, INC.
BEI SANJAC, INC.
CLC FUNDING CORP.
COMMONWEALTH TRUST DEED SERVICES, INC.
ENT MIDWEST, INC.
ENT NEW JERSEY, INC.
ENT SOUTHERN CALIFORNIA, INC.
EXPRESS FUNDING, INC.
GRANITE EQUITIES, INC.
HOLLIDAY FENOGLIO FOWLER, L.P.
LIFETIME HOMES, INC.
OAK CLIFF FINANCIAL, INC.
OLD MIDLAND HOUSE LIMITED
SAVE-MORE INSURANCE SERVICES, INC.
SCOTTSDALE INN LLC
QUALITY FUNDING, INC.
WHITEROCK INVESTMENTS, INC.
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
AMRESCO, INC.
We consent to the incorporation by reference in the
Registration Statements No. 033-60015 and No. 033-58629 on
Form S-8 and Registration Statements No. 333-27853, No. 033-
65329, No. 333-13823, No. 333-00157, and No. 333-25353 on
Form S-3 of our report dated February 2, 1998 (except Note 15
which is as of March 11, 1998) appearing in this Annual Report
on Form10-K of AMRESCO, INC. for the year ended December 31, 1997.
/s/DELIOTTE & TOUCHE LLP
Dallas, Texas
March 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 25,866
<SECURITIES> 0
<RECEIVABLES> 19,638
<ALLOWANCES> 455
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 20,788
<DEPRECIATION> 10,641
<TOTAL-ASSETS> 2,633,848
<CURRENT-LIABILITIES> 0
<BONDS> 839,073
0
0
<COMMON> 1,827
<OTHER-SE> 406,673
<TOTAL-LIABILITY-AND-EQUITY> 2,633,848
<SALES> 0
<TOTAL-REVENUES> 423,755
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 211,831
<LOSS-PROVISION> 17,764
<INTEREST-EXPENSE> 102,063
<INCOME-PRETAX> 92,097
<INCOME-TAX> 35,873
<INCOME-CONTINUING> 56,224
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,224
<EPS-PRIMARY> 1.58
<EPS-DILUTED> 1.53
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<RESTATED>
<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> 12-MOS 12-MOS 3-MOS 6-MOS
9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1996
DEC-31-1996
<PERIOD-END> DEC-31-1995 DEC-31-1996 MAR-31-1996 JUN-30-1996
SEP-30-1996
<CASH> 16,139 29,046 18,338 14,650
14,157
<SECURITIES> 21,942 34,190 33,046 32,921
36,392
<RECEIVABLES> 20,313 13,854 16,684 19,651
18,536
<ALLOWANCES> 1,737 1,611 1,681 1,182
2,091
<INVENTORY> 0 0 0 0
0
<CURRENT-ASSETS> 0 0 0 0
0
<PP&E> 8,239 23,513 9,544 9,891
10,462
<DEPRECIATION> 2,335 5,285 2,919 3,518
4,229
<TOTAL-ASSETS> 521,713 1,075,941 644,061 603,911
867,698
<CURRENT-LIABILITIES> 0 0 0 0
0
<BONDS> 172,796 375,092 231,735 224,491
276,921
0 0 0 0
0
0 0 0 0
0
<COMMON> 1,334 1,690 1,340 1,345
1,359
<OTHER-SE> 159,460 299,825 164,850 172,851
183,734
<TOTAL-LIABILITY-AND-EQUITY> 160,794 301,515 644,061 603,911
867,698
<SALES> 0 0 0 0
0
<TOTAL-REVENUES> 110,486 200,067 36,896 83,709
129,195
<CGS> 0 0 0 0
0
<TOTAL-COSTS> 0 0 0 0
0
<OTHER-EXPENSES> 73,307 109,643 23,634 502,268
74,050
<LOSS-PROVISION> 0 3,195 0 0
0
<INTEREST-EXPENSE> 6,921 36,763 5,167 13,495
21,478
<INCOME-PRETAX> 30,258 50,466 8,095 19,946
33,667
<INCOME-TAX> 11,593 19,134 3,300 7,803
12,968
<INCOME-CONTINUING> 18,665 31,332 4,975 12,143
20,699
<DISCONTINUED> 2,425 0 0 0
0
<EXTRAORDINARY> 0 0 0 0
0
<CHANGES> 0 0 0 0
0
<NET-INCOME> 21,090 31,332 4,795 12,143
20,699
<EPS-PRIMARY> 0.87 1.115 0.18 0.45
0.77
<EPS-DILUTED> 0.85 1.06 0.17 0.42
0.71
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<RESTATED>
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 33,577 23,148 31,346
<SECURITIES> 0 0 0
<RECEIVABLES> 15,306 15,369 21,514
<ALLOWANCES> 1,796 2,832 3,191
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 0 0 0
<PP&E> 24,334 25,966 24,827
<DEPRECIATION> 6,393 7,920 9,397
<TOTAL-ASSETS> 1,530,422 1,902,248 1,647,501
<CURRENT-LIABILITIES> 0 0 0
<BONDS> 545,167 705,266 630,992
0 0 0
0 0 0
<COMMON> 1,799 1,803 1,825
<OTHER-SE> 339,123 354,347 377,864
<TOTAL-LIABILITY-AND-EQUITY> 1,530,422 1,902,248 1,647,501
<SALES> 0 0 0
<TOTAL-REVENUES> 74,840 178,721 291,507
<CGS> 0 0 0
<TOTAL-COSTS> 0 0 0
<OTHER-EXPENSES> 43,155 95,799 148,888
<LOSS-PROVISION> 1,920 7,218 11,556
<INTEREST-EXPENSE> 16,159 41,412 71,219
<INCOME-PRETAX> 13,606 34,292 59,844
<INCOME-TAX> 5,045 13,245 23,461
<INCOME-CONTINUING> 8,561 21,047 36,383
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 8,561 21,047 36,383
<EPS-PRIMARY> 0.25 0.60 1.03
<EPS-DILUTED> 0.25 0.59 1.00
</TABLE>
