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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
March 17, 2000
AMRESCO, INC.
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(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of Incorporation)
0-8630 59-1781257
(Commission File number) (I. R. S. Employer Identification No.)
700 North Pearl Street
Suite 1900, LB 342
Dallas, Texas 75201-7424
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (214) 953-7700
No Change
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
General. On December 8, 1999, the Company and certain of its
subsidiaries, as sellers, and Lend Lease (US) Services, Inc. ("Lend Lease"), as
purchaser, entered into an Asset Purchase Agreement, which agreement was amended
on March 17, 2000 (as amended, the "Purchase Agreement"), pursuant to which the
Company agreed to sell to Lend Lease the Company's commercial mortgage banking
business (including commercial mortgage servicing, commercial mortgage brokerage
and commercial loan origination (excluding the Company's conduit lending
programs)) and asset management and real estate structured finance platforms
(collectively, the "Businesses"). The transaction encompassed both the domestic
and international operations of the Businesses, other than those Business
operations conducted in Europe. This sale was completed on March 17, 2000.
Purchase Price. The gross, unadjusted purchase price for the Businesses
was approximately $248.6 million (the "Consideration"). The Consideration was
increased by amendment to the Purchase Agreement to reflect certain additional
investments made prior to closing that inure to the benefit of Lend Lease. The
Consideration is comprised of approximately $223.6 million of cash payable at
closing (subject to certain adjustments and holdbacks described below) and an
unsecured, non-negotiable promissory note of Lend Lease (the "Note") in the
principal amount of $25.0 million. The Consideration received at closing was
adjusted for an estimated increase in the net working capital of the Businesses,
decreases in the estimated revenues to be received by Lend Lease pursuant to
certain servicing agreements as a result of pre-closing asset sales and
estimated enumerated expenditures and investments made by the Company prior to
closing that inure to Lend Lease's benefit. The cash paid at closing, after
adjustments for net working capital of $1.2 million, the Note and holdbacks of
$25.0 million was $202.7 million (including an advance by Lend Lease of $4.0
million against the holdbacks, which was repaid on March 22, 2000). The amount
of Consideration paid was reduced on an item-by-item basis by the $25.0 million
in holdbacks for certain significant consents or approvals not obtained by the
Company at the time of closing. If any of these consents or approvals are
obtained within one year of the closing and certain other conditions are
satisfied, the amount of the corresponding closing reduction will be repaid to
the Company. $10 million for consents or approvals were received before the end
of the first quarter of 2000. Additionally, consents for $15 million of
holdbacks are expected to be received prior to the end of the third quarter of
2000. The purchase price was the result of arms-length negotiations between the
parties.
Interest on the Note accrues at a rate of 7.5% per annum. The initial
principal payment under the Note is due on the second anniversary of closing.
Payment of the principal is subject to and may be offset by any obligation of
the Company owed to Lend Lease under the Purchase Agreement or other agreements
related to the Purchase Agreement, including the Company's indemnity obligations
thereunder. The Note will not be paid in full until all indemnity claims of Lend
Lease or other permitted holdbacks have been finally resolved.
Purchased Assets. Lend Lease acquired substantially all of the assets
(the "Purchased Assets") used in the Businesses. The Purchased Assets include
the Businesses' real property, real property leases, fixtures and improvements,
furniture, office equipment and similar tangible personal property, permits (to
the extent transferable), intellectual property, various servicing and other
agreements, accounts receivable, earned and unearned fees and cash. In addition,
certain computer hardware and software were also conveyed as well as the equity
interests of certain co-
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investments related to the Businesses and certain foreign subsidiaries. With
certain exceptions, Lend Lease did not acquire the loans and other
financial-type assets of the Company, whether or not originated by the
Businesses.
Lend Lease assumed certain pre-closing liabilities relating to the
Businesses and the Purchased Assets, including certain accounts payable accrued
in the ordinary course of business and included in the net working capital of
the Businesses, obligations under assumed leases and contracts, and certain
obligations to employees hired by Lend Lease to the extent included in the net
working capital of the Businesses. Outside of enumerated liabilities or
obligations expressly assumed by Lend Lease, all pre-closing liabilities and
obligations related to the Businesses remain with the Company.
Representations and Warranties. The Purchase Agreement contains various
representations and warranties customary for asset purchase transactions. The
representations and warranties address various matters, including the
authorization of the Purchase Agreement, required consents, power and authority,
litigation, compliance with laws, title to the assets being conveyed,
intellectual property rights and software matters, accuracy of the information
supplied to Lend Lease by the Company, absence of changes and undisclosed
liabilities, and servicing contract matters.
Covenants. Following closing, the Company may neither compete, directly
or indirectly, in any manner with the Businesses nor solicit employees,
customers, clients, suppliers, or licensors with respect to any business
conducted by the Company substantially similar to the Businesses.
Survival and Indemnification. Generally, the representations and
warranties survive until the second anniversary of closing. Certain
representations and warranties survive indefinitely or until expiration of the
applicable statute of limitations. The Purchase Agreement provides that the
respective parties will indemnify the other for certain breaches, actions or
other claims, including claims arising with respect to liabilities to be assumed
by Lend Lease or retained by the Company. The indemnities made by each of the
Company and Lend Lease are subject to a basket or floor of $750,000 before any
claim can be pursued against the indemnifying party. The indemnity of the
Company is subject to a cap of $100 million for breaches of representations and
warranties claimed through the first anniversary of closing and, thereafter, $50
million (plus claims made during the first year). Lend Lease's indemnity is
limited to $25 million in the aggregate.
Management Agreement. At closing, Lend Lease entered into an Asset
Management and Servicing Agreement (the "Management Agreement") with the
Company. Pursuant to the Management Agreement, Lend Lease will manage for the
Company various financial and other assets held by the Company, including
commercial and industrial loans, commercial and multi-family real estate
(including partnership and other equity interests therein). The assets were
originated and managed by the Businesses acquired by Lend Lease. The services
provided by Lend Lease include advisory, consultation, management, servicing and
disposition services. The Management Agreement is similar in its terms to the
management agreements that the Company previously entered into with third
parties in respect of the same type of assets. The Management Agreement has an
initial term of three years subject to automatic annual renewals at the
Company's election.
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See Item 7 Exhibit No. 99.1 for the pro forma effects of this
transaction.
Item 5. Other Events.
On March 30, 2000 AMERSCO, INC. entered into the Second Modification of
Amended and Restated Credit Agreement by and among AMRESCO, INC. and the
subsidiaries of AMRESCO listed as borrowers and Bank of America, N.A., as
Administrative Agent, for and on behalf of the Lenders. See the Second
Modification in Item 7 Exhibit No. 10.1.
Item 7. Exhibits.
Exhibit
No.
10.1 Second Modification of Amended and Restated Credit Agreement, dated
March 30, 2000, by and among AMRESCO, INC. and the subsidiaries of
AMRESCO listed as borrowers and Bank of America, N.A., as
Administrative Agent, for and on behalf of the Lenders.
99.1 Unaudited Pro forma Consolidated Financial Statements showing the
effect of the transaction with Lend Lease (US) Services, Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
By: AMRESCO, INC.
By: /s/ Jonathan S. Pettee
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Name: Jonathan S. Pettee
Title: Executive Vice President and
Chief Financial Officer
Dated: May 30, 2000
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INDEX TO EXHIBITS
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<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
10.1 Second Modification of Amended and Restated Credit Agreement, dated
March 30, 2000, by and among AMRESCO, INC. and the subsidiaries of
AMRESCO listed as borrowers and Bank of America, N.A., as
Administrative Agent, for and on behalf of the Lenders.
99.1 Unaudited Pro Forma Consolidated Financial Statements showing the
effect of the transaction with Lend Lease (US) Services, Inc.
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