-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SPtrev1NBn9b4lxVp6ieUF7UpHkjcvJwaFyDHlt9eeU3Zq3q2iZGMcebFlsKWWit yjVgvCLwVesvUWiM318BlA== 0000077543-96-000009.txt : 19970924 0000077543-96-000009.hdr.sgml : 19970924 ACCESSION NUMBER: 0000077543-96-000009 CONFORMED SUBMISSION TYPE: PRE 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961004 FILED AS OF DATE: 19961004 DATE AS OF CHANGE: 19961004 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERINI CORP CENTRAL INDEX KEY: 0000077543 STANDARD INDUSTRIAL CLASSIFICATION: 1540 IRS NUMBER: 041717070 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PRE 14A SEC ACT: SEC FILE NUMBER: 001-06314 FILM NUMBER: 96639870 BUSINESS ADDRESS: STREET 1: 73 MT WAYTE AVE CITY: FRAMINGHAM STATE: MA ZIP: 01701 BUSINESS PHONE: 5086282000 DEF 14A 1 PERINI CORPORATION PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [X ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission Only (as permitted by Rule 14(a)-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 Perini Corporation (Name of Registrant as Specified in Its Charter) (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. [ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1) Title of each class of securities to which transaction applies: 2) Aggregate number of securities to which transaction applies: 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): 4) Proposed maximum aggregate value of transaction: 5) Total fee paid: [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: 2) Form, Schedule or Registration Statement No.: 1 3) Filing Party: 4) Date Filed: 2 October 4, 1996 VIA EDGAR Securities and Exchange Commission 450 Fifth Street, N.W. Judiciary Plaza Washington, DC 20549 Re: Perini Corporation Preliminary Proxy Materials Ladies and Gentlemen: On behalf of Perini Corporation (the "Company"), we enclose herewith the following documents for filing pursuant to the requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and the applicable rules and regulations thereunder. (1) A letter to stockholders, preliminary proxy statement, and form of proxy to be furnished to stockholders of the Company in connection with a Special Meeting of Stockholders. At the meeting, stockholders of the Company will be asked to approve two proposals: (a) the issuance of 150,150 shares of Series B Cumulative Convertible Preferred Stock, par value $1.00 per share, of the Company (see "Series B Preferred Stock") to PB Capital Partners, L.P. ("PB Capital") for an aggregate purchase price of $30,030,000, upon the terms and conditions described in the Proxy Statement and the issuance of any other shares of the Series B Preferred Stock as dividends on outstanding shares of the Series B Preferred Stock upon the terms and conditions described in the Proxy Statement and (b) an amendment to the By-Laws of the Company, as more fully described in the Proxy Statement, which requires the Board of Directors to elect an Executive Committee and sets forth its powers and composition. This amendment, if approved, will take effect only if shares of the Series B Preferred Stock are in fact issued to PB Capital. (2) The $125 filing fee required to be paid to the Commission pursuant to Rule 14a6(i) has been paid to the Commission by wire transfer of immediately available funds. The Company currently anticipates that the special meeting will be held on [November 18, 1996] and subject to approval by the Commission, expects to mail the letter to stockholders, definitive proxy statement, proxy card, 10-K for the fiscal year ended [December 31, 1995], and 10-Q for the fiscal quarter ended June 30, 1996 on or about October 21, 1996. Please note that the 10-K and 10- Q have been incorporated by reference into the Proxy Statement and have been previously filed via EDGAR. If you have any questions or require any further information with respect to this filing, please contact me at (617) 570-1087. Very truly yours, /s/Thomas I. Benda -------------------------- Thomas I. Benda /ck Enclosures cc: David Perini, Perini Corporation Richard A. Soden, Esq. Stephen W. Carr, P.C. October __, 1996 To Our Stockholders: We will be holding a Special Meeting on [______________ at _____] at [State Street Bank and Trust Company, Enterprise Room, Fifth Floor, 225 Franklin Street,] Boston, Massachusetts. At this meeting you will be asked to consider and vote upon two proposals that will enable Perini to satisfy the final conditions to closing our previously announced $30 Million issuance of new Series B Cumulative Convertible Preferred Stock to an investor group led by Richard C. Blum & Associates, L.P. The two stockholder proposals which are described in the accompanying Proxy Statement have been unanimously approved by Perini's Board of Directors. Perini Corporation has a recognized construction franchise built upon an enviable record of performance that spans over 100 years. We have grown to be one of the largest, most respected contractors in the United States, and our current backlog and prospects are extremely promising. The new Series B Preferred Stock will enhance our strategic operating and financial flexibility by increasing our equity base and concurrently extending the term of our existing bank debt, as well as favorably adjusting certain bank terms and covenants. The issuance of the new Series B Preferred Stock may also be supplemented by the acceleration of the sale of certain real estate assets which would further bolster the liquidity position of the Company. As I announced during our Annual Meeting last May, we have been reviewing options to improve the near and long term liquidity of the Company, including bringing in new equity. The choice of the proposed issuance came after an exhaustive review of the options available. Management and the Board of Directors believe that the issuance of the new Series B Preferred Stock, together with the simultaneous extension of our current senior credit agreements, form key and critical elements of our strategy to regain the financial health and strength required to sustain and grow our core construction operations in the years ahead. Implementation of the issuance of the new Series B Preferred Stock will reduce the relative voting power of current stockholders. However, if the new Series B Preferred Stock is not issued, the Company may not be able to sustain its current level of construction operations and will have to once again renegotiate its senior credit agreements without the benefit of new equity coming into the Company. As a result, more restrictive financial and operating covenants may be imposed on the Company. 3 The Board of Directors believes that approval of these two proposals is in the best interest of Perini and its stockholders. The Board of Directors has unanimously approved the proposals and recommends that stockholders vote FOR approval of the proposals. Whether or not you expect to attend the Special Meeting of Stockholders in person, you are encouraged to date, sign and return the proxy card or voting instructions form in the addressed, postage prepaid envelope provided. Your vote is important, regardless of the size of your holdings. To vote in accordance with the recommendation of your Board of Directors, you need only date, sign and return the proxy card or voting instructions form in the addressed, postage prepaid envelope provided. Thank you for your continued support. Sincerely, DAVID B. PERINI Chairman, President and Chief Executive Officer If you need assistance in voting your shares, please call Perini's proxy solicitor, D.F. King & Co., Inc., 77 Water Street, New York, NY 10005-4495 at 1-800-769-5414. You also may call Investor Relations at Perini for assistance at (508) 628-2402. 4 PRELIMINARY COPY PERINI CORPORATION 73 Mt. Wayte Avenue Framingham, Massachusetts 01701-9160 ------------------------------------ NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON ________, 1996 ----------------------------------------- NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "Special Meeting") of Perini Corporation (the "Company") will be held on [ at A.M. at State Street Bank and Trust Company, Enterprise Room, 5th Floor, 225 Franklin Street, Boston, Massachusetts] for the following purposes: 1. To approve (a) the issuance of 150,150 shares of Series B Cumulative Convertible Preferred Stock, par value $1.00 per share, of the Company (the "Series B Preferred Stock") to PB Capital Partners, L.P. ("PB Capital") for an aggregate purchase price of $30,030,000, upon the terms and conditions described in the attached proxy statement (the "Proxy Statement") and (b) the issuance of any other shares of the Series B Preferred Stock as dividends on outstanding shares of Series B Preferred Stock upon the terms and conditions described in the attached Proxy Statement. 2. To approve an amendment to the By-Laws of the Company, as more fully described in the attached Proxy Statement, which requires the Board of Directors to elect an Executive Committee and sets forth its powers and composition. This amendment, if approved, will take effect only if shares of the Series B Preferred Stock are in fact issued to PB Capital. Under the Company's Restated Articles of Organization, as amended, and the Massachusetts Business Corporation Law, the Board of Directors of the Company has the authority to approve the issuance of the Series B Preferred Stock and to amend the By-Laws without stockholder approval. However, as explained in more detail in the Proxy Statement, the Company is seeking stockholder approval of the issuance of the Series B Preferred Stock so that it will be able to list the common stock, par value $1.00 per share, of the Company (the "Common Stock") to be issued upon conversion of the Series B Preferred Stock, on the American Stock Exchange. Under the terms of the Stock Purchase and Sale Agreement between the Company and PB Capital relating to the Series B Preferred Stock, stockholder approval of the issuance of the Series B Preferred Stock and of the amendment to the By-Laws is a condition to PB Capital's obligation to purchase the Series B Preferred Stock. Action may be taken on the foregoing matters at the Special Meeting on the date specified above, or on any date or dates to which the Special Meeting may be postponed or adjourned. 1 PRELIMINARY COPY The Board of Directors has fixed the close of business on October 10, 1996 as the record date (the "Record Date") for determining the stockholders entitled to notice of, and to vote at, the Special Meeting and at any adjournments thereof. Only stockholders of record of the Company's Common Stock at the close of business on the Record Date will be entitled to notice of, and to vote at, the Special Meeting and at any adjournments thereof. You are requested to fill in and sign the enclosed Proxy Card, which is being solicited by the Board of Directors, and to mail it promptly in the enclosed postage-prepaid envelope. Any proxy may be revoked by notice to the Secretary of the Company or by delivery of a later dated proxy. Stockholders of record who attend the Special Meeting may vote in person, even if they have previously delivered a signed proxy. By Order of the Board of Directors Richard E. Burnham Secretary Framingham, Massachusetts [ , 1996] WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID ENVELOPE PROVIDED. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD. 2 PRELIMINARY COPY PERINI CORPORATION 73 Mt. Wayte Avenue Framingham, Massachusetts 01701-9160 --------------- PROXY STATEMENT --------------- FOR SPECIAL MEETING OF STOCKHOLDERS To Be Held on [ , 1996] This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Perini Corporation (the "Company") for use at a Special Meeting of Stockholders of the Company to be held on [ ] and at any adjournments thereof (the "Special Meeting"). At the Special Meeting, stockholders will be asked to approve (1) the issuance of 150,150 shares of Series B Cumulative Convertible Preferred Stock, par value $1.00 per share, of the Company (the "Series B Preferred Stock") to PB Capital Partners, L.P. ("PB Capital") for an aggregate purchase price of $30,030,000, upon the terms and conditions described herein and the issuance of any other shares of the Series B Preferred Stock as dividends on outstanding shares of Series B Preferred Stock upon the terms and conditions set forth herein; and (2) to approve an amendment to the By-Laws of the Company, as more fully described herein, which requires the Board of Directors to elect an Executive Committee and sets forth its powers and composition. This amendment, if approved, will take effect only if shares of the Series B Preferred Stock are in fact issued to PB Capital. This Proxy Statement and the accompanying Notice of Special Meeting of Stockholders and Proxy Card are first being sent to stockholders on or about [ , 1996]. The Board of Directors has fixed the close of business on October 10, 1996 as the record date for the determination of stockholders entitled to notice of and to vote at the Special Meeting (the "Record Date"). Only stockholders of record of the Company's common stock, par value $1.00 per share (the "Common Stock"), at the close of business on the Record Date will be entitled to notice of and to vote at the Special Meeting. As of the Record Date, there were 4,851,381 shares of Common Stock outstanding and entitled to vote at the Special Meeting. Holders of Common Stock outstanding as of the close of business on the Record Date will be entitled to one vote for each share held by them. The presence, in person or by proxy, of holders of at least a majority of the total number of issued and outstanding shares of Common Stock entitled to vote is necessary to constitute a quorum for the transaction of business at the Special Meeting. The Company is seeking the affirmative vote of the holders of a 1 PRELIMINARY COPY majority of the shares of Common Stock cast atthe Special Meeting for the approval of the issuance of the Series B Preferred Stock and for the amendment to the Company's By-Laws. Under Massachusetts law, abstentions and broker non-votes (that is, shares represented at the meeting which are held by a broker or nominee and as to which (i) instructions have not been received from the beneficial owner or the person entitled to vote and (ii) the broker or nominee does not have discretionary voting power) shall be treated as shares that are present and entitled to vote for the purpose of determining whether a quorum is present, but shall not constitute a vote "for" or "against" a matter and will be disregarded in determining the "votes cast." Stockholders of the Company are requested to complete, sign, date and promptly return the accompanying Proxy Card in the enclosed postage-prepaid envelope. Shares represented by a properly executed Proxy Card received prior to the vote at the Special Meeting and not revoked will be voted at the Special Meeting as directed on the Proxy Card. If a properly executed Proxy Card is submitted but not marked as to a particular item, the shares will be voted FOR the approval of the issuance of the Series B Preferred Stock and FOR the amendment to the Company's By-Laws. No matters other than those set forth in the Proxy Statement will be presented at the Special Meeting. A stockholder of record may revoke a proxy at any time before it has been exercised by filing a written revocation with the Secretary of the Company at the address of the Company set forth above, by filing a duly executed proxy bearing a later date, or by appearing in person and voting by ballot at the Special Meeting. Any stockholder of record as of the Record Date attending the Special Meeting may vote in person whether or not a proxy has been previously given, but the presence (without further action) of a stockholder at the Special Meeting will not constitute revocation of a previously given proxy. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE FOLLOWING PROPOSALS. 2 PRELIMINARY COPY PROPOSAL 1 APPROVAL OF THE ISSUANCE OF THE SERIES B PREFERRED STOCK Need for Additional Equity and Working Capital - - - - - ---------------------------------------------- As disclosed for the last two years in the Company's reports to shareholders and in its public filings, the Company has been cash constrained as its core construction business has experienced growth and, in particular, as the Company has increased its level of higher margin civil construction work. Generally, civil construction work requires more working capital than building construction work because of its equipment intensive nature, progress billing terms imposed by certain public owners and, in some instances, the time required to process contract change orders. In addition, some of the Company's real estate assets have required regular cash support which has adversely affected its working capital. Over this period the Company has increased its revolving credit facilities with its bank group from $70 million to $129.5 million. As previously indicated to shareholders, since late 1995 the Company has been seeking new equity to support its growth and to allow the Company over time to reduce debt. In this regard, the Company in October 1995 retained J.P. Morgan & Co. Incorporated as its investment bank to advise the Company on its strategic alternatives to obtain additional equity. The original efforts focused largely on potential strategic partners but also sought interest from select financial investors. From those efforts, the $30,030,000.00 investment opportunity, before fees and expenses, presented by PB Capital Partners, L.P. ("PB Capital"), a Delaware investment limited partnership managed by Richard C. Blum & Associates, L.P. ("RCBA"), was determined by the Board of Directors to be the best opportunity. As a result, with the approval of the Board of Directors, the Company entered into a Stock Purchase and Sale Agreement (the "Agreement") with PB Capital whereby PB Capital agreed to purchase 150,150 shares of Series B Preferred Stock subject to certain conditions (the "Transaction") (see "Description of Transaction"). RCBA has in the past taken significant ownership positions in public corporations and subsequently worked with management to enhance shareholder value. In conjunction with PB Capital, the Company is reviewing all the Company's real estate assets and current strategies related to those assets with the expectation that a plan may be developed to generate short term liquidity of up to an additional $20 million for the Company. Currently, the Company's strategy has been to hold all of its real estate assets through the necessary development and stabilization periods to achieve full value. A strategy which includes earlier disposal of those assets could require a write down of such assets to the lower of carrying amounts or current fair values, less costs to sell. The specific assets or timing of sales of such a plan has not yet been determined, but it is anticipated that implementation would require the Company to take a significant writedown of its real estate assets which could range from 3 PRELIMINARY COPY as little as $30 million to as much as $80 million on a pretax basis. If such a writedown were required, it is expected that it would be done during 1996 after the plan was formalized, but in advance of the actual sale of properties. Description of Transaction - - - - - -------------------------- The Agreement provides that 500,000 shares of Series B Preferred Stock of the Company will be approved for issuance by the Company's Board of Directors. Of that amount 150,150 shares would be issued to PB Capital at the time of the closing of the Transaction. The remainder would be set aside for possible future payment-in-kind dividend distributions to the holders of the Series B Preferred Stock. The purchase price of the Series B Preferred Stock will be $200.00 per share, for a total of $30,030,000.00. As a condition to its obligation to acquire the Series B Preferred Stock, PB Capital is requiring that the By-Laws of the Company be amended as described below (see "BY-LAW AMENDMENT"), that the Company's Shareholder Rights Agreement be revised as described below (see "Shareholder Rights Agreement Amendment"), and that three persons designated by PB Capital be elected to the Board of Directors of the Company (the "Designated Directors") -- one in Class I, one in Class II, and one in Class III. All three Designated Directors will be appointed to the newly reconstituted Executive Committee of the Board of Directors, and certain of them will be appointed to other committees as well. Other conditions to PB Capital's obligation to acquire the Series B Shares include, but are not limited to: (i) compliance by the Company with all terms, covenants and conditions of the Agreement; (ii) that the Company's representations and warranties in the Agreement are true and correct in all material respects at and as of the time of the closing; (iii) the approval by the Company's stockholders of the issuance of the Series B Preferred Stock sought by this proxy statement; and (iv) that there be no additional holders of 5% or more of the equity of the Company (which holders could jeopardize the Company's ability to use present and future net operating losses (see Shareholder Rights Agreement Amendment)). The issuance of the Series B Preferred Stock has also been contingent upon the renegotiation and confirmation of the Company's existing credit agreements and confirmation that the Company's bonding is adequate, both in manners reasonably satisfactory to RCBA and the Company (see "Credit Facilities"). The conditions to the Company's obligations to sell the Series B Preferred Stock to PB Capital include, but are not limited to: (i) compliance by PB Capital and RCBA with all terms, covenants and conditions of the Agreement; (ii) that their representations and warranties in the Agreement are true and correct in all material respects at and as of the time of the closing; (iii) the Company having received certain fairness opinions regarding the Transaction from its investment bankers; and (iv) the approval by the Company's stockholders of the issuance of the Series B Preferred Stock sought by this Proxy Statement. 4 PRELIMINARY COPY Use of Proceeds - - - - - --------------- The net proceeds of the proposed issuance of the Series B Preferred Stock will be used for working capital purposes. Description of Series B Preferred Stock - - - - - --------------------------------------- The vote of the Company's Board of Directors establishing the terms of the Series B Preferred Stock (the "Certificate of Vote") provides as follows: LIQUIDATION PREFERENCE Upon liquidation the holders of Series B Preferred Stock would be entitled to $200.00 per share (the "Liquidation Preference") plus accrued and unpaid dividends. The Series B Preferred Stock will rank junior in liquidation preference to the Company's $21.25 Convertible Exchangeable Preferred Stock and senior to all other currently issued capital stock of the Company (including the Common Stock). DIVIDENDS Dividends are payable on the Liquidation Preference either in cash or in additional shares of Series B Preferred Stock (a "Payment-In-Kind"). The cash dividend rate is 7 percent per annum (9 percent while there is a Special Default) and the Payment-In-Kind dividend rate is 10 percent per annum (12 percent while there is a Special Default). Dividends are payable quarterly commencing on December 15, 1996. A Special Default would occur upon (1) the making of certain changes to the Executive Committee without the prior written approval of a majority of the members of the Executive Committee who were members prior to such change; (2) the taking of certain actions required to be approved by the Executive Committee (see "ByLaw Amendment") without that Committee's approval; (3) any change by the Company in the composition of the Executive Committee which results in members of such Committee selected by the holders of the Series B Preferred Stock being fewer in number than the number of directors such shareholders are entitled to designate; and (4) solely for purposes of the right to elect additional directors, the failure of the Company to authorize, declare, and pay dividends on the Series B Preferred Stock when due. Prior to December 15, 1999, the Company will make annual elections as to whether dividends will be paid in cash or in kind. Beginning December 15, 1999, the Company will make such election semiannually. In the event that, during any period for which the Company has elected to pay cash dividends, it is unable to pay the full amount of the cash dividend due, the Board of Directors is required to authorize, declare and pay a supplemental stock dividend equal to the difference between the dividend that would have been paid in kind at the Payment- In-Kind rate (assuming that the Board of Directors had elected to pay 5 PRELIMINARY COPY dividends for such in-kind and assuming that a Special Default existed) and the cash dividend actually declared and paid on such dividend payment date, if any, and on the previous dividend payment date during such payment period. Dividends not paid will cumulate. There is no sinking fund. The Series B Preferred Stock will rank junior in cash dividend preference to the $21.25 Convertible Exchangeable Preferred Stock and senior to the Common Stock. The terms of the Series B Preferred Stock further provide that no cash dividends or other distributions payable in cash will be authorized, declared, paid or set apart for payment on any shares of Common Stock or other stock of the Company ranking junior as to dividends to the Series B Preferred Stock except for certain limited dividends on Common Stock beginning in 2001. In addition, the proposed new credit facilities will further limit the ability of the Company to pay cash dividends. (See "Credit Facilities"). REDEMPTION BY THE COMPANY (OPTIONAL AND MANDATORY) All, but not less than all, of Series B Preferred Stock may be redeemed at the election of the Board of Directors for the Redemption Price (defined below) plus accrued and unpaid dividends, if and when the shares of the Common Stock have traded (i) for at least forty (40) of the forty-five (45) trading days (each of which trading days shall be after the original issue date) immediately preceding the date on which the redemption decision is made by the Board of Directors (the "Determination Date"), and (ii) on each of the ten (10) consecutive trading days immediately prior to the Determination Date, at a price in excess of 150% (125% after September 2001) of the conversion price then in effect for the Series B Preferred Stock for each such trading day. The Redemption Price will be the Liquidation Preference where there have been no Special Defaults and, if one or more Special Defaults has occurred, will be 130% of the greater of the Liquidation Preference or the market value of the Common Stock (valued at the average of the closing prices on the preceding twenty (20) trading days immediately prior to the occurrence of the most recent Special Default) into which the Series B Preferred Stock would then be convertible, assuming such shares were then immediately convertible. On the eighth, ninth, and tenth anniversaries of the issuance of the 150,150 shares of Series B Preferred Stock to PB Capital, the Company is required to purchase from each holder of Series B Preferred Stock at the then-effective Redemption Price (plus accrued but then unpaid dividends) one-third of the number of shares of the Series B Preferred Stock held by such holder on the eighth anniversary (plus a portion of any subsequently issued shares). In addition, if one or more Special Defaults were to occur at any time or from time to time on or after the date of the issuance of the Series B Preferred Stock, each holder of Series B Preferred Stock would have the right, 6 PRELIMINARY COPY at such holder's option exercisable at any time within 120 days after the occurrence of each such Special Default, to require the Company to purchase all or any part of the shares of Series B Preferred Stock then held by such holder as such holder may elect at the Redemption Price plus the accrued and unpaid dividends thereon. There is no restriction on the redemption of the Series B Preferred Stock while there is an arrearage on the payment of dividends; however, such repurchases shall be for the Redemption Price plus accrued and unpaid dividends. The proposed new credit facilities will limit the aforementioned rights of redemption. (See "Credit Facilities"). CONVERSION Each Share of Series B Preferred Stock shall be convertible, at the election of the holder, at any time (including immediately prior to any scheduled or announced redemption) into fully paid and nonassessable shares of Common Stock (or, in certain instances, other securities and property of the Company) at the rate of that number of shares of Common Stock for each full share of Series B Preferred Stock that is equal to the Liquidation Preference plus an amount in cash equal to the accrued and unpaid dividends thereon, whether or not authorized or declared, divided by the conversion price applicable per share of Common Stock. The Company shall at all times reserve and keep available, out of its authorized and unissued stock, solely for the purpose of effecting the conversion of the Series B Preferred Stock, such number of shares of its Common Stock free of preemptive rights as shall from time to time be sufficient to effect the conversion of all Series B Preferred Stock. The conversion price, as adjusted for the issuance of warrants to the Company's bank group (see "Effect of Warrants"), will initially be $9.68219 per share. The conversion price will be adjusted periodically to account for certain distributions of Common Stock or other securities convertible into Common Stock. ELECTION OF DIRECTORS In addition to being entitled to select the Designated Directors, the holders of the Series B Preferred Stock also have the right to designate the successors to each Designated Director. The Company is required to nominate and use its best efforts to elect such directors. In addition, the holders of the Series B Preferred Stock have the right to appoint to the Executive Committee the same number of directors as they are entitled to designate for election to the Board of Directors. The number of directors that the holders of the Series B Preferred Stock are entitled to designate (initially, three) drops to two when their holdings (including any payment-in-kind dividends) have been reduced by 66-2/3% from their holdings at the original issue date, to one when their holdings have been reduced by 80% from their holdings at the original issue date, and to zero when their holdings have been reduced by 90% from their holdings at the original issue date. 7 PRELIMINARY COPY PB Capital has informed the Company that it intends to nominate Michael R. Klein, Douglas __. McCarron, and Ronald N. Tutor as its initial Designated Directors, and the Company has indicated that such nominees are acceptable to it. Michael R. Klein (53). Partner in the law firm of Wilmer, Cutler & Pickering since 1974. Chairman of Realty Information Group, Inc., a real estate information company, since 1987. Director of Steck Vaughn Publishing Corporation, [type of business], since May 1993. Director of National Education Corp., [type of business], since _____. Douglas __. McCarron (__). President of the Southern California Conference of Carpenters since _____. Member of the Executive Council of the AFL-CIO, since 1995. Trustee of the Carpenters Pension Trust of Southern California since ______ and of the United Brotherhood of Carpenters and Joiners of America Local Unions and Councils Pension Fund ("United Brotherhood Pension Fund") since _____. The United Brotherhood Pension Fund is expected to be a significant investor in PB Capital. Ronald N. Tutor (56). President and Chief Executive Officer of Tutor-Saliba Corporation, a California-based construction company, since ____, Director of Southdown Inc., [type of business], since _____, Trustee of The Carpenters Trust, a pension fund governed by the provisions of the Employee Retirement Income Security Act of 1974, as amended. In addition, as described below, Mr. Tutor will be appointed Acting Chief Operating Officer of the Company in connection with the Transaction. Tutor-Saliba Corporation, a corporation controlled by Mr. Tutor, has been a participant in joint ventures with the Company since 1977. The Company currently has eight (8) active joint ventures with Tutor-Saliba Corporation with a total contract value of over $1 billion. The proposed new credit facilities provide that it is an event of default if the Designated Directors cease to constitute a majority of the members of the Executive Committee. (See "Credit Facilities"). Voting Rights The holders of Series B Preferred Stock will each initially have 20.65648 votes for each share held after the issuance of warrants to the Company's bank group. The Series B Preferred Stock will vote as a class with the holders of the Common Stock on all matters on which the Common Stock may vote, except as set forth below. Upon the occurrence of any event that causes an increase or decrease in the conversion price, the number of votes possessed by each share of Series B Preferred Stock shall be correspondingly decreased or increased. Whenever a Special Default exists or if the Company has failed to repurchase Shares of Series B Preferred Stock that it is required to purchase, (i) the number of members of the 8 PRELIMINARY COPY Board of Directors shall be increased by such number as is necessary to allow the election of the directors specified in clause (ii), and (ii) the holders of the Series B Preferred Stock, voting separately as a class, shall have the right to elect an additional number of directors to the Board of Directors such that directors selected by the holders of the Series B Preferred Stock constitute a majority of the Board of Directors. So long as any of the Series B Preferred Stock is outstanding, the Company shall not, directly or indirectly, without the affirmative vote or consent of the holders of at least 66-2/3% of all outstanding Series B Preferred Stock voting separately as a class: (i) amend, alter or repeal any provision of the Company's Restated Articles of Organization, Certificate of Vote, or By-Laws, if such amendment, alteration or repeal would alter the contract rights, as expressly set forth in the Certificate of Vote, of the Series B Preferred Stock so as to adversely affect the rights of the holders thereof; (ii) create, authorize or issue, or reclassify shares of any authorized stock of the Company; or (iii) approve certain fundamental changes (e.g., any plan or agreement pursuant to which all or substantially all of the shares of Common Stock shall be exchanged for, converted into, acquired for or constitute solely the right to receive cash, securities, property or other assets). RESTRICTIONS ON TRANSFER PB Capital has covenanted not to transfer its interest in the Company to, and not to permit investors in it to transfer their interests in PB Capital to, entities that are competitive with the Company for a period of two years after the closing of the Transaction. Thereafter, for an additional two years, PB Capital has granted to the Company a right of first refusal on any transfer of Company stock by PB Capital to an entity that is competitive with the Company. In addition, the proposed new credit facility provides that certain transfers by PB Capital will be considered events of default. (See "Credit Facilities"). Credit Facilities - - - - - ----------------- In conjunction with the proposed issuance of the Series B Preferred Stock, the Company, with the assistance of RCBA, has been in the process of renegotiating the Company's credit facilities. The current agreed upon term sheet provides for a restructuring of the existing credit agreement and the bridge credit agreement into a single $129.5 million revolving credit facility, comprised of a Tranche A commitment in the amount of $110 million and a Tranche B commitment in the amount of $19.5 million. The Tranche B commitment provides for a higher interest rate than the Tranche A commitment since it principally represents the current bridge facility. The term sheet further requires that the Company repay the loans based upon the following schedule: December 31, 1997 $15,000,000 December 31, 1998 $15,000,000 March 31, 1999 $ 2,500,000 June 30, 1999 $ 5,000,000 9 PRELIMINARY COPY September 30, 1999 $ 5,000,000 January 1, 2000 Remaining Balance The new credit facilities would also require that a percentage of any net proceeds from the disposition of real estate be allocated to the banks to prepay the loans and reduce the maximum amount of the facility. In this regard, the first $20 million of net proceeds from real estate sales may be retained by the Company to fund its operations. Thereafter, fifty percent (50%) of all net proceeds would be paid to the banks, with the remaining fifty percent (50%) available to the Company to fund its operations. In addition, eighty percent (80%) of the net proceeds from the disposition of other assets with net proceeds greater than $25,000 must be paid to the banks to prepay the facilities when the aggregate net proceeds from such sales equal at least $125,000 (and at each $125,000 increment thereafter). All mandatory prepayments resulting from asset dispositions will reduce the mandatory principal payments detailed above. In addition to certain restructuring fees, upon commencement of the new credit facilities the banks will also be granted warrants to purchase an aggregate of 4.9% (currently equivalent to approximately 410,000 shares) of the Common Stock of the Company (on a fully diluted basis, after giving effect to the issuance of the Series B Preferred Stock to PB Capital) with an exercise price equal to the average daily closing market price on the five trading days before the commencement date of the new facility. The warrants will have customary antidilution provisions and registration rights, and will be exercisable for seven years after such date. The new credit facilities, in addition to general covenants, would further provide that there may be no purchase or redemption by the Company or any of its subsidiaries of any of the Series B Preferred Stock at any time prior to the date when the credit facility is paid in full. The new credit facilities would provide that the Company may not pay cash dividends or make other restricted payments prior to September 30, 1998 and thereafter may not pay cash dividends or make other restricted payments unless: (i) the Company is not in default under the credit agreement; (ii) commitments under the credit facility have been reduced to less than $90 million; (iii) restricted payments in any quarter, when added to restricted payments made in the prior three quarters, do not exceed fifty percent (50%) of net income from continuing operations for the prior four quarters; and (iv) net worth (after taking into consideration the amount of the proposed cash dividend or restricted payment) is at least equal to the amount shown below, adjusted for losses from dispositions of real estate, provided that unadjusted net worth must be at least $60,000,000: October 1, 1998 to December 30, 1998 $165,000,000 December 31, 1998 to March 31, 1999 $170,000,000 April 1, 1999 to June 30, 1999 $172,500,000 July 1, 1999 to September 30, 1999 $175,000,000 October 1, 1999 to January 1, 2000 $177,500,000 10 PRELIMINARY COPY For purposes of the new credit facilities, net worth shall include the net proceeds from the sale of the Series B Preferred Stock to PB Capital. The new credit facilities would further provide that there will be an event of default if (i) PB Capital fails to maintain an ownership interest in the Company of at least one half of its interest as of the commencement date of the facilities or (ii) the members of Board of Directors designated by PB Capital cease to constitute a majority of the members of the Executive Committee of the Board of Directors. Effect of Warrants - - - - - ------------------ If, as contemplated, the warrants are issued to the Company's banks (see "Credit Facilities"), the conversion price of the Series B Preferred Stock will be lowered to $9.68219, a reduction from the $10.50 conversion price originally announced by the Company. Impact of Failure to Approve the Issuance of the Series B Preferred Stock - - - - - ------------------------------------------------------------------------- If the Transaction is not consummated, the Company will be required to enter into new negotiations with its revolving credit agreement bank group. The significant issues to be resolved would include the extension of the $15 million bridge loan beyond its current maturity of November 22, 1996 and the extension of the underlying $114.5 million revolving credit facility, which currently is scheduled to mature on December 6, 1997. Without the continued availability of these funds the Company cannot conduct operations at its current level of business. There is no assurance at this time that any such negotiations with the bank group will result in loan extensions or lending levels sufficient to provide the necessary liquidity to meet the Company's current needs. The failure to obtain such new credit facilities or other alternative financing might force the Company to change its current real estate strategies, as they relate to certain of its holdings, and sell some properties on an accelerated basis to provide near term liquidity. Such a change in strategy would result in the writedown of those real estate assets to current disposition levels as opposed to longer term full development values. Moreover, without the equity infusion from PB Capital and the negotiation of new credit facilities, it is not certain that the real estate sales by the Company could generate sufficient cash to meet the Company's short-term needs. The execution of the new credit agreement with the bank group and the availability to the Company of the proposed new credit facilities are subject to various conditions in addition to the consummation of the Transaction, and no assurance can be given that such conditions will be satisfied or waived by the bank group. 11 PRELIMINARY COPY Employment and Severance Agreements - - - - - ----------------------------------- In connection with the closing of the Transaction, the Company plans to enter into separate employment agreements with David B. Perini, John H. Schwarz, Richard J. Rizzo and Donald E. Unbekant. Under the terms of Mr. Perini's agreement, Mr. Perini will continue as Chief Executive Officer and Chairman of the Board of Directors of the Company for a period of three years. Mr. Perini will also remain President of the Company until the appointment of a Chief Operating Officer for the Company. The agreement will provide that Mr. Perini will receive his current salary, which will continue to be reviewed annually by the Board of Directors. Mr. Perini will also continue to receive certain benefits, including health and life insurance and pension accrual. In addition, Mr. Perini will continue to receive incentive compensation under the Company's current plans until the end of 1996 and pursuant to any plans which are in effect thereafter. Mr. Perini's agreement will provide that, during the 3-month period after the first anniversary of the agreement, Mr. Perini may voluntarily terminate his employment for any reason with 90 days notice to the Company. In such event, Mr. Perini would be entitled to receive his base compensation and benefits for the balance of the contract term. In the event of a reduction in Mr. Perini's compensation or a material change in his responsibilities at the Company, Mr. Perini would be entitled to terminate his employment with the Company and receive his base compensation and benefits for up to three years, depending on when the termination of employment occurred. In the event Mr. Perini's employment were terminated in accordance with either of the above provisions, his stock options would become fully exercisable and could be exercised at any time during the salary continuation period (but not beyond the applicable option term). Each of the agreements with Messrs. Schwarz, Rizzo and Unbekant will provide that the executive will continue to serve the Company, in the position or positions currently held, through December 31, 1997. Each agreement will provide that the executive will receive his current salary, which will continue to be reviewed annually by the Board of Directors. Each executive will also continue to receive benefits, including health and life insurance and pension accrual. In addition, each executive will continue to receive incentive compensation under the Company's current plans until the end of 1996 and pursuant to any plans which are in effect thereafter. Each agreement will provide that, in the event of a reduction in the executive's compensation or a material change in the executive's responsibilities at the Company, the executive would be entitled to terminate his employment with the Company and receive his base compensation and benefits for the greater of one year or the remaining contract term. In the event the executive's employment were terminated in accordance with the above provision, his stock options would become fully exercisable and could be exercised at any time during the salary continuation period (but not beyond the applicable option term). 12 PRELIMINARY COPY Bart W. Perini will retire as an active employee of the Company effective December 31, 1996. He will continue to serve as a Director. The Company will enter into a severance agreement with Mr. Perini which, in recognition of his thirty-five years of service, provides for the continuation of his base salary and benefits, including health and life insurance and pension accrual, through December 31, 1998. In addition, he will continue to receive incentive compensation under the Company's current plans through 1996. Option Grant and Employment Arrangements - - - - - ---------------------------------------- Upon the closing of the Transaction, Mr. Tutor will be appointed by the Board of Directors as Acting Chief Operating Officer and will thereafter by paid an annual salary of $150,000. In addition, in order to provide additional incentive to Mr. Tutor in his role as Acting Chief Operating Officer, he will also be granted, at the closing of the Transaction, options to purchase 150,000 shares of Common Stock of which [________] will be granted under the Perini Corporation 1982 Stock Option and Long Term Performance Incentive Plan, as amended, and [___________] will be granted subject to stockholder approval of an increase in the number of shares available under the plan at the next annual meeting. The options will be granted with an exercise price equal to the fair market value of a share of Common Stock at the close of business on the closing date of the Transaction. The options will not be qualified under Section 422 of the Internal Revenue Code of 1986, as amended, and will not vest for three years in order to protect significant tax benefits associated with certain net operating losses. (See "The Company's NOLs and Section 382"). The options expire after eight years. Executive Committee Compensation - - - - - -------------------------------- The non-employee members of the Executive Committee will receive $4,000 for each Executive Committee meeting attended. In addition, each of the non-employee members of the Executive Committee will also be granted, at the closing of the Transaction, options to purchase 25,000 shares of Common Stock of which [_________] will be granted under the Amended Perini Corporation 1982 Stock Option and Long Term Performance Incentive Plan, as amended, and [__________] will be granted subject to stockholder approval of an increase in the number of shares available under the plan at the next annual meeting. The options will be granted with an exercise price equal to the fair market value of a share of Common Stock at the close of business on the closing date of the Transaction. The options expire after eight years. The options will not be qualified under Section 422 of the Internal Revenue Code of 1986, as amended, and will not vest for three years in order to protect significant tax benefits associated with certain net operating losses. (See "The Company's NOLs and Section 382"). The options expire after eight years. Registration Rights Agreement - - - - - ----------------------------- The Series B Preferred Stock will not be listed on the American Stock Exchange or any other national securities exchange, and the issuance of the Series B Preferred Stock will not be registered with the SEC. The shares of Series B Preferred Stock will therefore be restricted 13 PRELIMINARY COPY securities. However, the Company will enter into a Registration Rights Agreement (the "Registration Rights Agreement") with PB Capital pursuant to which PB Capital or its permitted successors and assigns under the Agreement (the "Purchasers") will be entitled to certain additional rights with respect to the registration under the Securities Act of 1933, as amended, (the "Securities Act") of the shares of Common Stock received upon conversion of the Series B Preferred Stock (the "Conversion Shares"). The Registration Rights Agreement will provide that in the event that the Company files a registration statement for its Common Stock under the Securities Act, for a purpose and on a form that would permit the registration of the Conversion Shares, the Purchasers may participate in the offering under such registration statement, on a basis at least as favorable as any other offeror (other than the Company). Such participation would be subject to the reasonable judgment of the lead underwriter of the offering that such participation would not impair the ability of the Company to raise the capital being sought by it. The Registration Rights Agreement will further provide that Purchasers holding unregistered Conversion Shares or Preferred Stock may, under certain circumstances, demand that the Company file a "shelf" registration statement for the purpose of registering the resale of such unregistered Conversion Shares and any shares of Common Stock into which Preferred Stock may be converted (together, the "Registrable Securities"). Such agreement will provide that the Company shall use its best efforts to maintain the effectiveness of such registration statement until the resale of all such Registrable Securities and, in the event all Registrable Securities are not resold under such registration statement, the Company must file a second "shelf" registration statement for the resale of any and all remaining Registrable Securities. Voting Agreement - - - - - ---------------- PB Capital, David B. Perini, Bart W. Perini, Ronald N. Tutor, and Tutor-Saliba Corporation (collectively, the "Stockholders" and each individually a "Stockholder") have entered into an agreement (the "Voting Agreement") with the Company, pursuant to which the Stockholders have agreed to vote all of the shares of Common Stock, Series B Preferred Stock, Series A Junior Participating Cumulative Preferred Stock, and any other series or class of voting stock to be issued by the Company (collectively, the "Perini Voting Stock") owned of record or thereafter acquired by them, or over which they have voting control, in favor of the election to the Board of Directors of the Company of three representatives designated by PB Capital and reasonably satisfactory to the Company at the first meeting of the Stockholders at which directors will be elected. The terms of the Voting Agreement are binding upon transferees of Perini Voting Stock. The Voting Agreement will remain in effect until the first meeting of the Stockholders, after the date of this special meeting, at which directors will be elected. 14 PRELIMINARY COPY Shareholder Rights Agreement Amendments - - - - - --------------------------------------- The Company is a party to a Shareholder Rights Agreement, dated as of September 23, 1988, as amended and restated as of May 17, 1990, with The First National Bank of Boston as Rights Agent. On September 23, 1988, the Board of Directors of the Company declared a dividend distribution of one Preferred Stock Purchase Right (a "Right") for each outstanding share of Common Stock of the Company to stockholders of record at the close of business on October 6, 1988. Each Right entitles the registered holder thereof to purchase one one-hundredth of a share (a "Unit") of Series A Junior Participating Cumulative Preferred Stock (the "Series A Preferred Stock") at a cash exercise price of $100.00 per Unit. The Rights expire on September 23, 1998. The purpose of the Shareholder Rights Agreement is to prevent hostile attempts to acquire control of the Company by making such attempts prohibitively expensive, unless the Board of Directors acts to redeem the Rights. The Rights Agreement presently provides that, absent intervention by the Board of Directors, certain anti-takeover provisions become operative in the event that a person or group of affiliated or associated persons (other than the Company and certain of its affiliates and other exempted persons) either: (i) acquires beneficial ownership of 20% or more of the then outstanding shares of Common Stock (the date of the announcement of such acquisition being the "Stock Acquisition Date"), or (ii) acquires beneficial ownership of 10% or more of the then outstanding shares of Common Stock and the Board of Directors of the Company determines that such person or group is adverse to the interests of the Company (an "Adverse Person"). (For purposes of this provision, a person is deemed to beneficially own the shares of Common Stock into which any class of preferred stock of the Company is convertible. Such shares issuable on conversion, however, are generally not counted as part of the number of shares of Common Stock then outstanding in calculating the percentage of shares owned by other persons.) Following either such event, the Board of Directors may provide that each holder of a Right will thereafter have the right to receive upon exercise that number of Units of Series A Preferred Stock having a market value of two times the exercise price of the Right, unless the Board of Directors redeems the Rights. The Board of Directors may also, at its option, exchange all or any part of the then outstanding and exercisable Rights for shares of Common Stock or Units of Series A Preferred Stock at an exchange ratio of one share of Common Stock or one Unit of Preferred Stock per Right. As part of the Transaction necessary to permit the issuance of the Series B Preferred Stock, the Board of Directors plans to amend the Shareholder Rights Agreement in two ways. o First, in order to permit the acquisition of the Series B Preferred Stock by PB Capital pursuant to the Agreement, any additional Preferred Stock issued as dividends, and any Common Stock issued upon conversion of the Series B Preferred Stock, without triggering the distribution of Rights, the Board will amend the Shareholder Rights Agreement to provide that the 15 issuance of the Series B Preferred Stock and the Common Stock into which such stock is convertible will not give rise to a "Stock Acquisition Date" within the meaning of the Rights Agreement and that PB Capital will not be deemed to be an "Adverse Person." Accordingly, the issuance of the Series B Preferred Stock will not trigger the anti-takeover provisions of the Shareholder Rights Agreement. o Second, in order to protect significant potential tax benefits of the Company attributable to certain net operating losses ("NOLs") that the Company already has, as well as those that it may have in the future (see "The Company's NOLs and Section 382"), the Company plans to lower the threshold for the occurrence of a Stock Acquisition Date from 20% to 10% of the outstanding shares of Common Stock, (the "Second Amendment") and plans to extend the expiration of the Shareholder Rights Agreement until 38 months following the closing date, at which point, the Board may consider the adoption of a new shareholder rights agreement. Prior to the new expiration date of the Shareholder Rights Agreement, these thresholds may not be changed without the prior consent of a majority of the Executive Committee. The purpose of these amendments which lower the trigger thresholds for the Rights is to reduce the risk that one person or a group of persons will acquire an amount of capital stock of the Company that would limit the Company's ability to use these NOLs in the future by making such an acquisition unattractive to buyers. These amendments do not in any way prevent such acquisitions from occurring, nor do they render such purchases null and void. The Company believes that this is the best means presently available to it to accomplish this end. Depending on the circumstances in the future, the Company may consider other means of preventing an "ownership change" as defined by the Internal Revenue Code of 1986, as amended. The Shareholder Rights Agreement Amendments may be deemed to have an "anti-takeover" effect because, during the new term of the Shareholder Rights Agreement, they will make it unattractive for a person or entity (or group thereof) to accumulate more than 10% of the Company's Common Stock. The Shareholder Rights Agreement Amendments thus would discourage or prohibit accumulations of substantial blocks of shares for which stockholders might receive a premium above market value. In the opinion of the Board of Directors of the Company, the fundamental importance to the Company's stockholders of maintaining the availability of the tax benefits to the Company outweighs the added anti-takeover effect the Shareholder Rights Agreement Amendments may have. 16 PRELIMINARY COPY THE COMPANY'S NOLS AND SECTION 382 As of December 31, 1995, NOLs of approximately $55 million were available to offset taxable income recognized by the Company in periods after December 31, 1995. The Company estimates that as of December 31, 1996, such NOLs will amount to approximately $52 million. There are also various tax credits that are available to the Company to offset future tax liabilities after utilizing the above mentioned NOLs. For Federal income tax purposes, the NOLs and tax credits will expire according to the following schedule (in thousands):
Year of Unused Investment Foreign Tax Net Operating Loss Expiration Tax Credits Credits Carryforwards ---------- ----------- ------- ------------- 1998 $ $ 952 $ 1999 26 2001 449 2002 37 2003 3,046 675 2004 293 2005 728 2006 1,142 2009 26,147 2010 26,283 ------- ------ ------------ Total $ 3,532 $ 978 $ 55,268 ======= ====== ============
NOLs benefit the Company by offsetting taxable income dollar for dollar by the amount of the NOLs, thereby eliminating (subject to a relatively minor alternative minimum tax) the 35% federal corporate tax on such income. In contrast, tax credits offset federal taxes dollar for dollar after application of various enumerated rules and limitations. The benefit of a company's NOLs and tax credits can be reduced or eliminated under Section 382 of the Internal Revenue Code ("IRC"). Section 382 limits the use of losses and other tax benefits by a company that has undergone an "ownership change," as defined in Section 382. Generally, an ownership change occurs if one or more stockholders, each of whom owns 5% or more in value of a company's capital stock, increase their aggregate percentage ownership by more than 50 percentage points over the lowest percentage of stock owned by such stockholders over the preceding three year period. For this purpose, all holders who each own less than 5% of a company's capital stock are generally treated together 17 PRELIMINARY COPY as one or more 5 percent stockholders (that is, all holders with less than 5% of a company's stock are typically treated, in effect, as one "public" stockholder). In addition, certain constructive ownership rules, which generally attribute ownership of stock to the ultimate beneficial owner thereof without regard to ownership by nominees, trusts, corporations, partnerships or other entities, or to related individuals, are applied in determining the level of stock ownership of a particular stockholder. Special rules, described below, can result in the treatment of options (including warrants) as exercised if such treatment would result in an ownership change. All percentage determinations are based on the fair market value of a com pany's capital stock, including any preferred stock which is voting or convertible (or otherwise participates in corporate growth). If an ownership change of the Company were to occur, the amount of taxable income in any year (or portion of a year) subsequent to the ownership change that could be offset by NOLs or other carryovers existing (or "built in") prior to such ownership change generally could not exceed the product obtained by multiplying (i) the aggregate value of the Company's stock immediately prior to the ownership change (with certain adjustments) by (ii) the federal long-term tax-exempt rate (currently 5.8%). Because the value of the Company's stock, as well as the federal long-term tax-exempt rate, fluctuate, it is not possible to predict with accuracy the annual limitation upon the amount of taxable income of the Company that could be offset by such NOLs or other items if an ownership change were to occur on or subsequent to the closing date of the Transaction. The Company would incur a corporate level tax (current maximum federal rate of 35%) on any taxable income during a given year in excess of such limitation plus any prior year's unused NOL that was not utilized in such prior year. While the NOLs not used as a result of this limitation remain available to offset taxable income in future years, the effect of an ownership change, under certain circumstances, would be to significantly defer the utilization of the NOLs, accelerate the payment of federal income tax, and cause a portion of the NOLs to expire prior to their use. Approval and consummation of the Transaction increases the risk that the Company will undergo an ownership change because of the significant change in ownership attributable to PB Capital's ownership interest in the Company. Regulations issued by the Internal Revenue Service (the "IRS") in March 1994 provide that an "option" will be treated as exercised for purposes of Section 382 if it meets any one of three tests, each of which will apply only if a "principal purpose" of the issuance, transfer or structuring of the option was to avoid or ameliorate the impact of an ownership change under Section 382. The term "option" for this purpose is defined broadly to include, among other things, a contingent purchase, warrant or put, regardless of whether it is contingent or otherwise not currently exercisable. Under this definition, the Series B Preferred Stock being reserved for issuance as payment-in- kind dividends (the "PIK Shares") could be viewed as "options." The Company believes that, based on its estimate of the potential values of the Series B Preferred Stock, its knowledge of the current ownership of Common Stock and $21.25 Preferred Stock by 5 percent stockholders, and the current trading price of the Common Stock and the $21.25 Preferred Stock, all of which are subject to change following the date of this Proxy Statement, an 18 PRELIMINARY COPY ownership change of the Company will not occur on the closing date of the Transaction whether or not the PIK Shares are considered as "options" under Section 382 of the IRC. The Company did not negotiate the terms of the Agreement, including the terms of the Series B Preferred Stock (including the stock being reserved as PIK Shares), with a view to avoid or ameliorate the impact of an ownership change of the Company under Section 382, and the Company believes that the issuance, transfer, or structuring of any aspect of the Agreement did not have as one of its purposes the avoidance or amelioration of the impact of an ownership change. PB Capital also has indicated that it did not negotiate the terms of the Agreement with a view to avoiding an ownership change, and it has indicated its belief that the issuance, transfer, or structuring of any aspect of the Agreement did not have as one of its purposes the avoidance or amelioration of an ownership change of the Company. The Company and PB Capital's conclusions are not binding on the IRS, however, and thus the IRS could challenge this conclusion. Even if the IRS were to successfully challenge this position, it is unlikely that the consummation of the Transaction in and of itself would cause an ownership change of the Company. However, as indicated in the previous paragraph, such a challenge, if successful, could increase the risk that purchases by other stockholders of the Company's Common Stock could effect the percentage shift in the Company's ownership as determined for purposes of Section 382. Any such acquisition could increase the likelihood that the Company would experience an ownership change if such shift, coupled with the consummation of the Transaction, causes the ownership by 5 percent stockholders (including groups of less than 5 percent stockholders that are treated as 5 percent stockholders) of the Company to increase by more than 50 percentage points during a three year period. In addition, approval and consummation of the renegotiation of the Company's credit facilities could also increase the risk that the Company will undergo an ownership change because of the bank warrants described above (see "Credit Facilities"). If the banks were to exercise such warrants within the three years following the closing date of the Transaction, it is likely that the banks' acquisition of Common Stock would be deemed part of the holdings of the public (as noted above, the holdings of less than 5% stockholders are generally aggregated and treated as one stockholder for Section 382 purposes). As a result, upon the exercise of those warrants, the public stockholders would be deemed to have increased their holdings of the Company vis-a-vis their lowest holdings during the preceding three years. This transaction also could increase the likelihood that the Company would undergo an ownership change for purposes of Section 382. The desire of the Company to maintain its NOLs could make it difficult for the Company to complete any further significant equity issuances (public or private) for the three years following the closing date of the Transaction. That is, even if PB Capital is the only holder of more than 5% of the Company's capital stock to increase its holdings of capital stock 19 PRELIMINARY COPY of the Company during the past three years, the fact that, by the Company's estimates, PB Capital will own approximately 32% of the Company's capital stock after consummation of the Transaction and that the Company may issue up to an additional estimated 7% of the Company's capital stock as PIK Shares for the payment of dividends over the next three years, means that the Company may have little ability to obtain further equity during that same period if it wants to maintain its ability to use NOLs without application of the Section 382 limitation. Under the terms of the Series B Preferred Stock, PB Capital has the right to approve certain future issuances of equity, whether junior or senior in rank. CONTINUED RISK OF OWNERSHIP CHANGE Notwithstanding the Shareholder Rights Agreement Amendments, there remains a risk that certain changes in relationships among stockholders or other events will cause an ownership change of the Company under Section 382. Future significant purchases of the Company's Common Stock and other events that occur prior to the consummation of the Transaction can effect the percentage shift in the Company's ownership as determined for purposes of Section 382, and any such acquisition could increase the likelihood that the Company will experience an ownership change if such shift, coupled with the consummation of the Transaction, causes the ownership of 5 percent stockholders of the Company to increase. There also can be no assurance that the Second Amendment to the Shareholder Rights Agreement will be effective, either because a person or group of persons acquires stock in excess of 10% of the capital stock of the Company (notwithstanding that such acquisition would trigger the distribution of rights under the Shareholder Rights Agreement) or because of other factors. For example, while Section 382 provides that fluctuations in the relative values of different classes of stock are not taken into account in determining whether an ownership change occurs, no regulations or other guidance have been issued under this provision. Therefore, the extent to which changes in relative values of the Series B Preferred Stock, the $21.25 Preferred Stock, and the Common Stock could result in an ownership change of the Company is unclear, and it is possible that fluctuations in value could result in an ownership change of the Company. In addition, the Board of Directors of the Company has the discretion to prevent the distribution of Rights and also to redeem the Rights for a nominal sum. Either of these actions would otherwise result in an ownership change that would limit the use of the tax attributes of the Company. The Board of Directors of the Company intends to consider any such transactions individually and determine at the time whether it is in the best interests of the Company, after consideration of any factors that the Board deems relevant (including possible future events), to permit any such transactions to occur notwithstanding that an ownership change of the Company may occur. 20 PRELIMINARY COPY As a result of the foregoing, the Shareholder Rights Agreement Amendments may serve to reduce, but do not serve to eliminate, the risk that Section 382 will cause the limitations described above on the use of tax attributes of the Company to be applicable. Regulation of Certain Business Combinations under Massachusetts Law - - - - - ------------------------------------------------------------------- Chapter 110F of the Massachusetts General Laws provides that a corporation may not engage in any business combination with any interested stockholder for a period of three years following the date that such stockholder became an interested stockholder. Chapter 110F further provides that this prohibition does not apply if, prior to the date that such stockholder became an interested stockholder, the board of directors of the corporation approved the transaction which resulted in the stockholder becoming an interested stockholder. Upon consummation of the Transaction, PB Capital would own more than five percent of the outstanding voting stock of the Company and would therefore be an "interested stockholder" as defined under chapter 110F. The Board of Directors has voted to approve the Stock Purchase and Sale Agreement and the transactions contemplated thereby. Accordingly, the prohibition of chapter 110F will not apply to future transactions between PB Capital and the Company. Fairness Opinions - - - - - ----------------- OPINION OF J.P. MORGAN SECURITIES, INC. Pursuant to an engagement letter dated October 9, 1995, the Company retained J.P. Morgan Securities, Inc. ("J.P. Morgan") as its financial advisor to assist the Company in assessing its alternatives to obtain strategic capital, including consideration of potential business combinations, private equity placements, and other transactions including the possible sale of real estate assets. At the meeting of the Board of Directors of the Company on June 12, 1996, J.P. Morgan rendered its oral opinion to the Board of Directors of the Company that, as of such date, the consideration to be paid to the Company for the proposed issuance of Series B Preferred Stock was fair from a financial point of view to the Company. J.P. Morgan has confirmed its June 12, 1996 oral opinion by delivering its written opinion to the Board of Directors of the Company, dated the date of this Proxy Statement, that, as of such date, the consideration to be paid to the Company in the proposed Transaction is fair from a financial point of view to the Company. No limitations were imposed by the Company's Board of Directors upon J.P. Morgan with respect to the investigations made or procedures followed by it in rendering its opinions. The full text of the written opinion of J.P. Morgan dated the date of this Proxy Statement, which sets forth the assumptions made, matters considered and limits on the review 21 PRELIMINARY COPY undertaken, is attached as Annex A to this Proxy Statement. The Company's stockholders are urged to read the opinion in its entirety. J.P. Morgan's written opinion is addressed to the Board of Directors of the Company, is directed only to the consideration to be paid by PB Capital for the Series B Preferred Stock and does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote at the Special Meeting and should not be relied upon by any stockholder as such. The summary of the opinion of J.P. Morgan set forth in this Proxy Statement is qualified in its entirety by reference to the full text of such opinion. In arriving at its opinions, J.P. Morgan reviewed, among other things, in the case of its June 12, 1996 opinion, the investment offer as then proposed and negotiated with RCBA, and in the case of its opinion dated the date of this Proxy Statement, the Stock Purchase and Sale Agreement, related Transaction documents and this Proxy Statement; the audited financial statements of the Company for the fiscal years ended December 31, 1995 and December 31, 1994, and the unaudited financial statements of the Company for the period ended June 30, 1996 in the case of its opinion dated the date of this Proxy Statement; current and historical market prices of the Common Stock; certain publicly available information concerning the business of the Company and of certain other companies engaged in businesses comparable to those of the Company, and the reported market prices for certain other companies' securities deemed comparable; publicly available terms of certain transactions involving companies comparable to the Company and the consideration paid for such companies; certain agreements with respect to outstanding indebtedness or obligations of the Company; certain information regarding the Company's real estate subsidiary and portfolio of assets provided by the Company; and certain internal financial analyses and forecasts prepared by the Company and its management. J.P. Morgan also held discussions with certain members of the management of the Company with respect to certain aspects of the Transaction, the past and current business operations of the Company, the financial condition and future prospects and operations of the Company, the effects of the Transaction on the financial condition and future prospects of the Company, and certain other matters believed necessary or appropriate to J.P. Morgan's inquiry. These matters included the overall high debt level of the Company; the need for further liquidity to support the Company's construction operations and bonding capacity; limited net proceeds available to the Company if it were to pursue an accelerated disposition of its real estate assets; potential exposure to future payments resulting from the Company's WMATA litigation; and the benefits of the Transaction in strengthening the balance sheet of the Company. In addition, J.P. Morgan visited certain representative facilities and real estate assets of the Company, and reviewed such other financial studies and analyses and considered such other information as deemed appropriate for the purposes of its opinions. J.P. Morgan relied upon, without assuming any responsibility for independent verification, the accuracy and completeness of all information that was publicly available or that was furnished to it by the Company or otherwise reviewed by J.P. Morgan, and J.P. 22 PRELIMINARY COPY Morgan has not assumed any liability therefor. J.P. Morgan has not conducted any valuation or appraisal of any assets or liabilities, nor have any valuations or appraisals been provided to J.P. Morgan. In relying on financial analyses and forecasts provided to J.P. Morgan, J.P. Morgan has assumed that they have been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of the Company to which such analyses or forecasts relate. J.P. Morgan has also assumed that the Transaction will have the tax consequences described in discussions with them, and materials furnished to them by, representatives of the Company, and that the other transactions contemplated by the Agreement will be consummated as described in such Agreement. J.P. Morgan's opinions are based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinions. Subsequent developments may affect the written opinion dated the date of this Proxy Statement, and J.P. Morgan does not undertake any obligation to update, revise, or reaffirm such opinion. J.P. Morgan expresses no opinion as to the price at which the Company's Common Stock will trade at any future time. The following is a summary of the material financial analyses utilized by J.P. Morgan in connection with providing its opinions. The Company is engaged in both the construction and real estate businesses. J.P. Morgan valued the Company's construction operations employing generally accepted valuation methods. In valuing the real estate business, J.P. Morgan estimated realizable proceeds from an accelerated disposition strategy, an approach which differs materially from the Company's current and historical long-term hold strategy toward its real estate operations. CONSTRUCTION BUSINESS - DISCOUNTED CASH FLOW ANALYSIS. J.P. Morgan conducted a discounted cash flow analysis for the purpose of determining the equity value per share of the Company's construction operations. J.P. Morgan calculated the unlevered free cash flows that the Company is expected to generate through its construction operations during fiscal years 1996 through 2000 based upon management financial projections. J.P. Morgan also calculated a range of terminal values of the Company's construction operations at the end of the period ending December 31, 2000 by applying exit earnings before interest and taxes ("EBIT") multiples to the EBIT of the Company during the final year period. The EBIT multiples applied were equivalent to EBIT multiples at which certain publicly traded comparable companies are currently trading. The unlevered free cash flows and the range of terminal asset values were then discounted to present values using a range of discount rates from 10.0% to 11.0% which were chosen by J.P. Morgan based upon an analysis of the average weighted average cost of capital of certain publicly traded comparable companies. After giving effect to the total corporate level debt and existing preferred stock of the Company, the discounted cash flow analysis yielded an implied trading value for the Company's Common Stock of approximately $6.75 to $11.25 per share for its construction operations. 23 PRELIMINARY COPY CONSTRUCTION BUSINESS - PUBLIC TRADING MULTIPLES. J.P. Morgan compared selected financial data of the Company with similar data for selected publicly traded companies engaged in businesses which J.P. Morgan judged to be analogous to the Company. The companies selected by J.P. Morgan were Granite Construction Inc., Guy F. Atkinson Company of California, and The Turner Corporation. These companies were selected, among other reasons, because they were principally engaged in the business of general contracting, specifically commercial buildings and civil projects, without a substantial component of design and engineering work. For each comparable company, publicly available financial performance through the twelve months ended December 31, 1995 and through the six months ended June 30, 1996 was analyzed. In addition, publicly available estimates of each comparable company's future financial performance was reviewed in relation to the current market valuation of that company. J.P. Morgan selected the median value for each multiple, specifically: firm value divided by projected 1996 EBIT, market value divided by projected 1996 net income, and market value divided by projected 1997 net income where available. These multiples were then applied to the Company's projected 1996 EBIT and net income for the twelve months ending December 31, 1996 and December 31, 1997. After giving effect to certain adjustments including the total corporate level debt and existing preferred stock of the Company, these multiples yielded an implied trading value for the Company's Common Stock of approximately $7.00 to $13.50 per share. J.P. Morgan did not use multiples based on historical financial results due to the distorting effect of the Company's losses during 1995. CONSTRUCTION BUSINESS - SELECTED TRANSACTION ANALYSIS. Using publicly available information, J.P. Morgan examined selected transactions involving general contracting companies of the type analogous to the Company. J.P. Morgan found that such transactions were very limited and identified only one transaction which involved a suitably comparable company and occurred recently enough to be relevant to its valuation of the Company. This transaction was the merger of Washington Contractors Group, Inc. with Kasler Corporation in July 1993. J.P. Morgan compared the consideration received by Kasler shareholders to the financial performance of Kasler Corporation and applied the implied EBIT multiple to the Company's estimated 1996 EBIT. After giving effect to the total corporate level debt and existing preferred stock of the Company, this multiple yielded an implied trading value for the Company's Common stock of approximately $9.25 per share. REAL ESTATE ASSETS. The Company's real estate portfolio consists of two large assets, the Resort at Squaw Creek in Squaw Valley, California and Rincon Center in San Francisco, and a diverse group of thirteen other assets including office buildings, residential land and lots and commercial land held for development in several regions of the United States. The Company has a strategy of holding its major real estate assets as long as required to realize profits on its investments while selectively selling off its smaller real estate assets. In addition to reviewing the Company's forecasts for its long-term real estate strategy and analyzing the portfolio's estimated near-term negative cash flow performance, J.P. Morgan focused on the near-term net proceeds realizable through an accelerated disposition strategy. In estimating near-term liquidity, J.P. Morgan employed several valuation methodologies including a 24 PRELIMINARY COPY discounted cash flow approach, comparable sales transactions, and estimated cost of carry of certain assets. The contribution of the real estate assets in providing potential near-term liquidity to the Company is estimated to be approximately $15 to $20 million, or $3.00 to $4.00 per share. Such estimate does not constitute an appraisal of these assets, and the actual proceeds realized by the Company in any such sales could be materially different. WMATA LITIGATION. J.P. Morgan factored into its financial analyses a preliminary judgment by the U.S. District Court (D.C.) in July 1993 in which the Company was found liable for $16.5 million, equivalent to approximately $3.40 per share, in connection with subway construction contracts for the Washington Metropolitan Area Transit Authority (WMATA). The case is awaiting a final decision and the Company has asked the Court to rule upon undecided claims outstanding against WMATA which would offset the preliminary judgment and thereby reduce or eliminate its ultimate exposure at this level or through the appeals process. In connection with its opinion dated the date of this Proxy Statement, J.P. Morgan reviewed the analyses used to render its June 12, 1996 oral opinion to the Board of Directors of the Company by performing procedures to update certain of such analyses and by reviewing the assumptions upon which such analyses were based and the factors considered in connection therewith. The summary set forth above does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the summary set forth above and its analyses must be considered as a whole and that selecting portions thereof, without considering all of its analyses, could create an incomplete view of the processes underlying its analyses and opinion. J.P. Morgan based its analyses on assumptions that it deemed reasonable, including assumptions concerning general business and economic conditions and industry-specific factors. The other principal assumptions upon which J.P. Morgan based its analyses are set forth above under the description of each such analysis. J.P. Morgan's analyses are not necessarily indicative of actual values or actual future results that might be achieved, which values may be higher or lower than those indicated. Moreover, J.P. Morgan's analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be bought or sold. As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for estate, corporate and other purposes. J.P. Morgan was selected to advise the Company with respect to the Transaction and to deliver an opinion to the Company's Board of 25 PRELIMINARY COPY Directors with respect to the Transaction on the basis of such experience and its familiarity with the Company. For services rendered as financial advisor to assist the Company in assessing its alternatives to obtain strategic capital, including consideration of potential business combinations, private equity placements, and other transactions including the possible sale of real estate assets, J.P. Morgan has received fees totaling $550,000 prior to the date of this Proxy Statement. Upon the delivery to the Company's Board of Director's of its written opinion, J.P. Morgan will receive a fee of $350,000, and upon the closing of the Transaction, J.P. Morgan will receive an additional fee from the Company of $750,000. In addition, the Company has agreed to reimburse J.P. Morgan for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities, including liabilities arising under the Federal securities laws. J.P. Morgan and its affiliates maintain banking and other business relationships with the Company and its affiliates, for which it receives customary fees. J.P. Morgan's affiliated bank, Morgan Guaranty Trust Company of New York ("Morgan Guaranty") is the agent bank for the Company's current revolving credit facility which is being restructured as part of the Transaction. In connection with the restructuring of the revolving credit facility, Morgan Guaranty will receive certain fees and warrants as described herein under "Bank Facilities." In the ordinary course of their businesses, affiliates of J.P. Morgan may actively trade the debt and equity securities of the Company for their own accounts or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities. OPINION OF CHASE SECURITIES INC. The Company engaged Chase Securities Inc. ("Chase") to evaluate the fairness to the Company of the consideration to be paid to the Company in connection with the transactions pursuant to the Agreement. On September 27, 1996, Chase delivered its written opinion to the Board of Directors of the Company to the effect that, based upon and subject to the assumptions, factors and limitations set forth in such written opinion, as of the date of such opinion, the consideration to be paid to the Company in connection with the Transaction is fair, from a financial point of view, to the Company. The full text of Chase's written opinion, which sets forth assumptions made, factors considered and limitations on the review undertaken by Chase in rendering its opinion, is attached as Annex B to this Proxy Statement and is incorporated herein by reference. The summary set forth below is qualified in its entirety by reference to the full text of such opinion. Stockholders are urged to read the opinion carefully and in its entirety. Chase's opinion is directed only to the fairness, from a financial point of view, of the consideration to be paid to the Company in connection with the Transaction and does not address the Company's underlying decision to proceed with or effect the Transaction. Chase's 26 PRELIMINARY COPY opinion was rendered for the use and benefit of the Board of Directors of the Company in its evaluation of the Transaction and does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote at the Special Meeting and should not be relied upon by any stockholder as such. Except as set forth in Chase's opinion, the Board of Directors did not impose any limitations upon the scope of the investigation that Chase deemed necessary to enable it to deliver its opinion, In arriving at its opinion, Chase, among other things: (i) reviewed the Agreement and other Transaction documents referred to therein; (ii) reviewed a draft proxy statement of the Company prepared in connection with seeking stockholder approval for the Transaction; (iii) reviewed certain publicly available business and financial information of the Company, including the audited financial statements of the Company for the fiscal years ended December 31, 1995 and December 31, 1994 and the unaudited financial statements of the Company for the period ended June 30, 1996; (iv) reviewed certain publicly available business and financial information of certain companies engaged in businesses Chase deemed comparable to those of the Company; (v) compared current and historical market prices of the Company's Common Stock and reported market prices of the securities of certain other companies that were deemed comparable; (vi) reviewed publicly available financial terms of certain business transactions Chase deemed comparable to the Transaction and otherwise relevant to Chase's inquiry; (vii) held discussions with members of the Company's senior management concerning certain aspects of the Transaction, the Company's past and current business operations, the Company's financial condition, future prospects, and operations, before and after giving effect to the Transaction, as well as their views of the business, operational, strategic benefits, and other implications of the Transaction, and certain other matters Chase believed necessary or appropriate to Chase's inquiry, including (a) the overall high debt level of the Company, (b) the need for further liquidity to support the Company's construction operations and bonding capacity, (c) limited net proceeds available to the Company if it were to pursue an accelerated disposition of its real estate assets, (d) potential exposure to future payments resulting from the Company's Washington Metropolitan Area Transit Authority litigation in which the Company was found liable in a Preliminary judgment by the U.S. District Court (D.C.) in July 1993, and (e) the benefits of the Transaction in strengthening the balance sheet of the Company; (viii) reviewed certain agreements with respect to outstanding indebtedness or obligations of the Company; (ix) reviewed certain information provided by the Company regarding its real estate subsidiary and portfolio of assets; (x) reviewed certain internal non-public financial and operating data provided by the Company's management concerning the Company's business, including management forecasts and projections of future financial results; and (xi) made such other analyses and examinations as Chase deemed necessary or appropriate. In connection with its opinion, Chase relied upon and did not assume any responsibility for independently verifying the accuracy and completeness of all of the information provided to, discussed with, or reviewed by or for Chase, or publicly available for purposes of its opinion, and did not assume any liability with respect thereto. Chase has not made nor 27 PRELIMINARY COPY obtained any independent evaluations or appraisals of the assets or liabilities of the Company, and Chase has not conducted a physical inspection of the properties and facilities of the Company. With respect to financial forecasts and projections prepared by the Company, Chase assumed that they were reasonably prepared on bases reflecting the best currently available estimates and judgments of the Company's management as to the future financial performance of the Company. Chase expressed no views as to such forecasts or projections or the assumptions on which they were based. Chase also assumed that the Transaction will have the tax consequences described to it in discussions with, and materials furnished to Chase by, representatives of the Company, and that the other transactions contemplated by the Agreement will be consummated as described in such agreement. In addition, Chase was not authorized and did not solicit any indications of interest from any third parties with respect to the purchase of all or part of the Company's business or assets, and accordingly Chase relied entirely on the results of the process conducted by representatives of J.P. Morgan in that regard. For purposes of rendering its opinion, Chase has also assumed, in all respects material to its analysis, that the representations and warranties of each party contained in the Agreement are true and correct, that each party has and will perform all of the covenants and agreements required to be performed by it under such agreement, and that all conditions to the consummation of the Transaction will be satisfied without waiver thereof. Chase necessarily based its opinion on market, economic, and other conditions as they existed on, and could be evaluated as of, the date of such opinion. Subsequent developments may affect or have affected Chase's opinion, and Chase did not undertake any obligation to update, revise, or reaffirm its opinion. Additionally, Chase expressed no opinion as to the price at which the Company's Common Stock will trade at any future time. The following is a summary of certain of the financial analyses utilized by Chase and reviewed with the Board of Directors of the Company at its meeting on September 27, 1996, and does not purport to be a complete description of the analyses performed by Chase. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses as a whole could create an incomplete view of the processes underlying Chase's opinion. In arriving at its fairness determination, Chase considered the results of all such analyses. The analyses were prepared solely for the purpose of enabling Chase to render its opinion to the Board of Directors of the Company. Analyses based upon forecasts of future results are not necessarily indicative of actual future values, which may be significantly more or less favorable than suggested by such analyses. COMPARABLE COMPANY ANALYSIS. Chase compared certain publicly available financial data of selected companies in the construction and the construction and engineering industries with that of the Company. The selected construction companies were Guy F. Atkinson Company of California, Banister Foundation Inc., Granite Construction Incorporated and 28 Turner Corporation. The selected construction and engineering companies were Fluor Corporation, Foster Wheeler Corporation, Jacobs Engineering Group and Stone & Webster Incorporated. For each selected company, Chase, among other things, derived an adjusted market value of such company, consisting of the aggregate market value of the Company's common stock trading price, plus the amount of total indebtedness and preferred stock of such company less its cash and cash equivalents, and analyzed the (i) revenues, (ii) earnings before interest, taxes, depreciation and amortization ("EBITDA") and (iii) EBIT of these companies for the last twelve months, in each case as a multiple of adjusted market value. This analysis produced multiples of (i) revenues to adjusted market value ranging from a high of 0.6x to a low of 0.0x, with a mean of 0.3x, as compared to a multiple for the Company of 0.lx, (ii) EBITDA to adjusted market value ranging from a high of 9.3x to a low of 5.10x, with a mean of 7.6x, as compared to a multiple for the Company of 18.5x and (iii) EBIT to adjusted market value ranging from a high of 17.6x to a low of 9.0x, with a mean of 12.9x, as compared to a multiple for the Company of 27.9x. Due to the depressed financial results of the Company, as well as the financial condition of some of the comparable companies, Chase did not derive a specific per share reference range from this analysis. MERGER & ACQUISITION TRANSACTION ANALYSIS. Chase reviewed nine merger and acquisition transactions in the construction industry announced since October 1, 1990. The transactions reviewed in this analysis (collectively, the "Transaction Comparables") were Washington Construction Group Inc.'s acquisition of Morrison Knudsen Corp., Granite Construction Co.'s acquisition of Gibbons Co., Ogden Corp.'s acquisition of Ogden Projects Inc., Washington Contractors Group Inc.'s acquisition Of Kasler Corp., Karl Steiner Holding Corp.'s acquisition of Turner Corp, Banister Capital Foundation Inc.'s acquisition of Majestic Contractors Ltd., Blackstone Capital Partners LP's acquisition of Great Lakes Dredge & Dock Co., LE Myers Co. Group's acquisition of Hawkeye Construction Inc. and Ogden Corp's acquisition of ERC Environmental & Energy Services Inc. For each Transaction Comparable, Chase, among other things, analyzed each acquired company's EBIT for the last twelve months, in each case as a multiple of the transaction value, and derived reference multiples ranging from 7.5x to 8.5x. Based on this range, Chase calculated the implied equity value of the Company to be approximately $8.97 to $12.25 per share. CONSTRUCTION BUSINESS DISCOUNTED CASH FLOW ANALYSIS. Chase performed a discounted cash flow analysis for the purpose of determining the equity value per share of the Company's construction business. Based on certain forecasts and projections provided to Chase by the Company's management for the fourth quarter of 1996 and the years 1997 through 2000, Chase calculated the projected stream of unlevered free cash flows of the Company's construction business through the year 2000. Chase derived the estimated present value of such cash flows using discount rates ranging from 10.5% (low) to 11.5% (high), which were selected by Chase based on an analysis of the weighted average cost of capital of the companies named in the comparable company peer groups. After taking into account assumed terminal values of the construction business at the end of the year 2000 (based on exit 29 PRELIMINARY COPY multiples of projected EBIT ranging from 6.0x and 8.0x) and giving effect to the total corporate debt level, Chase calculated a per share reference range of $6.31 to $11.50 for the Company's construction business. PUBLIC COMPANY TRANSACTION ANALYSIS. Chase summarized eight transactions in which private equity investors purchased significant equity stakes directly from publicly traded corporations. The companies used in this analysis were the investment by Brown Brothers Harriman 1818 Fund L.P. in Columbia Hospital Corp., by Kohlberg Kravis Roberts & Co. in TW Holdings, Inc., by Joseph Littlejohn & Levy in Doskocil Companies Inc., by Blackstone Capital Partners LP in People's Choice TV Corp., by Warburg Pincus Ventures/International Biotechnology Trust in Amergen Inc., by Hass Wheat & Harrison Inc. in Playtex Products, Inc., by Insurance Partners, L.P./Management in Highland Insurance Group Inc. and by Warburg Pincus Ventures/Richard Snyder in Western Publishing Group Inc. Chase noted that none of the transactions was identical to the Transaction. However, despite significant variations among these transactions, this analysis provides a useful benchmark with respect to certain structural, corporate governance, and financial aspects of this type of investment transaction. The terms of the engagement of Chase by the Board of Directors are set forth in the letter agreement, dated September 5, 1996, by and between Chase and the Company (the "Engagement Letter"). Pursuant to the terms of the Engagement Letter, the Company has paid Chase, in consideration of certain advisory services with respect to the Transaction, a fee of $500,000 upon delivery of its written opinion dated as of September 27, 1996. In addition, the Company has agreed to reimburse Chase for its reasonable out-of-pocket expenses, including fees and disbursements of its counsel, and to indemnify Chase against certain liabilities relating to or arising out of this engagement. In the ordinary course of business, Chase or its affiliates may trade in the securities of the Company for their own accounts and for the accounts of their customers and, accordingly, may at any time hold a long or short position in such securities. 30 PRELIMINARY COPY THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE ISSUANCE OF THE SERIES B PREFERRED STOCK PROPOSAL 2 APPROVAL OF AMENDMENT OF BY-LAWS Reason for By-Law Amendment As part of the Transaction pursuant to which the Series B Preferred Stock will be issued, the Board of Directors of the Company has approved a By-Law Amendment that will become operative with no further action of the Board or the stockholders immediately upon the consummation of the purchase of the Series B Preferred Stock by PB Capital. However, because of the size of its investment in the Company, PB Capital, as a condition of its obligation to acquire the Series B Preferred Stock, is requiring that the Company obtain stockholder approval of the By-Law Amendment even though stockholder approval is not required under Massachusetts law. The By-Law Amendment is described in the following paragraph. Description of By-Law Amendment Under the By-Laws of the Company, as amended by the By-Law Amendment, the Executive Committee is fixed at five members. Certain powers of the Board of Directors are expressly delegated to the Executive Committee. More specifically, neither the Company nor the Board of Directors may take any of the following actions without the approval of a majority of the members of the Executive Committee of the Board of Directors: (1) any borrowing or guarantee by the Company exceeding $15 million, (2) except for issuance of stock or stock options pursuant to the Company's incentive compensation plans or programs, any issuance of stock other than Common Stock of the Company in an aggregate amount not exceeding five percent (5%) of the Common Stock of the Company issued and outstanding on the date of the initial issuance of Series B Preferred Stock to PB Capital, (3) any strategic alliance (other than a construction joint venture) involving a capital commitment by the Company exceeding $5 million, (4) any asset sale by the Company or lease as lessor exceeding $5 million (other than equipment dispositions in the normal course of business); and (5) any redemption or amendment of the Shareholder Rights Agreement or the preferred stock of the Company issuable upon the exercise of such rights. In addition, the Executive Committee shall have the power to supervise the activities of the Company's chief executive officer. The Certificate of Vote provides that the By-Laws of the Company may not be amended in a manner that affects the rights of the holders of the Series B Preferred Stock without the affirmative vote or consent of two-thirds of such shares. 31 PRELIMINARY COPY THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE AMENDMENT OF THE COMPANY'S BY-LAWS Principal Stockholders The following table sets forth the beneficial ownership of the Company's voting securities as to (i) each person who is known by the Company to beneficially own more than five percent of any class of the Company's voting securities, (ii) each of the Company's directors, (iii) the Company's Chief Executive Officer and each of the three other most highly compensated executive officers during 1995 (the "Named Executive Officers"), and (iv) all directors and Named Executive Officers as a group, based on representations of officers and directors of the Company as of October 1, 1996 and filings as of or prior to October 1, 1996 received by the Company on Schedules 13D and 13G or Form 13F under the Exchange Act. All such information was provided by the stockholders listed and reflects their beneficial ownership based on such representations or filings. In addition, the table sets forth the pro-forma voting power for the listed beneficial owners in the event that the closing of the Transaction occurs and in the event that the Series B Preferred Stock is converted to Common Stock. 32 PRELIMINARY COPY
5% Stockholders, Named Amount and Pro Forma Voting Power Assuming ---------------------- ---------- ------------------------------- Executive Officers, and Nature of Approval of Conversion of Directors and Named Executive Beneficial Percentage Present Issuance of Series B Title of Class Officers as a Group Ownership(1) of Class Voting Power Series B Preferred(2) Preferred(2) - - - - - -------------- ----------------------------- ------------ -------- ------------ --------------------- ----------------- Series B PB Capital Partners, L.P. 150,150(3) 100.00% 0.00% 37.09%(4) 37.09%(4) Preferred 909 Montgomery St. Suite 400 San Francisco, CA 94113 Common Stock Perini Corporation 472,236(6) 9.73% 9.73% 5.65% 5.65% Employee Stock Ownership Trust ("ESOT")(5) 73 Mt. Wayte Avenue Framingham, MA 01701 Common Stock Tutor-Saliba Corporation 351,318(7) 7.24% 7.24% 4.20% 4.20% c/o Ronald N. Tutor 15901 Olden Street Sylmar, CA 91342 Common Stock Quest Advisory Corp 327,000(8) 6.74% 6.74% 3.91% 3.91% 1414 Avenue of the Americas New York, NY 10019 Common Stock TCW Group, Inc. 284,500(9) 5.86% 5.86% 3.40% 3.40% 865 So. Figueroa St. Los Angeles, CA 90017 33
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5% Stockholders, Named Amount and Pro Forma Voting Power Assuming ---------------------- ---------- ------------------------------- Executive Officers, and Nature of Approval of Directors and Named Executive Beneficial Percentage Present Issuance of Conversion of Title of Class Officers as a Group Ownership(1) of Class Voting Power Series B Series B Preferred (2) Preferred(2) - - - - - -------------- ----------------------------------- ------------- ------------- --------------- ------------ ----------------- Common Stock David B. Perini 375,580(10) 7.74% 7.74% 4.49% 4.49% Chairman, President and Chief Executive Officer Common Stock John J. McHale 4,305(11) * * * * Director Common Stock Richard J. Boushka 5,105(11) * * * * Director Common Stock Bart W. Perini 218,609(12) 4.51% 4.51% 2.61% 2.61% Director, Chairman, President and Chief Executive Officer of Perini Land and Development Company Common Stock Marshall M. Criser 4,305(13) * * * * Director Common Stock Thomas E. Dailey 12,822(14) * * * * Director Common Stock Arthur J. Fox, Jr. 4,468(15) * * * * Director Common Stock Jane E. Newman 2,484(16) * * * * Director
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5% Stockholders, Named Amount and Pro Forma Voting Power Assuming ---------------------- ---------- ------------------------------- Executive Officers, and Nature of Approval of Directors and Named Executive Beneficial Percentage Present Issuance of Conversion of Title of Class Officers as a Group Ownership(1) of Class Voting Power Series B Series B Preferred (2) Preferred(2) - - - - - -------------- ----------------------------------- ------------- ------------- --------------- ------------ ----------------- Common Stock Albert A. Dorman 3,207(17) * * * * Director Common Stock Nancy Hawthorne 3,100(18) * * * * Director Common Stock Richard J. Rizzo 28,778(19) * * * * Executive Vice President, Building Construction Common Stock John H. Schwarz 26,117(20) * * * * Executive Vice President, Finance & Administration Common Stock Donald E. Unbekant 35,852(21) * * * * Executive Vice President, Civil & Environmental Construction Common Stock All directors and executive 519,283(22) 10.70% 10.70% 6.21% 6.21% officers as a group (13 persons)
- - - - - ------------------------ * Less than one percent (1) Unless otherwise noted in the footnotes to this table, each individual or entity in the table above has sole or shared voting and investment power over the shares listed. (2) For purposes of calculating the pro forma beneficial ownership percentages, the total shares outstanding include the 3,101,571 shares referred to in Note (3) below and 409,774 shares applicable to the Stock Purchase Warrants (see "Credit Facilities"). (3) Assuming issuance of Series B Preferred Stock. (4) Includes voting power equal to 3,101,571 shares of Common Stock assuming approval of the issuance of the Series B Preferred Stock pursuant to this Proxy solicitation. Voting power, assuming conversion of the Series B Preferred Stock, is also equal to 3,101,571 shares of Common Stock. (5) Robert E. Higgins, John E. Chiaverini, and [substitute trustee to be elected] are Trustees of the Perini Corporation ESOT and are members of the Committee empowered to administer the Perini Corporation Employee Stock Ownership Plan ("ESOP") under the terms thereof. (6) The ESOT has sole voting and investing power for 149,861 shares. In addition, there are 322,375 shares held by the Trust that have been allocated to the accounts of participants in the Perini Corporation Employee Stock Ownership Plan. (7) Based on information contained in Schedule 13D of Tutor-Saliba Corporation dated March 9, 1995 and subsequent direct communications by the Company with the appropriate representatives of Tutor-Saliba Corporation. (8) Based on information contained in Schedule 13G of Quest Advisory Corp. (a New York Corporation) and Quest Management Company (a Connecticut General Partnership) dated February 15, 1996. (9) Based on information contained in Schedule 13G of the TCW Group, Inc. dated February 12, 1996. (10) David B. Perini disclaims beneficial ownership in 208,544 of such 375,580 shares. Includes 12,942 shares in his children's names for which he has Power of Attorney giving him voting power. Includes 40,500 shares for which Mr. Perini holds options. Includes 596 shares of Common Stock resulting from the assumed conversion of 900 shares of Convertible Preferred Stock (.662 shares of Common Stock for each share of Preferred Stock). Includes 56,499 shares, held in a testamentary trust established under the will of Louis R. Perini Sr. David B. Perini is one of four trustees of such trust and is one of the beneficiaries of this trust. Includes 66 shares of Common Stock resulting from the assumed conversion of 100 shares of Convertible Preferred Stock (.662 shares of Common Stock for each share of Preferred Stock), as to which Mr. Perini disclaims beneficial ownership. Includes 205,449 shares, as to which Mr. Perini disclaims beneficial interest, held by The Perini Memorial Foundation, Inc., a 35 PRELIMINARY COPY Massachusetts charitable corporation ("The Perini Foundation"), of which David B. Perini is an officer and director. The wife of Mr. Perini owns 3,029 of such shares in her name, as to all of which shares Mr. Perini disclaims beneficial ownership. (11) Includes 1,148 shares awarded on May 19, 1994, 366 shares awarded on May 19, 1988 and 835 shares awarded on May 16, 1991 pursuant to the 1988 Perini Corporation Restricted Stock Plan for Outside Directors. Also includes 1,756 shares of Common Stock received in lieu of the 1996 first, second, third and fourth quarterly cash payments of the director's annual retainer due January 2, April 1, July 1 and October 1, 1996, respectively. (12) Includes 7,500 shares for which Mr. Perini holds options. Includes 205,449 shares, as to which Mr. Perini disclaims any beneficial interest, held by The Perini Foundation, of which Bart W. Perini is an officer and director. (13) Includes 1,148 shares awarded on May 19, 1994, 366 shares awarded on May 19, 1988 and 835 shares awarded on May 16, 1991 pursuant to the 1988 Perini Corporation Restricted Stock Plan for Outside Directors. Also includes 1,756 shares of Common Stock received in lieu of the 1996 first, second, third and fourth quarterly cash payments of the director's annual retainer due January 2, April 1, July 1 and October 1, 1996, respectively. Includes 200 shares which Mr. Criser owns jointly with his wife. (14) Includes 4,500 shares for which Mr. Dailey holds options. Also includes 1,756 shares of Common Stock received in lieu of the 1996 first, second, third and fourth quarterly cash payments of the director's annual retainer due January 2, April 1, July 1 and October 1, 1996, respectively, and 6,566 shares of Common Stock received in May, 1996 in lieu of cash payment of partial amount due in conjunction with the Company's Construction Business Unit Incentive Compensation Plan. (15) Includes 1,148 shares awarded on May 19, 1994, 214 shares awarded on May 19, 1988 and 835 shares awarded on May 16, 1991 pursuant to the 1988 Perini Corporation Restricted Stock Plan for Outside Directors. Also includes 1,756 shares of Common Stock received in lieu of the 1996 first, second, third and fourth quarterly cash payments of the director's annual retainer due January 2, April 1, July 1 and October 1, 1996, respectively. (16) Includes 728 shares awarded on May 19, 1994 pursuant to the 1988 Perini Corporation Restricted Stock Plan for Outside Directors. Also includes 1,756 shares of Common Stock received in lieu of the 1996 first, second, third and fourth quarterly cash payments of the director's annual retainer due January 2, April 1, July 1 and October 1, 1996, respectively. (17) Includes 1,148 shares awarded on May 19, 1994, and 303 shares awarded on March 10, 1993 pursuant to the 1988 Perini Corporation Restricted Stock Plan for Outside Directors. Also includes 1,756 shares of Common Stock received in lieu of the 1996 first, second, third and fourth quarterly cash payments of the director's annual retainer due January 2, April 1, July 1 and October 1, 1996, respectively. (18) Includes 1,148 shares awarded on May 19, 1994, and 196 shares awarded on December 7, 1993 pursuant to the 1988 Perini Corporation Restricted Stock Plan for Outside Directors. Also includes 1,756 shares of Common Stock received in lieu of the 1996 first, second, third and fourth quarterly cash payments of the director's annual retainer due January 2, April 1, July 1 and October 1, 1996, respectively. 36 PRELIMINARY COPY (19) Includes 14,000 shares for which Mr. Rizzo holds options. (20) Includes 14,000 shares for which Mr. Schwarz holds options. (21) Includes 14,000 shares for which Mr. Unbekant holds options. (22) The number of shares beneficially owned by all directors and corporate officers as a group has been adjusted to eliminate the duplicate inclusion of 205,449 shares owned by The Perini Foundation. 37 PRELIMINARY COPY CHANGE IN CONTROL If the approval of the stockholders for the issuance of the Series B Preferred Stock is obtained pursuant to this proxy solicitation, PB Capital will upon issuance of the initial 150,150 shares of Series B Preferred Stock have voting rights equivalent to 3,101,571 Shares of Common Stock, or approximately 37% voting power, as well as, conversion rights providing equal voting power as indicated in the table above. Furthermore, as noted in "Description of Series B Preferred Stock," the holders of Series B Preferred Stock will elect three members to the Board of Directors and will also elect three members of the five member Executive Committee. As a result, PB Capital will have an effective veto over certain of the major financial decisions of the Company and provide oversight to the Company's Chief Executive Officer. (See Description of By-Law Amendment). In addition, assuming the Company elects to pay dividends in the form of additional Series B Preferred Stock, PB Capital will acquire additional shares of the Company's Common Stock. As a result, the Transaction may constitute a "Change in Control" for the purposes of disclosure under the Securities Exchange Act of 1934. Independent Auditors - - - - - -------------------- The accounting firm of Arthur Andersen LLP has served as the Company's independent auditors since 1960. A representative of Arthur Andersen LLP will be present at the Special Meeting and will be available to respond to appropriate questions. 38 PRELIMINARY COPY Financial Information - - - - - --------------------- SUMMARY CONSOLIDATED FINANCIAL INFORMATION
Six Months Ended June 30, (Unaudited) Year Ended December 31, ---------------------------- ------------------------------------------------------------------- 1996 1995 1995 1994 1993 1992 1991 -------------- ----------- ------------- ------------- ------------ ------------- ---- (Amounts in thousands, except per share data) Statement of Operations Data Revenues: Construction $ 565,753 $ 547,027 $ 1,056,673 $ 950,884 $ 1,030,341 $ 1,023,274 $ 919,641 Real estate development 20,768 23,023 44,395 61,161 69,775 47,578 72,267 Net Income (loss) (1) (2) 3,511 1,758 (27,585) 303 3,165 (16,984) 3,178 Earnings (loss) per common share $ .51 $ .15 $ (6.38) $ (.42) $ .24 $ (4.69) $ .27 Pro forma earnings (loss) per common share (3) $ .05 $ (.29) $ (7.27) Weighted average number of shares outstanding 4,758 4,600 4,655 4,380 4,265 4,079 3,918 At June 30, 1996 ---------------------------------- As Actual Adjusted (4) -------------- --------------- Balance Sheet Data Working capital $ 50,519 $ 77,519 Long-term debt, less current maturities 92,941 92,941 Redeemable preferred - 27,000 stock Stockholders' equity 110,151 112,281 Total assets 530,477 559,607 Backlog $ 1,536,530 $ 1,536,530
(1) Net income (loss) in 1992 and 1991 includes pretax writedowns of $31.4 million and $2.8 million, respectively, to reduce the carrying value of certain real estate to net realizable value. (2) Net income (loss) for 1995 includes a pretax charge of $25.6 million in connection with previously disclosed litigation in Washington, D.C. and downward revisions in estimated probable recoveries on certain outstanding contract claims. (3) Reflects impact of quarterly payment of "in-kind" dividend at an annual rate of 10% on the new Series B Cumulative Convertible Preferred Stock, accretion to the carrying amount of the Series B Preferred Stock required over time to increase the carrying amount to its "Redemption Value," and amortization of the initial carrying value attributable to the Stock Purchase Warrants. 39 (4) Adjusted to give effect to (i) the sale of 150,150 shares of Series B Cumulative Convertible Preferred Stock at $200 per share less related expenses and (ii) the estimated grant date present value of Stock Purchase Warrants of $2.13 million to purchase 409,774 shares of common stock, $1.00 par value, at $9.025 per share (market value as of October 1, 1996). 40 PRELIMINARY COPY CAPITALIZATION The following table sets forth the consolidated capitalization of the Company at June 30, 1996, and as adjusted to (1) reflect the issuance of the 150,150 shares of Series B Cumulative Convertible Preferred Stock and (2) the granting of certain warrants to the Company's Revolving Bank Group:
In thousands -------------------------------------------- Actual As Adjusted ------------------- -------------------- Short-term Debt - Current Maturities of Long-term Debt $ 6,800 $ 6,800 ------------------- -------------------- Long-term Debt: Real Estate Development $ 3,501 $ 3,501 Other 89,440 89,440 ------------------- -------------------- Total Long-term Debt $ 92,941 $ 92,941 ------------------- -------------------- Redeemable Preferred Stock, $1.00 par value 150,150 shares of Series B Cumulative Convertible Preferred Stock, liquidation preference of $30,030,000 (1) $ $ 27,000(2) ------------------- -------------------- Stockholders' Equity: Preferred Stock, $1.00 par value Authorized - 1,000,000 shares Issued - 100,000 shares of $21.25 Convertible Exchangeable Preferred Stock, liquidation preference of $25,000,000 $ 100 $ 100 Stock Purchase Warrants --- 2,130(3) Common Stock, $1.00 par value Authorized - 15,000,000 shares Issued - 4,985,160 shares (4) 4,985 4,985 Paid-in Surplus 56,762 56,762 Retained Earnings 54,511 54,511 ESOT Related Obligations (3,976) (3,976) Less - Common Stock in Treasury, at cost - 139,971 shares (2,231) (2,231) ------------------- -------------------- Total Stockholders' Equity $ 110,151 $ 112,281 ------------------- -------------------- Total Capitalization $ 203,092 $ 232,222 ------------------- --------------------
(1) Dividends on the Series B Preferred Stock are payable quarterly based on an annual rate of 7% if payable in cash and 10% if payable "in-kind" with additional shares of Series B Preferred Stock. Also, the Company is required to purchase the Redeemable Preferred Stock under certain circumstances (see "Description of Series B Preferred"). In addition, in connection with the Transaction, the new credit facilities will limit the aforementioned rights of redemption (see "Credit Facilities"). (2) Represents proceeds of $30,030,000 less related estimated expenses of $3,030,000. (3) The grant date present value of the Stock Purchase Warrants to purchase 409,774 shares of Common Stock was calculated using the Black-Scholes option pricing model. (4) If the Series B Preferred Stock had been converted into Common Stock, the number of shares of Common Stock issued would have been increased by 3,101,571 shares. SELECTED FINANCIAL DATA The Selected Financial Data contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and Quarterly Report on Form 10- Q for the fiscal quarter ended June 30, 1996 are incorporated herein by reference and are being provided along with this Proxy Statement to each person to whom this Proxy Statement is being delivered. MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Management Discussion and Analysis of the the financial condition and results of operations contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996 are incorporated herein by reference and are being provided along with this Proxy Statement to each person to whom this Proxy Statement is being delivered. 41 PRELIMINARY COPY Solicitation of Proxies - - - - - ----------------------- The cost of solicitation of proxies in the form enclosed herewith will be paid by the Company. In addition to the solicitation of proxies by mail, the directors, officers and employees of the Company may also solicit proxies personally or by telephone or facsimile without additional compensation for such activities. Arrangements will also be made with brokerage firms and other custodians, nominees and fiduciaries for forwarding solicitation materials to the beneficial owners of shares held of record by such persons and the Company will reimburse such persons for their reasonable out-of-pocket expenses incurred in that connection. The Company has also retained D.F. King, a proxy soliciting firm, to assist in the solicitation of proxies at a fee of $5,500, plus reimbursement of certain out-of-pocket costs. The Company will also request persons, firms and corporations holding shares in their names or in the names of their nominees, which are beneficially owned by others, to send proxy materials to and obtain proxies from such beneficial owners. The Company will reimburse such holders for their reasonable expenses. Stockholder Proposals for 1997 Annual Meeting - - - - - --------------------------------------------- For a proposal of a stockholder (including director nominations) to be presented to the Company's 1997 Annual Meeting of Stockholders, a stockholder's notice must be delivered to, or mailed and received at, the principal executive offices of the Company on or before December 11, 1996. Any such proposal should be mailed to: Perini Corporation, 73 Mt. Wayte Avenue, Framingham, Massachusetts 01701, Attn. Richard E. Burnham. In addition, stockholder proposals and director nominations must comply with the requirements of the Company's By-Laws. Incorporation of Certain Documents by Reference - - - - - ----------------------------------------------- The Company hereby incorporates by reference the documents listed in (a) and (b) below, which have previously been filed with the Securities and Exchange Commission. (a) The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, filed with the Securities and Exchange Commission (File No. 1-6314) pursuant to the Exchange Act; and (b) The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996. 42 PRELIMINARY COPY Inclusion of Documents Incorporated by Reference - - - - - ------------------------------------------------ Along with this Proxy Statement, the Company has provided, without charge, to each person to whom this Proxy Statement is delivered, a copy of the information that has been incorporated by reference in this Proxy Statement (not including exhibits to the information that is incorporated by reference unless such exhibits are specifically incorporated by reference into the information that this Proxy Statement incorporates). Other Matters - - - - - ------------- The Board of Directors does not know of any other matters other than those described in this Proxy Statement which will be presented for action at the Special Meeting. If other matters are duly presented, proxies will be voted in accordance with the best judgment of the proxy holders. REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE COMPANY. PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD TODAY. 309215.c7 10/3/96 43 PRELIMINARY COPY ANNEX A ------- The Board of Directors Perini Corporation 73 Mt. Wayte Avenue Box 9160 Framingham, MA 01701-9160 Attention: Mr. David B. Perini Chairman Ladies and Gentlemen: You have requested our opinion as to the fairness, from a financial point of view, to Perini Corporation (the "Company") of the consideration to be paid to the Company in connection with the proposed issuance and sale to PB Capital Partners, L.P. (the "Buyer") of 150,150 shares of Series B Cumulative Convertible Preferred Stock (the "Preferred Stock") of the Company (the "Transaction"). Pursuant to the Stock Purchase and Sale Agreement, dated as of July 24, 1996 (the "Agreement"), between the Company, Richard C. Blum & Associates, L.P. and the Buyer, the Buyer will purchase an aggregate of 150,150 newly issued shares of the Preferred Stock, and the Company will receive consideration equal to $30,030,000. In arriving at our opinion, we have reviewed (i) the Agreement and the other Transaction Documents referred to therein; (ii) the audited financial statements of the Company for the fiscal years ended December 31, 1995 and December 31, 1994, and the unaudited financial statements of the Company for the period ended June 30,1996; (iii) current and historical market prices of the Company's common stock; (iv) certain publicly available information concerning the business of the Company and of certain other companies engaged in businesses comparable to those of the Company, and the reported market prices for certain other companies' securities deemed comparable; (v) publicly available terms of certain transactions involving companies comparable to the Company and the consideration paid for such companies; (vi) certain agreements with respect to outstanding indebtedness or obligations of the Company; (vii) certain information regarding the Company's real estate subsidiary and portfolio of assets provided by the Company; and (viii) certain internal financial analyses and forecasts prepared by the Company and its management. In addition, we have held discussions with certain members of the management of the Company with respect to certain aspects of the Transaction, the past and current business operations of the Company, the financial condition and future prospects and operations of the Company, the effects of the Transaction on the financial condition and future prospects of the 44 PRELIMINARY COPY Company, and certain other matters we believed necessary or appropriate to our inquiry. These matters included the overall high debt level of the Company; the need for further liquidity to support the Company's construction operations and bonding capacity; limited net proceeds available to the Company if it were to pursue an accelerated disposition of its real estate assets; potential exposure to future payments resulting from the Company's Washington Metropolitan Area Transit Authority litigation, in which the Company was found liable for $16.5 million in a preliminary judgment by the U.S. District Court (D.C.) in July 1993; and the benefits of the transaction in strengthening the balance sheet of the Company. We have visited certain representative facilities and real estate assets of the Company, and reviewed such other financial studies and analyses and considered such other information as we deemed appropriate for the purposes of this opinion. In giving our opinion, we have relied upon, without assuming any responsibility for independent verification, the accuracy and completeness of all information that was publicly available or was furnished to us by the Company or otherwise reviewed by us, and we have not assumed any liability therefor. We have not conducted any valuation or appraisal of any assets or liabilities, nor have any such valuations or appraisals been provided to us. In relying on financial analyses and forecasts provided to us, we have assumed that they have been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of the Company to which such analyses or forecasts relate. We have also assumed that the Transaction will have the tax consequences described to us in discussions with, and materials furnished to us by, representatives of the Company, and that the other transactions contemplated by the Agreement will be consummated as described in such Agreement. Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. It should be understood that subsequent developments may affect this opinion and that we do not undertake any obligation to update, revise, or reaffirm this opinion. We are expressing no opinion herein as to the price at which the Company's Common Stock will trade at any future time. We have acted as financial advisor to the Company with respect to the proposed Transaction and have received advisory fees from the Company for our services. We will receive a fee for delivery of this opinion and, if the proposed Transaction is consummated, an additional success fee from the Company. Please be advised that our affiliated bank, Morgan Guaranty Trust Company of New York, is agent bank for the Company's current revolving credit facility which is being restructured as part of the Transaction. In the ordinary course of their businesses, our affiliates may actively trade the equity securities of the Company for their own account or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities. 45 PRELIMINARY COPY On the basis of and subject to the foregoing, it is our opinion as of the date hereof that the consideration to be paid to the Company in the proposed Transaction is fair, from a financial point of view, to the Company. This letter is provided for the benefit of the Board of Directors of the Company in connection with and for the purposes of its evaluation of the Transaction. This opinion does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote with respect to the Transaction and should not be relied upon by any stockholder as such. This opinion may not be disclosed, referred to, or communicated (in whole or in part) to any third party for any purpose whatsoever except with our prior written consent in each instance. This opinion may be reproduced in full in any proxy or information statement mailed to stockholders of the Company but may not otherwise be disclosed publicly in any manner without our prior written approval and, if not so disclosed, must be treated as confidential. Very truly yours, J.P. MORGAN SECURITIES INC. BY: ---------------------------- Name: Dianne F. Lob Title: Managing Director 46 PRELIMINARY COPY ANNEX B ------- Fairness Opinion PRIVATE AND CONFIDENTIAL - - - - - ------------------------ September 27, 1996 The Board of Directors Perini Corporation 73 Mt. Wayte Avenue Box 9160 Framingham, MA 01701-9160 Attention: Mr David B. Perini Chairman Ladies and Gentlemen: You have requested our opinion as to the fairness, from a financial point of view, to Perini Corporation (the "Company") of the consideration to be paid to the Company in connection with the issuance and sale (the "Transaction") of 150,150 newly issued shares of Series B Cumulative Convertible Preferred Stock (the "Preferred Stock") of the Company to PB Capital Partners, L.P. (the "Buyer"). You have informed us that the Buyer will purchase the Preferred Stock pursuant to the Stock Purchase and Sale Agreement, dated as of July 24, 1996 (the "Agreement"), by and among the Company, the Buyer, and Richard C. Blum & Associates, L.P., and that the Company will receive cash consideration before expenses in connection with such purchase of $30,030,000. In arriving at the opinion set forth below, we have, among other things: (a) reviewed the Agreement and other Transaction documents referred to therein; (b) reviewed the Company's draft proxy statement prepared in connection with seeking shareholder approval for the Transaction; (c) reviewed certain publicly available business and financial information of the Company, including the audited financial statements of the Company for the fiscal years ended December 31, 1995 and December 31, 1994 and the unaudited financial statements of the Company for the period ended June 30, 1996; 47 PRELIMINARY COPY (d) reviewed certain publicly available business and financial information of certain companies engaged in businesses we deemed comparable to those of the Company; (e) compared current and historical market prices of the Company's common stock and reported market prices of the securities of certain other companies that were deemed comparable; (f) reviewed publicly available financial terms of certain business transactions we deemed comparable to the Transaction and otherwise relevant to our inquiry; (g) held discussions with members of the Company's senior management concerning certain aspects of the Transaction, the Company's past and current business operations, the Company's financial condition, future prospects, and operations, before and after giving effect to the Transaction, as well as their views of the business, operational, strategic benefits, and other implications of the Transaction, and certain other matters we believed necessary or appropriate to our inquiry, including (i) the overall high debt level of the Company; (ii) the need for further liquidity to support the Company's construction operations and bonding capacity; (iii) limited net proceeds available to the Company if it were to pursue an accelerated disposition of its real estate assets; (iv) potential exposure to future payments resulting from the Company's Washington Metropolitan Area Transit Authority litigation in which the Company was found liable in a Preliminary judgment by the U.S. District Court (D.C.) in July 1993, and (v) the benefits of the Transaction in strengthening the balance sheet of the Company; (h) reviewed certain agreements with respect to outstanding indebtedness or obligations of the Company, including a draft of the summary terms and conditions of the Company's restructured bank agreement; (i) reviewed certain information provided by the Company regarding its real estate subsidiary and portfolio of assets; (j) reviewed certain internal non-public financial and operating data provided to us by the Company's management concerning the Company's business, including management forecasts and projections of future financial results; and 48 PRELIMINARY COPY (k) made such other analyses and examinations as we have deemed necessary or appropriate. We have relied upon, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial and other information provided to, discussed with, or reviewed by or for us, or publicly available for purposes of this opinion, and we have not assumed any liability therefor. We have neither made nor obtained any independent evaluations or appraisals of the assets or liabilities of the Company, nor have we conducted a physical inspection of the properties and facilities of the Company. We have assumed that the financial forecasts and projections prepared by the Company have been reasonably prepared on bases reflecting the best currently available estimates and judgments of management of the Company as to the future financial performance of the Company. We express no views as to such forecasts or projections or the assumptions on which they were based. We have also assumed that the Transaction will have the tax consequences described to us in discussions with, and materials furnished to us by, representatives of the Company, and that the other transactions contemplated by the Agreement will be consummated as described in the Agreement. Furthermore, we have assumed that the documents that have been furnished to us in draft form in connection with the Transaction will not, when executed, contain any terms and conditions that differ materially from the terms and conditions previously disclosed to us. In addition, you have not authorized us to solicit, and we have not solicited, any indications of interest from any third parties with respect to the purchase of all or part of the Company's business or assets, and, accordingly, we have relied entirely on the results of the process conducted by representatives of J.P. Morgan Securities Inc. in this regard. For purposes of rendering our opinion we have assumed, in all respects material to our analysis, that the representations and warranties of each party contained in the Agreement are true and correct, that each party has and will perform all of the covenants and agreements required to be performed by it under the Agreement and that all conditions to the consummation of the Transaction have and will be satisfied without waiver thereof. Our opinion herein is necessarily based on market, economic and other conditions as they exist and can be evaluated on the date of this letter. It should be understood that subsequent developments may affect this opinion and that we do not undertake any obligation to update, revise, or reaffirm this opinion. We are expressing no opinion herein as to the price at which the Company's common stock will trade at any future time. Our opinion is limited to the fairness, from a financial point of view, to the consideration to be paid to the Company in connection with the Transaction and we express no opinion as to the merits of the 49 PRELIMINARY COPY underlying decision by the Company to engage in the Transaction. This opinion does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote with respect to the Transaction and should not be relied upon by any stockholder as such. Chase Securities Inc., as part of its financial advisory business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions and valuations for estate, corporate and other purposes. We have acted as financial advisor to the Company in connection with the Transaction and will receive a fee for our services that includes the rendering of this opinion. The Company has agreed to indemnify us for certain liabilities arising out of our engagement. In the ordinary course of business, we or our affiliates may trade in the securities of the Company for our own accounts and for the accounts of our customers and, accordingly, may at any time hold a long or short position in such securities. Based upon and subject to the foregoing, we are of the opinion, as of the date hereof, that the consideration to be paid to the Company in connection with the Transaction is fair, from a financial point of view, to the Company. This opinion is for the use and benefit of the Board of Directors of the Company in its evaluation of the Transaction and shall not be used for any other purpose without the prior written consent of Chase Securities Inc. Very truly yours, CHASE SECURITIES INC. 309215.c7 50 ANNEX C CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the inclusion in this Proxy of our report dated February 26, 1996 included in Perini Corporation's Form 10-K for the year ended December 31, 1995 and to all references to our Firm included in this Proxy. ARTHUR ANDERSEN LLP Boston, Massachusetts October ___, 1996 REVOCABLE PROXY/VOTING INSTRUCTION CARD PERINI CORPORATION 73 Mt. Wayte Avenue, Framingham, Massachusetts 01701-9160 Proxy for Special Meeting of Stockholders to be Held on [ at a.m.] This proxy is solicited by the Board of Directors. The undersigned hereby constitutes and appoints Richard E. Burnham and [ ], and each of them, as proxies of the undersigned (the "Proxies"), with full power to substitute, and authorizes each of them to represent and to vote all shares of Common Stock of Perini Corporation (the "Company") held by the undersigned at the close of business on October 10, 1996 at the Special Meeting of Stockholders to be held at State Street Bank and Trust Company, Enterprise Room, 5th Floor, 225 Franklin Street, Boston, Massachusetts, on [___________________ at ___ a.m.], local time, and at any adjournments or postponements thereof. When properly executed this proxy will be voted in the manner directed herein by the undersigned stockholder(s). If no direction is given, this Proxy will be voted FOR the Proposals set forth on the reverse side hereof. A stockholder wishing to vote in accordance with the Board of Directors' recommendation need only sign and date this proxy and return it in the stamped envelope provided. (Continued, and to be signed and dated, on reverse side) 1 1. Proposal 1: To approve (i) the issuance of 150,150 shares of Series B Cumulative Convertible Preferred Stock, par value $1.00 per share, of the Company (the "Series B Preferred Stock") to PB Capital Partners, L.P. ("PB Capital") for an aggregate purchase price of $30,030,000, upon the terms and conditions described in the Proxy Statement and (ii) the issuance of any other shares of the Series B Preferred Stock as dividends on outstanding shares of the Series B Preferred Stock upon the terms and conditions described in the Proxy Statement. FOR o AGAINST o ABSTAIN o 2. Proposal 2 to approve an amendment to the By-Laws of the Company, as more fully described in the Proxy Statement, which requires the Board of Directors to elect an Executive Committee and sets forth its powers and composition. This amendment, if approved, will take effect only if shares of the Series B Preferred Stock are in fact issued to PB Capital. FOR o AGAINST o ABSTAIN o The undersigned hereby acknowledge(s) receipt of a copy of the Notice of Special Meeting of Stockholders, the Proxy Statement with respect thereto and accompanying Annexes, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, and the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996, and hereby revoke(s) any proxy or proxies heretofore given. This proxy may be revoked at any time before it is exercised. Please sign name exactly as shown. Where there is more than one holder, each should sign. When signing as an attorney, administrator, executor, guardian or trustee, please add your title as such. If executed by a corporation, the proxy should be signed by a duly authorized person, stating such person's title or authority. If a partnership, please sign in partnership name by authorized person. Dated: Signature of Stockholder Please Date, Sign and Mail Your Proxy Card Promptly Votes must be indicated in the Enclosed Envelope. (X) in Black or Blue ink. 319215.c1 2 -----END PRIVACY-ENHANCED MESSAGE-----