UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-6314
Perini Corporation
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-1717070
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
73 MT. WAYTE AVENUE, FRAMINGHAM, MASSACHUSETTS 01701-9160
(Address of principal executive offices)
(Zip code)
(508)-628-2000
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Number of shares of common stock of registrant outstanding at November 9, 1999:
5,682,287
Page 1 of 21
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<CAPTION>
PERINI CORPORATION & SUBSIDIARIES
INDEX
Page Number
-----------
<S> <C>
Part I. - Financial Information:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - 3
September 30, 1999 and December 31, 1998
Consolidated Condensed Statements of Operations - 4
Three Months and Nine Months ended
September 30, 1999 and 1998
Consolidated Condensed Statements of Cash Flows - 5
Nine Months ended September 30, 1999 and 1998
Notes to Consolidated Condensed Financial Statements 6 - 9
Item 2. Management's Discussion and Analysis of the Consolidated 10 - 14
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
Part II. - Other Information:
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15 - 20
Signatures 21
</TABLE>
2
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<TABLE>
<CAPTION>
PERINI CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(In Thousands)
ASSETS
SEPT. 30, DEC. 31,
1999 1998
-------------- -------------
(Note 3)
<S> <C> <C>
Cash $ 33,625 $ 46,507
Accounts and Notes Receivable 134,264 113,052
Unbilled Work 17,760 19,585
Construction Joint Ventures 74,264 67,100
Net Current Assets of Discontinued Operations (Note 3) 14,206 8,068
Deferred Tax Assets 1,076 1,076
Other Current Assets 5,100 2,469
-------------- -------------
Total Current Assets $ 280,295 $ 257,857
-------------- -------------
Net Long-Term Assets of Discontinued Operations (Note 3) $ --- $ 104,017
------------- -------------
Other Assets $ 3,704 $ 3,734
-------------- -------------
Property and Equipment, less Accumulated Depreciation of $17,177 in 1999 and
$16,378 in 1998 $ 9,840 $ 9,858
-------------- -------------
$ 293,839 $ 375,466
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Maturities of Long-Term Debt $ 14,016 $ 2,036
Accounts Payable 108,260 127,349
Advances from Construction Joint Ventures 12,904 17,300
Deferred Contract Revenue 33,187 14,350
Accrued Expenses 38,765 39,157
-------------- -------------
Total Current Liabilities $ 207,132 $ 200,192
-------------- -------------
Deferred Income Taxes and Other Liabilities $ 17,485 $ 15,319
-------------- -------------
Long-Term Debt, less current maturities included above $ 72,382 $ 75,857
-------------- -------------
Redeemable Convertible Series B Preferred Stock $ 36,613 $ 33,540
-------------- -------------
Stockholders' Equity (Deficit):
Preferred Stock $ 100 $ 100
Series A Junior Participating Preferred Stock --- ---
Stock Purchase Warrants 2,233 2,233
Common Stock 5,743 5,506
Paid-In Surplus 45,184 49,219
Retained Deficit (91,920) (3,642)
ESOT Related Obligations (120) (1,381)
-------------- -------------
$ (38,780) $ 52,035
Less - Treasury Stock 993 1,477
-------------- -------------
Total Stockholders' Equity (Deficit) $ (39,773) $ 50,558
============== =============
$ 293,839 $ 375,466
============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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<TABLE>
<CAPTION>
PERINI CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands, Except Per Share Data)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------------- -----------------------
1999 1998 1999 1998
---------- ---------- --------- ---------
(Note 3) (Note 3)
<S> <C> <C> <C> <C>
CONTINUING OPERATIONS:
Construction Revenues $ 244,887 $ 247,730 $ 776,233 $ 740,693
----------- ----------- ---------- ----------
Cost and Expenses:
Cost of Operations $ 230,708 $ 234,767 $ 737,729 $ 703,020
General, Administrative and Selling Expenses 7,434 5,947 19,869 19,482
----------- ----------- ---------- ----------
$ 238,142 $ 240,714 $ 757,598 $ 722,502
----------- ----------- ---------- ----------
INCOME FROM OPERATIONS $ 6,745 $ 7,016 $ 18,635 $ 18,191
Other Expense, Net (96) (289) (984) (717)
Interest Expense (2,048) (1,985) (5,424) (6,198)
----------- ----------- ---------- ----------
Income from Continuing Operations before Income Taxes $ 4,601 $ 4,742 $ 12,227 $ 11,276
Provision for Income Taxes (Note 4) --- 390 500 780
----------- ---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS $ 4,601 $ 4,352 $ 11,727 $ 10,496
----------- ---------- ---------- ----------
DISCONTINUED OPERATIONS (Note 3):
Loss from Operations (Note 4) $ --- $ (615) $ (694) $ (1,426)
Estimated Loss on Disposal of Real Estate Business Segment (Note 4) --- --- (99,311) ---
----------- ---------- ---------- ----------
LOSS FROM DISCONTINUED OPERATIONS $ --- $ (615) $(100,005) $ (1,426)
----------- ---------- ---------- ----------
NET INCOME (LOSS) $ 4,601 $ 3,737 $ (88,278) $ 9,070
=========== ========== ========== ==========
BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE (Note 5):
Income from Continuing Operations $ .53 $ .53 $ 1.26 $ 1.15
Loss from Discontinued Operations --- (.11) (.12) (.27)
Estimated Loss on Disposal --- --- (17.79) ---
----------- ---------- ---------- ----------
Total $ .53 $ .42 $ (16.65) $ .88
----------- ---------- ---------- ----------
DIVIDENDS PER COMMON SHARE (Note 6) $ --- $ --- $ --- $ ---
=========== ========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (Note 5) 5,680,485 5,413,647 5,582,859 5,288,825
=========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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<TABLE>
<CAPTION>
PERINI CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(In Thousands)
NINE MONTHS
ENDED SEPTEMBER 30,
---------------------------------
1999 1998
-------------- --------------
(Note 3)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ (88,278) $ 9,070
Adjustments to reconcile net income (loss) to net cash from operating activities:
Loss from discontinued operations 100,005 1,426
Depreciation and amortization 2,328 2,246
Noncurrent deferred taxes and other liabilities 179 395
Distributions greater (less) than earnings of joint ventures and affiliates 1,156 (104)
Cash provided from (used by) changes in components of working capital other
than cash, net current assets of discontinued operations and current maturities of
long-term debt (26,884) 2,998
Other non-cash items, net (34) (76)
-------------- --------------
NET CASH PROVIDED FROM (USED BY) OPERATING ACTIVITIES $ (11,528) $ 15,955
-------------- --------------
Cash Flows from Investing Activities:
Proceeds from sale of property and equipment $ 492 $ 594
Cash distributions of capital from unconsolidated joint ventures 1,475 2,565
Acquisition of property and equipment (1,222) (568)
Capital contributions to unconsolidated joint ventures (9,910) (1,022)
Investment in discontinued operations (Note 3) (2,126) (3,052)
Investment in other activities (624) (195)
-------------- --------------
NET CASH PROVIDED FROM (USED BY) INVESTING ACTIVITIES $ (11,915) $ (1,678)
-------------- --------------
Cash Flows from Financing Activities:
Proceeds of long-term debt $ 9,790 $ 14,600
Repayment of long-term debt (581) (5,349)
Common Stock issued 1,197 2,482
Treasury Stock issued 155 151
-------------- --------------
NET CASH PROVIDED FROM (USED BY) FINANCING ACTIVITIES $ 10,561 $ 11,884
-------------- --------------
Net Increase (Decrease) in Cash $ (12,882) $ 26,161
Cash at Beginning of Year 46,507 31,305
-------------- --------------
Cash at End of Period $ 33,625 $ 57,466
============== ==============
Supplemental Disclosure of Cash paid during the period for:
Interest $ 5,627 $ 6,128
============== ==============
Income tax payments $ 110 $ 135
============== ==============
Supplemental Disclosures of Non-cash Transactions:
Dividends paid in shares of Series B Preferred Stock (Note 6) $ 2,789 $ 2,527
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) Basis of Presentation
The unaudited consolidated condensed financial statements presented
herein have been prepared in accordance with the instructions to Form
10-Q and do not include all of the information and note disclosures
required by generally accepted accounting principles. These statements
should be read in conjunction with the financial statements and notes
thereto included in the Company's Form 10-K for the year ended December
31, 1998. In the opinion of management, the accompanying unaudited
condensed financial statements include all adjustments, consisting only
of normal recurring adjustments, except for the presentation of
Discontinued Operations and related non-cash provision for estimated
loss on disposal of the Company's real estate development business
segment as more fully described in Note 3 below, necessary to present
fairly the Company's financial position as of September 30, 1999 and
December 31, 1998, results of operations for the three month and nine
month periods ended September 30, 1999 and 1998 and cash flows for the
nine month periods ended September 30, 1999 and 1998. The results of
operations for the nine month period ended September 30, 1999 may not be
indicative of the results that may be expected for the year ending
December 31, 1999 because the Company's results generally consist of a
limited number of large transactions in both construction and real
estate. Therefore, such results can vary depending on the timing of
transactions and the profitability of projects being reported.
(2) Significant Accounting Policies
The significant accounting policies followed by the Company and its
subsidiaries in preparing its consolidated financial statements are set
forth in Note (1) to such financial statements included in Form 10-K for
the year ended December 31, 1998. The Company has made no significant
change in these policies during 1999.
(3) Discontinued Operations
Effective June 30, 1999, management adopted a plan to withdraw
completely from the real estate development business and to wind down
the operations of Perini Land and Development Company ("PL&D"), the
Company's real estate development subsidiary. Therefore, both historical
and current real estate results through September 30, 1999 have been
presented as a discontinued operation in accordance with generally
accepted accounting principles. Based on the plan, the 1999 nine month
results include a $99,311,000 non-cash provision which represents the
estimated loss on disposal of this business segment. This non-cash
charge reflects the impact of the previously announced disposition of
the Rincon Center property located in San Francisco and the reduction in
projected future cash flow from the disposition of PL&D's remaining real
estate development operations resulting from the change in strategy of
holding the properties through the necessary development and
stabilization periods to a new strategy of generating short-term
liquidity through an accelerated disposition or bulk sale. The estimated
loss on disposal of the real estate business segment also includes a
provision for shut down costs related to PL&D during the wind down
period. No Federal tax benefit was attributable to the estimated loss on
disposal of the real estate business segment (see Note 4). Several of
the remaining real estate properties now being offered for sale are
currently under or are pending a purchase and sale agreement.
At September 30, 1999 the net assets of discontinued real estate
development operations, consisting primarily of real estate properties
for sale, have been reclassified as current assets at estimated net
realizable value. At December 31, 1998 the net current assets of
discontinued real estate development operations consist primarily of
certain real estate properties for sale. The net long-term assets of
discontinued operations at December 31, 1998 consist primarily of land
held
6
<PAGE>
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(continued)
for sale or development and investments in and advances to real estate
joint ventures. In accordance with generally accepted accounting
principles, the results of discontinued real estate development
operations have been reclassified to "Loss from Operations" of
Discontinued Operations. In connection therewith, the revenues related
to these operations are summarized below (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- --------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $12,121 $3,556 $21,052 $18,186
============== ========== ============ ===============
</TABLE>
During the third quarter of 1999, PL&D concluded the sale of two
properties. The net proceeds of $14.6 million realized from the sale of
these two properties was equal to the net proceeds originally
anticipated in calculating the estimated loss on disposal of the real
estate business segment at June 30, 1999. The loss from operations
resulting from the sale of these two properties was approximately equal
to the loss from operations originally anticipated in calculating the
estimated loss on disposal of the real estate business segment at June
30, 1999.
(4) Provision For Income Taxes
The provision for income taxes applicable to Income from Continuing
Operations reflects a lower-than-normal tax rate in 1999 and 1998 due to
the realization of a portion of the Federal tax benefit not recognized
in prior years due to certain accounting limitations. No tax benefit was
attributable to Losses from Discontinued Operations in either 1999 or
1998 due to the same accounting limitations.
(5) Per Share Data
Computations of basic and diluted earnings (loss) per common share
amounts are based on the weighted average number of the Company's common
shares outstanding during the periods presented. Earnings from Income
from Continuing Operations available for common shares are calculated as
follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ----------------------------
1999 1998 1999 1998
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Income from Continuing Operations $ 4,601 $ 4,352 $ 11,727 $ 10,496
------------ ----------- ------------ ------------
Less:
- - Accrued dividends on $21.25 Senior Preferred Stock $ (531) $ (531) $ (1,593) $ (1,593)
- - Dividends declared on Series B Preferred Stock (953) (863) (2,789) (2,527)
- - Accretion deduction required to reinstate
mandatory
redemption value of Series B Preferred Stock over a
period of 8-10 years (95) (93) (284) (280)
------------ ----------- ------------ ------------
$ (1,579) $ (1,487) $ (4,666) $ (4,400)
------------ ----------- ------------ ------------
Earnings from Income from Continuing Operations available
for Common Stockholders $ 3,022 $ 2,865 $ 7,061 $ 6,096
============ =========== ============ ============
Weighted average shares outstanding 5,680 5,414 5,583 5,289
------------ ----------- ------------ ------------
Basic and diluted earnings per Common Share on Income from
Continuing Operations $ 0.53 $ 0.53 $ 1.26 $ 1.15
============ =========== ============ ============
</TABLE>
7
<PAGE>
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(continued)
Basic EPS equals diluted EPS for the periods presented due to the
immaterial effect of stock options and the antidilutive effect of
conversion of the Company's depositary convertible exchangeable
preferred shares, Series B preferred shares and stock purchase warrants
into common stock.
(6) Dividends
There were no cash dividends on common stock declared or paid during the
periods presented in the consolidated condensed financial statements
presented herein.
As previously disclosed, in conjunction with the covenants of the
Company's Revolving Credit Agreement, the Company is required to suspend
the payment of quarterly dividends on its $21.25 Preferred Stock
("Senior Preferred Stock") until certain financial criteria are met.
Therefore, the dividends on the Senior Preferred Stock have not been
declared since 1995 (although they have been fully accrued due to the
"cumulative" feature of the Senior Preferred Stock). The aggregate
amount of dividends in arrears is approximately $8,500,000 at September
30, 1999 which represents approximately $85.00 per share of Preferred
Stock or approximately $8.50 per Depositary Share and is included in
"Other Liabilities" (long-term) in the accompanying Consolidated
Condensed Balance Sheet. Under the terms of the Preferred Stock, the
holders of the Depositary Shares were entitled to elect two additional
Directors since dividends had been deferred for more than six quarters
and they did so at both the May 14, 1998 and the May 13, 1999 Annual
Meetings.
Quarterly In-kind dividends (based on an annual rate of 10%) were paid
on March 15, 1999 on the Series B Preferred Stock to the stockholders of
record on March 1, 1999. The dividend was paid in the form of
approximately 4,534 additional shares of Series B Preferred Stock valued
at $200.00 per share for a total of $906,783. In-kind dividends for the
second quarter were paid on June 15, 1999 to stockholders of record on
June 1, 1999. The dividend was paid in the form of approximately 4,647
additional shares of Series B Preferred Stock valued at $200.00 per
share for a total of $929,453. In-kind dividends for the third quarter
were paid on September 15, 1999 to stockholders of record on September
1, 1999. The dividend was paid in the form of approximately 4,763
additional shares of Series B Preferred Stock valued at $200.00 per
share for a total of $952,689.
(7) Business Segments
The following tables set forth certain updated business segment
information relating to the Company's operations for the three and nine
month periods ended September 30, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
Three months ended September 30, 1999
Reportable Segments
-------------------------------------------
Consolidated
Building Civil Totals Corporate Totals
---------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues $164,532 $ 80,355 $244,887 $ - $244,887
Income (Loss) from Ops. $ 4,760 $ 4,038 $ 8,798 $(2,053)* $ 6,745
Three months ended September 30, 1998
Reportable Segments
---------------------------------------
Consolidated
Building Civil Totals Corporate Totals
---------- ---------- ----------- ----------- ------------
Revenues $157,317 $ 90,413 $247,730 $ - $247,730
Income (Loss) from Ops. $ 2,935 $ 5,693 $ 8,628 $(1,612)* $ 7,016
</TABLE>
8
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PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(continued)
<TABLE>
<CAPTION>
Nine months ended September 30, 1999
Reportable Segments
-------------------------------------------
Consolidated
Building Civil Totals Corporate Totals
---------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues $549,224 $227,009 $776,233 $ - $776,233
Income (Loss) from Ops. $ 14,214 $ 9,894 $ 24,108 $(5,473)* $ 18,635
Assets $138,133 $104,270 $242,403 $51,436** $293,839
Nine months ended September 30, 1998
Reportable Segments
---------------------------------------
Consolidated
Building Civil Totals Corporate Totals
---------- ---------- ----------- ----------- ------------
Revenues $502,865 $237,828 $740,693 $ - $740,693
Income (Loss) from Ops. $ 12,919 $ 10,718 $ 23,637 $(5,446)* $ 18,191
Assets $111,651 $106,094 $217,745 $173,039** $390,784
</TABLE>
* In all periods, consists of corporate general and administrative
expenses.
** In all periods, corporate assets consist principally of cash, cash
equivalents, marketable securities and other investments available for
general corporate purposes plus the net assets of discontinued
operations.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
Discontinued Operations
- -----------------------
Effective June 30, 1999, management adopted a plan to withdraw completely from
the real estate development business and to wind down the operations of Perini
Land and Development Company ("PL&D"), the Company's real estate development
subsidiary. Therefore, both historical and current real estate results through
September 30, 1999 have been presented as a discontinued operation in accordance
with generally accepted accounting principles. Based on the plan, the 1999 nine
month results include a $99,311,000 non-cash provision which represents the
estimated loss on disposal of this business segment. This non-cash charge
reflects the impact of the previously announced disposition of the Rincon Center
property located in San Francisco and the reduction in projected future cash
flow from the disposition of PL&D's remaining real estate development operations
resulting from the change in strategy of holding the properties through the
necessary development and stabilization periods to a new strategy of generating
short-term liquidity through an accelerated disposition or bulk sale. The
estimated loss on disposal of the real estate business segment also includes a
provision for shut down costs related to PL&D during the wind down period. No
Federal tax benefit was attributable to the estimated loss on disposal of the
real estate business segment (see Note 4). On October 12, 1999, the Company and
PL&D, the managing partner of Rincon Center Associates ("RCA"), entered into a
full and final non-cash settlement regarding its interests in the Rincon Center
property. As part of the settlement and in exchange for the transfer of its
ownership interest in the RCA property, the Company has exchanged mutual
releases with the other RCA general partner, the RCA-related lenders and all
other entities formally associated with the RCA property from any claims,
lawsuits or other liabilities they may have with respect to each other in
connection with the Rincon Center property. This completes a major step in the
Company's plan to discontinue its real estate development operations. In
addition, during the third quarter of 1999, PL&D concluded the sale of two other
properties at prices approximating those originally anticipated in calculating
the estimated loss on disposal of the real estate business segment at June 30,
1999. Several of the remaining real estate properties now being offered for sale
are currently under or are pending a purchase and sale agreement.
Results of Operations from Continuing Operations
- ------------------------------------------------
Comparison of the Third Quarter of 1999 with the Third Quarter of 1998
Overall, revenue from construction operations decreased by $2.8 million (or
1.1%), from $247.7 million in 1998 to $244.9 million in 1999. This decrease was
primarily due to a decrease in revenues from civil operations of $10.0 million
(or 11.1%), from $90.4 million in 1998 to $80.4 million in 1999 due primarily to
the completion of several major transit and infrastructure projects in late 1998
and early 1999. Revenues from building operations increased $7.2 million (or
4.6%), from $157.3 million in 1998 to $164.5 million in 1999 due primarily to
the start up of several new projects in both the eastern and western United
States.
Overall, income from construction operations (before corporate G&A expenses)
increased by $.2 million (or 2.3%), from $8.6 million in 1998 to $8.8 million in
1999. The increase in operating income results from an increase from building
operations of $1.9 million (or 65.5%), from $2.9 million in 1998 to $4.8 million
in 1999 primarily due to the increase in revenues discussed above and the
non-recurring profit write-down recorded in 1998 on a project associated with a
business unit which was being phased out. Largely offsetting the increase from
building operations was a $1.7 million (or 29.8%) decrease in operating income
from civil operations, from $5.7 million in 1998 to $4.0 million in 1999 due
primarily to the decrease in revenues referred to above and a lower average
margin in the backlog at the beginning of 1999. Corporate G&A increased $.5
million in 1999 due primarily to an increase in legal fees relating to the
administration of the Company's revolving credit agreement with its bank group
and other
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(continued)
corporate matters. As a result, overall income from operations decreased $.3
million (or 4.3%), from $7.0 million in 1998 to $6.7 million in 1999.
Other expense, net, decreased by $.2 million from $.3 million in 1998 to $.1
million in 1999 due primarily to a non-recurring loss on sale of fixed assets
recorded in 1998.
The provision for income taxes applicable to Income from Continuing Operations
reflects a lower-than-normal tax rate in 1999 and 1998 due to the realization of
a portion of the Federal tax benefit not recognized in prior years due to
certain accounting limitations. No tax benefit was attributable to Losses from
Discontinued Operations in either 1999 or 1998 due to the same accounting
limitations
Comparison of the Nine Months Ended September 30, 1999 With the Nine
Months Ended September 30, 1998
Overall, revenue from construction operations increased $35.5 million (or 4.8%),
from $740.7 million in 1998 to $776.2 million in 1999. This increase was
primarily due to an increase in revenues from building operations of $46.3
million (or 9.2%), from $502.9 million in 1998 to $549.2 million in 1999 due
primarily to the start up of several new projects in both the eastern and
western United States. Revenues from civil construction operations decreased
$10.8 million (or 4.5%), from $237.8 million in 1998 to $227.0 million in 1999
primarily due to the completion of several major mass transit and infrastructure
projects in late 1998 and early 1999.
Overall, income from construction operations (before corporate G&A expenses)
increased by $.5 million (or 2.1%), from $23.6 million in 1998 to $24.1 million
in 1999. The increase in operating income results from an increase from building
operations of $1.3 million (or 10.1%), from $12.9 million in 1998 to $14.2
million in 1999 primarily due to the increase in revenues discussed above.
Operating income from civil operations decreased $.8 million (or 7.5%), from
$10.7 million in 1998 to $9.9 million in 1999 primarily due to the decrease in
revenues discussed above. Corporate G&A expenses were $5.5 million in both
years.
Other expenses, net, increased by $.3 million, from $.7 million in 1998 to $1.0
million in 1999 as a result of increased bank financing fees.
Interest expense decreased by $.8 million, from $6.2 million in 1998 to $5.4
million in 1999 due in part to a reduction in the average amount borrowed.
The provision for income taxes applicable to Income from Continuing Operations
reflects a lower-than-normal tax rate in 1999 and 1998 due to the realization of
a portion of the Federal tax benefit not recognized in prior years due to
certain accounting limitations. No tax benefit was attributable to Losses from
Discontinued Operations in either 1999 or 1998 due to the same accounting
limitations.
Financial Condition
- -------------------
Working capital increased $15.5 million, from $57.7 million at the end of 1998
to $73.2 million at September 30, 1999. The current ratio increased from 1.29:1
to 1.35:1 during this same period.
During the first nine months of 1999, the Company used $10.5 million from
financing activities, primarily additional borrowings under the Company's
Revolving Credit Agreement, plus $12.9 million of cash on hand to fund $11.5
million used by operating activities, primarily for changes in working capital,
and $11.9 million for investing activities, primarily to fund the working
capital needs of construction joint ventures.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(continued)
Long-term debt at September 30, 1999 was $72.4 million, a decrease of $3.5
million from December 31, 1998. Effective March 23, 1999, the Company finalized
certain changes to its Revolving Credit Agreement with its Bank Group, including
extending the Revolving Credit Agreement from January 3, 2000 to January 3,
2001. Other changes to the Revolving Credit Agreement include, among other
things, scheduled mandatory reductions to the maximum commitment of $20.0
million in 1999 and $15.0 million in 2000; additional permanent mandatory
reductions, as defined, from the net proceeds from real estate sales with the
balance payable in 2001; interest rate increases of 3/4 of 1%; and a bank fee of
$483,000 payable in two installments in 1999 and 2000. Under the terms of the
Revolving Credit Agreement, the Company had $5.2 million available to borrow
under its maximum commitment of $86.2 million as of September 30, 1999.
As a result of the net loss recorded in 1999, the Company's stockholders' equity
was reduced to a negative $39.8 million. Management is currently continuing to
work with its investment bankers in an effort to raise additional capital,
restore balance sheet net worth and improve liquidity. Management believes that
cash generated from operations, existing credit lines, and sales of real estate
should be adequate to meet the Company's funding requirements for at least the
next twelve months.
Outlook
- -------
o Continuing Construction Operations - The overall construction backlog at
September 30, 1999 was $1.503 billion, a 22% increase from the backlog
at December 31, 1998. Projects awarded during 1999 and included in the
backlog at September 30, 1999 totaled in excess of $880 million,
including the previously announced construction management services
contract for the $650 million Mohegan Sun Phase II Expansion Project in
Uncasville, CT. Approximately 60% of the current backlog relates to
building construction projects which generally represent lower risk,
lower margin work and approximately 40% of the current backlog relates
to heavy construction projects which generally represent higher risk,
but correspondingly higher margin work.
o Discontinued Real Estate Operations - As described in detail at the
beginning of Page 10 to this Form 10-Q, the Company is proceeding to
implement its plan to wind down its discontinued real estate development
operations. A major step in the plan was completed on October 12, 1999
whereby the Company entered into a settlement agreement regarding its
interest in the Rincon Center property. As part of the settlement and in
exchange for the transfer of its ownership interest in the RCA property,
the Company has exchanged mutual releases with the other RCA general
partners, the RCA-related lenders and all other entities formally
associated with the RCA property from any claims, lawsuits or other
liabilities they may have with respect to each other in connection with
the Rincon Center property. In addition, during the third quarter of
1999, PL&D concluded the sale of two other properties at prices
approximating those originally anticipated in calculating the estimated
loss on disposal of the real estate business segment at June 30, 1999.
Several of the remaining real estate properties now being offered for
sale are currently under or are pending a purchase and sale agreement.
o Rebuilding Equity - As a result of the net loss recorded in 1999, the
Company's stockholders' equity has been reduced to a negative $39.8
million. Management is continuing to work with its investment bankers in
an effort to raise additional capital, restore balance sheet net worth
and improve liquidity.
o Year 2000 Readiness Disclosures - Since many computers, related software
and certain devices with embedded microchips record only the last two
digits of a year, they may not be able to recognize that January 1, 2000
(or subsequent dates) comes after December 31, 1999. This situation
could cause erroneous calculations or system shutdowns, causing problems
that could range from merely inconvenient to significant.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(continued)
As previously reported, the Company began a project to review all of its
computer systems in 1995. One factor, among many, to consider was what
impact, if any, would the Year 2000 have on computer systems. As a
result of this project, the Company implemented new fully integrated
on-line construction specific financial systems during the first quarter
of 1998 which are Year 2000 compliant. The cost of these new systems,
including the hardware, software and implementation costs, approximated
$1.5 million which was capitalized and is being amortized over ten years
on a straight-line basis.
The Company recognizes the Year 2000 issue could be an overall business
problem, not just a technical problem. Therefore, it established a Year
2000 Committee early in 1998 to identify all of the other potential Year
2000 problems that could impact the Company, including readiness issues
for its computer applications and business processes, non-information
technology systems such as those of its facilities and equipment, along
with relationships with third parties, such as our customers, vendors,
subcontractors, joint ventures, and other business partners; develop
plans to evaluate the significance of the potential problem; develop
plans to remedy or minimize the potential problem; assign appropriate
resources; and monitor the implementation of the plans. During the third
quarter of 1998, the Committee, which included both the Company's
Chairman and CEO, designated the Year 2000 Project Manager. The Project
Manager has organized a Year 2000 Team, consisting of specific
individuals assigned from each operating unit and each corporate
department. In addition, the Company developed, published and commenced
implementation of its Year 2000 Readiness Plan which has as its overall
objective "to eliminate or minimize the potential internal and external
impact of the Year 2000 issue on the normal business operations of the
Company, its subsidiaries, and joint ventures in a timely and cost
effective manner".
The Year 2000 Plan includes the following phases: (1) potential problem
identification, (2) resource commitment, (3) inventory, (4) assessment,
(5) prioritization, (6) remediation and (7) testing. The Company
completed the problem identification, resource commitment and
prioritization phases during 1998, the inventory phase during the first
quarter of 1999, and the "assessment", "testing", and "remediation"
phases as of September 30, 1999. As a result of completing its Year 2000
Plan the Company believes its internal financial and operating systems
are compliant. The Company currently estimates that costs related to
implementation of the Year 2000 Plan, over and above the cost of the new
financial systems referred to above, were approximately $0.4 million
which were expensed as incurred.
The Company, as a general contractor, generally provides its
construction services in accordance with detailed contracts and
specifications provided by its clients. In addition to addressing its
own computer applications, facilities, and construction equipment, the
Plan includes communication with critical third parties. In light of a
relatively weak response to these inquiries, the Company has defined its
most reasonably likely worst case scenario at this time to include last
minute inquiries and requests for assistance in determining Year 2000
compliance by some limited number of clients or other third parties who
have not properly prepared for this event. The Company currently plans
to have in place by December 1, 1999 a Year 2000 Urgent Response Team
defined and available to respond to last minute Year 2000 issues raised
by clients or others, in a timely, proactive and cost effective manner.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(continued)
Forward-looking Statements
- --------------------------
The statements contained in this Management's Discussion and Analysis of the
Consolidated Condensed Financial Statements, including "Outlook", and other
sections of this Form 10-Q that are not purely historical are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, including statements
regarding the Company's expectations, hopes, beliefs, intentions or strategies
regarding the future. Forward-looking statements involve a number of risks,
uncertainties or other factors that may cause actual results or performance to
be materially different from those expressed or implied by such forward-looking
statements. These risks and uncertainties include, but are not limited to, the
continuing validity of the underlying assumptions and estimates of total
forecasted project revenues, costs and profits and project schedules; the
outcomes of pending or future litigation, arbitration or other dispute
resolution proceedings; changes in federal and state appropriations for
infrastructure projects; possible changes or developments in worldwide or
domestic, social, economic, business, industry, market and regulatory conditions
or circumstances; and actions taken or omitted to be taken by third parties
including the Company's customers, suppliers, business partners, and competitors
and legislative, regulatory, judicial and other governmental authorities and
officials. In addition, forward-looking statements regarding the year 2000 issue
carry risk factors which include, without limitation, the availability and cost
of personnel trained in these areas; the ability to locate and correct all
relevant computer codes; changes in consulting fees and costs to remediate or
replace hardware and software; changes in non-incremental costs resulting from
redeployment of internal resources; timely responses to and corrections by third
parties such as significant customers and suppliers; and similar uncertainties.
QUANTITATIVE AND QUALITATIVE DISLOSURES ABOUT MARKET RISK
There has been no material change in the Company's exposure to market risk since
December 31, 1998.
14
<PAGE>
Part II. - Other Information
Item 1. - Legal Proceedings - None
Item 2. - Changes in Securities
(a) None
(b) None
(c) None
Item 3. - Defaults Upon Senior Securities
(a) None
(b) In accordance with the provisions of the 1995 Amended Revolving Credit
Agreement and the Credit Agreement which became effective on January 17,
1997, the Company suspended payment of quarterly dividends on its $21.25
Convertible Exchangeable Preferred Stock ("Senior Preferred Stock")
commencing with the dividend that normally would have been declared
during December 1995 through the dividend that would normally have been
declared during September 1999 for a total arrearage of $85.00 per share
(or $8.50 per depositary share) which aggregates approximately
$8,500,000 to date. While these dividends have not been declared or
paid, they have been fully accrued in accordance with the "cumulative"
feature of the stock.
Item 4. - Submission of Matters to a Vote of Security Holders - None
Item 5. - Other Information - None
Item 6. - Exhibits and Reports on Form 8-K
(a) The following designated exhibits are, as indicated below, either filed
herewith or have heretofore been filed with the Securities and Exchange
Commission under the Securities Act of 1933 or the Securities Act of
1934 and are referred to and incorporated herein by reference to such
filings:
Exhibit 3. Articles of Incorporation and By-laws
Incorporated herein by reference:
3.1 Restated Articles of Organization - As amended
through January 17, 1997 - Exhibit 3.1 to 1996
Form 10-K filed March 31, 1997.
3.2 By-laws - As amended and restated as of January
17, 1997 - Exhibit 3.2 to Form 8-K filed on
February 14, 1997.
Exhibit 4. Instruments Defining the Rights of Security Holders,
Including Indentures
Incorporated herein by reference:
15
<PAGE>
Part II. - Other Information (Continued)
4.1 Certificate of Vote of Directors Establishing a
Series of a Class of Stock determining the
relative rights and preferences of the $21.25
Convertible Exchangeable Preferred Stock -
Exhibit 4(a) to Amendment No. 1 to Form S-2
Registration Statement filed June 19, 1987; SEC
Registration No. 33-14434.
4.2 Form of Deposit Agreement, including form of
Depositary Receipt - Exhibit 4(b) to Amendment
No. 1 to Form S-2 Registration Statement filed
June 19, 1987; SEC Registration No. 33-14434.
4.3 Form of Indenture with respect to the 8 1/2%
Convertible Subordinated Debentures Due June 15,
2012, including form of Debenture - Exhibit 4(c)
to Amendment No. 1 to Form S-2 Registration
Statement filed June 19, 1987; SEC Registration
No. 33-14434.
4.4 Shareholder Rights Agreement dated as of
September 23, 1988, as amended and restated as
of May 17, 1990, as amended and restated as of
January 17, 1997, between Perini Corporation and
State Street Bank and Trust Company, as Rights
Agent - Exhibit 4.4 to Amendment No. 1 to
Registration Statement on Form 8-A/A filed on
January 29, 1997.
4.5 Stock Purchase and Sale Agreement dated as of
July 24, 1996 by and among the Company, PB
Capital and RCBA, as amended - Exhibit 4.5 to
the Company's Quarterly Report on Form 10-Q/A
for the fiscal quarter ended September 30, 1996
filed on December 11, 1996.
4.8 Certificate of Vote of Directors Establishing a
Series of Preferred Stock determining the
relative rights and preferences of the Series B
Cumulative Convertible Preferred Stock, dated
January 16, 1997 - Exhibit 4.8 to Form 8-K filed
on February 14, 1997.
4.9 Stock Assignment and Assumption Agreement dated
as of December 13, 1996 by and among the
Company, PB Capital and ULLICO (filed as Exhibit
4.1 to the Schedule 13D filed by ULLICO on
December 16, 1996 and incorporated herein by
reference).
4.10 Stock Assignment and Assumption Agreement dated
as of January 17, 1997 by and among the Company,
RCBA and The Common Fund - Exhibit 4.10 to Form
8-K filed on February 14, 1997.
4.11 Voting Agreement dated as of January 17, 1997 by
and among PB Capital, David B. Perini, Perini
Memorial Foundation, David B. Perini
Testamentary Trust, Ronald N. Tutor, and
Tutor-Saliba Corporation - Exhibit 4.11 to Form
8-K filed on February 14, 1997.
4.12 Registration Rights Agreement dated as of
January 17, 1997 by and among the Company, PB
Capital and ULLICO - Exhibit 4.12 to Form 8-K
filed on February 14, 1997.
16
<PAGE>
Part II. - Other Information (Continued)
Exhibit 10. Material Contracts
Incorporated herein by reference:
10.1 1982 Stock Option and Long Term Performance
Incentive Plan - Exhibit A to Registrant's Proxy
Statement for Annual Meeting of Stockholders
dated April 15, 1992.
10.2 Perini Corporation Amended and Restated General
Incentive Compensation Plan - Exhibit 10.2 to
1997 Form 10-K filed on March 30, 1998.
10.3 Perini Corporation Amended and Restated
Construction Business Unit Incentive
Compensation Plan - Exhibit 10.3 to 1997 Form
10-K filed on March 30, 1998.
10.4 $125 million Credit Agreement dated as of
December 6, 1994 among Perini Corporation, the
Banks listed herein, Morgan Guaranty Trust
Company of New York, as Agent, and Shawmut Bank,
N.A., Co-Agent - Exhibit 10.4 to 1994 Form 10-K,
as filed.
10.5 Amendment No. 1 as of February 26, 1996 to the
Credit Agreement dated as of December 6, 1994
among Perini Corporation, the Banks listed
herein, Morgan Guaranty Trust Company of New
York, as Agent, and Fleet National Bank of
Massachusetts (f/k/a Shawmut Bank, N.A.), as
Co-Agent - Exhibit 10.5 to 1995 Form 10-K, as
filed.
10.6 Bridge Credit Agreement dated as of February 26,
1996 among Perini Corporation, the Bridge Banks
listed herein, Morgan Guaranty Trust Company of
New York, as Agent, and Fleet National Bank of
Massachusetts (f/k/a Shawmut Bank, N.A.) as
Co-Agent - Exhibit 10.6 to 1995 Form 10-K, as
filed.
10.7 Amendment No. 2 as of July 30, 1996 to the
Credit Agreement dated as of December 6, 1994
and Amendment No. 1 as of July 30, 1996 to the
Bridge Credit Agreement dated February 26, 1996
among Perini Corporation, the Banks listed
herein, Morgan Guaranty Trust Company of New
York, as Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - Exhibit 10.7 to
Perini Corporation's Form 10-Q/A for the fiscal
quarter ended September 30, 1996 filed on
December 11, 1996.
10.8 Amendment No. 2 as of September 30, 1996 to the
Bridge Credit Agreement dated as of February 26,
1996 among Perini Corporation, the Banks listed
herein, Morgan Guaranty Trust Company of New
York, as Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - Exhibit 10.8 to
Perini Corporation's Form 10-Q/A for the fiscal
quarter ended September 30, 1996 filed on
December 11, 1996.
10.9 Amendment No. 3 as of October 2, 1996 to the
Bridge Credit Agreement dated as of February 26,
1996 among Perini Corporation, the Banks listed
herein, Morgan Guaranty Trust Company of New
York, as Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - Exhibit 10.9 to
Perini Corporation's Form 10-Q/A for the fiscal
quarter ended September 30, 1996 filed on
17
<PAGE>
Part II. - Other Information (Continued)
December 11, 1996.
10.10 Amendment No. 4 as of October 15, 1996 to the
Bridge Credit Agreement dated as of February 26,
1996 among Perini Corporation, the Banks listed
herein, Morgan Guaranty Trust Company of New
York, as Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - Exhibit 10.10 to
Perini Corporation's Form 10-Q/A for the fiscal
quarter ended September 30, 1996 filed on
December 11, 1996.
10.11 Amendment No. 5 as of October 21, 1996 to the
Bridge Credit Agreement dated as of February 26,
1996 among Perini Corporation, the Banks listed
herein, Morgan Guaranty Trust Company of New
York, as Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - Exhibit 10.11 to
Perini Corporation's Form 10-Q/A for the fiscal
quarter ended September 30, 1996 filed on
December 11, 1996.
10.12 Amendment No. 6 as of October 24, 1996 to the
Bridge Credit Agreement dated as of February 26,
1996 among Perini Corporation, the Banks listed
herein, Morgan Guaranty Trust Company of New
York, as Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - Exhibit 10.12 to
Perini Corporation's Form 10-Q/A for the fiscal
quarter ended September 30, 1996 filed on
December 11, 1996.
10.13 Amendment No. 7 as of November 1, 1996 to the
Bridge Credit Agreement dated as of February 26,
1996 among Perini Corporation, the Banks listed
herein, Morgan Guaranty Trust Company of New
York, as Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - Exhibit 10.13 to
Perini Corporation's Form 10-Q/A for the fiscal
quarter ended September 30, 1996 filed on
December 11, 1996.
10.14 Amendment No. 8 as of November 4, 1996 to the
Bridge Credit Agreement dated as of February 26,
1996 and Amendment No. 3 as of November 4, 1996
to the Credit Agreement dated December 6, 1994
among Perini Corporation, the Banks listed
herein, Morgan Guaranty Trust Company of New
York, as Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - Exhibit 10.14 to
Perini Corporation's Form 10-Q/A for the fiscal
quarter ended September 30, 1996 filed on
December 11, 1996.
10.15 Amendment No. 9 as of November 12, 1996 to the
Bridge Credit Agreement dated as of February 26,
1996 and Amendment No. 4 as of November 12, 1996
to the Credit Agreement dated December 6, 1994
among Perini Corporation, the Banks listed
herein, Morgan Guaranty Trust Company of New
York, as Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - Exhibit 10.15 to
Perini Corporation's Form 10-Q/A for the fiscal
quarter ended September 30, 1996 filed on
December 11, 1996.
10.16 Management Agreement dated as of January 17,
1997 by and among the Company, Ronald N. Tutor
and Tutor-Saliba Corporation - Exhibit 10.16 to
Form 8-K filed on February 14, 1997.
18
<PAGE>
Part II. - Other Information (Continued)
10.17 Amended and Restated Credit Agreement dated as
of January 17, 1997 among Perini Corporation,
the Banks listed herein and Morgan Guaranty
Trust Company of New York, as Agent, and Fleet
National Bank, as Co-Agent - Exhibit 10.17 to
1996 Form 10-K - as filed.
10.18 Amendment No. 1 as of November 10, 1997 to the
Amended and Restated Credit Agreement dated as
of January 17, 1997 among Perini Corporation,
the Banks listed herein and Morgan Guaranty
Trust Company of New York, as Agent, and Fleet
National Bank, as Co-Agent - Exhibit 10.18 to
1998 Form 10-K - as filed.
10.19 Amendment No. 2 as of August 31, 1998 to the
Amended and Restated Credit Agreement dated as
of January 17, 1997 among Perini Corporation,
the Banks listed herein and Morgan Guaranty
Trust Company of New York, as Agent, and Fleet
National Bank, as Co-Agent - Exhibit 10.19 to
1998 Form 10-K - as filed.
10.20 Amendment No. 3 as of September 9, 1998 to the
Amended and Restated Credit Agreement dated as
of January 17, 1997 among Perini Corporation,
the Banks listed herein and Morgan Guaranty
Trust Company of New York, as Agent, and Fleet
National Bank, as Co-Agent - Exhibit 10.20 to
1998 Form 10-K - as filed.
10.21 Amendment No. 4 as of September 30, 1998 to the
Amended and Restated Credit Agreement dated as
of January 17, 1997 among Perini Corporation,
the Banks listed herein and Morgan Guaranty
Trust Company of New York, as Agent, and Fleet
National Bank, as Co-Agent - Exhibit 10.21 to
1998 Form 10-K - as filed.
10.22 Amendment No. 5 as of November 16, 1998 to the
Amended and Restated Credit Agreement dated as
of January 17, 1997 among Perini Corporation,
the Banks listed herein and Morgan Guaranty
Trust Company of New York, as Agent, and Fleet
National Bank, as Co-Agent - Exhibit 10.22 to
1998 Form 10-K - as filed.
10.23 Amendment No. 6 as of December 1, 1998 to the
Amended and Restated Credit Agreement dated as
of January 17, 1997 among Perini Corporation,
the Banks listed herein and Morgan Guaranty
Trust Company of New York, as Agent, and Fleet
National Bank, as Co-Agent - Exhibit 10.23 to
1998 Form 10-K - as filed.
10.24 Amendment No. 7 as of March 23, 1999 to the
Amended and Restated Credit Agreement dated as
of January 17, 1997 among Perini Corporation,
the Banks listed herein and Morgan Guaranty
Trust Company of New York, as Agent, and Fleet
National Bank, as Co-Agent - Exhibit 10.24 to
Perini Corporation's Form 10-Q for the fiscal
quarter ended March 31, 1999 filed on May 14,
1999.
10.25 Amendment No. 8 as of July 19, 1999 to the
Amended and Restated Credit Agreement dated as
of January 17, 1997 among Perini Corporation,
the Banks listed herein and Morgan Guaranty
Trust Company of New York, as
19
<PAGE>
Part II. - Other Information (Continued)
Agent, and Fleet National Bank, as Co-Agent -
Exhibit 10.25 to Perini Corporation's Form 10-Q
for the fiscal quarter ended June 30, 1999 filed
on August 13, 1999.
10.26 Amendment No. 9 as of October 1, 1999 to the
Amended and Restated Credit Agreement dated as
of January 17, 1997 among Perini Corporation,
the Banks listed herein and Morgan Guaranty
Trust Company of New York, as Agent, and Fleet
National Bank, as Co-Agent - filed herewith.
10.27 Amendment No. 10 as of October 19, 1999 to the
Amended and Restated Credit Agreement dated as
of January 17, 1997 among Perini Corporation,
the Banks listed herein and Morgan Guaranty
Trust Company of New York, as Agent, and Fleet
National Bank, as Co-Agent - filed herewith.
(b) Reports on Form 8-K
A Form 8-K was filed on July 15, 1999 and reported on the
"Commencement of Rincon Foreclosure" in "Item 5. Other Events"
in said Form 8-K.
A Form 8-K was filed on July 28, 1999 and reported on the
"Receipt of Waiver from Bank Group" in "Item 5. Other Events" in
said Form 8-K.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Perini Corporation
Registrant
Date: November 12, 1999 /s/ Robert Band
-----------------------------------------------
Robert Band, President, Chief Executive Officer
and Chief Financial Officer
Date: November 12, 1999 /s/ Michael E. Ciskey
-----------------------------------------------
Michael E. Ciskey, Vice President and Controller
21
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Balance Sheets as of September 30, 1999 and the Consolidated Statements of
Operations for the nine months ended September 30, 1999 as qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1999
<CASH> 33,625
<SECURITIES> 0
<RECEIVABLES> 134,264
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 280,295 <F1>
<PP&E> 27,017
<DEPRECIATION> 17,177
<TOTAL-ASSETS> 293,839 <F2>
<CURRENT-LIABILITIES> 207,132
<BONDS> 72,382
100
0
<COMMON> 5,743
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 293,839 <F3>
<SALES> 0
<TOTAL-REVENUES> 776,233
<CGS> 0
<TOTAL-COSTS> (737,729)
<OTHER-EXPENSES> (984)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (5,424)
<INCOME-PRETAX> 12,227 <F4>
<INCOME-TAX> (500)
<INCOME-CONTINUING> 11,727
<DISCONTINUED> (100,005)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (88,278)
<EPS-BASIC> (16.65)
<EPS-DILUTED> (16.65)
<FN>
<F1> Includes Equity in Construction Joint Ventures of $74,264, Unbilled Work
of $17,760, Net Current Assets of Discontinued Operations of $14,206,
and Other Short-Term Assets of $6,176, not currently reflected in this
tag list.
<F2> Includes Other Long-Term Assets of $3,704, not currently reflected in
this tag list.
<F3> Includes Deferred Income Taxes and Other Liabilities of $17,485,
Redeemable Series B Preferred Stock of $36,613, Stock Purchase Warrants
of $2,233, Paid-In Surplus of $45,184, Retained Deficit of $(91,920),
ESOT Related Obligations of $(120), and Treasury Stock of $(993).
<F4> Includes General, Administrative and Selling Expenses of $19,869 not
currently refelected on this tag list.
</FN>
</TABLE>
AMENDMENT NO. 9 TO CREDIT AGREEMENT AND WAIVERS
AMENDMENT and WAIVERS dated as of October 1, 1999 among PERINI
CORPORATION (the "Borrower"), the banks listed on the signature pages hereof
(collectively, the "Banks"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Agent (the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower, the Banks and the Agent are parties to an Amended
and Restated Credit Agreement dated as of January 17, 1997 (as heretofore
amended, the "Credit Agreement");
WHEREAS, the Borrower has failed to reimburse Harris Trust and Savings
Bank ("Harris Bank") for the amount of a drawing under a letter of credit issued
by Harris Bank, as described in the Forbearance Agreement dated as of September
23, 1999 among Harris Bank, the Borrower and Perini Building Corporation (the
"Forbearance Agreement");
WHEREAS, the Borrower's failure to reimburse Harris Bank when due for
the amount of such drawing (the "Harris Default") constitutes an Event of
Default under the Credit Agreement;
WHEREAS, the parties have agreed to amend certain provisions of the
Credit Agreement as provided herein, and at the request of the Borrower the
Banks have agreed to grant the waiver provided herein;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions. Unless otherwise specifically defined herein,
each term used herein which is defined in the Credit Agreement shall have the
meaning assigned to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Credit Agreement shall from and after the date hereof refer to
the Credit Agreement as amended hereby.
<PAGE>
Exhibit 10.26
Section 2. Amendment to Definitions. Section 1.01 of the Credit
Agreement is amended by inserting the following new definition, in appropriate
alphabetical order:
"Capital Restructuring" means the restructuring of the
Borrower's payment and other obligations under this Agreement and
appropriate modifications to the other Financing Documents, such that
the Borrower will reasonably be expected to satisfy all of its payment
obligations thereunder and no Default will reasonably be foreseeable at
the time of such restructuring, which restructuring shall be pursuant to
terms and conditions acceptable to each Bank and to each of the other
parties thereto.
Section 3. Amendment to Maximum Amount of Performance Letters of Credit.
Section 2.16(a) of the Credit Agreement is amended by amending and restating
clause (ii) in the proviso therein in its entirety to read as follows:
"the aggregate amount of the Letter of Credit Liabilities for
all Performance Letters of Credit shall not exceed $3,000,000."
Section 4. Amendment to Events of Default. Section 6.01 of the Credit
Agreement is amended by (i) deleting the word "or" at the end of subsection (n)
thereof, (ii) adding the word "or" at the end of subsection (o) thereof and
(iii) inserting the following new subsection (p):
"(p) the $3,000,000 Letter of Credit issued in favor of
Perini/Suitt shall not have expired or been terminated on or before
January 21, 2000 or the Capital Restructuring shall not have become
effective on or before January 21, 2000;".
Section 5. Waiver With Respect to the Harris Default. Solely for the
period from September 23, 1999 through and including the "Harris Waiver
Termination Date" (as defined below), the Banks hereby waive the Default
existing under the Credit Agreement due solely to the Harris Default.
As used herein, "Harris Waiver Termination Date" means the earlier of
November 30, 1999 and the first date, if any, when any of the following events
shall occur:
(a) A "Standstill Termination" (as defined in the Forbearance
Agreement) shall occur;
(b) Harris Bank shall exercise any rights or remedies available to
it in connection with the Harris Default; or
2
<PAGE>
EXHIBIT 10.26
(c) October 30, if the Banks shall not have received from the
Borrower a copy of a commitment letter to the Borrower from
Amresco Capital L.P., or such other lender as shall be
reasonably acceptable to the Banks, describing terms and
conditions reasonably acceptable to the Banks for a refinancing
of the Borrower's obligations to Harris Bank under the
reimbursement agreement referenced in the Forbearance Agreement.
Section 6. Waivers With Respect to Rincon. Solely for the period from
September 30, 1999 through and including the "Rincon Waivers Termination Date"
(as defined below), each Bank waives the Defaults (including notice thereof)
arising under the Credit Agreement solely as a result of the fact that:
(i) the Rincon Restructuring shall not have become effective on or
before April 30, 1999;
(ii) the Borrower's shall have failed to comply with its obligations
under Section 5.02 of the Credit Agreement, but solely to the
extent such obligations would require the Borrower to cause
Perini Land and Development and Rincon Center Associates to pay
and discharge, at or before maturity, all of their respective
material obligations and liabilities relating to the Rincon
Center project;
(iii) Rincon Center Associates shall have failed to make any payment
in respect of Debt relating to the Rincon Center project; or
(iv) any event or condition shall occur which results in the
acceleration of the maturity of any Debt of Rincon Center
Associates relating to the Rincon Center project or enables (or,
with the giving of notice or lapse of time or both, would
enable) the holder of such Debt or any Person acting on such
holder's behalf to accelerate the maturity thereof.
As used herein, "Rincon Waivers Termination Date" means the earlier of
October 30, 1999 and the first date, if any, when any of the following events
shall occur:
(i) The Borrower or Perini Land and Development shall become a named
defendant in any proceeding relating to the Rincon Center
project, other than (A) the proceeding commenced by Pacific
Gateway Properties, Inc., Case No. 301993, (B) the proceeding
commenced by Pacific Gateway Properties, Inc., Case No. 985464
or (C) the proceeding commenced by Susan L. Uecker, Receiver for
Chrysler MacNally Corporation in Case No. 304815, Case No.
306037 (collectively, the "PGP Lawsuits");
3
<PAGE>
EXHIBIT 10.26
(ii) Any development occurs in the PGP Lawsuits that is adverse to
the Borrower or Perini Land and Development;
(iii) An Event of Default described in Section 6.01(i) shall occur
with respect to Rincon Center Associates, other than an Event of
Default arising solely from Rincon Center Associates' failure
generally to pay its debts as they become due; or
(iv) An involuntary case or other proceeding shall be commenced
against Rincon Center Associates seeking liquidation,
reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
material part of its property;
provided that neither the appointment of receivers nor the naming of Perini Land
and Development as a party pursuant to (a) the August 3, 1999 Order Appointing
Receiver; Preliminary Injunction of the Superior Court of the State of
California for the County of San Francisco in Citicorp Real Estate, Inc. v.
Rincon Center Associates, Case No. 304816, and (b) the August 3, 1999 Order
Appointing Receiver; Preliminary Injunction of the Superior Court of the State
of California for the County of San Francisco in Citicorp Real Estate, Inc. v.
Chrysler MacNally Corporation, Case No. 304815, shall constitute a Rincon
Waivers Termination Date.
Section 7. Waiver of Condition to Borrowings. Solely for Borrowings on
any date from the date hereof through and including the Rincon Waivers
Termination Date, the Banks hereby waive the condition to Borrowing contained in
Section 3.02(d) of the Credit Agreement, but only to the extent such condition
cannot be satisfied due solely to the inability of the Borrower to make the
representation and warranty contained in Section 4.04(c) of the Credit Agreement
as a result of the write-down of its investment in the Rincon Center project.
The Banks acknowledge that a Borrowing on any day from the date hereof through
and including the Rincon Waivers Termination Date shall not be deemed to be a
representation and warranty by the Borrower on such date as to the condition
specified in Section 3.02(d) to the extent that such condition is waived
hereunder.
Section 8. Representations and Warranties Correct; No Default. The
Borrower represents and warrants that on and as of the date hereof, after giving
effect to this Amendment and Waivers, (a) the representations and warranties of
each Obligor contained in each Financing Document, as amended, to which it is a
party are true, other than the representation and warranty contained in Section
4.04(c) of the Credit Agreement to the extent that the Borrower cannot make such
representation and warranty due solely to the status of the Rincon Center
project and (b) no Default under the Credit Agreement exists.
4
<PAGE>
EXHIBIT 10.26
Section 9. Effect of Amendments and Waiver. Except as expressly set
forth herein, this Amendment and Section 9. Effect of Amendments and Waiver.
Except as expressly set forth herein, this Amendment and Waivers shall not
constitute an amendment or waiver of any term or condition of the Credit
Agreement or any other Financing Document, and all such terms and conditions
shall remain in full force and effect and are hereby ratified and confirmed in
all respects.
Section 10. Governing Law. This Amendment and Waivers shall be governed
by and construed in accordance with the laws of the State of New York.
Section 11. Counterparts. This Amendment and Waivers may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
Section 12. Consent by Subsidiary Guarantors. By signing this Amendment
and Waivers below, each Subsidiary Guarantor affirms its obligations under the
Subsidiary Guarantee Agreement and acknowledges that this Amendment and Waivers
shall not alter, release, discharge or otherwise affect any of such obligations,
all of which shall remain in full force and effect and are hereby ratified and
confirmed in all respects.
Section 13. Effectiveness. This Amendment and Waivers shall become
effective as of the date hereof when the Agent shall have received duly executed
counterparts hereof signed by the Borrower, the Required Banks and each
Subsidiary Guarantor (or, in the case of any party as to which an executed
counterpart shall not have been received, the Agent shall have received
telegraphic, telex or other written confirmation from such party of execution of
a counterpart hereof by such party).
Section 14. Termination.
(a) The waiver granted pursuant to Section 4 shall terminate and be
of no further force and effect on the Harris Waiver Termination
Date. The Banks shall retain, and upon such termination shall be
entitled to exercise, any and all remedies with respect to any
and all Defaults that are waived pursuant thereto.
(b) The waivers granted pursuant to Sections 6 and 7 shall terminate
and be of no further force and effect on the Rincon Waivers
Termination Date. The Banks shall retain, and upon such
termination shall be entitled to exercise, any and all remedies
with respect to any and all Defaults that are waived pursuant
thereto.
5
<PAGE>
EXHIBIT 10.26
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Waivers to be duly executed by their respective authorized officers as of the
date first above written.
AMENDMENT NO. 10 TO CREDIT AGREEMENT, WAIVERS
AND CONSENTS RELATING TO AMRESCO DEBT
AMENDMENT, WAIVERS and CONSENTS dated as of October 19, 1999 among
PERINI CORPORATION (the "Borrower"), the banks listed on the signature pages
hereof (collectively, the "Banks"), and MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as Agent (the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower, the Banks and the Agent are parties to an Amended
and Restated Credit Agreement dated as of January 17, 1997 (as heretofore
amended, the "Credit Agreement");
WHEREAS, the Borrower has proposed to contribute certain real property
(including its headquarters building) located in Framingham, Massachusetts to a
newly created, 100%-owned subsidiary and to obtain financing secured by such
real property pursuant to the terms and conditions contained in the August 13,
1999 Application/Commitment of Amresco Capital, L.P. attached hereto as Exhibit
A; and
WHEREAS, the Borrower has requested certain amendments to the Credit
Agreement in connection therewith, and the parties have agreed to amend certain
provisions of the Credit Agreement as provided herein;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions. Unless otherwise specifically defined herein,
each term used herein which is defined in the Credit Agreement shall have the
meaning assigned to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Credit Agreement shall from and after the date hereof refer to
the Credit Agreement as amended hereby.
Section 2. Amendment to Definitions. Section 1.01 of the Credit
Agreement is amended by inserting, in appropriate alphabetical order, the
following definitions:
<PAGE>
EXHIBIT 10.27
"Amresco Commitment Letter" means the August 13, 1999
Application/Commitment issued to Amresco Capital, L.P . by the Borrower and a
borrower to be determined, in the form attached as Exhibit A to Amendment No. 10
to Credit Agreement dated as of October 19, 1999.
"Amresco Debt" means Debt owed by the New Headquarters Subsidiary to
Amresco Capital, L.P., in the aggregate principal amount of not more than
$7,250,000 and having the terms and conditions described in the Amresco
Commitment Letter.
"Headquarters Building" means the office building located at 73 Mount
Wayte Avenue in Framingham, Middlesex County, Massachusetts.
"New Headquarters Subsidiary" means a 100%-owned Subsidiary of the
Borrower formed for the purpose of acquiring the Headquarters Building from the
Borrower, leasing the office space in such office building to the Borrower,
incurring and servicing the Amresco Debt and conducting such other activities
incidental thereto as contemplated by the Amresco Commitment Letter.
Section 3. Amendment to Debt Covenant.
(a) Section 5.08(a) of the Credit Agreement is amended by: (1)
deleting the word "and" at the end of clause (vi); (2) changing
clause (vii) to clause (viii); and (3) inserting the following
new clause (vii) immediately after clause (vi):
"(vii) the limited recourse Guarantee by the Borrower of the
Amresco Debt as described in the Amresco Commitment
Letter; and".
(b) Section 5.08(b) of the Credit Agreement is amended by: (1)
deleting the word "and" at the end of clause (v); (2) changing
clause (vi) to clause (vii); and (3) inserting the following new
clause (vi) immediately after clause (v):
"(vi) the Amresco Debt; and".
Section 4. Amendment to Negative Pledge Covenant. Section 5.11 of the
Credit Agreement is amended by: (1) deleting the word "and" at the end of clause
(e); (2) inserting a semi-colon and the word "and" at the end of clause (f); and
(3) inserting the following new clause (g):
"(g) Liens on the Headquarters Building granted to Amresco
Capital, L.P. to secure the Amresco Debt."
2
<PAGE>
EXHIBIT 10.27
Section 5. Amendment to Sale of Assets Covenant. Section 5.12(b) of the
Credit Agreement is amended by: (1) deleting the word "and" at the end of clause
(iv); (2) inserting a semi-colon and the word "and" at the end of clause "(v)";
and (3) inserting the following new clause (vi):
"(vi) the transfer of the Headquarters Building by the
Borrower to the New Headquarters Subsidiary."
Section 6. Amendment to Real Estate Investments Covenant. Section 5.15
of the Credit Agreement is amended by adding the following proviso at the end
thereof:
"; provided that notwithstanding the foregoing, the Borrower
shall be permitted to transfer the Headquarters Building to the New
Headquarters Subsidiary."
Section 7. Consents and Waivers in Connection with Creation of New
Headquarters Subsidiary and Amresco Debt.
(a) Each Bank consents to the creation of the New Headquarters
Subsidiary, but if the New Headquarters Subsidiary is created as
a corporation, then such consent is conditional on the following
occuring promptly following such creation (and, in any event, on
or prior to the date of closing of the Amresco Debt): (i) the
Borrower Pledge Agreement shall be amended to add all of the
shares of capital stock of the New Headquarters Subsidiary and
the related rights, entitlements, privileges and other interests
described in Section 3 thereof as Collateral thereunder and (ii)
the Borrower shall deliver certificates representing such
capital stock to the Agent, with duly executed instruments of
transfer or assignment in blank in form and substance
satisfactory to the Agent.
(b) Each Bank consents to the amendment to the Borrower Pledge
Agreement contemplated by clause (a) above, and acknowledges and
agrees that upon the effectiveness of this Amendment, the Agent
is authorized to execute and deliver such amendment to the
Borrower Pledge Agreement.
(c) Each Bank waives the requirements of Section 5.16 of the Credit
Agreement to the extent it would require the New Headquarters
Subsidiary to guaranty the Borrower's obligations under the
Credit Agreement or to grant a Lien on its assets to secure such
guaranty; provided that this waiver shall expire at such time as
the New Headquarters Subsidiary shall not be prohibited by the
terms and conditions of the Amresco Debt from giving such a
guaranty or granting a Lien on its assets to secure such
guaranty.
3
<PAGE>
EXHIBIT 10.27
(d) Each Bank waives the requirements of Section 5.18 of the Credit
Agreement to the extent it would prohibit the Borrower from
transferring the Headquarters Building to the New Headquarters
Subsidiary or from leasing the Headquarters Building from the
New Headquarters Subsidiary as contemplated by the Amresco
Commitment Letter.
(e) Each Bank waives the requirements of Section 5.20 of the Credit
Agreement to the extent it would prohibit the Borrower from
using a portion of the proceeds of the Amresco Debt to pay the
principal, interest and other amounts owed to Harris Trust and
Savings Bank in respect of the reimbursement obligations arising
as a result of the drawing under the letter of credit issued by
Harris Trust and Savings Bank ("Harris Bank") as described in
the Forbearance Agreement dated as of September 23, 1999 between
Harris Bank and Perini Building Corporation.
(f) Each Bank acknowledges and agrees that the Agent is authorized
to release the Mortgage on the Headquarters Building upon the
closing of the Amresco Debt, but only if the Commitments are
reduced at such time by an aggregate amount equal to the amount
by which 100% of the aggregate principal amount of the Amresco
Debt exceeds the sum of (i) the aggregate amount paid to Harris
Bank for amounts described in clause (e) and (ii) the
out-of-pocket transaction costs incurred by the Borrower or the
New Headquarters Subsidiary in connection with the Amresco Debt,
including all fees, commissions and reserve or escrow fundings
described in the Amresco Commitment Letter.
Section 8. Representations and Warranties Correct; No Default. The
Borrower represents and warrants that on and as of the date hereof, after giving
effect to this Amendment, Waivers and Consents, (a) the representations and
warranties of each Obligor contained in each Financing Document, as amended, to
which it is a party are true, other than the representation and warranty
contained in Section 4.04(c) of the Credit Agreement to the extent that the
Borrower cannot make such representation and warranty due solely to the status
of the Rincon Center project and (b) no Default under the Credit Agreement
exists.
Section 9. Effect of Amendments, Waivers and Consents. Except as
expressly set forth herein, this Amendment, Waivers and Consents shall not
constitute an amendment or waiver of any term or condition of the Credit
Agreement or any other Financing Document, and all such terms and conditions
shall remain in full force and effect and are hereby ratified and confirmed in
all respects.
Section 10. Governing Law. This Amendment, Waivers and Consents shall be
governed by and construed in accordance with the laws of the State of New York.
Section 11. Counterparts. This Amendment, Waivers and Consents may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument.
4
<PAGE>
EXHIBIT 10.27
Section 12. Consent by Subsidiary Guarantors. By signing this Amendment,
Waivers and Consents below, each Subsidiary Guarantor affirms its obligations
under the Subsidiary Guarantee Agreement and acknowledges that this Amendment,
Waivers and Consents shall not alter, release, discharge or otherwise affect any
of such obligations, all of which shall remain in full force and effect and are
hereby ratified and confirmed in all respects.
Section 13. Effectiveness. This Amendment, Waivers and Consents shall
become effective as of the date hereof when the Agent shall have received duly
executed counterparts hereof signed by the Borrower, each Bank and each
Subsidiary Guarantor (or, in the case of any party as to which an executed
counterpart shall not have been received, the Agent shall have received
telegraphic, telex or other written confirmation from such party of execution of
a counterpart hereof by such party).
IN WITNESS WHEREOF, the parties hereto have caused this Amendment,
Waivers and Consents to be duly executed by their respective authorized officers
as of the date first above written.
5
<PAGE>
EXHIBIT 10.27
APPLCATION/COMMITMENT
BORROWER: Single Asset Entity To-Be-Determined
c/o Frank D. Pietroski
FDP Financial Services
175 Derby Street, Suite 21
Hingham, MA 02043
August 13, 1999
AMRESCO CAPITAL, L.P.
37 Franklin Street, Suite 410
Buffalo, New York 14202
Re: Loan Application together with all attachments and any
amendments thereto agreed to by the parties in writing, (the
"Application"), submitted by Borrower (as defined below) to
Lender (as defined below) relating to the proposed Loan (as
defined below) in the original principal sum of $7,275,000.00
and secured by, among other things, a first mortgage on 73 Mount
Wayte Avenue, Framingham, Massachusetts (the "Property")
Dear Sir:
The undersigned hereby submits this Application/Commitment (this "Application")
to AMRESCO Capital, L.P., its successors and assigns ("Lender"), for a first
mortgage loan up to the principal amount set forth below (the "Loan") to
Borrower (as defined below), subject to the terms and conditions contained
herein (including the Standard Terms and Conditions attached hereto). It is
acknowledged that this Application shall not constitute a commitment by Lender
to make the Loan (a "Commitment") to Borrower unless and until (a) this
Application is executed by Borrower and Key Principals and delivered to Lender
accompanied by the Processing Fee, the Application Fee, the completed
Environmental Questionnaire and Certificate (the form of which is attached
hereto) and the items identified on the Borrower Documentation List (attached
hereto) and (b) Lender's issuance of a Commitment. Furthermore, the Commitment
and the consummation of the Loan are conditioned
<PAGE>
EXHIBIT 10.27
upon the (a) completion by Lender of a due diligence investigation of Borrower,
its principals and the Property (as defined below) confirming that Borrower, its
principals and the Property are as represented and meet Lender's underwriting
criteria, (b) execution and delivery by Borrower of the required documentation
relating to the Loan, and (c) absence of any changed circumstances which may
materially and adversely affect the proposed Loan. All documents and
investigation(s) must be acceptable to Lender and all conditions must be
satisfied in a manner acceptable to Lender. Capitalized terms used in this
Application shall have the meanings set forth below. Capitalized terms used in
this Application and not otherwise defined below are defined in the Standard
Terms and Conditions attached hereto and incorporated by reference.
Property: That office building which is further described below:
Name: 73 Mount Wayte Avenue
Address (Street, City, County, State): 73 Mount Wayte Avenue
Framingham, Middlesex County,
Massachusetts
Type: Two Story Office Building
No. of Units: N/A
No. of Stories: Two
Physical Occupancy: 100%
Year Built: Unknown
Land Area: 7.3 acres
Parking Spaces: Unknown
Acquisition: No
Security: The Loan shall be secured by a first and prior mortgage or deed of
trust on the Property and a perfected first security interest in all
leases, rents, income and profits, and all other personal property,
rights and interests owned by Borrower and related or appurtenant to the
Property. SEE SPECIAL CONDITION #13.
Borrower: Borrower must be a single asset entity meeting Lender's single asset
entity requirements, ("Single Asset Entity"), which means a United
States corporation, limited partnership or limited liability company
which does not and cannot by virtue of its organizational documents
engage in any business other than owning and operating the Property
which cannot acquire or own material assets other than the Property and
incidental personal property, and which (i) maintains its assets in a
way which segregates and identifies such assets separate and apart from
the assets of any other person or entity, (ii) holds itself out to the
public as a separate legal entity from any other person or entity, (iii)
conducts business solely in its name, (iv) shall not have any
indebtedness other than the Loan and indebtedness for trade payables
incurred in
2
<PAGE>
EXHIBIT 10.27
the ordinary course of business, and (v) otherwise complies with rating
agency standards for a single purpose entity.
Key Principals: Perini Corporation will execute a guaranty with respect to the
limited recourse carve-out provisions (as described herein).
Loan Amount: $7,275,000.00 (Subject to adjustment at the time of rate lock
and/or upon final approval of the Appraisal. The adjustment shall be based upon
the Maximum Loan to Value and/or Minimum Debt Service Coverage required
described herein.)
Term: Ten (10) years from the first day of the first calendar month following
the Closing Date or, if the Closing Date is the first day of a calendar month,
ten (10) years from such day.
Amortization of Principal: Twenty (25) years, with the understanding that the
Loan is payable in full at the end of the Term.
Interest Rate: The greater of (a) 7.8% per annum or (b) a rate per annum equal
to the Treasury Rate (defined as the yield for the "on the run" most recently
issued and currently traded 10-year United States Treasury Note as determined by
Lender) plus 245 basis points (the "Interest Rate Spread").
Rate Lock: The Interest Rate will be set no earlier than 9:00 a.m. (New York
time) two (2) Business Days prior to the related funding date for no charge or
deposit. If the Loan does not close within such two (2) Business Day period,
except due to Lender's willful default, Borrower will reimburse Lender for any
costs related to changes in interest rates.
3
<PAGE>
EXHIBIT 10.27
Maximum Loan
to Value Ratio: The lesser of:
(A) Seventy five percent (75%) of the appraised value of the
Property pursuant to the Appraisal; or
(B) Seventy five percent (75%) of the purchase price of the Property
if the Loan is being made in connection with an acquisition of
the Property, or the property has been purchased within the last
twelve months.
Minimum Debt Service Coverage Ratio: 1.25x, which is calculated as the ratio of
(a) Lender's estimated net underwritable cash flow from the Property over a
trailing twelve (12) month period adjusted, if necessary, to reflect the results
of an audit of the Property cash flows ("Net Cash Flow"), divided by (b) the
loan constant [which shall be (i) the sum of twelve (12) regularly scheduled
principal and interest payments divided by (ii) the Loan Amount ("Loan
Constant") ] times the Loan Amount.
Closing Date/ Commitment Expiration Date: Unless extended by Lender, the Loan
must close and fund on such a date (the "Closing Date") not later than the
thirtieth (30th ) Business Day following Borrower's acceptance of the Commitment
(the "Commitment Expiration Date"), unless Lender shall, in its sole discretion,
otherwise agree, in writing. For purposes hereof, the "Effective Date of the
Commitment" shall be the date Lender issues its Commitment. Should the
Commitment be issued without any material changes to Application, Borrower's
signature to the Application will be deemed as acceptance of the Commitment and
the thirty (30) day period will run from issuance of the Commitment. Borrower
and Key Principals acknowledge time is of the essence in regard to closing the
Loan on or before the Commitment Expiration Date.
LENDER'S FEES:
Processing Fee: $5,000. The Processing Fee is payable to Lender simultaneously
with submission of this Application. The Processing Fee shall be earned by
Lender upon Lender's completion of its site inspection.
Application Fee: $22,500. The Application Fee is payable to Lender
simultaneously with submission of this Application. The Application Fee is
non-refundable upon submission of this Application, except as described below in
the "Use of Lender's Fees/Partial
4
<PAGE>
EXHIBIT 10.27
Refund" provision. The Application Fee will be used by Lender to cover all of
the costs of the Phase I Environmental Report, the Engineering Report and the
Appraisal (the "Third Party Analyses"), as well as Lender's usual and customary
attorneys' fees incurred in connection with legal due diligence and
documentation of the Loan. The Application Fee does not include, and Borrower
shall pay the costs of (i) a Phase II Environmental Report, or any additional
environmental analyses, if applicable, a seismic survey, or any other
extraordinary engineering reports or analyses; (ii) expenses and/or
disbursements of Lender's legal counsel; (iii) third party reviewer fees; and
(iv) legal fees incurred as a result of significant negotiations of the Loan
Documents, extraordinary and/or complex legal issues uncovered by the due
diligence performed by Lender or Lender's counsel, or non-standard loan
provisions. By way of example (but not by way of limitation), additional legal
fees may be incurred for items such as assignment of existing indebtedness
secured by the Property, environmental issues, or condominium projects with
bifurcated ownership. Borrower authorizes Lender to order the Third Party
Analyses upon receipt of signed Application and related fees. SEE SPECIAL
CONDITION #4.
Use of Lender's Fees/Partial Refund:
A. The Processing Fee is earned by Lender upon completion of its
site inspection of the Property and is thereafter non-refundable
to Borrower under all circumstances. In the event Lender does
not complete its site inspection of the Property within fourteen
(14) days after its receipt of this signed Application and the
items to be submitted herewith, Borrower may, at its option,
terminate this Application by written notice to Lender and
receive a full refund of the Processing Fee and the Application
Fee.
B. In the event the Loan closes in accordance with the terms of
this Application, the Application Fee will be retained by
Lender.
C. If the Loan does not close for any reason other than a Borrower
Default described in subparagraph (D) set forth below, including
Borrower's decision to terminate this Application (by written
notice to Lender) because the Commitment issued by Lender is on
terms materially different from those contained in this
Application, then the balance of the Application Fee in excess
of the costs of the Third Party Analyses, Lender's attorneys'
fees and costs incurred to date and the Loan Expenses (as
defined in section 4 of the attached Standard Terms and
Conditions) incurred by Lender to date will be refunded to
Borrower.
D. In the event that the Commitment expires or is terminated by
Lender because Borrower, its Key Principals or agents (i) made a
material misrepresentation, (ii) fail to timely furnish
information requested under the Commitment or to comply with a
condition precedent within their control, (iii) terminate
negotiations prior to execution of the Loan Documents or (iv)
otherwise
5
<PAGE>
EXHIBIT 10.27
refuse to close the Loan (individually or collectively, a
"Borrower Default"), then Lender will be entitled to retain the
entire Application Fee, in its entirety, and to recover from
Borrower and Key Principals, as liquidated damages, the amount
by which the costs of the Third Party Analyses, Lender's
attorneys' fees and costs incurred to date and the Loan Expenses
incurred by Lender to date exceed the Application Fee. In such
event, Borrower will also be solely responsible for the payment
of any fee or commission due Broker (if any) or any other broker
involved in the proposed Loan. This subparagraph (D) will
survive the expiration or termination of this Application and
the Commitment, if any, that may subsequently be issued by
Lender. SEE SPECIAL CONDITION #5.
OTHER LOAN TERMS:
Limited Recourse: No deficiency or other judgment for repayment of principal and
interest on the Loan will be entered by Lender against Borrower or Key
Principals following an Event of Default (as defined in the Loan Documents)
except in the event of fraud or material misrepresentation by Borrower or Key
Principals in connection with the Loan (including, but not limited to, the
failure to pay the first full monthly payment of principal and interest when due
and failure to timely establish the Lockbox required should Borrower fail to
comply with the Reporting Requirements, as set forth hereinafter). In addition,
Borrower and Key Principals will be liable for Lender's standard carve-outs and
limitations as set forth in Section 2 of the Standard Terms and Conditions.
Repayment Terms: If funding of the Loan does not occur on the first day of a
calendar month, Borrower will pay interest accruing up to the first day of the
next calendar month, in advance at closing. Thereafter, principal and interest
(payable in arrears) shall be due in monthly installments until maturity.
Interest shall be computed and payable in arrears on a monthly basis of a
360-day year for the actual number of days elapsed (subject to the provisions of
the Loan Documents limiting interest to the maximum amount allowed by law).
Prepayment: Except in the case of casualty or condemnation proceeds actually
applied to the Loan balance, the Loan may not be prepaid except as provided
herein below. After the earlier of: (i) the first five (5) years following the
full funding of the Loan; or (ii) two years after securitization of the Loan,
Borrower may defease the Loan and have the lien on the property released by
purchasing U.S. Treasury securities in an amount sufficient to pay the remaining
principal and interest due on the Loan as scheduled. Provided Borrower has not
previously elected the option to defease, prepayment will be permitted during
the last three (3) months of the term of the Loan without payment of these fees.
6
<PAGE>
EXHIBIT 10.27
Assumability: The Loan may be assumed upon prior written approval of Lender, its
agent, successors, or assigns in accordance with the terms of the Loan Documents
and the payment by Borrower of a one percent (1%) assumption fee, which right is
not limited to one such assumption. SEE SPECIAL CONDITION #6.
Additional Encumbrances: No additional financing of any type will be allowed on
the Property, Borrower or on the constituent interests in Borrower. SEE SPECIAL
CONDITION #7 & #13.
Reporting Requirements: During the Loan Term, Borrower and all indemnitors and
guarantors of the Loan shall keep adequate books and records of account in
accordance with generally accepted accounting principles and furnish to Lender
the following, all as more particularly set forth in the Loan Documents:
(i) On a monthly basis, rent rolls and property operating statements
for the immediately preceding month or such prior period as
Lender shall require, or if the Loan has been securitized or
sold as a whole loan by Lender, quarterly and annual rent rolls
and property operating statements;
(ii) Annual property operating statements and operating budgets;
(iii) Borrower's quarterly and annual balance sheets and profit and
loss statements relating to the Property; and
(iv) Such other additional financial and management information as
Lender may require from time to time
Springing Lockbox: If Borrower fails to comply with a reporting
requirement, as set forth above and in the Loan Documents, twice in any
twelve (12) month period during the Term, the Borrower will be obligated
to establish a lockbox account with Lender, its successors or assigns,
and enter into a cash management agreement (the "Lockbox") with Lender,
its successors or assigns. Borrower will have thirty (30) days from the
date of the second default during any twelve (12) month period to
institute the Lockbox. Failure to institute the Lockbox within this
thirty (30) day period will result in the Loan becoming full recourse to
the Borrower and Key Principals and will constitute a default under the
Loan. SEE SPECIAL CONDITION #8.
Failure to deliver the financial information as required in the Loan
Documents within the time period specified therein shall constitute an
Event of Default under the Loan Documents.
7
<PAGE>
EXHIBIT 10.27
ESCROWS AND RESERVES:
Operating Escrows: A monthly escrow for taxes, insurance, and other special
assessments will be required. At closing, the escrow must be funded initially in
an amount which, when the required monthly payments are added thereto, will be
sufficient in Lender's estimation to pay such charges on the first day of the
calendar month preceding the month when due. SEE SPECIAL CONDITION #9, #11, #12
& #16.
General Replacement: A general replacement reserve of $0.20 per square foot per
year will be funded through monthly deposits by Borrower. Monies deposited will
be released to Borrower for reimbursement of exterior, structural, HVAC and
mechanical improvements and repairs in accordance with the terms of the
applicable Loan Documents. This reserve may be increased after Lender's
evaluation of the Engineering Report, but in no event will the monthly deposit
be less than $0.20 per square foot for office.
Repairs: 125.0% of the estimated cost of any needed maintenance and repairs as
determined by Lender's evaluation of the Engineering Report will be deposited at
closing, if such costs exceed the greater of one half of one percent (.5%) of
the Loan Amount or $10,000, for subsequent release to Borrower, upon completion
of the required maintenance and repair, for reimbursement of the costs of such
maintenance and repairs (not to exceed the amount budgeted for such maintenance
and repairs), which must be completed within the time period established by
Lender.
TI/LC's: A reserve for future tenant improvements and leasing commissions in the
amount of $50,000 will be funded by Borrower at closing; thereafter, the amount
of $25,000 per year will be funded through monthly deposits by Borrower until
the balance in this reserve is at least $200,000. If the balance in this reserve
is subsequently reduced below such amount (whether on account of expenditures
approved by Lender or its servicer or otherwise), or if there is any event of
default (or any event with which notice or lapse of time or both could
constitute an event of default) under the Loan Documents, then Borrower shall
resume making monthly deposits in such reserve until a balance of at least
$200,000 is restored and there is no uncured event of default. Lender shall
release to Borrower the lesser of (i) the actual amounts expended by Borrower or
(ii) $8.00/sq. ft. to reimburse Borrower for costs incurred in accordance with
the terms of the applicable Loan Documents. This reserve may be increased after
Lender's evaluation of the Appraisal and market survey. SEE SPECIAL CONDITION #3
& #12.
Other: Lender may require additional funding of the foregoing at closing as well
as any escrow for any other purpose as may be provided in the Loan Documents,
all of which shall be pursuant to escrow agreements acceptable to Lender and
executed by Borrower at closing. At this time, Lender is unaware of the need for
any
8
<PAGE>
EXHIBIT 10.27
such additional escrow but merely wishes to retain the right to require any such
other additional escrow should it become necessary. SEE SPECIAL CONDITION #10.
Grace and Cure Period: Payments are due and payable on the first of each
calendar month. Payments will be considered to be late, and subject to a late
charge without notice, if the payments have not been received by the fifth day
of each calendar month. If the default is not timely cured, then the Loan will
be subject to default interest and Lender may exercise its other remedies under
the Loan Documents. SEE SPECIAL CONDITION #15.
Loan Closing Conditions: Lender's agreement to fund the Loan is contingent upon
its receipt and approval of (a) an appraisal prepared by an independent
appraiser acceptable to Lender in accordance with FIRREA/USPAP standards (the
"Appraisal"), (b) capital expenditure budget(s), (c) engineering report(s), (d)
environmental report(s), (e) legal opinion(s) regarding the Borrower's ownership
structure, the enforceability of the Loan documents and such other matters as
Lender's counsel may require, (f) title insurance, (g) survey(s), (h) certified
current and historical rent rolls and property operating statements, (i)
management agreement(s), (j) organizational documents, (k) financial statements,
credit reports and UCC, litigation, bankruptcy and judgment searches for the
Borrower, the Controlling Entity, all entities comprising the Borrower and Key
Principals (as defined herein), (l) copies of the standard form of lease, (m)
copies of all commercial space leases, historical tenant sales data, provided
tenant is required to report same to Landlord, tenant estoppels and
subordination, non-disturbance and attornments agreements, (n) current and prior
years' real estate tax statements, (o) evidence of casualty, liability and other
insurance, (p) evidence of establishment of operations and maintenance plans for
possible asbestos-containing materials, lead-based paint or radon, if
applicable, (q) evidence of compliance with all applicable laws and ordinances,
(r) acceptable evidence of a Minimum DSCR (as defined in herein) for the
Property at closing together with (s) such other documentation as Lender may, in
its sole and absolute discretion, require. All of the aforementioned items must
be satisfactory to Lender and its counsel, in their sole discretion.
Lender will make the Loan to Borrower only if Lender receives and
approves the items set forth in clauses (a) through (s) above.
Special Conditions Supplement: Special provisions of this Application are set
forth in the Special Conditions Supplement attached and incorporated herein by
reference. If any such special provision is in conflict with another term or
condition of this Application, the special provisions shall control.
9
<PAGE>
EXHIBIT 10.27
Borrower shall have five (5) Business Days from the date of this
Application to execute this Application and submit it to Lender. If Lender does
not receive Borrower's submission of this Application by the close of business
on the fifth (5th) Business Day from the date hereof, Lender may thereafter
refuse, at its option, to accept Borrower's Application. Time is of the essence
with respect to all obligations under this Application.
THE FUNDING AND CLOSING OF THE LOAN IS SUBJECT TO A DETERMINATION BY THE
LENDER IN ITS SOLE DISCRETION THAT THE LOAN CAN BE EITHER SOLD OR TRANSFERRED
UPON TERMS, (INCLUDING PURCHASE PRICE), AND CONDITIONS ACCEPTABLE TO THE LENDER.
THIS APPLICATION, AND THE OTHER LOAN DOCUMENTS REFERRED TO OR
CONTEMPLATED HEREIN, REPRESENT OR WILL REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENT OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
The provisions of this Application and resulting Commitment, if any,
cannot be waived or modified unless such waiver or modification is in writing
and signed by the Lender, Borrower and Key Principals, if any. The Loan
Application and related materials submitted to Lender shall survive the issuance
of any such Commitment.
BORROWER:
By: To Be Determined
Name:
Title:
Tax I.D. No.:
KEY PRINCIPALS: Perini Corporation
By:
Printed Name:
Title: ____________________________________
Tax I.D. No.:
Attachments:
Special Conditions Supplement
Standard Terms and Conditions
Surveyor Selection
Survey Requirements
Title Requirements
Borrower Documentation List
10
<PAGE>
EXHIBIT 10.27
Environmental Questionnaire and Certificate
[to be completed by Borrower and returned with signed Application]
11
<PAGE>
EXHIBIT 10.27
ACKNOWLEDGEMENT OF RECEIPT OF APPLICATION AND PROCESSING AND APPLICATION FEE in
the amount of $ by Lender on _______________, 1999.
LENDER: AMRESCO CAPITAL, L.P.,
a Delaware limited partnership
By: AMRESCO Mortgage Capital, Inc.,
a Delaware corporation
its sole General Partner
By:
Name:
Title:
12
<PAGE>
EXHIBIT 10.27
ISSUANCE OF COMMITMENT
LENDER HEREBY ISSUES THIS COMMITMENT in accordance with the terms hereof on this
day of , 1999 (the "Effective Date of this Commitment").
LENDER: AMRESCO CAPITAL, L.P.,
a Delaware limited partnership
By: AMRESCO Mortgage Capital, Inc.,
a Delaware corporation
its sole General Partner
By:
Name:
Title:
13
<PAGE>
EXHIBIT 10.27
SPECIAL CONDITIONS SUPPLEMENT
Prior to closing the Loan, the following conditions must have been
fulfilled to Lender's satisfaction:
1. This transaction is subject to Lender's approval of a comprehensive
credit review of Perini Corp.
2. Borrower will be required to enter into a 25-year lease, acceptable to
Lender, with Perini Corp. at a rental rate equal to or greater than
$11.75 per square foot (triple net) for the entire net rentable area.
The rental rate will be verified by an independent appraiser as to
market validity and may be subject to adjustment based upon such
appraisal. Borrower will also provide estoppel and subordination
agreement related thereto.
3. In lieu of the TI/LC reserve requirements set forth above, Borrower may
elect to provide to Lender at closing a letter of credit in the amount
of $140,000.00 relating to the TI/LC reserve. Any such letter of credit
must be an irrevocable letter of credit furnished by Borrower at its own
expense for the benefit of Lender and its assigns, to be in transferable
form reasonably acceptable to Lender and issued by a financial
institution acceptable to Lender. Such letter of credit shall be held as
additional collateral for the term of the Loan and shall be subject to
being drawn down in the case of an event of default, as defined in the
Loan Documents. Borrower shall notify Lender should it elect this letter
of credit option at least two weeks prior to funding and closing of the
Loan.
4. Lender will contact Borrower and receive Borrower's written permission
to proceed if Lender's additional expenses, which are to be paid
separately by Borrower, set forth as (i), (ii), (iii) and (iv) in the
Application Fee section above, will exceed $5,000.00.
5. Lender is not responsible for the payment of any fee or commission due
Broker, as defined hereinafter. Neither Borrower nor Lender has
contracted with, nor knows of any broker, other than broker who has
participated in the application for the Loan or the transactions
contemplated by the Commitment (the "Broker").
6. Notwithstanding the assumption fee set forth in the Assumption section
above, the Loan may be assumed upon prior written approval of Lender,
its agent, successors, or assigns in accordance with the terms of the
Loan Documents and the payment by Borrower of a one half of one per cent
(.5%) assumption fee, which right is not limited to one such assumption.
7. Reference in the Additional Encumbrances section above to no additional
financing being allowed on the constituents in the Borrower should not
be construed as a requirement that Perini Corporation not incur
additional debt.
8. In regard to the Springing Lockbox provision set forth in the Reporting
Requirements section
1
<PAGE>
EXHIBIT 10.27
above, Lender will agree to a 10 day notice and cure period for any
failure to comply with a reporting requirement set forth herein and in
the Loan Documents. In addition, notwithstanding the terms set forth in
the Loan Documents, Borrower will provide its required financial
reports, as described therein, on or before 45 days after the end of
each month/quarter and within 90 days following the end of each calendar
year.
9. The phrase "special assessments" used in the Operating Escrows section
above refers to any assessments, fees or taxes assessed against the
Property by any governmental body.
10. Should any additional escrows be required pursuant to the Other section
above, any such escrow shall be pursuant to an escrow agreement
acceptable to Lender and Borrower.
11. Notwithstanding the Operating Escrows section above, Borrower may elect
to provide to Lender at closing the following:
TAXES: The amount of all taxes and other assessments on the Property will be
among the deductions used in underwriting cash flow available for debt service;
however, Lender agrees to defer its right under the Loan Documents to require
monthly escrow deposits for the payment of taxes and other assessments on the
Property as long as there exists no event of default (or event with which notice
or lapse of time or both could constitute an event of default) under the Loan
Documents, and the following conditions are met to Lender's satisfaction:
Borrower provides to Lender at closing an amount sufficient to make
one-half the then-current required payment, whether quarterly or
semi-annually. Lender shall hold this amount in escrow as additional
collateral for the term of the Loan.
o The sole fee simple owner of the Property is Borrower or an
entity which Lender has approved in writing (not only as an
acceptable transferee and assumptor generally but also as to the
suspension of such escrow payments specifically).
o Borrower delivers tax receipts and other evidence satisfactory
to Lender of the payment of all taxes at least twenty (20) days
prior to their becoming due and all taxes are paid as required
by the Loan Documents.
If Lender determines that any of the foregoing conditions are not
satisfied, then Lender may, in addition to its other remedies under
applicable law and the Loan Documents, require that Borrower immediately
pay all unpaid taxes and that escrows for all taxes on the Property be
established and fully funded in accordance with Lender's standard
provisions.
INSURANCE: The amount of premiums for all insurance required under the Loan
Documents will be among the deductions used in underwriting cash flow available
for debt service; however,
2
<PAGE>
EXHIBIT 10.27
Lender agrees to defer its right under the Loan Documents to require monthly
escrow deposits for the payment of premiums for insurance on the Property as
long as there exists no event of default (or event with which notice of lapse of
time or both could constitute an event of default) under the Loan Documents and
the following conditions are met to Lender's satisfaction
Borrower provides to Lender at closing an amount sufficient to pay one
half the then-current insurance premium payment, whether annual or
semi-annual, which shall be held in escrow as additional collateral for
the term of the Loan.
o The sole fee simple owner of the Property is Borrower or an
entity which Lender has approved in writing (not only as an
acceptable transferee and assumptor generally but also as to the
suspension of such escrow payments specifically).
o Lender has received, prior to Closing, original insurance
policies or Accord 27 certificates specifically identifying the
Property from an insurance company acceptable to Lender and
meeting Lender's rating requirements naming Lender and its
assigns as payees under a standard mortgagee clause and
providing that the policy will not be terminated without thirty
(30) days (or such shorter time as may be acceptable to Lender)
prior written notice delivered to Lender or its servicer, and
such policy or certificate assigns a coverage amount at least
equal to the amount required by Lender.
o Borrower provides written evidence satisfactory to Lender that
all such insurance premiums are paid current at the time of
Closing and at all times during the Term of the Loan.
o If Lender determines that any of the foregoing conditions are not
satisfied, then Lender may, in addition to its other remedies under
applicable law and the Loan Documents, require that Borrower immediately
pay all unpaid premiums for insurance and that escrows for insurance be
established and fully funded in accordance with Lender's standard
provisions.
12. Provided Borrower does not elect to fund this reserve with a letter of
credit as described above, subject to the payment of Lender's or its
servicer's service charges in connection with such accounts and subject
to the collateral and other provisions of the applicable Loan Documents,
Lender or its servicer will allocate to Borrower (and Borrower will
report as income) an amount of interest on the average monthly balance
in the specific reserve for tenant improvements and leasing commissions,
based on a business money market savings account rate (or a comparable
rate) quoted by the depository institution selected by Lender or its
servicer. Such interest shall be part of such escrow fund and shall be
held or disbursed as provided in the escrow agreement and other Loan
Documents. Lender and its servicer shall not be responsible for
obtaining any specific return or yield on such funds, which may be
invested with escrows for other loans.
13. Borrower and its managing members or members will not, during the term
of the Loan, incur any
3
<PAGE>
EXHIBIT 10.27
indebtedness contrary to the bankruptcy remote requirements referred to
in this Application, including, without limitation, any financing
directly or indirectly secured by any lien on or other interest in the
Property evidenced by a note.
14. Notwithstanding the liquidated damages set forth in D of the Use of
Lender's Fees/Partial Refund section, Lender's liquidated damages shall
be capped at one per cent (1%) of the Loan Amount in the event of a
Borrower Default.
15. For informational purposes only in regard to a question regarding notice
and cure provisions, Lender is providing the following excerpt from the
mortgage form loan document:
General Event of Default: In addition to Section 24[Events of Default] above, it
shall also be an Event of Default if for more than ten (10) days after notice
from Mortgagee, Mortgagor shall continue to be in default under any other term,
covenant or condition of the Note, this Mortgage or the other Loan Documents in
the case of any default which can be cured by the payment of a sum of money or
for thirty (30) days after notice from Mortgagee in the case of any other
default, provided that if such default cannot reasonably be cured within such
thirty (30) day period and Mortgagor shall have commenced to cure such default
within such thirty (30) day period and thereafter diligently and expeditiously
proceeds to cure the same, such thirty (30) day period shall be extended for so
long as it shall require Mortgagor in the exercise of due diligence to cure such
default, it being agreed that no such extension shall be for a period in excess
of sixty (60) days. Notwithstanding the foregoing, Mortgagee agrees to give to
Mortgagor notice as described in this Section 25 of a default referred to in
Section 24 (j) - (q) above.
Provision of this excerpt is not meant to imply that notice will be given under
any circumstances other than those set forth in the Loan Documents. Borrower has
been informed that notice and cure is not applicable to monetary defaults as set
forth in the Note.
4
<PAGE>
EXHIBIT 10.27
16. Subject to the payment of Lender's or its servicer's service charges in
connection with such accounts and subject to the collateral and other
provisions of the applicable Loan Documents, Lender or its servicer will
allocate to Borrower (and Borrower will report as income) an amount of
interest on the average monthly balance in taxes and insurance, based on
a business money market savings account rate (or a comparable rate)
quoted by the depository institution selected by Lender or its servicer.
Such interest shall be part of such escrow fund and shall be held or
disbursed as provided in the escrow agreement and other Loan Documents.
Lender and its servicer shall not be responsible for obtaining any
specific return or yield on such funds, which may be invested with
escrows for other loans.
5
<PAGE>
EXHIBIT 10.27
[REMOVE THIS PAGE PRIOR TO SENDING TO BORROWER]
REVIEWED BY ACLP LEGAL COUNSEL.
_____________________________________ _____________________________
Counsel Date
1
<PAGE>
EXHIBIT 10.27
STANDARD TERMS AND CONDITIONS:
THESE STANDARD TERMS AND CONDITIONS ARE ATTACHED TO AND MADE A PART OF
THE RELATED APPLICATION. ALL CAPITALIZED TERMS NOT OTHERWISE DEFINED HEREIN HAVE
THE RESPECTIVE MEANINGS SET FORTH IN THE APPLICATION.
1. Due Diligence/Reports.
Lender will provide to Borrower a detailed Due Diligence and Legal
Checklist. Borrower agrees to provide in a timely fashion to Lender and its
agents all information as well as any other items Lender may request in order to
underwrite and close the Loan. Borrower acknowledges that if the Application is
accepted by Lender, and Lender thereafter issues a Commitment, Lender is issuing
the Commitment and underwriting the Loan based upon: (i) the timeliness of the
receipt of information and (ii) reliance on the representations by Borrower, its
Key Principals and agents concerning the Property, and the financial and other
condition(s) of Borrower and Key Principals. The failure to furnish complete and
accurate information in a timely manner or to cooperate in the underwriting and
closing of the Loan may cause the Commitment to expire and/or entitle Lender to
terminate the Commitment on account of such Borrower default.
Lender's due diligence investigations shall include, but not be limited
to, the receipt and review of the following items (in form and substance
satisfactory to Lender), each of which will be obtained at the expense of
Borrower and submitted to Lender in sufficient time for Lender to adequately
evaluate its acceptability: (i) evidence of proper zoning, permitting, licensing
and certificates of occupancy for the Property; (ii) operating statements,
balance sheets, tax returns and supporting documentation for Borrower and Key
Principals for the past three calendar years; (iii) a year-to-date operating
statement for the Property for the current year; (iv) if applicable, copies of
reciprocal operating agreements, and property owners association documents for
the Property (including all amendments and guarantees thereof); (v) evidence of
the availability of all utility service at the Property; (vi) a copy of the
Management Agreement for the Property; (vii) evidence of the absence of material
litigation (including current or past bankruptcies) affecting Borrower, Key
Principals and/or their respective principals or the Property; and (viii)
certificates and affidavits of Borrower, Key Principals and/or their respective
principals with respect to certain of the above items and such other items as
Lender may reasonably request. In addition, Borrower shall, at its expense,
cause Lender to receive, at the closing of the Loan, a lender's title insurance
policy, in form and substance satisfactory to Lender and from a title insurance
company satisfactory to Lender, in the amount of the Loan. If the Property has
not been inspected and approved by Lender prior to issuance of this Commitment,
then an inspection of the Property and Lender's approval is required.
Third Party Analyses: In addition to the investigations set forth above,
at Borrower's expense, Lender shall commission a Phase I environmental report
and review (the "Phase I Environmental Report") by the environmental consultants
(collectively, the "Environmental Consultant") and an engineering report (the
"Engineering Report") by the engineer (the "Engineer") selected by Lender. If
recommended by the Environmental Consultant in the Phase I Environmental Report,
Lender shall require a Phase II environmental analysis be performed at
Borrower's expense and the results be submitted to Lender in a written report.
All analyses and reports by the Environmental Consultant and the Engineer must
be acceptable to Lender.
At Borrower's expense, Lender shall also commission a full narrative
appraisal of the Property (the "Appraisal") by an independent appraiser (the
"Appraiser") selected by Lender. The making of the Loan is contingent
1
<PAGE>
EXHIBIT 10.27
upon the Appraisal setting forth a current fair market value as determined by
using the lesser of a leased fee or fee simple analysis of the Property
necessary to satisfy the Maximum Loan to Value Ratio and confirming the
appropriateness of market rents and market vacancy calculations used in
connection with the issuance of the Commitment.
Borrower hereby authorizes Lender to engage the Appraiser, the
Environmental Consultant and the Engineer for the purposes described herein.
Borrower further authorizes the Environmental Consultant, the Engineer and the
Appraiser to perform such analyses, to contact such persons, entities or
governmental authorities and to perform such non-intrusive and intrusive
analyses of the Property as each shall deem appropriate. Borrower shall have no
claim against Lender relating to the conduct by such persons of any activities
or the willful misconduct or negligence of such persons in connection with those
activities.
2. Loan Documents.
The definitive documentation for the Loan (the "Loan Documents") will
include, but not be limited to: (i) a promissory note; (ii) a first lien deed of
trust, deed to secure debt or mortgage and security agreement; (iii) an absolute
assignment of leases and rents; (iv) an absolute and unconditional guaranty of
payment of the carve-outs and limitations with respect to exculpation set forth
in the Loan Documents executed jointly and severally by the Key Principals; (v)
a Hazardous Substances Indemnity Agreement indemnifying Lender for all costs
incurred by Lender in connection with the removal of any hazardous substances
from the Property, regardless of whether or not Borrower caused the presence of
such hazardous substance, and against any loss, cost, damage or expense that
Lender may incur, directly or indirectly, as a result of or in connection with
the assertion against Lender of any claim relating to the presence or removal of
any hazardous substance on the Property; (vi) UCC-1 financing statements; (vii)
a Manager's Consent and Subordination of Management Agreement (which will also
be executed by the property manager for the Property), (viii) Borrower's Closing
Certificate; (ix) if required by Lender, a lead based paint acknowledgment and
indemnification agreement; and (x) if required by Lender, an asbestos operations
and maintenance agreement.
The Loan Documents will provide that upon the occurrence and during the
continuation of any Event of Default, the Loan shall bear interest at a default
rate equal to the lesser of (i) five percent (5%) above the Interest Rate, or
(ii) the maximum rate permitted by law. A late charge equal to five percent (5%)
of the lesser of (i) five percent (5%) of any installment or other payment due
under the Note or (ii) the maximum amount permitted by law will be assessed if
any payment is not made within any applicable grace period permitted under the
Note. Any late charge allowed under the Loan Documents may be assessed whether
or not a notice of any event of default is required or given.
Under the Loan Documents, Borrower and Key Principals will be liable for
principal and interest on the Loan in the event of fraud or material
misrepresentation by Borrower or Key Principals in connection with the Loan
(including, but not limited to, the failure to pay the first full monthly
payment of principal and interest and failure to timely establish the Lockbox
required should Borrower fail to comply with the Reporting Requirements
described herein).
In addition, Key Principals will be liable for damages relating to
certain recourse obligations, paraphrased hereinafter, including, but not
limited to, (i) physical waste caused by Borrower or its Agents, or removal,
after an Event of Default, of any portion of the Property; (ii) misapplication
or conversion of proceeds of insurance or condemnation; (iii) failure to deliver
tenant security deposits; and/or rents and other funds due Lender under the Loan
Documents accruing after an Event of Default, except as used to pay amounts
required to be paid under the Loan Documents.
2
<PAGE>
EXHIBIT 10.27
Borrower will be liable for damages relating to certain recourse
obligations, paraphrased hereinafter, including, but not limited to, (i) breach
of Borrower's agreements regarding environmental laws or regulations of
hazardous substances; (ii) failure to obtain Lender's prior written consent to a
transfer of, or other lien or encumbrance on, the Property or transfer of a
majority interest in the borrowing entity; (iii) voluntary bankruptcy,
involuntary bankruptcy (unless such proceeding is dismissed within ninety (90)
days without entry of an order for relief being entered and no other event of
default has occurred under the Loan Documents at the time of such dismissal) or
other legal proceedings delaying or impairing Lender in the exercise of its
rights to the Property; (iv) failure to pay taxes or other liens or insurance
premiums (or to make escrow payments for such purposes) as provided in the Loan
Documents; (v) gross negligence or willful misconduct of Borrower, Key
Principals, its principals, directors, beneficiaries, shareholders, partners,
members, trustees, agents, affiliates, officers or employees, or any person
owning, directly or indirectly, any legal or beneficial interest in Borrower, or
any successors or assignors of the foregoing, (collectively, "Agents") resulting
in damage to or loss of value in the Property not reimbursed to Lender through
insurance carried by Borrower or exposing Lender to liability claims or
litigation costs; (vi) seizure of any of the Property resulting from any
criminal wrongdoing by any person or entity other than Lender; (vii) physical
waste caused by Borrower or its Agents, failure by Borrower to maintain, repair
or restore the Property as required by the Loan Documents, or removal, after an
Event of Default, of any portion of the Property; (viii) misapplication or
conversion of proceeds of insurance or condemnation; (ix) failure to pay
lienable charges for labor and materials furnished prior to foreclosure; (x)
failure to deliver tenant security deposits after an Event of Default; (xi)
failure to deliver rents and other funds due Lender under the Loan Documents
accruing after an Event of Default, except as used to pay amounts required to be
paid under the Loan Documents; (xii) removal of Personal Property (as defined in
the Loan Documents) from the Property by or on behalf of Borrower, or its
Agents, and failure to replace with Personal Property of the same utility and of
the same or greater value; (xiii) any act of arson by Borrower or its Agents; or
(xiv) any fees or commissions paid by Borrower after the occurrence of, and
during the continuance of, an event of default to its Agents in violation of the
terms of the Loan Documents.
At closing, Lender's standard form Loan Documents will be executed by
Borrower without material change and in form and substance satisfactory to
Lender in its sole discretion to enable the Loan to be eligible for inclusion in
a possible securitization pool (See Section 12 herein). The Loan and Loan
Documents related thereto, must meet standards for the commercial mortgage
securitization market as determined by Lender, its successors and assigns, from
time to time. Borrower and Key Principals shall cooperate, as necessary, to
ensure compliance in this regard. The Loan Documents shall be governed in
accordance with the laws of the state where the Property is located except where
it is customary for out of state lenders to select the state of lender's
domicile to govern matters other than lien perfection and the exercise of
remedies relating to the Property.
3. Borrower's Representations.
Borrower represents to Lender that no pending action, suit or
proceeding, or any governmental investigation or any arbitration, exists or, to
the knowledge of Borrower, is threatened against Borrower or the Property before
any governmental or administrative body, agency or official which (i) challenges
the validity of the Commitment or the Loan Documents, or the authority of
Borrower to enter into the Commitment or the Loan Documents or to perform the
transactions herein or therein, or (ii) would have a material adverse effect on
the occupancy of the Property or on the business, financial condition or results
of operations of Borrower, Key Principals or the Property. Borrower shall
deliver to Lender a certificate confirming the truth and accuracy of the
foregoing representation at the closing of the Loan.
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<PAGE>
EXHIBIT 10.27
Borrower represents to Lender: (i) it has previously provided to Lender
(a) (except for multi-family or self-storage tenants, if applicable), true,
correct and complete counterpart executed copies of all leases with tenants at
the Property (and all amendments and supplements thereto and agreements
collateral thereto including, but not limited to, any guarantees thereof)
(collectively, the "Leases"), (b) a standard form of lease for the Property, and
(c) a true, complete and correct rent roll of the Property as of the date set
forth thereon (the "Rent Roll"); (ii) the Rent Roll remains true, complete and
correct as of the date hereof; (iii) it has neither provided nor received any
notices of default with respect to the Leases; (iv) except as noted on the Rent
Roll, it knows of no default of the landlord or the tenants under the Leases;
and, (v) it has not been notified, in writing or otherwise, by any tenant of the
discontinuance of, or intent to discontinue, its operations at the Property. The
standard form of lease must be satisfactory to Lender. All Leases and the
identity of all tenants and guarantors thereunder must be consistent with the
information set forth in the Rent Roll and satisfactory to Lender.
Borrower shall promptly notify Lender of any facts or circumstances
which result in a change to the information set forth in the Rent Roll. At the
closing of the Loan, Borrower shall deliver to Lender (i) a rent roll for the
Property dated as of the Closing Date (the "Closing Rent Roll") which shall be
consistent in form to the Rent Roll and (ii) a certification by Borrower that
the Closing Rent Roll and all Leases theretofore provided to Lender by Borrower
are true, correct and complete in all respects. Borrower must proffer a written
explanation for, and Lender must agree, in its sole discretion, to accept said
explanation, for any differences between facts and circumstances on the Closing
Rent Roll and the facts and circumstances on the Rent Roll.
Borrower represents (i) it has previously delivered to Lender true,
correct and complete copies of operating statements of the Property for the
lesser of the past three (3) calendar years or as many years as the Property has
existed and a year-to-date operating statement of the Property for the current
calendar year (which, to the extent included therein, contain true and accurate
schedules of tenant improvements, leasing commissions and other capital
expenditures), balance sheets and profit and loss statements, federal and state
income tax returns, tenant sales figures and all financial statements or reports
prepared by independent certified public accountants with respect to Borrower
for the lesser of the past three (3) calendar years or as many years as the
Borrower has existed, and (ii) the current budget, site plan and leasing plan
prepared by Borrower and submitted to Lender with respect to the Property
constitute good faith projections of the facts and circumstances set forth
therein and Borrower is aware of no facts or circumstances which would adversely
affect such projections.
Except as set forth in the Environmental Questionnaire and Certificate
attached hereto and made a part of the Application, or previously delivered to
Lender, Borrower represents to Lender it is not aware of any of the following
affecting the Property, either currently or historically: any
asbestos-containing materials, lead-based paint, storage tanks, toxic
substances, hazardous waste or any other adverse environmental condition.
Except as set forth on a separate written explanation attached hereto
and made a part of the Application, or previously delivered to Lender, neither
Borrower, any Key Principal, nor any Principal Owner (as defined below) of
Borrower has closed any other loan with Lender within the last two (2) years nor
has any other loans pending with Lender.
Except as set forth in detail in a separate written explanation attached
hereto and made a part of the Application, or previously delivered to Lender,
Borrower represents to Lender that neither Borrower, its Principal Owners (being
defined as any person or entity directly or indirectly owning or controlling
twenty-five percent [25%] or more of an ownership interest in Borrower or having
the power to direct the management and policies of Borrower, whether by
contract, through an ownership interest, or otherwise) nor any Key Principal (i)
has during the past seven (7) years, had any judgment remain unsatisfied for
more than thirty (30) days; (ii) has during the past seven (7) years,
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<PAGE>
EXHIBIT 10.27
transferred its right, title, and interest in a property through a deed-in-lieu
or foreclosure action, or has filed or has had filed against it any action under
the bankruptcy laws of the United States; (iii) is currently a co-maker,
endorser or guarantor on or of any note (except as disclosed to Lender in
writing as provided above); (iv) is currently a party to any lawsuit; (v) has
received notice of, or is otherwise aware of, any bankruptcy, insolvency or
comparable proceedings, condemnation, litigation, or any other action against or
affecting the Property, Borrower or any Key Principals or contemplates filing
any such proceedings; or (vi) has ever been convicted of a felony. Any such
exception must be acceptable to Lender.
On the Closing Date, Borrower shall certify to Lender if an adverse
change has occurred in the: (i) occupancy of the Property; or (ii) the business,
financial condition or results of operations of Borrower, Key Principals or the
Property from that set forth on the rent rolls, financial statements and reports
referred to above. Any such adverse change must be acceptable to Lender.
As of the date hereof and throughout the term of the Loan, Borrower and
Key Principals, if any, represent, warrant and covenant that (i) neither
Borrower nor any of its Principal Owners is, or will be, an "employee benefit
plan" as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or other retirement arrangement, which is subject
to Title I of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code"); (ii) the assets of Borrower or any Principal Owners do
not, and will not, constitute "plan assets" of one or more such plans or
arrangements for purposes of Title I of ERISA or Section 4975 of the Code; (iii)
neither Borrower nor any Principal Owner is or will be a "governmental plan"
within the meaning of Section 3(32) of ERISA; and (iv) transactions by or with
Borrower or any Principal Owners are not, and will not be, subject to state
statutes applicable to Borrower regulating investments of and fiduciary
obligations with respect to governmental plans. The provisions of this paragraph
shall survive the termination of the Application (and, if accepted by Lender,
the Commitment) and Borrower and Key Principals warrant the representations made
in this paragraph shall continue to be true and correct until all sums owed
under the Loan Documents have been paid in full.
The Loan Documents shall contain additional representations and
warranties of Borrower concerning Borrower, its constituent partner(s),
shareholder(s) or member(s) and the Property.
4. Lender's Fees, Costs and Expenses.
Borrower shall, as a condition to the effectiveness of the Application
and, if accepted by Lender, the Commitment, deposit with Lender amounts equal to
those set forth as the Processing Fee and the Application Fee. Borrower shall
pay all costs and expenses incurred in connection with underwriting, preparing
for and closing the Loan (the "Loan Expenses"), whether or not the Loan is
closed. Borrower understands the Loan Expenses include, but are not limited to,
the following: (i) the costs of any additional analyses of the Property, such
as, any Phase II Environmental Site Assessments or other environmental analyses,
seismic surveys, and any additional structural or engineering surveys; (ii) all
inspection fees, credit report fees, insurance policy review fees, title
insurance report fees, surveyor's fees, disbursements/expenses of Lender's
counsel, any extraordinary legal fees incurred by Lender not covered by the
Application Fee, fees for filing and recording the Mortgage and other Loan
Documents and fees for all title, UCC, litigation and tax lien searches; (iii)
to the extent permitted by applicable law, all note taxes, intangibles taxes,
transfer taxes, tangible personal property taxes, documentary stamp taxes, and
all taxes relating to or arising from, the Loan Documents; (iv) third party
reviewer fee and (v) all license and permit fees, fees in connection with the
preparation and delivery of releases or assignments (which must be acceptable to
Lender) of any existing mortgage, premiums for title and other insurance, escrow
and disbursement fees and other closing costs; and (v) all out-of-pocket losses
or expenses incurred, or paid, by Lender in connection with the establishment
and termination of the Interest Rate if it is locked at the request, or with the
consent, of Borrower and the Commitment expires or is terminated for
5
<PAGE>
EXHIBIT 10.27
any reason without the Loan being closed and funded. This paragraph shall
survive the termination of the Application (and, if accepted by Lender, the
Commitment), and if Borrower fails to pay all Loan Expenses, then Key Principals
shall each be jointly and severally responsible for such payment. Loan Expenses
do not include, and Borrower shall have no other obligation to pay the costs of
any Third Party Analyses or Lender's usual and customary legal fees which are
covered under the Application Fee section of the Application.
5. Brokers.
Borrower agrees to pay, indemnify and hold the Lender harmless from any
and all loss, cost or expense arising out of, or relating to, the claims of any
brokers or anyone claiming a right to any fees in connection with the financing
of the Property. Borrower has not contracted with, nor does it know of, any
broker, other than broker who has participated in the application for the Loan
or the transactions contemplated by the Commitment (the "Broker"). Borrower
acknowledges that Broker (if any) does not have the authority to, and cannot,
bind Lender in any respect, including, without limitation, the authority to
waive any conditions or make any changes to this Application, and the resulting
Commitment, if any.
6. Termination.
Upon written notice to the addressee, Lender may, if this Application is
accepted by Lender, terminate the Commitment if any of the following events
occur:
a. Without Lender's prior written consent, Borrower sells, transfers,
pledges, encumbers or assigns its interest in the Property (or any part
thereof).
b. Without Lender's prior written consent, the sale, transfer, pledge,
encumbrance or assignment of any equitable or beneficial ownership
interest in Borrower.
c. A material, adverse change in the following:
i) the occupancy of the Property;
ii) the business, financial condition or result of operations of
Borrower, Key Principals, or the Property; or
iii) the business, financial condition or result of operations of any
tenant of the Property whose gross annual rent is equal to or
exceeds three percent (3%) of the gross annual rent arising from
the Property and/or whose net rentable area is equal to or
exceeds three percent (3%) of the net rentable area of the
Property.
d. Any petition of bankruptcy, insolvency or reorganization is filed by, or
against, Borrower, Key Principals, the Property and/or any tenant of the
Property.
e. Any material damage, destruction or alteration occurs with respect to
the improvements located upon the Property, whether or not covered by
insurance.
f. Borrower and/or Key Principals breaches any provision contained in the
Application or, if accepted by Lender, the Commitment.
6
<PAGE>
EXHIBIT 10.27
g. Borrower and/or Key Principals has made any representation or warranty
to Lender which was false or misleading when made in any material
respect or which becomes false or misleading in any material respect.
h. Condemnation proceedings are pending or threatened against any part of
the Property.
i. Borrower's and/or Key Principals' failure to satisfy any condition set
forth in the Application or, if accepted by Lender, the Commitment.
j. Material, adverse change in the commercial lending market.
Lender's delay in exercising its right to terminate the Commitment upon
the occurrence of any of the above events shall not be construed as a waiver of
such right. The failure of Lender to act in any such event shall not be
construed as a waiver of its right to act with respect to any subsequent event
of a similar nature. Upon termination, Lender's obligations pursuant to the
Commitment shall cease and be of no further force and effect.
7. Lender Authorized.
Borrower agrees Lender and its agents are authorized to enter the
Property for any purpose related to the Application during normal business hours
upon reasonable notice to Borrower. Lender is further authorized to obtain
credit reports on Borrower and Key Principals and to obtain verification of
statements made in the Application and any attachments hereto.
8. Lender Approval.
Except as otherwise expressly provided, any instance where the consent
or approval of Lender is required, or may be given, or where any determination,
judgment or decision is to be rendered by Lender under this Application, such
approval and consent shall be given or withheld in Lender's sole and absolute
discretion.
9. Additional Definitions/Liquidated Damages.
For the purposes of the Application, (i) the term "Business Day" shall
mean any day other than Saturday, Sunday or any other day on which banks are
required or authorized to close in Dallas, Texas or New York, New York; (ii) the
singular case includes the plural and the plural the singular; and (iii) the
terms "include(s)" and "including" shall mean "include(s), without limitation,"
and "including, without limitation," respectively. Where any sums are stated as
being full liquidated damages, including, but not limited to as more fully set
forth in paragraph 18, both parties acknowledge such sums are stated in
circumstances in which it is difficult to ascertain the sum required to
compensate Lender or Borrower for the loss of opportunity to make or obtain the
Loan, the loss of opportunity to make or obtain other loans on account of the
time and attention relating to the Loan, the internal expenses incurred by
Lender or Borrower in connection with the review and processing of material
information relating to the Loan and such provision for liquidated damages
represents the reasonable, good faith attempt of the parties to liquidate such
damages in advance.
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<PAGE>
EXHIBIT 10.27
10. Servicing/Assignment.
The Loan Documents will include provisions permitting Lender to freely
transfer the servicing of the Loan. In addition, without Borrower's consent,
Lender may assign all or any portion of its rights in the Loan. Borrower shall
cooperate in connection with any such transfer and/or assignment. Without
limiting the circumstances in which Lender may assign the Loan, Borrower
acknowledges that Lender may assign the Loan in connection with a securitization
involving the Loan and other assets.
11. Counterparts.
The Application may be signed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed and delivered, shall be an original, but all of which shall together
constitute one and the same instrument.
12. Secondary Market.
If closed and funded, Borrower acknowledges Lender intends to sell the
Loan, and such a sale may include the securitization of the Loan through a real
estate mortgage investment conduit or other securitization structure. Lender,
its servicer, and their respective successors and assigns, have the right to
disclose any information concerning the proposed Loan, Borrower, Key Principals
and the Property as Lender deems necessary in connection with any such sale.
Furthermore, any assignee of Lender or its servicer may continue to make such
information available as each deems necessary in connection with any securities
relating to the Loan and all shall have the benefit of any warranty, indemnity
or other covenant of Borrower or Key Principals under the Application, such as
survive the closing of the Loan. . In the event the Loan is securitized or sold
as a whole loan, Borrower agrees to meet with representatives of the national
credit rating agencies and prospective purchasers and investors to discuss the
business and operations of the Property and to cooperate with the reasonable
requests of such representatives, purchasers, investors and Lender's assignees
or successors.
13. No Assignment or Third-Party Reliance.
Unless otherwise approved in writing by Lender, Borrower's rights under
the Application may not be assigned to, or relied on by, any person or entity
who is not a party hereto other than any borrowing entity to be formed in
accordance with the requirements of the Application.
14. Public Announcement.
Upon closing of the Loan, Lender (at its own expense) is authorized to
issue news releases and to publish announcements in newspapers, trade journals
and other appropriate media, containing information about the Loan as may be
deemed noteworthy by Lender, including without limitation the legal and trade
name (and, if such information is public, the ownership affiliation) of
Borrower, the term and amount of the Loan, and the name, nature and location of
the Property. This provision shall survive the closing of the Loan.
15. Title Company Selection.
Lender has previously experienced closings which are expedited and
result in fewer costs to the Borrower if the title commitment and closing are
coordinated through a national office of a title underwriter ("Title Company").
The Title Company will (a) handle all funds, escrow functions and related
aspects of closing the Loan for such portion of the title premium as it may
receive
8
<PAGE>
EXHIBIT 10.27
in accordance with applicable law (which amount shall be paid by Borrower), as
well as issue title commitment and policy; and (b) cooperate with the local
title agent selected by Borrower, if any. Accordingly, please select an
underwriter from the list set forth below:
_____ Alamo Title Insurance
_____ Chicago Title Insurance Company
_____ Commonwealth Land Title Insurance Company
_____ Fidelity National Title Insurance
_____ Lawyers Title Insurance Company
_____ Security Union Insurance Company
_____ TICOR Title Insurance
_____ Transnation Title Insurance Company of New York
If the Borrower desires to utilize the following local agent (whom
Borrower represents is an authorized agent for the underwriter selected above),
Borrower agrees and acknowledges: (i) Borrower is solely responsible for the
payment of any additional fee or expense related to the use of this local title
agent (which increase shall be in the range of $500.00 - $1,000.00) in addition
to the payment of monies owed to the Title Company and (ii) Borrower will not
contact local agent regarding this loan until the Title Company has done so.
Name:___________________________________________
Address:___________________________________________
City, State, ZIP:____________________________________
Lender and Borrower agree that the closing of the Loan, including
execution of all Loan Documents shall take place at the offices of a local
agent.
16. Surveyor Selection.
Lender has previously experienced closings which are expedited and
result in fewer costs to Borrower if the survey is obtained through a national
office of a surveyor. If Borrower elects to choose a surveyor, other than such
national surveyor, Borrower agrees and acknowledges: i) Borrower has ordered a
survey from and has furnished Lender's survey requirements to the following
surveyor, who shall provide such survey to Lender no later than twenty (20) days
before the closing of the Loan; ii) Borrower is solely responsible for the
payment of the fee of this surveyor selected by Borrower. The local surveyor
selected by Borrower, if any, is:
Company Name: ___________________________
Address: ___________________________
City, State ZIP: ___________________________
Contact: ___________________________
Phone/Fax: ___________________________
Date Ordered: ___________________________
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<PAGE>
EXHIBIT 10.27
17. Borrower's Counsel:
IF LOAN AMOUNT IS LESS THAN $5,000,000: Counsel for Borrower shall have
no ownership, employment or familial relationship to Borrower, Key Principals or
any of their affiliates, if any.
IF LOAN AMOUNT IS $5,000,000 TO $15,000,000: Counsel for Borrower shall
have no ownership, employment or familial relationship to Borrower, Key
Principals, or any of their affiliates, if any. In addition, the law firm
representing Borrower and/or Key Principals must have Errors and Omissions
coverage in the minimum amount of $1,000,000. A statement setting forth this
coverage must be included in the opinion letter delivered by said firm.
IF THE LOAN AMOUNT IS GREATER THAN $15,000,000: Counsel for Borrower
shall have no ownership, employment or familial relationship to Borrower, Key
Principals, or any of their affiliates, if any. In addition, the law firm
representing Borrower and/or Key Principals must have Errors and Omissions
coverage in the minimum amount of $5,000,000. A statement setting forth this
coverage must be included in the opinion letter delivered by said firm.
18. Governing Laws.
THE APPLICATION AND, IF ACCEPTED BY LENDER, THE RESULTING COMMITMENT,
SHALL BE DEEMED TO BE EXECUTED, PERFORMED, GOVERNED, CONSTRUED, APPLIED, AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF, THE STATE OF TEXAS (WITHOUT
REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND THE APPLICABLE LAWS OF THE UNITED
STATES OF AMERICA. BORROWER AND KEY PRINCIPALS IRREVOCABLY SUBMIT TO THE
JURISDICTION OF ANY COURT OF COMPETENT JURISDICTION IN THE STATE OF TEXAS IN
CONNECTION WITH ANY PROCEEDING OUT OF OR RELATING TO THE APPLICATION, AND, IF
ACCEPTED BY LENDER, THE RESULTING COMMITMENT.
The Loan Documents shall be governed in accordance with the laws of the
state where the Property is located except where it is customary for out of
state lenders to select the state of lender's domicile to govern matters other
than lien perfection and the exercise of remedies relating to the Property.
19. Waiver of Jury Trial; Limitation on Damages.
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND KEY
PRINCIPALS AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY
JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH
RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE APPLICATION (AND, IF
ACCEPTED BY LENDER, THE RESULTING COMMITMENT), THE OTHER LOAN DOCUMENTS, OR ANY
CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. IN NO EVENT
SHALL LENDER OR ANY ASSIGNEE OF THE LOAN BE LIABLE FOR ANY SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES WHATSOEVER (INCLUDING BY WAY OF ILLUSTRATION
BUT NOT LIMITATION, LOSS OF BUSINESS PROFITS OR OPPORTUNITY, PAIN AND SUFFERING,
EMOTIONAL DISTRESS, OR LOSS OR DIMINUTION OF BUSINESS REPUTATION OR GOODWILL).
FURTHERMORE BY THEIR EXECUTION OF THE APPLICATION, BORROWER AND KEY PRINCIPALS
EACH WAIVE ANY RIGHT TO CLAIM OR SEEK ANY SUCH DAMAGES. LENDER'S LIABILITY FOR
ANY DAMAGES CLAIMED BY BORROWER OR ANY KEY PRINCIPALS FOR ANY CAUSE WHATSOEVER
ARISING OUT OF, OR IN ANY WAY
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<PAGE>
EXHIBIT 10.27
RELATED TO, THE APPLICATION, ITS ACCEPTANCE, (AND THE RESULTING COMMITMENT, IF
ANY,) INCLUDING LENDER'S NEGLIGENCE, SHALL BE LIMITED TO ONE PERCENT (1%) OF THE
LOAN AMOUNT AS FULL LIQUIDATED DAMAGES. THIS PARAGRAPH SHALL SURVIVE THE
TERMINATION OF THE COMMITMENT AND THE CLOSING OF THE LOAN. SEE SPECIAL CONDITION
#14.
20. Equal Credit Opportunity Act Notice
THE FEDERAL EQUAL CREDIT OPPORTUNITY ACT PROHIBITS CREDITORS FROM
DISCRIMINATING AGAINST CREDIT APPLICANTS ON THE BASIS OF RACE, COLOR, RELIGION,
NATIONAL ORIGIN, SEX, MARITAL STATUS, AGE (PROVIDED THE APPLICANT HAS THE
CAPACITY TO ENTER INTO A BINDING CONTRACT), BECAUSE ALL OR PART OF THE
APPLICANT'S INCOME DERIVES FROM ANY PUBLIC ASSISTANCE PROGRAM OR BECAUSE THE
APPLICANT HAS IN GOOD FAITH EXERCISED ANY RIGHT UNDER THE CONSUMER CREDIT
PROTECTION ACT. THE FEDERAL AGENCY THAT ADMINISTERS COMPLIANCE WITH THIS LAW
CONCERNING THIS CREDITOR IS THE FEDERAL TRADE COMMISSION, EQUAL CREDIT
OPPORTUNITY, WASHINGTON, D.C. 20580.
21. Disclosure Notice
IF YOUR APPLICATION FOR BUSINESS CREDIT IS DENIED, YOU HAVE THE RIGHT TO
A WRITTEN STATEMENT OF THE SPECIFIC REASONS FOR THE DENIAL. TO OBTAIN THE
STATEMENT, PLEASE CONTACT AMRESCO CAPITAL, L.P., 700 NORTH PEARL STREET, SUITE
2400 - LB #342, DALLAS, TEXAS 75201, ATTENTION: LEGAL DEPARTMENT, (214)
953-7700, WITHIN SIXTY (60) DAYS FROM THE DATE YOU ARE NOTIFIED OF OUR DECISION.
WE WILL SEND YOU A WRITTEN STATEMENT OF REASONS FOR THE DENIAL WITHIN THIRTY
(30) DAYS OF RECEIVING YOUR REQUEST FOR THE STATEMENT.
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<PAGE>
EXHIBIT 10.27
Instructions to Surveyor
All surveys shall be performed in accordance with "Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys," jointly established and adopted
by ALTA and ACSM in 1997, and meeting the accuracy requirements of an Urban
Survey as defined therein, except that the accuracy and precision requirements
are modified to meet the current minimum technical accuracy requirements of your
state.
1. The complete and correct legal description of the land (The "Land") as
shown on the title insurance commitment or preliminary title report.
(NOTE: It must be possible to trace the legal description of the Land on
the survey by following the bearings and dimensions around the
boundaries of the Land.)
2. The location of all recorded easements and of all unrecorded easements
ascertainable by an inspection of the Land, which benefit or burden the
Land. (NOTE: All recorded easements are to be identified by a document
recording number or by Book and Page numbers of recording). If such an
easement cannot be located, a note to this effect should be included.
3. All areas affected by any recorded restrictions of access limitations.
(NOTE: All such areas are to be identified by a document recording
number or by Book and Page numbers of recording).
4. The location of all monuments designating corners and other boundaries
of the Land.
5. The distances and bearings of all boundaries of the property and the
location of all changes in bearing.
6. In the case of curved boundaries, complete curve data, including length
of the arc, and the chord distance and bearing.
7. The location of all adjoining streets, roads, highways and alleys, with
names, rights-of-way widths and distances from the Land noted. If none
adjoin the Land, then the location of the nearest public street, road or
highway and its distance from the Land, together with the location of
the private access easement thereto.
8. The location of public access to the Land and of all entrance drives and
curb-cuts.
9. The exact dimensions of any encroachments on the Land.
10. A directional indicator showing North.
11. The street address of each improvement.
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EXHIBIT 10.27
12. The zoning designation of the Land.
13. The dimensions of the Land.
14. The perimeter dimensions and height of each improvement and the location
of each improvement as measured from the two (2) nearest property lines
or other defined points. Identify, and show, if possible, setback,
height and bulk restrictions of record or disclosed by applicable zoning
or building codes (in addition to those recorded in subdivision maps).
If none, so state.
15. The location of all paved parking areas and the number and type (e.g.
handicapped, motorcycle, regular, etc.) of parking spaces contained
therein.
16. The location of all walkways driveways and alleys on or crossing the
property.
17. All applicable municipal building setback lines.
18. The location of existing observable onsite easements and/or service
lines for natural gas, telephone, electricity, water and sanitary and
storm sewers, and their points of connection with the public system.
19. The area of the Land.
20. The exterior dimensions of each building at ground level.
21. All entrances and exits to and from each building.
22. Any portion of the Land which is located in a flood plain or in any
other flood hazard, mudslide hazard or flood danger area as designated
by applicable governmental authorities (with proper annotation based on
Federal Floor Insurance Rate Maps or the State or local equivalent, by
scaled map location and graphic plotting only).
23. Legend of all symbols and abbreviations used.
24. Vicinity map showing the property surveyed in reference to nearby
highway(s) or major street intersection(s).
25. All substantial, visible improvements (in addition to buildings, such as
signs, parking areas, bus stop enclosures, swimming pools, etc.)
2
<PAGE>
EXHIBIT 10.27
26. Physical evidence of all encroaching structures and projections within 5
feet of the boundary of the property (including those outside the
boundary).
27. The character and location of all walls, buildings, fences and other
visible improvements within five (5) feet of each side of the boundary
lines shall be noted.
28. The location of any ponds, lakes, springs, or rivers bordering or
running through the property shall be shown.
29. The following surveyor's certificate:
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EXHIBIT 10.27
SURVEYOR'S CERTIFICATE
To: AMRESCO Capital, L.P., a Delaware limited partnership, its successors
and assigns; Morgan Stanley Mortgage Capital, Inc. and its successors
and assigns, [BORROWER] and [TITLE INSURANCE COMPANY]
This is to certify that (a) this map of survey and the property
description with respect thereto are true and correct and represent an actual
field survey of the real property shown hereon; (b) such survey was conducted
under the direct supervision of the undersigned Registered Land Surveyor; (c)
such map of survey shows the premises specifically described in [title
commitment]; (d) such survey complies with all requirements, terms and
conditions of the Lender's Instructions to Surveyor, the receipt of which is
hereby acknowledged; and (e) such map of survey was made (i) in accordance with
"Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys", jointly
established and adopted by ALTA and ACSM in 1997 and includes Items 2, 3, 4, 6,
7(a), 8, 9 and 10, and to the extent necessary to determine compliance with
applicable zoning requirements, items 7(b) and 7(c), on Table A, "Optional
Survey Responsibilities and Specifications", specifically defined therein, and
(ii) pursuant to the Accuracy Standards (as adopted by ALTA and ACSM and in
effect on the date of this certification) of an Urban Survey.
[Signature]
[Type name of surveyor below signature line]
Registration No._______________
Date: [Date]
[Seal]
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<PAGE>
EXHIBIT 10.27
TITLE REQUIREMENTS
Title insurance insures AMRESCO Capital, L.P., a Delaware limited partnership,
its successors and assigns, as to the first priority lien of the mortgage
subject only to permitted encumbrances, none of which should interfere with the
current use or the value of the mortgage. Lender requires that title insurance
is provided by a company acceptable to it and authorized to do business in the
jurisdiction where the property is located. The policy must comply with the
following Lender requirements:
o The title insurance policy (the "Policy") must equal the stated
principal amount of the Loan. If such amount exceeds the single risk
limit determined by Lender from time to time with respect to the title
company issuing the Policy, arrangements must be made for reinsurance
and/or co-insurance which are satisfactory to Lender.
o The Policy must name AMRESCO Capital, L.P., a Delaware limited
partnership, its successors and assigns as the insured. The effective
date of the Policy and all endorsements must be the date of recording of
the mortgage or the day of funding, whichever is later. If the loan will
be funded prior to the recordation of the mortgage, the Policy must
insure the "gap" between funding and recording.
o The Policy must be written on the standard 1992 American Land Title
Association ("ALTA") form of loan policy or on the 1987 or 1970 form of
ALTA loan policy. The 1990 form of ALTA Loan Policy is not acceptable.
If these forms are not available in a particular jurisdiction by statute
or regulation, the equivalent form approved for use in such state may be
used. If the 1987 or 1970 form of ALTA loan policy or the equivalent
form is issued, the Policy cannot contain any creditors' rights or
similar exception or exclusion which must be deleted by endorsement. If
the Policy contains any provisions for the arbitration of claims, such
provisions must also be deleted by endorsement.
o All standard exceptions, (i.e., parties in possession, matters not shown
on the public records, any state of facts that an accurate survey or
physical inspection might show, claims or liens of mechanics or
material-men) must be deleted. An exception for "rights of tenants, as
tenants only" is acceptable. Other exceptions unacceptable to ACLP's
counsel should be deleted or insured over in a manner acceptable to
ACLP's counsel. Recorded leases should be reflected in the Policy as
subordinate to the security instrument.
o If the Policy contains exceptions for taxes, assessments or other
lienable items, the Policy must insure that such items are not yet due
and payable.
o The legal description in the Policy must conform to the survey, and the
Policy should specifically refer to the survey. All appurtenant
easements that benefit the property should be included in
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EXHIBIT 10.27
Schedule A of the Policy. A so-called "Meridian" legal description in
the absence of a metes and bounds description or a Surveyor endorsement
(see below) is unacceptable.
o Each Policy should contain the following standard endorsements or their
equivalent, unless such endorsements are not applicable or are not
available by statute or regulation in the jurisdiction where the
property is located:
a. Comprehensive Endorsement (ALTA Form 9)
b. Survey Endorsement (Land Same as Survey)
c. Usury Endorsement
d. Variable Rate Endorsement (if applicable)
e. Environmental lien protection Endorsement (ALTA Form 8. 1)
f. Separate tax lot endorsement
g. Contiguity endorsement
h. Mortgage tax endorsement
i. If blanket easements affect the property, a CLTA 103.1 or
equivalent endorsement
j. Access endorsement
k. Zoning endorsement (ALTA Form 3.1 with parking)
2
<PAGE>
EXHIBIT 10.27
BORROWER DOCUMENTATION LIST
Borrower is responsible for providing all of the following documentation
and underwriting information with the signed Application:
A. Required to Obtain Third Party Reports
1. Brief description of the Borrower, Key Principals and property
manager
2. Neighborhood map
3. Copy of site plan and building layout/floor plan
4. Color photographs (including aerial photographs, if available)
of Property and surrounding area
5. Property operating statements and occupancy for (i) the lesser
of the past three (3) full calendar years, or as many years as
Property has existed, (ii) current year-to-date actual and
remainder of the year budget and (iii) trailing 12-month
statements, if available, each signed, dated and certified*
correct by the Borrower/Key Principal
6. Current rent roll (or other evidence of leasing status), signed,
dated and certified correct by the Borrower/Key Principal (dated
within 30 days of closing)
7. Capital expenditures (i) incurred for the lesser of the past
three (3) years, or as many years as Property has existed, and
(ii) budgeted for the next 12 months for the Property, each
signed, dated and certified correct by the Borrower/Key
Principal
* certified documents must contain the following language
preceding the required signature of the certifying party:
"Certified true and correct".
B. Property and Lease Data
1. One copy of each lease currently in effect (with all
modifications, amendments and assignments)
2. Real Estate Tax Bills for the lesser of the past three (3) full
calendar years, or as many years as the Property has existed,
and current year-to-date
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EXHIBIT 10.27
3. Monthly Occupancy History for the lesser of the past three (3)
full calendar years, or as many years as the Property has
existed, and current year-to-date (certified, dated and signed)
4. For Retail, Industrial, Office only - Most recent Financial
Statements for all major tenants (more than 20% of NRSF or Total
Revenue), to the extent available
5. For Retail, Industrial, Office only - List of all current tenant
concessions (including free rent and above standard tenant
allowance) (letter signed by Borrower)
6. For Retail only - Sales History for the lessor of the past three
(3) full calendar years, or as many years as the Property has
existed, and current year-to-date for all major tenants which
account for more than 20% of NRSF or Total Revenue
7. Existing Survey, if available
8. Existing Title Policy, if available
C. Property Management Data
1. Executed Property Management Agreement (or Asset Management
Agreement, if applicable)
2. All known current property code violations and other litigation
affecting the Property (letter signed by Borrower)
3. Name, address and telephone number of insurance agent with whom
Lender is to coordinate.
4. Copy of Property Insurance Policies (including casualty,
liability and rent loss)
5. For Hotel only - Copy of franchise agreement
6. For an Acquisition only - Contract of Sale
D. Financial Data
1. Financial Statements for Borrower (and Borrower's corporate
general partner, if applicable) and each Key Principal as of
prior year-end and current year-to-date (certified, dated and
signed)
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<PAGE>
EXHIBIT 10.27
2. Federal Tax Return for Borrower and each Key Principal for the
prior year (signed and dated)
3. Three (3) credit references for the Borrower and each Key
Principal, including each reference's address and phone number
4. Sources and Uses of Funds - Detailed breakdown of allocation of
loan proceeds, including, but not limited to, estimated payoff
of existing mortgage, fees, expenses, and amount to be retained
by Borrower, if any.
E. Organizational Documents
If Borrower is a Partnership, copies of:
1. Partnership Agreement and all modifications/amendments thereto
(if this entity is to be formed, or agreement amended to
incorporate single-purpose provisions, provide drafts of
documents prior to final execution)
2. Certified Certificate of Limited Partnership, if applicable
3. List of current partners and their respective partnership
interests
If Borrower (or its general partner or managing member) is a
Corporation, copies of:
1. Certified Articles of Incorporation (if entity is to be formed,
or existing documents are to be modified, provide drafts of the
documents before final execution)
2. List of all officers and directors of the corporation
3. List of current stockholders and their respective ownership
interests
If Borrower is a Trust, copies of:
1. Trust Agreement (if entity is to be formed, or existing
documents are to be modified, provide drafts of the documents
before final execution)
2 List of current trustees
3. List of current beneficiaries
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<PAGE>
EXHIBIT 10.27
If Borrower is a Limited Liability Company, copies of:
1. Certified Articles of Organization and Regulations (if entity is
to be formed, or existing documents are to be modified, provide
drafts of the documents before final execution)
2. List of current managers
3. List of current members and their respective ownership interests
NOTE: Lender's Counsel will deliver to Borrower's Counsel SPV
(single-purpose) provisions for use in the organizational
documents.
This list is for convenience only to inform Borrower of certain items
Borrower must furnish in connection with the Loan. Nothing herein shall
bind Lender or constitute any commitment, approval, or waiver by Lender.
Lender reserves the right to require that all of its requirements,
whether or not shown on this list, be fully satisfied prior to closing.
4
<PAGE>
EXHIBIT 10.27
ENVIRONMENTAL QUESTIONNAIRE AND CERTIFICATE
Definitions. The following definitions shall apply to this Environmental
Questionnaire and Certificate (the "Questionnaire").
A "Hazardous materials" means any element, substance, compound, or
mixture, including disease-causing agents which (i) after release into
the environment and upon exposure, ingestion, inhalation, or
assimilation into any organism, either directly or indirectly, will or
may reasonably be anticipated to cause death, disease, behavioral
abnormalities, cancer, genetic mutation, physiological malfunctions
(including malfunctions in reproduction) or physical deformations, in
such organisms or their offspring or (ii) pose a substantial present or
potential hazard to human health or the environment when improperly
treated, stored, transported or disposed of or otherwise managed.
B. "Property " means the land, the buildings thereon, and the other
improvements, as applicable, thereon which are to be the security for
the Loan from AMRESCO CAPITAL, L.P. being applied for by Borrower in the
attached Application ("the Loan").
______________________________________________________________________________
1. Are any hazardous materials generated, stored, treated, or disposed of
or expected to be generated, store, treated, or disposed of on the
Property?
Yes _____ No _____
If the answer to 1. is yes, please explain in detail the nature of those
items (attach additional pages if necessary).
2. a. To the best of your knowledge, have any hazardous materials (i) been
disposed of or released at, on, or under the Property, (ii) been
disposed of or released at on or under land abutting the Property, or
(iii) migrated from other land to the Property?
Yes _____ No _____
If the answer to 2a. is yes, please explain in detail the nature of
those items (attach additional pages if necessary).
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<PAGE>
EXHIBIT 10.27
b. To the best of your knowledge, are there any landfills or sites
listed under the Comprehensive Environmental Response Compensation and
Liability Act of 1980 as amended ("CERCLA") or any comparable state
statute located within a quarter mile radius of the Property?
Yes _____ No _____
If the answer to 2.b. is yes, please explain in detail the nature of
those items (attach additional pages if necessary).
3. Are any oil or petroleum related products now being stored in drums,
containers and/or tanks on the Property other than minor amounts stored
for personal, household or routine maintenance purposes?
Yes _____ No _____
If the answer to 3. is yes, please explain in detail the nature of those
items (attach additional pages if necessary).
4. a. Are any active underground or other storage tanks on the Property?
Yes _____ No _____
b. If the answer to 4.a. is yes, state the type and quantity of material
being stored, the location, type of tank material, if known, and age of
each tank. In addition, please describe the leak containment system,
detection system and the inventory control system utilized for each
tank. (Attach additional pages if necessary.)
c. If the answer to 4.a. is yes, state the date the tank was last tested
for tightness, and whether each tank is registered with any governmental
entity. In addition, please attach copies of the most recent test
results for each tank and all registration materials. If the tank is not
required to be registered, attach a copy of the relevant regulations
exempting registration.
d. Does any empty or unused underground or above ground tank exist on
the property?
Yes _____ No _____
If the answer to 4.d. is yes, state the location of each (attach
additional pages if necessary.
e. To the best of your knowledge, has there ever been any underground or
above ground tank on the Property that has been removed?
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<PAGE>
EXHIBIT 10.27
Yes _____ No _____
If the answer to 4.e. is yes, state the approximate location, if known,
and provide copies of any documentation in your possession regarding the
removal of the tank.
f. To the best of your knowledge, are there now or has there ever been
any leaking underground storage tank located within a radius of 1/8th of
a mile from the Property?
Yes _____ No _____
5. a. Does the Property have any materials which contain as a component
asbestos?
Yes _____ No _____
If the answer to 5.a. is yes, please describe the materials and their
location (attach additional pages, if necessary).
b. Is any electrical transformer (whether pole or pad mounted) any other
electrical equipment (i.e., elevator, hydraulic lift) located on the
Property?
Yes _____ No _____
If the answer to 5.b. is yes, please describe its location (attach
additional pages, if necessary).
c. Does the Property contain urea formaldehyde foam insulation in its
building materials?
Yes _____ No _____
If the answer to 5.c. is yes, please describe its location (attach
additional pages, if necessary).
d. Has radon gas ever been detected on the Property?
Yes _____ No _____
If the answer to 5.d. is yes, please describe its location (attach
additional pages, if necessary).
e. Has methane gas ever been detected on the Property?
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<PAGE>
EXHIBIT 10.27
Yes _____ No _____
If the answer to 5.e. is yes, please describe its location (attach
additional pages, if necessary).
f. If the Property consists of multifamily, congregate care or
daycare facility, are you aware of the presence of any
lead-based materials (e.g., paint, piping or pipe fittings)?
Yes _____ No _____
If the answer to 5.f. is yes, please describe the materials and the
location (attach additional pages, if necessary).
g. Has there ever been an active dry cleaning processing
establishment located on the Property?
Yes _____ No _____
If the answer to 5.g. is yes, please describe the materials and the
location (attach additional pages, if necessary).
h. Has any dry cleaning solvent ever been detected on the Property?
Yes _____ No _____
If the answer to 5.h. is yes, please describe location (attach
additional pages, if necessary).
6. a. What is the name of the seller from whom you bought the Property?
Name: ____________________________________________________________
b. Describe the current use of the Property and the use at the time you
acquired it (attach additional
pages, if necessary).
__________________________________________________________________
c. Will any future use ever be different from the current use? If the
answer to 6.c. is yes, please describe all proposed future uses (attach
additional pages, if necessary).
__________________________________________________________________
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EXHIBIT 10.27
7. (To be answered if the Property is in Connecticut, Maine, or Rhode
Island:)
a. Was the Property transferred out of or described as part of a larger
parcel within the past five years (relates to state superlien statute
"clawback" provisions)?
Yes _____ No _____
b. If the answer to 7.a. is yes, please describe by boundaries the
larger parcel of which the Property was a part (attach additional pages
if necessary).
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EXHIBIT 10.27
I/(We) certify (i) that each of the above answers is true and complete;
(ii) that to the best of my (our) knowledge there is no violation of federal,
state, or local environmental laws on the Property, except as described herein;
and (iii) that I (we) will immediately notify AMRESCO CAPITAL, L.P. if at any
time while the Loan is outstanding I (we) learn that any of the above answers
either was not true when made or is no longer true.
I/(We) understand that if any of the above answers has been answered in
the affirmative or are not confirmed by Phase I Environmental Site Assessment,
AMRESCO CAPITAL, L.P. may require (i) satisfactory answers to further questions,
to be provided by AMRESCO CAPITAL, L.P. and/or (ii) further investigation of the
Property, including, in AMRESCO CAPITAL, L.P.'s sole discretion, soil and
groundwater sampling and monitoring, with results satisfactory to AMRESCO
CAPITAL, L.P. in its sole discretion, as a condition or conditions to closing
the proposed Loan.
BORROWER:
______________________________________
By: _______________________________
Name: _______________________________
Title: _______________________________
Date: _______________________________
KEY PRINCIPAL(S):
By: ______________________________
Name: ______________________________
Title: ______________________________
Date: ______________________________
