SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission File Number 0-3797
MASTEC, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0829355
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
3155 N.W. 77th Avenue, Miami, FL 33122-1205 (305) 599-1800
(Address of principal executive offices) Registrant's telephone number,
including area code
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $.10 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 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 .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. __
The number of shares of Common Stock outstanding as of March 26, 1999 was
27,341,385. The aggregate market value of the voting stock held by
non-affiliates of the registrant based on the $22 5/8 closing price for the
registrant's Common Stock on the New York Stock Exchange on March 26, 1999 was
approximately $304,703,626. Directors, executive officers and 10% or greater
shareholders are considered affiliates for purposes of this calculation but
should not necessarily be deemed affiliates for any other purpose.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement relating to the 1999 Annual Meeting
of Shareholders to be held on May 25, 1999, are incorporated by reference.
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The following statement is made pursuant to the safe harbor provisions for
forward-looking statements described in the Private Securities Litigation Reform
Act of 1995. MasTec, Inc. and subsidiaries ("MasTec" or the "Company") may make
certain statements in this Annual Report on Form 10-K that are forward-looking,
such as statements regarding MasTec's future growth and profitability, growth
strategy and anticipated trends in the industries and economies in which MasTec
operates. These forward-looking statements are based on MasTec's current
expectations and are subject to a number of risks, uncertainties and assumptions
relating to MasTec's operations, financial condition and results of operations,
competitive factors, shifts in market demand, and other risks and uncertainties,
including risks and uncertainties relating to MasTec's dependence on key
customers and the telecommunications industry, MasTec's growth strategy, foreign
operations, restrictions imposed by MasTec's credit agreements, the impact of
competition, MasTec's dependence on the labor supply and on senior management,
the ability of MasTec to dispose of non-core assets and seasonality, among
others. Should one or more of these risks or uncertainties materialize, or
should the underlying assumptions prove incorrect, actual results may differ
significantly from results expressed or implied in any forward-looking
statements made by MasTec. These and other risks are detailed in this Annual
Report on Form 10-K and in other documents filed by MasTec with the Securities
and Exchange Commission. MasTec does not undertake any obligation to revise
these forward-looking statements to reflect future events or circumstances.
BUSINESS
General
MasTec is one of the preeminent builders of internal and external voice,
video, data, internet and other computer and communications networks for leading
telecommunications service providers, cable television operators, Fortune 500
corporations and power companies. MasTec designs, installs, constructs and
maintains aerial, underground and buried copper, coaxial and fiber optic cable
networks as well as wireless antenna networks ("external network services").
Clients for MasTec's external network services include major domestic and
international telecommunication service providers, incumbent and competitive
local exchange carriers, cable television operators, long-distance carriers and
wireless phone companies. MasTec also provides external network services to the
electric power industry ("power") that are similar to the services it provides
to telecommunications customers. Additionally, MasTec designs, installs and
maintains integrated local and wide area networks and provides systems
integration and other value added services ("internal network services") for
corporate customers and other organizations with multiple locations.
MasTec was formed in March 1994 through the combination of two companies
providing services to the telecommunications and other utility infrastructure
construction industry since 1969 and 1929. MasTec has grown significantly in the
past five years expanding its customer base and its geographic presence across
the United States and Latin America. Since March 1994, MasTec has completed 31
domestic and seven foreign acquisitions. Currently, MasTec is consolidating its
existing domestic acquisitions and emphasizing domestic internal growth,
although it intends to continue to grow through selected acquisitions to take
advantage of consolidation opportunities in the fragmented telecommunications
and other utilities construction industry in the United States. MasTec is
currently evaluating strategic alternatives for its international operations and
investments in order to maximize their value. On December 31, 1998, MasTec sold
substantially all of its operations in Spain, Argentina, Chile, Colombia, Peru,
Puerto Rico and Venezuela.
Customers. MasTec provides a full range of infrastructure services to a
diverse customer base. Domestically, MasTec provides external network services
to incumbent local exchange customers ("ILEC's") such as BellSouth
Telecommunications, Inc. ("BellSouth"), US West Communications, Inc., Bell
Atlantic Corp., SBC Communications, Inc. and GTE Corporation. MasTec also
provides external network services to competitive local exchange carriers
("CLEC's") such as Qwest Communications, Inc. and MFS Communications Company,
Inc., cable television operators ("CATV's") such as Charter Cable, Inc.,
Cablevision Systems, Inc., Time Warner Inc., Tele-Communications, Inc., Comcast
Corporation, and Cox Communications, Inc., long distance carriers such as AT&T
Corporation and Sprint Corp. and wireless communications providers such as
Sprint Spectrum, L.P. Internationally, MasTec provides external network services
to the local, long distance and wireless telephone companies formed as a result
of the privatization of Telecomunicacoes Brasileiras S.A. ("Telebras"), the
Brazilian telecommunications system, primarily in Sao Paulo, Rio de Janeiro,
Parana and other states in the southern region of Brazil.
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MasTec provides external network services to power companies such as
Carolina Power and Light Co., Florida Power and Light Co., Texas Utilities
Company, Virginia Power Co., the City of Austin Electric Department, City Public
Service of San Antonio, Georgia Power Co., and a number of regional electrical
cooperatives. MasTec provides internal network services to large corporate
customers with multiple locations such as First Union National Bank, Montgomery
Wards and Co., other major retailers, universities and health care providers.
MasTec believes that its customer base allows it to take advantage of
technological advances and other market developments that may favor one class of
customer over another. MasTec also believes that its diverse customer base makes
it less susceptible to downturns in any particular geographic region or industry
sector. For the year ended December 31, 1998, MasTec derived approximately 6.7%
of its revenue (or 10.6% of its North American revenue) from services performed
for BellSouth, its largest customer; no other on going customer accounted for
more than 5% of total revenue. See Note 9 of Notes to Consolidated Financial
Statements.
Turn-key Capabilities. MasTec believes it is one of the few contractors
capable of providing all of the design, construction, installation and
maintenance services necessary for a cable or wireless network starting from a
transmission point, such as a central office or head-end, and running
continuously through aerial, underground and buried cables or through wireless
transmission to the ultimate end users' voice and data ports, cable outlets or
cellular stations. MasTec can also install the switching devices at a central
office or set up local and wide area voice, video, data and internet networks to
expand a business' telecommunications infrastructure both inside a specific
structure or between multiple structures.
MasTec believes that its customers increasingly are seeking comprehensive
solutions to their infrastructure needs by turning to fewer qualified
contractors who have the size, financial capability and technical expertise to
provide a full range of infrastructure services. MasTec believes that this trend
will accelerate as industry consolidations increase and as these consolidated
entities begin to provide bundled services to end users. MasTec believes it has
positioned itself as a full service provider of external and internal network
services to take advantage of this trend.
Nationwide Presence. MasTec believes it is capable of servicing customers
across the United States. MasTec has significantly broadened its geographic
presence in recent years beyond its historical base in the Southeastern United
States. Currently, MasTec has external network operations in more than 40 states
in the Southeast, Northeast, mid-Atlantic, Southwest, West and upper Midwest
regions of the country. MasTec provides internal network services for corporate
customers and external network services for wireless communication companies
nationwide. MasTec believes that its customers are looking for contractors who
can provide services nationwide on a consistent and timely basis and that
MasTec's broad geographic presence is a competitive advantage with these
customers. MasTec is developing the brand name "MasTec" across all of its
operating units nationwide to further position itself as a single, national
company.
Growth Strategy
Internal Expansion. MasTec believes that current industry trends, including
deregulation and demonopolization, increased competition among
telecommunications and other utility providers, increased outsourcing, and
increased use of more powerful computers and the Internet, will lead to a
significant increase in the demand for its services over the next several years.
During 1998, MasTec realigned its North American operations along service and
customer lines to focus on its core businesses and believes it is
well-positioned to capitalize on this anticipated growth as one of the leading
telecommunications infrastructure contractors in the United States. MasTec
believes that its strong customer relationships, reputation for quality and
reliability, operating efficiency, financial strengths, technical expertise,
presence in key geographic areas and ability to offer a full range of
construction services make it well positioned to compete for this increased
business, particularly the larger, more technically complex infrastructure
projects.
Strategic Acquisitions. MasTec plans to continue to pursue selected
acquisitions in the fragmented telecommunications and utilities infrastructure
industry that either expand its geographic coverage and customer base or broaden
the range of services it can offer to clients. MasTec focuses its acquisition
efforts primarily on profitable companies with good reputations and strong
management. MasTec has acquired 38 companies, domestic and international, since
March 1994 and has significant experience in identifying, purchasing and
integrating telecommunications infrastructure businesses. MasTec believes that
it is able to improve the acquired companies' operating performance by providing
strategic guidance, administrative support, greater access to capital and
savings in the cost of capital, purchasing and insurance costs.
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North American Service Lines
MasTec's principal business is providing telecommunications and other
utilities infrastructure construction services, consisting of external network
services for telecommunications service providers, external network services for
power companies, and internal network services. For the years ended December 31,
1996, 1997 and 1998, revenue expressed as a percentage of North American revenue
generated by external network services for telecommunications service providers
was 77.1%, 74.6% and 68.1%, respectively, by external network services for power
companies was 1.3%, 5.2% and 18.0%, respectively, and by internal network
services was 12.5%, 12.5% and 13.4%, respectively.
External Networks - Telecommunications
MasTec's principal domestic business consists of external network services
for telecommunications providers such as ILEC's, CLEC's, CATV's, long-distance
carriers and wireless communications providers. External network services
consist of all of the services necessary to design, install, construct and
maintain the physical facilities used to provide telecommunications service from
the provider's central office, switching center or cable head-end to the
ultimate consumer's home or business. These services include designing conduit
networks and fiber rings; placing and splicing of cable; excavating trenches in
which to place the cable; fabricating and placing related structures such as
poles, anchors, conduits, manholes, cabinets and closures; placing drop lines
from the main distribution terminals to the customer's home or business;
maintaining, removing and replacing these facilities; and installing
transmission and central office equipment. MasTec has developed expertise in
directional boring, a highly specialized and increasingly common method of
placing underground and buried cable networks.
MasTec provides a full range of external network services to its
telecommunications company customers, although certain of MasTec's customers
handle certain of these services in-house. MasTec's customers generally supply
materials such as cable, conduit and telephone equipment, and MasTec provides
the expertise, personnel, tools and equipment necessary to perform the required
installation, construction and maintenance services.
Services rendered to ILEC's, including BellSouth, are performed primarily
under master service agreements, which typically are exclusive service
agreements to provide all of the carrier's external network requirements up to a
specified dollar amount per job within certain geographic areas. These contracts
generate revenue ranging from $3.0 million to $30.0 million over their
respective contract terms, generally two to three years. Such contracts are
typically subject to termination at any time upon 90 to 180 days prior notice to
MasTec. Each master services agreement contemplates hundreds of individual
construction and maintenance projects generally valued at less than $100,000
each. These master services agreement are typically awarded on a competitive bid
basis, although customers are sometimes willing to negotiate contract extensions
beyond their original terms without opening them up to bid. MasTec currently has
43 master service agreements with telecommunications and other utility customers
covering defined regions within the United States, including 10 with BellSouth.
In addition to services rendered pursuant to master services agreement,
MasTec provides external network services on individual projects awarded on a
competitive bid basis or through individual negotiation. While such projects are
generally substantially larger than the individual projects covered by master
contracts, they typically require services identical to those rendered under
master services agreement. Most of MasTec's external network contracts, whether
master services agreement or individual projects, are based either on a fixed
price for the entire project or on a unit price basis for units of work
performed. MasTec also performs work under cost-plus contracts under which
MasTec is reimbursed for certain costs plus a fee in a fixed amount or equal to
a percentage of reimbursable costs. Many of MasTec's contracts require
performance and payment bonds. Contracts generally include payment provisions
under which 5% to 10% is withheld from payment until the contract work has been
completed. MasTec typically agrees to indemnify its customers against certain
claims and warrants the quality of its services for specified time periods,
usually one year.
MasTec also provides turn-key design, installation and maintenance
services to the wireless communications industry, including project and
construction management, site acquisition and development, design and
construction of communications towers, placement of antennas and associated
wiring, construction of equipment huts, and site maintenance.
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Technology convergence has led to the development of "smart highways,"
which employ video cameras, remote controlled traffic signals, "talking" message
signs, road sensors and other similar devices interconnected by fiber optic
cable to a central computer that monitors and controls traffic flow remotely.
MasTec provides infrastructure construction services to the traffic control and
highway safety industry, including the design, construction and maintenance of
"smart highway" equipment and networks. These services consist of installing and
maintaining traffic signals and their associated supporting mechanisms (such as
mast-arm poles, conduit, electrical wiring and sensors), installing and
maintaining traffic controllers, connecting signals and controllers with fiber
optic cables, and erecting signs on highways and expressways. The labor,
equipment and expertise required for traffic control and highway safety systems
construction are similar to those required for external network services for
telecommunications service providers, such as the installation of fiber optic or
coaxial cable and conduit for electronically controlled signage and other
traffic control systems. These services primarily are rendered on specific
projects awarded on a competitive bid basis. Customers include state
transportation departments, cities and counties, highway contractors and private
developers, principally in the Southeast. MasTec conducts this business both as
a prime contractor and as a subcontractor. MasTec currently has three master
service agreements to provide these services.
External Networks - Power
MasTec provides external network services to power companies, including
investor-owned utilities and rural cooperatives. These services, which are
substantially similar to the external network services provided to
telecommunications companies, include overhead and underground construction and
maintenance of electrical and other utilities transmission and distribution
networks, substation construction and maintenance, right-of-way maintenance and
restoration of asphalt and concrete surfaces. The work often involves the
installation and splicing of high-voltage transmission and distribution lines.
Services to many of these customers are provided under exclusive master
contracts with 2 to 3 year initial terms expiring at various dates, as well as
on a project by project basis awarded under competitive bidding and individual
negotiations. MasTec currently has 42 master service agreements with power
companies.
Internal Network Services
MasTec provides design, installation and maintenance of internal networks
linking the customers' voice, video, data and internet computer and
communications networks at multiple locations. MasTec also provides systems
integration services, which involve the selection, configuration, installation
and maintenance of software, hardware, other computing and communications
equipment and cabling to provide an integrated computing and communications
system. Internal network services is less capital intensive than external
network construction but requires a more technically proficient work force.
MasTec provides these services to its customers nationwide, primarily on the
east and west coasts of the United States.
MasTec provides internal network services to certain customers under master
service agreements similar to those in the external network business that grant
MasTec the exclusive right to provide network services to the customer within
certain geographic regions. MasTec also provides inside wiring on individual
projects that are awarded on a competitive bid basis or through individual
negotiation. MasTec currently has two master service agreements to provide
internal network services. MasTec intends to take advantage of the fragmentation
of the internal network services industry by marketing a full range of network
services to organizations with multiple locations across the country. MasTec
believes that these types of customers increasingly are seeking a single vendor
to provide all of their network services needs.
International Operations and Investments
MasTec operated in 1998 principally in North America (the United States and
Canada), the Caribbean and Latin America ("CALA") and in Spain (CALA and Spain
combined are also referred to as "International"). Combined revenue generated by
International operations, as a percentage of total revenue was 39.8% in 1996,
42.8% in 1997 and 36.2% in 1998. See Note 9 of Notes to Consolidated Financial
Statements for a description of operations by geographic areas and segments.
MasTec provides external network construction outside of North America primarily
in Brazil through MasTec Inepar S/A Sistemas de Telecomunicacoes ("MasTec
Inepar"), a Brazilian company owned 51% by MasTec and 49% by Inepar SA
Industrias e Construcoes ("Inepar"), a leading telecommunications and power
infrastructure and equipment company in Brazil. MasTec Inepar provides external
network services to the local, long distance and wireless telephone companies
formed as a result of the privatization of Telebras, primarily in Sao Paulo, Rio
de Janeiro, Parana and other states in the more populous and developed southern
region of Brazil.
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In December 1998, MasTec disposed of 87% of its Spanish operations, which
included affiliates in Argentina, Chile, Colombia, Peru, Puerto Rico, and
Venezuela to a group of investors. The investor group included the chief
executive officer of Sintel and a member of its board of directors. MasTec
received $0.9 million (130.5 million pesetas at an exchange rate of 142 pesetas
to the dollar) on the date of closing and through March 31, 1999 has received
$10.2 million. Payment terms are being re-negotiated not to extend beyond 1999.
The sale included the assumption of the remaining indebtedness of MasTec to
Telefonica S.A. for the purchase of the Spanish operations of $25.0 million (3.6
billion pesetas). See Notes 2 and 9 of Notes to Consolidated Financial
Statements for a description of the Spanish operations and additional terms of
the sale.
MasTec has invested in certain telecommunications businesses located in or
servicing Latin America. These include minority interests in Supercanal Holding,
S.A. ("Supercanal") and related entities, which operate a cable television
system in Argentina, and in Consorcio Ecuatoriano de Telecomunicaciones, S.A.
("Conecel"), an Ecuadorian cellular company. MasTec also has an investment in a
company with a license to construct and operate a personal communication system
("PCS") in Paraguay. MasTec is seeking to maximize the value of these
investments and has hired investment bankers to explore strategic alternatives.
Backlog
At December 31, 1998, MasTec had a backlog for domestic operations of
approximately $249.9 million consisting of the uncompleted portion of services
to be performed under project-specific contracts. MasTec does not include as
backlog the estimated amount of work under master services agreements because
the customer under these contracts is not committed to order a specific volume
of services from MasTec. MasTec expects to complete substantially all of its
backlog at December 31, 1998 during calendar years 1999 through 2002, of which
approximately 88.0% of the domestic backlog is expected to be completed during
1999. MasTec also has international backlog through its Brazilian subsidiary
MasTec Inepar of approximately R$148.2 million denominated in Brazilian reais,
representing approximately $123.4 million in U.S. dollars as of December 31,
1998, of which 75% is expected to be completed during 1999. Due to the recent
devaluation of the Brazilian currency and the likelihood of further devaluation
and deteriorating economic conditions in Brazil it is uncertain the amount of
revenue that MasTec will recognize from its international backlog. See Note 1 of
Notes to Consolidated Financial Statements.
Marketing
MasTec has developed a company-wide marketing plan to emphasize the
"MasTec" brand name to its customers. Marketing efforts are principally carried
out by management of MasTec's service lines. Executives of MasTec's service
lines market to existing and potential telecommunications and other utility
customers in order to negotiate new contracts or be placed on lists of vendors
invited to submit bids for master services agreement and individual construction
projects. External and internal network services are also marketed through
commissioned salespeople. These efforts are supported by MasTec's corporate
marketing department.
Suppliers
MasTec's customers supply the majority of the raw materials and supplies
necessary to carry out MasTec's contracted work, although MasTec is increasingly
supplying materials and supplies on turn-key projects. MasTec obtains materials
and supplies for its own account from independent third-party providers and does
not manufacture any significant amount of materials or supplies for resale.
MasTec is not dependent on any one supplier for any materials or supplies that
MasTec obtains for its own account. MasTec has not experienced any difficulty in
obtaining an adequate supply of materials and supplies.
MasTec also uses independent contractors to perform portions of its
services and to manage work flow. These independent contractors typically are
sole proprietorships or small business entities. Independent contractors
typically provide their own vehicles, tools and insurance coverage. MasTec is
not dependent on any single independent contractor.
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Competition
The industry in which MasTec competes is highly competitive and fragmented.
MasTec competes with a number of contractors in the markets in which it
operates, ranging from small independent firms servicing local markets to larger
firms servicing regional markets, as well as with large national and
international engineering firms and equipment vendors on turn-key projects who
subcontract construction work to contractors other than MasTec. These
engineering firms and equipment vendors typically are better capitalized and
have greater resources than MasTec. Most companies engaged in the same or
similar business tend to operate in a specific, limited geographic area,
although larger competitors may bid on a particular project without regard to
location. Although MasTec believes it is the largest provider of external
network services for telecommunications service providers and power companies in
the United States and has a significant presence in Brazil, neither MasTec nor
any of its competitors can be considered dominant in the industry on a national
or international basis. MasTec also faces competition from the in-house
construction and maintenance departments of various customers and potential
customers, which employ personnel who perform some of the same types of services
as those provided by MasTec.
Because of the highly competitive bidding environment for infrastructure
services, the price of the contractor's bid historically has often been the
principal factor in determining whether the contractor is awarded the work.
Smaller competitors are sometimes able to win bids based on price alone due to
their lower overhead costs. MasTec believes that as demand for its services
increases, customers will increasingly consider other factors in choosing a
contractor, including technical expertise and experience, financial and
operational resources, nationwide presence, industry reputation and
dependability, which should benefit larger, national contractors such as MasTec.
Employees
As of December 31, 1998, MasTec (excluding its unconsolidated companies)
had approximately 8,250 employees, 7,400 of whom were employed in North American
operations and 850 of whom were employed in International operations.
Approximately 250 employees are represented by a labor union, principally the
Communication Workers of America or the International Brotherhood of Electrical
Workers. MasTec believes that its employee relations are good.
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3), the information regarding executive
officers of MasTec called for by Item 401(b) of Regulation S-K is hereby
included in this Annual Report on Form 10-K.
The following is a list of the names and ages of all of the executive
officers of MasTec, indicating all positions and offices with MasTec held by
each such person, and each such person's principal occupation or employment
during the past five years. The executive officers hold office for one year or
until their successors are elected by the Board of Directors.
Name Age Position
Jorge Mas 36 Chairman of the Board of Directors,
President and Chief Executive Officer
Joel-Tomas Citron 36 Vice Chairman of the Board of Directors
Carmen M. Sabater 34 Senior Vice President-Finance
Jose Sariego 44 Senior Vice President-General Counsel
Arlene Vargas 32 Vice President and Controller
Jorge Mas has been President, Chief Executive Officer and a Director of
MasTec since March 1994 and was elected Chairman of the Board of Directors of
MasTec in January 1998. Prior to March 1994, Mr. Mas served as the President and
Chief Executive Officer of Church & Tower, Inc., MasTec's predecessor. In
addition, Mr. Mas is the Chairman of the Board of Directors of Neff Corporation,
a publicly-held construction equipment sales and leasing company, and Atlantic
Real Estate Holding Corp., a private real estate holding company controlled by
Mr. Mas and, during all or a portion of the past five years, has served as the
President and Chief Executive Officer of these corporations.
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Joel-Tomas Citron has been a member of the Board of Directors of MasTec
since January 1998 and was elected Vice Chairman of the Board of Directors in
November 1998. Mr. Citron was the managing partner of Triscope Capital LLC, a
private investment partnership between January 1998 and December 1998; Chairman
of the Board of Directors of the United States subsidiary of Proventus AB, a
privately held investment company based in Stockholm, Sweden, and a member of
the Executive Committee of the group between January 1992 and December 1997; a
member of the Board of Directors of Neff Corporation since 1998; Chairman of the
Board of American Information Systems, Inc., a provider of intranet and internet
systems solutions between September 1996 and January 1999; between and a member
of the Board of Directors of Nesuah Zannex Limited, a publicly-traded full
service Israeli securities firm between May 1998 and February 1999.
Carmen M. Sabater has been MasTec's Corporate Controller since 1994 and was
elected Senior Vice President-Director of Finance in December 1998. Prior to
joining MasTec, Ms. Sabater was a Senior Manager with Deloitte & Touche, a
public accounting firm.
Jose Sariego has been Senior Vice President-General Counsel of MasTec since
September 1995. Prior to joining MasTec, Mr. Sariego was Senior Corporate
Counsel and Secretary of Telemundo Group, Inc., a Spanish language television
network, from August 1994 to August 1995. From January 1990 to August 1994, Mr.
Sariego was a partner in the Miami office of Kelley Drye & Warren, an
international law firm.
Arlene Vargas has been MasTec's Vice President and Corporate Controller
since September 1998. Prior to joining MasTec, Ms. Vargas was a Senior Manager
from June 1997 to September 1998 and a Manager from June 1994 to June 1997 with
PricewaterhouseCoopers LLP, a public accounting firm.
PROPERTIES
MasTec's corporate headquarters are located in a 60,000 square foot
building owned by MasTec in Miami, Florida. MasTec's principal operations are
conducted from regional and field offices, equipment yards and temporary storage
locations, none of which MasTec believes is material to its operations because
most of MasTec's services are performed on the customers' premises or on public
rights of way. In addition, MasTec believes that equally suitable alternative
locations are available in all areas where it currently does business.
MasTec also owns a substantial amount of construction equipment, which at
December 31, 1998 had a gross book value of $170.9 million. This equipment
includes trucks, tractors, trailers, bucket trucks, backhoes, bulldozers,
directional boring machines, digger derricks and cranes. MasTec obtains
substantially all of its equipment from various third-party vendors, none of
which MasTec is dependent upon, and has not experienced any difficulties in
obtaining desired equipment.
LEGAL PROCEEDINGS
In December 1990, Albert H. Kahn, a shareholder of MasTec, filed a class
action and derivative suit in Delaware state court against MasTec, the
then-members of its Board of Directors and National Beverage Corporation
("NBC"), MasTec's then-largest shareholder. The complaint alleges, among other
things, that MasTec's Board of Directors and NBC breached their respective
fiduciary duties in approving certain transactions. The lawsuit seeks to rescind
these transactions and to recover damages in an unspecified amount.
In November 1993, Mr. Kahn filed a class action and derivative suit in the
same court against MasTec, the then members of its Board of Directors, and Jorge
L. Mas, Jorge Mas and Juan Carlos Mas, the principal shareholders of MasTec. The
lawsuit alleges, among other things, that MasTec's Board of Directors and NBC
breached their respective fiduciary duties by approving the terms of the
acquisition of MasTec by the Mas family, and that the Mas family had knowledge
of the fiduciary duties owed by NBC and MasTec's Board of Directors and
knowingly and substantially participated in the breach of these duties. The
lawsuit also claims derivatively that each member of MasTec's Board of Directors
engaged in mismanagement, waste and breach of fiduciary duties in managing
MasTec's affairs prior to the acquisition by the Mas family.
There has been no significant activity in either of these lawsuits in more
than two years. MasTec believes that the allegations in each of these lawsuits
are without merit and intends to defend these lawsuits vigorously.
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In November 1997, Church & Tower, Inc., a wholly-owned subsidiary of
MasTec, filed a lawsuit against Miami-Dade County in Florida state court
alleging breach of contract and seeking damages exceeding $3.0 million in
connection with the county's refusal to pay amounts due to Church & Tower under
a multi-year agreement to perform road restoration work for the Miami-Dade Water
and Sewer Department ("MWSD"), a department of the county, and the county's
wrongful termination of the agreement. The county has refused to pay amounts due
to Church & Tower under the agreement until alleged overpayments under the
agreement have been resolved, and has counterclaimed against Church & Tower
seeking damages. The county also has refused to award a new road restoration
agreement for MWSD to Church & Tower, which was the low bidder for the new
agreement. MasTec is vigorously pursuing this lawsuit.
MasTec is a party to other pending legal proceedings arising in the normal
course of business, none of which MasTec believes is material to its financial
position or results of operations.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information. MasTec's Common Stock currently is listed on the New
York Stock Exchange under the symbol "MTZ". The following table sets forth, for
the quarters indicated, the high and low sale prices of the Common Stock, as
reported by the New York Stock Exchange.
Fiscal Year Ended December 31,
-----------------------------------------------------------
1997 1998
High Low High Low
--------------------------- -----------------------------
First Quarter .... $ 46 11/32 $ 23 $ 34 3/16 $ 22 3/8
Second Quarter ... $ 48 5/8 $ 25 1/8 $ 34 $ 19 13/16
Third Quarter .... $ 55 1/4 $ 38 1/4 $ 26 3/8 $ 14 1/2
Fourth Quarter ... $ 45 1/2 $ 20 3/8 $ 28 3/4 $ 12 3/8
Holders. As of March 26, 1999, there were 4,679 shareholders of record of
the Common Stock.
Dividends. MasTec has not declared cash dividends since its inception and
does not anticipate paying any cash dividends in the foreseeable future, but
intends instead to retain any future earnings for reinvestment in its business.
On January 15, 1997, MasTec announced a three-for-two split of its outstanding
shares of Common Stock. The stock split was effected in the form of a stock
dividend and entitled each shareholder of record on February 3, 1997 to receive
an additional share of Common Stock for every two shares of Common Stock held by
such shareholder of record on the record date. The stock split was paid on
February 28, 1997. MasTec paid cash in lieu of fractional shares resulting from
the stock split based on the last sale price as reported on the New York Stock
Exchange on the record date. All references in this Annual Report to shares of
Common Stock have been adjusted to give effect to the stock split.
Any future determination as to the payment of dividends will be made at the
discretion of the Board of Directors of MasTec and will depend upon its
operating results, financial condition, capital requirements, general business
conditions and such other factors as the Board of Directors deem relevant. In
addition, certain credit agreements to which MasTec is a party prohibit from
paying dividends or making other distributions on the Common Stock without the
prior written consent of the lenders under such credit agreements. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
8
<PAGE>
SELECTED FINANCIAL DATA
The following statement of operations and balance sheet data have been
derived from MasTec's audited financial statements including the consolidated
balance sheets at December 31, 1998 and 1997 and the related consolidated
statements of operations, of changes in shareholders' equity and of cash flows
for each of the years in the three-year period ended December 31, 1998 and the
notes thereto, appearing elsewhere in this Annual Report. The following selected
financial data should be read in conjunction with such consolidated financial
statements and the notes thereto, as well as "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
1994(1) 1995 1996(2) 1997(3) 1998(4)
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(In thousands, except per share data)
Statement of Income Data:
Revenue ...................................... $111,294 $174,583 $472,800 $659,439 $1,048,922
Costs of revenue ............................. 83,952 130,762 352,329 496,230 803,112
Depreciation and amortization ................ 4,439 6,913 12,000 23,465 43,313
Compensation charge .......................... -- -- -- -- 33,765
General and administrative expenses .......... 13,022 19,081 58,529 82,261 140,472
-------------------------------------------------------------------------------------------------------------
Operating income ............................. 9,881 17,827 49,942 57,483 28,260
Interest expense ............................. 3,587 4,954 11,434 11,541 29,580
Interest income .............................. 1,469 3,349 3,246 1,783 9,093
Real estate and investment write-downs (5) ... -- 23,086 -- -- --
Other income (expense), net (6) .............. 2,386 4,424 769 8,332 (5,155)
-------------------------------------------------------------------------------------------------------------
Income (loss) before provision (benefit) for
income taxes, equity in earnings (losses) of
unconsolidated companies and minority interest 10,149 (2,440) 42,523 56,057 2,618
Provision (benefit) for income taxes (7) ..... 2,877 (1,970) 15,591 20,944 12,550
Equity in earnings (losses) of unconsolidated
companies and minority interest (8) .......... 247 (139) 3,133 (449) (3,983)
=============================================================================================================
Net income (loss) ............................ $ 7,519 $ (609) $ 30,065 $ 34,664 $ (13,915)
=============================================================================================================
Weighted average common shares outstanding (9) 24,116 23,892 24,703 26,460 27,489
Basic earnings (loss) per share .............. $ 0.31 $ (0.03) $ 1.22 $ 1.31 $ (0.51)
Weighted average common shares outstanding (9) 24,116 23,892 25,128 27,019 27,489
Diluted earnings (loss) per share ............ $ 0.31 $ (0.03) $ 1.20 $ 1.28 $ (0.51)
As of December 31,
----------------------------------------------------------
1994 1995 1996 1997 1998(10)
----------------------------------------------------------
(In thousands)
Balance Sheet Data:
Property and equipment, net .................. $ 40,102 $ 44,571 $ 59,602 $ 86,109 $ 142,897
Total assets ................................. 142,452 170,163 483,018 630,224 735,486
Total debt ................................... 44,185 72,089 155,192 149,057 321,832
Total shareholders' equity ................... 50,874 50,504 103,504 223,697 204,273
</TABLE>
(1) Includes the results of operations of Burnup & Sims Inc. from March
11, 1994.
(2) Includes the results of operations of MasTec's Spanish subsidiary
Sintel from May 1, 1996.
(3) Includes the results of operations of MasTec's Brazilian subsidiary
MasTec Inepar from July 31, 1997.
9
<PAGE>
(4) Includes the results of operations of MasTec's Spanish subsidiary
Sintel through December 31, 1998, which includes severance charges of
$13.4 million, of which $1.9 million is reflected in costs of revenue
and $11.5 million in general and administrative expenses.
(5) As a result of the disposal of non-core real estate assets and other
investments, MasTec recorded $23.1 million in charges in the year
ended December 31, 1995.
(6) Included in 1997 results of operations is a gain of $7.1 million from
the partial sale of MasTec's interest in Conecel and in 1998 includes
a loss of $9.2 million related to the sale of MasTec's Spanish
subsidiary.
(7) MasTec's effective tax rate for the year ended December 31, 1998 was
mainly affected by a tax liability of approximately $7.8 million
resulting from the sale of 87% of MasTec's Spanish subsidiary, the
non-deductibility of the amortization of certain intangibles and the
non-deductibility of other expenses.
(8) Included in 1997 and 1998 results of operations is the minority
interest related to MasTec's Brazilian subsidiary MasTec Inepar.
(9) Amounts have been adjusted to reflect the three-for-two stock split
effected on February 28, 1997.
(10) As of December 31, 1998, MasTec sold 87% of its Spanish subsidiary,
therefore, the balance sheet data as of December 31, 1998 does not
include the financial position of these operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Revenue is generated primarily from external and internal network services.
See Notes 1 and 9 of Notes to Consolidated Financial Statements. Services are
provided to telephone companies, public utilities, cable television operators,
other telecommunications providers, governmental agencies and private
businesses. Costs of revenue include operations payroll and employee benefits,
subcontractor costs and expenses, materials not supplied by the customer, fuel,
equipment rental and insurance. General and administrative expenses include
management salaries and benefits, rent, travel, telephone and utilities,
professional fees and clerical and administrative overhead.
The following tables sets forth for each of 1996, 1997 and 1998 income
statement data and its related percentage of revenue by geographic region.
During 1998, MasTec recharacterized as purchases two acquisitions consummated in
1997, which were originally accounted for as pooling of interests. See Note 1 of
Notes to Consolidated Financial Statements.
North America
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1996 1997 1998(1)
---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Revenue ........................... $284,645 100.0% $377,046 100.0% $669,628 100.0%
Costs of revenue .................. 216,940 76.2% 279,394 74.1% 506,721 75.7%
Depreciation and amortization ..... 9,942 3.5% 20,452 5.4% 37,284 5.6%
General and administrative expenses 27,554 9.7% 41,167 10.9% 112,530 16.8%
======== ====== ======== ====== ======== ======
Operating income ............. $ 30,209 10.6% $ 36,033 9.6% $ 13,093 1.9%
======== ====== ======== ====== ======== ======
</TABLE>
(1) General and administrative expenses includes a $33.8 million charge
for compensation and severance charges.
Year Ended December 31, 1998 Operating Income Compared to Year Ended
December 31, 1997 Operating Income
MasTec's North American revenue was $669.6 million for the year ended
December 31, 1998, compared to $377.0 million in 1997, representing an increase
of $292.6 million or 77.6%. The increase in North American revenue was due
primarily to revenue generated from acquired companies, as well as internally
generated growth. During 1998, MasTec acquired 12 companies in North America
which generated revenue of approximately $255.1 million, representing 87.2% of
the total increase in revenue. MasTec's North American operations have
experienced an internal compounded annual growth rate of approximately 21.4%
since 1995. For the year ended December 31, 1998, the percentage of MasTec's
North American revenue generated by external network services for
10
<PAGE>
telecommunication services providers was 68.1% (74.6% in 1997), by external
network services for power companies was 18.0% (5.2% in 1997) and by internal
network services was 13.4% (12.5% in 1997).
MasTec's North American costs of revenue were $506.7 million or 75.7% of
revenue for the year ended December 31, 1998, compared to $279.4 million or
74.1% of revenue in 1997, representing an increase of $227.3 million or 81.4%.
The increase in costs of revenue as a percentage of revenue was due primarily to
numerous inefficiencies caused by severe weather conditions in various regions
as a result of the climactic condition known as "El Nino", poor performance in
three divisions and losses from a non-core contract.
Depreciation and amortization expense was $37.3 million or 5.6% of revenue
for the year ended December 31, 1998, compared to $20.5 million or 5.4% of
revenue in 1997.
General and administrative expenses were $112.5 million or 16.8% of revenue
for the year ended December 31, 1998, compared to $41.2 million or 10.9% of
revenue in 1997, representing an increase of $71.4 million or 173.4%. The
increase in general and administrative expenses was due primarily to a $33.8
million compensation charge for senior management at certain operating
subsidiaries, $1.4 million for start-up costs and charges of $4.5 million
related to bad debts. Excluding the previously mentioned expenses, general and
administrative expenses were $72.9 million or 10.9% of revenue in 1998.
Year Ended December 31, 1997 Operating Income Compared to Year Ended
December 31, 1996 Operating Income
Revenue from North America operations was $377.0 million for the year ended
December 31, 1997, compared to $284.6 million in 1996, representing an increase
of $92.4 million or 32.5%. The increase in North American revenue was due
primarily to revenue generated from acquired companies, as well as internal
growth. MasTec's North American operations experienced an internal compounded
annual growth rate of approximately 19.3% since 1995. For the year ended
December 31, 1997, the percentage of MasTec's North American revenue generated
by external network services for telecommunication service providers was 74.6%
(77.1% in 1996) external network services for electric power companies was 5.2%
(1.3% in 1996) and 12.5% (12.5% in 1996) was generated by internal network
services.
MasTec's North American costs of revenue were $279.4 million or 74.1% of
revenue for the year ended December 31, 1997, compared to $216.9 million or
76.2% of revenue in 1996, representing an increase of $62.5 million or 28.8%.
The increase in North American costs of revenue was due primarily to costs of
revenue generated from acquired companies as well as cost of revenue generated
by internal growth. The decrease in costs of revenue as a percentage of revenue
was due primarily to improved margins generated during 1997 in certain projects,
as well as improved costs of revenue management.
Depreciation and amortization expense was $20.5 million or 5.4% of revenue
for the year ended December 31, 1997, compared to $9.9 million or 3.5% of
revenue in 1996, representing an increase of $10.5 million or 105.7%. The
increase in depreciation and amortization was a result of increased capital
expenditures ($19.7 million in 1997 compared to $7.1 million in 1996), as well
as amortization of intangibles resulting from acquisitions.
General and administrative expenses were $41.2 million or 10.9% of revenues
for the year ended December 31, 1997, compared to $27.6 million or 9.7% of
revenue in 1996. The increase in general and administrative expenses was due
primarily to general and administrative expenses generated from acquired
companies. The increase of general and administrative expenses as a percentage
of revenue was due primarily to a $4.6 million reserve recorded by MasTec.
11
<PAGE>
CALA
Year Ended December 31,
-----------------------------------
1997 (1) 1998
---------------- ----------------
Revenue ........................... $ 74,900 100.0% $141,954 100.0%
Costs of revenue .................. 63,266 84.5% 112,667 79.4%
Depreciation and amortization ..... 390 0.4% 3,349 2.4%
General and administrative expenses 1,615 2.2% 10,636 7.4%
-------- ------ -------- ------
Operating income ............. $ 9,629 12.9% $ 15,302 10.8%
======== ====== ======== ======
(1) CALA operations began on August 1, 1997
Year Ended December 31, 1998 Operating Income Compared to Five Months
Ended December 31, 1997 Operating Income
MasTec's CALA revenue was $142.0 million for the year ended December 31,
1998, compared to $74.9 million in 1997, representing an increase of $67.1
million or 89.5%. The increase in revenue was due primarily to a full year of
operations in 1998, compared to five months in 1997.
MasTec's CALA costs of revenue were $112.7 million for the year ended
December 31, 1998, compared to $63.3 million in 1997, representing an increase
of $49.4 million or 78.0%. Costs of revenue were 79.4% of revenue in 1998,
compared to 84.5% in 1997. The decrease in costs of revenue as a percentage of
revenue was due primarily to the completion of certain wireless projects in the
fourth quarter of 1998. MasTec does not anticipate CALA margins to remain at
this level in the future.
Depreciation and amortization expense was $3.3 million for the year ended
December 31, 1998. Depreciation and amortization relates primarily to an
intangible asset resulting from one acquisition which is being amortized over a
five year period. Depreciation and amortization expense was 2.4% of revenue for
the year ended December 31, 1998.
General and administrative expenses were $10.6 million or 7.4% of revenue
for the year ended December 31, 1998, compared to $1.6 million or 2.2% in 1997,
representing an increase of $9.0 million or 558.6%. The increase in general and
administrative expenses was due primarily to costs of establishing an
infrastructure to support anticipated additional work following the
privatization of Telebras, which did not take place until July 1998. Due to
recent economic conditions in Brazil, it is uncertain when, if at all, such
additional work will materialize.
Spain
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1996 (1) 1997 1998 (2)
---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Revenue ........................... $188,155 100.0% $207,493 100.0% $237,340 100.0%
Costs of revenue .................. 135,389 71.9% 153,180 73.8% 183,724 77.4%
Depreciation and amortization ..... 2,058 1.1% 3,013 1.5% 2,680 1.1%
General and administrative expenses 30,975 16.5% 39,478 19.0% 51,070 21.5%
-------- ------ -------- ------ -------- -=----
Operating income ............. $ 19,733 10.5% $ 11,822 5.7% $ (134) 0.0%
======== ====== ======== ====== ======== ======
</TABLE>
(1) Spanish operations began on April 30, 1996, the date of acquisition.
(2) Includes a total of $13.4 million of severance charges of which $1.9
million is reflected in costs of revenue and $11.5 million in general
and administrative expenses.
12
<PAGE>
Year Ended December 31, 1998 Operating Income Compared to Year Ended
December 31, 1997 Operating Income
Revenue from Spanish operations was $237.3 million for the year ended
December 31, 1998, compared to $207.5 million in 1997, representing an increase
of $29.8 million or 14.4%. The increase was due to acquisitions made in 1998.
Costs of revenue were $183.7 million or 77.4% of revenue for the year ended
December 31, 1998, compared to $153.2 million or 73.8% of revenue in 1997,
representing an increase of $30.5 million or 19.9%. The increase in costs of
revenue as a percentage of revenue was due primarily to increased labor costs
associated with a new labor agreement and to $1.9 million in direct labor
severance costs.
Depreciation and amortization expense was $2.7 million for the year ended
December 31, 1998, compared to $3.0 million in 1997. Depreciation and
amortization expense was 1.1% of revenue for the year ended December 31, 1998,
compared to 1.5% of revenue in 1997.
General and administrative expenses were $51.1 million or 21.5% of revenue
for the year ended December 31, 1998, compared to $39.5 million or 19.0% of
revenue in 1997, representing an increase of $11.6 million or 29.4%. The
increase in general and administrative expenses as a percentage of revenue was
due to severance charges of $11.5 million resulting from reductions in
administrative personnel.
Year Ended December 31, 1997 Operating Income Compared to Eight Months
Ended December 31, 1996 Operating Income
Revenue generated by Spanish operations was $207.5 million for the year
ended December 31, 1997, compared to $188.2 million in 1996, representing an
increase of $19.3 million or 10.3%. The increase in revenue was due primarily to
a full year of operations in 1997, compared to eight months in the 1996.
MasTec's Spanish operations were negatively impacted during 1997 by a
devaluation of approximately 18% in the Spanish peseta and by work stoppages in
the second half of 1997.
Costs of revenue were $153.2 million or 73.8% of revenue for the year ended
December 31, 1997, compared to $135.4 million or 71.9% of revenue in 1996,
representing an increase of $17.8 million or 13.1%. The increase in costs of
revenue as a percentage of revenue was due primarily to lower productivity
during 1997 as a result of the work stoppages.
General and administrative expenses were $39.5 million or 19.0% of revenue
for the year ended December 31, 1997, compared to $31.0 million or 16.5% of
revenue in 1996, representing an increase of $8.5 million or 27.5%. The increase
in general and administrative expenses was due to a full year of operations in
1997, compared to eight months in 1996. The increase in general and
administrative expenses as a percentage of revenue was due mainly to increased
salaries and compensation expense resulting from increases in base salary.
13
<PAGE>
Consolidated Results
The following table sets forth for each of 1996, 1997 and 1998 certain
consolidated income statement data and its related percentage of consolidated
revenue.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1996 1997 1998
---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Operating income ............................. $ 49,942 10.6% $ 57,483 8.7% $ 28,260 2.7%
Interest expense ............................. 11,434 2.4% 11,541 1.8% 29,580 2.8%
Interest income .............................. 3,246 0.7% 1,783 0.3% 9,093 0.9%
Other income (expense), net .................. 769 0.1% 8,332 1.3% (5,155) 0.5%
-------- ------ -------- ------ -------- ------
Income before provision for income taxes,
equity in earnings (losses) of
unconsolidated companies and minority
interest .................................. 42,523 9.0% 56,057 8.5% 2,618 0.3%
Provision for income taxes ................... 15,591 3.3% 20,944 3.2% 12,550 1.2%
Equity in earnings (losses) of unconsolidated
companies and minority interest ........... 3,133 0.7% (449) (0.0)% (3,983) 0.4%
-------- ------ -------- ------ -------- ------
Net income (loss) ....................... $ 30,065 6.4% $ 34,664 5.3% $(13,915) (1.3)%
======== ====== ======== ====== ======== ======
</TABLE>
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
For a discussion of revenue, costs of revenue, depreciation and
amortization and general and administrative expenses, see "North America,"
"CALA" and "Spain" above.
Interest expense was $29.6 million for the year ended December 31, 1998,
compared to $11.5 million in 1997, representing an increase of $18.0 million or
156.3%. The increase in interest expense was due primarily to increased
indebtedness resulting from the issuance of the Senior Notes in early 1998, the
proceeds of which were used primarily for acquisitions and to fund international
operations investments. See Note 5 of Notes to Consolidated Financial
Statements.
Included in other expense for 1998 is a $9.2 million loss on sale of the
Spanish operation. The effective income tax rate, on a consolidated basis for
the year ended December 31, 1998 increased to 479%, from 37% in 1997. This
increase was mainly attributable to the recognition of approximately $9.2
million of a loss on sale of MasTec's Spanish operations, however for tax
purposes the Company recorded a tax provision of $7.8 million. Excluding the
effect of the book loss on sale and the taxable gain, the effective tax rate
would have been 42.2%, which is attributed to the non-deductibility of the
amortization of intangibles and other expenses. See Note 7 of Notes to
Consolidated Financial Statements.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Interest expense was $11.5 million or 1.8% of revenue for the year ended
December 31, 1997, compared to $11.4 million or 2.4% of revenue in 1996,
representing an increase of $107,000 or 0.9%. The decrease in interest expense
as a percentage of revenue was due to increased revenue while the average
balance on debt remained basically unchanged.
Included in other income for 1997 is a $7.1 million gain on sale of
MasTec's indirect interest in Conecel. See Note 11 of Notes to Consolidated
Financial Statements.
Liquidity and Capital Resources
MasTec's primary liquidity needs are for working capital, to finance
acquisitions, for capital expenditures and to service its indebtedness. MasTec's
primary sources of liquidity are cash flow from operations, borrowings under
revolving lines of credit and the proceeds from the sale of investments and
other assets held for sale.
14
<PAGE>
Net cash used in operating activities was $13.9 million for the year ended
December 31, 1998, compared to cash provided by operating activities of $15.2
million in 1997. Net cash used by operating activities of $13.9 million was due
primarily to a net loss for the year ended December 31, 1998.
As of December 31, 1998, working capital was $244.5 million ($180.4 million
domestic and $64.1 million international) compared to working capital of $124.1
million ($76.8 million domestic and $47.3 million international) at December 31,
1997. As of December 31, 1998, working capital included $50.9 million related to
financing and $46.4 million of assets held for sale included in domestic
operations and $27.3 million of receivables from the sale of MasTec's Spanish
operations included in international operations. Working capital in 1998,
excluding previously described items, was $83.1 million for domestic compared to
$76.8 million in 1997. For international, working capital increased, excluding
Spanish operations, from $22.8 million in 1997 to $36.8 million at December 31,
1998.
MasTec invested cash (net of cash acquired of $5.0 million in 1998 and $3.3
million in 1997) in acquisitions and investments in unconsolidated companies
totaling $89.1 million during 1998 compared to $49.0 million in 1997. During
1998, MasTec made capital expenditures of $76.4 million, primarily for machinery
and equipment used in the production of revenue, compared to $21.5 million in
1997. The increase in capital expenditures was due mainly to fleet upgrades for
acquired companies and internal growth. Of the total invested funds in 1998,
$64.5 million was related to North American acquisitions and $71.4 million was
related to North American capital expenditures.
MasTec entered into agreements with certain senior management personnel at
two of its operating subsidiaries. These senior managers agreed to multi-year
employment agreements and 10-year non-competition and non-solicitation
agreements. Under the agreements, MasTec paid the senior managers compensation
in the form of cash and common stock options. The cash portion totaled
approximately $33.3 million, of which approximately $13.3 million was paid in
1998 and approximately $20.0 million was paid in the first quarter of 1999. As a
result of these agreements, MasTec recorded a non-recurring compensation charge
of approximately $33.8 million (including the value of vested stock options) in
the fourth quarter of 1998.
During 1998, MasTec provided a customer financing in connection with the
sale of construction services. As of December 31, 1998, MasTec had $41.8 million
outstanding under this agreement. MasTec anticipates that it will provide an
additional $8.0 million of financing under this agreement. MasTec will terminate
financing agreement as of April 30, 1999.
Although the PCS system is held for sale, MasTec is committed to continue
developing the system in Paraguay. MasTec anticipates investing approximately
$13.0 million for the development of this system over the next 12 months.
Commercial operation of the system must be initiated no later than May 10, 1999,
unless extended. MasTec is seeking an extension of this date.
During 1998, MasTec sold 87% of its Spanish operations for $27.3 million
which is recorded in other current assets in the accompanying consolidated
balance sheet as of December 31, 1998. The proceeds from the sale will be used
for general corporate purposes including reducing indebtedness.
MasTec announced a stock repurchase program in April 1998. Through December
1998, MasTec had purchased a total of 667,000 shares at an average price of
$20.58.
In December 1998, MasTec increased its existing credit facility from $125.0
million to $165.0 million (the "Credit Facility"), with a group of financial
institutions led by BankBoston, N.A. Amounts outstanding under the Credit
Facility mature on June 9, 2000. Upon written request by MasTec and at the
bank's sole discretion, the maturity date of the Credit Facility may be extended
for successive annual periods up to a final maturity date of June 9, 2002.
MasTec is required to pay an unused facility fee ranging from .25% to .50% per
annum on the facility, depending upon certain financial covenants.
The Credit Facility is secured by a pledge of shares of certain of MasTec's
subsidiaries. Interest under the Credit Facility accrues at rates based, at
MasTec's option, on the agent bank's Base Rate plus a margin of up to .50%
depending on certain financial covenants or 1% above the overnight federal funds
effective rate, whichever is higher, or its LIBOR Rate (as defined in the Credit
Facility) plus a margin of 1.00% to 2.25%, depending on certain financial
covenants.
MasTec had outstanding $18.7 million in standby letters of credit as of
December 31, 1998.
15
<PAGE>
In January 1998, MasTec issued $200.0 million principal amount of 7.75%
senior subordinated notes (the "Senior Notes") due 2008 with interest due
semi-annually. The net proceeds were used primarily for acquisitions and for
other corporate purposes.
The Credit Facility and the Senior Notes contain customary events of
default and covenants which prohibit, among other things, making certain
investments in excess of a specified amount, incurring additional indebtedness
in excess of a specified amount, paying dividends in excess of a specified
amount, making capital expenditures in excess of a specified amount, creating
liens, prepaying other indebtedness, including the Senior Notes, and engaging in
certain mergers or combinations without the prior written consent of the
lenders. The Credit Facility also provides that MasTec must maintain certain
financial ratio coverages, requiring, among other things minimum ratios at the
end of each fiscal quarter of debt to earnings and earnings to interest expense.
See Note 5 of Notes to Consolidated Financial Statements.
MasTec expects to finance its current working capital needs, capital
expenditures, debt service obligations and other commitments from cash generated
from operations, borrowings under its existing Credit Facility and the sale of
investments and other assets. Subsequent to December 31, 1998, MasTec has signed
letters of intent to acquire two external network and one internal network
services contractors, subject to a number of conditions. MasTec anticipates that
available cash, cash flows from operations and borrowing availability under the
Credit Facility will be sufficient to satisfy MasTec's liquidity and working
capital requirements for the foreseeable future; however, to the extent that
MasTec should desire to increase its financial flexibility and capital resources
or require or choose to fund future capital commitments from sources other than
operating cash or from borrowings under its existing Credit Facility, MasTec may
consider raising additional capital by increasing its Credit Facility or through
the offering of equity and/or debt securities in the public or private markets.
There can be no assurance, however, that additional capital will be available to
MasTec on acceptable terms, or at all.
MasTec owns interest in a number of foreign operations, primarily in Latin
America, which are subject to greater political, monetary, economic and
regulatory risks than its domestic operations. During January 1999 the Brazilian
government allowed its currency to trade freely against other currencies
resulting in an immediate devaluation of the Brazilian reais. The impact on the
devaluation on an operation depends on the devaluation's effect on the local
economy and the ability of an operation to raise prices and/or reduce expenses.
Additionally, the economies of other countries in Latin America could be
adversely impacted by Brazil's economic and monetary problems. The likelihood
and extent of further devaluation and deteriorating economic conditions in
Brazil and other Latin America countries and the resulting impacts on MasTec's
results of operations, financial position and cash flows cannot now be
determined. MasTec monitors its currency exchange risk but currently does not
hedge against this risk. There can be no assurance that currency exchange
fluctuations or other economic problems will not adversely affect MasTec's
results of operations, financial position and cash flows.
Year 2000
The Year 2000 issue is the result of computer programs using two digits
rather than four to define the applicable year. Any of MasTec's computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure,
disruption of operations and/or a temporary inability to conduct normal business
activities.
MasTec has undertaken a Year 2000 project which includes an assessment of
telecommunications equipment, computer equipment, software, database, data
services, network infrastructure, and telephone equipment. MasTec's Year 2000
plan addresses the Year 2000 issue in four phases: (1) inventory and assessment;
(2) impact analysis and implementation planning; (3) implementation and testing;
and (4) on-going and monitoring. As each phase is completed, project progress
will be tracked against planned targets, and resource adjustments made as
necessary. At this time, a majority of MasTec's information systems and embedded
devices have been inventoried and assessed, and MasTec has begun impact analysis
and implementation planning, as well as some implementation and testing. The
project is estimated to be complete by the end of 1999, prior to any anticipated
impact on MasTec's operating systems. MasTec believes that with upgrades to
existing software, conversions to new software and replacement of certain
products and equipments, the Year 2000 issue will not pose significant
16
<PAGE>
operational problems. Based on its current assessment efforts, MasTec does not
believe that Year 2000 issues will have a material adverse effect on its
financial condition or results of operations. If, however, necessary upgrades,
replacements and conversions are not made or are not completed on a timely
basis, the Year 2000 issue may have a material adverse effect on MasTec's
business, financial condition and results of operations. MasTec's Year 2000
issues and any potential business interruptions, costs, damages or losses
related thereto, are dependent, to a certain degree, upon the Year 2000
readiness of third parties such as vendors and suppliers. As part of MasTec's
Year 2000 efforts, formal communications with all significant vendors,
suppliers, banks and clients are being pursued to determine the extent to which
related interfaces with MasTec's systems are vulnerable if these third parties
fail to remediate their Year 2000 issues. There cannot be any assurance that any
such third parties will address any Year 2000 issues that they have or that such
third parties' systems will not materially adversely affect MasTec's systems and
operations.
MasTec continues to assess the Year 2000 issue with respect to internal
business systems, and has initiated the implementation of corrective measures to
address the issue. MasTec is evaluating the need for contingency planning at
this time of its system and embedded devices. The assessment of third parties
external to MasTec is underway, and may reveal the need for contingency planning
based on the progress and findings of the Year 2000 project.
MasTec will utilize both internal and external resources to complete and
test the Year 2000 project. At the present time, MasTec is estimating the cost
of this project. Through December 31, 1998, related costs incurred were not
material, and MasTec does not expect that the total cost of its Year 2000
project will be material to its financial position or results of operations.
Project costs and the targeted completion date will be based on management's
best estimates, which will be derived from utilizing numerous assumptions of
future events, including the continued availability of certain resources, the
ability to locate and correct all relevant computer codes, third party
modification plans and other factors. There can be no assurance these estimates
will be achieved or that the actual results will not differ materially from
those anticipated.
Seasonality
MasTec's North America operations have historically been seasonally weaker
in the first and fourth quarters of the year and have produced stronger results
in the second and third quarters. This seasonality is primarily the result of
customer budgetary constraints and preferences and the effect of winter weather
on external network activities. Certain U.S. customers, particularly the ILEC's,
tend to complete budgeted capital expenditures before the end of the year and
defer additional expenditures until the following budget year. Revenue in a
local currency from MasTec Inepar is not expected to fluctuate seasonally.
Impact of Inflation
The primary inflationary factor affecting MasTec's operations is increased
labor costs. MasTec has not experienced significant increases in labor costs to
date. Competition for qualified personnel could increase labor costs for MasTec
in the future. MasTec's international operations may, at times in the future,
expose it to high inflation in certain foreign countries. During 1998, MasTec
generated approximately 17.5% of its total revenue (excluding revenue generated
from MasTec's Spanish operations which were sold in December 1998) from
international operations that are susceptible to currency devaluation.
Management anticipates that revenue from MasTec's international operations will
be less significant to MasTec's operations in the foreseeable future due to its
current intentions to dispose of them, however, the likelihood and extent of
further devaluation and deteriorating economic conditions in Brazil and other
Latin America countries and the resulting impacts on MasTec's results of
operations, financial position and cash flows cannot now be determined.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Notes 1 and 5 of Notes to Consolidated to Financial Statements for
disclosures about market risk.
17
<PAGE>
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
Reports of Independent Accountants........................................ 19
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1997, and 1998....................................... 21
Consolidated Balance Sheets as of December 31, 1997 and 1998.............. 22
Consolidated Statement of Changes in Shareholders' Equity for
the Years Ended December 31, 1995, 1996, 1997 and 1998............... 23
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1997, and 1998.................................... 24
Notes to Consolidated Financial Statements................................ 27
18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of MasTec, Inc.:
In our opinion, based upon our audits and the report of other auditors, the
accompanying consolidated balance sheets and the related consolidated statements
of operations, changes in shareholders' equity and cash flows present fairly, in
all material respects, the financial position of MasTec, Inc. and its
subsidiaries ("MasTec") at December 31, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
These consolidated financial statements are the responsibility of MasTec's
management; our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the consolidated
financial statements of Sintel, S.A., a wholly-owned subsidiary until December
31, 1998 which statements reflect total assets of $195.2 million at December 31,
1997 and total revenues of $207.2 million and $207.6 million for the years ended
December 31, 1997 and 1998, respectively. Those statements were audited by other
auditors whose report thereon has been furnished to us, and our opinion
expressed herein, insofar as it relates to the amounts included for Sintel, S.A.
is based solely on the report of the other auditors. We conducted our audits of
the consolidated financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall consolidated financial statement
presentation. We believe that our audits and the report of other auditors
provide a reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
- -------------------------------
PRICEWATERHOUSECOOPERS LLP
Miami, Florida
February 10, 1999
19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Sistemas e Instalaciones de Telecomunicacion, S.A.:
We have audited the consolidated balance sheet of SINTEL, S.A. and subsidiaries
("Sintel") as of December 31, 1998 and 1997, the related consolidated statements
of income and cash flows for the two years then ended, and the notes to the
financial statements, all expressed in Spanish pesetas. These financial
statements are the responsibility of Sintel's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
On December 31, 1998, the agreement signed with Telefonica de Espana, S.A.
terminated. Such contract guaranteed a minimum contract revenue amount. As a
result of this situation, the Company has a strategy to restructure its
operations as well as a planned expansion and diversification of its commercial
activities in Spain and Latin America, as explained in Note 1.
In relation to what is described in the previous paragraph, during 1998 a
restructure of its operations was executed which resulted in an extraordinary
expense of 1.810 millions pesetas related to severance payments to personnel. In
view of the extraordinary nature of such restructure, management considered it
appropriate to compensate part of such cost by reversing 1.000,8 millions
pesetas from the voluntary reserves with a corresponding increase to 1998
income, recorded as described in Notes 10 and 18. Although such voluntary
reserves are free to be disposed of by the Board of Directors, Spanish Generally
Accepted Accounting Principles does not permit such reversal and the ultimate
recording of extraordinary income in 1998. Therefore, in accordance with General
Accepted Accounting Principles, net income and the voluntary reserves should be
reduced and increased, accordingly, by 1000,8 millions pesetas. Such treatment
does not impact the capital accounts of the Company.
Certain accounting practices of Sintel used in preparing the consolidated
financial statements of Sintel conform with generally accepted accounting
principles in Spain, but do not conform with accounting principles generally
accepted in the United States. A description of these differences and the
adjustments required to conform the consolidated financial statements to
accounting principles generally accepted in the United States are set forth in
Note 22.
In our opinion, except for the effects of the matter described in the preceding
paragraph 4, the accompanying consolidated financial statements express, in all
material respects, the capital and the financial position of Sintel, S.A. and
consolidated subsidiaries at December 31, 1998 and 1997 and the result of its
operations for the two years then ended and includes all the necessary and
sufficient information for an adequate interpretation and comprehension, in
accordance with generally accepted accounting principles applied on a consistent
basis.
/s/ ARTHUR ANDERSEN
- ---------------------
ARTHUR ANDERSEN
Madrid, Spain
March 31, 1999
20
<PAGE>
MASTEC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Revenue ...................................... $ 472,800 $ 659,439 $1,048,922
Costs of revenue ............................. 352,329 495,840 803,112
Depreciation and amortization ................ 12,000 23,855 43,313
Compensation charge .......................... -- -- 33,765
General and administrative expenses .......... 58,529 82,261 140,472
---------- ---------- ----------
Operating income ......................... 49,942 57,483 28,260
Interest expense ............................. 11,434 11,541 29,580
Interest income .............................. 3,246 1,783 9,093
Other income (expense), net .................. 769 8,332 (5,155)
---------- ---------- ----------
Income before provision for income taxes,
equity in earnings of unconsolidated
companies and minority interest .......... 42,523 56,057 2,618
Provision for income taxes ................... 15,591 20,944 12,550
Equity in earnings of unconsolidated companies 3,040 2,897 1,906
Minority interest ............................ 93 (3,346) (5,889)
========== ========== ==========
Net income (loss) ............................ $ 30,065 $ 34,664 $ (13,915)
========== ========== ==========
Weighted average common shares outstanding ... 24,703 26,460 27,489
Basic earnings (loss) per share .............. $ 1.22 $ 1.31 $ (0.51)
Weighted average common shares outstanding ... 25,128 27,019 27,489
Diluted earnings (loss) per share ............ $ 1.20 $ 1.28 $ (0.51)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
21
<PAGE>
MASTEC, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31,
----------------------
1997 1998
--------- ---------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents .............................. $ 6,063 $ 19,864
Accounts receivable, unbilled revenue and retainage, net 346,596 284,575
Inventories ............................................ 8,746 13,423
Assets held for sale ................................... 10,782 49,973
Other current assets ................................... 22,009 59,601
--------- ---------
Total current assets .............................. 394,196 427,436
Property and equipment, net ................................ 86,109 142,897
Investments in unconsolidated companies .................... 48,160 5,886
Intangibles, net ........................................... 99,890 142,245
Other assets ............................................... 1,869 17,022
--------- ---------
Total assets ...................................... $ 630,224 $ 735,486
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of debt ............................. $ 54,562 $ 11,143
Accounts payable and accrued expenses .................. 166,596 84,372
Other current liabilities .............................. 48,950 87,417
--------- ---------
Total current liabilities ......................... 270,108 182,932
--------- ---------
Other liabilities .......................................... 41,924 37,592
--------- ---------
Long-term debt ............................................. 94,495 310,689
--------- ---------
Commitments and contingencies (Note 10)
Shareholders' equity:
Common stock ........................................... 2,758 2,738
Capital surplus ........................................ 154,013 149,479
Retained earnings ...................................... 70,392 56,477
Accumulated other comprehensive income ................. (3,466) (4,421)
--------- ---------
Total shareholders' equity ........................ 223,697 204,273
--------- ---------
Total liabilities and shareholders' equity ........ $ 630,224 $ 735,486
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
22
<PAGE>
MASTEC, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Foreign Accumulated
Common Stock Currency Other
----------------- Capital Retained Translation Treasury Comprehensive
Shares Amount Surplus Earnings Adjustments Stock Total Income
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------- ------------
Balance December 31, 1995 ................... 26,435 $ 2,643 $134,186 $ 5,663 $ 1 $(91,989) $ 50,504 $ 5,664
Net income .................................. 30,065 30,065 30,065
Foreign currency translation adjustment ..... (803) (803) (803)
Stock issued from treasury for stock
options exercised ....................... 48 523 571 --
Tax benefit resulting from stock
option plan ............................. 513 513 --
Stock issued from treasury for an
acquisition ............................. 8,844 2,201 11,045 --
Stock issued for debentures from
treasury ................................ 5,492 6,117 11,609 --
- --------------------------------------------------------------------------------------------------------------------- ------------
Balance December 31, 1996 ................... 26,435 2,643 149,083 35,728 (802) (83,148) 103,504 34,926
Net income .................................. 34,664 34,664 34,664
Foreign currency translation adjustment ..... (2,664) (2,664) (2,664)
Stock issued from treasury for options
exercised ............................... 206 979 1,185 --
Tax benefit resulting from stock
option plan ............................. 1,538 1,538 --
Stock issued for acquisitions ............... 1,621 162 76,219 76,381 --
Stock issued from treasury for an
acquisition ............................. 4,479 1,603 6,082 --
Stock issued for stock dividend from
treasury ................................ (75,802) 75,802 -- --
Stock issued from treasury .................. 3,007 3,007 --
- --------------------------------------------------------------------------------------------------------------------- ------------
Balance December 31, 1997 .................. 28,056 2,805 158,730 70,392 (3,466) (4,764) 223,697 66,926
Retirement of treasury stock ................ (476) (47) (4,717) -- -- 4,764 -- --
-------- -------- --------- --------- --------- --------- --------- ------------
Balance December 31, 1997 ................... 27,580 2,758 154,013 70,392 (3,466) -- 223,697 66,926
Net loss .................................... (13,915) (13,915) (13,915)
Accumulated other comprehensive income (955) (955) (955)
Stock issued, primarily for
acquisitions and stock options
exercised ............................... 469 47 8,721 8,768 --
Tax benefit resulting from stock
option plan ............................. 403 403 --
Repurchase of common stock .................. (667) (67) (13,658) (13,725) --
- --------------------------------------------------------------------------------------------------------------------- ------------
Balance December 31, 1998 ................... 27,382 $ 2,738 $149,479 $ 56,477 $ (4,421) $ -- $ 204,273 $ 52,056
===================================================================================================================== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
23
<PAGE>
MASTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) .................................. $ 30,065 $ 34,664 $ (13,915)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization .................... 12,000 23,855 43,313
Minority interest ................................ (93) 3,346 5,889
Equity in earnings of unconsolidated companies ... (3,040) (2,897) (1,906)
Deferred tax expense (benefit) ................... 2,574 (4,991) 6,974
(Gain) loss on sale of assets .................... (365) (6,848) 8,918
Changes in assets and liabilities net of
effect of acquisitions and divestitures:
Accounts receivable, unbilled revenue and retainage (12,013) (28,809) (34,942)
Inventories and other current assets ........... (2,448) 64 (16,759)
Other assets ................................... (2,102) (10,889) (27,341)
Accounts payable and accrued expenses .......... 24,492 5,348 (2,017)
Other current liabilities ...................... (6,706) 7,326 13,385
Other liabilities .............................. (4,942) (4,988) 4,548
---------- ---------- ----------
Net cash provided by (used in) operating activities ... 37,422 15,181 (13,853)
---------- ---------- ----------
Cash flows from investing activities:
Capital expenditures .............................. (7,059) (21,534) (76,445)
Cash paid for acquisitions, net of cash acquired .. (5,034) (45,606) (75,745)
Distributions from unconsolidated companies ....... -- 2,130 --
Investments in unconsolidated companies ........... (1,212) (3,364) (13,384)
Repayment (advances) of notes receivable, net .... 1,273 565 (18,667)
Repayment of notes from shareholders .............. -- 780 --
Net proceeds from sale of assets .................. 9,404 29,628 5,600
---------- ---------- ----------
Net cash used in investing activities ................. (2,628) (37,401) (178,641)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from revolving credit facilities ......... 17,476 57,328 5,032
Proceeds from Senior Notes ........................ -- -- 199,724
Other borrowings .................................. 21,739 19,936 35,106
Debt repayments ................................... (70,320) (59,059) (17,946)
Proceeds from issuance of common stock ............ 792 6,264 3,779
Stock repurchased ................................. -- -- (13,725)
Financing costs ................................... -- (587) (4,993)
---------- ---------- ----------
Net cash (used in) provided by financing activities ... (30,313) 23,882 206,977
---------- ---------- ----------
Net increase in cash and cash equivalents ............. 4,481 1,662 14,483
Net effect of translation on cash ..................... (803) (353) (682)
Cash and cash equivalents - beginning of period ....... 1,076 4,754 6,063
---------- ---------- ----------
Cash and cash equivalents - end of period ............. $ 4,754 $ 6,063 $ 19,864
========== ========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 10,029 $ 8,727 $ 21,795
========== ========== ==========
Income taxes $ 11,676 $ 10,377 $ 6,593
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
24
<PAGE>
MASTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
Supplemental disclosure of non-cash investing and financing activities:
Year Ended December 31,
-------------------------------
1996 1997 1998
--------- -------- --------
Acquisitions accounted for under purchase
method of accounting:
Fair value of assets acquired:
Accounts receivable .................... $248,087 $ 43,966 $ 35,184
Inventories ............................ 2,980 1,681 2,565
Other current assets ................... 12,661 2,127 1,615
Property and equipment ................. 13,148 27,480 27,168
Investments in unconsolidated companies 9,373 -- --
Real estate and other assets ........... 6,385 3,973 3,830
-------- -------- --------
Total non-cash assets ................ 292,634 79,227 70,362
-------- -------- --------
Liabilities ................................. 162,928 32,238 20,623
Long-term debt .............................. 78,966 8,535 18,609
-------- -------- --------
Total liabilities assumed ............ 241,894 40,773 39,232
-------- -------- --------
Net non-cash assets acquired ................ 50,740 38,454 31,130
Cash acquired ............................... 1,130 3,304 4,975
-------- -------- --------
Fair value of net assets acquired ........... 51,870 41,758 36,105
Excess over fair value of assets acquired ... 4,956 98,088 55,314
-------- -------- --------
Purchase price .............................. $ 56,826 $139,846 $ 91,419
======== ======== ========
Notes payable issued in acquisitions ........ $ 36,561 $ 130 $ 10,199
Acquisition costs, cash paid and common
stock is acquisitions ..................... 18,015 129,809 81,220
Contingent consideration .................... 2,250 9,907 --
-------- -------- --------
Purchase price .............................. $ 56,826 $139,846 $ 91,419
======== ======== ========
Property acquired through financing arrangements$ 8,550 $ 413 $ --
======== ======== ========
Disposal of Sintel:
Accounts receivable ........................................... $137,214
Inventories ................................................... 2,774
Other current assets .......................................... 37,722
Property and equipment ........................................ 17,251
Other assets .................................................. 2,825
--------
Total non-cash assets ....................................... 197,786
--------
Liabilities ...................................................... 109,448
Long-term debt ................................................... 25,013
--------
Total liabilities ........................................... 134,461
--------
Net non-cash assets sold ......................................... 63,325
Cash ............................................................. 2,234
Investment retained .............................................. (4,072)
--------
Fair value of net assets sold .................................... 61,487
Net loss on sale ................................................. (9,222)
--------
Sale price ....................................................... $ 52,265
========
Assumption of debt ............................................... 25,013
Seller financing ................................................. 27,252
--------
Sale price ....................................................... $ 52,265
========
The accompanying notes are an integral part of these consolidated financial
statements.
25
<PAGE>
MASTEC, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
In 1996, MasTec issued approximately 198,000 shares of common stock for an
acquisition. Common stock was issued from treasury at a cost of $2.2 million.
In 1996, MasTec converted $11.6 million of its 12% convertible subordinated
debentures into common stock. Common stock was issued from treasury at a cost of
$6.1 million.
In 1996, MasTec's purchase of an additional 3% interest in Supercanal was
financed in part by the sellers for $2 million.
In 1997, MasTec issued approximately 1,621,000 shares of common stock for
domestic acquisitions, of which 250,000 shares were issued from treasury stock
at a cost of approximately $1.6 million.
In 1997, MasTec converted a note receivable and accrued interest thereon
totaling $29 million into stock of
Conecel.
In 1998, MasTec issued approximately 158,200 shares of common stock
primarily as payment for contingent consideration related to 1997 acquisitions.
In addition, MasTec issued approximately 58,600 shares as bonuses to certain
employees and fees to directors.
The accompanying notes are an integral part of these consolidated financial
statements.
26
<PAGE>
MASTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1997 and 1998
Note 1 - Nature of the Business and Summary of Significant Accounting
Policies
MasTec is one of the preeminent builders of internal and external voice,
video, data, internet and other computer and communications networks for leading
telecommunications service providers, cable television operators, Fortune 500
corporations and power companies. MasTec designs, installs, constructs and
maintains aerial, underground and buried copper, coaxial and fiber optic cable
networks as well as wireless antenna networks ("external network services").
Clients for MasTec's external network services include major domestic and
international telecommunication service providers, incumbent and competitive
local exchange carriers, cable television operators, long-distance carriers and
wireless phone companies. MasTec also provides external network services to the
electric power industry ("power") that are similar to the services it provides
to telecommunications customers. Additionally, MasTec designs, installs and
maintains integrated local and wide area networks and provides systems
integration and other value added services ("internal network services") for
corporate customers and other organizations with multiple locations.
For the years ended, December 31, 1996, 1997 and 1998, revenue expressed as
a percentage of North American revenue, generated by external network services
for telecommunications service providers was 77.1%, 74.6% and 68.1%,
respectively, by external network services for electric power companies was
1.3%, 5.2% and 18.0%, respectively, and by internal network services was 12.5%,
12.5% and 13.4%, respectively. MasTec operated in 1998 principally in North
America (the United States and Canada), the Caribbean and Latin America ("CALA")
and in Spain (CALA and Spain combined are also referred to as "International").
Combined revenue generated by International operations, as a percentage of total
revenue was 39.8% in 1996, 42.8% in 1997 and 36.2% in 1998. See Note 9.
On December 31, 1998, MasTec sold its Spanish operations, whose principal
customer was Telefonica.
In July and August 1997, MasTec consummated two acquisitions, which were
accounted for as pooling of interests. In July 1998, MasTec applied purchase
accounting to these acquisitions due to transactions contemplated with
management of such acquired companies that were later finalized in 1998 (see
Note 2). Accordingly, MasTec's consolidated financial statements include the
results of operations from the dates of such acquisitions and prior years have
been adjusted accordingly. The change in accounting resulted in increases in
capital surplus and intangibles assets of approximately $53.0 million as of
December 1997. As to the statement of income, the restated 1997 revenue, net
income and earnings per share are $659.4 million, $34.7 million and $1.28,
respectively, in comparison to the originally reported amounts of $703.4
million, $42.7 million and $1.44, respectively.
A summary of the significant accounting policies followed in the
preparation of the accompanying consolidated financial statements is presented
below:
Management's estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The more significant estimates relate to MasTec's
reserve for allowance for bad debts, accrued workers' compensation claims, and
the realizability of certain intangibles and assets held for sale. Actual
results could differ from those estimates.
Principles of consolidation. The consolidated financial statements include
MasTec, Inc. and its subsidiaries. All material intercompany accounts and
transaction have been eliminated. Certain prior year amounts have been
reclassified to conform to the current presentation.
Comprehensive income (loss). As reflected in the consolidated statement of
changes in shareholders' equity, comprehensive income is a measure of net income
and all other changes in equity of MasTec that result from transactions other
than with shareholders. Comprehensive income (loss) consists of net income
(loss) and foreign currency translation adjustments.
Foreign currency. Assets and liabilities of foreign subsidiaries and equity
with a functional currency other than U.S. dollars are translated into U.S.
dollars at exchange rates in effect at the end of the reporting period. Foreign
entity revenue and expenses are translated into U.S. dollars at the average
27
<PAGE>
rates that prevailed during the period. The resulting net translation gains and
losses are reported as foreign currency translation adjustments in shareholders'
equity as a component of other accumulated comprehensive income. Exchange gains
and losses on transactions of MasTec and its equity investments denominated in a
currency other than their functional currency are generally included in results
of operations as incurred.
International Operations. MasTec owns interest in a number or foreign
operations, primarily in Latin America, which are subject to greater political,
monetary, economic and regulatory risks than its domestic operations. During
January 1999 the Brazilian government allowed its currency to trade freely
against other currencies resulting in an immediate devaluation of the Brazilian
reais. The impact of the devaluation on an operation depends on the
devaluation's effect on the local economy and the ability of an operation to
raise prices and/or reduce expenses. Additionally, the economies of other
countries in Latin America could be adversely impacted by Brazil's economic and
monetary problems. The likelihood and extent of further devaluation and
deteriorating economy conditions in Brazil and other Latin America countries and
the resulting impacts on MasTec's results of operations, financial position and
cash flows is not known.
Revenue recognition. Revenue and related costs for short-term construction
projects (i.e., generally projects with a duration of less than one month) are
recognized as the projects are completed. Revenue generated by certain long-term
construction contracts are accounted for by the percentage-of-completion method
under which income is recognized based on the ratio of estimated cost incurred
to total estimated contract cost. Losses, if any, on such contracts are provided
for in full when they become known. Billings in excess of costs and estimated
earnings on uncompleted contracts are classified as current liabilities. Any
costs in excess of billings are classified as current assets. Work in process on
contracts is based on work performed but not billed to customers as per
individual contract terms.
MasTec also provides management, coordination, consulting and
administration services for construction projects. Compensation for such
services is recognized ratably over the term of the service agreement.
Earnings per share. Basic earnings per common share is computed by dividing
income available to common shareholders by the weighted average number of common
shares outstanding. Diluted earnings per common share include the dilutive
effect of stock options using the treasury stock method. The difference between
the weighted average common shares outstanding used to calculate basic and
diluted earnings relates to options assumed exercised under the treasury method
of accounting of approximately 425,000 and 559,000 at December 31, 1996 and
1997, respectively.
Potentially dilutive shares, as of December 31, 1998 which have not been
included in the diluted per share calculation include 336,000 shares because
their effects would be anti-dilutive due to the loss incurred by MasTec.
Accordingly, for 1998, diluted net loss per common share is the same as basic
net loss per common share.
Cash and cash equivalent. MasTec considers all short-term investments with
maturities of three months or less when purchased to be cash equivalents. MasTec
places its temporary cash investments with high credit quality financial
institutions. At times, such investments may be in excess of the F.D.I.C.
insurance limits. MasTec has not experienced any loss to date on these
investments. At December 31, 1998, MasTec had cash and cash equivalent in
Brazilian reais of approximately $9.1 million.
Inventories. Inventories (consisting principally of material and supplies)
are carried at the lower of first-in, first-out cost or market.
Property and equipment. Property and equipment are recorded at cost.
Depreciation and amortization are computed using the straight-line method over
the estimated useful lives of the respective assets. Leasehold improvements are
amortized over the shorter of the term of the lease or the estimated useful
lives of the improvements. Expenditures for repairs and maintenance are charged
to expense as incurred. Expenditures for betterments and major improvements are
capitalized. The carrying amounts of assets sold or retired and related
accumulated depreciation are eliminated in the year of disposal and the
resulting gains and losses are included in income.
Intangibles and other long lived assets. Assets and liabilities acquired in
connection with business combinations accounted for under the purchase method
28
<PAGE>
are recorded at their respective estimated fair values. Goodwill represents the
excess of the purchase price over the estimated fair value of net assets
acquired, including the recognition of applicable deferred taxes, and is
amortized on a straight-line basis over a period ranging from 5 to 40 years,
with a weighted average amortization period of 22 years. At December 31, 1997
and 1998, MasTec had recorded intangibles, primarily consisting of goodwill of
$99.9 million and $142.2 million, respectively (net of accumulated amortization
of $3.5 million in 1997 and $14.9 million in 1998).
MasTec reviews long-lived assets, identifiable intangibles and goodwill and
reserves for impairment whenever events or changes in circumstances indicate
that the carrying amount of the assets may not be fully recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of the assets to future undiscounted net cash flows expected to
be generated by the assets. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets or expected future
cash flows on an undiscounted basis. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less costs to sell.
Accrued insurance. MasTec is self-insured for certain property and casualty
and worker's compensation exposure and, accordingly, accrues the estimated
losses not otherwise covered by insurance.
Income taxes. MasTec records income taxes using the liability method of
accounting for deferred income taxes. Under this method, deferred tax assets and
liabilities are recognized for the expected future tax consequence of temporary
differences between the financial statement and income tax bases of MasTec's
assets and liabilities. A valuation allowance is established when it is more
likely than not that any or all of the deferred tax assets will not be realized.
Stock based compensation. MasTec adopted the disclosure provision of
Statement of Financial Accounting Standard No. 123, Accounting for Stock Based
Compensation ("SFAS 123") and retained the intrinsic value method of accounting
for such stock based compensation (see Note 6).
Fair value of financial instruments. MasTec estimates the fair market value
of financial instruments through the use of public market prices, quotes from
financial institutions and other available information. Judgment is required in
interpreting data to develop estimates of market value and, accordingly, amounts
are not necessarily indicative of the amounts that MasTec could realize in a
current market exchange. MasTec's short-term financial instruments, including
cash and cash equivalents, accounts and notes receivable, accounts payable and
other liabilities, consist primarily of instruments without extended maturities,
the fair value of which, based on management's estimates, equaled their carrying
values. Long-term debt is carried at face value less unamortized discount,
$199.8 million at December 31, 1998. The fair value of MasTec's Senior Notes was
approximately $195.0 million at December 31, 1998. MasTec uses letters of credit
to back certain insurance policies. The letters of credit reflect fair value as
a condition of their underlying purpose and are subject to fees competitively
determined in the market place.
Note 2 - Acquisitions and Investing Activities
During 1997 and 1998, MasTec completed 11 and 12 North America
acquisitions, respectively, which have been accounted for under the purchase
method of accounting. Accordingly, the results of operations of acquired
companies have been included in MasTec's consolidated results of operations from
their respective acquisition dates. Contingent consideration, to the extent
earned, will be recorded as additional goodwill. If the acquisitions had been
made at the beginning of 1997 or 1998, pro forma results of operations would not
have differed materially from actual results based on historical performance
prior to their acquisition by MasTec. Acquisitions made in 1998 were: M.E.
Hunter, Inc. of Atlanta, Georgia, C & S Directional Boring, Inc. of Purcell,
Oklahoma, Office Communications Systems, Inc. of Inglewood, California, Phasecom
Systems, Inc. of Toronto, Canada, P&E Electric Company, Inc. of Nashville,
Tennessee, Lessard-Nyren Utilities, Inc. of Hugo, Minnesota, Electronic
Equipment Analyzers, Inc. of Raleigh, North Carolina, Cotton and Taylor of Las
Vegas, Nevada, Stackhouse, Inc. of Goldsboro, North Carolina, Martin Telephone
Contractors, Inc. of Cades, South Carolina, Barkers CATV Construction, Inc. of
Burleson, Texas and Fiber and Cable Works, Inc. of Roanoke, Virginia,
telecommunications infrastructure and utility contractors with operations
primarily in the western, northern and southeastern United States as well as
Canada. Of the total 1998 acquisitions, eight, two and two pertained to external
network services, power and internal network services, respectively.
Additionally, MasTec made four international acquisitions of telecommunications
infrastructure contractors: CIDE Engenharia Ltda. of Brazil, Acietel Mexicana,
S.A. of Mexico, Artcom Services, Inc. of Puerto Rico ("Artcom") and Proyco Ltda.
of Colombia ("Proyco"). During 1998, MasTec sold 87% of its Spanish operations
which included Artcom and Proyco.
29
<PAGE>
MasTec entered into agreements with certain senior management personnel at
two of its operating subsidiaries. These senior managers have agreed to
multi-year employment agreements and 10-year non-competition and
non-solicitation agreements. Under the definitive agreements, MasTec paid the
senior managers compensation in the form of cash and common stock options. The
cash portion totals approximately $33.3 million, of which approximately $13.3
million was paid in 1998 and approximately $20.0 million was paid in the first
quarter of 1999. As a result of these agreements, MasTec recorded a
non-recurring compensation charge of approximately $33.8 million (including the
value of vested stock options) in the fourth quarter of 1998. Additionally at
December 31, 1998, MasTec had approximately $7.1 million due from these
employees which was received during February 1999.
On April 30, 1996, MasTec purchased from Telefonica, 100% of the capital
stock of Sistemas e Instalaciones de Telecomunicacion, S.A. ("Sintel"), a
company engaged in telecommunications infrastructure construction services in
Spain, Argentina, Chile, and Peru. In Argentina, Chile and Peru, MasTec operated
through unconsolidated corporations in which it held a 50% interest. On December
31, 1998, MasTec sold 87% of its Spanish operations to a group of investors. The
investor group included the chief executive officer of Sintel and a member of
its board of directors. MasTec received $0.9 million (130.5 million pesetas at
an exchange rate of 142 pesetas to the dollar) on the date of closing and
through March 31, 1999 has received $10.2 million. Payment terms are being
re-negotiated not to extend beyond 1999. The sale included the assumption of the
remaining indebtedness of MasTec to Telefonica for the purchase of the Spanish
operations of $25.0 million (3.6 billion pesetas).
On July 31, 1997, MasTec completed its acquisition of 51% of MasTec Inepar
S/A-Sistemas de Telecomunicacoes ("MasTec Inepar"), a newly formed Brazilian
telecommunications infrastructure contractor, for 250,000 of MasTec's shares of
common stock and $29.4 million in cash, of which $7.3 million remains
outstanding.
Subsequent to December 31, 1998, MasTec has signed letters of intent to
acquire two external network and one internal network services contractors,
subject to a number of conditions.
Note 3 - Accounts Receivable
Accounts receivable are presented net of an allowance for doubtful accounts
of $3.1 million, $3.1 million, and $7.3 million at December 31, 1996, 1997 and
1998, respectively. MasTec recorded a provision for doubtful accounts of $1.2
million, $0.7 million and $4.5 million during 1996, 1997 and 1998, respectively.
In addition, MasTec recorded write-offs of $0.1 million, $0.7 million and $0.3
million during 1996, 1997 and 1998, respectively.
Accounts receivable include retainage which has been billed but is not due
until completion of performance and acceptance by customers, and claims for
additional work performed outside original contract terms. Retainage aggregated
$10.2 million and $16.1 million at December 31, 1997 and 1998, respectively.
Included in accounts receivable is unbilled revenue of $97.5 million and
$83.3 million at December 31, 1997 and 1998, respectively. Such unbilled amounts
represent work performed but not billable to customers as per individual
contract terms, of which $49.5 million and $45.2 million at December 31, 1997
and 1998, respectively, are related to MasTec's Brazilian operations.
During 1998, MasTec entered into a financing agreement to provide financing
to a customer. As of December 31, 1998, MasTec had $41.8 million outstanding
under this agreement, of which approximately $30.0 million and $11.8 million is
reflected in accounts receivable and other current assets, respectively, in the
accompanying consolidated balance sheet as of December 31, 1998. MasTec will
terminate the financing agreement as of April 30, 1999.
30
<PAGE>
Note 4 - Property and Equipment
Property and equipment is comprised of the following as of December 31,
1997 and 1998 (in thousands):
Estimated
Useful Lives
1997 1998 (In Years)
--------- --------- ----------
Land ......................... $ 8,430 $ 10,230
Buildings and improvements ... 9,474 11,291 5 - 20
Machinery and equipment ...... 97,727 170,922 3 - 7
Office furniture and equipment 5,810 9,319 3 - 5
--------- ---------
121,441 201,762
Less-accumulated depreciation (35,332) (58,865)
--------- ---------
$ 86,109 $ 142,897
========= =========
Note 5 - Debt
Debt is comprised of the following at December 31, (in thousands):
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Revolving Credit Facility, at LIBOR plus 1.50% (6.96%
at December 31, 1997 and 7.06% at December 31, 1998) ........ $ 83,010 $ 106,300
Revolving Credit Facility, at MIBOR plus 0.30 (5.60% at
December 31, 1997) .......................................... 10,894 --
Other Spanish bank facilities at interest rates from
5.65% to 6.75% .............................................. 17,438 --
Other bank facilities at LIBOR plus 1.25% (6.31% at
December 31, 1998)........................................... -- 6,206
Notes payable for equipment, at interest rates from 7.5% to 8.5%
due in installments through the year 2000 ................... 14,500 6,145
Notes payable for acquisitions, at interest rates from 7% to 8%
due in installments through February 2000 .................. 23,215 3,431
Senior Notes, 7.75% due February 2008 .......................... -- 199,750
--------- ---------
Total debt ..................................................... 149,057 321,832
Less current maturities ........................................ (54,562) (11,143)
--------- ---------
Long-term debt ................................................. $ 94,495 $ 310,689
========= =========
</TABLE>
In June 1997, MasTec entered into a revolving line of credit agreement with
a group of banks as amended, (the "Credit Facility"). The Credit Facility
provides for borrowings up to an aggregate amount of $165.0 million. Amounts
outstanding under the revolving credit facility mature on June 9, 2000. Upon
written request by MasTec and at the bank's sole discretion, the maturity date
of the Credit Facility may be extended for successive annual periods up to a
final maturity date of June 9, 2002. MasTec is required to pay an unused
facility fee ranging from .25% to .50% per annum on the facility, depending upon
certain financial covenants.
The Credit Facility is secured by a pledge of shares of certain of MasTec's
subsidiaries. Interest under the Credit Facility accrues at rates based, at
MasTec's option, on the agent bank's Base Rate plus a margin of up to .50%
depending on certain financial covenants or 1% above the overnight federal funds
effective rate, whichever is higher, or its LIBOR Rate (as defined in the Credit
Facility) plus a margin of 1.00% to 2.25%, depending on certain financial
covenants.
MasTec had outstanding $18.7 million in standby letters of credit as of
December 31, 1998.
On January 30, 1998, MasTec issued $200.0 million, 7.75% senior
subordinated notes (the "Senior Notes") due in February 2008 with interest due
semi-annually. The net proceeds were used primarily for acquisitions and other
corporate purposes.
31
<PAGE>
The Credit Facility and the Senior Notes contain customary events of
default and covenants which prohibit, among other things, making investments in
excess of a specified amount, incurring additional indebtedness in excess of a
specified amount, paying dividends in excess of a specified amount, making
capital expenditures in excess of a specified amount, creating liens, prepaying
other indebtedness, including the Senior Notes, and engaging in certain mergers
or combinations without the prior written consent of the lenders. The Credit
Facility also provides that MasTec must maintain certain financial ratio
coverage, requiring, among other things minimum ratios at the end of each fiscal
quarter of debt to earnings and earnings to interest expense.
At December 31, 1998 debt matures as follows:
1999 $ 11,143
2000 109,063
2001 1,503
2002 345
2003 28
Thereafter 199,750
----------------
$ 321,832
================
Note 6 - Stock Option Plans
Shares underlying stock options and exercise prices have been adjusted to
reflect the three-for-two stock split declared in 1997 by the Board of
Directors. MasTec's only stock option plans currently in effect is the 1994
Stock Incentive Plan (the "1994 Plan") and the 1994 Stock Option Plan for
Non-Employee Directors (the "Directors' Plan"). Under MasTec's 1976 stock option
plan, there are 5,250 shares available for grant and have been reserved for and
may still be issued in accordance with the terms of such plan.
The 1994 Plan authorizes the grant of options or awards of restricted stock
up to 2,500,000 shares of MasTec's common stock, of which 500,000 shares may be
awarded as restricted stock. As of December 31, 1998, options to purchase
1,567,695 (net of 464,255 stock options cancelled) shares had been granted under
the 1994 Plan. Options are exercisable at prices and over periods established by
the Compensation Committee of the Board of Directors and must be exercised no
later than 10 years from the date of grant.
The Directors' Plan authorizes the grant of options to purchase up to
600,000 shares of MasTec's common stock to the non-employee members of MasTec's
Board of Directors. Options to purchase 142,500 shares have been granted to
Board members through 1998. The options granted become exercisable ratably over
a three year period from the date of grant and may be exercised for a period of
up to ten years beginning the year after the date of grant at an exercise price
equal to the fair market value of such shares on the date the option is granted.
In addition, during 1994 options to purchase 150,000 shares of common stock
at $3.83 per share were granted to a director outside the Directors' Plan in
lieu of the Director's Plan and annual fees paid to the director. Compensation
expense of $42,500 in connection with the issuance of this option is being
recognized annually over the five-year vesting period. The options are
exercisable ratably over a three to five year period beginning the year after
the date of grant and may be exercised for a period of up to ten years beginning
the year after the date of grant. In 1997, options to purchase 110,000 shares of
common stock at fair market value on the date of grant were granted to two
executive officers outside the 1994 plan.
In connection with two acquisitions completed during 1997, options to
purchase 800,000 shares of MasTec's common stock at prices ranging from $17.50
to $20.19 were granted to individuals during 1998 outside the 1994 Plan subject
to varying vesting schedules.
32
<PAGE>
The following is a summary of all stock option transactions:
<TABLE>
<CAPTION>
Weighted
Average Fair
Weighted Value of
Stock Average Options
Options Exercise Price Exercise Price Granted
---------------- --------------- -------------------------------------- --------------
<S> <C> <C> <C> <C> <C>
Outstanding December 31, 1995 676,800 $ 6.33 $ 0.10 - $ 8.92
Granted 306,000 17.05 7.42 - 28.58 $ 9.23
Exercised (82,200) 6.38 0.10 - 8.92
Canceled (2,700) 5.29 5.29 - 8.92
---------------- --------------- --------------------------------------
Outstanding December 31, 1996 897,900 9.98 0.10 - 28.58
Granted 1,254,950 24.96 21.09 - 48.19 $ 19.97
Exercised (201,950) 5.58 0.10 - 21.83
Canceled (343,475) 23.62 5.29 - 48.19
---------------- --------------- --------------------------------------
Outstanding December 31, 1997 1,607,425 17.06 0.10 - 31.63
Granted 1,234,250 19.17 12.97 - 31.88 $ 13.29
Exercised (101,990) 11.38 1.33 - 21.09
Canceled (110,580) 19.47 5.29 - 31.63
================ =============== ======================================
Outstanding December 31, 1998 2,629,105 $ 18.32 $ 0.10 - $ 31.88
================ =============== ======================================
The following table summarizes information about stock options outstanding
at December 31, 1998:
</TABLE>
<TABLE>
<CAPTION>
Stock Options Outstanding Options Exercisable
------------------------------------------------------------ ---------------------------------------
Range of Exercise Number of Stock Weighted Weighted Average Number of Stock Weighted Average
Prices Options Average Exercise Options Exercise
Remaining Price Price
Contractual Life
- --------------------- ------------------ -------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C> <C>
.10 - .10 3,600 4.50 $ 0.10 3,600 $ 0.10
3.83 - 5.29 94,200 5.19 4.83 35,700 5.29
6.83 - 9.81 327,430 6.41 8.66 181,330 8.73
12.97 - 17.50 532,500 9.98 17.34 166,667 17.50
20.19 - 31.88 1,671,375 8.62 21.32 674,911 21.09
================== ==================== ================== ================== ===================
2,629,105 8.49 $ 18.32 1,062,208 $ 17.82
================== ==================== ================== ================== ===================
</TABLE>
MasTec has reflected below the 1996, 1997 and 1998 earnings as if
compensation expense relative to the fair value of the options granted had been
recorded under the provisions of SFAS No. 123 "Accounting for Stock- Based
Compensation." The fair value of each option grant was estimated using the
BlackScholes option-pricing model with the following assumptions used for grants
in 1996, 1997 and 1998, respectively: a five, six and five year expected life
for 1996, 1997 and 1998, respectively; volatility factors of 57%, 82% and 72%,
respectively; risk-free interest rates of 6.1%, 5.5% and 4.3%, respectively; and
no dividend payments.
33
<PAGE>
Had compensation cost for MasTec's options plans been determined and
recorded in accordance with SFAS No. 123, MasTec's net income and earnings per
share would have been reduced to the pro forma amounts as follows:
1996 1997 1998
--------- --------- ---------
Net income (loss):
As reported ........................ $ 30,065 $ 34,664 $(13,915)
========= ========= =========
Pro forma .......................... $ 29,211 $ 28,797 $(28,472)
========= ========= =========
Basic earnings (loss) per share:
As reported ........................ $ 1.22 $ 1.31 $ (0.51)
Pro forma .......................... $ 1.18 $ 1.09 $ (1.04)
Diluted earnings (loss) per share:
As reported ........................ $ 1.20 $ 1.28 $ (0.51)
Pro forma .......................... $ 1.16 $ 1.07 $ (1.04)
The 1996, 1997 and 1998 pro forma effect on net income (loss) is not
necessarily representative of the effect in future years because it does not
take into consideration pro forma compensation expense related to grants made
prior to 1995 and does not reflect a tax benefit related to the compensation
expense given that the options are considered incentive stock options and such
benefit, if any, cannot be presently determined.
Note 7 - Income Taxes
The provision (benefit) for income taxes consists of the following (in
thousands):
1996 1997 1998
-------- -------- --------
Current:
Federal ................ $ 10,891 $ 9,583 $ 3,198
Foreign ................ 5,347 4,465 1,376
State and local ........ 1,536 1,670 1,002
-------- -------- --------
17,774 15,718 5,576
-------- -------- --------
Deferred:
Federal ................ (1,965) 2,730 2,119
Foreign ................ -- 2,040 5,430
State and local ........ (218) 456 (575)
-------- -------- --------
(2,183) 5,226 6,974
-------- -------- --------
Provision for income taxes $ 15,591 $ 20,944 $ 12,550
======== ======== ========
34
<PAGE>
The tax effects of significant items comprising MasTec's net deferred tax
liability as of December 31, 1997 and 1998 are as follows (in thousands):
1997 1998
-------- --------
Deferred tax assets:
Non-compete ............................... $ -- $ 5,951
Bad debts ................................. 1,104 5,680
Accrued self insurance .................... 2,100 4,566
Operating loss and tax credit carry forward 1,565 1,186
All other ................................. 6,446 6,603
-------- --------
Total deferred tax assets ..................... 11,215 23,986
-------- --------
Deferred tax liabilities:
Installment sale .......................... -- 6,271
Accounts receivable retainage ............. 3,866 6,973
Property and equipment .................... 7,536 9,208
Asset re-evaluations ...................... 6,066 5,677
All other ................................. 5 3,420
-------- --------
Total deferred tax liabilities ................ 17,473 31,549
Valuation allowance ....................... 1,376 211
-------- --------
Net deferred tax liability .................... $ (7,634) $ (7,774)
======== ========
The net deferred tax liability includes deferred items resulting from
acquisitions made during the period which are not reflected as part of the
deferred tax provision. Deferred tax assets of $1.2 million for 1997 have been
recorded in current assets in the accompanying consolidated financial
statements. The net change in the valuation allowance for deferred tax assets
was a decrease of $1.2 million.
A reconciliation of U.S. statutory federal income tax expense on the
earnings from continuing operations is as follows:
l996 1997 1998
------ ------ ------
U.S. statutory federal rate
applied to pretax income ............ 35% 35% 35%
State and local income taxes ........... 2 2 10
Effect of non-U.S. tax rates ........... (1) (1) (23)
Amortization of intangibles ............ -- -- 58
Gain on sale of Spanish operations ..... -- -- 329
Non-deductible expenses ................ -- -- 37
Other .................................. 1 1 33
====== ====== ======
Provision for income taxes ............. 37% 37% 479%
====== ====== ======
No provision have been made for the years ended December 31, 1997 and 1998
for U.S. income taxes on the undistributed earnings of the foreign subsidiaries
since it is MasTec's intention to utilize those earnings in the foreign
operations for an indefinite period of time. During 1998, MasTec sold its
interest in its Spanish operations which resulted in a tax liability of $7.8
million. At December 31, 1998, undistributed earnings of the remaining foreign
subsidiaries amounted to $11.8 million. If the earnings of such foreign
subsidiaries were not indefinitely reinvested, a deferred tax liability of $0.2
million would be required.
The Internal Revenue Service (the "IRS") examined the tax returns for
the fiscal years ended April 30, 1989 through April 30, 1993. During 1998, the
IRS concluded its examination which resulted in a payment of approximately
$150,000. The IRS is currently reviewing the tax returns filed by MasTec for the
years ended December 31, 1995 and 1996. No adjustments have been proposed to
date related to this review.
35
<PAGE>
Note 8 - Capital Stock
MasTec has authorized 100,000,000 shares of common stock, $0.10 par value.
At December 31, 1997 and 1998, approximately 28,056,000 and 27,382,000 shares of
common stock were issued, 27,580,000 and 27,382,000 shares were outstanding
(adjusted for the stock split), respectively, and 476,000 and 0 were held in
treasury, at cost (after giving effect to the stock split paid in the form of a
dividend from treasury stock), respectively. At December 31, 1997 and 1998,
MasTec had 5,000,000 shares of authorized but unissued preferred stock.
Note 9 - Operations by geographic areas and segments
MasTec derives a substantial portion of its revenue from providing
telecommunications infrastructure services to Telefonica, BellSouth and
Telebras. For the year ended December 31, 1996, approximately 31% and 13% of
MasTec's revenue was derived from services performed for Telefonica and
BellSouth, respectively. For the year ended December 31, 1997, approximately
27%, 13% and 11% of MasTec's revenue was derived from services performed for
Telefonica, BellSouth and Telebras, respectively. For the year ended December
31, 1998, approximately 19%, 7% and 8% of MasTec's revenue was derived from
services performed for Telefonica, BellSouth and Telebras, respectively. For the
year ended December 31, 1997, revenue generated from Telebras is included from
August 1, 1997 (See Note 2). For the year ended December 31, 1998, revenue
generated from Telebras is included from January 1, 1998 through July 31, 1998,
subsequent to that period Telebras was privatized and divided into more than
eight unaffiliated companies owned by private investors. Accounts receivable
from MasTec's three largest customers approximated $192.0 million at December
31, 1997.
External Network Services. MasTec's principal domestic business consists of
external network services for telecommunications providers, including incumbent
and competitive local exchange carriers, cable television operators,
long-distance carriers and wireless communications providers. External network
services consist of all of the services necessary to design, install and
maintain the physical facilities used to provide telecommunications services
from the provider's central office, switching center or cable headed to the
ultimate consumer's home or business. These services include the placing and
splicing of cable, the excavation of trenches in which to place the cable, the
placing of related structures such as poles, anchors, conduits, manholes,
cabinets and closures, the placing of drop lines from the main transmission
lines to the customer's home or business, and the maintenance and removal of
these facilities. MasTec has developed expertise in directional boring, a highly
specialized and increasingly common method of placing buried cable networks in
congested urban markets without digging a trench. Services to many of these
customers are provided under exclusive master contracts with 2 to 3 year initial
terms expiring at various dates.
MasTec provides a full range of external network services to its
telecommunications company customers, although certain of MasTec's customers
handle certain of these services in-house. MasTec's customers generally supply
materials such as cable, conduit and telephone equipment, and MasTec provides
the expertise, personnel, tools and equipment necessary to perform the required
installation and maintenance services.
Internal Network Services. MasTec provides design, installation and
maintenance of internal networks linking the customers' voice, video, data and
internet computer and communications networks at multiple locations. MasTec also
provides systems integration services, which involve the selection,
configuration, installation and maintenance of software, hardware, other
computing and communications equipment and cabling to provide an integrated
computing and communications system. Internal network services is less capital
intensive than external network construction but requires a more technically
proficient work force. MasTec provides these services to its customers
nationwide, primarily on the east and west coasts of the United States.
Internal network services consist of designing, installing and maintaining
local area networks and wide area networks linking the customers' voice
communications networks at multiple locations with their data and video
services. This type of work is similar to external network construction; both
involve the placing and splicing of copper, coaxial and fiber optic cables.
Inside wiring is less capital intensive than external network construction but
requires a more technically proficient work force. MasTec contracts with primary
contractors to provide services under subcontracts that are similar to master
contracts in the external network business. MasTec also provides internal
network services on individual projects that are awarded on a competitive bid
basis or through individual negotiation.
36
<PAGE>
External Network Power. MasTec provides external network services to power
companies, including investor-owned utilities and rural cooperatives. These
services, which are substantially similar to the external network services
provided to telecommunications companies, include overhead and underground
construction and maintenance of electrical and other utilities transmission and
distribution networks, substation construction and maintenance, right-of-way
maintenance and restoration of asphalt and concrete surfaces. The work often
involves the installation and splicing of high-voltage transmission and
distribution lines. Services to many of these customers are provided under
exclusive master contracts with 2 to 3 year initial terms expiring at various
dates, as well as on a project by project basis awarded under competitive
bidding and individual negotiations. MasTec currently has 42 master service
agreements with power companies.
The following table set forth, for each of 1996, 1997 and 1998, certain
information about segment results of operations and segment assets (in
thousands).
<TABLE>
<CAPTION>
1996 External Internal External
Network Network Network Inter-
Services Services Power national Other(1) Consolidated
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue ............... $219,559 35,524 3,773 188,155 25,789 $ 472,800
======== ======== ======== ======== ======== ==========
Operating income (loss) 35,838 4,303 566 19,733 (10,498) 49,942
Depreciation and
amortization ....... 8,718 484 522 2,058 218 12,000
Total assets .......... 105,333 16,140 2,890 259,624 99,031 483,018
Capital Expenditures .. 3,714 689 320 -- 2,336 7,059
1997 External Internal External
Network Network Network Inter-
Services Services Power national Other(1) Consolidated
- -----------------------------------------------------------------------------------------
Revenue ............... $281,426 47,285 19,693 282,393 28,642 $ 659,439
======== ======== ======== ======== ======== ==========
Operating income (loss) 39,888 3,565 607 21,450 (8,019) 57,483
Depreciation and
amortization ....... 15,686 1,022 2,888 3,403 856 23,855
Total assets .......... 154,074 36,167 33,805 250,277 155,901 630,224
Capital Expenditures .. 16,387 1,113 1,223 1,879 932 21,534
1998 External Internal External
Network Network Network Inter-
Services Services Power national Other(1) Consolidated
- -----------------------------------------------------------------------------------------
Revenue ............... $455,798 89,687 120,218 379,294 3,925 $1,048,922
======== ======== ======== ======== ======== ==========
Operating income (loss) 58,974 (3,411) 10,910 15,167 (53,380) 28,260
Depreciation and
amortization ...... 24,600 1,617 10,095 6,029 972 43,313
Total assets .......... 303,088 60,659 86,809 88,612 196,318 735,486
Capital Expenditures .. 41,946 2,361 25,872 5,003 1,263 76,445
</TABLE>
(1) Consists of non-core construction and corporate operations.
37
<PAGE>
There are no significant transfers between geographic areas and segments.
Operating income consists of revenue less operating expenses, and does not
include interest expense, interest and other income, equity in earnings of
unconsolidated companies, minority interest and income taxes. Operating income
is net of corporate general and administrative expenses. Total assets are those
assets used in MasTec's operations in each segment. Corporate assets include
cash and cash equivalents, investments in unconsolidated companies, assets held
for sale and notes receivable.
Note 10 - Commitments and Contingencies
In December 1990, Albert H. Kahn, a stockholder of MasTec, filed a
purported class action and derivative suit in Delaware state court against
MasTec, the then-members of its Board of Directors, and National Beverage
Corporation ("NBC"), MasTec's then-largest stockholder. The complaint alleges,
among other things, that MasTec's Board of Directors and NBC breached their
respective fiduciary duties in approving certain transactions.
In November 1993, Mr. Kahn filed a class action and derivative complaint
against MasTec, the then members of its Board of Directors, and Jorge L. Mas,
Jorge Mas and Juan Carlos Mas, the principal shareholders of MasTec. The 1993
lawsuit alleges, among other things, that MasTec's Board of Directors and NBC
breached their respective fiduciary duties by approving the terms of the
acquisition of MasTec by the Mas family, and that the Mas family had knowledge
of the fiduciary duties owed by NBC and MasTec's Board of Directors and
knowingly and substantially participated in the breach of these duties. The
lawsuit also claims derivatively that each member of MasTec's Board of Directors
engaged in mismanagement, waste and breach of fiduciary duties in managing
MasTec's affairs prior to the acquisition by the Mas Family.
There has been no activity in either of these lawsuits in more than two
years. MasTec believes that the allegations in each of the lawsuits are without
merit and intends to defend these lawsuits vigorously.
In November 1997, Church & Tower filed a lawsuit against Miami-Dade County
(the "County") in Florida state court alleging breach of contract and seeking
damages exceeding $3.0 million in connection with the County's refusal to pay
amounts due to Church & Tower under a multi-year agreement to perform road
restoration work for the Miami-Dade Water and Sewer Department ("MWSD"), a
department of the County, and the County's wrongful termination of the
agreement. The County has refused to pay amounts due to Church & Tower under the
agreement until alleged overpayments under the agreement have been resolved, and
has counterclaimed against MasTec seeking damages. The County also has refused
to award a new road restoration agreement for MWSD to Church & Tower, which was
the low bidder for the new agreement. MasTec is vigorously pursuing this
lawsuit.
MasTec is a party to other pending legal proceedings arising in the normal
course of business, none of which MasTec believes is material to MasTec's
financial position or results of operations.
Federal, state and local laws and regulations govern MasTec's operation of
underground fuel storage tanks. MasTec is in the process of removing, restoring
and upgrading these tanks, as required by applicable laws, and has identified
certain tanks and surrounding soil which will require remedial cleanups. The
cost of these cleanups is not expected to be material.
In connection with certain contracts, MasTec has signed certain agreements
of indemnity in the aggregate amount of approximately $194.4 million, of which
approximately $145.3 million relate to the uncompleted portion of contracts in
process. These agreements are to secure the fulfillment of obligations and
performance of the related contracts.
During 1998, MasTec provided a customer financing in connection with the
sale of its services. As of December 31, 1998, MasTec had $41.8 million
outstanding under this agreement. MasTec anticipates that it will provide an
additional $8.0 million of financing under this agreement. MasTec will terminate
financing agreement as of April 30, 1999. MasTec has entered into an agreement
to expand the telephone network of the Nicaraguan telephone company. MasTec is
not currently rendering construction services in Nicaragua and has determined
not to proceed with the project unless MasTec obtains non-recourse outside
financing.
38
<PAGE>
MasTec has committed to continue developing a PCS cellular phone system
through its investment in Paraguay. MasTec anticipates investing approximately
$13.0 million for the development of this system over the next 12 months. MasTec
will terminate financing agreement as of April 30, 1999.
MasTec announced a stock repurchase program in April 1998. Through December
31, 1998, MasTec had purchased a total of 667,000 shares at an average price of
$20.58. MasTec may continue to purchase shares from time to time. The Credit
Facility restricts the amount of shares that MasTec may repurchase up to an
additional amount of $5.5 million (see Note 5).
MasTec's current and future operations and investments in certain foreign
countries are generally subject to the risks of political, economic or social
instability, including the possibility of expropriation, confiscatory taxation,
hyper-inflation or other adverse regulatory or legislative developments, or
limitations on the repatriation of investment income, capital and other assets.
MasTec cannot predict whether any of such factors will occur in the future or
the extent to which such factors would have a material adverse effect on
MasTec's international operations.
Note 11 - Assets Held for Sale
In previous years, MasTec has recorded a charge of $23.1 million to adjust
the carrying values of its real estate investment to estimated net realizable
value based on offers received by MasTec to dispose of certain real estate
investments in a bulk transaction. Included in assets held for sale in the
accompanying balance sheet is approximately $10.5 million of real estate at
December 31, 1998. MasTec is actively marketing this real estate and expects to
dispose of substantially all these assets in 1999.
MasTec has a 28% voting interest in Supercanal Holding, S.A.
("Supercanal"), a holding company of numerous cable television operators
predominately in Argentina. MasTec does not exercise significant influence over
the management of Supercanal. During 1998, MasTec contributed an additional $1.7
million. Based on the most recent available financial information, for the nine
months ended September 30, 1998, Supercanal incurred losses of $53.0 million
(unaudited) and reflected a shareholders' deficiency of $5.0 million
(unaudited).
In July 1995, MasTec made a $25 million non-recourse term loan
collateralized by 40% of the capital stock of a holding company that owned 52.6%
of the capital stock of Consorcio Ecuatoriano de Telecomunicaciones, S.A.
("Conecel"), one of two cellular phone operators in the Republic of Ecuador. In
June 1997, MasTec converted its loan and accrued interest into the stock of the
holding company. In December 1997, MasTec sold its investment in the holding
company for $20.0 million in cash and 7.5 million shares of Conecel common stock
valued at $25.0 million. Accordingly, MasTec recognized a gain of $4.4 million
net of tax based of the percent of cash received to the total transaction value.
During January 1999, MasTec engaged investment bankers to dispose of its
investments in Supercanal and Conecel which have a carrying value at December
31, 1998 of $33.9 million. MasTec also has other international investments with
a carrying value of $5.6 million recorded as assets held for sale as of December
31, 1998. MasTec estimates that the carrying value of such assets held for sale
will be realized upon their ultimate disposition.
39
<PAGE>
Note 12 - Quarterly Information (Unaudited)
The following table presents unaudited quarterly operating results for the
two years ended December 31, 1998. MasTec believes that all necessary
adjustments have been included in the amounts stated below to present fairly the
quarterly results when read in conjunction with the Consolidated Financial
Statements and Notes thereto for the years ended December 31, 1997 and 1998.
Results of operations for any particular quarter are not necessarily indicative
of results of operations for a full year or predictive of future periods.
Quarterly results have been adjusted to reflect the application of purchase
accounting to acquisitions previously accounted for as pooling of interests (see
Note 1).
<TABLE>
<CAPTION>
1997 1998
Quarter Ended Quarter Ended
--------------------------------------------------------------------------------
Mar 31 Jun 30 Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 Dec 31
-------- -------- -------- -------- --------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data
Revenue .................... $130,143 $141,499 $184,562 $203,235 $186,095 $246,106 $288,606 $328,115
Gross profit, excluding
depreciation and
amortization ............ 36,928 39,675 41,688 44,918 33,129 59,878 $ 70,093 82,710
Operating income (loss) .... 15,495 17,614 16,772 7,602 (13,599) 20,011 26,289 (4,441)
Net income (loss) .......... 9,287 10,826 8,498 6,053 (12,099) 9,395 13,413 (24,624)
Basic earnings (loss) per .. $ 0.36 $ 0.42 $ 0.32 $ 0.22 $ (0.44) $ 0.34 $ 0.49 $ (0.90)
share
Diluted earnings (loss) .... $ 0.36 $ 0.41 $ 0.31 $ 0.22 $ (0.44) $ 0.33 $ 0.48 $ (0.90)
per share
</TABLE>
MasTec believes that the effects of inflation have not had a significant
impact on its results of operations or financial condition. MasTec's results of
operations have historically been seasonally weaker in the first and fourth
quarters of the year and have produced stronger results in the second and third
quarters.
During the third quarter of 1997, MasTec commenced operations in Brazil,
through its subsidiary MasTec Inepar.
During the fourth quarter of 1997, MasTec sold at a gain of $4.4 million
net of taxes, a portion of Conecel.
First quarter of 1998 was negatively affected by severe weather, a $4.0
million related to charges incurred in North American operations and $13.4
million of severance expenses related to MasTec's Spanish operations.
During the fourth quarter of 1998, MasTec sold at a loss of $9.2 million
($17.0 million net of taxes) 87% of its Spanish operations.
During the fourth quarter of 1998, MasTec recorded a $33.8 million
compensation charge for senior management at certain operating subsidiaries,
$4.5 million for losses on a non-core contract, $1.4 million for startup costs
and $500,000 associated with bad debts reserves.
* * * * * * * * * * * *
40
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding MasTec's executive officers is included in this
Annual Report under the caption "Executive Officers of the Registrant."
Information regarding MasTec's directors and nominees for directors will be
contained in MasTec's Proxy statement relating to the 1999 Annual Meeting of
Shareholders to be held on May 25, 1999 (the "Proxy Statement"), and is
incorporated in this Annual Report by reference.
EXECUTIVE COMPENSATION
Information regarding compensation of MasTec's executive officers will be
contained in the Proxy Statement and is incorporated in this Annual Report by
reference, except the Compensation Committee Report and Performance Graph
contained in the Proxy Statement, which are not incorporated in this Annual
Report by reference.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding the ownership of MasTec's Common Stock will be
contained in the Proxy Statement and is incorporated in this Annual Report by
reference.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions will
be contained in the Proxy Statement and is incorporated in this Annual Report by
reference.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements - The financial statements and the reports of
Independent Accountants are listed on page 18 and included on pages 19
through 41.
2. Financial Statements Schedules - The financial statement schedule
information required by Item 14(a)(2) is included as part of "Note 3 -
Accounts Receivable" of the Notes to Consolidated Financial
Statements.
3. Exhibits including those incorporated by reference:
Exhibit
No. Description
1.1 Articles of Incorporation, filed as Appendix B to MasTec's definitive
Proxy Statement for its 1998 Annual Meeting of Stockholders dated
April 14, 1998 and filed with the Securities and Exchange Commission
on April 14, 1998, and incorporated by reference herein.
1.2 By-laws, filed as Exhibit 3.2 to MasTec's Form 8-K dated May 29, 1998
and filed with the Commission on June 26, 1998, and incorporated by
reference herein.
4.1 7 3/4% Senior Subordinated Notes Due 2008 Indenture dated as of
February 4, 1998, filed as Exhibit 4.2 to MasTec's Registration
Statement on Form S-4 (file No. 333-46361) and incorporated by
reference herein.
41
<PAGE>
10.1 Stock Option Agreement dated March 11, 1994 between MasTec and Arthur
B. Laffer, filed as Exhibit 10.6 to MasTec's Form 10-K for the year
ended December 31, 1995 and incorporated by reference herein.
10.2 Stock Option Agreement dated December 29, 1997 between MasTec and
Henry N. Adorno, filed as Exhibit 10.2 to MasTec's Form 10-K for the
year ended December 31,1997 and incorporated by reference herein.
10.3 Stock Option Agreement dated December 29, 1997 between MasTec and
Joel-Tomas Citron, filed as Exhibit 10.3 to MasTec's Form 10-K for the
year ended December 31, 1997 and incorporated by reference herein.
10.4 Revolving Credit Agreement dated as of June 9, 1997 between MasTec,
certain of its subsidiaries, and BankBoston, N.A. as agent.
10.5 Agreement dated July 21, 1997 between MasTec and Inepar S/A Industrias
e Construcoes, filed as Exhibit 10.5 to MasTec's Form 10-K for the
year ended December 31, 1997 and incorporated by reference herein.
10.6 First Amendment to Revolving Credit Agreement, filed as Exhibit 10.1
to MasTec's Quarterly Report on Form 10-Q for the quarter ended June
30, 1998 and incorporated by reference herein.
10.7 Second, Third, Fourth and Fifth Amendments to Revolving Credit
Agreement.
10.8 Agreement between Joel-Tomas Citron and MasTec dated as of November
18, 1998.
10.9 Stock purchase and sale agreement dated as of December 31, 1998
between MasTec and a group of investors regarding the sale of MasTec's
Spanish operations.
21.1 Subsidiaries of MasTec.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of PricewaterhouseCoopers LLP
27.1 Financial Data Schedule
99.1 Cautionary Statements Regarding Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995
(b) Reports on Form 8-K:
On January 14, 1999, MasTec filed a Current Report on Form 8-K dated
December 31, 1998 with the Securities and Exchange Commission reporting
information under Item 2, Acquisition or Disposition of Assets.
42
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Miami,
State of Florida, on March 29, 1999.
MASTEC, INC.
/S/ CARMEN M. SABATER
--------------------------------------------
Carmen M. Sabater
Senior Vice President - Director of Finance
(Principal Financial Officer)
/S/ ARLENE VARGAS
--------------------------------------------
Arlene Vargas
Vice President and Controller
(Principal Accounting Officer)
POWER OF ATTORNEY
The undersigned directors and officers of MasTec, Inc. hereby constitute
and appoint Carmen M. Sabater and Jose Sariego and each of them with full power
to act without the other and with full power of substitution and resubstitution,
our true and lawful attorneys-in-fact with full power to execute in our name and
behalf in the capacities indicated below this Annual Report on Form 10-K and any
and all amendments thereto and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and hereby ratify and confirm all that such attorneys-in-fact, or any
of them, or their substitutes shall lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 29, 1999.
/S/ JORGE MAS
- --------------------------------------
Jorge Mas, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
/S/ ELIOT C. ABBOTT
- --------------------------------------
Eliot C. Abbott, Director
/S/ ARTHUR B. LAFFER
- --------------------------------------
Arthur B. Laffer, Director
/S/ JOSE S. SORZANO
- --------------------------------------
Jose S. Sorzano, Director
/S/ JOEL-TOMAS CITRON
- --------------------------------------
Joel-Tomas Citron, Director
43
<PAGE>
MasTec, Inc.
Exhibit Index
Exhibit
No. Description
1.1 Articles of Incorporation, filed as Appendix B to MasTec's definitive
Proxy Statement for its 1998 Annual Meeting of Stockholders dated
April 14, 1998 and filed with the Securities and Exchange Commission
on April 14, 1998, and incorporated by reference herein.
1.2 By-laws, filed as Exhibit 3.2 to MasTec's Form 8-K dated May 29, 1998
and filed with the Commission on June 26, 1998, and incorporated by
reference herein.
4.1 7 3/4% Senior Subordinated Notes Due 2008 Indenture dated as of
February 4, 1998, filed as Exhibit 4.2 to MasTec's Registration
Statement on Form S-4 (file No. 333-46361) and incorporated by
reference herein.
10.1 Stock Option Agreement dated March 11, 1994 between MasTec and Arthur
B. Laffer, filed as Exhibit 10.6 to MasTec's Form 10-K for the year
ended December 31, 1995 and incorporated by reference herein.
10.2 Stock Option Agreement dated December 29, 1997 between MasTec and
Henry N. Adorno, filed as Exhibit 10.2 to MasTec's Form 10-K for the
year ended December 31,1997 and incorporated by reference herein.
10.3 Stock Option Agreement dated December 29, 1997 between MasTec and
Joel-Tomas Citron, filed as Exhibit 10.3 to MasTec's Form 10-K for the
year ended December 31, 1997 and incorporated by reference herein.
10.4 Revolving Credit Agreement dated as of June 9, 1997 between MasTec,
certain of its subsidiaries, and BankBoston, N.A. as agent.
10.5 Agreement dated July 21, 1997 between MasTec and Inepar S/A Industrias
e Construcoes, filed as Exhibit 10.5 to MasTec's Form 10-K for the
year ended December 31, 1997 and incorporated by reference herein.
10.6 First Amendment to Revolving Credit Agreement, filed as Exhibit 10.1
to MasTec's Quarterly Report on Form 10-Q for the quarter ended June
30, 1998 and incorporated by reference herein.
10.7 Second, Third, Fourth and Fifth Amendments to Revolving Credit
Agreement.
10.8 Agreement between Joel-Tomas Citron and MasTec dated as of November
18, 1998.
10.9 Stock purchase and sale agreement dated as of December 31, 1998
between MasTec and a group of investors regarding the sale of MasTec's
Spanish operations.
21.1 Subsidiaries of MasTec.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of PricewaterhouseCoopers LLP
27.1 Financial Data Schedule
99.1 Cautionary Statements Regarding Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995
Exhibit 10.4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REVOLVING CREDIT AGREEMENT
Dated as of June 9, 1997
by and among
MASTEC, INC.
- --------------------------------------------------------------------------------
(the "Parent")
- --------------------------------------------------------------------------------
and its Subsidiaries (other than Excluded Subsidiaries
and members of the MasTec International Group)
listed on Schedule 1 hereto
(collectively, the "Borrowers")
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
and
BANKBOSTON, N.A.
("BKB")
and
CREDITANSTALT-BANKVEREIN ("CB"),
FIRST UNION NATIONAL BANK OF FLORIDA ("First Union"),
THE SUMITOMO BANK, LIMITED ("Sumitomo"),
SCOTIABANC INC. ("SBI"),
THE FUJI BANK AND TRUST COMPANY ("Fuji"),
COMERICA BANK ("Comerica"),
and LTCB TRUST COMPANY ("LTCB")
(collectively, the "Banks")
and
BANKBOSTON, N.A., as Agent
<PAGE>
-iv-
ss.1. DEFINITIONS AND RULES OF INTERPRETATION.................................1
ss.1.1. Definitions. .................................................1
ss.1.2. Rules of Interpretation.......................................16
ss.2. THE REVOLVING CREDIT FACILITY..........................................17
ss.2.1. Commitment to Lend. .........................................17
ss.2.2. Reduction of Total Commitment. ..............................17
ss.2.3. The Revolving Credit Notes; the Swing Line Note. ............18
ss.2.4. Interest on Loans. ..........................................18
ss.2.5. Election of LIBOR Rate; Notice of Election; Interest
Periods; Minimum Amounts....................................19
ss.2.6. Requests for Revolving Credit Loans. ........................20
ss.2.7. Funds for Revolving Credit Loans. ...........................21
ss.2.8. Maturity of the Loans; Annual Option to Extend. .............22
ss.2.9. Mandatory Repayments of the Loans. ..........................23
ss.2.10. Optional Prepayments or Repayments of Loans. ................23
ss.2.11. Swing Line Loans; Settlements.................................23
ss.3. LETTERS OF CREDIT......................................................26
ss.3.1. Letter of Credit Commitments..................................26
ss.3.2. Reimbursement Obligation of the Borrowers. ..................27
ss.3.3. Obligations Absolute. .......................................27
ss.3.4. Reliance by Agent. ..........................................28
ss.4. FEES, PAYMENTS, AND COMPUTATIONS; JOINT AND
SEVERAL LIABILITY....................................................28
ss.4.1. Fees..........................................................28
ss.4.2. Payments......................................................29
ss.4.3. Computations. ...............................................30
ss.4.4. Additional Costs, Etc. ......................................31
ss.4.5. Capital Adequacy. ...........................................32
ss.4.6. Certificate. ................................................33
ss.4.7. Reasonable Efforts to Mitigate. .............................33
ss.4.8. LIBOR Indemnity. ............................................33
ss.4.9. Interest on Overdue Amounts. ................................34
ss.4.10. Interest Limitation. ........................................34
ss.4.11. Illegality; Inability to Determine LIBOR Rate. ..............35
ss.4.12. Concerning Joint and Several Liability of the
Borrowers...................................................35
ss.4.13. New Borrowers. ..............................................38
ss.4.14. Replacement of Banks. .......................................38
ss.5. REPRESENTATIONS AND WARRANTIES. ......................................39
ss.5.1. Corporate Authority...........................................39
ss.5.2. Governmental Approvals. .....................................40
ss.5.3. Title to Properties; Leases .................................41
ss.5.4. Financial Statements; Solvency................................41
ss.5.5. No Material Changes, Etc. ...................................42
ss.5.6. Permits, Franchises, Patents, Copyrights, Etc. ..............42
ss.5.7. Litigation. .................................................42
ss.5.8. No Materially Adverse Contracts, Etc. .......................42
ss.5.9. Compliance With Other Instruments, Laws, Etc. ...............43
ss.5.10. Tax Status. .................................................43
ss.5.11. No Event of Default. ........................................43
ss.5.12. Holding Company and Investment Company Acts. ................43
ss.5.13. Absence of Financing Statements, Etc. .......................44
ss.5.14. Employee Benefit Plans........................................44
ss.5.15. Use of Proceeds. ............................................45
ss.5.16. Environmental Compliance. ...................................45
ss.5.17. Perfection of Security Interests. ...........................47
ss.5.18. Certain Transactions. .......................................47
ss.5.19. Subsidiaries. ...............................................48
ss.5.20. True Copies of Charter and Other Documents. .................48
ss.6. AFFIRMATIVE COVENANTS OF THE BORROWERS. ..............................48
ss.6.1. Punctual Payment. ...........................................48
ss.6.2. Maintenance of Office. ......................................48
ss.6.3. Records and Accounts. .......................................49
ss.6.4. Financial Statements, Certificates and Information. .........49
ss.6.5. Corporate Existence and Conduct of Business. ................51
ss.6.6. Maintenance of Properties. ..................................51
ss.6.7. Insurance. ..................................................52
ss.6.8. Taxes. ......................................................52
ss.6.9. Inspection of Properties, Books, and Contracts. .............53
ss.6.10. Compliance with Laws, Contracts, Licenses and Permits;
Maintenance of Material Licenses and Permits. ............53
ss.6.11. ENVIRONMENTAL INDEMNIFICATION. ..............................53
ss.6.12. Further Assurances. .........................................54
ss.6.13. Notice of Potential Claims or Litigation. ...................54
ss.6.14. Notice of Default. ..........................................54
ss.7. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS. .........................54
ss.7.1. Restrictions on Funded Debt. ................................55
ss.7.2. Restrictions on Liens. ......................................55
ss.7.3. Restrictions on Investments. ................................57
ss.7.4. Mergers, Consolidations, Sales. .............................58
ss.7.5. Sale and Leaseback. .........................................59
ss.7.6. Restricted Distributions and Redemptions. ...................60
ss.7.7. Employee Benefit Plans. .....................................60
ss.7.8. Negative Pledges. ...........................................61
ss.7.9. Pledges of Stock of the Sintel Group. .......................61
ss.7.10. Newly-Created Subsidiaries. .................................61
ss.8. FINANCIAL COVENANTS OF THE BORROWERS. ................................61
ss.8.1. Leverage Ratios. ............................................61
ss.8.2. Capital Expenditures. .......................................62
ss.8.3. Interest Coverage Ratio. ....................................62
ss.8.4. Liquidity. ..................................................62
ss.8.5. Profitable Operations. ......................................62
ss.9. CLOSING CONDITIONS. ..................................................62
ss.9.1. Corporate Action. ...........................................62
ss.9.2. Loan Documents, Etc. ........................................62
ss.9.3. Certified Copies of Charter Documents. ......................62
ss.9.4. Incumbency Certificate. .....................................63
ss.9.5. Validity of Liens. ..........................................63
ss.9.6. UCC Search Results. .........................................63
ss.9.7. Certificates of Insurance. ..................................63
ss.9.8. Opinion of Counsel. .........................................63
ss.9.9. Certificate of Financial Condition. .........................64
ss.9.10. Initial Compliance Certificate. .............................64
ss.9.11. Interim Balance Sheets and Income Statements. ...............64
ss.9.12. Payoff Letters. .............................................64
ss.10. CONDITIONS OF ALL LOANS. .............................................65
ss.10.1. Representations True; No Event of Default. .................65
ss.10.2. Performance; No Event of Default. ..........................65
ss.10.3. No Legal Impediment. .......................................65
ss.10.4. Governmental Regulation. ...................................65
ss.10.5. Proceedings and Documents. .................................66
ss.11. COLLATERAL SECURITY. .................................................66
ss.12. EVENTS OF DEFAULT; ACCELERATION; TERMINATION
OF COMMITMENT. .....................................................66
ss.12.1. Events of Default and Acceleration. ........................66
ss.12.2. Termination of Commitments. ................................69
ss.12.3. Remedies. ..................................................70
ss.13. SETOFF. ..............................................................70
ss.14. THE AGENT. ..........................................................71
ss.14.1. Appointment of Agent, Powers and Immunities. ...............71
ss.14.2. Actions By Agent. ..........................................72
ss.14.3. INDEMNIFICATION. ...........................................72
ss.14.4. Reimbursement. .............................................73
ss.14.5. Documents. .................................................73
ss.14.6. Non-Reliance on Agent and Other Banks. .....................74
ss.14.7. Resignation of Agent. ......................................74
ss.14.8. Action by the Banks, Consents, Amendments, Waivers,
Etc. .....................................................75
ss.15. EXPENSES. ............................................................75
ss.16. SURVIVAL OF COVENANTS, ETC. ..........................................76
ss.17. ASSIGNMENT AND PARTICIPATION. ........................................77
ss.18. PARTIES IN INTEREST. .................................................78
ss.19. NOTICES, ETC. ........................................................78
ss.19.1. Notices. ...................................................78
ss.19.2. Deemed Notice. .............................................79
ss.20. MISCELLANEOUS. .......................................................79
ss.21. ENTIRE AGREEMENT, ETC. ...............................................79
ss.22. WAIVER OF JURY TRIAL. ................................................80
ss.23. GOVERNING LAW. .......................................................80
ss.24. SEVERABILITY. ........................................................81
Schedules & Exhibits
Exhibit A Form of Revolving Credit Note
Exhibit B Swing Line Note
Exhibit C Form of Loan and Letter of Credit Request
Exhibit D Form of Compliance Certificate
Exhibit E Form of Assignment and Acceptance
Schedule 1 Subsidiaries of the Parent
Schedule 5.7 Litigation
Schedule 5.10 Taxes
Schedule 5.14(b) Employee Benefit Plans
Schedule 5.16 Environmental Matters
Schedule 5.17 Claims on Collateral
Schedule 5.18 Certain Transactions
Schedule 6.7 Insurance
Schedule 7.1(c) Existing Funded Debt
Schedule 7.2(g) Existing Liens
Schedule 7.4 Permitted Dispositions
Schedule 9.11 Interim Balance Sheets and Income Statements
<PAGE>
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT is made as of June 9, 1997 (the
"Agreement"), by and among (a) MASTEC, INC., a Delaware corporation (the
"Parent"), its Subsidiaries (other than the Excluded Subsidiaries and members of
the MasTec International Group) listed on Schedule 1 hereto (collectively with
the Parent, the "Borrowers"), (b) BANKBOSTON, N.A. ("BKB"), a national banking
association having its principal place of business at 100 Federal Street,
Boston, Massachusetts 02110, CREDITANSTALT-BANKVEREIN ("CB"), an Austrian
banking corporation having an office at Two Greenwich Plaza, Greenwich,
Connecticut 06830, FIRST UNION NATIONAL BANK OF FLORIDA ("First Union"), a
national banking association having its principal place of business at 200 South
Biscayne Boulevard, 15th Floor, Miami, Florida 33131, THE SUMITOMO BANK, LIMITED
("Sumitomo"), a Japanese banking association having an office at One Biscayne
Tower, 2 South Biscayne Boulevard, Suite 3300, Miami, Florida 33131, SCOTIABANC
INC. ("SBI"), a wholly-owned subsidiary of The Bank of Nova Scotia, a Canadian
chartered bank, having its principal place of business at 600 Peachtree Street,
N.E., Suite 2700, Atlanta, Georgia 30308, THE FUJI BANK AND TRUST COMPANY
("Fuji"), a New York corporation having its principal place of business at Two
World Trade Center, New York, New York 10048, COMERICA BANK ("Comerica"), a
Michigan banking corporation having its principal place of business at 500
Woodward Avenue, 9th Floor, Detroit, Michigan 48226, and LTCB TRUST COMPANY
("LTCB"), a wholly-owned U.S. subsidiary of the Long-Term Credit Bank of Japan,
Ltd. having its principal place of business at 165 Broadway, New York, New York
10006, and the other lending institutions which become parties hereto (each a
"Bank" and, collectively, the "Banks"), and (c) BANKBOSTON, N.A., as agent for
the Banks (the "Agent").
ss.1. DEFINITIONS AND RULES OF INTERPRETATION.
ss.1.1. Definitions.
The following terms shall have the meanings set forth in this ss.1 or
elsewhere in the provisions of this Agreement referred to below:
Accounts Receivable. All rights of the Borrowers to payment for goods sold,
leased or otherwise marketed in the ordinary course of business and all rights
<PAGE>
-2-
of the Borrowers to payment for services rendered in the ordinary course of
business and all sums of money or other proceeds due thereon pursuant to
transactions with account debtors, except for that portion of the sum of money
or other proceeds due thereon that relate to sales, use or property taxes in
conjunction with such transactions, recorded on books of account in accordance
with GAAP.
Accountants. See ss.6.4(c).
Agent. BKB acting as agent for the Banks.
Agent's Head Office. The Agent's head office is located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
Agent's Special Counsel. Bingham, Dana & Gould LLP or such other counsel as
may be approved by the Agent. Agreement. This Revolving Credit Agreement,
including the Schedules and Exhibits hereto.
Applicable Commitment Rate. The Applicable Commitment Rate shall be as set
forth in the Pricing Table. The effective date of a change in the Applicable
Commitment Rate shall be the first day after receipt by the Banks of financial
statements delivered pursuant to ss.6.4(a) or (b) hereof which indicate a change
in the Pricing Ratio. If at any time the financial statements required to be
delivered pursuant to ss.6.4(a) or (b) hereof are not delivered within the time
periods specified in such subsections, the Applicable Commitment Rate shall be
0.375%, subject to adjustment upon actual receipt of such financial statements.
Applicable Laws. See ss.6.10.
Applicable LIBOR Margin. The Applicable LIBOR Margin on LIBOR Loans shall
be as set forth in the Pricing Table. Any change in the Applicable LIBOR Margin
shall become effective on the first day of each Interest Period which begins
three (3) or more days after receipt by the Banks of financial statements
delivered pursuant to ss.6.4(a) or (b) hereof which indicate a change in the
Pricing Ratio. If at any time the financial statements required to be delivered
pursuant to ss.6.4(a) or (b) hereof are not delivered within the time periods
specified in such subsections, the Applicable LIBOR Margin shall be 1.50% with
respect to any LIBOR Loan requested on or after the date on which such financial
statements were required to be delivered but before the time of actual receipt
of such financial statements, subject to adjustment upon actual receipt of such
financial statements.
<PAGE>
-3-
Applicable L/C Margin. The Applicable L/C Margin on Letters of Credit shall
be as set forth in the Pricing Table. The effective date of a change in the
Applicable L/C Margin shall be the first day after receipt by the Banks of
financial statements delivered pursuant to ss.6.4(a) or (b) hereof which
indicate a change in the Pricing Ratio. If at any time the financial statements
required to be delivered pursuant to ss.6.4(a) or (b) hereof are not delivered
within the time periods specified in such subsections, the Applicable L/C Margin
shall be 1.50% with respect to any Letter of Credit issued after the date on
which such financial statements were required to be delivered but before actual
receipt of such financial statements, subject to adjustment upon actual receipt
of such financial statements.
Applicable Swing Line Rate. The annual rate of interest agreed upon from
time to time by BKB and the Borrowers with respect to Swing Line Loans.
Balance Sheet Date. December 31, 1996.
Bankruptcy Event. Any event of the types described in ss.ss.12.1(h),
12.1(i).
Base Rate. The higher of (a) the annual rate of interest announced from
time to time by the Agent at its head office in Boston, Massachusetts as its
"base rate" (it being understood that such rate is a reference rate and not
necessarily the lowest rate of interest charged by the Agent) or (b) one percent
(1%) above the overnight federal funds effective rate, as published by the Board
of Governors of the Federal Reserve System, as in effect from time to time.
Base Rate Loans. Loans bearing interest calculated by reference to the Base
Rate.
BKB. BankBoston, N.A.
Borrowers. See preamble.
Business Day. Any day on which banking institutions in Boston,
Massachusetts are open for the transaction of banking business.
<PAGE>
-4-
Capital Assets. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that Capital Assets shall not
include (a) any item customarily charged directly to expense or depreciated over
a useful life of twelve (12) months or less in accordance with generally
accepted accounting principles, or (b) any item obtained through an acquisition
permitted by ss.7.4 hereof.
Capital Expenditures. Amounts paid or indebtedness incurred by the
Borrowers in connection with the purchase or lease by the Borrowers of Capital
Assets that would be required to be capitalized and shown on the balance sheet
of such Person in accordance with GAAP.
Capitalized Leases. Leases, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with GAAP.
CERCLA. See definition of Release.
certified. With respect to the financial statements of any Person, such
statements as audited by a firm of independent auditors, whose report expresses
the opinion, without qualification, that such financial statements present
fairly the financial position of such Person.
CFO. See ss.6.4(a).
CLEC. Any competitive (non-monopoly) local exchange carrier, as "local
exchange carrier" is defined in 47 U.S.C. ss.153.
Closing Date. The date on which the conditions precedent set forth in ss.9
are satisfied, as specified in a notice from the Agent.
Code. The Internal Revenue Code of 1986, as amended and in effect from time
to time.
Collateral. The shares of all direct or indirect Subsidiaries of the Parent
that are or are intended to be subject to the security interests created by the
Stock Pledge Agreements.
Commitment. With respect to each Bank, the amount determined by multiplying
such Bank's Commitment Percentage by the Total Commitment specified in ss.2.1
hereof, as the same may be reduced from time to time.
<PAGE>
-5-
Commitment Fee. See ss.4.1.
Commitment Percentage. With respect to each Bank, the percentage set forth
beside its name below (subject to adjustment upon any assignments pursuant to
ss.17):
Bank Percentage
BKB 17.6000%
CB 10.4000%
First Union 13.6000%
Sumitomo 10.4000%
SBI 10.4000%
Fuji 10.4000%
Comerica 13.6000%
LTCB 13.6000%
Compliance Certificate. See ss.6.4(e).
Consolidated or consolidated. With reference to any term defined herein,
shall mean that term as applied to the accounts of the Borrowers or the Parent,
as applicable, consolidated in accordance with GAAP.
Consolidated Earnings Before Interest and Taxes or EBIT. For any period,
the Consolidated Net Income (or Deficit) of the Borrowers determined in
accordance with GAAP, plus (a) interest expense and (b) income taxes, to the
extent that each was deducted in determining Consolidated Net Income (or
Deficit).
Consolidated Earnings Before Interest, Taxes, Depreciation and Amortization
or EBITDA. For any period, EBIT plus (a) depreciation expense, and (b)
amortization expense, to the extent such expenses were deducted in determining
Consolidated Net Income (or Deficit), provided that, for purposes of calculating
the financial covenants pursuant to ss.8.1 hereof, but not the Pricing Ratio,
EBITDA shall be adjusted to include earnings plus interest, income tax,
depreciation and amortization expenses of Borrowers acquired during the prior
twelve months as if acquired on the first day of such period, provided that such
adjustments shall not constitute more than 30% of EBITDA (as so adjusted), and
furthermore that no more than 15% of EBITDA (as so adjusted) shall be
attributable to such acquired Borrowers whose most recent financial statements
have not been audited by an independent accounting firm reasonably satisfactory
to the Agent.
Consolidated Net Income (or Deficit). The consolidated net income (or
deficit) of the Borrowers after deduction of all expenses, taxes, and other
proper charges, determined in accordance with GAAP but excluding, (a)
extraordinary income and expenses, and (b) income or expenses derived from
non-Borrowers.
Consolidated Total Interest Expense. For any period, the consolidated
interest expense required to be paid or accrued by the Borrowers during such
period on all Funded Debt of the Borrowers outstanding during all or any part of
such period, including capitalized interest expense for such period.
Consolidated Total Liabilities. All liabilities of the Borrowers determined
on a consolidated basis in accordance with GAAP.
Default. See ss.12.
Disposal (or Disposed). See definition of Release.
Distribution. The declaration or payment of any dividend or distribution on
or in respect of any shares of any class of capital stock, any partnership
interests or any membership interests of any Person, other than dividends or
other distributions payable solely in shares of common or preferred stock,
partnership interests or membership units of such Person, as the case may be;
the purchase, redemption, or other retirement of any shares of any class of
capital stock, partnership interests or membership units of such Person,
directly or indirectly through a Subsidiary or otherwise; the return of equity
capital by any Person to its shareholders, partners or members as such; or any
other distribution on or in respect of any shares of any class of capital stock,
partnership interest or membership unit of such Person.
Dollars or $. Dollars in lawful currency of the United States of America.
Drawdown Date. The date on which any Loan is made or is to be made, and the
date on which any Loan is converted or continued in accordance with ss.2.5.
EBIT. See definition of Consolidated Earnings Before Interest and Taxes.
EBITDA. See definition of Consolidated Earnings Before Interest, Taxes,
Depreciation and Amortization.
Eligible Foreign Bank. (a) Any commercial bank organized under the laws of
any other country which is a member of the Organization for Economic Cooperation
and Development (the "OECD"), or a political subdivision of any such country,
provided that such bank is acting through a branch or agency located in the
country in which it is organized or another country which is also a member of
the OECD; or (b) the central bank of any country which is a member of the OECD.
Employee Benefit Plan. Any employee benefit plan within the meaning of
ss.3(3) of ERISA maintained or contributed to by any Borrower, other than a
Guaranteed Pension Plan or a Multiemployer Plan.
Environmental Laws. See ss.5.16(a).
EPA. See ss.5.16(b).
ERISA. The Employee Retirement Income Security Act of 1974, as amended and
in effect from time to time.
ERISA Affiliate. Any Person which is treated as a single employer with any
Borrower under ss.414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of ss.4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
Event of Default. See ss.12.
Excluded Subsidiaries. The U.S. Subsidiaries of the Parent (other than
members of the MasTec International Group) listed as Excluded Subsidiaries on
Schedule 1 hereto, and any other U.S. Subsidiaries of the Parent acquired or
created after the date hereof which are not required to become Borrowers
pursuant to ss.4.13 hereof.
Extension Date. March 31, 1999 and, thereafter, March 31, 2000.
Fleet Credit Agreement. The Loan and Security Agreement among certain of
the Borrowers and Fleet Financial Corporation dated January 26, 1995, as
amended.
Funded Debt. Collectively, without duplication, whether classified as
indebtedness, an Investment or otherwise on the Borrowers' consolidated balance
sheet (excluding that portion of assets and liabilities of the Parent
attributable to non-Borrowers), (a) all indebtedness for borrowed money, direct
or indirect, (b) all obligations evidenced by notes, bonds, debentures or other
similar debt instruments (including any unpaid reimbursement obligations with
respect to letters of credit), (c) all obligations, liabilities and indebtedness
under Capitalized Leases which correspond to principal, and (d) Guarantees of
the Funded Debt of others referred to in clauses (a) through (c) above.
generally accepted accounting principles or GAAP. (i) When used in ss.8,
whether directly or indirectly through reference to a capitalized term used
therein, means (A) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and
(B) to the extent consistent with such principles, the accounting practice of
the Borrowers reflected in its financial statements for the year ended on the
Balance Sheet Date, and (ii) when used in general, other than as provided above,
means principles that are (A) consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, as in
effect from time to time, and (B) consistently applied with past financial
statements of the Borrowers adopting the same principles, provided that in each
case referred to in this definition of "generally accepted accounting
principles" a certified public accountant would, insofar as the use of such
accounting principles is pertinent, be in a position to deliver an unqualified
opinion (other than a qualification regarding changes in generally accepted
accounting principles) as to financial statements in which such principles have
been properly applied.
Guarantee. Any obligation, contingent or otherwise, of a Person directly or
indirectly guaranteeing any indebtedness of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person, (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such indebtedness (whether arising
by virtue of partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the holder of such indebtedness of the payment
thereof or to protect such holder against loss in respect thereof (in whole or
in part), provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of ss.3(2) of ERISA maintained or contributed to by any Borrower or any
ERISA Affiliate, the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Hazardous Substances. See ss.5.16(b).
Income Taxes. See ss.4.4.
Interest Period. With respect to each LIBOR Loan:
(a) initially, the period commencing on the date of a conversion from a
Base Rate Loan into a LIBOR Loan or the making of a LIBOR Loan, and ending one
(1), two (2), three (3), or six (6) months thereafter, as the case may be, as
the Borrowers may select; and
(b) thereafter, each subsequent Interest Period shall begin on the last day
of the preceding Interest Period and end one (1), two (2), three (3), or six (6)
months thereafter, as the case may be, as the Borrowers may select;
(c) provided that any Interest Period which would otherwise end on a day
which is not a LIBOR Business Day shall be deemed to end on the next LIBOR
Business Day; provided further that if such next LIBOR Business Day falls in the
next succeeding calendar month, such Interest Period shall be deemed to end on
the preceding LIBOR Business Day; and provided further that no Interest Period
shall extend beyond the Maturity Date.
Interim Balance Sheet Date. March 31, 1997.
International Signatories. MasTec International, Inc. and Sintel.
Investments. All expenditures made and all Funded Debt incurred
(contingently or otherwise) (a) for the acquisition of stock or indebtedness of,
or (b) for loans, advances, capital contributions or transfers of property to,
or (c) in respect of any Guarantees on behalf of, or (d) with respect to
obligations of, any Person. In determining the aggregate amount of Investments
outstanding at any particular time: (a) the amount of any Investment represented
by a Guarantee shall be taken at not less than the principal amount of the
obligations guaranteed and still outstanding; (b) there shall be included as an
Investment all interest accrued with respect to Funded Debt constituting an
Investment unless and until such interest is paid; (c) there shall be deducted
in respect of each such Investment any amount received as a return of capital
(including, without limitation, by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (d) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (b) may be
deducted when paid; and (e) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof.
Letter of Credit Applications. Letter of Credit Applications in such form
as may be agreed upon by any Borrower and the Agent from time to time which are
entered into pursuant to ss.3 hereof as such Letter of Credit Applications are
amended, varied or supplemented from time to time.
Letter of Credit Fee. See ss.4.1(b).
Letter of Credit Participation. See ss.3.1(b).
Letters of Credit. Standby Letters of Credit issued or to be issued by the
Agent under ss.3 hereof for the account of the Borrowers.
Leverage Ratios. The ratios of Senior Debt to EBITDA and Funded Debt to
EBITDA as set forth in ss.8.1.
LIBOR Business Day. Any Business Day on which dealings in foreign currency
and exchange are carried on among banks in London, England.
LIBOR Loans. Loans bearing interest calculated by reference to the LIBOR
Rate.
LIBOR Rate. For any Interest Period with respect to a LIBOR Loan, the rate
of interest equal to (i) the rate determined by the Agent at which Dollar
deposits for such Interest Period are offered based on information presented on
Telerate Page 3750 as of 11:00 a.m. London time two LIBOR Business Days prior to
the first day of such Interest Period, divided by (ii) a number equal to 1.00
minus the Reserve Rate, if applicable.
Loan and Letter of Credit Request. See ss.2.6.
Loan Documents. This Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit, and the Stock Pledge Agreements.
Loans. A borrowing hereunder consisting of one or more loans made by the
Banks or BKB to the Borrowers under the procedures described in ss.2.1 or
ss.2.11 hereof.
Majority Banks. The Banks with sixty-six and two thirds percent (66 2/3%)
of the Total Commitment; provided that, in the event that the Total Commitment
has been terminated, the Majority Banks shall be the Banks holding sixty-six and
two thirds percent (66 2/3%) of the aggregate outstanding principal amount of
the Loans on such date.
MasTec International Group. MasTec International, Inc., a Delaware
corporation, its direct and indirect Subsidiaries, and the Sintel Group.
Maturity Date. June 9, 2000; as the same may be extended pursuant toss.2.8,
but which date shall in no event be later than -------- ---- June 9, 2002.
Maximum Drawing Amount. The maximum aggregate amount from time to time that
the beneficiaries may draw under outstanding Letters of Credit.
Multiemployer Plan. Any multiemployer plan within the meaning of ss.3(37)
of ERISA maintained or contributed to by any Borrower or any ERISA Affiliate.
Notes. Collectively, the Revolving Credit Notes and the Swing Line Note.
Obligations. All indebtedness, obligations and liabilities of the Borrowers
to any of the Banks or the Agent, individually or collectively, existing on the
date of this Agreement or arising thereafter, direct or indirect, joint or
several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law or
otherwise, arising or incurred under this Agreement or any of the other Loan
Documents or in respect of any of the Loans made or Reimbursement Obligations
incurred or any of the Notes, Letter of Credit Applications, Letters of Credit
or other instruments at any time evidencing any thereof.
Parent. MasTec, Inc., a Delaware corporation.
PBGC. The Pension Benefit Guaranty Corporation created by ss.4002 of ERISA
and any successor entity or entities having similar responsibilities.
Permitted Liens. See ss.7.2.
Person. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Pricing Ratio. As at the end of any quarter, the ratio of (a) Funded Debt
to (b) EBITDA for the period of four (4) consecutive fiscal quarters then
ending, as set forth on the most recently delivered Compliance Certificate.
<TABLE>
Pricing Table:
<S> <C> <C>
------------------------------ ------------- -------------- -------------------
Applicable Applicable Applicable
Pricing Ratio LIBOR Margin L/C Margin Commitment Rate
(per annum) (per annum) (per annum)
------------------------------ ------------- -------------- -------------------
less than 1.00:1 0.75% 0.75% 0.250%
------------------------------ ------------- -------------- -------------------
greater than or equal to
1.00:1, but less than 1.50:1 1.00% 1.00% 0.250%
------------------------------ ------------- -------------- -------------------
greater than or equal to
.50:1, but less than 2.00:1 1.25% 1.25% 0.375%
------------------------------ ------------- -------------- -------------------
greater than or equal to 2.00:1 1.50% 1.50% 0.375%
------------------------------ ------------- -------------- -------------------
</TABLE>
Qualified Accounts Receivable. The aggregate of the unpaid portions of
Accounts Receivable (net of any credits, rebates, offsets, holdbacks or other
adjustments or commissions payable to third parties that are adjustments to such
Accounts Receivable) (i) that the Borrowers reasonably and in good faith
determine to be collectible; (ii) that are with account debtors that (A) are not
affiliates of the Borrowers, (B) purchased the goods or services giving rise to
the relevant Account Receivable in an arm's length transaction, (C) are not
insolvent or involved in any case or proceeding, whether voluntary or
involuntary, under any bankruptcy, reorganization, arrangement, insolvency,
adjustment of debt, dissolution, liquidation or similar law of any jurisdiction
and (D) are, in the Agent's reasonable judgment, creditworthy; (iii) that are in
payment of obligations that have been fully performed and are not subject to
dispute or any other similar claims that would reduce the cash amount payable
therefor; (iv) that are not subject to any pledge, restriction, security
interest or other lien or encumbrance other than those created by the Loan
Documents; (v) that are not outstanding for more than ninety (90) days (or one
hundred and twenty (120) days in the case of secured CLEC Accounts Receivable
not to exceed $5,000,000 in the aggregate at any time) past the earlier to occur
of (A) the date of the respective invoices therefor and (B) the date of shipment
thereof in the case of goods or the end of the calendar month following the
provision thereof in the case of services; (vi) that are not due from an account
debtor located in Alabama, Minnesota or New Jersey unless the Borrowers (A) have
received a certificate of authority to do business and are in good standing in
such state or (B) have filed a notice of business activities report with the
appropriate office or agency of such state for the current year; (vii) that are
payable in Dollars; and (viii) that are not payable from an office outside of
the United States.
Real Property. All real property heretofore, now, or hereafter owned or
leased by the Borrowers.
Reimbursement Obligation. The Borrowers' obligation to reimburse the Agent
and the Banks on account of any drawing under any Letter of Credit as provided
in ss.3.2.
RCRA. See definition of Release.
Release. Shall have the meaning specified in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
ss.ss.9601 et seq. ("CERCLA") and the term "Disposal" (or "Disposed") shall have
the meaning specified in the Resource Conservation and Recovery Act of 1976, 42
U.S.C. ss.ss.6901 et seq. ("RCRA") and regulations promulgated thereunder;
provided, that in the event either CERCLA or RCRA is amended so as to broaden
the meaning of any term defined thereby, such broader meaning shall apply as of
the effective date of such amendment and provided further, to the extent that
the laws of a state wherein the property lies establishes a meaning for
"Release" or "Disposal" which is broader than specified in either CERCLA or
RCRA, such broader meaning shall apply.
Reserve Rate. For any day with respect to a LIBOR Loan, the maximum rate
(expressed as a decimal) at which any lender subject thereto would be required
to maintain reserves under Regulation D of the Board of Governors of the Federal
Reserve System (or any subsequent or similar regulation relating to such reserve
requirements) against "Eurocurrency Liabilities" (as such term is defined in
Regulation D), if such liabilities were outstanding. The Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in the
Reserve Rate.
Revolving Credit Loans. Loans made by the Banks to the Borrowers pursuant
to ss.2.1.
Revolving Credit Notes. The promissory notes of the Borrowers evidencing
the Revolving Credit Loans hereunder, dated as of the date of this Agreement and
in substantially the form of Exhibit A hereto.
Senior Debt. Funded Debt minus Subordinated Debt.
Sintel. Sistemas e Instalaciones de Telecomunicacion, S.A.
Sintel Group. Sintel, Sietel, S.A., Sintelar, S.A., Sintel Peru, S.A. and
any Subsidiary of Sintel.
Sintel Stock Pledge Agreement. The stock pledge agreement and the
International Pledge Documents (defined therein) among the International
Signatories and the Agent for the benefit or in the name of the Banks in form
and substance satisfactory to the Agent.
Stock Pledge Agreements. The U.S. Stock Pledge Agreement and the Sintel
Stock Pledge Agreement.
Subordinated Debt. Indebtedness incurred by the Parent which has been
subordinated to the Obligations; provided that (a) at the time such Subordinated
Debt is incurred, no Default or Event of Default has occurred or would occur
(including under ss.8.1 hereof) as a result of such incurrence, and the Parent
shall have provided the Banks with a calculation of the Leverage Ratios required
by ss.8.1 hereof showing compliance therewith on a pro forma basis taking into
account the incurrence of such Subordinated Debt, and (b) the documentation
evidencing such Subordinated Debt shall have been delivered to the Agent and
shall contain all of the following characteristics: (i) it shall be unsecured,
(ii) it shall bear a market rate of interest, (iii) it shall have an average
weighted maturity of at least seven (7) years, (iv) it shall not require
principal repayments thereof prior to the Maturity Date, (v) it shall have
financial covenants (including covenants relating to incurrence of indebtedness)
which are meaningfully less restrictive than those set forth herein, (vi) it
shall have no restrictions on the Parent's or any of its Subsidiaries' ability
to grant liens securing indebtedness ranking senior to such Subordinated Debt,
(vii) it shall permit the incurrence of senior indebtedness under this Credit
Agreement (and under any refinancings hereof) in a principal amount at least
equal to the Total Commitment hereunder at the time of incurrence of such
Subordinated Debt minus any mandatory or optional reductions thereof plus
$25,000,000, (viii) it may be cross-accelerated with the Obligations and other
senior indebtedness of the Borrowers (but shall not be cross-defaulted except
for payment defaults which the senior lenders have not waived) and may be
accelerated upon bankruptcy, (ix) it shall provide that (A) upon any payment or
distribution of the assets of the Parent or its Subsidiaries (including after
the commencement of a bankruptcy proceeding) of any kind or character, all of
the Obligations (including interest accruing after the commencement of any
bankruptcy proceeding at the rate specified for the applicable Obligation,
whether or not such interest is an allowable claim in any such proceeding) shall
be paid in full prior to any payment being received by the holders of the
Subordinated Debt and (B) until all of the Obligations (including the interest
described in subclause (A) above) are paid in full, any payment or distribution
to which the holders of the Subordinated Debt would be entitled but for the
subordination provisions of the type described in clauses (x) and (xi) hereof
shall be made to the holders of the Obligations, (x) it shall provide that in
the event of a payment default under ss.12.1(a) or (b) hereof, the Parent shall
not be required to pay the principal of, or any interest, fees and all other
amounts payable with respect to the Subordinated Debt until the Obligations have
been paid in full in cash, (xi) it shall provide that in the event of any other
Event of Default, the Banks shall be permitted to block payments of principal,
interest, fees and all other amounts payable with respect to the Subordinated
Debt for a period of 180 days, and (xii) it shall acknowledge that none of the
provisions outlined in part (b) of this definition can be amended, modified or
otherwise altered without the prior written consent of the Banks.
Subsidiary. Any corporation, association, trust, or other business entity
of which the designated parent shall at any time own directly or indirectly
through a Subsidiary or Subsidiaries at least a majority of the outstanding
capital stock or other interest entitled to vote generally.
Swing Line Loans. Loans made by BKB to the Borrowers pursuant to
ss.2.11(a).
Swing Line Note. The promissory note of the Borrowers to BKB evidencing the
Swing Line Loans hereunder, dated as of the date of this Agreement and in
substantially the form of Exhibit B hereto.
Swing Line Settlement. The making or receiving of payments, in immediately
available funds, by the Banks to or from the Agent in accordance with ss.2.11
hereof to the extent necessary to cause each Bank's actual share of the
outstanding amount of the Loans to be equal to such Bank's Commitment Percentage
of the outstanding amount of such Loans, in any case when, prior to such action,
the actual share is not so equal.
Swing Line Settlement Amount. See ss.2.11(b).
Swing Line Settlement Date. See ss.2.11(b).
Swing Line Settling Bank. See ss.2.11(b).
Total Commitment. See ss.2.1.
U.S. Stock Pledge Agreement. The stock pledge agreement among the Parent,
its U.S. Subsidiaries (other than Excluded Subsidiaries) and the Agent for the
benefit or in the name of the Banks in form and substance satisfactory to the
Agent.
U.S. Subsidiaries. Subsidiaries of the Parent which are organized under the
laws of the United States of America, any state thereof or the District of
Columbia.
ss.1.2. Rules of Interpretation.
(a) A reference to any document or agreement shall include
such document or agreement as amended, modified or supplemented from
time to time in accordance with its terms and the terms of this
Agreement.
(b) The singular includes the plural and the plural includes
the singular.
(c) A reference to any law includes any amendment or
modification to such law.
(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) Accounting terms capitalized but not otherwise defined
herein have the meanings assigned to them by generally accepted
accounting principles applied on a consistent basis by the accounting
entity to which they refer.
(f) The words "include," "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts, have
the meanings assigned to them therein.
(h) Reference to a particular "ss." refers to that section of
this Agreement unless otherwise indicated.
(i) The words "herein," "hereof," "hereunder" and words of
like import shall refer to this Agreement as a whole and not to any
particular section or subdivision of this Agreement.
ss.2. THE REVOLVING CREDIT FACILITY.
ss.2.1. Commitment to Lend. Subject to the terms and conditions set forth
in this Agreement, each of the Banks severally agrees to lend to the Borrowers
and the Borrowers may borrow, repay, and reborrow from time to time commencing
on the Closing Date and prior to the Maturity Date, upon notice by the Borrowers
to the Agent given in accordance with ss.2.6, its Commitment Percentage of such
sums as are requested by the Borrowers, provided that the outstanding amount of
Loans (including the Swing Line Loans) and the Maximum Drawing Amount of the
Letters of Credit shall not exceed a maximum aggregate amount outstanding of
$125,000,000 at any time, as such amount may be reduced pursuant to ss.2.2
hereof (the "Total Commitment"). Each request for a Loan or Letter of Credit
hereunder shall constitute a representation and warranty by the Borrowers that
the conditions set forth in ss.9 and ss.10, as the case may be, have been
satisfied on the date of such request.
ss.2.2. Reduction of Total Commitment.
(a) The Borrowers shall have the right at any time and from
time to time upon two (2) Business Days' prior written notice to the
Agent to reduce by $10,000,000 or an integral multiple thereof or
terminate entirely the Total Commitment, whereupon the Commitments of
the Banks shall be reduced pro rata in accordance with their respective
Commitment Percentages of the amount specified in such notice or, as
the case may be, terminated. The Agent will notify the Banks promptly
after receiving any notice of the Borrowers delivered pursuant to this
ss.2.2. Notwithstanding the foregoing, at no time may the Total
Commitment be reduced to an amount less than the sum of (i) the Maximum
Drawing Amount, and (ii) all Loans then outstanding.
(b) No reduction or termination of the Commitments once made
may be revoked; the portion of the Commitments reduced or terminated
may not be reinstated; and amounts in respect of such reduced or
terminated portion may not be reborrowed.
ss.2.3. The Revolving Credit Notes; the Swing Line Note.
(a) The Revolving Credit Loans shall be evidenced by separate
promissory notes of the Borrowers in substantially the form of Exhibit
A hereto (each a "Revolving Credit Note"), dated as of the date hereof.
One Revolving Credit Note shall be payable to the order of each Bank in
a principal amount equal to such Bank's Commitment or, if less, the
outstanding amount of all Revolving Credit Loans made by such Bank,
plus interest accrued thereon, as set forth herein.
(b) The Swing Line Loans shall be evidenced by a promissory
note of the Borrowers in substantially the form of Exhibit B hereto
(the "Swing Line Note"), dated as of the date hereof. The Swing Line
Note shall be payable to BKB in the principal amount of $5,000,000 or,
if less, the outstanding amount of all Swing Line Loans made by BKB,
plus interest accrued thereon, as set forth herin.
(c) The Borrowers irrevocably authorize each Bank to make or
cause to be made, in connection with a Drawdown Date of any Loan, or at
the time of receipt of any payment of principal on such Bank's Note(s),
an appropriate notation on such Bank's records reflecting the making of
such Loan or the receipt of such payment (as the case may be). The
outstanding amount of the Loans set forth on such Bank's record shall
be prima facie evidence of the principal amount thereof owing and
unpaid to such Bank, but the failure to record, or any error in so
recording, any such amount shall not limit or otherwise affect the
obligations of the Borrowers hereunder or under any Note to make
payments of principal of or interest on any Note when due.
ss.2.4. Interest on Loans.
(a) The outstanding principal amount of the Revolving Credit
Loans shall bear interest at the rate per annum equal to (i) the Base
Rate, or (ii) at the Borrowers' option as provided herein, the LIBOR
Rate plus the Applicable LIBOR Margin.
(b) The outstanding principal amount of the Swing Line Loans
shall bear interest at the rate per annum equal to the Applicable Swing
Line Rate.
(c) Interest shall be payable (i) quarterly in arrears on the
first Business Day of the next succeeding quarter, commencing July 1,
1997, on Base Rate Loans and Swing Line Loans, (ii) on the last day of
the applicable Interest Period, and if such Interest Period is longer
than three (3) months, also on the last day of the third month
following the commencement of such Interest Period, on LIBOR Loans, and
(iii) on the Maturity Date for all Loans.
ss.2.5. Election of LIBOR Rate; Notice of Election; Interest Periods;
Minimum Amounts.
(a) At the Borrowers' option, so long as no Default or Event
of Default has occurred and is then continuing, the Borrowers may (i)
elect to convert any Revolving Credit Loan or a portion thereof from a
Base Rate Loan to a LIBOR Loan, (ii) at the time of any Loan and Letter
of Credit Request, specify that such requested Revolving Credit Loan
shall be a LIBOR Loan, or (iii) upon expiration of the applicable
Interest Period, elect to maintain an existing LIBOR Loan as such,
provided that the Borrowers give notice to the Agent pursuant to
ss.2.5(b) hereof. Upon determining any LIBOR Rate, the Agent shall
forthwith provide notice thereof to the Borrowers and the Banks, and
each such notice to the Borrowers and the Banks shall be considered
prima facie correct and binding, absent manifest error.
(b) Three (3) LIBOR Business Days prior to the making of any
LIBOR Loan or the conversion of any Base Rate Loan to a LIBOR Loan, or,
in the case of an outstanding LIBOR Loan, the expiration date of the
applicable Interest Period, the Borrowers shall give telephonic notice
(confirmed by telecopy on the same LIBOR Business Day) to the Agent not
later than 11:00 a.m. (Boston time) of its election pursuant to
ss.2.5(a). Each such notice delivered to the Agent shall specify the
aggregate principal amount of the Revolving Credit Loans to be borrowed
or maintained as or converted to LIBOR Loans and the requested duration
of the Interest Period that will be applicable to such LIBOR Loan, and
shall be irrevocable and binding upon the Borrowers. If the Borrowers
shall fail to give the Agent notice of their election hereunder
together with all of the other information required by this ss.2.5(b)
with respect to any Revolving Credit Loan, such Loan shall be deemed a
Base Rate Loan. In the event that the Borrowers fail to provide any
such notice with respect to the continuation of any LIBOR Loan as such,
then such LIBOR Loan shall be automatically converted to a Base Rate
Loan at the end of the then expiring Interest Period relating thereto.
(c) Notwithstanding anything herein to the contrary, the
Borrowers may not specify an Interest Period that would extend beyond
the Maturity Date.
(d) All Revolving Credit Loans shall be in a minimum
amount of not less than $5,000,000 and in integral multiples of
$500,000 above such amount.
(e) In no event shall the Borrowers have more than seven
(7) different maturities of LIBOR Loans outstanding at any time.
ss.2.6. Requests for Revolving Credit Loans. The Borrowers shall give to
the Agent written notice in the form of Exhibit C hereto (or telephonic notice
confirmed by telecopy on the same Business Day in the form of Exhibit C hereto)
of each Revolving Credit Loan requested hereunder (a "Loan and Letter of Credit
Request") not later than (a) 9:00 a.m. (Boston time) on the proposed Drawdown
Date of any Base Rate Loan, or (b) three (3) LIBOR Business Days prior to the
proposed Drawdown Date of any LIBOR Loan. Each such notice shall be given by the
Parent as agent for the Borrowers and shall specify the principal amount of the
Revolving Credit Loan requested and shall include a current Loan and Letter of
Credit Request, reflecting the Maximum Drawing Amount of all Letters of Credit
outstanding. Each Loan and Letter of Credit Request shall be irrevocable and
binding on the Borrowers and shall obligate the Borrowers to accept the
Revolving Credit Loan requested from the Banks on the proposed Drawdown Date.
Each of the representations and warranties made by or on behalf of any of the
Borrowers to the Banks or the Agent in this Agreement or any other Loan Document
shall be true and correct in all material respects when made and shall, for all
purposes of this Agreement, be deemed to be repeated on and as of the date of
the submission of any Loan and Letter of Credit Request and on and as of the
Drawdown Date of any Loan (including Swing Line Loans) or the date of issuance
or renewal of any Letter of Credit (except to the extent of changes resulting
from transactions contemplated or permitted by this Agreement and the other Loan
Documents and changes occurring in the ordinary course of business that do not
in the aggregate have a material adverse effect on the Borrowers taken as a
whole, or to the extent that such representations and warranties expressly
relate to an earlier date). The Agent shall promptly notify each Bank of each
Loan and Letter of Credit Request received by the Agent (i) not later than 12:00
p.m. (Boston time) on the proposed Drawdown Date of any Base Rate Loan, (ii)
three (3) LIBOR Business Days prior to the proposed Drawdown Date of any LIBOR
Loan to be made to the Borrowers. or (iii) on a monthly basis with respect to
Letters of Credit.
ss.2.7. Funds for Revolving Credit Loans.
(a) Not later than 1:00 p.m. (Boston time) on the proposed
Drawdown Date of any Revolving Credit Loans, each of the Banks will
make available to the Agent, at its Head Office, in immediately
available funds, the amount of such Bank's Commitment Percentage of the
amount of the requested Revolving Credit Loans. Upon receipt from each
Bank of such amount, and upon receipt of the documents required by
ss.ss.9 and 10 and the satisfaction of the other conditions set forth
therein, to the extent applicable, the Agent will make available to the
Borrowers the aggregate amount of such Revolving Credit Loans made
available to the Agent by the Banks on the Drawdown Date. The failure
or refusal of any Bank to make available to the Agent at the aforesaid
time and place on any Drawdown Date the amount of its Commitment
Percentage of the requested Revolving Credit Loans shall not relieve
any other Bank from its several obligation hereunder to make available
to the Agent the amount of such other Bank's Commitment Percentage of
any requested Revolving Credit Loans.
(b) The Agent may, unless notified to the contrary by any Bank
prior to a Drawdown Date, assume that such Bank has made available to
the Agent on such Drawdown Date the amount of such Bank's Commitment
Percentage of the Revolving Credit Loans to be made on such Drawdown
Date, and the Agent may (but it shall not be required to), in reliance
upon such assumption, make available to the Borrowers a corresponding
amount. If any Bank makes available to the Agent such amount on a date
after such Drawdown Date, such Bank shall pay to the Agent on demand an
amount equal to the product of (i) the average computed for the period
referred to in clause (iii) below, of the weighted average interest
rate paid by the Agent for federal funds acquired by the Agent during
each day included in such period, times (ii) the amount of such Bank's
Commitment Percentage of such Revolving Credit Loans, times (iii) a
fraction, the numerator of which is the number of days that elapse from
and including such Drawdown Date to the date on which the amount of
such Bank's Commitment Percentage of such Revolving Credit Loans shall
become immediately available to the Agent, and the denominator of which
is 365. A statement of the Agent submitted to such Bank with respect to
any amounts owing under this paragraph shall be prima facie evidence,
absent manifest error, of the amount due and owing to the Agent by such
Bank. If the amount of such Bank's Commitment Percentage of such
Revolving Credit Loans is not made available to the Agent by such Bank
within three (3) Business Days following such Drawdown Date, the Agent
shall be entitled to recover such amount from the Borrowers on demand,
with interest thereon at the rate per annum applicable to the Revolving
Credit Loans made on such Drawdown Date.
ss.2.8. Maturity of the Loans; Annual Option to Extend. The Total
Commitment shall terminate and all Loans shall be due and payable on the
Maturity Date; provided, however, that such Total Commitment and Maturity Date
may be extended for successive annual periods up to a final Maturity Date of
June 9, 2002, as provided in this ss.2.8 and at each Bank's sole discretion,
upon the written request of the Borrowers. A written request, if any, for the
extension of the Total Commitment and Maturity Date shall be given by the
Borrowers to the Agent and the Banks not less than one-hundred twenty (120) days
prior to the Extension Date. Except as expressly provided in this ss.2.8, no
extension of the Total Commitment and then current Maturity Date pursuant to
this ss.2.8 shall be effective unless all of the Banks shall have approved such
extension by written notice to the Agent. If on or prior to ninety (90) days
prior to the applicable Extension Date, all of the Banks consent to such
extension by written notice to the Agent, the Total Commitment and Maturity Date
automatically shall be extended to that date which is one year later than the
then current Maturity Date. If on or prior to ninety (90) days prior to the
applicable Extension Date, any Bank (a "Declining Bank") shall have objected to
such requested extension by written notice to the Agent or shall not have
delivered written notice to the Agent consenting to such requested extension,
then the Borrowers or the Agent may, no later than such Extension Date, replace
each such Declining Bank if necessary so that, as of such Extension Date, the
Total Commitment is not less than $100,000,000. In no event shall the Maturity
Date be extended beyond June 9, 2002; nor shall the Total Commitment of such
extended facility be less than $100,000,000.
ss.2.9. Mandatory Repayments of the Loans. If at any time the outstanding
amount of the Loans plus the Maximum Drawing Amount of all outstanding Letters
of Credit exceeds the Total Commitment, whether by reduction of the Total
Commitment or otherwise, then the Borrowers shall immediately pay the amount of
such excess to the Agent for application to the Loans, or if no Loans shall be
outstanding, to be held by the Agent as collateral security for the
Reimbursement Obligations, provided, however, that if the amount of cash
collateral held by the Agent pursuant to this ss.2.9 exceeds the amount of the
Obligations, the Agent shall return such excess to the Borrowers.
ss.2.10. Optional Prepayments or Repayments of Loans. Subject to ss.4.8,
the Borrowers shall have the right, at their election, to repay or prepay the
outstanding amount of the Loans, as a whole or in part, at any time without
penalty or premium, provided that such repayments or prepayments shall be in a
minimum amount of not less than $5,000,000 and in integral multiples of $500,000
above such amount. The Borrowers shall give the Agent, no later than 11:00 a.m.
(Boston time) on the Business Day of such proposed prepayment or repayment,
written notice (or telephonic notice confirmed in writing) of any proposed
prepayment or repayment pursuant to this ss.2.10, specifying the proposed date
of prepayment or repayment of Loans and the principal amount to be paid.
ss.2.11. Swing Line Loans; Settlements.
(a) Solely for ease of administration of the Loans, BKB may,
but shall not be required to, fund Base Rate Loans made in accordance
with the provisions of this Agreement in amounts less than $5,000,000
("Swing Line Loans") provided that the outstanding amount of Swing Line
Loans advanced by BKB hereunder shall not exceed $5,000,000 at any
time. Each Bank shall remain severally and unconditionally liable to
fund its Commitment Percentage of such Swing Line Loans on each Swing
Line Settlement Date and, in the event BKB chooses not to fund all Base
Rate Loans requested on any date, to fund its Commitment Percentage of
the Base Rate Loans requested, subject to satisfaction of the
provisions hereof relating to the making of Base Rate Loans. Prior to
each Swing Line Settlement, all payments or repayments of the principal
of, and interest on, Swing Line Loans shall be credited to the account
of BKB.
(b) The Banks shall effect a Swing Line Settlement of each
Swing Line Loan on (i) the Business Day immediately following any day
on which the Agent gives notice of a Swing Line Settlement, (ii) the
Business Day immediately following the Agent's becoming aware of the
existence of any Default or Event of Default, (iii) the Maturity Date,
and (iv) the Business Day immediately following any day on which the
outstanding amount of Swing Line Loans advanced by BKB exceeds
$5,000,000 (each such date, a "Swing Line Settlement Date"). One (1)
Business Day prior to each such Swing Line Settlement Date, the Agent
shall give telephonic notice to the Banks of (A) the respective
outstanding amount of Loans made by each Bank as at the close of
business on the prior day, (B) the amount that any Bank, as applicable
(a "Swing Line Settling Bank"), shall pay to effect a Swing Line
Settlement (a "Swing Line Settlement Amount") and (C) the portion (if
any) of the aggregate Swing Line Settlement Amount to be paid to each
Bank. A statement of the Agent submitted to the Banks with respect to
any amounts owing hereunder shall be prima facie evidence of the amount
due and owing. Each Swing Line Settling Bank shall, not later than 1:00
p.m. (Boston time) on each Swing Line Settlement Date, effect a wire
transfer of immediately available funds to the Agent at its Head Office
in the amount of such Bank's Swing Line Settlement Amount. The Agent
shall, as promptly as practicable during normal business hours on each
Swing Line Settlement Date, effect a wire transfer of immediately
available funds to each Bank of the Swing Line Settlement Amount to be
paid to such Bank. All funds advanced by any Bank as a Swing Line
Settling Bank pursuant to this ss.2.11(b) shall for all purposes be
treated as a Base Rate Loan made by such Swing Line Settling Bank to
the Borrowers, and all funds received by any Bank pursuant to this
ss.2.11(b) shall for all purposes be treated as repayment of amounts
owed by the Borrowers with respect to Base Rate Loans made by such
Bank. In the event that any Bankruptcy Event prevents a Swing Line
Settling Bank from making any Swing Line Settlement as contemplated
hereby, such Swing Line Settling Bank will make such dispositions and
arrangements, either by way of purchase of participations,
distribution, pro tanto assignment of claims, subrogation or otherwise
as shall result in each Bank's share of the outstanding Revolving
Credit Loans being equal, as nearly as may be, to such Bank's
Commitment Percentage of the outstanding amount of the Revolving Credit
Loans.
(c) The Agent may (unless notified to the contrary by any
Swing Line Settling Bank by 12:00 noon (Boston time) one (1) Business
Day prior to the Settlement Date) assume that each Swing Line Settling
Bank has made available (or will make available by the time specified
in ss.2.11(b)) to the Agent its Swing Line Settlement Amount, and the
Agent may (but shall not be required to), in reliance upon such
assumption, make available to each applicable Bank its share (if any)
of the aggregate Swing Line Settlement Amount. If the Swing Line
Settlement Amount of such Swing Line Settling Bank is made available to
the Agent by such Swing Line Settling Bank on a date after such Swing
Line Settlement Date, such Swing Line Settling Bank shall pay the Agent
on demand an amount equal to the product of (i) the average, computed
for the period referred to in clause (iii) below, of the weighted
average annual interest rate paid by the Agent for federal funds
acquired by the Agent during each day included in such period times
(ii) such Swing Line Settlement Amount times (iii) a fraction, the
numerator of which is the number of days that elapse from and including
such Swing Line Settlement Date to but not including the date on which
such Swing Line Settlement Amount shall become immediately available to
the Agent, and the denominator of which is 365. Upon payment of such
amount such Swing Line Settling Bank shall be deemed to have delivered
its Swing Line Settlement Amount on the Swing Line Settlement Date and
shall become entitled to interest payable by the Borrowers with respect
to such Swing Line Settling Bank's Swing Line Settlement Amount as if
such share were delivered on the Swing Line Settlement Date. If such
Swing Line Settlement Amount is not in fact made available to the Agent
by such Swing Line Settling Bank within three (3) Business Days of such
Swing Line Settlement Date, the Agent shall be entitled to recover such
amount from the Borrowers, with interest thereon at the Base Rate.
(d) After any Swing Line Settlement Date, any payment by the
Borrowers of Swing Line Loans hereunder shall be allocated among the
Banks, in amounts determined so as to provide that after such
application and the related Swing Line Settlement, the outstanding
amount of Loans of each Bank equals, as nearly as practicable, such
Bank's Commitment Percentage of the aggregate amount of Loans.
ss.3. LETTERS OF CREDIT.
ss.3.1. Letter of Credit Commitments.
(a) Subject to the terms and conditions hereof and the
execution and receipt of a Loan and Letter of Credit Request reflecting
the Maximum Drawing Amount of all Letters of Credit (including the
requested Letter of Credit) and a Letter of Credit Application, the
Agent, on behalf of the Banks and in reliance upon the agreement of the
Banks set forth in ss.3.1(b) and upon the representations and
warranties of the Borrowers contained herein, subject to the provisions
of ss.ss.2.6 and 19.2 hereof, agrees to issue, extend and renew for the
account of the Borrowers one or more standby or documentary letters of
credit (individually, a "Letter of Credit"), in such form as may be
requested from time to time by the Borrowers and agreed to by the
Agent; provided, however, that, after giving effect to such request,
the aggregate Maximum Drawing Amount of all Letters of Credit issued at
any time under this ss.3.1(a) shall not exceed $10,000,000, and no
Letter of Credit shall have an expiration date later than the earlier
of (i) one (1) year after the date of issuance of the Letter of Credit
(which may incorporate automatic renewals for periods of up to one (1)
year, provided that the Agent may, upon 30 days' notice to the
beneficiary, cancel such Letter of Credit which has been renewed beyond
its initial one (1) year term), or (ii) thirty (30) days prior to the
Maturity Date.
(b) Each Bank severally agrees that it shall be absolutely
liable, without regard to the occurrence of any Default or Event of
Default or any other condition precedent whatsoever, to the extent of
such Bank's Commitment Percentage thereof, to reimburse the Agent on
demand for the amount of each draft paid by the Agent under each Letter
of Credit to the extent that such amount is not reimbursed by the
Borrowers pursuant to ss.3.2 (such agreement for a Bank being called
herein the "Letter of Credit Participation" of such Bank).
(c) Each such payment made by a Bank shall be treated as the
purchase by such Bank of a participating interest in the Borrowers'
Reimbursement Obligation under ss.3.2 in an amount equal to such
payment. Each Bank shall share in accordance with its participating
interest in any interest which accrues pursuant to ss.3.2.
ss.3.2. Reimbursement Obligation of the Borrowers. In order to induce the
Agent to issue, extend and renew each Letter of Credit and the Banks to
participate therein, the Borrowers hereby agree to reimburse or pay to the Agent
with respect to each Letter of Credit issued, extended or renewed by the Agent
hereunder as follows:
(a) on each date that any draft presented under any Letter of
Credit is honored by the Agent or the Agent otherwise makes payment
with respect thereto, (i) the amount paid by the Agent under or with
respect to such Letter of Credit, and (ii) the amount of any taxes,
fees, charges or other costs and expenses whatsoever incurred by the
Agent or any Bank in connection with any payment made by the Agent or
any Bank under, or with respect to, such Letter of Credit, provided,
however, that if the Borrowers do not reimburse the Agent on the date
the Agent makes payment with respect to such Letter of Credit, such
amount shall, provided that a Bankruptcy Event has not occurred, become
automatically a Revolving Credit Loan which is a Base Rate Loan; and
(b) upon the Maturity Date or the acceleration of the
Reimbursement Obligations with respect to all Letters of Credit in
accordance with ss.12, an amount equal to the then Maximum Drawing
Amount of all Letters of Credit and any unpaid Reimbursement
Obligations, which amount shall be held by the Agent for the benefit of
the Banks and the Agent as cash collateral for all Reimbursement
Obligations, provided, however, that if the amount of cash collateral
held by the Agent pursuant to this ss.3.2 exceeds the amount of the
Obligations, the Agent shall return such excess to the Borrowers.
ss.3.3. Obligations Absolute. The Borrowers' obligations under this ss.3
shall be absolute and unconditional under any and all circumstances and
irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which the Borrowers may have or have had against the Agent, any Bank or any
beneficiary of a Letter of Credit. The Borrowers further agree with the Agent
and the Banks that the Agent and the Banks shall not be responsible for, and the
Borrowers' Reimbursement Obligations under ss.3.2 shall not be affected by,
among other things, the validity or genuineness of documents or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, fraudulent or forged, or any dispute between or among
the Borrowers, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of the Borrowers against the beneficiary of
any Letter of Credit or any such transferee. The Agent and the Banks shall not
be liable for any error, omission, interruption or delay in transmission,
dispatch or delivery of any message or advice, however transmitted, in
connection with any Letter of Credit. The Borrowers agree that any action taken
or omitted by the Agent or any Bank under or in connection with each Letter of
Credit and the related drafts and documents, if done in good faith, shall be
binding upon the Borrowers and shall not result in any liability on the part of
the Agent or any Bank to the Borrowers.
ss.3.4. Reliance by Agent. To the extent not inconsistent with ss.3.4, the
Agent shall be entitled to rely, and shall be fully protected in relying upon,
any Letter of Credit, draft, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document believed by it to be genuine and correct and
to have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel, independent accountants and other
experts selected by the Agent.
ss.4. FEES, PAYMENTS, AND COMPUTATIONS; JOINT AND SEVERAL LIABILITY.
ss.4.1. Fees.
(a) Commitment Fee. The Borrowers agree to pay to the Agent,
for the accounts of the Banks, a fee (the "Commitment Fee") equal to
the Applicable Commitment Rate multiplied by the amount of the unused
portion of the Total Commitment during each calendar quarter or portion
thereof from the date hereof to the Maturity Date (or to the date of
termination in full of the Total Commitment, if earlier). The
Commitment Fee shall be payable quarterly in arrears on the first day
of each calendar quarter for the immediately preceding calendar quarter
commencing on July 1, 1997, with a final payment on the Maturity Date.
(b) Letter of Credit Fees. The Borrowers shall pay in advance
on the date of issuance of each Letter of Credit an issuance fee to the
Agent for its account equal to one eighth of one percent (1/8%) per
annum on the Maximum Drawing Amount of each Letter of Credit (the
"Issuance Fee"). The Borrowers shall also pay quarterly in advance on
the first Business Day of each fiscal quarter a fee to the Agent equal
to the Applicable L/C Margin multiplied by the Maximum Drawing Amount
of all outstanding Letters of Credit (the "Letter of Credit Fee"),
which fee shall be for the accounts of the Banks in accordance with
their respective Commitment Percentages. In addition to the Issuance
Fee and the Letter of Credit Fee, the Borrowers shall pay to the Agent,
for its own account, all related customary administrative fees in
accordance with customary practice.
ss.4.2. Payments.
(a) All payments of principal, interest, Reimbursement
Obligations, fees and any other amounts due hereunder or under any of
the other Loan Documents shall be made to the Agent, for the respective
accounts of the Banks and the Agent, to be received at the Agent's Head
Office in immediately available funds by 12:00 p.m. (Boston time) on
any due date. If a payment (other than with respect to Swing Line
Loans) is received by the Agent at or before 12:00 p.m. (Boston time)
on any Business Day, the Agent shall on the same Business Day transfer
in immediately available funds to each of the Banks their pro rata
portion of such payment in accordance with their respective Commitment
Percentages. If such payment is received by the Agent after 12:00 p.m.
(Boston time) on any Business Day, such transfer shall be made by the
Agent to the applicable Bank(s) on the next Business Day. In the event
that the Agent fails to make such transfer to any Bank as set forth
above, the Agent shall pay to such Bank on demand an amount equal to
the product of (i) the average, computed for the period referred to in
clause (iii) below, of the weighted average interest rate paid by such
Bank for funds acquired by such Bank during each day included in such
period, times (ii) the amount equal to such Bank's Commitment
Percentage of such payment, times (iii) a fraction, the numerator of
which is the number of days that elapse from and including the date of
payment to and including the date on which the amount due to such Bank
shall become immediately available to such Bank, and the denominator of
which is 365.
(b) All payments by the Borrowers hereunder and under any of
the other Loan Documents shall be made without setoff or counterclaim
and free and clear of and without deduction for any taxes, levies,
imposts, duties, charges, fees, deductions, withholdings, compulsory
loans, restrictions or conditions of any nature now or hereafter
imposed or levied by any jurisdiction or any political subdivision
thereof or taxing or other authority therein unless the Borrowers are
compelled by law to make such deduction or withholding. If any such
obligation is imposed upon the Borrowers with respect to any amount
payable by them hereunder or under any of the other Loan Documents, the
Borrowers will pay to the Agent, for the account of the Banks or (as
the case may be) the Agent, on the date on which such amount is due and
payable hereunder or under such other Loan Document, such additional
amount in Dollars as shall be necessary to enable the Banks or the
Agent to receive the same net amount which the Banks or the Agent would
have received on such due date had no such obligation been imposed upon
the Borrowers, provided however that the foregoing obligation to pay
such additional amounts shall not apply:
(i) to any payment to a Bank if such Bank is not, on
the date hereof (or on the date it becomes a Bank under this
Agreement) and on the date of any change in the lending office
of such Bank identified after its execution, entitled by
virtue of its status as a non-resident alien to submit either
a Form 1001 (relating to such Bank and entitling it to a
complete exemption from withholding on all interest to be
received by it hereunder in respect of the Revolving Credit
Loans) or Form 4224 (relating to all interest to be received
by such Bank hereunder in respect of Revolving Credit Loans)
of the U.S. Department of Treasury, or
(ii) to any item referred to in the preceding
sentence that would not have been imposed but for the failure
by such Bank to comply with applicable certification,
information, documentation or other reporting requirements
concerning the nationality, residence, identity or connections
of such Bank with the United States if such compliance is
required by statute or regulation of the United States as a
precondition to relief or exemption from such item.
The Borrowers will deliver promptly to the Agent certificates
or other valid vouchers for all taxes or other charges deducted from or
paid with respect to payments made by the Borrowers hereunder or under
such other Loan Document.
ss.4.3. Computations. All computations of interest on Base Rate Loans and
of Commitment Fees, Letter of Credit Fees or other fees shall, unless otherwise
expressly provided herein, be based on a 365-day year (or 366-day year, as
applicable) and paid for the actual number of days elapsed. All computations of
interest on LIBOR Loans shall, unless otherwise expressly provided herein, be
based on a 360-day year and paid for the actual number of days elapsed. Whenever
a payment hereunder or under any of the other Loan Documents becomes due on a
day that is not a Business Day or LIBOR Business Day (as applicable), the due
date for such payment shall be extended to the next succeeding Business Day or
LIBOR Business Day (as applicable), and interest shall accrue during such
extension; provided that, for any Interest Period for any LIBOR Loan, if such
next succeeding LIBOR Business Day falls in the next succeeding calendar month
or after the Maturity Date, it shall be deemed to end on the preceding LIBOR
Business Day.
ss.4.4. Additional Costs, Etc. If, after the date hereof, any change in
present applicable law or adoption of any applicable law after the date hereof
(including, in either case, without limitation, statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Bank by any central bank or other fiscal, monetary or
other authority, whether or not having the force of law) shall:
(a) subject such Bank to any tax, levy, impost, duty, charge,
fee, deduction or withholding of any nature with respect to this
Agreement, the other Loan Documents, such Bank's Commitment, or the
Loans (other than taxes based upon or measured by the income or profits
of such Bank or any franchise tax imposed by the jurisdiction of its
incorporation or organization, or the location of its lending office,
hereinafter referred to as "Income Taxes"); or
(b) materially change the basis of taxation (except for
changes in Income Taxes) of payments to such Bank of the principal or
of the interest on any Loans or any other amounts payable to such Bank
under this Agreement or the other Loan Documents; or
(c) except as provided in ss.4.5 or as otherwise reflected in
the Base Rate or the LIBOR Rate, impose or increase or render
applicable (other than to the extent specifically provided for
elsewhere in this Agreement) any special deposit, reserve, assessment,
liquidity, capital adequacy or other similar requirements (whether or
not having the force of law) against assets held by, or deposits in or
for the account of, or loans by, or commitments of, an office of any
Bank with respect to this Agreement, the other Loan Documents, the
Commitment, or the Loans; or
(d) impose on such Bank any other conditions or requirements
with respect to this Agreement, the other Loan Documents, the Loans,
such Bank's Commitment, or any class of loans or commitments of which
any of the Loans or such Bank's Commitment forms a part, and the result
of any of the foregoing is
(i) to increase the cost to such Bank of making,
funding, issuing, renewing, extending or maintaining the Loans
or such Bank's Commitment, or issuing or participating in
Letters of Credit;
(ii) to reduce the amount of principal, interest or
other amount payable to such Bank hereunder on account of such
Bank's Commitment or the Loans;
(iii) to require such Bank to make any payment or to
forego any interest or other sum payable hereunder, the amount
of which payment or foregone interest or other sum is
calculated by reference to the gross amount of any sum
receivable or deemed received by such Bank from the Borrower
hereunder,
then,and in each such case, the Borrowers will, upon demand made by such
Bank at any time and from time to time as often as the occasion therefore may
arise (which demand shall be accompanied by a statement setting forth the basis
of such demand), pay such reasonable additional amounts as will be sufficient to
compensate such Bank for such additional costs, reduction, payment or foregone
interest or other sum.
ss.4.5. Capital Adequacy. If any Bank shall have determined that, after the
date hereof, the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change in any such law, rule, or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Bank (or any corporation controlling such Bank) as a
consequence of such Bank's obligations hereunder to a level below that which
such Bank (or any corporation controlling such Bank) could have achieved but for
such adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by such Bank to
be material, then from time to time, within thirty (30) days after demand by
such Bank (which demand shall be accompanied by a statement setting forth the
basis of such demand), the Borrower shall pay to such Bank such additional
amount or amounts as will, in such Bank's reasonable determination, fairly
compensate such Bank (or any corporation controlling such Bank) for such
reduction.
ss.4.6. Certificate.
A certificate setting forth any additional amounts payable pursuant to
ss.ss.4.4 or 4.5 and a reasonable explanation of such amounts which are due,
submitted by any Bank or the Agent to the Borrowers, shall be prima facie
correct and binding, absent manifest error.
ss.4.7. Reasonable Efforts to Mitigate. Each Bank agrees that as promptly
as practicable after it becomes aware of the occurrence of an event or the
existence of a condition that would cause it to be affected under ss.ss.4.4, 4.5
or 4.11, such Bank will give notice thereof to the Borrower, with a copy to the
Agent, and, to the extent so requested by the Borrower and not inconsistent with
such Bank's internal policies, such Bank shall use reasonable efforts and take
such actions as are reasonably appropriate if as a result thereof the additional
moneys which would otherwise be required to be paid to such Bank pursuant to
such subsections would be materially reduced, or the illegality or other adverse
circumstances which would otherwise require a conversion of such Loans or result
in the inability to make such Loans pursuant to such sections would cease to
exist, and in each case if, as determined by such Bank in its sole discretion,
the taking such actions would not adversely affect such Loans or such Bank or
otherwise be disadvantageous to such Bank. To the extent practicable and
applicable, each Bank shall allocate such cost increases among its customers in
good faith and on an equitable basis.
ss.4.8. LIBOR Indemnity. The Borrowers agree to indemnify the Banks and the
Agent and to hold them harmless from and against any loss, cost or expenses
(including loss of anticipated profits) that the Banks and the Agent may sustain
or incur as a consequence of (a) default by the Borrowers in payment of the
principal amount of or any interest on any LIBOR Loans as and when due and
payable, including any such loss or expense arising from interest or fees
payable by any Bank or the Agent to lenders of funds obtained by it in order to
maintain its LIBOR Loans, or (b) default by the Borrowers in making a borrowing
or conversion after the Borrowers have given (or are deemed to have given)
notice pursuant to ss.2.5 or ss.2.6, the making of any payment of a LIBOR Loan
or the making of any conversion of any such LIBOR Loan to a Base Rate Loan on a
day that is not the last day of the applicable Interest Period with respect
thereto, including interest or fees payable by any Bank to lenders of funds
obtained by it in order to maintain any such LIBOR Loans. Such loss or
reasonable expense shall include an amount equal to the excess, if any, as
reasonably determined by each Bank of (i) its cost of obtaining the funds for
the LIBOR Loan being paid, prepaid, converted, not converted, or not borrowed,
as the case may be (based on the LIBOR Rate) for the period from the date of
such payment, prepayment, conversion, or failure to borrow or convert, as the
case may be, to the last day of the Interest Period for such Loan (or, in the
case of a failure to borrow, the Interest Period for the Loan which would have
commenced on the date of such failure to borrow) over (ii) the amount of
interest (as reasonably determined by such Bank) that would be realized by such
Bank in re-employing the funds so paid, prepaid, converted, or not borrowed,
converted, or prepaid for such period or Interest Period, as the case may be,
which determinations shall be prima facie correct and binding, absent manifest
error.
ss.4.9. Interest on Overdue Amounts. Overdue principal and (to the extent
permitted by applicable law) interest on the Loans and all other overdue amounts
payable hereunder or under any of the other Loan Documents shall bear interest
compounded monthly and payable on demand at a rate per annum equal to the Base
Rate plus two (2) percent until such amount shall be paid in full (after, as
well as before, judgment).
ss.4.10. Interest Limitation. Notwithstanding any other term of this
Agreement or any Note or any other document referred to herein or therein, the
maximum amount of interest which may be charged to or collected from any person
liable hereunder or under any Note by any Bank shall be absolutely limited to,
and shall in no event exceed, the maximum amount of interest which could
lawfully be charged or collected under applicable law (including, to the extent
applicable, the provisions of Section 5197 of the Revised Statutes of the United
States of America, as amended, 12 U.S.C. Section 85, as amended), so that the
maximum of all amounts constituting interest under applicable law, howsoever
computed, shall never exceed as to any Person liable therefor such lawful
maximum, and any term of this Agreement, the Notes, the Letter of Credit
Applications, or any other document referred to herein or therein which could be
construed as providing for interest in excess of such lawful maximum shall be
and hereby is made expressly subject to and modified by the provisions of this
paragraph, and in the event any amount in excess of the lawful maximum is
charged or collected by the Agent or the Banks or paid by the Borrowers, the
Borrowers shall be entitled to the reimbursement of such excess together with
interest thereon at the highest lawful rate at the time of such overcharge.
ss.4.11. Illegality; Inability to Determine LIBOR Rate. Notwithstanding any
other provision of this Agreement, if (a) the introduction of, any change in, or
any change in the interpretation of, any law or regulation applicable to the
Agent or any Bank shall make it unlawful, or any central bank or other
governmental authority having jurisdiction thereof shall assert that it is
unlawful, for any Bank or the Agent to perform its obligations in respect of any
LIBOR Loans, or (b) if the Banks or the Agent shall reasonably determine with
respect to LIBOR Loans that (i) by reason of circumstances affecting any LIBOR
interbank market, adequate and reasonable methods do not exist for ascertaining
the LIBOR Rate which would otherwise be applicable during any Interest Period,
or (ii) deposits of Dollars in the relevant amount for the relevant Interest
Period are not available to the Banks or the Agent in any LIBOR interbank
market, or (iii) the LIBOR Rate does not or will not accurately reflect the cost
to the Banks or the Agent of obtaining or maintaining the applicable LIBOR Loans
during any Interest Period, then the Banks or the Agent shall promptly give
telephonic, telex or cable notice of such determination to the Borrowers (which
notice shall be conclusive and binding upon the Borrowers). Upon such
notification by the Banks or the Agent, the obligation of the Banks or the Agent
to make LIBOR Loans shall be suspended until the Banks or the Agent determine
that such circumstances no longer exist, and the outstanding LIBOR Loans shall
continue to bear interest at the applicable rate based on the LIBOR Rate until
the end of the applicable Interest Period, and thereafter shall be deemed
converted to Base Rate Loans in equal principal amounts.
ss.4.12. Concerning Joint and Several Liability of the Borrowers.
(a) Each of the Borrowers is accepting joint and several
liability hereunder and under the other Loan Documents in consideration
of the financial accommodations to be provided by the Banks under this
Agreement, for the mutual benefit, directly and indirectly, of each of
the Borrowers and in consideration of the undertakings of each other
Borrower to accept joint and several liability for the Obligations.
(b) Each of the Borrowers, jointly and severally, hereby
irrevocably and unconditionally accepts, not merely as a surety but
also as a co-debtor, joint and several liability with the other
Borrowers with respect to the payment and performance of all of the
Obligations (including, without limitation, any Obligations arising
under this ss.4.12), it being the intention of the parties hereto that
all of the Obligations shall be the joint and several Obligations of
each of the Borrowers without preferences or distinction among them.
(c) If and to the extent that any of the Borrowers shall fail
to make any payment with respect to any of the Obligations as and when
due or to perform any of the Obligations in accordance with the terms
thereof, then in each such event the other Borrowers will make such
payment with respect to, or perform, such Obligation.
(d) The Obligations of each of the Borrowers under the
provisions of this ss.4.12 constitute full recourse Obligations of each
of the Borrowers enforceable against each such corporation to the full
extent of its properties and assets, irrespective of the validity,
regularity or enforceability of this Agreement or any other
circumstance whatsoever.
(e) Except as otherwise expressly provided in this Agreement,
each of the Borrowers hereby waives notice of acceptance of its joint
and several liability, notice of any Loans made under this Agreement,
notice of any action at any time taken or omitted by the Banks under or
in respect of any of the Obligations, and, generally, to the extent
permitted by applicable law, all demands, notices and other formalities
of every kind in connection with this Agreement. Each of the Borrowers
hereby assents to, and waives notice of, any extension or postponement
of the time for the payment of any of the Obligations, the acceptance
of any payment of any of the Obligations, the acceptance of any partial
payment thereon, any waiver, consent or other action or acquiescence by
the Banks at any time or times in respect of any default by any of the
Borrowers in the performance or satisfaction of any term, covenant,
condition or provision of this Agreement, any and all other indulgences
whatsoever by the Banks in respect of any of the Obligations, and the
taking, addition, substitution or release, in whole or in part, at any
time or times, of any security for any of the Obligations or the
addition, substitution or release, in whole or in part, of any of the
Borrowers. Without limiting the generality of the foregoing, each of
the Borrowers assents to any other action or delay in acting or failure
to act on the part of the Banks with respect to the failure by any of
the Borrowers to comply with any of its respective Obligations,
including, without limitation, any failure strictly or diligently to
assert any right or to pursue any remedy or to comply fully with
applicable laws or regulations thereunder, which might, but for the
provisions of this ss.4.12, afford grounds for terminating, discharging
or relieving any of the Borrowers, in whole or in part, from any of its
Obligations under this ss.4.12, it being the intention of each of the
Borrowers that, so long as any of the Obligations hereunder remain
unsatisfied, the Obligations of such Borrowers under this ss.4.12 shall
not be discharged except by performance and then only to the extent of
such performance. The Obligations of each of the Borrowers under this
ss.4.12 shall not be diminished or rendered unenforceable by any
winding up, reorganization, arrangement, liquidation, re-construction
or similar proceeding with respect to any of the Borrowers or the
Banks. The joint and several liability of the Borrowers hereunder shall
continue in full force and effect notwithstanding any absorption,
merger, amalgamation or any other change whatsoever in the name,
membership, constitution or place of formation of any of the Borrowers
or the Banks.
(f) The provisions of this ss.4.12 are made for the benefit of
the Banks and their successors and assigns, and may be enforced in good
faith by them from time to time against any or all of the Borrowers as
often as the occasion therefor may arise and without requirement on the
part of the Banks first to marshal any of their claims or to exercise
any of their rights against any other Borrower or to exhaust any
remedies available to them against any other Borrower or to resort to
any other source or means of obtaining payment of any of the
Obligations hereunder or to elect any other remedy. The provisions of
this ss.4.12 shall remain in effect until all of the Obligations shall
have been paid in full or otherwise fully satisfied. If at any time,
any payment, or any part thereof, made in respect of any of the
Obligations, is rescinded or must otherwise be restored or returned by
the Banks upon the insolvency, bankruptcy or reorganization of any of
the Borrowers, or otherwise, the provisions of this ss.4.12 will
forthwith be reinstated in effect, as though such payment had not been
made.
ss.4.13. New Borrowers. Any existing or newly-created or acquired U.S
Subsidiary of the Parent (other than members of the MasTec International Group),
which (a) has annual gross revenues of at least $1,000,000 on an historical or
annualized basis, or (b) is the parent of any other Borrower, shall be Borrowers
hereunder, and all other U.S. Subsidiaries of the Parent designated as such by
the Parent shall be Excluded Subsidiaries, provided that the Excluded
Subsidiaries may not, in the aggregate, have in excess of five percent (5%) of
consolidated total assets, consolidated total liabilities or consolidated gross
revenues of the Parent and its U.S. Subsidiaries (other than members of the
MasTec International Group) at any time, in each case as determined in
accordance with GAAP. Any Subsidiary which is required to become a Borrower
pursuant to the terms of this ss.4.13 shall sign Notes, shall enter into an
amendment to this Agreement and the U.S. Stock Pledge Agreement with the other
parties hereto providing that such Subsidiary shall become a Borrower hereunder,
and shall provide such other documentation as the Agent may reasonably request,
including, without limitation, documentation with respect to conditions
specified in ss.9 hereof. In such event, the Agent is hereby authorized by the
parties to amend Schedule 1 hereto to include such Subsidiary as a Borrower
hereunder. The Borrowers hereby agree to pledge all of their stock of the U.S.
Subsidiaries (including members of the MasTec International Group which are U.S.
Subsidiaries), other than the stock of Excluded Subsidiaries, to the Agent for
the benefit of the Banks pursuant to the terms of the U.S. Stock Pledge
Agreement.
ss.4.14. Replacement of Banks.
If any Bank (an "Affected Bank") (i) makes demand upon the Borrowers for
(or if Borrowers are otherwise required to pay) amounts pursuant to
ss.ss.4.2(b), 4.4 or 4.5, (ii) is unable to make or maintain LIBOR Loans as a
result of a condition described in ss.4.11, or (iii) defaults in its obligation
to make Loans or participate in Letters of Credit in accordance with the terms
of this Agreement, the Borrowers or the Agent may, within 90 days of receipt of
such demand, notice (or the occurrence of such other event causing the Borrowers
to be required to pay such compensation or causing ss.4.11 to be applicable) or
default, as the case may be, by notice (a "Replacement Notice") in writing to
such Affected Bank and the Agent or Borrowers, as applicable, (A) request the
Affected Bank to cooperate with the Borrowers in obtaining a replacement bank
satisfactory to the Agent and the Borrowers (the "Replacement Bank"); (B)
request the non-Affected Banks to acquire and assume all of the Affected Bank's
Loans and Commitment and participate in Letters of Credit as provided herein,
but none of such Banks shall be under an obligation to do so; or (C) designate a
Replacement Bank reasonably satisfactory to the Agent or Borrowers, as
applicable. If any satisfactory Replacement Bank shall be obtained, and/or any
of the non-Affected Banks shall agree to acquire and assume all of the Affected
Bank's Loans and Commitment and participate in Letters of Credit, then such
Affected Bank shall, so long as no Event of Default shall have occurred and be
continuing, assign, in accordance with ss.17, all of its Commitment, Loans,
Notes and other rights and obligations under this Agreement and all other Loan
Documents to such Replacement Bank or non-Affected Banks, as the case may be, in
exchange for payment of the principal amount so assigned and all interest and
fees accrued on the amount so assigned, plus all other Obligations then due and
payable to the Affected Bank; provided, however, that (i) such assignment shall
be without recourse, representation or warranty and shall be on terms and
conditions reasonably satisfactory to such Affected Bank and such Replacement
Bank and/or non-Affected Banks, as the case may be, and (ii) prior to any such
assignment, the Borrowers shall have paid to such Affected Bank all amounts
properly demanded and unreimbursed under ss.ss.4.2(b), 4.4, 4.5 or 4.8. Upon the
effective date of such assignment the Borrowers shall issue replacement Notes to
such Replacement Bank and/or non-Affected Banks, as the case may be, and such
Replacement Bank shall become a "Bank" for all purposes under this Agreement and
the other Loan Documents.
ss.5. REPRESENTATIONS AND WARRANTIES. The Borrowers jointly and severally
represent and warrant to the Banks that on and as of the date of this Agreement
(any disclosure on a schedule pursuant to this ss.5 shall be deemed to apply to
all relevant representations and warranties, regardless of whether such schedule
is referenced in each relevant representation):
ss.5.1. Corporate Authority.
(a) Incorporation; Good Standing. Each of the Borrowers and
the International Signatories (i) is a corporation duly organized,
validly existing and in good standing or in current status under the
laws of its respective jurisdiction of incorporation, (ii) has all
requisite corporate power to own its property and conduct its business
as now conducted and as presently contemplated, and (iii) is in good
standing as a foreign corporation and is duly authorized to do business
in each jurisdiction in which its property or business as presently
conducted or contemplated makes such qualification necessary except
where a failure to be so qualified would not have a material adverse
effect on the business, assets or financial condition of the Borrowers,
taken as a whole, or the MasTec International Group, taken as a whole.
(b) Authorization. The execution, delivery and performance of
its Loan Documents and the transactions contemplated hereby and thereby
(i) are within the corporate authority of each of the Borrowers and the
International Signatories, (ii) have been duly authorized by all
necessary corporate proceedings, (iii) do not conflict with or result
in any material breach or contravention of any provision of law,
statute, rule or regulation to which any Borrower or International
Signatory is subject or any judgment, order, writ, injunction, license
or permit applicable to any Borrower or International Signatory so as
to have a material adverse effect on the assets, business or any
activity of such Borrower or International Signatory, (iv) do not
conflict with any provision of the corporate charter or bylaws of any
Borrower or International Signatory, (v) do not conflict with any
material contract, agreement or other instrument binding upon any
Borrower or International Signatory, and (vi) will not create a lien on
any properties of any of the Borrowers or International Signatories
other than pursuant to the Loan Documents.
(c) Enforceability. The execution, delivery and performance of
the Loan Documents will result in valid and legally binding obligations
of the Borrowers and the International Signatories, enforceable against
each of them in accordance with the respective terms and provisions
hereof and thereof, except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors' rights and except to
the extent that availability of the remedy of specific performance or
injunctive relief is subject to the discretion of the court before
which any proceeding therefor may be brought.
ss.5.2. Governmental Approvals. The execution, delivery and performance by
the Borrowers and the International Signatories of the Loan Documents and the
transactions contemplated hereby and thereby do not require any approval or
consent of, or filing with, any governmental agency or authority other than
those already obtained; provided, however, that the International Signatories
shall have ninety (90) days after the date hereof to effect this provision.
ss.5.3. Title to Properties; Leases. Each of the Parent and its
Subsidiaries owns all of its respective assets reflected in the consolidated
balance sheet of the Parent as at the Interim Balance Sheet Date or acquired
since that date (except property and assets sold or otherwise disposed of in the
ordinary course of business since that date), subject to no mortgages,
capitalized leases, conditional sales agreements, title retention agreements,
liens or other encumbrances except Permitted Liens.
ss.5.4. Financial Statements; Solvency.
(a) There has been furnished to the Banks (i) unaudited
consolidated financial statements of the Parent dated the Balance Sheet
Date, including reconciliations of (A) the Borrowers and the MasTec
International Group (excluding that portion of assets, liabilities,
income and expenses attributable to the Sintel Group) and (B) the
Sintel Group to the consolidated financial statements of the Parent,
and (ii) an unaudited consolidated balance sheet and statement of
income of the Parent dated the Interim Balance Sheet Date, including
reconciliations of (A) the Borrowers (excluding that portion of assets,
liabilities, income and expenses of the Parent attributable to
non-Borrowers) and (B) the non-Borrowers to the consolidated balance
sheet and statement of income of the Parent. Said financial statements
have been prepared in accordance with GAAP (but only to the extent that
GAAP is applicable to unaudited reports), fairly present in all
material respects the financial condition of the Borrowers, on a
consolidated basis, as at the close of business on the dates thereof
and the results of operations for the period then ended. There are no
contingent liabilities of the Borrowers as of such date involving
material amounts known to the officers of the Borrowers which have not
been disclosed in said balance sheets and the related notes thereto, as
the case may be.
(b) The Parent (both before and after giving effect to the
transactions contemplated by this Agreement) is solvent (i.e., it has
assets having a fair value in excess of the amount required to pay its
probable liabilities on its existing debts as they become absolute and
matured) and has, and expects to have, the ability to pay its debts
from time to time incurred in connection therewith as such debts
mature.
(c) The Borrowers taken as a whole (both before and after
giving effect to the transactions contemplated by this Agreement) are
solvent (i.e., they have assets having a fair value in excess of the
amount required to pay their probable liabilities on their existing
debts as they become absolute and matured) and have, and expect to
have, the ability to pay their debts from time to time incurred in
connection therewith as such debts mature.
ss.5.5. No Material Changes, Etc. Since the Balance Sheet Date, there have
occurred no material adverse changes in the financial condition or business of
the Borrowers as shown on or reflected in the consolidated balance sheet of the
Parent as at the Balance Sheet Date, or the consolidated statement of income for
the fiscal year then ended other than changes occurring in the ordinary course
of business that in the aggregate have not had a material adverse effect on the
business or financial condition of the Borrowers taken as a whole. Since the
Balance Sheet Date, no Borrower has made any Distribution other than to the
Parent.
ss.5.6. Permits, Franchises, Patents, Copyrights, Etc. Each of the
Borrowers possesses all franchises, patents, copyrights, trademarks, trade
names, licenses and permits, and rights in respect of the foregoing, adequate
for the conduct of its business substantially as now conducted without known
conflict with any rights of others.
ss.5.7. Litigation. Except as shown on Schedule 5.7 hereto, there are no
actions, suits, proceedings or investigations of any kind pending or, to the
knowledge of the Borrowers, threatened against any Borrower before any court,
tribunal or administrative agency or board which, if adversely determined,
might, either in any case or in the aggregate, have a material adverse effect on
the properties, assets, financial condition or business of the Borrowers,
considered as a whole, or materially impair the right of the Borrowers,
considered as a whole, to carry on business substantially as now conducted, or
result in any substantial liability not adequately covered by insurance, or for
which adequate reserves are not maintained on the consolidated balance sheet or
which question the validity of any of the Loan Documents or any action taken or
to be taken pursuant hereto or thereto.
ss.5.8. No Materially Adverse Contracts, Etc. None of the Borrowers is
subject to any charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation which in the judgment of the Borrowers'
officers has or is expected in the future to have a material adverse effect on
the business, assets or financial condition of the Borrowers taken as a whole.
None of the Borrowers is a party to any contract or agreement which in the
judgment of the Borrowers' officers has or is expected to have any material
adverse effect on the business of the Borrowers taken as a whole, except as
otherwise reflected in adequate reserves.
ss.5.9. Compliance With Other Instruments, Laws, Etc. None of the Borrowers
or the International Signatories is violating any provision of its charter
documents or by-laws or any agreement or instrument by which any of them may be
subject or by which any of them or any of their properties may be bound or any
decree, order, judgment, or any statute, license, rule or regulation, in a
manner which could in the aggregate result in the imposition of substantial
penalties or a material adverse effect on the financial condition, properties or
business of the Borrowers taken as a whole, or would impair the ability of any
Borrower or International Signatory to enter into or perform the Loan Documents.
ss.5.10. Tax Status. The Borrowers have made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which any of them is subject (unless and only to the extent that
any Borrower has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes); and have paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith; and have set aside on their books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. Except as set
forth on Schedule 5.10, there are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Borrowers know of no basis for any such claim.
ss.5.11. No Event of Default. No Default or Event of Default has occurred
and is continuing as of the date of this Agreement.
ss.5.12. Holding Company and Investment Company Acts. None of the Borrowers
is a "holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company," as such terms are defined in the Public
Utility Holding Company Act of 1935; nor is any of them a "registered investment
company," or an "affiliated company" or a "principal underwriter" of a
"registered investment company," as such terms are defined in the Investment
Company Act of 1940, as amended.
ss.5.13. Absence of Financing Statements, Etc. Except with respect to
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry, or other public office, which purports to cover,
affect or give notice of any present or possible future lien on, or security
interest in, any assets or property of any of the Borrowers or rights
thereunder.
ss.5.14. Employee Benefit Plans.
(a) In General. Each Employee Benefit Plan and each Guaranteed
Pension Plan has been maintained and operated in compliance in all
material respects with the provisions of ERISA and, to the extent
applicable, the Code, including but not limited to the provisions
thereunder respecting prohibited transactions and the bonding of
fiduciaries and other persons handling plan funds as required by ss.412
of ERISA. The Borrowers have heretofore delivered to the Agent the most
recently completed annual report, Form 5500, with all required
attachments, and actuarial statement required to be submitted under
ss.103(d) of ERISA, with respect to each Guaranteed Pension Plan.
(b) Terminability of Welfare Plans. Except as set forth on
Schedule 5.14(b), no Employee Benefit Plan which is an employee welfare
benefit plan within the meaning of ss.3(1) or ss.3(2)(B) of ERISA,
provides benefit coverage subsequent to termination of employment
except as required by Title I, Part 6 of ERISA or applicable state
insurance laws. Any Borrower may terminate each such Plan at any time
(or at any time subsequent to the expiration of any applicable
bargaining agreement) in the discretion of such Borrower without
liability to any Person other than for claims arising prior to
termination.
(c) Guaranteed Pension Plans. Each contribution required to be
made to a Guaranteed Pension Plan, whether required to be made to avoid
the incurrence of an accumulated funding deficiency, the notice or lien
provisions of ss.302(f) of ERISA, or otherwise, has been timely made.
No waiver of an accumulated funding deficiency or extension of
amortization periods has been received with respect to any Guaranteed
Pension Plan, and neither any of the Borrowers nor any ERISA Affiliate
is obligated to or has posted security in connection with an amendment
of a Guaranteed Pension Plan pursuant to ss.307 of ERISA or
ss.401(a)(29) of the Code. No liability to the PBGC (other than
required insurance premiums, all of which have been paid) has been
incurred by any Borrower or any ERISA Affiliate with respect to any
Guaranteed Pension Plan and there has not been any ERISA Reportable
Event, or any other event or condition which presents a material risk
of termination of any Guaranteed Pension Plan by the PBGC. Based on the
latest valuation of each Guaranteed Pension Plan (which in each case
occurred within twelve months of the date of this representation), and
on the actuarial methods and assumptions employed for that valuation,
the aggregate benefit liabilities of all such Guaranteed Pension Plans
within the meaning of ss.4001 of ERISA did not exceed the aggregate
value of the assets of all such Guaranteed Pension Plans, disregarding
for this purpose the benefit liabilities and assets of any Guaranteed
Pension Plan with assets in excess of benefit liabilities.
(d) Multiemployer Plans. None of the Borrowers nor any ERISA
Affiliate has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete or
partial withdrawal from such Multiemployer Plan under ss.4201 of ERISA
or as a result of a sale of assets described in ss.4204 of ERISA. None
of the Borrowers nor any ERISA Affiliate has been notified that any
Multiemployer Plan is in reorganization or is insolvent under and
within the meaning of ss.4241 or ss.4245 of ERISA or is at risk of
entering reorganization or becoming insolvent, or that any
Multiemployer Plan intends to terminate or has been terminated under
ss.4041A of ERISA.
ss.5.15. Use of Proceeds. The proceeds of the Loans shall be used as
follows: (a) for general corporate purposes; (b) to repay the existing
indebtedness of the Borrowers; (c) for Investments permitted pursuant to ss.7.3
hereof, and (d) for acquisitions permitted pursuant to ss.7.4 hereof. No
proceeds of the Loans shall be used in any way that will violate Regulations G,
T, U or X of the Board of Governors of the Federal Reserve System.
<PAGE>
ss.5.16. Environmental Compliance. Except as shown on Schedule 5.16:
(a) None of the Borrowers, nor any operator of their
properties, is in violation, or alleged violation, of any judgment,
decree, order, law, permit, license, rule or regulation pertaining to
environmental matters, including without limitation, those arising
under RCRA, CERCLA, the Superfund Amendments and Reauthorization Act of
1986, the Federal Clean Water Act, the Federal Clean Air Act, the Toxic
Substances Control Act, or any state or local statute, regulation,
ordinance, order or decree relating to health, safety or the
environment (the "Environmental Laws"), which violation would have a
material adverse effect on the business, assets or financial condition
of the Borrowers on a consolidated basis.
(b) None of the Borrowers has received notice from any third
party, including, without limitation, any federal, state or local
governmental authority, (i) that any one of them has been identified by
the United States Environmental Protection Agency ("EPA") as a
potentially responsible party under CERCLA with respect to a site
listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B;
(ii) that any hazardous waste, as defined by 42 U.S.C. ss.6903(5), any
hazardous substances as defined by 42 U.S.C. ss.9601(14), any pollutant
or contaminant as defined by 42 U.S.C. ss.9601(33) or any toxic
substance, oil or hazardous materials or other chemicals or substances
regulated by any Environmental Laws ("Hazardous Substances") which any
one of them has generated, transported or disposed of has been found at
any site at which a federal, state or local agency or other third party
has conducted or has ordered that any Borrower conduct a remedial
investigation, removal or other response action pursuant to any
Environmental Law; or (iii) that it is or shall be a named party to any
claim, action, cause of action, complaint, legal or administrative
proceeding arising out of any third party's incurrence of costs,
expenses, losses or damages of any kind whatsoever in connection with
the release of Hazardous Substances.
(c) (i) No portion of the Real Property has been used for the
handling, processing, storage or disposal of Hazardous Substances
except in material compliance with applicable Environmental Laws; (ii)
in the course of any activities conducted by the Borrowers, or
operators of the Real Property, no Hazardous Substances have been
generated or are being used on such properties except in material
compliance with applicable Environmental Laws; (iii) there have been no
unpermitted Releases or threatened Releases of Hazardous Substances on,
upon, into or from the Real Property, which Releases would have a
material adverse effect on the value of such properties; (iv) to the
best of the Borrowers' knowledge, there have been no Releases on, upon,
from or into any real property in the vicinity of the Real Property
which, through soil or groundwater contamination, may have come to be
located on, and which would have a material adverse effect on the value
of, such properties; and (v) in addition, any Hazardous Substances that
have been generated on the Real Property have been transported offsite
only by carriers having an identification number issued by the EPA,
treated or disposed of only by treatment or disposal facilities
maintaining valid permits as required under applicable Environmental
Laws, which transporters and facilities, to the best of the Borrowers'
knowledge, have been and are operating in material compliance with such
permits and applicable Environmental Laws.
(d) None of the Real Property is or shall be subject to any
applicable environmental clean-up responsibility law or environmental
restrictive transfer law or regulation, by virtue of the transactions
set forth herein and contemplated hereby.
ss.5.17. Perfection of Security Interests. Except as set forth on Schedule
5.17, the Collateral and the Agent's rights with respect to the Collateral are
not subject to any setoff, claims, withholdings or other defenses. The Borrowers
and MasTec International, Inc. are the owners of the Collateral free from any
lien, security interest, encumbrance and any other claim or demand, other than
liens in favor of the Agent for the benefit of the Banks to secure the
Obligations. The Stock Pledge Agreements are effective to create in favor of the
Agent, for the benefit of the Banks, a legal, valid and enforceable first
priority security interest in the Collateral. The certificates for the shares of
such Collateral have been delivered to the Agent; provided, however, that MasTec
International, Inc. shall have ninety (90) days after the Closing Date to effect
this provision. The parties agree that there shall be no public filing,
registration or notice of the Sintel Stock Pledge Agreement unless an Event of
Default shall have occurred.
ss.5.18. Certain Transactions. Except as set forth on Schedule 5.18 and
except for arm's length transactions pursuant to which the Borrowers make
payments in the ordinary course of business upon terms no less favorable than
the Borrowers could obtain from third parties, none of the officers, directors,
or employees of the Borrowers is presently a party to any transaction with the
Borrowers (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Borrowers, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
ss.5.19. Subsidiaries. Schedule 1 sets forth a complete and accurate list
of the direct or indirect Subsidiaries of the Parent, including the name of each
Subsidiary and its jurisdiction of incorporation, together with the number of
authorized and outstanding shares of each Subsidiary. All of the stock of each
U.S. Subsidiary (other than the Excluded Subsidiaries) and 66% of the stock of
Sintel which is directly or indirectly owned by the Parent has been pledged to
the Agent on behalf of the Banks pursuant to the Stock Pledge Agreements. The
Parent has good and marketable title to all of the shares it purports to own of
the stock of each such Subsidiary, free and clear in each case of any lien. All
such shares have been duly issued and are fully paid and non-assessable. Each
Subsidiary of the Parent, other than the Excluded Subsidiaries and the members
of the MasTec International Group, is a Borrower hereunder.
ss.5.20. True Copies of Charter and Other Documents. The Borrowers and the
International Signatories have furnished the Agent copies, in each case true and
complete as of the date hereof, of (a) all charter and other incorporation
documents (together with any amendments thereto) and (b) by-laws (together with
any amendments thereto); provided, however, that the International Signatories
shall have ninety (90) days to effect this provision as regards Sintel.
ss.6. AFFIRMATIVE COVENANTS OF THE BORROWERS. The Borrowers jointly and
severally covenant and agree that, so long as any Loan, Reimbursement Obligation
or Note is outstanding or the Banks have any obligation to make Loans or the
Agent has any obligation to issue, extend, or renew any Letters of Credit
hereunder:
ss.6.1. Punctual Payment. The Borrowers will duly and punctually pay or
cause to be paid the principal and interest on the Loans, all fees and other
amounts provided for in this Agreement and the other Loan Documents, all in
accordance with the terms of this Agreement and such other Loan Documents.
ss.6.2. Maintenance of Office. The Borrowers will maintain their chief
executive offices as set forth on Schedule 1 or at such other place in the
United States of America as the Borrowers shall designate upon thirty (30) days'
prior written notice to the Agent.
ss.6.3. Records and Accounts. Each of the Borrowers will keep true and
accurate records and books of account in which full, true and correct entries
will be made in accordance with GAAP and with the requirements of all regulatory
authorities, and will maintain adequate accounts and reserves for all taxes
(including income taxes), depreciation, depletion, obsolescence and amortization
of its properties, all other contingencies, and all other proper reserves.
ss.6.4. Financial Statements, Certificates and Information. The Borrowers
shall deliver to the Banks:
(a) as soon as practicable, but in any event not later than
fifty (50) days after the end of each fiscal quarter of the Borrowers,
copies of the consolidated balance sheet and statement of income of the
Borrowers (excluding that portion of the Parent's assets, liabilities,
income and expenses attributable to non-Borrowers) as at the end of
such quarter, subject to year end adjustments, and the related
statement of cash flows, all in reasonable detail and prepared in
accordance with GAAP, with a certification by the principal financial
or accounting officer of the Parent (the "CFO") that these consolidated
financial statements are prepared in accordance with GAAP and fairly
present the consolidated financial condition of the Borrowers as at the
close of business on the date thereof and the results of operations for
the period then ended;
(b) as soon as practicable, but in any event not later than
fifty (50) days after the end of each fiscal quarter of the Parent,
copies of the consolidated balance sheet and statement of income of the
Parent as at the end of such quarter, subject to year end adjustments,
and the related statement of cash flows, all in reasonable detail and
prepared in accordance with GAAP, with a certification by the CFO that
these consolidated financial statements are prepared in accordance with
GAAP and fairly present the consolidated financial condition of the
Parent as at the close of business on the date thereof and the results
of operations for the period then ended;
(c) as soon as practicable, but, in any event not later than
one hundred (100) days after the end of each fiscal year of the Parent,
the consolidated and consolidating balance sheets of Parent as at the
end of such year, statements of cash flows, and the related
consolidated and consolidating statements of income, each setting forth
in comparative form the figures for the previous fiscal year, all such
consolidated and consolidating financial statements to be in reasonable
detail, prepared in accordance with GAAP and, with respect to the
consolidated financial statements, certified by Coopers & Lybrand
L.L.P. or another independent accounting firm of national standing
acceptable to the Agent (the "Accountants") and including a
reconciliation of the consolidated financial statements of the
Borrowers (excluding that portion of the Parent's assets, liabilities,
income and expenses attributable to non-Borrowers) to the consolidated
financial statements of the Parent. In addition, simultaneously
therewith, the Borrowers shall use their reasonable best efforts to
provide the Banks with a written statement from such Accountants to the
effect that the Borrowers are in compliance with the covenants set
forth in ss.8 hereof, and that, in making the examination necessary to
said certification, nothing has come to the attention of such
Accountants that would indicate that any Default or Event of Default
exists, or, if such Accountants shall have obtained knowledge of any
then existing Default or Event of Default they shall disclose in such
statement any such Default or Event of Default; provided, that such
Accountants shall not be liable to the Banks for failure to obtain
knowledge of any Default or Event of Default;
(d) as soon as practicable, but in any event not later than
thirty (30) days after the end of each fiscal quarter of the Borrowers,
copies of the Accounts Receivable aging reports of the Borrowers and
the consolidated liquidity calculation for such date required under
ss.8.4 hereof, all in reasonable detail and prepared in accordance with
GAAP, with a certification by the CFO that these reports and
calculation are prepared in accordance with GAAP and fairly present the
Accounts Receivable of the Borrowers as at the close of business on the
date thereof;
(e) simultaneously with the delivery of the items referred to
in (a), (b) and (c) above, a statement in the form of Exhibit D hereto
(the "Compliance Certificate") certified by the CFO that the Borrowers
are in compliance with the covenants contained in ss.ss.6, 7 and 8
hereof as of the end of the applicable period and setting forth in
reasonable detail computations evidencing such compliance, provided
that if the Borrowers shall at the time of issuance of such certificate
or at any other time obtain knowledge of any Default or Event of
Default, the Borrowers shall include in such certificate or otherwise
deliver forthwith to the Banks a certificate specifying the nature and
period of existence thereof and what action the Borrowers propose to
take with respect thereto;
(f) contemporaneously with, or promptly following, the filing
or mailing thereof, copies of all material filed with the Securities
and Exchange Commission or sent to the stockholders of the Parent or
any of the Borrowers; and
(g) from time to time, such other financial data and other
information (including accountants' management letters) as the Banks
may reasonably request.
The Borrowers hereby authorize the Banks to disclose any information
obtained pursuant to this Agreement to all appropriate governmental regulatory
authorities where required by law; provided, however, that the Banks shall, to
the extent practicable and allowable under law, notify the Borrowers within a
reasonable period prior to the time any such disclosure is made; and provided
further, that this authorization shall not be deemed to be a waiver of any
rights to object to the disclosure by the Banks of any such information which
any Borrower has or may have under the federal Right to Financial Privacy Act of
1978, as in effect from time to time.
ss.6.5. Corporate Existence and Conduct of Business. Except where the
failure of a Borrower to remain so qualified would not materially adversely
impair the financial condition of the Borrowers on a consolidated basis, each
Borrower will do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, corporate rights and
franchises; effect and maintain its foreign qualifications, licensing,
domestication or authorization except as terminated by its Board of Directors in
the exercise of its reasonable judgment; and shall not become obligated under
any contract or binding arrangement which, at the time it was entered into would
materially adversely impair the financial condition of the Borrowers on a
consolidated basis. Each Borrower will continue to engage primarily in the
businesses now conducted by it and in related businesses.
ss.6.6. Maintenance of Properties. The Borrowers will cause all material
properties used or useful in the conduct of their businesses to be maintained
and kept in good condition, repair and working order (reasonable wear and tear
excepted) and supplied with all necessary equipment and will cause to be made
all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Borrowers may be necessary so that the
businesses carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this section shall
prevent any Borrower from (i) discontinuing the operation and maintenance of any
of its properties if such discontinuance is, in the judgment of such Borrower,
desirable in the conduct of its or their business and does not in the aggregate
have a material adverse effect on the business or financial condition of the
Borrowers taken as a whole, or (ii) conducting a sale of assets permitted
pursuant to ss.7.4 hereof.
ss.6.7. Insurance. The Borrowers will maintain with financially sound and
reputable insurance companies, funds or underwriters' insurance of the kinds,
covering the risks (other than risks arising out of or in any way connected with
personal liability of any officers and directors thereof) and in the relative
proportionate amounts usually carried by reasonable and prudent companies
conducting businesses similar to that of the Borrowers, but in no event less
than the amounts and coverages set forth in Schedule 6.7 hereto as affected by
adjustments to retention levels in the ordinary course of business. In addition,
the Borrowers will furnish from time to time, upon the Agent's request, a
summary of the insurance coverage of each of the Borrowers, which summary shall
be in form and substance satisfactory to the Agent and, if requested by the
Agent, will furnish to the Agent copies of the applicable policies.
ss.6.8. Taxes. The Borrowers will each duly pay and discharge, or cause to
be paid and discharged, before the same shall become overdue, all taxes,
assessments and other governmental charges (other than taxes, assessments and
other governmental charges imposed by foreign jurisdictions which in the
aggregate are not material to the business or assets of the Borrowers taken as a
whole) imposed upon it and its real properties, sales and activities, or any
part thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies, which if unpaid might by law become a lien or
charge upon any of its property other than a Permitted Lien; provided, however,
that any such tax, assessment, charge, levy or claim need not be paid if the
validity or amount thereof shall currently be contested in good faith by
appropriate proceedings and if such Borrower shall have set aside on its books
adequate reserves with respect thereto; and provided, further, that such
Borrower will pay all such taxes, assessments, charges, levies or claims
forthwith upon the commencement of proceedings to foreclose any lien which may
have attached as security therefor.
ss.6.9. Inspection of Properties, Books, and Contracts. The Borrowers shall
permit the Banks, the Agent or any of their designated representatives, upon
reasonable notice to the Parent, to visit and inspect any of the properties of
the Borrowers, to examine the books of account of the Borrowers (including the
making of periodic accounts receivable reviews), or contracts (and to make
copies thereof and extracts therefrom), and to discuss the affairs, finances and
accounts of the Borrowers with, and to be advised as to the same by, their
officers, all at such times and intervals as the Banks may reasonably request.
ss.6.10. Compliance with Laws, Contracts, Licenses and Permits; Maintenance
of Material Licenses and Permits. Each Borrower will (i) comply with the
provisions of its charter documents and by-laws and all agreements and
instruments by which it or any of its properties may be bound; and (ii) comply
with all applicable laws and regulations (including Environmental Laws),
decrees, orders, judgments, licenses and permits, including, without limitation,
all environmental permits hereto ("Applicable Laws"), except where noncompliance
in the case of (i) and (ii) above would not have a material adverse effect in
the aggregate on the consolidated financial condition, properties or business of
the Borrowers taken as a whole, or would not impair the ability of any Borrower
or International Signatory to enter into or perform the Loan Documents. If at
any time while the Notes, or any Loan or Letter of Credit is outstanding or any
Bank or the Agent has any obligation to make Loans or issue Letters of Credit
hereunder, any authorization, consent, approval, permit or license from any
officer, agency or instrumentality of any government shall become necessary or
required in order that any Borrower may fulfill any of its obligations
hereunder, such Borrower will immediately take or cause to be taken all
reasonable steps within the power of such Borrower to obtain such authorization,
consent, approval, permit or license and furnish the Banks with evidence
thereof.
ss.6.11. ENVIRONMENTAL INDEMNIFICATION. THE BORROWERS COVENANT AND AGREE
THAT THEY WILL INDEMNIFY AND HOLD THE BANKS HARMLESS FROM AND AGAINST ANY AND
ALL CLAIMS, EXPENSE, DAMAGE, LOSS OR LIABILITY INCURRED BY THE BANKS (INCLUDING
ALL COSTS OF LEGAL REPRESENTATION INCURRED BY THE BANKS) RELATING TO (A) ANY
RELEASE OR THREATENED RELEASE OF HAZARDOUS SUBSTANCES ON THE REAL PROPERTY; (B)
ANY VIOLATION OF ANY ENVIRONMENTAL LAWS WITH RESPECT TO CONDITIONS AT THE REAL
PROPERTY OR THE OPERATIONS CONDUCTED THEREON; OR (C) THE INVESTIGATION OR
REMEDIATION OF OFFSITE LOCATIONS AT WHICH THE BORROWERS OR THEIR PREDECESSORS
ARE ALLEGED TO HAVE DIRECTLY OR INDIRECTLY DISPOSED OF HAZARDOUS SUBSTANCES. IT
IS EXPRESSLY ACKNOWLEDGED BY THE BORROWERS THAT THIS COVENANT OF INDEMNIFICATION
SHALL INCLUDE CLAIMS, EXPENSE, DAMAGE, LOSS OR LIABILITY INCURRED BY THE BANKS
BASED UPON THE BANKS' NEGLIGENCE, AND THIS COVENANT SHALL SURVIVE ANY
FORECLOSURE OR ANY MODIFICATION, RELEASE OR DISCHARGE OF THE STOCK PLEDGE
AGREEMENTS OR THE PAYMENT OF THE LOANS AND SHALL INURE TO THE BENEFIT OF THE
BANKS, THEIR SUCCESSORS AND ASSIGNS.
ss.6.12. Further Assurances. The Borrowers will cooperate with the Banks
and execute such further instruments and documents as the Banks shall reasonably
request to carry out to the Banks' satisfaction the transactions contemplated by
this Agreement.
ss.6.13. Notice of Potential Claims or Litigation. The Borrowers shall
deliver to the Banks, within 30 days of receipt thereof, written notice of the
initiation of any action, claim, complaint, or any other notice of dispute or
potential litigation wherein the potential liability would be material to the
Borrowers taken as a whole under the regulations of the United States Securities
and Exchange Commission, together with a copy of each such notice received by
the Parent or any of its Subsidiaries.
ss.6.14. Notice of Default. The Borrowers will promptly notify the Banks in
writing of the occurrence of any Default or Event of Default. If any Person
shall give any notice or take any other action in respect of a claimed default
(whether or not constituting an Event of Default) under this Agreement or any
other note, evidence of indebtedness, indenture or other obligation evidencing
indebtedness in excess of $1,000,000 as to which any Borrower is a party or
obligor, whether as principal or surety, the Borrowers shall forthwith give
written notice thereof to the Banks, describing the notice of action and the
nature of the claimed default.
ss.7. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS. The Borrowers agree
that, so long as any Loan, Reimbursement Obligation or any Note is outstanding
or the Banks have any obligation to make Loans or the Agent has any obligation
to issue, extend or renew any Letters of Credit hereunder:
ss.7.1. Restrictions on Funded Debt. None of the Borrowers shall become or
be a guarantor or surety of, or otherwise create, incur, assume, or be or remain
liable, contingently or otherwise, with respect to any Funded Debt, or become or
be responsible in any manner (whether by agreement to purchase any obligations,
stock, assets, goods or services, or to supply or advance any funds, assets,
goods or services or otherwise) with respect to any Funded Debt of any other
Person, or incur any Funded Debt other than:
(a) Indebtedness to the Banks and the Agent arising under
this Agreement or the Loan Documents;
(b) Subordinated Debt of the Parent;
(c) Existing Funded Debt listed on Schedule 7.1(c) hereto, on
the terms and conditions in effect as of the date hereof, together with
any renewals, extensions or refinancings thereof on terms which are not
materially different than those in effect as of the date hereof;
provided that no more than $5,000,000 of such indebtedness may be
prepaid without prior written consent of the Banks;
(d) Funded Debt incurred in connection with acquisitions after
the date hereof of any stocks of, partnership or joint venture
interests in, or assets of any Person and owing to the seller(s) of
such stocks, partnership or joint venture interests, or assets;
provided that the principal amount of any such Funded Debt owed (when
aggregated with all such other Funded Debt permitted pursuant to this
ss.7.1(d)) shall not exceed $10,000,000; and provided, further, that
such acquisitions shall be otherwise permitted pursuant to ss.7.4; and
(e) Other Funded Debt not to exceed $10,000,000 in the
aggregate incurred after the date hereof (including existing Funded
Debt of any Borrower acquired pursuant to ss.7.4 hereof after the date
hereof).
ss.7.2. Restrictions on Liens. None of the Borrowers will create or incur
or suffer to be created or incurred or to exist any lien, encumbrance, mortgage,
pledge, charge, restriction or other security interest of any kind upon any
property or assets of any character, whether now owned or hereafter acquired, or
upon the income or profits therefrom; or transfer any of such property or assets
or the income or profits therefrom for the purpose of subjecting the same to the
payment of indebtedness or performance of any other obligation in priority to
payment of its general creditors; or acquire, or agree or have an option to
acquire, any property or assets upon conditional sale or other title retention
or purchase money security agreement, device or arrangement; or suffer to exist
for a period of more than thirty (30) days after the same shall have been
incurred any indebtedness or claim or demand against it which if unpaid might by
law or upon bankruptcy or insolvency, or otherwise, be given any priority
whatsoever over its general creditors; or sell, assign, pledge or otherwise
transfer any accounts, contract rights, general intangibles or chattel paper,
with or without recourse, except as follows (the "Permitted Liens"):
(a) Liens securing Funded Debt permitted under ss.ss.7.1(d)
and 7.1(e) incurred in connection with the lease or acquisition of
property or fixed assets useful or intended to be used in carrying on
the business of the Borrowers, provided that such Liens shall encumber
only the property or assets so acquired and shall not exceed the fair
market value thereof and provided further that the aggregate amount of
Funded Debt secured by such liens shall not exceed $5,000,000;
(b) Liens to secure taxes, assessments and other government
charges or claims for labor, material or supplies in respect of
obligations not overdue;
(c) Deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age
pensions or other social security obligations;
(d) Liens in respect of judgments or awards which have been in
force for less than the applicable period for taking an appeal so long
as execution is not levied thereunder or in respect of which any
Borrower shall at the time in good faith be prosecuting an appeal or
proceedings for review and in respect of which a stay of execution
shall have been obtained pending such appeal or review and in respect
of which the Borrowers have maintained adequate reserves;
(e) Liens of carriers, warehousemen, mechanics and
materialmen, and other like liens, in existence less than one-hundred
and twenty (120) days from the date of creation thereof in respect of
obligations not overdue;
(f) Encumbrances consisting of easements, rights of way,
zoning restrictions, restrictions on the use of real property and
defects and irregularities in the title thereto, landlord's or lessor's
liens under leases to which any Borrower is a party, and other minor
liens or encumbrances none of which in the opinion of the respective
Borrower interferes materially with the use of the property affected in
the ordinary conduct of the business of such Borrower, which defects do
not individually or in the aggregate have a material adverse effect on
the business of such Borrower individually or of the Borrowers on a
consolidated basis;
(g) Liens (including Liens securing Funded Debt permitted
under ss.7.1(c)) existing as of the date hereof and listed on Schedule
7.2(g) on the terms and conditions in effect as of the date hereof;
(h) Existing Liens in connection with the Fleet Credit
Agreement and the First Union mortgages, provided that the proceeds of
the initial Loan advanced hereunder shall be used to discharge such
Liens;
(i) Liens granted pursuant to the Stock Pledge Agreements; and
(j) Other Liens securing indebtedness in an aggregate amount
not to exceed $500,000 at any time.
ss.7.3. Restrictions on Investments. None of the Borrowers shall make or
permit to exist or to remain outstanding any other Investment other than:
(a) marketable direct or guaranteed obligations of the United
States of America or any agency or instrumentality thereof fully
guaranteed or otherwise fully backed by the full faith and credit of
the United States Government that mature within one (1) year from the
date of purchase by the Borrower;
(b) demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks or Eligible
Foreign Banks having total assets in excess of $1,000,000,000;
(c) securities commonly known as "commercial paper" issued by
a corporation organized and existing under the laws of the United
States of America or any state thereof that at the time of purchase
have been rated and the ratings for which are not less than "P 1" if
rated by Moody's Investors Services, Inc., and not less than "A 1" if
rated by Standard and Poor's;
(d) Subject to ss.7.1 and ss.7.4, Investments by any Borrower
in any other Borrower; and
(e) Investments by any Borrower in any affiliate or Subsidiary
of a Borrower which is not also a Borrower (which may include the
MasTec International Group or other non-U.S. entities) or in any other
Person, provided, however, that the aggregate amount from the date
hereof of such Investments outstanding at any time shall not exceed
$15,000,000 plus
(i) the lesser of (A) the sum of net cash proceeds
received in connection with the sale of the Cempresa, S.A.
and Supercanal Holding, S.A. investments and the issuance
of common stock of the Parent after the date hereof or
(B) $35,000,000;
plus
(ii) with the prior consent of the Majority Banks,
(A) 50% of net cash proceeds received in connection with the
issuance of Subordinated Debt after the date hereof plus (B)
without double counting any such amounts included in (i)(A)
hereof, up to 75% of net cash proceeds received in connection
with the issuance of common stock of the Parent after the date
hereof;
provided, however, that the aggregate amount of (ii) hereof shall not exceed
$100,000,000.
Notwithstanding (e) above, none of the Borrowers shall make any Investment
in any Subsidiary which is not a Borrower hereunder unless, both before and
after giving effect thereto, there does not exist a Default or Event of Default
and no Default or Event of Default would be created by the making of such
Investment.
ss.7.4. Mergers, Consolidations, Sales. None of the Borrowers shall be a
party to any merger, consolidation or exchange of stock, or purchase or
otherwise acquire all or substantially all of the assets or stock of, or any
partnership or joint venture interest in, any other Person except as otherwise
provided in this ss.7.4, or sell, transfer, convey or lease any assets or group
of assets (except sales of equipment tools, parts and related assets in the
ordinary course of business, sales of assets totaling an aggregate amount, from
the date hereof through the Maturity Date, of no more than $10,000,000, and
dispositions listed on Schedule 7.4) or sell or assign, with or without
recourse, any receivables (except to another Borrower). A Borrower may purchase
or otherwise acquire all or substantially all of the assets or stock of any
class of, or joint venture interest in, any Person provided that (a) at the time
of such acquisition, no Default or Event of Default has occurred and is
continuing, and such acquisition will not otherwise create a Default or an Event
of Default hereunder; (b) the business to be acquired is predominantly in the
same lines of business as the Borrowers, or businesses reasonably related
thereto; (c) the aggregate cash consideration to be paid in connection with any
such acquisition (including deferred payments and the aggregate amount of all
Funded Debt assumed, but excluding contingent payments) shall not exceed
$10,000,000; (d) the Borrowers are in current compliance with and, giving effect
to the proposed acquisition (including any borrowings made or to be made in
connection therewith), will continue to be in compliance with all of the
covenants in ss.8 hereof on a pro forma historical combined basis as if the
transaction occurred on the first day of the period of measurement, and in the
event that the aggregate cash consideration given in connection with any such
acquisition exceeds $7,500,000, including deferred payments and the aggregate
amount of all liabilities assumed, the Banks shall have been provided with a
Compliance Certificate demonstrating such compliance; (e) the board of directors
and (if required by applicable law) the shareholders, or the equivalent thereof,
of the business to be acquired has approved such acquisition; (f) the business
to be acquired operates predominantly in the continental United States; (g) in
the case of an asset acquisition, all of the assets to be acquired shall be
owned by an existing or newly created Subsidiary of the Parent which is a
Borrower, all of the stock of which that is directly or indirectly owned by the
Parent has been or will be pledged to the Agent on behalf of the Banks, or, in
the case of a stock acquisition, the acquired company shall become or shall be
merged with a wholly-owned Subsidiary of the Parent which is a Borrower, 100% of
the stock of which has been or will be pledged to the Agent on behalf of the
Banks; and (h) if such acquisition is made by a merger, the surviving entity
shall be a Borrower, 100% of the stock of which shall be pledged to the Agent on
behalf of the Banks. Any Borrower may merge with any other Borrower.
ss.7.5. Sale and Leaseback. None of the Borrowers shall enter into any
arrangement, directly or indirectly, whereby any Borrower shall sell or transfer
any property owned by it in order then or thereafter to lease such property or
lease other property which such Borrower intends to use for substantially the
same purpose as the property being sold or transferred, without the prior
written consent of the Banks; other than such arrangements which do not in the
aggregate exceed $100,000.
ss.7.6. Restricted Distributions and Redemptions. None of the Borrowers may
make Distributions except as set forth in this ss.7.6. Each Borrower may make
distributions payable solely in common stock or preferred stock of such
Borrower, subject to the requirement to pledge all such stock pursuant to
ss.5.19 hereof. Borrowers other than the Parent may declare or pay Distributions
to the Parent. In addition, the Borrowers (other than the Parent) shall not
redeem, convert, retire or otherwise acquire shares of any class of capital
stock of such Borrowers. The Parent may declare or pay dividends and may redeem,
convert, retire, or otherwise acquire shares of its capital stock, provided that
the aggregate amount of all such Distributions by the Parent shall not exceed
50% of Consolidated Net Income in any one fiscal year. None of the Borrowers may
make any Distribution under this ss.7.6 if a Default or Event of Default exists
or would be created by the making of such Distribution. The Borrowers shall not
effect or permit any change in or amendment to any document or instrument
pertaining to the terms of the Borrowers' or the International Signatories'
capital stock other than the amendment to the Parent's certificate of
incorporation increasing the authorized amount of common stock and the par value
of the common stock and the preferred stock.
ss.7.7. Employee Benefit Plans. None of the Borrowers nor any ERISA
Affiliate will:
(a) engage in any "prohibited transaction" within the meaning
of ss.406 of ERISA or ss.4975 of the Code which could result in a
material liability for the Borrowers taken as a whole; or
(b) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency," as such term is defined in ss.302 of
ERISA, whether or not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a manner
which, could result in the imposition of a lien or encumbrance on the
assets of any Borrower pursuant to ss.302(f) or ss.4068 of ERISA; or
(d) amend any Guaranteed Pension Plan in circumstances
requiring the posting of security pursuant to ss.307 of ERISA or
ss.401(a)(29) of the Code; or
(e) permit or take any action which would result in the
aggregate benefit liabilities (within the meaning of ss.4001 of ERISA)
of all Guaranteed Pension Plans exceeding the value of the aggregate
assets of such Plans, disregarding for this purpose the benefit
liabilities and assets of any such Plan with assets in excess of
benefit liabilities.
The Borrowers will (i) promptly upon filing the same with the Department of
Labor or Internal Revenue Service, furnish to the Banks a copy of the most
recent actuarial statement required to be submitted under ss.103(d) of ERISA and
Annual Report, Form 5500, with all required attachments, in respect of each
Guaranteed Pension Plan and (ii) promptly upon receipt or dispatch, furnish to
the Banks any notice, report or demand sent or received in respect of a
Guaranteed Pension Plan under ss.ss.302, 4041, 4042, 4043, 4063, 4066 and 4068
of ERISA, or in respect of a Multiemployer Plan, under ss.ss.4041A, 4202, 4219,
4242, or 4245 of ERISA.
ss.7.8. Negative Pledges. Except for Permitted Liens, no Borrower will
pledge any of its assets to any Person other than to the Agent for the benefit
of the Banks, nor will any Borrower grant any negative pledges on their assets
to any Person other than hereunder.
ss.7.9. Pledges of Stock of the Sintel Group. So long as the Sintel Stock
Pledge Agreement or any successor agreement has not been terminated pursuant to
ss.11 hereof, Sintel will not pledge any of the capital stock of the Sintel
Group to any Person other than to the Agent for the benefit of the Banks, nor
will Sintel grant any negative pledges on the capital stock of the Sintel Group
to any Person other than hereunder.
ss.7.10. Newly-Created Subsidiaries. No Borrower shall create a Subsidiary
which is not a U.S. Subsidiary.
ss.8. FINANCIAL COVENANTS OF THE BORROWERS. The Borrowers agree that, so
long as any Loan, Reimbursement Obligation or any Note is outstanding or the
Banks have any obligation to make Loans or the Agent has any obligation to
issue, extend or renew any Letters of Credit hereunder, they shall comply with
the following covenants:
ss.8.1. Leverage Ratios. As of the end of any fiscal quarter of the
Borrowers commencing with the fiscal quarter ending March 31, 1997, (a) the
ratio of (i) Senior Debt to (ii) EBITDA for the period of four (4) consecutive
fiscal quarters ending on such date shall not exceed 2.50:1, and (b) the ratio
of (i) Funded Debt to (ii) EBITDA for the period of four (4) consecutive fiscal
quarters ending on such date shall not exceed 3.00:1.
ss.8.2. Capital Expenditures. In any fiscal year, the Borrowers shall not
make or commit to make Capital Expenditures in excess of two times the
consolidated depreciation and amortization expenses of the Borrowers for such
fiscal year.
ss.8.3. Interest Coverage Ratio. As of the end of any fiscal quarter of the
Borrowers commencing with the fiscal quarter ending March 31, 1997, the ratio of
(a) EBIT for the period of four (4) consecutive fiscal quarters ending on such
date to (b) Consolidated Total Interest Expense for such period shall not be
less than 4.00:1.
ss.8.4. Liquidity. As of the end of any fiscal quarter of the Borrowers
commencing with the fiscal quarter ending March 31, 1997, (i) the ratio of (a)
Qualified Accounts Receivable to (b) the sum of trade payables of the Borrowers
shall not be less than 1.40:1, and (ii) the ratio of (a) Qualified Accounts
Receivable to (b) Accounts Receivable shall not be less than 0.70:1.
ss.8.5. Profitable Operations. The Borrowers will not permit Consolidated
Net Income to be less than $0 for any two consecutive fiscal quarters.
ss.9. CLOSING CONDITIONS.
The obligations of the Banks to make the Loans and the Agent to issue
Letters of Credit on the Closing Date and otherwise be bound by the terms of
this Agreement shall be subject to the satisfaction of each of the following
conditions precedent:
ss.9.1. Corporate Action. All corporate action necessary for the valid
execution, delivery and performance by each Borrower and International Signatory
of the Loan Documents shall have been duly and effectively taken, and evidence
thereof satisfactory to the Agent shall have been provided to the Agent;
provided, however, that Sintel shall have ninety (90) days after the Closing
Date to effect this provision.
ss.9.2. Loan Documents, Etc. Each of the Loan Documents shall have been
duly and properly authorized, executed and delivered by the respective parties
thereto and shall be in full force and effect in a form satisfactory to the
Banks; provided, however, that Sintel shall have ninety (90) days after the
Closing Date to effect this provision.
ss.9.3. Certified Copies of Charter Documents. The Agent shall have
received from each of the Borrowers and the International Signatories a copy,
certified by a duly authorized officer of such Person to be true and complete on
the date hereof, of each of (a) its charter or other incorporation documents
(including certificates of merger and name changes) as in effect on such date of
certification, and (b) its by-laws as in effect on such date; provided, however,
that Sintel shall have ninety (90) days after the Closing Date to effect this
provision.
ss.9.4. Incumbency Certificate. The Agent shall have received an incumbency
certificate, dated as of the date hereof, signed by duly authorized officers
giving the name and bearing a specimen signature of each individual who shall be
authorized: (a) to sign the Loan Documents on behalf of the Borrowers and the
International Signatories; (b) to make Loan and Letter of Credit Requests; and
(c) to give notices and to take other action on the Borrowers' and the
International Signatories' behalf under the Loan Documents; provided, however,
that Sintel shall have ninety (90) days after the Closing Date to effect this
provision.
ss.9.5. Validity of Liens. Each of the Stock Pledge Agreements shall be
effective to create in favor of the Agent a legal, valid and enforceable first
security interest in and lien upon the Collateral, subject only to Permitted
Liens. All filings, recordings, deliveries of instruments and other actions
necessary or desirable in the opinion of the Agent to protect and preserve such
security interests shall have been duly effected. The Agent shall have received
evidence thereof in form and substance satisfactory to the Agent; provided,
however, that the International Signatories shall have ninety (90) days after
the Closing Date to effect this provision.
ss.9.6. UCC Search Results. The Agent shall have received the results of
UCC searches with respect to the Borrowers indicating no liens other than
Permitted Liens and otherwise in form and substance satisfactory to the Agent.
ss.9.7. Certificates of Insurance. The Agent shall have received (a) a
certificate of insurance from an independent insurance broker dated as of the
date hereof, or within fifteen (15) days prior thereto, identifying insurers,
types of insurance, insurance limits, and policy terms, and otherwise describing
the insurance coverage of the Borrowers and (b) copies of all policies
evidencing such insurance (or certificates therefor signed by the insurer or an
agent authorized to bind the insurer).
ss.9.8. Opinion of Counsel. The Banks shall have received favorable legal
opinions from general counsel to the Borrowers, addressed to the Banks, dated as
of the date hereof, in form and substance satisfactory to the Agent. Opinions
satisfactory to the Agent regarding the Sintel Stock Pledge Agreement and the
International Pledge Documents (defined therein) shall be received within ninety
(90) days of the date hereof.
ss.9.9. Certificate of Financial Condition. The Agent shall have received a
certificate from the CFO satisfactory to the Agent certifying that no material
adverse change has occurred in the financial condition, results of operations,
business, properties or prospects of the Borrowers, taken as a whole, since the
date of the most recent financial statements and projections provided to the
Banks.
ss.9.10. Initial Compliance Certificate. The Agent shall have received a
Compliance Certificate regarding compliance with the covenants set forth in ss.8
hereof as of the Closing Date.
ss.9.11. Interim Balance Sheets and Income Statements. The Agent shall have
received an unaudited consolidated balance sheet and statement of income of the
Parent dated the Interim Balance Sheet Date, including reconciliations of (A)
the Borrowers (excluding that portion of assets, liabilities, income and
expenses of the Parent attributable to non-Borrowers) and (B) the non-Borrowers
to the consolidated balance sheet and statement of income of the Parent, which
balance sheet and statement of income shall be attached hereto as Schedule 9.11.
ss.9.12. Payoff Letters. The Banks shall have received payoff letters from
Fleet Financial Corporation ("Fleet") with respect to the Fleet Credit Agreement
and from First Union regarding its mortgages indicating the amount to be paid to
such lenders on the Closing Date in order to fully discharge such obligations to
the lenders and acknowledging that upon receipt of such funds each will
forthwith execute and deliver to the Agent for filing all termination statements
and take such other actions as may be necessary to discharge all mortgages and
security interests in favor of such lender.
ss.10. CONDITIONS OF ALL LOANS.
The obligations of the Banks to make any Loan (including without limitation
the obligation of the Agent to issue any Letter of Credit) on and subsequent to
the Closing Date is subject to the following conditions precedent:
ss.10.1. Representations True; No Event of Default. Each of the
representations and warranties of the Borrowers contained in this Agreement or
in any document or instrument delivered pursuant to or in connection with this
Agreement shall be true as of the date as of which they were made and shall also
be true at and as of the time of any Drawdown Date with the same effect as if
made at and as of that time (except to the extent of changes resulting from
transactions contemplated or permitted by this Agreement and changes occurring
in the ordinary course of business which singly or in the aggregate are not
materially adverse, or to the extent that such representations and warranties
relate expressly to an earlier date) and no Default or Event of Default shall
have occurred and be continuing.
ss.10.2. Performance; No Event of Default. The Borrowers shall have
performed and complied with all terms and conditions herein required to be
performed or complied with by them prior to or at the time of any Loan, and at
the time of any Loan, there shall exist no Event of Default or condition which
would result in an Event of Default upon consummation of such Loan (including
without limitation any amounts to be drawn under a Letter of Credit). Each
request by the Borrowers for a Loan (including without limitation each request
for issuance of a Letter of Credit) subsequent to the first Loan shall
constitute certification by the Borrowers that the conditions specified in
ss.ss.10.1 and 10.2 will be duly satisfied on the date of such Loan or Letter of
Credit issuance.
ss.10.3. No Legal Impediment. No change shall have occurred in any law or
regulations thereunder or interpretations thereof which in the reasonable
opinion of the Banks would make it illegal for the Banks to make Loans
hereunder.
ss.10.4. Governmental Regulation. The Banks shall have received such
statements in substance and form reasonably satisfactory to the Banks as they
shall require for the purpose of compliance with any applicable regulations of
the Comptroller of the Currency or the Board of Governors of the Federal Reserve
System.
ss.10.5. Proceedings and Documents. All proceedings in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall have been delivered to the Banks as of the date hereof in form and
substance satisfactory to the Banks, including without limitation a Letter of
Credit and Loan Request in the form attached hereto as Exhibit C, and the Banks
shall have received all information and such counterpart originals or certified
or other copies of such documents as the Banks may reasonably request.
ss.11. COLLATERAL SECURITY. The Obligations shall be secured by a perfected
security interest (having, with respect to each category of Collateral, the
respective rights and priorities set forth herein and in the Stock Pledge
Agreements) in all of the Collateral, whether now owned or hereafter acquired,
pursuant to the terms of the Stock Pledge Agreements. However, provided that no
Default or Event of Default has occurred and is continuing, the Agent shall
release the stock of Sintel and the Sintel Stock Pledge Agreement (or any
successor agreement) shall terminate, if such release and termination is a
required condition of refinancing the indebtedness of Sintel or its immediate
parent (including, without limitation, refinancing existing indebtedness to
Telefonica), provided that the Agent consents to the terms of such refinancing,
which consent shall not be unreasonably withheld.
ss.12. EVENTS OF DEFAULT; ACCELERATION; TERMINATION OF COMMITMENT.
ss.12.1. Events of Default and Acceleration. If any of the following events
("Events of Default" or, if the giving of notice or the lapse of time or both is
required, then, prior to such notice and/or lapse of time, "Defaults") shall
occur:
(a) the Borrowers shall fail to pay any principal of the Loans
or any Reimbursement Obligations when the same shall become due and
payable, whether at the Maturity Date or any accelerated date of
maturity or at any other date fixed for payment;
(b) the Borrowers shall fail to pay any interest or fees or
other amounts owing hereunder within five (5) Business Days after the
same shall become due and payable whether at the Maturity Date or any
accelerated date of maturity or at any other date fixed for payment;
(c) the Borrowers shall fail to comply with the covenants
contained inss.ss.6.3, 6.5, 6.7, 6.9, 6.13, 6.14, 7 or 8 hereof;
(d) the Borrowers shall fail to comply with the
covenants contained inss.ss.6.4 or 6.10 hereof and such failure shall
be continuing for ten (10) days;
(e) the Borrowers shall fail to perform any term, covenant or
agreement contained herein or in any of the other Loan Documents (other
than those specified in subsections (a), (b), (c) and (d) above) within
thirty (30) days after written notice of such failure has been given to
the Borrowers by the Banks;
(f) any representation or warranty contained in this Agreement
or in any document or instrument delivered pursuant to or in connection
with this Agreement shall prove to have been false in any material
respect upon the date when made or repeated;
(g) any Borrower shall fail to pay at maturity, or within any
applicable period of grace, any and all obligations for Funded Debt
(other than the Obligations) or any Guarantee with respect thereto in
an aggregate amount greater than $1,000,000, or fail to observe or
perform any material term, covenant or agreement contained in any
agreement by which it is bound, evidencing or securing borrowed money
in an aggregate amount greater than $1,000,000 for such period of time
as would, or would have permitted (assuming the giving of appropriate
notice if required) the holder or holders thereof or of any obligations
issued thereunder to accelerate the maturity thereof;
(h) (i) any Borrower makes an assignment for the benefit of
creditors, or admits in writing its inability to pay or generally fails
to pay its debts as they mature or become due, or petitions or applies
for the appointment of a trustee or other custodian, liquidator or
receiver of any Borrower or of any substantial part of the assets of
any Borrower or commences any case or other proceeding relating to any
Borrower under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or takes any action to
authorize or in furtherance of any of the foregoing (other than the
dissolution of Subsidiaries with assets, liabilities and projected or
anticipated revenues of less than (in each such case) $100,000); or
(ii) any such petition or application is filed or any such case or
other proceeding is commenced against any Borrower and or any Borrower
indicates its approval thereof, consent thereto or acquiescence
therein;
(i) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating any Borrower bankrupt
or insolvent, or approving a petition in any such case or other
proceeding, or a decree or order for relief is entered in respect of
any Borrower in an involuntary case under federal bankruptcy laws as
now or hereafter constituted, and such decree or order remains in
effect for more than sixty (60) days, whether or not consecutive;
(j) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty (30) days, whether or not consecutive,
any final judgment against any Borrower which, with other outstanding
final judgments against any Borrower, exceeds in the aggregate
$1,000,000 after taking into account any undisputed insurance coverage;
(k) any Borrower or any ERISA Affiliate incurs any liability
to the PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA
in an aggregate amount exceeding $1,000,000; any Borrower or any ERISA
Affiliate is assessed withdrawal liability pursuant to Title IV of
ERISA by a Multiemployer Plan requiring aggregate annual payments
exceeding $1,000,000, or any of the following occurs with respect to a
Guaranteed Pension Plan: (i) an ERISA Reportable Event, or a failure to
make a required installment or other payment (within the meaning of
ss.302(f)(1) of ERISA), provided the Agent determines in its reasonable
discretion that such event (A) could be expected to result in liability
of such Borrower to the PBGC or the Plan in an agregate amount
exceeding $1,000,000 and (B) could constitute grounds for the
termination of such Plan by the PBGC, for the appointment by the
appropriate United States District Court of a trustee to administer
such Plan or for the imposition of a lien in favor of the Guaranteed
Pension Plan; (ii) the appointment by a United States District Court of
a trustee to administer such Plan; or (iii) the institution by the PBGC
of proceedings to terminate such Plan;
(l) any of the Loan Documents shall be cancelled, terminated,
revoked or rescinded otherwise than in accordance with the terms
thereof or with the express prior written agreement, consent or
approval of the Banks, or any action at law, suit or in equity or other
legal proceeding to cancel, revoke or rescind any of the Loan Documents
shall be commenced by or on behalf of the Borrowers or any of their
respective stockholders, or any court or any other governmental or
regulatory authority or agency of competent jurisdiction shall make a
determination that, or issue a judgment, order, decree or ruling to the
effect that, any one or more of the Loan Documents is illegal, invalid
or unenforceable in accordance with the terms thereof; or
(m) (i) any person or group of persons (within the meaning of
Section 13 or 14 of the Securities Exchange Act of 1934, as amended)
shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under said
Act) of 20% or more of the outstanding shares of common stock of the
Parent, or (ii) members of the Jorge L. Mas family cease to own 30% or
more of the common stock of the Parent; or (iii) during any period of
twelve consecutive calendar months, individuals who were directors of
the Parent on the first day of such period shall cease to constitute a
majority of the Board of Directors of the Parent unless the replacement
directors were nominated by the original directors;
then, and in any such event, so long as the same may be continuing, the Agent
may and, upon the request of the Banks, shall, by notice in writing to the
Borrowers, declare all amounts owing with respect to this Agreement, the Notes
and the other Loan Documents and all Reimbursement Obligations to be, and they
shall thereupon forthwith become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrowers; provided that, in the event of any
Bankruptcy Event, all such amounts shall become immediately due and payable
automatically and without any requirement of notice from the Agent or any Bank.
Upon demand by the Banks after the occurrence of any Event of Default, the
Borrowers shall immediately provide to the Agent cash in an amount equal to the
aggregate Maximum Drawing Amount of all Letters of Credit and Reimbursement
Obligations outstanding, to be held by the Agent as collateral security for the
Obligations.
ss.12.2. Termination of Commitments. If any Event of Default shall occur,
any unused portion of the Total Commitment hereunder shall forthwith terminate
and the Banks shall be relieved of all further obligations to make Loans to the
Borrowers and the Agent shall be relieved of all further obligations to issue
Letters of Credit; or if on any Drawdown Date the conditions precedent to the
making of the Loans to be made on such Drawdown Date or the issuance of any
Letters of Credit to be issued on such date are not satisfied (except as a
consequence of a default on the part of the Banks), the Banks may by notice to
the Borrowers, terminate the unused portion of the Total Commitment hereunder,
and upon such Notice being given, such unused portion of the Total Commitment
hereunder shall terminate immediately and the Banks shall be relieved of all
further obligations to make Loans to the Borrowers and the Agent shall be
relieved of all further obligations to issue, extend or renew Letters of Credit.
No termination of any portion of the Total Commitment hereunder shall relieve
the Borrowers of any of the Obligations.
ss.12.3. Remedies. Subject to ss.14.8, in case any one or more of the
Events of Default shall have occurred and be continuing, and whether or not the
Banks shall have accelerated the maturity of the Loans pursuant to ss.12.1, each
Bank, if owed any amount with respect to the Loans or the Reimbursement
Obligations, may, with the consent of the Majority Banks but not otherwise,
proceed to protect and enforce its rights by suit in equity, action at law or
other appropriate proceeding, whether for the specific performance of any
covenant or agreement contained in this Agreement and the other Loan Documents
or any instrument pursuant to which the Obligations to such Bank are evidenced,
including, without limitation, as permitted by applicable law the obtaining of
the ex parte appointment of a receiver, and, if such amount shall have become
due, by declaration or otherwise, proceed to enforce the payment thereof or any
legal or equitable right of such Bank. No remedy herein conferred upon any Bank
or the Agent or the holder of any Note or purchaser of any Letter of Credit
Participation is intended to be exclusive of any other remedy and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or any
other provision of law.
ss.13. SETOFF. Regardless of the adequacy of any collateral, during the
continuance of an Event of Default, any deposits or other sums credited by or
due from any Bank to the Borrowers and any securities or other property of the
Borrowers in the possession of such Bank may be applied to or set off against
the payment of the Obligations and any and all other liabilities, direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Borrowers to the Banks. Such Bank shall notify the
Parent and the other Banks of such application or setoff. The Banks agree among
themselves that, if a Bank shall obtain payment on any Obligations outstanding
under this Agreement through the exercise of a right of offset, banker's lien or
counterclaim, or from any other source (other than by way of a pro rata
payment), it shall promptly notify the Agent thereof and make such adjustments
with the other Banks as shall be equitable to the end that all the Banks shall
share the benefits of such payments pro rata in accordance with the aggregate
unpaid amount of the Notes held by each Bank immediately prior to the payment
obtained by such Bank as aforesaid. The Banks further agree among themselves
that if any payment to a Bank obtained by such Bank through the exercise of a
right of offset, banker's lien or counterclaim, or from any other source (other
than by way of a pro rata payment) as aforesaid shall be rescinded or must
otherwise be restored, the Banks who shall have shared the benefit of such
payment shall return their share of that benefit to the Bank whose payment shall
have been rescinded or otherwise restored.
ss.14. THE AGENT.
ss.14.1. Appointment of Agent, Powers and Immunities. Each Bank hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under the other Loan Documents, provided, however, the Agent is hereby
authorized to serve only as an administrative and collateral agent for the Banks
and to exercise such powers as are reasonably incidental thereto and as are set
forth in this Agreement and the other Loan Documents. The Agent hereby
acknowledges that it does not have the authority to negotiate any agreement
which would bind the Banks or agree to any amendment, waiver or modification of
any of the Loan Documents or bind the Banks except as set forth in this
Agreement or the Loan Documents. Except as provided herein and in the other Loan
Documents, the Agent shall take action or refrain from acting only upon
instructions of the Banks and no action taken or failure to act without the
consent of the Banks shall be binding on any Bank which has not consented. Each
Bank irrevocably authorizes the Agent to execute the Stock Pledge Agreements and
all other instruments relating thereto and to take such action on behalf of each
of the Banks and to exercise all such powers as are expressly delegated to the
Agent under the Loan Documents and all related documents, together with such
other powers as are reasonably incidental thereto. It is agreed that the duties,
rights, privileges and immunities of the Agent, in its capacity as issuer of
Letters of Credit hereunder, shall be identical to its duties, rights,
privileges and immunities as a Bank as provided in this ss.14. The Agent shall
not have any duties, obligations or responsibilities, or any fiduciary
relationship with any Bank, except those expressly set forth in this Agreement
and the other Loan Documents. Without limiting the generality of the foregoing,
the Agent shall not be required to take any action with respect to any Default
or Event of Default, except as expressly provided in ss.12. Neither the Agent
nor any of its affiliates shall be responsible to the Banks for any recitals,
statements, representations or warranties made by the Borrowers or any other
Person whether contained herein or otherwise or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, the
other Loan Documents or any other document referred to or provided for herein or
therein or for any failure by the Borrowers or any other Person to perform its
obligations hereunder or thereunder or in respect of the Notes. The Agent may
employ agents and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care. Neither the Agent nor any of its directors, officers,
employees or agents shall be responsible for any action taken or omitted to be
taken in good faith by it or them hereunder or in connection herewith, except
for its or their own gross negligence or willful misconduct. The Agent in its
separate capacity as a Bank shall have the same rights and powers hereunder as
any other Bank.
ss.14.2. Actions By Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Agreement as it reasonably
deems appropriate unless it shall first have received such advice or concurrence
of the Banks and shall be indemnified to its reasonable satisfaction by the
Banks against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement or any of the Loan Documents in accordance with a request of the
Banks, and such request and any action taken or failure to act pursuant thereto
shall be binding upon the Banks and all future holders of the Notes or any
Letter of Credit Participation.
ss.14.3. INDEMNIFICATION. WITHOUT LIMITING THE OBLIGATIONS OF THE BORROWERS
HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENTS, THE BANKS AGREE TO INDEMNIFY THE
AGENT, RATABLY IN ACCORDANCE WITH THEIR RESPECTIVE COMMITMENT PERCENTAGES, FOR
ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND OR NATURE
WHATSOEVER (OTHER THAN LOSSES WITH RESPECT TO THE AGENT'S PRO RATA SHARE OF THE
OBLIGATIONS) WHICH HAVE NOT BEEN REIMBURSED BY THE BORROWERS AND WHICH MAY AT
ANY TIME BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT IN ANY WAY
RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY
DOCUMENTS CONTEMPLATED BY OR REFERRED TO HEREIN OR THEREIN OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY OR THE ENFORCEMENT OF ANY OF THE TERMS HEREOF OR
THEREOF OR OF ANY SUCH OTHER DOCUMENTS; PROVIDED, THAT NO BANK SHALL BE LIABLE
FOR ANY OF THE FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE AGENT (OR ANY AGENT THEREOF), IT BEING THE INTENT OF
THE PARTIES HERETO THAT ALL SUCH INDEMNIFIED PARTIES SHALL BE INDEMNIFIED FOR
THEIR ORDINARY SOLE OR CONTRIBUTORY NEGLIGENCE.
ss.14.4. Reimbursement. Without limiting the provisions of ss.14.3, the
Banks and the Agent hereby agree that the Agent shall not be obliged to make
available to any Person any sum which the Agent is expecting to receive for the
account of that Person until the Agent has determined that it has received that
sum. The Agent may, however, disburse funds prior to determining that the sums
which the Agent expects to receive have been finally and unconditionally paid to
the Agent, if the Agent wishes to do so. If and to the extent that the Agent
does disburse funds and it later becomes apparent that the Agent did not then
receive a payment in an amount equal to the sum paid out, then any Person to
whom the Agent made the funds available shall, on demand from the Agent, refund
to the Agent the sum paid to that Person. If, in the opinion of the Agent, the
distribution of any amount received by it in such capacity hereunder or under
the Loan Documents might involve it in liability, it may refrain from making
distribution until its right to make distribution shall have been adjudicated by
a court of competent jurisdiction. If a court of competent jurisdiction shall
adjudge that any amount received and distributed by the Agent is to be repaid,
each Person to whom any such distribution shall have been made shall either
repay to the Agent its proportionate share of the amount so adjudged to be
repaid or shall pay over the same in such manner and to such Persons as shall be
determined by such court.
ss.14.5. Documents. The Agent will forward to each Bank, promptly after the
Agent's receipt thereof, a copy of each notice or other document furnished to
the Agent for such Bank hereunder; provided, however, that, notwithstanding the
foregoing, the Agent may furnish to the Banks a monthly summary with respect to
Letters of Credit issued hereunder in lieu of copies of the related Letter of
Credit Applications.
ss.14.6. Non-Reliance on Agent and Other Banks. Each Bank represents that
it has, independently and without reliance on the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own appraisal of the financial condition and affairs of the Borrowers and
decision to enter into this Agreement and the other Loan Documents and agrees
that it will, independently and without reliance upon the Agent or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own appraisals and decisions in taking or not
taking action under this Agreement or any other Loan Document. The Agent shall
not be required to keep informed as to the performance or observance by the
Borrowers of this Agreement, the other Loan Documents or any other document
referred to or provided for herein or therein or by any other Person of any
other agreement or to make inquiry of, or to inspect the properties or books of,
any Person. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning any person which may come into the
possession of the Agent or any of its affiliates. Each Bank shall have access to
all documents relating to the Agent's performance of its duties hereunder at
such Bank's request. Unless any Bank shall promptly object to any action taken
by the Agent hereunder (other than actions to which the provisions of ss.14.8
are applicable and other than actions which constitute gross negligence or
willful misconduct by the Agent), such Bank shall conclusively be presumed to
have approved the same.
ss.14.7. Resignation of Agent. The Agent may resign at any time by giving
60 days' prior written notice thereof to the Banks and the Borrowers. Upon any
such resignation, the Banks shall have the right to appoint a successor Agent.
If no successor Agent shall have been so appointed by the Banks and shall have
accepted such appointment within 30 days after the retiring Agent's giving of
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a financial institution having a
combined capital and surplus in excess of $150,000,000. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring Agent's
resignation, the provisions of this Agreement shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent. Any new Agent appointed pursuant to this ss.14.7 shall
immediately issue new Letters of Credit in place of Letters of Credit previously
issued by the Agent.
ss.14.8. Action by the Banks, Consents, Amendments, Waivers, Etc. Except as
otherwise expressly provided in this ss.14.8, any action to be taken (including
the giving of notice) may be taken or any consent or approval required or
permitted by the Agreement or any other Loan Document to be given by the Banks
may be given, and any term of this Agreement, any other Loan Document or any
other instrument, document or agreement related to this Agreement or the other
Loan Documents or mentioned therein may be amended and the performance or
observance by the Borrowers or any other person of any of the terms thereof and
any Default or Event of Default (as defined in any of the above-referenced
documents or instruments) may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the Majority Banks; provided, however, that no such consent or
amendment which affects the rights, duties or liabilities of the Agent (in its
capacity as Agent) shall be effective without the written consent of the Agent.
Notwithstanding the foregoing, no amendment, waiver or consent shall do any of
the following unless in writing and signed by ALL of the Banks: (a) increase the
principal amount of the Total Commitment (or subject the Banks to any additional
obligations), (b) reduce the principal of or interest on the Notes (including,
without limitation, interest on overdue amounts) or any fees or other amounts
payable hereunder, (c) postpone any date fixed for any payment in respect of
principal or interest or Reimbursement Obligations (including, without
limitation, interest on overdue amounts) on the Notes, or any fees or other
amounts payable hereunder; (d) extend the expiration date of any Letter of
Credit beyond the Maturity Date, (e) change the definition of "Majority Banks"
or number of Banks which shall be required for the Banks or any of them to take
any action under the Loan Documents; (f) amend this ss.14.8; (g) change the
Commitment Percentage of any Bank, except as permitted under ss.17 hereof; or
(h) except as otherwise permitted in ss.11 hereof, release any Collateral.
<PAGE>
ss.15. EXPENSES.
The Borrowers agree to pay (a) any taxes (including any interest and
penalties in respect thereto) payable by the Agent or any of the Banks (other
than Income Taxes) on or with respect to the transactions contemplated by this
Agreement (the Borrowers hereby agreeing to indemnify the Agent and each Bank
with respect thereto), (b) the reasonable fees, expenses and disbursements of
the Agent's Special Counsel or any local counsel to the Agent incurred in
connection with the preparation, administration or interpretation of the Loan
Documents and other instruments mentioned herein, each closing hereunder, and
amendments, modifications, approvals, consents or waivers hereto or hereunder,
(c) the fees, expenses and disbursements of the Agent incurred by the Agent in
connection with the preparation, administration or interpretation of the Loan
Documents and other instruments mentioned herein, including all credit
examination fees, (d) all reasonable out-of-pocket expenses (including without
limitation reasonable attorneys' fees and costs, which attorneys may be
employees of any Bank or the Agent, and reasonable consulting, accounting,
appraisal, investment banking and similar professional fees and charges)
incurred by any Bank or the Agent in connection with (i) the enforcement of or
preservation of rights under any of the Loan Documents against the Borrowers or
the administration thereof after the occurrence of a Default or Event of Default
and (ii) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to any Bank's or the Agent's relationship with the
Borrowers. In addition, the Borrowers agree to pay and save the Agent and the
Banks harmless against any liability for payment of any state documentary stamp
taxes, intangible taxes or similar taxes (including interest or penalties, if
any) which may now or hereafter be determined to be payable in respect to the
execution, delivery or recording of any Loan Document or the funding of any
Loan, whether originally thought to be due or not, and regardless of any mistake
of fact or law on the part of the Agent, the Banks or the Borrowers with respect
to the applicability of such tax. The covenants of this ss.15 shall survive
payment or satisfaction of all other Obligations.
ss.16. SURVIVAL OF COVENANTS, ETC. Unless otherwise stated herein, all
covenants, agreements, representations and warranties made herein, in the other
Loan Documents or in any documents or other papers delivered by or on behalf of
the Borrowers pursuant hereto shall be deemed to have been relied upon by the
Banks and the Agent, notwithstanding any investigation heretofore or hereafter
made by any of them, and shall survive the making of the Loans and the issuance,
extension or renewal of any Letters of Credit, as herein contemplated, and shall
continue in full force and effect so long as any amount due under this
Agreement, any Letter of Credit or the Notes remains outstanding and unpaid or
any Bank has any obligation to make any Loans or the Agent has any obligation to
issue any Letters of Credit hereunder. All statements contained in any
certificate or other paper delivered by or on behalf of the Borrowers pursuant
hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties by the Borrowers hereunder.
ss.17. ASSIGNMENT AND PARTICIPATION. It is understood and agreed that each
Bank shall have the right to assign at any time all or a portion of its
Commitment Percentage and interests in the risk relating to the Loans,
outstanding Letters of Credit, and its Commitment hereunder in an amount equal
to or greater than $5,000,000 (which assignment shall be of an equal percentage
of the Commitment, the Loans and outstanding Letters of Credit unless otherwise
agreed to by the Agent) to additional banks or other financial institutions with
the prior written approval of the Agent and, so long as no Default or Event of
Default has occurred and is continuing, the Borrowers, which approvals shall not
be unreasonably withheld. Any Bank may at any time, and from time to time,
assign to any branch, lending office, or affiliate of such Bank all or any part
of its rights and obligations under the Loan Documents by notice to the Agent
and the Borrowers. It is further agreed that each bank or other financial
institution which executes and delivers to the Agent and the Borrowers hereunder
an Assignment and Acceptance substantially in the form of Exhibit E hereto
together with an assignment fee in the amount of $3,500 payable by the assigning
Bank to the Agent, shall, on the date specified in such Assignment and
Acceptance, become a party to this Agreement and the other Loan Documents for
all purposes of this Agreement and the other Loan Documents, and its portion of
the Commitment, the Loans and Letters of Credit shall be as set forth in such
Assignment and Acceptance. The Bank assignor thereunder shall, to the extent
that rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement. Upon the execution and delivery of such
Assignment and Acceptance, (a) the Borrowers shall issue to the bank or other
financial institution a Note in the amount of such bank's or other financial
institution's Commitment dated the date of the assignment or such other date as
may be specified by the Agent and otherwise completed in substantially the form
of Exhibit A and to the extent any assigning Bank has retained a portion of its
obligations hereunder, an appropriate replacement Note to the assigning Bank
reflecting its assignment; (b) the Agent shall distribute to the Borrowers, the
Banks and such bank or financial institution a schedule reflecting such changes;
and (c) this Agreement shall be appropriately amended to reflect (i) the status
of the bank or financial institution as a party hereto and (ii) the status and
rights of the Banks hereunder.
Each Bank shall also have the right to grant participations to one or more
banks or other financial institutions in its Commitment, the Loans and
outstanding Letters of Credit. The documents evidencing any such participation
shall limit such participating bank or financial institutions voting rights with
respect to this Agreement to the matters set forth in ss.14.8 which require the
vote of all Banks.
Notwithstanding the foregoing, no assignment or participation shall operate
to increase the Total Commitment hereunder or otherwise alter the substantive
terms of this Agreement. Without the prior consent of the Agent and the
Borrowers, no Bank which retains a Commitment hereunder shall have a Commitment
of less than $5,000,000, as such amount may be reduced upon reductions in the
Total Commitment pursuant to ss.2.2 hereof.
Anything contained in this ss.17 to the contrary notwithstanding, any Bank
may at any time pledge all or any portion of its interest and rights under this
Agreement (including all or any portion of its Notes) to any of the twelve
Federal Reserve Lenders organized under ss.4 of the Federal Reserve Act, 12
U.S.C. ss.341. No such pledge or the enforcement thereof shall release the
pledgor Lender from its obligations hereunder or under any of the other Loan
Documents.
ss.18. PARTIES IN INTEREST. All the terms of this Agreement and the other
Loan Documents shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto and
thereto; provided that no Borrower shall assign or transfer its rights hereunder
without the prior written consent of the Banks.
ss.19. NOTICES, ETC.
ss.19.1. Notices. Except as otherwise expressly provided in this Agreement,
all notices and other communications made or required to be given pursuant to
this Agreement or the other Loan Documents shall be in writing and shall be
delivered in hand, mailed by United States first-class mail, postage prepaid, or
sent by telecopier and confirmed by letter, addressed as follows:
(a) if to the Borrowers, at 3155 N.W. 77th Avenue, Miami, Florida
33122-1205, Attention: Edwin D. Johnson; Senior Vice President & Chief Financial
Officer, telecopy number (305) 406-1908, with a copy to the Legal Department of
the Borrowers at the same address, telecopy number (305) 406-1907;
(b) if to the Agent or BKB, at 100 Federal Street, Boston,
Massachusetts 02110, Attention: Arthur Oberheim, Vice President, telecopy
number 617-434-2160;
or such other address for notice as shall have last been furnished in
writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (a) if delivered by hand to a responsible officer
of the party to which it is directed, at the time of the receipt thereof by such
officer, (b) if sent by registered or certified first-class mail, postage
prepaid, five Business Days after the posting thereof, and (c) if sent by
telecopier, at the time of the dispatch thereof with answer-back confirmation,
if in normal business hours in the country of receipt, or otherwise at the
opening of business on the following Business Day.
ss.19.2. Deemed Notice. Except for notice of the occurrence of any Default
or Event of Default required pursuant to ss.6.14 hereof, the Agent and the Banks
shall be deemed to have received notice of any matter disclosed in the filings
of the Parent with the United States Securities and Exchange Commission at the
time such filing are delivered to the Banks.
ss.20. MISCELLANEOUS. The rights and remedies herein expressed are
cumulative and not exclusive of any other rights which the Banks or Agent would
otherwise have. The captions in this Agreement are for convenience of reference
only and shall not define or limit the provisions hereof. This Agreement and any
amendment hereof may be executed in several counterparts and by each party on a
separate counterpart, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one instrument. In proving
this Agreement it shall not be necessary to produce or account for more than one
such counterpart signed by the party against whom enforcement is sought.
ss.21. ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents
executed in connection herewith or therewith express the entire understanding of
the parties with respect to the transactions contemplated hereby. Neither this
Agreement nor any term hereof may be changed, waived, discharged or terminated,
except as provided in ss.14.8. No waiver shall extend to or affect any
obligation not expressly waived or impair any right consequent thereon. No
course of dealing or omission on the part of the Agent or any Bank in exercising
any right shall operate as a waiver thereof or otherwise be prejudicial thereto.
No notice to or demand upon the Borrowers shall entitle the Borrowers to other
or further notice or demand in similar or other circumstances.
ss.22. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS HEREBY WAIVES ITS RIGHT
TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE
IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS,
ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH
RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH BORROWER HEREBY WAIVES
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE
PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR
ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE BORROWERS (a)
CERTIFY THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY BANK OR THE AGENT HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH BANK OR THE AGENT WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (b)
ACKNOWLEDGE THAT THE AGENT AND THE BANKS HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY BECAUSE OF, AMONG
OTHER THINGS, THE BORROWERS' WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.
ss.23. GOVERNING LAW. THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS
(OTHER THAN THE INTERNATIONAL PLEDGE DOCUMENTS DEFINED IN THE SINTEL STOCK
PLEDGE AGREEMENT) ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF SAID COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO
CONFLICTS OR CHOICE OF LAW). THE BORROWERS CONSENT TO THE JURISDICTION OF ANY OF
THE FEDERAL OR STATE COURTS LOCATED IN THE COMMONWEALTH OF MASSACHUSETTS IN
CONNECTION WITH ANY SUIT TO ENFORCE THE RIGHTS OF ANY BANK OR THE AGENT UNDER
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
ss.24. SEVERABILITY. The provisions of this Agreement are severable and if
any one clause or provision hereof shall be held invalid or unenforceable in
whole or in part in any jurisdiction, then such invalidity or unenforceability
shall affect only such clause or provision, or part thereof, in such
jurisdiction, and shall not in any manner affect such clause or provision in any
other jurisdiction, or any other clause or provision of this Agreement in any
jurisdiction.
[The remainder of this page is intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
under seal as of the date first set forth above.
THE BORROWERS:
MASTEC, INC.
By:______________________________________________
Title:___________________________________________
B & D CONTRACTORS OF SHELBY, INC.
BURNUP & SIMS OF TEXAS, INC.
BURNUP & SIMS OF THE CAROLINAS, INC.
HARRISON-WRIGHT CO., INC.
UTILITY PRECAST, INC.
BURNUP & SIMS TELCOM OF FLORIDA, INC.
BURNUP & SIMS TSI, INC.
CHURCH & TOWER ENVIRONMENTAL, INC.
CHURCH & TOWER FIBER TEL, INC.
CHURCH & TOWER, INC.
CHURCH & TOWER OF FLORIDA, INC.
CHURCH & TOWER OF TN, INC.
DESIGNED TRAFFIC INSTALLATION CO.
GDSI, INC.
KENNEDY CABLE CONSTRUCTION, INC.
LATLINK CORPORATION
LATLINK ARGENTINA, INC.
MASTEC COMTEC OF CALIFORNIA, INC.
MASTEC COMTEC OF THE CAROLINAS, INC.
MASTEC TECHNOLOGIES, INC.
MASTEC TELEPORT, INC.
R.D. MOODY & ASSOCIATES, INC.
R.D. MOODY AND ASSOCIATES, INC. OF VIRGINIA
SHANCO CORPORATION
UTILITY LINE MAINTENANCE, INC.
By:______________________________________________
Title:___________________________________________
<PAGE>
THE BANKS:
CREDITANSTALT-BANKVEREIN
By:______________________________________________
Title:___________________________________________
By:______________________________________________
Title:___________________________________________
FIRST UNION NATIONAL BANK OF FLORIDA
By:______________________________________________
Title:___________________________________________
THE SUMITOMO BANK, LIMITED
By:______________________________________________
Title:___________________________________________
By:______________________________________________
Title:___________________________________________
SCOTIABANC INC.
By:______________________________________________
Title:___________________________________________
<PAGE>
THE FUJI BANK AND TRUST COMPANY
By:______________________________________________
Title:___________________________________________
COMERICA BANK
By:______________________________________________
Title:___________________________________________
LTCB TRUST COMPANY
By:______________________________________________
Title:___________________________________________
BANKBOSTON, N.A.,
individually and as Agent
By:______________________________________________
Title:___________________________________________
Exhibit 10.7
SECOND AMENDMENT TO REVOLVING
CREDIT AGREEMENT
THIS SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Second
Amendment") is made and entered into as of the 31st day of July, 1998, by and
among MASTEC, INC., a Delaware corporation (the "Parent"), its Subsidiaries
(other than Excluded Subsidiaries and members of the MasTec International Group)
listed on Schedule 1 to the Credit Agreement defined below (together with the
Parent, collectively the "Borrowers"), BANKBOSTON, N.A., CREDITANSTALT CORPORATE
FINANCE, INC., FIRST UNION NATIONAL BANK OF FLORIDA, SCOTIABANC INC., THE FUJI
BANK AND TRUST COMPANY, COMERICA BANK and LTCB TRUST COMPANY (collectively, the
"Banks") and BANKBOSTON, N.A. as agent (the "Agent") for the Banks.
WHEREAS, the Borrowers, the Banks and the Agent entered into a
Revolving Credit Agreement dated as of June 9, 1997, as amended by a First
Amendment to Revolving Credit Agreement dated as of January 28, 1998 (as the
same may be further amended and in effect from time to time the "Credit
Agreement"), pursuant to which the Banks extended credit to the Borrowers on the
terms set forth therein;
WHEREAS, the Parent has informed the Banks that G.J.S. Construction
Company has merged into Shanco Corporation;
WHEREAS, the Parent has requested that the Banks consent to make
effective the provisions of ss.7.3(e)(ii) of the Credit Agreement, and the Banks
are willing to consent to make effective the provisions of ss.7.3(e)(ii) of the
Credit Agreement on the terms set forth herein;
WHEREAS, the Parent has requested certain revisions to the Credit
Agreement and the parties desire to amend the Credit Agreement on the terms set
forth herein;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree to amend the Credit Agreement as follows:
1. Definitions. Capitalized terms used herein without
definition shall have the meanings assigned to such terms in the
Credit Agreement.
2. Addition of Creditanstalt Corporate Finance, Inc. Pursuant to that
certain Assignment and Acceptance dated as of April 1, 1998, by and between
Creditanstalt AG (f/k/a Creditanstalt-Bankverein) and Creditanstalt Corporate
Finance, Inc. ("CCFI"), as of such date CCFI accepted and assumed the rights and
obligations of a Bank under the Credit Agreement.
3. Amendment to ss.1 of the Credit Agreement. Effective as of July 9,
1998, ss.1 of the Credit Agreement is hereby amended by deleting the definition
of "Commitment Percentage" in its entirety and substituting in place thereof the
following new definition:
"Commitment Percentage. With respect to each Bank, the
percentage set forth beside its name below (subject to adjustment upon
any assignments pursuant to ss.17):
Bank Percentage
BKB 21.6000%
First Union 20.0000%
Comerica 13.6000%
LTCB 13.6000%
Creditanstalt Corporate
Finance, Inc. 10.4000%
Fuji 10.4000%
SBI 10.4000%".
4. Amendment to ss.7.3 of the Credit Agreement. Section 7.3 of the
Credit Agreement is hereby amended by deleting clause (e)(ii) thereof in its
entirety and substituting in place thereof the following new clause (e)(ii):
"(ii) (A) 50% of net cash proceeds received in connection with
the issuance by the Parent of the Senior Subordinated Notes due
February 1, 2008."
5. Amendment to ss.8.1 of the Credit Agreement. Section 8.1 of the
Credit Agreement is hereby amended by deleting clause (b) thereof in its
entirety and substituting in place thereof the following new clause (b):
"(b) the ratio of (i) Funded Debt to (ii) EBITDA for the period of four
(4) consecutive fiscal quarters ending on such date shall not exceed
the ratio set forth opposite such date below:
--------------------------------- ------------------------
Date Ratio
--------------------------------- ------------------------
June 30, 1998 4.50:1
--------------------------------- ------------------------
September 30, 1998 4.50:1
--------------------------------- ------------------------
December 31, 1998 4.00:1
--------------------------------- ------------------------
March 31, 1999 3.50:1
--------------------------------- ------------------------
June 30, 1999 3.25:1
--------------------------------- ------------------------
September 30, 1999 and 3.00:1
thereafter
--------------------------------- ------------------------
6. Amendment to ss.8.3 of the Credit Agreement. Section 8.3 of the
Credit Agreement is hereby amended by deleting ss.8.3 in its entirety and
substituting in place thereof the following new ss.8.3:
"ss.8.3 Interest Coverage Ratio. As of the end of any fiscal
quarter of the Borrowers commencing with the fiscal quarter ending
March 31, 1997, the ratio of (a) EBIT for the period of four (4)
consecutive fiscal quarters ending on such date to (b) Consolidated
Total Interest Expense for such period shall not be less than the ratio
set forth opposite such date below:
--------------------------------- ------------------------
Date Ratio
--------------------------------- ------------------------
June 30, 1998 3.50:1
--------------------------------- ------------------------
September 30, 1998 2.50:1
--------------------------------- ------------------------
December 31, 1998 2.50:1
--------------------------------- ------------------------
March 31, 1999 2.75:1
--------------------------------- ------------------------
June 30, 1999 3.00:1
--------------------------------- ------------------------
September 30, 1999 3.25:1
--------------------------------- ------------------------
December 31, 1999 3.50:1
--------------------------------- ------------------------
Thereafter 4.00:1."
--------------------------------- ------------------------
7. Amendment to ss.8.4 of the Credit Agreement. Section 8.4 of the
Credit Agreement is hereby amended by deleting ss.8.4 in its entirety and
substituting in place thereof the following new ss.8.4:
"ss.8.4 [This section intentionally omitted.]"
8. Amendment Fee. Each Bank which executed and delivered its signature
pages by 5:00 p.m. July 31, 1998 by facsimile (to be followed by originals)
shall receive from the Parent an amendment fee equal to 0.05% of such Bank's
Commitment payable to such Bank for its own account.
9. Effectiveness. This Second Amendment shall be effective as of the date
hereof, subject to the receipt by the Agent of this Second Amendment duly and
properly authorized, executed and delivered by the respective parties hereto.
This Second Amendment shall become effective upon satisfaction of each of the
following conditions:
(a) This Second Amendment shall have been executed and delivered
by the respective parties hereto;
(b) The Borrowers shall have executed and delivered an
affidavit regarding the execution of the Second Amendment outside of
the State of Florida; and
(c) Shanco Corporation shall have delivered to the Agent
copies of its certificate and/or plan of merger filed with its charter
or other incorporation documents, certified by the Secretary of State
of its jurisdictions of incorporation;
provided, however, that as of the Effective Date ss.2 of this Second
Amendment shall be deemed to have been effective as of April 1, 1998 and ss.3 of
this Second Amendment shall be deemed to have been effective as of July 9, 1998.
10. Representations and Warranties. Each of the Borrowers represents
and warrants as follows:
(a) The execution, delivery and performance of each of this Second
Amendment and the transactions contemplated hereby are within the
corporate power and authority of such Borrower and have been or will
be authorized by proper corporate proceedings, and do not (a)
require any consent or approval of the stockholders of such Borrower,
(b) contravene any provision of the charter documents or by-laws of
such Borrower or any law, rule or regulation applicable to such
Borrower, or (c) contravene any provision of, or constitute an event of
default or event which, but for the requirement that time elapse or
notice be given, or both, would constitute an event of default under,
any other material agreement, instrument or undertaking binding on such
Borrower.
(b) This Second Amendment and the Credit Agreement, as amended as of
the date hereof, and all of the terms and provisions hereof and
thereof are the legal, valid and binding obligations of such Borrower
enforceable in accordance with their respective terms except as limited
by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally, and except as
the remedy of specific performance or of injunctive relief is subject
to the discretion of the court before which any proceeding therefor may
be brought.
(c) The execution, delivery and performance of this Second
Amendment and the transactions contemplated hereby do not require any
approval or consent of, or filing or registration with, any
governmental or other agency or authority, or any other party.
(d) The representations and warranties contained in ss.5 of
the Credit Agreement are true and correct in all material respects as
of the date hereof as though made on and as of the date hereof.
(e) No Default or Event of Default under the Credit Agreement
has occurred and is continuing.
11. Ratification, etc. Except as expressly amended hereby, the Credit
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. This Second Amendment and the Credit
Agreement shall hereafter be read and construed together as a single document,
and all references in the Credit Agreement or any related agreement or
instrument to the Credit Agreement shall hereafter refer to the Credit Agreement
as amended by this Second Amendment.
12. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND
SHALL TAKE EFFECT AS A SEALED INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
13. Counterparts. This Second Amendment may be executed in any number
of counterparts and by different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned have duly executed this
Second Amendment under seal as of the date first set forth above.
The Borrowers:
MASTEC, INC.
By:___________________________________
Name:
Title:
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
B & D CONTRACTORS OF SHELBY, INC.
BURNUP & SIMS OF TEXAS, INC.
HARRISON-WRIGHT CO., INC.
UTILITY PRECAST, INC.
BURNUP & SIMS TELCOM OF FLORIDA, INC.
CHURCH & TOWER ENVIRONMENTAL, INC.
CHURCH & TOWER FIBER TEL, INC.
CHURCH & TOWER, INC.
CHURCH & TOWER OF FLORIDA, INC.
CHURCH & TOWER OF TN, INC.
DESIGNED TRAFFIC INSTALLATION CO.
GDSI, INC.
KENNEDY CABLE CONSTRUCTION, INC.
LATLINK CORPORATION
LATLINK ARGENTINA, INC.
MASTEC COMTEC OF CALIFORNIA, INC.
MASTEC COMTEC OF THE CAROLINAS, INC.
MASTEC TECHNOLOGIES, INC.
MASTEC TELEPORT, INC.
R.D. MOODY & ASSOCIATES, INC.
R.D. MOODY AND ASSOCIATES, INC. OF VIRGINIA
SHANCO CORPORATION
UTILITY LINE MAINTENANCE, INC.
AIDCO, INC.
AIDCO SYSTEMS, INC.
E. L. DALTON & COMPANY, INC.
NORTHLAND CONTRACTING, INC.
WILDE CONSTRUCTION, INC.
WILDE OPTICAL SERVICE, INC.
TELE-COMMUNICATIONS CORPORATION OF VIRGINIA
WILDE ACQUISITION CO., INC.
WILDE HOLDING CO., INC.
WEEKS CONSTRUCTION COMPANY
C & S DIRECTIONAL BORING, INC.
LESSARD-NYREN UTILITIES, INC.
LNU, INC.
S.S.S. CONSTRUCTION, INC.
CONTRACT MANAGEMENT AND ASSISTANCE CORP.
ELECTRONIC EQUIPMENT ANALYZERS, INC.
By:___________________________________
Name:
Title:
<PAGE>
The Banks:
CREDITANSTALT CORPORATE FINANCE, INC.
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
FIRST UNION NATIONAL BANK OF FLORIDA
By:___________________________________
Name:
Title:
SCOTIABANC INC.
By:___________________________________
Name:
Title:
THE FUJI BANK AND TRUST COMPANY
By:___________________________________
Name:
Title:
COMERICA BANK
By:___________________________________
Name:
Title:
<PAGE>
LTCB TRUST COMPANY
By:___________________________________
Name:
Title:
BANKBOSTON, N.A.,
individually and as Agent
By:___________________________________
Name:
Title:
<PAGE>
THIRD AMENDMENT TO REVOLVING
CREDIT AGREEMENT
THIS THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Third
Amendment") is made and entered into as of the 11th day of September, 1998, by
and among MASTEC, INC., a Delaware corporation (the "Parent"), its Subsidiaries
(other than Excluded Subsidiaries and members of the MasTec International Group)
listed on Schedule 1 to the Credit Agreement defined below (together with the
Parent, collectively the "Borrowers"), BANKBOSTON, N.A., CREDITANSTALT CORPORATE
FINANCE, INC., FIRST UNION NATIONAL BANK OF FLORIDA, SCOTIABANC INC., THE FUJI
BANK AND TRUST COMPANY, COMERICA BANK and LTCB TRUST COMPANY (collectively, the
"Banks") and BANKBOSTON, N.A. as agent (the "Agent") for the Banks.
WHEREAS, the Borrowers, the Banks and the Agent entered into a
Revolving Credit Agreement dated as of June 9, 1997, as amended by a First
Amendment to Revolving Credit Agreement dated as of January 28, 1998, and as
further amended by a Second Amendment to Revolving Credit Agreement dated as of
July 31st, 1998 (as the same may be further amended and in effect from time to
time the "Credit Agreement"), pursuant to which the Banks extended credit to the
Borrowers on the terms set forth therein;
WHEREAS, the Parent has requested certain revisions to the Credit
Agreement and the parties desire to amend the Credit Agreement on the terms set
forth herein;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree to amend the Credit Agreement as follows:
1. Definitions. Capitalized terms used herein without definition
shall have the meanings assigned to such terms in the Credit Agreement.
2. Amendment of ss.1 of the Loan Agreement. Section 1 of the Credit
Agreement is hereby amended by
(a) inserting the following definition in its proper alphabetical
place:
"Equity Purchase Contract. Any agreement (including any master
agreement and any agreement, whether or not in writing, relating to any
single transaction) that is an equity derivative or equity index swap
or option or other similar agreement (including any option to enter
into any of the foregoing)."
and (b) deleting the definition of "Obligations" in its entirety and
replacing it with the following new definition, inserted in its proper
alphabetical place:
"Obligations. All indebtedness, obligations and liabilities of
the Borrowers to any of the Banks or the Agent, individually or
collectively, existing on the date of this Agreement or arising
thereafter, direct or indirect, joint or several, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured
or unsecured, arising by contract, operation of law or otherwise,
arising or incurred under this Agreement or any of the other Loan
Documents, or under any Equity Purchase Contract between the Borrowers
and any Bank, or in respect of any of the Loans made or Reimbursement
Obligations incurred or any of the Notes, Letter of Credit
Applications, Letters of Credit or other instruments at any time
evidencing any thereof."
3. Amendment to ss.7.6 of the Credit Agreement. Section 7.6 of the
Credit Agreement is hereby amended by deleting ss.7.6 in its entirety and
substituting in place thereof the following new ss.7.6:
"ss.7.6 Restricted Distributions and Redemptions. None of the
Borrowers may make Distributions except as set forth in this ss.7.6.
Each Borrower may make distributions payable solely in common stock or
preferred stock of such Borrower, subject to the requirement to pledge
all such stock pursuant to ss.5.19 hereof. Borrowers other than the
Parent may declare or pay Distributions to the Parent. In addition, the
Borrowers (other than the Parent) shall not redeem, convert, retire or
otherwise acquire shares of any class of capital stock of such
Borrowers. The Parent may declare or pay dividends and may redeem,
convert, retire, or otherwise acquire shares of its capital stock
(either directly or via an Equity Purchase Contract), provided that the
aggregate amount of all such Distributions by the Parent shall not
exceed (i) 50% of Consolidated Net Income in any one fiscal year, plus
(ii) $10,000,000 (which $10,000,000 shall not be reduced by any losses
in Consolidated Net Income). None of the Borrowers may make any
Distribution under this ss.7.6 if a Default or Event of Default exists
or would be created by the making of such Distribution. The Borrowers
shall not effect or permit any change in or amendment to any document
or instrument pertaining to the terms of the Borrowers' or the
International Signatories' capital stock other than the amendment to
the Parent's certificate of incorporation increasing the authorized
amount of common stock and the par value of the common stock and the
preferred stock."
4. Effectiveness. This Third Amendment shall be effective as of the date
hereof, subject to the receipt by the Agent of this Third Amendment duly and
properly authorized, executed and delivered by the respective parties hereto.
This Third Amendment shall become effective upon satisfaction of each of the
following conditions:
(a) This Third Amendment shall have been executed and delivered by the
respective parties hereto; and
(b) The Borrowers shall have executed and delivered an affidavit regarding
the execution of the Third Amendment outside of the State of Florida.
5. Representations and Warranties. Each of the Borrowers represents and
warrants as follows:
(a) The execution, delivery and performance of each of this
Third Amendment and the transactions contemplated hereby are within the
corporate power and authority of such Borrower and have been or will be
authorized by proper corporate proceedings, and do not (a) require any
consent or approval of the stockholders of such Borrower, (b)
contravene any provision of the charter documents or by-laws of such
Borrower or any law, rule or regulation applicable to such Borrower, or
(c) contravene any provision of, or constitute an event of default or
event which, but for the requirement that time elapse or notice be
given, or both, would constitute an event of default under, any other
material agreement, instrument or undertaking binding on such Borrower.
(b) This Third Amendment and the Credit Agreement, as amended
as of the date hereof, and all of the terms and provisions hereof and
thereof are the legal, valid and binding obligations of such Borrower
enforceable in accordance with their respective terms except as limited
by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally, and except as
the remedy of specific performance or of injunctive relief is subject
to the discretion of the court before which any proceeding therefor may
be brought.
(c) The execution, delivery and performance of this Third
Amendment and the transactions contemplated hereby do not require any
approval or consent of, or filing or registration with, any
governmental or other agency or authority, or any other party.
(d) The representations and warranties contained in ss.5 of
the Credit Agreement are true and correct in all material respects as
of the date hereof as though made on and as of the date hereof.
(e) No Default or Event of Default under the Credit Agreement
has occurred and is continuing.
6. Ratification, etc. Except as expressly amended hereby, the Credit
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. This Third Amendment and the Credit
Agreement shall hereafter be read and construed together as a single document,
and all references in the Credit Agreement or any related agreement or
instrument to the Credit Agreement shall hereafter refer to the Credit Agreement
as amended by this Third Amendment.
7. GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND
SHALL TAKE EFFECT AS A SEALED INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
8. Counterparts. This Third Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned have duly executed this
Third Amendment under seal as of the date first set forth above.
The Borrowers:
MASTEC, INC.
By:___________________________________
Name:
Title:
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
B & D CONTRACTORS OF SHELBY, INC.
BURNUP & SIMS OF TEXAS, INC.
HARRISON-WRIGHT CO., INC.
UTILITY PRECAST, INC.
BURNUP & SIMS TELCOM OF FLORIDA, INC.
CHURCH & TOWER ENVIRONMENTAL, INC.
CHURCH & TOWER FIBER TEL, INC.
CHURCH & TOWER, INC.
CHURCH & TOWER OF FLORIDA, INC.
CHURCH & TOWER OF TN, INC.
DESIGNED TRAFFIC INSTALLATION CO.
GDSI, INC.
KENNEDY CABLE CONSTRUCTION, INC.
LATLINK CORPORATION
LATLINK ARGENTINA, INC.
MASTEC COMTEC OF CALIFORNIA, INC.
MASTEC COMTEC OF THE CAROLINAS, INC.
MASTEC TECHNOLOGIES, INC.
MASTEC TELEPORT, INC.
R.D. MOODY & ASSOCIATES, INC.
R.D. MOODY AND ASSOCIATES, INC. OF VIRGINIA
SHANCO CORPORATION
UTILITY LINE MAINTENANCE, INC.
AIDCO, INC.
AIDCO SYSTEMS, INC.
E. L. DALTON & COMPANY, INC.
NORTHLAND CONTRACTING, INC.
WILDE CONSTRUCTION, INC.
WILDE OPTICAL SERVICE, INC.
TELE-COMMUNICATIONS CORPORATION OF VIRGINIA
WILDE ACQUISITION CO., INC.
WILDE HOLDING CO., INC.
WEEKS CONSTRUCTION COMPANY
C & S DIRECTIONAL BORING, INC.
LESSARD-NYREN UTILITIES, INC.
LNU, INC.
S.S.S. CONSTRUCTION, INC.
CONTRACT MANAGEMENT AND ASSISTANCE CORP.
ELECTRONIC EQUIPMENT ANALYZERS, INC.
By:___________________________________
Name:
Title:
<PAGE>
The Banks:
CREDITANSTALT CORPORATE FINANCE, INC.
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
FIRST UNION NATIONAL BANK OF FLORIDA
By:___________________________________
Name:
Title:
SCOTIABANC INC.
By:___________________________________
Name:
Title:
THE FUJI BANK AND TRUST COMPANY
By:___________________________________
Name:
Title:
COMERICA BANK
By:___________________________________
Name:
Title:
<PAGE>
LTCB TRUST COMPANY
By:___________________________________
Name:
Title:
BANKBOSTON, N.A.,
individually and as Agent
By:___________________________________
Name:
Title:
<PAGE>
FOURTH AMENDMENT TO REVOLVING
CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Fourth
Amendment") is made and entered into as of the 25th day of September, 1998, by
and among MASTEC, INC., a Delaware corporation (the "Parent"), its Subsidiaries
(other than Excluded Subsidiaries and members of the MasTec International Group)
listed on Schedule 1 to the Credit Agreement defined below (together with the
Parent, collectively the "Borrowers"), BANKBOSTON, N.A., CREDITANSTALT CORPORATE
FINANCE, INC., FIRST UNION NATIONAL BANK OF FLORIDA, SCOTIABANC INC., THE FUJI
BANK AND TRUST COMPANY, COMERICA BANK and LTCB TRUST COMPANY (collectively, the
"Banks") and BANKBOSTON, N.A. as agent (the "Agent") for the Banks.
WHEREAS, the Borrowers, the Banks and the Agent entered into a
Revolving Credit Agreement dated as of June 9, 1997, as amended by a First
Amendment to Revolving Credit Agreement dated as of January 28, 1998, as further
amended by a Second Amendment to Revolving Credit Agreement dated as of July 31,
1998, and as further amended by a Third Amendment to Revolving Credit Agreement
dated as of September 11, 1998 (as the same may be further amended and in effect
from time to time the "Credit Agreement"), pursuant to which the Banks extended
credit to the Borrowers on the terms set forth therein;
WHEREAS, the Parent has requested certain revisions to the Credit
Agreement and the parties desire to amend the Credit Agreement on the terms set
forth herein;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree to amend the Credit Agreement as follows:
1. Definitions. Capitalized terms used herein without definition shall
have the meanings assigned to such terms in the Credit Agreement.
2. Amendment of ss.1 of the Loan Agreement. Section 1 of the Credit
Agreement is hereby amended by
(a) inserting the following definition in its proper alphabetical
place:
"Approval Date. The date on which all of the Banks agree to
the pricing change for documentary Letters of Credit."
and (b) deleting the definitions of "Letters of Credit" and "Pricing
Table" in their entirety and replacing them with the following new definitions,
inserted in proper alphabetical order:
"Letters of Credit. Documentary or standby Letters of Credit
issued or to be issued by the Agent under ss.3 hereof for the account of the
Borrowers."
"Pricing Table:
----------------- ------------------- ----------------- ---------------------
Applicable Applicable Applicable
Pricing Ratio LIBOR Margin L/C Margin Commitment Rate
(per annum) (per annum) (per annum)
----------------- ------------------- ----------------- ---------------------
less than 1.00:1 0.75% 0.75% 0.250%
----------------- ------------------- ----------------- ---------------------
greater than or equal to
1.00:1, but less than 1.50:1
1.00% 1.00% 0.250%
----------------- ------------------- ----------------- ---------------------
greater than or equal to
1.50:1, but less than 2.00:1
1.25% 1.25% 0.375%
----------------- ------------------- ----------------- ---------------------
greater than or equal to 2.00:1
1.50% 1.50% 0.375%
----------------- ------------------- ----------------- ---------------------
provided that prior to the Approval Date, the Applicable L/C Margin for
documentary Letters of Credit shall be as set forth in the table above, and that
on and after the Approval Date, the Applicable L/C Margin for documentary
Letters of Credit shall be priced at the Applicable L/C Margin set forth in the
table above multiplied by 0.5."
3. Amendment to ss.3.1 of the Credit Agreement. Section 3.1 of the
Credit Agreement is hereby amended by deleting the figure "$10,000,000" in
clause (a) and substituting in place thereof the figure "$20,000,000".
4. Effectiveness. This Fourth Amendment shall be effective as of the
date hereof, subject to the receipt by the Agent of this Fourth Amendment duly
and properly authorized, executed and delivered by the Majority Banks and the
Borrowers, whereas the pricing change for documentary Letters of Credit shall
only be effective upon the approval of all of the Banks.
5. Representations and Warranties. Each of the Borrowers represents
and warrants as follows:
(a) The execution, delivery and performance of each of this
Fourth Amendment and the transactions contemplated hereby are within
the corporate power and authority of such Borrower and have been or
will be authorized by proper corporate proceedings, and do not (a)
require any consent or approval of the stockholders of such Borrower,
(b) contravene any provision of the charter documents or by-laws of
such Borrower or any law, rule or regulation applicable to such
Borrower, or (c) contravene any provision of, or constitute an event of
default or event which, but for the requirement that time elapse or
notice be given, or both, would constitute an event of default under,
any other material agreement, instrument or undertaking binding on such
Borrower.
(b) This Fourth Amendment and the Credit Agreement, as amended
as of the date hereof, and all of the terms and provisions hereof and
thereof are the legal, valid and binding obligations of such Borrower
enforceable in accordance with their respective terms except as limited
by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally, and except as
the remedy of specific performance or of injunctive relief is subject
to the discretion of the court before which any proceeding therefor may
be brought.
(c) The execution, delivery and performance of this Fourth
Amendment and the transactions contemplated hereby do not require any
approval or consent of, or filing or registration with, any
governmental or other agency or authority, or any other party.
(d) The representations and warranties contained in ss.5 of
the Credit Agreement are true and correct in all material respects as
of the date hereof as though made on and as of the date hereof.
(e) No Default or Event of Default under the Credit Agreement
has occurred and is continuing.
6. Ratification, etc. Except as expressly amended hereby, the Credit
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. This Fourth Amendment and the Credit
Agreement shall hereafter be read and construed together as a single document,
and all references in the Credit Agreement or any related agreement or
instrument to the Credit Agreement shall hereafter refer to the Credit Agreement
as amended by this Fourth Amendment.
7. GOVERNING LAW. THIS FOURTH AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND
SHALL TAKE EFFECT AS A SEALED INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
8. Counterparts. This Fourth Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned have duly executed this
Fourth Amendment under seal as of the date first set forth above.
The Borrowers:
MASTEC, INC.
By:___________________________________
Name:
Title:
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
B & D CONTRACTORS OF SHELBY, INC.
BURNUP & SIMS OF TEXAS, INC.
HARRISON-WRIGHT CO., INC.
UTILITY PRECAST, INC.
BURNUP & SIMS TELCOM OF FLORIDA, INC.
CHURCH & TOWER ENVIRONMENTAL, INC.
CHURCH & TOWER FIBER TEL, INC.
CHURCH & TOWER, INC.
CHURCH & TOWER OF FLORIDA, INC.
CHURCH & TOWER OF TN, INC.
DESIGNED TRAFFIC INSTALLATION CO.
GDSI, INC.
KENNEDY CABLE CONSTRUCTION, INC.
LATLINK CORPORATION
LATLINK ARGENTINA, INC.
MASTEC COMTEC OF CALIFORNIA, INC.
MASTEC COMTEC OF THE CAROLINAS, INC.
MASTEC TECHNOLOGIES, INC.
MASTEC TELEPORT, INC.
R.D. MOODY & ASSOCIATES, INC.
R.D. MOODY AND ASSOCIATES, INC. OF VIRGINIA
SHANCO CORPORATION
UTILITY LINE MAINTENANCE, INC.
AIDCO, INC.
AIDCO SYSTEMS, INC.
E. L. DALTON & COMPANY, INC.
NORTHLAND CONTRACTING, INC.
WILDE CONSTRUCTION, INC.
WILDE OPTICAL SERVICE, INC.
TELE-COMMUNICATIONS CORPORATION OF VIRGINIA
WILDE ACQUISITION CO., INC.
WILDE HOLDING CO., INC.
WEEKS CONSTRUCTION COMPANY
C & S DIRECTIONAL BORING, INC.
LESSARD-NYREN UTILITIES, INC.
LNU, INC.
S.S.S. CONSTRUCTION, INC.
CONTRACT MANAGEMENT AND ASSISTANCE CORP.
ELECTRONIC EQUIPMENT ANALYZERS, INC.
By:___________________________________
Name:
Title:
<PAGE>
The Banks:
CREDITANSTALT CORPORATE FINANCE, INC.
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
FIRST UNION NATIONAL BANK OF FLORIDA
By:___________________________________
Name:
Title:
SCOTIABANC INC.
By:___________________________________
Name:
Title:
THE FUJI BANK AND TRUST COMPANY
By:___________________________________
Name:
Title:
COMERICA BANK
By:___________________________________
Name:
Title:
<PAGE>
LTCB TRUST COMPANY
By:___________________________________
Name:
Title:
BANKBOSTON, N.A.,
individually and as Agent
By:___________________________________
Name:
Title:
<PAGE>
FIFTH AMENDMENT TO REVOLVING
CREDIT AGREEMENT AND CONSENT
THIS FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT AND CONSENT (this
"Fifth Amendment") is made and entered into as of the 29th day of December,
1998, by and among MASTEC, INC., a Florida corporation (the "Parent"), its
Subsidiaries (other than Excluded Subsidiaries and members of the MasTec
International Group) listed on Schedule 1 to the Credit Agreement defined below
(together with the Parent, collectively the "Borrowers"), BANKBOSTON, N.A.
("BKB"), BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. (f/k/a Creditanstalt
Corporate Finance, Inc.), FIRST UNION NATIONAL BANK OF FLORIDA ("First Union"),
SCOTIABANC INC. ("SBI"), COMERICA BANK, LTCB TRUST COMPANY and LASALLE NATIONAL
BANK (collectively, the "Banks") and BANKBOSTON, N.A. as agent (the "Agent") for
the Banks.
WHEREAS, the Borrowers, the Banks and the Agent entered into a
Revolving Credit Agreement dated as of June 9, 1997, as amended by a First
Amendment to Revolving Credit Agreement dated as of January 28, 1998, as further
amended by a Second Amendment to Revolving Credit Agreement dated as of July 31,
1998, and as further amended by a Third Amendment to Revolving Credit Agreement
dated as of September 11, 1998, as further amended by a Fourth Amendment to
Revolving Credit Agreement dated as of September 25, 1998 (as the same may be
further amended and in effect from time to time the "Credit Agreement"),
pursuant to which the Banks extended credit to the Borrowers on the terms set
forth therein;
WHEREAS, the Parent has requested certain revisions to the Credit
Agreement, including an increase in the Total Commitment, and the parties desire
to amend the Credit Agreement on the terms set forth herein;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree to amend the Credit Agreement as follows:
1. Definitions. Capitalized terms used herein without definition shall
have the meanings assigned to such terms in the Credit Agreement.
2. Addition of LaSalle National Bank. LaSalle National Bank ("LaSalle")
by its signature below agrees to become a Bank under the Credit Agreement, and
does hereby join and become a party to the Credit Agreement as a Bank, accepting
and assuming the rights and obligations of a Bank under the Credit Agreement.
LaSalle agrees to comply with, and be bound by, all of the terms and conditions
of the Credit Agreement in all respects as an original Bank thereunder, as if
such Bank were an original signatory thereto, including without limitation,
assuming all responsibilities and liabilities arising or incurred under the
Credit Agreement and the Notes on and after the Closing Date. Without limiting
the above, LaSalle hereby expressly consents to the terms and conditions of
ss.23 (Governing Law; Submission to Jurisdiction) of the Credit Agreement. The
parties to this Fifth Amendment agree that this ss.2 shall be deemed to be, and
is hereby made a part of, the Credit Agreement as if set forth therein in full.
3. Amendment of ss.1 of the Loan Agreement. Section 1 of the Credit
Agreement is hereby amended by
(a) inserting the following definitions in their proper alphabetical
places:
Aidco Management. The managers of Aidco, Inc. and Aidco Systems, Inc.
Applicable Base Rate Margin. The Applicable Base Rate Margin
on Base Rate Loans shall be as set forth in the Pricing Table. Any
change in the Applicable Base Rate Margin shall become effective on the
first day of each quarter which begins after receipt by the Banks of
financial statements delivered pursuant to ss.6.4(a) or (b) hereof
which indicate a change in the Pricing Ratio. If at any time the
financial statements required to be delivered pursuant to ss.6.4(a) or
(b) hereof are not delivered within the time periods specified in such
subsections, the Applicable Base Rate Margin shall be 0.5% with respect
to any Base Rate Loan requested on or after the date on which such
financial statements were required to be delivered but before the time
of actual receipt of such financial statements, subject to adjustment
upon actual receipt of such financial statements.
Co-Agent(s). First Union and SBI.
Wilde-Aidco Bonuses. Signing bonuses for certain employees
of Wilde Construction, Inc., Wilde Optical Service, Inc., Wilde
Acquisition Co., Inc., Wilde Holding Co., Inc., Aidco, Inc. and Aidco
Systems, Inc., not to exceed an aggregate amount of $17,500,000.00.
Wilde-Aidco Non-Compete Agreement(s). Non-compete agreement(s)
with certain members of Wilde Management and Aidco Management, with
payments under such non-compete agreement(s) not to exceed an aggregate
amount of $16,000,000.00.
Wilde-Aidco Transaction. The Parent's (a) repurchase in three
installments during the period beginning December 1, 1998 and ending
November 30, 1999 of 440,000 shares of its capital stock from Aidco
Management for $30.00 per share, (b) the Wilde-Aidco Non-Compete
Agreement(s), and (c) the Wilde-Aidco Bonuses.
Wilde Management. The managers of Wilde Construction, Inc.,
Wilde Optical Service, Inc., Wilde Acquisition Co., Inc. and Wilde Holding
Co., Inc."
and (b) deleting the definitions of "Applicable L/C Margin,"
"Applicable LIBOR Margin," "Collateral," "Commitment Percentage," "Loan
Documents," and "Pricing Table" in their entirety and replacing them with the
following new definitions, inserted in proper alphabetical order:
"Applicable L/C Margin. The Applicable L/C Margin on Letters
of Credit shall be as set forth in the Pricing Table. The effective
date of a change in the Applicable L/C Margin shall be the first day
after receipt by the Banks of financial statements delivered pursuant
to ss.6.4(a) or (b) hereof which indicate a change in the Pricing
Ratio. If at any time the financial statements required to be delivered
pursuant to ss.6.4(a) or (b) hereof are not delivered within the time
periods specified in such subsections, the Applicable L/C Margin shall
be 2.25% with respect to any Letter of Credit issued after the date on
which such financial statements were required to be delivered but
before actual receipt of such financial statements, subject to
adjustment upon actual receipt of such financial statements.
Applicable LIBOR Margin. The Applicable LIBOR Margin on LIBOR
Loans shall be as set forth in the Pricing Table. Any change in the
Applicable LIBOR Margin shall become effective on the first day of each
Interest Period which begins three (3) or more days after receipt by
the Banks of financial statements delivered pursuant to ss.6.4(a) or
(b) hereof which indicate a change in the Pricing Ratio. If at any time
the financial statements required to be delivered pursuant to ss.6.4(a)
or (b) hereof are not delivered within the time periods specified in
such subsections, the Applicable LIBOR Margin shall be 2.25% with
respect to any LIBOR Loan requested on or after the date on which such
financial statements were required to be delivered but before the time
of actual receipt of such financial statements, subject to adjustment
upon actual receipt of such financial statements.
Collateral. The shares of all direct or indirect Subsidiaries
of the Parent that are or are intended to be subject to the security
interests created by the U.S. Stock Pledge Agreement.
Commitment Percentage. With respect to each Bank, the
percentage set forth beside its name below (subject to adjustment upon
any assignments pursuant to ss.17):
Bank Percentage
BKB 24.2424%
First Union 22.7273%
SBI 15.4545%
Comerica 10.3030%
LTCB 10.3030%
LaSalle National Bank 9.0909%
Bank Austria Creditanstalt
Corporate Finance, Inc. 7.8788%.
Loan Documents. This Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit, and the U.S.Stock Pledge Agreement.
<PAGE>
Pricing Table:
---------------------- ------------- ------------- ------------ --------------
Applicable Applicable Applicable Applicable
Base Rate Margin LIBOR Margin L/C Margin Commitment Rate
(per annum) (per annum) per annum) (per annum)
Pricing Ratio
---------------------- ------------- ------------- ------------ --------------
less than 2.00:1 0.00% 1.00% 1.00% 0.250%
---------------------- ------------- ------------- ------------ --------------
greater than or equal 0.00% 1.25% 1.25% 0.250%
to 2.00:1, but less than
2.50:1
---------------------- ------------- ------------- ------------ --------------
greater than or equal 0.00% 1.50% 1.50% 0.375%
to 2.50:1, but less than
3.00:1
---------------------- ------------- ------------- ------------ --------------
greater than or equal 0.25% 1.75% 1.75% 0.375%
to 3.00:1, but less than
3.50:1
---------------------- ------------- ------------- ------------ --------------
greater than or equal 0.25% 2.00% 2.00% 0.500%
to 3.50:1, but less than
4.00:1
---------------------- ------------- ------------- ------------ --------------
greater than or equal 0.50% 2.25% 2.25% 0.500%
to 4.00:1
---------------------- ------------- ------------- ------------ --------------
provided that the Applicable L/C Margin for documentary Letters of Credit issued
on or after December 29, 1998 shall be priced at the Applicable L/C Margin set
forth in the table above multiplied by 0.5."
4. Amendment to ss.2.1 of the Credit Agreement. Section 2.1 of the
Credit Agreement is hereby amended by deleting the figure "$125,000,000" therein
and substituting in place thereof the figure "$165,000,000".
5. Amendment to ss.2.4(a) of the Credit Agreement. Section 2.4(a) of
the Credit Agreement is hereby amended by deleting ss.2.4(a) in its entirety and
substituting in place thereof the following new ss.2.4(a):
"(a) The outstanding principal amount of the Revolving Credit
Loans shall bear interest at the rate per annum equal to (i) the Base
Rate plus the Applicable Base Rate Margin, or (ii) at the Borrowers'
option as provided herein, the LIBOR Rate plus the Applicable LIBOR
Margin."
6. Amendment to ss.4.1(b) of the Credit Agreement. Section 4.1(b) of
the Credit Agreement is hereby amended by deleting ss.4.1(b) in its entirety and
substituting in place thereof the following new ss.4.1(b):
"(b) Letter of Credit Fees. The Borrowers shall pay in advance
on the date of issuance of each Letter of Credit an issuance fee to the
Agent for its account equal to one eighth of one percent (1/8%) per
annum on the Maximum Drawing Amount of each Letter of Credit (the
"Issuance Fee"). The Borrowers shall also pay a fee to the Agent (the
"Letter of Credit Fee"), which fee shall be for the accounts of the
Banks in accordance with their respective Commitment Percentages. With
respect to each standby Letter of Credit, such fees shall be calculated
and paid quarterly in advance on the first Business Day of each fiscal
quarter and equal to the Applicable L/C Margin multiplied by the
Maximum Drawing Amount of all outstanding Letters of Credit. With
respect to any documentary Letter of Credit, such fees shall be
calculated based on the Maximum Drawing Amount thereunder during the
period commencing on the date of issuance thereof (or with respect to
documentary Letters of Credit outstanding on December 29, 1998,
commencing December 29, 1998) through the date of negotiation or
cancellation thereof (calculated on the basis of a 360-day year for the
actual number of days elapsed) and shall be payable in arrears within
seven (7) Business Days after the end of each month during which, or
any part of which, such documentary Letter of Credit is outstanding. In
addition to the Issuance Fee and the Letter of Credit Fee, the
Borrowers shall pay to the Agent, for its own account, all related
customary administrative fees in accordance with customary practice.
Notwithstanding any provision contained herein to the contrary, no
fees, commissions or other amounts paid as of or prior to December 29
,1998 in respect of any Letter of Credit existing as of such date shall
be repaid or credited against any amounts otherwise payable pursuant to
this ss.4.1(b)."
7. Amendment to ss.4.9 of the Credit Agreement. Section 4.9 of the
Credit Agreement is hereby amended by deleting ss.4.9 in its entirety and
substituting in place thereof the following new ss.4.9:
"ss.4.9 Interest on Overdue Amounts. Overdue principal and (to
the extent permitted by applicable law) interest on the Loans and all
other overdue amounts payable hereunder or under any of the other Loan
Documents shall bear interest compounded monthly and payable on demand
at a rate per annum equal to the Base Rate plus the Applicable Base
Rate Margin plus two (2) percent until such amount shall be paid in
full (after, as well as before, judgment)."
8. Amendment to ss.5 of the Credit Agreement. Section 5 of the Credit
Agreement is hereby amended by
(a) adding the following ss.5.21 in its proper place:
"5.21. Year 2000 Issue. The Borrowers and their Subsidiaries
have reviewed the areas within their businesses and operations which
could be adversely affected by, and have developed or are developing a
program to address on a timely basis, the "Year 2000 Issue" (i.e. the
risk that computer applications used by any of the Borrowers or their
Subsidiaries may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date
after December 31, 1999). Based upon such review, the Borrowers
reasonably believe that the "Year 2000 Issue" will not have any
materially adverse effect on the business or financial condition of any
of the Borrowers or its Subsidiaries."
and (b) deleting ss.ss.5.17 and 5.19 in their entirety and substituting
in place thereof the following new ss.ss.5.17 and 5.19:
"ss.5.17 Perfection of Security Interests. Except as set forth
on Schedule 5.17, the Collateral and the Agent's rights with respect to
the Collateral are not subject to any setoff, claims, withholdings or
other defenses. The Borrowers and MasTec International, Inc. are the
owners of the Collateral free from any lien, security interest,
encumbrance and any other claim or demand, other than liens in favor of
the Agent for the benefit of the Banks to secure the Obligations. The
U.S. Stock Pledge Agreement is effective to create in favor of the
Agent, for the benefit of the Banks, a legal, valid and enforceable
first priority security interest in the Collateral. The certificates
for the shares of such Collateral have been delivered to the Agent.
ss.5.19 Subsidiaries. Schedule 1 sets forth a complete and
accurate list of the direct or indirect Subsidiaries of the Parent,
including the name of each Subsidiary and its jurisdiction of
incorporation, together with the number of authorized and outstanding
shares of each Subsidiary. All of the stock of each U.S. Subsidiary
(other than the Excluded Subsidiaries) which is directly or indirectly
owned by the Parent has been pledged to the Agent on behalf of the
Banks pursuant to the U.S. Stock Pledge Agreement. The Parent has good
and marketable title to all of the shares it purports to own of the
stock of each such Subsidiary, free and clear in each case of any lien.
All such shares have been duly issued and are fully paid and
non-assessable. Each Subsidiary of the Parent, other than the Excluded
Subsidiaries and the members of the MasTec International Group, is a
Borrower hereunder."
9. Amendment to ss.7.3(e) of the Credit Agreement. Section 7.3(e) of
the Credit Agreement is hereby amended by deleting ss.7.3(e) in its entirety and
substituting in place thereof the following new ss.7.3(e):
"(e) Investments (as defined in ss.1) by any Borrower in any
affiliate or Subsidiary of a Borrower which is not also a Borrower
(which may include the MasTec International Group or other non-U.S.
entities) or in any other Person (i) funded prior to or on December 29,
1998 and listed on Schedule 7.3(e), plus (ii) $15,000,000, plus (iii)
the net cash proceeds from the sale of any Investments listed on
Schedule 7.3(e) and the net cash proceeds from any sale of the stock of
Sintel; provided that the sum of items (i) through (iii) shall not
exceed $125,000,000."
10. Amendment to ss.7.6 of the Credit Agreement. Section 7.6 of the
Credit Agreement is hereby amended by deleting ss.7.6 in its entirety and
substituting in place thereof the following new ss.7.6:
"ss.7.6 Restricted Distributions and Redemptions. None of the
Borrowers may make Distributions except as set forth in this ss.7.6.
Each Borrower may make distributions payable solely in common stock or
preferred stock of such Borrower, subject to the requirement to pledge
all such stock pursuant to ss.5.19 hereof. Borrowers other than the
Parent may declare or pay Distributions to the Parent. In addition, the
Borrowers (other than the Parent) shall not redeem, convert, retire or
otherwise acquire shares of any class of capital stock of such
Borrowers. The Parent may declare or pay dividends and may redeem,
convert, retire, or otherwise acquire shares of its capital stock
(either directly or via an Equity Purchase Contract), provided that (a)
prior to December 29, 1998, the aggregate amount of all such
Distributions by the Parent shall not exceed 50% of Consolidated Net
Income in any one fiscal year, plus, for the fiscal year ending
December 31, 1998 only, $10,000,000 (which $10,000,000 shall not be
reduced by any losses in Consolidated Net Income), and (b) on or after
December 29, 1998, the aggregate amount of all such Distributions by
the Parent shall consist of the Parent's repurchase in three
installments from December 1, 1998 to November 30, 1999 of 440,000
shares of its capital stock from Aidco Management for $30.00 per share.
Notwithstanding the above, none of the Borrowers may make any
Distribution under this ss.7.6 if a Default or Event of Default exists
or would be created by the making of such Distribution. The Borrowers
shall not effect or permit any change in or amendment to any document
or instrument pertaining to the terms of the Borrowers' or the
International Signatories' capital stock other than the amendment to
the Parent's certificate of incorporation increasing the authorized
amount of common stock and the par value of the common stock and the
preferred stock."
11. Amendment to ss.7.9 of the Credit Agreement. Section 7.9 of the
Credit Agreement is hereby amended by deleting ss.7.9 in its entirety and
substituting in place thereof the following new ss.7.9:
"ss.7.9 [This section intentionally omitted.]"
12. Amendment to ss.8 of the Credit Agreement. Section 8 of the Credit
Agreement is hereby amended by deleting ss.ss.8.1 and 8.3 in their entirety and
substituting in place thereof the following new ss.ss.8.1 and 8.3:
"ss.8.1. Leverage Ratios. As of the end of any fiscal quarter
of the Borrowers commencing with the fiscal quarter ending March 31,
1997, (a) the ratio of (i) Senior Debt to (ii) EBITDA for the period of
four (4) consecutive fiscal quarters ending on such date shall not
exceed 2.50:1, and (b) the ratio of (i) Funded Debt to (ii) EBITDA for
the period of four (4) consecutive fiscal quarters ending on such date
shall not exceed the ratio set forth opposite such date below:
--------------------------------- ------------------------
Date Ratio
--------------------------------- ------------------------
June 30, 1998 4.50:1
--------------------------------- ------------------------
September 30, 1998 4.50:1
--------------------------------- ------------------------
December 31, 1998 4.00:1
--------------------------------- ------------------------
March 31, 1999 3.50:1
--------------------------------- ------------------------
June 30, 1999 3.25:1
--------------------------------- ------------------------
September 30, 1999 and 3.00:1
thereafter
--------------------------------- ------------------------
For purposes of determining compliance with the Funded Debt to
EBITDA ratio, but not for purposes of determining the Pricing Ratio,
EBITDA shall be adjusted to add back pre-tax charges taken in
connection with the Wilde-Aidco Transaction, provided that (a)
PricewaterhouseCoopers determines that the Parent must take such
pre-tax charges in the fiscal quarter ending on December 31, 1998, (b)
such pre-tax charges are taken in the fiscal quarter ending on December
31, 1998, and (c) such pre-tax charges do not exceed an aggregate
amount of $33,500,000 (the "Wilde-Aidco Special Charges").
ss.8.3. Interest Coverage Ratio. As of the end of any fiscal
quarter of the Borrowers commencing with the fiscal quarter ending
March 31, 1997, the ratio of (a) EBIT for the period of four (4)
consecutive fiscal quarters ending on such date to (b) Consolidated
Total Interest Expense for such period shall not be less than the ratio
set forth opposite such date below:
--------------------------------- ------------------------
Date Ratio
--------------------------------- ------------------------
June 30, 1998 3.50:1
--------------------------------- ------------------------
September 30, 1998 2.50:1
--------------------------------- ------------------------
December 31, 1998 2.50:1
--------------------------------- ------------------------
March 31, 1999 2.75:1
--------------------------------- ------------------------
June 30, 1999 3.00:1
--------------------------------- ------------------------
September 30, 1999 3.25:1
--------------------------------- ------------------------
December 31, 1999 3.50:1
--------------------------------- ------------------------
Thereafter 4.00:1
--------------------------------- ------------------------
For purposes of calculating the EBIT to Consolidated Total
Interest Expense ratio, EBIT shall be adjusted to add back the
Wilde-Aidco Special Charges."
13. Amendment toss.11 of the Credit Agreement. Section 11 of the
Credit Agreement is hereby amended by deleting ss.11 in its entirety and
substituting in place thereof the following new ss.11:
"ss.11. COLLATERAL SECURITY. The Obligations shall be secured
by a perfected security interest (having, with respect to each category
of Collateral, the respective rights and priorities set forth herein
and in the Stock Pledge Agreements) in all of the Collateral, whether
now owned or hereafter acquired, pursuant to the terms of the U.S.
Stock Pledge Agreement. The Agent may from time to time, in its
discretion, release Collateral, provided that the aggregate value of
such released Collateral does not exceed five percent (5%) of the
consolidated net worth of the Borrowers determined in accordance with
GAAP."
1. Amendment toss.14 of the Credit Agreement. Section 14 of the Credit
Agreement is hereby amended by adding the following ss.14.9 to the end thereof:
"ss.14.9. Co-Agents. None of the Banks identified in this Agreement as a
"Co-Agent" shall have any right, power, obligation, liability, responsibility or
duty under this Agreement other than those applicable to all Banks as such.
Without limiting the foregoing, none of the Banks so identified as a "Co-Agent"
shall have or be deemed to have any fiduciary relationship with any Bank. Each
Bank acknowledges that it has not relied, and will not rely, on any of the Banks
so identified in deciding to enter into this Agreement or not taking action
hereunder."
2. Amendment to Schedules of the Credit Agreement. Schedule 7.3(e) is
hereby added to the Credit Agreement in the form attached hereto.
3. Consent to Wilde-Aidco Bonuses and Non-Compete Agreement(s).
Notwithstanding the provisions of ss.5.18 of the Credit Agreement, each of the
Banks hereby consents to the Wilde-Aidco Bonuses and the Wilde-Aidco Non-Compete
Agreements, provided that (a) no Default or Event of Default exists or would be
created by the Wilde-Aidco Bonuses or the Wilde-Aidco Non-Compete Agreements
(other than under ss.5.18), and (b) all other conditions of the Credit Agreement
(other than ss.5.18) be met in connection with the Wilde-Aidco Bonuses and the
Wilde-Aidco Non-Compete Agreements.
4. Consent to Release of Sintel Stock and Termination of Sintel Stock
Pledge Agreement. Notwithstanding the provisions of ss.14.8(h) of the Credit
Agreement, each of the Banks hereby consents to the Agent's release of the
Sintel stock, and the termination of the Sintel Stock Pledge, provided that
Sintel shall be sold in accordance with the Stock Purchase Agreement; Stock
Purchase Option, Stock Pledge and Shareholder Agreement dated December 30, 1998
(the "Sale Agreement"). If for any reason Sintel is not sold pursuant to the
Sale Agreement, the Borrowers agree to re-pledge the stock of Sintel to the
Agent for the benefit of the Banks, and to execute any agreements, further
assurances or other instruments in connection with the re-pledge of the Sintel
stock that the Agent may reasonably request.
5. Effectiveness. This Fifth Amendment shall become effective as of the
date hereof, subject to the satisfaction of each of the following conditions:
(a) receipt by the Agent of this Fifth Amendment duly and
properly authorized, executed and delivered by the respective parties
hereto;
(b) the Borrowers shall have executed and delivered to the
Agent amended and restated Notes for each of BKB, First Union and SBI,
reflecting their revised Commitment Percentages as described in ss.2(b)
of this Fifth Amendment;
(c) the Borrowers shall have delivered to the Agent certified
copies of corporate resolutions of each of the Borrowers satisfactory
to the Agent authorizing this Fifth Amendment, the amended and restated
Notes, and all related documents;
(d) payment of all fees due to each Bank pursuant to the terms
of the separate fee letters dated as of the date hereof; and
(e) the Parent shall have delivered to the Agent copies of (i)
its charter or other incorporation documents, certified by the
Secretary of State of Florida, and (ii) its termination of
incorporation documents, certified by the Secretary of State of
Delaware, evidencing its changed jurisdiction of incorporation.
6. Representations and Warranties. Each of the Borrowers represents and
warrants as follows:
(a) The execution, delivery and performance of each of this
Fifth Amendment and the transactions contemplated hereby are within the
corporate power and authority of such Borrower and have been or will be
authorized by proper corporate proceedings, and do not (a) require any
consent or approval of the stockholders of such Borrower, (b)
contravene any provision of the charter documents or by-laws of such
Borrower or any law, rule or regulation applicable to such Borrower, or
(c) contravene any provision of, or constitute an event of default or
event which, but for the requirement that time elapse or notice be
given, or both, would constitute an event of default under, any other
material agreement, instrument or undertaking binding on such Borrower.
(b) This Fifth Amendment and the Credit Agreement, as amended
as of the date hereof, and all of the terms and provisions hereof and
thereof are the legal, valid and binding obligations of such Borrower
enforceable in accordance with their respective terms except as limited
by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally, and except as
the remedy of specific performance or of injunctive relief is subject
to the discretion of the court before which any proceeding therefor may
be brought.
(c) The execution, delivery and performance of this Fifth
Amendment and the transactions contemplated hereby do not require any
approval or consent of, or filing or registration with, any
governmental or other agency or authority, or any other party.
(d) The representations and warranties contained in ss.5 of
the Credit Agreement are true and correct in all material respects as
of the date hereof as though made on and as of the date hereof.
(e) After giving effect to this Fifth Amendment, no Default or
Event of Default under the Credit Agreement has occurred and is
continuing.
7. Ratification, etc. Except as expressly amended hereby, the Credit
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. This Fifth Amendment and the Credit
Agreement shall hereafter be read and construed together as a single document,
and all references in the Credit Agreement or any related agreement or
instrument to the Credit Agreement shall hereafter refer to the Credit Agreement
as amended by this Fifth Amendment.
8. GOVERNING LAW. THIS FIFTH AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND
SHALL TAKE EFFECT AS A SEALED INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
9. Counterparts. This Fifth Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned have duly executed this
Fifth Amendment under seal as of the date first set forth above.
The Borrowers:
MASTEC, INC.
By:___________________________________
Name:
Title:
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
B & D CONTRACTORS OF SHELBY, INC.
BURNUP & SIMS OF TEXAS, INC.
HARRISON-WRIGHT CO., INC.
UTILITY PRECAST, INC.
BURNUP & SIMS TELCOM OF FLORIDA, INC.
CHURCH & TOWER ENVIRONMENTAL, INC.
CHURCH & TOWER FIBER TEL, INC.
CHURCH & TOWER, INC.
CHURCH & TOWER OF FLORIDA, INC.
CHURCH & TOWER OF TN, INC.
DESIGNED TRAFFIC INSTALLATION CO.
GDSI, INC.
KENNEDY CABLE CONSTRUCTION, INC.
LATLINK CORPORATION
LATLINK ARGENTINA, INC.
MASTEC COMTEC OF CALIFORNIA, INC.
MASTEC COMTEC OF THE CAROLINAS, INC.
MASTEC TECHNOLOGIES, INC.
MASTEC TELEPORT, INC.
R.D. MOODY & ASSOCIATES, INC.
R.D. MOODY AND ASSOCIATES, INC. OF VIRGINIA
SHANCO CORPORATION
UTILITY LINE MAINTENANCE, INC.
AIDCO, INC.
AIDCO SYSTEMS, INC.
E. L. DALTON & COMPANY, INC.
NORTHLAND CONTRACTING, INC.
WILDE CONSTRUCTION, INC.
WILDE OPTICAL SERVICE, INC.
TELE-COMMUNICATIONS CORPORATION OF VIRGINIA
WILDE ACQUISITION CO., INC.
WILDE HOLDING CO., INC.
WEEKS CONSTRUCTION COMPANY
C & S DIRECTIONAL BORING, INC.
LESSARD-NYREN UTILITIES, INC.
LNU, INC.
S.S.S. CONSTRUCTION, INC.
CONTRACT MANAGEMENT AND ASSISTANCE CORP.
ELECTRONIC EQUIPMENT ANALYZERS, INC.
MASTEC NORTH AMERICA, INC.
J.C. ENTERPRISES, INC (d/b/a Cotton & Taylor)
By:___________________________________
Name:
Title:
<PAGE>
The Banks:
BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE,
INC. (f/k/a Creditanstalt Corporate Finance, Inc.)
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
FIRST UNION NATIONAL BANK OF FLORIDA
By:___________________________________
Name:
Title:
SCOTIABANC INC.
By:___________________________________
Name:
Title:
LASALLE NATIONAL BANK
By:___________________________________
Name:
Title:
COMERICA BANK
By:___________________________________
Name:
Title:
<PAGE>
LTCB TRUST COMPANY
By:___________________________________
Name:
Title:
BANKBOSTON, N.A.,
individually and as Agent
By:___________________________________
Name:
Title:
Exhibit 10.8
AGREEMENT dated as of November 18, 1998 between MASTEC, INC. (the
"Company") and JOEL T. CITRON (the "Executive").
The Executive is skilled in financial matters and possesses
knowledge of the business, products and operations of the Company. The Executive
and the Company believe that it is in their respective interests to enter into
an employment agreement whereby, for the consideration specified herein,
including options to purchase shares of Common Stock of the Company, $.10 par
value (the "Common Stock"), Executive shall provide the services specified
herein.
ACCORDINGLY, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties agree as follows:
SECTION 1. EMPLOYMENT OF EXECUTIVE.
The Company hereby employs the Executive and the Executive
hereby accepts such employment upon the terms and conditions hereinafter set
forth.
SECTION 2. TERM.
The Executive's employment hereunder shall be for the period
(the "Employment Period") commencing on the date hereof (the "Commencement
Date") and ending on (a) the second anniversary of the date hereof, or (b) such
earlier date upon which the employment of the Executive shall terminate in
accordance with the provisions hereof (the date of termination being hereinafter
called the "Termination Date"). The Employment Period may be extended by
agreement of the Company and the Executive.
SECTION 3. SERVICES; OFFICES.
(a) The Executive shall be the Vice Chairman of the Company. The Executive shall
direct and supervise the finance, administrative and mergers and acquisitions
activities of the Company. The Executive shall report only directly to the
Chairman of the Board of Directors of the Company (the "Board") or to the Board
as a whole. The Company shall maintain for the Executive's exclusive use an
office at the Company's headquarters facility in Miami, Florida and shall
provide secretarial and other support personnel for the Executive, in each case
commensurate with the Executive's status as an executive officer equal to or
higher than all other executive officers of the Company with the exception of
the Chairman of the Company. The Company shall also maintain for the Executive
an office in New York City.
(b) The Company shall use its best efforts to assure that the Executive is
elected a member of the Board. If the stockholders of the Company fail during
the Employment Period to elect the Executive as a director or the Board shall
fail to elect him as a member of the executive committee of the Board or shall
remove him from that office other than a Termination for Cause, the Executive
shall continue to receive the Salary (as defined herein) and the Executive
Option (as defined herein) pursuant to this Employment Agreement.
SECTION 4. TIME TO BE DEVOTED TO COMPANY; NO SERVICES FOR COMPETITOR.
During the Employment Period, the Executive shall devote such
working time, attention and energies as he, in his discretion, deems reasonably
necessary for the business of the Company and any subsidiaries ("Subsidiaries").
The Company acknowledges that the Executive currently is a director of other
companies and is a consultant to various other businesses. The Executive may,
without restriction, carry on his current activities of this nature and any
other activities that he deems appropriate during the Employment Period.
However, notwithstanding the foregoing, the Executive shall not during the
Employment Period be employed by or provide paid consulting services for any
enterprise engaged in a business that competes with the Company. The Executive
resides in New York City, and the Company shall not request or require him to
change residences. The Executive may from time to time provide services
hereunder to the Company at its headquarters in Miami, Florida and at its other
locations.
SECTION 5. COMPENSATION; BONUS.
(a) Upon the execution hereof, the Company shall pay to the Executive as
compensation for services previously rendered a fee of $100,000.
(b) The Company shall pay to the Executive as compensation for services rendered
during the Employment Period a salary of not less than $300,000 per year (the
"Salary"). The Salary shall be paid in semi-monthly installments of $12,500,
subject to withholding of taxes and other deductions required by law.
Notwithstanding anything to the contrary contained herein, the Salary payable
for services rendered during the first twelve months of the Employment Period
shall be paid by the Company to the Executive in any event.
(c) In addition to the Salary, the Company shall pay the Executive a cash
bonus (each, a "Bonus") as follow:
(i) if the price per share of the Common Stock reaches $26 or more (determined
in accordance with clause (f) below) on the last trading day of a calendar year
or for any period of 5 consecutive trading days in the month of December in such
year (the "First Threshold Pricing Period") during the Employment Period, then
the Company shall pay to the Executive a Bonus of $300,000 in January next
following such year; and
(ii) if the price per share of the Common Stock reaches $30 or more (determined
in accordance with clause (f) below) on the last trading day of a calendar year
or for any period of 5 consecutive trading days in the month of December in such
year (the "Second Threshold Pricing Period") during the Employment Period, then
the Company shall pay to the Executive an additional Bonus of $300,000 (for a
total of $600,000 payable under clauses (i) and (ii) of this subsection (c) as
Bonuses), in January next following such calendar year; and
(iii) in the event of a Change of Control during the Employment Period or within
180 days thereafter in a transaction initiated during the Employment Period, if
the average sale price per share of Common Stock related to the Change of
Control is $30 or more, then the Company shall pay to the Executive at the
initial closing of the Change of Control, a Bonus of $600,000. "Change of
Control" means any transaction or any event as a result of which (A) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), other than a trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or its Subsidiaries or a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportion as their
ownership of stock of the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Age), directly or indirectly, of
securities of the Company representing [50%] or more of the combined voting
power of the Company's then-outstanding securities; or (B) during any period of
two consecutive years (not including any period prior to the execution of this
Employment Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a director designated by a
person who has entered into an agreement with the Company to effect a
transaction described in clauses (A) or (C) of this subsection) whose election
by the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof; or (C) the shareholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation (either alone or in combination with new or
additional voting securities held by management of the Company and its
Subsidiaries and any trustee or other fiduciary holding securities under an
employee benefit plan of the Company and its subsidiaries); or (D) the
shareholders of the Company approve an agreement for the sale or disposition by
the Company of all or substantially all the Company's assets.
(d) In addition to the Bonuses that may be awarded pursuant to Sections 5(c)(i),
(ii) or (iii) above, the Board may, on its own initiative and in its sole
discretion, award cash or other bonuses to the Executive, whether or not any of
the performance thresholds in Section 5(c)(i), (ii) or (iii) are achieved by the
Company.
(e) In the event of a Change of Control, the Company shall pay to the Executive,
immediately upon the initial closing of the Change of Control, any unpaid
portion of the Salary in respect of the year in which the Change of Control
occurs and any bonus earned or awarded pursuant to this Employment Agreement or
otherwise awarded by the Board
(f) The price for each share shall be the Fair Value of each share. As used
herein, "Fair Value" means (i) if the Common Stock is traded on the New York
Stock Exchange or another public exchange, the average price at which the Common
Stock traded during the 10 trading days immediately prior to the event for which
Fair Value is to be calculated; (ii) if the Common Stock is available only
"over-the-counter," the average price at which the Common Stock was sold during
the 10 business days immediately prior to the event for which Fair Value is to
be calculated; or (iii) if the Common Stock is not actively traded, its value as
determined in good faith by the Board; provided, however, that if within 10 days
of the determination thereof, the Executive shall object to such fair market
value determination, the Fair Value shall be finally determined by an
independent investment banking firm mutually selected by the Company and the
Executive (or if such selection cannot be made within 10 days after one party
proposes such a firm to the other, by the American Arbitration Association in
accordance with its rules).
SECTION 6. BUSINESS EXPENSES; BENEFITS.
(a) The Company shall pay for or reimburse the Executive (at the Executive's
option), in accordance with its practice for executive officers of the Company,
all reasonable and necessary expenses and other disbursements incurred by the
Executive for or on behalf of the Company in the performance of his duties
hereunder, including, without limitation, first-class travel (including, but not
limited to, airfare) to and from the Company's office or offices on behalf of or
in connection with his services for the Company, and food and first-class
lodging expenses while the Executive is away from home performing services for
the Company. The Executive shall provide such appropriate documentation of
expenses and disbursements as may from time to time be reasonably requested by
the Company.
(b) The Executive (and his family) shall be covered under all of the Company's
group health, dental and disability plans, or, at the Company's option, the
Company shall reimburse Executive the cost of obtaining similar coverage. (c)
The Company shall lease, at its expense, an automobile exclusively for the
Executive's use. (d) The Executive shall receive any and all other benefits
accorded by the Company to executive officers of the Company. (e) The Company
shall pay for any and all attorneys' fees and related expenses incurred by the
Executive with respect to the formulation, negotiation and finalizing of this
Employment Agreement.
SECTION 7. TERMINATION FOR CAUSE.
(a) The Company may terminate the employment of the Executive hereunder at any
time for Cause (as hereinafter defined) (such termination being referred to
herein as a "Termination For Cause") by giving the Executive written notice of
such termination, with such termination to take effect upon the receipt of such
notice. "Cause" means (A) the Executive's conviction of a crime constituting a
felony or (B) any of the following performed or caused by the Executive which
may reasonably be anticipated to have a Material Adverse Effect and which, if
curable, remains uncured for a period of fifteen (15) days after written notice
thereof is delivered from the Company to the Executive: (i) the willful and
continued failure to substantially perform the duties described in Section 3
(other than any failure resulting from an illness or other similar incapacity or
disability), (ii) misappropriation of funds, properties or assets of the Company
or any of its subsidiaries, (iii) commission of a material tort relating to the
Executive's employment with the Company and (iv) breach of any fiduciary duty
owed to the Company or its subsidiaries. "Material Adverse Effect" means a
material adverse effect on the business, operations, financial condition,
results of operations, properties, assets or liabilities of the Company and its
Subsidiaries taken as a whole.
(b) Notwithstanding any provisions contained herein to the contrary, in no event
shall the Company cause a Termination for Cause without a prior hearing or at
least 45 days' notice to the Executive and approval of such Termination for
Cause by the entire Board.
SECTION 8. EFFECT OF TERMINATION FOR CAUSE.
Upon the termination of the Executive's retention hereunder
due to (a) a Termination for Cause or (b) the Executive's incapacity or
disability due to accident, sickness or otherwise so as to render him mentally
or physically incapable of performing the services required to be performed by
him for the Company for a period of four consecutive months, or for 6 months
during any twelve-month period, neither the Executive nor his beneficiary or
estate shall have any further rights or claims against the Company under this
Employment Agreement, except to receive (i) the unpaid portion, if any, of the
Salary or bonuses provided for in Section 5, computed on a pro rata basis to the
Termination Date (based on the actual number of days elapsed over a year of 365
or 366 days, as applicable), (ii) reimbursement for any expenses for which the
Executive shall not have been reimbursed as provided in Section 6, and (iii)
rights to the Options (as defined below) as provided in Section 11 hereof.
SECTION 9. OPTIONS TO PURCHASE COMMON STOCK OF THE COMPANY
The Company hereby confirms that effective as of November 18,
1998 (the "Grant Date") it, acting through its Board of Directors (the
"Executive Option"), (i) has granted to the Executive, options to purchase up to
250,000 shares of Common Stock, pursuant to a Stock Option Agreement (the
"Executive Option Agreement") dated November 18, 1998 between the Executive and
the Company, and (ii) has granted to Janine Larkin options (the "Larkin Option")
to purchase up to 7,500 shares of Common Stock, pursuant to a Stock Option
Agreement (together with the Executive Option Agreement, the "Option
Agreements"), on the terms and subject to the conditions set forth in Sections
10 through 13 hereof. Shares reserved under the Executive Option and the Larkin
Option are called "Reserved Shares." The price for the Options per share is
equal to $20.5625, except for 4,812 shares granted as incentive stock options
under the Executive Option Agreement which are issued at $20.7813 per share.
SECTION 10. TERM.
The term of each Option commenced on the Grant Date and shall
expire on the seventh anniversary of the date hereof, unless such Option shall
theretofore have been terminated in accordance with the terms of its respective
Option Agreement.
SECTION 11. TIME OF EXERCISE.
(a) Unless accelerated as provided herein, the Executive Option shall become
exercisable on each date set forth below (each, a "Vesting Date") as to that
number of Reserved Option Shares set forth opposite such Vesting Date:
Vesting Date ..................................... No. of Reserved Option Shares
Grant Date ............................................ 66,110
May 18, 1999 ......................................... 149,564
November 18, 2000 ..................................... 34,326
(b) The Larkin Option shall be immediately exercisable as of the Grant Date
(a "Vesting Date").
(c) Reserved Option Shares which vest under this Section 11 may be purchased
upon exercise of an Option and are called "Vested Option Shares" hereunder.
(d) The unvested portion of the Executive Option (i.e., that portion which
does not constitute Vested Option Shares) shall terminate or accelerate
upon a termination of the Executive's employment with the Company as follows:
(i) in the event (A) that the Executive voluntarily terminates his employment
with the Company other than a termination by the Executive under Section
3(b) of this Employment Agreement or under circumstances where the Company
has not breached or potentially breached a provision of this Employment
Agreement, or (B) of a Termination for Cause, the unvested portion of the
Executive Option shall terminate effective immediately.
(ii) in the event (A) that the Executive's employment with the Company is
terminated by the Company without Cause or (B) the Executive dies or is
incapacitated, then the unvested portion of the Option shall vest
immediately; and
(iii)in the event of a Change of Control of the Company n connection with which
the Executive's employment with the Company is terminated by the Company
for any reason within the twelve-month period immediately following such
Change of Control, any unvested portion of the Option shall accelerate and
vest in full effective as of such termination date.
SECTION 12. EXECUTIVE'S EMPLOYMENT.
The Option shall not be affected by any change of duties or
position of the Executive.
SECTION 13. NOTICES.
All notices, claims, certificates, requests, demands and other
communications relating hereto shall be in writing and shall be deemed to have
been duly given and delivered if personally delivered or if sent by
nationally-recognized overnight courier guaranteeing next business day delivery,
by telecopy, or by registered or certified mail, return receipt requested and
postage prepaid, addressed as follows:
(a) if to the Company, to:
Mastec, Inc.
3155 N.W. 77th Avenue
Miami, FL 33122-1205
Telephone: 305-599-1800
Telecopy: 305-406-1818
Attention: Jorge Mas; and
(b) if to the Executive, to:
Joel T. Citron
660 Madison Avenue, 22nd FL
New York, New York
Telephone: 212-688-7070
Telecopy: 212-688-3009
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. Any such notice
or communication shall be deemed to have been received (i) in the case of
personal delivery, on the date of such delivery (or if not delivered during
regular business hours on such day, on the next business after the date sent),
(ii) in the case of nationally-recognized overnight courier, on the next
business day after the date sent, (iii) in the case of telecopy transmission,
when received (or if not received during regular business hours on such day, on
the next business day after the date sent), and (iv) in the case of mailing, on
the third business day following that on which the piece of mail containing such
communication is posted.
SECTION 14. ENFORCEMENT; SEVERABILITY; ETC.
It is the desire and intent of the parties that the provisions
of this Employment Agreement shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of this
Employment Agreement shall be adjudicated to be invalid or unenforceable, such
provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
SECTION 15. BINDING AGREEMENT; BENEFIT.
The provisions of this Employment Agreement will be binding
upon, and will inure to the benefit of, the respective heirs, legal
representatives, successors and assigns of the parties.
SECTION 16. WAIVER OF BREACH.
The waiver by either party of a breach of any provision of
this Employment Agreement must be in writing and shall not operate or be
construed as a waiver of any other breach.
SECTION 17. ENTIRE AGREEMENT; AMENDMENTS.
This Employment Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements or understandings between the parties with respect thereto.
This Employment Agreement may be amended only by an agreement in writing signed
by the parties.
SECTION 18. HEADINGS.
The section headings contained in this Employment Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Employment Agreement.
SECTION 19. ASSIGNMENT.
This Employment Agreement is personal in its nature and the
parties shall not, without the consent of the other, assign or transfer this
Employment Agreement or any rights or obligations hereunder; provided, however,
that the Company may assign this Employment Agreement to any of its affiliates
and the provisions of this Employment Agreement shall inure to the benefit of,
and be binding upon, each successor of the Company, whether by merger,
consolidation, transfer of all or substantially all of its assets, or otherwise.
SECTION 20. COUNTERPARTS.
This Employment Agreement may be executed in counterparts, and
each such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
<PAGE>
Joel T. Citron
IN WITNESS WHEREOF, the parties hereto have executed this
Employment Agreement effective as of the date first above written.
MASTEC, INC.
By: /s/ Jorge Mas
-----------------
Name: Jorge Mas
Title: President and Chief Executive Officer
By: /s/ Joel-Tomas Citron
-----------------
Joel-Tomas Citron
Exhibit 10.9
SHARES PURCHASE AND SALE WITH REFERRED PAYMENT AND DELIVERY AGREEMENT,
SHARES PUT OPTION, PROMISE OF SHARES PLEDGE, SHAREHOLDERS AGREEMENT AND OTHERS
With the intervention of Mr. Pedro de Elizalde y Aymerich, Official Stockbroker
duly authorised to act in Madrid, ascribed to the Official Stockbrokers College
of Madrid.
In Madrid, December 30, 1998
GATHERED
ON THE ONE SIDE
Mr. Jose Miguel Sariego, married, American lawyer, domiciled in 3155 North West,
77 Avenue Miami, Florida, holder of passport number 044707068 of the United
States of America.
AND ON THE OTHER SIDE
Mr. Francisco Javier Martinez de Lahidalga Gonzalez, of Spanish
nationality, of full age, domiciled in Madrid, calle Espalter 6 and with DNI
number 13637114.
Mr. Juan Antonio Casanova de San Simon, of Spanish nationality, of full
age, domiciled in Madrid, calle del Arte 21 and with DNI number 41428116.
Mr. Ricardo Campos Dufaut, of Spanish nationality, of full age, domiciled
in Madrid, Paseo de la Habana 20, and with Passport number 05206867.
Mr. Alfredo Florez Plaza, of Spanish nationality, of full age, domiciled in
Madrid, calle Ibiza 41, and with DNI number 00618808.
Mr. Serafin Gonzalez Morcillo, of Spanish nationality, of full age,
domiciled in Madrid, calle General Arrando 11, and with DNI number 40251250 and
Mr. Carlos Tejera Osuna of Spanish nationality, of full age, domiciled in
Madrid, calle General Arrando 11 and with DNI number 2192396.
INTERVENE
Mr. Jose Miguel Sariego, in the name and on behalf of , as attorney and
Vicepresident of MasTec Inc. (hereinafter referred to as "MasTec") company
validly incorporated and in force according to the laws of the State of Florida
of the United States of America, domiciled in 3155 North West, 77 Avenue, Miami
Florida, he acts by virtue of the power of attorney granted in his favour on
December 29, 1998 before the Notary Public of the State of Florida (United
States) Ms. Patricia Pizzuto, duly appostilled on the same date by the Secretary
of the State of Florida in Tallahassee, Florida under number 1998-16739.
Mr. Francisco Javier Martinez de Lahidalga Gonzalez, as verbal mandatory,
representing the company LAMEGO Holdings Corp., duly incorporated and registered
in the British Virgin Islands.
Mr. Juan Antonio Casanova de San Simon, as verbal mandatory, representing
the
company Fawn Creek, Ltd, duly incorporated and registered in the British Virgin
Islands.
Mr. Ricardo Campos Defaut, as verbal mandatory, representing the company
Bending Oak, Ltd,duly incorporated and registered in the British Virgin Islands.
Mr. Alfredo Florez Plaza, as verbal mandatory, representing the company
TILPA Trading Limited, duly incorporated and registered in the British Virgin
Islands and as attorney of Sintel International Corp. BVI, company domiciled in
Omar Hodge Building, Wickham's Cay, Road Town, Tortola, British Virgin Islands
validly incorporated and in force according the laws of the British Virgin
Islands.
Mr. Serafin Gonzalez Morcillo and Mr. Carlos Tejera Osuna, in the name and
on behalf of, as joint directors of the company F.G NEWCO, S.L. of Spanish
nationality, domiciled in Madrid, calle General Arrando 11 - 4(0), with NIF
number B-81516296 and registered with the Mercantile Registry of Madrid under
Volume 11482, Folio 106, Page number M-1802289.
The companies LAMEGO Holdings Corp., Fawn Creek Ltd, Bending Oak, Ltd, TILPA
Trading Limited and F.G. NEWCO S.L, will be jointly referred hereinafter as "the
Purchaser".
Except for Sintel International Corp. BVI, F.G. NEWCO S.L and MasTec Inc
which are acting with the corresponding legal capacity, the remaining parties
will have to ratify this agreement in the shortest term with retroactive effects
as from the date hereof, and
WHEREAS
I. MasTec is the legal owner of 1000 shares of 1 cent US dollar par value
each, representing the total share capital of MasTec International Inc.
company with corporate domicile in Florida, 77 Avenue, Miami 3155 NW,
validly incorporated and existing under the laws of the State of
Delaware.
TITLE OF OWNERSHIP: deed of incorporation of the company.
LIENS AND ENCUMBRANCES: the shares are pledged to the benefit of Bank
Boston NA as agent and a syndicate of other banks as security for a credit
facility.
II. A call option agreement (over the shares of MasTec International Inc.)
was executed on October 15, 1998 as amended on December 24, 1998, in
which the parties to this agreement (other than Sintel International
Corp. BVI) have subrogated.
The original holder of the call option referred to in the above paragraph
has waived the same, as states the Purchaser and he accredits by means of
the Waiver Document attached hereto as Annex No. 3 of this agreement.
III. MasTec International Inc., Telefonica, S.A. and Sistemas de Instalaciones
de Telecomunicacion, S.A. (Sintel) have executed prior to this agreement,
a document of debt acknowledgement and payment commitment a copy of which
is attached hereto as Annex No. 1.
IV. Sintel International Corp. BVI, holds the shares or participations
representing the share capital of the entities Proyco Ltda, a Colombian
company and Artcom Services, S.A., a company from Puerto Rico.
V. The Purchaser shall incorporate the vehicle or vehicles through which it
will complete the transactions included herein in the terms and
conditions contained herein.
VI. The parties to this agreement wish to implement the terms agreed herein in
accordance with the following
CLAUSES
FIRST.- PURCHASE AND SALE OF SHARES
MasTec transfers to the Purchaser who acquires, 870 shares representing 87% of
the share capital of MasTec International Inc., referred to under recital I of
this document which will be represented by means of the stock certificates No. 2
to 6 both inclusive which will be delivered as follows:
Stock certificate no. 2 representing 250 shares to the company LAMEGO Holdings
Corp. who acquires the same.
Stock certificate no. 3 representing 150 shares to the company Fawn Creek, Ltd
who acquires the same.
Stock certificate no. 4 representing 200 shares to the company Bending Oak, Ltd
who acquires the same.
Stock certificate no. 5 representing 70 shares to the company TILPA Trading
Limited who acquires the same.
Stock certificate no. 6 representing 200 shares to the company FG NEWCO, S.L.
who acquires the same.
SECOND.- PRICE AND DELIVERY OF THE SHARES
2.1 The total price for the shares transferred amounts to 3,869,821,052 pesetas
distributed as follows:
Payment of 1,112,017,544 pesetas corresponds to LAMEGO Holdings Corp. for
the purchase of 25% of the share capital of MasTec International Inc.
Payment of 667,210,526 pesetas corresponds to Fawn Creek Ltd. for the
purchase of 15% of the share capital of MasTec International Inc.
Payment of 889,614,035 pesetas corresponds to Bending Oak Ltd. for the
purchase of 20% of the share capital of MasTec International Inc.
Payment of 311,364,912 pesetas corresponds to TILPA Trading Limited for
the purchase of 7% of the share capital of MasTec International Inc.
Payment of 889,614,035 pesetas corresponds to F.G. NEWCO, S.L. for
the purchase of 20% of the share capital of MasTec International Inc.
2.2 Delivery of the shares shall be effected on January 31, 1999 in the event
the conditions referred to under clause fourth of this agreement are met;
in case such conditions were not met, delivery of the shares shall be
effected once they are accomplished on February 28, 1999; if they were
not accomplished in said date delivery will be effected on March 31, 1999
or April 30, 1999, as long as the abovementioned conditions have been
fulfilled.
THIRD.- PAYMENT OF THE PRICE
Payment of the purchase price will be made as follows:
3.1 The Purchaser pay upon the execution of this agreement, on account of the
payment of the price, the amount of 130,500,000 pesetas which will be
deposited in the current account number 252529001-24 opened with the bank
BNP located in c/ Bolivia 28, Madrid.
The above payment on account is distributed among the companies forming
the Purchaser as follows:
Payment of 37,500,000 pesetas corresponds to LAMEGO Holdings Corp. for
the purchase of 25% of the share capital of MasTec International Inc.
Payment of 22,500,000 pesetas corresponds to Fawn Creek Ltd. for the
purchase of 15% of the share capital of MasTec International Inc.
Payment of 30,000,000 pesetas corresponds to Bending Oak Ltd. for the
purchase of 20% of the share capital of MasTec International Inc.
Payment of 10,500,000 pesetas corresponds to TILPA Trading Limited for
the purchase of 7% of the share capital of MasTec International Inc.
Payment of 30,000,000 pesetas corresponds to F.G. NEWCO, S.L. for the
purchase of 20% of the share capital of MasTec International Inc.
3.2 Deferred price will be payable in four equal instalments (that is of
934,830,263 pesetas each) on the following dates: January 31, February
28, March 31 and April 30, 1999, free of interest. In case the conditions
of the following clause fourth (4.1, 4.2 and 4.3) were not fulfilled on
January 31, 1999, said payments will be postponed without interest until
the date of delivery of the shares according to the second clause (2.2)
above. In this case payments will be made as follows: (i) if delivery of
the shares takes place between March 31 and April 30 1999, payment will
be effected within the 10 business days following delivery of the shares
except for the instalment due on April 30, 1999, which will be paid on
such dated; (ii) if delivery of the shares takes place between February
28 and March 31 1999, payment will be effected within the 10 business
days following delivery of the shares except for the instalment due on
March 31 and April 30, 1999, which will be paid on such dates; (iii) if
delivery of the shares takes place between January 31 and February 28,
payment of the instalment due on January 31 will be effected within the
10 business days following delivery of the shares and the remaining
instalments on its respective maturities.
Once the conditions of the fourth bellow have been fulfilled, the delay
in payment of the deferred amounts will accrue an annual interest of 9%
as from the last business day of payment until its complete settlement.
Deferred amounts will be secured by means of a pledge of shares of MasTec
International Inc., being the promise of pledge regulated under the ninth
clause of this agreement. Additionally, each of the companies forming the
so called Purchaser guarantees joint and severally with the vehicle
company to which this agreement may be assigned, the deferred part of the
price corresponding to each of them.
3.3 The total or partial unpayment at the maturity dates established in this
third clause (3.2) will enable MasTec to call as due and payable the
remaining instalments payable by the defaulting company forming the
Purchaser, who will be obliged to settle the total pending amount of
payment.
FOURTH.- SUSPENSIVE CONDITIONS AND TERM
The effectiveness of this purchase and sale is conditioned by the fulfilment by
MasTec, the Purchaser and Sintel International Corp. BVI of the following
transactions within the term established hereinafter:
4.1 MasTec is obliged to release the shares of MasTec International Inc.
pledged in favour of Bank Boston, N.A. as agent and other syndicated
banks, leaving them free of liens and encumbrances, restrictions or third
parties rights for delivery to the Purchaser before April 30, 1999.
4.2 Mastec by itself and in the name and on behalf of Mastec International
Inc. is obliged to release 4,026,000 shares representing the 66% of the
share capital of the company Sistemas e Instalaciones de
Telecomunicacion, S.A. (Sintel), domiciled in Madrid, c/ Arte n(0) 21,
incorporated by means of the public deed granted on February 8, 1950 by
Mr. Jose Luis Diez Pastor and subsequently amended by others, having duly
adapted its bylaws by means of the public deed dated July 4, 1991, before
the Notary Public of Madrid, Mr. Rafael Vallejo Zapatero, under number
3212 of his protocol, registered with the Mercantile Registry of Madrid,
volume 1764, folio 79, page number M-31898, entry 250, with CIF number
A-28/048502, whose pledge deed was granted on August 29, 1997 before the
Public Notary of Madrid, Mr. Emilio Villalobos Bernal, under number 2323
of his protocol, ratified by another one granted before the same Notary
Public on September 17 of the same year, under number 2448 of his
protocol, leaving them free of charges, restrictions and third parties
rights on the date in which MasTec delivers the shares of MasTec
International Inc to the Purchaser before April 30, 1999.
4.3 MasTec is obliged to perform the necessary transactions so that the
balance sheet of MasTec International Inc.'s as of the date in which the
shares are delivered as established under clause second (2.2),
exclusively shows in its assets side the investment in Sistemas e
Instalaciones de Telecomunicacion, S.A. (Sintel) (the ownership of the
100% of Sintel) and in liabilities side the share capital and the debt
owed to Telefonica, S.A. in the corresponding amount according to Annex
No. 1, before April 30, 1999. To these effects, the Purchaser authorises
MasTec to dispose of any assets of the company MasTec International Inc.
other than the shares of Sistemas e Instalaciones de Telecomunicacion,
S.A (Sintel) obtaining a balance formed by the stake in Sintel in the
assets side and ten American dollars (10US$) of share capital and the
debt owed Telefonica, S.A. of Annex n(0) 1 in the liabilities side.
4.4 The Purchaser is obliged to incorporate the companies, to be used as
vehicles for this investment as soon as possible, and guarantees that the
competent authority bodies of the same will ratify this agreement in all
its terms, before delivery of the shares, transferred hereby, and in any
case, not later than April 30, 1999.
4.5 Sintel International Corp. BVI will join as subsidiary 100% to MasTec
International Inc. for the amount of one peseta or will transfer its
participations in the companies mentioned in recital IV at a price equal
to their acquisition cost to MasTec International Inc. immediately after
delivery of the shares transferred hereby, in such way that they will not
appear in the balance sheet of MasTec International Inc.'s which MasTec
will deliver to the Purchaser simultaneously with the shares. MasTec does
not assume any responsibility whatsoever in relation to this transaction.
In the event the above transactions were not accomplished and duly
executed by April 30, 1999, the purchase and sale and remaining
commitments of this agreement will remain without effect and force and
MasTec will be obliged to return the amount of 130,500,000 pesetas
received from the Purchaser on the immediately following day. None of the
parties will be entitled to claim from the others damages or losses for
breach of the abovementioned transactions, except for the breach or non
compliance of any of the abovementioned transactions due to malice or
negligence on the exclusive part of the party concerned with its
fulfilment, whether by action or omission. To such purposes, the parties
commit themselves to develop the most strict diligence. Notwithstanding
the above, were the transactions referred to under clause four (4.1 and
4.2) of this agreement not carried out by April 30, 1999, the Purchaser
may opt for the abovementioned termination or for the purchase of 34% of
the shares of Sistemas e Instalaciones de Telecomunicacion, S.A. (Sintel)
which are not pledged, for the proportional corresponding price in
relation with the purchase price established in this agreement for the
shares of MasTec International Inc. remaining the clauses of this
document in force whose terms and conditions will be duly adapted by the
parties to the new situation if necessary.
All the parties as owners of 100% of the share capital of MasTec
International Inc will execute the necessary agreements to implement this
call option.
FIFTH.- OTHER OBLIGATIONS OF MASTEC
MasTec is obliged to deliver together with the titles of the shares of MasTec
International Inc. a balance sheet of the latter that will be attached hereto as
Annex No. 2 of, whose asset side will exclusively consist of the 100% of the
share capital of Sintel and whose liability side will exclusively consist of its
share capital of ten (10US$) American dollars and the owed to Telefonica, S.A.
as per Annex No. 1. Likewise, MasTec is obliged to deliver to the Purchaser a
"Compilation" prepared by Price Waterhouse Coopers, Auditors of MasTec, carried
out according to the GAAP of the United States of America, and as long as this
documents has not been delivered to the Purchaser, he will be entitled to retain
the last instalment of the owed deferred price according to the third clause
(3.2) of this document.
MasTec represents and warrants not having notice of other liabilities,
provisioned or not, and that such balance will clearly and faithfully show the
economic situation of MasTec International Inc. according to GAAP of the United
States of America.
MasTec represents and warrants that the balance sheet of Sistemas e
Instalaciones de Telecomunicacion, S.A. (Sintel) as of December 31, 1997,
audited by Arthur Andersen, clearly and faithfully shows the economic and
financial situation of this company and its consolidated group as of such date.
MasTec represents that, as far as it is concerned, the management of Sistemas e
Instalaciones de Telecomunicacion, S.A. (Sintel) during the financial year of
1998 has been carried out in accordance with continuance and consistency
criteria as regards the financial year of exercise 1997 and precedents and
within the ordinary course of business and, therefore, MasTec does not know of
the existence of any liabilities which are not going to be adequately and
sufficiently accounted or provisioned in the balance sheet closed as of December
31, 1998, that may cause a patrimonial damage to Sistemas e Instalaciones de
Telecomunicacion, S.A. (Sintel); nevertheless, MasTec does not guarantee the
non-existence of said liabilities.
Mr. Juan Antonio Casanova de San Simon, represents and expressly admits to have
had access to all legal, commercial, economic and financial information of
Sintel and furthermore represents that he has a personal and direct knowledge of
the situation of its situation.
MasTec represents and warrants to the Purchaser that: (i) MasTec International
Inc. is validly incorporated in force according to the laws of the State of
Delaware; (ii) the shares of MasTec International Inc and the shares of Sintel,
will be the exclusive property of MasTec International Inc. respectively on the
day of delivery of the shares according to the second clause (2.2); (iii) the
transfer of ownership of the shares of MasTec International Inc, and accordingly
the shares of Sintel are not subject to any restriction except for the content
of Annex No. 1; (iv) MasTec International Inc is currently up to date as regards
the fulfilment of its tax obligations and the payment of the same, having duly
made the necessary provisions according to the GAAP of the United States of
America until December 31, 1998, and Sintel is also up to date as regards its
tax obligations and payment thereof, having made the necessary legal provisions
in accordance with GAAP of the Kingdom of Spain and the tax regulating in force
until December 31, 1997; v) there are no third party claims apart from that of
Telefonica, S.A. referred to in Annex No. 1, against MasTec International Inc,
for which provision has not been made, or of which the Purchaser has no
knowledge of, nor against Sintel for which provision had not been made as of
December 31, 1997; vi) neither is MasTec aware of possible third party claims
against MasTec International Inc which might be formulated at a future date in
respect of events previous to December 31, 1998, nor against Sintel by events
previous to December 31, 1997; vii) neither do tax liabilities exist in MasTec
International Inc., either in respect of Social Security payments or pensions
which have not been duly accounted for or provisioned in the balance sheet which
will be delivered together with the shares, nor do tax liabilities exist in
respect of Social Security payments or pensions in Sintel which have not been
duly accounted or provisioned in the balance sheet as of December 31, 1997.
MasTec declares that it does not guarantee to the Purchaser for any economic
deficit or liabilities derived or consequence of the application by the
Purchaser of different accounting criteria or principles which have been applied
by Arthur Andersen, Auditors of Sistemas e Instalaciones de Telecomunicacion,
S.A. (Sintel) up to the December 31, 1997 and which are included in their
auditing report corresponding to the accounts of such financial year.
SIXTH.- RESPONSIBILITY OF MASTEC
MasTec is obliged to pay to MasTec International Inc., as the case may be, the
effective net damage multiplied by 0.87, which is directly derived from an
omission or inaccuracy in its balance sheet at the date of delivery of the
shares as a consequence of events or businesses prior to December 31, 1998 or in
the balance sheet of Sistemas e Instalaciones de Telecomunicacion, S.A. (Sintel)
as of December 31, 1997 as a consequence of events or businesses prior to such
date, which were not duly accounted for or were not known by the Purchaser up to
a limit equal to eighty per cent (80 %) of the sale price obtained by MasTec.
Effective damage is deemed to be the net amount (after deduction of tax)
multiplied by 0.87 of the economic deficit which should have been legally
accounted according to US GAAP if it concerns the MasTec International Inc.
balance sheet or according to the Spanish GAAP if it concerns the balance sheet
of Sistemas e Instalaciones de Telecomunicacion, S.A. (Sintel) and in both cases
above the threshold agreed upon in the following paragraph.
MasTec will benefit from a threshold of up to forty million (40.000.000) pesetas
for this concept. Therefore, there will be no indemnity at all as long as
MasTecs liability does not exceed such figure, when it does exceed said
figure, MasTec will only pay the excess.
Such liability will last for one year to be counted as from December 31, 1998,
except for the tax liabilities or Social Security payments liabilities which
will be extended until their legal prescription and except for the liabilities
resulting from claims or processes in progress as of December 31, 1998 or as of
December 31, 1997 in the case of Sistemas e Instalaciones de Telecomunicacion,
S.A. (Sintel), in which case the liability for such claims or processes in
progress will be extended until their definitive resolution, except, in this
last case, the Telefonica claim referred to in Annex No. 1 for which MasTec will
not be liable whatsoever.
In order for MasTec to be bound to the compensation agreed upon hereby it will
be necessary that the following steps and requirements are fulfilled: i) the
Purchaser must notify MasTec of the deficit by means of a writ accompanied by
the necessary documentation so that MasTec may decide how to proceed; ii) if
MasTec accepts the claim, it will immediately proceed to pay it, but if it
rejects it, it will be entitled to oppose the third party claim bearing the
legal defence and representation expenses, including those of the guarantee if
necessary, the Purchaser having to collaborate in said defence, providing the
necessary information and elements of conviction; MasTec undertakes to rely on
the active collaboration of the Purchasers legal advisors; iii) if the
claim follows a judicial, extrajudicial or administrative procedure, the
Purchaser undertakes to grant the necessary powers of attorney in order to
defend the interests of MasTec in favour of the persons which the latter
designates.
MasTec is exonerated of all liability for compensation if the Purchaser does not
duly notify the claim or does not fulfil the obligation of providing the defence
and procedural representation therewith; said notification will be deemed to be
correctly given if it is done in an authoritative manner at the location
indicated in the thirteenth clause. It will also be exonerated in case the
Purchaser waives or accepts a claim or if it compromises in another manner or
extrajudicially resolves it without the previous written consent of MasTec.
SEVENTH.- COMMITMENTS OF THE PURCHASER
7.1 Shareholders Agreement in MasTec International Inc.
The Purchaser and MasTec hereby agree that the latter will have, in addition to
the legal protection, a veto right on resolutions relating to transactions
involving extraordinary indebtedness, spin off, dissolution, liquidation, sale
or encumbrance of the assets of the company MasTec International Inc.
Notwithstanding the aforementioned, the consent of MasTec will not be necessary
as regards acts of disposition or encumbrance of assets of MasTec International
Inc. whose value or amount does not exceed the figure ten million (10.000.000)
U.S. dollars, provided always that MasTec International Inc.'s net assets is not
reduced or prejudiced.
The Purchaser and MasTec furthermore agree that the latter will be informed and
will have the right to, of his own choice, subscribe to any shareholders
agreement that the Purchaser has intention to subscribe regarding the company
MasTec International, Inc.
7.2 "Tag-along":
The Purchaser grants MasTec the right to participate in a percentage of 13 % in
the event of sale of all or part of the shares of MasTec International Inc. or
of its assets, that is to say, its participation in Sistemas e Instalaciones de
Telecomunicacion, S.A. (Sintel) to a third party, in the same terms and
conditions of the other sellers. If the sale or transfer was that of the company
Sistemas e Instalaciones de Telecomunicacion, S.A. (Sintel), the Purchaser
grants MasTec the right to receive for its participation of 13% in MasTec
International Inc., a price or compensation of the 13% of the value or sale
price received by MasTec International Inc. for the sale of the company Sistemas
e Instalaciones de Telecomunicacion, S.A., either through the amortisation of
its shares or through the purchase of the same by MasTec International Inc. with
the proportional part of the sale price.
7.3 Positions as Directors:
Mr. Jorge Mas, American citizen holding Passport number 044886171 will be
entitled to be appointed Director of MasTec International Inc. and Chairman of
the Board of Directors of Sintel until December 31, 2000, or until the put
option is exercised, as the case may be, referred to in the eighth clause below.
In such case, Mr. Jorge Mas will enjoy the insurances and coverages
corresponding to the responsibilities of a Director which the remaining
independent directors of said companies enjoy.
EIGHTH.- PUT OPTION
MasTec is obliged to use its best efforts in order to transfer the total or part
of its share holding in MasTec International Inc (13% of its share capital) in
favour of the Mas family, subject to the legal requirements applicable at any
time and to the acceptance of said family.
If in spite of the fact that MasTec has used its best efforts to carry out the
abovementioned transfer, it could not be effected, a put option right will arise
offered from the Purchaser to MasTec, who accepts, over 130 shares of MasTec
International Inc, by representing 13% of its share capital, represented by the
"Stock Certificate No. 7" by virtue of which the Purchaser is obliged to buy
said shares under request of MasTec, who will be able to exercise said put
option right on December 31, 1999 or on December 31, 2000. The sale price will
be of 578,249,123 pesetas plus 7.5% annual interest as from January 1, 1999 to
December 31, 1999 or 15% annual interest if the put option is exercised on
December 31, 2000, calculated as from January 1, 1999 to December 31, 2000, in
this last case, depending on the exercise put option. If MasTec decides to
exercise the put option on the agreed date, the Purchaser will receive an
authentic notification, appointing a public fedatary for the formalisation of
the purchase and sale with advance notice of 15 days. If the Purchaser totally
or partially sells to a third party the shares of MasTec International or the
shares of Sintel before those dates, MasTec will be able to exercise in advance
its put option right.
The put option right referred to in the above paragraph of this eighth clause
will be proportionally cancelled in relation to the number of shares transferred
to the Mas family in accordance with the first paragraph of this clause.
If the Purchaser transferred by means of a public or private tender offer in an
organised market or out of it all or part of its shares in MasTec International
Inc. or in Sistemas e Instalaciones de Telecomunicacion, S.A. (Sintel), MasTec
will have the right to demand the inclusion of its 13% shareholding or the
proportional part thereof in case the public or private tender offer were
partial.
NINTH.- PROMISE OF SHARES PLEDGE
The Purchaser promises to create a pledge over 870 shares of MasTec
International Inc in favour of MasTec, who will accept such pledge as a
guarantee of the deferred payment of the sale price referred to under the third
clause (3.2) of this agreement. The pledge will be formalised in a public
instrument which will have to be simultaneously granted with the delivery of the
shares as established under the second clause (2.2) in accordance with the
following principles:
The Purchaser will deliver as deposit to MasTec the "Stock Certificates" numbers
2 to 6, inclusive, issued in favour of the Purchaser, representing 870 pledged
shares. The Purchaser will expressly undertake to immediately obtain the pledge
registration in the share registry book of MasTec International Inc. MasTec will
receive in escrow the "Stock Certificates" numbers 2 to 6 inclusive representing
the pledged shares and will cooperate in all that is necessary so that the
Purchaser may exercise the corresponding politic rights.
The Pledge will be extended to all rights (excluding politic and economic ones)
that may correspond to the pledged shares and, in case there is a delay in
payment of the Purchaser and while the pledge subsists it will be automatically
extendible to the corporate profits and other economic rights and to the voting
rights, to which purpose the Purchaser will notify MasTec in writing well before
the holding of the General Shareholders Meetings (and informing of the Agenda)
granting special power to the benefit of MasTec so that it may attend such
meeting in its name and representation, except for the written waiver of MasTec
to this purposes or authorisation from MasTec to allow the dilatory debtor to
attend the meeting having his vote to be agreed upon by MasTec.
The pledge will be indivisible. Consequently, each of the shares will secure the
complete fulfilment of the guaranteed obligation. The Purchaser will only be
able to request the extinction of the pledge and further devolution of the
holding of the pledged shares when the deferred payment secured has been duly
settled. MasTec will reduce the pledge after having received the complete
deferred sale price referred to under the third clause (3.2) of this document in
the following way: (i) after the first deferred payment instalment, to shares
representing 63%; (ii) after the second deferred payment instalment, to shares
representing 42%; (iii) after the third deferred payment instalment, to shares
representing 21% of the share capital of MasTec International Inc.
The pledge will be made effective by means of an auction of all or part of the
pledged shares before the Notary Public of Madrid appointed by MasTec. The
Public Notary will order the valuation of the shares to one of the auditing
companies of international well known prestige established in Spain. The Notary
Public will proceed in the following manner: (i) he will request the Purchaser
the payment giving him a term of 15 days; (ii) if payment is not effected in the
above term, he will proceed to the abovementioned valuation; (iii) the Notary
Public will notify MasTec of the number of shares to be auctioned and the value
corresponding to such shares, as well as the minimum price of the bidding,
place, date and hour of the auction; and (iv) he will order the publishing of
the same information in the BOE (Boletin Oficial del Estado) and in two
newspapers of wide circulation in Madrid at least 10 days in advance. The price
in the first auction will be at least the minimum bidding price or valuation; in
the second auction the minimum price of the bidding will be equal to 25% of the
first auction price; no minimum price will be established for the third auction.
Anyone wishing to participate in the auction will have to deposit before the
Notary Public 20% of the minimum value of the bidding for the first auction.
These amounts will be reimbursed to the persons who have not been awarded the
shares when the auction is finished. The auction will take place by bids. The
bidder will pay the difference up to the final price at the moment of the
assignation. If the highest bidder does not pay the price, the auction will be
reinitiated. Once the shares are assigned to the highest bidder, MasTec will
receive payment for its debts credit and after the expenses of the auction have
been liquidated the remaining amount, if any, will be paid to the Purchaser. The
purchase and sale deed in favour of the highest bidder will be granted before
the same Notary Public on behalf of the Purchaser. In the event the shares were
not sold in the first auction, a second auction will be called and likewise a
further third auction. Each calling will be done as stated beforehand. In case
the balance obtained during the auction was insufficient to cover the secured
debt, each of the purchasers forming the Purchaser will be liable with their
patrimony of the difference corresponding to them.
TENTH.- ASSIGNMENT OF THE AGREEMENT
MasTec and the Purchaser may assign their respective contractual positions to a
third party with the prior written consent from the other party, who may not
unreasonably withheld it in accordance with the ordinary business practice. The
Purchaser acquires for itself or on behalf of a corporate entity or entities
owned by itself which will be designated with such prior consent, so that there
will only be one transfer of the ownership of the shares transmitted which will
be effected directly from MasTec to the entity or entities finally designated by
the Purchaser.
ELEVENTH.- MANAGEMENT OF MASTEC INTERNATIONAL INC AND SINTEL
MasTec undertakes to abstain from intervening in the management of MasTec
International Inc. and Sintel, entrusting the latter to the Managing Director of
Sintel, Mr. Juan Antonio Casanova de San Simon, who will carry it out according
to the instructions of the Purchaser, who will always take into account the
temporary nature of the situation, until the fulfilment of the transactions
referred to under the fourth clause of this document and therefore abstaining
from performing transactions outside the ordinary course of business.
TWELFTH.- DEBT OWED TO TELEFONICA
The debt of MasTec International Inc. to Telefonica, S.A. for the purchase and
sale of the shares of Sistemas e Instalaciones de Telecomunicacion, S.A.
(Sintel) documented in the Public Deed, granted before the Notary Public of
Madrid Mr. Jose Luis Figuerola Cerdan, on April 30, 1996, under number 1107 of
this protocol, whose amount and details appear in the novation agreement which
is attached as Annex No.1 to this agreement, will be satisfied in accordance
with its own terms.
THIRTEENTH.- NOTIFICATIONS
Any notification will be made in writing, by registered mail will
acknowledgement of receipt to the following addresses:
MasTec
MasTec Inc
3155 N.W. 77 Avenue
Miami Florida 33122
Attention: Mr Jorge Mas
Copy to:
MasTec Inc
3155 N.W. 77 Avenue
Miami Florida 33122
Attention: Mr Jose Sariego
Legal Department
The Purchaser
Sintel c/Arte n(0) 21
MADRID
Attention: Mr Juan Antonio Casanova de San Simon
The parties are able to change address by giving prior notification to the other
party.
FOURTEENTH.- TAX AND EXPENSES
The Purchaser and MasTec will each bear half of all expenses and taxes incurred
in the granting and fulfilment of this agreement.
FIFTEENTH.- LAW AND JURISDICTION
This agreement will be governed and construed in accordance to Spanish Law.
The parties submit themselves to the jurisdiction of the Courts of Madrid and
expressly renounce to any other jurisdiction which may correspond to them, as
regards any matter relating to this agreement.
MERCANTILE POLICY
This agreement and the eventual amendments thereto, will be formalised as a
Policy intervened by Public Fedatary (Fedatario Publico) with the aim that all
due amounts due under the same are qualified as a Public Deed Debt to all
effects foreseen in Article 1429,6(0) of the Civil Procedure Law (Ley de
Enjuiciamiento Civil) and Articles 913.4(0) and 914.2(0) of the Commercial Code
(Codigo de Comercio) in relation to Article 916.2 of the same Code and other
applicable legal provisions.
This agreement is formalised as a Policy formed of a principal body of [ ] pages
and 3 Annexes of [ ] pages in 7 original documents.
THE PARTIES WHILE EXECUTING THE LAST PAGE MANIFEST THEIR FULL AGREEMENT WITH THE
ENTIRE CONTENT OF THIS DOCUMENT, for the acknowledgement of which the Public
Fedatary intervenes, attesting to the identity and capacity of the Parties, to
the legitimacy of their signatures and to all that is agreed in the agreement
and having made the legal observations, particularly, the need to ratify the
intervention of the verbal mandatories, seals and signs all the pages, giving to
all the counterparts an original value and full Mercantile and Procedural
effects.
- -------------------------
Signed Mr Jose Miguel Sariego
MASTEC INC.
- -------------------------------- ------------------------------
Signed Mr Francisco Javier Martinez de Signed Mr Juan Antonio Casanova
Lahidalga Gonzalez de San Simon
LAMEGO HOLDINGS CORP. FAWN CREEK, LTD.
- -------------------------------- -----------------------------
Signed Mr Ricardo Campos Dufaut Signed Mr Alfredo Florez Plaza
BENDING OAK, LTD. TILPA TRADING LTD
- --------------------------------
Signed Mr Serafin Gonzalez Morcillo
Signed Mr Carlos Tejera Osuna
F.G. NEWCO, S.L.
- --------------------------------
Signed Mr Alfredo Florez Plaza
SINTEL INTERNATIONAL CORP. BVI
Intervening Public Fedatary
With my intervention, Mr Pedro de Elizalde y Aymerich
<PAGE>
ANNEX 1
ACKNOWLEDGEMENT OF DEBT AND
PAYMENT UNDERTAKING AGREEMENT
ANNEX 2
BALANCE SHEET OF MASTEC INTERNATIONAL INC.
ANNEX 3
WAIVER OF CALL OPTION RIGHT
Exhibit 21.1
Set forth below is a list of the significant subsidiaries of MasTec.
MasTec North America, Inc.
MasTec Latin America, Inc.
MasTec Inepar S/A Sistemas de Telecomunicacoes
LatLink Corporation
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference to the registration statements of
MasTec, Inc. (the "Company") on Post-Effective Amendment No. 1 to Form S-3 (File
Nos. 333-11013 and 333-46067), Post-Effective Amendment No. 1 to Form S-4 File
No. 333-30645, and Post-Effective Amendment No. 1 to Form S-8 (File Nos.
033-55327, 333-30647, 333-47003 and 333-22465) of our report dated March 31,
1999, on our audits of the consolidated financial statements of Sintel, S.A. and
subsidiaries as of December 31, 1997 and 1998 and for each of the two years in
the period ended December 31, 1998, which report is included in this Annual
Report on Form 10-K.
/s/ ARTHUR ANDERSEN LLP
- -----------------------
ARTHUR ANDERSEN LLP
Madrid, Spain
March 31, 1999
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference to the registration statements
of MasTec, Inc. (the "Company") on Post-Effective Amendment No. 1 to Form S-3
(File Nos. 333-11013 and 333-46067), Post-Effective Amendment No. 1 to Form S-4
File No. 333-30645, and Post-Effective Amendment No. 1 to Form S-8 (File Nos.
033-55327, 333-30647, 333-47003 and 333-22465) of our report dated February 10,
1999, on our audits of the consolidated financial statements of the Company as
of December 31, 1997 and 1998 and for each of the three years in the period
ended December 31, 1998, which report is included in this Annual Report on Form
10-K.
/s/ PRICEWATERHOUSECOOPERS LLP
- ------------------------------
PRICEWATERHOUSECOOPERS LLP
Miami, Florida
March 31, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED
IN ITS ENTRIETY BY REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 19,864
<SECURITIES> 0
<RECEIVABLES> 291,875
<ALLOWANCES> 7,300
<INVENTORY> 13,423
<CURRENT-ASSETS> 427,436
<PP&E> 201,762
<DEPRECIATION> 58,865
<TOTAL-ASSETS> 735,486
<CURRENT-LIABILITIES> 182,932
<BONDS> 199,750
0
0
<COMMON> 2,738
<OTHER-SE> 201,535
<TOTAL-LIABILITY-AND-EQUITY> 735,486
<SALES> 1,048,922
<TOTAL-REVENUES> 1,048,922
<CGS> 803,112
<TOTAL-COSTS> 217,550
<OTHER-EXPENSES> 5,155
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,487
<INCOME-PRETAX> 2,618
<INCOME-TAX> 12,550
<INCOME-CONTINUING> (13,915)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,915)
<EPS-PRIMARY> (0.51)
<EPS-DILUTED> (0.51)
</TABLE>
EXHIBIT 99.1
CAUTIONARY STATEMENTS REGARDING SAFE HARBOR PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company is filing this cautionary statement identifying important
factors that could cause the Company's actual results to differ materially from
those projected in forward looking statements of the Company made by, or on
behalf of, the Company.
Dependence on Key Customers and the Telecommunications Industry
The Company derives a substantial portion of its revenue from customers in
the telecommunications industry, particularly BellSouth. The Company anticipates
that it will continue to derive a significant portion of its revenue from
services performed for customers in the telecommunications industry and
specifically BellSouth. The loss of BellSouth as a customer or a significant
reduction in the aggregate amount of business generated by these customers could
have a material adverse effect on the Company's results of operations.
In addition, there are a number of factors that could adversely affect
these and the Company's other customers and their ability or willingness to fund
capital expenditures in the future, which in turn could have a material adverse
effect on the Company's results of operations. These factors include the
potential adverse nature of, or the uncertainty caused by, changes in
governmental regulation, technological changes, increased competition, adverse
financing conditions for the industry and economic conditions generally.
Further, the volume of work awarded under contracts with the Company's public
utility customers is subject to periodic appropriations during the term of the
contract, and a failure by the customer to receive sufficient appropriations
could result in a reduction in the volume of work under these contracts or a
delay in payments, which in turn could negatively affect the Company.
Risks Inherent in Growth Strategy
The Company has grown rapidly through the acquisition of other companies
and its growth strategy is dependent in part on additional acquisitions. The
Company anticipates that it will make additional acquisitions and is actively
seeking and evaluating new acquisition candidates. There can be no assurance
that the Company will be able to continue to identify and acquire appropriate
businesses or obtain financing for acquisitions on satisfactory terms or that
acquired companies will perform as expected. The Company's growth strategy
presents the risks inherent in assessing the value, strengths and weaknesses of
growth opportunities, in evaluating the costs and uncertain returns of expanding
the operations of the Company and in integrating existing operations with new
acquisitions. Future competition for acquisition candidates could raise prices
for these targets and lengthen the time period required to recoup the Company's
investment. The Company's growth strategy also assumes there will be a
significant increase in demand for telecommunications and other infrastructure
services, which may not materialize. The Company's anticipated growth may place
significant demands on the Company's management and its operational, financial
and marketing resources. The Company's operating results could be adversely
affected if it is unable to integrate and manage acquired companies
successfully. Future acquisitions by the Company could also result in the
incurrence of additional debt and contingent liabilities, and amortization
expenses related to goodwill and other intangible assets, which could materially
adversely affect the Company's financial condition and results of operations.
Risks of Foreign Operations
Some of the countries in which the Company conducts business are
experiencing or have experienced political, economic or social instability,
including expropriations, currency devaluations, hyper-inflation, confiscatory
taxation or other adverse regulatory or legislative developments, or have
limited the repatriation of investment income, capital and other assets. There
can be no assurance that some of these circumstances will not occur in the
future or that, if they occur, they will not have a material adverse effect on
the Company's financial condition and results of operations.
The Company conducts business in several foreign currencies that are
subject to fluctuations in the exchange rate relative to the U.S. dollar. The
Company's results of operations from foreign activities are translated into U.S.
dollars at the average prevailing rates of exchange during the period reported,
which average rates may differ from the actual rates of exchange in effect at
the time of actual conversion into U.S. dollars. The Company monitors its
currency exchange risk but currently does not hedge against this risk. There can
be no assurance that currency exchange fluctuations will not adversely affect
the Company's financial condition or results of operations.
Dependence on Labor Force
The Company's business is labor intensive with high employee turnover in
many operations. The low unemployment rate in the United States has made it more
difficult to find qualified personnel at low cost in some areas where the
Company operates. Shortages of labor or increased labor costs could have a
material adverse effect on the Company's operations. There can be no assurance
that the Company will be able to continue to hire and retain a sufficient labor
force of qualified persons.
Dependence on Management
The Company's businesses are managed by a small number of key executive and
operational officers, including Jorge Mas, the Company's Chairman, President and
Chief Executive Officer, Joel-Tomas Citron, the Company's Vice Chairman, and the
Company's service line presidents. The loss of services of certain of these
executives and managers could have a material adverse effect on the Company. The
Company's growth strategy also is dependent on its ability to hire and retain
additional qualified management personnel. There can be no assurance that the
Company will be able to hire and retain such personnel.
Technological Changes
The telecommunications industry is subject to rapid changes in technology.
Wireline systems used for the transmission of video, voice and data face
potential displacement by various technologies, including wireless technologies
such as direct broadcast satellite television and cellular telephony. An
increase in the use of such technologies could, over the long term, have an
adverse effect on the Company's wireline operations.
Seasonality; Variability of Quarterly Results
The Company's external network services business is subject to seasonality,
with the Company experiencing a reduction in revenue during the first and fourth
quarters relative to other quarters. This reduction is due, in large part, to
reduced expenditures and work order requests of the Company's telecommunications
and other utility customers, particularly the ILEC's, at the end of their
budgetary years, which typically end in December. The onset of winter also
affects the Company's ability to render external networks in certain regions of
the United States.
The Company may experience variances in quarterly results as a consequence
of winning major contracts, which typically require significant start-up costs
in one period and realization of the benefit of contractual revenue in
subsequent periods, or as a result of the completion of major contracts. In
addition, the amount and type of work performed at any given time and the
general mix of customers for which work is being performed can vary
significantly from quarter to quarter, which also may affect quarterly results.
Short-Term Nature of Contracts; Failure to Renew or Win Bids
A significant portion of the Company's services are provided on a
non-recurring, project by project basis under contracts of relatively short
duration, typically less than one year. Many of the Company's contracts with its
customers, including most of its master contracts and contracts with its public
utility customers, are subject to cancellation by the customer without notice or
on relatively short notice, typically 90 to 180 days, even if the Company is not
in default under the contract. Many of the Company's contracts, including master
contracts, also are opened to public bid at the expiration of the contract term,
and there can be no assurance that the Company will be the successful bidder on
existing contracts that come up for bid. Cancellation of a significant number of
contracts by the Company's customers or the failure of the Company to win a
significant number of existing contracts upon re-bid could have a material
adverse effect on the Company.
Disposal of Non-Core Assets
The Company currently has investments in a number of non-core assets,
including non-operating real estate, an interest in an Argentine cable
television operator, an interest in an Ecuadorian cellular telephone company,
and a voice and data teleport facility. The Company is exploring strategic
alternatives to maximize the value of these assets. There can be no assurance
that the Company will be successful in achieving any proposed alternatives or
that the achievement of any proposed alternatives would not result in a charge,
loss or tax liability.
Controlling Shareholders
Jorge Mas, the Company's Chairman, President and Chief Executive Officer,
and other family members beneficially own more than 50% of the outstanding
shares of Common Stock of the Company. Accordingly, they have the power to
control the affairs of the Company.
Restrictions Imposed By Credit Facility and Senior Notes
The Credit Facility and the Senior Notes contain customary events of
default and covenants which prohibit the Company, among other things, making
investments in excess of specified amounts, incurring additional indebtedness in
excess of a specified amount, paying dividends in excess of a specified amount,
making capital expenditures in excess of a specified amount, creating liens,
prepaying other indebtedness, including the Senior Notes and engaging in certain
margins or combinations without the prior written consent of the lenders. The
Credit Facility also provides that the Company must maintain certain financial
ratio coverage, requiring, among other things, minimum ratios at the end of each
fiscal quarter of debt to earnings and earnings to interest expense. The ability
of the Company to comply with such provisions may be affected by events that are
beyond the Company's control. The breach of any of these covenants could result
in a default under the Credit Facility and the Senior Notes indenture and a
subsequent acceleration of such indebtedness. In addition, as a result of these
covenants, the ability of the Company to respond to changing business and
economic conditions and to secure additional financing, if needed, may be
restricted significantly, and the Company may be prevented from engaging in
transactions that might otherwise be considered beneficial to the Company.
