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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 0-3797
MasTec, Inc.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 59-1259279
--------------------------------- ------------------
(State or other Jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8600 N.W. 36th Street, Miami, FL 33166
--------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(305) 599-1800
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ___X____ No _______
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding as of
Class of Common Stock June 30, 1995
----------------------- ------------------
$ 0.10 par value 16,045,180
Page 1 of 22
MasTec, Inc. Form 10-Q
June 30, 1995 Index
PART I FINANCIAL INFORMATION
Item 1 - Unaudited Condensed Consolidated Statements
of Income for the Three Months and Six Months Ended
June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets
as of June 30, 1995 (Unaudited) and
December 31, 1994 . . . . . . . . . . . . . . . . . . . . 4
Unaudited Condensed Consolidated Statements
of Cash Flows for the Six Months
Ended June 30, 1995 and June 30, 1994 . . . . . . . . . . 6
Notes to Condensed Consolidated
Financial Statements (Unaudited) . . . . . . . . . . . . 9
Item 2 - Management's Discussion and Analysis
of Results of Operations and Financial Condition . . . 16
PART II OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 20
Page 2 of 22
MasTec, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
--------- --------- --------- ---------
Revenues $ 46,454 $ 36,616 $ 90,016 $ 53,773
--------- --------- --------- ---------
Costs and Expenses
Costs of Revenues (exclusive of
depreciation and amortization
shown separately below) 33,403 27,985 65,417 41,175
--------- --------- --------- ---------
Gross Profit 13,051 8,631 24,599 12,598
General and Administrative 4,795 4,245 9,788 6,352
Depreciation and Amortization 1,839 1,709 3,444 2,262
--------- --------- --------- ---------
Operating Income 6,417 2,677 11,367 3,984
Other Expense (Income)
Interest Expense-
Borrowings 1,060 895 2,222 1,222
Notes to Shareholders 66 60 135 120
Interest and Dividend Income (441) (393) (838) (468)
Interest on Notes from Shareholders (95) (81) (193) (141)
Gain on Sale of Theatre Assets 0 0 (2,304) 0
Other, Net (1,604) (88) (1,686) (192)
--------- --------- --------- ---------
(1,014) 393 (2,664) 541
--------- --------- --------- ---------
Income before income taxes, equity
in earnings of unconsolidated
joint ventures and minority interest 7,431 2,284 14,031 3,443
Equity in earnings (losses) of
unconsolidated joint ventures 0 92 (11) 137
Provision for Income Taxes 2,800 793 5,243 395
--------- --------- --------- ---------
Income before minority interest 4,631 1,583 8,777 3,185
Minority interest 22 0 36 0
--------- --------- --------- ---------
NET INCOME $ 4,653 $ 1,583 $ 8,813 $ 3,185
========= ========= ========= =========
Weighted Average Shares Outstanding 16,166 16,051 16,168 16,056
Earnings Per Share $ 0.29 $ 0.10 $ 0.55 $ 0.20
The accompanying notes are an integral part of these financial statements.
Page 3 of 22
MasTec, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
JUNE 30, DECEMBER 31,
1995 1994
(Unaudited) (Audited)
----------- -----------
ASSETS
Current Assets
Cash and Cash Equivalents $ 12,676 $ 5,612
Accounts Receivable-Net and Unbilled
Revenues 41,813 33,837
Inventories 4,491 4,111
Deferred and Refundable Income Taxes 1,308 1,368
Theatre Assets held for Sale 0 7,414
Other 1,685 700
----------- -----------
Total Current Assets 61,973 53,042
----------- -----------
Property and Equipment - At Cost 56,814 50,104
Accumulated Depreciation (8,430) (6,102)
----------- -----------
Property - Net 48,384 44,002
Investment in Preferred Stock 9,000 9,000
Notes Receivable from Shareholders 1,770 3,570
Real Estate Investments 30,732 30,704
Other Assets 1,841 2,134
----------- -----------
TOTAL ASSETS $ 153,700 $ 142,452
=========== ===========
The accompanying notes are an integral part of these financial statements.
Page 4 of 22
MasTec, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
JUNE 30, DECEMBER 31,
1995 1994
(Unaudited) (Audited)
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current Maturities of Debt $ 8,037 $ 8,229
Current Portion of Notes Payable
To Shareholders 0 1,000
Accounts Payable 16,699 8,512
Accrued Insurance 3,503 4,227
Accrued Compensation 1,893 2,193
Accrued Interest 420 631
Accrued Taxes 1,257 0
Other 5,323 5,966
----------- -----------
Total Current Liabilities 37,132 30,758
----------- -----------
Deferred Income Taxes 17,628 17,938
----------- -----------
Accrued Insurance - Non-Current 7,743 6,893
----------- -----------
Other Liabilities 0 33
----------- -----------
Long-Term Debt
Long-Term Debt 19,185 15,206
Notes Payable to Shareholders 0 1,500
Convertible Subordinated Debentures 12,250 19,250
----------- -----------
Total Long-Term Debt 31,435 35,956
----------- -----------
Shareholders' Equity
Common Stock 2,643 2,643
Capital Surplus 134,110 134,094
Retained Earnings 15,085 6,272
Treasury Stock (92,076) (92,135)
----------- -----------
Total Shareholders Equity 59,762 50,874
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 153,700 $ 142,452
=========== ===========
The accompanying notes are an integral part of these financial statements.
Page 5 of 22
MasTec, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
SIX MONTHS ENDED
JUNE 30,
1995 1994
----------- -----------
(Unaudited)
Cash Flows from Operating Activities:
Net Income $ 8,813 $ 3,185
Adjustments to Reconcile Net Income to
Net Cash Provided (Used) by Operating Activities:
Minority Interest in Consolidated
Joint Ventures (36) 0
Depreciation and Amortization 3,444 2,262
Equity in (Earnings) Losses of Unconsolidated
Joint Ventures 11 (137)
(Gain) on Sale of Theatre Assets (2,304) 0
(Gain) on Sale of Assets (138) 0
Changes in Assets and Liabilities Net of
Effect of Acquisitions:
Accounts Receivable-Net and Unbilled
Revenues (6,776) (5,702)
Inventories and Other Current Assets (849) 512
Other Assets 160 202
Accounts Payable and Accrued Expenses 6,952 (394)
Accrued and Refundable Income Taxes 1,317 (1,007)
Other-Current Liabilities (643) (750)
Deferred Taxes (310) 87
Other Liabilities 853 (236)
----------- -----------
Net Cash Provided (Used) by
Operating Activities 10,494 (1,978)
----------- -----------
Cash Flows from Investing Activities:
Cash Acquired in Acquisition 0 6,362
Distribution from Unconsolidated Joint Ventures 79 75
Net Proceeds from Sale of Theatre Assets 9,718 0
Proceeds from Sale of Assets 1,218 93
Repayment of Loans to Shareholders 1,800 0
Capital Expenditures (7,170) (2,197)
Investments in Unconsolidated Joint Ventures 0 (140)
Investment in Unconsolidated Subsidiary 0 (1,000)
Loans to Shareholders 0 (3,570)
----------- -----------
Net Cash Provided (Used) by Investing Activities 5,645 (377)
----------- -----------
(Continued)
The accompanying notes are an integral part of these financial statements.
Page 6 of 22
MasTec, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Cash Flows from Financing Activities:
Proceeds from Term Loan 12,000 0
Proceeds from Equipment Loan 2,584 0
Debt Repayments (20,718) (543)
Repayment of Loans from Shareholders (2,500) 0
Financing Costs (516) 0
Net Proceeds from Common Stock
issued from Treasury 75 0
----------- -----------
Net Cash Used in Financing Activities (9,075) (543)
----------- -----------
Net Increase (decrease) in Cash and
Cash Equivalents 7,064 (2,898)
Cash and Cash Equivalents -
Beginning of Period 5,612 8,930
----------- -----------
Cash and Cash Equivalents - End of Period $ 12,676 $ 6,032
=========== ===========
Supplemental disclosures of Cash Flow information:
Cash Paid During the Period:
Interest $ 2,568 $ 1,682
Income Taxes (net of refunds) $ 4,121 $ (30)
(Continued)
The accompanying notes are an integral part of these financial statements.
Page 7 of 22
MasTec, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(In Thousands)
SIX MONTHS ENDED
JUNE 30,
1995 1994
----------- -----------
(Unaudited)
Supplemental Schedule of non-cash investing activities:
Reverse Acquisition of Burnup
Fair Value of Net Assets Acquired:
Accounts Receivables $ 18,274
Inventories and Other Current Assets 7,524
Investment 9,000
Property 40,685
Real Estate Investments and Other Assets 32,645
-----------
Total Non-Cash Assets $ 108,128
-----------
Liabilities 49,559
Long-Term Debt 31,776
-----------
Total Liabilities Assumed $ 81,335
-----------
Net Non-Cash Assets Acquired 26,793
Cash Acquired 6,362
-----------
Net Value of Assets Acquired $ 33,155
-----------
Purchase Price $ 33,155
===========
Property Acquired:
Through Financing Arrangements $ 2,921 $ 142
=========== ===========
Note Payable for Purchase of Unconsolidated
Subsidiary $ 2,244
===========
Property Disposed:
Receivable arising from the sale of
equipment (collected July 11, 1995) $ 1,200
===========
The accompanying notes are an integral part of these financial statements.
Page 8 of 22
MasTec, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 (Unaudited)
1. CONSOLIDATION AND PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
MasTec, Inc. have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions for Form 10-Q and Rule 10-01 of Regulation S-X. They do not
include all information and notes required by generally accepted accounting
principles for complete financial statements and should be read in
conjunction with the audited financial statements and notes thereto
included in the Company's annual report on Form 10-K for the year ended
December 31, 1994. The financial information furnished reflects all
adjustments, consisting only of normal recurring accruals which are, in the
opinion of management, necessary for a fair presentation of the financial
position and results of operations for the periods presented. The results
of operations are not necessarily indicative of future results of
operation or financial position of MasTec , Inc.
Under generally accepted accounting principles, the Burnup Acquisition (as
defined in Note 2 below) was accounted for as a purchase by the CT Group
(as defined in Note 2 below) and, therefore, the 1994 financial statements
presented are those of the CT Group during such period and the operations
of Burnup & Sims Inc. ("Burnup") during the period March 11, 1994 through
June 30, 1994.
2. ACQUISITIONS
On March 11, 1994, Church & Tower, Inc. ("CT") and Church & Tower of
Florida, Inc. ("CTF" and, together with CT, "CT Group"), privately held
corporations under common control, were acquired (the "Burnup Acquisition")
through an exchange of stock, by Burnup, a Delaware public company.
Immediately following the Burnup Acquisition, the name of Burnup was
changed to MasTec, Inc. ("MasTec" or the "Company") and its fiscal year end
was changed to December 31.
The following information presents the unaudited pro forma condensed
results of operations for the six months ended June 30, 1994 of MasTec as
if the Acquisitions described in the Company's Annual Report on Form 10-K
had occurred on January 1, 1994. Adjustments have been made related to
purchase accounting and other matters related to the Acquisitions. These
results are presented for informational purposes only and are not
necessarily indicative of the future results of operations or financial
position of MasTec or the results of operations or financial position of
MasTec had the Acquisitions occurred on January 1, 1994.
Page 9 of 22
MasTec, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 (Unaudited)
RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(In Thousands Except Per Share Amounts)
(Unaudited)
ACTUAL PRO FORMA
1995 1994
Revenues $ 90,016 $ 74,041
Net Income 8,813 107
Earnings Per Share $ 0.55 $ 0.01
Revenues for the six months ended June 30, 1995 are $16 million higher than
pro forma 1994 revenues primarily due to an increase in revenue from new
and existing utilities services contracts.
Actual 1995 results reflect an improvement of $8.7 million from 1994 pro
forma net income of $107,000 to net income of $8.8 million for 1995. The
improved results are directly related to an increase in revenues, improved
efficiencies in core contract areas as a result of cost reductions and
enhanced productivity, a $1.4 million gain, net of tax, from the sale of
theatre assets and an $844,000 favorable settlement of litigation, net of
tax.
3. Related Party Transactions
Notes Receivable from shareholders bear interest at the prime rate plus 2%
(11% at June 30, 1995). On June 30, 1995, the Company collected notes
receivable from shareholders of $1,800,000 plus accrued interest thereon of
$467,000. Further on such date, the Company paid notes payable to
shareholders of $2,500,000 plus accrued interest thereon of $259,000.
Page 10 of 22
MASTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 (Continued)
4. Debt
Debt is summarized as follows (in thousands):
June 30, December 31,
1995 1994
Term Loan payable to Bank, at LIBOR
plus 2.50% (8.5% at June 30, 1995) $ 10,674 $ 0
Term Loan payable to Bank, at 7.7% fixed 886 1,144
Term Loan payable to Bank at prime rate
plus 1.5% (10% at December 31, 1994) 0 8,294
Term Loan payable to Bank at prime rate
plus 1.5% (10% at December 31, 1994) 0 1,000
Equipment Loan payable to Bank at LIBOR
plus 2.5% (8.5% at June 30, 1995) 2,584 0
Notes Payable to Shareholders, at prime
rate plus 2% (11% at June 30, 1995) 0 2,500
Capital Leases, at interest
rates from 6% to 12% due in
installments through the year 2000 2,272 3,826
Other notes payable for equipment, at
interest rates from 9% to 10% due in
installments through the year 2000 5,973 3,899
Other, at 7% due in four semi-annual
installments through July 10, 1996 1,412 1,851
Other, at 7% due in eight quarterly installments
through July 1, 1996 796 796
12% Convertible Subordinated Debentures
due in year 2000 14,875 21,875
----------- -----------
Total Debt 39,472 45,185
Less Current Maturities (8,037) (9,229)
----------- -----------
Long Term Debt $ 31,435 $ 35,956
=========== ===========
The 12% convertible subordinated debentures (the "Debentures") require an
annual payment to a sinking fund, which commenced on November 15, 1990,
calculated to retire 75% of the issue prior to maturity. The Company has
the option to redeem all or part of the Debentures prior to the due date by
paying the principal amount at face value. The Debentures are convertible
into Common Stock at an adjusted conversion price of $16.79 per share. At
June 30, 1995, approximately 886,000 shares were reserved for conversion.
The terms of the Debentures include certain restrictions on the
Page 11 of 22
MasTec, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 (Unaudited)
payment of dividends. On April 17, 1995, the Company redeemed $7 million
of the outstanding balance.
On January 26, 1995 the Company entered into a new $39.5 million credit
facility (the Credit Facility ) with Shawmut Capital (the Bank ). The
Credit Facility is comprised of three sub-facilities: a $12 million term
loan (the "Term Loan") secured by certain equipment, a $15 million
revolving loan (the "Revolver") collateralized by receivables and inventory
and a $12.5 million equipment revolver term loan (the "Equipment Loan")
secured by new or used equipment purchased under the Equipment Loan
facility. The Company used a portion of the proceeds of the Term Loan to
repay $10.5 million in term loans outstanding at December 31, 1994. The
remaining portion of the Term Loan was used to primarily finance new
equipment purchases and expenses associated with obtaining the Credit
Facility.
Interest on the Term Loan and Equipment Loan accrue, at the Company's
option, at the rate of prime or 2.5% over LIBOR. Interest on the Revolver
accrues, at the Company's option, at the rate of prime or 2.25% over LIBOR.
The Credit Facility requires the Company to pay a commitment fee of
$162,500 and an unused line fee at an annual rate of one quarter of one
percent of the amount of the unused facility amount less $6,000,000. The
Term Loan is payable in quarterly installments based upon a ten year
amortization.
Borrowings outstanding during the period ended June 30, 1995 under the
Equipment Loan were $2.5 million. The Equipment Loan is payable in
quarterly installments based on a four year amortization commencing January
1996.
No borrowings were outstanding during the period ended June 30, 1995 under
the Revolver. See Note 8 regarding the Devono Transaction and sale of
Lectro.
Debt agreements contain, among other things, restrictions on the payment of
dividends and require the maintenance of certain financial covenants.
5. Earnings Per Share and Capital Stock
Earnings per share is based on the weighted average number of common shares
outstanding. Fully diluted earnings per share is not presented as the
effect is anti-dilutive or not material.
At June 30, 1995 the Company had 50,000,000 shares of $.10 par value common
stock (the "Common Stock") authorized and 16,045,180 shares outstanding,
and 5,000,000 shares of authorized but unissued preferred stock.
Page 12 of 22
MasTec, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 (Unaudited)
6. Contingencies
In 1990 and 1993 purported class action and derivative complaints were
filed against the Company, members of its Board of Directors, the Company's
then largest stockholders, and CT and CTF. The complaints generally
alleged that the defendants breached their fiduciary duties in connection
with certain corporate transactions which occurred prior to the Burnup
Acquisition and certain other matters which allegedly could have impacted
the terms of the Burnup Acquisition.
The 1993 Complaint also claims derivatively that each member of the Board
of Directors engaged in mismanagement, waste and breach of his fiduciary
duties in managing the Company's affairs. On November 29, 1993, plaintiff
filed a motion for an order preliminarily and permanently enjoining the
Acquisition and the Redemption. On March 7, 1994, the court heard arguments
with respect to plaintiff's motion to enjoin the Burnup Acquisition and on
March 10, 1994, the court denied plaintiff's request for injunctive relief.
The Company believes that the allegations in the complaint, the Amended
Complaint and the 1993 Complaint and the 1993 Amended Complaint are without
merit, and intends to vigorously defend this action.
Trilogy Communications, Inc. V. Excom Realty, Inc., was filed on April 19,
1990 in the Superior Court of New Jersey, Monmouth County, Law Division,
Docket No. L-52787-90. The plaintiff served its complaint for damages and
declatory relief on Excom Realty, Inc. , a wholly owned subsidiary of the
Company. On May 3, 1991, the plaintiff moved for summary judgment. On
January 2, 1992, the Court denied plaintiff s motion for summary judgment
and granted the Company s cross motion for summary judgment and granted the
Company leave to amend and supplement its answer to assert a counterclaim.
On May 1, 1995, the Company settled its claim for $1.3 million which is
recorded as other income in the accompanying financial statements.
The Company is also a defendant in other legal actions arising in the
normal course of business. Management believes, based on consultations
with its legal counsel, that the amount provided in the financial
statements of the Company are adequate to cover the estimated losses
expected to be incurred in connection with these matters.
Page 13 of 22
MasTec, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 (Unaudited)
7. Sale of Theatre Assets
On March 17, 1995, the Company sold the assets of its indoor theatre chain
for approximately $11.5 million of which $1.8 million was used to pay
liabilities not assumed by the buyer and transaction costs incurred.
Revenues from the indoor theatres included in the general products and
other segment for the six months ended June 30, 1995 and the period March
11, 1994 through June 30, 1994 were approximately $2.6 million and $3.8
million, respectively. A gain on sale of approximately $2.3 million pretax
or $1.4 million, net of tax was realized on the sale.
8. Subsequent Events
Devono Transaction
On July 14, 1995 the Company entered into a loan agreement with Devono
Company Limited, a British Virgin Islands corporation (the "Borrower"),
whereby the Company lent the Borrower $25,000,000 at an annual interest
rate of 15% for a term of 180 days (the "Devono Loan"). The Company
financed the Loan by providing the Borrower with $5,000,000 from its
working capital and drawing upon the Company's existing credit facilities
for the remaining amount. The Borrower may extend the term of the Devono
Loan at an annual interest rate of 17.5% for two additional ninety day
periods. The Devono Loan is non-recourse to the Borrower, and, in the
event of a default, the Company's sole recourse will be to its security
interest in 40% of the outstanding and issued shares of the common stock of
an Ecuadorian company which owns a majority interest in a company licensed
to operate a cellular phone service and an international teleport system in
the Republic of Ecuador.
ULM Acquisition
On July 17, 1995 the Company purchased for $3.25 million the outstanding
stock of Utility Line Maintenance, Inc. ("ULM"), a company engaged in the
right of way clearance business using customized machinery for its
operations. The shareholder of ULM received $1.75 million at closing with
the balance to be paid over the next four years based on future pre-tax
earnings of ULM.
Page 14 of 22
MasTec, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 (Unaudited)
Lectro Sale
On August 9, 1995, the Company sold the stock of Lectro Products, Inc., a
wholly owned subsidiary, for $11.9 million in cash and a note receivable
(the "Note") of $450,000. Cash proceeds,f net of transaction expenses, were
$11.3 million. The Company estimates recording a pre-tax gain of
approximately $8 million after transaction expenses. The proceeds were
used to repay $10 million borrowed to finance the Devono Loan with the
excess invested in short term investments. A portion of the Note
($250,000) is subject to adjustments based upon ultimate collectability of
Lectro's accounts receivables as of June 30, 1995. Any changes in proceeds
as a result of any adjustments are not expected to be material.
Revenues from Lectro included in the general products and other segment for
the six months ended June 30, 1995 and the period March 11, 1994 through
June 30, 1994 were approximately $6.8 million and $3.6 million,
respectively.
Page 15 of 22
MasTec, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION JUNE 30, 1995
The following discussion of the Company s financial condition and results
of operations should be read in conjunction with the Condensed Consolidated
Financial Statements and notes thereto included elsewhere herein.
RESULTS OF OPERATIONS
The following table sets forth certain historical consolidated earnings
data as a percentage of revenues for the periods indicated.
THREE MONTHS
ENDED JUNE 30
1995 1994
----- -----
Revenues 100.0% 100.0%
Cost of revenues 71.9% 76.4%
Gross Margin 28.1% 23.6%
General and Administrative Expenses 10.3% 11.6%
Depreciation & Amortization 4.0% 4.7%
Interest expense 2.4% 2.6%
Interest Income and Other income(expense), net 4.6% 1.5%
Net income 10.0% 4.3%
Three Months Ended June 30, 1995 vs. Three Months Ended June 30, 1994.
The results for the quarter ended June 30, 1995, include the favorable
settlement of litigation of $1,350,000, pretax, which is included in other
income above. See Note 6 to the Condensed Consolidated Financial
Statements.
Revenues for the three months ended June 30, 1995 were $46.5 million,
representing an increase of $9.8 million or 21% when compared to revenues
for the three months ended June 30, 1994. The increase resulted primarily
from the inclusion of revenues from companies acquired during 1994 ($5.1
million), the expansion into new contract areas ($3.4 million) and
increased revenues ($3.7 million) from existing utilities services
contracts. The increase was offset by a lower revenue base from theatre
operations as a result of the sale of its indoor theatres in March 1995.
Cost of revenues as a percentage of revenues decreased from 76.4% in 1994
to 71.9% in 1995. The resulting increase in gross margin to 28.1% in 1995
from 23.6% in 1994 is primarily due to the increase in volume which
translated into operational efficiencies in contract areas, coupled with
enhanced productivity and cost reductions.
Page 16 of 22
MasTec, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION JUNE 30, 1995
(continued)
General and administrative expenses for the quarter ended June 30, 1995
were $4.8 million or 10.3% of revenues, compared to $4.2 million or 11.6%
of revenues for the same period in the prior year. Although, as a percent
of revenues, general and administrative expenses have decreased, as a
result of
the Company s continuous evaluation and pursuit of growth opportunities and
business development in the United States and abroad, certain general and
administrative costs are incurred without current economic benefit. See
Liquidity and Capital Resources for a discussion of investments
considered.
Depreciation and amortization expense was $1.8 million for the three months
ended June 30, 1995, or 4.0% of revenues, compared to $1.7 or 4.7% of
revenues for 1994. The increased expenses are primarily a result of
increased equipment capital expenditures for new contract areas as well as
scheduled fleet replacements.
Interest expense was $1,126,000 for 1995 compared to $955,000 for 1994.
The increase is due primarily to new borrowings for equipment of $5.5
million. This increase was offset by the $7 million repayment of the
debentures in April 1995.
Other income includes $1,350,000 related to the favorable settlement of the
Trilogy litigation described in Note 6 to the Condensed Consolidated
Financial Statements.
SIX MONTHS
ENDED JUNE 30
1995 1994
----- -----
Revenues 100.0% 100.0%
Cost of revenues 72.7% 76.6%
Gross Margin 27.3% 23.4%
General and Administrative Expenses 10.9% 11.8%
Depreciation & Amortization 3.8% 4.2%
Interest expense 2.6% 2.5%
Other income(expense), net 5.6% 1.5%
Net income 9.8% 5.9%
Six Months Ended June 30, 1995 vs Six Months Ended June 30, 1994
-----------------------------------------------------------------
The results for the six months ended June 30, 1994 include six months of
operations of the CT Group and operating results of Burnup for the period
March 11, 1994 through June 30, 1994. (See Note 2 to the condensed
Page 17 of 22
MasTec, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION JUNE 30, 1995
(Continued)
Consolidated Financial Statements.) The results for the six months ended
June 30, 1995 include a gain from the sale of theatre assets of
approximately $2.3 million, pretax, which is included in other income
above. See Note 7 to the Condensed Consolidated Financial Statements.
Revenues for the six months ended June 30, 1995 increased by approximately
$36.2 million from $53.8 million in 1994, primarily resulting from
companies acquired (approximately $19 million), expansion into new contract
areas, and an increase in revenues from existing service utilities
contracts.
Cost of revenues as a percentage of revenues decreased from 76.6% in 1994
to 72.7% in 1995 primarily due to the reason cited in the quarterly
discussion.
General and administrative expenses increased by approximately $3.4 million
due primarily to the impact of the Burnup Acquisition.
Depreciation and amortization decreased as of percentage of revenues from
4.2% in 1994 to 3.8% in 1995, primarily as a result of an increase in
revenue. Depreciation expense increased from $2.3 million to $3.4 million
primarily due to a fleet replacement program and an increased in capital
expenditures resulting from expansion into new contract areas.
Interest expense increased due to debt assumed (see Statement of Cash
Flows- Supplemental Schedule of Non-cash Financing and Investing
Activities) and the incurrence of indebtedness to shareholders pursuant to
the Burnup Acquisition.
The increase in interest and dividend income resulted from the preferred
stock investment acquired as part of the Burnup Acquisition.
On March 17, 1995, the Company sold Floyd Theatres 83 indoor screens to
Carmike Cinemas realizing a gain on sale of $2.3 million.
Upon consummation of the Burnup Acquisition, the CT Group's election to be
treated as an S Corporation was terminated and, accordingly, the Company
recognized a net deferred tax asset of approximately $435,000 related to
deductible temporary differences. This benefit was reduced by a provision
for the results of operations of the consolidated group for the period
March 31, 1994 to June 30, 1994 at an effective tax rate of 35%.
Page 18 of 22
MasTec, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION JUNE 30, 1995
(Continued)
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
June 30, 1995 vs December 31, 1994
The Company s primary source of liquidity during the six months ended June
30, 1995 was cash flow from operations of $10.5 million and net proceeds
from the sale of theatre assets of $9.7 million. As of June 30, 1995,
working capital was approximately $24.8 million compared to working capital
of approximately $22.3 million at December 31, 1994. The Company's cash
position was $12.7 million at June 30, 1995 compared to $5.6 million at
December 31, 1994.
In the six months ended June 30,1995, cash of $10.5 million was generated
from operations compared to $2.0 used by operations in the six months ended
June 30,1994. The increase in 1995's operating cash flows represents
improved results in the Company s core utilities services segment.
The Company, as a result of obtaining new contracts and continuing a fleet
replacement program, increased capital expenditures by approximately
$5.0 million during the first six months of 1995 compared to the first six
months of 1994.
It is anticipated that an additional $6 million will be invested in
machinery and equipment for the balance of the year.
A portion of the net proceeds ($7 million) from the sale of the theatre
assets was used to repay the Debentures on April 17, 1995. The reduction
in the outstanding balance of the Debentures reduced interest cost. See
Note 4 to the Condensed Consolidated Financial Statements.
The Company continues to evaluate the feasibility of investing and
participating in the operations of certain telecommunications related
companies in Latin America. External financing, cash generated by
operations and sale of non-core assets are anticipated sources of funding
for these investments. As discussed in Note 8 to the Condensed
Consolidated Financial Statements, on July 14, 1995, the Company made the
Devono Loan. In connection with the Devono Loan, the Company borrowed $20
million under its line of credit, $10 million of which was repaid with
proceeds from the sale of Lectro. Availability under the Company's existing
credit facility is currently $14 million.
Debt agreements to which the Company is a party contain, among other
things, restrictions on the payment of dividends and require the
maintenance of certain financial covenants. Pursuant to such covenants, the
Company is currently prohibited from declaring or paying dividends. See
Note 4 to the Condensed Consolidated Financial Statements.
The Company currently anticipates that operating cash requirements, capital
expenditures, and debt service will substantially be funded from cash flow
generated by operations, sale of non-core assets and investment income, as
well as, existing credit facilities.
Page 19 of 22
MasTec, Inc.
PART II - OTHER INFORMATION
JUNE 30, 1995
Item 1. Legal Proceedings
See Note 6 to the Condensed Consolidated Financial Statements.
Item 2. Changes in Securities
None
Item 3. Defaults on Senior Securities
None
Item 4. Results of Votes of Security-Holders
The 1994 Annual Meeting of Stockholders of MasTec, Inc. (the
"Meeting") was held on May 16, 1995 for the purpose of electing
two directors for term ending in 1998.
The following summarizes the results of the vote for each
candidate.
Number of Shares Voted
-------------------------------------------
Issue For Withheld Abstaining
-------------------------------------------
Jose S. Sorzano 14,680,988 72,499 0
Arthur B. Laffer 14,681,408 72,079 0
At the meeting, Mr. Jose S. Sorzano and Arthur B. Laffer were
elected as Class III Directors.
Item 5. Other Information
None
Page 20 of 22
MasTec, Inc.
PART II - OTHER INFORMATION
JUNE 30, 1995
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 10. Loan Agreement dated July 14, 1995 between
MasTec, Inc. and Devono Company Inc.
Exhibit 27. Article 5 - Financial Data Schedule
(b) Reports on Form 8-K.
On May 12, 1995, the Company filed Form 8-K with the
Securities and Exchange Commission reporting the dismissal
of Price Waterhouse LLP as the Company s independent
certified public accountants.
On June 30, 1995, the Company filed Form 8-K with the
Securities and Exchange Commission reporting the engagement
of Coopers & Lybrand, L.L.P. as the Company's independent
accountant.
On August 10, 1995, the Company filed Form 8-K with the
Securities and Exchange Commission reporting the Company's
loan agreement with Devono Company Limited, a British Virgin
Islands corporation.
Page 21 of 22
MasTec, Inc.
SIGNATURES
FORM 10-Q
Pursuant to the requirement 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.
MasTec, Inc.
Registrant
Date: August 14, 1995 /s/ Carlos A. Valdes
----------------------------
Carlos A. Valdes
Sr. Vice-President - Finance
(Principal Financial Officer)
and
Authorized Officer of the
Registrant
Page 22 of 22
LOAN AGREEMENT
This Loan Agreement is entered into on this 14th day of July,
1995, by and between Devono Company Limited, a British Virgin
Islands corporation (the "Borrower"), and MasTec, Inc. , a
Delaware corporation with its principal place of business located
at 8600 N.W. 36th Street, 8th Floor, Miami, Florida 33166 (the
"Lender")
WITNESSETH:
WHEREAS, the Borrower owns all of the issued and outstanding
capital stock of Cempresa, S.A., an Ecuadorian corporation
("Cempresa");
WHEREAS, Cempresa owns 13,157,942 shares or approximately fifty-
two and six-tenths percent (52.6%) of the issued and outstanding
shares of the common stock of Consorcio Ecuatoriano de
Telecomunicaciones S.A. ("Conecell"), an Ecuadorian corporation
licensed to operate a mobile cellular telecommunications system
and an international teleport system in the Republic of Ecuador;
WHEREAS, the Borrower wishes to obtain a loan from the Lender; and
WHEREAS, the Lender is willing to provide a loan to the Borrower,
subject to the terms and conditions set forth in this Agreement;
NOW, THEREFORE, for and in consideration of the above premises,
the mutual covenants and agreements contained herein and other
good and valuable consideration, the receipt of which is hereby
acknowledged by the parties, the Borrower and the Lender agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms. As used in this Agreement, the
following terms have the following meanings (terms defined in the
singular shall have the same meaning when used in the plural and
vice versa):
"Agreement" means this Loan Agreement, as amended, supplemented,
or modified from time to time.
"Cempresa Shares" means two-thousand (2,000) shares representing
forty percent (40%) of the issued and outstanding common stock
of Cempresa.
"Conecell Shares" means thirteen million one hundred fifty
seven thousand nine hundred forty-two (13,157,942) shares
representing fifty-two and six tenths percent (52.6%) of the
issued and outstanding common stock of Conecell.
"Fideicomiso" means that certain trust agreement to be
entered into simultaneously herewith by and between the Borrower
and the Lender, whereby the Borrower shall place the Cempresa
Shares in an Ecuadorian trust for the benefit of Lender.
Page 1 of 9
"Lender" means MasTec, Inc.
"Loan" means the Twenty-Five Million Dollars ($25,000,000)
being provided by Lender to Borrower under this Agreement.
"Loan Documents" means this Loan Agreement, the Note, and
all other documents evidencing this transaction.
"Non-Recourse Promissory Note" shall have the meaning
assigned to such term in Section 2.4.
"Dollars" or "$" means the lawful currency of the United
States of America.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority, or other
entity of whatever nature.
ARTICLE II
AMOUNT AND TERMS OF THE LOAN
Section 2.1 Loan; Funding. The Lender agrees on the terms
and conditions hereinafter set forth, to make a Loan to the
Borrower on the date of this Agreement in the amount of Twenty-
Five Million Dollars ($25,000,000). The funding of the Loan by
the Lender shall occur upon the execution- of this Agreement in
the following manner:
(i) delivery of a check or wire transfer payable to the Borrower
in the amount of Five Million Dollars ($5,000,000); and
(ii) delivery of a Letter of Credit issued by Shawmut Bank
Connecticut, N.A. for the benefit of the Borrower in the
amount of Twenty Million Dollars ($20,000,000) and in the
form of Exhibit "All attached hereto and made a part hereof
(the "Letter of Credit").
The Lender acknowledges and agrees that the amount payable under
Letter of Credit represents a portion of the Loan which has been
funded as of the date of this Agreement and that the Lender shall
not have the right, under any circumstances, to interfere in any
way with the payment of the Letter of Credit pursuant to its
terms. The Lender hereby waives and relinquishes any and all
rights of any kind to exercise set-off or pose counterclaims with
regard to the Letter of Credit and shall not obstruct the payment
under the Letter of Credit even if an Event of Default (as
defined below) were to occur under this Agreement.
Section 2.2 Payment. The Loan and all accrued and unpaid
interest thereon shall be due and payable in full upon the
expiration of the Term, as defined herein in Section 2.2;
provided however, that the Loan and all accrued and unpaid
interest thereon (i) shall be due and payable in full upon the
Sale of the Conecell Shares as described in Section 2.7; and (ii)
Page 2 of 9
shall be deemed paid in full upon the transfer to the Lender of
the Cempresa Shares. Provided that the Sale has not commenced as
contemplated in Section 2.7 herein, the Lender shall have the
option to accept the Cempresa Shares in satisfaction of the Loan
instead of payment in dollars in the amount set forth herein.
Section 2.3 No Prepayment. The Borrower shall not have the
right to prepay the Loan.
Section 2.4 Interest. The Lender shall be entitled to interest
on the unpaid principal amount of the Loan outstanding during the
initial Term of this Agreement and any extensions thereof, as
follows:
(i) During the initial Term, the first one hundred and eighty
(180) days of this Agreement, the Loan shall bear interest
at the annual rate of fifteen percent (15%).
(ii) In the event that this Agreement is extended for an
additional period of ninety (90) days by the Borrower, as
provided herein, the Loan shall bear interest at the annual
rate of seventeen and one half percent (17.5%)
(iii) In the event that this Agreement is extended for the
second period of ninety (90) days and the final period of
forty five (45) days by the Borrower, as provided herein,
the Loan shall bear interest at the annual rate of seventeen
and one half percent (17.5%).
Interest shall be calculated on the basis of a year of three
hundred sixty five (365) days for the actual number of days
elapsed. Interest shall be due and payable on the Maturity Date
(as defined in Section 2.5 below).
In no contingency or event whatsoever, whether by reason of
advancement of the Loan or otherwise, shall the amount paid or
agreed to be paid to Lender for the use, forbearance or detention
of money advanced hereunder exceed the highest lawful rate
permissible under any law which a court of competent jurisdiction
may deem applicable hereto. In the event that such a court
determines that Lender has charged or received interest hereunder
in excess of the highest applicable rate, such rate shall
automatically be reduced to the maximum rate permitted by law and
Lender shall promptly refund to Borrower any interest received by
it in excess of the maximum lawful rate. It is the intent hereof
that Borrower not pay or contract to pay, and that Lender not
receive or contract to receive, directly or indirectly in any
manner whatsoever, interest in excess of that which may be paid
by Borrower under applicable law.
Section 2.5 Term. This Agreement shall be for an initial
term of six (6) months; provided, however, that the initial term
may be extended by the Borrower for two (2) separate ninety (90)
day-periods by providing the Lender with five (5) days written
notice prior to the expiration of an applicable term; provided,
however, that the Borrower may extend this Agreement for an
additional forty five (45) days in the event that Cempresa shall
have entered into an agreement with a purchaser to sell the
Page 3 of 9
Conecell Shares prior to July 14, 1996 (collectively, the
"Term"). As used in this Agreement, the "Maturity Date" means
the last day of the Term.
Section 2.6 Note. The Loan made by the Lender under this
Agreement shall be evidenced by a Non-Recourse Promissory Note of
the Borrower (the "Note") in the principal amount of Twenty Five
Million Dollars ($25,000,000), dated as of the date of this
Agreement. As described in the Note, in the event of any default
by Borrower under this Agreement or the Note, the Lender's sole
recourse shall be the Cempresa Shares.
Section 2.7 Sale of Conecell Shares. The Lender
acknowledges and agrees that the Borrower, in its sole and
absolute discretion, may authorize and cause Cempresa to sell the
Conecell Shares, subject only to the conditions set forth in
Section 2.8 below. In the event that the Borrower decides to
sell the Conecell Shares, the Lender agrees to cooperate with
regard to such sale and to execute any documents reasonably
deemed necessary or appropriate by the Borrower to effectuate the
sale. If the Borrower sells the Conecell Shares during the Term
(the "Sale") , at the closing of the Sale the Borrower shall pay
the Lender, in satisfaction of any and all amounts owed by
Borrower under this Agreement, the following sum: (a) the
outstanding principal amount of the Loan plus accrued and unpaid
interest thereon; and (b) the net proceeds of the Sale
attributable to the Cempresa Shares after deducting (i) the
amount payable in (a) above, and (ii) fifty percent (50%) of the
difference between the amount payable in (a) above and the net
proceeds of the Sale attributable to the Cempresa Shares. As
used in this Agreement, "net proceeds" means the gross proceeds
received by Cempresa from the Sale of the Conecell Shares, less
all applicable fees, taxes, commissions and expenses relating to
the Sale.
Section 2.8 Lender's Rights Regarding Sale. If the purchase
price offered to Cempresa (the "Offer") for the Conecell Shares
shall be less than Ninety Million Dollars ($90,000, 000), the
Lender shall have the right to either (i) match the Offer and
acquire the Conecell Shares on the exact terms and conditions of
the Offer; or (ii) veto the proposed Sale of the Conecell Shares;
provided, however, that Borrower shall have the right, in its
sole and absolute discretion, to accept the Offer and sell the
Conecell Shares, notwithstanding Lender' s veto rights, if the
Borrower shall agree to pay Lender Five Million Dollars ($5,000,000)
plus the Loan and any accrued and unpaid interest thereon
(the "Veto Payment"). The Veto Payment shall be in lieu of any
other payments or sums due to the Lender under Section 2.7 above
and the Lender shall have no rights to the Cempresa Shares after
receipt of the Veto Payment. The Veto Payment shall be due and
payable by Borrower at the closing of the Sale of the Conecell
Shares. If Borrower intends to sell the Conecell Shares for less
than Ninety Million Dollars ($90,000,000), Borrower agrees to
provide prior written notice to Lender twenty (20) days prior to
the proposed consummation of the Sale of the Conecell Shares.
Lender shall then have ten (10) days to either match the Offer
and acquire the Conecell Shares, as provide in (i) above, or to
Page 4 of 9
exercise its veto as provided in (ii) above subject to Borrower's
right to pay the Veto Payment. if Lender fails to notify Borrower
in writing within the prescribed ten-day (10) period, Lender
shall waive its rights to match the Offer, any veto over the
Offer and the Veto Payment.
Section 2.9 "Fideicomiso". In connection with the execution
and delivery of this Agreement, the Borrower has executed and
delivered to the Lender a Fideicomiso whereby the Borrower has
placed all of the Cempresa Shares as security for its obligations
under this Agreement and the Note.
ARTICLE III
CONDITIONS PRECEDENT TO THE LOAN
Section 3.1 By executing this Agreement, the Lender
acknowledges and agrees that the following conditions precedent
have been satisfied:
(i) Lender has received the Note, duly executed and delivered by
Borrower;
(ii) Lender has received the Convenio de Fideicomiso executed by
Borrower in favor of Lender, and such other documents, stock
powers and stock certificates that Lender has required in
connection with the Fideicomiso; and
(iii) Borrower has demonstrated that it is in good standing
in its place of incorporation and in any other jurisdiction
where such qualification is necessary or desirable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender that:
Section 4.1 Incorporation, Good Standing, and Due Qualific-
cation. The Borrower is a corporation duly incorporated, validly
existing, and in good standing under the laws of the British
Virgin Islands; has the corporate power and authority to own its
assets and to transact the business in which it is now engaged or
proposes to be engaged in; and is duly qualified as a foreign
corporation and in good standing under the laws of such other
jurisdiction in which such qualification is required.
Section 4.2 Corporate Power and Authority. The execution,
delivery and performance by the Borrower of the Loan Documents
have been duly authorized by all necessary corporate action and
do not and will not (i) require any consent or approval of the
stockholders of such corporation; (ii) contravene such
corporation's charter or bylaws; (iii) violate any provision of
any law, rule or regulation, order, writ, judgement, injunction,
decree, determination, or award presently in effect having
applicability to such corporation; (iv) result in a breach of or
violation of any other agreement, lease, or instrument to which
Page 5 of 9
such corporation may be a party or by which it or its properties
may be bound or affected; (v) result in, or require the creation
or imposition of any lien upon or with respect to any of the
properties now owned or hereafter acquired by such corporation;
or (vi) cause such corporation to be in default under any such
law, rule, regulation, order, writ, judgement, injunction,
decree, determination, or award or any such indenture, agreement,
lease or instrument.
Section 4.3 Legally Enforceable Agreement. This Agreement
and each of the other Loan Documents when delivered will be,
legal, valid, and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their
respective terms.
Section 4.4 Valid Title to Cempresa Shares. Borrower has
good and valid title to the Cempresa Shares, free and clear of
any and all encumbrances, security interests and other adverse
claims whatsoever.
Section 4.5 Valid Title to Conecell Shares. Cempresa has
good and valid title to the Conecell Shares, free and clear of
any and all encumbrances, security interests and other adverse
claims whatsoever, including but not limited to applicable
creditor's remedies, pursuant to fraudulent and preferential
transfer laws.
Section 4.6 Cellular License. Conecell has a license to
operate a cellular phone service and an international teleport
system in the Republic of Ecuador.
ARTICLE V
CLOSING
The closing and funding of the Loan shall occur
simultaneously with the execution of this Agreement and the other
Loan Documents.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.1 Events of Default. The entire unpaid principal
balance of the Loan, and all other sums owing under this
Agreement or any other instrument or document executed by the
Borrower in connection with the Loan, shall at the option of the
Lender become immediately due and payable upon the occurrence of
any one or more of the following events ("Events of Default") ,
regardless of the cause thereof and whether within or beyond the
control of the Borrower:
(i) If Borrower shall make any representations or warranties in
any of the Loan Documents or in any certificate furnished at
any time hereunder or in connection with any of the Loan
Documents which proves to have been untrue or misleading in
any material respect when made or furnished;
Page 6 of 9
(ii) If Borrower shall default in the observance or performance
of any agreement or covenant contained in this Agreement or
any of other Loan Document, unless such default is cured
within thirty (30) days thereafter;
(iii) If Borrower shall file a voluntary petition in
bankruptcy or a voluntary petition or answer seeking
liquidation, reorganization, arrangement, re-adjustment of
its debts, or for any other relief under the Bankruptcy
Code, or under any other act or law pertaining to
insolvency or debtor relief, whether state, federal, or
foreign, now or hereafter existing; Borrower shall enter
into any agreement indicating its consent to, approval of,
or acquiescence in, any such petition or proceeding;
Borrower shall apply for or permit the appointment by
consent or acquiescence of a receiver, custodian or trustee
of Borrower for all or a substantial part of its property;
Borrower shall make an assignment for the benefit of
creditors; or Borrower shall be unable or shall fail to pay
its debts generally as such debts become due, or Borrower
shall admit, in writing, its inability or failure to pay its
debts generally as such debts become due; or
(iv) If the Borrower shall make an assignment for the benefit of
creditors, file a petition in bankruptcy, apply to or
petition any tribunal for the appointment of a custodian,
receiver, intervenor or trustee for the Borrower or a
substantial part of Borrower's assets; or if the Borrower
shall commence any proceeding under any bankruptcy,
arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now
or hereafter in effect; or if any such petition or
application shall have been filed or proceeding commenced
against the Borrower or if any such custodian, receiver,
intervenor or trustee shall have been appointed and the same
shall have not been dismissed within sixty (60) days after
such filing, commencement or appointment.
ARTICLE VII
REMEDIES AND WAIVER OF ANY OTHER RIGHTS
Section 7.1 Remedies. Upon the occurrence or existence of
any Event of Default, Lender's sole and exclusive remedy shall be
to take possession of the Cempresa Shares pursuant to the
Fideicomiso. The Lender hereby acknowledges and agrees to waive
any and all other rights or remedies that Lender may have under
the laws of the Republic of Ecuador, the United States of America
and any other applicable jurisdiction to collect the proceeds of
the Loan, including principal and accrued interest thereon, or to
enforce any claim whatsoever against the Borrower due to
Borrower's Default. The parties hereto acknowledge and agree
that the foregoing waiver by Lender does not intend to limit any
rights which the Lender may acquire as a shareholder in the event
the Lender becomes a shareholder of Cempresa, including the
rights of first refusal described in Section 8.1.
Page 7 of 9
ARTICLE VIII
RIGHT OF FIRST REFUSAL
Section 8.1 Right of First Refusal. In the event that
the Lender shall become a shareholder of Cempresa pursuant
to Section 7.1 of this Agreement, the Borrower and the
Lender shall grant to each other a right of first refusal
with regard to their respective share interests in Cempresa.
The right of first refusal shall provide that either party
must provide the other with written notice at least twenty
(20) days prior to the sale of their respective shares to a
third party. The party receiving the notice shall have ten
(10) days to purchase the other party's shares on the same
terms as that being contemplated.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Entirety. This Agreement, including the other
documents referred to herein, which form a part hereof, contains
the entire understanding of the parties hereto with respect to
the subject matter contained herein and therein. This Agreement
supersedes all prior oral or written agreements and
understandings between the parties with respect to such subject
matter.
Section 9.2 Amendments, Etc. No amendment, modification,
termination, or waiver of any provision of any Loan Document to
which the Borrower is a party, nor consent to any departure by
the Borrower from any Loan Document to which it is a party, shall
in any event be effective unless the same shall be in writing and
signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given.
Section 9.3 Notices, Etc. All notices and other communications
provided for under this Agreement and under the other Loan
Documents to which the Borrower is a party shall be in writing
via telecopy with a confirmation by mail, or delivered, as to
each party, at such address as contained herein.
Section 9.4 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Borrower and the
Lender and shall not be assignable or transferred by either
without the written consent of the other party hereto.
Section 9.5 Governing Law; Jurisdiction. This Agreement
and the Note shall be governed by, and construed in accordance
with, the laws of the State of Florida. To the fullest extent
permitted by law, the Borrower and the Lender submit to the
jurisdiction of the state and federal courts in the State of
Florida for the purposes of any action or proceeding relating to
this Agreement or any other Loan Document, and agree that the
venue of any such action or proceeding may be laid in Dade
Page 8 of 9
County, Florida, and waive any claim that the same is an
inconvenient forum. No provision of this Agreement shall limit
the Lender's right to serve legal process in any other manner
permitted by law or to bring any such action or proceeding in any
other competent jurisdiction.
Section 9.6 Service of Process. The Borrower hereby
irrevocably appoints C.T. Corporation (the "Process Agent"), with
an off ice on the date hereof at 1200 South Pine Island Road,
Plantation, Florida 33324, as its agent to receive on its behalf
service of copies of any summons and complaint and any other
process which may be served in any action or proceeding, provided
that a copy of such process is also mailed, to the Borrower at
its address specified herein. Such service may be made by
mailing or delivering a copy of such process to the Borrower in
care of the Process Agent at the Process Agent's above address,
and the Borrower hereby irrevocably authorizes and directs the
Process Agent to accept such service on its behalf.
Section 9.7 Severability of Provisions. Any provision
of any Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions of such Loan Document or
affecting the validity or enforceability of such provision in any
other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers or legal
representatives thereunto duly authorized, as of the date first
above written.
DEVONO COMPANY LIMITED, the
Borrower.
By: /s/ Simon Parra
----------------------------------------------
SIMON PARRA, Legal Representative
Road Town
Post Office Box No. 71
Tortola, British Virgin Islands
MASTEC, INC., the Lender.
By: /s/ Jorge Mas
---------------------------------------------
8600 N.W 36th Street
8th Floor
Miami, FL 33166
Page 9 of 9