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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
Commission File Number 001-08106
MASTEC, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0829355
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3155 N.W. 77th Avenue, Miami, FL 33122-1205
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 599-1800
Former name, former address and former fiscal year, if changed since
last report: Not Applicable
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No ____.
As of November 11, 2002, MasTec, Inc. had 47,989,971 shares of common
stock, $0.10 par value, outstanding.
MASTEC, INC.
TABLE OF CONTENTS
Part I. Financial Information
Item 1. Financial Statements
Unaudited Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 2002 and 2001. . . . . 3
Consolidated Balance Sheets as of September 30, 2002
(Unaudited) and December 31, 2001. . . . . . . . . . . . . . . . 4
Unaudited Consolidated Statement of Changes in Shareholders'
Equity for the Nine Months Ended September 30, 2002. . . . . . . 5
Unaudited Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 2002 and 2001. . . . . . . . . . . . 6
Notes to Consolidated Financial Statements (Unaudited) . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . . 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk. . 22
Item 4. Controls and Procedures . . . . . . . . . . . . . . . . . . . 22
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . 22
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Certifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
MASTEC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2002 2001 2002 2001
--------- -------- -------- ---------
Revenue $231,758 $302,243 $648,581 $969,675
Costs of revenue 196,604 247,394 544,208 785,502
Depreciation 8,085 12,262 26,282 39,144
Amortization 128 2,377 384 8,025
General and administrative expenses 19,196 142,422 60,541 226,500
Interest expense 4,777 5,346 14,413 15,211
Interest income 264 315 908 5,518
Other income (loss), net 484 (10,223) 5,198 (15,829)
-------- -------- -------- --------
Income (loss) before provision for
income taxes, minority interest and
cumulative effect of accounting change 3,716 (117,466) 8,859 (115,018)
Provision (benefit) for income taxes 1,357 (41,970) 3,480 (40,786)
Minority interest 4 255 17 125
-------- -------- -------- --------
Income (loss) before cumulative effect
of accounting change 2,363 (75,241) 5,396 (74,107)
Cumulative effect of accounting change,
net of tax - - (25,671) -
-------- -------- -------- --------
Net income (loss) $ 2,363 $(75,241)$(20,275)$(74,107)
======== ======== ======== ========
Basic weighted average common shares
outstanding 47,926 47,787 47,916 47,761
======== ======== ======== ========
Basic earnings per share before
cumulative effect of accounting
change $ 0.05 $ (1.57)$ 0.11 $ (1.55)
Cumulative effect of accounting change - - (0.53) -
-------- -------- -------- --------
Basic earnings per share $ 0.05 $ (1.57)$ (0.42)$ (1.55)
======== ======== ======== ========
Diluted weighted average common
shares outstanding 47,965 47,787 48,063 47,761
======== ======== ======== ========
Diluted earnings per share before
cumulative effect of accounting
change $ 0.05 $ (1.57)$ 0.11 $ (1.55)
Cumulative effect of accounting
change - - (0.53) -
-------- -------- -------- --------
Diluted earnings per share $ 0.05 $ (1.57)$ (0.42)$ (1.55)
======== ======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
MASTEC, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
2002 2001
------------ -----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 11,516 $ 48,478
Accounts receivable, unbilled revenue and
retainage, net 232,599 251,715
Inventories 32,618 25,697
Income tax refund recoverable 14,798 44,904
Other current assets 35,303 23,078
----------- -----------
Total current assets 326,834 393,872
Property and equipment, net 127,378 151,774
Goodwill, net 232,135 264,826
Other assets 32,649 40,900
----------- -----------
Total assets $ 718,996 $ 851,372
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of debt $ 2,536 $ 1,892
Accounts payable 74,234 75,508
Other current liabilities 41,775 68,410
----------- -----------
Total current liabilities 118,545 145,810
----------- -----------
Other liabilities 21,720 30,902
----------- -----------
Long-term debt 197,348 267,857
----------- -----------
Commitments and contingencies (Note 5)
Shareholders' equity:
Common stock 4,799 4,791
Capital surplus 348,273 348,022
Retained earnings 53,721 73,996
Foreign currency translation adjustments (25,410) (20,006)
----------- -----------
Total shareholders' equity 381,383 406,803
----------- -----------
Total liabilities and shareholders'
equity $ 718,996 $ 851,372
The accompanying notes are an integral part of these consolidated
financial statements.
MASTEC, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands)
(Unaudited)
Foreign
Common Stock Currency
-------------- Capital Retained Translation
Shares Amount Surplus Earnings Adjustments Total
------ ------ -------- -------- ----------- -------
Balance December 31, 2001 47,905 $4,791 $348,022 $ 73,996 $(20,006) $406,803
Net income - - - (20,275) - (20,275)
Foreign currency translation
adjustments - - - - (5,404) (5,404)
Stock issued 82 8 251 - - 259
------ ------ -------- ------- -------- --------
Balance September
30, 2002 47,987 $4,799 $348,273 $ 53,721 $(25,410)$ 381,383
====== ====== ======== ======= ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
MASTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
------------------
2002 2001
-------- --------
Cash flows from operating activities:
Net loss $(20,275) $(74,107)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 26,666 47,169
Minority interest (17) (125)
Gain on disposal of assets and investments (5,444) (611)
Write down of assets - 161,200
Cumulative change in accounting principle, net 25,671 -
Changes in assets and liabilities net of effect
of acquisitions:
Accounts receivables, unbilled revenue and
retainage, net 9,218 (41,125)
Inventories (7,114) (4,146)
Income tax recoverable 50,784 (41,436)
Other assets, current and non-current portion (10,383) (19,486)
Accounts payable 1,017 7,250
Other liabilities, current and non-current
portion (14,436) (32,266)
-------- --------
Net cash provided by operating activities 55,687 2,317
-------- --------
Cash flows from investing activities:
Capital expenditures (14,579) (32,526)
Cash paid for acquisitions (net of cash acquired)
and contingent consideration (16,005) (26,737)
Investment in companies and distribution to joint
venture partner - (6,450)
Investment in life insurance (1,230) -
Proceeds from sale of assets and investments 11,534 3,294
-------- --------
Net cash used in investing activities (20,280) (62,419)
-------- --------
Cash flows from financing activities:
(Repayments) borrowings on revolving credit
facilities, net (70,165) 65,272
Net proceeds from common stock issued 259 896
-------- --------
Net cash (used in) provided by financing activities (69,906) 66,168
-------- --------
Net decrease in cash and cash equivalents (34,499) 6,066
Effect of translation on cash and cash equivalents (2,463) (2,488)
Cash and cash equivalents - beginning of period 48,478 18,457
-------- --------
Cash and cash equivalents - end of period $ 11,516 $ 22,035
======== ========
Supplemental disclosure of non-cash investing and financing activities:
During the nine months ended September 30, 2001, we completed certain
acquisitions that have been accounted for as purchases. The fair value
of the net assets excluding goodwill acquired totaled $2.7 million and
was comprised primarily of $3.0 million of accounts receivable, $2.0
million of property and equipment, $0.5 million of other assets and
$0.2 million in cash, offset by $3.0 million of assumed liabilities.
The excess of the purchase price over the fair value of net assets
acquired was $2.7 million and was allocated to goodwill. The total
purchase price of $5.4 million is comprised of $4.5 million, paid in
cash, and the balance in seller financing. During the nine months
ended September 30, 2001, we paid approximately $22.3 million related
to contingent consideration from earlier acquisitions of which
$0.6 million was reflected as additional goodwill and $21.7 million
reflected as a reduction in other current liabilities.
During the nine months ended September 30, 2002, we paid
approximately $16.0 million related to contingent consideration from
earlier acquisitions that was reflected as a reduction in other current
liabilities.
The accompanying notes are an integral part of these consolidated
financial statements.
MASTEC, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Nature of the Business and Summary of Significant Accounting
Policies
We are a leading end-to-end communication, broadband and energy
infrastructure service provider for a broad range of clients in North
America and Brazil. We design, build, install, maintain, upgrade and
monitor internal and external networks and other facilities for our
clients. We are one of the few national, multi-disciplinary infra-
structure providers that furnishes a comprehensive solution to our
clients' infrastructure needs ranging from basic installation and
construction to sophisticated engineering, design and integration.
Our diverse and long-standing client base, experienced management and
integrated value added service offering provide a stable base of repeat
business and enable us to quickly and efficiently meet client demands.
Basis for Presentation of Consolidated Financial Statements.
The accompanying unaudited consolidated financial statements of MasTec
have been prepared in accordance with accounting principles generally
accepted in the United States 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 together with the audited financial statements and notes thereto
included in our annual report on Form 10-K for the year ended December
31, 2001. The balance sheet data as of December 31, 2001 was derived
from audited financial statements but does not include all disclosures
required by generally accepted accounting principles. 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, results of operations
and cash flows for the quarterly periods presented. The results of
operations for the periods presented are not necessarily indicative of
our future results of operations for the entire year. A summary of the
significant accounting policies followed in the preparation of the
accompanying consolidated financial statements is presented below:
Management estimates. The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue and expenses, and
related disclosure of contingent assets and liabilities. The more
significant estimates relate to our revenue recognition, allowance for
doubtful accounts, intangible assets, accrued insurance, income taxes,
and litigation and contingencies. We base our estimates on historical
experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis
for our judgments about our results and the carrying values of our
assets and liabilities. Actual results and values may differ from
these estimates.
Principles of consolidation. The consolidated financial statements
include MasTec and its subsidiaries. All material intercompany accounts
and transactions have been eliminated. Certain amounts have been
reclassified in the prior period financial statements to conform with
the current period presentation.
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 services are rendered, generally
using units of output. 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. We follow this method
since reasonably dependable estimates of the revenue and costs
applicable to various stages of a contract can be made. Recognized
revenue and profits are subject to revisions as the contract progresses
to completion. Revisions in profit estimates are charged to income in
the period in which the facts that give rise to the revision become
known. Monitoring service and support revenue is recognized ratably
over the term of the agreement. We also provide management,
coordination, consulting and administration services for network
infrastructure projects. Compensation for such services is recognized
ratably over the term of the service agreement. Losses, if any, on
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 clients as per
individual contract terms.
Allowance for doubtful accounts. We maintain allowances for
doubtful accounts for estimated losses resulting from the inability of
our clients to make required payments. Management analyzes historical
bad debt experience, client concentrations, client credit-worthiness,
the availability of mechanic's and other liens, the existence of payment
bonds and other sources of payment, and current economic trends when
evaluating the adequacy of the allowance for doubtful accounts.
Foreign currency. We operate in Brazil, which is subject to
greater political, monetary, economic and regulatory risks than our
domestic operations. 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 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 and equity investments denominated in a
currency other than their functional currency are included in results
of operations as incurred.
Comprehensive income (loss). As reflected in the consolidated
statements of changes in shareholders' equity, comprehensive income is
a measure of net income and all other changes in equity that result
from transactions other than with shareholders. Comprehensive income
(loss) consists of net income (loss) and foreign currency translation
adjustments. Our comprehensive losses for the nine months
ended September 30, 2002 and 2001 were ($25.7) million and ($78.8)
million, respectively. Comprehensive losses for the three months ended
September 30, 2002 and 2001 were ($0.5) million and ($77.8) million
respectively.
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 per share
relates to stock options assumed exercised under the treasury method of
accounting of approximately 39,000 and 147,000 for the three and nine
months ended September 30, 2002. Potentially dilutive shares for the
three and nine months ended September 30, 2001 totaling 150,000 and
367,000 shares, respectively, were not included in the diluted per
share calculation because their effect would be anti-dilutive.
Accordingly, for the three and nine months ended September 30, 2001,
diluted net loss per common share is the same as basic net loss per
common share.
Cash and cash equivalents. We consider all short-term investments
with maturities of three months or less when purchased to be cash
equivalents. At September 30, 2002 and December 31, 2001, we had cash
and cash equivalents denominated in Brazilian reals that translate to
approximately $2.9 million and $4.0 million, respectively.
Inventories. Inventories (consisting principally of materials 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 other income or expense.
Intangibles and other long lived assets. Intangibles, long-lived
assets and goodwill are recorded at estimated fair value. Long-lived
assets and other intangibles are amortized on a straight-line basis
over periods of between five and 15 years. We assess the impairment of
identifiable intangibles, long-lived assets and goodwill whenever events
or changes in circumstances indicate that the carrying value may not be
recoverable.
In July 2001, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 141,
Business Combinations. SFAS No. 141 requires that all business
combinations initiated after June 30, 2001, be accounted for using the
purchase method. The FASB also issued SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 142 requires that goodwill be assessed at
least annually for impairment by applying a fair-value based test.
Goodwill will no longer be amortized over its estimated useful life.
In addition, acquired intangible assets are required to be recognized
and amortized over their useful lives if the benefit of the asset is
based on contractual or legal rights.
Effective January 1, 2002, we adopted SFAS No. 142 resulting in a
write-down of our goodwill, net of tax, in the amount of $25.7 million,
which is reflected in our consolidated financial statements as a
cumulative effect due to a change in accounting principle as discussed
in Note 2.
In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses
financial accounting and reporting for the impairment or disposal of
long-lived assets. This statement supersedes SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of, and establishes a single accounting model, based on the
framework established in SFAS No. 121, for long-lived assets to be
disposed of by sale. We adopted SFAS No. 144 effective January 1,
2002, which did not result in any material change in our accounting for
long lived assets.
Litigation and contingencies. Litigation and contingencies are
reflected in our consolidated financial statements based on management's
assessment, along with legal counsel, of the expected outcome from such
litigation.
Accrued insurance. We maintain insurance policies subject to a
$1.0 million deductible per claim for certain property and casualty and
worker's compensation claims. Our estimated liability for claims and
the associated claim expenses is reflected in other current and
non-current liabilities. The determination of such claims and expenses
and the appropriateness of the related liability is reviewed and updated
semi-annually.
Income taxes. We record 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 our 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. We present the disclosures required by
Statement of Financial Accounting Standard No. 123, Accounting for Stock
Based Compensation and use the intrinsic value method of accounting for
such stock based compensation.
Fair value of financial instruments. We estimate 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 we could realize in a current market exchange. Our 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. We use 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 marketplace.
New pronouncements. In May 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections. SFAS No. 145 rescinds the
automatic treatment of gains or losses from extinguishment of debt as
extraordinary unless they meet the criteria for extraordinary items as
outlined in APB Opinion No. 30, Reporting the Results of Operations,
Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. SFAS No. 145 also requires sale-leaseback accounting for
certain lease modifications that have economic effects that are similar
to sale-leaseback transactions and makes various technical corrections
to existing pronouncements. The provisions of SFAS No. 145 related to
the rescission of FASB Statement 4 are effective for fiscal years
beginning after May 15, 2002, with early adoption encouraged. All other
provisions of SFAS No. 145 are effective for transactions occurring
after May 15, 2002, with early adoption encouraged. We do not anticipate
that adoption of SFAS No. 145 will have a material effect on our results
of operations or financial position.
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement requires
the recording of costs associated with exit or disposal activities at
their fair values only once a liability exists. Under previous guidance,
certain exit costs were accrued when management committed to an exit
plan, which may have been before an actual liability arose. The
provisions of SFAS No. 146 are effective for exit or disposal activities
that are initiated after December 31, 2002, with early adoption
encouraged. We do not anticipate that adoption of SFAS No. 146 will
have a material effect on our results of operations or financial position.
Note 2 - Change in Accounting Principle
As discussed in Note 1, in January 2002 we adopted SFAS No. 142,
which requires companies to stop amortizing goodwill and certain
intangible assets with an indefinite useful life. Instead, SFAS No. 142
requires that goodwill and intangible assets deemed to have an indefinite
useful life be reviewed for impairment upon adoption of SFAS No. 142 and
annually thereafter.
Under SFAS No. 142, goodwill impairment is deemed to exist if the
net book value of a reporting unit exceeds its estimated fair value as
determined using a discounted cash flow methodology applied to the
particular unit. This methodology differs from MasTec's previous policy,
in accordance with accounting standards existing at that time, of using
undiscounted cash flows on an enterprise-wide basis to determine
recoverability. Upon adoption of SFAS No. 142 in the first quarter of
2002, we recorded a one-time, non-cash charge of approximately $25.7
million net of tax to reduce the carrying value of our goodwill. This
charge is not related to our operations and is reflected as a cumulative
effect of an accounting change in the accompanying consolidated
statement of operations. The SFAS No. 142 goodwill impairment recorded
in the first quarter is associated with goodwill resulting from the
acquisition of various inside plant infrastructure businesses and is
based on discounting our projected future cash flows for these companies.
During 2001, our inside plant infrastructure businesses experienced
losses due to a decrease in demand for services from telecommunications
equipment manufacturers, competitive local exchange carriers and
corporate clients. Based on that trend, our earnings forecasts were
revised, resulting in an impairment of the goodwill associated with our
acquisitions of businesses that provide these services.
We will perform an annual impairment review during the fourth
quarter of each year, commencing in the fourth quarter of 2002. Future
impairments of intangible assets will be recorded in operating expenses.
As of September 30, 2002, our intangible assets consisted of goodwill
of $232.1 million, net of accumulated amortization of $46.6 million,
and non-compete agreements of $0.9 million, net of $2.5 million in
accumulated amortization.
The following table sets forth our results for the nine months
ended September 30, 2001, which are presented on a basis comparable to
the 2002 results, adjusted to exclude amortization expense related to
goodwill:
Nine months ended
September 30,
--------------------------
2002 2001
--------- ---------
Income (loss) before cumulative effect
of accounting change, as reported $ 5,396 $ (74,107)
Adjustments:
Goodwill amortization, net of tax - 4,891
--------- ---------
Income (loss) before cumulative effect
of accounting change, as adjusted $ 5,396 $ (69,216)
========= =========
Net (loss), as reported $ (20,275) $ (74,107)
Adjustments:
Goodwill amortization, net of tax - 4,891
--------- ---------
Net (loss), as adjusted $ (20,275) $ (69,216)
========= =========
Basic earnings per share:
Net (loss), as reported $ (0.42) $ (1.55)
Adjustments:
Goodwill amortization, net of tax - 0.10
--------- ---------
Net (loss), as adjusted $ (0.42) $ (1.45)
========= =========
Diluted earnings per share:
Net (loss), as reported $ (0.42) $ (1.55)
Adjustments:
Goodwill amortization, net of tax - 0.10
--------- ---------
Net (loss), as adjusted $ (0.42) $ (1.45)
========= =========
Note 3 - Debt
Debt is comprised of the following (in thousands):
September 30, December 31,
2002 2001
------------ -----------
Revolving credit facility at prime plus 1.25%
(6.0% at September 30, 2002) and LIBOR plus
2.25% (4.18% at December 31, 2001) $ - $ 70,000
Other revolving debt (4.75% at September 30,
2002 and 4.5% at December 31, 2001) 2,170 78
Notes payable for equipment, at interest rates
from 7.5% to 8.5% due in installments through
the year 2004 1,861 3,839
7.75% senior subordinated notes due February 2008 195,853 195,832
-------- ---------
Total debt 199,884 269,749
Less current maturities (2,536) (1,892)
-------- ---------
Long-term debt $197,348 $ 267,857
======== =========
We have a credit facility that provides for borrowings up to an
aggregate of $125.0 million, based on a percentage of eligible accounts
receivable and work in process as well as a fixed amount of equipment
that decreases quarterly. Although the credit facility provides for
borrowings of up to $125.0 million, the amount that can be borrowed at
any given time is based upon a formula that takes into account, among
other things, our eligible accounts receivable, which can result in
borrowing availability of less than the full amount of the facility.
As of September 30, 2002, availability under the credit facility totaled
$61.4 million net of outstanding standby letters of credit aggregating
$17.5 million. We had no outstanding borrowings under the credit
facility as of September 30, 2002. Amounts outstanding under the
revolving credit facility mature in January 2007. The credit facility
is collateralized by a first priority security interest in
substantially all of our assets and a pledge of the stock of our
operating subsidiaries. Interest under the facility accrues at rates
based, at our option, on the agent bank's base rate plus a margin of
between 0.50% and 1.50% depending on certain financial covenants and
the expected term of the borrowings or its LIBOR rate (as defined in
the credit facility) plus a margin of between 2.0% and 3.0%, depending
on certain financial covenants. The facility includes an unused
facility fee of 0.50%, which may be adjusted to as low as 0.375% or as
high as 0.625% depending on the achievement of certain financial
thresholds.
The credit facility contains customary events of default
(including cross-default) provisions and covenants related to our
North American operations that prohibit, among other things, making
investments and acquisitions in excess of a specified amount, incurring
additional indebtedness in excess of a specified amount, paying cash
dividends, making other distributions in excess of a specified amount,
making capital expenditures in excess of a specified amount, creating
liens, prepaying other indebtedness, including our 7.75% senior
subordinated notes, and engaging in certain mergers or combinations
without the prior written consent of the lenders. In addition,
deterioration in the quality of our receivables or work in process
will reduce availability under our credit facility.
The credit facility also contains certain financial covenants that
require us to maintain (a) tangible net worth on or after March 31,
2002 of $180.0 million plus an amount equal to 50% of net income from
North American operations generated after January 1, 2002, and (b) a
fixed charge coverage ratio of at least 2:1 (all as defined in the
credit facility) for the successive periods of three, four, five, six,
seven, eight, nine, 10 and 11 consecutive calendar months beginning
January 1, 2002 and each period of 12 consecutive months ending on or
after December 31, 2002. As of September 30, 2002, we were in
compliance with all of the covenants under the credit facility. Failure
to achieve certain results could cause us not to meet these covenants in
the future. There can be no assurance that we will continue to meet
these covenant tests in future periods. If we violate one or more of
these covenants in the future, and we are unable to cure or obtain
waivers from our lenders or amend or otherwise restructure the credit
facility, we could be in default under the facility which would entitle
the lenders to accelerate the repayment of amounts outstanding and
terminate the facility, and we may be required to sell assets for less
than their carrying value to repay any amounts outstanding under this
facility. We also may be required to seek alternative sources of
liquidity if our cash flows from operations were insufficient to fund
our operations. As a result of these covenants, our ability to respond
to changing business and economic conditions and to secure additional
financing, if needed, may be restricted significantly, and we may be
prevented from engaging in transactions that might otherwise be
considered beneficial to us. Further, to the extent additional
financing is needed, there can be no assurance that such financing
would be available at all or on terms favorable to us.
Our variable rate credit facility exposes us to interest rate risk.
However, we believe that changes in interest rates should not materially
affect our financial position, results of operations or cash flows since
at September 30, 2002 we had no borrowings under our credit facility.
We also have $200.0 million, 7.75% senior subordinated notes due
in February 2008, with interest due semi-annually, of which $195.9
million, net of discount, is outstanding as of September 30, 2002. The
notes also contain default (including cross-default) provisions and
covenants restricting many of the same transactions as under our credit
facility.
We had no holdings of derivative financial or commodity instruments
at September 30, 2002.
Note 4 - Operations by Segments and Geographic Areas
We operate in one reportable segment as a specialty contractor.
We design, build, install, maintain and upgrade aerial, underground,
and buried fiber-optic, coaxial and copper cable systems owned by local
and long distance communications carriers and cable television multiple
system operators. Additionally, we provide similar services related to
the installation of integrated voice, data and video local and wide
area networks within office buildings and similar structures and also
provide construction and maintenance services to electrical and other
utilities. All of our operating units have been aggregated into one
reporting segment due to their similar customer bases, products and
production and distribution methods. We also operate in Brazil through
an 87.5% joint venture that we consolidate net of a 12.5% minority
interest after tax. Our Brazilian operations perform similar services
and for the nine months ended September 30, 2002 and 2001 had revenue
of $36.5 million and $43.0 million, respectively. In the three months
ended September 30, 2002 and 2001, revenue from Brazil was $10.1 million
and $15.7 million, respectively. Total assets for Brazil aggregated
$24.9 million and $33.9 million as of September 30, 2002 and December
31, 2001, respectively.
Note 5 - Commitments and Contingencies
The labor union representing the workers of Sistemas e
Instalaciones de Telecomunicacion S.A. ("Sintel"), a former MasTec
subsidiary, has instigated an investigative action with a Spanish
federal court that commenced in July 2001 alleging that five former
members of the board of directors of Sintel, including Jorge Mas, the
Chairman of the Board of MasTec, and his brother Juan Carlos Mas,
approved a series of allegedly unlawful transactions that led to the
bankruptcy of Sintel. We are also named as a potentially liable party.
The union alleges Sintel and its creditors were damaged in the
approximate amount of 13 billion pesetas ($76.7 million at September
30, 2002 exchange rates). The Spanish court is seeking a bond from the
subjects of the inquiry and us in this amount as well as security for
the bond. Neither we nor our executives have been served in the action.
In November 1997, we filed a suit against Miami-Dade County
in Florida state court in Miami alleging breach of contract and seeking
damages exceeding $3.0 million in connection with the county's refusal
to pay amounts due to us under a multi-year agreement to perform road
restoration work for the Miami-Dade Water and Sewer Department, a
department of the county. The county has counterclaimed against us
seeking unspecified damages.
On January 9, 2002, Harry Schipper, a MasTec shareholder, filed a
shareholder derivative lawsuit in the U.S. District Court for the
Southern District of Florida against us as nominal defendant and against
certain current and former members of the Board of Directors and senior
management, including Jorge Mas, our Chairman of the Board, and Austin
J. Shanfelter, our President and Chief Executive Officer. The lawsuit
alleges mismanagement, misrepresentation and breach of fiduciary duty as
a result of a series of allegedly fraudulent and criminal transactions,
including both the matters described above, the severance we paid our
former chief executive officer, and our investment in and financing of a
client that subsequently filed for bankruptcy protection, as well as
certain other matters. The lawsuit seeks damages and injunctive relief
against the individual defendants on MasTec's behalf. The Board of
Directors has formed a special committee, as contemplated by Florida
law, to investigate the allegations of the complaint and to determine
whether it is in the best interests of MasTec to pursue the lawsuit.
The lawsuit has been administratively dismissed without prejudice by
agreement of the parties to permit the committee to complete its
investigation. On July 16, 2002, Mr. Schipper made a supplemental
demand on our Board of Directors by letter to investigate allegations
that (a) we reported greater revenue in an unspecified amount on certain
contracts than permitted under the contract terms and (b) we recognized
between $3.0-$5.0 million in income for certain projects on the books
of two separate subsidiaries. These additional allegations have also
been referred to the special committee for investigation.
We believe we have meritorious defenses to the actions described
above. We are also a party to other pending legal proceedings arising
in the normal course of business, none of which we believe are material
to our financial position or results of operations.
We have commitments to make certain severance payments to our
former chief executive officer, totaling $1.25 million as of September
30, 2002. We also have commitments to pay life insurance premiums on
policies on the life of our chairman of the board and our chief
executive officer totaling $18.6 million over the next 19 years.
Our operations in Brazil are subject to the risks of political,
currency, 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. We cannot
predict whether any of these factors will occur in the future or the
extent to which such factors would have a material adverse effect on our
Brazilian operations.
Note 6 - Client Credit Risk
We have more than 200 clients, which include some of the largest
and most prominent companies in the communications, broadband and energy
fields, as well as government agencies such as departments of
transportation. Our clients include incumbent local exchange carriers,
cable television operators, public and private energy providers, long
distance carriers, financial institutions and wireless service providers.
We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our clients to make required payments.
Management analyzes historical bad debt experience, client
concentrations, client credit-worthiness, the availability of mechanic's
and other liens, the existence of payment bonds and other sources of
payment, and current economic trends when evaluating the adequacy of the
allowance for doubtful accounts. If our judgments regarding the
collectability of our accounts receivables were incorrect, adjustments
to the allowance may be required, which would reduce our profitability.
Prior to 2001, the allowance for doubtful accounts had averaged
approximately $3.0 to $6.0 million annually, as we had not incurred
significant bad debts or experienced significant client bankruptcies.
However, during 2001, we recorded a bad debt provision of $182.2 million
primarily due to the unprecedented number of clients that filed for
bankruptcy protection during the year. As of September 30, 2002, we
had remaining receivables from clients undergoing bankruptcy
reorganization totaling $20.3 million for which we have not established
a specific allowance. Based on the analytical process described
above, management believes that we will recover the net amounts
recorded. We maintain a general allowance for doubtful accounts of
$11.5 million as of September 30, 2002. There can be no assurance that
we will collect the amounts reflected on our books for these clients
as well as other clients. Should additional clients file for
bankruptcy or experience difficulties, or should anticipated recoveries
in existing bankruptcies and other workout situations fail to
materialize, we could experience reduced cash flows and losses in excess
of the current allowance.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for historical information, the matters discussed below may
contain forward-looking statements, such as statements regarding our
future growth and profitability, growth strategy and anticipated trends
in the industries and economies in which we operate. These forward-
looking statements are based on our current expectations and are subject
to a number of risks, uncertainties and assumptions, including that our
revenue or profit may differ from that projected, that we may be further
impacted by slowdowns in our clients' businesses or deterioration in our
clients' financial condition, that our reserves and allowances may be
inadequate or the carrying value of our assets may be impaired, that the
outcome of pending litigation and other proceedings may be adverse to
us and that we may experience increased costs associated with realigning
our business or may be unsuccessful in those efforts. 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 us. These and other risks are detailed in this
quarterly report on Form 10-Q and in other documents filed by us with
the Securities and Exchange Commission, including our registration
statement on Form S-3 (No. 333-90027). We do not undertake any
obligation to revise these forward-looking statements to reflect
future events or circumstances.
General
We are a leading end-to-end communication, broadband and energy
infrastructure service provider for a broad range of clients in North
America and Brazil. We design, build, install, maintain, upgrade and
monitor internal and external networks and other facilities for our
clients. We are one of the few national, multi-disciplinary
infrastructure providers that furnishes a comprehensive solution to
our clients' infrastructure needs ranging from basic installation and
construction to sophisticated engineering, design and integration. Our
diverse and long-standing client base, experienced management and
integrated value added service offering provide a stable base of
repeat business and enable us to quickly and efficiently meet client
demands.
Our strategy is to use these competitive strengths to increase
market share in the fragmented network infrastructure industry by
expanding relationships across multiple service offerings with long-time
clients and selected new clients who have both financial liquidity and
end-user customers. We target predictable recurring maintenance and
upgrade work under exclusive, multiple year master service and other
agreements. We are also focused on leveraging our administrative base
and achieving other cost savings and efficiencies through better
utilization of our equipment, facilities and personnel and through
economies of scale.
We have begun implementing an organizational efficiency plan
designed to improve gross margins and reduce general and administrative
costs. There can be no assurance that we will be able to effect the
plan or that the plan will result in the expected benefits.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results
of operations is based upon our consolidated financial statements, which
have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial
statements requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue and expenses, and
related disclosure of contingent assets and liabilities. The more
significant estimates relate to our revenue recognition, allowance for
doubtful accounts, intangible assets, accrued insurance, income taxes,
and litigation and contingencies. We base our estimates on historical
experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis
for our judgments about our results and the carrying values of assets
and liabilities. Actual results and values may differ from these
estimates.
We believe the following critical accounting policies affect our
more significant estimates and judgments used in the preparation of our
consolidated financial statements.
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 services are rendered, generally using units of
output. We recognize revenue and profits as work progresses on long-
term, fixed price contracts using the percentage-of-completion method,
which relies on estimates of total expected contract revenue and costs.
We follow this method since reasonably dependable estimates of the
revenue and costs applicable to various stages of a contract can be
made. Recognized revenue and profits are subject to revisions as the
contract progresses to completion. Revisions in profit estimates are
charged to income in the period in which the facts that give rise to
the revision become known. If we do not accurately estimate revenue
and costs, the profitability of such contracts can be affected
adversely.
We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our clients to make required payments.
Management analyzes historical bad debt experience, client
concentrations, client credit-worthiness, the availability of mechanic's
and other liens, the existence of payment bonds and other sources of
payment, and current economic trends when evaluating the adequacy of the
allowance for doubtful accounts. If our estimates of the collectability
of accounts receivable are incorrect, adjustments to the allowance for
doubtful accounts may be required, which could reduce our profitability.
Intangibles, long-lived assets and goodwill are recorded at
estimated fair value. Long-lived assets and other intangibles are
amortized on a straight-line basis over periods of between five and 15
years. We assess the impairment of identifiable intangibles, long-lived
assets and goodwill whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. Some of these events or
changes include, but are not limited to:
* significant underperformance relative to expected historical or
projected future operating results,
* significant changes in the manner of our use of the acquired assets
or the strategy for our overall business,
* significant decline in our stock price for a sustained period, and
* our market capitalization relative to net book value.
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. If our
estimates of fair value are incorrect, the carrying value of our assets
may have to be adjusted, affecting our financial position.
Effective January 1, 2002, we adopted SFAS No. 142 resulting in a
write-down of our goodwill, net of tax, in the amount of $25.7 million,
which is reflected in our consolidated financial statements as a
cumulative effect due to a change in accounting principle as discussed
in Note 2 to the unaudited consolidated financial statements.
We maintain insurance policies subject to a $1.0 million
deductible per claim for certain property and casualty and worker's
compensation claims. We are required to post letters of credit to
secure our obligation to reimburse the insurance carrier for amounts
that could potentially be advanced by the carrier that are not covered
by insurance. Our estimated liability for claims and the associated
expenses is reflected in other current and non-current liabilities. The
determination of such claims and expenses and the appropriateness of the
related liability is reviewed and updated semi-annually. If we do not
accurately estimate the losses resulting from these claims, we may
experience losses in excess of our estimated liability, which may reduce
our profitability. We also may be required to post additional collateral
with the insurance carrier, which may affect our liquidity.
We record 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 our assets and liabilities. We estimate our income taxes in
each of the jurisdictions in which we operate. This process involves
estimating our actual current tax exposure together with assessing
temporary differences resulting from differing treatment of items, such
as deferred revenue, for tax and accounting purposes. These differences
result in deferred tax assets and liabilities, which are included within
our consolidated balance sheet. We may not be able to realize all or
part of our deferred tax assets in the future and an adjustment would be
charged to income in the period such determination was made. If we do
not estimate our tax liability accurately, an adjustment to our income
may be required. 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.
Litigation and contingencies are reflected in our consolidated
financial statements based on managements' assessment, along with legal
counsel, of the expected outcome from such litigation. If the final
outcome of such litigation and contingencies differs significantly from
that currently expected, it could result in a charge to earnings when
determined.
Results of Operations
The following table reflects our consolidated results of operations
in dollar and percentage of revenue terms for the periods indicated
(dollars in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
2002 2001 2002 2001
--------------- --------------- --------------- ---------------
Revenue $231,758 100.0% $302,243 100.0% $648,581 100.0% $969,675 100.0%
Costs of revenue 196,604 84.8% 247,394 81.9% 544,208 83.9% 785,502 81.0%
Depreciation 8,085 3.5% 12,262 4.1% 26,282 4.1% 39,144 4.0%
Amortization 128 0.1% 2,377 0.8% 384 0.1% 8,025 0.8%
General and administrative
expenses 19,196 8.3% 142,422 47.1% 60,541 9.3% 226,500 23.4%
Interest expense, net of
interest income 4,513 1.9% 5,031 1.7% 13,505 2.1% 9,693 1.0%
Other income
(expense), net 484 0.2% (10,223) (3.4)% 5,198 0.8% (15,829) (1.6)%
-------- ----- -------- ----- ------- ----- ------- -----
Income (loss) before
provision (benefit) for
income taxes, minority
interest and cumulative
effect of accounting
change 3,716 1.6% (117,466)(38.9)% 8,859 1.4% (115,018)(11.9)%
Provision (benefit) for
income taxes 1,357 0.6% (41,970)(13.9)% 3,480 0.5% (40,786) (4.2)%
Minority interest 4 - 255 0.1% 17 - 125 -
-------- ----- -------- ----- ------- ----- ------- -----
Income (loss) before
cumulative effect of
accounting change $ 2,363 1.0% $(75,241)(24.9)% $ 5,396 0.8% $(74,107) (7.6)%
Cumulative effect of
accounting change,
net of tax - - - - (25,671) (4.0)% - -
-------- ----- -------- ---- -------- ----- -------- -----
Net income (loss) $ 2,363 1.0% $(75,241)(24.9)%$(20,275) (3.1)% $(74,107)(7.6)%
======== ===== ======== ==== ======== ===== ======== =====
Three Months Ended September 30, 2002
Compared to Three Months Ended September 30, 2001
Our revenue was $231.8 million for the three months ended September
30, 2002, compared to $302.2 million for the same period in 2001,
representing a decrease of $70.4 million or 23.3%. This decrease was due
primarily to a continued reduction in capital expenditures by incumbent
communications and broadband clients and our decision to reduce services
to certain competitive telecommunications carriers.
Our costs of revenue were $196.6 million or 84.8% of revenue for the
three months ended September 30, 2002, compared to $247.4 million or
81.9% of revenue for the same period in 2001. In the three months ended
September 30, 2002, margins were negatively impacted by under-utilization
of personnel and equipment and demobilization and redeployment costs as
we adjusted to reduced capital spending by our client base.
Depreciation was $8.1 million or 3.5% of revenue for the three
months ended September 30, 2002, compared to $12.3 million or 4.1% of
revenue for the same period in 2001. Depreciation expense decreased
in the three months ended September 30, 2002 due to reduced capital
expenditures and disposals of excess equipment.
Amortization of intangibles decreased $2.3 million to $0.1 million
for the three months ended September 30, 2002, compared to $2.4 million
or 0.8% of revenue for the same period in 2001, as goodwill is no longer
amortized in accordance with SFAS No. 142 (see Note 2 to the Unaudited
Consolidated Financial Statements).
General and administrative expenses were $19.2 million or 8.3% of
revenue for the three months ended September 30, 2002, compared to
$142.4 million or 47.1% of revenue for the same period in 2001. Included
in general and administrative expense in 2001 is a provision for bad
debts of $106.7 million to provide for receivables from specific clients
who filed for bankruptcy and a charge of $9.8 million primarily related
to severance payments to our former president and chief executive
officer. Excluding these provisions and charges, general and
administrative expenses were $25.9 million or 8.6% of revenue in the
three months ended September 30, 2001. The decrease in general and
administrative expenses as a percentage of revenue in 2002 is related
to an overall reduction in administrative staffing levels during the
three months ended September 30, 2002. We are currently implementing
additional measures to streamline our cost structure to reflect reduced
revenue.
Interest expense, net of interest income, was $4.5 million or 1.9%
of revenue for the three months ended September 30, 2002, compared to
$5.0 million or 1.7% of revenue for the same period in 2001. We had no
outstanding borrowings on our credit facility as of September 30, 2002.
Although we continue to incur interest expense from our long term debt
and periodic credit line borrowing to meet working capital needs and
support various letters of credit, we have reduced net interest expense
by $0.5 million during the quarter.
Other income of $0.5 million reflects the gain on disposal of
certain non-core assets, investments and excess equipment. In 2001,
other losses aggregated $10.2 million related primarily to an impairment
charge on our equity investment in a client.
For the three months ended September 30, 2002, our effective tax
rate was approximately 36.5%, compared to 35.7% in 2001. The increase
in our effective tax rate is due primarily to the proportionate increase
in income before taxes for the 2002 period.
Nine Months Ended September 30, 2002
Compared to Nine Months Ended September 30, 2001
Our revenue was $648.6 million for the nine months ended September
30, 2002, compared to $969.7 million for the same period in 2001,
representing a decrease of $321.1 million or 33.1%. This decrease was
due primarily to a continued reduction in capital expenditures by
incumbent communications and broadband clients and our decision to
reduce services to certain competitive telecommunications carriers.
Our costs of revenue were $544.2 million or 83.9% of revenue for
the nine months ended September 30, 2002, compared to $785.5 million or
81.0% of revenue for the same period in 2001. In the nine months ended
September 30, 2002, margins were negatively impacted by under-utilization
of personnel and equipment and demobilization and redeployment costs as
we adjusted to reduced capital spending by our client base, partially
offset by adjustments to accruals resulting from improved insurance
claims experience.
Depreciation was $26.3 million or 4.1% of revenue for the nine
months ended September 30, 2002, compared to $39.1 million or 4.0% of
revenue for the same period in 2001. Depreciation expense decreased in
the nine months ended September 30, 2002 due to reduced capital
expenditures and disposals of excess equipment.
Amortization of intangibles decreased $7.6 million to $0.4 million
for the nine months ended September 30, 2002, compared to $8.0 million
for the same period in 2001, as goodwill is no longer amortized in
accordance with SFAS No. 142 (see Note 2 to the Consolidated Financial
Statements).
General and administrative expenses were $60.5 million or 9.3% of
revenue for the nine months ended September 30, 2002, compared to $226.5
million or 23.4% of revenue for the same period in 2001. Included in
general and administrative expense in 2001 is a provision for bad debt
of $144.7 million to provide for receivables from specific clients who
filed for bankruptcy and a charge of $11.5 million primarily related to
severance for our former president and chief executive officer.
Excluding these provisions, general and administrative expenses were
$70.3 million or 7.3% of revenue in the nine months ended September 30,
2001. The increase in general and administrative expenses as a
percentage of revenue is related to the overall decline in revenue
experienced during the nine months ended September 30, 2002, partially
offset by adjustments to accruals resulting from improved bad debt and
insurance claims experience. We are currently implementing additional
measures to streamline our cost structure to reflect reduced revenue.
Interest expense, net of interest income, was $13.5 million or 2.1%
of revenue for the nine months ended September 30, 2002, compared to
$9.7 million or 1.0% of revenue for the same period in 2001. Although
we had no outstanding borrowings on the credit facility as of September
30, 2002, we experienced an increase in net interest expense of $3.8
million in 2002 resulting from increased net borrowing to meet working
capital needs during the nine months ended September 30, 2002 and
reductions in interest income from notes receivable.
Other income of $5.2 million during the nine months ended September
30, 2002 reflects the gain on disposal of certain non-core assets and
investments held for sale as of December 31, 2001. In 2001, other
losses aggregated $15.8 million related primarily to an impairment
charge on our equity investment in a client.
For the nine months ended September 30, our effective tax rate was
approximately 39.3% and 35.5% in 2002 and 2001, respectively. The
increase in our effective tax rate is due primarily to the proportionate
increase in income before taxes for the 2002 period.
Financial Condition, Liquidity and Capital Resources
We derive a significant amount of our revenue from telecommunica-
tions clients. During the last two years, the telecommunications
industry suffered a severe downturn that resulted in a number of our
clients filing for bankruptcy protection or experiencing financial
difficulties. The downturn adversely affected capital expenditures
for infrastructure projects even among clients that did not experience
financial difficulties. Capital expenditures by telecommunications and
other clients in 2002 are expected to remain at low levels in comparison
with prior years, and there can be no assurance that additional clients
will not file for bankruptcy protection or otherwise experience
financial difficulties in 2002. Although we have refocused our business
on long-time, stable telecommunications and other clients, there can be
no assurance that these clients will continue to fund capital
expenditures for infrastructure projects at current levels or that we
will be able to increase our market share with these stronger clients.
Further decreases in our client's capital expenditures could reduce our
cash flows and adversely impact our liquidity.
Our primary liquidity needs are for working capital, capital
expenditures, letters of credit and debt service. Our primary sources of
liquidity are cash flows from operations and borrowings under revolving
lines of credit.
Net cash provided by operating activities was $55.7 million for the
nine months ended September 30, 2002, compared to $2.3 million used in
2001. The net cash provided by operating activities in 2002, is due in
part to collection of receivables, changes in other working capital
components, and receipt of a $50.8 million income tax refund resulting
from losses incurred in 2001. Proceeds from the income tax refund were
used to repay all borrowings under our credit facility at the time of
receipt.
We have a credit facility that provides for borrowings up to an
aggregate of $125.0 million, based on a percentage of eligible accounts
receivable and work in process as well as a fixed amount of equipment
that decreases quarterly. Although the credit facility provides for
borrowings of up to $125.0 million, the amount that can be borrowed at
any given time is based upon a formula that takes into account, among
other things, our eligible accounts receivable, which can result in
borrowing availability of less than the full amount of the facility. As
of September 30, 2002, availability under the credit facility totaled
$61.4 million net of outstanding standby letters of credit aggregating
$17.5 million. Since September 30, 2002, we have issued an additional
$18.8 million in standby letters of credit to secure our potential
obligations under casualty and worker's compensation insurance programs.
We had no outstanding borrowings under the credit facility as of
September 30, 2002. Amounts outstanding under the revolving credit
facility mature in January 2007. The credit facility is collateralized
by a first priority security interest in substantially all of our assets
and a pledge of the stock of our operating subsidiaries. Interest under
the facility accrues at rates based, at our option, on the agent bank's
base rate plus a margin of between 0.50% and 1.50% depending on certain
financial covenants and the expected term of the borrowings or its LIBOR
rate (as defined in the credit facility) plus a margin of between 2.0%
and 3.0%, depending on certain financial covenants. The facility
includes an unused facility fee of 0.50%, which may be adjusted to as
low as 0.375% or as high as 0.625% depending on the achievement of
certain financial thresholds.
The credit facility contains customary events of default (including
cross-default) provisions and covenants related to our North American
operations that prohibit, among other things, making investments and
acquisitions in excess of a specified amount, incurring additional
indebtedness in excess of a specified amount, paying cash dividends,
making other distributions in excess of a specified amount, making
capital expenditures in excess of a specified amount, creating liens,
prepaying other indebtedness, including our 7.75% senior subordinated
notes, and engaging in certain mergers or combinations without the prior
written consent of the lenders. In addition, deterioration in the
quality of our receivables or work in process will reduce availability
under our credit facility.
The credit facility also contains certain financial covenants that
require us to maintain (a) tangible net worth on or after March 31, 2002
of $180.0 million plus an amount equal to 50% of net income from North
American operations generated after January 1, 2002, and (b) a fixed
charge coverage ratio of at least 2:1 (all as defined in the credit
facility) for the successive periods of three, four, five, six, seven,
eight, nine, 10 and 11 consecutive calendar months beginning January 1,
2002 and each period of 12 consecutive months ending on or after
December 31, 2002. As of September 30, 2002 we were in compliance with
all of the covenants under the credit facility. Since September 30,
2002, we have amended the credit facility to exclude a portion of the
cost of implementing our new management information system. Failure to
achieve certain results could cause us not to meet these covenants in
the future. There can be no assurance that we will continue to meet
these covenant tests in future periods. If we violate one or more of
these covenants in the future, and we are unable to cure or obtain
waivers from our lenders or amend or otherwise restructure the credit
facility, we could be in default under the facility which would entitle
the lenders to accelerate the repayment of amounts outstanding and
terminate the facility, and we may be required to sell assets for less
than their carrying value to repay any amounts outstanding under this
facility. We also may be required to seek alternative sources of
liquidity if our cash flows from operations were insufficient to fund
our operations. As a result of these covenants, our ability to respond
to changing business and economic conditions and to secure additional
financing, if needed, may be restricted significantly, and we may be
prevented from engaging in transactions that might otherwise be
considered beneficial to us. Further, to the extent additional
financing is needed, there can be no assurance that such financing
would be available at all or on terms favorable to us.
We also have $200.0 million, 7.75% senior subordinated notes due in
February 2008, with interest due semi-annually, of which $195.9 million,
net of discount, is outstanding at September 30, 2002. The notes also
contain default (including cross-default) provisions and covenants
restricting many of the same transactions as under our credit facility.
During the nine months ended September 30, 2002, we paid
approximately $16.0 million related to contingent consideration from
earlier acquisitions that was reflected as a reduction in other
current liabilities. During the nine months ended September 30, 2002,
we invested $8.3 million in our fleet to replace or upgrade equipment
and $6.5 million in technology enhancements including approximately
$0.3 million acquired under capital leases. Also, we received proceeds
of approximately $11.5 million on the sale of assets and disposal of
assets held for sale and investments. During the nine months ended
September 30, 2002, our financing activities primarily consisted of the
repayment of all borrowings under our credit facility using the
proceeds from the $50.8 million income tax refund received, sales of
assets and cash generated from operations.
The following table sets forth our contractual commitments as of
September 30, 2002 (in thousands) and the payment obligations as of
December 31:
2002- 2007 &
Contractual Obligations Total 2003 2004 2005 2006 Thereafter
- -------------------------------------------------------------------------
Long-term debt $195,853 $ - $ - $ - $ - $195,853
Other obligations 1,565 262 1,303 - - -
Revolving debt 2,170 2,170 - - - -
Obligations related to
acquisitions (1) 4,778 4,778 - - - -
Obligations related to
severance (2) 1,250 1,250 - - - -
Capital leases 2,394 1,089 703 552 50 -
Operating leases 33,241 13,500 9,833 5,607 2,379 1,922
-------- ------- ------- ------ ------ --------
Total $241,251 $23,049 $11,839 $6,159 $2,429 $197,775
======== ======= ======= ====== ====== ========
(1) Primarily related to contingent consideration for acquisitions.
(2) Severance for our former chief executive officer..
Total
Amounts 2002- 2007 &
Other Commitments Committed 2003 2004 2005 2006 Thereafter
- -----------------------------------------------------------------------
Thereafter
Credit facility $ - $ - $ - $ - $ - $ -
Standby letters of
credit 17,519 17,514 - 5 - -
Executive life
insurance 18,625 1,875 1,375 1,375 875 13,125
------- ------- ------ ------ ------ -------
Total $36,144 $19,389 $1,375 $1,380 $ 875 $13,125
======= ======= ====== ====== ====== =======
Seasonality
Our North American operations are historically seasonally slower in
the first and fourth quarters of the year. This seasonality is
primarily the result of client budgetary constraints and preferences
and the effect of winter weather on external network activities. Some
of our clients, particularly the incumbent local exchange carriers, tend
to complete budgeted capital expenditures before the end of the year
and defer additional expenditures until the following budget year.
Revenue in local currency from our Brazilian operations is not expected
to fluctuate seasonally.
Impact of Inflation
The primary inflationary factor affecting our operations is
increased labor costs. We have not experienced significant increases in
labor costs to date. Our Brazilian operations may be exposed to risks
associated with high inflation.
Recently Issued Accounting Pronouncements
In July 2001, the FASB issued Statement of Financial Accounting
Standard (SFAS) No. 141, Business Combinations. SFAS No. 141 requires
that all business combinations initiated after June 30, 2001, be
accounted for using the purchase method. The FASB also issued SFAS No.
142, Goodwill and Other Intangible Assets. SFAS No. 142 requires that
goodwill be assessed at least annually for impairment by applying a
fair-value based test. Goodwill will no longer be amortized over its
estimated useful life. In addition, acquired intangible assets are
required to be recognized and amortized over their useful lives if the
benefit of the asset is based on contractual or legal rights.
Effective January 1, 2002, we implemented SFAS No. 142, which resulted
in a write-down of our goodwill, net of tax, in the amount of $25.7
million and is reflected in our consolidated financial statements as a
cumulative effect due to a change in accounting principle.
In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses
financial accounting and reporting for the impairment or disposal of
long-lived assets. This statement supersedes SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of and establishes a single accounting model, based on the
framework established in SFAS No. 121, for long-lived assets to be
disposed of by sale. We adopted SFAS No. 144 effective January 1, 2002.
In May 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections. SFAS No. 145 rescinds the automatic treatment of
gains or losses from extinguishment of debt as extraordinary unless they
meet the criteria for extraordinary items as outlined in APB Opinion
No. 30, Reporting the Results of Operations, Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions. SFAS No. 145 also
requires sale-leaseback accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions
and makes various technical corrections to existing pronouncements.
The provisions of SFAS No. 145 related to the rescission of FASB
Statement 4 are effective for fiscal years beginning after May 15, 2002,
with early adoption encouraged. All other provisions of SFAS No. 145
are effective for transactions occurring after May 15, 2002, with early
adoption encouraged. We do not anticipate that adoption of SFAS No. 145
will have a material effect on our earnings or financial position.
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement requires
the recording of costs associated with exit or disposal activities at
their fair values only once a liability exists. Under previous
guidance, certain exit costs were accrued when management committed to
an exit plan, which may have been before an actual liability arose.
The provisions of SFAS No. 146 are effective for exit or disposal
activities that are initiated after December 31, 2002, with early
application encouraged. We do not anticipate that adoption of SFAS
No. 146 will have a material effect on our earnings or financial
position.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Notes 1, 3 and 5 to Consolidated Financial Statements for
disclosure about market risk.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. MasTec's chief
executive officer and chief financial officer are responsible for
establishing and maintaining "disclosure controls and procedures" (as
defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and
15d-14(c)) for the company. Our disclosure controls and procedures
include "internal controls," as that term is used in Section 302 of the
Sarbanes-Oxley Act of 2002 and described in the Securities and Exchange
Commission's Release No. 34-46427 (August 29, 2002). MasTec's chief
executive officer and chief financial officer, after evaluating the
effectiveness of its disclosure controls and procedures as of September
30, 2002, have concluded that its disclosure controls and procedures are
adequate and effective in timely alerting them to material information
relating to MasTec (including its consolidated subsidiaries) required
to be included in its periodic SEC filings.
(b) Changes in internal controls. There were no significant changes in
MasTec's internal controls or in other factors that could significantly
affect those controls subsequent to the date of the evaluation. As a
result, no corrective actions were taken.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
10.1 Employment Agreement dated September 27, 2002, between MasTec,
Inc. and Austin J. Shanfelter.
10.2 Employment Agreement dated July 15, 2002, between MasTec, Inc.
and Eric J. Tveter.
(b) Reports on Form 8-K
None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
MASTEC, INC.
Date: November 14, 2002 /s/ DONALD P. WEINSTEIN
--------------------------
Donald P. Weinstein
Executive Vice President
Chief Financial Officer
(Authorized Officer;
Principal Financial and
Accounting Officer)
CERTIFICATIONS REQUIRED BY SECTION
302(a) OF SARBANES-OXLEY ACT OF 2002
I, Austin J. Shanfelter, President and Chief Executive Officer of
MasTec, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of MasTec, Inc.
for the quarter ended September 30, 2002;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of the registrant's board of directors (or
persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
/s/ Austin J. Shanfelter
--------------------------------
Austin J. Shanfelter, President
Date: November 14, 2002 and Chief Executive Officer
I, Donald P. Weinstein, Executive Vice President and Chief Financial
Officer of MasTec, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of MasTec, Inc.
for the quarter ended September 30, 2002;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of the registrant's board of directors (or
persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
/s/ Donald P. Weinstein
-----------------------------
Donald P. Weinstein,
Executive Vice President
Date: November 14, 2002 and Chief Financial Officer
Exhibit 10.1
- ------------
EMPLOYMENT AGREEMENT
AGREEMENT executed as of September 27, 2002 but effective as of
January 1, 2002, (the "Effective Date"), between MASTEC, INC. (the
"Company") and AUSTIN J. SHANFELTER (the "Executive").
In consideration of the mutual covenants and obligations set
forth in this Agreement, the parties agree as follows:
1. Employment Position. The Company hereby agrees to employ Executive
and Executive hereby accepts employment as President and Chief
Executive Officer of the Company and its subsidiaries, upon the
terms and conditions set forth in this Agreement. Executive will
report only to the Board of Directors of the Company (the "Board")
or its designee. Executive will have such responsibilities and
perform such duties as the Board or its designee assigns to
Executive, commensurate with Executive's position as President and
Chief Executive Officer of the Company.
2. Employment Term. Executive's employment will be for a term (the
"Employment Term") commencing on the Effective Date and ending on
the close of business December 31, 2005 (the "End-of-Term Date").
3. Responsibilities. During the Employment Term, Executive will devote
his full working time, attention and energies to the business of the
Company and its subsidiaries, except that the Company acknowledges
that Executive is a director of philanthropic organizations and may
continue to devote a reasonable amount of his time to such existing
directorships so long as they do not unreasonably interfere with the
discharge of his duties for the Company. Executive will not accept
any new directorships or other positions that require Executive's
working time and attention without the consent of the Board or its
designee. Executive will be employed by the Company at the
Company's headquarters in Miami, Florida as well as its offices in
Fort Myers, Florida and will travel to such other locations as may
be reasonably necessary to discharge his duties. During the
Employment Term and the Consulting Period, the Company will
maintain for Executive's exclusive use an office at the Company's
headquarters facility in Miami, Florida and at the Company's office
in Fort Myers, Florida, and will provide secretarial and other
support personnel for Executive, in each case commensurate with
Executive's status as President and Chief Executive Officer of the
Company.
4. Compensation and Benefits.
a. Base Salary and Initial Bonus. During the Employment Term,
Executive will be paid, as compensation for services rendered
pursuant to this Agreement and Executive's observance and
performance of all of the provisions of this Agreement at the rate
of $600,000.00 per year (the "Base Salary"). The Base Salary will
be payable in accordance with the normal payroll procedures of the
Company as are in effect from time to time. In addition to the
Base Salary, Company shall pay to Executive a one time bonus of
$100,000.00 which shall be paid in full prior to March 31, 2003, in
one or more installments at the option of the Company (the
"Initial Bonus").
b. Benefits. During the Term, Executive will be entitled to
participate in or benefit from, in accordance with the eligibility
and other provisions thereof, such life, health, medical, accident,
dental and disability insurance and such other benefit plans as the
Company may make generally available to, or have in effect for,
other employees of the Company at the same general level as
Executive. In addition to the foregoing the Company shall provide
Executive with a car during the Employment Term. The Company
retains the right to terminate or amend any such plans from time to
time in its sole discretion.
c. Performance Bonus. During the Term, Executive shall be entitled
to participate in the Company's Executive Bonus Plan. Executive
shall have the right to receive the compensation due Executive
pursuant to the Terms of the Executive Bonus Plan in cash, deferred
compensation or stock options. In the event the Executive elects
deferred compensation or stock options, the terms of the deferred
compensation or stock options shall be agreed to by both the
Company and the Executive. If the Company and the Executive are
unable to agree to such terms the Executive shall receive such
compensation in cash.
d. Stock Options. Executive is granted, in accordance with the
terms of the MasTec 1994 Stock Incentive Plan or the 1999 Non-
Qualified Employee Stock Option Plan or any other incentive plan
adopted by MasTec or the Company from time to time (the "Plans"),
options to purchase shares of MasTec common stock with terms and
conditions described on Exhibit A (the "Options"). The Options will
be subject to the terms and conditions of the Plans, as they may be
amended from time to time in the Company's sole discretion.
e. Expenses. The Company will reimburse Executive, in accordance
with the Company's expense reimbursement policies as may be
established from time to time by the Company, for all reasonable
travel and other expenses actually incurred or paid by him during
the Employment Term in the performance of his services under this
Agreement, upon presentation of expense statements or vouchers or
such other supporting information as the Company may require.
f. Deferred Compensation. The Company shall pay for the benefit of
Executive $2,000,000 to a deferred compensation plan in accordance
with the terms set forth in Exhibit B.
5. Consulting Services; Consulting Period and Fees.
a. Subject to the other provisions of this Agreement, for a period
of two (2) years after the End-of-Term Date (the "Consulting
Period"), Executive shall provide such consulting services (the
"Consulting Services") (i) as may be reasonably necessary or
appropriate in order to effect an orderly transfer of Executive's
responsibilities to one or more other executives of the Company and
to ensure that the Company is aware of all matters that were handled
by Executive during his employment by the Company and (ii) as may be
reasonably requested by the Company in connection with general
corporate matters. In furtherance of and without limiting the
foregoing, during the Consulting Period, Executive shall assist the
Company in connection with any legal quasi-legal, administrative or
other similar proceeding, including any external or internal
investigation, involving the Company or any of its subsidiaries or
affiliates, by furnishing such information and appropriate services
to the Company as may be reasonably requested by the Company.
b. During the Consulting Period, Executive shall not have any
formal schedule of duties or assignments, but shall make himself
available for at least twenty hours per month to perform the
Consulting Services. Executive shall receive reasonable advance
notice from the Company of the time requested for such Services,
which time shall not unreasonably interfere with Executive's other
activities. Executive may perform Consulting Services by telephone
and may be required to reasonable travel in connection with his
performance of Consulting Services.
c. In consideration for the Consulting Services, the Company shall
pay Executive a consulting fee equal to $500,000.00 per annum for
the year ending December 31, 2006, and $500,000.00 per annum for the
year ending December 31, 2007 (the per annum amount described in
this Section 6(c) being referred to herein as the "Consulting Fee"
and the Consulting Fee for each of the two years being referred to
herein in the aggregate as the "Consulting Fees"). The Consulting
Fees shall be payable by the Company to Executive in the same manner
as the Base Salary is paid to Executive.
d. During the Consulting Period the Company shall reimburse
Executive for any reasonable related expenses coverable under the
Company's then current policies for business expenses. Executive
will provide such appropriate documentation of expenses and
disbursements as may from time to time be reasonably requested by
the Company.
e. In the event Executive's employment with the Company terminates
prior to the End-of-Term Date, the two-year period during which
Executive shall provide Consulting Services hereunder shall commence
immediately after such termination, rather than after the End-of-Term
Date, and such period shall be referred to herein as the "Consulting
Period".
f. Notwithstanding anything contained herein to the contrary, in the
event Executive terminates his employment with the Company for Good
Reason prior to the End-of-Term Date, Executive shall not be
obligated to provide any Consulting Services.
g. During the Consulting Period Executive shall receive the benefits
set forth in Section 4(b).
6. Covenants.
a. Non-Competition and Non Solicitation. Executive acknowledges
and agrees that the Company's and its subsidiary and affiliated
companies' (collectively, the "Companies") telecommunications,
energy and infrastructure services businesses (the "Business") are
conducted throughout the United States of America and the
Commonwealth of Canada. During the Employment Term and the
Consulting Term, (the "Period of Non-Competition") and within the
United States of America and the Commonwealth of Canada (including
their possessions, protectorates and territories, the "Territory"),
Employee will not (whether or not then employed by the Company for
any reason), without the Company's prior written consent:
(i) Directly or indirectly own, manage, operate, control, be
employed by, act as agent, consultant or advisor for, or
participate in the ownership, management, operation or control
of, or be connected in any manner through the investment of
capital, lending of money or property, rendering of services or
otherwise, with, any business of the type and character engaged
in and competitive with the Business. For these purposes,
ownership of securities of one percent (1%) or less of any class
of securities of a public company will not be considered to be
competition with the Business;
(ii) solicit, persuade or attempt to solicit or persuade or
cause or authorize directly or indirectly to be solicited or
persuaded any existing customer or client, or potential customer
or client to which the Companies have made a presentation or with
which the Companies have been having discussions, to cease doing
business with or decrease the amount of business done with or not
to hire the Companies, or to commence doing Business with or
increase the amount of Business done with or hire another company.
(iii) solicit, persuade or attempt to solicit or persuade or
cause or authorize directly or indirectly to be solicited or
persuaded the business of any person or entity that is a customer
or client of the Companies, or was their customer within two (2)
years prior to cessation of the Executive's employment by any of
the Companies or any of their subsidiaries, for the purpose of
competing with the Business; or
(iv) solicit, persuade or attempt to solicit or persuade, or
cause of authorize directly or indirectly to be solicited or
persuaded for employment, or employ or cause or authorize
directly or indirectly to be employed, on behalf of Executive or
any other person or entity, any individual who is or was at any
time within six (6) months prior to cessation of Executive's
employment by the Companies, an employee of any of the
Companies.
If Executive breaches or violates any of the provisions of this Section
6, the running of the Period of Non-Competition will be tolled with
respect to Executive during the continuation of any actual breach or
violation. In addition to any other rights or remedies the Company may
have under this Agreement or applicable law, the Company will be
entitled to receive from Executive reimbursement for all attorneys' and
paralegal fees and expenses and court costs incurred by the Company in
enforcing this Agreement and will have the right and remedy to require
Executive to account for an pay over to the Company all compensation,
profits, monies, accruals or other benefits derived or received,
directly or indirectly, by Executive from the action constituting a
breach of violation of this Section 6.
7. Termination Without Cause; Certain Consequences. The Company may
terminate Executive's employment under this Agreement at any time
without Cause (as defined Annex A), subject to the other terms and
conditions of this Agreement, by giving Executive five (5) business
days' prior written notice of termination. In addition to any other
compensation or benefits payable to Executive under this Agreement,
upon any such termination of employment Executive will receive (a)
continuation of the Base Salary payable in accordance with the
normal payroll procedures of the Company through the End of Term
Date; (b) any unpaid portion of the Initial Bonus, payable in cash
not later than the next regular payroll payment date, (c) the entire
Deferred Compensation Amount paid in the manner set forth in Exhibit
C; and (d) the Consulting Fees described under Section 5 of the
Agreement; and (e) all amounts due to Executive under the Company's
401(k) retirement plan, deferred compensation plan, split dollar
insurance policy or any other benefit plan of the Company in which
the Executive participates. Executive will also be entitled to
elect continuation of health benefits under COBRA.
Further, upon the effective date of such termination, all of Executive's
stock options or restricted stock awards under the Company's 1994 Stock
Incentive Plan or any other option or benefit plan will immediately (a)
in the case of options, become fully vested and immediately exercisable
and may be exercised by Executive for the full remaining term of the
options, and (b) in the case of restricted stock, all restrictions on
the stock will lapse and the stock may be freely sold without further
restriction, except as required by applicable law.
8. Termination Due to death or Disability; Certain Other Consequences:
In the event that Executive's employment is terminated as a result
of death or Disability (as defined in Annex A), Executive will
receive the compensation and benefits described in Section 7 above.
In addition to such compensation and benefits, and any other
compensation or benefits payable to Executive under this Agreement,
the Company will pay in cash to Executive (or his estate) any
Performance Bonus described under Section 4 of this Agreement to
which Executive would have been entitled for the year in which
the death.
9. Triggering Events; Certain Consequences.
a. If, prior to the End-of-Term Date, (i) there occurs a Change in
Control (as defined in Annex A), or (ii) the Company terminates
Executive's employment without Cause, or (iii) Executive terminates
his employment with the Company for Good Reason (as defined in
Annex A) (each of (i), (ii) and (iii) a "Triggering Event"),
Executive will receive the compensation and benefits described in
Section 7 above; provided, however, that in the event the Triggering
Event is Change in Control (only) the Consulting Fees shall be
payable on the effective date of the Triggering Event. If the
Triggering Event is for a reason set forth in (ii) or (iii) the
Consulting Fees shall be paid as set forth in Section 5.
b. Further, upon the occurrence of a Triggering Event other than a
Change in Control, all of the Executive's stock options or
restricted stock awards under the Company's 1994 Stock Incentive
Plan or any other option or benefit plan will immediately:
(i) in the case of options, become fully vested and
immediately exercisable and may be exercised by Executive for
the full remaining term of the options; and
(ii) in the case of restricted stock, all restrictions on the
stock will lapse and the stock may be freely sold without
further restriction, except as required by applicable law.
(iii) Executive also will be entitled to receive any bonus to
which Executive would have been entitled for the year in which
the Triggering Event occurred, which bonus shall be payable on
the date described in the applicable bonus plan. Additional
Triggering Events may also be determined by a majority of the
Board (not including Executive in determining the total number
of directors on the Board).
10. Termination for Cause or Resignation for other than Good Reason or
Disability Certain Consequences. The Company may terminate
Executive's employment under this Agreement at any time for Cause
(as defined Annex A), subject to the other terms and conditions of
this Agreement, by giving Executive five (5) business days' prior
written notice of termination. In the event of a termination of
employment for Cause or a resignation by Executive for other than
Good Reason or Disability, upon any such termination of employment
Executive will receive (a) any accrued and unpaid portion of the
Base Salary through the date of termination and any unpaid portion
of the Initial Bonus, payable in accordance with the provision set
forth in Section 4a, ; (b) the entire Deferred Compensation Amount
paid in the manner set forth in Exhibit C; and (c) all amounts due
to Executive under the Company's 401(k) retirement plan, deferred
compensation plan, split dollar insurance policy or any other
benefit plan of the Company in which the Executive participates.
Executive will also be entitled to elect continuation of health
benefits under COBRA; provided, however, Executive will not be
entitled to any Performance Bonus under Section 4 of this Agreement
the Consulting Fees described under Section 5 of this Agreement, and
all unvested stock options or restricted stock as to which the
restriction has not lapsed owned by Executive will terminate upon
the effective date of such termination of employment.
11. Gross-Up for Excise Tax.
a. If any payment or benefit under this Agreement becomes subject
to the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), or any substitute provision
of the Code, or any interest or penalties are incurred by Executive
with respect to such excise tax (collectively, the "Excise Tax"),
then the Company will pay Executive an additional amount or amounts
(the "Gross-up Payment"), such that the net amount or amounts
retained by Executive, after deduction of any Excise Tax on any of
the payments or benefits under this Agreement and any federal, state
and local tax and Excise Tax on the Gross-up Payment will equal the
amount of such payment or benefits prior to the imposition of such
Excise Tax. For purposes of determining the amount of a Gross-up
Payment, Executive will be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar
year in which the Gross-up Payment is payable and state and local
income taxes at the highest marginal rate of taxation in the state
and locality of Executive's residence on the date the Gross-up
Payment is payable, net of the maximum reduction in federal income
taxes that could be obtained from any available deduction of such
state and local taxes.
b. The Company will pay each Gross-up Payment on the date on which
Executive becomes entitled to the payment or benefits giving rise
to the Excise Tax. If the amount Excise Tax is later determined
to be less than the amount taken into account in calculating the
Gross-up Payment, Executive will repay to the Company (to the extent
actually paid by the Company) the portion of the Gross-up Payment
attributable to the overstated amount of Excise Tax at the time such
reduction is finally determined, plus interest at the rate set forth
in Section 1274(b)(2)(B) of the Code. If the amount of the Excise
Tax is later determined to be more than the amount taken into account
in calculating the Gross-up Payment, the Company will pay Executive
an additional Gross-up Payment in respect of the additional amount
of Excise Tax and the time the amount of the additional tax is
finally determined.
12. Indemnification; Insurance. The Company will (a) indemnify and hold
Executive harmless for any claims, demands, damages, liabilities,
losses, costs and expenses (including attorneys' fees and court
costs) incurred or suffered by Executive in connection with
Executive's performance of his duties under this Agreement or
otherwise on behalf of the Company or its affiliates to the fullest
extent (including advancement of expenses) permitted by Florida
corporate law for the indemnification of officers and directors of
a Florida corporation and (b) will include Executive as a covered
employee under the Company's directors' and officers' liability
insurance policy and employment practices liability insurance policy.
13. Confidentiality of Agreement. The parties acknowledge that the
provisions of this Agreement are highly confidential and that
disclosure of this Agreement or its terms would be extremely
prejudicial to the other party. Accordingly, neither party will
disclose the terms of this Agreement to any other person or entity
other than third party advisors with a need to know (such as legal
or tax advisors) and other than when required by law, without
the prior written consent of the other party.
14. Proprietary Information, Trade Secrets, Etc. Executive acknowledges
that as a result of his employment with the Company, Executive will
gain knowledge of, and will have access to, proprietary and
confidential information and trade secrets of the Company and its
affiliates. Therefore, Executive agrees that he will not, in any
fashion, form or manner, directly or indirectly (i) use, disclose,
communicate or provide or permit access to any person or entity, or
(ii) remove from the premises of the Company or any of its
affiliates any notes or records (including copies or facsimiles,
whether made by electronic, electrical, magnetic, optical, laser
acoustic or other means), relating to any confidential, proprietary
or secret information of the Company or any of its affiliates
(collectively, "Confidential Information") (including without
limitation (1) the identity of customers, suppliers, subcontractors
and others with whom they do business; (2) their marketing methods,
strategies and related information; (3) contract terms, pricing,
margin or cost information or other information or other information
regarding the relationship between them and the persons and entities
with which they have contracted; (4) their services, products,
software, technology, developments, improvements and methods of
operation; (5) their results of operations, financial condition,
projected financial performance, sales and profit performance and
financial requirements; (6) the identity of and compensation paid to
their employees and consultants; (7) any business plans, models or
strategies and the information contained therein; (8) their sources,
leads or methods of obtaining new business; and (9) all other
confidential information of, about or concerning the business of
the Company and its affiliates), except for (x) information that is
or becomes available to the public generally other than as a result
of an unauthorized disclosure by Executive, including as an example
publicly-available information filed by the Company with the
Securities and Exchange Commission or other governmental or
regulatory authorities, (y) information that is generally know in
the business of the Company or its affiliates or that constitutes
standard industry practices, customs and methods, or (z) information
known to Executive prior to joining the Company or its predecessors
or gained during his employment with the Company from sources
outside of the Company or its employees, officers, directors,
consultants, advisors or other representatives. Executive will be
entitled to use Confidential Information in the discharge of his
duties to the Company.
15. Severability; Remedies. It is the desire and intent of the parties
to this Agreement that the provisions of Sections 6, 13 and 14 be
enforced to the fullest extend permissible under the laws and public
policies applied in each jurisdiction in which enforcement is
sought. If any particular provisions or portion of Section 6, 13
and 14 is adjudicated invalid or unenforceable, such section will be
deemed amended to delete any provision or portion adjudicated to be
invalid or unenforceable, the amendment to apply only with respect
to the operation of that section in the particular jurisdiction in
which the adjudication is made. The parties recognize that the
performance by Executive of his obligations under Sections 6, 13 and
14 are special, unique and extraordinary in character, and that if
Executive breaches or threatens to breach the terms and conditions
of this Agreement, the Company may suffer irreparable injury for
which no adequate remedy at law may exist. Accordingly, in the
event of such breach or threatened breach, the Company will be
entitled, if it so elects, to institute and prosecute proceedings in
any court of competent jurisdiction, either in law or in equity, to
obtain damages for any breach of this Agreement, to enforce the
specific performance of this Agreement by Executive, or to enjoin
Executive from breaching or attempting to breach this Agreement.
16. Key Man Insurance. Executive agrees to allow the Company to
purchase "Key Man Insurance" in an amount desired by the Company for
the benefit of the Company and to reasonably cooperate with the
Company and its designated insurance agent to allow the purchase of
such insurance.
17. Waiver of Right to Jury Trial. THE COMPANY AND EXECUTIVE KNOWINGLY,
VOLUNTARILY, IRREVOCABLY, UNCONDITIONALLY AND INTENTIONALLY WAIVE
THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON
THIS AGREEMENT, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OR DEALINGS, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PERSON OR PARTY AND
RELATED TO THIS AGREEMENT; THIS IRREVOCABLE WAIVER OF THE RIGHT TO
A JURY TRIAL BEING A MATERIAL INDUCEMENT FOR THE COMPANY AND
EXECUTIVE TO ENTER INTO THIS AGREEMENT.
18. Notices. Any notice, demand, consent, agreement, request, or other
communication required or permitted under this Agreement must be in
writing and must be, (a) mailed by first-class United States mail,
registered or certified, return receipt requested, proper postage
prepaid, or (b) delivered personally by independent courier (such
as FedEx, DHL or similar nationally-recognized courier), to the
parties at the addresses as follows (or at such other addressed as
shall be specified by the parities by like notice):
If to the Company, to: MasTec, Inc.
3155 N.W. 77th Avenue
Miami, Florida 33122-1205
Attention: Legal Department
If to Executive, to: Austin J. Shanfelter
16600 Bear Cub Court
Fort Myers, Florida 33908
Each party may on five (5) days' prior notice in the manner set forth
in this Section 18 designate by notice in writing a new address to which
any notice, demand, consent, agreement, request for communication may
thereafter be given, served or sent. Each notice, demand, consent,
agreement, request or communication which is mailed or hand delivered
in the manner described above will be deemed received for all purposes
at such time as it is delivered to the addressee (with the return
receipt or the courier delivery receipt being deemed conclusive evidence
of such delivery) or at such time as delivery is refused by the
addressee upon presentation.
19. Miscellaneous. This Agreement: (a) may be executed in counterparts,
and all counterparts will collectively constitute a single
agreement, (b) may not be amended or modified except in a writing
signed by both parties nor may any provision hereof be waived except
in writing signed by the waiving party, (c) constitutes the entire
agreement of the parties with respect to the subject matter hereof
and supersedes all prior agreements or understanding with respect
thereto, (d) is binding upon and inures to the benefit of the
parties and their respective heirs, personal representatives,
beneficiaries, joint tenants, successors and assigns (whether by
merger, consolidation, transfer of all or substantially all assets,
or otherwise), and (e) may not be assigned or the duties delegated
without the consent of both parties except as expressly set forth
in this Agreement.
20. Governing Law. This Agreement, the rights and obligations of the
parties, and any claims or disputes relating in any way thereto
will be governed by and construed in accordance with the laws of the
State of Florida, without giving effect to any choice or conflict
of law provision or rule (whether in the State of Florida or any
other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of Florida. Each of
Executive and the Company, by executing this Agreement, (a)
irrevocably submits to the exclusive jurisdiction of any federal or
Florida state court sitting in Miami-Dade County, Florida in respect
of any suit, action or proceeding arising out of or relating in any
way to this Agreement, and irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the
jurisdiction of such courts and to be bound by any judgment rendered
in such courts; (b) waives, to the fullest extent it may do so
effectively under applicable law, any objection it may have to the
laying of the venue of any such suit, action or proceeding brought
in any such court and any claim that any such suit, action or
proceeding brought in any such court has been brought in an
inconvenient forum; and (c) irrevocably consents, to the fullest
extent it may do so effectively under applicable law, to the service
of process of any of the aforementioned courts in any such suit,
action or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, to Executive or the Company at
the address set forth in this Agreement, such service to become
effective five (5) business days (or such other period of time
provided by applicable law) after such mailing. In addition to any
other rights or remedies that either party may have under this
Agreement or under law, the prevailing party in any suit, action or
proceeding will be entitled to collect attorneys fees from the
other party and (ii) interest on any amount not paid when due at
a rate per annum equal to eighteen percent (18%) or the maximum
amount permitted by law.
EXECUTED as of the date first above written.
MASTEC, INC.
By: /s/ Jorge Mas
-----------------------------
Name: Jorge Mas
Title: Chairman of the Board
EXECUTIVE
By: /s/ Austin J. Shanfelter
-----------------------------
Austin J. Shanfelter
Annex A
"Cause" means (i) Executive being convicted of any felony (whether
or not against the Company or its affiliates), (ii) willful malfeasance
in the performance of the Executive's responsibilities after ten (10)
days' written notice to Executive and an opportunity to cure, (iii) any
material act of dishonesty by the Executive against the Company or any
of its affiliates, (iv) a material violation by the Executive of any of
the written policies or rules of the Company or any of its affiliates
or (v) the voluntary resignation of (or the giving of notice of voluntary
resignation by) Executive from employment with the Company or any of its
affiliates without Good Reason (as defined below) or Disability (as
defined below). The determination that Cause had occurred must be made
by unanimous vote of all of the members of the Board (other than
Executive) after forty-five (45) days' prior written notice to Executive
and an opportunity to appear before the Board and contest the
determination of Cause.
"Change in Control: means the occurrence of any of the following
events: (i) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to
which shares of common stock of the Company are to be converted into
cash, securities or other property, provided that the consolidation or
merger is not with a corporation (X) in which a majority of the
combined voting power of the corporation's outstanding common stock
immediately before the consolidation or merger is beneficially owned by
an individual or entity described in subclauses (iv)(b) or (iv)(c)
below, unless the Requisite Percentage described in subclause (iv)
below of the combined voting power of such corporation's outstanding
common stock immediately before the consolidation or merger is held by
individuals or entities not meeting the definition of subclause (iv)(a),
(iv)(b) or (iv)(c) below or (Y) a wholly-owned subsidiary of the Company
immediately before the consolidation or merger, (ii) any sale, lease,
exchange or other transfer (in one transaction or a series of
transactions) of all, or substantially all, of the assets of the Company,
(iii) the shareholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company, (iv) any "person,"
including a "group" as determined in accordance with Sections 13(d) and
14(d) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), becomes the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act), directly or indirectly, of the
Requisite Percentage (as hereinafter defined) of the combined voting
power of the Company's then outstanding common stock, provided that
such person, immediately before it becomes such a beneficial owner of
such Requisite Percentage, is not (a) a wholly-owned subsidiary of the
Company, (b) an individual, or a spouse or a child of such individual,
that on January 1, 2002, owned greater than 20% of the combined voting
power of the Company's common stock, or (c) a trust, foundation or
other entity controlled by an individual or individuals described in the
preceding subsection (b), (v) individuals who constitute the Board on
June 1, 2002 (the Incumbent Board"), cease for any reason to constitute
at least a majority thereof, provided that any person becoming a
director subsequent to June 1, 2002, whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least three quarters of the directors comprising the Incumbent Board
(either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director, without
objection to such nomination) will be, for purposes of this clause,
considered as though such person were a member of the Incumbent Board,
or (vi) the individuals or entities described in clauses (iv)(b) and
(iv)(c) of this definition sell, transfer or exchange to unaffiliated
persons or entities 80% or more of their combined beneficial ownership
of the voting power of the Company's outstanding common stock.
"Disability" means the inability to perform the material duties of
President and Chief Executive Officer of the Company.
"Good Reason" means any of the following events unless it occurs
with Executive's express prior written consent: (i) the assignment to
Executive of any duties inconsistent with, or a diminution of,
Executive's position, duties, titles, offices, responsibilities and
status with the Company, or any removal of Executive or any failure to
reelect Executive to any of such positions, including as President and
Chief Executive Officer; (ii) a reduction or material delay in payment
of Executive's compensation and benefits, including Salary and bonuses;
(iii) except with respect to changes required to maintain its tax-
qualified status or changes generally applicable to all employees of
the Company, any failure by the Company to continue in effect or make
any provision for any benefit, stock option, annual bonus or contingent
loan arrangements, or other incentive plan or arrangement of any type
in which Executive is participating from time to time, the taking of
which action would adversely affect Executive's participation in or
materially reduce Executive's benefits under any such benefit plan or
arrangement or deprive Executive of any material fringe benefit enjoyed
by Executive from time to time, or the failure to provide Executive with
the number of paid vacation days to which he is entitled; (iv) a
relocation of the Company's principal executive offices outside of Miami-
Dade, Broward, Palm Beach or Monroe counties, Florida, or Executive's
relocation to any place other than the location at which Executive
performed his duties as of the date hereof; (v) Executive timely
receives an Opt-Out Notice or (vi) a breach of any other material
provision of this Agreement.
"Requisite Percentage" means 20%, or a percentage greater than 20%.
EXHIBIT A
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Number of Options: 150,000
Vesting Schedule:
50,000 June 30, 2003
50,000 June 30, 2004
50,000 June 30, 2005
Exercise Period seven (7) years from date of grant.
Exercise Price closing price on day of grant.
Date of Grant: August 15, 2002.
EXHIBIT B
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[TO FOLLOW]
Exhibit 10.2
- ------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of
July 15, 2002 (the "Hire Date"), by and between MASTEC, INC., a Florida
corporation (the "Company"), and ERIC TVETER ("Employee").
Recitals
The Company desires to employ Employee and Employee desires to be
employed by the Company on the terms and subject to the conditions set
forth in this Agreement.
ACCORDINGLY, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and adequacy of which are acknowledged, the
Company and Employee agree as follows:
Terms
1. Employment. The Company employs Employee and Employee accepts such
employment and agrees to perform the services specified in this
Agreement, upon the terms and subject to the conditions set forth in
this Agreement.
2. Term.
a. General. The term of Employee's employment under this Agreement
will be from the Hire Date to July 14, 2004, unless earlier
terminated in accordance with this Agreement (the "Term").
b. Potential Extension. On or before July 14, 2003, the Chief
Executive Officer of the Company (the "CEO") and Employee will meet
to discuss extending the term of this Agreement for one (1)
additional year upon terms and conditions to be agreed upon;
provided, however, nothing herein shall obligate either the Company
or Employee to extend or renew this Agreement or constitute an offer
of employment beyond the Term.
3. Duties.
a. Position. During the Term, Employer will serve as Executive
Vice President and Chief Operating Officer of the Company. Subject
to the direction of the CEO, Employee will perform all duties
commensurate with his position and as may otherwise be assigned to
him by the CEO or the Board of Directors of the Company. If
requested by the Company, Employee will serve as an officer or
director of any subsidiary of the Company, without additional
compensation; provided however, that if Employee is asked to serve
as a director of any subsidiary of the Company, Employee may resign
or refuse to accept such appointment without causing a breach of
this Agreement by Employee. If asked to serve as an officer or
director of a subsidiary of the Company, Employee will be provided
those officer and director indemnifications provided to other
officers and directors of the Company and any such subsidiary.
b. Full Time and Attention. During the Term, Employee will devote
his full business time and energies to the business and affairs of
the Company and will use his best efforts, skills and abilities
solely to promote the interests of the Company and to diligently and
competently perform his duties, all in a manner in compliance with
all applicable laws and regulations and in accordance with
applicable policies and procedures adopted or amended from time to
time by the Company, including, without limitation, the 2000 Personal
Responsibility Code, a copy of which Employee acknowledges having
received. The Company represents that none of the terms and
provisions of this Agreement conflict with the provisions of the
2000 Personal Responsibility Code. The parties agree that, in the
event of conflict or inconsistency, the terms and provisions of this
Agreement will control. Employee's primary place of employment
shall be at the Company's primary place of business (the Employee
acknowledges the Company may relocate from its present location) in
Miami-Dade County, Florida; however, Employee agrees and
acknowledges that approximately one-half (1/2) of the time devoted
to his duties and position hereunder will require that Employee
travel on behalf of the Company. Notwithstanding the foregoing
Employee may continue to serve on the Board of Directors of the
Companies set forth in Exhibit B and any other Boards approved, in
advance, in writing, by the CEO.
4. Compensation and Benefits.
a. Base Salary
(i) During the Term, Employee will be paid, as compensation for
services rendered pursuant to this Agreement and Employee's
observance and performance of all of the provisions of this
Agreement, the amount of Three Hundred Thousand and No/100 Dollars
($300,000.00) per annum (the "Base Salary"). The Base Salary will
be payable in accordance with the normal payroll procedures of the
Company as in effect from time to time.
(ii) Base Salary for each year of the Term shall be adjusted to
reflect any increase in the cost of living. The Company and the
Employee agree to adopt as a standard for measuring the cost of
living the Consumer Price Index for all Urban Consumers (1982-84=100)
issued by the Bureau of Labor Statistics of the United States
Department of Labor ("CPI"). The CPI index figure for the first
month of the Term shall be defined as the "Basic Standard." The
CPI index figure for the last month of each year (i.e. June) of the
Term shall be defined as the " New Index Figure." Base Salary for
each year of the Term (the "New Base Salary") shall be determined
by multiplying the Base Salary for the immediately preceding Year
of the Term by a fraction, the numerator of which shall be the New
Index Figure and the denominator of which shall be the Basic
Standard. The New Base Salary for each year of the Term shall be
effective on July 15 of the applicable year of the Agreement.
Base Salary x New Index Figure = New Base Salary
----------------
Basic Standard
b. Benefits. During the Term, Employee will be entitled to
participate in or benefit from, in accordance with the eligibility
and other provisions thereof, such life, health, medical, accident,
dental and disability insurance and such other benefit plans as
the Company may make generally available to, or have in effect for,
other employees of the Company at the same general level as
Employee. The Company retains the right to terminate or amend any
such plans from time to time in its sole discretion.
c. Performance Bonus. Employee will be entitled to receive a
performance bonus for the period from the Hire Date through
December 31, 2002 (the "Performance Period") equal to the product
of (i) the Base Salary paid to Employee for the Performance Period,
and (ii) one-half (1/2), payable no later than March 31, 2003.
Commencing January 1, 2003, Employee shall be entitled to
participate in the Company's bonus plan for senior management.
d. Stock Options. Subject to the approval of the Compensation
Committee of the Board of Directors of the Company, Employee is
granted, in accordance with the terms of the 1994 Stock Incentive
Plan or the 1999 Non-Qualified Employee Stock Option Plan or any
other incentive plan adopted by the Company from time to time (the
"Plans"), options to purchase fifty thousand (50,000) shares of
common stock of the Company with terms and conditions described on
Exhibit A (the "Options"). So long as the Employee is not
terminated for Cause (as defined in Section 11c), options shall
continue to vest during any Period of Non-Competition provided
the Employee honors his obligations set forth in Section 8.
The options will be subject to the terms and conditions of the
Plans, as they may be amended from time to time in the Company's
sole discretion.
e. Housing Allowance; Automobile; Moving Expenses. From the Hire
Date until July 14, 2003, the Company shall reimburse Employee for
temporary housing in an amount not to exceed Two Thousand Five
Hundred and No/100 Dollars ($2,500.00) per month, upon presentation
of supporting documentation as the Company may require. For the
Term, the Company shall provide Employee with an automobile to be
used in the course of rendering services hereunder.
f. Expenses. The Company will reimburse Employee, in accordance
with the Company's expense reimbursement policies as may be
established from time to time by the Company, for all reasonable
travel and other expenses actually incurred or paid by him during
the Term in the performance of his services under this Agreement,
upon presentation of expense statements or vouchers or such other
supporting information as the Company may require.
g. Withholding. All payments under this Agreement will be subject
to applicable taxes and required withholdings.
5. Representations of Employee. Employee represents and warrants that
he is not, (i) a party to any enforceable employment agreement or
other arrangement, whether written or oral, with any past employer,
that would prevent or restrict Employee's employment with the
Company; (ii) a party to or bound by any agreement, obligation or
commitment, or subject to any restriction, including, but not
limited to, confidentiality agreements, restrictive covenants or
non-compete and non-solicitation covenants, except for agreements
with the Company or its affiliates; or (iii) involved with any
professional endeavors which in the future may possibly adversely
affect or interfere with the business of the Company, the full
performance by Employee of his duties under this Agreement or
the exercise of his best efforts hereunder.
6. Confidentiality.
a. Confidentiality of this Agreement. Employee acknowledges that
the provisions of this Agreement are highly confidential and that
disclosure of this Agreement or its terms would be extremely
prejudicial to the Company. Accordingly, neither the Company nor
Employee will disclose the terms of this Agreement to any other
person or entity (other than immediate family and financial and
legal advisors with a need-to-know and who agree to the
confidentiality provisions of this Agreement) without the prior
written consent of the other party, except that (i) the Company
may disclose this Agreement or its terms if in the reasonable
opinion of counsel for the Company such disclosure is required by
applicable law or regulation; and, (ii) Employee may disclose this
Agreement in court filings or pleadings by Employee to enforce its
terms and conditions or as otherwise may be necessary to comply
with the requirements of law, after providing the Company with not
less than five (5) days prior written notice of Employee's intent
to disclose.
b. Confidential Information. Employee acknowledges that as a
result of his employment with the Company, Employee will gain
knowledge of, and access to, proprietary and confidential
information and trade secrets of the Company and its subsidiaries
and affiliates, including, without limitation, (1) the identity of
customers, suppliers, subcontractors and others with whom they do
business; (2) their marketing methods and strategies; (3) contract
terms, pricing, margin, cost information and other information
regarding the relationship between them and the persons and
entities with which they have contracted; (4) their services,
products, software, technology, developments, improvements and
methods of operation; (5) their results of operations, financial
condition, projected financial performance, sales and profit
performance and financial requirements; (6) the identity of and
compensation paid to their employees, including Employee; (7) their
business plans, models or strategies and the information contained
therein; (8) their sources, leads or methods of obtaining new
business; and (9) all other confidential information of, about or
concerning the business of the Company and its subsidiaries and
affiliates (collectively, the "Confidential Information"). Employee
further acknowledges that such information, even though it may be
contributed, developed or acquired by Employee, and whether or not
the foregoing information is actually novel or unique or is actually
known by others, constitutes valuable assets of the Company developed
at great expense which are the exclusive property of the Company or
its subsidiaries and affiliates. Accordingly, Employee will not, at
any time, either during or subsequent to the Term, in any fashion,
form or manner, directly or indirectly, (i) use, divulge, disclose,
communicate, provide or permit access to any person or entity, any
Confidential Information of any kind, nature or description, or (ii)
remove from the Company's or its subsidiaries' or affiliates'
premises any notes or records relating thereto, or copies or
facsimiles thereof (whether made by electronic, electrical,
magnetic, optical, laser acoustic or other means) except in the
case of both (i) and (ii), (A) as reasonably required in the
performance of his services to the Company under this Agreement,
(B) to responsible officers and employees of the Company who are
in a contractual or fiduciary relationship with the Company and who
have a need for such information for purposes in the best
interests of the Company, (C) for such information which is or
becomes generally available to the public other than as a result of
an unauthorized disclosure by Employee, and (D) or as otherwise
necessary to comply with the requirements of law, after providing
the Company with not less than five (5) days prior written notice
of Employee's intent to disclose. Employee acknowledges that the
Company would not enter into this Agreement without the assurance
that all Confidential Information will be used for the exclusive
benefit of the Company.
c. Return of Confidential Information. Upon request by the
Company, Employee will promptly deliver to the Company all drawings,
manuals, letters, notes, notebooks, reports and copies thereof,
including all originals and copies contained in computer hard
drives or other electronic or machine readable format, all
Confidential Information and other materials relating to the
Company's business, including, without limitation, any materials
incorporating Confidential Information, which are in Employee's
possession or control.
7. Intellectual Property. Any and all material eligible for copyright
or trademark protection and any and all ideas and inventions
("Intellectual Property"), whether or not patentable, in any such
case solely or jointly made, developed, conceived or reduced to
practice by Employee (whether at the request or suggestion of any
officer or employee of the Company or otherwise, whether alone or
in conjunction with others, and whether during regular hours of
work or otherwise) during the Term which arise from the fulfillment
of Employee's duties hereunder and which may be directly or
indirectly useful in the business of the Company will be promptly
and fully disclosed in writing to the Company. The Company will
have the entire right, title and interest (both domestic and
foreign) in and to such Intellectual Property, which is the sole
property of the Company. All papers, drawings, models, data and
other materials relating to any such idea, material or invention
will be included in the definition of Confidential Information,
will remain the sole property of the Company, and Employee will
return to the Company all such papers, and all copies thereof,
including all originals and copies contained in computer hard drives
or other electronic or machine readable format, upon the earlier of
the Company's request therefore, or the expiration or termination of
Employee's employment hereunder. Employee will execute, acknowledge
and deliver to the Company any and all further assignments,
contracts or other instruments the Company deems necessary or
expedient, without further compensation, to carry out and effectuate
the intents and purposes of this Agreement and to vest in the
Company each and all of the rights of the Company in the
Intellectual Property.
8. Covenants.
a. Non-Competition and Non-Solicitation. Employee acknowledges and
agrees that the Company's and its subsidiary and affiliated
companies' (collectively, the "Companies") telecommunications
infrastructure services businesses (the "Business") are conducted
throughout the United States of America and the Commonwealth of
Canada. Until two (2) years following the date of the termination
of Employee's employment with the Company (the "Period of Non-
Competition") and within the United States of America and the
Commonwealth of Canada (including their possessions, protectorates
and territories, the "Territory"), Employee will not (whether or not
then employed by the Company for any reason), without the Company's
prior written consent:
(i) directly or indirectly own, manage, operate, control, be
employed by, act as agent, consultant or advisor for, or participate
in the ownership, management, operation or control of, or be
connected in any manner through the investment of capital, lending
of money or property, rendering of services or otherwise, with, any
business of the type and character engaged in and competitive with
the Business. For these purposes, ownership of securities of one
percent (1%) or less of any class of securities of a public company
will not be considered to be competition with the Business;
(ii) solicit, persuade or attempt to solicit or persuade or cause
or authorize directly or indirectly to be solicited or persuaded
any existing customer or client, or potential customer or client to
which the Companies have made a presentation or with which the
Companies have been having discussions, to cease doing business
with or decrease the amount of business done with or not to hire
the Companies, or to commence doing Business with or increase the
amount of Business done with or hire another company;
(iii) solicit, persuade or attempt to solicit or persuade or cause or
authorize directly or indirectly to be solicited or persuaded the
business of any person or entity that is a customer or client of the
Companies, or was their customer or client within two (2) years
prior to cessation of Employee's employment by any of the Companies
or any of their subsidiaries, for the purpose of competing with the
Business; or
(iv) solicit, persuade or attempt to solicit or persuade, or cause
or authorize directly or indirectly to be solicited or persuaded
for employment, or employ or cause or authorize directly or
indirectly to be employed, on behalf of Employee or any other
person or entity, any individual who is or was at any time within
six (6) months prior to cessation of Employee's employment by the
Companies, an employee of any of the Companies.
If Employee breaches or violates any of the provisions of this
Section 8, the running of the Period of Non-Competition (but not of
any of Employee's obligations under this Section 8) will be tolled
with respect to Employee during the continuance of any actual
breach or violation. In addition to any other rights or remedies
the Company may have under this Agreement or applicable law, the
Company will be entitled to receive from Employee reimbursement for
all attorneys' and paralegal fees and expenses and court costs
incurred by the Companies in enforcing this Agreement and will have
the right and remedy to require Employee to account for and pay over
to the Company all compensation, profits, monies, accruals or other
benefits derived or received, directly or indirectly, by Employee
from the action constituting a breach or violation of this Section 8.
b. Exceptions. Telecommunications operators (such as Sprint, MCI,
AT&T) cable companies and other non construction or installation
customers of the Company shall not be considered engaged in and
competitive with the Business.
9. Reasonable Restrictions. The parties acknowledge and agree that the
restrictions set forth in Sections 6, 7 and 8 of this Agreement are
reasonable for the purpose of protecting the value of the business
and goodwill of the Companies. It is the desire and intent of the
parties that the provisions of Sections 6, 7 and 8 be enforced to
the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which enforcement is sought. If
any particular provisions or portions of Sections 6, 7 and 8 are
adjudicated to be invalid or unenforceable, then such section will
be deemed amended to delete such provision or portion adjudicated to
be invalid or unenforceable; provided, however, that such amendment
is to apply only with the respect to the operation of such section
in the particular jurisdiction in which such adjudication is made.
10. Breach or Threatened Breach. The parties acknowledge and agree that
the performance of the obligations under Sections 6, 7 and 8 by
Employee are special, unique and extraordinary in character, and
that in the event of the breach or threatened breach by Employee of
the terms and conditions of Sections 6, 7 or 8, the Companies will
suffer irreparable injury and that monetary damages would not
provide an adequate remedy at law and that no remedy at law may
exist. Accordingly, in the event of such breach or threatened
breach, the Company will be entitled, if it so elects and without
the posting of any bond or security, to institute and prosecute
proceedings in any court of competent jurisdiction, in law and in
equity, to obtain damages for any breach of Sections 6, 7 or 8
or to enforce the specific performance of this Agreement by
Employee or to enjoin Employee from breaching or attempting to
breach Sections 6, 7 or 8. In the event the Company believes that
the Employee has breached Employee's obligations under Sections 6,
7 or 8, or threatens to do so, it shall promptly provide the Employee
written notice of such belief setting forth the basis for its belief
and, (unless under exigent circumstances, as determined by the
Company at its sole discretion, it would harm the Company to delay
the institution of legal proceedings) five (5) business days to
respond to the notice, prior to the initiation of legal proceedings.
11. Termination. This Agreement and Employee's employment under this
Agreement may be terminated upon the occurrence of any of the events
described in, and subject to the terms of, this Section 11:
a. Death. Immediately and automatically upon the death of Employee.
b. Disability. At the Company's option, immediately upon written
notice if Employee suffers a "permanent disability," meaning any
incapacity, illness or disability of Employee which renders Employee
mentally or physically unable to perform his duties under this
Agreement for a continuous period of sixty (60) days, or one hundred
twenty (120) days (whether or not consecutive), during the Term, as
reasonably determined by the Company.
c. Termination for Cause. At the Company's option, immediately
upon notice to Employee, upon the occurrence of any of the following
events (each "Cause"), (i) Employee being convicted of any felony
(whether or not against the Company or its subsidiaries or
affiliates); (ii) a material failure of Employee to perform
Employee's responsibilities after ten (10) days' written notice
given by an Executive Officer to Employee, which notice shall
identify the Employee's failure in sufficient detail and grant
Employee an opportunity to cure such failure within such ten (10)
day period ("Notice"); (iii) a breach by Employee of any of his
obligations under Sections 6, 7 or 8; (iv) any material act of
dishonesty or other misconduct by Employee against the Company or
any of its subsidiaries or affiliates; (v) a material violation by
Employee of any of the policies or procedures of the Company or any
of its subsidiaries or affiliates, including without limitation the
2000 Personal Responsibility Code, provided, however, that if such
violation is curable, then Employee will be given ten (10) days'
written Notice and the opportunity to cure such violation; or (vi)
Employee voluntarily terminates this Agreement or leaves the employ
of the Company or its subsidiaries or affiliates for any reason,
other than Good Reason.
d. Termination Without Cause. At the Company's option for any
reason, or no reason, at any time after December 31, 2002, upon one
(1) day's notice to Employee given by the CEO.
e. Termination with Good Reason. At Employee's option, upon not
less than five (5) business days written notice to the Company, and
the Company's failure to cure within such five (5) business days,
upon the occurrence of any of the following events (each "Good
Reason"), (i) the material diminution of, Employee's position,
duties, titles, offices and responsibilities with the Company,
(ii) a reduction or material delay in payment of Employee's
compensation and benefits ; (iii) a relocation of the Company's
principal executive offices outside of Miami-Dade, Broward, Palm
Beach or Monroe counties, Florida ; or (iv) a breach of any other
material provision of this Agreement by the Company.
f. Payments After Termination. If this Agreement and Employee's
employment hereunder are terminated for the reasons set forth in
Sections 11(a) or 11(b), then Employee or Employee's estate will
receive the Base Salary and any performance bonus earned through
the date of death or disability in accordance with the terms of
this Agreement, and all of Employee's Stock Options shall
immediately vest. If the Company terminates this Agreement and
Employee's employment hereunder for the reasons set forth in Section
11(c)(i-vi), then (i) Employee will receive his Base Salary through
the date of termination and (ii) Employee will forfeit any
entitlement that Employee may have to receive any performance bonus.
If this Agreement is terminated for the reason set forth in
Section 11(d) or Section 11(e), then (i) Employee will receive his
Base Salary, and benefits set forth in Section 4(b) hereof
(collectively, with the payment of the Base Salary, the "Severance
Benefits"), for the lesser of (A) one (1) year or (B) the remainder
of the Term (the "Severance Period"), payable in accordance with
the Company's payroll procedures and subject to applicable
withholdings, and (ii) Employee will forfeit any entitlement that
Employee may have to receive any performance bonus and provided
however, Employee represents and warrants that during the Severance
Period he shall affirmatively and in good faith seek another
position (whether as an employee or independent contractor) and the
Severance Benefits shall be mitigated upon his obtaining employment
or being engaged as an independent contractor by a third party by
an amount equal to the amounts received by Employee in such new
position (as an employee or identified contractor). Upon payment by
the Company of the amounts described in this Section 11(f), Employee
will not be entitled to receive any further compensation or benefits
from the Company whatsoever.
g. General. Notwithstanding anything to the contrary set forth in
this Agreement, the provision of payments after termination in
accordance with the provisions of Section 11(f) above, shall not be
a bar to the Employee's continued entitlement from the Company of
(i) reimbursements of proper expenses, (ii) housing, automobile and
expense allowances, (iii) vested benefit and welfare entitlements;
(iv) unemployment compensation, (v) workers compensation benefits,
(vi) accrued vacation time (if consistent with Company policy),
(vii) Base Salary through date of termination. Notwithstanding
anything in this Agreement to the contrary, if Employee is
employed by the Company for an entire calendar year (e.g., the 2003
calendar year) and is terminated for any reason prior to the payment
of a bonus, if any, the Company hereby agrees to pay Employee any
bonus that he would have otherwise been entitled to hereunder or
the Company's bonus plan for senior management, simultaneous with
the payment of such bonus to the Company's employees, and (viii)
continued vesting of options as may be provided in accordance with
the provisions of this Agreement or any stock option plan.
12. Miscellaneous.
a. Survival. The provisions of Sections 6, 7, 8, 10 and 11 will
survive the termination or expiration of this Agreement for any
reason.
b. Entire Agreement. This Agreement constitutes the entire agreement
of the parties pertaining to its subject matter and supersedes all
prior or contemporaneous agreements or understandings between the
parties pertaining to the subject matter of this Agreement, and there
are no promises, agreements, conditions, undertakings, warranties,
or representations, whether written or oral, express or implied,
between the parties other than as set forth in this Agreement.
c. Modification. This Agreement may not be amended or modified, or
any provision waived, unless in writing and signed by both parties.
d. Waiver. Failure of a party to enforce one or more of the
provisions of this Agreement or to require at any time performance
of any of the obligations of this Agreement will not be construed to
be a waiver of such provisions by such party nor to in any way
affect the validity of this Agreement or such party's right
thereafter to enforce any provision of this Agreement, nor to
preclude such party from taking any other action at any time which
it would legally be entitled to take.
e. Successors and Assigns. This Agreement may not be assigned or
the duties delegated unless in writing and signed by both parties,
except for any assignment by the Company occurring by operation of
law. Subject to the foregoing, this Agreement will inure to the
benefit of, and be binding upon, the parties and their heirs,
beneficiaries, personal representatives, successors and permitted
assigns.
f. Notices. Any notice, demand, consent, agreement, request, or
other communication required or permitted under this Agreement will
be in writing and will be, (i) mailed by first-class mail,
registered or certified, return receipt requested, postage prepaid,
(ii) delivered personally by independent courier, or (iii)
transmitted by facsimile, to the parties at the addresses as follows
(or at such other addresses as will be specified by the parties by
like notice):
If to Employee, then to:
Eric Tveter
1240 Moores Hill Road
Laurel Hollow, New York, New York 11791-9631
With a copy sent simultaneously
by identical delivery mode to:
Sklover, Himmel & Bernstein, LLP
Attn: Alan L. Sklover, Esq.
10 Rockefeller Plaza
New York, New York 10020
If to the Company, then to:
MasTec, Inc.
3155 Northwest 77th Avenue
Miami, Florida 33122-1205
Attn: Legal Department
Facsimile: (305) 406-1907
Each party may designate by notice in writing a new address to which any
notice, demand, consent, agreement, request or communication may
thereafter be given, served or sent. Each notice, demand, consent,
agreement, request or communication that is mailed, hand delivered or
transmitted in the manner described above will be deemed received for
all purposes at such time as it is delivered to the addressee (with the
return receipt, the courier delivery receipt or the telecopier
answerback confirmation being deemed conclusive evidence of such
delivery) or at such time as delivery is refused by the addressee upon
presentation.
g. Severability. If any provision of this Agreement is held to be
invalid or unenforceable by a court of competent jurisdiction, then
such invalidity or unenforceability will not affect the validity and
enforceability of the other provisions of this Agreement and the
provision held to be invalid or unenforceable will be enforced as
nearly as possible according to its original terms and intent to
eliminate such invalidity or unenforceability.
h. Counterparts. This Agreement may be executed in any number of
counterparts, and all counterparts will collectively be deemed to
constitute a single binding agreement.
i. Governing Law; Venue. This Agreement will be governed by the
laws of the State of Florida, without regard to its conflicts of
law principles. Employee consents to the jurisdiction of any state
or federal court located within Miami-Dade County, State of Florida,
and consents that all service of process may be made by registered
or certified mail directed to Employee at the address stated in
Section 13 (f) of this Agreement. Employee waives any objection
which Employee may have based on lack of personal jurisdiction or
improper venue or forum non conveniens to any suit or proceeding
instituted by the Company under this Agreement in any state or
federal court located within Miami-Dade County, Florida and consents
to the granting of such legal or equitable relief as is deemed
appropriate by the court. This provision is a material inducement
for the Company to enter into this Agreement with Employee.
j. Participation of Parties. The parties acknowledge that this
Agreement and all matters contemplated herein have been negotiated
between both of the parties and their respective legal counsel and
that both parties have participated in the drafting and preparation
of this Agreement from the commencement of negotiations at all
times through execution. Therefore, the parties agree that this
Agreement will be interpreted and construed without reference to
any rule requiring that this Agreement be interpreted or construed
against the party causing it to be drafted.
k. Injunctive Relief. It is possible that remedies at law may be
inadequate and, therefore, the parties will be entitled to equitable
relief including, without limitation, injunctive relief, specific
performance or other equitable remedies in addition to all other
remedies provided hereunder or available to the parties hereto at
law or in equity.
l. Waiver of Jury Trial. EACH OF THE COMPANY AND EMPLOYEE
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THE
PROVISIONS OF THIS AGREEMENT.
m. Right of Setoff. The Company will be entitled, in its
discretion and in addition to any other remedies it may have in law
or in equity, to set-off against any amounts payable to Employee
under this Agreement or otherwise the amount of any obligations of
Employee to the Company under this Agreement that are not paid by
Employee when due. In the event of any such setoff, the Company
will promptly provide the Employee with a written explanation of
such setoff, and an opportunity to register a written protest
thereof.
n. Litigation; Prevailing Party. In the event of any litigation,
administrative proceeding, arbitration, mediation or other
proceeding with regard to this Agreement, the prevailing party will
be entitled to receive from the non-prevailing party and the non-
prevailing party will pay upon demand all court costs and all
reasonable fees and expenses of counsel and paralegals for the
prevailing party.
o. Descriptive Headings. The descriptive headings herein are inserted
for convenience only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
EXECUTED as of the date set forth in the first paragraph of this
Agreement.
EMPLOYEE
/s/ Eric Tveter
-------------------------------------------
ERIC TVETER
MASTEC, INC.
By: /s/ Austin Shanfelter
-------------------------------------------
Austin Shanfelter, Chief Executive Officer
Exhibit A
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TERMS OF STOCK OPTIONS
Number: 50,000 shares in MasTec common stock.
Term: Termination of Employment and non-competition
period.
Exercise Price: Fair market value (as defined in the plan) as of
the Hire Date.
Vesting: One-half (1/2) on each of the first and second
anniversary of the Hire Date, if then employed
by the Company, subject to the provisions of 4d,
11a and 11b.
Other: In accordance with the plan and the standard
stock option agreement for employees.
EXHIBIT B
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EXISTING BOARD OF DIRECTORS
[TO FOLLOW]