<PAGE>
As filed with the Securities and Exchange Commission on , 1998
---------
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________________________
MASTECH CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1802235
(State or other jurisdiction of (I.R.S. Employer
incorporation or Identification No.)
organization) 1004 McKee Road
Oakdale, Pennsylvania 15071
412-787-2100
(Address, including ZIP code, and
telephone number, including area code,
of Registrant's principal executive offices)
Sunil Wadhwani
Co-Chairman and Chief Executive Officer
Mastech Corporation
1004 McKee Road
Oakdale, Pennsylvania 15071
412-787-2100
(Name, address, including ZIP code, and
telephone number, including area code,
of agent for service)
Copies to:
Carl A. Cohen, Esq. Paul J. Pollock, Esq.
James J. Barnes, Esq. Piper & Marbury L.L.P.
Buchanan Ingersoll Professional Corporation 1251 Avenue of the Americas
One Oxford Centre, 301 Grant Street, 20th Floor 29th Floor
Pittsburgh, Pennsylvania 15219-1410 New York, New York 10029
412-562-8800 212-835-6000
FAX 412-562-1041 FAX 212-835-6001
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.[X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
Title of Each Class of Securities to Amount to be Proposed Maximum Offering Proposed Maximum Amount of Registration
be Registered Registered Price per Unit(1)(2) Aggregate Offering Fee(2)
Price(1)(2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value 1,623,000 $26.44 $42,912,120 $12,874
$.01 per share
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</TABLE>
(1) Estimated solely for purposes of calculation of the registration fee.
(2) Calculated in accordance with Rule 457(c) under the Securities Act of 1933
on the basis of high and low sale prices of the Registrant's Common Stock on
the Nasdaq National Market on June 26, 1998.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
================================================================================
<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION, DATED ____________, 1998
1,623,000 Shares
MASTECH CORPORATION
Common Stock
Par Value $.01
This prospectus relates to an offering of up to 1,623,000 shares (the
"Shares") of common stock, par value $.01 per share (the "Common Stock"), of
Mastech Corporation, a Pennsylvania corporation (the "Company"), which are
issuable upon conversion of the exchangeable non-voting shares (the
"Exchangeable Shares") of Quantum Information Resources Limited ("Quantum"), a
wholly-owned subsidiary of the Company. The Exchangeable Shares were issued to
the shareholders of Quantum in connection with the Company's acquisition of
Quantum on June 1, 1998. Once issued, the Shares may be offered and sold from
time to time by the security holders of Quantum listed herein under "Selling
Security Holders" or any affiliate or transferee of a Selling Security Holder
who may be referenced in a supplement or amendment to this prospectus (the
"Selling Security Holders"). The Exchangeable Shares may be converted into
Shares at the option of the holder at any time prior to June 1, 2002 for an
amount equal to the 20-day trailing average closing price of the Company's
common stock on the Nasdaq National Market (the "Mastech Market Price") plus an
additional amount equal to the amount by which the declared and unpaid dividends
on one Exchangeable Share then exceed the amount of declared and unpaid
dividends on one share of the Company's Common Stock (the "Dividend Amount," and
together with the Mastech Market Price, the "Exchangeable Share Price"). The
Exchangeable Share Price will be satisfied by the Company, Mastech Canada Inc.
(a wholly-owned subsidiary of the Company) or Quantum causing to be delivered to
such holder one Share for each such Exchangeable Share and paying to such holder
the Dividend Amount.
The Common Stock is quoted on the Nasdaq National Market under the symbol
"MAST." The reported closing sale price for the Common Stock on June 29, 1998
was $27.75 per share.
SEE "RISK FACTORS" ON PAGE 5 HEREIN FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Shares may be sold from time to time by the Selling Security Holders or
their transferees, directly or indirectly, through underwriters, broker-dealers
or agents acting on their behalf, and in connection with such sales, such
broker-dealers or agents may receive compensation in the form of commissions,
concessions, allowances or discounts from the Selling Security Holders and/or
the purchasers of the Shares for whom they may act as agent or to whom they sell
Shares as principal or both (which commissions, concessions, allowances or
discounts might be in excess of customary amounts thereof). No underwriting
arrangements have been entered into by the Selling Security Holders as of the
date hereof. The distribution of the Shares by the Selling Security Holders may
be effected in one or more transactions that may take place in the over-the-
counter market, including ordinary broker's transactions, privately negotiated
transactions, or through sales to one or more dealers for resale of such Shares
as principals, at prevailing market prices at the time of sale, prices related
to such prevailing market prices, or negotiated prices. Whether such sales will
be made and the timing and amount of any sale is within the sole discretion of
each Selling Security Holder. Underwriting discounts and usual and customary or
specifically negotiated brokerage fees or commissions will be paid by the
Selling Security Holders in connection with sales of
(cover page continued)
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold, nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
the Shares. To the extent required, the name of any agents, broker-dealers or
underwriters and applicable commissions, concessions, allowances or discounts
and any other required information with respect to any particular offer of the
Shares by the Selling Security Holders, will be set forth in a Prospectus
Supplement. See "Plan of Distribution."
The Selling Security Holders have agreed with the Company not to sell,
exchange, transfer, distribute, pledge or otherwise dispose of, or enter into
any transaction to reduce their respective interest in or risk relating to
(whether by short sale or otherwise) or any transaction which would result in a
direct or indirect disposition of the Shares until such time as the Company has
published (within the meaning of Accounting Series Releases Nos. 130 and 135
published by the Securities and Exchange Commission) financial results covering
at least 30 days of combined operations of the Company and Quantum.
By agreement with the Selling Security Holders, the Company will pay all of
the expenses incident to the registration of the Shares under the Securities
Act, except for any and all brokerage or underwriting expenses or commissions,
if any, applicable to the sale of the Shares, which will be borne by the Selling
Security Holders.
The Selling Security Holders, and any broker-dealers, agents, or
underwriters through whom the Shares are sold, may be deemed "underwriters"
within the meaning of the Securities Act with respect to securities offered by
them, and any profits realized or commissions received by them may be deemed
underwriting compensation.
The date of this Prospectus is _________________, 1998
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934 and files reports and other information with the Securities
and Exchange Commission in accordance therewith. Reports, proxy statements and
other information filed by the Company with the Commission can be inspected and
copied at the public reference facilities of the Securities and Exchange
Commission (the "Commission") located at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the following Regional Offices of the Commission:
7 World Trade Center, Suite 1300, New York, New York 10048, and at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
In addition, reports, proxy statements, registration statements and certain
other filings made with the Commission through its Electronic Data Gathering,
Analysis and Retrieval ("EDGAR") system are publicly available through the
Commission's site on the Internet's World Wide Web, located at
http://www.sec.gov. The registration statement of which this Prospectus forms a
part, including all exhibits thereto and amendments thereof, has been filed with
the Commission through EDGAR.
The Company has filed with the Commission a registration statement on Form
S-3 (herein together with all schedules, amendments and exhibits, referred to as
the "Registration Statement") under the Securities Act with respect to the
Shares. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain portions of which are omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock to be offered and sold from time to
time, reference is made to the Registration Statement. Statements contained in
this Prospectus regarding the contents of any contract or other document
referred to are not necessarily complete, and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. The Registration Statement may be inspected at the principal
offices of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of such materials may be obtained upon written request from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.,
at prescribed rates.
In addition, the Common Stock is quoted on the Nasdaq National Market.
Reports and other information concerning the Company may be inspected at the
offices of the National Association of Securities Dealers, Inc., 1735 K Street,
N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated herein by reference and made a part of this Prospectus are the
following documents filed by the Company with the Commission pursuant to the
Exchange Act:
Annual Report on Form 10-K, for the fiscal year ended December 31, 1997;
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998; and
The description of the Common Stock, which is registered under Section 12
of the Exchange Act, contained in the Company's registration statement on
Form 8-A, filed with the Commission on November 19, 1996.
All other reports and other documents filed by the Company since December
31, 1997, pursuant to Section 13(a) or 15(d) of the Exchange Act.
All documents subsequently filed by the Company with the Commission
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Prospectus and prior to the termination of this offering will be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the respective dates of filing of such documents. Any statement
contained in any document incorporated or deemed to be incorporated by reference
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement
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<PAGE>
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
All information appearing in this Prospectus is qualified in its entirety by the
information and financial statements (including notes thereto) appearing in the
documents incorporated herein by reference, except to the extent set forth in
the immediately preceding statement.
The Company will provide without charge to each person who receives this
Prospectus, upon written or oral request of such person, a copy of the
information that is incorporated by reference herein (not including exhibits to
the information that is incorporated by reference herein). Requests for such
information should be directed to: Mastech Corporation, 1004 McKee Road,
Oakdale, Pennsylvania 15071, Attention: Jeffrey McCandless, Vice President of
Finance, telephone: 412-787-2100.
4
<PAGE>
THE COMPANY
Mastech Corporation ("Mastech" or the "Company") is a worldwide
provider of information technology ("IT") services to large and medium-sized
organizations. Mastech provides its clients with a single source for a broad
range of applications solutions and services, including client/server design and
development, conversion/migration services, Year 2000 services, Enterprise
Resource Planning ("ERP") package implementation services, Internet/intranet
services and applications maintenance outsourcing. These services are provided
in a variety of computing environments and use leading technologies, including
client/server architectures, object-oriented programming languages and tools,
distributed database management systems and the latest networking and
communications technologies. To enhance its services, Mastech has formed
business alliances with leading software companies such as Baan, Oracle and
PeopleSoft. In addition, the Company has developed its own proprietary
methodologies and tools, under the name SmartAPPS, that enhance the productivity
of the Company's Year 2000 and other services.
Mastech's revenues have grown from $13.5 million in 1991 to $196.0 million
in 1997. During 1997, Mastech has provided IT services to over 495 clients
worldwide in a diverse range of industries. These clients include AT&T,
Citibank, EDS, IBM, Intel, Oracle and Wal-Mart. The Company sets high standards
for client responsiveness and project quality. A significant number of the
Company's clients have selected Mastech on a recurring basis to provide
additional services.
Mastech believes that the growth of the IT services industry offers
significant opportunities and has developed a set of strategies that the Company
believes differentiate it from competitors. These strategies include: (i) the
development of a global recruitment network through which the Company recruits
and deploys qualified IT professionals from a number of countries to address the
shortage of IT professionals in the U.S. and other developed countries; (ii) a
focus on applications services including ERP package implementation, Year 2000
and Internet/intranet services; (iii) the development of proprietary technology,
including an automated tool for Year 2000 code conversions and other programming
language translations; (iv) international expansion to leverage the growing need
for value-added IT services in areas outside the U.S.; and (v) the development
of an extensive offshore software development infrastructure to provide cost
advantages to clients that are increasingly short of resources.
One of the key elements of Mastech's growth has been its ability to recruit
and deploy, on short notice, experienced IT professionals on a worldwide basis.
As of May 31, 1998, the Company employed approximately 3,425 IT professionals,
over 2,185 of whom were in the U.S., with the remainder in Canada, Europe, the
Middle East, Singapore, Japan, India and Australia. To support the Company's
growth and to meet the increased demand for IT professionals, the Company has
embarked on an aggressive recruiting strategy, designed to significantly
increase the number of IT professionals hired. The Company is also establishing
a network of training centers in which it trains new recruits in value-added
technologies such as PeopleSoft, Oracle Applications, Java/HTML and Year 2000
solutions.
In 1995, the Company began marketing its services in key international
markets to meet the large and growing demand for IT services overseas and to
serve its client base of large multinational corporations that need support on a
global basis. In addition to offices in the U.S., the Company maintains
international offices in Toronto, Singapore, London, Sydney, Tokyo, Amsterdam
and the Middle East. As a result of the Company's expanding international
operations, as of May 31, 1998, it had over 875 employees working with over 100
clients outside the U.S.
To provide cost advantages to clients that are increasingly short of
resources, Mastech is investing in an extensive offshore software development
infrastructure in India, including three state-of-the-art software development
centers. The center in Bangalore, India has been operational for over a year and
is conducting over 30 engagements for Mastech clients in the U.S. and Canada.
Two additional centers are under development in Pune and
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Madras, India. The Company believes that this offshore infrastructure, with the
ability to accommodate 1,500 IT professionals when complete, will represent one
of the largest offshore presences in the industry.
The Company maintains its principal executive offices at 1004 McKee Road,
Oakdale, PA 15071. The Company's World Wide Web address is www.mastech.com. The
Company's Web site is not part of this Prospectus. The Company's telephone
number is (412) 787-2100.
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RISK FACTORS
In addition to the other information contained in or incorporated into this
Prospectus, investors should consider carefully the following factors in
connection with an investment in the Shares offered hereby.
This Prospectus contains certain forward-looking statements that involve
substantial risks and uncertainties. When used in this Prospectus, the words
"anticipate," "believe," "estimate," "expect" and similar expressions as
they relate to the Company or its management are intended to identify such
forward-looking statements. Such statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 and are based
upon information available to the Company at the time the statement is made.
The Company's actual results, performance or achievements could differ
materially from the results expressed in, or implied by, these forward-looking
statements. Factors that could cause or contribute to such differences include
those discussed in "Risk Factors."
----------------
Mastech(R) and SmartAPPS/SM/ are service marks of the Company. Windows(R)
is a registered trademark of Microsoft Corporation. All other trademarks,
service marks and trade names referred to in this Prospectus are the property of
their respective owners.
Recruitment and Retention of IT Professionals
The Company's business involves the delivery of professional services and
is labor-intensive. The Company's success depends upon its ability to attract,
develop, motivate and retain highly skilled Information Technology ("IT")
professionals and project managers, who possess the technical skills and
experience necessary to deliver the Company's services. Qualified IT
professionals are in great demand worldwide and are likely to remain a limited
resource for the foreseeable future. There can be no assurance that qualified IT
professionals will continue to be available to the Company in sufficient
numbers, or that the Company will be successful in retaining current or future
employees. Failure to attract or retain qualified IT professionals in sufficient
numbers could have a material adverse effect on the Company's business,
operating results and financial condition. Historically, the Company has done
most of its recruiting outside of the countries where the client work is
performed. Accordingly, any perception among the Company's IT professionals,
whether or not well founded, that the Company's ability to assist them in
obtaining temporary work visas and permanent residency status has been
diminished, could lead to significant employee attrition. In the first eight
months of 1996, the Company experienced a higher than normal rate of employee
attrition because the Company was experiencing delays in securing the first-
stage approval for permanent residency status for its foreign employees working
in the U.S. This attrition resulted in the Company incurring increased costs for
IT professionals and a reduction in its revenue growth.
Government Regulation of Immigration
The Company recruits its IT professionals on a global basis to create a
mobile workforce that it can deploy wherever required and, therefore, must
comply with the immigration laws in the countries in which it operates,
particularly the U.S. Over 90% of Mastech's IT professionals are citizens of
countries other than the United States, with most of those in the U.S. working
under H-1B temporary visas. Under current law, there is a statutory limit of
65,000 new H-1B visas that may be issued in any federal fiscal year. In the
federal fiscal year ended September 30, 1998, this limit was reached for the
first time in May. In years in which this limit is reached, the Company may be
unable to obtain enough H-1B visas to bring sufficient foreign employees to the
U.S. If the Company were unable to obtain H1-B visas for its employees in
sufficient quantities or at a sufficient rate for a significant period of time,
the Company's business, operating results and financial condition could be
materially adversely affected. Furthermore, Congress and administrative agencies
with jurisdiction over immigration matters have periodically expressed concerns
over the levels of legal and illegal immigration into the U.S. These concerns
have often resulted in proposed legislation, rules and regulations aimed at
reducing the number of employment-based visas and
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permanent residency visas that may be issued. Any changes in such laws making it
more difficult to hire foreign nationals or limiting the ability of the Company
to retain foreign employees, could require the Company to incur additional
unexpected labor costs and expenses or result in the Company having insufficient
qualified personnel to perform all of the engagements that might otherwise be
available to the Company. Any such restrictions or limitations on the Company's
hiring practices could have a material adverse effect on the Company's business,
operating results and financial condition.
Variability of Quarterly Operating Results
The Company's revenues and operating results are subject to significant
variation from quarter to quarter depending on a number of factors, including
the timing and number of client projects commenced and completed during the
quarter, the number of working days in a quarter, employee hiring, attrition and
utilization rates and the mix of time-and-materials projects versus fixed-price
projects during the quarter. The Company recognizes revenues on time-and-
materials projects as the services are performed, while revenues on fixed-price
projects are recognized using the percentage of completion method. Although
fixed-price projects have not contributed significantly to revenues and
profitability to date, operating results may be adversely affected in the future
by cost overruns on fixed-price projects. Because a high percentage of the
Company's expenses are relatively fixed, variations in revenues may cause
significant variations in operating results. Additionally, the Company
periodically incurs cost increases due to both the hiring of new employees and
strategic investments in its infrastructure in anticipation of future
opportunities for revenue growth. No assurances can be given that quarterly
results will not fluctuate, causing a material adverse effect on the Company's
business and financial condition.
Increasing Significance of Non-U.S. Operations and Risks of International
Operations
The Company's international consulting and offshore software development
operations are important elements of its growth strategy. The Company opened
offices in Canada and Singapore in 1995, Japan and the U.K. in 1996, and
Australia, The Netherlands and the Middle East during 1997. These operations
depend greatly upon business, immigration and technology transfer laws in those
countries, and upon the continued development of technology infrastructure.
There can be no assurance that the Company's international operations will be
profitable or support the Company's growth strategy. The risks inherent in the
Company's international business activities include unexpected changes in
regulatory environments, foreign currency fluctuations, tariffs and other trade
barriers, difficulties in managing international operations and potential
foreign tax consequences, including repatriation of earnings and the burden of
complying with a wide variety of foreign laws and regulations. The failure of
the Company to manage growth, attract and retain personnel, manage major
development efforts, profitably deliver services, or a significant interruption
of the Company's ability to transmit data via satellite, could have a material
adverse impact on the Company's ability to successfully maintain and develop its
international operations and could have a material adverse effect on the
Company's business, operating results and financial condition.
Although the Company's ownership of a U.S. trademark registration covering
the service mark "Mastech" gives the Company the presumption of ownership in
the U.S. of the "Mastech" mark for the services identified in the
registration, there can be no assurance that the Company is entitled to use the
designation "Mastech" in all international operations and there is the
possibility that third parties have superior rights to the "Mastech" mark (or
similar marks) outside the U.S.
Exposure to Regulatory and General Economic Conditions in India
A significant element of the Company's business strategy is to increase the
utilization of its offshore software development centers in India. Mastech has
utilized an offshore software development center in Bangalore, India, for
approximately one year and is in the process of opening two more centers in Pune
and Madras, India. The Company also operates recruiting and training centers in
India. The Indian government exerts significant influence over its economy. In
the recent past, the Indian government has provided significant tax incentives
and relaxed
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certain regulatory restrictions in order to encourage foreign investment in
certain sectors of the economy, including the technology industry. Certain of
these benefits that directly affect the Company include, among others, tax
holidays (temporary exemptions from taxation on operating income), liberalized
import and export duties and preferential rules on foreign investment and
repatriation. To be eligible for certain of these tax benefits, the Company must
continue to meet certain conditions. A failure to meet such conditions in the
future could result in the cancellation of the benefits. There can be no
assurance that such tax benefits will be continued in the future at their
current levels. Changes in the business or regulatory climate of India could
have a material adverse effect on the Company's business, operating results and
financial condition.
Although wage costs in India are significantly lower than in the U.S. and
elsewhere for comparably skilled IT professionals, wages in India are increasing
at a faster rate than in the U.S. In the past, India has experienced significant
inflation and shortages of foreign exchange, and has been subject to civil
unrest and acts of terrorism. Changes in inflation, interest rates, taxation or
other social, political, economic or diplomatic developments affecting India in
the future could have a material adverse effect on the Company's business,
operating results and financial condition.
Intense Competition
The IT services industry is highly competitive and served by numerous
national, regional and local firms, all of which are either existing or
potential competitors of the Company. Primary competitors include participants
from a variety of market segments, including "Big Six" accounting firms,
systems consulting and implementation firms, applications software firms,
service groups of computer equipment companies, general management consulting
firms, programming companies and temporary staffing firms. Many of these
competitors have substantially greater financial, technical and marketing
resources and greater name recognition than the Company. There are relatively
few barriers to entry into the Company's markets and the Company may face
additional competition from new entrants into its markets. In addition, there is
a risk that clients may elect to increase their internal IT resources to satisfy
their applications solutions needs. Further, the IT services industry is
undergoing consolidation which may result in increasing pressure on margins.
These factors may limit the Company's ability to increase prices commensurate
with increases in compensation. There can be no assurance that the Company will
compete successfully with existing or new competitors.
Concentration of Revenues; Risk of Termination
The Company has in the past derived, and may in the future derive, a
significant portion of its revenues from a relatively limited number of clients.
The Company's five largest clients represented approximately 29% of revenues for
the year ended December 31, 1997. EDS accounted for approximately 13% of the
Company's revenues for the year ended December 31, 1997. Most of the Company's
projects are terminable by the client without penalty. An unanticipated
termination of a major project could result in the loss of substantial
anticipated revenues and could require the Company to maintain or terminate a
significant number of unassigned IT professionals, resulting in a higher number
of unassigned IT professionals and/or significant termination expenses. The loss
of any significant client or project could have a material adverse effect on the
Company's business, operating results and financial condition.
Management of Growth
The Company's business has experienced rapid growth over the years that
could strain the Company's managerial and other resources. Revenues have grown
from $13.5 million in 1991 to $196.0 million in 1997. The number of employees
has grown from 250 in 1991 to 3,125 as of December 31, 1997. The Company's
continued growth depends on adding key managers, increasing its international
operations, adding service lines and growing its offshore infrastructure. The
Company has broadened its range of services to include Year 2000 compliance, ERP
package implementation, Internet/intranet services and offshore software
development. The Company opened offices in Canada and Singapore in 1995, Japan
and the U.K. in 1996, and Dallas, Texas, Australia, the Netherlands
9
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and the Middle East during 1997. In addition, the Company's offshore software
development center in Bangalore has been operational for over a year and two
additional centers in Pune and Madras, India are scheduled to become operational
during the second quarter of 1998. Effective management of these growth
initiatives will require the Company to continue to improve its operational,
financial and other management processes and systems. The failure to manage
growth effectively could have a material adverse effect on the Company's
business, operating results and financial condition.
Rapid Technological Change; Dependence on New Solutions
The IT services industry is characterized by rapid technological change,
evolving industry standards, changing client preferences and new product
introductions. The Company's success will depend in part on its ability to
develop IT solutions that keep pace with changes in the IT services industry.
There can be no assurance that the Company will be successful in addressing
these developments on a timely basis or that, if these developments are
addressed, the Company will be successful in the marketplace. In addition, there
can be no assurance that products or technologies developed by others will not
render the Company's services uncompetitive or obsolete. The Company's failure
to address these developments could have a material adverse effect on the
Company's business, operating results and financial condition.
A significant number of organizations are attempting to migrate business
applications from a mainframe environment to advanced technologies, including
client/server architectures. As a result, the Company's ability to remain
competitive will be dependent on several factors, including its ability to help
existing employees maintain or develop mainframe skills and to train and hire
employees with skills in advanced technologies. The Company's failure to hire,
train and retain employees with such skills could have a material adverse impact
on the Company's business. The Company's ability to remain competitive will also
be dependent on its ability to design and implement, in a timely and cost-
effective manner, effective transition strategies for clients moving from the
mainframe environment to client/server or other advanced architectures. The
failure of the Company to design and implement such transition strategies in a
timely and cost-effective manner could have a material adverse effect on the
Company's business, operating results and financial condition.
Dependence on Principals
The success of the Company is highly dependent on the efforts and abilities
of Sunil Wadhwani and Ashok Trivedi, the Company's Co-Chairman and Chief
Executive Officer and the Company's Co-Chairman and President, respectively.
Although Messrs. Wadhwani and Trivedi have entered into employment agreements
containing noncompetition, nondisclosure and nonsolicitation covenants, these
contracts do not guarantee that they will continue their employment with the
Company or that such covenants will be enforceable. The loss of the services of
either of these key executives for any reason could have a material adverse
effect on the Company's business, operating results and financial condition.
Risk of Preferred Vendor Contracts
The Company is a party to several "preferred vendor" contracts and is
seeking additional similar contracts in order to obtain new or additional
business from large or medium-sized clients. Clients enter into these contracts
to reduce the number of vendors and obtain better pricing in return for a
potential increase in the volume of business to the preferred vendor. While
these contracts are expected to generate higher volumes, they generally result
in lower margins. Although the Company attempts to lower costs to maintain
margins, there can be no assurance that the Company will be able to sustain
margins on such contracts. In addition, the failure to be designated a preferred
vendor, or the loss of such status, may preclude the Company from providing
services to existing or potential clients, except as a subcontractor, which
could have a material adverse effect on the Company's business, operating
results and financial condition.
10
<PAGE>
Risks Related to Possible Acquisitions
The Company has been expanding its operations through the acquisition of
additional businesses. There can be no assurance that the Company will be able
to identify, acquire or profitably manage additional businesses or successfully
integrate any acquired businesses into the Company without substantial expenses,
delays or other operational or financial problems. Further, acquisitions may
involve a number of special risks, including diversion of management's
attention, failure to retain key acquired personnel, unanticipated events or
circumstances and legal liabilities and amortization of acquired intangible
assets, some or all of which could have a material adverse effect on the
Company's business, operating results and financial condition. Client
satisfaction or performance problems at a single acquired firm could have a
material adverse impact on the reputation of the Company as a whole. In
addition, there can be no assurance that acquired businesses will achieve
anticipated revenues and earnings. The failure of the Company to manage its
acquisition strategy successfully could have a material adverse effect on the
Company's business, operating results and financial condition.
Intellectual Property Rights
The Company's success depends in part upon certain methodologies and tools
it uses in designing, developing and implementing applications systems and other
proprietary intellectual property rights. The Company is also developing
proprietary conversion tools, specifically tools tailored to address the Year
2000 problem. The Company relies upon a combination of nondisclosure and other
contractual arrangements and trade secret, copyright and trademark laws to
protect its proprietary rights and the proprietary rights of third parties from
whom the Company licenses intellectual property. The Company enters into
confidentiality agreements with its employees and limits distribution of
proprietary information. There can be no assurance that the steps taken by the
Company in this regard will be adequate to deter misappropriation of proprietary
information or that the Company will be able to detect unauthorized use and take
appropriate steps to enforce its intellectual property rights.
Although the Company believes that its services do not infringe on the
intellectual property rights of others and that it has all rights necessary to
utilize the intellectual property employed in its business, the Company is
subject to the risk of litigation alleging infringement of third-party
intellectual property rights. Any such claims could require the Company to spend
significant sums in litigation, pay damages, develop non-infringing intellectual
property or acquire licenses to the intellectual property which is the subject
of asserted infringement.
Limited Trading History of Common Stock; Stock Price Volatility
The Common Stock first became publicly traded on December 17, 1996 after
the Company's initial public offering at $7 1/2 per share (adjusted to reflect
the Company's two-for-one stock split on April 10, 1998). Between December 17,
1996 and June 30, 1998, the closing sale price has ranged from a low of $5 3/4
per share to a high of $30.44 per share (adjusted to reflect the Company's two-
for-one stock split on April 10, 1998). The market price of the Common Stock
could continue to fluctuate substantially due to a variety of factors, including
quarterly fluctuations in results of operations, adverse circumstances affecting
the introduction or market acceptance of new products and services offered by
the Company, announcements of new products and services by competitors, changes
in the IT environment, changes in earnings estimates by analysts, changes in
accounting principles, sales of Common Stock by existing holders, loss of key
personnel and other factors. The market price for the Common Stock may also be
affected by the Company's ability to meet analysts' expectations, and any
failure to meet such expectations, even if minor, could have a material adverse
effect on the market price of the Common Stock. In addition, the stock market is
subject to extreme price and volume fluctuations. This volatility has had a
significant effect on the market prices of securities issued by many companies
for reasons unrelated to the operating performance of these companies. In the
past, following periods of volatility in the market price of a company's
securities, securities class action litigation has often been instituted against
such a company. Any such litigation instigated against the Company could result
in substantial costs and a diversion of management's attention and resources,
which could have a material adverse effect on the Company's business, operating
results and financial condition.
11
<PAGE>
Control by Existing Shareholders
Messrs. Wadhwani and Trivedi beneficially own approximately 60.8% of, and
have voting power over approximately 42.5% of, the Company's Common Stock.
Messrs. Wadhwani and Trivedi, as a practical matter, are able to elect the
entire Board of Directors and to control or veto matters requiring shareholder
approval, including certain fundamental transactions such as a merger,
consolidation or the sale of substantially all of the assets of the Company,
which may require the approval of the holders of 66 2/3% of the votes cast.
Messrs. Wadhwani and Trivedi have entered into a shareholders agreement
requiring each of them to vote their shares of Common Stock in favor of the
other in the election of directors. The approval of the Government of
India/Reserve Bank of India will be required for the Company to continue to own
Mascot Systems Private Limited ("Mascot Systems") and Scott Systems Private
Limited ("Scott Systems") if the ownership of the Company by persons of Indian
origin, in the aggregate, falls below 60% of the voting power of the Company.
The Company's ability to raise additional capital by the issuance of Common
Stock or voting Preferred Stock or to sell control of the Company to a third
party or to use Common Stock to acquire other businesses may be restricted if
the Company is unable to obtain the required approval.
Potential Decrease in Demand for Year 2000 Services
The Company earned approximately 4% and 9% of its revenues from Year 2000
engagements in the years ended December 31, 1996 and 1997, respectively. The
Company expects that it will continue to receive increased revenues from
additional Year 2000 engagements in the near term. However, the Company expects
that Year 2000 engagements and revenues derived from such engagements will peak
prior to calendar year 2000 as companies address their needs. Thereafter, the
Company expects that revenues derived from Year 2000 engagements will steadily
decline. In the absence of additional revenues from other sources, a decline in
such engagements could have a material adverse effect on the Company's business,
operating results and financial condition.
Anti-Takeover Provisions
Certain provisions of the Company's Articles of Incorporation, as amended
("Articles") and the Pennsylvania Business Corporation Law (the "PBCL") will
effectively make it more difficult for a third party to acquire control of the
Company by means of a tender offer or a proxy contest for the election of
directors or otherwise. The Company's Articles contain provisions which: (i)
classify the Board of Directors into three classes, with one class being elected
each year; (ii) require the approval of holders of 66 2/3% of the votes cast on
a proposal to amend the Articles, effect a merger or consolidation of the
Company, sell, lease or exchange all or substantially all of the Company's
assets or dissolve and wind-up the affairs of the Company, unless any such
proposal is unanimously approved by all of the Company's directors; and (iii)
require the approval of four of the Company's five directors for action by the
Board of Directors. These provisions may have the effect of lengthening the time
required for a person to acquire control of the Company through a proxy contest
for the election of a majority of the Board of Directors, may discourage bids
for the Common Stock at a premium over the market price and may deter efforts to
obtain control of the Company.
Fixed-Price Projects
The Company undertakes certain projects billed on a fixed-price basis,
which is distinguishable from the Company's principal method of billing on a
time-and-materials basis. The failure of the Company to complete such projects
within budget would expose the Company to risks associated with cost overruns,
which could have a material adverse effect on the Company's business, operating
results and financial condition.
12
<PAGE>
Potential Liability to Clients
Many of the Company's engagements involve projects that are critical to the
operations of its clients' businesses and provide benefits that may be difficult
to quantify. Although the Company attempts to contractually limit its liability
for damages arising from errors, mistakes, omissions or negligent acts in
rendering its services, there can be no assurance that its attempts to limit
liability will be successful. The Company's failure or inability to meet a
client's expectations in the performance of its services could result in a
material adverse change to the client's operations and therefore could give rise
to claims against the Company or damage the Company's reputation, adversely
affecting its business, operating results and financial condition.
Absence of Dividends
The Company does not anticipate paying any dividends on its Common Stock in
the foreseeable future. The Company's ability to pay dividends is subject to the
requirement of its revolving credit facility with PNC Bank that the Company
satisfy certain financial covenants.
Forward-Looking Statements and Associated Risks
Included in this Prospectus are various forward-looking statements,
including, among others, the expected growth related to the Year 2000 problem,
the Company's goals and strategies, the importance and expected growth of the IT
applications solutions market, the pace of change in the IT marketplace, the
demand for IT services, the ability of the Company to capitalize on offshore
investments and infrastructure, the Company's goal to expand service offerings
and to pursue acquisitions, and the ability to leverage Year 2000 engagements
into additional contracts.
These statements are forward-looking and reflect the Company's current
expectations. Such statements are subject to a number of risks and
uncertainties, including, but not limited to, changes in the economic and
political environments, changes in technology and changes in the IT marketplace.
In light of the many risks and uncertainties surrounding the Company and the IT
marketplace, a prospective purchaser should keep in mind that there can be no
assurance that the forward-looking statements described in this Prospectus will
transpire.
13
<PAGE>
RECENT DEVELOPMENTS
On June 1, 1998, the Company acquired all of the issued and outstanding
capital stock of Quantum Information Resources Limited, a Canadian corporation
("Quantum"), pursuant to a combination of Quantum with the Company. By virtue
of the combination and by operation of law, the Company acquired all of the
assets and assumed all liabilities of Quantum. The aggregate purchase price
paid to the shareholders of Quantum consisted of the Exchangeable Shares which
are convertible into the Shares offered hereby. The Company also agreed to file
this Registration Statement with respect to a market offering of the Shares.
The assets of Quantum acquired by the Company in the combination include
cash, accounts receivable, equipment, prepaid expenses and leasehold
improvements. These assets were used by Quantum in the operation of a business
providing IT services. The Registrant intends to use the acquired assets in a
similar fashion.
USE OF PROCEEDS
Because the Shares will be issued upon conversion of the Exchangeable
Shares, the Company will not receive any proceeds upon such issuance.
14
<PAGE>
DESCRIPTION OF EXCHANGE FEATURES
Set forth below is a summary of the conversion features of the Exchangeable
Shares.
Pursuant to the share provisions of the Exchangeable Shares, subject to
applicable law and the overriding retraction call rights of Mastech and Mastech
Canada, Inc., a Canadian subsidiary of Mastech ("Mastech Canada"), described
below, holders of Exchangeable Shares shall be entitled at any time to require
Quantum to redeem any or all such Exchangeable Shares and to receive, for each
Exchangeable Share, the Exchangeable Share Price, which shall be satisfied by
Quantum causing to be delivered to such holder one Share for each such
Exchangeable Share and paying to such holder the Dividend Amount (the
"Retraction").
Holders of Exchangeable Shares may effect the Retraction by presenting a
certificate or certificates along with one or more stock transfer powers
(executed in blank) to Quantum or its transfer agent representing the number of
Exchangeable Shares the holder desires to retract, together with a written
request (a "Retraction Request") specifying the number of Exchangeable Shares
the holder wishes to retract and the date upon which the holder desires to
receive the Shares (which date shall be not less than five (5) business days nor
more than ten (10) business days after the date on which such Retraction Request
is received by Quantum) (the "Retraction Date") and acknowledging the overriding
retraction call right of Mastech and Mastech Canada described below and such
other documents as may be required to effect the retraction of the Exchangeable
Shares.
Upon receipt of a Retraction Request, Quantum shall immediately notify
Mastech and Mastech Canada of such request. Mastech or Mastech Canada shall
thereafter have five (5) business days in which to notify Quantum that Mastech
or Mastech Canada (as the case may be) intends to exercise its overriding
retraction call right to purchase all, but not less than all, of the
Exchangeable Shares submitted by the holder thereof. The purchase price for
each such Exchangeable Share purchased by Mastech or Mastech Canada (as the case
may be) shall be the Exchangeable Share Price, and shall be satisfied by Mastech
or Mastech Canada (as the case may be) causing to be delivered to such holder
one Share for each such Exchangeable Share and paying to such holder the
Dividend Amount.
Pursuant to the share provisions of the Exchangeable Shares, subject to
applicable law and the redemption call rights of Mastech and Mastech Canada
described below, on June 1, 2002 (the "Final Redemption Date") Quantum shall
redeem all, but not less than all, of the then outstanding Exchangeable Shares
by payment of the Exchangeable Share Price for each Exchangeable Share, which
shall be satisfied by Quantum causing to be delivered to such holder one Share
for each such Exchangeable Share and paying to such holder the Dividend Amount.
In addition, Mastech shall have the overriding right, notwithstanding any
proposed redemption of the Exchangeable Shares by Quantum as outlined above, to
unilaterally purchase, or alternatively to cause Mastech Canada to purchase, on
the Final Redemption Date all, but not less than all, of the outstanding
Exchangeable Shares by payment of the Exchangeable Share Price for each
Exchangeable Share, which shall be satisfied by Mastech or Mastech Canada (as
the case may be) causing to be delivered to such holder one Share for each such
Exchangeable Share and paying to such holder the Dividend Amount.
Quantum shall, at least 20 days before the Final Redemption Date, provide
each holder of Exchangeable Shares with written notice of Quantum's, Mastech's
or Mastech Canada's redemption of the Exchangeable Shares, as the case may be.
The Exchangeable Share Price is subject to adjustment in certain events,
including: (a) the issuance of Mastech Common Stock as a dividend or
distribution on Mastech Common Stock to all or substantially all of the then
outstanding holders of Mastech Common Stock; (b) the issuance to the holders of
all or substantially all of the then outstanding Mastech Common Stock of rights,
options or warrants entitling them to subscribe for or purchase Mastech Common
Stock; and (c) the issuance or distribution to holders of all or substantially
all of the then
15
<PAGE>
outstanding Mastech Common Stock of (1) shares or securities of Mastech of any
class other than Mastech Common Stock (other than shares exchangeable into or
exchangeable for or carrying rights to acquire Mastech Common Stock), (2)
rights, options or warrants other than those referred to in (b) above, (3)
evidences of indebtedness, or (4) assets of Mastech.
Quantum is obligated to make the same or an economically equivalent change
to, or in the rights of the holders of, the Exchangeable Shares in the event of
any (a) subdivision, redivision or change of the then outstanding Mastech Common
Stock into a greater number of shares; (b) reduction, combination, consolidation
or change of the then outstanding Mastech Common Stock into a lesser number of
shares; or (c) reclassification, or other change, amalgamation, merger,
reorganization or other transaction affecting the Mastech Common Stock.
16
<PAGE>
SELLING SECURITY HOLDERS
The following table sets forth information with respect to the beneficial
ownership of Common Stock by each Selling Security Holder as of the close of
business of June 30, 1998, and the Shares which may be offered by each from
time to time hereby. Unless otherwise indicated, each person has sole voting
and sole dispositive power with respect to all Shares shown.
<TABLE>
<CAPTION>
Beneficial Ownership
------------------------------------------------------------------------------------
Number of
Selling Security Holders Prior to the Offering Shares Offered After the Offering
- ------------------------ --------------------- -------------------- -------------------------------------
Number Percent Number Percent
------------- ------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Quantum Management 892,650 1.8 892,650 0 ---
Investments Limited
King Moore Consultants 649,200 1.3 649,200 0 ---
Limited
412977, Ontario Limited 81,150 * 81,150 0 ---
</TABLE>
___________
*Less than one percent
PLAN OF DISTRIBUTION
The Shares offered hereby may be sold from time to time to purchasers
directly by any of the Selling Security Holders or certain transferees or
affiliates of such Selling Security Holders (a "Selling Party"). Alternatively,
a Selling Party may from time to time offer the Shares through underwriters,
dealers or agents who may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Party and/or the
purchasers of the Shares for whom they may act as agents.
Sales of the Shares offered hereby may be made on the Nasdaq National
Market or the over-the-counter market or otherwise at prices and on terms then
prevailing or at prices related to the then-current market price, or in
negotiated transactions. Such prices will be determined by the Selling Party or
by agreement between the Selling Party and underwriters or dealers.
The Shares may be sold in or by (a) a block trade in which the broker or
dealer so engaged will attempt to sell the Shares as agent, but may position and
resell a portion of the block as principal to facilitate the transaction, (b)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this Prospectus, (c) an exchange distribution in
accordance with the rules of such exchange, (d) ordinary brokerage transactions
and transactions in which the broker solicits purchases, and (e) privately
negotiated transactions. In effecting sales, brokers or dealers engaged by the
Selling Party may arrange for other brokers or dealers to participate. A
Selling Party also may, from time to time with the consent of the Company,
authorize underwriters acting as his agent to offer and sell Shares upon such
terms and conditions as shall be set forth in any Prospectus supplement.
Underwriters, brokers or dealers will receive commissions or discounts from a
Selling Party in amounts to be negotiated. Such underwriters, brokers or
dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales and any discounts and commissions received by them, and any profit
realized by them on the resale of the Shares may be deemed to be underwriting
discounts and commissions under the Securities Act.
In connection with distributions of the Shares or otherwise, the Selling
Security Holders may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the Shares registered hereunder in the course of hedging the positions they
assume with the Selling Security Holders. The Selling Security Holders may also
sell Shares short and deliver the Shares to close out such short positions. The
Selling Security Holders may also enter into option or other transactions with
broker-dealers which require the delivery to the broker-dealer of the Shares
registered hereunder, which the broker-dealer may resell pursuant to this
Prospectus.
The Selling Security Holders may also pledge the Shares registered
hereunder to a broker or dealer and upon a default, the broker or dealer may
effect sales of the pledged Shares pursuant to this Prospectus.
Any dealer or broker participating in any distribution of the Shares may be
required to deliver a copy of this Prospectus, including the prospectus
supplement, if any, to any person who purchases any of the Shares from or
through such dealer or broker.
17
<PAGE>
In order to comply with certain state securities laws, if applicable, the
Shares will be sold in such jurisdictions only through registered or licensed
brokers or dealers. In certain states, the Shares may not be sold unless such
Shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Shares may not simultaneously engage in market-
making activities with respect to such Shares, except in accordance with
applicable laws. In addition to, and without limiting the foregoing, each
Selling Party and any other person participating in a distribution will be
subject to the applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rule 10b-5 and Regulation
M, which provisions may limit the timing of purchases and sales of any of the
Shares by a Selling Party or any other person. All of the foregoing may affect
the marketability of the Shares.
Pursuant to certain contractual obligations, the Company will pay all the
fees and expenses incident to the registration of the Shares (other than
underwriting discounts and commissions, if any, and the Selling Security
Holders' counsel fees and expenses in excess of $5,000 if any). In addition, the
Company has agreed to maintain the effectiveness of the Registration Statement
until the later of the first anniversary of the effective date of this
Registration Statement or the first anniversary of the date on which all
Exchangeable Shares are converted to Common Stock (or such earlier time upon
which to Shares may be sold pursuant to Rule 144(k) of the Securities Act), and
has agreed to indemnify the Selling Security Holders against certain
liabilities, including liabilities under the Securities Act. In addition, each
of the Selling Security Holders has agreed to indemnify the Company against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Shares will be passed upon for the Company by Buchanan
Ingersoll Professional Corporation, Pittsburgh, Pennsylvania. Carl A. Cohen, a
shareholder of Buchanan Ingersoll Professional Corporation, owned 2,000 shares
of Common Stock as of June 30, 1998.
EXPERTS
The consolidated financial statements and related financial statement
schedule of the Company incorporated by reference in this Prospectus as of
December 31, 1997 and 1996 and for each of the three years ended December 31,
1997, 1996 and 1995 have been audited by Arthur Andersen LLP, independent public
accountants, to the extent and for the periods as indicated in their reports
with respect thereto, and are incorporated herein by reference in reliance upon
the authority of such firms as experts in giving said reports.
With respect to the unaudited interim financial information for the
quarters ended March 31, 1998 and 1997, Arthur Andersen LLP has applied limited
procedures in accordance with professional standards for a review of that
information. However, their separate report thereon states that they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report of that information should
be restricted in light of the limited nature of the review procedures applied.
In addition, the accountants are not subject to the liability provisions of
Section 11 of the Securities Act of 1933 for their report on the unaudited
interim financial information because that report is not a "report" or a "part"
of the registration statement prepared or certified by the accountants within
the meaning of Sections 7 and 11 of the Act.
18
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================
<S> <C>
NO DEALER, SALESPERSON, OR ANY OTHER PERSON
HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE HEREBY,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN 1,623,000 Shares
OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY OF THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
AN OFFER OR SOLICITATION IN SUCH MASTECH
JURISDICTION. NEITHER THE DELIVERY OF CORPORATION
THIS PROSPECTUS, NOR ANY SALE MADE
HEREUNDER, SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE COMPANY Common Stock
SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATES AS OF
WHICH SUCH INFORMATION IS FURNISHED.
______________
TABLE OF CONTENTS
PAGE _______________
----
AVAILABLE INFORMATION.......................... 3 PROSPECTUS
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE..................................... 3 ________________
THE COMPANY.................................... 5
RISK FACTORS................................... 7
USE OF PROCEEDS................................ 14
SELLING SECURITY HOLDERS....................... 17 _______________, 1998
PLAN OF DISTRIBUTION........................... 17
LEGAL MATTERS.................................. 18
EXPERTS........................................ 18
==================================================================================================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses of this offering in connection with the distribution
of the Common Stock being registered hereby, all of which are to be borne by the
Registrant, are as follows:
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee............................................................... $12,874
Accounting fees and expenses....................................................... $ 1,000
Legal fees and expenses............................................................ $ 7,500
Printing........................................................................... $ 750
Miscellaneous...................................................................... $ 1,500
-------
Total.............................................................................. $23,624
</TABLE>
Item 15. Indemnification of Directors and Officers
Subchapter D of Chapter 17 of the Pennsylvania Business Corporation Law
("PBCL") provides in general that a corporation may indemnify any person,
including its directors, officers and employees, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative (including
actions by or in the right of the corporation) by reason of the fact that he or
she is or was a representative of or serving at the request of the corporation,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in connection with
the action or proceeding if he or she is determined by the board or directors,
or in certain circumstances by independent legal counsel or the shareholders, to
have acted in good faith and in a manner he or she reasonably believed to be in,
or not opposed to, the best interests of the corporation and, with respect to
any criminal proceeding, had no reason believe his or her conduct was unlawful.
In the case of actions by or in the right of the corporation, indemnification is
not permitted in respect of any claim, issue or matter as to which the person
has been adjudged to be liable to the corporation except to the extent a court
determines that the person is fairly and reasonably entitled to indemnification.
In any case, to the extent that the person has been successful on the merits or
otherwise in defense of any claim, issue or matter, he or she shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith. Subchapter D of Chapter 17 also
provides that the indemnification permitted or required thereby is not exclusive
of any other rights to which a person seeking indemnification may be entitled.
Article 10 of the Company's Articles of Incorporation provides that the
Company shall indemnify and hold harmless to the full extent not prohibited by
law, as the same exists or may be amended, interpreted or implemented (but, in
the case of any amendment, only to the extent that such amendment permits the
Company to provide broader indemnification rights than the Company is permitted
to provide prior to such amendment), each person who was or is made a party or
is threatened to be made a party to or is otherwise involved in (as witness or
otherwise) any threatened, pending or completed action, suit, or proceeding,
whether civil, criminal, administrative or investigative and whether or not by
or in the right of the Company or otherwise (hereinafter, a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the heir,
executor or administrator, is or was a director or executive officer of the
Company or is or was serving at the request of the Company as a director,
officer or trustee of another corporation or of a partnership, joint venture,
trust or other enterprise (including without limitation service with respect to
employee benefit plans), or where the basis of such proceeding is any alleged
action or failure to take any action by such person while acting in an official
capacity as a director or executive officer of the Company, or in any other
capacity on behalf of the Company while such person is or was serving as a
director or executive officer of the Company, against all expenses, liability
and loss, including but not limited to attorney's fees, judgments, fines, excise
taxes or penalties and amounts paid or to be paid in settlement (whether with or
without court approval), actually and reasonably incurred or paid by such person
in connection therewith. The right to indemnification is a contract right and
includes the right to be paid by the Company the expenses incurred in defending
any such proceeding (or part thereof) or in enforcing his or her rights to
indemnification in
II-1
<PAGE>
advance of the final disposition thereof promptly after receipt by the Company
of a request therefor stating in reasonable detail the expenses incurred;
provided, however, that to the extent required by law, the payment of such
expenses incurred by a director or executive officer of the Company in advance
of the final disposition of a proceeding shall be made only upon receipt of an
undertaking, by or on behalf of such person, to repay all amounts so advanced if
and to the extent it shall ultimately be determined by a court that he or she is
not entitled to be indemnified by the Company.
The Company has entered into employment agreements with Sunil Wadhwani and
Ashok Trivedi, Co-Chairman and Chief Executive Officer and Co-Chairman and
President, respectively, which entitle them to be indemnified in their
capacities as directors, officers and controlling shareholders of the Company to
the full extent not prohibited by law. The Company also has entered into a
Shareholders Agreement with Messrs. Wadhwani and Trivedi pursuant to which the
Company agrees to indemnify them against certain liabilities, including
liabilities under the securities laws, that they may incur in connection with
any offering effected pursuant to their registration rights under the
Shareholders Agreement.
The Articles of the Company also provide pursuant to Section 1713 of the
PBCL that a director of Mastech shall not be personally liable for monetary
damages as such for any action taken, or any failure to take any action, unless:
(1) the director has breached or failed to perform the duties of his/her office
under Section 1712 of the PBCL (relating to standard of conduct and justifiable
reliance); and (2) the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness. This limitation on the personal liability of
directors of Company does not apply to: (1) the responsibility or liability of a
director pursuant to any criminal statute; or (2) the liability of a director
for the payment of taxes pursuant to local, state or Federal law.
The Company has purchased insurance insuring its directors and officers
against certain liabilities which they might incur as directors or officers of
the Company or of any other organization which they serve at its request,
including certain liabilities under the Securities Act.
Item 16. Exhibits
The following is a complete list of Exhibits filed as part of this
Registration Statement.
Exhibit No.
- -----------
5.01 Opinion of Buchanan Ingersoll Professional Corporation.
23.01 Consent of Arthur Andersen LLP.
23.02 Acknowledgment of Arthur Andersen LLP.
23.03 Consent of Buchanan Ingersoll Professional Corporation (included
in its opinion).
24.01 Power of Attorney (included on signature page).
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
II-2
<PAGE>
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the Registration Statement (or the most
recent post-effective amendment thereof); and
(iii) To include in such prospectus any additional or changed
material information on the plan of distribution contained
in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To file a post-effective amendment to remove from registration
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the success defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Pittsburgh, Commonwealth of Pennsylvania, on June
30, 1998.
MASTECH CORPORATION
By: /s/ Sunil Wadhwani
-------------------------------------
Sunil Wadhwani
Co-Chairman and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of Mastech Corporation, hereby
severally constitute Sunil Wadhwani, Ashok Trivedi and Jeffrey McCandless, and
each of them singly, our true and lawful attorneys with full power to any of
them, and to each of them singly, to sign for us and in our names in the
capacities indicated below, the Registration Statement on Form S-3 filed
herewith and any and all pre-effective and post-effective amendments to said
Registration Statement (or any other registration statement for the same
offering that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act) and generally to do all such things in our name and behalf in
our capacities as officers and directors to enable Mastech Corporation to comply
with the provisions of the Securities Act and all requirements of the Securities
and Exchange Commission, hereby ratifying and confirming our signatures as they
may be signed by our said attorneys, or any of them, to said Registration
Statement (or any other registration statement for the same offering that is to
be effective upon filing pursuant to Rule 462(b) under the Securities Act) and
any and all amendments thereto.
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<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Principal Executive Officer:
/s/ Sunil Wadhwani
_________________ Co-Chairman, Chief Executive June 30, 1998
Sunil Wadhwani Officer and Director
Principal Financial Officer:
/s/ Jeffrey McCandless
_________________ Vice President - Finance June 30, 1998
Jeffrey McCandless (principal financial officer)
Principal Accounting Officer:
/s/ Neil M. Ebner
_________________ Corporate Controller June 30, 1998
Neil M. Ebner (principal accounting officer)
/s/ Ashok Trivedi
_________________ Co-Chairman, President and June 30, 1998
Ashok Trivedi Director
/s/ Ed Yourdon
_________________ Director June 30, 1998
Ed Yourdon
/s/ J. Gordon Garrett
_________________ Director June 30, 1998
J. Gordon Garrett
_________________ Director ------------
Michel Berty
</TABLE>
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Reference Page
- ----------- --------- ------
<S> <C> <C>
5.01 Opinion of Buchanan Ingersoll Professional Corporation Filed herewith E-1
23.01 Consent of Arthur Andersen LLP Filed herewith E-2
23.02 Acknowledgment of Arthur Andersen LLP Filed herewith E-3
23.03 Consent of Buchanan Ingersoll Professional Corporation
(included in its opinion in Exhibit 5.01)
24.01 Power of Attorney (contained in the signature page)
</TABLE>
<PAGE>
Exhibit 5.01
BUCHANAN INGERSOLL PROFESSIONAL CORPORATION
One Oxford Centre
301 Grant Street, 20th Floor
Pittsburgh, PA 15219-1410
June 30, 1998
Mastech Corporation
1004 McKee Road
Oakdale, PA 15071
Ladies and Gentlemen:
In connection with the Registration Statement on Form S-3 (the
"Registration Statement"), to be filed by Mastech Corporation, a Pennsylvania
corporation (the "Company"), under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the registration for resale by the Selling
Security Holders named therein of 1,623,000 shares of the Company's Common
Stock, par value of $.01 per share (the "Shares"), we, as counsel for the
Company, have examined such corporate records, other documents, and questions of
law as we have considered necessary or appropriate for the purposes of this
opinion.
Upon the basis of such examination, we advise you that in our opinion the
Shares to be sold by the Selling Security Holders have been duly and validly
authorized, validly issued, fully paid and non-assessable.
It is our understanding that this opinion is to be used only in connection
with the offer and sale of the Shares while the Registration Statement is in
effect.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and any amendment thereto, including any and all post-effective
amendments and any registration statement relating to the same offering that is
to be effective upon filing pursuant to Rule 462(b) under the Securities Act,
and to the reference to this firm under the caption "Legal Matters." In giving
such consent, we do not hereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act or the rules and
regulations of the Securities and Exchange Commission.
Very truly yours,
Buchanan Ingersoll Professional Corporation
By: /s/ James J. Barnes
------------------------------------------
E-1
<PAGE>
Exhibit 23.01
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 4, 1998,
included in Mastech Corporation's Form 10-K for the year ended December 31,
1997, and all references to our Firm included in this registration statement.
Pittsburgh, Pennsylvania ARTHUR ANDERSEN LLP
June 30, 1998 /s/ Arthur Andersen LLP
E-2
<PAGE>
Exhibit 23.02
June 30, 1988
Mastech Corporation
1004 McKee Road
Oakdale, PA 15071
Dear Sir:
We are aware that Mastech Corporation has incorporated by reference in this
Registration Statement its Form 10-Q for the quarter ended March 31, 1998, which
includes our report dated April 24, 1998 covering the unaudited interim
financial information contained herein. Pursuant to Regulation C of the
Securities Act of 1933, that report is not considered a part of the registration
statement prepared or certified by our firm or a report prepared or certified by
our firm within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
E-3
