<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MASTECH CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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MASTECH CORPORATION
1004 MCKEE ROAD
OAKDALE, PENNSYLVANIA 15071
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 1, 1999
----------------
A Special Meeting of Shareholders of Mastech Corporation (the "Company")
will be held at the Company's Corporate Offices at 1004 McKee Road, Oakdale,
Pennsylvania on Monday, February 1, 1999, at 11:00 a.m., to consider and act
upon the following matters:
1. To consider and approve an amendment to the Company's 1996 Incentive
Stock Plan to increase the number of shares available for issuance
thereunder; and
2. Such other matters as may properly come before the meeting.
The Board of Directors has established the close of business on Monday,
December 21, 1998, as the record date for the determination of the
shareholders entitled to notice of and to vote at the Special Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE TO
ASSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. NO POSTAGE IS NECESSARY
IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors
/s/ Michael J. Zugay
Michael J. Zugay, Secretary
Pittsburgh, PA
December 31, 1998
<PAGE>
MASTECH CORPORATION
1004 MCKEE ROAD
OAKDALE, PENNSYLVANIA 15071
----------------
PROXY STATEMENT FOR SPECIAL MEETING
OF SHAREHOLDERS
TO BE HELD ON MONDAY, FEBRUARY 1, 1999
----------------
This Proxy Statement is being furnished to the holders of the common stock,
par value $.01 per share (the "Common Stock"), of Mastech Corporation, a
Pennsylvania corporation, in connection with the solicitation by the Board of
Directors of the Company (the "Board of Directors" or the "Board") of proxies
to be voted at the special meeting of shareholders (the "Special Meeting")
scheduled to be held on Monday, February 1, 1999 at 11:00 a.m., at the
Company's corporate offices at 1004 McKee Road, Oakdale, Pennsylvania, or at
any adjournment thereof. This Proxy Statement is being mailed to shareholders
on or about December 31, 1998. As used in this Proxy Statement, the terms
"Mastech" and "the Company" refer to Mastech Corporation (or its predecessor)
and its subsidiaries, unless the context otherwise requires.
Only holders of record of the Common Stock as of the close of business on
Monday, December 21, 1998 (the "Record Date") are entitled to notice of and to
vote at the Special Meeting and any adjournment thereof. On the Record Date,
there were 49,135,286 shares of Common Stock outstanding. Unless otherwise
indicated, all share numbers referred to herein reflect the Company's two-for-
one stock split in April 1998.
All shares of Common Stock represented by valid proxies received by the
Secretary of the Company at or prior to the Special Meeting will be voted as
specified in the proxy. If no specification is made, the shares will be voted
FOR the amendment to the Company's 1996 Incentive Stock Plan (now and as
amended, the "Plan" or the "1996 Plan") to increase the number of shares
available for issuance under the Plan and each of the matters submitted by the
Board of Directors for vote by the shareholders. Unless otherwise indicated by
the shareholder, the proxy card also confers discretionary authority on the
Board-appointed proxies to vote the shares represented by the proxy on any
matter that is properly presented for action at the Special Meeting. A
shareholder giving a proxy has the power to revoke it any time prior to its
exercise by delivering to the Secretary of the Company a written revocation or
a duly executed proxy bearing a later date (though no revocation shall be
effective until notice thereof has been given to the Secretary of the
Company), or by attendance at the meeting and voting his or her shares in
person.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding is required to constitute a quorum for the
transaction of business at the Special Meeting. The holders of Common Stock
have one vote for each share held by them as of the Record Date. A properly
executed proxy marked "abstain" will not be voted on the approval of the
amendment of the Plan but will count toward determining whether a quorum is
present. Under NASD rules, brokers who hold Common Stock in "street name" for
the beneficial owners of such shares cannot vote these shares on the proposed
amendment without specific instructions from their customers. Under
Pennsylvania law and Mastech's Bylaws, abstentions or, if your shares are held
in "street name," your failure to instruct your broker, will have no effect in
determining whether the proposed amendment to the Plan will be approved.
PROPOSAL 1
APPROVAL OF AMENDMENT TO 1996 INCENTIVE STOCK PLAN
AMENDMENT TO 1996 STOCK INCENTIVE PLAN
In September, 1998, the Board approved an amendment to the 1996 Plan which
you are now being asked to approve (the "Amendment") to increase the number of
shares covered by the 1996 Plan. Under the Amendment,
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the number of shares available for issuance under the 1996 Plan will be 15% of
the outstanding shares of the Company on each December 31 beginning on
December 31, 1998, provided, however, that the foregoing formula shall never
result in a decrease in the maximum number of shares available under the 1996
Plan. This represents an increase of 5% of the outstanding shares of the
Company over the current limit of shares available for issuance under the
Plan. The Amendment will take effect immediately upon its approval by the
shareholders. The Amendment is set forth in Exhibit A to this Proxy Statement.
The Board of Directors believes that the Amendment is necessary in light of
the substantial growth that the Company has experienced, both internally and
through acquisitions, and will benefit the Company by enhancing its ability to
attract and retain key personnel.
VOTES REQUIRED
The Amendment is being submitted to the shareholders of the Company in
compliance with certain rules of the Nasdaq Stock Market. The affirmative vote
of a majority of the votes cast by shareholders entitled to vote at the
Special Meeting is required for the approval of the Amendment to the 1996
Plan. If the shareholders do not approve the proposal, then the 1996 Plan will
continue in effect in accordance with its existing provisions.
SUMMARY OF THE MASTECH CORPORATION 1996 STOCK INCENTIVE PLAN
Purpose. The primary purposes of the 1996 Plan are to promote the long-term
success of the Company and its shareholders by strengthening the Company's
ability to attract and retain highly competent directors, employees and
consultants and to provide a means to encourage stock ownership and
proprietary interest in the Company. Grants of awards under the 1996 Plan are
consistent with the Company's goal of providing total employee compensation
that is competitive in the marketplace, recognizing meaningful differences in
individual performance, fostering teamwork and offering the opportunity to
earn above-average rewards when merited by individual and Company performance.
Eligibility, Shares Available and Closing Quotation. Directors, officers,
employees and consultants of the Company and its subsidiaries who, in the
opinion of the Plan Administrator, are mainly responsible for the continued
growth and development and future financial success of the Company shall be
eligible to participate in the Plan. Currently, 4,716,600 shares of Common
Stock, which represents 10% of the number of shares of Common Stock
outstanding on December 31, 1997, are available for issuance under the Plan.
Following the adoption of the Amendment, 15% of the number of outstanding
shares of the Company on each December 31 beginning on December 31, 1998 shall
be available for issuance under the Plan; provided, however, that the
foregoing formula shall never result in a reduction of the shares available
for issuance under the Plan. The Company estimates that the aggregate amount
of shares that will be subject to the Plan in 1999 will be approximately
7,074,900. As of November 30, 1998, options to purchase 3,862,385 shares of
Common Stock have been granted under the 1996 Plan. The aggregate number of
shares of Common Stock that may be covered by stock option awards granted to
any single individual under the 1996 Plan may not exceed 400,000 shares per
calendar year.
As of December 28, 1998, the closing price of Common Stock as reported on
the Nasdaq National Market was $27.06.
Types of Awards and Award Estimates. Under the 1996 Plan, participants may
receive stock options, SARs, stock awards and performance share awards, as
discussed in greater detail below. The Plan Administrator will determine the
type or types of awards to be made to each participant. Awards may be granted
singly, in combination or in tandem. "Fair Market Value" for all awards
granted under the 1996 Plan is defined generally as the closing price of a
share of Common Stock as reported or the Nasdaq National Market. Because the
grant
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of awards under the Plan is at the discretion of the Plan Administrator, it is
not possible to indicate which persons may receive awards under the Plan or
the amount of such awards.
Administration of the 1996 Plan. The 1996 Plan is administered by the Plan
Administrator, which has full and exclusive power to administer and interpret
the 1996 Plan and its provisions. This power includes, but is not limited to,
selecting award recipients, establishing all award terms and conditions,
adopting procedures and regulations governing awards and making all other
determinations necessary or advisable for the administration of the 1996 Plan.
All decisions made by the Plan Administrator are final and binding on all
persons affected by such decisions.
Stock Options. A stock option represents a right to purchase a specified
number of shares of Common Stock during a specified period as determined by
the Plan Administrator. The purchase price per share for each stock option
shall be determined by the Plan Administrator; provided, however, that such
price shall not, in the case of an Incentive Stock Option ("ISO"), be less
than 100% of the Fair Market Value of a share of Common Stock on the date of
grant, subject to certain exceptions. A stock option may be in the form of an
ISO which complies with Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or a non-qualified stock option. The shares covered by a
stock option may be purchased by (1) cash payment, (2) tendering shares of
Common Stock, (3) third-party cash-less exercise transactions or (4) any
combination of these methods. The term of any ISO shall not exceed ten years
from the date of grant.
SARs. A SAR generally represents a right to receive payment, in cash and/or
shares of Common Stock, equal to the excess of the Fair Market Value of a
specified number of shares of Common Stock on the date the SAR is exercised
over the Fair Market Value of such shares on the date the SAR was granted, as
set forth in the applicable award agreement.
Stock Awards. The Plan Administrator may, in its sole discretion, grant or
sell a Stock Award to any officer, employee or consultant of the Company or
its subsidiaries, pursuant to which such individual may receive shares of
Common Stock free of any vesting restrictions. Stock Awards, may be granted or
sold in respect of past services or other valid consideration, or in lieu of
any cash compensation due to such individual.
Performance Share Awards. Independent of or in connection with the granting
of any other award under the 1996 Plan, the Plan Administrator may, in its
sole discretion, grant Performance Share Awards to any officer, employee or
consultant of the Company or its subsidiaries. A Performance Share Award is an
award entitling the recipient to acquire shares of Common Stock upon the
attainment of specialized performance goals, which shall be determined by the
Plan Administrator.
Restricted Stock. Restricted Stock Awards entitle the participant to acquire
shares subject to such restrictions, conditions and vesting schedules as the
Plan Administrator may determine.
Adjustments or Amendment. In the event of a stock dividend, stock split or
other change affecting the shares or share price of Common Stock, adjustments
shall be made with respect to (1) the aggregate number of shares of Common
Stock that may be issued under the 1996 Plan, (2) each outstanding award made
under the 1996 Plan, and (3) the exercise price per share for any outstanding
stock options, SARs or similar awards under the 1996 Plan. The Board of
Directors may alter, amend, suspend or otherwise discontinue the Plan at any
time, provided that no such action will adversely affect prior awards under
the Plan.
Tax Withholding.
Whenever shares are to be issued or cash is to be paid under the 1996 Plan,
the Company shall have the right to require the participant to remit to the
Company an amount sufficient to satisfy federal, state and local tax
withholding requirements. Such withholding requirements may be paid (i) in
cash; (ii) in the discretion of the Plan Administrator, through the delivery
to the Company of previously-owned shares of Common Stock having an aggregate
Fair Market Value equal to the tax obligation provided that the previously
owned shares delivered
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in satisfaction of the withholding obligations must have been held by the
participant for at least six (6) months; or (iii) in the discretion of the
Plan Administrator, through a combination of the procedures set forth in
subsections (i) and (ii) above.
Federal Income Tax Consequences. In general, under the Code as presently in
effect, a participant will not be deemed to receive any income for federal
income tax purposes at the time an option or SAR is granted or a restricted
stock award or other non-vested share award is made, nor will the Company be
entitled to a tax deduction at that time. A participant will recognize
ordinary income and the Company will be entitled to a corresponding tax
deduction at the time a stock award is granted. When any part of an option or
SAR is exercised, when restrictions on restricted stock lapse (or performance
goals are attained for performance share awards) or when an unrestricted stock
award is made, the federal income tax consequences may be summarized as
follows:
1. In the case of an exercise of a non-qualified stock option or an SAR, the
participant will recognize ordinary income in an amount equal to the
difference between the option price and the Fair Market Value of the Common
Stock on the exercise date.
2. In the case of performance share awards or restricted stock awards, the
immediate federal income tax effect for the recipient will depend on the
nature of the restrictions. Generally, the value of the Common Stock will
not be taxable to the recipient as ordinary income until the year in which
his or her interest in the stock is freely transferable or is no longer
subject to a substantial risk of forfeiture. However, the recipient may
elect to recognize income when the stock is received, rather than when his
or her interest in the stock is freely transferable or is no longer subject
to a substantial risk of forfeiture. If the recipient makes this election,
the amount taxed to the recipient as ordinary income is determined as of
the date of receipt of the restricted stock. Unrestricted stock awards will
generally be taxable as ordinary income to the recipient upon receipt.
3. In the case of an ISO, there is no tax liability at the time of exercise.
However, the excess of the Fair Market Value of the Common Stock on the
exercise date over the option price is included in the participant's income
for purposes of the alternative minimum tax. If no disposition of the ISO
stock is made before the later of one year from the date of exercise or two
years from the date the ISO is granted, the participant will realize a
long-term capital gain or loss upon a sale of the stock; if the stock is
not held for the required period, ordinary income tax treatment will
generally apply to the amount of any gain at sale or exercise, whichever is
less, and the balance of any gain or loss will be treated as capital gain
or loss (long-term or short-term, depending on whether the shares have been
held for more than one year).
4. Upon the exercise of a non-qualified stock option or SAR, or the vesting of
a performance share award or a restricted stock award, and the recognition
of income upon the vesting of a performance share award or a restricted
stock award, the Company will generally be allowed an income tax deduction
equal to the ordinary income recognized by the employee. The Company does
not receive an income tax deduction as a result of the exercise of an ISO,
provided that the ISO stock is held for the required period as described
above. If the ISO is not held for such required period and ordinary income
tax treatment is applied to the amount of any gain at sale or exercise by
the recipient, the Company will generally receive an income tax deduction
for a corresponding amount.
The foregoing is only a summary of the effect of federal income taxation
upon award recipients and the Company with respect to the grant and exercise
of awards under the 1996 Plan. It does not purport to be complete, and does
not discuss the tax consequences of the employee's death or the provisions of
the income tax laws of any municipality, state or foreign country in which the
employee may reside.
Because executive officers (who may also be members of the Board) are
eligible to receive awards under the Plan, each of them has a personal
interest in the approval of these amendments.
5
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT.
PROXIES RECEIVED BY THE COMPANY WILL BE VOTED IN FAVOR OF APPROVAL OF THE
AMENDMENT UNLESS A CONTRARY CHOICE IS INDICATED.
DIRECTORS' COMPENSATION
Directors who are not executive officers of the Company are paid an annual
retainer of $20,000, and all directors are reimbursed for travel expenses
incurred in connection with attending Board and committee meetings. Directors
are not entitled to additional fees for serving on committees of the Board of
Directors. Pursuant to the terms of the Company's 1996 Stock Incentive Plan,
each of Messrs. Berty, Garrett and Yourdon, the nonemployee directors of the
Company, were granted options to purchase 15,000 shares of Common Stock in
December of 1996. The exercise price for these options is $15 per share, which
was the price per share for the Common Stock in the Company's initial public
offering. The options vest in annual installments equally over three years
commencing December 16, 1997, and expire ten years after grant, subject to
earlier termination if the optionee ceases to serve as a director prior to
vesting. On April 10, 1998 (the "Distribution Date"), the Company effected a
2-for-1 stock split in the form of a 100% stock distribution. Each unexercised
option as of the Distribution Date was automatically converted into the right
to receive two shares of Common Stock at an exercise price of $7.50 per share.
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of December 21, 1998 of: (i) each
person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock; (ii) each executive officer named in the
Summary Compensation Table below; and (iii) all directors and executive
officers of the Company as a group. As of December 21, 1998, there were
49,135,286 shares of Common Stock outstanding. Except as noted, all persons
listed below have sole voting and investment power with respect to their
shares of Common Stock, subject to community property laws where applicable.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
--------------------------
PERCENTAGE OF
NAME AND ADDRESS OF SHARES OF COMMON STOCK
BENEFICIAL OWNER COMMON STOCK OUTSTANDING
------------------- ------------ -------------
<S> <C> <C>
Sunil Wadhwani (1)(2).............................. 14,880,000 30.3%
Ramesh Thadani, as co-trustee of a Wadhwani family
trust (2)(3)...................................... 2,667,392 5.4
Ashok Trivedi (2)(4)............................... 14,880,000 30.3
Arun Nayar, as co-trustee of certain Trivedi family
trusts (2)(5)..................................... 4,487,392 9.1
Mohan Phanse, as co-trustee of certain Trivedi
family trusts (2)(5).............................. 2,667,392 5.4
Michel Berty....................................... 10,000 *
J. Gordon Garrett.................................. 24,000 *
Ed Yourdon......................................... 20,000 *
Steven Shangold (6) ............................... 30,000 *
Lisa Kustra........................................ 20,000 *
Ajmal Noorani...................................... 20,000 *
All directors and executive officers as a group 13
persons (7)....................................... 29,964,000 61.0
</TABLE>
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* Less than 1%
(1) Includes 4,487,392 shares held by three family trusts, for which Mr.
Wadhwani is a co-trustee with sole investment power and no voting power
over such shares.
(2) The address of Messrs. Wadhwani, Trivedi, Thadani, Nayar and Phanse is
c/o Mastech Corporation, 1004 McKee Road, Oakdale, Pennsylvania 15071.
(3) Mr. Thadani is a co-trustee of two of the Wadhwani family trusts referred
to in note 1, above, with no investment power and sole voting power over
such shares.
(4) Includes 4,487,392 shares held by three family trusts, for which Mr.
Trivedi is a co-trustee with sole investment power and no voting power
over such shares.
(5) Mr. Nayar is co-trustee of the three Trivedi family trusts and Mr. Phanse
is co-trustee of two of the Trivedi family trusts, in each case, referred
to in note 4 above, with no investment power and shared voting power over
such shares.
(6) Includes 20,000 shares of Common Stock underlying options which are
exercisable on or before December 21, 1998 or within 60 days after such
date.
(7) Includes 80,000 shares of Common Stock underlying options which are
exercisable on or before December 21, 1998 or within 60 days after such
date.
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SUMMARY COMPENSATION TABLE
The following table sets forth certain information with respect to the
annual and long-term compensation of the Company's Chief Executive Officer and
each of the four other most highly compensated executive officers of the
Company (such executive officers are sometimes collectively referred to herein
as the "Named Executive Officers"). The information in this table is presented
for the three years ended December 31, 1997.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------------- --------------------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND COMPENSATION STOCK AWARDS OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(2) ($)(3)(4) ($) (#) ($)
------------------ ---- ---------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sunil Wadhwani 1997 300,000 158,473 20,334 -- -- --
Co-Chairman and Chief 1996 168,000(1) -- 21,050 -- -- --
Executive Officer 1995 108,102(1) -- -- -- -- --
Ashok Trivedi 1997 300,000 158,473 20,306 -- -- --
Co-Chairman 1996 168,000(1) -- 20,963 -- -- --
and President 1995 108,102(1) -- -- -- -- --
Steven Shangold 1997 150,000 186,365 -- -- -- --
Vice President--U.S.
Sales 1996 126,667 74,265 -- 819,000(5) 25,000 819,000(5)
and Marketing 1995 68,333 170,003 -- -- -- --
Lisa Kustra 1997 80,000 170,240 -- -- -- --
Vice President--
Enterprise 1996 70,000 61,484 -- -- 52,000 --
Package Solutions
Division 1995 40,000 142,713 -- -- -- --
Ajmal Noorani 1997 150,000 73,672 -- -- -- --
Vice President-- 1996 64,615 10,000 -- -- 62,000 --
International
Operations 1995 -- -- -- -- -- --
</TABLE>
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(1) During 1995 and 1996 (prior to the initial public offering), Messrs.
Wadhwani and Trivedi received Subchapter S distributions as shareholders
of the Company. Following the initial public offering this practice was
terminated.
(2) Bonuses were paid in 1995, 1996 and 1997 for performance in 1994, 1995
and 1996, respectively. The 1995 bonus amount shown for Mr. Shangold
includes sales commissions of $24,944. The 1995 and 1996 bonus amounts
for Ms. Kustra include sales commissions of $142,713 and $27,967,
respectively.
(3) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted when such perquisites and other personal benefits
constituted less than 10% of the total annual salary and bonus for each
of the named executive officers for such year.
(4) During 1995, 1996 and 1997, the Company leased automobiles for Messrs.
Wadhwani and Trivedi. The incremental costs to the Company in 1996 and
1997 for the automobiles leased was $21,050 and $20,334, respectively for
Mr. Wadhwani and $20,963 and $20,306, respectively for Mr. Trivedi.
(5) As compensation for past services, the Company paid Mr. Shangold an
amount equal to the value of 109,200 shares of Common Stock at the
initial public offering price of $15 per share. One-half of this payment
was made in cash, at Mr. Shangold's election. The remaining half of this
obligation was satisfied through the issuance of 54,600 shares of
restricted Common Stock. In December 1997, Mr. Shangold sold 25,000
shares of the restricted stock under the above agreement. The aggregate
value of the 29,600 (59,200 post stock split) remaining shares of
restricted stock which vested on June 30, 1998 was $939,800 at December
31, 1997.
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OPTION GRANTS DURING 1997
The Company did not grant options to purchase Common Stock to the Named
Executive Officers during 1997.
OPTION EXERCISES DURING 1997 AND YEAR END OPTION VALUES
The following table sets forth the aggregate dollar value of all options
exercised and the total number of unexercised options held, on December 31,
1997, by each of the Named Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF IN-THE-MONEY
UNDERLYING OPTIONS/SARS OPTIONS/SARS
AT FISCAL YEAR END (#) AT FISCAL YEAR END ($)
SHARES ACQUIRED VALUE ------------------------- ----------------------------
EXECUTIVE OFFICER ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ----------------- --------------- ------------ ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Sunil Wadhwani.......... -- -- --/-- --/--
Ashok Trivedi........... -- -- --/-- --/--
Steven Shangold......... 25,000 $756,250 --/25,000 --/$418,750
Lisa Kustra............. 12,000 $183,000 10,000/30,000 $167,500/$502,500
Ajmal Noorani........... 20,000 $305,000 2,000/40,000 $ 33,500/$670,000
</TABLE>
- --------
(1) The closing price for the Company's Common Stock as reported by THE
NASDAQ NATIONAL MARKET tier of THE NASDAQ STOCK MARKET on December 31,
1997 was $31.75. Value is calculated on the basis of the difference
between the option exercise price and $31.75, multiplied by the number of
shares of Common Stock underlying the option.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to March of 1997, Messrs. Wadhwani and Trivedi, the Company's Co-
Chairman and Chief Executive Officer and the Company's Co-Chairman and
President, respectively, had responsibility for all decisions with respect to
executive officer compensation. In March of 1997 the Compensation Committee
was formed and consists of Messrs. Garrett, Berty and Trivedi. Mr. Trivedi is
the Company's Co-Chairman and President.
EMPLOYMENT AGREEMENTS
The Company has entered into substantially identical employment contracts
with Messrs. Wadhwani and Trivedi, pursuant to which each of them serves as an
executive officer of the Company at an annual base salary of not less than
$300,000, plus an annual bonus of not less than $200,000 if performance goals
to be established by the Compensation Committee of the Board of Directors are
met. The agreements have a term of 24 months and automatically extend for one
month at the end of each month unless either party gives notice of their
intention to terminate the agreement at the end of the term. The agreements
provide that upon termination of employment by the Company other than for
cause (as defined in the agreements) or death, disability or retirement, the
Company shall pay the officer a lump sum amount equal to the amount the
executive would have been paid, based upon his base salary at the time of
termination, if such executive had remained an employee for the full term of
his contract, plus shares of Common Stock having a value equal to the value of
the executive's vested stock options and stock appreciation rights. In such
event, the Company will also provide health insurance for the executive for
the remainder of his life at the level in effect for other executives prior to
his termination for the remainder of the term. In the event the executive is
terminated due to a disability, the Company will continue to pay for three
years the executive's salary and an amount equal to his bonus in the year
prior to his termination, reduced by any amounts paid to the executive under
the Company's disability plan. Under the agreements, the Company agrees to
indemnify the executive to the full extent not prohibited by law for
liabilities he incurs in his capacity as a director, officer or controlling
person of the Company. Under the agreements, the executives agree to a
noncompetition covenant during the term of the agreement and for one year
after the termination of their employment for cause and to nonsolicitation and
nondisclosure covenants during the term of the agreement and for one year
after the termination of their employment for any reason.
9
<PAGE>
The other Named Executive Officers are parties to employment agreements
which outline their responsibilities and provide generally for base salary
plus annual incentive bonuses. These Named Executive Officers are "at-will"
employees of the Company and can be terminated by the Company with or without
cause, or they may resign. Under the agreements, the Named Executive Officers
are entitled to three months' salary continuation if they are terminated by
the Company without cause generally, and to six months' salary continuation if
they are terminated by the Company without cause during the 90 days following
the sale of the Company to a third party. The employment agreements also
contain confidentiality provisions and noncompetition and nonsolicitation
covenants.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the meeting. However, if any other matters are properly presented to
the meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and
regular employees, without additional remuneration, may solicit proxies by
telephone, telegraph and personal interviews. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the
owners of stock held in their names, and the Company will reimburse them for
reasonable out-of-pocket expenses in connection with the distribution of proxy
solicitation material.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Proxy Statement incorporates by reference (i) the Company's Annual
Report to Shareholders on Form 10-K (without exhibits) for the year ended
December 31, 1997 and (ii) the Company's Quarterly Report on Form 10-Q for the
quarterly periods ending March 31, 1998, June 30, 1998 and September 30, 1998
(collectively, the "Mastech Reports"). The Company will, upon written request
of any shareholder, furnish any exhibits to the Mastech Reports upon payment
of an appropriate processing fee. Please address all such requests to the
Company, Attention of Jeffrey McCandless, Vice President--Finance, 1004 McKee
Road, Oakdale, Pennsylvania 15071.
DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the Company at its principal
office in Oakdale, Pennsylvania not later than January 1, 1999 for inclusion
in the Proxy Statement for that meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE. YOUR PROMPT RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE
MEETING. WE APPRECIATE YOUR COOPERATION.
10
<PAGE>
EXHIBIT A
MASTECH CORPORATION 1996 STOCK INCENTIVE PLAN
SECOND AMENDMENT TO PLAN
Section 5 of the 1996 Plan (Shares Subject to the Plan) shall be replaced by
the following paragraph:
SHARES SUBJECT TO THE PLAN. The number of shares of Stock which may be
issued pursuant to the Plan shall be 15% of the total of the number of shares
outstanding on each December 31, beginning on December 31, 1998; provided,
however, that the foregoing formula shall never result in a decrease in the
maximum number of shares available under this Plan. For purposes of the
foregoing limitation, the shares of Stock underlying any Awards which are
forfeited, canceled, reacquired by the Company, satisfied without the issuance
of Stock or otherwise terminated (other than by exercise) shall be added back
to the number of shares of Stock available for issuance under the Plan.
Notwithstanding the foregoing, on and after the date that the Plan is subject
to Section 162(m) of the Code, Stock Options with respect to no more than
400,000 shares of Stock may be granted to any one individual participant
during any one calendar year period. To the extent that an SAR is granted in
conjunction with an Option, the shares covered by such SAR and Option shall be
counted only once. Common Stock to be issued under the Plan may be either
authorized and unissued shares or shares held in treasury by the Company.
1
<PAGE>
FORM OF
PROXY
MASTECH CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
Sunil Wadhwani and Ashok Trivedi, with full power of substitution in each,
are hereby authorized to represent the undersigned at the 1999 Special Meeting
of Shareholders of Mastech Corporation to be held at the Company's Corporate
Offices at 1004 McKee Road, Oakdale, Pennsylvania on Monday, February 1, 1999
at 11:00 a.m., and at any adjournment thereof, and thereat to vote the same
number of shares as the undersigned would be entitled to vote if then
personally present.
PROPOSAL 1.
Approval of an Amendment to the Company's 1996 Incentive Stock
Plan ("the Amended Plan") which will increase the number of
shares of Common Stock the Company is authorized to issue under
the Amended Plan from 10% of the shares outstanding to 15% of
the shares outstanding on each December 31.
FOR [_] AGAINST [_] ABSTAIN [_]
--------------------------------------------------
(IMPORTANT--TO BE SIGNED AND DATED ON REVERSE SIDE)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL HAVE
NO EFFECT ON THE VOTE ON ANY MATTER TO COME BEFORE THE SHAREHOLDERS AT THE
ANNUAL MEETING.
DATE: , 1999
----------------------------------
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Shareholder(s) sign above exactly
as name is printed on label. If
signing as representative, so
indicate. For joint accounts, all
owners should sign.
<PAGE>
Mastech Corporation
SECOND AMENDED AND RESTATED 1996 STOCK INCENTIVE PLAN
Section 1. General Purpose of the Plan; Definitions. The name of the plan
is the Mastech Corporation Second Amended and Restated 1996 Stock Incentive Plan
(the "Plan"). The purpose of the Plan is to encourage and enable the officers,
employees, directors and consultants of Mastech Corporation (the "Company") and
its Subsidiaries upon whose judgment, initiative and efforts the Company largely
depends for the successful conduct of its business to acquire a proprietary
interest in the Company. It is anticipated that providing such persons with a
direct stake in the Company's welfare will assure a closer identification of
their interests with those of the Company, thereby stimulating their efforts on
the Company's behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Restricted Stock Awards, Stock Awards, Performance Share Awards and
Stock Appreciation Rights.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Effective Date" means the date on which the Plan is approved by the
stockholders as set forth in Section 19.
"Fair Market Value" of the Stock on any given date means (i) if the Stock
is admitted to quotation on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), the Fair Market Value on any given date
shall be the average of the highest bid and lowest asked prices of the Stock
reported for such date or, if no bid and asked prices were reported for such
date, for the last day preceding such date for which such prices were reported,
or (ii) if the Stock is admitted to trading on a United States securities
exchange or the NASDAQ National Market System, the Fair Market Value on any date
shall be the closing price reported for the Stock on such exchange or system for
such date or, if no sales were reported for such date, for the last day
preceding such date for which a sale was reported; (iii) notwithstanding the
foregoing, the Fair Market Value of the Stock on the effective date of the
Initial Public Offering shall be the offering price to the public of the Stock
on such date; and (iv) if the Fair Market Value cannot be determined on the
basis previously set forth in this definition on the date that
<PAGE>
Fair Market Value is to be determined, The Board shall in good faith determine
the Fair Market Value of the Stock on such date.
"Incentive Stock Option" means any Stock Option designated and qualified as
an "incentive stock option" as defined in Section 422 of the Code.
"Independent Director" means a member of the Board who is not an employee
or officer of the Company or any Subsidiary.
"Initial Public Offering" means the first underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Stock to the public.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Option" or "Stock Option" means any Option to purchase shares of Stock
granted pursuant to Section 6.
"Performance Share Award" means any Award granted pursuant to Section 12.
"Restricted Stock Award" means any Award granted pursuant to Section 10.
"Stock" means the Common Stock, par value $.01 per share, of the Company,
subject to adjustments pursuant to Section 14.
"Stock Appreciation Right" or "SAR" means any Award granted pursuant to
Section 7.
"Stock Award" means any award granted pursuant to Section 11.
"Subsidiary" means any corporation or other entity (other than the Company)
in any unbroken chain of corporations or other entities, beginning with the
Company, if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50% or more of the economic interest or the total combined voting
power of all classes of stock or other interests in one of the other
corporations or entities in the chain.
Section 2. Administration. The Plan shall be administered by the full
Board of Directors of the Company or a committee of such Board of Directors
comprised of two or more "Non-Employee Directors" within the meaning of Rule
16b-3(a)(3) promulgated under the Act (the "Plan Administrator"). Subject to the
provisions of the Plan, the Plan Administrator is authorized to:
(a) construe the Plan and any Award under the Plan;
(b) select the directors, officers, employees and consultants of the
Company and its Subsidiaries to whom Awards may be granted;
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<PAGE>
(c) determine the number of shares of Stock to be covered by any
Award;
(d) determine and modify from time to time the terms and conditions,
including restrictions, of any Award and to approve the form of
written instrument evidencing Awards;
(e) accelerate at any time the exercisability or vesting of all or
any portion of any Award and/or to include provisions in awards
providing for such acceleration;
(f) impose limitations on Awards, including limitations on transfer
and repurchase provisions;
(g) extend the exercise period within which Stock Options may be
exercised; and
(h) determine at any time whether, to what extent, and under what
circumstances Stock and other amounts payable with respect to an
Award shall be deferred either automatically or at the election
of the participant and whether and to what extent the Company
shall pay or credit amounts constituting interest (at rates
determined by the Plan Administrator) or dividends or deemed
dividends on such deferrals.
The determination of the Plan Administrator on any such matters shall be
conclusive.
Section 3. Delegation of Authority to Grant Awards. The Plan
Administrator, in its discretion, may delegate to the Co-Chairmen of the Company
all or part of the Plan Administrator's authority and duties with respect to
granting Awards to individuals who are not subject to the reporting provisions
of Section 16 of the Act or "covered employees" within the meaning of Section
162(m) of the Code. The Plan Administrator may revoke or amend the terms of such
a delegation at any time, but such revocation shall not invalidate prior actions
of the Co-Chairmen that were consistent with the terms of the Plan.
Section 4. Eligibility. Directors, officers, employees and consultants of
the Company or its Subsidiaries who, in the opinion of the Plan Administrator,
are mainly responsible for the continued growth and development and future
financial success of the business shall be eligible to participate in the Plan.
In addition, Independent Directors are eligible to receive an automatic grant of
Stock Options pursuant to Section 9 hereof.
Section 5. Shares Subject to the Plan. The number of shares of Stock
which may be issued pursuant to the Plan shall be 15% of the total of the number
of shares outstanding on each December 31, beginning on December 31, 1998;
provided, however, that the foregoing formula shall never result in a decrease
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in the maximum number of shares available under this Plan. For purposes of the
foregoing limitation, the shares of Stock underlying any Awards which are
forfeited, canceled, reacquired by the Company, satisfied without the issuance
of Stock or otherwise terminated (other than by exercise) shall be added back to
the number of shares of
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<PAGE>
Stock available for issuance under the Plan. Notwithstanding the foregoing, on
and after the date that the Plan is subject to Section 162(m) of the Code, Stock
Options with respect to no more than 400,000 shares of Stock may be granted to
any one individual participant during any one calendar year period. To the
extent that an SAR is granted in conjunction with an Option, the shares covered
by such SAR and Option shall be counted only once. Common Stock to be issued
under the Plan may be either authorized and unissued shares or shares held in
treasury by the Company.
Section 6. Stock Options. Options granted pursuant to the Plan may be
either Options which are Incentive Stock Options or Non-Qualified Stock Options.
Incentive Stock Options and Non-Qualified Stock Options shall be granted
separately hereunder. The Plan Administrator, shall determine whether and to
what extent Options shall be granted under the Plan and whether such Options
granted shall be Incentive Stock Options or Non-Qualified Stock Options;
provide, however, that: (a) Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a "subsidiary corporation"
within the meaning of Section 424(f) of the Code; and (b) No Incentive Stock
Option may be granted following the tenth anniversary of the effective date of
the Plan. The provisions of the Plan and any stock Option agreement pursuant to
which Incentive Stock Options shall be issued shall be construed in a manner
consistent with Section 422 of the Code (or any successor provision) and rules
and regulations promulgated thereunder.
Section 7. Stock Appreciation Rights. The Plan Administrator may, from
time to time, subject to the provisions of the Plan, grant SARs to eligible
participants. Such SARs may be granted (i) alone, (ii) simultaneously with the
grant of an Option (either an Incentive Stock Option or Non-Qualified Stock
Option) and in conjunction therewith or in the alternative thereto or (iii)
subsequent to the grant of a Non-Qualified Stock Option and in conjunction
therewith or in the alternative thereto.
(a) An SAR shall entitle the holder upon exercise thereof to receive
from the Company, upon a written request filed with the Secretary
of the Company at its principal offices (the "Request"), (i) a
number of shares of Stock (with or without restrictions as to
substantial risk of forfeiture and transferability, as determined
by the Plan Administrator in its sole discretion), (ii) an amount
of cash, or (iii) any combination of shares of Stock and cash, as
specified in the Request (but subject to the approval of the Plan
Administrator in its sole discretion, at any time up to and
including the time of payment, as to the making of any cash
payment), having an aggregate Fair Market Value equal to the
product of (i) the excess of the Fair Market Value, on the day of
such Request, of one share of Stock over the exercise price per
share specified in such SAR or its related Option, multiplied by
(ii) the number of shares of Stock for which such SAR shall be
exercised.
(b) The exercise price of an SAR granted alone shall be determined by
the Plan Administrator, but may not be less than the Fair Market
Value of the
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<PAGE>
underlying Stock on the date of grant. An SAR granted
simultaneously with or subsequent to the grant of an Option and
in conjunction therewith or in the alternative thereto shall have
the same exercise price as the related Option, shall be
transferable only upon the same terms and conditions as the
related Option, and shall be exercisable only to the same extent
as the related Option; provided, however, that an SAR, by its
-------- -------
terms, shall be exercisable only when the Fair Market Value of
the Stock subject to the SAR and related Option exceeds the
exercise price thereof.
(c) Upon exercise of an SAR granted simultaneously with or subsequent
to an Option and in the alternative thereto, the number of shares
of Stock for which the related Option shall be exercisable shall
be reduced by the number of shares of Stock for which the SAR
shall have been exercised. The number of shares of Stock for
which an SAR shall be exercisable shall be reduced upon any
exercise of a related Option by the number of shares of Stock for
which such Option shall have been exercised.
(d) Any SAR shall be exercisable upon such additional terms and
conditions as may be prescribed by the Plan Administrator.
Section 8. Terms of Options and SARs. Each Option or SAR granted under
the Plan shall be evidenced by an agreement between the Company and the person
to whom such Option or SAR is granted and shall be subject to the following
terms and conditions:
(a) Subject to adjustment as provided in Section 14 of this Plan, the
price at which each share covered by an Option may be purchased
shall be determined in each case by the Plan Administrator;
provided, however, that such price shall not, in the case of an
Incentive Stock Option, be less than the Fair Market Value of the
underlying Stock at the time the Option is granted. If an
optionee owns (or is deemed to own under applicable provisions of
the Code and rules and regulations promulgated thereunder) more
than ten percent (10%) of the combined voting power of all
classes of the stock of the Company and an Option granted to such
optionee is intended to qualify as an Incentive Stock Option, the
Option price shall be no less than 110% of the Fair Market Value
of the Common Stock covered by the Option on the date the Option
is granted.
(b) The aggregate Fair Market Value of shares of Stock with respect
to which Incentive Stock Options are first exercisable by the
optionee in any calendar year (under all plans of the Company)
shall not exceed the limitations, if any, imposed by Section
422(d) of the Code (or any successor provision). If any Option
designated as an Incentive Stock Option, either alone or in
conjunction with any other Option or Options, exceeds the
foregoing limitation, the portion of such Option in excess of
such limitation shall automatically be reclassified (in whole
share
-5-
<PAGE>
increments and without fractional share portions) as a Non-
Qualified Stock Option, with later granted Options being so
reclassified first.
(c) Neither an Option nor an SAR shall be transferable by the
participant otherwise than by will or by the laws of descent and
distribution or pursuant to a domestic relations order. After the
death of the participant, the Option or SAR may be transferred to
the Company upon such terms and conditions, if any, as the Plan
Administrator and the personal representative or other person
entitled to exercise the Option or SAR may agree within the
period specified in subsection 8(d)(iii) hereof.
(d) An Option or SAR may be exercised in whole at any time, or in
part from time to time, within such period or periods (not to
exceed ten years from the granting of the Option in the case of
an Incentive Stock Option) as may be determined by the Plan
Administrator and set forth in the agreement (such period or
periods being hereinafter referred to as the "Option Period"),
provided that, unless the agreement provides otherwise:
(i) If a participant who is an employee of the Company shall
cease to be employed by the Company, all Options and SARs
to which the employee is then entitled to exercise may be
exercised only within three months after the termination of
employment and within the Option Period or, if such
termination was due to disability or retirement (as
hereinafter defined), within one year after termination of
employment and within the Option Period. Notwithstanding
the foregoing: (a) in the event that any termination of
employment shall be for Cause (as defined herein) or the
participant becomes an officer or director of, a consultant
to or employed by a Competing Business (as defined herein),
during the Option Period, then any and all Options and SARs
held by such participant shall forthwith terminate; and(b)
the Plan Administrator may, in its sole discretion, extend
the Option Period of any Option or SAR for up to three
years from the date of termination of employment regardless
of the original Option Period. For purposes of the Plan,
retirement shall mean the termination of employment with
the Company, other than for Cause, at any time after the
age 65.
For purposes of this Plan, the term "Cause" shall mean (a)
with respect to an individual who is party to a written
agreement with the Company which contains a definition of
"cause" or "for cause" or words of similar import for
purposes of termination of employment thereunder by the
Company, "cause" or "for cause" as defined in such
agreement; (b) in all other cases (I) the willful
commission by an employee of a criminal or other act that
causes
-6-
<PAGE>
substantial economic damage to the Company or substantial
injury to the business reputation of the Company; (II) the
commission of an act of fraud in the performance of such
person's duties to or on behalf of the Company; or (III)
the continuing willful failure of a person to perform the
duties of such person to the Company (other than a failure
to perform duties resulting from such person's incapacity
due to illness) after written notice thereof (specifying
the particulars thereof in reasonable detail) and a
reasonable opportunity to cure such failure are given to
the person by the Board of Directors of the Company or the
Plan Administrator. For purposes of the Plan, no act, or
failure to act, on the part of any person shall be
considered "willful" unless done or omitted to be done by
the person other than in good faith and without reasonable
belief that the person's action or omission was in the best
interest of the Company.
For purposes of this Plan, the term "Competing Business"
shall mean: any person, corporation or other entity engaged
in the business of (a) providing information technology
services or (b) selling or attempting to sell any product
or service which is the same as or similar to products or
services sold by the Company within the last year prior to
termination of such person's employment, consultant
relationship or directorship, as the case may be,
hereunder.
(ii) If a participant who is a director of the Company shall
cease to serve as a director of the Company, any Options or
SARs then exercisable by such director may be exercised
only within three months after the cessation of service and
within the Option Period unless such cessation was due to
disability, in which case such optionee may exercise such
Option or SAR within one year after cessation of service
and within the Option Period. Notwithstanding the
foregoing: (a) if any cessation of service as a director
was the result of removal for Cause or the participant
becomes an officer or director of, a consultant to or
employed by a Competing Business during the Option Period,
any Options and SARs held by such participant shall
forthwith terminate; and (b) the Plan Administrator may in
its sole discretion extend the Option Period of any Option
or SAR for up to three years from the date of cessation of
service regardless of the original Option Period;
(iii) If the participant shall die during the Option Period, any
Options or SARs then exercisable may be exercised only
within one year after the participant's death and within
the Option Period and only by
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<PAGE>
the participant's personal representative or persons
entitled thereto under the participant's will or the laws
of descent and distribution;
(iv) The Option or SAR may not be exercised for more shares
(subject to adjustment as provided in Section 14) after the
termination of the participant's employment, cessation of
service as a director or the participant's death, as the
case may be, than the participant was entitled to purchase
thereunder at the time of the termination of the
participant's employment or the participant's death; and
(v) If a participant owns (or is deemed to own under applicable
provisions of the Code and regulations promulgated
thereunder) more than 10% of the combined voting power of
all classes of stock of the Company (or any parent or
subsidiary corporation of the Company) and an Option
granted to such participant is intended to qualify as an
Incentive Stock Option, the Option by its terms may not be
exercisable after the expiration of five years from the
date such Option is granted.
(e) The Option exercise price of each share purchased pursuant to an
Option shall be paid in full at the time of each exercise (the
"Payment Date") of the Option (i) in cash; (ii) by delivering to
the Company a notice of exercise with an irrevocable direction to
a broker-dealer registered under the Act to sell a sufficient
portion of the shares and deliver the sale proceeds directly to
the Company to pay the exercise price; (iii) in the discretion of
the Plan Administrator, through the delivery to the Company of
previously-owned shares of Common Stock having an aggregate Fair
Market Value equal to the Option exercise price of the shares
being purchased pursuant to the exercise of the Option; provided,
however, that shares of Common Stock delivered in payment of the
Option price must have been held by the participant for at least
six (6) months in order to be utilized to pay the Option price;
(iv) in the discretion of the Plan Administrator, through an
election to have shares of Common Stock otherwise issuable to the
optionee withheld to pay the exercise price of such Option; or (v)
in the discretion of the Plan Administrator, through any
combination of the payment procedures set forth in subsections
(i)-(iv) of this Section 8(e).
(f) The Plan Administrator, in its discretion, may authorize "stock
retention Options" which provide, upon the exercise of an Option
previously granted under this Plan (a "prior Option"), using
previously owned shares, for the automatic issuance of a new
Option under this Plan with an exercise price equal to the current
Fair Market Value and for up to the number of shares equal to the
number of previously-owned shares
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<PAGE>
delivered in payment of the exercise price of the prior Option.
Such stock retention Option shall have the same Option Period as
the prior Option.
(g) Nothing contained in the Plan nor in any Award agreement shall
confer upon any participant any right with respect to the
continuance of employment by the Company nor interfere in any way
with the right of the Company to terminate his employment or
change his compensation at any time.
(h) The Plan Administrator may include such other terms and conditions
not inconsistent with the foregoing as the Plan Administrator
shall approve. Without limiting the generality of the foregoing
sentence, the Plan Administrator shall be authorized to determine
that Options or SARs shall be exercisable in one or more
installments during the term of the Option, subject to the
attainment of performance goals and objectives and the right to
exercise may be cumulative as determined by the Plan
Administrator.
Section 9. Independent Director Options. Anything to the contrary
notwithstanding, each Independent Director who is first elected or appointed to
serve as a director commencing after the effective time of the Initial Public
Offering shall automatically be granted Non-Qualified Stock Options to purchase
15,000 shares of Stock. The Option exercise price for Options granted to
Independent Directors under the Plan will be equal the Fair Market Value of the
Stock on the date of grant. Options granted to Independent Directors under the
foregoing provisions will be granted on the date that such Independent Director
is first elected or appointed to serve as a director and will vest in equal
annual installments over three years commencing on the anniversary of the date
of grant and will expire ten years after grant, subject to earlier termination
if the optionee ceases to serve as a director.
Section 10. Restricted Stock Awards.
(a) The Plan Administrator may grant Restricted Stock Awards to any
officer, employee or consultant of the Company and its
Subsidiaries. A Restricted Stock Award entitles the recipient to
acquire shares of Stock subject to such restrictions and
conditions as the Plan Administrator may determine at the time of
grant ("Restricted Stock"). Conditions may be based on continuing
employment (or other business relationship) and/or achievement of
pre-established performance goals and objectives.
(b) Upon execution of a written instrument setting forth the
Restricted Stock Award and paying any applicable purchase price,
a participant shall have the rights of a shareholder with respect
to the Stock subject to the Restricted Stock Award, including,
but not limited to the right to vote and receive dividends with
respect thereto; provided, however, that shares of Stock subject
to Restricted Stock Awards that have not vested shall be subject
to the restrictions on transferability described in Section 10(d)
below. Unless the Plan Administrator shall otherwise determine,
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<PAGE>
certificates evidencing the Restricted Stock shall remain in the
possession of the Company until such Restricted Stock is vested
as provided in Section 10(c) below.
(c) The Plan Administrator at the time of grant shall specify the
date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which
Restricted Stock shall become vested, subject to such further
rights of the Company or its assigns as may be specified in the
instrument evidencing the Restricted Stock Award. If the grantee
or the Company, as the case may be, fails to achieve the
designated goals or the grantee's relationship with the Company
is terminated prior to the expiration of the vesting period, the
grantee shall forfeit all shares of Stock subject to the
Restricted Stock Award which have not then vested.
(d) Unvested Restricted Stock may not be sold, assigned transferred,
pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the written instrument
evidencing the Restricted Stock Award.
Section 11. Stock Awards. The Plan Administrator may, in its sole
discretion, grant (or sell at a purchase price determined by the Plan
Administrator) a Stock Award to any officer, employee or consultant of the
Company or its Subsidiaries, pursuant to which such individual may receive
shares of Stock free of any vesting restrictions (a "Stock Award") under the
Plan. Stock Awards may be granted or sold as described in the preceding
sentence in respect of past services or other valid consideration, or in lieu of
any cash compensation due to such individual.
Section 12. Performance Share Awards. A Performance Share Award is an
Award entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Plan Administrator may make Performance Share
Awards independent of or in connection with the granting of any other Award
under the Plan. Performance Share Awards may be granted under the Plan to any
officer, employee or consultant of the Company or its Subsidiaries, including
those who qualify for awards under other performance plans of the Company. The
Plan Administrator in its sole discretion shall determine whether and to whom
Performance Share Awards shall be made, the performance goals applicable under
each such Award, the periods during which performance is to be measured, and all
other limitations and conditions applicable to the awarded Performance Shares;
provided, however, that the Plan Administrator may rely on the performance goals
and other standards applicable to other performance plans of the Company in
setting the standards for Performance Share Awards under the Plan.
Section 13. Tax Withholding.
(a) Whenever shares are to be issued or cash is to be paid under the
Plan, the Company shall have the right to require the participant
to remit to the Company an amount sufficient to satisfy federal,
state and local tax withholding requirements prior to the
delivery of any certificate for shares or any proceeds; provided,
however, that in the case of a participant who
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receives an Award of shares under the Plan which is not fully
vested, the participant shall remit such amount on the first
business day following the Tax Date. The "Tax Date" for purposes
of this Section 13 shall be the date on which the amount of tax
to be withheld is determined. If a participant makes a
disposition of shares acquired upon the exercise of an Incentive
Stock Option within either two years after the Option was granted
or one year after its exercise by the participant, the
participant shall promptly notify the Company and the Company
shall have the right to require the participant to pay to the
Company an amount sufficient to satisfy federal, state and local
tax withholding requirements.
(b) A participant who is obligated to pay the Company an amount
required to be withheld under applicable tax withholding
requirements may pay such amount (i) in cash; (ii) in the
discretion of the Plan Administrator, through the delivery to the
Company of previously-owned shares of Common Stock having an
aggregate Fair Market Value on the Tax Date equal to the tax
obligation provided that the previously owned shares delivered in
satisfaction of the withholding obligations must have been held
by the participant for at least six (6) months; or (iii) in the
discretion of the Plan Administrator, through a combination of
the procedures set forth in subsections (i) and (ii) of this
Section 13(b).
(c) A participant who is obligated to pay to the Company an amount
required to be withheld under applicable tax withholding
requirements in connection with either the exercise of a Non-
Qualified Stock Option, or the receipt of a Restricted Stock
Award, Stock Award or Performance Share Award under the Plan may,
in the discretion of the Plan Administrator, elect to satisfy
this withholding obligation, in whole or in part, by requesting
that the Company withhold shares of stock otherwise issuable to
the participant having a Fair Market Value on the Tax Date equal
to the amount of the tax required to be withheld; provided,
however, that shares may be withheld by the Company only if such
withheld shares have vested. Any fractional amount shall be paid
to the Company by the participant in cash or shall be withheld
from the participant's next regular paycheck.
(d) An election by a participant to have shares of stock withheld to
satisfy federal, state and local tax withholding requirements
pursuant to Section 13(c) must be in writing and delivered to the
Company prior to the Tax Date.
Section 14. Adjustment of Number and Price of Shares.
Any other provision of the Plan notwithstanding:
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(a) If, through or as a result of any merger, consolidation, sale of
all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar
transaction, the outstanding shares of Stock are increased or
decreased or are exchanged for a different number or kind of
shares or other securities of the Company, or additional shares
or new or different shares or other securities of the Company or
other non-cash assets are distributed with respect to such shares
of Stock or other securities, the Plan Administrator shall make
an appropriate or proportionate adjustment in (i) the number of
Stock Options that can be granted to any one individual
participant, (ii) the number and kind of shares or other
securities subject to any then outstanding Awards under the Plan,
and (iii) the price for each share subject to any then
outstanding Stock Options under the Plan, without changing the
aggregate exercise price (i.e., the exercise price multiplied by
the number of shares) as to which such Stock Options remain
exercisable. The adjustment by the Plan Administrator shall be
final, binding and conclusive.
(b) In the event that, by reason of a corporate merger,
consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Board of Directors shall
authorize the issuance or assumption of a stock Option or stock
Options in a transaction to which Section 424(a) of the Code
applies, then, notwithstanding any other provision of the Plan,
the Plan Administrator may grant an Option or Options upon such
terms and conditions as it may deem appropriate for the purpose
of assumption of the old Option, or substitution of a new Option
for the old Option, in conformity with the provisions of Code
Section 424(a) and the rules and regulations thereunder, as they
may be amended from time to time.
(c) No adjustment or substitution provided for in this Section 14
shall require the Company to issue or to sell a fractional share
under any stock Option agreement or share award agreement and the
total adjustment or substitution with respect to each stock
Option and share award agreement shall be limited accordingly.
(d) In the case of (i) the dissolution or liquidation of the Company,
(ii) a merger, reorganization or consolidation in which the
Company is acquired by another person or entity (other than a
holding company formed by the Company), (iii) the sale of all or
substantially all of the assets of the Company to an unrelated
person or entity, or (iv) the sale of all of the stock of the
Company to a unrelated person or entity (in each case, a
"Fundamental Transaction"), the Plan and all Awards granted
hereunder shall terminate, unless provision is made in connection
with the Fundamental Transaction for the assumption of the Awards
heretofore granted, or the substitution of such Awards with new
awards of the
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successor entity, with appropriate adjustment as to the number
and kind of shares and, if appropriate, the per share exercise
price as provided in Subsections (a) and (b) of this Section 14.
In the event of such termination each participant shall be
notified of such proposed termination and permitted to exercise
for a period of at least 15 days prior to the date of such
termination all Options and SARs held by such participant which
are then exercisable.
Section 15. Amendment and Discontinuance. The Board of Directors may
alter, amend, suspend or discontinue the Plan, provided that no such action
shall deprive any person without such person's consent of any rights theretofore
granted pursuant hereto.
Section 16. Compliance with Governmental Regulations. Notwithstanding any
provision of the Plan or the terms of any agreement entered into pursuant to the
Plan, the Company shall not be required to issue any shares hereunder prior to
registration of the shares subject to the Plan under the Securities Act of 1933
or the Act, if such registration shall be necessary, or before compliance by the
Company or any participant with any other provisions of either of those acts or
of regulations or rulings of the Securities and Exchange Commission thereunder,
or before compliance with other federal and state laws and regulations and
rulings thereunder, including the rules any applicable exchange or of the Nasdaq
Stock Market. The Company shall use its best efforts to effect such
registrations and to comply with such laws, regulations and rulings forthwith
upon advice by its counsel that any such registration or compliance is
necessary.
Section 17. Compliance with Section 16. With respect to persons subject
to Section 16 of the Act, transactions under this Plan are intended to comply
with all applicable conditions of Rule 16b-3 (or its successor rule and shall
be construed to the fullest extent possible in a manner consistent with this
intent). To the extent that any Award fails to so comply, it shall be deemed to
be modified to the extent permitted by law and to the extent deemed advisable by
the Plan Administrator in order to comply with Rule 16b-3.
Section 18. Participation by Foreign Nationals. The Plan Administrator
may, in order to fulfill the purposes of the Plan and without amending the Plan,
modify grants to foreign nationals or United States citizens employed abroad in
order to recognize differences in local law, tax policy or custom.
Section 19. Effective Date of Plan. The Plan became effective on
November 4, 1996, the date of approval and adoption of the Plan by requisite
vote of the holders of the outstanding shares of Stock, and was amended and
restated on each of June 1, 1998 and February 1, 1999.
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