<PAGE>
SCHEDULE 14A
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 (S) 240.14a-11(c) or (S) 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:
-------------------------------------------------------------------------
(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.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
MASTECH CORPORATION
1004 McKee Road
Oakdale, Pennsylvania 15071
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on June 1, 1999
----------------
The Annual Meeting of Shareholders of Mastech Corporation (the "Company")
will be held at the Company's Corporate Offices at 1004 McKee Road, Oakdale,
Pennsylvania on Tuesday, June 1, 1999, at 9:30 a.m., to consider and act upon
the following matters:
1. The election of one (1) person to the Board of Directors; and
2. Such other matters as may properly come before the meeting.
The Board of Directors has established the close of business on March 26,
1999, as the record date for the determination of the shareholders entitled to
notice of and to vote at the Annual Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL 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
April 30, 1999
<PAGE>
MASTECH CORPORATION
1004 McKee Road
Oakdale, Pennsylvania 15071
----------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
To Be Held on June 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 annual meeting of shareholders (the "Annual Meeting")
scheduled to be held on Tuesday, June 1, 1999 at 9:30 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 April 30, 1999. 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
March 26, 1999 (the "Record Date") are entitled to notice of and to vote at
the Annual Meeting and any adjournment thereof. On the Record Date, there were
50,352,671 shares of Common Stock outstanding.
All shares of Common Stock represented by valid proxies received by the
Secretary of the Company at or prior to the Annual Meeting will be voted as
specified in the proxy. If no specification is made, the shares will be voted
FOR the election of the Board's nominee to the Board of Directors 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 Annual 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 Annual Meeting. The holders of Common Stock
have one vote for each share held by them as of the Record Date. In the
election of directors, the duly nominated candidates receiving the highest
number of votes will be elected as directors. Under Pennsylvania law and the
Company's Bylaws, abstentions and broker non-votes (shares held of record by a
broker which are present at the meeting by proxy, but which the broker does
not have authority to vote with respect to the matter in question) will have
no effect on the vote on any matter to come before the meeting.
PROPOSAL 1
ELECTION OF DIRECTOR
The Company's Articles of Incorporation provide that the number of directors
constituting the entire Board shall be five (5).
The Company's Board of Directors is divided into three (3) classes, each as
nearly equal in number as possible, with one class being elected each year for
a term of three (3) years as follows: one (1) Class C director whose term
expires in 1999; two (2) Class A directors whose terms expire in 2000; and two
(2) Class B directors whose terms expire in 2001. Therefore, one (1) director
is being elected to Class C at the Annual Meeting for a three-year term
expiring in the year 2002.
2
<PAGE>
The persons named as proxies on the enclosed proxy card were selected by the
Board of Directors and have advised the Board of Directors that, unless
authority is withheld, they intend to vote the shares represented by them at
the Annual Meeting for the election to Class C of Sunil Wadhwani, the nominee
of the Board of Directors, who presently serves as a director of the Company.
The Board of Directors knows of no reason why Mr. Wadhwani would be unable
to serve as director. If at the time of the Annual Meeting Mr. Wadhwani is
unable or unwilling to serve as a director of the Company, the persons named
as proxies intend to vote for such substitute as may be nominated by the Board
of Directors.
The section captioned "Board of Directors and Certain Board Committees" sets
forth certain information concerning the Company's nominee for election to the
Board of Directors at the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR MR. WADHWANI FOR
ELECTION AS DIRECTOR.
BOARD OF DIRECTORS AND CERTAIN BOARD COMMITTEES
Nominee for Director in Class C Whose Term Expires in 2002
Sunil Wadhwani, age 46, has served as Co-Chairman and Chief Executive
Officer of the Company since October 1996, and as a director since 1986. From
1986 through September 1996, he served as Chairman of the Company and held
several other offices, including Vice President, Secretary and Treasurer. From
1981 to 1986, Mr. Wadhwani served as President of Uro-Valve, Inc., a start-up
manufacturer of specialized medical devices that he founded in 1981. Prior to
1981, Mr. Wadhwani worked as a management consultant assisting companies in
strategic planning, operations, marketing and sales.
Directors in Class B Whose Terms Expire in 2001
Ashok Trivedi, age 50, has served as Co-Chairman and President of the
Company since October 1996, and as a director since 1988. He was elected by
the shareholders in 1998 to serve a three year term expiring in 2001. From
1988 through September 1996, Mr. Trivedi served as President of the Company
and held other offices, including Secretary and Treasurer. From 1976 to 1988,
he held various marketing and management positions with Unisys Corporation.
Ed Yourdon, age 55, was appointed as a director of the Company effective
immediately after the Company's initial public offering in December 1996, and
was elected by the shareholders in 1998 to serve a three year term expiring in
2001. Mr. Yourdon has served as a consultant to the information technology
industry for the past thirty five years, most currently focusing on the
Internet, Year 2000, business re-engineering, object technology and the design
of Internet/intranet software applications.
Directors in Class A Whose Terms Expire in 2000
Michel Berty, age 59, was appointed as a director of the Company effective
immediately after the Company's initial public offering in December 1996, and
was elected by the shareholders in 1997 to serve a three year term expiring in
2000. Mr. Berty served in various executive and management positions with the
Cap Gemini Group from 1972 through April 1997, most recently, from 1992
through April 1997, as Chairman and Chief Executive Officer of the American
subsidiary of Cap Gemini. Mr. Berty serves as a member of the board of
directors of Ascent Logic Corporation, BuySMART, Inc., Elligent Consulting,
Level 8 Systems, Merant and Sapiens International. He is also the President of
PAC U.S., the American subsidiary of PAC, a foreign information technology
strategy consulting firm.
3
<PAGE>
J. Gordon Garrett, age 59, was appointed as a director of the Company
effective immediately after the Company's initial public offering in December
1996, and was elected by the shareholders in 1997 to serve a three year term
expiring in 2000. He is currently Senior Vice President of Ricoh Corp.,
Caldwell, New Jersey and Chief Executive Officer of Ricoh Canada, a position
he has held since 1995. From 1991 to 1995, Mr. Garrett was Chairman of the
Board, Chief Executive Officer and President of Information Systems Management
(ISM) Corporation. He held the position of President of Gestetner USA from
1989 to 1991 and is a board member of NULOGIX Technical Services, Inc. (a
subsidiary of IBM Canada).
The Board of Directors has established an Audit Committee, Compensation
Committee and an Executive Committee. During 1998, the Board of Directors met
four (4) times with all directors attending each meeting. The Company does not
have a standing nominating committee.
Audit Committee
The Board has an Audit Committee comprised of Messrs. Garrett, Berty and
Wadhwani, a majority of whom are independent directors. The Audit Committee's
duties include recommending to the Board of Directors the firm of independent
accountants to audit the Company's financial statements, reviewing the scope
and results of the independent auditors' activities and the fees proposed and
charged therefor, reviewing the adequacy of internal controls, reviewing the
scope and results of internal audit activities, and reporting the results of
the committee's activities to the full Board. During 1998, the Audit Committee
met twice with all committee members attending each meeting.
Compensation Committee
The Board has a Compensation Committee, consisting of Messrs. Garrett, Berty
and Trivedi, a majority of whom are independent directors. The Compensation
Committee is responsible for reviewing and approving matters involving the
compensation of directors and executive officers of the Company, periodically
reviewing management development plans, administering the incentive
compensation plans and making recommendations to the full Board on these
matters. During 1998, the Compensation Committee met twice with all committee
members attending each meeting.
Executive Committee
The Board has an Executive Committee, consisting of Messrs. Wadhwani and
Trivedi, which exercises the full power of the Board of Directors between
meetings of the Board, provided, however, that the Executive Committee does
not have power or authority to: (i) approve any fundamental change that
requires shareholder approval; (ii) create or fill vacancies on the Board of
Directors; (iii) adopt, amend or repeal the Bylaws; (iv) take any action with
respect to the compensation of executive officers; (v) take any other action
committed by resolution of the Board of Directors to another committee of the
Board of Directors; (vi) authorize the issuance of any shares of the Company's
stock; or (vii) authorize any distributions with respect to the Company's
outstanding shares. The Executive Committee did not meet during 1998.
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,
as amended, each of Messrs. Berty, Garrett and Yourdon, the non-employee
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
4
<PAGE>
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 a right to receive two
shares of Common Stock at an exercise price of $7.50 per share.
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 February 26, 1999 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 under the caption "Executive Officers and Executive
Compensation" below; and (iii) all directors and executive officers of the
Company as a group. As of February 26, 1999, there were 50,330,605 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
Shares of Common Stock
Name and Address of Beneficial Owner Common Stock Outstanding
- ------------------------------------ ------------ -------------
<S> <C> <C>
Sunil Wadhwani (1)(2)............................... 14,880,000 29.6%
Ramesh Thadani, as co-trustee of a Wadhwani family
trust (2)(3)....................................... 2,552,261 5.1
Ashok Trivedi (2)(4)................................ 14,880,000 29.6
Arun Nayar, as co-trustee of certain Trivedi family
trusts (2)(5)...................................... 4,370,597 8.7
Mohan Phanse, as co-trustee of certain Trivedi
family trusts (2)(5)............................... 2,550,597 5.1
Michel Berty........................................ 10,000 *
J. Gordon Garrett................................... 25,600 *
Ed Yourdon.......................................... 20,000 *
Steven Shangold (6)................................. 40,000 *
Lisa Kustra (6)..................................... 30,000 *
Ajmal Noorani....................................... 20,000 *
All directors and executive officers as a group 13
persons (7)........................................ 29,985,600 59.6
</TABLE>
- --------
*Less than 1%
(1) Includes 4,372,261 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 4,370,597 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 10,000 shares of Common Stock underlying options which are
exercisable on or before February 26, 1999 or within 60 days after such
date.
(7) Includes 80,000 shares of Common Stock underlying options which are
exercisable on or before February 26, 1999 or within 60 days after such
date.
5
<PAGE>
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION
In addition to Messrs. Wadhwani and Trivedi, whose positions and background
are discussed above, the following persons serve as executive officers of the
Company:
Murali Balasubamanyam, age 43, has served as Co-Managing Director of Scott
Systems, a wholly owned subsidiary of the Company, since July 1998. From
October 1995 to June 1998, he served as the Company's Vice President--Human
Resources and from September 1994 to September 1995, he served as the
Company's Director--Human Resources. Prior to joining the Company, he served
as Deputy General Manager (Human Resources) with HCL Group of Companies from
November 1992 to September 1994. Mr. Balasubamanyam earned a Bachelor's degree
in Business Administration from Madurai University.
Lisa Kustra, age 39, has served as Senior Vice President--Enterprise Package
Solutions Division of the Company since August 1998. From September 1997 to
July 1998, she served as the Vice President--Enterprise Package Solutions
Division and from January 1996 to August 1997, she served as the Director of
the Company's Enterprise Package Solutions Division. From August 1992 to
December 1995, Ms. Kustra held various managerial positions with the Company
including National Sales Manager--Strategic Alliance Division. Ms. Kustra
earned Bachelors' degrees in Business Management and Psychology from the
University of Pittsburgh.
Jeffrey McCandless, age 40, has served as Vice President--Finance and Chief
Financial Officer of the Company since November 1997. Prior to joining the
Company, he was employed by Winner International as Chief Financial Officer
from November 1991 through October 1997. Mr. McCandless is a certified public
accountant with over 19 years of financial and operational experience. Mr.
McCandless earned a Bachelor's degree in Business Administration from
Westminster College.
Ajmal Noorani, age 37, has served as Vice President--E-Business Solutions
Division of the Company since March 1999. From June 1996 to February 1999 he
was the Company's Vice President--International Operations. From June 1994 to
May 1996, he was employed by Mellon Bank as an Assistant Vice President--
Corporate Finance. From 1990 to May 1994, Mr. Noorani held a number of
positions with the Company, including Director--Government Division. Mr.
Noorani earned a Master's degree in Industrial Administration from Carnegie-
Mellon University and a Bachelor's degree in Engineering from Maharaja
Sayajrao University.
Sushma Rajagopalan, age 35, has served as Vice President--Global Resourcing
and Recruiting of the Company since October 1995. From June 1993 to October
1995, she served as the Company's Director--Federal Division, and between
November 1992 and June 1993, she held various managerial positions with the
Company. Ms. Rajagopalan earned a Master's degree in Personnel Management from
the Tata Institute of Social Sciences.
Steven Shangold, age 38, has served as Senior Vice President--U.S. Client
Services for the Company since August 1998. From September 1995 through July
1998, he served as the Company's Vice President of U.S. Sales and Marketing.
From February 1992 through September 1995, he served as the Company's Sales
Director--Commercial Division. Mr. Shangold earned a Bachelor's degree in
Management from Syracuse University and a Bachelor's degree in Advertising
from the S.I. Newhouse School.
Michael Zugay, age 47, has served as Vice President--Corporate Development
of the Company since November 1997. From March 1995 through October 1997, he
served as the Company's Vice President--Finance. From March 1994 to March
1995, he served as an independent consultant to the steel industry. From 1990
through February 1994, he served as President and CEO of Bliss-Salem, Inc., a
provider of products to the steel industry. Mr. Zugay is a certified public
accountant with over 25 years of financial and operational experience. Mr.
Zugay earned a Bachelor's degree in Business Management from Indiana
University of Pennsylvania.
The Company's executive officers are appointed annually by, and serve at the
discretion of, the Board of Directors. Each executive officer is a full-time
employee of the Company. There are no family relationships between any
director or executive officer of the Company.
6
<PAGE>
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, 1998.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
------------------------------------------- --------------------------
Securities
Other Annual Restricted Underlying All Other
Compensation Stock Awards Options/SARs Compensation
Name and Principal Position Year Salary ($) Bonus ($)(2) ($)(3)(4) ($) (#) ($)
- --------------------------- ---- ---------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sunil Wadhwani 1998 303,846 288,879 20,540 -- -- --
Co-Chairman and Chief 1997 300,000 158,473 20,334 -- -- --
Executive Officer 1996 168,000(1) -- 21,050 -- -- --
Ashok Trivedi 1998 303,846 288,879 20,414 -- -- --
Co-Chairman 1997 300,000 158,473 20,306 -- -- --
and President 1996 168,000(1) -- 20,963 -- -- --
Steven Shangold 1998 219,871 206,577 -- -- 150,000 --
Senior Vice President-- 1997 150,000 186,365 -- -- -- --
U.S. Client Services 1996 126,667 74,265 -- 819,000(5) 50,000 819,000(5)
Lisa Kustra 1998 164,564 210,708 -- -- 90,000 --
Senior Vice President-- 1997 80,000 170,240 -- -- -- --
Enterprise Package 1996 70,000 61,484 -- -- 104,000 --
Solutions Division
Ajmal Noorani 1998 179,808 105,421 -- -- -- --
Vice President-- 1997 150,000 73,672 -- -- -- --
E-Business
Solutions Division 1996 64,615 10,000 -- -- 124,000 --
</TABLE>
- --------
(1) Prior to the initial public offering in 1996, 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 1998, 1997 and 1996 for performance in 1997, 1996
and 1995, respectively. The 1996 bonus amount for Ms. Kustra includes
sales commissions of $27,967.
(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 1998, 1997 and 1996, the Company leased automobiles for Messrs.
Wadhwani and Trivedi. The incremental costs to the Company in 1998, 1997
and 1996 for the automobiles leased was $20,540, $20,334 and $21,050,
respectively for Mr. Wadhwani and $20,414, $20,306 and $20,963,
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 and he sold the
remaining shares in 1998.
7
<PAGE>
OPTION GRANTS DURING 1998
The following table sets forth the number of shares of the Company's Common
Stock underlying options granted, the exercise price per share and the
expiration date of all options granted to each of the Named Executive Officers
during 1998.
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------
Number of Percent of Total
Securities Options/SARs Exercise or
Underlying Granted to Base Price Grant Date
Options/SARs Employees in Per Share Expiration Value
Executive Officer Granted (1) Fiscal Year $/SH Date ($)(2)
- ----------------- ------------ ---------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Sunil Wadhwani.......... -- -- -- -- --
Ashok Trivedi........... -- -- -- -- --
Steven Shangold......... 50,000 2.9% 15.88 1/1/08 400,840
100,000 5.9% 20.53 9/1/08 1,015,660
Lisa Kustra............. 40,000 2.3% 15.88 1/1/08 320,672
50,000 2.9% 20.53 9/1/08 507,830
Ajmal Noorani........... -- -- -- -- --
</TABLE>
- --------
(1) The options granted during 1998 vest as follows: (i) of the 50,000
options awarded to Mr. Shangold on January 1, 1998, 20,000, 15,000 and
15,000 vest on December 31, 1998, July 1, 1999 and July 1, 2000,
respectively; (ii) of the 100,000 options awarded to Mr. Shangold on
September 1, 1998, these vest in equal quarterly installments over ten
quarters commencing on December 1, 1998; (iii) of the 40,000 options
awarded to Ms. Kustra on January 1, 1998, these vest in equal annual
installments over three years commencing July 1, 1998; (iv) of the 50,000
options awarded to Ms. Kustra on September 1, 1998, 10,000 vest on March
1, 1999, September 1, 1999, March 1, 2000, September 1, 2000 and December
1, 2000, respectively.
(2) The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted
average assumptions for grants in 1998: (i) risk free interest rate of
5.6%; (ii) expected dividend yield of 0.0%; (iii) expected life of
options of five (5) years; and (iv) an expected volatility rate of 50.0%.
OPTION EXERCISES DURING 1998 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,
1998, 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......... -- -- 30,000/170,000 $335,930/2,167,120
Lisa Kustra............. 33,334 $429,155 20,000/116,666 $422,500/1,589,641
Ajmal Noorani........... 4,000 $ 61,163 20,000/60,000 $422,500/1,267,500
</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,
1998 was $28.625. Value is calculated on the basis of the difference
between the option exercise price and $28.625, multiplied by the number
of shares of Common Stock underlying the option.
8
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than 10 percent of a registered class of the Company's
equity securities, to file reports of ownership and change in ownership with
the Securities and Exchange Commission and Nasdaq. Directors, executive
officers and other 10 percent shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) reports that they file.
Based solely on its review of the copies of such reports, and written
representations from the reporting persons, the Company believes that during
1998, all filing requirements under Section 16(a) applicable to its directors
and executive officers were met, except that each of Steven Shangold and Lisa
Kustra did not report on a timely basis one report disclosing the receipt of
an award of stock options pursuant to the Company's 1996 Stock Incentive Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Messrs. Garrett, Berty and
Trivedi. No executive officer of the Company has served as a director or
member of the compensation committee (or other committee serving an equivalent
function) of any other entity, one of whose executive officers served as a
director or member of the Compensation Committee of the Company.
9
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION
Introduction
The following report of the Compensation Committee of the Board of Directors
of the Company shall not be deemed incorporated by reference by any general
statement incorporating this proxy statement by reference into any filing
under the Securities Act of 1933, as amended (the "Securities Act"), or under
the Exchange Act, and shall not be deemed filed under either of the Securities
Act or the Exchange Act except to the extent that the Company specifically
incorporates this information by reference.
The Compensation Committee is responsible for reviewing and approving
matters involving the compensation of directors and executive officers of the
Company, periodically reviewing management development plans and making
recommendations to the full Board on these matters as well as matters
involving the Company's 1996 Stock Incentive Plan, as amended. The
Compensation Committee met twice during fiscal 1998 to carry out the
aforementioned duties.
Co-Chairman Compensation
The key components of executive officer compensation are salary, bonus and
stock option awards. Each of Messrs. Wadhwani and Trivedi is party to a two-
year employment agreement (collectively the "Executive Employment Agreements")
that were negotiated at arms-length and entered into prior to the Company's
initial public offering but did not become effective until the offering was
consummated. Each of the Executive Employment Agreements automatically extends
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. Each
Executive Employment Agreement provides for a base salary of $300,000 (subject
to increase by the Board of Directors) and the right to receive discretionary
performance bonuses of not less than $200,000 upon approval by the Board of
Directors and payable no later than April 15 of each calendar year.
Compensation Philosophy
The members of the Compensation Committee hold primary responsibility for
determining the remaining executive officer compensation levels. The
Compensation Committee has adopted a compensation philosophy intended to align
compensation with the Company's overall business strategy. The philosophy
guiding the executive compensation program is designed to link executive
compensation and shareholder value in order to attract, retain and motivate
high quality employees capable of maximizing shareholder value. The goals of
the program are:
. To compensate executive employees in a manner that aligns the employees'
interests with the interests of the shareholders;
. To reward executives for successful long-term strategic management;
. To recognize outstanding performance; and
. To attract and retain highly qualified and motivated executives.
The strategy established by the Compensation Committee with respect to
executive compensation includes maintaining base salaries for executives and
providing bonuses which, when combined with base salary amounts, give the
Company's executives the potential to earn in excess of competitive industry
compensation if certain subjective and objective performance goals for the
Company are achieved. The Compensation Committee intends to continue to grant,
or recommend to the Board of Directors that it approve the granting of stock
options to the Company's executives and other key employees at current market
value, which options have no monetary value to the executives unless and until
the market price of the Company's Common Stock increases. The mix of base
salary, bonuses and stock option awards reflects the Compensation Committee's
intention to link executive
10
<PAGE>
compensation to the Company's operational performance and the price of its
Common Stock. The Compensation Committee anticipates that bonus payments and
option grants made during 1999 and thereafter will be based on a subjective
analysis of various performance criteria and will not directly be tied to any
one factor.
1996 Stock Incentive Plan
The Company's long term incentives are in the form of stock options, stock
appreciation rights ("SARs"), restricted or unrestricted stock awards and
performance share awards to directors, executives and other key employees and
consultants under the 1996 Stock Incentive Plan (the "1996 Plan") adopted by
the Board of Directors prior to the Company's initial public offering. The
shareholders of the Company have approved two subsequent amendments to the
1996 Plan since its adoption. The first amendment, on June 1, 1998, increased
the number of shares available for issuance under the 1996 Plan to 10% of the
outstanding shares of Common Stock 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 of Common
Stock available under the 1996 Plan. The 1996 Plan was amended again by
affirmative vote of a majority of the shareholders on February 1, 1999 to
increase the available amount of shares of Common Stock issuable under the
1996 Plan from 10% to 15%. As of December 31, 1998 there were 3,605,286 shares
of Common Stock available for issuance under the 1996 Plan, as amended.
The objective of these awards is to advance the longer term interests of the
Company and its shareholders and complement incentives tied to annual
performance. These awards provide rewards to directors, executives and other
key employees and consultants upon the creation of incremental shareholder
value and attainment of long-term earnings goals. Stock incentive awards under
the 1996 Plan produce value to participants only if the price of the Company's
stock appreciates, thereby directly linking the interests of the participants
with those of the shareholders. Subject to the provisions of the 1996 Plan,
the Plan Administrator (which may be either the full Board of Directors or a
committee thereof including members of the Compensation Committee) in its
discretion, selects the recipients of awards and the number of shares or
options granted thereunder and determines other matters such as (i) vesting
schedules, (ii) the exercise price of options, (iii) the duration of awards
and (iv) the price of SARs.
Deductibility of Executive Compensation Expenses
In general, under Section 162(m) of the Internal Revenue Code of 1986, as
amended, the Company cannot deduct, for federal income tax purposes,
compensation in excess of $1,000,000, paid to any Named Executive Officer,
except to the extent such excess constitutes performance-based compensation.
The policy of the Company is to qualify future performance-based compensation
arrangements to ensure deductibility in those cases where the Committee
believes that shareholder value is maximized by this approach.
Respectively submitted,
The Compensation Committee
Ashok Trivedi
J. Gordon Garrett
Michel Berty
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
11
<PAGE>
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.
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.
12
<PAGE>
STOCK PERFORMANCE CHART
The following graph shows a comparison of the cumulative total return on the
Company's Common Stock during the period commencing on December 16, 1996, the
date of the Company's initial public offering and ended December 31, 1998, with
the cumulative total return during such period for (i) the Standard and Poor's
500 Composite Index ("S & P 500") and (ii) a peer group index* selected by the
Company's management which includes seven public companies within the Company's
industry. The comparison assumes $100 was invested on December 16, 1996 in the
Company's stock and in each of the foregoing indices and assumes reinvestment
of dividends, if any.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF THREE YEAR CUMULATIVE RETURN
AMONG MASTECH CORP., PEER GROUP INDEX AND S&P 500 INDEX
<CAPTION>
Measurement period MASTECH PEER GROUP S&P 500
(Fiscal year Covered) CORP. Index Index
- --------------------- -------- ------- -------
<S> <C> <C> <C>
Measurement PT -
12/16/96 $100 $100 $100
FYE 12/31/97 $212 $172 $135
FYE 12/31/98 $382 $139 $171
</TABLE>
The Common Stock is currently traded on the NASDAQ NATIONAL MARKET tier of
THE NASDAQ STOCK MARKET under the SYMBOL "MAST".
- --------
* The peer group index reflects the stock performance of the following
information technology companies: Cambridge Technology Partners, Inc., CIBER,
Inc., Computer Horizons Corp., Computer Management Sciences, Inc., Keane,
Inc., Technology Solutions Company and Whittman-Hart, Inc.
CERTAIN RELATED PARTY TRANSACTIONS
Mascot Systems, a wholly owned subsidiary of the Company, leases from the
controlling shareholders the office space for the offshore software development
facilities in Bangalore, India. The acquisition of the real estate and the
construction of this office building (but not the buildout of the office space)
was financed entirely by Messrs. Wadhwani and Trivedi out of personal funds.
Specifically, Mascot Systems leases approximately 4,500 square feet of office
space on one floor of an office building located in Bangalore which floor is
owned by Messrs. Wadhwani and Trivedi. The lease has a ten-year term expiring
in February 2008, with a rent revision clause every March, and the rent is
approximately $29,000 per year. Mascot Systems also leases a 32,500-square-foot
office building located in Bangalore from Messrs. Wadhwani and Trivedi. This
lease has a ten-year term expiring in October 2006, and the rent is
approximately $95,000 per year. The Offshore Development Center at Chennai was
partly functional during 1998 and fully functional beginning January 1, 1999.
The lease agreement effective for a ten-year period effective March 1998 and
expiring February 2008 has an annual rent of $449,000. The rental agreement may
be revised each March. Since the facility was partly occupied during 1998, rent
paid
13
<PAGE>
to Messrs. Wadhwani and Trivedi was $118,000. Mascot Systems has also rented
approximately 9,000 square feet of space for its facilities located in
Bangalore and Chennai for which rent in the amount of $9,000 was paid during
1998.
Scott Systems, a wholly owned subsidiary of the Company, leases, for its
training facilities, approximately 2,100 square feet of office space on one
floor of an office building located in Mumbai (Bombay, India). The leased
space is divided into five separately owned suites owned individually by
Messrs. Wadhwani and Trivedi. The lease expires in March 2003, and the
aggregate rent is approximately $20,000 per year. Scott Systems also leases
further office space of approximately 900 square feet on another floor in the
same office building which is owned by Messrs. Wadhwani and Trivedi. This
lease has a term that expires in August 2007, and the rent is $6,000 per year.
Scott Systems also leases a portion of the Pune facility from Messrs. Wadhwani
and Trivedi. This lease covers 7,500 square feet and expires in August 2007.
The rent is approximately $18,000 per year.
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.
A copy of the Company's Annual Report to Shareholders for the year ended
December 31, 1998 is being furnished with this proxy statement. The Company
will, upon written request of any shareholder, furnish without charge a copy
of its Annual Report on Form 10-K for the year ended December 31, 1998, as
filed with the Securities and Exchange Commission, without exhibits. Please
address all such requests to the Company, Attention of Jeffrey McCandless,
Vice President--Finance and Chief Financial Officer, 1004 McKee Road, Oakdale,
Pennsylvania 15071. Exhibits will be provided upon request and payment of an
appropriate processing fee.
14
<PAGE>
DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 2000 Annual
Meeting of Shareholders must be received by the Company at its principal
office in Oakdale, Pennsylvania not later than January 1, 2000 for inclusion
in the Proxy Statement for that meeting.
April 30, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL 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.
15
<PAGE>
MASTECH CORPORATION
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Sunil Wadhwani and Ashok Trivedi and each
of them Proxies with power to appoint a substitute and hereby authorizes them to
represent and to vote all shares of Common Stock of Mastech Corporation (the
"Company") held of record by the undersigned on March 26, 1999 at the Annual
Meeting of Shareholders of the Company to be held on June 1, 1999 and at any
adjournment thereof, and to vote as directed on the reverse side of this form
and, in their discretion, upon such other matters not specified as may properly
come before said meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED, FOR THE ELECTION OF A
DIRECTOR, AND IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR
ADJOURNMENT THEREOF.
(IMPORTANT--TO BE SIGNED AND DATED ON REVERSE SIDE)
/\ FOLD AND DETACH HERE /\
<PAGE>
Please mark
your votes as X
indicated on
this example.
Proposal 1 -- Election of Director NOMINEE: Sunil Wadhwani
WITHHOLD
FOR AUTHORITY
nominee to vote for
listed nominee listed
[ ] [ ]
The Board of Directors recommends a vote FOR Proposal 1.
The undersigned hereby acknowledges receipt of the
notice of Annual Meeting and Proxy Statement.
PLEASE SIGN, DATE AND RETURN YOUR PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
NOTE: Please sign name(s) exactly as printed hereon.
Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or guardian,
please give full title as such.
- ----------------------------------------------------
Signature
DATE , 1999.
----------------------------------------
Shareholder(s) sign above exactly as name is printed
on label. If signing as representative, so indicate. For
joint accounts, all owners should sign.
/\ FOLD AND DETACH HERE /\
