Exhibit 10.16
MASTECH CORPORATION
SHAREHOLDERS AGREEMENT
THIS AGREEMENT, made as of December __, 1996, by and among Mastech
Corporation, a Pennsylvania corporation (the "Company"), Xxxxx Xxxxxxxx, an
individual residing in Allegheny County, Pennsylvania ("Xxxxxxxx"), and Xxxxx
Xxxxxxx, an individual residing in Allegheny County, Pennsylvania ("Trivedi")
(Xxxxxxxx and Xxxxxxx are sometimes referred to herein as the "Shareholders").
WHEREAS, as of the date hereof, each of the Shareholders is the beneficial
owner of 250,000 shares of the Company's Common Stock, par value $.01 per share
(the "Common Stock"), including 12,500 shares of Common Stock beneficially owned
by each of them in their respective Family Trusts, which constitutes all of the
outstanding Common Stock of the Company; and
WHEREAS, the Company and the Shareholders are contemplating an underwritten
public offering of Common Stock (the "Initial Public Offering"), and in
connection therewith will effect a stock dividend to permit the shares of Common
Stock to be issued in the Initial Public Offering at an appropriate price; and
WHEREAS, each Shareholder desires that after the Initial Public Offering,
the shares of Common Stock held by them will be voted in the election of
directors for the election of the other as a director; and
WHEREAS, in order to ensure, among other things, that the Shareholders will
have liquidity after the Initial Public Offering, the Company desires to grant
to the Shareholders certain registration rights with respect to the Common Stock
held by them on the terms provided herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Definitions. For purposes of this Agreement:
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(a) The term "Act" means the Securities Act of 1933, as amended, or
any successor statute.
(b) The term "beneficial ownership" and like terms have the meaning
ascribed to the term "beneficial ownership" under Rule 13d-3 of the Securities
Exchange Act of 1934, as amended, or any successor provision.
(c) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act and the declaration or ordering of effectiveness of
such registration statement.
(d) The term "Registrable Securities" means (i) the Common Stock,
and (ii) any securities of the Company issued as a dividend or other
distribution with respect to, or in exchange or in replacement of, such Common
Stock, in either case, beneficially owned by a Holder. As to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
when (i) a registration statement with respect to the sale of such securities
shall have been declared effective under the Securities Act and such securities
shall have been disposed of in accordance with such registration statement, or
(ii) such securities shall have been sold (other than in a privately negotiated
sale) pursuant to Rule 144 (or any successor provision) under the Act and in
compliance with the requirements of paragraphs (c), (e), (f) and (g) of Rule 144
(notwithstanding the provisions of paragraph (h) of such Rule).
(e) The term "Holder" means (i) Xxxxxxxx, (ii) Xxxxxxx, and (ii)
any Permitted Transferee.
(f) The term "Permitted Transferee" means (i) any spouse, issue, or
parents of Xxxxxxxx or Trivedi, (ii) trusts for the benefit of any such persons,
(iii) entities controlled by Xxxxxxxx or Xxxxxxx or any such persons, (iv) in
the event of the death of Xxxxxxxx or Trivedi or any such person, their heirs
and testamentary legatees, and (v) a transferee pursuant to Section 16 hereof,
in each case, to whom Xxxxxxxx or Xxxxxxx or any such person has transferred
their shares of Common Stock and who has agreed in writing to be bound by the
terms of this Agreement.
2. Voting of Common Stock
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(a) Each Holder agrees to vote all shares of Common Stock
beneficially owned by them, and to take all other necessary or desirable actions
within their control (including, without limitation, attendance at meetings in
person or by proxy for purposes of obtaining a quorum and execution of written
consents in lieu of meetings), to effectuate the provisions of this Section 2.
(b) The Company and its subsidiaries shall take all necessary or
desirable actions within their control (including, without limitation, calling
special board and shareholder meetings) to effectuate the provisions of this
Agreement.
(c) Each Holder shall vote, or cause to be voted, all shares of
Common Stock beneficially owned by them and shall take all necessary action
within their control, to elect to the Board of Directors of the Company,
Xxxxxxxx and Trivedi, or the person designated by either of them in a written
notice sent to each Holder, or the person designated in a written notice sent to
each Holder by the person authorized by Xxxxxxxx or Xxxxxxx, as the case may be,
to make such designation, provided that such person's authority to make such
designation is set forth in a notarized writing, a copy of which is filed with
the Company and sent to each Holder, and provided, further, that Xxxxxxxx and
Trivedi agree not to designate or permit to be designated their respective
spouses for election as a director pursuant to this Section 2(c).
3. Request for Registration.
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(a) If at any time the Company shall receive a written request
(specifying that it is being made pursuant to this Section 3(a)) from Holders
holding more than thirty percent (30%) of the Registrable Securities held by all
Holders at that time outstanding, that the Company file a registration statement
or similar document under the Act covering the registration of Registrable
Securities with a market value of not less than $10,000,000, then the Company
shall promptly notify all other Holders of such request and shall use its best
efforts to cause all Registrable Securities that Holders have requested be so
registered to be registered under the Act. Holders shall have fifteen (15) days
after such notice to make such request.
(b) The Company shall be obligated to effect two registrations after
the date of this Agreement pursuant to Section 3(a); provided that the Company
shall not be obligated to effect any registrations pursuant to Section 3(a)
during the period ending two years after the date of the Initial Public
Offering.
4. Piggyback Registration. Subject to Section 7 and Section 10, if at
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any time or from time to time the Company proposes to register any of its equity
securities under the Act in connection with a primary or secondary public
offering of such securities solely for cash on a form that would also permit the
registration of the Registrable Securities (not including Form S-8 or Form S-4,
or any successor form to those forms), the Company shall, each such time,
promptly give each Holder written notice of the proposed registration. Upon the
written request of any Holder given within twenty (20) days after mailing of any
such notice by the Company, the Company shall use its best efforts to cause to
be registered under the Act all of the Registrable Securities that each such
Holder has requested be registered.
5. Registrations on Form S-3. If (i) a Holder or Holders request in
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writing (specifying that it is being made pursuant to this Section 5) that the
Company file a registration statement on Form S-3 (or any successor form to Form
S-3 regardless of its designation) for a public offering of shares of
Registrable Securities, and (ii) the Company is a registrant eligible to use
Form S-3 to register such shares (and the Company shall use its reasonable best
efforts to become and remain eligible to use Form S-3), then the Company shall
notify all other Holders of such request and shall use its best efforts to cause
to be registered on Form S-3 (or any successor form to Form S-3) all of the
Registrable Securities that each Holder requests to be so registered. Holders
shall have fifteen (15) days after such notice to make such request. Rights to
registration under this Section 5 are unlimited in number and are in addition
to, and not in lieu of, rights to registration under Sections 3 and 4 above,
provided that the Company shall not be obligated to effect more than one
registration on Form S-3 pursuant to this Section 5 in any six-month period, and
provided further that the Company shall not be obligated to effect any
registrations pursuant to this Section 5 during the period ending two years
after the date of the Initial Public Offering.
6. Obligations of the Company. Whenever required under Sections 3, 4 or
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5 to use its best efforts to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably possible:
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(a) Prepare and file with the Securities and Exchange Commission
("SEC") a registration statement with respect to such Registrable Securities,
and use its best efforts to cause such registration statement to become and
remain effective until all Registrable Securities to be sold under such
registration statement shall have been sold by Holders pursuant to such
registration statement.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement, and the prospectus used in connection with such
registration statement, as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish and deliver to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus in conformity with the
requirements of the Act, and such other documents as they may reasonably
request, in order to facilitate the disposition of Registrable Securities owned
by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably appropriate for the
distribution of the securities covered by the registration statement, provided
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, and further provided that
(notwithstanding anything in this Agreement to the contrary with respect to the
bearing of expenses) if any jurisdiction in which the securities shall be
qualified shall require that expenses incurred in connection with the
qualification of the securities in that jurisdiction be borne by selling
shareholders, then such expenses shall be payable by selling shareholders pro
rata, to the extent required by such jurisdiction.
(e) In the event that Holders propose to sell Registrable Securities
pursuant to an underwritten offering registered pursuant to Section 3 or 5, the
Company shall have the right to approve the managing underwriters for such
offering proposed by a majority in interest of the Holders participating in such
offering; provided, however, that such approval shall not be unreasonably
withheld. The Company shall select the underwriters, if any, for any other
public offering of securities by the Company, regardless of the Holders' right
to participate in such offering pursuant to Section 4 hereof.
7. Furnish Information. It shall be a condition precedent to the
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obligations of the Company to take any action pursuant to this Agreement that
the Holders shall furnish to the Company such information regarding them, the
Registrable Securities held by them, and the intended method of disposition of
such securities as the Company shall reasonably request and as shall be required
in connection with the action to be taken by the Company.
8. Expenses of Demand Registration. All expenses incurred in connection
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with a registration pursuant to Section 3 (excluding underwriters' discounts and
commissions), including without limitation all registration and qualification
fees, printers' and accounting fees,
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fees and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
Company; provided, however, that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to Section 3 if the
registration request is subsequently withdrawn, unless the Holders agree to
forfeit their right to one demand registration pursuant to Section 3.
9. Company Registration Expenses. In the case of any registration
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effected pursuant to Sections 4 or 5, the Company shall bear all registration
and qualification fees and expenses (excluding underwriters' discounts and
commissions), including any additional cost and disbursements of counsel for the
Company that result from the inclusion of securities held by the Holders in such
registration; provided, however, that each selling Holder shall bear the fees
and costs of its own counsel.
10. Underwriting Requirements. In connection with any offering involving
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an underwriting of shares being issued by the Company, such Registrable
Securities as are requested to be included in such offering pursuant to this
Agreement shall be included in such offering on the same terms as other
securities of the same class as the Registrable Securities included in such
offering; provided, however, that if in the written good faith opinion of the
managing underwriter or underwriters, the total amount of such securities to be
so registered, when added to such Registrable Securities, will exceed the
maximum amount of the Company's securities which can be marketed without
otherwise materially and adversely affecting the entire offering, then the
Company shall exclude from such offering (a) first, all securities other than
Registrable Securities held by the Holders, being sold for the account of
persons other than the Company, (b) next, the minimum number of Registrable
Securities held by the Holders, pro rata to the extent practicable on the basis
of the number of Registrable Securities requested to be registered among the
selling Holders as is necessary in the opinion of the managing underwriter or
underwriters to reduce the size of the offering, and (c) last, the minimum
number of securities for the account of the Company which in the opinion of the
managing underwriter or underwriters may be excluded.
11. Delay of Registration. No Holder shall take any action to restrain,
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enjoin, or otherwise delay any registration as the result of any controversy
that might arise with respect to the interpretation or implementation of this
Agreement.
12. Indemnification and Contribution. Subject to Section 7, and in the
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event any Registrable Securities are included in a registration statement under
this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder requesting or joining in a registration, any
underwriter (as defined in the Act) for it, and each person, if any, who
controls such Holder or underwriter within the meaning of the Act or the
Securities Exchange Act of 1934 (the "1934 Act") against any losses, claims,
damages or liabilities, joint or several, to which they may become subject under
the Act, the 1934 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based on any
untrue or alleged untrue statement of any material fact
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contained in such registration statement, including any preliminary prospectus
or final prospectus, or any amendments or supplements thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein, or necessary to make the statements therein
not misleading or arise out of any violation by the Company of any rule or
regulation promulgated under the Act or the 1934 Act applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration; and will reimburse each such Holder such underwriter, or
such controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this paragraph 12(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action to the extent that it arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in connection with such registration statement,
preliminary prospectus, final prospectus, or amendments or supplements thereto,
in reliance upon and in conformity with written information furnished expressly
for use in connection with such registration by any such Holder, underwriter or
controlling person.
(b) To the extent permitted by law, each Holder requesting or joining in a
registration will severally indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, any
underwriter (as defined in the Act) for the Company, and each person, if any,
who controls the Company or such underwriter (within the meaning of the Act or
the 0000 Xxx) against any losses, claims, damages or liabilities, joint or
several, to which the Company or any such director, officer, controlling person,
agent or underwriter may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in such registration statement, including any
preliminary prospectus or final prospectus, or any amendments or supplements
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in such registration statement, preliminary or
final prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, agent or underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 12(b)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld). The amount payable by
any Holder pursuant to this Section 12(b) shall be such Holder's pro rata share
of the total amount payable, based on the number of Registrable Securities
registered by such Holder.
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(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section, notify the indemnifying party in writing of the commencement thereof
and (unless the interest of the indemnifying party conflicts with that of the
indemnified party) the indemnifying party shall have the right to participate
in, and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties. The failure to notify an indemnifying
party promptly of the commencement of any such action, if prejudicial to his
ability to defend such action, shall relieve such indemnifying party, to the
extent that he is prejudiced thereby, of any liability to the indemnified party
under this paragraph, but the omission to notify the indemnifying party will not
relieve him of any liability that he may have to any indemnified party otherwise
than under this paragraph.
(d) In order to provide for just and equitable contribution to joint
liability under the Act in any case in which either (i) any Holder exercising
rights under this Agreement, or any controlling person of any such Holder, makes
a claim for indemnification pursuant to this Section 12 but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 12 provides for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
such selling Holder or any such controlling person in circumstances for which
indemnification is provided under this Section 12; then, and in each such case,
the Company and such Holder will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution from
others) in such proportion so that such Holder is responsible for the portion
represented by the percentage that the public offering price represented by the
Registrable Securities registered by such Holder bears to the public offering
price of all securities registered on such registration statement, and the
Company is responsible for the remaining portion; provided, however, that, in
any such case, (A) no such Holder will be required to contribute any amount in
excess of the public offering price of all such Registrable Securities offered
by it pursuant to such registration statement; and (B) no person or entity
guilty of fraudulent misrepresentation (within the meaning of paragraph 11(f) of
the Act) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.
13. Reports Under Securities Exchange Act of 1934. With a view to making
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available to the Holders the benefits of Rule 144, and any other rule or
regulation of the SEC promulgated under the Act, the Company agrees to use its
best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times subsequent to ninety (90) days
after the effective date of the first registration statement covering an
underwritten public offering filed by the Company;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1934 Act;
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(c) furnish to any Holder so long as such Holders own any of the
Registrable Securities forthwith upon request a written statement by the Company
that it has complied with the reporting requirements of Rule 144 (at any time
after ninety (90) days after the effective date of said first registration
statement filed by the Company), and of the Act and the 1934 Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed by the Company as may be reasonably requested in availing any
Holder of any rule or regulation of the SEC permitting the selling of any such
securities without registration; and
(d) file with any national securities exchange or automatic
quotation system, any and all registered documents to keep and maintain the
shares of the Company listed for trading with said exchange or quotation system.
14. Lockup Agreement. In consideration for the Company agreeing to its
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obligations under this Agreement, each Holder agrees in connection with any
registration of the Company's Common Stock for sale to the general public that,
upon the request of the Company or the underwriters managing any underwritten
offering of the Company's securities, not to sell, make short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any Registrable
Securities (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed one hundred eighty (180 days) from the
effective date of such registration as the Company or the underwriters may
specify; provided, however, that the Company may not discriminate among the
Holders with respect to any lockup arrangements pursuant to this Section 14.
15. Assignment of Registration Rights. The registration rights of the
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Holders under Sections 3, 4 and 5 may not be assigned except to the Permitted
Transferees specified in Sections 1(f)(i) through (iv) and except that each
Shareholder (and their respective estates) may assign the registration rights
under Sections 4 and 5 to a transferee who acquires at least 10% of the Common
Stock outstanding at the time of transfer. The Company shall be given written
notice by the Holder at the time of such transfer stating the name and address
of the transferee and identifying the securities with respect to which the
rights under this Agreement are being assigned.
16. Effectiveness and Termination. This Agreement shall become effective
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upon the closing of the Initial Public Offering. The rights of Holders under
Sections 3, 4 and 5 of this Agreement shall terminate as to any Holder that
beneficially owns Registrable Securities constituting less than five percent
(5%) of the outstanding Common Stock of the Company.
17. Entire Agreement. This Agreement and the documents referred to herein
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constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and negotiations relating
thereto.
18. Governing Law. This Agreement, together with the rights and
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obligations of the parties hereunder shall be governed by and construed and
enforced in accordance with the laws
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of the Commonwealth of Pennsylvania without regard to any jurisdiction's
conflicts of laws provisions.
19. Payment of Legal Fees. If a Holder is required to bring any action to
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enforce rights under this Agreement, the Company shall pay to the Holder the
fees and expenses incurred by him in bringing and pursuing such action if the
Holder is successful, in whole or in part, on the merits or otherwise (including
by way of a settlement involving a payment of money by the Company to the
Holder), in such action. The Company shall pay such fees and expenses in
advance of the final disposition of such action upon receipt of an undertaking
from the Holder to repay to the Company such advances if he is not ultimately
successful, in whole or in part, on the merits or otherwise, in such action.
20. Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
21. Titles and Subtitles. The titles and subtitles used in this
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Agreement are for convenience only and are not to be considered in construing or
interpreting this Agreement.
22. Notices. Any notice, request or other communication required or
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permitted under this Agreement shall be given in writing and shall be deemed to
be effectively given upon (i) personal delivery, (ii) delivery by overnight
courier service which provides evidence of delivery, (iii) legible facsimile
transmission, or (iv) the expiration of three (3) days following deposit with
the United States Postal Service, by registered or certified mail, postage
prepaid, addressed, in each case, as follows:
If to the Company:
Mastech Corporation
0000 XxXxx Xxxx
Xxxxxxx, XX 00000
with a copy to:
Xxxxxxxx Ingersoll Professional Corporation
One Oxford Centre
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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If to Xxxxxxxx:
Xx. Xxxxx Xxxxxxxx
000 Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
If to Trivedi
Xx. Xxxxx Xxxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
or at such other address as any party, including any Holder, may designate by
ten (10) days advance written notice to the other party in accordance with the
provisions of this paragraph.
23. Amendments. This Agreement may not be amended and no rights of the
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Holders may be waived without the written consent of the Company and the Holders
of at least a majority in interest of the then outstanding Registrable
Securities. Any amendment or waiver so approved shall be binding on and
enforceable against all Holders.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by a duly authorized representative as of the day first above written.
MASTECH CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
_____________________________________
XXXXX XXXXXXXX
_____________________________________
XXXXX XXXXXXX
The undersigned agree to be bound by the terms of this Agreement.
XXXXXXXX SUBCHAPTER S FAMILY TRUST
By:__________________________, Trustee
TRIVEDI SUBCHAPTER S FAMILY TRUST
By:__________________________, Trustee
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