<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 28, 1997
REGISTRATION NO. 333-21779
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
RWD TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 7389 52-1552720
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
10480 LITTLE PATUXENT PARKWAY, SUITE 1200
COLUMBIA, MARYLAND 21044-3530
410-730-4377
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RONALD E. HOLTZ
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
RWD TECHNOLOGIES, INC.
10480 LITTLE PATUXENT PARKWAY, SUITE 1200
COLUMBIA, MARYLAND 21044-3530
410-730-4377
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------
COPIES OF ALL COMMUNICATIONS,
INCLUDING ALL COMMUNICATIONS SENT TO THE AGENT FOR SERVICE, SHOULD BE SENT TO:
RICHARD C. TILGHMAN, JR., ESQUIRE GARY T. JOHNSON, ESQUIRE
PIPER & MARBURY L.L.P. JONES, DAY, REAVIS & POGUE
36 SOUTH CHARLES STREET 77 WEST WACKER DRIVE
BALTIMORE, MARYLAND 21201 CHICAGO, ILLINOIS 60601-1692
410-539-2530 312-782-3939
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered in connection with dividend or interest
reinvestment plans, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_] ___________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_] ____________________________________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT OF
PROPOSED MAXIMUM REGISTRATION
TITLE OF SHARES TO BE REGISTERED AGGREGATE OFFERING PRICE FEE
- -------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.10 par value.......... $41,400,000.00(1)(2) $12,546.00(2)
</TABLE>
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- -------------------------------------------------------------------------------
(1) Includes 450,000 shares of Common Stock subject to an option granted to
the Underwriters solely to cover over-allotments, if any. See
"Underwriting."
(2) The registration fee was paid on February 14, 1997.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES +
+LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 25, 1997
PROSPECTUS
3,000,000 SHARES
[LOGO OF RWD TECHNOLOGIES, INC.(R) APPEARS HERE]
COMMON STOCK
All of the 3,000,000 shares of Common Stock offered hereby are being sold by
RWD Technologies, Inc. ("RWD" or the "Company"). Prior to this offering, there
has been no public market for the Common Stock of the Company. It is currently
anticipated that the initial public offering price will be between $10.00 and
$12.00 per share. See "Underwriting" for information relating to the
determination of the initial public offering price. Application has been made
to list the Common Stock on The Nasdaq National Market under the symbol "RWDT."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF COMMON
STOCK OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................................... $ $ $
Total(3)..................................... $ $ $
================================================================================
</TABLE>
(1) See "Underwriting" for a description of the indemnification arrangements
with the Underwriters.
(2) Before deducting expenses payable by the Company estimated at $985,000.
(3) The Company and certain Selling Stockholders of the Company have granted to
the Underwriters a 30-day option to purchase up to an aggregate of 450,000
additional shares of Common Stock solely to cover over-allotments, if any.
If all such shares are purchased, the total Price to Public, Underwriting
Discount, Proceeds to Company and Proceeds to Selling Stockholders will be
$ , $ , $ and $ , respectively. See "Underwriting."
The Common Stock is offered by the several Underwriters when, as and if
delivered to and accepted by them and subject to their right to reject orders
in whole or in part. It is expected that delivery of the certificates for the
Common Stock will be made on or about , 1997.
WILLIAM BLAIR & COMPANY MONTGOMERY SECURITIES
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
RWD TECHNOLOGIES, INC.
[GRAPHICS TO BE INSERTED]
WE BRING PEOPLE AND TECHNOLOGY TOGETHER(R)
RWD'S MISSION IS TO SATISFY OUR CLIENTS BY
ASSISTING WITH THE SUCCESSFUL
IMPLEMENTATION AND OPERATION OF HIGH-
TECHNOLOGY SYSTEMS AND EQUIPMENT. WE
BRING PEOPLE AND TECHNOLOGY TOGETHER(R)
BY FOCUSING ON THE INTEGRATION OF PEOPLE,
ADVANCED TECHNOLOGY, AND SUPPORT SYSTEMS
TO HELP END USERS PERFORM SUCCESSFULLY IN
COMPLEX OPERATIONAL ENVIRONMENTS.
OUR COMMITMENT TO EXCELLENCE IS A
FUNDAMENTAL TENET OF OUR MANAGEMENT
PHILOSOPHY AND IS ACHIEVED THROUGH A
PROCESS OF CONTINUOUS IMPROVEMENT.
The Company intends to furnish to its stockholders annual reports containing
audited financial statements and quarterly reports containing unaudited
financial information for the first three quarters of each year.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and the
Financial Statements and related Notes thereto appearing elsewhere in this
Prospectus. Unless indicated otherwise, all information contained in this
Prospectus (i) assumes that the Underwriters' over-allotment option is not
exercised, (ii) gives effect to the issuance of 5,926,727 shares upon the
exercise of options concurrently with this offering (the "Concurrent
Exercises") and (iii) gives retroactive effect to the 3-for-1 split of the
shares of Common Stock effected at the close of business on March 21, 1997. See
"Underwriting" and "Description of Capital Stock."
THE COMPANY
RWD Technologies, Inc. provides a broad range of integrated solutions
designed to improve the productivity and effectiveness of workers in complex
operating environments. As the scope and complexity of technology used by
businesses accelerates and the global business environment becomes more
competitive, companies are increasingly focused on maximizing the return on
their advanced technology investments. To achieve this goal, companies must
ensure their employees receive effective performance support, including the
tools and training to operate these advanced systems effectively. Founded in
1988, the Company initially provided conventional performance support services
such as classroom training and hard copy documentation to plant personnel in
large industrial companies employing complex manufacturing systems and
technologies. In recent years, the Company has expanded its performance support
services to include the design, development and implementation of customized
information technology solutions including Enhanced User Interface ("EUI")
systems, Electronic Performance Support Systems ("EPSS"), Electronic Document
Management Systems ("EDMS"), sales force automation systems and
Internet/Intranet applications. More recently, RWD has expanded its services to
include end-user training and performance support services essential to the
effective implementation of enterprise-wide business process reengineering
efforts (particularly SAP software implementation) and lean manufacturing
consulting. All of the Company's services are designed to improve its clients'
product quality, worker productivity and competitiveness and to ensure an
attractive return on the clients' technology investments. The Company believes
its focus on end-user performance, embedded in all its service offerings,
differentiates it from many of its competitors in the performance support and
information technology services marketplaces. The Company's registered service
mark, "We bring people and technology together,"(R) succinctly describes the
Company's activities.
The Company's clients are primarily Fortune 200 companies having a need for
large, diverse and recurring performance support and information technology
solutions. In 1996, RWD provided services to 83 companies in 23 industries.
Among these clients were seven of the Fortune 10 companies and 20 of the
Fortune 100 companies. The Company's clients include Anheuser-Busch, Bristol-
Myers Squibb, Chevron, Chrysler, Continental Cablevision, Deere & Company,
Detroit Edison, Dow Chemical, Ford, Merck, Procter & Gamble and Steelcase.
Chrysler engagements generated 33.2%, 33.9% and 28.5% of total revenue in 1994,
1995 and 1996, respectively. No other client generated more than 10% of total
revenue in any of these years. Historically, a large percentage of the
Company's revenue has come from follow-on business from its existing clients.
For example, in each of the past three years, more than 80% of the year's total
revenue was generated by clients who had been significant clients in the
previous year; and, in each of these years, aggregate revenue generated by
these repeat clients exceeded the previous year's total revenue by more than
25%. As the scope of the Company's services has become more comprehensive,
average revenue per client has increased from $398,000 in 1994 to $783,000 in
1996, and the number of clients generating individually more than $1.0 million
of annual revenue has grown from seven in 1994 to 19 in 1996.
3
<PAGE>
In 1996, the Company made significant inroads into global markets. The
Company expanded its services to Ford to include the global implementation of
lean manufacturing. To further augment these efforts, the Company expects to
open an office in London in 1997. Moreover, the Company is helping petroleum
companies improve the safety and efficiency of their overseas exploration and
production operations. The Company has begun providing tailored training and
documentation solutions to large companies installing enterprise-wide software
applications in their worldwide operations and has entered into an alliance
with Price Waterhouse to work together to provide implementation services. As a
result of these developments, RWD expects that services to multi-national
clients in their foreign operations will continue to grow.
RWD manages each of its projects using proven state-of-the-art methodologies
and formalized management techniques designed to ensure that each engagement
meets the Company's high standards for quality and client satisfaction as well
as its profitability objectives. The Company believes its structured project
management process, combined with its flexible organizational structure and
substantial commitment to internal training, positions RWD to achieve
sustainable, long-term growth. The Company strives to provide a work
environment and employee reward system that will enable it to attract, develop
and retain highly skilled and motivated professionals. RWD is also committed to
significant and broad-based employee stock ownership, believing this will
maximize employees' dedication to the Company's growth and profitability. In
addition to the co-founders' 56.8% post-offering, fully-diluted equity of the
Company, 452 persons, or 70% of the Company's employees as of December 31,
1996, held options to purchase 18.1% of the post-offering, fully-diluted equity
of the Company.
Total revenue and operating income increased from $12.7 million and $702,000,
respectively, in 1992 to $65.0 million and $8.7 million, respectively, in 1996,
while the number of employees increased from 168 on December 31, 1992 to 648 on
December 31, 1996. The Company believes demand for the types of services RWD
provides has increased rapidly in recent years and will continue to do so as
the gap between technological complexity and unsupported human capability
continues to widen. The Company's growth strategy is designed to enhance its
position as a comprehensive provider of performance support services and
information technology solutions by (i) increasing sales to its existing client
base, (ii) adding new clients and industries, (iii) broadening its range of
service offerings, (iv) expanding the scope of its geographic presence, (v)
maintaining its emphasis on recruiting and employee development and (vi)
exploring complementary acquisitions.
The Company was incorporated in Maryland in January 1988. The Company's
executive offices are located at 10480 Little Patuxent Parkway, Suite 1200,
Columbia, Maryland 21044-3530, and its telephone number is 410-730-4377.
THE OFFERING
<TABLE>
<S> <C>
Shares Offered by the Company....................... 3,000,000 shares
Shares Outstanding Immediately After the Offering... 13,786,367 shares(1)
Use of Proceeds..................................... To repay $3.8 million owed
to two stockholders and for
general corporate purposes,
including working capital
and possible acquisitions
Proposed Nasdaq National Market Symbol.............. RWDT
</TABLE>
- --------
(1) Excludes 3,221,160 shares issuable upon exercise of stock options
outstanding on December 31, 1996, at a weighted average exercise price of
$2.52 per share. See "Capitalization" and "Management--Employee Benefit
Plans."
4
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- -------- --------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue..................... $12,655 $18,418 $29,424 $47,132 $65,006
Operating income............ 702 1,607 4,158 6,651 8,737
Pro Forma Data(1):
Net income................. $ 217 $ 731 $ 2,384 $ 3,918 $ 5,168
Net income per share(3).... $ 0.40
Weighted average shares
outstanding(3)............ 12,933
OPERATING DATA:
Number of employees (at end
of year)................... 168 222 332 520 648
Average revenue per client
(000s)..................... n/a $ 242 $ 398 $ 620 $ 783
<CAPTION>
DECEMBER 31, 1996
--------------------------------
PRO
FORMA
PRO AS
ACTUAL FORMA(2) ADJUSTED(2)(4)
------- -------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and marketable securi-
ties....................... $ 5,534 $ 2,714 $28,619
Working capital............. 12,053 (3,317) 26,338
Total assets................ 29,858 27,038 52,943
Total debt.................. 3,925 10,925 7,125
Stockholders' equity........ 20,132 4,537 34,242
</TABLE>
--------
(1) For each of the fiscal years presented, the Company was an S
Corporation and, accordingly, was not subject to federal and certain
state corporate income taxes. The pro forma information has been
computed as if the Company were subject to federal and all applicable
state corporate income taxes for each of the periods presented assuming
the tax rate that would have applied had the Company been taxed as a C
Corporation. See "Dividend Policy and Prior S Corporation Status."
(2) Pro forma to give effect to the (i) cash payment of approximately $7.0
million and issuance by the Company of approximately $8.0 million of
non-interest bearing, demand promissory notes (the "S Corporation
Notes") to its stockholders prior to this offering (collectively, the
"S Corporation Distribution"), representing earnings not previously
distributed to the stockholders, (ii) establishment of a $4.8 million
deferred tax liability, calculated as if the Company had converted from
an S Corporation to a C Corporation as of December 31, 1996 and (iii)
$4.2 million of cash proceeds to be received by the Company from the
Concurrent Exercises. See "Dividend Policy and Prior S Corporation
Status" and "Management--Executive Compensation--Option Exercises and
Holdings."
(3) Includes that number of shares of Common Stock which would have to have
been issued (at an assumed public offering price of $11.00 per share
less the underwriting discount and estimated expenses for this
offering) to generate cash sufficient to fund the portion of the S
Corporation Distribution in excess of the Company's 1996 net income;
however, the Company plans to use operating cash flows, rather than the
proceeds of this offering, for this purpose.
(4) Pro forma as adjusted to give effect to the sale of the 3,000,000
shares of Common Stock offered hereby at an assumed public offering
price of $11.00 per share and application of the net proceeds therefrom
as described in "Use of Proceeds."
The RWD Technologies, Inc. logo and the phrase, "We bring people and
technology together,"(R) are registered service marks of the Company. All
other trademarks or service marks appearing in this Prospectus are
trademarks or registered service marks of the companies that utilize them.
Certain statements contained in "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
"Business," including statements regarding development of the Company's
services, markets and future demand for the Company's services and other
statements herein regarding matters that are not historical facts, are
forward-looking statements (as defined in the Private Securities Litigation
Reform Act of 1995). Such forward-looking statements include risks and
uncertainties; consequently, actual results may differ materially from those
expressed or implied thereby. Factors that could cause actual results to
differ materially include, but are not limited to, those discussed under
"Risk Factors."
5
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered hereby.
Reliance on Key Clients; Industry Concentration. The Company has relied in
the past, and expects to continue to rely for the foreseeable future, on a few
key clients for a majority of its revenue. Chrysler, the Company's largest
client, generated 33.2%, 33.9% and 28.5% of total revenue in 1994, 1995 and
1996, respectively. The Company's top five clients in 1994, 1995 and 1996
generated in the aggregate 62.1%, 57.8% and 51.4% of total revenue in 1994,
1995 and 1996, respectively. Automotive industry clients generated 46.9%,
43.5% and 40.6% of total revenue in 1994, 1995 and 1996, respectively. As a
result of a significant contract with Ford Motor Company, RWD anticipates that
its automotive industry concentration may increase in 1997 and that Ford Motor
Company may generate more than 10% of the Company's revenue in 1997. The
automotive industry is subject to cyclical and economic factors beyond the
control of the Company which could negatively affect future demand for the
Company's services from automotive clients. It is also possible that clients
will develop or acquire in-house expertise in services similar to those
provided by the Company, thereby significantly reducing demand for the
Company's services. No assurance can be given that the Company will be able to
maintain its existing client base, maintain or increase the level of revenue
generated by its existing clients or be able to attract new clients. The loss
of one or more of the Company's significant clients, especially Chrysler or
Ford, or a substantial reduction in business from any of its significant
clients, regardless of the reason, is likely to have a materially adverse
effect on the Company. See "Business--Industries and Clients Served."
Fluctuating Results; Project Risks. The Company's operating results have
fluctuated from period to period in the past and may fluctuate significantly
in future periods. These variations result from a number of factors, such as
the number, significance and mix of client projects commenced or completed
during a period and the number of business days in a particular period. It is
difficult to forecast the timing of revenue because project cycles depend on
factors such as the size and scope of assignments and circumstances specific
to particular clients or industries. Third party products and services are
integral to the success of certain Company projects. To the extent third
parties do not deliver effective products and services on a timely basis, the
Company's project results could be negatively impacted. Additionally, employee
utilization rates vary from period to period not only due to changes in the
Company's volume of business but because of the timing of employee vacations,
hiring and training, the amount of time spent by employees on marketing and
project terminations or postponements. Generally, client engagements,
including the Chrysler and Ford engagements, are terminable with little or no
notice or penalty, and a client's unanticipated decision to terminate or
postpone a project may result in higher than expected numbers of unassigned
Company professionals or severance costs, either of which could materially
adversely affect the Company's results of operations. The Company's most
significant expenses relate to salaries and benefits for its professional
staff. Since these expenses are generally fixed, the Company's results of
operations in a particular period may be materially adversely affected if
revenue falls below expectations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Need to Attract and Retain Professional Employees. The Company's continued
success and future growth will depend upon its ability to attract, develop and
retain a sufficient number of highly skilled, motivated professional
employees. Competition for personnel qualified to deliver most of the
Company's services is intense, and many of the companies with which the
Company competes for qualified professionals have substantially greater
financial and other resources than the Company. Furthermore, competition for
qualified personnel can be expected to increase as competition in the
Company's service offerings increases. There can be no assurance that the
Company will be able to recruit, develop and retain a sufficient number of
highly skilled, motivated professionals to compete successfully. The loss of a
significant number of professional personnel is likely to have a materially
adverse effect on the Company's business prospects and results of operations,
particularly its ability to complete existing projects or secure new projects.
See "Business--Company Organization and Methodologies."
6
<PAGE>
Management of Growth. The Company's rapid growth has placed significant
demands on the Company's management, administrative, operating and financial
resources. The Company's ability to manage future growth will require the
Company to continue to enhance its operating, financial and management
information systems and to expand, develop, motivate and manage effectively a
changing and expanding professional work force. If the Company is unable to
manage growth effectively, the quality of the Company's services, its ability
to retain key personnel and its results of operations are likely to be
materially adversely affected. Should the Company acquire businesses in the
future, there can be no assurance that it will be successful in integrating
the acquired businesses into the Company's infrastructure or retaining their
key professionals. Furthermore, there can be no assurance that the Company's
business will continue to expand. The Company's growth could be adversely
affected by client dissatisfaction with prior Company services, reductions in
clients' spending allocations for services the Company provides, restrictions
placed by clients on services to client competitors, increased competition,
possible pricing or labor cost pressures and general economic trends. Also,
the Company's enterprise-wide reengineering implementation support services
will likely continue to depend, in part, upon its alliance with Price
Waterhouse. Any adverse change in this relationship could materially adversely
affect the Company's ability to generate or increase revenue from these
services. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business--RWD Growth Strategy" and "--RWD Services."
Risk of Client Dissatisfaction. The Company is subject to potential claims
by dissatisfied clients that Company services or actions by RWD employees did
not achieve the results expected by those clients or adversely impacted the
clients' operations. Any such claim could have a materially adverse effect on
the Company's results of operations and financial condition. The Company's
failure to meet a client's expectations or the client's belief that RWD may
have contributed to operating downtime could damage its relationship with that
client, could cause the client to terminate the Company's engagement with
little or no notice and could damage the Company's reputation, thereby
adversely affecting its ability to attract new or repeat business. See
"Business--Risk Management."
Dependence on Key Personnel. The success of the Company is highly dependent
upon the efforts and abilities of its co-founders, Dr. Robert W. Deutsch, 73,
and Mr. John H. Beakes, 54, the Chief Executive Officer and the Chief
Operating Officer, respectively, as well as its Group Vice Presidents, Messrs.
John E. Lapolla, 43, Kenneth J. Rebeck, 45, and Jeffrey W. Wendel, 42. Each of
these individuals is party to an employment agreement with the Company
containing customary noncompetition, nondisclosure and nonsolicitation
covenants. There can be no assurance that these agreements will prevent the
loss of any of these individuals or Company business. The loss of the services
of any of these key executives could have a materially adverse effect upon the
Company's business, results of operations and financial condition. The Company
does not maintain key man life insurance on these or any other RWD employees.
See "Management."
Budget Overruns. The majority of the Company's contracts are on a time and
materials basis, although many of these contracts contain initial "not-to-
exceed" fees and Company performance obligations. The remainder of the
Company's contracts are on a fixed-price basis, particularly those related to
the Company's information technology services. The failure of the Company to
complete a project to the client's satisfaction within the "not-to-exceed" or
fixed fee exposes the Company to unrecoverable budget overruns, which could
have a materially adverse effect on the Company's business, results of
operations and financial condition. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Risks of Conducting International Operations. The Company expects that
within the next several years, its international operations may increase
significantly. Generally, the cost of doing business abroad is higher for U.S.
businesses than the cost of doing business domestically. Therefore, the
Company could experience a decline in its operating margins as the
significance of its international operations increases. International
operations and the provision of services in foreign markets are subject to a
number of special risks, including currency exchange rate fluctuations, trade
barriers, exchange controls, national and regional labor strikes, political
risks and risks of increases in duties, taxes and governmental royalties, as
well as changes in laws and policies governing operations of foreign-based
companies. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business--RWD Growth Strategy."
7
<PAGE>
Rapid Technological Change; Dependence on New Solutions. The Company's
future success will depend on its ability to gain expertise in technological
advances rapidly as well as to respond quickly to evolving industry trends and
client needs. There can be no assurance that the Company will be successful in
adapting to these advances in technology or in addressing changing client
needs on a timely basis or, if the Company does gain such expertise, that it
will be able to market new services successfully. There can be no assurance
that the Company will satisfactorily complete projects where unproven
technologies or tools are critical to the projects' success. In addition,
there can be no assurance that the services or technologies developed by
others will not significantly reduce demand for the Company's services or
render the Company's services obsolete. See "Business--RWD's Services."
Substantial Competition. The Company's service areas are highly competitive
and are subject to low barriers to entry and rapid change. The Company faces
competition for client assignments from a number of companies having
significantly greater financial, technical and marketing resources and greater
name recognition than the Company. Principal competitors for the Company's
services include the consulting practices of the six largest national
accounting firms as well as professional services groups of many large
technology and management consulting companies. The Company also competes with
smaller service providers whose specific, more narrowly focused service
offerings may be more attractive to potential clients than the Company's
multi-dimensional approach. In addition, clients may elect to use their
internal resources to satisfy their needs for the services the Company
provides. There can be no assurance that the Company will compete successfully
with potential clients' internal resources or with existing or new
competitors. See "Business--Competition."
Limited Protection of Proprietary Expertise, Methodologies and Software. The
Company's success is highly dependent upon its specialized and proprietary
expertise, methodologies and software. To protect proprietary information, the
Company relies only on a combination of trade secret laws, employee
nondisclosure policies and third party confidentiality agreements. A
substantial majority of the Company's employees are not bound by their
nondisclosure agreements once their employment has been terminated, although
the Company believes common law generally prohibits these employees from
disclosing to third parties proprietary information of the Company. There can
be no assurance that the steps taken by the Company to protect its proprietary
rights will be adequate to prevent misappropriation of such rights or that
third parties will not independently develop functionally equivalent or
superior methodologies or software. Additionally, because the Company's
engagements are work-for-hire based, the Company assigns ownership of all
materials the Company develops specifically for its clients to those clients
upon project completion. There can be no assurance, however, that third
parties will not assert infringement claims against the Company in the future
that would result in costly litigation or license arrangements regardless of
the merits of such claims. See "Business--Intellectual Property and Other
Proprietary Rights."
Risks Associated with Acquisition Strategy. One of the elements of the
Company's growth strategy is to pursue acquisitions that could provide well-
trained, high-quality professionals, new service offerings, additional
industry expertise, a broader client base or an expanded geographic presence.
The Company has never made an acquisition, and there can be no assurance that
it will be able to identify acceptable acquisition candidates or complete the
acquisition of any identified candidates. A substantial portion of the
Company's capital resources, including a portion of the net proceeds from this
offering, could be used for these acquisitions. The Company may require
additional debt or equity financings for future acquisitions, which may not be
available on terms favorable to the Company, if at all. There also can be no
assurance that the Company will be able to successfully integrate an
acquisition into the Company's operations or that any acquired business will
be able to be operated profitably by the Company. See "Business--RWD Growth
Strategy."
Control by Principal Stockholder. Dr. Deutsch and members of his family will
beneficially own approximately 72.9% of the shares of Common Stock outstanding
upon completion of this offering. As a result, Dr. Deutsch and his family will
be able to control the outcome of all matters requiring a stockholder vote,
including the election of the entire Board of Directors and the approval of
significant corporate matters such as change of control transactions, thereby
controlling the affairs and management of the Company. See "Principal
Stockholders."
Effect of Anti-Takeover Provisions. The Company's Board of Directors has the
authority to issue preferred stock and to determine the price, rights,
conversion ratios, preferences and privileges of that stock without further
8
<PAGE>
vote or action by the holders of the Common Stock. The rights of the holders
of Common Stock will be subject to, and may be adversely affected by, the
rights, including economic rights, of the holders of any shares of preferred
stock issued in the future. Any such issuance may discourage third parties
from attempting to acquire control of the Company. Furthermore, the Company is
subject to the anti-takeover provisions of the Maryland General Corporation
Law which prohibit the Company from engaging in a "business combination" with
an "interested stockholder" for a period of five years after the date of the
transaction in which the person first becomes an "interested stockholder,"
unless the business combination is approved in a prescribed manner. The
Company is also subject to the control share acquisition provisions of the
Maryland General Corporation Law, which provide that shares acquired by a
person with certain levels of voting power have no voting rights unless
approved by a stockholder vote of two-thirds of the votes entitled to be cast,
excluding shares owned by the acquiror and by the Company's officers and
employee-directors, and in certain circumstances, such shares may be redeemed
by the Company. The application of these statutes and certain other provisions
of the Company's Charter could have the effect of discouraging, delaying or
preventing a change of control of the Company not approved by the Board of
Directors, which could adversely affect the market price of the Company's
Common Stock. See "Description of Capital Stock."
Shares Eligible for Future Sale. Upon completion of this offering, the
Company will have outstanding 13,795,367 shares of Common Stock. Sales of a
substantial number of shares of Common Stock in the public market following
this offering, or the perception that such sales could occur, could adversely
affect the market price for the Company's Common Stock. Substantially all of
the shares to be outstanding upon completion of this offering (other than the
3,000,000 shares being offered hereby) are subject to the lock-up agreements
described below. Of the shares to be outstanding upon completion of this
offering, 10,611,257 shares are "restricted," as that term is defined in the
Securities Act of 1933, as amended (the "Securities Act"). Of these restricted
shares, 4,666,530 have been held for more than one year and, as such, will be
salable upon expiration of the lock-up agreements described below, subject to
certain volume and manner of sale restrictions under Rule 144 of the
Securities Act.
The 3,221,160 shares reserved for issuance upon exercise of options
outstanding on December 31, 1996 and the 818,640 shares reserved for issuance
upon exercise of future grants under the Company's stock option plan will be
registered under the Securities Act 90 days after completion of this offering.
The Company has an additional 175,000 shares of Common Stock reserved for
issuance in connection with its Employee Stock Purchase Plan which the Company
intends to register under the Securities Act no earlier than September 1,
1997. Other than shares subject to the lock-up agreements, shares registered
under the Securities Act will be freely transferable upon issuance unless
acquired by affiliates of the Company. Of the shares subject to outstanding
options, 1,105,320 shares are issuable upon exercise of fully vested options,
with 390,000 of such shares subject to the lock-up agreements described below.
See "Management--Employee Benefit Plans" and "Shares Eligible for Future
Sale."
All directors, executive officers, principal stockholders and certain other
officers of the Company who hold in the aggregate 10,641,227 shares of Common
Stock (plus options to purchase an aggregate of 826,500 shares), and the
Company have agreed not to sell or otherwise dispose of any of their shares or
options for a period of 180 days after the date of this Prospectus without the
prior written consent of William Blair & Company, L.L.C. However, William
Blair & Company, L.L.C., may, in its sole discretion and at any time without
notice, release for public sale all or any portion of these shares subject to
such lock-up agreements. See "Underwriting."
No Prior Market for Common Stock; Possible Volatility of Stock Price. Prior
to this offering, there has been no public market for the Common Stock, and
there can be no assurance that an active public market for the Common Stock
will develop or be sustained after the offering. The initial public offering
price will be determined by negotiations among the Company and the
Representatives of the Underwriters and may not be indicative of market prices
of the Common Stock after this offering. See "Underwriting." The market price
of the Common Stock may be subject to significant fluctuations in response to
variations in quarterly operating results and other events or factors, such as
announcements of new services by the Company or its competitors and changes in
9
<PAGE>
financial estimates by securities analysts. Moreover, the stock market and the
market prices of the shares of many technology companies in recent years have
experienced significant price and volume fluctuations. These fluctuations
often have been unrelated to the operating performance of specific public
companies. Broad market fluctuations, as well as economic conditions generally
and in technology industries specifically, may adversely affect the market
price of the Common Stock. There can be no assurance that the market price of
the Common Stock will not decline below the initial public offering price.
Dividend Policy; S Corporation Distribution. Until March 31, 1997, the
Company will be treated as an S Corporation under the Internal Revenue Code of
1986, as amended (the "Code"). Accordingly, the Company has made and, prior to
that date, will make periodic distributions to its stockholders in amounts
sufficient to enable the stockholders to pay income taxes on account of the
Company's earnings. Following consummation of this offering, the Company does
not anticipate paying any further cash dividends for the foreseeable future.
As of March 31, 1997, the Company will convert from S Corporation to C
Corporation status. In connection with this conversion, the Company will
effect the S Corporation Distribution to its stockholders. As a result of the
S Corporation Distribution, consisting of an aggregate of approximately $7.0
million in cash and $8.0 million of S Corporation Notes, the Company's
retained earnings and stockholders' equity will be significantly reduced. In
addition, the Company will record a one-time, non-cash charge against earnings
in the three months ending March 31, 1997, resulting from a deferred tax
liability in connection with the Company's conversion from S Corporation to C
Corporation status. Had the Company recorded this liability on December 31,
1996, the amount of this charge would have been approximately $4.8 million.
However, the amount to be recorded upon conversion may be materially higher or
lower than $4.8 million, depending primarily upon the timing of accounts
receivable collections through the date of conversion. This tax liability will
become due ratably over the four years following conversion. See "Dividend
Policy and Prior S Corporation Status," "Capitalization" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
Dilution. Investors participating in this offering will incur immediate and
substantial dilution in the tangible book value of their shares. To the extent
that currently outstanding options to purchase Common Stock are exercised,
there will be further dilution. See "Dilution."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock being offered hereby are estimated to be approximately $29.7
million ($32.8 million if the Underwriters' over-allotment option is exercised
in full), assuming an initial public offering price of $11.00 per share, after
deducting the underwriting discount and estimated offering expenses. The
Company will use $3.8 million of the net proceeds to retire notes issued to
the Company's co-founders to evidence loans made to the Company at various
times from 1988 to 1991, which bear interest at 9% per annum and mature on
March 31, 1998 (the "Stockholder Notes"). The Company will use the remaining
net proceeds (plus the $4.2 million of cash proceeds from the Concurrent
Exercises) for working capital to support the planned growth of its business
and for other general corporate purposes, which may include the acquisition of
complementary businesses. From time to time, the Company evaluates possible
acquisitions, but is not currently considering any specific acquisition. The
Company intends to invest the net proceeds from this offering in interest-
bearing, investment-grade obligations pending application thereof in the
manner described above.
10
<PAGE>
DIVIDEND POLICY AND PRIOR S CORPORATION STATUS
From its inception in January 1988 until March 31, 1997, the Company was
subject to taxation under Subchapter S of the Code. As a result, the net
income of the Company, for federal and certain state income tax purposes, was
reported by and taxable directly to the Company's stockholders during that
time rather than to the Company. Primarily to provide funds for tax
obligations payable by its stockholders on account of the Company's income in
1995 and 1996, the Company made $691,300 of cash distributions during 1996 to
its stockholders. In connection with its conversion from S Corporation to C
Corporation status, the Company will effect the S Corporation Distribution
(consisting of an aggregate of approximately $7.0 million in cash payments and
the issuance of approximately $8.0 million principal amount of S Corporation
Notes) to the Company's stockholders on March 27, 1997. The S Corporation
Distribution represents the stockholders' proportionate interest in Company
earnings which had not been distributed to the stockholders prior to the
conversion date. See "Certain Transactions."
Following this offering, the Company does not intend to pay cash dividends
as it intends to retain all earnings to support its planned growth. Any future
dividends will depend upon the Company's results of operations, financial
condition, cash requirements and other factors deemed relevant by the Board of
Directors.
11
<PAGE>
CAPITALIZATION
At December 31, 1996, the following table sets forth: (i) the actual total
short-term debt and total capitalization of the Company; (ii) such short-term
debt and capitalization on a pro forma basis to give effect to the S
Corporation Distribution, the Concurrent Exercises and recognition of a
deferred tax liability resulting from conversion to C Corporation status; and
(iii) such pro forma short-term debt and capitalization as adjusted to reflect
the sale of the 3,000,000 shares of Common Stock offered hereby at an assumed
initial public offering price of $11.00 per share and application of the net
proceeds therefrom (including retirement of the Stockholder Notes), after
deducting the underwriting discount and estimated offering expenses. This
table should be read in conjunction with the Company's Financial Statements
and related Notes thereto and other financial information appearing elsewhere
in this Prospectus. See "Use of Proceeds," "Dividend Policy and Prior S
Corporation Status" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt:
S Corporation Notes............................ $ -- $ 8,000 $ 8,000
Current portion of capital lease obligation.... 42 42 42
Stockholder Notes.............................. 3,800 3,800 --
------- ------- -------
Total short-term debt........................ $ 3,842 $11,842 $ 8,042
======= ======= =======
Capital lease obligation, net of current portion. $ 83 $ 83 $ 83
------- ------- -------
Stockholders' equity:
Common Stock, $0.10 par value; 50,000,000
shares authorized; 4,859,640 shares issued and
outstanding actual; 10,786,367 shares issued
and outstanding pro forma; 13,786,367 shares
issued and outstanding pro forma as adjust-
ed(1)......................................... 486 1,079 1,379
Additional paid-in capital..................... 2,754 6,341 35,746
Retained earnings (accumulated deficit)........ 16,892 (2,883) (2,883)
------- ------- -------
Total stockholders' equity................... 20,132 4,537 34,242
------- ------- -------
Total capitalization....................... $20,215 $ 4,620 $34,325
======= ======= =======
</TABLE>
- --------
(1) Actual shares outstanding assume the Concurrent Exercises had not
occurred and exclude 9,194,160 shares issuable upon exercise of all
options that were outstanding on December 31, 1996. Pro forma and pro
forma as adjusted information assume the occurrence of the Concurrent
Exercises and exclude the 3,221,160 shares issuable upon exercise of
options outstanding on December 31, 1996, having a weighted average
exercise price of $2.52 per share. All share amounts exclude 818,640
shares reserved for issuance upon exercise of future option grants under
the Company's Amended and Restated Equity Participation Plan and 175,000
shares reserved for issuance in connection with the Company's Employee
Stock Purchase Plan. See "Management--Employee Benefit Plans" and Note 5
of Notes to Financial Statements.
12
<PAGE>
DILUTION
At December 31, 1996, the pro forma net tangible book value of the Company
was $4.5 million, or $0.42 per share of Common Stock after giving effect to
the S Corporation Distribution, recognition of a $4.8 million deferred tax
liability resulting from converting to a C Corporation and the Concurrent
Exercises. Pro forma net tangible book value per share is determined by
dividing the pro forma tangible book value of the Company (total tangible
assets less total liabilities) by the number of outstanding shares of Common
Stock as of that date. After giving effect to the sale by the Company of the
3,000,000 shares of Common Stock offered hereby, assuming an initial public
offering price of $11.00 per share and after deducting the underwriting
discount and estimated offering expenses, the Company's pro forma net tangible
book value as of December 31, 1996 would have been $34.2 million, or $2.48 per
share. This represents an immediate increase in pro forma net tangible book
value to existing stockholders of $2.06 per share and an immediate dilution to
new investors of $8.52 per share. The following table illustrates the per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $ 11.00
Pro forma tangible book value before offering............... $0.42
Increase attributable to new investors...................... 2.06
-----
Pro forma net tangible book value after the offering........ 2.48
-------
Dilution to new investors................................... $ 8.52
=======
</TABLE>
On a pro forma basis after giving effect to the S Corporation Distribution
and the Concurrent Exercises, the following table summarizes, as of December
31, 1996, differences between existing stockholders and new investors with
respect to the number of shares of Common Stock purchased from the Company,
the total consideration paid and the average price paid per share, assuming an
initial public offering price of $11.00 per share but before deducting the
underwriting discount and estimated offering expenses:
<TABLE>
<CAPTION>
AVERAGE PRICE
SHARES PURCHASED TOTAL CONSIDERATION PER SHARE
------------------ ------------------- -------------
NUMBER PERCENT AMOUNT PERCENT
---------- ------- ----------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 10,786,367 78.2% $ 7,420,000 18.4% $ 0.69
New investors.............. 3,000,000 21.8 33,000,000 81.6 11.00
---------- ------ ----------- ------
Total.................... 13,786,367 100.0% $40,420,000 100.0%
========== ====== =========== ======
</TABLE>
At December 31, 1996, there were also outstanding options to purchase an
additional 3,221,160 shares of Common Stock at a weighted average exercise
price of $2.52 per share. To the extent these options are exercised, there
will be further dilution to new investors in the net tangible book value of
their shares. See "Capitalization," "Management--Employee Benefit Plans" and
Note 5 of Notes to Financial Statements.
13
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Company's Financial Statements and related Notes thereto and
other financial information included elsewhere in this Prospectus. The balance
sheet and income statement data at and for the years ended December 31, 1993,
1994, 1995 and 1996, are derived from the Company's Financial Statements,
which have been audited by Arthur Andersen LLP, independent public
accountants. The balance sheet and income statement data at and for the year
ended December 31, 1992 have been derived from unaudited financial statements
of the Company which, in the opinion of management, include all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation
of the financial condition and results of operations of the Company.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue........................ $12,655 $18,418 $29,424 $47,132 $ 65,006
Cost of services............... 10,217 14,654 21,751 35,269 48,132
------- ------- ------- ------- --------
Gross profit................... 2,438 3,764 7,673 11,863 16,874
General and administrative ex-
penses........................ 1,736 2,157 3,515 5,212 8,137
------- ------- ------- ------- --------
Operating income............... 702 1,607 4,158 6,651 8,737
Other income (expense), net.... (321) (368) (185) (121) (123)
------- ------- ------- ------- --------
Income before taxes............ 381 1,239 3,973 6,530 8,614
Provision for income taxes..... 34 45 60 168 365
------- ------- ------- ------- --------
Net income..................... $ 347 $ 1,194 $ 3,913 $ 6,362 $ 8,249
======= ======= ======= ======= ========
Pro Forma Data(1):
Provision for income taxes... $ 164 $ 508 $ 1,589 $ 2,612 $ 3,446
Net income................... $ 217 $ 731 $ 2,384 $ 3,918 $ 5,168
======= ======= ======= ======= ========
Net income per share(2)...... $ 0.40
Weighted average shares
outstanding(2).............. 12,933
BALANCE SHEET DATA (AT YEAR END):
Cash and marketable securities. $ 26 $ 2,292 $ 1,726 $ 2,394 $ 5,534
Working capital................ 1,908 4,600 7,620 11,439 12,053
Total assets................... 4,466 10,171 14,533 23,658 29,858
Total debt..................... 3,952 4,677 4,276 6,500 3,925
Stockholders' equity (deficit). (712) 2,484 6,397 12,758 20,132
</TABLE>
- --------
(1) For each of the fiscal years presented, the Company was an S Corporation
and, accordingly, was not subject to federal and certain state corporate
income taxes. The pro forma information has been computed as if the
Company were subject to federal and all applicable state corporate income
taxes for each of the periods presented assuming the tax rate that would
have applied had the Company been taxed as a C Corporation. See "Dividend
Policy and Prior S Corporation Status" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview."
(2) Includes that number of shares of Common Stock which would have to have
been issued (at an assumed public offering price of $11.00 per share less
the underwriting discount and estimated expenses for this offering) to
generate cash sufficient to fund the portion of the S Corporation
Distribution in excess of the Company's 1996 net income; however, the
Company plans to use operating cash flows, rather than the proceeds of
this offering, for this purpose.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
RWD provides a broad range of integrated solutions designed to improve the
productivity and effectiveness of workers in complex operating environments.
The Company was founded in 1988 by Dr. Robert W. Deutsch, the Company's Chief
Executive Officer, and Mr. John H. Beakes, the Company's Chief Operating
Officer. Since 1991, its third year of operations, the Company has been
profitable in every quarter. Since inception, the Company has significantly
expanded its client base and the breadth of its service offerings. The Company
manages each project using proven state-of-the-art methodologies and
formalized management techniques designed to ensure that each engagement meets
the Company's high standards for quality and client satisfaction as well as
its profitability objectives. The Company's services integrate its
comprehensive expertise in information technology, conventional performance
support, reengineering and lean manufacturing in a coordinated manner,
customized to the individual needs of each client. Revenue increased by $17.9
million, or 37.9%, from $47.1 million in 1995 to $65.0 million in 1996. The
Company's operating income increased by $2.1 million, or 31.4%, from $6.7
million in 1995 to $8.7 million in 1996.
Almost all of RWD's revenue is generated from professional fees. The
majority of the Company's contracts are on a time-and-materials basis,
although many of these contracts contain initial "not-to-exceed" fees and
Company performance obligations. The remainder of the Company's contracts are
on a fixed-price basis, particularly those related to the Company's
information technology services. All revenue is recognized using the
percentage-of-completion method. The Company typically bills all contracts on
a monthly basis, and senior management reviews outstanding accounts receivable
balances weekly to monitor client satisfaction and collections. Generally, the
Company's engagements, including those with Chrysler and Ford, are terminable
by the client with little or no notice to the Company. The Company's projects
are typically completed in as few as one to as many as 24 months.
One of the contributing factors to the Company's revenue growth has been the
increase in the breadth of its service offerings. Prior to 1990, the Company
offered conventional performance support services. Since that time, the
Company has added information technology services, including EPSS in 1990, EUI
systems in 1991 and EDMS in 1992, lean manufacturing consulting services in
1993 and enterprise-wide software implementation support services in 1994. In
1996, RWD provided services to 83 companies in 23 industries. Chrysler
engagements generated 33.2%, 33.9% and 28.5% of total revenue in 1994, 1995
and 1996, respectively. These engagements were performed pursuant to multiple
purchase orders, which were governed by customary terms and conditions
applicable to all of Chrysler's service providers. No other client generated
more than 10% of total revenue in any of these years. Automotive industry
clients generated 46.9%, 43.5% and 40.6% of total revenue in 1994, 1995 and
1996, respectively. As a result of a significant contract with Ford Motor
Company, RWD anticipates that its automotive industry concentration may
increase in 1997 and that Ford Motor Company may generate more than 10% of the
Company's revenue in 1997. Historically, a large percentage of the Company's
revenue has come from follow-on business from its existing clients. For
example, in each of the past three years, over 80% of the year's total revenue
was generated by clients who had been significant clients in the previous
year; and, in each of those years, aggregate revenue generated by these repeat
clients exceeded the previous year's total revenue by over 25%. As the scope
of the Company's services has become more comprehensive, average revenue per
client has increased from $398,000 in 1994 to $783,000 in 1996, and the number
of clients generating individually more than $1.0 million of annual revenue
increased from seven in 1994 to 19 in 1996.
Gross profit margins per project and professional staff utilization rates
are critical to the Company's financial performance. The Company manages these
parameters by carefully establishing and monitoring project budgets and
timetables and by closely tracking staffing requirements for projects in
progress and anticipated projects. The status of all projects in progress and
personnel utilization are reviewed twice per month by project managers, first
line supervisors and senior management to ensure client satisfaction and to
monitor performance relative to internal financial and operating expectations.
The number of professionals assigned to a project varies according to the
size, complexity, duration and demands of the project. Professional staff
utilization rates vary from period to period not only because of variations in
the Company's volume of business but because of the timing of employee
vacations, hiring and training, the amount of time spent by employees on
marketing and
15
<PAGE>
project terminations or postponements. Client engagements are generally
terminable with little or no notice or penalty, and a client's unanticipated
decision to terminate or postpone a project may result in higher than expected
unassigned Company professionals or severance expenses.
The principal components of cost of services are compensation and benefits
to the Company's professional staff. Cost of services also includes training
and travel expenses for the Company's professional staff, fees paid to
subcontractors and depreciation of capital equipment provided to the
professional staff. The Company does not maintain a separate marketing or
sales staff, and time devoted by professional personnel to marketing is
included in cost of services as are costs associated with administrative
personnel that directly support the Company's professional staff. General and
administrative expenses are primarily comprised of salaries for corporate,
accounting and other headquarters executive and administrative personnel and
other corporate overhead. During all periods discussed, the Company was an S
Corporation and, accordingly, was not subject to federal or most state
corporate income taxes. Therefore, the provision for income taxes consists
only of state and local income taxes payable directly by the Company,
including a Michigan corporate tax. The pro forma provision for income taxes
assumes the Company was subject to federal, state and local income taxes
applicable to C Corporations and was calculated using effective tax rates of
43.0%, 41.0%, 40.0%, 40.0% and 40.0%, respectively, in each of the five years
ended December 31, 1996.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, income statement
data expressed as a percentage of revenue and the percentage change in such
items versus the prior comparable period.
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUE
-------------------------
YEAR ENDED DECEMBER 31, PERCENTAGE INCREASE (DECREASE)
------------------------- ------------------------------------
1994 1995 1996 1994 TO 1995 1995 TO 1996
------- ------- ------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenue................. 100.0% 100.0% 100.0% 60.2% 37.9%
Cost of services........ 73.9 74.8 74.0 62.1 36.5
------- ------- -------
Gross profit............ 26.1 25.2 26.0 54.6 42.2
General and administra-
tive expenses.......... 12.0 11.1 12.5 48.3 56.1
------- ------- -------
Operating income........ 14.1 14.1 13.5 59.9 31.4
Other income (expense),
net.................... (0.6) (0.3) (0.2) (35.1) 2.2
------- ------- -------
Income before taxes..... 13.5 13.8 13.3 64.4 31.9
Provision for income
taxes.................. 0.2 0.4 0.6 181.8 116.6
------- ------- -------
Net income.............. 13.3% 13.4% 12.7% 62.6 29.7
======= ======= =======
Pro Forma Data:
Provision for income
taxes................. 5.4% 5.5% 5.3% 64.4 31.9
Net income............. 8.1% 8.3% 8.0% 64.4 31.9
======= ======= =======
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenue. Revenue increased by $17.9 million, or 37.9%, from $47.1 million in
1995 to $65.0 million in 1996. The Company experienced growth in each of its
service areas from 1995 to 1996, with enterprise-wide software implementation
support services revenue increasing by 75.8%, from $7.6 million to $13.4
million; lean manufacturing consulting revenue increasing by 99.8%, from $3.8
million to $7.7 million; information technology services revenue increasing by
84.0%, from $9.4 million to $17.2 million; and conventional performance
support services revenue increasing by 1.4%, from $26.3 million to $26.7
million. Conventional performance support services, enterprise-wide software
implementation support services, information technology services and lean
manufacturing consulting services generated 41.0%, 20.7%, 26.5% and 11.8% of
total revenue, respectively, in 1996 compared to 55.8%, 16.2%, 19.9% and 8.1%
of total revenue, respectively, in 1995.
Revenue from the Company's largest client, Chrysler, increased by 16.3%,
from $16.0 million in 1995 to $18.6 million in 1996, primarily as a result of
increases in information technology and lean manufacturing consulting services
provided by the Company.
16
<PAGE>
Gross Profit. Gross profit increased by $5.0 million, or 42.2%, from $11.9
million in 1995 to $16.9 million in 1996 and increased from 25.2% of revenue
in 1995 to 26.0% of revenue in 1996. This increase in the gross margin
resulted from an increase in billing rates charged to clients, partially
offset by a decline in professional staff utilization. In addition,
reimbursable expenses made up a smaller proportion of revenue, increasing the
gross margin because these expenses are reimbursed to the Company generally
without significant mark-up.
General and Administrative Expenses. General and administrative expenses
increased by $2.9 million, or 56.1%, from $5.2 million in 1995 to $8.1 million
in 1996, increasing from 11.1% of revenue in 1995 to 12.5% of revenue in 1996.
This increase in general and administrative expenses as a percentage of
revenue resulted primarily from increased rent associated with expansion of
existing offices and increased depreciation associated with purchases of
furniture, computer and office equipment and leasehold improvements.
Operating Income. As a result of the foregoing, the Company's operating
income increased by $2.1 million, or 31.4%, from $6.7 million in 1995 to $8.7
million in 1996 but declined from 14.1% of revenue in 1995 to 13.5% of revenue
in 1996.
Other Income (Expense). Other expense was $120,500 in 1995 and $123,100 in
1996. In both years, this expense consisted primarily of interest paid on the
Stockholder Notes and the Company's line of credit, partially offset by
interest income from cash balances.
Pro Forma Net Income. Pro forma net income increased by $1.3 million, or
31.9% from $3.9 million in 1995 to $5.2 million in 1996 but declined slightly
from 8.3% of revenue in 1995 to 8.0% of revenue in 1996. Pro forma net income
in 1995 and 1996 assumes the Company was taxed for federal and state income
tax purposes as a C Corporation at an effective rate of 40.0%.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenue. Revenue increased by $17.7 million, or 60.2%, from $29.4 million in
1994 to $47.1 million in 1995. The Company experienced growth in all of its
service areas in 1995 compared to 1994, with enterprise-wide software
implementation support services revenue increasing by 451.8%, from
$1.4 million to $7.6 million; lean manufacturing consulting revenue increasing
by 81.0%, from $2.1 million to $3.8 million; conventional performance support
services revenue increasing by 38.5%, from $19.0 million to $26.3 million; and
information technology services revenue increasing by 35.1%, from $6.9 million
to $9.4 million. Conventional performance support services, enterprise-wide
software implementation support services, information technology services and
lean manufacturing consulting services generated 55.8%, 16.2%, 19.9% and 8.1%
of total revenue, respectively, in 1995, compared to 64.5%, 4.7%, 23.6% and
7.2% of total revenue, respectively, in 1994.
Revenue from the Company's largest client, Chrysler, increased by $6.2
million, or 63.2%, from $9.8 million in 1994 to $16.0 million in 1995,
primarily as a result of increases in conventional performance support
services provided by RWD. The Company also had significant increases in its
information technology services and began providing lean manufacturing
consulting services to Chrysler in 1995, both of which contributed to the
revenue increase.
Gross Profit. Gross profit increased by $4.2 million, or 54.6%, from $7.7
million in 1994 to $11.9 million in 1995 but declined from 26.1% of revenue in
1994 to 25.2% of revenue in 1995. This decline in the gross margin resulted
from increases in training, benefits and other personnel-related costs,
including increased depreciation expense from the purchase of additional
computer equipment for professional staff. The professional staff utilization
rate declined slightly in 1995, which also adversely affected the gross
margin.
17
<PAGE>
General and Administrative Expenses. General and administrative expenses
increased by $1.7 million, or 48.3%, from $3.5 million in 1994 to $5.2 million
in 1995 but declined from 12.0% of revenue in 1994 to 11.1% of revenue in
1995. This decline in general and administrative expenses as a percentage of
revenue resulted primarily from efficiencies achieved in benefits and
professional services expenses, which were offset in part by increased
expenditures to support new services and the opening of additional offices.
Operating Income. As a result of the foregoing, the Company's operating
income increased by $2.5 million, or 59.9%, from $4.2 million in 1994 to $6.7
million in 1995 and remained constant at 14.1% of revenue in both 1994 and
1995.
Other Income (Expense). Other expense decreased from $185,800 in 1994 to
$120,500 in 1995. Interest expense remained relatively constant while the
Company generated more interest income from higher cash balances in 1995.
Pro Forma Net Income. Pro forma net income increased by $1.5 million, or
64.4%, from $2.4 million in 1994 to $3.9 million in 1995 and increased from
8.1% of revenue in 1994 to 8.3% of revenue in 1995. Pro forma net income in
1994 and 1995 assumes the Company was taxed for federal and state income tax
purposes as a C Corporation at an effective rate of 40.0%.
18
<PAGE>
SELECTED QUARTERLY OPERATING RESULTS
The following tables set forth unaudited income statement data for each of
the eight quarters in the two year period beginning January 1, 1995 and ending
December 31, 1996, as well as the percentage of the Company's revenue
represented by each item. In management's opinion, this unaudited information
has been prepared on a basis consistent with the Company's annual financial
statements and includes all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the information for the
quarters presented, when read in conjunction with the Financial Statements and
related Notes thereto included elsewhere in this Prospectus. The operating
results for any quarter are not necessarily indicative of results for any
future period.
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED
------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
--------- -------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................ $10,199 $11,838 $12,562 $12,533 $14,632 $15,999 $16,606 $17,769
Cost of services....... 7,382 8,628 9,543 9,716 10,863 11,717 12,382 13,170
------- ------- ------- ------- ------- ------- ------- -------
Gross profit........... 2,817 3,210 3,019 2,817 3,769 4,282 4,224 4,599
General and adminis-
trative expenses...... 1,204 1,329 1,269 1,410 1,820 1,938 2,107 2,272
------- ------- ------- ------- ------- ------- ------- -------
Operating income....... 1,613 1,881 1,750 1,407 1,949 2,344 2,117 2,327
Other income (ex-
pense), net........... (48) (30) (19) (24) (61) (48) 4 (18)
------- ------- ------- ------- ------- ------- ------- -------
Income before taxes.... 1,565 1,851 1,731 1,383 1,888 2,296 2,121 2,309
Provision for income
taxes................. 40 48 45 35 70 70 75 150
------- ------- ------- ------- ------- ------- ------- -------
Net income............. $ 1,525 $ 1,803 $ 1,686 $ 1,348 $ 1,818 $ 2,226 $ 2,046 $ 2,159
======= ======= ======= ======= ======= ======= ======= =======
Pro Forma Data (1):
Provision for income
taxes............... $ 626 $ 740 $ 692 $ 554 $ 755 $ 918 $ 848 $ 925
Net income........... $ 939 $ 1,111 $ 1,039 $ 829 $ 1,133 $ 1,378 $ 1,273 $ 1,384
======= ======= ======= ======= ======= ======= ======= =======
Net income per share. $ 0.09 $ 0.10 $ 0.10 $ 0.11
Weighted average
shares outstanding.. 12,933 12,933 12,933 12,933
<CAPTION>
AS A PERCENTAGE OF REVENUE
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of services....... 72.4 72.9 76.0 77.5 74.2 73.2 74.6 74.1
------- ------- ------- ------- ------- ------- ------- -------
Gross profit........... 27.6 27.1 24.0 22.5 25.8 26.8 25.4 25.9
General and adminis-
trative expenses...... 11.8 11.2 10.1 11.3 12.4 12.1 12.7 12.8
------- ------- ------- ------- ------- ------- ------- -------
Operating income....... 15.8 15.9 13.9 11.2 13.3 14.7 12.7 13.1
Other income (ex-
pense), net........... (0.5) (0.3) (0.2) (0.2) (0.4) (0.3) 0.0 (0.1)
------- ------- ------- ------- ------- ------- ------- -------
Income before taxes.... 15.3 15.6 13.8 11.0 12.9 14.3 12.8 13.0
Provision for income
taxes................. 0.4 0.4 0.4 0.3 0.5 0.4 0.5 0.8
------- ------- ------- ------- ------- ------- ------- -------
Net income............. 14.9% 15.2% 13.4% 10.7% 12.4% 13.9% 12.3% 12.2%
======= ======= ======= ======= ======= ======= ======= =======
Pro forma data (1):
Provision for income
taxes............... 6.1% 6.3% 5.5% 4.4% 5.2% 5.7% 5.1% 5.2%
Net income........... 9.2% 9.3% 8.3% 6.6% 7.7% 8.6% 7.7% 7.8%
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
- --------
(1) For each of the periods presented, the Company was an S Corporation and,
accordingly, was not subject to federal and certain state corporate income
taxes. The pro forma information has been computed as if the Company were
subject to federal and all applicable state corporate income taxes for
each of the periods presented assuming the tax rate that would have
applied had the Company been taxed as a C Corporation. See "Dividend
Policy and Prior S Corporation Status" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview."
19
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital need is for working capital and capital
expenditures necessary to support its growth. Since its inception, the Company
has financed its operations and capital expenditures primarily with cash flow
from operations and approximately $3.8 million in stockholder debt and $3.0
million in equity provided by the Company's co-founders. This stockholder debt
and equity was primarily provided from 1988 through 1991. See "Certain
Transactions."
The Company's cash and marketable securities were $5.5 million at December
31, 1996, compared to $2.4 million at December 31, 1995 and $1.7 million at
December 31, 1994. Increases in cash and marketable securities were
attributable primarily to increases in cash provided by operations, partially
offset by investments in equipment necessary to support the Company's
increasing number of employees. The Company's working capital was $12.1
million at December 31, 1996, $11.4 million at December 31, 1995 and $7.6
million at December 31, 1994.
The Company's operating activities provided cash of $11.9 million in 1996
compared to $3.0 million in 1995 and $459,000 in 1994. These increases in cash
provided by operations resulted from higher net income, depreciation and
accounts payable partially offset in 1995 by increases in contract accounts
receivable balances at year-end.
Investing activities used cash of $5.0 million in 1996, compared to $4.0
million in 1995 and $1.2 million in 1994. Cash used in investing activities
consisted primarily of purchases of computer and office equipment, office
furniture and leasehold improvements.
Financing activities used cash of $3.8 million in 1996, compared to
providing $1.4 million of cash in 1995 and $459,000 in 1994. In all periods,
financing activities consisted primarily of borrowings and repayments under
the Company's line of credit. In 1996, Common Stock was repurchased by the
Company from departing employees for $214,100 pursuant to stock restriction
agreements. In addition, the Company distributed an aggregate of $691,300 to
its stockholders to enable them to pay income taxes on the Company's 1995 S
Corporation earnings.
The Company has a $7.5 million unsecured revolving line of credit with a
commercial bank, which bears interest at the 30-day LIBOR rate, plus 1.75%
(7.44% on December 31, 1996). The Company utilizes this line of credit to
finance a portion of its working capital needs. There was a $476,200
outstanding balance on December 31, 1994, a $2.7 million outstanding balance
on December 31, 1995 and no balance outstanding on December 31, 1996.
In connection with its conversion to C Corporation status to be effected on
March 31, 1997, the Company will make the S Corporation Distribution, of which
approximately $7.0 million will be paid in cash from the Company's working
capital and $8.0 million paid by issuance of the S Corporation Notes. The
Company expects to repay the S Corporation Notes from operating cash flow in
1997. In addition, the Company intends to repay the $3.8 million of
Stockholder Notes from the net proceeds of this offering.
The Company will record a one-time, non-cash charge against earnings in the
first quarter of 1997 resulting from a deferred tax liability in connection
with the Company's conversion from S Corporation to C Corporation status. This
tax liability will become due ratably over the four years beginning in 1997.
If this deferred tax liability had been established on December 31, 1996, the
liability would have been approximately $4.8 million. Since the Company pays
income taxes on a cash basis, the deferred tax liability to be established
upon conversion to C Corporation status may be materially higher or lower than
$4.8 million, depending primarily upon the timing of the Company's accounts
receivable collections through the date of conversion.
During 1997, the Company expects to make between $4.0 million and $5.0
million in capital expenditures, primarily for office furniture, computer and
office equipment and leasehold improvements to support the anticipated growth
in its professional and administrative staff. These capital expenditures
currently are expected to be funded from available cash, although the Company
may consider alternative financing methods, such as equipment leases or asset-
based borrowings.
20
<PAGE>
The Company believes the net proceeds from this offering and the $4.2
million in cash proceeds from the Concurrent Exercises, together with its
current cash balances, cash provided by future operations and its line of
credit, will be sufficient to meet the Company's working capital and cash
needs for at least the next 12 months.
EFFECTS OF INFLATION
Inflation has not had a significant effect on the Company's business during
the past three years. The Company cannot predict what effect, if any,
inflation may have on its future results of operations.
21
<PAGE>
BUSINESS
INTRODUCTION
RWD Technologies, Inc. provides a broad range of integrated solutions
designed to improve the productivity and effectiveness of workers in complex
operating environments. As the scope and complexity of technology used by
businesses accelerates and the global business environment becomes more
competitive, companies are increasingly focused on maximizing the return on
their advanced technology investments. To achieve this goal, companies must
ensure their employees receive effective performance support, including the
tools and training to operate these advanced systems effectively. Founded in
1988, the Company initially provided conventional performance support services
such as classroom training and hard copy documentation to plant personnel in
large industrial companies employing complex manufacturing systems and
technologies. In recent years, the Company has expanded its performance
support services to include the design, development and implementation of
customized information technology solutions including Enhanced User Interface
("EUI") systems, Electronic Performance Support Systems ("EPSS"), Electronic
Document Management Systems ("EDMS"), sales force automation systems and
Internet/Intranet applications. More recently, RWD has expanded its services
to include end-user training and performance support services essential to the
effective implementation of enterprise-wide business process reengineering
efforts (particularly SAP software implementation) and lean manufacturing
consulting. All of the Company's services are designed to improve its clients'
product quality, worker productivity and competitiveness and to ensure an
attractive return on its clients' technology investments. The Company's
services integrate its comprehensive expertise in information technology,
conventional performance support, reengineering and lean manufacturing in a
coordinated manner, customized to the individual needs of each client. The
Company believes its focus on end-user performance, embedded in all its
service offerings, differentiates the Company from many of its competitors in
the performance support and information technology services marketplaces. The
Company's registered service mark, "We bring people and technology
together,"(R) succinctly describes the Company's activities.
RWD was founded in January 1988 by Dr. Robert W. Deutsch and Mr. John H.
Beakes. For the 21 years prior to founding RWD, Dr. Deutsch was the Chief
Executive Officer of General Physics Corporation ("General Physics"), a
company he founded while a Professor of Nuclear Science and Engineering at The
Catholic University of America in Washington, D.C. During Dr. Deutsch's
tenure, General Physics became a leading provider of plant operator training
services to the nuclear power industry and professional services to the
defense industry. General Physics completed an initial public offering in 1982
and by 1987 had grown to 1,700 employees, with annual revenue of $115 million.
Mr. Beakes is a graduate of the U.S. Naval Academy and served for eight years
in the U.S. Navy's Nuclear Submarine Service. He joined General Physics in
1974 and had advanced to the position of Executive Vice President and Chief
Operating Officer by 1985. A change of control and resulting shift in
operating philosophy precipitated Dr. Deutsch's and Mr. Beakes's decision to
leave General Physics at the end of 1987.
Based on their experience at General Physics, Dr. Deutsch and Mr. Beakes
believed large U.S. industrial companies were making substantial investments
in automation and other advanced operating technologies but achieving
relatively low returns on these investments. They concluded this was the
result of plant workers having inadequate training and performance support
systems. Dr. Deutsch and Mr. Beakes formed RWD with the objective of applying
to large U.S. industrial companies the performance support methodologies
proven to be successful in the nuclear power industry. The Company's first
significant client was Chrysler. The Company's client list has grown to
include other clients in the automotive industry as well as clients in the
chemical, consumer products, pharmaceutical and telecommunications industries,
among others. In 1996, RWD provided services to 83 companies in 23 industries.
Among these clients were seven of the Fortune 10 companies and 20 of the
Fortune 100 companies. The Company's clients include Anheuser-Busch, Bristol-
Myers Squibb, Chevron, Chrysler, Continental Cablevision, Deere & Company,
Detroit Edison, Dow Chemical, Ford, Merck, Procter & Gamble, and Steelcase.
Chrysler engagements generated 33.2%, 33.9% and 28.5% of total revenue in
1994, 1995 and 1996, respectively. No other client generated more than 10% of
total revenue in any of these years.
22
<PAGE>
BUSINESS OPPORTUNITIES
In recent years, the scope and complexity of technology used by businesses
worldwide have grown rapidly, outpacing the typical worker's unsupported
capability to understand and operate this technology. This widening gap
between technological complexity and worker competence significantly limits a
company's ability to realize the full benefits of its technology investments.
RWD believes this trend has accelerated the demand for a variety of
performance support tools. These tools include customized performance-based
training programs, custom-designed job aids and software systems for task
support, all of which accelerate the time to competency for end users.
Workers operating highly complex and expensive equipment are critical to a
company's productivity and competitiveness. Companies are faced with the
challenge of ensuring their work forces have the skills necessary to maximize
productivity. This is typically in an environment of high labor turnover,
constant upgrading of technologies and retirement of senior employees whose
knowledge has been critical to operations. Workers are supported by operating,
maintenance and reference materials and training which often are poorly
designed, contain extraneous information, are difficult to update and modify
and are delivered inefficiently. With rapid advances in software technology,
including the transition from mainframe to distributed client/server
environments and the development of Internet/Intranet technologies, companies
increasingly seek support systems that are user friendly and reduce worker
time to competency while increasing their productivity. Information technology
solutions such as EUI systems, EPSS and EDMS are designed to provide end users
with critical, real-time information, in order to allow them to operate and
maintain equipment employing a wide range of advanced technologies safely and
efficiently.
Rapid technological advancements during the past several years have
contributed to heightened global competition in virtually all industries. This
global competition has provided the impetus for companies to reengineer
business processes, information systems and individual workers' job functions
to improve productivity and responsiveness to market trends. For example, a
growing number of large companies have begun to implement enterprise-wide
software systems such as SAP, a state-of-the-art software system designed to
integrate all of the critical functions of a company's global operations.
These systems involve the redesign of business processes as well as job
functions in long-term implementation processes typically costing millions of
dollars. High-quality training and performance support for workers are
critical to the success of business reengineering and to the effective ongoing
use of enterprise-wide systems.
Increased global competition has also provided the impetus for many
companies to maximize the efficiency of their operations and redesign their
manufacturing functions. When properly implemented, lean manufacturing, a
system developed by the Japanese, has been demonstrated to provide substantial
improvements in cost, quality and productivity compared to traditional mass
production methods. These improvements are achieved through a system of
changes affecting all aspects of production, including inventory controls,
production line operations, equipment configuration and preventive maintenance
and training. Increasingly, large manufacturing enterprises are seeking
specialized expertise to assist them in obtaining the efficiencies available
through the effective implementation of lean manufacturing.
23
<PAGE>
RWD OPERATING STRATEGY
To address these business opportunities, RWD has developed the following
operating strategies:
. Focus on Enhancing End-User Performance. Since its inception, RWD has
focused its efforts on enhancing the performance of end users employing
advanced technologies in complex operating environments. This focus is
based on the Company's belief that end-user performance is the single
most important factor enabling a business enterprise to achieve product
or service quality and profitability. By concentrating its efforts on
the end user, RWD strives to provide services that produce tangible
improvements in its clients' productivity and a high return on their
advanced technology investments.
. Provide Broad Range of Services. The Company's current service offerings
include conventional performance support, information technology
solutions, enterprise-wide software implementation support and lean
manufacturing consulting. The Company intends to adapt and expand its
service offerings in response to emerging needs in the marketplace and
through the application of evolving technologies.
. Build Long-Term Relationships with Large Companies. The Company targets
Fortune 200 companies because these organizations have diverse and
recurring performance support needs and the competitive incentives and
financial resources to justify utilizing RWD's services. RWD believes
there is an economic incentive for these companies to enter into
partnership relationships with RWD covering a wide range of services
which are not part of their core competencies. The Company's ability to
achieve a high degree of understanding of a client's operations and work
force needs enables RWD to provide valuable, as-needed services to the
client on a recurring basis.
. Maintain and Improve Standardized Work Processes. The development and
utilization of structured and standardized work processes have been
integral to the Company's success to date. The Company's internally
developed methods for project management and its standardized tools for
developing performance-based training programs and customized software
and documentation are integral to the Company's ability to deliver
consistent, high-quality solutions and successfully manage its growth.
. Provide Supportive Organizational Structure and Reward System. A
critical element of the Company's success has been its ability to
attract, develop and retain a highly skilled and motivated professional
staff. Extensive technical and management training together with a
project management certification program enable RWD professionals to
expand their skills and attain increasing levels of responsibility. The
Company believes providing employees with a challenging and fulfilling
work environment, a competitive compensation structure and broad-based
equity ownership will continue to maximize their commitment to the
Company's growth and profitability.
RWD GROWTH STRATEGY
The Company's growth strategy is designed to improve its position as a
comprehensive provider of performance support services and information
technology solutions by:
. Increasing Sales to Existing Client Base. The Company believes
significant opportunities exist to provide Company services to
additional divisions within its existing clients and to market other RWD
services to client divisions already served. As the scope of the
Company's services has become more comprehensive, average revenue per
client has increased from $398,000 in 1994 to $783,000 in 1996, and the
number of clients generating individually more than $1.0 million of
revenue grew from seven in 1994 to 19 in 1996. The Company believes
that, by consistently providing high-quality, value-added services, its
revenue from its existing client base will continue to increase.
. Providing Current Service Offerings to New Clients and Industries. RWD
targets industries that employ advanced and rapidly changing
technologies and complex, capital-intensive processes. The Company often
leverages expertise gained in one industry to expand its client base
within that industry and to target clients in other industries.
Currently, the Company is seeking to expand its presence, or establish
new client relationships, with companies in the consumer products,
pharmaceutical, healthcare, semiconductor and airline industries.
24
<PAGE>
. Broadening Range of Services. RWD intends to continue to broaden its
service offerings to meet client demands, thereby further establishing
itself as a leading provider of a comprehensive range of performance
support services. The Company is committed to monitoring emerging
technologies and incorporating appropriate advances into RWD's service
offerings. The Company's New Products and Services Committee manages and
allocates funds for the Company's internal research and development
efforts as well as cultivates relationships with various universities
and their faculties to facilitate expansion of RWD's service offerings.
. Expanding Geographic Presence. The Company currently serves clients
located across the United States and has provided services to European,
Asian and South American operations of several U.S.-based clients. The
Company has expanded the number of its offices from three in 1992 to 10
as of the date of this Prospectus. The Company intends to continue its
"pull" expansion strategy, opening U.S. offices in locations where there
exist significant ongoing client needs. The Company will apply this same
strategy to the pursuit of international engagements with multi-national
clients, establishing overseas offices based upon client requirements.
RWD expects to open its first overseas office in London in 1997.
. Maintaining Emphasis on Recruiting and Employee Development. The ability
to attract, develop and retain a highly skilled professional staff is
critical to the growth and future success of RWD. The Company intends to
continue to expand and refine its recruiting process to attract the best
available work force. RWD has developed a series of rigorous training
programs, in which its professional staff is encouraged to participate.
These programs are designed to teach technical, management and business
skills to both entry level and experienced personnel.
. Exploring Complementary Acquisitions. The Company will evaluate the
acquisition of complementary businesses that could act as a source of well-
trained, high-quality professionals, new service offerings, additional
industry expertise, a broader client base or an expanded geographic
presence.
RWD'S SERVICES
The Company's core services are as follows:
Conventional Performance Support. RWD is a leading provider of conventional
end-user performance support services. These services include designing and
presenting classroom and plant-floor training; developing and managing hard
copy training materials, technical procedures and documentation; designing and
developing customized job aids; and acting as plant-floor consultants to ensure
proper integration of equipment and systems and reduction of plant down-time.
The Company believes it is essential that the delivery systems used to impart
knowledge to workers be cost effective and readily accepted by workers.
Personnel who operate and maintain high technology equipment often have little
experience using computers or other advanced technologies. For these workers,
conventional training is generally preferable to computer-based training, and
hard copy documentation is preferable to on-line documentation. RWD uses a
performance-based approach to training which focuses on streamlining training
content to include only the information required to perform each task
effectively. The Company's training materials make extensive use of graphical
representations of information. The Company believes these "mental models" are
particularly effective in facilitating quick and accurate comprehension and
decreasing training delivery costs.
RWD's documentation services are integral and complementary to its
performance-based training approach. These services include data collection and
the creation, management and distribution of engineering, operating and
technical information. Documentation services also include upgrading existing
documentation and capturing "best operating" practices, which are then
presented concisely in steps that are accurate, user-focused, easy to follow
and error resistant. RWD documentation services make extensive use of graphics
to illustrate how equipment operates and create technical descriptions that
help personnel develop strong cognitive models of the equipment they operate.
RWD's conventional performance support services are delivered primarily to
manufacturing and process industries. A significant portion of these services
is provided to the automotive industry in connection with the
25
<PAGE>
launch of new and redesigned vehicles. In addition, the Company provides
training courses for engineers, operators and maintenance and laboratory
personnel that support new technologies in the petroleum, chemical, consumer
products and other industries. Conventional performance support services are
also provided to assist clients in complying with regulatory requirements such
as OSHA safety regulations in the petroleum and chemical industries and in
obtaining ISO quality certification. RWD has earned a number of distinguished
service awards, including Chrysler's Gold Pentastar award which it received in
the two most recent years awarded, 1994 and 1995. This award is given annually
to fewer than 2% of Chrysler's 2,200 non-production service providers. The
Company believes its expertise in conventional performance support services
provides a foundation for all its other services and serves as an effective
first step in assisting clients in their migration to more advanced
performance support technologies. Conventional performance support services
generated $26.3 million, or 55.8%, and $26.7 million, or 41.0%, of total
revenue in 1995 and 1996, respectively.
The following are examples of the Company's conventional performance support
projects:
. Since 1990, RWD has worked together with a large U.S. automobile
manufacturer to provide technical training to the manufacturer's plant-
floor workers in locations worldwide. This training is designed to
increase worker competency in connection with the launch of new and
redesigned vehicles. RWD's customized performance-based training
programs have resulted in significantly reduced classroom time and
training costs. RWD instructors also function as plant-floor
consultants, engaging in systems integration and preparing workers to
trouble-shoot malfunctioning equipment.
. A major oil company engaged RWD to assist it in increasing refinery run
times and reducing the frequency and duration of unit shutdowns. To
accomplish this goal, the Company developed user-friendly, task-oriented
operating manuals, procedures and performance-based training courses.
RWD also helped the client develop a laboratory calibration and
maintenance program.
Information Technology. The Company's information technology services
include the design and implementation of customized Enhanced User Interface
("EUI") systems, Electronic Performance Support Systems ("EPSS") and
Electronic Document Management Systems ("EDMS"), all of which give the end
user easy access to information critical to operating advanced technology
effectively. These information technology solutions and services include
client/server applications development, implementation and support;
Internet/Intranet technology solutions; software development; and systems
integration. The Company's information technology services incorporate
multimedia, detailed graphics and animation to generate intelligent learning
tools and systems to support human performance. RWD provides information
technology services to clients in a number of industries such as automotive,
public utilities, cable television, telecommunications, pharmaceutical, hotel
and financial services. RWD has designed and implemented EUI-based
client/server systems for remote workers in the office furniture,
pharmaceutical, publishing and agricultural machinery industries. RWD is also
working with a number of document management software manufacturers to provide
comprehensive enterprise-wide EDMS solutions. In addition, RWD is involved in
several projects which rely on Internet technology as a platform for
communication and information transfer in a variety of industries. These
projects include developing Intranets, designing remote diagnostic information
systems and related projects. Information technology services generated $9.4
million, or 19.9%, and $17.2 million, or 26.5%, of total revenue in 1995 and
1996, respectively.
The following are examples of the Company's information technology projects:
. An international hotel chain using a text-based, computer reservation
system engaged the Company to design an EUI system to enable the
client's reservations center operators to handle incoming calls more
quickly and to market the chain's services more effectively. RWD
designed an EUI system that was integrated with the client's existing
reservation system, resulting in an intuitive graphical interface. This
replaced the existing system which required the operator to utilize up
to 12,000 different codes. The Company's EUI system significantly
shortened operator training time, time to competency and call handling
time, thereby resulting in increased caller satisfaction and improved
overall sales effectiveness. The chain's 1,800 reservation agents now
use the Company's EUI system to annually log approximately 22 million
calls worldwide.
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. A major pulp and paper manufacturer, faced with the challenge of
transferring expert-level knowledge from its most experienced operators
to its newer workers, selected RWD to design and implement a stand-alone
EPSS. This EPSS is designed to reduce plant down-time and improve
product quality by providing job-related practical knowledge and
structured training information to all operators on the plant floor,
whenever needed. This "just-in-time" information system includes
operating procedures, equipment and process chemistry information,
problem-solving guidance and training. The system uses text, photos,
graphics, animation and video to explain concepts and provide
information.
. A consortium of major oil companies and a foreign government needed to
manage more than 150,000 technical documents to construct and safely
operate a large offshore oil platform. RWD designed an extensive EDMS
that incorporated intuitive navigational strategies so end users could
readily access the required documents. End users accustomed to eight-to-
ten minute document retrieval times now experience an on-screen document
delivery rate of four seconds, with printouts available in less than one
minute.
Enterprise-Wide Reengineering Support. Capitalizing on its end-user focus
and performance support expertise, RWD has developed a rapidly growing service
area supporting the implementation of enterprise-wide software applications.
The Company uses its standardized performance-based training approach to
support multi-year, high-cost, enterprise-wide software implementation efforts
of Fortune 200 companies. This approach is designed to ensure that system end
users have the knowledge and tools necessary to operate effectively during
enterprise-wide software implementations. As with its other support services,
the Company's software implementation support tools include on-line help
systems that provide end users with immediate access to information specific
to their identified tasks.
RWD has entered into a strategic alliance with Price Waterhouse, an
international consulting firm and leading provider of enterprise-wide software
implementation services. Under this non-binding arrangement, the Company
provides performance support services in joint software implementation
engagements with Price Waterhouse. The Company believes this arrangement
represents a substantial opportunity to expand its client base in this service
area. Through this relationship, Price Waterhouse and the Company have worked
together to assist two pharmaceutical companies, three high-technology
companies and one consumer products company in their enterprise-wide software
implementation efforts. The Company began 1996 with five significant
enterprise-wide software implementation training and documentation clients and
ended the year with 13 such clients. Enterprise-wide software implementation
support services generated $7.6 million, or 16.2%, and $13.4 million, or
20.7%, of total revenue in 1995 and 1996, respectively.
The following is an example of the Company's enterprise-wide software
implementation training and documentation projects:
. An international chemical company engaged RWD to provide performance
support to the client's employees during its multi-year, global
implementation of SAP enterprise-wide software. RWD prepared and
presented classroom and on-the-job materials and training. Each training
course contained an appropriate level of concepts, a series of job aids
and scenario-based, hands-on exercises that made the SAP software easier
for the employees to understand and use. RWD also designed on-line
support tools that provide users with immediate access to information
specific to their tasks. Deploying RWD training and support materials
has resulted in reduced time spent in training and has improved time to
competency of the client's end users.
Lean Manufacturing Consulting. RWD is a leading provider of lean
manufacturing expertise to U.S. industry. The Company's lean manufacturing
consulting services include developing and deploying entire production systems
as well as designing and presenting specialized lean manufacturing training
workshops to illustrate and teach the benefits of lean manufacturing. The
objective of lean manufacturing is to achieve world-class quality and cost
performance based on continuous improvement and the elimination of waste. The
major components for lean manufacturing, a system developed and refined by the
Japanese, include high machine reliability, level production, just-in-time
material control, "stop-the-line" operating procedures and the human systems
that support this manufacturing philosophy. This system utilizes specific,
simple-to-understand tools,
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including mistake-proofing, standardized work procedures and housekeeping
techniques. RWD provides lean manufacturing implementation guidance through a
team of experts who have substantial experience using and deploying this
systems approach to manufacturing. Lean manufacturing consulting services
generated $3.8 million, or 8.1%, and $7.7 million, or 11.8%, of total revenue
in 1995 and 1996, respectively.
The following is an example of the Company's lean manufacturing consulting
projects:
. In planning to manufacture a new engine at its plant in Europe, a large
automobile manufacturer projected initial personnel requirements based
on a traditional mass manufacturing approach. The manufacturer then
asked RWD to work with the manufacturer's managers to assess the changes
in processes that could be made by applying lean manufacturing
principles. The critical issues facing the RWD team were reengineering
the material supply system and eliminating excess labor time within the
production process. RWD placed a team of experienced lean manufacturing
personnel on site to perform the necessary assessments and then to
implement the recommended lean manufacturing approaches on the engine
production line. Based on the early success of the Company's initial
five- month effort and other services provided by RWD, the client has
asked RWD to help implement lean manufacturing concepts in all of its
European operations.
INDUSTRIES AND CLIENTS SERVED
The Company has provided services to clients in the following 23 industries:
INDUSTRIES
<TABLE>
<S> <C> <C>
Agricultural Machinery Entertainment Petroleum
Automotive Manufacturing Financial Services Pharmaceutical
Automotive Components Healthcare Publishing
Chemical Hotel Pulp and Paper
Communications Equipment Insurance Restaurant
Computer Systems Metal Fabrication Software Applications
Consumer Products Office Furniture Telecommunications
Electric Utilities Package Delivery
</TABLE>
The following is a list of representative clients served by the Company
during 1996. These clients generated, in the aggregate, approximately 90% of
the Company's 1996 revenues.
CLIENTS
<TABLE>
<S> <C> <C>
Anheuser-Busch Companies, Inc. Ford Motor Company Lyondell Petrochemical Company
Applebee's International, Inc. Frito-Lay, Inc. Merck & Co., Inc.
Blandin Paper Company Gannett Media Technologies Merrill Lynch, Pierce, Fenner &
Boston Edison Company International Smith Incorporated
Bristol-Myers Squibb Company General Motors Corporation Mobil Oil Corporation
Chevron U.S.A. Products Company Georgia-Pacific Corporation Price Waterhouse, LLP
Chrysler Corporation Hibernia Management and The Procter & Gamble Company
CIGNA Company Development Company Ltd. Rhone Poulenc-Rorer
Continental Cablevision, Inc. Hitachi America Ltd Southern Natural Gas
Deere & Company Hoechst Marion Roussel, Inc. Steelcase, Inc.
The Detroit Edison Company Houston Lighting & Power Company UAW Ford
First Data Corporation Kraft Foods, Inc Visa Interactive, Inc.
</TABLE>
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<PAGE>
Chrysler, the Company's largest client, generated 33.2%, 33.9% and 28.5% of
total revenue in 1994, 1995 and 1996, respectively. No other client generated
more than 10% of total revenue in any of these periods. The Company's top five
clients in 1994, 1995 and 1996 generated an aggregate of 62.1%, 57.8% and
51.4% of total revenue, respectively. Automotive industry clients generated
46.9%, 43.5% and 40.6% of total revenue in 1994, 1995 and 1996, respectively.
COMPANY ORGANIZATION AND METHODOLOGIES
Adaptable Organizational Structure. The Company's organizational structure
provides its employees with clearly defined roles and accountability across
all levels of the organization. This well-defined structure is formally
evaluated on a semi-annual basis and modified as necessary to adapt to
changing client demands, introduction of new services and expansion and
diversification of the Company's client base. The Company has a divisional
structure, with each division organized into five tiers: Team Members, Team
Leaders, Managers, Directors and a Vice President. Specifically defined
responsibilities, communicated through formal training programs and review
processes, exist at each level. Each Team Leader, Manager, Director and Vice
President generally has no more than five individuals reporting directly to
him or her. All professionals in each division are involved directly in client
engagements. The Company believes its flexible, adaptable organizational
structure and formal periodic evaluations of this structure are important
elements in successfully managing the rapid growth of its business and its
ability to adapt to changing market demands while maintaining profitability
and high-quality services.
Project Management. RWD's project management process is critical to the
Company's ability to satisfy its clients. The Company's project management
process is utilized throughout all phases of an engagement and includes
controls and review processes designed to ensure each project is delivered in
a high-quality, cost-effective and timely manner. The project manager has
primary responsibility for the success of the engagement, including managing
project costs and staff schedules, service quality and the client
relationship. The project manager is supported in these efforts by the project
director, a designated senior individual with extensive project management
experience. The project management process includes processes for identifying
and assessing project risks as well as mechanisms designed to facilitate the
project manager's communication of project difficulties to the project
director and senior management before difficulties escalate. In addition, the
process places significant emphasis on client feedback through regular client
"alignment meetings." These client review meetings are utilized to ensure
continuous agreement on project goals and expectations, leading ultimately to
client satisfaction with the results. Once an engagement is completed, the
Company assesses the extent to which the project team met client expectations,
evaluates the effectiveness of RWD's project management process and uses this
analysis to support the Company's continuous improvement process. Project
managers are certified only after completing a rigorous one-year training
process that includes classroom and on-the-job training and an oral
examination before senior management. All RWD engagements are managed by a
certified project manager (or by an in-training project manager working under
the supervision of a certified project manager) and a project director. In
addition, all levels of management maintain technical proficiency to enable
them to direct projects.
Technical and Management Skills and Training. The Company's employees have
diverse educational and employment backgrounds, including engineering,
advanced manufacturing, computer systems analysis and design, technical
writing and editing and graphic arts. Many have advanced degrees in a wide
range of technical disciplines, including chemical, computer systems,
electrical, industrial, mechanical, nuclear and software engineering;
instructional system design; and organizational development. This breadth of
expertise enables the Company's professionals to interact with and understand
the performance challenges encountered by client personnel across a broad
range of industries. The Company employed 648 persons, including a
professional staff of 563 persons, as of December 31, 1996.
The Company's use of internally-developed, standardized tools and
methodologies and its strict adherence to a structured project management
process enable the Company to deliver consistent, high-quality services while
rapidly increasing the size of its work force. The Company places significant
emphasis on training its employees to understand and utilize the Company's
service methodologies and management processes. The Company uses
29
<PAGE>
a combination of internally developed and externally provided courses to
provide this training. Employees are encouraged to become trained in the
Company's proprietary service methodologies. Employees also participate in
internal and external training in specific technologies such as enterprise-
wide software implementation, object- oriented design, relational database
design, software configuration management, software programming languages
(e.g., Visual C++, SmallTalk, Visual Basic, MacApp, Java and JavaScript) and
document management software. In addition, employees are encouraged and
provided with financial support to enroll in advanced training and degree
programs to increase their technical and management capabilities.
Recruiting and Employee Retention. RWD places significant emphasis on
attracting, developing and retaining a highly skilled and motivated work
force. The Company recruits personnel through a variety of methods, including
on-campus recruiting, postings at conferences and advertising in newspapers
and technical publications. The Company actively recruits entry-level
personnel at selected college campuses and maintains a web site which includes
information targeted to college recruits. The Company has a policy of
promoting from within whenever appropriate and also actively recruits
employees with in-depth expertise in technical areas in which the Company
currently provides services or expects to provide services in the future. From
time to time, the Company utilizes technical recruiters to fill specific
staffing needs. The Company engages a limited number of technical personnel on
a consulting basis when appropriate to support particular client needs.
The Company's culture, its emphasis on training and the design of its
compensation structure have been coordinated to attract, develop and retain
qualified and motivated professionals. The Company's culture is captured and
communicated through its Mission, Values and Guiding Principles. Senior
management expends significant effort in communicating these principles to new
employees and to incorporating these values into the day-to-day operation of
the Company. The Company believes this effort has played a significant role in
maintaining its culture and guiding the actions of its employees. The Company
also strives to provide a challenging work environment and competitive
employee reward system. Additionally, the Company is committed to significant
and broad-based employee stock ownership, believing this maximizes employees'
dedication to the Company's growth and profitability. In addition to the co-
founders' 56.8% post-offering, fully-diluted equity of the Company, 452
persons, or approximately 70% of the Company's employees as of December 31,
1996, held options to purchase, in aggregate, 18.1% of the post-offering,
fully-diluted equity of the Company.
The Company's turnover rates in 1995 and 1996 were approximately 16.5% and
13.8%, respectively. The Company considers its culture, morale and employee
motivation to be excellent and a key component of its success to date.
Sales and Marketing. All RWD business is developed by senior management and
the technical personnel who manage client relationships and develop solutions
for clients rather than through a dedicated sales force. RWD professionals who
have worked closely with clients to solve complex technical problems are best
able to understand and communicate the Company's skills and services to
existing and prospective clients. This approach also contributes to the
Company's ability to establish and maintain long-term client relationships. In
addition to supporting existing client relationships, RWD's senior management
markets the Company's services at industry trade shows and delivers
presentations and papers at conferences. As a result, potential clients in new
and currently served industries have an opportunity to learn more about
Company services. The Company actively seeks to leverage existing client and
strategic relationships to increase its exposure within and across industries
and ultimately expand its client base. The Company also distributes a
quarterly newsletter that highlights results of RWD projects to approximately
12,000 personnel of existing and potential clients. Finally, RWD works closely
with software vendors to generate engagements in which their software products
are incorporated into RWD solutions.
COMPETITION
The Company's service areas are highly competitive and subject to both low
barriers to entry and rapid change. The Company faces competition for client
assignments from a number of companies having significantly greater financial,
technical and marketing resources and greater name recognition than the
Company. Principal
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<PAGE>
competitors for the Company's services include consulting practices of the six
largest national accounting firms as well as professional services groups of
many large technology and management consulting companies. The Company also
competes with smaller regional or local service providers whose specific, more
narrowly focused service offerings may be more attractive to potential clients
of the Company. In addition, clients may elect to use internal resources to
satisfy their needs for the services the Company provides. The Company
believes that the principal competitive factors in its industry are quality of
service, breadth of service offerings, reputation of the service provider and
price. The Company believes it competes effectively with respect to each of
these factors.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company relies upon a combination of nondisclosure and other contractual
arrangements and trade secret, copyright and trademark laws to protect its
proprietary rights. The Company generally enters into confidentiality
agreements with its employees and clients, thereby seeking to limit
distribution of proprietary information. A substantial majority of the
Company's employees are not bound by their nondisclosure agreements once their
employment has been terminated, although the Company believes common law
generally prohibits these employees from disclosing to third parties
proprietary information of the Company. There can be no assurance that the
steps taken by the Company in this regard will be adequate to deter
misappropriation of proprietary information or that the Company will be able
to detect unauthorized use of and take appropriate steps to enforce its
intellectual property rights.
Software developed and other materials prepared by RWD in connection with
client engagements are usually assigned to the clients. The Company retains
the right to its general know-how and general applications such as software
diagnostic and development tools.
The RWD Technologies, Inc. logo and the phrase, "We bring people and
technology together,"(R) are registered service marks of the Company. Certain
of the Company's methodologies are service marks of the Company. The Company
holds no patents. The Company may file additional copyright applications for
certain software it develops in the future.
FACILITIES
RWD leases approximately 85,000 square feet of space for its executive
offices at 10480 Little Patuxent Parkway, Columbia, Maryland. This lease
expires on December 31, 2003. The Company also leases nine additional offices
covering an aggregate of approximately 51,400 square feet in Atlanta, Georgia;
Auburn Hills, Michigan; Cincinnati, Ohio; Dearborn, Michigan; Houston, Texas;
Huntsville, Alabama; Lexington, Kentucky; Princeton, New Jersey and
Sacramento, California. Each of these offices is located near one or more
significant clients of the Company, and none of these leases expires prior to
December 31, 1997. Aggregate annual rent for the Company's corporate
headquarters and satellite offices is approximately $2.4 million. The
Company's strategy is to locate offices in areas where it has significant
client work. From time to time, the Company uses office space provided at
client sites to facilitate performance of its services and maximize client
contact. The Company expects to open an office in London in 1997. The Company
anticipates that additional office space will be required within the next 12
months and believes appropriate facilities can be leased at locations
convenient to its existing offices and headquarters.
RISK MANAGEMENT
The Company is subject to potential claims by dissatisfied clients that
Company services did not achieve the results expected by those clients or that
errors or omissions by the Company's employees contributed to disruptions in
the clients' operations. To mitigate this risk, RWD seeks to clearly
articulate, prior to commencement of each project, both the scope of services
to be provided and the solution to be achieved. The Company holds regular
progress meetings with each client while services are being provided so that
any problems can be discovered as early in the project as possible and then
corrected. This procedure is intended to allow RWD to regularly ascertain and
meet client expectations during all various phases of each project. In
addition, RWD's standard contract terms limit the Company's liability to the
amount of the fee payable to RWD under the contract. Despite these procedures,
it is possible that the Company may become subject to a claim from a
dissatisfied client although the Company has never been subject to litigation
by a client arising out of RWD's services.
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<PAGE>
The Company carries comprehensive liability and property damage insurance in
amounts it considers sufficient to cover these types of potential losses.
However, the Company is self-insured against any other claims by clients
related to services provided by RWD.
From time to time, the Company is a party to routine litigation in the
ordinary course of business. However, the Company is not currently a party to
any material litigation.
MANAGEMENT
The following table sets forth information regarding the executive officers,
directors and other significant employees of the Company:
<TABLE>
<CAPTION>
AGE POSITION
EXECUTIVE OFFICERS AND DIRECTORS (1): --- --------
<S> <C> <C>
Dr. Robert W. Deutsch... Chairman of the Board of Directors, Chief Executive
73 Officer
John H. Beakes.......... 54 President, Chief Operating Officer, Director
John E. Lapolla......... Group Vice President--Manufacturing Performance Support,
43 Director
Kenneth J. Rebeck....... 45 Group Vice President--Technology Transfer, Director
Jeffrey W. Wendel....... 42 Group Vice President--Information Technology, Director
Ronald E. Holtz......... Vice President, Chief Financial Officer, Secretary,
39 Director
Dr. David J. Deutsch.... 43 Director
Jerry P. Malec.......... 54 Director-nominee
<CAPTION>
OTHER OFFICERS AND EMPLOYEES:
<S> <C> <C>
Daniel A. Cantwell...... Vice President--Chrysler Training and Performance Support
44 Division
Robert B. Gosline, Jr... 54 Vice President--Chief Information Officer
Wade A. Martin.......... 38 Vice President--Performance Technology Services Division
Vincent Marucci, Jr. ... 39 Vice President--Information Technology Division
R. Butler Newman........ 40 Vice President--Business Development
Deborah T. Ung.......... 34 Vice President--Enterprise-Wide Reengineering Support
Dr. Steven M. Miller.... 41 Chief Technical Officer
James V. Thomas......... 53 Director of Lean Manufacturing
</TABLE>
- --------
(1) The Company is actively engaged in the search for one additional director
who is not affiliated with the Company or any of its directors or
officers. This individual and Mr. Malec will be elected to fill the
vacancies on the Company's Board of Directors and the Audit and
Compensation Committees of the Board within 90 days after this offering.
Each director holds office until his successor is duly elected and
qualified, or until his earlier death, resignation or removal. Pursuant to the
Company's Charter and By-Laws, the Board of Directors is classified into three
classes. Dr. Robert W. Deutsch and Messrs. Holtz and Rebeck serve in the class
whose term expires in 1998; Messrs. Beakes and Lapolla serve in the class
whose term expires in 1999; and Dr. David J. Deutsch and Mr. Wendel serve in
the class, the term of which expires in 2000. Upon expiration of the initial
term of each class of directors, directors comprising such class will be
elected to a three-year term at the next succeeding Annual Meeting of
Stockholders. Upon election, Mr. Malec and the as-yet unnamed director-nominee
will serve in the classes whose terms expire in 2000 and 1999, respectively.
Following this offering, officers will be elected by the Board of Directors
immediately following each annual stockholders' meeting and will serve at the
discretion of the Board of Directors until their successors are elected or
their earlier removal or resignation.
EXECUTIVE OFFICERS AND DIRECTORS
Dr. Robert W. Deutsch co-founded the Company in January 1988 and has been
Chairman of the Board and Chief Executive Officer since that time. Dr. Deutsch
founded General Physics Corporation in 1966 and was its Chairman, President
and Chief Executive Officer until 1987. From 1963 to 1971, Dr. Deutsch was
Chairman and Professor of Nuclear Science and Engineering at The Catholic
University of America. Dr. Deutsch has a
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<PAGE>
B.S. in Physics from the Massachusetts Institute of Technology, a Ph.D. in
Physics from the University of California, is a member of the National Academy
of Engineering and is a registered Professional Engineer.
John H. Beakes co-founded the Company with Dr. Deutsch and has been Chief
Operating Officer and a director since January 1988 and President since July
1995. From 1974 to 1988, Mr. Beakes was employed by General Physics, most
recently as Executive Vice President and Chief Operating Officer. Prior to
1974, Mr. Beakes served in the Nuclear Submarine Service of the United States
Navy, most recently as Chief Engineer of the USS George Bancroft. Mr. Beakes
received his B.S. from the U.S. Naval Academy, his M.S. in Environmental
Engineering from The Johns Hopkins University and is a registered Professional
Engineer.
John E. Lapolla joined the Company in 1988, has been Group Vice President of
Manufacturing Performance Support since 1995 and has been a director since
1992. From 1970 until 1988, Mr. Lapolla was employed by General Motors
Corporation, most recently as Divisional New Technology Training Coordinator
responsible for technical training for 35 manufacturing plants. Mr. Lapolla
received his B.S. in Industrial Engineering from the General Motors Institute
and is a Senior Member of the Society of Manufacturing Engineers.
Kenneth J. Rebeck joined the Company in 1988, has been Group Vice President
of Technology Transfer since 1995 and has been a director since 1992.
Previously, he served as the Company's Chief Engineer. From 1978 until 1988,
Mr. Rebeck was employed by General Physics Corporation in a variety of
professional and management capacities, including Project Director for a major
NASA Pressure Vessel Recertification Program and Chief Engineer and Director,
High Technology Activities. Mr. Rebeck received his B.S. in Nuclear
Engineering from the State University of New York at Buffalo, his M.S. in
Nuclear Science and Engineering from Carnegie-Mellon University and is a
registered Professional Engineer.
Jeffrey W. Wendel joined the Company in 1994 and serves as Group Vice
President of the Information Technology Division and a director of the
Company. Prior to joining the Company, Mr. Wendel was the Director of Process
Simulation for S3 Technologies, Inc., where he managed software projects for
the petrochemical, natural gas and nuclear power industries from 1990 to 1994.
From 1989 to 1990, Mr. Wendel was Director of Simulation Technology for that
company. Mr. Wendel received his B.S. in Systems Engineering from the U.S.
Naval Academy and his M.B.A. in management from Loyola College.
Ronald E. Holtz joined the Company in January 1996 and serves as Vice
President, Chief Financial Officer and a director. Prior to joining the
Company, Mr. Holtz was a Manager in Ernst & Young LLP's Financial Advisory
Services group from 1992 to 1995. From 1990 to 1992, Mr. Holtz was employed by
the Michael D. Dingman Center For Enterpreneurship at the University of
Maryland in a variety of project management capacities. Prior to 1990, Mr.
Holtz was a Construction Manager for The Artery Organization Inc., a
commercial real estate development company. Mr. Holtz received his B.A. in
Mathematics from the University of Wisconsin and his M.B.A. in Finance from
the University of Maryland. Mr. Holtz is a certified public accountant.
Dr. David J. Deutsch has been a director since July 1993. He is a Lecturer
in Mathematics at Boston University's Department of Mathematics, and prior
thereto he was a Senior Research Consultant at Boston University's Information
Technology Department where he was engaged in scientific software design and
algorithm development on parallel architecture machines. He received his B.S.
in Mathematics from the University of Maryland and his M.S. and Ph.D in
Applied Mathematics from Boston University.
Jerry P. Malec is a director nominee and will be elected to the Board of
Directors following completion of the offering. Since 1994, Mr. Malec has been
President and Chief Executive Officer of Checkmate Electronics, Inc., a
developer and manufacturer of check and credit card fraud prevention and
verification systems. Mr. Malec received his B.S. degree in Economics from
Wayne State University. Mr. Malec previously held executive positions at Apple
Computers, MICOM Systems and IBM.
OTHER OFFFICERS AND EMPLOYEES
Daniel A. Cantwell joined the Company in 1991 and serves as Vice President
of the Chrysler Training and Performance Support Division. Prior to joining
the Company, Mr. Cantwell was employed by Chrysler from 1984 to 1991 as a
Senior Technical Training Specialist. Mr. Cantwell received his B.A.S. in
Robotics and Flexible Automation from Sienna Heights College.
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Robert B. Gosline, Jr. joined the Company in 1988 and serves as Vice
President and Chief Information Officer, where he directs activities in
strategic information system planning and implementation. Prior to joining the
Company, Mr. Gosline was employed by General Physics from 1975 to 1988, and
prior thereto served as a nuclear submarine officer in the U.S. Navy. Mr.
Gosline received his B.S. from the U.S. Naval Academy and his M.S. in Computer
Science from The Johns Hopkins University.
Wade A. Martin joined the Company in 1990 and serves as Vice President of
the Performance Technology Services Division. Prior to joining the Company,
Mr. Martin was employed by General Physics from 1983 to 1990 as Supervisor of
Maintenance Engineering. From 1977 to 1983, Mr. Martin served on the USS
Eisenhower. Mr. Martin received his A.S., with a concentration in Engineering
Technology, from the University of the State of New York and is a graduate of
the U.S. Navy Nuclear Power Program.
Vincent Marucci, Jr. joined the Company in 1992 and serves as Vice President
of the Information Technology Division. Prior to joining the Company, Mr.
Marucci served as an active duty U.S. Army officer. His assignments included
information systems design and development for one of the Army's Artificial
Intelligence Centers and as an instructor in Mathematics and Computer Science
at the U.S. Military Academy. Mr. Marucci received an M.S. in Computer Science
and an M.S. in Operations Research from Stanford University and his B.S. from
the U.S. Military Academy.
R. Butler Newman joined the Company in 1988 and serves as Vice President of
Business Development. Prior to joining the Company, Mr. Newman was employed by
General Physics from 1986 to 1988. Mr. Newman received his B.S. from the U.S.
Naval Academy.
Deborah T. Ung joined the Company in 1989 and serves as Vice President of
the Enterprise-Wide Reengineering Support Division. Prior to joining the
Company, Ms. Ung was employed by General Physics in a variety of project
management capacities from 1985 to 1988. Ms. Ung received her B.S. in
Environmental Health from Purdue University.
Dr. Steven M. Miller joined the Company in 1995 and serves as Chief
Technical Officer. Prior to joining the Company, Dr. Miller was employed by
Fujitsu Limited from 1989 to 1995, most recently as Director of Manufacturing
Engineering in Richardson, Texas at Fujitsu's main telecommunications business
unit from 1992 to 1995. Dr. Miller received his B.S. in Systems Science and
Engineering from the University of Pennsylvania and his M.S. in Statistics and
Ph.D. in Engineering and Public Policy from the Carnegie-Mellon University.
James V. Thomas joined the Company in January 1996 and serves as the
Director of Lean Manufacturing. Prior to joining the Company, Mr. Thomas was
plant manager or operations manager for Kuhlman Electric Corp., Dannelly Corp.
and Danaher Tool Group where he was responsible for converting certain of
their operations from conventional mass production to lean manufacturing. Mr.
Thomas studied extensively with developers of the Toyota Production System,
the basis of lean manufacturing.
Dr. David J. Deutsch is Dr. Robert W. Deutsch's son. There are no other
family relationships among any of the executive officers or directors of the
Company.
DIRECTOR COMPENSATION
Prior to this offering, directors received no compensation for their service
on the Board of Directors. Upon completion of this offering, directors who are
not employees of the Company will receive (i) an annual retainer to be paid at
the beginning of each year in shares of Common Stock having a fair market
value of $10,000 on the date of issuance; (ii) $1,000 in cash for each Board
of Directors and Board Committee meeting attended and (iii) cash reimbursement
for expenses incurred in connection with their service as directors.
Upon their first election to the Board of Directors, each director who is
not an employee of the Company will be granted an option to purchase 12,000
shares of Common Stock under the Company's Amended and Restated Equity
Participation Plan (the "Option Plan"). Options granted to outside directors
will vest ratably over a three year period beginning one year after the date
of grant and will have an exercise price equal to the fair market value of the
Common Stock on the date of grant. Each such non-employee director also will
be eligible to receive additional options at the end of each year of service
based on the financial performance of the Company and the contribution of the
individual director. See "--Employee Benefit Plans."
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<PAGE>
BOARD COMMITTEES
The Board of Directors has established an Audit Committee, a Compensation
Committee and a Technical and Business Review Committee. Effective upon their
election to the Board of Directors, Mr. Malec and the other independent
director will serve as the members of the Audit Committee and the Compensation
Committee. Dr. David J. Deutsch and Messrs. Lapolla, Rebeck and Wendel will
serve as the Technical and Business Review Committee. The Audit Committee's
principal functions will include making recommendations to the Board regarding
the annual selection of independent public accountants, reviewing the proposed
scope of each annual audit and reviewing the recommendations of the
independent public accountants as a result of their audit of the Company's
financial statements. The Compensation Committee's principal function will be
to establish the compensation of officers of the Company and to establish and
administer the Company's compensation programs, including the grant of options
under the Company's Equity Participation Plan. The Technical and Business
Review Committee's principal function will be to evaluate Company performance
in the areas of quality and profitability on major contracts. The Board of
Directors may from time to time establish other committees to facilitate the
management of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Prior to this offering, the Company has had no separate Compensation
Committee or other committee performing equivalent functions. As a result,
compensation matters were performed by the Board of Directors or senior
management. None of the directors expected to serve on the Compensation
Committee is an employee of the Company, and neither the Chief Executive
Officer nor any other executive officer will serve on the Compensation
Committee. No director or executive officer of the Company is a director or
executive officer of any other corporation that has a director or executive
officer who is also a director of the Company.
EXECUTIVE COMPENSATION
Summary Compensation. The following table sets forth information with
respect to the annual and long-term compensation earned in 1996 by the Chief
Executive Officer and the four other executive officers whose annual salary
and bonus exceeded $100,000 in 1996 (collectively, the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPEN-
SATION
ANNUAL COMPENSATION AWARDS
-------------------------- ----------
NUMBER OF
SHARES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION SALARY BONUS OTHER(1) OPTIONS (2)
- --------------------------- -------- -------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Dr. Robert W. Deutsch....... $150,000 $250,000 $489,476 -- $17,031
Chief Executive Officer
John H. Beakes.............. 220,000 75,000 21,284 -- 23,402
President and Chief
Operating Officer
John E. Lapolla............. 150,000 30,000 -- 15,000 14,389
Group Vice President
Kenneth J. Rebeck........... 150,000 45,000 -- 15,000 15,143
Group Vice President
Jeffrey W. Wendel........... 100,000 30,000 -- 30,000 11,209
Group Vice President
</TABLE>
- --------
(1) Represents S Corporation distributions made to enable the recipients to
pay Federal income tax on the Company's earnings.
(2) Includes annual car allowances, premiums for life and medical insurance
and contributions by the Company to its 401(k) Plan on behalf of each of
the Named Executive Officers. The life insurance policies upon which the
Company pays the premiums are split-dollar policies.
35
<PAGE>
Employment Agreements. The Company has entered into Employment Agreements
with Dr. Robert W. Deutsch and each of Messrs. Beakes, Lapolla, Rebeck and
Wendel. Each of the Employment Agreements has an initial term of three years
and is automatically renewed thereafter for successive one year terms until
terminated by either the Company or the employee. The employment agreements
provide for initial annual salaries of $150,000, $220,000, $150,000, $150,000
and $150,000 for Dr. Deutsch and Messrs. Beakes, Lapolla, Rebeck and Wendel,
respectively, subject to annual adjustment at the discretion of the Board of
Directors, and provides for annual cash bonuses in amounts determined by the
Board of Directors. The Employment Agreements contain confidentiality
provisions and two year covenants-not-to-compete following termination or
expiration of employment (as defined in the Employment Agreements). In the
event of a "change in control" of the Company (as defined in the Employment
Agreements) followed by the termination of employment by the employee for
"good reason" (as defined in the Employment Agreements), the affected employee
would be entitled to three times his aggregate average annual compensation for
the last three complete years prior to such change in control.
Option Grants. The following table sets forth information regarding options
to purchase shares of the Common Stock granted to the Named Executive Officers
during 1996.
OPTION GRANTS DURING 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------
NUMBER OF
SECURITIES PERCENT OF POTENTIAL REALIZED VALUE AT
UNDERLYING TOTAL OPTIONS EXERCISE ASSUMED ANNUAL RATES OF
OPTIONS GRANTED TO PRICE PER EXPIRATION STOCK PRICE APPRECIATION FOR
NAME GRANTED EMPLOYEES SHARE(1) DATE OPTION TERM(2)
- ---- ---------- ------------- --------- ---------- -----------------------------
5% 10%
-------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Robert W. Deutsch... --
John H. Beakes.......... --
John E. Lapolla......... 15,000 1.4% $6.00 12/31/2007 $ 192,206 $ 380,764
Kenneth J. Rebeck....... 15,000 1.4 6.00 12/31/2007 192,206 380,764
Jeffrey W. Wendel....... 30,000 2.8 6.00 12/31/2007 384,412 761,529
</TABLE>
- --------
(1) The exercise price equaled the fair market value of the Common Stock as
determined by the Board of Directors on the date of grant. The exercise
price is payable in cash or by delivery of shares of Common Stock having a
fair value equal to the exercise price of options exercised.
(2) The assumed annual rates of appreciation of 5% and 10% would result in the
price of the Common Stock increasing to $18.81 and $31.38, respectively,
from an assumed initial public offering price of $11.00 per share during
the 11 year term of the options. The vesting of unvested options may be
accelerated at any time by the Company. The 5% and 10% assumed annual
rates of stock price appreciation used to calculate potential gains to
optionees are mandated by the rules of the U.S. Securities and Exchange
Commission. The potential realizable value does not represent the
Company's prediction of its stock price performance. There can be no
assurance that the stock price will actually appreciate over the 11 year
option term at the assumed 5% and 10% levels or at any other level.
36
<PAGE>
Option Exercises and Holdings. The following table sets forth information
concerning the number and exercise price of the options to purchase Common
Stock exercised by the Named Executive Officers during 1996 and the number and
value of unexercised options to purchase Common Stock held at the end of 1996
by the Named Executive Officers. Concurrently with this offering, Dr. Deutsch
intends to exercise options to purchase 5,370,000 shares of Common Stock, at
an aggregate exercise price of approximately $4.2 million, paid in cash, and
Mr. Beakes intends to exercise options to purchase 603,000 shares of Common
Stock on a cashless basis by surrender to the Company of 46,273 shares of
Common Stock, which shares will have a fair value of $509,000 (assuming an
initial public offering price for the Common Stock of $11.00 per share),
equaling the aggregate exercise price of the options so exercised.
OPTION EXERCISES AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
EXERCISABLE/ IN-THE-
SHARES UNEXERCISABLE MONEY
ACQUIRED VALUE OPTIONS AT OPTIONS AT
NAME UPON EXERCISE REALIZED(1) YEAR-END(2) YEAR-END(1)
- ---- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Dr. Robert W.
Deutsch(3)............. -- $ -- 5,370,000(E) $54,890,000(E)
-- (U) -- (U)
John H. Beakes(3)....... 9,000 93,000 664,800(E) 6,761,300(E)
76,200(U) 782,200(U)
John E. Lapolla......... -- -- 51,900(E) 535,300(E)
98,100(U) 919,700(U)
Kenneth J. Rebeck....... -- -- 52,800(E) 545,200(E)
97,200(U) 910,400(U)
Jeffrey W. Wendel....... -- -- -- (E) -- (E)
39,000(U) 240,000(U)
</TABLE>
- --------
(1) Value equals the assumed per share initial public offering price of $11.00
per share less the per share exercise price.
(2) (E) = Exercisable; (U) = Unexercisable.
(3) Assumes the Concurrent Exercises had not been exercised as of December 31,
1996.
EMPLOYEE BENEFIT PLANS
Amended and Restated 1988 Equity Participation Plan. The Company's Amended
and Restated Employee Equity Participation Plan (the "Plan") was originally
adopted as of January 1, 1989. Under the Plan, the Compensation Committee of
the Board of Directors is authorized to grant options to purchase shares of
Common Stock to any consultant, employee, officer or director of the Company
as compensation for services rendered or contributions made to the Company.
There are an aggregate of 4,065,000 shares reserved for issuance upon exercise
of options granted under the Plan. Employee options vest ratably over a five
year period, generally beginning on the second January 1 after the option is
granted. All options granted to date under the Plan are non-qualified options
(as described below) and expire on December 31st, ten years after the first
vesting date, unless terminated earlier as a result of termination of
employment or, in the case of outside directors, upon their removal for cause
or voluntary resignation from the Board of Directors. As of December 31, 1996,
options to purchase an aggregate of 3,204,000 shares of Common Stock under the
Plan, at a weighted average exercise price of $2.52 per share, were held by
453 employees of the Company. Of this amount, options to purchase 1,097,160
shares will be exercisable as of the date of this Prospectus and options to
purchase an additional 586,140 and 534,450 shares of Common Stock will become
exercisable on January 1, 1998 and January 1, 1999, respectively, assuming the
December 31, 1996 option holders remain employees of the Company. Plan options
to purchase 42,360 shares had been exercised on or before December 31, 1996,
at a weighted average exercise price of $0.68 per share.
37
<PAGE>
Under the Plan, the Compensation Committee has the authority to select the
persons to whom Plan options are granted and to determine the terms of each
Plan option, including (i) the number of shares of Common Stock subject to
such option; (ii) when the option becomes exercisable; (iii) whether the
option is intended to qualify as an incentive stock option within the meaning
of Section 422 of the Code ("incentive stock options") or not ("non-qualified
options"); (iv) the option exercise price, which, in the case of incentive
stock options, must be at least 100% (110% in the case of incentive stock
options granted to a shareholder owning more than 10% of the Common Stock),
and in the case of non-qualified options, must be at least 85% of the fair
market value of the Common Stock as of the date of the grant; and (v) the
duration of the option, which, in the case of incentive stock options, may not
exceed ten years (five years in the case of incentive stock options granted to
a shareholder owning more than 10% of the Common Stock). The Company does not
intend to grant options under the Plan in the future having exercise prices at
less than fair market value of the shares underlying the options on the date
of grant.
401(k) Savings Plan. The Company maintains the RWD Savings and Investment
Plan, a defined contribution pension plan with a cash or deferred arrangement
as described in Section 401(k) of the Internal Revenue Code of 1986, as
amended (the "401(k) Plan"). The 401(k) Plan is intended to qualify under
Section 401(a) of the Code, so that contributions, and income earned thereon,
are not taxable to employees until withdrawn. All regular full-time Company
employees over the age of 21 are eligible to participate in the 401(k) Plan.
The 401(k) Plan provides that each participant may make elective pre-tax
salary deferrals up to 15% of his or her annual compensation, subject to
statutory limits. The Company also may make discretionary annual matching
contributions in amounts determined by the Board of Directors, subject to
statutory limits. The Company's policy is to base its contributions on Company
profitability. The Trustee of the 401(k) Plan invests each employee's account
at the direction of the employee, who may choose among several investment
alternatives, which do not include shares of the Company's Common Stock. The
Company made aggregate contributions to the 401(k) Plan of $499,000, $1.1
million and $1.1 million on account of 1994, 1995 and 1996, respectively.
Employee Stock Purchase Plan. The Company has adopted an Employee Stock
Purchase Plan (the "Stock Purchase Plan"), subject to stockholder approval.
The Stock Purchase Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Code. All regular full-time employees of the
Company (including officers), and all other employees whose customary
employment is for more than 20 hours per week are eligible to participate in
the Stock Purchase Plan. Directors who are not employees are not eligible. A
maximum of 175,000 shares of the Company's Common Stock are reserved for
issuance under the Stock Purchase Plan and available for purchase thereunder,
subject to anti-dilution adjustments in the event of certain changes in the
capital structure of the Company.
Under the Stock Purchase Plan, offerings will be made at the beginning of
each offering period ("Offer Period") commencing no earlier than September 1,
1997. During each Offer Period, deductions are to be made from the pay of
participants (in accordance with their authorizations) and credited to their
accounts under the Stock Purchase Plan. The price per share at which shares of
Common Stock are to be purchased pursuant to the Stock Purchase Plan for any
Offer Period will be no less than 85% of the fair market value of the Common
Stock.
38
<PAGE>
CERTAIN TRANSACTIONS
At various times from 1988 to 1991, the Company borrowed an aggregate of
$3.6 million from Dr. Robert W. Deutsch, the Company's Chairman of the Board
and Chief Executive Officer, and $200,000 from Mr. Beakes, the Company's
President and Chief Operating Officer, in each case to provide the Company
with working capital (collectively, the "Stockholder Notes"). The Stockholder
Notes mature on March 31, 1998 and bear interest at 9% per annum. In the three
year period ended December 31, 1996, the Company made aggregate interest
payments to Dr. Deutsch and Mr. Beakes of approximately $1.0 million. The
Company intends to use approximately $3.8 million of the net proceeds from
this offering to retire the Stockholder Notes.
From its inception in January 1988 until March 31, 1997, the Company was
subject to taxation under Subchapter S of the Code. As a result, the net
income of the Company, for federal and certain state income tax purposes, was
reported by and taxable directly to the Company's stockholders during that
time rather than to the Company. Primarily to provide funds for tax
obligations payable by its stockholders on account of the Company's income in
1995 and 1996, the Company made $691,300 of cash distributions during 1996 to
its stockholders. In connection with its conversion from S Corporation to C
Corporation status, the Company will effect the S Corporation Distribution
(consisting of an aggregate of approximately $7.0 million in cash payments and
the issuance of approximately $8.0 million principal amount of S Corporation
Notes) to the Company's stockholders on March 27, 1997. The S Corporation
Distribution represents the stockholders' proportionate interest in Company
earnings which had not been distributed to the stockholders prior to the
conversion date. Dr. Robert W. Deutsch, Mr. John H. Beakes, Dr. David J.
Deutsch and Mrs. Jane W. Brown (Dr. Robert W. Deutsch's daughter) received
71.1%, 3.1%, 3.4% and 3.4%, respectively, of the 1996 cash distributions, and
will receive approximately the same percentage of the S Corporation
Distribution. The S Corporation Notes are non-interest bearing, demand notes
which the Company expects to retire during 1997.
39
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of January 31, 1997, with
respect to the beneficial ownership of the Common Stock (including shares
issuable upon the exercise of outstanding options that are exercisable as of
that date or within 60 days thereafter) by (i) each person who owns
beneficially more than 5% of the Common Stock, (ii) each of the directors of
the Company, (iii) the Chief Executive Officer and each of the Named Executive
Officers, and (iv) all directors and executive officers as a group. Unless
otherwise indicated, each named person exercises sole voting and investment
power.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO OFFERING AFTER OFFERING
------------------ ------------------
NAME OF BENEFICIAL OWNER(1) NUMBER PERCENT NUMBER PERCENT
- --------------------------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Robert W. Deutsch(2)..................... 9,270,000 85.9% 9,270,000 67.2%
John H. Beakes(3)........................ 785,327 7.2 785,327 5.7
David J. Deutsch(4)...................... 615,000 5.7 615,000 4.5
Jane C. Brown(4)......................... 615,000 5.7 615,000 4.5
John E. Lapolla(5)....................... 76,500 * 76,500 *
Kenneth J. Rebeck(5)..................... 76,800 * 76,800 *
Jeffrey W. Wendel(5)..................... 1,800 * 1,800 *
Ronald E. Holtz (5)...................... 600 * 600 *
All directors and officers as a group (6)
(7 persons)............................. 10,826,027 98.2 10,826,027 77.2
</TABLE>
- --------
* Less than 1%.
(1) The address of each stockholder listed in the table is c/o RWD
Technologies, Inc., 10480 Little Patuxent Parkway, Suite 1200, Columbia,
Maryland 21044-3530.
(2) Includes 450,000 shares owned by Mrs. Florence Deutsch, Dr. Robert
Deutsch's wife, as to which Dr. Robert Deutsch disclaims beneficial
ownership.
(3) Includes 78,600 shares issuable upon exercise of currently exercisable
options. Mr. Beakes has granted the Underwriters an option to purchase
150,000 shares of Common Stock to cover over-allotments, if any. See
"Underwriting." To the extent the Underwriters' over-allotment option is
exercised in full, the number of shares of Common Stock and percentage of
total number of outstanding shares of Common Stock beneficially owned by
Mr. Beakes will be reduced to 635,327 and 4.6%, respectively.
(4) Includes an aggregate of 450,000 shares held in trusts for the children of
Mrs. Jane Brown and Dr. David Deutsch, for which Mrs. Jane Brown and Dr.
David Deutsch serve as co-trustees. Mrs. Jane Brown and Dr. David J.
Deutsch are Dr. Robert W. Deutsch's children.
(5) Consists of currently exercisable options.
(6) Excludes an aggregate of approximately 2,727 shares of Common Stock to be
issued to the outside directors upon completion of this offering (assuming
a public offering price of $11.00 per share).
40
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's Charter authorizes the Company to issue up to 50,000,000
shares of Common Stock, $.10 par value per share. As of the date of this
Prospectus, there were 10,795,367 shares of Common Stock outstanding, held of
record by 18 persons. In addition, on December 31, 1996, there were
outstanding options to acquire up to an additional 3,221,160 shares of Common
Stock.
COMMON STOCK
Holders of the Common Stock are entitled to one vote per share on all
matters submitted to the stockholders for a vote. There are no cumulative
voting rights in the election of directors. Subject to the prior rights of any
outstanding preferred stock, the shares of Common Stock are entitled to
receive such dividends as may be declared and paid by the Board of Directors
out of funds legally available therefor and to share, ratably, in the net
assets, if any, of the Company upon liquidation. The stockholders have no
preemptive rights to purchase any shares of the Company's capital stock. All
outstanding shares of Common Stock are, and the shares of Common Stock offered
hereby will be, when issued and paid for, duly authorized, validly issued,
fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors, without further action by the holders of the Common
Stock, is authorized to classify any shares of its authorized but unissued
Common Stock as preferred stock in one or more series, from time to time. With
respect to each series, the Board of Directors determines the number of shares
constituting such series, the dividend rate on the shares of each series,
whether such dividends shall be cumulative and the relation of such dividends
to any dividends payable on any other class of stock, whether the shares of
each series shall be redeemable and the terms thereof, whether the shares
shall be convertible into Common Stock and the terms thereof, the amount per
share payable on each series or other rights of holders of such shares on
liquidation or dissolution of the Company, the voting rights, if any, of
shares of each series and any other rights and privileges not in conflict with
the Company's charter and any qualifications, limitations or restrictions
thereof. There are no shares of preferred stock outstanding, and the Board of
Directors has no present intention to issue any preferred stock.
The availability of preferred stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of discouraging takeover proposals, and the issuance of
preferred stock could have the effect of delaying or preventing a change in
control of the Company not approved by the Board of Directors.
ANTI-TAKEOVER PROVISIONS OF CHARTER AND BY-LAWS
The Company's Charter provides for a Board of Directors of three classes,
with the initial classes having one, two and three year terms, respectively,
and thereafter staggered three year terms. Under the Charter, directors may be
removed for cause only upon the affirmative vote of at least 80% of the shares
of capital stock entitled to vote in the election of directors. Under the By-
Laws, the number of directors is currently fixed at nine, which number may be
changed only upon the vote of two-thirds of the directors then in office.
The Company's Charter and By-Laws require that any stockholder proposal
relating to the nomination of a director must be delivered to the Company's
Secretary no more than 90 days nor less than 60 days prior to the Annual
Meeting of Stockholders at which such nominee will be voted upon.
The foregoing provisions of the Charter and all provisions of the By-Laws
may be amended or repealed by the stockholders only upon the affirmative vote
of at least 80% of the shares of capital stock entitled to vote thereon. The
By-Laws also may be amended or repealed by the Board of Directors only upon
the vote of at least two-thirds of the directors then in office. These
provisions of the Charter and By-Laws could have the effect of discouraging
takeover proposals and delaying or preventing a change in control of the
Company not approved by the Board of Directors.
41
<PAGE>
BUSINESS COMBINATIONS
Under Section 3-601, et seq. of the Maryland General Corporation Law (the
"Business Combination Statute"), certain "business combinations" (including
mergers or similar transactions subject to a statutory stockholder vote and
additional transactions involving transfers of assets or securities in
specific amounts) between a Maryland corporation subject to the Business
Combination Statute and any person who beneficially owns 10% or more of the
voting power of the corporation's shares or any affiliate of the corporation
who, at any time within the preceding two years, was the beneficial owner of
10% or more of the voting power of the then-outstanding voting stock of the
corporation (an "Interested Stockholder"), or an affiliate thereof, are
prohibited for five years after the most recent date on which the Interested
Stockholder became an Interested Stockholder unless an exemption is available.
Thereafter, any such business combination must be recommended by the board of
directors of the corporation and approved by the affirmative vote of at least:
(i) 80% of the votes entitled to be cast by all holders of outstanding voting
shares of the corporation; and (ii) two-thirds of the votes entitled to be
cast by holders of outstanding voting shares of the corporation other than
shares held by the Interested Stockholder with whom the business combination
is to be effected, unless the corporation's stockholders receive a minimum
price (as described in the Business Combination Statute) for their shares and
the consideration is received in cash or in the same form as previously paid
by the Interested Stockholder for its shares. The Business Combination Statute
does not apply, however, to business combinations that are (a) exempted in the
corporation's charter prior to the time the corporation became subject to the
Business Combination Statute or (b) approved or exempted by the board of
directors prior to the time that the Interested Stockholder becomes an
Interested Stockholder. After a corporation becomes subject to the Business
Combination Statute, in order to amend the corporation's charter to elect not
to be subject to the foregoing requirements with respect to one or more
Interested Stockholders, the affirmative vote of at least 80% of the votes
entitled to be cast by all holders of outstanding shares of voting stock and
two-thirds of the votes entitled to be cast by holders of outstanding shares
of voting stock who are not Interested Stockholders is required.
Generally the Company is subject to the provisions of the Business
Combination Statute; however, the Company's Charter exempts from the Business
Combination Statute any future "business combinations" between the Company and
Dr. Robert W. Deutsch or members of his immediate family.
CONTROL SHARE ACQUISITIONS
Section 3-701 et seq. of the Maryland General Corporation Law provides that
"control shares" of a Maryland Corporation acquired in a "control share
acquisition" have no voting rights except to the extent approved by a vote of
two-thirds of the votes entitled to be cast on the matter, excluding shares of
stock owned by the acquiror or by officers or directors who are employees of
the corporation. "Control shares" are voting shares of stock which, if
aggregated with all other such shares of stock previously acquired by the
acquiror, or in respect of which the acquiror is able to exercise or direct
the exercise of voting power except solely by virtue of a revocable proxy,
would entitle the acquiror to exercise voting power in electing directors
within one of the following ranges of voting power: (i) one-fifth or more but
less than one-third; (ii) one-third or more but less than a majority or (iii)
a majority of all voting power. Control shares do not include shares the
acquiring person is then entitled to vote as a result of having previously
obtained stockholder approval. A "control share acquisition" means the
acquisition of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses
and delivery of an "acquiring person statement"), may compel the corporation's
board of directors to call a special meeting of stockholders to be held within
50 days of demand to consider the voting rights of the shares. If no request
for a meeting is made, the corporation may itself present the question at any
stockholders meeting.
Unless the charter or bylaws provide otherwise, if voting rights are not
approved at the meeting or if the acquiring person does not deliver an
acquiring person statement within 10 days following a control share
42
<PAGE>
acquisition then, subject to certain conditions and limitations, the
corporation may redeem any or all of the control shares (except those for
which voting rights have previously been approved) for fair value determined,
without regard to the absence of voting rights for the control shares, as of
the date of the last control share acquisition or of any meeting of
stockholders at which the voting rights of such shares are considered and not
approved. Moreover, unless the articles or bylaws provide otherwise, if voting
rights for control shares are approved at a stockholders' meeting and the
acquiror becomes entitled to exercise or direct the exercise of a majority or
more of all voting power, other stockholders may exercise appraisal rights.
The fair value of the shares as determined for purposes of such appraisal
rights may not be less than the highest price per share paid by the acquiror
in the control share acquisition.
The control share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by the charter or bylaws
of the corporation. The Company's Charter exempts the applicability of the
control share acquisitions made by Dr. Robert W. Deutsch and members of his
immediate family.
The Business Combination Statute and the control share acquisition statute
could have the effect of discouraging takeover proposals and delaying or
preventing a change of control of the Company not approved by its Board of
Directors.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.
43
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
13,795,367 shares of Common Stock. Sales of a substantial number of shares of
Common Stock in the public market following this offering, or the perception
that such sales could occur, could adversely affect the market price for the
Company's Common Stock. Substantially all of the shares to be outstanding upon
completion of this offering (other than the 3,000,000 shares being offered
hereby) are subject to the lock-up agreements described below. Of the shares
to be outstanding upon completion of this offering, 10,611,257 shares are
"restricted," as that term is defined in the Securities Act of 1933, as
amended (the "Securities Act"). Of these restricted shares, 4,666,350 have
been held for more than one year and, as such, will be salable upon expiration
of the lock-up agreements described below, subject to certain volume and
manner of sale restrictions under Rule 144 of the Securities Act.
The 3,221,160 shares reserved for issuance upon exercise of options
outstanding on December 31, 1996 and the 818,640 shares reserved for issuance
upon exercise of future grants under the Company's stock option plan will be
registered under the Securities Act 90 days after completion of this offering.
The Company has an additional 175,000 shares of Common Stock reserved for
issuance in connection with its Employee Stock Purchase Plan which the Company
intends to register under the Securities Act no earlier than September 1,
1997. Other than shares subject to the lock-up agreements, shares registered
under the Securities Act will be freely transferable upon issuance unless
acquired by affiliates of the Company. Of the shares subject to outstanding
options, 1,105,320 shares are issuable upon exercise of fully vested options,
with 390,000 of such shares subject to the lock-up agreements described below.
See "Management--Employee Benefit Plans."
All directors, executive officers, principal stockholders and certain other
officers of the Company who hold in the aggregate 10,641,227 shares of Common
Stock (plus options to purchase an aggregate of 826,500 shares), and the
Company have agreed not to sell or otherwise dispose of any of their shares or
options for a period of 180 days after the date of this Prospectus without the
prior written consent of William Blair & Company, L.L.C. However, William
Blair & Company, L.L.C., may, in its sole discretion and at any time without
notice, release for public sale all or any portion of these shares subject to
such lock-up agreements. See "Underwriting."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) is entitled to sell restricted shares if at least
one year has passed since the later of the time such shares were acquired from
the Company or any affiliate of the Company. Rule 144 provides, however, that
within any three-month period such person may only sell up to the greater of:
(i) 1% of the then outstanding shares of the Common Stock (approximately
138,000 shares immediately following this offering) or (ii) the average weekly
trading volume in the Common Stock during the four calendar weeks immediately
preceding the date on which notice of the sale is filed with the Commission.
Sales under Rule 144 are also subject to certain manner-of-sale provisions and
notice requirements and to the availability of current public information
about the Company. All shares held by persons who are deemed to be affiliates
of the Company are subject to the volume limitations and other requirements of
Rule 144 regardless of how long the shares have been owned or how they were
acquired. Restricted shares held by non-affiliates of the Company for more
than two years can be sold without limitation under Rule 144.
Prior to the offering, there has been no public market for the Common Stock,
and no prediction can be made as to the effect, if any, that future sales of
Common Stock or the availability of shares of Common Stock for future sale
will have on the market price of the Common Stock prevailing from time to
time. Sales of substantial amounts of Common Stock following this offering, or
the perception that such sales could occur, could adversely affect prevailing
market prices of the Common Stock and could impair the Company's ability to
raise capital through an offering of its equity securities.
44
<PAGE>
UNDERWRITING
The several Underwriters named below (the "Underwriters"), for which William
Blair & Company, L.L.C. and Montgomery Securities are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions set forth in the Underwriting Agreement by and among the
Company and the Underwriters (the "Underwriting Agreement"), to purchase from
the Company, and the Company has agreed to sell to each of the Underwriters,
the respective number of shares of Common Stock set forth opposite each
Underwriter's name in the table below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------ ---------
<S> <C>
William Blair & Company, L.L.C. ......................................
Montgomery Securities.................................................
---------
Total............................................................. 3,000,000
=========
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Common Stock
being sold pursuant to the Underwriting Agreement if any of the Common Stock
being sold pursuant to the Underwriting Agreement (excluding shares covered by
the over-allotment option granted therein) is purchased. In the event of a
default by any Underwriter, the Underwriting Agreement provides that, in
certain circumstances, the purchase commitments of the non-defaulting
Underwriters shall be increased or the Underwriting Agreement may be
terminated.
The Representatives have advised the Company that the Underwriters propose
to offer the Common Stock to the public initially at the public offering price
set forth on the cover page of this Prospectus and to selected dealers at such
price less a concession of not more than $ per share. The Underwriters may
allow, and such dealers may re-allow, a concession not in excess of $ per
share to certain other dealers. After commencement of the initial public
offering, the public offering price and other selling terms may be changed by
the Representatives.
The Company and two stockholders (the "Selling Stockholders") have granted
to the Underwriters an option, exercisable within 30 days after the date of
this Prospectus, to purchase up to an aggregate of 282,000 and 168,000
additional shares of Common Stock, respectively, to cover over-allotments, at
the same price per share to be paid by the Underwriters for the other shares
offered hereby. If the Underwriters purchase any such additional shares
pursuant to this option, each of the Underwriters will be committed to
purchase such additional shares in approximately the same proportion as set
forth in the table above. If less than all of such additional shares are
purchased, the Underwriters will purchase such shares first from the Selling
Stockholders, pro rata, and then from the Company. The Underwriters may
exercise the option only for the purpose of covering over-allotments, if any,
made in connection with the distribution of the Common Stock offered hereby.
The directors, executive and certain other officers and principal
stockholders of the Company who hold in the aggregate 10,641,227 shares of
Common Stock (plus options to purchase an additional 826,500 shares of Common
Stock) and the Company have agreed that for a period of 180 days after the
date of this Prospectus,
45
<PAGE>
without the prior written consent of William Blair & Company, L.L.C., they
will not offer, sell, contract to sell, grant any option to purchase or
otherwise dispose of any Common Stock or securities convertible or
exchangeable into, or exercisable for, Common Stock. However, the Company may
grant options under its existing stock option plans. The Company also has
agreed not to file or cause to be filed any registration statement with the
Commission related to any of the foregoing during the lock-up period.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters and their controlling persons against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
the Underwriters may be required to make in respect thereof.
The Representatives have informed the Company that the Underwriters will not
confirm, without client authorization, sales to their client accounts as to
which they have discretionary authority.
Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock will be determined by negotiations among the Company and the
Representatives. Among the factors which will be considered in such
negotiations will be the prevailing market conditions, the results of
operations of the Company in recent periods, the market capitalizations and
stages of development of other companies which the Company and the
Representatives believe to be comparable to the Company, estimates of the
business potential of the Company, the present state of the Company's
development and other factors which may be deemed relevant.
LEGAL MATTERS
The legality of the issuance of the Common Stock offered hereby and certain
other matters will be passed upon for the Company and the Selling Stockholders
by Piper & Marbury L.L.P., Baltimore, Maryland. Certain legal matters will be
passed upon for the Underwriters by Jones, Day, Reavis & Pogue, Chicago,
Illinois. Robert M. Goldman, of counsel to Piper & Marbury L.L.P., owns 15,000
shares of Common Stock.
EXPERTS
The audited financial statements and schedule of the Company included in
this Prospectus and elsewhere in the Registration Statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company is not currently subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a result
of this offering, the Company will be required to file reports and other
information with the Securities and Exchange Commission pursuant to the
informational requirements of the Exchange Act.
The Company has filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement on Form S-1 under the Securities
Act with respect to the shares of Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Common Stock offered hereby, reference is made
to the Registration Statement and the exhibits and schedules filed therewith.
Statements contained in this Prospectus as to the contents of any contract or
any other document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. A copy of the Registration
Statement, and the exhibits and schedules thereto, may be inspected without
charge at the public reference facilities maintained by the Securities and
Exchange Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission located at Seven World
Trade Center, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and copies of all or any part of
the Registration Statement may be obtained from the Commission upon payment of
a prescribed fee. This information is also available from the Commission's
Internet web site at http://www.sec.gov. The Registration Statement, including
all exhibits thereto and amendments thereof, will be filed with the Commission
through EDGAR.
46
<PAGE>
RWD TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants................................... F-2
Balance Sheets as of December 31, 1995 and 1996............................ F-3
Statements of Income for the years ended December 31, 1994, 1995 and 1996.. F-4
Statements of Changes in Stockholders' Equity for the years ended December
31, 1994, 1995 and 1996................................................... F-5
Statements of Cash Flows for the years ended December 31, 1994, 1995 and
1996...................................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
RWD Technologies, Inc.:
We have audited the accompanying balance sheets of RWD Technologies, Inc. (a
Maryland corporation) as of December 31, 1995 and 1996, and the related
statements of income, changes in stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of RWD Technologies, Inc. as
of December 31, 1995 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
Baltimore, Maryland
Arthur Andersen LLP
January 31, 1997
F-2
<PAGE>
RWD TECHNOLOGIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1995 1996 1996
----------- ----------- -----------
(UNAUDITED
PROFORMA)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.................................. $ 390,900 $ 3,530,600 $ 7,710,600
Investments, held-to-maturity......... 2,003,100 1,502,300 1,502,300
Investments, available-for-sale....... -- 500,600 500,600
Contract accounts receivable, net of
allowance for doubtful accounts of
$412,300 and $383,700, respectively.. 11,448,800 11,981,600 11,981,600
Costs and estimated earnings in excess
of billings on uncompleted
contracts............................ 3,839,800 3,331,400 3,331,400
Prepaid expenses and other............ 856,900 849,500 849,500
----------- ----------- -----------
Total Current Assets................ 18,539,500 21,696,000 25,876,000
----------- ----------- -----------
FIXED ASSETS:
Furniture and fixtures................ 2,627,900 4,826,300 4,826,300
Office equipment...................... 835,500 1,448,300 1,448,300
Computer equipment.................... 3,940,300 5,594,400 5,594,400
Leasehold improvements................ 280,400 725,900 725,900
----------- ----------- -----------
Total Fixed Assets.................. 7,684,100 12,594,900 12,594,900
Less-Accumulated depreciation and am-
ortization........................... (2,638,600) (4,718,000) (4,718,000)
----------- ----------- -----------
Net Fixed Assets.................... 5,045,500 7,876,900 7,876,900
----------- ----------- -----------
OTHER ASSETS............................ 73,100 285,500 285,500
----------- ----------- -----------
Total Assets...................... $23,658,100 $29,858,400 $34,038,400
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable...................... $ 254,000 $ 652,800 $ 652,800
Accrued payroll and other............. 1,675,500 1,641,500 1,641,500
Accrued vacation payable.............. 610,400 817,400 817,400
Billings in excess of costs and
estimated earnings on uncompleted
contracts............................ 1,860,500 2,689,300 2,689,300
Dividends payable..................... -- -- 15,000,000
Deferred tax liability................ -- -- 4,550,000
Borrowings under line of credit....... 2,700,00 -- --
Current portion of capital lease obli-
gation............................... -- 41,600 41,600
Related party debt.................... -- 3,800,000 3,800,000
----------- ----------- -----------
Total Current Liabilities........... 7,100,400 9,642,600 29,192,600
NONCURRENT LIABILITIES:
Long-term related party debt.......... 3,800,000 -- --
Capital lease obligation, net of cur-
rent portion......................... -- 83,400 83,400
Deferred tax liability................ -- -- 225,000
----------- ----------- -----------
Total Liabilities................... 10,900,400 9,726,000 29,501,000
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value; autho-
rized--50,000,000 shares; issued and
outstanding--4,849,110, and
4,859,640, respectively.............. 484,900 486,000 1,078,700
Additional paid-in capital............ 2,747,900 2,753,800 6,341,300
Retained earnings..................... 9,524,900 16,892,600 (2,882,400)
----------- ----------- -----------
Total Stockholders' Equity.......... 12,757,700 20,132,400 4,537,400
----------- ----------- -----------
Total Liabilities and Stockhold-
ers' Equity...................... $23,658,100 $29,858,400 $34,038,400
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
RWD TECHNOLOGIES, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenue................................. $29,423,900 $47,131,600 $65,005,500
Cost of services........................ 21,750,800 35,268,900 48,131,300
----------- ----------- -----------
Gross profit............................ 7,673,100 11,862,700 16,874,200
General and administrative expenses..... 3,514,700 5,212,100 8,137,500
----------- ----------- -----------
Operating income........................ 4,158,400 6,650,600 8,736,700
Interest expense........................ (339,900) (342,800) (388,600)
Interest and other income............... 154,100 222,300 265,500
----------- ----------- -----------
Income before taxes..................... 3,972,600 6,530,100 8,613,600
Provision for income taxes.............. 59,800 168,500 364,900
----------- ----------- -----------
Net income............................ $ 3,912,800 $ 6,361,600 $ 8,248,700
=========== =========== ===========
Pro Forma Information (unaudited):
Income before taxes, as reported...... $ 3,972,600 $ 6,530,100 $ 8,613,600
Pro forma income tax provision to
recognize C Corporation provision for
income taxes ........................ 1,589,000 2,612,000 3,445,500
----------- ----------- -----------
Pro forma net income................ $ 2,383,600 $ 3,918,100 $ 5,168,100
=========== =========== ===========
Pro forma net income per share........ $ 0.19 $ 0.32 $ 0.40
=========== =========== ===========
Weighted average shares outstanding... 12,273,300 12,273,100 12,933,100
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
RWD TECHNOLOGIES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS
COMMON PAID-IN (ACCUMULATED
STOCK CAPITAL DEFICIT)
-------- ---------- ------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1993.................. $484,900 $2,748,500 $ (749,500)
Stock options exercised................... -- 400 --
Common stock repurchased.................. -- (300) --
Net income................................ -- -- 3,912,800
-------- ---------- -----------
BALANCE, DECEMBER 31, 1994.................. 484,900 2,748,600 3,163,300
Stock options exercised................... -- 300 --
Common stock repurchased.................. -- (1,000) --
Net income................................ -- -- 6,361,600
-------- ---------- -----------
BALANCE, DECEMBER 31, 1995.................. 484,900 2,747,900 9,524,900
Stock options exercised................... 4,600 26,800 --
Common stock repurchased.................. (3,500) (20,900) (189,700)
Stockholder distributions................. -- -- (691,300)
Net income................................ -- -- 8,248,700
-------- ---------- -----------
BALANCE, DECEMBER 31, 1996.................. $486,000 $2,753,800 $16,892,600
======== ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
RWD TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................ $ 3,912,800 $ 6,361,600 $ 8,248,700
Adjustments to reconcile net income to
net cash from operating activities--
Depreciation and amortization....... 568,500 1,179,800 2,232,400
(Gain) loss on sale of fixed assets. (1,700) 6,000 31,600
Increase in contract accounts re-
ceivable, net...................... (2,922,900) (3,652,900) (532,800)
(Increase) decrease in costs and es-
timated earnings in excess of bill-
ings on uncompleted contracts...... (885,600) (1,826,200) 508,400
(Increase) decrease in prepaid ex-
penses and other................... (202,900) (436,500) 7,400
Increase in payables and accrued ex-
penses............................. 193,800 806,000 571,800
(Decrease) increase in billings in
excess of costs and estimated
earnings on uncompleted contracts.. (203,000) 593,800 828,800
----------- ----------- -----------
Net cash from operating activi-
ties............................. 459,000 3,031,600 11,896,300
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments............... (6,501,800) (2,272,200) (2,002,900)
Proceeds from maturities of invest-
ments................................ 6,739,300 1,995,300 2,003,100
Purchase of fixed assets.............. (1,433,000) (3,738,100) (4,961,300)
(Increase) decrease in other assets... (37,600) 3,400 (50,000)
Proceeds from sale of fixed assets.... 10,900 7,300 8,400
----------- ----------- -----------
Net cash from investing activities.. (1,222,200) (4,004,300) (5,002,700)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in cash overdraft. 859,500 (859,500) --
Net (payments) borrowings under line
of credit............................ (400,700) 2,223,800 (2,700,000)
Principal portion paid on capital
lease obligation..................... -- -- (17,500)
Shareholder distributions............. -- -- (691,300)
Issuance of common stock.............. 400 300 31,400
Purchase of common stock.............. (300) (1,000) (214,100)
Public offering issuance costs........ -- -- (162,400)
----------- ----------- -----------
Net cash from financing activities.. 458,900 1,363,600 (3,753,900)
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH......... (304,300) 390,900 3,139,700
CASH, beginning of year................. 304,300 -- 390,900
----------- ----------- -----------
CASH, end of year....................... $ -- $ 390,900 $ 3,530,600
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE:
Income taxes paid..................... $ -- $ 270,400 $ 334,600
=========== =========== ===========
Interest expense paid................. $ 339,900 $ 342,800 $ 388,600
=========== =========== ===========
</TABLE>
In 1996, the Company entered into a $142,500 capital lease.
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
RWD TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Business
RWD Technologies, Inc. (the "Company") was incorporated on January 22, 1988,
in the State of Maryland. The Company provides a broad range of integrated
solutions designed to improve the productivity and effectiveness of workers in
complex operating environments.
The Company's operations depend, among other things, upon the Company's
ability to attract, develop and retain a sufficient number of highly skilled
professional employees. In addition, the Company's revenue is generated from a
limited number of clients in specific industries. Future operations may be
affected by its ability to retain these clients, and cyclical and economic
factors that could impact those industries. An evaluation of the Company's
operations should also include consideration of the "Risk Factors" described
in the Prospectus related to the Company's contemplated public offering.
Basis of Presentation
The accompanying financial statements are presented on the accrual basis of
accounting in accordance with generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements
and the reported amounts of total revenue and expenses during the reporting
period. While actual results could differ from those estimates, management
believes that actual results will not be materially different from amounts
provided in the accompanying financial statements.
Contemplated Initial Public Offering (IPO)
The Company is currently contemplating an IPO. Prior to the IPO, the Company
will make an approximate $15,000,000 S Corporation distribution representing
earnings not previously distributed to the stockholders. The proceeds of the
IPO will be used to retire the $3,800,000 of stockholder notes, and the
Company will use the remaining proceeds for working capital to support the
planned growth of its business and for other general corporate purposes.
Investments
Investments as of December 31, 1995 and 1996 consist of U.S. government
securities of $2,003,100 and $2,002,900, respectively. In accordance with
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," all investments are
classified as held-for-maturity except for $500,600 as of December 31, 1996,
which is classified as available-for-sale. Investments classified as held-to-
maturity are recorded at amortized cost and investments classified as
available-for-sale are recorded at market value. The amortized cost
approximated market value for all investments as of December 31, 1995 and
1996.
Financial Instruments
Financial instruments as of December 31, 1995 and 1996, consist of cash,
investments, receivables, accounts payable, borrowings under line of credit,
related party debt and a capital lease obligation, all of which the carrying
amounts approximate market.
F-7
<PAGE>
RWD TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Fixed Assets
Fixed assets are stated at cost. Depreciation and amortization is computed
using the straight-line method based on the estimated useful lives, as
follows:
<TABLE>
<S> <C>
Furniture and fixtures....................................... 7 years
Office equipment............................................. 5 years
Computer equipment........................................... 3-5 years
Leasehold improvements....................................... 7-10 years
</TABLE>
The depreciation and amortization expenses for the years ended December 31,
1994, 1995 and 1996, were $568,500, $1,179,800 and $2,232,400, respectively.
Revenue Recognition
Almost all of RWD's revenue is generated from professional fees. The
majority of the Company's contracts are on a time-and-materials basis,
although many of the contracts contain initial "not-to-exceed" fees and
Company performance obligations. The remainder of the Company's contracts are
on a fixed-bid basis. Revenue is recognized using the percentage of completion
method. The Company's contracts generally vary in length from one to 24
months.
Earned revenue is based on the percentage that direct labor and other
contract costs incurred to date bear to total estimated costs, after giving
effect to the most recent estimates of total cost. The cumulative impact of
revisions in total cost estimates during the progress of work is reflected in
the period in which these changes become known. Earned revenue reflects the
original contract price adjusted for agreed-upon claim and change order
revenue, if any. Losses expected to be incurred on jobs in process, after
consideration of estimated minimum recoveries from claims and change orders,
are charged to income as soon as such losses are known.
Significant Clients
Automobile industry clients generated 46.9%, 43.5% and 40.6% of the
Company's revenue in 1994, 1995 and 1996, respectively. During the years ended
December 31, 1994, 1995 and 1996, sales to one client were approximately
33.2%, 33.9% and 28.5%, respectively, of total revenue for that year. No other
client represented more than 10% of the Company's revenue in any of these
years.
Segment Information
The Company operates within one industry segment.
Income Taxes
Historically, the Company has elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code which provide that, in lieu of
corporate, federal and some state income taxes, the stockholders are taxed on
their proportionate share of the Company's taxable income. In connection with
the IPO of the Company's common stock, the Company will be taxed as a C
Corporation. As a result of the Company's Subchapter S election, the
accompanying statements of income do not include an income tax provision for
federal and most state income taxes; however, pro forma adjustments to reflect
a total provision for income taxes have been made. The pro forma adjustments
have been made in accordance with Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes", at an effective rate of 40.0% for the
years ended December 31, 1994, 1995 and 1996, which is the tax rate which
would have been in effect had the Company been taxed as a C Corporation.
Earnings Per Share
Pro forma earnings per share are based on the weighted average number of
common and dilutive common equivalent shares for stock options outstanding
during the period the calculation is made. Dilutive common equivalent shares
consist of shares issuable upon the exercise of stock options, using the
treasury stock method and the estimated IPO price of $11.00 per share. The
options outstanding as of December 31, 1996 were assumed
F-8
<PAGE>
RWD TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
to be outstanding for all of 1995 and 1996. The majority stockholder plans to
exercise options to acquire 5,370,000 shares concurrent with the completion of
the IPO. The majority stockholder's options are included in the weighted
average shares outstanding as if the 5,370,000 shares were outstanding for all
periods presented. The weighted average shares outstanding for 1996 include
the pro forma effect of shares that would have had to have been issued (at an
assumed public offering price of $11.00 less the underwriting discount and
estimated expenses) to generate sufficient cash to fund the portion of the
approximately $15 million S corporation distribution that is in excess of the
net income for the year ended December 31, 1996. While this assumption is
being made to calculate the weighted average shares outstanding for 1996, the
Company plans to use operating cash flows, and not IPO proceeds, to fund the
$14 million distribution. The weighted average shares outstanding is
calculated as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Common stock............................. 4,850,500 4,850,300 4,850,300
Dilutive effect of majority stockholder
options to be exercised................. 5,370,000 5,370,0000 5,370,000
Dilutive effect of remaining common
equivalent shares....................... 2,052,800 2,052,800 2,052,800
Dilutive effect of assumed IPO shares for
distribution............................ -- -- 660,000
---------- ---------- ----------
Weighted average shares outstanding...... 12,273,300 12,273,100 12,933,100
========== ========== ==========
</TABLE>
Stock Split
The Company effected a three for one stock split, effective at the close of
business on March 21, 1997. All share data included in the accompanying
financial statements and notes thereto are as if the stock split had occurred
prior to the periods presented.
New Accounting Standards
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of." SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS No. 121 is effective
for financial statements with fiscal years beginning after December 15, 1995.
The adoption of SFAS No. 121 as of January 1, 1996 had no impact on the
Company's financial position or results of operations.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock Based Compensation." With respect to stock options
granted to employees, SFAS No. 123 permits companies to continue using the
accounting method promulgated by the Accounting Principles Board Opinion No.
25 ("APB No. 25"), "Accounting for Stock Issued to Employees," to measure
compensation expense or to adopt the fair value based method prescribed by
SFAS No. 123. If APB No. 25's method is continued, pro forma disclosures are
required as if SFAS No. 123 accounting provisions were followed. Management
has elected to continue to measure compensation expense under APB No. 25, with
pro forma footnote disclosures of the expense under the SFAS No. 123 method.
(See Note 5).
During early 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earning Per Share," which becomes effective December 15, 1997, and as to
which early adoption is not permitted. Under SFAS No. 128, a company will be
required to disclose basic earnings per share (with the principal difference
from current disclosure being that common stock equivalence will not be
considered in the compilation of basic earnings per
F-9
<PAGE>
RWD TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
share) and diluted earnings per share. The adoption of this pronouncement will
require restatement of all prior periods presented. Because the pronouncement
was only recently issued, the Company has not calculated the effect adopting
this pronouncement will have.
Pro Forma Balance Sheet
The (unaudited) pro forma balance sheet as of December 31, 1996, gives pro
forma effect to the proposed approximate $15 million S corporation
distribution (as previously discussed) and the deferred income tax liability
that would be required if the Company had converted to a C corporation as of
December 31, 1996 (as previously discussed). This balance sheet also includes
the effect of the majority shareholders' concurrent exercise of 5,370,000
options and another founding shareholder's exercise of 556,727 shares on a
cashless basis.
2. COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROCESS:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------
1995 1996
----------- -----------
<S> <C> <C>
Cost incurred and estimated earnings on
uncompleted contracts............................ $39,721,500 $59,311,700
Less: Billings to date on uncompleted contracts... 37,742,200 58,669,600
----------- -----------
Net unbilled revenue............................ $ 1,979,300 $ 642,100
=========== ===========
Included in the accompanying balance sheets under
the following captions:
Costs and estimated earnings in excess of
billings on uncompleted contracts.............. $ 3,839,800 $ 3,331,400
Billings in excess of costs and estimated
earnings on uncompleted contracts.............. 1,860,500 2,689,300
----------- -----------
$ 1,979,300 $ 642,100
=========== ===========
</TABLE>
Generally, contracts provide for the billing of costs incurred and estimated
fees on primarily a monthly basis. Amounts incurred in "costs and estimated
earnings in excess of billings on uncompleted contracts" in the accompanying
financial statements will be billed within twelve months of the balance sheet
date.
3. DEBT:
Debt consists of the following as of December 31, 1995 and 1996:
<TABLE>
<S> <C>
Note payable--9.0%, due March 31, 1998, unsecured.............. $ 200,000
Note payable--9.0%, due March 31, 1998, unsecured.............. 3,600,000
----------
Total........................................................ $3,800,000
==========
</TABLE>
The notes payable listed above are payable to two officers of the Company
who are principal stockholders of the Company. Interest expense during the
years ended December 31, 1994, 1995 and 1996 on these loans from stockholders
was $338,600, $342,000 and $342,000, respectively. The Company intends to
retire the existing notes payable concurrent with the proposed IPO.
The Company has a line of credit agreement with a bank which extends to
working capital (Facility A) and vehicle and equipment purchases or leases
(Facility B). Facility A is an unsecured line of $7,500,000. Facility B is
secured by the specific vehicles or equipment being leased or purchased and
advances under this $250,000 line are limited to 80% of the cost of assets
purchased or 100% of the cost of assets leased. Interest under this agreement
is at the 30-day LIBOR rate, plus 1.75%. During the years ended December 31,
1994, 1995 and 1996, the average outstanding balance, the highest balance
outstanding, the weighted average interest rates and the interest rate at end
of year were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1995 1996
-------- ---------- ----------
<S> <C> <C> <C>
Average month-end outstanding balance... $ 66,900 $ 225,000 $ 58,300
Highest balance outstanding............. $476,200 $2,700,000 $2,700,000
Weighted average interest rates......... 6.4% 7.8% 7.2%
Interest rate at end of year............ 7.9% 7.7% 7.4%
</TABLE>
F-10
<PAGE>
RWD TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. COMMITMENTS AND CONTINGENCIES:
Commitments
The Company leases its office facilities under various operating leases
which expire through December 31, 2003. The leases require the Company to pay
for a portion of common area maintenance expenses and real estate taxes. Rent
expense for the years ended December 31, 1994, 1995 and 1996 was $660,200,
$1,265,800 and $2,016,000, respectively. During 1996, the Company entered into
a capital lease obligation for a copy machine. Future minimum payments under
these operating and capital leases, as of December 31, 1996, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, CAPITAL LEASE OPERATING LEASES
------------------------ ------------- ----------------
<S> <C> <C>
1997...................................... $66,300 $ 2,256,200
1998...................................... 66,300 2,346,400
1999...................................... 33,100 2,199,100
2000...................................... -- 1,970,500
2001...................................... -- 1,500,400
2002 and thereafter....................... -- 2,718,800
------- -----------
Total minimum lease payments............ 165,700 $12,991,400
===========
Less: Amounts representing imputed interest... 40,700
-------
Present value of net minimum payments... 125,000
Less: Current portion......................... 41,600
-------
$83,400
=======
</TABLE>
The Company has entered into employment agreements with certain key
employees with initial terms of three years, subject to successive one year
renewals.
Litigation
The Company is party to various litigation arising in the ordinary course of
its business. It is management's opinion, after consultation with its legal
counsel, that none of the outcomes of these claims, whether individually or in
the aggregate, will have a material adverse effect on the Company's financial
position or results of operations.
5. STOCK OPTION AND PURCHASE AGREEMENTS:
The Company has entered into various stock option agreements with key
employees. The options granted under these agreements expire at the earlier of
termination of employment or ten years from the date of grant.
The Company has also instituted a stock option plan whereby the Board of
Directors, at its discretion, can award employees and outside directors
options to purchase shares of the Company's common stock. Options for
4,065,000 shares are authorized under the plan. The options granted to
employees under this plan vest over five years at a rate of 20% per year and
expire at the earlier of termination of employment or December 31, ten years
after the first vesting date. The options granted to outside directors will
vest ratably over a three year period, beginning one year after grant, and
will expire at the earlier of termination or ten years after the first vesting
date.
During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock Based Compensation," which defines a fair value based
method of accounting for an employee stock option or similar equity
instrument. This statement allows an entity to continue to measure
compensation cost for those
F-11
<PAGE>
RWD TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
plans using the method of accounting prescribed by the Accounting Principles
Board Opinion No. 25 ("APB No. 25"), "Accounting for Stock Issued to
Employees." Entities electing to remain with the accounting in APB No. 25 must
make pro forma footnote disclosures of net income and earnings per share, as
if the fair value based method of accounting defined in this Statement had
been applied.
The Company has elected to account for its stock-based compensation plans in
accordance with APB No. 25, under which no compensation cost has been
recognized. The Company has computed for pro forma disclosure purposes the
value of all compensatory options granted during 1995 and 1996, using the
Black-Scholes option pricing model as prescribed by SFAS No. 123. During 1995,
the Company issued noncompensatory stock options to its founding stockholders.
The following assumptions were used for grants:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Risk-free interest rate (range)........................ 5.4%-7.8% 6.2%-6.7%
Expected dividend yield................................ 0.0% 0.0%
Expected lives......................................... 5 years 5 years
Expected volatility.................................... 42.0% 42.0%
</TABLE>
Options were assumed to be exercised upon vesting for the purposes of this
valuation. Adjustments are made for options forfeited prior to vesting. Had
compensation costs for compensatory options been determined consistent with
SFAS No. 123, the Company's pro forma net income and earnings per share
information reflected on the accompanying statements of income would have been
reduced to the following "as adjusted" amounts:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Net Income:
As reported in pro forma information............... $3,918,100 $5,168,100
As adjusted........................................ $3,881,700 $5,038,800
Earnings Per Share:
As reported in pro forma information............... $0.32 $0.40
As adjusted........................................ $0.32 $0.39
</TABLE>
The Company's stock did not actively trade during 1995 or 1996.
The following table summarizes all stock option and purchase right activity
for the three years ended December 31, 1994, 1995 and 1996.
<TABLE>
<CAPTION>
KEY PARTY OPTION
AGREEMENTS EMPLOYEE PLAN EXERCISE PRICE
NUMBER OF SHARES NUMBER OF SHARES PER SHARE
---------------- ---------------- --------------
<S> <C> <C> <C>
Outstanding as of December
31, 1993................. 3,912,000 728,100 $ 0.67
Granted................. -- 557,100 0.67
Exercised............... -- (660) 0.67
Terminated.............. -- (147,000) 0.67
--------- ---------
Outstanding as of December
31, 1994................. 3,912,000 1,137,540 0.67
Granted................. 2,125,740 1,464,750 0.67-1.00
Exercised............... -- (450) 0.67
Terminated.............. (37,500) (298,590) 0.67-1.00
--------- ---------
Outstanding as of December
31, 1995................. 6,000,240 2,303,250 0.67-1.00
Granted................. -- 1,069,350 6.00
Exercised............... (10,080) (36,150) 0.67-1.00
Terminated.............. -- (132,450) 0.67-1.00
--------- ---------
Outstanding as of December
31, 1996................. 5,990,160 3,204,000 0.67-6.00
========= =========
</TABLE>
F-12
<PAGE>
RWD TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Weighted average fair value of options granted for the years ended December
31, 1995 and 1996 was $0.43 and $2.78, respectively.
In connection with the proposed IPO, certain stockholders intend to exercise
outstanding options held.
The Company adopted an Employee Stock Purchase Plan (the "Stock Purchase
Plan"), subject to stockholder approval. The Stock Purchase Plan is intended
to qualify as an "employee stock purchase plan" under Section 423 of the Code.
All regular full-time employees of the Company (including officers), and all
other employees whose customary employment is for more than 20 hours per week
are eligible to participate in the Stock Purchase Plan. Directors who are not
employees are not eligible. A maximum of 175,000 shares of the Company's
Common Stock are reserved for issuance under the Stock Purchase Plan and
available for purchase thereunder, subject to anti-dilution adjustments in the
event of certain changes in the capital structure of the Company.
6. RETIREMENT SAVINGS PLAN:
The Company has a Retirement Savings Plan (401(k) plan) whereby employees
may contribute up to the limits established by the Internal Revenue Service.
The Company, at the discretion of the Board of Directors, will match employee
contributions up to 15%. The Company contributed $498,800, $1,100,900 and
$1,102,400 to the plan during the years ended December 31, 1994, 1995 and
1996, respectively.
7. INCOME TAXES:
In connection with the Company's change in tax election, the Company will
record a deferred income tax liability and corresponding income tax expense
arising from a change in the Company's tax status and a change from the cash
basis to the accrual basis of accounting for tax purposes. Beginning with this
change, the Company will provide for deferred income taxes under the asset and
liability method of accounting. This method requires the recognition of
deferred income taxes based upon the tax consequences of "temporary
differences" by applying enacted statutory tax rates applicable to future
years to differences between the financial statements carrying amounts and the
tax basis of existing assets and liabilities.
A reconciliation of the statutory tax to the effective tax for the years
ended December 31, 1994, 1995 and 1996 is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Statutory tax (at 34%
rate).................... $ 1,350,700 $ 2,220,200 $ 2,928,600
State taxes, net of fed-
eral benefit............. 210,500 346,100 456,500
Effect of S corporation
income taxes............. (1,539,300) (2,455,100) (3,092,200)
Other..................... 37,900 57,300 72,000
----------- ----------- -----------
Provision for income
taxes.................. $ 59,800 $ 168,500 $ 364,900
=========== =========== ===========
</TABLE>
F-13
<PAGE>
DEDICATED TO HELPING CLIENTS COMPETE
BY FOCUSING ON END-USER PERFORMANCE
[PHOTO APPEARS HERE] PLANT FLOOR TRAINING
RWD provides performance-based training programs for
plant-floor workers at a large U.S. automobile
manufacturer. As a result of the company's efforts,
worker competency has increased while classroom time
and training costs have dramatically decreased.
[PHOTO APPEARS HERE] CALL CENTER SYSTEMS
RWD developed and deployed an easy-to-use room
reservation system for an international hotel chain
that annually answers 22 million calls for properties
worldwide. The new system significantly reduced
operator training time, time-to-competency, and
overall call handling time.
[PHOTO APPEARS HERE] ENTERPRISE-WIDE SOFTWARE IMPLEMENTATIONS
An international chemical company engaged RWD to
develop an on-line reference system, training and
documentation materials, and job aids for end users
of their SAP software, worldwide. These tools greatly
increased end-user productivity, reduced classroom
training time, and decreased time-to-competence.
[PHOTO APPEARS HERE] GLOBAL LEAN MANUFACTURING
A large automobile manufacturer asked RWD to apply
lean manufacturing principles to their European
engine production line to reduce supply system and
labor inefficiencies. Based on the Company's early
success and other services RWD provided to this
client, RWD is assisting the client in implementing
lean manufacturing concepts in all of its European
operations.
[PHOTO APPEARS HERE] CUSTOM INFORMATION SYSTEMS EMBEDDED FOR
"JUST-IN-TIME" ACCESS
RWD developed and deployed a "just-in-time"
information system for a major pulp and paper
manufacturer, designed to capture and share expert-
level knowledge with new plant-floor workers. This
Embedded Performance Support System (EPSS) is
designed to reduce plant downtime and improve overall
product quality.
[PHOTO APPEARS HERE] WORKFLOW PROCESS REDESIGN AND TRAINING
A major oil company asked RWD to develop task-
oriented operating manuals, procedures, and
performance-based training courses. RWD designed
process improvements to support the client's efforts
to increase refinery run times and decrease the
frequency and duration of unit shutdowns.
[PHOTO APPEARS HERE] OPERATION AND SAFETY DOCUMENT MANAGEMENT
RWD developed a sophisticated Electronic Document
Management System (EDMS) to help a consortium of
major oil companies manage more than 150,000
operation and safety documents. Document retrieval
times were reduced from approximately 10 minutes
to under one minute.
[LOGO OF RWD TECHNOLOGIES APPEARS HERE]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SHARES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN
WHICH THE OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAK-
ING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 10
Dividend Policy and Prior S Corporation Status............................ 11
Capitalization............................................................ 12
Dilution.................................................................. 13
Selected Financial Data................................................... 14
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 15
Business.................................................................. 22
Management................................................................ 32
Certain Transactions...................................................... 39
Principal Stockholders.................................................... 40
Description of Capital Stock.............................................. 41
Shares Eligible for Future Sale........................................... 44
Underwriting.............................................................. 45
Legal Matters............................................................. 46
Experts................................................................... 46
Additional Information.................................................... 46
Index to Financial Statements............................................. F-1
</TABLE>
---------------
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING) ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPEC-
TUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,000,000 SHARES
[LOGO OF RWD TECHNOLOGIES, INC.(R) APPEARS HERE]
COMMON STOCK
------------
PROSPECTUS
, 1997
------------
WILLIAM BLAIR & COMPANY
MONTGOMERY SECURITIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses in connection with this
Registration Statement. The Company will pay all expenses of the offering. All
of such expenses are estimates, other than the filing fees payable to the
Securities and Exchange Commission, NASD and Nasdaq.
<TABLE>
<S> <C>
Securities and Exchange Commission Filing Fee...................... $ 12,546
NASD Filing Fee.................................................... 4,640
Nasdaq Listing Fee................................................. 50,000
Printing Fees and Expenses......................................... *
Legal Fees and Expenses............................................ *
Directors' and Officers' Insurance Premium......................... *
Accounting Fees and Expenses....................................... *
Blue Sky Fees and Expenses......................................... *
Miscellaneous...................................................... *
--------
TOTAL............................................................ $985,000
========
</TABLE>
- --------
* To be completed in an amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Charter provides that, to the fullest extent that limitations
on the liability of directors and officers are permitted by the Maryland
General Corporation Law, no director or officer of the Company shall have any
liability to the Company or its stockholders for monetary damages. The
Maryland General Corporation Law provides that a corporation's charter may
include a provision which restricts or limits the liability of its directors
or officers to the corporation or its stockholders for money damages except:
(1) to the extent that it is provided that the person actually received an
improper benefit or profit in money, property or services, for the amount of
the benefit or profit in money, property or services actually received, or (2)
to the extent that a judgment or other final adjudication adverse to the
person is entered in a proceeding based on a finding in the proceeding that
the person's action, or failure to act, was the result of active and
deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding. The Company's Charter and By-Laws provide that the Company
shall indemnify and advance expenses to its currently acting and its former
directors to the fullest extent permitted by the Maryland General Corporation
Law and that the Company shall indemnify and advance expenses to its officers
to the same extent as its directors and to such further extent as is
consistent with law.
The Charter and By-Laws provides that the Company will indemnify its
directors and officers and may indemnify employees or agents of the Company to
the fullest extent permitted by law against liabilities and expenses incurred
in connection with litigation in which they may be involved because of their
offices with the Company. In addition, the Company's Charter provides that its
directors and officers will not be liable to stockholders for money damages,
except in limited instances. However, nothing in the Charter or By-Laws of the
Company protects or indemnifies a director, officer, employee or agent against
any liability to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. To the extent that a director has been
successful in defense of any proceeding, the Maryland General Corporation Law
provides that he shall be indemnified against reasonable expenses incurred in
connection therewith.
The form of underwriting agreement, filed as Exhibit 1.1 hereto, contains
provisions by which the Underwriters agree to indemnify the Registrant and
each officer, director and controlling person of the Registrant against
certain liabilities.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this registration statement, the
Company has issued shares of Common Stock in the following transactions, each
of which was intended to be exempt from the registration requirements of the
Securities Act of 1933, as amended, by virtue of Section 4(2) thereunder. No
underwriters were involved in connection with the sales of these securities.
From January 1, 1994 to the present, the Company has granted options to
purchase a total of 5,216,940 shares of Common Stock at exercise prices
ranging from $.67 per share to $6.00 per share.
From January 1, 1994 to the present, 11 employees of the Company have
exercised stock options for 107,310 shares of Common Stock for aggregate cash
payments of $75,415. In addition, the Company will issue 5,926,727 shares of
Common Stock to the Company's founding stockholders upon the Concurrent
Exercises for an aggregate cash payment of approximately $4.2 million.
ITEM 16. EXHIBITS
(a)
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.01 Form of Underwriting Agreement
3.01 Amended and Restated Charter
3.02 Amended and Restated By-Laws
4.01 Specimen Common Stock Certificate
5.01 Opinion of Piper & Marbury L.L.P.*
10.01 Maryland Full-Service Office Lease between the Company and
Columbia Management, Inc., dated as of January 1, 1994, as
amended*
10.02 Chrysler Corporation General Terms & Conditions/Clause Manual--
Facilities and Material Purchasing--General Terms and
Conditions*
10.03 Letter Agreement from First National Bank of Maryland to the
Company, dated February 27, 1996 regarding $7.5 million
unsecured line of credit*
10.04 Amended and Restated Equity Participation Plan
10.05 Employee Stock Purchase Plan
23.01 Consent of Arthur Andersen LLP
23.02 Consent of Piper & Marbury L.L.P. (included in Exhibit 5.01)*
23.03 Consent of Jerry P. Malec*
24.01 Power of Attorney*
27.01 Financial Data Schedule*
</TABLE>
- --------
* Filed with the Registration Statement on February 14, 1997.
(b) Financial Statement Schedules:
<TABLE>
<CAPTION>
SCHEDULE
NUMBER DESCRIPTION PAGE NO.
- -------- ----------- --------
<S> <C> <C>
II Valuation and Qualifying Accounts S-2
</TABLE>
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in this Registration Statement
or otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
persons of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT OR AMENDMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN COLUMBIA, MARYLAND ON
THIS 27TH DAY OF MARCH, 1997.
RWD Technologies, Inc.
/s/ Dr. Robert W. Deutsch
By __________________________________
DR. ROBERT W. DEUTSCH, CHAIRMAN
AND CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Dr. Robert W. Deutsch Chief Executive
- ------------------------------------- Officer and March 27, 1997
DR. ROBERT W. DEUTSCH Chairman of the
Board of Directors
(Principal
Executive Officer)
/s/ John H. Beakes President, Chief
- ------------------------------------- Operating Officer March 27, 1997
JOHN H. BEAKES and Director
/s/ Ronald E. Holtz Vice President,
- ------------------------------------- Chief Financial March 27, 1997
RONALD E. HOLTZ Officer and
Director (Principal
Financial and
Accounting Officer)
II-4
<PAGE>
SIGNATURE TITLE DATE
Director
/s/ John E. Lapolla* March 27, 1997
- -------------------------------------
JOHN E. LAPOLLA
Director
/s/ Kenneth J. Rebeck* March 27, 1997
- -------------------------------------
KENNETH J. REBECK
Director
/s/ Jeffrey W. Wendel* March 27, 1997
- -------------------------------------
JEFFREY W. WENDEL
Director
/s/ David J. Deutsch* March 27, 1997
- -------------------------------------
DAVID J. DEUTSCH
* By: ____/s/ John H. Beake_____s
JOHN H. BEAKES ATTORNEY-IN-FACT
II-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
RWD Technologies, Inc.:
We have audited in accordance with generally accepted auditing standards,
the financial statements of RWD Technologies, Inc., a Maryland corporation,
included in this registration statement and have issued our report thereon
dated January 31, 1997. Our audit was made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The schedule
listed in the accompanying index is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Baltimore, Maryland
Arthur Andersen LLP
January 31, 1997
S-1
<PAGE>
RWD TECHNOLOGIES, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING CHARGED TO END OF
OF YEAR EXPENSE DEDUCTIONS YEAR
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1994....... $140,300 $163,300 $ -- $303,600
Year ended December 31, 1995....... 303,600 108,700 -- 412,300
Year ended December 31, 1996....... 412,300 -- 28,600 383,700
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO DESCRIPTION NUMBERED PAGE
---------- ----------- -------------
<C> <S> <C>
1.01 Form of Underwriting Agreement
3.01 Amended and Restated Charter
3.02 Amended and Restated Bylaws
4.01 Specimen Common Stock Certificate
5.01 Opinion of Piper & Marbury L.L.P.*
10.01 Maryland Full-Service Office Lease between the
Company and Columbia Management, Inc., dated as of
January 1, 1994, as amended*
10.02 Chrysler Corporation General Terms &
Conditions/Clause Manual--Facilities and Material
Purchasing--General Terms and Conditions*
10.03 Letter Agreement from First National Bank of
Maryland to the Company, dated February 27, 1996
regarding $7.5 million unsecured line of credit*
10.04 Amended and Restated Equity Participation Plan
10.05 Employee Stock Purchase Plan
23.01 Consent of Arthur Andersen LLP
23.02 Consent of Piper & Marbury L.L.P. (included in
Exhibit 5.01)*
23.03 Consent of Jerry P. Malec*
24.01 Power of Attorney*
27.01 Financial Data Schedule*
</TABLE>
- --------
* Filed with the Registration Statement on February 14, 1997.
<PAGE>
EXHIBIT 1.01
RWD TECHNOLOGIES, INC.
_________ Shares Common Stock/1/
UNDERWRITING AGREEMENT
______________, 1997
William Blair & Company, L.L.C.
Montgomery Securities
As Representatives of the Several
Underwriters Named in Schedule A
c/o William Blair & Company, L.L.C.
222 West Adams Street
Chicago, Illinois 60606
Ladies and Gentlemen:
SECTION 1. Introductory. RWD Technologies, Inc. ("Company"), a Maryland
corporation, has an authorized capital stock consisting of 50,000,000 shares of
Common Stock, $.10 par value ("Common Stock"), of which _____________ shares
were outstanding as of _____________ __, 1997 and of which such shares of Common
Stock that are authorized and unissued may be, but as of such date have not
been, classified by the Company's Board of Directors into shares of Preferred
Stock. The Company proposes to issue and sell __________ shares of its
authorized but unissued Common Stock (the "Firm Shares") to the several
underwriters named in Schedule A as it may be amended by the Pricing Agreement
hereinafter defined ("Underwriters"), who are acting severally and not jointly.
In addition, the Company and certain stockholders of the Company (referred to as
the "Selling Stockholders" and named in Schedule B) propose to grant to the
Underwriters an option to purchase up to _________ additional shares of Common
Stock ("Option Shares") as provided in Section 5 hereof. The Firm Shares and,
to the extent such option is exercised, the Option Shares, are hereinafter
collectively referred to as the "Shares."
You have advised the Company and the Selling Stockholders that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon as you deem advisable after the registration statement
hereinafter referred to becomes effective, if it has not yet become effective,
and the Pricing Agreement hereinafter defined has been executed and delivered.
Prior to the purchase and public offering of the Shares by the several
Underwriters, the Company, the Selling Stockholders and the Representatives,
acting on behalf of the several Underwriters, shall enter into an agreement
substantially in the form of Exhibit A hereto ("Pricing Agreement"). The
Pricing Agreement may take the form of an exchange of any standard form of
written telecommunication between the Company, the Selling Stockholders and the
Representatives and shall specify such applicable
- ---------------------
/1/ Plus an option to acquire up to ______________________ additional shares to
cover overallotments.
1
<PAGE>
information as is indicated in Exhibit A hereto. The offering of the Shares
will be governed by this Agreement, as supplemented by the Pricing Agreement.
From and after the date of the execution and delivery of the Pricing Agreement,
this Agreement shall be deemed to incorporate the Pricing Agreement.
The Company and each of the Selling Stockholders hereby confirm their
agreements with the Underwriters as follows:
SECTION 2. Representations and Warranties of the Company. The Company
represents and warrants to the several Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-_______) and a
related preliminary prospectus with respect to the Shares have been
prepared and filed with the Securities and Exchange Commission
("Commission") by the Company in conformity with the requirements of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "1933 Act;" unless indicated to
the contrary, all references herein to specific rules are rules promulgated
under the 1933 Act); and the Company has so prepared and has filed such
amendments thereto, if any, and such amended preliminary prospectuses as
may have been required to the date hereof and will file such additional
amendments thereto and such amended prospectuses as may hereafter be
required. There have been or will promptly be delivered to you three
signed copies of such registration statement and amendments, three copies
of each exhibit filed therewith, and conformed copies of such registration
statement and amendments (but without exhibits) and of the related
preliminary prospectus or prospectuses and final forms of prospectus for
each of the Underwriters.
Such registration statement (as amended, if applicable) at the
time it becomes effective and the prospectus constituting a part thereof
(including the information, if any, deemed to be part thereof pursuant to
Rule 430A(b) and/or Rule 434), as from time to time amended or
supplemented, are hereinafter referred to as the "Registration Statement,"
and the "Prospectus," respectively, except that if any revised prospectus
shall be provided to the Underwriters by the Company for use in connection
with the offering of the Shares which differs from the Prospectus on file
at the Commission at the time the Registration Statement became or becomes
effective (whether or not such revised prospectus is required to be filed
by the Company pursuant to Rule 424(b)), the term Prospectus shall refer to
such revised prospectus from and after the time it was provided to the
Underwriters for such use. If the Company elects to rely on Rule 434 of
the 1933 Act, all references to "Prospectus" shall be deemed to include,
without limitation, the form of prospectus and the term sheet, taken
together, provided to the Underwriters by the Company in accordance with
Rule 434 of the 1933 Act ("Rule 434 Prospectus"). Any registration
statement (including any amendment or supplement thereto or information
which is deemed part thereof) filed by the Company under Rule 462(b) ("Rule
462(b) Registration Statement") shall be deemed to be part of the
"Registration Statement" as defined herein, and any prospectus (including
any amendment or supplement thereto or information which is deemed part
thereof) included in such registration statement shall be deemed to be part
of the "Prospectus", as defined herein, as appropriate. The Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission thereunder are hereinafter collectively referred to as the
"Exchange Act."
(b) The Commission has not issued any order preventing or suspending
the use of any preliminary prospectus, and each preliminary prospectus has
conformed in all material respects with the requirements of the 1933 Act
2
<PAGE>
and, as of its date, has not included any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein not misleading; and when the Registration Statement became or
becomes effective, and at all times subsequent thereto, up to the First
Closing Date or the Second Closing Date hereinafter defined, as the case
may be, the Registration Statement, including the information deemed to be
part of the Registration Statement at the time of effectiveness pursuant to
Rule 430A(b), if applicable, and the Prospectus and any amendments or
supplements thereto, contained or will contain all statements that are
required to be stated therein in accordance with the 1933 Act and in all
material respects conformed or will in all material respects conform to the
requirements of the 1933 Act, and neither the Registration Statement nor
the Prospectus, nor any amendment or supplement thereto, included or will
include any untrue statement of a material fact or omitted or will omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the Company
makes no representation or warranty as to information contained in or
omitted from any preliminary prospectus, the Registration Statement, the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of any Underwriter through the Representatives specifically for use
in the preparation thereof.
(c) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Maryland,
with corporate power and authority to own its properties and conduct its
business as described in the Prospectus; the Company is duly qualified to
do business as a foreign corporation under the corporation law of, and is
in good standing as such in, each jurisdiction in which it owns or leases
substantial properties, has an office, or in which substantial business is
conducted and such qualification is required except in any such case where
the failure to so qualify or be in good standing would not have a material
adverse effect upon the Company; and no proceeding of which the Company has
knowledge has been instituted in any such jurisdiction, revoking, limiting
or curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification.
(d) The issued and outstanding shares of capital stock of the Company
as set forth in the Prospectus have been duly authorized and validly
issued, are fully paid and nonassessable, and conform to the description
thereof contained in the Prospectus.
(e) The Shares to be sold by the Company have been duly authorized and
when issued, delivered and paid for pursuant to this Agreement, will be
validly issued, fully paid and nonassessable, and will conform to the
description thereof contained in the Prospectus.
(f) The making and performance by the Company of this Agreement and
the Pricing Agreement have been duly authorized by all necessary corporate
action and will not violate any provision of the Company's charter or
bylaws and will not result in the breach, or be in contravention, of any
provision of any agreement, franchise, license, indenture, mortgage, deed
of trust, or other instrument to which the Company is a party or by which
the Company or its property may be bound or affected, or any order, rule or
regulation applicable to the Company of any court or regulatory body,
administrative agency or other governmental body having jurisdiction over
the Company or property, or any order of any court or governmental agency
or authority entered in any proceeding to which the Company was or is now a
party or by which it is bound. No consent, approval, authorization or
3
<PAGE>
other order of any court, regulatory body, administrative agency or other
governmental body is required for the execution and delivery of this
Agreement or the Pricing Agreement or the consummation of the transactions
contemplated herein or therein, except for compliance with the 1933 Act and
blue sky laws applicable to the public offering of the Shares by the
several Underwriters and clearance of such offering with the
National Association of Securities Dealers, Inc. ("NASD"). This Agreement
has been duly executed and delivered by the Company.
(g) The accountants who have expressed their opinions with respect to
certain of the financial statements and schedules included in the
Registration Statement are independent accountants as required by the 1933
Act.
(h) The financial statements and schedules of the Company included in
the Registration Statement present fairly the financial position of the
Company as of the respective dates of such financial statements, and the
results of operations and cash flows of the Company for the respective
periods covered thereby, all in conformity with generally accepted
accounting principles consistently applied throughout the periods involved,
except as disclosed in the Prospectus; and the supporting schedules
included in the Registration Statement present fairly the information
required to be stated therein. The financial information set forth in the
Prospectus under "Selected Financial Data" presents fairly on the basis
stated in the Prospectus, the information set forth therein.
The pro forma information included in the Prospectus present
fairly the information shown therein, have been prepared in accordance with
generally accepted accounting principles and the Commission's rules and
guidelines with respect to pro forma information, have been properly
compiled on the pro forma basis described therein, and, in the opinion of
the Company, the assumptions used in the preparation thereof are reasonable
and the adjustments used therein are appropriate under the circumstances.
(i) The Company is not in violation of its charter or in default under
any consent decree, or in default with respect to any material provision of
any lease, loan agreement, franchise, license, permit or other contract
obligation to which it is a party; and there does not exist any state of
facts which constitutes an event of default as defined in such documents or
which, with notice or lapse of time or both, would constitute such an event
of default, in each case, except for defaults which neither singly nor in
the aggregate are material to the Company.
(j) There are no material legal or governmental proceedings pending,
or to the Company's knowledge, threatened to which the Company is or may be
a party or of which material property owned or leased by the Company is or
may be the subject, or related to environmental or discrimination matters
which are not disclosed in the Prospectus, or which question the validity
of this Agreement or the Pricing Agreement or any action taken or to be
taken pursuant hereto or thereto.
(k) There are no holders of securities of the Company having rights to
registration thereof or preemptive rights to purchase Common Stock.
(l) The Company has good and marketable title to all the properties
and assets reflected as owned in the financial statements hereinabove
described (or elsewhere in the Prospectus), subject to no lien, mortgage,
4
<PAGE>
pledge, charge or encumbrance of any kind except those, if any, reflected
in such financial statements (or elsewhere in the Prospectus) or which are
not material to the Company. The Company holds its leased properties which
are material to the Company under valid and binding leases.
(m) The Company has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares.
(n) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as
contemplated by the Prospectus, the Company has not incurred any material
liabilities or obligations, direct or contingent, nor entered into any
material transactions not in the ordinary course of business and there has
not been any material adverse change in its condition (financial or
otherwise) or results of operations nor any material change in its capital
stock, short-term debt or long-term debt.
(o) The Company agrees not to sell, contract to sell or otherwise
dispose of any Common Stock or securities convertible into Common Stock
(except Common Stock issued pursuant to currently outstanding options,
warrants or convertible securities) for a period of 180 days after this
Agreement becomes effective without the prior written consent of the
Representatives. The Company has obtained agreements in the form of
Exhibit B hereto from each of its officers and directors and from certain
of its stockholders who collectively own ________ shares of Common Stock.
(p) There is no material document of a character required to be
described in the Registration Statement or the Prospectus or to be filed as
an exhibit to the Registration Statement which is not described or filed as
required.
(q) The Company owns and possesses all right, title and interest in
and to, or has duly licensed from third parties, all patents, patent
rights, trade secrets, inventions, know-how, trademarks, trade names,
copyrights, service marks and other proprietary rights ("Trade Rights")
material to the business of the Company. The Company has not received any
notice of infringement, misappropriation or conflict from any third party
as to such material Trade Rights which has not been resolved or disposed
of, and the Company has not infringed, misappropriated or otherwise
conflicted with material Trade Rights of any third parties, which
infringement, misappropriation or conflict would have a material adverse
effect upon the condition (financial or otherwise) or results of operations
of the Company.
(r) The conduct of the business of the Company is in compliance in all
respects with applicable federal, state, local and foreign laws and
regulations, except where the failure to be in compliance would not have a
material adverse effect upon the condition (financial or otherwise) or
results of operations of the Company.
(s) All offers and sales of the Company's capital stock prior to the
date hereof were at all relevant times exempt from the registration
requirements of the 1933 Act and were duly registered with or the subject
of an available exemption from the registration requirements of the
applicable state securities or blue sky laws.
5
<PAGE>
(t) The Company has filed all necessary federal and state income and
franchise tax returns and has paid all taxes shown as due thereon, and
there is no tax deficiency that has been, or to the knowledge of the
Company might be, asserted against the Company or any of its properties or
assets that would or could be expected to have a material adverse affect
upon the condition (financial or otherwise) or results of operations of the
Company.
(u) The Company has filed a registration statement pursuant to Section
12(g) of the Exchange Act to register the Common Stock thereunder, has
filed an application to list the Shares on the Nasdaq National Market, and
has received notification that the listing has been approved, subject to
notice of issuance or sale of the Shares, as the case may be.
(v) The Company is not, and does not intend to conduct its business in
a manner in which it would become, an "investment company" as defined in
Section 3(a) of the Investment Company Act of 1940, as amended ("Investment
Company Act").
(w) The Company has made a timely and valid election to be treated as
an "S corporation" for federal and state law tax purposes effective on
__________ __, 19__ and, prior to the First Closing Date, as hereinafter
defined, such S corporation election has not been terminated or revoked
pursuant to Section 1362 of the Internal Revenue Code of 1986, as amended,
for the periods ended on or before ___________ __, 1997.
(x) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-
198, An Act Relating to Disclosure of Doing Business with Cuba, and the
Company further agrees that if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba after
the date the Registration Statement becomes or has become effective with
the Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported in
the Prospectus, if any, concerning the Company's business with Cuba or with
any person or affiliate located in Cuba changes in any material way, the
Company will provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department.
SECTION 3. Representations, Warranties and Covenants of the Selling
Stockholders.
(a) Each Selling Stockholder severally represents and warrants to, and
agrees with, the Company and the several Underwriters that:
(i) Such Selling Stockholder has, and on the First Closing
Date or the Second Closing Date hereinafter defined, as the case may
be, will have, valid marketable title to the Shares proposed to be
sold by such Selling Stockholder hereunder on such date and full
right, power and authority to enter into this Agreement and the
Pricing Agreement and to sell, assign, transfer and deliver such
Shares hereunder, free and clear of all voting trust arrangements,
liens, encumbrances, equities, claims and community property rights;
and upon delivery of and payment for such Shares hereunder, the
Underwriters will acquire valid marketable title thereto, free and
clear of all voting trust arrangements, liens, encumbrances, equities,
claims and community property rights.
6
<PAGE>
(ii) Such Selling Stockholder has not taken and will not
take, directly or indirectly, any action designed to or which might be
reasonably expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Shares.
(iii) Such Selling Stockholder agrees with the Company and
the Underwriters not to sell, contract to sell or otherwise dispose of
any Common Stock or securities convertible into Common Stock for a
period of 180 days after this Agreement becomes effective without the
prior written consent of the Representatives.
(b) Each of the Selling Stockholders represents and warrants to, and agrees
with, the Underwriters to the same effect as the representations and warranties
of the Company set forth in Section 2 of this Agreement.
In order to document the Underwriter's compliance with the reporting and
withholding provisions of the Internal Revenue Code of 1986, as amended, with
respect to the transactions herein contemplated, each of the Selling
Stockholders agrees to deliver to you prior to or on the First Closing Date, as
hereinafter defined, a properly completed and executed United States Treasury
Department Form W-8 or W-9 (or other applicable form of statement specified by
Treasury Department regulations in lieu thereof).
SECTION 4. Representations and Warranties of the Underwriters. The
Representatives, on behalf of the several Underwriters, represent and warrant to
the Company and the Selling Stockholders that the information set forth (a) on
the cover page of the Prospectus with respect to price, underwriting discount
and terms of the offering and (b) under "Underwriting" in the Prospectus was
furnished to the Company by and on behalf of the Underwriters for use in
connection with the preparation of the Registration Statement and is correct and
complete in all material respects.
SECTION 5. Purchase, Sale and Delivery of Shares. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters named in Schedule A hereto, and the Underwriters agree, severally
and not jointly, to purchase from the Company _________ Firm Shares from the
Company at the price per share set forth in the Pricing Agreement. The
obligation of each Underwriter to the Company shall be to purchase from the
Company that number of full shares which (as nearly as practicable, as
determined by you) bears to ______________, the same proportion as the number of
Shares set forth opposite the name of such Underwriter in Schedule A hereto
bears to the total number of Firm Shares to be purchased by all Underwriters
under this Agreement. The initial public offering price and the purchase price
shall be set forth in the Pricing Agreement.
At 9:00 A.M., Chicago Time, on the fourth business day, if permitted under
Rule 15c6-1 under the Exchange Act, (or the third business day if required under
Rule 15c6-1 under the Exchange Act or unless postponed in accordance with the
provisions of Section 12) following the date the Registration Statement becomes
effective (or, if the Company has elected to rely upon Rule 430A, the fourth
business day, if permitted under Rule 15c6-1 under the Exchange Act, (or the
third business day if required under Rule 15c6-1 under the Exchange Act) after
execution of the Pricing Agreement), or such other time not later than ten
business days after such date as shall be agreed upon by the Representatives and
the Company, the Company will deliver to you at the offices of counsel for the
Underwriters or through the facilities of The Depository Trust Company for the
7
<PAGE>
accounts of the several Underwriters, certificates representing the Firm Shares
to be sold by it against payment of the purchase price therefor by delivery of
federal or other immediately available funds, by wire transfer or otherwise, to
the Company. Such time of delivery and payment is herein referred to as the
"First Closing Date." The certificates for the Firm Shares so to be delivered
will be in such denominations and registered in such names as you request by
notice to the Company prior to 10:00 A.M., Chicago Time, on the second business
day preceding the First Closing Date, and will be made available at the
Company's expense for checking and packaging by the Representatives at 10:00
A.M., Chicago Time, on the business day preceding the First Closing Date.
Payment for the Firm Shares so to be delivered shall be made at the time and in
the manner described above at the offices of counsel for the Underwriters.
In addition, on the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company and the Selling Stockholders hereby grant an option to the several
Underwriters to purchase, severally and not jointly, up to an aggregate of
_______ Option Shares, at the same purchase price per share to be paid for the
Firm Shares, for use solely in covering any overallotments made by the
Underwriters in the sale and distribution of the Firm Shares. The option granted
hereunder may be exercised at any time (but not more than once) within 30 days
after the date of the initial public offering upon notice by you to the Company
and the Selling Stockholder setting forth the aggregate number of Option Shares
as to which the Underwriters are exercising the option, the names and
denominations in which the certificates for such shares are to be registered and
the time and place at which such certificates will be delivered. Such time of
delivery (which may not be earlier than the First Closing Date), being herein
referred to as the "Second Closing Date," shall be determined by you, but if at
any time other than the First Closing Date, shall not be earlier than three nor
later than ten full business days after delivery of such notice of exercise. The
number of Option Shares to be purchased from the Company and each Selling
Stockholder are set forth in Schedule B hereto. If less than all Option Shares
are to be purchased, the Underwriters shall, severally and not jointly, first
purchase from each Selling Stockholder the number of shares set forth opposite
each Selling Stockholder's name in Schedule B hereto to the extent of the number
of Option Shares with respect to which the option is being exercised (or if the
total number of Option Shares with respect to which the option is being
exercised is less than the sum of the number of shares set forth opposite each
Selling Stockholder's name in Schedule B hereto, then the number of Option
Shares to be purchased from each Selling Stockholder shall be in the same
proportions as the number of Option Shares to be sold by each bears to the sum
of the number of Option Shares set forth opposite each such Selling
Stockholder's name in Schedule B hereto), and then shall, severally and not
jointly, purchase from the Company any remaining number of shares with respect
to which the option is being exercised. The number of Option Shares to be
purchased by each Underwriter shall be determined by multiplying the number of
Option Shares to be sold by the Company and the Selling Stockholders pursuant to
such notice of exercise by a fraction, the numerator of which is the number of
Firm Shares to be purchased by such Underwriter as set forth opposite its name
in Schedule A and the denominator of which is the total number of Firm Shares
(subject to such adjustments to eliminate any fractional share purchases as you
in your absolute discretion may make). Certificates for the Option Shares will
be made available at the Company's expense for checking and packaging at 10:00
A.M., Chicago Time, on the business day preceding the Second Closing Date. The
manner of payment for and delivery of the Option Shares shall be the same as for
the Firm Shares as specified in the preceding paragraph.
You have advised the Company and the Selling Stockholders that each
Underwriter has authorized you to accept delivery of its Shares, to make payment
and to receipt therefor. You, individually and not as the Representatives of
the Underwriters, may make payment for any Shares to be purchased by any
Underwriter whose funds shall not have been received by you by the First Closing
8
<PAGE>
Date or the Second Closing Date, as the case may be, for the account of such
Underwriter, but any such payment shall not relieve such Underwriter from any
obligation hereunder.
SECTION 6. Covenants of the Company. The Company covenants and agrees
that:
(a) The Company will advise you and the Selling Stockholders promptly
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the institution of any
proceedings for that purpose, or of any notification of the suspension of
qualification of the Shares for sale in any jurisdiction or the initiation
or threatening of any proceedings for that purpose, and will also advise
you and the Selling Stockholders promptly of any request of the Commission
for amendment or supplement of the Registration Statement, of any
preliminary prospectus or of the Prospectus, or for additional information.
(b) The Company will give you and the Selling Stockholders notice of
its intention to file or prepare any amendment to the Registration
Statement (including any post-effective amendment) or any Rule 462(b)
Registration Statement or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Shares which differs
from the prospectus on file at the Commission at the time the Registration
Statement became or becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) and any term
sheet as contemplated by Rule 434) and will furnish you and the Selling
Stockholders with copies of any such amendment or supplement a reasonable
amount of time prior to such proposed filing or use, as the case may be,
and will not file any such amendment or supplement or use any such
prospectus to which you or counsel for the Underwriters shall reasonably
object.
(c) If the Company elects to rely on Rule 434 of the 1933 Act, the
Company will prepare a term sheet that complies with the requirements of
Rule 434. If the Company elects not to rely on Rule 434, the Company will
provide the Underwriters with copies of the form of prospectus, in such
numbers as the Underwriters may reasonably request, and file with the
Commission such prospectus in accordance with Rule 424(b) of the 1933 Act
by the close of business in New York City on the second business day
immediately succeeding the date of the Pricing Agreement. If the Company
elects to rely on Rule 434, the Company will provide the Underwriters with
copies of the form of Rule 434 Prospectus, in such numbers as the
Underwriters may reasonably request, by the close of business in New York
on the business day immediately succeeding the date of the Pricing
Agreement.
(d) If at any time when a prospectus relating to the Shares is
required to be delivered under the 1933 Act any event occurs as a result of
which the Prospectus, including any amendments or supplements, would
include an untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the
Prospectus, including any amendments or supplements thereto and including
any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Shares which differs
from the prospectus on file with the Commission at the time of
effectiveness of the Registration Statement, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) to comply with
the 1933 Act, the Company promptly will advise you thereof and will
promptly prepare and file with the Commission an amendment or supplement
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which will correct such statement or omission or an amendment which will
effect such compliance; and, in case any Underwriter is required to deliver
a prospectus nine months or more after the effective date of the
Registration Statement, the Company upon request, but at the expense of
such Underwriter, will prepare promptly such prospectus or prospectuses as
may be necessary to permit compliance with the requirements of Section
10(a)(3) of the 1933 Act.
(e) The Company will not, prior to the earlier of the Second Closing
Date or termination or expiration of the related option, incur any
liability or obligation, direct or contingent, or enter into any material
transaction, other than in the ordinary course of business, except as
contemplated by the Prospectus.
(f) The Company will not acquire any capital stock of the Company
prior to the earlier of the Second Closing Date or termination or
expiration of the related option nor will the Company declare or pay any
dividend or make any other distribution upon the Common Stock payable to
stockholders of record on a date prior to the earlier of the Second Closing
Date or termination or expiration of the related option, except in either
case as contemplated by the Prospectus.
(g) Not later than ______________, 1998, the Company will make
generally available to its security holders an earnings statement (which
need not be audited) covering a period of at least 12 months beginning
after the effective date of the Registration Statement, which will satisfy
the provisions of the last paragraph of Section 11(a) of the 1933 Act.
(h) During such period as a prospectus is required by law to be
delivered in connection with offers and sales of the Shares by an
Underwriter or dealer, the Company will furnish to you at its expense,
subject to the provisions of subsection (d) hereof, copies of the
Registration Statement, the Prospectus, each preliminary prospectus and all
amendments and supplements to any such documents in each case as soon as
available and in such quantities as you may reasonably request, for the
purposes contemplated by the 1933 Act.
(i) The Company will cooperate with the Underwriters in qualifying or
registering the Shares for sale under the blue sky laws of such
jurisdictions as you designate, and will continue such qualifications in
effect so long as reasonably required for the distribution of the Shares.
The Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any such jurisdiction where
it is not currently qualified or where it would be subject to taxation as a
foreign corporation.
(j) During the period of five years hereafter, the Company will
furnish you and each of the other Underwriters with a copy (i) as soon as
practicable after the filing thereof, of each report filed by the Company
with the Commission, any securities exchange or the NASD; (ii) as soon as
practicable after the release thereof, of each material press release in
respect of the Company; and (iii) as soon as available, of each report of
the Company mailed to stockholders.
(k) The Company will use the net proceeds received by it from the sale
of the Shares being sold by it in the manner specified in the Prospectus.
(l) If, at the time of effectiveness of the Registration Statement,
any information shall have been omitted therefrom in reliance upon Rule
430A and/or Rule 434, then immediately following the execution of the
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Pricing Agreement, the Company will prepare, and file or transmit for
filing with the Commission in accordance with such Rule 430A, Rule 424(b)
and/or Rule 434, copies of an amended Prospectus, or, if required by such
Rule 430A and/or Rule 434, a post-effective amendment to the Registration
Statement (including an amended Prospectus), containing all information so
omitted. If required, the Company will prepare and file, or transmit for
filing, a Rule 462(b) Registration Statement not later than the date of the
execution of the Pricing Agreement. If a Rule 462(b) Registration
Statement is filed, the Company shall make payment of, or arrange for
payment of, the additional registration fee owing to the Commission
required by Rule 111.
(m) The Company will comply with all registration, filing and
reporting requirements of the Exchange Act and the Nasdaq National Market
and will file with the Commission in a timely manner all reports on Form SR
required by Rule 463 and will furnish you copies of any such reports as
soon as practicable after the filing thereof.
(n) The Company will not file with the Commission any registration
statement registering any options or shares that have been or may be
granted or issued, as the case may be, under its stock option plan(s),
including without limitation its Amended and Restated Equity Participation
Plan, until at least 90 days after this Agreement becomes effective without
the prior written consent of the Representatives and will not file with the
Commission any registration statement registering any shares that have been
or may be issued under its stock purchase plan(s), including without
limitation its Employee Stock Purchase Plan, until at least 180 days after
this Agreement becomes effective without the prior written consent of the
Representatives.
SECTION 7. Payment of Expenses. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective as to
all of its provisions or is terminated, the Company agrees to pay (i) all costs,
fees and expenses (other than legal fees and disbursements of counsel for the
Underwriters and the expenses incurred by the Underwriters) incurred in
connection with the performance of the Company's obligations hereunder,
including without limiting the generality of the foregoing, all fees and
expenses of legal counsel for the Company and of the Company's independent
accountants, all costs and expenses incurred in connection with the preparation,
printing, filing and distribution of the Registration Statement, each
preliminary prospectus and the Prospectus (including all exhibits, financial
statements and financial statement schedules) and all amendments and supplements
provided for herein, this Agreement, the Pricing Agreement and the Blue Sky
Memorandum, (ii) all costs, fees and expenses (including legal fees not to
exceed $_____________ and disbursements of counsel for the Underwriters)
incurred by the Underwriters in connection with qualifying or registering all or
any part of the Shares for offer and sale under blue sky laws, including the
preparation of a blue sky memorandum relating to the Shares and clearance of
such offering with the NASD; and (iii) all fees and expenses of the Company's
transfer agent, printing of the certificates for the Shares and all transfer
taxes, if any, with respect to the sale and delivery of the Shares to the
several Underwriters.
The provisions of this Section shall not affect any agreement which the
Company and the Selling Stockholders may make for the allocation or sharing of
such expenses and costs.
SECTION 8. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Firm Shares
on the First Closing Date and the Option Shares on the Second Closing Date shall
be subject to the accuracy of the representations and warranties on the part of
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the Company and the Selling Stockholders herein set forth as of the date hereof
and as of the First Closing Date or the Second Closing Date, as the case may be,
to the accuracy of the statements of officers of the Company made pursuant to
the provisions hereof, to the performance by the Company and the Selling
Stockholders of their respective obligations hereunder, and to the following
additional conditions:
(a) The Registration Statement shall have become effective either
prior to the execution of this Agreement or not later than 1:00 P.M.,
Chicago Time, on the first full business day after the date of this
Agreement, or such later time as shall have been consented to by you but in
no event later than 1:00 P.M., Chicago Time, on the third full business day
following the date hereof; and prior to the First Closing Date or the
Second Closing Date, as the case may be, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending
or, to the knowledge of the Company, the Selling Stockholders or you, shall
be contemplated by the Commission. If the Company has elected to rely upon
Rule 430A and/or Rule 434, the information concerning the initial public
offering price of the Shares and price-related information shall have been
transmitted to the Commission for filing pursuant to Rule 424(b) within the
prescribed period and the Company will provide evidence satisfactory to the
Representatives of such timely filing (or a post-effective amendment
providing such information shall have been filed and declared effective in
accordance with the requirements of Rules 430A and 424(b)). If a Rule
462(b) Registration Statement is required, such Registration Statement
shall have been transmitted to the Commission for filing and become
effective within the prescribed time period and, prior to the First Closing
Date, the Company shall have provided evidence of such filing and
effectiveness in accordance with Rule 462(b).
(b) The Shares shall have been qualified for sale under the blue sky
laws of such states as shall have been specified by the Representatives.
(c) The legality and sufficiency of the authorization, issuance and
sale or transfer and sale of the Shares hereunder, the validity and form of
the certificates representing the Shares, the execution and delivery of
this Agreement and the Pricing Agreement, and all corporate proceedings and
other legal matters incident thereto, and the form of the Registration
Statement and the Prospectus (except the financial statements and financial
statement schedules) shall have been approved by counsel for the
Underwriters exercising reasonable judgment.
(d) You shall not have advised the Company that the Registration
Statement or the Prospectus or any amendment or supplement thereto,
contains an untrue statement of fact, which, in the opinion of counsel for
the Underwriters, is material or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated therein
or necessary to make the statements therein not misleading.
(e) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred any change, or any development involving a
prospective change, in or affecting particularly the business or properties
of the Company, whether or not arising in the ordinary course of business,
which, in the judgment of the Representatives, makes it impractical or
inadvisable to proceed with the public offering or purchase of the Shares
as contemplated hereby.
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(f) There shall have been furnished to you, as Representatives of the
Underwriters, on the First Closing Date or the Second Closing Date, as the
case may be, except as otherwise expressly provided below:
(i) An opinion of Piper & Marbury L.L.P., counsel for the
Company and for the Selling Stockholders, addressed to the
Underwriters and dated the First Closing Date or the Second Closing
Date, as the case may be, to the effect that:
(1) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Maryland with corporate power and authority to own its
properties and conduct its business as described in the
Prospectus; and the Company has been duly qualified to do
business as a foreign corporation under the corporation law of,
and is in good standing as such in, every jurisdiction where the
ownership or leasing of property, or the conduct of its business
requires such qualification except where the failure so to
qualify would not have a material adverse effect upon the
condition (financial or otherwise) or results of operations of
the Company;
(2) the authorized capital stock of the Company, of which
there is outstanding the amount set forth in the Registration
Statement and Prospectus (except for subsequent issuances, if
any, pursuant to stock options or other rights referred to in the
Prospectus), conforms as to legal matters in all material
respects to the description thereof in the Registration Statement
and Prospectus;
(3) the issued and outstanding capital stock of the Company
has been duly authorized and validly issued and is fully paid and
nonassessable;
(4) the certificates for the Shares to be delivered
hereunder are in due and proper form, and when duly countersigned
by the Company's transfer agent and delivered to you or upon your
order against payment of the agreed consideration therefor in
accordance with the provisions of this Agreement and the Pricing
Agreement, the Shares represented thereby will be duly authorized
and validly issued, fully paid and nonassessable;
(5) the Registration Statement has become effective under
the 1933 Act, and, to the best knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the 1933 Act, and
the Registration Statement (including the information deemed to
be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b) and/or Rule 434, if
applicable), the Prospectus and each amendment or supplement
thereto (except for the financial statements, financial statement
schedules and other statistical or financial data included
therein as to which such counsel need express no opinion) comply
as to form in all material respects with the requirements of the
1933 Act; such counsel have no reason to believe that either the
Registration Statement (including the information deemed to be
part of the Registration Statement at the time of effectiveness
pursuant to Rule 430A(b) and/or Rule 434, if applicable) or the
Prospectus, or the Registration Statement or the Prospectus as
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amended or supplemented (except as aforesaid), as of their
respective effective or issue dates, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus as amended or
supplemented, if applicable, as of the First Closing Date or the
Second Closing Date, as the case may be, contained any untrue
statement of a material fact or omitted to state any material
fact necessary to make the statements therein not misleading in
the light of the circumstances under which they were made; the
statements in the Registration Statement and the Prospectus
summarizing statutes, rules and regulations are accurate and
fairly and correctly present the information required to be
presented by the 1933 Act or the rules and regulations
thereunder, in all material respects and such counsel does not
know of any statutes, rules and regulations required to be
described or referred to in the Registration Statement or the
Prospectus that are not described or referred to therein as
required; and such counsel does not know of any legal or
governmental proceedings pending or threatened required to be
described in the Prospectus which are not described as required,
nor of any contracts or documents of a character required to be
described in the Registration Statement or Prospectus or to be
filed as exhibits to the Registration Statement which are not
described or filed, as required;
(6) the statements under the captions "Management - Employee
Benefit Plans," "Certain Transactions," "Description of Capital
Stock" and "Shares Eligible for Future Sale" in the Prospectus,
insofar as such statements constitute a summary of documents
referred to therein or matters of law, are accurate summaries and
fairly and correctly present, in all material respects, the
information called for with respect to such documents and
matters;
(7) this Agreement and the Pricing Agreement and the
performance of the Company's obligations hereunder have been duly
authorized by all necessary corporate action and this Agreement
and the Pricing Agreement have been duly executed and delivered
by and on behalf of the Company, and are legal, valid and binding
agreements of the Company, except as enforceability of the same
may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights and
by the exercise of judicial discretion in accordance with general
principles applicable to equitable and similar remedies and
except as to those provisions relating to indemnities for
liabilities arising under the 1933 Act as to which no opinion
need be expressed; and no approval, authorization or consent of
any public board, agency, or instrumentality of the United States
or of any state or other jurisdiction is necessary in connection
with the issue or sale of the Shares by the Company pursuant to
this Agreement (other than under the 1933 Act and the rules of
the NASD) or the consummation by the Company of any other
transactions contemplated hereby;
(8) the execution and performance of this Agreement will not
contravene any of the provisions of, or result in a default
under, any agreement, franchise, license, indenture, mortgage,
deed of trust, or other instrument known to such counsel, of the
Company or by which its property is bound and which contravention
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or default would be material to the Company; or violate any of
the provisions of the charter or bylaws of the Company or, so far
as is known to such counsel, violate any statute, order, rule or
regulation of any regulatory or governmental body having
jurisdiction over the Company;
(9) to such counsel's knowledge, all offers and sales of the
Company's capital stock since __________ __, 1994 were at all
relevant times exempt from the registration requirements of the
1933 Act and were duly registered or the subject of an available
exemption from the registration requirements of the applicable
state securities or blue sky laws;
(10) with respect to each Selling Stockholder, this
Agreement and the Pricing Agreement have been duly authorized,
executed and delivered by or on behalf of each such Selling
Stockholder; and the performance of this Agreement and the
Pricing Agreement and the consummation of the transactions herein
contemplated by each such Selling Stockholder will not result in
a breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, any indenture, mortgage,
deed of trust, note agreement or other agreement or instrument
known to such counsel to which any of such Selling Stockholders
is a party or by which any is bound or to which any property of
such Selling Stockholders is subject, or any order, rule or
regulation known to such counsel of any court or governmental
agency or body having jurisdiction over any of such Selling
Stockholders or any of their properties; and no consent,
approval, authorization or order of any court or governmental
agency or body is required for the consummation of the
transactions contemplated by this Agreement and the Pricing
Agreement in connection with the sale of Shares to be sold by
such Selling Stockholders hereunder, except such as have been
obtained under the 1933 Act and such as may be required in
connection with the clearance of the offering with the NASD;
(11) each Selling Stockholder has full right, power and
authority to enter into this Agreement and the Pricing Agreement
and to sell, transfer and deliver the Shares to be sold on the
First Closing Date or the Second Closing Date, as the case may
be, by such Selling Stockholder hereunder and good and marketable
title to such Shares so sold, free and clear of all voting trust
arrangements, liens, encumbrances, equities, claims and community
property rights whatsoever, has been transferred to the
Underwriters (who counsel may assume to be bona fide purchasers)
who have purchased such Shares hereunder;
(12) this Agreement and the Pricing Agreement are legal,
valid and binding agreements of each Selling Stockholder except
as enforceability of the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights and by the exercise of judicial
discretion in accordance with general principles applicable to
equitable and similar remedies and except with respect to those
provisions relating to indemnities for liabilities arising under
the 1933 Act, as to which no opinion need be expressed; and
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(13) the Company is not an "investment company" or a person
"controlled by" an "investment company" within the meaning of the
Investment Company Act.
In rendering such opinion, such counsel may state that they
are relying upon the certificate of __________, the transfer agent for
the Common Stock, as to the number of shares of Common Stock at any
time or times outstanding, and that insofar as their opinion under
clause (5) above relates to the accuracy and completeness of the
Prospectus and Registration Statement, it is based upon a general
review with the Company's representatives and independent accountants
of the information contained therein, without independent verification
by such counsel of the accuracy or completeness of such information.
Such counsel may also rely upon the opinions of other competent
counsel and, as to factual matters, on certificates of the Selling
Stockholders and of officers of the Company and of state officials, in
which case their opinion is to state that they are so doing and copies
of said opinions or certificates are to be attached to the opinion
unless said opinions or certificates (or, in the case of certificates,
the information therein) have been furnished to the Representatives in
other form.
(ii) Such opinion or opinions of Jones, Day, Reavis & Pogue,
counsel for the Underwriters, dated the First Closing Date or the
Second Closing Date, as the case may be, with respect to the
incorporation of the Company, the validity of the Shares to be sold by
the Company, the Registration Statement and the Prospectus and other
related matters as you may reasonably require, and the Company shall
have furnished to such counsel such documents and shall have exhibited
to them such papers and records as they request for the purpose of
enabling them to pass upon such matters.
(iii) A certificate of the chief executive officer and the
principal financial officer of the Company, dated the First Closing
Date or the Second Closing Date, as the case may be, to the effect
that:
(1) the representations and warranties of the Company set
forth in Section 2 of this Agreement are true and correct as of
the date of this Agreement and as of the First Closing Date or
the Second Closing Date, as the case may be, and the Company has
complied with all the agreements and satisfied all the conditions
on its part to be performed or satisfied at or prior to such
Closing Date; and
(2) the Commission has not issued an order preventing or
suspending the use of the Prospectus or any preliminary
prospectus filed as a part of the Registration Statement or any
amendment thereto; no stop order suspending the effectiveness of
the Registration Statement has been issued; and to the best
knowledge of the respective signers, no proceedings for that
purpose have been instituted or are pending or contemplated under
the 1933 Act.
The delivery of the certificate provided for in this
subparagraph shall be and constitute a representation and warranty of
the Company as to the facts required in the immediately foregoing
clauses (1) and (2) of this subparagraph to be set forth in said
certificate.
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(iv) A certificate of each Selling Stockholder dated the
First Closing Date or the Second Closing Date, as the case may be, to
the effect that the representations and warranties of such Selling
Stockholder set forth in Section 3 of this Agreement are true and
correct as of such date and the Selling Stockholder has complied with
all the agreements and satisfied all the conditions on the part of
such Selling Stockholder to be performed or satisfied at or prior to
such date.
(v) At the time the Pricing Agreement is executed and also
on the First Closing Date or the Second Closing Date, as the case may
be, there shall be delivered to you a letter addressed to you, as
Representatives of the Underwriters, from Arthur Anderson LLP,
independent accountants, the first one to be dated the date of the
Pricing Agreement, the second one to be dated the First Closing Date
and the third one (in the event of a second closing) to be dated the
Second Closing Date, to the effect set forth in Schedule C. There
shall not have been any change or decrease specified in the letters
referred to in this subparagraph which makes it impractical or
inadvisable in the judgment of the Representatives to proceed with the
public offering or purchase of the Shares as contemplated hereby.
(vi) Such further certificates and documents as you may
reasonably request.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to you and
to Jones, Day, Reavis & Pogue, counsel for the Underwriters, which approval
shall not be unreasonably withheld. The Company shall furnish you with such
manually signed or conformed copies of such opinions, certificates, letters and
documents as you request.
If any condition to the Underwriters' obligations hereunder to be satisfied
prior to or at the First Closing Date is not so satisfied, this Agreement at
your election will terminate upon notification to the Company and the Selling
Stockholders without liability on the part of any Underwriter or the Company or
any Selling Stockholder, except for the expenses to be paid or reimbursed by the
Company pursuant to Sections 7 and 9 hereof and except to the extent provided in
Section 11 hereof.
SECTION 9. Reimbursement of Underwriters' Expenses. If the sale to the
Underwriters of the Shares on the First Closing Date is not consummated because
any condition of the Underwriters' obligations hereunder is not satisfied or
because of any refusal, inability or failure on the part of the Company or the
Selling Stockholders to perform any agreement herein or to comply with any
provision hereof, unless such failure to satisfy such condition or to comply
with any provision hereof is due to the default or omission of any Underwriter,
the Company agrees to reimburse you and the other Underwriters upon demand for
all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been reasonably incurred by you and them in connection
with the proposed purchase and the sale of the Shares. Any such termination
shall be without liability of any party to any other party except that the
provisions of this Section, Section 7 and Section 11 shall at all times be
effective and shall apply.
SECTION 10. Effectiveness of Registration Statement. You, the Company and
the Selling Stockholders will use your, its and their best efforts to cause the
Registration Statement to become effective, if it has not yet become effective,
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and to prevent the issuance of any stop order suspending the effectiveness of
the Registration Statement and, if such stop order be issued, to obtain as soon
as possible the lifting thereof.
SECTION 11. Indemnification.
(a) The Company and each Selling Stockholder, jointly and severally, agree
to indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of the 1933 Act or the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter or such controlling person may become subject under the 1933
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise (including in settlement of any litigation if such
settlement is effected with the written consent of the Company and/or such
Selling Stockholders, as the case may be), insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, including the information deemed to be
part of the Registration Statement at the time of effectiveness pursuant to Rule
430A and/or Rule 434, if applicable, any preliminary prospectus, the Prospectus,
or any amendment or supplement 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; and
will reimburse each Underwriter and each such controlling person for any legal
or other expenses reasonably incurred by such Underwriter or such controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that neither the Company nor any
Selling Stockholder will be liable in any such case to the extent that (i) any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
the Representatives, specifically for use therein; or (ii) if such statement or
omission was contained or made in any preliminary prospectus and corrected in
the Prospectus and (1) any such loss, claim, damage or liability suffered or
incurred by any Underwriter (or any person who controls any Underwriter)
resulted from an action, claim or suit by any person who purchased Shares which
are the subject thereof from such Underwriter in the offering and (2) such
Underwriter failed to deliver or provide a copy of the Prospectus to such person
at or prior to the confirmation of the sale of such Shares in any case where
such delivery is required by the 1933 Act. In addition to their other
obligations under this Section 11(a), the Company and the Selling Stockholders
agree that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
statement or omission, or any alleged statement or omission, described in this
Section 11(a), they will reimburse the Underwriters on a monthly basis for all
reasonable legal and other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's and the Selling Stockholders' obligation to
reimburse the Underwriters for such expenses and the possibility that such
payments might later be held to have been improper by a court of competent
jurisdiction. This indemnity agreement will be in addition to any liability
which the Company and the Selling Stockholders may otherwise have.
Without limiting the full extent of the Company's agreement to indemnify
each Underwriter, as herein provided, each Selling Stockholder shall be liable
under the indemnity agreements contained in paragraph (a) of this Section only
for an amount not exceeding the proceeds received by such Selling Stockholder
from the sale of Shares hereunder.
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(b) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement, and each Selling Stockholder and each person, if any, who controls
the Company within the meaning of the 1933 Act or the Exchange Act, against any
losses, claims, damages or liabilities to which the Company, or any such
director, officer, Selling Stockholder or controlling person may become subject
under the 1933 Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Underwriter), insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in the Registration Statement, any
preliminary prospectus, the Prospectus, or any amendment or supplement 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 the Registration Statement, any preliminary
prospectus, the Prospectus, or any amendment or supplement thereto in reliance
upon and in conformity with Section 4 of this Agreement or any other written
information furnished to the Company by such Underwriter through the
Representatives specifically for use in the preparation thereof; and will
reimburse any legal or other expenses reasonably incurred by the Company, or any
such director, officer, Selling Stockholder or controlling person in connection
with investigating or defending any such loss, claim, damage, liability or
action. In addition to their other obligations under this Section 11(b), the
Underwriters agree that, as an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
this Section 11(b), they will reimburse the Company and the Selling Stockholders
on a monthly basis for all reasonable legal and other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company and the Selling Stockholders
for such expenses and the possibility that such payments might later be held to
have been improper by a court of competent jurisdiction. This indemnity
agreement will be in addition to any liability which such Underwriter may
otherwise have.
(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 an indemnifying party under this
Section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party except to the extent that
the indemnifying party was prejudiced by such failure to notify. In case any
such action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
all other indemnifying parties similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided, however,
if the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, or the indemnified and indemnifying parties may have
conflicting interests which would make it inappropriate for the same counsel to
represent both of them, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defense and otherwise to
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section for any legal or other expenses
19
<PAGE>
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defense in accordance with the proviso
to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by the Representatives in the case of paragraph (a)
representing all indemnified parties not having different or additional defenses
or potential conflicting interest among themselves who are parties to such
action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability arising out
of such proceeding.
(d) If the indemnification provided for in this Section is unavailable to
an indemnified party under paragraphs (a) or (b) hereof in respect of any
losses, claims, damages or liabilities referred to therein, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, the
Selling Stockholders and the Underwriters from the offering of the Shares or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company, the Selling Stockholders and the Underwriters in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
respective relative benefits received by the Company, the Selling Stockholders
and the Underwriters shall be deemed to be in the same proportion in the case of
the Company and the Selling Stockholders, as the total price paid to the Company
and the Selling Stockholders for the Shares by the Underwriters (net of
underwriting discount but before deducting expenses), and in the case of the
Underwriters as the underwriting discount received by them bears to the total of
such amounts paid to the Company and the Selling Stockholders and received by
the Underwriters as underwriting discount in each case as contemplated by the
Prospectus. The relative fault of the Company, the Selling Stockholders and the
Underwriters shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Company, by the
Selling Stockholders or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, claims, damages and liabilities referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
The Company, the Selling Stockholders and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this
Section, no Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
20
<PAGE>
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Underwriters' obligations
to contribute pursuant to this Section are several in proportion to their
respective underwriting commitments and not joint.
(e) The provisions of this Section shall survive any termination of this
Agreement.
SECTION 12. Default of Underwriters. It shall be a condition to the
agreement and obligation of the Company and the Selling Stockholders to sell and
deliver the Shares hereunder, and of each Underwriter to purchase the Shares
hereunder, that, except as hereinafter in this paragraph provided, each of the
Underwriters shall purchase and pay for all Shares agreed to be purchased by
such Underwriter hereunder upon tender to the Representatives of all such Shares
in accordance with the terms hereof. If any Underwriter or Underwriters default
in their obligations to purchase Shares hereunder on the First Closing Date and
the aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed to purchase does not exceed ten percent of the total number of
Shares which the Underwriters are obligated to purchase on the First Closing
Date, the Representatives may make arrangements satisfactory to the Company and
the Selling Stockholders for the purchase of such Shares by other persons,
including any of the Underwriters, but if no such arrangements are made by such
date the nondefaulting Underwriters shall be obligated severally, in proportion
to their respective commitments hereunder, to purchase the Shares which such
defaulting Underwriters agreed but failed to purchase on such date. If any
Underwriter or Underwriters so default and the aggregate number of Shares with
respect to which such default or defaults occur is more than the above
percentage and arrangements satisfactory to the Representatives and the Company
and the Selling Stockholders for the purchase of such Shares by other persons
are not made within 36 hours after such default, this Agreement will terminate
without liability on the part of any nondefaulting Underwriter or the Company or
the Selling Stockholders, except for the expenses to be paid by the Company
pursuant to Section 7 hereof and except to the extent provided in Section 11
hereof.
In the event that Shares to which a default relates are to be purchased by
the nondefaulting Underwriters or by another party or parties, the
Representatives or the Company shall have the right to postpone the First
Closing Date for not more than seven business days in order that the necessary
changes in the Registration Statement, Prospectus and any other documents, as
well as any other arrangements, may be effected. As used in this Agreement, the
term "Underwriter" includes any person substituted for an Underwriter under this
Section. Nothing herein will relieve a defaulting Underwriter from liability
for its default.
SECTION 13. Effective Date. This Agreement shall become effective
immediately as to Sections 7, 9, 11 and 14 and as to all other provisions at
10:00 A.M., Chicago Time, on the day following the date upon which the Pricing
Agreement is executed and delivered, unless such a day is a Saturday,
Sunday or holiday (and in that event this Agreement shall become effective at
such hour on the business day next succeeding such Saturday, Sunday or holiday);
but this Agreement shall nevertheless become effective at such earlier time
after the Pricing Agreement is executed and delivered as you may determine on
and by notice to the Company and the Selling Stockholders or by release of any
Shares for sale to the public. For the purposes of this Section, the Shares
shall be deemed to have been so released upon the release for publication of any
newspaper advertisement relating to the Shares or upon the release by you of
21
<PAGE>
telegrams (i) advising Underwriters that the Shares are released for public
offering, or (ii) offering the Shares for sale to securities dealers, whichever
may occur first.
SECTION 14. Termination. Without limiting the right to terminate this
Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice to you
and the Selling Stockholders or by you by notice to the Company and the
Selling Stockholders at any time prior to the time this Agreement shall
become effective as to all its provisions, and any such termination shall
be without liability on the part of the Company or the Selling Stockholders
to any Underwriter (except for the expenses to be paid or reimbursed
pursuant to Section 7 hereof and except to the extent provided in Section
11 hereof) or of any Underwriter to the Company or the Selling
Stockholders.
(b) This Agreement may also be terminated by you prior to the First
Closing Date, and the option referred to in Section 5, if exercised, may be
cancelled at any time prior to the Second Closing Date, if (i) trading in
securities on the New York Stock Exchange shall have been suspended or
minimum prices shall have been established on such exchange, or (ii) a
banking moratorium shall have been declared by Illinois, New York, or
United States authorities, or (iii) there shall have been any change in
financial markets or in political, economic or financial conditions which,
in the opinion of the Representatives, either renders it impracticable or
inadvisable to proceed with the offering and sale of the Shares on the
terms set forth in the Prospectus or materially and adversely affects the
market for the Shares, or (iv) there shall have been an outbreak of major
armed hostilities between the United States and any foreign power which in
the opinion of the Representatives makes it impractical or inadvisable to
offer or sell the Shares. Any termination pursuant to this paragraph (b)
shall be without liability on the part of any Underwriter to the Company or
the Selling Stockholders or on the part of the Company to any Underwriter
or the Selling Stockholders (except for expenses to be paid or reimbursed
pursuant to Section 7 hereof and except to the extent provided in Section
11 hereof).
SECTION 15. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of the Selling Stockholders and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or the Company or any of its or their partners,
principals, members, officers or directors or any controlling person, or the
Selling Stockholders as the case may be, and will survive delivery of and
payment for the Shares sold hereunder.
SECTION 16. Notices. All communications hereunder will be in writing and,
if sent to the Underwriters will be mailed, delivered or telegraphed and
confirmed to you c/o William Blair & Company, L.L.C., 222 West Adams Street,
Chicago, Illinois 60606, with a copy to Gary T. Johnson, Esq. at Jones, Day,
Reavis & Pogue, 77 West Wacker, Chicago, Illinois 60601-1692; if sent to the
Company will be mailed, delivered or telegraphed and confirmed to the Company at
its corporate headquarters with a copy to Jill Cantor Nord, Esq. at Piper &
Marbury L.L.P., 36 South Charles Street, Baltimore, Maryland 21201; and if sent
to the Selling Stockholders will be mailed, delivered or telegraphed and
confirmed to the Selling Stockholders at such address as they have previously
furnished to the Company and the Representatives, with a copy to Jill Cantor
Nord, Esq. at Piper & Marbury L.L.P., 36 South Charles Street, Baltimore,
Maryland 21201.
22
<PAGE>
SECTION 17. Successors. This Agreement and the Pricing Agreement will
inure to the benefit of and be binding upon the parties hereto and their
respective successors, personal representatives and assigns, and to the benefit
of the officers and directors and controlling persons referred to in Section 11,
and no other person will have any right or obligation hereunder. The term
"successors" shall not include any purchaser of the Shares as such from any of
the Underwriters merely by reason of such purchase.
SECTION 18. Representation of Underwriters. You will act as
Representatives for the several Underwriters in connection with this financing,
and any action under or in respect of this Agreement taken by you will be
binding upon all the Underwriters.
SECTION 19. Partial Unenforceability. If any section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph or provision hereof.
SECTION 20. Applicable Law. This Agreement and the Pricing Agreement
shall be governed by and construed in accordance with the laws of the State of
Illinois.
23
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed duplicates hereof, whereupon it will
become a binding agreement among the Company, the Selling Stockholders and the
several Underwriters including you, all in accordance with its terms.
Very truly yours,
RWD TECHNOLOGIES, INC.
By
----------------------------
Chief Executive Officer
SELLING STOCKHOLDERS
By
----------------------------
John H. Beakes
By
----------------------------
R. Butler Newman
The foregoing Agreement is hereby
confirmed and accepted as of
the date first above written.
WILLIAM BLAIR & COMPANY, L.L.C.
MONTGOMERY SECURITIES
Acting as Representatives of the
several Underwriters named in
Schedule A.
By William Blair & Company, L.L.C.
By
--------------------------------
Principal
24
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Firm Shares
Underwriter to be Purchased
- -------------------------------- ---------------
<S> <C>
William Blair & Company, L.L.C
Montgomery Securities
--------
TOTAL
========
</TABLE>
25
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
Number of Number of
Firm Shares Option Shares
to be Sold to be Sold
----------- -------------
<S> <C> <C>
Company
Selling Stockholders:
John H. Beakes
R. Butler Newman
------- -------
TOTAL
======= =======
</TABLE>
26
<PAGE>
SCHEDULE C
Comfort Letter of Arthur Anderson LLP
(1) They are independent public accountants with respect to the
Company within the meaning of the 1933 Act.
(2) In their opinion the financial statements and schedules of the
Company included in the Registration Statement and the financial statements of
the Company from which the information presented under the caption "Selected
Financial Data" has been derived which are stated therein to have been examined
by them comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act.
(3) On the basis of specified procedures (but not an examination in
accordance with generally accepted auditing standards), including inquiries of
certain officers of the Company responsible for financial and accounting matters
as to transactions and events subsequent to December 31, 1996, a reading of
minutes of meetings of the stockholders and directors of the Company since
December 31, 1996, a reading of the latest available interim unaudited financial
statements of the Company (with an indication of the date thereof) and other
procedures as specified in such letter, nothing came to their attention which
caused them to believe that (i) the pro forma financial information of the
Company included in the Registration Statement do not comply as to form in all
material respects with the applicable accounting requirements of rule 11-02 of
Regulation S-X or that the pro forma adjustments have not been properly applied
to the historical amounts in the compilation of such information and (ii) at a
specified date not more than five days prior to the date thereof in the case of
the first letter and not more than two business days prior to the date thereof
in the case of the second and third letters, there was any change in the capital
stock or long-term debt or short-term debt (other than normal payments) of the
Company or any decrease in net current assets or stockholders' equity as
compared with amounts shown on the latest balance sheet of the Company included
in the Registration Statement or for the period from the date of such balance
sheet to a date not more than five days prior to the date thereof in the case of
the first letter and not more than two business days prior to the date thereof
in the case of the second and third letters, there were any decreases, as
compared with the corresponding period of the prior year, in net sales, income
before income taxes or in the total or per share amounts of net income except,
in all instances, for changes or decreases which the Prospectus discloses have
occurred or may occur or which are set forth in such letter.
(4) They have carried out specified procedures, which have been agreed
to by the Representatives, with respect to certain information in the Prospectus
specified by the Representatives, and on the basis of such procedures, they have
found such information to be in agreement with the general accounting records of
the Company.
27
<PAGE>
EXHIBIT A
RWD TECHNOLOGIES, INC.
_______ Shares Common Stock/2/
PRICING AGREEMENT
_______________, 1997
William Blair & Company, L.L.C.
Montgomery Securities
As Representatives of the Several
Underwriters
c/o William Blair & Company, L.L.C.
222 West Adams Street
Chicago, Illinois 60606
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement dated
_________________, 1997 (the "Underwriting Agreement") relating to the sale by
the Company and the Selling Stockholders and the purchase by the several
Underwriters for whom William Blair & Company, L.L.C. and Montgomery Securities
are acting as representatives (the "Representatives"), of the above Shares. All
terms herein shall have the definitions contained in the Underwriting Agreement
except as otherwise defined herein.
Pursuant to Section 5 of the Underwriting Agreement, the Company and
the Selling Stockholders agree with the Representatives as follows:
1. The initial public offering price per share for the Shares shall be
$__________.
2. The purchase price per share for the Shares to be paid by the
several Underwriters shall be $_____________, being an amount equal to the
initial public offering price set forth above less $____________ per share.
Schedule A is amended as follows:
- -----------------
/2/ Plus an option to acquire up to ___ additional shares to cover
overallotments.
28
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, the Selling
Stockholders and the several Underwriters, including you, all in accordance with
its terms.
Very truly yours,
RWD TECHNOLOGIES, INC.
By
----------------------------
Chief Executive Officer
SELLING STOCKHOLDERS
By
----------------------------
John H. Beakes
By
----------------------------
R. Butler Newman
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
WILLIAM BLAIR & COMPANY, L.L.C.
MONTGOMERY SECURITIES
Acting as Representatives of the
several Underwriters
By William Blair & Company, L.L.C.
By
--------------------------------
Principal
29
<PAGE>
EXHIBIT B
[Form of Lock-up Agreement]
RWD TECHNOLOGIES, INC.
Initial Public Offering of Shares of Common Stock
-------------------------------------------------
William Blair & Company, L.L.C.
Montgomery Securities,
as Representatives of the Several Underwriters
named in Schedule A to the Underwriting Agreement
c/o William Blair & Company, L.L.C.
222 West Adams Street
Chicago, Illinois 60606
Ladies and Gentlemen:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement"), by and among RWD
Technologies, Inc., a Maryland corporation (the "Company"), the Selling
Shareholder named therein and each of you as representatives of the several
Underwriters named therein, relating to an underwritten initial public offering
of Common Stock, $.10 par value (the "Common Stock"), of the Company.
In order to induce you and the other Underwriters to enter into the
Underwriting Agreement, I agree not to offer, sell or contract to sell, or
otherwise dispose of, directly or indirectly, or announce an offering, sale or
contract of sale of, any shares of Common Stock beneficially owned by me or any
securities convertible into or exchangeable or exercisable for shares of Common
Stock (such securities being hereinafter referred to as "Rights") for a period
of 180 days following the date of the Prospectus (as defined in the Underwriting
Agreement) without your prior written consent. The foregoing restriction is
expressly agreed to preclude me from engaging in any hedging or other
transaction which is designed to or reasonably expected to lead to or result in
such disposition during such 180-day period, even if such shares of Common Stock
or Rights would be disposed of by someone other than myself. I understand that
such prohibited hedging or other transactions would include transactions such as
a short sale (whether or not against the box) and a purchase, sale or grant of
any right (including a put or call option) with respect to any such shares of
Common Stock or Rights or with respect to any security (other than a broad-based
market basket or index) that includes, relates to or derives any significant
part of its value from such shares of Common Stock or Rights. I also agree and
consent to the entry of stop transfer instructions with the Company's transfer
agent against the transfer of the Common Stock or Rights held by me except in
compliance with this restriction.
If for any reason the Underwriting Agreement is terminated prior to
the First Closing Date (as defined in the Underwriting Agreement), the agreement
set forth above will likewise be terminated.
Yours very truly,
-----------------------------
Print name and address:
-----------------------------
-----------------------------
Date: ______________________, 1997 -----------------------------
30
<PAGE>
RWD TECHNOLOGIES, INC. Exhibit 3.01
ARTICLES OF AMENDMENT AND RESTATEMENT
RWD TECHNOLOGIES, INC., a Maryland corporation, having its principal office
in Howard County, Maryland (which is hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Corporation desires to amend and restate its Charter as
currently in effect as herein provided.
SECOND: The Charter of the Corporation is hereby amended by striking each
of the Articles of the existing Charter of the Corporation, and by substituting
in lieu thereof the following:
FIRST: THE UNDERSIGNED, Richard C. Tilghman, Jr., whose address is
Charles Center South, 36 South Charles Street, Baltimore, Maryland 21201,
being at least eighteen years of age, acting as incorporator, does hereby
form a corporation under and by virtue of the General Laws of the State of
Maryland.
SECOND: The name of the corporation (which is hereinafter called the
"Corporation") is:
RWD TECHNOLOGIES, INC.
THIRD: (a) The purposes for which and any of which the Corporation
is formed and the business and objects to be carried on and promoted by it
are:
(1) To provide engineering, technical and general consulting
and support services to industrial and manufacturing organizations, public
utilities, service companies and other business entities.
(2) To engage in any one or more businesses or transactions,
or to acquire all or any portion of any entity engaged in any one or more
businesses or transactions which the Board of Directors may from time to
time authorize or approve, whether or not related to the business described
elsewhere in this Article or to any other business at the time or
theretofore engaged in by the Corporation.
(b) The foregoing enumerated purposes and objects shall be in no
way limited or restricted by reference to, or inference from, the terms of
any other clause of this or any other Article of the charter of the
Corporation, and each shall be regarded as independent; and they are
intended to be and shall be construed as powers as well as purposes and
objects of the Corporation and shall be in addition to and not
-1-
<PAGE>
in limitation of the general powers of corporations under the General Laws
of the State of Maryland.
FOURTH: The present address of the principal office of the Corporation
in this State is 10480 Little Patuxent Parkway, Suite 1200, Columbia,
Maryland 21044.
FIFTH: The name and address of the resident agent of the Corporation in
this State are The Corporation Trust Incorporated, 32 South Street,
Baltimore, MD 21202. Said resident agent is a Maryland corporation.
SIXTH: (a) The total number of shares of stock of all classes which
the Corporation has authority to issue is 50,000,000 shares of capital stock
(par value $.10 per share), amounting in aggregate par value to
$5,000,000.00. All of such shares are initially classified as "Common
Stock". The Board of Directors may classify and reclassify any unissued
shares of capital stock by setting or changing in any one or more respects
the preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of
redemption of such shares of stock.
(b) The following is a description of the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption of the
Common Stock of the Corporation:
(1) Each share of Common Stock shall have one vote, and,
except as otherwise provided in respect of any class of stock hereafter
classified or reclassified, the exclusive voting power for all purposes
shall be vested in the holders of the Common Stock.
(2) Subject to the provisions of law and any preferences of
any class of stock hereafter classified or reclassified, dividends,
including dividends payable in shares of another class of the Corporation's
stock, may be paid on the Common Stock of the Corporation at such time and
in such amounts as the Board of Directors may deem advisable.
(3) In the event of any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the holders of the
Common Stock shall be entitled, after payment or provision for payment of
the debts and other liabilities of the Corporation and the amount to which
the holders of any class of stock hereafter classified or reclassified
having a preference on distributions in the liquidation, dissolution or
winding up of the Corporation shall be entitled, together with the holders
of any other class of stock hereafter classified or reclassified not having
a preference on distributions in the liquidation, dissolution
-2-
<PAGE>
or winding up of the Corporation, to share ratably in the remaining net
assets of the Corporation.
(c) Subject to the foregoing, the power of the Board of
Directors to classify and reclassify any of the shares of capital stock
shall include, without limitation, subject to the provisions of the charter,
authority to classify or reclassify any unissued shares of such stock into a
class or classes of preferred stock, preference stock, special stock or
other stock, and to divide and classify shares of any class into one or more
series of such class, by determining, fixing, or altering one or more of the
following:
(1) The distinctive designation of such class or series and
the number of shares to constitute such class or series; provided that,
unless otherwise prohibited by the terms of such or any other class or
series, the number of shares of any class or series may be decreased by the
Board of Directors in connection with any classification or reclassification
of unissued shares and the number of shares of such class or series may be
increased by the Board of Directors in connection with any such
classification or reclassification, and any shares of any class or series
which have been redeemed, purchased, otherwise acquired or converted into
shares of Common Stock or any other class or series shall become part of the
authorized capital stock and be subject to classification and
reclassification as provided in this sub-paragraph.
(2) Whether or not and, if so, the rates, amounts and times
at which, and the conditions under which, dividends shall be payable on
shares of such class or series, whether any such dividends shall rank senior
or junior to or on a parity with the dividends payable on any other class or
series of stock, and the status of any such dividends as cumulative,
cumulative to a limited extent or non-cumulative and as participating or
non-participating.
(3) Whether or not shares of such class or series shall have
voting rights, in addition to any voting rights provided by law and, if so,
the terms of such voting rights.
(4) Whether or not shares of such class or series shall have
conversion or exchange privileges and, if so, the terms and conditions
thereof, including provision for adjustment of the conversion or exchange
rate in such events or at such times as the Board of Directors shall
determine.
(5) Whether or not shares of such class or series shall be
subject to redemption and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which they shall be
redeemable and the amount per share payable in case of redemption, which
amount may vary under different conditions and at different redemption
dates; and whether or not there
-3-
<PAGE>
shall be any sinking fund or purchase account in respect thereof, and if so,
the terms thereof.
(6) The rights of the holders of shares of such class or
series upon the liquidation, dissolution or winding up of the affairs of, or
upon any distribution of the assets of, the Corporation, which rights may
vary depending upon whether such liquidation, dissolution or winding up is
voluntary or involuntary and, if voluntary, may vary at different dates, and
whether such rights shall rank senior or junior to or on a parity with such
rights of any other class or series of stock.
(7) Whether or not there shall be any limitations
applicable, while shares of such class or series are outstanding, upon the
payment of dividends or making of distributions on, or the acquisition of,
or the use of moneys for purchase or redemption of, any stock of the
Corporation, or upon any other action of the Corporation, including action
under this sub-paragraph, and, if so, the terms and conditions thereof.
(8) Any other preferences, rights, restrictions, including
restrictions on transferability, and qualifications of shares of such class
or series, not inconsistent with law and the charter of the Corporation.
(d) For the purposes hereof and of any articles supplementary to
the charter providing for the classification or reclassification of any
shares of capital stock or of any other charter document of the Corporation
(unless otherwise provided in any such articles or document), any class or
series of stock of the Corporation shall be deemed to rank:
(1) prior to another class or series either as to dividends
or upon liquidation, if the holders of such class or series shall be
entitled to the receipt of dividends or of amounts distributable on
liquidation, dissolution or winding up, as the case may be, in preference or
priority to holders of such other class or series;
(2) on a parity with another class or series either as to
dividends or upon liquidation, whether or not the dividend rates, dividend
payment dates or redemption or liquidation price per share thereof be
different from those of such others, if the holders of such class or series
of stock shall be entitled to receipt of dividends or amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in
proportion to their respective dividend rates or redemption or liquidation
prices, without preference or priority over the holders of such other class
or series; and
(3) junior to another class or series either as to dividends
or upon liquidation, if the rights of the holders of such class or series
shall be subject
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or subordinate to the rights of the holders of such other class or series in
respect of the receipt of dividends or the amounts distributable upon
liquidation, dissolution or winding up, as the case may be.
SEVENTH: (a) The number of directors of the Corporation shall be
seven, which number may only be increased or decreased, in the manner
prescribed in the By-Laws, by at least two-thirds of the directors then in
office, but shall never be less than the minimum number permitted by the
General Laws of the State of Maryland now or hereafter in force.
(b) Subject to the rights of the holders of any class of
Preferred Stock then outstanding, newly created directorships resulting from
any increase in the authorized number of directors or any vacancies on the
Board of Directors resulting from death, resignation, retirement,
disqualification, removal from office, or other cause shall be filled by a
majority vote of the stockholders or the directors then in office. A
director so chosen by the stockholders shall hold office for the balance of
the term then remaining. A director so chosen by the remaining directors
shall hold office until the next annual meeting of stockholders, at which
time the stockholders shall elect a director to hold office for the balance
of the term then remaining. No decrease in the number of directors
constituting the Board of Directors shall affect the tenure of office of any
director.
(c) Whenever the holders of any one or more series of Preferred
Stock of the Corporation shall have the right, voting separately as a class,
to elect one or more directors of the Corporation, the Board of Directors
shall consist of said directors so elected in addition to the number of
directors fixed as provided above in paragraph (a) of this Article SEVENTH
or in the By-Laws. Notwithstanding the foregoing, and except as otherwise
may be required by law, whenever the holders of any one or more series of
Preferred Stock of the Corporation shall have the right, voting separately
as a class, to elect one or more directors of the Corporation, the terms of
the director or directors elected by such holders shall expire at the next
succeeding annual meeting of stockholders.
(d) Subject to the rights of the holders of any class separately
entitled to elect one or more directors, any director, or the entire Board
of Directors, may be removed from office at any time, but only for cause and
then only by the affirmative vote of the holders of at least 80% of the
combined voting power of all classes of shares of capital stock entitled to
vote in the election for directors voting together as a single class.
(e) At each annual meeting of stockholders beginning in 1998,
successors to the class of directors whose term expires at that annual
meeting shall be elected for a three year term.
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(1) The following persons shall serve as directors until the
1998 annual meeting of stockholders:
Robert W. Deutsch
Ronald E. Holtz
Kenneth J. Rebeck
(2) The following persons shall serve as directors until the
1999 annual meeting of stockholders:
John H. Beakes
John E. Lapolla
(3) The following persons shall serve as directors until the
2000 annual meeting of stockholders:
David J. Deutsch
Jeffrey W. Wendel
EIGHTH: (a) The following provisions are hereby adopted for the
purpose of defining, limiting, and regulating the powers of the Corporation
and of the directors and stockholders:
(1) The Board of Directors is hereby empowered to authorize
the issuance from time to time of shares of the Corporation's stock of any
class, whether now or hereafter authorized, or securities convertible into
shares of its stock of any class or classes, now or hereafter authorized,
for such consideration as may be deemed advisable by the Board of Directors
and without any action by the stockholders.
(2) No holder of any stock or any other securities of the
Corporation, whether now or hereafter authorized, shall have any preemptive
right to subscribe for or purchase any stock or any other securities of the
Corporation other than such, if any, as the Board of Directors, in its sole
discretion, may determine and at such price or prices and upon such other
terms as the Board of Directors, in its sole discretion, may fix; and any
stock or other securities which the Board of Directors may determine to
offer for subscription may, as the Board of Directors in its sole discretion
shall determine, be offered to the holders of any class, series or type of
stock or other securities at the time outstanding to the exclusion of the
holders of any or all other classes, series or types of stock or other
securities at the time outstanding.
(3) The Board of Directors of the Corporation shall,
consistent with applicable law, have power in its sole discretion to
determine from time to time, in accordance with sound accounting practice or
other reasonable
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valuation methods, what constitutes annual or other net profits, earnings,
surplus, or net assets in excess of capital; to fix and vary from time to
time the amount to be reserved as working capital, or determine that
retained earnings or surplus shall remain in the hands of the Corporation;
to set apart out of any funds of the Corporation such reserve or reserves in
such amount or amounts and for such proper purpose or purposes as it shall
determine and to abolish any such reserve or any part thereof; to distribute
and pay distributions or dividends in stock, cash or other securities or
property, out of surplus or any other funds or amounts legally available
therefor, at such times and to the stockholders of record on such dates as
it may, from time to time, determine; and to determine whether and to what
extent and at what times and places and under what conditions and
regulations the books, accounts and documents of the Corporation, or any of
them, shall be open to the inspection of stockholders, except as otherwise
provided by statute or by the By-Laws, and, except as so provided, no
stockholder shall have any right to inspect any book, account or document of
the Corporation unless authorized so to do by resolution of the Board of
Directors.
(4) Except as otherwise expressly provided in the
Corporation's Charter, notwithstanding any provision of law requiring the
authorization of any action by a greater proportion than a majority of the
total number of shares of all classes of capital stock or of the total
number of shares of any class of capital stock, such action shall be valid
and effective if authorized by the affirmative vote of the holders of a
majority of the total number of shares of all classes outstanding and
entitled to vote thereon, except as otherwise provided in the charter.
(5) The Corporation shall indemnify (A) its directors and
officers, whether serving the Corporation or, at its request, any other
entity, to the full extent required or permitted by the General Laws of the
State of Maryland now or hereafter in force, including the advance of
expenses under the procedures and to the full extent permitted by law and
(B) other employees and agents to such extent as shall be authorized by the
Board of Directors or the Corporation's By-Laws and be permitted by law. The
foregoing rights of indemnification shall not be exclusive of any other
rights to which those seeking indemnification may be entitled. The Board of
Directors may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt, approve and
amend from time to time such By-Laws, resolutions or contracts implementing
such provisions or such further indemnification arrangements as may be
permitted by law. No amendment of the charter of the Corporation or repeal
of any of its provisions shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions
occurring prior to such amendment or repeal.
(6) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, no director or officer of this
Corporation
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shall be personally liable to the Corporation or its stockholders for money
damages. No amendment of the charter of the Corporation or repeal of any of
its provisions shall limit or eliminate the limitation on liability provided
to directors and officers hereunder with respect to any act or omission
occurring prior to such amendment or repeal.
(7) (A) Nominations for the election of directors and
proposals for any new business to be taken up at any annual or special
meeting of stockholders may be made by the Board of Directors of the
Corporation or by any stockholder of the Corporation entitled to vote
generally in the election of directors. In order for a stockholder of the
Corporation to make any such nominations and/or proposals, he or she shall
give notice thereof in writing, delivered or mailed by first class United
States mail, postage prepaid, to the Secretary of the Corporation not less
than 60 days nor more than 90 days prior to any such meeting; provided,
however, that if less than 61 days notice of the meeting is given to
stockholders, such written notice shall be delivered or mailed, as
prescribed, to the Secretary of the Corporation not later than the close of
the tenth day following the day on which notice of the meeting was mailed to
stockholders. Each such notice given by a stockholder with respect to
nominations for the election of directors shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of each such
nominee, (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee, (iv) such other information as
would be required to be included in a proxy statement soliciting proxies for
the election of the proposed nominee pursuant to Regulation 14A of the
Securities Exchange Act of 1934, as amended, including, without limitation,
such person's written consent to being named in the proxy statement as a
nominee and to serving as a director, if elected, and (v) as to the
stockholder giving such notice, his name and address as they appear on the
Corporation's books and the class and number of shares of the Corporation
which are beneficially owned by such stockholder. In addition, the
stockholder making such nomination shall promptly provide any other
information reasonably requested by the Corporation.
(B) Each such notice given by a stockholder to the
Secretary with respect to business proposals to bring before a meeting shall
set forth in writing as to each matter: (i) a brief description of the
business desired to be brought before the meeting and the reasons for
conducting such business at the meeting; (ii) the name and address, as they
appear on the Corporation's books, of the stockholder proposing such
business; (iii) the class and number of shares of the Corporation which are
beneficially owned by the stockholder; and (iv) any material interest of the
stockholder in such business. Notwithstanding anything in this charter to
the contrary, no business shall be conducted at the meeting except in
accordance with the procedures set forth in this sub-paragraph (7).
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(C) The Chairman of the annual or special meeting of
stockholders may, if the facts warrant, determine and declare to such
meeting that a nomination or proposal was not made in accordance with the
foregoing procedure, and, if he should so determine, he shall so declare to
the meeting, and the defective nomination or proposal shall be disregarded
and laid over for action at the next succeeding adjourned, special or annual
meeting of the stockholders taking place 30 days or more thereafter. This
provision shall not require the holding of any adjourned or special meeting
of stockholders for the purpose of considering such defective nomination or
proposal.
(8) The Board of Directors shall, in connection with the
exercise of its business judgment involving a Business Combination (as
defined in Section 3-601 of the Corporations and Associations Article of the
Annotated Code of Maryland) or any actual or proposed transaction which
would or may involve a change in control of the Corporation (whether by
purchases of shares of stock or any other securities of the Corporation in
the open market, or otherwise, tender offer, merger, consolidation,
dissolution, liquidation, sale of all or substantially all of the assets of
the Corporation, proxy solicitation or otherwise), in determining what is in
the best interests of the Corporation and its stockholders and in making any
recommendation to its stockholders, give due consideration to all relevant
factors, including, but not limited to (A) the economic effect, both
immediate and long-term, upon the Corporation's stockholders, including
stockholders, if any, not to participate in the transaction; (B) the social
and economic effect on the employees, depositors and customers of, and
others dealing with, the Corporation and its subsidiaries and on the
communities in which the Corporation and its subsidiaries operate or are
located; (C) whether the proposal is acceptable based on the historical and
current operating results or financial condition of the Corporation; (D)
whether a more favorable price could be obtained for the Corporation's stock
or other securities in the future; (E) the reputation and business practices
of the offeror and its management and affiliates as they would affect the
employees of the Corporation and its subsidiaries; (F) the future value of
the stock or any other securities of the Corporation; (G) any antitrust or
other legal and regulatory issues that are raised by the proposal; and (H)
the business and financial condition and earnings prospects of the acquiring
person or entity, including, but not limited to, debt service and other
existing financial obligations, financial obligations to be incurred in
connection with the acquisition, and other likely financial obligations of
the acquiring person or entity. If the Board of Directors determines that
any proposed Business Combination (as defined in Section 3-601 of the
Corporations and Associations Article of the Annotated Code of Maryland) or
actual or proposed transaction which would or may involve a change in
control of the Corporation should be rejected, it may take any lawful action
to defeat such transaction, including, but not limited to, any or all of the
following: advising stockholders not to accept the proposal; instituting
litigation against the party making the proposal;
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filing complaints with governmental and regulatory authorities; acquiring
the stock or any of the securities of the Corporation; selling or otherwise
issuing authorized but unissued stock, other securities or treasury stock or
granting options with respect thereto; acquiring a company to create an
antitrust or other regulatory problem for the party making the proposal; and
obtaining a more favorable offer from another individual or entity.
(9) With the exception of any Business Combination (as
defined in Section 3-601 of the Corporations and Associations Article of the
Annotated Code of Maryland) between the Corporation and Dr. Robert W.
Deutsch or members of his immediate family, the Corporation shall be subject
to the provisions of Section 3-601 et seq. of the Corporations and
Associations Articles of the Annotated Code of Maryland.
(10) Acquisitions of the capital stock of the Corporation by
Dr. Robert W. Deutsch, members of his immediate family, trusts for his or
their benefit or charitable foundations controlled by Dr. Deutsch or members
of his immediate family shall be exempt from the provisions of Section 3-701
et seq. of the Corporations and Associations Articles of the Annotated Code
of Maryland.
(11) In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors of the Corporation is expressly
authorized to make, repeal, alter, amend and rescind the By-Laws of the
Corporation upon vote of not less than two-thirds of the Directors then in
office. Notwithstanding any other provision of this charter or the By-Laws
of the Corporation (and notwithstanding the fact that some lesser percentage
may be specified by law), the By-Laws shall not be made, repealed, altered,
amended or rescinded by the stockholders of the Corporation except by the
vote of the holders of not less than 80% of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election
of directors (considered for this purpose as one class) cast at a meeting of
the stockholders called for that purpose (provided that notice of such
proposed adoption, repeal, alteration, amendment or rescission is included
in the notice of such meeting), or, as set forth above, by the Board of
Directors.
(b) The Corporation reserves the right from time to time to make
any amendments of its charter which may now or hereafter be authorized by
law, including any amendments changing the terms or contract rights, as
expressly set forth in its charter, of any of its outstanding stock by
classification, reclassification or otherwise, but no such amendment which
changes such terms or contract rights of any of its outstanding stock shall
be valid unless such amendment shall have been authorized by not less than a
majority of the aggregate number of the votes entitled to be cast thereon,
by a vote at a meeting or in writing with or without a meeting; provided,
however, that any amendment to, repeal or adopt any provision
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inconsistent with Article SEVENTH or Article EIGHTH shall have been
authorized by not less than 80% of the aggregate votes entitled to be cast
thereon (considered for this purpose as a single class), by vote at a
meeting or in writing with or without a meeting.
(c) The enumeration and definition of particular powers of the
Board of Directors included in the foregoing shall in no way be limited or
restricted by reference to or inference from the terms of any other clause
of this or any other Article of the charter of the Corporation, or construed
as or deemed by inference or otherwise in any manner to exclude or limit any
powers conferred upon the Board of Directors under the General Laws of the
State of Maryland now or hereafter in force.
NINTH: The duration of the Corporation shall be perpetual.
THIRD: The amendment increases the authorized stock of the Corporation
from 5,000,000 shares of Common Stock at $.10 par value per share, or an
aggregate par value of $500,000, to 50,000,000 shares, all of which is initially
classified as Common Stock, par value $.10 per share, or an aggregate par value
of $5,000,000.
FOURTH: The foregoing amendment and restatement of the Charter of the
Corporation has been advised by the Board of Directors and approved by the
stockholders of the Corporation.
IN WITNESS WHEREOF, RWD Technologies, Inc. has caused these presents to be
signed in its name and on its behalf by its President and witnessed by its
Secretary on March 18, 1997.
WITNESS: RWD TECHNOLOGIES, INC.
/s/ Ronald E. Holtz /s/ John H. Beakes
---------------------------- ---------------------------
Ronald E. Holtz John H. Beakes
Secretary President
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THE UNDERSIGNED, President of RWD Technologies, Inc., who executed on
behalf of the Corporation the foregoing Articles of Amendment and
Restatement of which this certificate is made a part, hereby acknowledges in
the name and on behalf of said Corporation the foregoing Articles of
Amendment and Restatement to be the corporate act of said Corporation and
hereby certifies that, to the best of his knowledge, information and belief,
the matters and facts set forth therein with respect to the authorization
and approval thereof are true in all material respects under the penalties
of perjury.
/s/ John H. Beakes
------------------------------
John H. Beakes
President
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RWD TECHNOLOGIES, INC. Exhibit 3.02
AMENDED AND RESTATED BY-LAWS
ARTICLE I
STOCKHOLDERS
SECTION 1.01. ANNUAL MEETING. The Corporation shall hold an annual
meeting of its stockholders to elect directors and transact any other business
within its powers, either at 10:00 a.m. on the last Thursday of May in each year
if not a legal holiday, or at such other time on such other day falling on or
before the 30th day thereafter as shall be set by the Board of Directors.
Except as the Charter or statute provides otherwise, any business may be
considered at an annual meeting without the purpose of the meeting having been
specified in the notice. Failure to hold an annual meeting does not invalidate
the Corporation's existence or affect any otherwise valid corporate acts.
SECTION 1.02. SPECIAL MEETING. At any time in the interval between annual
meetings, a special meeting of the stockholders may be called by the Chairman of
the Board or the President or by a majority of the Board of Directors by vote at
a meeting or in writing (addressed to the Secretary of the Corporation) with or
without a meeting. Special meetings of the stockholders shall be called by the
Secretary at the request of the stockholders only as may be required by law. A
request for a special meeting shall state the purpose of the meeting and the
matters proposed to be acted on at it. The Secretary shall inform the
stockholders who make the request of the reasonably estimated costs of preparing
and mailing a notice of the meeting and, on payment of these costs to the
Corporation, notify each stockholder entitled to notice of the meeting. Unless
requested by stockholders entitled to cast a majority of all the votes entitled
to be cast at the meeting, a special meeting need not be called to consider any
matter which is substantially the same as a matter voted on at any special
meeting of stockholders held in the preceding 12 months.
SECTION 1.03. PLACE OF MEETINGS. Meetings of stockholders shall be held
at such place in the United States as is set from time to time by the Board of
Directors.
SECTION 1.04. NOTICE OF MEETINGS; WAIVER OF NOTICE. Not less than ten nor
more than 90 days before each stockholders' meeting, the Secretary shall give
written notice of the meeting to each stockholder entitled to vote at the
meeting and each other stockholder entitled to notice of the meeting. The
notice shall state the time and place of the meeting and, if the meeting is a
special meeting or notice of the purpose is required by statute, the purpose of
the meeting. Notice is given to a stockholder when it is personally delivered
to him or her, left at his or her residence or usual place of business, or
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mailed to him or her at his or her address as it appears on the records of the
Corporation. Notwithstanding the foregoing provisions, each person who is
entitled to notice waives notice if he or she before or after the meeting signs
a waiver of the notice which is filed with the records of stockholders'
meetings, or is present at the meeting in person or by proxy.
SECTION 1.05. QUORUM; VOTING. Unless statute or the Charter provides
otherwise, at a meeting of stockholders the presence in person or by proxy of
stockholders entitled to cast a majority of all the votes entitled to be cast at
the meeting constitutes a quorum, and a majority of all the votes cast at a
meeting at which a quorum is present is sufficient to approve any matter which
properly comes before the meeting, except that a plurality of all the votes cast
at a meeting at which a quorum is present is sufficient to elect a director.
SECTION 1.06. ADJOURNMENTS. Whether or not a quorum is present, a meeting
of stockholders convened on the date for which it was called may be adjourned
from time to time without further notice by a majority vote of the stockholders
present in person or by proxy to a date not more than 120 days after the
original record date. Any business which might have been transacted at the
meeting as originally notified may be deferred and transacted at any such
adjourned meeting at which a quorum shall be present.
SECTION 1.07. GENERAL RIGHT TO VOTE; PROXIES. Unless the Charter provides
for a greater or lesser number of votes per share or limits or denies voting
rights, each outstanding share of stock, regardless of class, is entitled to one
vote on each matter submitted to a vote at a meeting of stockholders. In all
elections for directors, each share of stock may be voted for as many
individuals as there are directors to be elected and for whose election the
share is entitled to be voted. A stockholder may vote the stock the stockholder
owns of record either in person or by proxy. A stockholder may sign a writing
authorizing another person to act as proxy. Signing may be accomplished by the
stockholder or the stockholder's authorized agent signing the writing or causing
the stockholder's signature to be affixed to the writing by any reasonable
means, including facsimile signature. A stockholder may authorize another
person to act as proxy by transmitting, or authorizing the transmission of, a
telegram, cablegram, datagram, or other means of electronic transmission to the
person authorized to act as proxy or to a proxy solicitation firm, proxy support
service organization, or other person authorized by the person who will act as
proxy to receive the transmission. Unless a proxy provides otherwise, it is not
valid more than 11 months after its date. A proxy is revocable by a stockholder
at any time without condition or qualification unless the proxy states that it
is irrevocable and the proxy is coupled with an interest. A proxy may be made
irrevocable for so long as it is coupled with an interest. The interest with
which a proxy may be coupled includes an interest in the stock to be voted under
the proxy or another general interest in the Corporation or its assets or
liabilities.
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SECTION 1.08. LIST OF STOCKHOLDERS. At each meeting of stockholders, a
full, true and complete list of all stockholders entitled to vote at such
meeting, showing the number and class of shares held by each and certified by
the transfer agent for such class or by the Secretary, shall be furnished by the
Secretary.
SECTION 1.09. CONDUCT OF BUSINESS AND VOTING. At all meetings of
stockholders, unless the voting is conducted by inspectors, the proxies and
ballots shall be received, and all questions touching the qualification of
voters and the validity of proxies, the acceptance or rejection of votes and
procedures for the conduct of business not otherwise specified by these By-Laws,
the Charter or law, shall be decided or determined by the chairman of the
meeting. If demanded by stockholders, present in person or by proxy, entitled
to cast 10% in number of votes entitled to be cast, or if ordered by the
chairman, the vote upon any election or question shall be taken by ballot and,
upon like demand or order, the voting shall be conducted by two inspectors, in
which event the proxies and ballots shall be received, and all questions
touching the qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided, by such inspectors. Unless
so demanded or ordered, no vote need be by ballot and voting need not be
conducted by inspectors. The stockholders at any meeting may choose an
inspector or inspectors to act at such meeting, and in default of such election
the chairman of the meeting may appoint an inspector or inspectors. No
candidate for election as a director at a meeting shall serve as an inspector
thereat.
SECTION 1.10. INFORMAL ACTION BY STOCKHOLDERS. Any action required or
permitted to be taken at a meeting of stockholders may be taken without a
meeting if there is filed with the records of stockholders meetings an unanimous
written consent which sets forth the action and is signed by each stockholder
entitled to vote on the matter and a written waiver of any right to dissent
signed by each stockholder entitled to notice of the meeting but not entitled to
vote at it.
SECTION 1.11. STOCKHOLDER PROPOSALS. For any stockholder proposal to be
presented in connection with an annual meeting of stockholders of the
Corporation, including any proposal relating to the nomination of a director to
be elected to the Board of Directors of the Corporation, the stockholders must
have given timely notice thereof in writing to the Secretary of the Corporation.
To be timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not less than 60 days nor more
than 90 days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days from
such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the 90th day prior to such annual meeting and not
later than the close of business on the later of the 60th day prior to such
annual meeting or the tenth day following the day on which public announcement
of the date of such meeting is first made. Such stockholder's notice shall set
forth (a) as to each person whom the stockholder proposes to nominate for
election or reelection as a director all information relating to such person
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that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (b) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and of the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is
made, (i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class and number
of shares of stock of the Corporation which are owned beneficially and of record
by such stockholders and such beneficial owner. For the 1998 annual meeting the
previous year's meeting shall be deemed to have take place on May 31, 1997;
provided that this sentence shall cease to be a part of the By-Laws after the
holding of the 1998- annual meeting and any adjournments thereof.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.01. FUNCTION OF DIRECTORS. The business and affairs of the
Corporation shall be managed under the direction of its Board of Directors. All
powers of the Corporation may be exercised by or under authority of the Board of
Directors, except as conferred on or reserved to the stockholders by statute or
by the Charter or By-Laws.
SECTION 2.02. NUMBER OF DIRECTORS. The Corporation shall have at least
three directors; provided that, if there is no stock outstanding, the number of
Directors may be less than three but not less than one, and, if there is stock
outstanding and so long as there are less than three stockholders, the number of
Directors may be less than three but not less than the number of stockholders.
The Corporation shall have the number of directors provided in the Charter until
changed as herein provided. Two-thirds of the entire Board of Directors may
alter the number of directors set by the Charter to not exceeding 25 nor less
than the minimum number then permitted herein, but the action may not affect the
tenure of office of any director.
SECTION 2.03. ELECTION AND TENURE OF DIRECTORS. The directors shall be
divided into three classes as nearly equal in number as possible. At each
successive annual meeting of stockholders, the holders of stock present in
person or by proxy at such meeting and entitled to vote thereat shall elect
members of each successive class to serve for three year terms and until their
successors are elected and qualify. If the number of directors is changed, any
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increase or decrease shall be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as possible, and any
additional director of any class shall, subject to Section 2.05, hold office for
a term that shall coincide with the remaining term of that class, but in no case
shall a decrease in the number of directors shorten the term of any incumbent
director.
SECTION 2.04. REMOVAL OF DIRECTOR. Subject to the rights of the holders
of any class separately entitled to elect one or more directors, any director,
or the entire Board of Directors, may be removed from office at any time, but
only for cause and then only by the affirmative vote of the holders of at least
80% of the combined voting power of all classes of shares of capital stock
entitled to vote in the election for directors.
SECTION 2.05. VACANCY ON BOARD. Subject to the rights of the holders of
any class of stock separately entitled to elect one or more directors, the
stockholders may elect a successor to fill a vacancy on the Board of Directors
which results from the removal of a director. A director elected by the
stockholders to fill a vacancy which results from the removal of a director
serves for the balance of the term of the removed director. Subject to the
rights of the holders of any class of stock separately entitled to elect one or
more directors, a majority of the remaining directors, whether or not sufficient
to constitute a quorum, may fill a vacancy on the Board of Directors which
results from any cause except an increase in the number of directors, and a
majority of the entire Board of Directors may fill a vacancy which results from
an increase in the number of directors. A director elected by the Board of
Directors to fill a vacancy serves until the next annual meeting of stockholders
and until his successor is elected and qualifies.
SECTION 2.06. REGULAR MEETINGS. After each meeting of stockholders at
which directors shall have been elected, the Board of Directors shall meet as
soon as practicable for the purpose of organization and the transaction of other
business. In the event that no other time and place are specified by resolution
of the Board, the President or the Chairman, with notice in accordance with
Section 2.08, the Board of Directors shall meet immediately following the close
of, and at the place of, such stockholders' meeting. Any other regular meeting
of the Board of Directors shall be held on such date and at any place as may be
designated from time to time by the Board of Directors.
SECTION 2.07. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board or the
President or by one-third of the Board of Directors by vote at a meeting, or in
writing with or without a meeting. A special meeting of the Board of Directors
shall be held on such date and at any place as may be designated from time to
time by the Board of Directors. In the absence of designation such meeting
shall be held at such place as may be designated in the call.
SECTION 2.08. NOTICE OF MEETING. Except as provided in Section 2.06, the
Secretary shall give notice to each director of each regular and special meeting
of the Board of Directors. The notice shall state the time and place of the
meeting. Notice is given to a director when it is delivered personally to him
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or her, left at his or her residence or usual place of business, or sent by
telegraph, facsimile transmission or telephone, at least 24 hours before the
time of the meeting or, in the alternative by mail to his or headdress as it
shall appear on the records of the Corporation, at least 72 hours before the
time of the meeting. Unless the By-Laws or a resolution of the Board of
Directors provides otherwise, the notice need not state the business to be
transacted at or the purposes of any regular or special meeting of the Board of
Directors. No notice of any meeting of the Board of Directors need be given to
any director who attends except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened, or to any director who, in writing
executed and filed with the records of the meeting either before or after the
holding thereof, waives such notice. Any meeting of the Board of Directors,
regular or special, may adjourn from time to time to reconvene at the same or
some other place, and no notice need be given of any such adjourned meeting
other than by announcement.
SECTION 2.09. ACTION BY DIRECTORS. Unless statute or the Charter or By-
Laws requires a greater proportion, the action of a majority of the directors
present at a meeting at which a quorum is present is action of the Board of
Directors. A majority of the entire Board of Directors shall constitute a
quorum for the transaction of business. In the absence of a quorum, the
directors present by majority vote and without notice other than by announcement
may adjourn the meeting from time to time until a quorum shall attend. At any
such adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
notified. Any action required or permitted to be taken at a meeting of the
Board of Directors may be taken without a meeting, if an unanimous written
consent which sets forth the action is signed by each member of the Board and
filed with the minutes of proceedings of the Board.
SECTION 2.10. MEETING BY CONFERENCE TELEPHONE. Members of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
constitutes presence in person at a meeting, but shall not constitute attendance
for the purpose of compensation pursuant to Section 2.11.
SECTION 2.11. COMPENSATION. By resolution of the Board of Directors a
fixed sum and expenses, if any, for attendance at each regular or special
meeting of the Board of Directors or of committees thereof, and other
compensation for their services as such or on committees of the Board of
Directors, may be paid to directors. Directors who are full-time employees of
the Corporation need not be paid for attendance at meetings of the board or
committees thereof for which fees are paid to other directors. A director who
serves the Corporation in any other capacity also may receive compensation for
such other services, pursuant to a resolution of the directors.
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SECTION 2.12. RESIGNATION. Any director may resign at any time by sending
a written notice of such resignation to the home office of the Corporation
addressed to the Chairman of the Board or the President. Unless otherwise
specified herein such resignation shall take effect upon receipt thereof by the
Chairman of the Board or the President.
SECTION 2.13. PRESUMPTION OF ASSENT. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent or abstention shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the Secretary of the Corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to
a director who votes in favor of such action.
SECTION 2.14. ADVISORY DIRECTORS. The Board of Directors may by
resolution appoint advisory directors to the Board, who may also serve as
directors emeriti, and shall have such authority and receive such compensation
and reimbursement as the Board of Directors shall provide. Advisory directors
or directors emeriti shall not have the authority to participate by vote in the
transaction of business.
ARTICLE III.
COMMITTEES
SECTION 3.01. COMMITTEES. The Board of Directors may appoint from among
its members an Executive Committee, an Audit Committee, a Compensation
Committee, a Technical and Business Review Committee and other committees
composed of at least the number of directors required under Maryland General
Corporation Law, as in effect from time to time, and delegate to these
committees any of the powers of the Board of Directors, except the power to
declare dividends or other distributions on stock, elect directors, issue stock
other than as provided in the next sentence, recommend to the stockholders any
action which requires stockholder approval, amend the By-Laws, or approve any
merger or share exchange which does not require stockholder approval. If the
Board of Directors has given general authorization for the issuance of stock, a
committee of the Board, in accordance with a general formula or method specified
by the Board by resolution or by adoption of a stock option or other plan, may
fix the terms of stock subject to classification or reclassification and the
terms on which any stock may be issued, including all terms and conditions
required or permitted to be established or authorized by the Board of Directors.
SECTION 3.02. COMMITTEE PROCEDURE. Each committee may fix rules of
procedure for its business. A majority of the members of a committee shall
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constitute a quorum for the transaction of business and the act of a majority of
those present at a meeting at which a quorum is present shall be the act of the
committee. The members of a committee present at any meeting, whether or not
they constitute a quorum, may appoint a director to act in the place of an
absent member. Any action required or permitted to be taken at a meeting of a
committee may be taken without a meeting, if an unanimous written consent which
sets forth the action is signed by each member of the committee and filed with
the minutes of the committee. The members of a committee may conduct any
meeting thereof by conference telephone in accordance with the provisions of
Section 2.10.
SECTION 3.03. EMERGENCY. In the event of a state of disaster of
sufficient severity to prevent the conduct and management of the affairs and
business of the Corporation by its directors and officers as contemplated by the
Charter and the By-Laws, any two or more available members of the then incumbent
Executive Committee shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Corporation in
accordance with the provisions of Section 3.01. In the event of the
unavailability, at such time, of a minimum of two members of the then incumbent
Executive Committee, the available directors shall elect an Executive Committee
consisting of any two members of the Board of Directors, whether or not they be
officers of the Corporation, which two members shall constitute the Executive
Committee for the full conduct and management of the affairs of the Corporation
in accordance with the foregoing provisions of this Section. This Section shall
be subject to implementation by resolution of the Board of Directors passed from
time to time for that purpose, and any provisions of the By-Laws (other than
this Section) and any resolutions which are contrary to the provisions of this
Section or to the provisions of any such implementary resolutions shall be
suspended until it shall be determined by any interim Executive Committee acting
under this Section that it shall be to the advantage of the Corporation to
resume the conduct and management of its affairs and business under all the
other provisions of the By-Laws.
SECTION 3.04. AUDIT COMMITTEE. The principal functions of the Audit
Committee, if one shall be formed, shall include making recommendations to the
Board of Directors regarding the annual selection of independent public
accountants, reviewing the proposed scope of each annual audit and reviewing the
recommendations of the independent public accountants as a result of their audit
of the Corporation's financial Statements. In general, the Audit Committee
shall perform such duties as are customarily performed by an audit committee of
a corporation and shall perform such other duties and have such other powers as
are from time to time assigned to it by the Board of Directors.
SECTION 3.05. COMPENSATION COMMITTEE. The principal functions of the
Compensation Committee, if one shall be formed, shall include establishing the
compensation of officers of the Corporation and to establish and administer the
Corporation's compensation programs, including the grant of options under the
Corporation's Amended and Restated Equity Participation Plan. In general, the
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Compensation Committee shall perform such duties as are customarily performed by
a compensation committee of a corporation and shall perform such other duties
and have such other powers as are from time to time assigned to it by the Board
of Directors.
SECTION 3.06. TECHNICAL AND BUSINESS REVIEW COMMITTEE. The principal
function of the Technical and Business Review Committee, if one shall be formed,
shall be to evaluate of the Corporation's performance in the areas of quality
and profitability on material contracts. In general, the Technical and Business
Review Committee shall perform such duties as are customarily performed by a
technical and business review committee of a corporation and shall perform such
other duties and have such other powers as are from time to time assigned to it
by the Board of Directors.
ARTICLE IV
OFFICERS
SECTION 4.01. EXECUTIVE AND OTHER OFFICERS. The Corporation shall have a
Chairman of the Board, a President, one or more Group Vice Presidents, a
Secretary, and a Treasurer. The Board of Directors shall designate who shall
serve as chief executive officer, who shall have general supervision of the
business and affairs of the Corporation, and may designate a chief operating
officer, who shall have supervision of the operations of the Corporation; a
chief financial officer, who shall have supervision of the financial and
accounting functions of the Corporation; and a chief information officer, who
shall have supervision of the Corporation's information systems. In the absence
of any designation the Chairman of the Board shall serve as chief executive
officer and the President shall serve as chief operating officer. The same
person may hold the offices of Chairman of the Board and President. The
Corporation may also have one or more Vice-Presidents, assistant officers, and
subordinate officers as may be established by the Board of Directors. A person
may hold more than one office in the Corporation except that no person may serve
concurrently as both President and Vice-President of the Corporation. The
Chairman of the Board shall be a director; the other officers may be directors.
SECTION 4.02. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of the Board of Directors and of the stockholders at
which he or she shall be present. Unless otherwise specified by the Board of
Directors, he or she shall be the chief executive officer of the Corporation.
In general, he or she shall perform such duties as are customarily performed by
the chief executive officer of a corporation and may perform any duties of the
President and shall perform such other duties and have such other powers as are
from time to time assigned to him or her by the Board of Directors.
SECTION 4.03. PRESIDENT. Unless otherwise provided by resolution of the
Board of Directors, the President, in the absence of the Chairman of the Board,
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shall preside at all meetings of the Board of Directors and of the stockholders
at which he or she shall be present. Unless otherwise specified by the Board of
Directors, the President shall be the chief operating officer of the Corporation
and perform the duties customarily performed by chief operating officers. He or
she may execute, in the name of the Corporation, all authorized deeds,
mortgages, bonds, contracts or other instruments, except in cases in which the
signing and execution thereof shall have been expressly delegated to some other
officer or agent of the Corporation. In general, he or she shall perform such
other duties customarily performed by a president of a corporation and shall
perform such other duties and have such other powers as are from time to time
assigned to him or her by the Board of Directors or the chief executive officer
of the Corporation.
SECTION 4.04. GROUP VICE-PRESIDENTS. The Group Vice-President or Group
Vice-Presidents, at the request of the chief executive officer or the President,
or in the President's absence or during his or her inability to act, shall
perform the duties and exercise the functions of the President, and when so
acting shall have the powers of the President. If there be more than one Group
Vice-President, the Board of Directors may determine which one or more of the
Group Vice-Presidents shall perform any of such duties or exercise any of such
functions, or if such determination is not made by the Board of Directors, the
chief executive officer, or the President may make such determination; otherwise
any of the Group Vice-Presidents may perform any of such duties or exercise any
of such functions. Each Group Vice-President shall perform such other duties
and have such other powers, and have such additional descriptive designations in
their titles (if any), as are from time to time assigned to them by the Board of
Directors, the chief executive officer, or the President.
SECTION 4.05. SECRETARY. The Secretary shall keep the minutes of the
meetings of the stockholders, of the Board of Directors and of any committees,
in books provided for the purpose; he or she shall see that all notices are duly
given in accordance with the provisions of the By-Laws or as required by law; he
or she shall be custodian of the records of the Corporation; he or she may
witness any document on behalf of the Corporation, the execution of which is
duly authorized, see that the corporate seal is affixed where such document is
required or desired to be under its seal, and, when so affixed, may attest the
same. In general, he or she shall perform such other duties customarily
performed by a secretary of a corporation, and shall perform such other duties
and have such other powers as are from time to time assigned to him or her by
the Board of Directors, the chief executive officer, or the President.
SECTION 4.06. TREASURER. The Treasurer, who shall also be the Chief
Financial Officer if one shall be elected, shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit, or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust companies
or other depositories as shall, from time to time, be selected by the Board of
Directors; he or she shall render to the President and to the Board of
Directors, whenever requested, an account of the financial condition of the
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Corporation. In general, he or she shall perform such other duties customarily
performed by a treasurer of a corporation, and shall perform such other duties
and have such other powers as are from time to time assigned to him or her by
the Board of Directors, the chief executive officer, or the President.
SECTION 4.07. ASSISTANT AND SUBORDINATE OFFICERS. The assistant and
subordinate officers of the Corporation are all officers below the office of
Group Vice-President, Secretary, or Treasurer. The assistant or subordinate
officers shall have such duties as are from time to time assigned to them by the
Board of Directors, the Chief Executive Officer, or the President.
SECTION 4.08. ELECTION, TENURE AND REMOVAL OF OFFICERS. The Board of
Directors shall elect the officers of the Corporation. The Board of Directors
may from time to time authorize any committee or officer to appoint assistant
and subordinate officers. Election or appointment of an officer, employee or
agent shall not of itself create contract rights. All officers shall be
appointed to hold their offices, respectively, during the pleasure of the Board.
The Board of Directors (or, as to any assistant or subordinate officer, any
committee or officer authorized by the Board) may remove an officer at any time.
The removal of an officer does not prejudice any of his or her contract rights.
The Board of Directors (or, as to any assistant or subordinate officer, any
committee or officer authorized by the Board) may fill a vacancy which occurs in
any office for the unexpired portion of the term.
SECTION 4.09. COMPENSATION. The Board of Directors shall have power to
fix the salaries and other compensation and remuneration, of whatever kind, of
all officers of the Corporation. No officer shall be prevented from receiving
such salary by reason of the fact that he or she is also a director of the
Corporation. The Board of Directors may authorize any committee or officer,
upon whom the power of appointing assistant and subordinate officers may have
been conferred, to fix the salaries, compensation and remuneration of such
assistant and subordinate officers.
ARTICLE V
DIVISIONAL TITLES
SECTION 5.01. CONFERRING DIVISIONAL TITLES. The Board of Directors may
from time to time confer upon any employee of a division of the Corporation the
title of President, Vice President, Director, Treasurer or Controller of such
division or any other title or titles deemed appropriate, or may authorize the
Chairman of the Board or the President to do so. Any such titles so conferred
may be discontinued and withdrawn at any time by the Board of Directors, or by
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the Chairman of the Board or the President if so authorized by the Board of
Directors. Any employee of a division designated by such a divisional title
shall have the powers and duties with respect to such division as shall be
prescribed by the Board of Directors, the Chairman of the Board or the
President.
SECTION 5.02. EFFECT OF DIVISIONAL TITLES. The conferring of divisional
titles shall not create an office of the Corporation under Article IV unless
specifically designated as such by the Board of Directors; but any person who is
an officer of the Corporation may also have a divisional title.
ARTICLE VI
STOCK
SECTION 6.01. CERTIFICATES FOR STOCK. Each stockholder is entitled to
certificates which represent and certify the shares of stock he or she holds in
the Corporation. Each stock certificate shall include on its face the name of
the Corporation, the name of the stockholder or other person to whom it is
issued, and the class of stock and number of shares it represents. It shall be
in such form, not inconsistent with law or with the Charter, as shall be
approved by the Board of Directors or any officer or officers designated for
such purpose by resolution of the Board of Directors. Each stock certificate
shall be signed by the Chairman of the Board, the President, or a Vice-
President, and countersigned by the Secretary, an Assistant Secretary, the
Treasurer, or an Assistant Treasurer. Each certificate may be sealed with the
actual corporate seal or a facsimile of it or in any other form and the
signatures may be either manual or facsimile signatures. A certificate is valid
and may be issued whether or not an officer who signed it is still an officer
when it is issued.
SECTION 6.02. TRANSFERS. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem expedient concerning
the issue, transfer and registration of certificates of stock; and may appoint
transfer agents and registrars thereof. The duties of transfer agent and
registrar may be combined.
SECTION 6.03. RECORD DATES OR CLOSING OF TRANSFER BOOKS. The Board of
Directors may set a record date or direct that the stock transfer books be
closed for a stated period for the purpose of making any proper determination
with respect to stockholders, including which stockholders are entitled to
notice of a meeting, vote at a meeting, receive a dividend, or be allotted other
rights. The record date may not be prior to the close of business on the day
the record date is fixed nor, subject to Section 1.06, more than 90 days before
the date on which the action requiring the determination will be taken; the
transfer books may not be closed for a period longer than 20 days; and, in the
case of a meeting of stockholders, the record date or the closing of the
transfer books shall be at least ten days before the date of the meeting.
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SECTION 6.04. STOCK LEDGER. The Corporation shall maintain a stock ledger
which contains the name and address of each stockholder and the number of shares
of stock of each class which the stockholder holds. The stock ledger may be in
written form or in any other form which can be converted within a reasonable
time into written form for visual inspection. The original or a duplicate of
the stock ledger shall be kept at the offices of a transfer agent for the
particular class of stock, or, if none, at the principal office in the State of
Maryland or the principal executive offices of the Corporation.
SECTION 6.05. CERTIFICATION OF BENEFICIAL OWNERS. The Board of Directors
may adopt by resolution a procedure by which a stockholder of the Corporation
may certify in writing to the Corporation that any shares of stock registered in
the name of the stockholder are held for the account of a specified person other
than the stockholder. The resolution shall set forth the class of stockholders
who may certify; the purpose for which the certification may be made; the form
of certification and the information to be contained in it; if the certification
is with respect to a record date or closing of the stock transfer books, the
time after the record date or closing of the stock transfer books within which
the certification must be received by the Corporation; and any other provisions
with respect to the procedure which the Board considers necessary or desirable.
On receipt of a certification which complies with the procedure adopted by the
Board in accordance with this Section, the person specified in the certification
is, for the purpose set forth in the certification, the holder of record of the
specified stock in place of the stockholder who makes the certification.
SECTION 6.06. LOST STOCK CERTIFICATES. The Board of Directors of the
Corporation may determine the conditions for issuing a new stock certificate in
place of one which is alleged to have been lost, stolen, or destroyed, or the
Board of Directors may delegate such power to any officer or officers of the
Corporation. In their discretion, the Board of Directors or such officer or
officers may refuse to issue such new certificate save upon the order of some
court having jurisdiction in the premises.
ARTICLE VII
FINANCE
SECTION 7.01. CHECKS, DRAFTS, ETC. All checks, drafts and orders for the
payment of money, notes and other evidences of indebtedness, issued in the name
of the Corporation, shall, unless otherwise provided by resolution of the Board
of Directors, be signed by the President, a Vice-President or an Assistant Vice-
President and countersigned by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary.
SECTION 7.02. ANNUAL STATEMENT OF AFFAIRS. The President or chief
accounting officer shall prepare annually a full and correct statement of the
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affairs of the Corporation, to include a balance sheet and a financial statement
of operations for the preceding fiscal year. The statement of affairs shall be
submitted at the annual meeting of the stockholders and, within 20 days after
the meeting, placed on file at the Corporation's principal office.
SECTION 7.03. FISCAL YEAR. The fiscal year of the Corporation shall be
the twelve calendar months period ending December 31 in each year, unless
otherwise provided by the Board of Directors.
SECTION 7.04. DIVIDENDS. If declared by the Board of Directors at any
meeting thereof, the Corporation may pay dividends on its shares in cash,
property, or in shares of the capital stock of the Corporation, unless such
dividend is contrary to law or to a restriction contained in the Charter.
SECTION 7.05. CONTRACTS. To the extent permitted by applicable law, and
except as otherwise prescribed by the Charter or these By-Laws with respect to
certificates for shares, the Board of Directors may authorize any officer,
employee, or agent of the Corporation to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Corporation. Such
authority may be general or confined to specific instances.
SECTION 7.06. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued in its name unless
authorized by the Board of Directors. Such authority may be general or confined
to specific instances.
SECTION 7.07. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in any of its duly authorized depositories as the Board of Directors may select.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. PROCEDURE. Any indemnification, or payment of expenses in
advance of the final disposition of any proceeding, shall be made promptly, and
in any event within 60 days, upon the written request of the director or officer
entitled to seek indemnification (the "Indemnified Party"). The right to
indemnification and advances hereunder shall be enforceable by the Indemnified
Party in any court of competent jurisdiction, if (i) the Corporation denies such
request, in whole or in part, or (ii) no disposition thereof is made within 60
days. The Indemnified Party's costs and expenses incurred in connection with
successfully establishing his or her right to indemnification, in whole or in
part, in any such action shall also be reimbursed by the Corporation. It shall
be a defense to any action for advance for expenses that (a) a determination has
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been made that the facts then known to those making the determination would
preclude indemnification or (b) the Corporation has not received both (i) an
undertaking as required by law to repay such advances in the event it shall
ultimately be determined that the standard of conduct has not been met and (ii)
a written affirmation by the Indemnified Party of such Indemnified Party's good
faith belief that the standard of conduct necessary for indemnification by the
Corporation has been met.
SECTION 8.02. EXCLUSIVITY, ETC. The indemnification and advance of
expenses provided by the Charter and these By-Laws shall not be deemed exclusive
of any other rights to which a person seeking indemnification or advance of
expenses may be entitled under any law (common or statutory), or any agreement,
vote of stockholders or disinterested directors or other provision that is
consistent with law, both as to action in his or her official capacity and as to
action in another capacity while holding office or while employed by or acting
as agent for the Corporation, shall continue in respect of all events occurring
while a person was a director or officer after such person has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of such person. All rights to indemnification and
advance of expenses under the Charter of the Corporation and hereunder shall be
deemed to be a contract between the Corporation and each director or officer of
the Corporation who serves or served in such capacity at any time while this By-
Law is in effect. Nothing herein shall prevent the amendment of this By-Law,
provided that no such amendment shall diminish the rights of any person
hereunder with respect to events occurring or claims made before its adoption or
as to claims made after its adoption in respect of events occurring before its
adoption. Any repeal or modification of this By-Law shall not in any way
diminish any rights to indemnification or advance of expenses of such director
or officer or the obligations of the Corporation arising hereunder with respect
to events occurring, or claims made, while this By-Law or any provision hereof
is in force.
SECTION 8.03. SEVERABILITY; DEFINITIONS. The invalidity or
unenforceability of any provision of this Article VIII shall not affect the
validity or enforceability of any other provision hereof. The phrase "this By-
Law" in this Article VIII means this Article VIII in its entirety.
ARTICLE IX
SUNDRY PROVISIONS
SECTION 9.01. BOOKS AND RECORDS. The Corporation shall keep correct and
complete books and records of its accounts and transactions and minutes of the
proceedings of its stockholders and Board of Directors and of any executive or
other committee when exercising any of the powers of the Board of Directors.
The books and records of a Corporation may be in written form or in any other
form which can be converted within a reasonable time into written form for
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visual inspection. Minutes shall be recorded in written form but may be
maintained in the form of a reproduction. The original or a certified copy of
the By-Laws shall be kept at the principal office of the Corporation.
SECTION 9.02. CORPORATE SEAL. The Board of Directors shall provide a
suitable seal, bearing the name of the Corporation, which shall be in the charge
of the Secretary. The Board of Directors may authorize one or more duplicate
seals and provide for the custody thereof. If the Corporation is required to
place its corporate seal to a document, it is sufficient to meet the requirement
of any law, rule, or regulation relating to a corporate seal to place the word
"Seal" adjacent to the signature of the person authorized to sign the document
on behalf of the Corporation.
SECTION 9.03. BONDS. The Board of Directors may require any officer,
agent or employee of the Corporation to give a bond to the Corporation,
conditioned upon the faithful discharge of his or her duties, with one or more
sureties and in such amount as may be satisfactory to the Board of Directors.
SECTION 9.04. VOTING STOCK IN OTHER CORPORATIONS. Stock of other
corporations or associations, registered in the name of the Corporation, may be
voted by the President, a Vice-President, or a proxy appointed by either of
them. The Board of Directors, however, may by resolution appoint some other
person to vote such shares, in which case such person shall be entitled to vote
such shares upon the production of a certified copy of such resolution.
SECTION 9.05. MAIL. Any notice or other document which is required by
these By-Laws to be mailed shall be deposited in the United States mails,
postage prepaid.
SECTION 9.06. EXECUTION OF DOCUMENTS. A person who holds more than one
office in the Corporation may not act in more than one capacity to execute,
acknowledge, or verify an instrument required by law to be executed,
acknowledged, or verified by more than one officer.
SECTION 9.07. AMENDMENTS. Subject to the special provisions of Section
2.02, these By-Laws may be repealed, altered, amended or rescinded and new By-
Laws may be adopted (a) by the stockholders of the Corporation by vote of not
less than 80% of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for this
purpose as one class) cast at any meeting of the stockholders called for that
purpose (provided that notice of such proposal is included in the notice of such
meeting) or (b) by the Board of Directors by a vote of not less than two-thirds
of the Board of Directors at a meeting held in accordance with the provisions of
these By-Laws.
SECTION 9.07. RELIANCE. Each director, officer, employee and agent of the
Corporation shall, in the performance of his or her duties with respect to the
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<PAGE>
Corporation, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records of
the Corporation, upon an opinion of counsel or upon reports made to the
Corporation by any of its officers or employees or by the adviser, accountants,
appraisers or other experts or consultants selected by the Board of Directors or
officers of the Corporation, regardless of whether such counsel or expert may
also be a director.
SECTION 9.08. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
The directors shall have no responsibility to devote their full time to the
affairs of the Corporation. Any director or officer, employee or agent of the
Corporation, in his or her personal capacity or in a capacity as an affiliate,
employee, or agent of any other person, or otherwise, may have business
interests and engage in business activities similar to or in addition to those
of or relating to the Corporation.
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<PAGE>
Exhibit 4.01
RWD TECHNOLOGIES, INC.(R)
WE BRING PEOPLE AND TECHNOLOGY TOGETHER(R)
RWD
COMMON STOCK COMMON STOCK
$.10 PAR VALUE $.10 PAR VALUE
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
THIS CERTIFIES that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK $.10 PAR VALUE PER
SHARE OF
RWD TECHNOLOGIES, INC. (the "Corporation") transferable on the books of the
Corporation by the owner hereof in person or by duly authorized attorney upon
surrender of this Certificate properly endorsed.
This Certificate and the shares represented hereby, are issued and shall be
held subject to all the provisions of the articles of incorporation of the
Corporation, and any amendments thereto.
Each share of the common stock shall have equal rights, privileges and
preferences and shall be entitled to one vote per share. This Certificate is
not valid until countersigned and registered by the Transfer Agent and
Registrar.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed by the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
Secretary
Chairman/CEO
COUNTERSIGNED AND REGISTERED:
American Stock Transfer & Trust Company
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED OFFICER
<PAGE>
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT - Under the ________ Uniform Gifts
(State)
to Minors Act__________________as
(Name of Custodian)
custodian for____________________
(Name of Minor)
Additional abbreviations may also be used though not in the above list.
For value received,__________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint______________________________________________
________________________________________________________________________________
Attorney to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated,____________________
___________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
2
<PAGE>
RWD TECHNOLOGIES, INC. Exhibit 10.04
AMENDED AND RESTATED EQUITY PARTICIPATION PLAN
1. ESTABLISHMENT, PURPOSE AND TYPES OF AWARDS
RWD TECHNOLOGIES, INC. hereby amends and restates its 1988 Equity
Participation Plan, as previously amended from time to time, the effective date
of which was January 1, 1989 (as hereby amended and restated, the "Plan"). The
purpose of the Plan is to promote the long-term growth and profitability of RWD
Technologies, Inc. (the "Corporation") by (i) providing its employees with
incentives to improve stockholder value and to contribute to the growth and
financial success of the Corporation, and (ii) enabling the Corporation to
attract, retain and reward the best available employees..
The Plan permits the granting of stock options (including incentive stock
options qualifying under Code section 422 and nonqualified stock options), stock
appreciation rights, restricted or unrestricted stock awards, phantom stock,
performance awards, or any combination of the foregoing.
2. DEFINITIONS
Under this Plan, except where the context otherwise indicates, the
following definitions apply:
(a) "Affiliate" shall mean any entity, whether now or hereafter existing,
which controls, is controlled by, or is under common control with, the
Corporation (including, but not limited to, joint ventures, limited liability
companies, and partnerships). For this purpose, "control" shall mean ownership
of 50% or more of the total combined voting power of all classes of stock of the
entity.
(b) "Award" shall mean any stock option, stock appreciation right, stock
award, phantom stock award, or performance award.
(c) "Board" shall mean the Board of Directors of the Corporation.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended, and
any regulations promulgated thereunder.
(e) "Committee" shall mean the committee of the Board appointed to
administer the Plan; provided, however, that all the members of such committee
shall constitute both "Non-Employee Directors" within the meaning of Rule 16b-3,
and "outside directors" within the meaning of Code section 162(m).
(f) "Common Stock" shall mean shares of common stock of the Corporation,
par value of $.10 per share.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(h) "Fair Market Value" of a share of the Corporation's Common Stock for
any purpose on a particular date shall mean (i) the Closing Price on the trading
day preceding such date, (ii) the Closing Price on the fifth trading day
preceding such date or (iii) the average of the Closing Price on each of the ten
trading days preceding such date, as determined in the discretion of the
Committee on the date of grant; provided, however, that, with respect to any
Award, whichever definition is selected by the Committee on the date of grant
shall be used on all other dates on which the meaning of Fair Market Value is
required for the duration of that Award. As used herein, the "Closing Price" on
a particular date shall mean the last reported sale price per share of Common
Stock on such date or, in case no such sale takes place on such date, the
average of the high and low
<PAGE>
bid prices, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on a
national securities exchange or included for quotation on the Nasdaq Stock
Market (National Market), or if the Common Stock is not so listed or admitted to
trading or included for quotation, the last quoted price, or if the Common Stock
is not so quoted, the average of the high bid and low asked prices in the over-
the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or, if such system is no longer in use,
the principal other automated quotations system that may then be in use or, if
the Common Stock is not quoted by any such organization, the average of the
closing bid and asked prices, as furnished by a professional market maker making
a market in the Common Stock as selected in good faith by the Committee or by
such other source or sources as shall be selected in good faith by the
Committee. As used herein, the term "trading day" shall mean a day on which
public trading of securities occurs and is reported in the principal
consolidated reporting system referred to above, or if the Common Stock is not
listed or admitted to trading on a national securities exchange or included for
quotation on the Nasdaq Stock Market (National Market), any business day.
(i) "Grant Agreement" shall mean a written document memorializing the terms
and conditions of an Award granted pursuant to the Plan and shall incorporate
the terms of the Plan.
(j) "Parent" shall mean a corporation, whether now or hereafter existing,
within the meaning of the definition of "parent corporation" provided in Code
section 424(e), or any successor thereto.
(k) "Rule 16b-3" shall mean Rule 16b-3 as in effect under the Exchange Act
on the effective date of the Plan, or any successor provision prescribing
conditions necessary to exempt the issuance of securities under the Plan (and
further transactions in such securities) from Section 16(b) of the Exchange Act.
(l) "Subsidiary" and "subsidiaries" shall mean only a corporation or
corporations, whether now or hereafter existing, within the meaning of the
definition of "subsidiary corporation" provided in Section 424(f) of the Code,
or any successor thereto.
3. ADMINISTRATION
(a) Powers of the Committee. The Committee shall have all the powers vested
in it by the terms of the Plan, such powers to include authority, in its sole
and absolute discretion, to grant Awards under the Plan, prescribe Grant
Agreements evidencing such Awards and establish programs for granting Awards.
The Committee shall have full power and authority to take all other actions
necessary to carry out the purpose and intent of the Plan, including, but not
limited to, the authority to: (i) determine the eligible persons to whom, and
the time or times at which Awards shall be granted; (ii) determine the types of
Awards to be granted; (iii) determine the number of shares to be covered by or
used for reference purposes for each Award; (iv) impose such terms, limitations,
restrictions and conditions upon any such Award as the Committee shall deem
appropriate; (v) modify, amend, extend or renew outstanding Awards, or accept
the surrender of outstanding Awards and substitute new Awards (provided,
however, that any modification that would materially adversely affect any
outstanding Award shall not be made without the consent of the grantee); (vi)
accelerate or otherwise change the time in which an Award may be exercised or
becomes payable and to waive or accelerate the lapse, in whole or in part, of
any restriction or condition with respect to such Award, including, but not
limited to, any restriction or condition with respect to the vesting or
exercisability of an Award following termination of any grantee's employment;
and (vii) establish objectives and conditions, if any, for earning Awards and
determining whether Awards will be paid after the end of a performance period.
The Committee shall have full power and authority, in its sole and absolute
discretion, to administer and interpret the Plan and to adopt and interpret such
rules, regulations, agreements, guidelines and instruments
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<PAGE>
for the administration of the Plan and for the conduct of its business as the
Committee deems necessary or advisable.
(b) Non-Uniform Determinations. The Committee's determinations under the
Plan (including without limitation, determinations of the persons to receive
Awards, the form, amount and timing of such Awards, the terms and provisions of
such Awards and the Grant Agreements evidencing such Awards) need not be uniform
and may be made by the Committee selectively among persons who receive, or are
eligible to receive, Awards under the Plan, whether or not such persons are
similarly situated.
(c) Limited Liability. To the maximum extent permitted by law, no member
of the Committee shall be liable for any action taken or decision made in good
faith relating to the Plan or any Award thereunder.
(d) Indemnification. To the maximum extent permitted by law and by the
Corporation's charter and by-laws, the members of the Committee shall be
indemnified by the Corporation in respect of all their activities under the
Plan.
(e) Effect of Committee's Decision. All actions taken and decisions and
determinations made by the Committee on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Committee's sole
and absolute discretion and shall be conclusive and binding on all parties
concerned, including the Corporation, its stockholders, any participants in the
Plan and any other employee of the Corporation, and their respective successors
in interest.
4. SHARES AVAILABLE FOR THE PLAN; MAXIMUM AWARDS
Subject to adjustments as provided in Section 7(d) of the Plan, the shares
of Common Stock that may be delivered, purchased or used for reference purposes
(with respect to stock appreciation rights, phantom stock units or performance
awards) with respect to Awards granted under the Plan shall not exceed an
aggregate of 1,355,000 (4,065,000 after the Corporation's proposed 3:1 stock
split) shares of Common Stock. The Corporation shall reserve such number of
shares for Awards under the Plan, subject to adjustments as provided in Section
7(d) of the Plan. If any Award, or portion of an Award, under the Plan expires
or terminates unexercised, becomes unexercisable or is forfeited or otherwise
terminated, surrendered or canceled as to any shares, or if any shares of Common
Stock are surrendered to the Corporation in connection with any Award (whether
or not such surrendered shares were acquired pursuant to any Award), the shares
subject to such Award and the surrendered shares shall thereafter be available
for further Awards under the Plan; provided, however, than any such shares that
are surrendered to the Corporation in connection with any Award or that are
otherwise forfeited after issuance shall not be available for purchase pursuant
to incentive stock options intended to qualify under Code section 422.
Subject to adjustments as provided in Section 7(d) of the Plan, the maximum
number of shares of Common Stock subject to Awards of any combination that may
be granted during any one fiscal year of the Corporation to any one individual
shall be limited to 200,000. Such per-individual limit shall not be adjusted to
effect a restoration of shares of Common Stock with respect to which the related
Award is terminated, surrendered or canceled.
5. PARTICIPATION
Participation in the Plan shall be open to all employees, officers, and
directors of the Corporation, or of any Affiliate of the Corporation, as may be
selected by the Committee from time to time. Notwithstanding the foregoing,
participation in the Plan with respect to Awards of incentive stock options
shall be limited to employees of the Corporation or of any Parent or Subsidiary
of the Corporation.
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<PAGE>
6. AWARDS
The Committee, in its sole discretion, establishes the terms of all Awards
granted under the Plan. Awards may be granted individually or in tandem with
other types of Awards. All Awards are subject to the terms and conditions
provided in the Grant Agreement.
(a) Stock Options. The Committee may from time to time grant to eligible
participants Awards of incentive stock options as that term is defined in Code
section 422 or nonqualified stock options. Options intended to qualify as
incentive stock options under Code section 422 must have an exercise price at
least equal to Fair Market Value on the date of grant, but nonqualified stock
options may be granted with an exercise price less than Fair Market Value.
Incentive stock option Awards granted under the Plan shall comply in
all respects with Code section 422, including the following requirements of Code
section 422:
(i) Grant Date. An incentive stock option must be granted within 10
years of the earlier of the Plan's adoption by the Board of Directors or
approval by the Corporation's stockholders. The Grant Date is the date the
Committee formally acts to grant an Award to a grantee or such other date
as the Committee shall so designate at the time of taking such formal
action.
(ii) Exercise Price and Term. The exercise price of an incentive stock
option shall not be less than 100% of the Fair Market Value of the shares
on the date the stock option is granted and the term of the stock option
shall not exceed ten years. Notwithstanding the immediately preceding
sentence, the exercise price of any incentive stock option granted to a
grantee who owns (within the meaning of Code section 422(b)(6), after
application of the attribution rules in Code section 424(d)) more than 10%
of the total combined voting power of all classes of shares of the
Corporation, or its Parent or Subsidiary corporations, shall be not less
than 110% of the Fair Market Value of the Common Stock on the grant date
and the term of such stock option shall not exceed five years.
(iii) Maximum Grant. The aggregate Fair Market Value (determined as
of the Grant Date) of shares of Common Stock with respect to which all
incentive stock options first become exercisable by any grantee in any
calendar year under this or any other plan of the Corporation and its
Parent and Subsidiary corporations may not exceed $100,000 or such other
amount as may be permitted from time to time under Code section 422. To
the extent that such aggregate Fair Market Value shall exceed $100,000, or
other applicable amount, such stock options shall be treated as
nonqualified stock options.
(iv) Grantee. Incentive stock options shall only be issued to
employees of the Corporation, or of a Parent or Subsidiary of the
Corporation.
(v) Tandem Options Prohibited. An incentive stock option may not be
granted in tandem with a nonqualified option in such a manner that the
exercise of one affects a grantee's right to exercise the other.
(vi) Designation. No stock option shall be an incentive stock option
unless so designated by the Committee at the time of grant or in the Grant
Agreement evidencing such stock option.
The requirements set forth in clauses (i) through (vi) above shall be
deemed to be amended, without further action on the part of the Board or
the stockholders of the Corporation to conform with the provisions of Code
section 422, as the same may be in effect from time to time; provided,
however,
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<PAGE>
that stockholder approval for amendments to clauses (i) through (vi) above
shall be required if the provisions of Code section 422 shall require the
same.
(b) Stock Appreciation Rights. The Committee may from time to time grant
to eligible participants Awards of Stock Appreciation Rights ("SAR"). An SAR
entitles the grantee to receive, subject to the provisions of the Plan and the
Grant Agreement, a payment having an aggregate value equal to the product of (i)
the excess of (A) the Fair Market Value on the exercise date of one share of
Common Stock over (B) the base price per share specified in the Grant Agreement,
times (ii) the number of shares specified by the SAR, or portion thereof, which
is exercised. Payment by the Corporation of the amount receivable upon any
exercise of an SAR may be made by the delivery of Common Stock or cash, or any
combination of Common Stock and cash, as determined in the sole discretion of
the Committee. If upon settlement of the exercise of an SAR a grantee is to
receive a portion of such payment in shares of Common Stock, the number of
shares shall be determined by dividing such portion by the Fair Market Value of
a share of Common Stock on the exercise date. No fractional shares shall be
used for such payment and the Committee shall determine whether cash shall be
given in lieu of such fractional shares or whether such fractional shares shall
be eliminated.
(c) Stock Awards. The Committee may from time to time grant restricted or
unrestricted stock Awards to eligible participants in such amounts and for such
consideration, including no consideration or such minimum consideration as may
be required by law, as it determines. A stock Award may be paid in Common
Stock, in cash, or in a combination of Common Stock and cash, as determined in
the sole discretion of the Committee.
Each stock Award shall specify the applicable restrictions, if any, on such
shares of Common Stock, the duration of such restrictions, and the time or times
at which such restrictions shall lapse with respect to all or a specified number
of shares of Common Stock that are part of the Award. Notwithstanding the
foregoing, the Committee may reduce or shorten the duration of any restriction
applicable to any shares of Common Stock awarded to any grantee under the Plan.
Stock certificates with respect to restricted shares of Common Stock granted
pursuant to a stock Award may be issued at the time of grant of the stock Award,
subject to forfeiture if the restrictions do not lapse, or upon lapse of the
restrictions. If stock certificates are issued at the time of grant of the
stock Award, the certificates shall bear an appropriate legend with respect to
the restrictions applicable to such stock Award or, alternatively, the grantee
may be required to deposit the certificates with the Corporation during the
period of any restriction thereon and to execute a blank stock power or other
instrument of transfer therefor. Except as otherwise provided by the Committee,
during such period of restriction following issuance of stock certificates, the
grantee shall have all of the rights of a holder of Common Stock, including but
not limited to the rights to receive dividends (or amounts equivalent to
dividends) and to vote with respect to the restricted shares. If stock
certificates are issued upon lapse of restrictions on a stock Award, the
Committee may provide that the grantee will be entitled to receive any amounts
per share pursuant to any dividend or distribution paid by the Corporation on
its Common Stock to stockholders of record after grant of the stock Award and
prior to the issuance of the stock certificates.
(d) Phantom Stock. The Committee may from time to time grant Awards to
eligible participants denominated in stock-equivalent units ("phantom stock") in
such amount and for such consideration, including no consideration or such
minimum consideration as may be required by law, as it determines. Phantom
stock units granted to a participant shall be credited to a bookkeeping reserve
account solely for accounting purposes and shall not require a segregation of
any of the Corporation's assets. An Award of phantom stock may be settled in
Common Stock, in cash, or in a combination of Common Stock and cash, as
determined in the sole discretion of the Committee. Except as otherwise
provided in the applicable Grant Agreement, the grantee shall have none of the
rights of a stockholder with respect to any shares of Common Stock represented
by a phantom stock unit as a result of the grant of a phantom stock unit to the
grantee.
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<PAGE>
(e) Performance Awards. The Committee may, in its discretion, grant
performance Awards which become payable on account of attainment of one or more
performance goals established by the Committee. Performance Awards may be paid
by the delivery of Common Stock or cash, or any combination of Common Stock and
cash, as determined in the sole discretion of the Committee. Performance goals
established by the Committee may be based on the Corporation's operating income
or one or more other business criteria selected by the Committee that apply to
an individual or group of individuals, a business unit, or the Corporation as a
whole, over such performance period as the Committee may designate. The
Committee in its discretion may recommend to the Board that the material terms
of any Performance Award or program with respect to some or all eligible
participants be submitted for approval by the stockholders.
7. MISCELLANEOUS
(a) Withholding of Taxes. The Corporation may require, as a condition to
the grant of any Award under the Plan or exercise pursuant to such Award or to
the delivery of certificates for shares issued or payments of cash to a grantee
pursuant to the Plan or a Grant Agreement (hereinafter collectively referred to
as a "taxable event"), that the grantee pay to the Corporation, in cash or in
shares of Common Stock, including shares acquired upon grant of the Award or
exercise of the Award, valued at Fair Market Value on the date as of which the
withholding tax liability is determined, any federal, state or local taxes of
any kind required by law to be withheld with respect to any taxable event under
the Plan. The Corporation, to the extent permitted or required by law, shall
have the right to deduct from any payment of any kind (including salary or
bonus) otherwise due to a grantee any federal, state or local taxes of any kind
required by law to be withheld with respect to any taxable event under the Plan,
or to retain or sell without notice a sufficient number of the shares to be
issued to such grantee to cover any such taxes.
(b) Payment of Exercise Price. Payment of the exercise price for an Award
may be made in accordance with the terms of the Grant Agreement. The
Corporation may make or guarantee loans to grantees to assist grantees in
exercising Awards and satisfying any withholding tax obligations.
(c) Transferability. Except as otherwise determined by the Committee, and
in any event in the case of an incentive stock option or a stock appreciation
right granted with respect to an incentive stock option, no Award granted under
the Plan shall be transferable by a grantee otherwise than by will or the laws
of descent and distribution. Unless otherwise determined by the Committee in
accord with the provisions of the immediately preceding sentence, an Award may
be exercised during the lifetime of the grantee, only by the grantee or, during
the period the grantee is under a legal disability, by the grantee's guardian or
legal representative.
(d) Adjustments; Business Combinations. In the event of a
reclassification, recapitalization, stock split, stock dividend, combination of
shares, or other similar event, the maximum number and kind of shares reserved
for issuance or with respect to which Awards may be granted under the Plan as
provided in Section 4 shall be adjusted to reflect such event, and the Committee
shall make such adjustments as it deems appropriate and equitable in the number,
kind and price of shares covered by outstanding Awards made under the Plan, and
in any other matters which relate to Awards and which are affected by the
changes in the Common Stock referred to above.
The Committee is authorized to make adjustments in the terms and conditions
of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events affecting the Corporation, or the financial statements of
the Corporation or any Subsidiary, or of changes in applicable laws,
regulations, or accounting principles, whenever the Committee determines that
such adjustments are appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan.
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<PAGE>
(e) Termination, Amendment and Modification of the Plan. The Board,
without further approval of the stockholders, may terminate, amend or modify the
Plan or any portion thereof at any time.
(f) Non-Guarantee of Employment or Service. Nothing in the Plan or in any
Grant Agreement thereunder shall confer any right on an individual to continue
in the service of the Corporation or shall interfere in any way with the right
of the Corporation to terminate such service at any time.
(g) Compliance with Securities Laws; Listing and Registration. Common
Stock shall not be issued with respect to an Award granted under the Plan unless
the exercise of such Award and the issuance and delivery of stock certificates
for such Common Stock pursuant thereto shall comply with all relevant provisions
of law, including, without limitation, the Securities Act of 1933 and the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any national securities exchange or any listing or quotation
system established by the National Association of Securities Dealers, Inc.
("Nasdaq System") upon which the Common Stock may then be listed or quoted, and
shall be further subject to the approval of counsel for the Corporation with
respect to such compliance to the extent such approval is sought by the
Committee. If the Corporation determines that the listing, registration or
qualification upon any securities exchange or upon the Nasdaq System or under
any law, of shares subject to any Award is necessary or desirable as a condition
of, or in connection with, the granting of the Award or the issuance or purchase
of shares thereunder, no such Award may be exercised in whole or in part and no
restrictions on such Award shall lapse, unless such listing, registration or
qualification is effected free of any conditions not acceptable to the
Corporation.
(h) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Corporation or its Affiliates from adopting or continuing
in effect other compensation arrangements (whether such arrangements be
generally applicable or applicable only in specific cases) as the Committee in
its discretion determines desirable, including without limitation the granting
of stock options, stock awards, stock appreciation rights or phantom stock units
otherwise than under the Plan.
(i) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Corporation and a grantee or any other person. To the
extent that any grantee or other person acquires a right to receive payments
from the Corporation pursuant to an Award, such right shall be no greater than
the right of any unsecured general creditor of the Corporation.
(j) Governing Law. The validity, construction and effect of the Plan, of
Grant Agreements entered into pursuant to the Plan, and of any rules,
regulations, determinations or decisions made by the Committee relating to the
Plan or such Grant Agreements, and the rights of any and all persons having or
claiming to have any interest therein or thereunder, shall be determined
exclusively in accordance with applicable federal laws and the laws of Maryland,
without regard to its conflict of laws principles.
(k) Termination Date. No Award shall be granted under the Plan after the
close of business on the day immediately preceding the tenth anniversary of the
effective date of the Plan (January 1, 1989). Subject to other applicable
provisions of the Plan, all Awards made under the Plan prior to such termination
of the Plan shall remain in effect until such Awards have been satisfied or
terminated in accordance with the Plan and the terms of such Awards.
Date Amended and Restated Plan Approved by the Board: February 11, 1997
Date Approved by the Stockholders: March 14, 1997
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<PAGE>
RWD TECHNOLOGIES, INC. Exhibit 10.05
1997 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of RWD Technologies, Inc. (the "Company") has
adopted this Employee Stock Purchase Plan (the "Plan") to enable eligible
employees of the Company and its participating Affiliates (as defined below),
through payroll deductions, to purchase shares of the Company's Common Stock,
par value $0.10 per share (the "Common Stock"). The Plan is for the benefit of
the employees of RWD Technologies, Inc. and any participating Affiliates. The
Plan is intended to benefit the Company by increasing the employees' interest in
the Company's growth and success and encouraging employees to remain in the
employ of the Company or its participating Affiliates. The provisions of the
Plan are set forth below:
1. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 26 below, the aggregate number
of shares of Common Stock that may be made available for purchase by
participating employees under the Plan is 58,333. The shares issuable under the
Plan may, in the discretion of the Board of Directors of the Company (the
"Board"), be authorized but unissued shares of Common Stock.
2. ADMINISTRATION.
The Plan shall be administered under the direction of the Compensation
Committee of the Board of Directors of the Company (the "Committee"). No member
of the Board or the Committee shall be liable for any action or determination
made in good faith with respect to the Plan.
3. INTERPRETATION.
It is intended that the Plan will meet the requirements for an "employee
stock purchase plan" under Section 423 of the Internal Revenue Code of 1986 (the
"Code"), and it is to be so applied and interpreted. Subject to the express
provisions of the Plan, the Committee shall have authority to interpret the
Plan, to prescribe, amend and rescind rules relating to it, and to make all
other determinations necessary or advisable in administering the Plan, all of
which determinations will be final and binding upon all persons.
4. ELIGIBLE EMPLOYEES; EXCLUSIONS.
Any employee of the Company or any of its participating Affiliates may
participate in the Plan; provided, however, that prior to the commencement of
each Payroll Deduction Period, the Committee may, in its discretion, exclude
from participation in such Payroll Deduction Period,
<PAGE>
the following categories of employees: (a) employees who have been employed by
the Company or any of its participating Affiliates for any period less than two
years as of the beginning of a Payroll Deduction Period (as defined in Section 8
below); (b) employees whose customary employment is for less than five months in
any calendar year; (c) employees whose customary employment is 20 hours or less
per week; (d) highly compensated employees (within the meaning of Section 414(q)
of the Code and the regulations thereunder; and (e) employees who, after
exercising their rights to purchase shares under the Plan, would own shares of
Common Stock (including shares that may be acquired under any outstanding
options) representing five percent or more of the total combined voting power of
all classes of stock of the Company. The term "participating Affiliate" means
any company or other trade or business that is a parent or subsidiary of the
Company (determined in accordance with the principles of Sections 424(e) and (f)
of the Code and the regulations thereunder). The Board may at any time in its
sole discretion, if it deems it advisable to do so, terminate the participation
of the employees of a particular participating Affiliate.
5. PARTICIPATION IN THE PLAN.
An eligible employee may become a participating employee in the Plan by
completing an election to participate in the Plan on a form provided by the
Company and submitting that form to the Payroll Administrator of the Company.
The form will authorize payroll deductions and lump sum payment, if any (as
provided in Section 6 below), and authorize the purchase of shares of Common
Stock for the employee's account in accordance with the terms of the Plan.
Enrollment will become effective upon the first day of the first Payroll
Deduction Period that commences after the Company's receipt of the form but not
before September 1, 1997.
6. PAYROLL DEDUCTIONS.
At the time an eligible employee submits his or her election to participate
in the Plan (as provided in Section 5 above), the employee shall indicate on his
or her election form the manner in which such eligible employee elects to have
deductions made from his or her pay, which election shall be made from among the
choices given to eligible employees from the Committee prior to the deadline for
the submission of election forms for a Payroll Deduction Period. The deductions
will be credited to the participating employee's account under the Plan. Prior
to a Payroll Deduction Period, the Committee will determine whether or to what
extent an employee may during any Payroll Deduction Period change his or her
amount or manner of payroll deductions for that Payroll Deduction Period, or
whether or to what extent an employee may withdraw any contributed funds, other
than in accordance with Sections 15 through 20 below.
7. INTEREST ON PAYROLL DEDUCTIONS.
The Company and participating Affiliates will maintain a record of amounts
credited to each participating employee authorizing a payroll deduction, if any,
pursuant to Section 6.
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Interest will not be paid on any amounts credited to participating employees,
except to the extent that the Committee, in its sole discretion, elects to
credit such accounts with interest at such per annum rate as it may from time to
time determine.
8. PAYROLL DEDUCTION PERIODS.
The first Payroll Deduction Period under the Plan shall commence at such
time as the Committee determines but no earlier than September 1, 1997. The
duration of a Payroll Deduction Period shall be determined by the Committee, in
its discretion, prior to the deadline for submission of employee election forms
for such Payroll Deduction Period; provided, however, that no Payroll Deduction
Period shall have a duration in excess of 27 months.
9. RIGHTS TO PURCHASE COMMON STOCK; PURCHASE PRICE.
Rights to purchase shares of Common Stock will be deemed granted to
participating employees as of the first trading day of each Payroll Deduction
Period. The purchase price of each share of Common Stock (the "Purchase Price")
during a payroll Deduction Period shall be determined by the Committee, in its
discretion, prior to the deadline for submission of employee election forms for
such Payroll Deduction Period; provided, however, that the Purchase Price for a
Payroll Deduction Period shall never be less than the lesser of 85 percent of
the fair market value of the Common Stock on the (i) first trading day of the
Payroll Deduction Period or (ii) last trading day of such Payroll Deduction
Period; and, provided, further, that in no event shall the Purchase Price be
less than the par value of the Common Stock. For purposes of the Plan, "fair
market value" means the average of the high and low sale prices per share of
Common Stock as reflected on the principal consolidated transaction reporting
system for securities listed on any national securities exchange or other market
quotation system on which the Common Stock may be principally listed or quoted
or, if there are no transactions on a trading day, then such average for the
preceding trading day upon which transactions occurred.
10. TIMING OF PURCHASE; PURCHASE LIMITATION.
Unless a participating employee has given prior written notice terminating
such employee's participation in the Plan, or the employee's participation in
the Plan has otherwise been terminated as provided in Sections 15 through 20
below, such employee will be deemed to have exercised automatically his or her
right to purchase Common Stock on the last trading day of the Payroll Deduction
Period (except as provided in Section 15 below) for that number of whole shares
of Common Stock which the accumulated funds in the employee's account at that
time will purchase at the Purchase Price, subject to the participation
adjustment provided for in Section 14 below and subject to adjustment under
Section 26 below. Any balance remaining in an employee's account at the end of
a Payroll Deduction Period will be automatically carried forward into the
employee's account for the next Payroll Deduction Period unless the employee has
elected not to participate in the next Payroll Deduction Period in which case
the funds will be
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distributed to the employee. Notwithstanding any other provision of the Plan, no
employee may purchase in any one calendar year under the Plan and all other
"employee stock purchase plans" of the Company and its participating Affiliates
shares of Common Stock having an aggregate fair market value in excess of
$25,000, determined as of the first trading date of the Payroll Deduction Period
as to shares purchased during such period. Effective upon the last trading day
of the Payroll Deduction Period, a participating employee will become a
stockholder with respect to the shares purchased during such period, and will
thereupon have all dividend, voting and other ownership rights incident thereto.
Notwithstanding the foregoing, no shares shall be sold pursuant to the Plan
unless the Plan is approved by the Company's stockholders in accordance with
Section 25 below.
11. ISSUANCE OF STOCK CERTIFICATES.
On the last trading day of the Payroll Deduction Period, a participating
employee will be credited with the number of shares of Common Stock purchased
for his or her account under the Plan during such Period. Shares purchased
under the Plan will be held in the custody of an agent designated by the
Committee (the "Agent"). The Agent may hold the shares purchased under the Plan
in stock certificates in nominee names and may commingle shares held in its
custody in a single account or stock certificate without identification as to
individual participating employees. A participating employee may, at any time
following his or her purchase of shares under the Plan, by written notice
instruct the Agent to have all or part of such shares reissued in the
participating employee's own name and have the stock certificate delivered to
the employee.
12. WITHHOLDING OF TAXES.
To the extent that a participating employee realizes ordinary income in
connection with a sale or other transfer of any shares of Common Stock purchased
under the Plan or the crediting of interest to the employee's accounts, the
Company may withhold amounts needed to cover such taxes from any payments
otherwise due and owing to the participating employee or from shares that would
otherwise be issued to the participating employee hereunder. Any participating
employee who sells or otherwise transfers shares purchased under the Plan within
two years after the beginning of the Payroll Deduction Period in which the
shares were purchased must within 30 days of such transfer notify the Payroll
Administrator of the Company in writing of such transfer.
13. ACCOUNT STATEMENTS.
The Company will cause the Agent to deliver to each participating employee
a statement for each Payroll Deduction Period during which the employee
purchases Common Stock under the Plan, reflecting the amount of payroll
deductions, lump sum payments and interest (if the Committee has determined to
accrue any) accumulated during the Payroll Deduction Period, the number of
shares purchased for the employee's account, the price per share of the shares
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purchased for the employee's account, and the number of shares held for the
employee's account at the end of the Payroll Deduction Period.
14. PARTICIPATION ADJUSTMENT.
If in any Payroll Deduction Period the number of unsold shares that may be
made available for purchase under the Plan pursuant to Section 1 above is
insufficient to permit exercise of all rights deemed exercised by all
participating employees pursuant to Section 10 above, a participation adjustment
will be made, and the number of shares purchasable by all participating
employees will be reduced proportionately. Any funds then remaining in a
participating employee's account after such exercise will be refunded to the
employee.
15. CHANGES IN ELECTIONS TO PURCHASE.
a) A participating employee may, at any time prior to the last day of the
Payroll Deduction Period, by written notice to the Company, direct the Company
to cease payroll deductions. Prior to a Payroll Deduction Period, the Committee
will notify eligible employees which of the following alternatives a
participating employee will have if such an election is made:
(i) The amount then credited to such employee's account will continue
to be credited with interest, if any, and the employee's option to purchase
shall be reduced to the number of shares which may be purchased, as of the last
day of the Payroll Deduction Period, with the amount then credited to the
employee's account; or
(ii) Withdraw the amount (including interest, if any,) in such
employee's account and terminate such employee's option to purchase.
b) Any participating employee may increase or decrease his or her payroll
deduction, to take effect on the first day of the next Payroll Deduction Period,
by delivering to the Company a new form regarding election to participate in the
Plan under Section 5 above prior to such date.
16. VOLUNTARY TERMINATION OF EMPLOYMENT OR DISCHARGE.
In the event a participating employee voluntarily leaves the employ of the
Company or a participating Affiliate, otherwise than by retirement under a plan
of the Company or a participating Affiliate, or is discharged for cause prior to
the last day of the Payroll Deduction Period, the amount (including interest, if
any,) in the employee's account will be distributed to the employee and the
employee's option to purchase will terminate.
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17. RETIREMENT OR SEVERANCE
In the event a participating employee who has an option to purchase shares
leaves the employ of the Company or a participating Affiliate because of
retirement under a plan of the Company or a participating Affiliate, or because
of termination of the employee's employment by the Company or by a participating
Affiliate for any reason except discharge for cause, the participating employee
may elect, within 30 days after the date of such retirement or termination, one
of the following alternatives:
(a) The amount then credited to such employee's account will continue to be
credited with interest, if any, and the employee's option to purchase shall be
reduced to the number of shares which may be purchased, as of the last day of
the Payroll Deduction Period, with the amount credited to the employee's account
as of immediately prior to such retirement or termination; or
(b) Withdraw the amount (including interest, if any,) in such employee's
account and terminate such employee's option to purchase.
In the event the participating employee does not make an election within
the aforesaid 10-day period, he or she will be deemed to have elected subsection
17(b) above.
18. LAY-OFF, AUTHORIZED LEAVE OF ABSENCE OR DISABILITY.
Payroll deductions for shares for which a participating employee has an
option to purchase may be suspended during any period of absence of the employee
from work due to lay-off, authorized leave of absence or disability or at the
discretion of the Company, if the employee so elects in writing, periodic
payments for such shares may continue to be made in cash.
If such employee returns to active service prior to the last day of the
Payroll Deduction Period, the employee's payroll deductions will be resumed and
if said employee did not make periodic cash payments during the employee's
period of absence, the employee shall, by written notice to the Company's
Payroll Administrator within 10 days after the employee's return to active
service, but not later than the last day of the Payroll Deduction Period, elect:
(a) To make up any deficiency in the employee's account resulting from a
suspension of payroll deductions by an immediate cash payment;
(b) Not to make up such deficiency, in which event the number of shares to
be purchased by the employee shall be reduced to the number of shares which may
be purchased with the amount, if any, then credited to the employee's account
(including interest, if any,) plus the aggregate amount, if any, of all payroll
deductions to be made thereafter; or
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(c) Withdraw the amount (including interest, if any,) in the employee's
account and terminate the employee's option to purchase.
A participating employee on lay-off, authorized leave of absence or
disability on the last day of the Payroll Deduction Period shall deliver written
notice to his or her employer on or before the last day of the Payroll Deduction
Period, electing one of the alternatives provided in the foregoing clauses (a),
(b) and (c) of this Section 18. If any employee fails to deliver such written
notice within 10 days after the employee's return to active service or by the
last day of the Payroll Deduction Period, whichever is earlier, the employee
shall be deemed to have elected subsection 18(c) above.
If the period of a participating employee's lay-off, authorized leave of
absence or disability shall terminate on or before the last day of the Payroll
Deduction Period, and the employee shall not resume active employment with the
Company or a participating Affiliate, the employee shall receive a distribution
in accordance with the provisions of Section 16 of this Plan.
19. DEATH.
In the event of the death of a participating employee while the employee's
option to purchase shares is in effect, the legal representatives of such
employee may, within 90 days after the employee's death (but no later than the
last day of the Payroll Deduction Period) by written notice to the Company or
participating Affiliate, elect one of the following alternatives:
(a) The amount then credited to such employee's account will continue to be
credited with interest, if any, and the employee's option to purchase shall be
reduced to the number of shares which may be purchased, as of the last day of
the Payroll Deduction Period, with the amount then credited to the employee's
account; or
(b) Withdraw the amount (including interest, if any,) in such employee's
account and terminate such employee's option to purchase.
In the event the legal representatives of such employee fail to deliver
such written notice to the Company or participating Affiliate within the
prescribed period, the election to purchase shares shall terminate and the
amount, including interest, if any,, then credited to the employee's account
shall be paid to such legal representatives.
20. TERMINATION OF PARTICIPATION.
A participating employee will be refunded all monies in his or her account,
and his or her participation in the Plan will be terminated if either (a) the
Board elects to terminate the Plan as provided in Section 25 below, or (b) the
employee ceases to be eligible to participate in the Plan under Section 4 above.
As soon as practicable following termination of an employee's
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participation in the Plan, the Company will deliver to the employee a check
representing the amount (including interest, if the Committee has determined any
interest shall accrue,) in the employee's account and a stock certificate
representing the number of shares held in the employee's account. Once
terminated, participation may not be reinstated for the then current Payroll
Deduction Period, but, if otherwise eligible, the employee may elect to
participate in any subsequent Payroll Deduction Period.
21. ASSIGNMENT.
No participating employee may assign his or her rights to purchase shares
of Common Stock under the Plan, whether voluntarily, by operation of law or
otherwise. Any payment of cash or issuance of shares of Common Stock under the
Plan may be made only to the participating employee (or, in the event of the
employee's death, to the employee's estate). Once a stock certificate has been
issued to the employee or his or her account, such certificate may be assigned
the same as any other stock certificate.
22. APPLICATION OF FUNDS.
All funds received or held by the Company under the Plan may be used for
any corporate purpose until applied to the purchase of Common Stock and/or
refunded to participating employees and can be commingled with other general
corporate funds. Participating employees' accounts will not be segregated.
23. NO RIGHT TO CONTINUED EMPLOYMENT.
Neither the Plan or any right to purchase Common Stock under the Plan
confers upon any employee any right to continued employment with the Company or
any of its participating Affiliates, nor will an employee's participation in the
Plan restrict or interfere in any way with the right of the Company or any of
its participating Affiliates to terminate the employee's employment at any time.
24. AMENDMENT OF PLAN.
The Board may, at any time, amend the Plan in any respect (including an
increase in the percentage specified in Section 9 above used in calculating the
Purchase Price); provided, however, that without approval of the stockholders of
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the Company no amendment shall be made (a) increasing the number of shares
specified in Section 1 above that may be made available for purchase under the
Plan (except as provided in Section 26 below), (b) changing the eligibility
requirements for participating in the Plan, or (c) impairing the vested rights
of participating employees.
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25. EFFECTIVE DATE; TERM AND TERMINATION OF THE PLAN.
The Plan shall be effective as of the date of adoption by the Board, which
date is set forth below, subject to approval of the Plan by a majority of the
votes present and entitled to vote at a duly held meeting of the stockholders of
the Company at which a quorum representing a majority of all outstanding voting
stock is present, either in person or by proxy; provided, however, that upon
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approval of the Plan by the stockholders of the Company as set forth above, all
rights to purchase shares granted under the Plan on or after the effective date
shall be fully effective as if the stockholders of the Company had approved the
Plan on the effective date. If the stockholders fail to approve the Plan on or
before one year after the effective date, the Plan shall terminate, any rights
to purchase shares granted hereunder shall be null and void and of no effect,
and all contributed funds shall be refunded to participating employees. The
Board may terminate the Plan at any time and for any reason or for no reason,
provided that such termination shall not impair any rights of participating
employees that have vested at the time of termination. In any event, the Plan
shall, without further action of the Board terminate five (5) years after the
date of adoption of the Plan by the Board or, if earlier, at such time as all
shares of Common Stock that may be made available for purchase under the Plan
pursuant to Section 1 above have been issued.
26. EFFECT OF CHANGES IN CAPITALIZATION.
(a) CHANGES IN STOCK.
If the number of outstanding shares of Common Stock is increased or
decreased or the shares of Common Stock are changed into or exchanged for a
different number or kind of shares or other securities of the Company by reason
of any recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend, or other distribution
payable in capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Company occurring after the effective
date of the Plan, the number and kinds of shares that may be purchased under the
Plan shall be adjusted proportionately and accordingly by the Company. In
addition, the number and kind of shares for which rights are outstanding shall
be similarly adjusted so that the proportionate interest, if any, of a
participating employee immediately following such event shall, to the extent
practicable, be the same as immediately prior to such event. Any such adjustment
in outstanding rights shall not change the aggregate Purchase Price payable by a
participating employee with respect to shares subject to such rights, but shall
include a corresponding proportionate adjustment in the Purchase Price per
share.
(b) REORGANIZATION IN WHICH THE COMPANY IS THE SURVIVING CORPORATION.
Subject to Subsection (c) of this Section 26, if the Company shall be
the surviving corporation in any reorganization, merger or consolidation of the
Company with one or more other corporations, all outstanding rights under the
Plan shall pertain to and apply to the securities to which a holder of the
number of shares of Common Stock subject to such rights
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would have been entitled immediately following such reorganization, merger or
consolidation, with a corresponding proportionate adjustment of the Purchase
Price per share so that the aggregate Purchase Price thereafter shall be the
same as the aggregate Purchase Price of the shares subject to such rights
immediately prior to such reorganization, merger or consolidation.
(c) REORGANIZATION IN WHICH THE COMPANY IS NOT THE SURVIVING CORPORATION
OR SALE OF ASSETS OR STOCK.
Upon any dissolution or liquidation of the Company, or upon a merger,
consolidation or reorganization of the Company with one or more other
corporations in which the Company is not the surviving corporation, or upon a
sale of all or substantially all of the assets of the Company to another
corporation, or upon any transaction (including, without limitation, a merger or
reorganization in which the Company is the surviving corporation) approved by
the Board that results in any person or entity (other than Dr. Robert W. Deutsch
or any trust, charitable organization or foundation controlled by him,
individually or in the aggregate) owning more than 50 percent of the combined
voting power of all classes of stock of the Company, the Plan and all rights
outstanding hereunder shall terminate, except to the extent provision is made in
writing in connection with such transaction for the continuation of the Plan
and/or the assumption of the rights theretofore granted, or for the substitution
for such rights of new rights covering the stock of a successor corporation, or
a parent or subsidiary thereof, with appropriate adjustments as to the number
and kinds of shares and exercise prices, in which event the Plan and rights
theretofore granted shall continue in the manner and under the terms so
provided. In the event of any such termination of the Plan, the Payroll
Deduction Period shall be deemed to have ended on the last trading day prior to
such termination, and each participating employee shall have the ability to
choose either to (i) have all monies then credited to such employee's account
(including interest, to the extent any has accrued) returned to such
participating employee or (ii) exercise his or her rights in accordance with
Section 10 on such last trading day; provided, however, that if a participating
employee does not exercise his or her right of choice, his or her rights shall
be deemed to have been automatically exercised in accordance with Section 10 on
such last trading day.. The Board shall send written notice of an event that
will result in such a termination to all participating employees not later than
the time at which the Company gives notice thereof to its stockholders.
(d) ADJUSTMENTS.
Adjustments under this Section 26 related to stock or securities of
the Company shall be made by the Committee, whose determination in that respect
shall be final, binding, and conclusive.
(e) NO LIMITATIONS ON COMPANY.
The grant of a right pursuant to the Plan shall not affect or limit in
any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes
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of its capital or business structure or to merge, consolidate, dissolve or
liquidate, or to sell or transfer all or any part of its business or assets.
27. GOVERNMENTAL REGULATION.
The Company's obligation to issue, sell and deliver shares of Common Stock
pursuant to the Plan is subject to such approval of any governmental authority
and any national securities exchange or other market quotation system as may be
required in connection with the authorization, issuance or sale of such shares.
28. STOCKHOLDER RIGHTS.
The Company will deliver to each participating employee who purchases
shares of Common Stock under the Plan, as promptly as practicable by mail or
otherwise, all notices of meetings, proxy statements, proxies and other
materials distributed by the Company to its stockholders. Any shares of Common
Stock held by the Agent for an employee's account will be voted in accordance
with the employee's duly delivered and signed proxy instructions. There will be
no charge to participating employees in connection with such notices, proxies
and other materials.
29. RULE 16B-3.
Transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or any successor provision under the Exchange Act. If
any provision of the Plan or action by the Board fails to so comply, it shall be
deemed null and void to the extent permitted by law and deemed advisable by the
Board. Moreover, in the event the Plan does not include a provision required by
Rule 16b-3 to be stated herein, such provision (other than one relating to
eligibility requirements, or the price and amount of awards) shall be deemed
automatically to be incorporated by reference into the Plan.
30. PAYMENT OF PLAN EXPENSES.
The Company will bear all costs of administering and carrying out the Plan.
The Company may use any earnings in excess of interest paid to participants, if
any, to pay the costs of administering the Plan.
* * *
This Plan was duly adopted and approved by the Board of Directors of the
Company by resolution at a meeting held on the 11th of February, 1997 and
approved by the stockholders at a meeting held on March 14, 1997.
/s/ Ronald E. Holtz
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Ronald E. Holtz
Corporate Secretary
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EXHIBIT 23.01
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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
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As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Baltimore, MD
MARCH 24, 1997
