RWD TECHNOLOGIES INC, DEF 14A, 1998-04-15

RWD TECHNOLOGIES INC
DEF 14A, 1998-04-15
BUSINESS SERVICES, NEC

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<PAGE>

SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

RWD TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[_] Fee paid previously with preliminary materials.

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[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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<PAGE>

[LOGO OF RWD TECHNOLOGIES, INC. (R) APPEARS HERE]

10480 LITTLE PATUXENT PARKWAY, SUITE 1200
COLUMBIA, MARYLAND 21044-3530
(410) 730-4377

----------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1998

----------------

NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") of RWD Technologies, Inc. ("RWD" or the "Company"), will be
held on May 19, 1998, at 2 o'clock p.m., local time, at the Company's
corporate headquarters, 10480 Little Patuxent Parkway, Columbia, Maryland
21044-3530, for the following purposes:

I. To elect three (3) Class I directors to hold office until the 2001
Annual Meeting of Stockholders and until their successors are elected
and qualified;

II. To approve the RWD Technologies 1998 Omnibus Stock Incentive Plan;

III. To ratify the selection of Arthur Andersen, LLP, as the independent
auditors of RWD for the fiscal year ending December 31, 1998; and

IV. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.

The Board of Directors has fixed the close of business on March 31, 1998, as
the record date for the meeting, and only those stockholders of record of the
Company at that time will be entitled to notice of and to vote at the Annual
Meeting or any adjournments or postponements thereof. Accompanying this notice
is a Proxy Card and Proxy Statement and a copy of RWD's Annual Report for the
year ended December 31, 1997. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE
ANNUAL MEETING, PLEASE COMPLETE, SIGN, AND DATE THE PROXY CARD AND RETURN IT
IN THE ENCLOSED ENVELOPE PROVIDED FOR THAT PURPOSE PRIOR TO THE DATE OF THE
ANNUAL MEETING. The Proxy may be revoked at any time prior to the time that it
is voted at the Annual Meeting.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Ronald E. Holtz

Ronald E. Holtz
Secretary

Columbia, Maryland
April 9, 1998
<PAGE>

RWD TECHNOLOGIES, INC.
10480 LITTLE PATUXENT PARKWAY, SUITE 1200
COLUMBIA, MARYLAND 21044-3530
(410) 730-4377

----------------

PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 1998

----------------

INTRODUCTION

This Proxy Statement, the Notice of Annual Meeting of Stockholders, and the
accompanying proxy are furnished to stockholders of RWD Technologies, Inc.
("RWD" or "Company") in connection with the solicitation of proxies by RWD's
Board of Directors to be used at the Annual Meeting of Stockholders to be held
on May 19, 1998 (the "Annual Meeting"). The purpose of the Annual Meeting is
to: 1) elect three (3) directors of the Company; 2) approve the Company's 1998
Omnibus Stock Incentive Plan (the "1998 Stock Plan"); 3) ratify the selection
of Arthur Andersen, LLP, as independent auditors of the Company for the fiscal
year ending December 31, 1998; and 4) transact such other business as may
properly come before the Annual Meeting. This Proxy Statement, Notice of
Annual Meeting of Stockholders, and the accompanying proxy are first being
sent to stockholders on or about April 9, 1998.

The record date for determining the stockholders entitled to notice of and
to vote at the Annual Meeting was the close of business on March 31, 1998 (the
"Record Date"). On the Record Date, there were issued and outstanding
14,763,847 shares of Common Stock, par value $0.10 per share (the "RWD Common
Stock").

QUORUM AND VOTING RIGHTS

The presence, in person or by proxy, of the holders of a majority of the
issued and outstanding shares of RWD Common Stock as of the Record Date is
necessary to constitute a quorum at the Annual Meeting. For all matters except
the election of directors, each share is entitled to 1 vote. In the election
of directors, each share of RWD Common Stock may be voted for as many
individuals as there are directors to be elected. Cumulative voting is not
permitted. Those individuals receiving the 3 highest number of votes "For"
election to the Board of Directors shall be considered duly elected.
Otherwise, the affirmative vote of a majority of the shares of RWD Common
Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote there is required for approval of all matters being submitted
to the stockholders for their consideration. An automated system administered
by RWD's transfer agent will be used to tabulate the votes. Abstentions, votes
against or withholding approval, and broker non-votes will be counted to
determine whether a quorum is present. Abstentions and votes against or
withholding approval will be counted as votes against any given proposal,
whereas broker non-votes will not be counted in determining whether a
particular proposal has been approved by the stockholders.

The cost of soliciting proxies and preparing the proxy materials will be
borne by RWD. In addition, RWD will require securities brokers, custodians,
nominees, and fiduciaries to forward solicitation material to the beneficial
owners of stock held of record and will reimburse them for their reasonable
out-of-pocket expenses in forwarding such solicitation material. Proxies may
be solicited personally or by telephone or telegram by directors, officers,
and employees of RWD or its subsidiaries without additional compensation to
them.
<PAGE>

VOTING BY PROXY

The Board of Directors has selected John H. Beakes and Ronald E. Holtz, and
each of them, to act as proxies with full power of substitution. Any
stockholder executing a proxy has the power to revoke the proxy at any time
before it is voted. This right of revocation is not limited or subject to
compliance with any formal procedure. Any stockholder may attend the Annual
Meeting and vote in person, whether or not he has previously given a proxy.

With respect to the proposal regarding election of Class I directors,
stockholders may (a) vote in favor of all nominees, (b) withhold their votes
as to all nominees, or (c) withhold their votes as to specific nominees by so
indicating in the appropriate space on the enclosed proxy card. With respect
to the proposals to approve the 1998 Stock Plan and to ratify the appointment
of Arthur Andersen, LLP, as RWD's independent auditors for the fiscal year
ending December 31, 1998, stockholders may (a) vote "For", (b) vote "Against"
or (c) "Abstain" from voting as to each such matter. All properly executed
proxy cards delivered by stockholders and not revoked will be voted at the
Annual Meeting in accordance with the directions given. IF NO SPECIFIC
INSTRUCTIONS ARE GIVEN WITH REGARD TO THE MATTERS TO BE VOTED UPON, THE SHARES
REPRESENTED BY A PROPERLY EXECUTED PROXY CARD WILL BE VOTED "FOR" THE ELECTION
OF ALL NOMINATED DIRECTORS AND TO APPROVE THE 1998 STOCK PLAN, AND TO RATIFY
THE APPOINTMENT OF ARTHUR ANDERSEN, LLP, AS INDEPENDENT AUDITORS. Management
knows of no other matters that may come before the Annual Meeting for
consideration by the stockholders. However, if any other matter properly comes
before the Annual Meeting, the persons named in the enclosed proxy card as
proxies will vote upon such matters in accordance with their judgment.

Stockholders who do not expect to attend the Annual Meeting in person are
urged to execute and return the enclosed proxy card promptly. Any stockholder
delivering a proxy has the power to revoke it at any time before it is voted
by giving written notice of revocation to the Secretary of the Company, by
executing and delivering to the Secretary a proxy card bearing a later date,
or by voting in person at the Annual Meeting. Any stockholder also may be
represented by another person at the Annual Meeting by executing a form of
proxy designating such person to act on the stockholder's behalf at the Annual
Meeting.

I. ELECTION OF CLASS I DIRECTORS

The Board of Directors is composed of ten (10) persons separated into three
(3) classes, with each class serving a 3-year term. Three (3) directors serve
in Class I and are subject to reelection for a 3-year term beginning at the
Annual Meeting, three (3) directors serve in Class II and are subject to
reelection for a 3-year term beginning at the 1999 Annual Meeting, and four
(4) directors serve in Class III and are subject to reelection for a 3-year
term beginning at the 2000 Annual Meeting.

Three (3) Class I directors are to be elected at the Annual Meeting to serve
until the 2001 Annual Meeting of Stockholders and until their successors are
duly elected and qualified. The Board of Directors has nominated the 3 persons
named below to serve as Class I directors for the term indicated. Each nominee
is currently a member of the Board. All current directors were elected to the
Board by the stockholders. Each nominee has consented to serve on the Board of
Directors through the 2001 Annual Meeting of Stockholders and until his
successor is duly elected and qualified. If any of the nominees should be
unable to serve for any reason (which management has no reason to anticipate
at this time), the Board of Directors may designate a substitute nominee or
nominees (in which case the persons named as proxies in the enclosed proxy
card will vote all valid proxy cards for the election of such substitute
nominee or nominees), allow the vacancy or vacancies to remain open until a
suitable candidate or candidates are located, or, by resolution amending the
By-laws of the Company, provide for a lesser number of directors.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ELECTION OF ITS NOMINEES FOR CLASS I DIRECTOR.

2
<PAGE>

INFORMATION CONCERNING NOMINEES FOR DIRECTOR

The following table presents information about the persons nominated (who are
also current directors) by the RWD Board for election at the Annual Meeting as
Class I directors of RWD, to serve until the 2001 Annual Meeting of
Stockholders, and until their successors are duly qualified and elected.

<TABLE>
<CAPTION>
TERM DIRECTOR PRINCIPAL OCCUPATION, DIRECTORSHIPS
NAME AND AGE EXPIRES SINCE WITH PUBLIC COMPANIES, AND OTHER INFORMATION
------------ ------- -------- --------------------------------------------
<S> <C> <C> <C>
Dr. Robert W. Deutsch 2001 January Dr. Robert W. Deutsch co-founded the Company
(74)................... Annual 1988 in January 1988 and has been Chairman of the
Meeting 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 B.S. in
Physics from the Massachusetts Institute of
Technology and 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.
Ronald E. Holtz (40).... 2001 December Ronald E. Holtz joined the Company in
Annual 1996 January 1996 and serves as Vice President,
Meeting Chief Financial Officer, Secretary,
Treasurer, 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
Entrepreneurship at the University of
Maryland in a variety of project management
capacities. Prior to 1990, Mr. Holtz was
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.
Kenneth J. Rebeck (46).. 2001 April Kenneth J. Rebeck joined the Company in 1988
Annual 1991 and has been Group Vice President of
Meeting Technology Transfer since 1995 and a
director since 1991. 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 and his M.S. in Nuclear
Science and Engineering from Carnegie-Mellon
University, and he has Professional
Engineering licenses in Maryland, Michigan,
and Pennsylvania.
</TABLE>

3
<PAGE>

INFORMATION CONCERNING CONTINUING DIRECTORS

<TABLE>
<CAPTION>
TERM DIRECTOR PRINCIPAL OCCUPATION, DIRECTORSHIPS
NAME AND AGE EXPIRES SINCE WITH PUBLIC COMPANIES, AND OTHER INFORMATION
------------ ------- -------- --------------------------------------------
<S> <C> <C> <C>
John H. Beakes (55)..... 1999 January John H. Beakes co-founded the Company with
Annual 1988 Dr. Deutsch and has been Chief Operating
Meeting 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. in Engineering from the U.S. Naval
Academy and his M.S. in Environmental
Engineering from The Johns Hopkins
University, and he is a registered
Professional Engineer.
John E. Lapolla (44).... 1999 April John E. Lapolla joined the Company in 1988,
Annual 1993 has been Group Vice President of
Meeting Manufacturing Performance Support since
1995, and has been a director since 1993.
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.
Bruce D. Alexander 1999 August Bruce D. Alexander was elected to the Board
(54)................... Annual 1997 of Directors following completion of the
Meeting Company's 1997 initial public offering. Mr.
Alexander is currently Adjunct Professor at
the Yale School of Management and Vice
President Designate of the University. Mr.
Alexander spent 26 years at the Rouse
Company, most recently as Senior Vice
President, where he was responsible for
development of that company's commercial and
mixed use projects throughout the United
States. Mr. Alexander received his B.A.
degree from Yale University and his J.D.
from Duke University School of Law. Mr.
Alexander is also a director of LaSalle
Partners U.S. Real Estate Fund.
</TABLE>

4
<PAGE>

<TABLE>
<CAPTION>
TERM DIRECTOR PRINCIPAL OCCUPATION, DIRECTORSHIPS
NAME AND AGE EXPIRES SINCE WITH PUBLIC COMPANIES, AND OTHER INFORMATION
------------ ------- -------- --------------------------------------------
<S> <C> <C> <C>
Jeffrey W. Wendel (43).. 2000 April Jeffrey W. Wendel joined the Company in 1994
Annual 1996 and serves as Group Vice President of
Meeting Information Technology 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 the 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.
Dr. David J. Deutsch 2000 July Dr. David J. Deutsch has been a director
(44)................... Annual 1993 since July 1993. He is a Lecturer in
Meeting Mathematics at Boston University's
Department of Mathematics. Previously, 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. Dr. David J. Deutsch
is the son of Dr. Robert W. Deutsch.
Jerry P. Malec (55)..... 2000 June Jerry P. Malec was elected to the Board of
Annual 1997 Directors following completion of the
Meeting Company's initial public offering. From 1994
to 1997, Mr. Malec was President and Chief
Executive Officer of Checkmate Electronics,
Inc., a developer and manufacturer of check
and fraud prevention and verification
systems. For 5 years prior to that, Mr.
Malec was employed by Apple Computer, Inc.,
as Vice President and General Manager of its
Enterprise Markets division. Mr. Malec
received his B.S. degree in Economics from
Wayne State University.
Robert T. O'Connell 2000 June Robert T. O'Connell joined the Company in
(59)................... Annual 1997 August 1997 and serves as Senior Vice
Meeting President of Strategic Business Planning and
a director. From 1995 to 1997, Mr. O'Connell
served as Senior Vice President and Chief
Staff Officer of EMC Corporation, a leading
provider of intelligent enterprise storage
and retrieval technology. Between 1965 and
1994, Mr. O'Connell held several positions
in General Motors Corporation, including
Chairman and Chief Executive Officer of
General Motors Acceptance Corporation
Financial Services and Chief Financial
Officer of General Motors Corporation. Mr.
O'Connell received his B.S. degree in
Economics from Yale University and his
M.B.A. in Finance from the Harvard Graduate
School of Business Administration.
</TABLE>

5
<PAGE>

INFORMATION REGARDING THE RWD BOARD, COMMITTEES, AND REMUNERATION

Following the Company's June 1997 initial public offering, there were 2
meetings of the Board of Directors of RWD. Each director attended at least 80%
of the combined total number of meetings of the Board and Board committees of
which he was a member.

The Audit Committee meets with RWD's independent accountants to review
whether satisfactory accounting procedures are being followed by RWD and
whether its internal accounting controls are adequate, to monitor nonaudit
services performed by the independent accountants, and to review fees charged
by the independent accountants. The Audit Committee also recommends to the RWD
Board the selection of independent accountants. During 1997, nonemployee
directors, Dr. David J. Deutsch, Jerry P. Malec, and Bruce D. Alexander, were
the members of the Audit Committee. Two meetings of the Audit Committee were
held during 1997, and all members were in attendance.

The Compensation Committee establishes the compensation for executive
officers of RWD and generally reviews benefits and compensation for all
officers and employees. It also administers RWD's stock option plans. During
1997, nonemployee directors, Jerry P. Malec and Bruce D. Alexander, were the
members of the Compensation Committee and attended both of the Committee's
1997 meetings. The report of the Compensation Committee required by the rules
of the U.S. Securities and Exchange Commission (the "SEC") is included in this
Proxy Statement.

Directors who are not employees of RWD receive (a) an annual retainer, which
is paid at the beginning of the year in shares of Common Stock having a fair
market value of $10,000 on the date of issuance; (b) $1,000 in cash for each
Board of Directors and Board Committee meeting attended; and (c) cash
reimbursement for expenses incurred in connection with their service as
directors.

In addition, upon their first election to the Board of Directors, each
director who is not an employee of the Company is granted an option to
purchase 12,000 shares of Common Stock under the Company's stock option plan.
These options vest ratably over a 3-year period beginning 1 year after the
date of grant and have an exercise price equal to the fair market value of the
Common Stock on the date of grant. Each such nonemployee director is also
eligible to receive additional options at the end of each calendar year based
on the financial performance of the Company and the contribution of the
individual director. In 1997, options to purchase 36,000 shares of RWD Common
Stock were granted to nonemployee directors at a weighted average exercise
price of $15.33 per share.

Compensation Committee Interlocks and Insider Participation in Compensation
Decisions

Following the Company's initial public offering in June 1997, the Board of
Directors established a Compensation Committee. Prior to its initial public
offering, the Company's Board of Directors 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 serving on the Compensation Committee is an
employee of RWD, and neither the Chief Executive Officer nor any of the Named
Executive Officers (as defined below) has served on the Compensation
Committee. No director or executive officer of RWD is a director or executive
officer of any other corporation that has a director or executive officer who
is also a director or Board Committee member of RWD.

6
<PAGE>

Compensation of Executive Officers

Compensation of Executive Officers. The following table sets forth certain
information with respect to the annual and long-term compensation for the last
3 fiscal years of the Chief Executive Officer and the four other most highly
paid executive officers for the last 3 fiscal years (collectively, the "Named
Executive Officers"):

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------- ----------------
NUMBER OF SHARES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER(1) OPTIONS COMPENSATION(4)
- --------------------------- ---- -------- -------- ----------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Robert W. Deutsch... 1997 $150,000 $400,000 $11,606,745(2) -- $8,154
Chairman of the Board, 1996 150,000 250,000 489,476(3) -- 10,181
Chief Executive Officer 1995 150,000 425,000 -- -- 10,316

John H. Beakes.......... 1997 220,000 100,000 504,660(2) -- 13,563
President and Chief 1996 220,000 75,000 21,284(3) -- 16,552
Operating Officer 1995 200,000 40,000 -- 39,000 15,904

John E. Lapolla......... 1997 150,000 25,000 -- 10,000 8,833
Group Vice President 1996 150,000 30,000 -- 15,000 8,739
1995 130,000 24,000 -- 60,000 7,648

Kenneth J. Rebeck....... 1997 150,000 35,000 -- 15,000 9,611
Group Vice President 1996 150,000 45,000 -- 15,000 9,493
1995 130,000 24,000 -- 60,000 7,768

Jeffrey W. Wendel....... 1997 150,000 50,000 102(2) 20,000 8,662
Group Vice President 1996 100,000 30,000 -- 30,000 5,558
1995 89,000 7,000 -- 9,000 6,672
</TABLE>
- --------
(1) The Company also provides certain perquisites and other personal benefits.
The aggregate dollar cost to the Company of such perquisites and other
benefits in each of the years represented did not exceed the lesser of
$50,000 or 10 percent of the amount reflected in the Salary and Bonus
columns for any of the Named Executive Officers.
(2) Distributions to S corporation shareholders of earnings of the Company for
periods prior to conversion from S corporation to C corporation status not
previously distributed.
(3) Represents S corporation dividends to enable the recipients to pay income
tax on the Company's earnings.
(4) Includes 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.

7
<PAGE>

Option Grants in the Last Fiscal Year. The following table sets forth
information regarding options to purchase shares of the Common Stock granted
to the Named Executive Officers during the last fiscal year.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
POTENTIAL REALIZED VALUE AT
NUMBER OF ASSUMED ANNUAL RATES OF
SECURITIES STOCK PRICE APPRECIATION
UNDERLYING PERCENT OF TOTAL EXERCISE FOR OPTION TERM(2)
OPTIONS OPTIONS GRANTED PRICE PER EXPIRATION ----------------------------
NAME GRANTED TO EMPLOYEES SHARE(1) DATE 5% 10%
---- ---------- ---------------- --------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Robert W. Deutsch... -- -- -- -- -- --
John H. Beakes.......... -- -- -- -- -- --
John E. Lapolla......... 10,000 1.4% $19.75 12/31/2009 $ 140,292 $ 365,991
Kenneth J. Rebeck....... 15,000 2.1 19.75 12/31/2009 210,438 548,986
Jeffrey W. Wendel....... 20,000 2.8 19.75 12/31/2009 280,584 731,981
</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 $33.78 and $56.35, respectively,
from the exercise price of $19.75 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.

Option Exercises in Last Fiscal Year and Fiscal Year-End 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 the last fiscal year and the number and value of unexercised
options to purchase Common Stock held at the end of the fiscal year by the
Named Executive Officers. Value is considered to be, in the case of exercised
options, the difference between exercise price and market price on the date of
exercise, and, in the case of unexercised options and exercisable options, the
difference between exercise price and market price on December 31, 1997.

<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES IN-THE-MONEY
UNDERLYING OPTIONS AT YEAR-
SHARES ACQUIRED OPTIONS AT END EXERCISABLE/
NAME UPON EXERCISE VALUE REALIZED YEAR-END(1) UNEXERCISABLE(1)
---- --------------- -------------- ----------- ----------------
<S> <C> <C> <C> <C>
Dr. Robert W. Deutsch... 5,370,000 $65,630,000 -- --
-- --
John H. Beakes.......... 612,000 7,441,000 78,600(E) $1,359,800(E)
50,400(U) 869,700(U)
John E. Lapolla......... -- -- 76,500(E) 1,322,000(E)
83,500(U) 1,183,000(U)
Kenneth J. Rebeck....... -- -- 76,800(E) 1,327,200(E)
88,200(U) 1,177,800(U)
Jeffrey W. Wendel....... 1,800 12,600 -- --
57,200(U) 482,400(U)
</TABLE>
- --------
(1) (E) = Exercisable; (U) = Unexercisable.

8
<PAGE>

Compensation Committee Report on Executive Compensation

Compensation Committee Overview. The function of the Compensation Committee
is to advise the Board regarding overall compensation policies and recommend
specific compensation for the Company's 2 most senior executives. The
Compensation Committee is responsible for providing guidance to the Board of
Directors regarding broad compensation issues including salaries, bonuses,
option grants, benefits, and other remuneration for officers and employees of
the Company. The Compensation Committee's responsibilities also include
administering the Company's stock option plans and 401(k) plan.

The Committee was established following the Company's initial public
offering in June 1997 and met twice in 1997. At its initial meeting, the
Compensation Committee met with senior management to discuss the Company's
overall historical compensation philosophy. The Committee also met with the
Company's human resources managers to familiarize the Committee with the
Company's benefits and personnel policies. The Compensation Committee is
composed of Messrs. Bruce Alexander and Jerry Malec (Chair), who are
independent directors, having never been officers or employees of the Company.

The Committee has retained a leading compensation consulting firm to advise
the Committee on the Company's executive compensation programs, including the
salary, bonus, and equity compensation of the Company's officers. The
consultants' review provides benchmarks for comparison of executive
compensation to that of other companies whose business is similar in nature to
the Company's or who may compete with the Company for executive talent. The
compensation consultants advise the Committee based on data resources that
include publicly available proxy materials, industry survey data, and the
consultants' experience in assisting public companies in establishing
management compensation plans.

Compensation Philosophy. The Company applies a consistent philosophy to
compensation for all employees, including senior management. This philosophy
is based upon the premise that the success of the Company results from the
efforts of each employee of the Company and that a cooperative, team-oriented
environment is an essential part of the Company's culture and success. The
Company believes strongly in the importance of rewarding employees for the
common success of the organization. Consequently, the Company places
particular emphasis on (a) broad employee equity participation through the use
of stock options with long-term vesting, and (b) annual cash bonuses linked to
overall Company profitability as integral parts of its compensation structure.
The Compensation Committee continues to believe that this approach and
philosophy are appropriate.

Executive Compensation. The principal elements of the Company's executive
compensation program consist of both annual compensation (primarily base
salary and annual incentive cash bonuses) and long-term incentive compensation
in the form of stock options with extended vesting periods. Base salary,
annual cash bonuses, and option grants are determined on the basis of the
overall financial performance of the Company and the performance of the
individual officer. In addition, the Committee and Board utilized the survey
data provided by the compensation consultants in establishing compensation
levels for officers of the Company.

Chief Executive Officer and Chief Operating Officer Compensation. Dr. Robert
W. Deutsch and Mr. John H. Beakes are co-founders of RWD Technologies, Inc.
Dr. Deutsch serves as Chairman and Chief Executive Officer of the Company. Mr.
Beakes has served as Chief Operating Officer since the Company was founded and
has served as President beginning in 1995.

Base salary levels of the Company's CEO and COO are recommended by the
Compensation Committee for approval by the Board. In determining the
appropriate base salary levels for the Company's CEO and COO, the Compensation
Committee reviewed the performance of each officer and of the Company and
utilized the analysis of executive compensation provided by the compensation
consultants. Based on this review, the Compensation Committee recommended, and
the Board approved, base salaries of $150,000 for the Company's CEO and
$275,000 for the Company's COO, effective January 1998. The CEO's salary
reflects a higher proportion of compensation at risk through a discretionary
annual cash bonus.

9
<PAGE>

In addition to base salaries, officers of the Company are eligible to
receive annual cash bonuses at the discretion of the Board of Directors. Cash
bonuses for officers are determined at year end on the basis of the overall
financial performance of the Company and the performance of the individual
officer. In addition to these objectives, the CEO's bonus is also linked to
the annual increase in the Company's profitability. Based on these factors and
utilizing the analysis of executive compensation provided by the compensation
consultants, the Compensation Committee recommended, and the Board approved,
year-end bonuses of $400,000 for the Company's CEO and $100,000 for the
Company's COO for 1997.

Long-Term Incentive Compensation. During 1997, the Company granted stock
options on 755,000 shares to 552 directors, officers, and employees of the
Company. Each of the founders owns a significant percentage of the Company's
Common Stock, and, therefore, each of them participates proportionately in any
increase in stockholder value. The Compensation Committee believes that the
founders' existing equity ownership and stock options sufficiently link their
interests to the financial success of the Company. Therefore, during 1997,
neither of the founders was granted options under the Company's stock option
plan.

Jerry P. Malec
Bruce D. Alexander

10
<PAGE>

Stock Performance Table

RWD is required by the SEC's rules to provide a 5-year comparison of the
cumulative total stockholder return on RWD Common Stock compared with that of
a broad equity market index and either a published industry index or an RWD-
constructed peer group index.

The following chart compares the cumulative total stockholder return on RWD
Common Stock during the period beginning June 19, 1997, (the date of RWD's
initial public offering) and ending December 31, 1997, with the cumulative
total return on the Nasdaq Composite (U.S.) and Nasdaq Computer and Data
Processing indices. The comparison assumes $100 was invested on June 19, 1997,
in RWD Common Stock and in each of the foregoing indices. It also assumes
reinvestment of any dividends.

RWD does not make, nor does it endorse, any predictions as to future stock
performance.

[PERFORMANCE GRAPH APPEARS HERE]

RWD Nasdaq Computer and
Technologies, Inc. Nasdaq Composite (U.S.) Data Processing Index
------------------ ----------------------- ---------------------
6/19/97 100 100 100
6/30/97 132.69 99.7 99.31
7/31/97 161.54 110.23 109.63
8/31/97 148.08 110.06 106.71
9/30/97 176.92 116.57 108.61
10/31/97 173.08 110.51 106.36
11/30/97 155.77 111.06 109.06
12/31/97 138.46 109.32 102.49

11
<PAGE>

RWD MANAGEMENT

The following table sets forth information regarding the executive officers,
directors, and other significant employees of RWD:

<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AND
DIRECTORS: AGE POSITION
- ---------------------- --- --------
<S> <C> <C>
Dr. Robert W. Deutsch......... 74 Chairman of the Board of Directors, Chief
Executive Officer
John H. Beakes................ 55 President, Chief Operating Officer,
Director
John E. Lapolla............... 44 Group Vice President--Manufacturing
Performance Support, Director
Kenneth J. Rebeck............. 46 Group Vice President--Technology Transfer,
Chief Engineer, Director
Jeffrey W. Wendel............. 43 Group Vice President--Information
Technology, Director
Ronald E. Holtz............... 40 Vice President, Chief Financial Officer,
Director
Robert T. O'Connell........... 59 Senior Vice President, Strategic Business
Planning, Director
Dr. David J. Deutsch.......... 44 Director
Jerry P. Malec................ 55 Director
Bruce D. Alexander............ 54 Director
KEY EMPLOYEES:
- --------------
Daniel A. Cantwell............ 45 Vice President--Manufacturing & Performance
Training Support
Robert B. Gosline, Jr......... 55 Vice President--Chief Information Officer
Wade A. Martin................ 39 Vice President--Performance Technology
Services
Vincent Marucci, Jr........... 40 Vice President--Information Technology
Deborah T. Ung................ 35 Vice President--Enterprise Systems
Implementation Support
James V. Thomas............... 54 Vice President--Lean Manufacturing
Johnny T. Baker............... 39 Vice President--Business Development
</TABLE>

Information relating to RWD's key employees is set forth below. See
"Information Concerning Nominees for Directors" and "Information Concerning
Continuing Directors" above for information relating to the executive officers
and directors of RWD.

Daniel A. Cantwell joined the Company in 1991 and serves as Vice President
of the Manufacturing & Performance Training 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.

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 M.S. in Computer Science from The Johns Hopkins
University and his B.S. from the U.S. Naval Academy.

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, a nuclear aircraft carrier. Mr. Martin received his A.S. in
Engineering Technology from the State University of New York at Albany and is
a graduate of the U.S. Navy Nuclear Power Program.

12
<PAGE>

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.

Deborah T. Ung joined the Company in 1989 and serves as Vice President of
the Enterprise Systems Implementation 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.

James V. Thomas joined the Company in 1996 and serves as Vice President of
the Lean Manufacturing Division. Prior to joining the Company, Mr. Thomas was
plant manager or operations manager for Kuhlman Electric Corp., Donnelly
Corp., and Danaher Tool Group, where he was responsible for converting these
companies from conventional mass production to lean manufacturing. Mr. Thomas
has studied extensively with Japanese developers of the Toyota Production
System, the basis of Lean Manufacturing.

Johnny T. Baker joined the Company in 1993 and serves as Vice President of
Business Development. Prior to joining RWD, Mr. Baker was employed by Apple
Computer from 1988 to 1993, where his most recent assignment was serving as
the Special Assistant to the Vice President for Apple's Large Business and
Government Division. Mr. Baker received his B.A. in Management/Information
Systems from Texas Tech University.

Dr. David J. Deutsch is Dr. Robert W. Deutsch's son. There are no other
family relationships among any of the key employees, executive officers, or
directors of the Company. The executive officers and key employees of RWD are
elected by the RWD Board on an annual basis and serve at the discretion of the
RWD Board.

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth information as of December 31, 1997, with
respect to those persons known to the Company to be the beneficial owners of
more than 5% of the issued and outstanding Common Stock of the Company.

<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED PERCENTAGE OF CLASS
------------------- ------------------ -------------------
<S> <C> <C>
William Blair & Company, L.L.C(1)........ 831,100(2) 5.6%
222 West Adams Street
Chicago, Illinois 60606
</TABLE>
- --------
(1) The information set forth above was provided to the Company in the
beneficial owner's Schedule 13G dated February 14, 1998. Reporting as a
Broker-Dealer and an Investment Advisor in accordance with Rule 13d-1(b).
(2) Sole voting power in respect of 242,900 shares and investment power in
respect of all shares.

13
<PAGE>

STOCK OWNERSHIP OF MANAGEMENT

The following table sets forth information as of March 31, 1998, 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 (a) each of the directors (and
nominees) of the Company; (b) the Chief Executive Officer and each of the
other Named Executive Officers; and (c) all directors and executive officers
as a group. Unless otherwise indicated, each named person exercises sole
voting and investment power.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-----------------------------
NAME (1) NUMBER PERCENT
- -------- --------------- -------------
<S> <C> <C>
Robert W. Deutsch(2).............................. 9,270,000 62.8%
John H. Beakes(3)................................. 549,646 3.7
David J. Deutsch(4)............................... 616,304 4.2
Robert T. O'Connell............................... 35,000 *
Jerry P. Malec.................................... 1,304 *
Bruce D. Alexander................................ 1,084 *
John E. Lapolla(5)................................ 102,200 *
Kenneth J. Rebeck(5).............................. 82,000 *
Jeffrey W. Wendel(5).............................. 10,100 *
Ronald E. Holtz (5)............................... 3,900 *
All directors and officers as a group (10
persons)......................................... 10,753,538 70.9
</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, Attention: Chief Financial Officer.
(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 104,400 shares issuable upon exercise of currently exercisable
options. Also includes 25,000 shares owned by Mrs. Rosemary Beakes, 16,400
shares owned by adult children of Mr. Beakes, and 156,778 shares held in
grantor retained annuity trusts, as to all of which Mr. Beakes disclaims
beneficial ownership.
(4) Includes an aggregate of 450,000 shares held in trusts for the children of
Mrs. Jane Brown and Dr. David Deutsch, for which Ms. Jane Brown (Dr.
Robert W. Deutsch's daughter) and Dr. David Deutsch serve as co-trustees.
(5) Includes 102,000, 82,000, 7,800, and 2,300 shares issuable upon exercise
of currently exercisable options held by each of Messrs. Lapolla, Rebeck,
Wendel, and Holtz, respectively.

EMPLOYMENT AGREEMENTS

During 1997, the Company 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 3 years and is automatically
renewed thereafter for successive 1-year terms until terminated by either the
Company or the employee. The employment agreements provided 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 provide
for annual cash bonuses in amounts determined by the Board of Directors. The
Employment Agreements contain confidentiality provisions and 1-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 3 times his average
annual compensation during the last 3 complete years prior to such change in
control.

CERTAIN RELATIONSHIPS AND RELATED 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,

14
<PAGE>

the Company's Chief Operating Officer, in each case to provide the Company
with working capital (collectively, the "Stockholder Notes"). The Stockholder
Notes were repaid on June 19, 1997, using $3,800,000 of the net proceeds of
the Company's initial public offering. In the 3-year period ended December 31,
1997, the Company made aggregate interest payments to Dr. Deutsch and Mr.
Beakes of $788,942 and $41,679, respectively.

From its inception in January 1988 until June 12, 1997, the Company was
subject to taxation under Subchapter S of the Internal Revenue Service 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 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, the Company made approximately $691,000 of cash distributions during
1996 to its stockholders. In connection with its conversion from S Corporation
to C Corporation status, the Company effected a distribution (consisting of an
aggregate of approximately $9,864,000 in cash payments and the issuance of
approximately $6,500,000 principal amount of notes (the "S Corporation Notes")
to the Company's stockholders prior to its June 1997 initial public offering
(the "S Corporation Distribution"). 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, and Dr. David J. Deutsch received 70.8%, 3.1%,
and 3.4%, respectively, of the S Corporation Distribution. The S Corporation
Notes were noninterest bearing, demand notes, which the Company repaid on
December 12, 1997.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors and persons who beneficially own 10% or
more of the Company's Common Stock (the "Reporting Persons") to file reports
regarding their RWD Common Stock ownership and changes in ownership with the
SEC. Based solely on a review of the copies of such forms furnished to RWD and
written representations from certain of the Reporting Persons, the Company
believes that during 1997, the Reporting Persons complied with all Section
16(a) reporting requirements applicable to them.

II. APPROVAL OF 1998 OMNIBUS STOCK INCENTIVE PLAN

The RWD Board of Directors adopted the 1998 Omnibus Stock Incentive Plan
(the "1998 Stock Plan"), pursuant to the recommendation of the Compensation
Committee and subject to approval by the stockholders of RWD. Pursuant to the
1998 Stock Plan, stock options, stock appreciation rights, stock awards,
phantom stock awards, and performance awards can be granted under the plan. An
aggregate of 2,000,000 shares of Common Stock are authorized for issuance
under the 1998 Stock Plan. As of March 31, 1998, no options or other awards
had been granted under the 1998 Stock Plan.

The Board of Directors unanimously recommends that the 1998 Stock Plan be
approved because it believes the 1998 Stock Plan will advance the interests of
RWD and its stockholders by strengthening RWD's ability to retain and motivate
key employees whom the Board of Directors believe are integral to the long-
term success of RWD.

The Board of Directors intends to consider, from time to time, purchases of
Common Stock in the open market or block purchases of RWD Common Stock. The
purpose of these purchases would be to offset in part dilution resulting from
grants or exercises of employee stock options. Any such purchases will be made
in accordance with the applicable rules of the Securities and Exchange
Commission.

The following is a fair and complete summary of the 1998 Stock Plan as
proposed for approval; it is qualified in its entirety by reference to the
full text of the 1998 Stock Plan, which appears as Exhibit A to this Proxy
Statement.

GENERAL

Purpose: The purpose of the 1998 Stock Plan as proposed is to promote the
long-term growth and profitability of the Company by providing its employees
and directors with incentives to improve stockholder value and contribute to
the growth and financial success of the Company, and by enabling the Company
to attract, retain, and reward the best-available persons.

15
<PAGE>

Shares Available under the 1998 Stock Plan: The number of shares of Common
Stock that may be issued with respect to awards granted under the proposed
1998 Stock Plan shall not exceed an aggregate of 2,000,000 shares of Common
Stock. These shares are in addition to the approximately 300,000 shares that
remain available for further awards under the Amended and Restated Equity
Participation Plan, which expires December 31, 1998. The maximum number of
shares of Common Stock subject to awards of any combination that may be
granted under the 1998 Stock Plan during any 1 fiscal year of the Company to
any 1 individual shall be limited to 200,000. These limits are subject to
adjustment to reflect any stock dividends, split-ups, recapitalizations,
mergers, consolidations, business combinations, or exchanges of shares and the
like. If any award or portion of an award under the 1998 Stock 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 Company 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 1998 Stock Plan. As of March 31,
1998, the fair market value of a share of the Company's Common Stock,
determined by the last reported sale price per share of Common Stock on such
date as quoted on the Nasdaq National Market, was $27.50.

Administration: The proposed 1998 Stock Plan will be administered by the
Board of Directors or by such committee or committees as may be appointed by
the Board of Directors from time to time (the Board of Directors, committee or
committees hereinafter referred to as the "Administrator"). The Administrator
shall have full power and authority to take all actions necessary to carry out
the purpose and intent of the 1998 Stock Plan, including, but not limited to,
the authority to: (a) determine the eligible persons to whom, and the time or
times at which awards shall be granted; (b) determine the types of awards to
be granted; (c) determine the number of shares to be covered by or used for
reference purposes for each award; (d) impose such terms, limitations,
restrictions and conditions upon any such award as the Administrator shall
deem appropriate; (e) modify, amend, extend or renew outstanding awards, or
accept the surrender of outstanding awards and substitute new awards (provided
however, that, except as noted below, any modification that would materially
adversely affect any outstanding award shall not be made without the consent
of the holder); (f) 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 (g) establish objectives and conditions, if any, for
earning awards and determining whether awards will be paid after the end of a
performance period.

In the event of changes in the Common Stock of the Company by reason of any
stock dividend, split-up, recapitalization, merger, consolidation, business
combination, or exchange of shares and the like, the Administrator shall, in
its discretion, make appropriate adjustments to the maximum number and kind of
shares reserved for issuance or with respect to which awards may be granted
under the 1998 Stock Plan and to the number, kind, and price of shares covered
by outstanding awards, and shall, in its discretion and without the consent of
holders of awards, make any other adjustments in awards, including but not
limited to reducing the number of shares subject to awards or providing or
mandating alternative settlement methods such as settlement of the awards in
cash or in shares of Common Stock or other securities of the Company or of any
other entity, or in any other matters that relate to awards as the
Administrator shall, in its sole discretion, determine to be necessary or
appropriate.

Without the consent of holders of awards, the Administrator, in its sole
discretion, may make any modifications to any awards, including but not
limited to cancellation, forfeiture, surrender or other termination of the
awards in whole or in part regardless of the vested status of the award, in
order to facilitate any business combination that is authorized by the Board
of Directors of the Company to comply with requirements for treatment as a
pooling of interests transaction for accounting purposes under generally
accepted accounting principles.

Without the consent of holders of awards, the Administrator in its
discretion is authorized to make adjustments in the terms and conditions of,
and the criteria included in, awards in recognition of unusual or

16
<PAGE>

nonrecurring events affecting the Company, or the financial statements of the
Company or any subsidiary, or of changes in applicable laws, regulations, or
accounting principles, whenever the Administrator 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 1998
Stock Plan.

Participation: Participation in the 1998 Stock Plan will be open to all
employees, officers, and directors of the Company or any of its affiliates, as
may be selected by the Administrator from time to time. As of April 9, 1998,
all 3 nonemployee directors and approximately 800 employees would be eligible
to participate in the 1998 Stock Plan.

TYPE OF AWARDS

The 1998 Stock Plan as proposed would allow stock options, stock
appreciation rights, stock awards, phantom stock awards, and performance
awards to be granted. These awards may be granted separately or in tandem with
other awards. The Administrator will determine the prices, expiration dates,
and other material conditions upon which such awards may be exercised.

Stock Options: The proposed 1998 Stock Plan allows the Administrator to
grant either awards of incentive stock options as that term is defined in
section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
nonqualified stock options provided, however, that awards of incentive stock
options shall be limited to employees of the Company or of any subsidiary of
the Company. 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. The option exercise price may be
paid in cash, by tender of shares of Common Stock in the Administrator's
discretion, by a combination of cash and shares, or by any other means the
Administrator approves.

Stock Appreciation Rights: The proposed 1998 Stock Plan allows the
Administrator to grant awards of Stock Appreciation Rights ("SARs"). A SAR
entitles the holder to receive a payment in cash, in shares of Common Stock,
or in a combination of both, having an aggregate value equal to the product of
(a) the excess of (i) the fair market value on the exercise date of 1 share of
Common Stock over (ii) the base price per share specified in the grant
agreement, times (b) the number of shares specified by the SAR, or portion
thereof, that is exercised.

Stock and Phantom Stock Awards: The proposed 1998 Stock Plan allows the
Administrator to grant restricted or unrestricted stock awards, or awards
denominated in stock-equivalent units ("phantom stock") to eligible
participants with or without payment of consideration by the grantee. Stock
awards and phantom stock awards may be paid in cash, in shares of Common
Stock, or in a combination of both.

Performance Awards: The proposed 1998 Stock Plan allows the Administrator to
grant performance awards which become payable in cash, in shares of Common
Stock, or in a combination of both, on account of attainment of 1 or more
performance goals established by the Administrator. Performance goals
established by the Administrator may be based on the Company's or an
affiliate's operating income or 1 or more other business criteria selected by
the Administrator that apply to an individual or group of individuals, a
business unit, or the Company or an affiliate as a whole, over such
performance period as the Administrator may designate.

AWARDS UNDER THE 1998 STOCK PLAN

Because participation and the types of awards granted under the 1998 Stock
Plan as proposed are subject to the discretion of the Administrator, the
benefits or amounts that will be received by any participant or groups of
participants if the 1998 Stock Plan is approved are not currently
determinable.

AMENDMENT AND TERMINATION

The Board of Directors of the Company may terminate, amend, or modify the
1998 Stock Plan or any portion thereof at any time.

17
<PAGE>

FEDERAL INCOME TAX CONSEQUENCES

The following is a general summary of the current federal income tax
treatment of stock options, which would be authorized to be granted under the
1998 Stock Plan as proposed, based upon the current provisions of the Code and
regulations promulgated thereunder. The discussion set forth below, insofar as
it relates to the deductibility of any compensation payable under the 1998
Stock Plan, is subject to the paragraph captioned "Disallowance of Deductions"
relating to compensation in excess of $1,000,000 payable to certain executive
officers.

Incentive Stock Options: Incentive stock options under the 1998 Stock Plan
are intended to meet the requirements of Code section 422. No tax consequences
result from the grant of the option. If an option holder acquires stock upon
exercise, no income will be recognized by the option holder for ordinary
income tax purposes (although the difference between the option exercise price
and the fair market value of the stock subject to the option may result in
alternative minimum tax liability to the option holder) and the Company will
be allowed no deduction as a result of such exercise, provided that the
following conditions are met: (a) at all times during the period beginning
with the date of the granting of the option and ending on the day 3 months
before the date of such exercise, the option holder is an employee of the
Company or of a subsidiary; and (b) the option holder makes no disposition of
the stock within 2 years from the date the option is granted nor within 1 year
after the stock is transferred to the option holder. The 3-month period is
extended to 1 year in the event of disability and is waived in the event of
death of the employee. In the event of a sale of such stock by the option
holder after compliance with these conditions, any gain realized over the
price paid for the stock ordinarily will be treated as capital gain, and any
loss will be treated as capital loss in the year of the sale.

If the option holder fails to comply with the employment requirement
discussed above, the tax consequences will be the same as for a nonqualified
option, discussed below. If the option holder fails to comply with the holding
period requirements discussed above, the option holder will recognize ordinary
income in an amount equal to the lesser of (a) the excess of the fair market
value of the stock on the date the option was exercised over the exercise
price or (b) the excess of the amount realized upon such disposition over the
exercise price. Any additional gain ordinarily will be recognized by the
option holder as capital gain, either long-term or short-term, depending on
the holding period of the shares. If the option holder is treated as having
received ordinary income because of his or her failure to comply with either
condition above, an equivalent deduction will be allowed to the Company in the
same year.

Nonqualified Stock Options: No tax consequences result from the grant of the
option. An option holder who exercises a nonqualified stock option with cash
generally will realize compensation taxable as ordinary income in an amount
equal to the difference between the exercise price and the fair market value
of the shares on the date of exercise, and the Company will be entitled to a
deduction from income in the same amount in the fiscal year in which the
exercise occurred. The option holder's basis in such shares will be the fair
market value on the date income is realized, and when the holder disposes of
the shares, he or she will recognize capital gain or loss, either long-term or
short-term, depending on the holding period of the shares.

Disallowance of Deductions: The Code disallows deductions for publicly held
corporations with respect to compensation in excess of $1,000,000 paid to the
corporation's chief executive officer and its four other most highly
compensated officers. However, compensation payable solely on account of
attainment of 1 or more performance goals is not subject to this deduction
limitation if the performance goals are objective, pre-established, and
determined by a compensation committee composed solely of two or more outside
directors, the material terms under which the compensation is to be paid are
disclosed to the stockholders and approved by a majority vote, and the
compensation committee certifies that the performance goals and other material
terms were in fact satisfied before the compensation is paid. Under this
exception, the deduction limitation does not apply with respect to
compensation otherwise deductible on account of stock options and stock
appreciation rights granted at fair market value under a plan that limits the
number of shares that may be issued to any individual and that is approved by
the corporation's stockholders.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE 1998 OMNIBUS STOCK INCENTIVE PLAN.

18
<PAGE>

III. AUDITOR CONFIRMATION

The RWD Board of Directors, pursuant to the recommendation of its Audit
Committee, has selected Arthur Andersen, LLP, to examine and audit the
financial statements of RWD for the fiscal year ending December 31, 1998.
Arthur Andersen, LLP, has served as independent auditors of RWD since 1989. A
partner of the firm will be present at the Annual Meeting and available to
respond to appropriate questions and will have an opportunity to make a
statement if he desires to do so.

In 1997, Arthur Andersen, LLP, performed various professional services for
RWD. These services included completion of the examination of 1996 financial
statements for RWD, other review work of required filings with the Securities
and Exchange Commission, preliminary work on the examination of fiscal year
1997 financial statements, preparation of corporate tax returns, and other
consultation with RWD personnel on accounting and related matters.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION
OF ARTHUR ANDERSEN, LLP, AS INDEPENDENT AUDITORS OF RWD FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1998.

IV. OTHER MATTERS

The Board of Directors of the Company does not know of any matters other
than those described in this proxy statement that will be presented for action
at the Annual Meeting. If any other matters are properly brought before the
Annual Meeting, the persons named in the accompanying proxies will vote the
shares represented by such proxies on such matters as instructed by the Board
of Directors of the Company, who have instructed the proxies to vote in
accordance with the proxies' own best judgment in the absence of express
instruction from the Board.

STOCKHOLDERS PROPOSALS

Any stockholder who wishes to submit a proposal for the 1999 Annual Meeting
of Stockholders of RWD should submit the proposal to the Company by November
28, 1998.

MISCELLANEOUS

A copy of RWD's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, as filed with the Securities and Exchange Commission,
excluding certain exhibits thereto, may be obtained without charge, by writing
Investor Relations, RWD Technologies, Inc., 10480 Little Patuxent Parkway,
Suite 1200, Columbia, Maryland 21046-3530 or by telephoning (410) 730-4377.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Ronald E. Holtz

Ronald E. Holtz
Secretary

Columbia, Maryland
April 9, 1998

19
<PAGE>

EXHIBIT A

RWD TECHNOLOGIES, INC.
1998 OMNIBUS STOCK INCENTIVE PLAN

1. ESTABLISHMENT, PURPOSE AND TYPES OF AWARDS

RWD Technologies, Inc. hereby establishes the RWD Technologies, Inc. 1998
OMNIBUS STOCK INCENTIVE PLAN (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 and directors 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 persons.

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 or value of all classes of
stock or interests of the entity.

(b) "Award" shall mean any stock option, stock appreciation right, stock
award, phantom stock award, or performance award.

(d) "Code" shall mean the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder.

(e) "Common Stock" shall mean shares of common stock of the Corporation, par
value of ten cents ($0.10) per share.

(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

(g) "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
Administrator on the date of grant; provided, however, that, with respect to
any Award, whichever definition is selected by the Administrator 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. Notwithstanding the
preceding sentence, with respect to the grant of incentive stock options
within the meaning of Code section 422, Fair market value of a share of the
Corporation's Common stock on the grant date shall mean the Closing Price on
the trading day preceding such date. As used herein, the "Closing Price" on a
particular date shall mean the last reported sale price per share of Common
stock, regular way, on such date or, in case no such sale takes place on such
date, the average of the closing bid and asked prices, regular way, 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 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, regular way, in the over-the-
counter market, as reported by the National Association of Securities Dealers,
Inc. Automated Quotation

20
<PAGE>

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, regular way, as furnished by a professional market maker making a
market in the Common stock as selected in good faith by the Administrator or
by such other source or sources as shall be selected in good faith by the
Administrator. If, as the case may be, the relevant date is not a trading day,
the determination shall be made as of the next preceding trading day. 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 National Market, any business day.

(h) "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.

(i) "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.

(j) "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.

(k) "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) Administration of the Plan. The Plan shall be administered by the Board
or by such committee or committees as may be appointed by the Board from time
to time (the Board, committee or committees hereinafter referred to as the
"Administrator").

(b) Powers of the Administrator. The Administrator 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 Administrator 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
Administrator 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, except as provided in Section
7(d) of the Plan, any modification that would materially adversely affect any
outstanding Award shall not be made without the consent of the holder); (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 Administrator 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 for
the administration of the Plan and for the conduct of its business as the
Administrator deems necessary or advisable.

(c) Non-Uniform Determinations. The Administrator's determinations under the
Plan (including without limitation, determinations of the persons to receive
Awards; the form, amount, and timing of such Awards; the

21
<PAGE>

terms and provisions of such Awards, and the grant agreements evidencing such
Awards) need not be uniform and may be made by the Administrator selectively
among persons who receive, or are eligible to receive, Awards under the Plan,
whether or not such persons are similarly situated.

(d) Limited Liability. To the maximum extent permitted by law, the
Administrator shall be liable for any action taken or decision made in good
faith relating to the Plan or any Award thereunder.

(e) Indemnification. To the maximum extent permitted by law and by the
Corporation's charter and by-laws, the Administrator shall be indemnified by
the Corporation in respect of all their activities under the Plan.

(f) Effect of Administrator's Decision. All actions taken and decisions and
determinations made by the Administrator on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Administrator'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 issued with respect to Awards granted under the
Plan shall not exceed an aggregate of 2,000,000 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, that 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 Administrator from time to time.

6. AWARDS

The Administrator, 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 Administrator 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; provided, however, that Awards of
incentive stock options shall be limited to employees of the Corporation or of
any Parent or Subsidiary of the Corporation. 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. No
stock option shall be an incentive stock option unless so designated by the
Administrator at the time of grant or in the Grant Agreement evidencing such
stock option.

22
<PAGE>

(b) Stock Appreciation Rights. The Administrator 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 Administrator. 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
Administrator 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 Administrator may from time to time grant restricted
or unrestricted stock Awards to eligible participants in such amounts, on such
terms and conditions, and for such consideration, including no consideration
or such minimum consideration as may be required by law, as it shall
determine. 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 Administrator.

(d) Phantom Stock. The Administrator may from time to time grant Awards to
eligible participants denominated in stock-equivalent units ("phantom stock")
in such amounts and on such terms and conditions as it shall determine.
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 Administrator.
Except as otherwise provided in the applicable Grant Agreement, the grantee
shall not have the rights of a stockholder with respect to any shares of
Common stock represented by a phantom stock unit solely as a result of the
grant of a phantom stock unit to the grantee.

(e) Performance Awards. The Administrator may, in its discretion, grant
performance awards which become payable on account of attainment of one or
more performance goals established by the Administrator. 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
Administrator. Performance goals established by the Administrator may be based
on the Corporation's or an Affiliate's operating income or one or more other
business criteria selected by the Administrator that apply to an individual or
group of individuals, a business unit, or the Corporation or an Affiliate as a
whole, over such performance period as the Administrator may designate.

7. MISCELLANEOUS

(a) Withholding of Taxes. Grantees and holders of Awards shall pay to the
Corporation, or make provision satisfactory to the Administrator for payment
of, any taxes required to be withheld in respect of Awards under the Plan no
later than the date of the event creating the tax liability. The Corporation
may, to the extent permitted by law, deduct any such tax obligations from any
payment of any kind otherwise due to the grantee or holder of an Award, or to
retain or sell without notice a sufficient number of the shares to be issued
to such grantee or holder to cover any such taxes. In the event that payment
to the Corporation of such tax obligations is made in shares of Common stock,
such shares shall be valued at Fair market value on the applicable date for
such purposes.

(b) Loans. 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 Administrator,
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

23
<PAGE>

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 Administrator 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 changes in the
Common stock of the Corporation by reason of any stock dividend, split-up,
recapitalization, merger, consolidation, business combination or exchange of
shares and the like, the Administrator shall, in its discretion, make
appropriate adjustments to 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 of the Plan and to the number, kind and price of shares
covered by outstanding Awards, and shall, in its discretion and without the
consent of holders of Awards, make any other adjustments in outstanding
Awards, including but not limited to reducing the number of shares subject to
Awards or providing or mandating alternative settlement methods such as
settlement of the Awards in cash or in shares of Common stock or other
securities of the Corporation or of any other entity, or in any other matters
which relate to Awards as the Administrator shall, in its sole discretion,
determine to be necessary or appropriate.

Notwithstanding anything in the Plan to the contrary and without the consent
of grantees or holders of Awards, the Administrator, in its sole discretion,
may make any modifications to any Awards, including but not limited to
cancellation, forfeiture, surrender or other termination of the Awards in
whole or in part regardless of the vested status of the Award, in order to
facilitate any business combination that is authorized by the Board to comply
with requirements for treatment as a pooling of interests transaction for
accounting purposes under generally accepted accounting principles.

The Administrator is authorized to make, in its discretion and without the
consent of grantees or holders of Awards, 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 Administrator 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.

(e) Substitution of Awards in Mergers and Acquisitions. Awards may be
granted under the Plan from time to time in substitution for Awards held by
employees or directors of entities who become or are about to become employees
or directors of the Corporation or an Affiliate as the result of a merger or
consolidation of the employing entity with the Corporation or an Affiliate, or
the acquisition by the Corporation or an Affiliate of the assets or stock of
the employing entity. The terms and conditions of any substitute Awards so
granted may vary from the terms and conditions set forth herein to the extent
that the Administrator deems appropriate at the time of grant to conform the
substitute Awards to the provisions of the awards for which they are
substituted.

(f) Termination, Amendment and Modification of the Plan. The Board may
terminate, amend, or modify the Plan or any portion thereof at any time.

(g) 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.

(h) 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.

(i) 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 Administrator

24
<PAGE>

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 the State of Maryland, without regard to its conflict of laws
principles.

(j) Effective Date; Termination Date. The Plan is effective as of the date
on which the Plan was adopted by the Board, subject to approval of the
stockholders within twelve months before or after such 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. 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 Approved by the Board: March 6, 1998

25
<PAGE>

RWD TECHNOLOGIES, INC.

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS

SOLICITED BY THE BOARD OF DIRECTORS

MAY 19, 1998

The undersigned hereby appoints each of John H. Beakes and Ronald E. Holtz
proxies with full power of substitution, with the powers (each having full power
to act without the other) the undersigned would possess if personally present,
to vote, as designated below, all shares of Common Stock held by the undersigned
in RWD Technologies, Inc. (the "Company") at the Annual Meeting of Stockholders
to be held at 2:00 p.m. on May 19, 1998, at 10480 Little Patuxent Parkway,
Columbia, Maryland 21044 (the "Annual Meeting"), and at any adjournments or
postponements thereof.

This proxy is solicited on behalf of the Board of Directors of the Company
and will be voted FOR Proposals 1 through 3 below unless otherwise indicated.

You are encouraged to specify your choices by marking the appropriate box,
SEE REVERSE SIDE. The Proxies cannot vote your shares unless you sign and
return this card.

(continued and to be SIGNED on the other side)

/\ FOLD AND DETACH HERE /\

<PAGE>

Please mark your
vote as in this example

[X]

1. Election of Class I directors.

<TABLE>
<S> <C> <C>
FOR all nominees named WITHHOLD AUTHORITY Names of Nominees: Dr. Robert W. Deutsch, Ronald E. Holtz,
(except as marked to the to vote for all nominees names Kenneth J. Rebeck
contrary) (Instruction: To withhold your vote for any individual nominee,
[ ] [ ] write that nominee's name on the following line):

-----------------------------------------------------------------
</TABLE>

2. To adopt the Company's 1998 Omnibus Stock Incentive Plan.

<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
</TABLE>

3. Ratification of the appointment of independent auditors.

<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
</TABLE>

This Proxy, if properly
executed, will be voted
in accordance with the
undersigned's direction as
set forth herein. If no
direction is made, this
Proxy will be voted FOR
Proposals 1 through 3,
inclusive. This Proxy
may be revoked in writing
prior to its exercise.
The undersigned hereby
revokes any proxies
heretofore given to vote
upon or act with respect
to such shares.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME OR
NAMES APPEAR HEREON. JOINT OWNERS SHOULD
EACH SIGN PERSONALLY, WHEN SIGNING AS AN
ATTORNEY, EXECUTOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE YOUR FULL TITLE AS SUCH.

Dated: , 1998
--------------------------------

---------------------------------------------
Signature

---------------------------------------------
Signature (see note above)

IMPORTANT: PLEASE SIGN, DATE AND RETURN
PROMPTLY.