<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. __)
/X/ Filed by the Registrant
/ / Filed by a Party other than the Registrant
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CONDOR TECHNOLOGY SOLUTIONS, INC.
------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the
date of its filing.
(1) Amount previously paid:
----------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
----------------------------------------------------------------------
(3) Filing party:
CONDOR TECHNOLOGY SOLUTIONS, INC.
---------------------------------
(4) Date filed:
3/30/99
---------------------------
<PAGE>
<TABLE>
<S> <C> <C>
Annapolis Office Plaza
[LOGO] 170 Jennifer Road
CONDOR TECHNOLOGY SOLUTIONS, Suite 325
INC. Annapolis, MD 21401
Tel: 410-266-6700
Fax: 410-266-8400
</TABLE>
April 1, 1999
Dear Stockholders:
It is my pleasure to invite you to the 1999 Annual Meeting of Stockholders
of Condor Technology Solutions, Inc. to be held on Tuesday, May 4, 1999 at 10:00
a.m., Eastern Daylight Time, at the Annapolis Marriott Waterfront, 80 Compromise
Street, Annapolis, Maryland.
At the meeting, we will report on important activities and accomplishments
of the Company and review the Company's financial performance and business
operations. You will have an opportunity to ask questions and gain an up-to-date
perspective on your Company and its activities. You will also have an
opportunity to meet your directors and other executives of the Company.
The meeting will also be devoted to the election of three Class II
directors, approval of PricewaterhouseCoopers LLP as the independent accountants
for 1999, and consideration of other business matters properly brought before
the meeting.
Whether or not you plan to attend, and regardless of the number of shares
you own, it is important that your shares be represented at the Annual Meeting.
I therefore urge you to complete, sign, date and return your proxy promptly in
the enclosed envelope. Your return of a proxy in advance will not affect your
right to vote in person at the Annual Meeting.
I hope that you will attend the Annual Meeting. The officers and directors
of the Company look forward to seeing you at that time.
Very truly yours,
/s/ Kennard F. Hill
Kennard F. Hill
Chairman of the Board and
Chief Executive Officer
<PAGE>
CONDOR TECHNOLOGY SOLUTIONS, INC.
170 JENNIFER ROAD
SUITE 325
ANNAPOLIS, MARYLAND 21401
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, MAY 4, 1999
To our Stockholders:
The Annual Meeting of Stockholders of Condor Technology Solutions, Inc. will
be held on Tuesday, May 4, 1999, at 10:00 a.m. EDT at the Annapolis Marriott
Waterfront, 80 Compromise Street, Annapolis, Maryland, for the following
purposes:
1. To elect three Class II Directors, each for a term of three years and until
their respective successors have been elected and qualified;
2. To ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent accountants for 1999; and
3. To transact such other business as may properly come before the Meeting.
Stockholders of record at 5:00 p.m. EDT on March 22, 1999, are entitled to
receive notice of and to vote at the Meeting.
You are cordially invited to attend the Meeting. Please carefully read the
attached Proxy Statement for additional information regarding the matters to be
considered and acted upon at the Meeting.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING IN PERSON, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE. No postage need be affixed to the return envelope if mailed in the
United States. If you attend the Meeting, you may withdraw your proxy and vote
in person by ballot.
/s/ John F. McCabe
John F. McCabe
Vice President, General Counsel
and Secretary
Annapolis, Maryland
April 1, 1999
<PAGE>
CONDOR TECHNOLOGY SOLUTIONS, INC.
170 JENNIFER ROAD
SUITE 325
ANNAPOLIS, MARYLAND 21401
------------------------
PROXY STATEMENT
This Proxy Statement and the accompanying Notice of Annual Meeting of
Stockholders and Proxy Card are being furnished in connection with the
solicitation by the Board of Directors of Condor Technology Solutions, Inc. (the
"Company") of proxies to be voted at the Annual Meeting of Stockholders
scheduled to be held on Tuesday, May 4, 1999, at 10:00 a.m. EDT, at the
Annapolis Marriott Waterfront, 80 Compromise Street, Annapolis, Maryland, and
any adjournment or postponement thereof (the "Meeting"). This Proxy Statement
and the enclosed Proxy Card are being furnished on or about April 1, 1999, to
all holders of record of the Company's Common Stock as of 5:00 p.m. EDT on March
22, 1999. A copy of the Company's 1998 Annual Report to Stockholders accompanies
this Proxy Statement.
At the Meeting, Stockholders will elect three Class II directors, each to
serve for a term of three years. Stockholders will also act upon a proposal to
ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent accountants for 1999.
VOTING SECURITIES AND RECORD DATE
The Board of Directors has fixed 5:00 p.m. EDT on March 22, 1999 as the
record date (the "Record Date") for determination of Stockholders entitled to
notice of and to vote at the Meeting. As of the Record Date, there were
12,101,488 shares of Common Stock issued and outstanding and there were no other
voting securities of the Company outstanding. Each outstanding share of Common
Stock entitles the record holder thereof to one vote.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Eligible stockholders of record may vote at the Meeting in person or by
means of the enclosed Proxy Card. You may specify your voting choices by marking
the appropriate boxes on the Proxy Card. The proxy solicited hereby, if properly
signed and returned to the Company and not revoked prior to or at the Meeting,
will be voted in accordance with the instructions specified thereon. If you
properly sign and return your Proxy Card, but do not specify your choices, your
shares will be voted by the proxy holders as recommended by the Board of
Directors.
The Board of Directors encourages you to complete and return the Proxy Card
even if you expect to attend the Meeting. You may revoke your proxy at any time
before it is voted at the Meeting by giving written notice of revocation to the
Secretary of the Company, by submission of a proxy bearing a later date or by
attending the Meeting in person and casting a ballot.
The proxy holders, Kennard F. Hill, Daniel J. Roche and John F. McCabe, will
vote all shares of Common Stock represented by Proxy Cards that are properly
signed and returned by stockholders. The Proxy Card also authorizes the proxy
holders to vote the shares represented with respect to any matters not known at
the time this Proxy Statement was printed that may properly be presented for
consideration at the Meeting. YOU MUST RETURN A SIGNED PROXY CARD IF YOU WANT
THE PROXY HOLDERS TO VOTE YOUR SHARES OF COMMON STOCK.
Under Delaware law and the Company's Certificate of Incorporation, if a
quorum is present at the Meeting, the three nominees for election as directors
who receive the greatest number of votes will be elected Class II Directors.
Approval of other matters that properly come before the Meeting requires the
affirmative vote of a majority of the total number of votes cast. Abstentions
and broker non-votes are not
1
<PAGE>
counted as votes cast on any matter to which they relate. A "non-vote" occurs
when a nominee holding shares for a beneficial owner votes on one proposal, but
does not vote on another proposal because the nominee does not have
discretionary voting power and has not received instructions from the beneficial
owner.
The cost of soliciting proxies will be borne by the Company. Following the
mailing of proxy solicitation materials, proxies may be solicited by directors,
officers and employees of the Company and its subsidiaries personally, by
telephone or otherwise. Such persons will not receive any fees or other
compensation for such solicitation. In addition, the Company will reimburse
brokers, custodians, nominees and other persons holding shares of Common Stock
for others for their reasonable expenses in sending proxy materials to the
beneficial owners of such shares and in obtaining their proxies.
PROPOSAL 1--ELECTION OF DIRECTORS
The Amended and Restated By-Laws of the Company (the "By-Laws") provide that
the Company's business shall be managed under the direction of a Board of
Directors, with the number of directors to be fixed by the Board of Directors
from time to time. The Board of Directors has fixed the number of directors
which shall constitute the entire Board of Directors at eight.
Pursuant to the Company's Amended and Restated Certificate of Incorporation,
the Company's Board of Directors is divided into three classes: Class I, Class
II and Class III, each class being as nearly equal in number as possible. The
directors in each class serve terms of three years and until their respective
successors have been elected and qualified. There are presently two directors in
Class I and three directors in each of Class II and Class III.
The term of office of one class of directors expires each year in rotation
so that one class is elected at each annual meeting of stockholders for a three
year term. The term of the three Class II directors, Dennis E. Logue, Edward J.
Mathias and William E. Hummel, will expire at the Meeting. The other five
directors will remain in office for the remainder of their respective terms, as
indicated below.
Director candidates are nominated by the Board of Directors. Stockholders
are also entitled to nominate candidates for the Board of Directors in
accordance with the procedures set forth in the By-Laws.
Each of the nominees for election as a Class II director has consented to
being named as a nominee for director of the Company and has agreed to serve if
elected. In the event that any of the nominees should become unavailable or
unable to serve as a director, the persons named as proxies on the Proxy Card
will vote for the person(s) the Board of Directors recommends.
Set forth below is certain information regarding each nominee for Class II
director and each Class I and Class III director, whose term of office will
continue after the Meeting.
NOMINEES FOR CLASS II DIRECTOR
Dennis E. Logue, 55, has been a director of the Company since March 1998.
Mr. Logue has held various faculty positions at the Amos Tuck School of Business
Administration at Dartmouth College since 1974, including Professor of
Management since July 1985 and Associate Dean from July 1989 to June 1993. From
January 1994 to January 1995, Mr. Logue was the Economic Advisor to the Governor
of New Hampshire. Prior to joining the faculty at the Amos Tuck School in 1974,
Mr. Logue taught at Indiana University and worked at the U.S. Treasury as a
senior research economist. In addition, Mr. Logue has been a visiting professor
at the University of California at Berkeley, the University of Virginia and
Georgetown University. Mr. Logue was a founder and has served on the board of
directors of Ledyard National Bank since 1991. He also serves on the board of
directors of Sallie Mae (GSE), Promontory Software Technology, Preferred
Technology, Inc., and Synergy Innovations, Inc. Mr. Logue is also a Trustee of
Crossroads Academy and a Trustee of the Josiah Bartlett Center for Public
Policy. Mr. Logue received a
2
<PAGE>
bachelor of arts degree in English and philosophy from Fordham University, a
masters degree in business administration from Rutgers University and a Ph.D. in
managerial economics from Cornell University.
Edward J. Mathias, 57, has been a director of the Company since the February
10, 1998 closing of the Company's initial public offering (the "Offering"). Mr.
Mathias has been a Managing Director of The Carlyle Group, a Washington,
D.C.-based merchant bank, since January 1994. Prior to joining Carlyle, Mr.
Mathias held various positions at T. Rowe Price Associates, Inc., an investment
management firm, from June 1971 to December 1993, serving most recently as a
Managing Director. Mr. Mathias also serves on the board of directors of U.S.
Office Products and U S A Floral Products, Inc. Mr. Mathias is also a
shareholder in WIT Capital and Cross Hill Financial, both of which are
broker-dealers and members of the National Association of Securities Dealers,
Inc. He received a bachelor of arts degree from the University of Pennsylvania
and a masters degree in business administration from Harvard Business School.
William E. Hummel, 36, has been a director of the Company since the February
10, 1998 closing of the Offering. Mr. Hummel has been President of Federal
Computer Corporation ("Federal"), one of the eight information technology
service companies acquired in connection with the Offering (the "Founding
Companies"), since June 1994. From June 1984 to May 1994, Mr. Hummel was
President of Federal Datatronics Division, Inc., a systems integration company
servicing the federal government. Mr. Hummel received a bachelor of science
degree in business administration from Drake University.
INCUMBENT CLASS I DIRECTORS--TO CONTINUE IN OFFICE FOR TERMS EXPIRING IN 2001
Peter T. Garahan, 52, has been a director of the Company since the February
10, 1998 closing of the Offering. Mr. Garahan is Chief Operating Officer of
AmTeva Technologies, an enhanced voice services software company. Mr. Garahan
has also been a principal of The Ryegate Group, a strategic and financing
consulting firm, since January 1997. From March 1995 to December 1996, Mr.
Garahan was Executive Vice President--Sales and Marketing of Mitchell
International, an IT company servicing the automotive industry and a subsidiary
of the Thomson Corporation, a major publishing and information company. From May
1992 through December 1996, Mr. Garahan was President of Mitchell Medical,
formerly Medical Decision Systems, a software company specializing in automotive
medical insurance claims analysis. Mr. Garahan serves on the board of directors
of Celeris Corporation, AmTeva Technologies and National Medical Advisory
Service. Mr. Garahan received a bachelor of arts degree from the State
University of New York at Stony Brook and a masters degree in business
administration from Cornell University, and is a veteran of the United States
Navy.
C. Lawrence Meador, 52, has been Vice Chairman of the Board of Directors of
the Company and Chief Executive Officer of Management Support Technology ("MST")
since the February 10, 1998 closing of the Offering. Mr. Meador is the founder
and has been the President of MST, a Founding Company, since 1992. From January
1996 to June 1998, Mr. Meador served, under an MST contract, as the Chief
Information Officer of CIGNA Property and Casualty, an insurance company. All
fees payable by CIGNA Property and Casualty in connection with Mr. Meador's
services as the Chief Information Officer of CIGNA Property and Casualty were
paid to MST. Mr. Meador has also been on the academic staff of the Massachusetts
Institute of Technology for over 20 years, during which period he was a
consultant to numerous international Fortune 1000 companies, governmental bodies
and other organizations. From 1974 to 1992, Mr. Meador was the Founder,
President and Chief Executive Officer of Decision Support Technology, Inc., a
firm established to commercialize MIT research on Decision Support Systems. From
1985 to 1987 he served as a Co-Founder, Director and Vice Chairman of Software
Productivity Research, Inc. Mr. Meador received a bachelor of science degree
from the University of Texas and masters degrees in management and mechanical
engineering from the Massachusetts Institute of Technology.
3
<PAGE>
INCUMBENT CLASS III DIRECTORS--TO CONTINUE IN OFFICE FOR TERMS EXPIRING IN 2000
Kennard F. Hill, 58, has been Chief Executive Officer and a director of the
Company since January 1997. Mr. Hill became Chairman of the Board of the Company
upon the closing of the Offering on February 10, 1998. From January 1997 to
February 1998, Mr. Hill also served as President of the Company. Mr. Hill was
Group President of I-NET, Inc., a network computing and systems integration
services company, from September 1995 to December 1996. From June 1993 to June
1995, Mr. Hill was President and Chief Executive Officer of Insource Technology,
Inc., an IT consulting firm. From June 1992 to June 1993, Mr. Hill was a private
consultant on client/server acquisition strategy in the healthcare industry.
From 1988 to July 1992, Mr. Hill was Chief Executive Officer of DataLine Inc., a
data processing and IT firm. From 1968 to 1988, Mr. Hill was employed by
Electronic Data Systems Corporation ("EDS"), a full-service IT provider. He
served as President of General Motors-EDS for North America from 1985 to 1988.
At EDS, Mr. Hill also served as chief of the Healthcare Division, having
previously served as its Director of Sales. Mr. Hill also was an officer of
EDS's Federal Corp. subsidiary and a director of its National Heritage Insurance
Corp. subsidiary, which provides healthcare underwriting for lower-income
policyholders. In December 1994, Mr. Hill filed a voluntary petition in
bankruptcy in order to discharge indebtedness arising out of his divorce and
several partnerships in which he was a limited partner. The bankruptcy was
discharged in January 1996. Mr. Hill attended the University of Texas and served
two tours of duty as a United States Army pilot in Vietnam.
Ann Torre Grant, 40, has been a director of the Company since March 1998.
Ms. Grant has been a strategic and financial consultant since December 1997. Ms.
Grant was Executive Vice President, Chief Financial Officer and Treasurer of
NHP, Incorporated ("NHP"), a multifamily property management company, from
February 1995 until the sale of NHP in December 1997. From 1989 to February
1995, Ms. Grant held various corporate finance positions with US Airways,
serving as Vice President and Treasurer from 1991 to 1995. From 1983 to 1988,
Ms. Grant held various corporate finance positions with American Airlines. Ms.
Grant is a director of SLM Holding Co. and its subsidiary, Sallie Mae, of the
Franklin Mutual Series Funds and of U S A Floral Products, Inc. Ms. Grant
received a bachelor in business administration from the University of Notre Dame
and a masters in business administration from Cornell University.
William M. Newport, 63, has been a director of the Company since the
February 10, 1998 closing of the Offering. In addition, Mr. Newport has been a
Director and Chairman of the Audit Committee of the Corporation for National
Research Initiatives, a non-profit national information infrastructure research
and development organization, since 1990. Mr. Newport has been a director of
Authentix Network, Inc., a privately held company engaged in providing roaming
fraud prevention services to the wireless telecommunications industry, since
July, 1996. Mr. Newport has been the Chairman of the Board of Ursus Telecom
Corporation, a public international telecommunications service company, since
April, 1998. Mr. Newport retired from Bell Atlantic Corporation in December,
1993 as Vice President of Strategic Planning and a member of the Office of the
Chairman after 36 years in the telecommunications industry. Mr. Newport was the
President and Chief Executive of AT&T's cellular subsidiary from 1981 to 1983
when he joined the newly formed Bell Atlantic Corporation. Mr. Newport received
a bachelor of science degree in electrical engineering from Purdue University
and a master of science degree in management from the Sloan School of Business
at the Massachusetts Institute of Technology, which he attended as a Sloan
Fellow.
COMPENSATION OF DIRECTORS
Directors who are also officers or employees of the Company do not receive
additional compensation for serving as directors. Each director who is not an
officer or employee of the Company receives an annual retainer fee of $14,000,
plus $1,000 per day or any portion of a day for attendance at meetings of the
Board of Directors and any Committee of the Board, and $500 for each telephonic
meeting of the Board or Committee of the Board. In addition, under the Company's
1997 Long-Term Incentive Plan, each non-employee director will be granted,
subject to certain exceptions, an annual option to acquire 5,000
4
<PAGE>
shares at the first meeting of the Board of Directors immediately following an
annual meeting of the Company's stockholders at which such director is
re-elected or remains a director. In addition, each person who becomes a
non-employee director in the future will be granted automatically an option to
acquire 10,000 shares upon such person's initial election as a director. Each
such option will have an exercise price equal to the fair market value per share
of Common Stock on the date of grant. Directors are also reimbursed for
out-of-pocket expenses incurred in attending meetings of the Board of Directors
or committees thereof, and visiting the Company's offices and other specified
locations in their capacity as directors. Ms. Grant was paid $25,000 in 1998 for
consulting services in the areas of finance and risk management.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
During 1998, the Board of Directors held 10 meetings and took action by
unanimous written consent on a number of occasions. Each director of the Company
attended 75% or more of all Board meetings and 75% or more of all meetings of
each committee on which such director served.
The Board of Directors has established an Audit Committee, a Compensation
Committee and a Finance Committee. The Audit Committee reviews the results and
scope of the audit and other services provided by the Company's independent
accountants and consists of Ms. Grant (Chair) and Messrs. Newport and Logue. The
Compensation Committee approves salaries and certain incentive compensation for
management and key employees of the Company, administers the 1997 Long-Term
Incentive Plan and 1998 Employee Stock Purchase Plan, reviews executive benefit
plans and health and welfare plans, and consists of Messrs. Garahan and Mathias
(Chair) and Ms. Grant. The Finance Committee advises the Company on financing
alternatives and arrangements, approves credit agreements and consists of Mr.
Garahan and Ms. Grant (Chair).
5
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of the Record Date by (i) each
person known to beneficially own more than 5% of the outstanding shares of
Common Stock; (ii) each of the Company's directors; (iii) each named executive
officer; and (iv) all executive officers and directors as a group. Unless
otherwise indicated, all persons listed have an address in care of the Company's
principal executive offices and have sole voting and investment power with
respect to their shares.
<TABLE>
<CAPTION>
NAME NUMBER PERCENT
- -------------------------------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
J.P. Morgan & Co. Inc.(1)................................................................... 1,235,300 10.2%
Jerry B. Ward............................................................................... 738,178 6.0
PAR Investment Partners, L.P.(2)............................................................ 700,000 5.8
C. Lawrence Meador.......................................................................... 611,605 5.0
Kennard F. Hi11(3).......................................................................... 231,112 1.9
Daniel J. Roche(4).......................................................................... 177,963 1.4
Michael Louden.............................................................................. 124,486 1.0
William E. Humme1(5)........................................................................ 117,052 1.0
Michael G. Paglaiccetti(4).................................................................. 66,662 *
Edward J. Mathias(6)........................................................................ 53,022 *
William J. Caragol( 7)...................................................................... 38,195 *
John F. McCabe.............................................................................. 33,436 *
William M. Newport(8)....................................................................... 15,000 *
Ann Torre Grant(8).......................................................................... 14,000 *
Dennis E. Logue(8).......................................................................... 10,200 *
Peter T. Garahan(8)......................................................................... 10,000 *
Robert F. Hefner............................................................................ 7,592 *
All directors and executive officers as a group (15 persons)................................ 2,248,503 18.3%
</TABLE>
- ------------------------
* less than 1.0%
1 Shares reported are based on a Form 13G/A filing. The stockholder's
principle address is: 60 Wall Street, New York, NY 10260. Of the total
shares beneficially owned, the stockholder has the sole power to vote
993,600 shares.
2 Shares reported are based on a Form 13G filing. The stockholder's principle
address is: One Financial Center, Suite 1600, Boston, MA 02111.
3 Of this total, 175,302 shares are owned of record by the Hill-Craft
Irrevocable Family Trust, of which Mr. Hill and his spouse, Shirley Craft,
are trustees and share voting power and investment power with respect to
such shares. Total includes options to purchase 50,000 shares of Common
Stock that are currently exercisable.
4 Total includes options to purchase 25,000 shares of Common Stock that are
currently exercisable.
5 Total includes options to purchase 1,667 shares of Common Stock that are
currently exercisable.
6 Total includes options to purchase 26,667 shares of Common Stock that are
currently exercisable.
7 Total includes options to purchase 20,000 shares of Common Stock that are
currently exercisable.
8 Total includes options to purchase 10,000 shares of Common Stock that are
currently exercisable.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation of the
Company's Chief Executive Officer and the other four most highly compensated
executive officers during 1998 (the "Named Executive Officers"). Except for the
Chief Executive Officer, no executive officer's total salary and bonus exceeded
$100,000 in 1997. In addition, no executive officers were granted options in or
prior to 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ANNUAL COMPENSATION SECURITIES RESTRICTED
--------------------------------- UNDERLYING STOCK OTHER
YEAR SALARY BONUS(1) OTHER(2) OPTIONS AWARDS(3) COMPENSATION(4)
--------- ---------- ---------- --------- ----------- ----------- --------------
Kennard F. Hill....................... 1998 $ 289,500 $ 80,000 $ 40,734 150,000 $ 19,980 $ 7,711
Chairman of the Board and Chief 1997 216,000 -- -- -- -- --
Executive Officer
C. Lawrence Meador.................... 1998 431,000 60,000 -- -- 19,980 10,975
Vice Chairman of the Board
Daniel J. Roche....................... 1998 220,000 -- -- 75,000 84,915 6,439
President and Chief Operating Officer
William J. Caragol.................... 1998 129,792 75,000 -- 60,000 84,915 5,905
Vice President, Chief Financial
Officer and Treasurer
Michael G. Paglaiccetti............... 1998 232,308 60,000 -- 75,000 74,925 10,757
General Manager, Desktop Services
Division
</TABLE>
- ------------------------
1 Bonus amounts are reflected in the year to which they are attributable and
not the year in which they are paid.
2 Fringe benefit amounts are omitted to the extent the aggregate value of such
benefits is less than 10% of salary and bonus or $50,000. The amount shown
for Mr. Hill reflects a housing allowance.
3 Restricted stock awards were issued in which certain members of management
were granted restricted Common Stock at a price of $.01 per share. Ownership
of this restricted Common Stock vests ratably over 2 years. This stock is
subject to forfeiture in the event certain tenure criteria are not met. The
amounts shown represent the full dollar value of the shares of Common Stock
based on the closing market price on the date of grant, less the $.01 share
exercise price.
4 Consists of matching contributions under a defined contribution 401(k) or
profit sharing plan during 1998 and the dollar value of insurance premiums
paid by the Company with respect to term life insurance for the benefit of
the Named Executive Officer.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
Options granted to the Named Executive Officers during 1998 are set forth in
the following table. No stock appreciation rights ("SARs") were granted during
1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SHARES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES PRICE EXPIRATION ------------------------
NAME GRANTED(1) IN 1998 ($/SHARE)(1) DATE 5%($) 10%($)
- --------------------------------- ----------- ----------------- ----------- ------------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Kennard F. Hill.................. 150,000 9% $ 13.00 February 5, 2008 $ 1,226,345 $ 3,107,798
C. Lawrence Meador............... -- -- -- -- -- --
Daniel J. Roche.................. 75,000 5% 13.00 February 5, 2008 613,172 1,553,899
William J. Caragol............... 60,000 4% 13.00 February 5, 2008 490,538 1,243,119
Michael G. Paglaiccetti.......... 75,000 5% 13.00 February 5, 2008 613,172 1,553,899
</TABLE>
- ------------------------
1 The exercise price of each option was equal to at least the fair market
value of the underlying Common Stock on the date of grant, as determined in
accordance with the 1997 Long-Term Incentive Plan. Each option vests ratably
over a three year period.
2 Future value of current-year grants assuming appreciation of 5% and 10% per
year over the applicable option term. The actual value realized may be
greater than or less than the potential realizable values set forth in the
table.
In February, 1999, the Company granted options to purchase an aggregate of
95,000 shares of Common Stock to the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides the specified information concerning
unexercised options held as of December 31, 1998 by the Named Executive
Officers. There were no options exercised by the Named Executive Officers, and
no SARs outstanding, during 1998.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT
SHARES OPTIONS AT DECEMBER 31,
ACQUIRED DECEMBER 31, 1998 1998
ON ------------------------------ ---------------
EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE(1)
------------- ----------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Kennard F. Hill................... -- $ -- -- 150,000 $ --
C. Lawrence Meador................ -- -- -- -- --
Daniel J. Roche................... -- -- -- 75,000 --
William J. Caragol, Jr............ -- -- -- 60,000 --
Michael G. Pagliacetti............ -- -- -- 75,000 --
<CAPTION>
UNEXERCISABLE(1)
-----------------
<S> <C>
Kennard F. Hill................... $ --
C. Lawrence Meador................ --
Daniel J. Roche................... --
William J. Caragol, Jr............ --
Michael G. Pagliacetti............ --
</TABLE>
- ------------------------
1 The last reported sales price of the Common Stock on December 31, 1998, as
reported by the Nasdaq Stock Market, was $10.00, which was less than the
exercise price of $13.00 per share.
EMPLOYMENT AGREEMENTS; COVENANTS NOT TO COMPETE
Effective January 2, 1997, the Company entered into an employment agreement
with Mr. Hill providing for an annual base salary of $216,000 through the
February 10, 1998 closing of the Offering and $300,000 thereafter. Mr. Hill also
participates in the incentive bonus program established by the Company in the
same manner as the other executives as described below. A trust, of which Mr.
Hill is a trustee, acquired 175,302 shares of the Common Stock and Mr. Hill was
granted options to purchase 150,000 shares of Common Stock in 1998. Mr. Hill's
employment agreement has a term through February 10, 2001,
8
<PAGE>
with automatic renewals for successive one-year periods (each a "Renewal
Period") unless, within 30 days prior to the termination of any such period,
either party shall have given written notice to the other party that the term
shall not be so extended.
Each of Messrs. Meador, Roche, Caragol and Paglaiccetti has entered into an
employment agreement with the Company providing for an annual base salary of
$431,815, $220,000, $135,000 and $220,000, respectively, and a bonus to be
determined annually in accordance with the annual incentive program of the
Company for senior executives, which bonus shall be contingent upon the
achievement of certain corporate and/or individual performance goals established
by the Compensation Committee. Mr. Meador's agreement provides that he shall be
paid a special bonus equal to 1% of the total purchase price or total investment
for any acquisition or joint venture by the Company that Mr. Meador identifies
and in which he assists in the closing thereof. Mr. Meador's employment
agreement became effective as of the closing of the Offering for a term of three
years. Mr. Roche's employment agreement was effective as of October 27, 1997 for
a term of three years. Mr. Caragol's employment agreement was effective as of
November 1, 1997 for a term of three years. Mr. Paglaiccetti's employment
agreement was effective as of February 10, 1998 for a term of three years.
Effective as of the expiration of each such initial term and as of each
anniversary date thereof, the term shall be extended automatically for an
additional 12-month period on the same terms and conditions existing at the time
of renewal unless, not later than two months prior to each such respective date,
either party shall have given notice to the other party that the term shall not
be so extended.
Each of these agreements provide that, in the event of a termination of
employment by the Company without cause (other than upon the death or disability
of the employee) or by the employee for good reason (including (i) a material
breach by the Company of the compensation and benefits provisions set forth in
the agreement; (ii) a material breach by the Company of any other term of the
agreement; (iii) except in the case of Mr. Caragol, a material diminution in the
employee's duties or responsibilities, as defined under the agreement; or (iv)
in the case of Mr. Meador, if he is no longer a director of the Company or MST,
the employee shall be entitled to severance payments equal to the employee's
base salary as in effect immediately prior to such termination over the longer
of the then-remaining term or 12 months (the "Severance Period"). In addition,
under the foregoing circumstances, all options to purchase Common Stock issued
to the employee shall become immediately vested and exercisable and, subject to
the 1997 Long-Term Incentive Plan, shall remain exercisable during the Severance
Period. Pursuant to his employment agreement, Mr. Roche acquired 108,402 shares
of the Company's Common Stock. In addition, options to purchase 75,000 shares of
the Company's Common Stock were granted to Mr. Roche in 1998.
Each of the aforementioned employees will also be entitled to coverage under
the group medical care, disability and life insurance benefit plans or
arrangements in which such employee is participating at the time of termination,
for the continuation of the Severance Period, provided such employee does not
have comparable substitute coverage from another employer. Each employment
agreement contains a covenant-not-to-compete with the Company without the prior
approval of the Board of Directors of the Company. The covenant-not-to-compete
is in effect during the period of employment, as well as during the Severance
Period, if applicable. In the case of Mr. Meador, the covenant-not-to-compete is
in effect initially for a period of four years from the closing of the Offering
and remains in effect thereafter during his employment period. In the event Mr.
Meador is terminated by the Company without cause or he resigns for good reason,
the Company must continue to pay him his base salary in order to keep the
covenant-not-to-compete in effect beyond the Severance Period.
The information set forth in the following Report shall not be deemed
incorporated by reference into any existing or future filings under the
Securities Act of 1933, as amended (the "Securities Act"), or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which incorporate by
reference this Proxy Statement, except to the extent that the Company
specifically incorporates such information by reference.
9
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Compensation Committee, subject to the approval of the Board of
Directors, determines the amount and form of compensation and benefits payable
to the Company's executive officers. The Compensation Committee currently
consists of three members, none of whom is a current or former employee or
officer of the Company.
In general, the goals of the Compensation Committee are to enable the
Company to (i) recruit, develop and retain highly motivated and qualified
executive management; (ii) maximize financial performance, balancing
appropriately the short and long term goals of the Company; and (iii) align the
interests of Company management with those of its stockholders through the use
of stock options and incentives tied to increases in stockholder value.
The Compensation Committee's philosophy in structuring a competitive
executive compensation program is to provide for both variable incentive pay and
base salary. The Committee anticipates that variable incentive compensation will
become increasingly important as the Company matures and establishes baseline
results. The Committee's evaluation of performance will focus on the results of
the operational and financial integration of acquired companies, as well as on
traditional stock price and earnings measures. Performance-based incentive pay
is available through the 1998 Annual Incentive Plan and the grant of
equity-based compensation under the 1997 Long-Term Incentive Plan, both of which
are discussed below.
The Compensation Committee reviews the compensation of the Chief Executive
Officer, President and Chief Operating Officer and any other officer of the
Company or a subsidiary with base salary compensation of $175,000 or more
annually based on a variety of factors, including individual performance,
market-based salary trends and the Company's overall financial results. Base
salaries for other officers are set by the Chief Executive Officer, subject to
review and approval by the Compensation Committee.
The compensation of Messrs. Hill, Roche and Caragol for 1997 and 1998 was
established pursuant to employment agreements entered into prior to the
Offering. Mr. Paglaiccetti's and Mr. Meador's compensation for 1998 was
determined pursuant to employment agreements which were effective upon
consummation of the Offering. The Offering occurred prior to the appointment of
the Compensation Committee.
During 1998, the Compensation Committee recommended, and the Board of
Directors approved, an annual incentive plan (the "1998 Annual Incentive Plan").
The purpose of the 1998 Annual Incentive Plan is to provide senior management,
as well as other key employees, with additional performance incentives in the
form of an annual incentive bonus to be paid in recognition of meeting certain
financial, operational and qualitative goals to be set on an annual basis.
Incentive bonus levels will vary in accordance with individual and corporate
performance, with senior executives and qualified employees eligible to receive
a bonus of up to 100% of annual salary based on exceptional performance.
Based on the factors described above, the Committee provided incentive
compensation in regard to 1998 to certain key members of management, including
Mr. Hill, in the form of cash bonuses and/or shares of restricted Common Stock
of the Company.
The Committee provides equity incentive compensation through the grant of
stock options under the Company's 1997 Long-Term Incentive Plan (the "Plan").
All grants of options under the Plan are made at an exercise price equal to the
fair market value of the Common Stock on the grant date. In 1998 and through
March 22, 1999, stock options for 1,833,819 shares of Common Stock were granted
by the Compensation Committee. The Compensation Committee intends to make future
grants under the Plan based on the achievement of individual and Company goals,
as well as a subjective analysis of the executive's or key employee's
contributions to the Company.
10
<PAGE>
Section 162(m) of the Internal Revenue code limits the deductibility of
compensation in excess of $1.0 million paid-to the Chief Executive Officer and
the four most highly compensated officers of the Company (other than the Chief
Executive Officer) in any fiscal year, unless the compensation qualifies as
"performance based compensation." The Compensation Committee's policy with
respect to Section 162(m) is to make every reasonable effort to cause
compensation to be deductible by the Company while simultaneously providing
executive officers of the Company with appropriate and competitive compensation.
The aggregate base salaries and bonuses of the Company's executive officers are
not in the foreseeable future expected to exceed the $1.0 million limit, and
options under the Company's Long-Term Incentive Plan are intended to qualify as
performance-based compensation.
Compensation Committee:
Edward J. Mathias
Ann Torre Grant
Peter T. Garahan
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors has a Compensation Committee consisting of Edward J.
Mathias (Chair), Peter T. Garahan and Ann Torre Grant. Except for Mr. Hill, the
Company's Chairman and Chief Executive Officer, no other officer or employee
participated in deliberations of the committee concerning executive officer
compensation. No member of the Compensation Committee serves as a member of the
board of directors or compensation committee of any entity that has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers,
directors and persons who own more than ten percent (10%) of the Common Stock
(collectively, "Reporting Persons") to file initial reports of ownership and
reports of changes of ownership of the Common Stock with the Securities and
Exchange Commission ("SEC"). Reporting Persons are required to furnish the
Company with copies of all forms that they file under Section 16(a). Based
solely upon a review of the copies of such forms received by the Company or
written representations from Reporting Persons, the Company believes that,
through the date of this Proxy Statement, all Reporting Persons complied with
all applicable filing requirements under Section 16(a).
CERTAIN TRANSACTIONS
The Company was formed in August 1996. The Company was initially capitalized
by SCM, LLC, a Virginia-based merchant banking firm known as "Commonwealth" of
which J. Marshall Coleman, formerly the Chairman of the Board, is a member. In
connection with the organization of the Company, members of Commonwealth
acquired 1,413,806 shares of Common Stock in exchange for consulting, financial
advisory and capital raising services provided by members of Commonwealth to the
Company and the commitment of a member of Commonwealth to provide the funds
necessary to effect the acquisition of the Founding Companies and the Offering.
These shares were distributed to the members of Commonwealth, Mr. Coleman, James
J. Martell, Jr. and Charles F. Smith, in November 1997. Commonwealth was
reimbursed for the funds advanced by it to the Company out of the proceeds of
the Offering, together with interest on such advances at the prime rate. Such
advances aggregated approximately $2,770,000 as of the closing of the Offering.
On May 29, 1998 the Company and Mr. Smith entered into a settlement agreement
pursuant to which the Company reimbursed Mr. Smith for certain cash advances
made by him on behalf of the Company to fund organizational costs; entered into
a sublease agreement with Mr. Smith for premises located in Virginia previously
occupied the Company; and the Company and Mr. Smith exchanged releases. The
sublease was subsequently terminated, and the premises re-let.
11
<PAGE>
Simultaneously with the February 10, 1998 closing of the Offering, the
Company acquired by merger and in exchange for cash and shares of its Common
Stock (the "Mergers") all of the issued and outstanding stock of the Founding
Companies, at which time each Founding Company became a wholly owned subsidiary
of the Company. The aggregate consideration paid by the Company in the Mergers
consisted of (i) approximately $47.1 million in cash; (ii) 2,307,693 shares of
Common Stock, for an aggregate value of approximately $30.0 million; and (iii)
approximately $1.3 million of indebtedness of the Founding Companies assumed by
the Company. The Company also assumed options to purchase shares of common stock
of one of the Founding Companies, which constitute options to purchase an
aggregate of 62,471 shares of Common Stock of the Company at the initial public
offering price.
The consideration paid for the Founding Companies was determined through
arm's-length negotiations between the Company and the representatives of each
Founding Company. The factors considered by the Company in determining the
consideration paid included, among others, the historical operating results, the
net worth, the amount and type of indebtedness and the future prospects of the
Founding Companies. Each Founding Company was represented by independent counsel
in the negotiation of the terms and conditions of the Mergers. Immediately prior
to the Mergers, one of the Founding Companies repurchased certain shares held by
a minority stockholder for $2.0 million and distributed $1.0 million to its
stockholders and another Founding Company distributed $4.0 million to certain
stockholders. Each of the stockholders of the Founding Companies has agreed not
to compete with the Company through February 9, 2002.
In connection with the Merger of MST into the Company, and as consideration
for his interest in MST, Mr. Meador, who is an executive officer, director and
holder of 5% of the outstanding shares of Common Stock of the Company, received
603,846 shares of Common Stock and approximately $9.8 million in cash.
Additionally, pursuant to an arrangement in the purchase agreement, contingent
consideration of up to $8,400,000 may be paid to MST, $2,520,000 of which would
be paid in cash and the remainder of which would be paid in Common Stock,
depending on MST's pre-tax income in 1999 and 2000.
In connection with the Merger of Federal into the Company, and as
consideration for his interest in Federal, Mr. Hummel, who is a director of the
Company, received 115,385 shares of Common Stock and approximately $1.5 million
in cash. Additionally, pursuant to an arrangement in the purchase agreement,
contingent consideration of $9,000,000 has been earned and will be paid to
Federal, $3,150,000 of which will be paid in cash and the remainder of which
will be paid in Common Stock, based on Federal's pre-tax income in 1998.
12
<PAGE>
PERFORMANCE MEASUREMENT PRESENTATION
The following graph shows a comparison of the cumulative total returns for
an investment in the Company's Common Stock, the Nasdaq Composite Index and the
Nasdaq Computer & Data Processing Services Index. Although the SEC requires the
Company to present a graph for a five year period, the Common Stock has been
publicly traded only since February 5, 1998 and, as a result, the following
chart commences as of such date. This graph is not "soliciting material" and
should not be deemed to be "filed" with the SEC or subject to the SEC proxy
rules or to the liabilities of Section 18 of the Exchange Act.
The comparison assumes the investment of $100 on February 5, 1998 in the
Company's Common Stock and in each of the indices and, in each case, assumes
reinvestment of all dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CONDOR TECHNOLOGY NASDAQ COMPOSITE NASDAQ COMPUTER &
<S> <C> <C> <C>
Data Processing Services
Solutions, Inc. Index Index
2/5/98 $100.00 $100.00 $100.00
3/31/98 $107.69 $109.55 $117.36
6/30/98 $113.46 $112.54 $130.04
9/30/98 $78.85 $101.66 $122.17
12/31/98 $76.92 $131.91 $158.63
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIODS ENDED
-------------------------------------------------------
2/5/98 3/31/98 6/30/98 9/30/98 12/31/98
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Condor Technology Solutions, Inc................................. 100.00 107.69 113.46 78.85 76.92
Nasdaq Composite Index........................................... 100.00 109.55 112.54 101.66 131.91
Nasdaq Computer & Data Processing Services Index................. 100.00 117.36 130.04 122.17 158.63
</TABLE>
PROPOSAL 2--APPROVAL OF INDEPENDENT ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee, has
selected PricewaterhouseCoopers LLP, independent accountants, as auditors of the
Company to examine and report to stockholders on the consolidated financial
statements of the Company and its subsidiaries for the fiscal year ending on
December 31, 1999. PricewaterhouseCoopers LLP currently serves as the Company's
independent accountants. Representatives of PricewaterhouseCoopers LLP will be
present at the Meeting and will be given an opportunity to make a statement.
They also will be available to respond to appropriate questions from
stockholders.
13
<PAGE>
STOCKHOLDER PROPOSALS
Stockholder proposals submitted for inclusion in the Proxy Statement for the
2000 Annual Meeting of Stockholders must be received by the Company at the
Company's executive office in Annapolis, Maryland and must be submitted in
accordance with Rule 14a-8 of the Exchange Act on or before December 1, 1999.
All proposals intended to be submitted at the 2000 Annual Meeting of
Stockholders which are not sought to be included in the proxy statement must be
received by the Company at the Company's executive offices no later than
December 31, 1999. However, in the event that the 2000 Annual Meeting of the
Stockholders is more than 30 days before or more than 60 days after the
anniversary date of the 1999 Annual Meeting, proposals to be considered timely
must be received by the later of the 90th day prior to the 2000 Annual Meeting
or the 10th day following public announcement of the meeting date.
OTHER BUSINESS
The Board of Directors does not intend to bring any other matter before the
Meeting and does not know of any other business which others will present for
consideration at the Meeting. Except as the Board of Directors may otherwise
permit, only the business set forth and discussed in the Notice of Annual
Meeting of Stockholders and this Proxy Statement may be acted on at the Meeting.
If any other business does properly come before the Meeting the proxy holders
will vote on such matters according to their discretion.
ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN, DATE, AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. THANK YOU FOR
YOUR PROMPT ATTENTION TO THIS MATTER.
14
<PAGE>
PROXY CARD
CONDOR TECHNOLOGY SOLUTIONS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Kennard F. Hill, Daniel J. Roche and
John F. McCabe (the "Proxy Committee") or any of them as proxies, with full
power of substitution, to vote as directed all Shares of Condor Technology
Solutions, Inc. the undersigned is entitled to vote at the 1999 Annual Meeting
of Stockholders of Condor Technology Solutions, Inc. to be held at the Annapolis
Marriott Waterfront, 80 Compromise Street, Annapolis, Maryland on May 4, 1999,
at 10:00 a.m. THIS PROXY AUTHORIZE(S) EACH OF THEM TO VOTE AT HIS DISCRETION ON
ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF. IF THIS CARD CONTAINS NO SPECIFIC VOTING INSTRUCTIONS, MY (OUR) SHARES
WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS.
/X/ Please mark your votes
as in this example
The Board of Directors recommends a vote FOR election of directors and
FOR proposal 2.
FOR ALL NOMINEES WITHHELD FOR ALL
LISTED AT RIGHT
(except as marked)
1. Election of Dennis E. Logue, / / / /
Edward J. Mathias and
William E. Hummel as Class II
Directors for a three-year term
ending at the annual meeting in 2002
To withhold authority to vote for any individual nominee, write that nominee's
name on the line below:
FOR AGAINST ABSTAIN
2. Approval of Appointment of / / / / / /
Independent Accountants
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournments thereof.
This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR election of the three
Class II directors and FOR proposal 2.
SIGNATURE(S): DATE
- ---------------------------------------- -------------------
NOTE: Please sign exactly as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such.
