<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 [_] 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
OAO 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
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO OF OAO APPEARS HERE]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, MAY 21, 1998
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of OAO
Technology Solutions, Inc. (the "Company") will be held at Governor Calvert
House, 58 State Circle, Annapolis, Maryland on Thursday, May 21, 1998 at 2:00
p.m., local time, for the following purposes:
1. To elect seven directors;
2. To approve the Company's Employee Stock Purchase Plan;
3. To approve the Amended and Restated OAO Technology Solutions, Inc.
1996 Equity Compensation Plan; and
4. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has established the close of business on April 9,
1998 as the record date for the determination of stockholders entitled to
receive notice of, and to vote at, the meeting or any adjournments thereof. In
order that the meeting can be held and a maximum number of shares can be voted,
whether or not you plan to be present at the meeting in person, please fill in,
date and sign, and promptly return the enclosed Proxy in the return envelope
provided for your use. No postage is required if mailed in the United States.
By order of the Board of Directors,
/s/ JAMES A. OUNSWORTH
JAMES A. OUNSWORTH
Secretary
7500 Greenway Center Drive
16th Floor
Greenbelt, MD 20770
April 20, 1998
<PAGE>
OAO TECHNOLOGY SOLUTIONS, INC.
7500 Greenway Center Drive
16/th/ Floor
Greenbelt, MD 20770
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors (the "Board") of OAO Technology Solutions,
Inc. (the "Company") for use at the Annual Meeting of Stockholders to be held on
May 21, 1998 (such meeting and any adjournment or adjournments thereof referred
to as the "Annual Meeting") for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders and in this Proxy Statement. The
Company intends to mail this Proxy Statement and related form of Proxy to
stockholders on or about April 20, 1998.
VOTING SECURITIES
Only the holders of shares of common stock, par value $.01 per share (the
"Common Stock"), of the Company of record at the close of business on April 9,
1998 (the "Shares") are entitled to receive notice of, and to vote at, the
Annual Meeting. On that date, there were 16,358,526 Shares outstanding and
entitled to be voted at the Annual Meeting. It is the intention of the persons
named in the Proxy to vote as instructed by the stockholders or, if no
instructions are given, to vote as recommended by the Board. Each stockholder
has one vote per Share on all business of the Annual Meeting.
A majority of outstanding Shares will constitute a quorum for the
transaction of business at the Annual Meeting. The seven nominees receiving the
highest number of affirmative votes of the Shares present or represented and
entitled to be voted will be elected as directors. The approval of the
proposals to adopt the OAO Technology Solutions, Inc. Employee Stock Purchase
Plan and the Amended and Restated OAO Technology Solutions, Inc. 1996 Equity
Compensation Plan requires, in each case, a majority of the votes cast by all
stockholders entitled to vote thereon. Votes withheld from any director,
abstentions and broker non-votes will be counted for purposes of determining the
presence of a quorum for the transaction of business at the Annual Meeting.
Abstentions are counted in tabulations of the votes cast on proposals presented
to stockholders. Broker non-votes are not counted for purposes of determining
whether a proposal has been approved.
REVOCABILITY OF PROXY
Execution of the enclosed Proxy will not affect a stockholder's right to
attend the Annual Meeting and vote in person. A stockholder, in exercising his
right to vote in person at the Annual Meeting, effectively revokes all
previously executed Proxies. In addition, the Proxy is revocable at any time
prior to the effective exercise thereof by filing notice of revocation with the
Secretary of the Company or by filing a duly executed Proxy bearing a later
date.
1
<PAGE>
PERSONS MAKING THE SOLICITATION
The solicitation of this Proxy is made by the Company. The cost of
soliciting Proxies on behalf of the Company, including the actual expenses
incurred by brokerage houses, nominees and fiduciaries in forwarding Proxy
materials to beneficial owners, will be borne by the Company. In addition to
solicitation by mail, certain officers and other employees of the Company may
solicit Proxies on behalf of the Company in person or by telephone.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholders intending to present proposals at the next Annual Meeting of
Stockholders to be held in 1999 must notify the Company of the proposal no later
than December 21, 1998.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 9, 1998, the Company's Common
Stock beneficially owned by each person known to the Company to be the
beneficial owner of more than 5% of the outstanding Shares, the Company's only
class of equity securities outstanding. The table also shows the number of
Shares owned beneficially by each director, by each named executive officer, and
by all executive officers and directors as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT OF
OWNED /(1)/ CLASS
------------- -----------
<S> <C> <C>
Safeguard Scientifics, Inc.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087/(2)/..................... 4,813,100 29.4%
Cecile D. Barker
10816 Barnwood Lane
Potomac, MD 20854.......................... 3,160,000 19.3%
Jerry L. Johnson/(3)/........................ 39,496 *
William R. Hill/(4)/......................... 519,667 3.2%
Yvonne Brathwaite Burke/(5)/................. 5,000 *
Frank B. Foster, III/(5)/.................... 6,767 *
John F. Lehman/(5)/.......................... 5,000 *
Thomas C. Lynch/(6)/......................... 38,324 *
Edgar M. Fields/(5)/......................... 82,925 *
Richard Eubanks/(5)/......................... 23,000 *
Samuel D. Horgan/(6)/........................ 34,958 *
Gerry Lalonde/(5)/........................... 30,917 *
Executive officers and directors as a group
(11 persons)/(7)/.......................... 3,946,054 23.8%
</TABLE>
___________
* Less than 1% of the outstanding Common Stock.
(1) Except as otherwise disclosed, the nature of beneficial ownership is the
sole power to vote and to dispose of the Shares (except for Shares held
jointly with spouse).
2
<PAGE>
(2) Safeguard Scientifics (Delaware), Inc., a wholly owned subsidiary of
Safeguard Scientifics, Inc. ("Safeguard"), is the record owner of 3,813,100
of the Shares set forth above. The remaining 1,000,000 Shares are owned of
record by Safeguard 97 Capital, L.P., a limited partnership of which
Safeguard Delaware, Inc., a wholly owned subsidiary of Safeguard, is the
sole general partner. Consequently, such Shares are beneficially owned by
Safeguard. All of the Shares beneficially owned by Safeguard have been
pledged by Safeguard as collateral under its bank line of credit.
(3) Includes an aggregate of 4,800 Shares held by two trusts, of which Mr.
Johnson is a co-trustee. Mr. Johnson shares voting and dispositive power
of the Shares held by these trusts.
(4) Includes 28,758 Shares held by a charitable foundation and 7,084 Shares
that may be acquired pursuant to stock options that are currently
exercisable or that will become exercisable within 60 days of April 9,
1998. Mr. Hill shares voting and dispositive power of the Shares held by
the charitable foundation.
(5) Includes for Ms. Burke and Messrs. Foster, Lehman, Eubanks, Fields, and
Lalonde 5,000 Shares, 6,667 Shares, 5,000 Shares, 22,000 Shares, 79,625
Shares, and 29,917 Shares, respectively, that may be acquired pursuant to
stock options that are currently exercisable or that will become
exercisable within 60 days of April 9, 1998.
(6) Includes 500 Shares held by Mr. Horgan's spouse, 500 Shares held in trust
for the benefit of his son, and 32,958 Shares that may be acquired pursuant
to stock options that are currently exercisable or that will become
exercisable within 60 days of April 9, 1998.
(7) Includes 188,251 Shares that may be acquired upon exercise of stock options
that are currently exercisable or that will become exercisable within 60
days of April 9, 1998.
I. ELECTION OF DIRECTORS
It is intended that the persons named as proxies for this Annual Meeting
will vote in favor of the election of the following nominees as directors of the
Company to hold office until the Annual Meeting of Stockholders in 1999 and
until their successors are elected and have qualified. All of the nominees are
presently serving as directors of the Company. Proxies may not be voted for
more than seven directors. Each of the nominees has consented to serve if
elected. However, if any of the nominees should become unavailable prior to the
election, the holder of the Proxies may vote the Proxies for the election of
such other persons as the Board may recommend, unless the Board reduces the
number of directors to be elected.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF
THE NOMINEES SET FORTH IN THIS PROPOSAL. PROXIES RECEIVED BY THE BOARD WILL BE
SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE ON THEIR PROXY CARDS. THE SEVEN
NOMINEES RECEIVING THE HIGHEST NUMBER OF AFFIRMATIVE VOTES OF THE SHARES PRESENT
OR REPRESENTED AND ENTITLED TO BE VOTED SHALL BE ELECTED AS DIRECTORS.
3
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS HAS BEEN A
NAME EXPERIENCE DURING LAST FIVE YEARS DIRECTOR SINCE AGE
- ------------ --------------------------------- -------------- ---
<S> <C> <C> <C>
Jerry L. Johnson Senior Vice President, Operations,
Safeguard Scientifics, Inc., a strategic
information systems company/(3)/.............. 1996 50
Cecile D. Barker Chairman of the Board and Chief
Executive Officer of OAO Corporation, a
provider of total solutions for aerospace
and information systems industries/(4)/....... 1996 54
William R. Hill President and Chief Executive Officer of
the Company/(5)/.............................. 1996 51
Yvonne Brathwaite
Burke Supervisor, Second District, County
of Los Angeles/(1)(2)(6)/..................... 1997 65
Frank B. Foster, III Business Consultant/(1)(2)(7)/................ 1997 63
John F. Lehman Chairman of the Board of Directors,
J.F. Lehman & Co., a private equity
firm/(1)(2)(8)/............................... 1997 55
Thomas C. Lynch Senior Vice President, Safeguard
Scientifics, Inc./(9)/........................ 1996 56
</TABLE>
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee, of which Mr. Foster serves as Chairman.
(3) Mr. Johnson has served as the Chairman of the Board of Directors of the
Company since April 1996. Mr. Johnson has been Senior Vice President,
Operations of Safeguard since September 1995. From 1985 to 1995, Mr.
Johnson held various senior executive positions with US West, including
Group Director, Vice President of Network and Technology Services and Vice
President of Residence Planning. From 1983 to 1985, he was President and
Chief Executive Officer of Northwestern Bell Information Technologies, a
subsidiary of Northwestern Bell Telephone Company. Mr. Johnson is a
director of USDATA Corporation and is a member of the International Society
of Sloan Fellows.
(4) Mr. Barker has served as Vice Chairman of the Board of Directors of the
Company since April 1996. Mr. Barker is a majority owner of OAO
Corporation, a company which he founded in 1973. Mr. Barker regularly
serves as an advisor to other corporations, and he is a member of the
Advisory Committee for Scientific Policy for the National Science
Foundation and the Science and Technology Advisory Committee for the
Executive Office of the President of the United States. Mr. Barker has
over 28 years of experience in the management of major scientific,
technological and commercial programs.
(5) Mr. Hill has been President and Chief Executive Officer of the Company
since March 1996. From 1992 to March 1996, Mr. Hill was the Senior Vice
President of the Commercial Systems Group of OAO Corporation. From 1990 to
1992, Mr. Hill was Vice President for Planning Research Corporation, a
systems integration company. From 1985 to 1990, Mr. Hill was Vice
President of Business Development for OAO Corporation. He previously was
Director of the Legislative and Committee Systems Division for the United
States House of Representatives and a systems engineer and national account
manager for NCR. Mr. Hill has over 20 years of experience in the
information systems and services industry.
(6) Ms. Burke has served as Los Angeles County Supervisor since 1992. Ms.
Burke also serves on the Board of L.A. Care and NAACP Legal Defense and
Education Fund. Ms. Burke is a member of the Board of Trustees of the
Amateur Athletic Foundation and the National Academy of Public Trusteeship.
Ms. Burke is a former US. Congresswoman, who served on the Appropriations
4
<PAGE>
Committee, Departments of State, Justice and Commerce, and on the Select
Committee on Assassinations.
(7) Mr. Foster retired as President and Chief Executive Officer of Diamond
Bathurst (formerly Diamond Glass) in 1986 after almost 30 years of service.
Since 1986, Mr. Foster has served on the boards of numerous companies and
is currently a director of 1838 Investment Advisors, Airgas, Inc., Contour
Packaging, Inc., US Precision Glass Company and Carr-Lowrey Glass Company.
(8) Mr. Lehman also serves as Chairman of the Board of Directors of Ball
Corporation and Sedgwick Group, plc. Mr. Lehman was an investment banker
at Paine Webber Inc. and served as Secretary of the Navy for six years. He
served as staff member to Dr. Henry Kissinger on the National Security
Council.
(9) Mr. Lynch has served as Senior Vice President of Safeguard since November
1995. Prior to that time, Mr. Lynch retired from the U.S. Navy as an
Admiral after 31 years of service, including service as Superintendent of
the U.S. Naval Academy from 1991 through 1994 and Director, Navy Roles and
Missions from 1994 through 1955. Admiral Lynch is also a director of
Sanchez Computer Associates, Inc., a director of The Eastern Technology
Council, Commissioner of the Cradle of Liberty Council, Boy Scouts of
America, and a trustee of the U.S. Naval Academy Foundation.
DIRECTORS' COMPENSATION
Directors are elected annually and hold office until their successors are
elected and have qualified or until their earlier resignation or removal. In
1997, each director who was not receiving compensation as an officer, employee
or consultant of the Company or Safeguard received an annual cash retainer fee
of $6,000 ($7,000 with respect to the Chairman of the Audit Committee), plus a
fee of $1,000 and reimbursement of expenses for each meeting of the Board of
Directors and each Committee meeting that they attend in person.
DIRECTORS' STOCK OPTIONS
In October 1997, Mr. Foster received an option to purchase 10,000 shares of
Common Stock, and Ms. Burke and Mr. Lehman each received an option to purchase
20,000 shares of Common Stock, at an exercise price of $5.00 per share. The
options vest 25% each year commencing on the grant date and have a term of ten
years.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board held eight meetings in 1997. The Company's Board has appointed
standing Compensation and Audit Committees. The Compensation Committee reviews
and recommends the compensation arrangements for senior management of the
Company, including salaries, bonuses and grants of options to purchase shares of
Common Stock under the Company's equity compensation plan. The Compensation
Committee met five times during 1997. The Audit Committee recommends the firm
to be appointed as independent certified public accountants to audit the
Company's financial statements, discusses the scope and results of the audit
with the independent certified public accountants, reviews with management and
the independent certified public accountants the Company's interim and year-end
operating results, considers the adequacy of the internal accounting controls
and audit procedures of the Company and reviews the non-audit services to be
performed by the independent certified public accountants. The Audit Committee
met five times during 1997. All of the directors attended at least 75% of the
total number of meetings of the Board and the Committees of which they were
members during the period in which they served as a director.
5
<PAGE>
REPORT OF THE BOARD COMPENSATION COMMITTEE
The Compensation Committee of the Board (the "Compensation Committee")
reviews and approves compensation levels recommended by management, including
incentive compensation, for the executives of the Company, and administers the
Company's equity compensation plan. Messrs. Foster and Lehman and Ms. Burke
currently constitute the Compensation Committee. Prior to the Company's initial
public offering in October 1997, recommendations concerning the aggregate
compensation of the Company's employees were made to the Compensation Committee
by the Chief Executive Officer. The members of the Compensation Committee prior
to this offering were Messrs. Lynch and Barker.
EXECUTIVE COMPENSATION POLICIES
The Company is in a highly competitive industry. In order to succeed, the
Company believes that it must be able to attract and retain outstanding
executives, promote among them the economic benefits of stock ownership in the
Company, and motivate and reward executives who, by their industry, loyalty and
exceptional service, make contributions of special importance to the success of
the business of the Company. The Company has structured its executive
compensation program to support the strategic goals and objectives of the
Company.
Base compensation levels and benefits are established at the median for
companies of a comparable size in the information technology industry. For the
purpose of establishing these levels, findings and recommendations are made
through the William M. Mercer's Executive Compensation Competitive Review. A
range of salary increases generally is determined at the time the budget is
established each year based on a review of the level of achievement of financial
and strategic objectives as defined in the Company's annual strategic plan.
Salary increases are awarded at the time of an individual's review, based upon
such individual's performance and contributions to the achievement of the
Company's objectives. Such reviews are generally performed near the anniversary
of an individual's hire date. Annual cash bonuses are intended to create an
incentive for executives who significantly contribute to and influence the
Company's strategic plans and are responsible for the Company's performance. The
aims are to focus executives' attention on areas such as profitability and asset
management, to encourage teamwork, and to tie executive pay to corporate
performance goals, which are consistent with the long-term goals of stockholders
and other investors. Bonuses are awarded based on the achievement of annual
financial and strategic goals approved by the Compensation Committee at the
beginning of each year. These goals may include a target range of pretax
earnings, earnings per share, return on equity, or other objective measurement
consistent with long-term stockholder goals. The Compensation Committee
approves a target range for specific financial and/or strategic goals and a
range of potential bonus amounts for each executive, stated as a percentage of
base salary. Ranges of potential bonuses are determined based upon the
executive's ability to affect the Company's performance. Actual bonuses are
awarded following the year-end based on the actual achievement level of the
specified corporate goals compared to the target range of achievement.
Grants of Company stock options are intended to align the interests of
executives and key employees with the long-term interests of the Company's
stockholders and other investors and to encourage executives and key employees
to remain in the Company's employ. Grants are not made in every year, but are
awarded subjectively based on a number of factors, including the individual's
level of responsibility, the amount and term of options already held by the
individual, the individual's contributions to the achievement of the Company's
financial and strategic objectives, as defined in the Company's annual plan, and
the Company's achievement of its financial and strategic objectives, which may
include the goals described above, as well as developing strategic alliances,
identifying and exploiting markets, expanding
6
<PAGE>
existing market share and penetration, expanding operating capabilities and
improving net operating margins and return on equity.
COMPANY POLICY ON QUALIFYING COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), provides that publicly held companies may not deduct in any taxable
year compensation in excess of one million dollars paid to any of the
individuals named in the Summary Compensation Table which is not "performance-
based" as defined in section 162(m). The policy of the Board of Directors and
the Compensation Committee is to qualify future compensation arrangements to
ensure deductibility, except in those limited cases where stockholder value is
maximized by an alternative approach.
CEO COMPENSATION
In accordance with Mr. Hill's employment contract, Mr. Hill's base salary
for 1997 remained the same as authorized by the Compensation Committee. Mr.
Hill was entitled to a bonus for 1997 under the Company's bonus plan, but he
chose to not receive it.
OTHER EXECUTIVE COMPENSATION
The Compensation Committee approved executive bonuses in the form of cash
and/or stock options for certain executives equal to an average of 50% of the
target bonus amounts. The Compensation Committee granted options under the
Company's 1996 Equity Compensation Plan to a significant number of its
executives and employees during 1997. The relative number of options granted
was based on each such individual's responsibilities.
By the Compensation Committee:
Yvonne Brathwaite Burke Frank B. Foster, III John Lehman
Thomas C. Lynch Cecile D. Barker
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning compensation paid
during the last two fiscal years to the Chief Executive Officer and each of the
executive officers of the Company whose salary and bonus exceeded $100,000 in
1997 (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------ -------------------------
Awards
-------------------------
OTHER SECURITIES ALL OTHER
ANNUAL RESTRICTED UNDERLYING COMPEN-
NAME AND PRINCIPAL SALARY BONUS COMPEN- STOCK OPTIONS/ SATION
POSITION YEAR ($)/(1)/ ($)/(2)/ SATION($)/(3)/ AWARD(S)($) SARS (#) ($)/(4)/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
William R. Hill, 1997 $150,037 $ -- -- -- -- $ 1,375
Chief Executive
Officer and
President 1996 $152,042 $ 138,129 -- -- 28,333 $ 875
- ------------------------------------------------------------------------------------------------------------------------------------
Edgar M. Fields, 1997 $150,040 $ -- -- -- 19,625 $2,250
Chief Operating
Officer 1996 $154,027 $ 74,075 -- -- 100,000 $ 900
- ------------------------------------------------------------------------------------------------------------------------------------
Richard Eubanks, 1997 $150,010 $ 15,000 -- -- 15,750 --
Sr. Vice President
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel D. Horgan, 1997 $ 91,673 $ 50,000 -- -- 86,292 --
Chief Financial
Officer and
Treasurer /(5)/
- ------------------------------------------------------------------------------------------------------------------------------------
Gerry Lalonde, Sr. 1997 $129,868 $ 15,000 -- -- 15,750 --
Vice President 1996 $135,000 $ 80,518 -- -- 28,333 --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The amounts shown in this table do not include amounts expended by the
Company pursuant to plans, including medical, group life insurance, or
other benefits received by the Named Officers that do not discriminate in
scope, terms or operation in favor of executive officers or directors and
that are generally available to all salaried employees.
(2) Amounts have been listed for the year earned although actually paid in the
following fiscal year.
(3) Perquisites and other personal benefits for fiscal year 1997 did not exceed
the lesser of $50,000 or 10% of any executive officer's salary and bonus.
(4) The amounts listed represent the Company's matching contribution under the
401(k) plan.
(5) Mr. Horgan joined the Company in June 1997.
8
<PAGE>
STOCK OPTIONS
The following tables set forth information with respect to (i) individual
grants of stock options during 1997 to each of the Named Officers, (ii) options
exercised during fiscal year 1997, and (iii) the number of unexercised options
and the value of unexercised in-the-money options at December 31, 1997.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants For Option Term/(1)/
- ------------------------------------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options/
Underlying SARs Exercise
Options/ Granted to or
SARs Employees In Base Price Expiration 5% 10%
Name Granted (#) Fiscal Year ($/Sh)/(2)/ Date ($) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William R. Hill 0 -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Edgar M. Fields 19,625 /(3)/ 4.6% $5.10 6/30/03 $ 31,409 $ 73,747
- ------------------------------------------------------------------------------------------------------------------------------------
Richard Eubanks 15,750 /(3)/ 3.7% $5.10 6/30/03 $ 25,208 $ 59,185
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel D. Horgan 19,625 /(3)/ 4.6% $5.10 6/30/03 $ 31,409 $ 73,747
66,667 /(4)/ 15.7% $5.10 7/1/03 $106,699 $250,522
- ------------------------------------------------------------------------------------------------------------------------------------
Gerry Lalonde 15,750 /(3)/ 3.7% $5.10 6/30/03 $ 25,208 $ 59,185
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The potential realizable values are based on an assumption that the stock
price of the shares of Common Stock of the Company appreciate at the annual
rate shown (compounded annually) from the date of grant until the end of
the option term. These values do not take into account amounts required to
be paid as income taxes under the Code and any applicable state laws or
option provisions providing for termination of an option following
termination of employment, non-transferability or vesting over periods of
up to five years. These amounts are calculated based on the requirements
promulgated by the Securities and Exchange Commission and do not reflect
the Company's estimate of future stock price growth of the shares of Common
Stock of the Company.
(2) All options have an exercise price at least equal to the fair market value
on the date of grant of the shares subject to each option.
(3) Each option was 100% vested as of the consummation of the Company's initial
public offering on December 4, 1997, has a six-year term and remains
exercisable so long as employment with the Company or one of its
subsidiaries continues. The option exercise price may be paid in cash or
by (i) delivery of previously acquired shares or (ii) same day sales, i.e.
cashless broker's exercises.
(4) Option vests 20% each year commencing on the grant date, has a six-year
term and continues vesting and remains exercisable so long as employment
with the Company or one of its subsidiaries continues. The option exercise
price may be paid in cash or by (i) delivery of previously acquired shares
or (ii) same day sales, i.e. cashless broker's exercises.
9
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired Options/SARs In-the-Money Options/
On at Fiscal Year-End (#) SARs at Fiscal Year-End ($)/(1)/
Exercise Value
Name (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William R. Hill 7,083 $ 21,249 1 21,249 $ 7.25 $ 154,055
- ------------------------------------------------------------------------------------------------------------------------------------
Edgar M. Fields 0 -- 59,625 60,000 $371,444 $ 435,000
- ------------------------------------------------------------------------------------------------------------------------------------
Richard Eubanks 0 -- 22,000 18,750 $108,175 $ 128,438
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel D. Horgan 0 -- 32,959 53,333 $136,780 $ 221,332
- ------------------------------------------------------------------------------------------------------------------------------------
Gerry Lalonde 0 -- 22,834 21,249 $116,722 $ 154,055
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The value of unexercised in-the-money options is calculated based upon (i)
the fair market value per share of the stock at December 31, 1997, less the
option exercise price, multiplied by (ii) the number of shares subject to
an option. On December 31, 1997, the fair market value of a share of the
Company's common stock was $9.25. This table is presented solely for the
purpose of complying with Securities and Exchange Commission rules and does
not necessarily reflect the amounts the optionees will actually receive
upon any sale of the shares acquired upon the exercise of the options.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS.
The Company has entered into an employment agreement with Mr. Hill as of
April 1, 1996, which provides for the payment of an annual base salary of
$150,000, and incentive bonuses upon the achievement of certain objectives. For
1997, Mr. Hill was entitled to receive a maximum bonus of $210,000. This
agreement automatically continues for successive one-year terms unless written
notice is provided at least 90 days prior to the applicable expiration date.
This agreement generally restricts Mr. Hill from competing with the Company
during the term of the employment agreement and for a period ending one year
after the termination of his employment. The Company may terminate Mr. Hill's
employment without cause provided that it must continue to pay Mr. Hill his base
salary for the remaining term of the agreement and for such additional period
that he remains bound by his non-competition covenants.
10
<PAGE>
STOCK PERFORMANCE GRAPH
The following chart compares the cumulative total stockholder return on the
Company's Common Stock for the period beginning with the commencement of the
Company's initial public offering on October 21, 1997 through December 31, 1997
with the cumulative total return on the Nasdaq Index and the cumulative total
return for a peer group index for the same period. The peer group consists of
SIC Code 737--Computer Programming and Data Processing Services. The comparison
assumes that $100 was invested on October 21, 1997 in the Company's Common
Stock, at the initial public offering price of $5.00 per share, and in each of
the comparison indices, and assumes reinvestment of dividends. The Company has
historically reinvested earnings in the growth of its business and has not paid
cash dividends on its Common Stock.
<TABLE>
<CAPTION>
21-Oct-97 Dec-97
---------------------------------
<S> <C> <C>
OAO 100 185
Nasdaq 100 99
Peer Group 100 100
</TABLE>
CERTAIN TRANSACTIONS
Pursuant to the terms of a stock purchase agreement dated April 8, 1996
(the "1996 Purchase") among the Company, OAO Corporation, OAO Services, Inc.
("OAO Services") and Safeguard, Safeguard purchased from the Company 5,000,000
shares of the Company's Common Stock for an investment in the Company of $5.0
million plus a payment of an additional $5.0 million to OAO Services, a
subsidiary of OAO Corporation, in return for a grant by OAO Services to the
Company of an option (the "OAO Services Option") to purchase all of the shares
of common stock of OAO Services at an exercise price based on revenues and
earnings levels of OAO Services for the 12 months prior to the date of exercise.
In addition, Safeguard granted to Cecile D. Barker, the majority owner of OAO
Corporation and a director and significant stockholder of the Company, an option
exercisable for 1,000,000 shares of Common Stock held by Safeguard for an
aggregate exercise price of $2,000 (the "Barker Option"). The Barker Option was
granted at the time of Safeguard's investment by Safeguard to Barker, as a
shareholder-to-shareholder transaction. This option was to become exercisable
upon the achievement of certain milestones and was intended to serve as an
earnout feature between these two shareholders. Pursuant to the terms of the
1996 Purchase, Safeguard, William R. Hill and Cecile D. Barker were granted
certain registration rights with respect to their shares of Common Stock in the
Company.
Pursuant to the terms of a Stock Purchase Agreement dated as of July 11,
1997 between Safeguard and Cecile D. Barker, Safeguard purchased 1,000,000
shares of Common Stock from Mr. Barker for $4.2 million. Contemporaneous with
the consummation of this transaction, Mr. Barker exercised the Barker Option.
In addition, pursuant to the terms of an Option Cancellation Agreement by and
among the Company, Safeguard, Cecile D. Barker, OAO Corporation and OAO
Services, the OAO Services Option was canceled in consideration of the right to
receive certain future payments in the event of any sale of OAO Corporation or
any public offering by OAO Corporation which occurs prior to April 8, 2000. In
particular, the Company and Safeguard are each to receive from OAO Corporation
one-half of (i) the greater of $1.0 million or an amount equal to the lesser of
$3.0 million or three percent of the total sales price from the sale of both OAO
Corporation and OAO Services which occurs prior to April 8, 2000, (ii) the
greater of $1.0 million or an amount equal to the lesser of $2.0 million or
three percent of the total sales price from any sale of OAO Corporation which
occurs prior to April 8, 2000 and at such time that OAO Services if not an
affiliate of OAO Corporation, (iii) the greater of $1.0 million or an amount
equal to the lesser of $3.0 million or three percent of the market
11
<PAGE>
capitalization of OAO Corporation if OAO Corporation consummates an initial
public offering of its equity securities prior to April 8, 2000 (an "OAO
Corporation IPO"), or (iv) the greater of $1.0 million or an amount equal to the
lesser of $2.0 million or two percent of the market capitalization of OAO
Corporation if OAO Services is no longer affiliated with OAO Corporation at the
time of the OAO Corporation IPO. The market capitalization of OAO Corporation
would be based on the offering price of the equity securities in the OAO
Corporation IPO.
Pursuant to the terms of an Administrative Services Agreement between the
Company and Safeguard, the Company paid Safeguard $500,000 in 1997 in
consideration of administrative support services, including management
consultation, investor relations, legal services and tax planning.
II. PROPOSAL TO ADOPT THE OAO TECHNOLOGY SOLUTIONS, INC.
EMPLOYEE STOCK PURCHASE PLAN
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSAL.
---
PROXIES RECEIVED BY THE BOARD WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY
OTHERWISE ON THEIR PROXY CARDS.
BACKGROUND
The Company's stockholders are being asked to approve the adoption of the
OAO Technology Solutions, Inc. Employee Stock Purchase Plan (the "Purchase
Plan"). The Purchase Plan was approved by the Board of Directors on April 16,
1998, with a total of 1,000,000 shares reserved for issuance thereunder. The
purpose of the Purchase Plan is to provide employees of the Company, and its
majority owned subsidiaries that adopt the Purchase Plan, with an opportunity to
purchase Common Stock from the Company through payroll deductions and to provide
the Company with the ability to attract, retain, and motivate the best people
available for the successful conduct of its business. The essential features of
the Purchase Plan are outlined below. The description that follows, however, is
only a summary and is qualified in its entirety by reference to the full text of
the Purchase Plan, which is attached as Appendix A to this Proxy Statement.
OFFERING PERIOD
Offerings under the Purchase Plan have a duration of six months. The first
offering will begin on January 1, 1999 and end on June 30, 1999. A new Offering
Period shall begin on the first day of each six calendar month period beginning
on each January 1 and July 1 of a calendar year, starting with January 1, 1999,
and ending at the end of such six month period, unless changed by the committee
of the Board of Directors that administers the Purchase Plan (the "Committee").
GRANT AND EXERCISE OF OPTION
On the first day of an offering period (the "Enrollment Date"), the
participant is granted an option to purchase on the last day of the offering
period (the "Exercise Date") up to a number of whole shares of the Common Stock
determined by dividing 15% of the participant's Compensation (as defined in the
"Payroll Deduction" section, infra) by the exercise price, which shall not be
less than the lower of (i) 85% of the fair market value of a share of the Common
Stock on the Enrollment Date or (ii) 85% of the fair market value of a share of
Common Stock on the Exercise Date. The exercise price shall be determined by
the Committee. The number of shares subject to such option shall be reduced,
if necessary, to maintain the limitations with respect to a participant's
ownership of stock and/or options to purchase stock possessing 5% or more of the
total combined voting power or value of all classes of stock of the Company or
12
<PAGE>
any majority owned subsidiary, and to restrict a participant's right to purchase
stock under the Purchase Plan to $25,000 in fair market value of such stock
(determined at the time the option is granted) for each calendar year in which
such option is outstanding at any time. Unless the employee has withdrawn, his
option for the purchase of shares will be exercised automatically on the
Exercise Date at the applicable price. To the extent an employee's payroll
deductions exceed the amount required to purchase the shares subject to option,
such excess amount shall be held in such participant's account for the next
period.
SHARES AVAILABLE UNDER THE PURCHASE PLAN
The total number of shares of Common Stock that are issuable under the
Purchase Plan is 1,000,000 shares.
ELIGIBILITY AND PARTICIPATION
Any employee who is customarily employed for at least 20 hours per week and
more than five months per calendar year by the Company is eligible to
participate in offerings under the Purchase Plan. Employees of subsidiaries
that adopt the Purchase Plan with Company approval will be eligible on the same
basis. Employees become participants in the Purchase Plan by delivering to the
Company a subscription agreement authorizing payroll deductions within the
specified period of time prior to the Enrollment Date.
No employee is permitted to purchase shares under the Purchase Plan if such
employee owns 5% or more of the total combined voting power or value of all
classes of shares of stock of the Company (including shares that may be
purchased under the Purchase Plan or pursuant to any other options). In
addition, no employee is entitled to purchase more than $25,000 worth of shares
(based on the fair market value of the shares at the time the option is granted)
in any calendar year.
PURCHASE PRICE
The Committee will set the price at which shares are sold under the
Purchase Plan, which will not be less than 85% of the fair market value per
share of Common Stock at either the Enrollment Date or at the Exercise Date,
whichever is lower.
PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deduction over
each offering period. The deductions may not be greater than 15% of a
participant's compensation. "Compensation" for purposes of the Purchase Plan is
the base pay or regular straight-time earnings as in effect at the beginning of
each offering period.
All payroll deductions of a participant are credited to his or her account
under the Purchase Plan and are deposited with the general funds of the Company.
Such funds may be used for any corporate purpose pending the purchase of shares.
ADMINISTRATION
The Purchase Plan is administered by the Committee, which shall have all
powers with respect to the Purchase Plan, except for amending or terminating the
Purchase Plan.
WITHDRAWAL FROM THE PURCHASE PLAN
A participant may terminate his or her interest in a given offering by
withdrawing all, but not less than all, of the accumulated payroll deductions
credited to such participant's
13
<PAGE>
account at any time prior to the end of the offering period. The withdrawal of
accumulated payroll deductions automatically terminates the employee's interest
in that offering as the case may be. As soon as practicable after such
withdrawal, the payroll deductions credited to a participant's account are
returned to the participant without interest.
A participant's withdrawal from an offering does not have any effect upon
such participant's eligibility to participate in subsequent offerings under the
Purchase Plan.
TERMINATION OF EMPLOYMENT
Termination of a participant's employment for any reason, including
retirement or death or the failure to remain in the continuous employ of the
Company for at least 20 hours per week (except for certain leaves of absence),
cancels his or her participation in the Purchase Plan immediately. In such
event, the payroll deductions credited to the participant's account will be
returned to the participant, or in the case of death, to the person or persons
entitled thereto, without interest.
CAPITAL CHANGES
In the event of changes in the Common Stock of the Company due to a stock
split or other changes in capitalization, or in the event of any merger, sale,
reclassification, or any other reorganization, appropriate adjustments will be
made by the Company to the shares subject to purchase and to the price per
share.
NONASSIGNABILITY
No rights or accumulated payroll deductions of a participant under the
Purchase Plan may be pledged, assigned or transferred for any reason, and any
such attempt may be treated by the Committee as an election to withdraw from the
Purchase Plan.
AMENDMENT AND TERMINATION OF THE PURCHASE PLAN
The Board of Directors of the Company may at any time amend or terminate
the Purchase Plan; however, such termination cannot affect options previously
granted nor may any amendment make any change in an existing option that
adversely affects the rights of any participant, except as necessary to comply
with tax or securities laws. No amendment may be made to the Purchase Plan
without prior approval of the stockholders of the Company if such amendment
would increase the number of shares that may be issued under the Purchase Plan,
permit payroll deductions at a rate in excess of 15% of a participant's
compensation, change the designation of the employees eligible for participation
in the Purchase Plan or constitute an amendment for which stockholder approval
is required in order to comply with Rule 16b-3, or any successor rule.
TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of section 423 of the
Internal Revenue Code (the "Code"), which incorporates by reference the tax
treatment provisions of section 421 of the Code. Under these provisions, no
income will be taxable to a participant at the time of grant of the option or
purchase of shares. Upon disposition of the shares, the participant generally
will be subject to tax and the amount of the tax will depend upon the holding
period. If the shares have been held by the participant for more than two years
after the Enrollment Date and one year from the Exercise Date, the amount of
ordinary income will be the lesser of (a) the excess of the fair market value of
the shares at the time of disposition over the purchase price, or (b) the excess
of the fair market value of the shares at the time the option was granted over
the
14
<PAGE>
purchase price (which purchase price will be computed as of the Enrollment
Date), and any further gain will be treated as long-term capital gain. If the
shares are disposed of before the expiration of these holding periods, the
excess of the fair market value of the shares on the Exercise Date over the
purchase price will be treated as ordinary income. The Company is not entitled
to a deduction for amounts taxed as ordinary income or capital gain to a
participant except to the extent of ordinary income reported by participants
upon disposition of shares prior to the expiration of the holding period
described above.
The foregoing is only a summary of the effect of federal income taxation
upon the participant and the Company with respect to the shares purchased under
the Purchase Plan. Reference should be made to the applicable provisions of the
Code. In addition, the summary does not discuss the tax consequences of a
participant's death or the income tax laws of any state or foreign country in
which the participant may reside.
REQUIRED VOTE
Approval of the Purchase Plan requires the affirmative vote of a majority
of the votes cast by the holders of the Company's outstanding shares of Common
Stock entitled to vote thereon. If not so approved by the stockholders, the
Purchase Plan will be terminated.
III. PROPOSAL TO APPROVE THE
AMENDED AND RESTATED OAO TECHNOLOGY SOLUTIONS, INC.
1996 EQUITY COMPENSATION PLAN
THE BOARD BELIEVES THAT THE FOLLOWING PROPOSAL TO APPROVE THE AMENDED AND
RESTATED OAO TECHNOLOGY SOLUTIONS, INC. 1996 EQUITY COMPENSATION PLAN IS IN THE
BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS A
VOTE FOR APPROVAL OF THIS PROPOSAL. PROXIES RECEIVED BY THE BOARD WILL BE SO
---
VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE ON THEIR PROXY CARDS.
BACKGROUND AND PROPOSED AMENDMENT
At the Annual Meeting, the stockholders will be asked to approve the
Amended and Restated OAO Technology Solutions, Inc. 1996 Equity Compensation
Plan, as adopted by the Board in March 1998, subject to stockholder approval.
The Amended and Restated OAO Technology Solutions, Inc. 1996 Equity Compensation
Plan, as proposed to be amended, is hereinafter referred to as the "1996 Plan."
The 1996 Plan has been amended to revise the provision relating to the
definition of fair market value of the Company's shares for purposes of
determining the exercise price of an option. Prior to this amendment, the 1996
Plan provided that the purchase price of the Company's shares subject to an
incentive stock option would be equal to the last reported sale price of the
Company's shares on the date of grant, or, if there were no trades on that date,
the latest preceding date upon which a sale was reported. Because the Board
believes that the exercise price of the option should be established prior to
its approval of option grants, the exercise price of an option is more
appropriately determined based upon the fair market value of the Company's
shares as of the latest preceding date upon which a sale was reported.
We direct your attention to Appendix B of this Proxy Statement,
incorporated herein by reference, which contains a description of the material
features of the 1996 Plan.
15
<PAGE>
APPROVAL BY STOCKHOLDERS
Approval of the 1996 Plan requires the affirmative vote of a majority of
the votes cast by the holders of the Company's outstanding shares of Common
Stock entitled to vote thereon. If not so approved, then the 1996 Plan in the
form previously approved by the stockholders of the Company will remain in full
force and effect.
INDEPENDENT PUBLIC ACCOUNTANTS
Since 1996, the Company has retained Deloitte & Touche LLP as its
independent public accountants, and it intends to retain Deloitte & Touche LLP
for the current year ending December 31, 1998. Representatives of Deloitte &
Touche LLP are expected to be present at the Annual Meeting and will have an
opportunity at the meeting to make a statement if they desire to do so and will
be available to respond to appropriate questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than ten percent of a
registered class of the Company's equity securities ("10% Stockholders") to file
reports of ownership and changes in ownership of Common Stock and other equity
securities of the Company with the Securities and Exchange Commission ("SEC").
Officers, directors and 10% Stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms received by it and
written representations from certain reporting persons that no other reports
were required for those persons, the Company believes that all Section 16(a)
filing requirements were complied with during the period from October 21, 1997
through December 31, 1997, with the exception of the following transactions:
one transaction reported late by each of Frank B. Foster, III and Donald G.
Miller and two transactions reported late by each of Edgar M. Fields, Harvard V.
Hopkins, Jr. and Howard G. Ulep.
OTHER MATTERS
The Company is not aware of any other business to be presented at the
Annual Meeting. If any other matters should properly come before the Annual
Meeting, however, the enclosed Proxy confers discretionary authority with
respect thereto.
The Company's Annual Report for 1997, including financial statements and
other information with respect to the Company and its subsidiaries, is being
mailed simultaneously to the stockholders but is not to be regarded as proxy
solicitation material.
Dated: April 20, 1998
16
<PAGE>
APPENDIX A
OAO TECHNOLOGY SOLUTIONS, INC.
EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the Employee Stock Purchase Plan
of OAO Technology Solutions, Inc.
1. PURPOSE. The purpose of the Plan is to provide Employees of the
-------
Company and its Subsidiaries with an opportunity to purchase Common Stock of the
Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
section 423 of the Code (as defined below). The provisions of the Plan shall be
construed accordingly, so as to extend and limit participation in a manner
consistent with the requirements of that section of the Code.
2. DEFINITIONS.
-----------
(a) "Act" shall mean the Securities Exchange Act of 1934, as amended.
---
(b) "Board" shall mean the Board of Directors of the Company.
-----
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(d) "Common Stock" shall mean the common stock, $.01 par value per
------------
share, of the Company.
(e) "Committee" shall mean the committee appointed pursuant to
---------
PARAGRAPH 11.
(f) "Company" shall mean OAO Technology Solutions, Inc., a Delaware
-------
corporation, or any successor which adopts this Plan.
(g) "Compensation" shall mean the base pay or regular straight-time
------------
earnings as in effect at the beginning of each Offering Period.
(h) "Continuous Status as an Employee" shall mean the absence of any
--------------------------------
interruption or termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of a leave of
absence that meets the requirements of PARAGRAPH 9(B).
(i) "Designated Subsidiary" shall mean any Subsidiary that has
---------------------
adopted the Plan in accordance with PARAGRAPH 29.
(j) "Eligible Employee" shall have the meaning defined in PARAGRAPH
-----------------
3(A).
(k) "Employee" shall mean any person, including an officer, who is
--------
customarily employed for at least 20 hours per week and for more than five
months in the calendar year by an Employer, provided, however, that no
individual shall be considered an Employee for purposes of this Plan if a
country's law prohibits the granting of options under this Plan to
individuals who are citizens of that country. The determination of whether
an individual is an Employee for purposes of this Plan shall be made in
accordance with the rules under Section 3401(c) of the Code and the
Treasury Regulations thereunder.
(l) "Employer" shall mean the Company and each of its Designated
--------
A-1
<PAGE>
Subsidiaries.
(m) "Enrollment Date" shall mean the first day of each Offering
---------------
Period.
(n) "Exercise Date" shall mean the last day of each Offering Period.
-------------
(o) "Exercise Price" shall have the meaning as defined in PARAGRAPH
--------------
6(B).
(p) "Offering Period" shall mean that period to be determined by the
---------------
Committee beginning on the date Eligible Employees are offered the
opportunity to purchase Shares hereunder. The first Offering Period shall
begin on January 1, 1999 and shall end on June 30, 1999. Until changed by
the Committee, in its sole and absolute discretion, a new Offering Period
shall begin on the first day of each six calendar month period beginning on
each January 1 and July 1 of a calendar year, starting with January 1,
1999, and shall end on the end of such six month period.
(q) "Participant" shall mean an Eligible Employee who has elected to
-----------
participate herein by authorizing payroll deductions pursuant to PARAGRAPH
4.
(r) "Payroll Deduction Account" shall mean the separate account
-------------------------
maintained hereunder to record the amount of a Participant's Compensation
that has been withheld pursuant to PARAGRAPH 5.
(s) "Plan" shall mean the OAO Technology Solutions, Inc. Employee
----
Stock Purchase Plan.
(t) "Share" shall mean a share of Common Stock.
-----
(u) "Subscription Agreement" shall have the meaning as defined in
----------------------
PARAGRAPH 4(A).
(v) "Subsidiary" shall mean a corporation, domestic or foreign, of
----------
which at the time of the granting of the option pursuant to PARAGRAPH 6,
not less than 50% of the total combined voting power of all classes of
stock are held by the Company or a Subsidiary, whether or not such
corporation now exists or is hereafter organized or acquired by the Company
or a Subsidiary.
3. ELIGIBILITY.
-----------
(a) General Rule. Any Employee on an Enrollment Date shall be
------------
eligible to participate as an "Eligible Employee" during the Offering
Period beginning on such Enrollment Date, subject to the requirements of
PARAGRAPH 4(A) and the limitations imposed by section 423(b) of the Code.
(b) Exceptions. Any provisions of the Plan to the contrary
----------
notwithstanding, no Employee shall be an Eligible Employee if:
(i) Immediately after the grant, such Employee (or any other
person whose stock would be attributed to such Employee pursuant to
section 424(d) of the Code) would own stock (including for purposes of
this PARAGRAPH 3(B) any stock he may acquire upon exercise of
outstanding options) possessing 5% or more of the total combined
voting power or value of all classes of stock of the Company or of any
Subsidiary computed in accordance with section 423(b)(3) of the Code;
or
A-2
<PAGE>
(ii) Such option would permit such Employee's right to purchase
stock under all employee stock purchase plans (described in section
423 of the Code) of the Company and its Subsidiaries to accrue at a
rate which exceeds $25,000 of the fair market value of such stock
(determined at the time such option is granted) for each calendar year
in which such option is outstanding at any time, in accordance with
the provisions of section 423(b)(8) of the Code.
4. PARTICIPATION.
-------------
(a) An Eligible Employee may become a Participant in the Plan by
completing a Subscription Agreement authorizing payroll deductions, in a
form substantially similar to EXHIBIT A attached to this Plan
("Subscription Agreement"), and filing it with the Company's Human
Resources Department prior to the applicable Enrollment Date, unless a
later time for filing the Subscription Agreement is set by the Committee
for all Eligible Employees with respect to a given Offering Period.
(b) Payroll deductions for a Participant shall commence with the
first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is applicable,
unless sooner terminated by the Participant as provided in PARAGRAPH 9.
(c) An Eligible Employee may waive his right to participate for any
Offering Period by declining to authorize a payroll deduction. Such
declination must be filed in writing in the time and manner specified
thereby. The filing of a written declination shall result in the Employee's
waiver of participation for only the Offering Period to which it relates
and shall be irrevocable with respect to such Offering Period. Except as
otherwise provided in this Paragraph, an Employee's waiver of participation
for a specified Offering Period shall not, in and of itself, adversely
impact the right of such Employee to participate in the Plan during any
subsequent Offering Periods except those Offering Periods with respect to
which he files additional written declinations in accordance with the
provisions of this Paragraph.
5. PAYROLL DEDUCTIONS.
------------------
(a) At the time a Participant files his or her Subscription
Agreement, such Participant shall elect to have payroll deductions (in
whole percentage increments) made on each pay date during the Offering
Period in an amount of not less than 1% nor more than 15% of the
Compensation which he or she receives on each pay date during the Offering
Period.
(b) All payroll deductions made by a Participant shall be credited to
his or her Payroll Deduction Account under the Plan. No interest shall
accrue on the payroll deductions in a Participant's Payroll Deduction
Account in the Plan.
(c) No changes in the rate of payroll deductions other than a
withdrawal pursuant to PARAGRAPH 9 are permitted.
6. GRANT OF OPTION.
---------------
(a) On the Enrollment Date of each Offering Period during the term of
the Plan each Participant in such Offering Period shall be granted an
option to purchase up to a number of whole Shares determined by dividing
15% of the Participant's Compensation by the Exercise Price; provided,
however, that the number of shares subject to such option shall be reduced,
if necessary, to a number of shares which would not exceed the limitations
described in PARAGRAPH 3(B) OR PARAGRAPH 10(A) hereof.
A-3
<PAGE>
The fair market value of a Share shall be determined as provided in
PARAGRAPH 6(B).
(b) The "Exercise Price" per Share offered in a given Offering Period
shall be determined by the Committee but shall not be less than the lower
of: (i) 85% of the fair market value of a Share on the Enrollment Date, or
(ii) 85% of the fair market value of a Share on the Exercise Date. The
fair market value of a Share on a given date shall be the closing price of
such Share as reported by the Nasdaq National Market or reported on such
other national exchange as it may, from time to time, be reported on, on
such date (or if there shall be no trading on such date, then on the first
previous date on which there is such trading), unless the Shares cease to
be traded on a national exchange. If the Shares cease to be traded on a
national exchange, fair market value shall be determined by the Committee
in its discretion consistent with section 423 of the Code or the
regulations thereunder.
(c) All grants made hereunder shall be deemed to have been made on
the applicable Enrollment Date.
7. EXERCISE OF OPTION. The Participant's option for the purchase of
------------------
Shares will be exercised automatically on the Exercise Date of each Offering
Period, and the maximum number of full shares subject to such option will be
purchased for such Participant at the applicable Exercise Price with the payroll
deductions accumulated in his or her Payroll Deduction Account, unless prior to
such Exercise Date the Participant has withdrawn from the Offering Period as
provided in PARAGRAPH 9. During a Participant's lifetime a Participant's option
to purchase shares hereunder is exercisable only by such Participant. Any amount
remaining in the Participant's Payroll Deduction Account after the Offering
Period shall be held in the Payroll Deduction Account until the next Offering
Period, unless the Offering Period has been oversubscribed or has terminated, in
which case such amount shall be refunded to the Participant.
8. DELIVERY. As soon as practicable after the Exercise Date, the
--------
Committee shall arrange the delivery to each Participant, or to his account at a
brokerage firm, of a certificate representing the shares purchased upon exercise
of his or her option.
9. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
-------------------------------------
(a) A Participant may withdraw all, but not less than all, of the
payroll deductions credited to his or her Payroll Deduction Account and not
yet used toward the exercise of his or her option under the Plan at any
time by giving written notice to the Committee on a form substantially
similar to EXHIBIT B attached to this Plan. All of the Participant's
payroll deductions credited to his or her Payroll Deduction Account that
have not yet been used to purchase Shares will be paid to such Participant
as soon as practicable after receipt of his or her notice of withdrawal. A
withdrawal of a Participant's Payroll Deduction Account shall terminate the
Participant's participation for the Offering Period in which the withdrawal
occurs. No further payroll deductions for the purchase of shares will be
made during the Offering Period.
(b) Upon termination of the Participant's Continuous Status as an
Employee of the Company for any reason, he or she will be deemed to have
elected to withdraw from the Plan and the payroll deductions credited to
his or her Payroll Deduction Account will be returned to such Participant
and his or her option will be canceled; provided, however, a Participant
who goes on a leave of absence shall be permitted to remain in the Plan
with respect to an Offering Period which commenced prior to the beginning
of such leave of absence. If such Participant is not guaranteed
reemployment by contract or statute and the leave of absence exceeds 90
days, such Participant shall be deemed to have terminated employment on the
91st day of such leave of absence.
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<PAGE>
Payroll deductions for a Participant who has been on a leave of absence
will resume upon return to work at the same rate as in effect prior to such
leave unless the leave of absence begins in one Offering Period and ends in
a subsequent Offering Period, in which case the Participant shall not be
permitted to re-enter the Plan until a new Subscription Agreement is filed
with respect to an Offering Period which commences after such Participant
has returned to work from the leave of absence.
(c) A Participant's withdrawal from one Offering Period will not have
any effect upon his or her eligibility to participate in a different
Offering Period or in any similar plan which may hereafter be adopted by
the Company.
10. SHARES.
------
(a) The maximum number of Shares which shall be made available for
sale under the Plan shall be 1,000,000 Shares, subject to adjustment upon
changes in capitalization of the Company as provided in PARAGRAPH 16.
Either authorized and unissued Shares or issued Shares heretofore or
hereafter reacquired by the Employer may be made subject to purchase under
the Plan, in the sole and absolute discretion of the Committee. Further, if
for any reason any purchase of any Shares under the Plan is not
consummated, Shares subject to such purchase agreement may be subjected to
a new Subscription Agreement under the Plan. If, on the Exercise Date, the
number of Shares with respect to which options are to be exercised exceeds
the number of Shares then available under the Plan, the Company shall make
a pro rata allocation of the shares remaining available for purchase in as
uniform a manner as shall be practicable and as it shall determine to be
equitable. In such event, the Company shall give written notice of such
reduction of the Shares which each Employee shall be allowed to purchase.
Notwithstanding anything to the contrary herein, the Company shall not be
obligated to issue Shares hereunder if, in the opinion of counsel for the
Company, such issuance would constitute a violation of federal or state
securities laws.
(b) The Participant will have no interest or voting right in Shares
covered by his or her option until such option has been exercised and the
Shares have been issued or transferred to the Participant.
(c) Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant or, at the prior written request
of the Participant, in the names of the Participant and his or her spouse.
11. ADMINISTRATION. The Plan shall be administered by a Committee
--------------
appointed by the Board. Such Committee shall have all powers with respect to the
Plan, except for amending or terminating the Plan as set forth in PARAGRAPH 17
hereof.
(a) Each member of the Committee shall serve until his successor is
appointed. Any member of the Committee may be removed at any time by the
Board, with or without cause, which shall have the power to fill any
vacancy which may occur. A Committee member may resign by giving 30 days
written notice to the Company.
(b) The members of the Committee shall serve without compensation for
services as such, but the Company shall pay all expenses of the Committee.
(c) The Committee shall have the following powers and duties:
(1) To direct the administration of the Plan in accordance with
the provisions herein set forth;
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<PAGE>
(2) To adopt rules of procedure and regulations necessary for
the administration of the Plan provided the rules are not inconsistent
with the terms of the Plan;
(3) To determine all questions with regard to rights of
Employees and Participants under the Plan, including, but not limited
to, the eligibility of an Employee to participate in the Plan;
(4) To enforce the terms of the Plan and the rules and
regulations it adopts;
(5) To direct the distribution of the Shares purchased
hereunder;
(6) To furnish the Employer with information which the Employer
may require for tax or other purposes;
(7) To engage the service of counsel (who may, if appropriate,
be counsel for an Employer) and agents whom it may deem advisable to
assist it with the performance of its duties;
(8) To prescribe procedures to be followed by Participants in
electing to participate herein;
(9) To receive from each Employer and from Employees such
information as shall be necessary for the proper administration of the
Plan;
(10) To maintain, or cause to be maintained, separate accounts in
the name of each Participant to reflect the Participant's Payroll
Deduction Account under the Plan; and
(11) To interpret and construe the Plan.
12. DESIGNATION OF BENEFICIARY.
--------------------------
(a) A Participant may file a written designation of a beneficiary (as
indicated in the Subscription Agreement or otherwise) who is to receive any
Shares under the Plan in the event of such Participant's death subsequent
to the Exercise Date on which an option is exercised but prior to the
issuance of such shares. In addition, a Participant may file a written
designation of a beneficiary who is to receive any cash from the
Participant's Payroll Deduction Account under the Plan in the event of such
Participant's death prior to the Exercise Date of the option.
(b) Such designation of beneficiary may be changed by the Participant
at any time by written notice. In the event of the death of a Participant
and in the absence of a beneficiary validly designated under the Plan, the
Committee shall deliver such shares and/or cash to the executor or
administrator of the estate of the Participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company or
Committee), the Committee, in its discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of
the Participant, or if no spouse, dependent or relative is known to the
Committee, then to such other person as the Committee may designate.
13. TRANSFERABILITY. Neither payroll deductions credited to Participant's
---------------
Payroll Deduction Account nor any rights with regard to the exercise of an
option to receive Shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way
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<PAGE>
(other than by will, the laws of descent and distribution or as provided in
PARAGRAPH 12 hereof) by the Participant. Any such attempt at assignment,
transfer, pledge or other disposition shall be without effect, except that the
Committee may treat such act as an election to withdraw funds in accordance with
PARAGRAPH 9.
14. USE OF FUNDS. All payroll deductions received or held by the Company
------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
15. REPORTS. Individual Payroll Deduction Accounts will be maintained for
-------
each Participant in the Plan. Statements of Payroll Deduction Account will be
given to Participants as soon as practicable following an Exercise Date, such
statements will set forth the amounts of payroll deductions, the per share
purchase price, the number of shares purchased and the remaining cash balance,
if any.
16. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. If an option under this
------------------------------------------
Plan is exercised subsequent to any stock split, spinoff, recapitalization,
reorganization, reclassification, merger, consolidation, exchange of shares, or
the like occurring after such option was granted, as a result of which shares of
any class of stock shall be issued in respect of the outstanding shares, or
shares shall be changed into a different number of the same or another class or
classes, the number of Shares to which such option shall be applicable and the
option price for such Shares shall be appropriately adjusted by the Company.
Any such adjustment, however, in the Shares shall be made without change in the
total price applicable to the portion of the Shares purchased hereunder which
has not been fully paid for, but with a corresponding adjustment, if
appropriate, in the price for the Shares.
In the event of the proposed dissolution or liquidation of the Company or
upon a proposed reorganization, merger, or consolidation of the Company with one
or more corporations as a result of which the Company is not the surviving
corporation, or upon a proposed sale of substantially all of the property or
stock of the Company to another corporation, the Offering Period will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board, and the holder of each option then outstanding under the
Plan will thereafter be entitled to receive, upon the exercise of such option,
as nearly as reasonably may be determined, the cash, securities, and/or property
which a holder of one Share was entitled to receive upon and at the time of such
transaction for each Share to which such option shall be exercised. The Board
shall take such steps in connection with such transactions as the Board shall
deem necessary to assure that the provisions of this Paragraph shall thereafter
be applicable, as nearly as reasonably may be determined, in relation to the
said cash, securities, and/or property as to which such holder of such option
might thereafter be entitled to receive.
17. AMENDMENT OR TERMINATION. The Board may at any time and for any
------------------------
reason terminate or amend the Plan. Except as specifically provided in the
Plan, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board on any Exercise Date if the
Board determines that the termination of the Plan is in the best interest of the
Company and its stockholders. Except as specifically provided in the Plan or as
required to obtain a favorable ruling from the Internal Revenue Service or to
comply with tax or securities law, no amendment may make any change in any
option theretofore granted which adversely affects the rights of any
Participant. To the extent necessary to comply with Rule 16b-3 under the Act or
section 423 of the Code (or any successor rule or provision or any other
applicable law or regulation), the Company shall obtain stockholder approval in
such manner and to such a degree as required.
18. NOTICES. All notices or other communications by a Participant to the
-------
Company or Committee under or in connection with the Plan shall be deemed to
have been duly given
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<PAGE>
when received in the form specified by the Committee at the location, or by the
person, designated by the Committee for the receipt thereof.
19. STOCKHOLDER APPROVAL. Commencement of the Plan shall be subject to
--------------------
approval by the stockholders of the Company within 12 months before or after the
date the Plan is adopted. Notwithstanding any provision to the contrary,
failure to obtain such stockholder approval shall void the Plan, any options
granted under the Plan, any Share purchases pursuant to the Plan, and all rights
of all Participants.
20. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such Shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
21. TERM OF PLAN. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board or its approval by the stockholders of the
Company as described in PARAGRAPH 19. It shall continue in effect for a term of
ten years unless sooner terminated under PARAGRAPH 17.
22. No Rights Implied. Nothing contained in this Plan or any modification
-----------------
or amendment to the Plan or in the creation of any Payroll Deduction Account, or
the execution of any participation election form, or the issuance of any Shares,
shall give any Employee or Participant any right to continue employment, any
legal or equitable right against the Employer or Company or any officer,
director, or Employee of an Employer or Company, except as expressly provided by
the Plan.
23. SEVERABILITY. In the event any provision of the Plan shall be held to
------------
be illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining provisions of the Plan, but shall be fully severable and
the Plan shall be construed and enforced as if the illegal or invalid provision
had never been included herein.
24. WAIVER OF NOTICE. Any person entitled to notice under the Plan may
----------------
waive the notice.
25. SUCCESSORS AND ASSIGNS. The Plan shall be binding upon all persons
----------------------
entitled to purchase Shares under the Plan, their respective heirs, legatees,
and legal representatives and upon the Employer, its successors and assigns.
26. HEADINGS. The titles and headings of the Paragraphs are included for
--------
convenience of reference only and are not to be considered in construction of
the provisions hereof.
A-8
<PAGE>
27. GOVERNING LAW. All questions arising with respect to the provisions
-------------
of this Plan shall be determined by application of the laws of the State of
Delaware except to the extent Delaware law is preempted by federal statute. The
obligation of the Employer to sell and deliver Shares under the Plan is subject
to applicable laws and to the approval of any governmental authority required in
connection with the authorization, issuance, sale or delivery of such Shares.
28. NO LIABILITY FOR GOOD FAITH DETERMINATIONS. Neither the members of
------------------------------------------
the Board nor any member of the Committee (nor their delegates) shall be liable
for any act, omission, or determination taken or made in good faith with respect
to the Plan or any right to purchase Shares granted under it, and members of the
Board and the Committee (and their delegates) shall be entitled to
indemnification and reimbursement by the Company in respect of any claim, loss,
damage, or expense (including attorneys' fees, the costs of settling any suit,
provided such settlement is approved by independent legal counsel selected by
the Company, and amounts paid in satisfaction of a judgment, except a judgment
based on a finding of bad faith) arising therefrom to the full extent permitted
by law and under any directors and officers liability or similar insurance
coverage that may from time to time be in effect.
29. PARTICIPATING EMPLOYERS. This Plan shall constitute the employee
-----------------------
stock purchase plan of the Company and each Designated Subsidiary. A Designated
Subsidiary may adopt and participate in this Plan beginning as of the next
Enrollment Date, provided the Board has consented to such Designated
Subsidiary's participation. A Designated Subsidiary may withdraw from the Plan
as of any Enrollment Date by giving written notice to the Board, and such notice
must be received by the Board at least 30 days prior to such Enrollment Date.
30. NO GUARANTEE OF INTERESTS OR TAX TREATMENT. Neither the Committee nor
------------------------------------------
the Company guarantees the Common Stock from loss or depreciation. Neither the
Committee nor the Company guarantees favorable tax treatment for the purchase of
Shares hereunder.
31. PAYMENT OF EXPENSES. All expenses incident to the administration,
-------------------
termination, or protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Company.
IN WITNESS WHEREOF, this Employee Stock Purchase Plan has been executed
effective this _______ day of ___________________________, 1998.
OAO TECHNOLOGY SOLUTIONS, INC.
ATTEST: By: ____________________________________
_____________________________ Its_________________________________
Secretary
A-9
<PAGE>
EXHIBIT A
---------
OAO TECHNOLOGY SOLUTIONS, INC.
------------------------------
EMPLOYEE STOCK PURCHASE PLAN
----------------------------
SUBSCRIPTION AGREEMENT
----------------------
I, ____________________________________, have read the attached prospectus
explanation of the OAO Technology Solutions, Inc. Employee Stock Purchase Plan
(the "Plan"). I have decided (check one):
_____ NOT to participate.
_____ TO PARTICIPATE. I wish to purchase that number of shares of OAO
Technology Solutions, Inc. Common Stock, $.01 par value (the
"Shares"), that can be purchased with ______% of my
Compensation/1/ (select the percentage of your compensation
from 1 to 15, in increments of 1, that you elect to
contribute).
In order to pay for the Shares that I have elected to purchase, I hereby
authorize my Employer to deduct the percentage of my Compensation that I
specified above from my pay each pay period while this election is in effect.
I understand that said payroll deductions shall be accumulated for the
purchase of the Shares at the applicable purchase price determined in accordance
with the Plan. I further understand that, except as otherwise set forth in the
Plan, Shares will be purchased for me automatically on the Exercise Date of the
Offering Period unless I otherwise withdraw from the Offering Period or the
Plan.
I have received a copy of OAO Technology Solutions, Inc.'s most recent
prospectus that describes the Plan and a copy of the complete Plan. I
understand that my participation in the Plan is in all respects subject to the
terms of the Plan.
I hereby agree to be bound by the terms of the Plan. The effectiveness of
this Subscription Agreement is dependent upon my eligibility to participate in
the Plan.
Beneficiary Designation. In the event of my death, I hereby designate the
-----------------------
following as my beneficiary to receive all payments and Shares due me and not
yet paid or issued under the Plan, pursuant to Paragraph 12 of the Plan:
_____________________________________________________________
_____________________________________________________________
Name and Address of Participant:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
Signature: __________________________________________________
Date: __________________________________________________
___________________
/1/ Please refer to the Plan document for definitions of capitalized words
that are not defined in this Subscription Agreement.
A-10
<PAGE>
EXHIBIT B
---------
OAO TECHNOLOGY SOLUTIONS, INC.
------------------------------
EMPLOYEE STOCK PURCHASE PLAN
----------------------------
NOTICE OF WITHDRAWAL
--------------------
The undersigned Participant/1/ in the Offering Period of the OAO Technology
Solutions, Inc. Employee Stock Purchase Plan (the "Plan") which began on
___________________________, ______ (the "Enrollment Date") hereby notifies the
Committee that effective on the later of _________________________, 19_____ (the
"Withdrawal Date") or the date this form is received by the Committee, he or she
withdraws from the Offering Period.
The undersigned hereby directs OAO Technology Solutions, Inc. (the "Company") to
pay to the undersigned, as promptly as possible following the Withdrawal Date,
all the payroll deductions credited to his or her Payroll Deduction Account with
respect to such Offering Period. The undersigned understands and agrees that by
withdrawing from the Offering Period no further payroll deductions will be made
for the purchase of shares in such Offering Period.
Name and Address of Participant:
______________________________________________________________
______________________________________________________________
______________________________________________________________
Signature: _______________________________________
Date: _______________________________________
_______________________
/1/ Please refer to the Plan document for definitions of capitalized words
that are not defined in this Notice of Withdrawal.
A-11
<PAGE>
APPENDIX B
AMENDED AND RESTATED OAO TECHNOLOGY SOLUTIONS, INC.
1996 EQUITY COMPENSATION PLAN
PURPOSE OF THE 1996 PLAN
The 1996 Plan was created to assist the Company in retaining and attracting
key employees, non-employee directors and independent advisors who perform
services for the Company or its subsidiaries (collectively, the "Participants")
by offering such Participants a proprietary interest in the Company.
SHARES SUBJECT TO THE 1996 PLAN
Subject to adjustment in certain circumstances as discussed below, the 1996
Plan authorizes the issuance of up to 3,200,000 shares of Common Stock. If and
to the extent options or stock appreciation rights granted under the 1996 Plan
terminate, expire or are canceled without being exercised, or if a restricted
stock award or performance unit is forfeited, the shares subject to such option,
stock appreciation right, restricted stock award or performance unit will again
be available for purposes of the 1996 Plan. Of the 3,200,000 authorized shares,
as of April 9, 1998, 2,344,000 shares of Common Stock are subject to outstanding
options and 688,000 shares of Common Stock remain available for issuance upon
the exercise of options to be granted under the 1996 Plan. The closing price of
the Company's Common Stock on the Nasdaq National Market on April 9, 1998 was
$8.25 per share.
ADMINISTRATION OF THE 1996 PLAN
The 1996 Plan is administered by the Compensation Committee, which is
currently composed of Messrs. Foster and Lehman and Ms. Burke. The Compensation
Committee currently satisfies the requirement of section 162(m) of the Code that
grants of options, stock appreciation rights, and performance units and awards
of restricted stock made under the 1996 Plan be approved by a committee
appointed by the Board consisting of not less than two persons who are "outside
directors."
The Compensation Committee is authorized to determine, from time to time,
the persons to whom awards or grants will be made, and the term, exercise price,
settlement terms, forfeiture provisions and other terms and conditions of each
award or grant. The Compensation Committee has the power to establish and
waive, in its discretion, vesting provisions for awards or grants.
ELIGIBILITY FOR PARTICIPATION AND GRANTS
Employees (including employees who are also officers or directors), non-
employee directors and eligible independent advisors of the Company or of any
subsidiary are eligible to receive grants under the 1996 Plan. As of April 9,
1998, there were three executive officers, three non-employee directors, and
approximately 1,550 employees and 75 eligible independent contractors considered
eligible to participate in the 1996 Plan
Grants under the 1996 Plan may consist of incentive stock options, non-
qualified stock options, restricted stock awards, stock appreciation rights or
performance units (hereinafter collectively referred to as "Grants"). All
Grants are subject to the terms and conditions set forth in the 1996 Plan and to
those other terms and conditions consistent with the 1996 Plan as the
Compensation Committee deems appropriate and as are specified in writing by the
Compensation Committee. During the term of the 1996 Plan, no Participant may
receive Grants in the aggregate for more than 1,600,000 shares of Common Stock.
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<PAGE>
GRANTING OF OPTIONS
The Compensation Committee may grant options qualifying as incentive stock
options ("ISOs") within the meaning of section 422 of the Code to Participants
who are employees of the Company and/or other stock options ("NQSOs") to any
Participant. Such grants are made in accordance with the terms and conditions
set forth in the 1996 Plan and grants to employees may be made in any
combination of ISOs or NQSOs (hereinafter referred to collectively as "Stock
Options").
The exercise price of Common Stock subject to Stock Options is determined
by the Compensation Committee at the time of grant, provided, however, that the
exercise price per share for an ISO may not be less than 100% of the fair market
value of the Common Stock at the time of grant. Further, an ISO granted to a
Participant who owns stock having more than 10% of the voting power of the
Company or its subsidiaries must have an exercise price of not less than 110% of
the fair market value of the Common Stock on the date of grant. The 1996 Plan
provides that the aggregate fair market value (determined as of the time an ISO
is granted) of the shares with respect to which ISOs are exercisable for the
first time by a Participant during any calendar year, under the 1996 Plan and
any other ISO plan of the Company or any parent or subsidiary of the Company,
cannot exceed $100,000.
The term of any Stock Option granted under the 1996 Plan may not exceed ten
years from the date of the Grant. An ISO granted to a Participant who owns
stock having more than 10% of the voting power of the Company or its
subsidiaries shall have an exercise period not greater than five years. Stock
Options will become exercisable in such installments and on such dates as the
Compensation Committee may specify. Unless otherwise determined by the
Compensation Committee at or after grant, any Stock Option held by an individual
who dies while employed by the Company or any subsidiary, or whose employment
with the Company and all subsidiaries is terminated for any reason, prior to the
expiration date of such option, will generally remain exercisable by the former
employee or his personal representative, to the extent such Stock Option was
vested and exercisable on the date of death or termination of employment, for a
period of one year in the event of an individual's death or disability or for a
period of 90 days following an employee's termination of employment for any
other reason. However, in the event of termination of employment for cause all
Stock Options held by the Participant shall immediately terminate at the date of
termination, the Participant shall forfeit all shares underlying any exercised
portion of an Option for which the Company has not yet delivered the share
certificates upon refund by the Company of the exercise price paid by the
Participant for such shares, and the Participant shall pay to the Company an
amount equal to any option gain realized by the Participant from exercising all
or a portion of an Option within the two-year period prior such termination of
employment for cause.
The exercise price is payable in cash, by delivering shares of Common Stock
already owned by the Participant and having a fair market value on the date of
exercise equal to the exercise price, or with a combination of cash and shares.
Shares of Common Stock previously acquired by a Participant which are tendered
in payment of the exercise price may be subject to certain holding periods and
other requirements as set forth in the 1996 Plan. The Company also may accept
such other method of payment as the Compensation Committee may approve,
including a "cashless exercise" of a Stock Option, which may be effected by a
Participant by delivering a properly executed notice of exercise of the Stock
Option to the Company and a securities broker, with irrevocable instructions to
the securities broker promptly to deliver to the Company the amount of sale
proceeds necessary to pay the exercise price of the Stock Option. Shares of
Common Stock may not be issued or transferred upon exercise of the Stock Option
until the exercise price is paid and the withholding obligation, if any, is
fully satisfied.
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<PAGE>
RESTRICTED STOCK GRANTS
The Compensation Committee may award shares of Common Stock under a Grant
(a "Restricted Stock Grant") pursuant to the 1996 Plan to employees and eligible
independent advisors. Shares of Common Stock issued pursuant to a Restricted
Stock Grant may be issued for consideration or for no consideration. If a
Participant's employment or other service to the Company terminates during the
period, if any, designated in writing by the Compensation Committee at the time
of the Restricted Stock Grant during which the transfer of the shares is
restricted (the "Restriction Period"), the Restricted Stock Grant terminates
with respect to all shares covered by the Restricted Stock Grant as to which the
restrictions on transfer have not lapsed. During the Restriction Period, a
Participant may not sell, assign, transfer, pledge or otherwise dispose of the
shares of Common Stock to which such Restriction Period applies. All
restrictions imposed under the Restricted Stock Grant lapse upon the expiration
of the applicable Restriction Period. In addition, the Compensation Committee
may determine as to any or all Restricted Stock Grants that all restrictions
will lapse based on service, performance and/or such other factors or criteria
as the Compensation Committee may determine, in its sole discretion.
STOCK APPRECIATION RIGHTS
The Compensation Committee may make a Grant of stock appreciation rights
("SARs") to employees and eligible independent advisors in tandem with any Stock
Option for all or a portion of the applicable Stock Option, either at the time
the Stock Option is granted or at any time thereafter while the Stock Option
remains outstanding. In the case of an ISO, SARs may be granted only at the
time of the grant of the ISO. The number of SARs granted to a Participant that
are exercisable during any given period of time may not exceed the number of
shares of Common Stock that the Participant may purchase upon the exercise of
the related Stock Option during such period of time. Upon the exercise of a
Stock Option, the SARs relating to the Common Stock covered by such Stock Option
terminate. Upon the exercise of SARs, the related Stock Option terminates to
the extent of an equal number of shares of Common Stock.
Upon a Participant's exercise of some or all of his or her SARs, the
Participant receives in settlement of such SARs an amount equal to the value of
the stock appreciation for the number of SARs exercised, payable in cash, Common
Stock or a combination thereof. The stock appreciation for a SAR is the
difference between the exercise price specified for the related Stock Option and
the fair market value per share of the underlying Common Stock on the date of
exercise of the SAR. The 1996 Plan provides that the exercise price of a SAR is
the exercise price of the related Stock Option or, if the SAR is granted after
the Stock Option, the fair market value of a share of Common Stock as of the
date of the Grant of the SAR.
A SAR is exercisable only during the period when the Stock Option to which
it relates is also exercisable, provided, however, that no SAR may be exercised
for cash by an officer or director of the Company who is subject to Section 16
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), except
in accordance with Rule 16b-3 under the Exchange Act..
PERFORMANCE UNITS
The Compensation Committee may grant units ("Performance Units") to an
employee or independent advisor representing the right of such Participant to
receive an amount based on the value of the Performance Unit if the performance
goals established by the Compensation Committee are met. A Performance Unit may
be based on one or more of the following criteria: stock price, earnings per
share, net earnings, operating earnings, return on assets, stockholder return,
return on equity, growth in assets, unit volume, sales, market share, or
strategic business criteria consisting of one or more objectives based on
meeting specific revenue goals, market penetration goals, geographic business
expansion goals, cost targets or goals relating to
B-3
<PAGE>
acquisitions or divestitures. At the time of grant, the Compensation Committee
shall establish the performance period during which the performance will be
measured, the performance goals applicable to the Performance Units and any
other conditions that the Compensation Committee deems appropriate. At the end
of each performance period, the Compensation Committee shall determine to what
extent the performance goals have been met and the amount, if any, to be paid
with respect to the Performance Units. Payments may be made in cash, in Common
Stock, or in a combination of the two, as determined by the Compensation
Committee. If Performance Units measured with respect to the fair market value
of the Company Stock are granted, not more than 1,600,000 shares of Common Stock
may be granted to a Participant for any Performance Period. If Performance Units
are measured with respect to other criteria, the maximum amount that may be paid
to a Participant with respect to a Performance Period is $1,000,000.
TERMINATION OF THE 1996 PLAN; AMENDMENT OF OPTIONS OF THE EQUITY PLAN
The Board may amend or terminate the 1996 Plan at any time, provided,
however, that no amendment or termination may be made which would impair the
rights of a Participant without the Participant's consent. Further, the Board
may not amend the 1996 Plan without stockholder approval if such approval is
required pursuant to Section 162(m) of the Code. The 1996 Plan will terminate on
April 2, 2006, unless terminated earlier by the Board.
A termination or amendment of the 1996 Plan that occurs after a Grant is
made will not result in the termination or amendment of the Grant unless the
Participant consents or unless the Compensation Committee revokes a Grant, the
terms of which are contrary to applicable law. The termination of the 1996 Plan
will not impair the power and authority of the Compensation Committee with
respect to outstanding Grants.
ADJUSTMENT PROVISIONS; REORGANIZATION OF THE COMPANY
If there is any change in the number or kind of shares of Company Stock
outstanding (i) by reason of a stock dividend, spin off, recapitalization, stock
split, or combination or exchange of shares, (ii) by reason of a merger,
reorganization or consolidation in which the Company is the surviving
corporation, (iii) by reason of a reclassification or change in par value, or
(iv) by reason of any other extraordinary or unusual event affecting the
outstanding Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spin off or the Company's payment of an
extraordinary dividend or distribution, then unless such event or change results
in the termination of all outstanding awards under the 1996 Plan, the Committee
shall preserve the value of the outstanding awards by adjusting the maximum
number and class of shares issuable under the 1996 Plan to reflect the effect of
such event or change in the Company's capital structure, and by making
appropriate adjustments to the number and class of shares subject to an
outstanding award and/or the option price of each outstanding Option and Stock
Appreciation Right, except that any fractional shares resulting from such
adjustments shall be eliminated.
In the event of a Reorganization (as defined in the 1996 Plan) where the
Company is not the surviving corporation or survives only as a subsidiary of
another corporation, unless the Compensation Committee determines otherwise, all
outstanding Stock Options and Stock Appreciation Rights that are not exercised
shall be assumed by, or replaced with comparable options or rights by, the
surviving corporation. Notwithstanding the foregoing, the Compensation Committee
may require that Participants surrender outstanding Stock Options or SARs for a
payment in cash or Stock in an amount equal to the amount by which the then fair
market value of the shares of Company Stock subject to such Grant exceeds the
exercise price of the Stock Option or the base amount of the SAR, as applicable,
or may terminate any or all unexercised Stock Options and SARs after giving the
Participants an opportunity to exercise their outstanding Stock Options and
SARs. Notwithstanding anything in the 1996
B-4
<PAGE>
Plan to the contrary, in the event of a Reorganization, the Compensation
Committee shall not have the right to take any actions that would make the
Reorganization ineligible for pooling of interests accounting treatment or that
would make the Reorganization ineligible for desired tax treatment if, in the
absence of such right, the Reorganization would qualify for such treatment and
the Company intends to use such treatment with respect to the Reorganization.
FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a general description of the federal income tax
consequences relating to Stock Options, Stock Appreciation Rights, Restricted
Stock Grants and Performance Units under the 1996 Plan.
INCENTIVE STOCK OPTIONS
If the requirements regarding ISOs set forth in the 1996 Plan are met, ISOs
granted under the 1996 Plan will be afforded favorable federal income tax
treatment under the Code. The Participant will not recognize taxable income and
the Company will not be entitled to a deduction upon the grant of an ISO.
Moreover, the Participant will not recognize taxable income (except alternative
minimum taxable income, if applicable) and the Company will not be entitled to a
deduction upon the exercise by the Participant of an ISO, provided the
Participant was an employee of the Company or any of its subsidiary
corporations, as defined in section 424(f) of the Code, during the entire period
from the date of grant of the ISO until three months before the date of exercise
(increased to 12 months if employment ceased due to death or total and permanent
disability, or if the employee dies within a limited period of time following
termination of employment).
If the employment requirements described above are not met, the tax
consequences relating to NQSOs (discussed below) will apply.
If the Participant disposes of the shares acquired under an ISO after at
least two years following the date of grant of the ISO and at least one year
following the date of transfer of the shares to the Participant following
exercise of the ISO, the Participant will recognize a capital gain or loss equal
to the difference between the amount realized upon the disposition and the
exercise price. If the shares were held more than 12 months but not more than 18
months, any net capital gain will be taxed at a maximum rate of 28% (15% if the
individual is in the 15% bracket). If the shares were held more than 18 months,
any net capital gain is treated as long-term capital gain and will be taxed at
the rate of 20% (10% if the individual is in the 15% bracket). Any net capital
loss can only be used to offset up to $3,000 per year ($1,500 per year in the
case of a married individual filing separately) of ordinary income.
If the Participant makes a disqualifying disposition of the shares (that
is, disposes of the shares within two years after the date of grant of the ISO
or within one year after the transfer of the shares to the Participant), but all
other requirements of section 422 of the Code are met, the Participant will
generally recognize ordinary income upon disposition of the shares in an amount
equal to the lesser of (i) the fair market value of the shares on the date of
exercise minus the exercise price, or (ii) the amount realized on disposition
minus the exercise price. Disqualifying dispositions of shares may also,
depending upon the sales price, result in either long-term or short-term capital
gain or loss under the Code rules which govern other stock dispositions.
If the requirements of section 422 of the Code are not met, the Company
will be allowed a federal income tax deduction to the extent of the ordinary
income includible in the Participant's gross income in accordance with the
provisions of section 83 of the Code (and section 3402 of the Code, to the
extent applicable) and the regulations thereunder.
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<PAGE>
The use of shares of Common Stock received upon the exercise of an ISO to
pay the exercise price in connection with the exercise of other ISOs within
either the two-year or one-year holding periods described above will constitute
a disqualifying disposition of the shares so used which will result in income
(or loss) to the Participant and, to the extent of a recognized gain, a
deduction to the Company. If, however, these holding period requirements are met
and the number of shares received on the exercise does not exceed the number of
shares surrendered, the Participant will recognize no gain or loss with respect
to the surrendered shares, and will have the same basis and holding period with
respect to the newly acquired shares as with respect to the surrendered shares.
To the extent that the number of shares received exceeds the number surrendered,
the Participant's basis in such excess shares will equal the amount of cash paid
by the Participant upon the original exercise of the Stock Option, and the
Participant's holding period with respect to such excess shares will begin on
the date such shares are transferred to the Participant. The tax treatment
described above for shares newly received upon exercise is not affected by using
shares to pay the exercise price.
NON-QUALIFIED OPTIONS
All other Stock Options granted under the 1996 Plan are NQSOs and will not
qualify for any special tax benefits to the Participant. Under present Treasury
Regulations, the Company's Stock Options are not deemed to have a readily
ascertainable value. Accordingly, a Participant will not recognize any taxable
income at the time he or she is granted an NQSO and the Company will not be
entitled to a deduction upon the grant of an NQSO.
Generally, a Participant will recognize ordinary income at the time of
exercise of an NQSO, in an amount equal to the excess of the fair market value
of the shares at the time of such exercise over the exercise price.
The Company will be entitled to a deduction to the extent of the ordinary
income recognized by a Participant in accordance with the rules of section 83 of
the Code and the regulations thereunder. However, no deduction will generally
be allowed to the Company unless the Company deducts and withholds federal
income tax.
A Participant exercising an NQSO is subject to federal income tax on the
income recognized as a result of the exercise of an NQSO and federal income tax
must be withheld. The Compensation Committee, in its discretion, may permit the
Participant to elect to surrender or deliver shares otherwise issuable upon
exercise, or previously acquired shares, in order to satisfy the federal income
tax withholding, subject to certain restrictions set forth in the 1996 Plan.
Such an election will result in a disposition of the shares which are
surrendered or delivered, and an amount will be included in the Participant's
income equal to the excess of the fair market value of such shares over the
Participant's basis in such shares.
If the Participant pays the exercise price in cash, the basis of the shares
received by a Participant upon the exercise of an NQSO is the exercise price
paid plus the amount recognized by the Participant as income attributable to
such shares upon such exercise. If the exercise price is paid in cash, the
Participant's holding period for such shares will begin on the day after the
date on which the Participant realized income with respect to the transfer of
such Stock Option shares, i.e., generally the day after the exercise date. If
----
the shares are held more than 12 months but not more than 18 months, any net
capital gain realized by the Participant upon a subsequent disposition of any
such shares will be taxed at a maximum rate of 28% (15% if the individual is in
the 15% bracket). If the shares are held more than 18 months, any net capital
gain realized by the Participant upon a subsequent disposition of any such
shares will be taxed at the rate of 20% (10% if the individual is in the 15%
bracket). Any loss realized on a subsequent disposition, however, will be
treated as a capital loss and thus can only be used to offset up to $3,000 per
year ($1,500 in the case of a married individual filing separately) of ordinary
income.
B-6
<PAGE>
If the Participant surrenders shares to pay the exercise price, and the
number of shares received on the exercise does not exceed the number of shares
surrendered, the Participant will recognize no gain or loss with respect to the
surrendered shares, and will have the same basis and holding period with respect
to the newly acquired shares as with respect to the surrendered shares. To the
extent that the number of shares received exceeds the number surrendered, the
fair market value of such excess shares on the date of exercise, reduced by any
cash paid by the Participant upon such exercise, will be includible in the gross
income of the Participant. The Participant's basis in such excess shares will
equal the sum of the cash paid by the Participant upon the exercise of the Stock
Option plus any amount included in the Participant's gross income as a result of
the exercise of the Stock Option, and the Participant's holding period with
respect to such excess shares will begin on the day following the date of
exercise.
RESTRICTED STOCK
A Participant normally will not recognize taxable income upon the award of
a Restricted Stock Grant, and the Company will not be entitled to a deduction,
until such stock is transferable by the Participant or no longer subject to a
substantial risk of forfeiture for federal tax purposes, whichever occurs
earlier. When the Common Stock is either transferable or is no longer subject
to a substantial risk of forfeiture, the Participant will recognize ordinary
compensation income in an amount equal to the fair market value of the Common
Stock at that time less any consideration paid by the Participant for such
shares and the Company will be entitled to a deduction in the same amount. A
Participant may, however, elect to recognize ordinary compensation income in the
year the Restricted Stock Grant is awarded in an amount equal to the fair market
value of the Common Stock at that time less any consideration paid by the
Participant for such shares, determined without regard to the restrictions. In
this event, the Company will be entitled to a deduction in the same year,
provided the Company complies with the applicable withholding requirements for
federal tax purposes. Any gain or loss recognized by the Participant upon
subsequent disposition of the Common Stock will be capital gain or loss. If,
after making the election, any Common Stock subject to a Restricted Stock Grant
is forfeited, or if the market value declines during the Restriction Period, the
Participant is not entitled to any tax deduction or tax refund.
STOCK APPRECIATION RIGHTS
The Participant will not recognize any income upon the grant of a SAR.
Upon the exercise of a SAR, the Participant will recognize ordinary compensation
income in the amount of both the cash and the fair market value of the shares of
Common Stock received upon such exercise, and the Company is entitled to a
corresponding deduction, provided the Company complies with the applicable
withholding requirements for federal tax purposes. In the event that the
Participant receives shares of Common Stock upon the exercise of a SAR, the
shares so acquired will have a tax basis equal to their fair market value on the
date of transfer, and the holding period of the shares will commence on that
date for purposes of determining whether a subsequent disposition of the shares
will result in long-term or short-term capital gain or loss.
PERFORMANCE UNITS
The Participant will not recognize any income upon the grant of a
Performance Unit. At the time the Compensation Committee determines an amount,
if any, to be paid with respect to Performance Units, the Participant will
recognize ordinary compensation income in the amount of both the cash and the
fair market value of the shares of Common Stock authorized for payment by the
Compensation Committee, and the Company will be entitled to a corresponding
deduction, provided the Company complies with the applicable withholding
requirements for federal tax purposes. In the event that the Participant
receives shares of Common Stock upon the payment of a Performance Unit, the
shares so acquired will have a tax basis equal to their fair market value on the
date of transfer, and the holding period of the shares will commence
B-7
<PAGE>
on that date for purposes of determining whether a subsequent disposition of the
shares will result in long-term or short-term capital gain or loss.
TAX WITHHOLDING
No later than the date that an amount becomes includible in a Participant's
gross income for federal tax purposes in connection with a Grant under the 1996
Plan, a Participant who is an employee is required to pay the Company or make
arrangements satisfactory to the Compensation Committee for the payment of any
federal, state or local taxes required to be withheld. Unless the Compensation
Committee determines otherwise, withholding obligations may be satisfied with
shares of Common Stock, including shares of Common Stock received in connection
with the grant under the 1996 Plan. To the extent permitted by law, the Company
may deduct any required withholding from any payment of any kind otherwise due
to the Participant. The obligations of the Company under the 1996 Plan are
conditional upon the payment or arrangement for such payment of any required
withholding.
OTHER TAX CONSIDERATIONS
The 1996 Plan is not qualified under section 401(a) of the Code and is not
subject to the provisions of the Employee Retirement Income Security Act of
1984, as amended. The comments set forth in the above paragraphs are only a
summary of certain of the federal income tax consequences relating to the 1996
Plan. No consideration has been given to the effects of state, local and other
tax laws on the Participant or the Company.
B-8
<PAGE>
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P R O X Y
OAO TECHNOLOGY SOLUTIONS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I hereby constitute and appoint William R. Hill, Samuel D. Horgan and
Catherine A. Rich, and each of them, my true and lawful agents and proxies
with full power of substitution in each, to vote all shares held of record by
me as specified on the reverse side and, in their discretion, on all other
matters which may properly come before the 1998 Annual Meeting of Stockholders
of OAO Technology Solutions, Inc. to be held on May 21, 1998, and at any
adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL NOMINEES TO THE BOARD OF DIRECTORS, FOR THE ADOPTION OF
THE EMPLOYEE STOCK PURCHASE PLAN AND FOR THE ADOPTION OF THE AMENDED AND
RESTATED OAO TECHNOLOGY SOLUTIONS, INC. 1996 EQUITY COMPENSATION PLAN, AND AS
THE PROXIES MAY DETERMINE, IN THEIR DISCRETION WITH REGARD TO ANY OTHER MATTER
PROPERLY BROUGHT BEFORE THE MEETING.
PLEASE MARK, SIGN AND DATE THE PROXY CARD ON THE REVERSE SIDE
AND RETURN PROMPTLY USING THE ENCLOSED ENVELOPE.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE Please mark your
FOR PROPOSALS 1, 2 AND 3. [X] votes as indicated
in this example
FOR WITHHELD
FOR ALL
1. ELECTION OF DIRECTORS [_] [_]
Nominees:
Jerry L. Johnson Frank B. Foster, III
Cecile D. Barker John Lehman
William R. Hill Thomas C. Lynch
Yvonne Brathwaite Burke
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL WHILE VOTING FOR THE
REMAINDER, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST.
2. EMPLOYEE STOCK PURCHASE PLAN FOR WITHHELD ABSTAIN
[_] [_] [_]
3. AMENDED AND RESTATED 1996 FOR WITHHELD ABSTAIN
EQUITY COMPENSATION PLAN [_] [_] [_]
SIGNATURE(S) ______________ ______________ DATE: _________________________
THIS PROXY MUST BE SIGNED EXACTLY AS NAME APPEARS HEREIN. Joint tenants must
both sign. When signing as attorney, executor, administrator, trustee or
guardian, or for a corporation or partnership, please give full title.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
- --------------------------------------------------------------------------------
Your Proxy vote is important,
regardless of the number of shares you own.
Whether or not you plan to attend the meeting in person, please complete, date
and sign the above Proxy card and return it without delay in the enclosed
envelope.
[LOGO OF OAO TECHNOLOGY SOLUTIONS APPEARS HERE]
- --------------------------------------------------------------------------------
<PAGE>
AMENDED AND RESTATED OAO TECHNOLOGY SOLUTIONS, INC.
1996 EQUITY COMPENSATION PLAN
The purpose of the Amended and Restated OAO Technology Solutions, Inc. 1996
Equity Compensation Plan (the "Plan") is to provide (i) designated employees of
OAO Technology Solutions, Inc. (the "Company") and its subsidiaries, (ii)
certain Key Advisors and advisors who perform services for the Company or its
subsidiaries and (iii) non-employee members of the Board of Directors of the
Company (the "Board") with the opportunity to receive grants of incentive stock
options, nonqualified stock options, stock appreciation rights, restricted stock
and performance units. The Company believes that the Plan will encourage the
participants to contribute materially to the growth of the Company, thereby
benefiting the Company's shareholders, and will align the economic interests of
the participants with those of the shareholders.
1. Administration
--------------
(a) Committee. The Plan shall be administered and interpreted by a
---------
committee appointed by the Board (the "Committee"). Prior to the effective date
of an initial public offering of the Company's stock as described in Section
22(b)(a "Public Offering"), the Board may exercise any power or authority of the
Committee under the Plan and, in such case, references to the Committee
hereunder, as they relate to Plan administration, shall be deemed to include the
Board as a whole. After a Public Offering, the Committee may consist of two or
more persons appointed by the Board, all of whom may be "outside directors" as
defined under section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code") and related Treasury regulations and may be "non-employee
directors" as defined under Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act") unless grants authorized by such non-
employee directors are specifically approved by the Board.
(b) Committee Authority. The Committee shall have the sole authority
-------------------
to (i) determine the individuals to whom grants shall be made under the Plan,
(ii) determine the type, size and terms of the grants to be made to each such
individual, (iii) determine the time when the grants will be made and the
duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability and (iv) deal
with any other matters arising under the Plan.
(c) Committee Determinations. The Committee shall have full power
------------------------
and authority to administer and interpret the Plan, to make factual
determinations and to adopt or amend such rules, regulations, agreements and
instruments for implementing the Plan and for the conduct of its business as it
deems necessary or advisable, in its sole discretion. The Committee's
interpretations of the Plan and all determinations made by the Committee
pursuant to the powers vested in it hereunder shall be conclusive and binding on
all persons having any interest in the Plan or in any awards granted hereunder.
All powers of the Committee shall be executed in its sole discretion, in the
best interest of the Company, not as a fiduciary, and in keeping with the
objectives of the Plan and need not be uniform as to similarly situated
-1-
<PAGE>
individuals.
2. Grants
------
Awards under the Plan may consist of grants of incentive stock options as
described in Section 5 ("Incentive Stock Options"), nonqualified stock options
as described in Section 5 ("Nonqualified Stock Options")(Incentive Stock Options
and Nonqualified Stock Options are collectively referred to as "Options"),
restricted stock as described in Section 6 (Restricted Stock"), stock
appreciation rights as described in Section 7 ("SARs"), and performance units as
described in Section 8 ("Performance Units") (hereinafter collectively referred
to as "Grants"). All Grants shall be subject to the terms and conditions set
forth herein and to such other terms and conditions consistent with this Plan as
the Committee deems appropriate and as are specified in writing by the Committee
to the individual in a grant instrument (the "Grant Instrument") or an amendment
to the Grant Instrument. The Committee shall approve the form and provisions of
each Grant Instrument. Grants under a particular Section of the Plan need not
be uniform as among the grantees.
3. Shares Subject to the Plan
--------------------------
(a) Shares Authorized. Subject to the adjustment specified below, the
-----------------
aggregate number of shares of common stock of the Company ("Company Stock") that
may be issued or transferred under the Plan is 3,200,000 shares. After a Public
Offering, the maximum aggregate number of shares of Company Stock that shall be
subject to Grants made under the Plan to any individual during any calendar year
shall be 1,600,000 shares. The shares may be authorized but unissued shares of
Company Stock or reacquired shares of Company Stock, including shares purchased
by the Company on the open market for purposes of the Plan. If and to the
extent Options or SARs granted under the Plan terminate, expire, or are
canceled, forfeited, exchanged or surrendered without having been exercised, or
if any shares of Restricted Stock or Performance Units are forfeited, the shares
subject to such Grants shall again be available for purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind of
-----------
shares of Company Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation in which the Company is the
surviving corporation, (iii) by reason of a reclassification or change in par
value, or (iv) by reason of any other extraordinary or unusual event affecting
the outstanding Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for Grants, the maximum number of shares of Company Stock that
any individual participating in the Plan may be granted in any year, the number
of shares covered by outstanding Grants, the kind of shares issued under the
Plan, and the price per share or the applicable market value of such Grants
shall be appropriately adjusted by the Committee to reflect any increase or
decrease in the number of, or change in the kind or value of, issued shares of
Company Stock to preclude, to the extent practicable, the
-2-
<PAGE>
enlargement or dilution of rights and benefits under such Grants; provided,
however, that any fractional shares resulting from such adjustment shall be
eliminated. Any adjustments determined by the Committee shall be final, binding
and conclusive.
4. Eligibility for Participation
-----------------------------
(a) Eligible Persons. All employees of the Company and its
----------------
subsidiaries ("Employees"), including Employees who are officers or members of
the Board, and members of the Board who are not Employees ("Non-Employee
Directors") shall be eligible to participate in the Plan. Key Advisors and
advisors who perform services to the Company or any of its subsidiaries ("Key
Advisors") shall be eligible to participate in the Plan if the Key Advisors
render bona fide services and such services are not in connection with the offer
or sale of securities in a capital-raising transaction.
(b) Selection of Grantees. The Committee shall select the Employees,
---------------------
Non-Employee Directors and Key Advisors to receive Grants and shall determine
the number of shares of Company Stock subject to a particular Grant in such
manner as the Committee determines. Employees, Key Advisors and Non-Employee
Directors who receive Grants under this Plan shall hereinafter be referred to as
"Grantees".
5. Granting of Options
-------------------
(a) Number of Shares. The Committee shall determine the number of
----------------
shares of Company Stock that will be subject to each Grant of Options to
Employees, Non-Employee Directors and Key Advisors.
(b) Type of Option and Price.
------------------------
(i) The Committee may grant Incentive Stock Options that are
intended to qualify as "incentive stock options" within the meaning of section
422 of the Code or Nonqualified Stock Options that are not intended so to
qualify or any combination of Incentive Stock Options and Nonqualified Stock
Options, all in accordance with the terms and conditions set forth herein.
Incentive Stock Options may be granted only to Employees. Nonqualified Stock
Options may be granted to Employees, Non-Employee Directors and Key Advisors.
(ii) The purchase price (the "Exercise Price") of Company Stock
subject to an Option shall be determined by the Committee and may be equal to,
greater than, or less than the Fair Market Value (as defined below) of a share
of Company Stock on the date the Option is granted; provided, however, that (x)
the Exercise Price of an Incentive Stock Option shall be equal to, or greater
than, the Fair Market Value of a share of Company Stock on the date the
Incentive Stock Option is granted and (y) an Incentive Stock Option may not be
granted to an Employee who, at the time of grant, owns stock possessing more
than 10 percent of the total combined voting power of all classes of stock of
the Company or any parent or subsidiary of the Company, unless the Exercise
Price per share is not less than 110% of the Fair Market Value of Company Stock
on the date of grant.
-3-
<PAGE>
(iii) If the Company Stock is publicly traded, then the Fair
Market Value per share shall be determined as follows: (x) if the principal
trading market for the Company Stock is a national securities exchange or the
Nasdaq National Market, the last reported sale price thereof on the latest
preceding date upon which a sale was reported, or (y) if the Company Stock is
not principally traded on such exchange or market, the mean between the last
reported "bid" and "asked" prices of Company Stock on the latest preceding date,
as reported on Nasdaq or, if not so reported, as reported by the National Daily
Quotation Bureau, Inc. or as reported in a customary financial reporting
service, as applicable and as the Committee determines. If the Company Stock is
not publicly traded or, if publicly traded, is not subject to reported
transactions or "bid" or "asked" quotations as set forth above, the Fair Market
Value per share shall be as determined by the Committee.
(c) Option Term. The Committee shall determine the term of each
-----------
Option. The term of any Option shall not exceed ten years from the date of
grant. However, an Incentive Stock Option that is granted to an Employee who,
at the time of grant, owns stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company, or any parent or
subsidiary of the Company, may not have a term that exceeds five years from the
date of grant.
(d) Exercisability of Options. Options shall become exercisable in
-------------------------
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Committee and specified in the Grant Instrument or an
amendment to the Grant Instrument. The Committee may accelerate the
exercisability of any or all outstanding Options at any time for any reason.
(e) Termination of Employment, Disability or Death.
----------------------------------------------
(i) Except as provided below, an Option may only be exercised
while the Grantee is employed by the Company as an Employee, Key Advisor or
member of the Board. In the event that a Grantee ceases to be employed by the
Company for any reason other than a "disability", death or "termination for
cause", any Option which is otherwise exercisable by the Grantee shall terminate
unless exercised within 90 days after the date on which the Grantee ceases to be
employed by the Company (or within such other period of time as may be specified
by the Committee), but in any event no later than the date of expiration of the
Option term. Any of the Grantee's Options that are not otherwise exercisable as
of the date on which the Grantee ceases to be employed by the Company shall
terminate as of such date.
(ii) In the event the Grantee ceases to be employed by the
Company on account of a "termination for cause" by the Company, any Option held
by the Grantee shall terminate as of the date the Grantee ceases to be employed
by the Company.
(iii) In the event the Grantee ceases to be employed by the
Company because the Grantee is "disabled", any Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within one year
after the date on which the Grantee ceases to be
-4-
<PAGE>
employed by the Company (or within such other period of time as may be specified
by the Committee), but in any event no later than the date of expiration of the
Option term. Any of the Grantee's Options which are not otherwise exercisable as
of the date on which the Grantee ceases to be employed by the Company shall
terminate as of such date.
(iv) If the Grantee dies while employed by the Company or
within 90 days after the date on which the Grantee ceases to be employed on
account of a termination of employment specified in Section 5(e)(i) above (or
within such other period of time as may be specified by the Committee), any
Option that is otherwise exercisable by the Grantee shall terminate unless
exercised within one year after the date on which the Grantee ceases to be
employed by the Company (or within such other period of time as may be specified
by the Committee), but in any event no later than the date of expiration of the
Option term. Any of the Grantee's Options that are not otherwise exercisable as
of the date on which the Grantee ceases to be employed by the Company shall
terminate as of such date.
(v) For purposes of Sections 5(e), 6, 7, 8 and 13:
(A) "Company," when used in the phrase "employed by the
Company," shall mean the Company and its parent and subsidiary
corporations.
(B) "Employed by the Company" shall mean employment or service
as an Employee, Key Advisor or member of the Board (so that, for purposes
of exercising Options and SARs and satisfying conditions with respect to
Restricted Stock and Performance Units, a Grantee shall not be considered
to have terminated employment or service until the Grantee ceases to be an
Employee, Key Advisor and member of the Board), unless the Committee
determines otherwise.
(C) "Disability" shall mean a Grantee's becoming disabled within
the meaning of section 22(e)(3) of the Code.
(D) "Termination for cause" shall mean, except to the extent specified
otherwise by the Committee, a finding by the Committee that the Grantee has
breached his or her employment, service, noncompetition, nonsolicitation or
other similar contract with the Company, or has been engaged in disloyalty to
the Company, including, without limitation, fraud, embezzlement, theft,
commission of a felony or dishonesty in the course of his or her employment or
service, or has disclosed trade secrets or confidential information of the
Company to persons not entitled to receive such information. In the event a
Grantee's employment is terminated for cause, in addition to the immediate
termination of all Grants, the Grantee shall automatically forfeit all shares
underlying any exercised portion of an Option for which the Company has not yet
delivered the share certificates, upon refund by the Company of the Exercise
Price paid by the Grantee for such shares, and any option gain realized by the
Grantee from exercising all or a portion of an Option within the two-year period
prior to the event shall be paid by the Grantee to the Company.
(f) Exercise of Options. A Grantee may exercise an Option that has
-------------------
become
-5-
<PAGE>
exercisable, in whole or in part, by delivering a notice of exercise to the
Company with payment of the Exercise Price. The Grantee shall pay the Exercise
Price for an Option as specified by the Committee (x) in cash, (y) with the
approval of the Committee, by delivering shares of Company Stock owned by the
Grantee for the period necessary to avoid a charge to the Company's earnings for
financial reporting purposes (including Company Stock acquired in connection
with the exercise of an Option, subject to such restrictions as the Committee
deems appropriate) and having a Fair Market Value on the date of exercise equal
to the Exercise Price or (z) by such other method as the Committee may approve,
including after a Public Offering payment through a broker in accordance with
procedures permitted by Regulation T of the Federal Reserve Board. Shares of
Company Stock used to exercise an Option shall have been held by the Grantee for
the requisite period of time to avoid adverse accounting consequences to the
Company with respect to the Option. The Grantee shall pay the Exercise Price and
the amount of any withholding tax due (pursuant to Section 9) at the time of
exercise.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option
---------------------------------
shall provide that, if the aggregate Fair Market Value of the stock on the date
of the grant with respect to which Incentive Stock Options are exercisable for
the first time by a Grantee during any calendar year, under the Plan or any
other stock option plan of the Company or a parent or subsidiary, exceeds
$100,000, then the option, as to the excess, shall be treated as a Nonqualified
Stock Option. An Incentive Stock Option shall not be granted to any person who
is not an Employee of the Company or a parent or subsidiary (within the meaning
of section 424(f) of the Code).
6. Restricted Stock Grants
-----------------------
The Committee may issue or transfer shares of Company Stock to an Employee
or Key Advisor under a Grant of Restricted Stock, upon such terms as the
Committee deems appropriate. The following provisions are applicable to
Restricted Stock:
(a) General Requirements. Shares of Company Stock issued or
--------------------
transferred pursuant to Restricted Stock Grants may be issued or transferred for
consideration or for no consideration, as determined by the Committee. The
Committee may establish conditions under which restrictions on shares of
Restricted Stock shall lapse over a period of time or according to such other
criteria as the Committee deems appropriate. The period of time during which
the Restricted Stock will remain subject to restrictions will be designated in
the Grant Instrument as the "Restriction Period."
(b) Number of Shares. The Committee shall determine the number of
----------------
shares of Company Stock to be issued or transferred pursuant to a Restricted
Stock Grant and the restrictions applicable to such shares.
(c) Requirement of Employment. If the Grantee ceases to be employed
-------------------------
by the Company (as defined in Section 5(e)) during a period designated in the
Grant Instrument as the Restriction Period, or if other specified conditions are
not met, the Restricted Stock Grant shall terminate as to all shares covered by
the Grant as to which the restrictions have not lapsed, and
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<PAGE>
those shares of Company Stock must be immediately returned to the Company. The
Committee may, however, provide for complete or partial exceptions to this
requirement as it deems appropriate.
(d) Restrictions on Transfer and Legend on Stock Certificate. During
--------------------------------------------------------
the Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Restricted Stock except to a Successor
Grantee under Section 10(a). Each certificate for a share of Restricted Stock
shall contain a legend giving appropriate notice of the restrictions in the
Grant. The Grantee shall be entitled to have the legend removed from the stock
certificate covering the shares subject to restrictions when all restrictions on
such shares have lapsed. The Committee may determine that the Company will not
issue certificates for shares of Restricted Stock until all restrictions on such
shares have lapsed, or that the Company will retain possession of certificates
for shares of Restricted Stock until all restrictions on such shares have
lapsed.
(e) Right to Vote and to Receive Dividends. Unless the Committee
--------------------------------------
determines otherwise, during the Restriction Period, the Grantee shall have the
right to vote shares of Restricted Stock and to receive any dividends or other
distributions paid on such shares, subject to any restrictions deemed
appropriate by the Committee.
(f) Lapse of Restrictions. All restrictions imposed on Restricted
---------------------
Stock shall lapse upon the expiration of the applicable Restriction Period and
the satisfaction of all conditions imposed by the Committee. The Committee may
determine, as to any or all Restricted Stock Grants, that the restrictions shall
lapse without regard to any Restriction Period.
7. Stock Appreciation Rights
-------------------------
(a) General Requirements. The Committee may grant stock appreciation
--------------------
rights ("SARs") to an Employee or Key Advisor separately or in tandem with any
Option (for all or a portion of the applicable Option). Tandem SARs may be
granted either at the time the Option is granted or at any time thereafter while
the Option remains outstanding; provided, however, that, in the case of an
Incentive Stock Option, SARs may be granted only at the time of the Grant of the
Incentive Stock Option. The Committee shall establish the base amount of the
SAR at the time the SAR is granted. Unless the Committee determines otherwise,
the base amount of each SAR shall be equal to the per share Exercise Price of
the related Option or, if there is no related Option, the Fair Market Value of a
share of Company Stock as of the date of Grant of the SAR.
(b) Tandem SARs. In the case of tandem SARs, the number of SARs
-----------
granted to a Grantee that shall be exercisable during a specified period shall
not exceed the number of shares of Company Stock that the Grantee may purchase
upon the exercise of the related Option during such period. Upon the exercise
of an Option, the SARs relating to the Company Stock covered by such Option
shall terminate. Upon the exercise of SARs, the related Option shall terminate
to the extent of an equal number of shares of Company Stock.
(c) Exercisability. An SAR shall be exercisable during the period
--------------
specified
-7-
<PAGE>
by the Committee in the Grant Instrument and shall be subject to such vesting
and other restrictions as may be specified in the Grant Instrument. The
Committee may accelerate the exercisability of any or all outstanding SARs at
any time for any reason. SARs may only be exercised while the Grantee is
employed by the Company or during the applicable period after termination of
employment as described in Section 5(e). A tandem SAR shall be exercisable only
during the period when the Option to which it is related is also exercisable. No
SAR may be exercised for cash by an officer or director of the Company or any of
its subsidiaries who is subject to Section 16 of the Exchange Act, except in
accordance with Rule 16b-3 under the Exchange Act.
(d) Value of SARs. When a Grantee exercises SARs, the Grantee shall
-------------
receive in settlement of such SARs an amount equal to the value of the stock
appreciation for the number of SARs exercised, payable in cash, Company Stock or
a combination thereof. The stock appreciation for an SAR is the amount by which
the Fair Market Value of the underlying Company Stock on the date of exercise of
the SAR exceeds the base amount of the SAR as described in Subsection (a).
(e) Form of Payment. The Committee shall determine whether the
---------------
appreciation in an SAR shall be paid in the form of cash, shares of Company
Stock, or a combination of the two, in such proportion as the Committee deems
appropriate. For purposes of calculating the number of shares of Company Stock
to be received, shares of Company Stock shall be valued at their Fair Market
Value on the date of exercise of the SAR. If shares of Company Stock are to be
received upon exercise of an SAR, cash shall be delivered in lieu of any
fractional share.
8. Performance Units
-----------------
(a) General Requirements. The Committee may grant performance units
--------------------
("Performance Units") to an Employee or Key Advisor. Each Performance Unit
shall represent the right of the Grantee to receive an amount based on the value
of the Performance Unit, if performance goals established by the Committee are
met. A Performance Unit shall be based on the Fair Market Value of a share of
Company Stock or on such other measurement base as the Committee deems
appropriate. The Committee shall determine the number of Performance Units to
be granted and the requirements applicable to such Units.
(b) Performance Period and Performance Goals. When Performance Units
----------------------------------------
are granted, the Committee shall establish the performance period during which
performance shall be measured (the "Performance Period"), performance goals
applicable to the Units ("Performance Goals") and such other conditions of the
Grant as the Committee deems appropriate. Performance Goals may relate to the
financial performance of the Company or its operating units, the performance of
Company Stock, individual performance, or such other criteria as the Committee
deems appropriate.
(c) Payment with respect to Performance Units. At the end of each
-----------------------------------------
Performance Period, the Committee shall determine to what extent the Performance
Goals and
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<PAGE>
other conditions of the Performance Units are met and the amount, if any, to be
paid with respect to the Performance Units. Payments with respect to Performance
Units shall be made in cash, in Company Stock, or in a combination of the two,
as determined by the Committee.
(d) Requirement of Employment. If the Grantee ceases to be employed
-------------------------
by the Company (as defined in Section 5(e)) during a Performance Period, or if
other conditions established by the Committee are not met, the Grantee's
Performance Units shall be forfeited. The Committee may, however, provide for
complete or partial exceptions to this requirement as it deems appropriate.
9. Qualified Performance-Based Compensation.
----------------------------------------
(a) Designation as Qualified Performance-Based Compensation. The
-------------------------------------------------------
Committee may determine that Performance Units or Restricted Stock granted to an
Employee shall be considered "qualified performance-based compensation" under
Section 162(m) of the Code. The provisions of this Section 9 shall apply to
Grants of Performance Units and Restricted Stock that are to be considered
"qualified performance-based compensation" under Section 162(m) of the Code.
(b) Performance Goals. When Performance Units or Restricted Stock
-----------------
that are to be considered "qualified performance-based compensation" are
granted, the Committee shall establish in writing (i) the objective performance
goals that must be met in order for restrictions on the Restricted Stock to
lapse or amounts to be paid under the Performance Units, (ii) the Performance
Period during which the performance goals must be met, (iii) the threshold,
target and maximum amounts that may be paid if the performance goals are met,
and (iv) any other conditions, including without limitation provisions relating
to death, disability, other termination of employment or Reorganization, that
the Committee deems appropriate and consistent with the Plan and Section 162(m)
of the Code. The performance goals may relate to the Employee's business unit
or the performance of the Company and its subsidiaries as a whole, or any
combination of the foregoing. The Committee shall use objectively determinable
performance goals based on one or more of the following criteria: stock price,
earnings per share, net earnings, operating earnings, return on assets,
shareholder return, return on equity, growth in assets, unit volume, sales,
market share, or strategic business criteria consisting of one or more
objectives based on meeting specific revenue goals, market penetration goals,
geographic business expansion goals, cost targets or goals relating to
acquisitions or divestitures.
(c) Establishment of Goals. The Committee shall establish the
----------------------
performance goals in writing either before the beginning of the Performance
Period or during a period ending no later than the earlier of (i) 90 days after
the beginning of the Performance Period or (ii) the date on which 25% of the
Performance Period has been completed , or such other date as may be required or
permitted under applicable regulations under Section 162(m) of the Code. The
performance goals shall satisfy the requirements for "qualified performance-
based compensation," including the requirement that the achievement of the goals
be substantially uncertain at the time they are established and that the goals
be established in such a way that a third party with knowledge of the relevant
facts could determine whether and to what extent the
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<PAGE>
performance goals have been met. The Committee shall not have discretion to
increase the amount of compensation that is payable upon achievement of the
designated performance goals.
(d) Maximum Payment. If Restricted Stock, or Performance Units
---------------
measured with respect to the fair market value of the Company Stock, are
granted, not more than 1,600,000 shares of the Company Stock may be granted to
an Employee under the Performance Units or Restricted Stock for any Performance
Period. If Performance Units are measured with respect to other criteria, the
maximum amount that may be paid to an Employee with respect to a Performance
Period is $1,000,000.
(e) Announcement of Grants. The Committee shall certify and announce
----------------------
the results for each Performance Period to all Grantees immediately following
the announcement of the Company's financial results for the Performance Period.
If and to the extent that the Committee does not certify that the performance
goals have been met, the grants of Restricted Stock or Performance Units for the
Performance Period shall be forfeited.
10. Withholding of Taxes
--------------------
(a) Required Withholding. All Grants under the Plan shall be subject
--------------------
to applicable federal (including FICA), state and local tax withholding
requirements. The Company shall have the right to deduct from all Grants paid
in cash, or from other wages paid to the Grantee, any federal, state or local
taxes required by law to be withheld with respect to such Grants. In the case
of Options and other Grants paid in Company Stock, the Company may require the
Grantee or other person receiving such shares to pay to the Company the amount
of any such taxes that the Company is required to withhold with respect to such
Grants, or the Company may deduct from other wages paid by the Company the
amount of any withholding taxes due with respect to such Grants.
(b) Election to Withhold Shares. If the Committee so permits, a
---------------------------
Grantee may elect to satisfy the Company's income tax withholding obligation
with respect to an Option, SAR, Restricted Stock or Performance Units paid in
Company Stock by having shares withheld up to an amount that does not exceed the
Grantee's maximum marginal tax rate for federal (including FICA), state and
local tax liabilities. The election must be in a form and manner prescribed by
the Committee and shall be subject to the prior approval of the Committee.
11. Transferability of Grants
-------------------------
(a) Nontransferability of Grants. Except as provided below, only the
----------------------------
Grantee may exercise rights under a Grant during the Grantee's lifetime. A
Grantee may not transfer those rights except by will or by the laws of descent
and distribution or, with respect to Grants other than Incentive Stock Options,
if permitted in any specific case by the Committee, pursuant to a domestic
relations order (as defined under the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the regulations thereunder). When a
Grantee dies, the personal representative or other person entitled to succeed to
the rights of the Grantee ("Successor Grantee") may exercise such rights. A
Successor Grantee must furnish proof
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<PAGE>
satisfactory to the Company of his or her right to receive the Grant under the
Grantee's will or under the applicable laws of descent and distribution.
(b) Transfer of Nonqualified Stock Options. Notwithstanding the
--------------------------------------
foregoing, the Committee may provide, in a Grant Instrument, that a Grantee may
transfer Nonqualified Stock Options to family members or other persons or
entities according to such terms as the Committee may determine; provided that
the Grantee receives no consideration for the transfer of an Option and the
transferred Option shall continue to be subject to the same terms and conditions
as were applicable to the Option immediately before the transfer.
12. Right of First Refusal
----------------------
Prior to a Public Offering, if at any time an individual desires to sell,
encumber, or otherwise dispose of shares of Company Stock distributed to him
under this Plan, the individual shall first offer the shares to the Company by
giving the Company written notice disclosing: (a) the name of the proposed
transferee of the Company Stock; (b) the certificate number and number of shares
of Company Stock proposed to be transferred or encumbered; (c) the proposed
price; (d) all other terms of the proposed transfer; and (e) a written copy of
the proposed offer. Within 30 days after receipt of such notice, the Company
shall have the option to purchase all or part of such Company Stock at the same
price and on the same terms as contained in such notice.
In the event the Company (or a shareholder, as described below) does not
exercise the option to purchase Company Stock, as provided above, the individual
shall have the right to sell, encumber or otherwise dispose of his shares of
Company Stock on the terms of the transfer set forth in the written notice to
the Company, provided such transfer is effected within 30 days after the
expiration of the option period. If the transfer is not effected within such
period, the Company must again be given an option to purchase, as provided
above.
The Board, in its sole discretion, may waive the Company's right of first
refusal pursuant to this Section 12 and the Company's repurchase right pursuant
to Section 13 below. If the Company's right of first refusal or repurchase
right is so waived, the Board may, in its sole discretion, pass through such
right to the remaining shareholders of the Company in the same proportion that
each shareholder's stock ownership bears to the stock ownership of all the
shareholders of the Company, as determined by the Board. To the extent that a
shareholder has been given such right and does not purchase his or her
allotment, the other shareholders shall have the right to purchase such
allotment on the same basis.
On and after a Public Offering, the Company shall have no further right to
purchase shares of Company Stock under this Section 12 and Section 13 below, and
its limitations shall be null and void.
Notwithstanding the foregoing, the Committee may require that a Grantee
execute a shareholder's agreement, with such terms as the Committee deems
appropriate, with respect to any Company Stock distributed pursuant to this
Plan. Such agreement may provide that the provisions of this Section 12 and
Section 13 below shall not apply to such Company Stock.
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<PAGE>
13. Purchase by the Company
-----------------------
Prior to a Public Offering, if a Grantee ceases to be employed by the
Company, the Company shall have the right to purchase all or part of any Company
Stock distributed to him under this Plan at its then current Fair Market Value
(as defined in Section 5(b)); provided, however, that such repurchase shall be
made in accordance with applicable accounting rules to avoid adverse accounting
treatment.
14. Reorganization of the Company.
------------------------------
(a) Reorganization. As used herein, a "Reorganization" shall be
---------------
deemed to have occurred if the shareholders of the Company approve (or, if
shareholder approval is not required, the Board approves) an agreement providing
for (i) the merger or consolidation of the Company with another corporation
where the shareholders of the Company, immediately prior to the merger or
consolidation, will not beneficially own, immediately after the merger or
consolidation, shares entitling such shareholders to more than 50% of all votes
to which all shareholders of the surviving corporation would be entitled in the
election of directors (without consideration of the rights of any class of stock
to elect directors by a separate class vote), (ii) the sale or other disposition
of all or substantially all of the assets of the Company, or (iii) a liquidation
or dissolution of the Company.
(b) Assumption of Grants. Upon a Reorganization where the Company is
--------------------
not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding Options
and SARs that are not exercised shall be assumed by, or replaced with comparable
options or rights by, the surviving corporation.
(c) Other Alternatives. Notwithstanding the foregoing, in the event
------------------
of a Reorganization, the Committee may take one or both of the following
actions: the Committee may (i) require that Grantees surrender their outstanding
Options and SARs in exchange for a payment by the Company, in cash or Company
Stock as determined by the Committee, in an amount equal to the amount by which
the then Fair Market Value of the shares of Company Stock subject to the
Grantee's unexercised Options and SARs exceeds the Exercise Price of the Options
or the base amount of the SARs, as applicable, or (ii) after giving Grantees an
opportunity to exercise their outstanding Options and SARs, terminate any or all
unexercised Options and SARs at such time as the Committee deems appropriate.
Such surrender or termination shall take place as of the date of the
Reorganization or such other date as the Committee may specify.
(d) Limitations. Notwithstanding anything in the Plan to the
-----------
contrary, in the event of a Reorganization, the Committee shall not have the
right to take any actions described in the Plan (including without limitation
actions described in Subsection (b) above) that would make the Reorganization
ineligible for pooling of interests accounting treatment or that would make the
Reorganization ineligible for desired tax treatment if, in the absence of such
right, the Reorganization would qualify for such treatment and the company
intends to use such treatment
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<PAGE>
with respect to the Reorganization.
15. Requirements for Issuance or Transfer of Shares
-----------------------------------------------
(a) Shareholder's Agreement. The Committee may require that a Grantee
-----------------------
execute a shareholder's agreement, with such terms as the Committee deems
appropriate, with respect to any Company Stock distributed pursuant to this
Plan.
(b) Limitations on Issuance or Transfer of Shares. No Company Stock
---------------------------------------------
shall be issued or transferred in connection with any Grant hereunder unless and
until all legal requirements applicable to the issuance or transfer of such
Company Stock have been complied with to the satisfaction of the Committee. The
Committee shall have the right to condition any Grant made to any Grantee
hereunder on such Grantee's undertaking in writing to comply with such
restrictions on his or her subsequent disposition of such shares of Company
Stock as the Committee shall deem necessary or advisable as a result of any
applicable law, regulation or official interpretation thereof, and certificates
representing such shares may be legended to reflect any such restrictions.
Certificates representing shares of Company Stock issued or transferred under
the Plan will be subject to such stop-transfer orders and other restrictions as
may be required by applicable laws, regulations and interpretations, including
any requirement that a legend be placed thereon.
16. Amendment and Termination of the Plan
-------------------------------------
(a) Amendment. The Board may amend or terminate the Plan at any time;
---------
provided, however, that the Board shall not amend the Plan without shareholder
approval if such approval is required by Section 162(m) of the Code.
(b) Termination of Plan. The Plan shall terminate on the day
-------------------
immediately preceding the tenth anniversary of its effective date, unless the
Plan is terminated earlier by the Board or is extended by the Board with the
approval of the shareholders.
(c) Termination and Amendment of Outstanding Grants. A termination or
-----------------------------------------------
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents. The termination of
the Plan shall not impair the power and authority of the Committee with respect
to an outstanding Grant. Whether or not the Plan has terminated, an outstanding
Grant may be terminated or amended in accordance with the Plan or, may be
amended by agreement of the Company and the Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document.
------------------
No other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
17. Funding of the Plan
-------------------
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<PAGE>
This Plan shall be unfunded. The Company shall not be required to establish
any special or separate fund or to make any other segregation of assets to
assure the payment of any Grants under this Plan. In no event shall interest be
paid or accrued on any Grant, including unpaid installments of Grants.
18. Rights of Participants
----------------------
Nothing in this Plan shall entitle any Employee, Key Advisor or other
person to any claim or right to be granted a Grant under this Plan. Neither
this Plan nor any action taken hereunder shall be construed as giving any
individual any rights to be retained by or in the employ of the Company or any
other employment rights.
19. No Fractional Shares
--------------------
No fractional shares of Company Stock shall be issued or delivered pursuant
to the Plan or any Grant. The Committee shall determine whether cash, other
awards or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
20. Headings
--------
Section headings are for reference only. In the event of a conflict between
a title and the content of a Section, the content of the Section shall control.
21. Effective Date of the Plan.
--------------------------
(a) Effective Date. Subject to the approval of the Company's
--------------
shareholders, the Plan shall be effective as of May 3, 1996.
(b) Public Offering. The provisions of the Plan that refer to a
---------------
Public Offering, or that refer to, or are applicable to persons subject to,
section 16 of the Exchange Act or section 162(m) of the Code, shall be
effective, if at all, upon the initial registration of the Company Stock under
section 12(g) of the Exchange Act, and shall remain effective thereafter for so
long as such stock is so registered.
22. Miscellaneous
-------------
(a) Grants in Connection with Corporate Transactions and Otherwise.
--------------------------------------------------------------
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to make Grants under this Plan in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business or assets
of any corporation, firm or association, including Grants to employees thereof
who become Employees of the Company, or for other proper corporate purposes, or
(ii) limit the right of the Company to grant stock options or make other awards
outside of this Plan. Without limiting the foregoing, the Committee may make a
Grant to an employee of another corporation who becomes an Employee by reason of
a corporate merger,
-14-
<PAGE>
consolidation, acquisition of stock or property, reorganization or liquidation
involving the Company or any of its subsidiaries in substitution for a stock
option or restricted stock grant made by such corporation. The terms and
conditions of the substitute grants may vary from the terms and conditions
required by the Plan and from those of the substituted stock incentives. The
Committee shall prescribe the provisions of the substitute grants.
(b) Compliance with Law. The Plan, the exercise of Options and SARs
-------------------
and the obligations of the Company to issue or transfer shares of Company Stock
under Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. With respect to persons
subject to section 16 of the Exchange Act, it is the intent of the Company that
the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. The Committee
may revoke any Grant if it is contrary to law or modify a Grant to bring it into
compliance with any valid and mandatory government regulation. The Committee may
also adopt rules regarding the withholding of taxes on payments to Grantees. The
Committee may, in its sole discretion, agree to limit its authority under this
Section.
(c) Governing Law. The validity, construction, interpretation and
-------------
effect of the Plan and Grant Instruments issued under the Plan shall exclusively
be governed by and determined in accordance with the law of State of Delaware.
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